UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549FORM 10-Q
(Mark One) (X) Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the Quarterly Period Ended: SEPTEMBER 30, 2003
(Mark One) | |
(X) | Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the Quarterly Period Ended: |
MARCH 31, 2004
OR
( ) Transition Report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the Transition Period from ________ to
________.
( ) | Transition Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the Transition Period from ________ to ________. |
Commission File Number 000-50093
[COMCAST LOGO OMITTED]
COMCAST CORPORATION
(Exact
(Exact name of registrant as specified in its charter)
PENNSYLVANIA 27-0000798
- -------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1500 Market Street, Philadelphia, PA 19102-2148
- --------------------------------------------------------------------------------
(Address of principal executive offices)
(Zip Code)
PENNSYLVANIA | 27-0000798 | |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |
1500 Market Street, Philadelphia, PA 19102-2148 | ||
(Address of principal executive offices) (Zip Code) |
Registrant's telephone number, including area code: (215) 665-1700
__________________________
_________________
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding twelve months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such requirements for the past 90 days.
Yes X No ___
__________________________
Yes X | No |
_________________
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12-b2 of the Exchange Act). Yes X No ___
As of September 30, 2003,March 31, 2004, there were 1,356,652,5441,358,158,932 shares of our Class A Common Stock, 884,835,241884,278,121 shares of our Class A Special Common Stock and 9,444,375 shares of our Class B Common Stock outstanding.
COMCAST CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED SEPTEMBER 30, 2003
MARCH 31, 2004
TABLE OF CONTENTS
_________________
This Quarterly Report on Form 10-Q is for the three and nine months ended September 30, 2003.March 31, 2004. This Quarterly Report modifies and supersedes documents filed prior to this Quarterly Report. Information that we file with the SEC in the future will automatically update and supersede information contained in this Quarterly Report. In this Quarterly Report, "Comcast," "we," "us" and "our"we refer to Comcast Corporation as “Comcast”; Comcast and its subsidiaries.consolidated subsidiaries as “we,” “us” and “our”; and Comcast Holdings Corporation as “Comcast Holdings.”
You should carefully review the information contained in this Quarterly Report, and should particularly consider any risk factors that we set forth in this Quarterly Report and in other reports or documents that we file from time to time with the SEC. In this Quarterly Report, we state our beliefs of future events and of our future financial performance. In some cases, you can identify those so-called "forward-looking statements"“forward-looking statements” by words such as "may," "will," "should,"
"expects," "plans," "anticipates," "believes," "estimates," "predicts,"
"potential,"“may,” “will,” “should,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential,” or "continue"“continue” or the negative of those words and other comparable words. You should be aware that those statements are only our predictions. Actual events or results may differ materially. In evaluating those statements, you should specifically consider various factors, including the risks outlined below. Those factors may causeActual events or our actual results tomay differ materially from any of our forward-looking statements.
Factors Affecting Future Operations
On November 18, 2002, we acquired AT&T Corp.'s broadband business, which we
refer to as "Broadband" and we refer to this acquisition as the "Broadband
acquisition." In this Quarterly Report, we refer to cable operations owned prior
to the Broadband acquisition as "historical," and those we acquired in the
Broadband acquisition as "newly acquired."
As a result of the Broadband acquisition, we have newly acquired cable
operations in communities in which we do not have established relationships with
the subscribers, franchising authority and community leaders. Further, a
substantial number of new employees are being and must continue to be integrated
into our business practices and operations.
Our results of operations may be
significantly affected by our ability to efficiently and effectively manage
these changes.
Factors that may cause our actual results to differ materially from any of
our forward-looking statements presented in this Quarterly Report include, but
are not limited to:
o we may not successfully integrate Broadband or the integration may be more
difficult, time-consuming or costly than we expect,
o we may not realize the combination benefits we expect from the Broadband
acquisition or these benefits may take longer to achieve, and
o we may incur greater-than-expected operating costs, financing costs,
subscriber loss and business disruption, including, without limitation,
difficulties in maintaining relationships with employees, subscribers,
suppliers or franchising authorities.
As more fully described elsewhere in this Quarterly
Report and in our Annual Report on Form 10-K for the year ended December 31,
2002, the Broadband acquisition substantially increased the size of our cable
operations and caused significant changes in our capital structure. As a result,
direct comparisons of our results of operations for periods prior to November
18, 2002 to subsequent periods are not meaningful.
As more fully described elsewhere in this Quarterly Report, on September
17, 2003 we sold our approximate 57% interest in QVC, Inc., our electronic
retailing subsidiary, to Liberty Media Corporation. The results of QVC have been
reported as discontinued operations for all periods presented in the
accompanying condensed consolidated financial statements.
In addition, our businesses may be affected by, among other things:
o
changes in laws and regulations,
o
changes in the competitive environment,
o
changes in technology,
o
industry consolidation and mergers,
o
franchise related matters,
o
market conditions that may adversely affect the availability of debt and equity financing for working capital, capital expenditures or other purposes,
o
the demand for the programming content we distribute or the willingness of other video program distributors to carry our content, and
o
general economic conditions.
2
COMCAST CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED SEPTEMBER 30, 2003
PART I. FINANCIAL INFORMATION
- ------- ---------------------
ITEM 1. FINANCIAL STATEMENTS
CONDENSED CONSOLIDATED BALANCE SHEET
(Unaudited)
(Dollars in millions, except share data)
September 30, December 31,
2003 2002
------------ -----------
ASSETS
- ------
CURRENT ASSETS
Cash and cash equivalents.................................................. $3,245 $505
Investments................................................................ 2,982 3,258
Accounts receivable, less allowance for doubtful accounts of $166 and $172. 850 862
Other current assets....................................................... 537 380
Current assets of discontinued operations.................................. 1,481
Current assets held for sale............................................... 613
------------ -----------
Total current assets................................................... 7,614 7,099
------------ -----------
INVESTMENTS................................................................... 15,463 15,174
PROPERTY AND EQUIPMENT, net of accumulated depreciation of $5,890 and $3,855.. 18,194 18,381
FRANCHISE RIGHTS.............................................................. 46,023 48,222
GOODWILL...................................................................... 17,563 16,562
OTHER INTANGIBLE ASSETS, net of accumulated amortization of $2,008 and $735... 4,216 5,429
OTHER NONCURRENT ASSETS, net.................................................. 743 666
NONCURRENT ASSETS OF DISCONTINUED OPERATIONS.................................. 1,595
------------ -----------
$109,816 $113,128
============ ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
CURRENT LIABILITIES
Accounts payable........................................................... $1,188 $1,296
Accrued expenses and other current liabilities............................. 5,352 5,236
Deferred income taxes...................................................... 510 1,105
Short-term debt............................................................ 3,750
Current portion of long-term debt.......................................... 3,065 3,203
Current liabilities of discontinued operations............................. 816
------------ -----------
Total current liabilities.............................................. 10,115 15,406
------------ -----------
LONG-TERM DEBT, less current portion.......................................... 27,316 27,956
------------ -----------
DEFERRED INCOME TAXES......................................................... 24,654 23,104
------------ -----------
OTHER NONCURRENT LIABILITIES.................................................. 6,214 7,161
------------ -----------
MINORITY INTEREST............................................................. 279 249
------------ -----------
NONCURRENT LIABILITIES AND MINORITY INTEREST OF
DISCONTINUED OPERATIONS.................................................... 923
------------ -----------
COMMITMENTS AND CONTINGENCIES (NOTE 10)
STOCKHOLDERS' EQUITY
Preferred stock - authorized 20,000,000 shares; issued, zero...............
