[LOGO OF COMCAST(R)] PRESS RELEASE
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INVESTOR CONTACTS: PRESS CONTACTS:
Marlene S. Dooner (215) 981-7392 D'Arcy Rudnay (215) 981-8582
Leslie A. Arena (215) 981-8511 Tim Fitzpatrick (215) 981-8515
Daniel J. Goodwin (215) 981-7518
COMCAST REPORTS FOURTH QUARTER AND YEAR END 2005 RESULTS
Cable Revenue Increased 9.5% and
Cable Operating Cash Flow Increased 13.2% in 2005
Strong Growth in New Products Continues
Added 2.6 Million New Revenue Generating Units in 2005
Consolidated Operating Income in 2005 Increased 26.9% to $3.7 Billion
Comcast Provides Strong Outlook for Growth in 2006
***
Repurchased $901 Million or 34 Million Comcast Shares in Fourth Quarter 2005
$2.5 Billion Investment in Company Stock in 2005
Board of Directors Authorizes Additional $5 Billion
for Stock Repurchase Program
Philadelphia, PA - February 2, 2006...Comcast Corporation (Nasdaq: CMCSA, CMCSK)
today reported results for the quarter and year ended December 31, 2005. Comcast
will discuss its 2005 results and 2006 outlook on a conference call and webcast
today at 8:30 AM Eastern Time. A live broadcast of the conference call will be
available at our investor relations website at www.cmcsa.com and www.cmcsk.com.
Brian L. Roberts, Chairman and CEO of Comcast Corporation said, "Our operational
and financial achievements in 2005, which included delivering near double-digit
revenue and double-digit Operating Cash Flow growth, were driven by terrific
consumer demand for our new products and significant growth in our high-speed
and digital businesses. These results reinforce the value of the investments we
have already made in content and technology and demonstrate that our strategy of
offering our customers innovative, differentiated products is working.
Importantly, as our financial outlook suggests, we expect many of the positive
trends we reported in 2005 to continue in 2006. Additionally, our Board of
Directors has once again demonstrated its confidence in our underlying business
and its commitment to shareholder value by authorizing an additional $5 billion
to our repurchase program, giving us $5.2 billion of repurchase capacity.
"We have also made great strides in building the foundation that will
significantly accelerate our Comcast Digital Voice business in 2006. This in
turn will allow us to fully market a bundled offering of voice, video and
high-speed Internet products. In 2006 we expect to add at least 3.5 million new
revenue generating units, a 35% increase over 2005, including 1 million new
Comcast Digital Voice customers.
"Our customers are using our products more frequently than ever and in ways that
were unimaginable a short time ago. In 2005, Comcast digital customers watched
1.4 billion programs on demand - reaching a viewing rate of up to 30 programs in
December. Comcast ON DEMAND continues to lead the dramatic changes in how
consumers watch television.
"We continue to drive product innovation and differentiation in every area of
our business. On the programming side, we remain focused on creating value by
building and investing in our own networks, by establishing unique partnerships
with great brands like the NHL, the PGA TOUR and CBS, as well as investing in
new networks like PBS Kids Sprout.
"As we continue to invest in our business for future growth, we are also
continuing to invest in our stock. In the last two years, we have invested $5
billion in our stock and related securities resulting in 174 million or 7.5%
fewer shares outstanding.
"We are integrating entertainment and communication services and delivering a
unique experience to Comcast customers. We have a superior platform in place
today that reaches more than 41 million homes. Our goal is to continue to expand
our competitive advantage while continuing to build value for our customers and
shareholders."
Cable Segment Results
Cable results are presented on a pro forma basis. Pro forma cable results adjust
only for certain acquisitions and dispositions and are presented as if the
acquisitions and dispositions were effective on January 1, 2004. Please refer to
Table 7-A for a reconciliation of pro forma data.
For the year ended December 31, 2005, Comcast Cable reported revenue of $21.2
billion, a 9.5% increase from the same period in 2004. Video revenue increased
5.7% during the year, driven by higher monthly revenue per basic subscriber and
a 1.1 million or 13.1% increase in the number of digital customers, the highest
rate of digital subscriber additions in 3 years. Comcast Cable ended the year
with 9.8 million digital cable subscribers and digital cable penetration reached
45.6% of basic subscribers. Basic subscribers declined 0.5% to 21.4 million at
December 31, 2005.
Growth in video revenue and digital cable subscribers reflects increasing
consumer demand for new digital features, including Comcast ON DEMAND,
high-definition television (HDTV) programming and digital video recorders
(DVRs). During 2005, Comcast Digital customers watched 1.4 billion programs on
demand; reaching 30 programs a month in December with an average viewing time of
almost 30 minutes. Pay-per-view revenues increased 16.4% from 2004 driven by
movie and event purchases through the Comcast ON DEMAND service, representing
the second consecutive year of pay-per-view revenue growth of more than 15%.
During the year, Comcast Cable deployed 1.5 million advanced set-top boxes with
DVR and/or HDTV programming capability. At December 31, 2005, 25.2% of digital
customers have one or more advanced set-top boxes compared to 13.1% at the end
of 2004.
Comcast High-Speed Internet service revenues increased 27.6% to $4.0 billion in
2005, reflecting a 1.5 million or 21.8% increase in subscribers with stable
average monthly revenue per subscriber of $42.82. Comcast Cable ended 2005 with
more than 8.5 million high-speed Internet subscribers or 20.7% of available
homes. Strong subscriber growth and average monthly revenue per subscriber
reflect the success of Comcast's strategy of differentiation, providing more
features to our subscribers. In 2005, Comcast high-speed Internet increased the
speed of its two service tiers to 6 and 8 megabits per second, added new
features like Internet security and increased the amount of video streaming
through the Comcast.net portal, including exclusive streaming of National Hockey
League games.
