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| CMCSA > SEC Filings for CMCSA > Form 10-Q on 2-May-2012 | All Recent SEC Filings |
2-May-2012
Quarterly Report
Overview
We are a leading provider of entertainment, information and communication products and services. On January 28, 2011, we closed the NBCUniversal transaction in which we acquired control of the businesses of NBC Universal, Inc. ("NBCUniversal"), and on July 1, 2011, we closed the Universal Orlando transaction in which we acquired the remaining 50% equity interest in Universal City Development Partners, Ltd. ("Universal Orlando") that we did not already own. We report our operations as the following five reportable business segments.
Cable Communications
We are one of the nation's leading providers of video, high-speed Internet and voice services to residential and business customers. As of March 31, 2012, our cable systems served 22.3 million video customers, 18.6 million high-speed Internet customers and 9.5 million voice customers and passed more than 52 million homes and businesses in 39 states and the District of Columbia. Our Cable Communications segment generates revenue primarily from subscriptions to our cable services, which we market individually and in packages, and from the sale of advertising. During the three months ended March 31, 2012, our Cable Communications segment generated 64% of our consolidated revenue and over 80% of our operating income (loss) before depreciation and amortization.
NBCUniversal
NBCUniversal is a leading media and entertainment company that develops, produces and distributes entertainment, news and information, sports and other content for global audiences.
Cable Networks
Our Cable Networks segment consists primarily of our national cable networks, which provide entertainment, news and information, and sports programming, our regional sports and news networks, our international cable networks, our cable television production studio, and our related digital media properties. Our Cable Networks segment generates revenue primarily from the distribution of our cable network programming to multichannel video providers, the sale of advertising and the licensing and sale of our owned programming.
Broadcast Television
Our Broadcast Television segment consists primarily of the NBC and Telemundo broadcast networks, our NBC and Telemundo owned local television stations, our broadcast television production operations, and our related digital media properties. Our Broadcast Television segment generates revenue primarily from the sale of advertising and the licensing and sale of our owned programming.
Filmed Entertainment
Our Filmed Entertainment segment consists of the operations of Universal Pictures, including Focus Features, which produces, acquires, markets and distributes filmed entertainment worldwide in various media formats for theatrical, home entertainment, television and other distribution platforms. We also develop, produce and license stage plays. Our Filmed Entertainment segment generates revenue primarily from the worldwide theatrical release of our owned and acquired films, content licensing and home entertainment.
Theme Parks
Our Theme Parks segment consists primarily of our Universal theme parks in Orlando and Hollywood. We also receive fees related to intellectual property licenses and other services from third parties that own and operate Universal Studios Japan and Universal Studios Singapore. Our Theme Parks segment generates revenue primarily from theme park attendance and per capita spending, as well as from licensing and other fees. Per capita spending includes ticket price and in-park spending on food, beverage and merchandise.
Other
Our other business interests primarily include Comcast Spectacor, which owns the Philadelphia Flyers and the Wells Fargo Center, a large, multipurpose arena in Philadelphia. Comcast Spectacor also owns Global Spectrum, which provides facilities management services, and Ovations Food Services, which provides food services for sporting events, concerts and other events.
Consolidated Operating Results
Three Months Ended Increase/
March 31 (Decrease)
(in millions) 2012 2011
Revenue $ 14,878 $ 12,128 22.7 %
Costs and Expenses:
Operating costs and expenses 10,190 8,062 26.4
Depreciation 1,529 1,486 2.9
Amortization 401 356 12.3
Operating income 2,758 2,224 24.0
Other income (expense) items, net (561 ) (589 ) (4.8 )
Income before income taxes 2,197 1,635 34.4
Income tax expense (750 ) (596 ) 26.0
Net income 1,447 1,039 39.3
Net (income) loss attributable to
noncontrolling interests (223 ) (96 ) 134.4
Net income attributable to Comcast Corporation $ 1,224 $ 943 29.7 %
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All percentages are calculated based on actual amounts. Minor differences may exist due to rounding.
The comparability of our consolidated results of operations was impacted by the NBCUniversal transaction, which closed on January 28, 2011, and the Universal Orlando transaction, which closed on July 1, 2011. NBCUniversal's and Universal Orlando's results of operations are included in our consolidated financial statements following their respective acquisition dates.
