424B3 1 d424b3.htm FINAL PROSPECTUS Final Prospectus
Table of Contents

Filed pursuant to Rule 424(b)(3)
Registration No. 333-176498

PROSPECTUS

LOGO

NBCUniversal Media, LLC

CONSENT SOLICITATION AND OFFER TO GUARANTEE

8 7/8% Senior Notes due 2015 (CUSIP NO. 913405AE6)

10  7/8% Senior Subordinated Notes due 2016 (CUSIP NO. 913405AG1)

of

Universal City Development Partners, Ltd.

UCDP Finance, Inc.

We are offering to fully and unconditionally guarantee the above notes, collectively referred to in this prospectus as the “Notes,” of Universal City Development Partners, Ltd. and UCDP Finance, Inc. in return for your consent to an amendment to the terms of your Notes that would change the covenants and events of default as described in this prospectus in order to be consistent with those contained in our public debt securities. If we receive the requisite consents, then upon the issuance of the NBCUniversal guarantees your Notes will be effectively pari passu with all of our senior unsecured indebtedness, which totaled approximately $9.150 billion at June 30, 2011.

The NBCUniversal guarantees will be provided only if consents to the amendment have been validly submitted and not withdrawn by the expiration date for more than 50% of the then outstanding principal amount of each of the 8 7/8% Senior Notes due 2015 (the “Senior Notes”) and the 10 7/8% Senior Subordinated Notes due 2016 (the “Senior Subordinated Notes”). The amendment will amend the Senior Notes and the Senior Subordinated Notes so long as more than 50% of the principal amount of both the Senior Notes and the Senior Subordinated Notes consent, so the terms of your Notes may be affected by the amendment even if you do not consent to the amendment.

THE CONSENT SOLICITATION WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON OCTOBER 6, 2011 UNLESS EXTENDED IN OUR DISCRETION. YOU MAY WITHDRAW ANY CONSENTS TENDERED UNTIL THE EXPIRATION OF THE CONSENT SOLICITATION. THE CONSENT SOLICITATION AND OFFER OF THE GUARANTEES IS DESCRIBED IN DETAIL IN THIS PROSPECTUS AND WE URGE YOU TO READ IT CAREFULLY. THE BOARD OF DIRECTORS OF OUR SOLE MEMBER IS NOT, NOR IS THE PARK ADVISORY BOARD OF UNIVERSAL CITY DEVELOPMENT PARTNERS, LTD. OR THE BOARD OF DIRECTORS OF UCDP FINANCE, INC. OR ANY OTHER PERSON, MAKING ANY RECOMMENDATION AS TO WHETHER YOU SHOULD TENDER YOUR CONSENT TO THE AMENDMENT.

The Notes do not trade on any established exchange.

See “Risk Factors” beginning on page 23 for a discussion of risk factors that should be considered by you prior to tendering your consent.

Neither the Securities and Exchange Commission (the “SEC”) nor any state securities commission has approved or disapproved of the securities to be issued in the consent solicitation or passed upon the adequacy or accuracy of this prospectus. Any representation to the contrary is a criminal offense.

September 8, 2011


Table of Contents

TABLE OF CONTENTS

 

     Page  

Caution Concerning Forward-Looking Statements

    v   

Summary

    1   

Risk Factors

    23   

Use Of Proceeds

    43   

Capitalization

    43   

Ratio Of Earnings To Fixed Charges

    44   

Unaudited Pro Forma Financial Information

    45   

Selected Historical Financial Information for NBCUniversal

    54   

Management’s Discussion And Analysis Of Financial Condition And Results Of Operations of NBCUniversal

    56   

Quantitative And Qualitative Disclosures About Market Risk for NBCUniversal

    88   

Business of NBCUniversal

    91   

Legislation And Regulation of NBCUniversal

    101   

Management

    111   

Executive Compensation

    114   

Related Party Transactions

    121   

Principal Stockholders of NBCUniversal

    133   

Selected Historical Financial Information for UCDP

    135   

Management’s Discussion And Analysis Of Financial Condition And Results Of Operations of UCDP

    140   

Quantitative And Qualitative Disclosures About Market Risk for UCDP

    159   

Business of UCDP

    160   

Legislation And Regulation of UCDP

    174   

Principal Stockholders of UCDP

    175   

Description of the Consent Solicitation and the Offer to Guarantee

    176   

Description of the NBCUniversal Guarantees and the New Covenants

    182   

Description Of The Notes

 

- Description of the Senior Notes

    191   

- Description of the Senior Subordinated Notes

    243   

Material United States Federal Income Tax Consequences Of The Consent Solicitation

    299   

Certain ERISA Considerations

    301   

Validity Of the Guarantees

    303   

Experts

    303   

Where You Can Find More Information

    304   

Index To Financial Statements of NBCUniversal

    F-1   

Index To Financial Statements of UCDP

    F-99   

None of NBCUniversal, NBCUniversal Holdings, Comcast Corporation, General Electric Company, Universal City Development Partners, Ltd., UCDP Finance, Inc., Universal City Travel Partners or Universal Orlando Online Merchandise Store has authorized any other person to provide you with information other than that contained in this prospectus. NBCUniversal, NBCUniversal Holdings, Comcast, GE, Universal City Development Partners, Ltd. and UCDP Finance, Inc. do not take any responsibility for, and can provide no assurance as to the reliability of, any other information that others may give you. We are offering the NBCUniversal guarantees and soliciting consents with respect to the Notes described in this prospectus only under circumstances and in jurisdictions where it is lawful to do so. The information contained in this prospectus is current only as of its date.

 

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This prospectus is part of a registration statement on Form S-4 filed with the Securities and Exchange Commission, or the SEC, under the Securities Act of 1933, as amended and does not contain all of the information contained in the registration statement. This information is available without charge upon written or oral request. See “Where You Can Find More Information.” To obtain this information in a timely fashion, you must request such information no later than five business days before October 6, 2011, which is the date on which the consent solicitation expires (unless we extend the consent solicitation as described herein).

In this prospectus, unless otherwise indicated or the context otherwise requires, references to “NBCUniversal,” “our company,” “we,” “us” and “our” are both to (i) after January 28, 2011, NBCUniversal Media, LLC, the Delaware limited liability company into which NBC Universal, Inc. converted pursuant to the Joint Venture Transaction (as defined in “Summary”), together with its subsidiaries (including subsidiaries that hold the Comcast Content Business (as defined in “Summary”)) and (ii) on or prior to January 28, 2011, NBC Universal, Inc., together with its subsidiaries; references to “NBC Universal, Inc.” are to NBC Universal, Inc., excluding its subsidiaries, on or prior to January 28, 2011; references to “Predecessor” are to NBCUniversal on or prior to January 28, 2011 (without giving effect to the Joint Venture Transaction) and references to “Successor” are to NBCUniversal after January 28, 2011, giving effect to the Joint Venture Transaction; references to “Comcast” are to Comcast Corporation and its subsidiaries; references to “GE” are to General Electric Company and its subsidiaries; references to “Vivendi” are to Vivendi S.A.; references to “NBCUniversal Holdings” are to NBCUniversal, LLC, a limited liability company that owns 100% of NBCUniversal Media, LLC; references to “UCDP” are to Universal City Development Partners, Ltd., a Florida limited partnership; references to “UCDP Finance” are to UCDP Finance, Inc., a Florida corporation and a wholly owned subsidiary of UCDP; references to the “Issuers” are to UCDP and UCDP Finance, collectively; references to “Universal Orlando” are to UCDP and UCDP Finance, collectively and their respective subsidiaries; references to “Holding I” are to Universal City Florida Holding Co. I, a Florida general partnership, and “Holding II” are to Universal City Florida Holding Co. II, a Florida general partnership; references to “Holdings” or “UCHC” are to Holding I and Holding II, collectively; references to “Universal Orlando Resort” are to UCDP’s resort in Orlando, Florida, which includes two theme parks (Universal Studios Florida and Universal’s Islands of Adventure), UCDP’s entertainment complex (Universal CityWalk), and the three themed hotels owned by UCF Hotel Venture; references to “UCF Hotel Venture” are to Loews Portofino Bay Hotel at Universal Orlando® Resort (or “Loews Portofino Bay Hotel”), Hard Rock Hotel® (or “Hard Rock Hotel®”) and Loews Royal Pacific Resort at Universal Orlando® Resort (or “Loews Royal Pacific Resort”), in which Universal City Studio Productions LLLP has an indirect noncontrolling interest and from which UCDP derives revenue related to lease payments reflected in the other revenue line item, although UCDP does not own the hotel assets; references to “CityWalk” are to Universal CityWalk located in Orlando, Florida; references to “Universal CPM” are to Universal City Property Management II LLC, one of the partners in Holdings; references to “USC” are to Universal Studios Company LLC, an indirect wholly owned subsidiary of NBCUniversal and the indirect parent of Universal City Studio Productions LLLP; references to Universal City Studios Productions or “UCSP” are to Universal City Studios Productions LLLP, formerly known as “Vivendi Universal Entertainment” or “VUE”, the parent company of Universal CPM and UCDP’s manager; references to “Blackstone” are to Blackstone UTP Capital LLC, Blackstone UTP Capital A LLC, Blackstone UTP Offshore LLC and Blackstone Family Media Partnership III LLC, collectively, along with their sole members, who held each of their respective interests in and were, prior to July 1, 2011, the remaining partners in Holdings; references to “Universal Parks & Resorts Vacations” are to UCDP’s subsidiary, Universal City Travel Partners d/b/a Universal Parks & Resorts Vacations; references to “Universal Orlando Online Merchandise Store” are to a subsidiary of UCDP; references to “UCRP” are to Universal City Restaurant Partners, Ltd., a joint venture in which UCDP owns a 50% interest, and references to “Universal Parks & Resorts” are to a division of Universal City Studios Productions.

 

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TRADEMARKS

We own or have rights to use the trademarks, service marks and trade names that we use in connection with the operation of our businesses, including NBC®, NBC Universal®, USA Network®, CNBC®, SyfyTM, E!®, Bravo®, The Golf Channel®, Oxygen®, MSNBC®, VERSUS®, Style®, G4®, Sleuth®, mun2®, Universal HD®, CNBC World®, Telemundo®, Universal Pictures®, Focus Features®, Universal Studios Hollywood®, Universal Orlando®, Universal Studios Florida®, Universal’s Islands of Adventure®, Universal CityWalk®, CityWalk®, iVillage®, Fandango®, DailyCandy® and other names and marks that identify our networks, programs and other businesses. Universal Studios owns or has the rights to use the trademarks and service marks that it uses in connection with the operation of its businesses, including Universal Studios Florida, Universal’s Islands of Adventure, Universal Studios, Universal Orlando, Universal CityWalk, Universal Parks & Resorts Vacations, A Vacation From the Ordinary, TWISTER...Ride It Out, E.T. Adventure, JAWS, Revenge of the Mummy, Pteranodon Flyers, Dueling Dragons, The Lost Continent, Poseidon’s Fury, The Eighth Voyage of Sindbad, Halloween Horror Nights, CityWalk, Red Coconut Club, Hollywood Rip Ride Rockit, CityWalk’s Rising Star, Disaster! A Major Motion Picture Ride...Starring You!, Bob Marley’s—A Tribute to Freedom, the groove, and Universal Express Plus. Each trademark, service mark or trade name of any other company appearing in this prospectus is, to our knowledge, owned or licensed by such other company, including as set forth below.

HARRY POTTER, character names and related indicia are trademarks and copyrights of Warner Bros. Entertainment, Inc. Harry Potter Publishing Rights are copyrights of JKR. The Simpsons are trademarks and copyrights of Twentieth Century Fox Film Corporation. The Amazing Adventures of Spider-Man, Spider-Man, The Incredible Hulk Coaster, Dr. Doom’s Fearfall, Storm Force Accelatron, Marvel Super Hero Island and Marvel Super Hero character names and likenesses are trademarks and copyrights of Marvel and copyrights of Universal Studios. Barney and A Day in the Park with Barney are trademarks and copyrights of Lyons Partnership, L.P. The names and characters Barney, Baby Bop, BJ and Super-Dee-Duper are trademarks of Lyons Partnership, L.P. Barney and BJ are Reg. U.S. Pat. & Tm. Off. Jurassic Park, Jurassic Park River Adventure, Camp Jurassic, and Jurassic Park Discovery Center are registered trademarks of Universal Studios/Amblin. Dudley Do Right’s Ripsaw Falls is a trademark and copyright of Ward Prods. Popeye & Bluto’s Bilge Rat Barges and all Popeye characters are trademarks and copyrights of KFS, Inc. and trademarks of Hearst Holdings, Inc. Dr. Seuss properties are trademarks and copyrights of Dr. Seuss Enterprises, L.P. T2 and Terminator are registered trademarks of StudioCanal Image S.A. Men In Black & Alien Attack are trademark and copyrights of Columbia Pictures Industries, Inc. Beetlejuice and all related characters and elements are trademarks and copyrights of Warner Bros. Entertainment, Inc. Nickelodeon, SpongeBob SquarePants, The Fairly OddParents, Hey Arnold!, Rugrats, The Adventures of Jimmy Neutron Boy Genius, Jimmy Neutron’s Nicktoon Blast and all related titles, logos, and characters are trademarks of Viacom International, Inc. SpongeBob SquarePants created by Stephen Hillenberg. The Fairly OddParents created by Butch Hartman. Hey Arnold! created by Craig Bartlett. Rugrats created by Klasky Csupo, Inc. Woody Woodpecker’s KidZone and Woody Woodpecker’s Nuthouse Coaster are registered trademarks of Walter Lantz. Shrek 4-D is the trademark and copyright of DreamWorks Animation, LLC. Hard Rock Hotel, Hard Rock Cafe and Hard Rock Live are registered trademarks of Hard Rock Cafe International (USA), Inc. Pat O’Brien’s is a copyright of Pat O’Brien’s Bar, Inc. Emeril’s is the registered trademark of Emeril Lagasse. Jimmy Buffett’s Margaritaville is the registered trademark of Jimmy Buffett. Latin Quarter is the trademark of Latin Quarter Entertainment, Inc. NASCAR is a registered trademark of NASCAR, Inc. Bubba Gump Shrimp Co. Restaurant & Market is a registered trademark and copyright of Par, Plc. Cinnabon is the registered trademark of Cinnabon, Inc. Starbucks is a registered trademark of Starbucks Coffee Company. Blue Man Group is a registered trademark of Blue Man Productions, Inc. Fossil is the registered trademark of Fossil, Inc. Fresh Produce is the registered trademark of Fresh Produce Sportswear, Inc. Quiet Flight is the registered trademark of Seal Trademarks Pty. The Endangered Species Store is the registered trademark of Universal City Studios, LLC. NBA City is the registered trademark of NBA Properties, Inc. Walt Disney World,

 

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The Magic Kingdom, EPCOT, Disney’s Hollywood Studios and Disney’s Animal Kingdom are registered trademarks and service marks of Disney Enterprises, Inc. Wet ‘n Wild is the registered trademark of Festival Fun Parks, LLC. SeaWorld Adventure Parks is a registered trademark of SeaWorld LLC. Discovery Cove and Aquatica are registered trademarks of SeaWorld Parks & Entertainment LLC, and Busch Gardens is a registered trademark of Anheuser-Busch Corporation. Macy’s Thanksgiving Day Parade & Related Characters are copyrights of Macy’s East, Inc.

STATISTICAL AND OTHER DATA

Unless otherwise indicated in this prospectus:

 

   

A “subscriber” is a single household that receives an applicable network from its multichannel video provider (i.e., cable television operators, direct broadcast satellite providers and other content distributors), including subscribers who receive our networks from pay television providers without charge pursuant to various pricing plans that include free periods or free carriage. A subscriber, as measured by The Nielsen Company, a third-party marketing and media research company, does not include businesses.

 

 

   

All U.S. subscriber data for our national cable networks, except for our Universal HD network, are derived from The Nielsen Company’s July 2011 report, which covers that period from June 15, 2011 through June 21, 2011. U.S. subscriber data for our Universal HD network and international subscriber data are derived from information provided by multichannel video providers and our internal data.

 

 

   

All television ratings data are from Nielsen Media Research, the television audience media measurement subsidiary of The Nielsen Company.

 

 

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CAUTION CONCERNING FORWARD-LOOKING STATEMENTS

The SEC encourages companies to disclose forward-looking information so that investors can better understand a company’s future prospects and make informed investment decisions. In this prospectus, we state our beliefs of future events and of our future financial performance. In some cases, you can identify these so-called “forward-looking statements” by words such as “may,” “will,” “should,” “expects,” “believes,” “estimates,” “potential,” or “continue,” or the negative of these words, and other comparable words. You should be aware that these statements are only our predictions. In evaluating these statements, you should consider various factors, including the risks and uncertainties listed below. Our actual results could differ materially from our forward-looking statements as a result of any of these various factors, which could adversely affect our business, results of operations or financial condition. Important factors that could cause actual results to differ materially from those in the forward-looking statements include the following:

 

   

our ability to successfully anticipate and obtain consumer acceptance of our content

 

 

   

the competitive environment of the industries in which our businesses operate

 

 

   

changes in technology, distribution platforms and consumer behavior

 

 

   

declines in advertising expenditures or changes in advertising markets

 

 

   

declines in sales of DVDs

 

 

   

loss of program distribution or network affiliation agreements, or renewal of these agreements on less favorable terms

 

 

   

loss of, or changes in, key management personnel or popular on-air and creative talent

 

 

   

our ability to use and protect certain intellectual property rights

 

 

   

regulation by federal, state, local and foreign authorities

 

 

   

failure or destruction of our key properties or our information systems and other technology that support our businesses

 

 

   

labor disputes involving our employees or that occur in sports leagues that we have the right to broadcast

 

 

   

significant withdrawal liability if we withdraw from multiemployer pension plans in which we currently participate or any requirement to make additional contributions under such plans

 

 

   

competition within the Orlando theme park market

 

 

   

the dependence of UCDP’s theme park business on air travel

 

 

   

the loss of key distribution channels for UCDP’s theme park ticket sales

 

 

   

publicity associated with accidents occurring at theme parks

 

 

   

the seasonality of UCDP’s theme park business

 

 

   

the consultant’s right to exercise his put option under the Consultant Agreement (as defined herein) starting in June 2017 and the impact of such right on UCDP’s ability to refinance its existing indebtedness when it matures, including debt under the indentures governing the Notes

 

 

   

the occurrence of a change of control as defined in certain of UCDP’s significant agreements

 

 

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liabilities from various litigation matters

 

 

   

international business operations

 

 

   

weak economic conditions in the United States and other regions of the world

 

 

   

unanticipated expenses or other risks associated with acquisitions or other strategic transactions, including those associated with the Joint Venture Transaction

 

 

   

regulatory conditions and voluntary commitments to which we are subject as a result of the Joint Venture Transaction

 

 

   

the approval rights held by Comcast and GE over our business, and the fact that Comcast’s and GE’s interests may differ from those of the holders of the Notes

 

 

   

the possibility that NBCUniversal Holdings would be required to purchase GE’s interest in it, and may cause us to make distributions or loans to it to fund these purchases

 

 

   

the ability of Comcast and GE to compete with us in certain circumstances

 

 

   

the possibility that Comcast or GE may reduce or sell its entire interest in our company, which could impact the trading price of the Notes

 

 

   

other factors described under “Risk Factors” and elsewhere in this prospectus

 

Any forward-looking statement made by us in this prospectus speaks only as of the date on which it is made. Factors or events that could cause our actual results to differ may emerge from time to time, and it is not possible for us to predict all of them. We undertake no obligation to update any forward-looking statements.

 

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SUMMARY

This summary highlights the more detailed information located elsewhere in this prospectus and you should read the entire prospectus carefully.

OUR COMPANY

NBCUniversal Media, LLC

We are a leading media and entertainment company that develops, produces and distributes entertainment, news and information, sports and other content for global audiences, and we own and operate a diversified and integrated portfolio of some of the most recognizable media brands in the world.

We classify our operations into the following four reportable segments:

 

   

Cable Networks: Our Cable Networks segment consists primarily of our national cable entertainment networks (USA Network, Syfy, E!, Bravo, Oxygen, Style, G4, Chiller, Sleuth and Universal HD); our national news and information networks (CNBC, MSNBC and CNBC World); our national cable sports networks (Golf Channel and VERSUS); our regional sports and news networks; our international entertainment and news and information networks (including CNBC Europe, CNBC Asia and our Universal Networks International portfolio of networks); our cable television production operations and certain digital media properties consisting primarily of brand-aligned websites and other websites, such as DailyCandy, Fandango and iVillage.

 

 

   

Broadcast Television: Our Broadcast Television segment consists primarily of our U.S. broadcast networks, NBC and Telemundo; our 10 NBC and 15 Telemundo owned local television stations; our broadcast television production operations; and our related digital media properties consisting primarily of brand-aligned websites.

 

 

   

Filmed Entertainment: Our Filmed Entertainment segment consists of the operations of Universal Pictures, which produces, acquires, markets and distributes filmed entertainment and stage plays worldwide in various media formats for theatrical, home entertainment, television and other distribution platforms.

 

 

   

Theme Parks: Our Theme Parks segment consists primarily of our Universal Studios Hollywood theme park, our Wet ‘n Wild water park and fees from intellectual property licenses and other services from third parties that own and operate Universal Studios Japan and Universal Studios Singapore. Through June 30, 2011, we held a 50% equity interest in, and received special and other fees from, Universal City Development Partners (“UCDP”), which owns Universal Studios Florida and Universal’s Islands of Adventure. On July 1, 2011, we completed the acquisition of the remaining 50% equity interest in UCDP for $1.025 billion, subject to various purchase price adjustments. As a result, UCDP is now a wholly owned consolidated subsidiary.

