XMEX:CMCS A Comcast Corp Class A Quarterly Report 10-Q Filing - 3/31/2012

Effective Date 3/31/2012

XMEX:CMCS%20A (): Fair Value Estimate
Premium
XMEX:CMCS%20A (): Consider Buying
Premium
XMEX:CMCS%20A (): Consider Selling
Premium
XMEX:CMCS%20A (): Fair Value Uncertainty
Premium
XMEX:CMCS%20A (): Economic Moat
Premium
XMEX:CMCS%20A (): Stewardship
Premium
 
Table of Contents

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

x

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

For the quarterly period ended March 31, 2012

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 March 31, 2012, there were 2,109,694,188 shares of our Class A common stock, 577,031,322 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      1   
  Condensed Consolidated Balance Sheet as of March 31, 2012 and December 31, 2011 (Unaudited)      1   
  Condensed Consolidated Statement of Income for the Three Months Ended March 31, 2012
and 2011 (Unaudited)
     2   
  Condensed Consolidated Statement of Comprehensive Income for the Three Months Ended
March 31, 2012 and 2011 (Unaudited)
     3   
  Condensed Consolidated Statement of Cash Flows for the Three Months Ended March 31, 2012 and 2011 (Unaudited)      4   
  Condensed Consolidated Statement of Changes in Equity for the Three Months Ended March 31, 2012 and 2011 (Unaudited)      5   
  Notes to Condensed Consolidated Financial Statements (Unaudited)      6   

Item 2.

  Management’s Discussion and Analysis of Financial Condition and Results of Operations      26   

Item 3.

  Quantitative and Qualitative Disclosures About Market Risk      35   

Item 4.

  Controls and Procedures      35   
PART II. OTHER INFORMATION   

Item 1.

  Legal Proceedings      36   

Item 1A.

  Risk Factors      36   

Item 2.

  Unregistered Sales of Equity Securities and Use of Proceeds      36   

Item 6.

  Exhibits      37   
SIGNATURES        38   

 

 

This Quarterly Report on Form 10-Q is for the three months ended March 31, 2012. 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, including NBCUniversal, 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 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 businesses currently face a wide range of competition, and our businesses and results of operations could be adversely affected if we do not compete effectively

 

 

   

changes in consumer behavior driven by new technologies may adversely affect our competitive position, businesses and results of operations

 

 

   

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

 

 

   

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

 

 

   

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

 

 

   

a decline in advertising expenditures or changes in advertising markets could negatively impact our results of operations

 

 

   

NBCUniversal’s success depends on consumer acceptance of its content, which is difficult to predict, and our results of operations may be adversely affected if our content fails to achieve sufficient consumer acceptance or our costs to acquire content increase

 

 

   

the loss of our programming distribution agreements, or the renewal of these agreements on less favorable terms, could adversely affect our businesses and results of operations

 

 

   

our businesses depend on keeping pace with technological developments

 

 

   

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

 

 

   

sales of DVDs have been declining

 

 

   

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

 

 

   

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

 

 

   

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

 

 

   

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 or popular on-air and creative talent could have an adverse effect on our businesses

 

 

   

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

 

 

   

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

 


Table of Contents

PART I: FINANCIAL INFORMATION

ITEM 1: FINANCIAL STATEMENTS

Condensed Consolidated Balance Sheet

(Unaudited)

 

(in millions, except share data)   March 31,
2012
    December 31,
2011
 

Assets

   

Current Assets:

   

Cash and cash equivalents

  $ 2,207      $ 1,620   

Receivables, net

    4,379        4,351   

Programming rights

    1,011        987   

Other current assets

    1,758        1,615   

Total current assets

    9,355        8,573   

Film and television costs

    5,112        5,227   

Investments

    10,149        9,854   

Property and equipment, net of accumulated depreciation of $37,275 and $36,528

    26,962        27,559   

Franchise rights

    59,364        59,376   

Goodwill

    26,803        26,874   

Other intangible assets, net of accumulated amortization of $6,978 and $6,665

    18,001        18,165   

Other noncurrent assets, net

    2,203        2,190   

Total assets

  $ 157,949      $ 157,818   

Liabilities and Equity

   

Current Liabilities:

   

Accounts payable and accrued expenses related to trade creditors

  $ 5,763      $ 5,705   

Accrued participations and residuals

    1,394        1,255   

Accrued expenses and other current liabilities

    5,770        4,914   

Current portion of long-term debt

    2,705        1,367   

Total current liabilities

    15,632        13,241   

Long-term debt, less current portion

    35,080        37,942   

Deferred income taxes

    29,812        29,932   

Other noncurrent liabilities

    13,446        13,034   

Commitments and contingencies (Note 14)

   

Redeemable noncontrolling interests

    16,158        16,014   

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, 2,475,154,938 and 2,460,937,253; outstanding, 2,109,694,188 and 2,095,476,503

    25        25   

Class A Special common stock, $0.01 par value—authorized, 7,500,000,000 shares; issued, 647,966,086 and 671,947,577; outstanding, 577,031,322 and 601,012,813

    6        7   

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

             

Additional paid-in capital

    40,893        40,940   

Retained earnings

    14,217        13,971   

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)

    (148     (152

Total Comcast Corporation shareholders’ equity

    47,476        47,274   

Noncontrolling interests

    345        381   

Total equity

    47,821        47,655   

Total liabilities and equity

  $ 157,949      $ 157,818   

See accompanying notes to condensed consolidated financial statements.

 

1


Table of Contents

Condensed Consolidated Statement of Income

(Unaudited)

 

    Three Months Ended
March 31
 
(in millions, except per share data)       2012             2011      

Revenue

  $ 14,878      $ 12,128   

Costs and Expenses:

   

Operating costs and expenses

    10,190        8,062   

Depreciation

    1,529        1,486   

Amortization

    401        356   
      12,120        9,904   

Operating income

    2,758        2,224   

Other Income (Expense):

   

Interest expense

    (640     (605

Investment income (loss), net

    92        89   

Equity in net income (losses) of investees, net

    3        (37

Other income (expense), net

    (16     (36
      (561     (589

Income before income taxes

    2,197        1,635   

Income tax expense

    (750     (596

Net income

    1,447        1,039   

Net (income) loss attributable to noncontrolling interests

    (223     (96

Net income attributable to Comcast Corporation

  $ 1,224      $ 943   

Basic earnings per common share attributable to Comcast Corporation shareholders

  $ 0.45      $ 0.34   

Diluted earnings per common share attributable to Comcast Corporation shareholders

  $ 0.45      $ 0.34   

Dividends declared per common share attributable to Comcast Corporation shareholders

  $ 0.1625      $ 0.1125   

See accompanying notes to condensed consolidated financial statements.