We also incurred significant transaction costs directly related to the NBCUniversal transaction during the three months ended March 31, 2011. Incremental expenses were primarily related to legal, accounting and valuation services and investment banking fees. In addition, NBCUniversal incurred transaction-related costs associated with severance and other related compensation charges. Total transaction-related expenses incurred during the three months ended March 31, 2011 were $123 million.
For a more complete discussion of the NBCUniversal and Universal Orlando transactions, refer to our consolidated financial statements included in our 2011 Annual Report on Form 10-K.
Each of our businesses is subject to seasonal and cyclical variations. Revenue and operating costs and expenses in our Broadcast Television segment are cyclical as a result of our periodic broadcasts of the Olympic Games and Super Bowl games. During the three months ended March 31, 2012, we broadcast the 2012 Super Bowl. Our advertising revenue increased as a result of increased demand for advertising time and our operating costs and expenses also increased as a result of our production costs and amortization of the related rights fees.
Consolidated Revenue
Our Cable Communications segment and the NBCUniversal segments accounted for substantially all of the increase in consolidated revenue for the three months ended March 31, 2012. The remaining changes in consolidated revenue related to our other business activities, primarily Comcast Spectacor. Revenue for our Cable Communications and NBCUniversal segments is discussed separately under the heading "Segment Operating Results."
Consolidated Operating Costs and Expenses
Our Cable Communications segment and the NBCUniversal segments accounted for substantially all of the increase in consolidated operating costs and expenses for the three months ended March 31, 2012. The remaining changes in consolidated operating costs and expenses related to our other business activities, primarily Comcast Spectacor. Operating costs and expenses for our Cable Communications and NBCUniversal segments are discussed separately under the heading "Segment Operating Results."
Consolidated Depreciation and Amortization
Consolidated depreciation and amortization increased for the three months ended March 31, 2012 primarily due to the NBCUniversal and Universal Orlando transactions.
Segment Operating Results
Our segment operating results are presented based on how we assess operating
performance and internally report financial information. We use operating income
(loss) before depreciation and amortization, excluding impairment charges
related to fixed and intangible assets and gains or losses from the sale of
assets, if any, as the measure of profit or loss for our operating segments.
This measure eliminates the significant level of noncash depreciation and
amortization expense that results from the capital-intensive nature of certain
of our businesses and from intangible assets recognized in business
combinations. Additionally, it is unaffected by our capital structure or
investment activities. We use this measure to evaluate our consolidated
operating performance and the operating performance of our operating segments
and to allocate resources and capital to our operating segments. It is also a
significant performance measure in our annual incentive compensation programs.
We believe that this measure is useful to investors because it is one of the
bases for comparing our operating performance with other companies in our
industries, although our measure may not be directly comparable to similar
measures used by other companies. Because we use operating income (loss) before
depreciation and amortization 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 Note 15 to our condensed
consolidated financial statements. This measure should not be considered a
substitute for operating income (loss), net income attributable to Comcast
Corporation, net cash provided by operating activities, or other measures of
performance or liquidity we have reported in accordance with GAAP.
Cable Communications Segment-Results of Operations
Three Months Ended Increase/
March 31 (Decrease)
(in millions) 2012 2011 $ %
Revenue
Residential:
Video $ 4,969 $ 4,891 $ 78 1.6 %
High-speed Internet 2,323 2,106 217 10.3
Voice 878 860 18 2.0
Business services 541 394 147 37.0
Advertising 476 455 21 4.8
Other 412 378 34 8.9
Total revenue 9,599 9,084 515 5.7
Operating costs and expenses
Programming 2,076 1,969 107 5.5
Technical labor 588 593 (5 ) (0.9 )
Customer service 494 469 25 5.2
Marketing 630 564 66 11.7
Other 1,856 1,740 116 6.6
Total operating costs and expenses 5,644 5,335 309 5.8
Operating income before depreciation and
amortization $ 3,955 $ 3,749 $ 206 5.5 %
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Customer Metrics
Total Customers Net Additional Customers
Three Months Ended
(in thousands) March 31, 2012 March 31, 2011 March 31, 2012
Video customers 22,294 22,751 (37)
High-speed Internet customers 18,582 17,403 439
Voice customers 9,506 8,870 164
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Customer data include residential and business customers.
