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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
x | Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
For the quarterly period ended June 30, 2017
OR
c | 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 | Exact Name of Registrant; State of Incorporation; Address and Telephone Number of Principal Executive Offices | 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 | c | ||||
NBCUniversal Media, LLC | Yes | x | No | c | ||||
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 | c | ||||
NBCUniversal Media, LLC | Yes | x | No | c | ||||
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Comcast Corporation | Large accelerated filer | x | Accelerated filer | c | Non-accelerated filer | c | Smaller reporting company | c | Emerging growth company | c |
NBCUniversal Media, LLC | Large accelerated filer | c | Accelerated filer | c | Non-accelerated filer | x | Smaller reporting company | c | Emerging growth company | c |
If an emerging growth company, indicate by check mark whether the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Comcast Corporation | c |
NBCUniversal Media, LLC | c |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).
Comcast Corporation | Yes | c | No | x | ||||
NBCUniversal Media, LLC | Yes | c | 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 June 30, 2017, there were 4,703,928,010 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.
TABLE OF CONTENTS
Page Number | ||
Item 1. | ||
Item 2. | ||
Item 3. | ||
Item 4. | ||
Item 1. | ||
Item 1A. | ||
Item 2. | ||
Item 5. | ||
Item 6. | ||
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;” NBCUniversal, LLC as “NBCUniversal Holdings;” and NBCUniversal Enterprise, Inc. as “NBCUniversal Enterprise.”
This Quarterly Report on Form 10-Q is for the three and six months ended June 30, 2017. This Quarterly Report on Form 10-Q 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 on Form 10-Q. In addition, information that we file with the SEC in the future will automatically update and supersede information contained in this Quarterly Report on Form 10-Q.
You should carefully review the information contained in this Quarterly Report on Form 10-Q and particularly consider any risk factors set forth in this Quarterly Report on Form 10-Q and in other reports or documents that we file from time to time with the
SEC. In this Quarterly Report on Form 10-Q, 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 these words, and other comparable words. You should be aware that these statements are only our predictions. In evaluating these statements, you should consider various factors, including the risks outlined below and in other reports we file with the SEC. Actual events or our actual results could differ materially from our forward-looking statements as a result of any such factors, which could adversely affect our businesses, results of operations or financial condition. 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 new technologies and distribution platforms 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, including the launch of our wireless phone service, 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 |
PART I: FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS
Comcast Corporation
Condensed Consolidated Balance Sheet
(Unaudited)
(in millions, except share data) | June 30, 2017 | December 31, 2016 | |||||
Assets | |||||||
Current Assets: | |||||||
Cash and cash equivalents | $ | 2,693 | $ | 3,301 | |||
Receivables, net | 7,849 | 7,955 | |||||
Programming rights | 1,633 | 1,250 | |||||
Other current assets | 2,657 | 3,855 | |||||
Total current assets | 14,832 | 16,361 | |||||
Film and television costs | 6,595 | 7,252 | |||||
Investments | 6,521 | 5,247 | |||||
Property and equipment, net of accumulated depreciation of $49,951 and $49,694 | 37,171 | 36,253 | |||||
Franchise rights | 59,364 | 59,364 | |||||
Goodwill | 36,742 | 35,980 | |||||
Other intangible assets, net of accumulated amortization of $11,900 and $11,013 | 18,907 | 17,274 | |||||
Other noncurrent assets, net | 2,899 | 2,769 | |||||
Total assets | $ | 183,031 | $ | 180,500 | |||
Liabilities and Equity | |||||||
Current Liabilities: | |||||||
Accounts payable and accrued expenses related to trade creditors | $ | 6,730 | $ | 6,915 | |||
Accrued participations and residuals | 1,882 | 1,726 | |||||
Deferred revenue | 1,448 | 1,132 | |||||
Accrued expenses and other current liabilities | 5,858 | 6,282 | |||||
Current portion of long-term debt | 6,358 | 5,480 | |||||
Total current liabilities | 22,276 | 21,535 | |||||
Long-term debt, less current portion | 57,210 | 55,566 | |||||
Deferred income taxes | 35,409 | 34,854 | |||||
Other noncurrent liabilities | 10,837 | 10,925 | |||||
Commitments and contingencies (Note 10) | |||||||
Redeemable noncontrolling interests and redeemable subsidiary preferred stock | 1,451 | 1,446 | |||||
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, 5,576,719,038 and 5,614,950,039; outstanding, 4,703,928,010 and 4,742,159,011 | 56 | 56 | |||||
Class B common stock, $0.01 par value—authorized, 75,000,000 shares; issued and outstanding, 9,444,375 | — | — | |||||
Additional paid-in capital | 37,478 | 38,230 | |||||
Retained earnings | 24,560 | 23,076 | |||||
Treasury stock, 872,791,028 Class A common shares | (7,517 | ) | (7,517 | ) | |||
Accumulated other comprehensive income (loss) | 428 | 98 | |||||
Total Comcast Corporation shareholders’ equity | 55,005 | 53,943 | |||||
Noncontrolling interests | 843 | 2,231 | |||||
Total equity | 55,848 | 56,174 | |||||
Total liabilities and equity | $ | 183,031 | $ | 180,500 | |||
See accompanying notes to condensed consolidated financial statements.
