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Comcast Corporation - 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, 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 September 30, 2009, there were 2,062,064,242 shares of our Class A common stock, 783,174,865 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, 2009 and December 31, 2008 (Unaudited)    2
  Condensed Consolidated Statement of Operations for the Three and Nine Months Ended September 30, 2009 and 2008 (Unaudited)    3
  Condensed Consolidated Statement of Cash Flows for the Nine Months Ended September 30, 2009 and 2008 (Unaudited)    4
  Condensed Consolidated Statement of Changes in Equity for the Nine Months Ended September 30, 2009 and 2008 (Unaudited)    5
  Condensed Consolidated Statement of Comprehensive Income for the Three and Nine Months Ended September 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    33
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 6.

  Exhibits    34
SIGNATURES    35

 

 

This Quarterly Report on Form 10-Q is for the three and nine months ended September 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

 

 

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Table of Contents

PART I: FINANCIAL INFORMATION

ITEM 1: FINANCIAL STATEMENTS

Condensed Consolidated Balance Sheet

(Unaudited)

 

(in millions, except share data)   September 30,
2009
    December 31,
2008
 

ASSETS

   

Current Assets:

   

Cash and cash equivalents

  $ 862      $ 1,195   

Investments

    56        59   

Accounts receivable, less allowance for doubtful accounts of $188 and $190

    1,639        1,626   

Other current assets

    849        836   

Total current assets

    3,406        3,716   

Investments

    5,699        4,783   

Property and equipment, net of accumulated depreciation of $26,716 and $23,235

    23,605        24,444   

Franchise rights

    59,442        59,449   

Goodwill

    14,934        14,889   

Other intangible assets, net of accumulated amortization of $8,624 and $8,160

    4,209        4,558   

Other noncurrent assets, net

    1,168        1,178   

Total assets

  $ 112,463      $ 113,017   

LIABILITIES AND EQUITY

   

Current Liabilities:

   

Accounts payable and accrued expenses related to trade creditors

  $ 3,133      $ 3,393   

Accrued expenses and other current liabilities

    3,005        3,268   

Current portion of long-term debt

    954        2,278   

Total current liabilities

    7,092        8,939   

Long-term debt, less current portion

    28,493        30,178   

Deferred income taxes

    27,566        26,982   

Other noncurrent liabilities

    6,763        6,171   

Commitments and Contingencies (Note 11)

   

Redeemable noncontrolling interests

    168        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, 2,427,524,992 and 2,426,443,484; outstanding, 2,062,064,242 and 2,060,982,734

    24        24   

Class A Special common stock, $0.01 par value—authorized, 7,500,000,000 shares; issued, 854,109,629 and 881,145,954; outstanding 783,174,865 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

    40,451        40,620   

Retained earnings

    9,416        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)

    (72     (113

Total Comcast Corporation stockholders’ equity

    42,311        40,450   

Noncontrolling interests

    70        126   

Total equity

    42,381        40,576   

Total liabilities and equity

  $ 112,463      $ 113,017   

See notes to condensed consolidated financial statements.

 

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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)       2009             2008             2009             2008      

Revenue

  $ 8,802      $ 8,549      $ 26,575      $ 25,491   

Costs and Expenses:

       

Operating (excluding depreciation and amortization)

    3,490        3,345        10,600        10,040   

Selling, general and administrative

    1,986        1,967        5,670        5,689   

Depreciation

    1,362        1,332        4,148        4,093   

Amortization

    253        235        760        694   
      7,091        6,879        21,178        20,516   

Operating income

    1,711        1,670        5,397        4,975   

Other Income (Expense):

       

Interest expense

    (707     (601     (1,828     (1,840

Investment income (loss), net

    148        74        218        83   

Equity in net income (losses) of affiliates, net

    (17     3        (44     (36

Other income (expense)

    2        11        13        295   
      (574     (513     (1,641     (1,498

Income before income taxes

    1,137        1,157        3,756        3,477   

Income tax expense

    (203     (401     (1,088     (1,364

Net income from consolidated operations

    934        756        2,668        2,113   

Net (income) loss attributable to noncontrolling interests

    10        15        15        22   

Net income attributable to Comcast Corporation

  $ 944      $ 771      $ 2,683      $ 2,135   

Basic earnings per common share attributable to Comcast Corporation stockholders

  $ 0.33      $ 0.26      $ 0.93      $ 0.72   

Diluted earnings per common share attributable to Comcast Corporation stockholders

  $ 0.33      $ 0.26      $ 0.93      $ 0.72   

Dividends declared per common share attributable to Comcast Corporation stockholders

  $ 0.07      $ 0.06      $ 0.20      $ 0.19   

See notes to condensed consolidated financial statements.

