EX-99.1 2 dex991.htm COMCAST CORPORATION PRESS RELEASE DATED OCTOBER 29, 3008 Comcast Corporation press release dated October 29, 3008

Exhibit 99.1

 

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   PRESS RELEASE

 

Investor Contacts:       Press Contacts:    

Marlene S. Dooner

 

(215) 286-7392

 

D’Arcy Rudnay

 

(215) 286-8582

Michael A. Kelman

 

(215) 286-3035

 

John Demming

 

(215) 286-8011

 

 

 

 

 

COMCAST REPORTS THIRD QUARTER 2008 RESULTS

 

Consolidated Revenue Increased 10%; Pro Forma Growth of 7%

Consolidated Operating Cash Flow Increased 10%; Pro Forma Growth of 8%

Consolidated Operating Income Increased 20%

EPS of $0.26; Adjusted EPS of $0.24 Increased 33%

Free Cash Flow Increased 77% to $928 Million

Repurchased 40 Million Common Shares for $800 Million

Philadelphia, PA – October 29, 2008…Comcast Corporation (NASDAQ: CMCSA, CMCSK) today reported results for the quarter ended September 30, 2008. The following table highlights financial results (dollars in millions, except per share amounts):

 

     3rd Quarter      Year-to-Date
Consolidated    2008      2007      Growth      2008      2007      Growth

Revenue

   $ 8,549      $ 7,781      10%      $ 25,491      $ 22,881      11%

Operating Cash Flow

   $ 3,237      $ 2,929      10%      $ 9,762      $ 8,704      12%

Operating Income

   $ 1,670      $ 1,391      20%      $ 4,975      $ 4,120      21%

Net Cash Provided by Operating Activities

   $ 2,445      $ 1,598      53%      $ 7,373      $ 5,505      34%

Free Cash Flow

   $ 928      $ 524      77%      $ 2,793      $ 1,334      109%
                           

Net Income

   $ 771      $ 560      38%      $ 2,135      $ 1,985      8%

Earnings per Share

   $ 0.26      $ 0.18      44%      $ 0.72      $ 0.63      14%
                           

Adjusted Net Income1

   $ 691      $ 560      23%      $ 1,911      $ 1,685      13%

Adjusted Earnings per Share1

   $ 0.24      $ 0.18      33%      $ 0.64      $ 0.54      19%
                           

Pro Forma Revenue2

   $ 8,549      $ 7,974      7%      $ 25,491      $ 23,515      8%

Pro Forma Operating Cash Flow2

   $ 3,237      $ 3,004      8%      $ 9,762      $ 8,955      9%

 

 

See notes on page 4

Brian L. Roberts, Chairman and CEO of Comcast Corporation, said, “We delivered solid results in the third quarter, demonstrating the underlying strength of our subscription businesses and our ability to operate well in a challenging economic and competitive environment. Importantly, our financial position has never been stronger, reflecting disciplined and prudent balance sheet management and strong free cash flow growth. The success of our financial strategy enables us to grow the business, compete effectively and invest in our products and services. We will continue to apply this balanced approach to the business, as we remain focused on improving the customer experience and extending our long-term competitive advantage in order to build shareholder value.”

Consolidated Results

 

Revenue increased 10% in the third quarter of 2008 to $8.5 billion, while Operating Cash Flow (as defined in Table 7) increased 10% to $3.2 billion and Operating Income increased 20% to $1.7 billion. This growth was due to solid operating results at Comcast Cable and in the Programming segment, as well as the positive impact of cable acquisitions. For the nine months ended September 30, 2008,

 


 

revenue increased 11% to $25.5 billion, Operating Cash Flow increased 12% to $9.8 billion, and Operating Income increased 21% to $5.0 billion, all compared to the same time period in 2007.

On a pro forma basis2, Consolidated Revenue increased 7% to $8.5 billion in the third quarter of 2008, while Consolidated Operating Cash Flow increased 8% to $3.2 billion. Operating Cash Flow margin was 37.9%, a slight increase from the 37.7% reported in the third quarter of 2007. For the nine months ended September 30, 2008, pro forma Consolidated Revenue increased 8% to $25.5 billion and pro forma Consolidated Operating Cash Flow increased 9% to $9.8 billion. Operating Cash Flow margin was 38.3%, a slight increase from the 38.1% reported in the first nine months of 2007.

Net Income in the third quarter of 2008 was $771 million, or $0.26 per share compared to $560 million or $0.18 per share in the prior year. Net income in the third quarter of 2008 included favorable income tax adjustments. Excluding these adjustments and as reconciled in Table 7-B, Adjusted Earnings per Share increased 33% to $0.24. Net income for the nine months ended September 30, 2008, increased 8% from last year to $2.1 billion. Net income in the first nine months of 2008 and 2007 also included gains from the dissolution of cable partnerships. Excluding these gains in both periods and the income tax adjustments in the third quarter of 2008, Adjusted Earnings per Share for the nine months ended September 30, 2008 increased 19% to $0.64 compared to $0.54 in the first nine months of 2007.

Net Cash Provided by Operating Activities increased 53% to $2.4 billion in the third quarter of 2008 and increased 34% to $7.4 billion for the nine months ended September 30, 2008, due primarily to solid operating results in all segments, as well as a positive impact from the Economic Stimulus package.

