UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
(X) Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the Quarterly Period Ended:
MARCH 31, 2000
OR
( ) Transition Report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the Transition Period from ________ to ________.
Commission File Number 333-30745
COMCAST CABLE COMMUNICATIONS, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 23-2175755
- --------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1201 Market Street, Suite 2201, Wilmington, DE 19801
- --------------------------------------------------------------------------------
(Address of principal executive offices)
(Zip Code)
Registrant's telephone number, including area code: (302) 594-8700
--------------------------
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding twelve months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such requirements
for the past 90 days.
Yes X No
---- ---
--------------------------
As of March 31, 2000, there were 1,000 shares of Common Stock outstanding.
The Registrant meets the conditions set forth in General Instructions H(1)(a)
and (b) of Form 10-Q and is therefore filing this form with the reduced
disclosure format.
<PAGE>
COMCAST CABLE COMMUNICATIONS, INC. AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED MARCH 31, 2000
TABLE OF CONTENTS
Page
Number
PART I FINANCIAL INFORMATION
ITEM 1 Financial Statements
Condensed Consolidated Balance Sheet as of March 31,
2000 and December 31, 1999 (Unaudited).......................2
Condensed Consolidated Statement of Operations and
Accumulated Deficit for the Three Months Ended
March 31, 2000 and 1999 (Unaudited)..........................3
Condensed Consolidated Statement of Cash Flows for the
Three Months Ended March 31, 2000 and 1999 (Unaudited).......4
Notes to Condensed Consolidated
Financial Statements (Unaudited).........................5 - 8
ITEM 2 Management's Discussion and Analysis of Financial
Condition and Results of Operations.....................9 - 10
PART II OTHER INFORMATION
ITEM 1 Legal Proceedings...........................................11
ITEM 6 Exhibits and Reports on Form 8-K............................11
SIGNATURE...........................................................12
-----------------------------------
This Quarterly Report on Form 10-Q is for the three months ended March 31,
2000. This Quarterly Report modifies and supersedes documents filed prior to
this Quarterly Report. The SEC allows us to "incorporate by reference"
information that we file with them, which means that we can disclose important
information to you by referring you directly to those documents. Information
incorporated by reference is considered to be part of this Quarterly Report. In
addition, information that we file with the SEC in the future will automatically
update and supersede information contained in this Quarterly Report. In this
Quarterly Report, "Comcast Cable," the "Company," "we," "us" and "our" refer to
Comcast Cable Communications, Inc. and its subsidiaries.
You should carefully review the information contained in this Quarterly
Report and in other reports or documents that we file from time to time with the
SEC. In this Quarterly Report, we state our beliefs of future events and of our
future financial performance. In some cases, you can identify those so-called
"forward-looking statements" by words such as "may," "will," "should,"
"expects," "plans," "anticipates," "believes," "estimates," "predicts,"
"potential," or "continue" or the negative of those words and other comparable
words. You should be aware that those statements are only our predictions.
Actual events or results may differ materially. In evaluating those statements,
you should specifically consider various factors, including the risks outlined
below. Those factors may cause our actual results to differ materially from any
of our forward-looking statements.
Factors Affecting Future Operations
We have in the past acquired and we will be acquiring cable communications
systems in new communities in which we do not have established relationships
with the franchising authority, community leaders and cable subscribers.
Further, a substantial number of new employees must be integrated into our
business practices and operations. Our results of operations may be
significantly affected by our ability to efficiently and effectively manage
these changes.
In addition, the cable communications industry may be affected by, among
other things:
o changes in laws and regulations,
o changes in the competitive environment,
o changes in technology,
o franchise related matters,
o market conditions that may adversely affect the availability of debt
and equity financing for working capital, capital expenditures or
other purposes; and
o general economic conditions.