 

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Table of Contents

Condensed Consolidated Statement of Cash Flows

(Unaudited)

 

    Nine Months Ended
September 30
 
(in millions)       2009             2008      

Net cash provided by operating activities

  $ 7,725      $ 7,373   

Financing Activities

   

Proceeds from borrowings

    1,843        3,513   

Repurchases and repayments of debt

    (4,709     (1,143

Repurchases of common stock

    (438     (2,800

Dividends paid

    (568     (367

Issuances of common stock

    1        53   

Other

    (186     (148

Net cash provided by (used in) financing activities

    (4,057     (892

Investing Activities

   

Capital expenditures

    (3,508     (4,037

Cash paid for intangible assets

    (383     (376

Acquisitions, net of cash acquired

    (36     (700

Proceeds from sales of investments

    31        452   

Purchases of investments

    (142     (67

Other

    37        (2

Net cash provided by (used in) investing activities

    (4,001     (4,730

Increase (decrease) in cash and cash equivalents

    (333     1,751   

Cash and cash equivalents, beginning of period

    1,195        963   

Cash and cash equivalents, end of period

  $ 862      $ 2,714   

See notes to condensed consolidated financial statements.

 

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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

              215        (48           167   

Repurchase and retirement of common stock

          (1       (1,562     (1,237           (2,800

Employee stock purchase plan

              49                49   

Share exchange

              166        (166             

Dividends declared

                (547           (547

Other comprehensive income (loss)

                    (8       (8

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

    88                     

Contributions from and (distributions to) noncontrolling interests

    (1                   (17     (17

Net income (loss)

    (19                                 2,135                        (3     2,132   

Balance, September 30, 2008

  $ 169      $ 24   $ 9      $   $ 40,556      $ 7,196      $ (7,517   $ (64   $ 129      $ 40,333   

Balance, December 31, 2008

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

Stock compensation plans

              108                108   

Repurchase and retirement of common stock

              (353     (112           (465

Employee stock purchase plan

              46                46   

Dividends declared

                (582           (582

Other comprehensive income (loss)

                    41          41   

Purchases of subsidiary shares from noncontrolling interests

              30              (35     (5

Contributions from and (distributions to) noncontrolling interests

    10                      (19     (19

Net income (loss)

    (13                                 2,683                        (2     2,681   

Balance, September 30, 2009

  $ 168      $ 24   $ 9      $   $ 40,451      $ 9,416      $ (7,517   $ (72   $ 70      $ 42,381   

See notes to condensed consolidated financial statements.

 

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Table of Contents

Condensed Consolidated Statement of Comprehensive Income (Unaudited)

 

    Three Months Ended
September 30
    Nine Months Ended
September 30
 
(in millions)       2009           2008             2009           2008      

Net income from consolidated operations

  $ 934   $ 756      $ 2,668   $ 2,113   

Holding gains (losses) during the period, net of deferred taxes of $(1), $3, $(2) and $9

    2     (6     6     (16

Reclassification adjustments for losses (gains) included in net income attributable to Comcast Corporation, net of deferred taxes of $(3), $(2), $(17) and $(5)

    6     4        31     10   

Employee benefit obligations, net of deferred taxes

        1              

Cumulative translation adjustments

        (4     4     (2

Comprehensive income

    942     751        2,709     2,105   

Net (income) loss attributable to noncontrolling interests

    10     15        15     22   

Comprehensive income attributable to Comcast Corporation

  $ 952   $ 766      $ 2,724   $ 2,127   

See notes to condensed consolidated financial statements.

