Use these links to rapidly review the document
TABLE OF CONTENTS

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

(Mark One) 

ý
Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the Quarterly Period Ended:

SEPTEMBER 30, 2004MARCH 31, 2005

OR

o
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 001-15471

COMCAST HOLDINGS CORPORATION
(Exact name of registrant as specified in its charter)

PENNSYLVANIA
(State or other jurisdiction of
incorporation or organization)		 23-1709202
(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 ý        No o

        Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12-b2 of the Exchange Act). Yes o    No ý

        As of September 30, 2004,March 31, 2005, there were 21,591,115 shares of Class A Common Stock, 916,198,519 shares of Class A Special Common Stock and 9,444,375 shares of Class B Common Stock outstanding.

        The Registrant meets the conditions set forth in General Instructions H(1)(a) and (b) of Form 10-Q and is therefore filing this Form with the reduced disclosure format.

COMCAST HOLDINGS CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED SEPTEMBER 30, 2004MARCH 31, 2005

TABLE OF CONTENTS

 
  
  
 Page Number
PART I.    FINANCIAL INFORMATION  
  ITEM 1. Financial Statements  
    Condensed Consolidated Balance Sheet as of September 30, 2004March 31, 2005
and December 31, 20032004 (Unaudited)		 2
    Condensed Consolidated Statement of Operations for the Three and Nine Months Ended September 30,March 31, 2005 and 2004 and 2003 (Unaudited) 3
    Condensed Consolidated Statement of Cash Flows for the NineThree Months Ended September 30,March 31, 2005 and 2004 and 2003 (Unaudited) 4
    Notes to Condensed Consolidated Financial Statements (Unaudited) 5
  ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 1615
  ITEM 3. Quantitative and Qualitative Disclosures about Market Risk 20
  ITEM 4. Controls and Procedures 20
PART II.    OTHER INFORMATION  
  ITEM 1. Legal Proceedings 20
  ITEM 6. Exhibits 20
  SIGNATURES 21

This Quarterly Report on Form 10-Q is for the three and nine months ended September 30, 2004.March 31, 2005. This Quarterly Report modifies and supersedes documents filed prior to this Quarterly Report. The SEC allows us to "incorporate by reference" information that we file with them, which means that we can disclose important information to you by referring you directly to those documents. Information incorporated by reference is considered to be part of this Quarterly Report. In addition, information that we file with the SEC in the future will automatically update and supersede information contained in this Quarterly Report. InThroughout this Quarterly Report, "Comcast Holdings," "we," "us" and "our" refer to Comcast Holdings Corporation and its subsidiaries, and "Comcast" refers to Comcast Corporation.

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 thosethese so-called "forward-looking statements" by words such as "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. In evaluating those statements, you should specifically consider various factors, including the risks and uncertainties outlined below and in other reports we file with the SEC. Actual events or our actual results may differ materially from any of our forward-looking statements.

        Among other things, ourOur businesses may be affected by:by, among other things, the following:

        AsFor a more fully described elsewheredetailed explanation of the factors affecting our businesses, please refer to the Risk Factors section in this Quarterly Report and inItem 1 of our Annual Report on2004 Form 10-K for the year ended December 31, 2003, on September 17, 2003, we sold our approximate 57% interest in QVC, Inc., which markets a wide variety of products directly to consumers primarily on merchandise-focused television programs, to Liberty Media Corporation. Accordingly, financial information related to QVC is presented as a discontinued operation in our financial statements.10-K.


COMCAST HOLDINGS CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED SEPTEMBER 30, 2004MARCH 31, 2005

PART I.    FINANCIAL INFORMATION

ITEM 1.    FINANCIAL STATEMENTS

CONDENSED CONSOLIDATED BALANCE SHEET
(Unaudited)
 September 30,
2004
 December 31,
2003
 
 (Dollars in millions, except share data)
 (Dollars in millions, except share data)

 
 March 31,
2005
 December 31,
2004
ASSETSASSETS     ASSETS    
CURRENT ASSETSCURRENT ASSETS     CURRENT ASSETS    
Cash and cash equivalents $685 $1,509 Cash and cash equivalents $588 $428
Investments 81 139 Investments 62 87
Accounts receivable, less allowance for doubtful accounts of $66 and $74 470 453 Accounts receivable, less allowance for doubtful accounts of $64 and $65 482 500
Other current assets 209 179 Other current assets 226 265
 
 
   
 
 Total current assets 1,445 2,280  Total current assets 1,358 1,280
 
 
   
 
NOTES RECEIVABLE FROM AFFILIATESNOTES RECEIVABLE FROM AFFILIATES 4,851 3,310 NOTES RECEIVABLE FROM AFFILIATES 5,788 5,450
DUE FROM AFFILIATES, netDUE FROM AFFILIATES, net 1,970 943 DUE FROM AFFILIATES, net 1,754 1,756
INVESTMENTSINVESTMENTS 2,165 3,363 INVESTMENTS 2,462 2,488
PROPERTY AND EQUIPMENT, net of accumulated depreciation of $5,201 and $4,456 6,485 6,571 
PROPERTY AND EQUIPMENT, net of accumulated depreciation of $5,679 and $5,410PROPERTY AND EQUIPMENT, net of accumulated depreciation of $5,679 and $5,410 6,589 6,557
FRANCHISE RIGHTSFRANCHISE RIGHTS 16,617 16,620 FRANCHISE RIGHTS 16,613 16,613
GOODWILLGOODWILL 5,750 5,663 GOODWILL 5,797 5,736
OTHER INTANGIBLE ASSETS, net of accumulated amortization of $1,196 and $1,022 1,881 1,350 
OTHER INTANGIBLE ASSETS, net of accumulated amortization of $1,393 and $1,295OTHER INTANGIBLE ASSETS, net of accumulated amortization of $1,393 and $1,295 1,717 1,771
OTHER NONCURRENT ASSETS, netOTHER NONCURRENT ASSETS, net 273 302 OTHER NONCURRENT ASSETS, net 297 291
 
 
   
 
 $41,437 $40,402   $42,375 $41,942
 
 
   
 

LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES AND STOCKHOLDERS' EQUITY
 
 
 
 
 
LIABILITIES AND STOCKHOLDERS' EQUITY
 
 
 
 
CURRENT LIABILITIESCURRENT LIABILITIES     CURRENT LIABILITIES    
Accounts payable $376 $303 Accounts payable and accrued expenses related to trade creditors $1,243 $1,236
Accrued expenses and other current liabilities 1,992 2,014 Accrued expenses and other current liabilities 1,056 985
Deferred income taxes 5 26 Current portion of long-term debt 1,229 732
Current portion of long-term debt 27 373   
 
 
 
  Total current liabilities 3,528 2,953
 Total current liabilities 2,400 2,716   
 
 
 
 
LONG-TERM DEBT, less current portionLONG-TERM DEBT, less current portion 7,487 7,828 LONG-TERM DEBT, less current portion 6,268 6,826
NOTES PAYABLE TO AFFILIATESNOTES PAYABLE TO AFFILIATES 648 61 NOTES PAYABLE TO AFFILIATES 753 735
DEFERRED INCOME TAXESDEFERRED INCOME TAXES 8,321 8,288 DEFERRED INCOME TAXES 8,351 8,284
OTHER NONCURRENT LIABILITIESOTHER NONCURRENT LIABILITIES 2,637 2,289 OTHER NONCURRENT LIABILITIES 2,904 2,836
MINORITY INTERESTMINORITY INTEREST 384 316 MINORITY INTEREST 431 396
COMMITMENTS AND CONTINGENCIES (NOTE 8)     
COMMITMENTS AND CONTINGENCIES (NOTE 7)COMMITMENTS AND CONTINGENCIES (NOTE 7)    
STOCKHOLDERS' EQUITYSTOCKHOLDERS' EQUITY     STOCKHOLDERS' EQUITY    
Preferred stock—authorized, 20,000,000 shares; issued, zero     Preferred stock—authorized, 20,000,000 shares; issued, zero — —
Class A common stock, $1.00 par value—authorized, 200,000,000 shares; issued, 21,591,115 22 22 Class A common stock, $1.00 par value—authorized, 200,000,000 shares; issued, 21,591,115 22 22
Class A special common stock, $1.00 par value—authorized, 2,500,000,000 shares; issued, 916,198,519 916 916 Class A Special common stock, $1.00 par value—authorized, 2,500,000,000 shares; issued, 916,198,519 916 916
Class B common stock, $1.00 par value—authorized, 50,000,000 shares; issued, 9,444,375 9 9 Class B common stock, $1.00 par value—authorized, 50,000,000 shares; issued, 9,444,375 9 9
Additional capital 12,359 12,353 Additional capital 12,368 12,355
Retained earnings 6,268 5,623 Retained earnings 6,820 6,609
Accumulated other comprehensive loss (14) (19)Accumulated other comprehensive income 5 1
 
 
   
 
 Total stockholders' equity 19,560 18,904  Total stockholders' equity 20,140 19,912
 
 
   
 
 $41,437 $40,402   $42,375 $41,942
 
 
   
 

See notes to condensed consolidated financial statements.