<PAGE>
COMCAST CABLE COMMUNICATIONS, INC. AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED MARCH 31, 2000
PART I FINANCIAL INFORMATION
ITEM 1 FINANCIAL STATEMENTS
CONDENSED CONSOLIDATED BALANCE SHEET
------------------------------------
(Unaudited)
<TABLE>
<CAPTION>
(Dollars in millions, except share data)
March 31, December 31,
2000 1999
--------- ---------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents............................................................. $76.2 $61.0
Investments........................................................................... 78.5 0.4
Cash held by an affiliate............................................................. 18.4 34.0
Accounts receivable, less allowance for doubtful accounts of $26.9 and $31.2.......... 72.1 128.4
Other current assets.................................................................. 23.6 29.7
--------- ---------
Total current assets............................................................. 268.8 253.5
--------- ---------
INVESTMENTS.............................................................................. 15.8 119.4
--------- ---------
PROPERTY AND EQUIPMENT................................................................... 3,692.7 4,354.0
Accumulated depreciation.............................................................. (1,361.9) (1,477.4)
--------- ---------
Property and equipment, net........................................................... 2,330.8 2,876.6
--------- ---------
DEFERRED CHARGES......................................................................... 6,747.5 9,010.0
Accumulated amortization.............................................................. (1,917.8) (2,291.7)
--------- ---------
Deferred charges, net................................................................. 4,829.7 6,718.3
--------- ---------
$7,445.1 $9,967.8
========= =========
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES
Accounts payable and accrued expenses................................................. $364.6 $510.2
Accrued interest...................................................................... 80.4 62.6
Deferred income taxes, due to affiliate............................................... 11.4
Current portion of long-term debt..................................................... 0.1 202.6
Due to affiliates..................................................................... 153.6 160.2
--------- ---------
Total current liabilities........................................................ 610.1 935.6
--------- ---------
LONG-TERM DEBT, less current portion..................................................... 3,062.8 4,735.3
--------- ---------
MINORITY INTEREST AND OTHER.............................................................. 11.5 188.3
--------- ---------
DUE TO AFFILIATE......................................................................... 699.2 664.2
--------- ---------
DEFERRED INCOME TAXES, due to affiliate.................................................. 1,555.2 1,635.6
--------- ---------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDER'S EQUITY
Common stock, $1 par value - authorized and issued, 1,000 shares......................
Additional capital.................................................................... 5,262.4 4,931.4
Accumulated deficit................................................................... (3,200.4) (3,150.1)
Accumulated other comprehensive income................................................ 4.3 27.5
--------- ---------
2,066.3 1,808.8
Less: common stock of Parent held in treasury, at cost................................ 560.0
--------- ---------
Total stockholder's equity....................................................... 1,506.3 1,808.8
--------- ---------
$7,445.1 $9,967.8
========= =========
</TABLE>
See notes to condensed consolidated financial statements.
2
<PAGE>
COMCAST CABLE COMMUNICATIONS, INC. AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED MARCH 31, 2000
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS AND ACCUMULATED DEFICIT
----------------------------------------------------------------------
(Unaudited)
<TABLE>
<CAPTION>
(Dollars in millions)
Three Months Ended March 31,
2000 1999
----------- ------------
<S> <C> <C>
SERVICE INCOME................................................................ $751.2 $604.8
----------- ------------
COSTS AND EXPENSES
Operating.................................................................. 333.6 271.5
Selling, general and administrative........................................ 171.4 138.3
Depreciation and amortization.............................................. 249.2 194.2
----------- ------------
754.2 604.0
----------- ------------
OPERATING (LOSS) INCOME....................................................... (3.0) 0.8
OTHER (INCOME) EXPENSE
Interest expense........................................................... 81.7 65.7
Interest expense on notes payable to affiliates............................ 1.9
Investment income and other, net........................................... (35.3) (0.7)
----------- ------------
46.4 66.9
----------- ------------
LOSS BEFORE INCOME TAX AND MINORITY INTEREST.................................. (49.4) (66.1)
INCOME TAX EXPENSE (BENEFIT).................................................. 0.9 (18.5)
----------- ------------
LOSS BEFORE MINORITY INTEREST................................................. (50.3) (47.6)
MINORITY INTEREST............................................................. (8.8)
----------- ------------
NET LOSS...................................................................... (50.3) (38.8)
ACCUMULATED DEFICIT
Beginning of period........................................................ (3,150.1) (2,896.4)
----------- ------------
End of period.............................................................. ($3,200.4) ($2,935.2)
=========== ============
</TABLE>
See notes to condensed consolidated financial statements.
