UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
x | Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
For the quarterly period ended March 31, 2014
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 | Registrant; State of Incorporation; Address and Telephone Number |
I.R.S. Employer Identification No. | ||
001-32871 | COMCAST CORPORATION | 27-0000798 | ||
PENNSYLVANIA One Comcast Center Philadelphia, PA 19103-2838 (215) 286-1700 |
||||
333-174175 | NBCUNIVERSAL MEDIA, LLC | 14-1682529 | ||
DELAWARE 30 Rockefeller Plaza New York, NY 10112-0015 (212) 664-4444 |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding twelve months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Comcast Corporation |
Yes x |
No ¨ | ||
NBCUniversal Media, LLC |
Yes x |
No ¨ |
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, 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 period that the registrant was required to submit and post such files).
Comcast Corporation |
Yes x |
No ¨ | ||
NBCUniversal Media, LLC |
Yes x |
No ¨ |
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 definitions of large accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act.
Comcast Corporation |
Large accelerated filer | x | Accelerated filer | ¨ | Non-accelerated filer | ¨ | Smaller reporting company | ¨ | ||||||||
NBCUniversal Media, LLC |
Large accelerated filer | ¨ | Accelerated filer | ¨ | Non-accelerated filer | x | Smaller reporting company | ¨ |
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Act).
Comcast Corporation |
Yes ¨ |
No x | ||
NBCUniversal Media, LLC |
Yes ¨ |
No x |
As of March 31, 2014, there were 2,146,295,093 shares of Comcast Corporation Class A common stock, 444,064,771 shares of Comcast Corporation Class A Special common stock and 9,444,375 shares of Comcast Corporation Class B common stock outstanding.
Indicate the number of shares outstanding of each of the registrants classes of stock, as of the latest practical date: Not applicable for NBCUniversal Media, LLC.
NBCUniversal Media, LLC meets the conditions set forth in General Instruction H(1)(a) and (b) of Form 10-Q and is therefore filing this form with the reduced disclosure format.
Explanatory Note
This Quarterly Report on Form 10-Q is a combined report being filed separately by Comcast Corporation (Comcast) and NBCUniversal Media, LLC (NBCUniversal). Comcast owns all of the common equity interests in NBCUniversal, and NBCUniversal meets the conditions set forth in General Instruction H(1)(a) and (b) of Form 10-Q and is therefore filing its information within this Form 10-Q with the reduced disclosure format. Each of Comcast and NBCUniversal is filing on its own behalf the information contained in this report that relates to itself, and neither company makes any representation as to information relating to the other company. Where information or an explanation is provided that is substantially the same for each company, such information or explanation has been combined in this report. Where information or an explanation is not substantially the same for each company, separate information and explanation has been provided. In addition, separate condensed consolidated financial statements for each company, along with notes to the condensed consolidated financial statements, are included in this report. Unless indicated otherwise, throughout this Quarterly Report on Form 10-Q, we refer to Comcast Corporation as Comcast; Comcast and its consolidated subsidiaries, including NBCUniversal and its consolidated subsidiaries, as we, us and our; Comcast Cable Communications, LLC and its consolidated subsidiaries as Comcast Cable; Comcast Holdings Corporation as Comcast Holdings; and NBCUniversal, LLC as NBCUniversal Holdings.
This Quarterly Report on Form 10-Q is for the three months ended March 31, 2014. This Quarterly Report modifies and supersedes documents filed prior to this Quarterly Report. The Securities and Exchange Commission (SEC) allows us to incorporate by reference information that we file with it, which means that we can disclose important information to you by referring you directly to those documents. Information incorporated by reference is considered to be part of this Quarterly Report. In addition, information that we file with the SEC in the future will automatically update and supersede information contained in this Quarterly Report.
You should carefully review the information contained in this Quarterly Report and particularly consider any risk factors set forth in this Quarterly Report and in other reports or documents that we file from time to time with the SEC. In this Quarterly Report, we state our beliefs of future events and of our future financial performance. In some cases, you can identify these so-called forward-looking statements by words such as may, will, should, expects, believes, estimates, potential, or continue, or the negative of those words, and other comparable words. You should be aware that these statements are only our predictions. In evaluating these statements, you should specifically consider various factors, including the risks outlined below and in other reports we file with the SEC. Actual events or our actual results may differ materially from any of our forward-looking statements. We undertake no obligation to update any forward-looking statements.
Our businesses may be affected by, among other things, the following:
| our businesses currently face a wide range of competition, and our businesses and results of operations could be adversely affected if we do not compete effectively |
| changes in consumer behavior driven by new technologies may adversely affect our businesses |
| our businesses depend on keeping pace with technological developments |
| programming expenses for our video services are increasing, which could adversely affect our businesses |
| we are subject to regulation by federal, state, local and foreign authorities, which may impose additional costs and restrictions on our businesses |
| weak economic conditions may have a negative impact on our businesses |
| a decline in advertising expenditures or changes in advertising markets could negatively impact our businesses |
| NBCUniversals success depends on consumer acceptance of its content, which is difficult to predict, and its businesses may be adversely affected if its content fails to achieve sufficient consumer acceptance or the costs to create or acquire content increase |
| the loss of NBCUniversals programming distribution agreements, or the renewal of these agreements on less favorable terms, could adversely affect its businesses |
| our businesses depend on using and protecting certain intellectual property rights and on not infringing the intellectual property rights of others |
| we rely on network and information systems and other technologies, as well as key properties, and a disruption, cyber attack, failure or destruction of such networks, systems, technologies or properties may disrupt our businesses |
| we may be unable to obtain necessary hardware, software and operational support |
| labor disputes, whether involving employees or sports organizations, may disrupt our operations and adversely affect our businesses |
| the loss of key management personnel or popular on-air and creative talent could have an adverse effect on our businesses |
| we face risks relating to doing business internationally that could adversely affect our businesses |
| acquisitions and other strategic transactions, including the proposed transaction with Time Warner Cable, present many risks, and we may not realize the financial and strategic goals that were contemplated at the time of any transaction |
| 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 company through his beneficial ownership of our Class B common stock |
Comcast Corporation
Condensed Consolidated Balance Sheet
(Unaudited)
(in millions, except share data) | March 31, 2014 |
December 31, 2013 |
||||||
Assets |
||||||||
Current Assets: |
||||||||
Cash and cash equivalents |
$ | 3,054 | $ | 1,718 | ||||
Investments |
2,389 | 3,573 | ||||||
Receivables, net |
6,151 | 6,376 | ||||||
Programming rights |
863 | 928 | ||||||
Other current assets |
1,586 | 1,480 | ||||||
Total current assets |
14,043 | 14,075 | ||||||
Film and television costs |
5,058 | 4,994 | ||||||
Investments |
3,090 | 3,770 | ||||||
Property and equipment, net of accumulated depreciation of $43,381 and $42,574 |
29,588 | 29,840 | ||||||
Franchise rights |
59,364 | 59,364 | ||||||
Goodwill |
27,103 | 27,098 | ||||||
Other intangible assets, net of accumulated amortization of $9,141 and $8,874 |
17,145 | 17,329 | ||||||
Other noncurrent assets, net |
2,382 | 2,343 | ||||||
Total assets |
$ | 157,773 | $ | 158,813 | ||||
Liabilities and Equity |
||||||||
Current Liabilities: |
||||||||
Accounts payable and accrued expenses related to trade creditors |
$ | 5,534 | $ | 5,528 | ||||
Accrued participations and residuals |
1,256 | 1,239 | ||||||
Deferred revenue |
776 | 898 | ||||||
Accrued expenses and other current liabilities |
7,418 | 7,967 | ||||||
Current portion of long-term debt |
2,819 | 3,280 | ||||||
Total current liabilities |
17,803 | 18,912 | ||||||
Long-term debt, less current portion |
44,581 | 44,567 | ||||||
Deferred income taxes |
31,595 | 31,935 | ||||||
Other noncurrent liabilities |
11,109 | 11,384 | ||||||
Commitments and contingencies (Note 10) |
||||||||
Redeemable noncontrolling interests and redeemable subsidiary preferred stock |
1,053 | 957 | ||||||
Equity: |
||||||||
Preferred stockauthorized, 20,000,000 shares; issued, zero |
| | ||||||
Class A common stock, $0.01 par valueauthorized, 7,500,000,000 shares; issued, 2,511,755,843 and 2,503,535,883; outstanding, 2,146,295,093 and 2,138,075,133 |
25 | 25 | ||||||
Class A Special common stock, $0.01 par valueauthorized, 7,500,000,000 shares; issued, 514,999,535 and 529,964,944; outstanding, 444,064,771 and 459,030,180 |
5 | 5 | ||||||
Class B common stock, $0.01 par valueauthorized, 75,000,000 shares; issued and outstanding, 9,444,375 |
| | ||||||
Additional paid-in capital |
38,985 | 38,890 | ||||||
Retained earnings |
19,737 | 19,235 | ||||||
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) |
33 | 56 | ||||||
Total Comcast Corporation shareholders equity |
51,268 | 50,694 | ||||||
Noncontrolling interests |
364 | 364 | ||||||
Total equity |
51,632 | 51,058 | ||||||
Total liabilities and equity |
$ | 157,773 | $ | 158,813 |
See accompanying notes to condensed consolidated financial statements.
