Form 10-K
FORM 10-K
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
|
|
|
(Mark One) |
|
|
x |
|
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2009 |
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 001-32871
COMCAST CORPORATION
(Exact name of registrant as specified in its charter)
|
|
|
PENNSYLVANIA (State or other jurisdiction of incorporation or organization) |
|
27-0000798 (I.R.S. Employer Identification No.) |
One Comcast Center, Philadelphia, PA (Address of principal executive offices) |
|
19103-2838 (Zip Code) |
Registrants telephone number, including area code:
(215) 286-1700 |
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
|
|
|
Title of Each Class |
|
Name of Each Exchange on which Registered |
Class A Common Stock, $0.01 par value Class A Special Common Stock, $0.01 par value 2.0% Exchangeable Subordinated
Debentures due 2029 6.625% Notes due 2056 7.00% Notes due 2055 7.00% Notes due 2055, Series B 8.375% Guaranteed Notes due 2013 9.455%
Guaranteed Notes due 2022 |
|
NASDAQ Global Select Market NASDAQ Global Select Market New York Stock Exchange New York Stock Exchange New York Stock
Exchange New York Stock Exchange New York Stock Exchange New York Stock Exchange |
SECURITIES REGISTERED
PURSUANT TO SECTION 12(g) OF THE ACT:
NONE
Indicate by check mark if the
Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes x
No ¨
Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ¨ No x
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 12 months (or for such shorter period that the Registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days.
Yes x No ¨
Indicate by check mark whether the
registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period
that the registrant was required to submit and post such files). Yes x No ¨
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrants knowledge, in
definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendments to this Form 10-K. x
Indicate by check mark whether the Registrant is a large accelerated
filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition of large accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act:
Large accelerated filer x Accelerated filer ¨ Non-accelerated filer ¨ Smaller reporting company ¨
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ¨
No x
As of June 30, 2009, the aggregate market value of the Class A common stock and Class A Special common stock held by non-affiliates of
the Registrant was $29.778 billion and $11.063 billion, respectively.
As of December 31, 2009, there were 2,063,073,161 shares of
Class A common stock, 765,056,270 shares of Class A Special common stock and 9,444,375 shares of Class B common stock outstanding.
DOCUMENTS INCORPORATED BY
REFERENCE
Part IIIThe Registrants definitive Proxy Statement for its annual meeting of shareholders presently
scheduled to be held in May 2010.
Comcast Corporation
2009 Annual Report on Form 10-K
Table of Contents
This Annual Report on Form 10-K is for
the year ended December 31, 2009. This Annual Report on Form 10-K modifies and supersedes documents filed before it. The Securities and Exchange Commission (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 Annual Report on Form 10-K. In addition, information
that we file with the SEC in the future will automatically update and supersede information contained in this Annual Report on Form 10-K. Throughout this Annual Report on Form 10-K, we refer to Comcast Corporation as Comcast; Comcast and
its consolidated subsidiaries as we, us and our; and Comcast Holdings Corporation as Comcast Holdings.
Our registered trademarks include Comcast and the Comcast logo. This Annual Report on Form 10-K also contains other trademarks, service marks and trade names owned by us as well as those owned by others.
Part I
Item 1: Business
We are a leading provider of video, high-speed Internet and phone services (cable services), offering a variety of entertainment, information and communications services to
residential and commercial customers. As of December 31, 2009, our cable systems served approximately 23.6 million video customers, 15.9 million high-speed Internet customers and 7.6 million phone customers and passed over
51.2 million homes and businesses in 39 states and the District of Columbia. We report the results of these operations as our Cable segment, which generates approximately 95% of our consolidated revenue. Our Cable segment also includes the
operations of our regional sports networks. Our Programming segment consists primarily of our consolidated national programming networks, E!, Golf Channel, VERSUS, G4 and Style. We were incorporated under the laws of Pennsylvania in December 2001.
Through our predecessors, we have developed, managed and operated cable systems since 1963.
Our other business interests include
Comcast Interactive Media and Comcast Spectacor. Comcast Interactive Media develops and operates our Internet businesses, including Comcast.net, Fancast, the Platform, Fandango, Plaxo and DailyCandy. Comcast Spectacor owns two professional sports
teams, the Philadelphia 76ers and the Philadelphia Flyers, and a large, multipurpose arena in Philadelphia, the Wachovia Center, and provides facilities management services, including food services, for sporting events, concerts and other events.
Comcast Interactive Media, Comcast Spectacor and all other consolidated businesses not included in our Cable or Programming segments are included in Corporate and Other activities.
For financial and other information about our reportable segments, refer to Item 8, Note 18 to our consolidated financial statements included in this Annual Report on Form 10-K.
Available Information and Websites
Our phone number is (215) 286-1700, and our principal executive offices are located at One Comcast Center, Philadelphia, PA 19103-2838. The public may read and copy any materials we file with the SEC at the SECs Public Reference
Room at 100 F Street, NE, Washington, DC 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. Our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on
Form 8-K and any amendments to such reports filed with or furnished to the SEC under Sections 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the Exchange Act), are available free of charge on the SECs
website at www.sec.gov and on our website at www.comcast.com as soon as reasonably practicable after such reports are electronically filed with the SEC. The information posted on our website is not incorporated into our SEC filings.
General Developments of Our Businesses
The following are the more significant developments in our businesses during 2009:
|
|
an increase in consolidated revenue of 3.9% to approximately $35.8 billion and an increase in consolidated operating income of 7.2% to approximately $7.2
billion |
|
|
an increase in Cable segment revenue of 3.8% to approximately $33.9 billion and an increase in operating income before depreciation and amortization of 4.0%
to approximately $13.7 billion |
|
|
an increase in Programming segment revenue of 4.9% to approximately $1.5 billion and an increase in operating income before depreciation and amortization of
7.5% to approximately $389 million |
|
|
the addition of approximately 1.0 million high-speed Internet customers and approximately 1.1 million phone customers; a decrease of approximately
623,000 video customers |
|
|
a reduction in Cable segment capital expenditures of 9.2% to approximately $5.0 billion |
|
|
the continued investment in service enhancements, including the transition from analog to digital transmission of approximately 40 to 50 of the channels we
distribute (our all digital conversion), which allows us to recapture bandwidth and expand our video service offerings; the continued deployment of DOCSIS 3.0 wideband technology, which allows us to offer faster high-speed Internet
service; the offering of certain cable network programming to our customers online through Fancast XFINITY TV; and the initial deployment of 4G wireless high-speed Internet service in certain markets |
|
|
a decrease in our total debt outstanding of $3.4 billion or 10.4% to approximately $29.1 billion, which is primarily due to repayment of scheduled debt and
the repurchase of debt securities prior to their scheduled maturities |
|
|
the repurchase of approximately 49.8 million shares of our Class A and Class A Special common stock under our share repurchase authorization
for approximately $765 million |
|
|
we declared dividends of approximately $850 million in 2009 and paid approximately $761 million in 2009; in February 2009, our Board of Directors increased
the planned annual dividend by 8% to $0.27 per share; and in December 2009, it increased the planned annual dividend by 40% to $0.378 per share, with the first quarterly payment of $0.0945 per share occurring in January 2010
|
|
|
|
|
|
|
|
1 |
|
Comcast 2009 Annual Report on Form 10-K |
|
|
we entered into agreements with General Electric Company (GE) in December 2009 to form a new company of which we will own 51% and control, with
the remaining 49% owned by GE. Under the terms of the transaction, GE will contribute NBC Universals businesses, including its cable and broadcast networks, filmed entertainment, televised entertainment, theme parks and unconsolidated
investments. We will contribute our national programming networks, our regional sports networks, other programming networks and certain of our Internet businesses. The transaction is subject to various regulatory approvals and is expected to close
by the end of 2010. Refer to Item 7: Managements Discussion and Analysis of Financial Condition and Results of Operations for further details. |
We operate our businesses in an intensely competitive environment. Competition for the cable services
we offer consists primarily of direct broadcast satellite (DBS) operators and phone companies. In 2009, our competitors continued to add features and adopt aggressive pricing and packaging for services that are comparable to the services
we offer. In addition, a substantial portion of our revenue comes from residential customers whose spending patterns may be affected by prevailing economic conditions. Intensifying competition and the weak economy negatively affected our results of
operations in 2009 and may continue to impact our results of operations in the future.
Description of Our Businesses
Cable Segment
The table below summarizes certain customer
and penetration data for our cable operations as of December 31.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in millions) |
|
2009 |
|
|
2008 |
|
|
2007 |
|
|
2006 |
|
|
2005 |
|
Homes passed(a)
|
|
51.2 |
|
|
50.6 |
|
|
48.5 |
|
|
45.7 |
|
|
38.6 |
|
Video |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Video customers(b) |
|
23.6 |
|
|
24.2 |
|
|
24.1 |
|
|
23.4 |
|
|
20.3 |
|
Video penetration(c) |
|
46.0 |
% |
|
47.8 |
% |
|
49.6 |
% |
|
51.3 |
% |
|
52.7 |
% |
Digital video customers(d) |
|
18.4 |
|
|
17.0 |
|
|
15.2 |
|
|
12.1 |
|
|
9.1 |
|
Digital video penetration(c) |
|
78.2 |
% |
|
70.3 |
% |
|
63.1 |
% |
|
51.9 |
% |
|
44.8 |
% |
High-speed Internet |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available homes(e) |
|
50.8 |
|
|
50.3 |
|
|
48.1 |
|
|
45.2 |
|
|
38.2 |
|
Internet customers |
|
15.9 |
|
|
14.9 |
|
|
13.2 |
|
|
11.0 |
|
|
8.1 |
|
Penetration(c)
|
|
31.4 |
% |
|
29.7 |
% |
|
27.5 |
% |
|
24.4 |
% |
|
21.1 |
% |
Phone |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available homes(e) |
|
48.4 |
|
|
46.7 |
|
|
42.2 |
|
|
31.5 |
|
|
19.6 |
|
Phone customers |
|
7.6 |
|
|
6.5 |
|
|
4.6 |
|
|
2.4 |
|
|
1.2 |
|
Penetration(c) |
|
15.7 |
% |
|
13.9 |
% |
|
10.8 |
% |
|
7.6 |
% |
|
6.0 |
% |
Basis of Presentation: Information related to cable system acquisitions is included from the date acquired. Information related to cable systems sold or exchanged is excluded for all periods presented. All percentages are calculated based
on actual amounts. Minor differences may exist due to rounding.
(a) |
|
Homes and businesses are considered passed (homes passed) if we can connect them to our distribution system without further extending the
transmission lines. As described in Note (b) below, in the case of certain multiple dwelling units (MDUs), such as apartment buildings and condominium complexes, homes passed are counted on an adjusted basis. Homes passed is an
estimate based on the best available information. |
(b) |
|
Generally, a dwelling or commercial unit with one or more television sets connected to our distribution system counts as one video customer. In the case of
some MDUs, we count homes passed and video customers on a Federal Communications Commission (FCC) equivalent basis by dividing total revenue received from a contract with an MDU by the standard residential rate where the specific MDU is
located. |
(c) |
|
Penetration is calculated by dividing the number of customers by the number of homes passed or available homes, as appropriate. The number of customers
includes our small and medium-sized business customers. |
(d) |
|
Digital video customers are those who receive any level of video service via digital transmissions through any means, including customers who receive a
digital transmission as a result of our all digital conversion. A dwelling with one or more digital set-top boxes counts as one digital video customer. On average, as of December 31, 2009, each digital video customer had 2.0 digital set-top
boxes, including digital transport adapters (DTAs). |
(e) |
|
Homes and businesses are considered available (available homes) if we can connect them to our distribution system without further upgrading the
transmission lines and if we offer the service in that area. Available homes for phone include digital and circuit-switched homes. See also Note (a) above. |
|
|
|
|
|
Comcast 2009 Annual Report on Form 10-K |
|
2 |
|
|
Cable Services
We offer a variety
of services over our cable systems, including video, high-speed Internet and phone services. We market our cable services individually and in packages. Substantially all of our customers are residential customers. We have traditionally offered our
video services to restaurants and hotels, and we are now also offering our cable services to small and medium-sized businesses (commercial services). Subscription rates and related charges vary according to the service selected and the
type of equipment the customer uses, and customers typically pay us on a monthly basis. Residential customers may generally discontinue service at any time, while commercial customers may only discontinue service in accordance with the terms of
their respective contracts, which typically have one to three year terms.
We are focusing our technology initiatives on extending the
capacity and efficiency of our networks, increasing the capacity and functionality of advanced set-top boxes, developing and integrating cross-service features and functionality, and developing interactive Internet protocol-based services.
Video Services
Our
video service offerings range from a limited analog service to a full digital service, as well as advanced services, which consist of high-definition television (HDTV) and/or digital video recorders (DVR). We tailor our video
services for each cable system serving a particular geographic area according to applicable local and federal regulatory requirements, programming preferences and demographics.
Our analog video services range from a limited basic service with access to between 20 and 30 channels of programming to an expanded basic service with access to between 60 and 80
channels of programming. Our digital video services range from a digital starter service with access to between 40 and 50 channels to a full digital service with access to over 250 channels. Our video services generally include programming provided
by national and local broadcast networks, national and regional cable networks, as well as governmental and public access programming. Our digital video services generally include access to over 40 music channels, our On Demand service and an
interactive, on-screen program guide. We also offer some packages with extensive amounts of Spanish-language programming, as well as specialty tiers with sports, family or international themes.
Our video customers may also subscribe to premium channel programming. Premium channels include cable networks such as HBO, Showtime, Starz and
Cinemax, which generally offer, without commercial interruption, movies, original programming, live and taped sporting events, concerts and other special features.
Our On Demand service provides our digital video customers the opportunity to choose from a selection of more than 17,000
standard-definition and high-definition programming choices over the course of a month; start the programs at whatever time is convenient; and pause, rewind and fast-forward the programs. The
majority of our On Demand content is available to our digital video customers at no additional charge. Digital video customers subscribing to a premium channel generally have access to the premium channels On Demand content without
additional fees. We also offer a fee-based On Demand service that provides our video customers the opportunity to order individual new release and library movies and special-event programs, such as professional boxing, professional wrestling and
concerts. We are continuing to expand the number of On Demand choices, including HDTV programming choices.
Our HDTV service provides
our video customers with improved, high-resolution picture quality, improved audio quality and a wide-screen format. Our HDTV service offers our digital video customers a broad selection of high-definition programming choices, including most major
broadcast networks, leading national cable networks, premium channels and regional sports networks. In addition, our On Demand service provides over 2,600 HDTV programming choices over the course of a month. Our DVR service lets digital video
customers select, record and store programs and play them at whatever time is convenient. Our DVR service also provides the ability to pause and rewind live television. During 2009, we began to offer certain cable network programming
online to customers of both our video and high-speed Internet services through Fancast XFINITY TV.
High-Speed Internet Services
We offer high-speed Internet services with Internet access at downstream speeds of up to 50 Mbps, depending on the service selected and
subject to geographic market availability. These services also include our interactive portal, Comcast.net, which provides multiple e-mail addresses and online storage, as well as a variety of content and value-added features and enhancements that
are designed to take advantage of the speed of the Internet services we provide. Our commercial high-speed Internet service also includes a website hosting service and an online tool that allows customers to share, coordinate and store documents.
Phone Services
We
offer a Voice over Internet Protocol (VoIP) digital phone service that provides either usage-based or unlimited local and domestic long-distance calling, including features such as voice mail, caller ID and call waiting. We phased out
substantially all of our circuit-switched phone service in 2008. Our commercial phone service also includes a business directory listing and the option to add multiple phone lines.
Advertising
As part of our programming license agreements with programming networks, we often
receive an allocation of scheduled advertising
|
|
|
|
|
|
|
3 |
|
Comcast 2009 Annual Report on Form 10-K |
time that we may sell to local, regional and national advertisers. In most cases, the available advertising time is sold by our sales force. In some cases, we work with representation firms as an
extension of our sales force to sell a portion of the advertising time allocated to us. We also coordinate the advertising sales efforts of other cable operators in some markets, and in some markets we operate advertising interconnects. These
interconnects establish a physical, direct link between multiple providers for the sale of regional and national advertising across larger geographic areas than could be provided by a single cable operator. We are also in the process of developing
technology for interactive advertising.
Regional Sports Networks
Our regional sports networks include Comcast SportsNet (Philadelphia), Comcast SportsNet Mid-Atlantic (Baltimore/Washington), Cable Sports Southeast, Comcast SportsNet Chicago, MountainWest Sports Network, Comcast
SportsNet California (Sacramento), Comcast SportsNet New England (Boston), Comcast SportsNet Northwest (Portland), Comcast Sports Southwest (Houston) and Comcast SportsNet Bay Area (San Francisco). These networks generate revenue from monthly per
subscriber license fees paid by multichannel video providers and through the sale of advertising.
Other Revenue Sources
We also generate revenue from our digital media center, commissions from electronic retailing networks and fees from other services.
Sources of Supply
To offer our video services,
we license a substantial portion of our programming and the associated On Demand offerings from broadcast and cable programming networks, and we generally pay a monthly fee for such programming on a per video subscriber, per channel basis. We
attempt to secure long-term programming licenses with volume discounts and/or marketing support and incentives from these programming networks. We also license individual programs or packages of programs from programming suppliers for our On Demand
service, generally under shorter-term agreements.
Our video programming expenses depend on the number of our video customers, the
number of channels and programs we provide, and the programming license fees we are charged. We expect our video programming expenses to continue to be our largest single expense item and to increase in the future.
We purchase a significant number of set-top boxes and network equipment and services that we use in providing our cable services from a limited number
of suppliers.
For our high-speed Internet portal, Comcast.net, we license software products (such as e-mail and security software) and
content (such as news feeds) from a variety of suppliers under contracts in
which we generally pay on a fixed-fee basis, on a per customer basis in the case of software product licenses or on a video advertising revenue share basis in the case of content licenses.
To offer our phone services, we license software products (such as voice mail) from a variety of suppliers under multiyear contracts.
The fees we pay are based on the consumption of the related services.
We utilize two vendors to provide our subscriber billing.
Customer and Technical Services
We service our customers through local, regional and national call and technical centers. Call centers provide 24/7 call-answering capability, telemarketing and other services. Our technical services group performs various tasks, including
installations, transmission and distribution plant maintenance, plant upgrades, and activities related to customer service.
Technology
Our cable systems employ a network architecture of hybrid fiber coax that we believe is sufficiently flexible and scalable to
support our future technology requirements. This network allows the two-way delivery of transmissions, which is essential to providing interactive video services, such as On Demand, and high-speed Internet and phone services.
We continue to work on technology initiatives, including:
|
|
the development of cross-platform functionality that integrates key features of two or more of our services (such as universal caller ID and a remotely
programmable DVR) |
|
|
the deployment of multiple tools to recapture bandwidth and optimize our network, including increasing the number of nodes in a service area, using advanced
video encoding and digital compression technologies, transitioning from analog to digital transmission as part of our all digital conversion, and deploying switched digital technology, which transmits only those digital standard-definition and
high-definition video channels that are being watched within a given grouping of households at any given moment |
|
|
the development of technology and software to better identify problems within our cable services and to allow for better integration of our software with
third party software |
|
|
working with members of CableLabs, a nonprofit research and development consortium founded by members of the cable industry, to develop and integrate a common
software platform, known as tru2way, that enables cable companies, content developers, network programmers, consumer electronics companies and others to extend interactivity to the TV set and other types of devices |
|
|
|
|
|
Comcast 2009 Annual Report on Form 10-K |
|
4 |
|
|
|
|
exploring wireless options to extend our services outside the home to provide mobility and create new features that integrate with our services, including
through our investment in Clearwire |
|
|
offering of certain cable network programming to our customers online through Fancast XFINITY TV |
Sales and Marketing
We offer our products and
services directly to residential and commercial customers through our call centers, door-to-door selling, direct mail advertising, television advertising, Internet advertising, local media advertising, telemarketing and retail outlets. We also
market our video, high-speed Internet and phone services individually and as bundled services.
Competition
We operate our businesses in an intensely competitive environment. We compete with a number of different companies that offer a broad range of services
through increasingly diverse means. Competition for the cable services we offer consists primarily of DBS operators and phone companies. In 2009, our competitors continued to add features and adopt aggressive pricing and packaging for services that
are comparable to the services we offer. In addition, phone companies have continued to expand their service areas, which now overlap a substantial portion of our service areas. These competitive factors have had an impact on and are likely to
continue to negatively affect our results of operations. In addition, we operate in a technologically complex environment where the use of certain types of technology may provide our competitors with a competitive advantage and where new
technologies are likely to increase the number of competitors we face for our cable services and our advertising business. We expect advances in communications technology, as well as changes in the marketplace, to continue in the future, and we are
unable to predict what effects these developments may have on our businesses and operations.
Video Services
We compete with a number of different sources that provide news, sports, information and entertainment programming to consumers, including:
|
|
DBS providers that transmit satellite signals containing video programming, data and other information to receiving dishes located on the customers
premises |
|
|
certain phone companies that have built and are continuing to build wireline fiber-optic-based networks, in some cases using Internet protocol technology,
that provide video and high-speed Internet services in substantial portions of our service areas; these phone companies also market DBS service in certain areas where they provide only phone and high-speed Internet service
|
|
|
other providers that build and operate wireline communications systems in the same communities that we serve, including those operating as franchised cable
operators |
|
|
satellite master antenna television systems, known as SMATVs, that generally serve MDUs, office complexes, and residential developments
|
In recent years, Congress has enacted legislation and the FCC has adopted regulatory policies intended to provide a
favorable operating environment for existing competitors and for potential new competitors to our cable services. The FCC adopted rules favoring new investment by certain phone companies in networks capable of distributing video programming and
rules allocating and auctioning spectrum for new wireless services that may compete with our video service offerings. Furthermore, the FCC and various state governments have adopted measures that reduce or eliminate local franchising requirements
for new entrants into the multichannel video marketplace, including phone companies. Certain of these franchising entry measures have already been adopted in many states in which we operate. We believe that we have been and continue to be materially
disadvantaged as a result of these FCC rules, which apply less burdensome standards for certain types of our competitors (see Legislation and Regulation below).
Direct broadcast satellite systems
According to recent government and industry
reports, conventional, medium-power and high-power satellites provide video programming to approximately 38 million customers in the United States. DBS providers with high-power satellites typically offer more than 250 channels of programming,
including video services substantially similar to those offered by our video services. Two companies, DIRECTV and DISH Network, provide service to substantially all of these DBS customers.
High-power satellite service can be received throughout the continental United States through small rooftop or side-mounted outdoor antennas. Satellite systems use video compression technology
to increase channel capacity and digital technology to improve the quality and quantity of the signals transmitted to their customers. Our digital video services are competitive with the programming, channel capacity and quality of signals currently
delivered to customers by DBS providers.
Federal law generally provides satellite systems with access to cable-affiliated video
programming services delivered by satellite. DBS providers also have marketing arrangements with certain phone companies in which the DBS providers video services are sold together with the phone companys high-speed Internet and phone
services.
Phone companies
Certain phone companies, in particular AT&T and Verizon, have built and continue to build fiber-optic-based networks to provide
|
|
|
|
|
|
|
5 |
|
Comcast 2009 Annual Report on Form 10-K |
cable services similar to ours. These phone companies now offer their video services in a substantial portion of our service areas. In some areas, this expansion has been accelerated by certain
regulatory authorities adopting new rules designed to ease the franchising process and reduce franchising burdens for new providers of video services and by some phone companies claiming that they can provide their video services without a local
cable franchise (see Legislation and Regulation below). In some areas, these phone companies also have marketing arrangements with DBS providers in which their high-speed Internet and phone services are sold together with a DBS
providers video services.
Other wireline providers
We operate our cable systems under nonexclusive franchises that are issued by a local governing body, such as a city council or county board of supervisors or, in some cases, by a state
regulatory agency. Federal law prohibits franchising authorities from unreasonably denying requests for additional franchises, and it permits franchising authorities to operate cable systems. In addition to phone companies, various other companies,
including those that traditionally have not provided cable services and have substantial financial resources (such as public utilities, including those that own some of the poles to which our cables are attached), have obtained cable franchises and
provide competing cable services. These and other cable systems offer cable services in various areas where we hold franchises. We anticipate that facilities-based competitors may emerge in other franchise areas that we serve.
Satellite master antenna television systems
Our cable services also compete for customers with SMATV systems. SMATV system operators typically are not subject to regulation in the same manner as local, franchised cable system operators. SMATV systems offer
customers both improved reception of local television broadcast stations and much of the programming offered by our cable systems. In addition, some SMATV system operators offer packages of video, Internet and phone services to residential and
commercial developments.
Other competitors
Our cable services also may compete to some degree for customers with other companies, such as:
|
|
online services that offer Internet video streaming, downloading and distribution of movies, television shows and other video programming
|
|
|
local television broadcast stations that provide multiple channels of free over-the-air programming |
|
|
wireless and other emerging mobile technologies that provide for the distribution and viewing of video programming |
|
|
video rental services and home video products |
High-Speed Internet Services
We compete with a number of companies offering Internet services, many of which have substantial resources, including:
|
|
wireline phone companies |
|
|
Internet service providers, such as AOL, Earthlink and Microsoft |
|
|
wireless phone companies and other providers of wireless Internet service |
Digital
subscriber line (DSL) technology allows Internet access to be provided to customers over phone lines at data transmission speeds substantially greater than those of dial-up modems. Phone companies and certain other companies offer DSL
service, and several of these companies have increased transmission speeds, lowered prices or created bundled service packages. In addition, some phone companies, such as AT&T and Verizon, have built and are continuing to build fiber-optic-based
networks that allow them to provide data transmission speeds that exceed those that can be provided with DSL technology and are now offering these higher speed services in many of our service areas. The FCC has reduced the obligations of phone
companies to offer their broadband facilities on a wholesale or retail basis to competitors, and it has freed their DSL services of common carrier regulation.
Various wireless phone companies are offering 3G and 4G wireless high-speed Internet services. In addition, a growing number of commercial areas, such as retail malls, restaurants and airports, offer Wi-Fi Internet
service. Numerous local governments are also considering or actively pursuing publicly subsidized Wi-Fi and WiMAX Internet access networks, and commercial WiMAX offerings are being rolled out in some of our service areas by competing wireless
providers.
Phone Services
Our phone services compete against wireline phone companies, including competitive local exchange carriers (CLECs), wireless phone service providers and other VoIP service providers. Certain phone companies, such as AT&T and
Verizon, have substantial capital and other resources, longstanding customer relationships and extensive existing facilities and network rights-of-way. A few CLECs also have existing local networks and significant financial resources.