 

2


Table of Contents

Condensed Consolidated Statement of Comprehensive Income

(Unaudited)

 

     Three Months Ended
March 31
 
(in millions)        2012             2011      

Net income

   $ 1,447      $ 1,039   

Unrealized gains (losses) on marketable securities, net of deferred taxes of $— and $(3)

            5   

Deferred gains (losses) on cash flow hedges, net of deferred taxes of $(11) and $(6)

     20        11   

Amounts reclassified to net income:

    

Realized (gains) losses on marketable securities, net of deferred taxes of $— and $4

            (7

Realized (gains) losses on cash flow hedges, net of deferred taxes of $9 and $7

     (16     (12

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

     (2     3   

Currency translation adjustments, net of deferred taxes of $— and $—

     2        4   

Comprehensive income

     1,451        1,043   

Net (income) loss attributable to noncontrolling interests

     (223     (96

Other comprehensive (income) loss attributable to noncontrolling interests

            (2

Comprehensive income attributable to Comcast Corporation

   $ 1,228      $ 945   

See accompanying notes to condensed consolidated financial statements.

 

3


Table of Contents

Condensed Consolidated Statement of Cash Flows

(Unaudited)

 

    Three Months Ended
March 31
 
(in millions)       2012             2011      

Net cash provided by (used in) operating activities

  $ 4,393      $ 3,468   

Investing Activities

   

Capital expenditures

    (1,174     (1,106

Cash paid for intangible assets

    (184     (123

Acquisitions, net of cash acquired

           (5,658

Proceeds from sales of businesses and investments

    35        18   

Purchases of investments

    (62     (16

Other

    36        (2

Net cash provided by (used in) investing activities

    (1,349     (6,887

Financing Activities

   

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

    (407     1,677   

Repurchases and repayments of debt

    (1,125     (1,759

Repurchases and retirements of common stock

    (750     (525

Dividends paid

    (304     (261

Issuances of common stock

    150        129   

Distributions to noncontrolling interests

    (58     (46

Other

    37        42   

Net cash provided by (used in) financing activities

    (2,457     (743

Increase (decrease) in cash and cash equivalents

    587        (4,162

Cash and cash equivalents, beginning of period

    1,620        5,984   

Cash and cash equivalents, end of period

  $ 2,207      $ 1,822   

See accompanying notes to condensed consolidated financial statements.

 

4


Table of Contents

Condensed Consolidated Statement of Changes in Equity

(Unaudited)

 

    Redeemable
Non-
controlling
Interests
        Common Stock     Additional
Paid-In
Capital
    Retained
Earnings
    Treasury
Stock at
Cost
    Accumulated
Other
Comprehensive
Income (Loss)
    Non-
controlling
Interests
    Total
Equity
 
(in millions)          A     A Special     B              

Balance, January 1, 2011

  $ 143          $ 24      $ 8      $      $ 39,780      $ 12,158      $ (7,517   $ (99   $ 80      $ 44,434   

Stock compensation plans

                182        (22           160   

Repurchase and retirement of common stock

            (1       (261     (263           (525

Employee stock purchase plan

                14                14   

Dividends declared

                  (312           (312

Other comprehensive income (loss)

    2                        2          2   

NBCUniversal transaction

    15,166                  1,692              188        1,880   

Contributions from (distributions to) noncontrolling interests, net

    (126                       (31     (31

Net income (loss)

    54                                            943                        42        985   

Balance, March 31, 2011

  $ 15,239          $ 24      $ 7      $      $ 41,407      $ 12,504      $ (7,517   $ (97   $ 279      $ 46,607   

Balance, January 1, 2012

  $ 16,014          $ 25      $ 7      $      $ 40,940      $ 13,971      $ (7,517   $ (152   $ 381      $ 47,655   

Stock compensation plans

                224        (82           142   

Repurchase and retirement of common stock

            (1       (292     (457           (750

Employee stock purchase plan

                19                19   

Dividends declared

                  (439           (439

Other comprehensive income (loss)

                      4          4   

Contributions from (distributions to) noncontrolling interests, net

    (8                       (39     (39

Purchase of subsidiary shares from noncontrolling interest

    (44               2                2   

Other

                        (24     (24

Net income (loss)

    196                                            1,224                        27        1,251   

Balance, March 31, 2012

  $ 16,158          $ 25      $ 6      $  —      $ 40,893      $ 14,217      $ (7,517   $ (148   $ 345      $ 47,821   

See accompanying notes to condensed consolidated financial statements.

 

5


Table of Contents

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 consolidated results of operations, financial condition and cash flows for the periods shown, including normal, recurring accruals and other items. The consolidated results of operations for the interim periods presented are not necessarily indicative of results for the full year.

The year-end condensed consolidated balance sheet was derived from audited financial statements but does not include all disclosures required by generally accepted accounting principles in the United States (“GAAP”). For a more complete discussion of our accounting policies and certain other information, refer to our consolidated financial statements included in our 2011 Annual Report on Form 10-K.

On January 28, 2011, we closed the NBCUniversal transaction in which we acquired control of the businesses of NBC Universal, Inc. (“NBCUniversal”), and on July 1, 2011, we closed the Universal Orlando transaction in which we acquired the remaining 50% equity interest in Universal City Development Partners, Ltd. (“Universal Orlando”) that we did not already own. NBCUniversal’s and Universal Orlando’s results of operations have been consolidated with our results following their respective acquisition dates. For a more complete discussion of the NBCUniversal and Universal Orlando transactions, refer to our consolidated financial statements included in our 2011 Annual Report on Form 10-K.

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

Note 2: 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 issuable under our outstanding 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. Diluted EPS excludes the impact of potential common shares issuable under our outstanding 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 months ended March 31, 2012 and 2011 excludes approximately 26 million and 32 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.

