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, 2004
OR
( ) Transition Report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the Transition Period from ________ to
________.
Commission File Number 001-15471
COMCAST HOLDINGS CORPORATION
(Exact name of registrant as specified in its charter)
PENNSYLVANIA 23-1709202
- -------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1500 Market Street, Philadelphia, PA 19102-2148
- -------------------------------------------------------------------------------
(Address of principal executive offices)
(Zip Code)
Registrant's telephone number, including area code: (215) 665-1700
__________________________
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding twelve months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such requirements
for the past 90 days.
Yes X No ____
__________________________
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12-b2 of the Exchange Act). Yes ___ No X
As of June 30, 2004, there were 21,591,115 shares of Class A Common Stock,
916,198,519 shares of Class A Special Common Stock and 9,444,375 shares of Class
B Common Stock outstanding.
__________________________
The Registrant meets the conditions set forth in General Instructions H(1)(a)
and (b) of Form 10-Q and is therefore filing this Form with the reduced
disclosure format.
COMCAST HOLDINGS CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED JUNE 30, 2004
TABLE OF CONTENTS
Page Number
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
Condensed Consolidated Balance Sheet as of June 30, 2004
and December 31, 2003 (Unaudited)......................................................2
Condensed Consolidated Statement of Operations for the Three and Six Months
Ended June 30, 2004 and 2003 (Unaudited)...............................................3
Condensed Consolidated Statement of Cash Flows for the Six Months
Ended June 30, 2004 and 2003 (Unaudited)...............................................4
Notes to Condensed Consolidated Financial Statements (Unaudited).......................5
ITEM 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations.............................................................15
ITEM 3. Quantitative and Qualitative Disclosures about Market Risk............................19
ITEM 4. Controls and Procedures...............................................................19
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings.....................................................................19
ITEM 6. Exhibits and Reports on Form 8-K......................................................19
SIGNATURES ......................................................................................20
___________________________________
This Quarterly Report on Form 10-Q is for the three and six months ended
June 30, 2004. 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 Holdings," "we," "us" and
"our" refer to Comcast Holdings Corporation and its subsidiaries, and "Comcast"
refers to Comcast Corporation.
You should carefully review the information contained in this Quarterly
Report, and should particularly consider any risk factors that we set forth in
this Quarterly Report and in other reports or documents that we file from time
to time with the SEC. In this Quarterly Report, we state our beliefs of future
events and of our future financial performance. In some cases, you can identify
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. In evaluating those statements, you should specifically consider
various factors, including the risks outlined below. Actual events or our actual
results may differ materially from any of our forward-looking statements.
Our businesses may be affected by, among other things:
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.
As more fully described elsewhere in this Quarterly Report and in our
Annual Report on Form 10-K for the year ended December 31, 2003, on September
17, 2003, we sold to Liberty Media Corporation our approximate 57% interest in
QVC, Inc., which markets a wide variety of products directly to consumers
primarily on merchandise-focused television programs. Accordingly, financial
information related to QVC is presented as a discontinued operation in our
financial statements.
COMCAST HOLDINGS CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED JUNE 30, 2004
PART I. FINANCIAL INFORMATION
- ------- ---------------------
ITEM 1. FINANCIAL STATEMENTS
CONDENSED CONSOLIDATED BALANCE SHEET
(Unaudited)
(Dollars in millions, except share data)
June 30, December 31,
2004 2003
------------ ------------
ASSETS
------
CURRENT ASSETS
Cash and cash equivalents.................................................. $578 $1,509
Investments................................................................ 181 139
Accounts receivable, less allowance for doubtful accounts of $71 and $74... 466 453
Other current assets....................................................... 183 179
------------ ------------
Total current assets................................................... 1,408 2,280
------------ ------------
NOTES RECEIVABLE FROM AFFILIATES.............................................. 4,143 3,310
DUE FROM AFFILIATES, net...................................................... 1,530 943
INVESTMENTS................................................................... 3,228 3,363
PROPERTY AND EQUIPMENT, net of accumulated depreciation of $4,940 and $4,456.. 6,450 6,571
FRANCHISE RIGHTS.............................................................. 16,625 16,620
GOODWILL...................................................................... 5,667 5,663
OTHER INTANGIBLE ASSETS, net of accumulated amortization of $1,180 and $1,022. 1,723 1,350
OTHER NONCURRENT ASSETS, net.................................................. 269 302
------------ ------------
$41,043 $40,402
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES
Accounts payable........................................................... $281 $303
Accrued expenses and other current liabilities............................. 1,895 2,014
Deferred income taxes...................................................... 7 26
Current portion of long-term debt.......................................... 27 373
------------ ------------
Total current liabilities.............................................. 2,210 2,716
------------ ------------
LONG-TERM DEBT, less current portion.......................................... 7,534 7,828
NOTES PAYABLE TO AFFILIATES................................................... 641 61
DEFERRED INCOME TAXES......................................................... 8,657 8,288
OTHER NONCURRENT LIABILITIES.................................................. 2,262 2,289
MINORITY INTEREST............................................................. 405 316
COMMITMENTS AND CONTINGENCIES (NOTE 8)
STOCKHOLDERS' EQUITY
Preferred stock - authorized, 20,000,000 shares; issued, zero..............
Class A common stock, $1.00 par value - authorized,
200,000,000 shares; issued, 21,591,115 .................................. 22 22
Class A special common stock, $1.00 par value - authorized,
2,500,000,000 shares; issued, 916,198,519................................ 916 916
Class B common stock, $1.00 par value - authorized, 50,000,000 shares;
issued, 9,444,375........................................................ 9 9
Additional capital......................................................... 12,357 12,353
Retained earnings.......................................................... 6,035 5,623
Accumulated other comprehensive loss....................................... (5) (19)
------------ ------------
Total stockholders' equity............................................. 19,334 18,904
------------ ------------
$41,043 $40,402
============ ============
See notes to condensed consolidated financial statements.