1
Comcast Corporation
Condensed Consolidated Statement of Income
(Unaudited)
Three Months Ended March 31 |
||||||||
(in millions, except per share data) | 2014 | 2013 | ||||||
Revenue |
$ | 17,408 | $ | 15,310 | ||||
Costs and Expenses: |
||||||||
Programming and production |
5,908 | 4,663 | ||||||
Other operating and administrative |
4,752 | 4,466 | ||||||
Advertising, marketing and promotion |
1,210 | 1,147 | ||||||
Depreciation |
1,569 | 1,566 | ||||||
Amortization |
401 | 401 | ||||||
13,840 | 12,243 | |||||||
Operating income |
3,568 | 3,067 | ||||||
Other Income (Expense): |
||||||||
Interest expense |
(642 | ) | (653 | ) | ||||
Investment income (loss), net |
113 | 72 | ||||||
Equity in net income (losses) of investees, net |
32 | 11 | ||||||
Other income (expense), net |
(15 | ) | 73 | |||||
(512 | ) | (497 | ) | |||||
Income before income taxes |
3,056 | 2,570 | ||||||
Income tax expense |
(1,118 | ) | (925 | ) | ||||
Net income |
1,938 | 1,645 | ||||||
Net (income) loss attributable to noncontrolling interests and redeemable subsidiary preferred stock |
(67 | ) | (208 | ) | ||||
Net income attributable to Comcast Corporation |
$ | 1,871 | $ | 1,437 | ||||
Basic earnings per common share attributable to Comcast Corporation shareholders |
$ | 0.72 | $ | 0.55 | ||||
Diluted earnings per common share attributable to Comcast Corporation shareholders |
$ | 0.71 | $ | 0.54 | ||||
Dividends declared per common share |
$ | 0.225 | $ | 0.195 |
See accompanying notes to condensed consolidated financial statements.
2
Comcast Corporation
Condensed Consolidated Statement of Comprehensive Income
(Unaudited)
Three Months Ended March 31 |
||||||||
(in millions) | 2014 | 2013 | ||||||
Net income |
$ | 1,938 | $ | 1,645 | ||||
Unrealized gains (losses) on marketable securities, net of deferred taxes of $(17) and $(12) |
30 | 20 | ||||||
Deferred gains (losses) on cash flow hedges, net of deferred taxes of $1 and $21 |
(2 | ) | (36 | ) | ||||
Amounts reclassified to net income: |
||||||||
Realized (gains) losses on marketable securities, net of deferred taxes of $30 and $12 |
(50 | ) | (23 | ) | ||||
Realized (gains) losses on cash flow hedges, net of deferred taxes of $2 and $(27) |
(3 | ) | 46 | |||||
Employee benefit obligations, net of deferred taxes of $ and $(1) |
| 1 | ||||||
Currency translation adjustments, net of deferred taxes of $(1) and $5 |
2 | (17 | ) | |||||
Comprehensive income |
1,915 | 1,636 | ||||||
Net (income) loss attributable to noncontrolling interests and redeemable subsidiary preferred stock |
(67 | ) | (208 | ) | ||||
Other comprehensive (income) loss attributable to noncontrolling interests |
| 9 | ||||||
Comprehensive income attributable to Comcast Corporation |
$ | 1,848 | $ | 1,437 |
See accompanying notes to condensed consolidated financial statements.
3
Comcast Corporation
Condensed Consolidated Statement of Cash Flows
(Unaudited)
Three Months Ended March 31 |
||||||||
(in millions) | 2014 | 2013 | ||||||
Net cash provided by (used in) operating activities |
$ | 4,486 | $ | 4,369 | ||||
Investing Activities |
||||||||
Capital expenditures |
(1,448 | ) | (1,361 | ) | ||||
Cash paid for intangible assets |
(217 | ) | (182 | ) | ||||
Acquisitions and construction of real estate properties |
| (1,311 | ) | |||||
Proceeds from sales of businesses and investments |
300 | 74 | ||||||
Purchases of investments |
(37 | ) | (88 | ) | ||||
Other |
(103 | ) | 105 | |||||
Net cash provided by (used in) investing activities |
(1,505 | ) | (2,763 | ) | ||||
Financing Activities |
||||||||
Proceeds from (repayments of) short-term borrowings, net |
(364 | ) | 491 | |||||
Proceeds from borrowings |
2,187 | 2,933 | ||||||
Repurchases and repayments of debt |
(2,260 | ) | (1,811 | ) | ||||
Repurchases and retirements of common stock |
(750 | ) | (500 | ) | ||||
Dividends paid |
(508 | ) | (429 | ) | ||||
Issuances of common stock |
20 | 13 | ||||||
Purchase of NBCUniversal noncontrolling common equity interest |
| (10,747 | ) | |||||
Distributions to noncontrolling interests and dividends for redeemable subsidiary preferred stock |
(66 | ) | (49 | ) | ||||
Settlement of Station Venture liability |
| (602 | ) | |||||
Other |
96 | (17 | ) | |||||
Net cash provided by (used in) financing activities |
(1,645 | ) | (10,718 | ) | ||||
Increase (decrease) in cash and cash equivalents |
1,336 | (9,112 | ) | |||||
Cash and cash equivalents, beginning of period |
1,718 | 10,951 | ||||||
Cash and cash equivalents, end of period |
$ | 3,054 | $ | 1,839 |
See accompanying notes to condensed consolidated financial statements.
4
Comcast Corporation
Condensed Consolidated Statement of Changes in Equity
(Unaudited)
Redeemable |
Common Stock |
Additional |
Retained |
Treasury |
Accumulated |
Non- controlling |
Total |
|||||||||||||||||||||||||||||||||||||
(in millions) | A | A Special | B | |||||||||||||||||||||||||||||||||||||||||
Balance, January 1, 2013 |
$ | 16,998 | $ | 25 | $ | 6 | $ | | $ | 40,547 | $ | 16,280 | $ | (7,517 | ) | $ | 15 | $ | 440 | $ | 49,796 | |||||||||||||||||||||||
Stock compensation plans |
146 | (125 | ) | 21 | ||||||||||||||||||||||||||||||||||||||||
Repurchases and retirements of common stock |
(152 | ) | (348 | ) | (500 | ) | ||||||||||||||||||||||||||||||||||||||
Employee stock purchase |
22 | 22 | ||||||||||||||||||||||||||||||||||||||||||
Dividends declared |
(514 | ) | (514 | ) | ||||||||||||||||||||||||||||||||||||||||
Other comprehensive income |
(9 | ) | ||||||||||||||||||||||||||||||||||||||||||
Purchase of NBCUniversal noncontrolling common |
(17,006 | ) | (1,482 | ) | (26 | ) | (1,508 | ) | ||||||||||||||||||||||||||||||||||||
Redeemable subsidiary |
725 | |||||||||||||||||||||||||||||||||||||||||||
Contributions from |
(9 | ) | (31 | ) | (31 | ) | ||||||||||||||||||||||||||||||||||||||
Other |
(4 | ) | (124 | ) | 3 | (121 | ) | |||||||||||||||||||||||||||||||||||||
Net income (loss) |
159 | 1,437 | 49 | 1,486 | ||||||||||||||||||||||||||||||||||||||||
Balance, March 31, 2013 |
$ | 854 | $ | 25 | $ | 6 | $ | | $ | 38,957 | $ | 16,730 | $ | (7,517 | ) | $ | (11 | ) | $ | 461 | $ | 48,651 | ||||||||||||||||||||||
Balance, January 1, 2014 |
$ | 957 | $ | 25 | $ | 5 | $ | | $ | 38,890 | $ | 19,235 | $ | (7,517 | ) | $ | 56 | $ | 364 | $ | 51,058 | |||||||||||||||||||||||
Stock compensation plans |
242 | (206 | ) | 36 | ||||||||||||||||||||||||||||||||||||||||
Repurchases and retirements of common stock |
(172 | ) | (578 | ) | (750 | ) | ||||||||||||||||||||||||||||||||||||||
Employee stock purchase |
26 | 26 | ||||||||||||||||||||||||||||||||||||||||||
Dividends declared |
(585 | ) | (585 | ) | ||||||||||||||||||||||||||||||||||||||||
Other comprehensive |
(23 | ) | (23 | ) | ||||||||||||||||||||||||||||||||||||||||
Issuance of subsidiary shares |
82 | |||||||||||||||||||||||||||||||||||||||||||
Contributions from |
(5 | ) | (37 | ) | (37 | ) | ||||||||||||||||||||||||||||||||||||||
Other |
(5 | ) | (1 | ) | (6 | ) | (7 | ) | ||||||||||||||||||||||||||||||||||||
Net income (loss) |
24 | 1,871 | 43 | 1,914 | ||||||||||||||||||||||||||||||||||||||||
Balance, March 31, 2014 |
$ | 1,053 | $ | 25 | $ | 5 | $ | | $ | 38,985 | $ | 19,737 | $ | (7,517 | ) | $ | 33 | $ | 364 | $ | 51,632 |
See accompanying notes to condensed consolidated financial statements.
5
Comcast Corporation
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1: Condensed Consolidated Financial Statements
Basis of Presentation
We have prepared these unaudited condensed consolidated financial statements based on Securities and Exchange Commission (SEC) rules that permit reduced disclosure for interim periods. These financial statements include all adjustments that are necessary for a fair presentation of our consolidated results of operations, financial condition and cash flows for the periods shown, including normal, recurring accruals and other items. The consolidated results of operations for the interim periods presented are not necessarily indicative of results for the full year.
The year-end condensed consolidated balance sheet was derived from audited financial statements but does not include all disclosures required by generally accepted accounting principles in the United States of America (GAAP). For a more complete discussion of our accounting policies and certain other information, refer to our consolidated financial statements included in our 2013 Annual Report on Form 10-K.
Note 2: Earnings Per Share
Computation of Diluted EPS
Three Months Ended March 31 | ||||||||||||||||||||||||
2014 | 2013 | |||||||||||||||||||||||
(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 |
||||||||||||||||||
Basic EPS attributable to Comcast Corporation shareholders |
$ | 1,871 | 2,603 | $ | 0.72 | $ | 1,437 | 2,634 | $ | 0.55 | ||||||||||||||
Effect of dilutive securities: |
||||||||||||||||||||||||
Assumed exercise or issuance of shares relating to stock plans |
42 | 41 | ||||||||||||||||||||||
Diluted EPS attributable to Comcast Corporation shareholders |
$ | 1,871 | 2,645 | $ | 0.71 | $ | 1,437 | 2,675 | $ | 0.54 |
Our potentially dilutive securities include potential common shares related to our stock options and our restricted share units (RSUs). Diluted earnings per common share attributable to Comcast Corporation shareholders (diluted EPS) considers the impact of potentially dilutive securities using the treasury stock method. Diluted EPS excludes the impact of potential common shares related to our stock options in periods in which the combination of the option exercise price and the associated unrecognized compensation expense is greater than the average market price of our Class A common stock or our Class A Special common stock, as applicable.
