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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, 2011

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, 2011, there were 2,092,580,146 shares of our Class A common stock, 622,816,473 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, 2011 and December 31, 2010 (Unaudited)      2   
  Condensed Consolidated Statement of Income for the Three and Nine Months Ended September 30, 2011 and 2010 (Unaudited)      3   
  Condensed Consolidated Statement of Comprehensive Income for the Three and Nine Months Ended September 30, 2011 and 2010 (Unaudited)      4   
  Condensed Consolidated Statement of Cash Flows for the Nine Months Ended September 30, 2011 and 2010 (Unaudited)      5   
  Condensed Consolidated Statement of Changes in Equity for the Nine Months Ended September 30, 2011 and 2010 (Unaudited)      6   
  Notes to Condensed Consolidated Financial Statements (Unaudited)      7   

Item 2.

  Management’s Discussion and Analysis of Financial Condition and Results of Operations      39   

Item 3.

  Quantitative and Qualitative Disclosures About Market Risk      60   

Item 4.

  Controls and Procedures      61   
PART II. OTHER INFORMATION   

Item 1.

  Legal Proceedings      61   

Item 1A.

  Risk Factors      61   

Item 2.

  Unregistered Sales of Equity Securities and Use of Proceeds      62   

Item 6.

  Exhibits      63   
SIGNATURES        64   

 

 

This Quarterly Report on Form 10-Q is for the three and nine months ended September 30, 2011. 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, including NBCUniversal, 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 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:

 

   

our businesses currently face a wide range of competition, and our businesses and results of operations could be adversely affected if we do not compete effectively

 

 

   

changes in technology and consumer behavior may adversely affect our businesses and results of operations

 

 

   

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

 

 

   

as a result of the NBCUniversal transaction, our businesses are subject to the conditions set forth in the NBCUniversal Order and the NBCUniversal Consent Decree, and there can be no assurance that these conditions will not have an adverse effect on our businesses and results of operations

 

 

   

we are subject to regulation by federal, state, local and foreign authorities, which may impose additional costs and restrictions on our businesses

 

 

   

weak economic conditions may have a negative impact on our results of operations and financial condition

 

 

   

a decline in advertising expenditures or changes in advertising markets could negatively impact our results of operations

 

 

   

NBCUniversal’s success depends on consumer acceptance of its content, which is difficult to predict, and our results of operations may be adversely affected if our content fails to achieve sufficient consumer acceptance or our costs to acquire content increase

 

 

   

the loss of our programming distribution agreements, or the renewal of these agreements on less favorable terms, could adversely affect our business

 

 

   

sales of DVDs have been declining

 

 

   

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

 

 

   

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

 

 

   

our businesses depend on using and protecting certain intellectual property rights and on not infringing the intellectual property rights of others

 

 

   

labor disputes, whether involving our own employees or sports leagues, may disrupt our operations and adversely affect our business

 

 

   

we may face a significant withdrawal liability if we withdraw from multiemployer pension plans or be required to make additional contributions under such plans

 

 

   

the other risk factors that are described in our Annual Report on Form 10-K for the year ended December 31, 2010

 

 

1


Table of Contents

PART I: FINANCIAL INFORMATION

ITEM 1: FINANCIAL STATEMENTS

Condensed Consolidated Balance Sheet

(Unaudited)

 

(in millions, except share data)   September 30,
2011
    December 31,
2010
 

Assets

   

Current Assets:

   

Cash and cash equivalents

  $ 1,806      $ 5,984   

Receivables, net

    4,096        1,855   

Programming rights

    1,055        122   

Other current assets

    1,625        925   

Total current assets

    8,582        8,886   

Film and television costs

    5,369        460   

Investments

    9,575        6,670   

Property and equipment, net

    27,441        23,515   

Franchise rights

    59,442        59,442   

Goodwill

    26,831        14,958   

Other intangible assets, net

    17,386        3,431   

Other noncurrent assets, net

    2,201        1,172   

Total assets

  $ 156,827      $ 118,534   

Liabilities and Equity

   

Current Liabilities:

   

Accounts payable and accrued expenses related to trade creditors

  $ 5,455      $ 3,291   

Accrued participations and residuals

    1,247          

Accrued expenses and other current liabilities

    4,996        3,143   

Current portion of long-term debt

    2,448        1,800   

Total current liabilities

    14,146        8,234   

Long-term debt, less current portion

    38,522        29,615   

Deferred income taxes

    29,663        28,246   

Other noncurrent liabilities

    11,657        7,862   

Commitments and contingencies (Note 16)

   

Redeemable noncontrolling interests

    15,827        143   

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, 2,458,040,896 and 2,437,281,651; outstanding, 2,092,580,146 and 2,071,820,901

    25        24   

Class A Special common stock, $0.01 par value—authorized, 7,500,000,000 shares; issued, 693,751,237 and 766,168,658; outstanding, 622,816,473 and 695,233,894

    7        8   

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

             

Additional paid-in capital

    41,079        39,780   

Retained earnings

    13,236        12,158   

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)

    (147     (99

Total Comcast Corporation shareholders’ equity

    46,683        44,354   

Noncontrolling interests

    329        80   

Total equity

    47,012        44,434   

Total liabilities and equity

  $ 156,827      $ 118,534   

See accompanying notes to condensed consolidated financial statements.

 

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Table of Contents

Condensed Consolidated Statement of Income

(Unaudited)

 

    Three Months Ended
September 30
    Nine Months Ended
September 30
 
(in millions, except per share data)         2011           2010     2011           2010        

Revenue

  $ 14,339      $ 9,489      $ 40,800      $ 28,216   

Costs and Expenses:

       

Operating costs and expenses

    9,765        5,911        27,359        17,336   

Depreciation

    1,540        1,377        4,504        4,167   

Amortization

    393        247        1,134        746   
      11,698        7,535        32,997        22,249   

Operating income

    2,641        1,954        7,803        5,967   

Other Income (Expense):

       

Interest expense

    (637     (545     (1,863     (1,612

Investment income (loss), net

    (147     109        3        210   

Equity in net income (losses) of investees, net

    (40     (40     (40     (98

Other income (expense), net

    (12     (24     (82     (69
      (836     (500     (1,982     (1,569

Income before income taxes

    1,805        1,454        5,821        4,398   

Income tax expense

    (639     (584     (2,249     (1,763

Net income from consolidated operations

    1,166        870        3,572        2,635   

Net (income) loss attributable to noncontrolling interests

    (258     (3     (699     (18

Net income attributable to Comcast Corporation

  $ 908      $ 867      $ 2,873      $ 2,617   

Basic earnings per common share attributable to Comcast Corporation shareholders

  $ 0.33      $ 0.31      $ 1.04      $ 0.93   

Diluted earnings per common share attributable to Comcast Corporation shareholders

  $ 0.33      $ 0.31      $ 1.03      $ 0.93   

Dividends declared per common share attributable to Comcast Corporation shareholders

  $ 0.1125      $ 0.0945      $ 0.3375      $ 0.2835   

See accompanying notes to condensed consolidated financial statements.

 

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Condensed Consolidated Statement of Comprehensive Income

(Unaudited)

 

    Three Months Ended
September 30
    Nine Months Ended
September 30
 
(in millions)       2011             2010             2011             2010      

Net income from consolidated operations

  $ 1,166      $ 870      $ 3,572      $ 2,635   

Unrealized gains (losses) on marketable securities, net of deferred taxes of $—, $—, $(3) and $—

           1        5        2   

Deferred gains (losses) on cash flow hedges, net of deferred taxes of $35, $21, $33 and $45

    (59     (37     (57     (79

Amounts reclassified to net income:

       

Realized (gains) losses on marketable securities, net of deferred taxes of $—, $—, $5 and $—

                  (9       

Realized (gains) losses on cash flow hedges, net of deferred taxes of $(13), $(1), $(7) and $(4)

    23        2        13        7   

Employee benefit obligations, net of deferred taxes of $—, $—, $(1) and $—

    (3            (4       

Currency translation adjustments

    (9     4        (2       

Comprehensive income

    1,118        840        3,518        2,565   

Net (income) loss attributable to noncontrolling interests

    (258     (3     (699     (18

Other comprehensive (income) loss attributable to noncontrolling interests

    6               6          

Comprehensive income attributable to Comcast Corporation

  $ 866      $ 837      $ 2,825      $ 2,547   

See accompanying notes to condensed consolidated financial statements.

 

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Condensed Consolidated Statement of Cash Flows

(Unaudited)

 

    Nine Months Ended
September 30
 
(in millions)       2011               2010        

Net cash provided by operating activities

  $ 10,206      $ 7,732   

Investing Activities

   

Capital expenditures

    (3,785     (3,429

Cash paid for intangible assets

    (505     (372

Acquisitions, net of cash acquired

    (6,407     (183

Proceeds from sales of investments

    154        21   

Purchases of investments

    (85     (54

Other

    (33     149   

Net cash provided by (used in) investing activities

    (10,661     (3,868

Financing Activities

   

Proceeds from (repayments of) short-term borrowings, net

    1,642          

Proceeds from borrowings

           2,420   

Repurchases and repayments of debt

    (2,813     (649

Repurchases and retirements of common stock

    (1,650     (892

Dividends paid

    (881     (800

Distributions to noncontrolling interests

    (237     (48

Other

    216        (24

Net cash provided by (used in) financing activities

    (3,723     7   

Increase (decrease) in cash and cash equivalents

    (4,178     3,871   

Cash and cash equivalents, beginning of period

    5,984        671   

Cash and cash equivalents, end of period

  $ 1,806      $ 4,542   

See accompanying notes to condensed consolidated financial statements.