1
Condensed Consolidated Statement of Income
(Unaudited)
Three Months Ended June 30 | Six Months Ended June 30 | ||||||||||||||
(in millions, except per share data) | 2017 | 2016 | 2017 | 2016 | |||||||||||
Revenue | $ | 21,165 | $ | 19,269 | $ | 41,628 | $ | 38,059 | |||||||
Costs and Expenses: | |||||||||||||||
Programming and production | 6,341 | 5,492 | 12,415 | 10,923 | |||||||||||
Other operating and administrative | 6,060 | 5,763 | 11,887 | 11,289 | |||||||||||
Advertising, marketing and promotion | 1,665 | 1,559 | 3,195 | 3,025 | |||||||||||
Depreciation | 1,970 | 1,868 | 3,885 | 3,653 | |||||||||||
Amortization | 571 | 521 | 1,158 | 1,014 | |||||||||||
16,607 | 15,203 | 32,540 | 29,904 | ||||||||||||
Operating income | 4,558 | 4,066 | 9,088 | 8,155 | |||||||||||
Other Income (Expense): | |||||||||||||||
Interest expense | (758 | ) | (732 | ) | (1,513 | ) | (1,435 | ) | |||||||
Investment income (loss), net | 64 | 58 | 123 | 88 | |||||||||||
Equity in net income (losses) of investees, net | 15 | (19 | ) | 51 | (30 | ) | |||||||||
Other income (expense), net | 20 | (15 | ) | 55 | 115 | ||||||||||
(659 | ) | (708 | ) | (1,284 | ) | (1,262 | ) | ||||||||
Income before income taxes | 3,899 | 3,358 | 7,804 | 6,893 | |||||||||||
Income tax expense | (1,364 | ) | (1,278 | ) | (2,622 | ) | (2,589 | ) | |||||||
Net income | 2,535 | 2,080 | 5,182 | 4,304 | |||||||||||
Net (income) loss attributable to noncontrolling interests and redeemable subsidiary preferred stock | (22 | ) | (52 | ) | (103 | ) | (142 | ) | |||||||
Net income attributable to Comcast Corporation | $ | 2,513 | $ | 2,028 | $ | 5,079 | $ | 4,162 | |||||||
Basic earnings per common share attributable to Comcast Corporation shareholders | $ | 0.53 | $ | 0.42 | $ | 1.07 | $ | 0.86 | |||||||
Diluted earnings per common share attributable to Comcast Corporation shareholders | $ | 0.52 | $ | 0.41 | $ | 1.05 | $ | 0.85 | |||||||
Dividends declared per common share | $ | 0.1575 | $ | 0.1375 | $ | 0.315 | $ | 0.275 | |||||||
See accompanying notes to condensed consolidated financial statements.
2
Condensed Consolidated Statement of Comprehensive Income
(Unaudited)
Three Months Ended June 30 | Six Months Ended June 30 | ||||||||||||||
(in millions) | 2017 | 2016 | 2017 | 2016 | |||||||||||
Net income | $ | 2,535 | $ | 2,080 | $ | 5,182 | $ | 4,304 | |||||||
Unrealized gains (losses) on marketable securities, net of deferred taxes of $52, $—, $(9) and $(1) | (87 | ) | 1 | 17 | 3 | ||||||||||
Deferred gains (losses) on cash flow hedges, net of deferred taxes of $(3), $35, $(7) and $53 | 5 | (60 | ) | 12 | (91 | ) | |||||||||
Amounts reclassified to net income: | |||||||||||||||
Realized (gains) losses on marketable securities, net of deferred taxes of $—, $—, $— and $1 | — | — | — | (1 | ) | ||||||||||
Realized (gains) losses on cash flow hedges, net of deferred taxes of $8, $(26), $8 and $(36) | (14 | ) | 45 | (14 | ) | 62 | |||||||||
Employee benefit obligations, net of deferred taxes of $4, $—, $(33) and $(2) | (6 | ) | — | 57 | 2 | ||||||||||
Currency translation adjustments, net of deferred taxes of $2, $(58), $(39) and $(116) | (11 | ) | 249 | 146 | 487 | ||||||||||
Comprehensive income | 2,422 | 2,315 | 5,400 | 4,766 | |||||||||||
Net (income) loss attributable to noncontrolling interests and redeemable subsidiary preferred stock | (22 | ) | (52 | ) | (103 | ) | (142 | ) | |||||||
Other comprehensive (income) loss attributable to noncontrolling interests | 5 | (150 | ) | (82 | ) | (287 | ) | ||||||||
Comprehensive income attributable to Comcast Corporation | $ | 2,405 | $ | 2,113 | $ | 5,215 | $ | 4,337 | |||||||
See accompanying notes to condensed consolidated financial statements.
3
Condensed Consolidated Statement of Cash Flows
(Unaudited)
Six Months Ended June 30 | |||||||
(in millions) | 2017 | 2016 | |||||
Net cash provided by operating activities | $ | 10,814 | $ | 9,794 | |||
Investing Activities | |||||||
Capital expenditures | (4,405 | ) | (4,156 | ) | |||
Cash paid for intangible assets | (836 | ) | (737 | ) | |||
Acquisitions and construction of real estate properties | (250 | ) | (211 | ) | |||
Acquisitions, net of cash acquired | (398 | ) | (126 | ) | |||
Proceeds from sales of investments | 57 | 138 | |||||
Purchases of investments | (1,825 | ) | (580 | ) | |||
Other | 170 | (156 | ) | ||||
Net cash provided by (used in) investing activities | (7,487 | ) | (5,828 | ) | |||
Financing Activities | |||||||
Proceeds from (repayments of) short-term borrowings, net | (1,695 | ) | 205 | ||||
Proceeds from borrowings | 8,963 | 4,753 | |||||
Repurchases and repayments of debt | (4,967 | ) | (2,551 | ) | |||
Repurchases of common stock under repurchase program and employee plans | (2,476 | ) | (2,636 | ) | |||
Dividends paid | (1,404 | ) | (1,281 | ) | |||
Purchase of Universal Studios Japan noncontrolling interests | (2,299 | ) | — | ||||
Issuances of common stock | — | 19 | |||||
Distributions to noncontrolling interests and dividends for redeemable subsidiary preferred stock | (137 | ) | (125 | ) | |||
Other | 80 | 20 | |||||
Net cash provided by (used in) financing activities | (3,935 | ) | (1,596 | ) | |||
Increase (decrease) in cash and cash equivalents | (608 | ) | 2,370 | ||||
Cash and cash equivalents, beginning of period | 3,301 | 2,295 | |||||
Cash and cash equivalents, end of period | $ | 2,693 | $ | 4,665 | |||
See accompanying notes to condensed consolidated financial statements.
