Form 10-Q
Table of Contents

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

x

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

For the quarterly period ended September 30, 2010

OR

 

¨

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

For the Transition Period from                      to                     

Commission File Number 001-32871

 

 

LOGO

COMCAST CORPORATION

(Exact name of registrant as specified in its charter)

 

PENNSYLVANIA   27-0000798
(State or other jurisdiction of
incorporation or organization)
  (I.R.S. Employer
Identification No.)
One Comcast Center, Philadelphia, PA   19103-2838
(Address of principal executive offices)   (Zip Code)

Registrant’s telephone number, including area code: (215) 286-1700

 

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding twelve months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes x No ¨

 

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such period that the registrant was required to submit and post such files).

Yes x No ¨

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

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

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

Yes ¨ No x

As of September 30, 2010, there were 2,069,590,273 shares of our Class A common stock, 711,078,811 shares of our Class A Special common stock and 9,444,375 shares of our Class B common stock outstanding.

 

 

 


Table of Contents

TABLE OF CONTENTS

           Page
Number
PART I. FINANCIAL INFORMATION   

Item 1.

  Financial Statements    3
  Condensed Consolidated Balance Sheet as of September 30, 2010 and December 31, 2009 (Unaudited)    3
  Condensed Consolidated Statement of Operations for the Three and Nine Months Ended September 30, 2010 and 2009 (Unaudited)    4
  Condensed Consolidated Statement of Cash Flows for the Nine Months Ended September 30, 2010 and 2009 (Unaudited)    5
  Condensed Consolidated Statement of Changes in Equity for the Nine Months Ended September 30, 2010 and 2009 (Unaudited)    6
  Condensed Consolidated Statement of Comprehensive Income for the Three and Nine Months Ended September 30, 2010 and 2009 (Unaudited)    7
  Notes to Condensed Consolidated Financial Statements (Unaudited)    8

Item 2.

  Management’s Discussion and Analysis of Financial Condition and Results of Operations    27

Item 3.

  Quantitative and Qualitative Disclosures About Market Risk    35

Item 4.

  Controls and Procedures    35
PART II. OTHER INFORMATION

Item 1.

  Legal Proceedings    35

Item 1A.

  Risk Factors    35

Item 2.

  Unregistered Sales of Equity Securities and Use of Proceeds    35

Item 6.

  Exhibits    36
SIGNATURES    37

 

 

This Quarterly Report on Form 10-Q is for the three and nine months ended September 30, 2010. This Quarterly Report modifies and supersedes documents filed prior to this Quarterly Report. The Securities and Exchange Commission (“SEC”) allows us to “incorporate by reference” information that we file with it, which means that we can disclose important information to you by referring you directly to those documents. Information incorporated by reference is considered to be part of this Quarterly Report. In addition, information that we file with the SEC in the future will automatically update and supersede information contained in this Quarterly Report. Throughout this Quarterly Report, we refer to Comcast Corporation as “Comcast;” Comcast and its consolidated subsidiaries 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,” “believes,” “estimates,” “potential,” or “continue,” or the negative of those words, and other comparable words. You should be aware that those statements are only our predictions. In evaluating those statements, you should specifically consider various factors, including the risks outlined below and in other reports we file with the SEC. Actual events or our actual results may differ materially from any of our forward-looking statements. We undertake no obligation to update any forward-looking statements.

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

 

   

our cable services face a wide range of competition that could adversely affect our future results of operations

 

 

   

technological advances have increased and will likely continue to increase competition for our cable services, which could adversely affect our future results of operations

 

 

   

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

 

 

   

we are subject to regulation by federal, state and local governments, which may impose additional costs and restrictions

 

 

   

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

 

 

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

 

 

   

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

 

 

   

our business depends on certain intellectual property rights and on not infringing the intellectual property rights of others

 

 

   

we face risks arising from the outcome of various litigation matters

 

 

   

acquisitions and other strategic transactions present many risks, and we may not realize the financial and strategic goals that were contemplated at the time of any transaction

 

 

   

the loss of key management personnel could have a negative impact on our business

 

 

   

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

 

 

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PART I: FINANCIAL INFORMATION

ITEM 1: FINANCIAL STATEMENTS

Condensed Consolidated Balance Sheet

(Unaudited)

 

(in millions, except share data)   September 30,
2010
    December 31,
2009
 

Assets

   

Current Assets:

   

Cash and cash equivalents

  $ 4,542     $ 671  

Investments

    72       50  

Accounts receivable, less allowance for doubtful accounts of $196 and $175

    1,868       1,711  

Other current assets

    690       791  

Total current assets

    7,172       3,223  

Investments

    6,381       5,947  

Property and equipment, net of accumulated depreciation of $31,229 and $27,810

    23,328       23,855  

Franchise rights

    59,452       59,452  

Goodwill

    15,029       14,933  

Other intangible assets, net of accumulated amortization of $9,518 and $8,711

    3,750       4,105  

Other noncurrent assets, net

    1,413       1,218  

Total assets

  $ 116,525     $ 112,733  

Liabilities and Equity

   

Current Liabilities:

   

Accounts payable and accrued expenses related to trade creditors

  $ 3,297     $ 3,094  

Accrued expenses and other current liabilities

    3,260       2,999  

Current portion of long-term debt

    2,300       1,156  

Total current liabilities

    8,857       7,249  

Long-term debt, less current portion

    28,738       27,940  

Deferred income taxes

    27,347       27,800  

Other noncurrent liabilities

    7,571       6,767  

Commitments and contingencies (Note 12)

   

Redeemable noncontrolling interests

    144       166  

Equity:

   

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

             

Class A common stock, $0.01 par value—authorized, 7,500,000,000 shares; issued, 2,435,051,023 and 2,428,533,911; outstanding, 2,069,590,273 and 2,063,073,161

    24       24  

Class A Special common stock, $0.01 par value—authorized, 7,500,000,000 shares; issued, 782,013,575 and 835,991,034; outstanding, 711,078,811 and 765,056,270

    8       8  

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

             

Additional paid-in capital

    39,860       40,247  

Retained earnings

    11,525       10,005  

Treasury stock, 365,460,750 Class A common shares and 70,934,764 Class A Special common shares

    (7,517     (7,517

Accumulated other comprehensive income (loss)

    (116     (46

Total Comcast Corporation shareholders’ equity

    43,784       42,721  

Noncontrolling interests

    84       90  

Total equity

    43,868       42,811  

Total liabilities and equity

  $ 116,525     $ 112,733  

See notes to condensed consolidated financial statements.

 

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Condensed Consolidated Statement of Operations

(Unaudited)

 

    Three Months Ended
September 30
   

Nine Months Ended

September 30

 
(in millions, except per share data)       2010             2009             2010             2009      

Revenue

  $ 9,489     $ 8,845     $ 28,216     $ 26,689  

Costs and Expenses:

       

Operating (excluding depreciation and amortization)

    3,792       3,530       11,351       10,703  

Selling, general and administrative

    2,119       1,989       5,985       5,681  

Depreciation

    1,377       1,362       4,167       4,148  

Amortization

    247       253       746       760  
      7,535       7,134       22,249       21,292  

Operating income

    1,954       1,711       5,967       5,397  

Other Income (Expense):

       

Interest expense

    (545     (707     (1,612     (1,828

Investment income (loss), net

    109       148       210       218  

Equity in net income (losses) of affiliates, net

    (40     (17     (98     (44

Other income (expense)

    (24     2       (69     13  
      (500     (574     (1,569     (1,641

Income before income taxes

    1,454       1,137       4,398       3,756  

Income tax expense

    (584     (203     (1,763     (1,088

Net income from consolidated operations

    870       934       2,635       2,668  

Net (income) loss attributable to noncontrolling interests

    (3     10       (18     15  

Net income attributable to Comcast Corporation

  $ 867     $ 944     $ 2,617     $ 2,683  

Basic earnings per common share attributable to Comcast Corporation shareholders

  $ 0.31     $ 0.33     $ 0.93     $ 0.93  

Diluted earnings per common share attributable to Comcast Corporation shareholders

  $ 0.31     $ 0.33     $ 0.93     $ 0.93  

Dividends declared per common share attributable to Comcast Corporation shareholders

  $ 0.0945     $ 0.0675     $ 0.2835     $ 0.2025  

See notes to condensed consolidated financial statements.