 

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Condensed Consolidated Statement of Changes in Equity

(Unaudited)

 

   

Redeemable
Non-
controlling
Interests

        Common Stock    

Additional
Paid-In
Capital

   

Retained
Earnings

   

Treasury
Stock at
Cost

   

Accumulated
Other
Comprehensive
Income (Loss)

   

Non-

controlling
Interests

   

Total
Equity

 
(in millions)          A     A Special     B              

Balance, January 1, 2010

  $ 166          $ 24      $ 8      $  —      $ 40,247      $ 10,005      $ (7,517   $ (46   $ 90      $ 42,811   

Stock compensation plans

                160        (4           156   

Repurchases and retirements of common stock

                (603     (297           (900

Employee stock purchase plan

                45                45   

Dividends declared

                  (796           (796

Other comprehensive income (loss)

                      (70       (70

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

    (20               11                11   

Contributions from (distributions to) noncontrolling interests

                        (26     (26

Net income (loss)

    (2                                         2,617                        20        2,637   

Balance, September 30, 2010

  $ 144          $ 24      $ 8      $      $ 39,860      $ 11,525      $ (7,517   $ (116   $ 84      $ 43,868   

Balance, January 1, 2011

  $ 143          $ 24      $ 8      $      $ 39,780      $ 12,158      $ (7,517   $ (99   $ 80      $ 44,434   

Stock compensation plans

          1            414        (40           375   

Repurchases and retirements of common stock

            (1       (822     (827           (1,650

Employee stock purchase plan

                50                50   

Dividends declared

                  (928           (928

Other comprehensive income (loss)

    (6                     (48       (48

NBCUniversal transaction

    15,192                  1,612              211        1,823   

Issuance of subsidiary shares to noncontrolling interests

    83                  45              43        88   

Contributions from (distributions to) noncontrolling interests

    (177                       (112     (112

Net income (loss)

    592                                            2,873                        107        2,980   

Balance, September 30, 2011

  $ 15,827          $ 25      $ 7      $      $ 41,079      $ 13,236      $ (7,517   $ (147   $ 329      $ 47,012   

See accompanying notes to condensed consolidated financial statements.

 

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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 consolidated results of operations, financial condition and cash flows for the periods shown, including normal, recurring accruals and other items. We also evaluated events or transactions that occurred after the balance sheet date through the issuance date of these condensed consolidated financial statements to determine if financial statement recognition or additional disclosure is required. The consolidated 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 consolidated financial statements for the preceding fiscal year as filed with the SEC.

On January 28, 2011, we closed our transaction with General Electric Company (“GE”) in which we acquired control of the businesses of NBC Universal, Inc. (now named NBCUniversal Media, LLC (“NBCUniversal”)), a leading media and entertainment company that develops, produces and distributes entertainment, news and information, sports, and other content to global audiences. NBCUniversal’s results of operations from January 29, 2011 through September 30, 2011 are included in our consolidated results of operations. See Note 4 for additional information on the transaction.

Note 2: Summary of Significant Accounting Policies

The accounting policies described below became significant to our business as a result of the NBCUniversal transaction on January 28, 2011.

Use of Estimates

In connection with the NBCUniversal transaction, we have performed a preliminary allocation of purchase price to the assets and liabilities of the businesses acquired using preliminary estimates. The estimates are subject to change as discussed in Note 4. Estimates are also used when accounting for various items, including impairment of capitalized film and television costs, amortization of owned and acquired programming, participation and residual payments, and DVD and Blu-ray disc (together, “DVDs”) returns and customer incentives. Actual results could differ from those estimates.

Film and Television Costs

We capitalize film and television production costs, including direct costs, production overhead, print costs, development costs and interest. We amortize capitalized film and television production costs, as well as accrue costs associated with participation and residual payments, on an individual production basis using the ratio of the current period’s actual revenue to the estimated total remaining gross revenue from all sources, which is referred to as ultimate revenue. Estimates of total revenue and total costs are based on anticipated release patterns, public acceptance and historical results for similar productions. We state unamortized film and television costs at the lower of unamortized cost or fair value. We do not capitalize costs related to film exploitation, which are primarily costs associated with the marketing and distribution of film and television programming.

We state acquired film and television libraries at the lower of unamortized cost or fair value. In determining the estimated lives and method of amortization, we generally use the method and the life that most closely follow the undiscounted cash flows over the estimated life of the asset.

We capitalize the costs to license programming content, including rights to multiyear live-event sports programming, at the earlier of when the programming is acquired or when the license period begins and the

 

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content is available for use. We amortize capitalized programming costs as the associated programs are broadcast. We amortize multiyear, live-event sports programming rights using the ratio of the current period’s actual direct revenue to the estimated total remaining direct revenue or based on the terms of the contract.

We state the cost of acquired programming at the lower of unamortized cost or net realizable value on a program by program, package, channel or daypart basis. A daypart is defined as an aggregation of programs broadcast during a particular time of day or programs of a similar type. Acquired programming used by our cable programming networks is tested on a channel basis for impairment, whereas the programming for the NBC and Telemundo broadcast networks is tested on a daypart basis. If we determine that the estimates of future cash flows are insufficient or if there is no plan to broadcast certain programming, we will recognize an impairment charge to other operating costs and expenses.

We enter into arrangements with third parties to jointly finance and distribute certain of our film productions. These arrangements, which are referred to as cofinancing arrangements, can take various forms. In most cases, the form of the arrangement involves the grant of an economic interest in a film to a third-party investor. The number of investors and the terms of these arrangements can also vary, although in most cases an investor assumes the full risk for the portion of the film acquired in these arrangements. We account for our proceeds under these arrangements as a reduction to our capitalized film costs. In these arrangements, the investor owns an undivided copyright interest in the film and, therefore, in each period we record either a charge or benefit to operating costs and expenses to reflect the estimate of the third-party investor’s interest in the profit or loss of the film. The estimate of the third-party investor’s interest in the profit or loss of a film is determined by reference to the ratio of actual revenue earned to date in relation to the ultimate revenue expected to be recognized over a film’s useful life.

See Note 5 for additional information on our film and television costs.

Revenue Recognition

We recognize revenue from the theatrical distribution of films when films are exhibited. We recognize revenue from the licensing of film and television productions when the content is available for use by the licensee, and when certain other conditions are met. When license fees are contracted as part cash and part advertising time, we recognize the advertising time component when the advertising units are aired. We recognize revenue from home entertainment units, net of estimated returns and customer incentives, on the date that units are delivered to and made available for sale by retailers.

We recognize revenue from advance theme park ticket sales when the tickets are used. For nonexpiring, multiday or annual passes, we recognize revenue over the period of benefit based on estimated usage patterns that are derived from historical experience. We recognize revenue from corporate sponsors at the theme parks over the period of the applicable contract.

We also enter into nonmonetary exchanges of advertising units for other advertising units, products or services. Advertising units exchanged for advertising units are recorded at the fair value of advertising units provided and recognized when aired. Advertising units exchanged for products or services are recorded at the fair value of the goods or services received or advertising units provided. Advertising units provided are recognized when aired, and costs are recognized in the period the products or services are used.

Foreign Currency Translation

Functional currencies are determined based on entity-specific economic and management indicators. We translate the assets and liabilities of our foreign subsidiaries where the functional currency is the local currency, primarily the euro and the British pound, into U.S. dollars at the exchange rate in effect at the balance sheet date. We translate revenue and expenses using average exchange rates prevailing during the period. The related translation adjustments are recorded as a component of accumulated other comprehensive income (loss).

Reclassifications

Reclassifications have been made to the prior year’s condensed consolidated balance sheet to programming rights, other current assets, film and television costs, other intangible assets, net and other noncurrent assets, net to adjust to classifications used in the current period as a result of the acquisition of the NBCUniversal businesses.

 

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Note 3: Earnings Per Share

Basic earnings per common share attributable to Comcast Corporation shareholders (“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 shareholders (“diluted EPS”) considers the impact of potentially dilutive securities using the treasury stock method. Diluted EPS excludes the impact of potential common shares related to our stock options in periods in which the option exercise price is greater than the average market price of our Class A common stock or our Class A Special common stock, as applicable.

Diluted EPS for the three and nine months ended September 30, 2011 excludes 54 million and 45 million, respectively, of potential common shares related to our share-based compensation plans, because the inclusion of the potential common shares would have had an antidilutive effect. For the three and nine months ended September 30, 2010, diluted EPS excluded 178 million and 189 million, respectively, of potential common shares.

Computation of Diluted EPS

 

$2,873 $2,873 $2,873 $2,873 $2,873 $2,873
    Three Months Ended September 30  
    2011      2010  
(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 shareholders

  $ 908         2,739       $ 0.33       $ 867         2,802       $ 0.31   

Effect of dilutive securities:

                

Assumed exercise or issuance of shares relating to stock plans

             22                           8            

Diluted EPS attributable to Comcast Corporation shareholders

  $ 908         2,761       $ 0.33       $ 867         2,810       $ 0.31   

 

$2,870000 $2,870000 $2,870000 $2,870000 $2,870000 $2,870000
    Nine Months Ended September 30  
    2011      2010  
(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 shareholders

  $ 2,873         2,757       $ 1.04       $ 2,617         2,816       $ 0.93   

Effect of dilutive securities:

                

Assumed exercise or issuance of shares relating to stock plans

             32                           10            

Diluted EPS attributable to Comcast Corporation shareholders

  $ 2,873         2,789       $ 1.03       $ 2,617         2,826       $ 0.93   

Note 4: Acquisitions

NBCUniversal Transaction

On January 28, 2011, we closed our transaction with GE to form a new company named NBCUniversal, LLC (“NBCUniversal Holdings”). We now control and own 51% of NBCUniversal Holdings and GE owns the remaining 49%. As part of the NBCUniversal transaction, GE contributed the businesses of NBCUniversal, which is now a wholly owned subsidiary of NBCUniversal Holdings. The NBCUniversal contributed businesses include its national cable programming networks, the NBC network and its owned NBC affiliated local television stations, the Telemundo network and its owned Telemundo affiliated local television stations, Universal Pictures, the Universal Studios Hollywood theme park, and other investments and related assets. We contributed our national

 

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cable programming networks, our regional sports and news networks, certain of our Internet businesses, including DailyCandy and Fandango, and other related assets (the “Comcast Content Business”). The combination of these businesses creates a leading media and entertainment company capable of providing entertainment, news, sports and other content to a global audience across many platforms. In addition to contributing the Comcast Content Business, we made a cash payment to GE of $6.2 billion, which included transaction-related costs. We expect to receive tax benefits related to the transaction and have agreed to share with GE certain of these future tax benefits as they are realized.

In connection with the NBCUniversal transaction, during 2010 NBCUniversal issued $9.1 billion of senior debt securities with maturities ranging from 2014 to 2041 and repaid approximately $1.7 billion of existing debt. Prior to the close, NBCUniversal made a cash distribution of approximately $7.4 billion to GE.