 

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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 consolidated 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 condensed consolidated financial statements primarily 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

 

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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 updated the accounting standard related to the consolidation of variable interest entities. The updated standard (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 updated 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 was effective for us as of June 30, 2009. Accordingly, we have evaluated subsequent events through the issuance of these financial statements on November 4, 2009. The adoption of this standard did not have an 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 nine months ended September 30, 2009 excluded approximately 199 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 nine months ended September 30, 2008, Diluted EPS excluded approximately 142 million and 127 million potential common shares, respectively.

 

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Table of Contents

Computation of Diluted EPS

 

    Three Months Ended September 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

  $ 944    2,872    $ 0.33    $ 771    2,909    $ 0.26

Effect of dilutive securities:

                

Assumed exercise or issuance of shares related to stock plans

         5                  11       

Diluted EPS attributable to Comcast Corporation stockholders

  $ 944    2,877    $ 0.33    $ 771    2,920    $ 0.26

 

    Nine Months Ended September 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

  $ 2,683    2,882    $ 0.93    $ 2,135    2,958    $ 0.72

Effect of dilutive securities:

                

Assumed exercise or issuance of shares related to stock plans

         8                  15       

Diluted EPS attributable to Comcast Corporation stockholders

  $ 2,683    2,890    $ 0.93    $ 2,135    2,973    $ 0.72

Note 4: Investments

 

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

Fair value method

  $ 1,773    $ 943

Equity method, primarily SpectrumCo and Clearwire

    2,189      2,177

Cost method, primarily AirTouch redeemable preferred shares

    1,793      1,722

Total investments

    5,755      4,842

Less: Current investments

    56      59

Noncurrent investments

  $ 5,699    $ 4,783

As of September 30, 2009 and December 31, 2008, the estimated fair value of the AirTouch preferred stock was $1.541 billion and $1.357 billion, respectively.

Components of Investment Income (Loss), Net

 

    Three Months Ended
September 30
    Nine Months Ended
September 30
 
(in millions)     2009         2008         2009         2008    

Gains on sales and exchanges of investments, net

  $ 10      $      $ 14      $ 14   

Investment impairment losses

    (2     (3     (21     (5

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

    456        (122     836        (413

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

    (357     138        (697     411   

Mark to market adjustments on derivative component of ZONES

    2        49        6        27   

Interest and dividend income

    25        35        79        108   

Other

    14        (23     1        (59

Investment income (loss), net

  $ 148      $ 74      $ 218      $ 83   

 

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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. During the nine months ended September 30, 2009, we issued $300 million face amount of commercial paper, net of repayments. The net proceeds of these issuances, together with cash on hand, were used for the purchase of notes included in the cash tender offer, as described below, as well as for the repayment of outstanding borrowings under our revolving credit facility, the repayment of debt at its maturity as well as working capital and general corporate purposes.

Redemptions and Repayments

In June 2009, we repaid at maturity $750 million principal amount of our 6.875% notes due 2009. In July 2009, we repaid at maturity $1.2 billion principal amount of our floating rate notes due 2009.

In July 2009, we completed a cash tender to purchase $1.3 billion aggregate principal amount of certain of our outstanding 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. During the three months ended September 30, 2009, we recognized approximately $180 million of interest expense primarily associated with the premiums incurred in the tender offer.

During the nine months ended September 30, 2009, we repaid all $1.0 billion of amounts outstanding under our revolving credit facility due 2013.

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 September 30, 2009, our derivatives designated as hedges included (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 current or 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 our 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 September 30, 2009, our derivatives not designated as hedges included the derivative component of our ZONES debt, which is recorded to long-term debt.

 

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As of September 30, 2009, our debt had an estimated fair value of $32.153 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 September 30, 2009    December 31, 2008  
(in millions)   Level 1    Level 2    Level 3    Total    Total  

Assets

             

Trading securities

  $ 1,769    $  —    $  —    $ 1,769    $ 932   

Available-for-sale securities

    3                3      10   

Equity warrants

              1      1      1   

Interest rate swap agreements

         184           184      291   
    $ 1,772    $ 184    $ 1    $ 1,957    $ 1,234   

Liabilities

             

Derivative component of ZONES

  $    $ 16    $    $ 16    $ 23   

Derivative component of prepaid forward sale agreements

         231           231      (466

Interest rate swap agreements

         2           2      1   
    $    $ 249    $    $ 249    $ (442

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

 