2
COMCAST HOLDINGS CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED JUNE 30, 2004
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
(Dollars in millions)
Three Months Ended Six Months Ended
June 30, June 30,
2004 2003 2004 2003
----------- ----------- ---------- ----------
REVENUES................................................................... $2,148 $1,932 $4,237 $3,813
COSTS AND EXPENSES
Operating (excluding depreciation)..................................... 709 664 1,500 1,384
Selling, general and administrative.................................... 553 500 1,101 979
Depreciation........................................................... 302 329 635 633
Amortization........................................................... 43 43 90 89
----------- ----------- ---------- ----------
1,607 1,536 3,326 3,085
----------- ----------- ---------- ----------
OPERATING INCOME........................................................... 541 396 911 728
OTHER INCOME (EXPENSE)
Interest expense....................................................... (147) (168) (305) (339)
Interest income on affiliate notes, net................................ 41 14 82 11
Investment income (loss), net.......................................... 146 (1) 94 (31)
Equity in net losses of affiliates..................................... (11) (20) (19) (30)
Other income........................................................... 10 3 5 2
----------- ----------- ---------- ----------
39 (172) (143) (387)
----------- ----------- ---------- ----------
INCOME FROM CONTINUING OPERATIONS BEFORE
INCOME TAXES AND MINORITY INTEREST..................................... 580 224 768 341
INCOME TAX EXPENSE......................................................... (250) (84) (337) (132)
----------- ----------- ---------- ----------
INCOME FROM CONTINUING OPERATIONS BEFORE
MINORITY INTEREST...................................................... 330 140 431 209
MINORITY INTEREST.......................................................... (16) (8) (19) (20)
----------- ----------- ---------- ----------
INCOME FROM CONTINUING OPERATIONS.......................................... 314 132 412 189
INCOME FROM DISCONTINUED OPERATIONS, net of tax 71 129
----------- ----------- ---------- ----------
NET INCOME ................................................................ $314 $203 $412 $318
=========== =========== ========== ==========
See notes to condensed consolidated financial statements.
3
COMCAST HOLDINGS CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED JUNE 30, 2004
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
(Dollars in millions)
Six Months Ended June 30,
2004 2003
------------- -------------
OPERATING ACTIVITIES
Net income............................................................... $412 $318
Income from discontinued operations...................................... (129)
------------- -------------
Income from continuing operations........................................ 412 189
Adjustments to reconcile net income from continuing operations
to net cash provided by operating activities from continuing operations:
Depreciation........................................................... 635 633
Amortization........................................................... 90 89
Non-cash interest expense, net......................................... 23 5
Non-cash interest (income) expense on affiliate notes, net............. (82) (11)
Equity in net losses of affiliates..................................... 19 30
Losses (gains) on investments and other (income) expense, net.......... (70) 32
Non-cash contribution expense.......................................... 23
Minority interest...................................................... 19 20
Deferred income taxes.................................................. 264 123
Proceeds from sales of trading securities.............................. 85
Changes in operating assets and liabilities, net of effects of
acquisitions and divestitures
Change in accounts receivable, net................................... (3) 18
Change in accounts payable........................................... (22) (158)
Change in other operating assets and liabilities..................... 5 168
------------- -------------
Net cash provided by operating activities from continuing operations. 1,313 1,223
------------- -------------
FINANCING ACTIVITIES
Proceeds from borrowings................................................. 4 710
Retirements and repayments of debt....................................... (570) (1,570)
Net transactions with affiliates......................................... (704) 631
------------- -------------
Net cash used in financing activities from continuing operations..... (1,270) (229)
------------- -------------
INVESTING ACTIVITIES
Acquisitions, net of cash acquired....................................... (304) (22)
Proceeds from sales (purchases) of short-term investments, net........... 3 (2)
Proceeds from sales of investments....................................... 48 212
Purchases of investments................................................. (55) (43)
Capital expenditures..................................................... (618) (695)
Additions to intangible and other noncurrent assets...................... (48) (54)
------------- -------------
Net cash used in investing activities from continuing operations..... (974) (604)
------------- -------------
(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS............................ (931) 390
CASH AND CASH EQUIVALENTS, beginning of period.............................. 1,509 400
------------- -------------
CASH AND CASH EQUIVALENTS, end of period.................................... $578 $790
============= =============
See notes to condensed consolidated financial statements.
4
COMCAST HOLDINGS CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED JUNE 30, 2004
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Basis of Presentation
We have prepared these unaudited condensed consolidated financial
statements based upon Securities and Exchange Commission ("SEC") rules that
permit reduced disclosure for interim periods. We are an indirect wholly
owned subsidiary of Comcast Corporation ("Comcast"). Our presentation
differs from the consolidated financial statements of Comcast by excluding
both Comcast's corporate operations and certain cable operations, primarily
those acquired from AT&T in November 2002 (the "Broadband acquisition").
Subsequent to the Broadband acquisition, all of our and Comcast's cable
operations are operated as a single integrated cable business unit. Our
condensed consolidated financial statements reflect the assets,
liabilities, revenues and expenses directly attributable to us, as well as
allocations deemed reasonable by management, to present our financial
position, results of operations and cash flows on a stand-alone basis.
These allocations are further described in Note 10. All significant
intercompany accounts and transactions within our financial statements have
been eliminated.
These financial statements include all adjustments that are necessary for a
fair presentation of our 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.
