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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): April 28, 2005
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 2.02. Results of Operations and Financial Condition
On April 28, 2005, Comcast Corporation ("Comcast") issued a press release
reporting the results of its operations for the three months ended March 31,
2005. The press release is attached hereto as Exhibit 99.1. Comcast does not
intend for this Item 2.02 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.
Item 9.01. Exhibits
Exhibit 99.1 Comcast Corporation press release dated April 28, 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.
Dated: April 28, 2005 COMCAST CORPORATION
By: /s/ Lawrence J. Salva
------------------------
Lawrence J. Salva
Senior Vice President, Chief
Accounting Officer and Controller
(Principal Accounting Officer)
Exhibit 99.1
[LOGO OF COMCAST] PRESS RELEASE
Investor Contacts: Press Contacts:
Marlene S. Dooner (215) 981-7392 D'Arcy Rudnay (215) 981-8582
Leslie A. Arena (215) 981-8511 Tim Fitzpatrick (215) 981-8515
Daniel J. Goodwin (215) 981-7518
COMCAST REPORTS FIRST QUARTER 2005 RESULTS
Consolidated Revenue Increased 9.3% to $5.4 Billion
Cable Division Revenue Increased 9.7% to $5.1 Billion
Consolidated Operating Income Increased 31.3% to $866 Million
Consolidated Operating Cash Flow Increased 17.1% to $2.0 Billion
Cable Division Operating Cash Flow Increased 15.9% to $2.0 Billion
Strong Demand for New Products Continues
Adds More than 414,000 High-Speed Internet and 200,000 Digital Customers
Digital Customer Demand Drives 428,000 HDTV and DVR Additions
***
Comcast Board of Directors Authorizes $2 Billion Addition
To Stock Repurchase Program
Philadelphia, PA - April 28, 2005...Comcast Corporation (Nasdaq: CMCSA, CMCSK)
today reported results for the quarter ended March 31, 2005. Comcast will
discuss first quarter results on a conference call and webcast today at 8:30 AM
Eastern Time. A live broadcast of the conference call will be available on the
investor relations website at www.cmcsa.com and www.cmcsk.com.
Brian L. Roberts, Chairman and CEO of Comcast Corporation said, "We are off to a
great start this year. We are reporting strong revenue growth in our Cable and
Content divisions and more than $2 billion in Operating Cash Flow, representing
growth of more than 17% as compared to the first quarter of 2004. Operating
income increased more than 31% to $866 million. Our strategy of differentiating
our products by adding valuable features is showing continued positive results
with robust Comcast Digital Cable and Comcast High-Speed Internet net additions.
We are striking the right balance with our focus on customer growth and
profitability."
"Our customers are embracing a whole new way to watch television. In March, our
digital television customers viewed more than 100 million ON DEMAND programs.
That is three times the number of programs viewed ON DEMAND in March of last
year and a 40% increase in usage from the fourth quarter of 2004."
"We generated $722 million of Free Cash Flow in the first quarter of 2005,
repurchased $326 million in Comcast stock and continue to make investments to
support our growth and differentiation strategy. I am pleased to announce that
our Board of Directors has authorized a $2 billion addition to our stock
repurchase program, providing $2.3 billion of repurchase capacity. Since
December 2003, we have repurchased $1.7 billion of Comcast stock."
"The first quarter of 2005 demonstrates that we are executing on all fronts,
delivering strong operational and financial results, returning capital to
shareholders, and making investments to support our ongoing growth."
"Comcast has never had more potential for growth or been in a better position to
take advantage of those opportunities. We are excited about the future of the
cable business and we just announced transactions with Time Warner and Adelphia
that will allow us to expand our footprint and accelerate the deployment of our
advanced services even further."
COMCAST CABLE RESULTS
Cable results are presented on a pro forma basis. Pro forma cable results adjust
only for certain acquisitions and dispositions and are presented as if the
acquisitions and dispositions were effective on January 1, 2004. Please refer to
Table 7-A for a reconciliation of pro forma data.
