10-Q 1 d792357d10q.htm FORM 10-Q Form 10-Q
Table of Contents

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

x

Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended September 30, 2014

OR

 

¨

Transition Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the Transition Period from                      to                     

 

 

 

LOGO

 

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

 
001-36438   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

Indicate the number of shares outstanding of each of the registrant’s classes of stock, as of the latest practical date:

As of September 30, 2014, there were 2,150,368,818 shares of Comcast Corporation Class A common stock, 416,484,168 shares of Comcast Corporation Class A Special common stock and 9,444,375 shares of Comcast Corporation Class B common stock outstanding.

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.

 

 

 


Table of Contents

TABLE OF CONTENTS

          Page
Number
 
PART I. FINANCIAL INFORMATION  

Item 1.

  Comcast Corporation Financial Statements     1   
  Condensed Consolidated Balance Sheet as of September 30, 2014 and December 31, 2013 (Unaudited)     1   
  Condensed Consolidated Statement of Income for the Three and Nine Months Ended September 30, 2014 and 2013 (Unaudited)     2   
  Condensed Consolidated Statement of Comprehensive Income for the Three and Nine Months Ended September 30, 2014 and 2013 (Unaudited)     3   
  Condensed Consolidated Statement of Cash Flows for the Nine Months Ended September 30, 2014 and 2013 (Unaudited)     4   
  Condensed Consolidated Statement of Changes in Equity for the Nine Months Ended September 30, 2014 and 2013 (Unaudited)     5   
  Notes to Condensed Consolidated Financial Statements (Unaudited)     6   

Item 2.

  Management’s Discussion and Analysis of Financial Condition and Results of Operations     28   

Item 3.

  Quantitative and Qualitative Disclosures About Market Risk     44   

Item 4.

  Controls and Procedures     44   
PART II. OTHER INFORMATION  

Item 1.

  Legal Proceedings     45   

Item 1A.

  Risk Factors     45   

Item 2.

  Unregistered Sales of Equity Securities and Use of Proceeds     45   

Item 6.

  Exhibits     46   
SIGNATURES       47   

NBCUniversal Media, LLC Financial Statements

    48   

 

 

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 and nine months ended September 30, 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

 

 

   

NBCUniversal’s 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 NBCUniversal’s 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 transactions with Time Warner Cable Inc. and Charter Communications, Inc., 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

 


Table of Contents

PART I: FINANCIAL INFORMATION

ITEM 1: FINANCIAL STATEMENTS

Comcast Corporation

Condensed Consolidated Balance Sheet

(Unaudited)

 

(in millions, except share data)   September 30,
2014
    December 31,
2013
 

Assets

   

Current Assets:

   

Cash and cash equivalents

  $ 4,547      $ 1,718   

Investments

    531        3,573   

Receivables, net

    6,172        6,376   

Programming rights

    992        928   

Other current assets

    1,694        1,480   

Total current assets

    13,936        14,075   

Film and television costs

    5,560        4,994   

Investments

    3,129        3,770   

Property and equipment, net of accumulated depreciation of $44,821 and $42,574

    30,362        29,840   

Franchise rights

    59,364        59,364   

Goodwill

    27,323        27,098   

Other intangible assets, net of accumulated amortization of $9,649 and $8,874

    17,089        17,329   

Other noncurrent assets, net

    2,474        2,343   

Total assets

  $ 159,237      $ 158,813   

Liabilities and Equity

   

Current Liabilities:

   

Accounts payable and accrued expenses related to trade creditors

  $ 5,680      $ 5,528   

Accrued participations and residuals

    1,444        1,239   

Deferred revenue

    976        898   

Accrued expenses and other current liabilities

    5,461        7,967   

Current portion of long-term debt

    3,523        3,280   

Total current liabilities

    17,084        18,912   

Long-term debt, less current portion

    44,827        44,567   

Deferred income taxes

    32,227        31,935   

Other noncurrent liabilities

    10,388        11,384   

Commitments and contingencies (Note 12)

   

Redeemable noncontrolling interests and redeemable subsidiary preferred stock

    1,058        957   

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, 2,515,829,568 and 2,503,535,883; outstanding, 2,150,368,818 and 2,138,075,133

    25        25   

Class A Special common stock, $0.01 par value—authorized, 7,500,000,000 shares; issued, 487,418,932 and 529,964,944; outstanding, 416,484,168 and 459,030,180

    5        5   

Class B common stock, $0.01 par value—authorized, 75,000,000 shares; issued and outstanding, 9,444,375

             

Additional paid-in capital

    38,977        38,890   

Retained earnings

    21,805        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)

    3        56   

Total Comcast Corporation shareholders’ equity

    53,298        50,694   

Noncontrolling interests

    355        364   

Total equity

    53,653        51,058   

Total liabilities and equity

  $ 159,237      $ 158,813   

See accompanying notes to condensed consolidated financial statements.