Under the terms of the operating agreement of NBCUniversal Holdings, during the six month period beginning July 28, 2014, GE has the right to cause NBCUniversal Holdings to redeem, in cash, half of GE’s interest in NBCUniversal Holdings, and we would have the immediate right to purchase the remainder of GE’s interest. If, however, we elect not to exercise this right, during the six month period beginning January 28, 2018, GE has the right to cause NBCUniversal Holdings to redeem GE’s remaining interest, if any. If GE does not exercise its first redemption right, during the six month period beginning January 28, 2016, we have the right to purchase half of GE’s interest in NBCUniversal Holdings, and during the six month period beginning January 28, 2019, we have the right to purchase GE’s remaining interest, if any, in NBCUniversal Holdings. The purchase price to be paid in connection with any purchase or redemption described in this paragraph will be equal to the ownership percentage being acquired multiplied by an amount equal to 120% of the fully distributed public market trading value of NBCUniversal Holdings (determined pursuant to an appraisal process if NBCUniversal Holdings is not then publicly traded), less 50% of an amount (not less than zero) equal to the excess of 120% of the fully distributed public market trading value over $28.4 billion. Subject to various limitations, we are committed to fund up to $2.875 billion in cash or our common stock for each of the two redemptions (up to an aggregate of $5.75 billion) to the extent NBCUniversal Holdings cannot fund the redemptions, with amounts not used in the first redemption to be available for the second redemption.

Until July 28, 2014, GE may not directly or indirectly transfer its interest in NBCUniversal Holdings. Thereafter, GE may transfer its interest to a third party, subject to our right of first offer. The right of first offer would permit us to purchase all, but not less than all, of the interests proposed to be transferred. In the event that GE makes a registration request in accordance with certain registration rights that are granted to it under the operating agreement, we will have the right to purchase, for cash at the market value (determined pursuant to an appraisal process if NBCUniversal Holdings is not then publicly traded), all of GE’s interest in NBCUniversal Holdings that GE is seeking to register.

Preliminary Allocation of Purchase Price

Because we now control NBCUniversal Holdings, we have applied acquisition accounting to the NBCUniversal contributed businesses and their results of operations are included in our consolidated results of operations following the acquisition date. The net assets of the NBCUniversal contributed businesses were recorded at their estimated fair value using Level 3 inputs (see Note 10 for an explanation of Level 3 inputs). In valuing acquired assets and liabilities, fair value estimates are based on, but are not limited to, future expected cash flows, market rate assumptions for contractual obligations, actuarial assumptions for benefit plans and appropriate discount rates. The Comcast Content Business continues at its historical or carry-over basis. GE’s interest in NBCUniversal Holdings is recorded as a redeemable noncontrolling interest in our consolidated financial statements due to the redemption provisions outlined above. GE’s redeemable noncontrolling interest has been recorded at fair value for the portion attributable to the net assets we acquired, and at historical cost for the portion attributable to the Comcast Content Business. The estimated values are not yet final and are subject to change. We will finalize the amounts recognized as we obtain the information necessary to complete the analysis, but no later than one year from the acquisition date.

 

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The tables below present the preliminary fair value of the consideration transferred and the preliminary allocation of purchase price to the assets and liabilities of the NBCUniversal businesses acquired as a result of the NBCUniversal transaction. We have revised our estimates in the current quarter, which resulted in a decrease in goodwill of $1 billion from our initial allocation of purchase price. The changes related primarily to revisions in the estimated fair value of investments, property and equipment, and intangible assets.

Consideration Transferred

 

(in millions)       

Cash

  $ 6,120   

Fair value of 49% of the Comcast Content Business

    4,301   

Fair value of contingent consideration

    590   

Fair value of redeemable noncontrolling interest associated with net assets acquired

    13,065   
    $ 24,076   

Preliminary Allocation of Purchase Price

 

(in millions)       

Film and television costs (see Note 5)

  $ 5,040   

Investments (see Note 6)

    4,254   

Property and equipment (see Note 14)

    2,324   

Intangible assets (see Note 7)

    14,595   

Working capital

    (1,742

Long-term debt (see Note 8)

    (9,115

Deferred income tax liabilities

    (31

Other noncurrent assets and liabilities

    (2,005

Noncontrolling interests acquired

    (211

Fair value of identifiable net assets acquired

    13,109   

Goodwill

    10,967   
    $ 24,076   

Income Taxes

We are responsible for the tax matters for both NBCUniversal Holdings and NBCUniversal, including the filing of returns and the administering of any proceedings with taxing authorities. For U.S. federal income tax purposes, NBCUniversal Holdings is treated as a partnership and NBCUniversal is disregarded as an entity separate from NBCUniversal Holdings. Accordingly, neither NBCUniversal Holdings nor NBCUniversal and its subsidiaries will incur any material current or deferred U.S. federal income taxes. NBCUniversal Holdings and NBCUniversal and its subsidiaries are, however, expected to incur current and deferred income taxes in a limited number of states and localities. In addition, NBCUniversal’s foreign subsidiaries are expected to incur current and deferred foreign income taxes. GE has indemnified us and NBCUniversal Holdings for any income tax liability attributable to the historical NBCUniversal businesses for periods prior to the acquisition date. We have also indemnified GE and NBCUniversal Holdings for any income tax liability attributable to the Comcast Content Business for periods prior to the acquisition date.

NBCUniversal recognized net deferred income tax liabilities of $31 million in the preliminary allocation of purchase price related primarily to acquired intangible assets in state and foreign jurisdictions. In addition, Comcast recognized $562 million of deferred tax liabilities in connection with GE acquiring an indirect noncontrolling interest in the Comcast Content Business in exchange for our acquisition of a portion of our interest in NBCUniversal Holdings. Because we maintained control of the Comcast Content Business, the excess of fair value received over historical carrying value and the related tax impact were recorded to additional paid-in capital.

We agreed to share with GE certain tax benefits as they are realized, related to the form and structure of the transaction. These payments to GE are contingent on us realizing tax benefits in the future and are accounted for

 

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as contingent consideration. We have recorded $590 million in other current and noncurrent liabilities in our acquisition accounting based on the present value of the expected future payments to GE.

Following the close of the NBCUniversal transaction, our provision for income taxes includes a federal and state tax provision on our allocable share of the earnings of NBCUniversal Holdings and NBCUniversal, as well as the state, local and foreign tax provisions of NBCUniversal Holdings and NBCUniversal, adjusted for any foreign tax credits.

Goodwill

Goodwill is calculated as the excess of the consideration transferred over the identifiable net assets acquired and represents the future economic benefits expected to arise from other intangible assets acquired that do not qualify for separate recognition, including assembled workforce, noncontractual relationships and agreements between us and NBCUniversal. Because our allocation of purchase price and estimated values of identifiable assets and liabilities are not yet final, the amount of total goodwill and the amount of goodwill expected to be deductible for tax purposes are not yet final and are subject to change.

Transaction-Related Expenses

We have incurred significant transaction costs directly related to the NBCUniversal transaction. The incremental expenses related to legal, accounting and valuation services and investment banking fees are included in operating costs and expenses. We also incurred certain financing costs and other shared costs with GE associated with NBCUniversal’s debt facilities that were entered into in December 2009 and with the issuance of NBCUniversal’s senior notes in 2010, which are included in other income (expense), net and interest expense.

In addition, during the three and nine months ended September 30, 2011, NBCUniversal incurred transaction-related costs associated with severance and other related compensation charges, which are included in operating costs and expenses.

The table below presents the transaction costs and transaction-related costs included in our consolidated statement of income.

 

    Three Months Ended
September 30
     Nine Months Ended
September 30
 
(in millions)       2011              2010              2011          2010      

Operating costs and expenses

          

Transaction costs

  $       $ 21       $ 63       $ 57   

Transaction-related costs

    14                 64           

Total operating costs and expenses

    14         21         127         57   

Other expense

            43         16         91   

Interest expense

            2                 6   

Total

  $ 14       $ 66       $ 143       $ 154   

Universal City Development Partners

On July 1, 2011, NBCUniversal acquired the remaining 50% equity interest in Universal City Development Partners, Ltd. (“UCDP”) that it did not already own for $1 billion. UCDP is now a wholly owned consolidated subsidiary of NBCUniversal whose operations are reported in our Theme Parks segment. NBCUniversal funded this acquisition with cash on hand, borrowings under its revolving credit facility and a $250 million one-year intercompany note due to us, which is eliminated in our consolidated financial statements.

Preliminary Allocation of Purchase Price

Because we now control UCDP, we have applied acquisition accounting and its results of operations are included in our consolidated results of operations following the acquisition date.

The carrying value of our investment in UCDP on July 1, 2011 was $1 billion, which approximated its fair value and, therefore, no gain or loss was recognized as a result of the acquisition. The estimated fair values of the assets and liabilities acquired are not yet final and are subject to change. We will finalize the amounts recognized as we obtain the information necessary to complete the analysis, but no later than one year from the acquisition date.

 

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The table below presents the preliminary allocation of purchase price to the assets and liabilities of UCDP.

Preliminary Allocation of Purchase Price

 

(in millions)       

Property and equipment (see Note 14)

  $ 2,441   

Intangible assets (see Note 7)

    70   

Working capital

    242   

Long-term debt (see Note 8)

    (1,505

Deferred revenue

    (89

Other noncurrent assets and liabilities

    (5

Noncontrolling interests acquired

    (5

Fair value of identifiable net assets acquired

    1,149   

Goodwill

    909   
    $ 2,058   

Financing Transactions

Borrowings under the NBCUniversal revolving credit facility, along with cash on hand at UCDP, were used to refinance and terminate UCDP’s existing $801 million term loan immediately following the acquisition. In addition, on August 1, 2011, UCDP completed its redemption of $140 million aggregate principal amount of its 8.875% senior notes due 2015 and $79 million aggregate principal amount of its 10.875% senior subordinated notes due 2016. As of September 30, 2011, $260 million aggregate principal amount of UCDP’s senior notes and $146 million aggregate principal amount of UCDP’s senior subordinated notes remained outstanding.

Unaudited Actual and Pro Forma Information

Our consolidated revenue for the three months ended September 30, 2011 and from January 29, 2011 through September 30, 2011 included $3.8 billion and $10.1 billion, respectively, from the NBCUniversal contributed businesses. Our consolidated net income (loss) attributable to Comcast Corporation for the three months ended September 30, 2011 and from January 29, 2011 through September 30, 2011 included $127 million and $355 million, respectively, from the NBCUniversal contributed businesses.

Our consolidated revenue for the three and nine months ended September 30, 2011 included $375 million from UCDP. Our consolidated net income (loss) attributable to Comcast Corporation for the three and nine months ended September 30, 2011 included $29 million resulting from the acquisition of the remaining equity interest in UCDP on July 1, 2011.