Cable Communications Segment-Revenue
Our average monthly total revenue per video customer for the three months ended March 31, 2012 increased to $143 from $133 for the three months ended March 31, 2011. The increase in average monthly total revenue per video customer was primarily due to increases in the number of residential customers receiving multiple services, rate adjustments, higher contributions from business services and declines in the total number of video customers.
Video
Our video revenue increased for the three months ended March 31, 2012 compared to the same period in 2011 primarily due to rate adjustments, offset by declines in the number of residential video customers. For the three months ended March 31, 2012, the number of video customers decreased primarily due to competitive pressures in our service areas. We expect further declines in the number of residential video customers during the remainder of 2012. As of March 31, 2012, 54% of our digital video customers subscribed to at least one of our high-definition television ("HDTV") and digital video recorder ("DVR") services.
High-Speed Internet
Our high-speed Internet revenue increased for the three months ended March 31, 2012 compared to the same period in 2011 primarily due to increases in the number of residential customers, rate adjustments and additional customers receiving higher levels of service.
Voice
Our voice revenue increased for the three months ended March 31, 2012 compared to the same period in 2011 primarily due to increases in the number of residential customers.
Business Services
Our business services revenue increased for the three months ended March 31, 2012 compared to the same period in 2011 primarily due to increases in the number of customers.
Advertising
Our advertising revenue increased for the three months ended March 31, 2012 compared to the same period in 2011 primarily due to improvements in the local advertising market.
Other
Our other revenue increased for the three months ended March 31, 2012 compared to the same period in 2011 primarily due to an increase in franchise and other regulatory fees.
Cable Communications Segment-Operating Costs and Expenses
Programming expenses increased for the three months ended March 31, 2012 compared to the same period in 2011 primarily due to increases in rates and additional programming options offered to our customers. Technical labor expenses remained relatively flat for the three months ended March 31, 2012 compared to the same period in 2011. Customer service expenses increased for the three months ended March 31, 2012 compared to the same period in 2011 primarily due to an increase in personnel costs associated with higher levels of customer service activity. Marketing expenses increased for the three months ended March 31, 2012 compared to the same
period in 2011 primarily due to increases in sales employees and media spending for residential and business services. Other operating costs and expenses increased for the three months ended March 31, 2012 compared to the same period in 2011 primarily due to an increase in activity related to business services and an increase in franchise and other regulatory fees.
NBCUniversal Segments Overview
The discussion below compares the NBCUniversal segments' actual results for the three months ended March 31, 2012 to pro forma combined results for the three months ended March 31, 2011. Management believes reviewing our operating results by combining actual and pro forma results for the NBCUniversal segments for 2011 is more useful in identifying trends in, or reaching conclusions regarding, the overall operating performance of these segments for the current period. Our pro forma amounts presented in the tables below include adjustments as if the NBCUniversal and Universal Orlando transactions had occurred on January 1, 2010. Our pro forma data was also adjusted for the effects of acquisition accounting and the elimination of costs and expenses directly related to the transactions but does not include adjustments for costs related to integration activities, cost savings or synergies that have been or may be achieved by the combined businesses. Pro forma amounts are not necessarily indicative of what our results would have been had we operated the NBCUniversal contributed businesses or Universal Orlando since January 1, 2010, nor of our future results.
The operating results of the NBCUniversal segments for the three months ended March 31, 2012 and 2011 are presented in the table below.
2012 2011
Pro Forma Increase/
Actual(a) Actual(a) Pro Forma(b) Combined (Decrease)
Three Months Ended Three Months Ended NBCUniversal Three Months Ended
(in millions) March 31 March 31 Businesses March 31 $ %
Revenue
Cable Networks $ 2,138 $ 1,632 $ 388 $ 2,020 $ 118 5.8 %
Broadcast Television 1,851 888 464 1,352 499 36.9
Filmed Entertainment 1,192 622 353 975 217 22.3
Theme Parks 412 275 115 390 22 5.7
Headquarters, other and
eliminations (121 ) (274 ) 176 (98 ) (23 ) (23.4 )
Total revenue $ 5,472 $ 3,143 $ 1,496 $ 4,639 $ 833 18.0 %
Operating Income Before
Depreciation and Amortization
Cable Networks $ 805 $ 665 $ 152 $ 817 $ (12 ) (1.4 )%
Broadcast Television (10 ) 35 (15 ) 20 (30 ) (149.4 )
Filmed Entertainment 6 (143 ) (3 ) (146 ) 152 104.3
Theme Parks 157 97 37 134 23 17.1
Headquarters, other and
eliminations (145 ) (196 ) (24 ) (220 ) 75 33.6
Total operating income before
depreciation and amortization $ 813 $ 458 $ 147 $ 605 $ 208 34.3 %
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(a) Actual amounts include the results of operations of the businesses we contributed to NBCUniversal for the three months ended March 31, 2012 and 2011, as well as the results of operations for the NBCUniversal acquired businesses and Universal Orlando for the three months ended March 31, 2012 and for the period January 29, 2011 through March 31, 2011. Headquarters, other and eliminations includes the elimination of the results of operations for Universal Orlando for the period January 29, 2011 through March 31, 2011 in order to reconcile to our condensed consolidated financial statements because Universal Orlando was recorded as an equity method investment during that period.