3
<PAGE>
COMCAST CABLE COMMUNICATIONS, INC. AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED MARCH 31, 2000
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
----------------------------------------------
(Unaudited)
<TABLE>
<CAPTION>
(Dollars in millions)
Three Months Ended March 31,
2000 1999
----------- ----------
<S> <C> <C>
OPERATING ACTIVITIES
Net loss......................................................................... ($50.3) ($38.8)
Adjustments to reconcile net loss to net cash provided
by operating activities:
Depreciation and amortization................................................. 249.2 194.2
Non-cash interest expense..................................................... 0.2 0.1
Non-cash interest expense on notes payable to affiliates...................... 1.7
Deferred expenses charged by an affiliate..................................... 35.0 38.7
Gains on investments, net..................................................... (35.0)
Minority interest............................................................. (8.8)
Deferred income tax benefit, due to affiliate................................. (5.0) (22.2)
Other......................................................................... (2.8)
----------- ----------
191.3 164.9
Change in working capital accounts............................................ 46.8 (24.8)
----------- ----------
Net cash provided by operating activities.............................. 238.1 140.1
----------- ----------
FINANCING ACTIVITIES
Repayments of long-term debt..................................................... (200.3)
Repayment of notes payable to affiliates......................................... (45.0)
Capital contributions from Parent................................................ 331.0
Net transactions with affiliates................................................. 58.8 35.0
Other............................................................................ (0.1)
----------- ----------
Net cash provided by (used in) financing activities.................... 189.5 (10.1)
----------- ----------
INVESTING ACTIVITIES
Acquisitions, net of cash acquired............................................... (226.4)
Capital expenditures............................................................. (163.3) (105.6)
Decrease in cash held by an affiliate............................................ 15.6 27.2
Additions to deferred charges and other.......................................... (38.3) (18.5)
----------- ----------
Net cash used in investing activities.................................. (412.4) (96.9)
----------- ----------
INCREASE IN CASH AND CASH EQUIVALENTS............................................... 15.2 33.1
CASH AND CASH EQUIVALENTS, beginning of period...................................... 61.0 34.5
----------- ----------
CASH AND CASH EQUIVALENTS, end of period............................................ $76.2 $67.6
=========== ==========
</TABLE>
See notes to condensed consolidated financial statements.
4
<PAGE>
COMCAST CABLE COMMUNICATIONS, INC. AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED MARCH 31, 2000
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Basis of Presentation
The condensed consolidated balance sheet as of December 31, 1999 has been
condensed from the audited consolidated balance sheet as of that date. The
condensed consolidated balance sheet as of March 31, 2000 and the
condensed consolidated statements of operations and accumulated deficit
and of cash flows for the three months ended March 31, 2000 and 1999 have
been prepared by Comcast Cable Communications, Inc. (the "Company"), a
wholly owned subsidiary of Comcast Corporation ("Comcast"), and have not
been audited by the Company's independent auditors. In the opinion of
management, all adjustments necessary to present fairly the financial
position, results of operations and cash flows as of March 31, 2000 and
for all periods presented have been made.
See Notes 3 and 7 for a description and the effects of the exchange of the
Company's interest in Jones Intercable, Inc. ("Jones Intercable") for
shares of Comcast common stock in March 2000.
Certain information and note disclosures normally included in the
Company's annual financial statements prepared in accordance with
generally accepted accounting principles have been condensed or omitted.
