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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 March 31, 2016

OR

 

¨

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

For the Transition Period from                      to                     

 

 

 

LOGO

 

Commission File Number  

Registrant; State of

Incorporation; Address and Telephone

Number

  I.R.S. Employer Identification No.
001-32871   COMCAST CORPORATION   27-0000798
 

PENNSYLVANIA

One Comcast Center

Philadelphia, PA 19103-2838

(215) 286-1700

 
001-36438   NBCUNIVERSAL MEDIA, LLC   14-1682529
 

DELAWARE

30 Rockefeller Plaza

New York, NY 10112-0015

(212) 664-4444

 

 

 

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.

 

Comcast Corporation

 

Yes x

 

No ¨

NBCUniversal Media, LLC

 

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).

 

Comcast Corporation

 

Yes x

 

No ¨

NBCUniversal Media, LLC

 

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.

 

Comcast Corporation

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

NBCUniversal Media, LLC

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

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

 

Comcast Corporation

 

Yes ¨

 

No x

NBCUniversal Media, LLC

 

Yes ¨

 

No x

Indicate the number of shares outstanding of each of the registrant’s classes of stock, as of the latest practical date:

As of March 31, 2016, there were 2,417,751,218 shares of Comcast Corporation Class A common stock and 9,444,375 shares of Comcast Corporation Class B common stock outstanding.

Not applicable for NBCUniversal Media, LLC.

NBCUniversal Media, LLC meets the conditions set forth in General Instruction H(1)(a) and (b) of Form 10-Q and is therefore filing this form with the reduced disclosure format.

 

 

 


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TABLE OF CONTENTS

          Page
Number
 
PART I. FINANCIAL INFORMATION   

Item 1.

  Comcast Corporation Financial Statements     1   
  Condensed Consolidated Balance Sheet as of March 31, 2016 and December 31, 2015 (Unaudited)     1   
  Condensed Consolidated Statement of Income for the Three Months Ended March 31, 2016 and 2015 (Unaudited)     2   
  Condensed Consolidated Statement of Comprehensive Income for the Three Months Ended March 31, 2016 and 2015 (Unaudited)     3   
  Condensed Consolidated Statement of Cash Flows for the Three Months Ended March 31, 2016 and 2015 (Unaudited)     4   
  Condensed Consolidated Statement of Changes in Equity for the Three Months Ended March 31, 2016 and 2015 (Unaudited)     5   
  Notes to Condensed Consolidated Financial Statements (Unaudited)     6   

Item 2.

  Management’s Discussion and Analysis of Financial Condition and Results of Operations     24   

Item 3.

  Quantitative and Qualitative Disclosures About Market Risk     36   

Item 4.

  Controls and Procedures     36   
PART II. OTHER INFORMATION  

Item 1.

  Legal Proceedings     37   

Item 1A.

  Risk Factors     37   

Item 2.

  Unregistered Sales of Equity Securities and Use of Proceeds     37   

Item 6.

  Exhibits     38   
SIGNATURES       39   
NBCUniversal Media, LLC Financial Statements     40   

 

 

Explanatory Note

This Quarterly Report on Form 10-Q is a combined report being filed separately by Comcast Corporation (“Comcast”) and NBCUniversal Media, LLC (“NBCUniversal”). Comcast owns all of the common equity interests in NBCUniversal, and NBCUniversal meets the conditions set forth in General Instruction H(1)(a) and (b) of Form 10-Q and is therefore filing its information within this Form 10-Q with the reduced disclosure format. Each of Comcast and NBCUniversal is filing on its own behalf the information contained in this report that relates to itself, and neither company makes any representation as to information relating to the other company. Where information or an explanation is provided that is substantially the same for each company, such information or explanation has been combined in this report. Where information or an explanation is not substantially the same for each company, separate information and explanation has been provided. In addition, separate condensed consolidated financial statements for each company, along with notes to the condensed consolidated financial statements, are included in this report. Unless indicated otherwise, throughout this Quarterly Report on Form 10-Q, we refer to Comcast and its consolidated subsidiaries, including NBCUniversal and its consolidated subsidiaries, as “we,” “us” and “our;” Comcast Cable Communications, LLC and its consolidated subsidiaries as “Comcast Cable;” Comcast Holdings Corporation as “Comcast Holdings;” and NBCUniversal, LLC as “NBCUniversal Holdings.”

This Quarterly Report on Form 10-Q is for the three months ended March 31, 2016. This Quarterly Report modifies and supersedes documents filed before it. 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.

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,”


Table of Contents

“should,” “expects,” “believes,” “estimates,” “potential,” or “continue,” or the negative of those words, and other comparable words. You should be aware that these statements are only our predictions. In evaluating these 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 consumer behavior driven by alternative methods for viewing content may adversely affect our businesses and challenge existing business models

 

 

   

a decline in advertisers’ expenditures or changes in advertising markets could negatively impact our businesses

 

 

   

our businesses depend on keeping pace with technological developments

 

 

   

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

 

 

   

changes to existing statutes, rules, regulations, or interpretations thereof, or adoption of new ones, could have an adverse effect on our businesses

 

 

   

programming expenses for our video services are increasing, which could adversely affect our Cable Communications segment’s video business

 

 

   

NBCUniversal’s success depends on consumer acceptance of its content, and its businesses may be adversely affected if its content fails to achieve sufficient consumer acceptance or the costs to create or acquire content increase

 

 

   

the loss of NBCUniversal’s programming distribution agreements, or the renewal of these agreements on less favorable terms, could adversely affect its businesses

 

 

   

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

 

 

   

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

 

 

   

weak economic conditions may have a negative impact on our businesses

 

 

   

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

 

 

   

acquisitions and other strategic initiatives present many risks, and we may not realize the financial and strategic goals that we had contemplated

 

 

   

labor disputes, whether involving employees or sports organizations, may disrupt our operations and adversely affect our businesses

 

 

   

the loss of key management personnel or popular on-air and creative talent could have an adverse effect on our businesses

 

 

   

we face risks relating to doing business internationally that could adversely affect our businesses

 

 

   

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

 


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PART I: FINANCIAL INFORMATION

ITEM 1: FINANCIAL STATEMENTS

Comcast Corporation

Condensed Consolidated Balance Sheet

(Unaudited)

 

(in millions, except share data)   March 31,
2016
    December 31,
2015
 

Assets

   

Current Assets:

   

Cash and cash equivalents

  $ 5,628      $ 2,295   

Receivables, net

    6,375        6,896   

Programming rights

    1,390        1,213   

Other current assets

    1,787        1,899   

Total current assets

    15,180        12,303   

Film and television costs

    5,768        5,855   

Investments

    3,638        3,224   

Property and equipment, net of accumulated depreciation of $48,611 and $48,100

    34,122        33,665   

Franchise rights

    59,364        59,364   

Goodwill

    33,458        32,945   

Other intangible assets, net of accumulated amortization of $10,085 and $9,868

    16,832        16,946   

Other noncurrent assets, net

    2,237        2,272   

Total assets

  $ 170,599      $ 166,574   

Liabilities and Equity

   

Current Liabilities:

   

Accounts payable and accrued expenses related to trade creditors

  $ 6,333      $ 6,215   

Accrued participations and residuals

    1,510        1,572   

Deferred revenue

    1,393        1,302   

Accrued expenses and other current liabilities

    5,729        5,462   

Current portion of long-term debt

    4,119        3,627   

Total current liabilities

    19,084        18,178   

Long-term debt, less current portion

    51,515        48,994   

Deferred income taxes

    33,821        33,566   

Other noncurrent liabilities

    10,431        10,637   

Commitments and contingencies (Note 11)

   

Redeemable noncontrolling interests and redeemable subsidiary preferred stock

    1,236        1,221   

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, 2,854,146,732 and 2,869,349,502; outstanding, 2,417,751,218 and 2,432,953,988

    29        29   

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

             

Additional paid-in capital

    38,464        38,518   

Retained earnings

    21,750        21,413   

Treasury stock, 436,395,514 Class A common shares

    (7,517     (7,517

Accumulated other comprehensive income (loss)

    (84     (174

Total Comcast Corporation shareholders’ equity

    52,642        52,269   

Noncontrolling interests

    1,870        1,709   

Total equity

    54,512        53,978   

Total liabilities and equity

  $ 170,599      $ 166,574   

See accompanying notes to condensed consolidated financial statements.