4
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 | B | |||||||||||||||||||||||||
Balance, December 31, 2015 | $ | 1,221 | $ | 57 | $ | — | $ | 38,490 | $ | 21,413 | $ | (7,517 | ) | $ | (174 | ) | $ | 1,709 | $ | 53,978 | |||||||
Stock compensation plans | 422 | 422 | |||||||||||||||||||||||||
Repurchases of common stock under repurchase program and employee plans | (519 | ) | (2,121 | ) | (2,640 | ) | |||||||||||||||||||||
Employee stock purchase plans | 78 | 78 | |||||||||||||||||||||||||
Dividends declared | (1,337 | ) | (1,337 | ) | |||||||||||||||||||||||
Other comprehensive income (loss) | 175 | 287 | 462 | ||||||||||||||||||||||||
Contributions from (distributions to) noncontrolling interests, net | 1 | (68 | ) | (68 | ) | ||||||||||||||||||||||
Other | (20 | ) | (31 | ) | 154 | 123 | |||||||||||||||||||||
Net income (loss) | 46 | 4,162 | 96 | 4,258 | |||||||||||||||||||||||
Balance, June 30, 2016 | $ | 1,248 | $ | 57 | $ | — | $ | 38,440 | $ | 22,117 | $ | (7,517 | ) | $ | 1 | $ | 2,178 | $ | 55,276 | ||||||||
Balance, December 31, 2016 | $ | 1,446 | $ | 56 | $ | — | $ | 38,230 | $ | 23,076 | $ | (7,517 | ) | $ | 98 | $ | 2,231 | $ | 56,174 | ||||||||
Stock compensation plans | 288 | 288 | |||||||||||||||||||||||||
Repurchases of common stock under repurchase program and employee plans | (379 | ) | (2,097 | ) | (2,476 | ) | |||||||||||||||||||||
Employee stock purchase plans | 94 | 94 | |||||||||||||||||||||||||
Dividends declared | (1,498 | ) | (1,498 | ) | |||||||||||||||||||||||
Other comprehensive income (loss) | 136 | 82 | 218 | ||||||||||||||||||||||||
Contributions from (distributions to) noncontrolling interests, net | (27 | ) | (49 | ) | (49 | ) | |||||||||||||||||||||
Purchase of Universal Studios Japan noncontrolling interests | (696 | ) | 194 | (1,736 | ) | (2,238 | ) | ||||||||||||||||||||
Other | (9 | ) | (59 | ) | 253 | 194 | |||||||||||||||||||||
Net income (loss) | 41 | 5,079 | 62 | 5,141 | |||||||||||||||||||||||
Balance, June 30, 2017 | $ | 1,451 | $ | 56 | $ | — | $ | 37,478 | $ | 24,560 | $ | (7,517 | ) | $ | 428 | $ | 843 | $ | 55,848 | ||||||||
See accompanying notes to condensed consolidated financial statements.
5
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 2016 Annual Report on Form 10-K.
Stock Split
On January 24, 2017, our Board of Directors approved a two-for-one stock split in the form of a 100% stock dividend that was distributed on February 17, 2017 to shareholders of record as of February 8, 2017. The stock split was in the form of one additional share for every share held and was payable in shares of Class A common stock on the existing Class A common stock and Class B common stock. All share-based data, including the number of shares outstanding and per share amounts, have been adjusted to reflect the stock split for all periods presented.
Reclassifications
Reclassifications have been made to our condensed consolidated financial statements for the prior year periods to conform to classifications used in 2017.
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.
We have substantially completed the review of our revenue arrangements and do not currently expect that the adoption of the new standard will have a material impact on our financial position or results of operations. However, we do expect that the new standard will impact the timing of recognition for (1) our Cable Communications segment’s installation revenue and commission expenses, which will be recognized as revenue and costs over a period of time instead of immediately, and (2) our Cable Networks, Broadcast Television and Filmed Entertainment segments’ content licensing revenue associated with renewals or extensions of existing program licensing agreements, which will be recognized as revenue when the licensed content becomes available under the renewal or extension instead of when the agreement is renewed or extended. In addition, upon adoption, we anticipate implementing certain changes in the presentation of revenue and expenses, including changes related to the allocation of revenue among the cable services included in a bundle that our residential customers purchase at a discount. The updated guidance also requires additional disclosures regarding the nature, timing and uncertainty of our revenue transactions. We intend to adopt the provisions of the guidance using the full retrospective method, under which we will adjust any prior periods presented to reflect the updated guidance.
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 in the year the guidance is adopted with certain exceptions. If we had adopted the provisions of the updated guidance as of January 1, 2017 for our equity investments classified as available-for-sale securities, primarily our investment in Snap Inc. (see Note 6), net income attributable to Comcast Corporation would have decreased for the three months ended June 30, 2017 by $88 million and increased for the six months ended June 30, 2017 by $16 million. We are currently in the process of determining the impact that the updated accounting guidance will have on our cost method investments.
6
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. The asset and liability are initially measured based on the present value of committed lease payments. 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 were under the prior guidance. In addition, the updated guidance requires that, when an employer withholds shares upon exercise of options or the vesting of restricted stock for the purpose of meeting withholding tax requirements, the cash paid for withholding taxes be classified as a financing activity and we include these amounts in the caption “repurchases of common stock under repurchase program and employee plans” in our consolidated statement of cash flows. We previously recorded these amounts as operating activities.
We adopted the updated guidance as of January 1, 2017 and, as required, we prospectively adopted the provisions that relate to the recognition of the excess income tax benefits or deficiencies in our condensed consolidated statement of income. The excess tax benefits resulted in a decrease to income tax expense of $59 million and $198 million for the three and six months ended June 30, 2017, respectively. In addition, the excess tax benefits resulted in an increase to diluted earnings per common share attributable to Comcast Corporation shareholders of $0.01 and $0.03 for the three and six months ended June 30, 2017, respectively. As required by the updated guidance, the prior year periods in our condensed consolidated statement of income were not adjusted as a result of these provisions.
In addition, we retrospectively adopted the provisions of this guidance related to changes to the statement of cash flows for all periods presented. This resulted in increases to net cash provided by operating activities and decreases to net cash provided by (used in) financing activities of $543 million and $411 million for the six months ended June 30, 2017 and 2016, respectively.
Note 3: Earnings Per Share
Computation of Diluted EPS
Three Months Ended June 30 | |||||||||||||||||||||
2017 | 2016 | ||||||||||||||||||||
(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 | $ | 2,513 | 4,728 | $ | 0.53 | $ | 2,028 | 4,839 | $ | 0.42 | |||||||||||
Effect of dilutive securities: | |||||||||||||||||||||
Assumed exercise or issuance of shares relating to stock plans | 81 | 52 | |||||||||||||||||||
Diluted EPS attributable to Comcast Corporation shareholders | $ | 2,513 | 4,809 | $ | 0.52 | $ | 2,028 | 4,891 | $ | 0.41 | |||||||||||
7
Six Months Ended June 30 | |||||||||||||||||||||
2017 | 2016 | ||||||||||||||||||||
(in millions, except per share amounts) | 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 | $ | 5,079 | 4,738 | $ | 1.07 | $ | 4,162 | 4,853 | $ | 0.86 | |||||||||||
Effect of dilutive securities: | |||||||||||||||||||||
Assumed exercise or issuance of shares relating to stock plans | 82 | 55 | |||||||||||||||||||
Diluted EPS attributable to Comcast Corporation shareholders | $ | 5,079 | 4,820 | $ | 1.05 | $ | 4,162 | 4,908 | $ | 0.85 | |||||||||||
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 and six months ended June 30, 2017 and 2016.