Advertising
We compete for the sale
of advertising against a wide variety of media, including local television broadcast stations, national television broadcast networks, national and regional programming networks, local radio broadcast stations, local and regional newspapers,
magazines and Internet sites.
|
|
|
|
|
Comcast 2009 Annual Report on Form 10-K |
|
6 |
|
|
Programming Segment
Our Programming segment consists primarily of
our consolidated national programming networks. The table below presents a summary of our consolidated national programming networks.
|
|
|
|
|
Programming Network |
|
Approximate U.S. Subscribers at December 31, 2009 (in millions) |
|
Description of Programming |
E! |
|
86 |
|
Entertainment |
Golf Channel |
|
74 |
|
Golf and golf-related |
VERSUS |
|
54 |
|
Sports and leisure |
G4 |
|
59 |
|
Gamer lifestyle |
Style |
|
57 |
|
Lifestyle |
Revenue for our programming networks is primarily generated from monthly per subscriber license fees
paid by multichannel video providers that have typically entered into multiyear contracts to distribute our programming networks, the sale of advertising and the licensing of our programming internationally. To obtain long-term contracts with
distributors, we may make cash payments, provide an initial period in which license fee payments are waived or do both. Our programming networks assist distributors with ongoing marketing and promotional activities to acquire and retain customers.
Although we believe prospects of continued carriage and marketing of our programming networks by larger distributors are generally good, the loss of one or more of such distributors could have a material adverse effect on our programming networks.
Sources of Supply
Our
programming networks often produce their own television programs and broadcasts of live events. This often requires us to acquire the rights to the content that is used in such productions (such as rights to screenplays or sporting events). In other
cases, our programming networks license the cable telecast rights to television programs produced by third parties.
Competition
Our networks compete with other programming networks for distribution and programming. In addition, our programming networks compete for audience share
with all other forms of programming provided to viewers, including broadcast networks, local television broadcast stations, pay and other cable networks, home video, pay-per-view and video on demand services, and Internet sites. Finally, our
programming networks compete for advertising revenue with other national and local media, including other television networks, television stations, radio stations, newspapers, Internet sites and direct mail.
Other Businesses
Our other business interests include Comcast Interactive Media and Comcast Spectacor. Comcast Interactive Media develops and
operates our Internet businesses focused on entertainment, information and communication, including Comcast.net, Fancast, the Platform, Fandango, Plaxo and DailyCandy. Comcast Spectacor owns two
professional sports teams, the Philadelphia 76ers and the Philadelphia Flyers, and a large, multipurpose arena in Philadelphia, the Wachovia Center, and provides facilities management services, including food services, for sporting events, concerts
and other events.
We also own noncontrolling interests in certain networks and content providers, including FEARnet (33%), iN DEMAND
(54%), MGM (20%), Music Choice (12%), PBS KIDS Sprout (40%), Pittsburgh Cable News Channel (30%), TV One (34%), and SportsNet New York (8%). In addition, we have noncontrolling interests in wireless-related companies, including Clearwire
Communications LLC (9%) and SpectrumCo, LLC (64%).
Legislation and Regulation
Our Cable segment is subject to regulation by federal, state and local governmental authorities under applicable laws and regulations, as well as under agreements we enter into with
franchising authorities. The Communications Act of 1934, as amended (the Communications Act), and FCC regulations and policies affect significant aspects of our Cable segment, including cable system ownership, video customer rates,
carriage of broadcast television stations, how we sell our programming packages to customers, access to cable system channels by franchising authorities and other parties, the use of utility poles and conduits, and the offering of our high-speed
Internet and phone services. Our Programming segment is also subject to some governmental regulation.
Federal regulation and regulatory
scrutiny of our Cable and Programming segments have increased in recent years, even as the cable industry has become subject to increasing competition from DBS providers, phone companies and others for video, high-speed
|
|
|
|
|
|
|
7 |
|
Comcast 2009 Annual Report on Form 10-K |
Internet and phone services. Meanwhile, the FCC has provided regulatory relief and various regulatory advantages to our competitors, examples of which are provided below. Further, in some areas,
the Communications Act treats certain multichannel video programming distributors differently from others. For example, ownership limits, pricing and packaging regulation, must-carry rules and franchising regulations are not applicable to our DBS
competitors. Regulation continues to present significant adverse risks to our businesses.
It is possible that federal regulators will
condition their approval of the NBC Universal transaction on our agreeing to significant new regulatory obligations for our businesses or to limits on our business activities. Additionally, if our transaction with NBC Universal closes, we would
become subject to the array of broadcasting regulations and public interest obligations applicable to NBC Universals broadcasting stations.
Regulators at all levels of government frequently consider changing, and sometimes do change, existing rules or interpretations of existing rules, or prescribe new ones. For example, some parties have proposed that
the FCC subject our high-speed Internet services to the kinds of regulations that apply to common carrier telecommunications services, which would be a dramatic change from the regulatory approach that has applied to our high-speed Internet services
to date. We are unable to predict how any such changes will ultimately affect the regulation of our businesses. In addition, we always face the risk that Congress or one or more states will approve legislation significantly affecting our businesses,
such as proposed federal legislation that could substantially liberalize the procedures for union organization. The following paragraphs describe existing and potential future legal and regulatory requirements for our businesses.
Video Services
Ownership Limits
We currently serve
approximately 24% of the multichannel video customers nationwide. In August 2009, a federal appellate court struck down an FCC order that had established a 30% limit on the percentage of multichannel video customers that any single cable operator
could serve nationwide. While there is currently no limit on the number of video customers that a single cable operator can serve nationwide, the FCC may initiate consideration of a new ownership limit. However, even without the adoption of a new
ownership limit, federal regulators (including the FCC and the Federal Trade Commission (FTC) and/or the Department of Justice) could refuse to approve certain transactions that increase the number of video customers we serve.
The FCC is assessing whether it should revise a limit on the number of affiliated programming networks that a cable operator may carry
on its cable systems. While the FCCs previous limit of
40% of the first 75 channels was struck down by a federal appellate court in 2001, the FCC continues to enforce the previous limit. The percentage of affiliated programming networks we currently
carry is well below the previous limit. We expect to be able to comply with the previous limit if our transaction with NBC Universal closes, but compliance could become more difficult depending on what regulations the FCC adopts, if any.
Pricing and Packaging
The Communications
Act and FCC regulations and policies limit the prices that cable operators may charge for basic service (whether transmitted in analog or digital), equipment and installation. These rules do not apply to cable systems that the FCC determines are
subject to effective competition or where local or state franchising authorities have chosen not to regulate rates. As a result, 75% of our customers are not subject to rate regulation, and, as of December 31, 2009, we have pending before the
FCC additional petitions for determination of effective competition for systems covering another 12% of our customers. From time to time, Congress and the FCC consider imposing new pricing or packaging regulations on the cable industry, including
proposals that would require cable operators to offer programming networks on an a la carte or themed-tier basis instead of, or in addition to, our current packaged offerings. As discussed under Legal Proceedings in Item 3, we and
others are currently involved in litigation that could force us and other multichannel video programming distributors to offer programming networks on an a la carte basis. Additionally, uniform pricing requirements under the Communications Act may
affect our ability to respond to increased competition through offers that aim to retain existing customers or regain those we have lost.
Must-Carry/Retransmission Consent
Cable operators are currently required to carry, without compensation, the programming
transmitted by most local commercial and noncommercial television stations. Alternatively, local television stations may insist that a cable operator negotiate for retransmission consent, which may enable popular stations to demand cash payments or
other significant concessions (such as the carriage of, and payment for, other programming networks affiliated with the broadcaster) as a condition of transmitting the TV broadcast signals that video customers expect to receive. Now that
broadcasters have completed their transition from analog to digital technology, cable operators generally are required to carry the primary digital programming stream of local broadcast stations, as well as an analog version of the primary digital
programming stream on systems that are not all digital. These requirements are scheduled to last until June 12, 2012, subject to possible extensions. The FCC has provided a limited exemption from these requirements for cable systems with an
activated channel capacity of 552 MHz or less. Under this exemption, which applies to certain of our cable systems, the operator is only obligated to carry an
|
|
|
|
|
Comcast 2009 Annual Report on Form 10-K |
|
8 |
|
|
analog version of the broadcasters primary digital programming stream. The FCC may consider expanding must-carry rights in the future. Such expanded must-carry obligations could affect our
ability to allocate bandwidth to provide more HDTV programming and On Demand services, faster Internet speeds and other services.
Program
Access/Program Carriage/License Agreements
The Communications Act and the FCCs program access rules generally prevent video
programmers affiliated with cable operators from favoring cable operators over competing multichannel video programming distributors, such as DBS providers and phone companies that offer multichannel video services, and limit the ability of such
affiliated programmers to offer exclusive programming arrangements to cable operators. The FCC has extended the exclusivity restrictions through October 2012. We have joined a challenge to this FCC action in federal court. In addition, the
Communications Act and the FCCs program carriage rules prohibit cable operators and other multichannel video programming distributors from requiring a financial interest in, or exclusive distribution rights for, any video programming network
as a condition of carriage, or from unreasonably restraining the ability of an unaffiliated programming network to compete fairly by discriminating against the network on the basis of its nonaffiliation in the selection, terms or conditions for
carriage. The FCC is considering proposals to expand its program access and program carriage regulations. The adoption of one or more of these proposals could have an adverse effect on our businesses. In January 2010, the FCC adopted new rules that
allow multichannel video programming distributors to file program access complaints to try to show that their lack of access to a terrestrially-delivered programming network has hindered significantly their ability to deliver video programming to
subscribers. The rules are not yet in effect, and it is not yet clear whether and to what extent this will affect our terrestrially delivered regional sports network in Philadelphia. In addition, under the FCCs order that approved our
acquisition of Adelphia cable systems and related Time Warner transactions in July 2006, multichannel video programming distributors may invoke commercial arbitration against our regional sports networks as an alternative to filing a program access
complaint with the FCC until July 2012. We have been, and from time to time continue to be, involved in program carriage disputes at the FCC and may continue to be subject to such disputes. Adverse decisions in any such future disputes could
increase our costs and curtail our flexibility to deliver services to our customers.
Leased Access
The Communications Act requires a cable system to make available up to 15% of its channel capacity for commercial leased access by third parties to
provide programming that may compete with services offered directly by the cable operator. While we have not been required to devote significant channel capacity to leased access to date, the FCC adopted rules in 2007 that dramatically reduce the
rates we can charge for leased access channels. Although the reduced rates initially will not apply to home shopping
or infomercial programmers, the FCC issued a further notice to determine if such programming should also have the benefit of the reduced rates. Implementation of these FCC rules, however, has
been stayed by a federal court pending the outcome of a challenge brought by us and other cable operators and also has been blocked by the Office of Management and Budget. If implemented, these rules could adversely affect our business by
significantly increasing the number of cable system channels occupied by leased access users and by significantly increasing the administrative burdens and costs associated with complying with such rules.
Cable Equipment
The FCC has adopted
regulations aimed at promoting the retail sale of set-top boxes and other equipment that can be used to receive digital video services. These regulations prohibit cable operators from acquiring for deployment set-top boxes that perform both channel
navigation and security functions. As a result, set-top boxes that we purchase must rely on a separate security device known as a CableCARD, which adds to the cost of set-top boxes. In addition, the FCC has adopted rules aimed at promoting the
manufacture of plug-and-play TV sets that can connect directly to a cable network and receive one-way analog and digital video services without the need for a set-top box. The FCC is also considering proposals to establish regulations for
plug-and-play retail devices that can access two-way cable services and may also examine proposals affecting the marketplace for retail devices that can deliver multichannel video programming distributors and Internet content to consumers. Some of
these alternative approaches, if adopted, could impose substantial costs on us and impair our ability to innovate. In 2009, the FCC granted waivers of its separate security rule for certain set-top box models of one-way standard-definition DTAs. We
believe that DTAs are critical to our all digital conversion. DTAs enable us to convert analog channels to digital transmission, which requires less bandwidth, and to use the recaptured bandwidth capacity for more HDTV programming and On Demand
services, faster Internet speeds and other services. The FCC order that established the waiver process for the DTAs is subject to a petition for reconsideration at the FCC. We cannot predict the extent to which any FCC reconsideration or other FCC
action in this area may hinder our ability to continue deploying DTAs.
MDUs and Inside Wiring
Under an FCC order, exclusive video service access agreements between cable operators and MDUs or other private real estate developments are
prohibited. In May 2009, a federal appellate court upheld the FCC order, which had been challenged by the National Cable & Telecommunications Association. The FCC is also considering proposals to extend these prohibitions to non-cable
multichannel video programming distributors and to expand the scope of the rules to prohibit exclusive marketing and bulk billing agreements. The FCCs order to abrogate the exclusivity provisions of those agreements could negatively affect
|
|
|
|
|
|
|
9 |
|
Comcast 2009 Annual Report on Form 10-K |
our business, as would adoption of new limits on exclusive marketing and bulk billing. The FCC has also adopted rules facilitating competitors access to the cable wiring inside such MDUs.
These rules could also have an adverse impact on our business, as they allow our competitors to use wiring we have deployed to reach potential customers more quickly and inexpensively.
Pole Attachments
The Communications Act permits the FCC to regulate the rates that pole-owning
utility companies (with the exception of municipal utilities and rural cooperatives) charge cable systems for attachments to their poles. States are permitted to preempt FCC jurisdiction and regulate the terms of attachments themselves, and many
states in which we operate have done so. Most of these states have generally followed the FCCs pole attachment rate standards. The FCC or a state could increase pole attachment rates paid by cable operators. Additionally, higher pole
attachment rates apply to pole attachments that are subject to the FCCs telecommunications services pole rates. The applicability of and method for calculating those rates for cable systems over which phone services are transmitted remain
unclear, and there is a risk that we could face materially higher pole attachment costs. In August 2009, utility companies initiated a proceeding at the FCC seeking to apply the telecommunications services pole rate to all poles over which cable
operators provide phone services using interconnected VoIP technology, which is the type of technology we use for our phone services. If the FCC rules that the provision of such phone services requires application of the telecommunications services
pole rate, our payments for pole attachments would increase significantly. In addition to the utility company proceeding, the FCC separately has been considering establishing a new unified pole attachment rate that would apply to cable system
attachments where the cable operator provides high-speed Internet services and, perhaps, phone services as well. The proposed rate would be higher than the current rate paid by cable operators but lower than the telecommunications services pole rate
that the utility companies are seeking to apply to our pole attachments. If adopted, this proposal could materially increase our costs by increasing our existing payments for pole attachments.
Franchising
Cable operators generally operate
their cable systems under nonexclusive franchises granted by local or state franchising authorities. While the terms and conditions of franchises vary materially from jurisdiction to jurisdiction, franchises typically last for a fixed term, obligate
the franchisee to pay franchise fees and meet service quality, customer service and other requirements, and are terminable if the franchisee fails to comply with material provisions. The Communications Act permits franchising authorities to
establish reasonable requirements for public, educational and governmental access programming, and some of our franchises require substantial channel capacity and financial support for this programming. The Communications Act also contains
provisions
governing the franchising process, including, among other things, renewal procedures designed to protect incumbent franchisees against arbitrary denials of renewal. We believe that our franchise
renewal prospects generally are favorable.
Over the past few years, there has been considerable activity at both the federal and state
levels addressing franchise requirements imposed on new entrants, primarily directed at facilitating phone companies entry into cable services. Under FCC rules adopted in 2006, the franchising process and burdens for new entrants have been
eased by, among other things, limiting the range of financial, construction and other commitments that franchising authorities can request of new entrants, requiring franchising authorities to act on franchise applications by new entrants within 90
days, and preempting certain local level playing field franchising requirements. The FCC subsequently adopted more modest franchising relief for existing cable operators. We believe that we have been and continue to be materially
disadvantaged as a result of these FCC rules, which apply less burdensome franchising standards to certain types of our competitors. From time to time, Congress has also considered proposals to eliminate or streamline local franchising requirements
for phone companies and other new entrants. We cannot predict whether such legislation will be enacted or what effect it would have on our business.
In addition, approximately half of the states in which we operate have enacted legislation to provide statewide franchising or to simplify local franchising requirements for new entrants, thus relieving new
entrants of many of the local franchising burdens faced by incumbent cable operators like us. Some of these statutes also allow new entrants to operate on more favorable terms than our current operations, for instance by not requiring that the new
entrant provide service to all parts of the franchise area or permitting the new entrant to designate only those portions it wishes to serve. Certain of these state statutes allow incumbent cable operators to opt into the new state franchise where a
competing state franchise has been issued for the incumbent cable operators franchise area. However, even in those states where incumbent cable operators are allowed to opt into a state franchise, the incumbent cable operators often are
required to retain certain franchise obligations that are more burdensome than the new entrants state franchise.
Copyright Regulation
In exchange for filing reports and contributing a percentage of revenue to a federal copyright royalty pool, cable operators can obtain
blanket permission to retransmit copyrighted material contained in broadcast signals. The possible modification or elimination of this copyright license is the subject of ongoing legislative and administrative review. The Copyright Office has issued
a report to Congress in which it recommended eliminating the compulsory copyright license in favor of free market negotiations between cable operators and copyright owners. If adopted, this
|
|
|
|
|
Comcast 2009 Annual Report on Form 10-K |
|
10 |
|
|
proposal could adversely affect our ability to obtain certain programming and substantially increase our programming costs. In May 2008, the Copyright Office rejected a cable industry request to
clarify that copyright fees associated with the retransmission of out-of-market broadcast signals should be limited to system customers who actually receive those signals. The Copyright Office concluded it did not have authority under the governing
statute to adopt that interpretation. There is a risk that the Copyright Offices determination on this issue could materially increase the copyright royalty fees that we and other cable operators pay to retransmit out-of-market broadcast
signals. Further, in June 2008, the Copyright Office issued a Notice of Proposed Rulemaking addressing how the compulsory license will apply to digital broadcast signals and services. In this notice, the Copyright Office proposed to require royalty
fees from cable operators for carriage of each digital multicast stream of programming from an out-of-market television broadcast station. If adopted, this proposal could increase our royalty fees for the carriage of out-of-market television
stations. Currently, we do not carry a significant number of multicast streams of programming from out-of-market stations, although our carriage of such programming streams may increase in the future. Legislation is pending in Congress that, if
passed, would address each of the Copyright Office matters.
In addition, we pay standard industry licensing fees to use music in the
programs we create, including our Cable segments local advertising and local origination programming and our Programming segments original programs. These licensing fees have been the source of litigation with music performance rights
organizations in the past, and we cannot predict with certainty whether license fee disputes may arise in the future.
High-Speed
Internet Services
We
provide high-speed Internet services over our cable systems. In 2002, the FCC ruled that this was an interstate information service that is not subject to regulation as a telecommunications service under federal law or to state or local utility
regulation. However, our high-speed Internet services are subject to a number of regulatory obligations, including compliance with the Communications Assistance for Law Enforcement Act (CALEA) requirement that high-speed Internet service
providers must implement certain network capabilities to assist law enforcement in conducting surveillance of persons suspected of criminal activity.
The FCC has proposed adopting so-called net neutrality rules that would define certain rights for users of high-speed Internet services and regulate or restrict some types of commercial agreements
between service providers and providers of Internet content. In 2005, the FCC issued what was characterized at the time as a nonbinding policy statement identifying four principles of Internet openness that would guide its policymaking
regarding high-speed Internet and related services. In 2009, the FCC pro
-
posed to convert these principles into enforceable regulations and expand them. The proposed regulations would bar high-speed Internet service providers such as us from preventing any
consumer from (i) sending or receiving the lawful content of the consumers choice over the Internet; (ii) running the lawful applications or using the lawful services of the consumers choice; (iii) connecting to and using
on its network the consumers choice of lawful devices that do not harm the network; and (iv) enjoying competition among network providers, application providers, service providers and content providers. In addition, the proposed
regulations would add an obligation to treat lawful content, applications and service in a nondiscriminatory manner and a duty to disclose such information concerning network management and other practices as is reasonably required for consumers and
content, application and service providers to enjoy the protections specified in the regulations. The proposed regulations also would allow for reasonable network management by high-speed Internet service providers such as us, subject to FCC
oversight. The FCC also has raised the possibility of adopting additional rules that would govern, or restrict, our offering of managed services, although the definition of such term and proposed scope of any such rules cannot yet be
determined. Legislation has been introduced in Congress that would impose similar requirements on our provision of high-speed Internet services. Any net neutrality rules or statutes could limit our ability to manage not only our high-speed Internet
services but all of our cable services, which could adversely affect our ability to provide video and phone services. Further, any net neutrality rules or statutes could hinder our ability to obtain adequate value for use of our cable services or to
respond to competitive conditions. Even in the absence of new net neutrality rules, our high-speed Internet services may be subject to ad hoc enforcement actions by the FCC. For example, in August 2008, the FCC found that we had violated
federal Internet policies by engaging in certain network management practices intended to address congestion on our high-speed Internet network. We are challenging that decision in federal court.
The FCC also is currently developing a national broadband plan, which could result in new regulatory proposals for, or new competition to,
our high-speed Internet services. Meanwhile, the Departments of Agriculture and Commerce are awarding significant grants and loans to providers of Internet services, which may increase the competition we face.
A federal program known as the Universal Service program generally requires telecommunications service providers to collect and pay a fee based on
their revenue from their services (in recent years, approximately 11% of interstate revenue from our phone services) into a fund, the Universal Service Fund, used to subsidize the provision of telecommunications services in high-cost areas and
Internet and telecommunications services to schools, libraries and certain health care providers. Congress and the FCC are considering proposals that could result in our high-speed Internet services being subject to Universal Service fees and that
could
|
|
|
|
|
|
|
11 |
|
Comcast 2009 Annual Report on Form 10-K |
also result in subsidies being provided to our Internet (and video) competitors. We cannot predict whether or how the Universal Service funding system might be extended to cover high-speed
Internet services or, if that occurs, how it will affect us.
In addition, Congress and federal regulators have adopted a wide range of
measures affecting Internet use, including, for example, consumer privacy, consumer protection, copyright protection, defamation liability, taxation, obscenity and unsolicited commercial e-mail. State and local governments have also adopted
Internet-related regulations. Furthermore, Congress, the FCC and certain state and local governments are also considering proposals to impose customer service, quality of service, taxation, child safety, privacy and standard pricing regulations on
high-speed Internet service providers. It is uncertain whether any of these proposals will be adopted. The adoption of new laws or the application of existing laws to the Internet could have a material adverse effect on our high-speed Internet
business.
Phone Services
We provide voice services by using
interconnected VoIP technology, which we refer to as our phone services in this Annual Report on Form 10-K. The FCC has adopted a number of orders addressing regulatory issues relating to providers of nontraditional voice services such as ours,
including regulations relating to customer proprietary network information, local number portability duties and benefits, disability access, E911, CALEA, and contributions to the federal Universal Service Fund, but has not yet ruled on the
appropriate classification of phone services using interconnected VoIP technology. The regulatory environment for our phone services therefore remains uncertain at both the federal and the state levels. Until the FCC definitively classifies phone
services using interconnected VoIP technology for state and federal regulatory purposes, state regulatory commissions and legislatures may continue to investigate imposing regulatory requirements on our phone services.
Because the FCC has not determined the appropriate classification of our phone services, the precise scope of phone company interconnection rules
applicable to us as a provider of nontraditional voice services is not entirely clear. In light of this uncertainty, providers of nontraditional voice services typically either secure CLEC authorization or obtain interconnection to traditional
wireline phone company networks by contracting with an existing CLEC, whose right, as a telecommunications carrier, to request and obtain interconnection with the traditional wireline phone companies is set forth in the Communications Act. We have
arranged for such interconnection rights through our own CLECs and through third party CLECs. While some traditional wireline phone companies have challenged our right to interconnect directly with them, we have prevailed in almost all of these
challenges. If a regulatory or judicial authority were to deny our ability to interconnect through one of our CLECs, our ability to provide
phone services and compete in the area in question would be negatively impacted.
It is uncertain whether the FCC or Congress will adopt further rules regarding interconnection rights and arrangements and how such rules would affect our phone services.
In addition, a few state public utility commissions are conducting proceedings that could lead to the imposition of state telephone regulations upon our phone services, and we could incur
additional costs in complying with any such regulations.
Other Areas
The FCC actively regulates other aspects of
our Cable segment and limited aspects of our Programming segment, including the mandatory blackout of syndicated, network and sports programming; customer service standards; political advertising; indecent or obscene programming; Emergency Alert
System requirements for analog and digital services; closed captioning requirements for the hearing impaired; commercial restrictions on childrens programming; origination cablecasting (i.e., programming locally originated by and under the
control of the cable operator); sponsorship identification; equal employment opportunity; lottery programming; recordkeeping and public file access requirements; telemarketing; technical standards relating to operation of the cable network; and
regulatory fees. We are unable to predict how these regulations might be changed in the future and how any such changes might affect our Cable and Programming businesses. In addition, while we believe that we are in substantial compliance with FCC
rules, we are occasionally subject to enforcement actions at the FCC, which can result in our having to pay fines to the agency.
State and Local
Taxes
Some states and localities have imposed or are considering imposing new or additional taxes or fees on the services we offer,
or imposing adverse methodologies by which taxes or fees are computed. These include combined reporting or other changes to general business taxes, central assessments for property tax, and taxes and fees on video, high-speed Internet and phone
services. We and other cable industry members are challenging certain of these taxes through administrative and court proceedings. In addition, in some situations our DBS competitors and other competitors that deliver their services over a
high-speed Internet connection do not face similar state tax and fee burdens. Congress has also considered, and may consider again, proposals to bar states from imposing taxes on DBS providers that are equivalent to the taxes or fees that we pay.
Privacy and Security Regulation
The Communications Act generally restricts the nonconsensual collection and disclosure to third parties of cable customers personally identifiable information by cable operators. There are
|
|
|
|
|
Comcast 2009 Annual Report on Form 10-K |
|
12 |
|
|
exceptions that permit the collection and disclosure of this information for rendering service, conducting legitimate business activities related to the service and responding to legal requests.
The Telecommunications Act of 1996 provides additional privacy protections for customer proprietary network information, commonly known as CPNI, related to our digital phone services. A handful of states and the District of Columbia have enacted
privacy laws that apply to cable services. The FTC has begun to exercise greater authority over privacy protections generally, using its existing authority over unfair and deceptive practices and other public proceedings to apply greater
restrictions on the collection and use of personally identifiable and other information relating to consumers. The FCC also is seeking public comments on how and whether it should address broadband privacy issues in a notice of inquiry for a
national broadband plan. Further, certain key Congressional committees and lawmakers have expressed an intention to introduce legislation to expand privacy-related regulation.
We are also subject to state and federal rules and laws regarding information security. Most of these rules and laws apply to customer information that could be used to commit identity theft.
Forty-five states and the District of Columbia have enacted security breach notification laws. These laws generally require that a business give notice to its customers whose financial account information has been disclosed because of a security
breach. The FTC is applying the red flag rules in the Fair and Accurate Credit Transactions Act of 2003 to both financial institutions and creditors, and the FTCs interpretation of the rules considers us to be a creditor. We intend
to comply with these rules, which are currently scheduled to become effective for us on June 1, 2010, by using an identity theft prevention program to identify, detect and respond to patterns, practices or specific activities that could
indicate identity theft.
We are also subject to state and federal do not call laws regarding telemarketing and state and
federal laws regarding unsolicited commercial e-mails. Additional and more restrictive requirements may be imposed if and to the extent that state or local authorities establish their own privacy or security standards or if Congress enacts new
privacy or security legislation.
