UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
(X) Quarterly Report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the Quarterly Period Ended:
JUNE 30, 2003
OR
( ) Transition Report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the Transition Period from ________ to
________.
Commission File Number 000-50093
[COMCAST LOGO OMITTED]
COMCAST CORPORATION
(Exact name of registrant as specified in its charter)
PENNSYLVANIA 27-0000798
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1500 Market Street, Philadelphia, PA 19102-2148
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(Address of principal executive offices)
(Zip Code)
Registrant's telephone number, including area code: (215) 665-1700
--------------
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding twelve months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such requirements
for the past 90 days.
Yes X No
---- -----
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12-b2 of the Exchange Act). Yes X No
--- ----
As of June 30, 2003, there were 1,356,302,510 shares of Class A Common Stock,
884,684,113 shares of Class A Special Common Stock and 9,444,375 shares of Class
B Common Stock outstanding.
COMCAST CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED JUNE 30, 2003
TABLE OF CONTENTS
Page Number
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PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
Condensed Consolidated Balance Sheet as of June 30, 2003
and December 31, 2002 (Unaudited)......................................................3
Condensed Consolidated Statement of Operations for the Three and Six Months
Ended June 30, 2003 and 2002 (Unaudited)...............................................4
Condensed Consolidated Statement of Cash Flows for the Six Months
Ended June 30, 2003 and 2002 (Unaudited)...............................................5
Notes to Condensed Consolidated Financial Statements (Unaudited).......................6
ITEM 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations.............................................................31
ITEM 4. Controls and Procedures...............................................................41
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings.....................................................................41
ITEM 4. Submission of Matters to a Vote of Security Holders...................................42
ITEM 5. Other Information.....................................................................42
ITEM 6. Exhibits and Reports on Form 8-K......................................................43
SIGNATURES.......................................................................................44
___________________________________
This Quarterly Report on Form 10-Q is for the three and six months ended
June 30, 2003. This Quarterly Report modifies and supersedes documents filed
prior to this Quarterly Report. Information that we file with the SEC in the
future will automatically update and supersede information contained in this
Quarterly Report. In this Quarterly Report, "Comcast," "we," "us" and "our"
refer to Comcast Corporation and its subsidiaries.
You should carefully review the information contained 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 those so-called
"forward-looking statements" by words such as "may," "will," "should,"
"expects," "plans," "anticipates," "believes," "estimates," "predicts,"
"potential," or "continue" or the negative of those words and other comparable
words. You should be aware that those statements are only our predictions.
Actual events or results may differ materially. In evaluating those statements,
you should specifically consider various factors, including the risks outlined
below. Those factors may cause our actual results to differ materially from any
of our forward-looking statements.
Factors Affecting Future Operations
On November 18, 2002, we acquired AT&T Corp.'s broadband business, which we
refer to as "Broadband" and we refer to this acquisition as the "Broadband
acquisition." In this Quarterly Report, we refer to cable operations owned prior
to the Broadband acquisition as "historical," and those we acquired in the
Broadband acquisition as "newly acquired."
As a result of the Broadband acquisition, we have newly acquired cable
operations in communities in which we do not have established relationships with
the subscribers, franchising authority and community leaders. Further, a
substantial number of new employees are being and must continue to be integrated
into our business practices and operations. Our results of operations may be
significantly affected by our ability to efficiently and effectively manage
these changes.
Factors that may cause our actual results to differ materially from any of
our forward-looking statements presented in this Quarterly Report include, but
are not limited to:
o we may not successfully integrate Broadband or the integration may be more
difficult, time-consuming or costly than we expect,
o we may not realize the combination benefits we expect from the Broadband
acquisition or these benefits may take longer to achieve, and
o we may incur greater-than-expected operating costs, financing costs,
subscriber loss and business disruption, including, without limitation,
difficulties in
maintaining relationships with employees, subscribers, suppliers or
franchising authorities.
As more fully described elsewhere in this Quarterly Report and in our
Annual Report on Form 10-K for the year ended December 31, 2002, the Broadband
acquisition substantially increased the size of our cable operations and caused
significant changes in our capital structure. As a result, direct comparisons of
our results of operations for periods prior to November 18, 2002 to subsequent
periods are not meaningful.
As more fully described elsewhere in this Quarterly Report, in July 2003 we
and Liberty Media Corporation entered into an agreement pursuant to which
Liberty will purchase our approximate 57% interest in QVC in a transaction we
expect to close by the end of 2003.
In addition, our businesses may be affected by, among other things:
o changes in laws and regulations,
o changes in the competitive environment,
o changes in technology,
o industry consolidation and mergers,
o franchise related matters,
o market conditions that may adversely affect the availability of debt and
equity financing for working capital, capital expenditures or other
purposes,
o demand for the programming content we distribute or the willingness of
other video program distributors to carry our content, and
o general economic conditions.
2
COMCAST CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED JUNE 30, 2003
PART I. FINANCIAL INFORMATION
- ------- ---------------------
ITEM 1. FINANCIAL STATEMENTS
CONDENSED CONSOLIDATED BALANCE SHEET
(Unaudited)
(Dollars in millions, except share data)
June 30, December 31,
2003 2002
--------- -----------
ASSETS
- ---------
CURRENT ASSETS
Cash and cash equivalents ................................................. $ 1,324 $ 781
Investments ............................................................... 2,161 3,266
Accounts receivable, less allowance for doubtful accounts of $275 and $258 1,376 1,408
Inventories, net .......................................................... 506 479
Assets held for sale ...................................................... 613
Deferred income taxes ..................................................... 137 129
Other current assets ...................................................... 389 400
--------- ---------
Total current assets .................................................. 5,893 7,076
--------- ---------
INVESTMENTS .................................................................. 13,386 15,207
PROPERTY AND EQUIPMENT, net of accumulated depreciation of $5,447 and $4,061 . 19,079 18,866
FRANCHISE RIGHTS ............................................................. 48,332 48,222
GOODWILL ..................................................................... 17,182 17,397
OTHER INTANGIBLE ASSETS, net of accumulated amortization of $1,806 and $1,022 4,864 5,599
OTHER NONCURRENT ASSETS, net ................................................. 786 738
--------- ---------
$ 109,522 $ 113,105
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
CURRENT LIABILITIES
Accounts payable .......................................................... $ 1,507 $ 1,663
Accrued expenses and other current liabilities ............................ 5,060 5,649
Liabilities related to assets held for sale ............................... 13
Deferred income taxes ..................................................... 557 1,105
Short-term debt ........................................................... 3,750
Current portion of long-term debt ......................................... 2,416 3,203
--------- ---------
Total current liabilities ............................................. 9,540 15,383
--------- ---------
LONG-TERM DEBT, less current portion ......................................... 29,923 27,957
--------- ---------
DEFERRED INCOME TAXES ........................................................ 23,622 23,110
--------- ---------
OTHER NONCURRENT LIABILITIES ................................................. 5,542 5,652
--------- ---------
MINORITY INTEREST ............................................................ 2,814 2,674
--------- ---------
COMMITMENTS AND CONTINGENCIES (NOTE 10)
STOCKHOLDERS' EQUITY
Preferred stock - authorized 20,000,000 shares; issued, zero
Class A common stock, $0.01 par value - authorized,
7,500,000,000 shares; issued, 1,599,943,010 and 1,599,014,148;
outstanding, 1,356,302,510 and 1,355,373,648 ............................ 16 16
Class A special common stock, $0.01 par value - authorized,
7,500,000,000 shares; issued 931,973,956 and 930,633,433;
outstanding, 884,684,113 and 883,343,590 ................................ 9 9
Class B common stock, $0.01 par value - authorized, 75,000,000
shares; issued, 9,444,375
Additional capital ........................................................ 44,694 44,620
Retained earnings ......................................................... 1,004 1,340
Treasury stock, 243,640,500 Class A common shares and 47,289,843
Class A special common shares ........................................... (7,517) (7,517)
Accumulated other comprehensive loss ...................................... (125) (139)
--------- ---------
Total stockholders' equity ............................................ 38,081 38,329
--------- ---------
$ 109,522 $ 113,105
========= =========
See notes to condensed consolidated financial statements.
3
COMCAST CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED JUNE 30, 2003
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
(Dollars in millions, except per share data)
Three Months Ended Six Months Ended
June 30, June 30,
2003 2002 2003 2002
-------- -------- -------- --------
REVENUES
Service revenues ...................................................... $ 4,584 $ 1,714 $ 9,040 $ 3,393
Net sales from electronic retailing ................................... 1,101 990 2,163 1,978
-------- -------- -------- --------
5,685 2,704 11,203 5,371
-------- -------- -------- --------
COSTS AND EXPENSES
Operating (excluding depreciation) .................................... 1,878 722 3,808 1,465
Cost of goods sold from electronic retailing (excluding depreciation) . 697 626 1,370 1,255
Selling, general and administrative ................................... 1,279 490 2,556 977
Depreciation .......................................................... 837 342 1,636 676
Amortization .......................................................... 383 46 749 99
-------- -------- -------- --------
5,074 2,226 10,119 4,472
-------- -------- -------- --------
OPERATING INCOME .......................................................... 611 478 1,084 899
OTHER INCOME (EXPENSE)
Interest expense ...................................................... (492) (182) (1,017) (369)
Investment income (loss), net ......................................... 9 (459) (221) (707)
Equity in net losses of affiliates .................................... (1) (44) (21) (49)
Other income (expense) ................................................ 24 9 42 (14)
-------- -------- -------- --------
(460) (676) (1,217) (1,139)
-------- -------- -------- --------
INCOME (LOSS) BEFORE INCOME TAXES AND MINORITY INTEREST ................... 151 (198) (133) (240)
INCOME TAX (EXPENSE) BENEFIT .............................................. (77) 33 (9) 30
-------- -------- -------- --------
INCOME (LOSS) BEFORE MINORITY INTEREST .................................... 74 (165) (142) (210)
MINORITY INTEREST ......................................................... (96) (45) (177) (89)
-------- -------- -------- --------
NET LOSS .................................................................. ($ 22) ($ 210) ($ 319) ($ 299)
======== ======== ======== ========
BASIC NET LOSS FOR COMMON STOCKHOLDERS PER COMMON SHARE ................... ($ 0.01) ($ 0.22) ($ 0.14) ($ 0.31)
======== ======== ======== ========
DILUTED NET LOSS FOR COMMON STOCKHOLDERS PER COMMON SHARE ................. ($ 0.01) ($ 0.22) ($ 0.14) ($ 0.31)
======== ======== ======== ========
See notes to condensed consolidated financial statements.
4
COMCAST CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED JUNE 30, 2003
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
(Dollars in millions)
Six Months Ended June 30,
2003 2002
--------- --------
OPERATING ACTIVITIES
Net loss ............................................................................ ($ 319) ($ 299)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation ...................................................................... 1,636 676
Amortization ...................................................................... 749 99
Non-cash interest (income) expense, net ........................................... (61) 22
Equity in net losses of affiliates ................................................ 21 49
Losses (gains) on investments and other income (expense), net ..................... 257 739
Minority interest ................................................................. 126 89
Deferred income taxes ............................................................. (226) (4)
Proceeds from sales of trading securities ......................................... 85
Other ............................................................................. 101 (10)
-------- --------
2,369 1,361
Changes in working capital, net of effects of acquisitions and divestitures:
Decrease in accounts receivable, net ............................................ 32 9
(Increase) decrease in inventories, net ......................................... (27) 40
Decrease (increase) in other current assets ..................................... 3 (18)
Decrease in accounts payable, accrued expenses and other current liabilities..... (383) (342)
-------- --------
(375) (311)
Net cash provided by operating activities ................................... 1,994 1,050
-------- --------
FINANCING ACTIVITIES
Proceeds from borrowings ............................................................ 8,848 632
Retirements and repayments of debt .................................................. (11,545) (1,169)
Other ............................................................................... (3) 66
-------- --------
Net cash used in financing activities ....................................... (2,700) (471)
-------- --------
INVESTING ACTIVITIES
Acquisitions, net of cash acquired .................................................. (22) (16)
Proceeds from sales of (purchases of) short-term investments, net ................... (20) 3
Proceeds from restructuring of TWE investment ....................................... 2,100
Proceeds from sales of investments and assets held for sale ......................... 1,492 596
Purchases of investments ............................................................ (130) (32)
Capital expenditures ................................................................ (2,041) (789)
Additions to intangible and other noncurrent assets ................................. (130) (133)
-------- --------
Net cash provided by (used in) investing activities ......................... 1,249 (371)
-------- --------
INCREASE IN CASH AND CASH EQUIVALENTS .................................................. 543 208
CASH AND CASH EQUIVALENTS, beginning of period ......................................... 781 350
-------- --------
CASH AND CASH EQUIVALENTS, end of period ............................................... $ 1,324 $ 558
======== ========
See notes to condensed consolidated financial statements.
5
COMCAST CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED JUNE 30, 2003
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Basis of Presentation
Comcast Corporation and its subsidiaries ("Comcast" or the "Company") has
prepared these unaudited condensed consolidated financial statements based
upon Securities and Exchange Commission ("SEC") rules that permit reduced
disclosure for interim periods.
These financial statements include all adjustments that are necessary for a
fair presentation of the Company's results of operations and financial
condition for the interim periods shown including normal recurring accruals
and other items. The results of operations for the interim periods
presented are not necessarily indicative of results for the full year.
For a more complete discussion of the Company's accounting policies and
certain other information, refer to the financial statements included in
the Company's Annual Report on Form 10-K for the year ended December 31,
2002.
On November 18, 2002, the Company completed the acquisition (the "Broadband
acquisition") of AT&T Corp.'s ("AT&T") broadband business ("Broadband").
Accordingly, the accompanying financial statements include the results of
Broadband from the date of the Broadband acquisition (see Note 4). The
Broadband acquisition substantially increased the size of the Company's
cable operations and caused significant changes in the Company's capital
structure, including a substantially higher amount of debt. As a result,
direct comparisons of the Company's results of operations and financial
condition for periods prior to November 18, 2002 to subsequent periods are
not meaningful.
Reclassifications
Certain reclassifications have been made to the prior year financial
statements to conform to those classifications used in 2003. In the first
quarter of 2003, QVC, Inc. ("QVC") completed the sale of its infomercial
operations in Mexico ("QVC Mexico"). The results of operations for QVC
Mexico for the 2003 and 2002 interim periods were not significant and are
included in equity in net losses of affiliates in the Company's
consolidated statement of operations.