Note 4: Significant Transactions
FCC Spectrum Auction
On April 13, 2017, the Federal Communications Commission announced the results of its spectrum auction. In the auction, NBCUniversal relinquished its spectrum rights in the New York, Philadelphia and Chicago designated market areas (“DMAs”) where NBC and Telemundo had overlapping spectrum. NBCUniversal received proceeds of $482 million in July 2017. NBC and Telemundo stations will share broadcast signals in these DMAs. In connection with the auction, we also acquired the rights to $1.7 billion of spectrum, which were recorded to other intangible assets, net in our condensed consolidated balance sheet as of June 30, 2017. We had previously made a deposit of $1.8 billion to participate in the auction in the third quarter of 2016 and received a refund for amounts in excess of the purchase price in the second quarter of 2017.
Universal Studios Japan
On April 6, 2017, we acquired the remaining interests in Universal Studios Japan that we did not already own for $2.3 billion. The acquisition was funded through cash on hand and borrowings under our commercial paper program. Because we maintained control of Universal Studios Japan, the difference between the consideration transferred and the recorded value of the noncontrolling interests, as well as the related tax and accumulated other comprehensive income impacts, were recorded to additional paid-in capital.
DreamWorks Animation
On August 22, 2016, we acquired all of the outstanding stock of DreamWorks Animation for $3.8 billion. DreamWorks Animation’s stockholders received $41 in cash for each share of DreamWorks Animation common stock. DreamWorks Animation creates animated feature films, television series and specials, live entertainment, and related consumer products. The results of operations for DreamWorks Animation are reported in our Filmed Entertainment segment following the acquisition date.
Allocation of Purchase Price
The transaction was accounted for under the acquisition method of accounting and, accordingly, the assets and liabilities are to be recorded at their fair market values as of the acquisition date. We recorded the acquired assets and liabilities of DreamWorks Animation at their estimated fair values based on valuation analyses. In valuing acquired assets and liabilities, fair value estimates were primarily based on Level 3 inputs, including future expected cash flows, market rate assumptions and discount rates. The fair value of the assumed debt was primarily based on quoted market values. The fair value of the liability related to a tax receivable agreement that DreamWorks Animation had previously entered into with one of its former stockholders (the “tax receivable agreement”) was based on the contractual settlement provisions in the agreement. Further, we recorded deferred income taxes based on our estimates of the tax basis of the acquired net assets and the valuation allowances based on the expected use of net operating loss carryforwards. The goodwill is not deductible for tax purposes. During the six months ended June 30, 2017, we updated the preliminary allocation of purchase price for DreamWorks Animation, which primarily resulted in increases to noncontrolling interests, intangible assets and goodwill and decreases to working capital and deferred income tax assets. The changes did not have a material impact on our condensed consolidated financial statements. We may adjust these amounts further
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as valuations are finalized and we obtain information necessary to complete the analyses, but no later than one year from the acquisition date.
The table below presents the preliminary allocation of the purchase price to the assets and liabilities of DreamWorks Animation.
Allocation of Purchase Price | |||
(in millions) | |||
Film and television costs | $ | 854 | |
Intangible assets | 396 | ||
Working capital | 163 | ||
Debt | (381 | ) | |
Tax receivable agreement | (146 | ) | |
Deferred income taxes | 301 | ||
Other noncurrent assets and liabilities | 134 | ||
Identifiable net assets (liabilities) acquired | 1,321 | ||
Noncontrolling interests | (337 | ) | |
Goodwill | 2,789 | ||
Cash consideration transferred | $ | 3,773 | |
The tax receivable agreement was settled immediately following the acquisition and the payment was recorded as an operating activity in our condensed consolidated statement of cash flows in the third quarter of 2016. We also repaid all of the assumed debt of DreamWorks Animation in the third quarter of 2016.
Revenue and net income attributable to the acquisition of DreamWorks Animation were not material for the three and six months ended June 30, 2017.
Note 5: Film and Television Costs
(in millions) | June 30, 2017 | December 31, 2016 | |||||
Film Costs: | |||||||
Released, less amortization | $ | 1,949 | $ | 1,750 | |||
Completed, not released | 93 | 50 | |||||
In production and in development | 813 | 1,310 | |||||
2,855 | 3,110 | ||||||
Television Costs: | |||||||
Released, less amortization | 1,888 | 1,953 | |||||
In production and in development | 751 | 853 | |||||
2,639 | 2,806 | ||||||
Programming rights, less amortization | 2,734 | 2,586 | |||||
8,228 | 8,502 | ||||||
Less: Current portion of programming rights | 1,633 | 1,250 | |||||
Film and television costs | $ | 6,595 | $ | 7,252 | |||
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Note 6: Investments
(in millions) | June 30, 2017 | December 31, 2016 | |||||
Fair Value Method: | |||||||
Snap | $ | 522 | $ | — | |||
Other | 163 | 198 | |||||
685 | 198 | ||||||
Equity Method: | |||||||
Atairos | 2,233 | 1,601 | |||||
Hulu | 218 | 225 | |||||
Other | 653 | 550 | |||||
3,104 | 2,376 | ||||||
Cost Method: | |||||||
AirTouch | 1,606 | 1,599 | |||||
BuzzFeed | 400 | 400 | |||||
Other | 759 | 771 | |||||
2,765 | 2,770 | ||||||
Total investments | 6,554 | 5,344 | |||||
Less: Current investments | 33 | 97 | |||||
Noncurrent investments | $ | 6,521 | $ | 5,247 | |||
Investment Income (Loss), Net
Three Months Ended June 30 | Six Months Ended June 30 | ||||||||||||||
(in millions) | 2017 | 2016 | 2017 | 2016 | |||||||||||
Gains (losses) on sales and exchanges of investments, net | $ | — | $ | 13 | $ | (1 | ) | $ | 15 | ||||||
Investment impairment losses | (2 | ) | (1 | ) | (6 | ) | (21 | ) | |||||||
Interest and dividend income | 32 | 31 | 65 | 60 | |||||||||||
Other, net | 34 | 15 | 65 | 34 | |||||||||||
Investment income (loss), net | $ | 64 | $ | 58 | $ | 123 | $ | 88 | |||||||
Fair Value Method
Snap
In March 2017, we acquired an interest in Snap Inc. for $500 million as part of its initial public offering, which we have classified as an available-for-sale security. Snap is a camera company whose primary product is Snapchat, a camera app that was created to help people communicate through short videos and images.
