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, 1995
OR
( ) Transition Report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 For the Transition Period from ________ to ________.
Commission File Number 0-6983
COMCAST CORPORATION
[GRAPHIC OMITTED]
(Exact name of registrant as specified in its charter)
PENNSYLVANIA 23-1709202
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1500 Market Street, Philadelphia, PA 19102-2148
(Address of principal executive offices)
(Zip Code)
Registrant's telephone number, including area code: (215) 665-1700
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding twelve months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such requirements
for the past 90 days.
Yes _X_ No ___
As of June 30, 1995, there were 191,916,990 shares of Class A Special Common
Stock, 39,074,706 shares of Class A Common Stock and 8,786,250 shares of Class B
Common Stock outstanding.
COMCAST CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED JUNE 30, 1995
TABLE OF CONTENTS
Page
Number
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance
Sheet at June 30, 1995 and December 31,
1994 (Unaudited).....................................2
Condensed Consolidated Statement of
Operations and Accumulated Deficit for
the Six and Three Months Ended June 30,
1995 and 1994 (Unaudited)............................3
Condensed Consolidated Statement of Cash
Flows for the Six Months Ended June 30, 1995
and 1994 (Unaudited).................................4
Notes to Condensed Consolidated
Financial Statements (Unaudited)................5 - 12
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of
Operations.....................................13 - 20
PART II. OTHER INFORMATION
Item 1. Legal Proceedings...................................21
Item 4. Submission of Matters to a Vote of
Security Holders....................................21
Item 6. Exhibits and Reports on Form 8-K....................22
2
COMCAST CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED JUNE 30, 1995
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CONDENSED CONSOLIDATED BALANCE SHEET
(Unaudited)
(Dollars in thousands)
June 30, December 31,
1995 1994
ASSETS
CURRENT ASSETS
Cash and cash equivalents............................................. $447,889 $335,320
Short-term investments, at cost which approximates fair value......... 240,940 130,134
Accounts receivable, less allowance for doubtful accounts
of $84,607 and $11,272............................................ 301,615 108,245
Inventories, net...................................................... 196,849 18,553
Prepaid charges and other............................................. 38,988 16,254
Deferred income taxes................................................. 56,610
---------- ----------
Total current assets.............................................. 1,282,891 608,506
---------- ----------
INVESTMENTS, principally in affiliates.................................... 900,881 797,075
---------- ----------
PROPERTY AND EQUIPMENT.................................................... 2,338,663 2,081,256
Accumulated depreciation.............................................. (863,913) (823,570)
---------- ----------
Property and equipment, net........................................... 1,474,750 1,257,686
---------- ----------
DEFERRED CHARGES.......................................................... 6,358,224 4,945,613
Accumulated amortization.............................................. (1,009,706) (845,896)
---------- ----------
Deferred charges, net................................................. 5,348,518 4,099,717
---------- ----------
$9,007,040 $6,762,984
========== ==========
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
CURRENT LIABILITIES
Accounts payable and accrued expenses................................. $707,268 $402,869
Accrued interest...................................................... 73,880 60,219
Subscribers' advance payments and other............................... 20,777 14,637
Current portion of long-term debt..................................... 332,009 182,913
---------- ----------
Total current liabilities......................................... 1,133,934 660,638
---------- ----------
LONG-TERM DEBT, less current portion...................................... 6,399,519 4,810,541
---------- ----------
DEFERRED INCOME TAXES.................................................... 1,517,013 1,390,849
---------- ----------
MINORITY INTEREST AND OTHER............................................... 710,679 627,745
---------- ----------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' DEFICIENCY
Class A Special Common Stock, $1 par value - authorized, 500,000,000
shares; issued, 191,916,990 and 191,230,684....................... 191,917 191,231
Class A Common Stock, $1 par value - authorized, 200,000,000
shares; issued, 39,074,706 and 39,019,809........................ 39,075 39,020
Class B Common Stock, $1 par value - authorized, 50,000,000
shares; issued, 8,786,250........................................ 8,786 8,786
Additional capital.................................................... 882,940 875,501
Accumulated deficit................................................... (1,868,738) (1,827,647)
Unrealized gains on marketable securities............................. 6,283 3,862
Cumulative translation adjustments.................................... (14,368) (17,542)
---------- ----------
Total stockholders' deficiency.................................... (754,105) (726,789)
---------- ----------
$9,007,040 $6,762,984
========== ==========
See notes to condensed consolidated financial statements.
3
COMCAST CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED JUNE 30, 1995
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS AND ACCUMULATED DEFICIT
(Unaudited)
(Amounts in thousands, except per share data)
Six Months Ended Three Months Ended
June 30, June 30,
1995 1994 1995 1994
REVENUE
Service income............................................ $902,752 $669,343 $466,165 $340,640
Net sales from electronic retailing....................... 584,426 357,407
----------- ----------- ----------- -----------
1,487,178 669,343 823,572 340,640
----------- ----------- ----------- -----------
COSTS AND EXPENSES
Operating................................................. 367,357 201,472 195,890 100,573
Cost of goods sold from electronic retailing.............. 350,246 212,172
Selling, general and administrative....................... 289,145 177,798 154,686 91,514
Depreciation and amortization............................. 387,043 160,494 143,566 83,249
----------- ----------- ----------- -----------
1,393,791 539,764 706,314 275,336
----------- ----------- ----------- -----------
OPERATING INCOME.............................................. 93,387 129,579 117,258 65,304
INVESTMENT (INCOME) EXPENSE
Interest expense.......................................... 250,551 152,752 132,964 73,365
Investment income......................................... (165,424) (10,103) (12,600) (4,830)
Equity in net losses of affiliates........................ 37,906 18,515 21,489 8,869
Minority interest and other............................... (13,759) (3,417) (5,401) (375)
----------- ----------- ----------- -----------
109,274 157,747 136,452 77,029
----------- ----------- ----------- -----------
LOSS BEFORE INCOME TAX EXPENSE AND EXTRAORDINARY
ITEMS..................................................... (15,887) (28,168) (19,194) (11,725)
INCOME TAX EXPENSE............................................ 14,035 365 10,100 1,031
----------- ----------- ----------- -----------
LOSS BEFORE EXTRAORDINARY ITEMS............................... (29,922) (28,533) (29,294) (12,756)
EXTRAORDINARY ITEMS........................................... 11,703 123
----------- ----------- ----------- -----------
NET LOSS...................................................... (29,922) (40,236) (29,294) (12,879)
ACCUMULATED DEFICIT
Beginning of period ...................................... (1,827,647) (1,717,931) (1,833,858) (1,751,279)
Dividends declared - $.0467, $.0467, $.0233
and $.0233 per share.................................. (11,169) (11,556) (5,586) (5,565)
----------- ----------- ----------- -----------
End of period............................................. ($1,868,738) ($1,769,723) ($1,868,738) ($1,769,723)
=========== =========== =========== ===========
LOSS PER SHARE
Loss before extraordinary items........................... ($.12) ($.12) ($.12) ($.05)
Extraordinary items....................................... (.05)
----------- ----------- ----------- -----------
Net Loss.......................................... ($.12) ($.17) ($.12) ($.05)
=========== =========== =========== ===========
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING DURING THE PERIOD...................... 239,541 233,648 239,674 238,829
=========== =========== =========== ===========
See notes to condensed consolidated financial statements.
4
COMCAST CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED JUNE 30, 1995
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
(Dollars in thousands)
Six Months Ended June 30,
1995 1994
OPERATING ACTIVITIES
Net loss.............................................................. ($29,922) ($40,236)
Noncash items included in net loss:
Depreciation and amortization..................................... 387,043 160,494
Interest expense.................................................. 27,360 26,304
Equity in net losses of affiliates................................ 37,906 18,515
Gain on sale of division.......................................... (5,825)
Gain on sale of long-term investment.............................. (140,968)
Extraordinary items............................................... 11,703
Deferred income taxes, minority interest and other................ (21,296) 2,680
---------- ----------
260,123 173,635
Decrease (increase) in accounts receivable, net....................... 26,662 (10,071)
(Increase) decrease in inventories, net............................... (10,889) 175
Increase in prepaid charges and other................................. (12,348) (4,538)
Decrease in accounts payable and accrued expenses
and subscribers' advance payments and other....................... (69,778) (1,435)
Increase (decrease) in accrued interest............................... 13,069 (10,209)
---------- ----------
Net cash provided by operating activities..................... 206,839 147,557
---------- ----------
FINANCING ACTIVITIES
Borrowings............................................................ 2,018,977 959
Retirement and repayment of debt...................................... (194,378) (368,496)
Issuance of common stock, net......................................... 1,413 2,184
Equity contribution to a subsidiary................................... 6,556
Dividends............................................................. (11,169) (11,556)
Other................................................................. 1,488 (1,059)
---------- ----------
Net cash provided by (used in) financing activities........... 1,822,887 (377,968)
---------- ----------
INVESTING ACTIVITIES
Acquisitions, net of cash acquired.................................... 1,369,073 20,795
Sales of short-term investments, net.................................. (48,331) (306,410)
Increase in investments, principally in affiliates.................... 431,525 38,244
Proceeds from sale of long-term investment............................ (188,096)
Additions to property and equipment................................... 338,960 92,692
Proceeds from sale of division........................................ (28,183)
Other................................................................. 14,026 12,338
---------- ----------
Net cash used in (provided by) investing activities........... 1,917,157 (170,524)
---------- ----------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS......................... 112,569 (59,887)
Cash and Cash Equivalents, Beginning of Period........................ 335,320 160,434
---------- ----------
CASH AND CASH EQUIVALENTS, End of Period.................................. $447,889 $100,547
======== ========
See notes to condensed consolidated financial statements.
5
COMCAST CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED JUNE 30, 1995
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Basis of Presentation
The condensed consolidated balance sheet at December 31, 1994 has been
condensed from the audited balance sheet at that date. The condensed
consolidated balance sheet at June 30, 1995, the condensed consolidated
statement of operations and accumulated deficit for the six and three
months ended June 30, 1995 and 1994 and the condensed consolidated
statement of cash flows for the six months ended June 30, 1995 and 1994
have been prepared by Comcast Corporation (the "Company") and have not been
audited by the Company's Independent Auditors. In the opinion of
management, all adjustments (which include only normal recurring
adjustments and the adjustment described in Note 3) necessary to present
fairly the financial position, results of operations and cash flows at June
30, 1995 and for all periods presented have been made.