 

Joint Venture Transaction

On January 28, 2011, Comcast closed its transaction (the “Joint Venture Transaction”) with GE to form a new company named NBCUniversal, LLC (“NBCUniversal Holdings”). Comcast now controls and owns 51% of NBCUniversal Holdings and GE owns the remaining 49%. As part of the Joint Venture Transaction,

 

 

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NBC Universal, Inc. (our “Predecessor”) was converted into a Delaware limited liability company named NBCUniversal Media, LLC (“NBCUniversal”), which is a wholly owned subsidiary of NBCUniversal Holdings. Comcast contributed to NBCUniversal its national cable programming networks, including E!, Golf Channel, G4, Style and Versus, its regional sports and news networks, consisting of ten regional sports networks and three regional news channels, certain of its Internet businesses, including DailyCandy and Fandango, and other related assets (the “Comcast Content Business”). In addition to contributing the Comcast Content Business, Comcast also made a cash payment to GE of $6.2 billion, which included transaction-related costs.

As part of the Joint Venture Transaction, among other things:

 

   

GE contributed the equity of our company to NBCUniversal Holdings

 

 

   

We borrowed an aggregate of approximately $9.1 billion, consisting of $4.0 billion aggregate principal amount of the NBCUniversal notes issued in April 2010 (the “April Notes”) and $5.1 billion of NBCUniversal notes issued in October 2010 (the “October Notes” and, with the April Notes, the “NBCUniversal Notes”)

 

 

   

We used approximately $1.7 billion of the proceeds from the April Notes to repay existing debt in May 2010

 

 

   

We distributed approximately $7.4 billion to GE prior to the closing of the Joint Venture Transaction

 

 

   

Comcast contributed the Comcast Content Business to our company and, in consideration for such contribution, received equity interests in NBCUniversal Holdings

 

 

   

We converted from a Delaware corporation into a Delaware limited liability company and, for federal income tax purposes, we are a disregarded entity separate from NBCUniversal Holdings, which is a tax partnership

 

 

   

Comcast made a cash payment of $6.2 billion to GE, which included transaction-related costs, in exchange for a portion of their controlling interest in NBCUniversal Holdings

 

Acquisition of Equity Interest in UCDP, UCDP Equity Offering and Note Redemption

On July 1, 2011, we completed the acquisition of the remaining 50% equity interest in UCDP that we did not already own for $1.025 billion, subject to various purchase price adjustments. We and our affiliates now wholly own Universal Studios Florida, Universal’s Islands of Adventure and CityWalk, which are located at Universal Orlando Resort. The Issuers are now our wholly owned subsidiaries. We funded this acquisition with cash on hand, borrowings under our revolving credit facility and the issuance to Comcast of a $250 million one-year subordinated note. The note bears interest at a rate per annum of 1.75% over three month LIBOR. Additional borrowings under our revolving credit facility, along with cash on hand at UCDP, were used to refinance and terminate UCDP’s senior secured credit facilities, which had had $801 million outstanding, immediately following the acquisition.

In connection with the termination and refinancing of UCDP’s senior secured credit facilities, UCDP issued to us a $600 million unsecured note due July 1, 2016 (the “NBCUniversal Note”). The NBCUniversal Note bears interest at LIBOR plus 250 basis points. On July 26, 2011, UCDP made a prepayment of $75 million on the NBCUniversal Note.

 

 

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UCDP made an equity offering to us of approximately $244 million on August 1, 2011, the proceeds of which were used to redeem 35% of both the 8 7/8% Senior Notes due November 15, 2015 (the “Senior Notes”) and the 10 7/8% Senior Subordinated Notes due November 15, 2016 (the “Senior Subordinated Notes”, and together with the Senior Notes, the “Notes”), as follows: $140 million aggregate principal amount of the Senior Notes and $78.75 million aggregate principal amount of the Senior Subordinated Notes. The redemption price for the Senior Notes was 108.875% and the redemption price for the Senior Subordinated Notes was 110.875%, not including accrued and unpaid interest that was also payable. Following the redemption, $260 million principal amount of Senior Notes and $146.25 million principal amount of Senior Subordinated Notes remain outstanding.

We are offering to fully and unconditionally guarantee the remaining Senior Notes and Senior Subordinated Notes in return for your consent to an amendment to the terms of your Notes. The guarantees will be provided only if consents to the amendment have been validly submitted and not withdrawn both for more than $130 million principal amount of the Senior Notes and for more than $73.125 million of the Senior Subordinated Notes.

Universal City Development Partners, Ltd.

UCDP Finance, Inc.

UCDP owns and operates two theme parks, Universal Studios Florida and Universal’s Islands of Adventure, and CityWalk, a dining, retail and entertainment complex, at Universal Orlando Resort. Universal Orlando Resort also includes three themed hotels, Loews Portofino Bay Hotel, Hard Rock Hotel® and Loews Royal Pacific Resort, each of which is located within walking distance of the theme parks and CityWalk. These hotels are owned by UCF Hotel Venture, in which UCSP has an indirect noncontrolling interest. UCDP’s theme parks combine well-known movie, TV, comic and story book characters with exciting, technologically advanced rides and attractions.

The three principal areas that make up Universal Orlando Resort are:

 

   

Universal Studios Florida®. Universal Studios Florida is a movie-and-television-based theme park. Universal Studios Florida is also a working motion picture/TV studio. Universal Studios Florida opened in 1990.

 

 

   

Universal’s Islands of Adventure®. Universal’s Islands of Adventure, which opened in 1999, consists of six distinct and individually themed islands with rides, shows and attractions: Seuss Landing, The Lost Continent®, Toon Lagoon®, Jurassic Park®, Marvel Super Hero Island® and The Wizarding World of Harry Potter, which opened in June 2010.

 

 

   

CityWalk®. CityWalk is a diverse collection of restaurants, retail outlets and nightclubs and includes a 20-screen cineplex. CityWalk’s 37 facilities are located between the entrances to Universal Studios Florida and Universal’s Islands of Adventure.

 

UCDP owns and operates 14 facilities at CityWalk and leases 23 to third parties and affiliated entities (one of which UCDP operates). UCDP also has an ownership interest in five of the entities that lease land or facilities at CityWalk. CityWalk’s facilities include NBA City, The Sports Grille by NASCAR, Emeril’s® Restaurant Orlando, Bubba Gump Shrimp Co. Restaurant & Market®, AMC Universal Cineplex 20®, and Jimmy Buffett’s® Margaritaville®. In 2007, CityWalk opened the 1,015 seat Sharp AQUOS theater which houses the Blue Man Group show, one of seven permanently based Blue Man Group productions worldwide. Additionally, CityWalk contains the Hard Rock Live® Orlando concert venue, which has featured many popular recording artists. CityWalk was opened in 1999 in conjunction with the opening of Universal’s Islands of Adventure.

 

 

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Universal Orlando Resort also includes three on-site themed hotels. These hotels are owned by UCF Hotel Venture, a joint venture indirectly owned approximately 50% by Loews Hotel Holding Corp. (“Loews Hotels”), 25% by Universal Studios Hotel LLC, a subsidiary of Universal City Studios Productions LLLP (“UCSP”), and 25% by Rank Hotels Orlando, Inc., a subsidiary of Seminole Hard Rock Entertainment, Inc. The hotels, Loews Portofino Bay Hotel, Hard Rock Hotel® and Loews Royal Pacific Resort, have a total of 2,400 rooms and approximately 130,000 square feet of meeting space. All three hotels are within walking distance of UCDP’s two theme parks and CityWalk. Hotel guests enjoy preferential benefits at the theme parks and at certain restaurants in the parks and at CityWalk. Although UCDP owns the land on which these hotels are located and is responsible for sales, marketing and promotional activities relating to the hotels, it does not own the hotels and derives only a small portion of its total operating revenues from them.

NBCUniversal Current Ownership Structure

LOGO

 

 

 

 

 

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Pursuant to the agreements governing the Joint Venture Transaction, GE has certain rights to require NBCUniversal Holdings or Comcast to purchase some or all of its interests in NBCUniversal Holdings for cash, at specified times and subject to certain limitations. In addition, Comcast has certain rights to purchase some or all of GE’s interests in NBCUniversal Holdings for cash at specified times. For additional information concerning the Joint Venture Transaction, see “Related Party Transactions—Arrangements Entered into in Connection with the Joint Venture Transaction—Operating Agreement—GE Redemption and Comcast Purchase Rights.”

The Issuers’ Current Ownership Structure

LOGO

In January 1987, Universal City Florida Partners, or “UCFP,” a Florida general partnership, was formed to develop, operate and own Universal Studios Florida. In June 1992, Universal City Development Partners, a Florida general partnership, was formed for the purpose of developing and operating Universal’s Islands of Adventure and CityWalk, which were completed and opened to the public in 1999. In January 2000, Universal City Development Partners converted into a Delaware limited partnership and changed its name to Universal City Development Partners, LP, or “UCDP-DEL,” and UCFP was merged with and into UCDP-DEL. In June 2002, UCDP-DEL was merged with and into a newly formed Florida limited partnership. UCDP is the surviving entity of that merger. UCDP Finance is a Florida corporation that serves as co-issuer of the Notes. Holding I and Holding II are holding companies and do not have any material assets or operations other than ownership of partnership interests in UCDP.

 

 

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Additional information

UCDP is a Florida limited partnership. UCDP Finance, a wholly owned subsidiary of UCDP, is a Florida corporation and serves as co-issuer of the Notes. UCDP Finance does not have any operations or assets of any kind and will not have any revenues. UCDP Finance will likely not have the ability to service the interest and principal obligations on the Notes. UCDP’s principal executive offices are located at 1000 Universal Studios Plaza, Orlando, FL 32819-7610 and its telephone number at that address is (407) 363-8000. UCDP’s website address is www.universalorlando.com. The information on its website is not incorporated into this prospectus and should not be considered to be a part of this prospectus. UCDP has included its website address as an inactive textual reference only.

 

 

 

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THE CONSENT SOLICITATION AND OFFER TO GUARANTEE

 

Consent Solicitation

NBCUniversal is offering to fully and unconditionally guarantee $260,000,000 aggregate principal amount of Senior Notes and $146,250,000 aggregate principal amount of Senior Subordinated Notes in return for your consent to an amendment to the terms of your Notes, which would change the covenants and events of default as described in this prospectus to be consistent with those contained in NBCUniversal’s public debt securities. Upon the issuance of the guarantees, your Notes would effectively be pari passu with all of NBCUniversal’s senior and unsecured indebtedness, which totaled approximately $9.150 billion at June 30, 2011. See “Capitalization.”

 

The NBCUniversal Guarantees

NBCUniversal is offering to fully and unconditionally guarantee the Notes. For more information about the terms of the guarantees, see “Description of the NBCUniversal Guarantees and the New Covenants.”

 

Consents, Expiration Date, Withdrawal

The consent solicitation will expire at 5:00 p.m. New York City time on October 6, 2011 unless it is extended. If you decide to submit your consent, you may withdraw it at any time prior to October 6, 2011. NBCUniversal reserves the right to decide for any reason not to accept any of the consents.

 

The Amendment

The amendment would amend the indentures governing the Notes to conform the covenants and events of default in the indentures for the Notes with those contained in NBCUniversal’s public debt securities. The changes to the covenants and events of default applicable to the Notes will only take effect when the Notes receive the NBCUniversal guarantees. This prospectus refers to the covenants and events of default as amended that would apply to the Notes if the amendment is approved as the “new covenants.”

 

 

The new covenants would restrict or condition NBCUniversal’s ability to:

 

   

grant liens to secure other indebtedness;

 

   

enter into sale-leaseback transactions; and

 

   

consolidate or merge, or sell, convey, transfer, lease, or otherwise dispose of all or substantially all of NBCUniversal’s property and assets.

 

 

The amendment would also add as events of default under each indenture:

 

   

a default by NBCUniversal in the observance or performance of any covenant under that indenture or notes outstanding under that

 

 

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indenture for more than 90 days after written notice thereof shall have been given to NBCUniversal by the trustee, or to NBCUniversal and the trustee by the holders of at least 25% in aggregate principal amount of the notes then outstanding under that indenture;

 

   

the NBCUniversal guarantee is not (or is claimed by NBCUniversal not to be) in full force and effect; or

 

   

certain events involving bankruptcy, insolvency or reorganization of NBCUniversal.

 

 

A default under any of NBCUniversal’s other indebtedness will not be a default under the indentures.

 

 

The amendment would remove the following covenants and restrictive covenants contained in the Notes (references below are to the relevant caption under “Description of the Senior Notes” for the Senior Notes and “Description of the Senior Subordinated Notes” for the Senior Subordinated Notes, as the case may be):

 

   

Change of Control;

 

   

Limitation on Incurrence of Indebtedness and Issuance of Disqualified Stock and Preferred Stock;

 

   

Limitation on Restricted Payments;

 

   

Dividend and Other Payment Restrictions Affecting Subsidiaries;

 

   

Asset Sales;

 

   

Transactions with Affiliates;

 

   

Liens;

 

   

Limitation of Business Activities of UCDP Finance, Inc.;

 

   

Reports and Other Information;

 

   

Future Guarantors; and

 

   

Limitation on Layering (only with respect to the Senior Subordinated Notes).

In addition, the amendment would remove as events of default under the indentures: (a) failure by the Issuers to comply with certain covenants in the indentures, (b) failure by the Issuers to comply with other agreements in the Notes or the indentures, (c) a default under, or the acceleration of the maturity of, other indebtedness of UCDP, (d) the failure to pay final non-appealable judgments and (e) certain guarantees not being in effect. The amendment would also revise the event of default relating to certain events of bankruptcy, insolvency or reorganization to refer to NBCUniversal rather than UCDP or its subsidiaries.

 

 

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Material United States Federal Income Tax Consequences

See “Material United States Federal Income Tax Consequences of the Consent Solicitation.”

 

Use of Proceeds

NBCUniversal will not receive any proceeds from the consent solicitation.

 

Consent Agent

The Bank of New York Mellon is the consent agent for the consent solicitation.

 

Information Agent

D.F. King & Co., Inc. is the information agent for the consent solicitation.

 

Failure to Submit Your Consent

The NBCUniversal guarantees will be provided only if consents to the amendment have been validly submitted and not withdrawn both for more than $130 million principal amount of the Senior Notes and for more than $73.125 million of the Senior Subordinated Notes. The amendment will amend the Senior Notes and the Senior Subordinated Notes so long as more than 50% of the principal amount of both the Senior Notes and the Senior Subordinated Notes consent and the guarantees are provided, so the terms of your Notes may be affected by the amendment even if you do not consent to the amendment. See “Description of the NBCUniversal Guarantees and the New Covenants,” “Description of the Notes” and “Description of the Consent Solicitation and the Offer to Guarantee—The Proposed Amendment” for a more complete description of the consent solicitation and the amendment for which consent is being sought.

 

 

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SUMMARY DESCRIPTION OF THE NOTES

For a more complete understanding of the Notes, please refer to “Description of the Notes.

 

Issuers

Universal City Development Partners, Ltd. and UCDP Finance, Inc.

 

Guarantors

Universal City Travel Partners and Universal Orlando Online Merchandise Store currently guarantee the Senior Notes and, on a subordinated basis, the Senior Subordinated Notes.

 

NBCUniversal guarantees

Upon the issuance of the NBCUniversal guarantees, the Senior Notes and Senior Subordinated Notes will be fully and unconditionally guaranteed by NBCUniversal Media, LLC. The existing guarantees will be unaffected by the consent solicitation.

 

Maturity

Senior Notes: November 15, 2015.

 

 

Senior Subordinated Notes: November 15, 2016.

 

Interest

Senior Notes: 8 7/8% per annum.

 

 

Senior Subordinated Notes: 10 7/8% per annum.

 

Interest payment dates

May 15 and November 15 of each year.

 

Optional redemption

UCDP may redeem some or all of the Senior Notes at any time after November 15, 2012 at the redemption prices set forth in “Description of the Senior Notes—Optional Redemption.” In addition, prior to November 15, 2012, UCDP may redeem the Senior Notes, in whole or from time to time in part, at a redemption price equal to 100% of the principal amount of the Senior Notes plus accrued and unpaid interest, if any, to the applicable redemption date plus the applicable “make-whole” premium set forth in “Description of the Senior Notes—Optional Redemption.”

 

 

UCDP may redeem some or all of the Senior Subordinated Notes at any time after November 15, 2013 at the redemption prices set forth in “Description of the Senior Subordinated Notes—Optional Redemption.” In addition, prior to November 15, 2013, UCDP may redeem the Senior Subordinated Notes, in whole or from time to time in part, at a redemption price equal to 100% of the principal amount of the Senior Subordinated Notes plus accrued and unpaid interest, if any, to the applicable redemption date plus the applicable “make-whole” premium set forth in “Description of the Senior Subordinated Notes—Optional Redemption.”

 

 

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UCDP made an equity offering to NBCUniversal of approximately $244 million on August 1, 2011, the proceeds of which were used to redeem $140 million aggregate principal amount of the Senior Notes and $78.75 million aggregate principal amount of the Senior Subordinated Notes.

 

Change of Control; Certain Asset Sales

If, prior to the amendment, UCDP experiences specific kinds of changes of control, it will be required to make an offer to purchase the Notes at a price equal to 101% of the principal amount thereof, plus accrued and unpaid interest, if any, to the purchase date. See “Description of the Senior Notes—Change of Control” and “Description of the Senior Subordinated Notes—Change of Control.” If, prior to the amendment, UCDP sells assets under certain circumstances, it will be required to make an offer to purchase the Notes at their face amount, plus accrued interest and unpaid interest to the purchase date. See “Description of the Senior Notes—Asset Sales” and “Description of the Senior Subordinated Notes—Asset Sales.”

 

Ranking

The Senior Notes are unsecured senior obligations of the Issuers and:

 

   

rank senior in right of payment to all of the Issuers’ existing and future obligations and other obligations that are, by their terms, expressly subordinated in right of payment to the Senior Notes, including the Senior Subordinated Notes and special fees owed to UCSP;

 

   

rank equal in right of payment to all of the Issuers’ existing and future senior obligations and other obligations that are not, by their terms, expressly subordinated in right of payment to the Senior Notes, including UCDP’s obligations in respect of its agreement with a third-party consultant (the “Consultant Agreement”) under which a fee is payable equal to a percentage of certain gross revenues; and

 

   

will be effectively subordinated to all of the Issuers’ existing and future secured debt to the extent of the value of the assets securing such debt, and structurally subordinated to the obligations of any of their subsidiaries that do not guarantee the Senior Notes.

 

 

The Senior Subordinated Notes are not expressly subordinated in right of payment to UCDP’s obligations under the Consultant Agreement.

 

 

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The Senior Subordinated Notes are unsecured senior subordinated obligations of the Issuers and:

 

   

will be subordinated in right of payment to all of the Issuers’ existing and future senior debt, including the Senior Notes;

 

   

rank equal in right of payment to all of the Issuers’ future senior subordinated debt and other obligations that are not by the terms of the Senior Subordinated Notes expressly made senior;

 

   

will be effectively subordinated to all of the issuers’ existing and future secured debt to the extent of the value of the assets securing such debt, and structurally subordinated to the obligations of any of their subsidiaries that do not guarantee the Senior Subordinated Notes; and

 

   

rank senior in right of payment to all of the Issuers’ future debt and other obligations that are, by their terms, expressly subordinated in right of payment to the Senior Subordinated Notes, including the special fees owed to UCSP.

 

 

As of June 30, 2011, after giving effect to the refinancing and termination of UCDP’s senior secured credit agreement, (i) the Notes would have been effectively subordinated to $37 million of indebtedness (including UCDP’s obligations in respect of the Consultant Agreement), (ii) the Senior Notes would have ranked senior to the Senior Subordinated Notes and (iii) the Senior Subordinated Notes would have ranked junior to the Senior Notes.

 

New covenants

If the proposed amendment is adopted, the new covenants would restrict or condition NBCUniversal’s, but not the Issuers’, ability to:

 

   

grant liens to secure other indebtedness;

 

   

enter into sale-leaseback transactions; and

 

   

consolidate or merge NBCUniversal, or sell, convey, transfer, lease, or otherwise dispose of all or substantially all of its property and assets.

 

 

The new covenants would replace the restrictive and other covenants currently contained in the Notes, including those that restrict the Issuers’ ability and the ability of the Issuers’ restricted subsidiaries to:

 

   

incur or guarantee additional debt or issue preferred stock;

 

   

make certain distributions, investments and other restricted payments;

 

   

create certain liens;

 

   

transfer or sell assets;

 

   

enter into certain transactions with affiliates;

 

 

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enter into agreements that restrict dividends from subsidiaries;

 

   

engage in certain business activities in the case of UCDP Finance; and

 

   

incur, in the case of UCDP Finance, indebtedness senior to the Senior Subordinated Notes but junior to the Senior Notes (only with respect to the Senior Subordinated Notes).

 

 

The amendment would also remove the indentures’ requirement that (1) each of the Issuers’ future wholly owned domestic restricted subsidiaries that guarantees certain other indebtedness of the Issuers guarantee the Notes, (2) the Issuers offer to purchase the Notes upon a change of control and (3) the Issuers continue to file reports with the SEC.

 

 

See “Description of the Consent Solicitation and the Offer to Guarantee.”

 

Use of Proceeds

NBCUniversal will not receive any cash proceeds upon the completion of the consent solicitation.

 

Risk Factors

Consenting to the proposed amendment involves risk. See “Risk Factors” for more information about risks relating to the businesses and industries of NBCUniversal and UCDP and risks relating to the Notes.