Free Cash Flow (as defined in Table 7) totaled $928 million in the third quarter of 2008 as compared to $524 million in 2007, a 77% increase. Free Cash Flow for the nine months ended September 30, 2008 increased 109% to $2.8 billion. The definition of Free Cash Flow remains unchanged and excludes any impact from the Economic Stimulus package (see Table 4). The increase in Free Cash Flow was due primarily to growth in consolidated Operating Cash Flow and lower capital expenditures. During the third quarter of 2008, consolidated capital expenditures decreased 14% from the prior year to $1.3 billion, or 15.3% of total revenue, reflecting lower spending for residential services at Comcast Cable.

Pro Forma Cable Segment Results2

Revenue from our cable segment increased 7% to $8.1 billion for the third quarter of 2008 as compared to $7.6 billion in the third quarter of 2007 reflecting revenue increases across all product lines, with the exception of our advertising business, which has been impacted by weakness in the economy. The monthly average total revenue per basic subscriber increased 9% from $101.74 to $110.71, reflecting an increase in the number of customers taking multiple products. As of September 30, 2008, 22% of subscribers were three-product customers as compared to 15% at the end of last year’s third quarter. For the nine months ended September 30, 2008, cable revenue increased 8% to $24.1 billion.

Operating Cash Flow grew 7% to $3.3 billion in the third quarter of 2008 from $3.1 billion in the third quarter of 2007. Operating Cash Flow margin was 40.0%, a slight decrease from the 40.2% reported in the third quarter of 2007. Comcast continues to focus on controlling operating expenses; however, the company incurred expenses related to a divisional restructuring and employee reductions, the impact from two major hurricanes on Comcast systems in the southern U.S., and additional investments in Business Services. Excluding the impact of the hurricane and severance-related charges, which totaled $59 million, Operating Cash Flow grew 9% in 3Q08. For the nine months ended September 30, 2008, Operating Cash Flow increased 8% to $9.8 billion, a margin of 40.4%.

Video

 

 

Basic video subscribers declined 147,000 or 0.6% sequentially during the third quarter.

 

 

Added 417,000 digital cable subscribers during the third quarter – 69% or 16.8 million video subscribers have digital service.

 

 

7.3 million or 44% of digital cable subscribers have advanced services such as digital video recorders (DVR) and/or high-definition television service (HDTV).

Video revenue increased 4% to $4.7 billion in the third quarter of 2008 from $4.5 billion in 2007. The revenue increase reflects price increases for video services and growth in digital video customers, offset

 

See notes on page 4

 

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in part by an increasing number of customers in bundles and promotional offers, as well as a decline in basic video customers.

Basic video subscribers decreased by 147,000 to 24.4 million during the third quarter, including an estimated loss of 15,000 subscribers due to the hurricanes, compared to a 56,000 subscriber decline in the third quarter of 2007. Year to date through September 30, 2008, basic subscribers decreased 342,000, reflecting a more challenging competitive and economic environment.

Comcast added 417,000 digital cable customers in the third quarter of 2008, compared to 503,000 in the same period one year ago. Year to date through September 30, 2008, Comcast added 1.2 million digital cable customers. PPV revenue increased 9% in the third quarter and for the first nine months of 2008.

High-Speed Internet

 

 

Added 382,000 high-speed Internet subscribers during the third quarter – penetration reached 30% of homes passed or 14.7 million customers.

High-speed Internet revenue increased 9% to $1.8 billion in the third quarter of 2008 from $1.7 billion in 2007 reflecting an 11% increase in subscribers and a 2% decline in average monthly revenue per subscriber to $41.74 as a result of additional bundling and the recent introduction of new offers and speed tiers.

Phone

 

 

Added 483,000 Comcast Digital Voice (CDV) customers during the third quarter – penetration reached 13% of homes passed or 6.1 million customers.

Phone revenue increased 44% from $479 million to $690 million in the third quarter of 2008, reflecting significant growth in CDV subscribers and a 5% decrease in average revenue per subscriber to $38.98, resulting from an increase in the number of customers receiving service as part of a promotional offer or in a new product package. The increase in CDV revenue was also partially offset by a $49 million or 96% decline in circuit-switched phone revenue as Comcast exits that product offering.

Year to date through September 30, 2008, phone revenue increased 52% from $1.3 billion to $1.9 billion, reflecting significant growth in CDV customers, partially offset by a $182 million decline in circuit-switched phone revenue.

Advertising

Advertising revenue decreased 10% to $374 million in the third quarter of 2008 from $417 million in 2007, reflecting one less week in the broadcast advertising calendar as well as continued softness in the advertising marketplace, only partially offset by an increase in political advertising. Year to date through September 30, 2008, ad sales decreased 3% to $1.1 billion.

Programming Segment Results

Comcast’s Programming segment consists of national programming networks E! Entertainment Television, Style Network, Golf Channel, VERSUS, and G4.

The Programming segment reported third quarter 2008 revenue of $347 million, a 5% increase from $330 million in 2007, reflecting higher distribution revenue and strong international revenue growth, offset by one less week in the broadcast advertising calendar. Operating Cash Flow increased to $105 million, an increase of 9% from the same period last year.

Year to date through September 30, 2008, Programming segment revenue increased 11% to $1.1 billion from $966 million in the nine months ended September 30, 2007. During the same period, Operating Cash Flow increased 30% to $307 million in 2008, reflecting the favorable timing of certain marketing and programming expenses in the first nine months of the year, which are expected to be reversed in the fourth quarter.

