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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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SCHEDULE 13E-3
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RULE 13E-3 TRANSACTION STATEMENT
(Pursuant to Section 13(e) of the Securities Exchange Act of 1934 and Rule 13e-3
(Section 240.13e-3) thereunder)
CABLEVISION INVESTMENT OF DETROIT, INC.
(Name of the Issuer)
COMCAST CABLEVISION OF TAYLOR, INC.
CID TRANSACTION CO.
(Name of Person(s) Filing Statement)
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Common Stock, Par Value $.01 Per Share 12686100
(Title of Class of Securities) (CUSIP Number of Class of Securities)
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STANLEY WANG, SENIOR VICE PRESIDENT
COMCAST CORPORATION
1500 MARKET STREET
PHILADELPHIA, PA 19102-2148
(215) 665-1700
(Name, Address and Telephone Number of Person Authorized to Receive Notices and
Communications on Behalf of Person(s) Filing Statement)
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THIS STATEMENT IS FILED IN CONNECTION WITH (CHECK THE APPROPRIATE BOX):
a. /x/ The filing of solicitation materials or an information statement subject
to Regulation 14A, Regulation 14C, or Rule 13e-3(c) under the Securities
Exchange Act of 1934.
b. / / The filing of a registration statement under the Securities Act of 1933.
c. / / A tender offer.
d. / / None of the above.
Check the following box if the soliciting materials or information
statement referred to in checking box (a) are preliminary copies: /x/
CALCULATION OF FILING FEE
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Transaction Valuation* Amount of Filing Fee
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$960,485.04 $192.10
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* For purposes of calculating fee only. This amount assumes the purchase of
34,876 shares at $27.54 in cash per share. The amount of the filing fees,
calculated in accordance with Rule 0-11 of the Securities Exchange Act of
1934, equals 1/50th of one percentum of the value of the shares to be
purchased.
/ / Check box if any part of the filing fee is offset as provided by Rule
0-11(a)(2) and identify the filing with which the offsetting fee was
previously paid. Identify the previous filing by registration statement
number, or the form or schedule and the date of its filing.
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Amount previously paid: ______________ Filing party: ________________
Form or registration no.: ______________ Date filed: ________________
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TABLE OF CONTENTS
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CROSS-REFERENCE SHEET...................................................................................... ii
INTRODUCTION............................................................................................... 2
SPECIAL FACTORS............................................................................................ 4
Background of the Transaction............................................................................ 4
Business of the Company............................................................................... 4
General Developments of the Business.................................................................. 4
Principal Shareholders of the Company................................................................. 5
Relationship of the Company and the Partnership with Parent........................................... 5
Fairness of the Transaction........................................................................... 6
Fair Value Report of Kane Reece Associates, Inc....................................................... 8
Terms, Purpose and Structure of the Transaction.......................................................... 12
Plan of Merger........................................................................................... 13
Interest of Certain Persons in Securities
of the Issuer and the Transaction..................................................................... 14
Certain Effects of the Transaction....................................................................... 14
Certain Information Concerning the Company/Financial Information......................................... 16
Certain Information Concerning Parent and Merging Company................................................ 18
Fees and Expenses/Financing of the Transaction........................................................... 19
Procedures for Surrendering Shares in Exchange
for Payment of Merger Consideration or Pursuant
to the Exercise of Dissenters Rights.................................................................. 20
Dissenting Shares/Dissenters Rights...................................................................... 21
Summary of Procedure to Exercise Dissenters Rights....................................................... 22
Certain Federal Income Tax Consequences.................................................................. 23
Annex 1 -- Plan of Merger................................................................................ A-1-1
Annex 2 -- Directors and Executive Officers.............................................................. A-2-1
Annex 3 -- Dissenters Rights Provisions of Michigan Business Corporation Act............................. A-3-1
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CROSS-REFERENCE SHEET
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ITEM 1. ISSUER AND CLASS OF SECURITY SUBJECT TO THE TRANSACTION.
(a)-(d) The information set forth in 'INTRODUCTION'; 'SPECIAL FACTORS -- Background of the Transaction'
and 'SPECIAL FACTORS -- Certain Information Concerning the Company/Financial Information' is
incorporated herein by reference.
(e) Not applicable.
(f) The information set forth in 'SPECIAL FACTORS -- Certain Information Concerning Parent and Merging
Company' is incorporated herein by reference.
ITEM 2. IDENTITY AND BACKGROUND.
(a)-(d) This Statement is being filed by Parent and Merging Company. The information set forth in
and (g) 'INTRODUCTION'; 'SPECIAL FACTORS -- Certain Information Concerning Parent and Merging Company';
and Annex 2 hereto is incorporated herein by reference.
(e) and (f) During the last five years, none of Parent, Merging Company or Sural or, to the best of their
knowledge, any of their respective officers and directors listed in Annex 2 hereto, (i) has been
convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors), or (ii)
was a party to a civil proceeding of a judicial or administrative body of competent jurisdiction
and as a result of such proceeding was or is subject to a judgment, decree or final order
enjoining further violations of, or prohibiting activities subject to, Federal or State securities
laws or finding any violation of such laws.
ITEM 3. PAST CONTACTS, TRANSACTIONS OR NEGOTIATIONS.
(a)-(b) The information set forth in 'SPECIAL FACTORS -- Background of the Transaction -- General
Developments of the Business'; and 'SPECIAL FACTORS -- Background of the Transaction --
Relationship of the Company and the Partnership with Parent' is incorporated herein by reference.
ITEM 4. TERMS OF THE TRANSACTION.
(a)-(b) The information set forth in 'INTRODUCTION'; 'SPECIAL FACTORS -- Terms, Purpose and Structure of
the Transaction'; and 'SPECIAL FACTORS -- Plan of Merger' is incorporated herein by reference.
ITEM 5. PLANS OR PROPOSALS OF THE ISSUER OR AFFILIATE.
(a)-(c) and The information set forth in 'INTRODUCTION'; and 'SPECIAL FACTORS -- Certain Effects of the
(f)-(g) Transaction' is incorporated herein by reference.
(d)-(e) Not applicable.
ITEM 6. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
(a)-(b) The information set forth in 'SPECIAL FACTORS -- Fees and Expenses/Financing of the Transaction'
is incorporated herein by reference.
(c) Not applicable.
(d) Not applicable.
ITEM 7. PURPOSE(S), ALTERNATIVES, REASONS AND EFFECTS.
(a), (c) The information set forth in 'SPECIAL FACTORS -- Terms, Purpose and Structure of the Transaction';
and (d) 'SPECIAL FACTORS -- Certain Effects of the Transaction'; and 'SPECIAL FACTORS -- Certain Federal
Income Tax Consequences' is incorporated herein by reference.
(b) Not applicable.
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ITEM 8. FAIRNESS OF THE TRANSACTION.
(a)-(b) The information set forth in 'INTRODUCTION'; 'SPECIAL FACTORS -- Background of the Transaction';
and 'SPECIAL FACTORS -- Background of the Transaction -- Fairness of the Transaction' is
incorporated herein by reference.
(c) The information set forth in 'SPECIAL FACTORS -- Terms, Purpose and Structure of the Transaction'
is incorporated herein by reference.
(d) The information set forth in 'SPECIAL FACTORS -- Background of the Transaction -- Fairness of the
Transaction' is incorporated herein by reference.
(e) The information set forth in 'SPECIAL FACTORS -- Terms, Purpose and Structure of the Transaction'
is incorporated herein by reference.
(f) Not applicable.
ITEM 9. REPORTS, OPINIONS, APPRAISALS AND CERTAIN NEGOTIATIONS.
(a) The information set forth in 'SPECIAL FACTORS -- Background of the Transaction -- Fairness of the
Transaction' is incorporated herein by reference.
(b) The information set forth in 'SPECIAL FACTORS -- Background of the Transaction -- Fairness of the
Transaction' is incorporated herein by reference.
(c) The information set forth in 'SPECIAL FACTORS -- Background of the Transaction -- Fairness of the
Transaction' is incorporated herein by reference.
ITEM 10. INTEREST IN SECURITIES OF THE ISSUER.
(a) The information set forth in 'INTRODUCTION'; 'SPECIAL FACTORS -- Background of the Transaction';
'SPECIAL FACTORS -- Terms, Purpose and Structure of the Transaction'; and 'SPECIAL FACTORS --
Interest of Certain Persons in Securities of the Issuer and the Transaction' is incorporated
herein by reference.
(b) Not applicable.
ITEM 11. CONTRACTS, ARRANGEMENTS OR UNDERSTANDINGS WITH RESPECT TO THE ISSUER'S SECURITIES.
The information set forth in 'SPECIAL FACTORS -- Interest of Certain Persons in Securities of the
Issuer and the Transaction' is incorporated herein by reference.
ITEM 12. PRESENT INTENTION AND RECOMMENDATION OF CERTAIN PERSONS WITH REGARD TO THE TRANSACTION.
(a) The information set forth in 'SPECIAL FACTORS -- Interest of Certain Persons in Securities of the
Issuer and the Transaction' is incorporated herein by reference.
(b) The information set forth in 'SPECIAL FACTORS -- Background of the Transaction'; 'SPECIAL FACTORS
-- Background of the Transaction -- Fairness of the Transaction' is incorporated herein by
reference.
ITEM 13. OTHER PROVISIONS OF THE TRANSACTION.
(a) The information set forth in 'SPECIAL FACTORS -- Dissenting Shares/Dissenters Rights' is
incorporated herein by reference.
(b) Not applicable.
(c) Not applicable.
ITEM 14. FINANCIAL INFORMATION.
(a) The information set forth in 'SPECIAL FACTORS -- Certain Information Concerning the
Company/Financial Information'; and Exhibits (g)(1) and (g)(2) are incorporated herein by
reference.
(b) The information set forth in 'SPECIAL FACTORS -- Certain Effects of the Transaction' is
incorporated herein by reference.
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ITEM 15. PERSONS AND ASSETS EMPLOYED, RETAINED OR UTILIZED.
(a) The information set forth in 'SPECIAL FACTORS -- Background of the Transaction'; and 'SPECIAL
FACTORS -- Plan of Merger' is incorporated herein by reference.
(b) Not applicable.
ITEM 16. ADDITIONAL INFORMATION.
Not applicable.
ITEM 17. MATERIAL TO BE FILED AS EXHIBITS.
(a) Not applicable.
(b)(1) Fair Value Report of Kane Reece Associates, Inc.
(b)(2) Consent of Kane Reece Associates, Inc.
(c) Plan of Merger adopted by the Board of Directors of Merging Company on January 10, 1996
incorporated by reference to Annex 1 hereto.
(d)(1) Cover page to be substituted for cover page of this Schedule 13E-3 as filed with the Securities
and Exchange Commission. Parent and Merging Company intend to transmit to shareholders of the
Company a duplicate copy of this Rule 13E-3 Transaction Statement using Exhibit (d)(1) as a
substitute cover page, without this Cross-Reference Sheet and the Exhibits (other than Exhibits
(d)(3) and (d)(4)) referred to in this Item 17.
(d)(2) Form of Letter to Shareholders Providing Notice of Issuance of Press Release.
(d)(3) Form of Letter of Transmittal.
(d)(4) Form of Dissenters Demand for Payment Form.
(d)(5) Form of Notice of Adoption of Plan of Merger to be included with the Letter of Transmittal.
(d)(6) Form of Notice of Merger to be delivered to record shareholders of the Company following the
Effective Date (hereinafter defined) of the Merger.
(d)(7) Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9 to be
included with the Letter of Transmittal.
(d)(8) Text of Press Release issued by the Company on January 24, 1996.
(d)(9) Text of Sections 761 through 774 of the Michigan Business Corporation Act, as amended,
incorporated by reference to Annex 3 hereto.
(e) The information set forth in 'SPECIAL FACTORS -- Dissenting Shares/Dissenters Rights' is
incorporated herein by reference.
(f) Not applicable.
(g)(1) Audited financial statements for the two fiscal years required to be filed with the Company's
Annual Report on Form 10-K for the year ended December 31, 1994.
(g)(2) Unaudited condensed financial statements required to be included in the Company's Quarterly Report
on Form 10-Q for the nine (9) months ended September 30, 1995.
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SIGNATURE
After due inquiry and to the best of my knowledge and belief, I certify
that the information set forth in this Statement is true, complete and correct.
Dated: January 24, 1996 COMCAST CABLEVISION OF TAYLOR, INC.
By: /s/ Stanley Wang
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Name: Stanley Wang
Title: Senior Vice President
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SIGNATURE
After due inquiry and to the best of my knowledge and belief, I certify
that the information set forth in this Statement is true, complete and correct.
Dated: January 24, 1996 CID TRANSACTION CO.
By: /s/ Stanley Wang
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Name: Stanley Wang
Title: Senior Vice President
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INTRODUCTION
This Rule 13E-3 Transaction Statement (this 'Statement') relates to the
short form statutory merger (the 'Merger') of CID Transaction Co., a
newly-formed Michigan corporation (the 'Merging Company') that is a wholly-owned
subsidiary of Comcast Cablevision of Taylor, Inc., a Michigan corporation
('Parent'), with and into Cablevision Investment of Detroit, Inc., a Michigan
corporation (the 'Company'). The Company is an approximately 96.5%-owned
subsidiary of Merging Company and will be the surviving corporation. On the date
of filing a Certificate of Merger with the Department of Commerce of the State
of Michigan (the 'Effective Date'), which is expected to occur on or about
, 1996, the Merger will be consummated. From and after the
Effective Date, the Company will be a wholly-owned subsidiary of Parent.
Parent has contributed to Merging Company all of the shares of Common
Stock, constituting 965,124 shares, of the Company it owns so that the Company
is an approximately 96.5%-owned subsidiary of Merging Company. Prior to such
contribution and since the Share Purchase (defined below) on December 22, 1994,
Parent and/or a wholly-owned subsidiary of Parent have, in the aggregate,
continuously owned 90% or more of the Company's Common Stock.
Each share of Common Stock of the Company outstanding and held of record as
of the close of business on the day immediately preceding the Effective Date by
persons other than (i) Merging Company and (ii) persons who perfect their
dissenters rights granted to them by the Company even though not required under
Michigan law (the shares other than those described in (i) and (ii) of this
sentence being hereinafter referred to as the 'Shares' and the holders of the
Shares being hereinafter referred to as the 'Public Shareholders') will, without
any action on the part of any holder thereof, be automatically converted on the
Effective Date into the right solely to receive cash in the amount of $27.54 per
share without interest (the 'Merger Consideration') upon surrender of such
Shares, upon the terms and subject to the conditions set forth in the Plan of
Merger (the 'Plan') and in the Letter of Transmittal, copies of which are
included with this Statement.
Each share of Common Stock of the Company outstanding on the Effective Date
held by Merging Company will be cancelled and extinguished. The common stock of
Merging Company owned by Parent outstanding on the Effective Date will be
converted into one hundred (100) fully paid shares of Common Stock of the
Company, resulting in Parent being the sole shareholder of the Company.
UNDER THE MICHIGAN BUSINESS CORPORATION ACT (THE 'MBCA'), THE APPROVAL OF
THE SHAREHOLDERS OF THE COMPANY IS NOT REQUIRED BY THE PLAN, BECAUSE THE PLAN
HAS BEEN ADOPTED BY THE BOARD OF DIRECTORS AND THE SOLE SHAREHOLDER OF MERGING
COMPANY, THE OWNER OF APPROXIMATELY 96.5% OF THE OUTSTANDING SHARES OF COMMON
STOCK OF THE COMPANY.
THE PARENT HAS CONCLUDED THAT THE MERGER IS FAIR TO THE PUBLIC
SHAREHOLDERS. SEE 'SPECIAL FACTORS -- BACKGROUND OF THE TRANSACTION -- FAIRNESS
OF THE TRANSACTION.'
UNDER THE MBCA, THE SHAREHOLDERS OF THE COMPANY DO NOT HAVE RIGHTS TO
DISSENT FROM ADOPTION OF THE PLAN AND OBTAIN PAYMENT IN CASH OF THE FAIR VALUE
OF THEIR SHARES; HOWEVER, THE COMPANY HAS DECIDED TO GRANT DISSENTERS RIGHTS TO
THE PUBLIC SHAREHOLDERS. SUCH RIGHTS, IF THE STATUTORY PROCEDURES ARE COMPLIED
WITH, COULD LEAD TO A JUDICIAL DETERMINATION OF THE FAIR VALUE (EXCLUDING ANY
ELEMENT OF APPRECIATION OR DEPRECIATION IN ANTICIPATION OF THE ACCOMPLISHMENT OF
THE MERGER) REQUIRED TO BE PAID IN CASH TO SUCH DISSENTING HOLDERS ('DISSENTING
SHAREHOLDERS') FOR THEIR SHARES ('DISSENTING SHARES'). ANY SUCH JUDICIAL
DETERMINATION OF THE FAIR VALUE OF DISSENTING SHARES COULD BE BASED UPON
CONSIDERATIONS OTHER THAN OR IN ADDITION TO THE MARKET VALUE OF THE SHARES AND
THE FACTORS USED TO DETERMINE
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THE MERGER CONSIDERATION TO BE PAID IN THE MERGER, INCLUDING ASSET VALUES AND
THE INVESTMENT VALUE OF THE DISSENTING SHARES. THE VALUE SO DETERMINED COULD BE
MORE OR LESS THAN THE MERGER CONSIDERATION PAID PURSUANT TO THE MERGER. SEE
'SPECIAL FACTORS -- DISSENTING SHARES/DISSENTERS RIGHTS.'
SHAREHOLDERS ELECTING TO DISSENT MUST DEMAND PAYMENT FOR THEIR SHARES BY
COMPLETING THE LETTER OF TRANSMITTAL AND DISSENTERS DEMAND FOR PAYMENT FORM
INCLUDED HEREWITH AND RETURNING SUCH DOCUMENTS AS INSTRUCTED THEREIN, TOGETHER
WITH THEIR CERTIFICATES REPRESENTING DISSENTING SHARES AND ANY OTHER REQUIRED
DOCUMENTS BY , 1996.
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SPECIAL FACTORS
BACKGROUND OF THE TRANSACTION
Business of the Company
The Company is a general partner which holds a 10% partnership interest in
Comcast Cablevision of Detroit (formerly Barden Cablevision and referred to
herein as the 'Partnership'), a Michigan general partnership. The Partnership
operates a cable communications system (the 'System') pursuant to a franchise
agreement (the 'Franchise Agreement') with the city of Detroit, Michigan (the
'City'). The Partnership has two other general partners: Comcast Michigan
Holdings, Inc. (formerly Barden Communications, Inc. and referred to herein as
'CMH') which holds a 40% interest and Detroit Cable TV, Inc. ('Detroit Cable',
and referred to collectively with the Company and CMH as the 'Partners'), a
wholly-owned subsidiary of Parent, which holds a 50% interest. Effective
December 22, 1994, Parent became an affiliate of Comcast Corporation
('Comcast'), a Pennsylvania corporation which is a publicly owned company (see
'SPECIAL FACTORS -- Background of the Transaction -- General Developments of the
Business'). The Company's principal executive offices are located at 1500 Market
Street, Philadelphia, Pennsylvania 19102-2148.
General Developments of the Business
On March 31, 1994, Rogers Communications Inc. ('RCI') acquired
substantially all of the outstanding shares of capital stock of Maclean Hunter
Limited, which was the parent of Maclean Hunter, Inc. ('MHI'). On December 22,
1994 (the 'Purchase Date'), pursuant to a share purchase agreement ( the 'Share
Purchase Agreement') between Comcast and RCI, Comcast MH Holdings, Inc. ('MH
Holdings') purchased all of the issued and outstanding shares of capital stock
of MHI, the sole shareholder of Parent and, in conjunction with a separate
agreement with the shareholder of CMH, acquired all of the issued and
outstanding shares of capital stock of CMH (the purchase of the shares of MHI is
referred to herein as the 'MHI Share Purchase' and, together with the purchase
of the CMH shares, as the 'Share Purchase'). MH Holdings is an indirect
wholly-owned subsidiary of Comcast MHCP Holdings, L.L.C. ('MHCP'), a Delaware
limited liability corporation. MHCP is 55%-owned by a wholly-owned subsidiary of
Comcast and 45%-owned by the California Public Employees' Retirement System
('CalPERS'), and is managed by Comcast. The MHI Share Purchase resulted in a
change of control of the Company because Parent became an indirect wholly-owned
subsidiary of MH Holdings. The ownership structure of the Company is indicated
in the chart set forth below.
_______________
| COMCAST MH |
|HOLDINGS, INC.|
| |
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|
________________________________________
| |
| 100% | 100%
___________________ ______________________
| COM MH, INC. | | COMCAST MICHIGAN |
|(formerly Maclean | | HOLDINGS, INC. |--
| Hunter, Inc.) | | (fomerly Barden | |
| | |Communications, Inc.| |
-------------------- ---------------------- |
| | |
| 100% | |
_______________________ | |
| COMCAST CABLEVISION | | |
| OF TAYLOR, INC. | | |
| (formerly Maclean | | |
|Hunter Cable TV, Inc.)| | |
------------------------ | |
| | |
_______________________________________________________ | |
| | | | |
| 100% | 96.5% 66.7%GP | | 33.3%GP |
______________ _________________ _______________ __________________
| | | | | | | |
|DETROIT CABLE| | CABLEVISION |3.5%| PUBLIC | | CABLE |
| TV, INC. | | INVESTMENT OF |----| SHAREHOLDERS | | MANAGEMENT OF |
| | | DETROIT, INC. | | | | DETROIT |
- -------------- ----------------- --------------- ------------------|
| | 10%GP |
| _________________ |
| 50%GP | COMCAST | |
|___________| CABLEVISION OF |__________________________________________|
| DETROIT |
|(formerly Barden| 40%GP
| Cablevision) |
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MHI owned, directly or indirectly, approximately 59.65% of the Partnership
and substantial other cable television assets while CMH owned 40% of the
Partnership and, apart from an interest in the company that managed the
Partnership, no other material assets. Under the Share Purchase Agreement
between Comcast and RCI, approximately $1.2 billion was provided as payment for
all of the stock of MHI, which included its interest in the Partnership, and for
CMH's interest in the Partnership and the Partnership's management company,
which is 33.3%-owned by CMH. It was the responsibility of RCI to negotiate the
price at which the shareholder of CMH would sell its stock in CMH to Comcast.
These negotiations resulted in a purchase price of $118,060,000 paid by Comcast
to the shareholder of CMH principally for the CMH shares (the 'CMH Purchase
Price') and a purchase price of approximately $1,082,000,000 for the MHI shares.
The Share Purchase Agreement for the MHI shares did not provide for a separate
allocation between its ownership interest in the Partnership and its ownership
of other assets.
Principal Shareholders of the Company
Immediately prior to the contribution by Parent of the Common Stock of the
Company it owned to Merging Company, Parent owned approximately 96.5% of the
issued and outstanding Common Stock of the Company. As of the close of business
on December 31, 1995, the Company had 602 shareholders of record holding
(exclusive of Parent) 34,876 shares, or approximately 3.5% of the outstanding
Common Stock of the Company.
Relationship of the Company and the Partnership with Parent
A promissory note, between the Company and the Partnership, in the
principal amount of $1.0 million bearing interest at 3.52% was repaid by the
Partnership in 1994. The interest rate was based on the mean of the then
prevailing interest rate for certificates of deposit and one percent over the
then prevailing Eurodollar rate. The Company's interest income relating to the
note receivable totalled $6,000 and $50,000 for the years ended December 31,
1994 and 1993, respectively. The Company believes that this loan was on terms
fair and reasonable to it and did not involve a high risk of uncollectibility.
Effective December 22, 1994, management fees are charged to the Partnership
pursuant to a management agreement between Comcast and MH Holdings (the
'Management Agreement'). Under the terms of the Management Agreement, Comcast
supervises the management and operation of the Partnership for compensation
equal to 4.5% of the Partnership's gross revenues, with payment of one-third of
such fees being deferred by MH Holdings. In addition, the Management Agreement
provides for the reimbursement and sharing of certain of Comcast's actual costs
relating to the operations of MH Holdings, including the operations of the
Partnership. For the period from December 22, 1994 through December 31, 1994,
and for the nine months ended September 30, 1995, the Partnership was charged
$83,000 and $2.3 million, respectively.
Effective December 22, 1994, the Partnership is also charged by Comcast for
certain operating expenses, principally programming services, under a separate
agreement between Comcast and MH Holdings (the 'Cost Sharing Agreement'). These
expenses are charged to MH Holdings, and ultimately the Partnership, by Comcast
based on an amount which would approximate what MH Holdings would pay to an
unaffiliated third-party provider of these services, subject to certain
limitations. For the period from December 22, 1994 through December 31, 1994,
the amount charged to the Partnership under the Cost Sharing Agreement was not
significant. For the nine months ended September 30, 1995, the amount charged to
the Partnership under the Cost Sharing Agreement was $14.6 million.
In connection with the Share Purchase, MH Holdings entered into an $850.0
million credit agreement with certain lenders (the 'Credit Agreement'). On
December 22, 1994, the Partnership entered into a loan assumption agreement (the
'Assumption Agreement') with MH Holdings whereby the Partnership, along with
certain other subsidiaries of MH Holdings, would assume a portion of MH
Holdings' obligations under the Credit Agreement. The Partnership's allocated
portion of the total
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commitment under the Credit Agreement was $184.1 million, of which $154.9
million was outstanding as of December 31, 1994. During the nine months ended
September 30, 1995, additional borrowings were made under the Credit Agreement
and the Partnership was allocated an additional $4.3 million pursuant to the
Assumption Agreement, with a corresponding decrease in partners' capital. The
Company has recorded a decrease in its investment in the Partnership for its
proportionate share in this assumed liability of $433,000, with a corresponding
decrease in additional capital. For the nine months ended September 30, 1995,
interest expense of $9.3 million represents interest on the Partnership's
assumed portion of the outstanding borrowings of MH Holdings under the
Assumption Agreement. Neither the Partnership's debt represented by the Credit
Agreement, nor any interest on such debt, was considered in the valuation of the
Company.
As of September 30, 1995, the Company's due from affiliate balance includes
interest bearing amounts from MH Holdings of approximately $1.0 million, which
bear interest at the one-year certificate of deposit rate (6.27% at September
30, 1995).
Prior to the Share Purchase, Cable Management of Detroit, a Michigan
general partnership (the 'Manager Partnership'), was formed by Parent and CMH
for the purpose of entering into a management agreement with the Partnership.
Parent had a two-thirds partnership interest in and controlled the Manager
Partnership; CMH had a one-third interest in the Manager Partnership. Through
November 30, 1994, the Partnership paid the Manager Partnership a monthly fee
equal to 6% of the Partnership's gross revenues. Fees incurred in 1994 and 1993
amounted to approximately $3.6 million and $4.0 million, respectively. This
management agreement was terminated on the Purchase Date.
Through December 21, 1994, the Partnership purchased certain services
jointly with an affiliate owned by Parent. Reimbursement to the affiliate for
these services amounted to approximately $6.5 million and $5.8 million in 1994
and 1993, respectively, of which $1.1 million was due to the affiliate at
December 31, 1993. All amounts due to the affiliate in 1994 were paid prior to
the Share Purchase.
During 1994, MHI advanced a total of $55.7 million to the Partnership. Such
advances were used by the Partnership to repay the outstanding balance under a
loan agreement entered into by the Partnership in 1986 (the 'Loan Agreement')
and to make distributions to the Partners.
Fairness of the Transaction
Parent based the Merger Consideration on the CMH Purchase Price, which was
the result of arm's length negotiations between RCI and the shareholder of CMH.
The CMH Purchase Price was paid in exchange for 100% of the outstanding stock of
CMH. CMH's sole assets on the Purchase Date were its 40% interest in the
Partnership and its 33.33% interest in the Manager Partnership. In its
determination of the Merger Consideration, Parent elected not to allocate any
portion of the CMH Purchase Price to the interest in the Manager Partnership
held by CMH. Since the CMH Purchase Price represented the amount paid for a 40%
interest in the Partnership, Parent determined that the value of a 100% interest
in the Partnership, prior to purchase price adjustments, was $295,150,000.
Pursuant to agreement between the CMH shareholder and Comcast, the final CMH
Purchase Price was reduced by purchase price adjustments in an amount equal to
$59,993,464. This calculation resulted in an adjusted valuation for a 100%
interest in the Partnership equal to $235,156,536. Since the Company's primary
asset is its 10% interest in the Partnership, Parent determined that the value
of the Company, prior to adjustments, was $23,515,654. Parent then added an
amount equal to $1,115,394 to its valuation of the Company, which represented
the net working capital reflected on the Company's books as of December 22,
1994. This resulted in an adjusted valuation of the Company equal to
$24,631,048. The sum of $2.91 per share was then added to the adjusted CMH
Purchase Price, representing an amount equal to the prime rate of interest from
the Purchase Date to March 31, 1996, by which date it is anticipated that the
Public Shareholders could receive the Merger Consideration for the tendered
shares. This determination by the Company resulted in a price of $27.54 per
share, which is greater than the fair value determined by Kane Reece Associates,
Inc. ('Kane Reece'). Parent also considered the fair value report (the 'Kane
Reece Report') prepared by Kane Reece, which determined a fair value for
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the Company's interest in the Partnership of $23.60 per share. Accordingly, the
Board concluded that the Kane Reece Report provided support for the fairness of
the Merger Consideration.
As a consequence of the foregoing, the Board of Directors of Parent
believed that the creation of a special committee of independent directors was
not warranted under the circumstances. Moreover, all of the Directors of Parent
and Merging Company are affiliates of Comcast and, consequently, none of the
Directors are likely to be viewed as independent.
Under the MBCA, Parent may effect the proposed Merger without seeking the
approval of the Board of Directors or shareholders of the Company. On January
10, 1996, the Board of Directors and sole shareholder of Merging Company
approved the Plan. Parent believes that the Merger Consideration is fair to the
Public Shareholders. Parent initially determined the Merger Consideration solely
on the basis of the CMH Purchase Price. Parent then considered a number of
factors which support the fairness of its determination of the Merger
Consideration, including, without limitation, the factors set forth below.
Fair Value Report of Kane Reece. Parent considered the Kane Reece Report
for the purpose of supporting the fairness of the Merger Consideration to the
Public Shareholders. The Kane Reece Report was received by the Parent on January
3, 1996.
Kane Reece valued the shares of the Company's Common Stock after taking
into account such factors and information as Kane Reece considered relevant. For
a description of the Kane Reece Report, see 'SPECIAL FACTORS -- Background of
the Transaction -- Fair Value Report of Kane Reece Associates, Inc.'
Parent considered each of the following valuation approaches utilized by
Kane Reece, solely to determine whether the Merger Consideration is fair to the
Public Shareholders: (i) the present value of projected cash flows prepared by
Kane Reece (the 'Discounted Cash Flow Approach'); (ii) comparison of information
derived from the sale of other cable television companies (the 'Market
Approach'); and (iii) comparison of publicly-traded cable television companies
(the 'Guideline Company Approach'). Parent also considered the price paid to
shareholders by Parent's predecessor to purchase shares of the Company's Common
Stock since 1992 in order to determine whether the Merger Consideration is fair
to the Public Shareholders.
Discounted Cash Flow Approach. Parent compared the value of the Common
Stock of the Company based upon the projected cash flows prepared by Kane Reece
to the Merger Consideration in order to determine whether the Merger
Consideration is fair to the Public Shareholders. In the Kane Reece Report, Kane
Reece reported that its Discounted Cash Flow Approach resulted in a value of
$23.60 per share. Kane Reece used a multiple of 9.0 times its 2006 projected
annual cash flow for the residual value of the Company, and Kane Reece
discounted the projected cash flows and the residual value by an appropriate
discount rate for the Company, which Kane Reece determined to be 15.5%.
Market Approach. Parent compared the assumed value of the Company's Common
Stock based on Kane Reece's analysis of the sales of other cable television
systems to the Merger Consideration in order to determine whether the Merger
Consideration is fair to the Public Shareholders. In the Kane Reece Report, Kane
Reece reported that its Market Approach resulted in a price of $24.39 per share.
Guideline Company Approach. Parent also compared the value of the
Company's shares of Common Stock under the Guideline Company Approach with the
Merger Consideration in order to determine whether the Merger Consideration is
fair to the Public Shareholders. Kane Reece reported that its Guideline Company
Approach resulted in a value of $19.06 per share.
Historical Price for Purchase of Company's Common Stock by Parent's
Predecessor. Since the beginning of 1992, Maclean Hunter Cable TV, Inc.,
Parent's predecessor, has purchased 4,265 shares of the Company's Common Stock
at prices ranging from $13.50 to $15.00 per share. Parent compared such prices
to the Merger Consideration in order to determine whether the Merger
Consideration was fair to the Public Shareholders. See 'Special Factors --
Certain Information Concerning Parent and Merging Company.' There is no
established public trading market for the Company's Common Stock
7
<PAGE>
and consequently, Parent was not able to consider the historical market prices
of the Company's Common Stock.
On January 24, 1996, the Company issued a press release describing the
Merger.
Fair Value Report of Kane Reece Associates, Inc.
Parent received an analysis from Kane Reece with respect to the fair
valuation of the Company's shares of Common Stock held by the Public
Shareholders.
Kane Reece is a nationally recognized appraisal company in the
telecommunications field. Kane Reece is frequently engaged in the valuation of
businesses and their securities in connection with mergers and acquisitions,
with a concentration in the field of media/communications. Kane Reece was
selected by Parent to act as its appraiser based upon its expertise and
reputation in the valuation of cable companies.
Since Kane Reece is a recognized appraisal company in the
telecommunications field, it has in the past performed valuation and related
services for Comcast and its affiliates and performed such services in
connection with the Share Purchase. The aggregate fees for valuation related
services during 1994 and 1995 were approximately $103,000.
In conducting its analysis, Kane Reece considered such financial and other
factors as it deemed appropriate under the circumstances, including without
limitation: (i) the Partnership's 1996 Budget; (ii) the Partnership's audited
financial statements for the years ended December 31, 1991-1994 and the
Partnership's unaudited financial statements for the 10 months ended October 31,
1994 and 1995; (iii) the September 30, 1995 Form 10-Q of the Company; (iv) the
number of monthly basic subscribers and pay units for 1994 and 1995 and annually
from 1990-1994; (v) system channel charts and rate cards; (vi) system rate
history 1990-1995; (vii) the franchise agreement with the City; (viii) the
reported historical market prices, trading volume and market for the Common
Stock of the Company; (ix) financial and stock market information for the
Company and the Partnership and similar information for certain other
publicly-held cable television companies; and (x) the financial terms of recent
sales of cable television systems. Although Kane Reece did consider the debt
evidenced by the Loan Agreement in conducting the valuation of the Company, Kane
Reece determined not to consider the Partnership's debt represented by the
Credit Agreement, nor any interest on such debt, in the conduct of its analysis.
In addition, Kane Reece held discussions with certain members of the management
of the Company and Parent regarding the business, historical operating results,
financial condition, and future prospects of the Partnership and the Company,
and conducted other financial analyses, studies and investigations as it
considered appropriate.
Kane Reece relied upon the accuracy and completeness of the information
provided to it, including information from the Company and Parent and
information from various published sources. It did not independently verify such
information or undertake independent appraisals of the properties or the other
assets and liabilities of the Company or the Partnership. Kane Reece's report
was based upon conditions as they existed and as they reasonably could have been
evaluated on the date of the Kane Reece Report. No limitations were imposed by
Parent upon Kane Reece with respect to the scope of the investigation made by
Kane Reece in rendering the Kane Reece Report. The Company, Parent and their
management fully cooperated with Kane Reece in connection with its analysis.
Kane Reece performed certain financial analyses which it considered
relevant, including, (i) the Discounted Cash Flow Approach, (ii) the Market
Approach, and (iii) the Guideline Company Approach. Such analyses are set forth
in the Kane Reece Report and are summarized below.
8
<PAGE>
Financial Projections. Kane Reece's projections of the Partnership's
revenues, expenses and operating cash flow for the periods indicated, together
with significant assumptions made in computing the projections, are summarized
below.
<TABLE>
<CAPTION>
1996 1997 1998 1999 2000
----------- ----------- ----------- ----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Revenue......................................... $ 74,669 $ 80,398 $ 84,759 $ 90,325 $ 95,174
Expenses........................................ 42,561 45,023 46,618 49,679 52,346
----------- ----------- ----------- ----------- -----------
Operating Cash Flow............................. $ 32,108 $ 35,375 $ 38,141 $ 40,646 $ 42,828
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
</TABLE>
<TABLE>
<S> <C> <C> <C> <C> <C>
2001 2002 2003 2004 2005
----------- ----------- ----------- ----------- -----------
Revenue......................................... $ 101,301 $ 106,754 $ 113,579 $ 119,710 $ 127,118
Expenses........................................ 55,715 58,715 62,469 65,841 69,915
----------- ----------- ----------- ----------- -----------
Operating Cash Flow............................. $ 45,586 $ 48,039 $ 51,110 $ 53,869 $ 57,203
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
</TABLE>
Kane Reece's projections were based on (i) interviews with management of
Parent, (ii) financial information (including, without limitation, historical
financial information and estimates of future performance prepared for internal
purposes) provided to Kane Reece by Parent, and (iii) general industry and local
market trends.
Kane Reece's projections assumed that revenue would grow from $74.7 million
in 1996 to $127.1 million in 2005 (a compounded annual growth rate of 6.1%)
primarily due to growth in the number of cable subscribers and growth in average
revenues per subscriber. The number of cable subscribers was assumed to grow
from approximately 126,057 in 1996 to 160,845 in 2005 (a compounded annual
growth rate of 2.7%). Average monthly basic revenue per subscriber was projected
to grow at a compounded annual growth rate of 4.0% after 1996. Pay
(e.g. Home Box Office, Showtime and The Disney Channel) units were projected to
increase from approximately 234,466 units in 1996 to 270,219 in 2005 (a
compounded annual growth rate of 1.6%). The average monthly revenue per pay unit
was assumed to grow from $9.23 in 1996 to $10.70 in 2005 (a compounded annual
growth rate of 1.7%), and the average monthly pay-per-view revenue per basic
subscriber was estimated to grow from $1.98 in 1996 to $3.08 in 2005 (a
compounded annual growth rate of 5.0%).
Total operating expenses were assumed to grow at a compounded annual growth
rate of 5.7% annually between 1996 and 2005 (from $42.6 million in 1996 to $69.9
million in 2005). Operating cash flow was assumed to grow at a compounded annual
growth rate of 6.6% (from $32.1 million in 1996 to $57.2 million in 2005). As a
percentage of revenues, operating cash flow increased from 43% projected for
1996 to 45% in 2005.
Discounted Cash Flow Approach. In the Discounted Cash Flow Approach, Kane
Reece estimated a value for the Company's shares by calculating and then adding
the present values of (i) unleveraged annual cash flow streams for 1996 through
2005 derived from the financial projections as described above, and (ii) the
residual value of the Company.
In any analysis of future cash flows, a critical factor is the selection of
the discount rate which will be utilized in the calculation of the present value
of these future values. The investment's discount rate, also referred to as a
return requirement, is the overall return which an investor expects to achieve
on an investment. The development of the discount rate starts with the
determination of a weighted average cost of capital. The weighted average cost
of capital is made up of two components: debt and equity.
The cost of equity is arrived at by using the Capital Asset Pricing Model.
The derived equity rate represents the return expected on equity capital by an
investor and is consistent with Kane Reece's experience with respect to equity
investor expectations in today's cable television ('CATV') marketplace. Briefly,
this method begins with the risk free rate of return, generally the rate on U.S.
government debt instruments of appropriate duration, and then applies both an
equity risk premium and small stock premium that an equity investor requires in
order to invest. The appropriate discount rate for the Partnership needs to
consider the unsystematic risk associated with a single property.
9
<PAGE>
The next step is to determine the cost of debt capital. This rate is
principally affected by the credit worthiness of the borrower and the general
risk associated with the industry. To estimate the cost of debt as of the
valuation date, Kane Reece reviewed the CATV debt market. Paul Kagan, in the
October 17, 1995 issue of Cable TV Investor, tracked 44 cable bonds providing a
cable high-yield bond average. The average yield to maturity at October 15, 1995
for these bonds was 10.26%. Kane Reece then tax effected this assumed cost of
debt, taking into consideration statutory federal and state tax rates.
The final step is to determine the mixture of debt and equity in the
capital structure. The capital structure percentages were derived based upon a
review of the industry lending practices as of the valuation date. Senior debt
lending limits are typically discussed in terms of cash flow multiples. The
debt-to-equity ratio is derived by comparing the debt lending limit multiples to
the valuation cash flow multiples. Kane Reece calculated a weighted average cost
of capital of 15.5% for the Partnership.
The residual value was determined by multiplying the estimated 2005
operating cash flow by a multiple of 9.0 and applying the discount rate of
15.5%. The Discounted Cash Flow Approach resulted in a valuation of $23.60 per
share of the Company's Common Stock.
Market Approach. The Market Approach requires the appraiser to collect and
analyze recent comparable market transactions and then make value adjustments
based on a comparative analysis between the market transactions and the subject
property. It is important to use transactions which are on or about the
valuation date and which, if possible, straddle that date. The application of
the Market Approach is most commonly found in the appraisal of real estate. The
market for real estate is characterized by frequent sales within a geographic
area, reliably known sale prices, and readily discernable attributes of
properties sold. This is not the case for sales of CATV businesses. The
businesses are comprised of a number of types of tangible and intangible assets,
and data on these transactions are available only through the press and trade
publications. The quality of this reported data is suspect and quite incomplete.
Kane Reece's experience in the CATV industry has been that the publicly
available data is at best an approximation. The buyers and sellers in this
market are under no obligation to report the information. The application of the
Market Approach to the CATV business would be extremely difficult and unreliable
due to the lack of comparative data and the subjectivity of any comparative
value adjustments. Due to the unique nature of each cable property, to complete
a valid comparative analysis the following variables would need to be collected
and analyzed for each market transaction:
-- Homes in Franchise Area
-- Homes Passed by Cable
-- Subscriber Penetration
-- Revenues Per Subscriber
-- Current Cash Flow
-- Operating Margin
-- System/Size Configuration
-- Location
-- Service Area Demographics
-- Physical Plant Condition
-- Required Capital Expenditures
-- Regulatory Environment
-- Competition
-- Specific Buyer and Seller Motivations
-- Liabilities Assumed
Even if all the necessary information was available, the quantification of value
adjustments to reflect differences between market transaction comparative
indicators and the subject property's comparative indicators would be extremely
difficult. As such, the Market Approach was rejected by Kane Reece due to the
lack of appropriate data. While the Market Approach was not used to develop
separate value
10
<PAGE>
conclusions, market data from recent CATV transactions was collected and
reviewed to provide corroborative evidence to the value conclusion determined by
the Discounted Cash Flow Approach.
Industry practice is to describe market transactions for cable systems in
terms of subscriber (price/number subscribers) and cash flow multiples
(price/cash flow). Kane Reece reviewed the transactions, each of which was
greater than 47,000 subscribers, that were announced during 1995. Based on Kane
Reece's review, the weighted averages of price per subscriber and cash flow
multiples yielded a price per share of $24.39. The result of the Market Approach
corroborates the value conclusion determined by the Discounted Cash Flow
Approach.
Guideline Company Approach. The Guideline Company Approach is a technique
that provides an indicated publicly traded equivalent value of equity based on
direct comparison of the Company's common stock to common stocks of publicly
traded companies involved in the same or similar lines of business. Several
approaches for valuing closely held companies are available under the Guideline
Company Approach. Most approaches involve some variation of earnings power or
underlying assets, or a combination of the two. Kane Reece relied on the
following three approaches for its value indications: capitalization of earnings
before interest, taxes, depreciation, and amortization ('EBITDA'),
capitalization of earnings before interest and taxes and capitalization of
revenue. These three approaches rely on data from the publicly traded guideline
companies. The value multiples utilized in the three approaches relate the
guideline companies' stock price at the valuation date to various fundamental
data such as earnings and revenue. These multiples generally take into account
trends in operating performance as well as the stability or instability of the
underlying data. In this manner, the risks associated with the comparative
companies can be viewed in relation to return expectations as exhibited by the
pricing behavior of a particular company's common stock.
Kane Reece selected six publicly-traded companies (i) whose revenues were
substantially derived from cable operations, (ii) that had stock which was
publicly traded and was listed in Standard & Poor's S&P Reports, (iii) which
were United States companies that conducted their business primarily in the
United States, (iv) which were listed in SIC Code 4841, Cable and Other Pay
Services, (v) for which there was adequate information (five years) about such
corporations publicly available, (vi) which had positive cash flow in two of the
last three years and three of the last five years, and (vii) which were not
actively engaged in negotiations to be acquired. The companies used in this
analysis were Adelphia Communications Corp., Cablevision Systems Corporation,
Comcast, Falcon Cable Systems Co., TCA Cable TV, Inc. and Tele-Communications,
Inc.
The Company was equal to or above the guideline company group in the area
of operating income, however it had lower basic penetration, higher pay-to-basic
and higher basic churn. Based on these results, Kane Reece concluded that the
median multiple of the guideline company group is applicable to the Company. In
concluding a value for the Company's Common Stock, greatest weight was given to
the EBITDA approach (80%) as being most indicative of value in this case since
this multiple captures the unique operating properties of the CATV industry, and
additionally, sales transactions in the CATV industry are generally based on
this type of multiple. The other two multiples were given a weighting of 10%
each. The implied valuation of the Company based on the Guideline Company
Approach was $19.06 per share.
Kane Reece gave the greatest weight to the value obtained utilizing the
Discounted Cash Flow Approach, due to the unique characteristics of the CATV
system and the fact that the Discounted Cash Flow Approach incorporates the
unique combination of revenue sources and competitive forces to which the System
is subject. Kane Reece utilized the Market Approach and the Guideline Company
Approach primarily for corroborative purposes, and did not weight such
approaches highly as stand-alone value indicators.
The summary set forth above does not purport to be a complete description
of the Kane Reece Report. Kane Reece believes that its analysis must be
considered as a whole and that selecting portions of such analysis and of the
factors considered by it, without considering all factors and analysis, could
create an incomplete view of the processes underlying its analysis. The
preparation of a valuation report is a complex process and is not necessarily
susceptible to partial analysis or summary description. In its analysis, Kane
Reece made numerous assumptions with respect to industry performance, general
business and economic conditions, re-regulation and other matters, many of
11
<PAGE>
which are beyond the control of Parent or Kane Reece. Any estimates contained
therein are not necessarily indicative of actual values, which may be
significantly more or less favorable than as set forth therein. Estimates of
values of companies do not necessarily reflect the prices at which such
companies could actually be sold. Because such estimates are inherently subject
to uncertainty, none of Kane Reece, the Company, Parent, Merging Company or any
other person assumes responsibility for their accuracy.
The foregoing description of the Kane Reece Report is qualified by
reference to the full text of such report included as an Exhibit to the Schedule
13E-3 filed with the Securities and Exchange Commission (the 'Commission').
Copies of the Kane Reece Report will be made available for inspection and
copying at the principal executive offices of Parent during regular business
hours by any interested shareholder of the Company, or by his or her
representative who has been so designated in writing, and may be inspected and
copied, and obtained by mail, from the Commission as set forth in 'SPECIAL
FACTORS -- Certain Information Concerning the Company/Financial Information'.
TERMS, PURPOSE AND STRUCTURE OF THE TRANSACTION
The purpose of the Merger is for Parent, through Merging Company, to
acquire the entire equity interest in the Company for fair consideration in a
prompt and orderly manner.
One of the reasons Parent proposed the Merger when it did, and why the
Merger, in the view of the management of Parent, will be beneficial to the
Company and to Parent, is that the Merger will enable the Company to participate
in joint ventures and sharing arrangements with Parent-related entities in
connection with the convergence of cable television and other communications
technologies, including voice and data transmission. These arrangements will be
simplified if there is no perceived conflict with the interests of the Public
Shareholders.
Parent also considered the Merger at this point in order to facilitate
additional financing with respect to CATV systems owned by Comcast and unrelated
to the System. Increased competition in the CATV industry and the need to remain
competitive with the technology utilized by competitors creates a need for large
capital expenditures on equipment and research and development. Accordingly, in
order to compete more effectively, CATV companies are required to raise capital.
Following the Merger, Comcast will have the flexibility of utilizing the System
to provide credit enhancement opportunities.
Parent also considered the expense associated with the filing requirements
of a public company. Since the Company's Common Stock is currently registered
under the Securities Exchange Act of 1934, as amended (the 'Exchange Act'), the
Company has an obligation to comply with the proxy rules of Regulation 14A and
Section 14 of the Exchange Act. In addition, the Company is obligated to file
reports with the Commission pursuant to Sections 13 and 15(d) of the Exchange
Act or to disseminate the information contained in such reports. Following the
Merger, the Company will not be required to incur the expense in connection with
filing such reports and complying with such proxy rules.
The acquisition of the entire equity interest in the Company has been
structured as a short form reverse triangular merger under the MBCA in which
Public Shareholders will receive cash for their Shares and the Company will
become a wholly-owned subsidiary of Parent in order to enable Parent to acquire
100% ownership of the Company.
Because immediately prior to the adoption of the Plan, Merging Company
owned more than 90% of the outstanding shares of the Common Stock of the Company
and the Plan was adopted by the Board of Directors and sole shareholder of
Merging Company, the approval of the Board of Directors, shareholders or Public
Shareholders of the Company is not required.
Upon consummation of the Merger, the Public Shareholders of the Company
will no longer have an equity interest in the Company and, therefore, will not
benefit from future earnings and growth. Instead, under the Plan, each Public
Shareholder will have only the right to receive cash as specified in the Plan
for each Share theretofore held by him or her.
12
<PAGE>
The Company will, as a result of the Merger, become a privately-held
corporation, with no active market for its shares of Common Stock. The
registration of the Company's Common Stock under the Exchange Act will be
terminated. The Company will be relieved of the obligation to comply with the
proxy rules of Regulation 14A under Section 14 of the Exchange Act. Moreover,
the Company will no longer be obligated to file reports with the Commission
pursuant to Sections 13 and 15(d) of the Exchange Act or to disseminate the
information contained in such reports. See 'SPECIAL FACTORS -- Certain Effects
of the Transaction'.
PLAN OF MERGER
Under the MBCA, because the Plan has been adopted by the Board of Directors
and sole shareholder of Merging Company, which owns approximately 96.5% of the
outstanding shares of Common Stock of the Company, no action need be taken by
the directors or shareholders of the Company to approve the Plan.
The following is a summary of certain provisions of the Plan, a copy of
which is attached as Annex 1 hereto and incorporated herein by reference. Such
summary is qualified in its entirety by reference to the full text of the Plan.
The Plan provides that, subject to the right of Merging Company to
terminate and abandon the Plan, Merging Company will be merged with and into the
Company, which will be the surviving corporation. The separate existence of
Merging Company will cease. As a result of the Merger, the Company will become a
wholly-owned subsidiary of Parent. In the Merger, each Share held of record by
Public Shareholders as of the close of business on the day immediately preceding
the Effective Date (subject to the provisions applicable to dissenters rights of
appraisal) will, without any action on the part of any holder thereof, be
automatically converted on the Effective Date into the right, upon surrender of
the Shares, to receive the Merger Consideration in cash, without interest
thereon. Each outstanding share of Common Stock of the Company held by Merging
Company outstanding on the Effective Date will be cancelled and extinguished.
The Common Stock of Merging Company owned by Parent outstanding on the Effective
Date will, without any action on the part of Parent, be converted into one
hundred (100) fully paid shares of Common Stock of the Company.
The Articles of Incorporation and Bylaws of the Company in effect on the
Effective Date will continue in full force and effect, unless and until
subsequently amended, as the Articles of Incorporation and Bylaws, respectively,
of the Company.
The Directors and Officers of Merging Company in office on the Effective
Date will be the Directors and Officers of the Company after the Merger and will
continue in office until their successors have been duly elected and qualified,
subject to removal, resignation or such other change as may otherwise occur, and
all other officers and directors of the Company shall thereupon cease to hold
office.
Any cash provided to the Paying Agent pursuant to the Plan and not
exchanged for Shares within 180 days after the Effective Date will be returned
by the Paying Agent to the Company, which thereafter will act as paying agent.
Pursuant to law, the Company is required to escheat to the appropriate state any
funds set aside in exchange for Shares which are not tendered.
THE EFFECTIVE DATE OF THE MERGER WILL BE THE DATE UPON WHICH THE
CERTIFICATE OF MERGER IS FILED WITH THE DEPARTMENT OF COMMERCE OF THE STATE OF
MICHIGAN, WHICH IS EXPECTED TO BE ON OR ABOUT , 1996.
The Plan will have an identical effect on all Public Shareholders other
than those electing to exercise dissenters rights discussed under 'Dissenting
Shares/Dissenters Rights'.
13
<PAGE>
INTEREST OF CERTAIN PERSONS IN SECURITIES OF THE ISSUER AND THE TRANSACTION
As of November 30, 1995, Parent1 beneficially owned 965,124 shares (or
approximately 96.5% of the outstanding shares) of the Common Stock of the
Company. Since the Purchase Date, Parent, or a wholly-owned subsidiary of
Parent, has continuously owned 90% or more of the Company's Common Stock. As
majority shareholder of the Company and Merging Company, Parent has had the
ability to control the Company and Merging Company since the Purchase Date and
has been (and continues to be) able to control election of all of the directors
of the Company and Merging Company. As a result of their control of the Company,
Parent, Merging Company and certain affiliates have an interest in the Merger
that may be deemed to present an actual or potential conflict of interest and
certain officers and directors of Parent who also serve as officers and
directors of the Company may be deemed to have a similar conflict of interest.
To the knowledge of Parent and Merging Company, there are no contracts,
arrangements, understandings or relationships in connection with the Merger with
respect to the shares of Common Stock of the Company other than the Plan and the
agreement with the transfer agent for the Company's Common Stock to serve as
Paying Agent.
To the knowledge of Parent and Merging Company, after reasonable inquiry,
no executive officer, director or affiliate of the Company or of Parent owns any
Common Stock of the Company, except for the shares of Common Stock of the
Company owned by Merging Company.
On January 4, 1996, Parent formed Merging Company as a wholly-owned
subsidiary. On January 10, 1996, Parent contributed the 965,124 shares of the
Common Stock of the Company which it owned to the capital of Merging Company,
resulting in the ownership by Merging Company of approximately 96.5% of the
outstanding Common Stock of the Company.