The following unaudited pro forma information has been presented as if both the NBCUniversal transaction and the UCDP transaction occurred on January 1, 2010. This information is based on historical results of operations, adjusted for the allocations of purchase price and other acquisition accounting adjustments, and is not necessarily indicative of what our results would have been had we operated the businesses since January 1, 2010. No pro forma adjustments have been made for our incremental transaction costs or other transaction-related costs.

 

    Actual      Pro Forma      Pro Forma  
    Three Months Ended
September 30
     Nine Months Ended
September 30
 

(in millions)

      2011              2010              2011              2010      

Revenue

  $ 14,339       $ 13,670       $ 42,619       $ 40,453   

Net income from consolidated operations

  $ 1,166       $ 1,238       $ 3,584       $ 3,112   

Net income attributable to Comcast Corporation

  $ 908       $ 957       $ 2,862       $ 2,626   

Basic earnings per common share attributable to Comcast Corporation shareholders

  $ 0.33       $ 0.34       $ 1.04       $ 0.93   

Diluted earnings per common share attributable to Comcast Corporation shareholders

  $ 0.33       $ 0.34       $ 1.03       $ 0.93   

 

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Note 5: Film and Television Costs

 

(in millions)   September 30,
2011
     December 31,
2010
 

Film Costs:

    

Released, less amortization

  $ 1,524       $   

Completed, not released

    95           

In-production and in-development

    1,289           
    2,908           

Television Costs:

    

Released, less amortization

    1,170         94   

Completed, not released

              

In-production and in-development

    202         43   
    1,372         137   

Programming rights, less amortization

    2,144         445   
    6,424         582   

Less: Current portion of programming rights

    1,055         122   

Film and television costs

  $ 5,369       $ 460   

Film and television costs as of September 30, 2011 include the costs acquired in connection with the closing of the NBCUniversal transaction at fair value as of January 28, 2011, less accumulated amortization following the acquisition date. The capitalized programming costs of the Comcast Content Business are reflected at their historical cost, less accumulated amortization, for both periods presented.

As of September 30, 2011, acquired film and television libraries had remaining unamortized costs of $1.1 billion. For the three and nine months ended September 30, 2011, amortization of acquired film and television libraries included in operating costs and expenses totaled $46 million and $127 million, respectively.

Note 6: Investments

 

(in millions)   September 30,
2011
     December 31,
2010
 

Fair value method

  $ 2,754       $ 2,815   

Equity method, primarily SpectrumCo and Clearwire

    1,973         2,193   

Cost method, primarily AirTouch redeemable preferred shares

    1,780         1,743   

Acquired NBCUniversal and UCDP investments

    3,114           

Total investments

    9,621         6,751   

Less: Current investments

    46         81   

Noncurrent investments

  $ 9,575       $ 6,670   

Investments acquired in connection with the NBCUniversal transaction that we held as of September 30, 2011 primarily include equity method investments in A&E Television Networks (16%); The Weather Channel (25%); and MSNBC.com (50%); and cost method investments, primarily in Hulu (32%). On July 1, 2011, NBCUniversal completed the acquisition of the remaining 50% equity interest in UCDP that it did not already own. As a result, we no longer record UCDP as an equity method investment. See Note 4 for additional information on the NBCUniversal and UCDP transactions.

 

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Components of Investment Income (Loss), Net

 

    Three Months Ended
September 30
    Nine Months Ended
September 30
 
(in millions)       2011             2010             2011             2010      

Gains on sales and exchanges of investments, net

  $ 6      $ 3      $ 27      $ 14   

Investment impairment losses

           (10     (3     (24

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

    (576     475        (41     706   

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

    459        (399     7        (545

Mark to market adjustments on derivative component of ZONES

    (5     (1            1   

Interest and dividend income

    28        25        80        70   

Other, net

    (59     16        (67     (12

Investment income (loss), net

  $ (147   $ 109      $ 3      $ 210   

Note 7: Goodwill and Other Intangible Assets

Goodwill

The table below presents our goodwill attributable to our Cable Communications segment (previously our Cable segment), the Comcast Content Business (now included in the new NBCUniversal segments), and Corporate and Other, as well as the total goodwill attributable to the NBCUniversal acquired businesses. See Note 17 for additional information on our segments.

 

           NBCUniversal                
(in millions)   Cable
Communications
     Comcast Content
Business
    NBCUniversal
Acquired Businesses
     Corporate and
Other
     Total  

Balance, December 31, 2010

  $ 12,207       $ 2,564      $       $ 187       $ 14,958   

Acquisitions

                   11,899                 11,899   

Settlements and adjustments

    1         (27                     (26

Balance, September 30, 2011

  $ 12,208       $ 2,537      $ 11,899       $ 187       $ 26,831   

The change in goodwill for the nine months ended September 30, 2011 is primarily related to the close of the NBCUniversal transaction on January 28, 2011 and the acquisition of the remaining 50% equity interest in UCDP that NBCUniversal did not already own. The preliminary allocation of purchase price to the assets and liabilities of each of the NBCUniversal and UCDP businesses acquired, and the allocation of goodwill among reporting segments, are not final and are subject to change. See Note 4 for additional information on the NBCUniversal and UCDP transactions.

Other Intangible Assets

 

   

Original Useful
Life at
September 30,
2011

    

September 30,

2011

   

December 31,

2010

 
(in millions)      Gross Carrying
Amount
     Accumulated
Amortization
    Gross Carrying
Amount
     Accumulated
Amortization
 

Other intangible assets

    2-25 years       $ 8,880       $ (5,777   $ 12,271       $ (8,840

Acquired NBCUniversal and UCDP intangible assets:

            

Finite-lived intangible assets

    4-20 years         11,566         (483               

Indefinite-lived intangible assets

    N/A         3,200                            

Total

           $ 23,646       $ (6,260   $ 12,271       $ (8,840

The decrease in the gross carrying amount and accumulated amortization of other intangible assets for the nine months ended September 30, 2011 was due to the write-off of fully amortized customer relationship and other intangible assets.

 

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The intangible assets recorded as a result of the NBCUniversal transaction include finite-lived intangible assets, primarily relationships with advertisers and multichannel video providers, and indefinite-lived intangible assets, primarily trade names and Federal Communications Commission licenses.

The intangible assets recorded as a result of the UCDP transaction primarily consist of the rights to use certain characters and trademarks in our theme parks.

See Note 4 for additional information on the NBCUniversal and UCDP transactions.

Note 8: Long-Term Debt

As of September 30, 2011, our debt had an estimated fair value of approximately $46 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.

NBCUniversal and UCDP Notes

NBCUniversal issued $9.1 billion principal amount of senior debt securities during 2010 in connection with the NBCUniversal transaction. On July 1, 2011, NBCUniversal acquired the remaining 50% equity interest in UCDP that it did not already own (see Note 4) and consolidated UCDP’s senior notes due 2015 and senior subordinated notes due 2016. In accordance with acquisition accounting, the debt securities were recorded at fair value based on interest rates available to us for debt with similar terms and remaining maturities as of the respective acquisition dates. The table below presents the carrying value of NBCUniversal and UCDP debt securities included in our balance sheet as of September 30, 2011.

 

(in millions)   Interest Rate     September 30,
2011
 

NBCUniversal:

   

Senior notes due 2014

    2.100   $ 906   

Senior notes due 2015

    3.650     1,033   

Senior notes due 2016

    2.875     999   

Senior notes due 2020

    5.150     2,061   

Senior notes due 2021

    4.375     1,939   

Senior notes due 2040

    6.400     1,033   

Senior notes due 2041

    5.950     1,176   

UCDP:

   

Senior notes due 2015

    8.875     287   

Senior subordinated notes due 2016

    10.875     172   

Total

          $ 9,606   

Repayments

 

    Nine Months Ended
September 30
 
(in millions)                   2011                   

Comcast 6.75% notes due 2011

  $ 1,000   

Comcast 5.5% notes due 2011

    750   

UCDP term loan

    801   

UCDP 8.875% notes due 2015

    140   

UCDP 10.875% notes due 2016

    79   

Other

    43   

Total

  $ 2,813   

Revolving Bank Credit Facilities

In August 2011, we borrowed $300 million from our $6.8 billion revolving credit facility due 2013, which remained outstanding as of September 30, 2011. The proceeds from this borrowing will be used for general corporate working capital purposes.

 

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Effective with the close of the NBCUniversal transaction on January 28, 2011, NBCUniversal has a revolving credit facility with a syndicate of banks that may be used for general corporate purposes. In June 2011, NBCUniversal amended its revolving credit facility, which increased the size of the facility to $1.5 billion from $750 million, reduced the interest rate payable under the facility and extended the maturity of the loan commitment to June 2016 from January 2014. On July 1, 2011, $750 million of borrowings under the revolving credit facility were used to fund a portion of NBCUniversal’s acquisition of the remaining 50% equity interest in UCDP that it did not already own and to terminate UCDP’s existing term loan immediately following the acquisition. See Note 4 for additional information on the UCDP transaction. As of September 30, 2011, the amount outstanding under NBCUniversal’s revolving credit facility was $200 million, which was repaid in full in October 2011.

Commercial Paper

During the nine months ended September 30, 2011, we issued $400 million face amount of commercial paper, net of repayments. The proceeds from these issuances will be used for general corporate working capital purposes.

In August 2011, NBCUniversal initiated a commercial paper program to fund its short-term working capital requirements. The program is supported by NBCUniversal’s revolving credit facility and has a maximum borrowing capacity of $1.5 billion. During the three months ended September 30, 2011, NBCUniversal issued $749 million face amount of commercial paper, net of repayments. The proceeds from these issuances were used to repay the borrowings under the NBCUniversal revolving credit facility and fund our short-term working capital requirements.

Note 9: Derivative Financial Instruments

We use derivative financial instruments to manage our exposure to the risks associated with fluctuations in interest rates, foreign exchange rates and equity prices. Our objective is to manage the financial and operational exposure 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. We do not engage in any speculative or leveraged derivative transactions. All derivative transactions must comply with the derivatives policy approved by our Board of Directors. Derivative financial instruments are recorded in our consolidated balance sheet at fair value. We formally document, at inception of the hedging relationship, derivative financial instruments designated to hedge the exposure to changes in the fair value of a recognized asset or liability or an unrecognized firm commitment (“fair value hedge”) or the exposure to changes in cash flows of a forecasted transaction (“cash flow hedge”), and we evaluate them for effectiveness at the time they are designated, as well as throughout the hedging period.