 

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Condensed Consolidated Statement of Cash Flows

(Unaudited)

 

    Nine Months Ended
September 30
 
(in millions)       2010             2009      

Net cash provided by operating activities

  $ 7,732     $ 7,725  

Investing Activities

   

Capital expenditures

    (3,429     (3,508

Cash paid for intangible assets

    (372     (383

Acquisitions, net of cash acquired

    (183     (36

Proceeds from sales of investments

    21       31  

Purchases of investments

    (54     (142

Other

    149       37  

Net cash provided by (used in) investing activities

    (3,868     (4,001

Financing Activities

   

Proceeds from borrowings

    2,420       1,843  

Repurchases and repayments of debt

    (649     (4,709

Repurchases of common stock

    (892     (438

Dividends paid

    (800     (568

Other

    (72     (185

Net cash provided by (used in) financing activities

    7       (4,057

Increase (decrease) in cash and cash equivalents

    3,871       (333

Cash and cash equivalents, beginning of period

    671       1,195  

Cash and cash equivalents, end of period

  $ 4,542     $ 862  

See notes to condensed consolidated financial statements.

 

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Condensed Consolidated Statement of Changes in Equity

(Unaudited)

 

                  Common Stock                                    
(in millions)  

Redeemable
Non-

controlling
Interests

              A   A
Special
  B   Additional
Paid-In
Capital
    Retained
Earnings
    Treasury
Stock at
Cost
    Accumulated
Other
Comprehensive
Income (Loss)
   

Non-

controlling
Interests

    Total
Equity
 

Balance, January 1, 2009

  $ 171            $ 24   $ 9   $   $ 40,620      $ 7,427      $ (7,517   $ (113   $ 126      $ 40,576   

Stock compensation plans

                  108               108  

Repurchase and retirement of common stock

                  (353     (112           (465

Employee stock purchase plan

                  46               46  

Dividends declared

                    (582           (582

Other comprehensive income (loss)

                        41         41  

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

                  30             (35     (5

Contributions from (distributions to) noncontrolling interests

    10                           (19     (19

Net income (loss)

    (13                                       2,683                       (2     2,681  

Balance, September 30, 2009

  $ 168              $ 24   $ 9   $   $ 40,451      $ 9,416      $ (7,517   $ (72   $ 70      $ 42,381   

Balance, January 1, 2010

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

Stock compensation plans

                  160       (4           156  

Repurchase and retirement of common stock

                  (603     (297           (900

Employee stock purchase plan

                  45               45  

Dividends declared

                    (796           (796

Other comprehensive income (loss)

                        (70       (70

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

    (20                 11               11  

Contributions from (distributions to) noncontrolling interests

                          (26     (26

Net income (loss)

    (2                                       2,617                       20       2,637  

Balance, September 30, 2010

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

See notes to condensed consolidated financial statements.

 

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Condensed Consolidated Statement of Comprehensive Income

(Unaudited)

 

    Three Months Ended
September 30
   Nine Months Ended
September 30
(in millions)       2010             2009            2010             2009    

Net income from consolidated operations

  $ 870     $ 934    $ 2,635     $ 2,668

Holding gains (losses) during the period, net of deferred taxes of $21, $(1), $45 and $(2)

    (36     2      (77     6

Reclassification adjustments for losses (gains) included in net income attributable to Comcast Corporation, net of deferred taxes of $(1), $(3), $(4) and $(17)

    2       6      7       31

Cumulative translation adjustments

    4                   4

Comprehensive income

    840       942      2,565       2,709

Net (income) loss attributable to noncontrolling interests

    (3     10      (18     15

Comprehensive income attributable to Comcast Corporation

  $ 837     $ 952    $ 2,547     $ 2,724

See notes to condensed consolidated financial statements.

 

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

Note 1: Condensed Consolidated Financial Statements

Basis of Presentation

We have prepared these unaudited condensed consolidated financial statements based on Securities and Exchange Commission (“SEC”) rules that permit reduced disclosure for interim periods. These financial statements include all adjustments that are necessary for a fair presentation of our results of operations and financial condition for the periods shown, including normal, recurring accruals and other items. We also evaluated events or transactions that occurred after the balance sheet date through the issuance date of these financial statements to determine if financial statement recognition or additional disclosure is required. The results of operations for the interim periods presented are not necessarily indicative of results for the full year.

The year-end condensed consolidated balance sheet was derived from audited financial statements but does not include all disclosures required by generally accepted accounting principles in the United States (“GAAP”). For a more complete discussion of our accounting policies and certain other information, refer to our annual financial statements for the preceding fiscal year as filed with the SEC.

Reclassifications have been made to the prior year’s condensed consolidated financial statements between revenue and operating expenses to conform to classifications used in 2010.

Note 2: Recent Accounting Guidance

Consolidation of Variable Interest Entities

In June 2009, the Financial Accounting Standards Board (“FASB”) updated the accounting guidance related to the consolidation of variable interest entities (“VIEs”). The updated guidance (i) requires an ongoing reassessment of whether an enterprise is the primary beneficiary of a VIE, (ii) changes the quantitative approach previously required for determining the primary beneficiary of a VIE and replaces it with a qualitative approach, and (iii) requires additional disclosure about an enterprise’s involvement in VIEs. We adopted the updated guidance on January 1, 2010 and it did not impact our consolidated financial statements.

Note 3: Earnings Per Share

Basic earnings per common share attributable to Comcast Corporation shareholders (“basic EPS”) is computed by dividing net income attributable to Comcast Corporation by the weighted-average number of common shares outstanding during the period.

Our potentially dilutive securities include potential common shares related to our stock options and our restricted share units (“RSUs”). Diluted earnings per common share attributable to Comcast Corporation shareholders (“diluted EPS”) considers the impact of potentially dilutive securities using the treasury stock method, 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 or our Class A Special common stock, as applicable.

Diluted EPS for the three and nine months ended September 30, 2010 excludes approximately 178 million and 189 million, respectively, of potential common shares related to our share-based compensation plans, because the inclusion of the potential common shares would have had an antidilutive effect. For the three and nine months ended September 30, 2009, diluted EPS excludes approximately 199 million and 196 million, respectively, of potential common shares.