(in millions)   Three Months Ended
September 30, 2009
    Nine Months Ended
September 30, 2009
 

Designated Fair Value Hedging Relationships

   

Interest Income (Expense):

   

Interest rate swap agreements (fixed-to-variable)

  $ 43      $ (108

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

    (43     108   

Investment Income (Expense):

   

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

    (357     (697

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

    456        836   

Gain (Loss) on Fair Value Hedging Relationships

    99        139   

Nondesignated

   

Investment Income (Expense):

   

Mark to market adjustments on derivative component of ZONES

    2        6   

Total Gain (Loss)

  $ 101      $ 145   

The difference between variable and fixed rates received under the terms of our interest rate swap agreements reduced interest expense by approximately $26 million and $74 million during the three and nine months ended September 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 whereby interests held by the minority partners 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 interests were to be redeemed under these agreements, we would generally be required to purchase the interests at fair value on the date of redemption. In accordance with the accounting guidance for the classification and measurement of redeemable interests, these interests 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.

 

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During the nine months ended September 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)   Nine Months Ended
September 30, 2009

Net income attributable to Comcast Corporation

  $ 2,683

Transfers from (to) noncontrolling interests:

 

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

    30

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

  $ 2,713

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
September 30
   Nine Months Ended
September 30
(in millions)       2009            2008            2009            2008    

Stock options

  $ 28    $ 29    $ 75    $ 73

Restricted share units

    29      27      69      70

Employee stock purchase plan

    3      4      10      12

Total

  $ 60    $ 60    $ 154    $ 155

As of September 30, 2009, there was $344 million and $318 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 $11 million and $38 million for the three and nine months ended September 30, 2009, respectively. For the three and nine months ended September 30, 2008, the employee cost was approximately $12 million and $40 million, respectively.

Accumulated Other Comprehensive Income (Loss)

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

 

September 30 (in millions)       2009             2008      

Unrealized gains (losses) on marketable securities

  $ 23      $ 12   

Deferred gains (losses) on cash flow hedges

    (64     (100

Unrealized gains (losses) on employee benefit obligations

    (31     23   

Cumulative translation adjustments

           1   

Accumulated other comprehensive income (loss)

  $ (72   $ (64

 

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Deferred losses on cash flow hedges in the table above relate primarily to previous interest rate lock agreements. As of September 30, 2009, we expect $16 million of unrealized losses, $10 million net of deferred taxes, to be reclassified as an adjustment to interest expense over the next 12 months.

Note 9: Income Taxes

Income tax expense for the three and nine months ended September 30, 2009 was reduced by approximately $251 million and $436 million, respectively, primarily due to the recognition of tax benefits associated with uncertain tax positions and related interest and certain corporate reorganizations (see Note 13). The primary impacts of these adjustments were reductions to our deferred income tax and other long-term liabilities. These adjustments also reduced our unrecognized tax benefits, which were approximately $1.2 billion as of September 30, 2009.

In October 2009, we reached tentative settlements with various taxing authorities that are expected to result in recognition of additional tax benefits and a further reduction of our unrecognized tax benefits in 2009.

Note 10: 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.

 

    Nine Months Ended
September 30
 
(in millions)   2009     2008  

Net income from consolidated operations

  $ 2,668      $ 2,113   

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

   

Depreciation

    4,148        4,093   

Amortization

    760        694   

Share-based compensation

    192        195   

Noncash interest expense (income), net

    125        164   

Equity in net (income) losses of affiliates, net

    44        36   

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

    (146     (287

Deferred income taxes

    572        609   

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

   

Change in accounts receivable, net

    (11     4   

Change in accounts payable and accrued expenses related to trade creditors

    (73     (21

Change in other operating assets and liabilities

    (554     (227

Net cash provided by operating activities

  $ 7,725      $ 7,373   

Cash Payments for Interest and Income Taxes

 

    Three Months Ended
September 30
   Nine Months Ended
September 30
(in millions)       2009            2008            2009            2008    

Interest

  $ 615    $ 679    $ 1,678    $ 1,795

Income taxes

  $ 194    $ 234    $ 940    $ 589

Noncash Financing and Investing Activities

During the nine months ended September 30, 2009, we:

 

   

recorded a liability of approximately $193 million for a quarterly cash dividend of $0.0675 per common share paid in October 2009, which is a noncash financing activity

 

 

   

recorded a liability of approximately $27 million for share repurchases that settled in October 2009, which is a noncash financing activity

 

 

   

acquired approximately $381 million of property and equipment and software that was accrued but unpaid, which is a noncash investing activity

 

 

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Note 11: 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 commitment was $410 million as of September 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 Appeals 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, took place in October 2009, and a decision is pending. 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 October 2009, the Central District issued an order dismissing the plaintiffs’ complaint with prejudice. Plaintiffs have appealed that order 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.

* * *

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 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.

 

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Other

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 and technology vendors under applicable contractual indemnification provisions.

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 12: 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 September 30, 2009

           

Revenue(g)

  $ 8,356    $ 383    $ 156      $ (93   $ 8,802

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

    3,314      118      (107     1        3,326

Depreciation and amortization

    1,541      49      30        (5     1,615

Operating income (loss)

    1,773      69      (137     6        1,711

Capital expenditures

    1,212      9      6               1,227

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

Nine months ended September 30, 2009

           

Revenue(g)

  $ 25,181    $ 1,128    $ 517      $ (251   $ 26,575

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

    10,221      343      (258     (1     10,305

Depreciation and amortization

    4,698      146      86        (22     4,908

Operating income (loss)

    5,523      197      (344     21        5,397

Capital expenditures

    3,450      23      35               3,508

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

 

(a)

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

 

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    Three Months Ended
September 30
    Nine Months Ended
September 30
 
     2009     2008     2009     2008  

Video

  57.2   58.6   57.9   59.4

High-speed Internet

  23.1      22.4      22.9      22.2   

Phone

  9.9      8.5      9.6      7.9   

Advertising

  3.8      4.7      3.6      4.7   

Franchise fees

  2.8      2.8      2.8      2.8   

Other

  3.2      3.0      3.2      3.0   

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 (loss) 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.

 

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Note 13: Condensed Consolidating Financial Information

Comcast Corporation and four of our wholly owned cable holding company subsidiaries, Comcast Cable Communications, LLC (“CCCL”), 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.”

On August 31, 2009, we merged our wholly owned subsidiary Comcast Cable Communications Holdings, Inc. (“CCCH”), a guarantor prior to the merger, with and into CCCL. Accordingly, the financial information for the CCCL parent reflects both the former CCCH parent and the CCCL parent for all periods presented.

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

September 30, 2009

 

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

ASSETS

                  

Cash and cash equivalents

  $    $    $    $    $ 862    $      $ 862

Investments

                        56             56

Accounts receivable, net

                        1,639             1,639

Other current assets

    188      2                659             849

Total current assets

    188      2                3,216             3,406

Investments

                        5,699             5,699

Investments in and amounts due from subsidiaries eliminated upon consolidation

    73,639      79,245      46,299      27,635      5,355      (232,173    

Property and equipment, net

    307                     23,298             23,605

Franchise rights

                        59,442             59,442

Goodwill

                        14,934             14,934

Other intangible assets, net

    11                     4,198             4,209

Other noncurrent assets, net

    406      15           9      738             1,168

Total assets

  $ 74,551    $ 79,262    $ 46,299    $ 27,644    $ 116,880    $ (232,173   $ 112,463

LIABILITIES AND EQUITY

                  

Accounts payable and accrued expenses related to trade creditors

  $ 198    $    $    $    $ 2,935    $      $ 3,133

Accrued expenses and other current liabilities

    758      257      29      125      1,836             3,005

Current portion of long-term debt

    902                     52             954

Total current liabilities

    1,858      257      29      125      4,823             7,092

Long-term debt, less current portion

    20,629      4,925      2,356      326      257             28,493

Deferred income taxes

    8,068                688      18,810             27,566

Other noncurrent liabilities

    1,685                171      4,907             6,763

Redeemable noncontrolling interests

                        168             168

Equity:

                  