Class A common stock, $0.01 par value - authorized,
7,500,000,000 shares; issued, 1,600,293,044 and 1,599,014,148;
outstanding, 1,356,652,544 and 1,355,373,648............................. 16 16
Class A special common stock, $0.01 par value - authorized,
7,500,000,000 shares; issued 932,125,084 and 930,633,433;
outstanding, 884,835,241 and 883,343,590................................. 9 9
Class B common stock, $0.01 par value - authorized, 75,000,000
shares; issued, 9,444,375................................................
Additional capital......................................................... 44,709 44,620
Retained earnings.......................................................... 4,181 1,340
Treasury stock, 243,640,500 Class A common shares and 47,289,843
Class A special common shares............................................ (7,517) (7,517)
Accumulated other comprehensive loss....................................... (160) (139)
------------ -----------
Total stockholders' equity............................................. 41,238 38,329
------------ -----------
$109,816 $113,128
============ ===========
See notes to condensed consolidated financial statements.
3
COMCAST CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED SEPTEMBER 30, 2003
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
(Dollars in millions, except per share data)
Three Months Ended Nine Months Ended
September 30, September 30,
2003 2002 2003 2002
--------- --------- --------- ---------
SERVICE REVENUES........................................................... $4,546 $1,698 $13,606 $5,102
COSTS AND EXPENSES
Operating (excluding depreciation)..................................... 1,703 597 5,267 1,831
Selling, general and administrative.................................... 1,211 459 3,667 1,340
Depreciation........................................................... 774 321 2,370 957
Amortization........................................................... 365 50 1,090 134
--------- --------- --------- ---------
4,053 1,427 12,394 4,262
--------- --------- --------- ---------
OPERATING INCOME........................................................... 493 271 1,212 840
OTHER INCOME (EXPENSE)
Interest expense....................................................... (565) (172) (1,579) (535)
Investment loss, net................................................... (182) (47) (418) (702)
Equity in net losses of affiliates..................................... (16) (9) (33) (55)
Other income (expense)................................................. 28 5 71 (12)
--------- --------- --------- ---------
(735) (223) (1,959) (1,304)
--------- --------- --------- ---------
INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE INCOME TAXES AND
MINORITY INTEREST...................................................... (242) 48 (747) (464)
INCOME TAX (EXPENSE) BENEFIT............................................... 103 (27) 231 123
--------- --------- --------- ---------
INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE MINORITY INTEREST......... (139) 21 (516) (341)
MINORITY INTEREST.......................................................... (14) 3 (85) (23)
--------- --------- --------- ---------
INCOME (LOSS) FROM CONTINUING OPERATIONS................................... (153) 24 (601) (364)
INCOME FROM DISCONTINUED OPERATIONS, net of tax............................ 39 52 168 141
GAIN ON DISCONTINUED OPERATIONS, net of tax................................ 3,290 3,290
--------- --------- --------- ---------
NET INCOME (LOSS).......................................................... $3,176 $76 $2,857 ($223)
========= ========= ========= =========
BASIC EARNINGS (LOSS) FOR COMMON STOCKHOLDERS PER COMMON SHARE
Income (loss) from continuing operations............................... ($0.07) $0.03 ($0.27) ($0.38)
Income from discontinued operations.................................... 0.02 0.05 0.08 0.15
Gain on discontinued operations........................................ 1.46 1.46
--------- --------- --------- ---------
Net income (loss)...................................................... $1.41 $0.08 $1.27 ($0.23)
========= ========= ========= =========
DILUTED EARNINGS (LOSS) FOR COMMON STOCKHOLDERS PER COMMON SHARE
Income (loss) from continuing operations............................... ($0.07) $0.03 ($0.27) ($0.38)
Income from discontinued operations.................................... 0.02 0.05 0.08 0.15
Gain on discontinued operations........................................ 1.46 1.46
--------- --------- --------- ---------
Net income (loss)...................................................... $1.41 $0.08 $1.27 ($0.23)
========= ========= ========= =========
See notes to condensed consolidated financial statements.
4
COMCAST CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED SEPTEMBER 30, 2003
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
(Dollars in millions)
Nine Months Ended September 30,
2003 2002
----------- ----------
OPERATING ACTIVITIES
Net income (loss).................................................................. $2,857 ($223)
Income from discontinued operations................................................ (168) (141)
Gain on discontinued operations.................................................... (3,290)
----------- ----------
Loss from continuing operations.................................................... (601) (364)
Adjustments to reconcile net loss from continuing operations to net cash
provided by operating activities from continuing operations:
Depreciation..................................................................... 2,370 957
Amortization..................................................................... 1,090 134
Non-cash interest (income) expense, net.......................................... (85) 32
Equity in net losses of affiliates............................................... 33 55
Losses (gains) on investments and other (income) expense, net.................... 423 733
Minority interest................................................................ 34 23
Deferred income taxes............................................................ (289) (60)
Proceeds from sales of trading securities........................................ 85
Other............................................................................ 105 (56)
----------- ----------
3,165 1,454
Changes in working capital, net of effects of acquisitions and divestitures:
Decrease in accounts receivable, net........................................... 12 11
Increase in other current assets............................................... (157) (5)
(Decrease) increase in accounts payable, accrued expenses and
other current liabilities................................................... (501) 183
----------- ----------
(646) 189
Net cash provided by operating activities from continuing operations....... 2,519 1,643
----------- ----------
FINANCING ACTIVITIES
Proceeds from borrowings........................................................... 9,377 876
Retirements and repayments of debt................................................. (13,675) (1,801)
Other.............................................................................. (3) 70
----------- ----------
Net cash used in financing activities from continuing operations........... (4,301) (855)
----------- ----------
INVESTING ACTIVITIES
Acquisitions, net of cash acquired................................................. (39) (16)
Proceeds from sales of (purchases of) short-term investments, net.................. (8) 4
Proceeds from restructuring of TWE investment...................................... 2,100
Proceeds from sales of discontinued operations and assets held for sale............ 1,875
Proceeds from sales of Liberty Notes............................................... 3,000
Proceeds from sales of investments................................................. 977 734
Purchases of investments........................................................... (151) (48)
Capital expenditures............................................................... (3,093) (1,035)
Additions to intangible and other noncurrent assets................................ (139) (231)
----------- ----------
Net cash provided by (used in) investing activities from
continuing operations.................................................. 4,522 (592)
----------- ----------
INCREASE IN CASH AND CASH EQUIVALENTS................................................. 2,740 196
CASH AND CASH EQUIVALENTS, beginning of period........................................ 505 214
----------- ----------
CASH AND CASH EQUIVALENTS, end of period.............................................. $3,245 $410
=========== ==========
See notes to condensed consolidated financial statements.