Corporate and Other

Corporate and Other includes corporate overhead, Comcast-Spectacor, Comcast Interactive Media (CIM), and other operations and eliminations between Comcast’s businesses. For the third quarter of 2008, Corporate and Other revenue increased 38% to $71 million from $51 million in the third quarter of

 

 

See notes on page 4

 

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2007, reflecting strong results at CIM from internet advertising and search revenue. The Operating Cash Flow loss for the third quarter of 2008 decreased to $119 million compared to a loss of $143 million in 2007, which included $55 million of At Home litigation expense.

Year to date through September 30, 2008, Corporate and Other revenue increased 43% to $268 million from $187 million in the same period of 2007. Operating Cash Flow loss for Corporate and Other decreased 9% to $300 million for the nine months ended September 30, 2008 compared to a loss of $332 million in 2007.

Share Repurchases and Dividends

In the third quarter of 2008, Comcast repurchased 39.7 million of its common shares for $800 million, reducing the number of total shares outstanding by 1.4%. Year to date, Comcast repurchased 140.9 million of its common shares for $2.8 billion.

As of September 30, 2008, Comcast had approximately $4.1 billion of availability remaining under its share repurchase authorization. We have previously indicated our plan to fully use our remaining share repurchase authorization by the end of 2009, subject to market conditions. Given the overall economy and the unprecedented turmoil and instability in the capital markets, the company may not complete its share repurchase authorization in 2008 and 2009 as previously planned. The company believes this is a disciplined and responsible approach given the difficult market conditions.

Comcast paid quarterly cash dividends of $185 million on April 30, 2008, $182 million on July 30, 2008 and $180 million on October 29, 2008.

2008 Financial Outlook

For 2008, Comcast reaffirms the following previously issued guidance:

 

 

Consolidated Revenue and Operating Cash Flow growth of 8% to 10%2

 

 

Consolidated Capital Expenditures as a percent of revenue expected to decline to approximately 18%

 

 

Consolidated Free Cash Flow growth of at least 20% from the $2.3 billion reported in 2007

Given that actual capital expenditures have been trending lower than initially forecasted, and Free Cash Flow is highly sensitive to the level of our capital expenditures, we will exceed the above guidance for Free Cash Flow growth.

The outlook above does not reflect the impact of any tax law changes, including the U.S. Government Economic Stimulus package or any future sales or acquisitions of businesses or operating assets (or related tax effects).

Notes:

 

1

Net income and earnings per share are adjusted for gains, net of tax, related to the dissolution of the Texas/Kansas City Cable Partnership in 2007, the dissolution of the Insight Midwest Partnership in 2008, and gains related to the settlement of an uncertain tax position of an acquired entity and certain state tax law changes in 2008. Please refer to Table 7-B for a reconciliation of adjusted net income and earnings per share. Earnings per share amounts are presented on a diluted basis.

 

2

Pro forma results adjust for certain cable segment acquisitions and dispositions, including the acquisitions of Comcast SportsNet Bay Area/Comcast SportsNet New England (June 2007), the cable system acquired from Patriot Media (August 2007), and the dissolution of the Insight Midwest Partnership (January 2008). Consolidated and cable pro forma results are presented as if the transactions noted above were effective on January 1, 2007. The net impact of these transactions increased the number of basic cable subscribers by 765,000. Please refer to Table 7-A for a reconciliation of pro forma financial data.

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Conference Call Information

Comcast Corporation will host a conference call with the financial community today, October 29, 2008 at 8:30 a.m. Eastern Time (ET). The conference call will be broadcast live on Comcast’s Investor Relations website at www.cmcsa.com or www.cmcsk.com. A recording of the call will be available on the Investor Relations website starting at 12:30 p.m. ET on October 29, 2008. Those parties interested in participating via telephone should dial

 

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(800) 263-8495 with the conference ID number 65905828. A telephone replay will begin immediately following the call until Friday, October 31, 2008 at midnight ET. To access the rebroadcast, please dial (800) 642-1687 and enter passcode number 65905828. To automatically receive Comcast financial news by email, please visit www.cmcsa.com or www.cmcsk.com and subscribe to email alerts.

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Caution Concerning Forward-Looking Statements

This press release contains forward-looking statements. Readers are cautioned that such forward-looking statements involve risks and uncertainties that could cause actual events or our actual results to differ materially from those expressed in any such forward-looking statements. Readers are directed to Comcast’s periodic and other reports filed with the Securities and Exchange Commission (SEC) for a description of such risks and uncertainties. We undertake no obligation to update any forward-looking statements.

Non-GAAP Financial Measures

In this discussion, we sometimes refer to financial measures that are not presented according to generally accepted accounting principles in the U.S. (GAAP). Certain of these measures are considered “non-GAAP financial measures” under the SEC regulations; those rules require the supplemental explanations and reconciliations provided in Table 7 of this release. All percentages are calculated based on actual amounts. Minor differences may exist due to rounding.

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About Comcast Corporation

Comcast Corporation (Nasdaq: CMCSA, CMCSK) (http://www.comcast.com) is the nation’s leading provider of entertainment, information and communications products and services. With 24.4 million cable customers, 14.7 million high-speed Internet customers, and 6.1 million Comcast Digital Voice customers, Comcast is principally involved in the development, management and operation of broadband cable systems and in the delivery of programming content.

