| Notes to Financial Statements | |
| 6 Months Ended
Jun. 30, 2009
USD / shares
|
| Notes to Financial Statements [Abstract] | |
| Note 1: Condensed Consolidated Financial Statements |
Note 1: Condensed Consolidated Financial Statements
Basis of Presentation
We have prepared these unaudited condensed consolidated financial statements based on Securities and Exchange Commission (SEC) rules that permit reduced disclosure for interim periods. These financial statements include all adjustments that are necessary for a fair presentation of our results of operations and financial condition for the periods shown, including normal, recurring accruals and other items. We also evaluate events or transactions that occur after the balance sheet date but before the financial statements are issued (subsequent events) to determine if financial statement recognition or additional disclosure is required. The results of operations for the interim periods presented are not necessarily indicative of results for the full year.
The year-end condensed balance sheet was derived from audited financial statements but does not include all disclosures required by generally accepted accounting principles in the United States (GAAP). For a more complete discussion of our accounting policies and certain other information, refer to our annual financial statements for the preceding fiscal year as filed with the SEC.
Reclassifications have been made to the prior years consolidated financial statements between operating expenses and selling, general and administrative expenses to conform to classifications used in 2009. |
| Note 2: Recent Accounting Pronouncements |
Note 2: Recent Accounting Pronouncements
Noncontrolling Interests in Consolidated Financial Statements
In November 2007, the Financial Accounting Standards Board (FASB) issued a new accounting standard that provides guidance on the accounting and reporting requirements for noncontrolling interests in consolidated financial statements. The guidance requires noncontrolling interests (previously referred to as minority interests) that are not redeemable to be separately reported in the equity section of an entitys consolidated balance sheet. Redeemable noncontrolling interests continue to be presented outside of equity. The guidance establishes accounting and reporting standards for (i)ownership interests in subsidiaries held by parties other than the parent, (ii)the amount of consolidated net income attributable to the parent and to the noncontrolling interests, (iii)changes in a parents ownership interest and (iv)the valuation of retained noncontrolling equity investments when a subsidiary is deconsolidated. In addition, it establishes disclosure requirements, including new financial statement captions that clearly distinguish between controlling and noncontrolling interests. These include a separate presentation of net income attributable to controlling and noncontrolling interests with the combined amounts labeled as Net income from consolidated operations in our statement of operations. Under the guidance, Net income from consolidated operations is comparable to what was previously presented as Income from continuing operations before minority interest and Net income attributable to Comcast Corporation is comparable to what was previously presented as Net income. We adopted the standard on January1, 2009, at which time we applied the new presentation and disclosure requirements.
The new accounting standard requires the retrospective application of the new financial statement captions. The tables below reflect the revised presentations for our balance sheets as of December31, 2008 and 2007 and consolidated statements of operations for the years ended December31, 2008, 2007 and 2006.
Revised Balance Sheet Captions
December 31 (in millions) 2008 2007
Redeemable noncontrolling interests $ 171 $ 101
Noncontrolling interests (in equity) $ 126 $ 149
Revised Statement of Operations Captions
Year Ended December31 (in millions, except per share data) 2008 2007 2006
Net income from consolidated operations $ 2,525 $ 2,549 $ 2,545
Net (income) loss attributable to noncontrolling interests 22 38 (12 )
Net income attributable to Comcast Corporation $ 2,547 $ 2,587 $ 2,533
Basic earnings per common share attributable to Comcast Corporation stockholders $ 0.87 $ 0.84 $ 0.80
Diluted earnings per common share attributable to Comcast Corporation stockholders $ 0.86 $ 0.83 $ 0.79
See Note 7 for further details on our noncontrolling interests.
Consolidation of Variable Interest Entities
In June 2009, the FASB amended the accounting guidance related to the consolidation of va |
| Note 3: Earnings Per Share |
Note 3: Earnings Per Share
Basic earnings per common share attributable to Comcast Corporation stockholders (Basic EPS) is computed by dividing net income attributable to Comcast Corporation by the weighted-average number of common shares outstanding during the period.