Common stock

    33                                 33

Other stockholders’ equity

    42,278      74,080      43,914      26,334      87,845      (232,173     42,278

Total Comcast Corporation stockholders’ equity

    42,311      74,080      43,914      26,334      87,845      (232,173     42,311

Noncontrolling interests

                        70             70

Total equity

    42,311      74,080      43,914      26,334      87,915      (232,173     42,381

Total liabilities and equity

  $ 74,551    $ 79,262    $ 46,299    $ 27,644    $ 116,880    $ (232,173   $ 112,463

 

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Comcast Corporation

Condensed Consolidating Balance Sheet

December 31, 2008

 

(in millions)   Comcast
Parent
   CCCL
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      78,035      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      21           17      537             1,178

Total assets

  $ 71,157    $ 78,064    $ 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      297      87      129      1,945             3,268

Current portion of long-term debt

    1,242      1,006                30             2,278

Total current liabilities

    2,248      1,303      87      129      5,172             8,939

Long-term debt, less current portion

    19,839      6,756      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      70,005      43,536      25,022      86,852      (225,415     40,417

Total Comcast Corporation stockholders’ equity

    40,450      70,005      43,536      25,022      86,852      (225,415     40,450

Noncontrolling interests

                        126             126

Total equity

    40,450      70,005      43,536      25,022      86,978      (225,415     40,576

Total liabilities and equity

  $ 71,157    $ 78,064    $ 46,314    $ 26,536    $ 116,361    $ (225,415   $ 113,017

 

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Comcast Corporation

Condensed Consolidating Statement of Operations

For the Three Months Ended September 30, 2009

 

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

Revenue:

             

Service revenue

  $      $      $  —      $  —      $ 8,802      $      $ 8,802   

Management fee revenue

    192        168        108                      (468       
      192        168        108               8,802        (468     8,802   

Costs and Expenses:

             

Operating (excluding depreciation and amortization)

                                3,490               3,490   

Selling, general and administrative

    92        168        108        15        2,071        (468     1,986   

Depreciation

    7                             1,355               1,362   

Amortization

                                253               253   
      99        168        108        15        7,169        (468     7,091   

Operating income (loss)

    93                      (15     1,633               1,711   

Other Income (Expense):

             

Interest expense

    (335     (254     (79     (8     (31            (707

Investment income (loss), net

    1                      2        145               148   

Equity in net income (losses) of affiliates, net

    1,101        1,267        853        629        (234     (3,633     (17

Other income (expense)

                                2               2   
      767        1,013        774        623        (118     (3,633     (574

Income (loss) before income taxes

    860        1,013        774        608        1,515        (3,633     1,137   

Income tax (expense) benefit

    84        89        28        7        (411            (203

Net income (loss) from consolidated operations

    944        1,102        802        615        1,104        (3,633     934   

Net (income) loss attributable to noncontrolling interests

                                10               10   

Net income (loss) attributable to Comcast Corporation

  $ 944      $ 1,102      $ 802      $ 615      $ 1,114      $ (3,633   $ 944   

 

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Table of Contents

Comcast Corporation

Condensed Consolidating Statement of Operations

For the Three Months Ended September 30, 2008

 

(in millions)   Comcast
Parent
    CCCL
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        161        104                      (449       
      184        161        104               8,549        (449     8,549   

Costs and Expenses:

             

Operating (excluding depreciation and amortization)

                                3,345               3,345   

Selling, general and administrative

    95        161        104        14        2,042        (449     1,967   

Depreciation

    7                             1,325               1,332   

Amortization

                                235               235   
      102        161        104        14        6,947        (449     6,879   

Operating income (loss)

    82                      (14     1,602               1,670   

Other Income (Expense):

             

Interest expense

    (333     (158     (52     (26     (32            (601

Investment income (loss), net

    (13                   49        38               74   

Equity in net income (losses) of affiliates, net

    940        1,122        719        375        17        (3,170     3   

Other income (expense)

                                11               11   
      594        964        667        398        34        (3,170     (513

Income (loss) before income taxes

    676        964        667        384        1,636        (3,170     1,157   

Income tax (expense) benefit

    95        54        18        (3     (565            (401

Net income (loss) from consolidated operations

    771        1,018        685        381        1,071        (3,170     756   

Net (income) loss attributable to noncontrolling interests

                                15               15   

Net income (loss) attributable to Comcast Corporation

  $ 771      $ 1,018      $ 685      $ 381      $ 1,086      $ (3,170   $ 771   

 

