Form 10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One)

x Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the Quarterly Period Ended:

 

SEPTEMBER 30, 2005

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 000-50093

 

LOGO

 

COMCAST CORPORATION

(Exact name of registrant as specified in its charter)

 

PENNSYLVANIA

(State or other jurisdiction of

incorporation or organization)

 

27-0000798

(I.R.S. Employer

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 ¨

 


 

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12-b2 of the Exchange Act).

 

Yes x No ¨

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12-b2 of the Exchange Act).

 

Yes ¨ No x

 

As of September 30, 2005, there were 1,362,615,109 shares of our Class A Common Stock, 799,441,569 shares of our Class A Special Common Stock and 9,444,375 shares of our Class B Common Stock outstanding.

 



COMCAST CORPORATION AND SUBSIDIARIES

FORM 10-Q

QUARTER ENDED SEPTEMBER 30, 2005

TABLE OF CONTENTS

 

              Page
Number


PART I. FINANCIAL INFORMATION

   
     ITEM 1.    Financial Statements    
          Condensed Consolidated Balance Sheet as of September 30, 2005 and December 31,
2004 (Unaudited)
  2
          Condensed Consolidated Statement of Operations for the Three and Nine Months Ended
September 30, 2005 and 2004 (Unaudited)
  3
          Condensed Consolidated Statement of Cash Flows for the Nine Months Ended
September 30, 2005 and 2004 (Unaudited)
  4
          Notes to Condensed Consolidated Financial Statements (Unaudited)   5
     ITEM 2.    Management’s Discussion and Analysis of Financial Condition and Results of Operations   30
     ITEM 3.    Quantitative and Qualitative Disclosures About Market Risk   39
     ITEM 4.    Controls and Procedures   39

PART II. OTHER INFORMATION

   
     ITEM 1.    Legal Proceedings   39
     ITEM 2.    Unregistered Sales of Equity Securities and Use of Proceeds   39
     ITEM 5.    Other Information   40
     ITEM 6.    Exhibits   40
     SIGNATURES   41

 


 

This Quarterly Report on Form 10-Q is for the three and nine months ended September 30, 2005. This Quarterly Report modifies and supersedes documents filed prior to this Quarterly Report. The SEC allows us to “incorporate by reference” information that we file with them, which means that we can disclose important information to you by referring you directly to those documents. Information incorporated by reference is considered to be part of this Quarterly Report. In addition, information that we file with the SEC in the future will automatically update and supersede information contained in this Quarterly Report. Throughout this Quarterly Report, we refer to Comcast Corporation as “Comcast”; Comcast and its consolidated subsidiaries as “we,” “us” and “our”; and Comcast Holdings Corporation as “Comcast Holdings.”

 

You should carefully review the information contained in this Quarterly Report and particularly consider any risk factors that we set forth in this Quarterly Report and in other reports or documents that we file from time to time with the SEC. In this Quarterly Report, we state our beliefs of future events and of our future financial performance. In some cases, you can identify these so-called “forward-looking statements” by words such as “may,” “will,” “should,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential,” or “continue,” or the negative of these words, and other comparable words. You should be aware that these statements are only our predictions. In evaluating these statements, you should specifically consider various factors, including the risks and uncertainties outlined below. Actual events or our actual results may differ materially from any of our forward-looking statements.

 

Our businesses may be affected by, among other things, the following:

 

    All of the services offered by our cable systems face a wide range of competition that could adversely affect our future results of operations
    Programming costs are increasing, which could adversely affect our future results of operations
    We are subject to regulation by federal, state and local governments, which may change and cause increased costs and restrictions
    We may face increased competition because of technological advances and changing regulatory requirements, which could adversely affect our future results of operations
    We face risks arising from the outcome of various litigation matters, including litigation associated with our acquisition of AT&T’s Broadband operations
    Our Chairman and CEO has considerable influence over our operations

 

For a more detailed explanation of the factors affecting our businesses, please refer to the Risk Factors section in Item 1 of our 2004 Form 10-K.

 

1


COMCAST CORPORATION AND SUBSIDIARIES

FORM 10-Q

QUARTER ENDED SEPTEMBER 30, 2005

 

PART I. FINANCIAL INFORMATION

 

ITEM I. FINANCIAL STATEMENTS

 

CONDENSED CONSOLIDATED BALANCE SHEET

(Unaudited)

 

    

(Dollars in millions,

except share data)


 
     September 30,
2005


   

December 31,

2004


 

ASSETS

                

CURRENT ASSETS

                

Cash and cash equivalents

   $ 579     $ 452  

Investments

     207       1,555  

Accounts receivable, less allowance for doubtful accounts of $146 and $132

     990       959  

Other current assets

     587       569  
    


 


Total current assets

     2,363       3,535  
    


 


INVESTMENTS

     13,018       12,812  

PROPERTY AND EQUIPMENT, net of accumulated depreciation of $11,811 and $9,416

     18,781       18,711  

FRANCHISE RIGHTS

     51,111       51,071  

GOODWILL

     14,111       14,020  

OTHER INTANGIBLE ASSETS, net of accumulated amortization of $4,405 and $3,452

     3,378       3,851  

OTHER NONCURRENT ASSETS, net

     635       694  
    


 


     $ 103,397     $ 104,694  
    


 


LIABILITIES AND STOCKHOLDERS’ EQUITY

                

CURRENT LIABILITIES

                

Accounts payable and accrued expenses related to trade creditors

   $ 1,980     $ 2,041  

Accrued expenses and other current liabilities

     2,667       2,735  

Deferred income taxes

     17       360  

Current portion of long-term debt

     2,498       3,499  
    


 


Total current liabilities

     7,162       8,635  
    


 


LONG-TERM DEBT, less current portion

     20,107       20,093  

DEFERRED INCOME TAXES

     27,130       26,815  

OTHER NONCURRENT LIABILITIES

     7,388       7,261  

MINORITY INTEREST

     605       468  

COMMITMENTS AND CONTINGENCIES (NOTE 10)

                

STOCKHOLDERS’ EQUITY

                

Preferred stock—authorized 20,000,000 shares; issued, zero

            

Class A common stock, $0.01 par value—authorized, 7,500,000,000 shares; issued, 1,606,255,609 and 1,603,320,864; outstanding, 1,362,615,109 and 1,359,680,364

     16       16  

Class A Special common stock, $0.01 par value—authorized, 7,500,000,000 shares; issued 846,731,412 and 890,234,413; outstanding, 799,441,569 and 842,944,570

     9       9  

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

            

Additional capital

     43,516       44,142  

Retained earnings

     5,046       4,891  

Treasury stock, 243,640,500 Class A common shares and 47,289,843 Class A Special common shares

     (7,517 )     (7,517 )

Accumulated other comprehensive loss

     (65 )     (119 )
    


 


Total stockholders’ equity

     41,005       41,422  
    


 


     $ 103,397     $ 104,694  
    


 


 

See notes to condensed consolidated financial statements.

 

2


COMCAST CORPORATION AND SUBSIDIARIES

FORM 10-Q

QUARTER ENDED SEPTEMBER 30, 2005

CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS

(Unaudited)

 

     (Dollars in millions, except per share data)

 
     Three Months Ended
September 30,


    Nine Months Ended
September 30,


 
     2005

    2004

    2005

    2004

 

REVENUES

   $ 5,578     $ 5,098     $ 16,539     $ 15,072  

COSTS AND EXPENSES

                                

Operating (excluding depreciation)

     2,007       1,837       5,908       5,500  

Selling, general and administrative

     1,472       1,401       4,293       4,027  

Depreciation

     914       869       2,679       2,480  

Amortization

     302       305       862       868  
    


 


 


 


       4,695       4,412       13,742       12,875  
    


 


 


 


OPERATING INCOME

     883       686       2,797       2,197  

OTHER INCOME (EXPENSE)

                                

Interest expense

     (423 )     (435 )     (1,334 )     (1,419 )

Investment income (loss), net

     (104 )     89       36       231  

Equity in net losses of affiliates

     (18 )     (29 )     (22 )     (66 )

Other income (expense)

     17       63       (61 )     82  
    


 


 


 


       (528 )     (312 )     (1,381 )     (1,172 )
    


 


 


 


INCOME BEFORE INCOME TAXES AND MINORITY INTEREST

     355       374       1,416       1,025  

INCOME TAX EXPENSE

     (143 )     (156 )     (614 )     (466 )
    


 


 


 


INCOME BEFORE MINORITY INTEREST

     212       218       802       559  

MINORITY INTEREST

     10       2       (7 )     (12 )
    


 


 


 


NET INCOME

   $ 222     $ 220     $ 795     $ 547  
    


 


 


 


BASIC EARNINGS FOR COMMON STOCKHOLDERS PER COMMON SHARE

   $ 0.10     $ 0.10     $ 0.36     $ 0.24  
    


 


 


 


DILUTED EARNINGS FOR COMMON STOCKHOLDERS PER COMMON SHARE

   $ 0.10     $ 0.10     $ 0.36     $ 0.24  
    


 


 


 


 

 

See notes to condensed consolidated financial statements.