Our potentially dilutive securities include potential common shares related to our stock options and our restricted share units (RSUs). Diluted earnings per common share attributable to Comcast Corporation stockholders (Diluted EPS) considers the impact of potentially dilutive securities using the treasury stock method, except in periods in which there is a loss, because the inclusion of the potential common shares would have an antidilutive effect.
Diluted EPS for the three and six months ended June30, 2009 excluded approximately 204million and 196million, respectively, of potential common shares related to our share-based compensation plans, because their inclusion would have had an antidilutive effect. For the three and six months ended June30, 2008, Diluted EPS excluded approximately 146million and 165million potential common shares, respectively.
Computation of Diluted EPS
Three Months Ended June 30
2009 2008
(in millions, except per share data) Net Income Attributableto Comcast Corporation Shares PerShare Amount Net Income Attributableto Comcast Corporation Shares PerShare Amount
Basic EPS attributable to Comcast Corporation stockholders $ 967 2,887 $ 0.33 $ 632 2,957 $ 0.21
Effect of dilutive securities:
Assumed exercise or issuance of shares related to stock plans 4 13
Diluted EPS attributable to Comcast Corporation stockholders $ 967 2,891 $ 0.33 $ 632 2,970 $ 0.21
Six Months Ended June30
2009 2008
(in millions, except per share data) Net Income Attributableto Comcast Corporation Shares PerShare Amount Net Income Attributableto Comcast Corporation Shares PerShare Amount
Basic EPS attributable to Comcast Corporation stockholders $ 1,739 2,886 $ 0.60 $ 1,364 2,983 $ 0.46
Effect of dilutive securities:
Assumed exercise or issuance of shares related to stock plans 7 12
Diluted EPS attributable to Comcast Corporation stockholders $ 1,739 2,893 $ 0.60 $ 1,364 2,995 $ 0.46 |
| Note 4: Investments |
Note 4: Investments
(in millions) June30, 2009 December31, 2008
Fair value method $ 1,328 $ 943
Equity method, primarily SpectrumCo and Clearwire 2,205 2,177
Cost method, primarily AirTouch redeemable preferred shares 1,719 1,722
Total investments 5,252 4,842
Less: Current investments 62 59
Noncurrent investments $ 5,190 $ 4,783
As of June 30, 2009 and December 31, 2008, the estimated fair value of the AirTouch preferred stock was $1.469 billion and $1.357 billion, respectively.
Components of Investment Income (Loss), Net
ThreeMonthsEnded June30 SixMonthsEnded June30
(in millions) 2009 2008 2009 2008
Gains on sales and exchanges of investments, net $ 1 $ 2 $ 4 $ 13
Investment impairment losses (3 ) (19 ) (2 )
Unrealized gains (losses) on securities underlying prepaid forward sale agreements 342 (26 ) 380 (290 )
Mark to market adjustments on derivative component of prepaid forward sale agreements (311 ) (21 ) (340 ) 273
Mark to market adjustments on derivative component of ZONES (5 ) (43 ) 4 (22 )
Interest and dividend income 27 36 54 73
Other 6 (18 ) (13 ) (36 )
Investment income (loss), net $ 57 $ (70 ) $ 70 $ 9
|
| Note 5: Long-Term Debt |
Note 5: Long-Term Debt
Borrowings
In June 2009, we issued $700 million principal amount of 5.70% notes due 2019 and $800 million principal amount of 6.55% notes due 2039. In June 2009, we issued $1.0 billion face amount of commercial paper. The net proceeds of these issuances, together with cash on hand, will be used for the purchase of notes included in the cash tender offer, as described below, the repayment of outstanding borrowings under our revolving credit facility, the repayment of debt at its maturity, and for working capital and general corporate purposes.
Redemptions and Repayments
In June 2009, we repaid $600 million of the amount outstanding under our revolving credit facility due 2013 and repaid at the maturity $750 million principal amount of our 6.875% notes due 2009.
