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| CMCSA > SEC Filings for CMCSA > Form 10-Q on 6-Aug-2009 | All Recent SEC Filings |
6-Aug-2009
Quarterly Report
Overview
We are the nation's leading provider of cable services, offering a variety of entertainment, information and communications services to residential and commercial customers. As of June 30, 2009, our cable systems served approximately 23.9 million video customers, 15.3 million high-speed Internet customers and 7.0 million phone customers and passed over 50.9 million homes in 39 states and the District of Columbia. We report the results of these operations as our Cable segment, which generates approximately 95% of our revenue. Our Cable segment generates revenue primarily through subscriptions to our video, high-speed Internet and phone services ("cable services"). Other Cable segment revenue sources include advertising and the operation of our regional sports networks. Our other reportable segment, Programming, consists primarily of our consolidated national programming networks, including E!, Golf Channel, VERSUS, G4 and Style. Revenue from our Programming segment is generated primarily from the sale of advertising, from monthly per subscriber license fees paid by multichannel video providers and from licensing our programming internationally.
Highlights and business developments for the six months ended June 30, 2009 include the following:
• an increase in consolidated revenue of 4.9% to approximately $17.8 billion and an increase in consolidated operating income of 11.5% to approximately $3.7 billion compared to the same period in 2008
• an increase in Cable segment revenue of 5.1% to approximately $16.8 billion and an increase in operating income before depreciation and amortization of 6.2% to approximately $6.9 billion compared to the same period in 2008
• the addition of approximately 393,000 high-speed Internet customers, approximately 531,000 digital phone customers, a decrease of approximately 292,000 video customers and the addition or upgrade of approximately 538,000 digital video customers
• a reduction in Cable segment capital expenditures of 14.2% to approximately $2.2 billion compared to the same period in 2008
• the repurchase of approximately 15.5 million shares of our Class A and Class A Special common stock under our share repurchase authorization for approximately $215 million
• the initiation of a cash tender offer to repurchase $1.3 billion aggregate principal amount of our outstanding notes using proceeds from borrowings and cash from operations
Consolidated Operating Results
Three Months Ended Increase/ Six Months Ended Increase/
June 30 (Decrease) June 30 (Decrease)
(in millions) 2009 2008 2009 2008
Revenue $ 8,938 $ 8,553 4.5 % $ 17,773 $ 16,942 4.9 %
Costs and Expenses:
Operating, selling, general and
administrative (excluding
depreciation and amortization) 5,403 5,202 3.8 10,794 10,417 3.6
Depreciation 1,406 1,371 2.6 2,786 2,761 0.9
Amortization 254 230 10.6 507 459 10.4
Operating income 1,875 1,750 7.1 3,686 3,305 11.5
Other income (expense) items,
net (495 ) (676 ) (26.8 ) (1,067 ) (985 ) 8.3
Income before income taxes 1,380 1,074 28.6 2,619 2,320 12.9
Income tax expense (424 ) (455 ) (6.7 ) (885 ) (963 ) (8.1 )
Net income from consolidated
operations 956 619 54.5 1,734 1,357 27.8
Net (income) loss attributable
to noncontrolling interests 11 13 (15.4 ) 5 7 (28.6 )
Net income attributable to
Comcast Corporation $ 967 $ 632 53.0 % $ 1,739 $ 1,364 27.5 %
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All percentages are calculated based on actual amounts. Minor differences may exist due to rounding.
Consolidated Revenue
Our Cable segment and Programming segment accounted for substantially all of the increases in consolidated revenue for the three and six months ended June 30, 2009 compared to the same periods in 2008. Our other business activities consist primarily of Comcast Interactive Media and Comcast Spectacor. Cable segment revenue and Programming segment revenue are discussed separately in "Segment Operating Results."
Consolidated Operating, Selling, General and Administrative Expenses
Our Cable segment accounted for substantially all of the increases in consolidated operating, selling, general and administrative expenses for the three and six months ended June 30, 2009 compared to the same periods in 2008. The remaining changes related to our other business activities, primarily growth in our Comcast Interactive Media business and Comcast Spectacor. Cable segment and Programming segment operating, selling, general and administrative expenses are discussed separately in "Segment Operating Results."
Consolidated Depreciation and Amortization
Depreciation expense for the three and six months ended June 30, 2009 compared to the same periods in 2008 increased slightly primarily due to capital expenditures.
The increases in amortization expense for the three and six months ended June 30, 2009 compared to the same periods in 2008 were primarily due to increases in software intangibles.