Equity Method
Atairos
For the six months ended June 30, 2017, we made cash capital contributions totaling $994 million to Atairos Group, Inc., which included amounts accrued as of December 31, 2016. Atairos follows investment company accounting and records its investments at their fair values each reporting period with the net gains or losses reflected in its statement of income. We recognize our share of these gains and losses in equity in net income (losses) of investees, net. For the three and six months ended June 30, 2017, our share of Atairos income was $42 million and $99 million, respectively. For the three and six months ended June 30, 2016, our share of Atairos losses was $12 million and $27 million, respectively.
The Weather Channel
In January 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 for the six months ended June 30, 2016.
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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 June 30, 2017, 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 June 30, 2017, our debt had a carrying value of $63.6 billion and an estimated fair value of $70.3 billion. The estimated fair value of our publicly traded debt was 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 was 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 June 2017, NBCUniversal Enterprise issued $1.5 billion aggregate principal amount of senior floating rate notes due 2021. In March 2017, we issued $1.005 billion aggregate principal amount of 4.45% senior notes due 2047. In January 2017, we issued $1.25 billion aggregate principal amount of 3.00% senior notes due 2024 and $1.25 billion aggregate principal amount of 3.30% senior notes due 2027.
In May 2017, we repaid at maturity $550 million aggregate principal amount of 8.875% senior notes due 2017. In January 2017, we repaid at maturity $1.0 billion aggregate principal amount of 6.50% senior notes due 2017.
In May 2017, Universal Studios Japan entered into a new ¥450 billion ($3.9 billion at issuance) term loan with a final maturity of March 2022. We used the proceeds from this borrowing to repay in full $3.3 billion of Universal Studios Japan’s existing yen-denominated term loans and a portion of amounts outstanding under our commercial paper program.
Revolving Credit Facilities
As of June 30, 2017, amounts available under our consolidated revolving credit facilities, net of amounts outstanding under our commercial paper programs and outstanding letters of credit, totaled $7.2 billion, which included $1.5 billion available under NBCUniversal Enterprise’s revolving credit facility.
Commercial Paper Programs
In June 2017, we increased the Comcast and NBCUniversal Enterprise commercial paper programs to $7.0 billion and $1.5 billion, respectively, to coincide with the Comcast and NBCUniversal Enterprise revolving credit facilities’ commitments.
As of June 30, 2017, Comcast had $1.1 billion face amount of commercial paper outstanding and NBCUniversal Enterprise had no commercial paper outstanding.
Note 8: Share-Based Compensation
Our share-based compensation plans consist primarily 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 our common stock at a discount through payroll deductions.
In March 2017, we granted 10.6 million RSUs and 39.1 million stock options related to our annual management awards. The weighted-average fair values associated with these grants were $37.42 per RSU and $7.01 per stock option.
Recognized Share-Based Compensation Expense
Three Months Ended June 30 | Six Months Ended June 30 | ||||||||||||||
(in millions) | 2017 | 2016 | 2017 | 2016 | |||||||||||
Restricted share units | $ | 111 | $ | 89 | $ | 185 | $ | 159 | |||||||
Stock options | 63 | 48 | 103 | 85 | |||||||||||
Employee stock purchase plans | 7 | 8 | 17 | 16 | |||||||||||
Total | $ | 181 | $ | 145 | $ | 305 | $ | 260 | |||||||
As of June 30, 2017, we had unrecognized pretax compensation expense of $915 million and $502 million related to nonvested RSUs and nonvested stock options, respectively.
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Note 9: Supplemental Financial Information
Receivables
(in millions) | June 30, 2017 | December 31, 2016 | |||||
Receivables, gross | $ | 8,459 | $ | 8,622 | |||
Less: Allowance for returns and customer incentives | 345 | 417 | |||||
Less: Allowance for doubtful accounts | 265 | 250 | |||||
Receivables, net | $ | 7,849 | $ | 7,955 | |||
Accumulated Other Comprehensive Income (Loss)
(in millions) | June 30, 2017 | June 30, 2016 | |||||
Unrealized gains (losses) on marketable securities | $ | 17 | $ | 3 | |||
Deferred gains (losses) on cash flow hedges | (16 | ) | (75 | ) | |||
Unrecognized gains (losses) on employee benefit obligations | 276 | 8 | |||||
Cumulative translation adjustments | 151 | 65 | |||||
Accumulated other comprehensive income (loss), net of deferred taxes | $ | 428 | $ | 1 | |||
Net Cash Provided by Operating Activities
Six Months Ended June 30 | |||||||
(in millions) | 2017 | 2016 | |||||
Net income | $ | 5,182 | $ | 4,304 | |||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||
Depreciation and amortization | 5,043 | 4,667 | |||||
Share-based compensation | 391 | 331 | |||||
Noncash interest expense (income), net | 122 | 113 | |||||
Equity in net (income) losses of investees, net | (51 | ) | 30 | ||||
Cash received from investees | 49 | 42 | |||||
Net (gain) loss on investment activity and other | (110 | ) | (126 | ) | |||
Deferred income taxes | 470 | 618 | |||||
Changes in operating assets and liabilities, net of effects of acquisitions and divestitures: | |||||||
Current and noncurrent receivables, net | 18 | 172 | |||||
Film and television costs, net | 277 | (171 | ) | ||||
Accounts payable and accrued expenses related to trade creditors | (144 | ) | (104 | ) | |||
Other operating assets and liabilities | (433 | ) | (82 | ) | |||
Net cash provided by operating activities | $ | 10,814 | $ | 9,794 | |||
Cash Payments for Interest and Income Taxes
Three Months Ended June 30 | Six Months Ended June 30 | ||||||||||||||
(in millions) | 2017 | 2016 | 2017 | 2016 | |||||||||||
Interest | $ | 477 | $ | 512 | $ | 1,372 | $ | 1,235 | |||||||
Income taxes | $ | 2,077 | $ | 1,495 | $ | 2,209 | $ | 1,685 | |||||||
Noncash Investing and Financing Activities
During the six months ended June 30, 2017:
• | we acquired $1.3 billion of property and equipment and intangible assets that were accrued but unpaid |
• | we recorded a liability of $742 million for a quarterly cash dividend of $0.1575 per common share to be paid in July 2017 |
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Note 10: Commitments and Contingencies
Redeemable Subsidiary Preferred Stock
As of June 30, 2017, the fair value of the NBCUniversal Enterprise redeemable subsidiary preferred stock was $762 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.