We manage our exposure to fluctuations in interest rates by using derivative financial instruments such as interest rate exchange agreements (“swaps”) and interest rate lock agreements (“rate locks”). We sometimes enter into rate locks or collars to hedge the risk that the cash flows related to the interest payments on an anticipated issuance or assumption of fixed-rate debt may be adversely affected by interest rate fluctuations.

We manage our exposure to foreign exchange risk related to NBCUniversal’s recognized balance sheet amounts in foreign currency and foreign currency denominated production costs and rights, as well as international content-related revenue and royalties, by using foreign exchange contracts such as forward contracts and currency options. We manage our exposure to foreign exchange risk related to our foreign currency denominated borrowings by using cross-currency swap agreements, effectively converting these borrowings to U.S. dollar denominated borrowings.

We manage our exposure to price fluctuations in the common stock of some of our investments by using equity derivative financial instruments embedded in other contracts, such as prepaid forward sale agreements, whose values, in part, are derived from the market value of certain publicly traded common stock.

We manage the credit risks associated with our derivative financial instruments through diversification and 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. We have agreements with certain counterparties that include collateral provisions. These provisions require a party with an aggregate unrealized loss position in excess of certain thresholds to post cash collateral for the amount in excess of

 

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the threshold. The threshold levels in our collateral agreements are based on our and the counterparties’ credit ratings. As of September 30, 2011 and December 31, 2010, neither we nor any of the counterparties were required to post collateral under the terms of the agreements.

As of September 30, 2011, our derivative financial instruments designated as hedges included (i) our interest rate swap agreements, which are recorded to other current or noncurrent assets, (ii) certain of our foreign exchange contracts, which are recorded to other current assets or accrued expenses and other current liabilities, (iii) our cross-currency swap agreements, which are recorded to other noncurrent liabilities, and (iv) the derivative component of one of our prepaid forward sale agreements, which is recorded to other noncurrent liabilities.

As of September 30, 2011, our derivative financial instruments not designated as hedges were (i) certain of our foreign exchange contracts, which are recorded to other current assets or accrued expenses and other current liabilities, (ii) the derivative component of our indexed debt instruments (our ZONES debt), which is recorded to long-term debt, and (iii) the derivative component of certain of our prepaid forward sale agreements, which is recorded to noncurrent liabilities.

See Note 10 for additional information on the fair values of our derivative financial instruments as of September 30, 2011 and December 31, 2010.

Fair Value Hedges

Amount of Gain (Loss) Recognized in Income

 

    Three Months Ended
September 30
    Nine Months Ended
September 30
 
(in millions)       2011             2010             2011             2010      

Interest Income (Expense):

       

Interest rate swap agreements (fixed to variable)

  $ 41      $ 60      $ 70      $ 178   

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

    (41     (60     (70     (178

Investment Income (Loss):

       

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

    44        (8     37        (15

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

    (68     13        (55     29   

Gain (loss) on fair value hedging relationships

  $ (24   $ 5      $ (18   $ 14   

During the period from January 29, 2011 through September 30, 2011, NBCUniversal entered into fixed to variable swaps on $750 million principal amount of NBCUniversal senior debt securities with maturities ranging from 2014 to 2016. These fixed to variable swaps are designated as effective fair value hedges.

As of September 30, 2011 and December 31, 2010, the fair value of our prepaid forward sale agreement designated as a fair value hedge was an asset of $8 million and a liability of $29 million, respectively.

 

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Cash Flow Hedges

Pretax Amount of Gain (Loss) Recognized in Accumulated Other Comprehensive Income

 

$(124) $(124) $(124) $(124) $(124) $(124)
   

Three Months Ended

September 30

 
    2011     2010  
(in millions)   Interest Rate
Risk
     Foreign
Exchange
Risk
    Total    

Interest Rate

Risk

     Foreign
Exchange
Risk
    Total  

Deferred gain (loss) recognized

  $  —       $ (94   $ (94   $  —       $ (58   $ (58

Deferred (gain) loss reclassified to income

    6         30        36        3                3   

Total change in accumulated other

comprehensive income

  $ 6       $ (64   $ (58   $ 3       $ (58   $ (55

 

$(124) $(124) $(124) $(124) $(124) $(124)
   

Nine Months Ended

September 30

 
    2011     2010  
(in millions)   Interest Rate
Risk
     Foreign
Exchange
Risk
    Total    

Interest Rate

Risk

     Foreign
Exchange
Risk
    Total  

Deferred gain (loss) recognized

  $  —       $ (90   $ (90   $  —       $ (124   $ (124

Deferred (gain) loss reclassified to income

    17         3        20        11                11   

Total change in accumulated other

comprehensive income

  $ 17       $ (87   $ (70   $ 11       $ (124   $ (113

Interest rate risk deferred losses relate to interest rate lock agreements entered into to fix the interest rates of certain of our debt obligations in advance of their issuance. Unless we retire this debt early, these unrealized losses will be reclassified as an adjustment to interest expense, primarily through 2022, in the period in which the related interest expense is recognized in earnings. As of September 30, 2011, we expect $23 million of unrealized losses, $15 million net of deferred taxes, to be reclassified as an adjustment to interest expense over the next 12 months. The foreign exchange risk deferred losses for the three and nine months ended September 30, 2011 relate to cross-currency swap agreements on foreign currency denominated debt due in 2029 and foreign exchange contracts with initial maturities generally not exceeding one year and up to 18 months in certain circumstances. As of September 30, 2011, the fair value of the foreign exchange contracts related to NBCUniversal operations that were designated as cash flow hedges was a liability of $2 million.

Ineffectiveness related to our cash flow hedges was not material for the three and nine months ended September 30, 2011 or 2010.

Nondesignated Derivative Financial Instruments

Amount of Gain (Loss) Recognized in Income

 

    Three Months Ended
September 30
    Nine Months Ended
September 30
 
(in millions)       2011             2010             2011             2010      

Operating Costs and Expenses:

       

Mark to market adjustments on foreign exchange contracts

  $ 9      $      $ 5      $   

Investment Income (Loss):

       

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

    415        (391     (30     (530

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

    (508     462        14        677   

Mark to market adjustments on derivative component of ZONES

    (5     (1            1   

Total gain (loss)

  $ (89   $ 70      $ (11   $ 148   

As of September 30, 2011, foreign exchange contracts related to NBCUniversal operations that were not designated had a total notional value of $759 million. The notional amount is a measure of the activity related to our risk exposure and does not represent the amount of our exposure to credit loss or market loss, or reflect the gains or losses associated with the exposures and transactions that the foreign exchange contracts are intended to

 

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offset. The amounts ultimately realized upon settlement of these derivative financial instruments, together with the gains and losses on the underlying exposures, will depend on actual market conditions during the remaining life of the derivative financial instruments.

Note 10: Fair Value Measurements

The accounting guidance related to financial assets and financial liabilities (“financial instruments”) establishes a hierarchy that prioritizes fair value measurements based on the types of inputs used for the various valuation techniques (market approach, income approach and cost approach). Level 1 consists of financial instruments whose values are based on quoted market prices for identical financial instruments in an active market. Level 2 consists of financial instruments that are valued using models or other valuation methodologies. These models use inputs that are observable in the marketplace either directly or indirectly. Level 3 consists of financial instruments whose values are determined using pricing models that use significant inputs that are primarily unobservable, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant management judgment or estimation. Our financial instruments that are accounted for at fair value on a recurring basis are presented in the table below.

Recurring Fair Value Measures

 

    Fair Value as of September 30, 2011      December 31,
2010
 
(in millions)   Level 1      Level 2      Level 3      Total      Total  

Assets

             

Trading securities

  $ 2,666       $       $  —       $ 2,666       $ 2,688   

Available-for-sale securities

    86                 21         107         126   

Equity warrants

                    2         2         1   

Interest rate swap agreements

            302                 302         232   

Foreign exchange contracts

            14                 14           
    $ 2,752       $ 316       $ 23       $ 3,091       $ 3,047   

Liabilities

             

Derivative component of ZONES

  $       $ 8       $       $ 8       $ 8   

Derivative component of prepaid forward sale
agreements

            1,100                 1,100         1,021   

Cross-currency swap agreements

            118                 118         29   

Foreign exchange contracts

            14                 14           
    $       $ 1,240       $       $ 1,240       $ 1,058   

Our financial instruments included in Level 3 primarily consist of available-for-sale securities that we acquired in connection with the NBCUniversal transaction. These investments are initially recorded at cost and remeasured to fair value on a recurring basis at the end of each period using unobservable inputs, which include company-specific information and other third-party transactions. We did not incur any other-than-temporary impairments for these investments in the periods presented. The changes in our Level 3 financial instruments were not material for the periods presented.

Note 11: Noncontrolling Interests

Certain of the 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 interest at fair value on the date of redemption. 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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In connection with the NBCUniversal transaction in January 2011, GE obtained a 49% indirect noncontrolling interest in the Comcast Content Business in exchange for a portion of our interest in NBCUniversal Holdings. The difference between the fair value received and the historical carrying value of the noncontrolling interest in the Comcast Content Business resulted in an increase of $1.6 billion, net of taxes, to additional paid-in capital of Comcast Corporation.

GE’s 49% interest in NBCUniversal Holdings is recorded as a redeemable noncontrolling interest in our consolidated financial statements due to the redemption provisions discussed in Note 4. The initial value for the redeemable noncontrolling interest was based on the fair value for the portion attributable to the net assets we acquired and our historical cost for the portion attributable to the Comcast Content Business. We adjust GE’s redeemable noncontrolling interest for its 49% interest in NBCUniversal Holdings’ and NBCUniversal’s earnings and changes in other comprehensive income, as well as for other capital transactions attributable to GE.