COMCAST HOLDINGS CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED SEPTEMBER 30, 2004MARCH 31, 2005
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
 Three Months Ended
September 30,
 Nine Months Ended
September 30,
 
 (Dollars in Millions)

 
 2004
 2003
 2004
 2003
 
 Three Months Ended
March 31,
 
 (Dollars in millions)

 
 2005
 2004
 
REVENUESREVENUES $2,148 $1,882 $6,385 $5,703 
REVENUES
 
$
2,265
 
$
2,089
 

COSTS AND EXPENSES
COSTS AND EXPENSES
 
 
 
 
 
 
 
 
 
COSTS AND EXPENSES
 
 
 
 
 
Operating (excluding depreciation) 767 661 2,267 2,054 Operating (excluding depreciation) 787 791 
Selling, general and administrative 604 491 1,705 1,469 Selling, general and administrative 608 548 
Depreciation 333 330 967 965 Depreciation 339 333 
Amortization 55 49 146 136 Amortization 63 47 
 
 
 
 
   
 
 
 1,759 1,531 5,085 4,624   1,797 1,719 
 
 
 
 
   
 
 
OPERATING INCOMEOPERATING INCOME 389 351 1,300 1,079 OPERATING INCOME 468 370 

OTHER INCOME (EXPENSE)
OTHER INCOME (EXPENSE)
 
 
 
 
 
 
 
 
 
OTHER INCOME (EXPENSE)
 
 
 
 
 
Interest expense (147) (161) (452) (500)Interest expense (154) (158)
Interest income (expense) on affiliate notes, net 54 (10) 136 2 Interest income on affiliate notes, net 76 41 
Investment income (loss), net 96 (166) 190 (198)Investment loss, net (13) (52)
Equity in net losses of affiliates (14) (15) (33) (45)Equity in net income (losses) of affiliates 1 (8)
Other income (expense) 82 (1) 86 1 Other income (expense) 26 (5)
 
 
 
 
   
 
 
 71 (353) (73) (740)  (64) (182)
 
 
 
 
   
 
 
INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE INCOME TAXES AND MINORITY INTEREST 460 (2) 1,227 339 

INCOME TAX (EXPENSE) BENEFIT
 
(219
)
 
84
 
(555
)
 
(48
)
INCOME BEFORE INCOME TAXES AND MINORITY INTERESTINCOME BEFORE INCOME TAXES AND MINORITY INTEREST 404 188 

INCOME TAX EXPENSE
INCOME TAX EXPENSE
 
(181
)
 
(87
)
 
 
 
 
   
 
 
INCOME FROM CONTINUING OPERATIONS BEFORE MINORITY INTEREST 241 82 672 291 
INCOME BEFORE MINORITY INTERESTINCOME BEFORE MINORITY INTEREST 223 101 

MINORITY INTEREST
MINORITY INTEREST
 
(2
)
 
(14
)
 
(21
)
 
(33
)
MINORITY INTEREST
 
(19
)
 
(3
)
 
 
 
 
 
INCOME FROM CONTINUING OPERATIONS 239 68 651 258 

INCOME FROM DISCONTINUED OPERATIONS, net of tax
 
 
 
39
 
 
 
168
 
GAIN ON DISCONTINUED OPERATIONS, net of tax   3,290   3,290 
 
 
 
 
   
 
 
NET INCOMENET INCOME $239 $3,397 $651 $3,716 NET INCOME $204 $98 
 
 
 
 
   
 
 

See notes to condensed consolidated financial statements.


COMCAST HOLDINGS CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED SEPTEMBER 30, 2004MARCH 31, 2005
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)


 Nine Months Ended September 30,
 
 2004
 2003
 
 (Dollars in Millions)
Three Months Ended March 31,
 
 (Dollars in millions)

 
 2005
 2004
 
OPERATING ACTIVITIESOPERATING ACTIVITIES     OPERATING ACTIVITIES     
Net income $651 $3,716 
Income from discontinued operations   (168)
Gain on discontinued operations   (3,290)
 
 
 
Income from continuing operations 651 258 

Adjustments to reconcile net income from continuing operations to net cash provided by operating activities from continuing operations:
 
 
 
 
 		Net income $204 $98 
 Depreciation 967 965 
Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
 
 
 Amortization 146 136  Depreciation 339 333 
 Non-cash interest expense, net 33 22  Amortization 63 47 
 Non-cash interest (income) expense on affiliate notes, net (136) (2) Non-cash interest expense, net 10 14 
 Equity in net losses of affiliates 33 45  Non-cash interest income on affiliate notes, net (76) (41)
 Losses (gains) on investments and other (income) expense, net (217) 213  Equity in net (income) losses of affiliates (1) 8 
 Non-cash contribution expense 23    Losses (gains) on investments and other non-cash (income) expense, net (4) 62 
 Minority interest 21 33  Non-cash contribution expense 2 23 
 Deferred income taxes 423 128  Minority interest 19 3 
 Proceeds from sales or exchanges of trading securities 553 85  Deferred income taxes 66 40 
 
Changes in operating assets and liabilities, net of effects of acquisitions and divestitures
 
 
 
 
 		 
Changes in operating assets and liabilities, net of effects of acquisitions and divestitures:
 
 
 
 
 
 Change in accounts receivable, net (4) 32  Change in accounts receivable, net 18 51 
 Change in accounts payable 70 (176) Change in accounts payable and accrued expenses related to trade creditors 7 (16)
 Change in other operating assets and liabilities 7 327  Change in other operating assets and liabilities 146 144 
 
 
   
 
 
 Net cash provided by operating activities from continuing operations 2,570 2,066  Net cash provided by operating activities 793 766 
 
 
   
 
 
FINANCING ACTIVITIESFINANCING ACTIVITIES     FINANCING ACTIVITIES     
Proceeds from borrowings 4 1,260 Proceeds from borrowings — 4 
Retirements and repayments of debt (573) (2,293)Retirements and repayments of debt (7) (269)
Net transactions with affiliates (1,659) (1,598)Net transactions with affiliates (335) (869)
Other 2   Other 16 — 
 
 
   
 
 
 Net cash used in financing activities from continuing operations (2,226) (2,631) Net cash used in financing activities (326) (1,134)
 
 
   
 
 
INVESTING ACTIVITIESINVESTING ACTIVITIES     INVESTING ACTIVITIES     
Acquisitions, net of cash acquired (296) (22)Proceeds from sales of (purchases of) short-term investments, net (6) 6 
Proceeds from sales (purchases) of short-term investments, net (6) 4 Proceeds from sales of investments 100 — 
Proceeds from sales of investments and assets held for sale 197 4,563 Purchases of investments (10) (33)
Purchases of investments (62) (68)Capital expenditures (332) (275)
Capital expenditures (928) (1,038)Additions to intangible and other noncurrent assets (59) (25)
Additions to intangible and other noncurrent assets (73) (61)  
 
 
 
 
  Net cash used in investing activities (307) (327)
 Net cash (used in) provided by investing activities from continuing operations (1,168) 3,378   
 
 
 
 
 
(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (824) 2,813 
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTSINCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 160 (695)

CASH AND CASH EQUIVALENTS, beginning of period
CASH AND CASH EQUIVALENTS, beginning of period
 
1,509
 
400
 
CASH AND CASH EQUIVALENTS, beginning of period
 
428
 
1,509
 
 
 
   
 
 
CASH AND CASH EQUIVALENTS, end of periodCASH AND CASH EQUIVALENTS, end of period $685 $3,213 CASH AND CASH EQUIVALENTS, end of period $588 $814 
 
 
   
 
 

See notes to condensed consolidated financial statements.