Comcast Cable added 202,000 Comcast Digital Voice (CDV) customers in 2005,
reflecting the rollout of CDV to 25 new markets including Boston, Chicago,
Seattle and Atlanta. At year-end 2005,
2
CDV was being marketed to 16 million homes in our footprint. As expected, CDV
customer additions were offset by a decline in the number of Comcast's
circuit-switched telephone customers as Comcast transitions to Comcast Digital
Voice. As a result, Comcast Cable reported 98,000 net new phone customers in
2005 compared to a loss of 43,000 in 2004. Cable phone revenue remained
relatively unchanged from the prior year at $687 million which includes the
increase in revenue associated with the addition of CDV customers during the
year offset by the loss of circuit-switched customers and a 4.0% decline in
average monthly revenue per subscriber to $45.02. The decline in average monthly
revenue per subscriber was due in part to the all distance service and other
features that are included in the flat rate pricing of CDV.
During 2005, Comcast Cable added a total of 2.6 million new revenue generating
units. Revenue generating units (RGU) include the sum of analog and digital
cable subscribers, high-speed Internet subscribers and phone customers. As of
December 31, 2005, Comcast reported 41 million revenue generating units, a 6.9%
increase from 2004. In addition, Comcast had more than 2.7 million advanced
set-top boxes with DVR and/or HDTV programming capability in digital customers'
homes, driving growth in video revenue per subscriber.
Advertising revenue increased 5.5% to $1.4 billion in 2005 when compared to
2004, reflecting growth of 4.9% in local advertising and growth of 9.7% in
regional/national advertising. The growth in advertising revenue during the year
was partially offset by an anticipated decline in political advertising when
compared to the 2004 election year.
Cable Operating Cash Flow (as defined in Table 7) grew 13.2% to $8.5 billion in
2005. Operating Cash Flow margin increased to 40.0% in 2005 from 38.7% in 2004
reflecting strong revenue growth and our continuing success in controlling the
growth of certain operating costs including programming expense, which increased
5.4% to $4.4 billion. A number of major hurricanes impacted Comcast systems
serving the southeastern U.S. in the third and fourth quarters of 2005 and 2004.
Operating Cash Flow has been reduced by $60 million and $20 million related to
these hurricanes in 2005 and 2004, respectively. Excluding the hurricane-related
impact, Operating Cash Flow grew 13.7% in 2005.
Cable capital expenditures in 2005 remained relatively unchanged at $3.6 billion
when compared to one year ago. Expenditures for 2005 reflect increased purchases
of digital set-top boxes to meet strong demand for HDTV and DVR digital
services, costs associated with readiness and deployment of CDV and the impact
of hurricane related reconstruction costs, offset by declines in plant upgrade
spending. The hurricane-related costs included in capital expenditures for 2005
were $25 million. Upgrade capital in 2005 declined $637 million or 70.7% to $265
million. In 2005, 76.1% of cable capital expenditures were variable and directly
associated with new product deployment and consumer demand for our products, as
compared to 58.1% in 2004.
Fourth Quarter 2005
For the quarter ended December 31, 2005, Comcast Cable reported revenue of $5.4
billion, representing an 8.4% increase from the fourth quarter of 2004. Video
revenue increased 5.7% during the period, driven by higher monthly revenue per
basic subscriber and a 13.1% increase in the number of digital customers.
Comcast Cable added 342,000 digital cable subscribers and 40,000 basic cable
subscribers during the fourth quarter of 2005. Basic subscriber additions were
net of an estimated loss of 20,000 subscribers due to the hurricanes.
Comcast Cable added 378,000 High-Speed Internet subscribers during the fourth
quarter of 2005. Revenues for this service increased 23.9% from the prior year
to $1.1 billion, reflecting strong year-over-year subscriber growth and stable
average monthly revenue per subscriber. Cable phone revenue, in the fourth
quarter of 2005, remained relatively unchanged from the prior year at $173
million which includes the increase in revenue associated with the addition
of 134,000
3
CDV customers during the quarter offset by the loss of 55,000 circuit-switched
customers which, as described above, generate higher monthly revenue per
customer. Comcast Cable added 79,000 phone subscribers in the fourth quarter of
2005 compared to 10,000 subscribers in the fourth quarter of 2004.
Operating Cash Flow grew 10.1% during the fourth quarter of 2005 to $2.2 billion
when compared to the same period of 2004, reflecting strong revenue growth and
the Company's success in controlling the growth of operating costs. Excluding
the hurricane impacts of $48 million and $9 million in the fourth quarters of
2005 and 2004, respectively, Operating Cash Flow growth was 11.9%. Operating
Cash Flow margin for the fourth quarter of 2005 increased to 40.2% from 39.6%
when compared to the same quarter last year. Comcast Cable capital expenditures
were $849 million for the fourth quarter of 2005 compared to $1.0 billion last
year. The decline in capital expenditures was due primarily to a $119 million or
72.5% decline in plant upgrade spending in the fourth quarter of 2005.
Content Segment Results
Comcast's Content segment consists of our national networks E! Entertainment
Television and Style Network (E! Networks), The Golf Channel, OLN, G4 and AZN
Television.
The Content segment reported 2005 revenue of $919 million, a 16.7% increase from
2004 reflecting increases in network ratings and advertising revenue for all the
networks. Operating Cash Flow increased 7.0% to $283 million in 2005, primarily
reflecting programming and production expenses related to OLN's coverage of the
National Hockey League (NHL) beginning in the fourth quarter of 2005. Excluding
the impact of OLN coverage of the NHL, Content Segment Operating Cash Flow
increased 15.3%.
For the quarter ended December 31, 2005, Comcast's Content segment reported
revenue of $235 million, a 14.2% increase, compared to the prior year and
Operating Cash Flow of $35 million, a decline of 37.9% from the same period last
year. Results include the fourth quarter impact of the items described above.
Corporate and Other
Corporate and Other includes Comcast-Spectacor, corporate overhead and other
operations and eliminations between Comcast's businesses. In 2005, Comcast
reported Corporate and Other revenue of $178 million and an Operating Cash Flow
loss of $248 million, as compared to revenue of $204 million and an Operating
Cash Flow loss of $205 million in 2004.