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 June30, 2009, approximately $1.7 billion aggregate principal amount of these notes was tendered to us. We accepted tenders for approximately $1.3 billion principal amount of these notes consisting of approximately $621 million principal amount of our 8.375% notes due 2013, $367 million principal amount of our 7.125% notes due 2013 and $312 million principal amount of our 7.875% senior debentures due 2013. The tender offer settled in July 2009. As of June30, 2009, $1.3 billion was reclassified from long-term debt to current portion of long-term debt in our condensed consolidated balance sheet. |
| Note 6: Derivative Financial Instruments and Fair Value Measurements |
Note 6: Derivative Financial Instruments and Fair Value Measurements
We use derivative financial instruments to manage our exposure to the risks associated with fluctuations in interest rates and equity prices. Our objective is to manage the financial and operational exposures arising from these risks by offsetting gains and losses on the underlying exposures with gains and losses on the derivatives used to economically hedge them. Our risk management control system is used to assist us in monitoring the hedging program, derivative positions and hedging strategies. Hedges that receive designated hedge accounting treatment are evaluated for effectiveness at the time they are designated, as well as throughout the hedging period. We do not engage in any speculative or leveraged derivative transactions. All derivative transactions must comply with a derivatives policy authorized by our Board of Directors.
We manage the credit risks associated with our derivative financial instruments through the evaluation and monitoring of the creditworthiness of the counterparties. Although we may be exposed to losses in the event of nonperformance by the counterparties, we do not expect such losses, if any, to be significant. The valuation adjustments we recorded against the derivative assets to reflect counterparty credit risk are not significant.
We periodically examine the instruments we use to hedge exposure to interest rate and equity price risks to ensure that the instruments are matched with underlying assets or liabilities, to reduce our risks related to changes in interest rates or equity prices and, through market value and sensitivity analysis, to maintain a high correlation to the risk inherent in the hedged item. For those instruments that do not meet the above conditions, and for those derivative instruments that are not designated as a hedge, changes in fair value are recognized on a current basis in earnings.
As of June30, 2009, our derivatives designated as hedges include (i)the derivative component of our prepaid forward sale agreements, which are recorded to other noncurrent liabilities, and (ii)our interest rate swap agreements, which are recorded to other noncurrent assets or liabilities. Changes in the fair value of the derivative component of our prepaid forward sale agreements are recorded to investment income (loss). Changes in the fair value of the interest rate swap agreements are recorded to interest expense. These amounts are completely offset by changes in the fair value of the related debt because the swaps are deemed to be 100% effective. The difference between variable and fixed rates to be paid or received under the terms of the interest rate swap agreements is accrued as interest rates change and recognized as an adjustment to interest expense for the related debt.
As of June30, 2009, our derivatives not designated as hedges include the derivative component of our ZONES debt, which are recorded to long-term debt.
As of June30, 2009, our debt had an estimated fair value of $34.160 billion. The estimated fair value of our publicly traded debt is based on quoted market values for the debt. To estimate the fa |
| Note 7: Noncontrolling Interests |
Note 7: Noncontrolling Interests
Certain of our subsidiaries that we consolidate are not wholly owned. Some of the agreements with the minority partners of these subsidiaries contain redemption features that are redeemable either (i)at the option of the holder or (ii)upon the occurrence of an event that is not solely within our control. If securities were to be redeemed under these agreements, we would generally be required to purchase the security at fair value on the date of redemption. In accordance with the accounting guidance for the classification and measurement of redeemable securities, these securities are presented on the balance sheet outside of equity under the caption Redeemable noncontrolling interests. Noncontrolling interests that do not contain such redemption features are presented in equity.
During the six months ended June30, 2009, we purchased all of the noncontrolling interest of one of our technology ventures, which had a carrying value of approximately $35 million, for approximately $5 million and rights to existing intellectual property. The difference between the amount paid and the carrying value of the noncontrolling interest resulted in an increase of approximately $30 million to additional paid-in capital of Comcast Corporation.
The table below presents the changes in equity resulting from net income attributable to Comcast Corporation and transfers to or from noncontrolling interests.
