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 June 30, 2009

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 filing requirements for the past 90 days.

Yes x No ¨

 

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such period that the registrant was required to submit and post such files).

Yes x No ¨

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

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 June 30, 2009, there were 2,061,081,040 shares of our Class A common stock, 799,269,146 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 June 30, 2009 and December 31, 2008 (Unaudited)    2
  Condensed Consolidated Statement of Operations for the Three and Six Months Ended June 30, 2009 and 2008 (Unaudited)    3
  Condensed Consolidated Statement of Cash Flows for the Six Months Ended June 30, 2009 and 2008 (Unaudited)    4
  Condensed Consolidated Statement of Changes in Equity for the Six Months Ended June 30, 2009 and June 30, 2008 (Unaudited)    5
  Condensed Consolidated Statement of Comprehensive Income for the Three and Six Months Ended June 30, 2009 and 2008 (Unaudited)    6
  Notes to Condensed Consolidated Financial Statements (Unaudited)    7

Item 2.

  Management’s Discussion and Analysis of Financial Condition and Results of Operations    25

Item 3.

  Quantitative and Qualitative Disclosures About Market Risk    32

Item 4.

  Controls and Procedures    32
PART II. OTHER INFORMATION   

Item 1.

  Legal Proceedings    33

Item 1A.

  Risk Factors    33

Item 2.

  Unregistered Sales of Equity Securities and Use of Proceeds    33

Item 4.

  Submission of Matters to a Vote of Security Holders    33

Item 5.

  Other Information    34

Item 6.

  Exhibits    35
SIGNATURES    36

 

 

This Quarterly Report on Form 10-Q is for the three and six months ended June 30, 2009. 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 it, 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 and in other reports we file with the SEC. Actual events or our actual results may differ materially from any of our forward-looking statements. 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 have a negative impact on our results of operations and financial condition

 

 

   

we rely on network and information systems and other technology, and a disruption or failure of such networks, systems or technology may disrupt our business

 

 

   

we may be unable to obtain necessary hardware, software and operational support

 

 

   

our business depends on certain intellectual property rights and on not infringing the intellectual property rights of others

 

 

   

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)   June 30,
2009
    December 31,
2008
 

ASSETS

   

Current Assets:

   

Cash and cash equivalents

  $ 3,989      $ 1,195   

Investments

    62        59   

Accounts receivable, less allowance for doubtful accounts of $192 and $190

    1,677        1,626   

Other current assets

    809        836   

Total current assets

    6,537        3,716   

Investments

    5,190        4,783   

Property and equipment, net of accumulated depreciation of $25,544 and $23,235

    23,715        24,444   

Franchise rights

    59,446        59,449   

Goodwill

    14,928        14,889   

Other intangible assets, net of accumulated amortization of $8,299 and $8,160

    4,297        4,558   

Other noncurrent assets, net

    1,124        1,178   

Total assets

  $ 115,237      $ 113,017   

LIABILITIES AND EQUITY

   

Current Liabilities:

   

Accounts payable and accrued expenses related to trade creditors

  $ 3,070      $ 3,393   

Accrued expenses and other current liabilities

    3,320        3,268   

Current portion of long-term debt

    4,167        2,278   

Total current liabilities

    10,557        8,939   

Long-term debt, less current portion

    28,870        30,178   

Deferred income taxes

    27,394        26,982   

Other noncurrent liabilities

    6,435        6,171   

Commitments and Contingencies (Note 10)

   

Redeemable noncontrolling interests

    167        171   

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, 2,426,541,790 and 2,426,443,484; outstanding, 2,061,081,040 and 2,060,982,734

    24        24   

Class A Special common stock, $0.01 par value—authorized, 7,500,000,000 shares; issued, 870,203,910 and 881,145,954; outstanding 799,269,146 and 810,211,190

    9        9   

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

             

Additional paid-in capital

    40,561        40,620   

Retained earnings

    8,736        7,427   

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)

    (80     (113

Total Comcast Corporation stockholders’ equity

    41,733        40,450   

Noncontrolling interests

    81        126   

Total equity

    41,814        40,576   

Total liabilities and equity

  $ 115,237      $ 113,017   

See notes to condensed consolidated financial statements.

 

2


Table of Contents

Condensed Consolidated Statement of Operations

(Unaudited)

 

    Three Months Ended
June 30
    Six Months Ended
June 30
 
(in millions, except per share data)       2009             2008             2009             2008      

Revenue

  $ 8,938      $ 8,553      $ 17,773      $ 16,942   

Costs and Expenses:

       

Operating (excluding depreciation and amortization)

    3,545        3,334        7,110        6,695   

Selling, general and administrative

    1,858        1,868        3,684        3,722   

Depreciation

    1,406        1,371        2,786        2,761   

Amortization

    254        230        507        459   
      7,063        6,803        14,087        13,637   

Operating income

    1,875        1,750        3,686        3,305   

Other Income (Expense):

       

Interest expense

    (551     (618     (1,121     (1,239

Investment income (loss), net

    57        (70     70        9   

Equity in net income (losses) of affiliates, net

    (13     (4     (27     (39

Other income (expense)

    12        16        11        284   
      (495     (676     (1,067     (985

Income before income taxes

    1,380        1,074        2,619        2,320   

Income tax expense

    (424     (455     (885     (963

Net income from consolidated operations

    956        619        1,734        1,357   

Net (income) loss attributable to noncontrolling interests

    11        13        5        7   

Net income attributable to Comcast Corporation

  $ 967      $ 632      $ 1,739      $ 1,364   

Basic earnings per common share attributable to Comcast Corporation stockholders

  $ 0.33      $ 0.21      $ 0.60      $ 0.46   

Diluted earnings per common share attributable to Comcast Corporation stockholders

  $ 0.33      $ 0.21      $ 0.60      $ 0.46   

Dividends declared per common share attributable to Comcast Corporation stockholders

  $ 0.07      $ 0.06      $ 0.14      $ 0.13   

See notes to condensed consolidated financial statements.

 

3


Table of Contents

Condensed Consolidated Statement of Cash Flows

(Unaudited)

 

    Six Months Ended
June 30
 
(in millions)       2009             2008      

Net cash provided by operating activities

  $ 5,113      $ 4,928   

Financing Activities

   

Proceeds from borrowings

    2,522        2,009   

Repurchases and repayments of debt

    (1,767     (831

Repurchases of common stock

    (108     (1,979

Dividends paid

    (375     (185

Issuances of common stock

    1        42   

Other

    (22     (135

Net cash provided by (used in) financing activities

    251        (1,079

Investing Activities

   

Capital expenditures

    (2,281     (2,731

Cash paid for intangible assets

    (241     (245

Acquisitions, net of cash acquired

    (27     (331

Proceeds from sales of investments

    16        320   

Purchases of investments

    (67     (41

Other

    30        (17

Net cash provided by (used in) investing activities

    (2,570     (3,045

Increase (decrease) in cash and cash equivalents

    2,794        804   

Cash and cash equivalents, beginning of period

    1,195        963   

Cash and cash equivalents, end of period

  $ 3,989      $ 1,767   

See notes to condensed consolidated financial statements.