 

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Comcast Corporation

Condensed Consolidated Statement of Income

(Unaudited)

 

    Three Months Ended
September 30
    Nine Months Ended
September 30
 
(in millions, except per share data)   2014     2013     2014     2013  

Revenue

  $ 16,791      $ 16,151      $ 51,043      $ 47,731   

Costs and Expenses:

       

Programming and production

    4,772        4,787        15,554        14,418   

Other operating and administrative

    5,019        4,751        14,695        13,787   

Advertising, marketing and promotion

    1,296        1,283        3,748        3,737   

Depreciation

    1,539        1,520        4,707        4,669   

Amortization

    420        396        1,222        1,204   
      13,046        12,737        39,926        37,815   

Operating income

    3,745        3,414        11,117        9,916   

Other Income (Expense):

       

Interest expense

    (663     (639     (1,953     (1,928

Investment income (loss), net

    21        464        254        549   

Equity in net income (losses) of investees, net

    33        (130     87        (96

Other income (expense), net

    (96     (310     (150     (280
      (705     (615     (1,762     (1,755

Income before income taxes

    3,040        2,799        9,355        8,161   

Income tax expense

    (407     (1,021     (2,759     (2,994

Net income

    2,633        1,778        6,596        5,167   

Net (income) loss attributable to noncontrolling interests and redeemable subsidiary preferred stock

    (41     (46     (141     (264

Net income attributable to Comcast Corporation

  $ 2,592      $ 1,732      $ 6,455      $ 4,903   

Basic earnings per common share attributable to Comcast Corporation shareholders

  $ 1.00      $ 0.66      $ 2.49      $ 1.86   

Diluted earnings per common share attributable to Comcast Corporation shareholders

  $ 0.99      $ 0.65      $ 2.46      $ 1.84   

Dividends declared per common share

  $ 0.225      $ 0.195      $ 0.675      $ 0.585   

See accompanying notes to condensed consolidated financial statements.

 

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Comcast Corporation

Condensed Consolidated Statement of Comprehensive Income

(Unaudited)

 

    Three Months Ended
September 30
    Nine Months Ended
September 30
 
(in millions)       2014             2013         2014     2013  

Net income

  $ 2,633      $ 1,778      $ 6,596      $ 5,167   

Unrealized gains (losses) on marketable securities, net of deferred taxes of $—, $(11), $(19) and $(82)

           19        34        136   

Deferred gains (losses) on cash flow hedges, net of deferred taxes of $2, $(26), $1 and $(6)

    (4     45        (2     10   

Amounts reclassified to net income:

       

Realized (gains) losses on marketable securities, net of deferred taxes of $—, $165, $58 and $177

    (1     (278     (98     (301

Realized (gains) losses on cash flow hedges, net of deferred taxes of $(22), $22, $(10) and $(6)

    38        (38     18        10   

Employee benefit obligations, net of deferred taxes of $—, $(34), $— and $(36)

           57        (1     60   

Currency translation adjustments, net of deferred taxes of $10, $(5), $3 and $9

    (16     8        (4     (23

Comprehensive income

    2,650        1,591        6,543        5,059   

Net (income) loss attributable to noncontrolling interests and redeemable subsidiary preferred stock

    (41     (46     (141     (264

Other comprehensive (income) loss attributable to noncontrolling interests

                         9   

Comprehensive income attributable to Comcast Corporation

  $ 2,609      $ 1,545      $ 6,402      $ 4,804   

See accompanying notes to condensed consolidated financial statements.

 

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Comcast Corporation

Condensed Consolidated Statement of Cash Flows

(Unaudited)

 

    Nine Months Ended
September 30
 
(in millions)       2014             2013      

Net cash provided by operating activities

  $ 12,302      $ 11,679   

Investing Activities

   

Capital expenditures

    (5,196     (4,593

Cash paid for intangible assets

    (735     (694

Acquisitions and construction of real estate properties

    (28     (1,705

Acquisitions, net of cash acquired

    (477     (42

Proceeds from sales of businesses and investments

    622        655   

Return of capital from investees

    6        146   

Purchases of investments

    (145     (1,177

Other

    (127     83   

Net cash provided by (used in) investing activities

    (6,080     (7,327

Financing Activities

   

Proceeds from (repayments of) short-term borrowings, net

    (437     395   

Proceeds from borrowings

    4,182        2,933   

Repurchases and repayments of debt

    (3,172     (2,442

Repurchases and retirements of common stock

    (2,250     (1,500

Dividends paid

    (1,676     (1,454

Issuances of common stock

    33        35   

Purchase of NBCUniversal noncontrolling common equity interest

           (10,761

Distributions to noncontrolling interests and dividends for redeemable subsidiary preferred stock

    (170     (164

Settlement of Station Venture liability

           (602

Other

    97        (140

Net cash provided by (used in) financing activities

    (3,393     (13,700

Increase (decrease) in cash and cash equivalents

    2,829        (9,348

Cash and cash equivalents, beginning of period

    1,718        10,951   

Cash and cash equivalents, end of period

  $ 4,547      $ 1,603   

See accompanying notes to condensed consolidated financial statements.

