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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) of the
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): May 8, 2003
COMCAST CORPORATION
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Pennsylvania 000-50093 27-0000798
- ---------------- ---------------- -------------
(State or other (Commission file (IRS employer
jurisdiction of number) identification no.)
incorporation)
1500 Market Street, Philadelphia, PA 19102-2148
--------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (215) 665-1700
--------------
Item 7(c). Exhibits
Exhibit 99.1 Comcast Corporation press release dated May 8, 2003.
Item 9. Regulation FD Disclosure
The following information is furnished pursuant to Item 9, "Regulation
FD Disclosure," and Item 12, "Results of Operations and Financial Condition."
On May 8, 2003, Comcast Corporation ("Comcast") issued a press release
reporting the results of its operations for the three months ended March 31,
2003. The press release is attached hereto as Exhibit 99.1. Comcast does not
intend for this Item 9 or Exhibit 99.1 to be treated as "filed" under the
Securities Exchange Act of 1934, as amended, or incorporated by reference into
its filings under the Securities Act of 1933, as amended.
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.
Dated: May 9, 2003 COMCAST CORPORATION
By: /s/ Lawrence J. Salva
------------------------
Lawrence J. Salva
Senior Vice President and
Controller
(Principal Accounting Officer)
[COMCAST logo omitted] PRESS RELEASE
- --------------------------------------------------------------------------------
Contact:
- --------
Marlene S. Dooner, Vice President, Investor Relations (215) 981-7392
Leslie A. Arena, Director, Investor Relations (215) 981-8511
Daniel J. Goodwin, Director, Investor Relations (215) 981-7518
COMCAST REPORTS FIRST QUARTER 2003 RESULTS
Consolidated Revenue Increased to $5.52 billion and
EBITDA Increased to $1.64 billion
Operating Income Increased 12.4% to $473 million
COMCAST CABLE DELIVERS MEANINGFUL SUBSCRIBER ADDITIONS
Total Basic Cable Subscribers Increased by 56,900
High-Speed Internet Subscribers Increased By 417,000 to Exceed 4 Million
COMCAST INCREASES 2003 GUIDANCE FOR BASIC CABLE AND HIGH-SPEED
INTERNET SUBSCRIBERS AND REAFFIRMS ALL OTHER 2003 GUIDANCE
TURNAROUND OF NEWLY ACQUIRED SYSTEMS BEGINS TO YIELD
SUBSTANTIAL RESULTS
Pro Forma Cable Revenue Increased 10.0% and Pro Forma Cable
EBITDA Increased 35.8%
Pro Forma Cable Operating Income Increased to $341 million
Philadelphia, PA - May 8, 2003...Comcast Corporation (Nasdaq: CMCSA, CMCSK)
today reported results for the quarter ended March 31, 2003. Comcast will
discuss first quarter results on a conference call and webcast today at 10:30 AM
Eastern Time. A live broadcast of the conference call will be available on the
investor relations websites at www.cmcsa.com and www.cmcsk.com.
Brian L. Roberts, president and CEO of Comcast Corporation said, "We delivered
terrific results this quarter and remain confident that 2003 will be an
outstanding year for Comcast. The solid results for the first 4 months of
integration of our newly acquired cable systems strengthen the foundation for
continued momentum."
"Stemming cable subscriber losses in the newly acquired cable systems is a
critical step to a successful integration," said Roberts. "We added nearly
57,000 basic cable subscribers this quarter, a tremendous accomplishment. As a
result, we are increasing our guidance for basic cable subscriber additions for
2003. We now expect to add 75,000 to 100,000 basic cable subscribers, a
significant improvement from our previous expectation of flat subscriber growth.
As we refocus on video, accelerate the rebuild of the newly acquired cable
systems and
1
continue to work across a range of integration initiatives our results are very
encouraging. More work remains but I am confident that we can successfully
deliver on our plans."
Mr. Roberts continued, "We continue to experience strong demand for our
high-speed Internet service. With 417,000 net additions in the quarter, we
reached more than 4 million subscribers by quarter-end. As a result, we are
increasing our guidance for high-speed Internet service additions for 2003. We
now expect to add 1.6 million high-speed Internet subscribers, a 33% increase
above the net additions reported in 2002 and up from previous guidance of 1.3 to
1.4 million additions, to finish 2003 with 5.2 million high-speed Internet
subscribers. We continue to be very optimistic about the outlook for cable modem
service."
"During the first quarter, we completed the Time Warner Entertainment
restructuring that provided us more than $2 billion in cash for immediate debt
reduction. At closing, we also received $1.5 billion of AOL equity securities
and a 21% interest in Time Warner's cable business, providing additional
strength to our balance sheet. Throughout 2003 we will continue to identify
opportunities to further decrease our debt and increase liquidity in order to
solidify our investment grade ratings."
Comcast Cable Results
- ---------------------
Comcast Cable results for the quarter ended March 31, 2003 are presented on a
pro forma basis. Pro forma results adjust only for acquisitions and are
presented as if the acquisition of AT&T Broadband completed in November 2002 was
effective on January 1, 2002. Please refer to Table 8 "Non-GAAP and Other
Financial Measures."