These condensed consolidated financial statements should be read in
conjunction with the financial statements and notes thereto included in
the Company's December 31, 1999 Annual Report on Form 10-K filed with the
Securities and Exchange Commission. The results of operations for the
period ended March 31, 2000 are not necessarily indicative of operating
results for the full year.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
New Accounting Pronouncement
In June 1998, the Financial Accounting Standards Board (the "FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting
for Derivative Instruments and Hedging Activities." This statement
establishes the accounting and reporting standards for derivatives and
hedging activity. Upon the adoption of SFAS No. 133, all derivatives are
required to be recognized in the statement of financial position as either
assets or liabilities and measured at fair value. In July 1999, the FASB
issued SFAS No. 137, "Accounting for Derivative Instruments and Hedging
Activities - Deferral of the Effective Date of FASB Statement No. 133 - an
amendment of FASB Statement No. 133" deferring the effective date for
implementation of SFAS No. 133 to fiscal years beginning after June 15,
2000. The Company is currently evaluating the impact the adoption of SFAS
No. 133 will have on its financial position and results of operations.
Comprehensive Loss
Total comprehensive loss for the three months ended March 31, 2000 and
1999 was $73.5 million and $38.8 million, respectively. Total
comprehensive loss includes net loss and unrealized gains (losses) on
marketable securities for the periods presented.
Reclassifications
Certain reclassifications have been made to the prior year condensed
consolidated financial statements to conform to those classifications used
in 2000.
3. ACQUISITIONS AND OTHER SIGNIFICANT EVENTS
Acquisition of CalPERS' Interest in Jointly Owned Cable Properties
In February 2000, the Company acquired the California Public Employees
Retirement System's 45% interest in Comcast MHCP Holdings, L.L.C.
("Comcast MHCP"), formerly a 55% owned consolidated subsidiary of the
Company which serves approximately 642,000 cable subscribers in Michigan,
New Jersey and Florida. As a result, the Company now owns 100% of Comcast
MHCP. The consideration was $750.0 million in cash and was funded with the
proceeds from a capital contribution from Comcast. The acquisition was
accounted for under the purchase method of accounting. The allocation of
the purchase price (approximately $150 million to property and equipment
and approximately $600 million to deferred charges) is preliminary pending
completion of a final appraisal.
5
<PAGE>
COMCAST CABLE COMMUNICATIONS, INC. AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED MARCH 31, 2000
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)
Exchange of Jones Intercable, Inc. Common Stock
In April 1999, Comcast acquired a controlling interest in Jones
Intercable, a cable communications company serving approximately 1.1
million subscribers, for aggregate consideration of $706.3 million in
cash. Also on that date, Comcast contributed its shares in Jones
Intercable to the Company. The acquisition was accounted for under the
purchase method of accounting. As such, the operating results of Jones
Intercable have been included in the Company's condensed consolidated
statement of operations and accumulated deficit from the acquisition date.
In June 1999, Comcast purchased an additional 1.0 million shares of Jones
Intercable Class A Common Stock for $50.0 million in cash in a private
transaction and contributed such shares to the Company.
In March 2000, the Jones Intercable shareholders approved a merger
agreement pursuant to which the Jones Intercable shareholders, including
the Company, received 1.4 shares of Comcast's Class A Special Common Stock
in exchange for each share of Jones Intercable Class A Common Stock and
Common Stock, and Jones Intercable was merged with and into Comcast JOIN
Holdings, Inc., a wholly owned subsidiary of Comcast ("JOIN Holdings"),
with JOIN Holdings as the successor to Jones Intercable. In connection
with the closing of the merger, the Company exchanged its 39.6% interest
in Jones Intercable for approximately 23.3 million shares of Comcast Class
A Special Common Stock. As such, effective March 2, 2000, the results of
Jones Intercable are no longer included in the Company's condensed
consolidated financial statements. As the consideration received for the
Company's interest in Jones Intercable was shares of Comcast Class A
Special Common Stock, the exchange had no significant impact on the
Company's condensed consolidated statement of cash flows during the three
months ended March 31, 2000 (see Note 7). The shares of Comcast Class A
Special Common Stock held by the Company are presented as common stock of
Parent held in treasury, at cost, in the Company's March 31, 2000
condensed consolidated balance sheet (see Note 6).
