UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
(X) Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the Quarterly Period Ended:
SEPTEMBER 30, 2002
OR
( ) Transition Report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the Transition Period from ________ to ________.
Commission File Number 333-30745
COMCAST CABLE COMMUNICATIONS, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 23-2175755
- --------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1500 Market Street, Philadelphia, PA 19102-2148
- --------------------------------------------------------------------------------
(Address of principal executive offices)
(Zip Code)
Registrant's telephone number, including area code: (215) 665-1700
__________________________
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding twelve months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such requirements
for the past 90 days.
Yes X No
--- ---
__________________________
As of September 30, 2002, there were 138.89 shares of Common Stock outstanding.
The Registrant meets the conditions set forth in General Instructions H(1)(a)
and (b) of Form 10-Q and is therefore filing this form with the reduced
disclosure format.
COMCAST CABLE COMMUNICATIONS, INC. AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED SEPTEMBER 30, 2002
TABLE OF CONTENTS
Page
Number
------
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
Condensed Consolidated Balance Sheet as of September 30,
2002 and December 31, 2001 (Unaudited)........................2
Condensed Consolidated Statement of Operations for the
Three and Nine Months Ended September 30, 2002 and 2001
(Unaudited)...................................................3
Condensed Consolidated Statement of Cash Flows for the
Nine Months Ended September 30, 2002 and 2001 (Unaudited).....4
Notes to Condensed Consolidated Financial Statements
(Unaudited)..............................................5 - 12
ITEM 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.....................13 - 18
ITEM 4. Evaluation of Disclosure Controls and Procedures.............18
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings............................................18
ITEM 6. Exhibits and Reports on Form 8-K.............................18
SIGNATURE............................................................19
CERTIFICATIONS..................................................20 - 22
___________________________________
This Quarterly Report on Form 10-Q is for the three months ended September
30, 2002. This Quarterly Report modifies and supersedes documents filed prior to
this Quarterly Report. The SEC allows us to "incorporate by reference"
information that we file with them, which means that we can disclose important
information to you by referring you directly to those documents. Information
incorporated by reference is considered to be part of this Quarterly Report. In
addition, information that we file with the SEC in the future will automatically
update and supersede information contained in this Quarterly Report. In this
Quarterly Report, "Comcast Cable," the "Company," "we," "us" and "our" refer to
Comcast Cable Communications, Inc. and its subsidiaries.
You should carefully review the information contained in this Quarterly
Report and in other reports or documents that we file from time to time with the
SEC. In this Quarterly Report, we state our beliefs of future events and of our
future financial performance. In some cases, you can identify those so-called
"forward-looking statements" by words such as "may," "will," "should,"
"expects," "plans," "anticipates," "believes," "estimates," "predicts,"
"potential," or "continue" or the negative of those words and other comparable
words. You should be aware that those statements are only our predictions.
Actual events or results may differ materially. In evaluating those statements,
you should specifically consider various factors, including the risks outlined
below. Those factors may cause our actual results to differ materially from any
of our forward-looking statements.
Factors Affecting Future Operations
Our businesses may be affected by, among other things:
o changes in laws and regulations,
o changes in the competitive environment,
o changes in technology,
o industry consolidation and mergers,
o franchise related matters,
o market conditions that may adversely affect the availability of debt
and equity financing for working capital, capital expenditures or
other purposes; and
o general economic conditions.
COMCAST CABLE COMMUNICATIONS, INC. AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED SEPTEMBER 30, 2002
PART I. FINANCIAL INFORMATION
- ------- ---------------------
ITEM 1. FINANCIAL STATEMENTS
CONDENSED CONSOLIDATED BALANCE SHEET
------------------------------------
(Unaudited)
(Dollars in millions, except share data)
September 30, December 31,
2002 2001
------------- --------------
ASSETS
- ------
CURRENT ASSETS
Cash and cash equivalents...................................................... $23.1 $45.1
Investments.................................................................... 36.8 100.6
Accounts receivable, less allowance for doubtful accounts of $61.8 and $58.9... 240.3 269.3
Due from affiliates............................................................ 199.6 179.7
Other current assets........................................................... 84.7 75.3
----------- -----------
Total current assets....................................................... 584.5 670.0
----------- -----------
INVESTMENTS....................................................................... 175.2 178.4
NOTES RECEIVABLE FROM AFFILIATES.................................................. 261.6 566.3
PROPERTY AND EQUIPMENT, net of accumulated depreciation of $3,020.4 and $2,328.3.. 6,180.5 6,096.0
GOODWILL.......................................................................... 4,600.2 4,595.1
FRANCHISE RIGHTS.................................................................. 16,542.1 16,472.4
OTHER INTANGIBLE ASSETS, net of accumulated amortization of $147.4 and $122.1..... 173.9 149.6
OTHER NONCURRENT ASSETS, net...................................................... 163.7 105.0
----------- -----------
$28,681.7 $28,832.8
=========== ===========
LIABILITIES AND STOCKHOLDER'S EQUITY
- ------------------------------------
CURRENT LIABILITIES
Accounts payable............................................................... $363.4 $336.1
Accrued expenses and other current liabilities................................. 864.7 555.9
Accrued interest............................................................... 175.7 104.8
Current portion of long-term debt.............................................. 2.6 203.1
----------- -----------
Total current liabilities.................................................. 1,406.4 1,199.9
----------- -----------
LONG-TERM DEBT, less current portion.............................................. 7,807.4 8,359.4
----------- -----------
DEFERRED INCOME TAXES, due to affiliate, net...................................... 5,573.6 5,495.8
----------- -----------
OTHER NONCURRENT LIABILITIES...................................................... 519.2 534.5
----------- -----------
COMMITMENTS AND CONTINGENCIES (NOTE 11)
STOCKHOLDER'S EQUITY
Common stock, $1 par value - authorized 1,000 shares; issued 138.89 shares.....
Additional capital............................................................. 16,692.1 16,703.0
Accumulated deficit............................................................ (3,134.2) (3,494.9)
Accumulated other comprehensive income (loss).................................. (182.8) 35.1
----------- -----------
Total stockholder's equity................................................. 13,375.1 13,243.2
----------- -----------
$28,681.7 $28,832.8
=========== ===========
See notes to condensed consolidated financial statements.