For the quarter ended December 31, 2005, Corporate and Other revenue increased
to $73 million from the $43 million reported in 2004. The Operating Cash Flow
loss for the fourth quarter of 2005 was $52 million compared to $45 million in
2004. Results for the fourth quarter of 2005 were impacted by the resumption of
National Hockey League games, offset by transaction and other corporate
expenses.
Consolidated Results
Comcast delivered solid consolidated results as compared to guidance in 2005:
GUIDANCE RESULTS
-------- -------
Revenue growth Approximately 10% 9.6%
Operating Cash Flow growth Approximately 13% 12.8%
Cable RGU additions At least 2.5 million 2.6 million
Capital expenditures Approximately $3.5 billion $3.6 billion
Free Cash Flow growth Approximately 30% 32.5%
For 2005, the Company reported consolidated revenues of $22.3 billion, a 9.6%
increase from the $20.3 billion reported in 2004. Consolidated Operating Cash
Flow increased to $8.5 billion
4
or 12.8%, in 2005, from the $7.5 billion reported in the prior year.
Consolidated operating income increased 26.9% to $3.7 billion, in 2005, compared
to consolidated operating income of $2.9 billion in 2004. Excluding the
hurricane-related impact on our Cable division, as described above, consolidated
Operating Cash Flow grew 13.2% in 2005.
The Company reported net income of $928 million or $0.42 per share, in 2005,
compared to net income of $970 million or $0.43 per share in 2004. The decrease
in net income of $42 million was due primarily to growth in consolidated
operating income of $782 million driven by strong growth in Cable Operating Cash
Flow, as described above, offset by declines in investment income and other
income of $833 million. On a combined basis, investment and other income
declined to $33 million in 2005 from $866 million in 2004. This decline is due
primarily to the net effects of changes in the fair value of the Company's 2.0%
Exchangeable Subordinated Debentures (ZONES) and the underlying Sprint Nextel
common stock as well as litigation settlements in the first quarter of 2005 and
the fourth quarter of 2004. Excluding the items described above, and reconciled
in Table 7-B, Adjusted Net Income for 2005 would be $908 million or $0.41 per
share compared to $450 million or $0.20 per share in 2004.
Free Cash Flow (described further on Table 4) increased 32.5% to $2.6 billion in
2005 compared to $1.9 billion reported in 2004, due primarily to increases in
consolidated Operating Cash Flow offset in part by a $448 million increase in
cash paid for income taxes.
For the quarter ended December 31, 2005, consolidated revenue increased 9.2% to
$5.7 billion from the $5.2 billion reported in the same period of 2004.
Consolidated Operating Cash Flow for the fourth quarter of 2005 was $2.2
billion, an increase of 8.5% when compared to $2.0 billion in 2004. Consolidated
operating income increased 25.6% to $893 million in the fourth quarter of 2005
compared to consolidated operating income of $711 million during 2004. Excluding
the hurricane-related impact on our Cable division, as described above,
consolidated Operating Cash Flow grew 10.3% in the fourth quarter of 2005.
For the quarter ended December 31, 2005, the Company reported net income of $133
million or $0.06 per share compared to net income of $423 million or $0.19 per
share in 2004, a decline of $290 million. Net income reflects growth in
consolidated operating income of $182 million driven by strong growth in Cable
division Operating Cash Flow, as described above, offset by declines in
investment and other income and an increase in the effective tax rate. On a
combined basis, investment and other income for the fourth quarter of 2005
declined to $58 million from $553 million in the same quarter of 2004. The $495
million decline was driven by a lower level of unrealized gains in our
investment portfolio in the fourth quarter of 2005 and the positive impact of
the settlement of certain litigation included in the fourth quarter of 2004..
Excluding the items described above, and reconciled in Table 7-B, Adjusted Net
Income for the fourth quarter of 2005 would be $186 million or $0.09 per share
when compared to $91 million or $0.04 per share in the fourth quarter of 2004.
Free Cash Flow was $699 million during the fourth quarter of 2005, a 39.9%
increase when compared to the same period of the prior year due primarily to the
increase in consolidated Operating Cash Flow and lower capital expenditures
offset in part by an increase in cash paid for income taxes.
Share Repurchase Program
Comcast repurchased $901 million of its Class A Special Common Stock, or 34
million shares during the fourth quarter of 2005.
In 2005, the Company repurchased $2.3 billion, or 79 million shares, of its
common stock under its stock repurchase program. Including the $253 million paid
in cash to redeem debt exchangeable into 8.4 million shares of Comcast common
stock, Comcast invested $2.5 billion in its common stock and related securities
during the year.
5
Comcast's Board of Directors has authorized a $5 billion addition to the
existing stock repurchase program. As a result, availability under the Company's
stock repurchase program is $5.2 billion. Comcast expects such repurchases to
occur from time to time in the open market or in private transactions, subject
to market conditions.
Since the inception of the repurchase program in December 2003, the Company has
invested $5 billion in its common stock and related securities. These
investments include repurchasing $3.6 billion or 127 million shares of its
common stock and paying $1.4 billion to redeem several debt issues exchangeable
into 47 million shares of Comcast common stock.
2006 Financial Outlook
For 2006, excluding pending transactions with Adelphia, Time Warner and
Susquehanna Communications, Comcast expects:
o Cable and consolidated revenue growth between 9 - 10%
o Cable Operating Cash Flow growth between 10 - 11%*
o Cable capital expenditures to be consistent with 2005 at approximately
$165 per basic cable subscriber
o Total Revenue Generating Unit additions of at least 3.5 million
o Consolidated Operating Cash Flow growth of between 9 - 10%*,
reflecting continuing investment in our Content businesses
o Conversion of between 25 - 30% of consolidated Operating Cash Flow
into Free Cash Flow**
* Includes the impact of expensing stock options in 2005 and 2006. The impact on
Operating Cash Flow for 2005 had we expensed stock options would have been an
incremental expense of approximately $166 million, including $117 million at
Comcast Cable (see Table 7-A).