Comcast’s content networks and investments include E! Entertainment Television, Style Network, Golf Channel, VERSUS, G4, PBS KIDS Sprout, TV One, ten Comcast SportsNet networks and Comcast Interactive Media, which develops and operates Comcast’s Internet business. Comcast also has a majority ownership in Comcast-Spectacor, whose major holdings include the Philadelphia Flyers NHL hockey team, the Philadelphia 76ers NBA basketball team and two large multipurpose arenas in Philadelphia.

 

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TABLE 1

Condensed Consolidated Statement of Operations

(Unaudited)

 

     Three Months Ended
September 30,
     Nine Months Ended
September 30,
 
(in millions, except per share data)    2008      2007      2008      2007  

Revenues

   $ 8,549      $ 7,781      $ 25,491      $ 22,881  

Operating expenses

     3,095        2,759        9,293        8,272  

Selling, general and administrative expenses

     2,217        2,093        6,436        5,905  
     5,312        4,852        15,729        14,177  

Operating cash flow

     3,237        2,929        9,762        8,704  

Depreciation expense

     1,332        1,291        4,093        3,768  

Amortization expense

     235        247        694        816  
     1,567        1,538        4,787        4,584  

Operating income

     1,670        1,391        4,975        4,120  

Other income (expense)

           

Interest expense

     (601 )      (571 )      (1,840 )      (1,689 )

Investment income (loss), net

     74        158        83        458  

Equity in net (losses) income of affiliates, net

     2        (12 )      (46 )      (49 )

Other income (expense)

     12        (1 )      305        513  
     (513 )      (426 )      (1,498 )      (767 )

Income before income taxes and minority interest

     1,157        965        3,477        3,353  

Income tax expense

     (401 )      (421 )      (1,364 )      (1,400 )

Income before minority interest

     756        544        2,113        1,953  

Minority interest

     15        16        22        32  

Net income

   $ 771      $ 560      $ 2,135      $ 1,985  

Diluted earnings per common share

   $ 0.26      $ 0.18      $ 0.72      $ 0.63  

Adjusted earnings per common share (1)

   $ 0.24      $ 0.18      $ 0.64      $ 0.54  

Dividends declared per common share

   $ 0.0625      $ —        $ 0.1875      $ —    

Diluted weighted-average number of common shares

     2,920        3,118        2,973        3,145  

 

(1)

Please refer to Table 7-B for a reconciliation of adjusted net income and earnings per share.

 

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TABLE 2

Condensed Consolidated Balance Sheet

(Unaudited)

 

(in millions)    September 30,
2008
     December 31,
2007

ASSETS

       

Current Assets

       

Cash and cash equivalents

   $ 2,714      $ 963

Investments

     203        98

Accounts receivable, net

     1,658        1,645

Other current assets

     938        961

Total current assets

     5,513        3,667

Investments

     5,203        7,963

Property and equipment, net

     23,910        23,624

Franchise rights

     59,452        58,077

Goodwill

     14,909        14,705

Other intangible assets, net

     4,570        4,739

Other noncurrent assets, net

     939        642
   $ 114,496      $ 113,417

LIABILITIES AND STOCKHOLDERS’ EQUITY

       

Current Liabilities

       

Accounts payable and accrued expenses related to trade creditors

   $ 3,187      $ 3,336

Accrued expenses and other current liabilities

     2,985        3,121

Current portion of long-term debt

     3,087        1,495

Total current liabilities

     9,259        7,952

Long-term debt, less current portion

     30,601        29,828

Deferred income taxes

     27,209        26,880

Other noncurrent liabilities

     6,925        7,167

Minority interest

     298        250

Stockholders’ equity

     40,204        41,340
   $ 114,496      $ 113,417

 

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TABLE 3

Condensed Consolidated Statement of Cash Flows

(Unaudited)

 

     Nine Months Ended
September 30,
 
(in millions)        2008              2007      

OPERATING ACTIVITIES

     

Net cash provided by operating activities

   $ 7,373      $ 5,505  

FINANCING ACTIVITIES

     

Proceeds from borrowings

     3,513        3,610  

Retirements and repayments of debt

     (1,143 )      (1,529 )

Repurchases of common stock

     (2,800 )      (1,852 )

Dividends paid

     (367 )      —    

Issuances of common stock

     53        404  

Other

     (148 )      51  

Net cash provided by (used in) financing activities

     (892 )      684  

INVESTING ACTIVITIES

     

Capital expenditures

     (4,037 )      (4,584 )

Cash paid for software and other intangible assets

     (376 )      (313 )

Acquisitions, net of cash acquired

     (700 )      (1,277 )

Proceeds from sales of investments

     452        1,726  

Purchases of investments

     (67 )      (129 )

Other

     (2 )      98  

Net cash provided by (used in) investing activities

     (4,730 )      (4,479 )

Increase (decrease) in cash and cash equivalents

     1,751        1,710  

Cash and cash equivalents, beginning of period

     963        1,239  

Cash and cash equivalents, end of period

   $ 2,714      $ 2,949  

 

 

TABLE 4

Calculation of Free Cash Flow and Unlevered Free Cash Flow

(Unaudited) (1)

 