Diluted EPS for the three months ended March 31, 2014 and 2013 excludes 2 million of potential common shares related to our share-based compensation plans, because the inclusion of the potential common shares would have had an antidilutive effect.
Note 3: Significant Transactions
Time Warner Cable Transaction
On February 12, 2014, we entered into an agreement and plan of merger with Time Warner Cable Inc. (Time Warner Cable). As a result of this agreement, we will acquire 100% of Time Warner Cables outstanding shares of common stock in exchange for shares of our Class A common stock. Time Warner Cable stockholders will receive, in exchange for each share of Time Warner Cable common stock owned immediately prior to the
6
Comcast Corporation
transaction, 2.875 shares of our Class A common stock. Time Warner Cable stockholders will then own approximately 23% of our common stock, estimated based on the number of shares outstanding as of the date of the agreement. Because the exchange ratio was fixed at the time of the merger agreement and the market value of our Class A common stock will continue to fluctuate, the number of shares of Class A common stock to be issued and the total value of the consideration exchanged will not be determinable until the closing date. Following the close of the transaction, Time Warner Cable will be our wholly owned subsidiary. The transaction remains subject to shareholder approval at both companies, regulatory review and other customary conditions and is expected to close by the end of 2014.
Note 4: Film and Television Costs
(in millions) | March 31, 2014 |
December 31, 2013 |
||||||
Film Costs: |
||||||||
Released, less amortization |
$ | 1,480 | $ | 1,630 | ||||
Completed, not released |
40 | 70 | ||||||
In production and in development |
865 | 658 | ||||||
2,385 | 2,358 | |||||||
Television Costs: |
||||||||
Released, less amortization |
1,169 | 1,155 | ||||||
In production and in development |
363 | 370 | ||||||
1,532 | 1,525 | |||||||
Programming rights, less amortization |
2,004 | 2,039 | ||||||
5,921 | 5,922 | |||||||
Less: Current portion of programming rights |
863 | 928 | ||||||
Film and television costs |
$ | 5,058 | $ | 4,994 |
Note 5: Investments
(in millions) | March 31, 2014 |
December 31, 2013 |
||||||
Fair Value Method |
$ | 2,448 | $ | 4,345 | ||||
Equity Method: |
||||||||
The Weather Channel |
331 | 333 | ||||||
Hulu |
191 | 187 | ||||||
Other |
496 | 469 | ||||||
1,018 | 989 | |||||||
Cost Method: |
||||||||
AirTouch |
1,556 | 1,553 | ||||||
Other |
457 | 456 | ||||||
2,013 | 2,009 | |||||||
Total investments |
5,479 | 7,343 | ||||||
Less: Current investments |
2,389 | 3,573 | ||||||
Noncurrent investments |
$ | 3,090 | $ | 3,770 |
7
Comcast Corporation
Investment Income (Loss), Net
Three Months Ended March 31 |
||||||||
(in millions) | 2014 | 2013 | ||||||
Gains on sales and exchanges of investments, net |
$ | 83 | $ | 35 | ||||
Investment impairment losses |
(5 | ) | (9 | ) | ||||
Unrealized gains (losses) on securities underlying prepaid forward sale agreements |
(113 | ) | 605 | |||||
Mark to market adjustments on derivative component of prepaid forward sale agreements and indexed debt instruments |
117 | (602 | ) | |||||
Interest and dividend income |
28 | 30 | ||||||
Other, net |
3 | 13 | ||||||
Investment income (loss), net |
$ | 113 | $ | 72 |
Fair Value Method
As of March 31, 2014, the majority of our fair value method investments were equity securities held as collateral that were related to our obligations under prepaid forward sale agreements.
Prepaid Forward Sale Agreements
(in millions) | March 31, 2014 |
December 31, 2013 |
||||||
Assets: |
||||||||
Fair value equity securities held as collateral |
$ | 2,164 | $ | 3,959 | ||||
Liabilities: |
||||||||
Obligations under prepaid forward sale agreements |
$ | 463 | $ | 811 | ||||
Derivative component of prepaid forward sale agreements |
1,501 | 2,800 | ||||||
Total liabilities |
$ | 1,964 | $ | 3,611 |
During the three months ended March 31, 2014, we settled $1.5 billion of obligations under certain of our prepaid forward sale agreements by delivering equity securities. As of March 31, 2014, our remaining prepaid forward sale obligations had an estimated fair value of $2 billion. The estimated fair values are based on Level 2 inputs using pricing models whose inputs are derived primarily from or corroborated by observable market data through correlation or other means for substantially the full term of the financial instrument.
Cost Method
AirTouch
We hold two series of preferred stock of AirTouch Communications, Inc. (AirTouch), a subsidiary of Verizon Communications Inc., which are redeemable in April 2020. As of March 31, 2014, the estimated fair values of the AirTouch preferred stock and the associated liability related to the redeemable preferred shares issued by one of our consolidated subsidiaries were each $1.7 billion. The estimated fair values are based on Level 2 inputs using pricing models whose inputs are derived primarily from or corroborated by observable market data through correlation or other means for substantially the full term of the financial instrument.
Note 6: Long-Term Debt
As of March 31, 2014, our debt had a carrying value of $47.4 billion and an estimated fair value of $52.5 billion. The estimated fair value of our publicly traded debt is based on quoted market values for the debt. To estimate the fair value of debt for which there are no quoted market prices, we use interest rates available to us for debt with similar terms and remaining maturities.
Debt Borrowings and Repayments
In February 2014, we issued $1.2 billion aggregate principal amount of 3.60% senior notes due 2024 and $1 billion aggregate principal amount of 4.75% senior notes due 2044. The proceeds from this offering were used for working capital and general corporate purposes, including the repayment of a portion of our outstanding commercial paper and our $900 million aggregate principal amount of 2.10% senior notes in April 2014 at maturity.
8
Comcast Corporation
In January 2014, we repaid at maturity $1 billion aggregate principal amount of 5.30% senior notes due 2014. In February 2014, we repaid $1.25 billion of borrowings outstanding under NBCUniversal Enterprise Inc.s (NBCUniversal Enterprise) revolving credit facility with the proceeds from $990 million of borrowings under its new commercial paper program and cash on hand.
Revolving Credit Facilities
As of March 31, 2014, amounts available under our consolidated revolving credit facilities, net of amounts outstanding under our commercial paper program and outstanding letters of credit, totaled $6.3 billion, which included $360 million available under NBCUniversal Enterprises credit facility.
Commercial Paper Program
In February 2014, NBCUniversal Enterprise entered into a commercial paper program. The maximum borrowing capacity under this commercial paper program is $1.35 billion, and it is supported by NBCUniversal Enterprises existing $1.35 billion revolving credit facility due March 2018. The commercial paper program is fully and unconditionally guaranteed by us and our 100% owned cable holding company subsidiaries, Comcast Cable Communications, LLC (CCCL Parent), Comcast MO Group, Inc. (Comcast MO Group), Comcast Cable Holdings, LLC (CCH) and Comcast MO of Delaware, LLC (Comcast MO of Delaware) (collectively, the cable guarantors). As of March 31, 2014, NBCUniversal Enterprise had $990 million face amount of commercial paper outstanding.
Note 7: Fair Value Measurements
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). Level 1 consists of financial instruments whose values are 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 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 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 | ||||||||||||||||||||
March 31, 2014 | December 31, 2013 |
|||||||||||||||||||
(in millions) | Level 1 | Level 2 | Level 3 | Total | Total | |||||||||||||||
Assets |
||||||||||||||||||||
Trading securities |
$ | 2,168 | $ | | $ | | $ | 2,168 | $ | 3,956 | ||||||||||
Available-for-sale securities |
151 | 117 | 11 | 279 | 389 | |||||||||||||||
Interest rate swap agreements |
| 101 | | 101 | 110 | |||||||||||||||
Other |
| 74 | 1 | 75 | 81 | |||||||||||||||
Total |
$ | 2,319 | $ | 292 | $ | 12 | $ | 2,623 | $ | 4,536 | ||||||||||
Liabilities |
||||||||||||||||||||
Derivative component of prepaid forward sale agreements and indexed debt instruments |
$ | | $ | 1,515 | $ | | $ | 1,515 | $ | 2,816 | ||||||||||
Contractual obligation |
| | 761 | 761 | 747 | |||||||||||||||
Contingent consideration |
| | 677 | 677 | 684 | |||||||||||||||
Other |
| 17 | | 17 | 16 | |||||||||||||||
Total |
$ | | $ | 1,532 | $ | 1,438 | $ | 2,970 | $ | 4,263 |
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Comcast Corporation
Fair Value of Redeemable Subsidiary Preferred Stock Financial Instrument
As of March 31, 2014, the fair value of the NBCUniversal Enterprise redeemable subsidiary preferred stock was $750 million. The estimated fair value is based on Level 2 inputs using pricing models whose inputs are derived primarily from or corroborated by observable market data through correlation or other means for substantially the full term of the financial instrument.
Contractual Obligation and Contingent Consideration
The fair values of the contractual obligation and contingent consideration in the table above are primarily based on certain expected future discounted cash flows, the determination of which involves the use of significant unobservable inputs. The most significant unobservable inputs we use are our estimates of the future revenue we expect to generate from certain NBCUniversal businesses, which are related to our contractual obligation, and future net tax benefits that will affect payments to GE, which are related to contingent consideration. The discount rates used in the measurements of fair value were between 5% and 13% and are based on the underlying risk associated with our estimate of future revenue and the terms of the respective contracts, and the uncertainty in the timing of our payments to GE. The fair value adjustments to contractual obligation and contingent consideration are sensitive to the assumptions related to future revenue and tax benefits, respectively, as well as to current interest rates, and therefore, the adjustments are recorded to other income (expense), net in our condensed consolidated statement of income.