 

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Computation of Diluted EPS

 

    Three Months Ended September 30  
    2010      2009  
(in millions, except per share data)   Net Income
Attributable to
Comcast
Corporation
     Shares      Per Share
Amount
     Net Income
Attributable to
Comcast
Corporation
     Shares      Per Share
Amount
 

Basic EPS attributable to Comcast Corporation shareholders

  $ 867         2,802      $ 0.31       $ 944         2,872      $ 0.33   

Effect of dilutive securities:

                

Assumed exercise or issuance of shares relating to stock plans

             8                          5           

Diluted EPS attributable to Comcast Corporation shareholders

  $ 867         2,810      $ 0.31       $ 944         2,877      $ 0.33   

 

    Nine Months Ended September 30  
    2010      2009  
(in millions, except per share data)   Net Income
Attributable to
Comcast
Corporation
     Shares      Per Share
Amount
     Net Income
Attributable to
Comcast
Corporation
     Shares      Per Share
Amount
 

Basic EPS attributable to Comcast Corporation shareholders

  $ 2,617         2,816      $ 0.93       $ 2,683         2,882      $ 0.93   

Effect of dilutive securities:

                

Assumed exercise or issuance of shares relating to stock plans

             10                          8           

Diluted EPS attributable to Comcast Corporation shareholders

  $ 2,617         2,826      $ 0.93       $ 2,683         2,890      $ 0.93   

Note 4: Acquisitions and Other Significant Events

NBC Universal Transaction

We entered into agreements with General Electric Company (“GE”) in December 2009 to form a new company of which we will own 51% and control, with the remaining 49% to be owned by GE. Under the terms of the transaction, GE will contribute NBC Universal’s businesses, including its cable and broadcast networks, filmed entertainment, televised entertainment, theme parks and unconsolidated investments, as well as other GE assets used primarily in NBC Universal’s business. NBC Universal sold $4.0 billion aggregate principal amount of senior notes in April 2010 and $5.1 billion aggregate principal amount of senior notes in October 2010 in connection with the transaction. We will contribute our national programming networks, our regional sports networks and certain of our Internet businesses, as well as other assets used primarily in those businesses. We will also make a cash payment to GE of $7.1 billion, less certain adjustments primarily based on the free cash flow generated by NBC Universal between December 4, 2009 and the closing. The transaction is subject to various regulatory approvals and is expected to close by the end of 2010.

GE will be entitled to cause the new company to redeem half of GE’s interest 3.5 years after the closing and its remaining interest 7 years after the closing. If GE exercises its first redemption right, we have the right to purchase the remainder of GE’s interest at that time. If GE does not exercise its first redemption right, we have the right to purchase half of GE’s interest 5 years after the closing. We also will have the right to purchase GE’s remaining interest, if any, 8 years after the closing. The redemption and purchase price will equal the ownership percentage being acquired multiplied by 120% of the fully distributed public market trading value of the new company, less half of the excess of 120% of that value over $28.15 billion. Subject to various limitations, we are committed to fund up to $2.875 billion in cash or common stock for each of the two redemptions (for an aggregate of up to $5.75 billion), with amounts not used in the first redemption to be available for the second redemption.

The results of operations for the new company will be consolidated with our results of operations, as we will control the new company. When the transaction is completed, the NBC Universal businesses will be recorded at

 

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their fair value and the businesses we contribute will be recorded at their historical or carry-over basis. GE’s interest will be recorded in our consolidated financial statements as a redeemable noncontrolling interest.

Other

During the nine months ended September 30, 2010, we acquired CIMCO Communications, Inc. (“CIMCO”), a phone and high-speed Internet service provider for businesses, Paciolan, Inc. (“Paciolan”), a developer of automated ticketing software, New Global Telecom, Inc. (“NGT”), a phone service provider for small to medium-sized businesses, and made other smaller acquisitions. The aggregate purchase price of all these acquisitions was approximately $195 million. The results of operations for CIMCO and NGT are reported in our Cable segment. Paciolan is managed by Comcast Spectacor, whose results of operations are reported in Corporate and Other. The results of operations for these acquisitions have been included in our consolidated results of operations since their respective acquisition dates and were not material to our consolidated financial statements.

Note 5: Investments

 

(in millions)   September 30,
2010
     December 31,
2009
 

Fair value method

  $ 2,644      $ 1,933  

Equity method, primarily SpectrumCo and Clearwire

    2,087        2,341  

Cost method, primarily AirTouch redeemable preferred shares

    1,722        1,723  

Total investments

    6,453        5,997  

Less: Current investments

    72        50  

Noncurrent investments

  $ 6,381      $ 5,947  

As of September 30, 2010 and December 31, 2009, the estimated fair value of the AirTouch redeemable preferred stock was $1.731 billion and $1.524 billion, respectively, which exceeded our carrying basis as of each date.

Components of Investment Income (Loss), Net

 

    Three Months Ended
September 30
    Nine Months Ended
September 30
 
(in millions)       2010             2009             2010             2009      

Gains on sales and exchanges of investments, net

  $ 3     $ 10     $ 14     $ 14  

Investment impairment losses

    (10     (2     (24     (21

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

    475       456       706       836  

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

    (399     (357     (545     (697

Mark to market adjustments on derivative component of ZONES

    (1     2       1       6  

Interest and dividend income

    25       25       70       79  

Other, net

    16       14       (12     1  

Investment income (loss), net

  $ 109     $ 148     $ 210     $ 218  

Note 6: Goodwill

 

(in millions)   Cable     Programming      Corporate
and Other
     Total  

Balance, December 31, 2009(a)

  $ 12,828     $ 1,630      $ 475      $ 14,933  

Acquisitions

    74       13        10        97  

Settlements and adjustments

    (1                     (1

Balance, September 30, 2010

  $ 12,901     $ 1,643      $ 485      $ 15,029  

 

(a)

The December 31, 2009 Cable segment and Corporate and Other amounts have been adjusted for segment reclassifications to be consistent with our 2010 management reporting presentation.

 

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Note 7: Long-Term Debt

In March 2010, we issued $1.4 billion principal amount of 5.15% notes due 2020 and $1.0 billion principal amount of 6.4% notes due 2040. The net proceeds of these issuances will be used for working capital and general corporate purposes, which may include the repayment of debt at its maturity and funding a portion of our payment to GE due upon closing of the NBC Universal transaction.

Note 8: Fair Value Measurements and Derivative Financial Instruments

We use derivative financial instruments to manage our exposure to the risks associated with fluctuations in interest rates and equity prices. Our objective is to manage the financial and operational exposure arising from these risks by offsetting gains and losses on the underlying exposures with gains and losses on the derivatives used to economically hedge them. Derivative financial instruments that receive designated hedge accounting treatment are evaluated for effectiveness at the time they are designated, as well as throughout the hedging period. We do not engage in any speculative or leveraged derivative transactions. All derivative transactions must comply with a derivatives policy authorized by our Board of Directors.

We manage the credit risks associated with our derivative financial instruments through the evaluation and monitoring of the creditworthiness of the counterparties. Although we may be exposed to losses in the event of nonperformance by the counterparties, we do not expect such losses, if any, to be significant.

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

We periodically examine the instruments we use to hedge exposure to interest rate and equity price risks to ensure that the instruments are matched with underlying assets or liabilities, to reduce our risks relating to changes in interest rates or equity prices and, through market value and sensitivity analysis, to maintain a high correlation to the risk inherent in the hedged item. For those instruments that do not meet the above conditions, and for those derivative financial instruments that are not designated as a hedge, changes in fair value are recognized on a current basis in earnings.

As of September 30, 2010, our derivative financial instruments designated as hedges included (i) the derivative component of one of our prepaid forward sale agreements, which is recorded to other noncurrent liabilities, (ii) our interest rate swap agreements, which are recorded to other current or noncurrent assets or liabilities, and (iii) our interest rate collars, which are recorded to other current liabilities. Changes in the fair value of the derivative component of our prepaid forward sale agreements are recorded to investment income (loss), net. Changes in the fair value of our interest rate swap agreements are recorded to interest expense. These amounts are completely offset by changes in the fair value of the related debt because the swaps are deemed to be 100% effective. The difference between variable and fixed rates to be paid or received under the terms of the interest rate swap agreements is accrued as interest rates change and recognized as an adjustment to interest expense for the related debt. The effective portion of changes in the fair value of our interest rate collars is recorded to accumulated other comprehensive income (loss). The ineffective portion, if any, of changes in the fair value of our interest rate collars is recorded to investment income (loss), net.