2. RECENT ACCOUNTING PRONOUNCEMENTS
SFAS No. 143
The Financial Accounting Standards Board ("FASB") issued Statement of
Financial Accounting Standards ("SFAS") No. 143, "Accounting for Asset
Retirement Obligations," in June 2001. SFAS No. 143 addresses financial
accounting and reporting for obligations associated with the retirement of
tangible long-lived assets and the associated asset retirement costs. The
Company adopted SFAS No. 143 on January 1, 2003, in accordance with the new
statement. The adoption of SFAS No. 143 had no impact on the Company's
financial condition or results of operations.
SFAS No. 148
The FASB issued SFAS No. 148, "Accounting for Stock-Based Compensation -
Transition and Disclosure," in December 2002. SFAS No. 148 amends SFAS No.
123 to provide alternative methods of transition for an entity that
voluntarily changes to the fair value based method of accounting for
stock-based employee compensation. SFAS No. 148 also amends the disclosure
provisions of SFAS No. 123 to require disclosure about the effects on
reported net income of an entity's stock-based employee compensation in
interim financial statements. SFAS No. 148 is effective for fiscal years
beginning after December 31, 2002. The Company adopted SFAS No. 148 on
January 1, 2003. The Company did not change to the fair value based method
of accounting for stock-based employee compensation. Accordingly, the
adoption of SFAS No. 148 would only affect the Company's financial
condition or results of operations if the Company elects to change to the
fair value method specified in SFAS No. 123. The adoption of SFAS No. 148
requires the Company to disclose the effects of its stock-based employee
compensation in interim financial statements beginning with the first
quarter of 2003 (see Note 8).
6
COMCAST CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED JUNE 30, 2003
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)
SFAS No. 149
In April 2003, the FASB issued SFAS No. 149, "Amendment of Statement 133 on
Derivative Instruments and Hedging Activities." The Statement amends and
clarifies accounting for derivative instruments, including certain
derivative instruments embedded in other contracts, and for hedging
activities under SFAS No. 133. SFAS No. 149 is effective for contracts
entered into or modified after June 30, 2003, for hedging relationships
designated after June 30, 2003, and to certain preexisting contracts. The
Company adopted SFAS No. 149 on July 1, 2003 on a prospective basis in
accordance with the new statement. The Company does not expect the adoption
of SFAS No. 149 will have a material impact on its financial statements.
SFAS No. 150
In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain
Financial Instruments with Characteristics of both Liabilities and Equity."
This Statement establishes standards for how an issuer classifies and
measures certain financial instruments with characteristics of both
liabilities and equity. SFAS No. 150 requires that an issuer classify a
financial instrument that is within its scope as a liability or, in some
circumstances, as an asset, with many such financial instruments having
been previously classified as equity. SFAS No. 150 is effective for
financial instruments entered into or modified after May 31, 2003, and
otherwise is effective July 1, 2003. SFAS No. 150 is to be implemented by
reporting the cumulative effect of a change in an accounting principle for
financial instruments outstanding before the issuance date of the Statement
and still existing at July 1, 2003. Restatement is not permitted. The
Company is assessing the impact SFAS No. 150 may have on its financial
statements.
FIN 45
In November 2002, the FASB issued Interpretation No. 45, "Guarantor's
Accounting and Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others" ("FIN 45"). FIN 45 expands on the
accounting guidance of SFAS No.'s 5, 57, and 107 and supercedes FIN 34. FIN
45 clarifies that a guarantor is required to disclose in its interim and
annual financial statements its obligations under certain guarantees that
it has issued, including the nature and terms of the guarantee, the maximum
potential amount of future payments under the guarantee, the carrying
amount, if any, for the guarantor's obligations under the guarantee, and
the nature and extent of any recourse provisions or available collateral
that would enable the guarantor to recover the amounts paid under the
guarantee. FIN 45 also clarifies that, for certain guarantees, a guarantor
is required to recognize, at the inception of a guarantee, a liability for
the fair value of the obligation undertaken in issuing the guarantee. FIN
45 does not prescribe a specific approach for subsequently measuring the
guarantor's recognized liability over the term of the related guarantee.
The initial recognition and initial measurement provisions of FIN 45 apply
on a prospective basis to certain guarantees issued or modified after
December 31, 2002. The disclosure requirements in FIN 45 are effective for
financial statements of interim or annual periods ending after December 15,
2002. The Company adopted the disclosure provisions of FIN 45 in the fourth
quarter of 2002 and adopted the initial recognition and measurement
provisions of FIN 45 on January 1, 2003, as required by the Interpretation.
The impact of the adoption of FIN 45 will depend on the nature and terms of
guarantees entered into or modified by the Company in the future. The
adoption of FIN 45 in the first quarter of 2003 did not have a material
impact on the Company's consolidated financial statements (see Note 10).
3. EARNINGS PER SHARE
Earnings (loss) per common share is computed by dividing net income (loss)
for common stockholders by the weighted average number of common shares
outstanding during the period on a basic and diluted basis.
The Company's potentially dilutive securities include potential common
shares related to the Company's Zero Coupon Convertible Debentures due 2020
(the "Zero Coupon Debentures"), stock options, restricted stock, and Class
A Special common stock held in treasury. Diluted earnings for common
stockholders per common share ("Diluted EPS") considers the impact of
potentially dilutive securities except in periods in which there is a loss
as the inclusion of the potential common shares would have an antidilutive
effect. Diluted EPS excludes the impact of potential common shares related
to the Company's Zero Coupon Debentures in periods in which the weighted
average closing sale price of the Company's Class A Special common stock
during the period is not greater than
7
COMCAST CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED JUNE 30, 2003
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)
110% of the accreted conversion price. Diluted EPS excludes the impact of
potential common shares related to the Company's stock options in periods
in which the option exercise price is greater than the average market price
of the Company's common stock for the period.
Diluted EPS for the three months ended June 30, 2003 and 2002 and for the
six months ended June 30, 2003 and 2002 excludes approximately 196.5
million, 84.5 million, 189.6 million and 83.5 million potential common
shares, respectively, related to the Company's stock option and restricted
stock plans, Zero Coupon Debentures, and common stock held in treasury
because the assumed issuance of such potential common shares is
antidilutive in periods in which there is a loss.
Weighted average shares outstanding and loss per share were the same for
both Basic EPS and Diluted EPS for both the three and six months ended June
30, 2003 and 2002 since the Company reported a net loss for each period.
Weighted average shares outstanding during the three and six months ended
June 30, 2003 were 2.255 billion shares, and during the three and six
months ended June 30, 2002 were 952 million shares.
4. ACQUISITIONS AND OTHER SIGNIFICANT EVENTS
Acquisition of Broadband
On November 18, 2002, the Company completed the acquisition of Broadband.
The allocation of the purchase price for the Broadband acquisition recorded
during the fourth quarter of 2002 is preliminary. The values of certain
assets and liabilities are based on preliminary valuations and are subject
to adjustment as additional information is obtained. Such additional
information includes: reports from valuation specialists; information
related to the cost of terminating or meeting contractual obligations; and
information related to preacquisition contingencies.
As of the acquisition date, the Company initiated certain integration
activities based on a preliminary plan to terminate employees and exit
certain contractual obligations. Under the guidance in Emerging Issues Task
Force ("EITF") 95-3, "Recognition of Liabilities in Connection with a
Purchase Business Combination," the plan must be finalized within one year
of the acquisition date and must identify all significant actions to be
taken to complete the plan. Therefore, costs related to terminating
employees and exiting contractual obligations of the acquired entity are
included in the purchase price allocation. Changes to these estimated
termination or exit costs are reflected as adjustments to the purchase
price allocation to the extent they occur within one year of the
acquisition date or if there are reductions in the amount of estimated
termination or exit costs accrued. Otherwise, changes will affect future
results of operations.
Liabilities associated with exit activities recorded in the purchase price
allocation consist of accrued employee termination and related costs of
$602 million and $929 million associated with either the cost of
terminating contracts or the present value of remaining amounts payable
under non-cancelable contracts. Amounts paid, adjustments made against
these accruals and interest accretion during the six months ended June 30,
2003 were as follows (in millions):
Employee Contract
Termination and Exit
Related Costs Costs
-------------------- ------------------
Balance, December 31, 2002................... $492 $913
Payments..................................... (143) (24)
Adjustments.................................. (26)
Interest accretion........................... 20
------------------ ----------------
Balance, June 30, 2003....................... $349 $883
================== ================
8
COMCAST CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED JUNE 30, 2003
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)
Bresnan Transaction
On March 20, 2003, the Company completed the previously announced
transaction with Bresnan Broadband Holdings, LLC and Bresnan
Communications, LLC (together, "Bresnan") pursuant to which the Company
transferred cable systems serving approximately 314,000 subscribers in
Montana, Wyoming and Colorado to Bresnan that the Company had acquired in
connection with the Broadband acquisition. The Company received $525
million in cash, plus preferred and common equity interests in Bresnan in
exchange for these cable systems. The assets (which consist primarily of
cable franchise rights, other intangible assets and property and equipment)
for these cable systems were reported as assets held for sale in accordance
with SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived
Assets," in the Company's consolidated balance sheet as of December 31,
2002. The transfer of these cable systems was accounted for at fair value
with no gain or loss recognized. The results of operations for these cable
systems for the first quarter of 2003 were not significant and were
included in equity in net losses of affiliates in the Company's
consolidated statement of operations.
TWE Restructuring
On March 31, 2003, the Company announced the successful completion of the
previously announced restructuring of Time Warner Entertainment Company
L.P. ("TWE"). As a result of the restructuring, AOL Time Warner, Inc. ("AOL
Time Warner") assumed complete control over TWE's content assets, including
Home Box Office, Warner Bros., and stakes in The WB Network, Comedy Central
and Court TV. All of AOL Time Warner's interests in cable, including those
held through TWE, are now held through or for the benefit of a new
subsidiary of AOL Time Warner called Time Warner Cable, Inc. ("TWC"). In
exchange for its 27.6% interest in TWE, the Company received
common-equivalent preferred stock of AOL Time Warner, which will be
converted into $1.5 billion of AOL Time Warner common stock valued upon
completion of an effective registration statement filing with the SEC, and
the Company received a 21% economic stake in the business of TWC. In
addition, the Company received $2.1 billion in cash which was used
immediately to repay amounts outstanding under certain of the Company's
credit facilities (see Notes 5 and 7). The TWE restructuring was accounted
for as a fair value exchange with no gain or loss recognized. Under the
restructuring agreement, the Company has registration rights that should
facilitate the disposal or monetization of its shares in TWC and in AOL
Time Warner.
As part of the process of obtaining approval of the Broadband acquisition
from the Federal Communications Commission ("FCC"), at the closing of the
Broadband acquisition, the Company placed its entire interest in TWE in
trust for orderly disposition. Any non-cash consideration received in
respect of such interest as a result of the TWE restructuring, including
the AOL Time Warner and TWC stock, will remain in trust until disposed of
or FCC approval is obtained to remove such interests from the trust.
Under the trust, the trustee has exclusive authority to exercise any
management or governance rights associated with the securities in trust.
The trustee also has the obligation, subject to the rights of the Company
as described in the last sentence of this paragraph, to exercise available
registration rights to effect the sale of such interests in a manner
intended to maximize the value received consistent with the goal of
disposing such securities in their entirety by November 2007. Following
this time, if any securities remain in trust, the trustee will be obligated
to dispose of the remaining interests as quickly as possible, and in any
event by May 2008. The trustee is also obligated, through November 2007, to
effect certain specified types of sale or monetization transactions with
respect to the securities as may be proposed by the Company from time to
time.
As a condition of the closing of the TWE restructuring, the Company entered
into a three-year nonexclusive agreement with AOL Time Warner under which
the AOL High-Speed Broadband service will be made available over a
three-year period on certain of the Company's cable systems which pass
approximately 10 million homes.
Sale of QVC
On March 3, 2003, the Company announced that Liberty Media Corporation
("Liberty") delivered a notice to it, pursuant to the stockholders
agreement between the Company and Liberty, which triggered an exit rights
process with respect to Liberty's approximate 42% interest in QVC. On June
25, 2003, the Company and Liberty entered into an agreement (the "June 2003
Agreement") which superceded and replaced the exit rights process of the
9
COMCAST CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED JUNE 30, 2003
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)
stockholders agreement, and pursuant to which Liberty had to deliver to the
Company, no later than June 30, 2003, a notice setting forth Liberty's
determination of the aggregate fair value of the Company's and Liberty's
interests in QVC. On June 30, 2003, Liberty delivered notice to the Company
setting the aggregate fair value of the Company's and Liberty's interests
in QVC at $13.75 billion. Under the terms of the June 2003 Agreement, the
Company had to elect either to purchase Liberty's interest in QVC or sell
the Company's approximate 57% interest in QVC to Liberty, based on the
value determined by Liberty.
On July 3, 2003, the Company elected to sell its interest in QVC under a
stock purchase agreement with Liberty for approximately $7.9 billion.
Liberty will purchase the Company's interest in QVC in part with shares of
Liberty's Series A common stock (valued at $11.71 per share) representing
7.5% of the shares of Liberty common stock outstanding (after giving effect
to that issuance), or approximately 218 million shares based on the number
of Liberty shares currently outstanding. The remainder of the purchase
price will be paid in the form of a three-year senior unsecured note
bearing interest at LIBOR plus 1.5%. The values of the shares and the note
to be delivered to the Company are approximately $2.6 billion and $5.3
billion, respectively. Under the stock purchase agreement, the Company will
have registration rights that should facilitate the disposal or
monetization of its shares in Liberty and in the note.
The Company expects to record a pre-tax gain on the sale of approximately
$6.5 billion. The fair value of the consideration to be received from
Liberty upon consummation of the transaction will be determined at the
closing date and will affect the actual pre-tax gain to be recorded by the
Company. The transaction is subject to customary closing conditions and
regulatory approvals. The Company expects to close the transaction by the
end of 2003.
Effective in the third quarter, the Company will classify QVC as an asset
held for sale and will report the results of operations for QVC in
discontinued operations for all periods presented in accordance with SFAS
No. 144.
Unaudited Pro Forma Information
The following unaudited pro forma information has been presented as if the
Broadband acquisition occurred on January 1, 2002. This information is
based on historical results of operations, adjusted for acquisition costs,
and, in the opinion of management, is not necessarily indicative of what
the results would have been had the Company operated Broadband since
January 1, 2002.
(Amounts in millions,
except per share data)
Six Months Ended
June 30, 2002
------------------------
Revenues...................................... $10,190
Net loss...................................... ($14,172)
Diluted EPS................................... ($6.28)
The unaudited pro forma information for the six months ended June 30, 2002
includes $11.781 billion, net of tax, of goodwill and franchise impairment
charges recorded by Broadband prior to the closing of the Broadband
acquisition.