(b) Pro forma amounts include the results of operations for the NBCUniversal acquired businesses and Universal Orlando for the period January 1, 2011 through January 28, 2011 and other pro forma adjustments that include the effects of acquisition accounting.
Cable Networks Segment-Actual and Pro Forma Results of Operations
2012 2011
Pro Forma Increase/
Actual(a) Actual(a) Pro Forma(b) Combined (Decrease)
Three Months Ended Three Months Ended NBCUniversal Three Months Ended
(in millions) March 31 March 31 Businesses March 31 $ %
Revenue
Distribution $ 1,143 $ 913 $ 188 $ 1,101 $ 42 3.8 %
Advertising 814 607 162 769 45 5.9
Other 181 112 38 150 31 20.5
Total revenue 2,138 1,632 388 2,020 118 5.8
Operating costs and expenses 1,333 967 236 1,203 130 10.7
Operating income before
depreciation and amortization $ 805 $ 665 $ 152 $ 817 $ (12 ) (1.4 )%
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(a) Actual amounts include the results of operations for the Comcast Content Business for the three months ended March 31, 2012 and 2011, and the results of operations for the NBCUniversal acquired businesses for the three months ended March 31, 2012 and for the period January 29, 2011 through March 31, 2011.
(b) Pro forma amounts include the results of operations for the NBCUniversal acquired businesses for the period January 1, 2011 through January 28, 2011 and other pro forma adjustments that include the effects of acquisition accounting and the elimination of operating costs and expenses directly related to the transaction.
Cable Networks Segment-Revenue
Our Cable Networks revenue increased for the three months ended March 31, 2012 compared to the same period in 2011 due to increases in distribution, advertising and other revenue. The increase in distribution revenue was primarily due to rate increases, and the increase in advertising revenue was primarily due to an increase in the price of advertising units sold. Other revenue increased primarily due to an increase in the licensing of our owned content from our cable production studio.
For the three months ended March 31, 2012 and 2011, 13% and 14%, respectively, of our total Cable Networks segment revenue was generated from our Cable Communications segment. These amounts are eliminated in our condensed consolidated financial statements but are included in the amounts presented above.
Cable Networks Segment-Operating Costs and Expenses
Our operating costs and expenses increased for the three months ended March 31, 2012 compared to the same period in 2011 primarily due to higher programming and production expenses, including an increase in rights costs associated with additional NBA games in the current period compared to the prior year period, resulting from the condensed NBA schedule following the lockout at the beginning of the 2011-12 season.
Broadcast Television Segment-Actual and Pro Forma Results of Operations
2012 2011
Pro Forma Increase/
Actual(a) Actual(a) Pro Forma(b) Combined (Decrease)
For the Period
Three Months January 29 Three Months
Ended through NBCUniversal Ended
(in millions) March 31 March 31 Businesses March 31 $ %
Revenue
Advertising $ 1,266 $ 595 $ 315 $ 910 $ 356 39.2 %
Content licensing 457 219 111 330 127 38.5
Other 128 74 38 112 16 13.2
Total revenue 1,851 888 464 1,352 499 36.9
Operating costs and expenses 1,861 853 479 1,332 529 39.6
Operating income (loss) before
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(a) Actual amounts include the results of operations for the NBCUniversal acquired businesses for the three months ended March 31, 2012 and for the period January 29, 2011 through March 31, 2011.
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