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Comcast Corporation

Condensed Consolidating Statement of Operations

For the Nine Months Ended September 30, 2009

 

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

Revenue:

             

Service revenue

  $      $      $      $        26,575      $      $ 26,575   

Management fee revenue

    576        504        323                      (1,403       
      576        504        323               26,575        (1,403     26,575   

Costs and Expenses:

             

Operating (excluding depreciation and amortization)

                                10,600               10,600   

Selling, general and administrative

    252        504        323        43        5,951        (1,403     5,670   

Depreciation

    21                             4,127               4,148   

Amortization

                                760               760   
      273        504        323        43        21,438        (1,403     21,178   

Operating income (loss)

    303                      (43     5,137               5,397   

Other Income (Expense):

             

Interest expense

    (969     (562     (179     (18     (100            (1,828

Investment income (loss), net

    (6                   7        217               218   

Equity in net income (losses) of affiliates, net

    3,120        3,592        2,436        1,430        (329     (10,293     (44

Other income (expense)

                                13               13   
      2,145        3,030        2,257        1,419        (199     (10,293     (1,641

Income (loss) before income taxes

    2,448        3,030        2,257        1,376        4,938        (10,293     3,756   

Income tax (expense) benefit

    235        197        63        19        (1,602            (1,088

Net income (loss) from consolidated operations

    2,683        3,227        2,320        1,395        3,336        (10,293     2,668   

Net (income) loss attributable to noncontrolling interests

                                15               15   

Net income (loss) attributable to Comcast Corporation

  $ 2,683      $ 3,227      $ 2,320      $ 1,395      $ 3,351      $ (10,293   $ 2,683   

 

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Comcast Corporation

Condensed Consolidating Statement of Operations

For the Nine Months Ended September 30, 2008

 

(in millions)   Comcast
Parent
    CCCL
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        472        306                      (1,322       
      544        472        306               25,491        (1,322     25,491   

Costs and Expenses:

             

Operating (excluding depreciation and amortization)

                                10,040               10,040   

Selling, general and administrative

    272        472        306        40        5,921        (1,322     5,689   

Depreciation

    17                             4,076               4.093   

Amortization

                                694               694   
      289        472        306        40        20,731        (1,322     20,516   

Operating income (loss)

    255                      (40     4,760               4,975   

Other Income (Expense):

             

Interest expense

    (976     (479     (162     (121     (102            (1,840

Investment income (loss), net

    (22                   27        78               83   

Equity in net income (losses) of affiliates, net

    2,616        3,197        2,088        1,065        (38     (8,964     (36

Other income (expense)

    (1                          296               295   
      1,617        2,718        1,926        971        234        (8,964     (1,498

Income (loss) before income taxes

    1,872        2,718        1,926        931        4,994        (8,964     3,477   

Income tax (expense) benefit

    263        167        57        47        (1,898            (1,364

Net income (loss) from consolidated operations

    2,135        2,885        1,983        978        3,096        (8,964     2,113   

Net (income) loss attributable to noncontrolling interests

                                22               22   

Net income (loss) attributable to Comcast Corporation

  $ 2,135      $ 2,885      $ 1,983      $ 978      $ 3,118      $ (8,964   $ 2,135   

 

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Comcast Corporation

Condensed Consolidating Statement of Cash Flows

For the Nine Months Ended September 30, 2009

 

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

Net cash provided by (used in) operating activities

  $ 22      $ (330   $ (197   $ 6      $ 8,224           $ 7,725   

Financing Activities:

              

Proceeds from borrowings

    1,792                             51             1,843   

Repurchases and repayments of debt

    (1,241     (2,836     (312     (262     (58          (4,709

Repurchases of common stock

    (438                                      (438

Dividends paid

    (568                                      (568

Issuances of common stock

    1                                         1   

Other

    (10     (130     (42            (4          (186

Net cash provided by (used in) financing activities

    (464     (2,966     (354     (262     (11          (4,057

Investing Activities:

              