 

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Comcast Corporation

Condensed Consolidated Statement of Changes in Equity

(Unaudited)

 

   

Redeemable
Noncontrolling
Interests and
Redeemable
Subsidiary
Preferred Stock

            

 

Common Stock

    Additional
Paid-In
Capital
    Retained
Earnings
    Treasury
Stock at
Cost
    Accumulated
Other
Comprehensive
Income (Loss)
   

Non-

controlling
Interests

    Total
Equity
 
(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

                  433        (255           178   

Repurchases and retirements of common stock

              (1       (432     (1,067           (1,500

Employee stock purchase
plans

                  75                75   

Dividends declared

                    (1,537           (1,537

Other comprehensive income (loss)

    (9                       (99       (99

Purchase of NBCUniversal noncontrolling common
equity interest

    (17,006                 (1,482         (26       (1,508

Redeemable subsidiary
preferred stock

    725                           

Contributions from
(distributions to) noncontrolling interests, net

    (14                         (103     (103

Other

    (24                 (150           (2     (152

Net income (loss)

    183                                                4,903                        81        4,984   

Balance, September 30, 2013

  $ 853              $ 25      $ 5      $      $ 38,991      $ 18,324      $ (7,517   $ (110   $ 416      $ 50,134   

Balance, January 1, 2014

  $ 957            $ 25      $ 5      $      $ 38,890      $ 19,235      $ (7,517   $ 56      $ 364      $ 51,058   

Stock compensation plans

                  580        (391           189   

Repurchases and retirements of common stock

                  (504     (1,746           (2,250

Employee stock purchase
plans

                  91                91   

Dividends declared

                    (1,748           (1,748

Other comprehensive
income (loss)

                        (53       (53

Issuance of subsidiary shares
to noncontrolling interests

    85                            13        13   

Contributions from
(distributions to) noncontrolling interests, net

    (11                         (101     (101

Other

    (22                 (80           (13     (93

Net income (loss)

    49                                                6,455                        92        6,547   

Balance, September 30, 2014

  $ 1,058              $ 25      $ 5      $      $ 38,977      $ 21,805      $ (7,517   $ 3      $ 355      $ 53,653   

See accompanying notes to condensed consolidated financial statements.

 

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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 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: Recent Accounting Pronouncements

Discontinued Operations

In April 2014, the Financial Accounting Standards Board (“FASB”) updated the accounting guidance related to discontinued operations. The updated accounting guidance provides a narrower definition of discontinued operations than existing GAAP. The updated accounting guidance requires that only disposals of components of an entity, or groups of components, that represent a strategic shift that has or will have a material effect on the reporting entity’s operations be reported in the financial statements as discontinued operations. The updated accounting guidance also provides guidance on the financial statement presentations and disclosures of discontinued operations. The updated accounting guidance will be effective prospectively for us on January 1, 2015, with early adoption permitted in 2014.

Revenue Recognition

In May 2014, the FASB and the International Accounting Standards Board updated the accounting guidance related to revenue recognition. The updated accounting guidance provides a single, contract-based revenue recognition model to help improve financial reporting by providing clearer guidance on when an entity should recognize revenue, and by reducing the number of standards to which entities have to refer. The updated accounting guidance will be effective for us on January 1, 2017, and early adoption is not permitted. The updated accounting guidance allows for either a full retrospective adoption or modified retrospective adoption. We are currently in the process of determining the impact that the updated accounting guidance will have on our consolidated financial statements and our method of adoption.

 

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Comcast Corporation

 

Note 3: Earnings Per Share

Computation of Diluted EPS

 

    Three Months Ended September 30  
    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

  $ 2,592         2,580       $ 1.00       $ 1,732         2,622       $ 0.66   

Effect of dilutive securities:

                

Assumed exercise or issuance of shares relating to stock plans

             36                           36            

Diluted EPS attributable to Comcast Corporation shareholders

  $ 2,592         2,616       $ 0.99       $ 1,732         2,658       $ 0.65   

 

    Nine Months Ended September 30  
    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

  $ 6,455         2,592       $ 2.49       $ 4,903         2,629       $ 1.86   

Effect of dilutive securities:

                

Assumed exercise or issuance of shares relating to stock plans

             37                           39            

Diluted EPS attributable to Comcast Corporation shareholders

  $ 6,455         2,629       $ 2.46       $ 4,903         2,668       $ 1.84   

 

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 by using the treasury stock method.

For the three and nine months ended September 30, 2014, diluted EPS excluded 17 million and 13 million, respectively, 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. For the three and nine months ended September 30, 2013, diluted EPS excluded 18 million and 13 million, respectively, of potential common shares.

Note 4: Significant Transactions

Time Warner Cable Merger

On February 12, 2014, we entered into an agreement and plan of merger (the “merger agreement”) with Time Warner Cable Inc. (“Time Warner Cable”) whereby Time Warner Cable will become our wholly owned subsidiary (the “Time Warner Cable merger”). Time Warner Cable stockholders will receive, in exchange for each share of Time Warner Cable common stock owned immediately prior to the Time Warner Cable merger, 2.875 shares of our Class A common stock. We estimate that at the time of closing, Time Warner Cable stockholders will own approximately 24% of the outstanding shares of our common stock. 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. The Time Warner Cable merger was approved by Comcast shareholders on October 8, 2014 and by Time Warner Cable stockholders on October 9, 2014. The Time Warner Cable merger remains subject to regulatory review and other customary conditions and is expected to close in early 2015.