5
COMCAST CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED SEPTEMBER 30, 2003
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Basis of Presentation
Comcast Corporation
As more fully described elsewhere in this Quarterly Report and its subsidiaries ("Comcast" or the "Company") has
prepared these unaudited condensed consolidated financial statements based
upon Securities and Exchange Commission ("SEC") rules that permit reduced
disclosure for interim periods.
These financial statements include all adjustments that are necessary for a
fair presentation of the Company's results of operations and financial
condition for the interim periods shown including normal recurring accruals
and other items. The results of operations for the interim periods
presented are not necessarily indicative of results for the full year.
For a more complete discussion of the Company's accounting policies and
certain other information, refer to the financial statements included in the Company'sour Annual Report on Form 10-K for the year ended December 31, 2002.
On November 18, 2002, the Company completed the acquisition (the "Broadband
acquisition") of AT&T Corp.'s ("AT&T") broadband business ("Broadband").
Accordingly, the accompanying financial statements include the results of
Broadband from the date of the Broadband acquisition (see Note 4). The
Broadband acquisition substantially increased the size of the Company's
cable operations and caused significant changes in the Company's capital
structure, including a substantially higher amount of debt. As a result,
direct comparisons of the Company's results of operations and financial
condition for periods prior to November 18, 2002 to subsequent periods are
not meaningful.
On2003, on September 17, 2003, the Company completed the sale of itswe sold to Liberty Media Corporation our approximate 57% interest in QVC, Inc. ("QVC")., which markets a wide variety of products directly to consumers primarily on merchandise-focused television programs. Accordingly, financial information related to QVC has beenis presented as a discontinued operation pursuant to Statement of Financial Accounting
Standards ("SFAS") No. 144, "Accounting for the Impairment or Disposal of
Long-Lived Assets" (see Note 4).
Reclassifications
Certain reclassifications have been made to the prior yearin our financial statements to conform to those classifications used in 2003.
2. RECENT ACCOUNTING PRONOUNCEMENTS
SFAS No. 143
The Financial Accounting Standards Board ("FASB") issued SFAS No. 143,
"Accounting for Asset Retirement Obligations," in June 2001. SFAS No. 143
addresses financial accounting and reporting for obligations associated
with the retirement of tangible long-lived assets and the associated asset
retirement costs. The Company adopted SFAS No. 143 on January 1, 2003, in
accordance with the new statement. The adoption of SFAS No. 143 had no
impact on the Company's financial condition or results of operations.
SFAS No. 148
The FASB issued SFAS No. 148, "Accounting for Stock-Based Compensation -
Transition and Disclosure," in December 2002. SFAS No. 148 amends SFAS No.
123 to provide alternative methods of transition for an entity that
voluntarily changes to the fair value based method of accounting for
stock-based employee compensation. SFAS No. 148 also amends the disclosure
provisions of SFAS No. 123 to require disclosure about the effects on
reported net income of an entity's stock-based employee compensation in
interim financial statements. SFAS No. 148 is effective for fiscal years
beginning after December 31, 2002. The Company adopted SFAS No. 148 on
January 1, 2003. The Company did not change to the fair value based method
of accounting for stock-based employee compensation. Accordingly, the
adoption of SFAS No. 148 would only affect the Company's financial
condition or results of operations if the Company elects to change to the
fair value method specified in SFAS No. 123. The adoption of SFAS No. 148
requires the Company to disclose the effects of its stock-based employee
compensation in interim financial statements beginning with the first
quarter of 2003 (see Note 8).
6
COMCAST CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED SEPTEMBER 30,MARCH 31, 2004
PART I. | FINANCIAL INFORMATION |
ITEM 1. | FINANCIAL STATEMENTS |
CONDENSED CONSOLIDATED BALANCE SHEET
(Unaudited)
(Dollars in millions, except share data) | |||||
March 31, 2004 | December 31, 2003 | ||||
ASSETS | |||||
CURRENT ASSETS | |||||
Cash and cash equivalents | $875 | $1,550 | |||
Investments | 2,782 | 2,493 | |||
Accounts receivable, less allowance for doubtful accounts of $134 and $146 . | 776 | 907 | |||
Other current assets | 827 | 453 | |||
Total current assets | 5,260 | 5,403 | |||
INVESTMENTS | 14,270 | 14,818 | |||
PROPERTY AND EQUIPMENT, net of accumulated depreciation of $7,249 and $6,563 | 18,495 | 18,473 | |||
FRANCHISE RIGHTS | 51,050 | 51,050 | |||
GOODWILL | 14,840 | 14,841 | |||
OTHER INTANGIBLE ASSETS, net of accumulated amortization of $2,491 and $2,182 . | 3,961 | 3,859 | |||
OTHER NONCURRENT ASSETS, net | 691 | 715 | |||
$108,567 | $109,159 | ||||
LIABILITIES AND STOCKHOLDERS' EQUITY | |||||
CURRENT LIABILITIES | |||||
Accounts payable | $1,024 | $1,251 | |||
Accrued expenses and other current liabilities | 4,149 | 4,563 | |||
Deferred income taxes | 733 | 679 | |||
Current portion of long-term debt | 3,386 | 3,161 | |||
Total current liabilities | 9,292 | 9,654 | |||
LONG-TERM DEBT, less current portion | 23,240 | 23,835 | |||
DEFERRED INCOME TAXES | 26,291 | 25,900 | |||
OTHER NONCURRENT LIABILITIES | 7,706 | 7,816 | |||
MINORITY INTEREST | 300 | 292 | |||
COMMITMENTS AND CONTINGENCIES (Note 9) | |||||
STOCKHOLDERS' EQUITY | |||||
Preferred stock - authorized 20,000,000 shares; issued, zero | |||||
Class A common stock, $0.01 par value - authorized, | |||||
7,500,000,000 shares; issued, 1,601,799,432 and 1,601,161,057; | |||||
outstanding, 1,358,158,932 and 1,357,520,557 | 16 | 16 | |||
Class A special common stock, $0.01 par value - authorized, | |||||
7,500,000,000 shares; issued 931,567,964 and 931,732,876; | |||||
outstanding, 884,278,121 and 884,443,033 | 9 | 9 | |||
Class B common stock, $0.01 par value - authorized, 75,000,000 shares; | |||||
issued, 9,444,375 | |||||
Additional capital | 44,762 | 44,742 | |||
Retained earnings | 4,598 | 4,552 | |||
Treasury stock, 243,640,500 Class A common shares and 47,289,843 Class A special | |||||
common shares | (7,517 | ) | (7,517 | ) | |
Accumulated other comprehensive loss | (130 | ) | (140 | ) | |
Total stockholders' equity | 41,738 | 41,662 | |||
$108,567 | $109,159 | ||||
See notes to condensed consolidated financial statements.