2
COMCAST CABLE COMMUNICATIONS, INC. AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED SEPTEMBER 30, 2002
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
----------------------------------------------
(Unaudited)
(Dollars in millions)
Three Months Ended Nine Months Ended
September 30, September 30,
2002 2001 2002 2001
---------- ---------- ---------- ----------
SERVICE REVENUES............................................... $1,526.6 $1,360.6 $4,491.6 $3,847.0
---------- ---------- ---------- ----------
COSTS AND EXPENSES
Operating (excluding depreciation).......................... 545.0 476.1 1,591.9 1,355.7
Selling, general and administrative......................... 349.1 313.6 1,030.7 885.1
Depreciation................................................ 294.3 227.9 858.1 637.9
Amortization................................................ 10.0 538.4 27.5 1,536.3
---------- ---------- ---------- ----------
1,198.4 1,556.0 3,508.2 4,415.0
---------- ---------- ---------- ----------
OPERATING INCOME (LOSS)........................................ 328.2 (195.4) 983.4 (568.0)
OTHER INCOME (EXPENSE)
Interest expense............................................ (140.0) (143.9) (427.2) (405.4)
Interest income (expense) on affiliate notes, net........... 5.1 4.2 23.8 (18.5)
Investment income (expense)................................. 2.3 (8.8) 1.3 (71.2)
Equity in net income (losses) of affiliates................. 1.8 (2.1) 4.0 (6.4)
Other income (expense)...................................... (0.8) (5.1) 1,196.6
---------- ---------- ---------- ----------
(130.8) (151.4) (403.2) 695.1
---------- ---------- ---------- ----------
INCOME (LOSS) BEFORE INCOME TAXES AND
CUMULATIVE EFFECT OF ACCOUNTING CHANGE..................... 197.4 (346.8) 580.2 127.1
INCOME TAX BENEFIT (EXPENSE)................................... (74.9) 100.9 (219.5) (166.1)
---------- ---------- ---------- ----------
INCOME (LOSS) BEFORE CUMULATIVE EFFECT OF
ACCOUNTING CHANGE........................................... 122.5 (245.9) 360.7 (39.0)
CUMULATIVE EFFECT OF ACCOUNTING CHANGE......................... (61.3)
---------- ---------- ---------- ----------
NET INCOME (LOSS).............................................. $122.5 ($245.9) $360.7 ($100.3)
========== ========== ========== ==========
See notes to condensed consolidated financial statements.
3
COMCAST CABLE COMMUNICATIONS, INC. AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED SEPTEMBER 30, 2002
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
----------------------------------------------
(Unaudited)
(Dollars in millions)
Nine Months Ended September 30,
2002 2001
--------- ---------
OPERATING ACTIVITIES
Net income (loss)................................................................ $360.7 ($100.3)
Adjustments to reconcile net income (loss) to net cash provided by
operating activities:
Depreciation................................................................... 858.1 637.9
Amortization................................................................... 27.5 1,536.3
Non-cash interest (income) expense............................................. (1.7) 4.4
Non-cash interest (income) expense on affiliate notes.......................... (13.7)
Equity in net (income) losses of affiliates.................................... (4.0) 6.4
Losses (gains) on investments and other income (expense), net.................. 8.4 (1,110.7)
Cumulative effect of accounting change......................................... 61.3
Deferred income taxes, due to affiliate........................................ 195.2 145.8
Other.......................................................................... (22.3) (50.6)
--------- ---------
1,408.2 1,130.5
Changes in working capital, net of effects of acquisitions:
Decrease (increase) in accounts receivable, net................................ 27.7 (33.1)
Increase in other current assets............................................... (17.4) (20.2)
Increase in accounts payable, accrued expenses and other current liabilities... 88.8 112.9
--------- ---------
99.1 59.6
Net cash provided by operating activities................................ 1,507.3 1,190.1
--------- ---------
FINANCING ACTIVITIES
Proceeds from borrowings......................................................... 868.1 4,863.7
Retirements and repayments of long-term debt..................................... (1,618.6) (3,583.7)
Proceeds from settlement of interest rate exchange agreements.................... 56.8
Proceeds from notes payable to affiliates........................................ 673.0
Repayment of notes payable to affiliates......................................... (706.4)
Net transactions with affiliates................................................. (19.9) (196.9)
Capital contribution from Parent................................................. 43.1
Dividend to parent............................................................... (54.0)
Deferred financing costs......................................................... (2.3) (19.3)
--------- ---------
Net cash (used in) provided by financing activities...................... (726.8) 1,030.4
--------- ---------
INVESTING ACTIVITIES
Acquisitions, net of cash acquired............................................... (15.8) (588.0)
Capital expenditures............................................................. (1,009.6) (1,398.8)
Decrease in cash held by an affiliate............................................ 74.2
Decrease (increase) in notes receivable from affiliates.......................... 318.4 (28.3)
Purchases of investments......................................................... (5.6) (126.4)
Proceeds from sales of investments............................................... 38.7 156.6
Additions to intangible and other noncurrent assets.............................. (128.6) (67.6)
--------- ---------
Net cash used in investing activities.................................... (802.5) (1,978.3)
--------- ---------
(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS.................................... (22.0) 242.2
CASH AND CASH EQUIVALENTS, beginning of period...................................... 45.1 44.4
--------- ---------
CASH AND CASH EQUIVALENTS, end of period............................................ $23.1 $286.6
========= =========
See notes to condensed consolidated financial statements.
4
COMCAST CABLE COMMUNICATIONS, INC. AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED SEPTEMBER 30, 2002
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Basis of Presentation
Comcast Cable Communications, Inc. (the "Company"), a wholly-owned
subsidiary of Comcast Corporation ("Comcast"), has prepared these unaudited
condensed consolidated financial statements based upon Securities and
Exchange Commission rules that permit reduced disclosure for interim
periods.
These financial statements include all adjustments that are necessary for a
fair presentation of the Company's results of operations and financial
condition for the interim periods shown including normal recurring accruals
and other items. The results of operations for the interim periods
presented are not necessarily indicative of results for the full year.
For a more complete discussion of the Company's accounting policies and
certain other information, refer to the financial statements included in
the Company's Annual Report on Form 10-K for the year ended December 31,
2001.
Contribution of Comcast Cablevision of Philadelphia Area I, Inc.
During the third quarter of 2002, Comcast contributed its subsidiary,
Comcast Cablevision of Philadelphia Area I, Inc. ("Greater Philadelphia"),
which serves approximately 85,000 subscribers as of September 30, 2002 to
the Company. The contribution of Greater Philadelphia was accounted for at
Comcast's historical cost in a manner similar to a pooling of interests.
Accordingly, the accounts of Greater Philadelphia are combined with the
Company in the accompanying condensed consolidated financial statements for
all periods presented.
Reclassifications
Certain reclassifications have been made to the prior year financial
statements to conform to those classifications used in 2002 (see Note 2).
