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, 1998
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 333-31009
COMCAST CELLULAR CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 23-2687447
- --------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1105 North Market Street, Wilmington, Delaware 19801
- --------------------------------------------------------------------------------
(Address of principal executive offices)
(Zip Code)
Registrant's telephone number, including area code: (302) 427-8991
--------------------------
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, 1998, there were 100 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 CELLULAR CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED JUNE 30, 1998
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
Number
<S> <C> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance
Sheet as of June 30, 1998 and December 31,
1997 (Unaudited)......................................................2
Condensed Consolidated Statement of
Operations and Accumulated Deficit for
the Six and Three Months Ended June 30,
1998 and 1997 (Unaudited).............................................3
Condensed Consolidated Statement of Cash
Flows for the Six Months Ended June 30,
1998 and 1997 (Unaudited).............................................4
Notes to Condensed Consolidated
Financial Statements (Unaudited)..................................5 - 6
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of
Operations........................................................7 - 9
PART II. OTHER INFORMATION
Item 1. Legal Proceedings....................................................10
Item 6. Exhibits and Reports on Form 8-K.....................................10
SIGNATURE..........................................................................11
</TABLE>
--------------------------
This Quarterly Report on Form 10-Q contains forward looking statements made
pursuant to the "safe harbor" provisions of the Private Securities Litigation
Reform Act of 1995. Readers are cautioned that such forward looking statements
involve risks and uncertainties which could significantly affect expected
results in the future from those expressed in any such forward looking
statements made by, or on behalf, of the Company. Certain factors that could
cause actual results to differ materially include, without limitation, the
effects of legislative and regulatory changes; the potential for increased
competition; technological changes; the need to generate substantial growth in
the subscriber base by successfully launching, marketing and providing services
in identified markets; pricing pressures which could affect demand for the
Company's services; the Company's ability to expand its distribution; changes in
labor, equipment and capital costs; future acquisitions, strategic partnerships
and divestitures; general business and economic conditions; and other risks
detailed from time to time in the Company's periodic reports filed with the
Securities and Exchange Commission.
<PAGE>
COMCAST CELLULAR CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED JUNE 30, 1998
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CONDENSED CONSOLIDATED BALANCE SHEET
(Unaudited)
<TABLE>
<CAPTION>
(Dollars in thousands, except share data)
June 30, December 31,
1998 1997
---- ----
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents.................................................... $10,379 $4,692
Accounts receivable, less allowance for doubtful accounts
of $6,597 and $6,356....................................................... 69,721 59,252
Inventories.................................................................. 14,938 14,154
Due from affiliates.......................................................... 660
Other current assets......................................................... 3,678 3,147
---------- ----------
Total current assets....................................................... 99,376 81,245
---------- ----------
INVESTMENT IN AFFILIATE......................................................... 28,390 28,570
---------- ----------
PROPERTY AND EQUIPMENT.......................................................... 612,174 595,861
Accumulated depreciation..................................................... (222,413) (182,632)
---------- ----------
Property and equipment, net.................................................. 389,761 413,229
---------- ----------
DEFERRED CHARGES AND OTHER...................................................... 1,276,150 1,275,861
Accumulated amortization..................................................... (338,042) (321,450)
---------- ----------
Deferred charges and other, net.............................................. 938,108 954,411
---------- ----------
$1,455,635 $1,477,455
========== ==========
LIABILITIES AND STOCKHOLDER'S DEFICIENCY
CURRENT LIABILITIES
Accounts payable and accrued expenses........................................ $77,770 $100,159
Accrued interest............................................................. 16,820 17,388
Current portion of long-term debt............................................ 552 430
Due to affiliates............................................................ 47,116
---------- ----------
Total current liabilities.................................................. 95,142 165,093
---------- ----------
LONG-TERM DEBT, less current portion............................................ 1,249,338 1,224,511
---------- ----------
INVESTMENT IN AFFILIATE......................................................... 99,014
---------- ----------
DUE TO AFFILIATE................................................................ 13,725
---------- ----------
DEFERRED INCOME TAXES........................................................... 241,485 227,944
---------- ----------
MINORITY INTEREST AND OTHER..................................................... 7,206 5,878
---------- ----------
COMMITMENTS AND CONTINGENCIES
MANDATORILY REDEEMABLE PREFERRED STOCK HELD BY AFFILIATE........................ 184,018 173,602
---------- ----------
STOCKHOLDER'S DEFICIENCY
Common stock, $.01 par value - authorized, 1,000 shares;
issued, 100 shares ........................................................