 

4


Table of Contents

Condensed Consolidated Statement of Changes in Equity (Unaudited)

 

          Comcast Corporation Stockholders’ Equity              
          Common Stock                                    
(in millions)   Redeemable
Noncontrolling
Interests
    A   A
Special
    B   Additional
Paid-In
Capital
    Retained
Earnings
    Treasury
Stock at
Cost
    Accumulated
Other
Comprehensive
Income (Loss)
    Noncontrolling
Interests
    Total
Equity
 

Balance, December 31, 2007

  $ 101      $ 24   $ 10      $   $ 41,688      $ 7,191      $ (7,517   $ (56   $ 149      $ 41,489   

Cumulative effect related to change in accounting principle on January 1, 2008

                (132           (132

Stock compensation plans

              148        (47           101   

Repurchase and retirement of common stock

          (1       (1,123     (877           (2,001

Employee stock purchase plan

              35                35   

Share exchange

              165        (165             

Dividends declared

                (367           (367

Other comprehensive income (loss)

                    (3       (3

Sale (purchase) of subsidiary shares to (from) noncontrolling interests, net

    111                     

Contributions from and (distributions to) noncontrolling interests

    (2                   (4     (4

Net income (loss)

    (11                                 1,364                        4        1,368   

Balance, June 30, 2008

  $ 199      $ 24   $ 9      $   $ 40,913      $ 6,967      $ (7,517   $ (59   $ 149      $ 40,486   

Balance, December 31, 2008

  $ 171      $ 24   $ 9      $   $ 40,620      $ 7,427      $ (7,517   $ (113   $ 126      $ 40,576   

Stock compensation plans

              51        1              52   

Repurchase and retirement of common stock

              (173     (42           (215

Employee stock purchase plan

              33                33   

Dividends declared

                (389           (389

Other comprehensive income (loss)

                    33          33   

Purchases of subsidiary shares from noncontrolling interests

              30              (35     (5

Contributions from and (distributions to) noncontrolling interests

    3                      (12     (12

Net income (loss)

    (7                                 1,739                        2        1,741   

Balance, June 30, 2009

  $ 167      $ 24   $ 9      $   $ 40,561      $ 8,736      $ (7,517   $ (80   $ 81      $ 41,814   

See notes to condensed consolidated financial statements.

 

 

5


Table of Contents

Condensed Consolidated Statement of Comprehensive Income (Unaudited)

 

    Three Months Ended
June 30
    Six Months Ended
June 30
 
(in millions)       2009           2008             2009           2008      

Net income from consolidated operations

  $ 956   $ 619      $ 1,734   $ 1,357   

Holding gains (losses) during the period, net of deferred taxes of $(2), $3, $(1) and $6

    5     (5     4     (10

Reclassification adjustments for losses (gains) included in net income attributable to Comcast Corporation, net of deferred taxes of $(2), $(1), $(14) and $(3)

    3     2        25     6   

Employee benefit obligations, net of deferred taxes

                   (1

Cumulative translation adjustments

    5     1        4     2   

Comprehensive income

    969     617        1,767     1,354   

Net (income) loss attributable to noncontrolling interests

    11     13        5     7   

Comprehensive income attributable to Comcast Corporation

  $ 980   $ 630      $ 1,772   $ 1,361   

See notes to condensed consolidated financial statements.

 

6


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. We also evaluate events or transactions that occur after the balance sheet date but before the financial statements are issued (“subsequent events”) to determine if financial statement recognition or additional disclosure is required. 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.

Reclassifications have been made to the prior year’s consolidated financial statements between operating expenses and selling, general and administrative expenses to conform to classifications used in 2009.

Note 2: Recent Accounting Pronouncements

Noncontrolling Interests in Consolidated Financial Statements

In November 2007, the Financial Accounting Standards Board (“FASB”) issued a new accounting standard that provides guidance on the accounting and reporting requirements for noncontrolling interests in consolidated financial statements. The guidance requires noncontrolling interests (previously referred to as minority interests) that are not redeemable to be separately reported in the equity section of an entity’s consolidated balance sheet. Redeemable noncontrolling interests continue to be presented outside of equity. The guidance establishes accounting and reporting standards for (i) ownership interests in subsidiaries held by parties other than the parent, (ii) the amount of consolidated net income attributable to the parent and to the noncontrolling interests, (iii) changes in a parent’s ownership interest and (iv) the valuation of retained noncontrolling equity investments when a subsidiary is deconsolidated. In addition, it establishes disclosure requirements, including new financial statement captions that clearly distinguish between controlling and noncontrolling interests. These include a separate presentation of net income attributable to controlling and noncontrolling interests with the combined amounts labeled as “Net income from consolidated operations” in our statement of operations. Under the guidance, “Net income from consolidated operations” is comparable to what was previously presented as “Income from continuing operations before minority interest” and “Net income attributable to Comcast Corporation” is comparable to what was previously presented as “Net income.” We adopted the standard on January 1, 2009, at which time we applied the new presentation and disclosure requirements.

The new accounting standard requires the retrospective application of the new financial statement captions. The tables below reflect the revised presentations for our balance sheets as of December 31, 2008 and 2007 and consolidated statements of operations for the years ended December 31, 2008, 2007 and 2006.

Revised Balance Sheet Captions

 

December 31 (in millions)   2008    2007

Redeemable noncontrolling interests

  $ 171    $ 101

Noncontrolling interests (in equity)

  $ 126    $ 149

 

7


Table of Contents

Revised Statement of Operations Captions

 

Year Ended December 31 (in millions, except per share data)   2008    2007    2006  

Net income from consolidated operations

  $ 2,525    $ 2,549    $ 2,545   

Net (income) loss attributable to noncontrolling interests

    22      38      (12

Net income attributable to Comcast Corporation

  $ 2,547    $ 2,587    $ 2,533   

Basic earnings per common share attributable to Comcast Corporation stockholders

  $ 0.87    $ 0.84    $ 0.80   

Diluted earnings per common share attributable to Comcast Corporation stockholders

  $ 0.86    $ 0.83    $ 0.79   

See Note 7 for further details on our noncontrolling interests.