As of September 30, 2010, our derivative financial instruments not designated as hedges included (i) the derivative component of our indexed debt instruments (our ZONES debt), which is recorded to long-term debt, and (ii) the derivative component of certain of our prepaid forward sale agreements, which is recorded to other current and noncurrent liabilities.

As of September 30, 2010, our debt had an estimated fair value of $34.932 billion. The estimated fair value of our publicly traded debt is based on quoted market values for the debt. To estimate the fair value of debt for which there are no quoted market prices, we use interest rates available to us for debt with similar terms and remaining maturities.

 

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

Recurring Fair Value Measures

 

    Fair value as of September 30, 2010    December 31, 2009
(in millions)   Level 1    Level 2    Level 3    Total    Total

Assets

             

Trading securities

  $ 2,544    $    $  —    $ 2,544    $ 1,855

Available-for-sale securities

    98                98      76

Equity warrants

              2      2      2

Interest rate swap agreements

         321           321      143
    $ 2,642    $ 321    $ 2    $ 2,965    $ 2,076

Liabilities

             

Derivative component of ZONES

  $    $ 14    $    $ 14    $ 15

Derivative component of prepaid forward sale agreements

         894           894      349

Interest rate swap agreements

         1           1      1

Interest rate collars

         124           124     
    $    $ 1,033    $    $ 1,033    $ 365

Amount of Gain (Loss) Recognized in Income on Derivative Financial Instruments

 

   

Three Months Ended

September 30

   

Nine Months Ended

September 30

 
(in millions)       2010             2009             2010             2009      

Designated Fair Value Hedging Relationships

       

Interest Income (Expense):

       

Interest rate swap agreements (fixed to variable)

  $ 60     $ 43     $ 178     $ (108

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

    (60     (43     (178     108  

Investment Income (Expense):

       

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

    13       22       29       35  

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

    (8     (16     (15     (28

Gain (loss) on fair value hedging relationships

    5       6       14       7  

Nondesignated

       

Investment Income (Expense):

       

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

    462       434       677       801  

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

    (391     (341     (530     (669

Mark to market adjustments on derivative component of ZONES

    (1     2       1       6  

Total gain (loss)

  $ 75     $ 101     $ 162     $ 145  

 

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The difference between variable and fixed rates received under the terms of our interest rate swap agreements reduced interest expense by approximately $33 million and $98 million during the three and nine months ended September 30, 2010, respectively. These amounts during the three and nine months ended September 30, 2009 were approximately $26 million and $74 million, respectively.

Note 9: Noncontrolling Interests

Certain of our subsidiaries that we consolidate are not wholly owned. Some of the agreements with the minority partners of these subsidiaries contain redemption features whereby interests held by the minority partners are redeemable either (i) at the option of the holder or (ii) upon the occurrence of an event that is not solely within our control. If interests were to be redeemed under these agreements, we would generally be required to purchase the interest at fair value on the date of redemption. These interests are presented on the balance sheet outside of equity under the caption “Redeemable noncontrolling interests.” Noncontrolling interests that do not contain such redemption features are presented in equity.

During the nine months ended September 30, 2010, we acquired all of the noncontrolling interest of one of our technology ventures, which had a carrying value of approximately $20 million, for approximately $9 million. The difference between the amount paid and the carrying value of the noncontrolling interest resulted in an increase of approximately $11 million to additional paid-in capital of Comcast Corporation.

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

 

   

Nine Months Ended

September 30

(in millions)       2010            2009    

Net income attributable to Comcast Corporation

  $ 2,617    $ 2,683

Transfers from (to) noncontrolling interests:

    

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

    11      30

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

  $ 2,628    $ 2,713

Note 10: Equity

Share-Based Compensation

Our Board of Directors may grant share-based awards, in the form of stock options and RSUs, to certain employees and directors. Additionally, through our employee stock purchase plan, employees are able to purchase shares of Comcast Class A common stock at a discount through payroll deductions.

In March 2010, we granted 30.9 million stock options and 8.4 million RSUs related to our annual management grant program. The fair values associated with these grants were $5.11 per stock option and $16.87 per RSU.

Recognized Share-Based Compensation Expense

 

    Three Months Ended
September 30
   Nine Months Ended
September 30
(in millions)       2010            2009            2010            2009    

Stock options

  $ 25    $ 28    $ 78    $ 75

Restricted share units

    32      29      100      69

Employee stock purchase plan

    3      3      9      10

Total

  $ 60    $ 60    $ 187    $ 154

As of September 30, 2010, there was $312 million of unrecognized pretax compensation cost related to nonvested stock options and $312 million related to nonvested RSUs.

 

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The employee cost associated with participation in the employee stock purchase plan was satisfied with payroll deductions of approximately $13 million and $39 million for the three and nine months ended September 30, 2010, respectively. For the three and nine months ended September 30, 2009, the employee cost was $11 million and $38 million, respectively.

Accumulated Other Comprehensive Income (Loss)

 

    September 30,  
(in millions)       2010             2009      

Unrealized gains (losses) on marketable securities

  $ 22     $ 23  

Deferred gains (losses) on cash flow hedges

    (133     (64

Unrealized gains (losses) on employee benefit obligations

    (5     (31

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

  $ (116 )    $ (72 ) 

Deferred losses on cash flow hedges in the table above relate primarily to interest rate lock agreements and interest rate collars. As of September 30, 2010, we expect $16 million of unrealized losses, $10 million net of deferred taxes, related to the interest rate lock agreements, to be reclassified as an adjustment to interest expense over the next 12 months.

Note 11: Statement of Cash Flows—Supplemental Information

The table below presents adjustments to reconcile net income from consolidated operations to net cash provided by operating activities.

 

   

Nine Months Ended

September 30

 
(in millions)       2010             2009      

Net income from consolidated operations

  $ 2,635     $ 2,668  

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

   

Depreciation

    4,167       4,148  

Amortization

    746       760  

Share-based compensation

    226       192  

Noncash interest expense (income), net

    105       125  

Equity in net (income) losses of affiliates, net

    98       44  

(Gains) losses on investments and noncash other (income) expense, net

    (78     (146

Deferred income taxes

    (241     572  

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

   

Change in accounts receivable, net

    (145     (11

Change in accounts payable and accrued expenses related to trade creditors

    57       (73

Change in other operating assets and liabilities

    162       (554

Net cash provided by operating activities

  $ 7,732     $ 7,725  

Cash Payments for Interest and Income Taxes

 

   

Three Months Ended

September 30

    

Nine Months Ended

September 30

 
(in millions)       2010              2009              2010              2009      

Interest

  $ 661      $ 615      $ 1,630      $ 1,678  

Income Taxes

  $ 668      $ 194      $ 1,794      $ 940  

Noncash Financing and Investing Activities

During the nine months ended September 30, 2010, we:

 

   

recorded a liability of approximately $264 million for a quarterly cash dividend of $0.0945 per common share paid in October 2010, which is a noncash financing activity

 

 

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acquired approximately $554 million of property and equipment and software that was accrued but unpaid, which is a noncash investing activity

 

Note 12: Commitments and Contingencies

Commitments

One of our subsidiaries supports debt compliance with respect to obligations of a cable system in which we hold an ownership interest, which expires March 2011. Although there can be no assurance, we believe that this cable system will be able to support its debt compliance requirements on its own and that we will not be required to fund our obligation under this commitment. The total notional amount of our commitment was $410 million as of September 30, 2010, at which time there were no quoted market prices for similar agreements.