Changes in Contractual Obligation and Contingent Consideration
(in millions) | Contractual Obligation |
Contingent Consideration |
||||||
Balance, December 31, 2013 |
$ | 747 | $ | 684 | ||||
Fair value adjustments |
27 | 7 | ||||||
Payments |
(13 | ) | (14 | ) | ||||
Balance, March 31, 2014 |
$ | 761 | $ | 677 |
Note 8: Share-Based Compensation
Our share-based compensation primarily consists of awards of stock options and RSUs to certain employees and directors as part of our approach to long-term incentive compensation. Additionally, through our employee stock purchase plans, employees are able to purchase shares of Comcast Class A common stock at a discount through payroll deductions.
In March 2014, we granted 16.4 million stock options and 5.4 million RSUs related to our annual management awards. The weighted-average fair values associated with these grants were $11.09 per stock option and $46.57 per RSU.
Recognized Share-Based Compensation Expense
Three Months Ended March 31 |
||||||||
(in millions) | 2014 | 2013 | ||||||
Stock options |
$ | 36 | $ | 32 | ||||
Restricted share units |
48 | 38 | ||||||
Employee stock purchase plans |
6 | 6 | ||||||
Total |
$ | 90 | $ | 76 |
As of March 31, 2014, we had unrecognized pretax compensation expense of $428 million and $575 million related to nonvested stock options and nonvested RSUs, respectively.
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Comcast Corporation
Note 9: Supplemental Financial Information
Receivables
(in millions) | March 31, 2014 |
December 31, 2013 |
||||||
Receivables, gross |
$ | 6,645 | $ | 6,972 | ||||
Less: Allowance for returns and customer incentives |
285 | 375 | ||||||
Less: Allowance for doubtful accounts |
209 | 221 | ||||||
Receivables, net |
$ | 6,151 | $ | 6,376 |
Accumulated Other Comprehensive Income (Loss)
(in millions) | March 31, 2014 |
March 31, 2013 |
||||||
Unrealized gains (losses) on marketable securities |
$ | 47 | $ | 180 | ||||
Deferred gains (losses) on cash flow hedges |
(50 | ) | (57 | ) | ||||
Unrecognized gains (losses) on employee benefit obligations |
71 | (109 | ) | |||||
Cumulative translation adjustments |
(35 | ) | (25 | ) | ||||
Accumulated other comprehensive income (loss), net of deferred taxes |
$ | 33 | $ | (11 | ) |
Net Cash Provided by Operating Activities
Three Months Ended March 31 |
||||||||
(in millions) | 2014 | 2013 | ||||||
Net income |
$ | 1,938 | $ | 1,645 | ||||
Adjustments to reconcile net income to net cash provided by operating activities: |
||||||||
Depreciation and amortization |
1,970 | 1,967 | ||||||
Amortization of film and television costs |
2,876 | 1,972 | ||||||
Share-based compensation |
119 | 102 | ||||||
Noncash interest expense (income), net |
42 | 42 | ||||||
Equity in net (income) losses of investees, net |
(32 | ) | (11 | ) | ||||
Cash received from investees |
18 | 23 | ||||||
Net (gain) loss on investment activity and other |
(59 | ) | (132 | ) | ||||
Deferred income taxes |
(226 | ) | (373 | ) | ||||
Changes in operating assets and liabilities, net of effects of acquisitions and divestitures: |
||||||||
Change in current and noncurrent receivables, net |
195 | 465 | ||||||
Change in film and television costs |
(2,722 | ) | (1,577 | ) | ||||
Change in accounts payable and accrued expenses related to trade creditors |
82 | (281 | ) | |||||
Change in other operating assets and liabilities |
285 | 527 | ||||||
Net cash provided by operating activities |
$ | 4,486 | $ | 4,369 |
Cash Payments for Interest and Income Taxes
Three Months Ended March 31 |
||||||||
(in millions) | 2014 | 2013 | ||||||
Interest |
$ | 623 | $ | 617 | ||||
Income taxes |
$ | 186 | $ | 461 |
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Comcast Corporation
Noncash Investing and Financing Activities
During the three months ended March 31, 2014:
| we acquired $741 million of property and equipment and intangible assets that were accrued but unpaid |
| we recorded a liability of $585 million for a quarterly cash dividend of $0.225 per common share paid in April 2014 |
| we used $1.5 billion of equity securities to settle our obligations under prepaid forward sale agreements |
Note 10: Commitments and Contingencies
Contingencies
Antitrust Cases
We are defendants in two purported class actions originally filed in December 2003 in the United States District Courts for the District of Massachusetts and the Eastern District of Pennsylvania. The potential class in the Massachusetts case, which has been transferred to the Eastern District of Pennsylvania, is our customer base in the Boston Cluster area, and the potential class in the Pennsylvania case is our customer base in the Philadelphia and Chicago Clusters, as those terms are defined in the complaints. In each case, the plaintiffs allege that certain customer exchange transactions with other cable providers resulted in unlawful horizontal market restraints in those areas and seek damages under antitrust statutes, including treble damages.
Classes of Chicago Cluster and Philadelphia Cluster customers were certified in October 2007 and January 2010, respectively. We appealed the class certification in the Philadelphia Cluster case to the Third Circuit Court of Appeals, which affirmed the class certification in August 2011. In June 2012, the U.S. Supreme Court granted our petition to review the Third Circuit Court of Appeals ruling and in March 2013, the Supreme Court ruled that the class had been improperly certified and reversed the judgment of the Third Circuit. The matter has been returned to the District Court for action consistent with the Supreme Courts opinion. In August 2013, the plaintiffs in the Philadelphia Cluster case moved to certify a new, smaller class. The District Court denied our September 2013 motion to strike the plaintiffs motion on procedural grounds. In April 2014, the District Court granted our unopposed motion to de-certify the Chicago class and the plaintiffs unopposed motion to amend the Pennsylvania case so as to dismiss claims relating to the Chicago cluster.
In addition, we are the defendant in 22 purported class actions filed in federal district courts throughout the country. All of these actions have been consolidated by the Judicial Panel on Multidistrict Litigation in the United States District Court for the Eastern District of Pennsylvania for pre-trial proceedings. In a consolidated complaint filed in November 2009 on behalf of all plaintiffs in the multidistrict litigation, the plaintiffs allege that we improperly tie the rental of set-top boxes to the provision of premium cable services in violation of Section 1 of the Sherman Antitrust Act, various state antitrust laws and unfair/deceptive trade practices acts in California, Illinois and Alabama. The plaintiffs also allege a claim for unjust enrichment and seek relief on behalf of a nationwide class of our premium cable customers and on behalf of subclasses consisting of premium cable customers from California, Alabama, Illinois, Pennsylvania and Washington. In January 2010, we moved to compel arbitration of the plaintiffs claims for unjust enrichment and violations of the unfair/deceptive trade practices acts of Illinois and Alabama. In September 2010, the plaintiffs filed an amended complaint alleging violations of additional state antitrust laws and unfair/deceptive trade practices acts on behalf of new subclasses in Connecticut, Florida, Minnesota, Missouri, New Jersey, New Mexico and West Virginia. In the amended complaint, plaintiffs omitted their unjust enrichment claim, as well as their state law claims on behalf of the Alabama, Illinois and Pennsylvania subclasses. In June 2011, the plaintiffs filed another amended complaint alleging only violations of Section 1 of the Sherman Antitrust Act, antitrust law in Washington and unfair/deceptive trade practices acts in California and Washington. The plaintiffs seek relief on behalf of a nationwide class of our premium cable customers and on behalf of subclasses consisting of premium cable customers from California and Washington. In July 2011, we moved to compel arbitration of most of
12
Comcast Corporation
the plaintiffs claims and to stay the remaining claims pending arbitration. The West Virginia Attorney General also filed a complaint in West Virginia state court in July 2009 alleging that we improperly tie the rental of set-top boxes to the provision of digital cable services in violation of the West Virginia Antitrust Act and the West Virginia Consumer Credit and Protection Act. The Attorney General also alleges a claim for unjust enrichment/restitution. We removed the case to the United States District Court for West Virginia, and it was subsequently transferred to the United States District Court for the Eastern District of Pennsylvania and consolidated with the multidistrict litigation described above. In June 2013, a comprehensive settlement agreement for all 23 cases was submitted to the District Court for preliminary approval. Regardless of whether this settlement agreement is approved, we do not expect these cases to have a material effect on our results of operations, cash flows or financial position.
We believe the claims in each of the pending actions described above in this item are without merit, except as otherwise set forth above, and intend to defend the actions vigorously. We cannot predict the outcome of any of the actions described above, including a range of possible loss, or how the final resolution of any such actions would impact our results of operations or cash flows for any one period or our financial position. In addition, as any action nears a trial, there is an increased possibility that the action may be settled by the parties. Nevertheless, the final disposition of any of the above actions is 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 flows for any one period.
Other
We are a defendant in several unrelated lawsuits claiming infringement of various patents relating to various aspects of our businesses. In certain of these cases other industry participants are also defendants, and also in certain of these cases we expect that any potential liability would be in part or in whole the responsibility of our equipment and technology vendors under applicable contractual indemnification provisions. We are also subject to other legal proceedings and claims that arise in the ordinary course of our business. While the amount of ultimate liability with respect to such actions is not expected to materially affect our results of operations, cash flows or financial position, any litigation resulting from any such legal proceedings or claims could be time consuming, costly and injure our reputation.