4. INVESTMENTS
Motorola/General Instruments Warrants
In connection with the Company's agreements to purchase digital converters
from General Instruments Corporation ("GI"), the Company received warrants
to purchase up to a maximum of 1,100,648 shares of GI Common Stock at
$14.25 per share. The warrants become exercisable in three annual
installments, as the Company meets certain thresholds for digital
converter purchases. Accordingly, the Company records its investment in GI
warrants based on the fair value of the warrants when the performance
measures are achieved. In January 2000, GI was merged with and into a
wholly owned subsidiary of Motorola, Inc. (the "Motorola Merger") and the
Company received warrants to purchase 406,173 shares of Motorola common
stock at $24.78 in exchange for the GI warrants held by the Company.
During the three months ended March 31, 2000, warrants to purchase 226,700
shares of Motorola common stock became exercisable and the Company
recorded the value of the exercisable warrants as a reduction to the cost
of the digital converters. As of March 31, 2000, the Company reclassified
its investment in the Motorola warrants from long-term to current and
recorded its investment in the Motorola warrants at its estimated fair
value of $78.1 million. As of December 31, 1999, the Company recorded its
investment in the GI warrants, classified as long-term in the Company's
condensed consolidated balance sheet, at its estimated fair value of $53.0
million.
During the three months ended March 31, 2000, in connection with the
Motorola Merger, the Company recognized a pre-tax gain of $33.0 million,
representing the difference between the fair value of the Motorola
warrants received by the Company and the Company's cost basis in the GI
warrants exchanged. Such gain was recorded as a reclassification from
accumulated other comprehensive income to investment income.
AT&T Corporation Common Stock
As of March 31, 2000 and December 31, 1999, the Company has recorded its
investment in AT&T Corporation common stock, classified as long-term in
the Company's condensed consolidated balance sheet, at its estimated fair
value of $14.7 million and $13.2 million, respectively.
6
<PAGE>
COMCAST CABLE COMMUNICATIONS, INC. AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED MARCH 31, 2000
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)
5. LONG-TERM DEBT
Interest Rates
As of March 31, 2000 and December 31, 1999, the Company's effective
weighted average interest rate on its long-term debt outstanding was 7.54%
and 7.56%, respectively.
Lines of Credit
As of March 31, 2000, certain subsidiaries of the Company had unused lines
of credit of $810.0 million which is restricted by the covenants of the
related debt agreements.
6. RELATED PARTY TRANSACTIONS
Comcast, on behalf of the Company, has an affiliation agreement with QVC,
Inc. ("QVC"), an electronic retailer and a majority owned and controlled
subsidiary of Comcast, to carry its programming. In return for carrying
QVC programming, the Company receives an allocated portion, based upon
market share, of a percentage of net sales of merchandise sold to QVC
customers located in the Company's service area. For the three months
ended March 31, 2000 and 1999, the Company's service income includes $2.4
million and $2.6 million, respectively, relating to QVC.
Comcast, through management agreements, manages the operations of the
Company's subsidiaries, including rebuilds and upgrades. The management
agreements generally provide that Comcast will supervise the management
and operations of the cable systems and arrange for and supervise certain
administrative functions. As compensation for such services, the
agreements provide for Comcast to charge management fees of up to 6% of
gross revenues. Comcast charged the Company's subsidiaries management fees
of $41.9 million and $33.5 million during the three months ended March 31,
2000 and 1999, respectively. These management fees are included in
selling, general and administrative expenses in the Company's condensed
consolidated statement of operations and accumulated deficit. Comcast has
agreed to permit certain subsidiaries of the Company to defer payment of a
portion of these expenses with the deferred portion being treated as a
subordinated liability due to affiliate. Management fees deferred during
the three months ended March 31, 2000 and 1999 were $1.5 million and $1.4
million, respectively. Deferred management fees were $149.7 million and
$148.2 million as of March 31, 2000 and December 31, 1999, respectively.
On behalf of the Company, Comcast seeks and secures long-term programming
contracts that generally provide for payment based on either a monthly fee
per subscriber per channel or a percentage of certain subscriber revenues.