Contingencies

Antitrust Cases

We are defendants in two purported class actions originally filed in December 2003 in the United States District Courts for the District of Massachusetts and the Eastern District of Pennsylvania. The potential class in the Massachusetts case, which has been transferred to the Eastern District of Pennsylvania, is our customer base in the “Boston Cluster” area, and the potential class in the Pennsylvania case is our customer base in the “Philadelphia and Chicago Clusters,” as those terms are defined in the complaints. In each case, the plaintiffs allege that certain customer exchange transactions with other cable providers resulted in unlawful horizontal market restraints in those areas and seek damages under antitrust statutes, including treble damages.

Classes of Philadelphia Cluster and Chicago Cluster customers were certified in May 2007 and October 2007, respectively. In March 2009, as a result of a Third Circuit Court of Appeals decision clarifying the standards for class certification, the order certifying the Philadelphia Cluster class was vacated without prejudice to the plaintiffs filing a new motion. In January 2010, in its decision on the plaintiffs’ new motion, the Eastern District of Pennsylvania certified a class subject to certain limitations. In June 2010, the Third Circuit Court of Appeals granted our petition for an interlocutory appeal from the class certification decision. In March 2010, we moved for summary judgment dismissing all of the plaintiffs’ claims in the Philadelphia Cluster; the summary judgment motion is stayed pending the class certification appeal. The plaintiffs’ claims concerning the other two clusters are stayed pending determination of the Philadelphia Cluster claims.

We also are among the defendants in a purported class action filed in the United States District Court for the Central District of California in September 2007. The potential class is comprised of all persons residing in the United States who have subscribed to an expanded basic level of video service provided by one of the defendants. The plaintiffs allege that the defendants who produce video programming have entered into agreements with the defendants who distribute video programming via cable and satellite (including us), which preclude the distributor defendants from reselling channels to customers on an “unbundled” basis in violation of federal antitrust laws. The plaintiffs seek treble damages and injunctive relief requiring each distributor defendant to resell certain channels to its customers on an “unbundled” basis. In October 2009, the Central District of California issued an order dismissing the plaintiffs’ complaint with prejudice. The plaintiffs have appealed that order to the Ninth Circuit Court of Appeals.

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

 

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violations of additional state antitrust laws and unfair/deceptive trade practices acts on behalf of new subclasses in Connecticut, Florida, Minnesota, Missouri, New Jersey, New Mexico and West Virginia. In the amended complaint, plaintiffs dropped their unjust enrichment claim, as well as their state law claims on behalf of the Alabama, Illinois, and Pennsylvania subclasses.

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

ERISA Litigation

We and several of our current officers have been named as defendants in a purported class action lawsuit filed in the United States District Court for the Eastern District of Pennsylvania in February 2008. The potential class comprises participants in our retirement investment (401(k)) plan that invested in the plan’s company stock account. The plaintiffs assert that the defendants breached their fiduciary duties under the Employee Retirement Income Security Act of 1974 (ERISA) in managing the plan by allowing participants to continue to invest in the company stock account during a time in 2007 when we allegedly knew (but had not disclosed) that we would not meet our forecasted results. In July 2010, the parties agreed to settle this action with a payment by us of $5 million and our agreement to take certain action with respect to the administration of the plan.

Other

We are a defendant in several unrelated lawsuits claiming infringement of various patents relating to various aspects of our businesses. In certain of these cases other industry participants are also defendants, and also in certain of these cases we expect that any potential liability would be in part or in whole the responsibility of our equipment and technology vendors under applicable contractual indemnification provisions. We are also subject to other legal proceedings and claims that arise in the ordinary course of our business. While the amount of ultimate liability with respect to such actions is not expected to materially affect our financial position, results of operations or cash flows, any litigation resulting from any such legal proceedings or claims could be time consuming, costly and injure our reputation.

* * *

We believe the claims in each of the actions described above in this item are without merit and intend to defend the actions vigorously. Although we cannot predict the outcome of any of the actions described above or how the final resolution of any such actions would impact our results of operations or cash flows for any one period or our consolidated financial condition, the final disposition of any of the above actions is not expected to have a material adverse effect on our consolidated financial position, but could possibly be material to our consolidated results of operations or cash flows for any one period.

 

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Note 13: Financial Data by Business Segment

Our reportable segments consist of our Cable and Programming businesses. 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. Assets are not allocated to segments for management reporting, although over 95% of our assets relate to the Cable segment. Our financial data by business segment is presented in the table below.

 

(in millions)   Cable(a)(b)     Programming(c)     Corporate and
Other(d)(e)
    Eliminations(f)     Total

Three months ended September 30, 2010

         

Revenue(g)

  $ 8,981      $ 416      $ 174      $ (82   $ 9,489

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

    3,546        150        (115     (3 )       3,578

Depreciation and amortization

    1,552        52        29        (9 )       1,624

Operating income (loss)

    1,994        98        (144     6        1,954

Capital expenditures

    1,318        7        41               1,366

Three months ended September 30, 2009

         

Revenue(g)(i)(j)

  $ 8,402      $ 383      $ 153      $ (93   $ 8,845

Operating income (loss) before depreciation and amortization(h)(i)

    3,312        118        (104            3,326

Depreciation and amortization(i)

    1,545        49        26        (5 )       1,615

Operating income (loss)(i)

    1,767        69        (130     5        1,711

Capital expenditures

    1,212        9        6               1,227

Nine months ended September 30, 2010

         

Revenue(g)

  $ 26,607      $ 1,255      $ 630      $ (276   $ 28,216

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

    10,786        423        (326     (3 )       10,880

Depreciation and amortization

    4,696        155        84        (22 )       4,913

Operating income (loss)

    6,090        268        (410     19        5,967

Capital expenditures

    3,351        19        59               3,429

Nine months ended September 30, 2009

         

Revenue(g)(i)(j)

  $ 25,303      $ 1,128      $ 509      $ (251   $ 26,689

Operating income (loss) before depreciation and amortization(h)(i)

    10,215        343        (252     (1 )       10,305

Depreciation and amortization(i)

    4,708        146        76        (22 )       4,908

Operating income (loss)(i)

    5,507        197        (328     21        5,397

Capital expenditures

    3,450        23        35               3,508

 

(a)

Cable segment revenue was derived from the following services:

 

   

Three Months Ended

September 30

   

Nine Months Ended

September 30

 
         2010             2009             2010             2009      

Video(j)

  54.3   56.9   55.0   57.7

High-speed Internet

  24.1   23.1   23.9   22.9

Phone

  10.4   9.9   10.2   9.6

Advertising(j)

  5.1   4.3   4.8   4.0

Franchise fees

  2.8   2.8   2.8   2.8

Other(j)

  3.3   3.0   3.3   3.0

Total

  100.0   100.0   100.0   100.0

Subscription revenue received from customers who purchase bundled services at a discounted rate is allocated proportionally to each service based on the individual service’s price on a stand-alone basis.

 

(b)

Our Cable segment includes our regional sports networks.

 

(c)

Our Programming segment consists primarily of our consolidated national programming networks, E!, Golf Channel, VERSUS, G4 and Style.

 

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(d)

Corporate and Other activities include Comcast Interactive Media, Comcast Spectacor, a portion of the operating results of our less than wholly owned technology development ventures (see “(e)” below), corporate activities and all other businesses not presented in our Cable or Programming segments.