Pro forma Comcast Cable revenue for the quarter ended March 31, 2003 was $4.231
billion, representing a 10.0% increase from the $3.844 billion in the first
quarter of 2002. Pro forma operating income before depreciation and amortization
(EBITDA) for the quarter was $1.421 billion, an increase of 35.8% over the
$1.046 billion for the same period of 2002. Pro forma results include $88
million of acquisition and employee termination related costs incurred by AT&T
Broadband in the first quarter of 2002. Excluding these costs, cable EBITDA grew
25.3% over the $1.134 billion adjusted 2002 EBITDA figure. EBITDA margins were
33.6% for the first quarter of 2003 compared with 27.2% for the same period in
2002 as overhead reductions and other cost cutting measures took effect. Pro
forma cable operating income was $341 million in the current quarter compared to
a pro forma operating loss of $6 million in the first quarter of 2002.
Pro forma cable video revenues increased 5.4% in the first quarter of 2003
compared with the prior year quarter reflecting continuing growth in Digital
Cable subscriptions and basic cable rate increases, offset by subscriber losses
in the newly acquired cable systems during 2002. Pro forma high-speed Internet
service revenue for the first quarter of 2003 increased 57.5% over the prior
year quarter to $492 million, as a result of a 52.3% increase in the customer
base and a 4.3% increase in average revenue per subscriber. Pro forma cable
phone revenue totaled $224 million, a 27.9% increase from the first quarter of
2002, reflecting higher customer levels compared to the prior year and a 1.4%
decline in average revenue per subscriber. Pro forma advertising revenue
increased 8.3% over the prior year quarter to $235 million, reflecting growth of
13.9% in the historical Comcast systems as a result of the continued success of
regional interconnects in these markets and 4.9% growth in the newly acquired
systems.
In the first quarter of 2003 Comcast Cable added 56,900 basic cable subscribers,
a dramatic improvement over the combined loss of 139,000 subscribers in 2002.
The increase reflects growth in Comcast's historical cable systems of 14,300
basic subscribers, and the addition of 42,600 basic subscribers in the newly
acquired cable systems. The trailing twelve-month
2
growth rate of 0.5% in Comcast's historical systems reflects the negative impact
of military personnel relocations principally in our Savannah and Nashville
systems as a result of recent deployment of troops from these markets. Comcast
Cable expects to regain these subscribers as military personnel return home.
Basic subscriber gains of nearly 43,000 in the newly acquired systems represent
a marked turnaround from the first quarter of 2002 when those systems lost
179,800 subscribers.
Comcast Cable added 168,500 Digital Cable subscribers to end the first quarter
with 6.787 million Digital Cable subscribers, a pro forma increase of 23.4% over
the same prior year period, representing a penetration rate of nearly 32%.
Digital Cable subscriber additions slowed reflecting the impact of digital
repackaging and re-pricing in the newly acquired cable systems as well as a
planned slowdown in marketing as the Company prepares to expand its robust
On-Demand offering across many more markets. The Company expects that, over
time, repackaging and re-pricing will result in significant improvement in the
profitability of the Digital Cable offering in the newly acquired systems. The
Company reaffirms its previous guidance for Digital Cable subscriber additions
of between 950,000 and 1 million in 2003.
Comcast Cable continued to enhance its Digital Cable offering as it expanded the
availability of video-on-demand (VOD) and high-definition television (HDTV). VOD
is now available to 11 million subscribers and HDTV is now available to more
than 9 million subscribers.
Comcast Cable added 417,000 high-speed Internet customers to finish the first
quarter with more than 4 million subscribers, representing a penetration rate of
13%. During the quarter Comcast Cable added high-speed Internet subscribers at
an average weekly rate of over 32,000 new subscribers, nearly double the weekly
average a year ago and up nearly 14% sequentially. More than 79% of the homes in
Comcast's footprint, or 31.1 million homes, now have access to high-speed
Internet service. This represents the addition of over 1.0 million homes to the
service's footprint during the first quarter. As stated above, the Company is
increasing its guidance for high-speed Internet customer additions to 1.6
million in 2003 up from previous guidance of 1.3 to 1.4 million additions. The
Company expects to end the year with 5.2 million high-speed Internet customers.
Capital expenditures totaled $953 million as Comcast Cable upgraded over 12,200
miles of plant to end the quarter with more than 86% of its footprint upgraded
to provide two-way digital and high-speed Internet services. The newly acquired
systems are now nearly 80% upgraded to deliver two-way digital cable and
high-speed Internet service, up from 73% at December 31, 2002. The Company
expects to comfortably meet its target of upgrading approximately 46,000 miles
of cable plant this year at a total cost of approximately $1.3 billion with 94%
of the total cable plant upgraded to provide two-way digital and high-speed
Internet services.
Commerce: QVC
- -------------
QVC's consolidated revenues for the quarter ended March 31, 2003 were $1.062
billion, a 7.5% increase from the $988 million reported in the first quarter of
2002. Consolidated EBITDA for the quarter was $211 million, an increase of 9.8%
over the $192 million reported in the prior year quarter. Consolidated operating
income was $180 million, a 9.1% increase over operating income of $165 million
in the first quarter of 2002.
QVC's international operations contributed significantly to the growth in QVC's
consolidated results for the first quarter of 2003. International revenue grew
over 50% to $214 million for the quarter while international EBITDA grew nearly
five fold from $4 million in the first quarter of 2002 to $18 million for the
first quarter of 2003. QVC's domestic revenue of $848 million was flat when
compared to the first quarter of 2002, reflecting weakness in the domestic
economy and
3
the retail sector in particular. QVC's domestic EBITDA grew 2.6% to $193 million
for the quarter as a result of continued operating efficiencies, driving
domestic EBITDA margin to 22.8% from 22.2%.