** Beginning in 2006, we are changing the definition of Free Cash Flow to mean
"Net Cash Provided by Operating Activities From Continuing Operations" (as
stated in our Consolidated Statement of Cash Flows) reduced by capital
expenditures and cash paid for intangible assets; and increased by any payments
related to certain non-operating items, net of estimated tax benefits, (such as
income taxes on investment sales, and non-recurring payments related to income
tax and litigation contingencies of acquired companies). Please see Table 7-A
for further details.
###
This press release contains forward-looking statements. Readers are cautioned
that such forward-looking statements involve risks and uncertainties that could
cause actual events or our actual results to differ materially from those
expressed in any such forward-looking statements. Readers are directed to
Comcast's periodic and other reports filed with the Securities and Exchange
Commission for a description of such risks and uncertainties.
In this discussion we sometimes refer to financial measures that are not
presented according to generally accepted accounting principles (GAAP). Certain
of these measures are considered "non-GAAP financial measures" under the
Securities and Exchange Commission (SEC) regulations; those rules require the
supplemental explanation and reconciliation provided in Table 7 of this release.
All percentages are calculated based on actual amounts. Minor differences may
exist due to rounding.
###
Comcast Corporation will host a conference call with the financial community
today February 2, 2006 at 8:30 a.m. Eastern Time (ET). The conference call will
be broadcast live on the Company's Investor Relations website at www.cmcsa.com
or www.cmcsk.com. A recording of the call will be available on the Investor
Relations website starting at 12:30 p.m. ET on February 2, 2006. Those parties
interested in participating via telephone should dial (800) 263-8495 with the
conference ID number 4216292. A telephone replay will begin immediately
following the call until February 3, 2006 at midnight ET. To access the
rebroadcast, please dial (800) 642-1687 and enter passcode number 4216292. To
automatically receive Comcast financial news by email, please visit
www.cmcsa.com or www.cmcsk.com and subscribe to e-mail alerts.
About Comcast:
Comcast Corporation (Nasdaq: CMCSA, CMCSK) (www.comcast.com) is the nation's
leading provider of cable, entertainment and communications products and
services. With 21.4 million cable customers, 8.5 million high-speed Internet
customers, and 1.3 million voice customers, Comcast is principally involved in
the development, management and operation of broadband cable systems and in the
delivery of programming content.
The Company's content networks and investments include E! Entertainment
Television, Style Network, The Golf Channel, OLN, G4, AZN Television, PBS KIDS
Sprout, TV One and four regional Comcast SportsNets. The Company also has a
majority ownership in Comcast-Spectacor, whose major holdings include the
Philadelphia Flyers NHL hockey team, the Philadelphia 76ers NBA basketball team
and two large multipurpose arenas in Philadelphia. Comcast Class A common stock
and Class A Special common stock trade on The NASDAQ Stock Market under the
symbols CMCSA and CMCSK, respectively.
6
COMCAST CORPORATION
TABLE 1
Condensed Consolidated Statement of Operations (Unaudited)
(amounts in millions, except per share data)
Three Months Ended Twelve Months Ended
December 31, December 31,
----------------------- -----------------------
2005 2004 2005 2004
---------- ---------- ---------- ----------
Revenues $ 5,716 $ 5,235 $ 22,255 $ 20,307
Operating expenses 2,061 1,962 7,969 7,462
Selling, general and administrative expenses 1,500 1,287 5,793 5,314
3,561 3,249 13,762 12,776
Operating Cash Flow 2,155 1,986 8,493 7,531
Depreciation expense 951 940 3,630 3,420
Amortization expense 311 335 1,173 1,203
1,262 1,275 4,803 4,623
Operating Income 893 711 3,690 2,908
Other Income (Expense)
Interest expense (462) (457) (1,796) (1,876)
Investment income, net 53 241 89 472
Equity in net losses of affiliates (25) (22) (47) (88)
Other income (expense) 5 312 (56) 394
(429) 74 (1,810) (1,098)
Income before Income Taxes
and Minority Interest 464 785 1,880 1,810
Income tax expense (319) (360) (933) (826)
Income Before Minority Interest 145 425 947 984
Minority interest (12) (2) (19) (14)
Net Income $ 133 $ 423 $ 928 $ 970
Net Income per common share $ 0.06 $ 0.19 $ 0.42 $ 0.43
Basic weighted average number of common shares 2,169 2,218 2,197 2,240
Diluted weighted average number of common shares 2,179 2,229 2,208 2,250
7
COMCAST CORPORATION
TABLE 2
Condensed Consolidated Balance Sheet (Unaudited)
(dollars in millions)
December 31, December 31,
2005 2004
------------ ------------
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 693 $ 452
Investments 148 1,555
Accounts receivable, net 1,060 959
Other current assets 693 569
Total current assets 2,594 3,535
INVESTMENTS 12,682 12,812
PROPERTY AND EQUIPMENT, net 18,769 18,711
FRANCHISE RIGHTS 51,090 51,071
GOODWILL 14,218 14,020
OTHER INTANGIBLE ASSETS, net 3,160 3,851
OTHER NONCURRENT ASSETS, net 633 694
$ 103,146 $ 104,694
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued expenses related to trade creditors $ 2,033 $ 2,041
Accrued expenses and other current liabilities 2,545 2,735
Deferred income taxes 2 360
Current portion of long-term debt 1,689 3,499
Total current liabilities 6,269 8,635
LONG-TERM DEBT, less current portion 21,682 20,093
DEFERRED INCOME TAXES 27,370 26,815
OTHER NONCURRENT LIABILITIES 6,949 7,261
MINORITY INTEREST 657 468
STOCKHOLDERS' EQUITY 40,219 41,422
$ 103,146 $ 104,694
8
COMCAST CORPORATION
TABLE 3
Condensed Consolidated Statement of Cash Flows (Unaudited)
(dollars in millions)
Twelve Months Ended
December 31,
---------------------------
2005 2004
------------ ------------
OPERATING ACTIVITIES
Net cash provided by operating activities $4,922 $5,930
------------ ------------
FINANCING ACTIVITIES
Proceeds from borrowings 3,978 1,030
Retirements and repayments of debt (2,706) (2,323)
Repurchases of common stock and stock options (2,313) (1,361)