Contingencies
We are a defendant in a lawsuit filed in December 2011 by Sprint Communications Company L.P. (“Sprint”) in the United States District Court for the District of Kansas. Sprint’s initial complaint alleged that Comcast Digital Voice and XFINITY Voice infringe twelve Sprint patents covering various aspects of a telecommunications system. In March 2015, Sprint withdrew its allegations of infringement for two of the patents. In December 2016, the Court granted summary judgment for us with respect to non-infringement on one of the patents and granted summary judgment for Sprint on one of the patents as to infringement with respect to some but not all of our accused telecommunications systems but not as to the patent’s validity. In January 2017, the Court entered judgment in favor of us on Sprint’s claims for infringement of two of the patents. In March 2017, Sprint indicated that it would not proceed to trial on three of the patents. Trial with respect to the four remaining patents, including the patent for which the Court granted partial summary judgment to Sprint, is set to begin in late October 2017. Sprint seeks approximately $950 million in damages, plus pre-judgment interest. In July 2017, Sprint filed a motion to amend the pre-trial order seeking to add an allegation that we willfully infringed Sprint’s patents and should be subject to increased damages, which could as much as triple the amount of any damages awarded. In July 2017, Sprint also filed a motion for partial summary judgment of certain of our defenses.
We believe the claims in the Sprint lawsuit are without merit and are defending the action vigorously. We cannot predict the outcome of the Sprint lawsuit, estimate a range of possible loss or determine how the final resolution of the action would affect our results of operations or cash flows for any one period or our consolidated financial position. In addition, as any action nears a trial, there is an increased possibility that the action may be settled by the parties. Nevertheless, we do not expect the final disposition of the Sprint lawsuit to have a material adverse effect on our consolidated financial position, but it could be material to our consolidated results of operations or cash flows for any one period.
We also 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, including the Sprint lawsuit above. In addition, we are subject to other legal proceedings and claims that arise in the ordinary course of our business. While the amount of ultimate liability with respect to such actions is not expected to materially affect our 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 11: 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, voice, and security and automation 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. |
• | Filmed Entertainment: Consists primarily of the operations of Universal Pictures, which produces, acquires, markets and distributes filmed entertainment worldwide; our films are also produced under the Illumination, Focus Features and DreamWorks Animation names. |
• | Theme Parks: Consists primarily of our Universal theme parks in Orlando, Florida; Hollywood, California; and Osaka, Japan. |
We use Adjusted EBITDA (formerly operating income before depreciation and amortization) to evaluate the profitability of our operating segments and the components of net income attributable to Comcast Corporation below Adjusted EBITDA are not separately evaluated. Our financial data by business segment is presented in the tables below.
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Three Months Ended June 30, 2017 | ||||||||||||||||||
(in millions) | Revenue(e) | Adjusted EBITDA(f) | Depreciation and Amortization | Operating Income (Loss) | Capital Expenditures | Cash Paid for Intangible Assets | ||||||||||||
Cable Communications(a) | $ | 13,122 | $ | 5,320 | $ | 2,001 | $ | 3,319 | $ | 1,956 | $ | 327 | ||||||
NBCUniversal | ||||||||||||||||||
Cable Networks | 2,696 | 1,055 | 181 | 874 | 8 | 4 | ||||||||||||
Broadcast Television | 2,241 | 416 | 31 | 385 | 30 | 4 | ||||||||||||
Filmed Entertainment | 2,155 | 285 | 26 | 259 | 19 | 6 | ||||||||||||
Theme Parks | 1,314 | 551 | 186 | 365 | 243 | 26 | ||||||||||||
Headquarters and Other(b) | 9 | (235 | ) | 96 | (331 | ) | 38 | 33 | ||||||||||
Eliminations(c) | (84 | ) | (1 | ) | — | (1 | ) | — | — | |||||||||
NBCUniversal | 8,331 | 2,071 | 520 | 1,551 | 338 | 73 | ||||||||||||
Corporate and Other(d) | 205 | (302 | ) | 20 | (322 | ) | 33 | 20 | ||||||||||
Eliminations(c) | (493 | ) | 10 | — | 10 | — | — | |||||||||||
Comcast Consolidated | $ | 21,165 | $ | 7,099 | $ | 2,541 | $ | 4,558 | $ | 2,327 | $ | 420 | ||||||
Three Months Ended June 30, 2016 | ||||||||||||||||||
(in millions) | Revenue(e) | Adjusted EBITDA(f) | Depreciation and Amortization | Operating Income (Loss) | Capital Expenditures | Cash Paid for Intangible Assets | ||||||||||||
Cable Communications(a) | $ | 12,444 | $ | 5,048 | $ | 1,904 | $ | 3,144 | $ | 1,881 | $ | 289 | ||||||
NBCUniversal | ||||||||||||||||||
Cable Networks | 2,566 | 944 | 187 | 757 | 7 | 3 | ||||||||||||
Broadcast Television | 2,128 | 394 | 30 | 364 | 30 | 3 | ||||||||||||
Filmed Entertainment | 1,351 | 56 | 12 | 44 | 5 | 3 | ||||||||||||
Theme Parks | 1,136 | 469 | 145 | 324 | 240 | 20 | ||||||||||||
Headquarters and Other(b) | 6 | (175 | ) | 91 | (266 | ) | 78 | 33 | ||||||||||
Eliminations(c) | (84 | ) | 1 | — | 1 | — | — | |||||||||||
NBCUniversal | 7,103 | 1,689 | 465 | 1,224 | 360 | 62 | ||||||||||||
Corporate and Other(d) | 180 | (291 | ) | 20 | (311 | ) | 30 | 8 | ||||||||||
Eliminations(c) | (458 | ) | 9 | — | 9 | — | — | |||||||||||
Comcast Consolidated | $ | 19,269 | $ | 6,455 | $ | 2,389 | $ | 4,066 | $ | 2,271 | $ | 359 | ||||||
Six Months Ended June 30, 2017 | ||||||||||||||||||
(in millions) | Revenue(e) | Adjusted EBITDA(f) | Depreciation and Amortization | Operating Income (Loss) | Capital Expenditures | Cash Paid for Intangible Assets | ||||||||||||
Cable Communications(a) | $ | 26,034 | $ | 10,518 | $ | 3,981 | $ | 6,537 | $ | 3,737 | $ | 679 | ||||||