Effective in the first quarter of 2004, we changed the unit of accounting
used for testing impairment of our indefinite-lived franchise rights to
geographic regions and performed impairment testing of our cable franchise
rights. We did not record any impairment charges in connection with this
impairment testing.
For a more complete discussion of our accounting policies and certain other
information, refer to the financial statements included in our Annual
Report on Form 10-K for the year ended December 31, 2003.
On September 17, 2003, we completed the sale of our approximate 57%
interest in QVC, Inc. ("QVC"). Accordingly, QVC has been presented as a
discontinued operation pursuant to Statement of Financial Accounting
Standards ("SFAS") No. 144, "Accounting for the Impairment or Disposal of
Long-Lived Assets."
The results of operations of QVC included within income from discontinued
operations, net of tax are as follows (in millions):
Three Months Six Months
Ended Ended
June 30, 2003 June 30, 2003
----------------- ---------------
Revenues.................................................. $1,101 $2,163
Income before income taxes and minority interest.......... $199 $371
Income tax expense........................................ $64 $137
Reclassifications
Certain reclassifications have been made to the prior year financial
statements to conform to those classifications used in 2004.
2. RECENT ACCOUNTING PRONOUNCEMENTS
FIN 46/FIN 46R
In January 2003, the Financial Accounting Standards Board ("FASB") issued
Interpretation No. 46, "Consolidation of Variable Interest Entities" ("FIN
46"). We adopted the provisions of FIN 46 effective January 1, 2002. Since
our initial application of FIN 46, the FASB addressed various
implementation issues regarding the application of FIN 46 to entities
outside its originally interpreted scope, focusing on Special Purpose
Entities, or SPEs. In December 2003, the FASB revised FIN 46 ("FIN 46R"),
which delayed the required implementation date until March 31, 2004 for
5
COMCAST HOLDINGS CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED JUNE 30, 2004
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)
entities that are not SPEs. The adoption of FIN 46R did not have a material
impact on our financial condition or results of operations.
EITF 03-16
In March 2004, the Emerging Issues Task Force ("EITF") reached a consensus
regarding Issue No. 03-16, "Accounting for Investments in Limited Liability
Companies" ("EITF 03-16"). EITF 03-16 requires investments in limited
liability companies ("LLCs") that have separate ownership accounts for each
investor to be accounted for similar to a limited partnership investment
under Statement of Position No. 78-9, "Accounting for Investments in Real
Estate Ventures." Investors would be required to apply the equity method of
accounting to their investments at a much lower ownership threshold than
the 20% threshold applied under Accounting Principles Board ("APB") No. 18,
"The Equity Method of Accounting for Investments in Common Stock." EITF
03-16 is effective for the first period beginning after June 15, 2004. The
adoption of EITF 03-16 will not have a material impact on our financial
condition or results of operations.
3. ACQUISITION
On May 10, 2004, we completed the purchase of TechTV, Inc. ("TechTV") by
acquiring all outstanding common and preferred stock of TechTV from Vulcan
Programming, Inc. for approximately $300 million in cash, funded with
borrowings under a note payable to affiliate. Substantially all of the
purchase price has been recorded as an intangible asset pending the
completion of a formal valuation. The results of TechTV are not material
for pro forma presentation. On May 28, 2004, G4 and TechTV began operating
as one network called G4techTV, which is available to approximately 42
million cable and satellite homes nationwide. We have classified G4techTV
as part of our content business segment (see Note 9).
4. INVESTMENTS
June 30, December 31,
2004 2003
---------------- -----------------
(in millions)
Fair value method
Liberty Media Corporation............................... $1,981 $2,644
Liberty Media International............................. 407
Sprint.................................................. 515 349
Other................................................... 45 41
---------------- -----------------
2,948 3,034
Equity method............................................... 338 329
Cost method................................................. 123 139
---------------- -----------------
Total investments....................................... 3,409 3,502
Less, current investments................................... 181 139
---------------- -----------------
Noncurrent investments...................................... $3,228 $3,363
================ =================
Fair Value Method
We hold unrestricted equity investments, which we account for as available
for sale or trading securities, in certain publicly traded companies. The
net unrealized pre-tax gains on investments accounted for as available for
sale securities as of June 30, 2004 and December 31, 2003 of $38 million
and $42 million, respectively, have been reported in our consolidated
balance sheet principally as a component of accumulated other comprehensive
loss, net of related deferred income taxes of $13 million and $15 million,
respectively.
On June 7, 2004, we received approximately 11 million shares of Liberty
Media International, Inc. ("Liberty International") Series A common stock
in connection with the spin-off by Liberty Media Corporation ("Liberty") of
6
COMCAST HOLDINGS CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED JUNE 30, 2004
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)
Liberty International. In the spin-off, each share of Liberty Series A and
Series B common stock received 0.05 shares of the new Liberty International
Series A common stock. As of June 30, 2004, we have classified all of the
shares of Liberty International Series A common stock that we received as
trading securities recorded at fair value within noncurrent investments.
Approximately 5 million of these shares collateralize a portion of the ten
year prepaid forward sale of Liberty common stock that we entered into in
December 2003.