2. RECENT ACCOUNTING PRONOUNCEMENTS
SFAS No. 133, as Amended
On January 1, 2001, the Company adopted Statement of Financial Accounting
Standards ("SFAS") No. 133, "Accounting for Derivatives and Hedging
Activities," as amended. SFAS No. 133 establishes accounting and reporting
standards for derivatives and hedging activities. SFAS No. 133 requires
that all derivative instruments be reported on the balance sheet at their
fair values. Upon adoption of SFAS No. 133, the Company recognized as a
loss a cumulative effect of accounting change, net of related income taxes,
of $61.3 million. The loss consisted of $94.3 million principally related
to the reclassification of losses previously recognized as a component of
accumulated other comprehensive income (loss) on the Company's equity
derivative instruments, net of related deferred income taxes of $33.0
million.
SFAS No. 142
The Financial Accounting Standards Board ("FASB") issued SFAS No. 142,
"Goodwill and Other Intangible Assets," in June 2001. SFAS No. 142
addresses how intangible assets that are acquired individually or with a
group of other assets should be accounted for in financial statements upon
and subsequent to their acquisition. The Company adopted SFAS No. 142 on
January 1, 2002, as required by the new statement. Upon adoption, the
Company no longer amortizes goodwill and other indefinite lived intangible
assets, which consist of cable franchise rights. The Company will be
required to test its goodwill and intangible assets that are determined to
have an indefinite life for impairment at least annually. The provisions of
SFAS No. 142 require the completion of an initial transitional impairment
assessment, with any impairments identified treated as a cumulative effect
of a change in accounting principle. The Company completed this assessment
and determined that no cumulative effect results from adopting this change
in accounting principle. The provisions of SFAS No. 142 also require the
completion of an annual impairment test, with any impairments recognized in
current earnings. The Company completed the annual impairment test during
the quarter ended June 30, 2002 and determined that no impairment charge is
necessary (see Note 6).
5
COMCAST CABLE COMMUNICATIONS, INC. AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED SEPTEMBER 30, 2002
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)
SFAS No. 143
The FASB issued SFAS No. 143, "Accounting for Asset Retirement
Obligations," in June 2001. SFAS No. 143 addresses financial accounting and
reporting for obligations associated with the retirement of tangible
long-lived assets and the associated asset retirement costs. SFAS No. 143
is effective for fiscal years beginning after June 15, 2002. The Company
does not expect the adoption of SFAS No. 143 will have a material impact on
its financial condition or results of operations.
SFAS No. 144
The FASB issued SFAS No. 144, "Accounting for the Impairment or Disposal of
Long-Lived Assets," in August 2001. SFAS No. 144, which addresses financial
accounting and reporting for the impairment of long-lived assets and for
long-lived assets to be disposed of, supercedes SFAS No. 121 and is
effective for fiscal years beginning after December 15, 2001. The Company
adopted SFAS No. 144 on January 1, 2002. The adoption of SFAS No. 144 had
no impact on the Company's financial condition or results of operations.
SFAS No. 145
The FASB issued SFAS No. 145, "Rescission of FASB Statements No. 4, 44, and
64, Amendment of FASB Statement No. 13, and Technical Corrections," in
April 2002. SFAS No. 145 rescinds, amends or makes various technical
corrections to certain existing authoritative pronouncements. Among other
things, SFAS No. 145 changes the accounting for certain gains and losses
resulting from extinguishments of debt by requiring that a gain or loss
from extinguishments of debt be classified as an extraordinary item only if
it meets the specific criteria of APB Opinion No. 30. SFAS No. 145 also
requires that cash flows from all trading securities be classified as cash
flows from operating activities in its statement of cash flows.
The Company adopted the provisions of SFAS No. 145 effective April 1, 2002,
as permitted by the new statement. Upon adoption of SFAS No. 145, all gains
or losses on extinguishments of debt that were classified as extraordinary
items in prior periods presented that do not meet the APB Opinion No. 30
criteria for classification as an extraordinary item shall be reclassified.
The Company previously classified losses from debt extinguishments as
extraordinary items in its statement of operations. The change in
classification had no effect on the Company's net income (loss) or
financial condition.
SFAS No. 146
The FASB issued SFAS No. 146, "Accounting for Costs Associated with Exit or
Disposal Activities," in June 2002. SFAS No. 146 changes the standards for
recognition of a liability for a cost associated with an exit or disposal
activity. SFAS No. 146 requires that a liability for a cost associated with
an exit or disposal activity be recognized when the liability is incurred.
SFAS No. 146 establishes that fair value is the objective for initial
measurement of the liability. SFAS No. 146 nullifies the guidance of
Emerging Issues Task Force ("EITF") 94-3, under which an entity recognized
a liability for an exit cost on the date that the entity committed itself
to an exit plan. The Company will adopt the provisions of SFAS No. 146 for
exit or disposal activities that are initiated after December 31, 2002, as
required by the new statement. The Company does not expect the adoption of
SFAS No. 146 will have a material impact on its financial condition or
results of operations.
EITF 01-14
In November 2001, the FASB staff announced EITF Topic D-103, "Income
Statement Characterization of Reimbursements Received for 'Out-of-Pocket'
Expenses Incurred," which has subsequently been recharacterized as EITF
01-14. EITF 01-14 requires that reimbursements received for out-of-pocket
expenses incurred be characterized as revenue in the statement of
operations.
Under the terms of its franchise agreements, the Company is required to pay
up to 5% of its gross revenues derived from providing cable services to the
local franchising authority. The Company normally passes these fees through
to its cable subscribers. The Company previously classified cable franchise
fees collected from its cable subscribers as a reduction of the related
franchise fee expense included within selling, general and administrative
expenses in its statement of operations.
6
COMCAST CABLE COMMUNICATIONS, INC. AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED SEPTEMBER 30, 2002
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)
EITF 01-14, by analogy, applies to franchise fees. Upon adoption of EITF
01-14 on January 1, 2002, the Company reclassified franchise fees collected
from cable subscribers from a reduction of selling, general and
administrative expenses to a component of service revenues for all periods
presented in its statement of operations. The change in classification had
no impact on the Company's reported operating income (loss) or financial
condition.
3. COMPREHENSIVE INCOME (LOSS)
The Company's total comprehensive income (loss) for the interim periods was
as follows (in millions):
Three Months Ended Nine Months Ended
September 30, September 30,
2002 2001 2002 2001
--------- ---------- --------- ----------
Net income (loss).................................... $122.5 ($245.9) $360.7 ($100.3)
Unrealized gains (losses) on marketable securities... (8.9) (6.9) (21.0) 96.4
Reclassification of adjustments for (gains) losses
included in net income (loss)...................... (9.0) (1.4) 106.5
Unrealized losses on the effective portion of cash
flow hedges........................................ (197.8) (195.5)
--------- ---------- --------- ----------
Comprehensive income (loss).......................... ($84.2) ($261.8) $142.8 $102.6
========= ========== ========= ==========
4. ACQUISITIONS AND OTHER SIGNIFICANT EVENTS
Unaudited Pro Forma Information
The following unaudited pro forma information has been presented as if the
acquisitions made by the Company in 2001 each occurred on January 1, 2001.