 

3


COMCAST CORPORATION AND SUBSIDIARIES

FORM 10-Q

QUARTER ENDED SEPTEMBER 30, 2005

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

(Unaudited)

 

     (Dollars in millions)

 
     Nine Months Ended
September 30,


 
     2005

    2004

 

OPERATING ACTIVITIES

                

Net income

   $ 795     $ 547  

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

                

Depreciation

     2,679       2,480  

Amortization

     862       868  

Non-cash interest expense, net

     (8 )     26  

Equity in net losses of affiliates

     22       66  

Gains on investments and other (income) expense, net

     (35 )     (268 )

Non-cash contribution expense

     8       23  

Minority interest

     7       12  

Deferred income taxes

     (61 )     239  

Proceeds from sales or exchanges of trading securities

           553  

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

                

Change in accounts receivable, net

     (27 )     (20 )

Change in accounts payable and accrued expenses related to trade creditors

     (61 )     (196 )

Change in other operating assets and liabilities

     (241 )     105  
    


 


Net cash provided by operating activities

     3,940       4,435  
    


 


FINANCING ACTIVITIES

                

Proceeds from borrowings

     2,333       1,354  

Retirements and repayments of debt

     (1,942 )     (2,289 )

Issuances of common stock

     76       50  

Repurchases of common stock

     (1,291 )     (1,007 )

Other

     27       14  
    


 


Net cash used in financing activities

     (797 )     (1,878 )
    


 


INVESTING ACTIVITIES

                

Capital expenditures

     (2,753 )     (2,610 )

Proceeds from sales and restructuring of investments

     626       200  

Purchases of investments

     (310 )     (118 )

Acquisitions, net of cash acquired

     (196 )     (296 )

Additions to intangible and other noncurrent assets

     (317 )     (572 )

Purchases of short-term investments, net

     (66 )     (20 )

Proceeds from settlement of contract of acquired company

           26  
    


 


Net cash used in investing activities

     (3,016 )     (3,390 )
    


 


INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS

     127       (833 )

CASH AND CASH EQUIVALENTS, beginning of period

     452       1,550  
    


 


CASH AND CASH EQUIVALENTS, end of period

   $ 579     $ 717  
    


 


 

See notes to condensed consolidated financial statements.

 

4


COMCAST CORPORATION AND SUBSIDIARIES

FORM 10-Q

QUARTER ENDED SEPTEMBER 30, 2005

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

Basis of Presentation

 

We have prepared these unaudited condensed consolidated financial statements based upon Securities and Exchange Commission (“SEC”) rules that permit reduced disclosure for interim periods.

 

These financial statements include all adjustments that are necessary for a fair presentation of our financial condition, results of operations and cash flows for the interim periods shown, including normal recurring accruals and other items. The results of operations for the interim periods presented are not necessarily indicative of results for the full year.

 

For a more complete discussion of our accounting policies and certain other information, refer to our annual financial statements for the preceding fiscal year as filed with the SEC.

 

Reclassifications

 

Certain reclassifications have been made to the prior year financial statements to conform to those classifications used in 2005.

 

2. RECENT ACCOUNTING PRONOUNCEMENTS

 

SFAS No. 123R

 

In December 2004, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards (“SFAS”) No. 123 (revised 2004), “Share-Based Payment” (“SFAS No. 123R”), which replaces SFAS No. 123, “Accounting for Stock-Based Compensation” (“SFAS No. 123”) and supersedes Accounting Principles Board (“APB”) Opinion No. 25, “Accounting for Stock Issued to Employees” (“APB No. 25”). SFAS No. 123R requires all share-based payments to employees, including grants of employee stock options, to be recognized in the financial statements based on their fair values, beginning with the next fiscal year that begins after June 15, 2005, with early adoption encouraged. In addition, SFAS No. 123R will cause unrecognized expense (based on the amounts in our pro forma footnote disclosure) related to options vesting after the date of initial adoption to be recognized as a charge to results of operations over the remaining vesting period. We are required to adopt SFAS No. 123R beginning January 1, 2006. Under SFAS No. 123R, we must determine the appropriate fair value model to be used for valuing share-based payments, the amortization method for compensation cost and the transition method to be used at the date of adoption. The transition alternatives include prospective and retroactive adoption methods. Under the retroactive methods, prior periods may be retroactively adjusted either as of the beginning of the year of adoption or for all periods presented. The prospective method requires that compensation expense be recorded for all unvested stock options and share awards at the beginning of the first quarter of adoption of SFAS No. 123R, while the retroactive methods would record compensation expense for all unvested stock options and share awards beginning with the first period retroactively adjusted. We are evaluating the requirements of SFAS No. 123R, and we expect that the adoption of SFAS No. 123R will have a material impact on our consolidated results of operations and earnings per share. We have not determined the date or method of adoption or the effect of adopting SFAS No. 123R.

 

5


COMCAST CORPORATION AND SUBSIDIARIES

FORM 10-Q

QUARTER ENDED SEPTEMBER 30, 2005

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

 

FIN No. 47

 

In March 2005, the FASB issued FASB Interpretation (“FIN”) No. 47, “Accounting for Conditional Asset Retirement Obligations – an Interpretation of FASB Statement No. 143” (“FIN No. 47”). FIN No. 47 clarifies the timing of liability recognition for legal obligations associated with the retirement of a tangible long-lived asset when the timing and/or method of settlement are conditional on a future event. FIN No. 47 is effective for us no later than December 31, 2005. We do not expect that the adoption of FIN No. 47 will have a material impact on our consolidated financial condition or results of operations.

 

SFAS No. 153

 

In December 2004, the FASB issued SFAS No. 153, “Exchanges of Nonmonetary Assets—an amendment of APB Opinion No. 29” (“SFAS No. 153”). The guidance in APB Opinion No. 29, “Accounting for Nonmonetary Transactions,” is based on the principle that exchanges of nonmonetary assets should be measured based on the fair value of the assets exchanged. The guidance in APB Opinion No. 29, however, included certain exceptions to that principle. This Statement amends APB Opinion No. 29 to eliminate the exception for nonmonetary exchanges of similar productive assets and replaces it with a general exception for exchanges of nonmonetary assets that do not have commercial substance. SFAS No. 153 is effective for such exchange transactions occurring in fiscal periods beginning after June 15, 2005.

 

SFAS No. 154

 

In May 2005, the FASB issued SFAS No. 154, “Accounting Changes and Error Corrections—a replacement of APB Opinion No. 20 and FASB Statement No. 3” (“SFAS No. 154”). This Statement replaces APB Opinion No. 20, “Accounting Changes,” and FASB Statement No. 3, “Reporting Accounting Changes in Interim Financial Statements,” and changes the accounting and reporting requirements for a change in accounting principle. SFAS No. 154 applies to all voluntary changes in an accounting principle. It also applies to changes required by an accounting pronouncement in the unusual instance that the pronouncement does not include specific transition provisions. When a pronouncement includes specific transition provisions, those provisions should be followed. SFAS No. 154 is effective for accounting changes and error corrections occurring in fiscal years beginning after December 15, 2005.

 

3. EARNINGS PER SHARE

 

Basic earnings (loss) per common share (“Basic EPS”) is computed by dividing net income (loss) for common stockholders by the weighted average number of common shares during the period.

 

Our potentially dilutive securities include potential common shares related to our stock options, restricted stock and Comcast exchangeable notes (see Note 7). Diluted earnings for common stockholders per common share (“Diluted EPS”) considers the impact of potentially dilutive securities except in periods in which there is a loss because the inclusion of the potential common shares would have an antidilutive effect. Diluted EPS excludes the impact of potential common shares related to our stock options in periods in which the option exercise price is greater than the average market price of our Class A common stock and our Class A Special common stock for the period. Diluted EPS excludes the impact of potential common shares related to our Class A Special common stock held in treasury related to our Comcast exchangeable notes because they were settled using cash.

 

Diluted EPS for the three and nine months ended September 30, 2005, excludes approximately 93 million and 87 million potential common shares, respectively, and Diluted EPS for the three and nine months ended

 

6


COMCAST CORPORATION AND SUBSIDIARIES

FORM 10-Q

QUARTER ENDED SEPTEMBER 30, 2005

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

 

September 30, 2004, excludes approximately 108 million and 102 million potential common shares, respectively, related to our stock plans because the option exercise price was greater than the average market price of our Class A common stock and our Class A Special common stock for the period.

 

The following table reconciles the numerator and denominator of the computations of Diluted EPS for common stockholders for the interim periods presented:

 

    

(Amounts in millions, except per share data)

Three Months Ended September 30,


     2005

   2004

     Income

   Shares

   Per Share
Amount


   Income

   Shares

   Per Share
Amount


Basic EPS for common stockholders

   $ 222    2,196    $ 0.10    $ 220    2,234    $ 0.10

Effect of dilutive securities:

                                     

Assumed exercise or issuance of shares relating to stock plans

          13                  9       
    

  
  

  

  
  

Diluted EPS

   $ 222    2,209    $ 0.10    $ 220    2,243    $ 0.10
    

  
  

  

  
  

 

    

(Amounts in millions, except per share data)

Nine Months Ended September 30,


     2005

   2004

     Income

   Shares

   Per Share
Amount


   Income

   Shares

   Per Share
Amount


Basic EPS for common stockholders

   $ 795    2,206    $ 0.36    $ 547    2,249    $ 0.24

Effect of dilutive securities:

                                     

Assumed exercise or issuance of shares relating to stock plans

          13                  10       
    

  
  

  

  
  

Diluted EPS

   $ 795    2,219    $ 0.36    $ 547    2,259    $ 0.24
    

  
  

  

  
  

 

4. ACQUISITIONS AND OTHER SIGNIFICANT EVENTS

 

Motorola

 

On March 31, 2005, we entered into a strategic alliance with Motorola, Inc. whereby we will jointly develop next-generation conditional access software for cable networks and related products and market such products to other equipment manufacturers and cable companies through the creation of two ventures. Under the agreements, in addition to funding approximately 50% of the annual cost requirements of the ventures, we have paid, through the ventures, $20 million to Motorola and committed up to $80 million in cash, also to be paid through the ventures, over a four-year period to Motorola based on the achievement of certain milestones. Motorola contributed licenses to conditional access and related technology for their ownership in these entities. These two ventures are both considered variable interest entities under FASB Interpretation No. 46, “Consolidation of Variable Interest Entities,” and we have consolidated both of these ventures since we are the primary beneficiary. Accordingly, we have recorded approximately $190 million in other intangible assets, of which we recorded a charge of approximately $20 million related to in-process research and development in the first quarter that has been included in amortization expense. These amounts are based on a preliminary valuation estimate of the intangibles contributed to the ventures, and these intangibles, including in-process research and development, are subject to further adjustment as final valuations are obtained.