CERTAIN EFFECTS OF THE TRANSACTION
After the Effective Date, the business of the Company will continue to be
operated and managed under its current trade or business name by the current
operating management. The Company will continue to acquire and dispose of assets
in the ordinary course, as in the past, but has no current plans with respect to
specific acquisition or disposition transactions. Except for the Merger and as
otherwise described herein, neither Parent nor Merging Company has any present
plans or proposals with respect to the Company that would result in an
extraordinary corporate transaction, such as a merger,
- ------------------
1. Parent is a direct wholly-owned subsidiary of COM MH, Inc. (formerly known as
Maclean Hunter, Inc.), which is a direct wholly-owned subsidiary of MH
Holdings. MH Holdings is a direct wholly-owned subsidiary of Comcast
Communications Properties, Inc., a Delaware corporation ('CCPI'), which is a
direct wholly-owned subsidiary of MHCP. Fifty-five percent (55%) of MHCP is
owned by Comcast Cable Communications, Inc., a Delaware corporation ('CCC,
Inc.'), and forty-five percent (45%) of MHCP is owned by CalPERS. CCC, Inc.
is a direct wholly-owned subsidiary of Comcast. At November 30, 1995, Sural
Corporation, a Delaware corporation ('Sural'), owned 1,845,037 shares of
Comcast's Class A Common Stock and was the sole owner of Comcast's Class B
Common Stock. Mr. Ralph J. Roberts, Chairman of the Board of Directors of
Comcast, and members of his family own all of the voting securities of Sural.
Pursuant to Rule 13d-3 of the Exchange Act, Mr. Roberts is deemed to be the
beneficial owner of Comcast's Class A Common Stock owned by Sural. Mr.
Roberts' beneficial ownership also includes 319,070 shares of Comcast's Class
A Common Stock owned directly. Furthermore, pursuant to Rule 13d-3 of the
Exchange Act, Mr. Roberts is deemed to be the beneficial owner of Comcast's
Class B Common Stock owned by Sural. In addition to the shares owned by
Sural, Mr. Roberts has options to purchase 658,125 shares of Comcast's Class
B Common Stock, of which 556,875 options are currently exercisable or are
exercisable within 60 days of November 30, 1995. Since each share of
Comcast's Class B Common Stock is entitled to fifteen votes, the shares of
Comcast's Class A Common Stock and Comcast's Class B Common Stock owned by
Sural constitute approximately 78% of the voting power of the two classes of
Comcast's voting common stock combined (79% if all other shares of Comcast's
Class A Common Stock which Mr. Roberts is deemed to beneficially own and his
shares underlying options to purchase Comcast's Class B Common Stock
currently exercisable or exercisable within 60 days of November 30, 1995 are
included). Comcast's Class B Common Stock is convertible on a share-for-share
basis into Comcast's Class A Common Stock or Comcast's Class A Special Common
Stock. If Sural and Mr. Roberts were to convert Comcast's Class B Common
Stock which they are deemed to beneficially own into Comcast's Class A Common
Stock, Mr. Roberts would beneficially own 11,507,232 shares of Comcast's
Class A Common Stock (approximately 23.7% of Comcast's Class A Common Stock).
14
<PAGE>
reorganization, relocation of operations, sale or transfer of assets or any
material change in the Company's corporate structure, business or composition of
its management.
As set forth in the Plan, Directors and Officers of Merging Company in
office on the Effective Date will be the Directors and Officers of the Company
after the Merger and will continue in office until their successors have been
duly elected and qualified, subject to removal, resignation or such other change
as may otherwise occur and all other officers and directors of the Company shall
thereupon cease to hold office.
The Common Stock of the Company is currently registered under Section 12(g)
of the Exchange Act. Upon consummation of the Merger, the Company will apply to
the Commission for termination of the registration of its shares under the
Exchange Act. Termination of registration of the shares under the Exchange Act
will eliminate the Company's obligation to furnish information to the public and
the Commission pursuant to Sections 13 and 15(d) of the Exchange Act and would
make certain provisions of the Exchange Act, such as the short-swing profit
recovery provisions of Section 16(b), the requirement of furnishing a proxy
statement in connection with shareholders' meetings pursuant to Section 14(a)
and the requirements of Rule 13e-3 under the Exchange Act with respect to 'going
private' transactions, no longer applicable to the Company. IT IS THE PRESENT
INTENTION OF PARENT TO SEEK TO CAUSE THE COMPANY TO MAKE AN APPLICATION FOR
TERMINATION OF REGISTRATION OF ITS SHARES OF COMMON STOCK AS SOON AS PRACTICABLE
FOLLOWING THE MERGER. When the Merger is consummated, satisfaction of the
requirements for termination of registration is assured.
If the Merger had occurred on September 30, 1995, the Company's unaudited
pro forma total assets and stockholders' equity at September 30, 1995 would have
been $16.7 million and $9.3 million, respectively, representing increases of
$1.0 million from $15.7 million and $8.3 million, respectively. On a pro forma
basis, the Company's book value per share at September 30, 1995 would have been
$9.32 per share, an increase of $1.00 per share from $8.32 per share. If the
Merger had occurred on January 1, 1994, the Company's unaudited pro forma net
loss for the nine months ended September 30, 1995 would have been $924,000
($0.92 per share), representing an increase of $24,000 ($0.02 per share) from
$900,000 ($0.90 per share), while the Company's unaudited pro forma net income
for the year ended December 31, 1994 would have been $237,000 ($0.24 per share),
representing a decrease of $33,000 ($0.03 per share) from $270,000 ($0.27 per
share). The pro forma per share information presented herein assumes that the
Company's average number of shares of Common Stock outstanding is 1.0 million
shares before and after the Effective Date of the Merger. For periods prior to
the Share Purchase, pro forma financial information does not reflect the effects
of the Share Purchase on the Company's results of operations.
The increase in total assets results from the purchase of the outstanding
Shares from the Public Shareholders and related estimated transaction costs on
the Effective Date of the Merger. The increase in stockholders' equity results
from capital contributions to be made by Parent to Merging Company to fund the
Merger. The change in the Company's net (loss) income on a pro forma basis, for
each period discussed above, results from the additional amortization expense
associated with the excess of amounts paid over book value to acquire the
outstanding Shares from the Public Shareholders, net of related income tax
benefit.
Immediately prior to the contribution by Parent to the capital of Merging
Company of the shares of Common Stock of the Company owned by Parent, Parent
owned approximately 96.5% of the outstanding shares of Common Stock of the
Company. On the Effective Date of the Merger, all of the outstanding shares of
the Common Stock of the Company will be owned by Parent, resulting in an
increase in Parent's interest in the book value and earnings of the Company from
approximately 96.5% to 100%. If Parent's interest in the book value of the
Company had been 100% on September 30, 1995, its share of such book value would
have increased by $291,000 (from $8.0 million to $8.3 million). If Parent's
interest in the (loss) earnings of the Company had been 100% from January 1,
1994, its interest in such (loss) earnings would have increased by ($31,500)
(from ($868,500) to ($900,000)) for the nine months ended September 30, 1995 and
by $9,450 (from $260,550 to $270,000) for the year ended December 31, 1994. The
foregoing is based on historical financial information of the Company
15
<PAGE>
and does not give effect to the pro forma effects of the Merger and Share
Purchase on the Company, as discussed above.
The amounts contained in the preceding unaudited pro forma financial
information are not necessarily indicative of future results nor are they
necessarily indicative of results which actually would have occurred had the
Merger been consummated on the dates indicated.
CERTAIN INFORMATION CONCERNING THE COMPANY/FINANCIAL INFORMATION
The Company's Common Stock is the subject of the Plan as described by this
Rule 13E-3 Transaction Statement. As of January 10, 1996 (the record date for
purposes of determining shareholders of the Company entitled to notice of
adoption of the Plan), 1,000,000 shares of the Company's Common Stock were
outstanding and were held of record by 602 persons. A total of 34,876 shares
were then held of record by persons other than Merging Company.
There is no established public trading market for the Company's Common
Stock. The Company's Common Stock is not listed on any securities exchange.
During the year ended December 31, 1994, the Partnership made a
distribution to the Partners of $12.5 million. The Partnership charged this
distribution against the capital accounts of Detroit Cable, CMH and the Company
on a 50%, 40%, 10% basis, respectively. The Company's share of this distribution
was $1.25 million. The proceeds received by the Company were paid to its
shareholders in 1994 as a cash dividend of $1.25 per share of Common Stock.
During the year ended December 31, 1992, the Partnership made a similar
distribution to the partners of $15.0 million. The Company's share of this
distribution was $1.5 million. The proceeds received by the Company were paid to
its shareholders in 1993 as a cash dividend of $1.50 per share of Common Stock.
The Company is generally restricted from paying further dividends to its
shareholders under the terms of the Credit Agreement.
Set forth below is a summary of certain financial information with respect
to the Company and the Partnership. The audited financial statements contained
in the Company's Annual Report on Form 10-K for the fiscal year ended December
31, 1994 and the unaudited financial statements contained in the Company's
Quarterly Report on Form 10-Q for the nine (9) months ended September 30, 1995
are included as Exhibits to the Schedule 13E-3 filed with the Commission. More
comprehensive financial information is included in such reports and other
documents filed by the Company with the Commission, and the following summary is
qualified in its entirely by reference to such reports and other documents and
all of the financial information (including any related notes) contained
therein. Such reports and other documents may be inspected and copies may be
obtained from the offices of the Commission in the manner set forth below.
16
<PAGE>
SUMMARY FINANCIAL INFORMATION
CABLEVISION INVESTMENT OF DETROIT, INC.
<TABLE>
<CAPTION>
NINE MONTHS YEAR ENDED
ENDED SEPTEMBER 30, DECEMBER 31,
-------------------- --------------------
1995(1) 1994 1994(1) 1993
--------- --------- --------- ---------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Equity in net (loss) income of Partnership....................... ($ 1,117) $ 721 $ 813 $ 820
Interest income.................................................. 52 33 48 53
Net (loss) income................................................ (900) 305 270 278
BALANCE SHEET DATA (at end of period):
Working capital.................................................. $ 1,103 $ 1,117 $ 1,117 $ 1,109
Total assets..................................................... 15,663 3,499 17,484 4,445
Total stockholders' equity....................................... 8,316 3,490 9,649 4,435
PER SHARE(2)
Net (loss) income................................................ ($ .90) $ .31 $ .27 $ .28
Book value....................................................... 8.32 3.49 9.65 4.44
</TABLE>
- ------------------
1 As a result of the Share Purchase, a new cost basis was established for the
purchased assets and liabilities. The financial position of the Company as of
December 31, 1994 and September 30, 1995 and its results of operations for the
period from December 22, 1994 through December 31, 1994 and for the nine
months ended September 30, 1995, reflect an allocation of the purchase price
to the assets and liabilities of the Company based on relative estimated
market values. For the year ended December 31, 1994, the effects of such
allocations on the Company's results of operations were not significant. For
purposes hereof, 1994 results of operations for the periods prior and
subsequent to the Share Purchase have been combined. Information for the year
ended December 31, 1993 and the nine months ended September 30, 1994
represents that of the predecessor corporation.
2 Average number of shares of common stock outstanding during each period was
1.0 million.
17
<PAGE>
COMCAST CABLEVISION OF DETROIT
<TABLE>
<CAPTION>
NINE MONTHS YEAR ENDED
ENDED SEPTEMBER 30, DECEMBER 31,
----------------------- -----------------------
1995(1) 1994 1994(1) 1993
----------- ---------- ----------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Service income........................................... $ 50,633 $ 49,211 $ 65,380 $ 65,963
Net (loss) income for allocation to partners............. (11,173) 7,064 7,968 8,038
BALANCE SHEET DATA (at end of period):
Working capital (deficiency)............................. $ (57,026) $ (24,778) $ (58,560) $ (13,221)
Total assets............................................. 293,408 74,300 309,129 79,461
Total partners' capital.................................. 69,841 4,303 85,346 9,738
RATIO OF EARNINGS TO FIXED CHARGES: (2) 4.13 3.30 3.87
</TABLE>
- ------------------
1 As a result of the Share Purchase, a new cost basis was established for the
purchased assets and liabilities. The financial position of the Partnership as
of December 31, 1994 and September 30, 1995, and its results of operations for
the period from December 22, 1994 through December 31, 1994 and for nine
months ended September 30, 1995, reflect an allocation of the purchase price
to the assets and liabilities of the Partnership based on relative estimated
market values. For the year ended December 31, 1994, the effects of such
allocations on the Partnership's results of operations were not significant.
For purposes hereof, 1994 results of operations for the periods prior and
subsequent to the Share Purchase have been combined. Information for year
ended December 31, 1993 and for the nine months ended September 30, 1994
represents that of the predecessor partner.
2 Earnings were inadequate to cover fixed charges for the nine months ended
September 30, 1995. The amount of coverage deficiency was $11.2 million.
The Company is subject to the information filing requirements of the
Exchange Act and is required to file reports and other information with the
Commission relating to its business, financial condition and other matters.
Information, as of particular dates, concerning the Company's directors and
officers, their remuneration, the principal holders of the Company's securities
and any material interest of such persons in transactions with the Company is
required to be described in proxy statements distributed to the Company's
shareholders and filed with the Commission. These reports, proxy statements and
other information should be available for inspection at the Commission's office
at 450 Fifth Street, N.W., Washington, DC 20549, and also should be available
for inspection at the regional offices of the Commission located at Northwestern
Atrium Center, 500 W. Madison Street, Suite 1400, Chicago, Illinois 60661.
Copies of this material may also be obtained by mail, upon payment of the
Commission's customary fees, from the Commission's principal office at 450 Fifth
Street, N.W., Washington, DC 20549.
CERTAIN INFORMATION CONCERNING PARENT AND MERGING COMPANY
Merging Company is a newly-incorporated Michigan corporation and a
wholly-owned direct subsidiary of Parent. Merging Company has not conducted any
business to date other than in connection with the Merger.
Parent is a Michigan corporation and an indirect subsidiary of COM MH, Inc.
(formerly known as MHI). Parent's sole assets are its ownership of approximately
96.5% of the Common Stock of the Company; its ownership of 100% of the issued
and outstanding capital stock of Detroit Cable; and its 66.7% general
partnership interest in the Manager Partnership. The principal executive offices
of Parent and the Merging Company are located at 1500 Market Street,
Philadelphia, PA 19102-2148.
The name, citizenship, business addresses, present principal occupation or
employment, and material positions held during the past five years of each of
the directors and executive officers of the Merging Company and of Parent are
set forth in Annex 2 to this Statement, which is incorporated herein by
reference.
18
<PAGE>
Sural holds approximately 78% of the voting power of the two classes of
voting common stock of Comcast combined. Ralph J. Roberts, Chairman of the Board
and a Director of Comcast, Parent, Merging Company and the Company, and members
of his family own all of the voting securities of Sural. Pursuant to Rule 13d-3
of the Securities Exchange Act of 1934, as amended, he is deemed to be the
beneficial owner of the Comcast common stock owned by Sural, as well as the
beneficial owner of the Common Stock of the Company owned by Parent. The
principal executive offices of Sural are located at 1105 Market Street, Suite
1300, Wilmington, Delaware 19801.
The name, citizenship, business addresses, present principal occupation or
employment, and material positions held during the past five years of each of
the directors and executive officers of Sural are set forth in Annex 2 to this
Statement, which is incorporated herein by reference.
Until immediately prior to the time Merging Company merges with and into
the Company, it is anticipated that Merging Company will have no assets,
liabilities or activities other than those incident to its formation and
capitalization (including the shares of the Common Stock of the Company
contributed to it by Parent) and as contemplated to implement the Plan. No
meaningful financial information regarding Merging Company is available.
Since the commencement of the Company's 1992 fiscal year, Parent (including
Maclean Hunter Cable TV, Inc., Parent's predecessor) has purchased 4,265 shares
(.4265%) of the outstanding Common Stock of the Company. The purchase prices for
such shares ranged from $13.50 to $15.00 per share. Parent, or a wholly-owned
subsidiary of Parent, has owned 90% or more of the Company's outstanding Common
Stock since the Purchase Date. The following table sets forth for the periods
indicated the average purchase price paid for such shares.
<TABLE>
<CAPTION>
AVERAGE PURCHASE PRICE
----------------------
<S> <C>
1992
1st Quarter..................................... No Shares Purchased
2nd Quarter..................................... $15.00
3rd Quarter..................................... $15.00
4th Quarter..................................... No Shares Purchased
1993
1st Quarter..................................... No Shares Purchased
2nd Quarter..................................... No Shares Purchased
3rd Quarter..................................... No Shares Purchased
4th Quarter..................................... $13.50
1994
1st Quarter..................................... $13.50
2nd Quarter..................................... No Shares Purchased
3rd Quarter..................................... No Shares Purchased
4th Quarter..................................... No Shares Purchased
1995
1st Quarter..................................... No Shares Purchased
2nd Quarter..................................... No Shares Purchased
3rd Quarter..................................... No Shares Purchased
4th Quarter..................................... No Shares Purchased
</TABLE>
FEES AND EXPENSES/FINANCING OF THE TRANSACTION
It is estimated that the total funds required to consummate the Plan and
pay all related costs and expenses will be approximately $1.0 million. All costs
and expenses incurred in connection with the transactions contemplated by the
Plan shall be paid by the party incurring such expenses except that Parent, from
its available working capital, will provide Merging Company and the Company
surviving the Merger with the funds required to consummate the Merger, including
the aggregate Merger Consideration.
19
<PAGE>
It is estimated that the costs and expenses incurred in connection with the
Plan will be approximately as set forth below:
<TABLE>
<S> <C>
Aggregate Merger Consideration.......................................................... $ 960,485
Appraisal Fees.......................................................................... 20,200
Legal Fees and Expenses (1)............................................................. 7,500
Transfer Agent Fees and Expenses........................................................ 10,400
Filing Fees............................................................................. 192
Printing Fees........................................................................... 10,000
Miscellaneous........................................................................... 1,223
-------------
Total................................................................................... $ 1,010,000
-------------
-------------
</TABLE>
- ------------------
(1) Does not include fees and disbursements in connection with any proceeding
that may relate to the exercise of appraisal rights in respect of Dissenting
Shares.
PROCEDURES FOR SURRENDERING SHARES IN EXCHANGE FOR PAYMENT OF MERGER
CONSIDERATION OR PURSUANT TO THE EXERCISE OF DISSENTERS RIGHTS
DELIVERY OF LETTER OF TRANSMITTAL AND CERTIFICATES. In order to receive
the cash payment of $27.54 per Share Merger Consideration to which a holder of
Shares is entitled in exchange for the Shares under the terms of the Merger,
certificates for all physically surrendered Shares, together with a properly
completed and duly executed Letter of Transmittal, and any required signature
guarantees and any other required documents must be received by the Paying Agent
at one of its addresses set forth therein.
THE METHOD OF DELIVERY OF ALL DOCUMENTS, INCLUDING CERTIFICATES
REPRESENTING SHARES, IS AT THE OPTION AND RISK OF THE SHAREHOLDER. IF SENT BY
MAIL, IT IS RECOMMENDED THAT CERTIFICATES AND DOCUMENTS BE SENT BY REGISTERED
MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED.
GUARANTEE OF SIGNATURES. No signature guarantee on the Letter of
Transmittal is required (i) if the Letter of Transmittal is signed by the
registered holder(s) of the Shares being surrendered or deposited, as
applicable, and payment is to be made directly to such registered holder(s) or
(ii) if such Shares are delivered for the account of an 'Eligible Institution'.
For purposes of the Merger, 'Eligible Institution' means a financial institution
that is a member of the Securities Transfer Agents Medallion Program, the Stock
Exchange Medallion Program or the New York Stock Exchange, Inc. Medallion
Signature Program (each, an 'Eligible Institution'). IN ALL OTHER CASES ALL
SIGNATURES ON THE LETTER OF TRANSMITTAL MUST BE GUARANTEED BY AN ELIGIBLE
INSTITUTION AS DESCRIBED BELOW AND IN THE LETTER OF TRANSMITTAL.
SIGNATURES ON LETTER OF TRANSMITTAL, STOCK POWERS AND ENDORSEMENTS. If the
Letter of Transmittal is signed by the registered holder of the Shares delivered
thereby, the signature must correspond with the name as written on the face of
the certificate(s) without alteration, enlargement or any change whatsoever. If
any of the Shares delivered are owned of record by two or more joint owners, all
such owners must sign the Letter of Transmittal. If any Shares are registered in
different names on several certificates, it will be necessary to complete, sign
and submit as many separate Letters of Transmittal as there are different
registrations of certificates. If the Letter of Transmittal or any certificates
or stock powers are signed by a trustee, executor, personal representative,
administrator, guardian, attorney-in-fact, officer of a corporation or other
person acting in a fiduciary or representative capacity, such person should so
indicate when signing, and proper evidence satisfactory to the Company of such
person's authority so to act must be submitted.
When the Letter of Transmittal is signed by the registered owner(s) of the
Shares listed and transmitted thereby, no endorsements of certificates or
separate stock powers are required unless payment is to be made to a person
other than the registered owner(s).
If the Letter of Transmittal is signed by a person other than the
registered owner(s) of the certificates listed and submitted therewith, the
certificate(s) must be endorsed or accompanied by
20
<PAGE>
appropriate stock powers and any other required documents, in either case signed
by the registered owner(s) exactly as the name or name(s) of the registered
owner(s) appear(s) on the certificate(s), unless the Letter of Transmittal is
signed by an Eligible Institution. Signatures on such certificates or stock
powers must be guaranteed by an Eligible Institution.
DISSENTING SHAREHOLDERS. In the case of a shareholder who is exercising
dissenters rights granted by the Company under Michigan law, IN ADDITION TO
DELIVERING A COMPLETED LETTER OF TRANSMITTAL AND HIS OR HER SHARES AS DESCRIBED
ABOVE, A COMPLETED DISSENTERS DEMAND FOR PAYMENT FORM TOGETHER WITH ANY OTHER
REQUIRED DOCUMENTS MUST BE RECEIVED BY THE PAYING AGENT BY __, 1996 (THE 'DEMAND
DATE'). See 'SPECIAL FACTORS -- Summary of Procedure to Exercise Dissenters
Rights'.
SPECIAL PAYMENT AND DELIVERY INSTRUCTIONS. If a check is to be issued in
the name of a person other than the signer of the Letter of Transmittal or if a
check is to be sent to someone other than the signer of the Letter of
Transmittal or to an address other than that shown on the Letter of Transmittal,
the appropriate boxes on the Letter of Transmittal should be completed.
DETERMINATION OF VALIDITY. All questions as to the validity, form and
eligibility for payment of any surrendered Shares pursuant to any of the
procedures described above will be determined in the sole discretion of the
Company, whose determination will be final and binding.
MUTILATED, LOST, STOLEN OR DESTROYED CERTIFICATES. If any certificate for
Shares has been mutilated, lost, stolen or destroyed, you should contact State
Street Bank (the 'Paying Agent') at telephone number (800) 426-5523 for further
instructions as to obtaining the documents which must be delivered in order to
complete the delivery, surrender or deposit of your Shares.
REQUEST FOR ASSISTANCE OR ADDITIONAL COPIES. Questions and requests for
assistance or additional copies of the Transaction Statement, the Letter of
Transmittal and the Dissenters Demand for Payment Form may be directed to the
Paying Agent at P.O. Box 9061, Boston, MA 02205-8686. The telephone number of
the Paying Agent is (800) 426-5523.
DISSENTING SHARES/DISSENTERS RIGHTS
Under Michigan law, if a corporation owns at least 90% of each class of
stock of a subsidiary, such corporation can effect a merger with the subsidiary
without the authorization of the board of directors or other shareholders of the
subsidiary, and, consequently, no vote of the shareholders of the Company is
required. The Company has granted the shareholders of the Company the right to
dissent from the adoption of the Plan and obtain payment in cash of the fair
value of their shares (the 'Dissenting Shares') even though dissenters rights
are not required under the MBCA. Such rights, if the statutory procedures are
complied with, could lead to a judicial determination of the fair value
(excluding any appreciation or depreciation in anticipation of the
accomplishment of the Merger, unless exclusion would be inequitable) required to
be paid in cash to such dissenting holders for their Shares. Any such judicial
determination of the fair value of Dissenting Shares could be based upon
considerations other than or in addition to the market value of the Dissenting
Shares and the factors used to determine the Merger Consideration paid pursuant
to the Merger, including asset values and the investment value of the Dissenting
Shares. The value so determined could be more or less than the Merger
Consideration paid pursuant to the Merger. The MBCA provides that a shareholder
who is entitled to dissent and seek payment for his or her shares may not
challenge the corporate action creating his or her right to dissent unless such
action is unlawful or fraudulent with respect to the shareholder or the Company.
While there do not appear to be dispositive judicial decisions under
Section 711 of the MBCA, which authorizes the type of short form merger
described by the Plan, Section 711 is patterned generally after similar
provisions in the Delaware General Corporation Law. Several decisions by
Delaware courts (which are not controlling upon Michigan courts but which could
influence the judgment of a Michigan court) have held that, in certain
instances, a controlling shareholder of a corporation involved in a merger has a
fiduciary duty to the other shareholders that requires the merger
21
<PAGE>
to be fair to shareholders who did not have control. In determining whether a
merger is fair to shareholders who lack control, the Delaware courts have
considered, among other things, the type and amount of consideration to be
received by the shareholders and whether there were fair dealings among the
parties. The Delaware Supreme Court has indicated in recent decisions that in
most cases the remedy available in a merger that is found not to be 'fair' is a
damages remedy based on essentially the same principles.
SUMMARY OF PROCEDURE TO EXERCISE DISSENTERS RIGHTS
Under Section 762 of the MBCA, the shareholders of the Company are not
entitled to exercise dissenters rights. However, the Company has decided to
grant dissenters rights to any shareholder who complies with the procedures set
forth in the MBCA. Dissenting shareholders will be entitled to the rights and
remedies of dissenting shareholders provided in the MBCA, including having the
'fair value' of his or her Dissenting Shares (exclusive of any element of
appreciation or depreciation in anticipation of the accomplishment or
expectation of the Merger, unless exclusion would be inequitable) judicially
determined and paid to such dissenting shareholder. The following is a brief
summary of Sections 761 through 774 of the MBCA which sets forth the procedures
for dissenting from adoption of the Plan and demanding statutory appraisal
rights. This summary is qualified in its entirety by reference to Sections 761
through 774 of the MBCA, the full text of which is attached hereto as Annex 3.
DISSENTING SHAREHOLDERS ARE URGED TO CAREFULLY READ ANNEX 3 HERETO. FAILURE TO
TAKE ANY STEP IN A TIMELY MANNER IN CONNECTION WITH THE EXERCISE OF DISSENTERS
RIGHTS MAY RESULT IN THE LOSS OR WAIVER OF THESE RIGHTS.
SHAREHOLDERS OF RECORD AND BENEFICIAL OWNERS OF SHARES WHO DESIRE TO
EXERCISE THEIR DISSENTERS RIGHTS ('DISSENTING SHAREHOLDERS') MUST DEMAND PAYMENT
FOR THEIR DISSENTING SHARES BY COMPLETING THE LETTER OF TRANSMITTAL AND
DISSENTERS DEMAND FOR PAYMENT FORM INCLUDED HEREIN, AND RETURNING SUCH FORMS AS
INSTRUCTED THEREIN, TOGETHER WITH ANY REQUIRED SIGNATURE GUARANTEES, AND OTHER
REQUIRED DOCUMENTS AND HIS OR HER CERTIFICATES REPRESENTING DISSENTING SHARES SO
THAT THEY ARE RECEIVED BY THE PAYING AGENT BY __, 1996 (THE 'DEMAND DATE').
Certificates representing Dissenting Shares will be returned to Dissenting
Shareholders if the Merger has not been effectuated within sixty (60) days of
the Demand Date. FOR DISSENTERS RIGHTS TO BE PERFECTED, THE PAYING AGENT MUST
HAVE RECEIVED THE COMPLETED DISSENTERS DEMAND FOR PAYMENT FORM, LETTER OF
TRANSMITTAL, THE CERTIFICATES REPRESENTING DISSENTING SHARES AND ANY OTHER
REQUIRED DOCUMENTS BY THE DEMAND DATE. Dissenting Shareholders should mail the
completed Letter of Transmittal, Dissenters Demand for Payment Form, the
certificates representing the Dissenting Shares and any other required documents
to the address and pursuant to the instructions contained in the Letter of
Transmittal.
A record holder of shares may assert dissenters rights as to fewer than all
of the shares registered in his or her name only if such holder dissents with
respect to all of the shares beneficially owned by any one person and notifies
the Company in writing of the name and address of such beneficial owner on whose
behalf such record holder dissents (as set forth in the Dissenters Demand for
Payment Form). In that event, such record holder's rights will be determined as
if the shares as to which it has dissented and its other shares were registered
in the names of different shareholders.
A beneficial owner of shares who is not the record holder may assert
dissenters rights with respect to shares held on his or her behalf and shall be
treated as a Dissenting Shareholder under the MBCA if such beneficial owner
submits to the Paying Agent not later than the Demand Date a written consent of
the record holder (as set forth in the Dissenters Demand for Payment Form). A
beneficial owner may not dissent with respect to some but less than all shares
owned by such beneficial owner, whether or not the shares so owned are
registered in his or her name.
A DISSENTING SHAREHOLDER WHO FAILS TO DEMAND PAYMENT ON A TIMELY BASIS, OR
FAILS, ON A TIMELY BASIS, AS DESCRIBED BY THIS TRANSACTION STATEMENT, TO DEPOSIT
OR DELIVER DISSENTING SHARES, THE LETTER OF TRANSMITTAL, THE DEMAND FOR PAYMENT
FORM AND ANY OTHER REQUIRED DOCUMENTS, SHALL NOT BE ENTITLED TO DISSENTERS
RIGHTS. THE HOLDER OF DISSENTING SHARES SHALL RETAIN ALL OTHER
22
<PAGE>
RIGHTS OF A SHAREHOLDER UNTIL THOSE RIGHTS ARE CANCELLED BY EFFECTUATION OF THE
PROPOSED MERGER.
The MBCA contains detailed provisions concerning the Company's duty to
notify a Dissenting Shareholder, the procedures for determining the value of the
dissenters shares, Dissenting Shareholders' rights to payment, the situations
whereby dissenters rights will terminate (for example, abandonment of the Plan),
the procedures for settling disputes over valuation and other provisions too
numerous to set forth in detail herein. Sections 761 through 774 of the MBCA are
attached hereto as Annex 3. The Company will act in compliance with these
provisions in its handling of dissenters rights.
Shareholders should note that the Parent has concluded that the Merger is
fair to the Public Shareholders. See 'Special Factors -- Fairness of the
Transaction.'
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
Generally, the receipt of cash by a Public Shareholder of the Company in
exchange for his or her Shares pursuant to the Plan or the receipt of cash by
holders of Dissenting Shares (excluding interest, if any, awarded by a court in
a proceeding related thereto) will result in gain or loss for federal income tax
purposes equal to the difference between the amount of cash received in exchange
for the shares sold and such shareholder's adjusted tax basis in such shares.
Provided that the shares constitute capital assets in the hands of the
shareholder, such gain or loss will be capital gain or loss, and will be long-
term capital gain or loss if the holder has held the shares for more than one
year at the time of sale.
The foregoing discussion may not be applicable to certain types of
shareholders, including shareholders who are not citizens or residents of the
United States and foreign corporations, or to entities that are otherwise
subject to special tax treatment under the Internal Revenue Code of 1986, as
amended (such as insurance companies, tax-exempt entities and regulated
investment companies).
Neither Merging Company nor Parent anticipates the recognition of any gain,
loss or income by reason of the Merger.
THE FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE IS INCLUDED FOR GENERAL
INFORMATION ONLY AND IS BASED UPON PRESENT LAW. THE PRECISE TAX CONSEQUENCES OF
THE PLAN WILL DEPEND ON THE PARTICULAR CIRCUMSTANCES OF THE HOLDER. SHAREHOLDERS
ARE URGED TO CONSULT THEIR TAX ADVISORS WITH RESPECT TO THE SPECIFIC TAX
CONSEQUENCES OF THE MERGER TO THEM, INCLUDING THE APPLICATION AND EFFECT OF THE
ALTERNATIVE MINIMUM TAX, AND STATE, LOCAL AND FOREIGN TAX LAWS.
------------------------
Merging Company and Parent have filed with the Commission the Schedule
13E-3 pursuant to Rule 13e-3 under the Exchange Act, and furnished certain
additional information with respect to the Merger, and may file amendments
thereto. The Schedule 13E-3 and any amendments thereto, including exhibits, will
be made available for inspection and copying at the principal executive offices
of Parent during regular business hours by any interested shareholder of the
Company or by his or her representative who has been so designated in writing
and may be inspected and copied at the offices of the Securities and Exchange
Commission at 450 Fifth Street, N.W., Washington, DC 20549, and also should be
available for inspection at the regional offices of the Commission located at
Northwestern Atrium Center, 500 W. Madison Street, Suite 1400, Chicago, Illinois
60661. Copies of this material may also be obtained by mail, upon payment of the
Commission's customary fees, from the Commission's principal office at 450 Fifth
Street, N.W., Washington, DC 20549.
23
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ANNEX 1
PLAN OF MERGER
BACKGROUND OF PLAN
CID Transaction Co. ('Merging Company') is a business corporation organized
under the laws of the State of Michigan. Approximately ninety-six and one-half
percent (96.5%) of the issued and outstanding shares of Common Stock, par value
$.01 ('Subsidiary Common Stock'), of Cablevision Investment of Detroit, Inc., a
Michigan corporation (the 'Subsidiary'), is owned by Merging Company. Merging
Company is a wholly-owned subsidiary of Comcast Cablevision of Taylor, Inc., a
Michigan corporation ('Parent').
Merging Company and the Subsidiary are herein sometimes collectively called
the 'Constituent Corporations'.
Pursuant to Section 711(1) and Section 713(2)(b) of the Michigan Business
Corporation Act, as amended (the 'MBCA'), the Board of Directors and sole
shareholder of Merging Company have approved the merger of Merging Company with
and into Subsidiary (the 'Merger'), with the Subsidiary to exist as the
surviving corporation, pursuant to the terms of this Plan. The MBCA does not
require that this Plan be approved by the shareholders or Board of Directors of
the Subsidiary.
The Parent has concluded that the Merger is fair to the Public Shareholders
(as hereinafter defined) and the Board of Directors of Subsidiary has accepted
that determination.
1. MERGER
1.1 Upon the terms and subject to the conditions hereof, the Constituent
Corporations shall, on the 'Effective Date' (as hereinafter defined), be merged
into a single corporation in accordance with the applicable provisions of the
MBCA by the Merging Company merging into the Subsidiary. The Subsidiary shall be
the surviving corporation (the 'Surviving Corporation'). The separate existence
of Merging Company will cease upon the Effective Date. The Merger shall have the
effects set forth in Section 724 of the MBCA. As of the Effective Date, the
Subsidiary will be a wholly-owned subsidiary of Parent.
1.2 Not less than thirty (30) days prior to the Effective Date, Parent and
Merging Company shall file with the Securities and Exchange Commission a Rule
13e-3 Transaction Statement (the 'Schedule 13E-3') with respect to the Merger
and shall take all steps necessary to cause a Rule 13e-3 Transaction Statement
(the 'Transaction Statement'), as such Transaction Statement may be corrected,
amended and supplemented, to be disseminated to record holders of Subsidiary
Common Stock as, and to the extent, required by applicable law.
2. ARTICLES OF INCORPORATION, BYLAWS, DIRECTORS AND OFFICERS
2.1 Articles of Incorporation
The Articles of Incorporation of the Subsidiary in effect on the Effective
Date shall continue in full force and effect, unless and until subsequently
amended, as the Articles of Incorporation of the Surviving Corporation.
2.2 Bylaws
The Bylaws of the Subsidiary in effect on the Effective Date shall continue
in full force and effect, unless and until subsequently amended, as the Bylaws
of the Surviving Corporation.
2.3 Directors and Officers
The Directors and Officers of Merging Company in office on the Effective
Date shall become the Directors and Officers of the Surviving Corporation and
shall continue in office until their successors have been duly elected or
appointed and qualified, subject to removal, resignation or such other change as
may otherwise occur, or as otherwise provided by law, and on the Effective Date
of the Merger all
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other officers and directors of Subsidiary shall thereupon cease to hold office.
3. STATUS OF OUTSTANDING CAPITAL STOCK
3.1 The designation and number of outstanding shares of capital stock of
each of the Subsidiary and Merging Company is as follows:
(a) The Subsidiary has 1,000,000 shares of Common Stock, par value
$.01 per share, issued and outstanding. The Common Stock of Subsidiary is
not entitled to vote on the Merger.
(b) The Merging Company has 100 shares of Common Stock issued and
outstanding. The Common Stock of Merging Company is entitled to one (1)
vote per share on the Merger.
3.2 On the Effective Date, by virtue of the Merger and without any action
on the part of the Merging Company, the Surviving Corporation or Parent:
(a) Each share of Subsidiary Common Stock, par value $.01 per share (a
'Share'), issued and outstanding immediately prior to the Effective Date of
the Merger (other than Shares to be cancelled pursuant to Section 3.2
hereof and Shares held by any holder who becomes entitled to payment of the
fair value for his or her Shares pursuant to the exercise of dissenters
rights) shall be cancelled and extinguished and be converted into and
become solely a right to receive $27.54 in cash without interest thereon
(the 'Merger Consideration'), payable to the holder thereof (individually,
a 'Public Shareholder' and collectively, the 'Public Shareholders') upon
surrender of the certificates (or other indicia of ownership of Shares
acceptable to Merging Company) formerly representing such Shares as
provided in Section 5 hereof.
(b) Each Share issued and outstanding immediately prior to the
Effective Date of the Merger and held by Merging Company shall be cancelled
and retired, and no payment shall be made with respect thereto.
(c) Each share of Common Stock of Merging Company owned by Parent
issued and outstanding immediately prior to the Effective Date shall be
converted into one (1) share of Common Stock of the Surviving Corporation.
4. DISSENTING SHARES
4.1 Notwithstanding anything in this Plan to the contrary, Shares
('Dissenting Shares') held by shareholders who shall have delivered a written
demand for payment for such Shares ('Dissenting Shareholders'), and any other
required documents, as, in the manner, and within the time period, provided in
Sections 762 through 774 of the MBCA and who shall not have lost such right to
appraisal shall not be converted into or represent a right to receive the Merger
Consideration, but the holders thereof shall be entitled solely to such rights
as are granted by Sections 762 through 774 of the MBCA.
4.2 The Subsidiary shall give Parent and Merging Company (i) prompt notice
of receipt of any written demands for payment and any other instruments served
pursuant to Sections 762 through 774 of the MBCA and (ii) the opportunity to
direct all negotiations and proceedings with respect to demands for appraisal
under Sections 762 through 774 of the MBCA. The Subsidiary shall not, except
with the prior written consent of Parent, voluntarily make any payment with
respect to any demands for payment or offer to settle or settle any such
demands.
5. PAYMENT FOR SHARES
5.1 Prior to the Effective Date, Parent and Merging Company shall designate
a bank or trust company to act as Paying Agent in the Merger (the 'Paying
Agent') pursuant to a written agreement (the 'Paying Agent Agreement'). At or
prior to the Effective Date, Parent will take all steps necessary to enable and
cause Merging Company to provide the Paying Agent with the amounts necessary to
make the payments contemplated by Section 3.1, which amounts shall be placed by
the Paying Agent in a separate account (the 'Fund'). Out of the Fund, the Paying
Agent shall make the payments referred to in Section 3.1. The Fund shall not be
used for any other purpose. The Paying Agent may
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invest portions of the Fund, as directed by Parent and/or Merging Company (so
long as such directions do not impair the Paying Agent's ability to make other
payments referred to in Section 3 hereof or otherwise impair the rights of
holders of Shares as described in such Section 3.1). Any net earnings resulting
from, or interest or income produced by, such investments shall be paid to
Parent as and when requested by Parent. The Surviving Corporation shall replace
any monies lost through any investment pursuant to this Section.
5.2 Not less than twenty (20) days prior to the Effective Date, the
Surviving Corporation shall cause the Paying Agent to mail to each record holder
of Shares, (i) the Transaction Statement, (ii) a Notice of Adoption of Plan of
Merger approved by Parent and Merging Company, (iii) a form letter of
transmittal approved by Parent and Merging Company for use by Public
Shareholders and holders of Dissenting Shares (the 'Letter of Transmittal')
(which shall specify the procedure for delivery of the certificates representing
Shares ('Certificates') or Dissenting Shares ('Dissenting Certificates') and any
other required documents to the Paying Agent) and (iv) any other required
documents, instruments or disclosures requested by Parent and Merging Company to
be transmitted to shareholders of Subsidiary.
5.3 Promptly after the Effective Date, the Parent shall cause the Paying
Agent to mail to each record holder of Shares immediately prior to the Effective
Date, a Notice of Merger approved by Parent and Merging Company, together with
any other documents, instruments or disclosures requested by Parent and Merging
Company to be transmitted to shareholders of Subsidiary.
5.4 Upon surrender to the Paying Agent of a Certificate, together with the
Letter of Transmittal and any other duly executed required documents, the holder
of such Certificate shall be entitled to receive in exchange therefor, on the
Effective Date, cash in an amount equal to the Merger Consideration, and such
Certificate shall forthwith be cancelled. No interest will be paid or accrued on
the cash payable upon the surrender of Shares. Until surrendered in accordance
with the provisions of this Section 5, each Share (other than Shares held by
Merging Company or Dissenting Shares) shall represent for all purposes only the
right to receive the Merger Consideration, without any interest thereon.
5.5 Subject to full compliance with this Section 5, any cash provided to
the Paying Agent pursuant to this Section 5 and not exchanged for Shares within
180 days after the Effective Date will be returned by the Paying Agent to the
Surviving Corporation which thereafter will act as paying agent. The Surviving
Corporation will escheat to the appropriate state, in accordance with applicable
law, any funds set aside to exchange for Shares which are not tendered.
Notwithstanding the foregoing, neither the Paying Agent nor any party hereto
shall be liable to a holder of Shares for any Merger Consideration delivered to
a public official pursuant to applicable abandoned property, escheat and similar
laws.
5.6 In connection with the Merger, the Subsidiary will cause its transfer
agent promptly to furnish Parent and Merging Company with mailing labels,
security position listings and any available listing or computer file containing
the names and addresses of the record holders of Shares as of a recent date
immediately prior to the Effective Date and will cause its transfer agent to
furnish Parent and Merging Subsidiary with such additional information and
assistance as Parent or its agents may reasonably request (including, without
limitation, any of the foregoing) in transmitting the Transaction Statement and
the Letter of Transmittal to Public Shareholders.
6. NO FURTHER RIGHTS OR TRANSFERS
At and after the Effective Date and without affecting the conversion
referred to in Section 3.3 hereof, each holder of issued and outstanding Shares
of Subsidiary Common Stock immediately prior to the Effective Date shall cease
to have any rights as a shareholder of the Subsidiary, except for the right to
surrender his or her Shares in exchange for the Merger Consideration or to
perfect his or her right to receive payment for Shares pursuant to dissenters
rights granted by the Subsidiary under Sections 762 through 767 of the MBCA and
Section 4 hereof if such holder has validly exercised and perfected and not
withdrawn his or her right to receive payment therefor. There shall be no
transfers on
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the stock transfer books of the Surviving Corporation of the Shares from and
after the Effective Date. If, after the Effective Date and without affecting the
conversion referred to in Section 3.3 hereof, Certificates formerly representing
Shares are presented to the Surviving Corporation, they shall be cancelled and
exchanged solely for the Merger Consideration (unless such Certificates are
being deposited solely in connection with the exercise of dissenters rights as
Dissenting Certificates or represent Shares to be cancelled pursuant to Section
3.2).
7. ADJUSTMENTS
If, between the date of adoption of this Plan and the Effective Date, the
outstanding Shares shall be changed into a different number of shares or a
different class by reason of any reclassification, recapitalization, split-up,
combination, exchange of shares or readjustment, or a stock dividend thereon
shall be declared with a record date prior to the Effective Date, the amount of
consideration to be received pursuant to this Plan in exchange for each
outstanding Share shall be correspondingly adjusted.
8. EFFECTIVE DATE
The Board of Directors of Merging Company shall take all action necessary
in order that the Merger provided for herein shall be effective pursuant to the
laws of the State of Michigan. The Effective Date shall be the date upon which a
Certificate of Merger is filed with the Department of Commerce of the State of
Michigan (the 'Effective Date').
9. TERMINATION AND AMENDMENT
Notwithstanding anything to the contrary contained herein, (i) this Plan of
Merger and the Merger provided for herein may be terminated and abandoned at any
time prior to the Effective Date by the Board of Directors of Merging Company,
and (ii) this Plan of Merger may be amended at any time prior to its Effective
Date by the Board of Directors of Merging Company. To the full extent permitted
by applicable law, after the Effective Date the provisions of this Plan of
Merger may be interpreted, amended or waived by the Board of Directors of the
Surviving Corporation.
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ANNEX 2
DIRECTORS AND EXECUTIVE OFFICERS
The following sets forth for each director and executive officer of Parent,
Sural, Merging Company and the Company, the name, business address, position,
present principal occupation or employment and five-year employment history.
Except as otherwise noted, (i) each person listed below is a citizen of the
United States and (ii) the business address of each person listed below is 1500
Market Street, Philadelphia, Pennsylvania 19102-2148.
Ralph J. Roberts was elected as Chairman of the Board of Directors of the
Company in December 1994. Mr. Roberts has served as the Chairman of the Board of
Directors of Parent since December 1994 and of Merging Company since its
incorporation. Mr. Roberts has served as a Director and Chairman of the Board of
Directors of Comcast for more than five years. Mr. Roberts is the President and
a Director of Sural. Mr. Roberts devotes a major portion of his time to the
business and affairs of Comcast. Mr. Roberts is also a Director of Comcast UK
Cable Partners Limited and Storer Communications, Inc.
Julian A. Brodsky was elected as Vice Chairman of the Board of Directors,
Assistant Treasurer and Assistant Secretary of the Company in December 1994. Mr.
Brodsky has served as the Vice Chairman, Assistant Treasurer, Assistant
Secretary and Director of Parent since December 1994 and of Merging Company
since its incorporation. Mr. Brodsky has served as a Director and Vice Chairman
of the Board of Directors of Comcast for more than five years. Mr. Brodsky
presently serves as the Treasurer and a Director of Sural. Mr. Brodsky devotes a
major portion of his time to the business and affairs of Comcast. Mr. Brodsky is
also a Director of Comcast UK Cable Partners Limited, Storer Communications,
Inc. and RBB Fund, Inc.
Brian L. Roberts was elected to the Board of Directors and President of the
Company in December 1994. Mr. Roberts has served as Vice Chairman and Director
of the Parent since December 1994 and as President and Director of the Merging
Company since its incorporation. Mr. Roberts has served as President and as a
Director of Comcast for more than five years. Mr. Roberts presently serves as
Vice President and a Director of Sural. Mr. Roberts devotes a major portion of
his time to the business and affairs of Comcast. Mr. Roberts is also a Director
of Turner Broadcasting System, Inc., Comcast UK Cable Partners Limited and
Storer Communications, Inc. He is the son of Mr. Ralph J. Roberts.
John R. Alchin was elected Senior Vice President and Treasurer of the
Company in December 1994. Mr. Alchin has served as Senior Vice President and
Treasurer of Parent since December 1994 and of Merging Company since its
incorporation. Mr. Alchin has served as a Senior Vice President and Treasurer of
Comcast for more than five years. Mr. Alchin is a citizen of Australia. Mr.
Alchin devotes a substantial amount of his time to Comcast. Mr. Alchin is a
director of Comcast UK Cable Partners Limited.
Lawrence S. Smith was elected as Senior Vice President of the Company in
December 1994. Mr. Smith has served as Senior Vice President of Parent since
December 1994 and of Merging Company since its incorporation. Mr. Smith has
served as Executive Vice President of Comcast since December 1995. Prior to his
appointment as Executive Vice President of Comcast, Mr. Smith served as Senior
Vice President of Comcast for more than five years. Mr. Smith devotes a
substantial amount of his time to Comcast. Mr. Smith is a director of Comcast UK
Cable Partners Limited.
Stanley L. Wang was elected to the Board of Directors, and Senior Vice
President and Secretary of the Company in December 1994. Mr. Wang has served as
the Senior Vice President, Secretary and Director of Parent since December 1994
and of Merging Company since its incorporation. Mr. Wang has served as Senior
Vice President, Secretary and General Counsel of Comcast for more than five
years. Mr. Wang devotes a major portion of his time to the business and affairs
of Comcast. Mr. Wang is a Director of Storer Communications, Inc.
Suzanne F. Roberts has been, for more than five years, Vice President and a
Director of Sural,
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Comcast's largest shareholder. Ms. Roberts is the spouse of Ralph J. Roberts.
Thomas G. Baxter was elected President of the Parent in December 1994. Mr.
Baxter has also served as the President of CCC, Inc. for more than five years.
Gary Mizga was elected as Regional Senior Vice President of Parent in
December 1994. Mr. Mizga has also served as Regional Senior Vice President of
CCC, Inc. for more than five years.
Michael S. Tallent was elected as Senior Vice President of Parent in
December 1994. Mr. Tallent has also served as Senior Vice President of CCC, Inc.
since 1991. Prior to joining CCC, Inc. in 1991, Mr. Tallent served as President
of Storer Communications, Inc. from 1988 through 1991.
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ANNEX 3
DISSENTERS RIGHTS PROVISIONS OF MICHIGAN BUSINESS CORPORATION ACT
450.1761. DEFINITIONS
Sec. 761. As used in sections 762 to 774:3
(a) 'Beneficial shareholder' means the person who is a beneficial
owner of shares held by a nominee as the record shareholder.
(b) 'Corporation' means the issuer of the shares held by a dissenter
before the corporate action, or the surviving corporation by merger of that
issuer.
(c) 'Dissenter' means a shareholder who is entitled to dissent from
corporate action under section 7624 and who exercises that right when and
in the manner required by sections 764 through 7725.
(d) 'Fair value', with respect to a dissenter's shares, means the
value of the shares immediately before the effectuation of the corporate
action to which the dissenter objects, excluding any appreciation or
depreciation in anticipation of the corporate action unless exclusion would
be inequitable.
(e) 'Interest' means interest from the effective date of the corporate
action until the date of payment, at the average rate currently paid by the
corporation on its principal bank loans or, if none, at a rate that is fair
and equitable under all the circumstances.
(f) 'Record shareholder' means the person in whose name shares are
registered in the records of a corporation or the beneficial owner of
shares to the extent of the rights granted by a nominee certificate on file
with a corporation.
(g) 'Shareholder' means the record or beneficial shareholder.
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Amended by P.A. 1988, No. 58, Section 1, Eff. April 1; P.A. 1989, No. 121,
Section 1, Eff. Oct. 1.; P.A. 1993, No. 91, Section 1, Eff. Oct. 1.
3. Sections 450.1762 to 450.1774
4. Section 450.1762.
5. Sections 450.1764 through 450.1772
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450.1762. SHAREHOLDER'S RIGHT TO DISSENT, FAIR VALUE OF SHARES; EXCEPTIONS TO
RIGHT TO DISSENT
Sec. 762. (1) A shareholder is entitled to dissent from, and obtain payment
of the fair value of his or her shares in the event of, any of the following
corporate actions:
(a) Consummation of a plan of merger to which the corporation is a
party if shareholder approval is required for the merger by section 703a1
or the articles of incorporation and the shareholder is entitled to vote on
the merger, or the corporation is a subsidiary that is merged with its
parent under section 711.2
(b) Consummation of a plan of share exchange to which the corporation
is a party as the corporation whose shares will be acquired, if the
shareholder is entitled to vote on the plan.
(c) Consummation of a sale or exchange of all, or substantially all,
of the property of the corporation other than in the usual and regular
course of business, if the shareholder is entitled to vote on the sale or
exchange, including a sale in dissolution but not including a sale pursuant
to court order.
(d) An amendment of the articles giving rise to a right to dissent
pursuant to section 621.3
(e) A transaction giving rise to a right to dissent pursuant to
section 754.4
(f) Any corporate action taken pursuant to a shareholder vote to the
extent the articles, bylaws, or a resolution of the board provides that
voting or nonvoting shareholders are entitled to dissent and obtain payment
for their shares.
(g) The approval of a control share acquisition giving rise to a right
to dissent pursuant to section 799.5
(2) Unless otherwise provided in the articles, bylaws, or a resolution of
the board, a shareholder may not dissent from any of the following:
(a) Any corporate action set forth in subsection (1)(a) to (e) as to
shares which are listed on a national securities exchange or held of record
by not less than 2,000 persons on the record date fixed to determine the
shareholders entitled to receive notice of and to vote at the meeting of
shareholders at which the corporate action is to be acted upon.
(b) A transaction described in subsection (1)(a) in which shareholders
receive cash or shares that satisfy the requirements of subdivision (a) or
any combination thereof.
(c) A transaction described in subsection (1)(b) in which shareholders
receive cash or shares that satisfy the requirements of subdivision (a) or
any combination thereof.
(d) A transaction described in subsection (1)(c) which is conducted
pursuant to a plan of dissolution providing for distribution of
substantially all of the corporation's net assets to shareholders in
accordance with their respective interests within 1 year after the date of
the transaction, where the transaction is for cash or shares that satisfy
the requirements of subdivision (a) or any combination thereof.
(3) A shareholder entitled to dissent and obtain payment for his or her
shares pursuant to subsection (1)(a) to (e) may not challenge the corporate
action creating his or her entitlement unless the action is unlawful or
fraudulent with respect to the shareholder or the corporation.
(4) A shareholder who exercises his or her right to dissent and seek
payment for his or her shares pursuant to subsection (1)(f) may not challenge
the corporate action creating his or her entitlement unless that action is
unlawful or fraudulent with respect to the shareholder or the corporation.
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Amended by P.A. 1988, No. 58, Section 1, Eff. April 1; P.A. 1989, No. 121,
Section 1, Eff. Oct. 1.