 

 

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SUMMARY HISTORICAL AND UNAUDITED PRO FORMA

FINANCIAL INFORMATION FOR NBCUNIVERSAL

The table below sets forth our summary historical and pro forma financial information. The summary historical financial information for the years ended December 31, 2010, 2009 and 2008 and as of December 31, 2010 and 2009 has been derived from our annual consolidated financial statements included elsewhere in this prospectus. The summary historical financial information as of December 31, 2008 has been derived from our annual consolidated financial statements not included in this prospectus. The summary historical financial information as of and for the six months ended June 30, 2011 and the six months ended June 30, 2010 has been derived from our interim condensed consolidated financial statements included elsewhere in this prospectus.

The pro forma financial information reflects our historical consolidated statement of income information, as adjusted to give effect to the Joint Venture Transaction as if it had occurred as of January 1, 2010. We have not presented pro forma balance sheet information because the Joint Venture Transaction is already reflected in the most recent historical balance sheet as of June 30, 2011. The pro forma financial information does not give effect to our acquisition of the remaining 50% equity interest in UCDP, the associated borrowings or the consolidation of UCDP following the acquisition.

Due to the change in control of our company from GE to Comcast, we remeasured our assets and liabilities to fair value as of January 28, 2011 to reflect Comcast’s basis in the assets and liabilities of our existing businesses. The assets and liabilities of the Comcast Content Business contributed by Comcast have been reflected at their historical or carryover basis, as Comcast has maintained control of the Comcast Content Business. The preliminary purchase price has been allocated to our assets and liabilities based on current estimates and currently available information and is subject to revision based on final determinations of fair value and the final allocation of purchase price to our assets and liabilities.

The following transactions and other adjustments related to the Joint Venture Transaction are reflected in the pro forma financial information:

 

   

Comcast’s contribution of the Comcast Content Business to us

 

 

   

Our issuing an aggregate of approximately $9.1 billion of NBCUniversal Notes, consisting of $4.0 billion aggregate principal amount of the April Notes and $5.1 billion aggregate principal amount of the October Notes

 

 

   

Our repayment with a portion of the proceeds from the April Notes of approximately $1.7 billion due under our two-year term loan agreement in May 2010

 

 

   

Our cash distribution of approximately $7.4 billion to GE prior to the closing of the Joint Venture Transaction

 

 

   

Elimination of historical transactions between NBCUniversal and the Comcast Content Business

 

 

   

Remeasurement of our assets and liabilities acquired by Comcast to fair value

 

 

   

Adjustments to reflect the tax effect of the conversion of our company from a Delaware corporation into a Delaware limited liability company

 

 

   

Other adjustments necessary to reflect the effects of the Joint Venture Transaction

 

 

 

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The pro forma financial information below is based upon available information and assumptions that we believe are reasonable. The pro forma financial information is for illustrative and informational purposes only and is not intended to represent or be indicative of what our financial condition or results of operations would have been had the transactions described above occurred on the dates indicated. The pro forma financial information also should not be considered representative of our future financial condition or results of operations.

In addition to the pro forma adjustments to our historical consolidated financial statements, various other factors will have an effect on our future financial condition and results of operations. You should read the summary historical and pro forma financial information in conjunction with the information under “Risk Factors,” “Capitalization,” “Unaudited Pro Forma Financial Information” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations of NBCUniversal,” as well as our consolidated financial statements and the related notes, the combined financial statements and the related notes of the Comcast Content Business and the consolidated financial statements and the related notes of UCDP, all of which are included elsewhere in this prospectus.

 

 

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                Historical  
                NBCUniversal         NBC
Universal,
Inc.
                               
    Pro forma     Successor         Predecessor     Combined                          
(in millions)  

Six

Months
Ended
June 30,

2011 (1)

   

Year

Ended
December 31,

2010 (2)

   

For the Period

January 29,
2011 to
June 30,

2011

        

For the Period

January 1,
2011 to
January 28,

2011

   

Six

Months
Ended
June 30,

2011(3)

   

Six

Months
Ended
June 30,

2010

    Year Ended December 31  
                   2010     2009     2008  
    (unaudited)     (unaudited)     (unaudited)          (unaudited)     (unaudited)     (unaudited)                    

Consolidated Statement of Income:

  

                   

Revenue

  $ 9,527      $ 19,315      $ 8,090          $ 1,206      $ 9,296      $ 7,980      $ 16,590      $ 15,085      $ 16,802   

Costs and expenses:

                     

Operating costs and expenses

    8,030        16,023        6,697            1,171        7,868        6,984        14,037        12,870        13,943   

Depreciation

    142        308        118            19        137        134        252        242        242   

Amortization

    393        947        323            8        331        50        97        105        126   
      8,565        17,278        7,138            1,198        8,336        7,168        14,386        13,217        14,311   

Operating income

    962        2,037        952            8        960        812        2,204        1,868        2,491   

Other income (expense):

                     

Equity in income of investees, net(4)

    169        241        147            25        172        104        308        103        200   

Interest expense

    (206     (387     (164         (37     (201     (93     (277     (49     (82

Interest income

    9        17        7            4        11        28        55        55        110   

Other income (expense), net(5)

    (74     (83     (43         (29     (72     (42     (29     211        270   

Income (loss) before income taxes and noncontrolling interests

    860        1,825        899            (29     870        809        2,261        2,188        2,989   

(Provision) benefit for income taxes

    (96     (223     (93         4        (89     (274     (745     (872 )     (1,147

Net income (loss) before noncontrolling interests

    764        1,602        806            (25     781        535        1,516        1,316        1,842   

Net (income) loss attributable to noncontrolling interests

    (93     (165     (86         2        (84     (23     (49     (38     (73

Net income (loss) attributable to NBCUniversal

  $ 671      $ 1,437      $ 720          $ (23   $ 697      $ 512      $ 1,467      $ 1,278      $ 1,769   

Other Financial Information:

                     

Net cash provided by (used in):

                     

Operating activities

      $ 1,020          $ (629   $ 391      $ 565      $ 2,011      $ 2,622      $ 1,905   

Investing activities

      $ (83       $ 315      $ 232      $ (163   $ (381   $ (350   $ (748

Financing activities

      $ (324       $ (300   $ (624   $ (376   $ (743   $ (2,394   $ (1,181

Cash received from investees(6)

      $ 163          $      $ 163      $ 88      $ 215      $ 182      $ 218   

Capital expenditures

                  $ 165          $ 16      $ 181      $ 161      $ 352      $ 339      $ 363   

Segment Results:

                     

Segment revenue

                     

Cable Networks

      $ 3,573          $ 389      $ 3,962      $ 2,354      $ 4,954      $ 4,587      $ 4,350   

Broadcast Television

        2,583            464        3,047        3,508        6,888        6,166        7,207   

Filmed Entertainment

        1,876            353        2,229        2,097        4,576        4,220        5,115   

Theme Parks

                    215            27        242        202        522        432        461   

Total segment revenue(7)

                  $ 8,247          $ 1,233      $ 9,480      $ 8,161      $ 16,940      $ 15,405      $ 17,133   

Segment operating income (loss) before depreciation and amortization

                     

Cable Networks

      $ 1,445          $ 143      $ 1,588      $ 1,141      $ 2,347      $ 2,135      $ 2,092   

Broadcast Television

        225            (16     209        (6     124        445        611   

Filmed Entertainment

        (116         1        (115     13        290        39        648   

Theme Parks

                    152            11        163        57        291        173        208   

Total segment operating income before depreciation and amortization(8)

                  $ 1,706          $ 139      $ 1,845      $ 1,205      $ 3,052      $ 2,792      $ 3,559   

 

 

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          Historical  
          NBCUniversal                        NBC Universal, Inc.  
          Successor                        Predecessor  
           As of
June 30,

2011
                        As of December 31  
(in millions)                                2010      2009      2008  
          (unaudited)                                          

Balance Sheet Information:

                          

Cash and cash equivalents

      $ 1,121                   $ 1,084       $ 197       $ 319   

Total assets

      $ 47,229                   $ 42,424       $ 34,139       $ 34,519   

Total debt

      $ 9,150                   $ 9,906       $ 1,685       $ 1,695   

Total equity

        $ 29,082                         $ 23,817       $ 24,105       $ 24,714   

 

(1)

In addition to the incremental effect of the contribution of the Comcast Content Business, the unaudited pro forma statement of income for the period ended June 30, 2011 reflects the impact of, among other things, the following significant transactions, as discussed in detail in the pro forma financial statements and notes thereto: (a) a net decrease of $3 million of operating costs and expenses primarily related to the adjustment to the fair value of our film and television costs; (b) the estimated incremental amortization of $51 million related to the increase to the fair value of our incremental finite-lived intangible assets; (c) a decrease of $6 million in equity in net income of investees due to the amortization of basis differences on a straight line basis over the estimated useful lives of the underlying assets of investees; and (d) the elimination of a historical U.S. income tax benefit of $7 million as a result of our conversion to a Delaware limited liability company and GE’s indemnity with respect to our income tax obligations attributable to periods prior to the closing of the Joint Venture Transaction. See “Unaudited Pro Forma Financial Information” for additional information on these and other pro forma adjustments to our historical financial statements.

 

(2)

In addition to the incremental effect of the contribution of the Comcast Content Business, the unaudited pro forma statement of income for the year ended December 31, 2010 reflects the impact of, among other things, the following significant transactions, as discussed in detail in the pro forma financial statements and notes thereto: (a) a net decrease of $10 million of operating costs and expenses, of which $42 million of the net decrease is related to the adjustment of the fair value of our film and television costs partially offset by incremental benefit expenses and the reversal of the amortization of deferred gain on sale and lease-back transactions; (b) the estimated incremental amortization of $614 million related to the increase to the fair value of our incremental finite-lived intangible assets; (c) a net increase of $208 million in interest expense associated with the Notes; (d) a decrease of $75 million in equity in net income of investees due to the amortization of basis differences on a straight line basis over the estimated useful lives of the underlying assets of investees; and (e) the elimination of a historical U.S. income tax expense of $520 million as a result of our conversion to a Delaware limited liability company and GE’s indemnity with respect to our income tax obligations attributable to periods prior to the closing of the Joint Venture Transaction. See “Unaudited Pro Forma Financial Information” for additional information on these and other pro forma adjustments to our historical financial statements.

 

(3)

In addition to presenting our operations as reported in our interim condensed consolidated financial statements in accordance with generally accepted accounting principles in the United States (“GAAP”), the table above presents the combined results for the six months ended June 30, 2011, which is a non-GAAP presentation. We believe that presenting these combined results is useful in illustrating the presentation of our pro forma condensed combined statement of income for the six months ended June 30, 2011. The combined operating results may not reflect the actual results we would have achieved had the Joint Venture Transaction closed prior to January 28, 2011 and may not be predictive of future results of operations.

 

(4)

We use the equity method to account for investments in which we have the ability to exercise significant influence over the investee’s operating and financial policies. These equity method investees are referred to within our financial statements as “investees.”

 

(5)

Other income (expense), net includes, among other things, (a) gains or losses on the sale of equity method investments; and (b) other-than-temporary impairments of our investments.

 

(6)

Cash received from investees represents cash distributions received from these investees, which are recorded as a reduction of the carrying value of the investments.

 

 

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(7)

The following chart reflects the reconciliation between total segment revenue and total revenue:

 

    NBCUniversal         NBC
Universal, Inc.
                   
    Successor         Predecessor     Combined              
    For the Period
January 29,
2011 to

June 30,
2011
         For the Period
January 1,
2011 to

January 28,
2011
    Six
Months
Ended

June 30,
2011
    Six
Months
Ended

June 30,
2010
       
              Year Ended December 31  
(in millions)             2010     2009     2008  

Total segment revenue

  $ 8,247          $ 1,233      $ 9,480      $ 8,161      $ 16,940      $ 15,405      $ 17,133   

Headquarters and Other

    25            5        30        30        79        78        77   

Eliminations

    (182         (32     (214     (211     (429     (398     (408

Total revenue

  $ 8,090          $ 1,206      $ 9,296      $ 7,980      $ 16,590      $ 15,085      $ 16,802   

 

(8)

The following chart reflects the reconciliation between total segment operating income before depreciation and amortization and total operating income:

 

    NBCUniversal         NBC
Universal, Inc.
                   
    Successor         Predecessor     Combined              
   

For the Period
January 29,
2011 to

June 30,

2011

        

For the Period
January 1,
2011 to

January 28,

2011

   

Six Months
Ended

June 30,

2011

   

Six Months
Ended

June 30,

2010

       
            Year Ended
December 31
 
(in millions)                2010     2009     2008  
                                                             

Total segment operating income before depreciation and amortization

  $ 1,706          $ 139      $ 1,845      $ 1,205      $ 3,052      $ 2,792      $ 3,559   

Headquarters and Other

    (249         (99     (348     (222     (413     (568     (673

Eliminations

    (64         (5     (69     13        (86     (9     (27

Total operating income (loss) before depreciation and amortization

    1,393            35        1,428        996        2,553        2,215        2,859   

Depreciation

    (118         (19     (137     (134     (252     (242     (242

Amortization

    (323         (8     (331     (50     (97     (105     (126

Total operating income

  $ 952          $ 8      $ 960      $ 812      $ 2,204      $ 1,868      $ 2,491   

 

 

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SUMMARY HISTORICAL FINANCIAL INFORMATION FOR UCDP

The following table sets forth certain of UCDP’s historical financial data. The summary historical financial data for the fiscal years ended December 31, 2010, 2009 and 2008, and as of December 31, 2010 and 2009, have been derived from UCDP’s audited consolidated financial statements and the related notes included elsewhere in this prospectus. The summary historical financial data as of December 31, 2008 has been derived from UCDP’s annual consolidated financial statements not included in this prospectus. The summary historical financial data for the six months ended June 30, 2011 and June 27, 2010, and as of June 30, 2011, have been derived from UCDP’s unaudited condensed consolidated financial statements and the related notes included elsewhere in this prospectus, and include all adjustments that management considers necessary for a fair presentation of UCDP’s financial position and results of operations as of the date and for the periods indicated. Results for the six months ended June 30, 2011 and June 27, 2010 are not necessarily indicative of the results that may be expected for the entire year.

The information set forth below should be read in conjunction with “Selected Historical Financial Information for UCDP,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations of UCDP” and “Risk Factors,” together with UCDP’s consolidated financial statements and the related notes included elsewhere in this prospectus.

 

    Historical  
    Six Months Ended     Year Ended December 31,  
(in millions, except other operational data)   June 30,
2011
    June 27,
2010
    2010     2009     2008  

Statement of operations data:

         

Operating revenues:

         

Theme park tickets

  $ 364      $ 216      $ 587      $ 419      $ 456   

Theme park food and beverage

    78        46        128        95        112   

Theme park merchandise

    93        44        141        83        100   

Other theme park related(1)

    71        39        109        87        104   

Other(2)

    95        61        164        119        151   

Total operating revenues

    701        406        1,129        803        923   

Costs and operating expenses:

         

Theme park operations

    112        91        207        177        185   

Theme park selling, general and administrative

    103        101        183        124        153   

Theme park cost of products sold

    81        48        133        93        114   

Special fee payable to UCSP and consultant fee

    47        27        75        52        58   

Depreciation and amortization

    66        56        123        106        111   

Other

    91        58        141        102        122   

Total costs and operating expenses

    500        381        862        654        743   

Operating income

    201        25        267        149        180   

Total other expense, net

    57        59        119        125        102   

Net income (loss)

    144        (34     148        24        78   

Less: net income attributable to the noncontrolling interest in UCRP

    2        1        1        2        2   

Net income (loss) attributable to the Partners

  $ 142      $ (35   $ 147      $ 22      $ 76   

 

 

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    Historical  
    Six Months Ended     Year Ended December 31,  
(in millions, except other operational data)   June 30,
2011
    June 27,
2010
    2010     2009     2008  

Other data:

         

EBITDA(3)

  $ 267      $ 81      $ 391      $ 260      $ 292   

Covenant EBITDA(3)

    270        80        394        260        298   

Net cash and cash equivalents provided by operating activities

    214        84        350        66        191   

Net cash and cash equivalents used in investing activities

    23        71        110        134        135   

Net cash and cash equivalents (used in) provided by financing activities

    (174     (15     (25     25        (97

Capital expenditures

    23        71        110        143        137   

Ratio of earnings to fixed charges(4)

    3.4x        n/a        2.2x        1.1x        1.7x   

Other operational data:

         

Turnstile admissions in thousands(5)

    6,686        4,528        11,874        10,157        11,357   

Paid admissions in thousands(6)

    6,392        4,214        11,180        9,297        10,564   

Theme park ticket revenue per paid admission

  $ 56.89      $ 51.17      $ 52.48      $ 45.07      $ 43.16   

Theme park food, beverage and merchandise revenue per turnstile admission

  $ 25.57      $ 19.83      $ 22.58      $ 17.46      $ 18.66   

Other theme park related revenue per turnstile admission

  $ 10.67      $ 8.71      $ 9.16      $ 8.53      $ 9.19   

 

     Historical  
     As of
June 30,
2011
     As of December 31,  
(in millions)       2010      2009      2008  

Balance sheet data:

           

Total cash and equivalents

   $ 276       $ 259       $ 45       $ 88   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total assets

     2,142         2,156         1,970         1,975   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total long-term indebtedness (including current portion)

     1,407         1,495         1,505         1,008   
  

 

 

    

 

 

    

 

 

    

 

 

 

Other long-term obligations(7)

     27         27         27         120   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total equity

     466         401         255         642   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

(1)

Consists primarily of Universal ExpressSM Plus (“UEP”) sales, aged ticket sales, theme park corporate special events and the parking facility. UCDP hosts special events for corporate guests whereby a portion of the theme park is rented for corporate functions. UEP is a ticket that allows guests to experience reduced wait times at certain attractions and shows.

 

(2) Consists primarily of CityWalk, Universal Parks & Resorts Vacations and hotel rent received from the on-site hotels.

 

(3) UCDP has included Covenant EBITDA because it is used by some investors as a measure of its ability to service debt, while it has also included EBITDA, as it is a measure of UCDP’s operating performance under its annual incentive plan. While EBITDA represents earnings before interest, taxes and depreciation and amortization, Covenant EBITDA includes certain other adjustments permitted by the definition of EBITDA in its senior secured credit agreement, which was refinanced and terminated on July 1, 2011, and the indentures governing the Notes. Some of these adjustments include exclusion of gains or losses from the sale of assets held for sale, exclusion of impairment charges on long lived assets and adjustments related to income and cash flows derived from investments in unconsolidated entities. Covenant EBITDA and EBITDA are not prepared in accordance with GAAP and should not be considered alternatives for Net Income, Net Cash And Cash Equivalents Provided By Operating Activities and other consolidated income or cash flow statement data prepared in accordance with GAAP or as measures of profitability or liquidity. Covenant EBITDA and EBITDA, because they are before debt service, capital expenditures and working capital needs, do not represent cash that is available for other purposes at UCDP’s discretion. UCDP’s presentation of Covenant EBITDA and EBITDA may not be comparable to similarly titled measures reported by other companies. For these reasons, it has prepared a two step reconciliation between its GAAP financial measures, EBITDA and Covenant EBITDA. Covenant EBITDA was the primary basis in UCDP’s senior secured credit agreement to determine its quarterly compliance with its secured leverage ratio and the interest coverage ratio, which was computed based on the prior twelve months. See below for related reconciliations.

 

(4)

The Ratio Of Earnings To Fixed Charges is computed by dividing earnings by fixed charges. For purposes of calculating the Ratio Of Earnings To Fixed Charges, earnings represents Net Income (Loss) plus fixed charges. Fixed charges include Interest Expense (including Amortization Of Deferred Finance Costs) and the portion of operating rental expense that management believes represents the interest component of rent expense. During the six months ended June 27, 2010, UCDP’s earnings were insufficient to cover fixed charges by approximately $37 million.

 

(5)

Turnstile Admissions represent total admissions to UCDP’s theme parks, which includes paid admissions and complimentary tickets.

 

 

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(6)

Paid Admissions represent the total paid admissions to UCDP’s theme parks.

 

(7)

Other Long-term Obligations include Capital Lease And Financing Obligations, Net Of Current Portion and Deferred Special Fees Payable To Affiliates.

The following is a reconciliation of Net Cash And Cash Equivalents Provided By Operating Activities to EBITDA and Covenant EBITDA for each of the periods presented above:

 

     Historical  
     Six Months Ended     Year Ended
December 31,
 
(in millions)    June 30,
2011
    June 27,
2010
    2010     2009     2008  

Net cash and cash equivalents provided by operating activities

   $ 214      $ 84      $ 350      $ 66      $ 191   

Adjustments:

          

Interest expense

     59        56        118        108        103   

Interest income

     —          —          —          —          (3

Amortization of deferred finance costs

     (2     (2     (4     (9     (7

Interest on financing obligations

     (1     (1     (2     (2     (2

Changes in deferred special fee payable and related interest payable to affiliates

     —          —          —          92        (4

Gain on sale of assets held for sale

     —          —          —          5        —     

Distributions from investments in unconsolidated entities

     (1     (2     (3     (3     (4

Income from investments in unconsolidated entities

     2        1        2        2        3   

Loss from impairment of investments in unconsolidated entities

     —          —          —          —          —     

Accretion of bond discount

     (2     (2     (4     (1     (1

Income attributable to the noncontrolling interest in UCRP

     (2     (1     (2     (2     (2

Net change in working capital accounts (8)

     —          (52     (64     4        18   

EBITDA

     267        81        391        260        292   

Adjustments to arrive at Covenant EBITDA:

          

Income attributable to the noncontrolling interest in UCRP

     2        1        2        2        2   

Income from investments in unconsolidated entities

     (2     (1     (2     (2     (3

Distributions from investments in unconsolidated entities

     1        2        3        3        4   

Gain on sale of assets held for sale

     —          —          —          (5     —     

Interest income

     —          —          —          —          3   

Other

     2        (3     —          2        —     

Covenant EBITDA

   $ 270      $ 80      $ 394      $ 260      $ 298   

Note: Reconciliation for the year ended December 31, 2008 is shown for illustrative purposes only as results for that period were not subject to the same calculations of Covenant EBITDA as contained in the indentures governing the Notes.