Issuances of common stock 93 113
Other, net 15 25
------------ ------------
Net cash used in financing activities (933) (2,516)
------------ ------------
INVESTING ACTIVITIES
Capital expenditures (3,621) (3,660)
Proceeds from sales and restructuring of investments 861 228
Purchases of investments (306) (156)
Acquisitions, net of cash acquired (199) (296)
Cash paid for intangible assets (281) (615)
Purchases of short-term investments, net (86) (13)
Proceeds from settlement of contract of acquired company - 26
Other, net (116) (26)
------------ ------------
Net cash used in investing activities (3,748) (4,512)
------------ ------------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 241 (1,098)
CASH AND CASH EQUIVALENTS, beginning of period 452 1,550
------------ ------------
CASH AND CASH EQUIVALENTS, end of period $693 $452
============ ============
TABLE 4
Calculation of Free Cash Flow (Unaudited) (1)
(dollars in millions)
Three Months Ended Twelve Months Ended
December 31, December 31,
----------------------- -----------------------
2005 2004 2005 2004
---------- ---------- ---------- ----------
Operating Cash Flow $ 2,155 $ 1,986 $ 8,493 $ 7,531
Interest, Net (2) 410 420 1,653 1,729
Cash Paid for Income Taxes (3) 178 16 653 205
Capital Expenditures 868 1,050 3,621 3,660
---------- ---------- ---------- ----------
FREE CASH FLOW $ 699 $ 500 $ 2,566 $ 1,937
========== ========== ========== ==========
Changes in Working Capital and Other Items (4) (585) (55) (1,265) 333
---------- ---------- ---------- ----------
Net Cash Provided by Operating Activities Less Capital Expenditures $ 114 $ 445 $ 1,301 $ 2,270
---------- ---------- ---------- ----------
(1) Free Cash Flow (as presented above) is defined as Operating Cash Flow less
net interest, cash paid for income taxes, and capital expenditures. It is
unaffected by fluctuations in working capital levels from period to period and
cash payments associated with intangible and other noncurrent assets,
acquisitions and investments. Cash payments for intangible assets include
long-term technology license agreements including computer software and
long-term contract rights to service multi-dwelling properties. For the twelve
months ended December 31, 2005, cash payments for intangible assets of $281
million included licenses and software intangibles of $174 million and multiple
dwelling unit contracts of $68 million. For the twelve months ended December 31,
2004, cash payments for intangible assets of $615 million included a long-term
strategic license agreement with Gemstar of approximately $250 million, other
licenses and software intangibles of $161 million and multiple dwelling unit
contracts of $177 million. For the twelve months ended December 31, 2005, cash
payments for acquisitions and investments totaling $505 million included MGM
Inc., Liberate Technologies, and MetaTV. In 2004, cash payments for acquisitions
and investments totaling $452 million primarily related to the acquisition of
TechTV.
(2) Includes interest expense net of interest income and excludes non-cash
interest and subsidiary preferred dividends.
(3) Cash paid for income taxes excludes $490 million related to AT&T Broadband
income taxes and related interest, net of estimated tax benefit.
(4) Free Cash Flow excludes amounts necessary to reconcile Free Cash Flow to
"Net Cash Provided by Operating Activities Less Capital Expenditures." For the
twelve months ended December 31, 2005, this amount includes $994 million in cash
payments for liabilities incurred as part of the acquisition of AT&T Broadband,
including $220 million in payments representing our share of the settlement
payments related to certain AT&T litigation and $557 million related to AT&T
Broadband income tax related payments. For the twelve months ended December 31,
2004, this amount includes proceeds of $680 million related to the exchange/sale
of Liberty Media and Liberty Media International stock and income tax refunds of
$591 million offset by $515 million in cash payments for liabilities recorded as
part of the acquisition of AT&T Broadband. For the three months ended December
31, 2005, this amount includes $576 million in cash payments for liabilities
incurred as part of the acquisition of AT&T Broadband including $557 million
related to AT&T Broadband income tax related payments. For the three months
ended December 31, 2004, this amount includes $244 million in cash payments for
liabilities recorded as part of the acquisition of AT&T Broadband.
9
COMCAST CORPORATION
TABLE 5
Pro Forma Financial Data by Business Segment (Unaudited) (1)
(dollars in millions)
Corporate
and
Cable (2) Content (3) Other (4) Total
------------ ------------ ------------ ------------
Three Months Ended December 31, 2005
Revenues $ 5,408 $ 235 $ 73 $ 5,716
Operating Cash Flow $ 2,172 $ 35 $ (52) $ 2,155
Operating Income (Loss) $ 967 $ (8) $ (66) $ 893
Operating Cash Flow Margin 40.2% 15.0% NM 37.7%
Capital Expenditures (5) $ 849 $ 5 $ 14 $ 868
Three Months Ended December 31, 2004
Revenues $ 4,987 $ 205 $ 43 $ 5,235
Operating Cash Flow $ 1,974 $ 57 $ (45) $ 1,986
Operating Income (Loss) $ 771 $ 11 $ (71) $ 711
Operating Cash Flow Margin 39.6% 27.6% NM 37.9%
Capital Expenditures (5) $ 1,044 $ 3 $ 3 $ 1,050
Twelve Months Ended December 31, 2005
Revenues $ 21,158 $ 919 $ 178 $ 22,255
Operating Cash Flow $ 8,458 $ 283 $ (248) $ 8,493
Operating Income (Loss) $ 3,860 $ 128 $ (298) $ 3,690
Operating Cash Flow Margin 40.0% 30.8% NM 38.2%
Capital Expenditures (5) $ 3,567 $ 16 $ 38 $ 3,621
Twelve Months Ended December 31, 2004
Revenues $ 19,321 $ 787 $ 204 $ 20,312
Operating Cash Flow $ 7,473 $ 265 $ (205) $ 7,533
Operating Income (Loss) $ 3,098 $ 103 $ (291) $ 2,910
Operating Cash Flow Margin 38.7% 33.6% NM 37.1%
Capital Expenditures (5) $ 3,622 $ 17 $ 21 $ 3,660
(1) See Non-GAAP and Other Financial Measures in Table 7. Historical financial
data by business segment, as required under generally accepted accounting
principles, is available in the Company's annual report on Form 10-K. All
percentages are calculated based on actual amounts. Minor differences may exist
due to rounding.