Mr. Roberts said, "QVC continues to demonstrate its global leadership position
in electronic retailing. Despite a weak domestic retail environment, QVC's
international businesses powered the quarter's results, proving once again the
strength of its global business model."
On March 3, 2003, Liberty Media Corporation exercised its exit rights related to
QVC. Pursuant to the agreement between Comcast and Liberty, the parties have
begun the independent appraisal process outlined in the partnership contract.
Content and Other
- -----------------
Content and Other includes the Company's content businesses, corporate
overhead and eliminations. Content businesses include E! Networks (E!
Entertainment and Style), Comcast-Spectacor, The Golf Channel, Outdoor Life
Network, and G4.
Comcast's content and other businesses reported first quarter 2003 revenue of
$224 million, a 12.6% increase over the first quarter of 2002, principally the
result of increases in distribution across all the cable channels. Content and
other EBITDA declined 60% to $6 million, due primarily to a decline in EBITDA at
Comcast-Spectacor ($11 million) reflecting increased player compensation and
fewer events at the arenas, continuing investments in new networks and an
increase in corporate overhead from $20 million to $39 million. E! Networks and
The Golf Channel each reported double digit growth in revenue and EBITDA growth
above 30%.
Consolidated Results
- --------------------
The Company's consolidated results include all acquisitions as of the dates of
their closing. The Company acquired AT&T Broadband in November 2002 adding over
13 million cable subscribers to its customer base. Results of operations from
314,000 cable subscribers sold to Bresnan Communications on March 20, 2003 are
not included in operating results for any periods. All per share amounts are
reported on a diluted basis.
For the three months ended March 31, 2003, the Company reported consolidated
revenues of $5.518 billion, as compared to $2.667 billion reported in the first
quarter of 2002 while consolidated EBITDA more than doubled to $1.638 billion
from the $808 million reported in the first quarter of 2002. Increases in
revenue, EBITDA, depreciation and amortization and interest expense primarily
reflect the acquisition of AT&T Broadband in November 2002. For the three months
ended March 31, 2003, the Company reported operating income of $473 million, a
12.4% increase over the $421 million in operating income in the first quarter of
2002. The Company reported a consolidated net loss of $297 million or $0.13 per
share as compared to a net loss of $89 million or $0.09 per share in the same
period of the prior year. Please refer to the "Reconciliation of Net Income
(Loss) to Free Cash Flow" in Table 8 at the end of this release for further
details regarding non-operating items.
Pro forma consolidated results are presented as if the acquisition of AT&T
Broadband was effective on January 1, 2002. For the first quarter of 2003, the
Company reported pro forma consolidated revenues of $5.517 billion, a 9.7%
increase from the $5.031 billion in the first quarter of 2002. Pro forma
consolidated EBITDA for the first quarter of 2003 was $1.638 billion, a 30.8%
increase from the $1.253 billion in the prior year quarter. Included in the
first quarter of 2002 is $88 million of acquisition and employee termination
related costs. Excluding these costs, pro forma EBITDA grew 22.1% over the
$1.341 billion adjusted 2002 pro forma EBITDA
4
figure. Pro forma consolidated operating income was $473 million, as compared to
$107 million in the first quarter of 2002.
Balance Sheet and Liquidity
- ---------------------------
The Company made significant progress during the first quarter in further
strengthening its balance sheet and liquidity position. At March 31, 2003, the
Company's total debt was $32.910 billion, including $5.679 billion of
exchangeable notes collateralized by equity securities that the Company owns.
Debt excluding exchangeables was $27.231 billion. The Company reduced total debt
by $2.0 billion from December 31, 2002 through the use of cash proceeds from the
TWE restructuring. During the first quarter, the Company completely repaid the
bridge facility put in place to fund the acquisition of AT&T Broadband through
the issuance of $3 billion of long-term debt and asset sales including the $2.1
billion of cash proceeds received as part of the Time Warner Entertainment
restructuring.
Financial Guidance 2003
- -----------------------
The Company is increasing its guidance for basic cable subscriber additions and
for high-speed Internet additions for 2003. Comcast now expects to add 75,000 to
100,000 basic cable subscribers, a meaningful improvement from previous guidance
of flat subscriber growth. The Company now expects to add 1.6 million high-speed
Internet subscribers in 2003 versus previous guidance of 1.3 to 1.4 million
additions, to finish 2003 with 5.2 million high-speed Internet subscribers. The
Company reaffirms all other guidance for 2003 for its cable, QVC and content
businesses.
###
This press release contains forward-looking statements. Readers are cautioned
that such forward-looking statements involve risks and uncertainties that could
significantly affect actual results from those expressed in any such
forward-looking statements. Readers are directed to Comcast's Annual Report on
Form 10-K for a description of such risks and uncertainties.
Comcast Corporation will host a conference call with the financial community
today May 8, 2003 at 10:30 a.m. Eastern Time (ET).
The conference call and accompanying slides will be available on the Company's
Investor Relations website at www.cmcsk.com. A recording of the call will be
available on the Investor Relations website starting at 12:30 p.m. ET on May 8,
2003.
Those parties interested in participating via telephone should dial (847)
413-3237. A telephone replay will begin immediately following the call until May
9, 2003 at midnight ET. To access the rebroadcast, please dial (630) 652-3000
and enter passcode number 7018562.
