Disclaimer

The SEC Filings on this page are provided by EDGAR (www.sec.gov), the Electronic Data Gathering, Analysis, and Retrieval System of the U.S. Securities and Exchange Commission (SEC). EDGAR performs automated collection, validation, indexing, acceptance, and forwarding of submissions by companies and others who are required by law to file forms with the SEC. The information here is provided for your convenience only. Comcast has no control over the information provided by EDGAR and cannot guarantee the sequence, accuracy, or completeness of any information or data displayed through EDGAR. Accordingly, Comcast does not accept any responsibility for the content or use of any information obtained through EDGAR.

Consult Your Tax Advisor

The information in this document represents our understanding of federal income tax laws and regulations, but does not constitute personal tax advice based on your specific situation. It does not purport to be complete or to describe the consequences that may apply to you given your particular taxes. You should consult your own tax advisor regarding the applicability of any state, local and foreign tax laws.

Form 10-Q
Table of Contents

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

x

Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended September 30, 2008

OR

 

¨

Transition Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the Transition Period from                      to                     .

Commission File Number 001-32871

 

 

LOGO

COMCAST CORPORATION

(Exact name of registrant as specified in its charter)

 

PENNSYLVANIA   27-0000798

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

One Comcast Center, Philadelphia, PA   19103-2838
(Address of principal executive offices)   (Zip Code)

Registrant’s telephone number, including area code: (215) 286-1700

 

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding twelve months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such requirements for the past 90 days.

Yes x No ¨

 

 

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer x    Accelerated filer ¨    Non-accelerated filer ¨    Smaller reporting company ¨

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Act).

Yes ¨ No x

As of September 30, 2008, there were 2,060,122,419 shares of our Class A Common Stock, 810,211,191 shares of our Class A Special Common Stock and 9,444,375 shares of our Class B Common Stock outstanding.

 

 

 


Table of Contents

TABLE OF CONTENTS

           Page
Number
PART I. FINANCIAL INFORMATION   

Item 1.

  Financial Statements    2
  Condensed Consolidated Balance Sheet as of September 30, 2008 and December 31, 2007 (Unaudited)    2
  Condensed Consolidated Statement of Operations for the Three and Nine Months Ended September 30, 2008 and 2007 (Unaudited)    3
  Condensed Consolidated Statement of Cash Flows for the Nine Months Ended September 30, 2008 and 2007 (Unaudited)    4
  Notes to Condensed Consolidated Financial Statements (Unaudited)    5

Item 2.

  Management’s Discussion and Analysis of Financial Condition and Results of Operations    23

Item 3.

  Quantitative and Qualitative Disclosures About Market Risk    30

Item 4.

  Controls and Procedures    30
PART II. OTHER INFORMATION   

Item 1.

  Legal Proceedings    31

Item 1A.

  Risk Factors    31

Item 2.

  Unregistered Sales of Equity Securities and Use of Proceeds    31

Item 6.

  Exhibits    31
SIGNATURES      32

 

 

This Quarterly Report on Form 10-Q is for the three and nine months ended September 30, 2008. This Quarterly Report modifies and supersedes documents filed prior to this Quarterly Report. The Securities and Exchange Commission (“SEC”) allows us to “incorporate by reference” information that we file with them, which means that we can disclose important information to you by referring you directly to those documents. Information incorporated by reference is considered to be part of this Quarterly Report. In addition, information that we file with the SEC in the future will automatically update and supersede information contained in this Quarterly Report. Throughout this Quarterly Report, we refer to Comcast Corporation as “Comcast;” Comcast and its consolidated subsidiaries as “we,” “us” and “our;” and Comcast Holdings Corporation as “Comcast Holdings.”

You should carefully review the information contained in this Quarterly Report and particularly consider any risk factors that we set forth in this Quarterly Report and in other reports or documents that we file from time to time with the SEC. In this Quarterly Report, we state our beliefs of future events and of our future financial performance. In some cases, you can identify these so-called “forward-looking statements” by words such as “may,” “will,” “should,” “expects,” “believes,” “estimates,” “potential,” or “continue,” or the negative of those words, and other comparable words. You should be aware that those statements are only our predictions. In evaluating those statements, you should specifically consider various factors, including the risks outlined below. Actual events or our actual results may differ materially from any of our forward-looking statements. We undertake no obligation to update any forward-looking statements.

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

 

   

all of the services offered by our cable systems face a wide range of competition that could adversely affect our future results of operations

 

 

   

we may face increased competition because of technological advances and new regulatory requirements, which could adversely affect our future results of operations

 

 

   

programming expenses are increasing, which could adversely affect our future results of operations

 

 

   

we are subject to regulation by federal, state and local governments, which may impose additional costs and restrictions

 

 

   

weakening economic conditions may reduce subscriber spending on video, Internet and phone services and may reduce our rate of growth of subscriber additions

 

 

   

we face risks arising from the outcome of various litigation matters

 

 

   

acquisitions and other strategic transactions present many risks, and we may not realize the financial and strategic goals that were contemplated at the time of any transaction

 

 

   

our Class B common stock has substantial voting rights and separate approval rights over several potentially material transactions, and our Chairman and CEO has considerable influence over our operations through his beneficial ownership of our Class B common stock

 

 

1


Table of Contents

PART I: FINANCIAL INFORMATION

ITEM  1: FINANCIAL STATEMENTS

Condensed Consolidated Balance Sheet

(Unaudited)

 

(in millions, except share data)   September 30,
2008
    December 31,
2007
 

ASSETS

   

Current Assets:

   

Cash and cash equivalents

  $ 2,714     $ 963  

Investments

    203       98  

Accounts receivable, less allowance for doubtful accounts of $187 and $181

    1,658       1,645  

Other current assets

    938       961  

Total current assets

    5,513       3,667  

Investments

    5,203       7,963  

Property and equipment, net of accumulated depreciation of $22,671 and $19,808

    23,910       23,624  

Franchise rights

    59,452       58,077  

Goodwill

    14,909       14,705  

Other intangible assets, net of accumulated amortization of $7,826 and $6,977

    4,570       4,739  

Other noncurrent assets, net

    939       642  

Total assets

  $ 114,496     $ 113,417  

LIABILITIES AND STOCKHOLDERS’ EQUITY

   

Current Liabilities:

   

Accounts payable and accrued expenses related to trade creditors

  $ 3,187     $ 3,336  

Accrued expenses and other current liabilities

    2,985       3,121  

Current portion of long-term debt

    3,087       1,495  

Total current liabilities

    9,259       7,952  

Long-term debt, less current portion

    30,601       29,828  

Deferred income taxes

    27,209       26,880  

Other noncurrent liabilities

    6,925       7,167  

Minority interest

    298       250  

Commitments and Contingencies (Note 12)

   

Stockholders’ Equity:

   

Preferred stock—authorized, 20,000,000 shares; issued, zero

           

Class A common stock, $0.01 par value—authorized, 7,500,000,000 shares; issued, 2,425,583,169 and 2,419,025,659; outstanding, 2,060,122,419 and 2,053,564,909

    24       24  

Class A Special common stock, $0.01 par value—authorized, 7,500,000,000 shares; issued, 881,145,955 and 1,018,960,463; outstanding, 810,211,191 and 948,025,699

    9       10  

Class B common stock, $0.01 par value—authorized, 75,000,000 shares; issued and outstanding, 9,444,375

           

Additional paid-in capital

    40,556       41,688  

Retained earnings

    7,196       7,191  

Treasury stock—365,460,750 Class A common shares and 70,934,764 Class A Special common shares

    (7,517 )     (7,517 )

Accumulated other comprehensive income (loss)

    (64 )     (56 )

Total stockholders’ equity

    40,204       41,340  

Total liabilities and stockholders’ equity

  $ 114,496     $ 113,417  

See notes to condensed consolidated financial statements.

 

 

2


Table of Contents

Condensed Consolidated Statement of Operations

(Unaudited)

 

    Three Months Ended
September 30
    Nine Months Ended
September 30
 
(in millions, except per share data)       2008             2007             2008             2007      

Revenue

  $ 8,549     $ 7,781     $ 25,491     $ 22,881  

Costs and Expenses:

       

Operating (excluding depreciation and amortization)

    3,095       2,759       9,293       8,272  

Selling, general and administrative

    2,217       2,093       6,436       5,905  

Depreciation

    1,332       1,291       4,093       3,768  

Amortization

    235       247       694       816  
      6,879       6,390       20,516       18,761  

Operating income

    1,670       1,391       4,975       4,120  

Other Income (Expense):

       

Interest expense

    (601 )     (571 )     (1,840 )     (1,689 )

Investment income (loss), net

    74       158       83       458  

Equity in net (losses) income of affiliates, net

    2       (12 )     (46 )     (49 )

Other income (expense)

    12       (1 )     305       513  
      (513 )     (426 )     (1,498 )     (767 )

Income before income taxes and minority interest

    1,157       965       3,477       3,353  

Income tax expense

    (401 )     (421 )     (1,364 )     (1,400 )

Income before minority interest

    756       544       2,113       1,953  

Minority interest

    15       16       22       32  

Net income

  $ 771     $ 560     $ 2,135     $ 1,985  

Basic earnings per common share

  $ 0.26     $ 0.18     $ 0.72     $ 0.64  

Diluted earnings per common share

  $ 0.26     $ 0.18     $ 0.72     $ 0.63  

Dividends declared per common share

  $ 0.0625     $     $ 0.1875     $  

See notes to condensed consolidated financial statements.

 

3


Table of Contents

Condensed Consolidated Statement of Cash Flows

(Unaudited)

 

    Nine Months Ended
September 30
 
(in millions)       2008             2007      

Net cash provided by operating activities

  $ 7,373     $ 5,505  

Financing Activities:

   

Proceeds from borrowings

    3,513       3,610  

Retirements and repayments of debt

    (1,143 )     (1,529 )

Repurchases of common stock

    (2,800 )     (1,852 )

Dividends paid

    (367 )     —    

Issuances of common stock

    53       404  

Other

    (148 )     51  

Net cash provided by (used in) financing activities

    (892 )     684  

Investing Activities:

   

Capital expenditures

    (4,037 )     (4,584 )

Cash paid for intangible assets

    (376 )     (313 )

Acquisitions, net of cash acquired

    (700 )     (1,277 )

Proceeds from sales of investments

    452       1,726  

Purchases of investments

    (67 )     (129 )

Other

    (2 )     98  

Net cash provided by (used in) investing activities

    (4,730 )     (4,479 )

Increase (decrease) in cash and cash equivalents

    1,751       1,710  

Cash and cash equivalents, beginning of period

    963       1,239  

Cash and cash equivalents, end of period

  $ 2,714     $ 2,949  

See notes to condensed consolidated financial statements.

 

4


Table of Contents

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

Note 1: Condensed Consolidated Financial Statements

Basis of Presentation

We have prepared these unaudited condensed consolidated financial statements based on Securities and Exchange Commission (“SEC”) rules that permit reduced disclosure for interim periods. These financial statements include all adjustments that are necessary for a fair presentation of our results of operations and financial condition for the periods shown, including normal, recurring accruals and other items. The results of operations for the interim periods presented are not necessarily indicative of results for the full year.

The year-end condensed balance sheet was derived from audited financial statements but does not include all disclosures required by generally accepted accounting principles in the United States (“GAAP”). For a more complete discussion of our accounting policies and certain other information, refer to our annual financial statements for the preceding fiscal year as filed with the SEC.