Employees
As of December 31, 2009, we employed approximately 107,000 employees, including part-time employees. Of these employees, approximately 89,000 were associated with our Cable business and the remainder were associated with our
Programming and other businesses. Approximately 6,000 of our employees (including part-time employees) are covered by collective bargaining agreements or have organized but are not covered by collective bargaining agreements. We believe we have good
relationships with our employees.
Caution Concerning Forward-Looking Statements
The SEC encourages companies to disclose forward-looking information so that investors can better understand a companys future prospects and make informed investment decisions. In this
Annual Report on Form 10-K, we state our beliefs of future events and of our future financial performance. In some cases, you can identify these so-called forward-looking statements by words such as may, will,
should, expects, believes, estimates, potential, or continue, or the negative of these words, and other comparable words. You should be aware that those statements are only our
predictions. In evaluating those statements, you should specifically consider various factors, including the risks and uncertainties listed in Risk Factors under Item 1A and in other reports we file with the SEC.
Additionally, we operate in a highly competitive, consumer-driven and rapidly changing environment. The environment is affected by government
regulation; economic, strategic, political and social conditions; consumer response to new and existing products and services; technological developments; and, particularly in view of new technologies, the ability to develop and protect intellectual
property rights. Our actual results could differ materially from our forward-looking statements or as a result of any of such factors, which could adversely affect our business, results of operations or financial condition. We undertake no
obligation to update any forward-looking statements.
Item 1A: Risk Factors
Our cable services currently face a wide range of competition that could adversely affect our future results of operations.
We operate in intensely competitive industries. We compete with a number of companies that provide a broad range of news and entertainment programming
and information and communication services to consumers. While competition for the cable services we offer consists primarily of DBS operators and phone companies, we also directly compete against other providers of cable services, including
companies that build competing cable systems in the same communities that we serve, satellite master antenna television systems and other companies that offer programming and other communications services, including high-speed Internet and phone
services, to our customers and potential customers. In 2009, phone companies continued to expand their service areas, which now overlap a substantial portion of our service areas, and our primary competitors continued to add features and adopt
aggressive pricing and packaging for services that are comparable to the services we offer. Moreover, in recent years, Congress and various states have enacted legislation and the FCC has adopted
|
|
|
|
|
|
|
13 |
|
Comcast 2009 Annual Report on Form 10-K |
regulatory policies that have had the effect of providing a more favorable operating environment for some of our existing and potential new competitors. See Legislation and Regulation
in Item 1 for additional information. In addition, while we continue to seek ways to enhance and expand our existing products and services, such as by employing addressable advertising and offering commercial services, there can be no assurance
that we can execute on these enhancements or expansions in a manner sufficient to compete successfully in the future. Also, our ability to compete effectively is in part dependent upon our perceived image and reputation among our various
constituencies, including our customers, investors and governmental authorities. Our business and results of operations could be adversely affected if we do not compete effectively.
Technological advances have increased and will likely continue to increase competition for our cable services, which could adversely affect our future results of operations.
We operate in a technologically complex environment where the use of certain types of technology may provide our competitors with a competitive
advantage. For example, cable operators may employ different technologies in their efforts to recapture bandwidth to allow for more HDTV programming and On Demand services, faster Internet speeds and other services for customers. Also, in some
cases, phone companies are using IP technology to provide video services in substantial portions of their service areas. We expect other advances in communications technology, as well as changes in the marketplace, to occur in the future. If we
choose technology that is not as effective, cost-efficient or attractive to customers as that employed by our competitors, if we fail to employ technologies desired by our customers before our competitors do so or if we fail to execute effectively
on our technology initiatives, our business and results of operations could be adversely affected.
Moreover, new technologies have
been, and will likely continue to be, developed that further increase the number of competitors we face for our video, high-speed Internet and phone services and our advertising business. For example, new services and technologies that may compete
with our video services include online services that offer Internet video streaming, downloading and distribution of movies, television shows and other video programming, and wireless and other emerging mobile technologies that provide for the
distribution and viewing of video programming. Newer services in wireless Internet technology, such as third and fourth generation wireless broadband services, may compete with our high-speed Internet services, and our phone services are facing
increased competition from wireless phone services as more people choose to replace their traditional wireline phone service with wireless phone service. Moreover, some of our phone company competitors have their own wireless facilities, which we do
not have, and have expanded or may expand their cable service bundle offerings to include wireless offerings, which may adversely affect our growth, business and results of operations. The success of
any of these ongoing and future developments could have an adverse effect on our business and results of operations.
Programming expenses are increasing, which could adversely affect our future results of operations.
We expect our programming expenses to continue to be our largest single expense item in the foreseeable future. The multichannel video programming distribution industry has continued to experience an increase in the cost of programming,
especially sports programming. In addition, as we add programming to our video services or distribute existing programming to more of our customers, we incur increased programming expenses. If we are unable to raise our customers rates or
offset such programming cost increases through the sale of additional services, the increasing cost of programming could have an adverse impact on our results of operations. Moreover, as our programming contracts with programming providers
expire, there can be no assurance that they will be renewed on acceptable terms or that they will be renewed at all, in which case we may be unable to provide such programming as part of our video services and our business and results of operations
may be adversely affected.
We also expect to be subject to increasing demands, including demands for cash payments and other
concessions, by broadcasters in exchange for their required consent for the retransmission of broadcast programming to our customers. We cannot predict the magnitude of these demands or the effect on our business and operations should we concede to
certain of these demands or fail to obtain the required consents.
We are subject to regulation by federal, state and local
governments, which may impose additional costs and restrictions.
Federal, state and local governments extensively regulate the video
services industry and may increase the regulation of the Internet service and VoIP digital phone service industries. We expect that legislative enactments, court actions and regulatory proceedings will continue to clarify, and in some cases
adversely affect, the rights and obligations of cable operators and other entities under the Communications Act and other laws. Congress is constantly considering new legislative requirements potentially affecting our businesses. The results of
these legislative, judicial and administrative actions may materially affect our business and results of operations.
In addition, local
franchising authorities grant us franchises that permit us to operate our cable systems. We have to renew or renegotiate these franchises from time to time. Local franchising authorities often demand concessions or other commitments as a condition
of renewal or transfer, and these concessions or other commitments could be costly to us. In addition, we could be materially disadvantaged if we remain subject to legal constraints that do not apply equally to our competitors, such as if phone
companies that provide video services are not subject to the local franchising requirements and other requirements that apply to us.
|
|
|
|
|
Comcast 2009 Annual Report on Form 10-K |
|
14 |
|
|
For example, the FCC has adopted rules and several states have enacted legislation to ease the franchising process and reduce franchising burdens for new entrants. See Legislation and
Regulation in Item 1 and refer to the Franchising discussion within that section.
We also face other risks
related to federal, state and local regulations. For example, Congress and the FCC are also considering various forms of net neutrality regulation. See Legislation and Regulation in Item 1 and refer to the
High-Speed Internet Services discussion within that section. For a more detailed discussion of the risks associated with our regulation by federal, state and local governments, see Legislation and Regulation in
Item 1.
Weak economic conditions may have a negative impact on our results of operations and financial condition.
Weak economic conditions persisted during 2009, and a substantial portion of our revenue comes from residential customers whose
spending patterns may be affected by prevailing economic conditions. To the extent these weak economic conditions continue, customers may reduce the advanced or premium services to which they subscribe, or may discontinue subscribing to one or more
of our cable services. This risk may be worsened by the expanded availability of free or lower cost competitive services, such as video streaming over the Internet, or substitute services, such as wireless phones. The weak economy negatively
affected our net customer additions during 2009 and also had a negative impact on the advertising revenue of our Cable and Programming segments. If these weak economic conditions continue or deteriorate, our business, results of operations and
financial condition may be adversely affected.
We rely on network and information systems and other technology, and a disruption or
failure of such networks, systems or technology may disrupt our business.
Network and information systems and other technologies,
including those related to our network management and customer service operations, are critical to our business activities. Network and information systems-related events, such as computer hackings, computer viruses, worms or other destructive
or disruptive software, process breakdowns, denial of service attacks, malicious social engineering or other malicious activities, or any combination of the foregoing, or power outages, natural disasters, terrorist attacks or other similar events,
could result in a degradation or disruption of our cable services, excessive call volume to call centers or damage to our equipment and data. These network and information systems-related events also could result in large expenditures to repair or
replace the damaged networks or information systems or to protect them from similar events in the future. Further, any security breaches, such as misappropriation, misuse, leakage, falsification or accidental release or loss of information
maintained in our information technology systems and networks, including customer, personnel and vendor data, could damage our reputation and require us to expend significant capital
and other resources to remedy any such security breach. The occurrence of any such network or information systems-related events or security breaches could have a material adverse effect on our
business and results of operations.
We may be unable to obtain necessary hardware, software and operational support.
We depend on third party vendors to supply us with a significant amount of the hardware, software and operational support necessary to provide
certain of our services. Moreover, some of these vendors represent our primary source of supply or grant us the right to incorporate their intellectual property into some of our hardware and software products. While we actively monitor the
operations and financial condition of key vendors in an attempt to detect any potential difficulties, there can be no assurance that we would timely identify any operating or financial difficulties associated with these vendors or that we could
effectively mitigate our risks with respect to any such difficulties. If any of these vendors experience operating or financial difficulties or if demand exceeds their capacity or they otherwise cannot meet our specifications, our ability to
provide some services may be materially adversely affected, in which case, our business, results of operations and financial condition may be adversely affected.
Our business depends on certain intellectual property rights and on not infringing the intellectual property rights of others.
We rely on our patents, copyrights, trademarks and trade secrets, as well as licenses and other agreements with our vendors and other parties, to use our technologies, conduct our operations and sell our products
and services. Legal challenges to our intellectual property rights and claims of intellectual property infringement by third parties could require that we enter into royalty or licensing agreements on unfavorable terms, incur substantial monetary
liability or be enjoined preliminarily or permanently from further use of the intellectual property in question or from the continuation of our businesses as currently conducted, which could require us to change our business practices or limit our
ability to compete effectively or could have an adverse effect on our results of operations. Even if we believe any such challenges or claims are without merit, they can be time-consuming and costly to defend and divert managements attention
and resources away from our business. Moreover, because of the rapid pace of technological change, we rely on technologies developed or licensed by third parties, and if we are unable to obtain or continue to obtain licenses from these third parties
on reasonable terms, our business and results of operations could be adversely affected.
We face risks arising from the outcome of
various litigation matters.
We are subject to various legal proceedings and claims, including those referred to in Legal
Proceedings in Item 3 and those arising in the ordinary course of business, including regulatory and administrative proceedings, claims and audits. While we do not expect the final disposition of any of these litigation matters will
|
|
|
|
|
|
|
15 |
|
Comcast 2009 Annual Report on Form 10-K |
have a material effect on our financial condition, an adverse outcome in one or more of these matters could be material to our consolidated results of operations and cash flows for any one
period, and any litigation resulting from any such legal proceedings could be time-consuming, costly and injure our reputation. Further, no assurance can be given that any adverse outcome would not be material to our financial condition.
Acquisitions and other strategic transactions present many risks, and we may not realize the financial and strategic goals that were
contemplated at the time of any transaction.
From time to time we make acquisitions and investments and enter into other strategic
transactions. In connection with acquisitions and other strategic transactions, we may incur unanticipated expenses, fail to realize anticipated benefits, have difficulty incorporating the acquired businesses, disrupt relationships with current and
new employees, customers and vendors, incur significant indebtedness, or have to delay or not proceed with announced transactions. The occurrence of any of the foregoing events could have a material adverse effect on our business, results of
operations, cash flows and financial condition.
In addition, in connection with our proposed NBC Universal transaction with GE, we
cannot provide any assurance that we will be able to obtain necessary regulatory and governmental approvals to consummate the transaction on acceptable terms or predict whether any conditions that may be imposed on our businesses in permitting the
transaction to occur would have an adverse effect on our businesses. Further, we cannot provide any assurance that we will be able to complete a committed financing of NBC Universal on currently contemplated terms, including that the new company
will receive an investment grade credit rating from the debt rating agencies. Moreover, assuming the NBC Universal transaction is consummated, there can be no assurance that we can successfully integrate our programming assets with those of NBC
Universal, create popular programming, develop new digital products and services or succeed in the highly competitive media industry.
Also, as noted in more detail in Item 7, Managements Discussion and Analysis of Financial Condition and Results of Operations, we are required to pay to GE at the closing of this transaction $7.1 billion in cash, less
certain adjustments primarily based on the free cash flow generated by NBC Universal between December 4, 2009 and the closing, and we have committed to fund up to $2.875 billion in cash or common stock for each of two potential redemptions by
GE (for an aggregate of up to $5.75 billion, with amounts not used for the first redemption to be available for the second redemption) to the extent the new company cannot fund the redemptions. There can be no assurance that the new company will be
able to generate strong cash flows or attractive financial returns.
The loss of key management personnel could have a negative impact on our business.
We rely on certain key management personnel in the operation of our businesses. While we maintain long-term and emergency transition plans for
key management personnel and believe we could either identify internal candidates or attract outside candidates to fill any vacancy created by the loss of any key management personnel, the loss of one or more of our key management personnel could
have a negative impact on our business.
Our Class B common stock has substantial voting rights and separate approval rights over
several potentially material transactions, and our Chairman and CEO has considerable influence over our operations through his beneficial ownership of our Class B common stock.
Our Class B common stock has a nondilutable 33 1/3% of the combined voting power of our Class A and Class B common stock. This nondilutable voting power is subject to
proportional decrease to the extent the number of shares of Class B common stock is reduced below 9,444,375, which was the number of shares of Class B common stock outstanding on the date of our 2002 acquisition of AT&T Corp.s cable
business, subject to adjustment in specified situations. Stock dividends payable on the Class B common stock in the form of Class B or Class A Special common stock do not decrease the nondilutable voting power of the Class B common
stock. The Class B common stock also has separate approval rights over several potentially material transactions, even if they are approved by our Board of Directors or by our other stockholders and even if they might be in the best interests of our
other stockholders. These potentially material transactions include mergers or consolidations involving Comcast Corporation, transactions (such as a sale of all or substantially all of our assets) or issuances of securities that
require shareholder approval, transactions that result in any person or group owning shares representing more than 10% of the combined voting power of the resulting or surviving corporation, issuances of Class B common stock
or securities exercisable or convertible into Class B common stock, and amendments to our articles of incorporation or by-laws that would limit the rights of holders of our Class B common stock.
Brian L. Roberts beneficially owns all of the outstanding shares of our Class B common stock and, accordingly, has considerable influence
over our operations and the ability (subject to certain restrictions through November 17, 2012) to transfer potential effective control by selling the Class B common stock. In addition, under our articles of incorporation,
Mr. Roberts is entitled to remain as our Chairman, Chief Executive Officer and President until May 26, 2010, unless he is removed by the affirmative vote of at least 75% of the entire Board of Directors or he is no longer willing or able
to serve.
|
|
|
|
|
Comcast 2009 Annual Report on Form 10-K |
|
16 |
|
|
Item 1B: Unresolved Staff Comments
None.
Item 2: Properties
We believe that substantially all of our physical assets are in good
operating condition.
Cable
Our principal physical assets consist of
operating plant and equipment, including signal receiving, encoding and decoding devices, headends and distribution systems, and equipment at or near our customers homes. The signal receiving apparatus typically includes a tower, antenna,
ancillary electronic equipment and earth stations for reception of satellite signals. Headends consist of electronic equipment necessary for the reception, amplification and modulation of signals and are located near the receiving devices. Our
distribution system consists primarily of coaxial and fiber-optic cables, lasers, routers, switches and related electronic equipment. Our cable plant and related equipment generally are connected to utility poles under pole rental agreements with
local public utilities, although in some areas the distribution cable is buried in underground ducts or trenches. Customer premises equipment (CPE) consists primarily of set-top boxes and cable modems. The physical components of cable
systems require periodic maintenance and replacement.
Our signal reception sites, primarily antenna towers and headends, and microwave
facilities, are located on owned and leased parcels of land, and we own or lease space on the towers on which certain of our equipment is located. We own most of our service vehicles.
Our high-speed Internet network consists of fiber-optic cables owned or leased by us and related equipment. We also operate regional data centers with equipment that is used to provide
services (such as e-mail, news and web services) to our high-speed Internet customers and phone service customers. In addition, we maintain two network operations centers with equipment necessary to monitor and manage the status of our high-speed
Internet network.
We own or lease buildings throughout the country that contain call centers, service centers,
warehouses and administrative space. We also own a building that houses our media center. The media center contains equipment that we own or lease, including equipment related to network origination, global transmission via satellite and terrestrial
fiber optics, a broadcast studio, mobile and post-production services, interactive television services and streaming distribution services.
Programming
Television studios and business offices are the principal physical assets of our Programming business. We own or lease the television studios and business offices of our Programming business.
Other
A large, multipurpose arena that we own is the principal physical operating asset of our other businesses.
As of December 31, 2009, we leased locations for our corporate offices in Philadelphia, Pennsylvania, as well as numerous business offices,
warehouses and properties housing divisional information technology operations throughout the country.
Item 3: Legal Proceedings
Refer to Item 8, Note 17 to our consolidated financial
statements included in this Annual Report on Form 10-K.
Item 4: Submission of Matters to a Vote of
Security Holders
Not applicable.
|
|
|
|
|
|
|
17 |
|
Comcast 2009 Annual Report on Form 10-K |
Part II
Item 5: Market for the Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of
Equity Securities
Our Class A common stock is listed on the NASDAQ Global Select Market under the symbol CMCSA and our Class A
Special common stock is listed on the NASDAQ Global Select Market under the symbol CMCSK. There is no established public trading market for our Class B common stock. Our Class B common stock can be converted, on a share for share basis,
into Class A or Class A Special common stock.
Our Board of Directors approved the following quarterly dividends.
|
|
|
|
|
|
|
|
|
Dividend Per Share |
Period |
|
2009 |
|
2008 |
February |
|
$ |
0.0675 |
|
$ |
0.0625 |
May |
|
|
0.0675 |
|
|
0.0625 |
August |
|
|
0.0675 |
|
|
0.0625 |
December |
|
|
0.0945 |
|
|
0.0625 |
Total |
|
$ |
0.2970 |
|
$ |
0.2500 |
We expect to continue to pay quarterly dividends, although each dividend is subject to approval by our Board of Directors.
Holders of our Class A common stock in the aggregate hold 66
2/3% of the
voting power of our capital stock. The number of votes that each share of our Class A common stock has at any given time depends on the number of shares of Class A common stock and Class B common stock then outstanding. Holders of
shares of our Class A Special common stock cannot vote in the election of directors or otherwise, except where class voting is required by law. In that case, shares of our Class A Special common stock have the same number of votes per
share as shares of Class A common stock. Our Class B common stock has a 33 1/3% nondilutable voting interest, and each share of Class B common stock has 15 votes per share. Mr. Brian L. Roberts beneficially owns all outstanding shares of our Class B common stock. Generally,
including as to the election of directors, holders of Class A common stock and Class B common stock vote as one class except where class voting is required by law.
Record holders as of December 31, 2009, are presented in the table below.
|
|
|
Stock Class |
|
Record Holders |
Class A Common Stock |
|
755,259 |
Class A Special Common Stock |
|
2,082 |
Class B Common Stock |
|
3 |
The table below summarizes our repurchases under our Board-authorized share repurchase program during 2009.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Period |
|
Total Number of Shares Purchased |
|
Average Price per Share |
|
Total Number of Shares Purchased as Part of Publicly Announced Program |
|
Total Dollar Amount Purchased Under the Program |
|
Maximum Dollar Value of Shares That May Yet Be Purchased Under the Program(a) |
First Quarter 2009 |
|
|
|
$ |
|
|
|
|
$ |
|
|
$ |
4,106,044,773 |
Second Quarter 2009 |
|
15,546,200 |
|
$ |
13.83 |
|
15,546,200 |
|
$ |
215,008,681 |
|
$ |
3,891,036,092 |
Third Quarter 2009 |
|
16,097,056 |
|
$ |
15.53 |
|
16,097,056 |
|
$ |
250,001,477 |
|
$ |
3,641,034,615 |
October 131, 2009 |
|
|
|
$ |
|
|
|
|
$ |
|
|
$ |
3,641,034,615 |
November 130, 2009 |
|
|
|
$ |
|
|
|
|
$ |
|
|
$ |
3,641,034,615 |
December 131, 2009 |
|
18,119,000 |
|
$ |
16.56 |
|
18,119,000 |
|
$ |
300,059,336 |
|
$ |
3,340,975,279 |
Total |
|
49,762,256 |
|
$ |
15.37 |
|
49,762,256 |
|
$ |
765,069,494 |
|
$ |
3,340,975,279 |
(a) |
|
In 2007, our Board of Directors authorized a $7 billion addition to our existing share repurchase authorization. Under this authorization, we may repurchase
shares in the open market or in private transactions, subject to market conditions. The current share repurchase program does not have an expiration date. As of December 31, 2009, we had approximately $3.3 billion of availability remaining
under our share repurchase authorization. We intend to complete repurchases under the current share repurchase authorization by the end of 2012, subject to market conditions. |
The total number of shares purchased during 2009 does not include any shares received in the administration of employee share-based compensation plans.
|
|
|
|
|
Comcast 2009 Annual Report on Form 10-K |
|
18 |
|
|
Common Stock Sales Price Table
The following table sets forth, for the
indicated periods, the high and low sales prices of our Class A and Class A Special common stock.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Class A |
|
|
|
Class A Special |
|
|
High |
|
Low |
|
|
|
High |
|
Low |
2009 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Quarter |
|
$ |
18.10 |
|
$ |
11.10 |
|
|
|
$ |
17.35 |
|
$ |
10.33 |
Second Quarter |
|
$ |
17.06 |
|
$ |
13.17 |
|
|
|
$ |
16.19 |
|
$ |
12.38 |
Third Quarter |
|
$ |
17.68 |
|
$ |
13.04 |
|
|
|
$ |
16.89 |
|
$ |
12.64 |
Fourth Quarter |
|
$ |
17.88 |
|
$ |
13.95 |
|
|
|
$ |
17.04 |
|
$ |
13.54 |
2008 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Quarter |
|
$ |
20.70 |
|
$ |
16.11 |
|
|
|
$ |
20.45 |
|
$ |
15.95 |
Second Quarter |
|
$ |
22.86 |
|
$ |
18.48 |
|
|
|
$ |
22.52 |
|
$ |
18.28 |
Third Quarter |
|
$ |
22.54 |
|
$ |
17.88 |
|
|
|
$ |
22.37 |
|
$ |
17.76 |
Fourth Quarter |
|
$ |
19.62 |
|
$ |
12.50 |
|
|
|
$ |
19.64 |
|
$ |
12.10 |
Stock Performance Graph
The following graph compares the yearly
percentage change in the cumulative total shareholder return on our Class A common stock and Class A Special common stock during the five years ended December 31, 2009 with the cumulative total returns on the Standard &
Poors 500 Stock Index and with a selected peer group consisting of us and other companies engaged in the cable, communications and media industries. This peer group consists of Cablevision Systems Corporation (Class A), DISH Network
Corporation, DirecTV Inc., Time Warner Cable Inc. and Time Warner Inc. The graph assumes $100 was invested on December 31, 2004 in our Class A common stock and Class A Special common stock and in each of the following indices and
assumes the reinvestment of dividends.
Comparison of 5 Year Cumulative Total Return
|
|
|
|
|
|
|
|
|
|
|
(in dollars) |
|
2005 |
|
2006 |
|
2007 |
|
2008 |
|
2009 |
Comcast Class A |
|
78 |
|
127 |
|
82 |
|
77 |
|
78 |
Comcast Class A Special |
|
78 |
|
128 |
|
83 |
|
75 |
|
75 |
S&P 500 Stock Index |
|
105 |
|
121 |
|
128 |
|
81 |
|
102 |
Peer Group Index |
|
85 |
|
124 |
|
94 |
|
73 |
|
90 |
|
|
|
|
|
|
|
19 |
|
Comcast 2009 Annual Report on Form 10-K |
Item 6: Selected Financial Data
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31 (in millions, except per share data) |
|
2009 |
|
|
2008 |
|
|
2007 |
|
|
2006 |
|
|
2005 |
|
Statement of Operations Data |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue(a) |
|
$ |
35,756 |
|
|
$ |
34,423 |
|
|
$ |
31,060 |
|
|
$ |
25,140 |
|
|
$ |
21,243 |
|
Operating income |
|
|
7,214 |
|
|
|
6,732 |
|
|
|
5,578 |
|
|
|
4,619 |
|
|
|
3,521 |
|
Income from consolidated continuing operations attributable to Comcast Corporation |
|
|
3,638 |
|
|
|
2,547 |
|
|
|
2,587 |
|
|
|
2,235 |
|
|
|
828 |
|
Discontinued operations(b) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
298 |
|
|
|
100 |
|
Net income attributable to Comcast Corporation |
|
|
3,638 |
|
|
|
2,547 |
|
|
|
2,587 |
|
|
|
2,533 |
|
|
|
928 |
|
Basic earnings per common share |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from consolidated continuing operations attributable to Comcast Corporation |
|
$ |
1.27 |
|
|
$ |
0.87 |
|
|
$ |
0.84 |
|
|
$ |
0.71 |
|
|
$ |
0.25 |
|
Discontinued operations(b) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0.09 |
|
|
|
0.03 |
|
Net income attributable to Comcast Corporation |
|
$ |
1.27 |
|
|
$ |
0.87 |
|
|
$ |
0.84 |
|
|
$ |
0.80 |
|
|
$ |
0.28 |
|
Diluted earnings per common share |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from consolidated continuing operations attributable to Comcast Corporation |
|
$ |
1.26 |
|
|
$ |
0.86 |
|
|
$ |
0.83 |
|
|
$ |
0.70 |
|
|
$ |
0.25 |
|
Discontinued operations(b) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0.09 |
|
|
|
0.03 |
|
Net income attributable to Comcast Corporation |
|
$ |
1.26 |
|
|
$ |
0.86 |
|
|
$ |
0.83 |
|
|
$ |
0.79 |
|
|
$ |
0.28 |
|
Dividends declared per common share |
|
$ |
0.297 |
|
|
$ |
0.250 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Balance Sheet Data (at year end) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets |
|
$ |
112,733 |
|
|
$ |
113,017 |
|
|
$ |
113,417 |
|
|
$ |
110,405 |
|
|
$ |
103,400 |
|
Long-term debt, less current portion |
|
|
27,940 |
|
|
|
30,178 |
|
|
|
29,828 |
|
|
|
27,992 |
|
|
|
21,682 |
|
Comcast Corporation shareholders equity |
|
|
42,721 |
|
|
|
40,450 |
|
|
|
41,340 |
|
|
|
41,167 |
|
|
|
40,219 |
|
Statement of Cash Flows Data |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating activities |
|
$ |
10,281 |
|
|
$ |
10,231 |
|
|
$ |
8,189 |
|
|
$ |
6,618 |
|
|
$ |
4,835 |
|
Investing activities |
|
|
(5,897 |
) |
|
|
(7,477 |
) |
|
|
(8,149 |
) |
|
|
(9,872 |
) |
|
|
(3,748 |
) |
Financing activities |
|
|
(4,908 |
) |
|
|
(2,522 |
) |
|
|
(316 |
) |
|
|
3,546 |
|
|
|
(933 |
) |
(a) |
|
Reclassifications have been made to prior years to conform to classifications used in 2009. |
(b) |
|
In July 2006, in connection with transactions with Adelphia and Time Warner, we transferred our previously owned cable systems located in Los Angeles,
Cleveland and Dallas to Time Warner Cable. These cable systems are presented as discontinued operations for the years ended on or before December 31, 2006. |
|
|
|
|
|
Comcast 2009 Annual Report on Form 10-K |
|
20 |
|
|
Item 7: Managements Discussion and Analysis of Financial Condition and Results of Operations
Introduction and Overview
We are a leading provider of video, high-speed
Internet and phone services (cable services), offering a variety of entertainment, information and communications services to residential and commercial customers. As of December 31, 2009, our cable systems served approximately
23.6 million video customers, 15.9 million high-speed Internet customers and 7.6 million phone customers and passed over 51.2 million homes and businesses in 39 states and the District of Columbia. We report the results of these
operations as our Cable segment, which generates approximately 95% of our consolidated revenue. Our Cable segment also includes the operations of our regional sports networks. Our Programming segment consists primarily of our consolidated national
programming networks. During 2009, our operations generated consolidated revenue of approximately $ 35.8 billion.