10
COMCAST CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED JUNE 30, 2003
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)
5. INVESTMENTS
June 30, December 31,
2003 2002
----------- --------------
(in millions)
Fair value method (see Note 7)
AT&T Corp. ......................................................... $ $ 287
Cablevision ........................................................ 861 694
Microsoft .......................................................... 1,951 1,967
Sprint Corp. PCS Group ............................................. 357 369
Vodaphone .......................................................... 1,559 1,759
Other .............................................................. 109 82
------- -------
4,837 5,158
------- -------
Equity Method
Cable related ...................................................... 2,167 2,094
Other .............................................................. 223 236
------- -------
2,390 2,330
------- -------
Cost method, principally TWC and AOL Time Warner
at June 30, 2003 and TWE at December 31, 2002
(see Note 4) ....................................................... 8,320 10,985
------- -------
Total investments .................................................. 15,547 18,473
Less, current investments ............................................... 2,161 3,266
------- -------
Non-current investments ................................................. $13,386 $15,207
======= ========
Fair Value Method
The Company holds unrestricted equity investments in certain publicly
traded companies, which it accounts for as available for sale or trading
securities. The net unrealized pre-tax gains on investments accounted for
as available for sale securities as of June 30, 2003 and December 31, 2002
of $63 million and $72 million, respectively, have been reported in the
Company's consolidated balance sheet principally as a component of
accumulated other comprehensive loss, net of related deferred income taxes
of $22 million and $25 million, respectively.
The cost, fair value and gross unrealized gains and losses related to the
Company's available for sale securities are as follows (in millions):
June 30, December 31,
2003 2002
----------- -----------
Cost...................................... $77 $322
Gross unrealized gains.................... 64 73
Gross unrealized losses................... (1) (1)
----------- -----------
Fair value................................ $140 $394
=========== ===========
Cost Method
In connection with the Broadband acquisition, the Company acquired an
indirect interest in CC VIII, LLC ("CC VIII"), a cable joint venture with
Charter Communications, Inc. ("Charter"). In April 2002, AT&T exercised its
rights to cause Paul G. Allen ("Allen"), Charter's Chairman, or his
designee to purchase this indirect interest. In June 2003, Allen purchased
the Company's interest in CC VIII for $728 million in cash. The Company
accounted
11
COMCAST CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED JUNE 30, 2003
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)
for the sale of its interest in CC VIII at fair value with no gain or loss
recognized. The Company used the proceeds from the sale to repay a portion
of the amounts outstanding under its revolving credit facilities.
Investment Income (Loss), Net
Investment income (loss), net for the interim periods includes the
following (in millions):
Three Months Ended Six Months Ended
June 30, June 30,
2003 2002 2003 2002
------- ------- ------- -------
Interest and dividend income .............................. $ 49 $ 11 $ 82 $ 18
Gains (losses) on sales and exchanges of investments, net . (103) 22 (101)
Investment impairment losses .............................. (15) (208) (70) (221)
Unrealized gains (losses) on trading securities ........... 307 (420) 292 (1,440)
Mark to market adjustments on derivatives related to
trading securities ................................... (294) 324 (305) 1,171
Mark to market adjustments on derivatives and
hedged items ......................................... (38) (63) (242) (134)
------- ------- ------- -------
Investment income (loss), net ........................ $ 9 ($ 459) ($ 221) ($ 707)
======= ======= ======= =======
6. GOODWILL
The changes in the carrying amount of goodwill by business segment (see
Note 11) for the periods presented are as follows (in millions):
Corporate
Cable Commerce and Other Total
-------- -------- -------- --------
Balance, December 31, 2002 .............................. $ 15,644 $ 835 $ 918 $ 17,397
Purchase price allocation adjustments ............... (215) (215)
Intersegment transfers .............................. 20 (20)
-------- -------- -------- --------
Balance, June 30, 2003 .................................. $ 15,449 $ 835 $ 898 $ 17,182
======== ======== ======== =========
During the six months ended June 30, 2003, the Company adjusted its
preliminary purchase price allocation of the Broadband acquisition. These
adjustments resulted in a reduction of goodwill and corresponding
adjustments to franchise rights, other noncurrent liabilities, deferred
income taxes and certain working capital accounts (see Note 4).
7. LONG-TERM DEBT
June 30, December 31,
2003 2002
----------- -----------
(in millions)
Notes exchangeable into common stock ........... $ 5,613 $ 5,459
Bank and public debt ........................... 26,084 28,702
Other, including capital lease obligations...... 642 749
------- -------
Total debt ................................ $32,339 $34,910
======= =======
12
COMCAST CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED JUNE 30, 2003
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)
The Cross-Guarantee Structure
To simplify the Company's capital structure, effective with the acquisition
of Broadband, the Company and four of its cable holding company
subsidiaries fully and unconditionally guaranteed each other's debt
securities (the "Cross-Guarantee Structure"). Comcast Holdings Corporation
("Comcast Holdings") is not a guarantor, and none of its debt is
guaranteed. Comcast MO of Delaware, Inc. (formerly, MediaOne of Delaware,
Inc. and Continental Cablevision, Inc.) was not originally a part of the
Cross-Guarantee Structure. On March 12, 2003, the Company announced the
successful completion of a bondholder consent solicitation related to
Comcast MO of Delaware, Inc.'s $1.7 billion aggregate principal amount in
debt securities to permit it to become part of the Cross-Guarantee
Structure. As of June 30, 2003, $23.766 billion of the Company's debt
securities were entitled to the benefits of the Cross-Guarantee Structure
(see Note 12).
Senior Notes Offerings
In January, March and May 2003, the Company sold an aggregate of $4.0
billion of public debt consisting of $600 million of 5.85% senior notes due
2010, $900 million of 6.50% senior notes due 2015, $750 million of 5.50%
senior notes due 2011, $750 million of 7.05% senior notes due 2033 and $1.0
billion of 5.30% senior notes due 2014. The Company used all of the net
proceeds from the offerings to repay a portion of its short-term debt
outstanding and to repay a portion of amounts outstanding under its
revolving credit facilities due in 2005 and 2007.
Repayments of Debt with Proceeds from TWE Restructuring
On March 31, 2003, in connection with the closing of the TWE restructuring,
the Company received $2.1 billion in cash which was used to repay debt,
including the remaining outstanding balance of its short-term debt (see
Note 4).
Redemptions and Refinancings of Debt
In May 2003, the Company redeemed at their respective scheduled redemption
price $433 million aggregate principal amount of certain of its senior
notes and senior subordinated notes with maturities ranging from 2003 to
2023 and interest rates ranging from 8 1/4% to 9.65%. The Company financed
the redemptions with amounts available under its existing credit
facilities.
In May 2003, the Company borrowed an aggregate of $2.75 billion,
representing all amounts available under two new credit agreements.
Borrowings under the new credit agreements, which bear interest at LIBOR
plus 1.125% and LIBOR plus 0.875%, respectively, and are due in 2006, were
used to repay a portion of the $3.18 billion that was outstanding under the
Company's term loan due 2004. The new credit agreements replaced the
Company's 364-day credit facility, which expired in May 2003.
Notes Exchangeable into Common Stock
As a result of the Broadband acquisition, the Company assumed exchangeable
notes (the "Exchangeable Notes") which are mandatorily redeemable at the
Company's option into shares of Cablevision NY Group ("Cablevision") Class
A common stock or its cash equivalent, Microsoft Corporation ("Microsoft")
common stock or its cash equivalent, (i) Vodafone ADRs, (ii) the cash
equivalent, or (iii) a combination of cash and Vodafone ADRs, and Comcast
Class A Special common stock or its cash equivalent. The maturity value of
the Exchangeable Notes varies based upon the fair market value of the
security to which it is indexed. The Company's Exchangeable Notes are
collateralized by the Company's investments in Cablevision, Microsoft and
Vodafone, respectively, and the Comcast Class A Special common stock held
in treasury. The Exchangeable Notes mature in tranches from 2003 through
2007.
During the three months ended June 30, 2003, the Company settled $176
million of its obligations relating to Vodafone exchangeable notes by
delivering the underlying shares of Vodafone common stock to the
counterparty upon maturity of the instruments, and the equity collar
agreements related to the underlying Vodafone shares expired. The
transaction, which respresented a non-cash financing and investing
activity, had no effect on the Company's statement of cash flows due to its
non-cash nature. As of June 30, 2003, the securities held by the Company
collateralizing the Exchangeable Notes were sufficient to satisfy the debt
obligations associated with the outstanding Exchangeable Notes (see Notes 5
and 9).
13
COMCAST CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED JUNE 30, 2003
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)
ZONES
At maturity, holders of the Company's 2.0% Exchangeable Subordinated
Debentures due 2029 (the "ZONES") are entitled to receive in cash an amount
equal to the higher of the principal amount of the ZONES or the market
value of Sprint PCS common stock. Prior to maturity, each ZONES is
exchangeable at the holders' option for an amount of cash equal to 95% of
the market value of Sprint PCS Stock. As of June 30, 2003, the number of
Sprint PCS shares held by the Company exceeded the number of ZONES
outstanding.
The Company split the accounting for the Exchangeable Notes and the ZONES
into derivative and debt components. The Company records the change in the
fair value of the derivative component of the Exchangeable Notes and the
ZONES (see Note 5) and the change in the carrying value of the debt
component of the Exchangeable Notes and the ZONES as follows (in millions):
Exchangeable Notes ZONES
-------------------- -------------------
Six Months Six Months
Ended Ended
June 30, June 30,
2003 2003 2002
------- ------- -------
Balance at Beginning of Period:
Debt component ................................ $ 6,981 $ 491 $ 468
Derivative component .......................... (1,522) 208 1,145
------- ------- -------
Total ......................................... 5,459 699 1,613
Decrease in debt component due to maturities... (176)
(Decrease) increase in debt
component to interest expense ................. (55) 12 11
Increase (decrease) in derivative
component to investment income (loss), net .... 385 65 (935)
Balance at End of Period:
Debt component ................................ 6,750 503 479
Derivative component .......................... (1,137) 273 210
------- ------- -------
Total ......................................... $ 5,613 $ 776 $ 689
======= ======= =======
Interest Rates
Excluding the derivative component of the Exchangeable Notes and the ZONES
whose changes in fair value are recorded to investment income (loss), net,
the Company's effective weighted average interest rate on its total debt
outstanding was 6.53% and 6.00% as of June 30, 2003 and December 31, 2002,
respectively.
Derivatives
The Company uses derivative financial instruments to manage its exposure to
fluctuations in interest rates and securities prices. The Company has
issued indexed debt instruments and prepaid forward sale agreements whose
value, in part, is derived from the market value of certain publicly traded
common stock.
Lines and Letters of Credit
As of June 30, 2003, certain subsidiaries of the Company had unused lines
of credit of $5.163 billion under their respective credit facilities.
As of June 30, 2003, the Company and certain of its subsidiaries had unused
irrevocable standby letters of credit totaling $400 million to cover
potential fundings under various agreements.
14
COMCAST CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED JUNE 30, 2003
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)
8. STOCKHOLDERS' EQUITY
Stock-Based Compensation
The Company accounts for stock-based compensation in accordance with
Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees," and related interpretations, as permitted by SFAS No. 123,
"Accounting for Stock-Based Compensation," as amended. Compensation expense
for stock options is measured as the excess, if any, of the quoted market
price of the Company's stock at the date of the grant over the amount an
employee must pay to acquire the stock. The Company records compensation
expense for restricted stock awards based on the quoted market price of the
Company's stock at the date of the grant and the vesting period. The
Company records compensation expense for stock appreciation rights based on
the changes in quoted market prices of the Company's stock or other
determinants of fair value.
The following table illustrates the effect on net loss and loss per share
if the Company had applied the fair value recognition provisions of SFAS
No. 123 to stock-based compensation (dollars in millions, except per share
data):
Three Months Ended Six Months Ended
June 30, June 30,
2003 2002 2003 2002
----- ----- ----- -----
Net loss, as reported .......................................... ($ 22) ($210) ($319) ($299)
Deduct: Total stock-based compensation
expense determined under fair value based method
for all awards, net of related tax effects ................ (45) (36) (83) (69)
----- ----- ----- -----
Pro forma, net loss ............................................ ($ 67) ($246) ($402) ($368)
===== ===== ===== =====
Basic and Diluted loss for common stockholders per
common share:
As reported ............................................... ($0.01) ($0.22) ($0.14) ($0.31)
Pro forma ................................................. ($0.03) ($0.26) ($0.18) ($0.39)
Total stock-based compensation expense was determined under the fair value
method for all awards assuming accelerated vesting of the Company's stock
options as permitted under SFAS No. 123. Had the Company applied the fair
value recognition provisions of SFAS No. 123 assuming straight-line rather
than accelerated vesting of its stock options, total stock-based
compensation expense, net of related tax effects, would have been $38
million and $28 million for the three months ended June 30, 2003 and 2002,
respectively, and $71 million and $55 million for the six months ended June
30, 2003 and 2002, respectively.
The weighted-average fair value at date of grant of a Class A common stock
option granted under the Company's option plans during the three and six
months ended June 30, 2003 was $7.15 and $10.27, respectively. The
weighted-average fair value at date of grant of a Class A Special common
stock option granted under the option plans during the three and six months
ended June 30, 2002 was $12.98 and $16.30, respectively. The fair value of
each option granted during the interim periods in 2003 and 2002 was
estimated on the date of grant using the Black- Scholes option-pricing
model with the following weighted-average assumptions:
15
COMCAST CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED JUNE 30, 2003
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)
Three Months Ended June 30, Six Months Ended June 30,
2003 2002 2003 2002
--------------- ---------------- ---------------- ----------------
Class A Class A Special Class A Class A Special
Common Stock Common Stock Common Stock Common Stock
--------------- ---------------- ---------------- ----------------
Dividend yield..................... 0% 0% 0% 0%
Expected volatility................ 29.8% 30.0% 29.4% 29.2%
Risk-free interest rate............ 2.0% 5.3% 3.3% 5.3%
Expected option lives (in years)... 3.1 8.0 6.6 8.0
Forfeiture rate.................... 3.0% 3.0% 3.0% 3.0%
The pro forma effect on net loss and net loss per share for the interim
periods by applying SFAS No. 123 may not be indicative of the effect on net
income or loss in future years since SFAS No. 123 does not take into
consideration pro forma compensation expense related to awards made prior
to January 1, 1995 and since additional awards in future years are
anticipated.