 

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Divestiture Transactions

The terms of the merger agreement contemplate that we are prepared to divest systems serving up to approximately 3 million video customers of our company following the Time Warner Cable merger in order to obtain applicable regulatory approvals. As a result of this commitment, on April 25, 2014, we entered into a transactions agreement with Charter Communications, Inc. (“Charter”) that, if consummated, would satisfy the divestiture undertaking. Under the transactions agreement, following the close of the Time Warner Cable merger and subject to various conditions, we would divest cable systems resulting in a net disposition of approximately 3.9 million video customers through three transactions: (1) a spin-off of cable systems serving approximately 2.5 million of our video customers (the “spin-off transaction”) into a newly formed public entity (“SpinCo”), (2) an exchange of cable systems serving approximately 1.5 million Time Warner Cable video customers for cable systems serving approximately 1.7 million Charter video customers, and (3) a sale to Charter of cable systems serving approximately 1.5 million Time Warner Cable video customers for cash (collectively, the “divestiture transactions”).

In connection with the spin-off transaction and prior to the spin-off, it is expected that SpinCo will incur new debt to fund a cash distribution to us and to issue notes to us, which notes will enable us to then retire a portion of our debt. In the spin-off transaction, we will distribute common stock of SpinCo pro rata to the holders of all of our outstanding common stock, including the former Time Warner Cable stockholders who continue to hold shares through the record date of the spin-off transaction. After the spin-off transaction, a newly formed, wholly owned indirect subsidiary of Charter will merge with and into Charter with the effect that all shares of Charter will be converted into shares of a new holding company, which will survive as the publicly traded parent company of Charter (“New Charter”). New Charter will then acquire an interest in SpinCo by issuing New Charter stock in exchange for a portion of the outstanding SpinCo stock, following which it is expected that Comcast shareholders will own approximately 67% of SpinCo and New Charter will own approximately 33% of SpinCo. In addition, it is expected that Comcast shareholders will own approximately 10% of New Charter, though the actual percentage of New Charter that will be owned by Comcast shareholders will depend on a number of factors, some of which will not be known until completion of the divestiture transactions. Following the close of the divestiture transactions, we will no longer have any ownership interest in SpinCo.

The close of the divestiture transactions is subject to the completion of the Time Warner Cable merger, Charter stockholder approval, completion of the SpinCo financing transactions, regulatory approvals and other customary conditions. The Time Warner Cable merger and the divestiture transactions are subject to separate conditions, and the Time Warner Cable merger can be completed regardless of whether the divestiture transactions are ultimately completed.

Note 5: Film and Television Costs

 

(in millions)   September 30,
2014
     December 31,
2013
 

Film Costs:

    

Released, less amortization

  $ 1,313       $ 1,630   

Completed, not released

    193         70   

In production and in development

    1,143         658   
    2,649         2,358   

Television Costs:

    

Released, less amortization

    1,187         1,155   

In production and in development

    445         370   
    1,632         1,525   

Programming rights, less amortization

    2,271         2,039   
    6,552         5,922   

Less: Current portion of programming rights

    992         928   

Film and television costs

  $ 5,560       $ 4,994   

 

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Note 6: Investments

 

(in millions)   September 30,
2014
     December 31,
2013
 

Fair Value Method

  $ 588       $ 4,345   

Equity Method:

    

The Weather Channel

    333         333   

Hulu

    188         187   

Other

    503         469   
    1,024         989   

Cost Method:

    

AirTouch

    1,564         1,553   

Other

    484         456   
    2,048         2,009   

Total investments

    3,660         7,343   

Less: Current investments

    531         3,573   

Noncurrent investments

  $ 3,129       $ 3,770   

Investment Income (Loss), Net

 

    Three Months Ended
September 30
    Nine Months Ended
September 30
 
(in millions)       2014             2013             2014             2013      

Gains on sales and exchanges of investments, net

  $ 3      $ 445      $ 176      $ 483   

Investment impairment losses

    (6     (12     (30     (25

Unrealized gains (losses) on securities underlying prepaid forward sale agreements

    15        345        (13     1,197   

Mark to market adjustments on derivative component of prepaid forward sale agreements and indexed debt instruments

    (13     (348     19        (1,189

Interest and dividend income

    29        28        85        84   

Other, net

    (7     6        17        (1

Investment income (loss), net

  $ 21      $ 464      $ 254      $ 549   

Fair Value Method

As of September 30, 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)   September 30,
2014
     December 31,
2013
 

Assets:

    

Fair value equity securities held as collateral

  $ 444       $ 3,959   

Liabilities:

    

Obligations under prepaid forward sale agreements

  $ 117       $ 811   

Derivative component of prepaid forward sale agreements

    277         2,800   

Total liabilities

  $ 394       $ 3,611   

During the nine months ended September 30, 2014, we settled $3.2 billion of obligations under certain of our prepaid forward sale agreements by delivering equity securities. As of September 30, 2014, the carrying values of our remaining prepaid forward sale obligations approximated their fair values. The estimated fair values are based on Level 2 inputs that use 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.

