Comcast Reports Third Quarter 2004 Results
PHILADELPHIA, Oct. 27 /PRNewswire-FirstCall/ -- Comcast Corporation(Nasdaq: CMCSA, CMCSK) today reported results for the quarter endedSeptember 30, 2004. Comcast will discuss third quarter results on aconference call and webcast today at 8:30 AM Eastern Time. A live broadcastof the conference call will be available on the investor relations website athttp://www.cmcsa.com and http://www.cmcsk.com.
Brian L. Roberts, Chairman and CEO of Comcast Corporation, said, "Wereached record levels of new video and high-speed Internet service additionsthis quarter, confirming that we have successfully transformed Comcast into anew products company. Our high-speed Internet service led the way, addingover 549,000 subscribers - the highest level of quarterly high-speed Internetadditions in the Company's history. We also posted strong growth in DigitalCable as we continue to extend our video offering to include ON DEMAND, HDTVand DVRs. We added 341,000 new digital subscribers this quarter and installedmore than 200,000 HDTV set-top boxes in customers' homes. Interest in ourON DEMAND service continues to grow. Customers are selecting ON DEMANDcontent more than 50 million times each month and early indications suggeststrong demand for our DVR product. Our strong unit growth this quarterreflects the increasing appeal of our services, as we deliver differentiatedproducts and a better experience to our customers.
"We are also reporting strong financial results. We generated$540 million of Free Cash Flow this quarter through the combination ofOperating Cash Flow growth and capital expenditure declines as our two-waynetworks are now 98% upgraded. We continue to make investments to support ourgrowth and product differentiation strategy, while returning capital toshareholders. This year we have repurchased over $1 billion of our stock andcash settled more than $600 million of debt securities that were otherwiseexchangeable into our stock. At the same time, in the last quarter alone, weannounced several transactions that will enable us to offer a growing array ofchoices for movies, regional and national sports and children's programming,as well as video mail and other broadband features and applications. All ofthese will provide our customers more choice and control - on TV, onComcast.net and ON DEMAND."
Comcast Cable Results
Cable results are presented on a pro forma basis. Pro forma cable resultsadjust only for significant acquisitions and dispositions and are presented asif the acquisitions and dispositions were effective on January 1, 2003.Please refer to Table 7-A for a reconciliation of pro forma data.
For the quarter ended September 30, 2004, Comcast Cable reported revenueof $4.844 billion representing a 10.6% increase from the third quarter of2003. Video revenue increased 6.6% from the third quarter of 2003, driven bya 5.5% increase in average monthly revenue per basic subscriber and anincrease in digital revenue. During the third quarter, Comcast Cable added341,000 digital cable subscribers to end the period with over 8.4 millionsubscribers, or 39.1% of basic subscribers. Basic subscribers of 21.5 millionremained essentially unchanged from a year ago but increased 8,500 from theprior quarter. Included in the basic subscriber results for the quarter wasthe loss of an estimated 10,000 subscribers as a result of the severehurricane season experienced in parts of Florida and other Southeasternstates.
Growth in video revenue also reflects increasing consumer demand for newdigital features, including Comcast ON DEMAND, high-definition television(HDTV) programming and digital video recorders (DVRs). During the thirdquarter, pay-per-view revenues increased nearly 32% to more than $100 million,driven by more movie and event purchases through the Comcast ON DEMANDservice. Increasing demand for HDTV and the accelerating rollout of DVRs isalso contributing to digital growth. At the end of the third quarter, Comcasthad nearly 870,000 set-top boxes in customers' homes offering HDTV and/or DVRservice.
During the third quarter of 2004 Comcast Cable added a record 549,100High-Speed Internet subscribers to end the quarter with more than 6.5 millionsubscribers. Revenues for this service increased 37.9% from the third quarterof 2003 to $808 million reflecting strong subscriber growth and stable averagemonthly revenue per subscriber of $42.91. Comcast High-Speed Internet serviceis now available to 94% of the Company's footprint, or 38 million homes.
Advertising revenue increased 15.5% from the third quarter of 2003 to$319 million, reflecting growth of over 10% in local advertising and growth of20% in regional/national advertising as a result of an increase in politicaladvertising during the third quarter and the ongoing success of our regionalinterconnect strategy.