(in millions) SixMonthsEnded June30,2009
Net income attributable to Comcast Corporation $ 1,739
Transfers from (to) noncontrolling interests:
Increase in Comcast Corporation additional paid-in capital resulting from thepurchaseofnoncontrolling interest 30
Change from net income attributable to Comcast Corporation and transfers from(to)noncontrolling interests $ 1,769 |
| Note 8: Equity |
Note 8: Equity
Share-Based Compensation
Our Board of Directors may grant share-based awards, in the form of stock options and RSUs, to certain employees and directors. Additionally, through our employee stock purchase plan, employees are able to purchase shares of Comcast ClassA common stock at a discount through payroll deductions.
In March 2009, we granted 29.5million stock options and 10.0million RSUs related to our annual management grant program. The fair values associated with these grants were $4.94 per stock option and $13.48 per RSU.
Recognized Share-Based Compensation Expense
ThreeMonthsEnded June30 SixMonthsEnded June30
(in millions) 2009 2008 2009 2008
Stock options $ 28 $ 24 $ 47 $ 44
Restricted share units 27 23 40 43
Employee stock purchase plan 2 3 7 8
Total $ 57 $ 50 $ 94 $ 95
As of June30, 2009, there was $368 million and $340 million of unrecognized pretax compensation cost related to nonvested stock options and nonvested RSUs, respectively.
The employee cost associated with participation in the employee stock purchase plan was satisfied with payroll deductions of approximately $10 million and $27 million for the three and six months ended June30, 2009, respectively. For the three and six months ended June30, 2008, the employee cost was approximately $11 million and $28 million, respectively.
Accumulated Other Comprehensive Income (Loss)
The table below presents our accumulated other comprehensive income (loss), net of deferred taxes.
SixMonthsEnded
June 30
(in millions) 2009 2008
Unrealized gains (losses) on marketable securities $ 27 $ 18
Deferred gains (losses) on cash flow hedges (76 ) (105 )
Unrealized gains (losses) on employee benefit obligations (31 ) 23
Cumulative translation adjustments 5
Accumulated other comprehensive income (loss) $ (80 ) $ (59 )
Deferred losses on cash flow hedges in the table above relate primarily to previous interest rate lock agreements. As of June30, 2009, we expect $30 million of unrealized losses, $19 million net of deferred taxes, to be reclassified as an adjustment to interest expense over the next 12 months. These amounts include $14 million of deferred losses, $9 million net of deferred taxes, on cash flow hedges for which the related debt was extinguished in July 2009 in connection with the closing of the cash tender offer. |
| Note 9: Statement of Cash Flows-Supplemental Information |
Note 9: Statement of Cash Flows-Supplemental Information
The table below presents our adjustments to reconcile net income from consolidated operations to net cash provided by operating activities.
SixMonthsEnded June 30
(in millions) 2009 2008
Net income from consolidated operations $ 1,734 $ 1,357
Adjustments to reconcile net income from consolidated operations to net cash providedbyoperating activities:
Depreciation 2,786 2,761
Amortization 507 459
Share-based compensation 121 123
Noncash interest expense (income), net 81 132
Equity in net (income) losses of affiliates, net 27 39
(Gains) losses on investments and noncash other (income) expense, net (23 ) (234 )
Deferred income taxes 394 403
Changes in operating assets and liabilities, net of effects of acquisitions and divestitures:
Change in accounts receivable, net (49 ) (7 )
Change in accounts payable and accrued expenses related to trade creditors (112 ) (69 )
Change in other operating assets and liabilities (353 ) (36 )
Net cash provided by operating activities $ 5,113 $ 4,928
Cash Payments for Interest and Income Taxes
ThreeMonthsEnded
June30
SixMonthsEnded
June30
(in millions) 2009 2008 2009 2008
Interest $ 399 $ 408 $ 1,063 $ 1,116
Income taxes $ 585 $ 335 $ 746 $ 355
Noncash Financing and Investing Activities
During the six months ended June30, 2009, we:
recorded a liability of approximately $194 million for a quarterly cash dividend of $0.0675 per common share paid in July 2009, which is a noncash financing activity
recorded a liability of approximately $107 million for share repurchases that settled in July 2009, which is a noncash financing activity
acquired approximately $342 million of property and equipment and software that was accrued but unpaid, which is a noncash investing activity |
| Note 10: Commitments and Contingencies |
Note 10: Commitments and Contingencies
Commitments
One of our subsidiaries supports debt compliance with respect to obligations of a cable system in which we hold an ownership interest. The obligation expires March 2011. Although there can be no assurance, we believe that we will not be required to meet our obligation under this commitment. The total notional amount of our commitment was $410 million as of June30, 2009, at which time there were no quoted market prices for similar agreements.