 

7


COMCAST CORPORATION AND SUBSIDIARIES

FORM 10-Q

QUARTER ENDED SEPTEMBER 30, 2005

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

 

MGM

 

On April 8, 2005, we completed a transaction with a consortium of investors to acquire Metro-Goldwyn-Mayer Inc. We acquired our 20% interest for approximately $250 million in cash. We are accounting for this investment under the equity method of accounting.

 

Broadband Exit Activities

 

In connection with the purchase price allocation of AT&T Broadband in 2002 (the “Broadband acquisition”), we recorded approximately $1.5 billion of liabilities associated with exit activities and employee termination accruals. Remaining amounts under these accruals as of December 31, 2004, totaled $75 million. Payments under these liabilities are expected to continue over the next six years.

 

5. INVESTMENTS

 

     (Dollars in millions)
     September 30,
2005


   December 31,
2004


Fair value method

             

Cablevision

   $ 157    $ 362

Discovery Holding Company

     144     

Liberty Global

     408      366

Liberty Media Corporation

     805      1,098

Microsoft

          626

Sprint

     626      656

Time Warner

     1,213     

Vodafone

     129      540

Other

     114      24
    

  

       3,596      3,672

Equity method, principally cable-related

     2,809      2,460

Cost method, principally Time Warner Cable at September 30, 2005, and Time Warner Cable and Time Warner at December 31, 2004

     6,820      8,235
    

  

Total investments

     13,225      14,367

Less, current investments

     207      1,555
    

  

Non-current investments

   $ 13,018    $ 12,812
    

  

 

As of December 31, 2004, TWE Holdings II Trust (the “Trust”), a Delaware statutory trust whose beneficial interest is indirectly wholly held by Comcast, beneficially owned one share of Time Warner Inc. (“TW”) Series A Mandatorily Convertible Preferred Stock (the “Preferred Stock”). We accounted for the Preferred Stock as a cost method investment with a carrying value of $1.5 billion as of December 31, 2004. On March 31, 2005, the Preferred Stock was converted into 83,835,883 shares of TW common stock (the “TW Stock Conversion”). We recorded the TW common stock received at its fair value of approximately $1.471 billion at the date of the TW Stock Conversion and recognized an investment loss of approximately $29 million, representing the difference between the fair value of the TW common stock on the date it was converted and the carrying amount of our investment in the Preferred Stock. We have designated our investment in the TW common stock as an

 

8


COMCAST CORPORATION AND SUBSIDIARIES

FORM 10-Q

QUARTER ENDED SEPTEMBER 30, 2005

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

 

available for sale security. In the third quarter of 2005, we sold 16,835,883 shares of TW common stock for proceeds of $308 million and recognized a gain of $13 million to investment income.

 

Fair Value Method

 

We hold unrestricted equity investments, which we account for as available for sale or trading securities, in publicly traded companies. Our investments in Discovery Holding Company (“Discovery” – see below), Liberty Media Corporation (“Liberty”), Liberty Global Inc. (formerly known as Liberty Media International Inc. (“Liberty Global”), Microsoft, Sprint and Vodafone, and approximately 44% of our investment in Cablevision, are accounted for as trading securities. The net unrealized pre-tax gains on investments accounted for as available for sale securities as of September 30, 2005 and December 31, 2004, of $111 million and $26 million, respectively, have been reported in our consolidated balance sheet as a component of accumulated other comprehensive loss, net of related deferred income taxes of $39 million and $9 million, respectively.

 

The cost, fair value and unrealized gains and losses related to our available for sale securities are as follows (dollars in millions):

 

     September 30,
2005


   December 31,
2004


Cost

   $ 1,293    $ 65

Unrealized gains

     111      26

Unrealized losses

     —        —  
    

  

Fair value

   $ 1,404    $ 91
    

  

 

In February 2005, we entered into a 10 year prepaid forward sale of approximately 2.7 million shares of Liberty Global Series A common stock for proceeds of $99 million.

 

In June 2005, we, through a majority owned partnership, entered into a seven year, seven month prepaid forward sale of approximately 5.1 million shares of Cablevision Class A Common Stock for proceeds of $114 million. We have designated the derivative component of the prepaid forward as a fair value hedge of the related Cablevision shares. Accordingly, the mark to market adjustment on the 56% of the Cablevision shares held by us and classified as available for sale securities will be recorded to investment income, net over the term of the prepaid forward.

 

In July 2005, we received 10 million shares of Discovery Series A common stock in connection with the spin off by Liberty of Discovery. We have classified all of the shares of Discovery Series A common stock that we received as trading securities recorded at fair value. All of these shares collateralize a portion of the ten-year prepaid forward sale of Liberty common stock that we entered into in December 2003.

 

In September 2005, we received approximately 7.7 million shares of Liberty Global Series C common stock in connection with Liberty Global’s special stock dividend. We have classified all of the shares of Liberty Global Series C common stock that we received as trading securities recorded at fair value. Substantially all of these shares collateralize a portion of the ten year prepaid forward sale of Liberty common stock that we entered into in December 2003 and the seven year – seven month prepaid forward sale of Liberty Global common stock that we entered into in February 2005.

 

9


COMCAST CORPORATION AND SUBSIDIARIES

FORM 10-Q

QUARTER ENDED SEPTEMBER 30, 2005

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

 

Investment Income (Loss), Net

 

Investment income (loss), net for the interim periods includes the following (dollars in millions):

 

     Three Months Ended
September 30,


    Nine Months Ended
September 30,


 
       2005  

      2004  

      2005  

      2004  

 

Interest and dividend income

   $ 30     $ 22     $ 81     $ 65  

Gains (losses) on sales and exchanges of investments, net

     13       35       (15 )     36  

Investment impairment losses

           (7 )     (3 )     (10 )

Unrealized losses on trading securities and hedged items

     (18 )     (27 )     (112 )     (255 )

Mark to market adjustments on derivatives related to trading securities and hedged items

     (126 )     85       71       341  

Mark to market adjustments on derivatives

     (3 )     (19 )     14       54  
    


 


 


 


Investment income (loss), net

   $ (104 )   $ 89     $ 36     $ 231  
    


 


 


 


 

6. GOODWILL

 

The changes in the carrying amount of goodwill by business segment (see Note 11) for the period presented are as follows (dollars in millions):

 

     Cable

    Content

   Corporate
and Other


   Total

Balance, December 31, 2004

   $ 12,998     $ 824    $ 198    $ 14,020

Settlement or adjustments

     (62 )     92           30

Acquisitions

                61      61
    


 

  

  

Balance, September 30, 2005

   $ 12,936     $ 916    $ 259    $ 14,111
    


 

  

  

 

7. LONG-TERM DEBT

 

     (Dollars in millions)
     September 30,
2005


   December 31,
2004


Notes exchangeable into common stock

   $ 116    $ 1,699

Bank and public debt

     22,076      21,457

Other, including capital lease obligations

     413      436
    

  

Total debt

   $ 22,605    $ 23,592
    

  

 

The Cross-Guarantee Structure

 

We and a number of our wholly-owned subsidiaries that hold substantially all of our cable assets have unconditionally guaranteed each other’s debt securities and indebtedness for borrowed money. As of September 30, 2005, $20.795 billion of our debt was included in the cross-guarantee structure.

 

10


COMCAST CORPORATION AND SUBSIDIARIES

FORM 10-Q

QUARTER ENDED SEPTEMBER 30, 2005

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

 

Comcast Holdings Guarantee

 

In September 2005, we unconditionally guaranteed the ZONES due October 2029 (see below) and the 10 5/8% Senior Subordinated Debentures due 2012 issued by Comcast Holdings.

 

Senior Notes Offering

 

In June 2005, we issued $1.5 billion of notes consisting of $750 million of 4.95% notes due 2016 and $750 million of 5.65% notes due 2035. We used the net proceeds of this offering for working capital and general corporate purposes, including repayment of existing indebtedness.

 

Debt Redemption

 

In August 2005, we redeemed our 9.5% Senior Notes due 2013 with an aggregate principal amount of $525 million at a premium of 4.75% over par and recorded a $46 million gain on the early termination as a reduction to interest expense.

 

Lines and Letters of Credit

 

As of September 30, 2005, we and certain of our subsidiaries had unused lines of credit of $2.998 billion under respective credit facilities.

 

As of September 30, 2005, we and certain of our subsidiaries had unused irrevocable standby letters of credit totaling $385 million to cover potential fundings under various agreements.

 

Notes Exchangeable into Common Stock

 

As of September 30, 2005, we held Vodafone exchangeable notes that are mandatorily redeemable at our option into Vodafone ADRs, the cash equivalent, or a combination of cash and Vodafone ADRs. The maturity value of the exchangeable notes varies based upon the fair value of the security to which it is indexed. Our exchangeable notes are collateralized by our investment in Vodafone (see Note 5).