Consolidation of Variable Interest Entities

In June 2009, the FASB amended the accounting guidance related to the consolidation of variable interest entities. The amended guidance (i) requires ongoing reassessments of whether an enterprise is the primary beneficiary of a variable interest entity, (ii) eliminates the quantitative approach previously required for determining the primary beneficiary of a variable interest entity and replaces it with a qualitative approach and (iii) requires additional disclosure about an enterprise’s involvement in variable interest entities. The new standard will be effective for us as of January 1, 2010. We are currently assessing the impact this standard will have on our consolidated financial statements.

Subsequent Events

In May 2009, the FASB issued a new accounting standard on the accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued or are available to be issued (“subsequent events”). The standard requires disclosure of the date through which an entity has evaluated subsequent events and whether that date represents the date the financial statements were issued or were available to be issued. This disclosure is intended to alert all users of the financial statements that an entity has not evaluated subsequent events after that date in the set of financial statements being presented. The standard is effective for us as of June 30, 2009. Accordingly, we have evaluated subsequent events through the issuance of these financial statements on August 6, 2009. The adoption of this standard did not have a material impact on our consolidated financial statements.

Note 3: Earnings Per Share

Basic earnings per common share attributable to Comcast Corporation stockholders (“Basic EPS”) is computed by dividing net income attributable to Comcast Corporation by the weighted-average number of common shares outstanding during the period.

Our potentially dilutive securities include potential common shares related to our stock options and our restricted share units (“RSUs”). Diluted earnings per common share attributable to Comcast Corporation stockholders (“Diluted EPS”) considers the impact of potentially dilutive securities using the treasury stock method, except in periods in which there is a loss, because the inclusion of the potential common shares would have an antidilutive effect.

Diluted EPS for the three and six months ended June 30, 2009 excluded approximately 204 million and 196 million, respectively, of potential common shares related to our share-based compensation plans, because their inclusion would have had an antidilutive effect. For the three and six months ended June 30, 2008, Diluted EPS excluded approximately 146 million and 165 million potential common shares, respectively.

 

8


Table of Contents

Computation of Diluted EPS

 

    Three Months Ended June 30
    2009    2008
(in millions, except per share data)   Net Income
Attributable to
Comcast
Corporation
   Shares    Per Share
Amount
   Net Income
Attributable to
Comcast
Corporation
   Shares    Per Share
Amount

Basic EPS attributable to Comcast Corporation stockholders

  $ 967    2,887    $ 0.33    $ 632    2,957    $ 0.21

Effect of dilutive securities:

                

Assumed exercise or issuance of shares related to stock plans

         4                  13       

Diluted EPS attributable to Comcast Corporation stockholders

  $ 967    2,891    $ 0.33    $ 632    2,970    $ 0.21

 

    Six Months Ended June 30
    2009    2008
(in millions, except per share data)   Net Income
Attributable to
Comcast
Corporation
   Shares    Per Share
Amount
   Net Income
Attributable to
Comcast
Corporation
   Shares    Per Share
Amount

Basic EPS attributable to Comcast Corporation stockholders

  $ 1,739    2,886    $ 0.60    $ 1,364    2,983    $ 0.46

Effect of dilutive securities:

                

Assumed exercise or issuance of shares related to stock plans

         7                  12       

Diluted EPS attributable to Comcast Corporation stockholders

  $ 1,739    2,893    $ 0.60    $ 1,364    2,995    $ 0.46

Note 4: Investments

 

(in millions)   June 30,
2009
   December 31,
2008

Fair value method

  $ 1,328    $ 943

Equity method, primarily SpectrumCo and Clearwire

    2,205      2,177

Cost method, primarily AirTouch redeemable preferred shares

    1,719      1,722

Total investments

    5,252      4,842

Less: Current investments

    62      59

Noncurrent investments

  $ 5,190    $ 4,783

As of June 30, 2009 and December 31, 2008, the estimated fair value of the AirTouch preferred stock was $1.469 billion and $1.357 billion, respectively.

Components of Investment Income (Loss), Net

 

    Three Months Ended
June 30
    Six Months Ended
June 30
 
(in millions)       2009             2008             2009             2008      

Gains on sales and exchanges of investments, net

  $ 1      $ 2      $ 4      $ 13   

Investment impairment losses

    (3     —          (19     (2

Unrealized gains (losses) on securities underlying prepaid forward sale agreements

    342        (26     380        (290

Mark to market adjustments on derivative component of prepaid forward sale agreements

    (311     (21     (340     273   

Mark to market adjustments on derivative component of ZONES

    (5     (43     4        (22

Interest and dividend income

    27        36        54        73   

Other

    6        (18     (13     (36

Investment income (loss), net

  $ 57      $ (70   $ 70      $ 9   

 

9


Table of Contents

Note 5: Long-Term Debt

Borrowings

In June 2009, we issued $700 million principal amount of 5.70% notes due 2019 and $800 million principal amount of 6.55% notes due 2039. In June 2009, we issued $1.0 billion face amount of commercial paper. The net proceeds of these issuances, together with cash on hand, will be used for the purchase of notes included in the cash tender offer, as described below, the repayment of outstanding borrowings under our revolving credit facility, the repayment of debt at its maturity, and for working capital and general corporate purposes.

Redemptions and Repayments

In June 2009, we repaid $600 million of the amount outstanding under our revolving credit facility due 2013 and repaid at the maturity $750 million principal amount of our 6.875% notes due 2009.

In June 2009, we initiated a cash tender offer to purchase up to $1.3 billion aggregate principal amount of certain of our outstanding notes. As of June 30, 2009, approximately $1.7 billion aggregate principal amount of these notes was tendered to us. We accepted tenders for approximately $1.3 billion principal amount of these notes consisting of approximately $621 million principal amount of our 8.375% notes due 2013, $367 million principal amount of our 7.125% notes due 2013 and $312 million principal amount of our 7.875% senior debentures due 2013. The tender offer settled in July 2009. As of June 30, 2009, $1.3 billion was reclassified from long-term debt to current portion of long-term debt in our condensed consolidated balance sheet.

Note 6: Derivative Financial Instruments and Fair Value Measurements

We use derivative financial instruments to manage our exposure to the risks associated with fluctuations in interest rates and equity prices. Our objective is to manage the financial and operational exposures arising from these risks by offsetting gains and losses on the underlying exposures with gains and losses on the derivatives used to economically hedge them. Our risk management control system is used to assist us in monitoring the hedging program, derivative positions and hedging strategies. Hedges that receive designated hedge accounting treatment are evaluated for effectiveness at the time they are designated, as well as throughout the hedging period. We do not engage in any speculative or leveraged derivative transactions. All derivative transactions must comply with a derivatives policy authorized by our Board of Directors.

We manage the credit risks associated with our derivative financial instruments through the evaluation and monitoring of the creditworthiness of the counterparties. Although we may be exposed to losses in the event of nonperformance by the counterparties, we do not expect such losses, if any, to be significant. The valuation adjustments we recorded against the derivative assets to reflect counterparty credit risk are not significant.