Comcast charges each of the Company's subsidiaries for programming on a
basis which generally approximates the amount each such subsidiary would
be charged if it purchased such programming directly from the supplier,
subject to limitations imposed by debt facilities for certain
subsidiaries, and did not benefit from the purchasing power of Comcast's
consolidated operations. Amounts charged to the Company by Comcast for
programming (the "Programming Charges") are included in operating expenses
in the Company's condensed consolidated statement of operations and
accumulated deficit. The Company purchases certain other services,
including insurance and employee benefits, from Comcast under cost-sharing
arrangements on terms that reflect Comcast's actual cost. The Company
reimburses Comcast for certain other costs (primarily salaries) under
cost-reimbursement arrangements. Under all of these arrangements, the
Company incurred total expenses of $269.7 million and $221.9 million,
including $225.9 million and $189.8 million of Programming Charges, during
the three months ended March 31, 2000 and 1999, respectively. The
Programming Charges include $31.2 million and $18.7 million during the
three months ended March 31, 2000 and 1999, respectively, relating to
programming purchased by the Company, through Comcast, from suppliers in
which Comcast holds an equity interest.
Comcast has agreed to permit certain of the Company's subsidiaries to
defer payment of a portion of the Programming Charges with the deferred
portion being treated as a subordinated liability due to affiliate.
Programming Charges deferred during the three months ended March 31, 2000
and 1999 were $33.5 million and $37.3 million, respectively. Deferred
Programming Charges were $549.5 million and $516.0 million as of March 31,
2000 and December 31, 1999, respectively.
7
<PAGE>
COMCAST CABLE COMMUNICATIONS, INC. AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED MARCH 31, 2000
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONCLUDED
(Unaudited)
In May 2000, the Company exchanged the approximate 23.3 million shares of
Comcast Class A Special Common Stock held by the Company (see Note 3) with
a fair value of $758.1 million in satisfaction of certain amounts due to
affiliates, including amounts due related to previously deferred
management fees and Programming Charges.
Current due to affiliates in the Company's condensed consolidated balance
sheet includes amounts due to Comcast and its affiliates under the
cost-sharing arrangements described above and amounts payable to Comcast
and its affiliates as reimbursement for payments made, in the ordinary
course of business, by such affiliates on behalf of the Company.
The Company has entered into a custodial account arrangement with Comcast
Financial Agency Corporation ("CFAC"), a wholly owned subsidiary of
Comcast, under which CFAC provides cash management services to the
Company. Under this arrangement, the Company's cash receipts are deposited
with and held by CFAC, as custodian and agent, which invests and disburses
such funds at the direction of the Company. As of March 31, 2000 and
December 31, 1999, $18.4 million and $34.0 million, respectively, of the
Company's cash was held by CFAC. These amounts have been classified as
cash held by an affiliate in the Company's condensed consolidated balance
sheet. During the three months ended March 31, 2000 and 1999, the Company
recognized investment income of $1.9 million and $0.3 million,
respectively, on cash held by CFAC.
7. STATEMENT OF CASH FLOWS - SUPPLEMENTAL INFORMATION
During the three months ended March 31, 2000, the Company exchanged its
39.6% interest in Jones Intercable for approximately 23.3 million shares
of Comcast Class A Special Common Stock (see Note 3). The exchange has
been recorded at the cost basis of the Company's 39.6% interest in Jones
Intercable as follows (in millions):
Current assets.................................... ($38.4)
Investments....................................... (57.1)
Property, plant & equipment....................... (575.9)
Deferred charges.................................. (2,102.4)
Current liabilities............................... 213.2
Long-term debt.................................... 1,674.9
Deferred incomes taxes and other.................. 325.7
---------
Net assets exchanged.................... ($560.0)
=========
The Company made cash payments for interest on its long-term debt of $32.6
million and $11.4 million during the three months ended March 31, 2000 and
1999, respectively. The Company made cash payments for interest on the
notes payable to affiliates of $0.2 million during the three months March
31, 1999.
The Company made cash payments for state income taxes of $0.1 million
during the three months ended March 31, 1999.
8. COMMITMENTS AND CONTINGENCIES
The Company is subject to legal proceedings and claims which arise in the
ordinary course of its business. In the opinion of management, the amount
of ultimate liability with respect to these actions will not materially
affect the financial position, results of operations or liquidity of the
Company.