 

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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 September 30, 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 that use 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 7: Long-Term Debt

As of September 30, 2014, our debt had a carrying value of $48.4 billion and an estimated fair value of $54.4 billion. The estimated fair value of our publicly traded debt is primarily based on Level 1 inputs that use quoted market values for the debt. The estimated fair value of debt for which there are no quoted market prices is based on Level 2 inputs that use interest rates available to us for debt with similar terms and remaining maturities.

Debt Borrowings

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 $900 million aggregate principal amount of our 2.10% senior notes due April 2014 at maturity.

In August 2014, we issued $1 billion aggregate principal amount of 3.375% senior notes due 2025 and $1 billion aggregate principal amount of 4.20% senior notes due 2034. The proceeds from this offering were used for working capital and general corporate purposes, which may, in the future, include the repayment of certain of our senior notes.

Debt Repayments

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 September 30, 2014, amounts available under our consolidated revolving credit facilities, net of amounts outstanding under our commercial paper programs and outstanding letters of credit, totaled $6.4 billion, which included $440 million available under NBCUniversal Enterprise’s revolving credit facility.

Commercial Paper Programs

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 Enterprise’s 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 September 30, 2014, NBCUniversal Enterprise had $910 million face amount of commercial paper outstanding.

 

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Note 8: 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 by 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 by using pricing models that use significant inputs that are primarily unobservable, discounted cash flow methodologies or similar techniques, as well as financial 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  
    September 30, 2014      December 31,
2013
 
(in millions)   Level 1      Level 2      Level 3      Total      Total  

Assets

             

Trading securities (see Note 6)

  $ 450       $       $       $ 450       $ 3,956   

Available-for-sale securities

    6         121         10         137         389   

Interest rate swap agreements

            81                 81         110   

Other

            67         1         68         81   

Total

  $ 456       $ 269       $ 11       $ 736       $ 4,536   

Liabilities

             

Derivative component of prepaid forward sale agreements and indexed debt instruments (see Note 6)

  $       $ 288       $       $ 288       $ 2,816   

Contractual obligation

                    818         818         747   

Contingent consideration

                    653         653         684   

Other

            8                 8         16   

Total

  $       $ 296       $ 1,471       $ 1,767       $ 4,263   

 

Contractual Obligation and Contingent Consideration

The estimated 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 include 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 General Electric Company (“GE”), which are related to our 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, 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.

 

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Changes in Contractual Obligation and Contingent Consideration

 

(in millions)   Contractual
Obligation
    Contingent
Consideration
 

Balance, January 1, 2014

  $ 747      $ 684   

Fair value adjustments

    120        23   

Payments

    (49     (54

Balance, September 30, 2014

  $ 818      $ 653   

Fair Value of Redeemable Subsidiary Preferred Stock Financial Instrument

As of September 30, 2014, the fair value of the NBCUniversal Enterprise redeemable subsidiary preferred stock was $752 million. The estimated fair value is based on Level 2 inputs that use 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 9: 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
September 30
     Nine Months Ended
September 30
 
(in millions)       2014              2013              2014              2013      

Stock options

  $ 38       $ 34       $ 121       $ 102   

Restricted share units

    55         44         171         130   

Employee stock purchase plans

    5         4         18         15   

Total

  $ 98       $ 82       $ 310       $ 247   

 

As of September 30, 2014, we had unrecognized pretax compensation expense of $356 million and $489 million related to nonvested stock options and nonvested RSUs, respectively.

Note 10: Income Taxes

During the three months ended September 30, 2014, we reduced our accruals for uncertain tax positions and the related accrued interest on these tax positions. The reduction resulted in a decrease of $724 million in income tax expense, which excludes the benefits of uncertain tax positions for which we have been indemnified by GE. The table below presents a reconciliation of our uncertain tax positions from January 1, 2014 to September 30, 2014.

 

(in millions)       

Balance, January 1, 2014

  $ 1,701   

Additions based on tax positions related to the current year

    54   

Additions based on tax positions related to prior years

    31   

Reductions for tax positions of prior years

    (168

Reductions due to expiration of statutes of limitations

    (436

Settlements with taxing authorities

    (15

Balance, September 30, 2014

  $ 1,167   

 

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As of September 30, 2014 and December 31, 2013, our accrued interest associated with tax positions was $460 million and $780 million, respectively.