The cost, fair value and unrealized gains and losses related to our
available for sale securities are as follows (in millions):
June 30, December 31,
2004 2003
----------------- -----------------
Cost....................................................... $32 $44
Unrealized gains........................................... 38 43
Unrealized losses.......................................... (1)
----------------- -----------------
Fair value................................................. $70 $86
================= =================
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,
2004 2003 2004 2003
--------- --------- --------- ----------
Interest, dividend and other investment income (expense)...... ($2) $4 ($8) $8
(Losses) gains on sales and exchanges of investments, net..... (1) 1 (1) 23
Investment impairment losses.................................. (3) (14) (3) (69)
Mark to market adjustments on trading securities.............. (38) 71 (55) 69
Mark to market adjustments on derivatives related
to trading securities.................................... 200 (68) 159 (65)
Mark to market adjustments on derivatives and hedged items.... (10) 5 2 3
--------- --------- --------- ----------
Investment income (loss), net................................. $146 ($1) $94 ($31)
========= ========= ========= ==========
5. LONG-TERM DEBT
The Cross-Guarantee Structure
To simplify Comcast's capital structure, Comcast and certain of its cable
holding company subsidiaries, including our wholly owned subsidiary Comcast
Cable Communications, LLC ("Comcast Cable"), have unconditionally
guaranteed each other's debt securities and indebtedness for borrowed
money. As of June 30, 2004, $20.675 billion of Comcast's debt securities
were entitled to the benefits of the cross-guarantee structure, including
$6.317 billion of Comcast Cable's debt securities.
Comcast Holdings Corporation is not a guarantor, and none of its debt is
guaranteed. As of June 30, 2004, $981 million of debt was outstanding at
Comcast Holdings Corporation.
Repayments of Senior Notes
On March 31, 2004, we repaid all $250 million principal amount of our
8.875% senior notes due 2007. On May 1, 2004, we repaid all $300 million
principal amount of our 8.125% senior notes due 2004. The repayments were
both financed with available cash.
7
COMCAST HOLDINGS CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED JUNE 30, 2004
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)
ZONES
At maturity, holders of our 2.0% Exchangeable Subordinated Debentures due
2029 (the "ZONES") are entitled to receive in cash an amount equal to the
higher of the principal amount of the ZONES or the market value of Sprint
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
common stock. As of June 30, 2004, the number of Sprint shares we held
exceeded the number of ZONES outstanding.
We separated the accounting for the ZONES into derivative and debt
components. We record the change in the fair value of the derivative
component of the ZONES and the change in the carrying value of the debt
component of the ZONES as follows (in millions):
ZONES
------------------------
Six Months Ended
June 30,
2004 2003
------------ -----------
Balance at Beginning of Period:
Debt component....................................... $515 $491
Derivative component................................. 268 208
------------ -----------
Total............................................. 783 699
Change in debt component to interest expense............. 13 12
Change in derivative component to investment income
(loss), net.......................................... (56) 65
Balance at End of Period:
Debt component....................................... 528 503
Derivative component................................. 212 273
------------ -----------
Total............................................. $740 $776
============ ===========
Interest Rates
Excluding the derivative component of the ZONES whose changes in fair value
are recorded to investment income (loss), net, our effective weighted
average interest rate was 7.51% and 7.56% as of June 30, 2004 and December
31, 2003, respectively.
Derivatives
We use derivative financial instruments to manage our exposure to
fluctuations in interest rates and securities prices. We have 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, 2004, we and certain of our subsidiaries had unused lines of
credit of $287 million under our respective credit facilities.
As of June 30, 2004, we and certain of our subsidiaries had unused
irrevocable standby letters of credit totaling $13 million to cover
potential fundings under various agreements.
8
COMCAST HOLDINGS CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED JUNE 30, 2004
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)
6. STOCKHOLDERS' EQUITY
Stock-Based Compensation
We account for stock-based compensation in accordance with APB Opinion No.
25, "Accounting for Stock Issued to Employees," and related
interpretations, as permitted by SFAS No. 123, "Accounting for Stock-Based
Compensation," ("SFAS No. 123") as amended. Compensation expense for stock
options is measured as the excess, if any, of the quoted market price of
the stock at the date of the grant over the amount an employee must pay to
acquire the stock. We record compensation expense for restricted stock
awards based on the quoted market price of the stock at the date of the
grant and the vesting period. We record compensation expense for stock
appreciation rights based on the changes in quoted market prices of the
stock or other determinants of fair value.
The following table illustrates the effect that applying the fair value
recognition provisions of SFAS No. 123 to stock-based compensation would
have had on net income. Upon further analysis during 2003, it was
determined that the expected option lives for options granted in prior
years should have been 7 years rather than the 8 years used previously. The
amounts in the table reflect this revision for all periods presented. Total
stock-based compensation expense was determined under the fair value method
for all awards using the accelerated recognition method as permitted under
SFAS No. 123 (in millions):
Three Months Ended Six Months Ended
June 30, June 30,
2004 2003 2004 2003
---------- ---------- ---------- --------
Net income, as reported................................... $314 $203 $412 $318
Add:Total stock-based compensation expense
included in net income, as reported above........ 6 1 8 2
Deduct: Total stock-based compensation expense
determined under fair value based method
for all awards relating to continuing
operations, net of related tax effects........... (21) (22) (39) (41)
Deduct: Total stock-based compensation expense
determined under fair value based method for
all awards relating to discontinued operations,
net of related tax effects....................... (4) (7)
---------- ---------- ---------- --------
Pro forma, net income..................................... $299 $178 $381 $272
========== ========== ========== ========
The pro forma effect on net income for the interim periods by applying SFAS
No. 123 may not be indicative of the effect on net income or loss in future
years because additional awards in future years are anticipated.
9
COMCAST HOLDINGS CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED JUNE 30, 2004
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)
Comprehensive Income
Our total comprehensive income for the interim periods was as follows (in
millions):
Three Months Ended Six Months Ended
June 30, June 30,
2004 2003 2004 2003
--------- ---------- --------- ----------
Net income.......................................... $314 $203 $412 $318
Unrealized losses on marketable securities.......... (1) (1) (1) (38)
Reclassification adjustments for losses (gains)
included in net income.......................... 7 (1) 15 21
Foreign currency translation gains.................. 9 15
--------- ---------- --------- ----------
Comprehensive income................................ $320 $210 $426 $316
========= ========== ========= ==========
7. STATEMENT OF CASH FLOWS - SUPPLEMENTAL INFORMATION
We 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,
2004 2003 2004 2003
--------- ---------- ----------- -----------
Interest............................................ $194 $226 $289 $331
Income taxes........................................ $86 $33 $103 $44
During the three and six month interim periods in 2004, Comcast received a
federal income tax refund of approximately $536 million.