Contingencies
Antitrust Cases
We are defendants in two purported class actions originally filed in December 2003 in the United States District Courts for the District of Massachusetts and the Eastern District of Pennsylvania. The potential class in the Massachusetts case, which has been transferred to the Eastern District of Pennsylvania, is our subscriber base in the Boston Cluster area, and the potential class in the Pennsylvania case is our subscriber base in the Philadelphia and Chicago Clusters, as those terms are defined in the complaints. In each case, the plaintiffs allege that certain subscriber exchange transactions with other cable providers resulted in unlawful horizontal market restraints in those areas and seek damages under antitrust statutes, including treble damages.
Classes of Philadelphia Cluster and Chicago Cluster subscribers were certified in May 2007 and October 2007, respectively. In March 2009, as a result of a Third Circuit Court of Appeal decision clarifying the standards for class certification, the order certifying the Philadelphia Cluster class was vacated without prejudice to the plaintiffs filing a new motion. A hearing on the plaintiffs new motion, which was filed in April 2009, is scheduled for October 2009. The plaintiffs claims concerning the other two clusters are stayed pending determination of the Philadelphia Cluster claims.
In addition, we are among the defendants in a purported class action filed in the United States District Court for the Central District of California (Central District) in September 2007. The potential class is comprised of all persons residing in the United States who have subscribed to an expanded basic level of video service provided by one of the defendants. The plaintiffs allege that the defendants who produce video programming have entered into agreements with the defendants who distribute video programming via cable and satellite (including us), which preclude the distributor defendants from reselling channels to subscribers on an unbundled basis in violation of federal antitrust laws. The plaintiffs seek treble damages and injunctive relief requiring each distributor defendant to resell certain channels to its subscribers on an unbundled basis. In July 2009, the Central District issued a tentative ruling dismissing the plaintiffs complaint with prejudice. A final ruling is expected in the next several weeks. If the Central District issues a final ruling dismissing the plaintiffs complaint with prejudice, the plaintiffs may appeal to the Ninth Circuit Court of Appeals.
ERISA Litigation
We and several of our current officers have been named as defendants in a purp |
| Note 11: Financial Data by Business Segment |
Note 11: Financial Data by Business Segment
Our reportable segments consist of our Cable and Programming businesses. In evaluating the profitability of our segments, the components of net income (loss) below operating income (loss) before depreciation and amortization are not separately evaluated by our management. Assets are not allocated to segments for management reporting, although approximately 95% of our assets relate to our Cable segment. Our financial data by business segment is presented in the table below.