Note 11: Supplemental Financial Information

Receivables

 

(in millions)   September 30,
2014
     December 31,
2013
 

Receivables, gross

  $ 6,679       $ 6,972   

Less: Allowance for returns and customer incentives

    284         375   

Less: Allowance for doubtful accounts

    223         221   

Receivables, net

  $ 6,172       $ 6,376   

Accumulated Other Comprehensive Income (Loss)

 

(in millions)   September 30,
2014
    September 30,
2013
 

Unrealized gains (losses) on marketable securities

  $ 3      $ 18   

Deferred gains (losses) on cash flow hedges

    (29     (47

Unrecognized gains (losses) on employee benefit obligations

    70        (50

Cumulative translation adjustments

    (41     (31

Accumulated other comprehensive income (loss), net of deferred taxes

  $ 3      $ (110

Net Cash Provided by Operating Activities

 

    Nine Months Ended
September 30
 
(in millions)       2014             2013      

Net income

  $ 6,596      $ 5,167   

Adjustments to reconcile net income to net cash provided by operating activities:

   

Depreciation and amortization

    5,929        5,873   

Share-based compensation

    386        312   

Noncash interest expense (income), net

    132        122   

Equity in net (income) losses of investees, net

    (87     96   

Cash received from investees

    71        89   

Net (gain) loss on investment activity and other

    (24     (239

Deferred income taxes

    358        (52

Changes in operating assets and liabilities, net of effects of acquisitions and divestitures:

   

Current and noncurrent receivables, net

    89        145   

Film and television costs, net(a)

    (471     408   

Accounts payable and accrued expenses related to trade creditors

    119        (108

Other operating assets and liabilities

    (796     (134

Net cash provided by operating activities

  $ 12,302      $ 11,679   

 

(a)

Comprised of additions to our film and television cost assets of $7,198 million and $5,590 million, net of film and television cost amortization of $6,727 million and $5,998 million in 2014 and 2013, respectively.

Cash Payments for Interest and Income Taxes

 

    Three Months Ended
September 30
     Nine Months Ended
September 30
 
(in millions)       2014              2013              2014              2013      

Interest

  $ 656       $ 636       $ 1,820       $ 1,768   

Income taxes

  $ 974       $ 958       $ 2,878       $ 3,180   

 

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Noncash Investing and Financing Activities

During the nine months ended September 30, 2014:

 

   

we acquired $847 million of property and equipment and intangible assets that were accrued but unpaid

 

 

   

we recorded a liability of $580 million for a quarterly cash dividend of $0.225 per common share paid in October 2014

 

 

   

we used $3.2 billion of equity securities to settle our obligations under certain prepaid forward sale agreements

 

Note 12: 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 Court’s opinion. In August 2013, the plaintiffs in the Philadelphia Cluster case moved to certify a new, smaller class, which we opposed in January 2014. The parties have been discussing possible resolution of the Philadelphia Cluster case. Accordingly, in February 2014, the plaintiff filed an unopposed motion to stay the case, which the District Court granted. In April 2014, the District Court granted our unopposed motion to de-certify the Chicago Cluster class and the plaintiffs’ unopposed motion to amend the Pennsylvania case so as to dismiss claims relating to the Chicago Cluster. In April 2014, lead counsel for the Boston Cluster cases withdrew, and in June 2014, new counsel requested the Boston Cluster cases be transferred to the federal court in Boston, which we have opposed.

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

 

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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 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. Although a comprehensive settlement agreement for all 23 cases that had been submitted to the District Court for preliminary approval in June 2013 was withdrawn in October 2014, 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 and injure our reputation.

Note 13: 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 nation’s largest provider of video, high-speed Internet and voice 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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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 September 30, 2014  
(in millions)   Revenue(e)     Operating Income (Loss)
Before Depreciation and
Amortization(f)
    Depreciation
and
Amortization
     Operating
Income
(Loss)
    Capital
Expenditures
 

Cable Communications(a)

  $ 11,041      $ 4,464      $ 1,561       $ 2,903      $ 1,644   

NBCUniversal

          

Cable Networks(b)

    2,255        868        189         679        11   

Broadcast Television

    1,770        142        24         118        15   

Filmed Entertainment(b)

    1,186        151        6         145        4   

Theme Parks

    786        402        68         334        184   

Headquarters and Other(c)

    4        (142     84         (226     81   

Eliminations(d)

    (80     (5             (5       

NBCUniversal

    5,921        1,416        371         1,045        295   

Corporate and Other

    174        (197     27         (224     11   

Eliminations(d)

    (345     21                21          

Comcast Consolidated

  $ 16,791      $ 5,704      $ 1,959       $ 3,745      $ 1,950   

 

    Three Months Ended September 30, 2013  
(in millions)   Revenue(e)     Operating Income (Loss)
Before Depreciation and
Amortization(f)
    Depreciation
and
Amortization
    Operating
Income
(Loss)
    Capital
Expenditures
 

Cable Communications(a)

  $ 10,491      $ 4,246      $ 1,549      $ 2,697      $ 1,432   

NBCUniversal

         

Cable Networks(b)

    2,239        853        183        670        19   

Broadcast Television

    1,644        34        23        11        21   

Filmed Entertainment(b)

    1,400        189        4        185        1   

Theme Parks

    661        343        73        270        142   

Headquarters and Other(c)

    7        (167     69        (236     101   

Eliminations(d)

    (100     (2            (2       

NBCUniversal

    5,851        1,250        352        898        284   

Corporate and Other

    133        (178     16        (194     10   

Eliminations(d)

    (324     12        (1     13          

Comcast Consolidated

  $ 16,151      $ 5,330      $ 1,916      $ 3,414      $ 1,726   

 