During the six months ended June 30, 2004, property, plant and equipment
allocations were made to another Comcast subsidiary through non-cash
intercompany transactions in the amount of $107 million. During the six
months ended June 30, 2004, we recorded additional liabilities of
approximately $32 million relating to a subsidiary of Comcast, a
transaction that is considered a non-cash financing activity. This
additional liability resulted in a corresponding increase to due from
affiliates, net, in our consolidated balance sheet.
During the three months ended June 30, 2004, in connection with the
acquisition of TechTV (see Note 3), we issued shares in G4techTV with a
value of approximately $70 million, which is considered a non-cash
financing and investing activity.
8. COMMITMENTS AND CONTINGENCIES
Contingencies
At Home
-------
Litigation has been filed against us as a result of our alleged conduct
with respect to our investment in and distribution relationship with At
Home Corporation. At Home was a provider of high-speed Internet services
that filed for bankruptcy protection in September 2001. Filed actions are:
(i) class action lawsuits against us, Brian L. Roberts (our 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
in connection with transactions agreed to in March 2000 among At Home,
AT&T, Cox Communications, Inc. (Cox is also an investor in At Home and a
former distributor of the At Home service) and us; (ii) class action
lawsuits against Comcast Cable Communications, LLC, AT&T and others in the
United States District Court for the Southern District of New York,
10
COMCAST HOLDINGS CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED JUNE 30, 2004
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)
alleging securities law violations and common law fraud in connection with
disclosures made 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 us, Brian L. Roberts, Cox and
others, alleging breaches of fiduciary duty relating to the March 2000
transactions and seeking recovery of alleged short-swing profits of at
least $600 million pursuant to Section 16(b) of the Securities Exchange Act
of 1934 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. All of the
defendants served motions to dismiss on February 11, 2003. The court
dismissed the common law claims against us and Mr. Roberts, leaving only a
claim for "control person" liability under the Securities Exchange Act of
1934. In a subsequent decision, the court limited the remaining claim
against us and Mr. Roberts to disclosures that are alleged to have been
made by At Home prior to August 28, 2000. The Delaware case has been
transferred to the United States District Court for the Southern District
of New York, and we have moved to dismiss the Section 16(b) claims.
We deny any wrongdoing in connection with the claims that have been made
directly against us, our subsidiaries and Brian L. Roberts, and intend to
defend all of these claims vigorously. In our opinion, the final
disposition of these claims is not expected to have a material adverse
effect on our consolidated financial position, but could possibly be
material to our consolidated results of operations of any one period.
Further, no assurance can be given that any adverse outcome would not be
material to our consolidated financial position.
Other
-----
We are subject to other legal proceedings and claims that arise in the
ordinary course of our business. In our opinion, the amount of ultimate
liability with respect to such actions is not expected to materially affect
our financial position, results of operations or liquidity.
11
COMCAST HOLDINGS CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED JUNE 30, 2004
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)
9. FINANCIAL DATA BY BUSINESS SEGMENT
Our reportable segments consist of our Cable and Content businesses.
Beginning in the first quarter of 2004, although they do not meet the
quantitative disclosure requirements of SFAS No. 131, "Disclosures About
Segments of an Enterprise and Related Information," we elected to disclose
our content businesses separately as a reportable segment. Our content
segment consists of our national networks E! Entertainment, Style Network,
The Golf Channel, Outdoor Life Network and G4techTV. As a result of this
change, we have presented the comparable 2003 Content segment amounts. In
evaluating our segments' profitability, the components of net income (loss)
below operating income (loss) before depreciation and amortization are not
separately evaluated by our management (amounts in millions).
Corporate
and
Cable (1) Content Other (2) Total
--------- ------- --------- -------
Three Months Ended June 30, 2004
- --------------------------------
Revenues (3)........................................ $1,902 $199 $47 $2,148
Operating income (loss) before depreciation
and amortization (4)........................... 846 77 (37) 886
Depreciation and amortization....................... 294 39 12 345
Operating income (loss)............................. 552 38 (49) 541
Capital expenditures................................ 334 6 3 343
Three Months Ended June 30, 2003
- --------------------------------
Revenues (3)........................................ $1,716 $159 $57 $1,932
Operating income (loss) before depreciation
and amortization (4)........................... 738 56 (26) 768
Depreciation and amortization....................... 325 32 15 372
Operating income (loss)............................. 413 24 (41) 396
Capital expenditures................................ 350 4 2 356
Six Months Ended June 30, 2004
- ------------------------------
Revenues (3)........................................ $3,721 $375 $141 $4,237
Operating income (loss) before depreciation
and amortization (4)........................... 1,585 146 (95) 1,636
Depreciation and amortization....................... 623 74 28 725
Operating income (loss)............................. 962 72 (123) 911
Capital expenditures................................ 595 10 13 618
Six Months Ended June 30, 2003
- ------------------------------
Revenues (3)........................................ $3,361 $304 $148 $3,813
Operating income (loss) before depreciation
and amortization (4)........................... 1,413 97 (60) 1,450
Depreciation and amortization....................... 624 64 34 722
Operating income (loss)............................. 789 33 (94) 728
Capital expenditures................................ 685 7 3 695
As of June 30, 2004
- -------------------
Assets.............................................. $35,755 $2,460 $2,828 $41,043
As of December 31, 2003
- -----------------------
Assets.............................................. $34,952 $2,110 $3,340 $40,402
12
COMCAST HOLDINGS CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED JUNE 30, 2004
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)
_______________
(1) Our regional programming networks Comcast SportsNet, Comcast SportsNet
Mid-Atlantic, Comcast SportsNet Chicago, Cable Sports Southeast and
CN8-The Comcast Network are included in our cable segment.
