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 0-6983
COMCAST CORPORATION
[GRAPHIC OMITTED - LOGO]
COMCAST CORPORATION
(Exact name of registrant as specified in its charter)
PENNSYLVANIA 23-1709202
--------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1500 Market Street, Philadelphia, PA 19102-2148
--------------------------------------------------------------------------------
(Address of principal executive offices)
(Zip Code)
Registrant's telephone number, including area code: (215) 665-1700
--------------------------
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 872,670,649 shares of Class A Special Common
Stock, 22,624,080 shares of Class A Common Stock and 9,444,375 shares of Class B
Common Stock outstanding.
<PAGE>
COMCAST CORPORATION 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 - 15
ITEM 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations......................16 - 22
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings.............................................23
ITEM 4. Submission of Matters to a Vote of Security Holders......23 - 24
ITEM 6. Exhibits and Reports on Form 8-K..............................24
SIGNATURE.............................................................25
-----------------------------------
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," "we," "us" and "our" refer to Comcast Corporation
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 and the provision of
programming content 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,
o demand for the programming content we distribute or the willingness of
other video program distributors to carry our content, and
o general economic conditions.
<PAGE>
COMCAST CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED JUNE 30, 2000
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CONDENSED CONSOLIDATED BALANCE SHEET
(Unaudited)
<TABLE>
<CAPTION>
(Dollars in millions, except share data)
June 30, December 31,
2000 1999
--------- ------------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents......................................................... $652.3 $922.2
Investments....................................................................... 2,975.0 7,606.0
Accounts receivable, less allowance for doubtful accounts of $147.3 and $136.6.... 706.5 673.3
Inventories, net.................................................................. 373.3 402.8
Other current assets.............................................................. 120.7 100.1
--------- -----------
Total current assets.......................................................... 4,827.8 9,704.4
--------- -----------
INVESTMENTS.......................................................................... 5,192.5 5,548.8
--------- -----------
PROPERTY AND EQUIPMENT............................................................... 6,439.0 5,153.2
Accumulated depreciation.......................................................... (1,773.2) (1,700.9)
--------- -----------
Property and equipment, net....................................................... 4,665.8 3,452.3
--------- -----------
DEFERRED CHARGES..................................................................... 23,935.8 12,722.1
Accumulated amortization.......................................................... (3,290.2) (2,742.0)
--------- -----------
Deferred charges, net............................................................. 20,645.6 9,980.1
--------- -----------
$35,331.7 $28,685.6
========= ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued expenses............................................. $2,492.1 $2,737.5
Accrued interest.................................................................. 97.8 104.5
Deferred income taxes............................................................. 1,360.5 2,118.6
Current portion of long-term debt................................................. 146.9 517.5
--------- -----------
Total current liabilities..................................................... 4,097.3 5,478.1
--------- -----------
LONG-TERM DEBT, less current portion (including adjustment to carrying value of
$1,064.0 and $666.0).............................................................. 10,218.6 8,707.2
--------- -----------
DEFERRED INCOME TAXES................................................................ 4,936.8 3,150.5
--------- -----------
MINORITY INTEREST AND OTHER.......................................................... 1,219.1 1,008.5
--------- -----------
COMMITMENTS AND CONTINGENCIES (Note 8)
COMMON EQUITY PUT OPTIONS............................................................ 82.0
--------- -----------
STOCKHOLDERS' EQUITY
Preferred stock - authorized, 20,000,000 shares; 5.25% series B mandatorily redeemable
convertible, $1,000 par value; issued, 584,691 and 569,640 at redemption value.. 584.7 569.6
Class A special common stock, $1 par value - authorized, 2,500,000,000 shares;
issued, 895,995,560 and 716,442,482; outstanding, 872,670,649 and 716,442,482 .. 872.7 716.4
Class A common stock, $1 par value - authorized,
200,000,000 shares; issued, 22,624,080 and 25,993,380........................... 22.6 26.0
Class B common stock, $1 par value - authorized,
50,000,000 shares; issued, 9,444,375............................................ 9.4 9.4
Additional capital................................................................ 11,117.7 3,527.0
Accumulated deficit............................................................... (878.2) (619.8)
Accumulated other comprehensive income............................................ 3,049.0 6,112.7
--------- -----------
Total stockholders' equity.................................................... 14,777.9 10,341.3
--------- -----------
$35,331.7 $28,685.6
========= ===========
</TABLE>
See notes to condensed consolidated financial statements.
