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| CMCSA > SEC Filings for CMCSA > Form 10-Q on 4-Nov-2009 | All Recent SEC Filings |
4-Nov-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 September 30, 2009, our cable systems served approximately 23.8 million video customers, 15.7 million high-speed Internet customers and 7.4 million phone customers and passed over 51 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 nine months ended September 30, 2009 include the following:
• an increase in consolidated revenue of 4.3% to approximately $26.6 billion and an increase in consolidated operating income of 8.5% to approximately $5.4 billion compared to the same period in 2008
• an increase in Cable segment revenue of 4.3% to approximately $25.2 billion and an increase in operating income before depreciation and amortization of 4.8% to approximately $10.2 billion compared to the same period in 2008
• the addition of approximately 755,000 high-speed Internet customers, approximately 906,000 digital phone customers, and a net decrease of approximately 424,000 video customers with the addition or upgrade from analog of approximately 1.0 million digital video customers
• a reduction in Cable segment capital expenditures of 11.0% to approximately $3.4 billion compared to the same period in 2008
• the repurchase of approximately 31.6 million shares of our Class A and Class A Special common stock under our share repurchase authorization for approximately $465 million
• a decrease in our total debt primarily due to approximately $2.0 billion of scheduled debt maturities and approximately $1.3 billion related to the completion of a cash tender offer
Consolidated Operating Results
Three Months Ended Increase/ Nine Months Ended Increase/
September 30 (Decrease) September 30 (Decrease)
(in millions) 2009 2008 2009 2008
Revenue $ 8,802 $ 8,549 3.0 % $ 26,575 $ 25,491 4.3 %
Costs and Expenses:
Operating, selling, general and
administrative (excluding
depreciation and amortization) 5,476 5,312 3.1 16,270 15,729 3.4
Depreciation 1,362 1,332 2.2 4,148 4,093 1.3
Amortization 253 235 8.1 760 694 9.6
Operating income 1,711 1,670 2.4 5,397 4,975 8.5
Other income (expense) items,
net (574 ) (513 ) 11.8 (1,641 ) (1,498 ) 9.5
Income before income taxes 1,137 1,157 (1.7 ) 3,756 3,477 8.0
Income tax expense (203 ) (401 ) (49.4 ) (1,088 ) (1,364 ) (20.2 )
Net income from consolidated
operations 934 756 23.6 2,668 2,113 26.3
Net (income) loss attributable
to noncontrolling interests 10 15 (33.4 ) 15 22 (33.5 )
Net income attributable to
Comcast Corporation $ 944 $ 771 22.5 % $ 2,683 $ 2,135 25.7 %
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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 nine months ended September 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 and Programming segment accounted for substantially all of the increases in consolidated operating, selling, general and administrative expenses for the three and nine months ended September 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 nine months ended September 30, 2009 increased slightly compared to the same periods in 2008 primarily due to increases in property and equipment.