2
COMCAST CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED MARCH 31, 2004
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
(Dollars in millions, except per share data) Three Months Ended March 31, | |||||
2004 | 2003 | ||||
REVENUES | $4,908 | $4,466 | |||
COSTS AND EXPENSES | |||||
Operating (excluding depreciation) | 1,869 | 1,811 | |||
Selling, general and administrative | 1,306 | 1,227 | |||
Depreciation | 798 | 780 | |||
Amortization | 276 | 354 | |||
4,249 | 4,172 | ||||
OPERATING INCOME | 659 | 294 | |||
OTHER INCOME (EXPENSE) | |||||
Interest expense | (500 | ) | (524 | ) | |
Investment loss, net | (9 | ) | (223 | ) | |
Equity in net losses of affiliates | (17 | ) | (17 | ) | |
Other income | 7 | 13 | |||
(519 | ) | (751 | ) | ||
INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE INCOME TAXES | |||||
AND MINORITY INTEREST | 140 | (457 | ) | ||
INCOME TAX (EXPENSE) BENEFIT | (76 | ) | 141 | ||
INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE MINORITY | |||||
INTEREST | 64 | (316 | ) | ||
MINORITY INTEREST | 1 | (39 | ) | ||
INCOME (LOSS) FROM CONTINUING OPERATIONS | 65 | (355 | ) | ||
INCOME FROM DISCONTINUED OPERATIONS, net of tax | 58 | ||||
NET INCOME (LOSS) | $65 | ($297 | ) | ||
BASIC EARNINGS (LOSS) FOR COMMON STOCKHOLDERS PER COMMON SHARE | |||||
Income (loss) from continuing operations | $0.03 | ($0.16 | ) | ||
Income from discontinued operations | 0.03 | ||||
Net income (loss) | $0.03 | ($0.13 | ) | ||
DILUTED EARNINGS (LOSS) FOR COMMON STOCKHOLDERS PER | |||||
COMMON SHARE | |||||
Income (loss) from continuing operations | $0.03 | ($0.16 | ) | ||
Income from discontinued operations | 0.03 | ||||
Net income (loss) | $0.03 | ($0.13 | ) | ||
See notes to condensed consolidated financial statements.
3
COMCAST CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED MARCH 31, 2004
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
(Dollars in millions) Three Months Ended March 31, | |||||
2004 | 2003 | ||||
OPERATING ACTIVITIES | |||||
Net income (loss) | $65 | ($297 | ) | ||
Income from discontinued operations | (58 | ) | |||
Income (loss) from continuing operations | 65 | (355 | ) | ||
Adjustments to reconcile net income (loss) from continuing operations to net | |||||
cash provided by operating activities from continuing operations: | |||||
Depreciation | 798 | 780 | |||
Amortization | 276 | 354 | |||
Non-cash interest expense (income), net | 22 | (21 | ) | ||
�� Equity in net losses of affiliates | 17 | 17 | |||
Losses (gains) on investments and other (income) expense, net | 8 | 249 | |||
Non-cash contribution expense | 23 | ||||
Minority interest | (1 | ) | 13 | ||
Deferred income taxes | 5 | (182 | ) | ||
Proceeds from sales of trading securities | 32 | ||||
Changes in operating assets and liabilities, net of effects of | |||||
acquisitions and divestitures | |||||
Change in accounts receivable, net | 131 | 72 | |||
Change in accounts payable | (227 | ) | (29 | ) | |
Change in other operating assets and liabilities | (343 | ) | (277 | ) | |
Net cash provided by operating activities from continuing operations | 774 | 653 | |||
FINANCING ACTIVITIES | |||||
Proceeds from borrowings | 4 | 3,900 | |||
Retirements and repayments of debt | (273 | ) | (6,077 | ) | |
Other | 18 | (16 | ) | ||
Net cash used in financing activities from continuing operations | (251 | ) | (2,193 | ) | |
INVESTING ACTIVITIES | |||||
Acquisitions, net of cash acquired | (41 | ) | |||
Proceeds from sales of (purchases of) short-term investments, net | 6 | (9 | ) | ||
Proceeds from sales and restructuring of investments and assets held for sale | 4 | 2,768 | |||
Purchases of investments | (60 | ) | (72 | ) | |
Capital expenditures | (828 | ) | (958 | ) | |
Additions to intangible and other noncurrent assets | (305 | ) | (66 | ) | |
Proceeds from settlement of contract of acquired company | 26 | ||||
Net cash (used in) provided by investing activities from | |||||
continuing operations | (1,198 | ) | 1,663 | ||
(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS | (675 | ) | 123 | ||
CASH AND CASH EQUIVALENTS, beginning of period | 1,550 | 505 | |||
CASH AND CASH EQUIVALENTS, end of period | $875 | $628 | |||
See notes to condensed consolidated financial statements.
4
COMCAST CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED MARCH 31, 2004
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. | CONDENSED CONSOLIDATED FINANCIAL STATEMENTS |
Basis of Presentation We have prepared these unaudited condensed consolidated financial statements based upon Securities and Exchange Commission (“SEC”) rules that permit reduced disclosure for interim periods. |
These financial statements include all adjustments that are necessary for a fair presentation of our results of operations and financial condition for the interim periods shown, including normal recurring accruals and other items. The results of operations for the interim periods presented are not necessarily indicative of results for the full year. |
Effective in the first quarter of 2004, we changed the unit of accounting used for testing impairment of our indefinite-lived franchise rights to geographic regions and performed impairment testing of our cable franchise rights. We did not record any impairment charges in connection with this impairment testing. |
For a more complete discussion of our accounting policies and certain other information, refer to the financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2003. |
On September 17, 2003, we completed the sale of our approximate 57% interest in QVC, Inc. Accordingly, QVC has been presented as a discontinued operation pursuant to Statement of Financial Accounting Standards (“SFAS”) No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets.” |
The results of operations of QVC included within income from discontinued operations, net of tax for the three months ended March 31, 2003 are as follows (in millions): |
Revenues | $1,062 | ||
Income before income taxes and minority interest | $172 | ||
Income tax expense | $73 |
Reclassifications Certain reclassifications have been made to the prior year financial statements to conform to those classifications used in 2004. |
2. | RECENT ACCOUNTING PRONOUNCEMENTS |
FIN 46/FIN 46R In January 2003, the Financial Accounting Standards Board (“FASB”) issued Interpretation No. 46, “Consolidation of Variable Interest Entities” (“FIN 46”). We adopted the provisions of FIN 46 effective January 1, 2002. Since our initial application of FIN 46, the FASB addressed various implementation issues regarding the application of FIN 46 to entities outside its originally interpreted scope, focusing on Special Purpose Entities, or SPEs. In December 2003, the FASB revised FIN 46 (“FIN 46R”), which delayed the required implementation date until March 31, 2004 for entities that are not SPEs. The adoption of FIN 46R did not have a material impact on our financial condition or results of operations. |
EITF 03-16 In March 2004, the EITF reached a consensus regarding Issue No. 03-16, “Accounting for Investments in Limited Liability Companies” (“EITF 03-16”). EITF 03-16 requires investments in limited liability companies (“LLCs”) that have separate ownership accounts for each investor to be accounted for similar to a limited partnership investment under Statement of Position No. 78-9, “Accounting for Investments in Real Estate Ventures.” Investors would be required to apply the equity method of accounting to their investments at a much lower ownership threshold than the 20% threshold applied under Accounting Principles Board (“APB”) No. 18, “The Equity Method of Accounting for Investments in Common Stock.” EITF 03-16 is effective for the first period beginning after June 15, 2004, and will |
5
COMCAST CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED MARCH 31, 2004
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)
SFAS No. 149
In April 2003, the FASB issued SFAS No. 149, "Amendment of Statement 133 on
Derivative Instruments and Hedging Activities." The Statement amends and
clarifies accounting for derivative instruments, including certain
derivative instruments embedded in other contracts, and for hedging
activities under SFAS No. 133. SFAS No. 149 is effective for contracts
entered into or modified after June 30, 2003, for hedging relationships
designated after June 30, 2003, and to certain preexisting contracts. The
Company adopted SFAS No. 149 on July 1, 2003 on a prospective basis in
accordance with the new statement. The adoption of SFAS No. 149 had no
material impact on the Company's financial condition or results of
operations.
