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:
JUNE 30, 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 1405, 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 June 30, 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 JUNE 30, 2000
TABLE OF CONTENTS
Page
Number
------
PART I FINANCIAL INFORMATION
ITEM 1 Financial Statements
Condensed Consolidated Balance Sheet as of June 30,
2000 and December 31, 1999 (Unaudited)........................2
Condensed Consolidated Statement of Operations and
Accumulated Deficit for the Six and Three Months Ended
June 30, 2000 and 1999 (Unaudited)............................3
Condensed Consolidated Statement of Cash Flows for the
Six Months Ended June 30, 2000 and 1999 (Unaudited)...........4
Notes to Condensed Consolidated
Financial Statements (Unaudited)..........................5 - 9
ITEM 2 Management's Discussion and Analysis of Financial
Condition and Results of Operations.....................10 - 12
PART II OTHER INFORMATION
ITEM 1 Legal Proceedings............................................13
ITEM 6 Exhibits and Reports on Form 8-K.............................13
SIGNATURE............................................................14
-----------------------------------
This Quarterly Report on Form 10-Q is for the three months ended June 30,
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>
<TABLE>
<CAPTION>
COMCAST CABLE COMMUNICATIONS, INC. AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED JUNE 30, 2000
PART I FINANCIAL INFORMATION
------ ---------------------
ITEM 1 FINANCIAL STATEMENTS
CONDENSED CONSOLIDATED BALANCE SHEET
------------------------------------
(Unaudited)
(Dollars in millions, except share data)
June 30, December 31,
2000 1999
---------- ----------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents.................................................... $40.5 $61.0
Investments.................................................................. 53.2 0.4
Cash held by an affiliate.................................................... 34.0
Accounts receivable, less allowance for doubtful accounts of $24.8 and $31.2. 96.4 128.4
Deferred income tax benefit, due from affiliate.............................. 24.5
Other current assets......................................................... 25.1 29.7
---------- ----------
Total current assets..................................................... 239.7 253.5
---------- ----------
INVESTMENTS..................................................................... 27.9 119.4
---------- ----------
PROPERTY AND EQUIPMENT.......................................................... 3,751.9 4,354.0
Accumulated depreciation..................................................... (1,445.4) (1,477.4)
---------- ----------
Property and equipment, net.................................................. 2,306.5 2,876.6
---------- ----------
DEFERRED CHARGES................................................................ 6,829.7 9,010.0
Accumulated amortization..................................................... (2,018.8) (2,291.7)
---------- ----------
Deferred charges, net........................................................ 4,810.9 6,718.3
---------- ----------
$7,385.0 $9,967.8
========== ==========
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES
Accounts payable and accrued expenses........................................ $291.8 $461.2
Accrued interest............................................................. 32.1 62.6
Current portion of long-term debt............................................ 0.1 202.6
Due to affiliates............................................................ 125.1 160.2
---------- ----------
Total current liabilities................................................ 449.1 886.6
---------- ----------
LONG-TERM DEBT, less current portion............................................ 3,062.9 4,735.3
---------- ----------
MINORITY INTEREST AND OTHER..................................................... 127.4 237.3
---------- ----------
DUE TO AFFILIATE................................................................ 664.2
---------- ----------
DEFERRED INCOME TAXES, due to affiliate......................................... 1,553.4 1,635.6
---------- ----------
COMMITMENTS AND CONTINGENCIES (Note 8)
STOCKHOLDER'S EQUITY
Common stock, $1 par value - authorized and issued, 1,000 shares.............
Additional capital........................................................... 5,460.5 4,931.4
Accumulated deficit.......................................................... (3,245.5) (3,150.1)
Accumulated other comprehensive (loss) income................................ (22.8) 27.5
---------- ----------
Total stockholder's equity............................................... 2,192.2 1,808.8
---------- ----------
$7,385.0 $9,967.8
========== ==========
</TABLE>
See notes to condensed consolidated financial statements.