Our Cable segment
generates revenue primarily from subscriptions to our cable services. In addition to cable services, other Cable segment revenue sources include the sale of advertising and the operation of our regional sports networks. We market our cable services
individually and in packages. Our video services range from a limited analog service to a full digital service with access to hundreds of channels, including premium and pay-per-view channels On Demand, music channels, and an interactive, on-screen
program guide. Digital video customers may also subscribe to our advanced services, which consist of high-definition television (HDTV) and/or digital video recorders (DVR). Our high-speed Internet services provide Internet
access at downstream speeds of up to 50 Mbps, depending on the service selected and subject to geographic market availability. Our phone services provide local and long-distance calling and other features. We also offer our cable services to small
and medium-sized businesses (commercial services).
Our Programming segment consists primarily of our consolidated national
programming networks, E!, Golf Channel, VERSUS, G4 and Style. Revenue from our Programming segment is generated primarily from monthly per subscriber license fees paid by multichannel video providers, the sale of advertising and the licensing of our
programming internationally.
Our other business interests include Comcast Interactive Media and Comcast Spectacor. Comcast Interactive
Media develops and operates our Internet businesses, including Comcast.net, Fancast, thePlatform, Fandango, Plaxo and DailyCandy. Revenue from Comcast Interactive Media is generated primarily from the sale of advertising. Comcast Spectacor owns two
professional sports teams, the Philadelphia 76ers and the Philadelphia Flyers, and a
large, multipurpose arena in Philadelphia, the Wachovia Center, and provides facilities management services, including food services, for sporting events, concerts and other events. Comcast
Interactive Media, Comcast Spectacor and all other consolidated businesses not included in our Cable or Programming segments are included in Corporate and Other activities.
We operate our businesses in an intensely competitive environment. Competition for the cable services we offer consists primarily of direct broadcast satellite (DBS) operators and
phone companies. In 2009, our competitors continued to add features and adopt aggressive pricing and packaging for services that are comparable to the services we offer. In addition, a substantial portion of our revenue comes from residential
customers whose spending patterns may be affected by prevailing economic conditions. Intensifying competition and the weak economy negatively affected our results of operations in 2009 and may continue to impact our results of operations in the
future.
2009 Developments
The
following are the more significant developments in our businesses during 2009:
|
|
an increase in consolidated revenue of 3.9% to approximately $35.8 billion and an increase in consolidated operating income of 7.2% to approximately $7.2
billion |
|
|
an increase in Cable segment revenue of 3.8% to approximately $33.9 billion and an increase in operating income before depreciation and amortization of 4.0%
to approximately $13.7 billion |
|
|
an increase in Programming segment revenue of 4.9% to approximately $1.5 billion and an increase in operating income before depreciation and amortization of
7.5% to approximately $389 million |
|
|
the addition of approximately 1.0 million high-speed Internet customers and approximately 1.1 million phone customers; a decrease of approximately
623,000 video customers |
|
|
a reduction in Cable segment capital expenditures of 9.2% to approximately $5.0 billion |
|
|
the continued investment in service enhancements, including the transition from analog to digital transmission of approximately 40 to 50 of the channels we
distribute (our all digital conversion), which allows us to recapture bandwidth and expand our video service offerings; the continued deployment of DOCSIS 3.0 wideband technology, which allows us to offer faster high-speed Internet
service; the offering of certain cable network programming to our customers online through Fancast XFINITY TV; and the initial deployment of 4G wireless high-speed Internet service in certain markets |
|
|
|
|
|
|
|
21 |
|
Comcast 2009 Annual Report on Form 10-K |
|
|
a decrease in our total debt outstanding of $3.4 billion or 10.4% to approximately $29.1 billion, which is primarily due to repayment of scheduled debt and
the repurchase of debt securities prior to their scheduled maturities |
|
|
the repurchase of approximately 49.8 million shares of our Class A and Class A Special common stock under our share repurchase authorization
for approximately $765 million |
|
|
we declared dividends of approximately $850 million in 2009 and paid approximately $761 million in 2009; in February 2009, our Board of Directors increased
the planned annual dividend by 8% to $0.27 per share; and in December 2009, it increased the planned annual dividend by 40% to $0.378 per share, with the first quarterly payment of $0.0945 per share occurring in January 2010
|
NBC Universal Transaction
We entered into agreements with General Electric Company (GE) in December 2009 to form a new company of which we will own 51% and control, with the remaining 49% to be owned by GE. Under the terms of
the transaction, GE will contribute NBC Universals businesses, including its cable and broadcast networks, filmed entertainment, televised entertainment, theme parks and unconsolidated investments, as well as other GE assets used primarily in
NBC Universals business. NBC Universal will borrow
$9.1 billion from third party lenders and distribute the proceeds to GE. We will contribute our national programming networks, our regional sports networks and certain of our Internet businesses,
as well as other assets used primarily in those businesses, collectively valued at approximately $7.25 billion, and make a cash payment to GE of $7.1 billion, less certain adjustments primarily based on the free cash flow generated by NBC Universal
between December 4, 2009 and the closing. GE will be entitled to cause the new company to redeem half of GEs interest three and a half years after the closing and its remaining interest seven years after the closing. If GE exercises its
first redemption right, we have the right to purchase the remainder of GEs interest. If GE does not exercise its first redemption right, we have the right to purchase half of GEs interest five years after the closing. We also will have
the right to purchase GEs remaining interest, if any, eight years after the closing. The redemption and purchase price will equal the ownership percentage being acquired multiplied by 120% of the fully distributed public market trading value
of the new company, less half of the excess of 120% of that value over $28.15 billion. Subject to various limitations, we are committed to fund up to $2.875 billion in cash or common stock for each of the two redemptions (for an aggregate of up to
$5.75 billion), with amounts not used in the first redemption to be available for the second redemption. The transaction is subject to various regulatory approvals and is expected to close by the end of 2010.
The Areas We Serve
The map below highlights our 40 major markets with emphasis on our operations in the top 25 U.S. TV markets.
|
|
|
|
|
Comcast 2009 Annual Report on Form 10-K |
|
22 |
|
|
Consolidated Operating Results
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31 (in millions) |
|
2009 |
|
|
2008 |
|
|
2007 |
|
|
% Change 2008 to 2009 |
|
|
% Change 2007 to 2008 |
|
Revenue(a) |
|
$ |
35,756 |
|
|
$ |
34,423 |
|
|
$ |
31,060 |
|
|
3.9 |
% |
|
10.8 |
% |
Costs and expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating, selling, general and administrative (excluding depreciation and amortization)(a) |
|
|
22,042 |
|
|
|
21,291 |
|
|
|
19,274 |
|
|
3.5 |
% |
|
10.5 |
% |
Depreciation |
|
|
5,483 |
|
|
|
5,457 |
|
|
|
5,107 |
|
|
0.5 |
% |
|
6.9 |
% |
Amortization |
|
|
1,017 |
|
|
|
943 |
|
|
|
1,101 |
|
|
7.8 |
% |
|
(14.3 |
)% |
Operating income |
|
|
7,214 |
|
|
|
6,732 |
|
|
|
5,578 |
|
|
7.2 |
% |
|
20.7 |
% |
Other income (expense) items, net |
|
|
(2,108 |
) |
|
|
(2,674 |
) |
|
|
(1,229 |
) |
|
(21.2 |
)% |
|
117.4 |
% |
Income before income taxes |
|
|
5,106 |
|
|
|
4,058 |
|
|
|
4,349 |
|
|
25.8 |
% |
|
(6.7 |
)% |
Income tax expense |
|
|
(1,478 |
) |
|
|
(1,533 |
) |
|
|
(1,800 |
) |
|
(3.6 |
)% |
|
(14.8 |
)% |
Net income from consolidated operations |
|
|
3,628 |
|
|
|
2,525 |
|
|
|
2,549 |
|
|
43.7 |
% |
|
(0.9 |
)% |
Net (income) loss attributable to noncontrolling interests |
|
|
10 |
|
|
|
22 |
|
|
|
38 |
|
|
(54.5 |
)% |
|
(43.9 |
)% |
Net income attributable to Comcast Corporation |
|
$ |
3,638 |
|
|
$ |
2,547 |
|
|
$ |
2,587 |
|
|
42.8 |
% |
|
(1.6 |
)% |
All percentages are calculated based on actual amounts. Minor differences may exist due to rounding.
(a) |
|
Reclassifications have been made to prior years to conform to classifications used in 2009. See discussion described under advertising revenue below.
Adjustments were also made to average monthly total revenue per video customer and operating margins due to these reclassifications. |
Consolidated Revenue
Our Cable and Programming segments accounted for substantially all of the increases in consolidated revenue for 2009 and 2008. Our other business activities primarily consist of Comcast Interactive Media and Comcast Spectacor. Cable segment
revenue and Programming segment revenue are discussed separately in Segment Operating Results.
Consolidated Operating, Selling, General
and Administrative Expenses
Our Cable and Programming segments accounted for substantially all of the increases in consolidated
operating, selling, general and administrative expenses for 2009 and 2008. The remaining changes related to our other business activities, primarily Comcast Interactive Media and Comcast Spectacor, and approximately $20 million of transaction fees
associated with the NBC Universal
transaction. Cable segment and Programming segment operating, selling, general and administrative expenses are discussed separately in Segment Operating Results.
Consolidated Depreciation and Amortization
The
increases in depreciation expense for 2009 and 2008 were primarily a result of increases in property and equipment associated with capital spending in recent years, as well as the effects of cable system acquisitions in 2008, which resulted in
increased depreciation of approximately $138 million.
The increase in amortization expense for 2009 was primarily due to an increase in
software intangibles. The decrease in amortization expense for 2008 was primarily due to intangible assets associated with the AT&T Broadband acquisition in 2002 being fully amortized, partially offset by the amortization of similar intangible
assets recorded in connection with other cable system acquisitions.
Segment Operating Results
Our segment operating results are presented
based on how we assess operating performance and internally report financial information. To measure the performance of our operating segments, we use operating income (loss) before depreciation and amortization, excluding impairments related to
fixed and intangible assets, and gains or losses from the sale of assets, if any. This measure eliminates the significant level of noncash depreciation and amortization expense that results from the capital-intensive nature of our businesses and
from intangible assets recognized in
|
|
|
|
|
|
|
23 |
|
Comcast 2009 Annual Report on Form 10-K |
business combinations. Additionally, it is unaffected by our capital structure or investment activities. We use this measure to evaluate our consolidated operating performance and the operating
performance of our operating segments and to allocate resources and capital to our operating segments. It is also a significant performance measure in our annual incentive compensation programs. We believe that this measure is useful to investors
because it is one of the bases for comparing our operating performance with that of other companies in our industries, although our measure may not be directly comparable to similar measures used by other companies. Because we use this metric to
measure our segment profit or loss, we reconcile it to operating income, the most directly comparable financial measure calculated and presented in accordance with generally accepted accounting principles in the United States (GAAP) in
the business segment footnote to our consolidated financial statements (see Note 18 to our consolidated financial statements). This measure should not be considered a substitute for operating income (loss), net income (loss) attributable to Comcast
Corporation, net cash provided by operating activities, or other measures of performance or liquidity we have reported in accordance with GAAP.
Cable Segment Overview
Our cable systems allow us to deliver video,
high-speed Internet and phone services to our residential and commercial customers. The majority of our Cable segment revenue is generated from subscriptions to these cable services. Customers are billed monthly based on the services and features
they receive and the type of equipment they use. Residential customers may generally discontinue service at any time, while commercial customers may only discontinue service in accordance with the terms of their respective contracts, which typically
have one to three year terms. Our revenue and operating income before depreciation and amortization have increased as a result of continued demand for our services (including our bundled and advanced service offerings) and the effects of recent
acquisitions, as well as other factors discussed below. Intensifying competition and the weak economy negatively affected our results of operations in 2009 and may continue to impact our results of operations in the future.
Cable Segment Results of Operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31 (in millions) |
|
2009 |
|
2008 |
|
2007 |
|
% Change 2008 to 2009 |
|
|
% Change 2007 to 2008 |
|
Video(a) |
|
$ |
19,377 |
|
$ |
19,162 |
|
$ |
17,939 |
|
1.1 |
% |
|
6.8 |
% |
High-speed Internet |
|
|
7,757 |
|
|
7,225 |
|
|
6,402 |
|
7.4 |
% |
|
12.9 |
% |
Phone |
|
|
3,262 |
|
|
2,649 |
|
|
1,766 |
|
23.1 |
% |
|
50.0 |
% |
Advertising(a)
|
|
|
1,444 |
|
|
1,709 |
|
|
1,728 |
|
(15.5 |
)% |
|
(1.1 |
)% |
Other(a) |
|
|
1,069 |
|
|
954 |
|
|
808 |
|
12.1 |
% |
|
18.1 |
% |
Franchise fees |
|
|
948 |
|
|
911 |
|
|
827 |
|
4.1 |
% |
|
10.1 |
% |
Revenue |
|
|
33,857 |
|
|
32,610 |
|
|
29,470 |
|
3.8 |
% |
|
10.7 |
% |
Operating expenses(a) |
|
|
13,535 |
|
|
12,831 |
|
|
11,574 |
|
5.5 |
% |
|
10.9 |
% |
Selling, general and administrative expenses |
|
|
6,628 |
|
|
6,609 |
|
|
5,974 |
|
0.3 |
% |
|
10.6 |
% |
Operating income before depreciation and amortization |
|
$ |
13,694 |
|
$ |
13,170 |
|
$ |
11,922 |
|
4.0 |
% |
|
10.5 |
% |
(a) Reclassifications have been made to prior years to conform to classifications used in 2009.
|
|
|
|
|
Comcast 2009 Annual Report on Form 10-K |
|
24 |
|
|
Cable Segment Revenue
Our
average monthly total revenue per video customer increased to approximately $118 in 2009 from approximately $111 in 2008 and approximately $102 in 2007. The increases in average monthly total revenue per video customer are primarily due to an
increased number of customers receiving multiple services and a higher contribution from our commercial services business.
Video
We offer video services ranging from a limited analog service to a full digital service with access to hundreds of channels, including premium and pay-per-view channels. As of December 31, 2009, approximately 46% of the homes in the
areas we serve subscribed to our video services. As of December 31, 2009, approximately 78% of those video customers subscribed to at least one of our digital video services, compared to 70% and 63% as of December 31, 2008 and 2007,
respectively. Digital video customers may also subscribe to our advanced services, HDTV and/or DVR. As of December 31, 2009, approximately 50% of our digital video customers subscribed to at least one of our advanced services.
Our video revenue continued to grow in 2009 and 2008 due to rate adjustments, customer upgrades to our digital and advanced services and, in 2008,
the effects of cable system acquisitions, partially offset by declines in video customers in each of 2009 and 2008. During 2009 and 2008, the number of video customers decreased by approximately 623,000 and 575,000, respectively, excluding the
effects of cable system acquisitions in 2008. These decreases were primarily due to increased competition in our service areas, as well as weakness in the economy. During 2009 and 2008, we added or upgraded approximately 1.4 million and
1.5 million customers to our digital video service, respectively, including those customers added or upgraded in connection with our all digital conversion. We expect continued competition and weak economic conditions to result in further
declines in the number of video customers during 2010. In 2008, approximately $455 million of the increase in our video revenue was attributable to the effects of cable system acquisitions. Our average monthly
video revenue per video customer increased to approximately $68 in 2009 from approximately $65 in 2008 and approximately $61 in 2007.
High-Speed Internet
We offer
high-speed Internet services with Internet access at downstream speeds of up to 50 Mbps, depending on the service selected and subject to geographic market availability. These services also include our Internet portal, Comcast.net, which provides
multiple e-mail addresses and online storage, as well as a variety of content and value-added features and enhancements that are designed to take advantage of the speed of the Internet services we provide. Our commercial high-speed Internet service
also includes a website hosting service and an online tool that allows customers to share, coordinate and store documents. As of December 31, 2009, 31% of the homes in the areas we serve subscribed to our high-speed Internet services, compared
to 30% and 28% as of December 31, 2008 and 2007, respectively.
Our high-speed Internet revenue increased in 2009 and 2008
primarily due to an increase in the number of residential and commercial customers and, in 2008, due to the effects of cable system acquisitions. In 2008, approximately $157 million of the increase in revenue was attributable to the effects of cable
system acquisitions. Average monthly revenue per high-speed Internet customer has been relatively stable at approximately $42 from 2007 to 2009.
Phone
We offer phone services that provide local and long-distance calling and include features such as voice mail, caller ID and call waiting. Our commercial phone service also includes a business directory listing and the option to add multiple
phone lines. As of December 31, 2009, our phone services were available to approximately 48 million or 95% of the homes in the areas we serve, compared to 92% and 87% as of December 31, 2008 and 2007, respectively. As of
December 31, 2009, approximately 16% of the homes in the areas we serve subscribed to our phone services,
|
|
|
|
|
|
|
25 |
|
Comcast 2009 Annual Report on Form 10-K |
compared to 14% and 11% as of December 31, 2008 and 2007, respectively.
Our
phone revenue increased in 2009 and 2008 as a result of increases in the number of residential and commercial phone customers. In 2008, these increases were partially offset by the loss of approximately 170,000 circuit-switched phone customers. We
phased out substantially all of our circuit-switched phone service in 2008. In 2008, approximately $43 million of the increase in our phone revenue was attributable to the effects of cable system acquisitions. Average monthly revenue per phone
customer declined to approximately $39 in 2009 from approximately $40 in 2008 and approximately $42 in 2007, due to customers receiving service as part of a promotional offer or in a bundled service offering. We expect the rates of customer and
revenue growth to decline in 2010.
Advertising
As part of our programming license agreements with programming networks, we receive an allocation of scheduled advertising time that we may sell to local, regional and national advertisers. In most cases, the
available advertising time is sold by our sales force. In some cases, we work with representation firms as an extension of our sales force to sell a portion of the advertising time allocated to us. We also coordinate the advertising sales efforts of
other cable operators in some markets, and in some markets we operate advertising interconnects. These interconnects establish a physical, direct link between multiple providers for the sale of regional and national advertising across larger
geographic areas than could be provided by a single cable operator. Our prior practice had been to record the fees we pay to representation firms and other multichannel video providers as a revenue offset. However, since we are acting as the
principal in these arrangements and as these coordination and interconnect activities are expected to grow in significance, we have concluded that we should report the fees paid to representation firms and multichannel video providers as an
operating expense rather than as a revenue offset. Accordingly, we changed the presentation for these items for 2008 and 2007,
and classified approximately $167 million and $165 million, respectively, of the fees paid as operating expenses.
Advertising revenue decreased in 2009 and 2008 primarily due to a decline in the overall television advertising market as a result of weak economic conditions. In 2009, the decrease also resulted from a decline in
political advertising, while the decrease in 2008 was partially offset by an increase in political advertising and the impact of cable system acquisitions.
Other
We also generate revenue from our regional sports networks, our digital media center, commissions
from electronic retailing networks and fees for other services. Our regional sports networks include Comcast SportsNet (Philadelphia), Comcast SportsNet Mid-Atlantic (Baltimore/Washington), Cable Sports Southeast, Comcast SportsNet Chicago,
MountainWest Sports Network, Comcast SportsNet California (Sacramento), Comcast SportsNet New England (Boston), Comcast SportsNet Northwest (Portland), Comcast Sports Southwest (Houston), and Comcast SportsNet Bay Area (San Francisco). These
networks generate revenue from programming license agreements with multichannel video providers and through the sale of advertising.
Franchise Fees
Our franchise fee revenue represents the pass-through to our customers of the fees required to be
paid to state and local franchising authorities. Under the terms of our franchise agreements, we are generally required to pay to the franchising authority an amount based on our gross video revenue. The increases in franchise fees collected from
our cable customers in 2009 and 2008 were primarily due to increases in the revenue on which the fees apply.
Cable Segment Expenses
We continue to focus on controlling the growth of expenses. Our operating margins (operating income before depreciation and amortization
as a percentage of revenue) for 2009, 2008 and 2007 were 40.4%, 40.4% and 40.5%, respectively.
|
|
|
|
|
Comcast 2009 Annual Report on Form 10-K |
|
26 |
|
|
Cable Segment Operating Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31 (in millions) |
|
2009 |
|
2008 |
|
2007 |
|
% Change 2008 to 2009 |
|
|
% Change 2007 to 2008 |
|
Video programming |
|
$ |
7,046 |
|
$ |
6,479 |
|
$ |
5,813 |
|
8.8 |
% |
|
11.5 |
% |
Technical labor |
|
|
2,245 |
|
|
2,138 |
|
|
1,899 |
|
5.0 |
% |
|
12.6 |
% |
High-speed Internet |
|
|
519 |
|
|
523 |
|
|
575 |
|
(0.7 |
)% |
|
(9.0 |
)% |
Phone |
|
|
602 |
|
|
730 |
|
|
685 |
|
(17.5 |
)% |
|
6.6 |
% |
Other(a) |
|
|
3,123 |
|
|
2,961 |
|
|
2,602 |
|
5.4 |
% |
|
13.8 |
% |
Total operating expenses |
|
$ |
13,535 |
|
$ |
12,831 |
|
$ |
11,574 |
|
5.5 |
% |
|
10.9 |
% |
(a) Reclassifications have been made to prior years to conform to classifications used in 2009.
Video programming expenses, our largest operating expense, are the fees we pay to programming
networks to license the programming we distribute to our video customers. These expenses are affected by changes in the fees charged by programming networks, the number of video customers we serve and the number of channels and programs we provide.
Video programming expenses increased in 2009 and 2008, primarily due to rate increases, additional digital customers and additional programming options offered. The increase in 2009 was also due to fees for retransmission of broadcast networks. The
increase in 2008 was also due to additional customers as a result of our cable system acquisitions. We anticipate that our video programming expenses will continue to increase in 2010 as the fees charged by programming networks increase, as new fees
for retransmission of broadcast networks are incurred and as we provide additional channels and video on demand programming options to our customers.
Technical labor expenses include the internal and external labor to complete service call and installation activities in the home, network operations, fulfillment and provisioning costs. These expenses increased in
2009 and 2008 primarily due to growth in the number of customers, which required additional personnel to handle service calls and provide in-home customer support, as well as activity associated with the transition by broadcasters from
analog to digital transmission and our all digital conversion, and, in 2008, due to the effects of cable system acquisitions.
High-speed Internet expenses and phone expenses include certain direct costs for providing these services but do not fully reflect the amount of operating expenses that would be necessary to
provide these services on a stand-alone basis. Other related costs associated with providing these services are generally shared among all our cable services and are not allocated to these items. The decreases in high-speed Internet expenses in 2009
and 2008 and phone expenses in 2009 were primarily due to lower support service costs that were the result of operating efficiencies. Phone expenses increased in 2008 primarily due to an increase in the number of customers, partially offset by
operational efficiencies.
Other operating expenses include franchise fees, pole rentals, plant maintenance, vehicle-related costs,
expenses related to our regional sports networks, advertising representation and commission fees, and expenses associated with our commercial services. These expenses increased in 2009 and 2008 primarily due to the continued expansion of commercial
services, an increase in franchise fees and, in 2008, the effects of cable system acquisitions and the acquisitions in June 2007 of Comcast SportsNet Bay Area and Comcast SportsNet New England.
Cable Segment Selling, General
and Administrative Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31 (in millions) |
|
2009 |
|
2008 |
|
2007 |
|
% Change 2008 to 2009 |
|
|
% Change 2007 to 2008 |
|
Customer service |
|
$ |
1,879 |
|
$ |
1,773 |
|
$ |
1,674 |
|
6.0 |
% |
|
5.9 |
% |
Marketing |
|
|
1,600 |
|
|
1,625 |
|
|
1,404 |
|
(1.5 |
)% |
|
15.7 |
% |
Administrative and other |
|
|
3,149 |
|
|
3,211 |
|
|
2,896 |
|
(1.9 |
)% |
|
10.9 |
% |
Total selling, general and administrative expenses |
|
$ |
6,628 |
|
$ |
6,609 |
|
$ |
5,974 |
|
0.3 |
% |
|
10.6 |
% |
|
|
|
|
|
|
|
27 |
|
Comcast 2009 Annual Report on Form 10-K |
Customer service expenses increased in 2009 primarily due to activity associated with the transition
by broadcasters from analog to digital transmission during the first half of the year and our all digital conversion. Customer service expenses increased in 2008 primarily due to growth in the number of customers.
Marketing expenses decreased in 2009 primarily due to lower costs and volume for media advertising, partially offset by an increase in direct sales
efforts. Marketing expenses increased in 2008 primarily due to additional marketing costs associated with attracting and retaining customers, as well as the effects of cable system acquisitions.
During 2009 and 2008, we implemented personnel and cost reduction programs that were focused on
streamlining our Cable operations. In connection with these initiatives, we recorded $81 million and $126 million of severance costs during 2009 and 2008, respectively. Administrative and other expenses decreased in 2009 primarily due to the impact
of the programs initiated in 2008. Administrative and other expenses increased in 2008 primarily due to the effects of cable system acquisitions.
Programming Segment Overview
Our Programming segment
consists primarily of our consolidated national programming networks. The table below presents a summary of our consolidated national programming networks.
|
|
|
|
|
Programming Network |
|
Approximate U.S. Subscribers at December 31, 2009 (in millions) |
|
Description of Programming |
E! |
|
86 |
|
Entertainment |
Golf Channel |
|
74 |
|
Golf and golf-related |
VERSUS |
|
54 |
|
Sports and leisure |
G4 |
|
59 |
|
Gamer lifestyle |
Style |
|
57 |
|
Lifestyle |
We also own noncontrolling interests in certain networks and content providers, including FEARnet (33%), iN DEMAND (54%), MGM (20%), PBS KIDS Sprout (40%) and TV One (34%). The operating
results of these entities are not included in our Programming segments operating results because they are presented in equity in net income (losses) of affiliates.