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

 

    Nine Months Ended
September 30
 
(in millions)   2011      2010  

Net income attributable to Comcast Corporation

  $ 2,873       $ 2,617   

Transfers from (to) noncontrolling interests:

    

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

    1,657           

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

            11   

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

  $ 4,530       $ 2,628   

Note 12: Postretirement, Pension and Other Employee Benefit Plans

NBCUniversal Employee Benefit Plans

Following the close of the NBCUniversal transaction on January 28, 2011, NBCUniversal established new employee benefit plans for its U.S. employees, including defined benefit pension plans and postretirement medical and life insurance plans. Additionally, NBCUniversal assumed certain liabilities related to its obligation to reimburse GE for amounts paid by GE for specified employee benefits and insurance programs that GE will continue to administer. NBCUniversal’s defined benefit pension plans for NBCUniversal employees (the “qualified plan”) and executives (the “nonqualified plan”) provide a lifetime income benefit based on an individual’s length of service and related compensation. The nonqualified plan gives credit to eligible participants for length of service provided before the close of the NBCUniversal transaction to the extent that participants did not vest in a supplemental pension plan sponsored by GE. The qualified plan is closed to new participants. The postretirement medical and life insurance benefit plans that were established provide continued coverage to employees eligible to receive such benefits and give credit for length of service provided before the close of the NBCUniversal transaction. Certain covered employees also retain the right, upon retirement, to elect to participate in corresponding plans sponsored by GE. To the extent our employees make such elections, NBCUniversal will reimburse GE for any amounts due. We did not, however, assume any obligation for benefits due to employees who were retired at the close of the NBCUniversal transaction and were eligible to receive benefits under GE’s postretirement medical and life insurance programs.

NBCUniversal funds the nonqualified plan and the postretirement medical and life insurance plans on a pay-as-you-go basis. NBCUniversal expects to contribute approximately $8 million in 2011 to fund these benefits, which includes estimated payments to GE for NBCUniversal’s obligation associated with GE’s supplemental pension plan. NBCUniversal does not plan to fund its qualified plan until the second quarter of 2012, at which time it expects to fund it in the amount of approximately $100 million.

 

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The tables below present condensed information on the NBCUniversal pension and postretirement benefit plans.

 

    Three Months Ended
September 30, 2011
     Nine Months Ended
September 30, 2011
 
(in millions)   Pension
Benefits
     Postretirement
Benefits
     Pension
Benefits
     Postretirement
Benefits
 

Service cost

  $ 27       $ 1       $ 72       $ 4   

Interest cost

  $ 3       $ 2       $ 9       $ 6   

 

As of September 30, 2011 (in millions)    Pension
Benefits
    Postretirement
Benefits
 

Benefit obligation

   $ 326      $ 170   

Discount rate

     5.5% - 6.0     5.75

NBCUniversal also established a 401(k) defined contribution retirement plan for U.S. employees with 100% matching contributions on the first 3.5% of pay plus additional contributions based on employee classification and management discretion. The related expense for the three and nine months ended September 30, 2011 was $20 million and $41 million, respectively.

NBCUniversal Other Employee Benefit Plans

Our condensed consolidated financial statements include the assets and liabilities of certain legacy NBCUniversal benefit plans, as well as the assets and liabilities for benefit plans of certain foreign subsidiaries. NBCUniversal also participates in various multiemployer pension plans covering some of its employees who are represented by labor unions. NBCUniversal makes periodic contributions to these plans in accordance with the terms of applicable collective bargaining agreements and laws but does not sponsor or administer these plans.

Note 13: 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 plans, employees are able to purchase shares of Comcast Class A common stock at a discount through payroll deductions.

In March 2011, we granted 23.8 million stock options and 6.6 million RSUs related to our annual management grant program. The weighted-average fair values associated with these grants were $6.97 per stock option and $23.33 per RSU.

Recognized Share-Based Compensation Expense

 

    Three Months Ended
September 30
     Nine Months Ended    
September 30
 
(in millions)       2011      2010      2011      2010  

Stock options

  $ 30       $ 25       $ 86       $ 78   

Restricted share units

    35         32         113         100   

Employee stock purchase plans

    4         3         10         9   

Total

  $ 69       $ 60       $ 209       $ 187   

As of September 30, 2011, we had $345 million of unrecognized pretax compensation costs related to nonvested stock options and $353 million related to nonvested RSUs.

The employee cost associated with participation in the employee stock purchase plans was satisfied with payroll deductions of approximately $16 million and $44 million for the three and nine months ended September 30, 2011, respectively. For the three and nine months ended September 30, 2010, the employee cost was $13 million and $39 million, respectively.

 

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Note 14: Supplemental Financial Information

Receivables

 

December 31,0 December 31,0
(in millions)   September 30,
2011
     December 31,
2010
 

Receivables, gross

  $ 4,650       $ 2,028   

Less: Allowance for returns and customer incentives

    351           

Less: Allowance for doubtful accounts

    203         173   

Receivables, net

  $ 4,096       $ 1,855   

Allowances for returns and customer incentives are primarily attributable to our Filmed Entertainment segment.

The table below presents our unbilled receivables related to long-term licensing arrangements included in our condensed consolidated balance sheet as of September 30, 2011. Current and noncurrent unbilled receivables are recorded in receivables, net and other noncurrent assets, net, respectively.

 

December 31,0
(in millions)   September 30,
2011
 

Current

  $ 197   

Noncurrent, net of imputed interest

    648   

Total

  $ 845   

Property and Equipment

 

(in millions)   September 30,
2011
     December 31,
2010
 

Property and equipment, at cost

  $ 57,953       $ 56,020   

Acquired NBCUniversal property and equipment

    2,524           

Acquired UCDP property and equipment

    2,479           

Property and equipment, at cost

    62,956         56,020   

Less: Accumulated depreciation

    35,515         32,505   

Property and equipment, net

  $ 27,441       $ 23,515   

Accumulated Other Comprehensive Income (Loss)

 

December 31, December 31,
(in millions)   September 30,
2011
    September 30,
2010
 

Unrealized gains (losses) on marketable securities

  $ 22      $ 22   

Deferred gains (losses) on cash flow hedges

    (149     (133

Unrecognized gains (losses) on employee benefit obligations

    (23     (5

Currency translation adjustments

    (3       

Accumulated other comprehensive (income) loss attributable to noncontrolling interests

    6          

Accumulated other comprehensive income (loss), net of deferred taxes

  $ (147   $ (116

 

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Operating Costs and Expenses

 

    Three Months Ended
September 30
     Nine Months Ended
September 30
 
(in millions)       2011              2010            2011          2010    

Programming and production

  $ 4,344       $ 2,002       $ 11,946       $ 6,369   

Cable Communications technical labor

    587         594         1,729         1,696   

Cable Communications customer service

    466         463         1,385         1,367   

Advertising, marketing and promotion

    1,102         636         3,194         1,775   

Other

    3,266         2,216         9,105         6,129   

Operating costs and expenses (excluding depreciation
and amortization)

  $ 9,765       $ 5,911       $ 27,359       $ 17,336   

Net Cash Provided by Operating Activities

 

    Nine Months Ended
September 30
 
(in millions)   2011     2010  

Net income from consolidated operations

  $ 3,572      $ 2,635   

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

   

Depreciation and amortization

    5,638        4,913   

Amortization of film and television costs

    4,769        99   

Share-based compensation

    260        226   

Noncash interest expense (income), net

    111        105   

Equity in net (income) losses of investees, net

    40        98   

Net (gain) loss on investment activity and other

    325        (78

Deferred income taxes

    770        (241

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

   

Change in receivables, net

    290        (145

Change in film and television costs

    (5,342     (90

Change in accounts payable and accrued expenses related to trade creditors

    (242     57   

Change in other operating assets and liabilities

    15        153   

Net cash provided by operating activities

  $ 10,206      $ 7,732   

Cash Payments for Interest and Income Taxes

 

    Three Months Ended
September 30
     Nine Months Ended
September 30
 
(in millions)       2011              2010              2011              2010      

Interest

  $ 612       $ 661       $ 1,809       $ 1,630   

Income taxes

  $ 596       $ 668       $ 1,166       $ 1,794   

Noncash Investing and Financing Activities

During the nine months ended September 30, 2011, we:

 

   

acquired 51% of NBCUniversal Holdings on January 28, 2011, for cash and a 49% interest in the Comcast Content Business (see Note 4 for additional information on the NBCUniversal transaction)

 

 

   

acquired approximately $505 million of property and equipment and software that was accrued but unpaid, which is a noncash investing activity

 

 

   

recorded a liability of approximately $307 million for a quarterly cash dividend of $0.1125 per common share paid in October 2011, which is a noncash financing activity

 

 

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Note 15: Receivables Monetization

As a result of the close of the NBCUniversal transaction on January 28, 2011, NBCUniversal established new receivables monetization programs with a syndicate of banks. We account for receivables monetized through these programs as sales in accordance with the appropriate accounting guidance. We receive deferred consideration from the assets sold in the form of a receivable, which is funded by residual cash flows after the senior interests have been fully paid. The deferred consideration is recorded at its initial fair value, which includes a provision for estimated losses we expect to incur related to these interests. The accounts receivable we sold that underlie the deferred consideration are generally short-term in nature and, therefore, the fair value of the deferred consideration approximated its carrying value as of September 30, 2011.

For the majority of the receivables monetized under the securitization programs, an affiliate of GE is responsible for servicing the receivables and remitting collections to the owner and the lenders. We perform this service on the affiliate’s behalf for a fee that is equal to the prevailing market rate for such services. As a result, no servicing asset or liability has been recorded in our condensed consolidated balance sheet as of September 30, 2011. The subservicing fees are a component of net loss on sale presented in the table below, which is included in other income (expense), net.

Effect on Income From Receivables Monetization and Cash Flows on Transfers

 

    Three Months Ended
September 30
    Nine Months Ended
September 30
 
(in millions)   2011     2011  

Effect on income from services

   

Net (loss) gain on sale

  $ (7   $ (24

Cash flows on transfers

   

Net proceeds (payments) on transfers

  $ (168   $ (542

Receivables Monetized and Deferred Consideration

 

(in millions)   September 30,
2011
 

Monetized receivables sold

  $ 809   

Deferred consideration

  $ 204   

In addition to the amounts presented above, we had $552 million payable to our securitization programs as of September 30, 2011. This amount represents cash receipts that are not yet remitted to the securitization program as of the balance sheet date and is recorded to accounts payable and accrued expenses related to trade creditors.

Note 16: Commitments and Contingencies

NBCUniversal Obligations, Commitments and Guarantees

NBCUniversal enters into long-term commitments with third parties in the ordinary course of business, including commitments to acquire film and television programming, take-or-pay creative talent and employment agreements, and various other television commitments. Many of NBCUniversal’s employees, including writers, directors, actors, technical and production personnel and others, as well as some of its on-air and creative talent, are covered by collective bargaining agreements or works councils. Approximately 42 collective bargaining agreements covering approximately 3,600 of NBCUniversal’s full-time, part-time and full-time equivalent freelance employees on its payroll have expired or are scheduled to expire through the remainder of 2011.