 

(e)

We consolidate our less than wholly owned technology development ventures that we control or of which we are considered the primary beneficiary. These ventures are with Motorola. The ventures have been created to share the costs of development of new technologies for set-top boxes and other devices. The results of these entities are included within Corporate and Other except for cost allocations, which are made to the Cable segment based on our percentage ownership in each entity.

 

(f)

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

 

   

our Programming segment generates 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 Programming segment when negotiating programming contracts that are recorded as a reduction to programming expenses

 

 

   

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

 

 

   

our Cable segment generates revenue by providing network services to Comcast Interactive Media

 

 

(g)

Non-U.S. revenue was not significant in any period. No single customer accounted for a significant amount of our revenue in any period.

 

(h)

To measure the performance of our operating segments, we use operating income (loss) before depreciation and amortization, excluding impairments related to fixed and intangible assets, and gains or losses from the sale of assets, if any. This measure eliminates the significant level of noncash depreciation and amortization expense that results from the capital-intensive nature of our businesses and from intangible assets recognized in business combinations. It is also unaffected by our capital structure or investment activities. We use this measure to evaluate our consolidated operating performance, the operating performance of our operating segments, and to allocate resources and capital to our operating segments. It is also a significant performance measure in our annual incentive compensation programs. We believe that this measure is useful to investors because it is one of the bases for comparing our operating performance with other companies in our industries, although our measure may not be directly comparable to similar measures used by other companies. This measure should not be considered a substitute for operating income (loss), net income (loss) attributable to Comcast Corporation, net cash provided by operating activities, or other measures of performance or liquidity reported in accordance with GAAP.

 

(i)

The 2009 Cable segment and Corporate and Other amounts have been adjusted for segment reclassifications to be consistent with our 2010 management reporting presentation. The adjustments resulted in the reclassification of revenue, operating income (loss) before depreciation and amortization, depreciation and amortization, and operating income from Corporate and Other to our Cable segment for the amounts presented below.

 

(in millions)   Three Months Ended
September 30, 2009
    Nine Months Ended
September 30, 2009
 

Revenue

  $ 2      $ 7   

Operating income (loss) before depreciation and amortization

  $ (2   $ (6

Depreciation and amortization

  $ 4      $ 10   

Operating income (loss)

  $ (6   $ (16

 

(j)

Reclassifications have been made to prior year amounts between revenue and operating expenses to conform to classifications used in 2010.

 

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Note 14: Condensed Consolidating Financial Information

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

Comcast Corporation provides an unconditional subordinated guarantee of the $185 million principal amount currently outstanding of Comcast Holdings’ ZONES due October 2029 and the $202 million principal amount currently outstanding of Comcast Holdings’ 10 5/8% senior subordinated debentures due 2012. Comcast Corporation does not guarantee the $61 million principal amount currently outstanding of Comcast Holdings’ ZONES due November 2029. We have included Comcast Holdings’ condensed consolidated financial information for all periods presented. Our condensed consolidating financial information is presented in the tables below.

Condensed Consolidating Balance Sheet

September 30, 2010

 

(in millions)  

Comcast

Parent

   

CCCL

Parent

   

Combined

CCHMO

Parents

   

Comcast

Holdings

   

Non-

Guarantor

Subsidiaries

   

Elimination

and

Consolidation

Adjustments

   

Consolidated

Comcast

Corporation

 

ASSETS

             

Cash and cash equivalents

  $  —      $  —      $  —      $  —      $ 4,542      $  —      $ 4,542   

Investments

                                72              72  

Accounts receivable, net

                                1,868              1,868  

Other current assets

    170                            520              690  

Total current assets

    170                            7,002              7,172  

Investments

                                6,381              6,381  

Investments in and amounts due from subsidiaries eliminated upon consolidation

    67,962       85,786       48,960       71,404       9,199       (283,311       

Property and equipment, net

    280                            23,048              23,328  

Franchise rights

                                59,452              59,452  

Goodwill

                                15,029              15,029  

Other intangible assets, net

    9                            3,741              3,750  

Other noncurrent assets, net

    1,161       61              148       863       (820     1,413  

Total assets

  $ 69,582      $ 85,847      $ 48,960      $ 71,552      $ 124,715      $ (284,131   $ 116,525   

LIABILITIES AND EQUITY

             

Accounts payable and accrued expenses related to trade creditors

  $ 14      $ 3      $      $      $ 3,280      $      $ 3,297   

Accrued expenses and other current liabilities

    1,028       264       32       262       1,674              3,260  

Current portion of long-term debt

    1,261       1,000                     39              2,300  

Total current liabilities

    2,303       1,267       32       262       4,993              8,857  

Long-term debt, less current portion

    21,842       3,977       2,346       315       258              28,738  

Deferred income taxes

                         686       27,338       (677     27,347  

Other noncurrent liabilities

    1,653                            6,061       (143     7,571  

Redeemable noncontrolling interests

                                144              144  

Equity:

             

Common stock

    32                                          32  

Other shareholders’ equity

    43,752       80,603       46,582       70,289       85,837       (283,311     43,752  

Total Comcast Corporation shareholders’ equity

    43,784       80,603       46,582       70,289       85,837       (283,311     43,784  

Noncontrolling interests

                                84              84  

Total equity

    43,784       80,603       46,582       70,289       85,921       (283,311     43,868  

Total liabilities and equity

  $ 69,582      $ 85,847      $ 48,960      $ 71,552      $ 124,715      $ (284,131   $ 116,525   

 

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Table of Contents

Condensed Consolidating Balance Sheet

December 31, 2009

 

(in millions)  

Comcast

Parent

 

CCCL

Parent

 

Combined

CCHMO

Parents

 

Comcast

Holdings

 

Non-

Guarantor

Subsidiaries

 

Elimination

and

Consolidation

Adjustments

   

Consolidated

Comcast

Corporation

ASSETS

             

Cash and cash equivalents

  $  —   $  —   $  —   $  —   $ 671   $  —      $ 671

Investments

                    50            50

Accounts receivable, net

                    1,711            1,711

Other current assets

    169     2             620            791

Total current assets

    169     2             3,052            3,223

Investments

                    5,947            5,947

Investments in and amounts due from subsidiaries eliminated upon consolidation

    73,943     80,766     47,141     69,959     5,721     (277,530    

Property and equipment, net

    299                 23,556            23,855

Franchise rights

                    59,452            59,452

Goodwill

                    14,933            14,933

Other intangible assets, net

    11                 4,094            4,105

Other noncurrent assets, net

    419     13         6     780            1,218

Total assets

  $ 74,841   $ 80,781   $ 47,141   $ 69,965   $ 117,535   $ (277,530   $ 112,733

LIABILITIES AND EQUITY

             

Accounts payable and accrued expenses related to trade creditors

  $ 14   $   $   $   $ 3,080   $      $ 3,094

Accrued expenses and other current liabilities

    1,009     176     75     131     1,608            2,999

Current portion of long-term debt

    1,100                 56            1,156

Total current liabilities

    2,123     176     75     131     4,744            7,249

Long-term debt, less current portion

    20,089     4,925     2,352     326     248            27,940

Deferred income taxes

    8,068             697     19,035            27,800

Other noncurrent liabilities

    1,840             171     4,756            6,767

Redeemable noncontrolling interests

                    166            166

Equity:

             

Common stock

    32                            32

Other shareholders’ equity

    42,689     75,680     44,714     68,640     88,496     (277,530     42,689

Total Comcast Corporation shareholders’ equity

    42,721     75,680     44,714     68,640     88,496     (277,530     42,721

Noncontrolling interests

                    90            90

Total equity

    42,721     75,680     44,714     68,640     88,586     (277,530     42,811

Total liabilities and equity

  $ 74,841   $ 80,781   $ 47,141   $ 69,965   $ 117,535   $ (277,530   $ 112,733

 