Programming Segment Results of Operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31 (in millions) |
|
2009 |
|
2008 |
|
2007 |
|
% Change 2008 to 2009 |
|
|
% Change 2007 to 2008 |
|
Revenue |
|
$ |
1,496 |
|
$ |
1,426 |
|
$ |
1,314 |
|
4.9 |
% |
|
8.5 |
% |
Operating, selling, general and administrative |
|
|
1,107 |
|
|
1,064 |
|
|
1,028 |
|
4.0 |
% |
|
3.6 |
% |
Operating income before depreciation and amortization |
|
$ |
389 |
|
$ |
362 |
|
$ |
286 |
|
7.5 |
% |
|
26.3 |
% |
Programming Segment Revenue
Programming revenue increased in 2009 primarily due to growth in programming license fee revenue and a favorable adjustment to advertising revenue as a result of reduced reserves for ratings
commitments. Programming revenue increased in 2008 primarily due to growth in advertising revenue, programming license fee revenue and international revenue. In 2009, 2008 and 2007, advertising accounted for approximately 41%, 43% and 44%,
respectively, of total Programming revenue. In 2009, 2008 and 2007, approximately 12% to 13% of our Programming revenue was generated from our Cable segment. These amounts are eliminated in our consolidated financial statements but are included in
the amounts presented above.
Programming Segment Operating, Selling, General and Administrative Expenses
Programming operating, selling, general and administrative expenses consist mainly of the cost of producing television programs and live events, the
purchase of programming rights, the marketing and promotion of our programming networks and administrative costs. We have invested and expect to continue to invest in new and live-event programming that will cause our programming expenses to
increase in the future.
|
|
|
|
|
Comcast 2009 Annual Report on Form 10-K |
|
28 |
|
|
Consolidated Other Income (Expense) Items
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31 (in millions) |
|
2009 |
|
|
2008 |
|
|
2007 |
|
Interest expense |
|
$ |
(2,348 |
) |
|
$ |
(2,439 |
) |
|
$ |
(2,289 |
) |
Investment income (loss), net |
|
|
282 |
|
|
|
89 |
|
|
|
601 |
|
Equity in net (losses) income of affiliates, net |
|
|
(64 |
) |
|
|
(39 |
) |
|
|
(63 |
) |
Other income (expense) |
|
|
22 |
|
|
|
(285 |
) |
|
|
522 |
|
Total |
|
$ |
(2,108 |
) |
|
$ |
(2,674 |
) |
|
$ |
(1,229 |
) |
Interest Expense
During 2009, 2008 and 2007, interest expense included $175 million, $64 million and $2 million, respectively, of early
extinguishment losses, net of early extinguishment gains, associated with the repayment of debt obligations prior to their scheduled maturity. The decrease in interest expense for 2009 was primarily due to the decrease in our average debt
outstanding and decreases in interest rates on our variable rate debt and on debt subject to variable interest rate swap agreements, partially offset by an increase in early extinguishment costs in 2009. The increase in interest expense for 2008 was
primarily due to an increase in our average debt outstanding and an increase in early extinguishment costs in 2008, partially offset by the effects of lower interest rates on our fixed to variable rate interest rate exchange agreements.
Investment Income (Loss), Net
The
components of investment income (loss), net for 2009, 2008 and 2007 are presented in a table in Note 6 to our consolidated financial statements. We have entered into derivative financial instruments that we account for at fair value and that
economically hedge the market price fluctuations in the common stock of all of our investments accounted for as trading securities and substantially all of our investments accounted for as available for sale securities. The differences between the
unrealized gains or losses on securities underlying prepaid forward sale agreements and the mark to market adjustments on the derivative component of prepaid forward sale agreements, as presented in the table in Note 6 to our consolidated financial
statements, result from one or more of the following:
|
|
there were unusual changes in the derivative valuation assumptions such as interest rates, volatility and dividend policy |
|
|
the magnitude of the difference between the market price of the underlying security to which the derivative relates and the strike price of the derivative
|
|
|
the change in the time value component of the derivative value during the period |
|
|
the security to which the derivative relates changed due to a corporate reorganization of the issuing company to a security with a different volatility rate
|
Other Income (Expense)
Other expense for 2008 includes an impairment of approximately $600 million related to our investment in Clearwire LLC (see Note 6 to our consolidated financial statements), partially offset by a gain of
approximately $235 million on the sale of our 50% interest in the Insight asset pool in connection with the Insight transaction. Other income for 2007 consists primarily of a gain of approximately $500 million on the sale of our 50% interest in the
Kansas City asset pool in connection with the Houston transaction.
Income Tax Expense
Our effective income tax rate for 2009, 2008
and 2007 was 28.9%, 37.8% and 41.4%, respectively. Income tax expense reflects an effective income tax rate that differs from the federal statutory rate primarily due to state income taxes and interest on uncertain tax positions. Our 2009 income tax
expense was reduced by approximately $566 million primarily due to the recognition of tax benefits associated with settlements and adjustments of uncertain tax positions and related interest and certain subsidiary reorganizations impacting deferred
state income taxes (see Note 15 to our consolidated financial statements). Our 2008 income tax expense was reduced by approximately $154 million, primarily due to the settlement of an uncertain tax position and the net impact of certain state tax
law changes, which primarily affected our deferred income tax liabilities and other noncurrent liabilities, and the future deductibility of certain deferred compensation arrangements. Our income tax expense may in the future continue to be impacted
by adjustments to uncertain tax positions and related interest and changes in state tax laws. We expect our 2010 annual effective tax rate to be approximately 40%.
Liquidity and Capital Resources
Our businesses generate significant cash flows from operating activities. We believe that we will be able to meet our current and long-term liquidity
and capital requirements, including fixed charges, through our cash flows from operating activities, existing cash, cash equivalents and investments, available borrowings under our existing credit facilities, and our ability to obtain future
external financing.
We anticipate that we will continue to use a substantial portion of our cash flows to fund our capital
expenditures, to invest in business opportunities, to meet our debt repayment obligations and to return capital to investors.
We
traditionally maintain significant availability under our lines of credit and our commercial paper program to meet our short-term liquidity requirements. As of December 31, 2009, amounts available under all of our credit facilities totaled
approximately $6.4 billion.
|
|
|
|
|
|
|
29 |
|
Comcast 2009 Annual Report on Form 10-K |
We and our Cable subsidiaries that have provided guarantees are subject to the covenants and
restrictions set forth in the indentures governing our public debt securities and in the credit agreements governing our bank credit facilities (see Note 20 to our consolidated financial statements). We and the guarantors are in compliance with the
covenants, and we believe that neither the covenants nor the restrictions in our indentures or loan documents will limit our ability to operate our business or raise additional capital. We test our compliance with our credit facilities
covenants on an ongoing basis. The only financial covenant in our $6.8 billion revolving credit facility due 2013 pertains to leverage (ratio of debt to operating income before depreciation and amortization). As of December 31, 2009, we met
this financial covenant by a significant margin. Our ability to comply with this financial covenant in the future does not depend on further debt reduction or on improved operating results.
In connection with our NBC Universal transaction, we are required to make a cash payment to GE of $7.1 billion, less certain adjustments primarily based on free cash flow generated by NBC
Universal between December 4, 2009 and the closing of the NBC Universal transaction. We expect to fund this payment with cash on hand and through a combination of available borrowings under our existing credit facilities and issuance of debt to
the public or third party lenders. Any future redemptions of GEs stake in the new company are expected to be funded primarily through cash flows and borrowing capacity of the new company. If any borrowings by the new company to fund either of
GEs two potential redemptions would result in the new company exceeding a certain leverage ratio or the new company losing investment grade status or if the new company cannot otherwise fund such redemptions, we are committed to fund up to
$2.875 billion in cash or common stock for each of the two potential redemptions (for an aggregate of up to $5.75 billion), with amounts not used in the first redemption to be available for the second redemption.
Operating Activities
Components of Net Cash Provided by Operating Activities
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31 (in millions) |
|
2009 |
|
|
2008 |
|
|
2007 |
|
Operating income |
|
$ |
7,214 |
|
|
$ |
6,732 |
|
|
$ |
5,578 |
|
Depreciation and amortization |
|
|
6,500 |
|
|
|
6,400 |
|
|
|
6,208 |
|
Operating income before depreciation and amortization |
|
|
13,714 |
|
|
|
13,132 |
|
|
|
11,786 |
|
Noncash share-based compensation and contribution expense |
|
|
257 |
|
|
|
258 |
|
|
|
223 |
|
Changes in operating assets and liabilities |
|
|
(450 |
) |
|
|
(251 |
) |
|
|
(200 |
) |
Cash basis operating income |
|
|
13,521 |
|
|
|
13,139 |
|
|
|
11,809 |
|
Payments of interest |
|
|
(2,040 |
) |
|
|
(2,256 |
) |
|
|
(2,134 |
) |
Payments of income taxes |
|
|
(1,303 |
) |
|
|
(762 |
) |
|
|
(1,638 |
) |
Proceeds from interest, dividends and other nonoperating items |
|
|
103 |
|
|
|
125 |
|
|
|
185 |
|
Excess tax benefit under share-based compensation presented in financing activities |
|
|
|
|
|
|
(15 |
) |
|
|
(33 |
) |
Net cash provided by operating activities |
|
$ |
10,281 |
|
|
$ |
10,231 |
|
|
$ |
8,189 |
|
The increase in changes in operating assets and liabilities in 2009 relates to an increase in accounts receivable and the timing of payments of operating items and payroll.
The decrease in interest payments in 2009 was primarily due to decreases in interest rates on debt subject to variable interest rate swap agreements, the effects of our debt repayments and to
the maturity of certain higher rate debt in 2008. The increases in interest payments in 2008 were primarily due to an increase in our average debt outstanding.
The increase in income tax payments in 2009 was primarily due to higher 2009 taxable income, the settlements of uncertain tax positions and a tax payment made in 2009 that related to 2008, partially offset by the
net benefits of approximately $341 million from the 2008 and 2009 economic stimulus legislation. The decrease in income tax payments in 2008 was primarily due to the 2008 economic stimulus legislation, which resulted in a reduction in our tax
payments of approximately $600 million.
Investing Activities
Net cash used in investing activities consists primarily of cash paid for capital expenditures, intangible assets, acquisitions and investments.
|
|
|
|
|
Comcast 2009 Annual Report on Form 10-K |
|
30 |
|
|
Capital Expenditures
Our
most significant recurring investing activity has been capital expenditures in our Cable segment, and we expect that this will continue in the future. A significant portion of our capital expenditures is based on the level of customer growth and the
technology being deployed. The table below summarizes the capital expenditures we incurred in our Cable segment from 2007 through 2009.
|
|
|
|
|
|
|
|
|
|
Year ended December 31 (in millions) |
|
2009 |
|
2008 |
|
2007 |
Customer premises equipment(a) |
|
$ |
2,934 |
|
$ |
3,147 |
|
$ |
3,164 |
Scalable infrastructure(b) |
|
|
855 |
|
|
1,024 |
|
|
1,014 |
Line extensions(c) |
|
|
120 |
|
|
212 |
|
|
352 |
Support capital(d) |
|
|
421 |
|
|
522 |
|
|
792 |
Upgrades (capacity expansion)(e) |
|
|
356 |
|
|
407 |
|
|
520 |
Commercial services(f) |
|
|
351 |
|
|
233 |
|
|
151 |
Total |
|
$ |
5,037 |
|
$ |
5,545 |
|
$ |
5,993 |
(a) |
|
Customer premises equipment (CPE) includes costs incurred to connect our services at the customers home. The equipment deployed typically
includes standard digital set-top boxes, HD set-top boxes, digital video recorders, digital transport adapters, remote controls and modems. CPE also includes the cost of installing this equipment for new customers as well as the material and labor
cost incurred to install the cable that connects a customers dwelling to the distribution system. |
(b) |
|
Scalable infrastructure includes costs incurred to secure growth in customers or revenue units or to provide service enhancements, other than those related to
CPE. Scalable infrastructure includes equipment that controls signal reception, processing and transmission throughout our distribution system, as well as equipment that controls and communicates with the CPE residing within a customers home.
Also included in scalable infrastructure is certain equipment necessary for content aggregation and distribution (video on demand equipment) and equipment necessary to provide certain video, high-speed Internet and phone service features (e.g.,
voice mail and e-mail). |
(c) |
|
Line extensions include the costs of extending our distribution system into new service areas. These costs typically include network design, the purchase and
installation of fiber-optic and coaxial cable, and certain electronic equipment. |
(d) |
|
Support capital includes costs associated with the replacement or enhancement of non-distribution system assets due to technical or physical obsolescence and
wear-out. These costs typically include vehicles, computer and office equipment, furniture and fixtures, tools, and test equipment. |
(e) |
|
Upgrades include costs to enhance or replace existing portions of our distribution system, including recurring improvements. |
(f) |
|
Commercial services include the costs incurred related to the rollout of our services to small and medium-sized businesses. The equipment typically includes
modems and the cost of installing this equipment for new customers as well as materials and labor incurred to install the cable that connects a customers business to the closest point of the main distribution network.
|
Cable capital expenditures decreased 9.2% and 7.5% in 2009 and 2008, respectively, primarily due to fewer residential
unit additions and improved equipment pricing, partially offset by an increased investment in our commercial services and strategic initiatives like our all digital conversion and DOCSIS 3.0 wideband technology. Line extensions decreased in 2009 and
2008 primarily due to the slowdown in the housing market.
Capital expenditures in our Programming segment were not significant in 2009,
2008 or 2007. In 2008 and 2007, our other
business activities included approximately $137 million and $110 million, respectively, of capital expenditures related to the consolidation of offices and the relocation of our corporate
headquarters.
Capital expenditures for 2010 and for subsequent years will depend on numerous factors, including acquisitions,
competition, changes in technology, regulatory changes and the timing and rate of deployment of new services.
Acquisitions
Our 2009 acquisitions were not significant. In 2008, acquisitions were primarily related to our acquisition of an additional interest in Comcast
SportsNet Bay Area, our acquisition of the remaining interest in G4 that we did not already own, and our acquisitions of Plaxo and DailyCandy. In 2007, acquisitions were primarily related to our acquisitions of Patriot Media, Fandango, Comcast
SportsNet New England and an interest in Comcast SportsNet Bay Area.
Proceeds from Sales of Investments
In 2008, proceeds from the sales of investments were primarily related to the disposition of available-for-sale debt securities. In 2007, proceeds from
the sales of investments were primarily related to the disposition of our ownership interests in Time Warner Inc.
Purchases of
Investments
In 2009, purchases of investments consist primarily of our additional investment in Clearwire. In 2008, purchases of
investments consisted primarily of the funding of our initial investment in Clearwire. In 2007, purchases of investments consisted primarily of an additional investment in Insight Midwest, L.P. and the purchase of available-for-sale debt securities.
Financing Activities
Net cash
used in financing activities consists primarily of our debt repayments, our repurchases of our Class A and Class A Special common stock and dividend payments, partially offset by our proceeds from borrowings. Proceeds from borrowings
fluctuate from year to year based on the amounts paid to fund acquisitions and debt repayments.
In July 2009, we completed a cash
tender to purchase approximately $1.3 billion aggregate principal amount of certain of our outstanding notes for approximately $1.5 billion. We recognized additional interest expense of approximately $180 million primarily associated with the
premiums incurred in the tender offer. The premiums related to the tender offer are included in other financing activities.
We have
made, and may from time to time in the future make, optional repayments on our debt obligations, which may include repurchases of our outstanding public notes and debentures, depending on various factors, such as market conditions. In 2009
|
|
|
|
|
|
|
31 |
|
Comcast 2009 Annual Report on Form 10-K |
and 2008, we made $1.616 billion and $307 million, respectively, of optional purchases of our outstanding public bonds and ZONES debt. See Note 9 to our consolidated financial statements for
further discussion of our financing activities, including details of our debt repayments and borrowings.
Share Repurchases and
Dividends
In 2009, we repurchased approximately 49.8 million shares of our Class A and Class A Special common stock under
our share repurchase authorization for approximately $765 million. As of December 31, 2009, we had approximately $3.3 billion of availability remaining under our share repurchase authorization. We intend to complete repurchases under the
current share repurchase authorization by the end of 2012, subject to market conditions.
Our Board of Directors declared quarterly
dividends of $850 million in 2009. Dividends paid in 2009 were $761 million. In December 2009, our Board of Directors increased the planned annual dividend by 40% to $0.378 per share, with the first quarterly payment of $0.0945 per share occurring
in January 2010. We expect to continue to pay quarterly dividends, although each dividend is subject to approval by our Board of Directors.
The table below sets for information on our share repurchases and dividends paid in 2009, 2008 and
2007.
Contractual Obligations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payments Due by Period |
(in millions) |
|
Total |
|
|
|
Year 1 |
|
Years 2-3 |
|
Years 4-5 |
|
More than 5 |
Debt obligations(a) |
|
$ |
29,039 |
|
|
|
$ |
1,137 |
|
$ |
2,620 |
|
$ |
3,536 |
|
$ |
21,746 |
Capital lease obligations |
|
|
57 |
|
|
|
|
19 |
|
|
21 |
|
|
5 |
|
|
12 |
Operating lease obligations |
|
|
1,879 |
|
|
|
|
333 |
|
|
471 |
|
|
332 |
|
|
743 |
Purchase obligations(b) |
|
|
16,705 |
|
|
|
|
3,275 |
|
|
4,322 |
|
|
2,396 |
|
|
6,712 |
Other long-term liabilities reflected on the balance sheet: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquisition-related obligations(c) |
|
|
83 |
|
|
|
|
70 |
|
|
10 |
|
|
3 |
|
|
|
Other long-term obligations(d) |
|
|
4,964 |
|
|
|
|
271 |
|
|
664 |
|
|
1,844 |
|
|
2,185 |
Total |
|
$ |
52,727 |
|
|
|
$ |
5,105 |
|
$ |
8,108 |
|
$ |
8,116 |
|
$ |
31,398 |
Refer to Note 9 (long-term debt) and Note 17 (commitments) to our consolidated financial statements.
(a) |
|
Excludes interest payments. |
(b) |
|
Purchase obligations consist of agreements to purchase goods and services that are legally binding on us and specify all significant terms, including fixed or
minimum quantities to be purchased and price provisions. Our purchase obligations are primarily related to our Cable segment, including contracts with programming networks, CPE manufacturers, communication vendors, other cable operators for which we
provide advertising sales representation and other contracts entered into in the normal course of business. We also have purchase obligations through Comcast Spectacor for the players and coaches of our professional sports teams. Purchase
obligations do not include contracts with immaterial future commitments. |
(c) |
|
Acquisition-related obligations consist primarily of costs related to exiting contractual obligations and other assumed contractual obligations of the
acquired entity. |
(d) |
|
Other long-term obligations consist primarily of prepaid forward sale agreements of equity securities we hold; subsidiary preferred shares; deferred
compensation obligations; pension, post-retirement and post-employment benefit obligations; and programming rights payable under license agreements. Reserves for uncertain tax positions of approximately $1.2 billion are not included in the table
above. The liability for unrecognized tax benefits has been excluded because we cannot make a reliable estimate of the period in which the unrecognized tax benefits will be realized. |
|
|
|
|
|
Comcast 2009 Annual Report on Form 10-K |
|
32 |
|
|
In connection with the closing of our NBC Universal transaction, we are required to make a cash
payment to GE of $7.1 billion, less certain adjustments primarily based on the free cash flow generated by NBC Universal between December 4, 2009 and the closing. We also expect to incur other expenses associated with the closing of the
transaction. Following the closing of the NBC Universal transaction, GE will be entitled to cause the new company to redeem half of GEs interest three and a half years after closing and its remaining interest seven years after the closing.
Subject to various limitations, we are committed to fund up to $2.875 billion in cash or common stock for each of the two redemptions (for an aggregate of up to $5.75 billion) with amounts not used in the first redemption to be available for the
second redemption. None of the amounts are included in the table above. See NBC Universal Transaction under Introduction and Overview for additional details.
Off-Balance Sheet Arrangements
We do not have any significant off-balance sheet arrangements that are reasonably likely to have a current or future effect on our financial condition, results of operations, liquidity,
capital expenditures or capital resources.
Critical Accounting Judgments and Estimates
The preparation of our financial statements
requires us to make estimates that affect the reported amounts of assets, liabilities, revenue and expenses, and the related disclosure of contingent assets and contingent liabilities. We base our judgments on our historical experience and on
various other assumptions that we believe are reasonable under the circumstances, the results of which form the basis for making estimates about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual
results may differ from these estimates under different assumptions or conditions.
We believe our judgments and related estimates
associated with the valuation and impairment testing of our cable franchise rights and the accounting for income taxes are critical in the preparation of our financial statements. Management has discussed the development and selection of these
critical accounting judgments and estimates with the Audit Committee of our Board of Directors, and the Audit Committee has reviewed our disclosures relating to them, which are presented below.
Refer to Note 2 to our consolidated financial statements for a discussion of our accounting policies with respect to these and other items.
Valuation and Impairment Testing of Cable Franchise Rights
Our largest asset, our cable franchise rights, results from agreements we have with state and local governments that allow us to construct and operate
a cable business within a specified geographic area. The value of a franchise is derived from the economic benefits we receive from the right to solicit new customers and to market new services, such as advanced services and high-speed Internet and
phone services, in a particular service area. The amounts we record for cable franchise rights are primarily a result of cable system acquisitions. Typically when we acquire a cable system, the most significant asset we record is the value of the
cable franchise rights. Often these cable system acquisitions include multiple franchise areas. We currently serve approximately 6,400 franchise areas in the United States.
We have concluded that our cable franchise rights have an indefinite useful life since there are no legal, regulatory, contractual, competitive, economic or other factors which limit the
period over which these rights will contribute to our cash flows. Accordingly, we do not amortize our cable franchise rights but assess the carrying value of our cable franchise rights annually, or more frequently whenever events or changes in
circumstances indicate that the carrying amount may exceed its fair value (impairment testing). We estimate the fair value of our cable franchise rights primarily based on a discounted cash flow analysis that involves significant
judgment. When analyzing the fair values indicated under the discounted cash flow models we also consider multiples of operating income before depreciation and amortization generated by underlying assets, current market transactions and
profitability information.
If we were to determine that the value of our cable franchise rights is less than the carrying amount, we
would recognize an impairment for the difference between the estimated fair value and the carrying value of the assets. For purposes of our impairment testing, we have grouped the recorded values of our various cable franchise rights into our Cable
divisions or units of account. We evaluate the unit of account periodically to ensure our impairment testing is performed at an appropriate level.
Since the adoption of the accounting guidance related to goodwill and intangible assets in 2002, we have not recorded any significant impairments as a result of our impairment testing. A future change in the unit
of account could result in the recognition of an impairment.
We could also record impairments in the future if there are changes in
long-term market conditions, in expected future operating results, or in federal or state regulations that prevent us from recovering the carrying value of these cable franchise rights. Assumptions made about increased competition and economic
conditions could also impact the valuations used in future annual
impairment testing and result in a reduction of fair values from
|
|
|
|
|
|
|
33 |
|
Comcast 2009 Annual Report on Form 10-K |
those determined in the July 1, 2009 annual impairment testing. The table below illustrates the impairment related to our Cable divisions that would have occurred had the hypothetical
reductions in fair value existed at the time of our last annual impairment testing.
|
|
|
|
|
|
|
|
|
|
|
Percent Hypothetical Reduction in Fair Value and Related Impairment |
(in millions) |
|
10% |
|
15% |
|
20% |
|
25% |
Eastern Division |
|
($412) |
|
($1,284) |
|
($2,155) |
|
($3,027) |
NorthCentral Division |
|
($800) |
|
($1,686) |
|
($2,571) |
|
($3,456) |
Southern Division |
|
|
|
|
|
|
|
|
West Division |
|
|
|
($306) |
|
($1,186) |
|
($2,066) |
|
|
($1,212) |
|
($3,276) |
|
($5,912) |
|
($8,549) |
Income
Taxes
We base our provision for income taxes on our current period income, changes in our deferred income tax assets and
liabilities, income tax rates, changes in estimates of our uncertain tax positions, and tax planning opportunities available in the jurisdictions in which we operate. We prepare and file tax returns based on our interpretation of tax laws and
regulations, and we record estimates based on these judgments and interpretations.
From time to time, we engage in transactions in
which the tax consequences may be subject to uncertainty. In these cases, we evaluate our tax positions using the recognition threshold and the measurement attribute in accordance with the accounting guidance related to uncertain tax positions.
Examples of these transactions include business acquisitions and disposals, including
consideration paid or received in connection with these transactions, and certain financing transactions. Significant judgment is required in assessing and estimating the tax consequences of
these transactions. We determine whether it is more likely than not that a tax position will be sustained on examination, including the resolution of any related appeals or litigation processes, based on the technical merits of the position. In
evaluating whether a tax position has met the more-likely-than-not recognition threshold, we presume that the position will be examined by the appropriate taxing authority that has full knowledge of all relevant information. A tax position that
meets the more-likely-than-not recognition threshold is measured to determine the amount of benefit to be recognized in our financial statements. The tax position is measured at the largest amount of benefit that has a greater than 50%
likelihood of being realized when the position is ultimately resolved.
We adjust our estimates periodically to reflect changes in
circumstances in ongoing examinations by and settlements with the various taxing authorities, as well as changes in tax laws, regulations and precedent. We believe that adequate accruals have been made for income taxes. When uncertain tax positions
are ultimately resolved, either individually or in the aggregate, differences between our estimated amounts and the actual amounts are not expected to have a material adverse effect on our consolidated financial position but could possibly be
material to our consolidated results of operations or cash flow for any one period. As of December 31, 2009, our uncertain tax positions and related accrued interest were approximately $1.185 billion and $519 million, respectively.
|
|
|
|
|
Comcast 2009 Annual Report on Form 10-K |
|
34 |
|
|
Item 7A: Quantitative and Qualitative Disclosures About Market Risk
Interest Rate Risk Management
We maintain a mix of fixed-rate and
variable-rate debt. As of December 31, 2009, approximately 99.7% of our total debt of $29.1 billion was at fixed rates with the remaining debt at variable rates. We are exposed to the market risk of adverse changes in interest rates. In order
to manage the cost and volatility relating to the interest cost of our outstanding debt, we enter into various interest rate risk management derivative transactions in accordance with our policies.
We monitor our interest rate risk exposures using techniques that include market value and sensitivity analyses. We do not engage in any speculative
or leveraged derivative transactions.
We manage the credit risks associated with our derivative financial instruments through the
evaluation and monitoring of the creditworthiness of the counterparties. Although we may be exposed to losses in the event of nonperformance by the counterparties, we do not expect such losses, if any, to be significant.