For a discussion of the Company's 2001 acquisitions, refer to the financial
statements included in the Company's Annual Report on Form 10-K for the
year ended December 31, 2001.This information is based on historical
results of operations and has been adjusted for acquisition costs. This
information is not necessarily indicative of what the results would have
been had the Company operated the entities acquired since January 1, 2001
(in millions).
Nine Months
Ended
September 30,
2001
--------------
Service revenues......................................... $4,002.7
Loss before cumulative effect of accounting change....... ($41.4)
Net loss................................................. ($102.7)
Other Income (Expense)
On January 1, 2001, the Company and Comcast completed their cable systems
exchange with Adelphia Communications Corporation ("Adelphia"). The Company
received cable systems serving approximately 445,000 subscribers from
Adelphia and Adelphia received certain of the Company's cable systems
serving approximately 441,000 subscribers. The Company recorded to other
income (expense) a pre-tax gain of $1.199 billion, representing the
difference between the estimated fair value of $1.799 billion as of the
closing date of the transaction and the Company's cost basis in the systems
exchanged (see Note 10).
5. INVESTMENTS
Fair Value Method
The Company holds unrestricted equity investments in certain publicly
traded companies which it accounts for as available for sale securities.
The unrealized pre-tax gains on available for sale investments as of
September 30, 2002 and December 31, 2001 of $19.6 million and $54.0
million, respectively, have been reported in the Company's
7
COMCAST CABLE COMMUNICATIONS, INC. AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED SEPTEMBER 30, 2002
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)
balance sheet as a component of accumulated other comprehensive income
(loss), net of related deferred income taxes of $6.9 million and $18.9
million, respectively.
The cost, fair value and gross unrealized gains related to the Company's
available for sale securities are as follows (in millions):
September 30, December 31,
2002 2001
---------- ---------
Cost......................................... $15.0 $37.3
Gross unrealized gains....................... 19.6 54.0
---------- ---------
Fair value................................... $34.6 $91.3
========== =========
Derivatives
The Company uses derivative financial instruments to manage its exposure to
fluctuations in interest rates. The Company also invests in businesses, to
some degree, through the purchase of equity call option or call warrant
agreements.
The unrealized pre-tax loss on cash flow hedges as of September 30, 2002 of
$300.8 million has been reported in the Company's balance sheet as a
component of accumulated other comprehensive income (loss), net of related
deferred income taxes of $105.3 million. The unrealized pre-tax losses on
cash flow hedges as of September 30, 2002 consist primarily of the
unrealized pre-tax loss of $297.6 million related to the Company's interest
rate lock agreements ("Rate Locks") which has been reported as a component
of accumulated other comprehensive income (loss), net of related deferred
income taxes of $104.2 million (see Note 7).
Investment Income (Expense)
Investment income (expense) for the interim periods includes the following
(in millions):
Three Months Ended Nine Months Ended
September 30, September 30,
2002 2001 2002 2001
--------- --------- -------- ---------
Interest and dividend income....................... $2.0 $4.9 $4.6 $16.8
Gains on sales and exchanges of investments, net... 1.4 29.2
Investment impairment losses....................... (0.6) (4.5) (89.5)
Mark to market adjustments on derivatives.......... 0.3 (13.1) (0.2) (27.7)
--------- --------- -------- ---------
Investment income (expense)..................... $2.3 ($8.8) $1.3 ($71.2)
========= ========= ======== =========
The investment impairment loss for the nine months ended September 30, 2001
relates principally to other than temporary declines in the Company's
investments in AT&T Corp. ("AT&T") and Motorola Inc.
8
COMCAST CABLE COMMUNICATIONS, INC. AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED SEPTEMBER 30, 2002
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)
6. GOODWILL AND INTANGIBLE ASSETS
The changes in the carrying amount of goodwill for the periods presented
are as follows (in millions):
Balance, December 31, 2001................................. $4,595.1
Purchase price allocation adjustments.................. 5.1
-----------
Balance, September 30, 2002................................ $4,600.2
===========
During the nine months ended September 30, 2002, the Company recorded the
final purchase price allocation related to certain of its cable system
acquisitions, which resulted in an increase in goodwill and a corresponding
decrease in franchise rights.
As of September 30, 2002, the weighted average amortization period for the
Company's intangible assets subject to amortization is 5.4 years and
estimated related amortization expense for each of the five years ended
December 31 is as follows (in millions):
2002............................ $35.4
2003............................ $32.7
2004............................ $29.7
2005............................ $25.7
2006............................ $19.3
The following pro forma financial information for the three and nine months
ended September 30, 2001 is presented as if SFAS No. 142 was adopted as of
January 1, 2001 (in millions):
Three Months Nine Months
Ended Ended
September 30, September 30,
2001 2001
-------------- --------------
Net income (loss)
As reported................................................ ($245.9) ($100.3)
Amortization of goodwill................................. 63.3 190.3
Amortization of equity method goodwill................... 1.9 5.7
Amortization of franchise rights......................... 283.5 812.2
-------------- --------------
As adjusted................................................ $102.8 $907.9
============== ==============
Income before cumulative effect of accounting change,
as adjusted.............................................. $102.8 $969.2
============== ==============
7. LONG-TERM DEBT
Commercial Paper
The Company's senior bank credit facility consists of a $2.25 billion,
five-year revolving credit facility and a $1.925 billion, 364-day revolving
credit facility (together, the "Comcast Cable Revolver"). The 364-day
revolving credit facility supports the Company's commercial paper program.
Amounts outstanding under the commercial paper program are classified as
long-term in the Company's balance sheet as of September 30, 2002 and
December 31, 2001 as the Company has both the ability and the intent to
refinance these obligations, if necessary, on a long-term basis with
amounts available under the Comcast Cable Revolver.