As expected, cable phone revenue declined 8.6% from the third quarter of2003 to $173 million, the result of a 7.5% decrease in subscribers to1.2 million and stable average monthly revenue per subscriber of $47.18.Cable phone results continue to reflect the Company's focus on profitability,not unit growth, of its circuit-switched telephone business as it begins thetransition to offer cable phone service using VoIP. Excluding cable phonerevenue, which is expected to continue to decline through 2004, total revenuefor Comcast Cable increased 11.5% from the third quarter of 2003 to $4.671billion.
Cable operating income before depreciation and amortization (OperatingCash Flow) grew 14.6% from the third quarter of 2003 to $1.858 billion,reflecting strong revenue growth, offset by the impact of hurricane-relatedcosts estimated at $10-$15 million and higher operating and marketing expensesassociated with the record number of new service additions in the quarter.
Cable capital expenditures declined nearly 17% to $871 million compared tothe $1.045 billion in the third quarter of 2003. The decline in cable capitalexpenditures reflects the near-completion of the Company's cable networkupgrade. Comcast Cable finished the third quarter with nearly 98% of itscable network upgraded to provide advanced services.
For the nine months ended September 30, 2004, Comcast Cable reportedrevenue of $14.334 billion, a 10.3% increase from the same period in 2003.Comcast Cable Operating Cash Flow grew 18.4% from the nine months endedSeptember 30, 2003 to $5.499 billion. Video revenue increased 6.7% from thesame period in 2003, driven by a 5.7% increase in average monthly revenue perbasic subscriber and an increase in digital revenue, primarily reflecting a1.1 million increase in the number of digital cable subscribers. ComcastHigh-Speed Internet service revenues increased 39.6% from the nine monthsended September 30, 2003 to $2.269 billion reflecting the addition of1.7 million new subscribers and unchanged average monthly revenue persubscriber of $42.59. Advertising revenue increased 15.1% from the year-agoperiod to $918 million. As expected, cable phone revenue declined 14.6% from2003 to $528 million, the result of a 7.5% decrease in subscribers and 5.3%decrease in average monthly revenue per subscriber to $47.31.
Cable capital expenditures for the nine months ended September 30, 2004declined 15.3% to $2.578 billion compared to the $3.045 billion in the prioryear. The decline in cable capital expenditures reflects the near-completionof the Company's cable network upgrade.
Comcast's content segment consists of the national networks E!Entertainment Television and Style Network (E! Networks), The Golf Channel,Outdoor Life Network, G4techTV and the recently acquired International ChannelNetworks.
Comcast's content segment reported third quarter 2004 revenue of$207 million, a 30.6% increase from the third quarter of 2003 reflectingincreases in distribution and advertising revenue for all the networks. TheContent segment reported Operating Cash Flow of $62 million in the thirdquarter of 2004, a 7% increase above the third quarter of 2003 reflectinghigher development and marketing expenses for signature events and otheroriginal programming.
For the nine months ended September 30, 2004, Comcast's content segmentincreased revenue 26.0% to $582 million and increased Operating Cash Flow34.0% to $208 million.
Corporate and Other
Corporate and Other includes Comcast-Spectacor, corporate overhead andother operations and eliminations between Comcast's businesses. In the thirdquarter of 2004, we reported Corporate and Other revenue of $47 million and anOperating Cash Flow loss of $60 million as compared to revenue of $14 millionand an Operating Cash Flow loss of $46 million in the third quarter of 2003.Beginning in the third quarter of 2004, Comcast-Spectacor includes theoperating results of its investment in a sports event-related business.
For the nine months ended September 30, 2004, Corporate and Other revenueremained relatively unchanged at $161 million and Operating Cash Flow lossincreased to $160 million from the nine months ended September 30, 2003.
Comcast sold its 57% ownership interest in QVC in September 2003. QVC'sresults, prior to its sale, are presented as discontinued operations.Consolidated amounts primarily reflect the results of the cable division asdiscussed above.
For the three months ended September 30, 2004, the Company reportedconsolidated revenues of $5.098 billion, a 12.1% increase from the$4.546 billion reported in the same period of 2003. Consolidated OperatingCash Flow increased to $1.860 billion or 14.0%, in the third quarter of 2004,from the $1.632 billion reported in the same prior year period. Operatingincome increased 39.0% to $686 million in the third quarter of 2004 comparedto operating income of $493 million in the third quarter of 2003.