We periodically examine the instruments we use to hedge exposure to interest rate and equity price risks to ensure that the instruments are matched with underlying assets or liabilities, to reduce our risks related to changes in interest rates or equity prices and, through market value and sensitivity analysis, to maintain a high correlation to the risk inherent in the hedged item. For those instruments that do not meet the above conditions, and for those derivative instruments that are not designated as a hedge, changes in fair value are recognized on a current basis in earnings.

As of June 30, 2009, our derivatives designated as hedges include (i) the derivative component of our prepaid forward sale agreements, which are recorded to other noncurrent liabilities, and (ii) our interest rate swap agreements, which are recorded to other noncurrent assets or liabilities. Changes in the fair value of the derivative component of our prepaid forward sale agreements are recorded to investment income (loss). Changes in the fair value of the interest rate swap agreements are recorded to interest expense. These amounts are completely offset by changes in the fair value of the related debt because the swaps are deemed to be 100% effective. The difference between variable and fixed rates to be paid or received under the terms of the interest rate swap agreements is accrued as interest rates change and recognized as an adjustment to interest expense for the related debt.

As of June 30, 2009, our derivatives not designated as hedges include the derivative component of our ZONES debt, which are recorded to long-term debt.

 

10


Table of Contents

As of June 30, 2009, our debt had an estimated fair value of $34.160 billion. The estimated fair value of our publicly traded debt is based on quoted market values for the debt. To estimate the fair value of debt for which there are no quoted market prices, we use interest rates available to us for debt with similar terms and remaining maturities.

Recurring Fair Value Measures

 

    Fair Value as of June 30, 2009     December 31, 2008  
(in millions)   Level 1    Level 2     Level 3    Total     Total  

Assets

           

Trading securities

  $ 1,312    $  —      $  —    $ 1,312      $ 932   

Available-for-sale securities

    14                  14        10   

Equity warrants

                1      1        1   

Interest rate swap agreements

         146             146        291   
    $ 1,326    $ 146      $ 1    $ 1,473      $ 1,234   

Liabilities

           

Derivative component of ZONES

  $    $ 19      $    $ 19      $ 23   

Derivative component of prepaid forward sale agreements

         (126          (126     (466

Interest rate swap agreements

         7             7        1   
    $    $ (100   $    $ (100   $ (442

Amount of Gain (Loss) Recognized in Income on Derivative Instruments

 

(in millions)   Three Months Ended
June 30, 2009
    Six Months Ended
June 30, 2009
 

Designated Fair Value Hedging Relationships

   

Interest Income (Expense):

   

Interest rate swap agreements (fixed-to-variable)

  $ (113   $ (151

Long-term debt—interest rate swap agreements (fixed-to-variable)

    113        151   

Investment Income (Expense):

   

Mark to market adjustments on derivative component of prepaid forward sale agreements

    (311     (340

Unrealized gains (losses) on securities underlying prepaid forward sale agreements

    342        380   

Gain (Loss) on Fair Value Hedging Relationships

    31        40   

Nondesignated

   

Investment Income (Expense):

   

Mark to market adjustments on derivative component of ZONES

    (5     4   

Total Gain (Loss)

  $ 26      $ 44   

The difference between variable and fixed rates received under the terms of our interest rate swap agreements reduced interest expense by approximately $25 million and $48 million during the three and six months ended June 30, 2009, respectively.

Note 7: Noncontrolling Interests

Certain of our subsidiaries that we consolidate are not wholly owned. Some of the agreements with the minority partners of these subsidiaries contain redemption features that are redeemable either (i) at the option of the holder or (ii) upon the occurrence of an event that is not solely within our control. If securities were to be redeemed under these agreements, we would generally be required to purchase the security at fair value on the date of redemption. In accordance with the accounting guidance for the classification and measurement of redeemable securities, these securities are presented on the balance sheet outside of equity under the caption “Redeemable noncontrolling interests.” Noncontrolling interests that do not contain such redemption features are presented in equity.

 

11


Table of Contents

During the six months ended June 30, 2009, we purchased all of the noncontrolling interest of one of our technology ventures, which had a carrying value of approximately $35 million, for approximately $5 million and rights to existing intellectual property. The difference between the amount paid and the carrying value of the noncontrolling interest resulted in an increase of approximately $30 million to additional paid-in capital of Comcast Corporation.

The table below presents the changes in equity resulting from net income attributable to Comcast Corporation and transfers to or from noncontrolling interests.

 

(in millions)   Six Months Ended
June 30, 2009

Net income attributable to Comcast Corporation

  $ 1,739

Transfers from (to) noncontrolling interests:

 

Increase in Comcast Corporation additional paid-in capital resulting from the purchase of noncontrolling interest

    30

Change from net income attributable to Comcast Corporation and transfers from (to) noncontrolling interests

  $ 1,769

Note 8: 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 Class A common stock at a discount through payroll deductions.

In March 2009, we granted 29.5 million stock options and 10.0 million RSUs related to our annual management grant program. The fair values associated with these grants were $4.94 per stock option and $13.48 per RSU.

Recognized Share-Based Compensation Expense

 

    Three Months Ended
June 30
   Six Months Ended
June 30
(in millions)   2009    2008    2009    2008

Stock options

  $ 28    $ 24    $ 47    $ 44

Restricted share units

    27      23      40      43

Employee stock purchase plan

    2      3      7      8

Total

  $ 57    $ 50    $ 94    $ 95

As of June 30, 2009, there was $368 million and $340 million of unrecognized pretax compensation cost related to nonvested stock options and nonvested RSUs, respectively.

The employee cost associated with participation in the employee stock purchase plan was satisfied with payroll deductions of approximately $10 million and $27 million for the three and six months ended June 30, 2009, respectively. For the three and six months ended June 30, 2008, the employee cost was approximately $11 million and $28 million, respectively.

Accumulated Other Comprehensive Income (Loss)

The table below presents our accumulated other comprehensive income (loss), net of deferred taxes.

 

   

Six Months Ended

June 30

 
(in millions)       2009             2008      

Unrealized gains (losses) on marketable securities

  $ 27      $ 18   

Deferred gains (losses) on cash flow hedges

    (76     (105

Unrealized gains (losses) on employee benefit obligations

    (31     23   

Cumulative translation adjustments

           5   

Accumulated other comprehensive income (loss)

  $ (80   $ (59

 

 

12


Table of Contents

Deferred losses on cash flow hedges in the table above relate primarily to previous interest rate lock agreements. As of June 30, 2009, we expect $30 million of unrealized losses, $19 million net of deferred taxes, to be reclassified as an adjustment to interest expense over the next 12 months. These amounts include $14 million of deferred losses, $9 million net of deferred taxes, on cash flow hedges for which the related debt was extinguished in July 2009 in connection with the closing of the cash tender offer.