Comcast Cable reported revenue of $5.1 billion for the quarter ended March 31,
2005, representing a $453 million or 9.7% increase from the $4.7 billion in the
first quarter of 2004. Video revenue increased $178 million or 5.6% to $3.4
billion in the first quarter of 2005, driven by higher monthly revenue per
subscriber and an increase in digital cable subscriptions. Comcast Cable added
200,000 new digital customers in the first quarter of 2005 and, with more than
8.8 million subscribers, digital cable penetration reached 41.1% of basic
subscribers. Basic cable subscribers declined 29,000 during the first quarter of
2005.
Digital cable subscriber and video revenue growth reflect consumers' demand for
new digital features and services including Comcast ON DEMAND, high-definition
television (HDTV) programming and digital video recorders (DVRs). During the
first quarter of 2005, pay-per-view revenue increased more than 18% driven by
movie and event purchases through the Comcast ON DEMAND service. Pay-per-view
revenues have increased each of the last six quarters reflecting the strong
consumer appeal of the ON DEMAND service. At the end of the first quarter of
2005, we had deployed a combined 1.6 million set-top boxes with DVR and/or HDTV
programming capability, an increase of more than 1 million in the past year.
More than 428,000 or 25% of these advanced set-top boxes were deployed in the
first quarter of 2005, generating an incremental $5 to $10 of monthly revenue
per box.
Comcast High-Speed Internet service revenue increased 32.5% to $925 million in
the first quarter of 2005 reflecting strong growth in the number of subscribers
and higher average revenue per subscriber. Comcast Cable added 414,000
high-speed Internet customers to finish the first quarter of 2005 with 7.4
million subscribers, representing a penetration rate of 18.3% of available
homes. Average monthly revenue per subscriber was $42.81 in the first quarter of
2005, a slight increase from the first quarter of 2004 and a 1.8% increase from
the $42.06 reported in the fourth quarter of 2004.
Advertising revenue for the first quarter of 2005 increased 9.8% to $296 million
reflecting growth of 9.1% in local advertising and growth of 15.4% in
regional/national advertising as a result of the continuing success of our
regional interconnect strategy. The strong growth in advertising revenue during
the first quarter included a decline in political advertising. Advertising
growth in 2005 will continue to reflect a significant decline in political
advertising when compared to the 2004 election year.
Cable phone revenue declined 3.1% from the first quarter of 2004 to $173 million
in the first quarter of 2005. The decrease in revenue reflects a decline in
cable phone customers during 2004. Comcast Cable reported 4,000 net new cable
phone customers in the first quarter of 2005 including the addition of more than
7,000 Comcast Digital Voice customers (Comcast's phone service using IP
technology), offset by a decline in the number of Comcast's circuit-switched
telephone customers as we transition to focus on marketing Comcast Digital
Voice.
Cable operating income before depreciation and amortization (Operating Cash
Flow) increased 15.9% to $2.0 billion for the quarter from the $1.7 billion
reported for the first quarter of 2004. First quarter 2005 Operating Cash Flow
margin increased to 39.1% from 37.0% in the first quarter of last year.
Cable capital expenditures for the quarter ended March 31, 2005 increased 8.5%
to $883 million from the same period last year. The increase in capital
expenditures reflects certain capital investments, including equipment for
digital simulcasting and our integrated service platform, which will not recur
in the latter part of this year, and additional purchases of advanced set-top
boxes to meet customer demand.
CONTENT
Comcast's content segment consists of our national networks E! Entertainment
Television and Style Network (E! Networks), The Golf Channel, Outdoor Life
Network, G4 and AZN Television (formerly International Channel Networks).
2
Comcast's content segment reported first quarter 2005 revenue of $213 million, a
20.9% increase from the first quarter of 2004 reflecting increases in
distribution and advertising revenue for all the networks. The Content segment
reported Operating Cash Flow of $77 million, a 12.1% increase from the first
quarter of 2004 due primarily to strong growth at The Golf Channel offset by
funding of our developing networks.
CORPORATE AND OTHER
Corporate and Other includes Comcast-Spectacor, corporate overhead and other
operations and eliminations between Comcast's businesses. For the quarter ended
March 31, 2005, Comcast reported Corporate and Other revenue of $47 million and
an Operating Cash Flow loss of $42 million compared to revenue of $86 million
and an Operating Cash Flow loss of $55 million in the same period of 2004
reflecting the absence of National Hockey League games in 2005.