 

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Comcast Corporation

Condensed Consolidated Statement of Income

(Unaudited)

 

    Three Months Ended
March 31
 
(in millions, except per share data)       2016             2015      

Revenue

  $ 18,790      $ 17,853   

Costs and Expenses:

   

Programming and production

    5,431        5,463   

Other operating and administrative

    5,525        5,074   

Advertising, marketing and promotion

    1,467        1,360   

Depreciation

    1,785        1,634   

Amortization

    493        432   
      14,701        13,963   

Operating income

    4,089        3,890   

Other Income (Expense):

   

Interest expense

    (703     (656

Investment income (loss), net

    30        33   

Equity in net income (losses) of investees, net

    (11     33   

Other income (expense), net

    130        102   
      (554     (488

Income before income taxes

    3,535        3,402   

Income tax expense

    (1,311     (1,261

Net income

    2,224        2,141   

Net (income) loss attributable to noncontrolling interests and redeemable subsidiary preferred stock

    (90     (82

Net income attributable to Comcast Corporation

  $ 2,134      $ 2,059   

Basic earnings per common share attributable to Comcast Corporation shareholders

  $ 0.88      $ 0.82   

Diluted earnings per common share attributable to Comcast Corporation shareholders

  $ 0.87      $ 0.81   

Dividends declared per common share

  $ 0.275      $ 0.25   

See accompanying notes to condensed consolidated financial statements.

 

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Comcast Corporation

Condensed Consolidated Statement of Comprehensive Income

(Unaudited)

 

     Three Months Ended
March 31
 
(in millions)        2016             2015      

Net income

   $ 2,224      $ 2,141   

Unrealized gains (losses) on marketable securities, net of deferred taxes of $(1) and $—

     2          

Deferred gains (losses) on cash flow hedges, net of deferred taxes of $18 and $23

     (31     (39

Amounts reclassified to net income:

    

Realized (gains) losses on marketable securities, net of deferred taxes of $1 and $—

     (1       

Realized (gains) losses on cash flow hedges, net of deferred taxes of $(10) and $(22)

     17        37   

Employee benefit obligations, net of deferred taxes of $(2) and $—

     2          

Currency translation adjustments, net of deferred taxes of $(58) and $23

     238        (55

Comprehensive income

     2,451        2,084   

Net (income) loss attributable to noncontrolling interests and redeemable subsidiary preferred stock

     (90     (82

Other comprehensive (income) loss attributable to noncontrolling interests

     (137     15   

Comprehensive income attributable to Comcast Corporation

   $ 2,224      $ 2,017   

See accompanying notes to condensed consolidated financial statements.

 

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Comcast Corporation

Condensed Consolidated Statement of Cash Flows

(Unaudited)

 

     Three Months Ended
March 31
 
(in millions)        2016             2015      

Net cash provided by operating activities

   $ 5,110      $ 5,245   

Investing Activities

    

Capital expenditures

     (1,885     (1,726

Cash paid for intangible assets

     (378     (273

Acquisitions and construction of real estate properties

     (140     (24

Acquisitions, net of cash acquired

     (24       

Proceeds from sales of businesses and investments

     110        180   

Purchases of investments

     (448     (32

Other

     56        181   

Net cash provided by (used in) investing activities

     (2,709     (1,694

Financing Activities

    

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

     (538     (150

Proceeds from borrowings

     3,323          

Repurchases and repayments of debt

     (48     (909

Repurchases and retirements of common stock

     (1,249     (2,000

Dividends paid

     (611     (572

Issuances of common stock

     12        28   

Distributions to noncontrolling interests and dividends for redeemable subsidiary preferred stock

     (77     (62

Other

     120        141   

Net cash provided by (used in) financing activities

     932        (3,524

Increase (decrease) in cash and cash equivalents

     3,333        27   

Cash and cash equivalents, beginning of period

     2,295        3,910   

Cash and cash equivalents, end of period

   $ 5,628      $ 3,937   

See accompanying notes to condensed consolidated financial statements.

 

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Comcast Corporation

Condensed Consolidated Statement of Changes in Equity

(Unaudited)

 

    Redeemable
Noncontrolling
Interests and
Redeemable
Subsidiary
Preferred Stock
            

 

 

 

 

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, December 31, 2014

  $ 1,066              $ 25      $ 5      $      $ 38,805      $ 21,539      $ (7,517   $ (146   $ 357      $ 53,068   

Stock compensation plans

                  232        (189           43   

Repurchases and retirements of common stock

                  (407     (1,593           (2,000

Employee stock purchase plans

                  30                30   

Dividends declared

                    (630           (630

Other comprehensive income (loss)

                        (42     (15     (57

Contributions from (distributions to) noncontrolling interests, net

                          (34     (34

Other

    7                            (24     (24

Net income (loss)

    26                                                2,059                        56        2,115   

Balance, March 31, 2015

  $ 1,099              $ 25      $ 5      $      $ 38,660      $ 21,186      $ (7,517   $ (188   $ 340      $ 52,511   

Balance, December 31, 2015

  $ 1,221            $ 29      $      $      $ 38,518      $ 21,413      $ (7,517   $ (174   $ 1,709      $ 53,978   

Stock compensation plans

                  176        (137           39   

Repurchases and retirements of common stock

                  (259     (990           (1,249

Employee stock purchase plans

                  33                33   

Dividends declared

                    (670           (670

Other comprehensive income (loss)

                        90        137        227   

Contributions from (distributions to) noncontrolling interests, net

    (5                         (36     (36

Other

    (10                 (4             (4

Net income (loss)

    30                                                2,134                        60        2,194   

Balance, March 31, 2016

  $ 1,236              $ 29      $  —      $  —      $ 38,464      $ 21,750      $ (7,517   $ (84   $ 1,870      $ 54,512   

See accompanying notes to condensed consolidated financial statements.

 

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Comcast Corporation

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 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. 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 consolidated financial statements included in our 2015 Annual Report on Form 10-K.

Reclassifications

Reclassifications have been made to our condensed consolidated financial statements for the prior year period to conform to classifications used in 2016.

Note 2: Recent Accounting Pronouncements

Revenue Recognition

In May 2014, the Financial Accounting Standards Board (“FASB”) updated the accounting guidance related to revenue recognition. The updated accounting guidance provides a single, contract-based revenue recognition model to help improve financial reporting by providing clearer guidance on when an entity should recognize revenue and by reducing the number of standards to which an entity has to refer. The updated accounting guidance is effective for us as of January 1, 2018. The updated accounting guidance provides companies with alternative methods of adoption. We are currently in the process of determining the impact that the updated accounting guidance will have on our consolidated financial statements and our method of adoption.

Consolidations

In February 2015, the FASB updated the accounting guidance related to consolidation under the variable interest entity (“VIE”) and voting interest entity models. The updated accounting guidance modifies the consolidation guidance for VIEs, limited partnerships and similar legal entities. We have adopted this guidance as of January 1, 2016 and it did not have a material impact on our consolidated financial statements.

Financial Assets and Financial Liabilities

In January 2016, the FASB updated the accounting guidance related to the recognition and measurement of financial assets and financial liabilities. The updated accounting guidance, among other things, requires that all nonconsolidated equity investments, except those accounted for under the equity method, be measured at fair value and that the changes in fair value be recognized in net income. The updated guidance is effective for us as of January 1, 2018. The updated accounting guidance requires a cumulative effect adjustment to beginning retained earnings when the guidance is adopted with certain exceptions. We are currently in the process of determining the impact that the updated accounting guidance will have on our consolidated financial statements.