 

 

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(8)

Net change in working capital accounts represents changes in operating assets and liabilities, which includes Accounts Receivable (Net), Notes Receivable, Receivables From Related Parties, Inventories, Prepaid Expenses And Other Assets, Other Long-term Assets, Accounts Payable And Accrued Liabilities, Unearned Revenue, Payables To Related Parties, and Other Long-term Liabilities.

The following is a reconciliation of Net Income Attributable To The Partners to EBITDA and Covenant EBITDA for each of the periods presented above:

 

    Historical  
    Six Months Ended     Year Ended
December 31,
 
(in millions)  

June 30,
2011

   

June 27,
2010

    2010     2009     2008  

Net income (loss) attributable to the Partners

  $ 142      $ (35   $ 147      $ 22      $ 76   

Adjustments:

         

Interest expense

    59        57        118        108        103   

Expenses associated with debt refinancing

    —          3        3        25        —     

Loss on extinguishment of debt

   
—  
  
    —          —          4        —     

Depreciation and amortization

    66        56        123        106        111   

Net change in fair value of interest rate swaps and amortization of accumulated other comprehensive loss

    —          —          —          (5     5   

Interest income

    —          —          —          —          (3

EBITDA (as defined)

    267        81        391        260        292   

Adjustments to arrive at Covenant EBITDA:

         

Income attributable to the noncontrolling interest in UCRP

    2        1        2        2        2   

Income from investments in unconsolidated entities

    (2     (1     (2     (2     (3

Distributions from investments in unconsolidated entities

    1        2        3        3        4   

Gain on sale of assets held for sale

    —          —          —          (5     —     

Interest income

    —          —          —          —          3   

Other

    2        (3     —          2        —     

Covenant EBITDA

  $ 270      $ 80      $ 394      $ 260      $ 298   

Note: Reconciliation for the year ended December 31, 2008 is shown for illustrative purposes only, as results for that period were not subject to the same calculations of Covenant EBITDA as contained in the indentures governing the Notes.

 

 

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RISK FACTORS

In considering whether to tender your consent, you should carefully consider all the information set forth in this prospectus. In particular, you should carefully consider the risk factors described below, as well as all of the other information included in this prospectus, including the consolidated financial statements of us and UCDP and the related notes, the combined financial statements and the related notes of the Comcast Content Business, the pro forma financial information and the other financial information. You should note that risks relating to the NBCUniversal Notes may also apply to the NBCUniversal guarantees if the amendment is approved.

Risks Related to the Consent Solicitation

The new covenants that will apply to the Notes once the amendment of the covenants is effective impose fewer restrictions on the Issuers’ conduct than the covenants currently in the Notes.

The new covenants would generally impose fewer restrictions on the Issuers’ conduct than the covenants currently in the Notes. The amendment of the covenants may allow the Issuers to take actions that would otherwise have been restricted or conditioned, including the incurrence of indebtedness or transactions with affiliates, and with which you may not agree. See “Description of the NBCUniversal Guarantees and the New Covenants” and “Description of the Notes” for more information about the differences between what actions are currently restricted by the covenants currently applicable to the Notes and what actions would be restricted by the covenants as amended.

Risks Related to NBCUniversal’s Businesses and Industries

Our success depends on consumer acceptance of our content, which is difficult to predict, and our results of operations may be adversely affected if our content fails to achieve sufficient consumer acceptance or our costs to acquire content increase.

Most of our businesses create media and entertainment content, the success of which depends substantially on consumer tastes and preferences that change in often unpredictable ways. The success of these businesses depends on our ability to consistently create, acquire, market and distribute programming, filmed entertainment, theme park attractions and other content that meet the changing preferences of the broad domestic and international consumer market. We historically have invested substantial amounts in our content, including in the production of original content, before learning the extent to which it would earn consumer acceptance. We intend to continue to invest significantly in this area. In addition, we obtain a significant portion of our content from third parties, such as movie studios, television production companies, sports organizations and other suppliers. Competition for popular content is intense, and we may have to increase the price we are willing to pay or be outbid by our competitors for popular content. Renewing our contract rights or acquiring additional rights may result in significantly increased costs. If our content does not achieve sufficient consumer acceptance, or if we cannot obtain or retain rights to popular content on acceptable terms, or at all, our results of operations may be adversely affected. In addition, poor theatrical performance of a film may require us to reduce our estimate of revenue from that film, which would accelerate the amortization of capitalized film costs and could result in a significant write-off, and may adversely affect multiple fiscal periods.

Our businesses operate in highly competitive industries and increased competitive pressures may reduce our revenue or increase our costs.

We face substantial and increasing competition in each of our businesses from alternative providers of similar types of content, as well as from other forms of entertainment and recreational activities. We compete to obtain talent, programming and other resources required in operating our businesses. For example, our cable and

 

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broadcast networks and owned local television stations compete for viewers with other cable networks, broadcast networks and television stations, as well as with other forms of content available in the home, such as video games, standard-definition digital video discs and high-definition Blu-ray discs (together, “DVDs”) and websites, and they also compete for the sale of advertising time with other cable networks, broadcast networks and television stations, as well as with all other advertising platforms, such as radio stations, print media and websites. In addition, our cable networks compete with other cable networks and programming providers for carriage of their programming by multichannel video providers. Our filmed entertainment business competes with other film studios and independent producers for sources of financing for the production of its films, for the exhibition of its films in theaters and for shelf space in retail stores for its DVDs and also competes for consumers with other film producers and distributors and all other forms of entertainment inside and outside the home.

In addition, our ability to compete effectively is in part dependent upon our perceived image and reputation among our various constituencies, including our customers, consumers, advertisers, investors and governmental authorities. There can be no assurance that we will be able to compete effectively in the future against existing or new competitors or that competition will not have a material adverse effect on our business, financial condition or results of operations.

Changes in technology, distribution platforms and consumer behavior may adversely affect our ability to remain competitive and may adversely affect our business, results of operations or financial condition.

Technology in the media and entertainment industry, in general, and the television industry, in particular, continues to evolve rapidly and is affecting consumer behavior in ways that may have a negative impact on revenue for our programming content. For example, the increased availability of digital video recorders (“DVRs”) and video programming on the Internet, as well as increased access to various media through mobile devices, have the potential to reduce the viewing of our content through traditional distribution outlets. Some of these new technologies also give consumers greater flexibility to watch programming on a time-delayed or on-demand basis or to fast-forward or skip advertisements within our programming, which may adversely impact the advertising revenue we receive. Delayed viewing and advertising skipping have the potential to become more common as the penetration of DVRs increases and content becomes increasingly available via Internet sources. Changes in technology, distribution platforms and consumer behavior could have an adverse effect on our business, results of operations or financial condition.

A decline in advertising expenditures or changes in advertising markets could negatively impact our results of operations.

Our programming businesses derive substantial revenue from the sale of advertising on a variety of platforms, and a decline in advertising expenditures could negatively impact our results of operations. Declines can be caused by the economic prospects of specific advertisers or industries, by increased competition for the leisure time of audiences and audience fragmentation, by the growing use of new technologies, or by the economy in general, causing advertisers to alter their spending priorities based on these or other factors. In addition, advertisers’ willingness to purchase advertising may be adversely affected by lower audience ratings for our television programming. Changes in the advertising industry also could adversely affect the advertising revenue of our cable and broadcast networks. For example, we rely on Nielsen ratings and Nielsen’s audience measurement techniques to measure the popularity of our cable and broadcast programming content. A change in its measurement techniques or the introduction of new techniques could negatively impact the advertising revenue we receive. Further, natural disasters, wars, acts of terrorism or other significant news events could lead to a reduction in advertising expenditures as a result of uninterrupted news coverage and general economic uncertainty.

 

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Sales of DVDs have been declining, which may adversely affect our results of operations and growth prospects.

Several factors, including weak economic conditions, the maturation of the standard-definition DVD format, piracy and intense competition for consumer discretionary spending and leisure time, are contributing to an industry-wide decline in DVD sales both in the United States and internationally, which has had an adverse effect on our results of operations. DVD sales have also been adversely affected by an increasing shift by consumers toward subscription rental, discount rental kiosks and digital forms of entertainment, such as video on demand services and electronic sell-through, which generate less revenue per transaction than DVD sales. Media and entertainment industries face a challenge in managing the transition from physical to electronic formats in a manner that generates sufficient revenue to maintain historic profits and growth. There can be no assurance that DVD wholesale prices and sales volumes can be maintained at current levels.

The loss of our programming distribution or network affiliation agreements, or the renewal of these agreements on less favorable terms, could materially adversely affect our business, financial condition and results of operations.

Our cable networks depend on the maintenance of distribution agreements with multichannel video providers. Our broadcast networks depend on the maintenance of network affiliation agreements with third-party local television stations in the markets where we do not own our local television stations. In addition, every three years, each of our owned local television stations must elect, with respect to its retransmission by multichannel video providers within its designated market area, either “must-carry” status, pursuant to which the distributor’s carriage of the station is mandatory and does not generate any compensation for the local station, or “retransmission consent,” pursuant to which the station gives up its right to mandatory carriage and instead seeks to negotiate the terms and conditions of carriage with the distributor, including the amount of compensation (if any) paid to the station by such distributor. In the course of renewing distribution agreements with multichannel video providers, we may enter into retransmission consent agreements on behalf of our owned local television stations. All of our NBC affiliated owned local television stations have elected the retransmission consent option, while our owned Telemundo affiliated stations have elected must-carry or retransmission consent depending on circumstances. There can be no assurance that any of the foregoing agreements will be renewed in the future on acceptable terms, or at all. The loss of any of these agreements, or the renewal of these agreements on less favorable terms, could reduce the reach of our television programming and its attractiveness to advertisers, which in turn could adversely affect our business, financial condition and results of operations.

The loss of key management personnel or popular on-air and creative talent could have a negative impact on our business.

We rely on key management personnel in the operation of our business, the loss of one or more of whom could have a negative impact on our business. In addition, our business depends on the continued efforts, abilities and expertise of our on-air and creative talent. If we fail to attract or retain our on-air or creative talent, if the costs to attract or retain such talent increase materially, if we need to make significant termination payments, or if these individuals lose their current appeal, our business could be adversely affected.

Our business depends on using and protecting certain intellectual property rights and on not infringing the intellectual property rights of others.

Our intellectual property, including our copyrights, trademarks, service marks, patents, trade secrets, proprietary content and all of our other proprietary rights, constitutes a significant part of the value of our company, and the success of our business is highly dependent on protection of our intellectual property rights in the content we

 

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create or acquire against third-party misappropriation, reproduction or infringement. The unauthorized reproduction, distribution or display of copyrighted material negatively affects our ability to generate revenue from the legitimate sale of our content, as well as from the sale of advertising on our content, and increases our costs due to our active enforcement of protecting our intellectual property rights. Piracy and other unauthorized uses of content are made easier, and the enforcement of intellectual property rights more challenging, by technological advances allowing the conversion of programming, films and other content into digital formats, which facilitates the creation, transmission and sharing of high-quality unauthorized copies. In particular, piracy of programming and films through unauthorized distribution on DVDs, peer-to-peer computer networks and other platforms continues to present challenges for our cable and broadcast networks and filmed entertainment businesses. While piracy is a challenge in the United States, it is particularly prevalent in many parts of the world that lack developed copyright laws, effective enforcement of copyright laws and technical protective measures like those in effect in the United States. Any repeal or weakening of laws or enforcement in the United States or internationally that are intended to combat piracy and protect intellectual property rights, or a failure of existing laws to adapt to new technologies, could make it more difficult for us to adequately protect our intellectual property rights, negatively impacting their value or increasing the costs of enforcing our rights. See “Legislation and Regulation of NBCUniversal—Other Areas of Regulation—Intellectual Property—Piracy.”

In addition, we rely on our patents, copyrights, trademarks and trade secrets, as well as licenses and other agreements with our vendors and other third parties, to use various technologies, conduct our operations and sell our products and services. Legal challenges to our intellectual property rights and claims of intellectual property infringement by third parties could require that we enter into royalty or licensing agreements on unfavorable terms, incur substantial monetary liability or be enjoined preliminarily or permanently from further use of the intellectual property in question or from the continuation of our business as currently conducted, which could require us to change our business practices or limit our ability to compete effectively or could have an adverse effect on our results of operations. Even if we believe any such challenges or claims are without merit, they can be time-consuming and costly to defend and divert management’s attention and resources away from our business. Moreover, if we are unable to obtain or continue to obtain licenses from our vendors and other third parties on reasonable terms, our business and results of operations could be adversely affected.

We are subject to regulation by federal, state, local and foreign authorities, which may impose additional costs and restrictions on our businesses.

The television broadcasting and content distribution industries in the United States are highly regulated by federal laws and regulations. Our Broadcast Television segment may be adversely affected by recent proposals to reallocate spectrum for broadband capability that is currently available for television broadcasters. Our businesses also are subject to various other laws and regulations at the international, federal, state and local levels, including laws and regulations relating to environmental protection, which have become more stringent over time, and the safety of consumer products and theme park operations.

Complying with the laws and regulations applicable to our businesses may impose additional costs and restrictions on our businesses, and our failure to comply with these laws and regulations could result in administrative enforcement actions, fines and civil and criminal liability. In addition, Congress is constantly considering new legislative requirements, as are various regulatory agencies such as the Federal Communications Commission (the “FCC”), which could potentially affect our businesses. Any future legislative, judicial or administrative actions may increase our costs or impose additional restrictions on our businesses, which could materially affect our business, financial condition and results of operations. For a more detailed discussion of the risks associated with our regulation of all of our businesses, see “Legislation and Regulation of NBCUniversal.”

 

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The failure or destruction of key properties, such as our production studios, the satellites and facilities that we depend on to distribute our television programming and our theme parks, or our information systems and other technology that support our businesses, could adversely affect our business, financial condition and results of operations.

Our businesses depend on the successful operation of key properties, information systems and other technology. For example, we rely on a limited number of production studios to produce our original content, and we generate revenue from the rental of these facilities to third parties. We use satellite systems and other distribution facilities to transmit our television programming to multichannel video providers worldwide as well as to transmit programming between our locations. We also operate a limited number of theme parks. In addition, our businesses generally rely on information systems and other technology to conduct their operations. Material damage to, or the temporary or permanent loss of, any of our production studios, satellite systems, distribution facilities, theme parks or other key properties or our information systems and other technology that support our businesses, due to natural disasters, severe weather events, fires, acts of terrorism, power loss or otherwise (including through computer viruses, break-ins and similar disruptions from unauthorized tampering with our systems), could impose significant additional costs on us and could materially adversely affect our business, financial condition and results of operations. In addition, the amount and scope of any insurance we maintain against losses resulting from these events may not be sufficient to cover our losses or otherwise adequately compensate us for any disruptions to our business that may result.

Labor disputes, whether involving our own employees or sports leagues, may disrupt our operations and adversely affect our results of operations.

Many of our employees, including writers, directors, actors, technical and production personnel and others, as well as some of our on-air and creative talent, are covered by collective bargaining agreements or works councils. If we are unable to reach agreement with a labor union before the expiration of a collective bargaining agreement, our employees who were covered by that agreement may have a right to strike or take other actions that could adversely affect us. Moreover, many of our collective bargaining agreements are industry-wide agreements, and we may lack practical control over the negotiations and terms of the agreements. A labor dispute involving our employees may result in work stoppages or disrupt our operations and reduce our revenue, and resolution of disputes may increase our costs. For example, a Writers Guild of America strike in 2007-2008 disrupted our ability to produce scripted television programming, causing viewership levels and ratings to decline, which resulted in lower U.S. advertising revenue for the NBC Network. There can be no assurance that we will renew our collective bargaining agreements as they expire or that we can renew them on favorable terms or without any work stoppages.

In addition, our cable programming networks and our broadcast networks have programming rights agreements of varying scope and duration with various sports teams, leagues and associations to broadcast and produce sporting events, including certain National Football League (“NFL”), National Hockey League (“NHL”), National Basketball Association (“NBA”) and Major League Baseball (“MLB”) games. Labor disputes in sports leagues or associations could have an adverse impact on our business, financial condition and results of operations. In addition, any labor disputes that occur in any sports league or association for which we have the rights to broadcast live games or events may preclude us from airing or otherwise distributing scheduled games or events, which could have a negative effect on our business, financial condition and results of operations.

 

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We could face significant withdrawal liability if we withdraw from participation in one or more multiemployer pension plans in which we participate.

We participate in various multiemployer pension plans covering some of our employees who are represented by labor unions. We make periodic contributions to these plans pursuant to the terms of applicable collective bargaining agreements and laws, but we do not sponsor or administer these plans. If we cease to be obligated to make contributions or otherwise withdraw from participation in one of these plans, applicable law requires us to fund our allocable share of the unfunded vested benefits, if any, under the plan, and we would have to reflect that as an expense in our consolidated statement of income and as a liability on our consolidated balance sheet. Our withdrawal liability for any multiemployer plan would depend on the extent of the plan’s funding of vested benefits. In the ordinary course of our renegotiation of collective bargaining agreements with labor unions that maintain these plans, we may decide to discontinue participation in a plan and, in that event, we could face a withdrawal liability. Moreover, we could incur costs, in addition to withdrawal liability, for retirement arrangements for employees to replace their participation in the multiemployer pension plan. Further, applicable laws could result in certain multiemployer pension plans which are substantially underfunded to seek increases from contributing employers in the rates of contributions previously agreed in the applicable collective bargaining agreements. In addition, we could be liable for all or a portion of required contributions by defaulting employers. At least some of the multiemployer pension plans in which we participate are reported to have significant underfunded liabilities.

In addition, multiemployer pension plans in which we participate may, and some regularly do, audit our contributions to such plans in prior years for compliance with the terms of the applicable collective bargaining agreement. At any time, we have a number of pending audits involving different multiemployer pension plans and covering multiple years. These audits often, but not always, result in corrections to the amounts of contributions we previously made and, in some cases, we need to make additional contributions.

We face risks relating to doing business internationally that could adversely affect our business, financial condition and results of operations.

We have significant operations in a number of countries outside the United States and certain of our operations are conducted in foreign currencies. There are risks inherent in doing business internationally, including economic volatility and the global economic slowdown; currency exchange rate fluctuations and inflationary pressures; the requirements of local laws and customs relating to the publication and distribution of content and the display and sale of advertising; import or export restrictions and changes in trade regulations; difficulties in developing, staffing and managing foreign operations; issues related to occupational safety and adherence to diverse local labor laws and regulations; potential adverse tax developments; political or social unrest; corruption; and risks related to government regulation. If these risks come to pass, our business, financial condition and results of operations may be adversely affected.

Weak economic conditions may have a negative impact on our results of operations and financial condition.

Weak economic conditions have persisted in the United States and other regions of the world in which we do business, which has adversely affected and may continue to adversely affect demand for some of our products and services. This weakness in economic conditions has reduced and could continue to reduce the performance of our theatrical and home entertainment releases and attendance and spending for our theme parks business. A further decline in economic conditions could also reduce prices that multichannel video providers pay for our television programming. In addition, U.S. and global credit markets have experienced significant disruption, making it

 

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difficult for many businesses to obtain financing on acceptable terms. We are exposed to risks associated with disruptions in the financial markets, which can make it more difficult and more expensive to obtain financing for our operations or investments.

Disruptions in the financial markets can adversely affect our lenders, insurers, customers and counterparties, including content distributors, vendors, retailers, theater operators and film co-financing partners, and impair their ability to satisfy their obligations to us, which could result in fewer outlets for retail sales, business disruption, decreased revenue or bad debt write-offs. For example, we historically have financed a substantial portion of our films in participation with other partners. The inability of our film financing partners to obtain financing on acceptable terms, or at all, could impair their ability to perform under their agreements with us and lead to various adverse effects on us, including greater risk with respect to the performance of our films, the need for us to incur higher financing costs for alternative financing (if available) or the need to limit or delay our film production. In addition, state and local governments in the United States and foreign governments provide financial and other benefits as an incentive to produce our content in their locations. Economic disruption or changes in policy could reduce the availability of such government financial or other benefits.

Acquisitions and other strategic transactions also present various risks, and we may not realize the financial and strategic goals that were contemplated at the time of any transaction.

From time to time, we make acquisitions and investments and enter into other strategic transactions. In connection with acquisitions and other strategic transactions, we may incur unanticipated expenses and contingent liabilities, fail to realize anticipated benefits, have difficulty integrating the acquired businesses, disrupt relationships with current and new employees, customers and vendors, incur significant indebtedness, or have to delay or not proceed with announced transactions. The occurrence of any of the foregoing events could have a material adverse effect on our business, financial condition and results of operations.

In particular, the Joint Venture Transaction involves the integration of the Comcast Content Business with our legacy businesses. We have devoted, and will continue to devote, significant management attention and resources to continue integrating these businesses. Challenges involved in the integration include successfully integrating each company’s operations, technologies and content, and combining corporate cultures, maintaining employee morale and retaining key employees. There can be no assurance that we can successfully integrate these businesses.

Risks Related to the Joint Venture Transaction

As a result of the Joint Venture Transaction, our businesses are subject to the conditions set forth in the FCC Order and the DOJ Consent Decree, and there can be no assurance that these conditions will not have an adverse effect on our business and results of operations.