 

6


Table of Contents

Computation of Diluted EPS

 

    Three Months Ended March 31  
    2012      2011  
(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

  $ 1,224         2,708       $ 0.45       $ 943         2,772       $ 0.34   

Effect of dilutive securities:

                

Assumed exercise or issuance of shares relating to stock plans

             36                           33            

Diluted EPS attributable to Comcast Corporation shareholders

  $ 1,224         2,744       $ 0.45       $ 943         2,805       $ 0.34   

Note 3: Film and Television Costs

 

(in millions)   March 31,
2012
     December 31,
2011
 

Film Costs:

    

Released, less amortization

  $ 1,440       $ 1,428   

Completed, not released

    328         148   

In-production and in-development

    1,079         1,374   
    2,847         2,950   

Television Costs:

    

Released, less amortization

    1,019         1,002   

In-production and in-development

    143         201   
    1,162         1,203   

Programming rights, less amortization

    2,114         2,061   
    6,123         6,214   

Less: Current portion of programming rights

    1,011         987   

Film and television costs

  $ 5,112       $ 5,227   

 

7


Table of Contents

Note 4: Investments

 

(in millions)    March 31,
2012
     December 31,
2011
 

Fair value method

   $ 3,544       $ 3,028   

Equity Method:

     

A&E Television Networks

     2,019         2,021   

SpectrumCo

     1,414         1,417   

The Weather Channel

     464         463   

MSNBC.com

     175         174   

Clearwire LLC

     25         69   

Other

     736         736   
     4,833         4,880   

Cost Method:

     

AirTouch

     1,527         1,523   

Other

     473         477   
     2,000         2,000   

Total investments

     10,377         9,908   

Less: Current investments(a)

     228         54   

Noncurrent investments

   $ 10,149       $ 9,854   

 

(a)

Current investments are included in other current assets in our condensed consolidated balance sheet.

Fair Value Method

As of March 31, 2012, we held as collateral $3.5 billion of fair value method equity securities related to our obligations under prepaid forward sale agreements. As of March 31, 2012, our prepaid forward sale obligations were recorded at $2.9 billion and had an estimated fair value of approximately $3.0 billion. The estimated fair values are based on Level 2 inputs using pricing models whose inputs are derived primarily from or corroborated by observable market data through correlation or other means for substantially the full term of the financial instrument.

Equity Method

On March 26, 2012, NBCUniversal exercised an option that requires A&E Television Networks LLC (“A&E Television Networks”) to redeem a substantial portion of NBCUniversal’s equity interest in A&E Television Networks. We expect the transaction to close during the second half of 2012, upon the agreement by all parties as to the value of NBCUniversal’s equity interest. Under the terms of our existing shareholder agreement, NBCUniversal is required to provide a last dollar guarantee of indebtedness that A&E Television Networks may incur to finance the purchase of NBCUniversal’s equity interest.

Cost Method

We hold two series of preferred stock of AirTouch Communications, Inc. (“AirTouch”), a subsidiary of Vodafone, which are redeemable in April 2020. As of March 31, 2012, the estimated fair value of the AirTouch preferred stock and the associated liability related to redeemable preferred shares issued by one of our consolidated subsidiaries was approximately $1.8 billion. The estimated fair values are primarily based on Level 2 inputs using pricing models whose inputs are derived from or corroborated by observable market data through correlation or other means for substantially the full term of the financial instrument.

 

8


Table of Contents

Components of Investment Income (Loss), Net

 

     Three Months Ended
March 31
 
(in millions)        2012             2011      

Gains on sales and exchanges of investments, net

   $ 7      $ 14   

Investment impairment losses

     (12       

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

     516        309   

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

     (470     (261

Interest and dividend income

     29        26   

Other, net

     22        1   

Investment income (loss), net

   $ 92      $ 89   

Note 5: Goodwill

 

          NBCUniversal               
(in millions)   Cable
Communications
    Cable
Networks
     Broadcast
Television
    Filmed
Entertainment
     Theme
Parks
    Corporate
and Other
     Total  

Balance, December 31, 2011

  $ 12,208      $ 12,744       $ 772      $ 1       $ 1,140      $ 9       $ 26,874   

Dispositions

    (1                                           (1

Adjustments

                   (9             (61             (70

Balance, March 31, 2012

  $ 12,207      $ 12,744       $ 763      $ 1       $ 1,079      $ 9       $ 26,803   

There have been no significant changes during the three months ended March 31, 2012 to our preliminary allocation of purchase price for the Universal Orlando transaction from what was disclosed in our 2011 Annual Report on Form 10-K. The estimated fair values are not yet final and are subject to change. We will finalize the amounts recognized as we obtain the information necessary to complete the analysis, but no later than June 30, 2012.

Note 6: Long-Term Debt

As of March 31, 2012, our debt had an estimated fair value of $43.5 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.

Repayments

In February 2012, we redeemed $563 million principal amount of the $1.1 billion aggregate principal amount outstanding of our 7% senior notes due 2055 and repaid at maturity $553 million principal amount of our 9.8% senior notes due 2012.

In April 2012, we redeemed the remaining $563 million principal amount of our 7% senior notes due 2055. The carrying amount of these senior notes was recorded in current portion of long-term debt in our condensed consolidated balance sheet as of March 31, 2012.

Commercial Paper Program

During the three months ended March 31, 2012, net repayments of commercial paper by NBCUniversal were $400 million.

Note 7: Derivative Financial Instruments

We use derivative financial instruments to manage our exposure to the risks associated with fluctuations in interest rates, foreign exchange rates and equity prices.

We manage our exposure to fluctuations in interest rates by using derivative financial instruments such as interest rate exchange agreements (“swaps”), interest rate lock agreements (“rate locks”) and interest rate collars

 

9


Table of Contents

(“collars”). We sometimes enter into rate locks or collars to hedge the risk that the cash flows related to the interest payments on an anticipated issuance or assumption of fixed-rate debt may be adversely affected by interest rate fluctuations.

We manage our exposure to fluctuations in foreign exchange rates by using foreign exchange contracts such as forward contracts and currency options, as well as cross-currency swaps for our foreign currency denominated borrowings.

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 manage the credit risks associated with our derivative financial instruments through diversification and 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 have agreements with certain counterparties that include collateral provisions. These provisions require a party with an aggregate unrealized loss position in excess of certain thresholds to post cash collateral for the amount in excess of the threshold. The threshold levels in our collateral agreements are based on our and the counterparties’ credit ratings. As of March 31, 2012, neither we nor any of the counterparties were required to post collateral under the terms of the agreements.

During the three months ended March 31, 2012, there were no significant changes in the composition of any of our derivative financial instruments or their classification in our condensed consolidated balance sheet. In addition, the impact of our derivative financial instruments to our condensed consolidated financial statements was not material for the three months ended March 31, 2012 and 2011.

See Note 8 for additional information on the fair value of our derivative financial instruments as of March 31, 2012 and December 31, 2011.