 

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Comcast Corporation

 

Leases

In February 2016, the FASB updated the accounting guidance related to leases. The updated accounting guidance requires lessees to recognize a right-of-use asset and a lease liability on the balance sheet for all leases with the exception of short-term leases. For a lessee, the recognition, measurement and presentation of expenses and cash flows arising from a lease do not significantly change from previous guidance. For a lessor, the accounting applied is also largely unchanged from previous guidance. The updated guidance is effective for us as of January 1, 2019 and early adoption is permitted. The updated accounting guidance must be adopted using a modified retrospective approach for leases that exist or are entered into after the beginning of the earliest comparative period in the financial statements. We are currently in the process of determining the impact that the updated accounting guidance will have on our consolidated financial statements.

Share-Based Compensation

In March 2016, the FASB updated the accounting guidance that affects several aspects of the accounting for share-based compensation. The most significant change for us relates to the presentation of the income and withholding tax consequences of share-based compensation in our consolidated financial statements. Among the changes, the updated guidance requires that the excess income tax benefits or deficiencies that arise when the tax consequences of share-based compensation differ from amounts previously recognized in the statement of income be recognized as income tax benefit or expense in the statement of income rather than as additional paid-in capital in the balance sheet. The guidance also states that excess income tax benefits should not be presented separately from other income taxes in the statement of cash flows and, thus, should be classified as an operating activity rather than a financing activity as they are under the current guidance. In addition, the updated guidance requires when an employer withholds shares upon exercise of options or the vesting of restricted stock for the purpose of meeting withholding tax requirements, that the cash paid for withholding taxes be classified as a financing activity. We currently record these amounts within operating activities.

The updated guidance is effective for us as of January 1, 2017 and early adoption is permitted. The updated guidance provides companies with alternative methods of adoption, with certain items that are allowed to be applied retrospectively and certain other items that are only to be applied prospectively in the period of adoption. We are currently in the process of determining our method of adoption of this updated accounting guidance.

If we had adopted all provisions of the updated guidance as of January 1, 2016, it would have increased net income attributable to Comcast by $111 million and it would have increased net cash provided by operating activities and decreased net cash provided by (used in) financing activities each by $289 million for the three months ended March 31, 2016. The most significant impact of implementing the new guidance will occur in the first quarter of each year as a result of the vesting of restricted stock awards, which primarily occurs in March.

Note 3: Earnings Per Share

Computation of Diluted EPS

 

    Three Months Ended March 31  
    2016      2015  
(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

  $ 2,134         2,434       $ 0.88       $ 2,059         2,520       $ 0.82   

Effect of dilutive securities:

                

Assumed exercise or issuance of shares relating to stock plans

             28                           36            

Diluted EPS attributable to Comcast Corporation shareholders

  $ 2,134         2,462       $ 0.87       $ 2,059         2,556       $ 0.81   

 

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Comcast Corporation

 

Diluted earnings per common share attributable to Comcast Corporation shareholders (“diluted EPS”) considers the impact of potentially dilutive securities using the treasury stock method. Our potentially dilutive securities include potential common shares related to our stock options and our restricted share units (“RSUs”). The amount of potential common shares related to our share-based compensation plans that were excluded from diluted EPS because their effect would have been antidilutive was not material for the three months ended March 31, 2016 and 2015.

Note 4: Significant Transactions

Universal Studios Japan

On November 13, 2015, NBCUniversal acquired a 51% economic interest in the Universal Studios theme park in Osaka, Japan (“Universal Studios Japan”) for $1.5 billion. The acquisition was funded through cash on hand and borrowings under our commercial paper program.

Universal Studios Japan is a VIE based on the governance structure and we consolidate Universal Studios Japan as we have the power to direct activities that most significantly impact its economic performance. There are no liquidity arrangements, guarantees, or other financial commitments between us and Universal Studios Japan, and therefore our maximum risk of financial loss is NBCUniversal’s 51% interest. Universal Studios Japan’s results of operations are reported in our Theme Parks segment following the acquisition date.

Preliminary Allocation of Purchase Price

Due to the limited amount of time since the date of acquisition, the assets and liabilities of Universal Studios Japan were recorded at their historical carrying value. We will adjust these amounts to fair value as valuations are completed and we obtain information necessary to complete the analyses, but no later than one year from the acquisition date. The 49% noncontrolling interest in Universal Studios Japan is recorded in the equity section of our consolidated financial statements and has been recorded based on the total value of Universal Studios Japan implied in the transaction. For purposes of this preliminary allocation, the excess of the total value implied in the transaction over the historical carrying value has been recorded as goodwill.

The table below presents the preliminary allocation of the purchase price to the assets and liabilities of Universal Studios Japan.

Preliminary Allocation of Purchase Price

 

(in millions)       

Property and equipment

  $ 642   

Intangible assets

    57   

Working capital

    (32

Debt

    (3,271

Other noncurrent assets and liabilities

    162   

Identifiable net assets (liabilities) acquired

    (2,442

Noncontrolling interest

    (1,440

Goodwill

    5,381   

Cash consideration transferred

  $ 1,499   

Actual and Unaudited Pro Forma Results

Our consolidated revenue and net income attributable to Comcast Corporation for the three months ended March 31, 2016 included $293 million and $18 million, respectively, from the acquisition of Universal Studios Japan.

 

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The following unaudited pro forma information has been presented as if the acquisition occurred on January 1, 2014. This information is based on historical results of operations and is subject to change as valuations are completed and additional analysis is obtained. In addition, the unaudited pro forma accounting adjustments are not necessarily indicative of what our results would have been had we operated Universal Studios Japan since January 1, 2014. No pro forma adjustments have been made for our transaction-related expenses.

 

(in millions, except per share amounts)   Three Months Ended
March 31, 2015
 

Revenue

  $ 18,137   

Net income

  $ 2,191   

Net income attributable to Comcast Corporation

  $ 2,084   

Basic earnings per common share attributable to Comcast Corporation shareholders

  $ 0.83   

Diluted earnings per common share attributable to Comcast Corporation shareholders

  $ 0.82   

Note 5: Film and Television Costs

 

(in millions)   March 31,
2016
     December 31,
2015
 

Film Costs:

    

Released, less amortization

  $ 1,238       $ 1,275   

Completed, not released

    188         226   

In production and in development

    1,003         907   
    2,429         2,408   

Television Costs:

    

Released, less amortization

    1,633         1,573   

In production and in development

    617         737   
    2,250         2,310   

Programming rights, less amortization

    2,479         2,350   
    7,158         7,068   

Less: Current portion of programming rights

    1,390         1,213   

Film and television costs

  $ 5,768       $ 5,855   

Note 6: Investments

 

(in millions)   March 31,
2016
     December 31,
2015
 

Fair Value Method

  $ 165       $ 167   

Equity Method:

    

Atairos

    389           

Hulu

    159         184   

Other

    529         494   
    1,077         678   

Cost Method:

    

AirTouch

    1,587         1,583   

Other

    884         902   
      2,471         2,485   

Total investments

    3,713         3,330   

Less: Current investments

    75         106   

Noncurrent investments

  $ 3,638       $ 3,224   

 

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Investment Income (Loss), Net

 

    Three Months Ended
March 31
 
(in millions)       2016             2015      

Gains on sales and exchanges of investments, net

  $ 2      $   

Investment impairment losses

    (20     (15

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

           42   

Mark to market adjustments on derivative component of prepaid forward sale agreements and indexed debt instruments

           (38

Interest and dividend income

    29        28   

Other, net

    19        16   

Investment income (loss), net

  $ 30      $ 33   

Equity Method

The Weather Channel

On January 29, 2016, following a legal restructuring at The Weather Channel, we and the other investors sold the entity holding The Weather Channel’s product and technology businesses to IBM. Following the close of the transaction, we continue to hold an investment in The Weather Channel cable network through a new holding company. As a result of the sale of our investment, we recognized a pretax gain of $108 million in other income (expense), net.