SFAS No. 150
In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain
Financial Instruments with Characteristics of both Liabilities and Equity."
This Statement establishes standards for how an issuer classifies and
measures certain financial instruments with characteristics of both
liabilities and equity. SFAS No. 150 requires that an issuer classify a
financial instrument that is within its scope as a liability or, in some
circumstances, as an asset, with many such financial instruments having
been previously classified as equity. SFAS No. 150 is effective for
financial instruments entered into or modified after May 31, 2003, and
otherwise was effective July 1, 2003. In connection with the adoption of
SFAS No. 150, the Company reclassified its subsidiary preferred shares
totaling approximately $1.6 billion previously included in minority
interest to other noncurrent liabilities in the Company's consolidated
balance sheets.
The FASB is addressing certain implementation issues associated with the
application of SFAS No. 150. On October 29, 2003, the FASB decided to defer
certain provisions of SFAS No. 150 related to mandatorily redeemable
financial instruments representing noncontrolling interests in subsidiaries
included in consolidated financial statements. The Company will monitor the
actions of the FASB and assess the impact, if any, that these actions may
have on its financial statements.
FIN 45
In November 2002, the FASB issued Interpretation No. 45, "Guarantor's
Accounting and Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others" ("FIN 45"). FIN 45 expands on the
accounting guidance of SFAS No.'s 5, 57, and 107 and supercedes FIN 34. FIN
45 clarifies that a guarantor is required to disclose in its interim and
annual financial statements its obligations under certain guarantees that
it has issued, including the nature and terms of the guarantee, the maximum
potential amount of future payments under the guarantee, the carrying
amount, if any, for the guarantor's obligations under the guarantee, and
the nature and extent of any recourse provisions or available collateral
that would enable the guarantor to recover the amounts paid under the
guarantee. FIN 45 also clarifies that, for certain guarantees, a guarantor
is required to recognize, at the inception of a guarantee, a liability for
the fair value of the obligation undertaken in issuing the guarantee. FIN
45 does not prescribe a specific approach for subsequently measuring the
guarantor's recognized liability over the term of the related guarantee.
The initial recognition and initial measurement provisions of FIN 45 apply
on a prospective basis to certain guarantees issued or modified after
December 31, 2002. The disclosure requirements in FIN 45 are effective for
financial statements of interim or annual periods ending after December 15,
2002. The Company adopted the disclosure provisions of FIN 45 in the fourth
quarter of 2002 and adopted the initial recognition and measurement
provisions of FIN 45 on January 1, 2003, as required by the Interpretation.
The impact of the adoption of FIN 45 will depend on the nature and terms of
guarantees entered into or modified by the Company in the future. The
adoption of FIN 45 in the first quarter of 2003 did not have a material
impact on the Company's financial condition or results of operations (see
Note 10).
FIN 46
The Company adopted the provisions of FASB Interpretation No. 46
"Consolidation of Variable Interest Entities" ("FIN 46") effective January
1, 2002. FIN 46 clarifies the application of Accounting Research Bulletin
51 to certain entities, defined as variable interest entities ("VIEs"), in
which equity investors do not have characteristics of a controlling
financial interest or do not have sufficient equity at risk for the entity
to finance its activities without additional subordinated support from
other parties. At the time of the initial application, FIN 46 had no impact
on
7
be applied as a change in accounting principle with a cumulative effect reflected in the income statement. We are currently assessing the impact that the adoption of EITF 03-16 will have on our financial condition and results of operations. |
3. | EARNINGS PER SHARE |
Earnings (loss) per common share is computed by dividing net income (loss) from continuing operations for common stockholders by the weighted average number of common shares outstanding during the period on a basic and diluted basis. |
Our potentially dilutive securities include potential common shares related to our stock options, restricted stock and Comcast exchangeable notes (seeNote 6). Diluted earnings for common stockholders per common share (“Diluted EPS”) considers the impact of potentially dilutive securities except in periods in which there is a loss because the inclusion of the potential common shares would have an antidilutive effect. Diluted EPS excludes the impact of potential common shares related to our stock options in periods in which the option exercise price is greater than the average market price of our common stock for the period. Diluted EPS for the interim period in 2004 excludes the impact of potential common shares related to our Class A Special common stock held in treasury because it is our intent to settle the related Comcast exchangeable notes using cash. |
Diluted EPS for the interim period in 2004 excludes approximately 89.3 million potential common shares related to our stock option plans because the option exercise price was greater than the average market price of our Class A common stock and our Class A Special common stock for the period. Diluted EPS for the interim period in 2003 excludes approximately 179.0 million potential common shares primarily related to our stock option and restricted stock plans and our common stock held in treasury because the assumed issuance of such potential common shares is antidilutive in periods in which there is a loss. |
The following table reconciles the numerator and denominator of the computations of Diluted EPS for common stockholders from continuing operations for the interim periods presented: |
(Amounts in millions, except per share data) Three Months Ended March 31, | |||||||||||||
2004 | 2003 | ||||||||||||
Income | Shares | Per Share Amount | Loss | Shares | Per Share Amount | ||||||||
Basic EPS for common | |||||||||||||
stockholders | $65 | 2,258 | $0.03 | ($355) | 2,255 | ($0.16) | |||||||
Effect of Dilutive | |||||||||||||
Securities | |||||||||||||
Assumed exercise of | |||||||||||||
stock option and | |||||||||||||
restricted stock plans | 10 | ||||||||||||
Diluted EPS | $65 | 2,268 | $0.03 | ($355) | 2,255 | ($0.16) | |||||||
6
COMCAST CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED SEPTEMBER 30, 2003
MARCH 31, 2004
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)
the Company's financial condition or results of operations because the
Company previously consolidated all VIEs in which it was the primary
beneficiary. Since the Company's initial application, the FASB has been
addressing various implementation issues that could potentially broaden the
application of FIN 46 to entities outside its originally interpreted scope
and has issued and proposed several FASB Staff Positions. The Company does
not expect that these FASB Staff Positions will have a material impact on
its financial statements.
3. EARNINGS PER SHARE
Earnings (loss) per common share is computed by dividing net income (loss)
for common stockholders by the weighted average number of common shares
outstanding during the period on a basic and diluted basis.