Comcast Option Plans
The Company maintains stock option plans for certain employees, directors
and other persons (collectively, the "Comcast Option Plans"). The following
table summarizes the activity of the Comcast Option Plans during the six
months ended June 30, 2003 (options in thousands):
Class A Class A Special
Common Stock Common Stock
---------------------- ----------------------
Weighted- Weighted-
Average Average
Exercise Exercise
Options Price Options Price
--------- ------------ --------- -----------
Outstanding at beginning of period 63,575 $ 43.31 64,890 $ 28.57
Granted .......................... 23,327 28.64
Exercised ........................ (486) 16.32 (2,100) 8.63
Canceled ......................... (1,535) 49.48 (604) 36.36
--------- -------
Outstanding at end of period ..... 84,881 39.34 62,186 29.16
========= =======
Exercisable at end of period ..... 57,384 44.68 26,277 21.67
========= =======
16
COMCAST CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED JUNE 30, 2003
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)
Comprehensive Loss
The Company's total comprehensive loss for the interim periods was as
follows (in millions):
Three Months Ended Six Months Ended
June 30, June 30,
2003 2002 2003 2002
--------- ---------- --------- ----------
Net loss............................................. ($22) ($210) ($319) ($299)
Unrealized gains (losses) on marketable securities... 3 (223) (28) (364)
Reclassification adjustments for losses
included in net loss............................... 3 198 27 203
Unrealized gains on the effective portion
of cash flow hedges................................ 4
Foreign currency translation gains (losses).......... 9 5 15 (7)
--------- ---------- --------- ----------
Comprehensive loss................................... ($7) ($226) ($305) ($467)
========= ========== ========= ==========
9. STATEMENT OF CASH FLOWS - SUPPLEMENTAL INFORMATION
The Company made cash payments for interest and income taxes during the
interim periods as follows (in millions):
Three Months Ended Six Months Ended
June 30, June 30,
2003 2002 2003 2002
----------- ----------- ----------- -----------
Interest ............................................. $ 452 $ 237 $1,019 $ 347
Income taxes ........................................ $ 156 $ 129 $ 197 $ 159
During the three months ended June 30, 2003, the Company entered into
non-cash financing and investing activities related to certain of its
Exchangeable Notes (see Note 7).
10. COMMITMENTS AND CONTINGENCIES
Commitments
Certain subsidiaries of the Company support debt compliance with respect to
obligations aggregating $1.021 billion as of June 30, 2003 of certain cable
television partnerships and investments in which the Company holds an
ownership interest (see Note 5). The obligations expire between May 2008
and September 2010. Although there can be no assurance, management believes
that it will not be required to meet its obligations under such
commitments. The total notional amount of commitments for the Company was
$1.021 billion as of June 30, 2003, at which time there were no quoted
market prices for similar agreements.
Contingencies
Litigation has been filed against the Company as a result of alleged
conduct of the Company with respect to its investment in and distribution
relationship with At Home Corporation. At Home was a provider of high-speed
Internet access and content services which filed for bankruptcy protection
in September 2001. Filed actions are: (i) class action lawsuits against the
Company, Brian L. Roberts (the Company's President and Chief Executive
Officer and a director), AT&T (the former controlling shareholder of At
Home and also a former distributor of the At Home service) and other
corporate and individual defendants in the Superior Court of San Mateo
County, California, alleging breaches of fiduciary duty on the part of the
Company and the other defendants in connection with transactions agreed to
in March 2000 among At Home, the Company, AT&T and Cox Communications, Inc.
(Cox is also an investor in At Home and a former distributor of the At Home
service); (ii) class action lawsuits against Comcast Cable Communications,
Inc., AT&T and others in the United States District Court for the Southern
District of New York, alleging securities law violations and common law
fraud in connection with disclosures made
17
COMCAST CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED JUNE 30, 2003
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)
by At Home in 2001; and (iii) a lawsuit brought in the United States
District Court for the District of Delaware in the name of At Home by
certain At Home bondholders against the Company, Brian L. Roberts, Cox and
others, alleging breaches of fiduciary duty relating to the March 2000
transactions and seeking recovery of alleged short- swing profits of at
least $600 million pursuant to Section 16(b) of the Securities Exchange Act
of 1934 purported to have arisen in connection with certain transactions
relating to At Home stock effected pursuant to the March 2000 agreements.
The actions in San Mateo County, California have been stayed by the United
States Bankruptcy Court for the Northern District of California, the court
in which At Home filed for bankruptcy, as violating the automatic
bankruptcy stay. In the Southern District of New York actions, the court
ordered the actions consolidated into a single action. An amended
consolidated class action complaint was filed on November 8, 2002. All of
the defendants served motions to dismiss on February 11, 2003.
Under the terms of the Broadband acquisition, the Company is contractually
liable for 50% of any liabilities of AT&T relating to At Home, including
any resulting from any pending or threatened litigation. AT&T will be
liable for the other 50% of these liabilities. In addition to the actions
against AT&T described above, where the Company is also a defendant, there
are two additional actions brought by At Home's bondholders' liquidating
trust against AT&T, not naming the Company: (i) a lawsuit filed against
AT&T and certain of its senior officers in Santa Clara, California state
court alleging various breaches of fiduciary duties, misappropriation of
trade secrets and other causes of action in connection with the
transactions in March 2000 described above, and prior and subsequent
alleged conduct on the part of the defendants, and (ii) an action filed
against AT&T in the District Court for the Northern District of California,
alleging that AT&T infringes an At Home patent by using its broadband
distribution and high-speed Internet backbone networks and equipment. Both
of these actions are in the discovery stage. AT&T moved to dismiss the
Santa Clara action on the grounds that California is an inconvenient forum,
but the court denied AT&T's motion. AT&T also moved to transfer the
Northern District of California action to the Southern District of New York
as being a more convenient venue. AT&T's motion was denied on April 25,
2003.
The Company denies any wrongdoing in connection with the claims which have
been made directly against the Company, its subsidiaries and Brian L.
Roberts, and intends to defend all of these claims vigorously. In
management's opinion, the final disposition of these claims is not expected
to have a material adverse effect on the Company's consolidated financial
position, but could possibly be material to the Company's consolidated
results of operations of any one period. Further, no assurance can be given
that any adverse outcome would not be material to such consolidated
financial position.
Management is continuing to evaluate this litigation and is unable to
currently determine what impact, if any, that the Company's 50% share of
the AT&T At Home potential liabilities would have on the Company's
consolidated financial position or results of operations. No assurance can
be given that any adverse outcome would not be material.
Some of the entities formerly attributed to Broadband which are now
subsidiaries of the Company are parties to an affiliation term sheet with
Starz Encore Group LLC, an affiliate of Liberty Media Corporation, which
extends to 2022. The term sheet purports to require annual fixed price
payments, subject to adjustment for various factors, including inflation.
The term sheet also purports to require the Company to pay two-thirds of
Starz Encore's programming costs above levels designated in the term sheet.
Excess programming costs that may be payable by the Company in future years
are not presently estimable, and could be significant.
By letter dated May 29, 2001, Broadband disputed the enforceability of the
excess programming pass-through provisions of the Starz Encore term sheet
and questioned the validity of the term sheet as a whole. Broadband also
has raised certain issues concerning the uncertainty of the provisions of
the term sheet and the contractual interpretation and application of
certain of its provisions to, among other things, the acquisition and
disposition of cable systems. In July 2001, Starz Encore filed a lawsuit in
Colorado state court seeking payment of the 2001 excess programming costs
and a declaration that the term sheet is a binding and enforceable
contract. In October 2001, Broadband and Starz Encore agreed to delay any
further proceedings in the litigation until August 31, 2002 to allow the
parties time to continue negotiations toward a potential business
resolution of this dispute. As part of
18
COMCAST CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED JUNE 30, 2003
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)
this standstill agreement, Broadband and Starz Encore settled Starz
Encore's claim for the 2001 excess programming costs, and Broadband agreed
to continue to make the standard monthly payments due under the term sheet,
with a full reservation of rights with respect to these payments. Broadband
and Starz Encore agreed to extend the standstill agreement to and including
January 31, 2003, with a requirement that the parties attempt to mediate
the dispute. A mediation session held in January 2003 did not result in any
resolution of the matter.
On November 18, 2002, the Company and Comcast Holdings filed suit against
Starz Encore in the United States District Court for the Eastern District
of Pennsylvania. The Company and Comcast Holdings seek a declaratory
judgment that, pursuant to their rights under a March 17, 1999 contract
with a predecessor of Starz Encore, upon the completion of the Broadband
acquisition that contract now provides the terms under which Starz Encore
programming is acquired and transmitted by the Company's cable systems. On
January 8, 2003, Starz Encore filed a motion to dismiss the lawsuit on the
grounds that claims asserted by the Company and Comcast Holdings raised
issues of state law that the United States District Court should decline to
decide. The Company has responded contesting these assertions. That motion
has been submitted to the Court for decision.
On January 31, 2003, Starz Encore filed an amended complaint in its lawsuit
against Broadband in Colorado state court. The amended complaint adds the
Company and Comcast Holdings as defendants and adds new claims against the
Company, Comcast Holdings and Broadband asserting alleged breaches of, and
interference with, the standstill agreement relating to the lawsuit filed
by the Company and Comcast Holdings in federal District Court in
Pennsylvania and to the defendants' position that since the completion of
the Broadband acquisition, the March 17, 1999 contract now provides the
terms under which Starz Encore programming is acquired and transmitted by
the Company's cable systems.
On March 3, 2003, Starz Encore filed a motion for leave to file a second
amended complaint that would add allegations that Broadband has breached
certain purported joint-marketing obligations under the term sheet and that
the Company and Comcast Holdings have breached certain purported
joint-marketing obligations under the March 17, 1999 contract and other
agreements. The Company, Comcast Holdings and Broadband opposed Starz
Encore's motion for leave to file a second amended complaint and, in light
of Starz Encore's pending motion for leave to amend, sought an extension of
time from the Court to respond to Starz Encore's amended complaint. Both
Starz Encore's motion to amend and the Company's motion to extend time are
fully briefed and have been submitted to the Court for decision.
On April 3, 2003, the Company and Comcast Holdings filed a motion for
summary judgment in the federal action in Pennsylvania. On April 16, 2003,
Starz Encore filed a motion seeking (i) to strike the affidavit supporting
the summary judgment motion or, in the alternative, (ii) a general
postponement of Starz Encore's response date (or at a minimum a three week
extension). On April 29, 2003, the Company and Comcast Holdings filed an
opposition to Starz Encore's motion. The Court has not yet ruled on either
motion.
An entity formerly attributed to Broadband, which is now a subsidiary of
the Company, is party to a master agreement that may not expire until
December 31, 2012, under which it purchases certain billing services from
CSG Systems, Inc. The master agreement requires monthly payments, subject
to adjustment for inflation. The master agreement also contains a most
favored nation provision that may affect the amounts paid thereunder.
On May 10, 2002, Broadband filed a demand for arbitration against CSG
before the American Arbitration Association asserting, among other things,
the right to terminate the master agreement and seeking damages under the
most favored nation provision or otherwise. On May 31, 2002, CSG answered
Broadband's arbitration demand and asserted various counterclaims,
including for (i) breach of the master agreement; (ii) a declaration that
the Company is now bound by the master agreement to use CSG as its
exclusive provider for certain billing and customer care services; (iii)
tortious interference with prospective contractual relations; and (iv)
civil conspiracy. The evidentiary hearing commenced on May 9, 2003 and
concluded on June 17, 2003. The parties filed and exchanged opening
post-hearing briefs on July 25, 2003 and are scheduled to file and exchange
reply briefs on August 8, 2003. Final oral arguments are currently
scheduled for September 10 and 11, 2003.
19
COMCAST CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED JUNE 30, 2003
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)
On June 21, 2002, CSG filed a lawsuit against Comcast Holdings in federal
court in Denver, Colorado asserting claims related to the master agreement
and the pending arbitration. On November 4, 2002, CSG withdrew its
complaint against Comcast Holdings without prejudice. On November 15, 2002,
the Company initiated a lawsuit against CSG in federal court in
Philadelphia, Pennsylvania asserting that cable systems owned by Comcast
Holdings are not required to use CSG as a billing service or customer care
provider pursuant to the master agreement, and that the former Broadband
cable systems owned by the Company may be added to a billing service
agreement between the Company and CSG. CSG moved to dismiss or stay the
lawsuit on the ground that the issues raised by the complaint could be
wholly or substantially determined by the above-mentioned arbitration. By
Order dated February 10, 2003, the Court stayed the lawsuit until further
notice.
On January 8, 2003, Liberty Digital, Inc. filed a complaint in Colorado
state court against the Company and Comcast Cable Holdings, LLC (formerly
AT&T Broadband LLC and Tele-Communications, Inc.), a wholly owned
subsidiary of the Company. The complaint alleges that Comcast Cable
Holdings breached a 1997 "contribution agreement" between Liberty Digital
and Comcast Cable Holdings and that the Company tortiously interfered with
that agreement. The complaint alleges that this purported agreement
obligates Comcast Cable Holdings to pay fees to Liberty Digital totaling
$18 million (increasing at CPI) per year through 2017. The Company and
Comcast Cable Holdings filed their answer to the complaint on March 5,
2003, in which the Company and Comcast Cable Holdings denied the essential
allegations of the complaint and asserted various affirmative defenses.
In management's opinion, the final disposition of the Starz Encore, CSG and
Liberty Digital contractual disputes is not expected to have a material
adverse effect on the Company's consolidated financial position or results
of operations. However, no assurance can be given that any adverse outcome
would not be material to such consolidated financial position or results of
operations.
The Company is subject to other legal proceedings and claims which arise in
the ordinary course of its business. In the opinion of management, the
amount of ultimate liability with respect to such actions is not expected
to materially affect the financial condition, results of operations or
liquidity of the Company.
In connection with a license awarded to an affiliate, the Company is
contingently liable in the event of nonperformance by the affiliate to
reimburse a bank which has provided a performance guarantee. The amount of
the performance guarantee is approximately $165 million; however the
Company's current estimate of the amount of expenditures (principally in
the form of capital expenditures) that will be made by the affiliate
necessary to comply with the performance requirements will not exceed $50
million.
20
COMCAST CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED JUNE 30, 2003
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)
11. FINANCIAL DATA BY BUSINESS SEGMENT
The following represents the Company's significant business segments,
"Cable" and "Commerce." The components of net income (loss) below operating
income (loss) before depreciation and amortization are not separately
evaluated by the Company's management on a segment basis (in millions).