Atairos

In 2015, we entered into an agreement to establish Atairos Group, Inc. (“Atairos”), a strategic company focused on investing in and operating companies in a range of industries and business sectors, both domestically and internationally. The agreement became effective as of January 1, 2016. Atairos has a term of up to 12 years and is controlled by management companies led by our former CFO through interests that carry all of the voting rights. We are the only investor other than our former CFO and the other management company employees. We have committed to fund up to $4 billion in the aggregate at any one time in Atairos, subject to certain offsets, and $40 million annually to fund a management fee, subject to certain adjustments, while the management company investors have committed to fund up to $100 million (with at least $40 million to be funded by our former CFO, subject to his continued role with Atairos). Our economic interests do not carry voting rights and obligate us to absorb approximately 99% of any losses and provide us the right to receive approximately 86.5% of any residual returns in Atairos, in either case on a cumulative basis.

We have concluded that Atairos is a VIE, that we do not have the power to direct the activities that most significantly impact the economic performance of Atairos as we have no voting rights and only certain consent rights, and that we are not related parties with our former CFO or the management companies. We therefore do not consolidate Atairos and account for this investment as an equity method investment. There are no other liquidity arrangements, guarantees, or other financial commitments between Comcast and Atairos, and therefore our maximum risk of financial loss is our investment balance and remaining unfunded capital commitment.

For the three months ended March 31, 2016, we provided capital contributions totaling $404 million to Atairos.

Hulu

For the three months ended March 31, 2016 and 2015, we recognized our proportionate share of losses of $25 million and $11 million, respectively, related to our investment in Hulu.

 

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Cost Method

AirTouch

We hold two series of preferred stock of Verizon Americas, Inc., formerly known as AirTouch Communications, Inc. (“AirTouch”), a subsidiary of Verizon Communications Inc., which are redeemable in April 2020. As of March 31, 2016, the estimated fair value of the AirTouch preferred stock and the estimated fair value of the associated liability related to the redeemable subsidiary preferred shares issued by one of our consolidated subsidiaries were each $1.7 billion. The estimated fair values are based on Level 2 inputs that use pricing models whose inputs are derived primarily from or corroborated by observable market data through correlation or other means for substantially the full term of the financial instrument.

Note 7: Long-Term Debt

As of March 31, 2016, our debt had a carrying value of $55.6 billion and an estimated fair value of $63.4 billion. The estimated fair value of our publicly traded debt is primarily based on Level 1 inputs that use quoted market values for the debt. The estimated fair value of debt for which there are no quoted market prices is based on Level 2 inputs that use interest rates available to us for debt with similar terms and remaining maturities.

Debt Borrowings and Repayments

In February and March 2016, we issued $1.1 billion aggregate principal amount of 2.75% senior notes due 2023 and $2.2 billion aggregate principal amount of 3.15% senior notes due 2026. We intend to use the proceeds from these offerings for working capital and general corporate purposes, which may include the repayment of debt.

In April 2016, we repaid at maturity $1 billion aggregate principal amount of 2.875% senior notes due 2016 and $700 million aggregate principal amount of NBCUniversal Enterprise Inc.’s (“NBCUniversal Enterprise”) senior notes due 2016.

Revolving Credit Facilities

As of March 31, 2016, amounts available under our consolidated revolving credit facilities, net of amounts outstanding under our commercial paper programs and outstanding letters of credit, totaled $6.9 billion, which included $900 million available under NBCUniversal Enterprise’s revolving credit facility.

Commercial Paper Programs

As of March 31, 2016, NBCUniversal Enterprise had $450 million face amount of commercial paper outstanding.

 

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Note 8: 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 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 Measurements

 

    Fair Value as of  
   

March 31,

2016

     December 31,
2015
 
(in millions)   Level 1      Level 2      Level 3      Total      Total  

Assets

             

Trading securities

  $ 15       $       $       $ 15       $ 22   

Available-for-sale securities

            124         6         130         133   

Interest rate swap agreements

            63                 63         53   

Other

            15         20         35         17   

Total

  $ 15       $ 202       $ 26       $ 243       $ 225   

Liabilities

             

Other

  $       $ 142       $       $ 142       $ 91   

Total

  $  —       $ 142       $  —       $ 142       $ 91   

Fair Value of Redeemable Subsidiary Preferred Stock

As of March 31, 2016, the fair value of the NBCUniversal Enterprise redeemable subsidiary preferred stock was $757 million. The estimated fair value is based on Level 2 inputs that use pricing models whose inputs are derived primarily from or corroborated by observable market data through correlation or other means for substantially the full term of the financial instrument.

Note 9: Share-Based Compensation

Our share-based compensation plans primarily consist of awards of RSUs and stock options to certain employees and directors as part of our approach to long-term incentive compensation. 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 2016, we granted 5.9 million RSUs and 20.7 million stock options related to our annual management awards. The weighted-average fair values associated with these grants were $59.50 per RSU and $11.45 per stock option.

 

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Recognized Share-Based Compensation Expense

 

    Three Months Ended
March 31
 
(in millions)       2016              2015      

Restricted share units

  $ 70       $ 58   

Stock options

    37         35   

Employee stock purchase plans

    8         8   

Total

  $ 115       $ 101   

As of March 31, 2016, we had unrecognized pretax compensation expense of $903 million and $496 million related to nonvested RSUs and nonvested stock options, respectively.

Note 10: Supplemental Financial Information

Receivables

 

(in millions)   March 31,
2016
     December 31,
2015
 

Receivables, gross

  $ 6,952       $ 7,595   

Less: Allowance for returns and customer incentives

    359         473   

Less: Allowance for doubtful accounts

    218         226   

Receivables, net

  $ 6,375       $ 6,896   

Accumulated Other Comprehensive Income (Loss)

 

(in millions)   March 31,
2016
    March 31,
2015
 

Unrealized gains (losses) on marketable securities

  $ 2      $ 1   

Deferred gains (losses) on cash flow hedges

    (60     (6

Unrecognized gains (losses) on employee benefit obligations

    8        (68

Cumulative translation adjustments

    (34     (115

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

  $ (84   $ (188

Net Cash Provided by Operating Activities

 

    Three Months Ended
March 31
 
(in millions)       2016             2015      

Net income

  $ 2,224      $ 2,141   

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

   

Depreciation and amortization

    2,278        2,066   

Share-based compensation

    153        135   

Noncash interest expense (income), net

    55        51   

Equity in net (income) losses of investees, net

    11        (33

Cash received from investees

    16        22   

Net (gain) loss on investment activity and other

    (126     (121

Deferred income taxes

    217        (119

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

   

Current and noncurrent receivables, net

    562        119   

Film and television costs, net

    (80     (38

Accounts payable and accrued expenses related to trade creditors

    12        372   

Other operating assets and liabilities

    (212     650   

Net cash provided by operating activities

  $ 5,110      $ 5,245   

 

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Cash Payments for Interest and Income Taxes

 

    Three Months Ended
March 31
 
(in millions)       2016              2015      

Interest

  $ 723       $ 691   

Income taxes

  $ 190       $ 118   

Noncash Investing and Financing Activities

During the three months ended March 31, 2016:

 

   

we acquired $1.1 billion of property and equipment and intangible assets that were accrued but unpaid

 

 

   

we recorded a liability of $670 million for a quarterly cash dividend of $0.275 per common share to be paid in April 2016

 

Note 11: Commitments and Contingencies

Split-Dollar Life Insurance Agreements

As previously disclosed, in connection with the passing of our founder, Ralph J. Roberts, we made a lump sum payment in April 2016 to settle all of the benefit obligation liabilities related to split-dollar life insurance agreements with him. In connection with this settlement, in the second quarter of 2016 we will record an operating expense of $116 million and will eliminate substantially all of our liabilities related to split-dollar agreements, which are disclosed in Note 12 of our consolidated financial statements included in our 2015 Annual Report on Form 10-K.

Contingencies

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 results of operations, cash flows or financial position, any litigation resulting from any such legal proceedings or claims could be time-consuming and injure our reputation.

Note 12: Financial Data by Business Segment

We present our operations in five reportable business segments:

 

   

Cable Communications: Consists of the operations of Comcast Cable, which is one of the nation’s largest providers of video, high-speed Internet and voice services to residential customers under the XFINITY brand; we also provide these and other services to business customers and sell advertising.