The Company's potentially dilutive securities include potential common
shares related to the Company's Zero Coupon Convertible Debentures due 2020
(the "Zero Coupon Debentures"), stock options and restricted stock. Diluted
earnings for common stockholders per common share ("Diluted EPS") considers
the impact of potentially dilutive securities except in periods in which
there is a loss as the inclusion of the potential common shares would have
an antidilutive effect. Diluted EPS excludes the impact of potential common
shares related to the Company's Zero Coupon Debentures in periods in which
the weighted average closing sale price of the Company's Class A Special
common stock during the period is not greater than 110% of the accreted
conversion price. Diluted EPS excludes the impact of potential common
shares related to the Company's stock options in periods in which the
option exercise price is greater than the average market price of the
Company's common stock for the period. Diluted EPS excludes the impact of
potential common shares related to the Company's Class A Special common
stock held in treasury because it is the Company's intent to settle the
related Comcast exchangeable notes using cash (see Note 7).
Diluted EPS for the three and nine months ended September 30, 2003 and the
nine months ended September 30, 2002 excludes approximately 148.7 million,
144.4 million and 83.0 million potential common shares, respectively,
related to the Company's stock option plans, restricted stock plans and
Zero Coupon Debentures because the assumed issuance of such potential
common shares is antidilutive in periods in which there is a loss from
continuing operations.
Diluted EPS for the three months ended September 30, 2002 excludes
approximately 58.5 million potential common shares related to both the
Company's stock option plans because the option exercise price was greater
than the average market price of the Company's Class A Special common stock
for the period and also to the Zero Coupon Debentures.
8
4. | ACQUISITIONS AND OTHER SIGNIFICANT EVENTS |
Acquisition of Broadband On November 18, 2002, we completed the acquisition of AT&T Corp.'s (“AT&T”) broadband business, which we refer to as "Broadband." The acquisition created the largest cable operator in the United States by combining Broadband's and our cable networks. |
The application of purchase accounting under SFAS No. 141, "Business Combinations," requires that the total purchase price of an acquisition be allocated to the fair value of the assets acquired and liabilities assumed based on their fair values at the acquisition date. During 2003, we finalized the Broadband purchase price allocation, except for certain litigation contingencies relating to our share of AT&T's potential liability associated with the At Home Corporation litigation (seeNote 9). We are waiting for additional information to complete the Broadband purchase price allocation, which we have arranged with AT&T to obtain and expect to receive during 2004. |
Liabilities associated with exit activities recorded in the purchase price allocation consist of $602 million associated with accrued employee termination and related costs and $929 million associated with either the cost of terminating contracts or the present value of remaining amounts payable under non-cancelable contracts. Amounts paid, adjustments made against these accruals and interest accretion during the 2004 interim period were as follows (in millions): |
Employee Termination and Related Costs | Contract Exit Costs | ||||||
Balance, December 31, 2003 | $135 | $461 | |||||
Payments | (21 | ) | (6 | ) | |||
Interest accretion | 1 | ||||||
Balance, March 31, 2004 | $114 | $456 | |||||
Gemstar On March 31, 2004, we entered into a long-term, non-exclusive patent license and distribution agreement with Gemstar-TV Guide International (“Gemstar”) in exchange for a one-time payment of $250 million to Gemstar. This amount is included in other intangible assets in our condensed consolidated balance sheet based on a preliminary allocation of value. This agreement allows us to utilize Gemstar’s intellectual property and technology and the TV Guide brand and content on our interactive program guides. In addition, we formed an entity along with Gemstar to develop and enhance interactive programming guides. |
7
COMCAST CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED SEPTEMBER 30, 2003
MARCH 31, 2004
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)
The following table reconciles the numerator and denominator of the
computations of Diluted EPS for income (loss) from continuing operations
for the interim periods presented.
5. | INVESTMENTS |
March 31, 2004 | December 31, 2003 | ||||
(in millions) | |||||
Fair value method | |||||
Cablevision | $948 | $970 | |||
Liberty | 2,413 | 2,644 | |||
Microsoft | 1,267 | 1,331 | |||
Sprint | 546 | 349 | |||
Vodafone | 1,056 | 1,245 | |||
Other | 92 | 44 | |||
6,322 | 6,583 | ||||
Equity Method | |||||
Cable related | 2,167 | 2,145 | |||
Other | 234 | 242 | |||
2,401 | 2,387 | ||||
Cost method, principally Time Warner Cable and Time Warner | 8,329 | 8,341 | |||
Total investments | 17,052 | 17,311 | |||
Less, current investments | 2,782 | 2,493 | |||
Non-current investments | $14,270 | $14,818 | |||
Fair Value Method We hold unrestricted equity investments, which we account for as available for sale or trading securities, in |
The cost, fair value and |
March 31, 2004 | December 31, 2003 | ||||
Cost | $128 | $92 | |||
Unrealized gains | 66 | 66 | |||
Unrealized losses | (1 | ) | |||
Fair value | $194 | $157 | |||
8
COMCAST CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED SEPTEMBER 30, 2003
MARCH 31, 2004
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)
Investment Loss, Net Investment loss, net for the interim periods includes the following (in millions): |
Three Months Ended March 31, | |||||
2004 | 2003 | ||||
Interest and dividend income | $17 | $34 | |||
Gains on sales and exchanges of investments, net | 2 | 22 | |||
Investment impairment losses | (55 | ) | |||
Mark to market adjustments on trading securities | (174 | ) | (15 | ) | |
Mark to market adjustments on derivatives related | |||||
to trading securities | 55 | (10 | ) | ||
Mark to market adjustments on derivatives and hedged items | 91 | (199 | ) | ||
Investment loss, net | ($9 | ) | ($223 | ) | |
6. | LONG-TERM DEBT |
March 31, 2004 | December 31, 2003 | ||||
(in millions) | |||||
Notes exchangeable into common stock | $4,005 | $4,318 | |||
Bank and public debt | 22,146 | 22,193 | |||
Other, including capital lease obligations | 475 | 485 | |||
Total debt | $26,626 | $26,996 | |||
The Cross-Guarantee Structure To simplify our capital structure, we and |
Comcast Holdings is not a guarantor and none of its debt is guaranteed under the cross-guarantee structure. As of March 31, 2004, $1.199 billion of our debt was outstanding at Comcast Holdings. |
New Credit Facility In January 2004, we entered into a new $4.5 billion, five-year revolving bank credit facility. Interest |
Redemption of Debt On March 31, 2004, we redeemed all $250 million principal amount of our 8.875% senior notes due 2007. The redemption was financed with available cash. |
Notes Exchangeable into Common Stock We hold exchangeable notes (the “Exchangeable Notes”) that are mandatorily redeemable at our option into shares of Cablevision NY Group (“Cablevision”) Class A common stock or its cash equivalent, Microsoft Corporation (“Microsoft”) common stock or its cash equivalent, (i) Vodafone ADRs, (ii) the cash equivalent, or (iii) a combination of cash and Vodafone ADRs, and Comcast Class A Special common stock or its cash equivalent. The maturity value of the Exchangeable Notes varies based upon the fair market value of the security to which it is |
9
COMCAST CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED SEPTEMBER 30, 2003
MARCH 31, 2004
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)
preferred stock of Time Warner, which will be converted into $1.5 billion
of Time Warner common stock valued upon completion of an effective
registration statement filing with the SEC, and the Company received a 21%
economic stake in the business of TWC. In addition, the Company received
$2.1 billion in cash which was used immediately to repay amounts
outstanding under certain of the Company's credit facilities (see Notes 5
and 7). The TWE restructuring was accounted for as a fair value exchange
with no gain or loss recognized. Under the restructuring agreement, the
Company has registration rights that should facilitate the disposal or
monetization of its shares in TWC and in Time Warner.