Certain information and note disclosures normally included in the Company's
annual financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted. These condensed
consolidated financial statements should be read in conjunction with the
financial statements and notes thereto included in the Company's December
31, 1994 Annual Report on Form 10-K filed with the Securities and Exchange
Commission. The results of operations for the periods ended June 30, 1995
are not necessarily indicative of operating results for the full year.
Net Loss Per Share
Net loss per share is based on the weighted average number of common shares
outstanding during the period. For the six and three months ended June 30,
1995 and 1994, all of the common stock equivalents have an antidilutive
effect on the loss per share and, therefore, have not been used in
determining the total weighted average number of common shares outstanding.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
New Accounting Pronouncement
Effective January 1, 1995, the Company adopted the provisions of Statement
of Financial Accounting Standards ("SFAS") No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
Of." There was no cumulative effect of the adoption of SFAS No. 121.
As a result of the acquisition of QVC (see Note 3), the Company adopted the
following accounting policies:
Inventories
Inventories, consisting primarily of products held for sale, are stated at
the lower of cost or market. Cost is determined by the first-in, first-out
method.
Net Sales and Returns
Net sales from electronic retailing are recognized at the time of shipment
to customers. An allowance for returned merchandise is provided as a
percentage of sales based on historical experience.
3. ACQUISITIONS AND OTHER SIGNIFICANT EVENTS
QVC
In February 1995, the Company and Tele-Communications, Inc. ("TCI")
acquired all of the outstanding stock of QVC, Inc. ("QVC") not previously
owned by the Company and TCI (approximately 65% of such shares on a fully
diluted basis) for $46, in cash, per share. The total cost of acquiring the
outstanding shares of QVC was approximately $1.4 billion. Following the
acquisition, the Company and TCI own, through their respective
6
COMCAST CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED JUNE 30, 1995
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)
subsidiaries, 57.45% and 42.55%, respectively, of QVC. The Company has
accounted for the QVC acquisition under the purchase method of accounting
and QVC has been consolidated with the Company beginning in February 1995.
The allocation of the purchase price to the assets and liabilities of QVC
is preliminary pending receipt of a final appraisal.
The acquisition of QVC, including the exercise of certain warrants held by
the Company, was financed with cash contributions from the Company and TCI
of $296.3 million and $6.6 million, respectively, borrowings of $1.1
billion under a $1.2 billion QVC credit facility and existing cash and cash
equivalents held by QVC.
Liberty Media Corporation, a wholly owned subsidiary of TCI, may, at
certain times following February 9, 2000, trigger the exercise of certain
exit rights.
Sprint Telecommunications Venture
On March 28, 1995, subsidiaries of the Company, TCI, Sprint Corporation
("Sprint") and Cox Communications, Inc. ("Cox") formed several partnerships
to engage in the business of providing wireless and wireline telephony
services. The principal partnership is known as the Sprint
Telecommunications Venture ("STV"). The parties have agreed that STV and
its affiliated partnerships will be the exclusive vehicles for their
respective investments in certain specified telecommunications activities,
subject to certain limited exceptions. STV and the parties will
cross-promote telecommunications products and services using the "Sprint"
brand name with cable services and products branded by Cox, TCI or the
Company in their cable television systems. A partnership owned entirely by
subsidiaries of the Company, known as Comcast Telephony Services, owns 15%
of STV and, indirectly, each of STV's affiliated partnerships.
STV will engage in the business of providing wireless communications
services, primarily personal communication services ("PCS"), through a
partnership known as WirelessCo. Through WirelessCo, the partners propose
to create and operate a seamless, integrated, nationwide wireless
communications network. During the term of a trademark license from an
affiliate of Sprint, WirelessCo's services will be marketed under the
"Sprint" brand name.
WirelessCo was the successful bidder for 29 PCS licenses in the auction
conducted by the Federal Communications Commission ("FCC") from December
1994 through mid-March 1995. The purchase price for the licenses was
approximately $2.11 billion, all of which has been paid to the FCC.
WirelessCo may also elect to bid in subsequent auctions for PCS licenses.
In addition, WirelessCo has and expects to continue to invest in other
entities that hold PCS licenses, may acquire PCS licenses from other
license holders and may affiliate with other license holders.
STV will also engage in the business of providing local wireline telephone
service for both business and residential customers, primarily through the
cable networks of cable television operators that affiliate with the
partnership in exchange for agreed upon compensation. Cox, TCI and the
Company have agreed to affiliate their cable systems with STV to the extent
that their systems are located in markets designated in STV's business
plan. The offering of local wireline telephone services by the partnership
will require the removal of regulatory and legislative barriers to local
telephone competition.
The STV partners intend that the partnership will succeed to the business
currently conducted by Cox, TCI and the Company, together with Continental
Cablevision, Inc. ("Continental"), through Teleport Communications Group
Inc. and TCG Partners (collectively, "TCG"). TCG is one of the largest
competitive access providers in the United States. Pursuant to a
contribution agreement entered into on March 28, 1995, Cox, TCI and the
Company have agreed, subject to the satisfaction of certain conditions, to
contribute to STV their respective
7
COMCAST CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED JUNE 30, 1995
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)
interests in TCG and in various local joint ventures among local cable
operators and TCG. Such contributions will be subject to the receipt of
necessary regulatory approvals and the satisfaction of other conditions. In
addition, the cable partners intend to negotiate with Continental, which
owns that portion of TCG that is not owned by Cox, TCI or the Company,
regarding the acquisition of its interest by such cable partners.
Subject to agreement upon an initial business plan, the partners have
committed to contribute $4.4 billion in cash to STV during the next three
years, of which the Company's share would be $660 million, subject to
reduction resulting from the method of crediting in-kind contributions to
STV by the partners. Of the $660 million funding requirement, the Company
has made total cash capital contributions to WirelessCo of approximately
$334.5 million through June 30, 1995. The partners' capital contributions
to WirelessCo have been principally used to pay for the 29 PCS licenses
acquired in the FCC auction and to acquire interests in another entity that
holds a PCS license. Additional equity requirements of STV will be funded
by the partners through capital contributions to STV in proportion to their
ownership interests. The Company anticipates that STV's capital
requirements over the next several years will be significant. These
requirements are planned to be funded by external financing by STV in
addition to capital contributions by the partners. Although it is
anticipated that external financing will be available to STV on acceptable
terms and conditions, no assurances can be given as to such availability.
Cellular Rebuild
The Company's cellular division has entered into an agreement to purchase
approximately $172.0 million of switching and cell site equipment. This
equipment will replace existing switching and cell site equipment. The
Company expects the rebuild to be completed in the third quarter of 1995.
In accordance with the provisions of SFAS No. 121, during the first quarter
of 1995, the Company charged to its results of operations approximately
$110.0 million which represents the difference between the net book value
of the equipment to be replaced and the residual value expected to be
realized upon its disposal. This charge has been reflected in the Company's
condensed consolidated statement of operations and accumulated deficit as a
component of depreciation and amortization expense.
Ocean County
In May 1995, the Company completed the initial phase of its exchange
agreement with McCaw Cellular Communications, Inc. whereby the Company
acquired a 75% interest in the entity that holds the Ocean County, NJ Rural
Statistical Area ("RSA") cellular license (the "Ocean County Licensee") in
exchange for the Company's Hunterdon County, NJ RSA cellular license and
$37.8 million in cash. The Company expects to acquire the remaining 25%
interest in the Ocean County Licensee before the end of 1995.
Nextel
In April 1995, the Company exercised certain preemptive rights under
previously existing agreements with Nextel Communications, Inc. ("Nextel")
whereby the Company has elected to purchase approximately 9 million newly
issued Nextel shares at $12.25 per share for a total cost of approximately
$110 million (the "Nextel Share Purchase Commitment"). The purchase is
contingent on the closing of an acquisition transaction by Nextel which is
expected to occur no earlier than the fourth quarter of 1995.
In July 1995, the Company sold 11.3 million shares of Nextel common stock
for $212.6 million. These shares, which were classified as long-term
investments available for sale, had an historical cost basis of
approximately $176.1 million. This investment has been included in
short-term investments as of June 30, 1995 at its estimated fair value of
$159.1 million based on the July 1995 sale. As a result of this
transaction, the Company will recognize a pre-tax gain of approximately
$36.5
8
COMCAST CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED JUNE 30, 1995
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)
million in the third quarter of 1995. The Company continues to hold options
to acquire approximately 25.2 million shares of Nextel common stock in
addition to the Nextel Share Purchase Commitment.
Pro Forma Results
The following pro forma information for the six and three months ended June
30, 1995 and 1994 has been presented as if the acquisition of QVC occurred
at the beginning of each period and the acquisition of Maclean Hunter
occurred on January 1, 1994. This unaudited pro forma information is based
on historical results of operations, adjusted for acquisition costs, and is
not necessarily indicative of what the results would have been had the
Company operated the acquired entities since such dates.
(Dollars in thousands, except per share data)
Six Months Ended Three Months Ended
June 30, June 30,
1995(1) 1994(1) 1995 1994(1)
Revenue $ 1,617,552 $ 1,406,656 $ 823,572 $ 704,327
Loss before extraordinary items (34,715) (74,942) (29,294) (42,428)
Net loss (34,715) (86,645) (29,294) (42,551)
Net loss per share (0.14) (0.37) (0.12) (0.18)
(1) Effective April 1, 1995, QVC commenced consolidating its United
Kingdom ("UK") operations. Pro forma revenues presented above do
not reflect revenues relating to QVC's UK operations for periods
prior to April 1, 1995.
4. INVESTMENTS
The Company holds unrestricted equity investments in certain publicly
traded companies with an historical cost of $186.8 million and $186.6
million as of June 30, 1995 and December 31, 1994, respectively. The
Company has recorded these investments (including the Company's investment
in Nextel common stock (see Note 3) with an estimated fair value of $159.1
million as of June 30, 1995), which are classified as available for sale,
at their estimated fair values of $196.5 million as of June 30, 1995 and
$192.6 million as of December 31, 1994. The unrealized pre-tax gains of
$9.7 million and $6.0 million, respectively, have been reported in the
Company's condensed consolidated balance sheet as decreases in
stockholders' deficiency, net of related deferred income taxes.