 

 

   

Cable Networks: Consists primarily of our national cable networks, our regional sports and news networks, our international cable networks and our cable television studio production operations.

 

 

   

Broadcast Television: Consists primarily of the NBC and Telemundo broadcast networks, our NBC and Telemundo owned local broadcast television stations, the NBC Universo national cable network, and our broadcast television studio production operations.

 

 

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Filmed Entertainment: Consists primarily of the operations of Universal Pictures, which produces, acquires, markets and distributes filmed entertainment worldwide.

 

 

   

Theme Parks: Consists primarily of our Universal theme parks in Orlando, Florida; Hollywood, California; and Osaka, Japan.

 

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 tables below.

 

    Three Months Ended March 31, 2016  
(in millions)   Revenue(g)     Operating Income (Loss)
Before Depreciation and
Amortization(h)
    Depreciation
and
Amortization
     Operating
Income
(Loss)
    Capital
Expenditures
 

Cable Communications(a)(b)

  $ 12,204      $ 4,889      $ 1,843       $ 3,046      $ 1,576   

NBCUniversal

          

Cable Networks

    2,453        956        190         766        1   

Broadcast Television

    2,084        284        32         252        19   

Filmed Entertainment

    1,383        167        8         159        3   

Theme Parks(d)

    1,026        375        98         277        200   

Headquarters and Other(e)

    3        (160     86         (246     72   

Eliminations(f)

    (88                             

NBCUniversal

    6,861        1,622        414         1,208        295   

Corporate and Other(b)

    199        (154     21         (175     14   

Eliminations(d)(f)

    (474     10                10          

Comcast Consolidated

  $ 18,790      $ 6,367      $ 2,278       $ 4,089      $ 1,885   

 

    Three Months Ended March 31, 2015  
(in millions)   Revenue(g)     Operating Income (Loss)
Before Depreciation and
Amortization(h)
    Depreciation
and
Amortization
     Operating
Income
(Loss)
    Capital
Expenditures
 

Cable Communications(a)(b)

  $ 11,441      $ 4,658      $ 1,680       $ 2,978      $ 1,446   

NBCUniversal

          

Cable Networks

    2,359        898        184         714        6   

Broadcast Television(c)

    2,248        182        29         153        11   

Filmed Entertainment

    1,446        293        5         288        1   

Theme Parks(d)

    651        244        66         178        162   

Headquarters and Other(e)

    4        (140     80         (220     88   

Eliminations(f)

    (104     (2             (2       

NBCUniversal

    6,604        1,475        364         1,111        268   

Corporate and Other(b)

    193        (209     22         (231     12   

Eliminations(d)(f)

    (385     32                32          

Comcast Consolidated

  $ 17,853      $ 5,956      $ 2,066       $ 3,890      $ 1,726   

 

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(a)

For the three months ended March 31, 2016 and 2015, Cable Communications segment revenue was derived from the following sources:

 

    Three Months Ended
March 31
 
        2016             2015      

Residential:

               

Video

    45.4     46.6

High-speed Internet

    26.8     26.6

Voice

    7.3     7.9

Business services

    10.7     9.8

Advertising

    4.6     4.4

Other

    5.2     4.7

Total

    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 the three months ended March 31, 2016 and 2015, 2.9% and 2.8%, respectively, of Cable Communications segment revenue was derived from franchise and other regulatory fees.

 

(b)

Beginning in the first quarter of 2016, certain operations and businesses, including several strategic business initiatives, that were previously presented in Corporate and Other are now presented in our Cable Communications segment to reflect a change in our management reporting presentation. For segment reporting purposes, we have adjusted all periods presented to reflect this change.

 

(c)

The revenue and operating costs and expenses associated with our broadcast of the 2015 Super Bowl were reported in our Broadcast Television segment.

 

(d)

Beginning in the fourth quarter of 2015, we changed our method of accounting for a contractual obligation that involves an interest in the revenue of certain theme parks. As a result of the change, amounts payable based on current period revenue are presented in operating costs and expenses. Amounts paid through the third quarter of 2015 were included in other income (expense), net in our consolidated statement of income. For segment reporting purposes, we have adjusted periods prior to the fourth quarter of 2015 to reflect management reporting presentation for this expense on a consistent basis for all periods in the Theme Parks segment and total NBCUniversal, which resulted in a corresponding offsetting adjustment in Eliminations to reconcile to consolidated totals.

 

(e)

NBCUniversal Headquarters and Other activities include costs associated with overhead, personnel costs and headquarter initiatives.

 

(f)

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

 

 

   

our Broadcast Television segment generates revenue from the fees received under retransmission consent agreements with our Cable Communications segment

 

 

   

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

 

 

(g)

No single customer accounted for a significant amount of revenue in any period.

 

(h)

We use operating income (loss) before depreciation and amortization, excluding impairment charges related to fixed and intangible assets and gains or losses on the sale of assets, if any, as the measure of profit or loss for 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. Additionally, it is unaffected by our capital structure or investment activities. We use this measure to evaluate our consolidated operating performance and the operating performance of our operating segments and to allocate resources and capital to our operating segments. It is also a significant performance measure in our annual incentive compensation programs. We believe that this measure is useful to investors because it is one of the bases for comparing our operating performance with that of other 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 we have reported in accordance with GAAP.

 

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Note 13: Condensed Consolidating Financial Information

Comcast (“Comcast Parent”), Comcast Cable Communications, LLC (“CCCL Parent”), and NBCUniversal (“NBCUniversal Media Parent”) have fully and unconditionally guaranteed each other’s debt securities. In addition, the Comcast and Comcast Cable Communications, LLC $6.25 billion revolving credit facility due 2017 (the “Comcast revolving credit facility”) and the Comcast commercial paper program are also fully and unconditionally guaranteed by NBCUniversal. The Comcast commercial paper program is supported by the Comcast revolving credit facility.

Comcast Parent and CCCL Parent also fully and unconditionally guarantee NBCUniversal Enterprise’s $4 billion senior notes, as well as the NBCUniversal Enterprise revolving credit facility and the associated commercial paper program. NBCUniversal Media Parent does not guarantee the NBCUniversal Enterprise senior notes, credit facility or commercial paper program.

Comcast Parent provides an unconditional subordinated guarantee of the $185 million principal amount currently outstanding of Comcast Holdings’ ZONES due October 2029. Neither CCCL Parent nor NBCUniversal Media Parent guarantee the Comcast Holdings’ ZONES due October 2029. None of Comcast Parent, CCCL Parent nor NBCUniversal Media Parent guarantee the $62 million principal amount currently outstanding of Comcast Holdings’ ZONES due November 2029 or the $3.5 billion of Universal Studios Japan term loans.

 

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Condensed Consolidating Balance Sheet

March 31, 2016

 

(in millions)  

Comcast

Parent

    

Comcast

Holdings

    

CCCL

Parent

    NBCUniversal
Media Parent
   

Non-

Guarantor

Subsidiaries

   

Elimination

and

Consolidation

Adjustments

   

Consolidated

Comcast

Corporation

 

Assets

               

Cash and cash equivalents

  $  —       $  —       $  —      $ 178      $ 5,450      $  —      $ 5,628   

Receivables, net

                                  6,375               6,375   

Programming rights

                                  1,390               1,390   

Other current assets

    74                        24        1,689               1,787   

Total current assets

    74                        202        14,904               15,180   

Film and television costs

                                  5,768               5,768   

Investments

    41                        442        3,155               3,638   

Investments in and amounts due from subsidiaries eliminated upon consolidation

    90,281         113,635         121,305        43,623        110,013        (478,857       

Property and equipment, net

    211                               33,911               34,122   

Franchise rights

                                  59,364               59,364   

Goodwill

                                  33,458               33,458   

Other intangible assets, net

    11                               16,821               16,832   

Other noncurrent assets, net

    1,258         147                83        2,059        (1,310     2,237   

Total assets

  $ 91,876       $ 113,782       $ 121,305      $ 44,350      $ 279,453      $ (480,167   $ 170,599   