Additional capital........................................................... 548,269 488,301
Accumulated deficit.......................................................... (883,548) (906,888)
---------- ----------
Total stockholder's deficiency............................................. (335,279) (418,587)
---------- ----------
$1,455,635 $1,477,455
========== ==========
</TABLE>
See notes to condensed consolidated financial statements.
2
<PAGE>
COMCAST CELLULAR CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED JUNE 30, 1998
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS AND ACCUMULATED DEFICIT
(Unaudited)
<TABLE>
<CAPTION>
(Dollars in thousands)
Six Months Ended Three Months Ended
June 30, June 30,
1998 1997 1998 1997
<S> <C> <C> <C> <C>
SERVICE INCOME, net........................................... $221,274 $220,273 $115,888 $116,194
--------- --------- --------- ---------
COSTS AND EXPENSES
Operating.................................................. 18,822 18,931 9,466 9,047
Selling, general and administrative........................ 117,076 114,747 58,959 57,628
Depreciation and amortization.............................. 57,683 53,582 29,689 25,577
--------- --------- --------- ---------
193,581 187,260 98,114 92,252
--------- --------- --------- ---------
OPERATING INCOME.............................................. 27,693 33,013 17,774 23,942
OTHER (INCOME) EXPENSE
Interest expense........................................... 56,075 61,165 27,497 31,717
Investment income.......................................... (666) (1,570) (336) (1,119)
Equity in net losses (income) of affiliates................ 9 3,520 (11) 1,399
Other...................................................... 626 440 398 271
--------- --------- --------- ---------
56,044 63,555 27,548 32,268
--------- --------- --------- ---------
LOSS BEFORE INCOME TAX BENEFIT AND
EXTRAORDINARY ITEM......................................... (28,351) (30,542) (9,774) (8,326)
INCOME TAX BENEFIT............................................ (10,384) (10,948) (3,616) (3,024)
--------- --------- --------- ---------
LOSS BEFORE EXTRAORDINARY ITEM................................ (17,967) (19,594) (6,158) (5,302)
EXTRAORDINARY ITEM............................................ (7,313) (7,313)
--------- --------- --------- ---------
NET LOSS...................................................... (17,967) (26,907) (6,158) (12,615)
PREFERRED DIVIDENDS........................................... (10,416) (2,261) (5,310) (2,261)
--------- --------- --------- ---------
NET LOSS FOR COMMON STOCKHOLDER............................... ($28,383) ($29,168) ($11,468) ($14,876)
========= ========= ========= =========
ACCUMULATED DEFICIT
Beginning of period........................................ ($906,888) ($856,280) ($918,697) ($870,572)
Dividend of AWACS Garden State, Inc. to Parent............. 41,307 41,307
Net loss................................................... (17,967) (26,907) (6,158) (12,615)
--------- --------- --------- ---------
End of period.............................................. ($883,548) ($883,187) ($883,548) ($883,187)
========= ========= ========= =========
</TABLE>
See notes to condensed consolidated financial statements.