Note 2: Recent Accounting Pronouncements

SFAS No. 157

In September 2006, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards (“SFAS”) No. 157, “Fair Value Measurements,” (“SFAS No. 157”). SFAS No. 157 defines fair value, establishes a framework for measuring fair value and expands disclosure requirements for fair value measurements. SFAS No. 157 is effective for financial assets and financial liabilities in fiscal years beginning after November 15, 2007 and for nonfinancial assets and nonfinancial liabilities in fiscal years beginning after March 15, 2008. Effective January 1, 2008, we adopted the provisions of SFAS No. 157 that relate to our financial assets and financial liabilities. We are currently evaluating the impact of the provisions of SFAS No. 157 that relate to our nonfinancial assets and nonfinancial liabilities, which are effective for us as of January 1, 2009. See Note 8 for further details regarding our adoption of this standard.

SFAS No. 159

In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities,” (“SFAS No. 159”), which provides the option to report certain financial assets and financial liabilities at fair value, with the intent to mitigate the volatility in financial reporting that can occur when related assets and liabilities are recorded on different bases. SFAS No. 159 amends SFAS No. 95, “Statement of Cash Flows,” (“SFAS No. 95”) and SFAS No. 115, “Accounting for Certain Investments in Debt and Equity Securities,” (“SFAS No. 115”). SFAS No. 159 specifies that cash flows from trading securities, including securities for which an entity has elected the fair value option, should be classified in the statement of cash flows based on the nature of and purpose for which the securities were acquired. Before this amendment, SFAS No. 95 and SFAS No. 115 specified that cash flows from trading securities must be classified as cash flows from operating activities. Effective January 1, 2008, we adopted SFAS No. 159. We have not elected the fair value option for any financial assets or financial liabilities. Upon adoption, for both the nine months ended September 30, 2007 and the year ended December 31, 2007, we reclassified approximately $603 million of proceeds from the sale of trading securities within our statement of cash flows from operating activities to investing activities. The adoption of SFAS No. 159 had no effect on our statement of cash flows for the year ended December 31, 2006. We will classify proceeds from future sales based on the nature of the securities and the purpose for which they were acquired.

SFAS No. 161

In March 2008, the FASB issued SFAS No. 161, “Disclosures about Derivative Instruments and Hedging Activities,” (“SFAS No. 161”). SFAS No. 161 amends and expands the disclosure requirements of SFAS No. 133, “Derivative Instruments and Hedging Activities,” (“SFAS No. 133”). SFAS No. 161 requires enhanced disclosure about (i) how and why an entity uses derivative instruments, (ii) how derivative instruments and related hedged

 

5


Table of Contents

items are accounted for under SFAS No. 133 and its related interpretations, and (iii) how derivative instruments and related hedged items affect an entity’s financial position, financial performance and cash flows. SFAS No. 161 is effective for us as of January 1, 2009.

EITF Issue No. 06-10

In March 2007, the Emerging Issues Task Force (“EITF”) reached a consensus on EITF Issue No. 06-10, “Accounting for Deferred Compensation and Postretirement Benefit Aspects of Collateral Assignment Split-Dollar Life Insurance Arrangements,” (“EITF 06-10”). EITF 06-10 provides that an employer should recognize a liability for the postretirement benefit related to collateral assignment split-dollar life insurance arrangements. We adopted EITF 06-10 on January 1, 2008, at which time we adjusted beginning retained earnings and recorded a liability of approximately $130 million.

Note 3: Earnings Per Share

Basic earnings per common share (“Basic EPS”) is computed by dividing net income for common stockholders by the weighted-average number of common shares outstanding during the period. Diluted earnings per common share (“Diluted EPS”) considers the impact of potentially dilutive securities except in periods where there is a loss because the inclusion of the potential common shares would have an antidilutive effect. Our potentially dilutive securities include potential common shares related to our stock options and our restricted share units (“RSUs”).

Diluted EPS for the three and nine months ended September 30, 2008 excludes approximately 142 million and 127 million potential common shares, respectively, related to our share-based compensation plans, because their inclusion would have had an antidilutive effect. For the three and nine months ended September 30, 2007, Diluted EPS excluded approximately 56 million and 42 million potential common shares, respectively.

Computation of Diluted EPS

 

    Three Months Ended September 30
    2008    2007
(in millions, except per share data)   Income    Shares    Per Share
Amount
   Income    Shares    Per Share
Amount

Basic EPS

  $ 771    2,909    $ 0.26    $ 560    3,087    $ 0.18

Effect of dilutive securities:

                

Assumed exercise or issuance of shares relating to stock plans

         11                  31       

Diluted EPS

  $ 771    2,920    $ 0.26    $ 560    3,118    $ 0.18
    Nine Months Ended September 30
    2008    2007
(in millions, except per share data)   Income    Shares    Per Share
Amount
   Income    Shares    Per Share
Amount

Basic EPS

  $ 2,135    2,958    $ 0.72    $ 1,985    3,108    $ 0.64

Effect of dilutive securities:

                

Assumed exercise or issuance of shares relating to stock plans

         15                  37       

Diluted EPS

  $ 2,135    2,973    $ 0.72    $ 1,985    3,145    $ 0.63

Note 4: Acquisitions and Other Significant Events

Insight Midwest Partnership

In April 2007, we and Insight Communications (“Insight”) agreed to divide the assets and liabilities of Insight Midwest, a 50%-50% cable system partnership with Insight (the “Insight transaction”). On December 31, 2007, we contributed approximately $1.3 billion to Insight Midwest for our share of the partnership’s debt. On January 1, 2008, the distribution of the assets of Insight Midwest was completed without the assumption of any of Insight’s debt by us and we received cable systems serving approximately 696,000 video subscribers in Illinois and

 

6


Table of Contents

Indiana (the “Comcast asset pool”). Insight received cable systems serving approximately 652,000 video subscribers, together with approximately $1.24 billion of debt allocated to those cable systems (the “Insight asset pool”). We accounted for our interest in Insight Midwest as an equity method investment until the Comcast asset pool was distributed to us on January 1, 2008. We accounted for the distribution of assets by Insight Midwest as a sale of our 50% interest in the Insight asset pool in exchange for our acquiring an additional 50% interest in the Comcast asset pool. The estimated fair value of the 50% interest of the Comcast asset pool we received was approximately $1.2 billion and resulted in a pretax gain of approximately $235 million, which is included in other income (expense). We recorded our 50% interest in the Comcast asset pool as a step acquisition in accordance with SFAS No. 141, “Business Combinations,” (“SFAS No. 141”).

Unaudited Pro Forma Information

The following unaudited pro forma information has been presented as if the Insight transaction had occurred on January 1, 2007. It is based on historical results of operations, adjusted for purchase price allocations, and is not necessarily indicative of what the results would have been had we operated the cable systems since January 1, 2007.

 

(in millions, except per share data)   Three Months Ended
September 30, 2007
   Nine Months Ended
September 30, 2007

Revenue

  $ 7,955    $ 23,387

Net income

  $ 565    $ 2,014

Basic EPS

  $ 0.18    $ 0.65

Diluted EPS

  $ 0.18    $ 0.64

Note 5: Investments

 

(in millions)   September 30,
2008
   December 31,
2007

Fair value method

  $ 1,932    $ 2,701

Equity method, primarily SpectrumCo, LLC at September 30, 2008 and Insight Midwest and SpectrumCo, LLC at December 31, 2007

    1,759      3,682

Cost method, primarily AirTouch redeemable preferred shares

    1,715      1,678

Total investments

    5,406      8,061

Less: Current investments

    203      98

Noncurrent investments

  $ 5,203    $ 7,963

We accounted for our interest in Insight Midwest as an equity method investment until January 1, 2008, the date the Comcast asset pool was distributed to us (see Note 4).

Components of Investment Income (Loss), Net

 

    Three Months Ended
September 30
    Nine Months Ended
September 30
 
(in millions)       2008             2007             2008             2007      

Interest and dividend income

  $ 12     $ 35     $ 49     $ 126  

Gains on sales and exchanges of investments, net

          49       14       148  

Investment impairment losses

    (3 )     (1 )     (5 )     (4 )

Unrealized gains (losses) on trading securities and hedged items

    (122 )     1       (413 )     493  

Mark to market adjustments on derivatives related to trading securities and hedged items

    138       43       411       (376 )

Mark to market adjustments on derivatives

    49       31       27       71  

Investment income (loss), net

  $ 74     $ 158     $ 83     $ 458  

 

7


Table of Contents

Note 6: Indefinite-Lived Intangibles

Since the adoption of SFAS No. 142, “Goodwill and Other Intangible Assets,” (“SFAS No. 142”), we have performed the annual impairment testing of our indefinite-lived intangibles, including cable franchise rights and goodwill, using April 1 as the measurement date. In 2008, we changed the timing of our financial and strategic planning process, including the preparation of long-term projections, from completion in the early part of each calendar year to a midyear completion. These long-term financial projections are used as the basis for performing our annual impairment testing. As a result, we have changed our measurement date from April 1 to July 1. We tested our indefinite-lived intangibles for impairment as of April 1, 2008 and July 1, 2008, and no impairments were indicated. Since the adoption of SFAS No. 142 in 2002, we have not recorded any significant impairment charges as a result of our impairment testing. We believe changing the measurement date to coincide with the completion of our long-term financial projections is preferable and does not result in the delay, acceleration or avoidance of an impairment charge.

In July 2008, our Cable Division management structure was reorganized from five divisions to four. The divisions represent the unit of account we use to test for impairment of our cable franchise rights. Our testing as of July 1, 2008 confirmed that no impairment existed before the change.

The changes in the carrying amount of goodwill by business segment for the nine months ended September 30, 2008 are presented in the table below.

 

(in millions)   Cable     Programming    Corporate
and Other
   Total  

Balance, December 31, 2007

  $ 12,842     $ 1,482    $ 381    $ 14,705  

Settlements and adjustments

    (429 )          6      (423 )

Acquisitions

    302       125      200      627  

Balance, September 30, 2008

  $ 12,715     $ 1,607    $ 587    $ 14,909  

Settlements and adjustments for the nine months ended September 30, 2008 primarily relate to the settlement of an uncertain tax position of an acquired entity (see Note 10). For the nine months ended September 30, 2008, acquisitions in the Cable segment primarily relate to the Insight transaction and the acquisition of an additional interest in Pacific Regional Programming Partners, which operates the Comcast SportsNet Bay Area network. Acquisitions in the Programming segment primarily relate to the acquisition of the additional interest in G4 that we did not already own. Corporate and Other acquisitions relate primarily to Internet-related business, including Plaxo, Inc. and DailyCandy, Inc.

Note 7: Long-Term Debt

On September 16, 2008, we borrowed $1.5 billion from our $7.0 billion revolving bank credit facility due 2013. In May 2008, we issued $1.0 billion principal amount of 5.70% notes due 2018 and $1.0 billion principal amount of 6.40% notes due 2038.