Station Venture

NBCUniversal owns a 79.62% equity interest and a 50% voting interest in Station Venture Holdings, LLC (“Station Venture”), a variable interest entity. The remaining equity interests in Station Venture are held by LIN TV, Corp. (“LIN TV”). Station Venture holds an indirect interest in the NBC network affiliated local television stations in Dallas, Texas and San Diego, California through its ownership interests in Station Venture Operations, LP (“Station LP”), a less than wholly owned consolidated subsidiary of NBCUniversal. Station Venture is the

 

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obligor on an $816 million senior secured note that is due in 2023 to General Electric Capital Corporation, a subsidiary of GE, as servicer. The note is nonrecourse to NBCUniversal, guaranteed by LIN TV and collateralized by substantially all of the assets of Station Venture and Station LP. In connection with the close of the NBCUniversal transaction, GE indemnified NBCUniversal for all liabilities NBCUniversal may incur as a result of any credit support, risk of loss or similar arrangement related to the senior secured note in existence prior to the close. We are not the primary beneficiary of, and accordingly do not consolidate, Station Venture. Our equity method investment in Station Venture was assigned no value in the preliminary allocation of purchase price for the NBCUniversal transaction, which is also the carrying value of our investment as of September 30, 2011. Because the assets of Station LP serve as collateral for Station Venture’s $816 million senior secured note, we have recorded a $482 million liability in our preliminary allocation of purchase price, representing the fair value of the net assets that collateralize the note.

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 customer base in the “Boston Cluster” area, and the potential class in the Pennsylvania case is our customer base in the “Philadelphia and Chicago Clusters,” as those terms are defined in the complaints. In each case, the plaintiffs allege that certain customer 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 Chicago Cluster and Philadelphia Cluster customers were certified in October 2007 and January 2010, respectively. We appealed class certification in the Philadelphia Cluster case to the Third Circuit Court of Appeals, which affirmed the class certification in August 2011 and denied our petition for a rehearing en banc in September 2011. As a result, notice to the class is being made and is expected to be completed by the end of 2011. At the same time, we intend to file a writ of certiorari with the U.S. Supreme Court asking that it review the Third Circuit Court of Appeals’ ruling. In March 2010, we moved for summary judgment dismissing all of the plaintiffs’ claims in the Philadelphia Cluster; a stay that had been issued on the summary judgment motion pending the class certification appeal was lifted upon the Third Circuit Court of Appeal’s ruling. The plaintiffs’ claims concerning the other two clusters are stayed pending determination of the Philadelphia Cluster claims.

We also are among the defendants in a purported class action filed in the United States District Court for the Central District of California 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 customers 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 customers on an “unbundled” basis. In October 2009, the Central District of California issued an order dismissing the plaintiffs’ complaint with prejudice. In June 2011, a panel of the Ninth Circuit Court of Appeals affirmed the District Court’s order. In July 2011, the plaintiffs filed a petition for a panel rehearing and a rehearing en banc.

In addition, we are the defendant in 22 purported class actions filed in federal district courts throughout the country. All of these actions have been consolidated by the Judicial Panel on Multidistrict Litigation in the United States District Court for the Eastern District of Pennsylvania for pre-trial proceedings. In a consolidated complaint filed in November 2009 on behalf of all plaintiffs in the multidistrict litigation, the plaintiffs allege that we improperly “tie” the rental of set-top boxes to the provision of premium cable services in violation of Section 1 of the Sherman Antitrust Act, various state antitrust laws and unfair/deceptive trade practices acts in California, Illinois and Alabama. The plaintiffs also allege a claim for unjust enrichment and seek relief on behalf of a nationwide class of our premium cable customers and on behalf of subclasses consisting of premium cable customers from California, Alabama, Illinois, Pennsylvania and Washington. In January 2010, we moved to compel arbitration of the plaintiffs’ claims for unjust enrichment and violations of the unfair/deceptive trade

 

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practices acts of Illinois and Alabama. In September 2010, the plaintiffs filed an amended complaint alleging violations of additional state antitrust laws and unfair/deceptive trade practices acts on behalf of new subclasses in Connecticut, Florida, Minnesota, Missouri, New Jersey, New Mexico and West Virginia. In the amended complaint, plaintiffs omitted their unjust enrichment claim, as well as their state law claims on behalf of the Alabama, Illinois and Pennsylvania subclasses. In June 2011, the plaintiffs filed another amended complaint alleging only violations of Section 1 of the Sherman Antitrust Act, antitrust law in Washington and unfair/deceptive trade practices acts in California and Washington. The plaintiffs seek relief on behalf of a nationwide class of our premium cable customers and on behalf of subclasses consisting of premium cable customers from California and Washington. In July 2011, we moved to compel arbitration of most of the plaintiffs’ claims and to stay the remaining claims pending arbitration.

The West Virginia Attorney General also filed a complaint in West Virginia state court in July 2009 alleging that we improperly “tie” the rental of set-top boxes to the provision of premium cable services in violation of the West Virginia Antitrust Act and the West Virginia Consumer Credit and Protection Act. The Attorney General also alleges a claim for unjust enrichment/restitution. We removed the case to the United States District Court for West Virginia, and it was subsequently transferred to the United States District Court for the Eastern District of Pennsylvania and consolidated with the multidistrict litigation described above. In March 2010, the Eastern District of Pennsylvania denied the Attorney General’s motion to remand the case back to West Virginia state court. In June 2010, the Attorney General moved to sever and remand the portion of the claims seeking civil penalties and injunctive relief back to West Virginia state court. We filed a brief in opposition to the motion in July 2010.

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

Other

We are 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 also 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 17: Financial Data by Business Segment

Following the NBCUniversal transaction, we present our operations in five reportable segments: Cable Communications, Cable Networks, Broadcast Television, Filmed Entertainment and Theme Parks. The Comcast Content Business is presented with NBCUniversal’s businesses in the Cable Networks segment. The businesses of Comcast Interactive Media (previously presented in Corporate and Other) that were not contributed to NBCUniversal are included in the Cable Communications segment. We have recast our segment presentation for the three and nine months ended September 30, 2010 in order to reflect our current reportable segments. Following the acquisition of the 50% equity interest in UCDP that NBCUniversal did not already own, we revised our measure of operating performance for our Theme Parks segment. Operating income (loss) before depreciation and amortization for our Theme Parks segment now includes 100% of the results of operations of UCDP. Prior to this transaction, equity in income (loss) of investees was included in operating income (loss) before depreciation and amortization due to the significance of UCDP to the Theme Parks segment. We have recast our Theme Parks segment performance measure for the nine months ended September 30, 2011 in order to reflect our current segment performance measure. See Note 4 for additional information on the NBCUniversal and UCDP transactions.

 

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In evaluating the profitability of our operating segments, the components of net income (loss) below operating income (loss) before depreciation and amortization are not separately evaluated by our management. Our financial data by business segment is presented in the table below.

 

    Three Months Ended September 30, 2011  
(in millions)   Revenue(i)     Operating Income (Loss)
Before Depreciation and
Amortization(j)
    Depreciation and
Amortization
    Operating Income
(Loss)
    Capital
Expenditures
 

Cable Communications(a)

  $ 9,331      $ 3,714      $ 1,579      $ 2,135      $ 1,254   

NBCUniversal:

         

Cable Networks(b)

    2,097        751        183        568        7   

Broadcast Television(c)

    1,511        (7 )       24        (31     16   

Filmed Entertainment(d)

    1,096        54        6        48        2   

Theme Parks(e)

    580        285        63        222        42   

Headquarters and Other(f)

    9        (132 )       56        (188     41   

Eliminations(g)

    (93 )                              

NBCUniversal

    5,200        951        332        619        108   

Corporate and Other(h)

    107        (91 )       23        (114     46   

Eliminations(g)

    (299            (1     1          

Comcast Consolidated

  $ 14,339      $ 4,574      $ 1,933      $ 2,641      $ 1,408   

 

    Three Months Ended September 30, 2010  
(in millions)   Revenue(i)     Operating Income (Loss)
Before Depreciation and
Amortization(j)
    Depreciation and
Amortization
     Operating Income
(Loss)
    Capital
Expenditures
 

Cable Communications(a)

  $ 8,885      $ 3,479      $ 1,547       $ 1,932      $ 1,317   

Cable Networks(b)

    670        215        68         147        11   

Corporate and Other(h)

    (1     (115     9         (124     38   

Eliminations(g)

    (65     (1             (1       

Comcast Consolidated

  $ 9,489      $ 3,578      $ 1,624       $ 1,954      $ 1,366   

 

     Nine Months Ended September 30, 2011  
(in millions)   Revenue(i)     Operating Income (Loss)
Before Depreciation and
Amortization(j)
    Depreciation and
Amortization
   

Operating

Income (Loss)

    Capital
Expenditures
    Assets  

Cable Communications(a)

  $ 27,756      $ 11,349      $ 4,791      $ 6,558      $ 3,488      $ 118,561   

NBCUniversal:

           

Cable Networks(b)

    5,902        2,262        523        1,739        37        28,684   

Broadcast Television(c)

    4,094        218        54        164        33        7,402   

Filmed Entertainment(d)

    2,972        (62 )       15        (77     4        3,795   

Theme Parks(e)

    1,376        607        133        474        82        5,053   

Headquarters and Other(f)

    34        (381 )       120        (501     83        5,591   

Eliminations(g)

    (856 )       (234 )       (54     (180            (552

NBCUniversal

    13,522        2,410        791        1,619        239        49,973   

Corporate and Other(h)

    423        (319 )       55        (374     58        6,199   

Eliminations(g)

    (901 )       1        1                      (17,906

Comcast Consolidated

  $ 40,800      $ 13,441      $ 5,638      $ 7,803      $ 3,785      $ 156,827   

 

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Table of Contents
    Nine Months Ended September 30, 2010  
(in millions)   Revenue(i)     Operating Income (Loss)
Before Depreciation and
Amortization(j)
    Depreciation and
Amortization
     Operating Income
(Loss)
    Capital
Expenditures
 

Cable Communications(a)

  $ 26,313      $ 10,599      $ 4,680       $ 5,919      $ 3,349   

Cable Networks(b)

    2,025        613        209         404        33   

Corporate and Other(h)

    105        (332     23         (355     47   

Eliminations(g)

    (227 )              1         (1       

Comcast Consolidated

  $ 28,216      $ 10,880      $ 4,913       $ 5,967      $ 3,429   

 

(a)

Our Cable Communications segment consists primarily of our cable services business and the businesses of Comcast Interactive Media that were not contributed to NBCUniversal.