 

During the three and nine months ended September 30, 2005, we settled an aggregate of $743 million face amount and $1.315 billion face amount, respectively, of our obligations relating to our Cablevision, Microsoft, and Vodafone exchangeable notes by delivering the underlying shares or ADRs to the counterparties, and the equity collar agreements related to the underlying securities were exercised. The Cablevision, Microsoft, and Vodafone transactions represented non-cash investing and financing activities and had no effect on our statement of cash flows due to their non-cash nature. During the three and nine months ended September 30, 2005, we settled the remaining outstanding $329 million face amount of our obligations relating to our Comcast exchangeable notes due November 2005 with cash and the settlement of the related equity collars.

 

As of September 30, 2005, the securities we held collateralizing the exchangeable notes were sufficient to satisfy the debt obligations associated with the outstanding exchangeable notes (see Notes 5 and 9).

 

11


COMCAST CORPORATION AND SUBSIDIARIES

FORM 10-Q

QUARTER ENDED SEPTEMBER 30, 2005

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

 

ZONES

 

At maturity, holders of our 2.0% Exchangeable Subordinated Debentures due 2029 (the “ZONES”) are entitled to receive in cash an amount equal to the higher of the principal amount of the ZONES of $1.807 billion or the fair value of Sprint common stock. Prior to maturity, each ZONES is exchangeable at the holder’s option for an amount of cash equal to 95% of the fair value of Sprint common stock.

 

We separated the accounting for the Exchangeable Notes and the ZONES into derivative and debt components. We record the change in the fair value of the derivative component of the Exchangeable Notes and the ZONES (see Note 5) and the change in the carrying value of the debt component of the exchangeable notes and the ZONES as follows (dollars in millions):

 

     Exchangeable Notes

    ZONES

 
     Nine Months Ended
September 30,


    Nine Months Ended
September 30,


 
     2005

    2004

    2005

   2004

 

Balance at beginning of period:

                               

Debt component

   $ 1,758     $ 5,030     $ 540    $ 515  

Derivative component

     (59 )     (712 )     168      268  
    


 


 

  


Total

     1,699       4,318       708      783  

Decrease in debt component due to maturities and redemptions

     (1,644 )     (1,376 )           

Change in debt component to interest expense

     (1 )     (56 )     20      19  

Change in derivative component to investment income (loss), net

     7       (133 )     35      (139 )

Change in derivative component due to settlements

     55       238             

Balance at end of period:

                               

Debt component

     113       3,598       560      534  

Derivative component

     3       (607 )     203      129  
    


 


 

  


Total

   $ 116     $ 2,991     $ 763    $ 663  
    


 


 

  


 

Derivatives

 

We use derivative financial instruments to manage our exposure to fluctuations in interest rates and securities prices. We have entered into indexed debt instruments and prepaid forward sale agreements whose value, in part, is derived from the market value of certain publicly traded common stock.

 

Interest Rates

 

Excluding the derivative component of the Exchangeable Notes and the ZONES whose changes in fair value are recorded to investment income, net, our effective weighted average interest rate on our total debt outstanding was 7.34% and 7.38% as of September 30, 2005, and December 31, 2004, respectively. As of September 30, 2005, and December 31, 2004, accrued interest was $347 million and $444 million, respectively.

 

12


COMCAST CORPORATION AND SUBSIDIARIES

FORM 10-Q

QUARTER ENDED SEPTEMBER 30, 2005

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

 

8. STOCKHOLDERS’ EQUITY

 

Board-Authorized Repurchase Program

 

During the three and nine months ended September 30, 2005, we repurchased approximately 25.3 million shares and 45.2 million shares, respectively, of our Class A Special common stock for aggregate consideration of $752 million and $1.389 billion (on a trade date basis), respectively, pursuant to our Board-authorized share repurchase program. On April 27, 2005, our Board of Directors authorized a $2 billion increase to our share repurchase program. The maximum dollar value of shares that may yet be repurchased under the program is approximately $1.25 billion as of September 30, 2005.

 

Stock-Based Compensation

 

We account for stock-based compensation in accordance with APB No. 25 and related interpretations, as permitted by SFAS No. 123, as amended. Compensation expense for stock options is measured as the excess, if any, of the quoted market price of our stock at the date of the grant over the amount an optionee must pay to acquire the stock. We record compensation expense for restricted stock awards based on the quoted market price of our stock at the date of the grant and the vesting period. We record compensation expense for stock appreciation rights based on the changes in quoted market prices of our stock or other determinants of fair value.

 

The following table illustrates the effect on net income and earnings per share if we had applied the fair value recognition provisions of SFAS No. 123 to stock-based compensation. Total stock-based compensation expense was determined under the fair value-based method for all awards using the accelerated recognition method as permitted under SFAS No. 123 (dollars in millions, except per share data):

 

     Three Months Ended
September 30,


    Nine Months Ended
September 30,


 
     2005

    2004

    2005

    2004

 

Net income, as reported

   $ 222     $ 220     $ 795     $ 547  

Add: Stock-based compensation expense included in net income, as reported above, net of related tax effects

     11       6       27       21  

Deduct: Stock-based compensation expense determined under fair value-based method for all awards, net of related tax effects

     (37 )     (42 )     (102 )     (123 )
    


 


 


 


Pro forma, net income

   $ 196     $ 184     $ 720     $ 445  
    


 


 


 


Basic earnings for common stockholders per common share:

                                

As reported

   $ 0.10     $ 0.10     $ 0.36     $ 0.24  

Pro forma

   $ 0.09     $ 0.08     $ 0.33     $ 0.20  

Diluted earnings for common stockholders per common share:

                                

As reported

   $ 0.10     $ 0.10     $ 0.36     $ 0.24  

Pro forma

   $ 0.09     $ 0.08     $ 0.32     $ 0.20  

 

The pro forma effect on net income and net earnings per share for the interim periods by applying SFAS No. 123 may not be indicative of the effect on net income or loss in future years since SFAS No. 123 does not take into consideration additional awards that may be granted in future years on a much larger employee base.

 

13


COMCAST CORPORATION AND SUBSIDIARIES

FORM 10-Q

QUARTER ENDED SEPTEMBER 30, 2005

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

 

The following table summarizes the activity of the Comcast option plans during the nine months ended September 30, 2005 (options in thousands):

 

    

Class A

Common Stock


  

Class A Special

Common Stock


     Options

    Weighted-Average
Exercise Price


   Options

   

Weighted-Average

Exercise Price


Outstanding at beginning of period

   82,344     $ 36.99    55,238     $ 30.67

Granted

   9,835     $ 33.45         

Exercised

   (1,552 )   $ 24.17    (1,739 )   $ 12.83

Forfeited, expired or cancelled

   (4,747 )   $ 38.74    (879 )   $ 33.71
    

 

  

 

Outstanding at end of period

   85,880     $ 36.80    52,620     $ 31.21
    

 

  

 

Exercisable at end of period

   49,519     $ 41.80    48,297     $ 31.78
    

 

  

 

 

The following table summarizes the activity of our restricted stock plan during the nine months ended September 30, 2005 (shares in thousands):

 

     Class A
Common Stock
Awards


   

Class A Special

Common Stock
Awards


 

Awards outstanding at beginning of period

   2,536     392  

Granted

   3,835      

Awards vested and shares issued

   (450 )   (172 )

Forfeited or cancelled

   (165 )   (13 )
    

 

Awards outstanding at end of period

   5,756     207  
    

 

 

The weighted-average share price of each Class A Common restricted stock grant during the nine months ended September 30, 2005, was $33.50.

 

Comprehensive Income

 

Our total comprehensive income for the interim periods was as follows (dollars in millions):

 

     Three Months Ended
September 30,


    Nine Months Ended
September 30,


 
     2005

   2004

    2005

    2004

 

Net income

   $ 222    $ 220     $ 795     $ 547  

Unrealized gains (losses) on marketable securities

     87      1       55       (9 )

Reclassification adjustments included in net income

     2      (6 )     (1 )     14  
    

  


 


 


Comprehensive income

   $ 311    $ 215     $ 849     $ 552  
    

  


 


 


 

14


COMCAST CORPORATION AND SUBSIDIARIES

FORM 10-Q

QUARTER ENDED SEPTEMBER 30, 2005

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

 

9. STATEMENT OF CASH FLOWS—SUPPLEMENTAL INFORMATION

 

We made cash payments for interest and income taxes during the interim periods as follows (dollars in millions):

 

     Three Months Ended
September 30,


   Nine Months Ended
September 30,


     2005

   2004

   2005

   2004

Interest

   $ 559    $ 571    $ 1,438    $ 1,552

Income taxes

   $ 48    $ 39    $ 475    $ 189

 

During the nine months ended September 30, 2005, we:

 

    acquired $170 million of intangible assets and incurred a corresponding liability in connection with the formation of the ventures in the Motorola transaction, which is considered a non-cash investing and financing activity,

 

    acquired an investment of $40 million and incurred a corresponding liability related to the purchase of an equity method investment, which is considered a non-cash investing and financing activity, and

 

    acquired an additional equity interest with a fair value of $45 million in one of our equity method investments and recorded a liability for a corresponding amount in connection with our achievement of certain subscriber launch milestones, which is considered a non-cash investing and operating activity.

 

During the nine months ended September 30, 2004, we:

 

    acquired cable systems through the assumption of $68 million of debt which is considered a non-cash financing and investing activity, and

 

    issued shares of G4 with a value of approximately $70 million in connection with the acquisition of Tech TV, which is considered a non-cash financing and investing activity.

 

During the nine months ended September 30, 2005 and 2004, we entered into non-cash financing and investing activities related to certain of our Exchangeable Notes (see Note 7).