Corporate and
Cable Commerce Other (1) Total
Three Months Ended June 30, 2003 ----- -------- ------------- -----
- --------------------------------
Revenues (2) ................................ $ 4,379 $ 1,101 $ 205 $ 5,685
Operating income before depreciation and
amortization (3) ....................... 1,597 219 15 1,831
Depreciation and amortization ............... 1,133 34 53 1,220
Operating income (loss) ..................... 464 185 (38) 611
Interest expense ............................ 379 2 111 492
Capital expenditures ........................ 1,047 16 7 1,070
Three Months Ended June 30, 2002
- --------------------------------
Revenues (2) ................................ $ 1,541 $ 990 $ 173 $ 2,704
Operating income before
depreciation and amortization (3) ...... 654 194 18 866
Depreciation and amortization ............... 298 29 61 388
Operating income (loss) ..................... 356 165 (43) 478
Interest expense ............................ 141 3 38 182
Capital expenditures ........................ 331 51 8 390
Six Months Ended June 30, 2003
- ------------------------------
Revenues (2) ................................ $ 8,611 $ 2,163 $ 429 $ 11,203
Operating income before depreciation and
amortization (3) ....................... 3,018 430 21 3,469
Depreciation and amortization ............... 2,213 65 107 2,385
Operating income (loss) ..................... 805 365 (86) 1,084
Interest expense ............................ 827 3 187 1,017
Capital expenditures ........................ 2,000 29 12 2,041
Six Months Ended June 30, 2002
- ------------------------------
Revenues (2) ................................ $ 3,010 $ 1,978 $ 383 $ 5,371
Operating income before
depreciation and amortization (3) ...... 1,251 386 37 1,674
Depreciation and amortization ............... 591 56 128 775
Operating income (loss) ..................... 660 330 (91) 899
Interest expense ............................ 287 6 76 369
Capital expenditures ........................ 689 83 17 789
As of June 30, 2003
- -------------------
Assets ...................................... $ 96,200 $ 3,237 $ 10,085 $109,522
Long-term debt, less current portion ........ 21,677 8,246 29,923
As of December 31, 2002
- ----------------------
Assets ................................. ..... $106,291 $ 3,000 $ 3,814 $113,105
Long-term debt, less current portion ... ..... 26,033 1 1,923 27,957
- ----------------------
21
COMCAST CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED JUNE 30, 2003
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)
(1) Other includes segments not meeting certain quantitative guidelines for
reporting including the Company's content operations and elimination
entries related to the segments presented. Corporate and other assets
consist primarily of the Company's investments and intangible assets
related to the Company's content operations (see Notes 5 and 6).
(2) Revenues include $241 million, $146 million, $456 million and $286 million
during the three months ended June 30, 2003 and 2002 and during the six
months ended June 30, 2003 and 2002, respectively, of non-US revenues,
principally related to the Company's commerce segment. No single customer
accounted for a significant amount of the Company's revenues in any
period.
(3) Operating income before depreciation and amortization is defined as
operating income before depreciation and amortization and impairment
charges, if any, related to fixed and intangible assets. As such, it
eliminates the significant level of non-cash depreciation and amortization
expense that results from the capital intensive nature of the Company's
businesses and intangible assets recognized in business combinations, and
is unaffected by the Company's capital structure or investment activities.
The Company's management and Board of Directors use this measure in
evaluating the Company's consolidated operating performance and the
operating performance of all of its operating segments. This metric is
used to allocate resources and capital to the Company's operating segments
and is a significant component of the Company's annual incentive
compensation programs. This measure is also useful to investors as it is
one of the bases for comparing the Company's operating performance with
other companies in its industries, although the Company's measure may not
be directly comparable to similar measures used by other companies. This
measure should not be considered as a substitute for operating income
(loss), net income (loss), net cash provided by operating activities or
other measures of performance or liquidity reported in accordance with
generally accepted accounting principles.
22
COMCAST CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED JUNE 30, 2003
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)
12. CONDENSED CONSOLIDATING FINANCIAL INFORMATION
In November 2002, in order to simplify the Company's capital structure, the
Company and four of its cable holding company subsidiaries, Comcast Cable
Communications, Inc. (Comcast Cable or "CCCI"), Comcast Cable
Communications Holdings, Inc. (Comcast Cable Communications Holdings or
"CCCH"), Comcast MO Group, Inc. ("Comcast MO Group"), and Comcast Cable
Holdings, LLC (Comcast Cable Holdings or "CCH"), fully and unconditionally
guaranteed each other's debt securities. Comcast MO of Delaware, Inc.
("Comcast MO of Delaware") was not originally a part of the Cross-Guarantee
Structure. On March 12, 2003, the Company announced the successful
completion of a bondholder consent solicitation related to Comcast MO of
Delaware's $1.7 billion aggregate principal amount in debt securities to
permit it to become part of the Cross-Guarantee Structure (see Note 7).
Comcast MO Group and CCH (as of December 31, 2002) and Comcast MO Group,
CCH and Comcast MO of Delaware (as of June 30, 2003 and for the three and
six months ended June 30, 2003) are collectively referred to as the
"Combined CCHMO Parents." Condensed consolidating financial information of
the Company is as follows (in millions):
Comcast Corporation
Condensed Consolidating Balance Sheet
As of June 30, 2003
Elimination
Combined Non- and Consolidated
Comcast CCCI CCCH CCHMO Guarantor Consolidation Comcast
Parent Parent Parent Parents Subsidiaries Adjustments Corporation
--------------------------------------------------------------------------
ASSETS
- ------
Cash and cash equivalents...................... $ $ $ $ $1,324 $ $1,324
Investments.................................... 50 2,111 2,161
Accounts receivable, net....................... 1,376 1,376
Inventories, net............................... 506 506
Deferred income taxes.......................... 137 137
Other current assets........................... 6 383 389
-------- -------- -------- --------- -------- --------- -----------
Total current assets......................... 56 5,837 5,893
-------- -------- -------- --------- -------- --------- -----------
INVESTMENTS.............................. 13,386 13,386
INVESTMENTS IN AND AMOUNTS DUE FROM
SUBSIDIARIES ELIMINATED UPON
CONSOLIDATION................................ 45,268 21,148 27,176 34,350 14,162 (142,104)
PROPERTY AND EQUIPMENT, net.................... 19,079 19,079
FRANCHISE RIGHTS............................... 48,332 48,332
GOODWILL....................................... 17,182 17,182
OTHER INTANGIBLE ASSETS, net................... 4,864 4,864
OTHER NONCURRENT ASSETS, net................... 90 49 31 616 786
-------- -------- -------- --------- -------- --------- -----------
Total Assets................................... $45,414 $21,197 $27,207 $34,350 $123,458 ($142,104) $109,522
======== ======== ======== ========= ======== ========= ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Accounts payable............................... $ $ $ $ $1,507 $ $1,507
Accrued expenses and other current
liabilities.................................. 270 99 75 309 4,307 5,060
Deferred income taxes.......................... 557 557
Current portion of long-term debt.............. 308 152 1,956 2,416
-------- -------- -------- --------- -------- --------- -----------
Total current liabilities.................... 270 407 75 461 8,327 9,540
-------- -------- -------- --------- -------- --------- -----------
LONG-TERM DEBT, less current portion........... 6,768 6,628 3,498 6,513 6,516 29,923
DEFERRED INCOME TAXES.......................... 23,622 23,622
OTHER NONCURRENT LIABILITIES................... 295 200 5,047 5,542
MINORITY INTEREST.............................. 2,814 2,814
STOCKHOLDERS' EQUITY
Common stock................................... 25 25
Other stockholders' equity..................... 38,056 14,162 23,634 27,176 77,132 (142,104) 38,056
-------- -------- -------- --------- -------- --------- -----------
Total Stockholders' Equity................... 38,081 14,162 23,634 27,176 77,132 (142,104) 38,081
-------- -------- -------- --------- -------- --------- -----------
Total Liabilities and Stockholders' Equity ... $45,414 $21,197 $27,207 $34,350 $123,458 ($142,104) $109,522
======== ======== ======== ========= ======== ========= ===========
23
COMCAST CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED JUNE 30, 2003
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)
Comcast Corporation
Condensed Consolidating Balance Sheet
As of December 31, 2002
Elimination
Combined Non- and Consolidated
Comcast CCCI CCCH CCHMO Guarantor Consolidation Comcast
Parent Parent Parent Parents Subsidiaries Adjustments Corporation
--------------------------------------------------------------------------
ASSETS
- ------
Cash and cash equivalents.................... $ $ $ $ $781 $ $781
Investments.................................. 30 3,236 3,266
Accounts receivable, net..................... 1,408 1,408
Inventories, net............................. 479 479
Assets held for sale......................... 613 613
Deferred income taxes........................ 129 129
Other current assets......................... 22 378 400
-------- -------- -------- --------- -------- --------- -----------
Total current assets....................... 52 7,024 7,076
-------- -------- -------- --------- -------- --------- -----------
INVESTMENTS.................................. 15,207 15,207
INVESTMENTS IN AND AMOUNTS DUE FROM
SUBSIDIARIES ELIMINATED UPON
CONSOLIDATION.............................. 39,356 21,818 33,683 40,749 13,913 (149,519)
PROPERTY AND EQUIPMENT, net.................. 18,866 18,866
FRANCHISE RIGHTS............................. 48,222 48,222
GOODWILL..................................... 17,397 17,397
OTHER INTANGIBLE ASSETS, net................. 5,599 5,599
OTHER NONCURRENT ASSETS, net................. 74 99 121 444 738
-------- -------- -------- --------- -------- --------- -----------
Total Assets................................. $39,482 $21,917 $33,804 $40,749 $126,672 ($149,519) $113,105
======== ======== ======== ========= ======== ========= ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Accounts payable............................. $1 $ $ $ $1,662 $ $1,663
Accrued expenses and other current
liabilities................................ 208 107 46 469 4,819 5,649
Liabilities related to assets held for
sale....................................... 13 13
Deferred income taxes........................ 1,105 1,105
Short-term debt.............................. 3,750 3,750
Current portion of long-term debt............ 1,465 1,738 3,203
-------- -------- -------- --------- -------- --------- -----------
Total current liabilities.................. 209 107 3,796 1,934 9,337 15,383
-------- -------- -------- --------- -------- --------- -----------
LONG-TERM DEBT, less current portion......... 680 7,897 6,005 4,932 8,443 27,957
DEFERRED INCOME TAXES........................ 23,110 23,110
OTHER NONCURRENT LIABILITIES................. 264 200 5,188 5,652
MINORITY INTEREST............................ 2,674 2,674
STOCKHOLDERS' EQUITY
Common stock................................. 25 25
Other stockholders' equity................... 38,304 13,913 24,003 33,683 77,920 (149,519) 38,304
-------- -------- -------- --------- -------- --------- -----------
Total Stockholders' Equity................... 38,329 13,913 24,003 33,683 77,920 (149,519) 38,329
-------- -------- -------- --------- -------- --------- -----------
Total Liabilities and Stockholders' Equity... $39,482 $21,917 $33,804 $40,749 $126,672 ($149,519) $113,105
======== ======== ======== ========= ======== ========= ===========
24
COMCAST CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED JUNE 30, 2003
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)
Comcast Corporation
Condensed Consolidating Statement of Operations
For the Three Months Ended June 30, 2003
Elimination
Combined Non- and Consolidated
Comcast CCCI CCCH CCHMO Guarantor Consolidation Comcast
Parent Parent Parent Parents Subsidiaries Adjustments Corporation
-------- -------- -------- --------- -------- --------- -----------
REVENUES
Service revenues......................... $ $ $ $ $4,584 $ $4,584
Net sales from electronic retailing...... 1,101 1,101
Management fee revenue................... 92 34 58 58 (242)
-------- ------- --------- -------- -------- ---------- ----------
92 34 58 58 5,685 (242) 5,685
-------- ------- --------- -------- -------- ---------- ----------
COSTS AND EXPENSES
Operating (excluding depreciation)....... 1,878 1,878
Cost of goods sold from electronic
retailing (excluding depreciation)..... 697 697
Selling, general and administrative...... 38 34 58 58 1,333 (242) 1,279
Depreciation............................. 837 837
Amortization............................. 383 383
-------- ------- --------- -------- -------- ---------- ----------
38 34 58 58 5,128 (242) 5,074
-------- ------- --------- -------- -------- ---------- ----------
OPERATING INCOME............................ 54 557 611
OTHER INCOME (EXPENSE)
Interest expense......................... (79) (139) (93) (77) (104) (492)
Investment income, net................... 9 9
Equity in net (losses) income of
affiliates............................. (5) 272 (70) (20) 181 (359) (1)
Other income............................. 24 24
-------- ------- --------- -------- -------- ---------- ----------
(84) 133 (163) (97) 110 (359) (460)
-------- ------- --------- -------- -------- ---------- ----------
INCOME (LOSS) BEFORE INCOME TAXES AND
MINORITY INTEREST......................... (30) 133 (163) (97) 667 (359) 151
INCOME TAX BENEFIT (EXPENSE)................ 8 49 32 27 (193) (77)
-------- ------- --------- -------- -------- ---------- ----------
INCOME (LOSS) BEFORE MINORITY INTEREST...... (22) 182 (131) (70) 474 (359) 74
MINORITY INTEREST........................... (96) (96)
-------- ------- --------- -------- -------- ---------- ----------
NET INCOME (LOSS)........................... ($22) $182 ($131) ($70) $378 ($359) ($22)
======== ======= ========= ======== ======== ========== ===========
25
COMCAST CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED JUNE 30, 2003
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)
Comcast Corporation
Condensed Consolidating Statement of Operations
For the Three Months Ended June 30, 2002
Elimination
Combined Non- and Consolidated
Comcast CCCI CCCH CCHMO Guarantor Consolidation Comcast
Parent Parent Parent Parents Subsidiaries Adjustments Corporation
-------- -------- -------- --------- -------- --------- -----------
REVENUES
Service revenues......................... $ $ $ $ $1,714 $ $1,714
Net sales from electronic retailing...... 990 990
-------- ------- --------- -------- -------- ---------- ----------
2,704 2,704
-------- ------- --------- -------- -------- ---------- ----------
COSTS AND EXPENSES
Operating (excluding depreciation)....... 722 722
Cost of goods sold from electronic
retailing (excluding depreciation)..... 626 626
Selling, general and administrative...... 490 490
Depreciation............................. 342 342
Amortization............................. 46 46
-------- ------- --------- -------- -------- ---------- ----------
2,226 2,226
-------- ------- --------- -------- -------- ---------- ----------
OPERATING INCOME............................ 478 478
OTHER INCOME (EXPENSE)
Interest expense......................... (140) (42) (182)
Investment loss, net..................... (459) (459)
Equity in net income (losses) of
affiliates............................. 227 92 (363) (44)