Segment Operating Results
Our segment operating results are presented based on how we assess operating performance and internally report financial information. To measure the performance of our operating segments, we use operating income before depreciation and amortization, excluding impairments related to fixed and intangible assets, and gains or losses from the sale of assets, if any. This measure eliminates the significant level of noncash depreciation and amortization expense that results from the capital-intensive nature of our businesses and from intangible assets recognized in business combinations. Additionally, it is unaffected by our capital structure or investment activities. We use this measure to evaluate our consolidated operating performance and the operating performance of our operating segments, and to allocate resources and capital to our operating segments. It is also a significant performance measure in our annual incentive compensation programs. We believe that this measure is useful to investors because it is one of the bases for comparing our operating performance with that of other
companies in our industries, although our measure may not be directly comparable to similar measures used by other companies. Because we use this metric to measure 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 in the United States ("GAAP") in the business segment footnote to our consolidated financial statements (see Note 11 to our condensed consolidated financial statements). This measure should not be considered a substitute for operating income (loss), net income (loss) attributable to Comcast Corporation, net cash provided by operating activities, or other measures of performance or liquidity we have reported in accordance with GAAP.
Cable Segment Operating Results
Three Months Ended
June 30 Increase/(Decrease)
(in millions) 2009 2008 $ %
Video(a) $ 4,884 $ 4,800 $ 84 1.7 %
High-speed Internet 1,929 1,792 137 7.7
Phone 801 640 161 25.3
Advertising(a) 325 405 (80 ) (19.6 )
Other(a) 299 236 63 26.0
Franchise fees 238 227 11 4.9
Revenue 8,476 8,100 376 4.6
Operating expenses(a) 3,350 3,141 209 6.7
Selling, general and administrative
expenses(a) 1,625 1,597 28 1.8
Operating income before depreciation and
amortization $ 3,501 $ 3,362 $ 139 4.1 %
Six Months Ended
June 30 Increase/(Decrease)
(in millions) 2009 2008 $ %
Video(a) $ 9,813 $ 9,578 $ 235 2.4 %
High-speed Internet 3,838 3,542 296 8.4
Phone 1,578 1,227 351 28.6
Advertising(a) 587 751 (164 ) (21.9 )
Other(a) 537 467 70 15.1
Franchise fees 472 451 21 4.7
Revenue 16,825 16,016 809 5.1
Operating expenses(a) 6,695 6,304 391 6.2
Selling, general and administrative
expenses(a) 3,223 3,208 15 0.5
Operating income before depreciation and
amortization $ 6,907 $ 6,504 $ 403 6.2 %
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(a) Reclassifications have been made to 2008 amounts to conform to classifications used in 2009.
Cable Segment Revenue
Video
Our video revenue increased during the three and six months ended June 30, 2009 compared to the same periods in 2008 primarily due to rate adjustments and customer upgrades to digital and advanced services, offset by a decline in video customers. During the three and six months ended June 30, 2009, the number of video customers decreased by approximately 214,000 and 292,000, respectively, primarily due to increased competition in our service areas, as well as the weakness in the economy. During the three and six months ended June 30, 2009, we added or upgraded approximately 250,000 and 538,000 customers to our digital video service, respectively. As of June 30, 2009, approximately 73% of our 23.9 million video customers subscribed to at least one of our digital video services. Our average monthly video revenue per video customer increased to approximately $68 as of June 30, 2009 from approximately $65 as of June 30, 2008. Continued competition and weak economic conditions are expected to result in further declines in the number of video customers.
High-Speed Internet
The increases in high-speed Internet revenue for the three and six months ended June 30, 2009 compared to the same periods in 2008 were primarily due to increases in the number of residential and commercial customers. During the three and six months ended June 30, 2009, we added approximately 65,000 and 393,000 high-speed Internet customers, respectively. Average monthly revenue per high-speed Internet customer has remained relatively stable. The rate of residential customer and revenue growth has slowed due to increased competition and weak economic conditions.
Phone
Our phone revenue increased for the three and six months ended June 30, 2009 compared to the same periods in 2008 due to increases in the number of phone customers. During the three and six months ended June 30, 2009, we added approximately 233,000 and 531,000 digital phone customers, respectively. Average monthly revenue per phone customer has remained relatively stable. The rate of customer and revenue growth has slowed due to increased competition and weak economic conditions.
Advertising
Advertising revenue decreased for the three and six months ended June 30, 2009 compared to the same periods in 2008 primarily due to a decline in the overall television advertising market as a result of weak economic conditions, particularly in the automotive and housing sectors, and a decline in political advertising.