Note 11: Financial Data by Business Segment
We present our operations in five reportable business segments:
| Cable Communications: Consists of the operations of Comcast Cable, which is the nations largest provider of video, high-speed Internet and voice services (cable services) to residential customers under the XFINITY brand, and we also provide similar services to businesses and sell advertising. |
| Cable Networks: Consists primarily of our national cable networks, our regional sports networks, our international cable networks and our cable television production operations. |
| Broadcast Television: Consists primarily of the NBC and Telemundo broadcast networks, our NBC and Telemundo owned local broadcast television stations, and our broadcast television production operations. |
| Filmed Entertainment: Consists primarily of the studio operations of Universal Pictures, which produces, acquires, markets and distributes filmed entertainment worldwide. |
| Theme Parks: Consists primarily of our Universal theme parks in Orlando and Hollywood. |
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Comcast Corporation
In evaluating the profitability of our operating segments, the components of net income (loss) below operating income (loss) before depreciation and amortization are not separately evaluated by our management. Our financial data by business segment is presented in the tables below.
Three Months Ended March 31, 2014 | ||||||||||||||||||||
(in millions) | Revenue(e) | Operating Income (Loss) Before Depreciation
and |
Depreciation and Amortization |
Operating Income (Loss) |
Capital Expenditures |
|||||||||||||||
Cable Communications(a) |
$ | 10,757 | $ | 4,400 | $ | 1,584 | $ | 2,816 | $ | 1,145 | ||||||||||
NBCUniversal |
||||||||||||||||||||
Cable Networks(b) |
2,505 | 895 | 189 | 706 | 11 | |||||||||||||||
Broadcast Television |
2,621 | 122 | 27 | 95 | 11 | |||||||||||||||
Filmed Entertainment(b) |
1,351 | 288 | 5 | 283 | 1 | |||||||||||||||
Theme Parks |
487 | 170 | 69 | 101 | 144 | |||||||||||||||
Headquarters and Other(c) |
2 | (163 | ) | 75 | (238 | ) | 124 | |||||||||||||
Eliminations(d) |
(90 | ) | (1 | ) | | (1 | ) | | ||||||||||||
NBCUniversal |
6,876 | 1,311 | 365 | 946 | 291 | |||||||||||||||
Corporate and Other |
174 | (153 | ) | 21 | (174 | ) | 12 | |||||||||||||
Eliminations(d) |
(399 | ) | (20 | ) | | (20 | ) | | ||||||||||||
Comcast Consolidated |
$ | 17,408 | $ | 5,538 | $ | 1,970 | $ | 3,568 | $ | 1,448 |
Three Months Ended March 31, 2013 | ||||||||||||||||||||
(in millions) | Revenue(e) | Operating Income (Loss) Before Depreciation and Amortization(f) |
Depreciation and Amortization |
Operating Income (Loss) |
Capital Expenditures |
|||||||||||||||
Cable Communications(a) |
$ | 10,217 | $ | 4,219 | $ | 1,608 | $ | 2,611 | $ | 1,094 | ||||||||||
NBCUniversal |
||||||||||||||||||||
Cable Networks(b) |
2,225 | 859 | 184 | 675 | 24 | |||||||||||||||
Broadcast Television |
1,517 | (35 | ) | 25 | (60 | ) | 8 | |||||||||||||
Filmed Entertainment(b) |
1,216 | 69 | 4 | 65 | 2 | |||||||||||||||
Theme Parks |
462 | 173 | 72 | 101 | 138 | |||||||||||||||
Headquarters and Other(c) |
9 | (112 | ) | 59 | (171 | ) | 91 | |||||||||||||
Eliminations(d) |
(89 | ) | (1 | ) | | (1 | ) | | ||||||||||||
NBCUniversal |
5,340 | 953 | 344 | 609 | 263 | |||||||||||||||
Corporate and Other |
162 | (83 | ) | 15 | (98 | ) | 4 | |||||||||||||
Eliminations(d) |
(409 | ) | (55 | ) | | (55 | ) | | ||||||||||||
Comcast Consolidated |
$ | 15,310 | $ | 5,034 | $ | 1,967 | $ | 3,067 | $ | 1,361 |
(a) | For the three months ended March 31, 2014 and 2013, Cable Communications segment revenue was derived from the following sources: |
Three Months Ended March 31 |
||||||||
2014 | 2013 | |||||||
Residential: |
||||||||
Video |
48.1 | % | 50.0 | % | ||||
High-speed Internet |
25.6 | % | 24.7 | % | ||||
Voice |
8.5 | % | 8.8 | % | ||||
Business services |
8.5 | % | 7.2 | % | ||||
Advertising |
4.8 | % | 4.8 | % | ||||
Other |
4.5 | % | 4.5 | % | ||||
Total |
100 | % | 100 | % |
Subscription revenue received from customers who purchase bundled services at a discounted rate is allocated proportionally to each service based on the individual services price on a stand-alone basis.
For the three months ended March 31, 2014 and 2013, 2.8% and 2.9%, respectively, of Cable Communications revenue was derived from franchise and other regulatory fees.
14
Comcast Corporation
(b) | Beginning in 2014, Fandango, our movie ticketing and entertainment business that was previously presented in our Cable Networks segment, is now presented in the Filmed Entertainment segment to reflect the change in our management reporting presentation. Due to immateriality, prior period amounts have not been adjusted. The change in presentation resulted in the reclassification of $195 million of goodwill from our Cable Networks segment to our Filmed Entertainment segment. |
(c) | NBCUniversal Headquarters and Other activities includes costs associated with overhead, allocations, personnel costs and headquarter initiatives. |
(d) | Included in Eliminations are transactions that our segments enter into with one another. The most common types of transactions are the following: |
| our Cable Networks and Broadcast Television segments generate revenue by selling programming to our Cable Communications segment, which represents a substantial majority of the revenue elimination amount |
| our Cable Communications segment generates revenue by selling advertising and by selling the use of satellite feeds to our Cable Networks segment |
| our Filmed Entertainment and Broadcast Television segments generate revenue by licensing content to our Cable Networks segment |
| our Cable Communications segment receives incentives offered by our Cable Networks segment in connection with its distribution of the Cable Networks content that are recorded as a reduction to programming expenses |
(e) | No single customer accounted for a significant amount of revenue in any period. |
(f) | We use operating income (loss) before depreciation and amortization, excluding impairment charges related to fixed and intangible assets and gains or losses on the sale of assets, if any, as the measure of profit or loss for our operating segments. This measure eliminates the significant level of noncash depreciation and amortization expense that results from the capital-intensive nature of certain of our businesses and from intangible assets recognized in business combinations. Additionally, it is unaffected by our capital structure or investment activities. We use this measure to evaluate our consolidated operating performance and the operating performance of our operating segments and to allocate resources and capital to our operating segments. It is also a significant performance measure in our annual incentive compensation programs. We believe that this measure is useful to investors because it is one of the bases for comparing our operating performance with that of other companies in our industries, although our measure may not be directly comparable to similar measures used by other companies. 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. |
15
Comcast Corporation
Note 12: Condensed Consolidating Financial Information
Comcast Corporation (Comcast Parent), our cable guarantors and NBCUniversal Media, LLC (referred to as NBCUniversal Media Parent in the tables below) have fully and unconditionally guaranteed each others debt securities. Comcast MO Group, CCH and Comcast MO of Delaware are collectively referred to as the Combined CCHMO Parents.
Comcast Parent and the cable guarantors also fully and unconditionally guarantee NBCUniversal Enterprises $4 billion aggregate principal amount of senior notes, its $1.35 billion credit facility due March 2018 and the associated commercial paper program. NBCUniversal Media Parent does not guarantee the NBCUniversal Enterprise senior notes, credit facility or commercial paper program.
Comcast Parent provides an unconditional subordinated guarantee of the $185 million principal amount currently outstanding of Comcast Holdings ZONES due October 2029. Neither the cable guarantors nor NBCUniversal Media Parent guarantee the Comcast Holdings ZONES due October 2029. None of Comcast Parent, the cable guarantors nor NBCUniversal Media Parent guarantee the $62 million principal amount currently outstanding of Comcast Holdings ZONES due November 2029.