NBCUniversal | ||||||||||||||||||
Cable Networks | 5,337 | 2,171 | 395 | 1,776 | 10 | 7 | ||||||||||||
Broadcast Television | 4,449 | 738 | 63 | 675 | 59 | 7 | ||||||||||||
Filmed Entertainment | 4,136 | 653 | 47 | 606 | 29 | 11 | ||||||||||||
Theme Parks | 2,432 | 948 | 328 | 620 | 472 | 39 | ||||||||||||
Headquarters and Other(b) | 17 | (420 | ) | 195 | (615 | ) | 53 | 64 | ||||||||||
Eliminations(c) | (172 | ) | (2 | ) | — | (2 | ) | — | — | |||||||||
NBCUniversal | 16,199 | 4,088 | 1,028 | 3,060 | 623 | 128 | ||||||||||||
Corporate and Other(d) | 413 | (496 | ) | 34 | (530 | ) | 45 | 29 | ||||||||||
Eliminations(c) | (1,018 | ) | 21 | — | 21 | — | — | |||||||||||
Comcast Consolidated | $ | 41,628 | $ | 14,131 | $ | 5,043 | $ | 9,088 | $ | 4,405 | $ | 836 | ||||||
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Six Months Ended June 30, 2016 | ||||||||||||||||||
(in millions) | Revenue(e) | Adjusted EBITDA(f) | Depreciation and Amortization | Operating Income (Loss) | Capital Expenditures | Cash Paid for Intangible Assets | ||||||||||||
Cable Communications(a) | $ | 24,648 | $ | 9,937 | $ | 3,747 | $ | 6,190 | $ | 3,457 | $ | 613 | ||||||
NBCUniversal | ||||||||||||||||||
Cable Networks | 5,019 | 1,900 | 377 | 1,523 | 8 | 4 | ||||||||||||
Broadcast Television | 4,212 | 678 | 62 | 616 | 49 | 6 | ||||||||||||
Filmed Entertainment | 2,734 | 223 | 20 | 203 | 8 | 6 | ||||||||||||
Theme Parks | 2,162 | 844 | 243 | 601 | 440 | 29 | ||||||||||||
Headquarters and Other(b) | 9 | (335 | ) | 177 | (512 | ) | 150 | 69 | ||||||||||
Eliminations(c) | (172 | ) | 1 | — | 1 | — | — | |||||||||||
NBCUniversal | 13,964 | 3,311 | 879 | 2,432 | 655 | 114 | ||||||||||||
Corporate and Other(d) | 379 | (445 | ) | 41 | (486 | ) | 44 | 10 | ||||||||||
Eliminations(c) | (932 | ) | 19 | — | 19 | — | — | |||||||||||
Comcast Consolidated | $ | 38,059 | $ | 12,822 | $ | 4,667 | $ | 8,155 | $ | 4,156 | $ | 737 | ||||||
(a) | For the three and six months ended June 30, 2017 and 2016, Cable Communications segment revenue was derived from the following sources: |
Three Months Ended June 30 | Six Months Ended June 30 | ||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||
Residential: | |||||||||||
Video | 44.2 | % | 44.9 | % | 44.4 | % | 45.1 | % | |||
High-speed Internet | 28.0 | % | 27.1 | % | 28.0 | % | 27.0 | % | |||
Voice | 6.5 | % | 7.2 | % | 6.6 | % | 7.3 | % | |||
Business services | 11.7 | % | 10.9 | % | 11.6 | % | 10.8 | % | |||
Advertising | 4.4 | % | 4.7 | % | 4.2 | % | 4.6 | % | |||
Other | 5.2 | % | 5.2 | % | 5.2 | % | 5.2 | % | |||
Total | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | |||
Subscription revenue received from residential customers who purchase bundled services at a discounted rate is allocated proportionally to each cable service based on the individual service’s price on a stand-alone basis.
For the three and six months ended June 30, 2017 and 2016, 2.8% of Cable Communications segment revenue was derived from franchise and other regulatory fees.
(b) | NBCUniversal Headquarters and Other activities include costs associated with overhead, allocations, personnel costs and headquarter initiatives. |
(c) | 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 from the licensing of film and television content to our Cable Networks segment |
(d) | Corporate and Other activities include costs associated with overhead and personnel, the costs of other business initiatives, including our new wireless phone service, and the operations of Comcast Spectacor, which owns the Philadelphia Flyers and the Wells Fargo Center arena in Philadelphia, Pennsylvania and operates arena management-related businesses. |
(e) | No single customer accounted for a significant amount of revenue in any period. |
(f) | We use Adjusted EBITDA as the measure of profit or loss for our operating segments. Adjusted EBITDA is defined as net income attributable to Comcast Corporation before net (income) loss attributable to noncontrolling interests and redeemable subsidiary preferred stock, income tax expense, other income (expense) items, net, and depreciation and amortization, and excluding impairment charges related to fixed and intangible assets and gains or losses on the sale of long-lived assets, if any. Other income (expense) items, net include interest expense, investment income (loss), equity in net income (losses) of investees, and other income (expense), net (as stated in our condensed consolidated statement of income). 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 and tax structures and by our 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), 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. Our reconciliation of the aggregate amount of Adjusted EBITDA for our reportable segments to consolidated income before income taxes is presented in the table below. |
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Three Months Ended June 30 | Six Months Ended June 30 | ||||||||||||||
(in millions) | 2017 | 2016 | 2017 | 2016 | |||||||||||
Adjusted EBITDA | $ | 7,099 | $ | 6,455 | $ | 14,131 | $ | 12,822 | |||||||
Depreciation | (1,970 | ) | (1,868 | ) | (3,885 | ) | (3,653 | ) | |||||||
Amortization | (571 | ) | (521 | ) | (1,158 | ) | (1,014 | ) | |||||||
Other income (expense) items, net | (659 | ) | (708 | ) | (1,284 | ) | (1,262 | ) | |||||||
Income before income taxes | $ | 3,899 | $ | 3,358 | $ | 7,804 | $ | 6,893 | |||||||
Note 12: 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, including the Comcast revolving credit facility.
Comcast Parent and CCCL Parent also fully and unconditionally guarantee NBCUniversal Enterprise’s $4.8 billion aggregate principal amount of senior notes, $1.5 billion revolving credit facility and commercial paper program. NBCUniversal Media Parent does not guarantee the NBCUniversal Enterprise senior notes, revolving 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. Comcast Parent also provides an unconditional guarantee of the Universal Studios Japan ¥450 billion term loan with a final maturity of March 2022. 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.