For the three and nine months ended September 30, 2011 and 2010, Cable Communications segment revenue was derived from the following sources:

 

    Three Months Ended
September 30
    Nine Months Ended
September 30
 
       2011         2010       2011     2010  

Video

    52.4     54.5     53.0     55.2

High-speed Internet

    23.6     22.6     23.4     22.5

Phone

    9.5     9.3     9.4     9.3

Advertising

    5.3     5.8     5.3     5.4

Business services

    5.0     3.7     4.7     3.4

Other

    4.2     4.1     4.2     4.2

Total

    100.0     100.0     100.0     100.0

Subscription revenue received from customers who purchase bundled services at a discounted rate is allocated proportionally to each service based on the individual service’s price on a stand-alone basis. For both the three and nine months ended September 30, 2011 and 2010, approximately 2.8% of Cable Communications revenue was derived from franchise and other regulatory fees.

 

(b)

Our Cable Networks segment consists primarily of the NBCUniversal national cable networks, international cable networks, cable television production studio and certain digital media properties, and the Comcast Content Business.

 

(c)

Our Broadcast Television segment consists primarily of the NBC network and its owned NBC affiliated local television stations, the Telemundo network and its owned Telemundo affiliated local television stations, our broadcast television production operations, and related digital media properties.

 

(d)

Our Filmed Entertainment segment represents the operations of Universal Pictures, which produces, acquires, markets and distributes filmed entertainment and stage plays worldwide in various media formats for theatrical, home entertainment, television and other distribution platforms.

 

(e)

Our Theme Parks segment consists primarily of Universal theme parks in Orlando and Hollywood, our Wet ‘n Wild water park, and fees for intellectual property licenses and other services from third parties that own and operate Universal Studios Japan and Universal Studios Singapore.

 

(f)

NBCUniversal Headquarters and Other activities include costs associated with overhead and allocations and employee benefits.

 

(g)

Eliminations include the results of operations for UCDP for the period January 29, 2011 through June 30, 2011. The Theme Parks segment includes these amounts to reflect the current segment performance measure but these amounts are not included when we measure total NBCUniversal and our consolidated results of operations because we recorded UCDP as an equity method investment in our consolidated financial statements during this period.

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

 

   

our Cable Networks and Broadcast Television segments generate revenue by selling programming to our Cable Communications segment, which represents a substantial majority of the revenue elimination amount

 

 

   

our Cable Communications segment receives incentives offered by our Cable Networks segment in connection with its distribution of the Cable Networks’ content that are recorded as a reduction to programming expenses

 

 

   

our Cable Communications segment generates revenue by selling advertising and by selling the use of satellite feeds to our Cable Networks segment

 

 

   

our Filmed Entertainment and Broadcast Television segments generate revenue by licensing content to our Cable Networks segment

 

 

(h)

Corporate and Other activities include Comcast Spectacor, corporate activities and all other businesses not presented in our reportable segments.

 

(i)

Non-U.S. revenue, primarily in Europe and Asia, for the three and nine months ended September 30, 2011 was approximately $1.1 billion and $2.9 billion, respectively. Non-U.S. revenue was not significant for the three and nine months ended September 30, 2010. No single customer accounted for a significant amount of our revenue in any period.

 

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Table of Contents
(j)

We use operating income (loss) before depreciation and amortization, excluding impairment charges related to fixed and intangible assets and gains or losses from the sale of assets, if any, to measure the profit or loss of our operating segments. This measure eliminates the significant level of noncash depreciation and amortization expense that results from the capital-intensive nature of certain 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, 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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Table of Contents

Note 18: Condensed Consolidating Financial Information

Comcast Corporation and four of our 100% 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.”

Comcast Corporation provides an unconditional subordinated guarantee of the $185 million principal amount currently outstanding of Comcast Holdings’ ZONES due October 2029 and the $202 million principal amount currently outstanding of Comcast Holdings’ 105/8% senior subordinated debentures due 2012. Comcast Corporation does not guarantee the $62 million principal amount currently outstanding of Comcast Holdings’ ZONES due November 2029.

As a result of the NBCUniversal transaction on January 28, 2011, our investments in NBCUniversal Holdings are held by the Comcast parent and Comcast Holdings. Certain entities of the Comcast Content Business were subsidiaries of Comcast Holdings. Since these entities were contributed to NBCUniversal Holdings, they are included with the Comcast Parent’s investment in NBCUniversal Holdings. However, the operations of these businesses are presented in the nonguarantor subsidiaries column. Our condensed consolidating financial information is presented in the tables below.

Condensed Consolidating Balance Sheet

September 30, 2011

 

(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

  $      $      $      $      $ 1,806      $      $ 1,806   

Receivables, net

                                4,096               4,096   

Programming rights

                                1,055               1,055   

Other current assets

    154        2        1               1,468               1,625   

Total current assets

    154        2        1               8,425               8,582   

Film and television costs

                                5,369               5,369   

Investments

                                9,575               9,575   

Investments in and amounts due from subsidiaries eliminated upon consolidation

    71,319        88,112        44,755        86,696        34,669        (325,551       

Property and equipment, net

    263                             27,178               27,441   

Franchise rights

                                59,442               59,442   

Goodwill

                                26,831               26,831   

Other intangible assets, net

    10                             17,376               17,386   

Other noncurrent assets, net

    971        39        6        148        1,692        (655     2,201   

Total assets

  $ 72,717      $ 88,153      $ 44,762      $ 86,844      $ 190,557      $ (326,206   $ 156,827   

Liabilities and Equity

             

Accounts payable and accrued expenses related to trade creditors

  $ 13      $      $      $      $ 5,442      $      $ 5,455   

Accrued participations and residuals

                                1,247               1,247   

Accrued expenses and other current liabilities

    935        278        32        267        3,484               4,996   

Current portion of long-term debt

    400        300        557        202        989               2,448   

Total current liabilities

    1,348        578        589        469        11,162               14,146   

Long-term debt, less current portion

    22,842        3,961        1,767        112        9,840               38,522   

Deferred income taxes

                         721        29,454        (512     29,663   

Other noncurrent liabilities

    1,844                             9,956        (143     11,657   

Redeemable noncontrolling interests

                                15,827               15,827   

Equity:

             

Common stock

    32                                           32   

Other shareholders’ equity

    46,651        83,614        42,406        85,542        113,989        (325,551     46,651   

Total Comcast Corporation shareholders’ equity

    46,683        83,614        42,406        85,542        113,989        (325,551     46,683   

Noncontrolling interests

                                329               329   

Total equity

    46,683        83,614        42,406        85,542        114,318        (325,551     47,012   

Total liabilities and equity

  $ 72,717      $ 88,153      $ 44,762      $ 86,844      $ 190,557      $ (326,206   $ 156,827   

 

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Condensed Consolidating Balance Sheet

December 31, 2010

 

(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

  $  —       $  —       $  —       $  —       $ 5,984       $  —      $ 5,984   

Receivables, net

                                    1,855                1,855   

Programming rights

                                    122                122   

Other current assets

    162                                 763                925   

Total current assets

    162                                 8,724                8,886   

Film and television costs

                                    460                460   

Investments

                                    6,670                6,670   

Investments in and amounts due from subsidiaries eliminated upon consolidation

    68,987         90,076         52,652         72,629         12,339         (296,683       

Property and equipment, net

    278                                 23,237                23,515   

Franchise rights

                                    59,442                59,442   

Goodwill

                                    14,958                14,958   

Other intangible assets, net

    10                                 3,421                3,431   

Other noncurrent assets, net

    1,128         45                 148         670         (819     1,172   

Total assets

  $ 70,565       $ 90,121       $ 52,652       $ 72,777       $ 129,921       $ (297,502   $ 118,534   

Liabilities and Equity

                  

Accounts payable and accrued expenses related to trade creditors

  $ 6       $ 3       $       $       $ 3,282       $      $ 3,291   

Accrued expenses and other current liabilities

    1,038         187         74         266         1,578                3,143   

Current portion of long-term debt

    755         1,000                         45                1,800   

Total current liabilities

    1,799         1,190         74         266         4,905                8,234   

Long-term debt, less current portion

    22,754         3,963         2,339         310         249                29,615   

Deferred income taxes

                            704         28,218         (676     28,246   

Other noncurrent liabilities

    1,658                                 6,347         (143     7,862   

Redeemable noncontrolling interests

                                    143                143   

Equity:

                  

Common stock

    32                                                32   

Other shareholders’ equity

    44,322         84,968         50,239         71,497         89,979         (296,683     44,322   

Total Comcast Corporation shareholders’ equity

    44,354         84,968         50,239         71,497         89,979         (296,683     44,354   

Noncontrolling interests

                                    80                80   

Total equity

    44,354         84,968         50,239         71,497         90,059         (296,683     44,434   

Total liabilities and equity

  $ 70,565       $ 90,121       $ 52,652       $ 72,777       $ 129,921       $ (297,502   $ 118,534   

 

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Table of Contents

Condensed Consolidating Statement of Income

For the Three Months Ended September 30, 2011

 

(in millions)  

Comcast

Parent

   

CCCL

Parent

   

Combined

CCHMO

Parents

   

Comcast

Holdings

   

Non-

Guarantor

Subsidiaries

   

Elimination

and

Consolidation

Adjustments

   

Consolidated

Comcast

Corporation

 

Revenue:

             

Service revenue

  $      $      $      $      $ 14,339      $      $ 14,339   

Management fee revenue

    200        194        119                      (513       
      200        194        119               14,339        (513     14,339   

Costs and Expenses:

             

Operating costs and expenses

    84        194        119               9,881        (513     9,765   

Depreciation

    8                             1,532               1,540   

Amortization

                                393               393   
      92        194        119               11,806        (513     11,698   

Operating income (loss)

    108                             2,533               2,641   

Other Income (Expense):

             

Interest expense

    (358     (82     (43     (8     (146            (637

Investment income (loss), net

    1                      (5     (143            (147

Equity in net income (losses) of investees, net

    1,072        1,369        787        1,338        (40     (4,566     (40

Other income (expense), net

    (3                          (9            (12
      712        1,287        744        1,325        (338</