(2) Corporate and other includes corporate activities, elimination entries
and all other businesses not presented in our cable or content
segments. Assets included in this caption consist primarily of our
investments (see Note 4).
(3) Non-US revenues were not significant in any period. No single customer
accounted for a significant amount of our revenue in any period.
(4) Operating income (loss) before depreciation and amortization is defined
as operating income before depreciation and amortization, impairment
charges, if any, related to fixed and intangible assets and gains or
losses from the sale of assets, if any. As such, it eliminates the
significant level of non-cash depreciation and amortization expense
that results from the capital intensive nature of our businesses and
intangible assets recognized in business combinations, and is
unaffected by our capital structure or investment activities. Our
management and Board of Directors use this measure in evaluating our
consolidated operating performance and the operating performance of all
of our operating segments. This metric is used to allocate resources
and capital to our operating segments and is a significant component of
our annual incentive compensation programs. We believe that this
measure is also useful to investors as it is one of the bases for
comparing our operating performance with other companies in our
industries, although our measure may not be directly comparable to
similar measures used by other companies. This measure should not be
considered as a substitute for operating income (loss), net income
(loss), net cash provided by operating activities or other measures of
performance or liquidity reported in accordance with generally accepted
accounting principles.
10. RELATED PARTY TRANSACTIONS
Our related party transactions for the interim periods presented are as
follows (in millions):
Three Months Ended Six Months Ended
June 30, June 30,
2004 2003 2004 2003
--------- --------- --------- ----------
Content affiliation agreement revenue......................... $15 $8 $28 $17
Comcast management fees....................................... 40 34 79 71
Comcast cost sharing charges:
Cable-related costs...................................... 52 42 105 82
Other costs.............................................. 49 38 97 76
Software licensing fees....................................... 3 3
Interest income on affiliate notes, net....................... 41 14 82 11
Our content businesses generate a portion of their revenues through the
sale of subscriber services under affiliation agreements with cable
subsidiaries of Comcast. These amounts are included in service revenues in
our consolidated statement of operations. Amounts related to similar
affiliation agreements between our content businesses and our wholly owned
subsidiaries are eliminated in our consolidated financial statements.
Comcast has entered into management agreements with our cable subsidiaries.
The management agreements generally provide that Comcast supervise the
management and operations of the cable systems and arrange for and
supervise certain administrative functions. As compensation for such
services, the agreements provide for Comcast to charge management fees
based on a percentage of gross revenues. These charges are included in
selling, general and administrative expenses in our consolidated statement
of operations.
We reimburse Comcast for certain cable-related costs under a cost sharing
agreement. These charges are included in selling, general and
administrative expenses in our consolidated statement of operations.
13
COMCAST HOLDINGS CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED JUNE 30, 2004
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONCLUDED
(Unaudited)
We purchase certain other services from Comcast under cost sharing
arrangements on terms that reflect Comcast's actual cost. These charges are
included in selling, general and administrative expenses in our
consolidated statement of operations.
Comcast has purchased long-term, non-exclusive patent and software licenses
to use on Comcast's and our interactive program guides. Comcast charges us
a licensing fee for use of this software. This charge is included in
selling, general and administrative expenses in our consolidated statement
of operations.
Comcast Financial Agency Corporation ("CFAC"), an indirect wholly owned
subsidiary of ours, provides cash management services to Comcast and to
certain cable subsidiaries of Comcast. Under this arrangement, Comcast's
and these subsidiaries' cash receipts are deposited with and held by CFAC,
as custodian and agent, which invests and disburses such funds at our
direction. Interest income related to this cash was not significant during
the 2004 or 2003 interim periods.
With the exception of cash payments related to interest and income taxes,
we consider all of our transactions with Comcast or its affiliates to be
financing transactions, which are presented as net transactions with
affiliates in our consolidated statement of cash flows. Our significant
financing transactions with Comcast and its affiliates are described below.
As of June 30, 2004 and December 31, 2003, due from affiliates in our
consolidated balance sheet primarily consists of amounts due from Comcast
and from certain cable subsidiaries of Comcast for advances we made for
working capital and capital expenditures in the ordinary course of
business. Also, included within accrued expenses and other current
liabilities as of June 30, 2004 and December 31, 2003 is approximately $560
million and $528 million, respectively, related to other Comcast
subsidiaries.
QVC, a discontinued operation, has an affiliation agreement with certain
cable subsidiaries of Comcast to carry QVC's programming. In return for
carrying QVC programming, QVC pays these Comcast subsidiaries an allocated
portion, based upon market share, of a percentage of net sales of
merchandise sold to QVC customers located in their service areas. These
amounts are not significant and are included in income from discontinued
operations in our consolidated statement of operations. Amounts related to
a similar affiliation agreement between QVC and our wholly owned
subsidiaries are not significant and are included in service revenues and
income from discontinued operations in our consolidated statement of
operations.