The increases in amortization expense for the three and nine months ended September 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 (loss) before depreciation and amortization, excluding impairments related to fixed and intangible assets, and gains or losses from the sale of assets, if any. This measure eliminates the significant level of noncash depreciation and amortization expense that results from the capital-intensive nature of our businesses and from intangible assets recognized in business combinations. 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 12 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
September 30 Increase/(Decrease)
(in millions) 2009 2008 $ %
Video(a) $ 4,777 $ 4,767 $ 10 0.2 %
High-speed Internet 1,930 1,822 108 5.9
Phone 829 690 139 20.2
Advertising(a) 321 381 (60 ) (15.6 )
Other(a) 261 243 18 7.0
Franchise fees 238 228 10 4.2
Revenue 8,356 8,131 225 2.8
Operating expenses(a) 3,340 3,182 158 5.0
Selling, general and administrative
expenses(a) 1,702 1,698 4 0.2
Operating income before depreciation and
amortization $ 3,314 $ 3,251 $ 63 2.0 %
Nine Months Ended
September 30 Increase/(Decrease)
(in millions) 2009 2008 $ %
Video(a) $ 14,590 $ 14,345 $ 245 1.7 %
High-speed Internet 5,768 5,364 404 7.5
Phone 2,407 1,917 490 25.6
Advertising(a) 908 1,132 (224 ) (19.8 )
Other(a) 798 710 88 12.3
Franchise fees 710 679 31 4.5
Revenue 25,181 24,147 1,034 4.3
Operating expenses(a) 10,035 9,486 549 5.8
Selling, general and administrative
expenses(a) 4,925 4,906 19 0.4
Operating income before depreciation and
amortization $ 10,221 $ 9,755 $ 466 4.8 %
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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 nine months ended September 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 net decline in video customers. During the three and nine months ended September 30, 2009, the number of video customers decreased by approximately 132,000 and 424,000, respectively, primarily due to increased competition in our service areas, as well as the weakness in the economy. During the three and nine months ended September 30, 2009, we added or upgraded approximately 463,000 and 1.0 million customers to our digital video service, respectively. As of September 30, 2009, approximately 76% of our 23.8 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 September 30, 2009 from approximately $65 as of September 30, 2008. Continued competition and weak economic conditions are expected to result in further declines in the number of video customers.
High-Speed Internet
Our high-speed Internet revenue increased during the three and nine months ended September 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 nine months ended September 30, 2009, we added approximately 361,000 and 755,000 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 during the three and nine months ended September 30, 2009 compared to the same periods in 2008 due to increases in the number of phone customers. During the three and nine months ended September 30, 2009, we added approximately 375,000 and 906,000 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 nine months ended September 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 nine months ended September 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
September 30 Increase/(Decrease)
(in millions) 2009 2008 $ %
Video programming $ 1,759 $ 1,617 $ 142 8.8 %
Technical labor 561 559 2 0.2
High-speed Internet 123 131 (8 ) (5.8 )
Phone 154 179 (25 ) (14.3 )
Other 743 696 47 6.9
Total operating expenses $ 3,340 $ 3,182 $ 158 5.0 %
Nine Months Ended
September 30 Increase/(Decrease)
(in millions) 2009 2008 $ %
Video programming $ 5,292 $ 4,847 $ 445 9.2 %
Technical labor 1,707 1,598 109 6.8
High-speed Internet 360 405 (45 ) (11.1 )
Phone 471 561 (90 ) (16.0 )
Other 2,205 2,075 130 6.3
Total operating expenses $ 10,035 $ 9,486 $ 549 5.8 %
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Video programming expenses increased during the three and nine months ended September 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 nine months ended
September 30, 2009 compared to the same period in 2008 primarily due to the 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 nine months ended September 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 nine months ended September 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
September 30 Increase/(Decrease)
(in millions) 2009 2008 $ %
Customer service $ 476 $ 443 $ 33 7.4 %
Marketing 442 426 16 3.7
Administrative and other 784 829 (45 ) (5.5 )
Total selling, general and administrative
expenses $ 1,702 $ 1,698 $ 4 0.2 %
Nine Months Ended
September 30 Increase/(Decrease)
(in millions) 2009 2008 $ %
Customer service $ 1,415 $ 1,319 $ 96 7.3 %
Marketing 1,213 1,236 (23 ) (1.8 )
Administrative and other 2,297 2,351 (54 ) (2.4 )
Total selling, general and administrative
expenses $ 4,925 $ 4,906 $ 19 0.4 %