For the three months ended September 30, 2004, the Company reportedconsolidated net income of $220 million or $0.10 per share compared to aconsolidated net loss from continuing operations of $153 million or a loss of$0.07 per share in the third quarter of 2003. For the nine months endedSeptember 30, 2004, the Company reported consolidated net income of$547 million or $0.24 per share compared to a consolidated net loss fromcontinuing operations of $601 million or a loss of $0.27 per share in the ninemonths ended September 30, 2003. Please refer to the "Reconciliation of NetIncome to Free Cash Flow" in Table 7-B at the end of this release and theCompany's Form 10-Q for further details on items affecting net income.
As previously announced in July 2004, Comcast exchanged its 120 millionshares of Liberty Media common stock for 100% ownership in a subsidiary ofLiberty Media that primarily held a 100% ownership interest in InternationalChannel Networks, a 10.4% ownership interest in E! Entertainment Televisionand $547 million in cash. This transaction results in Comcast owning 60.5% ofE! Entertainment Television.
Share Repurchase Program
During the third quarter, Comcast repurchased $502 million or 18.4 millionshares of its common stock under its stock repurchase program. Comcastexpects such repurchases to continue to occur from time to time in the openmarket or in private transactions, subject to market conditions.
During the third quarter the Company elected to redeem for $209 million incash, a debt issue that was exchangeable into Comcast Class A Special CommonStock, eliminating the need to issue 7.6 million additional shares.
Starting in December 2003, the inception of the program, through October2004, the Company has repurchased $1.1 billion of its Class A Special CommonStock or 38.9 million shares under its $2 billion share repurchase program.Including the $609 million paid in cash to redeem several debt issuesexchangeable into Comcast common stock, the Company has invested $1.7 billionin its common stock and related securities.
Financial Guidance 2004:
Comcast Cable Reaffirms:
-- Revenue growth of approximately 10%
-- OCF of approximately $7.5 billion or 18% growth
-- The number of basic cable subscribers is expected to remain at approximately 21.5 million
-- The number of cable phone subscribers may decline by up to 100,000
-- Capital expenditures of between $3.3 and $3.4 billion
Comcast Cable Updates:
-- Digital Cable subscriber net additions of approximately 1 million, representing the top end of the previous guidance range of between 700,000 and 1 million net additions
-- High-speed Internet subscriber net additions of between 1.6 and 1.7 million, an increase from original guidance of between 1.5 and 1.6 million net additions
Comcast Content Segment Reaffirms:
-- Revenue growth of at least 20%
-- OCF growth of at least 30%
Other Financial Guidance Reaffirmed:
-- Consolidated Free Cash Flow of $2 billion
This press release contains forward-looking statements. Readers arecautioned that such forward-looking statements involve risks and uncertaintiesthat could cause actual events or our actual results to differ materially fromthose expressed in any such forward-looking statements. Readers are directedto Comcast's periodic and other reports filed with the Securities and ExchangeCommission for a description of such risks and uncertainties.
In this discussion we sometimes refer to financial measures that are notpresented according to generally accepted accounting principles (GAAP).Certain of these measures are considered "non-GAAP financial measures" underthe Securities and Exchange Commission (SEC) regulations; those rules requirethe supplemental explanation and reconciliation provided in Table 7 of thisrelease. All percentages are calculated based on actual amounts. Minordifferences may exist due to rounding.
Comcast Corporation will host a conference call with the financialcommunity today October 27, 2004 at 8:30 a.m. Eastern Time (ET). Theconference call will be broadcast live on the Company's Investor Relationswebsite at http://www.cmcsa.com or http://www.cmcsk.com. A recording of thecall will be available on the Investor Relations website starting at12:30 p.m. ET on October 27, 2004. Those parties interested in participatingvia telephone should dial (847) 413-2408. A telephone replay will beginimmediately following the call until October 28, 2004 at midnight ET. Toaccess the rebroadcast, please dial (630) 652-3000 and enter passcode number9980173#. To automatically receive Comcast financial news by email, pleasevisit http://www.cmcsa.com or http://www.cmcsk.com and subscribe to e-mailAlerts.
Comcast Corporation (http://www.comcast.com) is principally involved inthe development, management and operation of broadband cable networks and inthe provision of programming content. The Company is the largest provider ofcable and broadband services in the United States, serving more than21 million cable television subscribers and more than 6 million high-speedInternet customers. The Company's content businesses include ComcastSportsNet, Comcast-Spectacor, E! Entertainment Television, Style Network,G4techTV, The Golf Channel, International Channel Networks and Outdoor LifeNetwork. Comcast Class A common stock and Class A Special common stock tradeon The NASDAQ Stock Market under the symbols CMCSA and CMCSK, respectively.