Note 9: Statement of Cash Flows—Supplemental Information

The table below presents our adjustments to reconcile net income from consolidated operations to net cash provided by operating activities.

 

    Six Months Ended
June 30
 
(in millions)       2009             2008      

Net income from consolidated operations

  $ 1,734      $ 1,357   

Adjustments to reconcile net income from consolidated operations to net cash provided by operating activities:

   

Depreciation

    2,786        2,761   

Amortization

    507        459   

Share-based compensation

    121        123   

Noncash interest expense (income), net

    81        132   

Equity in net (income) losses of affiliates, net

    27        39   

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

    (23     (234

Deferred income taxes

    394        403   

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

   

Change in accounts receivable, net

    (49     (7

Change in accounts payable and accrued expenses related to trade creditors

    (112     (69

Change in other operating assets and liabilities

    (353     (36

Net cash provided by operating activities

  $ 5,113      $ 4,928   

Cash Payments for Interest and Income Taxes

 

   

Three Months Ended

June 30

  

Six Months Ended

June 30

(in millions)       2009            2008            2009            2008    

Interest

  $ 399    $ 408    $ 1,063    $ 1,116

Income taxes

  $ 585    $ 335    $ 746    $ 355

Noncash Financing and Investing Activities

During the six months ended June 30, 2009, we:

 

   

recorded a liability of approximately $194 million for a quarterly cash dividend of $0.0675 per common share paid in July 2009, which is a noncash financing activity

 

 

   

recorded a liability of approximately $107 million for share repurchases that settled in July 2009, which is a noncash financing activity

 

 

   

acquired approximately $342 million of property and equipment and software that was accrued but unpaid, which is a noncash investing activity

 

Note 10: Commitments and Contingencies

Commitments

One of our subsidiaries supports debt compliance with respect to obligations of a cable system 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 this commitment. The total notional amount of our

 

13


Table of Contents

commitment was $410 million as of June 30, 2009, at which time there were no quoted market prices for similar agreements.

Contingencies

Antitrust Cases

We are defendants in two purported class actions originally filed in December 2003 in the United States District Courts for the District of Massachusetts and the Eastern District of Pennsylvania. The potential class in the Massachusetts case, which has been transferred to the Eastern District of Pennsylvania, 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.

Classes of Philadelphia Cluster and Chicago Cluster subscribers were certified in May 2007 and October 2007, respectively. In March 2009, as a result of a Third Circuit Court of Appeal decision clarifying the standards for class certification, the order certifying the Philadelphia Cluster class was vacated without prejudice to the plaintiffs filing a new motion. A hearing on the plaintiffs’ new motion, which was filed in April 2009, is scheduled for October 2009. The 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 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 defendants. 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), which preclude the distributor defendants from reselling channels to subscribers on an “unbundled” basis in violation of federal antitrust laws. The plaintiffs seek treble damages and injunctive relief requiring each distributor defendant to resell certain channels to its subscribers on an “unbundled” basis. In July 2009, the Central District issued a tentative ruling dismissing the plaintiffs’ complaint with prejudice. A final ruling is expected in the next several weeks. If the Central District issues a final ruling dismissing the plaintiffs’ complaint with prejudice, the plaintiffs may appeal to the Ninth Circuit Court of Appeals.

ERISA Litigation

We and several of our current officers have been named as defendants in a purported class action lawsuit filed in the United States District Court for the Eastern District of Pennsylvania 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 under the Employee Retirement Income Security Act of 1974 (ERISA) in managing the plan by allowing participants to continue to invest in the company stock account during a time in 2007 when we allegedly knew (but had not disclosed) that we would not meet our forecasted results. The plaintiff seeks unspecified damages. In June 2009, the plaintiff filed a motion to have the case certified as a class action and we filed a response opposing that motion.

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. Although we cannot predict the outcome of any of the actions described above or how the final resolution of any such actions would impact our results of operations or cash flows for any one period or our consolidated financial condition, the final disposition of any of the above actions is not expected to have a

 

14


Table of Contents

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. While 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, any litigation resulting from any such legal proceedings or claims could be time consuming, costly and injure our reputation.

Note 11: 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 in the table below.

 

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

Three months ended June 30, 2009

           

Revenue(g)

  $ 8,476    $ 384    $ 153      $ (75   $ 8,938

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

    3,501      113      (80     1        3,535

Depreciation and amortization

    1,594      48      26        (8     1,660

Operating income (loss)

    1,907      65      (106     9        1,875

Capital expenditures

    1,108      6      7               1,121

Three months ended June 30, 2008

           

Revenue(g)

  $ 8,100    $ 366    $ 142      $ (55   $ 8,553

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

    3,362      89      (98     (2     3,351

Depreciation and amortization

    1,537      45      27        (8     1,601

Operating income (loss)

    1,825      44      (125     6        1,750

Capital expenditures

    1,254      6      40               1,300

Six months ended June 30, 2009

           

Revenue(g)

  $ 16,825    $ 745    $ 361      $ (158   $ 17,773

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

    6,907      225      (151     (2     6,979

Depreciation and amortization

    3,156      97      56        (16     3,293

Operating income (loss)

    3,751      128      (207     14        3,686

Capital expenditures

    2,238      14      29               2,281

Six months ended June 30, 2008

           

Revenue(g)

  $ 16,016    $ 729    $ 325      $ (128   $ 16,942

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

    6,504      202      (180     (1     6,525

Depreciation and amortization

    3,085      99      51        (15     3,220

Operating income (loss)

    3,419      103      (231     14        3,305

Capital expenditures

    2,609      10      112               2,731

 

(a)

For the three and six months ended June 30, 2009 and 2008, Cable segment revenue was derived from the following services:

 

15


Table of Contents
   

Three Months Ended

June 30

   

Six Months Ended

June 30

 
     2009     2008     2009     2008  

Video

  57.6   59.3   58.3   59.8

High-speed Internet

  22.8      22.1      22.8      22.1   

Phone

  9.5      7.9      9.4      7.7   

Advertising

  3.8      5.0      3.5      4.7   

Franchise fees

  2.8      2.8      2.8      2.8   

Other

  3.5      2.9      3.2      2.9   

Total

  100   100   100   100

Subscription revenue received from customers 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 networks.

 

(c)

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

 

(d)

Corporate and Other activities include Comcast Interactive Media, Comcast Spectacor, 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 that 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 advertising and by selling the use of satellite feeds to our Programming segment

 

 

   

our Cable segment generates revenue by providing network services to Comcast Interactive Media

 

 

(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 before depreciation and amortization, excluding impairments 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. It is also unaffected by our capital structure or investment activities. We use this measure to evaluate our consolidated operating performance and 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 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) attributable to Comcast Corporation, net cash provided by operating activities or other measures of performance or liquidity reported in accordance with GAAP.