2
<PAGE>
COMCAST CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED JUNE 30, 2000
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS AND ACCUMULATED DEFICIT
(Unaudited)
<TABLE>
<CAPTION>
(Amounts in millions, except per share data)
Six Months Ended Three Months Ended
June 30, June 30,
2000 1999 2000 1999
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
REVENUES
Service income......................................................... $2,259.4 $1,570.5 $1,141.5 $846.1
Net sales from electronic retailing.................................... 1,591.6 1,425.4 770.6 703.1
--------- --------- --------- ---------
3,851.0 2,995.9 1,912.1 1,549.2
--------- --------- --------- ---------
COSTS AND EXPENSES
Operating.............................................................. 1,077.9 789.5 529.0 415.9
Cost of goods sold from electronic retailing........................... 1,015.2 912.6 488.2 449.4
Selling, general and administrative.................................... 568.2 411.3 292.1 226.6
Depreciation........................................................... 376.7 254.0 204.8 137.3
Amortization........................................................... 803.4 292.1 429.6 170.2
--------- --------- --------- ---------
3,841.4 2,659.5 1,943.7 1,399.4
--------- --------- --------- ---------
OPERATING INCOME (LOSS).................................................... 9.6 336.4 (31.6) 149.8
OTHER (INCOME) EXPENSE
Interest expense....................................................... 331.8 254.7 163.2 143.5
Investment income...................................................... (959.4) (128.0) (314.8) (0.2)
Expense (income) related to indexed debt............................... 398.0 (289.5)
Equity in net losses of affiliates..................................... 4.0 1.6 1.1 2.7
Other expense (income)................................................. 8.6 (1,430.9) (2.2) (1,430.7)
--------- --------- --------- ---------
(217.0) (1,302.6) (442.2) (1,284.7)
--------- --------- --------- ---------
INCOME FROM CONTINUING OPERATIONS BEFORE INCOME
TAX, MINORITY INTEREST AND EXTRAORDINARY ITEMS......................... 226.6 1,639.0 410.6 1,434.5
INCOME TAX EXPENSE......................................................... 153.3 723.7 185.1 636.3
--------- --------- --------- ---------
INCOME FROM CONTINUING OPERATIONS BEFORE
MINORITY INTEREST AND EXTRAORDINARY ITEMS.............................. 73.3 915.3 225.5 798.2
MINORITY INTEREST.......................................................... 60.9 (12.8) 26.7 (28.1)
--------- --------- --------- ---------
INCOME FROM CONTINUING OPERATIONS BEFORE
EXTRAORDINARY ITEMS.................................................... 12.4 928.1 198.8 826.3
LOSS FROM DISCONTINUED OPERATIONS, net of income tax
benefit of $11.9 in 1999............................................... 20.1
--------- --------- --------- ---------
INCOME BEFORE EXTRAORDINARY ITEMS.......................................... 12.4 908.0 198.8 826.3
EXTRAORDINARY ITEMS........................................................ (16.2) (3.0) (11.1) (2.3)
--------- --------- --------- ---------
NET (LOSS) INCOME.......................................................... (3.8) 905.0 187.7 824.0
PREFERRED DIVIDENDS........................................................ (15.1) (15.1) (7.6) (7.6)
--------- --------- --------- ---------
NET (LOSS) INCOME FOR COMMON STOCKHOLDERS.................................. ($18.9) $889.9 $180.1 $816.4
========= ========= ========= =========
ACCUMULATED DEFICIT
Beginning of period.................................................... ($619.8) ($1,488.2) ($975.9) ($1,416.8)
Net (loss) income...................................................... (3.8) 905.0 187.7 824.0
Retirement of common stock............................................. (254.6) (9.6) (90.0)
--------- --------- --------- ---------
End of period.......................................................... ($878.2) ($592.8) ($878.2) ($592.8)
========= ========= ========= =========
BASIC (LOSS) EARNINGS FOR COMMON STOCKHOLDERS PER COMMON SHARE
Income from continuing operations before extraordinary items........... $ $1.23 $0.21 $1.10
Loss from discontinued operations...................................... (.03)
Extraordinary items.................................................... (0.02) (0.01)
--------- --------- --------- ---------
Net (loss) income................................................... ($0.02) $1.20 $0.20 $1.10
========= ========= ========= =========
BASIC WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING................. 873.2 742.9 909.8 744.4
========= ========= ========= =========
DILUTED (LOSS) EARNINGS FOR COMMON STOCKHOLDERS PER COMMON SHARE
Income from continuing operations before extraordinary items........... $ $1.13 $0.20 $1.01
Loss from discontinued operations...................................... (0.02)
Extraordinary items.................................................... (0.02) (0.01)
--------- --------- --------- ---------
Net (loss) income................................................... ($0.02) $1.11 $0.19 $1.01
========= ========= ========= =========
DILUTED WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING............... 873.2 815.1 974.7 815.3
========= ========= ========= =========
</TABLE>
See notes to condensed consolidated financial statements.