9
COMCAST CABLE COMMUNICATIONS, INC. AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED SEPTEMBER 30, 2002
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)
New Credit Facilities
On May 3, 2002, AT&T Broadband Corp. ("Broadband") and AT&T Comcast
Corporation, a company owned 50% each by AT&T and Comcast ("AT&T Comcast"),
entered into definitive credit agreements with a syndicate of lenders for
an aggregate of $12.825 billion of financing to complete the merger of
Comcast and a holding company of AT&T's broadband business ("AT&T
Broadband"), and to provide for the combined company's financing needs
after the transaction. The financing requires subsidiary guarantees,
including guarantees by the Company and by subsidiaries of Broadband. Under
the terms of the new credit facilities, the obligation of the lenders to
provide the financing upon completion of the AT&T Broadband transaction is
subject to a number of conditions, including a condition that the combined
company holds investment-grade credit ratings from both Standard & Poor's
("S&P") and Moody's Investor Services ("Moody's") ratings agencies at the
time of closing. On September 30, 2002, Comcast announced that AT&T Comcast
had received investment-grade credit ratings from each of S&P and Moody's
allowing AT&T Comcast to access all amounts under the credit facilities
upon closing of the AT&T Broadband transaction.
Interest Rates
As of September 30, 2002 and December 31, 2001, the Company's effective
weighted average interest rate on its long-term debt outstanding was 7.03%
and 6.41%, respectively.
Interest Rate Risk Management
During the nine months ended September 30, 2002, the Company settled all of
its outstanding fixed to variable interest rate exchange agreements
totaling $950.0 million aggregate notional amount and received proceeds of
$56.8 million. This amount is being recognized as an adjustment to interest
expense over the term of the related debt.
In June, July and November 2002, the Company entered into interest rate
lock agreements ("Rate Locks") to hedge the risk that the cash flows
related to the interest payments on an anticipated issuance or assumption
of certain fixed rate debt in connection with the AT&T Broadband
transaction may be adversely affected by interest rate fluctuations. The
Rate Locks mature in the fourth quarter of 2002, the timing of the
anticipated issuance or assumption of the fixed rate debt. To the extent
the Rate Locks are effective in offsetting the variability of the hedged
cash flows, changes in the fair value of the Rate Locks are not included in
earnings but are reported as a component of accumulated other comprehensive
income (loss) (see Note 5). Upon the issuance or assumption of the debt,
the value of the Rate Locks will be recognized as an adjustment to AT&T
Comcast's interest expense over the same period in which the related
interest costs on the debt are recognized in earnings.
Lines and Letters of Credit
As of September 30, 2002, the Company had unused lines of credit of $3.418
billion under its revolving credit facility.
As of September 30, 2002, the Company and certain of its subsidiaries had
unused irrevocable standby letters of credit totaling $57.2 million to
cover potential fundings under various agreements.
8. NOTES RECEIVABLE FROM AFFILIATES
As of September 30, 2002 and December 31, 2001, notes receivable from
affiliates consist of $261.6 million and $543.5 million principal amount of
notes receivable from Comcast and certain of its wholly owned subsidiaries.
The notes receivable bear interest at 7.75% as of September 30, 2002 and at
rates ranging from 5.75% to 8.76% as of December 31, 2001 (weighted average
interest rate of 7.75% and 7.10% as of September 30, 2002 and December 31,
2001, respectively). Notes receivable from affiliates outstanding at
September 30, 2002 are due in 2011. Interest receivable relating to such
notes of $22.8 million is included in notes receivable from affiliates as
of December 31, 2001.
10
COMCAST CABLE COMMUNICATIONS, INC. AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED SEPTEMBER 30, 2002
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)
9. RELATED PARTY TRANSACTIONS
Comcast, on behalf of the Company, has an affiliation agreement with QVC,
Inc. ("QVC"), an electronic retailer and a majority owned and controlled
subsidiary of Comcast, to carry its programming. In return for carrying QVC
programming, the Company receives an allocated portion, based upon market
share, of a percentage of net sales of merchandise sold to QVC customers
located in the Company's service area. These amounts are included in
service revenues in the Company's statement of operations.
The Company has entered into an agreement with QVC pursuant to which the
Company has agreed to reposition the QVC channel on the Company's cable
systems. In return for repositioning the QVC channel, the Company receives
incentive payments based on the number of subscribers for which the QVC
channel has been repositioned. During the nine months ended September 30,
2002, QVC paid $17.8 million to the Company under the terms of the
agreement. As of September 30, 2002 and December 31, 2001, other
non-current liabilities includes $27.1 million and $11.6 million related to
this agreement. The Company recognizes to service revenues the QVC
incentive payments over the ten year life of the agreement on a
straight-line basis.
The Company purchases programming from suppliers in which Comcast holds an
equity interest. These charges are included in operating expenses in the
Company's statement of operations.
The Company purchases certain other services, including insurance and
employee benefits, from Comcast under cost-sharing arrangements on terms
that reflect Comcast's actual cost. The Company reimburses Comcast for
certain other costs (primarily salaries) under cost reimbursement
agreements. These charges are included in selling, general and
administrative expenses in the Company's statement of operations.
Effective August 1, 2001, Comcast contributed its wholly owned subsidiary,
Comcast Financial Agency Corporation ("CFAC"), to the Company. CFAC
provides cash management services to the Company. Under this arrangement,
the Company's cash receipts are deposited with and held by CFAC, as
custodian and agent, which invests and disburses such funds at the
direction of the Company.
During the nine months ended September 30, 2002, the Company received a
capital contribution of $43.1 million from Comcast and paid a cash dividend
of $54.0 million to Comcast.
The Company's related party transactions for the interim periods were as
follows (in millions):
Three Months Ended Nine Months Ended
September 30, September 30,
2002 2001 2002 2001
--------- ---------- --------- ----------
QVC service revenue:
Commissions........................................ $4.2 $3.7 $13.8 $12.2
Channel repositioning.............................. $1.1 $2.3
Programming charges with affiliates.................. $45.2 $35.1 $135.3 $100.0
Comcast cost-sharing charges......................... $36.9 $35.9 $114.6 $106.5
CFAC investment income............................... $8.7
11
COMCAST CABLE COMMUNICATIONS, INC. AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED SEPTEMBER 30, 2002
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONCLUDED
(Unaudited)
10. STATEMENT OF CASH FLOWS - SUPPLEMENTAL INFORMATION
The fair values of the assets and liabilities acquired by the Company
through non-cash transactions during the nine months ended September 30,
2001 are presented as follows (in millions):
Current assets..................................... $22.2
Property, plant & equipment........................ 681.3
Intangible assets.................................. 2,537.1
Current liabilities................................ (19.1)
-----------
Net assets acquired....................... $3,221.5
===========
The Company made cash payments for interest and income taxes during the
interim periods as follows (in millions):
Three Months Nine Months
Ended September 30, Ended September 30,
2002 2001 2002 2001
-------- -------- -------- --------
Long-term debt interest............................ $70.4 $85.6 $358.0 $303.7
Notes payable to affiliates interest............... $7.9 $37.6
Income taxes....................................... $0.2 $1.6 $4.2 $7.3
11. COMMITMENTS AND CONTINGENCIES
The Company is subject to legal proceedings and claims which arise in the
ordinary course of its business. In the opinion of management, the amount
of ultimate liability with respect to such actions is not expected to have
a material adverse effect on the financial position or results of
operations of the Company.