As a result of the Joint Venture Transaction, our businesses are subject to compliance with the terms of the FCC Order approving the Joint Venture Transaction (the “FCC Order”) and a consent decree entered into with the Department of Justice (the “DOJ Consent Decree”). The FCC Order and the DOJ Consent Decree incorporated numerous voluntary commitments made by the parties and imposed numerous conditions on our businesses relating to the treatment of competitors and other matters. Among other things, (i) we are required to make certain of our cable, broadcast and film programming available to online video distributors under certain conditions, and these distributors may invoke commercial arbitration to determine what programming must be made available and the price, terms and conditions that apply; (ii) multichannel video providers may invoke commercial arbitration to determine the price, terms and conditions for access to our broadcast stations and cable

 

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networks; and (iii) we must continue to deliver content to Hulu LLC at the same levels that we were providing to Hulu at the close of the Joint Venture Transaction if its two other broadcast network owners also continue to deliver at the same levels, and we were required to relinquish all voting rights and our board seats in Hulu. These and other conditions and commitments relating to the Joint Venture Transaction are of varying duration, ranging from three to seven years. Although we cannot predict how the conditions will be administered or what effects they will have on our businesses, we do not expect them to have a material adverse effect on our business or results of operations. See “Legislation and Regulation of NBCUniversal—FCC Order and DOJ Consent Decree.”

We are controlled by Comcast and GE has certain approval rights, and Comcast and GE’s interests may differ from those of its debt holders.

In connection with the closing of the Joint Venture Transaction, our company converted from a Delaware corporation into a Delaware limited liability company of which NBCUniversal Holdings is the sole member. We are now managed by NBCUniversal Holdings as our sole member. NBCUniversal Holdings is beneficially owned 51% by Comcast and 49% by GE, and Comcast has the right to designate a majority of the board of directors of NBCUniversal Holdings. As a result, Comcast controls NBCUniversal Holdings and effectively controls us. This means that Comcast generally is able to cause or prevent us from taking any actions, subject to the right of GE (so long as GE directly or indirectly owns at least a 20% interest in NBCUniversal Holdings) to approve certain actions. The GE approval right applies to various matters, including certain acquisitions, mergers or similar transactions; liquidation or dissolution (or similar events) or the commencement of bankruptcy or insolvency proceedings; a material expansion in the scope of our business; certain dividends or other distributions and repurchases, redemptions or other acquisitions of equity securities by NBCUniversal Holdings; the incurrence of certain new debt; the making of certain loans; and the issuance by NBCUniversal Holdings of equity or the increase in the authorized amount of equity securities of NBCUniversal Holdings in certain circumstances. Comcast’s interests in controlling our company, and GE’s interest in exercising its right to approve certain of our actions, could differ from those of its debt holders (including their interests in potentially pursuing actions that favor the interests of equity holders over its debt holders), and therefore actions they cause or prevent us from taking may adversely impact the ratings or trading prices of the Notes. See “Related Party Transactions—Arrangements Entered into in Connection with the Joint Venture Transaction—Operating Agreement.”

NBCUniversal Holdings may be required to purchase all or part of GE’s interests in NBCUniversal Holdings and may cause us to make distributions or loans to it to fund these purchases, which may adversely affect the NBCUniversal Notes.

At July 28, 2014, GE will be entitled to cause NBCUniversal Holdings to redeem half of its interests in NBCUniversal Holdings, and its remaining interest in NBCUniversal Holdings on January 28, 2018, subject to certain conditions and limitations. If certain limitations on NBCUniversal Holdings’ purchase obligation apply so that NBCUniversal Holdings will not be required to fully purchase the GE interests that it otherwise would be required to purchase, Comcast will be required to purchase the applicable GE interests NBCUniversal Holdings does not purchase, subject to an overall maximum amount. NBCUniversal Holdings is a holding company whose sole asset is the equity interest in our company, and NBCUniversal Holdings currently has no source of cash to fund these repurchases other than distributions or loans from us or proceeds of any debt or equity it may issue in the future. Comcast may, but is not required to, cause us to distribute to NBCUniversal Holdings all or a portion of the funds NBCUniversal Holdings or Comcast requires to fund any required repurchases from GE (or for any other reason). We cannot assure you that these distributions, if made, would not have a material adverse effect on our financial condition or the ratings or trading prices of the NBCUniversal Notes or our ability to make

 

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payments on the NBCUniversal Notes. See “Related Party Transactions—Arrangements Entered into in Connection with the Joint Venture Transaction—Operating Agreement—GE Redemption and Comcast Purchase Rights.”

Comcast and GE may compete with us in certain cases and have the ability on their own to pursue opportunities that might be attractive to us.

Although both Comcast and GE are generally subject to non-compete restrictions with respect to our principal businesses, there are important exceptions to these non-compete restrictions and Comcast and GE can compete with us in businesses that are not our principal businesses. Comcast and GE do not owe fiduciary duties to each other and do not otherwise have any obligation to refrain from engaging in businesses that are the same as or similar to our businesses or pursuing other opportunities that might be attractive for us.

Comcast or GE may reduce or sell its entire interest in our company, which could have an impact on the trading prices of the Notes.

Although Comcast and GE have agreed to restrictions on their rights to dispose of interests in our company, those restrictions will lapse over time, and each of Comcast and GE has rights to waive restrictions on transfer. In addition, GE has certain rights to require NBCUniversal Holdings to purchase its interests, and Comcast has certain rights to require GE to sell its interests, in NBCUniversal Holdings. See “Related Party Transactions—Arrangements Entered into in Connection with the Joint Venture Transaction—Operating Agreement—GE Redemption and Comcast Purchase Rights.” As a result, we cannot assure you that the current ownership of our business will remain for the entire period that the Notes are outstanding or that Comcast will continue to control, or that GE will maintain a significant indirect interest in, our business. Any change in the ownership of our company, or uncertainty regarding potential changes in our control, could adversely affect the trading prices of the Notes.

Risks Related to the Notes

Changes in our credit ratings or the debt markets could adversely affect the price of the Notes.

The price for the Notes will depend on many factors, including:

 

   

our credit ratings with major credit rating agencies

 

 

   

the prevailing interest rates being paid by other companies similar to us and the Issuers

 

 

   

our financial condition, financial performance and future prospects

 

 

   

investor perceptions of us and UCDP and the industries in which we operate

 

 

   

any change in the ownership of us or UCDP, or uncertainty regarding potential changes in control

 

 

   

issuance of new or changed securities analysts’ reports or recommendations relating to our company or the industries in which we operate

 

 

   

the overall condition of the financial markets

 

The condition of the financial markets and prevailing interest rates have fluctuated in the past and are likely to fluctuate in the future. These fluctuations could have an adverse effect on the price of the Notes. In addition, credit rating agencies continually review their ratings for the companies that they follow, including us. The credit

 

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rating agencies also evaluate each of the industries in which we operate and may change their credit rating for us based on their overall view of these industries. A negative change in our rating could have an adverse effect on the price of the Notes and increase our borrowing costs.

Risks Related to UCDP’s Business and Industry

Recent instability in general economic conditions throughout the world could reduce consumer discretionary spending which could impact UCDP’s profitability and liquidity while increasing its exposure to counterparty risk.

Unfavorable general economic conditions, such as higher unemployment rates, a constrained credit market, housing-related pressures, and higher prices for consumer goods can reduce spending for leisure travel and family entertainment. Unfavorable economic conditions can also impact UCDP’s ability to raise theme park ticket prices to counteract increased energy, labor, and other costs. Therefore, a continued economic recessionary environment would likely continue to negatively impact UCDP’s results of operations. UCDP remains cautious of current economic conditions domestically and in its key international markets (including foreign currency exchange rates, which affect the relative prices for its international guests and therefore impact attendance from that market), as recessionary fears have continued. Factors such as continued unfavorable economic conditions, a significant decline in demand for family entertainment, or continued instability of the credit and capital markets could adversely impact UCDP’s results, which in turn, could trigger a downgrade in its credit rating. These factors could also negatively impact UCDP’s ability to obtain financing, its profitability and its liquidity generally. These conditions could also hinder the ability of those with which UCDP does business, including vendors, customers and tenants, to satisfy their obligations to it. UCDP’s exposure to credit losses will depend on the financial condition of its vendors, customers and tenants and other factors beyond its control, such as deteriorating conditions in the world economy or in the theme park industry. The unprecedented levels of disruption and volatility in the credit and financial markets have increased UCDP’s possible exposure to vendor, customer and tenant credit risk because it has made it harder for them to access sufficient capital to meet their liquidity needs. This market turmoil coupled with a reduction of business activity generally increases UCDP’s risks related to its status as an unsecured creditor of most of its vendors, customers and tenants. Credit losses, if significant, would have a material adverse effect on UCDP’s business, financial condition and results of operations. Moreover, these issues could also increase the counterparty risk inherent in UCDP’s business, including with its suppliers, vendors and financial institutions with which it enters into hedging agreements and long-term debt agreements. The financial stability of these counterparties could adversely affect UCDP. In this difficult economic environment, UCDP’s credit evaluations may be inaccurate and UCDP cannot assure you that credit performance will not be materially worse than anticipated, and, as a result, materially and adversely affect its results of operations, financial position and cash flows.

Failure to comply with regulations, or changes in regulations or new regulations, applicable to UCDP’s business could limit its ability to conduct its business and could increase its operating costs.

UCDP is subject to various federal, state and local regulations of its business. These regulations include those relating to environmental protection, privacy and data protection laws and regulations, and the regulation of the safety of consumer products, ride safety and theme park operations. UCDP is also subject to regulation by state and local authorities relating to health, sanitation, safety and fire standards and liquor licenses and federal and state laws governing its relationships with employees, federal and state laws which prohibit discrimination and other laws regulating the design and operation of facilities such as the Americans With Disabilities Act of 1990, as amended. Failure to comply with the laws and regulatory requirements applicable to UCDP’s business could result in revocation of required licenses, administrative enforcement actions, fines and civil and criminal liability. Changes in any of these regulatory areas may increase UCDP’s costs and adversely affect the profitability of its business.

 

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Attendance at UCDP’s theme parks is influenced by general economic and other conditions.

Attendance at UCDP’s theme parks is heavily dependent upon consumer spending on travel and other leisure activities. Because consumer spending on travel and other leisure activities is discretionary, this is usually the first type of spending to be curtailed by consumers during economic downturns such as the current one. As a result, UCDP has historically experienced weaker attendance during economic downturns and during other events affecting travel and leisure activities. In addition, during economic downturns, if people travel to UCDP’s theme parks, they generally spend less on merchandise, food and beverage while at the park. Any further deterioration in the already weakened general economic conditions, increases in the cost of travel (including the cost of fuel), additional outbreaks or escalation of war, or terrorist or political events that diminish consumer spending and confidence could reduce attendance and in-park spending at UCDP’s theme parks.

UCDP’s parks are subject to numerous environmental and other regulations which could impact its operating results.

UCDP is subject to various federal, state and local environmental laws and regulations, including those governing water discharges, air emissions, soil and groundwater contamination, the installation and operation of underground and above ground storage tanks, and the disposal of waste and hazardous materials. In the event of any violations of or liabilities under any of these environmental laws or instances of noncompliance with environmental permits required at its facilities, UCDP could incur substantial costs, including cleanup costs, fines and civil or criminal penalties.

UCDP’s business is largely dependent on air travel.

UCDP estimates that approximately half of the visitors to its theme parks travel to Orlando by air. An increase in the price of jet fuel may serve to increase the price of air travel and reduce the number of visitors traveling by air. In addition, the continuing economic difficulties facing the airline industry may result in a reduction in scheduled flights to Orlando and an increase in the price of air travel which in turn may have a negative effect on the number of visitors to Orlando. In addition, another terrorist attack in the United States or in one of our major international attendance markets or the mere threat of a terrorist attack is likely to result in a decline in air travel. A significant decline in visitors traveling to Orlando by air would negatively affect attendance at UCDP’s theme parks, possibly dramatically.

UCDP is subject to the risks inherent in deriving substantially all of its revenue from one location.

Substantially all of UCDP’s revenue is derived from the operation of its two theme parks and CityWalk in Orlando, Florida. This subjects UCDP to a number of risks. UCDP’s business is and will continue to be influenced by local economic, financial and other conditions affecting the Orlando area. This may include prolonged or severe inclement weather in the Orlando area, a catastrophic event such as a hurricane or tornado, or the occurrence or threat of a terrorist attack in the Orlando area, any of which could significantly reduce attendance at UCDP’s theme parks and CityWalk. In addition, the partial or total destruction of UCDP’s theme parks or CityWalk requiring any of them to be closed for an extended period of time would have a material adverse effect on its ability to generate revenue.

 

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Armed conflicts, acts of terrorism and other world events affecting the safety and security of travel could adversely impact the demand for family entertainment or leisure travel which could affect UCDP’s future sales and profitability.

UCDP’s business has been impacted in the past by geopolitical events such as the terrorist attacks in the United States on September 11, 2001 and the wars in Iraq and Afghanistan. Occurrences such as these have historically had an impact on the demand for family entertainment and leisure travel. Decreases in the demand for UCDP’s products and services could lead to price discounting, which could reduce its ability to generate revenue.

Events such as the United States’ military operations in the Middle East and ongoing unrest in the Middle East and North Africa could negatively impact UCDP’s parks by, for example, driving up the prices of gas and air travel which would have a negative impact on attendance at its theme parks.

The United States and certain of its allies are currently engaged in military operations in the Middle East. This military action could exacerbate the risks identified above and have a number of other consequences, many of which would likely have a negative impact on attendance at UCDP’s theme parks and, as a result, its prospects. Military operations such as those in Iraq and Afghanistan and the ongoing civil unrest in the Middle East and North Africa could increase the price of crude oil, which in turn would increase the price of gasoline and jet fuel. Similarly, other events could also cause an increase in gasoline and jet fuel prices. If gas prices increase substantially beyond current levels, it may cause significant numbers of domestic consumers to forego taking a vacation, which could negatively affect UCDP’s attendance, as approximately 30% of its visitors drive more than 200 miles to its theme parks and approximately half of its visitors travel by air to its theme parks. Furthermore, the current military operations in Iraq and Afghanistan may increase the likelihood of another major terrorist attack in the United States or one or more of UCDP’s key international markets. The threat or occurrence of a terrorist attack could serve to discourage many consumers from travel or otherwise participating in leisure activities.

Loss of key distribution channels for ticket sales or the loss of key ticket products may reduce UCDP’s revenues.

Approximately 41% of UCDP’s annual theme park ticket sales are generated by third party distribution channels, the majority of which are concentrated among approximately 30 third party customers. As an example, approximately 8% of UCDP’s annual theme park ticket sales are derived from timeshare operators, which are dominated by a few major operators in the Orlando area. Due to the upheaval in the credit markets in 2008 in conjunction with the timeshare industry’s reliance on access to credit, certain timeshare operators have experienced a significant downturn in their business. Continuation or worsening of these circumstances could adversely impact this important distribution channel. Other significant distribution channels include key domestic and international travel operators. In addition, UCDP also has key ticket products such as the Orlando FlexTicket™ which entitles a guest to visit both of UCDP’s theme parks as well as Wet ‘n Wild®, SeaWorld®, Aquatica™ and Busch Gardens® Tampa Bay. A loss of any key distribution channel or ticket product could have a negative effect on UCDP’s ticket sales.

The theme park industry competes with numerous vacation and entertainment alternatives; the Orlando theme park market is extremely competitive.

UCDP’s theme parks compete with other theme, water and amusement parks in Orlando and around the country and with other types of recreational facilities and other forms of entertainment, including cruise ships, other vacation travel, major sports attractions and other major entertainment activities. UCDP’s business is also subject

 

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to factors that affect the recreation, vacation and leisure industries generally, such as general economic conditions, consumer confidence and changes in consumer spending habits. The Orlando theme park market is extremely competitive. There are currently seven major theme parks in the Orlando area, including UCDP’s competitors: Walt Disney World’s Magic Kingdom®, Epcot®, Disney’s Hollywood Studios, Disney’s Animal Kingdom® and Blackstone’s SeaWorld® and Aquatica™. All of these theme parks are located within a 10-mile radius of UCDP’s theme parks, which has the effect of increasing competition for market share among the major competitors. Some of these theme parks, particularly those affiliated with The Walt Disney Company, enjoy better name recognition than UCDP’s theme parks do. This puts UCDP at a disadvantage in its attempts to attract guests to its theme parks over those of its competitors. As a result, UCDP offers significant commissions to travel agents and wholesalers in order to provide them with an incentive to encourage their customers to purchase tickets to UCDP’s theme parks rather than those of its competitors in the Orlando area. Additionally, because UCDP’s sponsorship relationships change over time, the sponsorship relationships that it may have in the future may not benefit its business to the extent they do currently by providing marketing exposure for UCDP.

There is the risk of accidents or other incidents occurring at theme parks, including those owned by other theme park operators, which may create negative publicity which may reduce attendance and thereby negatively impact UCDP’s results of operations.

UCDP’s theme parks feature “thrill rides.” There are inherent risks involved with these sorts of rides and attractions. An accident or an injury at UCDP’s theme parks or at another theme park may result in negative publicity which could reduce attendance and thereby negatively impact UCDP’s results of operations, financial position and cash flows. UCDP purchases insurance to protect it in the event of an accident or certain other losses, however UCDP is subject to high deductibles and its insurance may not cover all types of incidents. Additionally, UCDP cannot be assured that negative events unrelated to attractions, such as the outbreak of infectious disease or other health concerns, will not occur at its theme parks or at another theme park. Any of these events could negatively impact UCDP’s results of operations.

UCDP may be unable to adequately protect the right to use the Universal name or other intellectual property of the themed elements of its rides and attractions.

UCDP’s continued use of the “Universal” name and its future access to new intellectual property from USC, Universal City Studios LLC, an indirect, wholly owned subsidiary of Universal City Studios Productions, Universal CPM and USI Asset Transfer LLC, a direct, wholly owned subsidiary of Universal City Studios Productions (collectively referred to as the “Universal License Parties”), is dependent upon there not being a change of control as described in UCDP’s partnership agreement and as confirmed by the License Agreement dated as of March 28, 2002, as amended May 25, 2007 and January 15, 2010 (the “Universal License Agreement”) among UCDP and the Universal License Parties. In addition, a change of control could have other negative consequences for UCDP, including potential termination of the License Agreement (the “WB Agreement”) between Warner Bros. Consumer Products Inc. (“WB”) and UCDP, acceleration of payments due under certain of its license agreements and the loss of significant benefits it enjoys from its relationship with certain of its affiliates. Accordingly, a change of control under UCDP’s license agreements could impair its name recognition and growth prospects and negatively impact its results of operations.

Additionally, failure to protect UCDP’s existing intellectual property rights received from the Universal License Parties or other licensors may result in the loss of those rights, require UCDP to make significant additional payments to third parties for infringing their intellectual property rights, and negatively impact UCDP’s ability to obtain intellectual property licenses in the future. The loss of the right to use a particular themed element means

 

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that UCDP would be unable to operate the rides or attractions that utilize the relevant element. This may require it to re-theme those rides or attractions which may involve taking the relevant ride or attraction out of service and may require significant capital expenditures. Any of those actions could negatively impact UCDP’s results of operations, name recognition and growth prospects.

In addition, if there were an event of default that UCDP failed to cure under one of its intellectual property agreements, and such agreement were terminated, it may become subject to accelerated payments. For example, the WB Agreement, pursuant to which UCDP licenses certain rights to the characters and other intellectual property contained in the Harry Potter™ books and motion pictures, is terminable, subject to applicable cure periods, if UCDP fails to maintain quality standards, fails to invest minimum required capital, fails to use the properties in accordance with the license, or upon other customary events of default. In addition, if UCDP sells Universal’s Islands of Adventure, or if 50% of UCDP is not owned by Universal City Studios Productions (formerly known as Vivendi Universal Entertainment or “VUE”) or its affiliates, the agreement is terminable unless the buyer of Universal’s Islands of Adventure or of the interests in UCDP meets certain financial and reputation tests. In addition, Universal’s Islands of Adventure must either continue to be managed by NBCUniversal or continue to be operated under a license from NBCUniversal that enables NBCUniversal to maintain the quality and reputation of Universal’s Islands of Adventure (the “NBCUniversal License Agreement”). UCDP’s partnership agreement has been amended to provide that NBCUniversal will execute the NBCUniversal License Agreement with it, on the same financial terms as set forth in its existing partnership agreement and the Universal License Agreement, if, following a sale or change in control, UCDP will no longer be managed by NBCUniversal. In the event that, following a sale or change in control, in accordance with the WB Agreement, the name of the Universal’s Islands of Adventure theme park no longer contains the word “Universal” or “Universal’s”, then The Wizarding World of Harry Potter™, Jurassic Park®, Seuss Landing™ and Marvel Super Hero Island® and other themed areas of Universal’s Islands of Adventure need to be operated under the NBCUniversal License Agreement, or the name of the theme park and resort must include the name of another major recognized theme park operator, major established motion picture and television studio or another name approved by WB. In the event of termination by WB due to UCDP’s default, a sale of Universal’s Islands of Adventure or a change of control of UCDP for which the foregoing requirements are not satisfied, payments due with respect to the remaining term of the agreement will be accelerated and due immediately. In addition, UCDP licenses various elements based on The Simpsons™, including certain characters under the License Agreement (the “Fox Agreement”) among UCDP, Universal City Studios LLC and Twentieth Century Fox Licensing & Merchandising (“Fox”). The Fox Agreement would be terminable in the event of UCDP’s breach, or in certain cases following a change of control to which Fox did not consent. If Fox were to terminate the Fox Agreement under such circumstances, payments due with respect to the remaining term of the Fox Agreement would continue to be due and payable as and when they would have become due and payable, except that if the breach is a result of a change of control, then 50% of such remaining payments allocated to UCDP shall be due and payable as and when they would have become due and payable. See “Business of UCDP—Intellectual Property.”