3
<PAGE>
COMCAST CELLULAR CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED JUNE 30, 1998
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
(Dollars in thousands)
Six Months Ended June 30,
1998 1997
---- ----
<S> <C> <C>
OPERATING ACTIVITIES
Net loss..................................................................... ($17,967) ($26,907)
Adjustments to reconcile net loss to net cash (used in) provided
by operating activities:
Depreciation and amortization.............................................. 57,683 53,582
Non-cash interest expense.................................................. 1,441 27,997
Equity in net losses of affiliates......................................... 9 3,520
Minority interest.......................................................... 663 702
Deferred management fees................................................... 3,006
Deferred income taxes and other............................................ (9,819) (9,750)
Extraordinary item......................................................... 7,313
------- -------
32,010 59,463
Changes in working capital accounts........................................ (36,077) 14,165
------- -------
Net cash (used in) provided by operating activities.................. (4,067) 73,628
------- -------
FINANCING ACTIVITIES
Proceeds from borrowings of long-term debt................................... 35,000 1,018,370
Repayments of long-term debt................................................. (10,104) (1,143,474)
Deferred financing costs..................................................... (120) (27,572)
Proceeds from issuance of mandatorily redeemable preferred stock............. 161,478
Net transactions with affiliates............................................. 2,770 570
------- -------
Net cash provided by financing activities............................ 27,546 9,372
------- -------
INVESTING ACTIVITIES
Capital expenditures......................................................... (17,377) (57,897)
Other........................................................................ (415) (1,101)
------- -------
Net cash used in investing activities................................ (17,792) (58,998)
------- -------
INCREASE IN CASH AND CASH EQUIVALENTS........................................... 5,687 24,002
CASH AND CASH EQUIVALENTS, beginning of period.................................. 4,692 4,980
------- -------
CASH AND CASH EQUIVALENTS, end of period........................................ $10,379 $28,982
======= =======
</TABLE>
See notes to condensed consolidated financial statements.
4
<PAGE>
COMCAST CELLULAR CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED JUNE 30, 1998
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Basis of Presentation
The condensed consolidated balance sheet as of December 31, 1997 has been
condensed from the audited consolidated balance sheet as of that date. The
condensed consolidated balance sheet as of June 30, 1998, the condensed
consolidated statements of operations and accumulated deficit for the six
and three months ended June 30, 1998 and 1997 and the condensed
consolidated statement of cash flows for the six months ended June 30, 1998
and 1997 have been prepared by Comcast Cellular Corporation (the "Company")
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,
1998 and for all periods presented have been made.
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, 1997 Annual Report on Form 10-K filed with the Securities and Exchange
Commission. The results of operations for the periods ended June 30, 1998
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 issued Statement of
Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative
Instruments and Hedging Activities." This statement, which establishes
accounting and reporting standards for derivatives and hedging activities,
is effective for fiscal years beginning after June 15, 1999. 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. The Company is currently evaluating the impact the
adoption of SFAS No. 133 will have on its financial position and results of
operations.
Reclassifications
Certain reclassifications have been made to the prior year condensed
consolidated financial statements to conform to those classifications used
in 1998.
3. LONG-TERM DEBT
As of June 30, 1998 and December 31, 1997, the Company's effective weighted
average interest rate on its long-term debt outstanding was 8.80% and
8.88%, respectively.
In May 1997, the Company canceled $575.0 million of its revolving credit
loan. In connection with the reduction of the revolving credit loan, the
Company expensed unamortized debt acquisition costs of $11.3 million,
resulting in an extraordinary loss, net of tax, of $7.3 million during the
six and three months ended June 30, 1997.
4. INVESTMENT IN AND DUE TO AFFILIATE
In 1992, AWACS Garden State, Inc. ("AWACS Garden State"), an indirect
subsidiary of the Company, issued a note (the "AWACS Note") with an initial
principal amount of $51.0 million to purchase, from a subsidiary of Comcast
Corporation ("Comcast"), the Company's parent, a 40% limited partnership
interest in Garden State Cablevision L.P. ("Garden State Cablevision"). The
AWACS Note bears interest at a rate of 11% per annum. Interest is payable
on a quarterly basis to the extent of available cash, with any unpaid
interest added to principal. Interest expense on the AWACS Note was $1.4
million and $2.5 million for the six months ended June 30, 1998 and 1997,
respectively, and $1.3 million for the three months ended June 30, 1997.
The balance of the AWACS Note, classified as current due to affiliates, was
$50.4 million as of December 31, 1997. As of December 31, 1997, the
Company's investment in Garden State Cablevision, classified as investment
in affiliate, was ($99.0) million.
5
<PAGE>
COMCAST CELLULAR CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED JUNE 30, 1998
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONCLUDED
(Unaudited)
Effective April 1, 1998, the Company transferred, via a dividend, its
indirect interest in AWACS Garden State to a wholly owned subsidiary of
Comcast at its net book value of $41.3 million.
As of June 30, 1998, long-term due to affiliate consists of amounts due to
AWACS Garden State in connection with tax savings received by the Company
during prior year periods in which AWACS Garden State joined with an
indirect subsidiary of the Company in filing consolidated federal tax
returns.