To automatically receive Comcast financial news by email, please visit
www.cmcsk.com and subscribe to e-mail Alerts.
Comcast Corporation (www.comcast.com) is principally involved in the
development, management and operation of broadband cable networks, and in the
provision of electronic commerce and programming content. The Company is the
largest cable company in the United States, serving over 21 million cable
subscribers. The Company's commerce and content businesses include majority
ownership of QVC, Comcast Spectacor, Comcast SportsNet, E! Entertainment
Television, Style, The Golf Channel, Outdoor Life Network and G4. Comcast Class
A common stock and Class A Special common stock trade on The NASDAQ Stock Market
under the symbols CMCSA and CMCSK, respectively.
5
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TABLE 1
Condensed Consolidated Statement of Operations (Unaudited)
(dollars in millions, except per share data)
Three Months Ended
March 31,
2003 2002
------- -------
Service revenues $ 4,456 $ 1,679
Net sales from electronic retailing 1,062 988
------- -------
5,518 2,667
Cost of goods sold from electronic retailing 673 629
Operating, selling, general and administrative expenses 3,207 1,230
------- -------
Operating income before depreciation and amortization 1,638 808
Depreciation and amortization 1,165 387
------- -------
Operating income 473 421
Interest expense (525) (187)
Investment loss, net (230) (248)
Other, net (2) (28)
------- -------
(757) (463)
------- -------
Loss before income taxes and minority interest (284) (42)
Income tax benefit (expense) 68 (3)
Minority interest (81) (44)
------- -------
Net loss ($297) ($89)
======= =======
Basic net loss per common share ($ 0.13) ($ 0.09)
======= =======
Diluted net loss per common share ($ 0.13) ($ 0.09)
======= =======
Basic and Diluted weighted average number of common shares outstanding 2,255 951
======= =======
6
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TABLE 2
Condensed Consolidated Balance Sheet (Unaudited)
(dollars in millions)
March 31, December 31,
2003 2002
-------- --------
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 1,024 $ 781
Other current assets 5,464 6,295
-------- --------
Total current assets 6,488 7,076
-------- --------
INVESTMENTS 13,188 15,207
OTHER NONCURRENT ASSETS - including property and
equipment, and intangible assets 90,336 90,822
-------- --------
$110,012 $113,105
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable, accrued expenses and other current liabilities $ 7,594 $ 8,430
Short-term debt and current portion of long-term debt 2,652 6,953
-------- --------
Total current liabilities 10,246 15,383
-------- --------
LONG-TERM DEBT, less current portion 30,258 27,957
OTHER NONCURRENT LIABILITIES & MINORITY INTEREST 31,454 31,436
STOCKHOLDERS' EQUITY 38,054 38,329
-------- --------
$110,012 $113,105
======== ========
Note:
The value of certain assets and liabilities in the November 2002 AT&T Broadband acquisition are based on
preliminary valuations and are subject to adjustment as additional information is obtained, including
reports from valuation specialists and information related to the cost of terminating or meeting contractual
obligations.
7
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TABLE 3
Condensed Consolidated Statement of Cash Flows (Unaudited)
(dollars in millions)
Three Months Ended
March 31,
2003 2002
------- -------
OPERATING ACTIVITIES
Net cash provided by operating activities $ 800 $ 519
------- -------
FINANCING ACTIVITIES
Proceeds from borrowings 3,900 520
Retirements and repayments of debt (6,079) (451)
Other, net (16) 62
------- -------
Net cash (used in) provided by financing activities (2,195) 131
------- -------
INVESTING ACTIVITIES
Capital expenditures (971) (399)
Proceeds from restructuring of TWE investment 2,100 --
Proceeds from sales of investments and assets held for sale 668 --
Other, net (159) (58)
------- -------
Net cash provided by (used in) investing activities 1,638 (457)
------- -------
INCREASE IN CASH AND CASH EQUIVALENTS 243 193
CASH AND CASH EQUIVALENTS, beginning of period 781 350
------- -------
CASH AND CASH EQUIVALENTS, end of period $ 1,024 $ 543
======= =======
8
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TABLE 4
Pro Forma Financial Data by Business Segment (Unaudited) (1)
(dollars in millions)
(2) (3) (4)
Cable Commerce Content and Other Total
------ -------- ----------------- -----
Three Months Ended March 31, 2003
- ---------------------------------
Revenues $4,231 $1,062 $224 $5,517
EBITDA $1,421 $211 $6 $1,638
Operating Income (Loss) $341 $180 ($48) $473
EBITDA Margin 33.6% 19.9% NM 29.7%
Capital Expenditures (7) $953 $13 $5 $971
Three Months Ended March 31, 2002
- ---------------------------------
Revenues $3,844 $988 $199 $5,031
EBITDA (5) $1,046 $192 $15 $1,253
Operating Income (Loss) ($6) $165 ($52) $107
EBITDA Margin (5) 27.2% 19.4% NM 24.9%
Capital Expenditures (6) $1,097 $32 $9 $1,138
(1) See Non-GAAP and Other Financial Measures in Table 8. Historical financial data by business segment, as required
under generally accepted accounting principles, is available in the Company's quarterly report on Form 10-Q.
(2) Pro forma financial data includes the results of AT&T Broadband acquired in November 2002 (newly acquired
systems). Pro forma financial data excludes the results of the 314,000 cable subscribers sold to Bresnan
Communications in March 2003 and excludes the results of the net reduction of 16,000 subscribers associated with
the cable system exchange with Insight Communications in February 2003.