1. Section 450.1703a.
2. Section 450.1711.
3. Section 450.1621.
4. Section 450.1754.
5. Section 450.1799.
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450.1763. DISSENTER'S RIGHTS; PARTIAL DISSENTER, BENEFICIAL SHAREHOLDER
Sec. 763. (1) A record shareholder may asset dissenters' rights as to fewer
than all the shares registered in his or her name only if he or she dissents
with respect to all shares beneficially owned by any 1 person and notifies the
corporation in writing of the name and address of each person on whose behalf he
or she asserts dissenters' rights. The rights of a partial dissenter under this
subsection are determined as if the shares as to which he or she dissents and
his or her other shares were registered in the names of different shareholders.
(2) A beneficial shareholder may assert dissenters' rights as to shares
held on his or her behalf only if all of the following apply:
(a) He or she submits to the corporation the record shareholder's
written consent to the dissent not later than the time the beneficial
shareholder asserts dissenters' rights.
(b) He or she does so with respect to all shares of which he or she is
the beneficial shareholder or over which he or she has power to direct the
vote.
450.1764. CORPORATE ACTION CREATING DISSENTERS' RIGHTS; VOTE AT SHAREHOLDERS'
MEETING, NOTICE; ACTION TAKEN WITHOUT SHAREHOLDER VOTE, NOTICE
Sec. 764. (1) If proposed corporate action creating dissenters' rights
under section 7621 is submitted to a vote at a shareholders' meeting, the
meeting notice must state that shareholders are or may be entitled to assert
dissenters' rights under this act and shall be accompanied by a copy of sections
761 to 774.2
(2) If corporate action creating dissenters' rights under section 762 is
taken without a vote of shareholders, the corporation shall notify in writing
all shareholders entitled to assert dissenters' rights that the action was taken
and send them the dissenters' notice described in section 766.3 A shareholder
who consents to the corporate action is not entitled to assert dissenters
rights.
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Amended by P.A. 1989, No. 121, Section 1, Eff. Oct. 1; P.A. 1993, No. 91,
Section 1, Eff. Oct. 1.
1. Section 450.1762.
2. Section 450.1761 to 450.1774.
3. Section 450.1766.
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450.1765. SHAREHOLDER ASSERTING DISSENTER RIGHTS; WRITTEN NOTICE OF INTENT TO
DEMAND PAYMENT FOR SHARES, SUBMISSION PRIOR TO VOTE AT SHAREHOLDER
MEETING
Sec. 765. (1) If proposed corporate action creating dissenters' rights
under section 7611 is submitted to a vote at a shareholders' meeting, a
shareholder who wishes to assert dissenters' rights must deliver to the
corporation before the vote is taken written notice of his or her intent to
demand payment for his or her shares if the proposed action is effectuated and
must not vote his or her shares in favor of the proposed action.
(2) A shareholder who does not satisfy the requirements of subsection (1)
is not entitled to payment for his or her shares under this act.
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Amended by P.A. 1989, No. 121, Section 1, Eff. Oct. 1.
1. Section 450.1762.
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450.1766. DELIVERY OF WRITTEN DISSENTERS NOTICE BY CORPORATION; NOTICE CONTENTS
Sec. 766. (1) If proposed corporate action creating dissenters' rights
under section 7621 is authorized at a shareholders' meeting, the corporation
shall deliver a written dissenters' notice to all shareholders who satisfied the
requirements of section 765.2
(2) The dissenters' notice must be sent no later than 10 days after the
corporate action was taken, and must provide all of the following:
(a) State where the payment demand must be sent and where and when
certificates for shares represented by certificates must be deposited.
(b) Inform holders of shares without certificates to what extent
transfer of the shares will be restricted after the payment demand is
received.
(c) Supply a form for the payment demand that includes the date of the
first announcement to news media or to shareholders of the terms of the
proposed corporate action and requires that the person asserting
dissenters' rights certify whether he or she acquired beneficial ownership
of the shares before the date.
(d) Set a date by which the corporation must receive the payment
demand, which date may not be fewer than 30 nor more than 60 days after the
date the subsection (1) notice is delivered.
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Amended by P.A. 1989, No. 121, Section 1, Oct. 1.
1. Section 450.1762.
2. Section 450.1765.
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450.1767. SHAREHOLDERS SENT DISSENTER'S NOTICE; DEMAND FOR PAYMENT,
CERTIFICATION OF BENEFICIAL OWNERSHIP DATE, DEPOSIT OF CERTIFICATES;
RIGHTS RETAINED; FAILURE TO DEMAND PAYMENT
Sec. 767. (1) A shareholder sent a dissenter's notice described in section
7661 must demand payment, certify whether he or she acquired beneficial
ownership of the shares before the date required to be set forth in the
dissenters' notice pursuant to section 766(2)(c),2 and deposit his or her
certificates in accordance with the terms of the notice.
(2) The shareholder who demands payment and deposits his or her share
certificates under subsection (1) retains all other rights of a shareholder
until these rights are canceled or modified by the taking of the proposed
corporate action.
(3) A shareholder who does not demand payment or deposit his or her share
certificates where required, each by the date set in the dissenters' notice, is
not entitled to payment for his or her shares under this act.
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Amended by P.A. 1985, No. 76, Section 1, Imd. Eff. July 5; P.A. 1989, No. 121,
Section 1, Eff. Oct. 1.
1. Section 450.1766.
2. Section 450.1766(2)(c).
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450.1768. TRANSFER OF SHARES WITHOUT CERTIFICATES, RESTRICTION; RIGHTS RETAINED
Sec. 768. (1) The corporation may restrict the transfer of shares without
certificates from the date the demand for their payment is received until the
proposed corporate action is taken or the restrictions released under section
770.1
(2) The person for whom dissenters' rights are asserted as to shares
without certificates retains all other rights of a shareholder until these
rights are canceled or modified by the taking of the proposed corporate action.
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Amended by P.A. 1985, No. 76, Section 1, Imd. Eff. July 5; P.A. 1989, No. 121,
Section 1, Eff. Oct. 1.
1. Section 450.1770.
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<PAGE>
450.1769. PAYMENT TO DISSENTERS OF ESTIMATED FAIR VALUE OF SHARES PLUS ACCRUED
INTEREST; ACCOMPANYING INFORMATION
Sec. 769. (1) Except as provided in section 771,1 within 7 days after the
proposed corporate action is taken or a payment demand is received, whichever
occurs later, the corporation shall pay each dissenter who complied with section
7672 the amount the corporation estimates to be the fair value of his or her
shares, plus accrued interest.
(2) The payment must be accompanied by all of the following:
(a) The corporation's balance sheet as of the end of a fiscal year
ending not more than 16 months before the date of payment, an income
statement for that year, a statement of changes in shareholder's equity for
that year, and if available the latest interim financial statements.
(b) A statement of the corporation's estimate of the fair value of the
shares.
(c) An explanation of how the interest was calculated.
(d) A statement of the dissenter's right to demand payment under
section 772.3
- ------------------
Amended by P.A. 1989, No. 121, Section 1, Eff. Oct. 1; P.A. 1993, No. 91,
Section 1, Eff. Oct. 1.
1. Section 450.1771.
2. Section 450.1767.
3. Section 450.1772.
A-3-8
<PAGE>
450.1770. FAILURE OF CORPORATION TO TAKE PROPOSED ACTION; RETURN OF
CERTIFICATES, RELEASE OF TRANSFER RESTRICTIONS; TAKING ACTION AFTER
RETURN AND RELEASE, NEW DISSENTER'S NOTICE
Sec.1770. (1) If the corporation does not take the proposed action within
60 days after the date set for demanding payment and depositing share
certificates, the corporation shall return the deposited certificates and
release the transfer restrictions imposed on shares without certificates.
(2) If after returning deposited certificates and releasing transfer
restrictions, the corporation takes the proposed action, it must send a new
dissenters' notice under section 7661 and repeat the payment demand procedure.
- ------------------
Amended by P.A. 1989, No. 121, Section 1, Eff. Oct. 1.
1. Section 450.1766.
A-3-9
<PAGE>
450.1771. ELECTION BY CORPORATION TO WITHHOLD PAYMENT FROM CERTAIN DISSENTERS;
ESTIMATE OF FAIR VALUE OF SHARES, OFFER OF PAYMENT, STATEMENT
Sec. 771. (1) A corporation may elect to withhold payment required by
section 7691 from a dissenter unless he or she was the beneficial owner of the
shares before the date set forth in the dissenters' notice pursuant to section
766(2)(c).2
(2) To the extent the corporation elects to withhold payment under
subsection (1), after taking the proposed corporate action, it shall estimate
the fair value of the shares, plus accrued interest, and shall offer to pay this
amount to each dissenter who shall agree to accept it in full satisfaction of
his or her demand. The corporation shall send with its offer a statement of its
estimate of the fair value of the shares, an explanation of how the interest was
calculated, and a statement of the dissenter's right to demand payment under
section 772.3
- ------------------
Amended by P.A. 1989, No. 121, Section 1, Eff. Oct. 1.
1. Section 450.1769.
2. Section 450.1766(2)(c).
3. Section 450.1772.
A-3-10
<PAGE>
450.1772. ESTIMATE OF FAIR VALUE, WRITTEN NOTICE; DEMAND FOR PAYMENT,
CONDITIONS; WAIVER OF RIGHT TO DEMAND PAYMENT
Sec. 772. (1) A dissenter may notify the corporation in writing of his or
her own estimate of the fair value of his or her shares and amount of interest
due, and demand payment of his or her own estimate of the fair value of his or
her shares and amount of interest due, and demand payment of his or her
estimate, less any payment under section 769,1 or reject the corporation's offer
under section 7712 and demand payment of the fair value of his or her shares and
interest due, if any 1 of the following applies:
(a) The dissenter believes that the amount paid under section 769 or
offered under section 771 is less than the fair value of his or her shares
or that the interest due is incorrectly calculated.
(b) The corporation fails to make payment under section 769 within 60
days after the date set for demanding payment.
(c) The corporation, having failed to take the proposed action, does
not return the deposited certificates or release the transfer restrictions
imposed on shares without certificates within 60 days after the date set
for demanding payment.
(2) A dissenter waives his or her right to demand payment under this
section unless he or she notifies the corporation of his or her demand in
writing under subsection (1) within 30 days after the corporation made or
offered payment for his or her shares.
- ------------------
P.A. 1972, No. 284, Section 722, added by P.A. 1989, No. 121, Section 1, Eff.
Oct. 1, 1989.
1. Section 450.1769.
2. Section 450.1771.
A-3-11
<PAGE>
450.1773. UNSETTLED DEMAND FOR PAYMENT, APPRAISAL PROCEEDINGS; COMMENCEMENT,
PARTIES, JURISDICTION, APPRAISERS, DISCOVERY RIGHTS, JUDGMENT AMOUNT
Sec. 773. (1) If a demand for payment under section 7721 remains unsettled,
the corporation shall commence a proceeding within 60 days after receiving the
payment demand and petition the court to determine the fair value of the shares
and accrued interest. If the corporation does not commence the proceeding within
the 60-day period, it shall pay each dissenter whose demand remains unsettled
the amount demanded.
(2) The corporation shall commence the proceeding in the circuit court of
the county in which the corporation's principal place of business or registered
office is located. If the corporation is a foreign corporation without a
registered office or principal place of business in this state, it shall
commence the proceeding in the county in this state where the principal place of
business or registered office of the domestic corporation whose shares are to be
valued was located.
(3) The corporation shall make all dissenters, whether or not residents of
this state, whose demands remain unsettled parties to the proceeding as in an
action against their shares and all parties shall be served with a copy of the
petition. Nonresidents may be served by registered or certified mail or by
publication as provided by law.
(4) The jurisdiction of the court in which the proceeding is commenced
under subsection (2) is plenary and exclusive. The court may appoint 1 or more
persons as appraisers to receive evidence and recommend decision on the question
of fair value. The appraisers have the powers described in the order appointing
them, or in any amendment to it. The dissenters are entitled to the same
discovery rights as parties in other civil proceedings.
(5) Each dissenter made a party to the proceeding is entitled to judgment
for the amount, if any, by which the court finds the fair value of his or her
shares, plus accrued interest, of his or her after-acquired shares for which the
corporation elected to withhold payment under section 771.2
- ------------------
P.A. 1972, No. 284, Section 773, added by P.A. 1989, No. 121, Section 1, Eff.
Oct. 1989.
1. Section 450.1772.
2. Section 450.1771.
A-3-12
<PAGE>
450.1773A. APPOINTMENT OF REFEREE TO CONDUCT PROCEEDINGS; POWERS AND DUTIES
Sec. 773a. (1) In a proceeding brought pursuant to section 773,1 the court
may, pursuant to the agreement of the parties, appoint a referee selected by the
parties and subject to the approval of the court. The referee may conduct
proceedings within the state, or outside the state by stipulation of the parties
with the referee's consent, and pursuant to the Michigan court rules. The
referee shall have powers that include, but are not limited to, the following:
(a) To hear all pretrial motions and submit proposed orders to the
court. In ruling on the pretrial motion and proposed orders, the court
shall consider only those documents, pleadings, and arguments that were
presented to the referee.
(b) To require the production of evidence, including the production of
all books, papers, documents, and writings applicable to the proceeding,
and to permit entry upon designated land or other property in the
possession or control of the corporation.
(c) To rule upon the admissibility of evidence pursuant to the
Michigan rules of evidence.
(d) To place witnesses under oath and to examine witnesses.
(e) To provide for the taking of testimony by deposition.
(f) To regulate the course of the proceeding.
(g) To issue subpoenas, when a written request is made by any of the
parties, requiring the attendance and testimony of any witness and the
production of evidence including books, records, correspondence, and
documents in the possession of the witness or under his or her control, at
a hearing before the referee or at a deposition convened pursuant to
subdivision (e). In case of a refusal to comply with a subpoena, the party
on whose behalf the subpoena was issued may file a petition in the court
for an order requiring compliance.
(2) The amount and manner of payment of the referee's compensation shall be
determined by agreement between the referee and the parties, subject to the
court's allocation of compensation between the parties at the end of the
proceeding pursuant to equitable principles, notwithstanding section 774.2
(3) The referee shall do all of the following:
(a) Make a record and reporter's transcript of the proceeding.
(b) Prepare a report, including proposed findings of fact and
conclusions of law, and a recommended judgment.
(c) File the report with the court, together with all original
exhibits and the reporter's transcript of the proceeding.
(4) Unless the court provides for a longer period, not more than 45 days
after being served with notice of the filing of the report described in
subsection (3), any party may serve written objections to the report upon the
other party. Application to the court for action upon the report and objections
to the report shall be made by motion upon notice. The court, after hearing, may
adopt the report, may receive further evidence, may modify the report, or may
recommit the report to the referee with instructions. Upon adoption of the
report, judgment shall be entered in the same manner as if the action had been
tried by the court and shall be subject to review in the same manner as any
other judgment of the court.
- ------------------
P.A. 1972, No. 284, Section 773a, added by P.A. 1989, No. 121, Section 1, Eff.
Oct. 1, 1989.
1. Section 450.1773.
2. Section 450.1774.
A-3-13
<PAGE>
450.1774. APPRAISAL PROCEEDING; DETERMINATION OF COSTS, ASSESSMENT OF COSTS,
FEES AND EXPENSES
Sec. 774. (1) The court in an appraisal proceeding commenced under section
7731 shall determine all costs of the proceeding, including the reasonable
compensation and expenses of appraisers appointed by the court. The court shall
assess the costs against the corporation, except that the court may assess costs
against all or some of the dissenters, in amounts the court finds equitable, to
the extent the court finds the dissenters acted arbitrarily, vexatiously, or not
in good faith in demanding payment under section 772.2
(2) The court may also assess the fees and expenses of counsel and experts
for the respective parties, in amounts the court finds equitable in the
following manner:
(a) Against the corporation and in favor of any or all dissenters if
the court finds the corporation did not substantially comply with the
requirements of sections 764 through 772.3
(b) Against either the corporation or a dissenter, in favor of any
other party, if the court finds that the party against whom the fees and
expenses are assessed acted arbitrarily, vexatiously, or not in good faith
with respect to the rights provided by this act.
(3) If the court finds that the services of counsel for any dissenter were
of substantial benefit to other dissenters similarly situated, and that the fees
for those services should not be assessed against the corporation, the court may
award to those counsel reasonable fees paid out of the amounts awarded the
dissenters who were benefited.
- ------------------
P.A. 1972, No. 284, Section 774, added by P.A. 1989, No. 121, Section 1, Eff.
Oct. 1, 1989.
1. Section 450.1773.
2. Section 450.1772.
3. Sections 450.1764 through 450.1772.
A-3-14
<PAGE>
- -------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
EXHIBITS
to
SCHEDULE 13E-3
RULE 13E-3 TRANSACTION STATEMENT
(Pursuant to Section 13(e) of the Securities Exchange Act of 1934 and Rule 13e-3
(Section 240.13e-3) thereunder)
------------------------
CABLEVISION INVESTMENT OF DETROIT, INC.
(Exact name of the issuer as specified in its charter)
COMCAST CABLEVISION OF TAYLOR, INC.
CID TRANSACTION CO.
(Name of Person(s) Filing Statement)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT SEQUENTIALLY
NUMBER DESCRIPTION NUMBERED PAGE
- --------- -------------------------------------------------------------------------------------- -------------------
<S> <C> <C>
(b)(1) Fair Value Report of Kane Reece Associates, Inc.
(b)(2) Consent of Kane Reece Associates, Inc.
(c) Plan of Merger adopted by the Board of Directors of Merging Company on January 10,
1996 (incorporated by reference to Annex 1 hereto).
(d)(1) Cover page to be substituted for cover page of this Schedule 13E-3 as filed with the
Securities and Exchange Commission.
(d)(2) Form of Letter to Shareholders Providing Notice of Press Release.
(d)(3) Form of Letter of Transmittal.
(d)(4) Form of Dissenters Demand for Payment Form.
(d)(5) Form of Notice of Adoption of Plan of Merger to be included with the Letter of
Transmittal.
(d)(6) Form of Notice of Merger to be delivered to record shareholders of the Company
following the Effective Date of the Merger.
(d)(7) Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9
to be included with the Letter of Transmittal.
(d)(8) Text of Press Release issued by the Company on January 24, 1996.
(d)(9) Text of Sections 761 through 774 of the Michigan Business Corporation Act, as amended,
(incorporated by reference to Annex 3 hereto).
(e) The information set forth in 'SPECIAL FACTORS -- Dissenting Shares/Dissenters Rights'
is incorporated herein by reference.
(g)(1) Audited financial statements for the two fiscal years required to be filed with the
Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1994.
(g)(2) Unaudited condensed financial statements required to be included in the Company's
Quarterly Report on Form 10-Q for the nine (9)-month period ended September 30, 1995.
</TABLE>
<PAGE>
EXHIBIT (b)(1)
FAIR VALUE
OF A 3.4876% INTEREST IN
CABLEVISION INVESTMENT OF DETROIT
AS OF OCTOBER 31, 1995
Prepared for:
Comcast Corporation
Philadelphia, Pennsylvania
<PAGE>
January 3, 1996
Mr. Robert S. Pick
Vice President - Corporate Development
Comcast Corporation
1500 Market Street
Philadelphia, PA 19102-2148
Dear Mr. Pick:
In accordance with your authorization, Kane Reece Associates, Inc.
("Kane Reece" or the "appraiser") has made an investigation and valuation of a
3.4876% interest in Cablevision Investment of Detroit ("CID") whose sole asset
is a 10% general partnership interest in the cable television system known as
Comcast Cablevision of Detroit ("Detroit" or the "System"). Detroit serves
portions of the city of Detroit. The valuation date is October 31, 1995. Kane
Reece understands that this value determination will be included in a public
filing (SEC 13 E-3 Transaction Statement) which will be provided to
shareholders.
The standard of value used in this appraisal is fair value. In states that
have adopted the Uniform Business Corporation Act (which Michigan is one), the
definition of fair value is as follows:
"Fair value" with respect to dissenters shares means the value of the
sharesimmediately before the effectuation of the corporate action to
which the dissenter objects, excluding any appreciation or depreciation
in anticipation of the corporate action unless exclusion would be
inequitable.
Our methodology for determining the fair value of any CATV property
incorporates an assessment of the potential revenues and cash flows the property
will generate over an appropriate investment term and the likely appreciation in
value of the property over that term. We confirm this calculated economic
valuation with an analysis of recent sales of comparable properties to the
extent available.
As part of the research required for our study, we were furnished materials on
operations. We have also consulted recognized sources of financial and industry
information, visited the System's headquarters (in conjunction with a prior
engagement) and service area and interviewed management. Kane Reece and this
report comply with the appraisal standards set forth in the Uniform Standards of
Professional Appraisal Practice and those promulgated by the American Society of
Appraisers.
<PAGE>
Mr. Robert S. Pick
January 3, 1996
Page 2
Based upon our investigation and valuation as described in the accompanying
report and subject to the Limited and General Service Conditions and Appraisal
Certificate contained herein, it is our opinion that the aggregate fair value of
a 3.4876% interest in CID and a per share interest in CID as of October 31, 1995
was:
$823,000 (rounded)
==================
$23.60 per share
==================
Respectfully submitted,
KANE REECE ASSOCIATES, INC.
/s/ KANE REECE ASSOC
<PAGE>
LIMITING AND GENERAL SERVICE CONDITIONS
1) We were provided certain financial and operating data by management and
we have relied on this information without independent analysis or
verification by Kane Reece Associates, Inc.
2) Kane Reece Associates, Inc. is not responsible for the impact of
economic events occurring after the date of this report and we have no
obligation to update this report unless subsequently engaged to do so.
3) We have made no investigation of, and assume no responsibility for,
the title to the assets appraised nor for any undisclosed liabilities
of the subject company.
4) All statements in this appraisal are based on the best knowledge and
belief of Kane Reece Associates, Inc.
5) Neither Kane Reece Associates, Inc. nor any of its employees has any
present or contemplated financial interest in the appraised entity,
and we certify the compensation received for this study is in no way
contingent upon the valuation conclusions.
6) Kane Reece Associates, Inc. is not required to give testimony in
court, or be in attendance during any hearings or depositions, with
reference to the company being appraised, unless previous arrangements
have been made.
7) This appraisal is valid only for the purpose(s) stated herein, and no
one may rely on the report for any other purpose(s) and is valid
only for the appraisal date or dates specified herein. You may show our
report in its entirety to those third parties who need to review the
information contained therein. You agree to hold Kane Reece Associates,
Inc., harmless from any liability, including attorneys' fees, damages or
cost which may result from any improper use or reliance by you or third
parties. No reference to our name or our report, in whole or in part, in
any document you prepare and/or distribute to third parties may be made
without our prior written consent. We will maintain the confidentiality
of all conversations, documents provided to us, and the contents of our
reports, subject to legal or administrative process or proceedings.
These conditions can be modified only by written documents executed by
both parties.
KANE REECE ASSOCIATES, INC.
399 Thornall Street
Metro Park, NJ 08837-2236
(908) 494-3700
<PAGE>
FAIR VALUE
OF A 3.4876% INTEREST IN
CABLEVISION INVESTMENT OF DETROIT
AS OF OCTOBER 31, 1995
<PAGE>
FAIR VALUE
OF A 3.4876% INTEREST IN
CABLEVISION INVESTMENT OF DETROIT
AS OF OCTOBER 31, 1995
TABLE OF CONTENTS
TRANSMITTAL LETTER
LIMITING AND GENERAL SERVICE CONDITIONS
I. INTRODUCTION.................................................... 1
II. INDUSTRY REVIEW ................................................ 5
III. DESCRIPTION OF THE SERVICE AREA AND SYSTEM ..................... 36
IV. BUSINESS ENTERPRISE VALUATION................................... 40
Selection of Guideline Companies ............................... 48
Description of Guideline Companies ............................. 49
Analysis and Comparison of Publicly Traded Guideline Companies.. 50
Valuation using Guideline Company Analysis ..................... 51
Correlation and Conclusion ..................................... 54
APPRAISAL CERTIFICATE ................................................. 56
EXHIBIT A: Program Offerings
EXHIBIT B: Financial Statements
EXHIBIT C: Cash Flow Projection Assumptions
EXHIBIT D: Cash Flow Projection
EXHIBIT E: Financial Statements and Common Size Statements 1991-1995
of the Public Guideline Companies
EXHIBIT F: Five Year Comparison of Financial Ratios and Trends Between
Detroit and Guideline Companies
EXHIBIT G: Investor Appraisal Ratios
QUALIFICATIONS OF THE APPRAISERS
<PAGE>
FAIR VALUE
OF A 3.4876% INTEREST IN
CABLEVISION INVESTMENT OF DETROIT
AS OF OCTOBER 31, 1995
PART I - INTRODUCTION
Comcast Cablevision of Detroit (the "System") operates a cable
television system serving portions of Detroit, Michigan. The System is a
general partnership owned 50% by Detroit Cable TV, Inc., 40% by Comcast Michigan
Holdings, Inc. and 10% by Cablevision Investment of Detroit, Inc. ("CID"). CID
is in turn owned 96.5124% by COMMH Cable TV. Inc. and 3.4876% by public
shareholders.
Kane Reece Associates, Inc. ("Kane Reece" or the "appraiser") of Metro
Park, New Jersey was retained by Comcast Corporation to determine the fair
value of the 3.4876% of CID owned by public shareholders as of October 31, 1995
(the "valuation date"). Kane Reece understands that this report will be included
in a public filing (SEC 13 E-3 Transaction Statement) which will be provided to
shareholders. This is the sole purpose of this report.
Since the sole operating asset of CID is its 10% ownership of the
System, this appraisal will concentrate on the value of the System as of
the valuation date.
Kane Reece has previously appraised the System. In conjunction with this
previous appraisal, performed a site inspection. This appraisal had an effective
date of December 22, 1994
The standard of value used in this appraisal is fair value. In states
that have adopted the Uniform Business Corporation Act (which Michigan is
one), the definition of fair value is as follows:
-1-
<PAGE>
"Fair value" with respect to dissenters shares means the value of the
shares immediately before the effectuation of the corporate action to which
the dissenter objects, excluding any appreciation or depreciation in
anticipation of the corporate action unless exclusion would be inequitable.
The appraiser had visited in conjunction with a previous appraisal the
System's offices and service area to interview management, inspect System
facilities, and to determine the growth potential of the service area. Pursuant
to a current information request, the appraiser was provided various documents.
These documents include but are not limited to the following:
o Comcast Cable of Detroit 1996 Budget.
o Barden Cablevision/Comcast Cable of Detroit unaudited financial
statements for the years ending December 31, 1991-1994 and the
10 months ending October 31, 1994 and 1995.
o Form 10-Q for September 30, 1995 for Cablevision Investment of
Detroit, Inc.
o Monthly basic subscriber and pay unit counts for 1994 and 1995 and
annually from 1990-1994.
o System channel charts and rate cards.
o System rate history 1990-1995.
o Reviewed the franchise partnership agreement between Barden
Cablevision of Detroit, Inc., Detroit Cable TV, Inc., and Cablevision
Investment of Detroit, Inc.
The appraiser also relied on demographic data and other service area
information provided by Strategic Mapping and Sales & Marketing Management,
as well as cable industry trade publications and various industry analysts'
reports in forming the value conclusion.
-2-
<PAGE>
GENERAL APPRAISAL CONSIDERATIONS
The following paragraphs discuss some of the pertinent variables which
contribute to or detract from the value of a cable system, and provide
commentary on how they are considered in this study.
Remaining Life of the Franchise
The remaining life of the franchise is expressed as the remaining term
of the acquired franchise. The term of the acquired franchise represents
franchise life because the continued operation of the existing system will
terminate at that point. In order to secure a new franchise, the operator will
be required to negotiate a new franchise. Typical system changes agreed to by
the incumbent operator in this negotiation process include, but are not limited
to, rebuilding the system, adding local origination facilities, adding more
channels, and making rate concessions. There are numerous examples of onerous
franchise provisions demanded by cities to grant a new franchise. These types of
changes materially alter the economic environment for the cable system.
Additionally, there are many examples of cities either denying a new franchise
or allowing a second franchise when the incumbent operator resists new franchise
provisions. As of the valuation date, the System operated under a single
franchise that had a remaining life of 4.6 years.
Franchise Fee Required
The terms under which franchises are issued vary considerably. Usually,
however, a franchise fee up to 5% of gross revenue is permitted by the FCC.
Detroit's franchise requires a franchise fee equal to 5.25% of gross revenue.
Homes in the Franchise Area
The number of homes possible in the franchise area limits the maximum
potential for expansion of the system and for revenues from the system. The
System operates in communities where growth in homes is much lower than the
national average.
-3-
<PAGE>
Net Plant Age and Channel Capacity
A typical cable television system plant is generally believed to have a
10 to 12 year life. A new system plant is obviously more attractive for
investment than one which is facing a very near-term major rebuild. The 10 to 12
year life can be longer or shorter depending on preventive maintenance, several
environmental factors, e.g., proximity to salt water, and type and quality of
initial construction.
Old-fashioned 12-channel systems, or for that matter 36 channel systems,
are obsolete when compared to the new or high capacity systems. The greater
the channel capacity, the greater the possibility for offering additional pay
services and other revenue enhancing services. The Detroit system was built in
the mid to late 1980's. The System has 550 MHz capacity and offers 77 channels.
Exhibit A depicts the channel offerings as of October 31, 1995.
Local Political Considerations
Across the country, certain areas have been identified as politically
difficult for the cable TV operators. In such cases, if applicable, the
anticipated market value or selling price for a cable system will be less than
in areas with a cooperative political environment.
The above variables are generally translated into potential for
subscriber growth, pay services, potential life for the existing system,
and potential revenue over the life of the existing system.
The procedures and methods used for this appraisal correspond with
generally accepted valuation techniques. The next section, Industry Review,
is intended to give the reader a primer on the state of the cable television
industry in which the System operates.
-4-
<PAGE>
FAIR VALUE
OF A 3.4876% INTEREST IN
CABLEVISION INVESTMENT OF DETROIT
AS OF OCTOBER 31, 1995
PART II- INDUSTRY REVIEW
The cable television ("CATV") industry, whose core basic cable channel
service business is nearly mature, is currently facing sweeping regulatory
and technological changes which offer the potential for new services and growth
opportunities. It is the purpose of this section to provide the reader with a
brief historical backdrop and a discussion of factors that have or will impact
the industry.
Early History
The first cable television system was developed in Mahanoy, Pennsylvania
in 1948 as a re-distributor of off-air television broadcast signals.
Technical complications and potential customers perception of limited product
value confined industry growth to areas of limited or no off-air television
reception through the mid-1970s. By that time, 29% of television homes in the
United States had cable television service available to them, and approximately
12% to 15% of television households subscribed. Home Box Office and other
satellite delivered cable exclusive programming was developed in the mid-1970s.
Historic Growth and Forecasts
During the late 1970s and early 1980s, the cable television industry was
characterized by a period of rapid growth in the number of communities
franchised and wired and, of course, subscribers. This growth was spawned by an
easing of government regulations, the increased availability of capital, more
cable exclusive programming, and improving technology. Following this period of
intensive construction, the industry's attention in the latter half of the 1980s
turned to new programming, geographic consolidation
-5-
<PAGE>
("clustering"), new sources of revenues, e.g. pay-per-view, increased
competition with broadcasters, the need for more dynamic consumer
marketing, and the potential adverse impact of new government regulations.
From 1980 to 1994 the number of cable subscribers more than tripled
from 18.1 million in 1980 to 59.7 million in 1994, representing a compound
annual growth rate ("CAGR") of 8.9%. During the same time period, pay TV units
grew from 9 million to 45 million representing a 12.1% CAGR. Basic cable TV is
now in 65% of United States television households; this is projected by Kagan1,
to rise to nearly 70% by 2000.
As the industry further matures, these high growth rates will not be
sustainable. While basic subscribers will continue to grow both in absolute
numbers and in percentage of total television households, the rate of growth
will be slower than in the past. While basic cable units grew at a CAGR of 8.9%
between 1980 - 1994, they are expected to grow only at a 1.2% rate between 1994
and 2004. Pay unit growth patterns exhibit an even more pronounced slowing.
Between 1980 and 1994 pay units grew at a CAGR of 12.1%; however, between 1994
and 2004 the growth rate is expected to decline to 1.9%. Subscriber appetites
for pay services have been dampened due to:
o Home video - there are more VCR's than cable subscribers;
o Increased competition from additional basic cable networks;
o Pay-per-view; and
o Technological advancement such as video-on-demand and direct
broadcast satellite delivery systems.
__________
1 Source: The Cable TV Financial Databook 1994, published by Paul Kagan
Associates, Inc.
-6-
<PAGE>
Historical and projected subscriber growth rates and industry revenues
are shown in Table 1A.
Regulation
The Cable Communications Policy Act of 1984 (the "1984 Act") had a
major impact on the CATV industry. The most important change was the
deregulation of basic cable rates. Effective December 29, 1986 cable operators
were able to raise monthly subscription rates on basic service at their own
discretion, rather than being limited to rate approval by local and state
authorities. The 1984 Act also eased the franchise renewal process. This
"deregulated" cable world came to an end with the passage of the "Cable
Television Consumer Protection Act of 1992" (the "1992 Act").
The Congress authorized the FCC to promulgate and enforce the major
elements of the 1992 Act.
Some of the key elements and issues addressed by the 1992 Act are:
o "Retransmission consent" whereby local TV stations were
allowed to negotiate with cable operators for consent, for a
fee, to retransmit their signals on cable, or local TV stations
could opt for "must carry" which requires cable systems to carry
the station for no fee (the CBS Chairman originally said this
"consent" could amount to $1 billion a year; cable operators,
however,were tough negotiators and few paid anything to
broadcasters for carriage -- CBS recently granted a further
"extension" to October of 1995 allowing cable operators to
carry CBS with no agreements in place).
o The "anti-buythrough" provision requires cable operators to
install expensive new addressable technology over the next ten
years so subscribers would no longer be required to buy "full
basic", or the "second tier," before being eligible to buy
premium and pay-per-view services.
o Rates of the lowest tier of local broadcast signals are
subject to local regulation of most cable systems (97%) under
guidelines developed by the FCC; expanded tiers of service may
be subject to rate regulation if subscribers complain to the FCC
and cable rates are found to be "unreasonable" on a case-by-case
basis by the FCC.
-7-
<PAGE>
TABLE 1A
CABLE TELEVISION INDUSTRY STATISTICS
CABLE INDUSTRY GROWTH STATISTICS
<TABLE>
<CAPTION>
Basic Cable Pay Cable Units
--------------------------- -----------------------------------
TV Homes % of % of
TV Homes Passed Subscribers* Homes Units Homes % of
Yr End (Millions) (Millions) (Millions) Passed (Millions) Passed Basic
- ------ ---------- ---------- ------------ ------ ---------- ------ -----
<C> <C> <C> <C> <C> <C> <C> <C>
1980 79.9 32.8 18.1 55.0% 9.1 27.9% 50.6%
1981 81.3 41.2 22.5 54.7% 15.5 37.5% 68.6%
1982 82.4 ** 49.1 27.2 55.5% 20.8 42.4% 76.4%
1983 83.3 55.9 31.4 56.1% 26.4 47.3% 84.2%
1984 84.9 60.5 34.2 56.6% 30.0 49.5% 87.5%
1985 86.5 64.7 36.7 56.6% 30.6 47.3% 83.5%
1986 87.7 69.4 39.7 57.2% 32.1 46.2% 80.8%
1987 89.2 73.1 42.6 58.3% 34.8 47.6% 81.6%
1988 90.9 77.2 45.7 59.2% 38.8 50.3% 85.0%
1989 91.6 82.8 49.3 59.5% 41.1 49.6% 83.3%
1990 91.1 86.0 51.7 60.2% 41.5 48.3% 80.2%
1991 92.1 88.4 53.4 60.4% 39.9 45.1% 74.7%
1992 93.1 89.7 55.2 61.5% 40.7 45.4% 73.7%
1993 94.0 90.6 57.2 63.1% 41.5 45.8% 72.6%
1994 94.9 91.6 59.7 65.2% 45.0 49.1% 75.4%
1995 (Est.) 95.9 92.7 61.7 66.6% 47.2 50.9% 76.5%
1999 (Est.) 100.0 97.0 66.1 68.2% 52.9 54.5% 80.0%
2004 (Est.) 105.4 102.8 67.1 65.3% 54.5 53.0% 81.2%
COMPOUND AVERAGE ANNUAL GROWTH RATES (CAGR)
1980-1994 1.2% 7.6% 8.9% 12.1%
1994-1999 1.1% 1.2% 2.1% 3.3%
1994-2004 1.1% 1.2% 1.2% 1.9%
</TABLE>
* Prior to 1982, basic subscribers and homes passed reflect quantities in those
systems offering pay TV.
** Estimate (conflicting data in published reports).
Sources: Paul Kagan Associates, Inc., The Cable TV Financial Databook,
June 1995.
Kane Reece Associates, Inc., Compound Average Annual Growth Rates.
-8-
<PAGE>
TABLE 1B
CABLE TELEVISION INDUSTRY STATISTICS (Continued)
CABLE INDUSTRY REVENUES
($ Millions)
<TABLE>
<CAPTION>
Act F/C F/C 1994-1999
Year 1994 1995 1999 CAGR
---- ---- ---- ----
<S> <C> <C> <C> <C>
Basic/Exp. Basic Cable Revenue $ 15,164 $ 16,803 $ 21,822 7.6%
Pay/Mini-Pay Pay Cable Revenue 4,522 4,800 5,357 3.4%
PPV Revenue:
PPV Movie Revenue 269 323 642
PPV Event Revenue 215 260 519
---------- ---------- -----------
Subtotal PPV Revenue 484 583 1,161 19.1%
Other Video Revenue*:
Advertising (Net) 1,077 1,281 2,169
Home Shopping 127 144 201
Misc. 1,412 585 1,071
---------- ---------- -----------
Subtotal Other Video Rev 2,616 2,010 3,441 5.6%
Digital Revenue**: 262 422 5,104 81.1%
---------- ---------- -----------
Total Video Revenues $ 23,048 $ 24,618 $ 36,885 9.9%
========== ========== ===========
Video Revenue/Average Sub $ 32.86 $ 33.80 $ 46.71 7.3%
========== ========== ===========
Competitive Access Provider Revenue $ n/a $ n/a $ 517 n/a
Cable Telephony Revenue*** $ n/a $ n/a $ 2,453 n/a
---------- ---------- -----------
Total Video & Telephony Rev. $ 23,048 $ 24,619 $ 39,855 11.6%
========== ========== ===========
Per Sub $ 32.86 $ 33.80 $ 50.47 9.0%
========== ========== ===========
</TABLE>
Sources: Paul Kagan Associates, Inc., The Cable TV Financial Databook,
June 1995.
Kane Reece Associates, Inc. Growth Rate Calculations.
* 1993 from The Cable TV Financial Databook, June 1994.
** Digital Revenue includes: Near video-on-demand/video-on-demand movie and
non-movie, digital video tier, cable to business video, cable delivered
video games, and on line hi speed access revenues.
*** Includes cablephone upgrade payments, cable operator share of cablephone
revenues and cable to business telephony revenue.
-9-
<PAGE>
o New competition is "encouraged" by the bill from new cable
operators, municipalities and alternate video distributors, but
little in the bill appears to simulate such other than the
"forced program access" provision requiring cable programmers
to sell their creative products to competitors at prices set by
the federal government rather than the marketplace.
o The number of cable subscribers any one cable operator may
serve through cable systems owned or financially backed by that
operator may be limited by the FCC; other provisions affect
channel positioning, customer service standards, and the number
of channels that can be occupied by a programmer owned or
backed by a cable operator.
o An anti-trafficing provision prohibits cable operators from
selling or transferring ownership in a cable system for at
least three years after buying or building the system.
Other issues addressed are:
o Customer service standards
o Home wiring ownership after subscriber cancels cable service
o Sports migration to pay channels
o Technical standards
o Indecency
o Equal employment opportunity - expansion of job categories covered
o Electronic equipment compatibility
o Home shopping - public interest study
o Direct Broadcast Satellite ("DBS") public interest study.
Some key elements under the 1992 Act are currently being revised.
-10-
<PAGE>
Some of the above elements are still being contested in the courts,
legislature or at the FCC. While the industry awaits further FCC interpretations
of the 1992 Act and the outcome of various court actions, it is clear that
the ground rules have changed and profitability has been impacted.
Rate regulation became effective with the FCC initial benchmark on
September 1, 1993, followed by revised benchmarks effective as of May 15,
1994. In general, the new regulations call for up to a maximum 17% reduction in
basic cable service rates and a cost based approach to the pricing of
installation and customer premise equipment such as remote control devices,
converters and additional outlets. The impact of these rules and regulations on
the industry is still unclear and each individual cable franchise, even within a
multiple franchise operating system, can be affected differently.
Historically, cable operators have been hit by the new rate regulations with
individual company estimates ranging from negative impacts of 5% to 15% on
revenue and 1% to 8% on margins.
The Congress is currently revising the Telecommunications Act of 1934
with "reform" bills ("Telcom Bill") that will have a great impact on all
players who might play a role in the convergence of the cable TV and
telecommunications industries. The House and Senate have been trying to resolve
differences in their respective bills virtually all year long and, while
progress has been made, the final outcome is still uncertain.
The most fundamental issue that the Telcom Bill addresses is the
permission for communications service providers to enter each other's lines
of business. Namely, local exchange carriers, long-distance interexchange
carriers and cable television companies will be allowed to enter into each
others markets, albeit with some regulations and restrictions.
-11-
<PAGE>
The potential implications for the current proposed legislation is
summarized in the September 5, 1995 Research Weekly published by Prudential
Securities:
Cable Should Benefit Through Rate Deregulation and Entry Into New
Business...The proposed legislation has two favorable aspects for
cable: deregulation of basic cable rates, and opening of entry of cable
into the telephone business.
We don't think cable companies will raise rates significantly if
legislation passes, but we do think they can capitalize on the renewed
ability to price and package programming services according to consumer
demand rather than by government mandate. More flexible marketing
should result in higher consumer satisfaction, higher subscriber
growth, and improved cash flow.
Several major cable companies have put plans in place to enter
the wireless telephone business (PCS), but in most states they've
been prevented from contemplating rollout of wireline phone service
over their cable networks. The proposed legislation would allow cable
entry into the phone business (and reciprocal phone company entry into
the cable business) -- and while the challenges are considerable, we
think cable can create a profitable new revenue stream from entry into
the phone business over the next several years.
As noted above, the legislative reform bills also address the
deregulation of cable rates. The latest report from the House-Senate
conference committee has suggested a postponement of deregulation for several
more years.2 In the meantime, cable companies are working with the FCC towards
a possible regional pricing agreement that would allow the operators to engage
in a price averaging structure similar to telephone companies. With
consolidation in the industry this would certainly enable cable operators, to
both expand and standardize their pricing structures from a franchise specific
capacity to a regional one3, thereby creating a more competitive and efficient
marketplace.
- -----------
2 Cable World, December 11, 1995, As Telecom Bill Inches Forward, Cable Bites
Bullet on Rate Rereg.
3 Multichannel News, November 6, 1995, FCC May Give Cable Operators Regional
Pricing.
-12-
<PAGE>
A summary of the key provisions included in the proposed
Telecommunications Bill before Congress is outlined in Broadcasting &
Cable, December 18, 1995. The ultimate resolution of the following items is
obviously not certain.
o Cable Rate Deregulation
- Deregulates cable rates for the extended basic tier
(MTV, Lifetime, ESPN, etc.) in three years.
- Equipment rates remain regulated under the bill.
- Eliminates the ability of a single subscriber to initiate
a rate review at the FCC.
- Small cable systems would be deregulated upon enactment.
The bill defines a small cable system as one with 50,000 or
fewer subscribers. Small cable systems cannot be owned or
affiliated with a company that has more than $250 million in
annual income.
- A cable system also is free from rate regulation when "a
telephone company offers cable service by any means that is
comparable to the competing cable system."
o Set-Top Boxes
- The bill insures that consumers can purchase set-top boxes in
retail stores. Cable companies and others that provide
multichannel video services also may provide set-top boxes, but
the price may not be subsidized by subscription fees.
o Telephone and Cable Buyouts
- Bars telephone companies from buying cable systems in markets
of fewer than 35,000. There is an exemption for markets of 50,000
or fewer with only one cable system.
- Cable companies and telcos also are barred from having more than
a 10% financial stake in each other.
- The bill prohibits joint ventures between telcos and cable
systems in their own markets.
o Telco Provision of Video Programming
- Eliminates the ban on telcos' providing video programming in
their own service areas. A telco would be regulated according to
the technology it chooses to deliver video programming. If it
builds a cable system, it would be regulated under cable rules.
-13-
<PAGE>
- The bill also establishes a new entity known as an "open video
system". The open video system must provide two-thirds of its
capacity to unaffiliated programmers but does not need a local
franchise in order to operate.
o Cable Entry Into Telephony
- Local authorities may not require a cable company to obtain an
additional franchise agreement to enter the telephone business.
o Infrastructure Sharing
- Requires telcos to provide information about their switched
network to any "qualifying carrier". Potential competitors,
including cable, need the information in order to connect their
network with the telcos' network.
o Direct Broadcast Satellite
- Gives the FCC exclusive authority over direct-to-home satellite
services, including DBS. The bill also bars local jurisdictions
from taxing DTH satellite services but does not affect state
taxes.
- Bars local communities, including homeowner associations, from
writing zoning laws that prohibit DBS dishes.
Additionally the FCC is exploring whether home wiring rules should be
changed. It is questioning whether a common "demarcation point" for cable
and telco should be established and whether customers should be allowed to
install and maintain their own customer premise equipment ("CPE").
The cable industry is also continuing its appeal to the Supreme Court to
determine the constitutionality of the 1992 Cable Act "must carry" rules,
whereby the carriage of "local" broadcast TV stations must be negotiated between
the cable TV operator and broadcaster.
-14-
<PAGE>
On December 15, 1995, the FCC ruled that in condominium and apartment
complexes, the demarcation point for determining where a cable subscriber
controls wiring would remain at or about 12 inches outside the unit. This was in
response to challenges by those seeking to use cable systems feeder line to
provide competitive video services.
Additionally, the FCC ruled on cost-of-service filings that operators
can factor in intangible assets in calculating their rates. Under a formula
approach, an operator acquiring a system before May 15, 1994 can presumptively
include 66% of the gross purchase price of a system -- both tangible and
intangible -- in its rate base.4
In summary, the implication is that there is a likelihood that Congress
will finally address revisions to the Communications Act of 1934. Thus,
there is potential for allowing the CATV industry to compete in the
Telecommunications arena and allow Telecommunications Companies to provide CATV
services. Additionally, it is anticipated that Congress will lessen both rate
and service regulations in order to provide a "level playing field."
The December 6, 1995 NY Times reported that House and Senate conferences
would incorporate in the final Telcom bill an end to rate regulation for
the expanded cable tier approximately three years after enactment. The CATV
industry has more or less accepted this provision for the following four reasons
discussed in Prudential Securities, December 11, 1995 Research Weekly:
o Strategically, the most important issue for cable companies is local
phone entry, not rate relief.
o The prospect of growth driven by new technologies and services is
capturing the markets attention.
o Two large cable operators (Continental Cablevision, Inc. and
Time Warner Cable) have already entered into "social contracts"
with the FCC that will govern their rate increases, system
upgrades and retiering of channels for the next few years.
- -------------
4 Multichannel News, December 18, 1995.
-15-
<PAGE>
o The FCC has proposed or finalized resolutions dealing with
outstanding rate complaints against other cable operators
including Cox Communications, Inc., Times Mirror Cable
Television, Inc., TCI Communications, Inc., and Cablevision
Industries, Inc.
Consolidation
The uncertainty of the impact of regulation, the timing and financing
of the "information superhighway" and its associated potential new revenue
sources, and the advent of a competitive environment have created a market for
cable systems driven by a need for consolidation. This is evident in the
unprecedented number of large cable operators who have put their cable systems
up for sale this year, serving over 13 million subscribers, almost one quarter
of the industry. As of the date of this report, the following list of
completed/pending cable deals and MSO systems "on the block" are reported in the
Cable TV Investor, December 18, 1995:
1995 Completed/Pending Deals
<TABLE>
<CAPTION>
Basic
Subs
Company (MSO Rank) Thousands Buyer(s)
------------------ --------- --------
<S> <C> <C>
Cablevision Ind. (8) 1,450 Time Warner
Houston Industries 1,174 Time Warner
Viacom (11)* 1,173 TCI
Sammons (12)* 1,107 Marcus, Lenfest, TKR, Service Electric, Fanch
Colony (15) 800 Continental
E.W. Scripps (15)* 800 Comcast
Multimedia (24) 457 Gannett
TKR (50%) (18)* 395 TCI
Western Comm. (29)* 335 TCI
Columbia (31) 277 TCI, Jones, Continental
Gaylord 180 Charter
United Video (42)* 163 FrontierVision, Charter, Cablevision, Classic
First Carolina (96)/East* 58 Adelphia
Fairbanks Comm. (74)* 55 Adelphia
Douglas Comm. (57) 51 Galaxy, Lynch
113 Other 1995 deals 3,801
------
Total '95 announced 12,276
======
</TABLE>
Numbers in () denote company ranking at time of acquisition, or current ranking.
* Pending deal. Other deals include system swaps.
-16-
<PAGE>
On The Block
Company (MSO Rank) Basic Subs Thousands
------------------ --------------------
Triax Comm. (26) 390
C-TEC (27) 367
Greater Media (33) 241
Insight Comm. (42) 162
Omega 38
Masada Cable (75) 31
Fanch Comm. (46) 30
------
Total 1,259
======
As Kagan notes,
Once all these proposed deals close, the top 20 U.S. cable MSOs will own
about 87% (<<<) of an estimated 62.5 million cable customers and the top
five MSOs will control 65% of the universe.
The industry consensus is that consolidation is necessary in order to
survive the negative impacts of convergence, regulation, and competition,
and to provide operators with greater access to investment capital and greater
leverage with equipment suppliers.
This has resulted in a deal market where large deals are being
completed but small deals are hard to complete due to lack of financing.
Premium prices are being paid for trophy properties with significant amounts of
non-regulated revenue and reduced prices are being paid for smaller systems with
mostly regulated revenues.
A good example of industry convergence is the Sprint/Cable Alliance. The
major players include Sprint with a 40% equity interest in the venture, TCI with
a 30% equity interest and Cox Communications and Comcast Corporation each with a
15% equity interest. The total costs have been estimated at around $8 billion.
-17-
<PAGE>
Each of the players in the alliance will bring something different to
the table in an attempt to accomplish what is best described as a national
digital wireless communications network based on broadband communications
services. Sprint brings long-distance and local exchange authority, as well as
the most marketable and recognizable name. TCI offers a vast broadband wireline
network. Comcast brings wireline and cellular service expertise to the venture
and will look to develop a Sprint named wireline service to Baltimore and
Detroit, and Cox Communications will provide a wireless service in the large
southern California/Las Vegas market.5
Cable Financing
Regardless of the size of current transactions, the ability to complete
a transaction requires the use of creative financing. The traditional
financing vehicles, i.e., senior debt and mezzanine financing, have become
limited as the investment community tries to analyze the potential impact of new
telecommunications legislation, as well as the effects of re-regulation. New
areas of financing include strategic alliances, e.g., Time Warner/US West;
recently increased junk bond activity, e.g.,seller paper; major pension fund
investors, and increased liquidity from non-traditional investors, e.g., telco
acquisitions such as US West's acquisition of the Bass Atlanta systems and
Southwestern Bell's acquisition of the Hauser Washington D.C. area systems.
Industry Trends
Cable TV historically has provided competitively priced entertainment
compared with movie theaters and other away-from-home leisure activities. Cable
revenues continue to exhibit stability over the business cycle relative to many
other discretionary consumer expenditures.
- ------------
5 Cablevision Magazine, November 13, 1995, Sprinting Into Telecommunications.
-18-
<PAGE>
The latter half of the nineties is expected to bring continued growth
in both cable television subscriptions and revenues, albeit at a somewhat
slower growth rate, reflecting a maturing of the traditional basic cable
industry. The industry will focus on new programming and alternative viewing
selections, such as staggered starting times on alternative channels for
entertainment events. Technology will play a major role in the continued growth
and profitability of the industry. The use of fiber optic technology for 750 MHz
systems with 500-2,000 households per node is now standard for industry rebuilds
in high density areas. This, along with developments in digital television
signal compression technologies, will allow cable systems to offer more channels
by orders of magnitude at cost effective rates. Additionally, this distribution
network architecture should position the cable operator to offer new interactive
services in competition with other service providers as the new services
approach viability. High speed cable modem services offering extremely rapid
access to the internet and other data based services, telecommunications, and
information services, such as Personal Communications Networks, are expected to
offer additional revenue sources.
Programming and Services: The next five to ten years will see additional
growth of CATV revenues from other revenue categories (other than basic
and pay cable subscription revenue) such as advertising, pay-per-view ("PPV"),
home shopping, digital audio, telephony, and potential new technology oriented
services such as interactive games and computer related services. In 1994 other
revenues (see Table 1B) were approximately $3.4 billion, or 14.6%, of the
industry's $23.0 billion in revenues. As depicted in Table 1B, between 1994 and
1999 other revenues are projected to grow to $12.7 billion, representing 31.8%
of total industry revenue and a CAGR of approximately 30%. Basic cable
subscription revenue is expected to grow at a 7.6% CAGR and pay services revenue
increasing by 3.4% CAGR.
-19-
<PAGE>
As of December 31, 1994, over 65% of United States TV households had
basic cable television. In addition to providing broadcast stations, basic
cable offers the availability of program alternatives in the form of basic
cable networks. Each of the six largest basic service networks (Cable News
Network,ESPN, TBS Superstation, USA Network, and The Discovery Channel) has over
60 million subscribers. Other basic cable networks include The Learning Channel,
Headline News, Lifetime, The Travel Channel, The Family Channel, C-Span, MTV,
TNT, Arts & Entertainment, The Weather Channel, WWOR-TV, Home Shopping Network,
The Nashville Network, CNBC, and Comedy Channel.