5. RELATED PARTY TRANSACTIONS
Comcast and Comcast Cellular Communications, Inc. ("CCCI"), a wholly owned
subsidiary of the Company, were parties to a management agreement (the "Old
Management Agreement") pursuant to which Comcast managed the business and
operations of CCCI. In May 1997, the Old Management Agreement was
terminated and replaced with a new management agreement (the "New
Management Agreement") which provides for an annual management fee of 1.5%
of revenues. The New Management Agreement eliminated the prior management
fee which was limited to $5.0 million, subject to annual increases based on
the consumer price index. The New Management Agreement has a ten year term.
Management fees of $3.3 million, $3.0 million, $1.7 million and $1.6
million were charged to selling, general and administrative expenses during
the six and three months ended June 30, 1998 and 1997, respectively (on a
pro forma basis, giving effect to the New Management Agreement, management
fees for the six and three months ended June 30, 1997 would have been $3.3
million and $1.7 million, respectively).
During 1997, the Company authorized 10,000 shares of $.01 par value
preferred stock and designated 5,200 of such shares as Series A Preferred
Stock. In May 1997, the Company issued 1,614.775 shares of its mandatorily
redeemable Series A Preferred Stock to Comcast Financial Corporation, a
wholly owned subsidiary of Comcast. Each holder of the Series A Preferred
Stock is entitled to receive cumulative cash dividends at the annual rate
of $12,000 per share, payable semi-annually on May 1 and November 1 each
year, in arrears. At the option of the Company, by declaration of the
Company's Board of Directors, dividends may be paid in additional shares of
Series A Preferred Stock (the "Additional Shares") instead of cash through
May 1, 2007. To the extent dividends are paid in Additional Shares, such
Additional Shares shall be valued at $100,000 per share with a liquidation
value of $100,000 per share. The Series A Preferred Stock is redeemable, at
the option of the Company, at any time prior to May 2, 2007, at a
redemption price of $100,000 per share, plus accrued and unpaid dividends,
and is mandatorily redeemable on May 2, 2007 after final maturity of the
Senior Notes, subject to certain conditions. The Series A Preferred Stock
is generally non-voting. During the six and three months ended June 30,
1998 and 1997, the Company accrued $10.4 million, $2.3 million, $5.3
million and $2.3 million, respectively, of dividends on the Series A
Preferred Stock, with a corresponding reduction in additional capital. Such
amounts have been excluded from the Company's condensed consolidated
statement of cash flows due to their noncash nature.
6. STATEMENT OF CASH FLOWS - SUPPLEMENTAL INFORMATION
The Company made cash payments for interest of $55.2 million, $22.2
million, $51.5 million and $11.0 million during the six and three months
ended June 30, 1998 and 1997, respectively.
The Company made cash payments for income taxes of $0.2 million during the
six and three months ended June 30, 1997.
7. 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.
6
<PAGE>
COMCAST CELLULAR CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED JUNE 30, 1998
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 to Form 10-Q, except as noted below.