COMCAST HOLDINGS CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED SEPTEMBER 30, 2004MARCH 31, 2005
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1.    CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

We have prepared these unaudited condensed consolidated financial statements based upon Securities and Exchange Commission ("SEC") rules that permit reduced disclosure for interim periods. We are an indirect, wholly ownedwholly-owned subsidiary of Comcast Corporation ("Comcast"). Our presentation differs from the condensed consolidated financial statements of Comcast by excluding both Comcast's corporate operations and certain cable operations, primarily those acquired from AT&T in November 2002 (the "Broadband acquisition"). Subsequent to the Broadband acquisition, all of our and Comcast's cable operations are operated as a single, integrated cable business unit. Our condensed consolidated financial statements reflect the assets, liabilities, revenues and expenses directly attributable to us, as well as allocations deemed reasonable by management, to present our financial position, results of operations and cash flows on a stand-alone basis. These allocations are further described in Note 10.9. All significant intercompany accounts and transactions withinbetween entities consolidated in our financial statements have been eliminated.

These financial statements include all adjustments that are necessary for a fair presentation of our financial condition and results of operations 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 our annual financial statements for the preceding fiscal year as filed with the SEC.

        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 are as follows (in millions):

 
 Three Months Ended
September 30, 2003
 Nine Months Ended
September 30, 2003
Revenues $752 $2,915
Income before income taxes and minority interest $123 $496
Income tax expense $47 $184

        Both periods presented above include QVC's operations through August 31, 2003, as reported to us by QVC.

Certain reclassifications have been made to the prior year financial statements to conform to those classifications used in 2004.2005.

2.    RECENT ACCOUNTING PRONOUNCEMENTS

SFAS No. 123R

In December 2004, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards ("SFAS") No. 123 (revised 2004), "Share-Based Payment" ("SFAS No. 123R"), which replaces SFAS No. 123, "Accounting for Stock-Based Compensation" ("SFAS No. 123") and supersedes Accounting Principles Board ("APB") Opinion No. 25, "Accounting for Stock Issued to Employees" ("APB No. 25"). SFAS No. 123R requires all share-based payments to employees, including grants of employee stock options, to be recognized in the financial statements based on their fair values, beginning with the next fiscal year that begins after June 15, 2005, with early adoption encouraged. In addition, SFAS No. 123R will cause unrecognized expense (based on the amounts in our pro forma footnote disclosure) related to options vesting after the date of initial adoption to be recognized as a charge to results of operations over the remaining vesting period. We are required to adopt SFAS No. 123R beginning January 1, 2006. Under SFAS No. 123R, we must determine the appropriate fair value model to be used for valuing share-based payments, the amortization method for compensation cost and the transition method to be used at the date of adoption. The transition alternatives include prospective and retroactive adoption methods. Under the retroactive methods, prior periods may be retroactively adjusted either as of the beginning of the year of adoption or for all periods presented. The prospective method requires that compensation expense be recorded for all unvested stock options and share awards at the beginning of the first quarter of adoption of SFAS No. 123R, while the retroactive methods would record compensation expense for all unvested stock options and share awards beginning with the first period retroactively adjusted. We are evaluating the


COMCAST HOLDINGS CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED SEPTEMBER 30, 2004MARCH 31, 2005
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)


2.    RECENT ACCOUNTING PRONOUNCEMENTS

        In January 2003, the Financial Accounting Standards Board ("FASB") issued Interpretationrequirements of SFAS No. 46, "Consolidation of Variable Interest Entities" ("FIN 46"). We adopted123R, and we expect that 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 notSFAS No. 123R will have a material impact on our financial condition orconsolidated results of operations.

        In March 2004, We have not determined the Emerging Issues Task Force ("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 are required to apply the equitydate or method of accounting to their investments at a much lower ownership threshold thanadoption or the 20% threshold applied under Accounting Principles Board ("APB")effect of adopting SFAS 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. We adopted EITF 03-16 on July 1, 2004. The adoption of EITF 03-16 did not have a material impact on our financial condition or results of operations.123R.

3.    ACQUISITIONS AND OTHER SIGNIFICANT EVENTS

        On May 10, 2004, we completed the purchase of TechTV Inc. ("TechTV") by acquiring all outstanding common and preferred stock of TechTV from Vulcan Programming Inc. for approximately $300 million in cash, funded with borrowings under a note payable to affiliate. Substantially all of the purchase price has been recorded as an intangible asset pending the completion of a formal valuation. The results of TechTV are not material for pro forma presentation. On May 28, 2004, G4, our wholly-owned subsidiary, and TechTV began operating as one network called G4techTV, which is available to approximately 44 million cable and satellite homes nationwide. We have classified G4techTV as part of our content business segment (see Note 9).

        On July 28, 2004, we exchanged approximately 120 million shares of Liberty Media Corporation ("Liberty") Series A common stock that we held (see Note 4), valued at approximately $1.022 billion based upon the price of Liberty common stock on the closing date of the transaction, with Liberty for 100% of the stock of Liberty's subsidiary, Encore ICCP, Inc. ("Encore"). Encore's assets consisted of cash of approximately $547 million, a 10.4% interest in E! Entertainment Television, Inc. ("E!") and 100% of the International Cable Channels Partnership, Ltd. ("International Channel Networks"). We also received all of Liberty's rights, benefits and obligations under the TCI Music contribution agreement (an agreement between another Comcast cable subsidiary and Liberty), which resulted in the resolution of all pending litigation between Liberty and Comcast regarding the contribution agreement. The Liberty exchange increased our portfolio of programming investments because we now own 60.5% of E! and 100% of International Channel Networks. The exchange was structured as a tax free transaction. We allocated the value of the shares exchanged in the transaction between cash, our additional investment in E!, International


COMCAST HOLDINGS CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED SEPTEMBER 30, 2004
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Channel Networks and the resolution of the Comcast litigation related to the contribution agreement. The values of certain assets and liabilities are based on preliminary valuations and are subject to adjustment as the valuation reports and any additional information are obtained. The effects of our acquisition of the additional interest in E! and the acquisition of International Channel Networks have been reflected in our consolidated statement of operations from the date of the transaction. The results of International Channel Networks and the impact of our additional interest in E! are not material for pro forma presentation.

4.    INVESTMENTS
 September 30,
2004
 December 31,
2003
 (Dollars in millions)
 (in millions)
 March 31,
2005
 December 31,
2004
Fair value methodFair value method    Fair value method    
Liberty Media Corporation $872 $2,644Liberty Media Corporation $1,037 $1,098
Liberty Media International 366  Liberty Media International 344 366
Sprint 574 349Sprint 643 701
Other 43 41Other 84 24
 
 
  
 
 1,855 3,034  $2,108 2,189

Equity method
Equity method
 
260
 
331
Equity method
 
286
 
268
Cost methodCost method 131 137Cost method 130 118
 
 
  
 
Total investments 2,246 3,502Total investments 2,524 2,575

Less, current investments
Less, current investments
 
81
 
139
Less, current investments
 
62
 
87
 
 
  
 
Noncurrent investmentsNoncurrent investments $2,165 $3,363Noncurrent investments $2,462 $2,488
 
 
  
 

We hold unrestricted equity investments, which we account for as available for sale or trading securities, in certain publicly traded companies. Our investments in Liberty Media Corporation, Liberty Media International, Inc. ("Liberty International") and Sprint are accounted for as trading securities. The net unrealized pre-tax gains on investments accounted for as available for sale securities as of September 30, 2004, and DecemberMarch 31, 2003,2005, of $10$6 million and $42 million, respectively, havehas been reported in our consolidated balance sheet principally as a component of accumulated other comprehensive loss,income, net of related deferred income taxes of $4 million and $15 million, respectively.$2 million.

        On June 7, 2004, we received approximately 11 million shares of Liberty Media International, Inc. ("Liberty International") Series A common stock in connection with the spin-off by Liberty of Liberty International. In the spin-off, each share of Liberty Series A and Series B common stock received 0.05 shares of the new Liberty International Series A common stock. We have classified all of the shares of Liberty International Series A common stock that we received as trading securities recorded at fair value within noncurrent investments. Approximately 5 million of these shares collateralize a portion of the ten-year prepaid forward sale of Liberty common stock that we entered into in December 2003.