The use of, and ability to create derivative works from, copyrighted material is important in UCDP’s business. If an author claims a right to terminate a copyright for a work from which UCDP has created derivative works for use in its business, UCDP’s ability to create new derivative works from any such work in the future could be compromised or the costs it incurs to preserve its rights to continue to create derivative works from any such work could increase.

Copyright is the right to prevent others from copying protected expression in a work of authorship. Under the U.S. Copyright Act, the owner of a copyright enjoys a number of rights, including the right to prepare derivative works based upon the copyrighted work. Bona fide individual authors and their heirs have a statutory right to terminate their earlier assignments and licenses in certain copyrighted works by sending notice within a

 

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statutorily-defined window of time. The timing requirements with respect to such notice period mean that notice is required years in advance of the statutory termination date. Any termination of our licensors’ rights in the respective copyrighted works which they, in turn, license to UCDP could result in significant capital expenditures by UCDP to replace rides or attractions based upon such works.

The loss of key personnel could hurt UCDP’s operations.

UCDP’s success depends upon the continuing contributions of its executive officers and other key operating personnel. The complete or partial loss of their services could adversely affect UCDP’s business. UCDP’s Chief Executive Officer and other executives are employees of, and have employment agreements with, UCSP. UCDP cannot be certain that it will be able to retain their services or to find adequate replacements for them in the event UCDP were to lose their services.

UCDP’s business is seasonal and bad weather can adversely impact attendance at its theme parks.

UCDP’s business is seasonal. Attendance at its theme parks follows a seasonal pattern which coincides closely with holiday and school schedules. Some of UCDP’s attractions and other facilities may close periodically for maintenance, re-theming, or to adjust to varying attendance levels. Because many of the attractions at UCDP’s theme parks are outdoors, attendance at its theme parks is adversely affected by bad weather. Prolonged bad or mixed weather conditions during UCDP’s seasonal peak attendance periods may reduce attendance, causing a more severe decline in revenues than if those conditions occurred during a low attendance period. In addition, temporary but severe weather conditions, such as a hurricane, can adversely impact attendance at UCDP’s theme parks.

UCDP relies heavily on information technology in its operations, and any material failure, inadequacy, interruption or breach of security of that technology could harm its ability to effectively operate its business and subject UCDP to financial liability, potentially damaging its reputation.

UCDP relies heavily on information systems across its operations. UCDP’s ability to effectively manage its business depends significantly on the reliability and capacity of these systems. Despite UCDP’s considerable efforts and technology to secure its computer network, security could be compromised, confidential information, such as customer credit card numbers, could be misappropriated, or disruptions could occur in its systems, including its ride systems. This could lead to adverse publicity, decreased ride efficiency and/or increased maintenance costs, loss of sales and profits, or cause UCDP to incur significant costs to reimburse third parties for damages, which could impact its results of operations, financial position and cash flows.

Risks Related to UCDP’s Indebtedness

To the extent we fail to receive the requisite consents to the amendment, you should carefully consider the risk factors described below.

UCDP’s ability to generate sufficient cash to service all of its indebtedness depends on many factors, some of which are beyond its control.

UCDP’s ability to generate cash depends on many factors, some of which are beyond its control. UCDP estimates its annual cash debt service, based on the amount of indebtedness currently outstanding, to be approximately $54 million, of which $39 million represents debt service on fixed-rate obligations. Accordingly, UCDP will have to generate cash flows from operations to meet its debt service requirements. UCDP’s ability to make scheduled

 

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payments or to refinance its indebtedness, including the Notes, depends on its ability to generate cash from operations in the future. This is subject, in part, to general economic, financial, competitive, legislative, regulatory, social, political and other factors. In addition, NBCUniversal and UCSP may have interests adverse to parties with which UCDP would like to enter into sponsorship relationships, and thus certain sponsorship relationships may be unavailable to it. Additionally, because UCDP’s sponsorship relationships change over time, the sponsorship relationships that it may have in the future may not benefit its business to the extent they do currently by providing marketing exposure for UCDP.

UCDP cannot assure you that its business will generate sufficient cash flow from operations or that future borrowings will be available to it in an amount sufficient to enable it to fund planned capital expenditures, pay indebtedness, including the Notes, or to fund other liquidity needs. If UCDP cannot pay its indebtedness, it may need to refinance its indebtedness. The Consultant Agreement caps UCDP’s ability to incur secured borrowings to an amount equal to the greater of $975.0 million and 3.75x UCDP’s Covenant EBITDA. This cap may make it more difficult to refinance UCDP’s indebtedness, including the Notes.

Federal and state statutes allow courts, under specific circumstances, to void the Notes and guarantees, subordinate claims in respect of the Notes and guarantees and require noteholders to return payments received.

Certain of the existing domestic subsidiaries of the registrants guarantee the Notes and certain of their future domestic subsidiaries may guarantee the Notes. The issuance of the Notes and the incurrence of the guarantees may be subject to review under state and federal laws if a bankruptcy, liquidation or reorganization case or a lawsuit, including in circumstances in which bankruptcy is not involved, were commenced at some future date by, or on behalf of, UCDP’s unpaid creditors. Under the federal bankruptcy laws and comparable provisions of state fraudulent transfer laws, a court may void or otherwise decline to enforce the Notes or guarantees or subordinate the Notes or guarantees to UCDP’s existing and future indebtedness. While the relevant laws may vary from state to state, a court might do so if it found that when UCDP issued the Notes and the guarantors incurred the guarantees or, in some states, when payments became due under the Notes or guarantees, UCDP or the guarantors received less than reasonably equivalent value or fair consideration and either:

 

   

UCDP was insolvent or rendered insolvent by reason of such incurrence;

 

 

   

UCDP was engaged in a business or transaction for which its remaining assets constituted unreasonably small capital; or

 

 

   

UCDP intended to incur, or believed that it would incur, debts beyond its ability to pay such debts as they mature.

 

The court might also void the Notes or guarantees, without regard to the above factors, if the court found that UCDP issued the Notes or the guarantors incurred the guarantees with actual intent to hinder, delay or defraud its creditors. In addition, any payment by UCDP or the guarantors pursuant to the Notes or guarantees could be voided and required to be returned to it or to a fund for the benefit of its creditors.

A court would likely find that UCDP or the guarantors did not receive reasonably equivalent value or fair consideration for the Notes or guarantees if they did not substantially benefit directly or indirectly from the issuance of the Notes. If a court were to void the Notes or guarantees, you would no longer have a claim against UCDP or the guarantors and sufficient funds to repay the Notes may not be available from other sources. In addition, the court might direct you to repay any amounts that you already received from UCDP or the guarantors.

 

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The measures of insolvency for purposes of these fraudulent transfer laws will vary depending upon the law applied in any proceeding to determine whether a fraudulent transfer has occurred. Generally, however, an issuer or guarantor would be considered insolvent if:

 

   

the sum of its debts, including contingent liabilities, was greater than the fair saleable value of its assets;

 

 

   

the present fair saleable value of its assets were less than the amount that would be required to pay its probable liability on its existing debts, including contingent liabilities, as they become absolute and mature; or

 

 

   

it could not pay its debts as they become due.

 

Each guarantee will contain a provision intended to limit the guarantor’s liability to the maximum amount that it could incur without causing the incurrence of obligations under its guarantee to be a fraudulent transfer. This provision may not be effective to protect the guarantees from being voided under fraudulent transfer laws, or may eliminate the guarantors’ obligations or reduce the guarantors’ obligations to an amount that effectively makes the guarantees worthless. In a 2009 Florida bankruptcy case, this kind of provision was found to be ineffective to protect the guarantees. To the extent a court voids the Notes as fraudulent transfers or holds the Notes unenforceable for any other reason, holders of Notes would cease to have any direct claim against UCDP. If a court were to take this action, UCDP’s assets would be applied first to satisfy its liabilities, if any, before any portion of its assets could be applied to the payment of Notes.

Despite UCDP’s existing indebtedness, it may still incur significantly more debt. Moreover, it may incur a significant amount of additional secured indebtedness. This could exacerbate the risks described above.

The terms of the indentures governing the Notes permit UCDP to incur significant additional indebtedness in the future. Certain future borrowings would be effectively senior to the Notes (to the extent of the value of the collateral securing such borrowings in the case of the Senior Notes). If new debt is added to UCDP’s current debt levels, this would increase the risks described above.

The right of noteholders to receive payments on the Notes will be effectively subordinated to the rights of UCDP’s existing and future secured creditors.

Holders of UCDP’s secured obligations will have claims that are prior to your claims as holders of the Notes to the extent of the value of the assets securing those other obligations. The Notes are effectively subordinated to all such secured indebtedness to the extent of the value of the collateral. In the event of any distribution or payment of UCDP’s assets in any foreclosure, dissolution, winding-up, liquidation, reorganization or other bankruptcy proceeding, holders of secured indebtedness and other secured claims will have a prior claim to the assets that constitute their collateral. Holders of the Notes will participate ratably with all holders of UCDP’s unsecured indebtedness that is deemed to be of the same class as the Notes, and potentially with all of UCDP’s other general creditors, based upon the respective amounts owed to each holder or creditor, in its remaining assets. In any of the foregoing events, UCDP cannot assure you that there will be sufficient assets to pay amounts due on the Notes. As a result, holders of Notes may receive less, ratably, than holders of UCDP’s secured obligations.

Claims of creditors of UCDP’s non-guarantor subsidiaries will have priority with respect to the assets and earnings of such subsidiaries over you.

None of UCDP’s subsidiaries other than Universal Parks & Resorts Vacations and Universal Orlando Online Merchandise Store have guaranteed the Notes. Claims of creditors of UCDP’s subsidiaries, including trade

 

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creditors, secured creditors and creditors holding indebtedness and guarantees issued by such subsidiaries, will generally have priority with respect to the assets and earnings of such subsidiaries over its claims or those of its creditors, including you, even if the obligations of those subsidiaries do not constitute senior indebtedness.

The right of noteholders to receive payments on the Senior Subordinated Notes will be subordinated to the rights of the holders of the Senior Notes and the consultant, and to all of UCDP’s other senior indebtedness, including any of its future senior debt.

The Senior Subordinated Notes and the existing subsidiary guarantees thereof rank junior in right of payment to all of UCDP’s and the guarantors’ respective existing senior indebtedness, including the Senior Notes, and will rank junior in right of payment to all of their future borrowings, except for any future indebtedness that expressly provides that it ranks equal or junior in right of payment to the Senior Subordinated Notes and the guarantees thereof.

UCDP and the guarantors may not be permitted to pay principal, premium, if any, interest or other amounts on account of the Senior Subordinated Notes or the guarantees thereof in the event of a payment default or certain other defaults in respect of certain of their senior indebtedness, including debt under the Senior Notes, unless such senior indebtedness has been paid in full or the default has been cured or waived. In addition, in the event of certain other defaults with respect to such senior indebtedness, UCDP and the guarantors may not be permitted to pay any amount on account of the Senior Subordinated Notes or the guarantees thereof for a designated period of time.

Because of the subordination provisions in the Senior Subordinated Notes and the guarantees thereof, in the event of a bankruptcy, liquidation, reorganization or similar proceeding relating to UCDP and each guarantor, its assets will not be available to pay obligations under the Senior Subordinated Notes or the guarantees until it has made all payments in cash on its senior indebtedness. Sufficient assets may not remain after all these payments of principal or interest when due. In addition, in the event of a bankruptcy, liquidation or reorganization or similar proceeding relating to UCDP, holders of the Senior Subordinated Notes will participate with trade creditors and all other holders of its senior subordinated indebtedness, as the case may be, in the assets (if any) remaining after it has paid all of the senior indebtedness. However, because the indenture governing the Senior Subordinated Notes requires that amounts otherwise payable to holders of the Senior Subordinated Notes in a bankruptcy or similar proceeding be paid to holders of senior indebtedness instead, holders of Senior Subordinated Notes may receive less, ratably, than holders of trade payables or other unsecured, unsubordinated creditors in any such proceeding. In any of these cases, UCDP may not have sufficient funds to pay all creditors, and holders of the Senior Subordinated Notes may receive less, ratably, than the holders of senior indebtedness.

UCDP’s ability to refinance its debt obligations, including the Notes, could be adversely impacted by the consultant’s right, starting in June 2017, to terminate the periodic payments under the Consultant Agreement and receive instead one payment equal to the fair market value of the consultant’s interest in Universal Studios Florida and Universal’s Islands of Adventure, along with related properties (collectively, the “Orlando Parks”) any comparable projects or, under certain circumstances, an alternative one-time payment.

UCDP has a Consultant Agreement with a consultant under which it pays a fee for consulting services and exclusivity equal to a percentage of its gross revenues from the attractions and certain other facilities owned or operated, in whole or in part, by it. The Consultant Agreement also provides that the consultant is entitled to a fee based on a percentage of gross revenues of comparable projects, which are gated motion picture and television themed attractions owned or operated, in whole or in part, by UCDP, or any of its partners or any of their affiliates, other than in Universal City, California. At present, the only operating theme parks that are deemed to

 

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be comparable projects are Universal Studios Japan in Osaka, Japan and Universal Studios Singapore on Sentosa Island, Singapore, which are not owned by UCDP. The amount of fees paid by Universal Studios Japan to the consultant have historically been between 70% and 80% of the fees paid to the consultant by UCDP, while fees based on Universal Studios Singapore’s results have only recently begun to be paid, as the park soft-opened in March 2010. Fees with respect to Universal Studios Japan and Universal Studios Singapore are paid by an affiliate of Universal City Studios Productions and are not paid by UCDP. In addition to the existing comparable parks, there are three contemplated comparable parks which are vested immediately for purposes of the consulting fee payments and it is possible that other comparable projects will be created in the future that would fall under the Consultant Agreement. In fiscal years 2010, 2009 and 2008, the fees incurred by UCDP payable to the consultant under the Consultant Agreement were approximately $24.4 million, $17.5 million and $19.6 million, respectively. The Consultant Agreement does not have an expiration date, but starting in June 2017, the Consultant has the right upon 90 days’ notice to terminate the periodic payments under the Consultant Agreement and receive instead one cash payment equal to the fair market value of the Consultant’s interest in the ongoing revenue streams or, under certain circumstances, an alternative one-time payment, in each case with respect to certain UCDP revenue and any comparable projects that have been opened at that time for at least one year, which amounts could be significant. The amount of such cash payment would be determined in a manner that includes fees paid with respect to Universal Studios Japan and Universal Studios Singapore and any other comparable parks that may open. Because this could increase the size of such cash payment even if a portion of such cash payment is not UCDP’s responsibility in the first instance, it could make the financing of any such payment more difficult. In addition, the Consultant Agreement limits the amount of secured debt UCDP may incur to the greater of $975.0 million and 3.75x UCDP’s Covenant EBITDA. Accordingly, UCDP may not be able to refinance existing debt on a secured basis or make the payment to the consultant. Upon the sale of any portion of NBCUniversal’s interest in UCDP, the consultant may have the right to sell in such sale an equal portion of his compensation rights under the Consultant Agreement to the prospective purchaser. This could make any financing in the future more difficult. UCDP cannot predict whether the consultant will exercise his payment option or his tag-along option or the timing of any such decision. Due to uncertainties in the amount and timing of such cash payment and UCDP’s ability to make such a cash payment and the limits on its ability to incur additional senior secured debt, UCDP’s ability to refinance the Notes, and its ability to incur future indebtedness, may be adversely impacted by this right of the consultant.

UCDP may not have the ability to raise the funds necessary to finance any change of control offer required by the indentures governing the Notes.

Pursuant to the indentures governing the Notes, UCDP may need to refinance large amounts of its debt, including the Notes, upon the incurrence of specific kinds of change of control events. The indentures define a change of control as either (1) the sale, lease or transfer, in one or a series of related transactions, of all or substantially all of UCDP’s assets and the assets of its subsidiaries, taken as a whole (other than to NBCUniversal, UCSP or an entity with more than 50% of its capital stock owned collectively by NBCUniversal or UCSP, each of which is referred to as a “Permitted Holder”), or (2) when the issuers of the Notes become aware of an acquisition of more than 50% of the total voting power or economic interests in UCDP by someone other than a Permitted Holder. If a change of control occurs, UCDP must offer to purchase all of the Notes then outstanding for a price equal to 101% of the principal amount of the Notes, plus any accrued and unpaid interest. UCDP cannot assure you that there will be sufficient funds available for it to make any required repurchases of the Notes upon a change of control. If UCDP fails to repurchase the Notes in that circumstance, it will go into default under the indentures governing the Notes. Any future debt that UCDP incurs may also contain restrictions on repayment upon a change of control. If any change of control occurs, UCDP cannot assure you that it will have sufficient funds to satisfy all of its debt obligations. NBCUniversal’s acquisition of Blackstone’s 50% interest in UCDP did not constitute a change of control under the indentures governing the Notes.

 

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UCDP’s debt agreements and the Consultant Agreement contain restrictions that limit its flexibility in operating the business.

The indentures governing the Notes currently contain a number of significant covenants that, among other things, restrict UCDP’s ability to:

 

   

incur additional indebtedness;

 

 

   

create liens on its assets;

 

 

   

issue dividends;

 

 

   

engage in mergers or acquisitions; and

 

 

   

make investments.

 

If the amendment is not approved, these restrictive covenants may not allow UCDP the flexibility it needs to operate the business in an effective and efficient manner and may prevent it from taking advantage of strategic opportunities that would benefit its business or address the effects of the global economic downturn and liquidity crisis in the financial markets.

If any of UCDP’s indebtedness were to be accelerated, its consolidated assets may not be sufficient to repay in full that indebtedness. In addition, as described above, the terms of the Consultant Agreement limit UCDP’s ability to incur existing or subsequent senior secured debt. In light of current global economic conditions and the liquidity crisis in the financial markets, UCDP could have difficulty finding alternative financing.

Current turmoil in the credit and capital markets could impede UCDP’s ability to refinance its long-term debt or prevent it from obtaining additional funds required to effectively operate its business.

Since 2008, the United States and global credit markets have experienced significant disruption, making it increasingly difficult for many businesses to obtain financing on acceptable or previously customary terms. Additionally, the volatility in equity markets due to rapid and wide fluctuations in value has resulted in a reduction of public offerings of equity securities. If these conditions persist or worsen, UCDP’s borrowing costs may increase, and it may be more difficult to secure funding for its operations, including capital expenditures for theme park attractions. These risks could also impact UCDP’s long-term debt ratings which would likely increase its cost of borrowing and/or make it more difficult for it to obtain funding.

 

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USE OF PROCEEDS

We will not receive any cash proceeds from the consent solicitation.

CAPITALIZATION

The table below sets forth our capitalization as of June 30, 2011 (i) on an historical basis, giving effect to the closing of the Joint Venture Transaction on January 28, 2011 and (ii) as adjusted, assuming that each of the closing of our acquisition of the remaining 50% equity interest in UCDP that we did not already own, the refinancing and termination of UCDP’s senior secured credit facilities and the redemption by UCDP of $140 million aggregate principal amount of Senior Notes and $78.75 million aggregate principal amount of Senior Subordinated Notes had occurred on June 30, 2011.

This table should be read in conjunction with our consolidated financial statements and the related notes included elsewhere in this prospectus.

 

     As of June 30, 2011  
(in millions)    Actual      As Adjusted  

Long-term debt, including current portion:

     

NBCUniversal Notes

   $ 9,132       $ 9,132   

The Notes(a)

     —           463   

Revolving Credit Facility(b)

     —           750   

Other long-term debt(c)

     18         297   

Total long-term debt, including current portion

     9,150         10,642   

Member’s equity, including noncontrolling interest

     

NBCUniversal member’s equity

     28,851         28,851   

Noncontrolling interest

     231         231   

Total member’s equity

     29,082         29,082   

Total capitalization

   $ 38,232       $ 39,724   

 

(a)

As Adjusted amount represents the preliminary estimates of fair value of $260 million aggregate principal amount of the Senior Notes and $146.25 million aggregate principal amount of the Senior Subordinated Notes. The estimated values are not yet final and are subject to change, and changes could be significant.

 

(b)

Represents our Revolving Credit Facility, which permits borrowings of up to $1.5 billion. We used $750 million of borrowings under this facility to fund a portion of our acquisition on July 1, 2011 of the remaining 50% equity interest in UCDP that we did not already own and to refinance and terminate UCDP’s senior secured credit agreement immediately following the acquisition.

 

(c)

As Adjusted amount includes a one-year $250 million subordinated note issued to Comcast, the proceeds of which were used to fund a portion of the purchase price of the remaining 50% equity interest in UCDP that we did not already own.

 

 

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RATIO OF EARNINGS TO FIXED CHARGES

The table below sets forth our historical and pro forma ratio of earnings to fixed charges for each of the periods indicated.

 

     Pro Forma      Historical  
                   NBCUniversal     NBC
Universal, Inc.
                                    
                   Successor     Predecessor                                     
      Six
Months
Ended
June 30,

2011
     Year Ended
December 31,

2010
     For the Period
January 29,
2011 to
June 30,

2011
    For the Period
January 1,
2011 to
January 28,

2011
     Year Ended December 31  
              2010      2009      2008      2007      2006  

Ratio of earnings to fixed charges

     3.8x         4.4x         4.8x        NM         6.8x         16.9x         16.7x         21.5x         18.3x   

 

NM

= Not meaningful

For purposes of calculating these ratios, the term “earnings” consists of income before income taxes and noncontrolling interests, less net unconsolidated affiliates’ interests, plus fixed charges (excluding capitalized interest). The term “fixed charges” consists of interest expense, the amortization of debt issuance costs and an estimate of interest as a component of rental expense.