As of June 30, 2004 and December 31, 2003, notes receivable from affiliates
and notes payable to affiliates consist of notes receivable from and notes
payable to Comcast and certain cable subsidiaries of Comcast. Our notes
receivable and notes payable, whose interest receivable and payable are
included in our condensed consolidated balance sheet, have the following
characteristics (amounts in millions):
June 30, 2004 December 31, 2003
------------------------------------- ----------------------------------------
Notes Receivable Notes Payable Notes Receivable Notes Payable
------------------ ---------------- ------------------ -----------------
Principal balance $4,107 $629 $3,284 $58
Interest receivable (payable) $36 ($12) $26 ($3)
Interest rate range 5.0% to 7.5% 5.0% to 7.5% 5.0% to 7.5% 5.0% to 7.5%
Maturity date range 2009-2014 2012-2014 2012-2013 2012-2013
14
COMCAST HOLDINGS CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED JUNE 30, 2004
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Information for this item is omitted pursuant to SEC General Instruction H
to Form 10-Q, except as noted below.
Overview
We are an indirect wholly owned subsidiary of Comcast Corporation
("Comcast"). We are principally involved in the management and operation of
broadband communications networks (our cable segment) and in the management of
programming content over cable and satellite television networks (our content
segment). During the six months ended June 30, 2004, we received over 87% of our
revenue from our cable segment, primarily through monthly subscriptions to our
video, high-speed Internet and phone services, as well as from advertising.
Subscribers typically pay us monthly, based on rates and related charges that
vary according to their chosen level of service and the type of equipment they
use. Revenue from our content segment is derived from the sale of advertising
time and affiliation agreements with cable and satellite television companies.
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 common stock, borrowings of long-term
debt, sales of investments and from existing cash, cash equivalents and
short-term investments.
Business Developments
On July 28, 2004, Comcast and Liberty Media Corporation ("Liberty")
completed their previously announced agreement in which Liberty redeemed 120.3
million shares of its Series A common stock we held in exchange for 100% of the
stock of a Liberty subsidiary that held Liberty's 10% ownership interest in E!
Entertainment Television, Inc., its 100% ownership interest in International
Channel Networks, all of Liberty's rights, benefits and obligations under a TCI
Music contribution agreement, and approximately $545 million of cash (the
"Liberty transaction"). The Liberty transaction also removed all litigation
pending between Comcast and Liberty regarding the TCI Music contribution
agreement, which Comcast assumed as part of its acquisition of Broadband in
November 2002.
Refer to Note 3 to our financial statements included in Item 1 for a
discussion of our acquisition.
Results of Continuing Operations
Revenues
Consolidated revenues for the three and six month interim periods in 2004
increased $216 million and $424 million, respectively, from the same periods in
2003. Of these increases, $186 million and $360 million relate to our cable
segment, which is discussed separately below. The remaining increases are
primarily the result of our content segment, which achieved combined revenue
growth of 25.3% and 23.4%, respectively, during the three and six month interim
periods in 2004 compared to the same periods in 2003. These increases in our
content segment were the result of increases in distribution revenue and
advertising revenue.
Operating, selling, general and administrative expenses
Consolidated operating, selling, general and administrative expenses for
the three and six month interim periods in 2004 increased $98 million and $238
million, respectively, from the same periods in 2003. Of these increases, $78
million and $188 million, respectively, relate to our cable segment, which is
discussed separately below. The remaining increases for the three month interim
period relate primarily to increases in our content divisions' expenses while
the remaining increases for the six month interim period relate to increases in
both our content divisions' expenses and to corporate expenses.
Depreciation
Depreciation expense decreased $27 million and increased $2 million,
respectively, for the three and six month interim periods in 2004 compared to
the same periods in 2003. The changes are primarily attributable to our cable
segment and are principally due to the allocations of property, plant and
equipment to other Comcast subsidiaries during the 2004 interim periods.
Amortization
Amortization expense remained consistent for the three and six month
interim periods in 2004 compared to the same periods in 2003.
15
COMCAST HOLDINGS CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED JUNE 30, 2004
_________
Cable Segment Operating Results
The following table presents our cable segment operating results (dollars
in millions):
Three Months Ended
June 30, Increase
2004 2003 $ %
---------- ---------- ----------- ----------
Video........................................................ $1,330 $1,257 $73 5.8%
High-speed Internet.......................................... 314 229 85 37.1
Advertising sales............................................ 129 109 20 18.3
Other........................................................ 71 68 3 4.4
Franchise fees............................................... 58 53 5 9.4
---------- ---------- ----------- ----------
Revenues.................................................. 1,902 1,716 186 10.8
Operating, selling, general and administrative expenses...... 1,056 978 78 8.0
---------- ---------- ----------- ----------
Operating income before depreciation and amortization (a).... $846 $738 $108 14.6%
========== ========== =========== ==========
Six Months Ended
June 30, Increase
2004 2003 $ %
---------- ---------- ----------- ----------
Video........................................................ $2,630 $2,486 $144 5.8%
High-speed Internet.......................................... 601 433 168 38.8
Advertising sales............................................ 234 202 32 15.8
Other........................................................ 142 136 6 4.4
Franchise fees............................................... 114 104 10 9.6
---------- ---------- ----------- ----------
Revenues.................................................. 3,721 3,361 360 10.7
Operating, selling, general and administrative expenses...... 2,136 1,948 188 9.7
---------- ---------- ----------- ----------
Operating income before depreciation and amortization (a).... $1,585 $1,413 $172 12.2%
========== ========== =========== ==========
_______________
(a) Operating income before depreciation and amortization is defined as
operating income before depreciation and amortization, impairment charges,
if any, related to fixed and intangible assets and gains or losses from the
sale of assets, if any. As such, it eliminates the significant level of
non-cash depreciation and amortization expense that results from the
capital intensive nature of our businesses and intangible assets recognized
in business combinations, and is unaffected by our capital structure or
investment activities. Our management and Board of Directors use this
measure in evaluating our consolidated operating performance and the
operating performance of all of our operating segments. This metric is used
to allocate resources and capital to our operating segments and is a
significant component of our annual incentive compensation programs. We
believe that this measure is also useful to investors as it is one of the
bases for comparing our operating performance with other companies in our
industries, although our measure may not be directly comparable to similar
measures used by other companies. Because we use operating income before
depreciation and amortization 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.