CONSOLIDATED RESULTS
In the first quarter of 2005, the Company reported consolidated revenues of $5.4
billion, a 9.3% increase from the $4.9 billion reported in the same period of
2004. Operating income increased 31.3% to $866 million in the first quarter of
2005 compared to operating income of $659 million in the same period of 2004.
Consolidated Operating Cash Flow increased to $2.0 billion, or 17.1%, in the
first quarter of 2005 from the $1.7 billion reported in the prior year.
Free Cash Flow (described further on Table 4) increased $325 million or 81.9%
reflecting higher Operating Cash Flow and capital expenditures, as described
above.
For the quarter ended March 31, 2005, the Company reported consolidated net
income of $313 million, or $0.14 per share compared to a consolidated net income
of $65 million, or $0.03 per share in the same period of 2004.
As previously disclosed and more fully described in our 2004 Form 10-K, Comcast
is liable for a portion of any liabilities of AT&T relating to certain At Home
litigation. AT&T is currently involved in advanced settlement discussions,
following a mediation, relating to two of the lawsuits. If AT&T reaches a
settlement prior to the filing of our Form 10-Q, Comcast would be required to
reflect in its first quarter earnings its share of the settlement amount. No
assurances can be given that a settlement will be reached or the amount of any
such settlement. Final disposition of these lawsuits and the final resolution of
Comcast's share of these potential liabilities are not expected to have a
material adverse effect on its consolidated financial position but could be
material to its consolidated results of operations of any one period. Financial
results contained in this press release do not reflect the potential effect of
any such settlement.
2005 FINANCIAL OUTLOOK:
Comcast updates the following previously issued guidance for 2005:
o Consolidated Operating Cash Flow growth of 14% to 15%; up from the
previous guidance of at least 12% growth.*
o Consolidated capital expenditures will increase by $200 to $300
million over previous guidance of approximately $3 billion due to the
strong demand for advanced set-top boxes.
Comcast affirms the following previously issued guidance for 2005:
o Consolidated revenue growth of approximately 10%.
o Total Revenue Generating Unit growth of at least 2.5 million units.
o Consolidated Free Cash Flow growth of 35% to 45%.*
* Does not include any impact from the adoption of SFAS No. 123R (Accounting for
stock-based compensation).
###
This press release contains forward-looking statements. Readers are cautioned
that such forward-looking statements involve risks and uncertainties that could
cause actual events or our actual results to differ materially from those
expressed in any such forward-looking statements, including the effect of any
settlement reached in the At Home litigation. Readers are directed to Comcast's
periodic and other reports filed with the Securities and Exchange Commission for
a description of such risks and uncertainties.
3
In this discussion we sometimes refer to financial measures that are not
presented according to generally accepted accounting principles (GAAP). Certain
of these measures are considered "non-GAAP financial measures" under the
Securities and Exchange Commission (SEC) regulations; those rules require the
supplemental explanation and reconciliation provided in Table 7 of this release.
All percentages are calculated based on actual amounts. Minor differences may
exist due to rounding.
###
Comcast Corporation will host a conference call with the financial community
today April 28, 2005 at 8:30 a.m. Eastern Time (ET). The conference call will be
broadcast live on the Company's Investor Relations website at www.cmcsa.com or
www.cmcsk.com. A recording of the call will be available on the Investor
Relations website starting at 12:30 p.m. ET on Thursday, April 28, 2005. Those
parties interested in participating via telephone should dial (847) 413-2408. A
telephone replay will begin immediately following the call until Friday, April
29, 2005 at midnight Eastern Time (ET). To access the rebroadcast, please dial
(630) 652-3000 and enter passcode number 11274875#. To automatically receive
Comcast financial news by email, please visit www.cmcsa.com or www.cmcsk.com and
subscribe to e-mail Alerts.
Comcast Corporation (Nasdaq: CMCSA, CMCSK) (http://www.comcast.com) is the
nation's leading provider of cable, entertainment and communications products
and services. With 21.5 million cable customers, 7.4 million high-speed Internet
customers, and 1.2 million voice customers, Comcast is principally involved in
the development, management and operation of broadband cable networks and in the
delivery of programming content.