2
<PAGE>
<TABLE>
<CAPTION>
COMCAST CABLE COMMUNICATIONS, INC. AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED JUNE 30, 2000
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS AND ACCUMULATED DEFICIT
----------------------------------------------------------------------
(Unaudited)
(Dollars in millions)
Six Months Ended Three Months Ended
June 30, June 30,
2000 1999 2000 1999
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
SERVICE INCOME............................................ $1,436.5 $1,353.7 $685.3 $748.9
---------- ---------- ---------- ----------
COSTS AND EXPENSES
Operating.............................................. 647.4 596.0 313.8 324.5
Selling, general and administrative.................... 324.2 311.6 152.8 173.3
Depreciation and amortization.......................... 465.9 454.7 216.7 260.5
---------- ---------- ---------- ----------
1,437.5 1,362.3 683.3 758.3
---------- ---------- ---------- ----------
OPERATING (LOSS) INCOME................................... (1.0) (8.6) 2.0 (9.4)
OTHER (INCOME) EXPENSE
Interest expense....................................... 140.6 159.0 58.9 93.3
Interest expense on notes payable to affiliates........ 3.6 1.7
Investment (income) expense and other, net............. (33.6) 6.4 1.7 7.1
---------- ---------- ---------- ----------
107.0 169.0 60.6 102.1
---------- ---------- ---------- ----------
LOSS BEFORE INCOME TAX AND MINORITY INTEREST.............. (108.0) (177.6) (58.6) (111.5)
INCOME TAX BENEFIT........................................ (12.6) (29.8) (13.5) (11.3)
---------- ---------- ---------- ----------
LOSS BEFORE MINORITY INTEREST............................. (95.4) (147.8) (45.1) (100.2)
MINORITY INTEREST......................................... (57.7) (48.9)
---------- ---------- ---------- ----------
NET LOSS.................................................. (95.4) (90.1) (45.1) (51.3)
ACCUMULATED DEFICIT
Beginning of period.................................... (3,150.1) (2,896.4) (3,200.4) (2,935.2)
---------- ---------- ---------- ----------
End of period.......................................... ($3,245.5) ($2,986.5) ($3,245.5) ($2,986.5)
========== ========== ========== ==========
</TABLE>
See notes to condensed consolidated financial statements.
3
<PAGE>
<TABLE>
<CAPTION>
COMCAST CABLE COMMUNICATIONS, INC. AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED JUNE 30, 2000
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
----------------------------------------------
(Unaudited)
(Dollars in millions)
Six Months Ended June 30,
2000 1999
--------- ---------
<S> <C> <C>
OPERATING ACTIVITIES
Net loss......................................................................... ($95.4) ($90.1)
Adjustments to reconcile net loss to net cash provided
by operating activities:
Depreciation and amortization.................................................. 465.9 454.7
Non-cash interest expense...................................................... 0.3 0.4
Non-cash interest expense on notes payable to affiliates....................... 3.3
Deferred expenses charged by an affiliate...................................... 74.8
Gains on investments, net...................................................... (33.0)
Minority interest.............................................................. (57.7)
Deferred income tax benefit, due to affiliate.................................. (9.1) (43.7)
Other.......................................................................... (2.9) 2.5
--------- ---------
325.8 344.2
Changes in working capital accounts............................................ (21.0) (95.2)
--------- ---------
Net cash provided by operating activities................................ 304.8 249.0
--------- ---------
FINANCING ACTIVITIES
Proceeds from borrowings......................................................... 125.8
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................................................. 124.2 60.2
Deferred financing costs......................................................... (0.2)
--------- ---------
Net cash provided by financing activities................................ 254.9 140.8
--------- ---------
INVESTING ACTIVITIES
Acquisitions, net of cash acquired............................................... (234.9) (2.3)
Capital expenditures............................................................. (300.5) (290.0)
Decrease in cash held by an affiliate............................................ 34.0 50.6
Additions to deferred charges and other.......................................... (78.8) (92.4)
--------- ---------
Net cash used in investing activities.................................... (580.2) (334.1)
--------- ---------
(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS.................................... (20.5) 55.7
CASH AND CASH EQUIVALENTS, beginning of period...................................... 61.0 34.5
--------- ---------
CASH AND CASH EQUIVALENTS, end of period............................................ $40.5 $90.2
========= =========
</TABLE>
See notes to condensed consolidated financial statements.
4
<PAGE>
COMCAST CABLE COMMUNICATIONS, INC. AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED JUNE 30, 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 June 30, 2000, the condensed
consolidated statement of operations and accumulated deficit for the six
and three months ended June 30, 2000 and 1999, and the condensed
consolidated statement of cash flows for the six months ended June 30, 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 June 30,
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 Class A Special 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 "SEC"). The results of operations for the periods ended
June 30, 2000 are not necessarily indicative of operating results for the
full year.