In January 1995, the Company exchanged its interest in Heritage
Communications, Inc. with TCI for Class A common shares of TCI with a fair
market value of approximately $290 million. Shortly thereafter, the Company
sold certain of these shares for total proceeds of approximately $188
million which were used to fund, in part, the acquisition of QVC. As a
result of these transactions, the Company recognized a pre-tax gain of $141
million in the first quarter of 1995.
As a result of the QVC acquisition, the Company commenced consolidating the
financial results of QVC, effective February 1, 1995, on a current basis.
In the first quarter of 1995, the Company recorded its proportionate
interest in QVC's net income for the period from November 1, 1994 through
January 31, 1995. Such results were not previously recorded by the Company
since QVC was accounted for under the equity method of accounting and its
proportionate interest in QVC's results of operations were recorded two
months in arrears. The effect of this one-time adjustment was not
significant to the Company's results of operations.
9
COMCAST CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED JUNE 30, 1995
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)
The difference between the Company's recorded investment and its
proportionate interests in the book value of its equity investees' net
assets is being amortized to equity in net income or loss, primarily over a
period of twenty years, which is consistent with the estimated lives of the
underlying assets.
Summarized financial information for investments accounted for under the
equity method of accounting is as follows (dollars in thousands):
Three Months Six Months Three Months
Ended Ended Ended
January 31, 1995 June 30, 1995 June 30, 1995
QVC Other Combined (1) Combined (1)
Combined Results of Operations
Revenue................................... $425,921 $289,653 $715,574 $149,267
Depreciation and amortization............. 12,992 70,065 83,057 36,272
Operating income (loss)................... 58,247 (99,549) (41,302) (50,594)
Net income (loss) as reported
by affiliates...................... $28,333 ($145,874) ($117,541) ($78,683)
Company's Equity in Net Income (Loss)
Equity in current period net income
(loss).................................. $4,286 ($39,970) ($35,684) ($19,992)
Amortization income (expense)............. 1,194 (3,416) (2,222) (1,497)
-------- -------- -------- --------
Total equity in net income (loss)......... $5,480 ($43,386) ($37,906) ($21,489)
====== ======== ======== ========
June 30, 1995
Combined (1)
Combined Financial Position
Current assets........................................ $342,481
Noncurrent assets..................................... 4,197,342
Current liabilities................................... 270,987
Noncurrent liabilities................................ 1,487,906
(1) Excludes the results of operations (subsequent to January 31,
1995) and financial position of QVC which was consolidated with
the Company beginning in February 1995.
10
COMCAST CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED JUNE 30, 1995
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)
Six Months Six Months
Ended Ended
April 30, 1994 June 30, 1994
QVC Other Combined
Combined Results of Operations
Revenue................................... $668,930 $158,989 $827,919
Depreciation and amortization............. 21,261 51,874 73,135
Operating income (loss)................... 86,020 (55,526) 30,494
Net income (loss) as reported
by affiliates...................... $14,909 ($74,623) ($59,714)
Company's Equity in Net Income (Loss)
Equity in current period net income (loss) $2,283 ($20,506) ($18,223)
Amortization income (expense)............. 2,486 (2,778) (292)
-------- -------- --------
Total equity in net income (loss)......... $4,769 ($23,284) ($18,515)
====== ======== ========
Three Months Three Months
Ended Ended
April 30, 1994 June 30, 1994
QVC Other Combined
Combined Results of Operations
Revenue................................... $296,441 $82,095 $378,536
Depreciation and amortization............. 10,447 26,822 37,269
Operating income (loss)................... 32,854 (30,738) 2,116
Net income (loss) as reported
by affiliates...................... $12,063 ($41,099) ($29,036)
Company's Equity in Net Income (Loss)
Equity in current period net income (loss) $1,862 ($10,552) ($8,690)
Amortization income (expense)............. 1,195 (1,374) (179)
-------- -------- --------
Total equity in net income (loss)......... $3,057 ($11,926) ($8,869)
====== ======== =======
5. LONG-TERM DEBT
On May 16, 1995, the Company issued $250.0 million principal amount of its
9-3/8% senior subordinated debentures due 2005.
The Company paid premiums and expensed unamortized debt acquisition costs
totalling $18.0 million during the six months ended June 30, 1994,
primarily as a result of the redemption of its $150.0 million, 11-7/8%
senior subordinated debentures due 2004, resulting in the Company recording
an extraordinary loss, net of tax, of $11.7 million or $.05 per share.
The Company has entered into interest rate protection products to limit the
Company's exposure to loss from adverse fluctuations in interest rates. As
of June 30, 1995, $815.0 million of the Company's variable rate debt was
protected by these products. Such agreements mature on various dates
through 1997 and the related differentials to be paid or received are
recognized over the terms of the related agreements.
11
6. STATEMENT OF CASH FLOWS - SUPPLEMENTAL INFORMATION
The Company made interest payments of approximately $210.1 million, $136.7
million, $115.3 million and $66.7 million during the six and three months
ended June 30, 1995 and 1994, respectively.
The Company redeemed its 7% convertible subordinated debentures due 2001 on
February 27, 1994 (accreted value $152.1 million). In connection with such
redemption, substantially all of the debentures were converted into 13.5
million shares of Class A Special Common Stock of the Company.
7. CONTINGENCIES
The Company is subject to claims which arise in the ordinary course of its
business and other legal proceedings. In the opinion of management, the
amount of ultimate liability with respect to these actions will not
materially affect the financial position or results of operations of the
Company.
The Company currently is seeking to justify rates for regulated services in
certain of its cable systems in the States of New Jersey and Connecticut on
the basis of cost-of-service showings. A tentative settlement, subject to
regulatory approval, has been reached with the State of New Jersey with
respect to rates for basic cable services and equipment. The State of
Connecticut has ordered the Company to reduce rates for basic cable
services and equipment and to make refunds to subscribers. The Connecticut
decision has been appealed to the FCC. The Company and the FCC have reached
agreement, subject to regulatory approval, of outstanding cost-of-service
rate complaints for cable programming services for systems in the States of
New Jersey and Connecticut. The proposed settlement will also resolve
outstanding complaints with regard to "benchmark" rate regulation in other
systems. Absent legislative, administrative or judicial relief, such as
that discussed above, the FCC regulations will continue to adversely affect
the Company's results of operations.
12
COMCAST CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED JUNE 30, 1995
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONCLUDED
(Unaudited)
8. FINANCIAL DATA BY BUSINESS SEGMENT
(Dollars in thousands)
Domestic
Cable Electronic Cellular Corporate
Communications Retailing Communications and Other (1) Total
Six Months Ended June 30, 1995
Revenue..................................... $709,580 $584,426 $176,413 $16,759 $1,487,178
Depreciation and amortization............... 183,666 37,006 155,224 11,147 387,043
Operating income (loss)..................... 164,034 58,365 (84,443) (44,569) 93,387
Interest expense............................ 123,904 34,816 35,577 56,254 250,551
Capital expenditures and acquisitions....... 112,687 1,317,594 226,269 51,483 1,708,033
Equity in net (losses) income of
affiliates.............................. (6,921) 608 (535) (31,058) (37,906)
Three Months Ended June 30, 1995
Revenue..................................... $362,458 $357,407 $94,260 $9,447 $823,572
Depreciation and amortization............... 94,168 22,734 20,742 5,922 143,566
Operating income (loss)..................... 88,398 33,965 18,853 (23,958) 117,258
Interest expense............................ 62,321 22,171 18,107 30,365 132,964
Capital expenditures and acquisitions....... 68,825 7,237 176,016 35,570 287,648
Equity in net losses of affiliates.......... (3,952) (450) (271) (16,816) (21,489)
As of June 30, 1995
Assets...................................... $4,533,525 $1,855,170 $1,223,879 $1,394,466 $9,007,040
Long-term debt, less current portion........ 2,795,695 1,019,674 763,924 1,820,226 6,399,519
Six Months Ended June 30, 1994
Revenue..................................... $526,622 $ $130,986 $11,735 $669,343
Depreciation and amortization............... 110,141 43,634 6,719 160,494
Operating income (loss)..................... 146,838 13,893 (31,152) 129,579
Interest expense............................ 72,763 27,393 52,596 152,752
Capital expenditures and acquisitions....... 81,038 24,228 8,221 113,487
Equity in net (losses) income of
affiliates.............................. (4,487) 4,769 (18,797) (18,515)
Three Months Ended June 30, 1994
Revenue.. ................................. $265,740 $ $70,108 $4,792 $340,640
Depreciation and amortization ............. 57,750 22,027 3,472 83,249
Operating income (loss) ................... 72,317 10,034 (17,047) 65,304
Interest expense .......................... 36,043 13,537 23,785 73,365
Capital expenditures and acquisitions ..... 46,387 19,125 5,576 71,088
Equity in net (losses) income of
affiliates ........................... (2,150) 3,057 (9,776) (8,869)
---------------
(1) Corporate and other includes certain operating businesses and elimination
entries related to the segments presented.
13
COMCAST CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED JUNE 30, 1995
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Overview
The Company has experienced significant growth in recent years both through
strategic acquisitions and growth in its existing businesses. The Company has
historically met its cash needs for operations through its cash flows from
operating activities. Cash requirements for acquisitions and capital
expenditures have been provided through the Company's financing activities as
well as its existing cash and cash equivalents and short-term investments.
General Developments of Business
QVC
In February 1995, the Company and Tele-Communications, Inc. ("TCI") acquired all
of the outstanding stock of QVC, Inc. ("QVC") not previously owned by the
Company and TCI (approximately 65% of such shares on a fully diluted basis) for
$46, in cash, per share. The total cost of acquiring the outstanding shares of
QVC was approximately $1.4 billion. Following the acquisition, the Company and
TCI own, through their respective subsidiaries, 57.45% and 42.55%, respectively,
of QVC. The Company has accounted for the QVC acquisition under the purchase
method of accounting and QVC has been consolidated with the Company beginning in
February 1995. The allocation of the purchase price to the assets and
liabilities of QVC is preliminary pending receipt of a final appraisal.
The acquisition of QVC, including the exercise of certain warrants held by the
Company, was financed with cash contributions from the Company and TCI of $296.3
million and $6.6 million, respectively, borrowings of $1.1 billion under a $1.2
billion QVC credit facility and existing cash and cash equivalents held by QVC.