 

16


Table of Contents

Note 12: 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”), have fully and unconditionally guaranteed 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 the $211 million principal amount currently outstanding of Comcast Holdings’ ZONES due October 2029 and the $202 million principal amount currently outstanding of Comcast Holdings’ 10 5/8% senior subordinated debentures due 2012. Comcast Corporation does not guarantee the $71 million principal amount outstanding of Comcast Holdings’ ZONES due November 2029. We have included Comcast Holdings’ condensed consolidating financial information for all periods presented. Our condensed consolidating financial information is presented in the tables below.

Comcast Corporation

Condensed Consolidating Balance Sheet

June 30, 2009

 

(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

  $  —   $  —   $  —   $  —   $  —   $ 3,989   $  —      $ 3,989

Investments

                        62            62

Accounts receivable, net

                        1,677            1,677

Other current assets

    308     3                 498            809

Total current assets

    308     3                 6,226            6,537

Investments

                        5,190            5,190

Investments in and amounts due from subsidiaries eliminated upon consolidation

    74,946     35,048     44,299     47,066     27,024     5,240     (233,623    

Property and equipment, net

    312                     23,403            23,715

Franchise rights

                        59,446            59,446

Goodwill

                        14,928            14,928

Other intangible assets, net

    1                     4,296            4,297

Other noncurrent assets, net

    375     5     12         9     723            1,124

Total assets

  $ 75,942   $ 35,056   $ 44,311   $ 47,066   $ 27,033   $ 119,452   $ (233,623   $ 115,237

LIABILITIES AND EQUITY

               

Accounts payable and accrued expenses related to trade creditors

  $ 205   $ 3   $   $   $   $ 2,862   $      $ 3,070

Accrued expenses and other current liabilities

    921     288     72     87     130     1,822            3,320

Current portion of long-term debt

    2,809     364     625     317         52            4,167

Total current liabilities

    3,935     655     697     404     130     4,736            10,557

Long-term debt, less current portion

    20,593     2,137     3,180     2,359     328     273            28,870

Deferred income taxes

    8,067                 680     18,647            27,394

Other noncurrent liabilities

    1,614         2     4     171     4,644            6,435

Redeemable noncontrolling interests

                        167            167

Equity:

               

Common stock

    33                                33

Other stockholders’ equity

    41,700     32,264     40,432     44,299     25,724     90,904     (233,623     41,700

Total Comcast Corporation stockholders’ equity

    41,733     32,264     40,432     44,299     25,724     90,904     (233,623     41,733

Noncontrolling interests

                        81            81

Total equity

    41,733     32,264     40,432     44,299     25,724     90,985     (233,623     41,814

Total liabilities and equity

  $ 75,942   $ 35,056   $ 44,311   $ 47,066   $ 27,033   $ 119,452   $ (233,623   $ 115,237

 

17


Table of Contents

Comcast Corporation

Condensed Consolidating Balance Sheet

December 31, 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

  $  —   $  —   $  —   $  —   $  —   $ 1,195   $  —      $ 1,195

Investments

                        59            59

Accounts receivable, net

                        1,626            1,626

Other current assets

    171     8                 657            836

Total current assets

    171     8                 3,537            3,716

Investments

                        4,783            4,783

Investments in and amounts due from subsidiaries eliminated upon consolidation

    70,076     34,499     43,536     46,314     26,519     4,471     (225,415    

Property and equipment, net

    306                     24,138            24,444

Franchise rights

                        59,449            59,449

Goodwill

                        14,889            14,889

Other intangible assets, net

    1                     4,557            4,558

Other noncurrent assets, net

    603     7     14         17     537            1,178

Total assets

  $ 71,157   $ 34,514   $ 43,550   $ 46,314   $ 26,536   $ 116,361   $ (225,415   $ 113,017

LIABILITIES AND EQUITY

       

Accounts payable and accrued expenses related to trade creditors

  $ 196   $   $   $   $   $ 3,197   $      $ 3,393

Accrued expenses and other current liabilities

    810     224     73     87     129     1,945            3,268

Current portion of long-term debt

    1,242     1,006                 30            2,278

Total current liabilities

    2,248     1,230     73     87     129     5,172            8,939

Long-term debt, less current portion

    19,839     2,294     4,462     2,691     610     282            30,178

Deferred income taxes

    7,160                 656     19,166            26,982

Other noncurrent liabilities

    1,460                 119     4,592            6,171

Redeemable noncontrolling interests

                        171            171

Equity:

               

Common stock

    33                                33

Other stockholders’ equity

    40,417     30,990     39,015     43,536     25,022     86,852     (225,415     40,417

Total Comcast Corporation stockholders’ equity

    40,450     30,990     39,015     43,536     25,022     86,852     (225,415     40,450

Noncontrolling interests

                        126            126

Total equity

    40,450     30,990     39,015     43,536     25,022     86,978     (225,415     40,576

Total liabilities and equity

  $ 71,157   $ 34,514   $ 43,550   $ 46,314   $ 26,536   $ 116,361   $ (225,415   $ 113,017

 

18


Table of Contents

Comcast Corporation

Condensed Consolidating Statement of Operations

For the Three Months Ended June 30, 2009

 

(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

  $      $      $      $      $      $ 8,938      $      $ 8,938   

Management fee revenue

    193        61        108        108                      (470       
      193        61        108        108               8,938        (470     8,938   

Costs and Expenses:

               

Operating (excluding depreciation and amortization)

                                       3,545               3,545   

Selling, general and administrative

    82        61        108        108        14        1,955        (470     1,858   

Depreciation

    7                                    1,399               1,406   

Amortization

                                       254               254   
      89        61        108        108        14        7,153        (470     7,063   

Operating income (loss)

    104                             (14     1,785               1,875   

Other Income (Expense):

               

Interest expense

    (315     (56     (84     (50     (8     (38            (551

Investment income (loss), net

                                (4     61               57   

Equity in net income (losses) of affiliates, net

    1,104        440        806        839        450        (59     (3,593     (13

Other income (expense)

                                       12               12   
      789        384        722        789        438        (24     (3,593     (495

Income (loss) before income taxes

    893        384        722        789        424        1,761        (3,593     1,380   

Income tax (expense) benefit

    74        20        29        17        10        (574            (424

Net income (loss) from consolidated operations

    967        404        751        806        434        1,187        (3,593     956   

Net (income) loss attributable to noncontrolling interests

                                       11               11   

Net income (loss) attributable to Comcast Corporation

  $ 967      $ 404      $ 751      $ 806      $ 434      $ 1,198      $ (3,593   $ 967   