 

10


Table of Contents

Note 8: Fair Value Measurements

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

Recurring Fair Value Measures

 

    Fair Value as of  
    March 31, 2012      December 31,
2011
 
(in millions)   Level 1      Level 2      Level 3      Total      Total  

Assets

             

Trading securities

  $ 3,401       $       $       $ 3,401       $ 2,895   

Interest rate swap agreements

            234                 234         246   

Available-for-sale securities

    100         20         21         141         131   

Foreign exchange contracts

            13                 13         10   

Equity warrants

                    2         2         2   
    $ 3,501       $ 267       $ 23       $ 3,791       $ 3,284   

Liabilities

             

Derivative component of prepaid forward sale agreements

and indexed debt instruments

  $       $ 1,704       $       $ 1,704       $ 1,234   

Contractual obligations

                    984         984         1,004   

Contingent consideration

                    579         579         583   

Cross-currency swap agreements

            35                 35         69   

Foreign exchange contracts

            13                 13         8   
    $       $ 1,752       $ 1,563       $ 3,315       $ 2,898   

The determinations of the fair values of the contractual obligations and contingent consideration in the table above are primarily based on certain expected future discounted cash flows, which involves the use of significant unobservable inputs. The most significant unobservable input we use is our estimate of the future revenue we expect to generate from certain NBCUniversal entities related to our contractual obligations and future payments to GE that are related to contingent consideration. The discount rates used in the measurements of fair value ranged between 5.6% and 13.0% and are based on the underlying risk associated with our estimate of future revenue, as well as the terms of the respective contracts, and the uncertainty in the timing of our payments to GE. Fair value adjustments to these liabilities are recorded in other income (expense), net in our condensed consolidated statement of income.

Changes in Contractual Obligations and Contingent Consideration

 

(in millions)   Contractual
Obligations
    Contingent
Consideration
 

Balance, December 31, 2011

  $ 1,004      $ 583   

Acquisition accounting adjustments

    (20       

Fair value adjustments

    19        8   

Payments

    (19     (12

Balance, March 31, 2012

  $ 984      $ 579   

 

11


Table of Contents

Note 9: Noncontrolling Interests

Certain of the 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, including GE’s 49% interest in NBCUniversal, 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.

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

 

    Three Months Ended
March 31
 
(in millions)       2012              2011      

Net income attributable to Comcast Corporation

  $ 1,224       $ 943   

Transfers from (to) noncontrolling interests:

    

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

            1,692   

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

    2           

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

  $ 1,226       $ 2,635   

Note 10: Pension Plans and Postretirement Benefits

The table below presents the components of net periodic benefit expense related to our active pension plans and postretirement benefit plans.

 

    Three Months Ended
March 31, 2012
     Three Months Ended
March 31, 2011
 
(in millions)   Pension
Benefits
    Postretirement
Benefits
     Pension
Benefits
     Postretirement
Benefits
 

Service cost

  $ 32      $ 8       $ 18       $ 7   

Interest cost

    4        7         2         7   

Prior service cost

                           (13

Other

    (1                       

Total benefits expense

  $ 35      $ 15       $ 20       $ 1   

In April 2012, NBCUniversal provided initial funding to its qualified defined benefit plan of $76 million. The expected return on the plan assets of this plan is 5%.

Note 11: Share-Based Compensation

Our approach to long-term incentive compensation includes awarding stock options and RSUs to certain employees and directors. We grant these awards under various plans. Additionally, through our employee stock purchase plans, employees are able to purchase shares of Comcast Class A common stock at a discount through payroll deductions.

In March 2012, we granted 21.8 million stock options and 5.7 million RSUs related to our annual management grant program. The weighted-average fair values associated with these grants were $7.38 per stock option and $27.43 per RSU.

 

12


Table of Contents

Recognized Share-Based Compensation Expense

 

    Three Months Ended
March 31
 
(in millions)       2012              2011      

Stock options

  $ 29       $ 22   

Restricted share units

    35         40   

Employee stock purchase plans

    5         3   

Total

  $ 69       $ 65   

As of March 31, 2012, we had unrecognized pretax compensation expense related to nonvested stock options and nonvested RSUs of $417 million and $439 million, respectively.

For the three months ended March 31, 2012 and 2011, the employee cost associated with participation in the employee stock purchase plans was satisfied with payroll deductions of $18 million and $15 million, respectively.

Note 12: Supplemental Financial Information

Receivables

 

(in millions)   March 31,
2012
     December 31,
2011
 

Receivables, gross

  $ 4,880       $ 4,978   

Less: Allowance for returns and customer incentives

    333         425   

Less: Allowance for doubtful accounts

    168         202   

Receivables, net

  $ 4,379       $ 4,351   

Accumulated Other Comprehensive Income (Loss)

 

(in millions)   March 31,
2012
    March 31,
2011
 

Unrealized gains (losses) on marketable securities

  $ 22      $ 24   

Deferred gains (losses) on cash flow hedges

    (107     (106

Unrecognized gains (losses) on employee benefit obligations

    (58     (16

Cumulative translation adjustments

    (5     1   

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

  $ (148   $ (97

Operating Costs and Expenses

 

    Three Months Ended
March 31
 
(in millions)   2012      2011  

Programming and production

  $ 4,737       $ 3,271   

Cable Communications technical labor

    588         593   

Cable Communications customer service

    494         469   

Advertising, marketing and promotion

    1,203         980   

Other

    3,168         2,749   

Operating costs and expenses (excluding depreciation and amortization)

  $ 10,190       $ 8,062   

 

13


Table of Contents

Net Cash Provided by Operating Activities

 

    Three Months Ended
March 31
 
(in millions)   2012     2011  

Net income

  $ 1,447      $ 1,039   

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

   

Depreciation and amortization

    1,930        1,842   

Amortization of film and television costs

    2,153        1,184   

Share-based compensation

    89        84   

Noncash interest expense (income), net

    48        40   

Equity in net (income) losses of investees, net

    (3     37   

Cash received from investees

    73        98   

Net (gain) loss on investment activity and other

    (74     (85

Deferred income taxes

    (59     130   

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

   

Change in receivables, net

    (30     725   

Change in film and television costs

    (2,061     (1,466

Change in accounts payable and accrued expenses related to trade creditors

    169        (131

Change in other operating assets and liabilities

    711        (29

Net cash provided by operating activities

  $ 4,393      $ 3,468   

Cash Payments for Interest and Income Taxes

 

    Three Months Ended
March 31
 
(in millions)       2012              2011      

Interest

  $ 614       $ 657   

Income taxes

  $ 118       $ 74   

Noncash Investing and Financing Activities

During the three months ended March 31, 2012, we:

 

   

acquired $476 million of property and equipment and intangible assets that were accrued but unpaid, which is a noncash investing activity

 

 

   

recorded a liability of $439 million for a quarterly cash dividend of $0.1625 per common share paid in April 2012, which is a noncash financing activity

 

Unaudited Actual and Pro Forma Information

The following unaudited pro forma information has been presented as if both the NBCUniversal transaction and the Universal Orlando transaction occurred on January 1, 2010. This information is based on historical results of operations, adjusted for the allocation of purchase price and other acquisition accounting adjustments, and is not necessarily indicative of what our results would have been had we operated the businesses since January 1, 2010. No pro forma adjustments have been made for our incremental transaction-related expenses.