COMCAST HOLDINGS CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED SEPTEMBER 30, 2004
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

The cost, fair value and unrealized gains and losses related to our available for sale securities are as follows (in(dollars in millions):


 September 30,
2004
 December 31,
2003
  March 31,
2005
 December 31,
2004
Cost $20 $44  $74 $19
Unrealized gains 10 43  8 —
Unrealized losses   (1) (2) —
 
 
  
 

Fair value
 
$
30
 
$
86
 
 
$
80
 
$
19
 
 
  
 

On February 23, 2005, we entered into a 10 year prepaid forward sale of approximately 2.7 million shares of Liberty International Series A common stock for proceeds of $99 million.

The increase in our other fair value method investments relates principally to non-cash additions during 2005 in connection with the exchange of one of our equity method investments.


COMCAST HOLDINGS CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED MARCH 31, 2005
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

        Investment income (loss),loss, net for the interim periods includes the following (in(dollars in millions):

 
 Three Months Ended
September 30,
 Nine Months Ended
September 30,
 
 
 2004
 2003
 2004
 2003
 
Interest, dividend and other investment income (expense) $(4)$5 $(12)$13 
Gains on sales and exchanges of investments, net  35     34  23 
Investment impairment losses  (7)    (10) (69)
Mark to market adjustments on trading securities  (59) (166) (113) (98)
Mark to market adjustments on derivatives related to trading securities  139  (1) 297  (66)
Mark to market adjustments on derivatives and hedged items  (8) (4) (6) (1)
  
 
 
 
 
Investment income (loss), net $96  ($166)$190  ($198)
  
 
 
 
 
 
 Three Months Ended
March 31,
 
 
 2005
 2004
 
Interest, dividend and other investment income (expense) $(3)$(6)
Unrealized losses on trading securities  (135) (17)
Mark to market adjustments on derivatives related to trading securities  129  (41)
Mark to market adjustments on derivatives  (4) 12 
  
 
 
Investment loss, net $(13)$(52)
  
 
 

        On September 30, 2004, we sold our 20% interestThe changes in DHC Ventures, LLC (Discovery Health Channel) to Discovery Communications, Inc.the carrying amount of goodwill by business segment (see Note 8) for approximately $149 millionthe period presented are as follows (dollars in cash and recognized a gain on the sale of approximately $94 million to other income.millions):

 
 Cable
 Content
 Corporate and Other
 Total
Balance, December 31, 2004 $4,714 $824 $198 $5,736
Acquisitions  —  —  61  61
  
 
 
 
Balance, March 31, 2005 $4,714 $824 $259 $5,797
  
 
 
 

5.    LONG-TERM DEBT

        To simplify Comcast's capital structure, Comcast and certain of its cable holding company subsidiaries, including our wholly ownedwholly-owned subsidiary Comcast Cable Communications, LLC ("Comcast Cable"), have unconditionally guaranteed each other's debt securities and indebtedness for borrowed money. As of September 30, 2004, $20.588March 31, 2005, $20.275 billion of Comcast's debt securities were entitled to the benefits of the cross-guarantee structure, including $6.350$6.322 billion of Comcast Cable's debt securities.

Comcast Holdings Corporation is not a guarantor, and none of its debt is guaranteed. As of September 30, 2004, $905March 31, 2005, $902 million of debt was outstanding at Comcast Holdings Corporation.

        OnAs of March 31, 2004, we repaid all $250 million principal amount2005, certain of our 8.875% senior notes due 2007. On May 1, 2004, we repaid all $300subsidiaries had unused lines of credit of $287 million principal amountunder our respective credit facilities.

As of March 31, 2005, certain of our 8.125% senior notes due 2004. These repayments were both financed with available cash.subsidiaries had unused irrevocable standby letters of credit totaling $13 million to cover potential fundings under various agreements.


COMCAST HOLDINGS CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED SEPTEMBER 30, 2004
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

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 of $1.807 billion or the market value of Sprint common stock. Prior to maturity, each ZONES is exchangeable at the holders'holder's option for an amount of cash equal to 95% of the market value of Sprint common stock.


COMCAST HOLDINGS CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED MARCH 31, 2005
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

We separated the accounting for the ZONES into derivative and debt components. We record the change in the carrying value of the debt component of the ZONES (see Note 3) and the change in the fair value of the derivative component of the ZONES and the change in the carrying value of the debt component of the ZONES as follows (in(dollars in millions):

 
 ZONES
 
 Nine Months Ended
September 30,
 
 2004
 2003
Balance at Beginning of Period:      
 Debt component $515 $491
 Derivative component  268  208
  
 
  Total  783  699

Change in debt component to interest expense
 
 
19
 
 
18
Change in derivative component to investment income (loss), net  (139) 64

Balance at End of Period:
 
 
 
 
 
 
 Debt component  534  509
 Derivative component  129  272
  
 
  Total $663 $781
  
 
 
 ZONES
 
 Three Months Ended
March 31,
 
 2005
 2004
Balance at beginning of period:      
 Debt component $540 $515
 Derivative component  168  268
  
 
  Total  708  783

Change in debt component to interest expense
 
 
7
 
 
6
Change in derivative component to investment loss, net  (53) 169

Balance at end of period:
 
 
 
 
 
 
 Debt component  547  521
 Derivative component  115  437
  
 
  Total $662 $958
  
 

Excluding the derivative component of the ZONES whose changes in fair value are recorded to investment income (loss), net, our effective weighted average interest rate on our total debt outstanding was 7.48%7.50% and 7.56%7.48% as of September 30, 2004March 31, 2005, and December 31, 2003,2004, respectively. As of March 31, 2005, and December 31, 2004, accrued interest was $167 million and $111 million, respectively.

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.

        As of September 30, 2004, we and certain of our subsidiaries had unused lines of credit of $287 million under our respective credit facilities.

        As of September 30, 2004, we and certain of our subsidiaries had unused irrevocable standby letters of credit totaling $13 million to cover potential fundings under various agreements.


COMCAST HOLDINGS CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED SEPTEMBER 30, 2004MARCH 31, 2005
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

6.    STOCKHOLDERS' EQUITY

We account for stock-based compensation in accordance with APB Opinion No. 25 "Accounting for Stock Issued to Employees," and related interpretations, as permitted by SFAS No. 123, "Accounting for Stock-Based Compensation," ("SFAS No. 123") as amended. Compensation expense for stock options is measured as the excess, if any, of the quoted market price of theComcast's stock at the date of the grant over the amount an employeeoptionee must pay to acquire the stock. We record compensation expense for restricted stock awards based on the quoted market price of theComcast's stock at the date of the grant and the vesting period. We record compensation expense for stock appreciation rights based on the changes in quoted market prices of the underlying stock or other determinants of fair value.

The following table illustrates the effect that applyingon net income if we had applied the fair value recognition provisions of SFAS No. 123 to stock-based compensation would have had on net income. Upon further analysis during 2003, it was determined that the expected option lives for options granted in prior years should have been seven years rather than the eight years used previously. The amounts in the table reflect this revision for all periods presented.compensation. Total stock-based compensation expense was determined under the fair value basedvalue-based method for all awards using the accelerated recognition method as permitted under SFAS No. 123 (in(dollars in millions):

 
  
 Three Months Ended
September 30,
 Nine Months Ended
September 30,
 
 
  
 2004
 2003
 2004
 2003
 
Net income, as reported $239 $3,397 $651 $3,716 
Add: Total stock-based compensation expense included in net income, as reported above  2  2  10  4 
Deduct: Total stock-based compensation expense determined under fair value based method for all awards relating to continuing operations, net of related tax effects  (20) (23) (59) (64)
Deduct: Total stock-based compensation expense determined under fair value based method for all awards relating to discontinued operations, net of related tax effects     (5)    (12)
    
 
 
 
 
Pro forma, net income $221 $3,371 $602 $3,644 
    
 
 
 
 
 
 Three Months Ended
March 31,
 
 
 2005
 2004
 
Net income, as reported $204 $98 
Add: Stock-based compensation expense included in net income, as reported above  1  2 
Deduct: Stock-based compensation expense determined under fair value-based method
                for all awards, net of related tax effects		  (14) (18)
  
 
 
Pro forma, net income $191 $82 
  
 
 

The pro forma effect on net income for the interim periods by applying SFAS No. 123 may not be indicative of the effect on net income or loss in future years becausesince SFAS No. 123 does not take into consideration additional awards that may be granted in future years are anticipated.years.