Liabilities and Equity

               

Accounts payable and accrued expenses related to trade creditors

  $ 27       $  —       $  —      $  —      $ 6,306      $  —      $ 6,333   

Accrued participations and residuals

                                  1,510               1,510   

Accrued expenses and other current liabilities

    1,795         335         405        371        4,216               7,122   

Current portion of long-term debt

    1,749                        1,004        1,366               4,119   

Total current liabilities

    3,571         335         405        1,375        13,398               19,084   

Long-term debt, less current portion

    33,406         131         2,650        8,208        7,120               51,515   

Deferred income taxes

            624                68        34,293        (1,164     33,821   

Other noncurrent liabilities

    2,257                        1,125        7,195        (146     10,431   

Redeemable noncontrolling interests and redeemable subsidiary preferred stock

                                  1,236               1,236   

Equity:

               

Common stock

    29                                             29   

Other shareholders’ equity

    52,613         112,692         118,250        33,574        214,341        (478,857     52,613   

Total Comcast Corporation shareholders’ equity

    52,642         112,692         118,250        33,574        214,341        (478,857     52,642   

Noncontrolling interests

                                  1,870               1,870   

Total equity

    52,642         112,692         118,250        33,574        216,211        (478,857     54,512   

Total liabilities and equity

  $ 91,876       $ 113,782       $ 121,305      $ 44,350      $ 279,453      $ (480,167   $ 170,599   

 

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Condensed Consolidating Balance Sheet

December 31, 2015

 

(in millions)  

Comcast

Parent

   

Comcast

Holdings

   

CCCL

Parent

    NBCUniversal
Media Parent
   

Non-

Guarantor

Subsidiaries

   

Elimination

and

Consolidation

Adjustments

   

Consolidated

Comcast

Corporation

 

Assets

             

Cash and cash equivalents

  $  —      $  —      $  —      $ 414      $ 1,881      $  —      $ 2,295   

Receivables, net

                                6,896               6,896   

Programming rights

                                1,213               1,213   

Other current assets

    69                      17        1,813               1,899   

Total current assets

    69                      431        11,803               12,303   

Film and television costs

                                5,855               5,855   

Investments

    33                      430        2,761               3,224   

Investments in and amounts due from subsidiaries eliminated upon consolidation

    87,142        111,241        119,354        42,441        109,598        (469,776       

Property and equipment, net

    210                             33,455               33,665   

Franchise rights

                                59,364               59,364   

Goodwill

                                32,945               32,945   

Other intangible assets, net

    12                             16,934               16,946   

Other noncurrent assets, net

    1,301        147               78        2,114        (1,368     2,272   

Total assets

  $ 88,767      $ 111,388      $ 119,354      $ 43,380      $ 274,829      $ (471,144   $ 166,574   

Liabilities and Equity

             

Accounts payable and accrued expenses related to trade creditors

  $ 16      $  —      $  —      $  —      $ 6,199      $  —      $ 6,215   

Accrued participations and residuals

                                1,572               1,572   

Accrued expenses and other current liabilities

    1,789        335        290        389        3,961               6,764   

Current portion of long-term debt

    1,149                      1,005        1,473               3,627   

Total current liabilities

    2,954        335        290        1,394        13,205               18,178   

Long-term debt, less current portion

    31,106        130        2,650        8,211        6,897               48,994   

Deferred income taxes

           624               66        34,098        (1,222     33,566   

Other noncurrent liabilities

    2,438                      1,087        7,258        (146     10,637   

Redeemable noncontrolling interests and redeemable subsidiary preferred stock

                                1,221               1,221   

Equity:

             

Common stock

    29                                           29   

Other shareholders’ equity

    52,240        110,299        116,414        32,622        210,441        (469,776     52,240   

Total Comcast Corporation shareholders’ equity

    52,269        110,299        116,414        32,622        210,441        (469,776     52,269   

Noncontrolling interests

                                1,709               1,709   

Total equity

    52,269        110,299        116,414        32,622        212,150        (469,776     53,978   

Total liabilities and equity

  $ 88,767      $ 111,388      $ 119,354      $ 43,380      $ 274,829      $ (471,144   $ 166,574   

 

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Comcast Corporation

Condensed Consolidating Statement of Income

For the Three Months Ended March 31, 2016

 

(in millions)  

Comcast

Parent

   

Comcast

Holdings

   

CCCL

Parent

    NBCUniversal
Media Parent
   

Non-

Guarantor

Subsidiaries

   

Elimination

and

Consolidation

Adjustments

   

Consolidated

Comcast

Corporation

 

Revenue:

             

Service revenue

  $  —      $  —      $  —      $  —      $ 18,790      $  —      $ 18,790   

Management fee revenue

    259               254                      (513       
      259               254               18,790        (513     18,790   

Costs and Expenses:

             

Programming and production

                                5,431               5,431   

Other operating and administrative

    156               254        295        5,333        (513     5,525   

Advertising, marketing and promotion

                                1,467               1,467   

Depreciation

    8                             1,777               1,785   

Amortization

    1                             492               493   
      165               254        295        14,500        (513     14,701   

Operating income (loss)

    94                      (295     4,290               4,089   

Other Income (Expense):

             

Interest expense

    (451     (3     (59     (117     (73            (703

Investment income (loss), net

                         (2     32               30   

Equity in net income (losses) of investees, net

    2,366        2,264        2,114        1,297        991        (9,043     (11

Other income (expense), net

                         124        6               130   
      1,915        2,261        2,055        1,302        956        (9,043     (554

Income (loss) before income taxes

    2,009        2,261        2,055        1,007        5,246        (9,043     3,535   

Income tax (expense) benefit

    125        1        21        (5     (1,453            (1,311

Net income (loss)

    2,134        2,262        2,076        1,002        3,793        (9,043     2,224   

Net (income) loss attributable to noncontrolling interests and redeemable subsidiary preferred stock

                                (90            (90

Net income (loss) attributable to Comcast Corporation

  $ 2,134      $ 2,262      $ 2,076      $ 1,002      $ 3,703      $ (9,043   $ 2,134   

Comprehensive income (loss) attributable to Comcast Corporation

  $ 2,224      $ 2,306      $ 2,078      $ 1,146      $ 3,705      $ (9,235   $ 2,224   

 

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Table of Contents

Comcast Corporation

Condensed Consolidating Statement of Income

For the Three Months Ended March 31, 2015

 

(in millions)  

Comcast

Parent

   

Comcast

Holdings

   

CCCL

Parent

    NBCUniversal
Media Parent
   

Non-

Guarantor

Subsidiaries

   

Elimination

and

Consolidation

Adjustments

   

Consolidated

Comcast

Corporation

 

Revenue:

             

Service revenue

  $  —      $  —      $  —      $  —      $ 17,853      $  —      $ 17,853   

Management fee revenue

    244               237                      (481       
      244               237               17,853        (481     17,853   

Costs and Expenses:

             

Programming and production

                                5,463               5,463   

Other operating and administrative

    226               237        237        4,855        (481     5,074   

Advertising, marketing and promotion

                                1,360               1,360   

Depreciation

    8                             1,626               1,634   

Amortization

    1                             431               432   
      235               237        237        13,735        (481     13,963   

Operating income (loss)

    9                      (237     4,118               3,890   

Other Income (Expense):

             

Interest expense

    (410     (3     (73     (120     (50            (656

Investment income (loss), net

    1        2               (6     36               33   

Equity in net income (losses) of investees, net

    2,322        2,226        1,992        1,231        885        (8,623     33   

Other income (expense), net

    (5                   (11     118               102   
      1,908        2,225        1,919        1,094        989        (8,623     (488

Income (loss) before income taxes

    1,917        2,225        1,919        857        5,107        (8,623     3,402   

Income tax (expense) benefit

    142               25        (5     (1,423            (1,261

Net income (loss)