 

    Three Months Ended
March 31
 
    Actual      Pro Forma  
(in millions except per share amounts)   2012      2011  

Revenue

  $ 14,878       $ 13,580   

Net income

  $ 1,447       $ 1,000   

Net income attributable to Comcast Corporation

  $ 1,224       $ 916   

Basic earnings per common share attributable to Comcast Corporation shareholders

  $ 0.45       $ 0.33   

Diluted earnings per common share attributable to Comcast Corporation shareholders

  $ 0.45       $ 0.33   

 

14


Table of Contents

Note 13: Receivables Monetization

NBCUniversal monetizes certain of its accounts receivable under programs with a syndicate of banks. We account for receivables monetized through these programs as sales in accordance with the appropriate accounting guidance. We receive deferred consideration from the assets sold in the form of a receivable, which is funded by residual cash flows after the senior interests have been fully paid. The deferred consideration is recorded in receivables, net at its initial fair value, which reflects the net cash flows we expect to receive related to these interests. The accounts receivable we sold that underlie the deferred consideration are generally short-term in nature and, therefore, the fair value of the deferred consideration approximated its carrying value as of March 31, 2012.

NBCUniversal is responsible for servicing the receivables and remitting collections to the purchasers under the monetization programs. NBCUniversal performs this service for a fee that is equal to the prevailing market rate for such services. As a result, no servicing asset or liability has been recorded in our condensed consolidated balance sheet as of March 31, 2012. The servicing fees are a component of net loss (gain) on sale, which is presented in the table below.

Effect on Income from Receivables Monetization and Cash Flows on Transfers

 

    Three Months Ended
March 31
 
(in millions)       2012             2011      

Interest expense

  $ 3      $   

Net (loss) gain on sale(a)

  $ (1   $ (8

Net cash proceeds (payments) on transfers(b)

  $ (90   $ (424

 

(a)

Net (loss) gain on sale is included in other income (expense), net in our condensed consolidated statement of income.

 

(b)

Net cash proceeds (payments) on transfers are included within net cash provided by operating activities in our condensed consolidated statement of cash flows.

Receivables Monetized and Deferred Consideration

 

(in millions)   March 31,
2012
     December 31,
2011
 

Monetized receivables sold

  $ 808       $ 961   

Deferred consideration

  $ 278       $ 268   

In addition to the amounts presented above, we had $855 million and $781 million payable to our monetization programs as of March 31, 2012 and December 31, 2011, respectively. These amounts represent cash receipts that have not yet been remitted to the monetization programs as of the balance sheet date and are recorded to accounts payable and accrued expenses related to trade creditors.

 

 

15


Table of Contents

Note 14: Commitments and Contingencies

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 Chicago Cluster and Philadelphia Cluster customers were certified in October 2007 and January 2010, respectively. We appealed the class certification in the Philadelphia Cluster case to the Third Circuit Court of Appeals, which affirmed the class certification in August 2011 and denied our petition for a rehearing en banc in September 2011. While we have given notice to the class, we filed a writ of certiorari with the U.S. Supreme Court asking that it review the Third Circuit Court of Appeals’ ruling. In March 2010, we moved for summary judgment dismissing all of the plaintiffs’ claims in the Philadelphia Cluster. In April 2012, the District Court issued a decision dismissing some of the plaintiffs’ claims, but allowing two claims to proceed to trial. A trial for the Philadelphia Cluster case has been set for September 2012. 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. In March 2012, a panel of the Ninth Circuit Court of Appeals affirmed the District Court’s order, and in April 2012, the plaintiffs filed a petition for a rehearing.

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 multidistrict 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 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 omitted their unjust enrichment claim, as well as their state law claims on behalf of the Alabama, Illinois and Pennsylvania subclasses. In June 2011, the plaintiffs filed another amended complaint alleging only violations of Section 1 of the Sherman Antitrust Act, antitrust law in Washington and unfair/deceptive trade practices acts in California and Washington. The plaintiffs 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 and Washington. In July 2011, we moved to compel arbitration of certain claims and to stay the remaining claims pending arbitration.

 

 

16


Table of Contents

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 digital 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 multidistrict 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 the 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.

We believe the claims in each of the pending actions described above in this item are without merit and intend to defend the actions vigorously. We cannot predict the outcome of any of the actions described above, including a range of possible loss, 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 position. In addition, as any action nears a trial, there is an increased possibility that the action may be settled by the parties. Nevertheless, 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.

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.

Note 15: Financial Data by Business Segment

We present our operations in five reportable business segments:

 

   

Cable Communications: Provides video, high-speed Internet and voice services (“cable services”) to residential and business customers in 39 states and the District of Columbia.

 

 

   

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

 

 

   

Broadcast Television: Consists primarily of our NBC and Telemundo broadcast networks, our NBC and Telemundo owned local television stations, our broadcast television production operations, and our related digital media properties.

 

 

   

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

 

 

   

Theme Parks: Consists primarily of our Universal theme parks in Orlando and Hollywood.

 

 

17


Table of Contents

In evaluating the profitability of our operating segments, the components of net income (loss) below operating income (loss) before depreciation and amortization are not separately evaluated by our management. Our financial data by business segment is presented in the tables below.