     Three Months Ended
September 30,
     Nine Months Ended
September 30,
 
(in millions)        2008              2007              2008              2007      

Net Cash Provided by Operating Activities

   $ 2,445      $ 1,598      $ 7,373      $ 5,505  

Capital Expenditures

     (1,306 )      (1,526 )      (4,037 )      (4,584 )

Cash Paid for Capitalized Software

     (100 )      (60 )      (287 )      (228 )

Cash Paid for Other Intangible Assets

     (31 )      (24 )      (89 )      (85 )

Nonoperating and Nonrecurring items, net of tax:

           

Payment of Tax on Nonoperating Items

     88        536        316        726  

Impact of Economic Stimulus Package (2)

     (168 )      —          (483 )      —    

Free Cash Flow

     928        524        2,793        1,334  

Cash Paid Interest

     679        646        1,795        1,724  

Unlevered Free Cash Flow

   $ 1,607      $ 1,170      $ 4,588      $ 3,058  

 

(1)

See Non-GAAP and Other Financial Measures in Table 7 for the definition of Free Cash Flow and Unlevered Free Cash Flow.

 

(2)

Our definition of Free Cash Flow remains unchanged and specifically eliminates any impact from the Economic Stimulus package. Net Cash Provided by Operating Activities included a $315 million benefit in 2Q08 and a $168 million benefit in 3Q08 from the Economic Stimulus package. These amounts have been excluded from Free Cash Flow to provide an appropriate comparison.

 

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TABLE 5

Pro Forma Financial Data by Business Segment

(Unaudited) (1)

 

(dollars in millions)    Cable      Programming (2)      Corporate
and Other
     Total
Three Months Ended September 30, 2008                

Revenues

   $ 8,131      $ 347      $ 71      $ 8,549

Operating Cash Flow

   $ 3,251      $ 105      ($ 119 )    $ 3,237

Operating Income (Loss)

   $ 1,749      $ 59      ($ 138 )    $ 1,670

Operating Cash Flow Margin

     40.0%        30.3%        NM        37.9%

Capital Expenditures (3)

   $ 1,268      $ 12      $ 26      $ 1,306
Three Months Ended September 30, 2007                

Revenues

   $ 7,593      $ 330      $ 51      $ 7,974

Operating Cash Flow

   $ 3,050      $ 97      ($ 143 )    $ 3,004

Operating Income (Loss)

   $ 1,541      $ 51      ($ 162 )    $ 1,430

Operating Cash Flow Margin

     40.2%        29.3%        NM        37.7%

Capital Expenditures (3)

   $ 1,528      $ 8      $ 26      $ 1,562
Nine Months Ended September 30, 2008                

Revenues

   $ 24,147      $ 1,076      $ 268      $ 25,491

Operating Cash Flow

   $ 9,755      $ 307      ($ 300 )    $ 9,762

Operating Income (Loss)

   $ 5,168      $ 162      ($ 355 )    $ 4,975

Operating Cash Flow Margin

     40.4%        28.5%        NM        38.3%

Capital Expenditures (3)

   $ 3,877      $ 22      $ 138      $ 4,037
Nine Months Ended September 30, 2007                

Revenues

   $ 22,362      $ 966      $ 187      $ 23,515

Operating Cash Flow

   $ 9,050      $ 237      ($ 332 )    $ 8,955

Operating Income (Loss)

   $ 4,554      $ 98      ($ 392 )    $ 4,260

Operating Cash Flow Margin

     40.5%        24.5%        NM        38.1%

Capital Expenditures (3)

   $ 4,623      $ 22      $ 41      $ 4,686

 

(1)

See Non-GAAP and Other Financial Measures in Table 7. Historical financial data by business segment, in accordance with generally accepted accounting principles in the United States (GAAP), is available in the Company’s Quarterly Report on Form 10-Q. All percentages are calculated based on actual amounts. Minor differences may exist due to rounding.

 

(2)

Programming includes our national networks E! Entertainment Television and Style Network (E! Networks), Golf Channel, VERSUS and G4.

 

(3)

Our Cable segment’s capital expenditures are comprised of the following categories:

 

    3Q08    3Q07          YTD 3Q08    YTD 3Q07

Growth

               

Customer Premise Equipment (CPE)

  $ 590    $ 701         $ 2,096    $ 2,256

Scalable Infrastructure

    60      98           175      320

Line Extensions

    54      98           154      287

Support Capital

    65      99           176      279

Upgrades (Capacity Expansion)

    13      28           58      77

Business Services

    61      23           160      60
    843      1,047           2,819      3,279
 

Maintenance

               

CPE (Drop Replacements)

    76      84           207      227

Scalable Infrastructure

    194      140           411      465

Support Capital

    54      99           155      261

Upgrades

    81      129           199      328
    405      452           972      1,281
 

Discretionary

    20      29           86      63

Total

  $ 1,268    $ 1,528         $ 3,877    $ 4,623

CPE includes costs incurred at the customer residence to secure new customers, revenue units and additional bandwidth revenues (e.g. digital converters). Scalable infrastructure includes costs, not CPE or network related, to secure growth of new customers, revenue units and additional bandwidth revenues or provide service enhancements (e.g. headend equipment). Line extensions include network costs associated with entering new service areas (e.g. fiber/coaxial cable). Support capital includes costs associated with the replacement or enhancement of non-network assets due to obsolescence and wear out (e.g. non-network equipment, land, buildings and vehicles). Upgrades include costs to enhance or replace existing fiber/coaxial cable networks, including network improvements. Business Services includes fiber/coax extension, electronics, CPE and costs to secure new customers.