Other
We also generate revenue from our regional sports networks, our digital media center, on-screen guide advertising, commissions from electronic retailing networks and fees for other services.
Franchise Fees
The increases in franchise fees collected from our cable customers for the three and six months ended June 30, 2009 compared to the same periods in 2008 were primarily due to increases in the revenue on which the fees apply.
Cable Segment Operating Expenses
Three Months Ended
June 30 Increase/(Decrease)
(in millions) 2009 2008 $ %
Video programming $ 1,757 $ 1,611 $ 146 9.1 %
Technical labor 574 516 58 11.2
High-speed Internet 117 136 (19 ) (14.2 )
Phone 149 182 (33 ) (18.0 )
Other 753 696 57 8.2
Total operating expenses $ 3,350 $ 3,141 $ 209 6.7 %
Six Months Ended
June 30 Increase/(Decrease)
(in millions) 2009 2008 $ %
Video programming $ 3,532 $ 3,230 $ 302 9.4 %
Technical labor 1,147 1,039 108 10.4
High-speed Internet 237 274 (37 ) (13.7 )
Phone 318 382 (64 ) (16.8 )
Other 1,461 1,379 82 6.0
Total operating expenses $ 6,695 $ 6,304 $ 391 6.2 %
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Video programming expenses increased during the three and six months ended June 30, 2009 compared to the same periods in 2008 primarily due to rate increases, additional digital customers and additions to the number of programming options we offer. Technical labor expenses increased during the three and six months ended
June 30, 2009 compared to the same periods in 2008 primarily due to growth in the number of customers, including activity associated with the transition by broadcasters from analog to digital transmission.
High-speed Internet expenses and phone expenses include certain direct costs identified by us for providing these services, but do not fully reflect the amounts for operating expenses that would be necessary to provide these services on a stand-alone basis. Other related costs associated with providing these services are generally shared among all our cable services and are not allocated to these captions. Our high-speed Internet and phone expenses decreased during the three and six months ended June 30, 2009 compared to the same periods in 2008 primarily due to lower support service costs that were the result of operating efficiencies and our entering into new contracts with lower cost providers and renegotiating existing contracts. Other expenses increased during the three and six months ended June 30, 2009 compared to the same periods in 2008 primarily due to the continued expansion of our cable services to small and medium-sized businesses and an increase in franchise fees.
Cable Segment Selling, General and Administrative Expenses
Three Months Ended
June 30 Increase/(Decrease)
(in millions) 2009 2008 $ %
Customer service $ 462 $ 434 $ 28 6.4 %
Marketing 402 411 (9 ) (2.0 )
Administrative and other 761 752 9 1.1
Total selling, general and administrative
expenses $ 1,625 $ 1,597 $ 28 1.8 %
Six Months Ended
June 30 Increase/(Decrease)
(in millions) 2009 2008 $ %
Customer service $ 940 $ 876 $ 64 7.3 %
Marketing 771 810 (39 ) (4.7 )
Administrative and other 1,512 1,522 (10 ) (0.7 )
Total selling, general and administrative
expenses $ 3,223 $ 3,208 $ 15 0.5 %
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Customer service expenses increased during the three and six months ended June 30, 2009 compared to the same periods in 2008 primarily due to the growth in activity associated with the transition by broadcasters from analog to digital transmission. Marketing expenses decreased during the three and six months ended June 30, 2009 compared to the same periods in 2008 primarily due to the timing of our marketing campaigns and lower costs for media advertising. Administrative and other expenses remained relatively stable during the three and six months ended June 30, 2009 compared to the same periods in 2008 primarily due to the impact of our divisional reorganization and other cost reduction programs implemented in 2008.
Programming Segment Operating Results
Three Months Ended
June 30 Increase/(Decrease)
(in millions) 2009 2008 $ %
Revenue $ 384 $ 366 $ 18 5.1 %
Operating, selling, general and
administrative expenses 271 277 (6 ) (2.3 )
Operating income before depreciation and
amortization $ 113 $ 89 $ 24 28.3 %
Six Months Ended
June 30 Increase/(Decrease)
(in millions) 2009 2008 $ %
Revenue $ 745 $ 729 $ 16 2.2 %
Operating, selling, general and
administrative expenses 520 527 (7 ) (1.4 )
Operating income before depreciation and
amortization $ 225 $ 202 $ 23 11.5 %
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Programming Segment Revenue
Programming segment revenue increased for the three and six months ended June 30, 2009 compared to the same periods in 2008 primarily due to an increase in programming license fee revenue, which was partially offset by a decrease in advertising revenue. For the three and six months ended June 30, 2009, advertising accounted for approximately 42% and 41%, respectively, of total Programming segment revenue. For the three and six months ended June 30, 2008, advertising accounted for approximately 47% and 45%, respectively, of total Programming segment revenue. For each of the 2009 and 2008 three and six month periods, approximately 12% of our Programming segment revenue was generated from our Cable segment. These amounts are eliminated in our consolidated financial statements but are included in the amounts presented in the table above.