 

         Three Months Ended March 31, 2012  
(in millions)   Revenue(f)     Operating Income (Loss)
Before Depreciation and
Amortization(g)
    Depreciation and
Amortization
    Operating Income
(Loss)
    Capital
Expenditures
 

Cable Communications(a)

  $ 9,599      $ 3,955      $ 1,602      $ 2,353      $ 1,056   

NBCUniversal

         

Cable Networks

      2,138        805        178        627        9   

Broadcast Television

      1,851        (10 )       21        (31     8   

Filmed Entertainment

      1,192        6        4        2        1   

Theme Parks

      412        157        62        95        47   

Headquarters and Other(d)

      12        (146 )       48        (194     46   

Eliminations(e)

        (133 )       1        (1     2          

NBCUniversal

    5,472        813        312        501        111   

Corporate and Other

    174        (64 )       14        (78     7   

Eliminations(e)

    (367 )       (16 )       2        (18       

Comcast Consolidated

  $ 14,878      $ 4,688      $ 1,930      $ 2,758      $ 1,174   
         Three Months Ended March 31, 2011  
(in millions)   Revenue(f)     Operating Income (Loss)
Before Depreciation and
Amortization(g)
    Depreciation and
Amortization
    Operating Income
(Loss)
    Capital
Expenditures
 

Cable Communications(a)

  $ 9,084      $ 3,749      $ 1,621      $ 2,128      $ 1,053   

NBCUniversal

         

Cable Networks(b)

      1,632        665        153        512        12   

Broadcast Television

      888        35        21        14        5   

Filmed Entertainment

      622        (143 )       4        (147     1   

Theme Parks(c)

      275        97        28        69        12   

Headquarters and Other(d)

      11        (96 )       22        (118     17   

Eliminations(e)

        (285 )       (100 )       (22     (78       

NBCUniversal

    3,143        458        206        252        47   

Corporate and Other

    188        (141 )       16        (157     6   

Eliminations(e)

    (287 )              (1     1          

Comcast Consolidated

  $ 12,128      $ 4,066      $ 1,842      $ 2,224      $ 1,106   

 

(a)

For the three months ended March 31, 2012 and 2011, Cable Communications segment revenue was derived from the following sources:

 

     Three Months Ended
March 31
 
          2012             2011      

Residential:

    

Video

     51.8     53.8

High-speed Internet

     24.2     23.2

Voice

     9.1     9.5

Business services

     5.6     4.3

Advertising

     5.0     5.0

Other

     4.3     4.2

Total

     100     100

Subscription revenue received from customers who purchase bundled services at a discounted rate is allocated proportionally to each service based on the individual service’s price on a stand-alone basis. For both the three months ended March 31, 2012 and 2011, 2.8% of Cable Communications revenue was derived from franchise and other regulatory fees.

 

(b)

For the three months ended March 31, 2011, our Cable Networks segment included the results of operations of the businesses we contributed to NBCUniversal, as well as the results of operations of the NBCUniversal contributed cable networks for the period January 29, 2011 through March 31, 2011.

 

18


Table of Contents
(c)

For the three months ended March 31, 2011, our Theme Parks segment included the results of operations for Universal Orlando for the period January 29, 2011 through March 31, 2011 to reflect our measure of operating performance for our Theme Parks segment.

 

(d)

NBCUniversal Headquarters and Other activities included costs and expenses associated with overhead, employee benefits and headquarter initiatives.

 

(e)

NBCUniversal eliminations for the three months ended March 31, 2011 included the elimination of the results of operations for Universal Orlando for the period January 29, 2011 through March 31, 2011. These results were not included in our consolidated results of operations for the period January 29, 2011 through March 31, 2011 because we recorded Universal Orlando as an equity method investment.

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

 

   

our Cable Networks and Broadcast Television segments generate revenue by selling programming to our Cable Communications segment, which represents a substantial majority of the revenue elimination amount

 

 

   

our Cable Communications segment receives incentives offered by our Cable Networks segment in connection with its distribution of the Cable Networks’ content, which are recorded as a reduction to programming expenses

 

 

   

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

 

 

   

our Filmed Entertainment and Broadcast Television segments generate revenue by licensing content to our Cable Networks segment

 

 

(f)

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

 

(g)

We use operating income (loss) before depreciation and amortization, excluding impairment charges related to fixed and intangible assets and gains or losses from the sale of assets, if any, as the measure of profit or loss for our operating segments. This measure eliminates the significant level of noncash depreciation and amortization expense that results from the capital-intensive nature of certain of our businesses and from intangible assets recognized in business combinations. Additionally, it is unaffected by our capital structure or investment activities. We use this measure to evaluate our consolidated operating performance and the operating performance of our operating segments and to allocate resources and capital to our operating segments. It is also a significant performance measure in our annual incentive compensation programs. We believe that this measure is useful to investors because it is one of the bases for comparing our operating performance with 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 attributable to Comcast Corporation, net cash provided by operating activities, or other measures of performance or liquidity we have reported in accordance with GAAP.

 

19


Table of Contents

Note 16: Condensed Consolidating Financial Information

Comcast Corporation and four of our 100% owned cable holding company subsidiaries, Comcast Cable Communications, LLC (“CCCL Parent”), 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 $62 million principal amount currently outstanding of Comcast Holdings’ ZONES due November 2029.

Condensed Consolidating Balance Sheet

March 31, 2012

 

(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

  $      $      $      $      $ 2,207      $      $ 2,207   

Receivables, net

                                4,379               4,379   

Programming rights

                                1,011               1,011   

Other current assets

    169        20        1               1,568               1,758   

Total current assets

    169        20        1               9,165               9,355   

Film and television costs

                                5,112               5,112   

Investments

                                10,149               10,149   

Investments in and amounts due from subsidiaries eliminated upon consolidation

    71,062        94,024        47,950        85,926        40,567        (339,529       

Property and equipment, net

    255                             26,707               26,962   

Franchise rights

                                59,364               59,364   

Goodwill

                                26,803               26,803   

Other intangible assets, net

    9                             17,992               18,001   

Other noncurrent assets, net

    882        10        5        148        1,818        (660     2,203   

Total assets

  $ 72,377      $ 94,054      $ 47,956      $ 86,074      $ 197,677      $ (340,189   $ 157,949   

Liabilities and Equity

             

Accounts payable and accrued expenses related to trade creditors

  $ 11      $      $      $      $ 5,752      $      $ 5,763   

Accrued participations and residuals

                                1,394               1,394   

Accrued expenses and other current liabilities

    1,132        287        24        267        4,060               5,770   

Current portion of long-term debt

    589        1,733               202        181               2,705   

Total current liabilities

    1,732        2,020        24        469        11,387               15,632   

Long-term debt, less current portion

    21,345        2,216        1,762        112        9,645               35,080   

Deferred income taxes

                         734        29,595        (517     29,812   

Other noncurrent liabilities

    1,824                             11,765        (143     13,446   

Redeemable noncontrolling interests

                                16,158               16,158   

Equity:

             

Common stock

    31                                           31   

Other shareholders’ equity

    47,445        89,818        46,170        84,759        118,782        (339,529     47,445   

Total Comcast Corporation shareholders’ equity

    47,476        89,818        46,170        84,759        118,782        (339,529     47,476   

Noncontrolling interests

                                345               345   

Total equity

    47,476        89,818        46,170        84,759        119,127        (339,529     47,821   

Total liabilities and equity

  $ 72,377      $ 94,054      $ 47,956      $ 86,074      $ 197,677      $ (340,189   $ 157,949   

 

20


Table of Contents

Condensed Consolidating Balance Sheet

December 31, 2011

 

(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

  $       $       $       $       $ 1,620       $      $ 1,620   

Receivables, net

                                    4,351                4,351   

Programming rights

                                    987                987   

Other current assets

    235         8         3                 1,369                1,615   

Total current assets

    235         8         3                 8,327                8,573   

Film and television costs

                                    5,227                5,227   

Investments

                                    9,854                9,854   

Investments in and amounts due from subsidiaries eliminated upon consolidation

    71,222         89,568         45,725         88,336         36,949         (331,800       

Property and equipment, net

    262                                 27,297                27,559   

Franchise rights

                                    59,376                59,376   

Goodwill

                                    26,874                26,874   

Other intangible assets, net

    9                                 18,156                18,165   

Other noncurrent assets, net

    912         30         5         148         1,761         (666     2,190   

Total assets

  $ 72,640       $ 89,606       $ 45,733       $ 88,484       $ 193,821       $ (332,466   $ 157,818   

Liabilities and Equity

                  

Accounts payable and accrued expenses related to trade creditors

  $ 10       $       $       $       $ 5,695       $      $ 5,705   

Accrued participations and residuals

                                    1,255                1,255   

Accrued expenses and other current liabilities

    1,030         189         77         272         3,346                4,914   

Current portion of long-term debt

    26                 554         202         585                1,367   

Total current liabilities

    1,066         189         631         474         10,881                13,241   

Long-term debt, less current portion

    22,451         3,953         1,764         111         9,663                37,942   

Deferred income taxes

                            727         29,728         (523     29,932   

Other noncurrent liabilities

    1,849                                 11,328         (143     13,034   

Redeemable noncontrolling interests

                                    16,014                16,014   

Equity:

                  

Common stock

    32                                                32   

Other shareholders’ equity

    47,242         85,464         43,338         87,172         115,826         (331,800     47,242   

Total Comcast Corporation shareholders’ equity

    47,274         85,464         43,338         87,172         115,826         (331,800     47,274   

Noncontrolling interests

                                    381                381   

Total equity

    47,274         85,464         43,338         87,172         116,207         (331,800     47,655   

Total liabilities and equity

  $ 72,640       $ 89,606       $ 45,733       $ 88,484       $ 193,821       $ (332,466   $ 157,818   

 

21


Table of Contents

Condensed Consolidating Statement of Income

For the Three Months Ended March 31, 2012

 

(in millions)  

Comcast

Parent

   

CCCL

Parent

   

Combined

CCHMO

Parents

   

Comcast

Holdings

   

Non-

Guarantor

Subsidiaries

   

Elimination

and

Consolidation

Adjustments

   

Consolidated

Comcast

Corporation

 

Revenue:

             

Service revenue

  $      $      $      $      $ 14,878      $      $ 14,878   

Management fee revenue

    204        200        125                      (529       
      204        200        125               14,878        (529     14,878   

Costs and Expenses:

             

Operating costs and expenses

    92        200        125               10,302        (529     10,190   

Depreciation

    7                             1,522               1,529   

Amortization

    1                             400               401   
      100        200        125               12,224        (529     12,120   

Operating income (loss)

    104                             2,654               2,758   

Other Income (Expense):

             

Interest expense

    (367     (82     (36     (8     (147            (640

Investment income (loss), net

    1                             91               92   

Equity in net income (losses) of investees, net

    1,394        1,543        1,049        1,504        3        (5,490     3   

Other income (expense), net

                                (16            (16
      1,028        1,461        1,013        1,496        (69     (5,490     (561

Income (loss) before income taxes

    1,132        1,461        1,013        1,496        2,585        (5,490     2,197   

Income tax (expense) benefit

    92        29        13        3        (887            (750

Net income (loss)

    1,224        1,490        1,026        1,499        1,698        (5,490     1,447   

Net (income) loss attributable to noncontrolling interests

                                (223            (223

Net income (loss) attributable to Comcast Corporation

  $ 1,224      $ 1,490      $ 1,026      $ 1,499      $ 1,475      $ (5,490   $ 1,224   

Comprehensive income attributable to Comcast Corporation

  $ 1,227      $ 1,492      $ 1,026      $ 1,499      $ 1,474      $ (5,490   $ 1,228   

 

22


Table of Contents

Condensed Consolidating Statement of Income

For the Three Months Ended March 31, 2011

 

(in millions)  

Comcast

Parent

   

CCCL

Parent

   

Combined

CCHMO

Parents

   

Comcast

Holdings

   

Non-

Guarantor

Subsidiaries

   

Elimination

and

Consolidation

Adjustments

   

Consolidated

Comcast

Corporation

 

Revenue:

             

Service revenue

  $      $      $      $      $ 12,128      $      $ 12,128   

Management fee revenue

    198        185        115                      (498       
      198        185        115               12,128        (498     12,128   

Costs and Expenses:

             

Operating costs and expenses

    148        185        115        5        8,107        (498     8,062   

Depreciation

    7                             1,479               1,486   

Amortization

    1                             355               356   
      156        185        115        5        9,941        (498     9,904   

Operating income (loss)

    42                      (5     2,187               2,224   

Other Income (Expense):

             

Interest expense

    (361     (91     (43     (8     (102            (605

Investment income (loss), net

    1                      4        84               89   

Equity in net income (losses) of investees, net

    1,161        1,323        794        1,292        (37     (4,570     (37

Other income (expense), net

    (17                   1        (20            (36
      784        1,232        751        1,289        (75     (4,570     (589

Income (loss) before income taxes

    826        1,232        751        1,284        2,112        (4,570     1,635   

Income tax (expense) benefit

    117        32        15        3        (763            (596

Net income (loss)