8
<PAGE>
COMCAST CABLE COMMUNICATIONS, INC. AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED MARCH 31, 2000
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Information for this item is omitted pursuant to Securities and Exchange
Commission General Instruction H to Form 10-Q, except as noted below.
Results of Operations
Our summarized consolidated financial information for the three months
ended March 31, 2000 and 1999 is as follows (dollars in millions, "NM" denotes
percentage is not meaningful):
<TABLE>
<CAPTION>
Three Months Ended
March 31, Increase / (Decrease)
2000 1999 $ %
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Service income.......................................... $751.2 $604.8 $146.4 24.2%
Operating, selling, general and administrative
expenses............................................. 505.0 409.8 95.2 23.2
--------- ---------
Operating income before depreciation and
amortization (1)..................................... 246.2 195.0 51.2 26.3
Depreciation and amortization........................... 249.2 194.2 55.0 28.3
--------- ---------
Operating (loss) income................................. (3.0) 0.8 (3.8) NM
--------- ---------
Interest expense........................................ 81.7 65.7 16.0 24.4
Interest expense on notes payable to affiliates......... 1.9 (1.9) NM
Investment income and other, net........................ (35.3) (0.7) 34.6 NM
Income tax expense (benefit)............................ 0.9 (18.5) (19.4) NM
Minority interest....................................... (8.8) (8.8) NM
--------- ---------
Net loss................................................ ($50.3) ($38.8) $11.5 29.6%
========= =========
<FN>
- ------------
(1) Operating income before depreciation and amortization is commonly referred
to in the cable communications business as "operating cash flow."
Operating cash flow is a measure of a company's ability to generate cash
to service its obligations, including debt service obligations, and to
finance capital and other expenditures. In part due to the capital
intensive nature of the cable communications business and the resulting
significant level of non-cash depreciation and amortization expense,
operating cash flow is frequently used as one of the bases for comparing
businesses in the cable communications industry, although our measure of
operating cash flow may not be comparable to similarly titled measures of
other companies. Operating cash flow is the primary basis used by our
management to measure the operating performance of our business. Operating
cash flow does not purport to represent net income or net cash provided by
operating activities, as those terms are defined under generally accepted
accounting principles, and should not be considered as an alternative to
such measurements as an indicator of our performance.
</FN>
</TABLE>
Service Income
Of the $146.4 million increase for the three month period from 1999 to
2000, $95.9 million is due to the effects of our acquisitions of cable
communications systems and $50.5 million is due to growth in our historical
operations. Of the $50.5 million increase related to our historical operations,
$24.2 million is due principally to subscriber growth in digital cable and cable
modem Internet access service, $15.0 million is due to subscriber growth in
analog cable service, $8.3 million is related to changes in rates, $4.8 million
is attributable to growth in cable advertising sales and $2.4 million is due to
other service offerings, offset by the effects of a $4.2 million decrease in pay
per view revenue as a result of fewer events during the three months ended March
31, 2000.
Operating, Selling, General and Administrative Expenses
See Note 6 to our condensed consolidated financial statements included in
Item 1.
Of the $95.2 million increase for the three month period from 1999 to
2000, $62.8 million is due to the effects of our acquisitions of cable
communications systems and $32.4 million is due to growth in our historical
operations. Of the $32.4 million increase related
9
<PAGE>
COMCAST CABLE COMMUNICATIONS, INC. AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED MARCH 31, 2000
to our historical operations, $12.6 million is due to increases in the costs of
cable programming as a result of changes in rates, subscriber growth and
additional channel offerings, $13.2 million is due principally to subscriber
growth in cable modem Internet access service and $9.3 million results from
increases in labor costs and other volume related expenses, offset by the
effects of a $2.7 million decrease in pay per view programming costs as a result
of fewer events during the three months ended March 31, 2000.
Depreciation and Amortization Expense
The $55.0 million increase for the three month period from 1999 to 2000 is
primarily attributable to the effects of Comcast Corporation's ("Comcast")
contribution of Jones Intercable, Inc. ("Jones Intercable") to us in April 1999,
the effects of our acquisitions of other cable communications systems and the
effects of our capital expenditures.