(3) Pro forma financial data excludes the results of QVC's infomercial operations in Mexico which were sold in
February 2003.
(4) Content and Other includes segments not meeting quantitative guidelines for reporting, including our content and
business communications operations, and corporate expenses. It also includes elimination entries related to the
segments presented. Content includes E! Networks (E! Entertainment and Style), Comcast-Spectacor, The Golf
Channel, Outdoor Life Network and G4. Revenues and EBITDA of our content businesses for the three months ended
March 31, 2003 and 2002 were as follows:
2003 2002
---- ----
Revenue $242 $219
EBITDA $50 $56
EBITDA Margin 20.5% 25.5%
(5) Included for the three months ended March 31, 2002 are acquisition & employee termination related costs of $88
million incurred by AT&T Broadband prior to the acquisition of AT&T Broadband by Comcast.
(6) For newly acquired systems, includes capital expenditures made since January 1, 2002.
(7) Our Cable segment's capital expenditures are comprised of the following categories:
Recurring
Capital
1Q03 Percentage*
---- -----------
Customer Premise Equipment (CPE) $386 15%-25%
Scalable Infrastructure 54 2%-10%
Line Extensions 54 -
Upgrade/Rebuild 342 20%-30%
Support Capital 117 100%
----
Total $953
====
CPE includes costs incurred at the customer residence to secure new customers, revenue units and additional
bandwidth revenues (e.g. digital converters). Scalable infrastructure includes costs, not CPE or network related,
to secure growth of new customers, revenue units and additional bandwidth revenues or provide service enhancements
(e.g. headend equipment). Line extensions include network costs associated with entering new service areas (e.g.
fiber/coaxial cable). Upgrade/rebuild includes costs to enhance or replace existing fiber/coaxial cable networks,
including recurring betterments. Support capital includes costs associated with the replacement or enhancement of
non-network assets due to obsolescence and wear out (e.g. non-network equipment, land, buildings and vehicles).
* Represents an estimate of the recurring capital expenditures for each of the above components.
9
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TABLE 5
Pro Forma Data - Cable Segment Components (Unaudited) (1)(2)
------------------------------------------------------------
(dollars in millions, except average revenue per basic subscriber data)
Historical Newly Acquired
Systems (3) Systems (3) Total
----------------------- ----------------------- --------------------
Three Months Ended March 31 2003 2002 2003 2002 2003 2002
-- ---- ---- ---- ---- ---- ----
Revenues:
Video (4) $1,230 $1,149 $1,752 $1,678 $2,982 $2,827
High-Speed Internet 204 119 288 193 492 312
Phone 6 6 218 169 224 175
Advertising 92 81 143 136 235 217
Other (5) 62 63 85 102 147 165
Franchise Fees 51 51 100 97 151 148
----------------------- ----------------------- --------------------
Total Revenues $1,645 $1,469 $2,586 $2,375 $4,231 $3,844
Average Total Revenue per Basic Subscriber $64.16 $57.64 $67.51 $60.24 $66.15 $59.08
EBITDA (6) $675 $597 $746 $449 $1,421 $1,046
Operating Income (Loss) $376 $304 ($35) ($310) $341 ($6)
EBITDA Margin (6) 41.0% 40.7% 28.9% 18.9% 33.6% 27.2%
Capital Expenditures (7) $335 $358 $618 $739 $953 $1,097
EBITDA, Net of Capital Expenditures $340 $239 $128 ($290) $468 ($51)
- -----------------------------------------------------------------------------------------------------------------------------------
(1) See Non-GAAP and Other Financial Measures in Table 8.
(2) Pro forma financial data includes the results of AT&T Broadband acquired in November 2002 (newly acquired
systems). Pro forma financial data excludes the results of the 314,000 cable subscribers sold to Bresnan
Communications in March 2003 and excludes the results of the net reduction of 16,000 subscribers associated with
the cable system exchange with Insight Communications in February 2003.
(3) Historical systems represent those cable businesses operated by the Company prior to the acquisition of AT&T
Broadband. The newly acquired systems represent those cable businesses acquired from AT&T.
(4) Video revenues consist of our basic, expanded basic, premium, pay-per-view, equipment and digital services.
(5) Other revenues include installation revenues, guide revenues, commissions from electronic retailing, other product
offerings and revenues of our digital media center and regional sports programming networks.
(6) Included for the three months ended March 31, 2002 are acquisition & employee termination related costs of $88
million incurred by AT&T Broadband prior to the acquisition of AT&T Broadband by Comcast.
(7) For newly acquired systems, includes capital expenditures made since January 1, 2002.