 

10. COMMITMENTS AND CONTINGENCIES

 

Commitments

 

Certain of our subsidiaries support debt compliance with respect to obligations of certain cable television partnerships and investments in which we hold an ownership interest (see Note 5). The obligations expire between March 2007 and September 2010. Although there can be no assurance, we believe that we will not be required to meet our obligations under such commitments. The total notional amount of our commitments was $1.021 billion as of September 30, 2005, at which time there were no quoted market prices for similar agreements.

 

15


COMCAST CORPORATION AND SUBSIDIARIES

FORM 10-Q

QUARTER ENDED SEPTEMBER 30, 2005

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

 

Contingencies

 

At Home

 

Litigation has been filed against us as a result of our alleged conduct with respect to our investment in and distribution relationship with At Home Corporation. At Home was a provider of high-speed Internet services that filed for bankruptcy protection in September 2001. Filed actions are: (i) class action lawsuits against us, Brian L. Roberts (our Chairman and Chief Executive Officer and a director), AT&T (the former controlling shareholder of At Home and also a former distributor of the At Home service) and others in the Superior Court of San Mateo County, California, alleging breaches of fiduciary duty in connection with transactions agreed to in March 2000 among At Home, AT&T, Cox Communications, Inc. (Cox is also an investor in At Home and a former distributor of the At Home service) and us; (ii) class action lawsuits brought in the name of At Home’s shareholders against us, AT&T and others in the United States District Court for the Southern District of New York, alleging securities law violations and common law fraud in connection with disclosures made by At Home in 2001; (iii) a lawsuit brought by an individual At Home shareholder in the United States District Court for the Southern District of New York against us, AT&T and others making substantively similar allegations concerning At Home’s disclosures as the class action described in item (ii) above; (iv) a lawsuit brought in the United States District Court for the District of Delaware in the name of At Home by certain At Home bondholders against us, Brian L. Roberts, Cox and others, alleging breaches of fiduciary duty relating to the March 2000 transactions and seeking recovery of alleged short-swing profits of at least $600 million, pursuant to Section 16(b) of the Securities Exchange Act of 1934, as amended (“the 1934 Act”), purported to have arisen in connection with certain transactions relating to At Home stock, effected pursuant to the March 2000 agreements; (v) a lawsuit brought by At Home’s bondholders in the Delaware Court of Chancery against us, Brian L. Roberts, Cox and others alleging breaches of fiduciary duty relating to the March 2000 transactions; and (vi) a lawsuit brought in the United States Bankruptcy Court for the Northern District of California by certain At Home bondholders against us, AT&T, AT&T Credit Holdings, Inc. and AT&T Wireless Services, Inc., seeking to avoid and recover certain alleged “preference” payments in excess of $89 million, allegedly made to the defendants prior to the At Home bankruptcy filing.

 

The actions in San Mateo County, California (item (i) above), have been stayed by the United States Bankruptcy Court for the Northern District of California, the court in which At Home filed for bankruptcy, as violating the automatic bankruptcy stay. The decision to stay the actions was affirmed by the District Court, and an appeal to the Court of Appeals for the Ninth Circuit is pending, with oral argument scheduled for November 14, 2005. In the Southern District of New York actions (item (ii) above), the court has dismissed the common law fraud claims against all defendants, leaving only the securities law claims. In a subsequent decision, the court limited the remaining claims against us and Mr. Roberts to disclosures that are alleged to have been made by At Home prior to August 28, 2000. On March 10, 2005, the court certified a class of all purchasers of publicly traded At Home stock between March 28, 2000, and September 28, 2001. Plaintiffs have moved to amend the complaint so as to move the commencement of the class period back to November 9, 1999. We are opposing this amendment. We have also moved to dismiss this class action on the grounds that Plaintiffs cannot adequately plead loss causation. The individual shareholder’s action (item (iii) above) has been stayed until the court in the class action rules on the pending motions. The Delaware case (item (iv) above) was transferred to the United States District Court for the Southern District of New York. The court dismissed the Section 16(b) claims against us for failure to state a claim and the breach of fiduciary duty claim for lack of federal jurisdiction. The plaintiffs have appealed the decision dismissing the Section 16(b) claims. Oral argument was held on October 17, 2005, and the court reserved its decision. The Bondholders have also recommenced the breach of fiduciary duty claim

 

16


COMCAST CORPORATION AND SUBSIDIARIES

FORM 10-Q

QUARTER ENDED SEPTEMBER 30, 2005

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

 

in Delaware Chancery Court (item (v) above. The action in the United States Bankruptcy Court for the Northern District of California (item (v) above) was dismissed upon approval by the Bankruptcy Court of the settlement between At Home’s bondholders and AT&T described below.

 

Under the terms of the Broadband acquisition, we are contractually liable for 50% of any liabilities of AT&T relating to certain At Home litigation. For litigation in which we are contractually liable for 50% of any liabilities, AT&T will be liable for the other 50%. In addition to the actions against AT&T described in items (i), (ii) and (iv) above, (in which we are also a defendant), such litigation matters included two additional actions brought by At Home’s bondholders’ liquidating trust against AT&T (and not naming us): (i) a lawsuit filed against AT&T and certain of its senior officers in Santa Clara, California, state court alleging various breaches of fiduciary duties, misappropriation of trade secrets and other causes of action in connection with the transactions and prior and subsequent alleged conduct on the part of the defendants and (ii) an action filed against AT&T in the District Court for the Northern District of California, alleging that AT&T infringes an At Home patent by using its broadband distribution and high-speed Internet backbone networks and equipment.

 

In May 2005, At Home bondholders’ liquidating trust and AT&T agreed to settle these two actions. Pursuant to the settlement, AT&T agreed to pay $340 million to the bondholders’ liquidating trust. The settlement is subject to the approval of the Bankruptcy Court. Upon approval, these two actions, as well as the action described in item (iv) above, will be dismissed. As a result of the settlement by AT&T, we recorded a $170 million charge to other income (expense), reflecting our portion of the settlement amount, in our first quarter financial results. In May 2005, we paid $170 million representing our share of the settlement amount to AT&T, and we have classified such payment as an operating activity in our statement of cash flows.

 

We deny any wrongdoing in connection with the claims that have been made directly against us, our subsidiaries and Brian L. Roberts, and are defending all of these claims vigorously. The final disposition of these claims is not expected to have a material adverse effect on our consolidated financial position but could possibly be material to our consolidated results of operations of any one period. Further, no assurance can be given that any adverse outcome would not be material to our consolidated financial position.

 

AT&T—Wireless and Common Stock Cases

 

Under the terms of the Broadband acquisition, we are potentially responsible for a portion of the liabilities arising from two purported securities class action lawsuits brought against AT&T and others and consolidated for pre-trial purposes in the United States District Court for the District of New Jersey. These lawsuits assert claims under Section 11 and Section 12(a)(2) of the Securities Act of 1933, as amended, and Section 10(b) of the 1934 Act.

 

The first lawsuit, for which our portion of any loss is up to 15%, alleges, among other things, that AT&T made material misstatements and omissions in the Registration Statement and Prospectus for the AT&T Wireless initial public offering (“Wireless Case”). In March 2004, the plaintiffs, and AT&T and the other defendants, moved for summary judgment in the Wireless Case. The New Jersey District Court denied the motions, and the Judicial Panel on Multidistrict Litigation remanded the cases for trial to the United States District Court for the Southern District of New York, where they had originally been brought. A trial date has been set for April 19, 2006. We and AT&T believe that AT&T has meritorious defenses in the Wireless Case, and it is being vigorously defended.

 

17


COMCAST CORPORATION AND SUBSIDIARIES

FORM 10-Q

QUARTER ENDED SEPTEMBER 30, 2005

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

 

The second lawsuit, for which our portion of any loss is 50%, alleges, among other things, that AT&T knowingly provided false projections relating to AT&T common stock (“Common Stock Case”). In October 2004, the plaintiffs, and AT&T and the other defendants, agreed to settle the Common Stock Case for $100 million. In April 2005, the court entered an order approving the proposed settlement. In May 2005, we paid $50 million representing our share of the settlement cost to AT&T and we have classified such payment as an operating activity in our statement of cash flows.

 

In November 2004, AT&T brought suit against the D&O insurers in Delaware Superior Court, seeking a declaration of coverage and damages in the At Home cases, the Wireless Case and the Common Stock Case. This litigation is in its very early stages.

AT&T—TCI

 

In June 1998, the first of a number of purported class action lawsuits was filed by then-shareholders of Tele-Communications, Inc. (“TCI”) Series A TCI Group Common Stock (“Common A”) against AT&T and the directors of TCI relating to the acquisition of TCI by AT&T. A consolidated amended complaint combining the various different actions was filed in February 1999 in the Delaware Court of Chancery. The consolidated amended complaint alleges that former members of the TCI board of directors breached their fiduciary duties to Common A shareholders by agreeing to transaction terms whereby holders of the Series B TCI Group Common Stock received a 10% premium over what Common A shareholders received in connection with the transaction. The complaint further alleges that AT&T aided and abetted the TCI directors’ breach of their fiduciary duties.

 

In connection with the TCI acquisition, which was completed in early 1999, AT&T agreed under certain circumstances to indemnify TCI’s former directors for certain losses, expenses, claims or liabilities, potentially including those incurred in connection with this action. In connection with the Broadband acquisition, we agreed to indemnify AT&T for certain losses, expenses, claims or liabilities. Those losses and expenses potentially include those incurred by AT&T in connection with this action, both as a defendant and in connection with any obligation that AT&T may have to indemnify the former TCI directors for liabilities incurred as a result of the claims against them.