Management evaluates capital expenditures by categorizing investments into three groups: Growth, Maintenance and Discretionary. Growth is directly tied to revenue generation and represents the costs required to secure new customers, revenue units or additional bandwidth revenues. Maintenance includes investments that allow the company to maintain its competitive position and provide a foundation for growth. Discretionary includes investments that lay the groundwork for future products and services, such as our investments in interactive advertising, cross-platform product development or switched digital video.

 

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TABLE 6

Pro Forma Data – Cable Segment Components

(Unaudited) (1) (2)

 

     Three Months Ended
September 30,
     Nine Months Ended
September 30,
(dollars in millions, except per subscriber data)        2008              2007              2008              2007    

Revenues:

                 

Video (3)

   $ 4,681      $ 4,519      $ 14,113      $ 13,607

High-speed Internet

     1,822        1,666        5,364        4,867

Phone

     690        479        1,917        1,260

Advertising

     374        417        1,117        1,149

Other (4)

     336        299        957        848

Franchise fees

     228        213        679        631

Total Revenues *

   $ 8,131      $ 7,593      $ 24,147      $ 22,362

Operating Cash Flow

   $ 3,251      $ 3,050      $ 9,755      $ 9,050

Operating Income

   $ 1,749      $ 1,541      $ 5,168      $ 4,554

Operating Cash Flow Margin

     40.0%        40.2%        40.4%        40.5%

Capital Expenditures

   $ 1,268      $ 1,528      $ 3,877      $ 4,623

 

*

Total Revenues include revenue from Business Services of $145 million in 3Q08 and $102 million in 3Q07, and $396 million in YTD 2008 and $285 million in YTD 2007.

 

 

 

    3Q08     2Q08     3Q07  

Video

     

Homes Passed (000’s)

    50,329       50,096       49,457  

Basic Subscribers (000’s)

    24,406       24,553       24,848  

Basic Penetration

    48.5 %     49.0 %     50.2 %

Quarterly Net Basic Subscriber Additions (000’s)

    (147 )     (138 )     (56 )

Digital Subscribers (000’s)

    16,752       16,335       14,991  

Digital Penetration

    68.6 %     66.5 %     60.3 %

Quarterly Net Digital Subscriber Additions (000’s)

    417       320       503  

Digital Set-Top Boxes

    27,060       26,345       24,117  

Monthly Average Video Revenue per Basic Subscriber

  $ 63.74     $ 63.98     $ 60.54  

High-Speed Internet

     

“Available” Homes (000’s)

    49,982       49,745       49,081  

Subscribers (000’s)

    14,738       14,357       13,245  

Penetration of “Available” Homes

    29.5 %     28.9 %     27.0 %

Quarterly Net Subscriber Additions (000’s)

    382       278       474  

Monthly Average Revenue per Subscriber

  $ 41.74     $ 42.01     $ 42.69  

Phone

     

Comcast Digital Voice

     

“Available” Homes (000’s)

    46,083       45,143       41,395  

Subscribers (000’s)

    6,126       5,643       3,831  

Penetration of “Available” Homes

    13.3 %     12.5 %     9.3 %

Quarterly Net Subscriber Additions (000’s)

    483       555       681  

Monthly Average Revenue per Subscriber

  $ 38.98     $ 39.48     $ 40.99  

Circuit Switched Phone

     

“Available” Homes (000’s)

    101       1,429       8,897  

Subscribers (000’s)

    7       10       304  

Penetration of “Available” Homes

    6.6 %     0.7 %     3.4 %

Quarterly Net Subscriber Additions (000’s)

    (4 )     (56 )     (138 )

Total Revenue Generating Units (000’s) (5)

    62,029       60,899       57,219  

Total Quarterly Net Additions (000’s)

    1,131       960       1,463  

Total Monthly Average Revenue per Basic Subscriber

  $ 110.71     $ 109.66     $ 101.74  

 

(1)

See Non-GAAP and Other Financial Measures in Table 7. All percentages are calculated based on actual amounts. Minor differences may exist due to rounding.

 

(2)

Pro forma financial data includes the results of Comcast SportsNet Bay Area and Comcast SportsNet New England acquired on June 30, 2007, the cable system acquired from Patriot Media Holdings, LLC on August 31, 2007, and the cable systems resulting from the dissolution of the Insight Midwest Partnership on January 1, 2008. Pro forma results are presented as if the acquisitions and dispositions were effective on January 1, 2007. The net impact of these transactions was an increase of 765,000 basic cable subscribers.

 

(3)

Video revenues consist of our basic, expanded basic, digital, premium, pay-per-view and equipment services.

 

(4)

Other revenues include regional sports programming networks, residential video installation revenues, guide revenues, commissions from electronic retailing, other product offerings and revenues of our digital media center.

 

(5)

Represents the sum of basic and digital video, high-speed Internet and net phone subscribers, excluding additional outlets. Subscriptions to DVR and/or HDTV services do not result in additional RGUs.

 

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TABLE 7

Non-GAAP and Other Financial Measures

Operating Cash Flow is the primary basis used to measure the operational strength and performance of our businesses. Free Cash Flow and Unlevered Free Cash Flow are additional performance measures used as indicators of our ability to service and repay debt, make investments and return capital to investors, through stock repurchases and dividends. We also adjust certain historical data on a pro forma basis following certain acquisitions or dispositions to enhance comparability.