Comprehensive Income

Our total comprehensive income for the interim periods was as follows (dollars in millions):

 
 Three Months Ended
March 31,
 
 2005
 2004
Net income $204 $98
Unrealized gains on marketable securities  4  —
Reclassification adjustments for losses included in net income  —  8
  
 
Comprehensive income $208 $106
  
 

COMCAST HOLDINGS CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED SEPTEMBER 30, 2004
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

        Our total comprehensive income for the interim periods was as follows (in millions):

 
 Three Months Ended
September 30,
 Nine Months Ended
September 30,
 
 
 2004
 2003
 2004
 2003
 
Net income $239 $3,397 $651 $3,716 
Unrealized losses on marketable securities  (1) (19) (2) (44)
Reclassification adjustments for losses (gains) included in net income  (8) (14) 7  7 
Unrealized losses on the effective portion of cash flow hedges     1     1 
Foreign currency translation gains     3     5 
  
 
 
 
 
Comprehensive income $230 $3,368 $656 $3,685 
  
 
 
 
 

7.    STATEMENT OF CASH FLOWS—SUPPLEMENTAL INFORMATION

        We made cash payments for interest and income taxes during the interim periods as follows (in millions):

 
 Three Months Ended
September 30,
 Nine Months Ended
September 30,
 
 2004
 2003
 2004
 2003
Interest $86 $90 $374 $420
Income taxes $39 $12 $141 $56

        During the nine months ended September 30, 2004, Comcast received a federal income tax refund of approximately $536 million.

        During the nine months ended September 30, 2004, property, plant and equipment allocations were made with another Comcast subsidiary through non-cash intercompany transactions resulting in net transfers out of $57 million. During the nine months ended September 30, 2004, we recorded additional liabilities of approximately $35 million relating to a subsidiary of Comcast, a transaction that is considered a non-cash financing activity. This additional liability resulted in a corresponding increase to due from affiliates, net, in our consolidated balance sheet.

        During the nine months ended September 30, 2004, in connection with the acquisition of TechTV (see Note 3), we issued shares in G4techTV with a value of approximately $70 million, which is considered a non-cash financing and investing activity.

        During the nine months ended September 30, 2004, in connection with the Liberty Exchange Agreement (see Note 3), we received non-cash consideration of approximately $475 million, which is considered a non-cash investing activity.


COMCAST HOLDINGS CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED SEPTEMBER 30, 2004MARCH 31, 2005
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

8.7.    COMMITMENTS AND CONTINGENCIES

At Home

Litigation has been filed against us as a result of our alleged conduct with respect to our investment in and distribution relationship with At Home Corporation. At Home was a provider of high-speed Internet services that filed for bankruptcy protection in September 2001. Filed actions are: (i) class action lawsuits against us, Brian L. Roberts (our President and Chief Executive Officer and a director), AT&T (the former controlling shareholder of At Home and also a former distributor of the At Home service) and other corporate and individual defendantsothers in the Superior Court of San Mateo County, California, alleging breaches of fiduciary duty in connection with transactions agreed to in March 2000 among At Home, AT&T, Cox Communications, Inc. (Cox is also an investor in At Home and a former distributor of the At Home service) and us; (ii) class action lawsuits against Comcast, Cable Communications, LLC, AT&T and others in the United States District Court for the Southern District of New York, alleging securities law violations and common law fraud in connection with disclosures made by At Home in 2001; and (iii) a lawsuit brought in the United States District Court for the District of Delaware in the name of At Home by certain At Home bondholders against us, Brian L. Roberts, Cox and others, alleging breaches of fiduciary duty relating to the March 2000 transactions and seeking recovery of alleged short-swing profits of at least $600 million, pursuant to Section 16(b) of the Securities Exchange Act of 1934, as amended, purported to have arisen in connection with certain transactions relating to At Home stock, effected pursuant to the March 2000 agreements.

The actions in San Mateo County, California (item (i) above), have been stayed by the United States Bankruptcy Court for the Northern District of California, the court in which At Home filed for bankruptcy, as violating the automatic bankruptcy stay. The decision to stay the actions was affirmed by the District Court, and an appeal to the Court of Appeals for the Ninth Circuit is pending. In the Southern District of New York actions (item (ii) above), the court ordered the actions consolidated into a single action. All of the defendants served motions to dismiss on February 11, 2003. The courthas dismissed the common law fraud claims against us and Mr. Roberts,all defendants, leaving only a claim for "control person" liability under the Securities Exchange Act of 1934.securities law claims. In a subsequent decision, the court limited the remaining claimclaims against us and Mr. Roberts to disclosures that are alleged to have been made by At Home prior to August 28, 2000. On March 10, 2005, the court certified a class of all purchasers of publicly-traded At Home stock between March 28, 2000, and September 28, 2001. The Delaware case has been(item (iii) above), was transferred to the United States District Court for the Southern District of New York, and we have moved to dismiss the Section 16(b) claims.York. The court dismissed the Section 16(b) claims against us leaving onlyfor failure to state a claim and the claim for breach of fiduciary duty.duty claim for lack of federal jurisdiction. The plaintiffs have appealed the decision dismissing the Section 16(b) claims and may recommence the breach of fiduciary duty claim. In the meantime, we have entered into an agreement with plaintiffs tolling the statute of limitations for the breach of fiduciary duty claim.

We deny any wrongdoing in connection with the claims that have been made directly against us, our subsidiaries and Brian L. Roberts, and intend to defendare defending all of these claims vigorously. The final disposition of these claims is not expected to have a material adverse effect on our consolidated financial position but could possibly be material to our consolidated results of operations of any one period. Further, no assurance can be given that any adverse outcome would not be material to our consolidated financial position.

Acacia.

In June 2004, Acacia Media Technologies Corporation ("Acacia") filed a lawsuit against us and others in the United States District Court for the Northern District of California. The complaint alleges infringement of certain United States patents that allegedly relate to systems and methods for transmitting and/or receiving


COMCAST HOLDINGS CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED MARCH 31, 2005
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)


digital audio and video content. The complaint seeks injunctive relief and damages in an unspecified amount. In the event that a Court ultimately determines that we infringe on any of the patents, we may be subject to substantial damages, which may include treble damages and/or an injunction that could require us to materially modify certain products and services that we currently offer to subscribers. We believe that the claims are without merit and intend to defend the action vigorously.

The final disposition of this claim is not expected to have a material adverse effect on our consolidated financial position but could possibly be material to our consolidated results of operations of any one period. Further, no assurance can be given that any adverse outcome would not be material to our consolidated financial position.

Other

We are subject to other legal proceedings and claims that arise in the ordinary course of our business. The amount of ultimate liability with respect to such actions is not expected to materially affect our financial position, results of operations or liquidity.

9.8.    FINANCIAL DATA BY BUSINESS SEGMENT

Our reportable segments consist of our cableCable and contentContent businesses. Beginning in the first quarter of 2004, we elected to disclose our content businesses separately as a reportable segment even though they do


COMCAST HOLDINGS CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED SEPTEMBER 30, 2004
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)


not meet the quantitative disclosure requirements of SFAS No. 131, "Disclosures About Segments of an Enterprise and Related Information." Our content segment consists of our national networks E! Entertainment and Style Network, The Golf Channel, Outdoor Life Network, G4techTVG4 and AZN Television (formerly known as International Channel Networks. As a result of this change, we have presented the comparable 2003 content segment amounts.Channel). In evaluating the profitability of our segments' profitability,segments, the components of net income (loss) below operating income (loss) before depreciation and amortization are not separately evaluated by our management (amounts(dollars in millions).