Reorganization
On August 1, 2000, two wholly owned subsidiaries of Comcast, Comcast LCI
Holdings, Inc. and Comcast JOIN Holdings, Inc. were merged into the Company
(the "Reorganization"). Comcast LCI Holdings, Inc. (and its subsidiaries)
owned cable systems and was acquired by Comcast in January 2000. Comcast
JOIN Holdings, Inc. (and its subsidiaries) ("JOIN Holdings") owned cable
systems and was acquired by Comcast in April 1999 and March 2000. The
Reorganization will be accounted for at Comcast's historical cost in a
manner similar to a pooling of interests. Accordingly, effective August 1,
2000, the Company's condensed consolidated financial statements will
include the accounts of the merged subsidiaries since the dates of their
acquisition by Comcast (see Note 3).
Reclassifications
Certain reclassifications have been made to the prior years' condensed
consolidated financial statements to conform to those classifications used
in 2000.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
SFAS No. 133, as Amended
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 and June
2000, the FASB issued SFAS No. 137 and SFAS No. 138 which deferred the
effective date for implementation of SFAS No. 133 to fiscal years beginning
after June 15, 2000 and which addressed a limited number of issues causing
implementation difficulties for entities that apply SFAS No. 133,
respectively. The Company is continuing to evaluate the impact the adoption
of SFAS No. 133, as amended, will have on its financial position and
results of operations.
SAB No. 101, as Amended
In December 1999, the staff of the SEC issued Staff Accounting Bulletin
("SAB") No. 101, "Revenue Recognition in Financial Statements," which
provides guidance in applying generally accepted accounting principles to
selected revenue recognition issues. In March 2000 and June 2000, the staff
of the SEC amended SAB No. 101 to delay the required implementation date of
SAB No. 101 to the fourth quarter of fiscal years beginning after
5
<PAGE>
COMCAST CABLE COMMUNICATIONS, INC. AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED JUNE 30, 2000
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)
December 15, 1999. While the Company is continuing to evaluate the impact
the adoption of SAB No. 101, as amended, will have on its results of
operations, the Company does not expect such impact to be material.
Comprehensive Loss
Total comprehensive loss for the six months ended June 30, 2000 and 1999
and for the three months ended June 30, 2000 and 1999 was $145.7 million,
$89.9 million, $72.2 million and $51.1 million, respectively. Total
comprehensive loss includes net loss and unrealized gains (losses) on
marketable securities for the periods presented.
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 ("CalPERS") 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 Company
adjusted the purchase price allocation related to the acquisition during
the second quarter of 2000.
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 through February 2000
(see below). 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 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 2000, the results of Jones
Intercable are no longer included in the Company's condensed consolidated
financial statements (see Note 1). The Company's service income for the six
months ended June 30, 2000 includes $92.2 million of Jones Intercable
service income for January and February 2000. 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 six
months ended June 30, 2000 (see Note 7).
In May 2000, the Company sold its interest in its wholly owned subsidiary
which held the Comcast Class A Special Common Stock to a wholly owned
subsidiary of Comcast in consideration for amounts due to affiliates
totaling $758.1 million related to management fees and programming charges
(see Note 6). The Company did not record any gain or loss on the
transaction as it was between subsidiaries under the common control of
Comcast.
Time Warner Agreement
In November 1999, Comcast entered into an agreement to exchange certain of
the Company's cable communications systems with Time Warner Cable, a
division of Time Warner Entertainment Company, LP. On July 1, 2000, the
agreement expired with a closing not having occurred.
6
<PAGE>
COMCAST CABLE COMMUNICATIONS, INC. AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED JUNE 30, 2000
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)
Prime Communications Agreement
In December 1998, Comcast agreed to invest in Prime Communications LLC
("Prime"), a cable communications company serving approximately 430,000
subscribers. Pursuant to the terms of this agreement, in December 1998
Comcast acquired from Prime a $50.0 million 12.75% subordinated note due
2008 issued by Prime. In July 1999, Comcast made a loan to Prime in the
form of a $733.5 million 6% ten year note, convertible into 90% of the
equity of Prime. Since that time, Comcast made an additional $50.0 million
in loans to Prime (on the same terms as the original loan). On August 1,
2000, the note was converted and the owners of Prime sold their remaining
10% equity interest in Prime to Comcast for approximately $87.7 million. As
a result, Comcast owned 100% of Prime. Upon closing, the Company repaid
$535.1 million of Prime's debt with proceeds from borrowings under existing
credit facilities. Comcast contributed its interest in Prime to the Company
in August 2000.