 

In July 2003, the Delaware Court of Chancery granted AT&T’s motion to dismiss on the ground that the complaint failed to adequately plead AT&T’s “knowing participation,” as required to state a claim for aiding and abetting a breach of fiduciary duty. The other claims made in the complaint remain outstanding. Fact discovery in this matter is now closed. In February 2005, the former TCI director defendants filed a motion for summary judgment. In April 2005, plaintiffs filed their brief in opposition.

 

The final disposition of these claims is not expected to have a material adverse effect on our consolidated financial position but could possibly be material to our consolidated results of operations of any one period. Further, no assurance can be given that any adverse outcome would not be material to our consolidated financial position.

 

Acacia

 

In June 2004, Acacia Media Technologies Corporation (“Acacia”) filed a lawsuit against us and others in the United States District Court for the Northern District of California. The complaint alleges infringement of certain United States patents that allegedly relate to systems and methods for transmitting and/or receiving digital audio

 

18


COMCAST CORPORATION AND SUBSIDIARIES

FORM 10-Q

QUARTER ENDED SEPTEMBER 30, 2005

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

 

and video content. The complaint seeks injunctive relief and damages in an unspecified amount. In the event that a Court ultimately determines that we infringe on any of the patents, we may be subject to substantial damages, which may include treble damages and/or an injunction that could require us to materially modify certain products and services that we currently offer to subscribers. We believe that the claims are without merit and intend to defend the action vigorously.

 

The final disposition of this claim is not expected to have a material adverse effect on our consolidated financial position but could possibly be material to our consolidated results of operations of any one period. Further, no assurance can be given that any adverse outcome would not be material to our consolidated financial position.

 

Other

 

We are subject to other legal proceedings and claims that arise in the ordinary course of our business. The amount of ultimate liability with respect to such actions is not expected to materially affect our financial position, results of operations or liquidity.

 

19


COMCAST CORPORATION AND SUBSIDIARIES

FORM 10-Q

QUARTER ENDED SEPTEMBER 30, 2005

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

 

11. FINANCIAL DATA BY BUSINESS SEGMENT

 

Our reportable segments consist of our Cable and Content businesses. Our content segment consists of our national networks E! Entertainment and Style Network, The Golf Channel, OLN, G4 and AZN Television (formerly known as International Channel). In evaluating the profitability of our segments, the components of net income (loss) below operating income (loss) before depreciation and amortization are not separately evaluated by our management (dollars in millions).

 

     Cable(1)

   Content

   Corporate and
Other(2)


    Eliminations(3)

    Total

Three Months Ended September 30, 2005

                                    

Revenues(4)

   $ 5,319    $ 237    $ 54     $ (32 )   $ 5,578

Operating income (loss) before depreciation and amortization(5)

     2,116      74      (89 )     (2 )     2,099

Depreciation and amortization

     1,168      38      15       (5 )     1,216

Operating income (loss)

     948      36      (104 )     3       883

Capital expenditures

     899      4      8             911

Three Months Ended September 30, 2004

                                    

Revenues(4)

   $ 4,844    $ 207    $ 69     $ (22 )   $ 5,098

Operating income (loss) before depreciation and amortization(5)

     1,858      62      (60 )           1,860

Depreciation and amortization

     1,112      42      25       (5 )     1,174

Operating income (loss)

     746      20      (85 )     5       686

Capital expenditures

     871      4      3             878

Nine Months Ended September 30, 2005

                                    

Revenues(4)

   $ 15,750    $ 684    $ 211     $ (106 )   $ 16,539

Operating income (loss) before depreciation and amortization(5)

     6,286      248      (187 )     (9 )     6,338

Depreciation and amortization

     3,393      112      51       (15 )     3,541

Operating income (loss)

     2,893      136      (238 )     6       2,797

Capital expenditures

     2,718      11      24             2,753

Nine Months Ended September 30, 2004

                                    

Revenues(4)

   $ 14,329    $ 582    $ 257     $ (96 )   $ 15,072

Operating income (loss) before depreciation and amortization(5)

     5,497      208      (158 )     (2 )     5,545

Depreciation and amortization

     3,172      116      75       (15 )     3,348

Operating income (loss)

     2,325      92      (233 )     13       2,197

Capital expenditures

     2,578      14      18             2,610

As of September 30, 2005

                                    

Assets

   $ 101,633    $ 2,464    $ 2,528     $ (3,228 )   $ 103,397

As of December 31, 2004

                                    

Assets

   $ 103,727    $ 2,533    $ 1,112     $ (2,678 )   $ 104,694

(1) Our regional sports and news networks Comcast SportsNet, Comcast SportsNet Mid-Atlantic, Comcast SportsNet Chicago, Comcast SportsNet West, Cable Sports Southeast and CN8-The Comcast Network are included in our cable segment.

 

20


COMCAST CORPORATION AND SUBSIDIARIES

FORM 10-Q

QUARTER ENDED SEPTEMBER 30, 2005

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

 

(2) Corporate and other includes Comcast-Spectacor, corporate activities and all other businesses not presented in our cable or content segments. Assets included in this caption consist primarily of our investments (see Note 5).

 

(3) Included in the Eliminations column are intersegment transactions that our segments enter into with one another. The most common types of transactions are the following:

 

    our content segment generates affiliate revenue by selling cable network programming to our cable segment, which represents a substantial majority of the revenue elimination amount

 

    our cable segment receives incentives offered by our content segment when negotiating programming contracts that are recorded as a reduction of programming costs

 

    our cable segment generates revenue by selling the use of satellite feeds to our content segment

 

    our cable segment generates revenue by selling the use of its fiber-optic lines and site conditioning to our corporate and other segment. Our corporate and other segment pays our cable segment a lump sum and holds the property and the related depreciation expense and accumulated depreciation. Our cable segment’s revenue is generated through the amortization of the deferred revenue recorded for the lump sum payment

 

    our corporate and other segment generates revenue by selling long-distance services to our cable segment

 

(4) Non-U.S. revenues were not significant in any period. No single customer accounted for a significant amount of our revenue in any period.

 

(5) Operating income (loss) before depreciation and amortization is defined as operating income (loss) before depreciation and amortization, impairment charges, if any, related to fixed and intangible assets, and gains or losses from the sale of assets, if any. As such, it eliminates the significant level of non-cash depreciation and amortization expense that results from the capital intensive nature of our businesses and intangible assets recognized in business combinations, and is unaffected by our capital structure or investment activities. Our management and Board of Directors use this measure in evaluating our consolidated operating performance and the operating performance of all of our operating segments. This metric is used to allocate resources and capital to our operating segments and is a significant component of our annual incentive compensation programs. We believe that this measure is also useful to investors as it is one of the bases for comparing our operating performance with other companies in our industries, although our measure may not be directly comparable to similar measures used by other companies. This measure should not be considered as a substitute for operating income (loss), net income (loss), net cash provided by operating activities or other measures of performance or liquidity reported in accordance with generally accepted accounting principles.

 

12. CONDENSED CONSOLIDATING FINANCIAL INFORMATION

 

We and five of our cable holding company subsidiaries, Comcast Cable Communications, LLC (“CCCL”), Comcast Cable Communications Holdings, Inc. (“CCCH”), Comcast MO Group, Inc. (“Comcast MO Group”), Comcast Cable Holdings, LLC (“CCH”), and Comcast MO of Delaware, LLC (“Comcast MO of Delaware”) fully and unconditionally guaranteed each other’s debt securities. Comcast MO Group, CCH and Comcast MO of Delaware are collectively referred to as the “Combined CCHMO Parents.”

 

21


COMCAST CORPORATION AND SUBSIDIARIES

FORM 10-Q

QUARTER ENDED SEPTEMBER 30, 2005

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

 

In September 2005, we unconditionally guaranteed the ZONES due October 2029 and 10 5/8% Senior Subordinated Debentures due 2012 issued by Comcast Holdings; accordingly we have added Comcast Holdings condensed consolidated information for all periods presented. Our condensed consolidating financial information is as follows (dollars in millions):

 

Comcast Corporation

Condensed Consolidating Balance Sheet

As of September 30, 2005

 

    Comcast
Parent


  CCCL
Parent


  CCCH
Parent


 

Combined

CCHMO
Parents


  Comcast
Holdings


 

Non-

Guarantor
Subsidiaries


 

Elimination

and
Consolidation

Adjustments


   

Consolidated

Comcast

Corporation


ASSETS

                                                 

Cash and cash equivalents

  $   $   $   $   $   $ 579   $     $ 579

Investments

                        207           207

Accounts receivable, net

                        990           990

Other current assets

    6                     581           587
   

 

 

 

 

 

 


 

Total current assets

    6                     2,357           2,363
   

 

 

 

 

 

 


 

INVESTMENTS

                        13,018           13,018

INVESTMENTS IN AND AMOUNTS DUE FROM SUBSIDIARIES ELIMINATED UPON CONSOLIDATION

    52,329     29,674     36,010     40,453     22,526     570     (181,562 )    

PROPERTY AND EQUIPMENT, net

    10         2         3     18,766           18,781

FRANCHISE RIGHTS

                        51,111           51,111

GOODWILL

                        14,111           14,111

OTHER INTANGIBLE ASSETS, net

                    7     3,371           3,378

OTHER NONCURRENT ASSETS, net

    107     24     24         43     437           635
   

 

 

 

 

 

 


 

Total assets

  $ 52,452   $ 29,698   $ 36,036   $ 40,453   $ 22,579   $ 103,741   $ (181,562 )   $ 103,397
   

 

 

 

 

 

 


 

LIABILITIES AND
STOCKHOLDERS’ EQUITY

                                                 