Results of Operations
Summarized consolidated financial information for Comcast Cellular Corporation
(the "Company") for the six and three months ended June 30, 1998 and 1997 is as
follows (dollars in millions, "NM" denotes percentage is not meaningful):
<TABLE>
<CAPTION>
Six Months Ended
June 30, Increase / (Decrease)
1998 1997 $ %
---- ---- - -
<S> <C> <C> <C> <C>
Service income, net.............................. $221.3 $220.3 $1.0 0.5%
Operating, selling, general and administrative
expenses.................................... 135.9 133.7 2.2 1.6
----- -----
Operating income before depreciation and
amortization (1)............................ 85.4 86.6 (1.2) (1.4)
Depreciation and amortization.................... 57.7 53.6 4.1 7.6
----- -----
Operating income................................. 27.7 33.0 (5.3) (16.1)
----- -----
Interest expense................................. 56.1 61.2 (5.1) (8.3)
Investment income................................ (0.6) (1.6) (1.0) (62.5)
Equity in net losses of affiliates............... 3.5 (3.5) NM
Other............................................ 0.6 0.4 0.2 50.0
Income tax benefit............................... (10.4) (10.9) (0.5) (4.6)
Extraordinary item............................... (7.3) (7.3) NM
----- -----
Net loss.................................... ($18.0) ($26.9) ($8.9) (33.1%)
====== ======
Three Months Ended
June 30, Increase / (Decrease)
1998 1997 $ %
---- ---- - -
Service income, net.............................. $115.9 $116.2 ($0.3) (0.3%)
Operating, selling, general and administrative
expenses.................................... 68.4 66.7 1.7 2.5
----- -----
Operating income before depreciation and
amortization (1)............................ 47.5 49.5 (2.0) (4.0)
Depreciation and amortization.................... 29.7 25.6 4.1 16.0
----- -----
Operating income................................. 17.8 23.9 (6.1) (25.5)
----- -----
Interest expense................................. 27.5 31.7 (4.2) (13.2)
Investment income................................ (0.3) (1.1) (0.8) (72.7)
Equity in net losses of affiliates............... 1.4 (1.4) NM
Other............................................ 0.4 0.2 0.2 100.0
Income tax benefit............................... (3.6) (3.0) 0.6 20.0
Extraordinary item............................... (7.3) (7.3) NM
----- -----
Net loss.................................... ($6.2) ($12.6) ($6.4) (50.8%)
====== ======
</TABLE>
- ----------
(1) Operating income before depreciation and amortization is commonly referred
to in the cellular industry 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
cellular industry and the resulting significant level of non-cash
depreciation and amortization expense, operating cash flow is frequently
used as one of the bases for evaluating cellular businesses, although the
Company's
7
<PAGE>
COMCAST CELLULAR CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED JUNE 30, 1998
measure of operating cash flow may not be comparable to similarly titled
measures of other companies. 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 the Company's performance.
Service income was flat for the six and three month periods from 1997 to 1998,
as subscriber growth was offset, in part, by the effects of increased use of
promotional and free minute plans offered to subscribers. These plans generally
have higher access fees and increase the minutes of use per subscriber while
lowering the average rate per minute of use.
The respective $2.2 million and $1.7 million increases in operating, selling,
general and administrative expenses for the six and three month periods from
1997 to 1998 are primarily attributable to increases in commission costs
associated with more gross sales in 1998 and increased labor costs, offset, in
part, by improved bad debt experience as a result of stronger credit procedures.
Comcast Corporation ("Comcast"), the Company's parent, and Comcast Cellular
Communications, Inc. ("CCCI"), a wholly owned subsidiary of the Company, were
parties to a management agreement (the "Old Management Agreement") pursuant to
which Comcast managed the business and operations of CCCI. In May 1997, the Old
Management Agreement was terminated and replaced with a new management agreement
(the "New Management Agreement") which provides for an annual management fee of
1.5% of revenues. The New Management Agreement eliminated the prior management
fee which was limited to $5.0 million, subject to annual increases based on the
consumer price index. The New Management Agreement has a ten year term.
Management fees of $3.3 million, $3.0 million, $1.7 million and $1.6 million
were charged to selling, general and administrative expenses during the six and
three months ended June 30, 1998 and 1997, respectively (on a pro forma basis,
giving effect to the New Management Agreement, management fees for the six and
three months ended June 30, 1997 would have been $3.3 million and $1.7 million,
respectively).
The $4.1 million increase in depreciation and amortization expense for each of
the six and three month periods from 1997 to 1998 is primarily attributable to
the effects of capital expenditures and losses on asset disposals offset, in
part, by a decrease in amortization expense as a result of certain intangible
assets becoming fully amortized in 1997.
The respective $5.1 million and $4.2 million decreases in interest expense for
the six and three month periods from 1997 to 1998 are primarily due to the
effects of a decrease in the Company's effective weighted average interest rate
and the transfer of AWACS Garden State (see below).
In 1992, AWACS Garden State, Inc. ("AWACS Garden State"), an indirect subsidiary
of the Company, issued a note (the "AWACS Note") with an initial principal
amount of $51.0 million to purchase, from a subsidiary of Comcast, a 40% limited
partnership in Garden State Cablevision L.P. ("Garden State Cablevision"). The
AWACS Note bears interest at a rate of 11% per annum. Interest is payable on a
quarterly basis to the extent of available cash, with any unpaid interest added
to principal. Interest expense on the AWACS Note was $1.4 million and $2.5
million for the six months ended June 30, 1998 and 1997, respectively, and $1.3
million for the three months ended June 30, 1997.