Operating Cash Flow is defined as operating income before depreciation and amortization, excluding impairment charges related to fixed and intangible assets and gains or losses on sale of assets, if any. As such, it eliminates the significant level of non-cash depreciation and amortization expense that results from the capital intensive nature of our businesses and intangible assets recognized in business combinations, and is unaffected by our capital structure or investment activities. Our management and Board of Directors use this financial measure in evaluating our consolidated operating performance and the operating performance of all of our operating segments. This metric is used to allocate resources and capital to our operating segments and is a significant performance measure in our annual incentive compensation programs. We believe that Operating Cash Flow is also useful to investors as it is one of the bases for comparing our operating performance with other companies in our industries, although our measure of Operating Cash Flow may not be directly comparable to similar measures used by other companies.

As Operating Cash Flow is the measure of our segment profit or loss, we reconcile it to operating income, the most directly comparable financial measure calculated and presented in accordance with generally accepted accounting principles in the United States (GAAP), in the business segment footnote of our quarterly and annual financial statements. Therefore, we believe our measure of Operating Cash Flow for our business segments is not a “non-GAAP financial measure” as contemplated by Regulation G adopted by the Securities and Exchange Commission. Consolidated Operating Cash Flow is a non-GAAP financial measure.

Free Cash Flow, which is a non-GAAP financial measure, is defined as “Net Cash Provided by Operating Activities” (as stated in our Consolidated Statement of Cash Flows) reduced by capital expenditures and cash paid for intangible assets; and adjusted for any payments related to certain nonoperating items, net of estimated tax benefits (such as income taxes on investment sales, and nonrecurring payments related to income tax and litigation contingencies of acquired companies). Unlevered Free Cash Flow is Free Cash Flow before cash paid interest. We believe that Free Cash Flow and Unlevered Free Cash Flow are also useful to investors as the basis for comparing our performance and coverage ratios with other companies in our industries, although our measure of Free Cash Flow and Unlevered Free Cash Flow may not be comparable to similar measures used by other companies.

Pro forma data is used by management to evaluate performance when certain acquisitions or dispositions occur. Historical data reflects results of acquired businesses only after the acquisition dates while pro forma data enhances comparability of financial information between periods by adjusting the data as if the acquisitions or dispositions occurred at the beginning of the prior year. Our pro forma data is only adjusted for the timing of acquisitions or dispositions and does not include adjustments for costs related to integration activities, cost savings or synergies that have been or may be achieved by the combined businesses. We believe our pro forma data is not a non-GAAP financial measure as contemplated by Regulation G.

In certain circumstances we also present “adjusted” data, to exclude certain gains, losses or other charges, net of tax (such as from the sales of investments or dispositions of businesses). This “adjusted” data is a non-GAAP financial measure. We believe, among other things, that the “adjusted” data may help investors evaluate our ongoing operations and can assist in making meaningful period-over-period comparisons.

Non-GAAP financial measures should not be considered as substitutes for operating income (loss), net income (loss), net cash provided by operating activities or other measures of performance or liquidity reported in accordance with GAAP. Additionally, in the opinion of management, our pro forma data is not necessarily indicative of future results or what results would have been had the acquired businesses been operated by us after the assumed earlier date.

We provide reconciliations of Consolidated Operating Cash Flow in Table 1, Free Cash Flow and Unlevered Free Cash Flow in Table 4, Pro Forma in Table 7-A and Adjusted Data in Table 7-B.

 

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TABLE 7-A

Reconciliation of GAAP to Pro Forma (1) Financial Data by Business Segment

(Unaudited)

 

    

GAAP

   

Cable

   

Total

   
(in millions)    Cable    Programming   

Corporate,

Other and
Eliminations

    Total     Pro Forma
Adjustments (1) (2)
   Pro Forma
Cable
    Pro Forma
Adjustments (1) (2)
   Total
Pro Forma

Three Months Ended September 30, 2008

                  

Revenue

   $ 8,131    $ 347    $ 71     $ 8,549          $ —      $ 8,131          $ —      $ 8,549
   

Operating Expenses (excluding depreciation and amortization)

     4,880      242      190       5,312       —        4,880       —        5,312

Operating Cash Flow

   $ 3,251    $ 105    ($ 119 )   $ 3,237     $ —      $ 3,251     $ —      $ 3,237

Depreciation and Amortization

     1,502      46      19       1,567       —        1,502       —        1,567

Operating Income (Loss)

   $ 1,749    $ 59    ($ 138 )   $ 1,670     $ —      $ 1,749     $ —      $ 1,670
   

Capital Expenditures

   $ 1,268    $ 12    $ 26     $ 1,306     $ —      $ 1,268     $ —      $ 1,306
   

Three Months Ended September 30, 2007

                  

Revenue

   $ 7,400    $ 330    $ 51     $ 7,781     $ 193    $ 7,593     $ 193    $ 7,974
   

Operating Expenses (excluding depreciation and amortization)

     4,425      233      194       4,852       118      4,543       118      4,970

Operating Cash Flow

   $ 2,975    $ 97    ($ 143 )   $ 2,929     $ 75    $ 3,050     $ 75    $ 3,004

Depreciation and Amortization

     1,473      46      19       1,538       36      1,509       36      1,574

Operating Income (Loss)