Interest Expense
The $16.0 million increase for the three month period from 1999 to 2000 is
primarily due to the effects of Comcast's contribution of Jones Intercable to us
in April 1999.
We anticipate that, for the foreseeable future, interest expense will be a
significant cost to us and will have a significant adverse effect on our ability
to realize net earnings. We believe we will continue to be able to meet our
obligations through our ability both to generate operating income before
depreciation and amortization and to obtain external financing.
Interest Expense on Notes Payable to Affiliates
The $1.9 million decrease for the three month period from 1999 to 2000 is
due to the repayment of our notes payable to affiliates in the fourth quarter of
1999.
Investment Income and Other, Net
During the three months ended March 31, 2000, in connection with the
merger of certain publicly traded companies held by us and accounted for as
investments available for sale, we recognized pre-tax gains of $33.0 million,
representing the difference between the fair value of the securities received by
us and our basis in the securities exchanged. This gain was recorded as a
reclassification from accumulated other comprehensive income to investment
income.
Income Tax Expense (Benefit)
The $19.4 million change for the three month period from 1999 to 2000 is
primarily the result of the effects of the decrease in our loss before income
tax and minority interest and the increase in our valuation allowance.
Minority Interest
The $8.8 million decrease for the three month period from 1999 to 2000 is
primarily due to the effects of our acquisition of the minority interest of
Comcast MHCP Holdings, L.L.C. in February 2000.
We believe that our operations are not materially affected by inflation.
10
<PAGE>
COMCAST CABLE COMMUNICATIONS, INC. AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED MARCH 31, 2000
PART II OTHER INFORMATION
ITEM 1 LEGAL PROCEEDINGS
We are subject to legal proceedings and claims which arise in the ordinary
course of our business. In the opinion of our management, the amount of
ultimate liability with respect to these actions will not materially
affect our financial position, results of operations or liquidity.
ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits required to be filed by Item 601 of Regulation S-K:
10.1 Agreement and Plan of Merger among Jones Intercable, Inc.,
Comcast Corporation and Comcast JOIN Holdings, Inc., dated as
of December 22, 1999 (incorporated by reference to Exhibit 2.1
to the Comcast Corporation Registration Statement on Form S-4
filed on January 10, 2000).
27.1 Financial Data Schedule.
(b) Reports on Form 8-K:
(i) We filed a Current Report on Form 8-K under Item 5 on January
4, 2000 relating to Comcast's announcement that it had entered
into a definitive agreement to acquire the California Public
Employees' Retirement System's 45% ownership interest in cable
operator Comcast MHCP Holdings, L.L.C., an indirect majority
owned subsidiary of ours.
(ii) We filed a Current Report on Form 8-K under Item 2 on March 3,
2000 relating to our announcement that Comcast had completed
its acquisition of Jones Intercable, Inc., a consolidated
subsidiary of ours through March 2, 2000.
11
<PAGE>
COMCAST CABLE COMMUNICATIONS, INC. AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED MARCH 31, 2000
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
COMCAST CABLE COMMUNICATIONS, INC.
-----------------------------------
/S/ LAWRENCE J. SALVA
-----------------------------------
Lawrence J. Salva
Senior Vice President
(Principal Accounting Officer)
Date: May 15, 2000
12
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0001040573
<NAME> COMCAST CABLE COMMUNICATIONS, INC.
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-END> MAR-31-2000
<CASH> 76
<SECURITIES> 97
<RECEIVABLES> 99
<ALLOWANCES> (27)
<INVENTORY> 0
<CURRENT-ASSETS> 269
<PP&E> 3,693
<DEPRECIATION> (1,362)
<TOTAL-ASSETS> 7,445
<CURRENT-LIABILITIES> 1,309
<BONDS> 3,063
0
0
<COMMON> 0
<OTHER-SE> 1,506
<TOTAL-LIABILITY-AND-EQUITY> 7,445
<SALES> 751
<TOTAL-REVENUES> 751
<CGS> 0
<TOTAL-COSTS> (754)
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (82)
<INCOME-PRETAX> (49)
<INCOME-TAX> (1)
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (50)
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