Note 8: Fair Value of Financial Assets and Financial Liabilities

Effective January 1, 2008, we adopted the provisions of SFAS No. 157 that relate to our financial assets and financial liabilities as discussed in Note 2. SFAS No. 157 establishes a hierarchy that prioritizes fair value measurements based on the types of inputs used for the various valuation techniques (market approach, income approach and cost approach). The levels of the hierarchy are described below:

 

   

Level 1: Observable inputs such as quoted prices in active markets for identical assets or liabilities

 

 

   

Level 2: Inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly; these include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active

 

 

   

Level 3: Unobservable inputs that reflect the reporting entity’s own assumptions

 

 

8


Table of Contents

Our assessment of the significance of a particular input to the fair value measurement requires judgment and may affect the valuation of financial assets and financial liabilities and their classification within the fair value hierarchy. There have been no changes in the classification of any financial assets or liabilities within the fair value hierarchy since our adoption of SFAS No. 157. Our financial assets and financial liabilities that are accounted for at fair value on a recurring basis are presented in the table below.

Recurring Fair Value Measures

 

    Fair value as of September 30, 2008
(in millions)   Level 1    Level 2    Level 3    Total

Assets

          

Trading securities

  $ 1,637    $    $  —    $ 1,637

Available-for-sale securities

    11      279           290

Equity warrants

              4      4

Cash surrender value of life insurance policies

         127           127

Interest rate exchange agreements

         47           47
    $ 1,648    $ 453    $ 4    $ 2,105

Liabilities

          

Indexed debt instruments

  $    $ 53    $    $ 53

Prepaid forward sale agreements

         243           243

Interest rate exchange agreements

         3           3
    $    $ 299    $    $ 299

Note 9: Stockholders’ Equity

Share-Based Compensation

Our Board of Directors may grant share-based awards, in the form of stock options and RSUs, to certain employees and directors. Additionally, through our employee stock purchase plan, employees are able to purchase shares of Comcast stock at a discount through payroll deductions.

In March 2008, we granted 21.1 million stock options and 7.3 million RSUs related to our annual management grant program. The fair values associated with these grants were $6.48 per stock option and $18.14 per RSU.

Recognized Share-Based Compensation Expense

 

    Three Months Ended
September 30
   Nine Months Ended
September 30
(in millions)       2008            2007            2008            2007    

Stock options

  $ 29    $ 22    $ 73    $ 59

Restricted share units

    27      21      70      55

Employee stock purchase plan (including employee cost)

    16      14      52      47

Total share-based compensation expense

  $ 72    $ 57    $ 195    $ 161

As of September 30, 2008, there was $319 million and $308 million of unrecognized pretax compensation cost related to nonvested stock options and nonvested RSUs, respectively.

 

9


Table of Contents

Comprehensive Income

Our comprehensive income is presented in the table below.

 

    Three Months Ended
September 30
    Nine Months Ended
September 30
 
(in millions)       2008             2007             2008             2007      

Net income

  $ 771     $ 560     $ 2,135     $ 1,985  

Holding (losses) gains during the period

    (6 )           (16 )     (2 )

Reclassification adjustments for losses (gains) included in net income

    4       42       10       138  

Employee benefit obligations

    1                    

Cumulative translation adjustments

    (4 )     (1 )     (2 )     (9 )

Comprehensive income

  $ 766     $ 601     $ 2,127     $ 2,112  

Note 10: Income Taxes

During the three months ended September 30, 2008, we recognized approximately $425 million of income tax benefits as a result of the settlement of an uncertain tax position of an acquired entity. The tax position related to the deductibility of certain costs incurred in connection with a business acquisition. The primary impacts of the settlement were reductions to our deferred income tax and other long-term liabilities of approximately $480 million, a reduction to goodwill of approximately $440 million and a reduction to income tax expense of approximately $40 million. The settlement also reduced our unrecognized tax benefits, which were approximately $1.4 billion as of September 30, 2008.

Note 11: Statement of Cash Flows—Supplemental Information

Components of Operating Activities

 

    Nine Months Ended
September 30
 
(in millions)       2008             2007      

Net income

  $ 2,135     $ 1,985  

Adjustments to reconcile net income to net cash provided by operating activities:

   

Depreciation

    4,093       3,768  

Amortization

    694       816  

Share-based compensation

    195       161  

Noncash interest expense (income), net

    164       80  

Equity in net losses (income) of affiliates, net

    46       49  

(Gains) losses on investments and noncash other (income) expense, net

    (297 )     (860 )

Noncash contribution expense

    —         11  

Minority interest

    (22 )     (32 )

Deferred income taxes

    609       160  

Changes in operating assets and liabilities, net of effects of acquisitions and divestitures:

   

Change in accounts receivable, net

    4       (51 )

Change in accounts payable and accrued expenses related to trade creditors

    (21 )     10  

Change in other operating assets and liabilities

    (227 )     (592 )

Net cash provided by operating activities

  $ 7,373     $ 5,505  

Cash Payments for Interest and Income Taxes

 

    Three Months Ended
September 30
   Nine Months Ended
September 30
(in millions)       2008            2007            2008            2007    

Interest

  $ 679    $ 646    $ 1,795    $ 1,724

Income taxes

  $ 234    $ 792    $ 589    $ 1,439

 

10


Table of Contents

Noncash Financing and Investing Activities

During the nine months ended September 30, 2008, we:

 

   

exchanged our 50% interest in the Insight asset pool for Insight’s 50% interest in the Comcast asset pool, which is a noncash investing activity

 

 

   

recorded a liability of approximately $180 million for a quarterly cash dividend of $0.0625 per common share paid in October 2008, which is a noncash financing activity

 

Note 12: Commitments and Contingencies

Commitments

One of our subsidiaries supports debt compliance with respect to obligations of a cable television investment in which we hold an ownership interest. The obligation expires March 2011. Although there can be no assurance, we believe that we will not be required to meet our obligation under such commitment. The total notional amount of our commitment was $410 million as of September 30, 2008, at which time there were no quoted market prices for similar agreements. This amount reflects a decrease of approximately $555 million from December 31, 2007, primarily as a result of the Insight transaction (see Note 4).

Contingencies

Antitrust Cases

We are defendants in two purported class actions originally filed in the United States District Courts for the District of Massachusetts and the Eastern District of Pennsylvania, respectively. The potential class in the Massachusetts case is our subscriber base in the “Boston Cluster” area, and the potential class in the Pennsylvania case is our subscriber base in the “Philadelphia and Chicago Clusters,” as those terms are defined in the complaints. In each case, the plaintiffs allege that certain subscriber exchange transactions with other cable providers resulted in unlawful horizontal market restraints in those areas and seek damages under antitrust statutes, including treble damages.

Our motion to dismiss the Pennsylvania case on the pleadings was denied and classes of Philadelphia Cluster and Chicago Cluster subscribers were certified. Our motion to dismiss the Massachusetts case, which was subsequently transferred to the Eastern District of Pennsylvania, was also denied. We are proceeding with discovery on plaintiffs’ claims concerning the Philadelphia Cluster. Plaintiffs’ claims concerning the other two clusters are stayed pending determination of the Philadelphia Cluster claims.

In addition, we are among the defendants in a purported class action filed in the United States District Court for the Central District of California (“Central District”) in September 2007. The plaintiffs allege that the defendants who produce video programming have entered into agreements with the defendants who distribute video programming via cable and satellite (including us, among others), which preclude the distributors from reselling channels to subscribers on an “unbundled” basis in violation of federal antitrust laws. The plaintiffs seek treble damages for the loss of their ability to pick and choose the specific “bundled” channels to which they wish to subscribe, and injunctive relief requiring each distributor defendant to resell certain channels to its subscribers on an “unbundled” basis. The potential class is comprised of all persons residing in the United States who have subscribed to an expanded basic level of video service provided by one of the distributor defendants. We and the other defendants filed motions to dismiss an amended complaint in April 2008. In June 2008, the Central District denied the motions to dismiss. In July 2008, we and the other defendants filed motions to certify certain issues decided in the Central District’s June 2008 order for interlocutory appeal to the Ninth Circuit Court of Appeals. On August 8, 2008, the Central District denied the certification motions.

Securities and Related Litigation

We and several of our current and former officers were named as defendants in a purported class action lawsuit filed in the United States District Court for the Eastern District of Pennsylvania (“Eastern District”) in January 2008. We filed a motion to dismiss the case in February 2008. The plaintiff did not respond, but instead sought leave to amend the complaint, which the court granted. The plaintiff filed an amended complaint in May 2008 naming only us and two current officers as defendants. The alleged class was comprised of purchasers of our

 

11


Table of Contents

publicly issued securities between February 1, 2007 and December 4, 2007. The plaintiff asserted that during the alleged class period, the defendants violated federal securities laws through alleged material misstatements and omissions relating to forecast results for 2007. The plaintiff sought unspecified damages. In June 2008, we filed a motion to dismiss the amended complaint. In an order dated August 25, 2008, the Court granted our motion to dismiss and denied the plaintiff permission to amend the complaint again. The plaintiff has not timely appealed the Court’s decision, so the dismissal of this case is final.

We and several of our current officers have been named as defendants in a separate purported class action lawsuit filed in the Eastern District in February 2008. The alleged class comprises participants in our retirement-investment (401(k)) plan that invested in the plan’s company stock account. The plaintiff asserts that the defendants breached their fiduciary duties in managing the plan. The plaintiff seeks unspecified damages. The plaintiff filed an amended complaint in June 2008, and in July 2008 we filed a motion to dismiss the amended complaint. On October 29, 2008, the Court granted in part and denied in part that motion. The Court dismissed a claim alleging that defendants failed to provide complete and accurate disclosures concerning the plan, but did not dismiss claims alleging that plan assets were imprudently invested in company stock.

Patent Litigation

We are a defendant in several unrelated lawsuits claiming infringement of various patents relating to various aspects of our businesses. In certain of these cases other industry participants are also defendants, and also in certain of these cases we expect that any potential liability would be in part or in whole the responsibility of our equipment vendors under applicable contractual indemnification provisions.

* * *

We believe the claims in each of the actions described above in this item are without merit and intend to defend the actions vigorously. The final disposition of any of the above actions is not expected to have a material adverse effect on our consolidated financial position, but could possibly be material to our consolidated results of operations or cash flows for any one period.

Other

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

 

12


Table of Contents

Note 13: Financial Data by Business Segment

Our reportable segments consist of our Cable and Programming businesses. In evaluating the profitability of our segments, the components of net income (loss) below operating income (loss) before depreciation and amortization are not separately evaluated by our management. Assets are not allocated to segments for management reporting, although approximately 95% of our assets relate to our Cable segment. Our financial data by business segment is presented below.