 Cable(1)
 Content
 Corporate
and
Other(2)
 Total
 Cable(1)
 Content
 Other(2)
 Eliminations(3)
 Total
Three Months Ended September 30, 2004           
Revenues(3) $1,889 $207 $52 $2,148
Operating income (loss) before depreciation and amortization(4) 777  62  (62) 777
Three Months Ended March 31, 2005              
Revenues(4) $1,983 $213 $84 $(15)$2,265
Operating income (loss) before depreciation and amortization(5) 842  77  (47) (2) 870
Depreciation and amortization 333  42  13  388 346  45  18  (7) 402
Operating income (loss) 444  20  (75) 389 496  32  (65) 5  468
Capital expenditures 304  4  2  310 324  4  4  —  332

Three Months Ended September 30, 2003
 
 
 
 
 
 
 
 
 
 
 
Revenues(3) $1,718 $158 $6 $1,882
Operating income (loss) before depreciation and amortization(4) 742  58  (70) 730

Three Months Ended March 31, 2004
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenues(4) $1,819 $176 $106 $(12)$2,089
Operating income (loss) before depreciation and amortization(5) 739  69  (55) (3) 750
Depreciation and amortization 333  32  14  379 329  35  21  (5) 380
Operating income (loss) 409  26  (84) 351 410  34  (76) 2  370
Capital expenditures 324  3  16  343 261  4  10  —  275

Nine Months Ended September 30, 2004
 
 
 
 
 
 
 
 
 
 
 
Revenues(3) $5,609 $582 $194 $6,385
Operating income (loss) before depreciation and amortization (4) 2,362  208  (157) 2,413
Depreciation and amortization 956  116  41  1,113
Operating income (loss) 1,406  92  (198) 1,300
Capital expenditures 899  14  15  928

Nine Months Ended September 30, 2003
 
 
 
 
 
 
 
 
 
 
 
Revenues(3) $5,079 $462 $162 $5,703
Operating income (loss) before depreciation and amortization(4) 2,155  155  (130) 2,180
Depreciation and amortization 957  96  48  1,101
Operating income (loss) 1,198  59  (178) 1,079
Capital expenditures 1,009  10  19  1,038

As of September 30, 2004
 
 
 
 
 
 
 
 
 
 
 

As of March 31, 2005
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Assets $36,880 $2,549 $2,008 $41,437 $39,153 $2,484 $792 $(54)$42,375

As of December 31, 2003
 
 
 
 
 
 
 
 
 
 
 

As of December 31, 2004
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Assets $34,952 $2,048 $3,402 $40,402 $38,480 $2,533 $942 $(13)$41,942
(1)
Our regional programmingsports and news networks Comcast SportsNet, Comcast SportsNet Mid-Atlantic, Comcast SportsNet Chicago, Cable Sports Southeast and CN8-The Comcast Network are included in our cable segment.

COMCAST HOLDINGS CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED SEPTEMBER 30, 2004MARCH 31, 2005
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

(2)
CorporateOther includes Comcast-Spectacor, other businesses and other includes corporate activities elimination entries and all other businesses not presented in our cable or content segments. Assets included in this caption consist primarily of our investments (see Note 4).segments, and Comcast management fees and allocations.

(3)
Non-USIncluded in the Eliminations column are intersegment transactions that our segments enter into with one another. The most common types of transactions are the following:

(4)
Non-U.S. revenues were not significant in any period. No single customer accounted for a significant amount of our revenue in any period.

(4)(5)
Operating income (loss) before depreciation and amortization is defined as operating income before depreciation and amortization, impairment charges, if any, related to fixed and intangible assets and gains or losses from the sale of assets, if any. As such, it eliminates the significant level of non-cash depreciation and amortization expense that results from the capital intensive nature of our businesses and intangible assets recognized in business combinations, and is unaffected by our capital structure or investment activities. Our management and Board of Directors use this measure in evaluating our consolidated operating performance and the operating performance of all of our operating segments. This metric is used to allocate resources and capital to our operating segments and is a significant component of our annual incentive compensation programs. We believe that this measure is also useful to investors as it is one of the bases for comparing our operating performance with other companies in our industries, although our measure may not be directly comparable to similar measures used by other companies. This measure should not be considered as a substitute for operating income (loss), net income (loss), net cash provided by operating activities or other measures of performance or liquidity reported in accordance with generally accepted accounting principles.

10.COMCAST HOLDINGS CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED MARCH 31, 2005
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

9.    RELATED PARTY TRANSACTIONS

Our related party transactions for the interim periods presented are as follows (in(dollars in millions):
 Three Months Ended
September 30,
 Nine Months Ended
September 30,
 Three Months Ended
March 31,
 2004
 2003
 2004
 2003
 2005
 2004
Content affiliation agreement revenueContent affiliation agreement revenue $13 $9 $41 $26Content affiliation agreement revenue $10 $9
Comcast management feesComcast management fees 41 39 120 109Comcast management fees 42 39
Comcast cost sharing charges:Comcast cost sharing charges:        Comcast cost sharing charges:    
Cable-related costs 56 47 161 129Cable-related costs 79 53
Other costs 48 40 145 116Other costs 57 48
Software licensing feesSoftware licensing fees 2   5  Software licensing fees 5 —
Interest income (expense) on affiliate notes, net 54 (10) 136 2
Interest income on affiliate notes, netInterest income on affiliate notes, net 76 41

Our content businesses generate a portion of their revenues through the sale of subscriber services under affiliation agreements with cable subsidiaries of Comcast. These amounts are included in service revenues in our consolidated statement of operations. Amounts related to similar affiliation agreements between our content businesses and our wholly ownedwholly-owned subsidiaries are eliminated in our condensed consolidated financial statements.

Comcast has entered into management agreements with our cable subsidiaries. The management agreements generally provide that Comcast supervise the management and operations of the cable systems and arrange for and supervise certain administrative functions. As compensation for such services, the agreements provide for Comcast to charge management fees based on a percentage of gross revenues. These charges are included in selling, general and administrative expenses in our consolidated statement of operations.

We reimburse Comcast for certain cable-related costs under a cost sharing agreement. These charges are included in selling, general and administrative expenses in our consolidated statement of operations.



COMCAST HOLDINGS CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED SEPTEMBER 30, 2004MARCH 31, 2005
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Concluded)

(Unaudited)

We purchase certain other services from Comcast under cost sharing arrangements on terms that reflect Comcast's actual cost. These charges are included in selling, general and administrative expenses in our consolidated statement of operations.

Comcast has purchased long-term, non-exclusive patent and software licenses to use on Comcast's and our interactive program guides. Comcast charges us a licensing fee for use of this software. This charge is included in selling, general and administrative expenses in our consolidated statement of operations.

Comcast Financial Agency Corporation ("CFAC"), an indirect wholly ownedwholly-owned subsidiary of ours, provides cash management services to certain cable subsidiaries of Comcast. Under this arrangement, Comcast's and these subsidiaries' cash receipts are deposited with and held by CFAC, as custodian and agent, which invests and disburses such funds at our direction. Interest income related to this cash was not significant during the 20042005 or 20032004 interim periods.

With the exception of cash payments related to interest and state income taxes, we consider all of our transactions with Comcast or its affiliates to be financing transactions, which are presented as net transactions with affiliates in our consolidated statement of cash flows. Our significant financing transactions with Comcast and its affiliates are described below.

As of September 30, 2004March 31, 2005, and December 31, 2003,2004, due from affiliates, net in our consolidated balance sheet primarily consists of amounts due from Comcast and from certain cable subsidiaries of Comcast for advances we made for working capital and capital expenditures in the ordinary course of business. Also,We act as the paying agent for all programming payments for all of Comcast's cable subsidiaries, including ours. Programming payments related to Comcast's other cable subsidiaries are recorded as due from affiliates. As a result, included withinin accounts payable and accrued expenses and other current liabilitiesrelated to trade creditors as of September 30, 2004March 31, 2005, and December 31, 20032004, is approximately $603$638 million and $568$600 million, respectively, related to other Comcast subsidiaries.

        QVC, a discontinued operation, has an affiliation agreement with certain cable subsidiaries of Comcast to carry QVC's programming. In return for carrying QVC programming, QVC pays these Comcast subsidiaries an allocated portion, based upon market share, of a percentage of net sales of merchandise sold to QVC customers located in their service areas. These amounts are not significant and are included in income from discontinued operations in our consolidated statement of operations. Amounts related to a similar affiliation agreement between QVC and our wholly owned subsidiaries are not significant and are included in service revenues and income from discontinued operations in our consolidated statement of operations.