Pay television services include channels for which an optional
additional fee is paid to the CATV operator. According to CableVision
Magazine, September 18, 1995, the top five movie oriented pay channels served
over 53 million subscribers. The top five movie entertainment services are Home
Box Office (19.2 million subscribers), Disney Channel, Showtime, Cinemax, and
Encore. In addition to these services, regional and local sport networks are
sometimes offered as pay services.
New programming services are anticipated as cable industry capacity
constraints, as well as regulatory "disincentives" are eased. New sources
of competition are expected from the RBOC's and Hollywood. Examples include the
formation of Tele-TV in 1994 by Bell Atlantic, Nynex, and Pacific Telisis to
develop programming content. Another video programming and interactive services
venture will be known as Americast and includes Ameritech, BellSouth, SBC
Communications and Disney which is in the process of acquiring Capital
Cities/ABC.6
According to Veronis, Suhler & Associates Communications Industry
Forecast (1995) the three networks' audience levels, which were declining,
have now stabilized, although their share of advertising dollars have continued
to decline. In 1995, the three networks' portion of total TV advertising dollars
are projected to be about 32.4%, compared with an estimated 44.7% in 1980. Much
of this market share loss has come to cable television, which has offered
advertisers both growing overall audiences and opportunities to reach niche
audiences attracted by specialized programming.
- -------------
6 Standard & Poors Telecommunications Industry Survey, December 7, 1995.
-20-
<PAGE>
This increase in cable viewership is summarized in the following report
in the November 1995 Cable Avails:
For the first three weeks of the 1995/96 broadcast season
that officially began on Sept. 18, ad-supported cable posted
significant gains in primetime viewership, while the four broadcast
networks continued to lose audience despite heavy promotion of their
fall program lineups. The average number of aggregate households
watching primetime basic cable during the launch of the new season
increased by more than 3 million -- up 26 percent from the same period
last year. Cable's average collective primetime jumped 26 percent (to
29 from 23) and average rating rose 21 percent (to 17.4 from 14).
A growing number of viewers, on the other hand, continued to tune out
ABC, CBS, NBC and Fox. The debut of their 1995/96 primetime program
schedules was met by an average collective loss of more than 2.7
million households, 6 share points and more than 3 rating points.
These shifts in TV viewership seem to confirm that basic cable's
audience is growing at the expense of broadcasters.
Cable advertising revenues have begun to play a significant role in the
industry's profitability. According to Veronis, Suhler & Associates'
Communications Industry Forecast (1995), the audience share for all cable
increased from 13.7% in 1984 to 30.1% in 1994. This has caught the attention of
both local and national advertisers. 1994 net national and local spot spending
totalled $2,930 million, a 14% increase over 1993, with 1995 advertising
spending projected to be $3.3 billion, an increase of 13% over 1994. 1994 cable
advertising represents 8.7% of total TV advertising. Cable advertising is
forecasted to grow to 4.9 billion in 1999 which represents 11.0% of total TV
forecasted advertising. In a rate regulated environment, advertising revenues,
which are not subject to regulation, will exhibit double digit growth for the
foreseeable future.
-21-
<PAGE>
The advantage of cable advertising lies in its ability to deliver
specialized demographics at competitive rates. This is particularly true
for small, local advertisers whose markets are too small to be efficiently
covered by broadcasters. Due to the niche nature of cable television
programming, cable advertising offers an attractive, cost effective advertising
medium to target specific consumer demographics. Additionally, cable advertising
interconnects, serving broad metropolitan areas, have developed to facilitate
the booking at multiple cable systems of advertising time by national and
regional advertisers.
Pay-per-view, and in fact all pay services, has not achieved the levels
of penetration and profitability that were anticipated in the mid-1980s. It is
suspected that the flourishing home video business is a major factor in the lack
of performance in this segment of the cable industry. Additionally, in recent
years there were fewer big events, e.g. boxing, to draw viewers. Veronis, Suhler
& Associates' Communications Industry Forecast (1995) summarizes the recent
performances of PPV as follows,
o A total of $269 million was spent on PPV movies in 1994.
o Buy rates have been disappointing with only 2.9 movies per
household bought by 21.7 million PPV households in 1994. By
contrast the average VCR household rented nearly 1 movie per
week.
o Total spending on PPV movies will rise to 1.0 billion in
1999 representing a CAGR of 28.7% from 1994 and based on the
following assumptions:
- Increased channel capacity will increase selection and
allow multiplexing.
- PPV cable buy rate will increase to 4.3 movies per year and PPV
capable homes will increase to 29.0 million homes, 34% over
1994 levels.
-22-
<PAGE>
- PPV price will drop from an average of $4.25 in 1994 to $3.75
in 1999, narrowing the gap with video rentals.
- PPV spending from DBS, backyard satellite dish and Telco video
dial tone services will increase from virtually nothing
presently to $581 million in 1999.
In the future, pay-per-view may become a significant source of revenues
as the technology improves and the acquisition of movies and event
programming becomes more aggressive, thereby improving their availability on
cable relative to theatrical and video cassette releases. A number of the large
MSO's (multiple system operators) as well as both cable and broadcast networks
have recently shown significant interest in both acquiring and developing new
programming. Examples include cable programmers purchase of the rights to
numerous professional sporting events including football, baseball, basketball,
hockey, and boxing. Additionally, the networks have effectively "joined the
fold" by developing their own cable TV channels (such as ESPN, ESPN2, CNBC,
America's Talking, etc.) and NBC has entered into sports right agreements for
Olympian coverage for the next eight years. Industry experts agree that this is
a long-term trend which will continue to intensify cable's already strong and
growing competition with the broadcasting industry.
Pay-per-view services can be looked at as event oriented and movie
oriented. According to Kagan, 1994 PPV gross revenues were $484 million and
are estimated to total $583 million in 1995, an increase of 20% from 1994. It is
anticipated that events will continue to increase in number and create an
increased audience for PPV, i.e. more homes with fully addressable converters,
and improved subscriber awareness of events and available movies will greatly
accelerate the growth of PPV revenue. Kagan estimates cable PPV gross revenues
to be $1.2 billion in 1999, representing a CAGR of 19%.
-23-
<PAGE>
Another source of new revenues has been the growth of home shopping
services on cable TV. Paul Kagan Associates projected these services to
generate 1994 revenue for CATV operators of $127 million and grow to $201
million by 1999 (a 9% CAGR). These services can be very profitable for cable
system operators who generally receive 5%-10% of gross sales. A number of
MSO's have taken equity positions in home shopping services and are earning even
greater returns.
The growth in cable video revenues and related service revenues such as
telephony will be dependent upon the cable industry's implementation of
interactive digital technology into their delivery system. These technical
architectural changes include both digital and switched technologies.
Such technology changes will have a profound affect on the industry's
future. Barry Kaplan identifies the key issues of cable's technological
future in a July 1992 Goldman Sachs report:
o The cable television industry operates the only ubiquitous local
broadband network in America today.
o Development of optical fiber and implementation of digital
video compression will revolutionize the capability of that
network over the next ten years.
o This process will significantly enhance the return from existing
customers and create entirely new business opportunities with new
customers.
Kaplan went on to state:
"We believe that the industry is now entering a period of genuine
technological revolution that, over a longer period of time, has the
potential to dramatically expand the scope of the cable industry's
business and greatly improve the quality and efficiency of its service.
This revolution is also likely to make for some strange bedfellows as
other industries and companies seek to take advantage of
cable operator's network, and as the cable operator seeks to make
the network more flexible and intelligent."
-24-
<PAGE>
The technology which is just over the horizon will enable cable
operators to provide several new revenue sources from video services,
telephony services (such as personal communication services, "PCS"), and
PC-based on-line services.
The implementation of interactive digital media services is now a
question of timing. The cable industry is still developing this technology
as witnessed by Time Warner's long awaited interactive multimedia system
implemented in 1995 to a test market in Orlando, Florida. Issues of operating
standards and bandwidth management must be resolved for effective
implementation. The timing of the implementation of interactive services will
also be dependent upon financing capabilities which may be impaired by perceived
fairness of the current rewrite of the Communications Act and by rate
regulation.
The rollout of interactive digital media services is discussed in the
Veronis, Suhler & Associates Communications Industry Forecast (1994).
The projected penetration path for the interactive digital media
network will likely mirror the growth of other successful consumer
technologies. Typically, the roll-out of a new technology is relatively
slow over the first five years. Then, if consumers accept and use the
technology, penetration growth accelerates over the next five years.
This pattern characterized the penetration paths of pay cable, home
video, and color television, three of the most successful new consumer
electronic technologies of the last 30 years.
Technology Developments
New revenue sources will be dependent upon new delivery systems.
Emerging technologies which will influence the new delivery systems are briefly
described below.
-25-
<PAGE>
Fiber Optics: Optical fiber technology is rapidly being deployed in cable
television systems and is projected to grow at an annual rate of 25% in the
1990s. It's use provides several advantages over traditional coaxial copper
cable:
o Cost effective upgrades of channel capacity by replacing
"trunk" without the high cost of replacing all cable to each
individual home, resulting in the "hybrid" fiber-coaxial system
commonly in use today;
o Improved reliability, by reducing the number of electronics required
between the head end and the user;
o The addition of two-way services for consumers or business at cost
effective rates.
o Reduced operating costs due to fewer electronics which need
periodic "balancing" or fine-tuning;
o Improved signal quality, due to fewer electronics and less
possibility of static or electrical interference.
HDTV: High Definition Television has been in development for over
fifteen years. It has been successfully demonstrated half a dozen times on
existing cable systems in the United States and Canada. Basically, the term HDTV
represents a variety of technological approaches to improved clarity and
quality. Recommendations regarding the technology have been made to the FCC, but
the future of HDTV is yet to be determined.
The current broadcast television transmission format was developed
based upon engineering and technology available in the late 1940s and early
1950s. The FCC is in the process of "adopting a series of standards for HDTV
transmission, designed by the Grand Alliance, a consortium of seven TV and cable
equipment vendors."7 The original objective of HDTV was to achieve TV pictures
that are more like movie screens than current TV sets. However, the capabilities
that digital TV technology offers are beyond that originally contemplated and
provide some issues to the television industry as outlined in the above
referenced article.
- ----------------
7 Cablevision, November 13, 1995, "The Digital TV Showdown".
-26-
<PAGE>
o Broadcasters would like to use the 6 MHz additional channel
any way they want. For example, does HDTV programming have to
be aired exclusively or could broadcasts, using digital
compression, offer multiple programs and if so, do CATV systems
have to carry all of them under the "must carry" rules?
o The computer industry is making a case before the FCC to use
progressive scanning versus current interlace scanning.
Progressive scanning is more legible for computer applications.
o Digital channel capacity could be used by broadcasters for
new telecommunications services such as paging and personal
communications services (PCS). The issue before the FCC, and
possibly Congress, is whether the award of the additional
bandwidth to broadcasters should be paid for, now or in the
future in a manner analogous to auctions used for recent PCS
licenses.
To deliver the sharper pictures of high definition TV, it will be
necessary for the FCC to increase the bandwidth of each TV station beyond
its current 6 MHz allocation. The FCC will also protect the existing base of
television sets by requiring that broadcasters and cablecasters transmit signals
that are compatible with existing sets for a period of several years.
Broadcasters and cable operators will need to make changes to their
current facilities to accommodate the new standard. We expect that the major
television networks and the premium program services will be the first to offer
programming in the high definition format. Local broadcasters and ad supported
cable channels may take longer before they deliver programs in the high
definition format.
Video Compression: The purpose of video compression is to achieve more
efficient use of expensive bandwidth and power. Currently, each television
channel on a cable system occupies 6 MHz of spectrum space which is the same
amount of bandwidth has a broadcast television channel. Hence the number of
channels that a cable system can deliver to subscribers at any one time is
limited by the bandwidth of the system. For example, an operator may currently
carry 60 channels in a 450 MHz system, and 76 channels in a 550 MHz system.
-27-
<PAGE>
The use of video compression permits a greater number of channels to be
transmitted in a given bandwidth then an analog signal. Most satellite
signals that are delivered to cable headends occupy one satellite transponder or
channel each. This transmission is in the analog mode. By digitizing and
compressing a television signal it is possible to carry several programs on one
satellite transponder. This is exactly the method that direct broadcast
satellites use to make more than one hundred channels available to their
customers. Similar technologies can be applied to a cable system. For example, a
cable operator might dedicate four standard TV channels (24 MHz of bandwidth) to
services to be delivered in a compressed mode. The compression technology might
accommodate 8 to 12 video signals in this bandwidth. Hence, viewers would have
four to eight additional program choices available to them. What would the cable
operator need to do and how would subscribers be affected by such a service?
First, only subscribers ordering channels being delivered in a compressed mode
would need special equipment in their homes, much like today where some
subscribers have addressable converters, some have plain converters and some
have no converters. The cable operator would need to install some form of
compression equipment in the headend, but would not need to make changes in the
distribution system. Systems that are building cable distribution plants to 750
MHz generally allocate the bandwidth between 650-750 MHz for these services. In
summary, the application of compression technology should make additional
services available to some subscribers without being a burden to those not
ordering such services.
Digital Storage and Switching: One of the major elements of an
interactive services delivery system will be the amount of digital storage
and switching technology installed at or accessible to either a cable headend or
a telephone switching office. Interactive services will require capabilities
that are new to cable headends and telephone switching centers. Historically,
cable headends do not have any significant switching requirements and telephone
central offices do not handle television services. Digital technology is
-28-
<PAGE>
beginning to place increased demands on each of these facilities as the role of
cable operators and telephone companies change. A major new element that is
common to most interactive experiments is a file server, which can store
gigabits of information. This information could include movies in a compressed
video format, games that could be played simultaneously by several customers of
a service, or data bases for use by local subscribers.
The emergence of digital technology threatens to revolutionize home
entertainment, education, and business into the next century. Interactive
or two-way cable television is likely to become increasingly commonplace as it
proves to be increasingly cost efficient in linking schools for special courses
like it does in Enfield, Connecticut, connecting hospitals for training and
videoconferences as it does at Portland, Oregon, providing municipal fire,
police, prison, and utilities with discreet video connections as it does in many
communities or providing data transmission for businesses as it does in New York
City; Dearborn, Michigan; Kansas City; and elsewhere.
Competition
As these technological developments occur, dramatically altering the way
households, businesses, and schools "connect" with informational,
educational, entertainment, telecommunications and transactional services, cable
television is well positioned to take advantage of a whole array of new
services. But, it is still a competitive marketplace. Today, future competition
to cable operators is expected to come from three industries; direct broadcast
satellite services, telephone companies, and wireless cable. It appears that all
three competitors are adequately financed to compete with cable operators.
Briefly, here are some of the strengths and weaknesses of the most frequently
mentioned competitive threats to cable television in the years ahead.
-29-
<PAGE>
DBS: Direct Broadcast Satellite, is a satellite-to-home service by
utilizing a "backyard dish" or receiver. Currently, most DBS customers are
in lightly populated rural areas which are not served by cable companies due to
cable's self-imposed guidelines for "cost-effective" densities of 20-30
households per mile.
In late June 1994, G. M. Hughes Electronics and U.S. Satellite
Broadcasting ("USSB") began offering a DBS system in five markets utilizing
high-tech, high cost Ku-Band satellites for multichannel reception. The
Hughes/USSB system (DirecTV) is currently available nationally, and has recently
passed the one million subscriber milestone.
PrimeStar, a direct satellite broadcast system owned by Comcast, TCI,
and several other cable operators also began service in June 1994 with 70
channels in the first all digital television signal delivery system. Echo Star
has successfully launched its DBS satellite in December 1995 and plans to begin
service at the end of the first quarter 1996.
Advantages of DBS to consumers are the prospect of satellite signals at
competitive monthly prices and additional program services (Hughes may
offer 50-80 channels of pay-per-view movies). Disadvantages are requirements for
an unimpeded line of sight for the antenna, a high initial cost to subscribers
(approximately $700 for a single TV set, $900 for two, plus installation fees up
to $150), no carriage of local broadcast signals or locally originated
programming, and currently the inability to provide practical interactive
services. Cable systems in rural, low density areas currently without wired
cable service or areas with limited channel capacity (35 or less) and poor
service are the most vulnerable to DBS competition. Telephone companies and
cable operators themselves may also market DBS services as a entree to cable
services.
-30-
<PAGE>
According to Morgan Stanley's US Investment Research8 "direct-to-home
satellites will become the largest competitors to the CATV industry with 12-
12.5 million subscribers by the end of the decade." The forecast assumes that
DBS reception equipment for a single TV set will decline to just under $500
within five years and that PPV movie buy rates will provide impetus to growth
and approximate video store rental by rates. We believe this to be an extremely
aggressive forecast and note that Veronis Shuler Communications Industry
Forecast 1995 only projects 4.0 million DBS subscribers by 1999, approximately
5% of total subscription video subscribers.
Wireless: Wireless cable (also referred to as multichannel multipoint
distribution system, "MMDS") provides multichannel television service via a
local microwave distribution system and microwave receive equipment at the
consumer location. Wireless requires less capital than cable, is easier to
construct, and provides service to an area faster than it takes to build a cable
system. Disadvantages include line of sight, interactivity and local content
limitations, similar to those stated above for DBS, plus there are current
limitations to a maximum of 33 channels of capacity. However, digital
compression techniques will increase the number of programs delivered.
Support for this technology is offered by recent proposed acquisitions
of MMDS providers by Pacific Telesis and Nynex. Bell Atlantic has also
formed an alliance with Cellular Vision of New York which provides a similar
wireless service but at an even higher frequency. Some current wireless
operators claim an "unlimited market" in United States cities with an average of
10% take-away of subscribers from cable, figures undocumented to date and
strongly disputed by cable operators. Though a true competitive service to
cable, the growth of wireless seems limited to 2-3% on average of the
marketplace. This is confirmed by Veronis Schuler's Communications Industry
Forecast 1995 which projects wireless cable subscribers increasing from 0.5
million in 1994 to 2.0 million in 1999 representing a 28% CAGR and 2.7% of the
total subscription video subscribers.
- -----------------
8 Cable Television Metamorphirs - the Arrival of DBS and RBOC Competition,
September 15, 1995.
-31-
<PAGE>
Telephone Companies: When talking about cable competition, "telephone"
usually means Regional Bell Operating Companies (RBOCs), GTE, Sprint, MCI,
because their lobbying and public campaign for rights to provide video in their
service areas has been highly visible. Telephone companies view cable as a great
new source of revenue and a way to finance fiber optic cable throughout their
areas. The RBOCs have financial resources, technical expertise and consumer
experience to be real competitive threats. However, serious barriers to their
entry remain. They have been prohibited from offering video services by the
court and the Cable Act of 1984; their drops to households would all need to be
replaced at a huge cost in order to provide a broadband video service comparable
to what cable already has in place; Public Utility Commissions would be unlikely
to tolerate any cross-ownership subsidiaries by a regulated utility for an entry
into a new, competitive field dominated by an experienced incumbent; telephone
companies have little experience in providing video, much less in a complicated,
multi-tiered, menu-driven post 1992 Act era; and finally, if telephone companies
should get full rights for video, it is likely that cable will get comparable
rights to provide telephone services, a situation cable is far better
situated to take advantage of from both a technological and regulatory
standpoint with its broadband network in place, than are the telephone companies
which would face heavy costs, time delays and regulatory challenges.
If Congress were to pass legislation, which is currently pending,
virtually granting telephone companies the right to offer video services
and cable companies the right to offer local telephone services, many analysts
give the competitive advantage to cable due to:
-32-
<PAGE>
o Cable's national broadband fiber/coaxial networks can be
expanded for telephone services with an estimated cost of $20
billion while telephone's limited fiber/twisted pair network
would require an investment of an estimated $400 billion to
enable it to provide high capacity video services;
o Cable companies are likely to react to market opportunities
more quickly having an opportunistic entrepreneurial history,
rather than that of a large, bureaucratic, utility monopoly
which has only recently ventured into competitive business;
o Cable is expected to "out-market" telephone companies,
having experienced some competition and several large cable
companies having managed cable-telco combined systems in the
U.K. for several years; and
o Cable will probably have an initial window of opportunity in
the "open marketplace" of 2-3 years due to the RBOC's focus on
first entering the long distance market, as well as normal
lapsed time required for telephone companies to work their way
through Public Utility Commission ("PUC") and
regulatory procedures.
Standard & Poor's Telecommunications Industry Survey, December 7, 1995
provides a synopsis of the issues facing the CATV industry as it prepares
to enter the telecommunications market:
o Cable networks are generally one way and operators must upgrade
their networks with appropriate switching capabilities.
o The cable industry must overcome the reliability of its service.
o The United Kingdom market provides some insight into the
ability of UK cable companies to capture as much as 25% of the
UK Telephony market. However, the telephony market in the UK
does not provide the same level of reliability as in the U.S.;
thus the analogy may not correlate.
Video dial tone (VDT) is a switched video two-way interactive network
that will allow numerous programming and transactional services, including
"standard" cable TV service. This service requires a substantial increase in the
capacity of the "wire" to the home, with most designs looking at all fiber to
the curb or a hybrid fiber to a node and coaxial cable from the node to the
curb.
-33-
<PAGE>
In any event, the RBOC's march towards being allowed to provide video in
their service areas seems inevitable -- if not in 1995, then surely in 1996
when legislation is anticipated to complete its journey through Congress. As of
the beginning of 1995, RBOC's have filed over 20 separate applications for
approval to build video dial-tone systems to enable them to build transport
systems and sell transmission capacity to video program operators. The U.S.
District Court for the Eastern District of Virginia in 1993 held for Bell
Atlantic that the cross-ownership provisions of the 1984 Cable Television Act
barring RBOC's from providing cable in their service areas were unconstitutional
(now on appeal). Currently, virtually all of the RBOC's have filed cases to
provide cable service as evidenced by the granting of several cable TV
franchises in its "territory" to Ameritech.
Joint ventures and cable/telco cooperative efforts may well be a more
likely development in the future instead of having head-to-head competition
throughout the marketplace. Such joint ventures by United States cable companies
and RBOCs are common in England, Australia, New Zealand, and elsewhere outside
the United States. Although the proposed mega-mergers of communications giants
like Bell Atlantic and TCI seem unlikely to re-occur in the near term, telephone
company investments such as those of US West in Time Warner are likely to
continue.
In summary, the cable TV industry is well positioned to participate in
the growth of the information highway. Additional services and corresponding
sources of revenue will continue to develop and the consolidation of
players in the CATV industry and telecommunications industry will continue so
that economies of scale and sufficient resources, both capital and management,
are available.
-34-
<PAGE>
Prudential Securities December 11, 1995 Research Weekly summarizes the
outlook for the CATV industry as follows:
...the near term is clouded, though the long term is bright....the
industry will ultimately generate multiple revenue streams over
one plant....timing remains a problem...key drivers for the group
over the next 12-18 months are:
o Basic fundamentals are better than they have been in a long
time owing to robust subscriber growth and easier comparison
against 1994's regulatory depressed cash flows.
o Telecom reform could still be enacted in 1995, likely giving a
boost to cable stock prices.
o Substantial upside moves in the group are likely to be driven by
Technology development, a late 1998-1997 event at best.
-35-
<PAGE>
FAIR VALUE
OF A 3.4876% INTEREST IN
CABLEVISION INVESTMENT OF DETROIT
AS OF OCTOBER 31,1995
PART III - DESCRIPTION OF THE SERVICE AREA AND SYSTEM
Description of Service Area
The System serves subscribers in portions of Detroit, Michigan that are
predominantly blue collar, high density areas.
According to Sales & Marketing Management's 1995 Survey of Buying
Power, the Detroit Metropolitan Statistical Area ("MSA") ranked sixth in
the nation in size with respect to total population, sixth in households, sixth
in total effective buying income, and sixth in total retail sales. According to
a demographic analysis done by Strategic Mapping, Inc., total population and
total household projections for the year 2000 portray little to no growth in the
Detroit MSA. The profile report projects population to increase from 4.315
million in 1995 to only 4.321 million in the year 2000 and households to
increase from 1.602 million in 1995 to only 1.611 million in the year 2000. The
analysis done by Strategic Mapping, Inc. agrees with a similar analysis
generated by Sales & Marketing Management's 1995 Survey of Media Markets. Sales
& Marketing Management's survey projects households to increase to an estimated
1.615 million by the year 2000, a little more aggressive than Strategic
Mapping's estimates, but only approximating one-tenth of one percent annually.
They also projected total population to decrease over the same time period from
a 1995 population of 4.308 million to 4.298 million in 2000, a decrease of .2%.
The Strategic Mapping Profile Report also provides 1990 census numbers
showing much greater growth between 1990 and 1995 than what is expected
over the next five years. Total population grew an estimated 1.1% from 1990-1995
and total households grew an estimated 1.4% over the same time period. In
comparison, growth projections through the end of the decade are unsubstantial.
-36-
<PAGE>
System Description
The System serving Detroit, Michigan is a modern cable television
system that includes a 550 MHz (80 channel) subscriber network and a fiber
optic (dark fiber) commercial network. There is one central processing facility
(headend) that is connected to hub sites by a combination of fiber optic cables
and AML microwave equipment. There are 1,981 miles of aerial plant and 90 miles
of underground plant. In the downtown business area there is a fiber network
approximately 35 miles in length passing the major corporations that has not
been activated yet and there is an additional empty 4" conduit in-place that
could be used for alternate access facilities, representing some future upside
potential for little incremental cost.
The system headend and the plant that was inspected are in very good
condition and appear to have been well maintained. The headend facility is
very well designed and has sufficient room for expansion to 750 MHz operation.
Detroit's operating statistics as of October 31, 1995 follow:
Homes Passed: 374,057
Equivalent Billing Units (Subscribers): 120,685
Penetration %: 32.3%
Pay Units: 227,422
Pay-to-EBU: 188.4%
Plant Miles: Aerial 1980.5
Underground 90.3
-------
Total 2.070.8
=======
Density 181 Homes/Mile
=======
-37-
<PAGE>
On October 31, 1995, the System passed 374,057 homes, serving 120,685
equivalent billing units ("EBU's") or 32.3% of homes passed. This was well
below the industry penetration rate of 66.6%. Pay units, as of the valuation
date, totalled 227,422 units, a pay-to-EBU ratio of 188.4%. This was well above
the industry pay-to-EBU ratio of approximately 79.5%. The industry estimates are
from The Cable TV Financial Databook (Paul Kagan Associates, Inc., July 1995).
Historically, Detroit's EBU's have been trending upward as follows:
Cumulative Gain %
EBU's from December 1990
-------- ------------------
December 1990 109,830
December 1991 113,361 3.2%
December 1992 113,495 3.3%
December 1993 116,539 6.1%
December 1994 119,879 9.2%
Table 2 details Detroit's actual revenue for October, month and
year-to-date 1995 compared to 1994. Basic revenue for the month of October
per subscriber was 6.5% higher than 1994. For the 10 month 1995 period, revenues
were 3.9% higher than 1994. These gains in subscriber revenue have come
primarily from increases in basic and pay monthly rates.
Expected competition for Detroit's services include DTH ("Direct-to-
Home") satellite multichannel video providers, as well as local telephone
providers.
These factors combine to limit cash flow margins and growth over the
short and long term. Part IV which follows addresses Detroit's business
enterprise valuation.
-38-
<PAGE>
TABLE 2
Cablevision Investment of Detroit
Comcast Cablevision of Detroit
Revenue Analysis
One Month Ten Months Year
Ended Ended Ended
(Unaudited) Oct. 31, 1995 Oct. 31, 1995 Dec. 31, 1994
------------- ------------- -------------
Revenues:
Cable Service - Basic $2,637,636 $25,574,054 $29,497,335
Additional Outlet 4,825 44,994 0
Pay Services 2,100,090 20,279,330 23,026,565
PPV - Movies 118,393 1,144,693 2,704,818
PPV - Events 44,443 1,149,007 0
---------- ----------- -----------
Total Basic & Pay 4,905,387 48,192,078 55,228,718
---------- ----------- -----------
Installation Revenue 78,174 806,010 1,000,870
Equipment Sales - Remotes 25,714 264,860 0
Other Revenue 11,124 324,423 336,615
Production 7,614 58,890 0
Home Shopping Revenue 52,066 723,618 527,444
Equipment Rental Revenue - Conv 374,920 3,466,682 4,353,504
Ad Sales Revenue 225,770 1,819,217 1,888,415
Guide 71,383 729,119 887,461
---------- ----------- -----------
Total Other Revenue 846,765 8,192,819 8,994,309
---------- ----------- -----------
Total Revenue $5,752,152 $56,384,897 $64,223,027
========== =========== ===========
Revenues/EBU:
Average EBU's 120,625 121,232 119,539
========== =========== ===========
Basic $21.91 $21.13 $20.56
Pay Revenue Per EBU 17.41 16.73 16.05
Pay Revenue Per Pay Sub 9.23 8.64 8.21
Pay-Per-View 1.35 1.89 1.89
Installation 0.65 0.66 0.70
Home Shopping Revenue 0.43 0.60 0.37
Equipment Rental Revenue 3.32 3.08 3.03
Other Revenue 0.16 0.32 0.23
Guide 0.59 0.60 0.62
Ad Sales Revenue 1.87 1.50 1.32
---------- ----------- -----------
Total Revenue/EBU $ 47.69 $ 46.51 $ 44.77
========== =========== ===========
-39-
<PAGE>
FAIR VALUE
OF A 3.4876% INTEREST IN
CABLEVISION INVESTMENT OF DETROIT
AS OF OCTOBER 31, 1995
PART IV - BUSINESS ENTERPRISE VALUATION
The purpose of developing a business enterprise value ("BEV") is to
determine the fair market value for a going concern entity. The business
enterprise value includes the additional value that all the assets generate
together as a going concern. This additional value is estimated from the returns
achieved by the operating assets (both tangible and intangible) of the System.
There are several possible approaches to value for any cable television
system. The three classical approaches to value, based upon cost, market,
and income, may all have relevance and validity in the valuation of a cable
system. However, approaches that are based on cost would be the least meaningful
and most subjective because a major element of value is the intangible assets,
such as franchises, licenses, and subscriber relationships which permit a system
to operate, and the cost of directly obtaining these assets usually bears little
relation to the value of those intangible assets. Consequently, the best
approaches to value are those which rely on estimates of future income to be
realized from operating the system, and to a lesser extent, on market data from
the sales of other systems.
THE VALUATION OF DETROIT
We have utilized the three most commonly employed methods for valuing a
CATV business namely: income approach, market approach, and guideline company
approach. The cost approach was considered, but rejected as inappropriate.
-40~
<PAGE>
Income Approach
There are several adaptions, or versions, of the income approach. The
method most applicable to valuing properties like the subject is the
Discounted Cash Flow Method ("DCF"). In this method, the anticipated future cash
flows of the System are discounted at a rate commensurate with the property's
risk characteristics.
The DCF approach is standard investor and appraisal industry practice.
The appraiser determined system operating cash flow, defined as income
before depreciation, amortization, debt retirement, interest on funds invested
in the property, and taxes, in arriving at a value indicator for the System.
In determining Detroit's operating cash flows, the appraiser derived
average annual revenue per subscriber, number of homes passed, operating
margin, and market penetration as a percent of homes passed. This data, along
with historical financial statements and other information obtained from System
management and industry sources, is reflected in our projections. Exhibit C
details the assumptions made and methodology employed in developing the cash
flow projections shown in Exhibit D.
In using the DCF, value results from the sum of two sources: the
present value of the annual cash flows of the projection period and the
present value of the property's residual value at the end of the projection
period. The reliability of this method rests directly with the accuracy of the
revenue forecast, the income-expense relationship, and other assumptions
required to produce the yearly cash flows.
In any analysis of future cash flows, a critical factor is the
selection of the discount rate which will be utilized in the calculation of
the present value of these future values. The investment's discount rate, also
referred to as a return requirement, is the overall return which an investor
expects to achieve on an investment. The development of the discount rate starts
with the determination of a weighted average cost of capital.
-41-
<PAGE>
The weighted average cost of capital is made up of two components: debt
and equity.9 The cost of equity is arrived at by using the widely accepted
Capital Asset Pricing Model ("CAPM"). The derivation of the cost of equity and
its formula is shown in Table 3 and is consistent with the general form of the
CAPM.
The derived equity rate represents the return expected on equity
capital by an investor and is consistent with our experience with respect
to equity investor expectations in today's CATV marketplace. Briefly, this
method begins with the risk free rate of return, generally the rate on U.S
government debt instruments of appropriate duration, and then applies both an
equity risk premium and small stock premium that equity requires in order to
invest. The appropriate discount rate for Detroit needs to consider the
unsystematic risk associated with a single property. The appraiser considered
the factors outlined in the System Description (Part III) in arriving at
Detroit's unsystematic risk of 7%. To determine the total equity return
requirement, these components are summed.
- -------------------
9 Stocks, Bonds, Bills, and Inflation 1995 Yearbook, Ibbotson Associates
Weighted Average Cost of Capital
r = (re x we) + (rd x wd)
---------------------
we + wd
r = weighted average cost of capital
re = expected rate of return on equity
rd = expected rate of return on debt
we = appropriate weight of equity
wd = appropriate weight of debt
Equity Cost of Capital
- ----------------------
rs = rf + (B x rp)
rs = the equity cost of capital
rf = the current riskless rate
B = the beta or market risk of the stock
rp = the arithmetic equity risk (or market) premium
sp = small stock premium is added if appropriate
-42-
<PAGE>
TABLE 3
WEIGHTED AVERAGE COST OF CAPITAL
COMCAST CABLEVISION OF DETROIT
AS OF OCTOBER 31, 1995
<TABLE>
<S> <C> <C>
Cost of Equity
Risk Free Rate
(10-Year Treasury Securities; October 26, 1995;
Source: Value Line) 6.06%
Equity Risk Premium Intermediate-Term (Entire Market) 7.60%
(Ibbotson Associates, 1995)
Market Beta CATV Stocks x 1.60
------
Adjusted Equity Risk Premium 12.16%
Small Stock Premium
(Ibbotson Associates, 1995) 4.00%
Unsystematic Risk - Company Specific 7.00%
------
Cost of Equity = (Risk Free Rate) + (Adjusted Equity
Risk Premium) + (Small Stock Premium)
+ (Unsystematic Risk) = 29.22%
======
Cost of Debt
Kagan High Yield Media Bonds 10.26%
Less Tax Effect (at 36.5%) 3.74%
------
After Tax Cost of Debt 6.52%
======
</TABLE>
<TABLE>
<CAPTION>
Weighting
% % of Capital Weighted Cost
Return Structure of Capital
------ ------------ ------------
<S> <C> <C> <C>
Equity 29.22% 40% 11.69%
Debt 6.52% 60% 3.91%
------
Weighted Average Cost of Capital 15.60%
======
Rounded to 15.50%
======
</TABLE>
-43-
<PAGE>
The next step is to determine the cost of debt capital. This rate is
principally affected by the credit worthiness of the borrower and the general
risk associated with the industry. To estimate the cost of debt as of the
valuation date,we look to the cable television debt market. Paul Kagan, in his
Cable TV Investor of October 17, 1995, tracks 44 cable bonds providing a cable
high-yield bond average. The average yield to maturity at October 15, 1995 for
these bonds was 10.26%. We then tax effected this assumed cost of debt,
taking into consideration statutory federal and state tax rates.
The final step is to determine the mixture of debt and equity in the
capital structure. The capital structure percentages were derived based
upon a review of the industry lending practices as of the valuation date. Senior
debt lending limits are typically discussed in terms of cash flow multiples. The
debt-to-equity ratio is derived by comparing the debt lending limit multiples to
the valuation cash flow multiples. The calculation for the weighted average cost
of capital of 15.5% (rounded) for the Detroit System is shown on Table 3.
Beyond the projection horizon, the System will still have value. This
residual value is based upon the theory that the investor would sell the
property at the end of the projection period. The present value of this
hypothetical sale (residual) is then added to the present value of annual cash
flows to arrive at a value indication under this approach. The appraiser
selected a residual multiple of 9.0. This multiple was derived based on the
dividend discount model which states that the value of the System in year ten is
equal to the expected future cash flow in year eleven divided by the remainder
of the required rate of return less the expected long-term growth rate. The
multiple is then equal to the inverse of the required rate of return (15.5%)
less the growth rate in perpetuity (4%), or 11.5%. The value indication for 100%
of the assets of Detroit as of October 31, 1995 under the income approach from
Exhibit D is $292,100,000 (rounded).
-44-
<PAGE>
Market Approach
Another approach to be considered in the valuation of CATV businesses
is known as the market approach or comparable sales approach. The market
approach requires the appraiser to collect and analyze recent comparable market
transactions and then make value adjustments based on a comparative analysis
between the market transactions and the subject property. It is important to use
transactions which are on or about the valuation date and which, if possible,
straddle that date.
The application of the market approach is most commonly found in the
appraisal of real estate. The market for real estate is characterized by
frequent sales within a geographic area, reliably known sale prices, and readily
discernable attributes of properties sold. This is not the case for sales of
cable television businesses. The businesses are comprised of a number of types
of tangible and intangible assets, and data on these transactions are available
only through the press and trade publications. The quality of this reported
data is suspect and quite incomplete. The appraiser's experience in the cable
industry has been that the publicly available data is at best an approximation.
The buyers and sellers in this market are under no obligation to report the
information.
The application of a classic market approach to cable television
business would be extremely difficult and unreliable due to the lack of
comparative data and the subjectivity of any comparative value adjustments. Due
to the unique nature of each cable property, to complete a valid comparative
analysis the following variables would need to be collected and analyzed for
each market transaction:
-45-
<PAGE>
- Homes in Franchise Area
- Homes Passed by Cable
- Subscriber Penetration
- Revenues Per Subscriber
- Current Cash Flow
- Operating Margin
- System/Size Configuration
- Location
- Service Area Demographics
- Physical Plant Condition
- Required Capital Expenditures
- Regulatory Environment
- Competition
- Specific Buyer and Seller Motivations
- Liabilities Assumed
Even if all the necessary information was available, the quantification
of value adjustments to reflect differences between market transaction
comparative indicators and the subject property's comparative indicators would
be extremely difficult. As such, the classic market approach was rejected due to
the lack of appropriate data.
While the market approach was not used to develop separate value
conclusions, market data from recent cable television transactions was
collected and reviewed to provide corroborative evidence to the value conclusion
determined by the income approach.
Industry practice is to describe market transactions for cable systems
in terms of subscriber (price/number subscribers) and cash flow multiples
(price/cash flow). We have reviewed the cable television transaction market, as
reported in Cable TV Investor (Paul Kagan Associates), through October 1995, and
selected the announced transactions each of which was over 47,000 subscribers as
presented in Table 4. The weighted average multiples and standard deviations are
as follows:
Std. Dev.
--------
Price/Subscriber $1,794 $391
====== ====
Price/Cash Flow 9.5 1.1
=== ===
-46-
<PAGE>
TABLE 4
1995 ANNOUNCED/PROPOSED CABLE SYSTEM SALES
<TABLE>
<CAPTION>
LOCATION SELLER BUYER
-------- ------ -----
<S> <C> <C>
ANN ARBOR COLUMBIA INT'L CONTINENTAL
AUGUSTA CABLE TV FUND JONES INTERCABLE
SANTA CLARA TCI INTERMEDIA
ATHENS INTERMEDIA TCI
CA, CO, ID, MT & WA CENTURY ROCK ASSOC.
NJ SAMMONS COMM. TKR
PA SAMMONS COMM. LENFEST
CA BASED MSO WESTERN COMM. TCI
DALE CITY COLUMBIA JONES INTERCABLE
FAYETTE ET. AL. CENCOM OF AL., LP MARCUS CABLE
PA, FL, N. ENGLD. LEADERSHIP, EAST. TELE 1ST CARO ADELPHIA/OLYMPUS
OR, WA, NV (SYS) COLUMBIA ASSOC. TELE-COMMS.
CA, HAWAII (SYS) CHRONICLE PUB. TELE-COMMS.
MO, MA UNITED VIDEO CBLVS CHARTER COMM.
KS,IL,IN,NC,OK MULTIMEDIA, INC. GANNETT CO., INC.
CA, WA, ID-BASED SYS. KING CABLE (50%) PROVIDENCE JRNL.
NC, FL, IL, KY, MO, AL US CABLE V CABLE
PA, WILLIAMSPORT COX SUSQUEHANNA
WA, SAVANNAH TIME WARNER JONES INTERCABLE
Wl, HI, OH-BASED SYS. JONES INTERCABLE TIME WARNER
RI, VA, AZ, LA, NB SYS. TCI COX
WA, IL, IA, MI, PA SYS. COX TCI
TOTALS / SIMPLE AVERAGES
WEIGHTED AVERAGES
STANDARD DEVIATION
SIMPLE AVERAGE RANGE WITHIN 1 STANDARD DEVIATION - HIGH
SIMPLE AVERAGE RANGE WITHIN 1 STANDARD DEVIATION - LOW
Value Based on Subscribers
Value Based on Cash Flow
</TABLE>
<TABLE>
<CAPTION>
BASIC HOMES VALUE CASH
PRICE SUBS PASSED % PER FLOW PROJ
($MIL) (000s) (000s) PEN. SUB ($000s) CFx
------ ----- ------- ----- ------ ------- ----
<S> <C> <C> <C> <C> <C> <C>
$155.0 74.0 119.9 61.7% $2,095 $13,596 11.4
141.7 66.0 98.1 67.3% 2,147 14,608 9.7
139.0 70.0 119.3 58.7% 1,986 15,618 8.9
163.3 86.0 118.6 72.5% 1,899 18,770 8.7
84.0 47.0 71.1 66.1% 1,787 8,660 9.7
267.5 147.0 188.7 77.9% 1,820 25,971 10.3
533.3 . 293.0 383.0 76.5% 1,820 50,311 10.6
578.0 327.1 436.1 75.0% 1,767 58,384 9.9
123.0 50.0 64.9 77.0% 2,460 12,947 9.5
151.0 83.6 120.5 69.4% 1,806 16,413 9.2
177.9 108.0 1,647 21,963 8.1
304.0 147.0 245.0 60.0% 2,068 30,400 10.0
565.0 328.0 435.0 75.4% 1,723 65,698 8.6
90.0 45.3 57.7 78.5% 1,987 10,000 9.0
861.0 450.0 737.7 61.0% 1,913 93,587 9.2
265.0 124.3 200.5 62.0% 2,132 22,650 11.7
219.0 252.5 336.7 75.0% 867 34,219 6.4
36.4 54.5 71.7 76.0% 668 4,044 9.0
130.0 63.5 100.8 63.0% 2,047 12,871 10.1
130.0 77.5 114.0 68.0% 1,677 15,663 8.3
590.0 295.6 454.8 65.0% 1,996 59,000 10.0
590.0 319.2 498.8 64.0% 1,848 59,000 10.0
- -------- ------- ------- ----- ------ -------- ----
$6,294.1 3,509.1 4,972.8 69.0% $1,825 $664,373 9.5
- -------- ------- ------- ----- ------ -------- ----
70.6% $1,794 9.5
----- ------ ----
$391 1.1
---- ----
$2,216 10.6
------ ----
$1,435 8.3
------ ----
Base High Average Low
------- -------- -------- --------
120,685 $267,436 $216,467 $173,180
$32,108 $340,494 $304,179 $267,508
</TABLE>
-47-
<PAGE>
The standard deviation for the subscriber and cash flow multiples
indicate that the multiples can vary between 24% and 12% respectively,
above and below the mean. The subscriber multiple has much greater variation and
hence is less useful as a value indicator than the cash flow multiple. The
weighted averages yield the following value indicators.
Price/Subscriber $1,794 x 120,685 = $216,470,000 (rounded)
============
Price/Cash Flow 9.5 x $32,108,000 = $304,200,000 (rounded)
============
In arriving at the value indicator, under the market approach, the
appraiser weighted the subscriber multiple value indication 5% and the cash
flow multiple value indication 95%. This weighting is due to investors'
preference for the cash flow multiple and the large variability, as described
above, of the subscriber multiple.
Therefore, the value indicator for 100% of Detroit's assets, under the
market approach, as of October 31, 1995 was:
$299,600,000 (rounded)
============
GUIDELINE COMPANY APPROACH
We have employed the guideline company method to establish multiples
which are applicable to the company being valued. Guideline company
valuation analysis is a technique that provides an indicated publicly traded
equivalent value of equity based on direct comparison of the subject company
common stock to common stocks of publicly traded companies involved in the same
or similar lines of business. As provided in the following sections, we have
identified a group of publicly traded companies that we consider suitable for
comparison with the Detroit System.
SELECTION OF GUIDELINES COMPANIES
The guidelines companies were selected on the basis of the following
criteria:
-48-
<PAGE>
1. The corporation was a United States company that conducted its
business primarily in the United States.
2. It derived a substantial portion of its revenues from activities
relating to cable television operations.
3. The corporation was listed in SIC Code 4841, Cable and Other
Pay Services.
4. Adequate financial information (five years) about the corporation
was publicly available.
5. The corporation had positive cash flow in two of the last three
years and three of the last five years.
6. The corporation was not currently involved in negotiations to be
acquired or actually in the process of being acquired.
7. The corporation's stock was publicly traded and was listed in
Standard & Poor's S&P Reports. Such a listing is indicative of
investor interest.
We have reviewed a comprehensive list of public companies and determined
that six companies met the above criteria. A brief description of each of
these companies follows. Financial and market data on these companies are
presented in Exhibit E, F, and G of this report.
DESCRIPTION OF GUIDELINE COMPANIES
ADELPHIA COMMUNICATIONS CORP. ("Adelphia"), NASDAQ (ADLAC) owns,
operators, and manages cable television systems in medium sized markets.
CABLEVISION SYSTEMS ("Cablevision") AMEX (CVC) owns and operates cable
television systems in addition to owning programming networks.
COMCAST CORPORATION ("Comcast") NASDAQ (CMCSK) is the third largest
cable television operator and through Comcast Cellular is a major provider
of cellular telephone services in the northeast.
-49-
<PAGE>
FALCON CABLE SYSTEMS ("Falcon") AMEX (FAL) is a limited partnership which
owns, operates, and develops cable television systems in California and Western
Oregon.
TCA CABLE TV ("TCA") NASDAQ (TCAT) owns systems primarily in smaller
markets in southern and western states.
TELE-COMMUNICATIONS, INC. ("TCI") NASDAQ (TCOMA) is the largest cable
television operator.
ANALYSIS AND COMPARISON OF PUBLICLY TRADED GUIDELINE COMPANIES
While ratio and trend analyses are particularly helpful in identifying
areas of improvement or deterioration from Detroit's norms, they give no
indication of how Detroit's balance sheet and operating performance compare with
other companies in the industry at the valuation date and over time. The
following observations are derived from the data presented in Exhibit E and F.
1. Size - Detroit is smaller, in terms of total assets and revenues,
than all of the guideline companies. The closest in size is Falcon.
2. Profit margins (cash flows) - For both operating income before and
after depreciation, Detroit was equal to or above the guideline
companies due to Detroit's very high revenue per subscriber.
In support of applying multiples to Detroit's business operations, the
following conclusions have been drawn:
Although Detroit is smaller then the guideline companies, it's
operating margins are higher, however, it has lower basic penetration,
higher pay-to-basic, and higher basic churn.
Given all these factors, the appraisers have determined that the median
multiple of the guideline companies is applicable to Detroit.
-50-
<PAGE>
VALUATION USING GUIDELINE COMPANY ANALYSIS
Several approaches for valuing closely held companies are available
under the guideline company analysis approach. Most approaches involve some
variation of earnings power or underlying assets, or a combination of the two.
After a review of several approaches, we have relied on the following three
approaches for our value indications:
1. Capitalization of earnings before interest, taxes, depreciation,
and amortization ("EBlTDA").
2. Capitalization of earnings before interest and taxes ("EBIT").
3. Capitalization of revenue.
These three approaches rely on data from the publicly traded guideline
companies.
The value multiples utilized in the three approaches relate the
guideline companies' stock price at the valuation date to various
fundamental data such as revenues and earnings. These multiples generally take
into account trends in operating performance as well as the stability or
instability of the underlying data. In this manner, the risks associated with
the comparative companies can be viewed in relation to return expectations as
exhibited by the pricing behavior of a particular company's common stock.
As a result of the above observations, we selected multiples
representing the median of the guideline companies. The following table
presents the indicated values using the results of the guideline company
methodology from Exhibit G ($000's):
- 51 -
<PAGE>
<TABLE>
<CAPTION>
Multiple
Approach Base Applied Value Weight Value
-------- -------- ------- -------- ------ ------
<S> <C> <C> <C> <C> <C>
PRICE: EBITDA
Latest 3 year average $26,040 4.60 $119,784 20.0% $23,957
Latest twelve months 27,236 4.10 111,668 60.0% 67,001
------ -------
80.0% 90,958
------ -------
PRICE: EBIT
Latest 3 year average 16,374 13.00 212,862 2.5% 5,322
Latest twelve months 18,006 13.90 250,283 7.5% 18,771
------ -------
10.0% 24,093
------ -------
PRICE: REVENUES
Latest 3 year average 65,384 1.70 111,153 2.5% 2,779
Latest twelve months 65,967 1.40 92,354 7.5% 6,927
------ -------
10.0% 9,706
------ -------
Indicated freely-traded lack of control value
of total invested capital 100.0% $124,757
====== ========
</TABLE>
In concluding a freely traded value for the common shares, greatest
weight was given to the price: EBDITA approach (80%) as being most
indicative of value in this case since this multiple captures the unique
operating properties of this industry, and additionally, sales transactions in
this industry are generally based on this type of multiple. The other two
multiples were given a weighting of 10% each.
The value derived from the above analysis represents the freely traded
value of non-controlling equity interests in Detroit, since market prices
of the guideline public companies show what investors paid for non-controlling
interests. The prices do not reflect the premiums a purchaser would most likely
be forced to pay to acquire 100% control of these companies.
The communication and broadcasting industries were examined for the
1992-1994 periods from Mergerstat Review to determine the premium for
control to be applied to Detroit.
-52-
<PAGE>
Premiums*
----------------------------------------
1994 1993 1992
-------- ------- -------
Communications 54.6%(7) 52.7%(6) 64.2%(5)
Broadcasting 40.4%(7) 66.5%(3) 49.3%(2)
Weighted Averages (by number
of transactions)
Communications 56.6%
Broadcasting 48.4%
------
Average 52.5%
======
Weighted Averages (with current
year more weight, 3, 2, 1)
Communications 55.6%
Broadcasting 50.6%
------
Average 53.1%
======
Average of Averages 52.8%
======
* Numbers in parenthesis are number of transactions in each year.
Applying this 52.8% premium to the freely traded lack of control value
of common equity yields a value of $190,600,000 (rounded) at October 31, 1995.
The valuation indicators, as of October 31, 1995, under the income,
market, and guideline company approaches follow:
Income $292,100,000
============
Market $299,600,000
============
Guideline Company $190,600,000
============
The income and market approaches have retuned value indicators for 100%
of the assets of the System, while the guideline Company approach has
yielded an equity value. This appraisal study is being undertaken to determine
an equity valuation. Therefore, existing System debt, as of October 31, 1995
most be subtracted from the 100% asset value indicators to determine the equity
on a fair market value basis in the System at the valuation date.
-53-
<PAGE>
Long-term debt on the System's balance sheet amounted to $55,687,500 at
October 31, 1995 per unaudited financial statements supplied to the
appraiser by Comcast management. If this debt ($55,700,000 rounded) is
subtracted from the asset value indicators, the equity values at October 31,
1995 are as follows:
Income $236,400,000
============
Market $243,900,000
============
Guideline Company $190,600,000
============
CORRELATION AND CONCLUSION
The value of a 100% equity interests have been derived under three
separate approaches as follows:
<TABLE>
<CAPTION>
Guideline Market
DCF Company Transaction
------------ ------------ ------------
<S> <C> <C> <C>
Freely Traded Value of Controlling
Equity Interests in Detroit $236,400,000 $190,600,000 $243,900,000
</TABLE>
The appraisers reconciled the three approaches by relying mainly on the
DCF approach. As discussed earlier, the transaction approach is mainly for
corroboration of the income approach. We believe that the DCF approach deserves
more weight due to the unique characteristics of each cable television system
and the fact that this method incorporates the unique combination of revenue
sources and competitive forces to which the System is subject. The guideline
company approach, while also useful for corroborative purposes, is not weighted
highly as a stand-alone value indicator due to the vast differences between
publicly traded MSO's and individual systems. The fair
-54~-
<PAGE>
value of 100% of Detroit's equity, is therefore, $236,000,000 (rounded) at
October 31, 1995.
Therefore, in the appraisers' opinion, ClD's 10% interest in Detroit is
valued at $23,600,000 or $23.60 per share and the public shareholder's
3.4876% interest in CID is valued at $823,000 (rounded) at October 31, 1995.
-55-
<PAGE>
APPRAISAL CERTIFICATE
The determination of the fair value of a 3.4876% interest in Cablevision
Investment of Detroit and its sole asset, the cable television system serving
portions of Detroit, Michigan, has been appraised by John E. Kane and Henry E.
Sherman of Kane Reece Associates, Inc., Metro Park, New Jersey. The effective
date of the appraisal is October 31. 1995.
We certify that, to the best of my knowledge and belief:
- The statements of fact contained in this report are true and correct.
- The reported analysis, opinions, and conclusions, are limited only
by the reported assumptions and limiting conditions and are our
personal, unbiased professional analyses, opinions, and conclusions.
- Neither Kane Reece Associates, Inc., nor I have any present or
prospective interest in the property that is subject of this report,
and we have no personal interest or bias with respect to the parties
involved.
- Kane Reece Associates, Inc.'s compensation is not contingent on an
action or event resulting from the analyses, opinions, or conclusions
in, or the use of, this report.
- Our analyses, opinions, and conclusions were developed, and this
report has been prepared in conformity with the Uniform Standards of
Professional Appraisal Practice.
- No one provided significant professional assistance to the persons
signing this report.
The appraiser personally interviewed management for the current
appraisal and inspected the System's service area in conjunction with a
previous appraisal.
No investigation has been made of the title to or the liabilities
against the assets which have been appraised.
It is understood that this report is provided for the purpose(s)
described in the transmittal letter and introduction of this report. It is not
to be quoted in whole or in
-56-
<PAGE>
part or otherwise referred to or disseminated to any other person, entity
or government agency without the prior written consent of Kane Reece Associates,
Inc.
KANE REECE ASSOCIATES, INC.