 

19


Table of Contents

Comcast Corporation

Condensed Consolidating Statement of Operations

For the Three Months Ended June 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

  $      $      $      $      $      $ 8,553      $      $ 8,553   

Management fee revenue

    192        56        103        103                      (454       
      192        56        103        103               8,553        (454     8,553   

Costs and Expenses:

               

Operating (excluding depreciation and amortization)

                                       3,334               3,334   

Selling, general and administrative

    93        56        103        103        22        1,945        (454     1,868   

Depreciation

    5                                    1,366               1,371   

Amortization

                                       230               230   
      98        56        103        103        22        6,875        (454     6,803   

Operating income (loss)

    94                             (22     1,678               1,750   

Other Income (Expense):

               

Interest expense

    (320     (77     (82     (54     (52     (33            (618

Investment income (loss), net

    (2                          (43     (25            (70

Equity in net income (losses) of affiliates, net

    781        370        639        673        296        22        (2,785     (4

Other income (expense)

    (1                                 17               16   
      458        293        557        619        201        (19     (2,785     (676

Income (loss) before income taxes

    552        293        557        619        179        1,659        (2,785     1,074   

Income tax (expense) benefit

    80        29        29        20        41        (654            (455

Net income (loss) from consolidated operations

    632        322        586        639        220        1,005        (2,785     619   

Net (income) loss attributable to noncontrolling interests

                                       13               13   

Net income (loss) attributable to Comcast Corporation

  $ 632      $ 322      $ 586      $ 639      $ 220      $ 1,018      $ (2,785   $ 632   

 

20


Table of Contents

Comcast Corporation

Condensed Consolidating Statement of Operations

For the Six Months Ended June 30, 2009

 

(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

  $  —      $  —      $  —      $  —      $  —      $ 17,773      $  —      $ 17,773   

Management fee revenue

    384        121        215        215                      (935       
      384        121        215        215               17,773        (935     17,773   

Costs and Expenses:

               

Operating (excluding depreciation and amortization)

                                       7,110               7,110   

Selling, general and administrative

    160        121        215        215        28        3,880        (935     3,684   

Depreciation

    14                                    2,772               2,786   

Amortization

                                       507               507   
      174        121        215        215        28        14,269        (935     14,087   

Operating income (loss)

    210                             (28     3,504               3,686   

Other Income (Expense):

               

Interest expense

    (634     (114     (194     (100     (10     (69            (1,121

Investment income (loss), net

    (7                          5        72               70   

Equity in net income (losses) of affiliates, net

    2,019        807        1,518        1,583        801        (95     (6,660     (27

Other income (expense)

                                       11               11   
      1,378        693        1,324        1,483        796        (81     (6,660     (1,067

Income (loss) before income taxes

    1,588        693        1,324        1,483        768        3,423        (6,660     2,619   

Income tax (expense) benefit

    151        40        68        35        12        (1,191            (885

Net income (loss) from consolidated operations

    1,739        733        1,392        1,518        780        2,232        (6,660     1,734   

Net (income) loss attributable to noncontrolling interests

                                       5               5   

Net income (loss) attributable to Comcast Corporation

  $ 1,739      $ 733      $ 1,392      $ 1,518      $ 780      $ 2,237      $ (6,660   $ 1,739   

 

21


Table of Contents

Comcast Corporation

Condensed Consolidating Statement of Operations

For the Six Months Ended June 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

  $  —      $  —      $  —      $  —      $  —      $ 16,942      $  —      $ 16,942   

Management fee revenue

    360        109        202        202                      (873       
      360        109        202        202               16,942        (873     16,942   

Costs and Expenses:

               

Operating (excluding depreciation and amortization)

                                       6,695               6,695   

Selling, general and administrative

    177        109        202        202        26        3,879        (873     3,722   

Depreciation

    10                                    2,751               2,761   

Amortization

                                       459               459   
      187        109        202        202        26        13,784        (873     13,637   

Operating income (loss)

    173                             (26     3,158               3,305   

Other Income (Expense):

               

Interest expense

    (643     (159     (162     (110     (95     (70            (1,239

Investment income (loss), net

    (9                          (22     40               9   

Equity in net income (losses) of affiliates, net

    1,676        777        1,298        1,369        690        (55     (5,794     (39

Other income (expense)

    (1                                 285               284   
      1,023        618        1,136        1,259        573        200        (5,794     (985

Income (loss) before income taxes

    1,196        618        1,136        1,259        547        3,358        (5,794     2,320   

Income tax (expense) benefit

    168        56        57        39        50        (1,333            (963

Net income (loss) from consolidated operations

    1,364        674        1,193        1,298        597        2,025        (5,794     1,357   

Net (income) loss attributable to noncontrolling interests

                                       7               7   

Net income (loss) attributable to Comcast Corporation

  $ 1,364      $ 674      $ 1,193      $ 1,298      $ 597      $ 2,032      $ (5,794   $ 1,364   

 

22


Table of Contents

Comcast Corporation

Condensed Consolidating Statement of Cash Flows

For the Six Months Ended June 30, 2009

 

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

Net cash provided by (used in) operating activities

  $ 155      $ 2      $ (87   $ (72   $ 28      $ 5,087      $  —   $ 5,113   

Financing Activities:

               

Proceeds from borrowings

    2,492                                    30            2,522   

Repurchases and repayments of debt

    (33     (793     (655            (262     (24         (1,767

Repurchases of common stock

    (108                                            (108

Dividends paid

    (375                                            (375

Issuances of common stock

    1                                               1   

Other

    (10            (4                   (8         (22

Net cash provided by (used in) financing activities

    1,967        (793     (659            (262     (2         251   

Investing Activities:

               

Net transactions with affiliates

    (2,100     791        746        72        234        257              

Capital expenditures

    (22                                 (2,259         (2,281

Cash paid for intangible assets

                                       (241         (241

Acquisitions, net of cash acquired

                                       (27         (27

Proceeds from sales of investments

                                       16            16   

Purchases of investments

                                       (67         (67

Other

                                       30            30   

Net cash provided by (used in) investing activities

    (2,122     791        746        72        234        (2,291         (2,570

Increase (decrease) in cash and cash equivalents

                                       2,794            2,794   

Cash and cash equivalents, beginning of period

                                       1,195            1,195   

Cash and cash equivalents, end of period

  $  —      $  —      $  —      $  —      $  —      $ 3,989      $  —   $ 3,989   

 

23


Table of Contents

Comcast Corporation

Condensed Consolidating Statement of Cash Flows

For the Six Months Ended June 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
 

Net cash provided by (used in) operating activities

  $ 13      $ (103   $ (94   $ (85   $ 61      $ 5,136      $  —   $ 4,928   

Financing Activities:

               