   $ 1,502    $ 51    ($ 162 )   $ 1,391     $ 39    $ 1,541     $ 39    $ 1,430
   

Capital Expenditures

   $ 1,492    $ 8    $ 26     $ 1,526     $ 36    $ 1,528     $ 36    $ 1,562
   

Nine Months Ended September 30, 2008

                  

Revenue

   $ 24,147    $ 1,076    $ 268     $ 25,491     $ —      $ 24,147     $ —      $ 25,491
   

Operating Expenses (excluding depreciation and amortization)

     14,392      769      568       15,729       —        14,392       —        15,729

Operating Cash Flow

   $ 9,755    $ 307    ($ 300 )   $ 9,762     $ —      $ 9,755     $ —      $ 9,762

Depreciation and Amortization

     4,587      145      55       4,787       —        4,587       —        4,787

Operating Income (Loss)

   $ 5,168    $ 162    ($ 355 )   $ 4,975     $ —      $ 5,168     $ —      $ 4,975
   

Capital Expenditures

   $ 3,877    $ 22    $ 138     $ 4,037     $ —      $ 3,877     $ —      $ 4,037
   

Nine Months Ended September 30, 2007

                  

Revenue

   $ 21,728    $ 966    $ 187     $ 22,881     $ 634    $ 22,362     $ 634    $ 23,515
   

Operating Expenses (excluding depreciation and amortization)

     12,929      729      519       14,177       383      13,312       383      14,560

Operating Cash Flow

   $ 8,799    $ 237    ($ 332 )   $ 8,704     $ 251    $ 9,050     $ 251    $ 8,955

Depreciation and Amortization

     4,384      139      61       4,584       112      4,496       111      4,695

Operating Income (Loss)

   $ 4,415    $ 98    ($ 393 )   $ 4,120     $ 139    $ 4,554     $ 140    $ 4,260
   

Capital Expenditures

   $ 4,521    $ 22    $ 41     $ 4,584     $ 102    $ 4,623     $ 102    $ 4,686

 

(1)

Pro forma data is adjusted only for timing of acquisitions or dispositions and does not include adjustments for costs related to integration activities, cost savings or synergies that have been or may be achieved by the combined businesses. Pro forma results are presented as if the acquisitions and dispositions were effective on January 1, 2007. Minor differences may exist due to rounding.

 

(2)

Total Pro Forma adjustments and Cable Pro Forma adjustments for 2007 include the results of Comcast SportsNet Bay Area and Comcast SportsNet New England, the cable system acquired from Patriot Media Holdings, LLC and the cable systems resulting from the dissolution of the Insight Midwest Partnership.

 

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TABLE 7-B

Reconciliation of Net Income to Adjusted Net Income

(Unaudited)

 

    

Three Months Ended

September 30,

             
     2008     2007     2008 vs. 2007
Growth (%)
 
(in millions, except per share data)    $     EPS (1)     $     EPS (1)     $     EPS (1)  

Net Income

   $ 771     $ 0.26     $ 560     $ 0.18          38 %   44 %
 

Adjustments:

              

Favorable income tax adjustments (2)

     (80 )     (0.03 )     —         —       NM     NM  
 

Adjusted Net Income

   $ 691     $ 0.24     $ 560     $ 0.18     23 %   33 %
                    
    

Nine Months Ended

September 30,

             
     2008     2007     2008 vs. 2007
Growth (%)
 
     $     EPS (1)     $     EPS (1)     $     EPS (1)  

Net Income

   $ 2,135     $ 0.72     $ 1,985     $ 0.63          8 %   14 %
 

Adjustments:

              

Gain related to the dissolution of the Texas/Kansas City Cable Partnership, net of tax (3)

     —         —         (300 )     (0.09 )   NM     NM  

Gain related to the dissolution of the Insight Midwest Partnership, net of tax (4)

     (144 )     (0.05 )     —         —       NM     NM  

Favorable income tax adjustments (2)

     (80 )     (0.03 )     —         —       NM     NM  
 

Adjusted Net Income

   $ 1,911     $ 0.64     $ 1,685     $ 0.54     13 %   19 %
            

(1)    Based on diluted average number of common shares for the respective periods as presented in Table 1.

      

(2)    2008 Net Income includes favorable income tax adjustments related to the settlement of an uncertain tax position of an acquired entity and the effect, principally on deferred taxes, of certain state tax law changes.

       

(3)    2007 Net Income includes a gain, net of tax, related to the dissolution of the Texas/Kansas City Cable Partnership.

      

(4)    2008 Net Income includes a gain, net of tax, related to the dissolution of the Insight Midwest Partnership.

      

Reconciliation of Pro Forma Cable Operating Cash Flow excluding Hurricane Impact and Severance Charges

(Unaudited)

    

Three Months Ended

September 30,

                                   
(in millions)    2008    2007                      Growth %     Margin %                                    

Cable Operating Cash Flow

   $ 3,251    $ 3,050             6.6 %   40.0 %                    

Hurricane Impact

     20      —               NM     NM                      

Severance Charges

     39      —                     NM     NM                      

Cable Operating Cash Flow excluding Hurricane Impact and Severance Charges

   $ 3,310    $ 3,050                   8.5 %   40.7 %                    

 

Note: Minor differences may exist due to rounding.

 

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