Liberty Media Corporation, a wholly owned subsidiary of TCI, may, at certain
times following February 9, 2000, trigger the exercise of certain exit rights.
Maclean Hunter
On December 22, 1994, the Company, through Comcast MHCP Holdings, L.L.C. (the
"LLC"), acquired the U.S. cable television and alternate access operations of
Maclean Hunter Limited ("Maclean Hunter") from Rogers Communications Inc.
("RCI") and all of the outstanding shares of Barden Communications, Inc.
(collectively such acquisitions are referred to as the "Maclean Hunter
Acquisition") for approximately $1.2 billion (subject to certain adjustments) in
cash. The Company and the California Public Employees' Retirement System
("CalPERS") invested approximately $305.0 million and $250.0 million,
respectively, in the LLC, which is owned 55% by a wholly owned subsidiary of the
Company and 45% by CalPERS, and is managed by the Company. The Maclean Hunter
Acquisition, including certain transaction costs, was financed with cash
contributions from the LLC of $555.0 million and borrowings of $715.0 million
under an $850.0 million Maclean Hunter credit facility. At any time after
December 18, 2001, CalPERS may elect to liquidate its interest in the LLC at a
price based upon the fair value of CalPERS' interest in the LLC, adjusted, under
certain circumstances, for certain performance criteria relating to the fair
value of the LLC or to the Company's common stock. Except in certain limited
circumstances, the Company, at its option, may satisfy this liquidity
arrangement by purchasing CalPERS' interest for cash, through the issuance of
the Company's common stock (subject to certain limitations) or by selling the
LLC. The Maclean Hunter Acquisition was accounted for under the purchase method
of accounting and Maclean Hunter is consolidated with the Company as of December
31, 1994.
14
COMCAST CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED JUNE 30, 1995
The allocation of the purchase price to the assets and liabilities of Maclean
Hunter is preliminary pending, among other things, the final purchase price
adjustment between the Company and RCI. The terms of the Maclean Hunter
Acquisition provide for, among other things, the indemnification of the Company
by RCI for certain liabilities, including tax liabilities, relating to Maclean
Hunter prior to the acquisition date.
Sprint Telecommunications Venture
On March 28, 1995, subsidiaries of the Company, TCI, Sprint Corporation
("Sprint") and Cox Communications, Inc. ("Cox") formed several partnerships to
engage in the business of providing wireless and wireline telephony services.
The principal partnership is known as the Sprint Telecommunications Venture
("STV"). The parties have agreed that STV and its affiliated partnerships will
be the exclusive vehicles for their respective investments in certain specified
telecommunications activities, subject to certain limited exceptions. STV and
the parties will cross-promote telecommunications products and services using
the "Sprint" brand name with cable services and products branded by Cox, TCI or
the Company in their cable television systems. A partnership owned entirely by
subsidiaries of the Company, known as Comcast Telephony Services, owns 15% of
STV and, indirectly, each of STV's affiliated partnerships.
STV will engage in the business of providing wireless communications services,
primarily personal communication services ("PCS"), through a partnership known
as WirelessCo. Through WirelessCo, the partners propose to create and operate a
seamless, integrated, nationwide wireless communications network. During the
term of a trademark license from an affiliate of Sprint, WirelessCo's services
will be marketed under the "Sprint" brand name.
WirelessCo was the successful bidder for 29 PCS licenses in the auction
conducted by the Federal Communications Commission ("FCC") from December 1994
through mid-March 1995. The purchase price for the licenses was approximately
$2.11 billion, all of which has been paid to the FCC. WirelessCo may also elect
to bid in subsequent auctions for PCS licenses. In addition, WirelessCo has and
expects to continue to invest in other entities that hold PCS licenses, may
acquire PCS licenses from other license holders and may affiliate with other
license holders.
STV will also engage in the business of providing local wireline telephone
service for both business and residential customers, primarily through the cable
networks of cable television operators that affiliate with the partnership in
exchange for agreed upon compensation. Cox, TCI and the Company have agreed to
affiliate their cable systems with STV to the extent that their systems are
located in markets designated in STV's business plan. The offering of local
wireline telephone services by the partnership will require the removal of
regulatory and legislative barriers to local telephone competition.
The STV partners intend that the partnership will succeed to the business
currently conducted by Cox, TCI and the Company, together with Continental
Cablevision, Inc. ("Continental"), through Teleport Communications Group Inc.
and TCG Partners (collectively, "TCG"). TCG is one of the largest competitive
access providers in the United States. Pursuant to a contribution agreement
entered into on March 28, 1995, Cox, TCI and the Company have agreed, subject to
the satisfaction of certain conditions, to contribute to STV their respective
interests in TCG and in various local joint ventures among local cable operators
and TCG. Such contributions will be subject to the receipt of necessary
regulatory approvals and the satisfaction of other conditions. In addition, the
cable partners intend to negotiate with Continental, which owns that portion of
TCG that is not owned by Cox, TCI or the Company, regarding the acquisition of
its interest by such cable partners.
--------------------
15
COMCAST CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED JUNE 30, 1995
Liquidity and Capital Resources
Cash and cash equivalents and short-term investments as of June 30, 1995 and
December 31, 1994 were $688.8 million and $465.5 million, respectively. A
portion of these cash and cash equivalents is held by subsidiaries of the
Company and is restricted to the use by these subsidiaries under contractual or
other arrangements.
The Company's cash and cash equivalents and short-term investments are recorded
at cost which approximates their fair value. At June 30, 1995, the Company's
short-term investments of $81.8 million, excluding the Nextel common stock sold
in July 1995 (see below), had a weighted average maturity of approximately 13
months. However, due to their high degree of liquidity and the intent of
management to use these investments as needed to fund its commitments, the
Company considers these as current assets.
In January 1995, the Company exchanged its interest in Heritage Communications,
Inc. with TCI for Class A common shares of TCI with a fair market value of
approximately $290 million (the "Heritage Transaction"). Shortly thereafter, the
Company sold certain of these shares for total proceeds of approximately $188
million which were used to fund, in part, the acquisition of QVC. As a result of
these transactions, the Company recognized a pre-tax gain of $141 million in the
first quarter of 1995.
In April 1995, the Company exercised certain preemptive rights under previously
existing agreements with Nextel Communications, Inc. ("Nextel") whereby the
Company has elected to purchase approximately 9 million newly issued Nextel
shares at $12.25 per share for a total cost of approximately $110 million (the
"Nextel Share Purchase Commitment"). The purchase is contingent on the closing
of an acquisition transaction by Nextel which is expected to occur no earlier
than the fourth quarter of 1995.
In July 1995, the Company sold 11.3 million shares of Nextel common stock for
$212.6 million. These shares, which were classified as long-term investments
available for sale, had an historical cost basis of approximately $176.1
million. This investment has been included in short-term investments as of June
30, 1995 at its estimated fair value of $159.1 million based on the July 1995
sale. As a result of this transaction, the Company will recognize a pre-tax gain
of approximately $36.5 million in the third quarter of 1995. The Company
continues to hold options to acquire approximately 25.2 million shares of Nextel
common stock in addition to the Nextel Share Purchase Commitment.
In May 1995, the Company completed the initial phase of its exchange agreement
with McCaw Cellular Communications, Inc. whereby the Company acquired a 75%
interest in the entity that holds the Ocean County, NJ Rural Statistical Area
("RSA") cellular license (the "Ocean County Licensee") in exchange for the
Company's Hunterdon County, NJ RSA cellular license and $37.8 million in cash.
The Company expects to acquire the remaining 25% interest in the Ocean County
Licensee before the end of 1995.
Subject to agreement upon an initial business plan, the partners have committed
to contribute $4.4 billion in cash to STV during the next three years, of which
the Company's share would be $660 million, subject to reduction resulting from
the method of crediting in-kind contributions to STV by the partners. Of the
$660 million funding requirement, the Company has made total cash capital
contributions to WirelessCo of approximately $334.5 million through June 30,
1995. The partners' capital contributions to WirelessCo have been used
principally to pay for the 29 PCS licenses acquired in the FCC auction and to
acquire interests in another entity that holds a PCS license. Additional equity
requirements of STV will be funded by the partners through capital contributions
to STV in proportion to their ownership interests. The Company anticipates that
STV's capital requirements over the next several years will be significant.
These requirements are planned to be funded by external financing by STV in
addition to capital contributions by the partners. Although it is anticipated
that external financing will be available to STV on acceptable terms and
conditions, no assurances can be given as to such availability.
16
COMCAST CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED JUNE 30, 1995
On May 16, 1995, the Company issued $250.0 million principal amount of its
9-3/8% senior subordinated debentures due 2005.
As of June 30, 1995, the Company and certain of its subsidiaries had unused
lines of credit totalling $647.1 million. Substantially all of these lines of
credit are restricted to use by the respective subsidiary.
The Company expects to continue to recognize significant losses and to continue
to pay dividends; therefore, it anticipates that it will continue to have a
deficiency in stockholders' equity that will increase for the foreseeable
future. The telecommunications industry, including cable and cellular
communications, and the electronic retailing industry are experiencing
increasing competition and rapid technological changes. The Company's future
results of operations will be affected by its ability to react to changes in the
competitive environment and by its ability to implement new technologies.
However, management believes that competition, technological changes and its
deficiency in stockholders' equity will not significantly affect its ability to
obtain financing.
The Company believes that it will be able to meet its current and long-term
liquidity and capital requirements, including its fixed charges, through its
cash flows from operating activities, existing cash and cash equivalents,
short-term investments, sales of assets, lines of credit and other external
financing.
Statement of Cash Flows
Net cash provided by operating activities amounted to $206.8 million and $147.6
million for the six months ended June 30, 1995 and 1994, respectively. The
increase of $59.2 million is principally due to the effects of the acquisitions
of QVC and Maclean Hunter, offset by changes in working capital as a result of
the timing of receipts and disbursements.
Net cash provided by (used in) financing activities, which includes the
issuances of securities as well as borrowings, was $1.823 billion and ($378.0)
million during the six months ended June 30, 1995 and 1994, respectively. For
the six months ended June 30, 1995, the Company borrowed $2.019 billion
consisting of $1.1 billion in connection with the acquisition of QVC, the
funding of STV of $300.9 million and the Company's $250.0 million principal
amount of its 9-3/8% senior subordinated debentures due 2005, issued in May
1995. In addition, the Company redeemed and retired $194.4 million of its
long-term debt. During the six months ended June 30, 1994, the Company
repurchased or redeemed and retired $368.5 million of its long-term debt,
including the Company's $150.0 million, 11-7/8% senior subordinated debentures
due 2004.