Our interest rate derivative financial instruments, which can include swaps, rate locks, caps and collars, represent an integral part of our interest
rate risk management program. Our interest rate derivative financial instruments reduced the portion of our total debt at fixed rates from 99.7% to 86.9% as of December 31, 2009. In 2009 and 2008, the effect of our interest rate derivative
financial instruments was a decrease in our interest expense of approximately $104 million and $34 million, respectively. In 2007, the effect was an increase in our interest expense of approximately $43 million. Interest rate risk management
instruments may have a significant effect on our interest expense in the future.
The table below summarizes the fair values and contract terms of financial instruments subject to interest rate risk maintained by us as of December 31, 2009.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in millions) |
|
2010 |
|
|
2011 |
|
|
2012 |
|
|
2013 |
|
|
2014 |
|
|
Thereafter |
|
|
Total |
|
|
Fair Value 12/31/2009 |
Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed rate |
|
$ |
1,150 |
|
|
$ |
1,804 |
|
|
$ |
820 |
|
|
$ |
2,394 |
|
|
$ |
1,091 |
|
|
$ |
21,758 |
|
|
$ |
29,017 |
|
|
$ |
31,168 |
Average interest rate |
|
|
5.7 |
% |
|
|
6.2 |
% |
|
|
9.5 |
% |
|
|
8.8 |
% |
|
|
5.0 |
% |
|
|
6.8 |
% |
|
|
6.9 |
% |
|
|
|
Variable rate |
|
$ |
6 |
|
|
$ |
5 |
|
|
$ |
12 |
|
|
$ |
56 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
79 |
|
|
$ |
79 |
Average interest rate |
|
|
5.3 |
% |
|
|
7.9 |
% |
|
|
9.0 |
% |
|
|
5.2 |
% |
|
|
|
% |
|
|
|
% |
|
|
6.0 |
% |
|
|
|
Interest rate instruments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed to variable swaps |
|
$ |
200 |
|
|
$ |
750 |
|
|
$ |
|
|
|
$ |
1,000 |
|
|
$ |
900 |
|
|
$ |
900 |
|
|
$ |
3,750 |
|
|
$ |
183 |
Average pay rate |
|
|
1.5 |
% |
|
|
2.6 |
% |
|
|
|
% |
|
|
7.9 |
% |
|
|
3.1 |
% |
|
|
5.1 |
% |
|
|
4.7 |
% |
|
|
|
Average receive rate |
|
|
5.9 |
% |
|
|
5.5 |
% |
|
|
|
% |
|
|
8.3 |
% |
|
|
5.3 |
% |
|
|
5.7 |
% |
|
|
6.3 |
% |
|
|
|
|
|
|
|
|
|
|
35 |
|
Comcast 2009 Annual Report on Form 10-K |
We use the notional amounts on the instruments to calculate the interest to be paid or received. The
notional amounts do not represent the amount of our exposure to credit loss. The estimated fair value approximates the payments necessary or proceeds to be received to settle the outstanding contracts. We estimate interest rates on variable debt and
swaps using the average implied forward London Interbank Offered Rate (LIBOR) for the year of maturity based on the yield curve in effect on December 31, 2009, plus the applicable margin in effect on December 31, 2009.
As a matter of practice, we typically do not structure our financial contracts to include credit-ratings-based triggers that could
affect our liquidity. In the ordinary course of business, some of our swaps could be subject to termination provisions if we do not maintain investment grade credit ratings. As of December 31, 2009 and 2008, the estimated fair value of those
swaps was an asset of $26 million and an asset of $44 million, respectively. The amount to be paid or received upon termination, if any, would be based on the fair value of the outstanding contracts at that time.
Equity Price Risk Management
We are exposed to the market risk of changes
in the equity prices of our investments in marketable securities. We enter into various derivative transactions in accordance with our policies to manage the volatility relating to these exposures. Through market value and sensitivity analyses,
we monitor our equity price risk exposures to ensure that the instruments are matched with the underlying assets or liabilities, reduce our risks relating to equity prices and maintain a high correlation to the risk inherent in the hedged item.
To limit our exposure to and benefits from price fluctuations in the common stock of some of our investments, we use equity derivative
financial instruments. These derivative financial instruments, which are accounted for at fair value, include equity collar agreements, prepaid forward sale agreements and indexed debt instruments.
Except as described above in Investment Income (Loss), Net, the changes in the fair value of the investments that we accounted for as
trading or available for sale securities were substantially offset by the changes in the fair values of the equity derivative financial instruments.
Refer to Note 2 to our consolidated financial statements for a discussion of our accounting policies for derivative financial instruments and to Note 6 and Note 10 to our consolidated financial statements for a
discussion of our derivative financial instruments.
|
|
|
|
|
Comcast 2009 Annual Report on Form 10-K |
|
36 |
|
|
Item 8: Financial Statements and Supplementary Data
|
|
|
|
|
|
|
37 |
|
Comcast 2009 Annual Report on Form 10-K |
Report of Management
Managements Report on Financial Statements
Our management is responsible for the preparation, integrity and fair presentation of information in our consolidated financial statements, including estimates and judgments. The consolidated financial statements
presented in this report have been prepared in accordance with accounting principles generally accepted in the United States. Our management believes the consolidated financial statements and other financial information included in this report
fairly present, in all material respects, our financial condition, results of operations and cash flows as of and for the periods presented in this report. The consolidated financial statements have been audited by Deloitte & Touche LLP, an
independent registered public accounting firm, as stated in their report, which is included herein.
Managements Report on Internal Control
Over Financial Reporting
Our management is responsible for establishing and maintaining an adequate system of internal control over
financial reporting. Our system of internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance
with accounting principles generally accepted in the United States.
Our internal control over financial reporting includes those
policies and procedures that:
|
|
Pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect our transactions and dispositions of our assets.
|
|
|
Provide reasonable assurance that our transactions are recorded as necessary to permit preparation of our financial statements in accordance with accounting
principles generally accepted in the United States, and that our receipts and expenditures are being made only in accordance with authorizations of our management and our directors. |
|
|
Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material
effect on the financial statements. |
Because of its inherent limitations, a system of internal control over financial
reporting can provide only reasonable assurance and may not prevent or detect misstatements. Further, because of changes in conditions, effectiveness of internal control over financial reporting may vary over time. Our system contains
self-monitoring mechanisms, and actions are taken to correct deficiencies as they are identified.
Our management conducted an
evaluation of the effectiveness of the system of internal control over financial reporting based on the framework in Internal Control Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway
Commission. Based on this evaluation, our management concluded that our system of internal control over financial reporting was effective as of December 31, 2009. The effectiveness of our internal controls over financial reporting has been
audited by Deloitte & Touche LLP, an independent registered public accounting firm, as stated in their report, which is included herein.
Audit Committee Oversight
The Audit Committee of the Board of Directors, which is comprised solely of independent
directors, has oversight responsibility for our financial reporting process and the audits of our consolidated financial statements and internal control over financial reporting. The Audit Committee meets regularly with management and with our
internal auditors and independent registered public accounting firm (collectively, the auditors) to review matters related to the quality and integrity of our financial reporting, internal control over financial reporting (including
compliance matters related to our Code of Ethics and Business Conduct), and the nature, extent, and results of internal and external audits. Our auditors have full and free access and report directly to the Audit Committee. The Audit Committee
recommended, and the Board of Directors approved, that the audited consolidated financial statements be included in this Form 10-K.
|
|
|
|
|
|
|
|
|
|
Brian L. Roberts |
|
Michael J. Angelakis |
|
Lawrence J. Salva |
Chairman and Chief Executive Officer |
|
Executive Vice President and Chief Financial Officer |
|
Senior Vice President, Chief Accounting Officer and Controller |
|
|
|
|
|
Comcast 2009 Annual Report on Form 10-K |
|
38 |
|
|
Report of Independent Registered Public Accounting Firm
Board of Directors and Stockholders
Comcast Corporation
Philadelphia, Pennsylvania
We have audited the accompanying consolidated balance sheets of Comcast Corporation and subsidiaries (the Company) as of
December 31, 2009 and 2008, and the related consolidated statements of operations, cash flows, changes in equity and comprehensive income for each of the three years in the period ended December 31, 2009. We also have audited the
Companys internal control over financial reporting as of December 31, 2009, based on criteria established in Internal Control Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway
Commission. The Companys management is responsible for these financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting,
included in the accompanying Managements Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on these financial statements and an opinion on the Companys internal control over financial
reporting based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board
(United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effective internal control over financial reporting was
maintained in all material respects. Our audits of the financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant
estimates made by management, and evaluating the overall financial statement presentation. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk
that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the
circumstances. We believe that our audits provide a reasonable basis for our opinions.
A companys internal control over financial
reporting is a process designed by, or under the supervision of, the companys principal executive and principal financial officers, or persons performing similar functions, and effected by the companys board of directors, management, and
other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A companys internal
control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;
(2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being
made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the companys assets
that could have a material effect on the financial statements.
Because of the inherent limitations of internal control over financial
reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis. Also, projections of any evaluation of the effectiveness
of the internal control over financial reporting to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position
of Comcast Corporation and subsidiaries as of December 31, 2009 and 2008, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2009, in conformity with accounting principles
generally accepted in the United States of America. Also, in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2009, based on the criteria established in
Internal Control Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.
As discussed in Note 3 to the consolidated financial statements, effective January 1, 2009, the Company retrospectively changed its method of accounting for noncontrolling interests. As discussed in Note 12 to the consolidated
financial statements, on January 1, 2008, the Company changed its method of accounting for split-dollar life insurance agreements.
|
/s/ Deloitte & Touche LLP |
Philadelphia, Pennsylvania |
February 23, 2010 |
|
|
|
|
|
|
|
39 |
|
Comcast 2009 Annual Report on Form 10-K |
Consolidated Balance Sheet
|
|
|
|
|
|
|
|
|
December 31 (in millions, except share data) |
|
2009 |
|
|
2008 |
|
Assets |
|
|
|
|
|
|
|
|
Current Assets: |
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
671 |
|
|
$ |
1,195 |
|
Investments |
|
|
50 |
|
|
|
59 |
|
Accounts receivable, less allowance for doubtful accounts of $175 and $190 |
|
|
1,711 |
|
|
|
1,626 |
|
Deferred income taxes |
|
|
240 |
|
|
|
292 |
|
Other current assets |
|
|
551 |
|
|
|
544 |
|
Total current assets |
|
|
3,223 |
|
|
|
3,716 |
|
Investments |
|
|
5,947 |
|
|
|
4,783 |
|
Property and equipment, net of accumulated depreciation of $27,810 and $23,235 |
|
|
23,855 |
|
|
|
24,444 |
|
Franchise rights |
|
|
59,452 |
|
|
|
59,449 |
|
Goodwill |
|
|
14,933 |
|
|
|
14,889 |
|
Other intangible assets, net of accumulated amortization of $8,711 and $8,160 |
|
|
4,105 |
|
|
|
4,558 |
|
Other noncurrent assets, net |
|
|
1,218 |
|
|
|
1,178 |
|
Total assets |
|
$ |
112,733 |
|
|
$ |
113,017 |
|
Liabilities and Equity |
|
|
|
|
|
|
|
|
Current Liabilities: |
|
|
|
|
|
|
|
|
Accounts payable and accrued expenses related to trade creditors |
|
$ |
3,094 |
|
|
$ |
3,393 |
|
Accrued expenses and other current liabilities |
|
|
2,999 |
|
|
|
3,268 |
|
Current portion of long-term debt |
|
|
1,156 |
|
|
|
2,278 |
|
Total current liabilities |
|
|
7,249 |
|
|
|
8,939 |
|
Long-term debt, less current portion |
|
|
27,940 |
|
|
|
30,178 |
|
Deferred income taxes |
|
|
27,800 |
|
|
|
26,982 |
|
Other noncurrent liabilities |
|
|
6,767 |
|
|
|
6,171 |
|
Commitments and contingencies (Note 17) |
|
|
|
|
|
|
|
|
Redeemable noncontrolling interests |
|
|
166 |
|
|
|
171 |
|
Equity: |
|
|
|
|
|
|
|
|
Preferred stock authorized, 20,000,000 shares; issued, zero |
|
|
|
|
|
|
|
|
Class A common stock, $0.01 par value authorized, 7,500,000,000 shares; issued, 2,428,533,911 and 2,426,443,484;
outstanding, 2,063,073,161 and 2,060,982,734 |
|
|
24 |
|
|
|
24 |
|
Class A Special common stock, $0.01 par value authorized, 7,500,000,000 shares; issued, 835,991,034 and
881,145,954; outstanding, 765,056,270 and 810,211,190 |
|
|
8 |
|
|
|
9 |
|
Class B common stock, $0.01 par value authorized, 75,000,000 shares; issued and outstanding, 9,444,375 |
|
|
|
|
|
|
|
|
Additional paid-in capital |
|
|
40,247 |
|
|
|
40,620 |
|
Retained earnings |
|
|
10,005 |
|
|
|
7,427 |
|
Treasury stock, 365,460,750 Class A common shares and 70,934,764 Class A Special common shares |
|
|
(7,517 |
) |
|
|
(7,517 |
) |
Accumulated other comprehensive income (loss) |
|
|
(46 |
) |
|
|
(113 |
) |
Total Comcast Corporation shareholders equity |
|
|
42,721 |
|
|
|
40,450 |
|
Noncontrolling interests |
|
|
90 |
|
|
|
126 |
|
Total equity |
|
|
42,811 |
|
|
|
40,576 |
|
Total liabilities and equity |
|
$ |
112,733 |
|
|
$ |
113,017 |
|
See notes to consolidated financial statements.
|
|
|
|
|
Comcast 2009 Annual Report on Form 10-K |
|
40 |
|
|
Consolidated Statement of Operations
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31 (in millions, except per share data) |
|
2009 |
|
|
2008 |
|
|
2007 |
|
Revenue |
|
$ |
35,756 |
|
|
$ |
34,423 |
|
|
$ |
31,060 |
|
Costs and Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
Operating (excluding depreciation and amortization) |
|
|
14,396 |
|
|
|
13,639 |
|
|
|
12,334 |
|
Selling, general and administrative |
|
|
7,646 |
|
|
|
7,652 |
|
|
|
6,940 |
|
Depreciation |
|
|
5,483 |
|
|
|
5,457 |
|
|
|
5,107 |
|
Amortization |
|
|
1,017 |
|
|
|
943 |
|
|
|
1,101 |
|
|
|
|
28,542 |
|
|
|
27,691 |
|
|
|
25,482 |
|
Operating income |
|
|
7,214 |
|
|
|
6,732 |
|
|
|
5,578 |
|
Other Income (Expense): |
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense |
|
|
(2,348 |
) |
|
|
(2,439 |
) |
|
|
(2,289 |
) |
Investment income (loss), net |
|
|
282 |
|
|
|
89 |
|
|
|
601 |
|
Equity in net income (losses) of affiliates, net |
|
|
(64 |
) |
|
|
(39 |
) |
|
|
(63 |
) |
Other income (expense) |
|
|
22 |
|
|
|
(285 |
) |
|
|
522 |
|
|
|
|
(2,108 |
) |
|
|
(2,674 |
) |
|
|
(1,229 |
) |
Income before income taxes |
|
|
5,106 |
|
|
|
4,058 |
|
|
|
4,349 |
|
Income tax expense |
|
|
(1,478 |
) |
|
|
(1,533 |
) |
|
|
(1,800 |
) |
Net income from consolidated operations |
|
|
3,628 |
|
|
|
2,525 |
|
|
|
2,549 |
|
Net (income) loss attributable to noncontrolling interests |
|
|
10 |
|
|
|
22 |
|
|
|
38 |
|
Net income attributable to Comcast Corporation |
|
$ |
3,638 |
|
|
$ |
2,547 |
|
|
$ |
2,587 |
|
Basic earnings per common share attributable to Comcast Corporation shareholders |
|
$ |
1.27 |
|
|
$ |
0.87 |
|
|
$ |
0.84 |
|
Diluted earnings per common share attributable to Comcast Corporation shareholders |
|
$ |
1.26 |
|
|
$ |
0.86 |
|
|
$ |
0.83 |
|
Dividends declared per common share attributable to Comcast Corporation
shareholders |
|
$ |
0.297 |
|
|
$ |
0.250 |
|
|
$ |
|
|
See notes to consolidated financial statements.
|
|
|
|
|
|
|
41 |
|
Comcast 2009 Annual Report on Form 10-K |
Consolidated Statement of Cash Flows
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31 (in millions) |
|
2009 |
|
|
2008 |
|
|
2007 |
|
Operating Activities |
|
|
|
|
|
|
|
|
|
|
|
|
Net income from consolidated operations |
|
$ |
3,628 |
|
|
$ |
2,525 |
|
|
$ |
2,549 |
|
Adjustments to reconcile net income from consolidated operations to net cash provided by operating activities: |
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation |
|
|
5,483 |
|
|
|
5,457 |
|
|
|
5,107 |
|
Amortization |
|
|
1,017 |
|
|
|
943 |
|
|
|
1,101 |
|
Share-based compensation |
|
|
257 |
|
|
|
258 |
|
|
|
212 |
|
Noncash interest expense (income), net |
|
|
160 |
|
|
|
209 |
|
|
|
114 |
|
Equity in net (income) losses of affiliates, net |
|
|
64 |
|
|
|
39 |
|
|
|
63 |
|
(Gains) losses on investments and noncash other (income) expense, net |
|
|
(201 |
) |
|
|
321 |
|
|
|
(938 |
) |
Noncash contribution expense |
|
|
|
|
|
|
|
|
|
|
11 |
|
Deferred income taxes |
|
|
832 |
|
|
|
495 |
|
|
|
247 |
|
Changes in operating assets and liabilities, net of effects of acquisitions and divestitures: |
|
|
|
|
|
|
|
|
|
|
|
|
Change in accounts receivable, net |
|
|
(84 |
) |
|
|
39 |
|
|
|
(100 |
) |
Change in accounts payable and accrued expenses related to trade creditors |
|
|
(136 |
) |
|
|
(38 |
) |
|
|
175 |
|
Change in other operating assets and liabilities |
|
|
(739 |
) |
|
|
(17 |
) |
|
|
(352 |
) |
Net cash provided by (used in) operating activities |
|
|
10,281 |
|
|
|
10,231 |
|
|
|
8,189 |
|
Investing Activities |
|
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures |
|
|
(5,117 |
) |
|
|
(5,750 |
) |
|
|
(6,158 |
) |
Cash paid for intangible assets |
|
|
(522 |
) |
|
|
(527 |
) |
|
|
(406 |
) |
Acquisitions, net of cash acquired |
|
|
(88 |
) |
|
|
(738 |
) |
|
|
(1,319 |
) |
Proceeds from sales of investments |
|
|
102 |
|
|
|
737 |
|
|
|
1,761 |
|
Purchases of investments |
|
|
(346 |
) |
|
|
(1,167 |
) |
|
|
(2,089 |
) |
Other |
|
|
74 |
|
|
|
(32 |
) |
|
|
62 |
|
Net cash provided by (used in) investing activities |
|
|
(5,897 |
) |
|
|
(7,477 |
) |
|
|
(8,149 |
) |
Financing Activities |
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from borrowings |
|
|
1,564 |
|
|
|
3,535 |
|
|
|
3,713 |
|
Repurchases and repayments of debt |
|
|
(4,738 |
) |
|
|
(2,610 |
) |
|
|
(1,401 |
) |
Repurchases of common stock |
|
|
(765 |
) |
|
|
(2,800 |
) |
|
|
(3,102 |
) |
Dividends paid |
|
|
(761 |
) |
|
|
(547 |
) |
|
|
|
|
Issuances of common stock |
|
|
1 |
|
|
|
53 |
|
|
|
412 |
|
Other |
|
|
(209 |
) |
|
|
(153 |
) |
|
|
62 |
|
Net cash provided by (used in) financing activities |
|
|
(4,908 |
) |
|
|
(2,522 |
) |
|
|
(316 |
) |
Increase (decrease) in cash and cash equivalents |
|
|
(524 |
) |
|
|
232 |
|
|
|
(276 |
) |
Cash and cash equivalents, beginning of year |
|
|
1,195 |
|
|
|
963 |
|
|
|
1,239 |
|
Cash and cash equivalents, end of year |
|
$ |
671 |
|
|
$ |
1,195 |
|
|
$ |
963 |
|
See notes to consolidated financial statements.
|
|
|
|
|
Comcast 2009 Annual Report on Form 10-K |
|
42 |
|
|
Consolidated Statement of Changes in Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Redeemable Non- controlling Interests |
|
|
|
|
|
|
Common Stock |
|
Additional Paid-In Capital |
|
|
|
|
|
Treasury Stock at Cost |
|
|
Accumulated Other Comprehensive Income (Loss) |
|
|
Non- controlling Interests |
|
|
|
|
(in millions) |
|
|
|
|
|
A |
|
A Special |
|
|
B |
|
|
Retained Earnings |
|
|
|
|
|
Total Equity |
|
Balance, January 1, 2007 |
|
$ |
63 |
|
|
|
|
|
|
$ |
24 |
|
$ |
11 |
|
|
$ |
|
|
$ |
42,401 |
|
|
$ |
6,214 |
|
|
$ |
(7,517 |
) |
|
$ |
34 |
|
|
$ |
178 |
|
|
$ |
41,345 |
|
Cumulative effect related to change in accounting principle on January 1, 2007 (see Note 15) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
60 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
60 |
|
Stock compensation plans |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
688 |
|
|
|
(28 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
660 |
|
Repurchase and retirement of common stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
(1 |
) |
|
|
|
|
|
(1,459 |
) |
|
|
(1,642 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3,102 |
) |
Employee stock purchase plan |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
58 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
58 |
|
Other comprehensive income (loss) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(90 |
) |
|
|
|
|
|
|
(90 |
) |
Sale (purchase) of subsidiary shares to (from) noncontrolling interests, net |
|
|
40 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1 |
) |
|
|
(1 |
) |
Contributions from (distributions to) noncontrolling interests |
|
|
18 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(10 |
) |
|
|
(10 |
) |
Net income (loss) |
|
|
(20 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,587 |
|
|
|
|
|
|
|
|
|
|
|
(18 |
) |
|
|
2,569 |
|
Balance, December 31, 2007 |
|
|
101 |
|
|
|
|
|
|
|
24 |
|
|
10 |
|
|
|
|
|
|
41,688 |
|
|
|
7,191 |
|
|
|
(7,517 |
) |
|
|
(56 |
) |
|
|
149 |
|
|
|
41,489 |
|
Cumulative effect related to change in accounting principle on January 1, 2008 (see Note 12) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(132 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(132 |
) |
Stock compensation plans |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
265 |
|
|
|
(49 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
216 |
|
Repurchase and retirement of common stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
(1 |
) |
|
|
|
|
|
(1,562 |
) |
|
|
(1,237 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2,800 |
) |
Employee stock purchase plan |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
63 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
63 |
|
Share exchange |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
166 |
|
|
|
(166 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends declared |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(727 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(727 |
) |
Other comprehensive income (loss) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(57 |
) |
|
|
|
|
|
|
(57 |
) |
Sale (purchase) of subsidiary shares to (from) noncontrolling interests, net |
|
|
88 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contributions from (distributions to) noncontrolling interests |
|
|
2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(21 |
) |
|
|
(21 |
) |
Net income (loss) |
|
|
(20 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,547 |
|
|
|
|
|
|
|
|
|
|
|
(2 |
) |
|
|
2,545 |
|
Balance, December 31, 2008 |
|
|
171 |
|
|
|
|
|
|
|
24 |
|
|
9 |
|
|
|
|
|
|
40,620 |
|
|
|
7,427 |
|
|
|
(7,517 |
) |
|
|
(113 |
) |
|
|
126 |
|
|
|
40,576 |
|
Stock compensation plans |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
159 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
159 |
|
Repurchase and retirement of common stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
(1 |
) |
|
|
|
|
|
(554 |
) |
|
|
(210 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(765 |
) |
Employee stock purchase plan |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
61 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
61 |
|
Dividends declared |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(850 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(850 |
) |
Other comprehensive income (loss) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
67 |
|
|
|
|
|
|
|
67 |
|
Sale (purchase) of subsidiary shares to (from) noncontrolling interests, net |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(39 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(12 |
) |
|
|
(51 |
) |
Contributions from (distributions to) noncontrolling interests |
|
|
9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(28 |
) |
|
|
(28 |
) |
Net income (loss) |
|
|
(14 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,638 |
|
|
|
|
|
|
|
|
|
|
|
4 |
|
|
|
3,642 |
|
Balance, December 31, 2009 |
|
$ |
166 |
|
|
|
|
|
|
$ |
24 |
|
$ |
8 |
|
|
$ |
|
|
$ |
40,247 |
|
|
$ |
10,005 |
|
|
$ |
(7,517 |
) |
|
$ |
(46 |
) |
|
$ |
90 |
|
|
$ |
42,811 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated Statement of Comprehensive Income
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, (in millions) |
|
2009 |
|
2008 |
|
|
2007 |
|
Net income from consolidated operations |
|
$ |
3,628 |
|
$ |
2,525 |
|
|
$ |
2,549 |
|
Holding gains (losses) during the period, net of deferred taxes of $(4), $7 and $23 |
|
|
8 |
|
|
(13 |
) |
|
|
(42 |
) |
Reclassification adjustments for losses (gains) included in net income, net of deferred taxes of $(18), $(10) and $46 |
|
|
30 |
|
|
18 |
|
|
|
(85 |
) |
Employee benefit obligations, net of deferred taxes of $(15), $30 and $(16) |
|
|
25 |
|
|
(55 |
) |
|
|
29 |
|
Cumulative translation adjustments |
|
|
4 |
|
|
(7 |
) |
|
|
8 |
|
Comprehensive income |
|
|
3,695 |
|
|
2,468 |
|
|
|
2,459 |
|
Net (income) loss attributable to noncontrolling interests |
|
|
10 |
|
|
22 |
|
|
|
38 |
|
Comprehensive income attributable to Comcast Corporation |
|
$ |
3,705 |
|
$ |
2,490 |
|
|
$ |
2,497 |
|
See notes to consolidated financial statements.
|
|
|
|
|
|
|
43 |
|
Comcast 2009 Annual Report on Form 10-K |
Notes to Consolidated Financial Statements
Note 1: Organization and Business
We are a Pennsylvania corporation and were
incorporated in December 2001. Through our predecessors, we have developed, managed and operated cable systems since 1963. We classify our operations in two reportable segments: Cable and Programming.
Our Cable segment is primarily involved in the management and operation of cable systems in the United States. As of December 31, 2009, we served
approximately 23.6 million video customers, 15.9 million high-speed Internet customers and 7.6 million phone customers. Our regional sports networks are also included in our Cable segment.
Our Programming segment consists primarily of our consolidated national programming networks, E!, Golf Channel, VERSUS, G4 and Style.
Our other business interests include Comcast Interactive Media and Comcast Spectacor. Comcast Interactive Media develops and operates our Internet
businesses including Comcast.net, Fancast, Fandango, Plaxo and DailyCandy. Comcast Spectacor owns two professional sports teams, the Philadelphia 76ers and the Philadelphia Flyers, and a large, multipurpose arena in Philadelphia, the Wachovia
Center, and manages other facilities for sporting events, concerts and other events. We also own equity method investments in other programming networks and wireless-related companies.