12
COMCAST CABLE COMMUNICATIONS, INC. AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED SEPTEMBER 30, 2002
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Information for this item is omitted pursuant to Securities and Exchange
Commission General Instruction H to Form 10-Q, except as noted below.
We are a wholly owned subsidiary of Comcast Corporation ("Comcast").
Contribution of Comcast Cablevision of
Philadelphia Area I, Inc.
During the third quarter of 2002, Comcast contributed its subsidiary,
Comcast Cablevision of Philadelphia Area I, Inc. ("Greater Philadelphia"), which
serves approximately 85,000 subscribers as of September 30, 2002 to us. The
contribution of Greater Philadelphia was accounted for at Comcast's historical
cost in a manner similar to a pooling of interests. Accordingly, the accounts of
Greater Philadelphia are combined with the Company in the accompanying condensed
consolidated financial statements for all periods presented.
AT&T Broadband Transaction
On December 19, 2001, Comcast entered into an Agreement and Plan of Merger
with AT&T Corp. ("AT&T") pursuant to which Comcast agreed to a transaction which
will result in the combination of Comcast and AT&T Broadband Corp.
("Broadband"), a holding company of AT&T's broadband business ("AT&T Broadband")
that AT&T will spin off to its shareholders immediately prior to the
combination. On July 10, 2002, shareholders of both Comcast and AT&T approved
the transaction. As of September 30, 2002, AT&T Broadband served approximately
13.1 million subscribers. The transaction is subject to customary closing
conditions and regulatory and other approvals and is expected to close by the
end of November 2002.
Excluding AT&T Broadband's exchangeable notes, which are mandatorily
redeemable at AT&T Broadband's option into shares of certain publicly traded
companies held by AT&T Broadband, Comcast currently estimates that the combined
company will require approximately $20 billion of assumed, refinanced and new
indebtedness upon completion of the AT&T Broadband transaction. Of this $20
billion of indebtedness, approximately $7 billion to $8 billion will be assumed
indebtedness of AT&T Broadband's subsidiaries, $9 billion to $10 billion will
retire amounts Comcast expects Broadband will owe AT&T at, and will be required
to pay, upon closing of the AT&T Broadband transaction (subject to offset for
amounts of AT&T indebtedness assumed at closing as described in the following
paragraph), and $2 billion to $4 billion will be needed to refinance AT&T
Broadband debt that will become due on or shortly after the closing of the AT&T
Broadband transaction and to provide appropriate cash reserves to fund AT&T
Broadband's operations and capital expenditures. Comcast can not provide
assurances that the actual amount of this indebtedness will not exceed $20
billion.
Subsequent to the original merger agreement, economic and business factors
led Comcast and AT&T to agree to change the form of consideration to be paid in
the AT&T Broadband transaction. On August 12, 2002, we, along with AT&T Comcast
Corporation ("AT&T Comcast"), AT&T, Broadband and two of AT&T's cable
subsidiaries filed a registration statement with the Securities and Exchange
Commission for a proposed exchange offer relating to $11.8 billion aggregate
principal amount of AT&T's existing debt securities. The exchange offer, if
successful, would result in the assumption of a portion of AT&T's indebtedness
by AT&T Broadband (and a corresponding decrease in the amount of intercompany
indebtedness Broadband must pay AT&T upon closing). The exchange offer is
subject to market conditions and is expected to close in November 2002.
On May 3, 2002, Broadband and AT&T Comcast entered into definitive credit
agreements with a syndicate of lenders for an aggregate of $12.825 billion of
financing to complete the AT&T Broadband transaction and to provide for the
combined company's financing needs after the transaction. Refer to Note 7 to our
financial statements included in Item 1 for a discussion of the new credit
facilities.
Comcast may also use other available sources of financing to fund these
requirements, including:
o its existing cash, cash equivalents and short-term investments, which
totaled $1.476 billion as of September 30, 2002,
o amounts available under Comcast's subsidiaries' lines of credit, which
totaled $3.722 billion as of September 30, 2002 (including $3.418
billion of amounts available under our lines of credit), and
o proceeds from the sales of Comcast's and AT&T Broadband's investments,
including
13
COMCAST CABLE COMMUNICATIONS, INC. AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED SEPTEMBER 30, 2002
AT&T Broadband's investment in Time Warner Entertainment L.P.
Subsequent to closing of the AT&T Broadband transaction, Comcast will have
a substantially higher amount of debt, interest expense and capital expenditures
at the combined company. If the credit rating agencies determine that the
combined company is less creditworthy, on a combined basis, than that of Comcast
on an historical basis, it is possible that our cost of and access to capital
could be negatively affected.
Interest Rate Risk
During the nine months ended September 30, 2002, we settled $950.0 million
aggregate notional amount of our fixed to variable interest rate exchange
agreements and received proceeds of $56.8 million. This amount is being
recognized as an adjustment to interest expense over the term of the related
debt.
In June, July and November 2002, we entered into interest rate lock
agreements ("Rate Locks") to hedge the risk that the cash flows related to the
interest payments on an anticipated issuance or assumption of certain fixed rate
debt in connection with the AT&T Broadband transaction may be adversely affected
by interest rate fluctuations. The Rate Locks mature in the fourth quarter of
2002, the timing of the anticipated issuance or assumption of the fixed rate
debt.