As part of the process of obtaining approval of the Broadband acquisition
from the Federal Communications Commission ("FCC"), at the closing of the
Broadband acquisition, the Company placed its entire interest in TWE in
trust for orderly disposition. Any non-cash consideration received in
respect of such interest as a result of the TWE restructuring, including
the Time Warner and TWC stock, will remain in trust until disposed of or
FCC approval is obtained to remove such interests from the trust.
Under the trust, the trustee has exclusive authority to exercise any
management or governance rights associated with the securities in trust.
The trustee also has the obligation, subject to the rights of the Company
as described in the last sentence of this paragraph, to exercise available
registration rights to effect the sale of such interests in a manner
intended to maximize the value received consistent with the goal of
disposing such securities in their entirety by November 2007. Following
this time, if any securities remain in trust, the trustee will be obligated
to dispose of the remaining interests as quickly as possible, and in any
event by May 2008. The trustee is also obligated, through November 2007, to
effect certain specified types of sale or monetization transactions with
respect to the securities as may be proposed by the Company from time to
time.
As a condition of the closing of the TWE restructuring, the Company entered
into a three-year nonexclusive agreement with Time Warner under which AOL
High-Speed Broadband service will be made available over a three- year
period on certain of the Company's cable systems which pass approximately
indexed. Our Exchangeable Notes are collateralized by our investments in Cablevision, Microsoft and Vodafone, respectively, and the Comcast Class A Special common stock held in treasury. |
During the 2004 interim period, we settled an aggregate of $176 million of our obligations relating to our Vodafone exchangeable notes by delivering the underlying shares of common stock to the counterparty upon maturity of the instruments, and the equity collar agreements related to the underlying shares expired. The Vodafone transactions represented non-cash investing and financing activities and had no effect on our statement of cash flows due to their non-cash nature. |
As of March 31, 2004, the securities we hold collateralizing the Exchangeable Notes were sufficient to satisfy the debt obligations associated with the outstanding Exchangeable Notes (seeNotes 5 and8). |
ZONES At maturity, holders of our 2.0% Exchangeable Subordinated Debentures due 2029 (the “ZONES”) are entitled to receive in cash an amount equal to the higher of the principal amount of the ZONES or the market value of Sprint common stock. Prior to maturity, each ZONES is exchangeable at the holders’ option for an amount of cash equal to 95% of the market value of Sprint common stock. As of March 31, 2004, the number of Sprint shares we held exceeded the number of ZONES outstanding. |
We separated the accounting for the Exchangeable Notes and the ZONES into derivative and debt components. We record the change in the fair value of the derivative component of the Exchangeable Notes and the ZONES and the change in the carrying value of the debt component of the Exchangeable Notes and the ZONES as follows (in millions): |
Exchangeable Notes | ZONES | ||||||||
Three Months Ended March 31, | Three Months Ended March 31, | ||||||||
Balance at Beginning of Period: | 2004 | 2003 | 2004 | 2003 | |||||
Debt component | $5,030 | $6,981 | $515 | $491 | |||||
Derivative component | (712 | ) | (1,522 | ) | 268 | 208 | |||
Total | 4,318 | 5,459 | 783 | 699 | |||||
Decrease in debt component due to maturities | (176 | ) | |||||||
Change in debt component to interest expense | (20 | ) | (25 | ) | 6 | 6 | |||
Change in derivative component to investment | |||||||||
loss, net | (117 | ) | 245 | 169 | (1 | ) | |||
Balance at End of Period: | |||||||||
Debt component | 4,834 | 6,956 | 521 | 497 | |||||
Derivative component | (829 | ) | (1,277 | ) | 437 | 207 | |||
Total | $4,005 | $5,679 | $958 | $704 | |||||
Interest Rates Excluding the derivative component of the Exchangeable Notes and the ZONES whose changes in fair value are recorded to investment loss, net, our effective weighted average interest rate was 7.08% as of March 31, 2004 and December 31, 2003. |
10 million homes.
Sale of QVC
On September 17, 2003, the Company completed the sale to Liberty Media
Corporation ("Liberty") of all shares of QVC common stock held by a number
of direct wholly-owned subsidiaries of the Company for an aggregate amount
of approximately $7.7 billion, consisting of $4 billion principal amount of
Liberty's Floating Rate Senior Notes due 2006 (the "Liberty Notes"), $1.35
billion in cash and approximately 218 million shares of Liberty Series A
common stock. The shares had a fair value on the closing date of $10.73 per
share. The consideration received, net of transaction costs, over the
Company's carrying value of the net assets of QVC resulted in a gain of
approximately $3.290 billion, net of approximately $2.865 billion of
related income taxes.
The Liberty Notes and shares of Liberty Series A common stock received in
the transaction have been registered with the SEC pursuant to the
Agreement. On September 24, 2003, the Company, through its wholly-owned
indirect subsidiaries, sold an aggregate of $3.0 billion principal amount
of the Liberty Notes for net proceeds of approximately $3.0 billion. The
remaining Liberty Notes held by the Company, which bear interest at LIBOR
plus 1.5%, are classified as available for sale and the shares of Liberty
Series A common stock received by the Company in connection with the sale
of QVC are classified as trading securities (see Note 5).