Net cash used in (provided by) investing activities was $1.917 billion and
($170.5) million for the six months ended June 30, 1995 and 1994, respectively.
During the six months ended June 30, 1995, net cash used in investing activities
includes acquisitions, including the acquisition of QVC, net of cash acquired,
of $1.369 billion, additional cash investments in affiliates of $431.5 million,
including capital contributions to STV of $315.9 million, and additions to
property and equipment of $339.0 million. Such amounts were offset by proceeds
from sales of short-term and long-term investments of $236.4 million. Net
proceeds of $306.4 million from the sale of short-term investments for the six
months ended June 30, 1994 were used principally to redeem and retire long-term
debt. In addition, during the six months ended June 30, 1994, the Company made
capital expenditures of $92.7 million and made additional cash investments in
affiliates of $38.2 million.
Results of Operations
The effects of the QVC and Maclean Hunter acquisitions have been to increase
significantly the Company's revenues and expenses resulting in substantial
increases in its operating income before depreciation and amortization,
depreciation and amortization expense and net interest expense. However, it is
expected that because of the increases in depreciation and amortization and
interest expense associated with these acquisitions and their financing, the
Company will continue to recognize substantial losses for the foreseeable
future.
17
COMCAST CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED JUNE 30, 1995
For the six and three months ended June 30, 1995 and 1994, the Company
recognized operating income before depreciation and amortization (commonly
referred to in the Company's businesses as "operating cash flow") of $480.4
million, $290.1 million, $260.8 million and $148.6 million, respectively. The
increases of $190.3 million or 66% and $112.2 million or 76% from 1994 to the
same periods in 1995 are a result of the items discussed below. Operating cash
flow is a measure of a company's ability to generate cash to service its
obligations, including debt service obligations, and to finance capital and
other expenditures. In part due to the capital intensive nature of the Company's
businesses and the resulting significant level of non-cash depreciation and
amortization expense, operating cash flow is frequently used as one of the bases
for comparing the Company's businesses. Operating cash flow does not purport to
represent net income or net cash provided by operating activities, as those
terms are defined under generally accepted accounting principles, and should not
be considered as an alternative to such measurements as an indicator of the
Company's performance. See "Statement of Cash Flows" above for a discussion of
net cash provided by operating activities.
The Company recognized revenue of $1.487 billion, $669.3 million, $823.6 million
and $340.6 million for the six and three months ended June 30, 1995 and 1994,
respectively, representing increases of $817.7 million or 122% and $483.0
million or 142% from 1994 to the same periods in 1995. For the six and three
months ended June 30, 1995, approximately 48% and 44%, respectively, of such
revenue represents service income related to the Company's cable division,
approximately 39% and 43%, respectively, represents net sales from electronic
retailing as a result of the consolidation of QVC and approximately 12% and 11%,
respectively, represents service income related to the Company's cellular
division. For the six and three months ended June 30, 1994, approximately 79%
and 78%, respectively, of such revenue represents service income related to the
Company's cable division and approximately 20% and 21%, respectively, represents
service income related to the Company's cellular division.
Cost of goods sold from electronic retailing was $350.2 million and $212.2
million for the five and three months ended June 30, 1995, respectively,
representing approximately 60% and 59% of net sales from electronic retailing
for those periods.
Operating, selling, general and administrative expenses were $656.5 million,
$379.3 million, $350.6 million and $192.1 million for the six and three months
ended June 30, 1995 and 1994, respectively, representing increases of $277.2
million or 73% and $158.5 million or 83% from 1994 to the same periods in 1995.
For the six and three months ended June 30, 1995, approximately 55% and 51%,
respectively, of such expenses relate to the Company's cable division,
approximately 21% and 25%, respectively, relate to the consolidation of QVC and
approximately 16% for each period relates to the Company's cellular division.
For the six and three months ended June 30, 1994, approximately 71% for each
period of such expenses related to the Company's cable division and
approximately 19% and 20%, respectively, related to the Company's cellular
division.
Depreciation and amortization was $387.0 million, $160.5 million, $143.6 million
and $83.2 million for the six and three months ended June 30, 1995 and 1994,
respectively, representing increases of $226.5 million or 141% and $60.4 million
or 73% from 1994 to the same periods in 1995. The increases are due to the
effects of the rebuild of certain of the Company's cellular equipment, as
described below, as well as depreciation and amortization resulting from the
acquisitions of QVC and Maclean Hunter.
Interest expense was $250.6 million, $152.8 million, $133.0 million and $73.4
million for the six and three months ended June 30, 1995 and 1994, respectively,
representing increases of $97.8 million or 64% and $59.6 million or 81% from
1994 to the same periods in 1995. The increases are primarily due to increased
levels of debt associated with the acquisitions of QVC and Maclean Hunter.
The Company has entered into interest rate protection products to limit the
Company's exposure to loss from adverse fluctuations in interest rates. As of
June 30, 1995, $815.0 million of the Company's variable rate debt was protected
18
COMCAST CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED JUNE 30, 1995
by these products. Such agreements mature on various dates through 1997 and the
related differentials to be paid or received are recognized over the terms of
the agreements.
For the six and three months ended June 30, 1995 and 1994, the Company's
earnings before extraordinary items, income tax expense, equity in net losses of
affiliates and fixed charges (interest expense) were $272.6 million, $143.1
million, $135.3 million and $70.5 million, respectively. Excluding the pre-tax
gain of $141 million recognized in the first quarter of 1995 in connection with
the Heritage Transaction, these earnings were not adequate to cover the
Company's fixed charges of $250.6 million, $152.8 million, $133.0 million and
$73.4 million for these periods, respectively. Fixed charges include non-cash
interest of $27.4 million, $26.3 million, $13.9 million and $12.7 million for
the six and three months ended June 30, 1995 and 1994, respectively. The
inadequacy of these earnings to cover fixed charges is primarily due to the
substantial non-cash charges for depreciation and amortization expense of $387.0
million, $160.5 million, $143.6 million and $83.2 million for the six and three
months ended June 30, 1995 and 1994, respectively, which includes a first
quarter 1995 pre-tax charge associated with the rebuild of certain of the
Company's cellular equipment.
The Company believes that its losses and inadequacy of earnings to cover fixed
charges will not significantly affect the performance of its normal business
activities because of its existing cash and cash equivalents and short-term
investments, its ability to generate operating income before depreciation and
amortization and its ability to obtain external financing.
The Company anticipates that, for the foreseeable future, interest expense will
be a significant cost to the Company and will have a significant adverse effect
on the Company's ability to realize net earnings. The Company believes it will
continue to be able to meet its obligations through its ability both to generate
operating income before depreciation and amortization and to obtain external
financing.
Minority interest and other income was $13.8 million, $3.4 million, $5.4 million
and $375,000 for the six and three months ended June 30, 1995 and 1994,
respectively, representing increases of $10.4 million and $5.0 million from 1994
to the same periods in 1995. These increases are primarily attributable to
minority interests in the net income or loss of QVC, Maclean Hunter and the
Company's United Kingdom operations.
The Company recognized income tax expense of $14.0 million, $365,000, $10.1
million and $1.0 million for the six and three months ended June 30, 1995 and
1994, respectively. The increases from 1994 to the same periods in 1995 are
primarily attributable to the acquisition of QVC.
The Company paid premiums and expensed unamortized debt acquisition costs
totalling $18.0 million during the six months ended June 30, 1994, primarily as
a result of the redemption of its $150.0 million, 11-7/8% senior subordinated
debentures due 2004, resulting in the Company recording an extraordinary loss,
net of tax, of $11.7 million or $.05 per share.
The Company believes that its operations are not materially affected by
inflation.
Cable Communications
The Company's cable division recognized service income of $709.6 million, $526.6
million, $362.5 million and $265.7 million for the six and three months ended
June 30, 1995 and 1994, respectively, representing increases of $183.0 million
or 35% and $96.8 million or 36% from 1994 to the same periods in 1995. The
Maclean Hunter acquisition accounted for $132.0 million and $67.5 million of
these increases. The remaining increases of $51.0 million and $29.3 million are
attributable to subscriber growth of $34.4 million and $17.7 million,
respectively, new product
19
COMCAST CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED JUNE 30, 1995
offerings of $7.1 million and $4.8 million, respectively, and $9.5 million and
$6.8 million relating to changes in rates which include the change in the
estimated effects of cable rate regulation, respectively.
Operating, selling, general and administrative expenses for the Company's cable
division were $361.9 million, $269.6 million, $179.9 million and $135.7 million
for the six and three months ended June 30, 1995 and 1994, respectively,
representing increases of $92.3 million or 34% and $44.2 million or 33% from
1994 to the same periods in 1995. The Maclean Hunter acquisition accounted for
$71.2 million and $35.1 million of these increases. The remaining increases of
$21.1 million and $9.1 million are attributable to increases in the costs of
labor, billing and cable programming as a result of subscriber growth and rate
increases. It is anticipated that the Company's cost of cable programming will
increase in the future as cable programming rates increase and additional
sources of cable programming become available.
Electronic Retailing
As a result of the QVC acquisition, the Company commenced consolidating the
financial results of QVC, effective February 1, 1995, on a current basis.
Comparative pro forma financial information for the six and three months ended
June 30, 1995 and 1994 is presented herein for purposes of analysis and may not
reflect what actual results of operations would have been had the Company owned
QVC since January 1, 1994.
QVC recognized net sales from electronic retailing of $715.9 million, $609.3
million, $357.4 million and $297.4 million for the six and three months ended
June 30, 1995 and 1994, respectively, representing increases of $106.6 million
or 17% and $60.0 million or 20% from 1994 to the same periods in 1995. Excluding
an increase of $11.8 million for both the six and three months ended June 30,
1995, which relates to the consolidation of QVC's UK operations effective April
1, 1995, the increases in net sales from electronic retailing in the six and
three months ended June 30, 1995 include the effects of a 6% increase, for both
periods, in net sales per full time equivalent home in the U.S. and the effects
of 9% and 10% increases, respectively, in the average number of QVC homes
receiving QVC services.