14
COMCAST CABLE COMMUNICATIONS, INC. AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED SEPTEMBER 30, 2002
Results of Operations
- ---------------------
Our summarized financial information for the interim periods is as follows
(dollars in millions, "NM" denotes percentage is not meaningful):
Three Months Ended
September 30, Increase / (Decrease)
2002 2001 $ %
--------- --------- --------- --------
Video........................................................... $1,180.5 $1,110.2 $70.3 6.3%
High-speed Internet............................................. 155.5 83.4 72.1 86.5
Advertising sales............................................... 93.2 83.3 9.9 11.9
Other........................................................... 48.0 32.5 15.5 47.7
Franchise fees.................................................. 49.4 51.2 (1.8) (3.5)
--------- --------- --------- --------
Service revenues............................................. 1,526.6 1,360.6 166.0 12.2
Operating, selling, general and administrative expenses......... 894.1 789.7 104.4 13.2
Depreciation.................................................... 294.3 227.9 66.4 29.1
Amortization.................................................... 10.0 538.4 (528.4) (98.1)
--------- --------- --------- --------
Operating income (loss)......................................... 328.2 (195.4) 523.6 NM
--------- --------- --------- --------
Interest expense................................................ (140.0) (143.9) (3.9) (2.7)
Interest income on affiliate notes, net......................... 5.1 4.2 0.9 21.4
Investment income (expense)..................................... 2.3 (8.8) 11.1 NM
Equity in net income (losses) of affiliates..................... 1.8 (2.1) 3.9 NM
Other expense................................................... (0.8) 0.8 NM
Income tax benefit (expense).................................... (74.9) 100.9 (175.8) NM
--------- --------- --------- --------
Income (loss) before cumulative effect of accounting change..... $122.5 ($245.9) $368.4 NM
========= ========= ========= ========
Operating income before depreciation and amortization (1)....... $632.5 $570.9 $61.6 10.8%
========= ========= ========= ========
Nine Months Ended
September 30, Increase / (Decrease)
2002 2001 $ %
--------- --------- --------- --------
Video........................................................... $3,516.7 $3,154.5 $362.2 11.5%
High-speed Internet............................................. 414.7 202.7 212.0 104.6
Advertising sales............................................... 274.2 235.2 39.0 16.6
Other........................................................... 135.1 112.0 23.1 20.6
Franchise fees.................................................. 150.9 142.6 8.3 5.8
--------- --------- --------- --------
Service revenues............................................. 4,491.6 3,847.0 644.6 16.8
Operating, selling, general and administrative expenses......... 2,622.6 2,240.8 381.8 17.0
Depreciation.................................................... 858.1 637.9 220.2 34.5
Amortization.................................................... 27.5 1,536.3 (1,508.8) (98.2)
--------- --------- --------- --------
Operating income (loss)......................................... 983.4 (568.0) 1,551.4 NM
--------- --------- --------- --------
Interest expense................................................ (427.2) (405.4) 21.8 5.4
Interest income (expense) on affiliate notes, net............... 23.8 (18.5) 42.3 NM
Investment income (expense)..................................... 1.3 (71.2) 72.5 NM
Equity in net income (losses) of affiliates..................... 4.0 (6.4) 10.4 NM
Other income (expense).......................................... (5.1) 1,196.6 (1,201.7) NM
Income tax expense.............................................. (219.5) (166.1) 53.4 32.1
--------- --------- --------- --------
Income (loss) before cumulative effect of accounting change..... $360.7 ($39.0) $399.7 NM
========= ========= ========= ========
Operating income before depreciation and amortization (1)....... $1,869.0 $1,606.2 $262.8 16.4%
========= ========= ========= ========
<FN>
____________
(1) Operating income before depreciation and amortization is commonly referred
to in the cable business as "operating cash flow." Operating cash flow is a
measure of a company's ability to generate cash to service its obligations,
including debt service obligations, and to finance capital and other
expenditures. In part due to the capital intensive nature of the cable
business and the resulting significant level of non-cash depreciation and
amortization expense, operating cash flow is frequently used as one of the
bases for comparing businesses in the cable industry, although
15
COMCAST CABLE COMMUNICATIONS, INC. AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED SEPTEMBER 30, 2002
our measure of operating cash flow may not be comparable to similarly
titled measures of other companies. Operating cash flow is the primary
basis used by our management to measure the operating performance of our
business. Operating cash flow does not purport to represent net income or
net cash provided by operating activities, as those terms are defined under
generally accepted accounting principles, and should not be considered as
an alternative to such measurements as an indicator of our performance.
</FN>
Video revenue consists of our basic, expanded basic, premium, pay-per-view,
equipment and digital subscriptions. Of the $70.3 million and $362.2 million
increases in video revenues for the interim periods from 2001 to 2002, zero and
$138.7 million are attributable to the effects of our acquisitions of cable
systems and $70.3 million and $223.5 million relate to increased rates and
subscriber growth in our historical operations, driven principally by growth in
digital boxes. During the three and nine months ended September 30, 2002, we
added approximately 205,400 and 607,000 digital boxes.
The increases in high-speed Internet revenue for the interim periods from
2001 to 2002 are primarily due to the addition of approximately 169,800 and
390,600 high-speed Internet subscribers during the three and nine months ended
September 30, 2002, and to the effects of rate increases.
The increases in advertising sales revenue for the interim periods from
2001 to 2002 are primarily attributable to the effects of a stronger advertising
market and the continued leveraging of our market-wide fiber interconnects.
Other revenue includes installation revenues, guide revenues, commissions
from electronic retailing, and revenue from other product offerings. The
increases for the interim periods from 2001 to 2002 are primarily attributable
to the effects of our acquisitions and to increases in commissions from
electronic retailing.
On January 1, 2002, we adopted Emerging Issues Task Force ("EITF") 01-14,
"Income Statement Characterization of Reimbursements Received for 'Out-
of-Pocket' Expenses Incurred." EITF 01-14 requires that reimbursements received
for out-of-pocket expenses incurred be characterized as revenue in the statement
of operations. Under the terms of our franchise agreements, we are required to
pay up to 5% of our gross revenues derived from providing cable services to the
local franchising authority. We normally pass these fees through to our cable
subscribers. Upon adoption of EITF 01-14, we reclassified franchise fees
collected from cable subscribers from a reduction of selling, general and
administrative expenses to a component of service revenues for all periods
presented in our statement of operations.
The changes in classification had no impact on our reported operating
income (loss) or financial condition. Refer to Note 2 to our financial
statements included in Item 1 for a discussion of the adoption of EITF 01-14.
The decrease in franchise fees collected from our cable subscribers for the
three month period from 2001 to 2002 is primarily attributable to the effects of
franchise fees related to high-speed Internet revenue during the three months
ended September 30, 2001. We no longer collect franchise fees for high-speed
Internet service. The increase for the nine month period from 2001 to 2002 is
attributable to the increases in our revenues upon which the fees apply.
The increases in operating, selling, general and administrative expenses
for the interim periods from 2001 to 2002 are primarily due to the effects of
increases in the costs of cable programming, high-speed Internet subscriber
growth, and, to a lesser extent, increases in labor costs and other volume
related expenses in our historical operations. The increase for the nine month
period from 2001 to 2002 is also attributable to the effects of our acquisitions
of cable systems.
Our cost of programming increases as a result of changes in rates,
subscriber growth, additional channel offerings and our acquisitions. We
anticipate the cost of cable programming will increase in the future as cable
programming rates increase and additional sources of cable programming become
available.