Note 2: Summary of Significant Accounting Policies
Basis of Consolidation
The accompanying
consolidated financial statements include (i) all of our accounts, (ii) all entities in which we have a controlling voting interest (subsidiaries) and (iii) variable interest entities (VIEs) required to be
consolidated in accordance with generally accepted accounting principles in the United States (GAAP). We have eliminated intercompany accounts and transactions among consolidated entities.
Our Use of Estimates
We prepare our
consolidated financial statements in conformity with GAAP, which requires us to make estimates and assumptions that affect the reported amounts and disclosures. Actual results could differ from those estimates. Estimates are used when accounting for
various items, such as allowances for doubtful accounts, investments, derivative financial instruments, asset impairments, nonmonetary transactions, certain acquisition-related liabilities, programming-related liabilities, pensions and other
postretirement benefits, revenue recognition, depreciation and amortization, income taxes, and legal contingencies. See Note 10 for our discussion on fair value estimates.
Cash Equivalents
The carrying amounts of our cash equivalents approximate their fair value. Our cash equivalents consist primarily of money market funds and U.S. government obligations, as well as commercial paper and certificates
of deposit with maturities of less than three months when purchased.
Investments
We classify publicly traded investments as available-for-sale (AFS) or trading securities and record them at fair value. For AFS securities, we record unrealized gains or losses
resulting from changes in fair value between measurement dates as a component of other comprehensive income (loss), except when we consider declines in value to be other than temporary. For trading securities, we record unrealized gains or losses
resulting from changes in fair value between measurement dates as a component of investment income (loss), net. We recognize realized gains and losses associated with our fair value method investments using the specific identification method. We
classify the cash flows related to purchases of, and proceeds from the sale of, trading securities based on the nature of the securities and purpose for which they were acquired. Investments in privately held companies are stated at cost.
We use the equity method to account for investments in which we have the ability to exercise significant influence over the
investees operating and financial policies. Equity method investments are recorded at cost and are adjusted to recognize (i) our proportionate share of the investees net income or losses after the date of investment,
(ii) amortization of basis differences, (iii) additional contributions made and dividends received, and (iv) impairments resulting from other-than-temporary declines in fair value. We generally record our share of the investees
net income or loss one quarter in arrears due to the timing of our receipt of such information. Gains or losses on the sale of equity method investments are recorded to other income (expense).
We review our investment portfolio each reporting period to determine whether there are identified events or circumstances that would indicate there is a decline in the fair value that is
considered to be other than temporary. For our non-public investments, if there are no identified events or circumstances that would have a significant adverse effect on the fair value of the investment, then the fair value is not estimated. If an
investment is deemed to have experienced an other-than-temporary decline below its cost basis, we reduce the carrying amount of the investment to its quoted or estimated fair value, as applicable, and establish a new cost basis for the investment.
For our AFS and cost method investments, we record the impairment to investment income (loss), net. For our equity method investments, we record the impairment to other income (expense).
|
|
|
|
|
Comcast 2009 Annual Report on Form 10-K |
|
44 |
|
|
If an equity method investee issues additional securities that change our proportionate share of the
entity, we recognize the change as a gain or loss in our consolidated statement of operations.
Property and Equipment
Property and equipment are stated at cost. We capitalize improvements that extend asset lives and expense other repairs and maintenance costs as
incurred. For assets that are sold or retired, we remove the applicable cost and accumulated depreciation and, unless the gain or loss on disposition is presented separately, we recognize it as a component of depreciation expense.
We capitalize the costs associated with the construction of and improvements to our cable transmission and distribution facilities and new service
installations. Costs include all direct labor and materials, as well as various indirect costs. We capitalize initial customer installation costs that are directly attributable to installation of the drop, including material, labor and overhead
costs, in accordance with accounting guidance related to cable television companies. All costs incurred in connection with subsequent service disconnects and reconnects are expensed as they are incurred. We record depreciation using the
straight-line method over the assets estimated useful life. See Note 7 for our significant components of property and equipment.
We evaluate the recoverability and estimated lives of our property and equipment whenever events or substantive changes in circumstances indicate that the carrying amount may not be recoverable or the useful life has changed. The evaluation
is based on the cash flows generated by the underlying assets and profitability information, including estimated future operating results, trends or other determinants of fair value. If the total of the expected future undiscounted cash flows are
less than the carrying amount of the asset, we would recognize a loss for the difference between the estimated fair value and the carrying value of the asset.
Intangible Assets
Indefinite-Lived Intangibles
Franchise Rights
Our franchise rights consist primarily of cable franchise
rights. Cable franchise rights represent the value we attributed to agreements with local authorities that allow access to homes and businesses in cable service areas acquired in business combinations. We also have sports franchise rights, which
represent the value we attributed to our two professional sports teams that were acquired in business combinations. We do not amortize our franchise rights because we have determined that they have an indefinite life. We reassess this determination
periodically or whenever events or substantive changes in circumstances occur. Costs we incur in negotiating and renewing cable franchise agreements are included in other intangible assets and are primarily amortized on a straight-line basis over
the term of the franchise agreement.
We evaluate the recoverability of our franchise rights annually, or more frequently whenever events
or substantive changes in circumstances indicate that the assets might be impaired. We estimate the fair value of our cable franchise rights primarily based on a discounted cash flow analysis. We consider multiples of operating income before
depreciation and amortization generated by the underlying assets, current market transactions, and profitability information in analyzing the fair values indicated under the discounted cash flow models. If the value of our cable franchise rights is
less than the carrying amount, we would recognize an impairment for the difference between the estimated fair value and the carrying value of the assets.
We also evaluate the unit of account used to test for impairment of our cable franchise rights periodically or whenever events or substantive changes in circumstances occur to ensure impairment testing is performed
at an appropriate level.
Goodwill
We assess the recoverability of our goodwill annually, or more frequently whenever events or substantive changes in circumstances indicate that the asset might be impaired, since we do not amortize goodwill. We
generally perform the assessment of our goodwill one level below the operating segment level. In our Cable business, since components one level below the segment level (Cable divisions) are not separate reporting units and have similar economic
characteristics, we aggregate the components into one reporting unit at the Cable segment level.
Other Intangibles
Other intangible assets consist primarily of franchise-related customer relationships acquired in business combinations, programming distribution
rights, software, cable franchise renewal costs, and programming agreements and rights. These assets are amortized primarily on a straight-line basis over the estimated useful life or the term of the related agreements. See Note 8 for the ranges of
useful lives of our intangible assets.
Programming Distribution Rights
Our Programming subsidiaries enter into multiyear license agreements with various multichannel video providers for distribution of our networks programming (programming
distribution rights). We capitalize amounts paid to secure or extend these programming distribution rights and include them within other intangible assets. We amortize these programming distribution rights on a straight-line basis over the
term of the related license agreements. We classify the amortization of these programming distribution rights as a reduction to revenue unless the Programming subsidiary receives, or will receive, an identifiable benefit from the distributor
separate from the fee paid for the programming distribution right, in which case we recognize the fair value of the identified benefit in the period in which it is received.
|
|
|
|
|
|
|
45 |
|
Comcast 2009 Annual Report on Form 10-K |
Software
We
capitalize direct development costs associated with internal-use software, including external direct costs of material and services and payroll costs for employees devoting time to these software projects. We also capitalize costs associated with
the purchase of software licenses. We include these costs within other intangible assets and amortize them on a straight-line basis over a period not to exceed 5 years, beginning when the asset is substantially ready for use. We expense maintenance
and training costs, as well as costs incurred during the preliminary stage of a project, as they are incurred. We capitalize initial operating system software costs and amortize them over the life of the associated hardware.
* * *
We periodically evaluate the recoverability and estimated lives of our intangible assets subject to amortization whenever events or substantive changes in circumstances indicate that the carrying amount may not be
recoverable or the useful life has changed. The evaluation is based on the cash flows generated by the underlying assets and profitability information, including estimated future operating results, trends or other determinants of fair value. If the
total of the expected future undiscounted cash flows is less than the carrying amount of the asset, we would recognize a loss for the difference between the estimated fair value and the carrying value of the asset. Unless presented separately, the
loss is included as a component of amortization expense.
Asset Retirement Obligations
We recognize a liability for asset retirement obligations in the period in which it is incurred if a reasonable estimate of fair value can be made.
Certain of our cable franchise agreements and lease agreements contain provisions requiring us to restore facilities or remove property in the event
that the franchise or lease agreement is not renewed. We expect to continually renew our cable franchise agreements and therefore cannot estimate any liabilities associated with such agreements. A remote possibility exists that franchise agreements
could be terminated unexpectedly, which could result in us incurring significant expense in complying with restoration or removal provisions. The disposal obligations related to our properties are not material to our consolidated financial
statements. We do not have any significant asset retirement-related liabilities recorded in our consolidated financial statements.
Revenue
Recognition
Cable Segment
Our Cable segment generates revenue primarily from subscriptions to our video, high-speed Internet and phone services (cable services) and from the sale of advertising. We recognize revenue from cable services as each service is
provided. We manage credit risk by screening applicants through the use of credit bureau data.
If a customers account is delinquent, various measures are used to collect outstanding amounts, including termination of the customers cable service. Since installation revenue
obtained from the connection of customers to our cable systems is less than related direct selling costs, we recognize revenue as connections are completed.
As part of our programming license agreements with programming networks, we receive an allocation of scheduled advertising time that we may sell to local, regional and national advertisers. We recognize advertising
revenue when the advertising is aired and based on the broadcast calendar. In most cases, the available advertising time is sold by our sales force. In some cases, we work with representation firms as an extension of our sales force to sell a
portion of the advertising time. We also coordinate the advertising sales efforts of other cable operators in some markets, and in some markets we operate advertising interconnects. These interconnects establish a physical, direct link between
multiple providers for the sale of regional and national advertising across larger geographic areas than could be provided by a single cable operator. Our prior practice had been to record the fees we pay to representation firms and other
multichannel video providers as a revenue offset. However, since we are acting as the principal in these arrangements and as these coordination and interconnect activities are expected to grow in significance, we have concluded that we should report
the fees paid to representation firms and multichannel video providers as an operating expense rather than as a revenue offset. Accordingly, we changed the presentation for these items for 2008 and 2007, and classified approximately $167 million and
$165 million, respectively, of the fees paid as operating expenses.
Revenue earned from other sources is recognized when services are
provided or events occur. Under the terms of our cable franchise agreements, we are generally required to pay to the local franchising authority an amount based on our gross video revenue. We normally pass these fees through to our cable customers
and classify the fees as a component of revenue with the corresponding costs included in operating expenses. We present other taxes imposed on a revenue-producing transaction as revenue if we are acting as a principal or as a reduction to operating
expenses if we are acting as an agent.
Programming Segment
Our Programming segment generates revenue primarily from monthly per subscriber license fees paid by multichannel video providers for the distribution of our networks programming, the
sale of advertising and the licensing of our networks programming internationally. We recognize revenue from distributors as programming is provided, generally under multiyear distribution agreements. From time to time these agreements expire while
programming continues to be provided to the distributor based on interim arrangements while the parties negotiate new contract terms. Revenue recognition is generally limited to current payments being made by the distributor, typically under the
prior
|
|
|
|
|
Comcast 2009 Annual Report on Form 10-K |
|
46 |
|
|
contract terms, until a new contract is negotiated, sometimes with effective dates that affect prior periods. Differences between actual amounts determined upon resolution of negotiations and
amounts recorded during these interim arrangements are recorded in the period of resolution.
Advertising revenue for our Programming
segment is recognized in the period in which commercials or programs are aired. In some instances, our Programming businesses guarantee viewer ratings either for the programming or for the commercials. Revenue is deferred to the extent of an
estimated shortfall in the ratings. Such shortfalls are primarily settled by providing additional advertising time, at which point the revenue is recognized.
Cable Programming Expenses
Cable programming expenses are the fees we pay to programming networks to license the
programming we distribute to our video customers. Programming is acquired for distribution to our video customers, generally under multiyear distribution agreements, with rates typically based on the number of customers that receive the programming,
adjusted for channel positioning and the extent of distribution. From time to time these contracts expire and programming continues to be provided based on interim arrangements while the parties negotiate new contractual terms, sometimes with
effective dates that affect prior periods. While payments are typically made under the prior contracts terms, the amount of our programming expenses recorded during these interim arrangements is based on our estimates of the ultimate
contractual terms expected to be negotiated. Differences between actual amounts determined upon resolution of negotiations and amounts recorded during these interim arrangements are recorded in the period of resolution.
When our Cable segment receives incentives from programming networks for the licensing of their programming, we classify the deferred portion of these
incentives within liabilities and recognize them over the term of the contract as a reduction of programming expenses, which are included in operating expenses.
Share-Based Compensation
Our share-based compensation consists of awards of stock options, restricted share units
(RSUs) and the discounted sale of company stock to employees through our employee stock purchase plan. Associated costs are based on an awards estimated fair value at the date of grant and are recognized over the period in which
any related services are provided. See Note 14 for further details regarding share-based compensation.
Income Taxes
We base our provision for income taxes on our current period income, changes in our deferred income tax assets and liabilities, income tax rates,
changes in estimates of our uncertain tax positions, and tax planning opportunities available in the jurisdictions in which we operate. Substantially all of our income is from operations
in the United States. We recognize deferred tax assets and liabilities when there are temporary differences between the financial reporting basis and tax basis of our assets and liabilities and
for the expected benefits of using net operating loss carryforwards. When a change in the tax rate or tax law has an impact on deferred taxes, we apply the change based on the years in which the temporary differences are expected to reverse. We
record the change in our consolidated financial statements in the period of enactment.
Income tax consequences that arise in connection
with business combinations include identifying the tax bases of assets and liabilities acquired and any contingencies associated with uncertain tax positions assumed or resulting from the business combination. Deferred tax assets and liabilities
related to temporary differences of acquired entities are recorded as of the date of the business combination and are based on our estimate of the ultimate tax basis that will be accepted by the various taxing authorities. We record liabilities for
contingencies associated with prior tax returns filed by the acquired entity based on criteria set forth in the accounting guidance related to accounting for uncertainty in income taxes. We adjust the deferred tax accounts and the liabilities
periodically to reflect any revised estimated tax basis and any estimated settlements with the various taxing authorities. Prior to January 1, 2009, the effect of these adjustments was generally applied to goodwill except for post-acquisition
interest expense, which was recognized as an adjustment to income tax expense. Due to changes in accounting guidance, effective January 1, 2009, all tax adjustments recognized after the initial allocation period that would have previously
impacted goodwill are recognized within income tax expense.
We classify interest and penalties, if any, associated with our uncertain
tax positions as a component of income tax expense.
Derivative Financial Instruments
We use derivative financial instruments to manage our exposure to the risks associated with fluctuations in interest rates and equity prices. Our objective is to manage the financial and
operational exposure arising from these risks by offsetting gains and losses on the underlying exposures with gains and losses on the derivatives used to economically hedge them. Derivative financial instruments that receive designated hedge
accounting treatment are evaluated for effectiveness at the time they are designated, as well as throughout the hedging period. We do not engage in any speculative or leveraged derivative transactions. All derivative transactions must comply with a
derivatives policy authorized by our Board of Directors.
We manage our exposure to fluctuations in interest rates by using derivative
financial instruments such as interest rate exchange agreements (swaps) and interest rate lock agreements (rate locks). We sometimes enter into rate locks to hedge the risk that the cash flows related to the interest payments
on an anticipated
|
|
|
|
|
|
|
47 |
|
Comcast 2009 Annual Report on Form 10-K |
issuance or assumption of fixed-rate debt may be adversely affected by interest-rate fluctuations.
We manage our exposure to and benefits from price fluctuations in the common stock of some of our investments by using equity derivative financial instruments embedded in other contracts, such as prepaid forward
sale agreements, whose values, in part, are derived from the market value of certain publicly traded common stock.
We periodically
examine the instruments we use to hedge exposure to interest rate and equity price risks to ensure that the instruments are matched with underlying assets or liabilities, to reduce our risks relating to changes in interest rates or equity prices
and, through market value and sensitivity analysis, to maintain a high correlation to the risk inherent in the hedged item. For those instruments that do not meet the above conditions, and for those derivative financial instruments that are not
designated as a hedge, changes in fair value are recognized on a current basis in earnings.
We manage the credit risks associated with
our derivative financial instruments through the evaluation and monitoring of the creditworthiness of the counterparties. Although we may be exposed to losses in the event of nonperformance by the counterparties, we do not expect such losses, if
any, to be significant. The valuation adjustments we recorded against the derivative financial instruments to reflect our credit risk and counterparty credit risk are not significant.
For derivative financial instruments used to hedge exposure to interest rate risk that are designated and effective as fair value hedges, such as fixed to variable swaps, changes in the fair
value of the derivative financial instrument substantially offset changes in the fair value of the hedged item, each of which is recorded to interest expense. For derivative financial instruments used to hedge exposure to equity price risk that are
designated and effective as fair value hedges, such as the derivative component of a prepaid forward sale agreement, changes in the fair value of the derivative financial instrument substantially offset changes in the fair value of the hedged item,
each of which is recorded to investment income (loss), net. When fair value hedges are terminated, sold, exercised or have expired, any gain or loss resulting from changes in the fair value of the hedged item is deferred and recognized in earnings
over the remaining life of the hedged item. When the hedged item is settled or sold, the unamortized adjustment in the carrying amount of the hedged item is recognized in earnings.
For derivative financial instruments designated as cash flow hedges, such as variable to fixed swaps and rate locks, the effective portion of the hedge is reported in other comprehensive
income (loss) and recognized as an adjustment to interest expense over the same period in which the related interest costs are recognized in earnings. When hedged variable-rate debt is settled, the
previously deferred effective portion of the hedge is written off to interest expense in a manner similar to debt extinguishment costs.
Equity derivative financial instruments embedded in other contracts are separated from their host contract. The derivative component is recorded at its estimated fair value in our consolidated
balance sheet and changes in its value are recorded each period to investment income (loss), net.
As of December 31, 2009, our
derivative financial instruments designated as hedges included (i) the derivative component of one of our prepaid forward sale agreements, which is recorded to other noncurrent liabilities, and (ii) our interest rate swap agreements, which
are recorded to other current or noncurrent assets or liabilities. As of December 31, 2009, our derivative financial instruments not designated as hedges were (i) the derivative component of our indexed debt instruments (our ZONES debt),
which is recorded to long-term debt, and (ii) the derivative component of certain of our prepaid forward sale agreements, which are recorded to other noncurrent liabilities.
The gain or loss recognized on our interest rate swap agreements due to changes in interest rates is recorded to interest expense and is fully offset by changes in the value of our debt. The
gain or loss recognized on the derivative component of our prepaid forward sale agreements is recorded to investment income (loss), net and is substantially offset by changes in the value of the underlying investments. The gain or loss recognized on
the derivative component of our ZONES debt is recorded to investment income (loss), net.
See Note 10 for further discussion on our
derivative financial instruments and fair value measurements.
Subsequent Events
We have evaluated events and transactions that occurred after the balance sheet date through the issuance date of these financial statements to determine if financial statement recognition or
additional disclosure is required.
Note 3: Recent Accounting Pronouncements
Business Combinations
In November 2007, the Financial Accounting Standards Board (FASB) made changes to the accounting guidance related to business combinations.
The updated guidance (i) continues to require that all business combinations be accounted for by applying the acquisition method, (ii) requires all transaction costs be expensed as incurred and (iii) rescinded the accounting guidance
for uncertainties related to income taxes in a business combination. We have applied the updated guidance since January 1, 2009, although none of our acquisitions in 2009 had a material impact on our consolidated financial statements.
|
|
|
|
|
Comcast 2009 Annual Report on Form 10-K |
|
48 |
|
|
Noncontrolling Interests in Consolidated Financial Statements
In November 2007, the FASB issued new accounting guidance that establishes accounting and reporting requirements for noncontrolling interests in
consolidated financial statements. The guidance requires noncontrolling interests (previously referred to as minority interests) that are not redeemable to be separately reported in the equity section of an entitys consolidated balance sheet.
Redeemable noncontrolling interests continue to be presented outside of equity. The guidance establishes accounting and reporting standards for (i) ownership interests in subsidiaries held by parties other than the parent, (ii) the amount
of consolidated net income attributable to the parent and to the noncontrolling interests, (iii) changes in a parents ownership interest and (iv) the valuation of retained noncontrolling equity investments when a subsidiary is
deconsolidated. In addition, it establishes disclosure requirements, including new financial statement captions that clearly distinguish between controlling and noncontrolling interests. These include a separate presentation of net income
attributable to controlling and noncontrolling interests with the combined amounts labeled as Net income from consolidated operations in our statement of operations. Under the new guidance, Net income from consolidated
operations is comparable to what was previously presented as Income from continuing operations before minority interest, and Net income attributable to Comcast Corporation is comparable to what was previously presented
as Net income. The new accounting guidance requires the retrospective application of the new financial statement captions. We have applied the new guidance since January 1, 2009. See Note 11 for further details on our noncontrolling
interests.
Consolidation of Variable Interest Entities
In June 2009, the FASB updated the accounting guidance related to the consolidation of VIEs. The updated guidance (i) requires ongoing reassessments of whether an enterprise is the
primary beneficiary of a VIE, (ii) changes the quantitative approach previously required for determining the primary beneficiary of a VIE and replaces it with a qualitative approach, and (iii) requires additional disclosure about an
enterprises involvement in VIEs. The guidance will be effective for us on January 1, 2010 and we do not expect it to have a material impact on our consolidated financial statements.
Note 4: Earnings Per Share
Basic earnings per common share attributable to Comcast Corporation shareholders (Basic EPS) is computed by dividing net income
attributable to Comcast Corporation by the weighted-average number of common shares outstanding during the period.
Our potentially
dilutive securities include potential common shares related to our stock options and our RSUs. Diluted earnings per common share attributable to Comcast Corporation shareholders (Diluted EPS) considers the impact of potentially dilutive
securities using the treasury stock method, except in periods in which there is a loss, because the inclusion of the potential common shares would have an antidilutive effect. Diluted EPS excludes the impact of potential common shares related to our
stock options in periods in which the option exercise price is greater than the average market price of our Class A common stock or our Class A Special common stock, as applicable (see Note 14).
Diluted EPS for 2009, 2008 and 2007 excludes approximately 195 million, 159 million and 61 million, respectively, of potential common
shares related to our share-based compensation plans, because the inclusion of the potential common shares would have an antidilutive effect.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009 |
|
|
|
2008 |
|
|
|
2007 |
Year ended December 31 (in millions, except per share data) |
|
Net Income Attributable to Comcast Corporation |
|
Shares |
|
Per Share Amount |
|
|
|
Net Income Attributable to Comcast Corporation |
|
Shares |
|
Per Share Amount |
|
|
|
Net Income Attributable to Comcast Corporation |
|
Shares |
|
Per Share Amount |
Basic EPS attributable to Comcast Corporation shareholders |
|
$ |
3,638 |
|
2,875 |
|
$ |
1.27 |
|
|
|
$ |
2,547 |
|
2,939 |
|
$ |
0.87 |
|
|
|
$ |
2,587 |
|
3,098 |
|
$ |
0.84 |
Effect of dilutive securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assumed exercise or issuance of shares relating to stock plans |
|
|
|
|
10 |
|
|
|
|
|
|
|
|
|
13 |
|
|
|
|
|
|
|
|
|
31 |
|
|
|
Diluted EPS attributable to Comcast Corporation shareholders |
|
$ |
3,638 |
|
2,885 |
|
$ |
1.26 |
|
|
|
$ |
2,547 |
|
2,952 |
|
$ |
0.86 |
|
|
|
$ |
2,587 |
|
3,129 |
|
$ |
0.83 |
|
|
|
|
|
|
|
49 |
|
Comcast 2009 Annual Report on Form 10-K |
Note 5: Acquisitions and Other Significant Events
2009
NBC Universal Transaction
We entered
into agreements with General Electric Company (GE) in December 2009 to form a new company of which we will own 51% and control, with the remaining 49% to be owned by GE. Under the terms of the transaction, GE will contribute NBC
Universals businesses, including its cable and broadcast networks, filmed entertainment, televised entertainment, theme parks and unconsolidated investments, as well as other GE assets used primarily in NBC Universals business. NBC
Universal will borrow $9.1 billion from third party lenders and distribute the proceeds to GE. We will contribute our national programming networks, our regional sports networks and certain of our Internet businesses, as well as other assets used
primarily in those businesses, collectively valued at approximately $7.25 billion, and make a cash payment to GE of $7.1 billion less certain adjustments primarily based on the free cash flow generated by NBC Universal between December 4, 2009
and the closing. GE will be entitled to cause the new company to redeem half of GEs interest three and a half years after the closing and its remaining interest seven years after the closing. If GE exercises its first redemption right, we have
the right to purchase the remainder of GEs interest. If GE does not exercise its first redemption right, we have the right to purchase half of GEs interest five years after the closing. We also will have the right to purchase GEs
remaining interest, if any, eight years after the closing. The redemption and purchase price will equal the ownership percentage being acquired multiplied by 120% of the fully distributed public market trading value of the new company, less half of
the excess of 120% of that value over $28.15 billion. Subject to various limitations, we are committed to fund up to $2.875 billion in cash or common stock for each of the two redemptions (for an aggregate of up to $5.75 billion), with amounts not
used in the first redemption to be available for the second redemption. The transaction is subject to various regulatory approvals and is expected to close by the end of 2010.
The results of operations for the new company will be consolidated with our results of operations, as we will control the new company. When the transaction is completed, the NBC Universal
businesses will be recorded at their fair value and the businesses we contribute will be recorded at their historical or carry-over basis. GEs interest will be recorded as a redeemable noncontrolling interest in our consolidated financial
statements.
2008
Insight
Transaction
In April 2007, we and Insight Communications (Insight) agreed to divide the assets and liabilities of Insight
Midwest, a 50%-50% cable system partnership with Insight (the Insight transaction). On December 31, 2007, we contributed approximately $1.3 billion to Insight Midwest for our share of the partnerships debt. On January 1,
2008, the distribution of the assets of Insight Midwest was completed without assumption of any of Insights debt by us and we received cable systems serving approximately 696,000 video
customers in Illinois and Indiana (the Comcast asset pool). Insight received cable systems serving approximately 652,000 video customers, together with approximately $1.24 billion of debt allocated to those cable systems (the
Insight asset pool). We accounted for our interest in Insight Midwest as an equity method investment until the Comcast asset pool was distributed to us on January 1, 2008. We accounted for the distribution of assets by Insight
Midwest as a sale of our 50% interest in the Insight asset pool in exchange for acquiring an additional 50% interest in the Comcast asset pool. The estimated fair value of the 50% interest of the Comcast asset pool we received was approximately $1.2
billion and resulted in a pretax gain of approximately $235 million, which is included in other income (expense). We recorded our 50% interest in the Comcast asset pool as a step acquisition, which was in accordance with the applicable accounting
guidance at that time.