16
Comcast Corporation
Condensed Consolidating Balance Sheet
March 31, 2014
(in millions) | Comcast Parent |
Comcast Holdings |
CCCL Parent |
Combined CCHMO Parents |
NBCUniversal Media Parent |
Non- Guarantor Subsidiaries |
Elimination and Consolidation Adjustments |
Consolidated Comcast Corporation |
||||||||||||||||||||||||
Assets |
||||||||||||||||||||||||||||||||
Cash and cash equivalents |
$ | | $ | | $ | | $ | | $ | 506 | $ | 2,548 | $ | | $ | 3,054 | ||||||||||||||||
Investments |
| | | | | 2,389 | | 2,389 | ||||||||||||||||||||||||
Receivables, net |
| | | | | 6,151 | | 6,151 | ||||||||||||||||||||||||
Programming rights |
| | | | | 863 | | 863 | ||||||||||||||||||||||||
Other current assets |
229 | | | | 29 | 1,328 | | 1,586 | ||||||||||||||||||||||||
Total current assets |
229 | | | | 535 | 13,279 | | 14,043 | ||||||||||||||||||||||||
Film and television costs |
| | | | | 5,058 | | 5,058 | ||||||||||||||||||||||||
Investments |
21 | | | | 378 | 2,691 | | 3,090 | ||||||||||||||||||||||||
Investments in and amounts due from subsidiaries eliminated upon consolidation |
80,474 | 99,606 | 105,083 | 55,737 | 41,042 | 87,497 | (469,439 | ) | | |||||||||||||||||||||||
Property and equipment, net |
213 | | | | | 29,375 | | 29,588 | ||||||||||||||||||||||||
Franchise rights |
| | | | | 59,364 | | 59,364 | ||||||||||||||||||||||||
Goodwill |
| | | | | 27,103 | | 27,103 | ||||||||||||||||||||||||
Other intangible assets, net |
10 | | | | | 17,135 | | 17,145 | ||||||||||||||||||||||||
Other noncurrent assets, net |
1,114 | 145 | | | 101 | 1,937 | (915 | ) | 2,382 | |||||||||||||||||||||||
Total assets |
$ | 82,061 | $ | 99,751 | $ | 105,083 | $ | 55,737 | $ | 42,056 | $ | 243,439 | $ | (470,354 | ) | $ | 157,773 | |||||||||||||||
Liabilities and Equity |
||||||||||||||||||||||||||||||||
Accounts payable and accrued expenses related to trade creditors |
$ | 7 | $ | | $ | | $ | | $ | | $ | 5,527 | $ | | $ | 5,534 | ||||||||||||||||
Accrued participations and residuals |
| | | | | 1,256 | | 1,256 | ||||||||||||||||||||||||
Accrued expenses and other current liabilities |
1,430 | 266 | 318 | 21 | 398 | 5,761 | | 8,194 | ||||||||||||||||||||||||
Current portion of long-term debt |
900 | | | | 902 | 1,017 | | 2,819 | ||||||||||||||||||||||||
Total current liabilities |
2,337 | 266 | 318 | 21 | 1,300 | 13,561 | | 17,803 | ||||||||||||||||||||||||
Long-term debt, less current portion |
26,455 | 130 | 1,827 | 1,504 | 10,232 | 4,433 | | 44,581 | ||||||||||||||||||||||||
Deferred income taxes |
| 758 | | | 58 | 31,553 | (774 | ) | 31,595 | |||||||||||||||||||||||
Other noncurrent liabilities |
2,001 | | | | 937 | 8,312 | (141 | ) | 11,109 | |||||||||||||||||||||||
Redeemable noncontrolling interests and redeemable subsidiary preferred stock |
| | | | | 1,053 | | 1,053 | ||||||||||||||||||||||||
Equity: |
||||||||||||||||||||||||||||||||
Common stock |
30 | | | | | | | 30 | ||||||||||||||||||||||||
Other shareholders equity |
51,238 | 98,597 | 102,938 | 54,212 | 29,529 | 184,163 | (469,439 | ) | 51,238 | |||||||||||||||||||||||
Total Comcast Corporation shareholders equity |
51,268 | 98,597 | 102,938 | 54,212 | 29,529 | 184,163 | (469,439 | ) | 51,268 | |||||||||||||||||||||||
Noncontrolling interests |
| | | | | 364 | | 364 | ||||||||||||||||||||||||
Total equity |
51,268 | 98,597 | 102,938 | 54,212 | 29,529 | 184,527 | (469,439 | ) | 51,632 | |||||||||||||||||||||||
Total liabilities and equity |
$ | 82,061 | $ | 99,751 | $ | 105,083 | $ | 55,737 | $ | 42,056 | $ | 243,439 | $ | (470,354 | ) | $ | 157,773 |
17
Comcast Corporation
Condensed Consolidating Balance Sheet
December 31, 2013
(in millions) | Comcast Parent |
Comcast Holdings |
CCCL Parent |
Combined CCHMO Parents |
NBCUniversal Media Parent |
Non- Guarantor Subsidiaries |
Elimination and Consolidation Adjustments |
Consolidated Comcast Corporation |
||||||||||||||||||||||||
Assets |
||||||||||||||||||||||||||||||||
Cash and cash equivalents |
$ | | $ | | $ | | $ | | $ | 336 | $ | 1,382 | $ | | $ | 1,718 | ||||||||||||||||
Investments |
| | | | | 3,573 | | 3,573 | ||||||||||||||||||||||||
Receivables, net |
| | | | | 6,376 | | 6,376 | ||||||||||||||||||||||||
Programming rights |
| | | | | 928 | | 928 | ||||||||||||||||||||||||
Other current assets |
237 | | | | 35 | 1,208 | | 1,480 | ||||||||||||||||||||||||
Total current assets |
237 | | | | 371 | 13,467 | | 14,075 | ||||||||||||||||||||||||
Film and television costs |
| | | | | 4,994 | | 4,994 | ||||||||||||||||||||||||
Investments |
11 | | | | 374 | 3,385 | | 3,770 | ||||||||||||||||||||||||
Investments in and amounts due from subsidiaries eliminated upon consolidation |
79,956 | 97,429 | 102,673 | 54,724 | 40,644 | 85,164 | (460,590 | ) | | |||||||||||||||||||||||
Property and equipment, net |
220 | | | | | 29,620 | | 29,840 | ||||||||||||||||||||||||
Franchise rights |
| | | | | 59,364 | | 59,364 | ||||||||||||||||||||||||
Goodwill |
| | | | | 27,098 | | 27,098 | ||||||||||||||||||||||||
Other intangible assets, net |
11 | | | | | 17,318 | | 17,329 | ||||||||||||||||||||||||
Other noncurrent assets, net |
1,078 | 145 | | | 103 | 1,899 | (882 | ) | 2,343 | |||||||||||||||||||||||
Total assets |
$ | 81,513 | $ | 97,574 | $ | 102,673 | $ | 54,724 | $ | 41,492 | $ | 242,309 | $ | (461,472 | ) | $ | 158,813 | |||||||||||||||
Liabilities and Equity |
||||||||||||||||||||||||||||||||
Accounts payable and accrued expenses related to trade creditors |
$ | 8 | $ | | $ | | $ | | $ | | $ | 5,520 | $ | | $ | 5,528 | ||||||||||||||||
Accrued participations and residuals |
| | | | | 1,239 | | 1,239 | ||||||||||||||||||||||||
Accrued expenses and other current liabilities |
1,371 | 266 | 180 | 47 | 323 | 6,678 | | 8,865 | ||||||||||||||||||||||||
Current portion of long-term debt |
2,351 | | | | 903 | 26 | | 3,280 | ||||||||||||||||||||||||
Total current liabilities |
3,730 | 266 | 180 | 47 | 1,226 | 13,463 | | 18,912 | ||||||||||||||||||||||||
Long-term debt, less current portion |
25,170 | 132 | 1,827 | 1,505 | 10,236 | 5,697 | | 44,567 | ||||||||||||||||||||||||
Deferred income taxes |
| 777 | | | 59 | 31,840 | (741 | ) | 31,935 | |||||||||||||||||||||||
Other noncurrent liabilities |
1,919 | | | | 931 | 8,675 | (141 | ) | 11,384 | |||||||||||||||||||||||
Redeemable noncontrolling interests and redeemable subsidiary preferred stock |
| | | | | 957 | | 957 | ||||||||||||||||||||||||
Equity: |
||||||||||||||||||||||||||||||||
Common stock |
30 | | | | | | | 30 | ||||||||||||||||||||||||
Other shareholders equity |
50,664 | 96,399 | 100,666 | 53,172 | 29,040 | 181,313 | (460,590 | ) | 50,664 | |||||||||||||||||||||||
Total Comcast Corporation shareholders equity |
50,694 | 96,399 | 100,666 | 53,172 | 29,040 | 181,313 | (460,590 | ) | 50,694 | |||||||||||||||||||||||
Noncontrolling interests |
| | | | | 364 | | 364 | ||||||||||||||||||||||||
Total equity |
50,694 | 96,399 | 100,666 | 53,172 | 29,040 | 181,677 | (460,590 | ) | 51,058 | |||||||||||||||||||||||
Total liabilities and equity |
$ | 81,513 | $ | 97,574 | $ | 102,673 | $ | 54,724 | $ | 41,492 | $ | 242,309 | $ | (461,472 | ) | $ | 158,813 |
18
Comcast Corporation
Condensed Consolidating Statement of Income
For the Three Months Ended March 31, 2014
(in millions) | Comcast Parent |
Comcast Holdings |
CCCL Parent |
Combined CCHMO Parents |
NBCUniversal Media Parent |
Non- Guarantor Subsidiaries |
Elimination and Consolidation Adjustments |
Consolidated Comcast Corporation |
||||||||||||||||||||||||
Revenue: |
||||||||||||||||||||||||||||||||
Service revenue |
$ | | $ | | $ | | $ | | $ | | $ | 17,408 | $ | | $ | 17,408 | ||||||||||||||||
Management fee revenue |
230 | | 223 | 141 | | | (594 | ) | | |||||||||||||||||||||||
230 | | 223 | 141 | | 17,408 | (594 | ) | 17,408 | ||||||||||||||||||||||||
Costs and Expenses: |
||||||||||||||||||||||||||||||||
Programming and production |
| | | | | 5,908 | | 5,908 | ||||||||||||||||||||||||
Other operating and administrative |
93 | | 223 | 141 | 257 | 4,632 | (594 | ) | 4,752 | |||||||||||||||||||||||
Advertising, marketing and promotion |
| | | | | 1,210 | | 1,210 | ||||||||||||||||||||||||
Depreciation |
7 | | | | | 1,562 | | 1,569 | ||||||||||||||||||||||||
Amortization |
1 | | | | | 400 | | 401 | ||||||||||||||||||||||||
101 | | 223 | 141 | 257 | 13,712 | (594 | ) | 13,840 | ||||||||||||||||||||||||
Operating income (loss) |
129 | | | | (257 | ) | 3,696 | | 3,568 | |||||||||||||||||||||||
Other Income (Expense): |
||||||||||||||||||||||||||||||||
Interest expense |
(387 | ) | (3 | ) | (45 | ) | (29 | ) | (124 | ) | (54 | ) | | (642 | ) | |||||||||||||||||
Investment income (loss), net |
1 | 3 | | | 1 | 108 | | 113 | ||||||||||||||||||||||||
Equity in net income (losses) of investees, net |
2,038 | 2,267 | 2,165 | 1,511 | 1,071 | 714 | (9,734 | ) | 32 | |||||||||||||||||||||||
Other income (expense), net |
| | | | (4 | ) | (11 | ) | | (15 | ) | |||||||||||||||||||||
1,652 | 2,267 | 2,120 | 1,482 | 944 | 757 | (9,734 | ) | (512 | ) | |||||||||||||||||||||||
Income (loss) before income taxes |
1,781 | 2,267 | 2,120 | 1,482 | 687 | 4,453 | (9,734 | ) | 3,056 | |||||||||||||||||||||||
Income tax (expense) benefit |
90 | | 16 | 10 | (5 | ) | (1,229 | ) | | (1,118 | ) | |||||||||||||||||||||
Net income (loss) |