16
COMCAST HOLDINGS CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED JUNE 30, 2004
Revenues
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 2003 to 2004 are primarily due to the effects of rate
increases in our traditional video service and growth in digital subscribers.
From June 30, 2003 to June 30, 2004, we added approximately 412,000 digital
subscribers, or a 17.0% increase in digital subscribers. We expect continued
growth in our video services revenue.
The increases in high-speed Internet revenue for the interim periods from
2003 to 2004 are primarily due to the addition of approximately 593,000
high-speed Internet subscribers from June 30, 2003 to June 30, 2004, or a 31.5%
increase in high-speed Internet subscribers. We expect continued high-speed
Internet revenue growth as overall demand for our services continues to
increase.
The increases in advertising sales revenue for the interim periods from
2003 to 2004 are primarily due to the effects of growth in regional/national
advertising as a result of the continuing success of our regional interconnects
and a stronger local advertising market.
Other revenue includes installation revenues, guide revenues, commissions
from electronic retailing, revenue from our regional programming networks,
commercial data revenue, revenue from other product offerings and phone
revenues.
Expenses
Total operating, selling, general and administrative expenses increased for
the interim periods from 2003 to 2004 primarily as a result of increases in the
costs of cable programming, increases in labor and other volume related expenses
associated with the growth in our high-speed Internet and digital cable
services, and increases in charges from cost-sharing arrangements.
Consolidated Income (Expense) Items
Interest Expense
The changes in interest expense for the interim periods from 2003 to 2004
are due to our decreased amount of debt outstanding as a result of our debt
reduction during 2003.
Interest Income on Affiliate Notes, Net
The changes in interest income on affiliate notes, net for the interim
periods from 2003 to 2004 are principally due to an increase in our notes
receivable from affiliates during 2003 and 2004.
____________
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,
2004 2003 2004 2003
---------- ----------- --------- ---------
Interest, dividend and other investment income (expense)...... ($2) $4 ($8) $8
(Losses) gains on sales and exchanges of investments, net..... (1) 1 (1) 23
Investment impairment losses.................................. (3) (14) (3) (69)
Mark to market adjustments on trading securities.............. (38) 71 (55) 69
Mark to market adjustments on derivatives
related to trading securities............................ 200 (68) 159 (65)
Mark to market adjustments on derivatives and hedged items.... (10) 5 2 3
---------- ----------- --------- ---------
Investment income (loss), net............................ $146 ($1) $94 ($31)
========== =========== ========= =========
17
COMCAST HOLDINGS CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED JUNE 30, 2004
We have entered into derivative financial instruments that we account for
at fair value and which economically hedge the market price fluctuations in the
common stock of certain of our investments accounted for as trading securities.
Investment income (loss), net includes the fair value adjustments related to our
trading securities and derivative financial instruments. The change in the fair
value of our investments accounted for as trading securities was substantially
offset by the changes in the fair value of the related derivatives, except for
the mark to market adjustments on our investment in Sprint, 116 million shares
of Liberty and 6 million shares of Liberty International for the three and six
months ended June 30, 2004.
During the three months ended June 30, 2004, investment income (loss), net
includes $224 million of investment income related to the decrease in the fair
value of the derivative component of the ZONES debt. This fair value adjustment
results principally from the change in the common stock underlying the ZONES
debt from the non-dividend paying Sprint PCS tracking stock to the dividend
paying Sprint FON common stock as a result of the elimination by Sprint of its
tracking stock in April 2004. In the future, we expect that changes in the fair
value of the derivative component of the ZONES debt will be substantially offset
by changes in the fair value of the Sprint FON common stock we hold and account
for as a trading security.
We are exposed to changes in the fair value of approximately 116 million
shares of Liberty common stock through the closing date of the Liberty
transaction and we will continue to be exposed to changes in the fair value of
approximately 6 million shares of Liberty International common stock we hold and
account for as trading securities because we have not entered into a
corresponding derivative to hedge either of these market exposures.
Accordingly, our investment income (loss) is affected by fluctuations in
the fair values of the Liberty and Liberty International common stocks.
Investment income (loss), net for the three and six month interim periods in
2004 includes losses of $8 million and $118 million, respectively, related to
these financial instruments.
Income Tax Expense
The changes in income tax expenses for the interim periods from 2003 to
2004 are primarily the result of the effects of the increases in our income from
continuing operations before taxes and minority interest.
Minority Interest
The changes in minority interest for the interim periods from 2003 to 2004
are attributable to the effects of changes in the net income or loss of our less
than wholly owned consolidated subsidiaries.
We believe that our operations are not materially affected by inflation.
18
COMCAST HOLDINGS CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED JUNE 30, 2004
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
There have been no significant changes to the information required under
this Item from what was disclosed in our 2003 Form 10-K.
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 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 effective 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 are reasonably likely to materially affect,
our internal control over financial reporting.
PART II. OTHER INFORMATION
- -------- -----------------
ITEM 1. LEGAL PROCEEDINGS
Refer to Note 8 to our condensed consolidated financial statements
included in Item 1 of this Quarterly Report on Form 10-Q for a discussion
of recent developments related to our legal proceedings.
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:
None.
19
COMCAST HOLDINGS CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED JUNE 30, 2004
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 HOLDINGS CORPORATION
-----------------------------------------
/S/ LAWRENCE J. SALVA
-----------------------------------------
Lawrence J. Salva
Senior Vice President, Chief Accounting
Officer and Controller
(Principal Accounting Officer)
Date: August 11, 2004
20