Accounts payable and accrued expenses related to trade creditors

  $   $   $   $   $   $ 1,980   $     $ 1,980

Accrued expenses and other current liabilities

    523     239     94     79     98     1,634           2,667

Deferred income taxes

                        17           17

Current portion of long-term debt

        1,319         1,038         141           2,498
   

 

 

 

 

 

 


 

Total current liabilities

    523     1,558     94     1,117     98     3,772           7,162
   

 

 

 

 

 

 


 

LONG-TERM DEBT, less current portion

    6,620     4,994     3,498     3,326     994     675           20,107

DEFERRED INCOME TAXES

                    784     26,346           27,130

OTHER NONCURRENT LIABILITIES

    4,304     50             50     2,984           7,388

MINORITY INTEREST

                        605           605

STOCKHOLDERS’ EQUITY

                                                 

Common stock

    25                               25

Other stockholders’ equity

    40,980     23,096     32,444     36,010     20,653     69,359     (181,562 )     40,980
   

 

 

 

 

 

 


 

Total stockholders’ equity

    41,005     23,096     32,444     36,010     20,653     69,359     (181,562 )     41,005
   

 

 

 

 

 

 


 

Total liabilities and stockholders’ equity

  $ 52,452   $ 29,698   $ 36,036   $ 40,453   $ 22,579   $ 103,741   $ (181,562 )   $ 103,397
   

 

 

 

 

 

 


 

 

22


COMCAST CORPORATION AND SUBSIDIARIES

FORM 10-Q

QUARTER ENDED SEPTEMBER 30, 2005

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

 

Comcast Corporation

Condensed Consolidating Balance Sheet

As of December 31, 2004

 

    Comcast
Parent


  CCCL
Parent


  CCCH
Parent


 

Combined

CCHMO
Parents


  Comcast
Holdings


 

Non-

Guarantor
Subsidiaries


 

Elimination

and
Consolidation

Adjustments


   

Consolidated

Comcast

Corporation


ASSETS

                                                 

Cash and cash equivalents

  $   $   $   $   $   $ 452   $     $ 452

Investments

                        1,555           1,555

Accounts receivable, net

                        959           959

Other current assets

    15                     554           569
   

 

 

 

 

 

 


 

Total current assets

    15                     3,520           3,535
   

 

 

 

 

 

 


 

INVESTMENTS

                        12,812           12,812

INVESTMENTS IN AND AMOUNTS DUE FROM SUBSIDIARIES ELIMINATED UPON CONSOLIDATION

    48,317     28,687     35,642     41,898     21,734     401     (176,679 )    

PROPERTY AND EQUIPMENT, net

    8         3         5     18,695           18,711

FRANCHISE RIGHTS

                        51,071           51,071

GOODWILL

                        14,020           14,020

OTHER INTANGIBLE ASSETS, net

                    14     3,837           3,851

OTHER NONCURRENT ASSETS, net

    107     30     27         46     484           694
   

 

 

 

 

 

 


 

Total assets

  $ 48,447   $ 28,717   $ 35,672   $ 41,898   $ 21,799   $ 104,840   $ (176,679 )   $ 104,694
   

 

 

 

 

 

 


 

LIABILITIES AND STOCKHOLDERS’ EQUITY

                                                 

Accounts payable and accrued expenses related to trade creditors

  $   $   $   $   $   $ 2,041   $     $ 2,041

Accrued expenses and other current liabilities

    671     216     126     197     204     1,321           2,735

Deferred income taxes

                        360           360

Current portion of long-term debt

        700         1,080         1,719           3,499
   

 

 

 

 

 

 


 

Total current liabilities

    671     916     126     1,277     204     5,441           8,635
   

 

 

 

 

 

 


 

LONG-TERM DEBT, less current portion

    4,323     5,643     3,498     4,979     950     700           20,093

DEFERRED INCOME TAXES

                    733     26,082           26,815

OTHER NONCURRENT LIABILITIES

    2,031     23                 5,207             7,261

MINORITY INTEREST

                        468           468

STOCKHOLDERS’ EQUITY

                                                 

Common stock

    25                               25

Other stockholders’ equity

    41,397     22,135     32,048     35,642     19,912     66,942     (176,679 )     41,397
   

 

 

 

 

 

 


 

Total stockholders’ equity

    41,422     22,135     32,048     35,642     19,912     66,942     (176,679 )     41,422
   

 

 

 

 

 

 


 

Total liabilities and stockholders’ equity

  $ 48,447   $ 28,717   $ 35,672   $ 41,898   $ 21,799   $ 104,840   $ (176,679 )   $ 104,694
   

 

 

 

 

 

 


 

 

23


COMCAST CORPORATION AND SUBSIDIARIES

FORM 10-Q

QUARTER ENDED SEPTEMBER 30, 2005

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

 

Comcast Corporation

Condensed Consolidating Statement of Operations

For the Three Months Ended September 30, 2005

 

     Comcast
Parent


    CCCL
Parent


    CCCH
Parent


   

Combined

CCHMO
Parents


    Comcast
Holdings


   

Non-

Guarantor
Subsidiaries


   

Elimination

and
Consolidation

Adjustments


   

Consolidated

Comcast

Corporation


 

REVENUES

                                                                

Service revenues

   $     $     $     $     $     $ 5,578     $     $ 5,578  

Management fee revenue

     115       44       71       71       1             (302 )      
    


 


 


 


 


 


 


 


       115       44       71       71       1       5,578       (302 )     5,578  
    


 


 


 


 


 


 


 


COSTS AND EXPENSES

                                                                

Operating (excluding depreciation)

                                   2,007             2,007  

Selling, general and administrative

     53       44       71       71       3       1,532       (302 )     1,472  

Depreciation

     1                               913             914  

Amortization

                             3       299             302  
    


 


 


 


 


 


 


 


       54       44       71       71       6       4,751       (302 )     4,695  
    


 


 


 


 


 


 


 


OPERATING INCOME

     61                         (5 )     827             883  

OTHER INCOME (EXPENSE)

                                                                

Interest expense

     (98 )     (124 )     (82 )     (38 )     (24 )     (57 )           (423 )

Investment loss, net

                             (86 )     (18 )           (104 )

Equity in net income (losses) of affiliates

     246       339       240       264       228       13       (1,348 )     (18 )

Other income

                                   17             17  
    


 


 


 


 


 


 


 


       148       215       158       226       118       (45 )     (1,348 )     (528 )
    


 


 


 


 


 


 


 


INCOME (LOSS) BEFORE INCOME TAXES AND MINORITY INTEREST

     209       215       158       226       113       782       (1,348 )     355  

INCOME TAX (EXPENSE) BENEFIT

     13       43       28       14       40       (281 )           (143 )
    


 


 


 


 


 


 


 


INCOME (LOSS) BEFORE MINORITY INTEREST

     222       258       186       240       153       501       (1,348 )     212  

MINORITY INTEREST

                                   10             10  
    


 


 


 


 


 


 


 


NET INCOME (LOSS)

   $ 222     $ 258     $ 186     $ 240     $ 153     $ 511     $ (1,348 )   $ 222  
    


 


 


 


 


 


 


 


 

24


COMCAST CORPORATION AND SUBSIDIARIES

FORM 10-Q

QUARTER ENDED SEPTEMBER 30, 2005

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

 

Comcast Corporation

Condensed Consolidating Statement of Operations

For the Three Months Ended September 30, 2004

 

     Comcast
Parent


    CCCL
Parent


    CCCH
Parent


   

Combined

CCHMO
Parents


    Comcast
Holdings


   

Non-

Guarantor
Subsidiaries


   

Elimination

and
Consolidation

Adjustments


   

Consolidated

Comcast

Corporation


 

REVENUES

                                                                

Service revenues

   $     $     $     $     $     $ 5,098     $     $ 5,098  

Management fee revenue

     105       41       62       62       2             (272 )      
    


 


 


 


 


 


 


 


       105       41       62       62       2       5,098       (272 )     5,098  
    


 


 


 


 


 


 


 


COSTS AND EXPENSES

                                                                

Operating (excluding depreciation)

                                   1,837             1,837  

Selling, general and administrative

     39       41       62       62       3       1,466       (272 )     1,401  

Depreciation

     1                         1       867             869  

Amortization

                             2       303             305  
    


 


 


 


 


 


 


 


       40       41       62       62       6       4,473       (272 )     4,412  
    


 


 


 


 


 


 


 


OPERATING INCOME

     65                         (4 )     625             686  

OTHER INCOME (EXPENSE)

                                                                

Interest expense

     (66 )     (115 )     (109 )     (101 )     (26 )     (18 )           (435 )

Investment income, net

                             84       5             89  

Equity in net income (losses) of affiliates

     221       267       101       166       204       (41 )     (947 )     (29 )

Other income

                                   63             63  
    


 


 


 


 


 


 


 


       155       152       (8 )     65       262       9       (947 )     (312 )
    


 


 


 


 


 


 


 


INCOME (LOSS) BEFORE INCOME TAXES AND MINORITY INTEREST

     220       152       (8 )     65       258       634       (947 )     374  

INCOME TAX (EXPENSE) BENEFIT

           40       38       36       (19 )     (251 )           (156 )
    


 


 


 


 


 


 


 


INCOME (LOSS) BEFORE MINORITY INTEREST

     220       192       30       101       239       383       (947 )     218  

MINORITY INTEREST

                                   2             2  
    


 


 


 


 


 


 


 


NET INCOME (LOSS)

   $ 220     $ 192     $ 30     $ 101     $ 239     $ 385     $ (947 )   $ 220  
    


 


 


 


 


 


 


 


 

25


COMCAST CORPORATION AND SUBSIDIARIES

FORM 10-Q

QUARTER ENDED SEPTEMBER 30, 2005

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

 