The Company's content networks and investments include E! Entertainment
Television, Style Network, The Golf Channel, Outdoor Life Network, G4, AZN
Television, PBS KIDS Sprout, TV One and four regional Comcast SportsNets. The
Company also has a majority ownership in Comcast-Spectacor, whose major holdings
include the Philadelphia Flyers NHL hockey team, the Philadelphia 76ers NBA
basketball team and two large multipurpose arenas in Philadelphia. Comcast Class
A common stock and Class A Special common stock trade on The NASDAQ Stock Market
under the symbols CMCSA and CMCSK, respectively.
4
COMCAST CORPORATION
Table 1
Condensed Consolidated Statement of Operations (Unaudited)
(amounts in millions, except per share data)
Three Months Ended
March 31,
---------------------------
2005 2004
------------ ------------
Revenues $ 5,363 $ 4,908
Operating expenses 1,957 1,869
Selling, general and administrative expenses 1,376 1,306
3,333 3,175
Operating Cash Flow 2,030 1,733
Depreciation expense 874 798
Amortization expense 290 276
1,164 1,074
Operating Income 866 659
Other Income (Expense)
Interest expense (444) (500)
Investment loss, net (36) (9)
Equity in net income (losses) of affiliates 12 (17)
Other income 62 7
(406) (519)
Income before Income Taxes
and Minority Interest 460 140
Income tax expense (140) (76)
Income Before Minority Interest 320 64
Minority interest (7) 1
Net Income $ 313 $ 65
Diluted earnings per common share $ 0.14 $ 0.03
Diluted weighted average number of common shares outstanding 2,222 2,268
5
COMCAST CORPORATION
TABLE 2
Condensed Consolidated Balance Sheet (Unaudited)
(dollars in millions)
March 31, December 31,
2005 2004
------------ ------------
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 636 $ 452
Investments 950 1,555
Accounts receivable, net 883 959
Other current assets 461 569
Total current assets 2,930 3,535
INVESTMENTS 12,945 12,812
PROPERTY AND EQUIPMENT, NET 18,738 18,711
FRANCHISE RIGHTS 51,088 51,071
GOODWILL 14,014 14,020
OTHER INTANGIBLE ASSETS, net 3,824 3,851
OTHER NONCURRENT ASSETS, net 699 694
$ 104,238 $ 104,694
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued expenses related to trade creditors $ 1,998 $ 2,041
Accrued expenses and other current liabilities 2,607 2,735
Deferred income taxes 166 360
Current portion of long-term debt 2,638 1,854
Current portion of exchangeable debt 1,217 1,645
Total current liabilities 8,626 8,635
LONG-TERM DEBT, less current portion 19,264 20,039
LONG-TERM EXCHANGEABLE DEBT, less current portion 53 54
DEFERRED INCOME TAXES 26,930 26,815
OTHER NONCURRENT LIABILITIES 7,237 7,261
MINORITY INTEREST 602 468
STOCKHOLDERS' EQUITY 41,526 41,422
$ 104,238 $ 104,694
6
COMCAST CORPORATION
TABLE 3
Condensed Consolidated Statement of Cash Flows (Unaudited)
(dollars in millions)
Three Months Ended
March 31,
---------------------------
2005 2004
------------ ------------
OPERATING ACTIVITIES
Net cash provided by operating activities $ 1,332 $ 774
------------ ------------
FINANCING ACTIVITIES
Proceeds from borrowings 225 4
Retirements and repayments of debt (112) (273)
Repurchases of common stock and stock options (326) (12)
Issuances of common stock and sales of options
and put options on common stock 40 22
Other, net 38 8
------------ ------------
Net cash used in financing activities (135) (251)
------------ ------------
INVESTING ACTIVITIES
Capital expenditures (892) (828)
Proceeds from sales and restructuring of investments 100 4
Purchases of investments (40) (60)
Acquisitions, net of cash acquired - (41)
Additions to intangible and other noncurrent assets (180) (305)
(Purchases of) proceeds from sales of short-term investments, net (1) 6
Proceeds from settlement of contract of acquired company - 26
------------ ------------
Net cash used in investing activities (1,013) (1,198)
------------ ------------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 184 (675)
CASH AND CASH EQUIVALENTS, beginning of period 452 1,550
------------ ------------
CASH AND CASH EQUIVALENTS, end of period $ 636 $ 875
============ ============
TABLE 4
Calculation of Free Cash Flow (Unaudited) (1)
(dollars in millions)
Three Months Ended
March 31,
---------------------------
2005 2004
------------ ------------
Operating Cash Flow $ 2,030 $ 1,733
Interest, Net (2) (404) (447)
Cash Paid for Income Taxes (12) (61)
Capital Expenditures (892) (828)
------------ ------------
FREE CASH FLOW $ 722 $ 397
============ ============
Changes in Working Capital and Other Items (3) (282) (451)
------------ ------------
Net Cash Provided by (Used in) Operating Activities
Less Capital Expenditures $ 440 $ (54)
------------ ------------
(1) Free Cash Flow is defined as Operating Cash Flow less net interest, cash
paid for taxes, and capital expenditures. It is unaffected by fluctuations in
working capital levels from period to period and cash payments associated with
intangible and other noncurrent assets. Cash payments for intangible and other
noncurrent assets include long-term technology license agreements including
computer software, long term rights to service multi-dwelling properties and
programming content for our cable networks. In 2004, cash payments for
intangible assets also included a long-term strategic license agreement with
Gemstar of approximately $250 million.