Net transactions with affiliates

    472        3,296        551        256        (4,575            

Capital expenditures

    (24                          (3,484          (3,508

Cash paid for intangible assets

    (6                          (377          (383

Acquisitions, net of cash acquired

                                (36          (36

Proceeds from sales of investments

                                31             31   

Purchases of investments

                                (142          (142

Other

                                37             37   

Net cash provided by (used in) investing activities

    442        3,296        551        256        (8,546          (4,001

Increase (decrease) in cash and cash equivalents

                                (333          (333

Cash and cash equivalents, beginning of period

                                1,195             1,195   

Cash and cash equivalents, end of period

  $      $      $      $        862      $  —    $ 862   

 

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Comcast Corporation

Condensed Consolidating Statement of Cash Flows

For the Nine Months Ended September 30, 2008

 

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

Net cash provided by (used in) operating activities

  $ (172   $ (356   $ (187   $ 25      $ 8,063      $  —    $ 7,373   

Financing Activities:

              

Proceeds from borrowings

    1,998        1,500                      15             3,513   

Retirement 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     1,150        (300     (207     (116          (892

Investing Activities:

              

Net transactions with affiliates

    1,753        (794     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        (794     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   

 

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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 September 30, 2009, our cable systems served approximately 23.8 million video customers, 15.7 million high-speed Internet customers and 7.4 million phone customers and passed over 51 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 nine months ended September 30, 2009 include the following:

 

   

an increase in consolidated revenue of 4.3% to approximately $26.6 billion and an increase in consolidated operating income of 8.5% to approximately $5.4 billion compared to the same period in 2008

 

 

   

an increase in Cable segment revenue of 4.3% to approximately $25.2 billion and an increase in operating income before depreciation and amortization of 4.8% to approximately $10.2 billion compared to the same period in 2008

 

 

   

the addition of approximately 755,000 high-speed Internet customers, approximately 906,000 digital phone customers, and a net decrease of approximately 424,000 video customers with the addition or upgrade from analog of approximately 1.0 million digital video customers

 

 

   

a reduction in Cable segment capital expenditures of 11.0% to approximately $3.4 billion compared to the same period in 2008

 

 

   

the repurchase of approximately 31.6 million shares of our Class A and Class A Special common stock under our share repurchase authorization for approximately $465 million

 

 

   

a decrease in our total debt primarily due to approximately $2.0 billion of scheduled debt maturities and approximately $1.3 billion related to the completion of a cash tender offer

 

 

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Table of Contents

Consolidated Operating Results

 

   

Three Months Ended

September 30

   

Increase/

(Decrease)

   

Nine Months Ended

September 30

   

Increase/

(Decrease)

 
(in millions)       2009             2008                    2009             2008             

Revenue

  $ 8,802      $ 8,549      3.0   $ 26,575      $ 25,491      4.3

Costs and Expenses:

           

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

    5,476        5,312      3.1        16,270        15,729      3.4   

Depreciation

    1,362        1,332      2.2        4,148        4,093      1.3   

Amortization

    253        235      8.1        760        694      9.6   

Operating income

    1,711        1,670      2.4        5,397        4,975      8.5   

Other income (expense) items, net

    (574     (513   11.8        (1,641     (1,498   9.5   

Income before income taxes

    1,137        1,157      (1.7     3,756        3,477      8.0   

Income tax expense

    (203     (401   (49.4     (1,088     (1,364   (20.2

Net income from consolidated operations

    934        756      23.6        2,668        2,113      26.3   

Net (income) loss attributable to noncontrolling interests

    10        15      (33.4     15        22      (33.5

Net income attributable to Comcast Corporation

  $ 944      $ 771      22.5   $ 2,683      $ 2,135      25.7

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 nine months ended September 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 and Programming segment accounted for substantially all of the increases in consolidated operating, selling, general and administrative expenses for the three and nine months ended September 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 nine months ended September 30, 2009 increased slightly compared to the same periods in 2008 primarily due to increases in property and equipment.

The increases in amortization expense for the three and nine months ended September 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 (loss) 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

 

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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 12 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
September 30
   Increase/(Decrease)  
(in millions)       2009            2008            $             %      

Video(a)

  $ 4,777    $ 4,767    $ 10      0.2

High-speed Internet

    1,930      1,822      108      5.9   

Phone

    829      690      139      20.2   

Advertising