(in millions) Cable(a)(b) Programming(c) Corporateand Other(d)(e) Eliminations(e)(f) Total
Three months ended June30, 2009
Revenue(g) $ 8,476 $ 384 $ 153 $ (75 ) $ 8,938
Operating income (loss) before depreciation and amortization(h) 3,501 113 (80 ) 1 3,535
Depreciation and amortization 1,594 48 26 (8 ) 1,660
Operating income (loss) 1,907 65 (106 ) 9 1,875
Capital expenditures 1,108 6 7 1,121
Three months ended June30, 2008
Revenue(g) $ 8,100 $ 366 $ 142 $ (55 ) $ 8,553
Operating income (loss) before depreciation and amortization(h) 3,362 89 (98 ) (2 ) 3,351
Depreciation and amortization 1,537 45 27 (8 ) 1,601
Operating income (loss) 1,825 44 (125 ) 6 1,750
Capital expenditures 1,254 6 40 1,300
Six months ended June30, 2009
Revenue(g) $ 16,825 $ 745 $ 361 $ (158 ) $ 17,773
Operating income (loss) before depreciation and amortization(h) 6,907 225 (151 ) (2 ) 6,979
Depreciation and amortization 3,156 97 56 (16 ) 3,293
Operating income (loss) 3,751 128 (207 ) 14 3,686
Capital expenditures 2,238 14 29 2,281
Six months ended June30, 2008
Revenue(g) $ 16,016 $ 729 $ 325 $ (128 ) $ 16,942
Operating income (loss) before depreciation and amortization(h) 6,504 202 (180 ) (1 ) 6,525
Depreciation and amortization 3,085 99 51 (15 ) 3,220
Operating income (loss) 3,419 103 (231 ) 14 3,305
Capital expenditures 2,609 10 112 2,731
(a)
For the three and six months ended June30, 2009 and 2008, Cable segment revenue was derived from the following services:
ThreeMonthsEnded
June30
SixMonthsEnded
June30
2009 2008 2009 2008
Video 57.6 % 59.3 % 58.3 % 59.8 %
High-speed Internet 22.8 22.1 22.8 22.1
Phone 9.5 7.9 9.4 7.7
Advertising 3.8 5.0 3.5 4.7
Franchise fees 2.8 2.8 2.8 2.8
Other 3.5 2.9 3.2 2.9
Total 100 % 100 % 100 % 100 % |
| Note 12: Condensed Consolidating Financial Information |
Note 12: Condensed Consolidating Financial Information
Comcast Corporation and five of our cable holding company subsidiaries, Comcast Cable Communications, LLC (CCCL), Comcast Cable Communications Holdings, Inc. (CCCH), Comcast MO Group, Inc. (Comcast MO Group), Comcast Cable Holdings, LLC (CCH) and Comcast MO of Delaware, LLC (Comcast MO of Delaware), have fully and unconditionally guaranteed each others debt securities. Comcast MO Group, CCH and Comcast MO of Delaware are collectively referred to as the Combined CCHMO Parents.
Comcast Corporation unconditionally guarantees the $211 million principal amount currently outstanding of Comcast Holdings ZONES due October 2029 and the $202 million principal amount currently outstanding of Comcast Holdings 105/8% senior subordinated debentures due 2012. Comcast Corporation does not guarantee the $71 million principal amount outstanding of Comcast Holdings ZONES due November 2029. We have included Comcast Holdings condensed consolidating financial information for all periods presented. Our condensed consolidating financial information is presented in the tables below.
Comcast Corporation
Condensed Consolidating Balance Sheet
June30, 2009
(inmillions) Comcast Parent CCCL Parent CCCH Parent Combined CCHMO Parents Comcast Holdings Non- Guarantor Subsidiaries Elimination and Consolidation Adjustments Consolidated Comcast Corporation
ASSETS
Cash and cash equivalents $ $ $ $ $ $ 3,989 $ $ 3,989
Investments 62 62
Accounts receivable, net 1,677 1,677
Other current assets 308 3 498 809
Total current assets 308 3 6,226 6,537
Investments 5,190 5,190
Investments in and amounts due from subsidiaries eliminated upon consolidation 74,946 35,048 44,299 47,066 27,024 5,240 (233,623 )
Property and equipment, net 312 23,403 23,715
Franchise rights 59,446 59,446
Goodwill 14,928 14,928
Other intangible assets, net 1 4,296 4,297
Other noncurrent assets, net 375 5 12 9 723 1,124
Total assets $ 75,942 $ 35,056 $ 44,311 $ 47,066 $ 27,033 $ 119,452 $ (233,623 ) $ 115,237
LIABILITIES AND EQUITY
Accounts payable and accrued expenses related totradecreditors $ 205 $ 3 $ $ $ $ 2,862 $ $ 3,070
Accrued expenses and other current liabilities 921 288 72 87 130 1,822 3,320
Current portion of long-term debt 2,809 364 625 317 52 4,167
Total current liabilities 3,935 655 697 404 130 4,736 |