/s/ John E. Kane
- ------------------------------------
John E. Kane
Principal
/s/ Henry E. Sherman
- ------------------------------------
Henry E. Sherman
Vice President
399 Thornall Street
Metro Park, NJ 08837-2236
January 3, 1996
-57-
<PAGE>
EXHIBIT A
PROGRAM OFFERINGS
<PAGE>
Comcast Cable of Detriot
Channel Line-up @ 11/15/95
System DETROIT
Franchise DETROIT
CABLE
CHANNEL PROGRAMMING SERVICES BST Pay PPV
- ------- -------------------- --- --- ----
2 WJBK 1
3 VH-1 1
4 WDIV 1
5 WKBD 1
6 LOCAL ACCESS 1
7 WXYZ 1
8 USA 1
9 ESPN 1
10 PREVUE GUIDE 1
11 CNN 1
12 WTBS 1
13 WGN 1
14 PHOTO CLASSIFIED 1
15 BULLETIN B0ARD 1
16 FAMILY 1
17 BET 1
18 E! TV 1
19 HB0 1
20 WXON 1
21 CINEMAX 1
22 SHOWTIME 1
23 TMC 1
24 DISNEY 1
25 PASS/PASS BASIC 1
26 PLAYBOY~/ValueVision 1
27 TNT 1
28 AMC 1
29 PPV/Sneak Preview 1
30 PPV 1
31 PPV 1
32 WEATHER 1
33 A & E 1
34 HEADLINE NEWS 1
35 CNBC 1
36 PPV 1
37 QVC 1
38 QVC II 1
39 HSN 1
40 HSN II 1
41 THE B0X 1
42 LIFETIME 1
43 MTV 1
44 NASHVILLE 1
45 DISCOVERY 1
46 NICKELODEON 1
47 LEARNING 1
48 HBO II 1
49 CINEMAX II 1
50 SHOWTIME II 1
51 SCI-FI 1
52 CARTOON 1
53 PPV 1
54 UNIVISION 1
55 TRAVEL 1
56 WTVS 1
57 CBET 1
58 CSPAN 1
59 WADL 1
60 LEASED ACCESS 1
61 LEASED ACCESS 1
62 WGPR 1
63 ARAB NETWORK 1
64 TV - 48 1
65 CSPAN II 1
66 NASA 1
67 PUBLIC ACCESS 1
68 TBN 1
69 INSPIRATION 1
70 HOME & GARDEN 1
71 GOV'T ACCESS 1
72 MEU 1
73 COURT TV 1
74 HISTORY CHANNEL 1
75 EDUCATIONAL ACCESS 1
76 RELIGIOUS CHANNEL 1
77 COLLEGE CABLE 1
78 WORKING CHANNEL 1
------ ----- -----
63 10 4
Detroit plans to add Bet on Jazz and Comedy in 8/96.
<PAGE>
EXHIBIT B
FINANCIAL STATEMENTS
<PAGE>
Exhibit B
Page 1
Comcast Cable of Detroit
Comparative Consolidated Income Statements
12 Months
Ended
($000's) 10/31 Year Ended December,
------------------------------------------------
1995 1994 1993 1992 1991
---- ---- ---- ---- ----
Net sales $65,967 $64,223 $65,963 $62,852 $60,645
------- ------- ------- ------- -------
Costs and expenses:
Cost of sales 47,961 48,426 43,022 43,268 41,694
Selling and administrative 0 0 7,622 8,215 8,162
- - ----- ----- -----
Operating Income 18,006 15,797 15,319 11,369 10,789
Interest 544 3,107 2,802 3,179 5,181
Other 2,874 3,615 3,958 3,771 3,633
----- ----- ----- ----- -----
Income before income taxes 14,588 9,075 8,559 4,419 1,975
Income taxes 105 589 521 417 380
--- --- --- --- ---
Net income $14,483 $ 8,486 $ 8,038 $ 4,002 $ 1,595
======= ======= ======= ======= =======
Comcast Cable of Detroit
Common Size Consolidated Income Statements
12 Months
Ended
10/31 Year Ended December,
-----------------------------------------
1995 1994 1993 1992 1991
---- ---- ---- ---- ----
Net sales 100.0% 100.0% 100.0% 100.0% 100.0%
----- ----- ----- ----- -----
Costs and expenses:
Cost of sales 72.7% 75.4% 65.2% 68.8% 68.8%
Selling and administrative 0.0% 0.0% 11.6% 13.1% 13.5%
--- --- ---- ---- ----
Operating Income 27.3% 24.6% 23.2% 18.1% 17.8%
Interest 0.8% 4.8% 4.2% 5.1% 8.5%
Other 0.0% 0.0% 0.0% 0.0% 0.0%
--- --- --- --- ---
Income before income taxes 22.1% 14.1% 13.0% 7.0% 3.3%
Income taxes 0.2% 0.9% 0.8% 0.7% 0.6%
--- --- --- --- ---
Net income 22.0% 13.2% 12.2% 6.4% 2.6%
==== ==== ==== === ===
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Supplementary data:
Depreciation and amortization in
operating expenses 9,230 10,055 9,713 11,411 15,304
Preferred dividend requirements 0 0 0 0 0
Cash dividends on common stock 0 0 0 0 0
Dividends per share 0.00 0.00 0.00 0.00 0.00
Effective income tax rate 0.7% 6.5% 6.1% 9.4% 19.2%
</TABLE>
Comcast Cable of Detroit
Comparative Consolidated Balance Sheets
<TABLE>
<CAPTION>
At
($000's) October 31 At December 31,
- -------- ---------- -------------------------------------------------------
1995 1994 1993 1992 1991
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Cash and cash equivalents $594 ($188) $240 ($1,828) ($1,221)
Accounts receivable, net 2,227 2,862 2,245 1,680 1,785
Inventories 0 0 0 0 0
Prepaid expenses and other 1,352 1,477 638 1,420 1,295
----- ----- --- ----- -----
Total current assets 4,173 4,151 3,123 1,272 1,859
----- ----- ----- ----- -----
Property, plant and equipment, gross 119,828 130,146 127,467 121,916 112,815
Less accumulated depreciation 61,138 61,018 52,396 42,910 31,730
------ ------ ------ ------ ------
Net property, plant and equipment 58,690 69,128 75,071 79,006 81,085
------ ------ ------ ------ ------
Other assets 16,092 0 0 0 0
FCC licenses 0 0 0 0 0
Intangible assets 7,363 0 0 0 0
----- - - - -
Total assets $86,318 $73,279 $78,194 $80,278 $82,944
======= ======= ======= ======= =======
Current liabilities, less current maturities
of long term debt and def. inc. tax $10,789 $6,159 $6,825 $8,641 $6,666
Current maturities of long term debt 0 0 7,043 0 0
- - ----- - -
Total current liabilities 10,789 6,159 13,868 8,641 6,666
------ ----- ------ ----- -----
Long term debt, less current maturities 55,688 55,688 46,480 62,600 56,900
Other liabilities 622 5,706 8,108 7,337 6,679
Deferred income taxes 975 0 0 0 0
------ ----- ------ ----- -----
Total long term debt 57,285 61,394 54,588 69,937 63,579
------ ------ ------ ------ ------
Partner's Capital 18,244 5,726 9,738 1,700 12,699
------ ----- ----- ----- ------
Total partner's capital 18,244 5,726 9,738 1,700 12,699
------ ----- ----- ----- ------
Total liabilities and partner's capital $86,318 $73,279 $78,194 $80,278 $82,944
======= ======= ======= ======= =======
</TABLE>
Comcast Cable of Detroit
Common Size Consolidated Balance Sheets
<TABLE>
<CAPTION>
At
($000's) October 31 At December 31,
---------- -------------------------------------------------------
1995 1994 1993 1992 1991
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Cash and cash equivalents 0.7% -0.3% 0.3% -2.3% -1.5%
Accounts receivable, net 2.6% 3.9% 2.9% 2.1% 2.2%
Inventories 0.0% 0.0% 0.0% 0.0% 0.0%
Prepaid expenses and other 1.6% 2.0% 0.8% 1.8% 1.6%
---- ---- ---- ---- ----
Total current assets 4.8% 5.7% 4.0% 1.6% 2.2%
---- ---- ---- ---- ----
Property, plant and equipment, gross 138.8% 177.6% 163.0% 151.9% 136.0%
Less accumulated depreciation 70.8% 83.3% 67.0% 53.5% 38.3%
---- ---- ---- ---- ----
Net property, plant and equipment 68.0% 94.3% 96.0% 98.4% 97.8%
---- ---- ---- ---- ----
Other assets 18.6% 0.0% 0.0% 0.0% 0.0%
FCC licenses 0.0% 0.0% 0.0% 0.0% 0.0%
Intangible assets 8.5% 0.0% 0.0% 0.0% 0.0%
---- ---- ---- ---- ----
Total assets 100.0% 100.0% 100.0% 100.0% 100.0%
----- ----- ----- ----- -----
Current liabilities, less current maturities
of long term debt and def. inc. tax 12.5% 8.4% 8.7% 10.8% 8.0%
Current maturities of long term debt 0.0% 0.0% 9.0% 0.0% 0.0%
--- --- --- --- ---
Total current liabilities 12.5% 8.4% 17.7% 10.8% 8.0%
---- --- ---- ---- ---
Long term debt, less current maturities 64.5% 0.0% 59.4% 78.0% 68.6%
Other liabilities 0.7% 83.8% 10.4% 9.1% 8.1%
Deferred income taxes 1.1% 0.0% 0.0% 0.0% 0.0%
--- --- --- --- ---
Total long term debt 66.4% 83.8% 69.8% 87.1% 76.7%
----- ----- ----- ----- -----
Common stockholders' equity 21.1% 7.8% 12.5% 2.1% 15.3%
---- --- ---- --- ----
Total partner's capital 21.1% 7.8% 12.5% 2.1% 15.3%
---- --- ---- --- ----
Total liabilities and partner's capital 100.0% 100.0% 100.0% 100.0% 100.0%
===== ===== ===== ===== =====
</TABLE>
<PAGE>
EXHIBIT C
CASH FLOW PROJECTION ASSUMPTIONS
<PAGE>
EXHIBIT C
CASH FLOW PROJECTION ASSUMPTIONS
BEGINNING OCTOBER 31, 1995
INTRODUCTION
A cash flow projection has been developed for Detroit and is in the CATV
System Valuation Model in Exhibit D.
Homes Passed
Homes passed are based upon current passings and projection of growth
provided by Strategic Mapping and Sales and Marketing and discussions with
System management. We have projected no growth in households in Detroit during
the projection period.
EBU PENETRATION
Current penetration of 32.3% is well below the national average of
66.6%. Penetration is increased from 33.7% in year 1 to 43% by year 10.
This growth considers historical performance, tempered by competition.
EBU's
This is the product of homes passed times EBU penetration.
AVERAGE EBU REVENUE
Table 3 analyzes System revenues for October 1995, month and
year-to-date and 1994. The analysis shows that for October 1995 EBU revenue
totaled $47.69. This analysis provides a baseline for the projection. The first
page of Exhibit D shows the revenue projection assumption by service. Many of
these assumptions are compared to projections prepared by Paul Kagan Associates,
Inc. and published in The Cable TV Financial Databook (1995). Revenues for
digital and telephony services have not been projected as they were too
speculative, nor were the capital expenditures needed to implement these
services forecasted.
TOTAL REVENUE
This is product of EBU's times average EBU revenue. Page 2 of Exhibit D
details the revenue projections by service.
OPERATING CASH FLOW MARGIN (%)
The Operating Margin is a function of the average revenue per subscriber
and the cost of providing services. The operating performance of the System
was reviewed for prior years and for 1993 through November. The appraiser
believes that there will be marketplace factors that will limit margin growth
including but not limited to the following:
o Continued rate regulations at least through 1997.
o Competition existing and new (e.g. Telcos) stepped up marketing,
rate restraint, and higher churn.
-1-
<PAGE>
EXHIBIT C (Continued)
o Growth in pay-per-view and potential new services (e.g. digital
audio) that have or will have higher attendant costs.
o System growth and competition will require increased direct and
indirect staff.
The System's current cash flow margin is 42%, approximately equal to
industry standards. However, we have increased margins to 43% in year 1
growing to and capped at 45% in year 3.
OPERATING CASH FLOW
This is the computational result of Total Revenue times Operating Margin.
CAPITAL EXPENDITURES
Capital expenditures for new plant, converters, and maintenance capital
have been supplied by System management through 2000; appraisers have grown
these estimates at 5% annually for recurring and 10% annually for rebuild
capital. In lieu of reflecting rebuild capital, we have not included digital and
telephony revenue and expenses which would result from such capital
expenditures.
NET CASH FLOW
This is the computational result of operating cash flow minus capital
expenditures.
PRESENT VALUE FACTOR
A 15.5% mid-year convention. The reader is referred to the text for a
discussion of the discount rate.
PRESENT VALUE CASH FLOW
This is the result of multiplying the net cash flow times the present
value factor. The sum of the yearly "present valued" cash flows is shown as
an element of the value indication.
RESIDUAL VALUE
The dividend discount model, also known as the Gordon Growth Model,
states that the value of the System in year 10 is equal to the expected
future dividend (cash flow) in year 11 divided by the remainder of the required
rate of return less the expected long-term growth rate. The multiple then, is
equal to the inverse of the required rate of return (15.5%) less the growth rate
in perpetuity (4%) or 11.5%. The inverse of 11.5% is 9 (rounded).
Therefore, the residual value is calculated using a 9 multiple of
year 11 cash flow. Taxes, adjusted for an estimated remaining tax basis in the
assets (calculation shown below), are deducted and the after tax proceeds are
then discounted to present value. The discounted residual is then added to the
present value of cash flows to yield the value indication.
-2-
<PAGE>
EXHIBIT C (Continued)
<TABLE>
<S> <C>
Estimated Tax Basis for Residual Calculation
Business Enterprise Value $ 292,000,000
Unamortized Basis:
Tangibles at 25%, life less than 10 years 0
Amortizable intangibles at 75% of BEV 72,952,000
Capital Expenditures 10,429,000
------------------
Tax Basis 83,384,000
Year 10 "sales price" 545,717,000
Percent of "sales price" not taxable 15.3%
------------------
Net capital gains tax (includes state tax factor) 30.9%
==================
</TABLE>
-3-
<PAGE>
EXHIBIT D
CASH FLOW PROJECTION
<PAGE>
Exhibit D
Page 1
Cablevision Investment of Detroit, Inc. KANE REECE ASSOCIATES, INC.
Comcast Cablevision of Detroit
As of October 31, 1995 CATV SYSTEM VALUATION MODEL
Growth Rate in Homes Passed 0.0%
Homes Passed 374,057
Equivalent Billing Units 120,685 32.3% EBU's/HP
Pay Units 227,422 188.4% Pay Units/EBU's
Operating Margin 41.9%
Weighted average discount rate 15.5%
<TABLE>
<CAPTION>
Year 1 2 3 4 5 6 7 8 9 10
---- - - - - - - - - - --
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Basic Rev/EBU (now $21.91) $22.79 $23.70 $24.60 $25.60 $26.60 $27.70 $28.80 $30.00 $31.20 $32.40
Growth rate 4.0% 4.0% 4.0% 4.0% 4.0% 4.0% 4.0% 4.0% 4.0% 4.0%
Kagan Projection $24.58 $25.56 $26.57 $27.64 $28.74 $29.87 $31.07 $32.33 $33.62 n/a
Growth rate 7.0% 4.0% 4.0% 4.0% 4.0% 3.9% 4.0% 4.1% 4.0%
Pay Rev/Pay Unit (now $9.23) $9.23 $9.51 $9.51 $9.79 $9.79 $10.09 $10.09 $10.39 $10.39 $10.70
Growth rate 0% 3% 0% 3% 0% 3% 0% 3% 0% 3%
Kagan Projection $8.20 $8.12 $8.04 $7.96 $7.88 $7.80 $7.80 $7.80 $7.80 n/a
Growth rate -1.0% -1.0% -1.0% -1.0% -1.0% -1.0% 0.0% 0.0% 0.0%
Pay-Per-View Rev/EBU (now $1.89) $1.98 $2.08 $2.19 $2.30 $2.41 $2.53 $2.66 $2.79 $2.93 $3.08
Growth rate 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0%
Kagan Projection $0.93 $1.10 $1.29 $1.47 $1.67 $1.87 $2.05 $2.22 $2.37 n/a
Growth rate 16.3% 18.3% 17.3% 14.0% 13.6% 12.0% 9.6% 8.3% 6.8%
Equipment Rental/EBU (now $3.32) $3.42 $3.52 $3.63 $3.74 $3.85 $3.96 $4.08 $4.21 $4.33 $4.46
Growth rate 3% 3% 3% 3% 3% 3% 3% 3% 3% 3%
Advertising/EBU (now $1.50) $1.73 $1.98 $2.22 $2.49 $2.74 $3.01 $3.31 $3.64 $4.01 $4.41
Growth rate 15.0% 15.0% 12.0% 12.0% 10.0% 10.0% 10.0% 10.0% 10.0% 10.0%
Kagan Projection $2.00 $2.24 $2.49 $2.75 $3.08 $3.47 $3.87 $4.28 $4.69 n/a
Growth rate 13.6% 12.0% 11.2% 10.4% 12.0% 12.7% 11.5% 10.6% 9.6%
Shopping Ch. Comm/EBU (now $0.60) $0.63 $0.66 $0.69 $0.73 $0.77 $0.80 $0.84 $0.89 $0.93 $0.98
Growth rate 5% 5% 5% 5% 5% 5% 5% 5% 5% 5%
Installation Rev/EBU (now $0.65) $0.68 $0.72 $0.75 $0.79 $0.83 $0.87 $0.91 $0.96 $1.01 $1.06
Growth rate 5% 5% 5% 5% 5% 5% 5% 5% 5% 5%
Other/EBU (now $0.92) $0.97 $1.01 $1.07 $1.12 $1.17 $1.23 $1.29 $1.36 $1.43 $1.50
Growth rate 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0%
Pay-to-EBU (now 188.4%) 186.0% 184.0% 182.0% 180.0% 178.0% 176.0% 174.0% 172.0% 170.0% 168.0%
Kagan Projection 81.2% 82.6% 84.0% 85.2% 86.1% 86.7% 87.4% 88.1% 88.8%
Total Annual EBU Rev $592.34 $614.10 $629.43 $652.63 $669.57 $694.41 $713.49 $740.59 $761.98 $790.32
monthly (now $32.22) $49.36 $51.17 $52.45 $54.39 $55.80 $57.87 $59.46 $61.72 $63.50 $65.86
Compound growth 3.3%
Kagan Projection $36.73 $40.05 $44.44 $50.47 $56.13 $61.09 $65.99 $70.40 $74.57
Compound growth 9.3%
</TABLE>
Exhibit D
Page 2
Cablevision Investment of Detroit, Inc. KANE REECE ASSOCIATES, INC.
Comcast Cablevision of Detroit
As of October 31, 1995 CATV SYSTEM VALUATION MODEL
<TABLE>
<CAPTION>
Year 1 2 3 4 5 6
---- - - - - - -
<S> <C> <C> <C> <C> <C> <C>
Homes Passed 374,057 374,057 374,057 374,057 374,057 374,057
EBU Penetration 33.7% 35.0% 36.0% 37.0% 38.0% 39.0%
Kagan Penetration Projection 67.5% 68.0% 68.3% 68.2% 67.7% 67.1%
Equivalent Billing Units 126,057 130,920 134,661 138,401 142,142 145,882
Basic Revenue/EBU $ 22.79 $ 23.70 $ 24.60 $ 25.60 $ 26.60 $ 27.70
Basic Revenue 34,468,680 37,233,634 39,751,786 42,516,815 45,371,618 48,491,253
---------- ---------- ---------- ---------- ---------- ----------
Pay-to-Basic Ratio 186.0% 184.0% 182.0% 180.0% 178.0% 176.0%
Pay Units 234,466 240,893 245,082 249,122 253,012 256,753
Pay Revenue/Pay Unit $ 9.23 $ 9.51 $ 9.51 $ 9.79 $ 9.79 $ 10.09
Pay Revenue 25,969,499 27,481,715 27,959,657 29,273,147 29,730,265 31,074,896
---------- ---------- ---------- ---------- ---------- ----------
Pay-Per-View Revenue/EBU $ 1.98 $ 2.08 $ 2.19 $ 2.30 $ 2.41 $ 2.53
Pay-Per-View Revenue 3,001,926 3,273,614 3,535,503 3,815,397 4,114,442 4,433,852
---------- ---------- ---------- ---------- ---------- ----------
Remotes Revenue/EBU $ 3.42 $ 3.52 $ 3.63 $ 3.74 $ 3.85 $ 3.96
Remotes Revenue 5,172,783 5,533,496 5,862,344 6,205,942 6,564,881 6,939,770
---------- ---------- ---------- ---------- ---------- ----------
Advertising Revenue/EBU $ 1.73 $ 1.98 $ 2.22 $ 2.49 $ 2.74 $ 3.01
Advertising Revenue/EBU 2,609,384 3,116,549 3,590,265 4,132,794 4,668,940 5,270,988
---------- ---------- ---------- ---------- ---------- ----------
Shopping Ch Revenue/EBU $ 0.63 $ 0.66 $ 0.69 $ 0.73 $ 0.77 $ 0.80
Shopping Ch Revenue 952,993 1,039,243 1,122,382 1,211,237 1,306,172 1,407,572
---------- ---------- ---------- ---------- ---------- ----------
Installation Revenue/EBU $ 0.68 $ 0.72 $ 0.75 $ 0.79 $ 0.83 $ 0.87
Installation Revenue 1,032,409 1,125,846 1,215,914 1,312,174 1,415,020 1,524,870
---------- ---------- ---------- ---------- ---------- ----------
Late Fees & Other Revenue/EBU $ 0.97 $ 1.01 $ 1.07 $ 1.12 $ 1.17 $ 1.23
Late Fees & Other Revenue 1,461,255 1,593,505 1,720,986 1,857,230 2,002,797 2,158,277
---------- ---------- ---------- ---------- ---------- ----------
Total Revenue $74,668,929 $80,397,602 $84,758,836 $90,324,736 $95,174,134 $101,301,479
----------- ----------- ----------- ----------- ----------- ------------
</TABLE>
<TABLE>
<CAPTION>
Year 7 8 9 10
---- - - - --
<S> <C> <C> <C> <C>
Homes Passed 374,057 374,057 374,057 374,057
EBU Penetration 40.0% 41.0% 42.0% 43.0%
Kagan Penetration Projection 66.5% 65.9% 65.3%
Equivalent Billing Units 149,623 153,363 157,104 160,845
Basic Revenue/EBU $28.80 $30.00 $31.20 $32.40
Basic Revenue 51,709,640 55,210,813 58,819,715 62,536,345
---------- ---------- ---------- ----------
Pay-to-Basic Ratio 174.0% 172.0% 170.0% 168.0%
Pay Units 260,344 263,785 267,077 270,219
Pay Revenue/Pay Unit $10.09 $10.39 $10.39 $10.70
Pay Revenue 31,509,510 32,883,795 33,294,143 34,696,414
---------- ---------- ---------- ----------
Pay-Per-View Revenue/EBU $2.66 $2.79 $2.93 $3.08
Pay-Per-View Revenue 4,774,918 5,139,006 5,527,564 5,942,132
--------- --------- --------- ---------
Remotes Revenue/ EBU $4.08 $4.21 $4.33 $4.46
Remotes Revenue 7,331,244 7,739,961 8,166,603 8,611,877
--------- --------- --------- ---------
Advertising Revenue/EBU $3.31 $3.64 $4.01 $4.41
Advertising Revenue/EBU 5,946,755 6,704,967 7,555,353 8,508,766
--------- --------- --------- ---------
Shopping Ch Revenue/EBU $0.84 $0.89 $0.93 $0.98
Shopping Ch Revenue 1,515,847 1,631,430 1,754,782 1,886,391
--------- --------- --------- ---------
Installation Revenue/EBU $0.91 $0.96 $1.01 $1.06
Installation Revenue 1,642,168 1,767,383 1,901,014 2,043,590
--------- --------- --------- ---------
Late Fees & Other Revenue/EBU $1.29 $1.36 $1.43 $1.50
Late Fees & Other Revenue 2,324,299 2,501,527 2,690,666 2,892,466
--------- --------- --------- ---------
Total Revenue $106,754,380 $113,578,881 $119,709,841 $127,117,982
------------ ------------ ------------ ------------
</TABLE>
Exhibit D
Page 3
Cablevision Investment of Detroit, Inc. KANE REECE ASSOCIATES, INC.
Comcast Cablevision of Detroit
As of October 31, 1995 CATV SYSTEM VALUATION MODEL
<TABLE>
<CAPTION>
1 2 3 4 5 6
- - - - - -
<S> <C> <C> <C> <C> <C> <C>
Total Revenue $74,668,929 $80,397,602 $84,758,836 $90,324,736 $95,174,134 $101,301,479
Margin % to Revenue 43.0% 44.0% 45.0% 45.0% 45.0% 45.0%
Operating Cash Flow 32,107,639 35,374,945 38,141,476 40,646,131 42,828,360 45,585,665
Capital Expenditures:
- Rebuild 440,000 484,000 532,000 585,000 644,000 708,000
- Recurring 1,695,000 2,166,000 2,318,000 2,415,000 2,606,000 2,736,000
--------- --------- --------- --------- --------- ---------
Total 2,135,000 2,650,000 2,850,000 3,000,000 3,250,000 3,444,000
Net Cash Flow 29,972,639 32,724,945 35,291,476 37,646,131 39,578,360 42,141,665
Present Value Factor @ 15.5% 0.93048 0.80561 0.69750 0.60390 0.52285 0.45269
PV Net Cash Flow $27,889,068 $26,363,675 $24,615,852 $22,734,395 $20,693,734 $19,077,031
----------- ----------- ----------- ----------- ----------- -----------
</TABLE>
<TABLE>
<CAPTION>
7 8 9 10
<S> <C> <C> <C> <C>
Total Revenue $106,754,380 $113,578,881 $119,709,841 $127,117,982
Margin % to Revenue 45.0% 45.0% 45.0% 45.0%
Operating Cash Flow 48,039,471 51,110,497 53,869,428 57,203,092
Captal Expenditures:
- Rebuild 779,000 857,000 943,000 1,037,000
- Recurring 2,873,000 3,017,000 3,168,000 3,326,000
--------- --------- --------- ---------
Total 3,652,000 3,874,000 4,111,000 4,363,000
Net Cash Flow 44,387,471 47,236,497 49,758,428 52,840,092
Present Value Factor @ 15.5% 0.39194 0.33934 0.29380 0.25437
PV Net Cash Flow $17,397,126 $16,029,235 $14,619,071 $13,441,097
----------- ----------- ----------- -----------
</TABLE>
Present Value of Net Cash Flows $202,860,284
Present Value of Residual 89,223,783
----------
Value Indication under Income Approach $292,084,068
------------
Value Indication Rounded $292,100,000
------------
Value Indication/EBU $2,420
------
Cash Flow Multiple - Projected 9.1
---
Residual Value
- ---------------------------------------------------
9x's Yr 11 Operating Cash Flow $545,717,498
Less: Taxes (see Schedule) @ 30.9% 168,752,978
-----------
After Tax Proceeds (end of year 10) 376,964,520
-----------
Present Value @ 15.5% $89,223,783
-----------
<PAGE>
EXHIBIT E
FINANCIAL STATEMENTS AND COMMON SIZE STATEMENTS 1991-1995
OF THE PUBLIC GUIDELINE COMPANIES
<TABLE>
<CAPTION>
Adelphia Exhibit E
Comparative Consolidated Income Statements Page 1
12 Months
Ended
($000's) 9/30 Year Ended March 31,
--------------------------------------------------------
1995 1995 1994 1993 1992
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net sales $380,693 $361,505 $319,045 $305,222 $273,630
-------- -------- -------- -------- --------
Costs and expenses:
Cost of sales 218,252 204,595 179,949 172,783 159,604
Selling and administrative 67,657 63,487 52,801 49,468 44,427
-------- -------- -------- -------- --------
Operating Income 94,784 93,423 86,295 82,971 69,599
Interest 206,251 195,698 182,136 164,859 164,839
Other 6,379 9,484 (1,135) 17,878 26,365
-------- -------- -------- -------- --------
Income before income taxes (117,846) (111,759) (94,706) (99,766) (121,605)
Income taxes (6,818) (5,475) 2,742 3,143 0
-------- -------- -------- -------- --------
Net income ($111,028) ($106,284) ($97,448) ($102,909) ($121,605)
-------- -------- -------- -------- --------
Earnings per common share
(based on weighted average #
of shares outstanding): ($4.19) ($4.32) ($5.66) ($6.80) ($8.80)
Supplementary data:
Depreciation and
amortization in
operating expenses 104,635 97,602 89,402 90,406 84,817
Preferred dividend
requirements 0 0 0 0 0
Cash dividends on
common stock 0 0 0 0 0
Dividends per share 0.00 0.00 0.00 0.00 0.00
Effective income tax rate 5.8% 4.9% -2.9% -3.2% 0.0%
</TABLE>
<TABLE>
<CAPTION>
Adelphia
Common Size Consolidated Income Statements
12 Months
Ended
($000's) 9/30 Year Ended March 31,
--------------------------------------------------------
1995 1995 1994 1993 1992
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net sales 100.0% 100.0% 100.0% 100.0% 100.0%
Costs and expenses:
Cost of sales 57.3% 56.6% 56.4% 56.6% 58.3%
Selling and administrative 17.8% 17.6% 16.5% 16.2% 16.2%
------ ------ ------ ------ ------
Operating Income 24.9% 25.8% 27.0% 27.2% 25.4%
------ ------ ------ ------ ------
Interest 54.2% 54.1% 57.1% 54.0% 60.2%
Other 1.7% 2.6% -0.4% 5.9% 9.6%
------ ------ ------ ------ ------
Income before income taxes -31.0% -30.9% -29.7% -32.7% -44.4%
Income taxes -1.8% -1.5% 0.9% 1.0% 0.0%
------ ------ ------ ------ ------
Net income -29.2% -29.4% -30.5% -33.7% -44.4%
------ ------ ------ ------ ------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Adelphia Exhibit E
Comparative Consolidated Balance Sheets Page 2
At
($000's) September 30 At March 31,
--------------------------------------------------------------------
1995 1995 1994 1993 1992
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Cash and cash equivalents $ 3,723 $ 5,045 $ 74,075 $ 38,671 $ 11,173
Accounts receivable, net 21,452 20,433 18,021 17,541 14,945
Inventories 0 0 0 0 0
Prepaid expenses and other 62,266 48,352 38,772 27,929 22,937
---------- ---------- ---------- -------- --------
Total current assets 87,441 73,830 130,868 84,141 49,055
---------- ---------- ---------- -------- --------
Property, plant and equipment, gross 0 0 0 0 0
Less accumulated depreciation 0 0 0 0 0
Net property, plant and equipment 542,225 518,405 446,290 398,859 371,357
---------- ---------- ---------- -------- --------
Other assets 56,690 48,968 23,922 15,467 478
Investments in affiliated cos 69,007 79,972 54,978 11,527 54,908
Intangibles 545,487 546,116 417,788 439,599 449,993
---------- ---------- ---------- -------- --------
Total assets $1,300,850 $1,267,291 $1,073,846 $949,593 $925,791
========== ========== ========== ======== ========
Current liabilities, less current maturities
of long term debt and def. inc. tax $167,135 $147,117 $106,478 $87,108 $85,065
Current maturities of long term debt 0 0 0 0 0
---------- ---------- ---------- ---------- ----------
Total current liabilities 167,135 147,117 106,478 87,108 85,065
---------- ---------- ---------- ---------- ----------
Long term debt, less current maturities 2,072,942 2,002,195 1,781,964 1,714,426 1,542,148
Other liabilities 17,873 19,415 11,747 16,673 12,122
Deferred income taxes 107,777 110,139 91,721 0 0
---------- ---------- ---------- ---------- ----------
Total long term debt 2,198,592 2,131,749 1,885,432 1,731,099 1,554,270
---------- ---------- ---------- ---------- ----------
Preferred stock 0 0 0 0 0
Common stockholders' equity (1,064,877) (1,011,575) (918,064) (868,614) (713,544)
---------- ---------- ---------- ---------- ----------
Total stockholders' equity (1,064,877) (1,011,575) (918,064) (868,614) (713,544)
---------- ---------- ---------- ---------- ----------
Total liabilities and equity $1,300,850 $1,267,291 $1,073,846 $949,593 $925,791
========== ========== ========== ========== ==========
Common shares outstanding 26,477 24,628 17,221 15,139 13,819
</TABLE>
<TABLE>
<CAPTION>
Adelphia
Common Size Consolidated Balance Sheets
At
($000's) September 30 At March 31,
--------------------------------------------------------------------
1995 1995 1994 1993 1992
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Cash and cash equivalents 0.3% 0.4% 6.9% 4.1% 1.2%
Accounts receivable, net 1.6% 1.6% 1.7% 1.8% 1.6%
Inventories 0.0% 0.0% 0.0% 0.0% 0.0%
Prepaid expenses and other 4.8% 3.8% 3.6% 2.9% 2.5%
----- ----- ----- ----- -----
Total current assets 6.7% 5.8% 12.2% 8.9% 5.3%
----- ----- ----- ----- -----
Property, plant and equipment, gross 0.0% 0.0% 0.0% 0.0% 0.0%
Less accumulated depreciation 0.0% 0.0% 0.0% 0.0% 0.0%
----- ----- ----- ----- -----
Net property, plant and equipment 41.7% 40.9% 41.6% 42.0% 40.1%
----- ----- ----- ----- -----
Other assets 4.4% 3.9% 2.2% 1.6% 0.1%
Investments in affiliated cos. 5.3% 6.3% 5.1% 1.2% 5.9%
Intangibles 41.9% 43.1% 38.9% 46.3% 48.6%
----- ----- ----- ----- -----
Total assets 100.0% 100.0% 100.0% 100.0% 100.0%
====== ====== ====== ======
Current liabilities, less current maturities
of long term debt and def. inc. tax 12.8% 11.6% 9.9% 9.2% 9.2%
Current maturities of long term debt 0.0% 0.0% 0.0% 0.0% 0.0%
--- --- --- --- ---
Total current liabilities 12.8% 11.6% 9.9% 9.2% 9.2%
---- ---- --- --- ---
Long term debt, less current
maturities 159.4% 158.0% 165.9% 180.5% 166.6%
Other liabilities 1.4% 1.5% 1.1% 1.8% 1.3%
Deferred income taxes 8.3% 8.7% 8.5% 0.0% 0.0%
--- --- --- --- ---
Total long term debt 169.0% 168.2% 175.6% 182.3% 167.9%
----- ----- ----- ----- -----
Preferred stock 0.0% 0.0% 0.0% 0.0% 0.0%
Common stockholders' equity -81.9% -79.8% -85.5% -91.5% -77.1%
---- ---- ---- ---- ----
Total stockholders' equity -81.9% -79.8% -85.5% -91.5% -77.1%
---- ---- ---- ---- ----
Total liabilities and equity 100.0% 100.0% 100.0% 100.0% 100.0%
===== ===== ===== ===== =====
</TABLE>
Cablevision Systems
Comparative Consolidated Income Statements
<TABLE>
<CAPTION>
12 Mths
($000's) Ended 9/30 Year Ended December 31,
----------------------------------------------------------------------------------
1995 1994 1993 1992 1991
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net sales $1,032,817 $837,169 $666,724 $572,487 $603,272
---------- -------- -------- -------- --------
Costs and expenses:
Cost of sales 722,245 578,534 436,781 372,987 428,385
Selling and administrative 268,962 195,942 172,687 120,356 121,527
---------- -------- -------- -------- --------
Operating Income 41,610 62,693 57,256 79,144 53,360
Interest 311,255 263,299 232,434 194,628 258,794
Other 103,892 114,545 71,604 135,019 21,765
---------- -------- -------- -------- --------
Income before income taxes (373,537) (315,151) (246,782) (250,503) (227,199)
Income taxes 0 0 0 0 0
---------- -------- -------- -------- --------
Net income ($373,537) ($315,151) ($246,782) ($250,503) ($227,199)
---------- -------- -------- -------- --------
Earnings per common share (based on
weighted average # of shares outstanding): ($15.73) ($13.44) ($10.80) ($11.13) ($10.12)
Supplementary data:
Depreciation and amortization in
operating expenses 332,177 271,343 194,904 168,538 215,326
Preferred dividend requirements 0 0 885 885 885
Cash dividends on common stock 0 0 0 0 0
Dividends per share 0.00 0.00 0.00 0.00 0.00
Effective income tax rate 0.0% 0.0% 0.0% 0.0% 0.0%
</TABLE>
<TABLE>
<CAPTION>
Cablevision Systems Exhibit E
Common Size Consolidated Income Statements Page 3
12 Mths
Ended 9/30 Year Ended December 31,
--------------------------------------------------------------------------
1995 1994 1993 1992 1991
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Net sales 100.0% 100.0% 100.0% 100.0% 100.0%
----- ----- ----- ----- -----
Costs and expenses:
Cost of sales 69.9% 69.1% 65.5% 65.2% 71.0%
Selling and administrative 26.0% 23.4% 25.9% 21.0% 20.1%
----- ----- ----- ----- -----
Operating Income 4.0% 7.5% 8.6% 13.8% 8.8%
----- ----- ----- ----- -----
Interest 30.1% 31.5% 34.9% 34.0% 42.9%
Other 10.1% 13.7% 10.7% 23.6% 3.6%
----- ----- ----- ----- -----
Income before income taxes -36.2% -37.6% -37.0% -43.8% -37.7%
Income taxes 0.0% 0.0% 0.0% 0.0% 0.0%
----- ----- ----- ----- -----
Net income -36.2% -37.6% -37.0% -43.8% -37.7%
----- ----- ----- ----- -----
</TABLE>
<TABLE>
<CAPTION>
Cablevision Systems
Comparative Consolidated Balance Sheets
At
($000's) September 30 At December 31,
---------------------------------------------------------------------------
1995 1994 1993 1992 1991
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Cash and cash equivalents $21,950 $11,350 $12,944 $2,721 $2,639
Accounts receivable, net 84,949 72,881 49,211 42,288 34,727
Inventories 144,219 129,496 0 0 0
Prepaid expenses and other 18,244 18,950 9,042 7,913 10,166
--------- --------- --------- --------- ---------
Total current assets 269,362 232,677 71,197 52,922 47,532
--------- --------- --------- --------- ---------
Property, plant and equipment, gross 0 1,558,297 1,175,745 959,393 903,542
Less accumulated depreciation 0 672,269 532,246 430,242 394,984
--------- --------- --------- --------- ---------
Net property, plant and equipment 941,853 886,028 643,499 529,151 508,558
--------- --------- --------- --------- ---------
Other 99,004 111,359 136,066 128,818 50,971
Investments in affiliated cos. 172,562 79,635 83,705 74,392 88,368
Intangibles 859,663 866,714 392,951 465,874 780,243
--------- --------- --------- --------- ---------
Total assets $2,342,444 $2,176,413 $1,327,418 $1,251,157 $1,475,672
========= ========= ========= ========= =========
Current liabilities, less current maturities
of long term debt and def. inc. tax $362,735 $321,533 $269,431 $242,274 $164,950
Current maturities of long term debt 0 14,475 20,216 15,493 5,404
--------- --------- --------- --------- ---------
Total current liabilities 362,735 336,008 289,647 257,767 170,354
--------- --------- --------- --------- ---------
Long term debt, less current maturities 3,025,039 2,948,186 2,115,510 1,913,818 2,197,371
Other liabilities 773,276 710,754 425,505 329,820 8,281
Deferred income taxes 0 0 0 0 0
--------- --------- --------- --------- ---------
Total long term debt 3,798,315 3,658,940 2,541,015 2,243,638 2,205,652
--------- --------- --------- --------- ---------
Preferred stock 250,000 0 0 0 32,094
Common stockholders' equity (2,068,606) (1,818,535) (1,503,244) (1,250,248) (932,428)
--------- --------- --------- --------- ---------
Total stockholders' equity (1,818,606) (1,818,535) (1,503,244) (1,250,248) (900,334)
--------- --------- --------- --------- ---------
Total liabilities and equity $2,342,444 $2,176,413 $1,327,418 $1,251,157 $1,475,672
========== ========== ========== ========== ==========
Common shares outstanding 23,745 23,444 22,859 22,512 22,446
</TABLE>
<TABLE>
<CAPTION>
Cablevision Systems Exhibit E
Common Size Consolidated Balance Sheets Page 4
At
($000's) September 30 At December 31,
-------------------------------------------------------------------------
1995 1994 1993 1992 1991
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Cash and cash equivalents 0.9% 0.5% 1.0% 0.2% 0.2%
Accounts receivable, net 3.6% 3.3% 3.7% 3.4% 2.4%
Inventories 6.2% 5.9% 0.0% 0.0% 0.0%
Prepaid expenses and other 0.8% 0.9% 0.7% 0.6% 0.7%
------ ------ ------ ------ ------
Total current assets 11.5% 10.7% 5.4% 4.2% 3.2%
------ ------ ------ ------ ------
Property, plant and equipment, gross 0.0% 71.6% 88.6% 76.7% 61.2%
Less accumulated depreciation 0.0% 30.9% 40.1% 34.4% 26.8%
------ ------ ------ ------ ------
Net property, plant and equipment 0.0% 40.7% 48.5% 42.3% 34.5%
------ ------ ------ ------ ------
Other 4.2% 5.1% 10.3% 10.3% 3.5%
Investments in affiliated cos. 7.4% 3.7% 6.3% 5.9% 6.0%
Intangibles 36.7% 39.8% 29.6% 37.2% 52.9%
------ ------ ------ ------ ------
Total assets 59.8% 100.0% 100.0% 100.0% 100.0%
====== ====== ====== ====== ======
Current liabilities, less current maturities
of long term debt and def. inc. tax 15.5% 14.8% 20.3% 19.4% 11.2%
Current maturities of long term debt 0.0% 0.7% 1.5% 1.2% 0.4%
------ ------ ------ ------ ------
Total current liabilities 15.5% 15.4% 21.8% 20.6% 11.5%
------ ------ ------ ------ ------
Long term debt, less current maturities 129.1% 135.5% 159.4% 153.0% 148.9%
Other liabilities 33.0% 32.7% 32.1% 26.4% 0.6%
Deferred income taxes 0.0% 0.0% 0.0% 0.0% 0.0%
------ ------ ------ ------ ------
Total long term debt 162.2% 168.1% 191.4% 179.3% 149.5%
------ ------ ------ ------ ------
Preferred stock 10.7% 0.0% 0.0% 0.0% 2.2%
Common stockholders' equity -88.3% -83.6% -113.2% -99.9% -63.2%
------ ------ ------ ------ ------
Total stockholders' equity -77.6% -83.6% -113.2% -99.9% -61.0%
------ ------ ------ ------ ------
Total liabilities and equity 100.0% 100.0% 100.0% 100.0% 100.0%
===== ===== ===== ===== =====
</TABLE>
<TABLE>
<CAPTION>
Comcast Corporation Exhibit E
Comparative Consolidated Income Statements Page 5
12 Mths
($000's) Ended 9/30 Year Ended December 31,
---------- ---------------------------------------------------------
1995 1994 1993 1992 1991
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net sales $2,717,644 $1,375,304 $1,338,228 $900,345 $721,000
---------- ---------- ---------- -------- --------
Costs and expenses:
Cost of sales 1,894,130 746,303 749,346 507,557 416,424
Selling and administrative 566,710 389,207 323,986 227,682 159,625
---------- ---------- ---------- -------- --------
Operating Income 256,804 239,794 264,896 165,106 144,951
Interest 473,380 313,477 347,448 231,318 158,100
Other (179,012) 10,876 1,090 137,723 129,625
---------- ---------- ---------- -------- --------
Income before income taxes (37,564) (84,559) (83,642) (203,935) (142,774)
Income taxes 23,857 (9,234) 15,229 14,000 12,798
---------- ---------- ---------- -------- --------
Net income ($61,421) ($75,325) ($98,871) ($217,935) ($155,572)
---------- ---------- ---------- -------- --------
Earnings per common share (based on
weighted average # of shares outstanding): ($0.26) ($0.32) ($0.46) ($1.08) ($0.87)
Supplementary data:
Depreciation and amortization in
operating expenses 627,828 336,462 341,500 232,047 164,299
Preferred dividend requirements 0 0 0 0 65,678
Cash dividends on common stock 22,325 22,688 20,739 19,164 17,279
Dividends per share 0.93 0.93 0.93 0.93 0.93
Effective income tax rate -63.5% 10.9% -18.2% -6.9% -9.0%
</TABLE>
<TABLE>
<CAPTION>
Comcast Corporation
Common Size Consolidated Income Statements
12 Mths
Ended 9/30 Year Ended December 31,
-----------------------------------------------------------------------
1995 1994 1993 1992 1991
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net sales 100.0% 100.0% 100.0% 100.0% 100.0%
----- ----- ----- ----- -----
Costs and expenses:
Cost of sales 69.7% 54.3% 56.0% 56.4% 57.8%
Selling and administrative 20.9% 28.3% 24.2% 25.3% 22.1%
----- ----- ----- ----- -----
Operating Income 9.4% 17.4% 19.8% 18.3% 20.1%
----- ----- ----- ----- -----
Interest 17.4% 22.8% 26.0% 25.7% 21.9%
Other -6.6% 0.8% 0.1% 15.3% 18.0%
----- ----- ----- ----- -----
Income before income taxes -1.4% -6.1% -6.3% -22.7% -19.8%
Income taxes 0.9% -0.7% 1.1% 1.6% 1.8%
----- ----- ----- ----- -----
Net income -2.3% -5.5% -7.4% -24.2% -21.6%
----- ----- ----- ----- -----
</TABLE>
<TABLE>
<CAPTION>
Comcast Corporation
Comparative Consolidated Balance Sheets
At
($000's) September 30 At December 31,
----------------------------------------------------------------
1995 1994 1993 1992 1991
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Cash and cash equivalents $616,490 $335,320 $160,434 $213,434 $125,658
Accounts receivable, net 336,559 108,245 72,182 57,776 30,142
Inventories 223,938 0 0 0 0
Prepaid expenses and other 314,548 164,941 537,877 157,351 489,690
--------- --------- --------- --------- ---------
Total current assets 1,491,535 608,506 770,493 428,561 645,490
--------- --------- --------- --------- ---------
Property, plant and equipment, gross 2,447,011 2,081,256 1,722,578 1,522,478 845,452
Less accumulated depreciation 892,893 823,570 701,591 565,392 340,628
--------- --------- --------- --------- ---------
Net property, plant and equipment 1,554,118 1,257,686 1,020,987 957,086 504,824
--------- --------- --------- --------- ---------
Other 0 0 0 0 0
Investments in affiliated cos. 898,859 797,075 665,208 356,191 894,899
Intangibles 5,292,865 4,099,717 2,491,588 2,530,060 748,371
--------- --------- --------- --------- ---------
Total assets $9,237,377 $6,762,984 $4,948,276 $4,271,898 $2,793,584
========== ========== ========== ========== ==========
Current liabilities, less current maturities
of long term debt and def. inc. tax $897,009 $477,725 $330,051 $304,470 $169,627
Current maturities of long term debt 249,058 182,913 263,873 87,205 94,680
--------- --------- --------- --------- ---------
Total current liabilities 1,146,067 660,638 593,924 391,675 264,307
--------- --------- --------- --------- ---------
Long term debt, less current maturities 6,619,495 4,810,541 4,154,830 3,973,514 1,689,884
Other liabilities 703,932 627,745 140,137 0 763,028
Deferred income taxes 1,520,200 1,390,849 929,916 88,350 56,885
--------- --------- --------- --------- ---------
Total long term debt 8,843,627 6,829,135 5,224,883 4,061,864 2,509,797
--------- --------- --------- --------- ---------
Preferred stock 0 191,231 173,953 0 0
Common stockholders' equity (752,317) (918,020) (1,044,484) (181,641) 19,480
--------- --------- --------- --------- ---------
Total stockholders' equity (752,317) (726,789) (870,531) (181,641) 19,480
--------- --------- --------- --------- ---------
Total liabilities and equity $9,237,377 $6,762,984 $4,948,276 $4,271,898 $2,793,584
========== ========== ========= ========= =========
Common shares outstanding 239,634 236,262 213,939 201,815 178,715
</TABLE>
<TABLE>
<CAPTION>
Comcast Corporation Exhibit E
Common Size Consolidated Balance Sheets Page 6
At
($000's) September 30 At December 31,
-----------------------------------------------------------------------
1995 1994 1993 1992 1991
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Cash and cash equivalents 6.7% 5.0% 3.2% 5.0% 4.5%
Accounts receivable, net 3.6% 1.6% 1.5% 1.4% 1.1%
Inventories 2.4% 0.0% 0.0% 0.0% 0.0%
Prepaid expenses and other 3.4% 2.4% 10.9% 3.7% 17.5%
----- ----- ----- ----- -----
Total current assets 16.1% 9.0% 15.6% 10.0% 23.1%
----- ----- ----- ----- -----
Property, plant and equipment, gross 26.5% 30.8% 34.8% 35.6% 30.3%
Less accumulated depreciation 9.7% 12.2% 14.2% 13.2% 12.2%
----- ----- ----- ----- -----
Net property, plant and equipment 16.8% 18.6% 20.6% 22.4% 18.1%
----- ----- ----- ----- -----
Other 0.0% 0.0% 0.0% 0.0% 0.0%
Investments in affiliated cos 9.7% 11.8% 13.4% 8.3% 32.0%
Intangibles 57.3% 60.6% 50.4% 59.2% 26.8%
----- ----- ----- ----- -----
Total assets 100.0% 100.0% 100.0% 100.0% 100.0%
----- ----- ----- ----- -----
Current liabilities, less current
maturities of long term debt
and def. inc. tax 9.7% 7.1% 6.7% 7.1% 6.1%
Current maturities of long term debt 2.7% 2.7% 5.3% 2.0% 3.4%
----- ----- ----- ----- -----
Total current liabilities 12.4% 9.8% 12.0% 9.2% 9.5%
----- ----- ----- ----- -----
Long term debt, less current maturities 71.7% 71.1% 84.0% 93.0% 60.5%
Other liabilities 7.6% 9.3% 2.8% 0.0% 27.3%
Deferred income taxes 16.5% 20.6% 18.8% 2.1% 2.0%
----- ----- ----- ----- -----
Total long term debt 95.7% 101.0% 105.6% 95.1% 89.8%
----- ----- ----- ----- -----
Preferred stock 0.0% 2.8% 3.5% 0.0% 0.0%
Common stockholders' equity -8.1% -13.6% -21.1% -4.3% 0.7%
----- ----- ----- ----- -----
Total stockholders' equity -8.1% -10.7% -17.6% -4.3% 0.7%
----- ----- ----- ----- -----
Total liabilities and equity 100.0% 100.0% 100.0% 100.0% 100.0%
----- ----- ----- ----- -----
</TABLE>
<TABLE>
<CAPTION>
Falcon Cable Systems Company
Comparative Consolidated Income Statements
12 Mths
($000's) Ended 9/30 Year Ended December 31,
----------------------------------------------------------------------
1995 1994 1993 1992 1991
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Net sales $52,615 $52,896 $53,743 $50,616 $45,934
------- ------- ------- ------- -------
Costs and expenses:
Cost of sales 32,115 31,716 31,653 31,281 28,853
Selling and administrative 12,444 12,992 12,728 11,674 9,723
------- ------- ------- ------- -------
Operating Expense (Income) 8,056 8,188 9,362 7,661 7,358
Interest Expense 16,432 14,403 14,553 15,402 17,528
Other 1,188 1,028 307 1,215 325
------- ------- ------- ------- -------
Income before income taxes (9,564) (7,243) (5,498) (8,956) (10,495)
Income taxes 0 0 0 0 0
------- ------- ------- ------- -------
Net income ($9,564) ($7,243) ($5,498) ($8,956) ($10,495)
======= ======= ======= ======= ========
Earnings per unit (based on weighted
average # of units outstanding): ($1.49) ($1.12) ($0.85) ($1.39) ($1.62)
Supplementary data:
Depreciation and amortization in
operating expenses 16,191 16,451 17,223 17,895 16,977
Preferred dividend requirements 0 0 0 0 0
Cash distributions on units 0 0 0 5,429 5,429
Distribution per unit 0.00 0.00 0.00 0.84 0.84
Effective income tax rate 0.0% 0.0% 0.0% 0.0% 0.0%
</TABLE>
<TABLE>
<CAPTION>
Falcon Cable Systems Company Exhibit E
Common Size Consolidated Income Statements Page 7
12 Mths
Ended 9/30 Year Ended December 31,
-----------------------------------------------------------------------
1992 1991 1990 1989 1988
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Net sales 100.0% 100.0% 100.0% 100.0% 100.0%
----- ----- ----- ----- -----
Costs and expenses:
Cost of sales 61.0% 60.0% 58.9% 61.8% 62.8%
Selling and administrative 23.7% 24.6% 23.7% 23.1% 21.2%
----- ----- ----- ----- -----
Operating Expense (Income) 15.3% 15.5% 17.4% 15.1% 16.0%
----- ----- ----- ----- -----
Interest Expense 31.2% 27.2% 27.1% 30.4% 38.2%
Other 2.3% 1.9% 0.6% 2.4% 0.7%
----- ----- ----- ----- -----
Income before income taxes -18.2% -13.7% -10.2% -17.7% -22.8%
Income taxes 0.0% 0.0% 0.0% 0.0% 0.0%
----- ----- ----- ----- -----
Net income -18.2% -13.7% -10.2% -17.7% 22.8%
----- ----- ----- ----- -----
</TABLE>
<PAGE>
Falcon Cable Systems Company Exhibit E
Comparative Consolidated Balance Sheets Page 8
<TABLE>
<CAPTION>
At
($000's) September 30 At December 31,
-------------------------------------------------------------------------
1995 1994 1993 1992 1991
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Cash and cash equivalents $1,136 $2,987 $1,186 $887 $2,117
Accounts receivable, net 798 2,287 1,222 1,050 1,365
Inventories 1,519 1,206 659 1,330 1,760
Prepaid expenses and other 1,907 8,500 1,574 1,398 1,382
-------- -------- -------- -------- --------
Total current assets 5,360 14,980 4,641 4,665 6,624
-------- -------- -------- -------- --------
Property, plant and equipment, gross 133,311 124,618 121,811 114,418 107,503
Less accumulated depreciation 66,006 59,158 55,032 45,722 38,402
-------- -------- -------- -------- --------
Net property, plant and equipment 67,305 65,460 66,779 68,696 69,101
-------- -------- -------- -------- --------
Other 1,154 0 0 0 0
Investment in affiliates 0 0 0 0 0
Intangibles 34,013 38,986 44,340 50,956 57,997
-------- -------- -------- -------- --------
Total assets $107,832 $119,426 $115,760 $124,317 $133,722
-------- -------- -------- -------- --------
Current liabilities, less current
maturities of long term debt and def.