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Condensed Consolidating Statement of Operations

For the Three Months Ended September 30, 2010

 

(in millions)  

Comcast

Parent

   

CCCL

Parent

   

Combined

CCHMO

Parents

   

Comcast

Holdings

   

Non-

Guarantor

Subsidiaries

   

Elimination

and

Consolidation

Adjustments

   

Consolidated

Comcast

Corporation

 

Revenue:

             

Service revenue

  $  —      $  —      $  —      $  —      $ 9,489      $  —      $ 9,489   

Management fee revenue

    202       182       113                     (497       
      202       182       113              9,489       (497     9,489  

Costs and Expenses:

             

Operating (excluding depreciation and amortization)

                                3,792              3,792  

Selling, general and administrative

    106       182       113       15       2,200       (497     2,119  

Depreciation

    8                            1,369              1,377  

Amortization

    2                            245              247  
      116       182       113       15       7,606       (497     7,535  

Operating income (loss)

    86                     (15     1,883              1,954  

Other Income (Expense):

             

Interest expense

    (357     (101     (44     (8     (35            (545

Investment income (loss), net

    2                     (1     108              109  

Equity in net income (losses) of affiliates, net

    1,057       1,119       701       1,137       (40     (4,014     (40

Other income (expense)

    (24                                        (24
      678       1,018       657       1,128       33       (4,014     (500

Income (loss) before income taxes

    764       1,018       657       1,113       1,916       (4,014     1,454  

Income tax (expense) benefit

    103       36       16       9       (748            (584

Net income (loss) from consolidated operations

    867       1,054       673       1,122       1,168       (4,014     870  

Net (income) loss attributable to noncontrolling interests

                                (3            (3

Net income (loss) attributable to Comcast Corporation

  $ 867      $ 1,054      $ 673      $ 1,122      $ 1,165      $ (4,014   $ 867   

 

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Table of Contents

Condensed Consolidating Statement of Operations

For the Three Months Ended September 30, 2009

 

(in millions)  

Comcast

Parent

   

CCCL

Parent

   

Combined

CCHMO

Parents

   

Comcast

Holdings

   

Non-

Guarantor

Subsidiaries

   

Elimination

and

Consolidation

Adjustments

   

Consolidated

Comcast

Corporation

 

Revenue:

             

Service revenue

  $  —      $  —      $  —      $  —      $ 8,845      $  —      $ 8,845   

Management fee revenue

    192       168       108                     (468       
      192       168       108              8,845       (468     8,845  

Costs and Expenses:

             

Operating (excluding depreciation and amortization)

                                3,530              3,530  

Selling, general and administrative

    92       168       108       15       2,074       (468     1,989  

Depreciation

    7                            1,355              1,362  

Amortization

                                253              253  
      99       168       108       15       7,212       (468     7,134  

Operating income (loss)

    93                     (15     1,633              1,711  

Other Income (Expense):

             

Interest expense

    (335     (254     (79     (8     (31            (707

Investment income (loss), net

    1                     2       145              148  

Equity in net income (losses) of affiliates, net

    1,101       1,267       853       1,319       (234     (4,323     (17

Other income (expense)

                                2              2  
      767       1,013       774       1,313       (118     (4,323     (574

Income (loss) before income taxes

    860       1,013       774       1,298       1,515       (4,323     1,137  

Income tax (expense) benefit

    84       89       28       7       (411            (203

Net income (loss) from consolidated operations

    944       1,102       802       1,305       1,104       (4,323     934  

Net (income) loss attributable to noncontrolling interests

                                10              10  

Net income (loss) attributable to Comcast Corporation

  $ 944      $ 1,102      $ 802      $ 1,305      $ 1,114      $ (4,323   $ 944   

 

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Table of Contents

Condensed Consolidating Statement of Operations

For the Nine Months Ended September 30, 2010

 

(in millions)  

Comcast

Parent

   

CCCL

Parent

   

Combined

CCHMO

Parents

   

Comcast

Holdings

   

Non-

Guarantor

Subsidiaries

   

Elimination

and

Consolidation

Adjustments

   

Consolidated

Comcast

Corporation

 

Revenue:

             

Service revenue

  $  —      $  —      $  —      $  —      $ 28,216      $  —      $ 28,216   

Management fee revenue

    600       539       335                     (1,474       
      600       539       335              28,216       (1,474     28,216  

Costs and Expenses:

             

Operating (excluding depreciation and amortization)

                                11,351              11,351  

Selling, general and administrative

    337       539       335       44       6,204       (1,474     5,985  

Depreciation

    22                            4,145              4,167  

Amortization

    2                            744              746  
      361       539       335       44       22,444       (1,474     22,249  

Operating income (loss)

    239                     (44     5,772              5,967  

Other Income (Expense):

             

Interest expense

    (1,049     (303     (130     (25     (105            (1,612

Investment income (loss), net

    5                     1       204              210  

Equity in net income (losses) of affiliates, net

    3,187       3,403       2,131       3,439       (98     (12,160     (98

Other income (expense)

    (72                          3              (69
      2,071       3,100       2,001       3,415       4       (12,160     (1,569

Income (loss) before income taxes

    2,310       3,100       2,001       3,371       5,776       (12,160     4,398  

Income tax (expense) benefit

    307       106       46       24       (2,246            (1,763

Net income (loss) from consolidated operations

    2,617       3,206       2,047       3,395       3,530       (12,160     2,635  

Net (income) loss attributable to noncontrolling interests

                                (18            (18

Net income (loss) attributable to Comcast Corporation

  $ 2,617      $ 3,206      $ 2,047      $ 3,395      $ 3,512      $ (12,160   $ 2,617   

 

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Table of Contents

Condensed Consolidating Statement of Operations

For the Nine Months Ended September 30, 2009

 

(in millions)  

Comcast

Parent

   

CCCL

Parent

   

Combined

CCHMO

Parents

   

Comcast

Holdings

   

Non-

Guarantor

Subsidiaries

   

Elimination

and

Consolidation

Adjustments

   

Consolidated

Comcast

Corporation

 

Revenue:

             

Service revenue

  $  —      $  —      $  —      $  —      $ 26,689      $  —      $ 26,689   

Management fee revenue

    576       504       323                     (1,403       
      576       504       323              26,689       (1,403     26,689  

Costs and Expenses:

             

Operating (excluding depreciation and amortization)

                                10,703              10,703  

Selling, general and administrative

    252       504       323       43       5,962       (1,403     5,681  

Depreciation

    21                            4,127              4,148  

Amortization

                                760              760  
      273       504       323       43       21,552       (1,403     21,292  

Operating income (loss)

    303                     (43     5,137              5,397  

Other Income (Expense):

             

Interest expense

    (969     (562     (179     (18     (100            (1,828

Investment income (loss), net

    (6                   7       217              218  

Equity in net income (losses) of affiliates, net

    3,120       3,592       2,436       3,512       (329     (12,375     (44

Other income (expense)

                                13              13  
      2,145       3,030       2,257       3,501       (199     (12,375     (1,641

Income (loss) before income taxes

    2,448       3,030       2,257       3,458       4,938       (12,375     3,756  

Income tax (expense) benefit

    235       197       63       19       (1,602            (1,088

Net income (loss) from consolidated operations

    2,683       3,227       2,320       3,477       3,336       (12,375     2,668  

Net (income) loss attributable to noncontrolling interests

                                15              15  

Net income (loss) attributable to Comcast Corporation

  $ 2,683      $ 3,227      $ 2,320      $ 3,477      $ 3,351      $ (12,375   $ 2,683   