 

(in millions)   Cable(a)(b)    Programming(c)    Corporate and
Other(d)(e)
    Eliminations(e)(f)     Total

Three months ended September 30, 2008

           

Revenue(g)

  $ 8,131    $ 347    $ 128     $ (57 )   $ 8,549

Operating income (loss) before depreciation and amortization(h)

    3,251      105      (119 )           3,237

Depreciation and amortization

    1,502      46      27       (8 )     1,567

Operating income (loss)

    1,749      59      (146 )     8       1,670

Capital expenditures

    1,268      12      26             1,306

Three months ended September 30, 2007

           

Revenue(g)

  $ 7,400    $ 330    $ 96     $ (45 )   $ 7,781

Operating income (loss) before depreciation and amortization(h)

    2,975      97      (152 )     9       2,929

Depreciation and amortization

    1,473      46      27       (8 )     1,538

Operating income (loss)

    1,502      51      (179 )     17       1,391

Capital expenditures

    1,492      8      26             1,526

Nine months ended September 30, 2008

           

Revenue(g)

  $ 24,147    $ 1,076    $ 453     $ (185 )   $ 25,491

Operating income (loss) before depreciation and amortization(h)

    9,755      307      (299 )     (1 )     9,762

Depreciation and amortization

    4,587      145      78       (23 )     4,787

Operating income (loss)

    5,168      162      (377 )     22       4,975

Capital expenditures

    3,877      22      138             4,037

Nine months ended September 30, 2007

           

Revenue(g)

  $ 21,728    $ 966    $ 354     $ (167 )   $ 22,881

Operating income (loss) before depreciation and amortization(h)

    8,799      237      (339 )     7       8,704

Depreciation and amortization

    4,384      139      79       (18 )     4,584

Operating income (loss)

    4,415      98      (418 )     25       4,120

Capital expenditures

    4,521      22      41             4,584

 

(a)

For the three and nine months ended September 30, 2008 and 2007, Cable segment revenue was derived from the following services:

 

   

Three Months Ended

September 30

   

Nine Months Ended

September 30

 
     2008     2007     2008     2007  

Video

  57.6 %   59.4 %   58.4 %   60.9 %

High-speed Internet

  22.4     21.9     22.2     21.8  

Phone

  8.5     6.4     7.9     5.7  

Advertising

  4.6     5.5     4.6     5.1  

Franchise fees

  2.8     2.8     2.8     2.8  

Other

  4.1     4.0     4.1     3.7  

Total

  100 %   100 %   100 %   100 %

Subscription revenue received from subscribers who purchase bundled services at a discounted rate is allocated proportionately to each service based on the individual service’s price on a stand-alone basis.

 

(b)

Our Cable segment includes our regional sports and news networks.

 

(c)

Programming consists primarily of our consolidated national programming networks, including E!, Golf Channel, VERSUS, G4 and Style.

 

13


Table of Contents
(d)

Corporate and Other includes Comcast Spectacor, Comcast Interactive Media, a portion of the operating results of our less than wholly owned technology development ventures (see “(e)” below), corporate activities and all other businesses not presented in our Cable or Programming segments.

 

(e)

We consolidate our less than wholly owned technology development ventures, which we control or of which we are considered the primary beneficiary. These ventures are with various corporate partners, such as Motorola and Gemstar. The ventures have been created to share the costs of development of new technologies for set-top boxes and other devices. The results of these entities are included within Corporate and Other except for cost allocations, which are made to the Cable segment based on our percentage ownership in each entity.

 

(f)

Included in the Eliminations column are transactions that our segments enter into with one another. The most common types of transactions are the following:

 

   

our Programming segment generates revenue by selling cable network programming to our Cable segment, which represents a substantial majority of the revenue elimination amount

 

 

   

our Cable segment receives incentives offered by our Programming segment when negotiating programming contracts that are recorded as a reduction to programming expenses

 

 

   

our Cable segment generates revenue by selling the use of satellite feeds to our Programming segment

 

 

(g)

Non-U.S. revenue was not significant in any period. No single customer accounted for a significant amount of our revenue in any period.

 

(h)

To measure the performance of our operating segments, we use operating income (loss) before depreciation and amortization, excluding impairment charges related to fixed and intangible assets, and gains or losses from the sale of assets, if any. This measure eliminates the significant level of noncash depreciation and amortization expense that results from the capital-intensive nature of our businesses and from intangible assets recognized in business combinations. Additionally, it is unaffected by our capital structure or investment activities. We use this measure to evaluate our consolidated operating performance, the operating performance of our operating segments and to allocate resources and capital to our operating segments. It is also a significant performance measure in our annual incentive compensation programs. We believe that this measure is useful to investors because it is one of the bases for comparing our operating performance with that of other companies in our industries, although our measure may not be directly comparable to similar measures used by other companies. This measure should not be considered a substitute for operating income (loss), net income (loss), net cash provided by operating activities, or other measures of performance or liquidity we have reported in accordance with GAAP.

 

14


Table of Contents

Note 14: Condensed Consolidating Financial Information

Comcast Corporation and five of our cable holding company subsidiaries, Comcast Cable Communications, LLC (“CCCL”), Comcast Cable Communications Holdings, Inc. (“CCCH”), Comcast MO Group, Inc. (“Comcast MO Group”), Comcast Cable Holdings, LLC (“CCH”) and Comcast MO of Delaware, LLC (“Comcast MO of Delaware”), fully and unconditionally guarantee each other’s debt securities. Comcast MO Group, CCH and Comcast MO of Delaware are collectively referred to as the “Combined CCHMO Parents.”

Comcast Corporation unconditionally guarantees Comcast Holdings’ ZONES due October 2029 and its 10 5/8% senior subordinated debentures due 2012, both of which were issued by Comcast Holdings. Accordingly, we have included Comcast Holdings’ condensed consolidated financial information for all periods presented. Our condensed consolidating financial information is presented below.

Comcast Corporation

Condensed Consolidating Balance Sheet

September 30, 2008

 

(in millions)   Comcast
Parent
  CCCL
Parent
  CCCH
Parent
  Combined
CCHMO
Parents
  Comcast
Holdings
  Non-
Guarantor
Subsidiaries
  Elimination
and
Consolidation
Adjustments
    Consolidated
Comcast
Corporation

ASSETS

               

Cash and cash equivalents

  $   $   $   $   $   $ 2,714   $     $ 2,714

Investments

                        203           203

Accounts receivable, net

                        1,658           1,658

Other current assets

    167     4                 767           938

Total current assets

    167     4                 5,342           5,513

Investments

                        5,203           5,203

Investments in and amounts due from subsidiaries eliminated upon consolidation

    69,791     34,446     43,445     46,179     26,466     3,661     (223,988 )    

Property and equipment, net

    299                     23,611           23,910

Franchise rights

                        59,452           59,452

Goodwill

                        14,909           14,909

Other intangible assets, net

    1                     4,569           4,570

Other noncurrent assets, net

    360     8     15         22     534           939

Total assets

  $ 70,618   $ 34,458   $ 43,460   $ 46,179   $ 26,488   $ 117,281   $ (223,988 )   $ 114,496

LIABILITIES AND STOCKHOLDERS’ EQUITY

               

Accounts payable and accrued expenses related to trade creditors

  $ 191   $   $   $   $   $ 2,996   $     $ 3,187

Accrued expenses and other current liabilities

    696     235     49     37     153     1,815           2,985

Current portion of long-term debt

    1,250     1,802                 35           3,087

Total current liabilities

    2,137     2,037     49     37     153     4,846           9,259

Long-term debt, less current portion

    19,596     2,294     4,998     2,697     745     271           30,601

Deferred income taxes

    7,197                 830     19,182           27,209

Other noncurrent liabilities

    1,484                 90     5,351           6,925

Minority interest

                        298           298

Stockholders’ Equity:

               

Common stock

    33                               33

Other stockholders’ equity

    40,171     30,127     38,413     43,445     24,670     87,333     (223,988 )     40,171

Total stockholders’ equity

    40,204     30,127     38,413     43,445     24,670     87,333     (223,988 )     40,204

Total liabilities and stockholders’ equity

  $ 70,618   $ 34,458   $ 43,460   $ 46,179   $ 26,488   $ 117,281   $ (223,988 )   $ 114,496

 

15


Table of Contents

Comcast Corporation

Condensed Consolidating Balance Sheet

December 31, 2007

 

(in millions)   Comcast
Parent
  CCCL
Parent
  CCCH
Parent
  Combined
CCHMO
Parents
  Comcast
Holdings
  Non-
Guarantor
Subsidiaries
  Elimination
and
Consolidation
Adjustments
    Consolidated
Comcast
Corporation

ASSETS

               

Cash and cash equivalents

  $   $   $   $   $   $ 963   $     $ 963

Investments

                        98           98

Accounts receivable, net

                        1,645           1,645

Other current assets

    100                     861           961

Total current assets

    100                     3,567           3,667

Investments

                        7,963           7,963

Investments in and amounts due from subsidiaries eliminated upon consolidation

    67,903     32,760     40,240     43,356     25,815     2,244     (212,318 )    

Property and equipment, net

    208                     23,416           23,624

Franchise rights

                        58,077           58,077

Goodwill

                        14,705           14,705

Other intangible assets, net

                        4,739           4,739

Other noncurrent assets, net

    281     11     17         30     303           642

Total assets

  $ 68,492   $ 32,771   $ 40,257   $ 43,356   $ 25,845   $ 115,014   $ (212,318 )   $ 113,417

LIABILITIES AND

STOCKHOLDERS’ EQUITY

       

Accounts payable and accrued expenses related to trade creditors

  $ 10   $ 3   $   $   $   $ 3,323   $     $ 3,336

Accrued expenses and other current liabilities

    694     267     75     98     74     1,913           3,121

Current portion of long-term debt

        1,142         305         48           1,495

Total current liabilities

    704     1,412     75     403     74     5,284           7,952

Long-term debt, less current portion

    19,133     3,294     3,498     2,713     908     282           29,828

Deferred income taxes

    6,256                 1,015     19,609           26,880

Other noncurrent liabilities

    1,059     6             116     5,986           7,167

Minority interest

                        250           250

Stockholders’ Equity:

               

Common stock

    34                               34

Other stockholders’ equity

    41,306     28,059     36,684     40,240     23,732     83,603     (212,318 )     41,306

Total stockholders’ equity

    41,340     28,059     36,684     40,240     23,732     83,603     (212,318 )     41,340

Total liabilities and stockholders’ equity

  $ 68,492   $ 32,771   $ 40,257   $ 43,356   $ 25,845   $ 115,014   $ (212,318 )   $ 113,417

 

16


Table of Contents

Comcast Corporation

Condensed Consolidating Statement of Operations

For the Three Months Ended September 30, 2008

 

(in millions)   Comcast
Parent
    CCCL
Parent
    CCCH
Parent
    Combined
CCHMO
Parents
    Comcast
Holdings
    Non-
Guarantor
Subsidiaries
    Elimination
and
Consolidation
Adjustments
    Consolidated
Comcast
Corporation
 

Revenue:

               

Service revenue

  $     $     $     $     $     $ 8,549     $     $ 8,549  

Management fee revenue

    184       57       104       104                   (449 )      
      184       57       104       104             8,549       (449 )     8,549  

Costs and Expenses:

               

Operating (excluding depreciation and amortization)

                                  3,095             3,095  

Selling, general and administrative

    95       57       104       104       14       2,292       (449 )     2,217  

Depreciation

    7                               1,325             1,332  

Amortization

                                  235             235  
      102       57       104       104       14       6,947       (449 )     6,879  

Operating income (loss)

    82                         (14 )     1,602             1,670  

Other Income (Expense):

               

Interest expense

    (333 )     (74 )     (84 )     (52 )     (26 )     (32 )           (601 )

Investment income (loss), net

    (13 )                       49       38             74  

Equity in net (losses) income of affiliates, net

    940       437       685       719       375       16       (3,170 )     2  

Other income (expense)

                                  12             12  
      594       363       601       667       398       34       (3,170 )     (513 )

Income (loss) before income taxes and minority interest

    676       363       601       667       384       1,636       (3,170 )     1,157  

Income tax (expense) benefit

    95       26       28       18       (3 )     (565 )           (401 )