4. INVESTMENTS
Gains on Exchanges of Fair Value Method Investments
During the six months ended June 30, 2000, in connection with the merger of
certain publicly traded companies held by the Company accounted for as
investments available for sale, the Company recognized a pre-tax gain of
$33.0 million, representing the difference between the fair value of the
securities received by the Company and the Company's cost basis in the
securities exchanged. Such gain was recorded as a reclassification from
accumulated other comprehensive income to investment income.
5. LONG-TERM DEBT
Interest Rates
As of June 30, 2000 and December 31, 1999, the Company's effective weighted
average interest rate on its long-term debt outstanding was 7.67% and
7.56%, respectively.
Lines of Credit
As of June 30, 2000, certain subsidiaries of the Company had unused lines
of credit of $782.7 million, $182.7 million of which is restricted by the
covenants of the related debt agreements (see Note 3).
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 six months ended June 30,
2000 and 1999 and for the three months ended June 30, 2000 and 1999, the
Company's service income includes $4.6 million, $4.7 million, $2.2 million
and $2.1 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
$83.0 million, $75.4 million, $41.1 million and $41.9 million during the
six months ended June 30, 2000 and 1999 and during the three months ended
June 30, 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.
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
7
<PAGE>
COMCAST CABLE COMMUNICATIONS, INC. AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED JUNE 30, 2000
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)
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 $538.1 million, $467.5 million, $268.4
million and $245.6 million, including $445.8 million, $401.2 million,
$219.9 million and $211.4 million of Programming Charges, during the six
months ended June 30, 2000 and 1999 and during the three months ended June
30, 2000 and 1999, respectively. The Programming Charges include $63.6
million, $41.2 million, $29.7 million and $22.5 million during the six
months ended June 30, 2000 and 1999 and during the three months ended June
30, 2000 and 1999, respectively, relating to programming purchased by the
Company, through Comcast, from suppliers in which Comcast holds an equity
interest.
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 December 31, 1999, $34.0
million of the Company's cash was held by CFAC. This amount has been
classified as cash held by an affiliate in the Company's condensed
consolidated balance sheet. As of June 30, 2000, current due to affiliates
in the Company's condensed consolidated balance sheet includes $32.5
million of amounts due to CFAC. During the six months ended June 30, 2000
and 1999 and during the three months ended June 30, 2000 and 1999, the
Company recognized investment income of $2.5 million, $0.8 million, $0.6
million and $0.5 million, respectively, on cash held by CFAC.
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, 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 and amounts due to
CFAC (as of June 30, 2000).
8
<PAGE>
COMCAST CABLE COMMUNICATIONS, INC. AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED JUNE 30, 2000
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONCLUDED
(Unaudited)
7. STATEMENT OF CASH FLOWS - SUPPLEMENTAL INFORMATION
In March 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)
==========
In May 2000, the Company sold its wholly owned subsidiary which held the
approximate 23.3 million shares of Comcast Class A Special Common Stock in
consideration for certain amounts due to affiliates totaling $758.1
million, including amounts due related to previously deferred management
fees and Programming Charges (see Notes 3 and 6). The transaction had no
significant impact on the Company's condensed consolidated statement of
cash flows during the six months ended June 30, 2000 due to its noncash
nature.
The Company made cash payments for interest on its long-term debt of $139.7
million, $138.5 million, $107.1 million and $127.1 million during the six
months ended June 30, 2000 and 1999 and during the three months ended June
30, 2000 and 1999, respectively. The Company made cash payments for
interest on the notes payable to affiliates of $0.3 million and $0.1
million during the six and three months June 30, 1999, respectively.
The Company made cash payments for state income taxes of $4.3 million
during the six and three months ended June 30, 2000, and $3.4 million and
$3.3 million during the six and three months ended June 30, 1999,
respectively.
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.