    2,059        2,225        1,944        852        3,684        (8,623     2,141   

Net (income) loss attributable to noncontrolling interests and redeemable subsidiary preferred stock

                                (82            (82

Net income (loss) attributable to Comcast Corporation

  $ 2,059      $ 2,225      $ 1,944      $ 852      $ 3,602      $ (8,623   $ 2,059   

Comprehensive income (loss) attributable to Comcast Corporation

  $ 2,017      $ 2,209      $ 1,942      $ 801      $ 3,601      $ (8,553   $ 2,017   

 

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Comcast Corporation

Condensed Consolidating Statement of Cash Flows

For the Three Months Ended March 31, 2016

 

(in millions)  

Comcast

Parent

   

Comcast

Holdings

   

CCCL

Parent

    NBCUniversal
Media Parent
   

Non-

Guarantor
Subsidiaries

   

Elimination

and

Consolidation

Adjustments

   

Consolidated

Comcast

Corporation

 

Net cash provided by (used in) operating activities

  $ (490   $  —      $ 78      $ (391   $ 5,913      $  —      $ 5,110   

Investing Activities

             

Net transactions with affiliates

    (679            (78     63        694                 

Capital expenditures

    (3                          (1,882            (1,885

Cash paid for intangible assets

                                (378            (378

Acquisitions and construction of real estate properties

                                (140            (140

Acquisitions, net of cash acquired

                                (24            (24

Proceeds from sales of businesses and investments

                         101        9               110   

Purchases of investments

    (7                          (441            (448

Other

    7                      (5     54               56   

Net cash provided by (used in) investing activities

    (682            (78     159        (2,108            (2,709

Financing Activities

             

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

    (400                          (138            (538

Proceeds from borrowings

    3,323                                           3,323   

Repurchases and repayments of debt

                         (4     (44            (48

Repurchases and retirements of common stock

    (1,249                                        (1,249

Dividends paid

    (611                                        (611

Issuances of common stock

    12                                           12   

Distributions to noncontrolling interests and dividends for redeemable subsidiary preferred stock

                                (77            (77

Other

    97                             23               120   

Net cash provided by (used in) financing activities

    1,172                      (4     (236            932   

Increase (decrease) in cash and cash equivalents

                         (236     3,569               3,333   

Cash and cash equivalents, beginning of period

                         414        1,881               2,295   

Cash and cash equivalents, end of period

  $  —      $  —      $  —      $ 178      $ 5,450      $  —      $ 5,628   

 

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Comcast Corporation

Condensed Consolidating Statement of Cash Flows

For the Three Months Ended March 31, 2015

 

(in millions)  

Comcast

Parent

   

Comcast

Holdings

   

CCCL

Parent

    NBCUniversal
Media Parent
   

Non-

Guarantor
Subsidiaries

   

Elimination

and

Consolidation

Adjustments

   

Consolidated

Comcast

Corporation

 

Net cash provided by (used in) operating activities

  $ (294   $ (1   $ 34      $ (361   $ 5,867      $  —      $ 5,245   

Investing Activities

             

Net transactions with affiliates

    3,609        1        (34     321        (3,897              

Capital expenditures

    (6                          (1,720            (1,726

Cash paid for intangible assets

                                (273            (273

Acquisitions and construction of real estate properties

                                (24            (24

Proceeds from sales of businesses and investments

                                180               180   

Purchases of investments

                                (32            (32

Other

                         (5     186               181   

Net cash provided by (used in) investing activities

    3,603        1        (34     316        (5,580            (1,694

Financing Activities

             

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

                                (150            (150

Proceeds from borrowings

                                                

Repurchases and repayments of debt

    (900                   (1     (8            (909

Repurchases and retirements of common stock

    (2,000                                        (2,000

Dividends paid

    (572                                        (572

Issuances of common stock

    28                                           28   

Distributions to noncontrolling interests and dividends for redeemable subsidiary preferred stock

                                (62            (62

Other

    135                             6               141   

Net cash provided by (used in) financing activities

    (3,309                   (1     (214            (3,524

Increase (decrease) in cash and cash equivalents

                         (46     73               27   

Cash and cash equivalents, beginning of period

                         385        3,525               3,910   

Cash and cash equivalents, end of period

  $      $  —      $      $ 339      $ 3,598      $      $ 3,937   

 

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Table of Contents

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

Overview

We are a global media and technology company with two primary businesses, Comcast Cable and NBCUniversal. We present our operations for Comcast Cable in one reportable business segment, referred to as Cable Communications, and our operations for NBCUniversal in four reportable business segments. The Cable Networks, Broadcast Television, Filmed Entertainment and Theme Parks segments comprise the NBCUniversal businesses (collectively, the “NBCUniversal segments”).

Cable Communications Segment

Comcast Cable is one of the nation’s largest providers of video, high-speed Internet and voice services (“cable services”) to residential customers under the XFINITY brand, and we also provide these and other services to business customers. As of March 31, 2016, our cable systems had 28.0 million total customer relationships; served 22.4 million video customers, 23.8 million high-speed Internet customers and 11.6 million voice customers; and passed more than 55 million homes and businesses. Our Cable Communications segment generates revenue primarily from residential and business customers subscribing to our cable services, which we market individually and as bundled services, and from the sale of advertising. During the three months ended March 31, 2016, our Cable Communications segment generated 65% of our consolidated revenue and 77% of our operating income before depreciation and amortization.

NBCUniversal Segments

NBCUniversal is one of the world’s leading media and entertainment companies that develops, produces and distributes entertainment, news and information, sports, and other content for global audiences, and owns and operates theme parks worldwide.

Cable Networks

Our Cable Networks segment consists primarily of a diversified portfolio of cable television networks. Our cable networks are comprised of our national cable networks, which provide a variety of entertainment, news and information, and sports content, our regional sports and news networks, various international cable networks, our cable television studio production operations, and related digital media properties. Our Cable Networks segment generates revenue primarily from the distribution of our cable network programming to multichannel video providers, from the sale of advertising units on our cable networks and related digital media properties, from the licensing of our owned programming to cable and broadcast networks and subscription video on demand services, and from the sale of our owned programming through digital distributors such as iTunes. Our Cable Networks segment also generates revenue from the production of programming for third-party networks and subscription video on demand services.

Broadcast Television

Our Broadcast Television segment consists primarily of the NBC and Telemundo broadcast networks, our NBC and Telemundo owned local broadcast television stations, the NBC Universo national cable network, our broadcast television studio production operations, and related digital media properties. Our Broadcast Television segment generates revenue primarily from the sale of advertising units on our broadcast networks, owned local television stations and related digital media properties, from the licensing of our owned programming to various distribution platforms, including to cable and broadcast networks as well as to subscription video on demand services, from fees received under retransmission consent agreements, and from the sale of our owned programming on standard-definition video discs and Blu-ray discs (together, “DVDs”) and in digital formats.

Filmed Entertainment

Our Filmed Entertainment segment primarily produces, acquires, markets and distributes filmed entertainment worldwide, and it also develops, produces and licenses live stage plays. Our films are produced primarily under

 

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the Universal Pictures, Illumination and Focus Features names. Our Filmed Entertainment segment generates revenue primarily from the worldwide theatrical release of our owned and acquired films for exhibition in movie theaters, from the licensing of our owned and acquired films through various distribution platforms, and from the sale of our owned and acquired films on DVDs and in digital formats. Our Filmed Entertainment segment also generates revenue from producing and licensing live stage plays, from distributing filmed entertainment produced by third parties, and from Fandango, our movie ticketing and entertainment business.

Theme Parks

Our Theme Parks segment consists primarily of our Universal theme parks in Orlando, Florida and Hollywood, California. In November 2015, NBCUniversal acquired a 51% interest in the Universal Studios theme park in Osaka, Japan (“Universal Studios Japan”). In addition, along with a consortium of Chinese state-owned companies, we are developing a theme park in China. Our Theme Parks segment generates revenue primarily from ticket sales and guest spending at our theme parks, as well as from licensing and other fees for intellectual property licenses and other services.