inc. tax $9,773 $11,950 $10,448 $11,023 $10,112
Current maturities of long term debt 0 0 0 0 0
-------- -------- -------- -------- --------
Total current liabilities 9,773 11,950 10,448 11,023 10,112
-------- -------- -------- -------- --------
Long term debt, less current maturities 169,705 170,439 168,364 171,804 167,593
Other liabilities 4,317 3,687 3,263 2,308 2,449
Deferred income taxes 0 0 0 0 0
-------- -------- -------- -------- --------
Total long term debt 174,022 174,126 171,627 174,112 170,043
-------- -------- -------- -------- --------
Partners' deficit (75,963) (66,650) (66,315) (60,818) (46,432)
-------- -------- -------- -------- --------
Total liabilities and partners' deficit $107,832 $119,426 $115,760 $124,317 $133,722
-------- -------- -------- -------- --------
Units outstanding 6,399 6,467 6,468 6,443 6,478
</TABLE>
Falcon Cable Systems Company
Common Size Consolidated Balance Sheets
<TABLE>
<CAPTION>
At
September 30 At December 31,
-------------------------------------------------
1995 1994 1993 1992 1991
----- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Cash and cash equivalents 1.1% 2.5% 1.0% 0.7% 1.6%
Accounts receivable, net 0.7% 1.9% 1.1% 0.8% 1.0%
Inventories 1.4% 1.0% 0.6% 1.1% 1.3%
Prepaid expenses and other 1.8% 7.1% 1.4% 1.1% 1.0%
----- ----- ----- ----- -----
Total current assets 5.0% 12.5% 4.0% 3.8% 5.0%
----- ----- ----- ----- -----
Property, plant and equipment, gross 123.6% 104.3% 105.2% 92.0% 80.4%
Less accumulated depreciation 61.2% 49.5% 47.5% 36.8% 28.7%
----- ----- ----- ----- -----
Net property, plant and equipment 62.4% 54.8% 57.7% 55.3% 51.7%
----- ----- ----- ----- -----
Other 1.1% 0.0% 0.0% 0.0% 0.0%
Investment in affiliates 0.0% 0.0% 0.0% 0.0% 0.0%
Intangibles 31.5% 32.6% 38.3% 41.0% 43.4%
----- ----- ----- ----- -----
Total assets 100.0% 100.0% 100.0% 100.0% 100.0%
----- ----- ----- ----- -----
Current liabilities, less current
maturities of long term debt and def.
inc. tax 9.1% 10.0% 9.0% 8.9% 7.6%
Current maturities of long term debt 0.0% 0.0% 0.0% 0.0% 0.0%
----- ----- ----- ----- -----
Total current liabilities 9.1% 10.0% 9.0% 8.9% 7.6%
----- ----- ----- ----- -----
Long term debt, less current maturities 157.4% 142.7% 145.4% 138.2% 125.3%
Other liabilities 4.0% 3.1% 2.8% 1.9% 1.8%
Deferred income taxes 0.0% 0.0% 0.0% 0.0% 0.0%
----- ----- ----- ----- -----
Total long term debt 161.4% 145.8% 148.3% 140.1% 127.2%
----- ----- ----- ----- -----
Common stockholders' equity -70.4% -55.8% -57.3% -48.9% -34.7%
----- ----- ----- ----- -----
Total liabilities and partners' deficit 100.0% 100.0% 100.0% 100.0% 100.0%
----- ----- ----- ----- -----
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
TCA Cable TV Exhibit E
Comparative Consolidated Income Statements Page 9
12 Mths
($000's) Ended 7/31 Year Ended October 31,
--------------------------------------------------
1995 1994 1993 1992 1991
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net sales $178,480 $162,300 $152,291 $138,839 $127,090
-------- -------- -------- -------- --------
Costs and expenses:
Cost of sales 89,871 87,007 97,480 90,607 85,707
Selling and administrative 29,597 29,342 10,471 10,637 10,009
-------- -------- -------- -------- --------
Operating Income 59,011 45,952 44,340 37,594 31,374
Interest 11,305 9,748 10,971 13,213 17,851
Other (109) (1,663) (321) (289) (345)
-------- -------- -------- -------- --------
Income before income taxes 47,815 37,867 33,690 24,671 13,868
Income taxes 18,742 14,892 13,241 9,682 5,375
-------- -------- -------- -------- --------
Net income $29,073 $22,975 $20,449 $14,989 $8,493
-------- -------- -------- -------- --------
Earnings per common share (based on
weighted average # of shares outstanding): $1.19 $1.01 $0.83 $0.61 $0.35
Supplementary data:
Depreciation and amortization in
operating expenses 29,560 33,636 33,330 32,805 34,007
Preferred dividend requirements 0 0 0 0 0
Cash dividends on common stock 11,542 10,832 9,846 8,344 6,841
Dividends per share 0.47 0.44 0.40 0.34 0.28
Effective income tax rate 39.2% 39.3% 39.3% 39.2% 38.8%
</TABLE>
<TABLE>
<CAPTION>
TCA Cable TV
Common Size Consolidated Income Statements
12 Mths
Ended 7/31 Year Ended October 31,
--------------------------------------------------
1995 1994 1993 1992 1991
----- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net sales 100.0% 100.0% 100.0% 100.0% 100.0%
----- ----- ----- ----- -----
Costs and expenses:
Cost of sales 50.4% 53.6% 64.0% 65.3% 67.4%
Selling and administrative 16.6% 18.1% 6.9% 7.7% 7.9%
----- ----- ----- ----- -----
Operating Income 33.1% 28.3% 29.1% 27.1% 24.7%
----- ----- ----- ----- -----
Interest 6.3% 6.0% 7.2% 9.5% 14.0%
Other -0.1% -1.0% -0.2% -0.2% -0.3%
----- ----- ----- ----- -----
Income before income taxes 26.8% 23.3% 22.1% 17.8% 10.9%
Income taxes 10.5% 9.2% 8.7% 7.0% 4.2%
----- ----- ----- ----- -----
Net income 16.3% 14.2% 13.4% 10.8% 6.7%
----- ----- ----- ----- -----
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
TCA Cable TV Exhibit E
Comparative Consolidated Balance Sheets Page 10
At
($000's) July 31 At October 31,
----------------------------------------------------
1995 1994 1993 1992 1991
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Cash and cash equivalents $ 2,285 $ 2,445 $ 1,450 $ 819 $ 987
Accounts receivable, net 8,167 5,079 5,185 3,805 3,440
Inventories 0 0 0 0 0
Prepaid expenses and other 1,807 495 624 668 448
-------- -------- -------- -------- --------
Total current assets 12,260 8,019 7,259 5,292 4,875
-------- -------- -------- -------- --------
Property, plant and equipment, gross 321,722 275,335 254,409 236,756 229,279
Less accumulated depreciation 178,255 162,750 147,999 132,075 119,649
-------- -------- -------- -------- --------
Net property, plant and equipment 143,467 112,585 106,411 104,681 109,630
-------- -------- -------- -------- --------
Other 0 0 0 0 0
Investments 4,209 2,223 0 0 0
Intangibles 271,668 163,387 174,407 179,916 191,194
-------- -------- -------- -------- --------
Total assets $431,604 $286,213 $288,077 $289,889 $305,700
-------- -------- -------- -------- --------
Current liabilities, less current
maturities of long term debt and def.
inc. tax $ 22,735 $ 20,869 $ 19,560 $ 15,649 $ 15,793
Current maturities of long term debt 0 0 0 0 0
-------- -------- -------- -------- --------
Total current liabilities 22,735 20,869 19,560 15,649 15,793
-------- -------- -------- -------- --------
Long term debt, less current maturities 251,027 126,447 143,253 163,319 189,252
Other liabilities 0 0 0 0 0
Deferred income taxes 45,400 40,000 35,013 32,964 29,893
-------- -------- -------- -------- --------
Total long term debt 296,427 166,447 178,266 196,283 219,145
-------- -------- -------- -------- --------
Preferred Stock 0 0 0 0 0
Common stockholders' equity 112,441 98,897 90,251 77,957 70,762
-------- -------- -------- -------- --------
Total stockholders' equity 112,441 98,897 90,251 77,957 70,762
-------- -------- -------- -------- --------
Total liabilities and equity $431,604 $286,213 $288,077 $289,889 $305,700
-------- -------- -------- -------- --------
Common shares outstanding 24,446 22,661 24,637 24,571 24,264
</TABLE>
TCA Cable TV
Common Size Consolidated Balance Sheets
<TABLE>
<CAPTION>
At
($000's) July 31 At October 31,
-------------------------------------------
1995 1994 1993 1992 1991
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Cash and cash equivalents 0.5% 0.9% 0.5% 0.3% 0.3%
Accounts receivable, net 1.9% 1.8% 1.8% 1.3% 1.1%
Inventories 0.0% 0.0% 0.0% 0.0% 0.0%
Prepaid expenses and other 0.4% 0.2% 0.2% 0.2% 0.1%
------ ------ ------ ------ ------
Total current assets 2.8% 2.8% 2.5% 1.8% 1.6%
------ ------ ------ ------ ------
Property, plant and equipment, gross 74.5% 96.2% 88.3% 81.7% 75.0%
Less accumulated depreciation 41.3% 56.9% 51.4% 45.6% 39.1%
------ ------ ------ ------ ------
Net property, plant and equipment 33.2% 39.3% 36.9% 36.1% 35.9%
------ ------ ------ ------ ------
Other 0.0% 0.0% 0.0% 0.0% 0.0%
Investments 1.0% 0.8% 0.0% 0.0% 0.0%
Intangibles 62.9% 57.1% 60.5% 62.1% 62.5%
------ ------ ------ ------ ------
Total assets 100.0% 100.0% 100.0% 100.0% 100.0%
------ ------ ------ ------ ------
Current liabilities, less current
maturities of long term debt and def.
inc. tax 5.3% 7.3% 6.8% 5.4% 5.2%
Current maturities of long term debt 0.0% 0.0% 0.0% 0.0% 0.0%
------ ------ ------ ------ ------
Total current liabilities 5.3% 7.3% 6.8% 5.4% 5.2%
------ ------ ------ ------ ------
Long term debt, less current maturities 58.2% 44.2% 49.7% 56.3% 61.9%
Other liabilities 0.0% 0.0% 0.0% 0.0% 0.0%
Deferred income taxes 10.5% 14.0% 12.2% 11.4% 9.8%
------ ------ ------ ------ ------
Total long term debt 68.7% 58.2% 61.9% 67.7% 71.7%
------ ------ ------ ------ ------
Preferred Stock 0.0% 0.0% 0.0% 0.0% 0.0%
Common stockholders' and equity 26.1% 34.6% 31.3% 26.9% 23.1%
------ ------ ------ ------ ------
Total stockholders' equity 26.1% 34.6% 31.3% 26.9% 23.1%
------ ------ ------ ------ ------
Total liabilities and equity 100.0% 100.0% 100.0% 100.0% 100.0%
------ ------ ------ ------ ------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Tele-Communications Exhibit E
Comparative Consolidated Income Statements Page 11
12 Mths
($000's) Ended 9/30 Year Ended December 31,
--------------------------------------------------------------------------
1995 1994 1993 1992 1991
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net sales $ 6,454,000 $ 4,936,000 $ 4,153,000 $ 3,574,000 $ 3,214,000
----------- ----------- ----------- ----------- -----------
Costs and expenses:
Cost of sales 3,881,000 2,768,000 2,132,000 1,801,000 1,777,000
Selling and administrative 1,855,000 1,380,000 1,105,000 909,000 763,000
----------- ----------- ----------- ----------- -----------
Operating Income 718,000 788,000 916,000 864,000 674,000
Interest 962,000 785,000 731,000 718,000 826,000
Other (113,000) (168,000) 24,000 101,000 (44,000)
----------- ----------- ----------- ----------- -----------
Income before income taxes (131,000) 171,000 161,000 45,000 (108,000)
Income taxes (73,000) 116,000 168,000 38,000 (30,000)
----------- ----------- ----------- ----------- -----------
Net income ($ 58,000) $ 55,000 ($ 7,000) $ 7,000 ($ 78,000)
----------- ----------- ----------- ----------- -----------
Earnings per common share (based on
weighted average # of shares outstanding): ($ 0.09) $ 0.09 ($ 0.02) $ 0.01 ($ 0.22)
Supplementary data:
Depreciation and amortization in
operating expenses 1,252,000 1,018,000 911,000 764,000 756,000
Preferred dividend requirements 31,000 8,000 2,000 15,000 0
Cash dividends on common stock 0 0 0 0 0
Dividends per share 0.00 0.00 0.00 0.00 0.00
Effective income tax rate 55.7% 67.8% 104.3% 84.4% 27.8%
</TABLE>
<TABLE>
<CAPTION>
Tele-Communications, Inc.
Common Size Consolidated Income Statements
12 Mths
Ended 9/30 Year Ended December 31,
--------------------------------------------------
1995 1994 1993 1992 1991
----- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net sales 100.0% 100.0% 100.0% 100.0% 100.0%
----- ----- ----- ----- -----
Costs and expenses:
Cost of sales 60.1% 56.1% 51.3% 50.4% 55.3%
Selling and administrative 28.7% 28.0% 26.6% 25.4% 23.7%
----- ---- ---- ---- ----
Operating Income 402.3% 84.0% 77.9% 75.8% 79.0%
----- ---- ---- ---- ----
Interest 14.9% 15.9% 17.6% 20.1% 25.7%
Other -1.8% -3.4% 0.6% 2.8% -1.4%
----- ---- ---- ---- ----
Income before income taxes -2.0% 3.5% 3.9% 1.3% -3.4%
Income taxes -1.1% 2.4% 4.0% 1.1% -0.9%
----- ---- ---- ---- ----
Net income -0.9% 1.1% -0.2% 0.2% -2.4%
----- ---- ---- ---- ----
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Tele-Communications, Inc. Exhibit E
Corporate Consolidated Balance Sheets Page 12
At
($000's) September 30 December 31,
- -------- ------------ -----------------------------------------------------
1995 1994 1993 1992 1991
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Cash and cash equivalents $ 142,000 $ 74,000 $ 1,000 $ 34,000 $ 32,000
Accounts receivable, net 310,000 301,000 232,000 203,000 228,000
Inventories 294,000 203,000 0 0 0
Prepaid expenses and other 63,000 36,000 0 0 0
----------- ----------- ----------- ----------- -----------
Total current assets 809,000 614,000 233,000 237,000 260,000
----------- ----------- ----------- ----------- -----------
Property, plant and equipment, gross 10,849,000 8,942,000 7,520,000 6,591,000 5,580,000
Less accumulated depreciation 3,696,000 3,066,000 2,585,000 2,207,000 1,702,000
----------- ----------- ----------- ----------- -----------
Net property, plant and equipment 7,153,000 5,876,000 4,935,000 4,384,000 3,878,000
----------- ----------- ----------- ----------- -----------
Other 1,785,000 1,438,000 528,000 567,000 656,000
Investments 3,076,000 1,945,000 1,627,000 1,577,000 1,985,000
Intangibles 11,778,000 9,444,000 9,197,000 6,399,000 5,581,000
----------- ----------- ----------- ----------- -----------
Total assets $24,601,000 $19,317,000 $16,520,000 $13,164,000 $12,360,000
=========== =========== =========== =========== ===========
Current liabilities, less current
maturities of long term debt and def.
inc. tax $ 1,294,000 $ 1,193,000 $ 781,000 $ 655,000 $ 542,000
Current maturities of long term debt 0 1,206,000 927,000 645,000 624,000
----------- ----------- ----------- ----------- -----------
Total current liabilities 1,294,000 2,399,000 1,708,000 1,300,000 1,166,000
----------- ----------- ----------- ----------- -----------
Long term debt, less current maturities 12,660,000 9,956,000 8,973,000 9,640,000 8,831,000
Other liabilities 1,342,000 757,000 417,000 446,000 853,000
Deferred income taxes 4,636,000 3,524,000 3,310,000 292,000 154,000
----------- ----------- ----------- ----------- -----------
Total long term debt 18,638,000 14,237,000 12,700,000 10,378,000 9,838,000
----------- ----------- ----------- ----------- -----------
Preferred Stock 0 0 0 0 0
Common stockholders' equity 4,669,000 2,681,000 2,112,000 1,486,000 1,356,000
----------- ----------- ----------- ----------- -----------
Total stockholders' equity 4,669,000 2,681,000 2,112,000 1,486,000 1,356,000
----------- ----------- ----------- ----------- -----------
Total liabilities and equity $24,601,000 $19,317,000 $16,520,000 $13,164,000 $12,360,000
=========== =========== =========== =========== ===========
Common shares outstanding 656,378 657,000 450,000 430,000 419,000
</TABLE>
<TABLE>
<CAPTION>
Tele-Communications, Inc. Exhibit E
Common Size Consolidated Balance Sheets Page 12
At
($000's) September 30 At December 31,
-----------------------------------------------
1995 1994 1993 1992 1991
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Cash and cash equivalents 0.6% 0.4% 0.0% 0.3% 0.3%
Accounts receivable, net 1.3% 1.6% 1.4% 1.5% 1.8%
Inventories 1.2% 1.1% 0.0% 0.0% 0.0%
Prepaid expenses and other 0.3% 0.2% 0.0% 0.0% 0.0%
------ ------ ------ ------ ------
Total current assets 3.3% 3.2% 1.4% 1.8% 2.1%
------ ------ ------ ------ ------
Property, plant and equipment, gross 44.1% 46.3% 45.5% 50.1% 45.1%
Less accumulated depreciation 15.0% 15.9% 15.6% 16.8% 13.8%
------ ------ ------ ------ ------
Net property, plant and equipment 29.1% 30.4% 29.9% 33.3% 31.4%
------ ------ ------ ------ ------
Other 7.3% 7.4% 3.2% 4.3% 5.3%
Investments 12.5% 10.1% 9.8% 12.0% 16.1%
Intangibles 47.9% 48.9% 55.7% 48.6% 45.2%
------ ------ ------ ------ ------
Total assets 100.0% 100.0% 100.0% 100.0% 100.0%
====== ====== ====== ====== ======
Current liabilities, less current
maturities of long term debt and def.
inc. tax 5.3% 6.2% 4.7% 5.0% 4.4%
Current maturities of long term debt 0.0% 6.2% 5.6% 4.9% 5.0%
------ ------ ------ ------ ------
Total current liabilities 5.3% 12.4% 10.3% 9.9% 9.4%
------ ------ ------ ------ ------
Long term debt, less current maturities 51.5% 51.5% 54.3% 73.2% 71.4%
Other liabilities 5.5% 3.9% 2.5% 3.4% 6.9%
Deferred income taxes 18.8% 18.2% 20.0% 2.2% 1.2%
------ ------ ------ ------ ------
Total long term debt 75.8% 73.7% 76.9% 78.8% 79.6%
------ ------ ------ ------ ------
Preferred Stock 0.0% 0.0% 0.0% 0.0% 0.0%
Common stockholders' equity 19.0% 13.9% 12.8% 11.3% 11.0%
------ ------ ------ ------ ------
Total stockholders' equity 19.0% 13.9% 12.8% 11.3% 11.0%
------ ------ ------ ------ ------
Total liabilities and equity 100.0% 100.0% 100.0% 100.0% 100.0%
====== ====== ====== ====== ======
</TABLE>
<PAGE>
EXHIBIT F
FIVE YEAR COMPARISON OF FINANCIAL RATIOS AND TRENDS
BETWEEN DETROIT AND GUIDELINE COMPANIES
Comcast Cable of Detroit Exhibit F
Size Versus Comparative Companies Page 1
Twelve
Months Operating Total
Company Ended Revenues Assets
------- ----- -------- ------
Adelphia 09/30/95 $380,693 $1,300,850
Cablevision Systems 09/30/95 1,032,817 2,342,444
Comcast Corporation 09/30/95 2,717,644 9,237,377
Falcon Cable Systems Company 09/30/95 52,615 107,832
TCA Cable TV 09/30/95 178,480 431,604
Tele-Communications, Inc. 09/30/95 6,454,000 24,601,000
Comcast Cable of Detroit 10/31/95 65,967 86,318
Comcast Cable of Detroit Exhibit F
Liquidity Ratios Page 2
Current Ratio
-------------------------------------
Company 1995 1994 1993 1992 1991
------- ---- ---- ---- ---- ----
Adelphia 0.5 0.5 1.2 1.0 0.6
Cablevision Systems 0.7 0.7 0.2 0.2 0.3
Comcast Corporation 1.3 0.9 1.3 1.1 2.4
Falcon Cable Systems Company 0.5 1.3 0.4 0.4 0.7
TCA Cable TV 0.5 0.4 0.4 0.3 0.3
Tele-Communications, Inc. 0.6 0.3 0.1 0.2 0.2
--- --- --- --- ---
Median 0.6 0.6 0.4 0.4 0.4
Comcast Cable of Detroit 0.4 0.7 0.2 0.1 0.3
Quick Asset Ratio
-----------------------------------------
Company 1995 1994 1993 1992 1991
------- ---- ---- ---- ---- ----
Adelphia 0.2 0.2 0.9 0.6 0.3
Cablevision Systems 0.3 0.3 0.2 0.2 0.2
Comcast Corporation 0.8 0.7 0.4 0.7 0.6
Falcon Cable Systems Company 0.2 0.4 0.2 0.2 0.3
TCA Cable TV 0.5 0.4 0.3 0.3 0.3
Tele-Communications, Inc. 0.3 0.2 0.1 0.2 0.2
--- --- --- --- ---
Median 0.3 0.3 0.3 0.2 0.3
Comcast Cable of Detroit 0.3 0.4 0.2 -0.0 0.1
Comcast Cable of Detroit Exhibit F
Asset Management Ratios Page 3
Total Assets Utilization
----------------------------------------
Company 1995 1994 1993 1992 1991
------- ---- ---- ---- ---- ----
Adelphia 0.3 0.3 0.3 0.3 0.3
Cablevision Systems 0.4 0.4 0.5 0.5 0.4
Comcast Corporation 0.3 0.2 0.3 0.2 0.3
Falcon Cable Systems Company 0.5 0.4 0.5 0.4 0.3
TCA Cable TV 0.4 0.6 0.5 0.5 0.4
Tele-Communications, Inc. 0.3 0.3 0.3 0.3 0.3
--- --- --- --- ---
Median 0.4 0.3 0.4 0.4 0.3
Comcast Cable of Detroit 0.8 0.9 0.8 0.8 0.7
Fixed Assets Utilization
----------------------------------------
Company 1995 1994 1993 1992 1991
------- ---- ---- ---- ---- ----
Adelphia n/a n/a n/a n/a n/a
Cablevision Systems n/a 0.5 0.6 0.6 0.7
Comcast Corporation 1.1 0.7 0.8 0.6 0.9
Falcon Cable Systems Company 0.4 0.4 0.4 0.4 0.4
TCA Cable TV 0.6 0.6 0.6 0.6 0.6
Tele-Communications, Inc. 0.6 0.6 0.6 0.5 0.6
--- --- --- --- ---
Median 0.5 0.5 0.6 0.6 0.6
Comcast Cable of Detroit 0.6 0.5 0.5 0.5 0.5
Comcast Cable of Detroit Exhibit F
Capital Formation and Debt Management Page 4
<TABLE>
<CAPTION>
Capital Formation
-----------------------------------------------------------------------------------
Twelve
Months Current Long-Term Long-Term Preferred Common
Company Ended Liabilities Liabilities Debt Stock Stock
------- ----- ----------- ----------- ---- ----- -----
<S> <C> <C> <C> <C> <C> <C>
Adelphia 09/30/95 12.8% 9.7% 159.4% 0.0% -81.9%
Cablevision Systems 09/30/95 15.5% 33.0% 129.1% 10.7% -88.3%
Comcast Corporation 09/30/95 12.4% 24.1% 71.7% 0.0% -8.1%
Falcon Cable Systems Company 09/30/95 9.1% 4.0% 157.4% 0.0% -70.4%
TCA Cable TV 09/30/95 5.3% 10.5% 58.2% 0.0% 26.1%
Tele-Communications, Inc. 09/30/95 5.3% 24.3% 51.5% 0.0% 19.0%
Comcast Cable of Detroit 10/31/95 12.5% 1.9% 64.5% 0.0% 21.1%
</TABLE>
Fixed-Charges Coverage
-------------------------------------------
Company 1995 1994 1993 1992 1991
------- ---- ---- ---- ---- ----
Adelphia 0.9 0.9 1.0 0.9 0.8
Cablevision Systems 0.9 0.8 0.8 0.6 1.0
Comcast Corporation 2.2 1.8 1.7 1.1 1.1
Falcon Cable Systems Company 1.4 1.6 1.8 1.6 1.4
TCA Cable TV 5.2 4.9 4.1 2.9 1.8
Tele-Communications, Inc. 0.9 1.2 1.2 1.1 0.9
--- --- --- --- ---
Median 1.2 1.4 1.5 1.1 1.0
Comcast Cable of Detroit 50.1 8.3 8.9 7.2 5.0
Comcast Cable of Detroit Exhibit F
Profitability Ratios Page 5
<TABLE>
<CAPTION>
Operating Income Before Depreciation
------------------------------------
Company 1995 1994 1993 1992 1991
------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Adelphia 52.4% 52.8% 55.1% 56.8% 56.4%
Cablevision Systems 36.2% 39.9% 37.8% 43.3% 44.5%
Comcast Corporation 32.6% 41.9% 45.3% 44.1% 42.9%
Falcon Cable Systems Company 46.1% 46.6% 49.5% 50.5% 53.0%
TCA Cable TV 49.6% 49.0% 51.0% 50.7% 51.4%
Tele-Communications, Inc. 30.5% 36.6% 44.0% 45.6% 44.5%
---- ---- ---- ---- ----
Median 41.1% 44.2% 47.4% 48.0% 48.0%
Comcast Cable of Detroit 41.3% 40.3% 37.9% 36.2% 43.0%
</TABLE>
<TABLE>
<CAPTION>
Operating Income After Depreciation
-----------------------------------
Company 1995 1994 1993 1992 1991
------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Adelphia 24.9% 25.8% 27.0% 27.2% 25.4%
Cablevision Systems 4.0% 7.5% 8.6% 13.8% 8.8%
Comcast Corporation 9.4% 17.4% 19.8% 18.3% 20.1%
Falcon Cable Systems Company 15.3% 15.5% 17.4% 15.1% 16.0%
TCA Cable TV 33.1% 28.3% 29.1% 27.1% 24.7%
Tele-Communications, Inc. 11.1% 16.0% 22.1% 24.2% 21.0%
---- ---- ---- ---- ----
Median 13.2% 16.7% 20.9% 21.3% 20.5%
Comcast Cable of Detroit 27.3% 24.6% 23.2% 18.1% 17.8%
</TABLE>
<TABLE>
<CAPTION>
Income Before Taxes
-------------------
Company 1995 1994 1993 1992 1991
------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Adelphia -31.0% -30.9% -29.7% -32.7% -44.4%
Cablevision Systems -36.2% -37.6% -37.0% -43.8% -37.7%
Comcast Corporation -1.4% -6.1% -6.3% -22.7% -19.8%
Falcon Cable Systems Company -18.2% -13.7% -10.2% -17.7% -22.8%
TCA Cable TV 26.8% 23.3% 22.1% 17.8% 10.9%
Tele-Communications, Inc. -2.0% 3.5% 3.9% 1.3% -3.4%
---- --- --- ---- ----
Median -10.1% -9.9% -8.2% -20.2% -21.3%
Comcast Cable of Detroit 22.1% 14.1% 13.0% 7.0% 3.3%
</TABLE>
Income After Taxes
------------------
Company 1995 1994 1993 1992 1991
------- ---- ---- ---- ---- ----
Adelphia -29.2% -29.4% -30.5% -33.7% -44.4%
Cablevision Systems -36.2% -37.6% -37.0% -43.8% -37.7%
Comcast Corporation -2.3% -5.5% -7.4% -24.2% -21.6%
Falcon Cable Systems Company -18.2% -13.7% -10.2% -17.7% -22.8%
TCA Cable TV 16.3% 14.2% 13.4% 10.8% 6.7%
Tele-Communications, Inc. -0.9% 1.1% -0.2% 0.2% -2.4%
--- --- --- --- ---
Median -10.2% -9.6% -8.8% -20.9% -22.2%
Comcast Cable of Detroit 22.2% 13.2% 12.2% 6.4% 2.6%
Comcast Cable of Detroit Exhibit F
Rates of Return and Leverage Factor Page 6
Return on Total Assets
----------------------
Company 1995 1994 1993 1992 1991
------- ---- ---- ---- ---- ----
Adelphia 14.8% 14.3% 16.5% 16.4% 13.8%
Cablevision Systems 11.5% 10.1% 13.6% 9.0% 16.7%
Comcast Corporation 11.5% 8.4% 12.2% 6.1% 6.4%
Falcon Cable Systems Company 21.4% 19.8% 22.7% 19.6% 18.0%
TCA Cable TV 13.7% 16.6% 15.5% 13.1% 10.4%
Tele-Communications, Inc. 3.4% 4.9% 5.4% 5.8% 5.8%
--- --- --- --- ---
Median 12.6% 12.2% 14.6% 11.0% 12.1%
Comcast Cable of Detroit 31.6% 35.3% 32.0% 28.4% 31.5%
Return on Common Stock Equity
-----------------------------
Company 1995 1994 1993 1992 1991
------- ---- ---- ---- ---- ----
Adelphia 10.4% 10.5% 10.6% 11.8% 17.0%
Cablevision Systems 18.1% 17.3% 16.4% 20.0% 24.4%
Comcast Corporation 8.2% 8.2% 9.5% 120.0% -798.6%
Falcon Cable Systems Company 12.6% 10.9% 8.3% 14.7% 22.6%
TCA Cable TV 25.9% 23.2% 22.7% 19.2% 12.0%
Tele-Communications, Inc. -1.2% 2.1% -0.3% 0.5% -5.8%
--- --- --- --- ---
Median 11.5% 10.7% 10.0% 17.0% 14.5%
Comcast Cable of Detroit 79.4% 148.2% 82.5% 235.4% 12.6%
Total Assets to Common Stock Equity
-----------------------------------
Company 1995 1994 1993 1992 1991
------- ---- ---- ---- ---- ----
Adelphia -1.2 -1.3 -1.2 -1.1 -1.3
Cablevision Systems -1.1 -1.2 -0.9 -1.0 -1.6
Comcast Corporation -12.3 -7.4 -4.7 -23.5 143.4
Falcon Cable Systems Company -1.4 -1.8 -1.7 -2.0 -2.9
TCA Cable TV 3.8 2.9 3.2 3.7 4.3
Tele-Communications, Inc. 5.3 7.2 7.8 8.9 9.1
--- --- --- --- ---
Median -1.2 -1.2 -1.0 -1.0 1.5
Comcast Cable of Detroit 4.7 12.8 8.0 47.2 6.5
<PAGE>
EXHIBIT G
INVESTOR APPRAISAL RATIOS
<PAGE>
<TABLE>
<CAPTION>
Comcast Cable of Detroit Exhibit G
Investor Appraisal Ratios Page 1
Primary Earnings Per Share
--------------------------------------------------
Latest 12 Latest F/Y
Mth Revenues Revenues 12 Months Latest 12 1994 1993 1992 1991
Company $000's $000's Ending Mth $ $ $ $ $
------- ------------ --------- -------- --------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Adelphia $380,693 $361,505 09/30/95 ($4.19) ($4.32) ($5.66) ($6.80) ($8.80)
Cablevision Systems 1,032,817 837,169 09/30/95 (15.73) (13.44) (10.80) (11.13) (10.12)
Comcast Corporation 2,717,644 1,375,304 09/30/95 (0.26) (0.32) (0.46) (1.08) (0.87)
Falcon Cable Systems Company 52,615 52,896 09/30/95 (1.49) (1.12) (0.85) (1.39) (1.62)
TCA Cable TV 178,480 162,300 09/30/95 1.19 1.01 0.83 0.61 0.35
Tele-Communications, Inc. 6,454,000 4,936,000 09/30/95 -0.09 0.09 -0.02 0.01 -0.22
Comcast Cable of Detroit 65,967 64,223 10/31/95 14,483 8,486 8,038 4,002 1,595
------------ --------- -------- --------- ------- ------- ------- -------
<CAPTION>
Revenue Per Share
-------------------------------------------------
5 Yr Avg 3 Yr Avg 5 Yr Avg 3 Yr Avg
EPS EPS Latest 12 1994 1993 1992 1991 RPS RPS
$ $ Mth $ $ $ $ $ $ $
------- -------- --------- ------ ------ ------ ------ -------- --------
Adelphia ($5.95) ($4.72) $14.38 $14.68 $18.53 $20.16 $19.80 $17.51 $15.86
Cablevision Systems -12.24 -13.32 43.50 35.71 29.17 25.43 26.88 32.14 36.12
Comcast Corporation -0.60 -0.35 11.34 5.82 6.26 4.46 4.03 6.38 7.81
Falcon Cable Systems Company -1.29 -1.15 8.22 8.18 8.31 7.86 7.09 7.93 8.24
TCA Cable TV 0.80 1.01 7.30 7.16 6.18 5.65 5.24 6.31 6.88
Tele-Communications, Inc. -0.04 -0.00 9.83 7.51 9.23 8.31 7.67 8.51 8.86
Comcast Cable of Detroit 7,321 10,336 65,967 64,223 65,963 62,852 60,645 63,930 65,384
------- -------- --------- ------ ------ ------ ------ -------- --------
</TABLE>
<TABLE>
<CAPTION>
P/E Ratio
-------------------------------------------------------------
10/31/95
Market Price Latest Latest 5 Yr 3 Yr Latest Latest
Company $ [*] 12 Mth Year Average Average 12 Mth F/Y
------- ------------ ------ ------ ------- ------- ------ -----
<S> <C> <C> <C> <C> <C> <C> <C>
Adelphia $8.75 -2.1 -2.0 -1.5 -1.9 0.61 0.60
Cablevision Systems 53.38 -3.4 -4.0 -4.4 -4.0 1.23 1.49
Comcast Corporation 17.75 n/a n/a n/a n/a 1.57 3.05
Falcon Cable Systems Company 10.00 -6.7 -8.9 -7.7 -8.7 1.22 1.22
TCA Cable TV 29.63 24.9 29.2 37.1 29.3 4.06 4.14
Tele-Communications, Inc. 17.00 -192.4 188.9 -379.6 -3664.0 1.73 2.26
Median -2.7 -1.0 -2.9 -2.9 1.40 1.88
Comcast Cable of Detroit
------ ----- ------ ------- ---- ----
Price/RPS Ratio Return Indicated Dividend
------------------- On Common Dividend Payout Dividend Latest
5 Yr 3 Yr Equity Yield Ratio Rate Avg Shares
Company Average Average % % % $ O/S (000)
------- ------- ------- ------- ------ -------- -------- ----------
Adelphia 0.50 0.55 10.4% 0.0% 0.0% $0.00 26,477
Cablevision Systems 1.66 1.48 18.1% 0.0% 0.0% 0.00 23,745
Comcast Corporation 2.78 2.27 8.2% 5.2% -362.8% 0.93 239,634
Falcon Cable Systems Company 1.26 1.21 12.6% 0.0% 0.0% 0.00 6,399
TCA Cable TV 4.70 4.31 25.9% 1.6% 39.7% 0.47 24,446
Tele-Communications, Inc. 2.00 1.92 -1.2% 0.0% 0.0% 0.00 656,378
Median 1.83 1.70 0.1 n/a n/a n/a
Comcast Cable of Detroit 79.4% 0.0% 0.0% 0.00 1.00
----- ---- ---- ---- ------
</TABLE>
Note [*]: 30 days of trading activity prior to and through October 31, 1995
were reviewed. The market price utilized in this study is the closing
price at October 31, 1995, unless it was determined that due to
trading anomalies or potential M & A acvtivity the October 31, 1995
price is not indicative of freely-traded value. In this study, no such
anomalies or M & A activity were found, and all prices are the October
31, 1995 closing prices.
Comcast Cable of Detroit Exhibit G
Investor Appraisal Ratios Page 2
<TABLE>
<CAPTION>
EBITDA per Share
-----------------------------------------------------
Latest 12 5 Yr Avg 3 Yr Avg
Mth EBITDA 12 Months Latest 12 1994 1993 1992 1991 EBITDA EBITDA
Company $000's Ending Mth $ $ $ $ $ $ $
------- ---------- -------- -------- ------- ------ ------ ------ ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Adelphia $ 199,419 09/30/95 $ 7.53 $ 7.76 $10.20 $11.45 $11.17 $9.62 $8.50
Cablevision Systems 373,787 09/30/95 15.74 14.25 11.03 11.00 11.97 12.80 13.67
Comcast Corporation 884,632 09/30/95 3.69 2.44 2.83 1.97 1.73 2.53 2.99
Falcon Cable Systems Company 24,247 09/30/95 3.79 3.81 4.11 3.97 3.76 3.89 3.90
TCA Cable TV 88,571 09/30/95 3.62 3.51 3.15 2.87 2.69 3.17 3.43
Tele-Communications, Inc. 1,970,000 09/30/95 3.00 2.75 4.06 3.79 3.41 3.40 3.27
Comcast Cable of Detroit 27,236 10/31/95 27,236 25,852 25,032 22,780 26,093 25,399 26,040
---------- -------- ------ ------ ------ ------ ------ ------ ------
</TABLE>
<TABLE>
<CAPTION>
EBIT per Share
--------------------------------------------------------
Latest 12 5 Yr Avg 3 Yr Avg
Mth EBIT 12 Months Latest 12 1994 1993 1992 1991 EBIT EBIT
Company $000's Ending Mth $ $ $ $ $ $ $
------- --------- -------- -------- ------- ------ ------ ------ ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Adelphia $ 94,784 09/30/95 $3.58 $3.79 $5.01 $5.48 $5.04 $4.58 $4.13
Cablevision Systems 41,610 09/30/95 1.75 2.67 2.50 3.52 2.38 2.56 2.31
Comcast Corporation 256,804 09/30/95 1.07 1.01 1.24 0.82 0.81 0.99 1.11
Falcon Cable Systems Company 8,056 09/30/95 1.26 1.27 1.45 1.19 1.14 1.26 1.32
TCA Cable TV 59,011 09/30/95 2.41 2.03 1.80 1.53 1.29 1.81 2.08
Tele-Communications, Inc. 718,000 09/30/95 1.09 1.20 2.04 2.01 1.61 1.59 1.44
Comcast Cable of Detroit 18,006 10/31/95 18,006 15,797 15,319 11,369 10,789 14,256 16,374
------ -------- ------ ------ ------ ------ ------ ------ ------
</TABLE>
<TABLE>
<CAPTION>
PRICE/EBITDA Ratio PRICE/EBIT Ratio
-----------------------------------------------------------------------------------
10/31/95
Market Price Latest Latest 5 Yr 3 Yr Latest Latest 5 Yr 3 Yr
Company $ (*) 12 Mth Year Average Average 12 Mth Year Average Average
------- ------------ ------ ------ ------- ------- ------ ------ ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Adelphia $8.75 1.2 1.1 0.9 1.0 2.4 2.3 1.9 2.1
Cablevision Systems 53.38 3.4 3.7 4.2 3.9 30.5 20.0 20.8 23.1
Comcast Corporation 17.75 4.8 7.3 7.0 5.9 16.6 17.5 17.9 16.0
Falcon Cable Systems Company 10.00 2.6 2.6 2.6 2.6 7.9 7.9 7.9 7.6
TCA Cable TV 29.63 8.2 8.4 9.3 8.6 12.3 14.6 16.3 14.2
Tele-Communications, Inc. 17.00 5.7 6.2 5.0 5.2 15.5 14.2 10.7 11.8
Median 4.1 5.0 4.6 4.6 13.9 14.4 13.5 13.0
--- --- --- --- ---- ---- ---- ----
</TABLE>
<PAGE>
QUALIFICATIONS OF THE APPRAISERS
<PAGE>
STATEMENT OF BACKGROUND AND EXPERIENCE
JOHN E. KANE CFA, ASA
John E. (Jack) Kane is a Principal and President of Kane Reece Associates, Inc.,
a Firm he co-founded in 1986.
Mr. Kane has personally conducted valuation and appraisal studies of real
and personal property and intangible assets of media/communications businesses
with aggregate values over $40 billion. He has served as a valuation and
communications industry expert, providing advice, management consulting,
testimony, and litigation support. The clients he serves number among the
largest in the industry. Mr. Kane has been accepted as an expert in the
media/communication industry in Federal Courts, U.S Bankruptcy Courts, various
trial courts, various administrative hearing boards, and the American
Arbitration Association. He has spoken on valuation, industry, and tax issues at
meetings of the National Cable Television Association, the Broadcast Cable
Financial Management Association, the Cable Television Tax Professionals
Institute, and the American Society of Appraisers.
Prior to his current position, Mr. Kane was Chief Operating Officer of
Frazier, Gross & Kadlec, Inc., a Washington, DC communications consultancy and
was Executive Vice President of Valuation Research Corporation in Princeton, New
Jersey. While at these firms, he was responsible for all media/communications
clients.
Mr. Kane has been actively involved in the communications industry for
eighteen years, gaining experience as a Vice President of Group W Cable
(formerly one of the largest cable television companies) where he was involved
with acquisitions, divestitures, strategic planning, and capital investments. In
that position, Mr. Kane was responsible for the analysis, approval, and
monitoring of approximately $100 million of annual capital expenditures. Prior
to Group W, Mr. Kane was Director of Financial Analysis for the RCA Corporation
and later, Director of Corporate Planning for the RCA Communications Group.
While at RCA, Mr. Kane was intimately involved in the start-up of RCA's domestic
satellite communications business (RCA American Communications).
He received an undergraduate degree from Upsala College and an M.B.A. in
Finance from St. Johns University where he was elected to the National Business
Honor Society, Beta Gamma Sigma and the National Economics Honor Society,
Omicron Delta Epsilon. Mr. Kane is a member of the Institute of Chartered
Financial Analysts (CFA), as well as the New York Society of Security Analysts
and the Association for Investment Management and Research. He or his Firm is
also a member of the American Economic Association, National Cable Television
Association, the Cable Television Tax Professionals Institute, National
Association of Broadcasters, the Broadcast Cable Financial Management
Association, the Personal Communications Industry Association, and International
Licensing Industry Merchandisers' Association. He is an Accredited Senior
Appraiser - Business Valuation of the American Society of Appraisers (ASA) and
the Firm's representative to the ASA's Affiliate Firm Committee.
Mr. Kane and his Firm received the 1993 Presidents Award from the Cable
Television Tax Professionals Institute.
Mr. Kane serves on the Executive Board of the Watchung Area Council of the Boy
Scouts of America.
<PAGE>
STATEMENT OF BACKGROUND AND EXPERIENCE
HENRY E. SHERMAN CFA, CPA
Henry E. Sherman is a Vice President of Kane Reece Associates, Inc. Mr. Sherman
joined the Firm in June 1988.
Mr. Sherman is responsible for the analysis and evaluation of business
operations for determining fair market value of closely held and thinly-traded
public corporations, purchase price allocations, due diligence support, and
solvency and fairness opinions. Mr. Sherman is experienced in valuing business
interests and intangible and tangible assets in the media, manufacturing, and
service industries.
Prior to his current position, Mr. Sherman was a Senior Consultant of
Standard Research Consultants in New York City. While at Standard Research, he
was responsible for all solvency letters and fairness opinions. Previous to
employment at Standard Research, Mr. Sherman was a Supervising Appraiser of
Valuation Research Corporation where he had responsibility for clients in a
broad range of industries.
Mr Sherman has been involved in the industry for over sixteen years,
beginning as Manager of Business Analysis of Group W Cable where he had
responsibility in the areas of acquisitions, divestitures, and capital
expenditure analysis. Mr. Sherman is also experienced in developing and
implementing business and strategic plans.
Mr.Sherman received an undergraduate degree from Johnston College of the
University of Redlands and an M.B.A. from the Bernard Baruch College of the City
University of New York. Mr. Sherman is a member of The Institute of Chartered
Financial Analysts (CFA), a Certified Public Accountant (CPA), a member of The
American Institute of Certified Public Accountants, a member of The New York
State Society of Certified Public Accountants, a member of The New York Society
of Security Analysts, a member of The American Bankruptcy Institute, and a
candidate for Senior Member - Business Valuation of the American Society of
Appraisers (ASA).
Exhibit (b)(2)
KANE REECE ASSOCIATES, INC. CONSENT
We, Kane Reece Associates, Inc., consent to the use of our
report on the valuation of Cablevision Investment of Detroit,
Inc., dated January 3, 1996, in the Rule 13E-3 Transaction
Statement, filed with the Securities and Exchange Commission,
pursuant to Section 13(e) of the Securities Exchange Act of 1934,
as amended.
KANE REECE ASSOCIATES, INC.
By: /s/John E. Kane
Title: Principal
Exhibit (d)(1)
RULE 13E-3 TRANSACTION STATEMENT
(Pursuant to Section 13(e) of the Securities Exchange Act of 1934 and
Rule 13e-3 (Section 240.13e-3) thereunder)
CABLEVISION INVESTMENT OF DETROIT, INC.
(Name of the Issuer)
COMCAST CABLEVISION OF TAYLOR, INC.
CID TRANSACTION CO.
(Name of Person(s) Filing Statement)
Common Stock, Par Value $.01 Per Share 12686100
(Title of Class of Securities) (CUSIP Number of Class of Securities)
THIS TRANSACTION STATEMENT RELATES TO THE SHORT FORM MERGER OF CID TRANSACTION
CO., THE HOLDER OF APPROXIMATELY 96.5% OF THE COMMON STOCK OF CABLEVISION
INVESTMENT OF DETROIT, INC. (THE "COMPANY") WITH AND INTO THE COMPANY (THE
"MERGER"). THE EFFECTIVE DATE OF THE MERGER WILL BE ON OR ABOUT ___________,
1996 UNLESS SUCH DATE IS EXTENDED. EACH SHARE OF COMMON STOCK OF THE COMPANY
HELD OF RECORD BY PUBLIC SHAREHOLDERS IMMEDIATELY PRIOR TO THE EFFECTIVE DATE
WILL BE CONVERTED INTO THE RIGHT TO RECEIVE $27.54, WITHOUT INTEREST (THE
"MERGER CONSIDERATION"). FOLLOWING THE EFFECTIVE DATE, THERE WILL BE NO ACTIVE
MARKET FOR THE SHARES AND HOLDERS SHALL CEASE TO HAVE THE RIGHTS OF A
SHAREHOLDER OF THE COMPANY. FOR A FURTHER DESCRIPTION OF THE MERGER AND RELATED
EVENTS, PLEASE REVIEW THIS TRANSACTION STATEMENT.
THIS TRANSACTION HAS NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE FAIRNESS OR
MERITS OF SUCH TRANSACTION NOR UPON THE ACCURACY OR ADEQUACY OF THE
INFORMATION CONTAINED IN THIS DOCUMENT. ANY REPRESENTATION TO THE
CONTRARY IS UNLAWFUL.
__________________________________
________________, 1996
Exhibit (d)(2)
CABLEVISION INVESTMENT OF DETROIT, INC.
January 22, 1996
Dear Shareholder:
Comcast Cablevision of Taylor, Inc. ("Taylor"), formerly, Maclean Hunter
Cable TV, Inc., has adopted a Plan of Merger under which Cablevision Investment
of Detroit, Inc. (the "Company") will become a wholly-owned subsidiary of Taylor
and the public shareholders will be entitled to receive $27.54 per share of the
Company's common stock. Set forth below is the text of a press release which
the Company will issue shortly.
As indicated in the press release, Taylor will soon file the required
documents with the Securities and Exchange Commission ("SEC") and will mail out
detailed information to all shareholders after the SEC has completed its
review. The Company will be pleased to assist shareholders with any questions
they may have after their receipt of such information.
Very truly yours,
Cablevision Investment of Detroit, Inc.
TEXT OF PRESS RELEASE
Cablevision Investment of Detroit, Inc. ("CID") announced today that, on
January 10, 1996, CID Transaction Co. ("CTC") adopted a plan of merger pursuant
to which CTC will merge into CID. CTC is a wholly-owned subsidiary of Comcast
Cablevision of Taylor, Inc., which owns approximately 96.5% of the stock of CID.
Under the plan of merger, the public shareholders of CID will receive
$27.54 in cash for each share of common stock of CID they own and CID will
become a 100%-owned subsidiary of Comcast Cablevision of Taylor, Inc. CID is a
10% general partner of the partnership which owns and operates the cable
television system serving the City of Detroit, Michigan.
John R. Alchin, Senior Vice President and Treasurer of CID, stated that
Comcast Cablevision of Taylor, Inc. and CTC will soon file the required
documents with the Securities and Exchange Commission and will mail detailed
information and instructions concerning the merger to its public shareholders as
soon as the Securities and Exchange Commission has reviewed the filed
documents. The merger will be concluded following the mailing to shareholders.
Exhibit (d)(3)
LETTER OF TRANSMITTAL
To Accompany Shares of Common Stock,
par value $.01 per share
of
CABLEVISION INVESTMENT OF DETROIT, INC.
PURSUANT TO THE MERGER (THE 'MERGER')
DESCRIBED BY THE RULE 13E-3 TRANSACTION STATEMENT
DATED , 1996 (THE 'TRANSACTION STATEMENT')
THIS TRANSMITTAL LETTER SHOULD BE COMPLETED, SIGNED AND SUBMITTED,
TOGETHER WITH YOUR SHARES OF CABLEVISION INVESTMENT OF DETROIT, INC. COMMON
STOCK,
AND ANY OTHER REQUIRED DOCUMENTS TO:
STATE STREET BANK AND TRUST COMPANY
<TABLE>
<S> <C> <C>
By Mail: By Hand: By Express Mail:
State Street Bank and Trust Company State Street Bank and Trust Company c/o Boston Financial Data Services
P.O. Box 9061 Corporate Reorganization Corporation Reorganization
Boston, Massachusetts 02205-8686 225 Franklin Street, Concourse Level Two Heritage Drive
Boston, Massachusetts 02110 North Quincy, Massachusetts 02171
or
61 Broadway
Concourse Level
New York, New York 10006
</TABLE>
------------------
DO NOT SEND STOCK CERTIFICATES TO CABLEVISION INVESTMENT OF DETROIT, INC.
------------------
FOR INFORMATION CALL: (800) 426-5523
PLEASE READ AND FOLLOW THE ACCOMPANYING INSTRUCTIONS
THE EFFECTIVE DATE OF THE MERGER WILL BE ON OR ABOUT , 1996 UNLESS SUCH DATE IS
EXTENDED. EACH SHARE OF COMMON STOCK OF CABLEVISION INVESTMENT OF DETROIT, INC.
(THE 'COMPANY') HELD OF RECORD IMMEDIATELY PRIOR TO THE EFFECTIVE DATE WILL BE
CONVERTED INTO THE RIGHT TO RECEIVE $27.54, WITHOUT INTEREST (THE 'MERGER
CONSIDERATION'). FOLLOWING THE EFFECTIVE DATE, THERE WILL BE NO ACTIVE MARKET
FOR THE SHARES AND HOLDERS SHALL CEASE TO HAVE RIGHTS OF A SHAREHOLDER OF THE
COMPANY. SHAREHOLDERS WHO DESIRE TO EXERCISE THEIR DISSENTER RIGHTS GRANTED BY
THE COMPANY UNDER MICHIGAN LAW MUST COMPLETE THE DISSENTERS DEMAND FOR PAYMENT
FORM AND RETURN SAME, TOGETHER WITH THIS LETTER OF TRANSMITTAL, HIS OR HER
SHARES AND ANY OTHER REQUIRED DOCUMENTS, BY , 1996 IN ORDER TO PERFECT SUCH
RIGHTS. SHAREHOLDERS SHOULD NOTE THAT THE PARENT OF THE COMPANY HAS CONCLUDED
THAT THE MERGER IS FAIR TO THE PUBLIC SHAREHOLDERS (AS DEFINED IN THE
TRANSACTION STATEMENT). FOR A FURTHER DESCRIPTION OF THE MERGER AND RELATED
EVENTS, PLEASE REVIEW THE TRANSACTION STATEMENT ENCLOSED HEREWITH. CAPITALIZED
TERMS NOT OTHERWISE DEFINED HEREIN SHALL HAVE THE MEANINGS ASCRIBED TO THEM IN
THE TRANSACTION STATEMENT.
DELIVERY OF THIS LETTER OF TRANSMITTAL AND ALL OTHER REQUIRED DOCUMENTS TO
AN ADDRESS OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.
/ / CHECK HERE IF CERTIFICATES REPRESENTING SHARES ARE BEING DELIVERED WITH THIS
LETTER AND ANY OTHER REQUIRED DOCUMENTS IN ORDER TO RECEIVE THE CASH PAYMENT
OF $27.54 PER SHARE.
/ / CHECK HERE IF CERTIFICATES REPRESENTING SHARES ARE BEING DELIVERED WITH THIS
LETTER AND ANY OTHER REQUIRED DOCUMENTS SOLELY TO BE DEPOSITED WITH THE
PAYING AGENT IN CONNECTION WITH THE EXERCISE OF DISSENTERS RIGHTS GRANTED BY
THE COMPANY UNDER MICHIGAN LAW.