As of September 30, 2004March 31, 2005, and December 31, 2003,2004, notes receivable from affiliates and notes payable to affiliates consist of notes receivable from and notes payable to Comcast and certain cable subsidiaries of Comcast. Our notes receivable and notes payable, whose interest receivable and payable are included in our condensed consolidated balance sheet, have the following characteristics (amounts(dollars in millions):


 September 30, 2004
 December 31, 2003
 March 31, 2005
 December 31, 2004

 Notes Receivable
 Notes Payable
 Notes Receivable
 Notes Payable
 Notes Receivable
 Notes Payable
 Notes Receivable
 Notes Payable
Principal balance $4,799 $627 $3,284 $58 $5,696 $711 $5,378 $704
Interest receivable (payable) $52 ($21) $26 ($3) $92 $(42) $72 $(31)
Interest rate range 5.0% to 7.5% 5.0% to 7.5% 5.0% to 7.5% 5.0% to 7.5% 6.75% to 7.5% 6.75% to 7.5% 6.25% to 7.5% 6.25% to 7.5%
Maturity date range 2009-2014 2012-2014 2012-2013 2012-2013 2009-2014 2012-2014 2009-2014 2012-2014


COMCAST HOLDINGS CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED SEPTEMBER 30, 2004MARCH 31, 2005


ITEM 2.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Information for this item is omitted pursuant to SEC General Instruction H to Form 10-Q, except as noted below.

Overview

We are an indirect, wholly ownedwholly-owned subsidiary of Comcast Corporation ("Comcast").Comcast. We are principally involved in the management and operation of broadband communications networks (our cable segment) and in the management of programming content that is distributed over national cable and satellite television networks (our content segment). During the nine months ended September 30, 2004,first quarter of 2005, we received over 87%nearly 88% of our revenue from our cable segment, primarily through monthly subscriptions to our video, and 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.

We have historically met our cash needs for operations through our cash flows from operating activities. We have generally financed our acquisitions and capital expenditures through issuances of Comcast common stock, borrowings of long-term debt, sales of investments and from existing cash, cash equivalents and short-term investments.

Business Developments

On July 28, 2004, we exchanged approximately 120 million shares of Liberty Media Corporation ("Liberty") Series A common stock that we held, valued at approximately $1.022 billion, with Liberty for 100% of the stock of Liberty's subsidiary, Encore ICCP, Inc. ("Encore"). Encore's assets consisted of cash of $547 million, a 10.4% interest in E! Entertainment Television, Inc. ("E!") and 100% of International Cable Channels Partnership, Ltd. ("International Channel Networks"). We also received all of Liberty's rights, benefits and obligations under the TCI Music contribution agreement, which resulted in the resolution of all litigation pending between Liberty and Comcast regarding the contribution agreement.

April 20, 2005, Comcast and Time Warner have agreed to work together to explore submitting a joint proposalreached definitive agreements to acquire cablesubstantially all the assets of Adelphia Communications Corporation for a total of $12.7 billion in cash and 16% of the fifth-largestcommon stock of Time Warner's cable television companysubsidiary, Time Warner Cable Inc. ("TWC"). Comcast also will exchange certain of its cable systems with TWC for certain TWC cable systems. In addition, TWC will redeem Comcast's 17.9% interest in TWC and Time Warner Entertainment Company, L.P. ("TWE") will redeem Comcast's 4.7% interest in TWE (together an effective 21% economic ownership of TWC). As a result of these transactions, Comcast will add approximately 1.8 million basic subscribers for a net cash investment of approximately $1.5 billion. Following these transactions, Comcast will serve a total of approximately 23.3 million basic subscribers. These transactions are subject to customary regulatory review and approvals, including Hart-Scott-Rodino, Federal Communications Commission and local franchise approvals, as well as the Adelphia bankruptcy process, which involves approvals by the bankruptcy court having jurisdiction of Adelphia's Chapter 11 case and Adelphia's creditors. Closing is expected to occur in the United States.

        Refer to Note 3 to our financial statements included in Item 1 for a discussionfirst or second quarter of this transaction.2006.

Results of Continuing Operations

Consolidated revenues for the three and nine month interim periods in 2004first quarter of 2005 increased $266$176 million, and $682 million, respectively,or 8.4%, from the same periodsquarter in 2003.2004. Of these increases, $171this increase, $164 million and $530 million relaterelates to our cable segment and $37 million relates to our content segment, which isare discussed separately below. The remaining increases are the result of our content segment, which achieved combined revenue growth of 30.6% and 26.0%, respectively, during the three and nine month interim periods in 2004 compared to the same periods in 2003. These increases in our content segment were the result of increases in distribution revenue and advertising revenue, as well aschange relates to our acquisition of TechTV. The remaining increases areother business activities, primarily Comcast-Spectacor, whose revenues were negatively affected by the result of our corporate and other segment, which includes the operating results of Comcast-Spectacor.

        Consolidated operating, selling, general and administrative expenses for the three and nine month interim periods in 2004 increased $219 million and $449 million, respectively, from the same periods in 2003. Of these increases, $136 million and $323 million, respectively, relate to our cable segment, which is discussed separately below. The remaining increases are the result of growth in our content segment, principally due toNational Hockey League ("NHL") lockout.


COMCAST HOLDINGS CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED SEPTEMBER 30, 2004MARCH 31, 2005

Operating, selling, general and administrative expenses

Consolidated operating, selling, general and administrative expenses for the first quarter of 2005 increased $56 million, or 4.2%, from the same quarter in 2004. Of this increase, $61 million relates to our acquisition of TechTV.cable segment and $29 million relates to our content segment, which are discussed separately below. The remaining increases arechange relates to our other business activities, primarily Comcast-Spectacor, whose operating expenses were positively affected by the result of our corporate and other segment, which includes the operating results of Comcast-Spectacor.NHL lockout.

Depreciation expense for the three and nine month interim periods in 2004 is consistent with the amounts reported forfirst quarter of 2005 increased $6 million, or 1.8%, compared to the same periodsquarter in 2003.2004. This slight increase is primarily attributable to our cable segment, principally due to the level of our recent capital expenditures.

Amortization expense increased $6 million and $10 million, respectively, for the three and nine month interim periods in 2004first quarter of 2005 increased $16 million, or 34.0%, compared to the same periodsquarter in 2003. These increases are2004, primarily attributable to amortization associated with intangibles acquired in the TechTVour recent acquisitions and Liberty exchange transactions.intangible additions.

Cable Segment Operating Results

        The following table presentsOperating income before depreciation and amortization is the primary basis we use to measure the operational strength and performance of our cable segment operating results (dollars in millions):

 
 Three Months Ended
September 30,
 Increase/(Decrease)
 
 
 2004
 2003
 $
 %
 
Video $1,316 $1,249 $67 5.4%
High-speed Internet  325  244  81 33.2 
Advertising sales  121  102  19 18.6 
Other  70  71  (1)(1.4)
Franchise fees  57  52  5 9.6 
  
 
 
 
 
 Revenues  1,889  1,718  171 10.0 
Operating, selling, general and administrative expenses  1,112  976  136 13.9 
  
 
 
 
 
Operating income before depreciation and amortization(a) $777 $742 $35 4.7%
  
 
 
 
 
 
 Nine Months Ended
September 30,
 Increase
 
 
 2004
 2003
 $
 %
 
Video $3,945 $3,735 $210 5.6%
High-speed Internet  925  677  248 36.6 
Advertising sales  355  304  51 16.8 
Other  212  206  6 2.9 
Franchise fees  172  157  15 9.6 
  
 
 
 
 
 Revenues  5,609  5,079  530 10.4 
Operating, selling, general and administrative expenses  3,247  2,924  323 11.0 
  
 
 
 
 
Operating income before depreciation and amortization(a) $2,362 $2,155 $207 9.6%
  
 
 
 
 
(a)
segments. Operating income before depreciation and amortization is defined as operating income before depreciation and amortization, impairment charges, if any, related to fixed and intangible assets and gains or losses from the sale of assets, if any. As such, it eliminates the significant level of non-cash depreciation and amortization expense that results from the capital intensive nature of our businesses and intangible assets recognized in business combinations, and is unaffected by our capital structure or investment activities. Our management and Board of Directors use this measure in evaluating our consolidated operating performance and the operating performance of all of our operating segments.