Full-time equivalent homes equal the total number of cable homes receiving the
QVC service 24 hours per day plus one-third of the part-time cable homes plus
one-half of the satellite dish homes. This calculation reflects the Company's
estimate of the relative value to the Company of part-time homes and satellite
dish homes compared to full-time homes.
QVC recognized operating, selling, general and administrative expenses of $168.8
million, $146.1 million, $88.5 million and $73.2 million for the six and three
months ended June 30, 1995 and 1994, respectively, representing increases of
$22.7 million or 16% and $15.3 million or 21% from 1994 to the same periods in
1995. Excluding an increase of $7.7 million for both the six and three months
ended June 30, 1995 relating to the consolidation of QVC's UK operations
effective April 1, 1995, these increases are principally attributable to higher
advertising costs and additional costs associated with secondary channel
services.
QVC recognized cost of goods sold from electronic retailing of $428.3 million,
$368.9 million, $212.2 million and $178.6 million for the six and three months
ended June 30, 1995 and 1994, respectively. Such costs have remained consistent
as a percentage of sales, representing 60% and 59%, respectively, of net sales
from electronic retailing for the six and three months ended June 30, 1995 and
61% and 60%, respectively, of net sales from electronic retailing for the six
and three months ended June 30, 1994.
Cellular Communications
The Company's cellular division recognized service income of $176.4 million,
$131.0 million, $94.3 million and $70.1 million for the six and three months
ended June 30, 1995 and 1994, respectively, representing increases of $45.4
20
COMCAST CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED JUNE 30, 1995
million or 35% and $24.2 million or 35% from 1994 to the same periods in 1995.
The increases are attributable to subscriber growth, partially offset by the
effects of decreases in the average minutes-of-use per cellular subscriber from
1994 to the same periods in 1995. The Company expects the trend in average
minutes-of-use per cellular subscriber to continue in the future.
Operating, selling, general and administrative expenses for the Company's
cellular division were $105.6 million, $73.5 million, $54.7 million and $38.0
million for the six and three months ended June 30, 1995 and 1994, respectively,
representing increases of $32.1 million or 44% and $16.7 million or 44% from
1994 to the same periods in 1995. These increases are primarily due to increases
in commissions and marketing expense as a result of subscriber growth.
The Company's cellular division has entered into an agreement to purchase
approximately $172.0 million of switching and cell site equipment. This
equipment will replace existing switching and cell site equipment. The Company
expects the rebuild to be completed in the third quarter of 1995. In accordance
with the provisions of Statement of Financial Accounting Standards No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed Of," during the first quarter of 1995, the Company charged to its
results of operations approximately $110.0 million which represents the
difference between the net book value of the equipment to be replaced and the
residual value expected to be realized upon its disposal. This charge has been
reflected in the Company's condensed consolidated statement of operations and
accumulated deficit as a component of depreciation and amortization expense.
Cable Rate Regulation Developments
The Company currently is seeking to justify rates for regulated services in
certain of its cable systems in the States of New Jersey and Connecticut on the
basis of cost-of-service showings. A tentative settlement, subject to regulatory
approval, has been reached with the State of New Jersey with respect to rates
for basic cable services and equipment. The State of Connecticut has ordered the
Company to reduce rates for basic cable services and equipment and to make
refunds to subscribers. The Connecticut decision has been appealed to the FCC.
The Company and the FCC have reached agreement, subject to regulatory approval,
of outstanding cost-of-service rate complaints for cable programming services
for systems in the States of New Jersey and Connecticut. The proposed settlement
will also resolve outstanding complaints with regard to "benchmark" rate
regulation in other systems. Absent legislative, administrative or judicial
relief, such as that discussed above, the FCC regulations will continue to
adversely affect the Company's results of operations.
21
COMCAST CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED JUNE 30, 1995
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings
1. In June 1995, a three-judge panel of the United States Court of
Appeals for the District of Columbia Circuit generally upheld the rate
regulations adopted by the FCC pursuant to the Cable Television
Consumer Protection and Competition Act of 1992. In July 1995, the
Company and other cable television operators and trade associations
petitioned for a rehearing of this decision by the entire court. The
court has not yet ruled on that petition.
2. In March 1995, the Company entered into agreements to settle various
disputes pending in the courts and at the FCC regarding the ownership,
operation and transfer of the license for the cellular telephone
system in the Atlantic City, New Jersey MSA. As part of that
settlement, the Company, in June 1995, purchased an 80% interest in
the cellular telephone system in the Vineland, New Jersey RSA and an
additional 9.3% interest in the Atlantic City MSA. The remaining
portion of the settlement, which involves the transfer to the Company
of control of the Atlantic City cellular telephone system, is subject
to a favorable determination at the FCC of proceedings concerning the
status of the current Atlantic City cellular licensee, approval by the
FCC of the transfer to the Company of the cellular license, other
regulatory approvals and consents of third parties.
ITEM 4. Submission of Matters to a Vote of Security Holders
At the Annual Meeting on June 21, 1995, the shareholders approved the
following proposals:
To elect ten directors to serve for the ensuing year and until their
respective successors shall have been duly elected and qualified.
Director Class of Stock For Withheld
Ralph J. Roberts Class A 34,065,822 130,450
Class B 131,793,750
Julian A. Brodsky Class A 34,079,326 116,946
Class B 131,793,750
Brian L. Roberts Class A 34,076,113 120,159
Class B 131,793,750
Daniel Aaron Class A 34,075,719 120,553
Class B 131,793,750
Gustave G. Amsterdam Class A 34,123,261 73,011
Class B 131,793,750
Sheldon M. Bonovitz Class A 33,368,339 827,933
Class B 131,793,750
Joseph L. Castle II Class A 34,128,088 68,184
Class B 131,793,750
Bernard C. Watson Class A 34,128,288 67,984
Class B 131,793,750
Irving A. Wechsler Class A 34,125,227 71,045
Class B 131,793,750
Anne Wexler Class A 34,072,010 124,262
Class B 131,793,750
22
COMCAST CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED JUNE 30, 1995
A proposal to the Board of Directors to amend the Company's articles of
incorporation to provide that future amendments shall be adopted by a
majority of votes cast.
Broker
Class of Stock For Against Abstain Nonvote
Class A 21,758,071 5,100,084 361,961 6,976,156
Class B 131,793,750
Ratify the appointment of Deloitte & Touche LLP as the Company's
independent auditors for the 1995 fiscal year.
Class of Stock For Against Abstain
Class A 34,120,044 37,042 39,186
Class B 131,793,750
ITEM 6. Exhibits and Reports on Form 8-K
(a) Exhibits required to be filed by Item 601 of Regulation S-K:
4.1 Form of Debenture relating to the Company's $250.0 million 9-3/8%
senior subordinated debentures due 2005.
10.1 Amendment No. 5 and waiver, dated as of June 14, 1995, to the
Credit Agreement dated as of March 4, 1992, between Comcast
Cellular Communications, Inc., the banks therein and the
Toronto-Dominion Bank Trust Company, as administrative agent.
27.1 Financial Data Schedule.
27.2 Restated Financial Data Schedule.
(b) Reports on Form 8-K
(i) The Company filed a Current Report on Form 8-K under Item 5 on
April 13, 1995 relating to the Telecommunications Joint Venture
among subsidiaries of the Company, Tele-Communications, Inc.,
Sprint Corporation and Cox Communications, Inc.
(ii) The Company filed a Current Report on Form 8-K under Item 2 on
April 25, 1995 relating to the acquisition of QVC, Inc. which
included the Company's Unaudited Pro Forma Condensed Consolidated
Financial Statements as of and for the year ended December 31,
1994, the Consolidated and Combined Financial Statements of
Comcast MHCP Holdings, L.L.C. and the Predecessor Corporation as
of December 31, 1994 and 1993 and for the periods from January 1,
1994 to December 21, 1994 and December 22, 1994 to December 31,
1994 and the years ended December 31, 1993 and 1992, and the
Consolidated Financial Statements of QVC, Inc. (formerly, QVC
Network, Inc.) as of and for the three years ended January 31,
1995.
23
COMCAST CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED JUNE 30, 1995
SIGNATURE
Pursuant to the Requirements of the Securities and Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
COMCAST CORPORATION
/s/ LAWRENCE S. SMITH
Lawrence S. Smith
Senior Vice President
Accounting and Administration
(Chief Accounting Officer)
Date: August 14, 1995
COMCAST
CORPORATION
9 3/8% SENIOR SUBORDINATED DEBENTURE DUE 2005
SEE REVERSE FOR
CERTAIN DEFINITIONS
COMCAST CORPORATION, a corporation duly organized and existing under the
Commonwealth of Pennsylvania (hereinafter called the "Company," which term
includes any successor corporation under the Indenture hereinafter referred to),
for value received, hereby promises to pay to
9 3/8%
DUE
2005
, or registered assigns, the principal sum of DOLLARS
in any coin or currency of the United States of America which at the time of
payment is legal tender for public and private debts, upon presentation and
surrender of this Debenture, on the fifteenth day of May, 2005, at the office or
agency of the Company in New York, New York, and to pay interest hereon to the
registered holder hereof in like coin or currency, at the rate per annum
specified in the title of this Debenture, semi-annually on the fifteenth day of
May and November in each year, commencing November 15, 1995, until payment of
said principal amount has been made or duly provided for. Such interest shall be
payable from the May 15 or the November 15, as the case may be, next preceding
the date hereof to which interest has been paid, or duly provided for, unless
the date hereof is a May 15 or November 15 to which interest has been paid, or
duly provided for, in which case from the date hereof, or unless the date hereof
is after May 1 or November 1, as the case may be, and prior to the following May
15 or November 15, in which case from such May 15 or November 15; provided,
however, that if the Company shall default in the payment of interest due on
such May 15 or November 15, then from the next preceding May 15 or November 15,
to which interest has been paid or duly provided for, or if no interest has been
paid, or duly provided for, on this Debenture, from May 23, 1995 any such
interest payable on any May 15 or November 15 shall (subject to exceptions
provided in the Indenture referred to on the reverse hereof) be paid to the
person in whose name this Debenture or the Debentures in exchange or
substitution for which this Debenture shall have been issued, shall have been
registered at the close of business on the May 1 or November 1, as the case may
be, next preceding such May 15 or November 15, whether or not such May 1 or
November 1 is a Business Day. Payment of the principal of, premium, if any, and
interest on this Debenture will be made at the office or agency of the Company
maintained for that purpose in New York, New York; provided, however, that, at
the option of the Company, payment of interest may be made by check mailed to
the address of the person entitled thereto as such address shall appear on the
books maintained for the registration of the Debentures.