The pro forma ratio of earnings to fixed charges assumes the Joint Venture Transaction was completed on January 1, 2010. The pro forma ratio reflects, among other items, (i) a net increase of $54 million and $647 million, for the six months ended June 30, 2011 and the year ended December 31, 2010, respectively, in amortization expense due to the remeasurement to fair value of certain finite-lived intangible assets, capitalized film and television production costs, acquired programming and equity method investments; and (ii) a $208 million increase for the year ended December 31, 2010 in interest expense due to the issuance of the NBCUniversal Notes. No adjustment was made to interest expense for the six months ended June 30, 2011 because the NBCUniversal Notes have been reflected in our interim condensed consolidated financial statements for the entire period. The pro forma ratio of earnings to fixed charges does not reflect the closing of our acquisition of the remaining 50% equity interest in UCDP, associated borrowings and the consolidation of UCDP. The effect of these transactions would not have a material effect on the pro forma ratio of earnings to fixed charges.

 

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UNAUDITED PRO FORMA FINANCIAL INFORMATION

On January 28, 2011, Comcast Corporation (“Comcast”) closed its transaction (the “Joint Venture Transaction”) with General Electric Company (“GE”) to form a new company named NBCUniversal, LLC (“NBCUniversal Holdings”). Comcast now controls and owns 51% of NBCUniversal Holdings and GE owns the remaining 49%. As part of the Joint Venture Transaction, NBC Universal, Inc. (our “Predecessor”) was converted into a Delaware limited liability company named NBCUniversal Media, LLC (“NBCUniversal”), which is a wholly owned subsidiary of NBCUniversal Holdings. Comcast contributed to NBCUniversal its national cable programming networks, including E!, Golf Channel, G4, Style and Versus, regional sports and news networks, consisting of ten regional sports networks and three regional news channels, certain of its Internet businesses, including DailyCandy and Fandango, and other related assets (the “Comcast Content Business”). In addition to contributing the Comcast Content Business, Comcast also made a cash payment to GE of $6.2 billion, which included various transaction-related costs.

The following pro forma financial information is based on our historical consolidated financial statements and the historical combined financial statements of the Comcast Content Business and is intended to provide you with information about how the Joint Venture Transaction might have affected our historical consolidated financial statements if it had closed as of January 1, 2010. Since the Joint Venture Transaction has been reflected in the most recent historical balance sheet as of June 30, 2011 included elsewhere in the prospectus, we have not presented a pro forma balance sheet. The pro forma financial information does not give effect to our acquisition of the remaining 50% equity interest in UCDP, the associated borrowings or the consolidation of UCDP following the acquisition.

The pro forma financial information below is based on available information and assumptions that we believe are reasonable. The pro forma financial information is for illustrative and informational purposes only and is not intended to represent or be indicative of what our financial condition or results of operations would have been had the transactions described above occurred on the dates indicated. The pro forma financial information also should not be considered representative of our future financial condition or results of operations.

Due to the change in control of our company from GE to Comcast, we remeasured our assets and liabilities to fair value as of January 28, 2011 to reflect Comcast’s basis in the assets and liabilities of our existing businesses. The assets and liabilities of the Comcast Content Business contributed by Comcast have been reflected at their historical or carryover basis, as Comcast has maintained control of the Comcast Content Business. The preliminary purchase price has been allocated to our assets and liabilities based on current estimates and currently available information and is subject to revision based on final determinations of fair value and the final allocation of purchase price to our assets and liabilities.

The following transactions and other adjustments related to the Joint Venture Transaction are reflected in the pro forma financial information:

 

   

Comcast’s contribution of the Comcast Content Business to us

 

 

   

Our issuing an aggregate principal amount of $4.0 billion on April 30, 2010 (“April Notes”) and additional aggregate principal amount of $5.1 billion on October 4, 2010 (“October Notes” and with April Notes, collectively, the “NBCUniversal Notes”)

 

 

   

Our repayment with a portion of the proceeds from the April Notes of approximately $1.7 billion due under our two-year term loan agreement (the “Two-Year Term Loan Agreement”) in May 2010

 

 

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Our cash distribution of approximately $7.4 billion to GE prior to the closing of the Joint Venture Transaction

 

 

   

Elimination of historical transactions between NBCUniversal and the Comcast Content Business

 

 

   

Remeasurement of our assets and liabilities acquired by Comcast to fair value

 

 

   

Adjustments to reflect the tax effect of the conversion of our company from a Delaware corporation into a Delaware limited liability company

 

 

   

Other adjustments necessary to reflect the effects of the Joint Venture Transaction

 

In addition to the pro forma adjustments to our historical consolidated financial statements, various other factors will have an effect on our results of operations. You should read the pro forma financial information in conjunction with the information under “Risk Factors,” “Capitalization” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations of NBCUniversal,” as well as our consolidated financial statements and the related notes, the combined financial statements and the related notes of the Comcast Content Business and the consolidated financial statements and the related notes of UCDP, all of which are included elsewhere in this prospectus. For information with respect to certain items that are not reflected in the pro forma financial information, see Note 5 below.

 

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Unaudited Pro Forma Condensed Combined Statement of Income

For the Six Months Ended June 30, 2011

 

    NBCUniversal         NBC
Universal, Inc.
                             
    Successor         Predecessor     Combined     Joint Venture Transaction (1)            
(in millions)  

For the Period

January 29,
2011 to
June 30,

2011

        

For the Period

January 1,
2011 to
January 28,
2011

    Six
Months
Ended
June 30,
2011
    Comcast
Content
Business (2)
    Transaction-
Related
Adjustments (3)
(4)
    Notes   Pro Forma
(5)
 

Revenue

  $ 8,090          $ 1,206      $ 9,296      $ 232      $ (1   3e, 4a   $ 9,527   

Costs and expenses:

                 

Operating costs and expenses

    6,697            1,171        7,868        168        (6   3a, 4a, 4b, 4c     8,030   

Depreciation

    118            19        137        5                 142   

Amortization

    323            8        331        13        49      3b, 4b     393   
      7,138            1,198        8,336        186        43            8,565   

Operating income

    952            8        960        46        (44       962   

Other income (expense):

                 

Equity in income of investees, net

    147            25        172        3        (6   3c, 3d     169   

Interest expense

    (164         (37     (201     (3     (2   3f, 3g, 3h, 3i, 4c, 4d     (206

Interest income

    7            4        11        3        (5   3f, 4d     9   

Other income (expense), net

    (43         (29     (72            (2   3e     (74

Income (loss) before income taxes and noncontrolling interests

    899            (29     870        49        (59       860   

(Provision) benefit for income taxes

    (93         4        (89     (18     11      3i, 4e     (96

Net income (loss) before noncontrolling interests

    806            (25     781        31        (48       764   

Net (income) loss attributable to noncontrolling interests

    (86         2        (84     (9          3h     (93

Net income (loss) attributable to NBCUniversal

  $ 720          $ (23   $ 697      $ 22      $ (48       $ 671   

 

 

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Unaudited Pro Forma Condensed Combined Statement of Income

For the Year Ended December 31, 2010

 

           Joint Venture Transaction (1)             
(in millions)    NBC
Universal, Inc.
Predecessor
    Comcast
Content
Business (2)
    Transaction-
Related
Adjustments
(3) (4)
    Notes    Pro Forma (5)  

Revenue

   $ 16,590      $ 2,719      $ 6     

3e, 4a

   $ 19,315   

Costs and expenses:

           

Operating costs and expenses

     14,037        2,015        (29   3a, 4a, 4b, 4c      16,023   

Depreciation

     252        56                  308   

Amortization

     97        266        584      3b, 4b      947   
       14,386        2,337        555             17,278   

Operating income

     2,204        382        (549        2,037   

Other income (expense):

           

Equity in income of investees, net

     308        16        (83   3c, 3d      241   

Interest expense

     (277     (36     (74   3f, 3g, 3h, 3i, 4c, 4d      (387

Interest income

     55        27        (65   3f, 4d      17   

Other income (expense), net

     (29     (8     (46   3e      (83

Income (loss) before income taxes and noncontrolling interests

     2,261        381        (817        1,825   

(Provision) benefit for income taxes

     (745     (165     687      3i, 4e      (223

Net income (loss) before noncontrolling interests

     1,516        216        (130        1,602   

Net (income) attributable to noncontrolling interests

     (49     (57     (59   3h      (165

Net income (loss) attributable to NBCUniversal

   $ 1,467      $ 159      $ (189        $ 1,437   

 

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NOTES TO UNAUDITED PRO FORMA FINANCIAL INFORMATION

(1) Basis of Presentation

The Joint Venture Transaction closed on January 28, 2011, which combined our Predecessor and the Comcast Content Business. The significant components of the consideration transferred were as follows:

 

   

Comcast made a cash payment to GE of $6.2 billion, which included various transaction-related costs, in exchange for a portion of their controlling interest in our existing businesses

 

 

   

Comcast exchanged a 49% noncontrolling interest in the Comcast Content Business for a portion of their controlling interest in our existing businesses

 

 

   

Comcast will receive certain tax benefits related to the form and structure of the Joint Venture Transaction and has agreed to share with GE certain of these expected future tax benefits, as they are realized; Comcast has accounted for this tax sharing arrangement as contingent consideration and has recorded a liability of $639 million

 

 

   

GE has a 49% redeemable noncontrolling interest in NBCUniversal Holdings attributable to the net assets of our existing businesses, which was recorded at fair value in Comcast’s consolidated financial statements

 

Due to the change in control of our company from GE to Comcast, acquisition accounting has been applied to the Joint Venture Transaction, which requires an allocation of the purchase price to the net assets of our existing businesses, based on their fair values as of the date of the acquisition. The Comcast Content Business is reflected at its historical or carryover basis. The table below summarizes the preliminary allocation of purchase price to the assets and liabilities of our existing businesses:

 

(in millions)        

Consideration Transferred

  

Cash

   $ 6,127   

Fair value of 49% interest in Comcast Content Business

     4,278   

Fair value of contingent consideration

     639   

Fair value of redeemable noncontrolling interest associated with net assets of our existing businesses

     13,032   
     $ 24,076   

Preliminary Allocation of Purchase Price

  

Film and television costs

   $ 5,126   

Investments

     3,848   

Property and equipment

     1,932   

Intangible assets

     14,376   

Working capital

     (1,241

Long-term debt

     (9,115

Deferred income tax liabilities

     (69

Deferred revenue

     (919

Other noncurrent assets and liabilities

     (1,629

Noncontrolling interests

     (188

Fair value of identifiable net assets acquired

     12,121   

Goodwill

     11,955   
     $ 24,076   

 

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In addition to presenting our operations as reported in our interim condensed consolidated financial statements in accordance with GAAP, our unaudited pro forma condensed combined statement of income also includes the combined results for the six months ended June 30, 2011, which is a non-GAAP presentation. We believe that presenting these combined results is useful in illustrating the presentation of our pro forma condensed combined statement of income for the six months ended June 30, 2011. The combined operating results may not reflect the actual results we would have achieved had the Joint Venture Transaction closed prior to January 28, 2011 and may not be predictive of future results of operations.

(2) Comcast Content Business

Reflects the historical combined financial information of the Comcast Content Business for the period from January 1, 2011 to January 28, 2011 and for the year ended December 31, 2010. Certain reclassifications have been made to the historical presentation of the Comcast Content Business to conform to the presentation used in our consolidated financial statements and the unaudited pro forma financial information as follows:

 

(in millions)

   Classification
on Comcast
Content
Business
Financial
Statements
     Reclassification
to conform to
NBCUniversal
Financial
Statements
 

For six months ended June 30, 2011

     

Comcast-affiliated companies interest income, net

   $ 1      

Interest income

      $ 3   

Interest expense

      $ (2

For the year ended December 31, 2010

     

Comcast-affiliated companies interest income, net

   $ 2      

Interest income

      $ 27   

Interest expense

            $ (25

(3) Transaction-Related Adjustments (NBCUniversal)

 

  (a)

Represents a net decrease in operating costs and expenses of $1 million and $13 million, for the six months ended June 30, 2011 and the year ended December 31, 2010, respectively, consisting of (i) estimated decrease in amortization of $3 million and $42 million related to the fair value adjustments of our film and television costs; (ii) an increase of $1 million and $17 million to record the reversal of the amortization of deferred gain on sale and lease-back transactions; and (iii) an increase of $1 million and $12 million to record estimated incremental expenses associated with our new employee benefit plans adopted upon close of the Joint Venture Transaction.

 

  (b)

Represents an estimated increase in amortization of $51 million and $614 million, for the six months ended June 30, 2011 and the year ended December 31, 2010, respectively, as a result of the increase to the fair value of the finite-lived intangible assets related primarily to relationships with advertisers and multichannel video providers. These assets are amortized over estimated useful lives, not to exceed 20 years.

 

  (c)

Represents the estimated decrease of $6 million and $75 million, for the six months ended June 30, 2011 and the year ended December 31, 2010, respectively, in equity in income of investees, net due to the amortization of basis differences created from step-up adjustments to fair value on a straight line basis over the estimated useful lives of the underlying assets of investees.

 

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  (d)

Represents an elimination of equity in income of investees of $8 million for the year ended December 31, 2010 related to the reclassification of an equity method investment to a cost method investment as a result of the Joint Venture Transaction. No adjustment was made to eliminate equity in income of investees for the six months ended June 30, 2011, as the amount was not considered material.

 

  (e)

Represents a net decrease in other income reflecting (i) the elimination of dividends of $21 million for the year ended December 31, 2010 received from an investment in a subsidiary of GE that was redeemed in January 2011, prior to the closing of the Joint Venture Transaction; and (ii) a reclassification of costs of $2 million and $25 million for the six months ended June 30, 2011 and the year ended December 31, 2010, respectively, related to a long-term contractual obligation.

 

  (f)

Represents elimination of interest income of $2 million and interest expense of $1 million recognized during the six months ended June 30, 2011 and elimination of interest income of $38 million and interest expense of $31 million for the year ended December 31, 2010 related to our cash pooling programs with GE, which were settled in connection with the Joint Venture Transaction.

 

  (g)

Represents a net increase in interest expense of $208 million for the year ended December 31, 2010. No adjustment was made for the six months ended June 30, 2011 because the NBCUniversal Notes have been reflected in our interim condensed consolidated financial statements for the entire period.

 

Description    Year Ended
December 31,
2010
 
     (in millions)  

$9.1 billion aggregate principal amount (fair value of $9.115 billion) of the NBCUniversal Notes with varying maturities at a weighted average interest rate of 4.51% (4.48% net of amortization of fair value)

   $ 408   

Commitment fees on the revolving credit facility of the Three-Year Credit Agreement at 0.375% on the undrawn balance of $750 million

     3   

Subtotal

   $ 411   

Less amounts included in our historical results of operations:

  

Interest and amortized financing costs on our Two Year Term Loan Agreement

     (14

Interest expense and amortized financing costs on the NBCUniversal Notes

     (189

Total

   $ 208   

 

  (h)

Included in our historical consolidated statement of income for the year ended December 31, 2010 are the operating results of a consolidated variable-interest entity, Station Venture Holdings, LLC (“Station Venture”). Effective upon closing of the Joint Venture Transaction, Station Venture has been deconsolidated due to a change in circumstances causing us to no longer be the primary beneficiary of the entity. Following deconsolidation, our investment in Station Venture is accounted for as an equity method investment. The deconsolidation adjustments reflect (i) the elimination of interest expense of $4 million and $67 million for the six months ended June 30, 2011 and the year ended December 31, 2010, respectively, on an $816 million note and (ii) the elimination of $59 million of net loss attributable to the noncontrolling interest for the year ended December 31, 2010. No adjustment was made to the net loss attributable to the noncontrolling interest for the six months ended June 30, 2011, as the amount was not considered material.

 

  (i)

Represents (i) the elimination of a historical U.S. income tax benefit of $7 million and income tax expense of $520 million for the six months ended June 30, 2011 and the year ended December 31,

 

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2010, respectively, as a result of our conversion to a Delaware limited liability company and election to be treated as a disregarded entity separate from NBCUniversal Holdings, which is a tax partnership, and GE’s indemnity with respect to our income tax obligations attributable to periods prior to the closing of the Joint Venture Transaction and (ii) the income tax effect of the pro forma adjustments of $4 million for the year ended December 31, 2010 giving effect to income tax at a rate of 0.5% for state and local income taxes. No adjustment was made for the six months ended June 30, 2011, as the amount was not considered material. In addition, we have eliminated a decrease to interest expense related to the settlement of uncertain tax positions of $9 million for the six months ended June 30, 2011 and eliminated interest expense on unrecognized tax obligations of $9 million for the year ended December 31, 2010. No pro forma adjustment has been made to our foreign taxes.

(4) Transaction-Related Adjustments (Comcast Content Business)

 

  (a)

Historically, our transactions with the Comcast Content Business have consisted primarily of the sale of advertising and the licensing of our owned programming. We have recorded an adjustment in the pro forma statements of income to reflect the elimination of the following items as intercompany transactions:

 

     Debits/(Credits)  
(in millions)    Six Months
Ended June 30,
2011
    Year Ended
December 31,
2010
 

Revenue

   $ 3      $ 19   

Operating costs and expenses

   $ (3   $ (19

 

  (b)

Represents a reclassification of $2 million and $30 million to operating costs and expenses for the six months ended June 30, 2011 and the year ended December 31, 2010, respectively, which relates to conforming amortization of certain intangible assets that were previously recorded as amortization expense.

 

  (c)

Represents decreases of (i) $4 million and $27 million to operating costs and expenses for the six months ended June 30, 2011 and the year ended December 31, 2010, respectively, and (ii) $2 million to interest expense for the year ended December 31, 2010. These adjustments reflect the elimination of costs allocated to the Comcast Content Business included in their historical financial statements that are not expected to be incurred by us after January 28, 2011. No adjustment was made to interest expense for the six months ended June 30, 2011, as the amount was not considered material.

 

  (d)

We have eliminated interest income of $3 million and $27 million and interest expense of $2 million and $25 million for the six months ended June 30, 2011 and the year ended December 31, 2010, respectively, related to receivables and payables with affiliated companies of the Comcast Content Business that were settled in connection with the Joint Venture Transaction.

 

  (e)

The provision for income taxes of $18 million and $163 million for the six months ended June 30, 2011 and the year ended December 31, 2010, respectively, has been eliminated, as we are a limited liability company and will not incur any material current or deferred U.S. federal income taxes. Comcast has indemnified NBCUniversal Holdings and us with respect to the Comcast Content Business’ income tax obligations attributable to periods prior to the closing of the Joint Venture Transaction. The Comcast Content Business historical financial statements do not include material foreign taxes.

 

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(5) Items Not Adjusted in Unaudited Pro Forma Financial Information

 

  (a)

As a result of the Joint Venture Transaction, GE will no longer provide a number of corporate services to us, the cost of which was previously allocated to our historical financial statements. In the future, these services will be provided to us under new arrangements with GE, Comcast and third parties. No adjustment has been reflected in the pro forma statement of income for any differences between the amount of estimated costs that will be incurred as part of these new arrangements and the amounts of historically allocated corporate services costs from GE, as the difference is not deemed material.

 

  (b)

We have not reflected any additional interest expense for borrowings of up to $1.5 billion available under our revolving credit facility, as this facility was not drawn upon at the closing of the Joint Venture Transaction.

 

  (c)

In connection with the Joint Venture Transaction, we have incurred and will continue to incur incremental transition and integration expenses, which have not been adjusted in the pro forma results above. Additionally, included in our consolidated statement of income are severance, retention and accelerated stock-based compensation expenses incurred as a result of the Joint Venture Transaction of $49 million and $55 million for the periods ended January 28, 2011 and June 30, 2011, respectively. We also have not made any adjustment to reflect any incremental executive compensation cost related to the changes in management in connection with the Joint Venture Transaction.

 

  (d)

On July 1, 2011, we completed our acquisition of the remaining 50% equity interest in UCDP for $1.025 billion, subject to various purchase price adjustments. As a result, UCDP is now a wholly owned consolidated subsidiary. We funded this acquisition with cash on hand, borrowings under our revolving credit facility and the issuance to Comcast of a $250 million one-year subordinated note. In addition, on July 1, 2011, UCDP refinanced and terminated its senior secured credit agreement, and on August 1, 2011, UCDP redeemed $140 million of Senior Notes and $78.75 million of Senior Subordinated Notes. Our unaudited pro forma financial information does not give effect to these transactions, the associated borrowings or the consolidation of UCDP for periods following the acquisition.

 

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SELECTED HISTORICAL FINANCIAL INFORMATION FOR NBCUNIVERSAL

The table below sets forth our selected historical financial information. The selected historical financial information for the years ended December 31, 2010, 2009 and 2008 and as of December 31, 2010 and 2009 has been derived from our annual consolidated financial statements included elsewhere in this prospectus. The selected historical financial information as of December 31, 2008 and as of and for the years ended December 31, 2007 and 2006 has been derived from our annual consolidated financial statements not included in this prospectus. The selected historical financial information as of and for the six months ended June 30, 2011 and the six months ended June 30, 2010 has been derived from our interim condensed consolidated financial statements included elsewhere in this prospectus.

The selected historical financial information presented below should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations of NBCUniversal” and our consolidated financial statements and the related notes, all included elsewhere in this prospectus.

 

    NBCUniversal         NBC Universal,
Inc.
             