9
<PAGE>
COMCAST CABLE COMMUNICATIONS, INC. AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED JUNE 30, 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 six and three
months ended June 30, 2000 and 1999 is as follows (dollars in millions, "NM"
denotes percentage is not meaningful):
<TABLE>
<CAPTION>
Six Months Ended
June 30, Increase / (Decrease)
2000 1999 $ %
--------- --------- --------- --------
<S> <C> <C> <C> <C>
Service income.................................................. $1,436.5 $1,353.7 $82.8 6.1%
Operating, selling, general and administrative expenses......... 971.6 907.6 64.0 7.1
--------- ---------
Operating income before depreciation and amortization (1)....... 464.9 446.1 18.8 4.2
Depreciation and amortization................................... 465.9 454.7 11.2 2.5
--------- ---------
Operating loss.................................................. (1.0) (8.6) (7.6) (88.4)
--------- ---------
Interest expense................................................ 140.6 159.0 (18.4) (11.6)
Interest expense on notes payable to affiliates................. 3.6 (3.6) NM
Investment (income) expense and other, net...................... (33.6) 6.4 (40.0) NM
Income tax benefit.............................................. (12.6) (29.8) (17.2) (57.7)
Minority interest............................................... (57.7) (57.7) NM
--------- --------- --------- --------
Net loss........................................................ ($95.4) ($90.1) $5.3 5.9%
========= ========= ========= ========
<CAPTION>
Three Months Ended
June 30, Increase / (Decrease)
2000 1999 $ %
--------- --------- --------- --------
<S> <C> <C> <C> <C>
Service income.................................................. $685.3 $748.9 ($63.6) (8.5%)
Operating, selling, general and administrative expenses......... 466.6 497.8 (31.2) (6.3)
--------- ---------
Operating income before depreciation and amortization (1)....... 218.7 251.1 (32.4) (12.9)
Depreciation and amortization................................... 216.7 260.5 (43.8) (16.8)
--------- ---------
Operating income (loss)......................................... 2.0 (9.4) 11.4 NM
--------- ---------
Interest expense................................................ 58.9 93.3 (34.4) (36.9)
Interest expense on notes payable to affiliates................. 1.7 (1.7) NM
Investment expense and other, net............................... 1.7 7.1 (5.4) (76.1)
Income tax benefit.............................................. (13.5) (11.3) 2.2 19.5
Minority interest............................................... (48.9) (48.9) NM
--------- --------- --------- --------
Net loss........................................................ ($45.1) ($51.3) ($6.2) (12.1%)
========= ========= ========= ========
<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>
10
<PAGE>
COMCAST CABLE COMMUNICATIONS, INC. AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED JUNE 30, 2000
In April 1999, Comcast Corporation ("Comcast") acquired a controlling
interest in Jones Intercable, Inc. ("Jones Intercable") and contributed its
interest in Jones Intercable to us. The acquisition was accounted for under the
purchase method of accounting. As such, the operating results of Jones
Intercable were included in our condensed consolidated statement of operations
and accumulated deficit from the acquisition date. In March 2000, the Jones
Intercable shareholders approved a merger agreement pursuant to which 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, we exchanged our
ownership interest in Jones Intercable for approximately 23.3 million shares of
Comcast Class A Special Common Stock. As such, effective March 2000, the results
of Jones Intercable are no longer included in our condensed consolidated
statement of operations and accumulated deficit.
On August 1, 2000, two wholly owned subsidiaries of Comcast, Comcast LCI
Holdings Inc. and JOIN Holdings were merged into us (the "Reorganization").
Comcast LCI Holdings, Inc. (and its subsidiaries) owned cable systems and was
acquired by Comcast in January 2000. The Reorganization will be accounted for at
Comcast's historical costs in a manner similar to a pooling of interests.
Accordingly, effective August 1, 2000, our condensed consolidated financial
statements will include the accounts of the merged subsidiaries since the dates
of their acquisition by Comcast.
See Notes 1, 3 and 7 to our condensed consolidated financial statements
included in Item 1.
As a result of Comcast's contribution of Jones Intercable to us in April
1999 and the exchange of our interest in Jones Intercable for shares of Comcast
Class A Special Common Stock in March 2000, our condensed consolidated statement
of operations and accumulated deficit for the six months ended June 30, 2000 and
for the six and three months ended June 30, 1999 includes the results of Jones
Intercable for January and February 2000 and for April, May and June 1999,
respectively.