10
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TABLE 6
Pro Forma Data - Cable Segment (Unaudited) (1) (2)
--------------------------------------------------
Historical Systems (3) Newly Acquired Systems (3) Total
---------------------- -------------------------- -----
1Q03 4Q02 1Q02 1Q03 4Q02 1Q02 1Q03 4Q02 1Q02
---- ---- ---- ---- ---- ---- ---- ---- ----
Cable
Homes Passed (000's) 14,270.0 14,188.4 13,986.1 25,042.1 24,926.8 24,375.7 39,312.1 39,115.2 38,361.8
Subscribers (000's) 8,553.7 8,539.4 8,511.7 12,792.4 12,749.8 13,053.3 21,346.1 21,289.2 21,565.0
Penetration 59.9% 60.2% 60.9% 51.1% 51.1% 53.6% 54.3% 54.4% 56.2%
Quarterly Net Subscriber
Additions (000's) 14.3 40.6 40.7 42.6 (49.8) (179.8) 56.9 (9.2) (139.1)
Digital Cable
"Digital Ready"
Subscribers (000's) 8,553.7 8,539.4 8,400.2 12,792.4 12,749.8 13,053.3 21,346.1 21,289.2 21,453.5
Subscribers (000's) 2,321.8 2,245.4 1,855.5 4,465.4 4,373.3 3,642.5 6,787.2 6,618.7 5,498.0
Penetration 27.1% 26.3% 22.1% 34.9% 34.3% 27.9% 31.8% 31.1% 25.6%
Quarterly Net Subscriber
Additions (000's) 76.4 132.9 114.7 92.1 254.4 251.7 168.5 387.3 366.4
Monthly Average Revenue
per Subscriber $15.42 $15.00 $14.66 $14.73 $14.21 $14.28 $14.96 $14.48 $14.40
High-Speed Internet
"Available" Homes (000's) 13,026.2 12,611.3 11,299.0 18,080.7 17,460.5 15,278.0 31,106.9 30,071.8 26,577.0
Subscribers (000's) 1,718.1 1,525.9 1,040.5 2,319.2 2,094.4 1,609.7 4,037.3 3,620.3 2,650.2
Penetration 13.2% 12.1% 9.2% 12.8% 12.0% 10.5% 13.0% 12.0% 10.0%
Quarterly Net Subscriber
Additions (000's) 192.2 187.2 92.4 224.8 179.8 136.6 417.0 367.0 229.0
Monthly Average Revenue
per Subscriber $41.97 $40.78 $39.97 $43.44 $43.09 $41.74 $42.82 $42.13 $41.05
Phone
"Available" Homes (000's) 320.9 273.8 251.1 8,674.2 8,438.4 7,125.0 8,995.1 8,712.2 7,376.1
Subscribers (000's) 38.0 39.5 41.8 1,380.8 1,398.9 1,114.9 1,418.8 1,438.4 1,156.7
Penetration 11.8% 14.4% 16.6% 15.9% 16.6% 15.6% 15.8% 16.5% 15.7%
Quarterly Net Subscriber
Additions (000's) (1.5) 0.8 1.0 (18.1) 76.0 110.4 (19.6) 76.8 111.4
Monthly Average Revenue
per Subscriber $50.18 $55.61 $45.52 $52.35 $53.33 $53.32 $52.29 $53.40 $53.03
Total Revenue Generating
Units (000's) (4) 12,631.6 12,350.2 11,449.5 20,957.8 20,616.4 19,420.4 33,589.4 32,966.6 30,869.9
- -----------------------------------------------------------------------------------------------------------------------------------
Supplemental Information - Pro Forma Historical Data
(dollars in millions)
Revenue 1Q03 4Q02 3Q02 2Q02 1Q02
---- ---- ---- ---- ----
Historical Systems $ 1,645 $ 1,601 $ 1,548 $ 1,541 $ 1,469
Newly Acquired Systems 2,586 2,548 2,487 2,468 2,375
----------------------------------------------------------------
Total $ 4,231 $ 4,149 $ 4,035 $ 4,009 $ 3,844
EBITDA
Historical Systems $ 675 $ 645 $ 647 $ 653 $ 597
Newly Acquired Systems 746 403 551 524 449
----------------------------------------------------------------
EBITDA (5) $ 1,421 $ 1,048 $ 1,198 $ 1,177 $ 1,046
Acquisition & employee termination related costs 130 107 100 88
included in EBITDA (5)
---------------------------------------------------
Adjusted EBITDA $ 1,178 $ 1,305 $ 1,277 $ 1,134
===================================================
- -----------------------------------------------------------------------------------------------------------------------------------
(1) See Non-GAAP and Other Financial Measures in Table 8.
(2) Pro forma financial data includes the results of AT&T Broadband acquired in November 2002 (newly acquired systems). Pro forma
financial data excludes the results of the 314,000 cable subscribers sold to Bresnan Communications in March 2003 and excludes
the results of the net reduction of 16,000 subscribers associated with the cable system exchange with Insight Communications in
February 2003.
(3) Historical systems represent those cable businesses operated by the Company prior to the acquisition of AT&T Broadband. The
newly acquired systems represent those cable businesses acquired from AT&T.
(4) The sum total of all primary analog video, digital video, high-speed Internet and phone customers, but excluding additional
outlets.
(5) Included for the four quarters ended December 31, 2002 are acquisition & employee termination related costs incurred by AT&T
Broadband prior to the acquisition of AT&T Broadband by Comcast.