1,871 | 2,267 | 2,136 | 1,492 | 682 | 3,224 | (9,734 | ) | 1,938 | |||||||||||||||||||||||
Net (income) loss attributable to noncontrolling interests and redeemable subsidiary preferred stock |
| | | | | (67 | ) | | (67 | ) | ||||||||||||||||||||||
Net income (loss) attributable to Comcast Corporation |
$ | 1,871 | $ | 2,267 | $ | 2,136 | $ | 1,492 | $ | 682 | $ | 3,157 | $ | (9,734 | ) | $ | 1,871 | |||||||||||||||
Comprehensive income (loss) attributable to Comcast Corporation |
$ | 1,848 | $ | 2,269 | $ | 2,138 | $ | 1,493 | $ | 685 | $ | 3,134 | $ | (9,719 | ) | $ | 1,848 |
19
Comcast Corporation
Condensed Consolidating Statement of Income
For the Three Months Ended March 31, 2013
(in millions) | Comcast Parent |
Comcast Holdings |
CCCL Parent |
Combined CCHMO Parents |
NBCUniversal Media Parent |
Non- Guarantor Subsidiaries |
Elimination and Consolidation Adjustments |
Consolidated Comcast Corporation |
||||||||||||||||||||||||
Revenue: |
||||||||||||||||||||||||||||||||
Service revenue |
$ | | $ | | $ | | $ | | $ | | $ | 15,310 | $ | | $ | 15,310 | ||||||||||||||||
Management fee revenue |
218 | | 212 | 133 | | | (563 | ) | | |||||||||||||||||||||||
218 | | 212 | 133 | | 15,310 | (563 | ) | 15,310 | ||||||||||||||||||||||||
Costs and Expenses: |
||||||||||||||||||||||||||||||||
Programming and production |
| | | | | 4,663 | | 4,663 | ||||||||||||||||||||||||
Other operating and administrative |
98 | | 212 | 133 | 225 | 4,361 | (563 | ) | 4,466 | |||||||||||||||||||||||
Advertising, marketing and promotion |
| | | | | 1,147 | | 1,147 | ||||||||||||||||||||||||
Depreciation |
7 | | | | | 1,559 | | 1,566 | ||||||||||||||||||||||||
Amortization |
1 | | | | | 400 | | 401 | ||||||||||||||||||||||||
106 | | 212 | 133 | 225 | 12,130 | (563 | ) | 12,243 | ||||||||||||||||||||||||
Operating income (loss) |
112 | | | | (225 | ) | 3,180 | | 3,067 | |||||||||||||||||||||||
Other Income (Expense): |
||||||||||||||||||||||||||||||||
Interest expense |
(376 | ) | (3 | ) | (78 | ) | (33 | ) | (120 | ) | (43 | ) | | (653 | ) | |||||||||||||||||
Investment income (loss), net |
1 | (3 | ) | | | (4 | ) | 78 | | 72 | ||||||||||||||||||||||
Equity in net income |
||||||||||||||||||||||||||||||||
(losses) of investees, net |
1,608 | 1,742 | 1,763 | 1,262 | 709 | 366 | (7,439 | ) | 11 | |||||||||||||||||||||||
Other income (expense), net |
(1 | ) | | | | | 74 | | 73 | |||||||||||||||||||||||
1,232 | 1,736 | 1,685 | 1,229 | 585 | 475 | (7,439 | ) | (497 | ) | |||||||||||||||||||||||
Income (loss) before income taxes |
1,344 | 1,736 | 1,685 | 1,229 | 360 | 3,655 | (7,439 | ) | 2,570 | |||||||||||||||||||||||
Income tax (expense) benefit |
93 | 2 | 27 | 11 | (5 | ) | (1,053 | ) | | (925 | ) | |||||||||||||||||||||
Net income (loss) |
1,437 | 1,738 | 1,712 | 1,240 | 355 | 2,602 | (7,439 | ) | 1,645 | |||||||||||||||||||||||
Net (income) loss attributable to noncontrolling interests and redeemable subsidiary preferred stock |
| | | | | (208 | ) | | (208 | ) | ||||||||||||||||||||||
Net income (loss)attributable to Comcast Corporation |
$ | 1,437 | $ | 1,738 | $ | 1,712 | $ | 1,240 | $ | 355 | $ | 2,394 | $ | (7,439 | ) | $ | 1,437 | |||||||||||||||
Comprehensive income (loss) attributable to Comcast Corporation |
$ | 1,437 | $ | 1,738 | $ | 1,714 | $ | 1,240 | $ | 333 | $ | 2,407 | $ | (7,432 | ) | $ | 1,437 |
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Comcast Corporation
Condensed Consolidating Statement of Cash Flows
For the Three Months Ended March 31, 2014
(in millions) | Comcast Parent |
Comcast Holdings |
CCCL Parent |
Combined CCHMO Parents |
NBCUniversal Media Parent |
Non- Guarantor |
Elimination and Consolidation Adjustments |
Consolidated Comcast Corporation |
||||||||||||||||||||||||
Net cash provided by (used in) operating activities |
$ | (96 | ) | $ | (2 | ) | $ | 110 | $ | (47 | ) | $ | (306 | ) | $ | 4,827 | $ | | $ | 4,486 | ||||||||||||
Investing Activities |
||||||||||||||||||||||||||||||||
Net transactions with affiliates |
1,370 | 2 | (110 | ) | 47 | 483 | (1,792 | ) | | | ||||||||||||||||||||||
Capital expenditures |
| | | | | (1,448 | ) | | (1,448 | ) | ||||||||||||||||||||||
Cash paid for intangible assets |
| | | | | (217 | ) | | (217 | ) | ||||||||||||||||||||||
Acquisitions and construction of real estate properties |
| | | | | | | | ||||||||||||||||||||||||
Proceeds from sales of businesses and investments |
| | | | | 300 | | 300 | ||||||||||||||||||||||||
Purchases of investments |
(10 | ) | | | | (6 | ) | (21 | ) | | (37 | ) | ||||||||||||||||||||
Other |
| | | | | (103 | ) | | (103 | ) | ||||||||||||||||||||||
Net cash provided by (used in) investing activities |
1,360 | 2 | (110 | ) | 47 | 477 | (3,281 | ) | | (1,505 | ) | |||||||||||||||||||||
Financing Activities |
||||||||||||||||||||||||||||||||
Proceeds from (repayments of) short-term borrowings, net |
(1,350 | ) | | | | | 986 | | (364 | ) | ||||||||||||||||||||||
Proceeds from borrowings |
2,184 | | | | | 3 | | 2,187 | ||||||||||||||||||||||||
Repurchases and repayments of debt |
(1,000 | ) | | | | (1 | ) | (1,259 | ) | | (2,260 | ) | ||||||||||||||||||||
Repurchases and retirements of common stock |
(750 | ) | | | | | | | (750 | ) | ||||||||||||||||||||||
Dividends paid |
(508 | ) | | | | | | | (508 | ) | ||||||||||||||||||||||
Issuances of common stock |
20 | | | | | | | 20 | ||||||||||||||||||||||||
Distributions to noncontrolling interests and dividends for redeemable subsidiary preferred stock |
| | | | | (66 | ) | | (66 | ) | ||||||||||||||||||||||
Other |
140 | | | | | (44 | ) | | 96 | |||||||||||||||||||||||
Net cash provided by (used in) financing activities |
(1,264 | ) | | | | (1 | ) | (380 | ) | | (1,645 | ) | ||||||||||||||||||||
Increase (decrease) in cash and cash equivalents |
| | | | 170 | 1,166 | | 1,336 | ||||||||||||||||||||||||
Cash and cash equivalents, beginning of period |
| | | | 336 | 1,382 | | 1,718 | ||||||||||||||||||||||||
Cash and cash equivalents, end of period |
$ | | | | | 506 | 2,548 | | 3,054 |
21
Comcast Corporation
Condensed Consolidating Statement of Cash Flows
For the Three Months Ended March 31, 2013
(in millions) | Comcast Parent |
Comcast Holdings |
CCCL Parent |
Combined CCHMO Parents |
NBCUniversal Media Parent |
Non-Guarantor Subsidiaries |
Elimination and Consolidation Adjustments |
Consolidated Comcast Corporation |
||||||||||||||||||||||||
Net cash provided by (used in) operating activities |
$ | (112 | ) | $ | 3 | $ | 49 | $ | (53 | ) | $ | (227 | ) | $ | 4,709 | $ | | $ | 4,369 | |||||||||||||
Investing Activities |
||||||||||||||||||||||||||||||||
Net transactions with affiliates |
(2,480 | ) | (6 | ) | 1,665 | 53 | (1,251 | ) | 2,019 | | | |||||||||||||||||||||
Capital expenditures |
| | | | | (1,361 | ) | | (1,361 | ) | ||||||||||||||||||||||
Cash paid for intangible assets |
| | | | | (182 | ) | | (182 | ) | ||||||||||||||||||||||
Acquisitions and construction of real estate properties |
| | | | | (1,311 | ) | | (1,311 | ) | ||||||||||||||||||||||
Proceeds from sales of businesses and investments |
| | | | | 74 | | 74 | ||||||||||||||||||||||||
Purchases of investments |
| | | | (1 | ) | (87 | ) | | (88 | ) | |||||||||||||||||||||
Other |
| 3 | | | (10 | ) | 112 | | 105 | |||||||||||||||||||||||
Net cash provided by (used in) investing activities |
(2,480 | ) | (3 | ) | 1,665 | 53 | (1,262 | ) | (736 | ) | | (2,763 | ) | |||||||||||||||||||
Financing Activities |
||||||||||||||||||||||||||||||||
Proceeds from (repayments of) short-term borrowings, net |
500 | | | | | (9 | ) | | 491 | |||||||||||||||||||||||
Proceeds from borrowings |
2,933 | | | | | | | 2,933 | ||||||||||||||||||||||||
Repurchases and repayments of debt |
| | (1,714 | ) | | (87 | ) | (10 | ) | | (1,811 | ) | ||||||||||||||||||||
Repurchases and retirements of common stock |
(500 | ) | | | | | | | (500 | ) | ||||||||||||||||||||||
Dividends paid |
(429 | ) | | | | | | | (429 | ) | ||||||||||||||||||||||
Issuances of common stock |
13 | | | | | | | 13 | ||||||||||||||||||||||||
Purchase of NBCUniversal noncontrolling common equity interest |
| | | | (3,200 | ) | (7,547 | ) | | (10,747 | ) | |||||||||||||||||||||
Distributions to noncontrolling interests and dividends for redeemable subsidiary preferred stock |
| | | | | (49 | ) | | (49 | ) | ||||||||||||||||||||||
Settlement of Station Venture liability |
| | | | | (602 | ) | | (602 | ) | ||||||||||||||||||||||
Other |
75 | | | | (40 | ) | (52 | ) | | (17 | ) | |||||||||||||||||||||
Net cash provided by (used in) financing activities |
2,592 | | (1,714 | ) | | (3,327 | ) | (8,269 | ) | | (10,718 | ) | ||||||||||||||||||||
Increase (decrease) in cash and cash equivalents |
| | | | (4,816 | ) | (4,296 | ) | | (9,112 | ) | |||||||||||||||||||||
Cash and cash equivalents, beginning of period |
| | | | 5,129 | 5,822 | | 10,951 | ||||||||||||||||||||||||
Cash and cash equivalents, end of period |
$ | | $ | | $ | | $ | | $ | 313 | $ | 1,526 | $ | | $ | 1,839 |
22
ITEM 2: MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Overview
We are a global media and technology company with two primary businesses, Comcast Cable and NBCUniversal. We present our operations for Comcast Cable in one reportable business segment, referred to as Cable Communications, and our operations for NBCUniversal in four reportable business segments.