(2) Pro forma financial data includes the results of the 30,000 cable
subscribers acquired from US Coastal Cable in April 2004.
(3) Content includes our national networks E! Entertainment Television and Style
Network (E! Networks), The Golf Channel, OLN, G4 and AZN Television.
(4) Corporate and Other includes Comcast-Spectacor, Corporate activities and all
other businesses not presented in the Cable or Content segments and elimination
entries. Beginning in the third quarter of 2004, Comcast-Spectacor includes the
operating results of its investment in a sports-event related business.
(5) Our Cable segment's capital expenditures are comprised of the following
categories:
FY FY
4Q05 4Q04 2005 2004
------------ ------------ ------------ ------------
New Service Offerings
Customer Premise Equipment (CPE) $ 460 $ 523 $ 1,876 $ 1,545
Scalable Infrastructure 197 178 837 561
657 701 2,713 2,106
Recurring Capital Projects
Line Extensions 75 86 303 311
Support Capital 72 93 286 303
147 179 589 614
Upgrades 45 164 265 902
Total $ 849 $ 1,044 $ 3,567 $ 3,622
CPE includes costs incurred at the customer residence to secure new customers,
revenue units and additional bandwidth revenues (e.g. digital converters).
Scalable infrastructure includes costs, not CPE or network related, to secure
growth of new customers, revenue units and additional bandwidth revenues or
provide service enhancements (e.g. headend equipment). Line extensions include
network costs associated with entering new service areas (e.g. fiber/coaxial
cable). Support capital includes costs associated with the replacement or
enhancement of non-network assets due to obsolescence and wear out (e.g.
non-network equipment, land, buildings and vehicles). Upgrades include costs to
enhance or replace existing fiber/coaxial cable networks, including recurring
betterments.
10
COMCAST CORPORATION
TABLE 6
Pro Forma Data - Cable Segment Components (Unaudited) (1) (2)
(dollars in millions, except per subscriber and per unit data)
Three Months Ended Twelve Months Ended
December 31, December 31,
--------------------------- ---------------------------
2005 2004 2005 2004
------------ ------------ ------------ ------------
Revenues:
Video (3) $ 3,426 $ 3,242 $ 13,635 $ 12,897
High-Speed Internet 1,059 855 3,986 3,124
Phone 173 173 687 701
Advertising 368 369 1,359 1,287
Other (4) 212 185 811 666
Franchise Fees 170 163 680 646
Total Revenues $ 5,408 $ 4,987 $ 21,158 $ 19,321
Programming Expense $ 4,371 $ 4,149
Operating Cash Flow $ 2,172 $ 1,974 $ 8,458 $ 7,473
Operating Income $ 967 $ 771 $ 3,860 $ 3,098
Operating Cash Flow Margin 40.2% 39.6% 40.0% 38.7%
Capital Expenditures $ 849 $ 1,044 $ 3,567 $ 3,622
Operating Cash Flow, Net of Capital Expenditures $ 1,323 $ 930 $ 4,891 $ 3,851
Capital Expenditures per Basic Subscriber $ 166 $ 168
Capital Expenditures per Revenue Generating Unit $ 87 $ 94
4Q05 4Q04 3Q05
------------ ------------ ------------
Video
Homes Passed (000's) 41,600 40,800 41,400
Basic Subscribers (000's) 21,449 21,561 21,409
Basic Penetration 51.5% 52.8% 51.8%
Quarterly Net Basic Subscriber Additions (000's) 40 60 (46)
Digital Subscribers (000's) 9,789 8,656 9,447
Digital Penetration 45.6% 40.1% 44.1%
Quarterly Net Digital Subscriber Additions (000's) 342 251 307
Digital Set-Top Boxes 15,052 12,960 14,398
Monthly Average Video Revenue per Basic Subscriber $ 53.29 $ 50.19 $ 52.98
Monthly Average Total Revenue per Basic Subscriber $ 84.12 $ 77.24 $ 82.70
High-Speed Internet
"Available" Homes (000's) 41,249 40,010 40,980
Subscribers (000's) 8,520 6,994 8,142
Penetration 20.7% 17.5% 19.9%
Quarterly Net Subscriber Additions (000's) 378 438 437
Monthly Average Revenue per Subscriber $ 42.39 $ 42.06 $ 42.88
Phone
"Available" Homes (000's) (5) 21,378 10,437 16,524
Subscribers (000's) 1,321 1,223 1,242
Penetration 6.2% 11.7% 7.5%
Quarterly Net Subscriber Additions (000's) 79 10 12
Monthly Average Revenue per Subscriber $ 45.19 $ 47.30 $ 46.03
Total Revenue Generating Units (000's) (6) 41,079 38,434 40,240
Quarterly Net Additions 839 759 710
(1) See Non-GAAP and Other Financial Measures in Table 7. All percentages are
calculated based on actual amounts. Minor differences may exist due to rounding.
(2) Pro forma financial and subscriber data includes the results of the 30,000
cable subscribers acquired from US Coastal Cable in April 2004. Pro forma
subscriber data also includes 85,000 subscribers acquired in various small
acquisitions during the periods presented. The impact of these acquisitions on
our segment operating results was not material.
(3) Video revenues consist of our basic, expanded basic, premium, pay-per-view,
equipment and digital services.
(4) Other revenues include installation revenues, guide revenues, commissions
from electronic retailing, other product offerings, commercial data services and
revenues of our digital media center and regional sports programming networks.
(5) Available homes includes circuit switched and Comcast Digital Voice homes.
(6) The sum total of all basic video, digital video, high-speed Internet and
phone subscribers, excluding additional outlets.