Income (loss) before minority interest

    771       389       629       685       381       1,071       (3,170 )     756  

Minority interest

                                  15             15  

Net income (loss)

  $ 771     $ 389     $ 629     $ 685     $ 381     $ 1,086     $ (3,170 )   $ 771  

 

17


Table of Contents

Comcast Corporation

Condensed Consolidating Statement of Operations

For the Three Months Ended September 30, 2007

 

(in millions)   Comcast
Parent
    CCCL
Parent
    CCCH
Parent
    Combined
CCHMO
Parents
    Comcast
Holdings
    Non-
Guarantor
Subsidiaries
    Elimination
and
Consolidation
Adjustments
    Consolidated
Comcast
Corporation
 

Revenue:

               

Service revenue

  $     $     $     $     $     $ 7,781     $     $ 7,781  

Management fee revenue

    159       55       85       85                   (384 )      
      159       55       85       85             7,781       (384 )     7,781  

Costs and Expenses:

               

Operating (excluding depreciation and amortization)

                                  2,759             2,759  

Selling, general and administrative

    67       55       85       85       4       2,181       (384 )     2.093  

Depreciation

                                  1,291             1,291  

Amortization

                                  247             247  
      67       55       85       85       4       6,478       (384 )     6,390  

Operating income (loss)

    92                         (4 )     1,303             1,391  

Other Income (Expense):

               

Interest expense

    (284 )     (87 )     (80 )     (56 )     (24 )     (40 )           (571 )

Investment income (loss), net

    5                         33       120             158  

Equity in net (losses) income of affiliates, net

    682       406       420       456       388       (50 )     (2,314 )     (12 )

Other income (expense)

    (1 )                                         (1 )
      402       319       340       400       397       30       (2,314 )     (426 )

Income (loss) before income taxes and minority interest

    494       319       340       400       393       1,333       (2,314 )     965  

Income tax (expense) benefit

    66       31       28       20       (2 )     (564 )           (421 )

Income (loss) before minority interest

    560       350       368       420       391       769       (2,314 )     544  

Minority interest

                                  16             16  

Net income (loss)

  $ 560     $ 350     $ 368     $ 420     $ 391     $ 785     $ (2,314 )   $ 560  

 

18


Table of Contents

Comcast Corporation

Condensed Consolidating Statement of Operations

For the Nine Months Ended September 30, 2008

 

(in millions)   Comcast
Parent
    CCCL
Parent
    CCCH
Parent
    Combined
CCHMO
Parents
    Comcast
Holdings
    Non-
Guarantor
Subsidiaries
    Elimination
and
Consolidation
Adjustments
    Consolidated
Comcast
Corporation
 

Revenue:

               

Service revenue

  $     $     $     $     $     $ 25,491     $     $ 25,491  

Management fee revenue

    544       166       306       306                   (1,322 )      
      544       166       306       306             25,491       (1,322 )     25,491  

Costs and Expenses:

               

Operating (excluding depreciation and amortization)

                                  9,293             9,293  

Selling, general and administrative

    272       166       306       306       40       6,668       (1,322 )     6,436  

Depreciation

    17                               4,076             4,093  

Amortization

                                  694             694  
      289       166       306       306       40       20,731       (1,322 )     20,516  

Operating income (loss)

    255                         (40 )     4,760             4,975  

Other Income (Expense):

               

Interest expense

    (976 )     (233 )     (246 )     (162 )     (121 )     (102 )           (1,840 )

Investment income (loss), net

    (22 )                       27       78             83  

Equity in net (losses) income of affiliates, net

    2,616       1,214       1,983       2,088       1,065       (48 )     (8,964 )     (46 )

Other income (expense)

    (1 )                             306             305  
      1,617       981       1,737       1,926       971       234       (8,964 )     (1,498 )

Income (loss) before income taxes and minority interest

    1,872       981       1,737       1,926       931       4,994       (8,964 )     3,477  

Income tax (expense) benefit

    263       82       85       57       47       (1,898 )           (1,364 )

Income (loss) before minority interest

    2,135       1,063       1,822       1,983       978       3,096       (8,964 )     2,113  

Minority interest

                                  22             22  

Net income (loss)

  $ 2,135     $ 1,063     $ 1,822     $ 1,983     $ 978     $ 3,118     $ (8,964 )   $ 2,135  

 

19


Table of Contents

Comcast Corporation

Condensed Consolidating Statement of Operations

For the Nine Months Ended September 30, 2007

 

(in millions)   Comcast
Parent
    CCCL
Parent
    CCCH
Parent
    Combined
CCHMO
Parents
    Comcast
Holdings
    Non-
Guarantor
Subsidiaries
    Elimination
and
Consolidation
Adjustments
    Consolidated
Comcast
Corporation
 

Revenue:

               

Service revenue

  $     $     $     $     $     $ 22,881     $     $ 22,881  

Management fee revenue

    467       160       248       248                   (1,123 )      
      467       160       248       248             22,881       (1,123 )     22,881  

Costs and Expenses:

               

Operating (excluding depreciation and amortization)

                                  8,272             8,272  

Selling, general and administrative

    212       160       248       248       13       6,147       (1,123 )     5,905  

Depreciation

    3                               3,765             3,768  

Amortization

                                  816             816  
      215       160       248       248       13       19,000       (1,123 )     18,761  

Operating income (loss)

    252                         (13 )     3,881             4,120  

Other Income (Expense):

               

Interest expense

    (795 )     (276 )     (241 )     (178 )     (71 )     (128 )           (1,689 )

Investment income (loss), net

    7             5             (14 )     460             458  

Equity in net (losses) income of affiliates, net

    2,333       1,261       1,631       1,747       1,137       (103 )     (8,055 )     (49 )

Other income (expense)

    1                               512             513  
      1,546       985       1,395       1,569       1,052       741       (8,055 )     (767 )

Income (loss) before income taxes and minority interest

    1,798       985       1,395       1,569       1,039       4,622       (8,055 )     3,353  

Income tax (expense) benefit

    187       98       84       62       34       (1,865 )           (1,400 )

Income (loss) before minority interest

    1,985       1,083       1,479       1,631       1,073       2,757       (8,055 )     1,953  

Minority interest

                                  32             32  

Net income (loss)

  $ 1,985     $ 1,083     $ 1,479     $ 1,631     $ 1,073     $ 2,789     $ (8,055 )   $ 1,985  

 

20


Table of Contents

Comcast Corporation

Condensed Consolidating Statement of Cash Flows

For the Nine Months Ended September 30, 2008

 

(in millions)   Comcast
Parent
    CCCL
Parent
    CCCH
Parent
    Combined
CCHMO
Parents
    Comcast
Holdings
    Non-
Guarantor
Subsidiaries
    Elimination
and
Consolidation
Adjustments
   Consolidated
Comcast
Corporation
 

Operating Activities:

                

Net cash provided by (used in) operating activities

  $ (172 )   $ (185 )   $ (171 )   $ (187 )   $ 25     $ 8,063     $  —    $ 7,373  

Financing Activities:

                

Proceeds from borrowings

    1,998             1,500                   15            3,513  

Retirements and repayments of debt

    (300 )     (350 )           (300 )     (154 )     (39 )          (1,143 )

Repurchases of common stock

    (2,800 )                                        (2,800 )

Dividends paid

    (367 )                                        (367 )

Issuances of common stock

    53                                          53  

Other

    (3 )                       (53 )     (92 )          (148 )

Net cash provided by (used in) financing activities

    (1,419 )     (350 )     1,500       (300 )     (207 )     (116 )          (892 )

Investing Activities:

                

Net transactions with affiliates

    1,753       535       (1,329 )     487       182       (1,628 )           

Capital expenditures

    (124 )                             (3,913 )          (4,037 )

Cash paid for intangible assets

                                  (376 )          (376 )

Acquisitions, net of cash acquired

                                  (700 )          (700 )

Proceeds from sales of investments

                                  452            452  

Purchases of investments

                                  (67 )          (67 )

Other

    (38 )                             36            (2 )

Net cash provided by (used in) investing activities

    1,591       535       (1,329 )     487       182       (6,196 )          (4,730 )

Increase (decrease) in cash and cash equivalents

                                  1,751            1,751  

Cash and cash equivalents, beginning of period

                                  963            963  

Cash and cash equivalents, end of period

  $     $     $     $     $     $ 2,714     $    $ 2,714  

 

 

21


Table of Contents

Comcast Corporation

Condensed Consolidating Statement of Cash Flows

For the Nine Months Ended September 30, 2007

 

(in millions)   Comcast
Parent
    CCCL
Parent
    CCCH
Parent
    Combined
CCHMO
Parents
    Comcast
Holdings
    Non-
Guarantor
Subsidiaries
    Elimination
and
Consolidation
Adjustments
  Consolidated
Comcast
Corporation
 

Operating Activities:

               

Net cash provided by (used in) operating activities

  $ (430 )   $ (211 )   $ (172 )   $ (198 )   $ 6     $ 6,510     $  —   $ 5,505  

Financing Activities:

               

Proceeds from borrowings

    3,595                               15           3,610  

Retirements and repayments of debt

    (200 )     (600 )           (226 )           (503 )         (1,529 )

Repurchases of common stock

    (1,852 )                                       (1,852 )

Issuances of common stock

    404                                         404  

Other

    6                   (8 )           53           51  

Net cash provided by (used in) financing activities

    1,953       (600 )           (234 )           (435 )         684  

Investing Activities:

               

Net transactions with affiliates

    (1,572 )     811       172       432       (6 )     163            

Capital expenditures

    (28 )                             (4,556 )         (4,584 )

Cash paid for intangible assets

                                  (313 )         (313 )

Acquisitions, net of cash acquired

                                  (1,277 )         (1,277 )

Proceeds from sales of investments

                                  1,726           1,726  

Purchases of investments

                                  (129 )         (129 )

Other

                                  98           98  

Net cash provided by (used in) investing activities

    (1,600 )     811       172       432       (6 )     (4,288 )         (4,479 )

Increase (decrease) in cash and cash equivalents

    (77 )                             1,787           1,710  

Cash and cash equivalents, beginning of period

    77                               1,162           1,239  

Cash and cash equivalents, end of period

  $     $     $     $     $     $ 2,949     $  —   $ 2,949  

 

 

22


Table of Contents

ITEM 2: MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Overview

We are the largest cable operator in the United States and offer a variety of entertainment and communications products and services. As of September 30, 2008, our cable systems served approximately 24.4 million video subscribers, 14.7 million high-speed Internet subscribers and 6.1 million phone subscribers and passed approximately 50.3 million homes in 39 states and the District of Columbia.

We classify our operations in two reportable segments: Cable and Programming. Our Cable segment, which generates approximately 95% of our consolidated revenue, manages and operates our cable systems, including video, high-speed Internet and phone services (“cable services”). The majority of our Cable segment revenue is earned from monthly subscriptions for these cable services. Other sources of revenue include advertising and the operation of our regional sports and news networks. Our Programming segment consists primarily of our consolidated national programming networks, including E!, Golf Channel, VERSUS, G4 and Style. Revenue from our Programming segment is earned primarily from the sale of advertising and from monthly per subscriber programming license fees.