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TABLE 7
Pro Forma Data - Commerce Segment (QVC) (Unaudited) (1)
-------------------------------------------------------
(dollars and homes in millions)
Domestic (2) Germany UK Japan Total
----------- ------- --- ----- -----
Three Months Ended March 31, 2003
Revenue $848 $95 $79 $40 $1,062
Gross Margin 37.1% 32.5% 36.8% 37.1% 36.6%
EBITDA $193 $6 $7 $5 $211
Operating Income $170 $3 $4 $3 $180
EBITDA Margin 22.8% 5.8% 9.0% 12.8% 19.9%
Average Homes (3) 75.7 26.0 11.5 6.7 N/A
Revenue per Average Home (in local currency) $11.16 [EURO]3.44 [POUND]4.29 Y722.50 N/A
Three Months Ended March 31, 2002
Revenue $848 $60 $68 $12 $988
Gross Margin 36.9% 31.1% 35.2% 34.0% 36.4%
EBITDA $188 $0 $6 ($2) $192
Operating Income (Loss) $165 ($2) $4 ($2) $165
EBITDA Margin 22.2% 0.8% 8.5% (20.4%) 19.4%
Average Homes (3) 73.5 24.2 9.6 3.7 N/A
Revenue per Average Home (in local currency) $11.46 [EURO]2.84 [POUND]4.82 Y410.60 N/A
(1) Financial data excludes the results of QVC's infomercial operations in
Mexico which were sold in February 2003.
(2) Domestic includes the U.S. channel, infomercial business and QVC.com.
(3) Note that while QVC has the potential to serve this many homes in Germany,
it is estimated that approximately 50% of the serviced homes are programmed
to receive the QVC channel.
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TABLE 8
Non-GAAP and Other Financial Measures
EBITDA is the primary basis used by our management to measure the operational
strength and performance of our businesses. Management uses Free Cash Flow as an
additional performance measure and as an indicator of our ability to pay debt
and make strategic investments. We use Debt Excluding Exchangeables as a measure
of debt that will require cash from future operations or financings. We also
adjust certain historical data on a pro forma basis following significant
acquisitions or dispositions to enhance comparability.
EBITDA is the measure of profit or loss our management uses to evaluate
performance of all of our operating segments and operating units within all of
our segments. EBITDA is defined as operating income before depreciation and
amortization and impairment charges, if any, related to fixed and intangible
assets. 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. EBITDA is
frequently used as one of the bases for comparing our operating performance with
other companies in our industries, although our measure of EBITDA may not be
directly comparable to similarly titled measures of other companies. Because we
use EBITDA as a measure of our segment profit or loss, we reconcile it to
operating income, the most directly comparable financial measure calculated and
presented in accordance with Generally Accepted Accounting Principles (GAAP), in
the business segment footnote of our quarterly and annual financial statements.
Therefore, we believe our measure of EBITDA is not a "non-GAAP financial
measure" as contemplated by Regulation G adopted by the Securities and Exchange
Commission.
Free Cash Flow is defined as EBITDA less net interest, cash paid for taxes, and
capital expenditures. As such, it is unaffected by fluctuations in working
capital levels from period to period. It can also be computed as cash provided
by operating activities less capital expenditures adjusted for the change in
operating assets and liabilities, net of acquisitions. We believe Free Cash Flow
is a non-GAAP financial measure as contemplated by Regulation G.
Debt Excluding Exchangeables refers to the aggregate amount of our consolidated
debt and capital lease obligations less the amount of notes that are
collateralized by securities that we own. We believe Debt Excluding
Exchangeables is a non-GAAP financial measure as contemplated by Regulation G.
Pro Forma data is used by management to evaluate performance when significant
acquisitions or dispositions occur. Historical data reflects results of acquired
businesses only after the acquisition dates while pro forma data enhances
comparability of financial information between periods by adjusting the data as
if the acquisitions (or dispositions) occurred at the beginning of the prior
year. Our pro forma data is only adjusted for the timing of acquisitions and
does not include adjustments for costs related to integration activities, cost
savings or synergies that have been or may be achieved by the combined
businesses. We believe our pro forma data is not a non-GAAP financial measure as
contemplated by Regulation G.
EBITDA and Free Cash Flow should not be considered as substitutes for operating
income (loss), net income (loss), net cash provided by operating activities or
other measures of performance or liquidity reported in accordance with GAAP.
Debt Excluding Exchangeables should not be considered as a substitute for Total
Debt. Additionally, in the opinion of management, our pro forma data is not
necessarily indicative of future results or what results would have been had the
acquired businesses been operated by us after the assumed earlier date.
Quantitative reconciliations of Free Cash Flow and Debt Excluding Exchangeables
and, although not required by Regulation G, of EBITDA and our pro forma data
follows.
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TABLE 8 continued
Reconciliations of Historical and Pro Forma Data by Business Segment (Unaudited)
(dollars in millions)
Historical
--------------------------------------------------
Adjustments (1)
------------------------
Cable Commerce Content and Other Total Cable Content and Other Pro forma
----- -------- ----------------- ----- ----- ----------------- ---------
Three Months Ended March 31, 2003
- ---------------------------------
Revenues $4,232 $1,062 $224 $5,518 ($1) - $5,517
Operating expenses (excluding
depreciation & amortization) 2,811 851 218 3,880 (1) - 3,879
------ ------- ------ ------- ---- ------- -------
EBITDA $1,421 $211 $6 $1,638 - - $1,638
Depreciation and amortization 1,080 31 54 1,165 - - 1,165
------ ------- ------ ------- ---- ------- -------
Operating income (loss) $341 $180 ($48) $473 - - $473
====== ======= ====== ======= ==== ======= =======
Capital expenditures $953 $13 $5 $971 - - $971
====== ======= ====== ======= ==== ======= =======
Adjustments (1)
------------------------
Three Months Ended March 31, 2002 Cable Commerce Content and Other Total Cable Content and Other Pro forma
- --------------------------------- ----- -------- ----------------- ----- ----- ----------------- ---------
Revenues $1,469 $988 $210 $2,667 $2,375 ($11) $5,031
Operating expenses (excluding
depreciation & amortization) 872 796 191 1,859 1,926 (7) 3,778
------ ------- ------ ------- ---- ------- -------
EBITDA $597 $192 $19 $808 $449 ($4) $1,253
Depreciation and amortization 293 27 67 387 759 - 1,146
------ ------- ------ ------- ---- ------- -------
Operating income (loss) $304 $165 ($48) $421 ($310) ($4) $107
====== ======= ====== ======= ==== ======= =======
Capital expenditures $358 $32 $9 $399 $739 - $1,138
====== ======= ====== ======= ==== ======= =======
Reconciliation of Total Debt to Debt Excluding Exchangeables (Unaudited)
(dollars in millions)
As of March 31, 2003
- --------------------
Current portion of long-term debt $2,652
Long-term debt 30,258
-------
Total Debt $32,910
Exchangeable debt 5,679
-------
Debt excluding exchangeables $27,231
=======
(1) Pro forma data is only adjusted for timing of the acquisitions (or
dispositions) and for acquisitions does not include adjustments for costs
related to integration activities, cost savings or synergies that have been
or may be achieved by the combined businesses.