Cable Communications Segment
Comcast Cable is the nations largest provider of video, high-speed Internet and voice services (cable services) to residential customers under the XFINITY brand, and we also provide similar and other services to small and medium-sized businesses. As of March 31, 2014, our cable systems served 22.6 million video customers, 21.1 million high-speed Internet customers and 10.9 million voice customers and passed more than 54 million homes and businesses. Our Cable Communications segment generates revenue primarily from subscriptions to our cable services, which we market individually and in packages, and from the sale of advertising. During the three months ended March 31, 2014, our Cable Communications segment generated 62% of our consolidated revenue and 79% of our operating income before depreciation and amortization.
NBCUniversal Segments
NBCUniversal is one of the worlds leading media and entertainment companies that develops, produces and distributes entertainment, news and information, sports, and other content for global audiences. The Cable Networks, Broadcast Television, Filmed Entertainment and Theme Parks segments comprise the NBCUniversal businesses and are collectively referred to as the NBCUniversal segments.
Cable Networks
Our Cable Networks segment consists primarily of a diversified portfolio of cable television networks. Our cable networks are comprised of our national cable networks, which provide a variety of entertainment, news and information, and sports content, our regional sports networks, various international cable networks, and our cable television production operations. Our Cable Networks segment generates revenue primarily from the distribution of our cable network programming to multichannel video providers, the sale of advertising on our cable networks and related digital media properties, and the licensing of our owned programming.
Broadcast Television
Our Broadcast Television segment consists primarily of the NBC and Telemundo broadcast networks, our NBC and Telemundo owned local broadcast television stations, and our broadcast television production operations. Our Broadcast Television segment generates revenue primarily from the sale of advertising on our broadcast networks, owned local broadcast television stations and related digital media properties, the licensing of our owned programming, and fees received under retransmission consent agreements.
Filmed Entertainment
Our Filmed Entertainment segment primarily produces, acquires, markets and distributes filmed entertainment worldwide. We also develop, produce and license live stage plays. Our Filmed Entertainment segment generates revenue primarily from the worldwide distribution of our owned and acquired films for exhibition in movie theaters, the licensing of our owned and acquired films through various distribution platforms, and the sale of our owned and acquired films on standard-definition video discs and Blu-ray discs (together, DVDs) and through digital distributors. Our Filmed Entertainment segment also generates revenue from producing and licensing live stage plays, from distributing filmed entertainment produced by third parties, and from various digital media properties.
Theme Parks
Our Theme Parks segment consists primarily of our Universal theme parks in Orlando and Hollywood. Our Theme Parks segment generates revenue primarily from theme park attendance and per capita spending. Per
23
capita spending includes ticket price and in-park spending on food, beverages and merchandise. We also receive fees from third parties that own and operate Universal Studios Japan and Universal Studios Singapore for intellectual property licenses and other services.
Other
Our other business interests primarily include Comcast-Spectacor, which owns the Philadelphia Flyers and the Wells Fargo Center arena in Philadelphia and operates arena management-related businesses.
Time Warner Cable Transaction
On February 12, 2014, we entered into an agreement and plan of merger with Time Warner Cable Inc. (Time Warner Cable). As a result of this agreement, we will acquire 100% of Time Warner Cables outstanding shares of common stock in exchange for shares of our Class A common stock. Time Warner Cable stockholders will receive, in exchange for each share of Time Warner Cable common stock owned immediately prior to the transaction, 2.875 shares of our Class A common stock. Time Warner Cable stockholders will then own approximately 23% of our common stock, estimated based on the number of shares outstanding as of the date of the agreement. Because the exchange ratio was fixed at the time of the merger agreement and the market value of our Class A common stock will continue to fluctuate, the number of shares of Class A common stock to be issued and the total value of the consideration exchanged will not be determinable until the closing date. Following the close of the transaction, Time Warner Cable will be our wholly owned subsidiary. The transaction remains subject to shareholder approval at both companies, regulatory review and other customary conditions and is expected to close by the end of 2014.
Competition
The results of operations of our reportable business segments are affected by competition, as all of our businesses operate in competitive, consumer-driven and rapidly changing environments and compete with a growing number of companies that provide a broad range of communications products and services and entertainment, news and information content to consumers. Additionally, there continue to be new companies with significant financial resources that potentially may compete on a larger scale with our cable services, as well as with our cable and broadcast networks and filmed entertainment businesses.
Competition for the cable services we offer consists primarily of direct broadcast satellite (DBS) providers, which have a national footprint and compete in all our service areas, and phone companies, which overlap approximately 45% of our service areas and are continuing to expand their fiber-based networks. We also compete with other providers of traditional cable services. All of these companies typically offer features, pricing and packaging for services comparable to our cable services.
Each of NBCUniversals businesses also faces substantial and increasing competition from providers of similar types of content, as well as from other forms of entertainment and recreational activities. NBCUniversal also must compete to obtain talent, programming and other resources required in operating these businesses.
Technological changes are further intensifying and complicating the competitive landscape for all of our businesses by challenging existing business models and affecting consumer behavior. Newer services and devices that enable online digital distribution of movies, television shows, and other cable and broadcast video programming continue to gain consumer acceptance and evolve, including some services that charge a nominal or no fee for such programming. These services and devices may potentially negatively affect demand for our video services, as well as demand for our cable network, broadcast television and filmed entertainment content, as the number of entertainment choices available to consumers increases and as video programming is more reliably delivered over the Internet and more easily viewed via the Internet on televisions. Wireless services and devices also continues to evolve allowing consumers to access information, entertainment and communication services, which could negatively impact demand for our cable services, including for our voice services as people substitute mobile phones for landline phones. In addition, delayed viewing and advertising skipping have become more common as the penetration of digital video recorders (DVRs) and similar products has increased and as content has become increasingly available via video-on-demand services and Internet sources, which may have a negative impact on our advertising revenue.
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In our Cable Communications segment, we believe that adding more content and delivering it on an increasing variety of platforms will assist in attracting and retaining customers for our cable services. We are also developing and launching new technology initiatives, such as our X1 platform, and deploying new wireless gateway devices, to further enhance our video and high-speed Internet services. In our NBCUniversal segments, to compete for consumers of our content and for customers at our theme parks, we have invested, and will continue to invest, substantial amounts in acquiring content and producing original content for our cable networks and broadcast television networks, including the acquisition of sports rights, and will continue to invest in our film productions and in the development of new theme park attractions.
Seasonality and Cyclicality
Each of our businesses is subject to seasonal and cyclical variations. In our Cable Communications segment, our results are impacted by the seasonal nature of customers receiving our cable services in college and vacation markets. This generally results in a reduction in net customer additions in the second calendar quarter and increased net customer additions in the third and fourth quarters of each year.
Revenue in our Cable Communications, Cable Networks and Broadcast Television segments is subject to cyclicality, with a benefit in even-numbered years from advertising related to candidates running for political office and issue-oriented advertising. Our Cable Networks and Broadcast Television segments revenue and operating costs and expenses are also cyclical as a result of our periodic broadcasts of the Olympic Games and the Super Bowl. Our advertising revenue generally increases in the period of these broadcasts from increased demand for advertising time, and our operating costs and expenses also increase as a result of our production costs and the amortization of the related rights fees.
Revenue in our Filmed Entertainment segment fluctuates due to the timing of the release of films in movie theaters and the release of our films on DVD and through digital distributors. Release dates are determined by several factors, including competition and the timing of vacation and holiday periods. As a result, revenue tends to be seasonal, with increases experienced each year during the summer months and around the holidays. Revenue in our Cable Networks and Broadcast Television segments fluctuates depending on the timing of when our programming is aired on television, which typically results in higher advertising revenue in the second and fourth calendar quarter of each year. Revenue in our Cable Networks, Broadcast Television and Filmed Entertainment segments also fluctuates due to the timing of when our owned content is made available to licensees.
Revenue in our Theme Parks segment fluctuates with changes in theme park attendance that result from the seasonal nature of vacation travel, local entertainment offerings and seasonal weather variations. Our theme parks generally experience peak attendance during the summer months when schools are closed and during early winter and spring holiday periods.
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Consolidated Operating Results
Three Months Ended March 31 |
Increase/ (Decrease) |
|||||||||||
(in millions) | 2014 | 2013 | & |