<PAGE>
/ / CHECK HERE IF YOU ARE THE RECORD HOLDER OF SHARES ON BEHALF OF OTHERS AND A
PORTION OF SUCH SHARES ARE BEING DELIVERED (I) TO RECEIVE THE CASH PAYMENT
OF $27.54 PER SHARE AND (II) SOLELY TO BE DEPOSITED WITH THE PAYING AGENT IN
CONNECTION WITH THE EXERCISE OF DISSENTERS RIGHTS UNDER MICHIGAN LAW, IN
WHICH CASE YOU SHOULD COMPLETE THE FOLLOWING AND DELIVER ANY OTHER REQUIRED
DOCUMENTS:
<TABLE>
<S> <C>
Number of Shares being delivered as to which dissenters rights are being exercised: ________________________
Number of Shares being delivered to receive the Merger Consideration: ________________________
</TABLE>
IF DISSENTERS RIGHTS ARE BEING EXERCISED, THE DISSENTERS DEMAND FOR PAYMENT
FORM INCLUDED HEREWITH MUST BE COMPLETED AND, TOGETHER WITH THIS LETTER OF
TRANSMITTAL AND ANY OTHER REQUIRED DOCUMENTS, MUST BE RECEIVED BY THE PAYING
AGENT BY , 1996. IN ADDITION, ALL SHARES OWNED OF RECORD AND
BENEFICIALLY AS TO WHICH DISSENTERS RIGHTS ARE BEING ASSERTED (AS SET FORTH IN
THE DISSENTERS DEMAND FOR PAYMENT FORM) MUST BE PROVIDED WITH, AND RECEIVED BY,
THE PAYING AGENT BY , 1996.
NOTE: UNLESS ONE OF THE FOREGOING BOXES IS CHECKED,
IT WILL BE ASSUMED THAT YOU ARE SURRENDERING ALL OF YOUR SHARES
IN EXCHANGE FOR THE MERGER CONSIDERATION.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
DESCRIPTION OF SHARES TENDERED
- -------------------------------------------------------------------------------------------------------
CERTIFICATE(S) ENCLOSED
PRINT NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER (ATTACH ADDITIONAL SIGNED LIST, IF NECESSARY)
- -------------------------------------------------------------------------------------------------------
TOTAL NUMBER NUMBER OF
OF SHARES SHARES
CERTIFICATE EVIDENCED BY SURRENDERED/
NUMBER(S) CERTIFICATE(S) DEPOSITED
--------------------------------------------------
<S> <C> <C> <C>
TOTAL SHARES
</TABLE>
NOTE: SIGNATURES MUST BE PROVIDED BELOW.
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY.
Ladies and Gentlemen:
The undersigned herewith delivers and surrenders to you, pursuant to the
merger of CID Transaction Co., a Michigan corporation ('Merging Company'), with
and into Cablevision Investment of Detroit, Inc., a Michigan corporation
(the 'Company'), the above-described shares of Common Stock, par value $.01 per
share (the 'Shares') (a) in exchange for $27.54 in cash, without interest (the
'Merger Consideration'), for each share so delivered and surrendered or (b)
solely to be deposited with the Paying Agent in connection with the exercise of
dissenters rights granted by the Company under Michigan law (see the section of
the Transaction Statement entitled 'SPECIAL FACTORS--Dissenting
Shares/Dissenters Rights'), as specified above.
The undersigned hereby represents and warrants that: (i) the undersigned
has full power and authority to deliver and surrender the Shares listed above
for exchange, or deposit the Shares in respect of the exercise of dissenters
rights granted by the Company under Michigan law and (ii) the undersigned has
good, marketable and unencumbered title to the Shares being delivered and
surrendered, free and clear of all liens, restrictions, charges, claims and
encumbrances and the same are not subject to any adverse claim. The undersigned,
upon request, will execute and deliver any additional documents deemed by the
Paying Agent or the Company to be required or desirable to perfect the delivery,
surrender or deposit of the Shares delivered herewith.
All authority herein conferred by this Letter of Transmittal shall survive
the death or incapacity of the undersigned and any obligation of the undersigned
hereunder shall be binding upon the heirs, personal representatives, successors
and assigns of the undersigned.
<PAGE>
Unless dissenters rights under Michigan law have been properly exercised,
please issue a check in the amount of the Merger Consideration to which the
undersigned is entitled pursuant to the Merger in the name and to the address
indicated on the records of the Company (unless otherwise instructed in the
following boxes):
SPECIAL PAYMENT INSTRUCTIONS
(SEE INSTRUCTIONS 2, 4, 7 AND 9)
To be completed ONLY if the check for the cash payment is to be made
payable to a name OTHER THAN the name(s) of the registered holder(s) appear-
ing under the 'DESCRIPTION OF SHARES SUBMITTED'.
Issue and mail check to:
(See Instructions 4 and 7 on the reverse side.)
Name: __________________________________________________________________________
(PRINT PRINT)
Address: _______________________________________________________________________
________________________________________________________________________________
(INCLUDE ZIP CODE)
(COMPLETE FORM W-9 BELOW)
________________________________________________________________________________
(TAX IDENTIFICATION OR SOCIAL SECURITY NO.)
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 2, 4, 7 AND 9)
To be completed ONLY if delivery of the check for the cash payment is to be
made to an address OTHER than to the address of the registered holder(s)
appearing under the 'DESCRIPTION OF SHARE(S) SUBMITTED' or if the address box
immediately to the left is filled in OTHER than for the address appearing above.
Mail check or deliver to:
Name: __________________________________________________________________________
(PRINT PRINT)
Address: _______________________________________________________________________
________________________________________________________________________________
(INCLUDE ZIP CODE)
<PAGE>
- --------------------------------------------------------------------------------
SIGN HERE
(Complete Substitute Form W-9 Above)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Signature(s) of Shareholder(s)
(See guarantee requirement below)
Dated: ------------------------------------, 1996
(Must be signed by registered holder(s) exactly as name(s) appear on stock
certificate(s) or on a security position listing or by person(s) authorized to
become registered holder(s) by certificates and documents transmitted herewith.
If signature is by an officer on behalf of a corporation or by an
attorney-in-fact, executor, personal representative, administrator, trustee,
guardian, attorney, agent or any other person acting in a fiduciary or
representative capacity, please provide the following information. See
Instructions 2 and 4.)
Name(s)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Please Print)
Capacity (full title)
- --------------------------------------------------------------------------------
(See Instruction 4)
Address
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Zip Code)
Area Code and Telephone No.
- --------------------------------------------------------------------------------
Taxpayer Identification or Social Security No.
- --------------------------------------------------------------------------------
(See Substitute Form W-9 above)
GUARANTEE OF SIGNATURE(S)
(If Required -- See Instructions 2 and 4)
Signature(s) guaranteed by:
Name
- --------------------------------------------------------------------------------
(Please Print)
Name of Firm
- --------------------------------------------------------------------------------
(Please Print)
Authorized Signature
- --------------------------------------------------------------------------------
Address
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Include Zip Code)
Area Code and Telephone No.
- --------------------------------------------------------------------------------
Dated_____________________________________________________________________, 1996
<PAGE>
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE MERGER
1. Delivery of Letter of Transmittal and Certificates. In order to
receive the cash payment of $27.54 per Share Merger Consideration to which the
holder of Shares is entitled in exchange for the Shares under the terms of the
Merger, certificates for all physically surrendered Shares, together with a
properly completed and duly executed Letter of Transmittal (or facsimile
thereof), any required signature guarantees and any other required documents
must be received by the Paying Agent at one of its addresses set forth herein.
THE METHOD OF DELIVERY OF ALL DOCUMENTS, INCLUDING CERTIFICATES
REPRESENTING SHARES, IS AT THE OPTION AND RISK OF THE SHAREHOLDER. IF SENT BY
MAIL, IT IS RECOMMENDED THAT CERTIFICATES AND DOCUMENTS BE SENT BY REGISTERED
MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED.
2. Guarantee of Signatures. No signature guarantee on this Letter of
Transmittal is required (i) if this Letter of Transmittal is signed by the
registered holder(s) of the Shares being surrendered or deposited, as
applicable, and payment is to be made directly to such registered holder(s) or
(ii) if such Shares are delivered for the account of an 'Eligible Institution'.
For purposes of the Merger, 'Eligible Institution' means a financial institution
that is a member of the Securities Transfer Agents Medallion Program, the Stock
Exchange Medallion Program or the New York Stock Exchange, Inc. Medallion
Signature Program (each, an 'Eligible Institution'). In all other cases all
signatures on this Letter of Transmittal must be guaranteed by an Eligible
Institution. See Instruction 4.
3. Inadequate Space. If the space provided herein is inadequate, the
certificate numbers and/or the number of Shares should be listed on a separate
schedule attached to the Letter of Transmittal.
4. Signatures on Letter of Transmittal, Stock Powers and Endorsements. If
the Letter of Transmittal is signed by the registered holder of the Shares
delivered hereby, the signature must correspond with the name as written on the
face of the certificate(s) without alteration, enlargement or any change
whatsoever.
If any of the Shares delivered hereby are owned of record by two or more
joint owners, all such owners must sign the Letter of Transmittal.
If any Shares are registered in different names on several certificates, it
will be necessary to complete, sign and submit as many separate Letters of
Transmittal as there are different registrations of certificates.
If the Letter of Transmittal or any certificates or stock powers are signed
by a trustee, executor, personal representative, administrator, guardian,
attorney-in-fact, officer of a corporation or other person acting in a fiduciary
or representative capacity, such person should so indicate when signing, and
proper evidence satisfactory to the Company of such person's authority so to act
must be submitted.
When the Letter of Transmittal is signed by the registered owner(s) of the
certificates listed and submitted herewith, the certificate(s) must be endorsed
or accompanied by appropriate stock powers and any other required documents, in
either case signed exactly as the name or name(s) of the registered owner(s)
appear(s) on the certificate(s), unless the Letter of Transmittal is signed by
an Eligible Institution. Signatures on such certificates or stock powers must be
guaranteed by an Eligible Institution.
5. Dissenting Shareholders. In the case of a shareholder who is
exercising dissenters rights under Michigan law, in addition to delivering a
completed Letter of Transmittal and his or her Shares as described in
Instruction 1 above, a completed Dissenters Demand for Payment Form, together
with any other required documents, must be received by the Paying Agent by
, 1996.
6. Stock Transfer Taxes. The Company will pay or cause to be paid any
stock transfer taxes with respect to the surrender of Shares pursuant to the
Merger. If, however, payment of the Merger Consideration is to be made to any
person other than the registered holder(s), or if delivered certificates are
registered in the name of any person(s) other than the person(s) signing this
Letter of Transmittal, the amount of any stock transfer taxes (whether imposed
on the registered owner or such other person) payable on account of the transfer
to such other person will be deducted from the Merger Consideration unless
evidence satisfactory to the Company of the payment of such taxes or exemption
therefrom is submitted.
EXCEPT AS PROVIDED IN THIS INSTRUCTION 6, IT WILL NOT BE NECESSARY FOR
TRANSFER TAX STAMPS TO BE AFFIXED TO THE CERTIFICATES LISTED IN THIS LETTER OF
TRANSMITTAL.
7. Special Payment and Delivery Instructions. If a check is to be issued
in the name of a person other than the signer of this Letter of Transmittal or
if a check is to be sent to someone other than the signer of this Letter of
Transmittal or to an address other than that shown above, the appropriate boxes
on this Letter of Transmittal should be completed.
8. Requests for Assistance or Additional Copies. Requests for assistance
may be directed to, or additional copies of the Transaction Statement, this
Letter of Transmittal, the Dissenters Demand for Payment Form and the Guidelines
for Certification of Taxpayer Identification Number on Substitute Form W-9 may
be obtained from, the Paying Agent at the address set forth below in Instruction
11 or from your broker, dealer, commercial bank or trust company.
9. Substitute Form W-9. The shareholder surrendering Shares for payment
pursuant hereto is required to provide the Paying Agent with a correct Social
Security Number or Taxpayer Identification Number ('TIN') on Substitute Form
W-9, which is provided above. FAILURE TO PROVIDE THE CORRECT INFORMATION ON THE
FORM OR AN ADEQUATE BASIS FOR AN EXEMPTION MAY SUBJECT THE SHAREHOLDER TO A $50
PENALTY IMPOSED BY THE INTERNAL REVENUE SERVICE. IN ADDITION, BACKUP WITHHOLDING
AT THE RATE OF 31% MAY BE IMPOSED UPON THE GROSS PROCEEDS OF THE MERGER
CONSIDERATION. IF WITHHOLDING RESULTS IN AN OVERPAYMENT OF TAXES, A REFUND MAY
BE OBTAINED. The box in Part 2 of the form may be checked if the shareholder has
not been issued a TIN and has applied for a number or intends to apply for a
number in the near future. If the box in Part 2 is checked and the Paying Agent
is not provided with a TIN within 60 days, the Paying Agent will withhold 31% of
all payments of the Merger Consideration pursuant to the Merger thereafter until
a TIN is provided to the Paying Agent.
<PAGE>
Exempt shareholders (including, among others, all corporations and certain
foreign individuals) are not subject to these backup withholding and reporting
requirements. To prevent possible erroneous backup withholding, an exempt
shareholder must enter its correct TIN in Part 1 of the Substitute Form W-9,
write 'Exempt' in Part 2 of such form, and sign and date the form. See the
enclosed Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9 (the 'W-9 Guidelines') for additional instructions. In order
for a non-resident alien or foreign entity to qualify as an exempt recipient,
such person must submit a completed Form W-8, 'Certificate of Foreign Status'
statement, signed under penalties of perjury, attesting to the individual's
exempt status. Such forms can be obtained from the Paying Agent.
WHAT NUMBER TO GIVE THE PAYING AGENT
The shareholder is required to give the Paying Agent the social security
number or employer identification number of the record owner of the Shares. If
the Shares are in more than one name or are not in the name of the actual owner,
consult the W-9 Guidelines for additional guidance on which TIN to report.
If you do not have a TIN, consult the W-9 Guidelines for instructions on
applying for a TIN, write 'Applied for' in the space for the TIN in Part 1 of
the Substitute Form W-9, and sign and date the form. If you provide your TIN to
the Paying Agent within 60 days of the date the Paying Agent receives such form,
amounts withheld during such 60 day period will be refunded to you by the Paying
Agent. NOTE: WRITING 'APPLIED FOR' ON THE FORM MEANS THAT YOU HAVE ALREADY
APPLIED FOR A TIN OR THAT YOU INTEND TO APPLY FOR ONE IN THE NEAR FUTURE.
10. Mutilated, Lost, Stolen or Destroyed Certificates. If any Certificate
has been mutilated, lost, stolen or destroyed, you should contact the Paying
Agent at telephone number (800) 426-5523 for further instructions as to
obtaining the documents which must be delivered in order to complete the
delivery, surrender or deposit of your Shares.
11. Assistance in the Preparation of this Form. Questions and requests
for assistance or additional copies of this Letter of Transmittal may be
directed to the Paying Agent at P.O. Box 9061, Boston, MA 02205-8686. Telephone
Number (800) 426-5523.
<PAGE>
<TABLE>
<S> <C> <C>
- -------------------------------------------------------------------------------
SUBSTITUTE PART I--PLEASE PROVIDE
FORM W-9 YOUR SOCIAL SECURITY
--------------------------
NUMBER OR TIN IN THE BOX Social Security Number
DEPARTMENT OF THE AT RIGHT AND CERTIFY BY OR
TREASURY SIGNING AND DATING BELOW. --------------------------
INTERNAL REVENUE SERVICE Employee Identification
Number
(If awaiting TIN write
'Applied For')
- -------------------------------------------------------------------------------
Payer's Request for
Taxpayer
Identification Number
(TIN) PART II--Awaiting TIN / /
- -------------------------------------------------------------------------------
CERTIFICATION--Under the penalties of perjury, I certify that:
(l) The number provided on this form is my correct Taxpayer Identification
Number (or I am waiting for a number to be issued to me),
(2) I am not subject to backup withholding either because I have not been
notified by the Internal Revenue Service ('IRS') that I am subject to
backup withholding as a result of failure to report all interest or
dividends or the IRS has notified me that I am no longer subject to
backup withholding, and
(3) Any other information provided on this form is true and correct.
You must strike out Item (2) above if you have been notified by the IRS that
you are subject to backup withholding because of underreporting interest or
dividends on your tax return and you have not been notified by the IRS that
you are no longer subject to backup withholding.
For instructions regarding completion of form W-9 see Instruction 9 below.
- -------------------------------------------------------------------------------
SIGNATURE DATE , 1996
</TABLE>
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING
OF 31% OF ANY PAYMENT MADE TO YOU PURSUANT TO THE MERGER. PLEASE REVIEW
THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification number
has not been issued to me, and either (1) I have mailed or delivered an
application to receive a taxpayer identification number to the appropriate
Internal Revenue Service Center or Social Security Administration Office or (2)
I intend to mail or deliver an application in the near future. I understand that
if I do not provide a taxpayer identification number by the time of payment, 31%
of all payments of the Merger Consideration made to me thereafter will be
withheld until I provide a number.
Signature ___________________________________ Date ____________________________
<PAGE>
Exhibit (d)(4)
DISSENTERS DEMAND FOR PAYMENT FORM
PURSUANT TO SECTION 762 OF
THE MICHIGAN BUSINESS CORPORATION ACT
NOTE: DO NOT SUBMIT THIS FORM IF YOU DESIRE TO ACCEPT THE $27.54 PER SHARE
CASH MERGER CONSIDERATION. THIS FORM IS TO BE COMPLETED AND RETURNED ONLY IF YOU
DESIRE TO EXERCISE DISSENTERS RIGHTS AND PURSUE THE APPRAISAL PROCEEDINGS
REQUIRED IN CONNECTION THEREWITH.
Pursuant to the dissenters rights granted by the Company to its
shareholders under Section 762 (the 'Dissenters Rights Section') of the Michigan
Business Corporation Act, the undersigned, in connection with the statutory
short form merger of CID Transaction Co., a Michigan corporation ('Merging
Company') that is a wholly-owned subsidiary of Comcast Cablevision of Taylor,
Inc., a Michigan corporation ('Parent'), with and into Cablevision Investment of
Detroit, Inc., a Michigan corporation (the 'Company'), does hereby certify as
follows:
1. The undersigned has received a copy of the Rule 13e-3 Transaction
Statement (the 'Transaction Statement') dated ________, 1996, distributed
by Merging Company and Parent, together with all Annexes referred to
therein including, without limitation, the Letter of Transmittal and text
of the Dissenters Rights Section.
2. The undersigned is the (CHECK ONE) / / record holder / / beneficial
owner of the number of shares of the Common Stock, par value $.01, of the
Company ('Shares') set forth in the lettered paragraphs below. The
undersigned certifies that he or she acquired beneficial ownership of the
shares before _________, 1996, which is the date of the first announcement
to the news media of the proposed merger.
3. If a record holder, the undersigned hereby asserts dissenters
rights and demands payment, pursuant to the Dissenters Rights Section, on
behalf of (CHECK ONE) / / itself and/or / / the beneficial owner(s) whose
name(s) and address(es) is (are) listed below, with respect to all Shares
owned by the undersigned as set forth in paragraph A below and/or held on
behalf of such beneficial owner(s) as set forth in paragraph B below. If
the undersigned is asserting dissenters rights on behalf of a beneficial
owner, the undersigned has received a representation from the beneficial
owner that such owner owns the total number of Shares set forth with
respect to such holder in paragraph B below.
4. If a beneficial owner, the undersigned hereby asserts dissenters
rights and demands payment, pursuant to the Dissenters Rights Section, with
respect to all Shares owned by the undersigned whether held as record owner
or as beneficial owner, including, without limitation, those held on the
undersigned's behalf by the record holder specified in paragraph C below.
NOTE: A BENEFICIAL OWNER WHO ASSERTS DISSENTERS RIGHTS ON HIS OR HER OWN
BEHALF MUST OBTAIN THE WRITTEN CONSENT OF THE RECORD HOLDER OF HIS OR HER
SHARES TO DO SO, a form of which is attached hereto as Exhibit A.
A. To be completed by record holders asserting dissenters rights on behalf
of themselves:
<TABLE>
<S> <C> <C>
____________________________________ __________________________________ __________________________________
Exact name and address of beneficial Date(s) Shares were acquired Number of Shares held of record and
owner (including zip code) beneficially owned by record holder
____________________________________ __________________________________
Taxpayer Identification or Social Telephone number, including area
Security number code
</TABLE>
<PAGE>
B. To be completed by record holders asserting dissenters rights on behalf
of beneficial owners:
<TABLE>
<S> <C> <C>
____________________________________ __________________________________
Exact name and address of record Taxpayer Identification or Social
holder (including zip code) Security number
____________________________________ __________________________________ __________________________________
Exact name and address (including Date(s) beneficial ownership was Number of Shares held by record
zip code) of beneficial owner on acquired holder on behalf of beneficial owner
whose behalf record holder is
asserting dissenters rights
____________________________________ __________________________________ __________________________________
Taxpayer Identification or Social Telephone number, including area
Security number code
</TABLE>
NOTE: A RECORD HOLDER WHO IS ASSERTING DISSENTERS RIGHTS ON BEHALF OF MORE THAN
ONE BENEFICIAL OWNER MUST COMPLETE PARAGRAPH B ON A SEPARATE SHEET FOR EACH SUCH
BENEFICIAL OWNER.
C. To be completed by beneficial owners exercising dissenters rights on
behalf of themselves:
<TABLE>
<S> <C> <C>
____________________________________ __________________________________ __________________________________
Exact name and address of beneficial Date(s) beneficial ownership was Total number of Shares owned,
owner (including zip code) acquired beneficially or otherwise, by the
beneficial owner
____________________________________ __________________________________
Taxpayer Identification or Social Telephone number, including area
Security number code
____________________________________ __________________________________
Exact name and address of record Number of Shares owned by beneficial
holder of Shares owned by beneficial owner and held by record holder
owner
____________________________________ __________________________________
Taxpayer Identification or Social Telephone number, including area
Security number code
</TABLE>
NOTE: A BENEFICIAL OWNER WHO DESIRES TO EXERCISE DISSENTERS RIGHTS MUST COMPLETE
PARAGRAPH C ON A SEPARATE SHEET FOR EACH RECORD HOLDER INCLUDING SUCH BENEFICIAL
OWNER, IF APPLICABLE.
SHAREHOLDERS OF RECORD AND BENEFICIAL OWNERS WHO DESIRE TO EXERCISE THEIR
DISSENTERS RIGHTS MUST DEMAND PAYMENT FOR THEIR SHARES BY COMPLETING THE LETTER
OF TRANSMITTAL AND THIS DISSENTERS DEMAND FOR PAYMENT FORM AND RETURNING SUCH
FORMS AS INSTRUCTED IN THE LETTER OF TRANSMITTAL AND THE TRANSACTION STATEMENT,
TOGETHER WITH ANY REQUIRED SIGNATURE GUARANTEES, CERTIFICATES REPRESENTING ALL
SHARES OWNED OR HELD (AS DESCRIBED ABOVE) AND ANY OTHER REQUIRED DOCUMENTS, SO
THAT SUCH DOCUMENTS AND CERTIFICATES ARE RECEIVED BY THE PAYING AGENT BY _____,
1996 (THE 'DEMAND DATE').
FOR DISSENTERS RIGHTS TO BE PERFECTED, THE PAYING AGENT MUST HAVE RECEIVED
THE COMPLETED DISSENTERS DEMAND FOR PAYMENT FORM, LETTER OF TRANSMITTAL AND THE
CERTIFICATES REPRESENTING SHARES, AND ANY OTHER REQUIRED DOCUMENTS, BY THE
DEMAND DATE. A SHAREHOLDER WHO ELECTS TO EXERCISE DISSENTERS RIGHTS SHOULD MAIL
THE COMPLETED LETTER OF TRANSMITTAL, DISSENTERS DEMAND FOR PAYMENT FORM, THE
CERTIFICATES REPRESENTING THE SHARES AND ANY OTHER REQUIRED DOCUMENTS TO THE
ADDRESS AND PURSUANT TO THE INSTRUCTIONS CONTAINED IN THE LETTER OF TRANSMITTAL.
<PAGE>
SIGN HERE
IN WITNESS WHEREOF, the undersigned has executed this Dissenters Demand for
Payment Form on the date set forth below.
______________________________________________________
Signature of Record Holder/Beneficial Owner
Dated: , 1996
Name(s):______________________________________________
(Please Print)
Capacity (full title):________________________________
Address:______________________________________________
______________________________________________________
(zip code)
Area Code and Tel. No.:_______________________________
<PAGE>
EXHIBIT A
CONSENT BY RECORD HOLDER TO ASSERTION OF DISSENTERS RIGHTS BY BENEFICIAL OWNER
The undersigned is the record holder for the benefit of the below-named
beneficial owner (the 'Beneficial Owner') of the number of shares ('Shares') of
Common Stock, par value $.01, of Cablevision Investment of Detroit, Inc., a
Michigan corporation (the 'Company') set forth opposite the signature of the
undersigned. In connection with the merger of CID Transaction Co., a Michigan
corporation, with and into the Company, the undersigned does hereby consent to
the assertion by the Beneficial Owner of dissenters rights under the Michigan
Business Corporation Act.
IN WITNESS WHEREOF, the undersigned record holder has executed this Consent
on the date set forth below.
<TABLE>
<S> <C>
____________________________________ ___________________________________________________________________________
Number of Shares held by record Signature of Record Holder
holder on behalf of beneficial owner
___________________________________________________________________________
Taxpayer Identification or Social Security Number
Date: ______________________, 1996
Exact name(s) of beneficial owner(s):
___________________________________________________________________________
(Please Print)
Capacity (full title):_____________________________________________________
Address:___________________________________________________________________
(zip code)
Area Code and Tel. No.:____________________________________________________
</TABLE>
NOTE: A RECORD HOLDER WHO DESIRES TO CONSENT TO THE ASSERTION OF DISSENTERS
RIGHTS BY MORE THAN ONE BENEFICIAL OWNER MUST PROVIDE A SEPARATE EXHIBIT A FOR
EACH SUCH BENEFICIAL OWNER.
<PAGE>
Exhibit (d)(5)
NOTICE OF ADOPTION OF PLAN OF MERGER
_________, 1996
Dear Shareholder:
On January 10, 1996 the Board of Directors of CID Transaction Co., a
Michigan corporation ('Merging Company'), the holder of approximately 96.5% of
the Company's Common Stock, par value $.01 per share, adopted a Plan of Merger
(the 'Plan') under the Michigan Business Corporation Act (the 'MBCA'), pursuant
to which Merging Company will merge with the Company, and the Company will be
the surviving corporation (the 'Merger'). Under the MBCA, no other action by the
shareholders of the Company is required for the Merger to become effective.
The Merger will become effective upon filing of a Certificate of Merger
with the Department of Commerce of the State of Michigan which is expected to be
on or about ______, 1996 (the 'Effective Date').
Pursuant to the terms of the Plan, each share of Company Common Stock
(other than shares owned by Merging Company or persons who perfect their
dissenters rights under Michigan law) which is outstanding immediately prior to
the Effective Date will, without any action on the part of the holder thereof,
be automatically converted on the Effective Date into the right solely to
receive $27.54 in cash, without interest (the 'Merger Consideration'), from the
Company.
Enclosed is a Rule 13e-3 Transaction Statement (the 'Transaction
Statement') relating to the Merger together with (a) a Letter of Transmittal to
be used by you in surrendering to the Paying Agent the certificates(s) which
prior to the Merger represent your shares of Common Stock of the Company, (i) in
exchange for the $27.54 per share cash Merger Consideration or (ii) for deposit
with the Paying Agent in connection with the exercise of dissenters rights; (b)
a Dissenters Demand for Payment Form; and (c) Guidelines for Certification of
Taxpayer Identification Number on Substitute Form W-9.
Please read carefully the instructions on the reverse side of the Letter of
Transmittal, fill in, date and sign the Letter of Transmittal and send or
deliver it, together with your stock certificate(s) and any other required
documents, to the Paying Agent in the envelope enclosed for that purpose. If
needed, additional copies of the Letter of Transmittal and other documents may
be obtained upon written or telephone request to the Paying Agent. If you are
surrendering your shares in exchange for the Merger Consideration, it is not
necessary to endorse your certificate(s) unless payment in exchange for the
shares is to be made to someone other than the registered holder of the
certificate(s). Your stock certificate(s) together with a completed Letter of
Transmittal and any other required documents must be received by the Paying
Agent in order for you to receive payment of the Merger Consideration. The
method of delivery of such documents is at your election and risk. If delivery
is by mail, registered mail with return receipt requested, properly insured, is
recommended.
<PAGE>
UNDER THE MBCA, SHAREHOLDERS OF THE COMPANY DO NOT HAVE RIGHTS TO DISSENT
FROM ADOPTION OF THE PLAN AND OBTAIN PAYMENT IN CASH OF THE FAIR VALUE OF THEIR
SHARES, HOWEVER, THE COMPANY HAS DECIDED TO GRANT DISSENTERS RIGHTS TO ITS
SHAREHOLDERS. SUCH RIGHTS, IF THE STATUTORY PROCEDURES WERE COMPLIED WITH, COULD
LEAD TO A JUDICIAL DETERMINATION OF THE FAIR VALUE (EXCLUDING ANY ELEMENT OF
APPRECIATION OR DEPRECIATION IN ANTICIPATION OF THE ACCOMPLISHMENT OF THE
MERGER) REQUIRED TO BE PAID IN CASH TO SUCH DISSENTING HOLDERS FOR THEIR SHARES
('DISSENTING SHARES'). ANY SUCH JUDICIAL DETERMINATION OF THE FAIR VALUE OF
DISSENTING SHARES COULD BE BASED UPON CONSIDERATIONS OTHER THAN OR IN ADDITION
TO THE MARKET VALUE OF THE SHARES AND THE FACTORS USED TO DETERMINE THE MERGER
CONSIDERATION TO BE PAID IN THE MERGER, INCLUDING ASSET VALUES AND THE
INVESTMENT VALUE OF THE DISSENTING SHARES. THE VALUE SO DETERMINED COULD BE MORE
OR LESS THAN THE MERGER CONSIDERATION PAID PURSUANT TO THE MERGER. SEE THE
SECTION OF THE TRANSACTION STATEMENT ENTITLED 'SPECIAL FACTORS -- DISSENTING
SHARES/DISSENTERS RIGHTS'.
SHAREHOLDERS WHO DESIRE TO EXERCISE THEIR DISSENTERS RIGHTS UNDER MICHIGAN
LAW MUST COMPLETE THE ENCLOSED LETTER OF TRANSMITTAL AND DISSENTERS DEMAND FOR
PAYMENT FORM AND RETURN SAME, TOGETHER WITH HIS OR HER SHARES AND ANY OTHER
REQUIRED DOCUMENTS, BY _______________, 1996 IN ORDER TO PERFECT SUCH RIGHTS.
Very truly yours,
CABLEVISION INVESTMENT OF DETROIT, INC.
<PAGE>
Exhibit (d)(6)
NOTICE OF MERGER
Dear Shareholder:
On January 10, 1996, the Board of Directors of CID Transaction Co., a
Michigan corporation ('Merging Company'), the holder of approximately 96.5% of
the Company's Common Stock, par value $.01 per share, adopted a Plan of Merger
(the 'Plan') pursuant to the provisions of Sections 711(1) and 713(2)(b) of the
Michigan Business Corporation Act, as a result of which Merging Company was
merged with and into the Company, which is the surviving corporation (the
'Merger'). Under applicable Michigan law, no other action by the shareholders of
the Company was required for the Merger to become effective.
The Merger became effective on ____________, 1996 (the 'Effective Date'),
and, thereupon, the Company became a wholly-owned subsidiary of Comcast
Cablevision of Taylor, Inc., a Michigan corporation ('Parent'). The stock
transfer books of the Company were closed as of the close of business on the day
immediately preceding the Effective Date.
Pursuant to the terms of the Plan, each share of Company Common Stock
(other than shares owned by Merging Company or persons who perfected their
dissenters rights granted by the Company under Michigan law) which was
outstanding immediately prior to the Effective Date was, without any action on
the part of the holder thereof, automatically converted on the Effective Date
into the right solely to receive $27.54 in cash, without interest (the 'Merger
Consideration'), from the Company.
On ____, 1996, Parent and Merging Company mailed to each shareholder of
record of the Company as of the close of business on January 10, 1996, a Rule
13E-3 Transaction Statement relating to the Merger together with, among other
things, a Letter of Transmittal to be used by shareholders in surrendering to
the Paying Agent, in exchange for the $27.54 per share cash Merger
Consideration, the certificate(s) which prior to the Merger represented the
shares of Common Stock of the Company. If they have not already done so, holders
of shares formerly representing shares of the Company's Common Stock are urged
to deliver to the Paying Agent the Letter of Transmittal, his or her shares and
any other required documents. Your stock certificate(s) together with a
completed Letter of Transmittal and any other required documents must be
received by the Paying Agent in order for you to receive payment of the Merger
Consideration. If needed, additional copies of the Letter of Transmittal and
other documents may be obtained upon written or telephone request to the Paying
Agent at:
<TABLE>
<S> <C> <C>
By Mail: By Hand: By Express Mail:
State Street Bank and Trust Company State Street Bank and Trust Company c/o Boston Financial Data Services
P.O. Box 9061 Corporate Reorganization Corporation Reorganization
Boston, Massachusetts 02205-8686 225 Franklin Street, Concourse Level Two Heritage Drive
Boston, Massachusetts 02110 North Quincy, Massachusetts 02171
or
61 Broadway
Concourse Level
New York, New York 10006
</TABLE>
Very truly yours,
CABLEVISION INVESTMENT OF DETROIT, INC.
<PAGE>
Exhibit (d)(7)
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GIVE THE PAYER.
- -- Social Security numbers have nine digits separated by two hyphens: i.e.
000-00-0000. Employer identification numbers have nine digits separated by only
one hyphen: i.e. 00-0000000. The table below will help determine the number to
give the payer.
<TABLE>
<S> <C>
- -------------------------------------------------------------
GIVE THE
SOCIAL SECURITY
FOR THIS TYPE OF ACCOUNT: NUMBER OF --
- -------------------------------------------------------------
1. An individual's account The individual
2. Two or more individuals The actual owner of the
(joint account) account or, if combined
funds, the first
individual on the
account(1)
3. Custodian account of a minor The minor(2)
(Uniform Gift to Minors Act)
4. Account in the name of guardian The ward, minor, or
or committee for a designated incompetent person(3)
ward, minor, or incompetent
person
5. (a) The usual revocable savings The grantor-trustee(1)
trust account (grantor is
also trustee)
5. (b) So-called trust account that The actual owner(1)
is not a legal or valid
trust under State law
6. Sole proprietorhip The owner(4)
- -------------------------------------------------------------
GIVE THE EMPLOYER
IDENTIFICATION NUMBER OF
FOR THIS TYPE OF ACCOUNT: --
- -------------------------------------------------------------
7. Sole proprietorship account The owner(4)
8. A valid trust, estate, or Legal entity (Do not
pension trust furnish the identifying
number of the personal
representative or
trustee unless the legal
entity itself is not
designated in the
account title.)(5)
9. Corporate The Corporation
10. Association, club, religious, The organization
charitable, educational or
other tax-exempt organization
account
11. Partnership The partnership
12. A broker or registered nominee The broker or nominee
13. Account with the Department of The public entity
Agriculture in the name of a
public entity (such as a state
or local government, school
district, or prison) that
receives agricultural program
payments
</TABLE>
- ---------------------------------------------------------------
- ---------------------------------------------------------------
(1) List first and circle the name of the person whose number you furnish.
(2) Circle the minor's name and furnish the minor's social security number.
(3) Circle the ward's, minor's or incompetent person's name and furnish such
person's social security number.
(4) Show your individual name. You may also enter your business name. You may
use your SSN or EIN.
(5) List first and circle the name of the legal trust, estate, or pension trust.
NOTE: If no name is circled when there is more than one name, the number will be
considered to be that of the first name listed.
<PAGE>
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
PAGE 2
<TABLE>
<S> <C>
OBTAINING A NUMBER o Payments to partnerships not engaged in a trade or
If you don't have a taxpayer identification number or business in the U.S. and which have at least one
you don't know your number, obtain Form SS-5, nonresident partner.
Application for Employer Identification Number, at the o Payments of patronage dividends where the amount
local office of the Social Security Administration or received is not paid in money.
the Internal Revenue Service and apply for a number. o Payments made by certain foreign organizations.
PAYEES EXEMPT FROM BACKUP WITHHOLDING Payments of interest not generally subject to backup
Payees specifically exempted from backup withholding withholding include the following:
on certain payments include the following: o Payments of interest on obligations issued by
1. A corporation. individuals.
2. An organization exempt from tax under section. NOTE: You may be subject to backup withholding if this
501(a), or an individual retirement plan, or a interest is $600 or more and is paid in the course of
custodial account under section 403(b)(7). the payer's trade or business and you have not
3. The United States or any agency or instrumentality provided your correct taxpayer identification number
thereof. to the payer.
4. A State, the District of Columbia, a possession of o Payments of tax-exempt interest (including exempt
the United States, or any subdivision or interest dividends under section 852).
instrumentality thereof. o Payments described in section 6049(b)(5) to non-
5. A foreign government, a political subdivision of a resident aliens.
foreign government, or agency or instrumentality o Payments on tax-free covenant bonds under section
thereof. 1451.
6. An international organization or any agency or o Payments made by certain foreign organizations.
instrumentality thereof. Exempt payees described above should file Form W-9 to
7. A foreign central bank of issue. avoid possible erroneous backup withholding. FILE THIS
8. A dealer in securities or commodities required to FORM WITH THE PAYER, FURNISH YOUR TAXPAYER
register in the U.S. or a possession of the U.S. IDENTIFICATION NUMBER, WRITE 'EXEMPT' ON THE FACE OF
9. A futures commission merchant registered with the THE FORM, SIGN AND DATE THE FORM AND RETURN IT TO THE
Commodities Futures Trading Commission. PAYER.
10. A real estate investment trust. Payments that are not subject to information reporting
11. An entity registered at all times during the tax are also not subject to backup withholding. For
year under the Investment Company Act of 1940. details, see the regulations under sections 6041,
12. A common trust fund operated by a bank under 6041A(a), 6045 and 6050A.
section 584(a). PRIVACY ACT NOTICE. -- Section 6109 requires you to
13. A financial institution. give your taxpayer identification numbers to payers
14. A middleman known in the investment community as a who must report the payments to IRS. The IRS uses the
nominee or listed in the most recent publication numbers for identification purposes and to help verify
of the American Society of Corporate Secretaries, the accuracy of your tax return. Payers must be given
Inc. Nominee List. the numbers whether or not recipients are required to
15. An exempt charitable remainder trust, or a file tax returns. Payers must generally withhold 31%
non-exempt trust described in section 4997(a)(1). of taxable interest, dividend, and certain other
For payments of interst and dividends, all listed payments to a payee who does not furnish a taxpayer
payees are exempt except item 9. For payments with identification number to a payer. Certain penalties
respect to broker transactions, payees listed in items may also apply.
1 through 13 and a person registered under the PENALTIES
Investment Advisers act of 1940 who regularly acts as (1) PENALTY FOR FAILURE TO FURNISH TAXPAYER
a broker are exempt. Payments subject to reporting IDENTIFICATION NUMBER -- If you fail to furnish your
under sections 6041 (payments of $600 or more by taxpayer identification number to a payer, you are
persons engaged in a trade or business) or 6041A subject to a penalty of $50 for each such failure
(payments for renumeration of services and direct unless your failure is due to reasonable cause and not
sales) are generally exempt only if made to payees to willful neglect.
described in items 1 through 7, except a corporation (2) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT
that provides medical and health care services or TO WITHHOLDING -- If you make a false statement with
bills and collects payments for such services is not no reasonable basis which results in no imposition of
exempt. Only payees described in items 2 through 6 are backup withholding, you are subject to a penalty of
exempt from backup withholding for barter exchange $500.
transactions, patronage dividends, and payments by (3) CRIMINAL PENALTY FOR FALSIFYING INFORMATION --
certain fishing boat operators. Payments of dividends Willfully falsifying certifications or affirmations
and patronage dividends not generally subject to may subject you to criminal penalties including fines
backup withholding include the following: and/or imprisonment.
o Payments to nonresident aliens subject to FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT
withholding under Section 1441. OR THE INTERNAL REVENUE SERVICE.
</TABLE>
PRESS RELEASE
Exhibit (d)(8)
CABLEVISION INVESTMENT OF DETROIT
ANNOUNCES PLAN OF MERGER
Cablevision Investment of Detroit, Inc. ("CID") announced today that, on
January 10, 1996, CID Transaction Co. ("CTC") adopted a plan of merger pursuant
to which CTC will merge into CID. CTC is a wholly-owned subsidiary of Comcast
Cablevision of Taylor, Inc., which owns approximately 96.5% of the stock of
CID.
Under the plan of merger, the public shareholders of CID will receive
$27.54 in cash for each share of common stock of CID they own and CID will
become a 100%-owned subsidiary of Comcast Cablevision of Taylor, Inc. CID is a
10% general partner of the partnership which owns and operates a cable
television system serving the City of Detroit, Michigan (the "Partnership").
On December 22, 1994, Mr. Barden received $23.52 per share on an equivalent per
share basis for his interest in the Partnership, as well as his one-third
interest in a management company, no part of which is owned by CID.
John R. Alchin, Senior Vice President and Treasurer of CID, stated that
Comcast Cablevision of Taylor, Inc. and CTC will soon file the required
documents with the Securities and Exchange Commission and will mail detailed
information and instructions concerning the merger to its public shareholders as
soon as the Securities and Exchange Commission has reviewed the filed documents.
The merger will be concluded following the mailing to shareholders.
CONTACT: William Dordelman 215-981-7550 or Marlene Dooner 215-981-7392.
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors and Stockholders
Cablevision Investment of Detroit, Inc.
Detroit, Michigan
We have audited the accompanying balance sheet of Cablevision Investment of
Detroit, Inc. (an indirect majority owned subsidiary of Comcast Corporation) as
of December 31, 1994, and the related statements of operations, stockholders'
equity and of cash flows for the periods from January 1, 1994 to December 21,
1994 and December 22, 1994 to December 31, 1994. These financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of Cablevision Investment of Detroit, Inc. as
of December 31, 1994, and the results of its operations and its cash flows for
the periods stated above, in conformity with generally accepted accounting
principles.
As discussed in Note 3 to the financial statements, on December 22, 1994 the
Company became an indirect majority owned subsidiary of Comcast Corporation,
which resulted in the establishment of a new cost basis for the Company's assets
and liabilities.
/s/ Deloitte & Touche LLP
Deloitte & Touche LLP
Philadelphia, Pennsylvania
February 28, 1995
1
<PAGE>
REPORT OF INDEPENDENT AUDITORS
To The Board of Directors and Shareholders
Cablevision Investment of Detroit, Inc.
We have audited the accompanying balance sheet of Cablevision Investment of
Detroit, Inc. as of December 31, 1993, and the related statements of operations,
stockholders' equity, and cash flows for each of the two years in the period
ended December 31, 1993. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Cablevision Investment of
Detroit, Inc. at December 31, 1993, and the results of its operations and its
cash flows for each of the two years in the period ended December 31, 1993, in
conformity with generally accepted accounting principles.
/s/ Ernst & Young LLP
January 27, 1994
2
<PAGE>
CABLEVISION INVESTMENT OF DETROIT, INC.
BALANCE SHEET
DECEMBER 31, 1994 AND 1993
(Dollars in thousands)
<TABLE>
<CAPTION>
(Predecessor
Corporation)
1994 1993
---- ----
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash.......................................................... $1,125 $119
Notes receivable from Comcast Cablevision of Detroit ......... 1,000
Other assets.................................................. 4
------- ------
Total Current Assets.................................... 1,129 1,119
INVESTMENT IN COMCAST CABLEVISION OF DETROIT...................... 8,534 3,326
------- ------
DEFERRED CHARGES.................................................. 7,839
Accumulated amortization...................................... (18)
------- ------
Deferred charges, Net......................................... 7,821
------- ------
$17,484 $4,445
======= ======
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable ............................................. $12 $10
------- ------
Total Current Liabilities............................... 12 10
------- ------
DEFERRED INCOME TAXES............................................. 7,823
------- ------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Common stock, $.01 par value - authorized,
4,000,000 shares; issued, 1,000,000 ....................... 10 10
Preferred stock, no par value - authorized,
2,000,000 shares; issued, none.............................
Additional capital............................................ 9,686 7,890
Accumulated deficit........................................... (47) (3,465)
------- ------
9,649 4,435
------- ------
$17,484 $4,445
======= ======
</TABLE>
See notes to financial statements.
3
<PAGE>
CABLEVISION INVESTMENT OF DETROIT, INC.
STATEMENT OF OPERATIONS
PERIODS FROM JANUARY 1, 1994 TO DECEMBER 21, 1994 AND DECEMBER 22, 1994 TO
DECEMBER 31, 1994 AND YEARS ENDED DECEMBER 31, 1993 AND 1992
(Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
(Predecessor Corporation)
---------------------------------
December 22 January 1 to
to December 31, December 21,
1994 1994 1993 1992
---- ---- ---- ----
<S> <C> <C> <C> <C>
INCOME
Interest income....................................... $ $48 $53 $58
Equity in net (loss) income of Comcast
Cablevision of Detroit............................. (45) 858 820 408
---- ---- ---- -----
(45) 906 873 466
---- ---- ---- -----
EXPENSES
Amortization.......................................... 18 549 564 564
Administrative........................................ 40 31 21
---- ---- ---- -----
18 589 595 585
---- ---- ---- -----
(LOSS) INCOME BEFORE INCOME
TAX BENEFIT .......................................... (63) 317 278 (119)
---- ---- ---- -----
INCOME TAX BENEFIT........................................ 16
---- ---- ---- -----
NET (LOSS) INCOME......................................... ($47) $317 $278 ($119)
==== ==== ==== =====
NET (LOSS) INCOME PER SHARE............................... ($.05) $.32 $.28 ($.12)
==== ==== ==== =====
</TABLE>
See notes to financial statements.
4
<PAGE>
CABLEVISION INVESTMENT OF DETROIT, INC.
STATEMENT OF CASH FLOWS
PERIODS FROM JANUARY 1, 1994 TO DECEMBER 21, 1994 AND DECEMBER 22, 1994 TO
DECEMBER 31, 1994 AND YEARS ENDED DECEMBER 31, 1993 AND 1992
(Dollars in thousands)
<TABLE>
<CAPTION>
(Predecessor Corporation)
----------------------------------
December 22 January 1 to
to December 31, December 21,
1994 1994 1993 1992
---- ---- ---- ----
<S> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net (loss) income .................................... ($47) $317 $278 ($119)
Noncash items included in net (loss) income:
Equity in net loss (income) of Comcast
Cablevision of Detroit...................... 45 (858) (820) (408)
Amortization.................................... 18 549 564 564
Deferred income tax benefit..................... (16)
------ ------ ------ -------
8 22 37
(Increase) decrease in other assets................ (4) 4
Increase (decrease) in accounts payable ........... 2 2 (13)
------ ------ ------ -------
Net cash provided by operating activities... 6 24 28
------ ------ ------ -------
FINANCING ACTIVITY-- Dividends............................ (1,250) (1,500)
------ ------ ------ -------
INVESTING ACTIVITIES
Advances to affiliate................................. 1,500
Advances repaid by affiliate ......................... (1,000) (1,500)
Distributions from Comcast
Cablevision of Detroit ............................ (1,250) (1,500)
------ ------ ------ -------
Net cash provided by investing activities... (2,250) (1,500)
------ ------ ------ -------
INCREASE IN CASH.......................................... 1,006 24 28
Cash, Beginning of Period............................. 1,125 119 95 67
------ ------ ------ -------
CASH, End of Period....................................... $1,125 $1,125 $119 $95
====== ====== ====== =======
</TABLE>
See notes to financial statements.
5
<PAGE>
CABLEVISION INVESTMENT OF DETROIT, INC.
STATEMENT OF STOCKHOLDERS' EQUITY
PERIODS FROM JANUARY 1, 1994 TO DECEMBER 21,
1994 AND DECEMBER 22, 1994 TO DECEMBER 31, 1994 AND YEARS ENDED DECEMBER 31,
1993 AND 1992
(Dollars in thousands)
<TABLE>
<CAPTION>
Common Additional Accumulated
Stock Capital Deficit Total
----- ------- ------- -----
<S> <C> <C> <C> <C>
Predecessor Corporation
BALANCE, JANUARY 1, 1992.................................. $10 $7,890 ($2,124) $5,776
Net loss............................................. (119) (119)
--- ------ ------- ------
BALANCE, DECEMBER 31, 1992................................ 10 7,890 (2,243) 5,657
Net income........................................... 278 278
Cash dividend, $1.50 per share....................... (1,500) (1,500)
--- ------ ------- ------
BALANCE, DECEMBER 31, 1993................................ 10 7,890 (3,465) 4,435
Net income, January 1 to
December 21, 1994................................. 317 317
Cash dividend, $1.25 per share....................... (1,250) (1,250)
--- ------ ------- ------
BALANCE, DECEMBER 21, 1994................................ $10 $7,890 ($4,398) $3,502
=== ====== ======= ======
Successor Corporation
Acquisition.......................................... $10 $9,686 $ $9,696
Net loss, December 22 to
December 31, 1994................................. (47) (47)
--- ------ ------- ------
BALANCE, DECEMBER 31, 1994................................ $10 $9,686 ($47) $9,649
=== ====== ======= ======
</TABLE>
See notes to financial statements.
6
<PAGE>
CABLEVISION INVESTMENT OF DETROIT, INC.
NOTES TO FINANCIAL STATEMENTS
PERIODS FROM JANUARY 1, 1994 TO DECEMBER 21, 1994
AND DECEMBER 22, 1994 TO DECEMBER 31, 1994 AND YEARS ENDED DECEMBER 31, 1993 AND
1992
1. ORGANIZATION
Cablevision Investment of Detroit, Inc. (the "Company"), an approximate
96.5% owned subsidiary of Maclean Hunter Cable TV, Inc. ("Cable TV"), a
Michigan corporation, is a general partner which holds a 10% partnership
interest in Comcast Cablevision of Detroit (formerly Barden Cablevision
and referred to herein as the "Partnership"), a Michigan general
partnership. The Partnership operates a cable communications system (the
"System") pursuant to a franchise agreement (the "Franchise") with the
city of Detroit, Michigan (the "City"). Effective December 22, 1994 (see
Note 3), Cable TV became an indirect majority owned subsidiary of Comcast
Corporation ("Comcast"), a Pennsylvania corporation which is a publicly
owned company.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Investments in Affiliates
The Company accounts for its investment in the Partnership under the
equity method. The Company records its investment at original cost and
adjusts the recorded investment periodically to recognize the Company's
proportionate share of the investees' net income or loss after the date
of investment, and additional contributions made and distributions
received.
New Accounting Pronouncements
Effective January 1, 1993, the Company adopted the provisions of
Statement of Financial Accounting Standards ("SFAS") No. 109, "Accounting
for Income Taxes" (see Note 5).
Net (Loss) Income per Share
Net (loss) income per share has been calculated based on the weighted
average number of common shares outstanding for all periods presented.
Reclassifications
Certain reclassifications have been made to the prior years financial
statements to conform to those classifications used in 1994.
3. MACLEAN HUNTER ACQUISITION
On March 31, 1994, Rogers Communications Inc. ("RCI") acquired
substantially all of the outstanding shares of capital stock of Maclean
Hunter Limited, which was formerly the parent of Maclean Hunter, Inc.
("MHI"). On December 22, 1994 (the "Purchase Date"), pursuant to a share
purchase agreement (the "Share Purchase Agreement") between Comcast and
RCI, Comcast MH Holdings, Inc. ("MH Holdings") purchased all of the
issued and outstanding shares of capital stock of MHI and, in conjunction
with a separate agreement with the shareholders of Comcast Michigan
Holdings, Inc. (formerly Barden Communications, Inc. and referred to
herein as "CMH"), acquired all of the issued and outstanding shares of
capital stock of CMH, for an aggregate purchase price of approximately
$1.2 billion (subject to certain adjustments) in cash (the purchase of
the shares of MHI is referred to herein as the "MHI Share Purchase" and,
together with the purchase of the CMH shares, as the "Share Purchase").
MH Holdings is an indirect wholly owned subsidiary of Comcast MHCP
Holdings, L.L.C. ("MHCP"), a Delaware limited liability corporation. MHCP
is owned 55% by a wholly owned subsidiary of Comcast and 45% by the
California Public Employees' Retirement System ("CalPERS"), and is
managed by Comcast. The MHI Share Purchase resulted in a change of
control of the Company because Cable TV, the Company's parent, became an
indirect wholly owned subsidiary of MH Holdings. In addition, the Share
Purchase resulted in a change of control of the Partnership because the
partners became substantially indirect wholly owned subsidiaries of MH
Holdings.
7
<PAGE>
CABLEVISION INVESTMENT OF DETROIT, INC.
NOTES TO FINANCIAL STATEMENTS
PERIODS FROM JANUARY 1, 1994 TO DECEMBER 21, 1994
AND DECEMBER 22, 1994 TO DECEMBER 31, 1994 AND YEARS ENDED DECEMBER 31, 1993 AND
1992 (Continued)
As a result of the Share Purchase, a new cost basis was established for
the purchased assets and liabilities. The financial position of the
Company and the Partnership as of December 31, 1994, and their results of
operations for the period from December 22, 1994 through December 31,
1994, reflect an allocation of the purchase price for the Share Purchase
to the assets and liabilities of the Company and the Partnership based on
relative estimated market values. Such allocation is preliminary pending,
among other things, the final purchase price adjustment between Comcast
and RCI. Financial information prior to the Share Purchase with respect
to the Company and the Partnership has been presented herein as
"Predecessor Corporation" and "Predecessor Partnership," respectively.
On the Purchase Date, the Board of Directors of the Company (the "Board")
appointed certain new members to the Board designated by Comcast (the
"Comcast Designees") and, pursuant to the Share Purchase Agreement, all
three incumbent members of the Board resigned. As a result, the Comcast
Designees constitute the entire Board. On the Purchase Date, and pursuant
to the Share Purchase Agreement, the incumbent officers of the Company
resigned from their positions. The Comcast Designees have appointed new
officers of the Company.