16
Condensed Consolidating Balance Sheet
June 30, 2017
(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 | $ | — | $ | — | $ | — | $ | 310 | $ | 2,383 | $ | — | $ | 2,693 | |||||||
Receivables, net | — | — | — | — | 7,849 | — | 7,849 | ||||||||||||||
Programming rights | — | — | — | — | 1,633 | — | 1,633 | ||||||||||||||
Other current assets | 67 | — | — | 21 | 2,569 | — | 2,657 | ||||||||||||||
Total current assets | 67 | — | — | 331 | 14,434 | — | 14,832 | ||||||||||||||
Film and television costs | — | — | — | — | 6,595 | — | 6,595 | ||||||||||||||
Investments | 96 | 1 | 15 | 690 | 5,719 | — | 6,521 | ||||||||||||||
Investments in and amounts due from subsidiaries eliminated upon consolidation | 101,430 | 126,187 | 124,549 | 49,038 | 110,545 | (511,749 | ) | — | |||||||||||||
Property and equipment, net | 434 | — | — | — | 36,737 | — | 37,171 | ||||||||||||||
Franchise rights | — | — | — | — | 59,364 | — | 59,364 | ||||||||||||||
Goodwill | — | — | — | — | 36,742 | — | 36,742 | ||||||||||||||
Other intangible assets, net | 11 | — | — | — | 18,896 | — | 18,907 | ||||||||||||||
Other noncurrent assets, net | 1,149 | 658 | — | 83 | 2,035 | (1,026 | ) | 2,899 | |||||||||||||
Total assets | $ | 103,187 | $ | 126,846 | $ | 124,564 | $ | 50,142 | $ | 291,067 | $ | (512,775 | ) | $ | 183,031 | ||||||
Liabilities and Equity | |||||||||||||||||||||
Accounts payable and accrued expenses related to trade creditors | $ | 12 | $ | — | $ | — | $ | — | $ | 6,718 | $ | — | $ | 6,730 | |||||||
Accrued participations and residuals | — | — | — | — | 1,882 | — | 1,882 | ||||||||||||||
Accrued expenses and other current liabilities | 1,887 | 92 | 295 | 286 | 4,746 | — | 7,306 | ||||||||||||||
Current portion of long-term debt | 4,032 | — | — | 4 | 2,322 | — | 6,358 | ||||||||||||||
Total current liabilities | 5,931 | 92 | 295 | 290 | 15,668 | — | 22,276 | ||||||||||||||
Long-term debt, less current portion | 39,725 | 142 | 2,100 | 8,204 | 7,039 | — | 57,210 | ||||||||||||||
Deferred income taxes | — | 508 | — | 70 | 35,886 | (1,055 | ) | 35,409 | |||||||||||||
Other noncurrent liabilities | 2,526 | — | — | 1,111 | 7,171 | 29 | 10,837 | ||||||||||||||
Redeemable noncontrolling interests and redeemable subsidiary preferred stock | — | — | — | — | 1,451 | — | 1,451 | ||||||||||||||
Equity: | |||||||||||||||||||||
Common stock | 56 | — | — | — | — | — | 56 | ||||||||||||||
Other shareholders’ equity | 54,949 | 126,104 | 122,169 | 40,467 | 223,009 | (511,749 | ) | 54,949 | |||||||||||||
Total Comcast Corporation shareholders’ equity | 55,005 | 126,104 | 122,169 | 40,467 | 223,009 | (511,749 | ) | 55,005 | |||||||||||||
Noncontrolling interests | — | — | — | — | 843 | — | 843 | ||||||||||||||
Total equity | 55,005 | 126,104 | 122,169 | 40,467 | 223,852 | (511,749 | ) | 55,848 | |||||||||||||
Total liabilities and equity | $ | 103,187 | $ | 126,846 | $ | 124,564 | $ | 50,142 | $ | 291,067 | $ | (512,775 | ) | $ | 183,031 | ||||||
17
Condensed Consolidating Balance Sheet
December 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 | $ | — | $ | — | $ | — | $ | 482 | $ | 2,819 | $ | — | $ | 3,301 | |||||||
Receivables, net | — | — | — | — | 7,955 | — | 7,955 | ||||||||||||||
Programming rights | — | — | — | — | 1,250 | — | 1,250 | ||||||||||||||
Other current assets | 151 | — | — | 36 | 3,668 | — | 3,855 | ||||||||||||||
Total current assets | 151 | — | — | 518 | 15,692 | — | 16,361 | ||||||||||||||
Film and television costs | — | — | — | — | 7,252 | — | 7,252 | ||||||||||||||
Investments | 75 | — | — | 651 | 4,521 | — | 5,247 | ||||||||||||||
Investments in and amounts due from subsidiaries eliminated upon consolidation | 98,350 | 120,071 | 117,696 | 47,393 | 97,704 | (481,214 | ) | — | |||||||||||||
Property and equipment, net | 298 | — | — | — | 35,955 | — | 36,253 | ||||||||||||||
Franchise rights | — | — | — | — | 59,364 | — | 59,364 | ||||||||||||||
Goodwill | — | — | — | — | 35,980 | — | 35,980 | ||||||||||||||
Other intangible assets, net | 13 | — | — | — | 17,261 | — | 17,274 | ||||||||||||||
Other noncurrent assets, net | 1,138 | 638 | — | 89 | 1,921 | (1,017 | ) | 2,769 | |||||||||||||
Total assets | $ | 100,025 | $ | 120,709 | $ | 117,696 | $ | 48,651 | $ | 275,650 | $ | (482,231 | ) | $ | 180,500 | ||||||
Liabilities and Equity | |||||||||||||||||||||
Accounts payable and accrued expenses related to trade creditors | $ | 23 | $ | — | $ | — | $ | — | $ | 6,892 | $ | — | $ | 6,915 | |||||||
Accrued participations and residuals | — | — | — | — | 1,726 | — | 1,726 | ||||||||||||||
Accrued expenses and other current liabilities | 1,726 | — | 341 | 302 | 5,045 | — | 7,414 | ||||||||||||||
Current portion of long-term debt | 3,739 | — | 550 | 4 | 1,187 | — | 5,480 | ||||||||||||||
Total current liabilities | 5,488 | — | 891 | 306 | 14,850 | — | 21,535 | ||||||||||||||
Long-term debt, less current portion | 38,123 | 141 | 2,100 | 8,208 | 6,994 | — | 55,566 | ||||||||||||||
Deferred income taxes | — | 542 | — | 70 | 35,259 | (1,017 | ) | 34,854 | |||||||||||||
Other noncurrent liabilities | 2,471 | — | — | 1,166 | 7,288 | — | 10,925 | ||||||||||||||
Redeemable noncontrolling interests and redeemable subsidiary preferred stock | — | — | — | — | 1,446 | — | |||||||||||||||