The results of operations for the cable systems acquired in the Insight transaction have been reported in our
consolidated financial statements since January 1, 2008 and are reported in our Cable segment. The weighted-average amortization period of the franchise-related customer relationship intangible assets acquired was 4.5 years. Substantially all
of the goodwill recorded is expected to be amortizable for tax purposes.
The table below presents the purchase price allocation to
assets acquired and liabilities assumed as a result of the Insight transaction.
|
|
|
|
|
(in millions) |
|
|
|
Property and equipment |
|
$ |
587 |
|
Franchise-related customer relationships |
|
|
64 |
|
Cable franchise rights |
|
|
1,374 |
|
Goodwill |
|
|
105 |
|
Other assets |
|
|
27 |
|
Total liabilities |
|
|
(31 |
) |
Net assets acquired |
|
$ |
2,126 |
|
Other
In April 2008, we acquired an additional interest in Comcast SportsNet Bay Area. In July 2008, we acquired Plaxo,
an address book management and social networking website service. In August 2008, we acquired the remaining interest in G4 that we did not already own. In September 2008, we acquired DailyCandy, an e-mail newsletter and website. The results of
operations for these acquisitions have been included in our consolidated results of operations since their respective acquisition dates. The results of operations for Plaxo and DailyCandy are reported in Corporate and Other. The aggregate purchase
price of these other 2008 acquisitions was approximately $610 million. None of these acquisitions were material to our consolidated financial statements for the year ended December 31, 2008.
|
|
|
|
|
Comcast 2009 Annual Report on Form 10-K |
|
50 |
|
|
2007
Houston Transaction
In July 2006, we initiated the dissolution of Texas and Kansas City Cable Partners (the Houston transaction), our 50%-50%
cable system partnership with Time Warner Cable (TWC). On January 1, 2007, the distribution of assets by Texas and Kansas City Cable Partners was completed and we received the cable system serving Houston, Texas (the Houston
asset pool) and TWC received the cable systems serving Kansas City, south and west Texas, and New Mexico (the Kansas City asset pool). We accounted for the distribution of assets by Texas and Kansas City Cable Partners as a sale of
our 50% interest in the Kansas City asset pool in exchange for acquiring an additional 50% interest in the Houston asset pool. This transaction resulted in an increase of approximately 700,000 video customers. The estimated fair value of the 50%
interest of the Houston asset pool we received was approximately $1.1 billion and resulted in a pretax gain of approximately $500 million, which is included in other income (expense). We recorded our 50% interest in the Houston asset pool as a step
acquisition, which was in accordance with the applicable accounting guidance at that time.
The results of operations for the cable
systems acquired in the Houston transaction have been reported in our Cable segment since August 1, 2006 and in our consolidated financial statements since January 1, 2007 (the date of the distribution of assets). The weighted-average
amortization period of the franchise-related customer relationship intangible assets acquired was 7 years. As a result of the Houston transaction, we reversed deferred tax liabilities of approximately $200 million, which were primarily related to
the excess of tax basis of the assets acquired over the tax basis of the assets exchanged, and reduced the amount of goodwill that would have otherwise been recorded in the acquisition. Substantially all of the goodwill recorded is expected to be
amortizable for tax purposes.
The table below presents the purchase price allocation to assets acquired and liabilities assumed as a
result of the Houston transaction.
|
|
|
|
|
(in millions) |
|
|
|
Property and equipment |
|
$ |
870 |
|
Franchise-related customer relationships |
|
|
266 |
|
Cable franchise rights |
|
|
1,954 |
|
Goodwill |
|
|
426 |
|
Other assets |
|
|
267 |
|
Total liabilities |
|
|
(73 |
) |
Net assets acquired |
|
$ |
3,710 |
|
Other
In April 2007, we acquired Fandango, an online entertainment site and movie-ticket service. The results of
operations of Fandango have been included in our consolidated financial statements since
the acquisition date and are reported in Corporate and Other. In June 2007, we acquired Rainbow Media Holdings LLCs 60% interest in Comcast SportsNet Bay Area (formerly known as Bay Area
SportsNet) and its 50% interest in Comcast SportsNet New England (formerly known as Sports Channel New England), expanding our regional sports networks. The completion of this transaction resulted in our 100% ownership in Comcast SportsNet New
England and 60% ownership in Comcast SportsNet Bay Area. In August 2007, we acquired the cable system of Patriot Media serving approximately 81,000 video customers in central New Jersey. The results of operations of Patriot Media, Comcast SportsNet
Bay Area and Comcast SportsNet New England have been included in our consolidated financial statements since their acquisition dates and are reported in our Cable segment. The aggregate purchase price of these other 2007 acquisitions was
approximately $1.288 billion. None of these acquisitions were material to our consolidated financial statements for the year ended December 31, 2007.
Note 6: Investments
|
|
|
|
|
|
|
December 31 (in millions) |
|
2009 |
|
2008 |
Fair Value Method |
|
|
|
|
|
|
Equity securities |
|
$ |
1,933 |
|
$ |
940 |
Debt securities |
|
|
|
|
|
3 |
|
|
|
1,933 |
|
|
943 |
Equity Method |
|
|
|
|
|
|
SpectrumCo, LLC |
|
|
1,410 |
|
|
1,354 |
Clearwire LLC |
|
|
530 |
|
|
421 |
Other |
|
|
401 |
|
|
402 |
|
|
|
2,341 |
|
|
2,177 |
Cost Method |
|
|
|
|
|
|
AirTouch |
|
|
1,494 |
|
|
1,479 |
Other |
|
|
229 |
|
|
243 |
|
|
|
1,723 |
|
|
1,722 |
Total investments |
|
|
5,997 |
|
|
4,842 |
Less: Current investments |
|
|
50 |
|
|
59 |
Noncurrent investments |
|
$ |
5,947 |
|
$ |
4,783 |
Fair
Value Method
As of December 31, 2009, we held $1.929 billion of fair value method equity securities related to our obligations
under prepaid forward sale agreements as collateral. These obligations are recorded to other noncurrent liabilities and terminate between 2011 and 2015. At termination of these prepaid forward sale agreements, the counterparties are entitled to
receive some or all of the equity securities, or an equivalent amount of cash at our option, based on the market value of the equity securities at that time.
|
|
|
|
|
|
|
51 |
|
Comcast 2009 Annual Report on Form 10-K |
The net unrealized gains on investments accounted for as AFS securities as of December 31, 2009 and 2008 were $ 34 million and $
29 million, respectively. The amounts were reported as a component of accumulated other comprehensive income (loss), net of related deferred income taxes of $12 million and $10 million as of December 31, 2009 and 2008, respectively.
Available-For-Sale Securities
|
|
|
|
|
|
|
|
Year ended December 31 (in millions) |
|
2009 |
|
2008 |
|
Cost |
|
$ |
46 |
|
$ |
60 |
|
Unrealized gains |
|
|
34 |
|
|
34 |
|
Unrealized losses |
|
|
|
|
|
(5 |
) |
Fair value |
|
$ |
80 |
|
$ |
89 |
|
Proceeds from the sale of AFS securities in 2009, 2008 and 2007 were $90 million, $638 million and $1.033 billion, respectively. Gross realized gains on these sales in 2009, 2008 and 2007 were $13 million, $1 million and $145 million,
respectively. Sales of AFS securities in 2008 and 2007 consisted primarily of the sale of debt securities and sales of Time Warner Inc. common stock, respectively.
Equity Method
SpectrumCo, LLC
SpectrumCo, LLC (SpectrumCo) is a joint venture in which we, along with TWC and Bright House Networks, are partners. SpectrumCo was the successful bidder for 137 wireless spectrum
licenses for approximately $2.4 billion in the Federal Communications Commissions advanced wireless spectrum auction that concluded in September 2006. Our portion of the total cost to purchase the licenses was approximately $1.3 billion. Based
on SpectrumCos currently planned activities, we have determined that it is not a VIE. We have and continue to account for this joint venture as an equity method investment based on its governance structure, notwithstanding our majority
interest.
Clearwire
In
November 2008, Sprint Nextel and the legal predecessor of Clearwire Corporation (old Clearwire) closed on a series of transactions (collectively, the Clearwire transaction) with an investor group made up of us, Intel, Google,
TWC and Bright House Networks. As a result of the Clearwire transaction, Sprint Nextel and old Clearwire combined their next-generation wireless broadband businesses and formed a new independent holding company, Clearwire Corporation, and its
operating subsidiary, Clearwire Communications LLC (Clearwire LLC), that will focus on the deployment of a nationwide 4G wireless network. We, together
with the other members of the investor group, initially invested $3.2 billion in Clearwire LLC. Our portion of the initial investment was $1.05 billion. As a result of our initial investment, we
received 61.8 million ownership units (ownership units) of Clearwire LLC and 61.8 million shares of Class B stock (voting stock) of Clearwire Corporation, the publicly traded holding company that controls Clearwire
LLC. The voting stock has voting rights equal to those of the publicly traded Class A stock of Clearwire Corporation, but has only minimal economic rights. We hold our economic rights through the ownership units, which have limited voting
rights. One ownership unit combined with one share of voting stock are exchangeable into one share of Clearwire Corporations publicly traded Class A stock. Also in connection with the Clearwire transaction, we entered into an agreement
with Sprint Nextel that allows us to offer wireless services using certain of Sprint Nextels existing wireless networks and an agreement with Clearwire LLC that allows us to offer wireless services using Clearwire LLCs next generation
wireless broadband network. We allocated a portion of our $1.05 billion investment to the related agreements.
In 2009, we purchased an
aggregate of approximately 25.6 million ownership units and approximately 25.6 million voting units of Clearwire LLC for approximately $185 million in connection with Clearwire Corporations $1.564 billion rights offering. Immediately
following the rights offering, we transferred the 25.6 million voting units received to Clearwire Corporation and received 25.6 million shares of Clearwire Corporation voting stock. As of December 31, 2009, we held approximately 9.4%
of the ownership interests in Clearwire Corporation on a fully diluted basis.
In 2008, as a result of the significant decline in the
quoted market value of Clearwire Corporations publicly traded Class A shares from the date of our initial agreement in May 2008 to the quoted market value as of December 31, 2008, we evaluated our investment to determine if an
other-than-temporary decline in fair value below our cost basis had occurred. As a result of the severe decline in the quoted market value, we recognized an impairment in other income (expense) of $600 million to adjust our cost basis in our
investment to its estimated fair value as of December 31, 2008. If, in the future, we are required to evaluate our investment to determine if an other-than-temporary decline in fair value below our cost basis has occurred, we anticipate that
our evaluation would consider (i) a comparison of actual operating results and updated forecasts to the projected discounted cash flows that were used in making our initial investment decision, (ii) other impairment indicators, such as
changes in competition or technology, and (iii) a comparison to the value that would be obtained by exchanging our investment into Clearwire Corporations publicly traded Class A shares. As of December 31, 2009, the fair value of
our investment exceeded our cost basis.
|
|
|
|
|
Comcast 2009 Annual Report on Form 10-K |
|
52 |
|
|
Cost Method
AirTouch Communications, Inc.
We hold two series of preferred stock of AirTouch Communications, Inc.
(AirTouch), a subsidiary of Vodafone, which are redeemable in April 2020. The estimated fair value of the AirTouch preferred stock was $1.524 billion and $1.357 billion as of December 31, 2009 and 2008, respectively.
The dividend and redemption activity of the AirTouch preferred stock determines the dividend and redemption payments associated with substantially all
of the preferred shares issued by one of our consolidated subsidiaries, which is a VIE. The subsidiary has three series of preferred stock outstanding with an aggregate redemption value of $1.750 billion. Substantially all of the preferred shares
are redeemable in April 2020 at a redemption value of $1.650 billion. As of December 31, 2009 and 2008, the two redeemable series of subsidiary preferred shares were recorded at $1.479 billion and $1.468 billion, respectively, and those amounts
are included in other noncurrent liabilities. The one nonredeemable series of subsidiary preferred shares was recorded at $100 million as of both December 31, 2009 and 2008 and those amounts are included in noncontrolling interests on our
consolidated balance sheet.
Investment Income (Loss), Net
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31 (in millions) |
|
2009 |
|
|
2008 |
|
|
2007 |
|
Gains on sales and exchanges of investments, net |
|
$ |
28 |
|
|
$ |
8 |
|
|
$ |
151 |
|
Investment impairment losses |
|
|
(44 |
) |
|
|
(28 |
) |
|
|
(4 |
) |
Unrealized gains (losses) on securities underlying prepaid forward sale agreements |
|
|
997 |
|
|
|
(1,117 |
) |
|
|
315 |
|
Mark to market adjustments on derivative component of prepaid forward sale agreements |
|
|
(815 |
) |
|
|
1,120 |
|
|
|
(188 |
) |
Mark to market adjustments on derivative component of ZONES |
|
|
8 |
|
|
|
57 |
|
|
|
160 |
|
Interest and dividend income |
|
|
102 |
|
|
|
149 |
|
|
|
199 |
|
Other, net |
|
|
6 |
|
|
|
(100 |
) |
|
|
(32 |
) |
Investment income (loss), net |
|
$ |
282 |
|
|
$ |
89 |
|
|
$ |
601 |
|
|
|
|
|
|
|
|
53 |
|
Comcast 2009 Annual Report on Form 10-K |
Note 7: Property and
Equipment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31 (in millions) |
|
Weighted Average Original Useful Life at December 31, 2009 |
|
|
|
2009 |
|
|
|
|
2008 |
|
Cable transmission equipment and distribution facilities |
|
12 years |
|
|
|
$ |
16,059 |
|
|
|
|
$ |
15,660 |
|
Customer premises equipment |
|
6 years |
|
|
|
|
20,154 |
|
|
|
|
|
17,788 |
|
Scalable infrastructure |
|
7 years |
|
|
|
|
6,525 |
|
|
|
|
|
5,776 |
|
Support capital |
|
5 years |
|
|
|
|
6,106 |
|
|
|
|
|
5,820 |
|
Buildings and building improvements |
|
20 years |
|
|
|
|
1,937 |
|
|
|
|
|
1,874 |
|
Land |
|
|
|
|
|
|
206 |
|
|
|
|
|
205 |
|
Other |
|
8 years |
|
|
|
|
678 |
|
|
|
|
|
556 |
|
Property and equipment, at cost |
|
|
|
|
|
|
51,665 |
|
|
|
|
|
47,679 |
|
Less: Accumulated depreciation |
|
|
|
|
|
|
(27,810 |
) |
|
|
|
|
(23,235 |
) |
Property and equipment, net |
|
|
|
|
|
$ |
23,855 |
|
|
|
|
$ |
24,444 |
|
Note
8: Goodwill and Other Intangible Assets
The changes in the carrying amount of goodwill by business segment (see Note 18) are presented in the table below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in millions) |
|
Cable |
|
|
Programming |
|
|
Corporate and Other |
|
|
Total |
|
Balance, December 31, 2007 |
|
$ |
12,842 |
|
|
$ |
1,482 |
|
|
$ |
381 |
|
|
$ |
14,705 |
|
Acquisitions |
|
|
306 |
|
|
|
139 |
|
|
|
209 |
|
|
|
654 |
|
Settlements and adjustments |
|
|
(475 |
) |
|
|
(1 |
) |
|
|
6 |
|
|
|
(470 |
) |
Balance, December 31, 2008 |
|
$ |
12,673 |
|
|
$ |
1,620 |
|
|
$ |
596 |
|
|
$ |
14,889 |
|
Acquisitions |
|
|
33 |
|
|
|
10 |
|
|
|
|
|
|
|
43 |
|
Settlements and adjustments |
|
|
63 |
|
|
|
|
|
|
|
(62 |
) |
|
|
1 |
|
Balance, December 31, 2009 |
|
$ |
12,769 |
|
|
$ |
1,630 |
|
|
$ |
534 |
|
|
$ |
14,933 |
|
Cable segment acquisitions in 2009 were primarily related to the acquisition of the remaining interest in New England Cable News that we did not already own. Programming segment acquisitions in 2009 were primarily related to the
acquisitions of GolfNow and WorldGolf. Settlements and adjustments in 2009 were primarily related to the DailyCandy and Plaxo transactions.
Cable segment acquisitions in 2008 were primarily related to the Insight transaction and the acquisition of an additional interest in Comcast SportsNet Bay Area. Programming segment acquisitions in 2008 were primarily related to the
acquisition of the remaining interest in G4 that we did not already own. Corporate and Other acquisitions in 2008 were primarily related to Internet-related businesses, including Plaxo and DailyCandy. Settlements and adjustments in 2008 were
primarily related to the settlement of an uncertain tax position of an acquired entity (see Note 15).
|
|
|
|
|
Comcast 2009 Annual Report on Form 10-K |
|
54 |
|
|
The gross carrying amount
and accumulated amortization of our intangible assets subject to amortization are presented in the table below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009 |
|
|
|
|
2008 |
|
December 31 (in millions) |
|
Original Useful Life at December 31, 2009 |
|
|
|
Gross Carrying Amount |
|
Accumulated Amortization |
|
|
|
|
Gross Carrying Amount |
|
Accumulated Amortization |
|
Customer relationships |
|
4-12 years |
|
|
|
$ |
5,515 |
|
$ |
(4,370 |
) |
|
|
|
$ |
5,512 |
|
$ |
(4,030 |
) |
Programming distribution rights |
|
6-22 years |
|
|
|
|
1,861 |
|
|
(1,119 |
) |
|
|
|
|
1,533 |
|
|
(859 |
) |
Cable franchise renewal costs and contractual operating rights |
|
5-15 years |
|
|
|
|
968 |
|
|
(499 |
) |
|
|
|
|
1,154 |
|
|
(484 |
) |
Software |
|
3-5 years |
|
|
|
|
2,283 |
|
|
(1,388 |
) |
|
|
|
|
1,887 |
|
|
(1,045 |
) |
Patents and other technology rights |
|
3-12 years |
|
|
|
|
246 |
|
|
(148 |
) |
|
|
|
|
244 |
|
|
(119 |
) |
Programming agreements and rights |
|
1-10 years |
|
|
|
|
1,094 |
|
|
(853 |
) |
|
|
|
|
1,508 |
|
|
(1,303 |
) |
Other agreements and rights |
|
2-25 years |
|
|
|
|
849 |
|
|
(334 |
) |
|
|
|
|
880 |
|
|
(320 |
) |
Total |
|
|
|
|
|
$ |
12,816 |
|
$ |
(8,711 |
) |
|
|
|
$ |
12,718 |
|
$ |
(8,160 |
) |
The
estimated expenses for each of the next five years recognized in amortization expense and other accounts are presented in the table below. The amortization of certain intangible assets of our Programming segment are not recognized as amortization
expense but as a reduction to revenue or as an operating expense and are presented under the caption Other Accounts.
|
|
|
|
|
|
|
(in millions) |
|
Amortization Expense |
|
Other Accounts |
2010 |
|
$ |
987 |
|
$ |
149 |
2011 |
|
$ |
835 |
|
$ |
67 |
2012 |
|
$ |
704 |
|
$ |
45 |
2013 |
|
$ |
470 |
|
$ |
18 |
2014 |
|
$ |
279 |
|
$ |
6 |
Note 9: Long-Term Debt
|
|
|
|
|
|
|
|
|
|
December 31 (in millions) |
|
Weighted Average Interest Rate as of December 31, 2009 |
|
|
2009 |
|
2008 |
Revolving bank credit facility due 2013 |
|
N/A |
|
|
$ |
|
|
$ |
1,000 |
Senior notes with maturities of 5 years or less |
|
6.82 |
% |
|
|
6,861 |
|
|
9,425 |
Senior notes with maturities between 6 and 10 years |
|
6.29 |
% |
|
|
9,293 |
|
|
9,798 |
Senior notes with maturities greater than 10 years |
|
7.00 |
% |
|
|
12,287 |
|
|
11,284 |
Senior subordinated notes due 2012 |
|
10.63 |
% |
|
|
202 |
|
|
202 |
ZONES due 2029 |
|
2.00 |
% |
|
|
124 |
|
|
408 |
Other, including capital lease obligations |
|
|
|
|
|
329 |
|
|
339 |
Total debt |
|
6.41 |
%(a) |
|
$ |
29,096 |
|
$ |
32,456 |
Less: Current portion |
|
|
|
|
|
1,156 |
|
|
2,278 |
Long-term debt |
|
|
|
|
$ |
27,940 |
|
$ |
30,178 |
(a) |
|
Includes the effects of our derivative financial instruments. |
|
|
|
|
|
|
|
55 |
|
Comcast 2009 Annual Report on Form 10-K |
As of December 31, 2009 and 2008, our debt had an estimated fair value of $31.247 billion and
$32.001 billion, respectively. The estimated fair value of our publicly traded debt is based on quoted market values on an active market for the debt. To estimate the fair value of debt issuances for which there are no quoted market prices, we use
interest rates available to us for debt issuances with similar terms and remaining maturities.
Some of our loan agreements require that
we maintain certain financial ratios based on our debt and our operating income before depreciation and amortization. We were in compliance with all financial covenants for all periods presented. See Note 20 for a discussion of our subsidiary
guarantee structures.
As of December 31, 2009 and 2008, accrued interest was $497 million and $520 million, respectively.
Debt Maturities
|
|
|
|
As of December 31, 2009 (in millions) |
|
|
2010 |
|
$ |
1,156 |
2011 |
|
$ |
1,809 |
2012 |
|
$ |
832 |
2013 |
|
$ |
2,450 |
2014 |
|
$ |
1,091 |
Thereafter |
|
$ |
21,758 |
Debt Borrowings
|
|
|
|
Year ended December 31, 2009 (in millions) |
|
|
5.70% notes due 2019 |
|
$ |
700 |
6.55% notes due 2039 |
|
|
800 |
Other |
|
|
64 |
Total |
|
$ |
1,564 |
We used the net proceeds of these borrowings, together with cash on hand, for the repurchase of debt securities prior to their scheduled maturities, the repayment of outstanding borrowings under our revolving credit facility, the repayment
of debt at its maturity, as well as for working capital and general corporate purposes.
Debt Repayments
|
|
|
|
Year ended December 31, 2009 (in millions) |
|
|
Revolving bank credit facility due 2013 |
|
$ |
1,000 |
Floating rate notes due 2009 |
|
|
1,241 |
6.875% notes due 2009 |
|
|
750 |
8.375% notes due 2013 |
|
|
676 |
7.125% notes due 2013 |
|
|
367 |
7.875% senior debentures due 2013 |
|
|
312 |
ZONES due 2029 |
|
|
262 |
Other |
|
|
130 |
Total |
|
$ |
4,738 |
In July 2009, we completed a cash tender to purchase $1.3 billion aggregate principal amount of certain of our outstanding notes for approximately $1.5 billion. These notes consisted of approximately $621 million principal amount of our
8.375% notes due 2013, $367 million principal amount of our 7.125% notes due 2013 and $312 million principal amount of our 7.875% senior debentures due 2013. In 2009, we recognized approximately $180 million of interest expense primarily associated
with the premiums incurred in this cash tender.
Debt Instruments
Commercial Paper Program
Our commercial paper program provides a lower cost borrowing
source of liquidity to fund our short-term working capital requirements. The program allows for a maximum of $2.25 billion of commercial paper to be issued at any one time. Our revolving bank credit facility supports this program.
Revolving Bank Credit Facility
As of
December 31, 2009, we had a $6.8 billion revolving credit facility due January 2013 (the credit facility) with a syndicate of banks. The base rate, chosen at our option, is either the London Interbank Offered Rate
(LIBOR) or the greater of the prime rate or the Federal Funds rate plus 0.5%. The borrowing margin is based on our senior unsecured debt ratings. As of December 31, 2009, the interest rate for borrowings under the credit facility
was LIBOR plus 0.35%.
Lines and Letters of Credit
As of December 31, 2009, we and certain of our subsidiaries had unused lines of credit totaling $6.411 billion under various credit facilities and unused irrevocable standby letters of credit totaling $416
million to cover potential fundings under various agreements.
ZONES
At maturity, holders of our 2.0% Exchangeable Subordinated Debentures due 2029 (ZONES) are entitled to receive in cash an amount equal to the higher of the principal amount of the
outstanding ZONES of $282 million or the market value of
|
|
|
|
|
Comcast 2009 Annual Report on Form 10-K |
|
56 |
|
|
approximately 3.8 million shares of Sprint Nextel common stock and 137,000 shares of CenturyTel common stock. Before maturity, each of the ZONES is exchangeable at the holders option
for an amount of cash equal to 95% of the aggregate market value of one share of Sprint Nextel common stock and 0.0685 shares of CenturyTel common stock.
We separate the accounting for the ZONES into derivative and debt components. The following table presents the change in the carrying value of the debt component and the change in the fair value of the derivative
component (see Note 6).
|
|
|
|
|
|
|
|
|
|
|
|
|
(in millions) |
|
Debt Component |
|
|
Derivative Component |
|
|
Total |
|
Balance as of January 1, 2009 |
|
$ |
385 |
|
|
$ |
23 |
|
|
$ |
408 |
|
Change in debt component to interest expense |
|
|
7 |
|
|
|
|
|
|
|
7 |
|
Change in derivative component to investment income (loss), net |
|
|
|
|
|
|
(8 |
) |
|
|
(8 |
) |
Repurchases |
|
|
(283 |
) |
|
|
|
|
|
|
(283 |
) |
Balance as of December 31, 2009 |
|
$ |
109 |
|
|
$ |
15 |
|
|
$ |
124 |
|
Note 10: Fair Value
Measurements and Derivative Financial Instruments
The accounting guidance related to financial assets and financial liabilities (financial instruments) establishes a hierarchy that prioritizes fair value measurements based on the types of inputs used
for the various valuation techniques (market approach, income approach and cost approach). The levels of the hierarchy are described below:
|
|
Level 1: consists of financial instruments whose value is based on quoted market prices for identical financial instruments in an active market
|
|
|
Level 2: consists of financial instruments that are valued using models or other valuation methodologies. These models use inputs that are observable either
directly or indirectly; Level 2 inputs include (i) quoted prices for similar assets or liabilities in active markets, (ii) quoted prices for identical or similar assets or liabilities in markets that are not active, (iii) pricing
models whose inputs are observable for substantially the full term of the financial instrument and (iv) pricing models whose inputs are derived principally from or corroborated by observable market data through correlation or other means for
substantially the full term of the financial instrument |
|
|
Level 3: consists of financial instruments whose values are determined using pricing models that use significant inputs that are primarily unobservable,
discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant management judgment or estimation |
Our assessment of the significance of a particular input to the fair value measurement requires judgment and may affect the valuation of financial
instruments and their classification within the fair value hierarchy. Financial instruments are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. There have been no changes in the
classification of any financial instruments within the fair value hierarchy in the periods presented. Our financial instruments that are accounted for at fair value on a recurring basis are presented in the table below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recurring Fair Value Measures |
|
|
|
Fair value as of December 31, 2009 |
|
|
|
Fair value as of December 31, 2008 |
|
(in millions) |
|
Level 1 |
|
|