11
COMCAST CORPORATION
TABLE 7
Non-GAAP and Other Financial Measures
Operating Cash Flow is the primary basis used to measure the operational
strength and performance of our businesses. Free Cash Flow is an additional
performance measure used as an indicator of our ability to repay debt, make
investments and return capital to investors, principally through stock
repurchases. We use Debt Excluding Exchangeables as a measure of debt that will
require cash from future operations or financings. We also adjust certain
historical data on a pro forma basis following significant acquisitions or
dispositions to enhance comparability.
Operating Cash Flow is defined as operating income before depreciation and
amortization and 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 Operating Cash Flow 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 of Operating Cash Flow may not be directly comparable to
similar measures used by other companies.
As Operating Cash Flow is 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 of our quarterly and annual
financial statements. Therefore, we believe our measure of Operating Cash Flow
for our business segments is not a "non- GAAP financial measure" as contemplated
by Regulation G adopted by the Securities and Exchange Commission. Consolidated
Operating Cash Flow is a non-GAAP financial measure.
Free Cash Flow, which is a non-GAAP financial measure, has been defined as
Operating Cash Flow less net interest, cash paid for income taxes, and capital
expenditures. As such, it is unaffected by fluctuations in working capital
levels from period to period and cash payments associated with intangible and
other non-current assets which are detailed in our quarterly and annual reports
on Forms 10Q/K. We believe that Free Cash Flow 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 of Free Cash Flow is accrual-based and
may not be comparable to similar measures used by other companies. Beginning in
2006, we are changing the definition of Free Cash Flow to mean "Net Cash
Provided by Operating Activities From Continuing Operations" (as stated in our
Consolidated Statement of Cash Flows) reduced by capital expenditures and cash
paid for intangible assets; and increased by any payments related to certain
non-operating items, net of estimated tax benefits (such as income taxes on
investment sales, and non-recurring payments related to income tax and
litigation contingencies of acquired companies).
Debt Excluding Exchangeables, which is a non-GAAP financial measure, refers to
the aggregate amount of our consolidated debt and capital lease obligations less
the amount of notes that are collateralized by securities that we own.
Pro forma data is used by management to evaluate performance when significant
acquisitions or dispositions occur. Historical data reflects results of acquired
businesses only after the acquisition dates while pro forma data enhances
comparability of financial information between periods by adjusting the data as
if the acquisitions (or dispositions) occurred at the beginning of the prior
year. Our pro forma data is only adjusted for the timing of acquisitions and
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. We believe our pro forma data is not a non-GAAP financial measure as
contemplated by Regulation G.
Operating Cash Flow and Free Cash Flow should not be considered as substitutes
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. Debt Excluding Exchangeables should not be considered as a substitute
for Total Debt. Additionally, in the opinion of management, our pro forma data
is not necessarily indicative of future results or what results would have been
had the acquired businesses been operated by us after the assumed earlier date.
Following are quantitative reconciliations of Free Cash Flow, Debt Excluding
Exchangeables, Consolidated Operating Cash Flow, and, although not required by
Regulation G, reconciliations of business segment Operating Cash Flow and pro
forma data.
12
COMCAST CORPORATION
TABLE 7-A
Reconciliation of Historical and Pro Forma Data by Business Segment
(Unaudited) (1)
(dollars in millions)
Historical Adjustments (1)
------------------------------------------------ ---------------------------------
Corporate Corporate
Three Months Ended December 31, 2004 Cable Content and Other Total Cable and Other Pro forma
- ------------------------------------------ ---------- ---------- ---------- --------- -------- --------- ----------
Revenues $ 4,987 $ 205 $ 43 $ 5,235 - - $ 5,235
Operating Expenses (excluding depreciation
and amortization) 3,013 148 88 3,249 - - 3,249
Operating Cash Flow $ 1,974 $ 57 $ (45) $ 1,986 - - $ 1,986
Depreciation and amortization 1,203 46 26 1,275 - - 1,275
Operating Income (loss) $ 771 $ 11 $ (71) $ 711 - - $ 711
Capital expenditures $ 1,044 $ 3 $ 3 $ 1,050 - - $ 1,050
Corporate Corporate
Twleve Months Ended December 31, 2004 Cable Content and Other Total Cable and Other Pro forma
- ------------------------------------------ ---------- ---------- ---------- --------- -------- --------- ----------
Revenues $ 19,316 $ 787 $ 204 $ 20,307 $ 5 - $ 20,312
Operating expenses (excluding depreciation
and amortization) 11,845 522 409 12,776 3 - 12,779
Operating Cash Flow $ 7,471 $ 265 $ (205) $ 7,531 $ 2 - $ 7,533
Depreciation and amortization 4,375 162 86 4,623 - - 4,623
Operating Income (loss) $ 3,096 $ 103 $ (291) $ 2,908 $ 2 - $ 2,910
Capital expenditures $ 3,622 $ 17 $ 21 $ 3,660 - - $ 3,660
Reconciliation of Operating Cash Flow to Free Cash Flow (Unaudited)
(dollars in millions)
Three Months Ended Twelve Months Ended
December 31, December 31,
----------------------------------------- -----------------------------------------
2005 2004 2005 2004
------------------- ------------------- ------------------- -------------------
Operating Cash Flow $ 2,155 $ 2,155 $ 1,986 $ 1,986 $ 8,493 $ 8,493 $ 7,531 $ 7,531
Less:
Interest, net (2) (410) (410) (420) (420) (1,653) (1,653) (1,729) (1,729)
Cash Paid for Income Taxes (178) (178) (16) (16) (653) (653) (205) (205)