(2) Includes interest expense net of interest income and excludes non-cash
interest and subsidiary preferred dividends.
(3) Free Cash Flow excludes amounts necessary to reconcile Free Cash Flow to
"Net Cash Provided by Operating Activities Less Capital Expenditures." In 2005,
this amount includes $92 million in cash payments for liabilities recorded as
part of the acquisition of AT&T Broadband with the remainder substantially
related to reductions in accruals associated with payments of interest and
employee compensation and bonuses. In 2004, this amount includes $149 million in
cash payments for liabilities recorded as part of the acquisition of AT&T
Broadband with the remainder substantially related to reductions in accruals
associated with payments of interest and employee compensation and bonuses.
7
COMCAST CORPORATION
TABLE 5
Pro Forma Financial Data by Business Segment (Unaudited) (1)
(dollars in millions)
Corporate and
Cable (2) Content (3) Other (4) Total
---------- ---------- -------------- ----------
Three Months Ended March 31, 2005
Revenues $ 5,103 $ 213 $ 47 $ 5,363
Operating Cash Flow $ 1,995 $ 77 $ (42) $ 2,030
Operating Income (Loss) $ 891 $ 32 $ (57) $ 866
Operating Cash Flow Margin 39.1% 36.1% NM 37.9%
Capital Expenditures (5) $ 883 $ 4 $ 5 $ 892
Three Months Ended March 31, 2004
Revenues $ 4,650 $ 176 $ 86 $ 4,912
Operating Cash Flow $ 1,721 $ 69 $ (55) $ 1,735
Operating Income (Loss) $ 704 $ 34 $ (77) $ 661
Operating Cash Flow Margin 37.0% 39.0% NM 35.3%
Capital Expenditures (5) $ 814 $ 4 $ 10 $ 828
(1) See Non-GAAP and Other Financial Measures in Table 7. 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. All
percentages are calculated based on actual amounts. Minor differences may exist
due to rounding.
(2) Pro forma financial data includes the results of the 30,000 cable
subscribers acquired from US Coastal Cable in April 2004.
(3) Content includes our national networks E! Entertainment Television and
Style Network (E! Networks), The Golf Channel, Outdoor Life Network, G4 and AZN
Television.
(4) Corporate and Other includes Comcast-Spectacor, Corporate activities and
all other businesses not presented in the Cable or Content segments and
elimination entries. Beginning in the third quarter of 2004, Comcast-Spectacor
includes the operating results of its investment in a sports-event related
business.
(5) Our Cable segment's capital expenditures are comprised of the following
categories:
1Q05 1Q04
-------- --------
New Service Offerings
Customer Premise Equipment (CPE) $ 463 $ 292
Scalable Infrastructure 209 121
672 413
Recurring Capital Projects
Line Extensions 64 60
Support Capital 47 89
111 149
Upgrades 100 252
Total $ 883 $ 814
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). 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). Upgrades include costs to
enhance or replace existing fiber/coaxial cable networks, including recurring
betterments.