Under the terms of the partnership agreement, 49.5% of Garden State
Cablevision's net (income) losses were allocated to the Company. During the six
months ended June 30, 1998 and 1997, the Company recognized equity in net
(income) loss of Garden State Cablevision of ($0.2) million and $3.0 million,
respectively. During the three months ended June 30, 1997, the Company
recognized equity in net loss of Garden State Cablevision of $1.1 million.
Effective April 1, 1998, the Company transferred, via a dividend, its indirect
interest in AWACS Garden State to a wholly owned subsidiary of Comcast at its
net book value of $41.3 million.
The respective $0.5 million decrease and $0.6 million increase in income tax
benefit for the six and three month periods from 1997 to 1998 are primarily
attributable to fluctuations in the Company's loss before income tax benefit and
extraordinary item.
In May 1997, the Company canceled $575.0 million of its revolving credit loan.
In connection with the reduction of the revolving credit loan, the Company
expensed unamortized debt acquisition costs of $11.3 million, resulting in an
extraordinary loss, net of tax, of $7.3 million during the six and three months
ended June 30, 1997.
8
<PAGE>
COMCAST CELLULAR CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED JUNE 30, 1998
For the six and three months ended June 30, 1998 and 1997, the Company's
earnings before extraordinary item, income tax benefit, equity in net losses
(income) of affiliates and fixed charges (interest expense) was $27.7 million,
$34.1 million, $17.7 million and $24.8 million, respectively. Such earnings were
not adequate to cover the Company's fixed charges of $56.1 million, $61.2
million, $27.5 million and $31.7 million for these periods, respectively. Fixed
charges include non-cash interest expense of $1.4 million and $28.0 million for
the six months ended June 30, 1998 and 1997, respectively, and $10.5 million for
the three months ended June 30, 1997. The inadequacy of the Company's earnings
to cover fixed charges is primarily due to substantial non-cash charges for
depreciation and amortization expense of $57.7 million, $53.6 million, $29.7
million and $25.6 million during the six and three months ended June 30, 1998
and 1997, respectively.
The Company anticipates that, for the foreseeable future, depreciation,
amortization and interest expense will continue to be significant and will have
a significant adverse effect on the Company's ability to realize net earnings.
The Company believes that its losses will not significantly affect the
performance of its normal business activities because of its existing cash and
cash equivalents, its ability to generate operating income before depreciation
and amortization and its ability to obtain external financing.
The Company believes that its operations are not materially affected by
inflation.
9
<PAGE>
COMCAST CELLULAR CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED JUNE 30, 1998
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
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.
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.
10
<PAGE>
COMCAST CELLULAR CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED JUNE 30, 1998
SIGNATURE
Pursuant to the requirements of the Securities and Exchange Act of
1934, the Registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
COMCAST CELLULAR CORPORATION
-----------------------------
/S/ LAWRENCE S. SMITH
-----------------------------
Lawrence S. Smith
Executive Vice President
(Principal Accounting Officer)
Date: August 14, 1998
11
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
consolidated statement of operations and consolidated balance sheet and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<CIK> 0001041854
<NAME> COMCAST CELLULAR CORPORATION
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1998
<CASH> 10,379
<SECURITIES> 0
<RECEIVABLES> 76,318
<ALLOWANCES> (6,597)
<INVENTORY> 14,938
<CURRENT-ASSETS> 99,376
<PP&E> 612,174
<DEPRECIATION> (222,413)
<TOTAL-ASSETS> 1,455,635
<CURRENT-LIABILITIES> 95,142
<BONDS> 1,249,338
184,018
0
<COMMON> 0
<OTHER-SE> (335,279)
<TOTAL-LIABILITY-AND-EQUITY> 1,455,635
<SALES> 221,274
<TOTAL-REVENUES> 221,274
<CGS> 0
<TOTAL-COSTS> (193,581)
<OTHER-EXPENSES> (626)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (56,075)
<INCOME-PRETAX> (28,351)
<INCOME-TAX> 10,384
<INCOME-CONTINUING> (17,967)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (17,967)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