Depreciation
The increases in depreciation expense for the interim periods from 2001 to
2002 are primarily due to the effects of our acquisitions and our capital
expenditures.
Amortization
Of the $528.4 million and $1.509 billion decreases in amortization expense
for the interim periods from 2001 to 2002, $499.5 million and $1.440 billion are
attributable to the adoption of Statement of Financial Accounting Standards
("SFAS") No. 142, "Goodwill and Other Intangible Assets," on January 1, 2002.
Refer to Note 6
16
COMCAST CABLE COMMUNICATIONS, INC. AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED SEPTEMBER 30, 2002
to our financial statements included in Item 1 for the pro forma impact of
adoption of SFAS No. 142 on amortization expense.
Interest Expense
The decrease in interest expense for the three month period from 2001 to
2002 is due to the effects of our net debt repayments during the three months
ended September 30, 2002. The increase for the nine month period from 2001 to
2002 is primarily due to the effects of our notes offerings in May and June
2001.
Interest Income (Expense) on Affiliate Notes, Net
The changes in interest income (expense) on affiliate notes, net for the
interim periods from 2001 to 2002 are due to the repayment of notes payable to
affiliates in the second quarter of 2001 and to the increases in the average
outstanding balance of notes receivable from affiliates as compared to the prior
year periods.
Investment Income (Expense)
Investment income (expense) for the interim periods includes the following
(in millions):
Three Months Ended Nine Months Ended
September 30, September 30,
2002 2001 2002 2001
--------- --------- -------- ---------
Interest and dividend income....................... $2.0 $4.9 $4.6 $16.8
Gains on sales and exchanges of investments, net... 1.4 29.2
Investment impairment losses....................... (0.6) (4.5) (89.5)
Mark to market adjustments on derivatives.......... 0.3 (13.1) (0.2) (27.7)
--------- --------- -------- ---------
Investment income (expense)................... $2.3 ($8.8) $1.3 ($71.2)
========= ========= ======== =========
The investment impairment loss for the nine months ended September 30, 2001
relates principally to other than temporary declines in our investments in AT&T
and Motorola, Inc.
Equity in Net Income (Losses) of Affiliates
The changes in equity in net income (losses) of affiliates for the interim
periods from 2001 to 2002 are primarily attributable to the effects of decreases
in the amortization of equity method goodwill as a result of the adoption of
SFAS No. 142 on January 1, 2002, as well as the effects of changes in the net
income (loss) of our equity method investees.
Other Income (Expense)
On January 1, 2001, we and Comcast completed our cable systems exchange
with Adelphia Communications Corporation ("Adelphia"). We received cable systems
serving approximately 445,000 subscribers from Adelphia and Adelphia received
certain of our cable systems serving approximately 441,000 subscribers. We
recorded to other income (expense) a pre-tax gain of $1.199 billion,
representing the difference between the estimated fair value of $1.799 billion
as of the closing date of the transaction and our cost basis in the systems
exchanged.
Income Tax Benefit (Expense)
The changes in income tax benefit (expense) for the interim periods from
2001 to 2002 are primarily the result of the effects of changes in our income
(loss) before income taxes and cumulative effect of accounting change.
Cumulative Effect of Accounting Change
In connection with the adoption of SFAS No. 142, we completed an initial
transitional impairment assessment of goodwill and other indefinite lived
intangible assets, which consist of our cable franchise operating rights, and we
determined that no cumulative effect results from adopting this change in
accounting principle.
In connection with the adoption of SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities," as amended, we recognized as a loss a
cumulative effect of accounting change, net of related income taxes, of $61.3
million during the nine months ended September 30, 2001. The loss consisted of
$94.3
17
COMCAST CABLE COMMUNICATIONS, INC. AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED SEPTEMBER 30, 2002
million principally related to the reclassification of losses previously
recognized as a component of accumulated other comprehensive income (loss) on
our equity derivative instruments, net of related deferred income taxes of $33.0
million.
We believe that our operations are not materially affected by inflation.
ITEM 4. EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES
(a) Evaluation of disclosure controls and procedures. Our chief
executive officer and our co-chief financial officers, after
evaluating the effectiveness of our "disclosure controls and
procedures" (as defined in the Securities Exchange Act of 1934
Rules 13a-14(c) and 15d-14(c)) as of a date (the "Evaluation
Date") within 90 days before the filing date of this quarterly
report, have concluded that as of the Evaluation Date, our
disclosure controls and procedures were adequate and designed to
ensure that material information relating to us and our
consolidated subsidiaries would be made known to them by others
within those entities.
(b) Changes in internal controls. There were no significant changes in
our internal controls or to our knowledge, in other factors that
could significantly affect our internal controls and procedures
subsequent to the Evaluation Date.
PART II. OTHER INFORMATION
- -------- -----------------
ITEM 1. LEGAL PROCEEDINGS
The Company is subject to legal proceedings and claims which arise in the
ordinary course of its business. In the opinion of management, the amount
of ultimate liability with respect to such actions is not expected to have
a material adverse effect on the financial position or results of
operations of the Company.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits required to be filed by Item 601 of Regulation S-K:
None.
(b) Reports on Form 8-K:
None.
18
COMCAST CABLE COMMUNICATIONS, INC. AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED SEPTEMBER 30, 2002
SIGNATURE
---------
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
COMCAST CABLE COMMUNICATIONS, INC.
---------------------------------------
/S/ LAWRENCE J. SALVA
---------------------------------------
Lawrence J. Salva
Senior Vice President
(Principal Accounting Officer)
Date: November 12, 2002
19
CERTIFICATIONS
I, Brian L. Roberts, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Comcast Cable
Communications, Inc.;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly report
is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of the registrant's board of directors (or persons performing the
equivalent function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and material
weaknesses.
Date: November 12, 2002
/s/ BRIAN L. ROBERTS
- --------------------------------------------
Name: Brian L. Roberts
Chief Executive Officer
20
I, Lawrence S. Smith, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Comcast Cable
Communications, Inc.;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly report
is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of the registrant's board of directors (or persons performing the
equivalent function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and material
weaknesses.
Date: November 12, 2002
/s/ LAWRENCE S. SMITH
- -------------------------------------------
Name: Lawrence S. Smith
Co-Chief Financial Officer
21
I, John R. Alchin, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Comcast Cable
Communications, Inc.;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly report
is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of the registrant's board of directors (or persons performing the
equivalent function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and material
weaknesses.
Date: November 12, 2002
/s/ JOHN R. ALCHIN
- --------------------------------------------
Name: John R. Alchin
Co-Chief Financial Officer
22