The increases in service income, operating, selling, general and
administrative expenses, depreciation expense and amortization expense for the
six months ended June 30, 2000 as compared to the prior year period are
primarily attributable to the effects of growth in our historical operations and
to our acquisitions of cable communications systems. The decrease in interest
expense for the six months ended June 30, 2000 as compared to the prior year
period is primarily attributable to the effects of Jones Intercable (three
months of interest expense in the 1999 period versus two months of interest
expense in the 2000 period) and to the effects of lower outstanding debt
balances in the 2000 period as a result of repayments on certain subsidiary
credit facilities.
The decreases in service income, operating, selling, general and
administrative expenses, depreciation expense, amortization expense and interest
expense for the three months ended June 30, 2000 as compared to the prior year
period are primarily attributable to Jones Intercable (whose results are
included in our consolidated results for three months ended June 30, 1999 but
whose results are excluded from our consolidated results for three months ended
June 30, 2000), offset in part by the effects of our acquisitions of other cable
communications systems.
Service Income
Of the respective $82.8 million increase and $63.6 million decrease for the
six and three month periods from 1999 to 2000, ($38.4) million and ($130.6)
million are due to Jones Intercable, $7.1 million and $7.1 million are due to
the effects of our acquisitions of cable communications systems and $114.1
million and $59.9 million are due to growth in our historical operations. Of the
respective $114.1 million and $59.9 million increases related to our historical
operations, $49.1 million and $24.8 million are due principally to subscriber
growth in digital cable and cable modem Internet access service, $13.3 million
and $6.3 million are due to subscriber growth in analog cable service, $35.3
million and $17.1 million are related to changes in rates, $9.9 million and $5.1
million are attributable to growth in cable advertising sales, $0.3 million and
$4.5 million are related to increases in pay per view revenue as a result of
more events during the six and three months ended June 30, 2000, and $6.2
million and $2.1 million are due to other service offerings.
Operating, Selling, General and Administrative Expenses
See Note 6 to our condensed consolidated financial statements included in
Item 1.
Of the respective $64.0 million increase and $31.2 million decrease for the
six and three month periods from 1999 to 2000, ($35.9) million and ($95.1)
million are due to Jones Intercable, $5.6 million and $5.6 million are due to
the effects of our acquisitions of cable communications
11
<PAGE>
COMCAST CABLE COMMUNICATIONS, INC. AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED JUNE 30, 2000
systems and $94.3 million and $58.3 million are due to growth in our historical
operations. Of the respective $94.3 million and $58.3 million increases related
to our historical operations, $45.0 million and $31.0 million are due to
increases in the costs of cable programming as a result of changes in rates,
subscriber growth and additional channel offerings, $25.7 million and $11.7
million are due principally to subscriber growth in cable modem Internet access
service, $24.7 million and $14.0 million result from increases in labor costs
and other volume related expenses, and ($1.1) million and $1.6 million relate to
changes in pay per view programming costs during the six and three months ended
June 30, 2000.
Interest Expense
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 respective $3.6 million and $1.7 million decreases for the six and
three month periods from 1999 to 2000 are due to the repayment of our notes
payable to affiliates in the fourth quarter of 1999.
Investment (Income) Expense and Other, Net
During the six months ended June 30, 2000, in connection with the merger of
certain publicly traded companies held by us and accounted for as investments
available for sale, we recognized a pre-tax gain 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.
Other expense for the six and three months ended June 30, 1999 is primarily
the result of the effects of Comcast's contribution of Jones Intercable to us in
April 1999.
Income Tax Benefit
The respective $17.2 million decrease and $2.2 million increase for the six
and three month periods from 1999 to 2000 are 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 respective $57.7 million and $48.9 million decreases for the six and
three month periods from 1999 to 2000 are primarily due to the effects of
Comcast's contribution of Jones Intercable to us in April 1999 and 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.
12
<PAGE>
COMCAST CABLE COMMUNICATIONS, INC. AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED JUNE 30, 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:
27.1 Financial Data Schedule.
(b) Reports on Form 8-K:
None.
13
<PAGE>
COMCAST CABLE COMMUNICATIONS, INC. AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED JUNE 30, 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: August 11, 2000
14