8
COMCAST CORPORATION
TABLE 6
Pro Forma Data - Cable Segment Components (Unaudited) (1) (2)
(dollars in millions, except average monthly revenue per subscriber data)
Three Months Ended
March 31,
----------------------
2005 2004
---------- ----------
Revenues:
Video (3) $ 3,362 $ 3,184
High-Speed Internet 925 698
Phone 173 179
Advertising 296 269
Other (4) 180 161
Franchise Fees 167 159
Total Revenues $ 5,103 $ 4,650
Operating Cash Flow $ 1,995 $ 1,721
Operating Income $ 891 $ 704
Operating Cash Flow Margin 39.1% 37.0%
Capital Expenditures $ 883 $ 814
Operating Cash Flow, Net of Capital Expenditures $ 1,112 $ 907
1Q05 1Q04 4Q04
---------- ---------- ----------
Video
Homes Passed (000's) 41,000 40,100 40,800
Basic Subscribers (000's) 21,525 21,581 21,553
Basic Penetration 52.6% 53.8% 52.8%
Quarterly Net Basic Subscriber Additions (000's) (29) 35 60
Digital Subscribers (000's) 8,856 7,859 8,656
Digital Penetration 41.1% 36.4% 40.2%
Quarterly Net Digital Subscriber Additions (000's) 200 192 251
Digital Set-Top Boxes 13,365 11,542 12,960
Monthly Average Video Revenue per Basic Subscriber $ 52.04 $ 49.22 $ 50.20
Monthly Average Total Revenue per Basic Subscriber $ 78.99 $ 71.89 $ 77.27
High-Speed Internet
"Available" Homes (000's) 40,483 36,167 40,010
Subscribers (000's) 7,408 5,680 6,994
Penetration 18.3% 15.7% 17.5%
Quarterly Net Subscriber Additions (000's) 414 394 438
Monthly Average Revenue per Subscriber $ 42.81 $ 42.44 $ 42.06
Phone
"Available" Homes (000's)(5) 11,277 9,657 10,437
Subscribers (000's) 1,228 1,247 1,223
Penetration 10.9% 12.9% 11.7%
Quarterly Net Subscriber Additions (000's) 4 (20) 10
Monthly Average Revenue per Subscriber $ 47.07 $ 47.34 $ 47.30
Total Revenue Generating Units (000's)(6) 39,017 36,367 38,426
Quarterly Net Additions 589 601 759
(1) See Non-GAAP and Other Financial Measures in Table 7. All percentages are
calculated based on actual amounts. Minor differences may exist due to rounding.
(2) Pro forma financial and subscriber data includes the results of the 30,000
cable subscribers acquired from US Coastal Cable in April 2004. Pro forma
subscriber data includes 60,000 subscribers acquired in various small
acquisitions during the periods presented. The impact of these acquisitions on
our segment operating results was not material.
(3) Video revenues consist of our basic, expanded basic, premium, pay-per-view,
equipment and digital services.
(4) Other revenues include installation revenues, guide revenues, commissions
from electronic retailing, other product offerings, commercial data services and
revenues of our digital media center and regional sports programming networks.
(5) Available homes includes circuit switched and Comcast Digital Voice homes.
(6) The sum total of all basic video, digital video, high-speed Internet and
phone subscribers, excluding additional outlets.
9
COMCAST CORPORATION
TABLE 7
NON-GAAP AND OTHER FINANCIAL MEASURES
Operating Cash Flow is the primary basis used to measure the operational
strength and performance of our businesses. Free Cash Flow is an additional
performance measure used as an indicator of our ability to repay debt, make
investments and return capital to investors, principally through stock
repurchases. 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.
Operating Cash Flow is defined as operating income before depreciation and
amortization and 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 Operating Cash Flow 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 of Operating Cash Flow may not be directly comparable to
similar measures used by other companies.
As Operating Cash Flow is the 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 Operating Cash Flow
for our business segments is not a "non-GAAP financial measure" as contemplated
by Regulation G adopted by the Securities and Exchange Commission. Consolidated
Operating Cash Flow is a non-GAAP financial measure.
Free Cash Flow, which is a non-GAAP financial measure, is defined as Operating
Cash Flow 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 and cash payments associated with intangible and other non-current assets
which are detailed in our quarterly and annual reports on Forms 10Q/K. We
believe that Free Cash Flow 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 of Free Cash Flow is accrual-based and may not
be comparable to similar measures used by other companies.