Highlights and business developments for the nine months ended September 30, 2008 include the following:

 

   

an increase in consolidated revenue of 11.4% to approximately $25.5 billion and an increase in consolidated operating income of 20.8% to approximately $5.0 billion

 

 

   

an increase in Cable segment revenue of 11.1% to approximately $24.1 billion and an increase in operating income before depreciation and amortization of 10.9% to approximately $9.8 billion, both driven by growth in subscribers from the success of our bundled service offerings and by acquisitions

 

 

   

the repurchase of approximately 141 million shares of our Class A and Class A Special common stock under our share repurchase authorization for approximately $2.8 billion

 

 

   

the acquisition of cable systems serving Illinois and Indiana (approximately 696,000 video subscribers), as a result of the dissolution of Insight Midwest, LP (the “Insight transaction”), in January 2008

 

Consolidated Operating Results

 

   

Three Months Ended

September 30

   

Increase/

(Decrease)

   

Nine Months Ended

September 30

   

Increase/

(Decrease)

 
(in millions)       2008             2007                    2008             2007             

Revenue

  $ 8,549     $ 7,781     9.9 %   $ 25,491     $ 22,881     11.4 %

Costs and expenses:

           

Operating, selling, general and administrative expenses (excluding depreciation and amortization)

    5,312       4,852     9.5       15,729       14,177     11.0  

Depreciation

    1,332       1,291     3.2       4,093       3,768     8.6  

Amortization

    235       247     (5.8 )     694       816     (15.1 )

Operating income

    1,670       1,391     20.1       4,975       4,120     20.8  

Other income (expense) items, net

    (513 )     (426 )   20.5       (1,498 )     (767 )   95.4  

Income before income taxes and minority interest

    1,157       965     20.0       3,477       3,353     3.7  

Income tax expense

    (401 )     (421 )   (4.7 )     (1,364 )     (1,400 )   (2.5 )

Income before minority interest

    756       544     39.0       2,113       1,953     8.2  

Minority interest

    15       16     (9.7 )     22       32     (30.0 )

Net income

  $ 771     $ 560     37.6 %   $ 2,135     $ 1,985     7.6 %

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

 

23


Table of Contents

Consolidated Revenue

Our Cable and Programming segments accounted for substantially all of the increases in consolidated revenue for the three and nine months ended September 30, 2008 compared to the same periods in 2007. The remaining increases relate to our other business activities, primarily growth in our Comcast Interactive Media business and playoff game revenue generated in the second quarter of 2008 by Comcast Spectacor’s professional sports teams. Cable segment revenue and Programming segment revenue are discussed separately in “Segment Operating Results.”

Consolidated Operating, Selling, General and Administrative Expenses

Our Cable and Programming segments accounted for substantially all of the increases in consolidated operating, selling, general and administrative expenses for the three and nine months ended September 30, 2008 compared to the same periods in 2007. The remaining changes relate to our other business activities, including expanding our Comcast Interactive Media business, Comcast Spectacor and litigation expense incurred in 2007. Cable segment and Programming segment operating, selling, general and administrative expenses are discussed separately in “Segment Operating Results.”

Consolidated Depreciation and Amortization

The increases in depreciation expense for the three and nine months ended September 30, 2008 compared to the same periods in 2007 were primarily a result of an increase in property and equipment associated with capital spending in recent years and the cable systems acquired in the Insight transaction.

The decreases in amortization expense for the three and nine months ended September 30, 2008 compared to the same periods in 2007 were primarily due to the customer relationship intangible assets associated with the AT&T Broadband acquisition in 2002 being fully amortized.

Segment Operating Results

To measure the performance of our operating segments, we use operating income (loss) before depreciation and amortization, excluding impairment charges related to fixed and intangible assets, and gains or losses from the sale of assets, if any. This measure eliminates the significant level of noncash depreciation and amortization expense that results from the capital-intensive nature of our businesses and from intangible assets recognized in business combinations. Additionally, it is unaffected by our capital structure or investment activities. We use this measure to evaluate our consolidated operating performance, the operating performance of our operating segments and to allocate resources and capital to our operating segments. It is also a significant performance measure in our annual incentive compensation programs. We believe that this measure is useful to investors because it is one of the bases for comparing our operating performance with that of other companies in our industries, although our measure may not be directly comparable to similar measures used by other companies. Because we use this metric to measure 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 in the United States (“GAAP”) in the business segment footnote to our consolidated financial statements (see Note 13). This measure should not be considered a substitute for operating income (loss), net income (loss), net cash provided by operating activities, or other measures of performance or liquidity we have reported in accordance with GAAP.

 

24


Table of Contents

Cable Segment Operating Results

 

    Three Months Ended
September 30
   Increase/
(Decrease)
 
(in millions)       2008            2007            $             %      

Video

  $ 4,681    $ 4,395    $ 286     6.5 %

High-speed Internet

    1,822      1,624      198     12.2  

Phone

    690      470      220     46.8  

Advertising

    374      407      (33 )   (7.8 )

Other

    336      296      40     12.6  

Franchise fees

    228      208      20     9.9  

Revenue

    8,131      7,400      731     9.9  

Operating expenses

    2,932      2,615      317     12.1  

Selling, general and administrative expenses

    1,948      1,810      138     7.7  

Operating income before depreciation and amortization

  $ 3,251    $ 2,975    $ 276     9.3 %
    Nine Months Ended
September 30
   Increase/
(Decrease)
 
(in millions)       2008            2007            $             %      

Video

  $ 14,113    $ 13,222    $ 891     6.7 %

High-speed Internet

    5,364      4,740      624     13.2  

Phone

    1,917      1,243      674     54.2  

Advertising

    1,117      1,119      (2 )   (0.1 )

Other

    957      788      169     20.8  

Franchise fees

    679      616      63     10.2  

Revenue

    24,147      21,728      2,419     11.1  

Operating expenses

    8,739      7,741      998     12.9  

Selling, general and administrative expenses

    5,653      5,188      465     9.0  

Operating income before depreciation and amortization

  $ 9,755    $ 8,799    $ 956     10.9 %

Cable Segment Revenue

Video

Our video revenue continued to grow for the three and nine months ended September 30, 2008 compared to the same periods in 2007 due to subscriber growth in our digital cable services, including the demand for digital features such as On Demand, DVR and HDTV; rate adjustments; and the addition of the cable systems acquired in the Insight transaction. During the nine months ended September 30, 2008, we added approximately 1.2 million digital cable subscribers. As of September 30, 2008, approximately 69% of our 24.4 million video subscribers subscribed to at least one of our digital cable services. During the nine months ended September 30, 2008, the number of basic subscribers decreased by approximately 342,000 primarily due to increased competition in our service areas, as well as the weakness in the economy. Our average monthly video revenue per video subscriber increased during the nine months ended September 30, 2008 to approximately $64 from approximately $61 as of December 31, 2007. The rate of this growth has slowed due to an increased number of subscribers participating in our bundles and in promotional offers.

High-Speed Internet

The increases in high-speed Internet revenue for the three and nine months ended September 30, 2008 compared to the same periods in 2007 were primarily due to an increase in subscribers and the addition of the cable systems acquired in the Insight transaction. During the nine months ended September 30, 2008, we added approximately 1.2 million high-speed Internet subscribers. Average monthly revenue per subscriber has declined slightly due to an increased number of subscribers participating in our bundled service offerings and the introduction of new promotional offers and speed tiers.

 

25


Table of Contents

Phone

Our phone revenue increased for the three and nine months ended September 30, 2008 compared to the same periods in 2007 due to subscriber growth in our digital phone service, which was partially offset by the loss of circuit-switched phone subscribers. During the nine months ended September 30, 2008, we added approximately 1.7 million digital phone subscribers. Average monthly revenue per subscriber for our digital phone service has decreased slightly due to an increased number of subscribers receiving service as part of a promotional offer or in a new product package.

Advertising

Advertising revenue decreased for the three and nine months ended September 30, 2008 compared to the same periods in 2007 primarily due to one less week in the broadcast advertising calendar for the three months ended September 30, 2008 and softness in the advertising marketplace throughout 2008. These declines have been partially offset by the inclusion of revenue from the cable systems acquired in the Insight transaction and increased political advertising revenue.

Other

We also generate revenue from our regional sports and news networks, our digital media center, residential video installation services, on-screen guide advertising, commissions from third-party electronic retailing and fees for other services. The increases in other revenue for the nine months ended September 30, 2008 compared to the same period in 2007 were primarily due to the regional sports network acquisitions of Comcast SportsNet Bay Area and Comcast SportsNet New England in the first half of 2007.

Franchise Fees

The increases in franchise fees collected from our cable subscribers for the three and nine months ended September 30, 2008 compared to the same periods in 2007 were primarily due to the increases in our revenue upon which the fees apply.

Cable Segment Operating Expenses

Operating expenses increased during the three and nine months ended September 30, 2008 compared to the same periods in 2007 primarily due to growth in the number of subscribers and the related costs associated with the delivery of services, including programming, and the addition of the cable systems acquired in the Insight transaction. The 2008 periods also include costs associated with the expansion of our cable services to small and medium-sized businesses.

Cable Segment Selling, General and Administrative Expenses

Selling, general and administrative expenses increased during the three and nine months ended September 30, 2008 compared to the same periods in 2007 primarily due to growth in the number of subscribers to our cable services, additional marketing costs associated with attracting new residential and business subscribers and the addition of the cable systems acquired in the Insight transaction. The 2008 periods also include severance costs related to our divisional reorganization.

 

26


Table of Contents

Programming Segment Operating Results

 

    Three Months Ended
September 30
   Increase/
(Decrease)
 
(in millions)       2008            2007            $            %      

Revenue

  $ 347    $ 330    $ 17    5.3 %

Operating, selling, general and administrative expenses

    242      233      9    3.7  

Operating income before depreciation and amortization

  $ 105    $ 97    $ 8    9.1 %
    Nine Months Ended
September 30
   Increase/
(Decrease)
 
(in millions)       2008            2007            $            %      

Revenue

  $ 1,076    $ 966    $ 110    11.4 %

Operating, selling, general and administrative expenses

    769      729      40    5.5  

Operating income before depreciation and amortization

  $ 307    $ 237    $ 70    29.7 %

Programming Segment Revenue

The increase in revenue for the three months ended September 30, 2008 compared to the same period in 2007 was primarily a result of increases in programming license fee revenue and international revenue. Advertising revenue decreased slightly during the three months ended September 30, 2008 compared to the same period in 2007 primarily due to the impact of one less week in the broadcast advertising calendar in 2008. The increase in revenue for the nine months ended September 30, 2008 compared to the same period in 2007 was primarily a result of increases in advertising revenue, programming license fee revenue and international revenue. For the three and nine months ended September 30, 2008, approximately 13% and 12%, respectively, of our Programming segment revenue was generated by our Cable segment. For the three and nine months ended September 30, 2007, approximately 11% and 13%, respectively, of our Programming segment revenue was generated by our Cable segment. These amounts are eliminated in our consolidated financial statements but are included in the amounts presented in the table above.

Programming Segment Expenses

Expenses grew at a rate slower than revenue growth for the three and nine months ended September 30, 2008 compared to the same periods in 2007, which resulted in improvements in margins. The 2008 periods were favorably impacted by the timing of certain marketing and programming expenses, which are expected to be incurred in the fourth quarter of 2008.