    Successor         Predecessor              
   

For the Period

January 29, 2011
to June 30,

2011

 

        

For the Period
January 1, 2011
to January 28,

2011

 

   

Six
Months
Ended
June 30,

2010

 

    Year Ended December 31  

(in millions)

 

         

2010

 

   

2009

 

   

2008

 

   

2007

 

   

2006

 

 
     (unaudited)          (unaudited)     (unaudited)                                     

Consolidated Statement of Income:

                   

Revenue

  $ 8,090          $ 1,206      $ 7,980      $ 16,590      $ 15,085      $ 16,802      $ 14,809      $ 15,383   

Costs and expenses:

                   

Operating costs and expenses

    6,697            1,171        6,984        14,037        12,870        13,943        11,803        12,729   

Depreciation

    118            19        134        252        242        242        210        186   

Amortization

    323            8        50        97        105        126        125        164   
      7,138            1,198        7,168        14,386        13,217        14,311        12,138        13,079   

Operating income

    952            8        812        2,204        1,868        2,491        2,671        2,304   

Other income (expense):

                   

Equity in income of investees, net

    147            25        104        308        103        200        243        185   

Interest expense

    (164         (37     (93     (277     (49     (82     (55     (96

Interest income

    7            4        28        55        55        110        106        80   

Other income (expense), net

    (43         (29     (42     (29     211        270        212        559   

Income (loss) before income taxes and noncontrolling interests

    899            (29     809        2,261        2,188        2,989        3,177        3,032   

(Provision) benefit for income taxes

    (93         4        (274     (745     (872     (1,147     (1,014     (1,016

Net income (loss) before noncontrolling interests

    806            (25     535        1,516        1,316        1,842        2,163        2,016   

Net (income) loss attributable to noncontrolling interests

    (86         2        (23     (49     (38     (73     (89     (117

Net income (loss) attributable to NBCUniversal

  $ 720          $ (23   $ 512      $ 1,467      $ 1,278      $ 1,769      $ 2,074      $ 1,899   

 

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    NBCUniversal                 NBC Universal, Inc.  
    Successor                 Predecessor  
   

As of

June 30,

2011

 

                 As of December 31,  

(in millions)

 

                

2010

 

   

2009

 

   

2008

 

   

2007

 

   

2006

 

 
     (unaudited)                                                    

Balance Sheet Information:

                   

Cash and cash equivalents

  $ 1,121              $ 1,084      $ 197      $ 319      $ 343      $ 425   

Total assets

  $ 47,229              $ 42,424      $ 34,139      $ 34,519      $ 34,344      $ 32,548   

Total debt(a)

  $ 9,150              $ 9,906      $ 1,685      $ 1,695      $ 1,691      $ 1,690   

Total equity

  $ 29,082                  $ 23,817      $ 24,105      $ 24,714      $ 24,590      $ 23,339   

 

(a)

Total debt in 2010 includes $816 million related to the senior secured note of Station Venture, which was classified as related party borrowings in our consolidated balance sheet at December 31, 2010. Effective upon closing of the Joint Venture Transaction, Station Venture has been deconsolidated due to a change in circumstances causing us to no longer be the primary beneficiary of the entity.

 

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF NBCUNIVERSAL

You should read the following discussion in conjunction with our consolidated financial statements and the related notes and our pro forma financial information included elsewhere in this prospectus. This discussion contains forward-looking statements that are based on management’s current expectations, estimates and projections about our business and operations. Our actual results may differ materially from those currently anticipated and expressed in such forward-looking statements as a result of various factors, including the factors we describe under “Caution Concerning Forward-Looking Statements,” “Risk Factors” and elsewhere in this prospectus.

Overview

We are a leading media and entertainment company that develops, produces and distributes entertainment, news and information, sports and other content for global audiences, and we own and operate a diversified and integrated portfolio of some of the most recognizable media brands in the world.

On January 28, 2011, Comcast Corporation (“Comcast”) closed its transaction (the “Joint Venture Transaction”) with General Electric Company (“GE”) to form a new company named NBCUniversal, LLC (“NBCUniversal Holdings”). Comcast now controls and owns 51% of NBCUniversal Holdings and GE owns the remaining 49%. As part of the Joint Venture Transaction, NBC Universal, Inc. (our “Predecessor”) was converted into a Delaware limited liability company named NBCUniversal Media, LLC (“NBCUniversal”), which is a wholly owned subsidiary of NBCUniversal Holdings. Comcast contributed to NBCUniversal its national cable programming networks, including E!, Golf Channel, G4, Style and Versus, its regional sports and news networks, consisting of ten regional sports networks and three regional news channels, certain of its Internet businesses, including DailyCandy and Fandango, and other related assets (the “Comcast Content Business”). In addition to contributing the Comcast Content Business, Comcast also made a cash payment to GE of $6.2 billion, which included various transaction-related costs.

In connection with the Joint Venture Transaction, we issued senior notes in an aggregate principal amount of $4.0 billion on April 30, 2010 (the “April Notes”) and additional senior notes in an aggregate principal amount of $5.1 billion on October 4, 2010 (the “October Notes” and with the April Notes, collectively, the “NBCUniversal Notes”), using $1.7 billion of the proceeds from the April Notes to repay existing indebtedness. We also distributed approximately $7.4 billion to GE prior to the closing of the Joint Venture Transaction. In addition, on January 26, 2011, GE purchased Vivendi’s remaining interest in our Predecessor company for $3.7 billion and made an additional payment to Vivendi of $222 million related to previously purchased shares.

The operating agreement of NBCUniversal Holdings (as amended, the “Operating Agreement”), which sets forth the governance and operation of NBCUniversal Holdings, among other things, gives GE certain rights to require NBCUniversal Holdings to purchase GE’s interest in NBCUniversal Holdings for cash. We also entered into transition services and other agreements with Comcast and GE relating to services Comcast and GE now provide to us. See “Related Party Transactions—Arrangements Entered into in Connection with the Joint Venture Transaction” for a detailed description of the Master Agreement, the Operating Agreement and other related agreements, including further information regarding the redemption rights of Comcast and GE.

Due to the change in control of our company from GE to Comcast, we remeasured our assets and liabilities to fair value as of January 28, 2011 to reflect Comcast’s basis in the assets and liabilities of our existing businesses. In valuing acquired assets and liabilities, fair value estimates are based on, but are not limited to, future expected cash flows, market rate assumptions for contractual obligations, actuarial assumptions for benefit plans

 

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and appropriate discount rates. The preliminary fair value of the consideration transferred and the preliminary allocation of purchase price to the assets and liabilities acquired as a result of the Joint Venture Transaction are not yet final and are subject to change, and the changes could be significant. The assets and liabilities of the Comcast Content Business contributed by Comcast have been reflected at their historical or carryover basis, as Comcast has maintained control of the Comcast Content Business. Historical financial information of NBCUniversal for the years ended December 31, 2010, 2009 and 2008 and as of December 31, 2010 and 2009, included elsewhere in this prospectus, does not reflect the contribution of the Comcast Content Business to our company and the remeasurement to fair value of our assets and liabilities. The impact of the Joint Venture Transaction is included in our consolidated results of operations after January 28, 2011. These results are discussed in more detail below under “Consolidated Historical Results of Operations.” See “Unaudited Pro Forma Financial Information” elsewhere in this prospectus for information about how the Joint Venture Transaction might have affected our historical consolidated statement of income if it had closed on January 1, 2010. Periods marked “Predecessor” in our condensed consolidated financial statements for the six months ended June 30, 2011 do not reflect the Joint Venture Transaction.

Our Businesses

Following the closing of the Joint Venture Transaction, we present our operations in four reportable segments: Cable Networks, Broadcast Television, Filmed Entertainment and Theme Parks. A brief discussion of our segments is presented below.

Cable Networks

Our Cable Networks segment consists primarily of our national cable entertainment networks (USA Network, Syfy, E!, Bravo, Oxygen, Style, G4, Chiller, Sleuth and Universal HD); our national news and information networks (CNBC, MSNBC and CNBC World); our national cable sports networks (Golf Channel and VERSUS); our regional sports and news networks; our international entertainment and news and information networks (including CNBC Europe, CNBC Asia and our Universal Networks International portfolio of networks); our cable television production operations; and certain digital media properties consisting primarily of brand-aligned websites and other websites, such as DailyCandy, Fandango and iVillage.

Revenue

Our Cable Networks segment primarily generates revenue from the distribution of our cable programming content and from the sale of advertising units. Distribution revenue is generated from distribution agreements with multichannel video providers. Advertising revenue is generated from the sale of commercial time on our national and international cable networks and related digital media properties. We also generate other revenue from the exploitation of our owned programming and the sale of our owned programming on standard-definition DVDs and high-definition Blu-ray discs (together, “DVDs”), electronic sell-through and other formats.

Distribution revenue is generally a function of the number of subscribers receiving our cable programming networks and the rates per subscriber for each of our cable networks. Our advertising revenue is generally based on network ratings, the value of our networks’ viewers to advertisers and the number of advertising units we can place in our cable programming networks’ programming schedules. Advertising revenue is affected by the strength of the advertising market, general economic conditions and the success of our programming. Our U.S. advertising revenue also is generally higher in the second and fourth quarters of each year due to seasonal increases in consumer advertising.

 

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Operating Costs and Expenses

Our Cable Networks segment operating costs and expenses consist primarily of programming and production costs, advertising and marketing costs and other operating costs and expenses. Programming and production costs include the amortization of owned and acquired programming, direct production costs, residual and participation payments, production overhead and on-air talent costs. Advertising and marketing costs primarily consist of the costs incurred in promoting our cable programming networks, as well as the replication, distribution and marketing costs of DVDs, costs associated with digital media and costs of licensing our programming to third-party networks and other media platforms. Other operating costs and expenses include salaries, employee benefits, rent and other overhead costs.

Significant contractual commitments in our Cable Networks segment include the licensing of rights for multi-year programming of varying scope and duration with various sports teams, leagues and associations to broadcast and produce sporting events, which include events by the National Hockey League (“NHL”), National Basketball Association, Major League Baseball, Professional Golf Association (“PGA”) and WWE.

Broadcast Television

Our Broadcast Television segment consists primarily of our U.S. broadcast networks, NBC and Telemundo; our 10 NBC and 15 Telemundo owned local television stations; our broadcast television production operations; and our related digital media properties consisting primarily of brand-aligned websites.

Revenue

Our Broadcast Television segment revenue primarily includes advertising revenue and content licensing revenue. Advertising revenue is generated from the sale of commercial time on our broadcast networks, owned local television stations and related digital media properties. Content licensing revenue includes content license fees and other revenue generated from the exploitation of our owned programming in the United States and internationally. We also generate other revenue from the sale of our owned programming on DVDs, electronic sell-through and other formats, and the licensing of our brands and characters for consumer products.

Our advertising revenue is generally based on audience ratings, the value of our broadcast networks’ and owned television stations’ viewers to advertisers and the number of advertising units we can place in our programming schedules. Advertising revenue is affected by the strength of the advertising market, general economic conditions, and the success of our programming. Our U.S. advertising revenue is generally higher in the second and fourth quarters of each year due to seasonal increases in consumer advertising. U.S. advertising revenue is also cyclical, benefitting in even numbered years from advertising placed by candidates for political office and issue oriented advertising and increased demand for advertising time during Olympics broadcasts. Content licensing revenue depends on the length and terms of the initial network license for our owned programming and our ability to subsequently license that programming to other networks, both in the U.S. and internationally, and to individual U.S. local television stations. In recent years, the production and distribution costs related to our owned programming have exceeded the license fees generated from the initial network license by an increasing amount. Exploitation of our owned programming after the initial network license is critical to its financial success. Other revenue from further exploitation of our owned programming and intellectual property is driven primarily by the popularity of our broadcast networks and programs and, therefore, fluctuates based on consumer spending and acceptance.

 

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Operating Costs and Expenses

Our Broadcast Television segment operating costs and expenses consist primarily of programming and production costs, advertising and marketing costs and other operating costs and expenses. Programming and production costs relate to content originating on our broadcast networks and local owned television stations and include the amortization of owned and acquired programming, direct production costs, residual and participation payments, production overhead and on-air talent costs. Advertising and marketing costs primarily consist of the costs incurred in promoting our owned programming, as well as the replication, distribution and marketing costs of DVDs, costs associated with digital media, and costs of licensing our programming to third-parties and other media platforms. Other operating costs and expenses include salaries, employee benefits, rent and other overhead costs.

The significant contractual commitments in our Broadcast Television segment consist primarily of the licensing of rights for multi-year programming, such as the NFL, NHL, PGA and Olympics. We currently have an agreement with the NFL to produce and broadcast a specified number of regular season and playoff games, including NBC’s Sunday Night Football through the 2013-2014 season, the 2012 Super Bowl and the 2012, 2013 and 2014 Pro Bowls. We also have an agreement for the broadcast rights to the 2012 London Olympic Games. On June 7, 2011, the International Olympic Committee accepted our bid of $4.38 billion in the aggregate for the U.S. broadcast rights to the 2014 Sochi Olympic Games, the 2016 Rio de Janeiro Olympic Games, the 2018 PyeongChang Olympic Games and the 2020 Summer Olympic Games. The majority of the Olympics-related cash payments will be made around the time the associated revenue is collected.

Filmed Entertainment

Our Filmed Entertainment segment consists of the operations of Universal Pictures, which produces, acquires, markets and distributes filmed entertainment and stage plays worldwide in various media formats for theatrical, home entertainment, television and other distribution platforms.

Revenue

Our Filmed Entertainment segment revenue consists primarily of theatrical revenue, content licensing revenue and home entertainment revenue. Theatrical revenue is generated from the worldwide theatrical release of our owned and acquired films. Content licensing revenue is generated primarily from the licensing of our owned and acquired films to pay and advertising-supported television distribution platforms. Home entertainment revenue is generated from the licensing or sale of our owned and acquired films through DVD sales to retail stores and through digital media platforms, including electronic sell-through. We also generate other revenue from distributing third parties’ filmed entertainment, producing stage plays, publishing music and licensing consumer products.

Revenue in our Filmed Entertainment segment is significantly affected by the timing and number of our theatrical and home entertainment releases, as well as their acceptance by consumers. Theatrical and home entertainment release dates are determined by several factors, including production schedules, vacation and holiday periods and the timing of competitive releases. As a result, revenue may fluctuate from period to period and is generally highest in the fourth quarter of each year. Theatrical revenue is a function of the number of exhibition screens, ticket prices, the percentage of ticket sale retention by theatrical exhibitors and the popularity of competing films at the time our films are released. The theatrical success of a film is a significant factor in determining the revenue a film is likely to generate in succeeding distribution platforms.

Our home entertainment revenue has been negatively affected by declines in DVD sales, both in the United States and internationally. Several factors have contributed to these declines, including weak economic conditions, the maturation of the standard-definition DVD format, piracy and intense competition for consumer discretionary

 

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spending and leisure time. DVD sales have also been negatively affected by an increasing shift by consumers toward subscription rental services, discount rental kiosks and digital forms of entertainment, such as video on demand services, which generate less revenue per transaction than DVD sales. Although certain favorable trends, such as growth in the sale of higher priced high-definition DVDs and growth in electronic sell-through, are expected to continue, we expect overall home entertainment revenue in 2011 will continue to be negatively affected by an overall decline in DVD sales.

Operating Costs and Expenses

Our Filmed Entertainment segment operating costs and expenses consist primarily of amortization of capitalized film production and acquisition costs, residual and participation payments, and distribution and marketing costs. Residual payments represent amounts payable to certain of our employees who are represented by labor unions or guilds, such as the Writers Guild of America, Screen Actors Guild and the Directors Guild of America, and are based on post-theatrical revenue. Participation payments are primarily based on film performance and represent contingent consideration payable to creative talent and other parties involved in the production of a film (including producers, writers, directors, actors, and technical and production personnel) under employment or other agreements and to our film co-financing partners under co-financing agreements. Distribution and marketing costs consist primarily of the costs associated with theatrical prints and advertising (“P&A”) and the replication, distribution and marketing of DVDs. Other operating costs and expenses in our Filmed Entertainment segment include salaries, employee benefits, rent and other overhead costs.

We incur significant marketing costs before and throughout the theatrical release of a film and in connection with the release of a film on other distribution platforms. As a result, we generally incur losses on a film prior to and during the film’s theatrical exhibition and may not realize profits, if any, until the film generates home entertainment and content licensing revenue.

The costs of producing and marketing films have generally increased in recent years and may continue to increase in the future, particularly if competition within the filmed entertainment industry continues to intensify.

Theme Parks

Our Theme Parks segment consists primarily of our Universal Studios Hollywood theme park, our Wet ‘n Wild water park and fees from intellectual property licenses and other services from third parties that own and operate Universal Studios Japan and Universal Studios Singapore. Through June 30, 2011, we held a 50% equity interest in, and received special and other fees from, Universal City Development Partners (“UCDP”), which owns Universal Studios Florida and Universal’s Islands of Adventure in Orlando, Florida. The income from this equity investment and other related properties (collectively, the “Orlando Parks”) is included in operating income (loss) before depreciation and amortization for the Theme Parks segment. On July 1, 2011, we completed the acquisition of the remaining 50% equity interest in UCDP for $1.025 billion, subject to various purchase price adjustments. As a result, UCDP is now a wholly owned consolidated subsidiary and its results will be included in our consolidated results of operations following the acquisition. For the six months ended June 30, 2011 and the year ended December 31, 2010, UCDP had revenue of $701 million and $1.1 billion, respectively. As of June 30, 2011, UCDP had total assets of $2.1 billion and long-term debt of $1.4 billion.

Revenue

Our Theme Parks segment revenue is generated primarily from theme park attendance and related per capita spending, including ticket sales and in-park spending on food, beverage and merchandise, as well as from management, licensing and other fees.

 

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Attendance at our theme parks and per capita spending depend heavily on the general environment for travel and tourism, including consumer spending on travel and other recreational activities. Revenue in our theme parks business fluctuates with the changes in theme park attendance that result from the seasonal nature of vacation travel, local entertainment offerings and seasonal weather variations. Our theme parks experience peak attendance generally during the summer months when school vacations occur and during early winter and spring holiday periods. License and other fees relate primarily to our agreements with third parties that operate the Universal Studios Japan and the Universal Studios Singapore theme parks to license the Universal Studios brand name, certain characters and other intellectual property.

Operating Costs and Expenses

Our Theme Parks segment operating costs and expenses consist primarily of theme park operations, including repairs and maintenance and related administrative expenses; costs of food, beverage and merchandise; labor costs; and sales and marketing costs. We expect operating costs and expenses in our Theme Parks segment to increase due to our continued investment in and promotion of new attractions.

Headquarters and Other

Revenue in Headquarters and Other primarily relates to management fees we charge to some of our equity method investments. Headquarters and Other operating costs and expenses include costs that are not allocated to our four reportable segments. These costs primarily include overhead, employee benefit costs, costs allocated from both Comcast and GE, expenses related to the Joint Venture Transaction, and other corporate initiatives.

Headquarters and Other includes the majority of our equity method investments, such as A&E Television Networks (“AETN”), The Weather Channel and MSNBC.com. As discussed above, our equity investment in the Orlando Parks is included in our Theme Parks segment. The performance of our equity method investments is discussed below under “Equity in Income of Investees, Net.”

Consolidated Operating Results

The information below has been derived from our consolidated financial statements included elsewhere in this prospectus and should be read in conjunction with the additional information regarding our results of operations by segment set forth under “—Segment Operating Results.”

Comparison of Six Months Ended June 30, 2011 and 2010

The following table sets forth our results of operations as reported in our condensed consolidated financial statements in accordance with generally accepted accounting principles in the United States (“GAAP”). GAAP requires that we separately present our results for the periods from January 1, 2011 to January 28, 2011 (the “Predecessor period”) and from January 29, 2011 to June 30, 2011 (the “Successor period”). Management believes reviewing our operating results for the six months ended June 30, 2011 by combining the results of the Predecessor and Successor periods is more useful in identifying any trends in, or reaching conclusions regarding, our overall operating performance, and performs reviews at that level. Accordingly, in addition to presenting our results of operations as reported in our condensed consolidated financial statements in accordance with GAAP, the table below presents the non-GAAP combined results for the six months ended June 30, 2011, which are also the periods we compare when computing percentage change from the prior year, as we believe this presentation provides the most meaningful basis for comparison of our results. The combined operating results may not reflect the actual results we would have achieved had the Joint Venture Transaction closed prior to January 28, 2011 and

 

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may not be predictive of future results of operations. See “Unaudited Pro Forma Financial Information” elsewhere in this prospectus for information about how the Joint Venture Transaction might have affected our historical consolidated statement of income information if it had closed on January 1, 2010.

 

     Successor         Predecessor     Combined
Results
    Predecessor        
(in millions)    For the
Period
January 29,
2011 to
June 30,
2011
         For the
Period
January 1,
2011 to
January 28,
2011
    Six Months
Ended
June 30,
2011
    Six Months
Ended
June 30,
2010
    % Change  

Revenue

   $ 8,090         $ 1,206     $ 9,296      $ 7,980       16

Costs and expenses:

              

Operating costs and expenses

     6,697            1,171       7,868        6,984        13   

Depreciation

     118            19       137        134        2   

Amortization

     323            8       331        50        NM   
       7,138            1,198        8,336        7,168        16   

Operating income

     952            8       960        812        18   

Other income (expense):

              

Equity in income of investees, net

     147            25       172        104        65   

Interest expense

     (164         (37     (201     (93     116   

Interest income

     7            4       11        28        (61

Other income (expense), net

     (43         (29     (72     (42     71   

Income (loss) before income taxes and noncontrolling interests

     899            (29