Debt Excluding Exchangeables, which is a non-GAAP financial measure, 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.
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.
Operating Cash Flow 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.
Following are quantitative reconciliations of Free Cash Flow, Debt Excluding
Exchangeables, Consolidated Operating Cash Flow, and, although not required by
Regulation G, reconciliations of business segment Operating Cash Flow and pro
forma data.
10
COMCAST CORPORATION
TABLE 7-A continued
Reconciliation of Historical and Pro Forma Data by Business Segment (Unaudited)
(dollars in millions)
Historical Adjustments (1)
------------------------------------------------- -----------------------
Corporate Corporate
Three Months Ended March 31, 2005 Cable Content and Other Total Cable and Other Pro forma
---------- ---------- ---------- ---------- ---------- ---------- ----------
Revenues $ 5,103 $ 213 $ 47 $ 5,363 -- -- $ 5,363
Operating expenses (excluding
depreciation and amortization) 3,108 136 89 3,333 -- -- 3,333
Operating Cash Flow $ 1,995 $ 77 $ (42) $ 2,030 -- -- $ 2,030
Depreciation and amortization 1,104 45 15 1,164 -- -- 1,164
Operating income (loss) $ 891 $ 32 $ (57) $ 866 -- -- $ 866
Capital expenditures $ 883 $ 4 $ 5 $ 892 -- -- $ 892
Adjustments (1)
-----------------------
Corporate Corporate
Three Months Ended March 31, 2004 Cable Content and Other Total Cable and Other Pro forma
---------- ---------- ---------- ---------- ---------- ---------- ----------
Revenues $ 4,647 $ 176 $ 85 $ 4,908 $ 3 $ 1 $ 4,912
Operating expenses (excluding
depreciation and amortization) 2,928 107 140 3,175 1 1 3,177
Operating Cash Flow $ 1,719 $ 69 $ (55) $ 1,733 $ 2 -- $ 1,735
Depreciation and amortization 1,017 35 22 1,074 -- -- 1,074
Operating income (loss) $ 702 $ 34 $ (77) $ 659 $ 2 -- $ 661
Capital expenditures $ 814 $ 4 $ 10 $ 828 -- -- $ 828
Reconciliation of Operating Cash Flow to Free Cash Flow (Unaudited)
(dollars in millions)
Three Months Ended
March 31,
-------------------------------------------------
2005 2004
----------------------- -----------------------
Operating Cash Flow $ 2,030 $ 2,030 $ 1,733 $ 1,733
Less:
Interest, net (2) (404) (404) (447) (447)
Cash Paid for Income Taxes (12) (12) (61) (61)
Change in Operating Assets and Liabilities,
net of acquisitions (88) (439)
Other (3) (194) (12)
Net Cash Provided by Operating Activities $ 1,332 $ 774
Less: Capital Expenditures (892) (828)
Free Cash Flow $ 722 $ 397
Calculation of 2005 Estimated Free Cash Flow
(dollars in billions)
Free Cash Flow
---------------
2004 Operating Income $ 2.9
Add: Depreciation and Amortization 4.6
2004 Operating Cash Flow 7.5
Less: 2004 Capital Expenditures 3.7
2004 Consolidated Interest, net 1.7
2004 Consolidated Cash Paid for Income Taxes 0.2
2004 Free Cash Flow $ 1.9
2005 Free Cash Flow Growth 35% to 45%
Projected 2005 Free Cash Flow $2.6 to $2.8
Reconciliation of Total Debt to Debt Excluding Exchangeables (Unaudited)
(dollars in millions)
March 31, 2005 December 31, 2004
----------------- -----------------
Current portion of long-term debt $ 3,855 $ 3,499
Long-term debt 19,317 20,093
Total Debt $ 23,172 $ 23,592
Exchangeable debt 1,270 1,699
Debt excluding exchangeables $ 21,902 $ 21,893
(1) Pro forma data is only adjusted for timing of the acquisitions (or
dispositions) 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. Minor differences may exist due to rounding.
(2) Includes interest expense net of interest income and excludes non-cash
interest and subsidiary preferred dividends.
(3) Includes non-cash expense included in Operating Cash Flow, cash related to
other (income) expense, dividends, and the net effect of changes in accrued
income taxes.
11