Consolidated Other Income (Expense) Items
Three Months Ended Six Months Ended
June 30 June 30
(in millions) 2009 2008 2009 2008
Interest expense $ (551 ) $ (618 ) $ (1,121 ) $ (1,239 )
Investment income (loss), net 57 (70 ) 70 9
Equity in net income (losses) of
affiliates, net (13 ) (4 ) (27 ) (39 )
Other income (expense) 12 16 11 284
Total $ (495 ) $ (676 ) $ (1,067 ) $ (985 )
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Interest Expense
The decreases in interest expense for the three and six months ended June 30, 2009 compared to the same periods in 2008 were primarily due to the effects of early extinguishment costs associated with the repayment and redemption of certain of our debt obligations in the 2008 periods, as well as to the effects of decreases in interest rates on our variable rate debt and on debt subject to variable interest rate swap agreements.
Investment Income (Loss), Net
The components of investment income (loss), net for the three and six months ended June 30, 2009 and 2008 are presented in a table in Note 4 to our condensed consolidated financial statements.
Other Income (Expense)
For the six months ended June 30, 2008, other income included a gain of approximately $235 million on the sale of our 50% interest in the Insight asset pool in connection with the Insight transaction.
Income Tax Expense
Income tax expense for the three and six months ended June 30, 2009 and 2008 reflects income tax rates that differ from the federal statutory rate primarily due to state income taxes and interest on uncertain tax positions. Income tax expense for the three and six months ended June 30, 2009 was reduced by approximately $137 million and $185 million, respectively, primarily due to the favorable settlements of uncertain tax positions and related interest. As a result of these settlements, we expect our 2009 annual effective tax rate to be below our normal rate of approximately 40%.
Liquidity and Capital Resources
Our businesses generate significant cash flows from operating activities. 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; through existing cash, cash equivalents and investments; through available borrowings under our existing credit facilities; and through our ability to obtain future external financing. We anticipate that we will continue to use a substantial portion of our cash flows to fund our capital expenditures, to invest in business opportunities, to meet our debt repayment obligations and to return capital to shareholders.
Operating Activities
Details of net cash provided by operating activities are presented in the table
below.
Six Months Ended
June 30
(in millions) 2009 2008
Operating income $ 3,686 $ 3,305
Depreciation and amortization 3,293 3,220
Operating income before depreciation and amortization 6,979 6,525
Noncash share-based compensation expense 121 123
Changes in operating assets and liabilities (236 ) (293 )
Cash basis operating income 6,864 6,355
Payments of interest (1,063 ) (1,116 )
Payments of income taxes (746 ) (355 )
Proceeds from interest and dividends received 58 59
Excess tax benefit under share-based compensation
presented in financing activities - (15 )
Net cash provided by operating activities $ 5,113 $ 4,928
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The decrease in interest payments for the six months ended June 30, 2009 compared to the same period in 2008 was primarily due to the effects of decreases in interest rates on debt subject to variable interest rate swap agreements and to the maturity in 2008 of certain of our higher rate debt. The increase in income tax payments for the six months ended June 30, 2009 compared to the same period in 2008 was primarily due to higher 2009 taxable income and a tax payment made in 2009 that related to 2008.
Financing Activities
Net cash provided by financing activities for the six months ended June 30, 2009 consisted primarily of cash proceeds from borrowings of $2.5 billion which were substantially offset by debt repurchases and repayments, share repurchases and dividend payments totaling $2.2 billion.
In June 2009, we initiated a cash tender offer to purchase up to $1.3 billion aggregate principal amount of certain of our outstanding notes. As of June 30, 2009, approximately $1.7 billion aggregate principal amount of these notes was tendered to us, of which we accepted tenders for $1.3 billion principal amount. The tender offer settled in July 2009. We anticipate recognizing additional interest expense of approximately $180 million primarily associated with the premiums incurred in the tender offer during the three months ended September 30, 2009. See Note 5 to our condensed consolidated financial . . .
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