Proceeds from borrowings

    1,998                                    11            2,009   

Repurchases and repayments of debt

    (300     (350                   (154     (27         (831

Repurchases of common stock

    (1,979                                            (1,979

Dividends paid

    (185                                            (185

Issuances of common stock

    42                                               42   

Other

    (3                          (53     (79         (135

Net cash provided by (used in) financing activities

    (427     (350                   (207     (95         (1,079

Investing Activities:

               

Net transactions with affiliates

    556        453        94        85        146        (1,334           

Capital expenditures

    (104                                 (2,627         (2,731

Cash paid for intangible assets

                                       (245         (245

Acquisitions, net of cash acquired

                                       (331         (331

Proceeds from sales of investments

                                       320            320   

Purchases of investments

                                       (41         (41

Other

    (38                                 21            (17

Net cash provided by (used in) investing activities

    414        453        94        85        146        (4,237         (3,045

Increase (decrease) in cash and cash equivalents

                                       804            804   

Cash and cash equivalents, beginning of period

                                       963            963   

Cash and cash equivalents, end of period

  $      $      $      $      $      $ 1,767      $  —   $ 1,767   

 

24


Table of Contents

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

Overview

We are the nation’s leading provider of cable services, offering a variety of entertainment, information and communications services to residential and commercial customers. As of June 30, 2009, our cable systems served approximately 23.9 million video customers, 15.3 million high-speed Internet customers and 7.0 million phone customers and passed over 50.9 million homes in 39 states and the District of Columbia. We report the results of these operations as our Cable segment, which generates approximately 95% of our revenue. Our Cable segment generates revenue primarily through subscriptions to our video, high-speed Internet and phone services (“cable services”). Other Cable segment revenue sources include advertising and the operation of our regional sports networks. Our other reportable segment, Programming, consists primarily of our consolidated national programming networks, including E!, Golf Channel, VERSUS, G4 and Style. Revenue from our Programming segment is generated primarily from the sale of advertising, from monthly per subscriber license fees paid by multichannel video providers and from licensing our programming internationally.

Highlights and business developments for the six months ended June 30, 2009 include the following:

 

   

an increase in consolidated revenue of 4.9% to approximately $17.8 billion and an increase in consolidated operating income of 11.5% to approximately $3.7 billion compared to the same period in 2008

 

 

   

an increase in Cable segment revenue of 5.1% to approximately $16.8 billion and an increase in operating income before depreciation and amortization of 6.2% to approximately $6.9 billion compared to the same period in 2008

 

 

   

the addition of approximately 393,000 high-speed Internet customers, approximately 531,000 digital phone customers, a decrease of approximately 292,000 video customers and the addition or upgrade of approximately 538,000 digital video customers

 

 

   

a reduction in Cable segment capital expenditures of 14.2% to approximately $2.2 billion compared to the same period in 2008

 

 

   

the repurchase of approximately 15.5 million shares of our Class A and Class A Special common stock under our share repurchase authorization for approximately $215 million

 

 

   

the initiation of a cash tender offer to repurchase $1.3 billion aggregate principal amount of our outstanding notes using proceeds from borrowings and cash from operations

 

 

25


Table of Contents

Consolidated Operating Results

 

   

Three Months Ended

June 30

   

Increase/

(Decrease)

   

Six Months Ended

June 30

   

Increase/

(Decrease)

 
(in millions)       2009             2008                    2009             2008             

Revenue

  $ 8,938      $ 8,553      4.5   $ 17,773      $ 16,942      4.9

Costs and Expenses:

           

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

    5,403        5,202      3.8        10,794        10,417      3.6   

Depreciation

    1,406        1,371      2.6        2,786        2,761      0.9   

Amortization

    254        230      10.6        507        459      10.4   

Operating income

    1,875        1,750      7.1        3,686        3,305      11.5   

Other income (expense) items, net

    (495     (676   (26.8     (1,067     (985   8.3   

Income before income taxes

    1,380        1,074      28.6        2,619        2,320      12.9   

Income tax expense

    (424     (455   (6.7     (885     (963   (8.1

Net income from consolidated operations

    956        619      54.5        1,734        1,357      27.8   

Net (income) loss attributable to noncontrolling interests

    11        13      (15.4     5        7      (28.6

Net income attributable to Comcast Corporation

  $ 967      $ 632      53.0   $ 1,739      $ 1,364      27.5

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

Consolidated Revenue

Our Cable segment and Programming segment accounted for substantially all of the increases in consolidated revenue for the three and six months ended June 30, 2009 compared to the same periods in 2008. Our other business activities consist primarily of Comcast Interactive Media and Comcast Spectacor. Cable segment revenue and Programming segment revenue are discussed separately in “Segment Operating Results.”

Consolidated Operating, Selling, General and Administrative Expenses

Our Cable segment accounted for substantially all of the increases in consolidated operating, selling, general and administrative expenses for the three and six months ended June 30, 2009 compared to the same periods in 2008. The remaining changes related to our other business activities, primarily growth in our Comcast Interactive Media business and Comcast Spectacor. Cable segment and Programming segment operating, selling, general and administrative expenses are discussed separately in “Segment Operating Results.”

Consolidated Depreciation and Amortization

Depreciation expense for the three and six months ended June 30, 2009 compared to the same periods in 2008 increased slightly primarily due to capital expenditures.

The increases in amortization expense for the three and six months ended June 30, 2009 compared to the same periods in 2008 were primarily due to increases in software intangibles.

Segment Operating Results

Our segment operating results are presented based on how we assess operating performance and internally report financial information. To measure the performance of our operating segments, we use operating income before depreciation and amortization, excluding impairments 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 and 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

 

26


Table of Contents

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 11 to our condensed consolidated financial statements). This measure should not be considered a substitute for operating income (loss), net income (loss) attributable to Comcast Corporation, net cash provided by operating activities, or other measures of performance or liquidity we have reported in accordance with GAAP.

Cable Segment Operating Results

 

    Three Months Ended
June 30
   Increase/(Decrease)  
(in millions)       2009            2008            $             %      

Video(a)

  $ 4,884    $ 4,800    $ 84      1.7

High-speed Internet

    1,929      1,792      137      7.7   

Phone

    801      640      161      25.3   

Advertising(a)

    325      405      (80   (19.6

Other(a)

    299      236      63      26.0   

Franchise fees

    238      227      11      4.9   

Revenue

    8,476      8,100      376      4.6   

Operating expenses(a)

    3,350      3,141      209      6.7   

Selling, general and administrative expenses(a)

    1,625      1,597      28      1.8   

Operating income before depreciation and amortization

  $ 3,501    $ 3,362    $ 139      4.1

 

    Six Months Ended
June 30
   Increase/(Decrease)  
(in millions)       2009            2008