Other income............................. 9 9
-------- ------- --------- -------- -------- ---------- ----------
87 (400) (363) (676)
-------- ------- --------- -------- -------- ---------- ----------
INCOME (LOSS) BEFORE INCOME TAXES
AND MINORITY INTEREST.................... 87 78 (363) (198)
INCOME TAX BENEFIT (EXPENSE)................ 49 (16) 33
-------- ------- --------- -------- -------- ---------- ----------
INCOME (LOSS) BEFORE MINORITY INTEREST...... 136 62 (363) (165)
MINORITY INTEREST........................... (45) (45)
-------- ------- --------- -------- -------- ---------- ----------
NET INCOME (LOSS)........................... $ $136 $ $ $17 ($363) ($210)
======== ======= ========= ======== ======== ========== ===========
26
COMCAST CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED JUNE 30, 2003
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)
Comcast Corporation
Condensed Consolidating Statement of Operations
For the Six Months Ended June 30, 2003
Elimination
Combined Non- and Consolidated
Comcast CCCI CCCH CCHMO Guarantor Consolidation Comcast
Parent Parent Parent Parents Subsidiaries Adjustments Corporation
-------- -------- -------- --------- -------- --------- -----------
REVENUES
Service revenues......................... $ $ $ $ $9,040 $ $9,040
Net sales from electronic retailing...... 2,163 2,163
Management fee revenue................... 187 71 116 116 (490)
-------- ------- --------- -------- -------- ---------- ----------
187 71 116 116 11,203 (490) 11,203
-------- ------- --------- -------- -------- ---------- ----------
COSTS AND EXPENSES
Operating (excluding depreciation)....... 3,808 3,808
Cost of goods sold from electronic
retailing (excluding depreciation)..... 1,370 1,370
Selling, general and administrative...... 76 71 116 116 2,667 (490) 2,556
Depreciation............................. 1,636 1,636
Amortization............................. 749 749
-------- ------- --------- -------- -------- ---------- ----------
76 71 116 116 10,230 (490) 10,119
-------- ------- --------- -------- -------- ---------- ----------
OPERATING INCOME............................ 111 973 1,084
OTHER INCOME (EXPENSE)
Interest expense......................... (123) (274) (206) (192) (222) (1,017)
Investment loss, net..................... (221) (221)
Equity in net income (losses) of
affiliates............................. (310) 501 (407) (282) 302 175 (21)
Other income............................. 42 42
-------- ------- --------- -------- -------- ---------- ----------
(433) 227 (613) (474) (99) 175 (1,217)
-------- ------- --------- -------- -------- ---------- ----------
INCOME (LOSS) BEFORE INCOME TAXES AND
MINORITY INTEREST......................... (322) 227 (613) (474) 874 175 (133)
INCOME TAX BENEFIT (EXPENSE)................ 3 96 72 67 (247) (9)
-------- ------- --------- -------- -------- ---------- ----------
INCOME (LOSS) BEFORE MINORITY INTEREST...... (319) 323 (541) (407) 627 175 (142)
MINORITY INTEREST........................... (177) (177)
-------- ------- --------- -------- -------- ---------- ----------
NET INCOME (LOSS)........................... ($319) $323 ($541) ($407) $450 $175 ($319)
======== ======= ========= ======== ======== ========== ===========
27
COMCAST CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED JUNE 30, 2003
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)
Comcast Corporation
Condensed Consolidating Statement of Operations
For the Six Months Ended June 30, 2002
Elimination
Combined Non- and Consolidated
Comcast CCCI CCCH CCHMO Guarantor Consolidation Comcast
Parent Parent Parent Parents Subsidiaries Adjustments Corporation
-------- -------- -------- --------- -------- --------- -----------
REVENUES
Service revenues......................... $ $ $ $ $3,393 $ $3,393
Net sales from electronic retailing...... 1,978 1,978
-------- ------- --------- -------- -------- ---------- ----------
5,371 5,371
-------- ------- --------- -------- -------- ---------- ----------
COSTS AND EXPENSES
Operating (excluding depreciation)....... 1,465 1,465
Cost of goods sold from electronic
retailing (excluding depreciation)..... 1,255 1,255
Selling, general and administrative...... 977 977
Depreciation............................. 676 676
Amortization............................. 99 99
-------- ------- --------- -------- -------- ---------- ----------
4,472 4,472
-------- ------- --------- -------- -------- ---------- ----------
OPERATING INCOME............................ 899 899
OTHER INCOME (EXPENSE)
Interest expense......................... (280) (89) (369)
Investment loss, net..................... (707) (707)
Equity in net income (losses) of
affiliates............................. 419 188 (656) (49)
Other expense............................ (14) (14)
-------- ------- --------- -------- -------- ---------- ----------
139 (622) (656) (1,139)
-------- ------- --------- -------- -------- ---------- ----------
INCOME (LOSS) BEFORE INCOME TAXES
AND MINORITY INTEREST.................... 139 277 (656) (240)
INCOME TAX BENEFIT (EXPENSE)................ 98 (68) 30
-------- ------- --------- -------- -------- ---------- ----------
INCOME (LOSS) BEFORE MINORITY INTEREST...... 237 209 (656) (210)
MINORITY INTEREST........................... (89) (89)
-------- ------- --------- -------- -------- ---------- ----------
NET INCOME (LOSS)........................... $ $237 $ $ $120 ($656) ($299)
======== ======= ========= ======== ======== ========== ===========
28
COMCAST CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED JUNE 30, 2003
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)
Comcast Corporation
Condensed Consolidating Statement of Cash Flows
For the Six Months Ended June 30, 2003
Elimination
Combined Non- and Consolidated
Comcast CCCI CCCH CCHMO Guarantor Consolidation Comcast
Parent Parent Parent Parents Subsidiaries Adjustments Corporation
-------- -------- -------- --------- -------- --------- -----------
OPERATING ACTIVITIES
Net income (loss)............................ ($319) $323 ($541) ($407) $450 $175 ($319)
Adjustments to reconcile net income (loss)
to net cash provided by (used in)
operating activities:
Depreciation.............................. 1,636 1,636
Amortization.............................. 749 749
Non-cash interest (income) expense, net... 3 (88) 24 (61)
Equity in net (income) losses of
affiliates.............................. 310 (501) 407 282 (302) (175) 21
Losses (gains) on investments and other
(income) expense, net................... 257 257
Minority interest......................... 126 126
Deferred income taxes..................... (226) (226)
Proceeds from sales of trading securities. 85 85
Other..................................... 101 101
------ ------- --------- -------- --------- ---------- ----------
(9) (178) (131) (213) 2,900 2,369
Changes in working capital
Decrease in accounts receivable, net.... 32 32
Increase in inventories, net............ (27) (27)
Decrease in other current assets........ 3 3
Increase (decrease) in accounts
payable, accrued expenses and
other current liabilities............. 62 (8) 29 (160) (306) (383)
------ ------- --------- -------- --------- ---------- ----------
62 (8) 29 (160) (298) (375)
Net cash provided by (used in)
operating activities.................. 53 (186) (102) (373) 2,602 1,994
------ ------- --------- -------- --------- ---------- ----------
FINANCING ACTIVITIES
Proceeds from borrowings.................. 8,138 600 110 8,848
Retirements and repayments of debt........ (2,050) (1,554) (6,250) (1,764) 73 (11,545)
Other..................................... (3) (3)
------ ------- --------- -------- --------- ---------- ----------
Net cash provided by (used in)
financing activities.................. 6,088 (954) (6,250) (1,764) 180 (2,700)
------ ------- --------- -------- --------- ---------- ----------
INVESTING ACTIVITIES
Net transactions with affiliates............. (6,141) 1,140 6,352 2,137 (3,488)
Acquisitions, net of cash acquired........... (22) (22)
Proceeds from sales of (purchases of)
short-term investments, net............... (20) (20)
Proceeds from restructuring of TWE
investment................................ 2,100 2,100
Proceeds from sales of investments and
assets held for sale...................... 1,492 1,492
Purchases of investments..................... (130) (130)
Capital expenditures......................... (2,041) (2,041)
Additions to intangible and other
noncurrent assets......................... (130) (130)
------ ------- --------- -------- --------- ---------- ----------
Net cash provided by (used in)
investing act........................... (6,141) 1,140 6,352 2,137 (2,239) 1,249
------ ------- --------- -------- --------- ---------- ----------
INCREASE IN CASH AND CASH EQUIVALENTS........ 543 543
CASH AND CASH EQUIVALENTS, beginning of
period.................................. 781 781
------ ------- --------- -------- --------- ---------- ----------
CASH AND CASH EQUIVALENTS, end of period..... $ $ $ $ $1,324 $ $1,324
======== ======= ========= ======== ======== ========== ===========
29
COMCAST CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED JUNE 30, 2003
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONCLUDED
(Unaudited)
Comcast Corporation
Condensed Consolidating Statement of Cash Flows
For the Six Months Ended June 30, 2002
Elimination
Combined Non- and Consolidated
Comcast CCCI CCCH CCHMO Guarantor Consolidation Comcast
Parent Parent Parent Parents Subsidiaries Adjustments Corporation
-------- -------- -------- --------- -------- --------- -----------
OPERATING ACTIVITIES
Net income (loss)............................ $ $237 $ $ $120 ($656) ($299)
Adjustments to reconcile net income (loss)
to net cash provided by (used in)
operating activities:
Depreciation.............................. 676 676
Amortization.............................. 99 99
Non-cash interest (income) expense, net... (8) 30 22
Equity in net (income) losses of
affiliates.............................. (419) (188) 656 49
Losses (gains) on investments and other
(income) expense, net................... 739 739
Minority interest......................... 89 89
Deferred income taxes..................... (4) (4)
Other..................................... (10) (10)
-------- ------- --------- ------- -------- ---------- ----------
(190) 1,551 1,361
Changes in working capital
Decrease in accounts receivable, net.... 9 9
Decrease in inventories................. 40 40
Increase in other current assets........ (18) (18)
Decrease in accounts payable, accrued
expenses and other current liabilities. (27) (315) (342)
-------- ------- --------- ------- -------- ---------- ----------
(27) (284) (311)
Net cash provided by (used in) operating
activities............................. (217) 1,267 1,050
-------- ------- --------- ------- -------- ---------- ----------
FINANCING ACTIVITIES
Proceeds from borrowings.................. 624 8 632
Retirements and repayments of debt........ (840) (329) (1,169)
Other..................................... 66 66
-------- ------- --------- ------- -------- ---------- ----------
Net cash used in financing activities........ (216) (255) (471)
-------- ------- --------- ------- -------- ---------- ----------
INVESTING ACTIVITIES
Net transactions with affiliates.......... 433 (433)
Acquisitions, net of cash required........ (16) (16)
Proceeds from sales of (purchase of)
short-term investments, net............. 3 3
Proceeds from sales of investments........ 596 596
Purchases of investments.................. (32) (32)
Capital expenditures...................... (789) (789)
Additions to intangible and other
noncurrent assets....................... (133) (133)
-------- ------- --------- ------- -------- ---------- ----------
Net cash provided by (used in)
investing activities.................... 433 (804) (371)
-------- ------- --------- ------- -------- ---------- ----------
INCREASE IN CASH AND CASH EQUIVALENTS........ 208 208
CASH AND CASH EQUIVALENTS, beginning of
period.................................. 350 350
-------- ------- --------- ------- -------- ---------- ----------
CASH AND CASH EQUIVALENTS, end of period..... $ $ $ $ $558 $ $558
======== ======= ========= ======== ======== ========== ===========
30
COMCAST CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED JUNE 30, 2003
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Overview
We have grown significantly in recent years through both strategic
acquisitions and growth in our existing businesses. On November 18, 2002,
we completed the acquisition of AT&T Corp.'s broadband business (the
"Broadband acquisition"). The Broadband acquisition substantially increased
the size of our cable operations and caused significant changes in our
capital structure, including a substantially higher amount of debt. As a
result, direct comparisons of our results of operations for periods prior
to November 18, 2002 to subsequent periods are not meaningful. See "Results
of Operations" for a discussion of the effects of the Broadband acquisition
on our results of operations.
We have historically met our cash needs for operations through our
cash flows from operating activities. We have generally financed our
acquisitions and capital expenditures through issuances of our common
stock, borrowings of long-term debt, sales of investments and from existing
cash, cash equivalents and short-term investments.
General Developments of Business
Refer to Note 4 to our financial statements included in Item 1 for a
discussion of our acquisitions and other significant events.
Liquidity and Capital Resources
We believe that we will be able to meet our current and long-term
liquidity and capital requirements, including fixed charges, through our
cash flows from operating activities, existing cash, cash equivalents and
investments, and through available borrowings under our existing credit
facilities.
Available sources of financing to fund these requirements include our
existing cash and cash equivalents, amounts available under our lines of
credit, which total $5.163 billion as of June 30, 2003, and through the
future sales or monetizations of our investments.
As more fully described in Note 4 to our financial statements included
in Item 1 (see Sale of QVC), in July 2003 we and Liberty Media Corporation
("Liberty") entered into a stock purchase agreement pursuant to which
Liberty will purchase our approximate 57% interest in QVC for approximately
$7.9 billion in a transaction we expect to close by the end of 2003. Upon
closing of the transaction, we expect to receive from Liberty shares of
Liberty Series A common stock and a three-year senior unsecured note
bearing interest at LIBOR plus 1.5%. The values of the shares and the note
to be delivered to us are approximately $2.6 billion and $5.3 billion,
respectively. Under the stock purchase agreement, we will have registration
rights that should facilitate the disposal or monetization of our shares in
Liberty and in the note.
Cash and Cash Equivalents
We have traditionally maintained significant levels of cash and cash
equivalents to meet our short-term liquidity requirements. Our cash
equivalents are recorded at fair value. Cash and cash equivalents as of
June 30, 2003 were $1.324 billion, substantially all of which is
unrestricted.
Investments
A significant portion of our investments are in publicly traded
companies and are reflected at fair value which fluctuates with market
changes.
We do not have any significant contractual funding commitments with
respect to any of our investments. Our ownership interests in these
investments may, however, be diluted if we do not fund our investees'
non-binding capital calls. We continually evaluate our existing
investments, as well as new investment opportunities.
Refer to Note 5 to our financial statements included in Item 1 for a
discussion of our investments.
Financing
As of June 30, 2003 and December 31, 2002, our debt, including capital
lease obligations, was $32.339 billion and $34.910 billion, respectively.
The $2.571 billion decrease from December 31, 2002 to June 30, 2003
results principally from the effects of our net repayments during 2003.
Included in our debt as of June 30, 2003 and December 31, 2002 was
short-term debt and current portion of long-term debt of $2.416 billion and
$6.953 billion, respectively.