Consolidated Other Income (Expense) Items

 

    Three Months Ended
September 30
   

Nine Months Ended

September 30

 
(in millions)       2008             2007             2008             2007      

Interest expense

  $ (601 )   $ (571 )   $ (1,840 )   $ (1,689 )

Investment income (loss), net

    74       158       83       458  

Equity in net (losses) income of affiliates, net

    2       (12 )     (46 )     (49 )

Other income (expense)

    12       (1 )     305       513  

Total

  $ (513 )   $ (426 )   $ (1,498 )   $ (767 )

Interest Expense

The increases in interest expense for the three and nine months ended September 30, 2008 compared to the same periods in 2007 were primarily due to an increase in our average debt outstanding, and early extinguishment costs associated with the repayment and redemption of certain debt obligations in the first half of 2008.

Investment Income (Loss), Net

The components of investment income (loss), net for the three and nine months ended September 30, 2008 and 2007 are presented in a table in Note 5 to our consolidated financial statements.

 

27


Table of Contents

Other Income (Expense)

Other income for the nine months ended September 30, 2008 included a gain of approximately $235 million on the sale of our 50% interest in the Insight asset pool in connection with the Insight transaction (see Note 4). Other income for the nine months ended September 30, 2007 included a gain of approximately $500 million on the sale of our 50% interest in the Kansas City asset pool in connection with the dissolution of Texas and Kansas City Cable Partners.

Income Tax Expense

Income tax expense for the three and nine months ended September 30, 2008 and 2007 reflects income tax rates which differ from the federal statutory rate primarily due to state income taxes and interest on uncertain tax positions. Income tax expense was reduced by approximately $80 million during the 2008 periods due to the settlement of an uncertain tax position (see Note 10), and the net impact of certain state tax law changes, which primarily affected our deferred income tax liabilities and other noncurrent liabilities. We expect our 2008 annual effective tax rate to be at the lower end of our anticipated range of 40% to 45%.

Liquidity and Capital Resources

Our businesses generate significant cash flows from operating activities. We believe that we will be able to meet our current and long-term liquidity and capital requirements, including fixed charges, through our cash flows from operating activities, existing cash, cash equivalents and investments; through available borrowings under our existing credit facilities; and through our ability to obtain future external financing.

We anticipate continuing to use a substantial portion of our cash flows to fund our capital expenditures, to invest in business opportunities, to meet our debt repayment obligations and to return capital to investors through stock repurchases and dividends.

The global financial markets have been and continue to be in turmoil, with extreme volatility in the equity and credit markets and with some financial and other institutions experiencing significant financial distress. During the three months ended September 30, 2008, we borrowed $1.5 billion using an existing credit facility in anticipation of our scheduled fourth quarter debt maturities and the funding of our investment in Clearwire in late 2008 (see “Investing Activities” below). As of September 30, 2008, we had approximately $5.2 billion remaining availability under these credit facilities and no commercial paper outstanding. From 2009 to 2011, our scheduled debt maturities total approximately $5.2 billion. In addition, neither our access to nor the value of our cash equivalents or short-term investments have been negatively affected by the recent liquidity problems of financial institutions. Although we have attempted to be prudent in our investment strategy and in pre-funding our anticipated fourth quarter liquidity needs, it is not possible to predict how the financial market turmoil and the deteriorating economic conditions may affect our financial position. Additional financial institution failures could reduce amounts available under committed credit facilities, could cause losses to the extent cash amounts or the value of securities exceed government deposit insurance limits, and could restrict our access to the public equity and debt markets.

 

28


Table of Contents

Operating Activities

Details of net cash provided by operating activities are presented in the table below.

 

    Nine Months Ended
September 30
 
(in millions)       2008             2007      

Operating income

  $ 4,975     $ 4,120  

Depreciation and amortization

    4,787       4,584  

Operating income before depreciation and amortization

    9,762       8,704  

Noncash share-based compensation and contribution expense

    195       172  

Changes in operating assets and liabilities

    (276 )     (297 )

Cash basis operating income

    9,681       8,579  

Payments of interest

    (1,795 )     (1,724 )

Payments of income taxes

    (589 )     (1,439 )

Proceeds from interest and dividends received

    91       125  

Excess tax benefit under SFAS No. 123R presented in financing activities

    (15 )     (36 )

Net cash provided by operating activities

  $ 7,373     $ 5,505  

The increase in interest payments for the nine months ended September 30, 2008 compared to the same period in 2007 was primarily due to an increase in our average debt outstanding. The decrease in income tax payments was primarily due to the Economic Stimulus Act of 2008, which resulted in a reduction in our tax payments of approximately $483 million. The 2007 period also includes the payment of $376 million related to the settlement of federal tax audits.

Financing Activities

Net cash used in financing activities for the nine months ended September 30, 2008 consisted primarily of cash paid for the repurchase of approximately 141 million shares of our Class A and Class A Special common stock for approximately $2.8 billion, which represents the activity on a settlement date or cash basis; debt retirements and repayments of $1.1 billion; and dividend payments of $367 million. These cash outflows were partially offset by cash proceeds from borrowings of $3.5 billion.

We have in the past made and may from time to time in the future make optional repayments on our debt obligations depending on various factors, such as market conditions. These repayments may include repurchases of our outstanding public notes and debentures.

Available Borrowings Under Credit Facilities

We traditionally maintain significant availability under our lines of credit and commercial paper program to meet our short-term liquidity requirements. In January 2008, we entered into an amended and restated revolving bank credit facility which may be used for general corporate purposes. This amendment increased the size of the credit facility from $5.0 billion to $7.0 billion and extended the maturity of the loan commitment from October 2010 to January 2013. As of September 30, 2008, amounts available under our facilities totaled approximately $5.2 billion. Lehman Brothers Bank, FSB, has a $157 million remaining commitment under our credit facility. This bank is not, to our knowledge, in any insolvency proceeding. Under our credit facility, other lenders are not obligated to fund a defaulting lender’s commitment, although another lender could agree to fund the defaulting lender’s commitment. Further, non-defaulting lenders are not able to use a default by another bank to avoid their own commitments.

Share Repurchases and Dividends

As of September 30, 2008, we had approximately $4.1 billion of availability remaining under our share repurchase authorization. We have previously indicated our plan to fully use our remaining share repurchase authorization by the end of 2009, subject to market conditions. Given the overall economy and the unprecedented turmoil and instability in the capital markets, we may not complete our share repurchase authorization in 2008 and 2009 as previously planned. We believe this is a disciplined and responsible approach given the difficult market conditions.

 

29


Table of Contents

In February, May and August 2008, our Board of Directors approved quarterly dividends of $0.0625 per share as part of our planned annual dividend of $0.25 per share.

Investing Activities

Net cash used in investing activities for the nine months ended September 30, 2008 consisted primarily of cash paid for capital expenditures of $4.0 billion; acquisitions of $700 million, net of cash acquired; and cash paid for intangible assets of $376 million. These cash outflows were partially offset by proceeds from sales of investments of $452 million. Capital expenditures have been our most significant recurring investing activity and we expect that this will continue in the future.

In May 2008, Sprint Nextel entered into an agreement with Clearwire Corporation and an investor group made up of us, Intel, Google, Time Warner Cable and Bright House. Under this agreement, Sprint Nextel and Clearwire Corporation will combine their next-generation wireless broadband businesses to form an independent, publicly traded company called Clearwire that will focus on the deployment of a nationwide 4G wireless network. We, together with the other members of the investment group, have agreed to invest $3.2 billion in Clearwire. Our portion of the investment is $1.05 billion. This transaction is expected to close in late 2008.

Critical Accounting Judgments and Estimates

The preparation of our consolidated financial statements requires us to make estimates that affect the reported amounts of assets, liabilities, revenue and expenses, and the related disclosure of contingent assets and contingent liabilities. We base our judgments on historical experience and on various other assumptions that we believe are reasonable under the circumstances, the results of which form the basis for making estimates about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

We believe our judgments and related estimates associated with the valuation and impairment testing of our cable franchise rights and the accounting for income taxes and legal contingencies are critical in the preparation of our consolidated financial statements. See Note 6 to our consolidated financial statements for a discussion of our 2008 annual impairment testing.

For a full discussion of the accounting judgments and estimates that we have identified as critical in the preparation of our consolidated financial statements, please refer to our 2007 Annual Report on Form 10-K.

ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We have evaluated the information required under this item that was disclosed in our 2007 Annual Report on Form 10-K in light of the current turmoil in the financial markets and believe there have been no significant changes to this information.

ITEM 4: CONTROLS AND PROCEDURES

Conclusions Regarding Disclosure Controls and Procedures

Our chief executive officer and our chief financial officer, after evaluating the effectiveness of our disclosure controls and procedures (as defined in the Securities Exchange Act of 1934 Rules 13a-15(e) or 15d-15(e)) as of the end of the period covered by this report, have concluded, based on the evaluation of these controls and procedures required by paragraph (b) of Exchange Act Rules 13a-15 or 15d-15, that our disclosure controls and procedures were effective.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting identified in connection with the evaluation required by paragraph (d) of Exchange Act Rules 13a-15 or 15d-15 that occurred during our last fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

30


Table of Contents

PART II: OTHER INFORMATION

ITEM 1: LEGAL PROCEEDINGS

Refer to Note 12 to our consolidated financial statements of this Quarterly Report on Form 10-Q for a discussion of recent developments related to our legal proceedings.

ITEM 1A: RISK FACTORS

There have been no significant changes from the risk factors previously disclosed in Item 1A of our 2007 Annual Report on Form 10-K.

ITEM 2: UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

The table below summarizes our repurchases under our Board-authorized share repurchase program during the three months ended September 30, 2008.

Purchases of Equity Securities

 

Period   Total
Number
of Shares
Purchased
   Average Price
Per Share
   Total Number of
Shares Purchased as
Part of Publicly
Announced
Program
   Total Dollars
Purchased
Under
the Program
  

Maximum Dollar Value

of Shares That May Yet

Be Purchased Under

the Program(a)

July 1-31, 2008

     $       $    $ 4,906,046,182

August 1-31, 2008

  27,647,637    $ 19.89    27,647,637    $ 550,001,409    $ 4,356,044,773

September 1-30, 2008

  12,030,799    $ 20.78    12,030,799    $ 250,000,000    $ 4,106,044,773

Total

  39,678,436    $ 20.16    39,678,436    $ 800,001,409    $ 4,106,044,773

 

(a)

In 2007, the Board of Directors authorized a $7 billion addition to the existing share repurchase authorization. Under this authorization, we may repurchase shares in the open market or in private transactions, subject to market conditions. As of September 30, 2008, we had approximately $4.1 billion of availability remaining under our share repurchase authorization. We have previously indicated our plan to fully use our remaining share repurchase authorization by the end of 2009, subject to market conditions. Given the overall economy and the unprecedented turmoil and instability in the capital markets, we may not complete our share repurchase authorization in 2008 and 2009 as previously planned. We believe this is a disciplined and responsible approach given the difficult market conditions.

The total number of shares purchased during the three months ended September 30, 2008 does not include any shares received in the administration of share-based compensation plans.

ITEM 6: EXHIBITS

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

 

10.1*

 

Comcast Corporation 2002 Restricted Stock Plan, as amended and restated effective October 7, 2008.

10.2*

 

Comcast Corporation 2002 Deferred Stock Option Plan, as amended and restated effective October 7, 2008.

10.3*

 

Comcast Corporation Retirement Investment Plan, as amended and restated effective October 7, 2008.