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TABLE 8 continued
Reconciliations of Cable Segment Historical and Pro Forma Data (Unaudited)
(dollars in millions)
Three Months Ended December 31, 2002 Historical Adjustments (1) Pro forma
- ------------------------------------ ---------- --------------- ---------
Revenues $2,792 $1,357 $4,149
Operating expenses (excluding depreciation & amortization) 1,890 1,211 3,101
------- -------- --------
EBITDA 902 146 1,048
Depreciation and amortization 770 421 1,191
------- -------- --------
Operating income (loss) $132 ($275) ($143)
======= ======== ========
Three Months Ended September 30, 2002 Historical Adjustments (1) Pro forma
- ------------------------------------- ---------- --------------- ---------
Revenues $1,548 $2,487 $4,035
Operating expenses (excluding depreciation & amortization) 901 1,936 2,837
------- -------- --------
EBITDA 647 551 1,198
Depreciation and amortization 309 777 1,086
------- -------- --------
Operating income (loss) $338 ($226) $112
======= ======== ========
Three Months Ended June 30, 2002 Historical Adjustments (1) Pro forma
- -------------------------------- ---------- --------------- ---------
Revenues $1,541 $2,468 $4,009
Operating expenses (excluding depreciation & amortization) 888 1,944 2,832
------- -------- --------
EBITDA 653 524 1,177
Depreciation and amortization 298 785 1,083
Impairment charge - 16,525 16,525
------- -------- --------
Operating income (loss) $355 ($16,786) ($16,431)
======= ======== ========
(1) Pro forma data is only adjusted for timing of the acquisitions (or dispositions) and for acquisitions does not include
adjustments for costs related to integration activities, cost savings or synergies that have been or may be achieved by
the combined businesses.
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TABLE 8 continued
Reconciliation of Net Income (Loss) to Free Cash Flow (Unaudited)
(dollars in millions, except per share data)
Three Months Ended
March 31,
2003 2002
---- ----
$ per share (3) $ per share (3)
------- ------------- ----- --------------
Net Income (Loss) as reported ($297) ($0.13) ($89) ($0.09)
Non-operating items, net of tax (1) 204 0.09 208 0.22
---- ----- ---- -----
Net Income (Loss) as adjusted (93) (0.04) 119 0.13
Items to reconcile net income (loss) as adjusted to EBITDA:
Depreciation & amortization 1,165 0.52 387 0.41
Interest expense 525 0.23 187 0.20
Income tax expense 41 0.02 115 0.11
---- ----- ---- -----
EBITDA $1,638 $0.73 $808 $0.85
==== ===== ==== =====
2003 2002
---- ----
EBITDA $1,638 $1,638 $808 $808
Less:
Interest, net (2) (540) (540) (171) (171)
Cash Paid for Income Taxes (41) (41) (30) (30)
Change in Operating Assets & Liabilities, net of acquisitions (257) (88)
---- ----
Cash Flow from Operating Activities $800 $519
==== ====
Less: Capital Expenditures (971) (399)
--- ----
Free Cash Flow $86 $208
=== ====
- ---------------------------------------------------------------------------------------------------------------------------------
(1) Detail of non-operating items:
$ per share (3) $ per share (3)
------- ------------- ----- --------------
Investment (income) expense - mark to market adjustments on
trading securities, derivatives and hedged items, net $230 $0.10 $244 $0.26
Investment expense - investment impairment losses (4) 55 0.02 13 0.01
All other, net (5) 28 0.02 63 0.07
---- ----- ---- -----
Total non-operating items 313 0.14 320 0.34
Tax effect (109) (0.05) (112) (0.12)
---- ----- ---- -----
Non-operating items, net of tax $204 $0.09 $208 $0.22
==== ===== ==== =====
(2) Includes interest expense net of interest income and excludes non-cash interest.
(3) Diluted weighted average shares outstanding for the three months ended March 31, 2003 and 2002 were 2.255 billion
and 951 million, respectively.
(4) We record losses on our investments for which we have determined that a decline in value of the investment was
considered other than temporary.
(5) Includes investment, interest and dividend income, equity in net (income) losses of affiliates, other income
(expense) and minority interest.
16