Competition

The results of operations of our reportable business segments are affected by competition, as all of our businesses operate in intensely competitive, consumer-driven and rapidly changing environments and compete with a growing number of companies that provide a broad range of communications products and services, and entertainment, news and information content to consumers.

For additional information on the competition our businesses face, see Item 1A: Risk Factors included in our 2015 Annual Report on Form 10-K and refer to the risk factors within that section entitled “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” and “Changes in consumer behavior driven by alternative methods for viewing content may adversely affect our businesses and challenge existing business models.”

Seasonality and Cyclicality

Each of our businesses is subject to seasonal and cyclical variations. In our Cable Communications segment, our results are impacted by the seasonal nature of customers receiving our cable services in college and vacation markets. This generally results in a reduction in net customer additions in the second quarter and an increase in net customer additions in the third and fourth quarters of each year.

Revenue in our Cable Communications, Cable Networks and Broadcast Television segments is subject to cyclical advertising patterns and changes in viewership levels. Our U.S. advertising revenue is generally higher in the second and fourth quarters of each year, due in part to increases in consumer advertising in the spring and in the period leading up to and including the holiday season. U.S. advertising revenue is also cyclical, with a benefit in even-numbered years due to advertising related to candidates running for political office and issue-oriented advertising. Revenue in our Cable Networks and Broadcast Television segments fluctuates depending on the timing of when our programming is aired on television, which typically results in higher advertising revenue in the second and fourth quarters of each year. Our revenue and operating costs and expenses, excluding depreciation and amortization (“operating costs and expenses”) are cyclical as a result of our periodic broadcasts of major sporting events such as the Olympic Games, which affect our Cable Networks and Broadcast Television segments, and the Super Bowl, which affect our Broadcast Television segment. Our advertising revenue generally increases in the period of these broadcasts due to increased demand for advertising time, and our operating costs and expenses also increase as a result of our production costs and the amortization of the related rights fees.

Revenue in our Filmed Entertainment segment fluctuates due to the timing of the release of films in movie theaters, on DVD and through digital distribution services. Release dates are determined by several factors, including competition and the timing of vacation and holiday periods. As a result, revenue tends to be seasonal, with increases experienced each year during the summer months and around the holidays. Revenue in our Cable Networks, Broadcast Television and Filmed Entertainment segments also fluctuates due to the timing of when our content is made available to licensees.

 

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Revenue in our Theme Parks segment fluctuates with changes in theme park attendance that result from the seasonal nature of vacation travel and weather variations, local entertainment offerings and the opening of new attractions. Our theme parks generally experience peak attendance during the summer months when schools are closed and during early winter and spring holiday periods.

Consolidated Operating Results

 

    Three Months Ended
March 31
    Increase/
(Decrease)
 
(in millions)       2016             2015            

Revenue

  $ 18,790      $ 17,853        5.3

Costs and Expenses:

     

Programming and production

    5,431        5,463        (0.6

Other operating and administrative

    5,525        5,074        8.9   

Advertising, marketing and promotion

    1,467        1,360        7.8   

Depreciation

    1,785        1,634        9.2   

Amortization

    493        432        14.2   

Operating income

    4,089        3,890        5.1   

Other income (expense) items, net

    (554     (488     13.5   

Income before income taxes

    3,535        3,402        3.9   

Income tax expense

    (1,311     (1,261     4.0   

Net income

    2,224        2,141        3.9   

Net (income) loss attributable to noncontrolling interests and redeemable subsidiary preferred stock

    (90     (82     10.7   

Net income attributable to Comcast Corporation

  $ 2,134      $ 2,059        3.6

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

Consolidated Revenue

Our Cable Communications, Cable Networks and Theme Parks segments accounted for the increase in consolidated revenue for the three months ended March 31, 2016. The increase in our Theme Parks segment was associated with the acquisition of a 51% interest in Universal Studios Japan in November 2015. The increase in consolidated revenue was partially offset by a decrease in revenue in our Broadcast Television and Filmed Entertainment segments. Consolidated revenue for the three months ended March 31, 2015 includes $376 million of revenue associated with our broadcast of the 2015 Super Bowl in February 2015.

Revenue for our segments is discussed separately below under the heading “Segment Operating Results.” Revenue for our other businesses is discussed separately below under the heading “Corporate and Other Results of Operations.”

Consolidated Costs and Expenses

Our Cable Communications, Cable Networks, Filmed Entertainment and Theme Parks segments accounted for substantially all of the increase in consolidated operating costs and expenses for the three months ended March 31, 2016. The increase in our Theme Parks segment was associated with the acquisition of a 51% interest in Universal Studios Japan in November 2015. The increase in consolidated operating costs and expenses was partially offset by lower operating costs and expenses in our Broadcast Television segment, which is primarily due to our broadcast of the 2015 Super Bowl in the prior year period. For the three months ended March 31, 2015, our consolidated operating costs and expenses also include transaction-related costs associated with the Time Warner Cable merger and the divestiture transactions of $99 million.

Operating costs and expenses for our segments is discussed separately below under the heading “Segment Operating Results.” Operating costs and expenses for our corporate and other businesses is discussed separately below under the heading “Corporate and Other Results of Operations.”

 

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Consolidated Depreciation and Amortization

 

    Three Months Ended
March 31
     Increase/
(Decrease)
 
(in millions)       2016              2015             

Cable Communications

  $ 1,843       $ 1,680         9.7

NBCUniversal

    414         364         13.6   

Corporate and Other

    21         22         (4.4

Comcast Consolidated

  $ 2,278       $ 2,066         10.2

Consolidated depreciation and amortization expenses increased for the three months ended March 31, 2016 primarily due to increases in capital expenditures, as well as expenditures for software, in our Cable Communications segment in recent years and the acquisition of a 51% interest in Universal Studios Japan in NBCUniversal’s Theme Parks segment. We continue to invest in customer premise equipment, primarily for our X1 platform, wireless gateways and Cloud DVR technology, and in equipment to increase our network capacity. In addition, because these assets generally have shorter estimated useful lives, our depreciation expenses have increased.

Segment Operating Results

Our segment operating results are presented based on how we assess operating performance and internally report financial information. 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, as the measure of profit or loss for 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. Additionally, it is unaffected by our capital structure or investment activities. We use this measure to evaluate our consolidated operating performance and the operating performance of our operating segments and to allocate resources and capital to our operating segments. It is also a significant performance measure in our annual incentive compensation programs. We believe that this measure is useful to investors because it is one of the bases for comparing our operating performance with that of other companies in our industries, although our measure may not be directly comparable to similar measures used by other companies. Because we use operating income (loss) before depreciation and amortization to measure our segment profit or loss, we reconcile it to operating income, the most directly comparable financial measure calculated and presented in accordance with generally accepted accounting principles in the United States (“GAAP”), in the business segment footnote to our condensed consolidated financial statements (see Note 12 to Comcast’s condensed consolidated financial statements and Note 10 to NBCUniversal’s condensed consolidated financial statements). This measure should not be considered a substitute for operating income (loss), net income (loss) attributable to Comcast Corporation or NBCUniversal, net cash provided by operating activities, or other measures of performance or liquidity we have reported in accordance with GAAP.

We have adjusted prior period segment operating results to reflect certain changes in our management reporting presentation. See Note 12 to Comcast’s condensed consolidated financial statements and Note 10 to NBCUniversal’s condensed consolidated financial statements for additional information on these changes.

 

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Table of Contents

Cable Communications Segment Results of Operations

 

    Three Months Ended
March 31
     Increase/
(Decrease)
 
(in millions)       2016              2015          $     %  

Revenue

         

Residential:

         

Video

  $ 5,538       $ 5,331       $ 207        3.9

High-speed Internet

    3,275         3,044         231        7.6   

Voice

    896         906         (10     (1.1

Business services

    1,311         1,116         195        17.5   

Advertising

    559         499         60        12.1   

Other

    625         545         80        14.8   

Total revenue

    12,204         11,441         763        6.7   

Operating costs and expenses

         

Programming

    2,891         2,644         247        9.4   

Technical and product support