11
COMCAST CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED SEPTEMBER 30, 2003
MARCH 31, 2004
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)
The current and noncurrent assets and liabilities of QVC included within
the related discontinued operations captions are as follows (in millions):
Derivatives We use derivative financial instruments to manage our exposure to fluctuations in interest rates and securities prices. We have issued indexed debt instruments and prepaid forward sale agreements whose value, in part, is derived from the market value of certain publicly traded common stock. |
Lines and Letters of Credit As of March 31, |
As of March 31, 2004, we and certain of our subsidiaries had unused irrevocable standby letters of credit totaling $419 million to cover potential fundings under various agreements. |
7. | STOCKHOLDERS' EQUITY |
Stock-Based Compensation We account for |
The following table illustrates the effect that applying the fair value recognition provisions of SFAS No. 123 to stock-based compensation would have had on net income (loss) and earnings (loss) per share. Upon further analysis during 2003, it was determined that the expected option lives for options granted in prior years should have been 7 years rather than the 8 years used previously. The amounts in the table reflect this revision for all periods presented. Total |
11
COMCAST CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED SEPTEMBER 30, 2003
MARCH 31, 2004
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)
5. INVESTMENTS
Three Months Ended March 31, | |||||
2004 | 2003 | ||||
Net income (loss), as reported | $65 | ($297 | ) | ||
Add: Total stock-based compensation expense | |||||
included in net income (loss), as reported above | 5 | 2 | |||
Deduct: Total stock-based compensation expense determined | |||||
under fair value based method for all awards relating to | |||||
continuing operations, net of related tax effects | (33 | ) | (35 | ) | |
Deduct: Total stock-based compensation expense determined | |||||
under fair value based method for all awards relating to | |||||
discontinued operations, net of related tax effects | (3 | ) | |||
Pro forma, net income (loss) | $37 | ($333 | ) | ||
Basic earnings (loss) from continuing operations for common | |||||
stockholders per common share: | |||||
As reported | $0.03 | ($0.16 | ) | ||
Pro forma | $0.02 | ($0.17 | ) | ||
Diluted earnings (loss) from continuing operations for common | |||||
stockholders per common share: | |||||
As reported | $0.03 | ($0.16 | ) | ||
Pro forma | $0.02 | ($0.17 | ) | ||
Basic earnings (loss) for common stockholders per | |||||
common share: | |||||
As reported | $0.03 | ($0.13 | ) | ||
Pro forma | $0.02 | ($0.15 | ) | ||
Diluted earnings (loss) for common stockholders per | |||||
common share: | |||||
As reported | $0.03 | ($0.13 | ) | ||
Pro forma | $0.02 | ($0.15 | ) |
The pro forma effect on net income (loss) and |
12
COMCAST CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED SEPTEMBER 30, 2003
MARCH 31, 2004
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)
The following table summarizes the activity of our option plans during the 2004 interim period (options in thousands): |
Class A Common Stock | Class A Special Common Stock | ||||||||
Options | Weighted- Average Exercise Price | Options | Weighted- Average Exercise Price | ||||||
Outstanding at beginning of period | 85,151 | $39.28 | 60,464 | $29.43 | |||||
Granted | 14,041 | 29.98 | |||||||
Exercised | (396 | ) | 26.83 | (477 | ) | 12.25 | |||
Canceled | (1,545 | ) | 39.62 | (323 | ) | 36.22 | |||
Outstanding at end of period | 97,251 | 37.99 | 59,664 | 29.53 | |||||
Exercisable at end of period | 55,181 | 44.87 | 33,647 | 26.82 | |||||
Comprehensive Income (Loss) Our total comprehensive income (loss) for the interim periods was as follows (in millions): |
Three Months Ended March 31, | |||||
2004 | 2003 | ||||
Net income (loss) | $65 | ($297 | ) | ||
Unrealized gains (losses) on marketable securities | 2 | (31 | ) | ||
Reclassification adjustments for losses | |||||
included in net income (loss) | 8 | 24 | |||
Foreign currency translation gains | 6 | ||||
Comprehensive income (loss) | $75 | ($298 | ) | ||
8. | STATEMENT OF CASH FLOWS - SUPPLEMENTAL INFORMATION |
We made cash payments for
13 COMCAST CORPORATION AND SUBSIDIARIES
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22 COMCAST CORPORATION AND SUBSIDIARIES
23 COMCAST CORPORATION AND SUBSIDIARIES
Overview We are principally involved in the management and operation of broadband communications networks (our cable segment) and in the management of programming content over cable and satellite television networks (our content segment). During the first quarter of 2004, we received over 94% of our revenue from our cable segment, primarily through monthly subscriptions to our video, high-speed Internet and phone services, as well as from advertising. Subscribers typically pay us monthly, based on rates and related charges that vary according to their chosen level of service and the type of equipment they use. Revenue from our content segment is derived from the sale of advertising time and affiliation agreements with cable and satellite television companies. Highlights for the first quarter of 2004 included the following: Revenue growth of 9.8% in our cable segment compared to the same quarter in 2003, Operating income before depreciation and amortization growth of 21.0% in our cable segment compared to the Refinancing three of our The following provides the details of these highlights and Business Developments Refer to On April 28, 2004, we announced the Results of Continuing Operations Revenues Consolidated revenues for the Operating, selling, general and administrative expenses Consolidated operating, selling, general and administrative expenses for the Depreciation Depreciation Amortization Amortization expense decreased $78 million for the 24 COMCAST CORPORATION AND SUBSIDIARIES Cable Segment Operating Results The
The following table presents our subscriber and
25 COMCAST CORPORATION AND SUBSIDIARIES Revenues Video revenue consists of our basic, expanded basic, premium, pay-per-view, equipment and digital cable services. The The The decrease in phone revenue for the The Other revenue includes installation revenues, guide revenues, commissions from electronic retailing, The Expenses Total operating, selling, general and administrative Consolidated Interest Expense The 26 COMCAST CORPORATION AND SUBSIDIARIES Investment Loss, Net
We have entered into derivative financial instruments We are exposed to changes in the We are also exposed to changes in Accordingly, our Income Tax (Expense) Benefit The Minority Interest The We believe that our operations are not materially affected by inflation. Liquidity and Capital Resources We believe that we will be able to meet our current and long-term liquidity and capital requirements, including fixed charges, through our cash flows from operating activities, existing cash, cash equivalents and investments, through available borrowings under our existing credit facilities, and through our ability to obtain future external financing. 27 COMCAST CORPORATION AND Cash and Cash Equivalents We have traditionally maintained significant levels of cash and cash equivalents to meet our Investments We consider investments that we determine to be non-strategic, highly-valued, or both, to be a source of liquidity. As of March 31, 2004, we consider our investments in the $1.5 billion in Time Warner Inc. common equivalent preferred stock, $1.3 billion in Liberty common stock, 21% interest in Time Warner Cable Inc., and interests in certain cable television partnerships. We do not have any significant contractual funding commitments with respect to any of our Refer toNote 5 to our financial statements included in Item 1 for a discussion of our investments. Available Borrowings Under Credit Facilities We have traditionally maintained significant availability under our lines of credit to meet our short-term liquidity requirements. On January 8, 2004, we refinanced three of our existing revolving credit facilities with a new $4.5 billion, five-year revolving bank credit facility due January 2009. As of March 31, 2004, amounts available under our lines of credit totaled $4.382 billion. Refer toNote 6 to our consolidated financial statements included in Item 1 for further discussion about our new credit facility. Financing As of March 31, 2004 and Excluding the effects of interest rate risk management instruments, 7.7% and 8.2% of our total debt as of March 31, 2004 and December 31, 2003, respectively, was at variable rates. We have made, and may from time to time in the Refer toNote 6 to our financial statements included in Item 1 for a discussion of our long-term debt. Statement of Cash Flows Cash and cash equivalents decreased $675 million as of March 31, 2004 from December 31, 2003. The decrease in cash and cash equivalents resulted from cash flows from operating, financing and investing activities, as explained below. Net cash provided by operating activities from continuing operations amounted to $774 million for the Net cash used in financing activities from continuing operations was $251 million for the three months ended March 31, 2004 and consists primarily of repayments of debt. During the three months ended March 31, 2004, we repaid $273 million of our debt, consisting principally of: $260 million of our senior and medium term notes and $13 million of capital leases and other. Net cash used in investing activities from continuing operations was $1.198 billion for the three months ended March 31, 2004. During this period, 28 COMCAST CORPORATION AND SUBSIDIARIES
Refer toNote
A summary of our repurchases during the quarter under the $1 billion repurchase program authorized by our Board of Directors in December 2003, are as follows: PURCHASES OF EQUITY SECURITIES
The total number of shares purchased includes approximately 115,000 shares received in the administration of employee equity compensation plans. 29 COMCAST CORPORATION AND SUBSIDIARIES
(i) We filed a Current Report on Form 8-K under Items 5 and 7(c) on 30 COMCAST CORPORATION AND SUBSIDIARIES SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
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