THE PROVISIONS OF THIS DEBENTURE ARE CONTINUED ON THE REVERSE HEREOF AND
SUCH CONTINUED PROVISIONS SHALL FOR ALL PURPOSES HAVE THE SAME EFFECT AS THOUGH
FULLY SET FORTH AT THIS PLACE.
This Debenture shall not be entitled to any benefit under the Indenture
referred to on the reverse hereof or any indenture supplemental thereto, or
become valid or obligatory for any purpose, until the Trustee under said
Indenture, or a successor trustee thereunder, shall have signed the form of
certificate of authentication appearing hereon.
IN WITNESS WHEREOF, COMCAST CORPORATION has caused this instrument to be
duly executed under its corporate seal.
Dated:
TRUSTEE'S CERTIFICATE
THIS IS ONE OF THE DEBENTURES OF THE SERIES REFERRED TO ON THE REVERSE
HEREOF.
BY: HARRIS TRUST AND SAVINGS BANK
AS TRUSTEE,
AUTHORIZED OFFICER
COMCAST CORPORATION
ATTEST: Stanley Wang By: Brian L. Roberts
Secretary President
COMCAST CORPORATION CORPORATE SEAL (Graphic Omitted)
9 3/8% Senior Subordinated Debenture Due 2005
This debenture is one of a duly authorized issue of debentures of the
Company (hereinafter called the "Debentures"), all issued or to be issued in one
or more series under an indenture dated as of October 17, 1991 (herein called
the "Indenture"), executed between the Company and Morgan Guaranty Trust Company
of New York, a New York banking corporation (the "Original Trustee"), for which
Harris Trust and Savings Bank, an Illinois banking corporation, is acting as
Trustee (hereinafter called the "Trustee") pursuant to an Agreement of
Resignation, Appointment and Acceptance, dated as of July 8, 1994 by and among
the Company, the Original Trustee, the Trustee and Bank of Montreal Trust
Company. Reference is hereby made to such Indenture and all indentures
supplemental thereto for a specification of the rights and limitations of rights
thereunder of the registered holders of the Debentures, the rights and
obligations thereunder of the Company and the rights, duties and immunities
thereunder of the Trustee and the terms upon which the Debentures are, and are
to be, authenticated and delivered. This Debenture is one of the series
designated on the face hereof, limited in aggregate principal amount to
$250,000,000.
The Debentures shall not be redeemable prior to May 15, 2000. On and after
May 15, 2000, the Debentures shall be redeemable, in whole or in part, at the
election of the Company at the following respective percentages of the principal
amount thereof if redeemed during the twelve-month period beginning May 15 of
the years indicated, together, in each case, with interest accrued to the date
fixed for redemption:
Year Percentage
2000........................................104.688%
2001........................................102.344%
2002 or thereafter..........................100.000%
such redemption to be made in accordance with the applicable provisions of
Article V of the Indenture.
The indebtedness evidenced by the Debentures is, to the extent provided in
the Indenture, subordinate and subject in right of payment to the prior payment
in full of all Senior Indebtedness, as defined in the Indenture, and each holder
of this Debenture, by accepting the same, agrees to and shall be bound by the
provisions of the Indenture.
In case an Event of Default, as defined in the Indenture, shall occur with
respect to the Debentures of this series and be continuing, the principal of all
Debentures of this series then Outstanding under the Indenture may be declared,
or may become, due and payable upon the conditions and in the manner and with
the effect provided in the Indenture. The Indenture provides that such
declaration may in certain events be annulled by the holders of a majority in
aggregate principal amount of the Debentures of this series then Outstanding.
To the extent permitted by, and as provided in, the Indenture,
modifications or alterations of the Indenture, or of any indenture supplemental
thereto, and of the rights and obligations of the Company and of the holders of
the Debentures, may be made by the Company with the consent of the holders of
not less than 66-2/3% of the Debentures then Outstanding of each series affected
by such supplement; provided, however, that no such modifications or alterations
shall (i) extend the time or times of payment of the principal of, premium, if
any, or the interest on, any Debenture, or reduce the principal amount of,
premium, if any, or the rate of interest on, any Debenture without the consent
of the holder of each Debenture so affected, or (ii) reduce the percentage of
Debentures of this series, the vote or consent of the holders of which is
required for such modifications and alterations, without the consent of the
holders of all Debentures of this series then Outstanding under the Indenture.
It is also provided in the Indenture that the holders of a majority in aggregate
principal amount of the Debentures of this series then Outstanding may on behalf
of the holders of all the Debentures of this series, under circumstances
specified in the Indenture, waive a past Event of Default under the Indenture
and its consequences, except a default in the payment of the principal of,
premium, if any, or interest on the Debentures of this series. Any such consent
or waiver by the holder of this Debenture shall be conclusive and binding upon
such holder and upon all future holders of this Debenture and of any Debenture
or Debentures issued in exchange or substitution herefor, irrespective of
whether or not any notation of such consent or waiver is made upon this
Debenture.
Except with respect to the rights of the holders of Senior Indebtedness set
forth in this Debenture and in the Indenture, no reference herein to the
Indenture and no provision of this Debenture or of the Indenture shall alter or
impair the obligation of the Company, which is absolute and unconditional, to
pay the principal of, premium, if any, and interest on this Debenture at the
place, at the respective times, at the rate, and in the coin or currency herein
prescribed.
The Indenture contains provisions setting forth certain conditions to the
institution of proceedings by holders of the Debentures of this series with
respect to this Debenture and the Indenture and the enforcement of remedies
under this Debenture and the Indenture, including, without limitation, the
appointment of a receiver or trustee. However no reference herein to the
Indenture and no provision of this Debenture or of the Indenture shall impair or
affect the right of any holder of any Debenture to receive payment of the
principal of, premium, if any, and interest on such Debenture, on or after the
respective dates expressed in this Debenture, or to institute suit for the
enforcement of any such payment on or after such respective dates and any such
right of such enforcement thereof shall not require the consent of any other
such holder.
The Debentures of this series are issuable only as registered Debentures
without coupons, in denominations of $1,000 and any integral multiple of $1000.
The transfer of this Debenture is registrable by the registered holder
hereof, in person or by his attorney duly authorized in writing, on the books of
the Company to be kept for that purpose at the office or agency of the Company
in New York, New York, upon surrender and cancellation of this Debenture and
upon presentation of a duly executed written instrument of transfer, and
thereupon a new Debenture of Debentures of this series, of authorized
denominations for the same aggregate principal amount, will be issued to the
transferee or transferees in exchange herefor; and this Debenture, with or
without others of like form, may be in like manner exchanged for one or more
Debentures of this series of other authorized denominations but of the same
aggregate principal amount, all in the manner and subject to the conditions in
the Indenture contained and without payment of any service or other charge,
except for any stamp or other tax or governmental charge in connection
therewith. The Company, the Trustee, any paying agent and any Debenture
registrar may deem and treat the person in whose name this Debenture is
registered as the absolute owner hereof for the purpose of receiving payment
hereof or on account hereof or of interest hereon (subject to the provisions of
the first paragraph on the face hereof) and for all other purposes.
No recourse shall be had for the payment of the principal of, premium, if
any, or interest on this Debenture or for any claim based hereon or otherwise in
any manner in respect hereof, or in respect of the Indenture, against any
subsidiary, incorporator, stockholder, officer, director or employee, as such,
past, present or future, of the Company or any subsidiary, incorporator,
stockholder, officer, director or employee, as such, past, present or future, of
any predecessor or successor corporation, whether by virtue of any
constitutional provision or statute or rule of law, or by the enforcement of any
assessment or penalty or in any other manner, all such liability being expressly
waived and released by the acceptance hereof and as part of the consideration
for the issue hereof.
The Indenture and this Debenture shall be deemed to be contract made under
the laws of the Commonwealth of Pennsylvania, and for all purposes shall be
construed in accordance with the laws of said jurisdiction, except that the
rights, duties, obligations, immunities and limitations or rights of the
Trustee, pursuant to the Indenture and the Debenture shall be governed by and
construed in accordance with the laws of the State of New York.
All terms used in this Debenture shall have meanings ascribed to them in
the Indenture.
ABBREVIATIONS
The following abbreviations, when used in the inscription on the face
of the within Debenture, shall be construed as though they were written out in
full according to applicable laws or regulations:
TEN COM - as tenants in common
TEN ENT - as tenants by the entireties
JT TEN - as joint tenants with right of
survivorship and not as tenants
in common
UNIF GIFT MIN ACT - ________ Custodian ________
(Cust) (Minor)
under Uniform Gifts to Minors
Act ________________
(State)
Additional abbreviations may also be used though not in the above list.
-----------------------------------------------------------
FOR VALUE RECEIVED the undersigned hereby sells, assigns and transfers unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
/ /
------------
------------------------------------------------------------------------------
(NAME AND ADDRESS OF ASSIGNEE, INCLUDING ZIP CODE, MUST BE PRINTED
OR TYPEWRITTEN)
------------------------------------------------------------------------------
the within Debenture, and all rights thereunder, hereby irrevocably constituting
and appointing
------------------------------------------------------------------------Attorney
to transfer said Debenture on the books of the Company, with full power of
substitution in the premises.
Dated: ______________________________
NOTICE: The signature to this assignment must correspond with the
name as it appears upon the face of the within Debenture in every particular,
without alteration or enlargement or any change whatever.
AMENDMENT NO. 5
AMENDMENT NO. 5 AND WAIVER dated as of June 14, 1995 between COMCAST
CELLULAR COMMUNICATIONS, INC., a Delaware corporation (the "Company"), the BANKS
(as such term is defined below) party hereto and THE TORONTO-DOMINION BANK TRUST
COMPANY, as administrative agent (the "Administrative Agent").
The Company, certain lenders (the "Banks"), certain Co-Agents, The Chase
Manhattan Bank (National Association) as Collateral Agent and the Administrative
Agent are party to a Credit Agreement dated as of March 4, 1992 (as amended,
supplemented and otherwise modified and in effect to but excluding the date
hereof (except as otherwise specified herein), the "Credit Agreement").