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Customer service expenses increased during the three months ended September 30, 2009 compared to the same period in 2008 primarily due to activity associated with the transition of more of our programming to digital transmission. Customer service expenses increased during the nine months ended September 30, 2009 compared to the same period in 2008 primarily due to the activity associated with the transition by broadcasters from analog to digital transmission during the first half of the year and the transition of more of our programming to digital transmission. Marketing expenses increased during the three months ended September 30, 2009 compared to the same period in 2008 primarily due to the launch of new marketing campaigns. Marketing expenses decreased during the nine months ended September 30, 2009 compared to the same period in 2008 primarily due to lower costs for media advertising. Administrative and other expenses decreased during the three and nine months ended September 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
September 30 Increase/(Decrease)
(in millions) 2009 2008 $ %
Revenue $ 383 $ 347 $ 36 10.3 %
Operating, selling, general and
administrative expenses 265 242 23 9.4
Operating income before depreciation and
amortization $ 118 $ 105 $ 13 12.5 %
Nine Months Ended
September 30 Increase/(Decrease)
(in millions) 2009 2008 $ %
Revenue $ 1,128 $ 1,076 $ 52 4.8 %
Operating, selling, general and
administrative expenses 785 769 16 2.0
Operating income before depreciation and
amortization $ 343 $ 307 $ 36 11.9 %
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Programming Segment Revenue
Programming segment revenue increased during the three months ended September 30, 2009 compared to the same period in 2008 primarily due to an increase in programming license fee revenue and a favorable adjustment to advertising revenue impacted by reduced reserves for ratings commitments. Programming segment revenue increased for the nine months ended September 30, 2009 compared to the same period 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 nine months ended September 30, 2009, advertising accounted for approximately 42% and 41%, respectively, of total Programming segment revenue. For the three and nine months ended September 30, 2008, advertising accounted for approximately 43% and 44%, respectively, of total Programming segment revenue. For each of the three and nine months ended September 30, 2009, approximately 12% of our Programming segment revenue was generated from our Cable segment. For the three and nine months ended September 30, 2008, approximately 13% and 12%, respectively, 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 Nine Months Ended
September 30 September 30
(in millions) 2009 2008 2009 2008
Interest expense $ (707 ) $ (601 ) $ (1,828 ) $ (1,840 )
Investment income (loss), net 148 74 218 83
Equity in net income (losses) of
affiliates, net (17 ) 3 (44 ) (36 )
Other income (expense) 2 11 13 295
Total $ (574 ) $ (513 ) $ (1,641 ) $ (1,498 )
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Interest Expense
The increase in interest expense for the three months ended September 30, 2009 compared to the same period in 2008 was primarily due to the effects of early extinguishment costs associated with the repayment and redemption of our debt obligations in connection with a cash tender transaction in July 2009. We recognized approximately $180 million of interest expense primarily associated with the premiums incurred in the cash tender transaction during the three months ended September 30, 2009. The increase was partially offset by a decrease in our average debt outstanding and a decrease in interest rates on our variable rate debt and on debt subject to variable interest rate swap agreements. The decrease in interest expense for the nine months ended September 30, 2009 compared to the same period in 2008 was primarily due to the effects of the decrease in our average debt outstanding, as well as to decreases in interest rates on our variable rate debt and on debt subject to variable interest rate swap agreements, partially offset by the effects of higher early extinguishment costs associated with the repayment and redemption of our debt obligations in the 2009 period.
Investment Income (Loss), Net
The components of investment income (loss), net for the three and nine months ended September 30, 2009 and 2008 are presented in a table in Note 4 to our condensed consolidated financial statements.
Other Income (Expense)
For the nine months ended September 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 nine months ended September 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 nine months ended September 30, 2009 was reduced by
approximately $251 million and $436 million, respectively, primarily due to the recognition of tax benefits associated with uncertain tax positions and related interest and certain corporate reorganizations (see Note 13), which primarily affected our deferred income tax liabilities and other noncurrent liabilities. As a result of these items, we expect our 2009 annual effective tax rate to be below our normal rate of approximately 40%. Income tax expense was reduced by approximately $80 million during the 2008 periods due to the settlement of an uncertain tax position and the net impact of certain changes in state tax laws. Adjustments to uncertain tax positions and related interest and changes in state tax laws may continue to impact our income tax expense in the future.
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.
Nine Months Ended
September 30
(in millions) 2009 2008
Operating income $ 5,397 $ 4,975
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