In January, March and May 2003, we sold an
31
COMCAST CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED JUNE 30, 2003
aggregate of $4.0 billion of public debt consisting of $600 million of
5.85% senior notes due 2010, $900 million of 6.50% senior notes due 2015,
$750 million of 5.50% senior notes due 2011, $750 million of 7.05% senior
notes due 2033 and $1.0 billion of 5.30% senior notes due 2014. We used all
of the net proceeds from the offerings to repay a portion of our short-term
debt outstanding and to repay a portion of amounts outstanding under our
revolving credit facilities due in 2005 and 2007.
On March 31, 2003, in connection with the closing of the TWE
restructuring, we received $2.1 billion in cash which was used to repay
debt, including the remaining outstanding balance of our short-term debt.
In May 2003, we redeemed at their respective scheduled redemption
price $433 million aggregate principal amount of certain of our senior
notes and senior subordinated notes with maturities ranging from 2003 to
2023 and interest rates ranging from 8 1/4% to 9.65%. We financed the
redemptions with amounts available under our existing credit facilities.
In May 2003, we borrowed an aggregate of $2.75 billion, representing
all amounts available under two new credit agreements. Borrowings under the
new credit agreements, which bear interest at LIBOR plus 1.125% and LIBOR
plus 0.875%, respectively, and are due in 2006, were used to repay a
portion of the $3.18 billion that was outstanding under our term loan due
2004. The new credit agreements replaced our 364-day credit facility, which
expired in May 2003.
In June 2003, we sold our interest in CC VIII, LLC, a cable joint
venture with Charter Communications, Inc. ("Charter") to Paul G. Allen,
Charter's Chairman, for $728 million in cash. We used the proceeds from the
sale to repay a portion of the amounts outstanding under our revolving
credit facilities.
During 2003, we settled our obligations relating to certain of our
Exchangeable Notes by delivering the underlying shares of common stock to
the counterparty upon maturity of the instruments, and the equity collar
agreements related to the underlying shares expired. The transaction, which
represented a non-cash financing and investing activity, had no effect on
our statement of cash flows due to its non-cash nature. As of June 30,
2003, the securities held by us collateralizing the Exchangeable Notes were
sufficient to satisfy the debt obligations associated with the outstanding
Exchangeable Notes.
Excluding the effects of interest rate risk management instruments,
18.5% and 31.8% of our long- term debt, including short-term debt and
current portion, as of June 30, 2003 and December 31, 2002, respectively,
was at variable rates.
We have and may in the future, depending on certain factors including
market conditions, make optional repayments on our debt obligations, which
may include open market repurchases of our outstanding public notes and
debentures.
Refer to Note 7 to our financial statements included in Item 1 for a
discussion of our long-term debt.
Equity Price Risk Management
We have entered into cashless collar agreements (the "Equity Collars")
and prepaid forward sales agreements ("Prepaid Forward Sales") which we
account for at fair value. The Equity Collars and Prepaid Forward Sales
limit our exposure to and benefits from price fluctuations in the common
stock of certain of our investments accounted for as trading securities.
The change in the fair value of our investments accounted for as
trading securities was substantially offset by the changes in the fair
values of the Equity Collars and the derivative components of the ZONES,
Exchangeable Notes and Prepaid Forward Sales. See "Results of Operations -
Investment Income (Loss), Net" below.
_______________________
Statement of Cash Flows
Cash and cash equivalents increased $543 million as of June 30, 2003
from December 31, 2002. The increase in cash and cash equivalents resulted
from cash flows from operating, financing and investing activities, which
are explained below.
Net cash provided by operating activities, which amounted to $1.994
billion for the six months ended June 30, 2003, is comprised of operating
income excluding depreciation and amortization (see "Results of
Operations"), the effects of interest payments and changes in working
capital as a result of the timing of receipts and disbursements, including
income tax payments.
32
COMCAST CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED JUNE 30, 2003
Net cash used in financing activities consists primarily of borrowings
and repayments of debt. Net cash used in financing activities was $2.700
billion for the six months ended June 30, 2003. During the six months ended
June 30, 2003, we borrowed $8.848 billion, consisting of:
o $3.988 billion of senior notes,
o $3.100 billion under revolving credit facilities,
o $1.650 billion under a term loan due 2006, and
o $110 million under capital leases and other.
During the six months ended June 30, 2003, we repaid $11.545 billion of our
debt, consisting of:
o $3.750 billion of our short-term debt,
o $3.200 billion of our revolving credit facilities,
o $2.750 billion of our term loans,
o $1.800 billion of our senior notes, and
o $45 million under capital leases and other.
Net cash provided by investing activities was $1.249 billion for the
six months ended June 30, 2003, including capital expenditures of $2.041
billion, proceeds from the restructuring of our TWE investment of $2.100
billion, and proceeds from sales of investments and assets held for sale of
$1.492 billion.
_______________________
Results of Operations
The effects of the Broadband acquisition were to increase our revenues
and expenses, resulting in increases in our operating income. The increases
in our depreciation expense from the 2002 to 2003 interim periods are
primarily due to the effects of the Broadband acquisition and our increased
levels of capital expenditures. The increases in our amortization expense
and interest expense from the 2002 to 2003 interim periods are primarily
due to the effects of the Broadband acquisition.
As the effect of the Broadband acquisition was to substantially
increase the size of our cable operations, direct comparisons of our
results of operations for periods prior to November 18, 2002 to subsequent
periods are not meaningful. Refer to "Pro Forma Results" below for
additional information relating to our cable segment operating results as
if the Broadband acquisition occurred on January 1, 2002.
33
COMCAST CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED JUNE 30, 2003
Our summarized financial information for the interim periods is as follows
(dollars in millions, "NM" denotes percentage is not meaningful):
Three Months Ended
June 30, Increase / (Decrease)
2003 2002 $ %
--------- --------- --------- ---------
Revenues....................................................... $5,685 $2,704 $2,981 110.3%
Cost of goods sold from electronic retailing................... 697 626 71 11.3
Operating, selling, general and administrative expenses........ 3,157 1,212 1,945 160.5
Depreciation................................................... 837 342 495 144.7
Amortization................................................... 383 46 337 732.6
--------- --------- --------- ---------
Operating income............................................... 611 478 133 27.8
--------- --------- --------- ---------
Interest expense............................................... (492) (182) 310 170.3
Investment income (loss), net.................................. 9 (459) 468 NM
Equity in net losses of affiliates............................. (1) (44) (43) (97.7)
Other income................................................... 24 9 15 166.7
Income tax (expense) benefit................................... (77) 33 (110) NM
Minority interest.............................................. (96) (45) 51 113.3
--------- --------- --------- ---------
Net loss....................................................... ($22) ($210) ($188) (89.5%)
========= ========= ========= =========
Six Months Ended
June 30, Increase / (Decrease)
2003 2002 $ %
--------- --------- --------- ---------
Revenues....................................................... $11,203 $5,371 $5,832 108.6%
Cost of goods sold from electronic retailing................... 1,370 1,255 115 9.2
Operating, selling, general and administrative expenses........ 6,364 2,442 3,922 160.6
Depreciation................................................... 1,636 676 960 142.0
Amortization................................................... 749 99 650 656.6
--------- --------- --------- ---------
Operating income............................................... 1,084 899 185 20.6
--------- --------- --------- ---------
Interest expense............................................... (1,017) (369) 648 175.6
Investment loss, net........................................... (221) (707) (486) (68.7)
Equity in net losses of affiliates............................. (21) (49) (28) (57.1)
Other income (expense)......................................... 42 (14) 56 NM
Income tax (expense) benefit................................... (9) 30 (39) NM
Minority interest.............................................. (177) (89) 88 98.9
--------- --------- --------- ---------
Net loss....................................................... ($319) ($299) $20 6.7%
========= ========= ========= =========
Consolidated Operating Results
Revenues
The increases in consolidated revenues for the interim periods from
2002 to 2003 are primarily attributable to increases in service revenues in
our Cable segment principally due to the effects of the Broadband
acquisition and, to a lesser extent, to increases in net sales in our
Commerce segment (see "Operating Results by Business Segment" below). The
remaining increases are primarily the result of increases in revenues from
our content operations, principally due to increases in distribution and
advertising revenues of our cable channels.
Cost of goods sold from electronic retailing
Refer to the "Commerce" section of "Operating Results by Business
Segment" below for a discussion of the increases in cost of goods sold from
electronic retailing.
Operating, selling, general and administrative expenses
The increases in consolidated operating, selling, general
34
COMCAST CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED JUNE 30, 2003
and administrative expenses for the interim periods from 2002 to 2003 are
primarily attributable to increases in expenses in our Cable segment
principally due to the effects of the Broadband acquisition and, to a
lesser extent, to increases in expenses in our Commerce segment (see
"Operating Results by Business Segment" below). The remaining increases are
primarily the result of increased expenses in our content operations, and
also due to increases in corporate overhead as a result of the Broadband
acquisition.
Depreciation and Amortization
The increases in depreciation and amortization expense for the interim
periods from 2002 to 2003 are primarily attributable to our Cable segment
and are principally due to the effects of the Broadband acquisition, as
well as our increased levels of capital expenditures. As a result of the
Broadband acquisition, we recorded approximately $4 billion of franchise
related customer relationship intangible assets which we are amortizing
over their average estimated useful life of approximately four years.
_______________________
Operating Results by Business Segment
The following represent the operating results of our significant
business segments, "Cable" and "Commerce." The remaining components of our
operations are not independently significant to our consolidated financial
condition or results of operations. Refer to Note 11 to our financial
statements included in Item 1 for a summary of our financial data by
business segment (dollars in millions).
Cable
The discussion of our cable segment operating results is presented as
a historical comparison of the 2003 interim periods and the pre-Broadband
acquisition 2002 interim periods. In order to provide additional
information relating to our cable segment operating results, we also
present a discussion comparing our cable segment operating results on a pro
forma basis. Pro forma data is used by management to evaluate performance
when significant acquisitions or dispositions occur. Historical data
reflects results of acquired businesses only after the acquisition dates
while pro forma data enhances comparability of financial information
between periods by adjusting the data as if the acquisitions (or
dispositions) occurred at the beginning of the prior year. Our pro forma
data is only adjusted for the timing of acquisitions and does not include
adjustments for costs related to integration activities, cost savings or
synergies that have or may be achieved by the combined businesses. In the
opinion of management, this information is not indicative of what our
results would have been had we operated Broadband since January 1, 2002,
nor of our future results.
35
COMCAST CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED JUNE 30, 2003
Pro Forma Results
As previously described, the following discussion includes the pro
forma results of our cable segment operations as if the Broadband
acquisition had occurred on January 1, 2002.
Three Months Ended
June 30, Increase/(Decrease)
2003 2002 $ %
--------- --------- --------- --------
Video........................................................ $3,037 $2,888 $149 5.1%
High-speed Internet.......................................... 548 349 199 56.6
Phone........................................................ 205 208 (3) (1.9)
Advertising sales............................................ 285 264 21 8.3
Other........................................................ 153 161 (8) (5.0)
Franchise fees............................................... 151 139 12 8.7
--------- --------- --------- --------
Revenues................................................ 4,379 4,009 370 9.2
Operating, selling, general and administrative expenses...... 2,782 2,832 (50) (1.8)
--------- --------- --------- --------
Operating income before depreciation
and amortization (a).................................... $1,597 $1,177 $420 35.7%
========= ========= ========= =========
Six Months Ended
June 30, Increase/(Decrease)
2003 2002 $ %
--------- --------- --------- --------
Video........................................................ $6,018 $5,715 $303 5.3%
High-speed Internet.......................................... 1,040 661 379 57.3
Phone........................................................ 430 383 47 12.0
Advertising sales............................................ 521 481 40 8.3
Other........................................................ 299 326 (27) (8.3)
Franchise fees............................................... 302 287 15 5.2
--------- --------- --------- --------
Revenues................................................ 8,610 7,853 757 9.6
Operating, selling, general and administrative expenses...... 5,592 5,630 (38) (0.7)
--------- --------- --------- --------
Operating income before depreciation
and amortization (a).................................... $3,018 $2,223 $795 35.8%
========= ========= ========= =========
____________
(a) Operating income before depreciation and amortization is defined as
operating income before depreciation and amortization and impairment
charges, if any, related to fixed and intangible assets. As such, it
eliminates the significant level of non-cash depreciation and amortization
expense that results from the capital intensive nature of our businesses
and intangible assets recognized in business combinations, and is
unaffected by our capital structure or investment activities. Our
management and Board of Directors use this measure in evaluating our
consolidated operating performance and the operating performance of all of
our operating segments. This metric is used to allocate resources and
capital to our operating segments and is a significant component of our
annual incentive compensation programs. We believe that this measure is
also useful to investors as it is one of the bases for comparing our
operating performance with other companies in our industries, although our
measure may not be directly comparable to similar measures used by other
companies. Because we use this measure as the measure of our segment
profit or loss, we reconcile it to operating income, the most directly
comparable financial measure calculated and presented in accordance with
Generally Accepted Accounting Principles (GAAP), in the business segment
footnote to our financial statements. This measure should not be
considered as a substitute for operating income (loss), net income (loss),
net cash provided by operating activities or other measures of performance
or liquidity reported in accordance with GAAP.
Video revenue consists of our basic, expanded basic, premium,
pay-per-view, equipment and digital cable services. The increases in video
revenue for the interim periods from 2002 to 2003 are primarily due to the
effects of increases in average monthly revenue per basic subscriber as a
result of rate increases in our traditional analog video service and growth
in digital subscribers. These increases were offset by lower pay-per-view
revenue due to the absence of major boxing events in the second quarter of
2003 and the continuing impact of pre-
36
acquisition basic subscriber losses in the newly acquired cable systems.
From June 30, 2002 to June 30, 2003, we added approximately 1,127,000
digital subscribers, or a 19.4% increase in digital subscribers.
The increases in high-speed Internet revenue for the interim periods
from 2002 to 2003 are primarily due to the addition of approximately
1,474,000 high-speed Internet subscribers from June 30, 2002 to June 30,
2003, or a 50.6% increase in high-speed Internet subscribers, as well as to
the effects of increases in average monthly revenue per subscriber as a
result of rate increases.
The decrease in phone revenue for the three-month interim period from
2002 to 2003 is primarily due to our reduced marketing efforts during 2003.
The increase in phone revenue for the six-month interim period from 2002 to
2003 is primarily due to an increase in the number of phone subscribers
during 2002 offset, to some extent, by the effects of our reduced marketing
efforts during 2003. During the three months ended June 30, 2003, our phone
subscribers decreased by approximately 52,000 subscribers primarily as a
result of our reduced marketing efforts. We anticipate that our phone
subscribers may decrease by up to a total of approximately 150,000
subscribers for all of 2003.
The increases in advertising sales revenue for the interim periods
from 2002 to 2003 are primarily due to the effects of growth in
regional/national advertising as a result of the continuing success of our
regional interconnects, and growth in a soft local advertising market.