 

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Table of Contents

Condensed Consolidating Statement of Cash Flows

For the Nine Months Ended September 30, 2010

 

(in millions)  

Comcast

Parent

   

CCCL

Parent

   

Combined

CCHMO

Parents

   

Comcast

Holdings

   

Non-

Guarantor

Subsidiaries

   

Elimination

and

Consolidation

Adjustments

 

Consolidated

Comcast

Corporation

 

Net cash provided by (used in) operating activities

  $ (1,320   $ (137   $ (141   $ (223   $ 9,553      $   $ 7,732   

Investing Activities:

             

Net transactions with affiliates

    1,268       137       141       236       (1,782           

Capital expenditures

    (3                          (3,426         (3,429

Cash paid for intangible assets

                                (372         (372

Acquisitions, net of cash acquired

                                (183         (183

Proceeds from sales of investments

                                21           21  

Purchases of investments

                                (54         (54

Other

                                149           149  

Net cash provided by (used in) investing activities

    1,265       137       141       236       (5,647         (3,868

Financing Activities:

             

Proceeds from borrowings

    2,394                            26           2,420  

Repurchases and repayments of debt

    (600                   (13     (36         (649

Repurchases of common stock

    (892                                     (892

Dividends paid

    (800                                     (800

Other

    (47                          (25         (72

Net cash provided by (used in) financing activities

    55                     (13     (35         7  

Increase (decrease) in cash and cash equivalents

                                3,871           3,871  

Cash and cash equivalents, beginning of period

                                671           671  

Cash and cash equivalents, end of period

  $  —      $  —      $  —      $  —      $ 4,542      $  —   $ 4,542   

 

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Table of Contents

Condensed Consolidating Statement of Cash Flows

For the Nine Months Ended September 30, 2009

 

(in millions)  

Comcast

Parent

   

CCCL

Parent

   

Combined

CCHMO

Parents

   

Comcast

Holdings

   

Non-

Guarantor

Subsidiaries

   

Elimination

and

Consolidation

Adjustments

 

Consolidated

Comcast

Corporation

 

Net cash provided by (used in) operating activities

  $ 22      $ (330   $ (197   $ 6      $ 8,224      $  —   $ 7,725   

Investing Activities:

             

Net transactions with affiliates

    472       3,296       551       256       (4,575           

Capital expenditures

    (24                          (3,484         (3,508

Cash paid for intangible assets

    (6                          (377         (383

Acquisitions, net of cash acquired

                                (36         (36

Proceeds from sales of investments

                                31           31  

Purchases of investments

                                (142         (142

Other

                                37           37  

Net cash provided by (used in) investing activities

    442       3,296       551       256       (8,546         (4,001

Financing Activities:

             

Proceeds from borrowings

    1,792                            51           1,843  

Repurchases and repayments of debt

    (1,241     (2,836     (312     (262     (58         (4,709

Repurchases of common stock

    (438                                     (438

Dividends paid

    (568                                     (568

Other

    (9     (130     (42            (4         (185

Net cash provided by (used in) financing activities

    (464     (2,966     (354     (262     (11         (4,057

Increase (decrease) in cash and cash equivalents

                                (333         (333

Cash and cash equivalents, beginning of period

                                1,195           1,195  

Cash and cash equivalents, end of period

  $  —      $  —      $  —      $  —      $ 862      $  —   $ 862   

 

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

Overview

We are a leading provider of video, high-speed Internet and phone services (“cable services”), offering a variety of entertainment, information and communications services to residential and commercial customers. As of September 30, 2010, our cable systems served approximately 22.9 million video customers, 16.7 million high-speed Internet customers and 8.4 million phone customers and passed over 51 million homes and businesses in 39 states and the District of Columbia. We report the results of these operations as our Cable segment, which generates approximately 94% of our consolidated revenue. Our Cable segment also includes the operations of our regional sports networks. Our Programming segment consists primarily of our consolidated national programming networks, E!, Golf Channel, VERSUS, G4 and Style. Revenue from our Programming segment is generated primarily from monthly per subscriber license fees paid by multichannel video providers, the sale of advertising and the licensing of our programming internationally.

The following are the more significant developments in our businesses during the nine months ended September 30, 2010:

 

   

an increase in consolidated revenue of 5.7% to $28.2 billion and an increase in consolidated operating income of 10.6% to $6.0 billion

 

 

   

an increase in Cable segment revenue of 5.2% to $26.6 billion and an increase in operating income before depreciation and amortization of 5.6% to $10.8 billion

 

 

   

an increase in Programming segment revenue of 11.3% to $1.3 billion and an increase in operating income before depreciation and amortization of 23.2% to $423 million

 

 

   

the addition of 766,000 high-speed Internet customers and 731,000 phone customers; a decrease of 622,000 video customers

 

 

   

a reduction in Cable segment capital expenditures of 2.9% to $3.4 billion

 

 

   

the repurchase of 54 million shares of our Class A Special common stock, including 438,000 shares which did not settle until October 2010, under our share repurchase authorization for $900 million

 

 

   

the payment of $800 million in dividends

 

 

   

the issuance of $2.4 billion aggregate principal amount of notes

 

NBC Universal Transaction

We entered into agreements with General Electric Company (“GE”) in December 2009 to form a new company of which we will own 51% and control, with the remaining 49% to be owned by GE. Under the terms of the transaction, GE will contribute NBC Universal’s businesses, including its cable and broadcast networks, filmed entertainment, televised entertainment, theme parks and unconsolidated investments, as well as other GE assets used primarily in NBC Universal’s business. NBC Universal sold $4.0 billion aggregate principal amount of senior notes in April 2010 and $5.1 billion aggregate principal amount of senior notes in October 2010 in connection with the transaction. We will contribute our national programming networks, our regional sports networks and certain of our Internet businesses, as well as other assets used primarily in those businesses. We will also make a cash payment to GE of $7.1 billion, less certain adjustments primarily based on the free cash flow generated by NBC Universal between December 4, 2009 and the closing. The transaction is subject to various regulatory approvals and is expected to close by the end of 2010.

GE will be entitled to cause the new company to redeem half of GE’s interest 3.5 years after the closing and its remaining interest 7 years after the closing. If GE exercises its first redemption right, we have the right to purchase the remainder of GE’s interest at that time. If GE does not exercise its first redemption right, we have the right to purchase half of GE’s interest 5 years after the closing. We also will have the right to purchase GE’s remaining

 

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interest, if any, 8 years after the closing. The redemption and purchase price will equal the ownership percentage being acquired multiplied by 120% of the fully distributed public market trading value of the new company, less half of the excess of 120% of that value over $28.15 billion. Subject to various limitations, we are committed to fund up to $2.875 billion in cash or common stock for each of the two redemptions (for an aggregate of up to $5.75 billion), with amounts not used in the first redemption to be available for the second redemption.

We have incurred expenses related to legal, accounting and valuation services of $21 million and $57 million for the three and nine months ended September 30, 2010, respectively, which are reflected in operating, selling, general and administrative expenses. We also incurred certain financing and other shared costs with GE associated with NBC Universal’s debt facilities entered into at the December 2009 agreement date and with the sale of NBC Universal’s senior notes in 2010. Other income (expense) includes $43 million and $91 million of these costs for the three and nine months ended September 30, 2010, respectively. Interest expense includes $2 million and $6 million of these costs for the three and nine months ended September 30, 2010, respectively.

Consolidated Operating Results

 

    Three Months Ended
September 30
    Increase/
(Decrease)
    Nine Months Ended
September 30
    Increase/
(Decrease)
 
(in millions)       2010             2009