18.1

 

Accountants’ preferability letter regarding change in accounting principles.

31

 

Certifications of Chief Executive Officer and Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32

 

Certifications of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

 

 

*

Constitutes a management contract or compensatory plan or arrangement.

 

31


Table of Contents

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

COMCAST CORPORATION

/S/ LAWRENCE J. SALVA

Lawrence J. Salva

Senior Vice President, Chief Accounting Officer

and Controller

(Principal Accounting Officer)

Date: October 29, 2008

 

32

Comcast Corporation 2002 Restricted Stock Plan, as amended and restated

Exhibit 10.1

COMCAST CORPORATION

2002 RESTRICTED STOCK PLAN

(As Amended And Restated, Effective October 7, 2008)

1. BACKGROUND AND PURPOSE

(a) Amendment and Restatement of Plan. COMCAST CORPORATION, a Pennsylvania corporation, hereby amends and restates the Comcast Corporation 2002 Restricted Stock Plan (the “Plan”), effective October 7, 2008. The purpose of the Plan is to promote the ability of Comcast Corporation to recruit and retain employees and enhance the growth and profitability of Comcast Corporation by providing the incentive of long-term awards for continued employment and the attainment of performance objectives.

(b) Purpose of the Amendment; Credits Affected. The Plan was previously amended and restated, effective January 1, 2005 in order (i) to preserve the favorable tax treatment available to amounts deferred pursuant to the Plan before January 1, 2005 and the earnings credited in respect of such amounts (each a “Grandfathered Amount”) in light of the enactment of section 409A of the Internal Revenue Code of 1986, as amended (the “Code”) as part of the American Jobs Creation Act of 2004, and the issuance of various Notices, Announcements, Proposed Regulations and Final Regulations thereunder (collectively, “Section 409A”), and (ii) with respect to all other amounts eligible to be deferred under the Plan, to comply with the requirements of Section 409A. Except as provided in Paragraph 2(dd) or Paragraph 8(i)(iii) of the Plan, Grandfathered Amounts will continue to be subject to the terms and conditions of the Plan as in effect prior to January 1, 2005. All amounts eligible to be deferred under the Plan other than Grandfathered Amounts will be subject to the terms of this amendment and restatement of the Plan and Section 409A.

(c) Reservation of Right to Amend to Comply with Section 409A. In addition to the powers reserved to the Board and the Committee under Paragraph 14 of the Plan, the Board and the Committee reserve the right to amend the Plan, either retroactively or prospectively, in whatever respect is required to achieve and maintain compliance with the requirements of the Section 409A.

(d) Deferral Provisions of Plan Unfunded and Limited to Select Group of Management or Highly Compensated Employees. Deferral Eligible Grantees and Non-Employee Directors may elect to defer the receipt of Restricted Stock and Restricted Stock Units as provided in Paragraph 8. The deferral provisions of Paragraph 8 and the other provisions of the Plan relating to the deferral of Restricted Stock and Restricted Stock Units are unfunded and maintained primarily for the purpose of providing a select group of management or highly compensated employees the opportunity to defer the receipt of compensation otherwise payable to such eligible employees in accordance with the terms of the Plan.


2. DEFINITIONS

(a) “Acceleration Election” means a written election on a form provided by the Committee, pursuant to which a Deceased Grantee’s Successor-in-Interest or a Disabled Grantee elects to accelerate the distribution date of Shares issuable with respect to Restricted Stock and/or Restricted Stock Units.

(b) “Account” means unfunded bookkeeping accounts established pursuant to Paragraph 8(h) and maintained by the Committee in the names of the respective Grantees (i) to which Deferred Stock Units, dividend equivalents and earnings on dividend equivalents shall be credited with respect to the portion of the Account allocated to the Company Stock Fund and (ii) to which an amount equal to the Fair Market Value of Deferred Stock Units with respect to which a Diversification Election has been made and interest thereon are deemed credited, reduced by distributions in accordance with the Plan.

(c) “Active Grantee” means each Grantee who is actively employed by a Participating Company.

(d) “Affiliate” means, with respect to any Person, any other person that, directly or indirectly, is in control of, is controlled by, or is under common control with, such Person. For purposes of this definition, the term “control,” including its correlative terms “controlled by” and “under common control with,” mean, with respect to any Person, the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities, by contract or otherwise.

(e) “Annual Rate of Pay” means, as of any date, an employee’s annualized base pay rate. An employee’s Annual Rate of Pay shall not include sales commissions or other similar payments or awards.

(f) “Applicable Interest Rate” means:

 

 

(i)

Except as otherwise provided in Paragraph 2(f)(ii), the Applicable Interest Rate means the interest rate that, when compounded annually pursuant to rules established by the Committee from time to time, is mathematically equivalent to 8% per annum, compounded annually, or such other interest rate established by the Committee from time to time. The effective date of any reduction in the Applicable Interest Rate shall not precede the later of: (A) the 30th day following the date of the Committee’s action to establish a reduced rate; or (B) the lapse of 24 full calendar months from the date of the most recent adjustment of the Applicable Interest Rate by the Committee.

 

  (ii)

Effective for the period extending from a Grantee’s employment termination date to the date the Grantee’s Account is distributed in full, the Committee, in its sole and absolute discretion, may

 

-2-


 

designate the term “Applicable Interest Rate” for such Grantee’s Account to mean the lesser of: (A) the rate in effect under Paragraph 2(f)(i) or (B) the interest rate that, when compounded annually pursuant to rules established by the Committee from time to time, is mathematically equivalent to the Prime Rate plus one percent, compounded annually as of the last day of the calendar year. Notwithstanding the foregoing, the Committee may delegate its authority to determine the Applicable Interest Rate under this Paragraph 2(f)(ii) to an officer of the Company or committee of two or more officers of the Company.

(g) “AT&T Broadband Transaction” means the acquisition of AT&T Broadband Corp. (now known as Comcast Cable Communications Holdings, Inc.) by the Company.

(h) “Award” means an award of Restricted Stock or Restricted Stock Units granted under the Plan.

(i) “Board” means the Board of Directors of the Company.

(j) “Change of Control” means:

 

  (i) For all purposes of the Plan other than Paragraph 8, any transaction or series of transactions as a result of which any Person who was a Third Party immediately before such transaction or series of transactions owns then-outstanding securities of the Company such that such Person has the ability to direct the management of the Company, as determined by the Board in its discretion. The Board may also determine that a Change of Control shall occur upon the completion of one or more proposed transactions. The Board’s determination shall be final and binding.

 

  (ii) For purposes of Paragraph 8, any transaction or series of transactions that constitutes a change in the ownership or effective control or a change in the ownership of a substantial portion of the assets of the Company, within the meaning of Section 409A.

(k) “Code” means the Internal Revenue Code of 1986, as amended.

(l) “Comcast Plan” means any restricted stock, restricted stock unit, stock bonus, stock option or other compensation plan, program or arrangement established or maintained by the Company or an Affiliate, including but not limited to this Plan, the Comcast Corporation 2003 Stock Option Plan, the Comcast Corporation 2002 Stock Option Plan, the Comcast Corporation 1996 Stock Option Plan, Comcast Corporation 1987 Stock Option Plan and the Comcast Corporation 2002 Deferred Stock Option Plan.

(m) “Committee” means the Compensation Committee of the Board.

 

-3-


(n) “Common Stock” means Class A Common Stock, par value $0.01, of the Company.

(o) “Company” means Comcast Corporation, a Pennsylvania corporation, including any successor thereto by merger, consolidation, acquisition of all or substantially all the assets thereof, or otherwise.

(p) “Company Stock Fund” means a hypothetical investment fund pursuant to which Deferred Stock Units are credited with respect to a portion of an Award subject to an Election, and thereafter until (i) the date of distribution or (ii) the effective date of a Diversification Election, to the extent a Diversification Election applies to such Deferred Stock Units, as applicable. The portion of a Grantee’s Account deemed invested in the Company Stock Fund shall be treated as if such portion of the Account were invested in hypothetical shares of Common Stock or Special Common Stock otherwise deliverable as Shares upon the Vesting Date associated with Restricted Stock or Restricted Stock Units, and all dividends and other distributions paid with respect to Common Stock or Special Common Stock were credited to the Income Fund, held uninvested in cash and credited with interest at the Applicable Interest Rate as of the next succeeding December 31 (to the extent the Account continues to be deemed credited in the form of Deferred Stock Units through such December 31).

(q) “Date of Grant” means the date on which an Award is granted.

(r) “Deceased Grantee” means:

 

  (i) A Grantee whose employment by a Participating Company is terminated by death; or

 

  (ii) A Grantee who dies following termination of employment by a Participating Company.

(s) “Deferral Eligible Employee” means:

 

  (i) An Eligible Employee whose Annual Rate of Pay is $200,000 or more as of both: (i) the date on which an Initial Election is filed with the Committee; and (ii) the first day of the calendar year in which such Initial Election filed.

 

  (ii) An Eligible Employee whose Annual Rate of Pay is $125,000 as of each of: (A) June 30, 2002; (B) the date on which an Initial Election is filed with the Committee; and (C) the first day of each calendar year beginning after December 31, 2002.

 

  (iii) Each New Key Employee.

 

  (iv) Each other employee of a Participating Company who is designated by the Committee, in its sole and absolute discretion, as a Deferral Eligible Employee.

 

-4-


(t) “Deferred Stock Units” means the number of hypothetical Shares subject to an Election.

(u) “Disability” means:

 

  (i) An individual’s inability to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than 12 months; or

 

  (ii) Circumstances under which, by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than 12 months, an individual is receiving income replacement benefits for a period of not less than three months under an accident or health plan covering employees of the individual’s employer.

(v) “Disabled Grantee” means:

 

  (i) A Grantee whose employment by a Participating Company is terminated by reason of Disability;

 

  (ii) The duly-appointed legal guardian of an individual described in Paragraph 2(v)(i) acting on behalf of such individual.

(w) “Diversification Election” means a Grantee’s election to have a portion of the Grantee’s Account credited in the form of Deferred Stock Units and attributable to any grant of Restricted Stock or Restricted Stock Units deemed liquidated and credited thereafter under the Income Fund, as provided in Paragraph 8(k).

(x) “Election” means, as applicable, an Initial Election, a Subsequent Election, or an Acceleration Election.

(y) “Eligible Employee” means an employee of a Participating Company, as determined by the Committee.

(z) “Fair Market Value” means:

 

  (i) If Shares are listed on a stock exchange, Fair Market Value shall be determined based on the last reported sale price of a Share on the principal exchange on which Shares are listed on the date of determination, or if such date is not a trading day, the next trading date.

 

  (ii)

If Shares are not so listed, but trades of Shares are reported on the Nasdaq National Market, Fair Market Value shall be determined

 

-5-


 

based on the last quoted sale price of a Share on the Nasdaq National Market on the date of determination, or if such date is not a trading day, the next trading date.

 

  (iii) If Shares are not so listed nor trades of Shares so reported, Fair Market Value shall be determined by the Committee in good faith.

(aa) “Grandfathered Amount” means amounts described in Paragraph 1(b) that were deferred under the Plan and that were earned and vested before January 1, 2005.

(bb) “Grantee” means an Eligible Employee or Non-Employee Director who is granted an Award.

(cc) “Hardship” means an “unforeseeable