Other revenue includes installation revenues, guide revenues,
commissions from electronic retailing, revenues of our digital media
center, revenues of our regional sports programming networks and revenue
from other product offerings.
The increases in franchise fees collected from our cable subscribers
for the interim periods from 2002 to 2003 are primarily attributable to the
increase in our revenues upon which the fees apply.
The decreases in operating, selling, general and administrative
expense for the interim periods from 2002 to 2003 are primarily due to the
effects of approximately $100 million and $188 million of acquisition and
employee termination related costs recorded by Broadband during the three
and six months ended June 30, 2002, offset by the effects of increases in
the costs of cable programming, high-speed Internet subscriber growth, and
increases in labor costs and other volume related expenses in our
operations.
Our cost of programming increases as a result of changes in rates,
subscriber growth, additional channel offerings and our acquisitions. We
anticipate the cost of cable programming will increase in the future as
cable programming rates increase and additional sources of cable
programming become available.
37
COMCAST CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED JUNE 30, 2003
Historical Results
Three Months Ended
June 30, Increase
2003 2002 $ %
--------- --------- --------- --------
Video........................................................ $3,037 $1,186 $1,851 156.1%
High-speed Internet.......................................... 548 140 408 291.4
Phone........................................................ 205 6 199 NM
Advertising sales............................................ 285 100 185 185.0
Other........................................................ 153 58 95 163.8
Franchise fees............................................... 151 51 100 196.1
--------- --------- --------- --------
Revenues................................................ 4,379 1,541 2,838 184.2
Operating, selling, general and administrative expenses...... 2,782 887 1,895 213.6
--------- --------- --------- --------
Operating income before depreciation
and amortization (a).................................... $1,597 $654 $943 144.2%
========= ========= ========= =========
Six Months Ended
June 30, Increase
2003 2002 $ %
--------- --------- --------- --------
Video........................................................ $6,018 $2,336 $3,682 157.6%
High-speed Internet.......................................... 1,040 259 781 301.5
Phone........................................................ 430 12 418 NM
Advertising sales............................................ 521 181 340 187.8
Other........................................................ 300 120 180 150.0
Franchise fees............................................... 302 102 200 196.1
--------- --------- --------- --------
Revenues................................................ 8,611 3,010 5,601 186.1
Operating, selling, general and administrative expenses...... 5,593 1,759 3,834 218.0
--------- --------- --------- --------
Operating income before depreciation
and amortization (a).................................... $3,018 $1,251 $1,767 141.2%
========= ========= ========= =========
_______________
(a) See footnote (a) on page 36.
Of the $1.851 billion and $3.682 billion increases in video revenues
for the interim periods from 2002 to 2003, $1.780 billion and $3.532
billion, respectively, is attributable to the effects of our acquisition of
Broadband and $71 million and $150 million, respectively, relates to
changes in rates and subscriber growth in our historical operations, driven
principally by growth in digital subscribers. From June 30, 2002 to June
30, 2003, we added approximately 435,000 digital subscribers in our
historical operations, or a 22.0% increase in digital subscribers. During
the three and six months ended June 30, 2003, we added approximately
162,000 and 331,000 digital subscribers, respectively, in our consolidated
cable operations.
The increases in high-speed Internet revenue for the interim periods
from 2002 to 2003 are primarily due to the effects of the Broadband
acquisition and growth in high-speed Internet subscribers. From June 30,
2002 to June 30, 2003, we added approximately 713,000 high- speed Internet
subscribers in our historical operations, or a 61.0% increase in high-speed
Internet subscribers. During the three and six months ended June 30, 2003,
we added approximately 351,000 and 768,000 high-speed Internet subscribers,
respectively, in our consolidated cable operations.
The increases in phone revenue are attributable to the effects of our
acquisition of Broadband.
The increases in advertising sales revenue for the interim periods
from 2002 to 2003 are primarily due to the effects of the Broadband
acquisition, as well as to the effects of growth in regional/national
advertising as a result of the continuing success of our regional
interconnects, and growth in a soft local advertising market.
The increases in other revenue for the interim periods from 2002 to
2003 are primarily attributable to the effects of the Broadband
acquisition.
The increases in franchise fees collected from our
38
COMCAST CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED JUNE 30, 2003
cable subscribers for the interim periods from 2002 to 2003 are primarily
attributable to the increases in our revenues upon which the fees apply.
The increases in operating, selling, general and administrative
expense for the interim periods from 2002 to 2003 are primarily due to the
effects of the Broadband acquisition, as well as to the effects of
increases in the costs of cable programming, high-speed Internet subscriber
growth, and, to a lesser extent, increases in labor costs and other volume
related expenses in our historical operations.
Commerce (QVC, Inc. and Subsidiaries)
Three Months Ended
June 30, Increase
2003 2002 $ %
--------- --------- --------- --------
Net sales from electronic retailing.......................... $1,101 $990 $111 11.3%
Cost of goods sold from electronic retailing................. 697 626 71 11.3
Operating, selling, general and administrative
expenses................................................ 185 170 15 8.8
--------- --------- --------- --------
Operating income before depreciation
and amortization (a).................................... $219 $194 $25 13.2%
========= ========= ========= ========
Gross margin................................................. 36.7% 36.7%
========= =========
Six Months Ended
June 30, Increase
2003 2002 $ %
--------- --------- --------- --------
Net sales from electronic retailing.......................... $2,163 $1,978 $185 9.4%
Cost of goods sold from electronic retailing................. 1,370 1,255 115 9.2
Operating, selling, general and administrative
expenses................................................ 363 337 26 7.7
--------- --------- --------- --------
Operating income before depreciation
and amortization (a).................................... $430 $386 $44 11.5%
========= ========= ========= ========
Gross margin................................................. 36.7% 36.5%
========= =========
_______________
(a) See footnote (a) on page 36.
Of the $111 million and $185 million increases in net sales from
electronic retailing for the interim periods from 2002 to 2003, $93 million
and $167 million, respectively, are attributable to increases in net sales
in Germany, Japan, and the United Kingdom, and to the effects of
fluctuations in foreign currency exchange rates during the interim periods.
The remaining increases in net sales from electronic retailing are
attributable to growth in QVC's U.S. operations. Changes in the average
number of homes receiving QVC services and net sales per home in the United
States as compared to the prior year interim periods are as follows:
Three Months Six Months
Ended Ended
June 30, 2003 June 30, 2003
----------------- ---------------
Increase in average number of homes.......................... 2.4% 2.7%
Increase (decrease) in net sales per home.................... 0.4% (1.1%)
It is unlikely that the number of homes receiving the QVC service
domestically will continue to grow at rates comparable to prior periods
given that the QVC service is already received by approximately 97% of all
U.S. cable television homes and substantially all satellite television
homes in the U.S. Future growth in domestic sales will depend increasingly
on continued additions of new customers from homes already receiving the
QVC service and growth in repeat sales to existing customers.
39
COMCAST CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED JUNE 30, 2003
The increases in cost of goods sold are primarily related to the
growth in net sales. The increase in gross margin for the six month interim
period from 2002 to 2003 is primarily due to the effects of shifts in sales
mix.
The increases in operating, selling, general and administrative
expenses are primarily attributable to higher variable costs and personnel
costs associated with the increases in sales volume.
Consolidated Analysis
Interest Expense
The increases in interest expense for the interim periods from 2002 to
2003 are due to the effects of our increased amount of debt outstanding as
a result of the Broadband acquisition.
We anticipate that, for the foreseeable future, interest expense will
be significant. We believe we will continue to be able to meet our
obligations through our ability both to generate cash flow from operations
and to obtain external financing.
---------------------------
Investment Income (Loss), Net
Investment income (loss), net for the interim periods includes the
following (in millions):
Three Months Ended Six Months Ended
June 30, June 30,
2003 2002 2003 2002
--------- --------- --------- ---------
Interest and dividend income................................... $49 $11 $82 $18
Gains (losses) on sales and exchanges of investments, net...... (103) 22 (101)
Investment impairment losses................................... (15) (208) (70) (221)
Unrealized gains (losses) on trading securities................ 307 (420) 292 (1,440)
Mark to market adjustments on derivatives
related to trading securities............................. (294) 324 (305) 1,171
Mark to market adjustments on derivatives and hedged items..... (38) (63) (242) (134)
--------- --------- --------- ---------
Investment income (loss), net............................. $9 ($459) ($221) ($707)
========= ========= ========= =========
Investment income (loss), net during the 2003 interim periods includes
fair value adjustments for the derivative component of the Comcast
Exchangeable Notes. There is no corresponding offset to these adjustments
in our statement of operations since the underlying Comcast common stock
held in treasury will continue to be carried at our historical cost and not
adjusted for changes in fair value. Accordingly, our future results of
operations may be affected by fluctuations in the fair value of the
derivative component of the Comcast Exchangeable Notes in future periods.
Equity in Net Losses of Affiliates
The decreases in equity in net losses of affiliates for the interim
periods from 2002 to 2003 are primarily attributable to decreases in the
net losses of certain of our international equity method investees.
Other Income (Expense)
The changes in other income (expense) for the interim periods from
2002 to 2003 are primarily attributable to lease rental income related to
certain assets acquired in connection with the Broadband acquisition.
Income Tax (Expense) Benefit
The changes in income tax (expense) benefit for the interim periods
from 2002 to 2003 are primarily the result of the effects of changes in our
income (loss) before taxes and minority interest.
Minority Interest
The increases in minority interest for the interim periods from 2002
to 2003 are attributable to the effects of changes in the net income or
loss of our less than wholly owned consolidated subsidiaries, as well as to
the minority interests in certain subsidiaries acquired in connection with
the Broadband acquisition.
We believe that our operations are not materially affected by
inflation.
40
COMCAST CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED JUNE 30, 2003
ITEM 4. CONTROLS AND PROCEDURES
Our chief executive officer and our co-chief financial officers, after
evaluating the effectiveness of our disclosure controls and procedures (as
defined in the Securities Exchange Act of 1934 Rules 13a-15(e) or
15d-15(e)) as of the end of the period covered by this quarterly report,
have concluded, based on the evaluation of these controls and procedures
required by paragraph (b) of Exchange Act Rules 13a-15 or 15d-15, that our
disclosure controls and procedures were adequate and designed to ensure
that material information relating to us and our consolidated subsidiaries
would be made known to them by others within those entities.
Changes in internal control over financial reporting. There were no changes
in our internal control over financial reporting identified in connection
with the evaluation required by paragraph (d) of Exchange Act Rules 13a-15
or 15d-15 that occurred during our last fiscal quarter that have materially
affected, or is reasonably likely to materially affect, our internal
control over financial reporting.
PART II. OTHER INFORMATION
- -------- -----------------
ITEM 1. LEGAL PROCEEDINGS
Refer to Note 10 to our condensed financial statements included in Item 1
for a discussion of recent developments related to our legal proceedings.
41
COMCAST CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED JUNE 30, 2003
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At the Annual Meeting on May 7, 2003, the shareholders approved the
following proposals:
To ratify the appointment of Deloitte & Touche LLP as the Company's
independent auditors for the 2003 fiscal year.
Class of Stock For Against Abstain
------------- --- ------- ---------
Class A 222,875,542 6,887,126 3,007,862
Class B 141,665,625
To approve the 2003 Stock Option Plan.
Class of Stock For Against Abstain
------------- --- ------- ---------
Class A 147,846,481 42,626,229 2,782,001
Class B 141,665,625
To approve the amended and restated 2002 Restricted Stock Plan.
Class of Stock For Against Abstain
------------- --- ------- ---------
Class A 165,885,062 23,680,216 3,689,432
Class B 141,665,625
To approve the amended and restated 2002 Employee Stock Purchase Plan.
Class of Stock For Against Abstain
------------- --- ------- ---------
Class A 223,890,208 5,887,583 2,992,688
Class B 141,665,625
To approve the 2002 Supplemental Cash Bonus Plan.
Class of Stock For Against Abstain
------------- --- ------- ---------
Class A 215,138,532 14,389,016 3,242,983
Class B 141,665,625
To approve the amended and restated 2002 Non-Employee Director Compensation
Plan (Stock Program).
Class of Stock For Against Abstain
------------- --- ------- ---------
Class A 216,197,458 13,227,317 3,345,756
Class B 141,665,625
To approve an amendment to the Company's Amended and Restated Articles of
Incorporation.
Class of Stock For Against Abstain
------------- --- ------- ---------
Class A 220,235,565 8,867,163 3,667,804
Class B 141,665,625
ITEM 5. OTHER INFORMATION
The information under this Item is being provided as required by Item 11 of
Form 8-K. Participants in the Comcast Corporation Retirement-Investment
Plan, the Company's 401(k) plan, were subject to a "blackout notice," as
defined in Regulation BTR, as a result of the transition of the plan
administrator from Putnam Investments to Fidelity Investments. The blackout
period commenced on June 16, 2003 and ended on July 7, 2003.
42
COMCAST CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED JUNE 30, 2003
During the blackout period, the ability of participants in the plan to make
certain changes and elections with regard to their assets and investment
options under the plan was suspended. From June 16, 2003 through June 24,
2003, the ability of all participants to receive in-kind distributions of
Company stock from their plan accounts was suspended. From June 24, 2003
through July 7, 2003, the ability of all participants in the plan to enroll
in the plan and to purchase, sell or otherwise acquire or transfer an
interest in plan assets, to make changes in investment options and to
initiate distributions and loans was suspended. The ability of the
Company's directors and executive officers to purchase, sell or otherwise
transfer any equity securities of the Company (or derivative securities of
those equity securities) acquired in connection with service to or
employment with the Company was also suspended from June 16, 2003 through
July 7, 2003. All of the Company's equity securities were subject to the
blackout period.
The person designated by the Company to respond to inquiries about the
blackout period was Elizabeth Weber at Comcast Corporation, 1500 Market
Street, Philadelphia, PA 19102-2148; telephone (215) 665-1700.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits required to be filed by Item 601 of Regulation S-K:
31 Certifications of Chief Executive Officer and Co-Chief Financial
Officers pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32 Certification of Chief Executive Officer and Co-Chief Financial
Officers pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
(b) Reports on Form 8-K:
(i) We filed a Current Report on Form 8-K under Items 7(c) and 9 on May
9, 2003 announcing our results of operations for the quarter ended
March 31, 2003.
43
COMCAST CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED JUNE 30, 2003
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
COMCAST CORPORATION
---------------------------------------
/S/ LAWRENCE J. SALVA
---------------------------------------
Lawrence J. Salva
Senior Vice President and Controller
(Principal Accounting Officer)
Date: August 1, 2003
44