Comcast Corporation

Condensed Consolidating Statement of Operations

For the Nine Months Ended September 30, 2005

 

     Comcast
Parent


    CCCL
Parent


    CCCH
Parent


   

Combined

CCHMO
Parents


    Comcast
Holdings


   

Non-

Guarantor
Subsidiaries


   

Elimination

and
Consolidation

Adjustments


   

Consolidated

Comcast

Corporation


 

REVENUES

                                                                

Service revenues

   $     $     $     $     $     $ 16,539     $     $ 16,539  

Management fee revenue

     339       130       207       207       5             (888 )      
    


 


 


 


 


 


 


 


       339       130       207       207       5       16,539       (888 )     16,539  
    


 


 


 


 


 


 


 


COSTS AND EXPENSES

                                                                

Operating (excluding depreciation)

                                   5,908             5,908  

Selling, general and administrative

     144       130       207       207       9       4,484       (888 )     4,293  

Depreciation

     2                         2       2,675             2,679  

Amortization

                             8       854             862  
    


 


 


 


 


 


 


 


       146       130       207       207       19       13,921       (888 )     13,742  
    


 


 


 


 


 


 


 


OPERATING INCOME

     193                         (14 )     2,618             2,797  

OTHER INCOME (EXPENSE)

                                                                

Interest expense

     (249 )     (364 )     (247 )     (233 )     (77 )     (164 )           (1,334 )

Investment income, net

                             (35 )     71             36  

Equity in net income (losses) of affiliates

     831       1,020       519       670       771       (10 )     (3,823 )     (22 )

Other income (expense)

                                   (61 )           (61 )
    


 


 


 


 


 


 


 


       582       656       272       437       659       (164 )     (3,823 )     (1,381 )
    


 


 


 


 


 


 


 


INCOME (LOSS) BEFORE INCOME TAXES AND MINORITY INTEREST

     775       656       272       437       645       2,454       (3,823 )     1,416  

INCOME TAX (EXPENSE) BENEFIT

     20       127       86       82       44       (973 )           (614 )
    


 


 


 


 


 


 


 


INCOME (LOSS) BEFORE MINORITY INTEREST

     795       783       358       519       689       1,481       (3,823 )     802  

MINORITY INTEREST

                                   (7 )           (7 )
    


 


 


 


 


 


 


 


NET INCOME (LOSS)

   $ 795     $ 783     $ 358     $ 519     $ 689     $ 1,474     $ (3,823 )   $ 795  
    


 


 


 


 


 


 


 


 

26


COMCAST CORPORATION AND SUBSIDIARIES

FORM 10-Q

QUARTER ENDED SEPTEMBER 30, 2005

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

 

Comcast Corporation

Condensed Consolidating Statement of Operations

For the Nine Months Ended September 30, 2004

 

     Comcast
Parent


    CCCL
Parent


    CCCH
Parent


   

Combined

CCHMO
Parents


    Comcast
Holdings


   

Non-

Guarantor
Subsidiaries


   

Elimination

and
Consolidation

Adjustments


   

Consolidated

Comcast

Corporation


 

REVENUES

                                                                

Service revenues

   $     $     $     $     $     $ 15,072     $     $ 15,072  

Management fee revenue

     307       120       187       187       6             (807 )      
    


 


 


 


 


 


 


 


       307       120       187       187       6       15,072       (807 )     15,072  
    


 


 


 


 


 


 


 


COSTS AND EXPENSES

                                                                

Operating (excluding depreciation)

                                   5,500             5,500  

Selling, general and administrative

     132       120       187       187       8       4,200       (807 )     4,027  

Depreciation

     1                         3       2,476             2,480  

Amortization

                             8       860             868  
    


 


 


 


 


 


 


 


       133       120       187       187       19       13,036       (807 )     12,875  
    


 


 


 


 


 


 


 


OPERATING INCOME

     174                         (13 )     2,036             2,197  

OTHER INCOME (EXPENSE)

                                                                

Interest expense

     (229 )     (357 )     (262 )     (302 )     (73 )     (196 )           (1,419 )

Investment income, net

                             139       92             231  

Equity in net income (losses) of affiliates

     583       874       271       467       617       (41 )     (2,837 )     (66 )

Other income

                                   82             82  
    


 


 


 


 


 


 


 


       354       517       9       165       683       (63 )     (2,837 )     (1,172 )
    


 


 


 


 


 


 


 


INCOME (LOSS) BEFORE INCOME TAXES AND MINORITY INTEREST

     528       517       9       165       670       1,973       (2,837 )     1,025  

INCOME TAX (EXPENSE) BENEFIT

     19       125       92       106       (19 )     (789 )           (466 )
    


 


 


 


 


 


 


 


INCOME (LOSS) BEFORE MINORITY INTEREST

     547       642       101       271       651       1,184       (2,837 )     559  

MINORITY INTEREST

                                   (12 )           (12 )
    


 


 


 


 


 


 


 


NET INCOME (LOSS)

   $ 547     $ 642     $ 101     $ 271     $ 651     $ 1,172     $ (2,837 )   $ 547  
    


 


 


 


 


 


 


 


 

27


COMCAST CORPORATION AND SUBSIDIARIES

FORM 10-Q

QUARTER ENDED SEPTEMBER 30, 2005

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

 

Comcast Corporation

Condensed Consolidating Statement of Cash Flows

For the Nine Months Ended September 30, 2005

 

    Comcast
Parent


    CCCL
Parent


    CCCH
Parent


   

Combined

CCHMO
Parents


    Comcast
Holdings


   

Non-

Guarantor
Subsidiaries


   

Elimination

and
Consolidation

Adjustments


 

Consolidated

Comcast

Corporation


 

OPERATING ACTIVITIES

                                                             

Net cash provided by (used in) operating activities

  $ 152     $ (175 )   $ (175 )   $ (374 )   $ (114 )   $ 4,626     $   $ 3,940  
   


 


 


 


 


 


 

 


FINANCING ACTIVITIES

                                                             

Proceeds from borrowings

    2,332                               1           2,333  

Retirements and repayments of debt

    (1 )                 (1,590 )     (11 )     (340 )         (1,942 )

Issuances of common stock

    76                                         76  

Repurchases of common stock

    (1,291 )                                       (1,291 )

Other

                                  27           27  
   


 


 


 


 


 


 

 


Net cash provided by (used in) financing activities

    1,116                   (1,590 )     (11 )     (312 )         (797 )
   


 


 


 


 


 


 

 


INVESTING ACTIVITIES

                                                             

Net transactions with affiliates

    (1,268 )     175       175       1,964       125       (1,171 )          

Capital expenditures

                                  (2,753 )         (2,753 )

Proceeds from sales of investments

                                  626           626  

Purchases of investments

                                  (310 )         (310 )

Acquisitions, net of cash acquired

                                  (196 )         (196 )

Additions to intangible and other noncurrent assets

                                  (317 )         (317 )

Purchases of short-term investments, net

                                  (66 )         (66 )

Proceeds from settlement of contract of acquired company

                                             
   


 


 


 


 


 


 

 


Net cash (used in) provided by investing activities

    (1,268 )     175       175       1,964       125       (4,187 )         (3,016 )
   


 


 


 


 


 


 

 


(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS

                                  127           127  

CASH AND CASH EQUIVALENTS, beginning of period

                                  452           452  
   


 


 


 


 


 


 

 


CASH AND CASH EQUIVALENTS, end of period

  $     $     $     $     $     $ 579     $   $ 579  
   


 


 


 


 


 


 

 


 

28


COMCAST CORPORATION AND SUBSIDIARIES

FORM 10-Q

QUARTER ENDED SEPTEMBER 30, 2005

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

 

Comcast Corporation

Condensed Consolidating Statement of Cash Flows

For the Nine Months Ended September 30, 2004

 

    Comcast
Parent


    CCCL
Parent


    CCCH
Parent


   

Combined

CCHMO
Parents


    Comcast
Holdings


   

Non-

Guarantor
Subsidiaries


   

Elimination

and
Consolidation

Adjustments


 

Consolidated

Comcast

Corporation


 

OPERATING ACTIVITIES

                                                             

Net cash provided by (used in) operating activities

  $ 57     $ 30     $ (58 )   $ (419 )   $ 41     $ 4,784     $   $ 4,435  
   


 


 


 


 


 


 

 


FINANCING ACTIVITIES

                                                             

Proceeds from borrowings

    948             400                   6           1,354  

Retirements and repayments of debt

    (300 )     (561 )     (400 )     (306 )           (722 )         (2,289 )

Issuances of common stock

    50                                         50  

Repurchases of common stock

    (1,007 )                                       (1,007 )

Other

                                  14           14  
   


 


 


 


 


 


 

 


Net cash provided by (used in) financing activities

    (309 )     (561 )           (306 )           (702 )         (1,878 )
   


 


 


 


 


 


 

 


INVESTING ACTIVITIES

                                                             

Net transactions with affiliates

    252       531       58       725       (41 )     (1,525 )          

Capital expenditures

                                  (2,610 )         (2,610 )

Proceeds from sales of investments

                                  200           200  

Purchases of investments

                                  (118 )         (118 )

Acquisitions, net of cash acquired

                                  (296 )         (296 )

Additions to intangible and other noncurrent assets

                                  (572 )         (572 )

Purchases of short-term investments, net

                                  (20 )         (20 )

Proceeds from settlement of contract of acquired company

                                  26           26  
   


 


 


 


 


 


 

 


Net cash (used in) provided by investing activities

    252       531       58       725       (41 )     (4,915 )         (3,390 )
   


 


 


 


 


 


 

 


(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS

                                 </