Change in Operating Assets and
Liabilities, net of acquisitions (693) (220) (1,022) (331)
Other (3) 108 165 (243) 664
Net Cash Provided by Operating
Activities $ 982 $ 1,495 $ 4,922 $ 5,930
Less: Capital Expenditures (868) (1,050) (3,621) (3,660)
Free Cash Flow $ 699 $ 500 $ 2,566 $ 1,937
Reconciliation of 2006 Outlook (Unaudited)
(dollars in millions)
CONSOLIDATED
--------------------------------------------------------------------------------
Year Ended As
December 31, 2005 FAS123R (4) Adjusted Outlook
----------------- ----------- ---------- ----------------------
Reconciliation of Operating Income to
Operating Cash Flow:
Operating Income $ 3,690 $ (166) $ 3,524
Depreciation and Amortization 4,803 - 4,803
Operating Cash Flow $ 8,493 $ (166) $ 8,327 Growth between 9 - 10%
Reconciliation of Net Cash Provided by
Operating Activities to Free Cash Flow
Net Cash provided by Operating Activities $ 4,922
Capital Expenditures (3,621)
Cash Paid for Intangible Assets (281)
Payments related to AT&T Broadband litigation 220
Income Tax Payments related to AT&T Broadband 557
Tax Payments on Investment Sales 431
Less: Tax Benefit (146)
Non-Operating Items, net of tax 1,062
Free Cash Flow * $ 2,082 Conversion of between 25% to 30% of Operating
Cash Flow
CABLE
--------------------------------------------------------------------------------
Year Ended As
December 31, 2005 FAS123R (4) Adjusted Outlook
----------------- ----------- ---------- ----------------------
Reconciliation of Operating Income to
Operating Cash Flow:
Operating Income $ 3,860 $ (117) $ 3,743
Depreciation and Amortization 4,598 - 4,598
Operating Cash Flow $ 8,458 $ (117) $ 8,341 Growth between 10 - 11%
Reconciliation of Net Cash Provided by
Operating Activities to Free Cash Flow
Net Cash provided by Operating Activities
Capital Expenditures
Cash Paid for Intangible Assets
Payments related to AT&T Broadband litigation
Income Tax Payments related to AT&T Broadband
Tax Payments on Investment Sales
Less: Tax Benefit
Non-Operating Items, net of tax
Free Cash Flow *
* Free Cash Flow Definition Beginning in 2006 (see table 7)
(1) Pro forma data is only adjusted for timing of the acquisitions (or
dispositions) and 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. There were no pro forma adjustments to
the three and twelve months ending December 31, 2005. Minor differences may
exist due to rounding.
(2) Includes interest expense net of interest income and excludes non-cash
interest and subsidiary preferred dividends.
(3) Includes non-cash interest expense included in Operating Cash Flow, cash
related to other (income) expense, dividends, and the net effect of changes
in accrued income taxes.
(4) The impact on Operating Cash Flow for 2005, under the provisions of SFAS No.
123 (predecessor to SFAS No. 123R), is an incremental expense of
approximately $166 million, including $117 million at Comcast Cable.
13
COMCAST CORPORATION
TABLE 7-B
Reconciliation of Net Income to Adjusted Net Income (Unaudited)
(dollars in millions, except per share data)
Three Months Ended Twelve Months Ended
December 31, December 31,
----------------------------------------- -----------------------------------------
2005 2004 2005 2004
------------------- ------------------- ------------------- -------------------
$ EPS (2) $ EPS (2) $ EPS (2) $ EPS (2)
-------- -------- -------- -------- -------- -------- -------- --------
Net Income $ 133 $ 0.06 $ 423 $ 0.19 $ 928 $ 0.42 $ 970 $ 0.43
Adjustments:
Investment income (53) (241) (89) (472)
Other income (expense) (5) (312) 56 (394)
Tax effect of adjustments (at 40%) and
refinement of effective tax rate 111 221 13 346
-------- -------- -------- -------- -------- -------- -------- --------
Adjusted Net Income (1) $ 186 $ 0.09 $ 91 $ 0.04 $ 908 $ 0.41 $ 450 $ 0.20
(1) Adjusted Net Income excludes Investment Income and Other Income (as
presented in our Consolidated Statement of Operations), net of a 40% income tax
rate and excludes in the fourth quarter of 2005 a refinement to our effective
tax rate.
(2) Based on diluted average number of common shares for the respective periods
as presented in Table 1.
Reconciliation of 2005 Content Segment (Unaudited)
(dollars in millions)
Three Months Ended
December 31,
------------------------------
2005 2004 Growth %
-------- -------- --------
Content Operating Cash Flow $ 35 $ 57 (37.9%)
NHL impact 22 - NM
-------- -------- --------
Content excluding NHL $ 57 $ 57 1.2%
Twelve Months Ended
December 31,
------------------------------
2005 2004 Growth %
-------- -------- --------
Content Operating Cash Flow $ 283 $ 265 7.0%
NHL impact 22 - NM
-------- -------- --------
Content excluding NHL $ 305 $ 265 15.3%
Reconciliation of Total Debt to Debt Excluding Exchangeables (Unaudited)
(dollars in millions)
December 31,
-------------------
2005 2004
-------- --------
Current portion of long-term debt $ 1,689 $ 3,499
Long-term debt 21,682 20,093
-------- --------
Total Debt $ 23,371 $ 23,592
Exchangeable Debt 46 1,699
-------- --------
Debt excluding exchangeables $ 23,325 $ 21,893
======== ========
Reconciliation of Operating Cash Flow Excluding Hurricane Impact (Unaudited)
(dollars in millions)
Three Months Ended
December 31,
------------------------------
2005 2004 Growth %
-------- -------- --------
Cable Operating Cash Flow $ 2,172 $ 1,974 10.1%
Hurricane impact 48 9 NM
-------- -------- --------
Cable excluding hurricane impact $ 2,220 $ 1,983 11.9%
Content 35 57 (37.9%)
Other (53) (44) 18.1%
-------- -------- --------
Total Comcast excluding
hurricane impact $ 2,202 $ 1,996 10.3%
Twelve Months Ended
December 31,
------------------------------
2005 2004 Growth %
-------- -------- --------
Cable Operating Cash Flow $ 8,458 $ 7,473 13.2%
Hurricane impact 60 20 NM
-------- -------- --------
Cable excluding hurricane impact $ 8,518 $ 7,493 13.7%
Content 283 265 7.0%
Other (249) (204) (21.7%)
-------- -------- --------
Total Comcast excluding
hurricane impact $ 8,552 $ 7,554 13.2%
14