    943        1,264        766        1,287        1,349        (4,570     1,039   

Net (income) loss attributable to noncontrolling interests

                                (96            (96

Net income (loss) attributable to Comcast Corporation

  $ 943      $ 1,264      $ 766      $ 1,287      $ 1,253      $ (4,570   $ 943   

Comprehensive income attributable to Comcast Corporation

  $ 941      $ 1,266      $ 766      $ 1,287      $ 1,255      $ (4,570   $ 945   

 

23


Table of Contents

Condensed Consolidating Statement of Cash Flows

For the Three Months Ended March 31, 2012

 

(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

  $ (242   $ 53      $ (77   $ (9   $ 4,668      $       $ 4,393   

Investing Activities:

              

Net transactions with affiliates

    1,639        (53     630        9        (2,225               

Capital expenditures

    (2                          (1,172             (1,174

Cash paid for intangible assets

    (1                          (183             (184

Proceeds from sales of businesses and investments

                                35                35   

Purchases of investments

                                (62             (62

Other

                                36                36   

Net cash provided by (used in) investing activities

    1,636        (53     630        9        (3,571             (1,349

Financing Activities:

              

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

                                (407             (407

Repurchases and repayments of debt

    (563            (553            (9             (1,125

Repurchases and retirements of common stock

    (750                                         (750

Dividends paid

    (304                                         (304

Issuances of common stock

    150                                            150   

Distributions to noncontrolling interests

                                (58             (58

Other

    73                             (36             37   

Net cash provided by (used in) financing activities

    (1,394            (553            (510             (2,457

Increase (decrease) in cash and cash equivalents

                                587                587   

Cash and cash equivalents, beginning of period

                                1,620                1,620   

Cash and cash equivalents, end of period

  $      $      $      $      $ 2,207      $       $ 2,207   

 

24


Table of Contents

Condensed Consolidating Statement of Cash Flows

For the Three Months Ended March 31, 2011

 

(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

  $ (210   $ 24      $ (75   $ (15   $ 3,744      $  —       $ 3,468   

Investing Activities:

              

Net transactions with affiliates

    (102     976        75        15        (964               

Capital expenditures

    (2                          (1,104             (1,106

Cash paid for intangible assets

                                (123             (123

Acquisitions, net of cash acquired

                                (5,658             (5,658

Proceeds from sales of businesses and investments

                                18                18   

Purchases of investments

                                (16             (16

Other

                                (2             (2

Net cash provided by (used in) investing activities

    (104     976        75        15        (7,849             (6,887

Financing Activities:

              

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

    1,688                             (11             1,677   

Repurchases and repayments of debt

    (750     (1,000                   (9             (1,759

Repurchases and retirements of common stock

    (525                                         (525

Dividends paid

    (261                                         (261

Issuances of common stock

    129                                            129   

Distributions to noncontrolling interests

                                (46             (46

Other

    33                             9                42   

Net cash provided by (used in) financing activities

    314        (1,000                   (57             (743

Increase (decrease) in cash and cash equivalents

                                (4,162             (4,162

Cash and cash equivalents, beginning of period

                                5,984                5,984   

Cash and cash equivalents, end of period

  $      $      $      $      $ 1,822      $       $ 1,822   

 

25


Table of Contents

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

Overview

We are a leading provider of entertainment, information and communication products and services. On January 28, 2011, we closed the NBCUniversal transaction in which we acquired control of the businesses of NBC Universal, Inc. (“NBCUniversal”), and on July 1, 2011, we closed the Universal Orlando transaction in which we acquired the remaining 50% equity interest in Universal City Development Partners, Ltd. (“Universal Orlando”) that we did not already own. We report our operations as the following five reportable business segments.

Cable Communications

We are one of the nation’s leading providers of video, high-speed Internet and voice services to residential and business customers. As of March 31, 2012, our cable systems served 22.3 million video customers, 18.6 million high-speed Internet customers and 9.5 million voice customers and passed more than 52 million homes and businesses in 39 states and the District of Columbia. Our Cable Communications segment generates revenue primarily from subscriptions to our cable services, which we market individually and in packages, and from the sale of advertising. During the three months ended March 31, 2012, our Cable Communications segment generated 64% of our consolidated revenue and over 80% of our operating income (loss) before depreciation and amortization.

NBCUniversal

NBCUniversal is a leading media and entertainment company that develops, produces and distributes entertainment, news and information, sports and other content for global audiences.

Cable Networks

Our Cable Networks segment consists primarily of our national cable networks, which provide entertainment, news and information, and sports programming, our regional sports and news networks, our international cable networks, our cable television production studio, and our related digital media properties. Our Cable Networks segment generates revenue primarily from the distribution of our cable network programming to multichannel video providers, the sale of advertising and the licensing and sale of our owned programming.

Broadcast Television

Our Broadcast Television segment consists primarily of the NBC and Telemundo broadcast networks, our NBC and Telemundo owned local television stations, our broadcast television production operations, and our related digital media properties. Our Broadcast Television segment generates revenue primarily from the sale of advertising and the licensing and sale of our owned programming.

Filmed Entertainment

Our Filmed Entertainment segment consists of the operations of Universal Pictures, including Focus Features, which produces, acquires, markets and distributes filmed entertainment worldwide in various media formats for theatrical, home entertainment, television and other distribution platforms. We also develop, produce and license stage plays. Our Filmed Entertainment segment generates revenue primarily from the worldwide theatrical release of our owned and acquired films, content licensing and home entertainment.

Theme Parks

Our Theme Parks segment consists primarily of our Universal theme parks in Orlando and Hollywood. We also receive fees related to intellectual property licenses and other services from third parties that own and operate Universal Studios Japan and Universal Studios Singapore. Our Theme Parks segment generates revenue primarily from theme park attendance and per capita spending, as well as from licensing and other fees. Per capita spending includes ticket price and in-park spending on food, beverage and merchandise.

 

26


Table of Contents

Other

Our other business interests primarily include Comcast Spectacor, which owns the Philadelphia Flyers and the Wells Fargo Center, a large, multipurpose arena in Philadelphia. Comcast Spectacor also owns Global Spectrum, which provides facilities management services, and Ovations Food Services, which provides food services for sporting events, concerts and other events.

Consolidated Operating Results

 

    Three Months Ended
March 31
   

Increase/

(Decrease)

 
(in millions)       2012             2011             

Revenue

  $ 14,878      $ 12,128        22.7

Costs and Expenses:

     

Operating costs and expenses

    10,190        8,062        26.4   

Depreciation

    1,529        1,486        2.9   

Amortization

    401        356        12.3   

Operating income

    2,758        2,224