COMCAST HOLDINGS CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED SEPTEMBER 30, 2004

All percentages are calculated based on actual amounts. Minor differences may exist due to rounding.


COMCAST HOLDINGS CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED MARCH 31, 2005

Cable Segment Operating Results

The following table presents our cable segment operating results (dollars in millions):

 
 Three Months Ended
March 31,
 Increase
 
 
 2005
 2004
 $
 %
 
Video $1,358 $1,300 $58 4.5%
High-speed Internet  365  287  78 27.2%
Advertising sales  112  105  7 6.7%
Other  89  71  18 25.4%
Franchise fees  59  56  3 5.4%
  
 
 
   
 Revenues  1,983  1,819  164 9.0%
Operating, selling, general and administrative expenses  1,141  1,080  61 5.6%
  
 
 
   
Operating income before depreciation and amortization $842 $739 $103 13.9%
  
 
 
   

Video revenue consists of our basic, expanded basic, premium, pay-per-view equipment and digital cable services.services, as well as equipment rentals. The increasesincrease in video revenue for the interim periodsperiod from 20032004 to 2004 are2005 is primarily due to increases in monthly average revenue per subscriber as a result of rate increasesgrowth in our traditionaldigital video service and growth in digital subscribers, reflecting increased consumer demand for new digital features.rate increases. From September 30, 2003March 31, 2004, to September 30, 2004,March 31, 2005, we added approximately 428,000424,000 digital subscribers, or a 16.8%15.4% increase in digital subscribers. We expect continued growth in our video services revenue.

The increasesincrease in high-speed Internet revenue for the interim periodsperiod from 20032004 to 2004 are2005 is primarily due to the addition of approximately 595,000592,000 high-speed Internet subscribers from September 30, 2003 to September 30,since March 31, 2004, or a 28.7%25.0% increase in high-speed Internet subscribers. We expect continued growth in our high-speed Internet revenue growth as overall demand for our services continues to increase.revenue.

The increasesincrease in advertising sales revenue for the interim periodsperiod from 20032004 to 2004 are2005 is primarily due to the effects of growth in regional/national advertising as a result of the continuing success of our regional interconnects and a stronger local advertising market, and an increaseoffset, in part, by a decrease in political advertising.advertising during 2005. We expect continued growth in our advertising sales revenue.

Other revenue includes installation revenues, revenue from our regional sports and news networks, guide revenues, commissions from electronic retailing, revenue from our regional programming networks, commercial data revenue,services and revenue from other product offeringsservice offerings.

The increase in franchise fees collected from our cable subscribers for the interim period from 2004 to 2005 is primarily attributable to the increase in our revenues upon which the fees apply.

Operating, Selling, General and phone revenues.

        Total operating,Operating, selling, general and administrative expenses increased for the interim periodsperiod from 20032004 to 20042005 increased $61 million, primarily as a result of higher operating, marketing and marketing expensesadministrative costs associated with the growth in our high-speed Internet and digital cable services, and increases in charges from cost-sharing arrangements.

Consolidated Income (Expense) Items

        The decreases in interest expense for the interim periods from 2003 to 2004 are due to our decreased amount of debt outstanding as a result of our debt reduction during 2003management fees and 2004.allocations.

        The changes in interest income (expense) on affiliate notes, net for the interim periods from 2003 to 2004 are principally due to an increase in our notes receivable from affiliates during 2003 and 2004.


COMCAST HOLDINGS CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED SEPTEMBER 30, 2004MARCH 31, 2005

Content Segment Operating Results

The following table presents our content segment operating results (dollars in millions):

 
 Three Months Ended
March 31,
 
 2005
 2004
Revenues $213 $176
Operating, selling, general and administrative expenses  136  107
  
 
Operating income before depreciation and amortization $77 $69
  
 

Our content segment consists of the national networks E! Entertainment and Style Network, The Golf Channel, Outdoor Life Network, G4 and AZN Television (formerly known as International Channel).

Revenues

Our content segment revenue increased $37 million, or 20.9%, for the first quarter of 2005 compared to the same period in 2004. The increase reflects increases in distribution and advertising revenue for all of the networks and the effects of the acquisitions of TechTV by G4 and AZN Television in May 2004 and July 2004, respectively.

Operating, Selling, General and Administrative Expenses

Operating, selling, general and administrative expenses increased $29 million, or 26.5%, for the first quarter of 2005 compared to the same period in 2004. Expenses increased in the 2005 interim period as a result of higher development and marketing expenses for signature events and other original programming in all of our networks, as well as due to the effects of the acquisitions of TechTV by G4 and AZN Television in May 2004 and July 2004, respectively.

Consolidated Income (Expense) Items

Interest Expense

The change in interest expense for the interim period from 2004 to 2005 is principally due to a decrease in our total debt outstanding.

Interest Income on Affiliate Notes, Net

The change in interest income on affiliate notes, net for the interim period from 2004 to 2005 is principally due to an increase in our notes receivable from affiliates.


COMCAST HOLDINGS CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED MARCH 31, 2005

        Investment income (loss),loss, net for the interim periods includes the following (in(dollars in millions):

 
 Three Months Ended September 30,
 Nine Months Ended
September 30,
 
 
 2004
 2003
 2004
 2003
 
Interest, dividend and other investment income (expense) $(4)$5 $(12)$13 
Gains on sales and exchanges of investments, net  35     34  23 
Investment impairment losses  (7)    (10) (69)
Mark to market adjustments on trading securities  (59) (166) (113) (98)
Mark to market adjustments on derivatives related to trading securities  139  (1) 297  (66)
Mark to market adjustments on derivatives and hedged items  (8) (4) (6) (1)
  
 
 
 
 
Investment income (loss), net $96  ($166)$190  ($198)
  
 
 
 
 
 
 Three Months Ended
March 31,
 
 
 2005
 2004
 
Interest, dividend and other investment income (expense) $(3)$(6)
Unrealized losses on trading securities  (135) (17)
Mark to market adjustments on derivatives related to trading securities  129  (41)
Mark to market adjustments on derivatives  (4) 12 
  
 
 
Investment loss, net  $(13) $(52)
  
 
 

We have entered into derivative financial instruments that we account for at fair value and which economically hedge the market price fluctuations in the common stock of certainmost (as of March 31, 2005) of our investments accounted for as trading securities. Investment income (loss), net includesThe differences between the fair value adjustments related to ourunrealized gains (losses) on trading securities and the mark-to-market adjustments on derivatives related to trading securities, as presented in the table above, result from one or more of the following:


COMCAST HOLDINGS CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED SEPTEMBER 30, 2004

        On September 30,The change in other income (expense) for the interim period from 2004 we sold our 20% interest in DHC Ventures, LLC to Discovery Communications, Inc. for approximately $1492005 is primarily due to a $24 million in cash and recognized a gain on the saleexchange of approximately $94 million to other income.one of our equity method investments.

        The changes inOur income tax expense forrate differs from the interim periods from 2003statutory rate primarily due to 2004 are primarily the result of the effects of changes in ourstate income (loss) from continuing operations before taxes and minority interest.adjustments to prior year accruals.

The changeschange in minority interest for the interim periodsperiod from 20032004 to 2004 are2005 is attributable to the effects of changes in the net income or loss of our less than wholly owned consolidated subsidiaries and to the minority interests in certain subsidiaries acquired or formed during 2004.


        We believe that our operations are not materially affected by inflation.COMCAST HOLDINGS CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED MARCH 31, 2005


ITEM 3.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK


ITEM 4.    CONTROLS AND PROCEDURES


PART II.    OTHER INFORMATION

ITEM 1.    LEGAL PROCEEDINGS


ITEM 6.    EXHIBITS

        Exhibits required to be filed by Item 601 of Regulation S-K:


COMCAST HOLDINGS CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED SEPTEMBER 30, 2004MARCH 31, 2005


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.

  COMCAST HOLDINGS CORPORATION

 
 
/S/  LAWRENCE J. SALVA      
Lawrence J. Salva
Senior Vice President, Chief Accounting Officer and Controller
(Principal Accounting Officer)

Date: November 12, 2004May 13, 2005