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    Nine Months Ended September 30, 2014  
(in millions)   Revenue(e)     Operating Income (Loss)
Before Depreciation and
Amortization(f)
    Depreciation
and
Amortization
     Operating
Income
(Loss)
    Capital
Expenditures
 

Cable Communications(a)

  $ 32,827      $ 13,428      $ 4,749       $ 8,679      $ 4,282   

NBCUniversal

          

Cable Networks(b)

    7,236        2,677        558         2,119        30   

Broadcast Television

    6,207        504        78         426        52   

Filmed Entertainment(b)

    3,713        634        16         618        8   

Theme Parks

    1,888        816        210         606        486   

Headquarters and Other(c)

    10        (464     244         (708     308   

Eliminations(d)

    (241     (6             (6       

NBCUniversal

    18,813        4,161        1,106         3,055        884   

Corporate and Other

    520        (532     74         (606     30   

Eliminations(d)

    (1,117     (11             (11       

Comcast Consolidated

  $ 51,043      $ 17,046      $ 5,929       $ 11,117      $ 5,196   

 

    Nine Months Ended September 30, 2013  
(in millions)   Revenue(e)     Operating Income (Loss)
Before Depreciation and
Amortization(f)
    Depreciation
and
Amortization
     Operating
Income
(Loss)
    Capital
Expenditures
 

Cable Communications(a)

  $ 31,175      $ 12,800      $ 4,780       $ 8,020      $ 3,766   

NBCUniversal

          

Cable Networks(b)

    6,877        2,572        549         2,023        67   

Broadcast Television

    4,893        205        74         131        38   

Filmed Entertainment(b)

    4,004        291        11         280        4   

Theme Parks

    1,669        747        218         529        427   

Headquarters and Other(c)

    25        (416     193         (609     271   

Eliminations(d)

    (282     (5             (5       

NBCUniversal

    17,186        3,394        1,045         2,349        807   

Corporate and Other

    431        (380     48         (428     20   

Eliminations(d)

    (1,061     (25             (25       

Comcast Consolidated

  $ 47,731      $ 15,789      $ 5,873       $ 9,916      $ 4,593   

 

(a)

For the three and nine months ended September 30, 2014 and 2013, Cable Communications segment revenue was derived from the following sources:

 

    Three Months Ended
September 30
    Nine Months Ended
September 30
 
         2014             2013             2014             2013      

Residential:

       

Video

    46.9     48.9     47.5     49.4

High-speed Internet

    25.7     24.7     25.6     24.6

Voice

    8.3     8.8     8.4     8.8

Business services

    9.2     8.0     8.8     7.6

Advertising

    5.5     5.2     5.3     5.1

Other

    4.4     4.4     4.4     4.5

Total

    100     100     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 service’s price on a stand-alone basis.

For both the three and nine months ended September 30, 2014, 2.8% of Cable Communications segment revenue was derived from franchise and other regulatory fees. For both the three and nine months ended September 30, 2013, 2.9% of Cable Communications segment revenue was derived from franchise and other regulatory fees.

 

(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

 

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Comcast Corporation

 

 

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.

 

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Comcast Corporation

Note 14: 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 other’s 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 Enterprise’s $4 billion aggregate principal amount of senior notes, its $1.35 billion revolving 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.

 

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Comcast Corporation

Condensed Consolidating Balance Sheet

September 30, 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

  $  —      $  —      $  —      $  —      $ 196      $ 4,351      $  —      $ 4,547   

Investments

                                5        526               531   

Receivables, net

                                       6,172               6,172   

Programming rights

                                       992               992   

Other current assets

    222                             43        1,429               1,694   

Total current assets

    222                             244        13,470               13,936   

Film and television costs

                                       5,560               5,560   

Investments

    21                             373        2,735               3,129   

Investments in and amounts due from subsidiaries eliminated upon consolidation

    84,503        103,462        110,327        59,160        41,038        95,665        (494,155       

Property and equipment, net

    202                                    30,160               30,362   

Franchise rights

                                       59,364               59,364   

Goodwill

                                       27,323               27,323   

Other intangible assets, net

    9                                    17,080               17,089   

Other noncurrent assets, net

    1,187        148                      94        2,059        (1,014     2,474   

Total assets

  $ 86,144      $ 103,610      $ 110,327      $ 59,160      $ 41,749      $ 253,416      $ (495,169   $ 159,237   

Liabilities and Equity

               

Accounts payable and accrued expenses related to trade creditors

  $ 11      $      $      $      $      $ 5,669      $      $ 5,680   

Accrued participations and residuals

                                       1,444               1,444   

Accrued expenses and other current liabilities

    1,374        283        347        21        415        3,997               6,437   

Current portion of long-term debt

    900                      679        1,008        936               3,523   

Total current liabilities

    2,285        283        347        700        1,423        12,046               17,084   

Long-term debt, less current portion

    28,401        131        1,827        822        9,219        4,427               44,827   

Deferred income taxes

           719                      59        32,319        (870     32,227   

Other noncurrent liabilities

    2,160                             945        7,427        (144     10,388   

Redeemable noncontrolling interests and redeemable subsidiary preferred stock

                                       1,058               1,058   

Equity:

               