In order to facilitate certain improvements to assets used in its Cellular
Systems, the Company has requested the Banks to amend the Credit Agreement to
exclude from the definition of Fixed Charges set forth therein those capital
expenditures made or to be made in connection with the proposed improvements. In
addition, the Company has requested the Banks to discontinue the requirement
that the Company maintain any Interest Rate Protection Agreements at such times
as the Debt to Cash Flow Ratio is less than or equal to 4.5 to 1.0. The Banks
are agreeable to all such amendments and related modifications to the Credit
Agreement on the terms and conditions set forth below.
Accordingly, in consideration of the premises and the mutual agreements
contained herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
Section 1. Definitions Terms used but not defined herein shall have the
respective meanings ascribed to such terms in the Credit Agreement.
Section 2. Amendments. Subject to the satisfaction of the conditions to
effectiveness specified in Section 3 hereof, the Credit Agreement shall be
amended as follows:
(a) Section 1.01 of the Credit Agreement shall be amended by inserting
the following new definitions in their appropriate alphabetical location:
"Amendment No. 5" shall mean Amendment No. 5 dated as of June 14,
1995 between the Company, the Banks party thereto and the
Administrative Agent.
"AT&T Switchout Capital Expenditures" shall mean Capital
Expenditures relating to the replacement of
Amendment No. 5
-2-
Motorola network equipment with AT&T network equipment in an aggregate
amount not to exceed $100,000,000.00.
(b) The definition of "Fixed Charges" set forth in Section 1.01 of the
Credit Agreement shall be amended by inserting the words "and other than
AT&T Switchout Capital Expenditures" after the words "Closing Date" in the
parenthetical phrase in clause (c) thereof.
(c) Section 8.19 of the Credit Agreement shall be amended by deleting
the period at the end thereof and adding the following in its place:
provided, however, that the Company shall not be obligated to
maintain any Interest Rate Protection Agreements at any time that
the Debt to Cash Flow Ratio is less than or equal to 4.5 to 1.0.
Section 3. Conditions to Effectiveness. The amendments to the Credit
Agreement set forth in Section 2 hereof shall be deemed effective as of March
31, 1995, upon:
(a) The receipt by the Administrative Agent of this Amendment, duly
executed and delivered by the Company, the Majority Banks and the
Administrative Agent; and
(b) The confirmation of each Obligor other than the Company, after
giving effect to the amendment of the Credit Agreement contemplated by this
Amendment, of its obligations under each of the Basic Documents to which it
is a party, effected by signing on the line provided for such Obligor on
the Consent of the Obligors attached hereto.
Section 4. Waiver. By executing this Amendment, the Administrative Agent
and the Banks hereby waive (i) any Default that exists, or existed at the end of
the first quarter of 1995, with respect to the Fixed Charges Coverage Ratio test
set forth in Section 8.10(c) of the Credit Agreement to the extent that such
Default would not exist, or would not have existed, if the Fixed Charges
Coverage Ratio were calculated in a manner consistent with this Amendment, (ii)
any default that exists, or existed at any time, with respect to the failure of
the Company to maintain any Interest Rate Protection Agreements to the extent
that such Default would not exist, or would not have existed, if the provisions
of Section 8.19 of the Credit Agreement had, at the time of such Default, been
modified as set forth in this Amendment, and (iii) any Default that exists, or
existed at any time, with respect to the notice requirements set forth in
Section 8.01(f) of the Credit Agreement to the extent that the Default giving
rise to such notice requirement either (x) relates to the timely delivery of
financial statements, certificates or other information respecting the first
fiscal quarter of 1995 and has been, or will be, satisfied within the grace
period provided by Section 9.01 of the Credit Agreement or (y) is otherwise a
Default waived hereunder.
Amendment No. 5
-3-
Section 5. Representations and Warranties. The Company represents and
warrants to the Banks and the Administrative Agent that, after giving effect to
this Amendment No. 5 and Waiver, no Default will have occurred and be
continuing.
Section 6. Documents Otherwise Unchanged. Except as herein provided, the
Credit Agreement shall remain unchanged and in full force and effect, and each
reference to the Credit Agreement and words of similar import therein and other
Basic Documents shall be a reference to the Credit Agreement as modified hereby
and as the same may be further amended, supplemented and otherwise modified and
in effect from time to time.
Section 7. Counterparts. This Amendment may be executed in any number of
counterparts, each of which shall be identical and all of which, when taken
together, shall constitute one and the same instrument, and any of the parties
hereto may execute this Amendment by signing any such counterpart.
Section 8. Expenses. Without limiting its obligations under Section 11.03
of the Credit Agreement, the Company agrees to pay, on demand, all reasonable
out-of-pocket costs and expenses of each of the Administrative Agent and the
Collateral Agent (including the fees and disbursements of Milbank, Tweed, Hadley
& McCloy, Special New York counsel to the Banks) incurred in connection with the
negotiation, preparation, execution and delivery of this Amendment.
Section 9. Binding Effect. This Amendment shall be binding upon and inure
to the benefit of the parties hereto and their respective successors and
assigns.
Section 10. Governing Law. This Amendment shall be governed by, and
construed in accordance with, the law of the State of New York.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed as of the day and year first above written.
COMCAST CELLULAR
COMMUNICATIONS, INC.
By: /s/ Christine K. Van Horne
------------------------
Title: Treasurer
Amendment No. 5
-4-
THE TORONTO-DOMINION
BANK TRUST COMPANY
as Administrative Agent
By:/s/ Martha Gariepy
--------------------------
Title: VP
THE TORONTO-DOMINION BANK
By: /s/ Sophia D. Sgarbi
--------------------------
Title: Mgr. Syndications &
Credit Admin.
THE BANK OF NOVA SCOTIA
By:/s/ Claudia Schifos
--------------------------
Title:
THE BANK OF NEW YORK
By:/s/ James Whittaker
--------------------------
Title: AVP
BARCLAYS BANK PLC
By:/s/ John B. Alter
--------------------------
Title: Associate Director
THE CHASE MANHATTAN BANK
(NATIONAL ASSOCIATION)
By:/s/ John White
--------------------------
Title: VP
CIBC, INC.
By:/s/ Deborah Streck
--------------------------
Title:
Amendment No. 5
-5-
BANK OF MONTREAL
By: /s/ Gretchen Shugart
--------------------------
Title: Director
CITIBANK, N.A.
By:/s/ Eric Huttner
As Attorney-In-Fact
--------------------------
Title: Vice President
THE FIRST NATIONAL BANK OF
BOSTON
By:
--------------------------
Title:
THE INDUSTRIAL BANK OF JAPAN,
LTD.
By: /s Jeffrey Co1e
--------------------------
Title: Senior Vice President
PNC BANK, NATIONAL ASSOCIATION
By: /s/ Marlene S. Dooner
--------------------------
Title: Vice President
CORESTATES BANK, N.A.
By:/s/ Elizabeth Elmore
--------------------------
Title: Vice President
Amendment No. 5
-6-
CREDIT LYONNAIS CAYMAN ISLAND
BRANCH
By: /s/ M. Bernadette Collins
--------------------------
Title: VP
FIRST NATIONAL BANK OF
MARYLAND
By: /s/ Timothy A. Knabe
--------------------------
Title: VP
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK
By: /s/ Eugenia Wilds
--------------------------
Title: Vice President
NATIONSBANK OF TEXAS, N.A.
By: /s/ Thomas Carter
--------------------------
Title: SVP
ROYAL BANK OF CANADA
By: /s/ John P. Page
--------------------------
Title: Senior Manager
SHAWMUT BANK CONNECTICUT,
NATIONAL ASSOCIATION
By:
--------------------------
Title:
Amendment No. 5
-7-
THE SUMITOMO BANK, LTD.
By:/s/ Hiroyuki Iwami
--------------------------
Title: Joint Central Manager
BANK OF HAWAII
By: /s/ Elizabeth O. Maclean
--------------------------
Title: Vice President
THE BANK OF IRELAND
By:/s/ Stephanie Linker
--------------------------
Title: AVP
MTBC FINANCE, INC.
By:/s/ Yasushi Satomi
--------------------------
Title: Managing Director
YASUDA TRUST - NEW YORK BRANCH
By:/s/ Neil Chau
--------------------------
Title: FVP
BANK OF TOKYO
By: /s/ Charles Poer
--------------------------
Title: Vice President
Amendment No. 5
-8-
Confirmation by Obligors
EACH OBLIGOR OTHER THAN THE COMPANY HEREBY (1) AGREES THAT EACH REFERENCE
TO THE CREDIT AGREEMENT AND WORDS OF SIMILAR IMPORT IN EACH BASIC DOCUMENT (AS
DEFINED IN THE CREDIT AGREEMENT) TO WHICH SUCH OBLIGOR IS PARTY SHALL BE A
REFERENCE TO THE CREDIT AGREEMENT AS AMENDED BY THIS AMENDMENT AND ALL PRIOR
AMENDMENTS AND (2) CONFIRMS ITS OBLIGATIONS UNDER EACH BASIC DOCUMENT TO WHICH
IT IS PARTY AFTER GIVING EFFECT TO THE AMENDMENT OF THE CREDIT AGREEMENT BY THIS
AMENDMENT AND ALL PRIOR AMENDMENTS:
COMCAST CELLULAR CORPORATION
By: /s/ Christine K. Van Horne
------------------------------
Title: Treasurer
COMCAST CORPORATION
By: /s/ John R. Alchin
------------------------------
Title: SVP & Treasurer
Amendment No. 5
5
0000022301
COMCAST CORPORATION
1,000
6-MOS
DEC-31-1995
JUN-30-1995
447,889
240,940
386,222
(84,607)
196,849
1,282,891
2,338,663
(863,913)
9,007,040
1,133,934
6,399,519
239,778
0
0
(993,883)
9,007,040
1,487,178
1,487,178
(350,246)
(1,393,791)
(37,906)
0
(250,551)
(15,887)
(14,035)
(29,922)
0
0
0
(29,922)
(.12)
(.12)
5
0000022301
COMCAST CORPORATION
1,000
3-MOS
DEC-31-1995
MAR-31-1995
415,881
25,355
366,785
(81,487)
193,665
1,000,478
2,120,595
(822,455)
8,460,121
956,414
6,025,763
239,636
0
0
(965,852)
8,460,121
663,606
663,606
(138,074)
(687,477)
(16,417)
0
(117,587)
3,307
(3,935)
(628)
0
0
0
(628)
0
0