4. INVESTMENT IN COMCAST CABLEVISION OF DETROIT
The following is summarized financial information with respect to the
Partnership:
Condensed Financial Position
(Dollars in thousands)
<TABLE>
<CAPTION>
(Predecessor
Partnership)
-----------
December 31,
1994 1993
---- ----
<S> <C> <C>
Current assets.................................................. $4,576 $4,390
Property and equipment, Net..................................... 59,358 71,707
Deferred charges, Net........................................... 245,195 3,364
-------- -------
$309,129 $79,461
======== =======
Current liabilities............................................. $63,136 $17,611
Long-term liabilities........................................... 160,647 52,112
Partners' capital............................................... 85,346 9,738
-------- -------
$309,129 $79,461
======== =======
</TABLE>
8
<PAGE>
CABLEVISION INVESTMENT OF DETROIT, INC.
NOTES TO FINANCIAL STATEMENTS
PERIODS FROM JANUARY 1, 1994 TO DECEMBER 21, 1994
AND DECEMBER 22, 1994 TO DECEMBER 31, 1994 AND YEARS ENDED DECEMBER 31, 1993 AND
1992 (Continued)
Condensed Statement of Operations
(Dollars in thousands)
<TABLE>
<CAPTION>
(Predecessor Partnership)
-----------------------------------------
December 22, January 1 to
to December 31, December 21, Years Ended December 31,
1994 1994 1993 1992
---- ---- ---- ----
<S> <C> <C> <C> <C>
Service income........................................ $1,843 $63,537 $65,963 $62,852
------ ------- ------- -------
Operating, selling, general and
administrative expenses.............................. 1,211 42,417 45,372 44,261
Depreciation and amortization......................... 722 9,600 9,752 11,411
------ ------- ------- -------
1,933 52,017 55,124 55,672
------ ------- ------- -------
Operating (loss) income .............................. (90) 11,520 10,839 7,180
Interest expense...................................... 355 3,107 2,801 3,178
------ ------- ------- -------
Net (loss) income for allocation to partners.......... ($445) $8,413 $8,038 $4,002
====== ======= ======= =======
</TABLE>
Prior to the Share Purchase, the Company was allocated 10.2% of the
Partnership's net income or loss. Contemporaneously with the Share
Purchase, Detroit Cable TV, Inc. ("Detroit Cable"), a wholly owned
subsidiary of Cable TV, exercised its option to acquire additional
interests in the Partnership of 0.2% from the Company and 0.8% from CMH
(collectively, the "Detroit Cable Option") for consideration previously
provided. Following the Share Purchase, Detroit Cable, CMH and the
Company hold interests of 50%, 40% and 10%, respectively, in the
Partnership. As a result of the Share Purchase, the Company's recorded
investment balance was increased to 10.0% of the new basis of the
Partnership's net assets.
Related Party Transactions
As of December 31, 1993, the Company had a note receivable of $1.0
million from the Partnership with interest at 3.52%. The note was repaid
by the Partnership in 1994. Interest income relating to the note
receivable totalled $6,000, $50,000 and $56,000 in 1994, 1993 and 1992,
respectively.
Effective December 22, 1994, management fees are charged to the
Partnership pursuant to a management agreement between Comcast and MH
Holdings (the "Management Agreement"). Under the terms of the Management
Agreement, Comcast will supervise the management and operation of the
Partnership for compensation equal to 4.5% of the Partnership's gross
revenues, with payment of one-third of such fees being deferred by MH
Holdings. In addition, the Management Agreement provides for the
reimbursement and sharing of certain of Comcast's actual costs relating
to the operations of MH Holdings, including the operations of the
Partnership. For the period from December 22, 1994 through December 31,
1994, the Partnership was charged $83,000 under the Management Agreement.
Effective December 22, 1994, the Partnership is also charged by Comcast
for certain operating expenses under a separate agreement between Comcast
and MH Holdings (the "Cost Sharing Agreement"). These expenses are
charged to MH Holdings, and ultimately the Partnership, by Comcast on the
same basis that approximates what would have been charged if it purchased
directly from the supplier, subject to certain adjustments and
limitations. For the period from December 22, 1994 through December 31,
1994, the amount charged to the Partnership under the Cost Sharing
Agreement was not significant.
Cable Management of Detroit (the "Manager Partnership") was formed by
Cable TV and CMH for the purpose of entering into a management agreement
with the Partnership. Cable TV has a two-thirds partnership
9
<PAGE>
CABLEVISION INVESTMENT OF DETROIT, INC.
NOTES TO FINANCIAL STATEMENTS
PERIODS FROM JANUARY 1, 1994 TO DECEMBER 21, 1994
AND DECEMBER 22, 1994 TO DECEMBER 31, 1994 AND YEARS ENDED DECEMBER 31, 1993 AND
1992 (Continued)
interest in and controls the Manager Partnership; CMH has a one-third
interest in the Manager Partnership. Through November 30, 1994, the
Partnership paid the Manager Partnership a monthly fee equal to 6% of the
Partnership's gross revenues. Fees incurred in 1994, 1993 and 1992
amounted to $3.6 million, $4.0 million and $3.8 million, respectively.
Through December 21, 1994, the Partnership purchased certain services
jointly with an affiliate owned by Cable TV. Reimbursement to the
affiliate for these services amounted to $6.5 million, $5.8 million, and
$6.6 million in 1994, 1993 and 1992, respectively, of which $1.1 million
was due to the affiliate at December 31, 1993 and 1992. All amounts due
to the affiliate in 1994 were paid prior to the Share Purchase.
During the year ended December 31, 1994, the Partnership made a
distribution to the partners of $12.5 million. The Partnership charged
this distribution against the capital accounts Detroit Cable, CMH and the
Company on a 50%, 40%, 10% basis, respectively. The Company's share of
this distribution was $1.25 million. The proceeds received by the Company
were paid to its shareholders in 1994 as a cash dividend of $1.25 per
share of Common Stock. During the year ended December 31, 1992, the
Partnership made a similar distribution to the partners of $15.0 million.
The Company's share of this distribution was $1.5 million. The proceeds
received by the Company were paid to its shareholders in 1993 as a cash
dividend of $1.50 per share of Common Stock. The Company is generally
restricted from paying further dividends to its shareholders under the
terms of MH Holdings' credit agreement.
Commitments and Contingencies
Under the terms of the Franchise, the Partnership is obligated to make
annual payments to the Public Benefit Corporation, an entity which
provides financial support of public, educational and governmental
programming. For the years ended December 31, 1994, 1993 and 1992, such
payments were $340,000, $333,000 and $323,000, respectively.
The Partnership has granted to the City an unconditional option and right
to purchase the System, generally at market value, in the event of
termination or non-renewal of the Franchise, subject to certain
limitations.
The Partnership is subject to legal proceedings and claims which arise in
the ordinary course of its business. In the opinion of management, the
amount of ultimate liability with respect to these actions will not
materially affect the financial position and results of operations of the
Partnership.
On March 30, 1994, the Federal Communications Commission ("FCC"), among
other things, adopted interim regulations to govern cost-of-service
showings by cable operators, establishing an industry-wide 11.25% after
tax rate of return and a rebuttable presumption that acquisition costs
above original historic book value of tangible assets should be excluded
from the rate base; and reconsidered, among other matters, its
regulations concerning rates for the addition of regulated services and
the treatment of packages of "a la carte" channels. The Partnership is
currently seeking to justify certain of its existing rates on the basis
of cost-of-service showings. Although management believes that the
Partnership's rates are supportable in a cost of service proceeding, no
assurance can be given that the Partnership will be successful. If the
Partnership is not successful in such efforts, and there is no
legislative, administrative or judicial relief, the FCC regulations may
adversely affect the Partnership's results of operations.
5. INCOME TAXES
Effective January 1, 1993, the Company adopted SFAS No. 109. SFAS 109
generally provides that deferred tax assets and liabilities be recognized
for temporary differences between the financial reporting basis and the
tax basis of the Company's assets and liabilities and expected benefits
of utilizing net operating loss carryforwards. The impact on deferred
taxes of changes in tax rates and laws, if any, applied to the years
10
<PAGE>
CABLEVISION INVESTMENT OF DETROIT, INC.
NOTES TO FINANCIAL STATEMENTS
PERIODS FROM JANUARY 1, 1994 TO DECEMBER 21, 1994
AND DECEMBER 22, 1994 TO DECEMBER 31, 1994 AND YEARS ENDED DECEMBER 31, 1993 AND
1992 (Continued)
during which temporary differences are expected to be settled are
reflected in the financial statements in the period of enactment.
Effective December 22, 1994, the Company became a majority owned
subsidiary of Comcast Communications Properties, Inc. ("CCP"), which is
wholly owned by MHCP, and is included in CCP's consolidated federal
income tax returns. CCP allocates income tax expense or benefit to the
Company as if the Company was filing a separate tax return. For the
period from January 1, 1994 through December 21, 1994 and for the years
ended December 31, 1993 and 1992, the Company's results of operations
were included in the consolidated federal income tax returns filed by
MHI. Pursuant to a tax sharing agreement between the Company and MHI,
charges or credits for federal income taxes were determined as if the
Company filed a separate federal income tax return. The Company incurred
a cumulative net operating loss since inception on a stand-alone basis,
which was utilized by affiliates of the Company in prior years'
consolidated returns. Income tax benefit was recognized by the Company
for such losses as the Company was able to utilize them on a stand-alone
basis; accordingly, no provision for income taxes was recorded in the
financial statements.
As a result of the Share Purchase, the Company has recorded a deferred
income tax liability of approximately $10.2 million for its proportionate
share of the temporary differences between the financial reporting basis
and the income tax reporting basis of the assets of the Partnership at
the date of the Share Purchase and a deferred tax asset of $2.4 million
for net operating loss and investment credit carryforwards. Deferred
charges were increased by the same amount as prescribed by SFAS No. 109.
For the period from December 22, 1994 through December 31, 1994, the
effective income tax benefit of the Company differs from the statutory
amount primarily because of non-deductible goodwill amortization. For the
period from January 1, 1994 through December 21, 1994 and for the years
ended December 31, 1993 and 1992, the Company did not record any
provision for income taxes.
For income tax reporting purposes, the Company has net operating loss
carryforwards and investment tax credits of approximately $6.1 million
and $172,000, respectively, which expire between 2001 and 2006.
6. QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
<TABLE>
<CAPTION>
First Second Third Fourth Total
Quarter Quarter Quarter Quarter (1) Year
------- ------- ------- ----------- ----
(Dollars in thousands, except per share data)
<S> <C> <C> <C> <C> <C>
1994
----
Equity in net income of Comcast
Cablevision of Detroit...................... $174 $312 $235 $92 $813
Net income (loss)............................. 38 166 101 (35) 270
Net income (loss) per share................... .04 .17 .10 (.04) .27
Cash dividends per share...................... 1.25 1.25
1993
----
Equity in net income of Comcast
Cablevision of Detroit...................... $136 $238 $241 $205 $820
Net income.................................... 14 91 104 69 278
Net income per share.......................... .01 .09 .10 .08 .28
Cash dividends per share...................... 1.50 1.50
</TABLE>
- --------------------
(1) As a result of the Share Purchase, a new cost basis was established for
the purchased assets and liabilities. The financial position of the
Company and the Partnership as of December 31, 1994, and their results
of
11
<PAGE>
CABLEVISION INVESTMENT OF DETROIT, INC.
NOTES TO FINANCIAL STATEMENTS
PERIODS FROM JANUARY 1, 1994 TO DECEMBER 21, 1994
AND DECEMBER 22, 1994 TO DECEMBER 31, 1994 AND YEARS ENDED DECEMBER 31, 1993 AND
1992 (Continued)
operations for the period from December 22, 1994 through December 31,
1994, reflect an allocation of the purchase price to the assets and
liabilities of the Company and the Partnership based on relative
estimated market values. For the year ended December 31, 1994, the
effects of such allocations on the Company's and the Partnership's
results of operations were not significant. Accordingly, the results of
operations for the period from December 22, 1994 through December 31,
1994 are not presented separately.
12
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Partners
Comcast Cablevision of Detroit
Detroit, Michigan
We have audited the accompanying balance sheet of Comcast Cablevision of Detroit
(formerly Barden Cablevision) (a partnership owned by subsidiaries of Comcast
Corporation) as of December 31, 1994 and the related statements of operations,
changes in partners' capital and of cash flows for the periods from January 1,
1994 to December 21, 1994 and December 22, 1994 to December 31, 1994. These
financial statements are the responsibility of the Partnership's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of Comcast Cablevision of Detroit as of
December 31, 1994, and the results of its operations and its cash flows for the
periods stated above, in conformity with generally accepted accounting
principles.
As discussed in Note 2 to the financial statements, on December 22, 1994 the
Partnership became an indirect majority owned subsidiary of Comcast Corporation,
which resulted in the establishment of a new cost basis for the Partnership's
assets and liabilities.
/s/ Deloitte & Touche LLP
Deloitte & Touche LLP
Philadelphia, Pennsylvania
February 28, 1995
13
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Partners of
Barden Cablevision
We have audited the accompanying balance sheet of Barden Cablevision as of
December 31, 1993, and the related statements of operations,
partners' capital and cash flows for each of the two years in the period ended
December 31, 1993. These financial statements are the responsibility of the
Partnership's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Barden Cablevision as of
December 31, 1993, and the results of its operations and its cash flows for each
of the two years in the period ended December 31, 1993, in conformity with
generally accepted accounting principles.
/s/ Ernst & Young LLP
January 27, 1994
14
<PAGE>
COMCAST CABLEVISION OF DETROIT (FORMERLY BARDEN CABLEVISION)
BALANCE SHEET
DECEMBER 31, 1994 AND 1993
(Dollars in thousands)
<TABLE>
<CAPTION>
(Predecessor
Partnership)
1994 1993
---- ----
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash............................................................ $ $1,545
Accounts receivable, less allowance for doubtful
accounts of $381 and $580..................................... 2,907 2,208
Prepaid charges and other....................................... 1,669 637
-------- -------
Total Current Assets................................. 4,576 4,390
-------- -------
PROPERTY AND EQUIPMENT............................................... 59,519 117,334
Accumulated depreciation........................................ (161) (45,627)
-------- -------
Property and equipment, Net..................................... 59,358 71,707
-------- -------
DEFERRED CHARGES..................................................... 245,756 10,133
Accumulated amortization........................................ (561) (6,769)
-------- -------
Deferred charges, Net........................................... 245,195 3,364
-------- -------
$309,129 $79,461
======== =======
LIABILITIES AND PARTNERS' CAPITAL
CURRENT LIABILITIES
Accounts payable and accrued expenses........................... $6,661 $6,973
Accrued interest................................................ 427 120
Due to affiliates............................................... 56,048 3,475
Current portion of long-term debt............................... 7,043
-------- -------
Total Current Liabilities............................ 63,136 17,611
-------- -------
LONG-TERM DEBT, Less current portion................................. 154,869 46,480
-------- -------
EQUIPMENT DEPOSITS AND OTHER......................................... 5,778 5,632
-------- -------
COMMITMENTS AND CONTINGENCIES
PARTNERS' CAPITAL.................................................... 85,346 9,738
-------- -------
$309,129 $79,461
======== =======
</TABLE>
See notes to financial statements.
15
<PAGE>
COMCAST CABLEVISION OF DETROIT (FORMERLY BARDEN CABLEVISION)
STATEMENT OF OPERATIONS
PERIODS FROM JANUARY 1, 1994 TO DECEMBER 21, 1994 AND DECEMBER 22, 1994 TO
DECEMBER 31, 1994 AND YEARS ENDED DECEMBER 31, 1993 AND 1992
(Dollars in thousands)
<TABLE>
<CAPTION>
(Predecessor Partnership)
----------------------------------
December 22 January 1 to
to December 31, December 21,
1994 1994 1993 1992
---- ---- ---- ----
<S> <C> <C> <C> <C>
SERVICE INCOME............................................... $1,843 $63,537 $65,963 $62,852
------ ------- ------- -------
COSTS AND EXPENSES
Operating............................................. 935 30,647 33,277 31,858
Selling, general and administrative................... 276 11,770 12,095 12,403
Depreciation and amortization......................... 722 9,600 9,752 11,411
------ ------- ------- -------
1,933 52,017 55,124 55,672
------ ------- ------- -------
OPERATING (LOSS) INCOME...................................... (90) 11,520 10,839 7,180
INTEREST EXPENSE............................................. 355 3,107 2,801 3,178
------ ------- ------- -------
NET (LOSS) INCOME FOR ALLOCATION
TO PARTNERS........................................... ($445) $8,413 $8,038 $4,002
====== ======= ======= =======
</TABLE>
See notes to financial statements.
16
<PAGE>
COMCAST CABLEVISION OF DETROIT (FORMERLY BARDEN CABLEVISION)
STATEMENT OF CASH FLOWS
PERIODS FROM JANUARY 1, 1994 TO DECEMBER 21, 1994 AND DECEMBER 22, 1994 TO
DECEMBER 31, 1994 AND YEARS ENDED DECEMBER 31, 1993 AND 1992
(Dollars in thousands)
<TABLE>
<CAPTION>
(Predecessor Partnership)
-----------------------------------
December 22 January 1 to
to December 31, December 21,
1994 1994 1993 1992
---- ---- ---- ----
<S> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net (loss) income for allocation to partners.......... ($445) $8,413 $8,038 $4,002
Noncash items included in net (loss) income for
allocation to partners:
Depreciation and amortization....................... 722 9,600 9,752 11,411
Interest expense.................................... 175 194 178
----- ------ ------ ------
277 18,188 17,984 15,591
(Increase) decrease in accounts receivable and
prepaid charges and other........................... (1,731) 255 (158)
Increase (decrease) in accounts payable and accrued
expenses, accrued interest and equipment
deposits and other.................................. 115 (762) 75 985
----- ------ ------ ------
Net cash provided by operating activities....... 392 15,695 18,314 16,418
----- ------ ------ ------
FINANCING ACTIVITIES
Repayment of long-term debt........................... (53,523) (10,066) (9,300)
Proceeds from borrowings.............................. 15,489
Distributions to partners............................. (12,500) (14,850)
Net financing transactions with affiliates............ (392) 52,039 (1,000) 1,500
----- ------ ------ ------
Net cash used in financing activities........... (392) (13,984) (11,066) (7,161)
----- ------ ------ ------
INVESTING ACTIVITIES
Additions to property and equipment and other......... 3,256 5,817 9,332
----- ------ ------ ------
Net cash used in investing activities........... 3,256 5,817 9,332
----- ------ ------ ------
(DECREASE) INCREASE IN CASH.................................. (1,545) 1,431 (75)
Cash, Beginning of Period............................. 1,545 114 189
----- ------ ------ ------
CASH, End of Period.......................................... $ $ $1,545 $114
===== ====== ====== ======
</TABLE>
See notes to financial statements.
17
<PAGE>
COMCAST CABLEVISION OF DETROIT (FORMERLY BARDEN CABLEVISION)
STATEMENT OF CHANGES IN PARTNERS' CAPITAL
PERIODS FROM JANUARY 1, 1994 TO
DECEMBER 21, 1994 AND DECEMBER 22, 1994 TO DECEMBER 31, 1994 AND YEARS ENDED
DECEMBER 31, 1993 AND 1992
(Dollars in thousands)
<TABLE>
<CAPTION>
Comcast Detroit Cablevision
Michigan Cable Investment of
Holdings, Inc. TV, Inc. Detroit, Inc. Total
-------------- -------- ------------- -----
<S> <C> <C> <C> <C>
Barden Cablevision - Predecessor Partnership
BALANCE, JANUARY 1, 1992............................. ($1,069) $13,872 ($105) $12,698
Net income for allocation to partners........... 1,633 1,961 408 4,002
Distribution to partners........................ (6,000) (7,500) (1,500) (15,000)
------- ------- ------ -------
BALANCE, DECEMBER 31, 1992........................... (5,436) 8,333 (1,197) 1,700
Net income for allocation to partners........... 3,279 3,939 820 8,038
------- ------- ------ -------
BALANCE, DECEMBER 31, 1993........................... (2,157) 12,272 (377) 9,738
Net income for allocation to partners,
January 1 to December 21, 1994................ 3,433 4,122 858 8,413
Distribution to partners........................ (5,000) (6,250) (1,250) (12,500)
------- ------- ------ -------
BALANCE, DECEMBER 21, 1994........................... ($3,724) $10,144 ($769) $5,651
======= ======= ====== =======
Comcast Cablevision of Detroit
Acquisition..................................... $34,316 $42,896 $8,579 $85,791
Net loss for allocation to partners,
December 22 to
December 31, 1994............................ (177) (223) (45) (445)
------- ------- ------ -------
BALANCE, DECEMBER 31, 1994........................... $34,139 $42,673 $8,534 $85,346
======= ======= ====== =======
</TABLE>
See notes to financial statements.
18
<PAGE>
COMCAST CABLEVISION OF DETROIT (FORMERLY BARDEN CABLEVISION)
NOTES TO FINANCIAL STATEMENTS
PERIODS FROM JANUARY 1, 1994 TO DECEMBER 21, 1994
AND DECEMBER 22, 1994 TO DECEMBER 31, 1994 AND YEARS ENDED DECEMBER 31, 1993 AND
1992
1. ORGANIZATION
Comcast Cablevision of Detroit (formerly Barden Cablevision and referred
to herein as the "Partnership"), a Michigan general partnership, operates
a cable communications system (the "System") pursuant to a franchise
agreement (the "Franchise") with the city of Detroit, Michigan (the
"City"). The Partnership has three general partners: Cablevision
Investment of Detroit, Inc. (the "Company"), with a 10% interest, Comcast
Michigan Holdings, Inc. (formerly Barden Communications, Inc. and
referred to herein as "CMH"), with a 40% interest and Detroit Cable TV,
Inc. ("Detroit Cable," and referred to collectively with the Company and
CMH as the "Partners"), with a 50% interest.
2. MACLEAN HUNTER ACQUISITION
On March 31, 1994, Rogers Communications Inc. ("RCI") acquired
substantially all of the outstanding shares of capital stock of Maclean
Hunter Limited, which was formerly the parent of Maclean Hunter, Inc.
("MHI"). On December 22, 1994 (the "Purchase Date"), pursuant to a share
purchase agreement (the "Share Purchase Agreement") between Comcast
Corporation ("Comcast") and RCI, Comcast MH Holdings, Inc. ("MH
Holdings") purchased all of the issued and outstanding shares of capital
stock of MHI and, in conjunction with a separate agreement with the
shareholders of CMH, acquired all of the issued and outstanding shares of
capital stock of CMH, for an aggregate purchase price of approximately
$1.2 billion (subject to certain adjustments) in cash (the purchase of
the shares of MHI is referred to herein as the "MHI Share Purchase" and,
together with the purchase of the CMH shares, as the "Share Purchase").
MH Holdings is an indirect wholly owned subsidiary of Comcast MHCP
Holdings, L.L.C. ("MHCP"), a Delaware limited liability corporation. MHCP
is owned 55% by a wholly owned subsidiary of Comcast and 45% by the
California Public Employees' Retirement System ("CalPERS"), and is
managed by Comcast. The MHI Share Purchase resulted in a change of
control of the Partnership because the Partners became substantially
indirect wholly owned subsidiaries of MH Holdings.
As a result of the Share Purchase, a new cost basis was established for
the purchased assets and liabilities. The financial position of the
Partnership as of December 31, 1994, and its results of operations for
the period from December 22, 1994 through December 31, 1994, reflect an
allocation of the purchase price to the assets and liabilities of the
Partnership based on relative estimated market values. Such allocation is
preliminary pending, among other things, the final purchase price
adjustment between Comcast and RCI. In addition, since the Partners
became substantially indirect wholly owned subsidiaries of MH Holdings,
their capital accounts have been adjusted to reflect each respective
partner's new ownership of the Partnership's net assets. Financial
information prior to the Share Purchase with respect to the Partnership
has been presented herein as "Predecessor Partnership."
Contemporaneously with the Share Purchase, Detroit Cable, a wholly owned
subsidiary of Maclean Hunter Cable TV, Inc. ("Cable TV"), exercised its
option to acquire additional interests in the Partnership of 0.2% from
the Company and 0.8% from CMH for consideration previously provided.
19
<PAGE>
COMCAST CABLEVISION OF DETROIT (FORMERLY BARDEN CABLEVISION)
NOTES TO FINANCIAL STATEMENTS
PERIODS FROM JANUARY 1, 1994 TO DECEMBER 21, 1994
AND DECEMBER 22, 1994 TO DECEMBER 31, 1994 AND YEARS ENDED DECEMBER 31, 1993 AND
1992 (Continued)
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Property and Equipment
Depreciation is provided by the straight-line method over estimated
useful lives as follows:
<TABLE>
<CAPTION>
December 22, 1994 January 1, 1992
to to
December 31, 1994 December 21, 1994
----------------- -----------------
(Predecessor
Partnership)
<S> <C> <C>
Buildings 20 years 30 years
Operating facilities 8 - 30 years 15 years
Other equipment 3 - 10 years 3 - 7 years
</TABLE>
On the Purchase Date, the Partnership adjusted its property and equipment
balance to reflect an allocated portion of the purchase price for the
Share Purchase. Prior to the Purchase Date, property and equipment were
stated at historical cost. In addition, effective with the Purchase Date,
estimated useful lives of property and equipment have been adjusted to
reflect such lives as stated in a preliminary appraisal of the
Partnership's assets. The effect of this change in estimate was not
significant to the Partnership's results of operations for the year ended
December 31, 1994.
During 1993, the Partnership changed the estimated useful life of
converters from five to six years to better reflect their economic
utility. The impact of this change was to reduce depreciation expense in
1993 by approximately $1.1 million.
Deferred Charges
Deferred charges consist principally of franchise and license acquisition
costs as of December 31, 1994 and franchise and license acquisition costs
and deferred financing fees as of December 31, 1993. For the period from
December 22, 1994 through December 31, 1994, franchise and license
acquisition costs are amortized over a period of 12 years. Through
December 21, 1994, franchise and license acquisition costs were being
amortized over an estimated useful life of 15 years and deferred
financing fees were being amortized over the term of the related debt
agreement. The Partnership periodically evaluates the recoverability of
its deferred charges using objective methodologies. Such methodologies
may include evaluations based on the cash flows generated by the
underlying assets or other determinants of fair value.
Income Taxes
These financial statements include only those assets, liabilities and
results of operations which relate to the business of the Partnership. No
provision or benefit has been provided for income taxes as the Partners
rather than the Partnership are subject to taxation.
Reclassifications
Certain reclassifications have been made to the prior years consolidated
financial statements to conform to those classifications used in 1994.
4. RELATED PARTY TRANSACTIONS
CMH obtained its initial general partnership interest in the Partnership
principally through the assignment to the Partnership of the franchise
rights for the construction and operation of a cable television system in
the City. Detroit Cable obtained its initial general partnership interest
in the Partnership through its agreement to make capital contributions of
$15 million to the Partnership. The parent of Cable TV, MHI, also agreed
20
<PAGE>
COMCAST CABLEVISION OF DETROIT (FORMERLY BARDEN CABLEVISION)
NOTES TO FINANCIAL STATEMENTS
PERIODS FROM JANUARY 1, 1994 TO DECEMBER 21, 1994
AND DECEMBER 22, 1994 TO DECEMBER 31, 1994 AND YEARS ENDED DECEMBER 31, 1993 AND
1992 (Continued)
to provide a limited completion guaranty of $5 million in connection with
an $80 million loan agreement between the Partnership and a bank (see
Note 5). On October 23, 1989, the bank consented to the cancellation of
the limited completion guaranty given by MHI. In consideration for the
completion guaranty provided by MHI, the Franchise Partnership Agreement
provided that, in 1994, Detroit Cable would be paid a fee of $2.5 million
and that its interest in the Partnership would become 50 percent. This
fee obligation, which was repaid in 1994, totalled $2.3 million and $2.1
million at December 31, 1993 and 1992, respectively, net of unamortized
discount based on an imputed interest rate of 8.75%. Interest expense for
the years ended December 31, 1994, 1993 and 1992 relating to the
obligation totalled $175,000, $194,000 and $178,000, respectively.
As of December 31, 1993, the Partnership had a note payable of $1.0
million to the Company with interest at 3.52%. The note was repaid by the
Partnership in 1994. Interest expense relating to the note payable
totalled $6,000, $50,000 and $56,000 in 1994, 1993 and 1992,
respectively.
Effective December 22, 1994, management fees are charged to the
Partnership pursuant to a management agreement between Comcast and MH
Holdings (the "Management Agreement"). Under the terms of the Management
Agreement, Comcast will supervise the management and operation of the
Partnership for compensation equal to 4.5% of the Partnership's gross
revenues, with payment of one-third of such fees being deferred by MH
Holdings. In addition, the Management Agreement provides for the
reimbursement and sharing of certain of Comcast's actual costs relating
to the operations of MH Holdings, including the operations of the
Partnership. For the period from December 22, 1994 through December 31,
1994, the Partnership was charged $83,000 under the Management Agreement.
Effective December 22, 1994, the Partnership is also charged by Comcast
for certain operating expenses under a separate agreement between Comcast
and MH Holdings (the "Cost Sharing Agreement"). These expenses are
charged to MH Holdings, and ultimately the Partnership, by Comcast on the
same basis that approximates what would have been charged if it purchased
directly from the supplier, subject to certain adjustments and
limitations. For the period from December 22, 1994 through December 31,
1994, the amount charged to the Partnership under the Cost Sharing
Agreement was not significant.
Cable Management of Detroit (the "Manager Partnership") was formed by
Cable TV and CMH for the purpose of entering into a management agreement
with the Partnership. Cable TV has a two-thirds partnership interest in
and controls the Manager Partnership; CMH has a one-third interest in the
Manager Partnership. Through November 30, 1994, the Partnership paid the
Manager Partnership a monthly fee equal to 6.0% of the Partnership's
gross revenues. Fees incurred in 1994, 1993 and 1992 amounted to $3.6
million, $4.0 million and $3.8 million, respectively.
Through December 21, 1994, the Partnership purchased certain services
jointly with an affiliate owned by Cable TV. Reimbursement to the
affiliate for these services amounted to $6.5 million, $5.8 million, and
$6.6 million in 1994, 1993 and 1992, respectively, of which $1.1 million
was due to the affiliate at December 31, 1993 and 1992. All amounts due
to the affiliate in 1994 were paid prior to the Share Purchase.
During the year ended December 31, 1994, the Partnership made a
distribution to the partners of $12.5 million. The Partnership charged
this distribution against the capital accounts of Detroit Cable, CMH and
the Company on a 50%, 40%, 10% basis, respectively. During the year ended
December 31, 1992, the Partnership made a similar distribution to the
Partners of $15.0 million.
21
<PAGE>
COMCAST CABLEVISION OF DETROIT (FORMERLY BARDEN CABLEVISION)
NOTES TO FINANCIAL STATEMENTS
PERIODS FROM JANUARY 1, 1994 TO DECEMBER 21, 1994
AND DECEMBER 22, 1994 TO DECEMBER 31, 1994 AND YEARS ENDED DECEMBER 31, 1993 AND
1992 (Continued)
5. LONG-TERM DEBT
On February 28, 1986, the Partnership entered into a loan agreement with
a bank (as amended, the "Loan Agreement"). The purpose of the loan was to
provide both construction and long-term financing for a portion of the
costs of the System. Interest expense under the Loan Agreement was $2.5
million, $2.6 million and $2.9 million during the years ended December
31, 1994, 1993 and 1992, respectively.
During 1994, MHI advanced $55.7 million to the Partnership. Such advances
were used by the Partnership to repay the outstanding balance under the
Loan Agreement and to make distributions to the Partners. Through
December 21, 1994, interest on such advances was at rates ranging from
the Prime Rate to the weighted average interest rate on the Loan
Agreement. No interest was charged on such advances for the period from
December 22, 1994 through December 31, 1994.
In connection with the Share Purchase, MH Holdings entered into a $850.0
million credit agreement with certain lenders (the "Credit Agreement").
On December 22, 1994, the Partnership entered into a loan assumption
agreement with MH Holdings whereby the Partnership, along with certain
other subsidiaries of MH Holdings, would assume a portion of MH Holdings'
obligations under the Credit Agreement. The Partnership's allocated
portion of the total obligation was $184.1 million, of which $154.9
million was outstanding as of December 31, 1994.
Maturities under the Credit Agreement commence in 1999. The Partnership's
allocated portion of such maturities for the year ending December 31,
1999 is $18.6 million.
Interest rates under the Credit Agreement vary based upon one or more of
the following rates at the option of MH Holdings:
Prime rate to prime plus 3/4%; or
London Interbank Offered Rate (LIBOR) plus 5/8% to 1 3/4%;
As of December 31, 1994, the weighted average effective interest rate on
borrowings under the Credit Agreement was 7.38%.
Substantially all of the assets of the Partnership are pledged as
collateral under the Credit Agreement.
6. PENSION PLAN
The Partnership has a defined benefit pension plan covering substantially
all employees. The Plan provides for benefits based on years of service
and the employee's highest 5 year average compensation during the last 10
years of service.
The Plan's investments are held in a trust which is invested in fixed
income and equity funds.
Contributions from the Partnership are accrued based on amounts computed
by the Plan's actuary. The contributions to the Plan are designed to meet
the minimum funding requirements of the Employee Retirement Income
Security Act.
22
<PAGE>
COMCAST CABLEVISION OF DETROIT (FORMERLY BARDEN CABLEVISION)
NOTES TO FINANCIAL STATEMENTS
PERIODS FROM JANUARY 1, 1994 TO DECEMBER 21, 1994
AND DECEMBER 22, 1994 TO DECEMBER 31, 1994 AND YEARS ENDED DECEMBER 31, 1993 AND
1992 (Continued)
The following actuarial assumptions were used in 1994, 1993 and 1992:
<TABLE>
<CAPTION>
<S> <C>
Weighted average discount rate ............................ 8.75%
Weighted average expected long-term rate
of return on assets..................................... 10.00%
Compensation increase...................................... 6.50%
</TABLE>
The Plan's funded status and amounts recognized in the Partnership's
financial statements at December 31 are as follows:
<TABLE>
<CAPTION>
1994 1993
---- ----
<S> <C> <C>
Actuarial present value of:
Vested benefit obligations....................... $200,500 $ 94,900
========== ========
Accumulated benefit obligation................... $316,500 $198,500
========== ========
Projected benefit obligation ........................ $1,008,900 $720,000
Plan assets at fair value ........................... 521,600 320,300
---------- --------
Projected benefit obligation in excess of plan assets 487,300 399,700
Unrecognized loss.................................... (45,600)
---------- --------
Accrued pension liability............................ $487,300 $354,100
========== ========
</TABLE>
The components of the annual net pension expense are as follows:
<TABLE>
<CAPTION>
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Service cost....................................... $234,400 $210,300 $166,800
Interest cost...................................... 62,300 41,000 21,800
Actual return on plan assets....................... (40,500) (22,800) (10,900)
-------- -------- --------
$256,200 $228,500 $177,700
======== ======== ========
</TABLE>
As a result the Share Purchase, the unrecognized loss associated with the
Partnership's pension liability was recorded.
7. PROFIT SHARING PLAN
The Partnership has a profit sharing plan which covers substantially all
employees. Contributions to the plan are discretionary and are determined
by management. Profit sharing expenses approximated $391,000, $328,000
and $234,000 for the years ended December 31, 1994, 1993 and 1992,
respectively.
8. STATEMENT OF CASH FLOWS - SUPPLEMENTAL INFORMATION
The Partnership made interest payments of $3.0 million, $2.7 million and
$3.2 million for the years ended December 31, 1994, 1993 and 1992,
respectively.
9. COMMITMENTS AND CONTINGENCIES
Under the terms of the Franchise, which expires in May 2000, the
Partnership is obligated to make annual payments to the Public Benefit
Corporation, an entity which provides financial support of public,
educational
23
<PAGE>
COMCAST CABLEVISION OF DETROIT (FORMERLY BARDEN CABLEVISION)
NOTES TO FINANCIAL STATEMENTS
PERIODS FROM JANUARY 1, 1994 TO DECEMBER 21, 1994
AND DECEMBER 22, 1994 TO DECEMBER 31, 1994 AND YEARS ENDED DECEMBER 31, 1993 AND
1992 (Continued)
and governmental programming. For the years ended December 31, 1994, 1993
and 1992, such payments were $340,000, $333,000 and $323,000,
respectively.
The Partnership has granted to the City an unconditional
option and right to purchase the System, generally at market value, in
the event of termination or non-renewal of the Franchise, subject to
certain limitations.
The Partnership is subject to legal proceedings and claims which arise in
the ordinary course of its business. In the opinion of management, the
amount of ultimate liability with respect to these actions will not
materially affect the financial position and results of operations of the
Partnership.
On March 30, 1994, the Federal Communications Commission ("FCC"), among
other things, adopted interim regulations to govern cost-of-service
showings by cable operators, establishing an industry-wide 11.25% after
tax rate of return and a rebuttable presumption that acquisition costs
above original historic book value of tangible assets should be excluded
from the rate base; and reconsidered, among other matters, its
regulations concerning rates for the addition of regulated services and
the treatment of packages of "a la carte" channels. The Partnership is
currently seeking to justify certain of its existing rates on the basis
of cost-of-service showings. Although management believes that the
Partnership's rates are supportable in a cost of service proceeding, no
assurance can be given that the Partnership will be successful. If the
Partnership is not successful in such efforts, and there is no
legislative, administrative or judicial relief, the FCC regulations may
adversely affect the Partnership's results of operations.
10. DISCLOSURE ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
Effective December 31, 1994, the Partnership adopted the provision of
SFAS No. 107, "Disclosures About Fair Value of Financial Instruments."
The carrying value of the Partnership's allocated portion of long-term
debt under the Credit Agreement approximates fair value. Interest rates
that are currently available to the Partnership for debt with similar
terms and remaining maturities are used to estimate fair value for this
debt since quoted market prices are not available.
The due to affiliates in the Partnership's Balance Sheet consists
primarily of advances to the Partnership by MHI. A reasonable estimate of
the fair value of this item is not practicable to obtain because of its
related party nature and the lack of market information.
24
<PAGE>
CABLEVISION INVESTMENT OF DETROIT, INC.
QUARTER ENDED SEPTEMBER 30, 1995
CONDENSED BALANCE SHEET
(Unaudited)
<TABLE>
<CAPTION>
(Dollars in thousands)
September 30, December 31,
1995 1994
---------- ----------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash.......................................................... $106 $1,125
Due from affiliate............................................ 1,005
Other assets.................................................. 4
------- -------
Total current assets.................................... 1,111 1,129
------- -------
INVESTMENT IN COMCAST CABLEVISION OF DETROIT...................... 6,984 8,534
------- -------
DEFERRED CHARGES.................................................. 7,880 7,839
Accumulated amortization...................................... (312) (18)
------- -------
Deferred charges, net......................................... 7,568 7,821
------- -------
$15,663 $17,484
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable ............................................. $8 $12
------- -------
Total current liabilities............................... 8 12
------- -------
DEFERRED INCOME TAXES............................................. 7,339 7,823
------- -------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Common stock, $.01 par value - authorized,
4,000,000 shares; issued, 1,000,000 ....................... 10 10
Additional capital............................................ 9,253 9,686
Accumulated deficit........................................... (947) (47)
------- -------
Total stockholders' equity.............................. 8,316 9,649
------- -------
$15,663 $17,484
======= =======
</TABLE>
See notes to condensed financial statements.
1
<PAGE>
CABLEVISION INVESTMENT OF DETROIT, INC.
QUARTER ENDED SEPTEMBER 30, 1995
CONDENSED STATEMENT OF OPERATIONS AND ACCUMULATED DEFICIT
(Unaudited)
<TABLE>
<CAPTION>
(Amounts in thousands, except per share data)
Nine Months Ended Three Months Ended
September 30, September 30,
1995 1994 1995 1994
-------- -------- -------- --------
(Predecessor (Predecessor
Corporation) Corporation)
<S> <C> <C> <C> <C>
INCOME
Interest income.............................................. $52 $33 $19 $16
Equity in net (loss) income of Comcast
Cablevision of Detroit.................................. (1,117) 721 (364) 234
-------- -------- ------- --------
(1,065) 754 (345) 250
-------- -------- ------- --------
EXPENSES
Amortization................................................ 294 423 98 141
Administrative.............................................. 25 26 16 8
-------- -------- ------- --------
319 449 114 149
-------- -------- ------- --------
(LOSS) INCOME BEFORE INCOME
TAX BENEFIT.................................................. (1,384) 305 (459) 101
-------- -------- ------- --------
INCOME TAX BENEFIT.............................................. (484) (160)
-------- -------- ------- --------
NET (LOSS) INCOME............................................... (900) 305 (299) 101
ACCUMULATED DEFICIT
Beginning of period......................................... (47) (3,465) (648) (3,261)
Dividends declared - $1.25 per share........................ (1,250) (1,250)
-------- -------- ------- --------
End of period............................................... ($947) ($4,410) ($947) ($4,410)
======== ======== ======= ========
NET (LOSS) INCOME PER SHARE..................................... ($.90) $.31 ($.30) $.10
======== ======== ======= ========
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING DURING THE PERIOD........................ 1,000 1,000 1,000 1,000
======== ======== ======= ========
</TABLE>
See notes to condensed financial statements.
2
<PAGE>
CABLEVISION INVESTMENT OF DETROIT, INC.
QUARTER ENDED SEPTEMBER 30, 1995
CONDENSED STATEMENT OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
(Dollars in thousands)
Nine Months Ended September 30,
1995 1994
(Predecessor
Corporation)
<S> <C> <C>
OPERATING ACTIVITIES
Net (loss) income ....................................... ($900) $305
Noncash items included in net (loss) income:
Equity in net loss (income) of Comcast
Cablevision of Detroit......................... 1,117 (721)
Amortization....................................... 294 423
Deferred income tax benefit........................ (484)
-------- --------
27 7
Decrease (increase) in other assets................... 4 (3)
Decrease in accounts payable.......................... (4) (1)
-------- --------
Net cash provided by operating activities...... 27 3
-------- --------
FINANCING ACTIVITIES
Dividends ............................................... (1,250)
-------- --------
Net cash used in financing activities.......... (1,250)
-------- --------
INVESTING ACTIVITIES
Net transactions with affiliates......................... (1,005) 1,000
Distribution received from Comcast
Cablevision of Detroit................................ 1,250
Purchase of short-term investment........................ (1,011)
Other.................................................... (41)
-------- --------
Net cash (used in) provided by
investing activities......................... (1,046) 1,239
-------- --------
DECREASE IN CASH.............................................. (1,019) (8)
Cash, Beginning of Period................................ 1,125 119
-------- --------
CASH, End of Period........................................... $106 $111
======== ========
</TABLE>
See notes to condensed financial statements.
3
<PAGE>
CABLEVISION INVESTMENT OF DETROIT, INC.
QUARTER ENDED SEPTEMBER 30, 1995
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
1. CONDENSED FINANCIAL STATEMENTS
Organization
Cablevision Investment of Detroit, Inc. (the "Company"), an approximate
96.5% owned subsidiary of Com MH Cable TV, Inc. (formerly Maclean Hunter
Cable TV, Inc.) ("Cable TV"), a Michigan corporation, is a general partner
which holds a 10% partnership interest in Comcast Cablevision of Detroit
(formerly Barden Cablevision and referred to herein as the "Partnership"),
a Michigan general partnership. The Partnership operates a cable
communications system pursuant to a franchise agreement with the city of
Detroit, Michigan (the "City"). Effective December 22, 1994 (see Note 2),
Cable TV became an indirect majority owned subsidiary of Comcast
Corporation ("Comcast"), a Pennsylvania corporation which is a publicly
owned company.
Basis of Presentation
The condensed balance sheet at December 31, 1994 has been condensed from
the audited balance sheet at that date. The condensed balance sheet at
September 30, 1995, the condensed statement of operations and accumulated
deficit for the nine and three months ended September 30, 1995 and 1994 and
the condensed statement of cash flows for the nine months ended September
30, 1995 and 1994 have been prepared by the Company and have not been
audited by the Company's Independent Auditors. In the opinion of
management, all adjustments (which include only normal recurring
adjustments) necessary to present fairly the financial position, results of
operations and cash flows as of September 30, 1995 and for all periods
presented have been made.
Certain information and note disclosures normally included in the Company's
annual financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted. These condensed
financial statements should be read in conjunction with the financial
statements and notes thereto included in the Company's December 31, 1994
Annual Report on Form 10-K filed with the Securities and Exchange
Commission. The results of operations for the periods ended September 30,
1995 are not necessarily indicative of operating results for the full year.
Net (Loss) Income Per Share
Net (loss) income per share is based on the weighted average number of
common shares outstanding. The Company has no common share equivalents
outstanding.
Reclassifications
Certain reclassifications have been made to the 1994 financial statements
to conform with the classifications used in 1995.
2. MACLEAN HUNTER ACQUISITION
On March 31, 1994, Rogers Communications Inc. ("RCI") acquired
substantially all of the outstanding shares of capital stock of Maclean
Hunter Limited, which was formerly the parent of Maclean Hunter, Inc.
("MHI"). On December 22, 1994, pursuant to a share purchase agreement
between Comcast and RCI, Comcast MH Holdings, Inc. ("MH Holdings")
purchased all of the issued and outstanding shares of capital stock of MHI
and, in conjunction with a separate agreement with the shareholders of
Comcast Michigan Holdings, Inc. (formerly Barden Communications, Inc. and
referred to herein as "CMH"), acquired all of the issued and outstanding
shares of capital stock of CMH, for an aggregate purchase price of
approximately $1.2 billion (subject to certain adjustments) in cash (the
purchase of the shares of MHI is referred to herein as the "MHI Share
Purchase" and, together with the purchase of the CMH shares, as the "Share
Purchase"). MH Holdings is an indirect wholly owned subsidiary of Comcast
MHCP Holdings, L.L.C. ("MHCP"), a Delaware limited liability corporation.
MHCP is owned 55% by a wholly owned subsidiary of Comcast and 45% by the
California Public Employees'
4
<PAGE>
CABLEVISION INVESTMENT OF DETROIT, INC.
QUARTER ENDED SEPTEMBER 30, 1995
NOTES TO CONDENSED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)
Retirement System ("CalPERS"), and is managed by Comcast. The MHI Share
Purchase resulted in a change of control of the Company because Cable TV,
the Company's parent, became an indirect wholly owned subsidiary of MH
Holdings. In addition, the Share Purchase resulted in a change of control
of the Partnership because the partners became substantially indirect
wholly owned subsidiaries of MH Holdings.
As a result of the Share Purchase, a new cost basis was established for the
purchased assets and liabilities. The financial position of the Company and
the Partnership as of September 30, 1995 and December 31, 1994, and their
results of operations for the nine and three months ended September 30,
1995, reflect an allocation of the purchase price for the Share Purchase to
the assets and liabilities of the Company and the Partnership based on
relative estimated market values. Such allocation is preliminary pending
the final purchase price adjustment between Comcast and RCI. Financial
information prior to the Share Purchase with respect to the Company and the
Partnership has been presented herein as "Predecessor Corporation" and
"Predecessor Partnership," respectively.
3. INVESTMENT IN COMCAST CABLEVISION OF DETROIT
The Company accounts for its investment in the Partnership under the equity
method. The Company records its investment at cost and adjusts the recorded
investment periodically to recognize the Company's proportionate share of
the Partnership's net income or loss after the date of investment, as well
as any additional contributions made and distributions received.
The following is summarized financial information with respect to the
Partnership:
<TABLE>
<CAPTION>
Condensed Financial Position
(Dollars in thousands)
September 30, December 31,
1995 1994
--------- ---------
<S> <C> <C>
Current assets.................................................. $4,959 $4,576
Property and equipment, net..................................... 58,497 59,358
Deferred charges, net........................................... 229,952 245,195
--------- ---------
$293,408 $309,129
========= =========
Current liabilities............................................. $61,985 $63,136
Long-term liabilities........................................... 161,582 160,647
Partners' capital............................................... 69,841 85,346
--------- ---------
$293,408 $309,129
========= =========
</TABLE>
5
<PAGE>
CABLEVISION INVESTMENT OF DETROIT, INC.
QUARTER ENDED SEPTEMBER 30, 1995
NOTES TO CONDENSED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)
Condensed Statement of Operations
(Dollars in thousands)
<TABLE>
<CAPTION>
(Predecessor (Predecessor
Partnership) Partnership)
Nine Months Ended Three Months Ended
September 30, September 30,
1995 1994 1995 1994
-------- -------- -------- ------
<S> <C> <C> <C> <C>
Service income......................................... $50,633 $49,211 $17,113 $16,128
--------- -------- --------- ---------
Operating, selling, general and
administrative expenses............................... 32,954 32,477 11,117 10,552
Depreciation and amortization.......................... 19,550 7,415 6,469 2,444
--------- -------- --------- ---------
52,504 39,892 17,586 12,996
--------- -------- --------- ---------
Operating (loss) income ............................... (1,871) 9,319 (473) 3,132
Interest expense....................................... 9,302 2,255 3,173 833
--------- -------- --------- ---------
Net (loss) income for allocation to partners........... ($11,173) $7,064 ($3,646) $2,299
========= ======== ========= =========
</TABLE>
Prior to the Share Purchase, the Company was allocated 10.2% of the
Partnership's net income or loss. Contemporaneously with the Share
Purchase, Detroit Cable TV, Inc. ("Detroit Cable"), a wholly owned
subsidiary of Cable TV, exercised its option to acquire additional
interests in the Partnership of 0.2% from the Company and 0.8% from CMH
for consideration previously provided. Following the Share Purchase,
Detroit Cable, CMH and the Company hold interests of 50%, 40% and 10%,
respectively, in the Partnership. As a result of the Share Purchase, the
Company's recorded investment balance was increased to 10% of the new
basis of the Partnership's net assets.
Related Party Transactions
Effective December 22, 1994, management fees are charged to the
Partnership pursuant to a management agreement between Comcast and MH
Holdings (the "Management Agreement"). Under the terms of the Management
Agreement, Comcast will supervise the management and operation of the
Partnership for compensation equal to 4.5% of the Partnership's gross
revenues, with payment of one-third of such fees being deferred by MH
Holdings. In addition, the Management Agreement provides for the
reimbursement and sharing of certain of Comcast's actual costs relating
to the operations of MH Holdings, including the operations of the
Partnership. For the nine and three months ended September 30, 1995, the
Partnership was charged $2.3 million and $770,000, respectively, under
the Management Agreement.
Effective December 22, 1994, the Partnership is also charged by Comcast
for certain operating expenses under a separate agreement between Comcast
and MH Holdings (the "Cost Sharing Agreement"). These expenses are
charged to MH Holdings, and ultimately the Partnership, by Comcast on the
same basis that approximates what would have been charged if it purchased
directly from the supplier, subject to certain adjustments and
limitations. For the nine and three months ended September 30, 1995, the
amount charged to the Partnership under the Cost Sharing Agreement was
$14.6 million and $4.9 million, respectively.
Through November 30, 1994, the Partnership paid to Cable Management of
Detroit, a partnership formed by Cable TV and CMH, a monthly fee equal to
6% of the Partnership's gross revenues. Fees incurred for the nine and
three months ended September 30, 1994 totalled $3.0 million and $1.0
million, respectively.
6
<PAGE>
CABLEVISION INVESTMENT OF DETROIT, INC.
QUARTER ENDED SEPTEMBER 30, 1995
NOTES TO CONDENSED FINANCIAL STATEMENTS - CONCLUDED
(Unaudited)
Through December 21, 1994, the Partnership purchased certain services
jointly with an affiliate owned by Cable TV. Reimbursement to the
affiliate for these services for the nine and three months ended
September 30, 1994 totalled $5.3 million and $1.7 million, respectively.
For the nine and three months ended September 30, 1995, interest expense
of $9.3 million and $3.2 million, respectively, represents interest on
the Partnership's assumed portion of the outstanding borrowings of MH
Holdings under the Assumption Agreement (see Note 4).
Pension Plan
On October 5, 1995, the Partnership decided to terminate its defined
benefit pension plan as soon as practicable, but prior to December 31,
1995. The termination of this plan is not expected to have a significant
effect on the financial position or results of operations of the
Partnership or the Company.
Commitments and Contingencies
The Partnership is subject to legal proceedings and claims which arise in
the ordinary course of its business. In the opinion of management, the
amount of ultimate liability with respect to these actions will not
materially affect the financial position and results of operations of the
Partnership.
On March 30, 1994, the Federal Communications Commission ("FCC"), among
other things, adopted interim regulations to govern cost-of-service
showings by cable operators, establishing an industry-wide 11.25% after
tax rate of return and a rebuttable presumption that acquisition costs
above original historic book value of tangible assets should be excluded
from the rate base; and reconsidered, among other matters, its
regulations concerning rates for the addition of regulated services and
the treatment of packages of "a la carte" channels. The Partnership is
currently seeking to justify certain of its existing rates on the basis
of cost-of-service showings at the City. Although management believes
that the Partnership's rates are supportable in a cost of service
proceeding, no assurance can be given that the Partnership will be
successful. If the Partnership is not successful in such efforts, and
there is no legislative, administrative or judicial relief, the FCC
regulations may adversely affect the Partnership's results of operations.
4. STATEMENT OF CASH FLOWS - SUPPLEMENTAL INFORMATION
In connection with the Share Purchase, MH Holdings entered into an $850.0
million credit agreement with certain lenders (the "Credit Agreement").
On December 22, 1994, the Partnership entered into a loan assumption
agreement (the "Assumption Agreement") with MH Holdings whereby the
Partnership, along with certain other subsidiaries of MH Holdings, would
assume a portion of MH Holdings' obligations under the Credit Agreement.
The Partnership's allocated portion of the total commitment under the
Credit Agreement was $184.1 million, of which $154.9 million was
outstanding as of December 31, 1994. During the nine months ended
September 30, 1995, additional borrowings were made under the Credit
Agreement and the Partnership was allocated an additional $4.3 million
pursuant to the Assumption Agreement, with a corresponding decrease in
partners' capital. The Company has recorded a decrease in its investment
in the Partnership for its proportionate share of this assumed liability
of $433,000, with a corresponding decrease in additional capital. This
transaction has been excluded from the Company's condensed statement of
cash flows due to its noncash nature.
5. RELATED PARTY TRANSACTIONS
As of September 30, 1995, the due from affiliate balance includes
interest bearing amounts due from MH Holdings of approximately $1.0
million.
7