Common stock

    30                                                  30   

Other shareholders’ equity

    53,268        102,477        108,153        57,638        30,103        195,784        (494,155     53,268   

Total Comcast Corporation shareholders’ equity

    53,298        102,477        108,153        57,638        30,103        195,784        (494,155     53,298   

Noncontrolling interests

                                       355               355   

Total equity

    53,298        102,477        108,153        57,638        30,103        196,139        (494,155     53,653   

Total liabilities and equity

  $ 86,144      $ 103,610      $ 110,327      $ 59,160      $ 41,749      $ 253,416      $ (495,169   $ 159,237   

 

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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   

 

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Comcast Corporation

Condensed Consolidating Statement of Income

For the Three Months Ended September 30, 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

  $      $      $      $      $      $ 16,791      $      $ 16,791   

Management fee revenue

    237               237        146                      (620       
      237               237        146               16,791        (620     16,791   

Costs and Expenses:

               

Programming and production

                                       4,772               4,772   

Other operating and administrative

    197               237        146        203        4,856        (620     5,019   

Advertising, marketing and promotion

                                       1,296               1,296   

Depreciation

    10                                    1,529               1,539   

Amortization

    1                                    419               420   
      208               237        146        203        12,872        (620     13,046   

Operating income (loss)

    29                             (203     3,919               3,745   

Other Income (Expense):

               

Interest expense

    (412     (2     (43     (29     (111     (66            (663

Investment income (loss), net

    1        2                      (14     32               21   

Equity in net income (losses) of investees, net

    2,840        2,556        2,362        1,801        1,144        835        (11,505     33   

Other income (expense), net

                                (3     (93            (96
      2,429        2,556        2,319        1,772        1,016        708        (11,505     (705

Income (loss) before income taxes

    2,458        2,556        2,319        1,772        813        4,627        (11,505     3,040   

Income tax (expense) benefit

    134               15        10        (11     (555            (407

Net income (loss)

    2,592        2,556        2,334        1,782        802        4,072        (11,505     2,633   

Net (income) loss attributable to noncontrolling interests and redeemable subsidiary preferred stock

                                       (41            (41

Net income (loss) attributable to Comcast Corporation

  $ 2,592      $ 2,556      $ 2,334      $ 1,782      $ 802      $ 4,031      $ (11,505   $ 2,592   

Comprehensive income (loss) attributable to Comcast Corporation

  $ 2,609      $ 2,551      $ 2,335      $ 1,781      $ 785      $ 4,031      $ (11,483   $ 2,609   

 

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Comcast Corporation

Condensed Consolidating Statement of Income

For the Three Months Ended September 30, 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

  $      $      $      $      $      $ 16,151      $      $ 16,151   

Management fee revenue

    225               219        137                      (581       
      225               219        137               16,151        (581     16,151   

Costs and Expenses:

               

Programming and production

                                       4,787               4,787   

Other operating and administrative

    92               219        137        211        4,673        (581     4,751   

Advertising, marketing and promotion

                                       1,283               1,283   

Depreciation

    7                                    1,513               1,520   

Amortization

    1                                    395               396   
      100               219        137        211        12,651        (581     12,737   

Operating income (loss)

    125                             (211     3,500               3,414   

Other Income (Expense):

               

Interest expense

    (382     (3     (45     (30     (123     (56            (639

Investment income (loss), net

    1        (5                   (3     471               464   

Equity in net income (losses) of investees, net

    1,898        1,787        1,850        1,371        576        106        (7,718     (130

Other income (expense), net

                                       (310            (310
      1,517        1,779        1,805        1,341        450        211        (7,718     (615

Income (loss) before income taxes

    1,642        1,779        1,805        1,341        239        3,711        (7,718     2,799   

Income tax (expense) benefit

    90        3        15        11        (3     (1,137            (1,021

Net income (loss)

    1,732        1,782        1,820        1,352        236        2,574        (7,718     1,778   

Net (income) loss attributable to noncontrolling interests and redeemable subsidiary preferred stock

                                       (46            (46

Net income (loss) attributable to Comcast Corporation

  $ 1,732      $ 1,782      $ 1,820      $ 1,352      $ 236      $ 2,528      $ (7,718   $ 1,732   

Comprehensive income (loss) attributable to Comcast Corporation

  $ 1,545      $ 1,828      $ 1,864      $ 1,415      $ 244      $ 2,327      $ (7,678   $ 1,545   

 

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Comcast Corporation

Condensed Consolidating Statement of Income

For the Nine Months Ended September 30, 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

  $      $      $      $      $      $ 51,043      $      $ 51,043   

Management fee revenue

    704               691        432                      (1,827       
      704               691        432               51,043        (1,827     51,043   

Costs and Expenses:

               

Programming and production

                                       15,554               15,554   

Other operating and administrative

    471               691        432        697        14,231        (1,827     14,695   

Advertising, marketing and promotion

                                       3,748               3,748   

Depreciation

    25                                    4,682               4,707   

Amortization

    4                                    1,218               1,222   
      500               691        432        697        39,433        (1,827     39,926   

Operating income (loss)

    204                             (697     11,610               11,117   

Other Income (Expense):