3
<PAGE>
COMCAST CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED JUNE 30, 2000
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
(Dollars in millions)
Six Months Ended June 30,
2000 1999
--------- --------
<S> <C> <C>
OPERATING ACTIVITIES
Net (loss) income................................................................ ($3.8) $905.0
Adjustments to reconcile net (loss) income to net cash provided
by operating activities from continuing operations:
Depreciation................................................................... 376.7 254.0
Amortization................................................................... 803.4 292.1
Non-cash interest income, net.................................................. (25.4) (2.6)
Non-cash expense related to indexed debt....................................... 398.0
Equity in net losses of affiliates............................................. 4.0 1.6
Gains on investments, net...................................................... (863.2) (54.8)
Minority interest.............................................................. 60.9 (12.8)
Loss from discontinued operations.............................................. 20.1
Extraordinary items............................................................ 16.2 3.0
Deferred income taxes and other................................................ (109.7) 388.0
--------- --------
657.1 1,793.6
Changes in working capital..................................................... (483.4) 177.7
--------- --------
Net cash provided by operating activities from continuing operations..... 173.7 1,971.3
--------- --------
FINANCING ACTIVITIES
Proceeds from borrowings......................................................... 188.8 912.6
Retirement and repayment of debt................................................. (1,078.3) (152.8)
Issuances of common stock and sales of put options on common stock............... 21.5 11.7
Repurchases of common stock...................................................... (219.6) (11.5)
Dividends........................................................................ (9.4)
Deferred financing costs......................................................... (14.6)
Other............................................................................ (3.0)
--------- --------
Net cash (used in) provided by financing activities
from continuing operations........................................... (1,087.6) 733.0
--------- --------
INVESTING ACTIVITIES
Acquisitions, net of cash acquired............................................... (83.8) (708.0)
Proceeds from sales of (purchases of) short-term investments, net................ 867.4 (83.3)
Purchases of investments......................................................... (348.7) (196.2)
Proceeds from sales of investments............................................... 983.8 54.3
Capital expenditures............................................................. (608.0) (326.4)
Additions to deferred charges.................................................... (166.7) (121.7)
--------- --------
Net cash provided by (used in) investing activities
from continuing operations........................................... 644.0 (1,381.3)
--------- --------
(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS -
CONTINUING OPERATIONS............................................................ (269.9) 1,323.0
CASH AND CASH EQUIVALENTS, beginning of period...................................... 922.2 870.7
--------- --------
CASH AND CASH EQUIVALENTS, end of period............................................ $652.3 $2,193.7
========= ========
</TABLE>
See notes to condensed consolidated financial statements.
4
<PAGE>
COMCAST CORPORATION 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 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, 2000 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, 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.
Sale of Comcast Cellular Corporation
In July 1999, the Company sold its indirect wholly owned subsidiary,
Comcast Cellular Corporation ("Comcast Cellular"), to SBC Communications,
Inc. The results of operations of Comcast Cellular for the six months ended
June 30, 1999 have been presented as a discontinued operation in accordance
with Accounting Principles Board Opinion No. 30, "Reporting the Results of
Operations - Reporting the Effects of Disposal of a Segment of a Business,
and Extraordinary, Unusual and Infrequently Occurring Events and
Transactions."
Reclassifications
Certain reclassifications have been made to the prior years' condensed
consolidated financial statements to conform to those classifications used
in 2000 (see Note 2).
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 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.
5
<PAGE>
COMCAST CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED JUNE 30, 2000
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)
EITF 00-10
In May and July 2000, the Emerging Issues Task Force (the "EITF") reached a
consensus on EITF Issue No. 00-10, "Accounting for Shipping and Handling
Fees and Costs." EITF No. 00-10 requires that all amounts billed to a
customer in a sale transaction for shipping and handling be classified as
revenue. The Company's majority-owned subsidiary, QVC, Inc. previously
classified shipping and handling revenue as an offset to cost of goods sold
from electronic retailing. The Company has reclassified shipping and
handling revenue from cost of goods sold from electronic retailing to net
sales from electronic retailing for all periods presented in the
accompanying condensed consolidated statement of operations and accumulated
deficit.
Securities Lending Transactions
The Company may enter into securities lending transactions pursuant to
which the Company requires the borrower to provide cash collateral equal to
the value of the loaned securities, as adjusted for any changes in the
value of the underlying loaned securities. Loaned securities for which the
Company maintains effective control are included in investments in the
Company's condensed consolidated balance sheet.
(Loss) Earnings for Common Stockholders Per Common Share
(Loss) earnings for common stockholders per common share is computed by
dividing net (loss) income, after deduction of preferred stock dividends,
when applicable, by the weighted average number of common shares
outstanding during the period on a basic and diluted basis.
The following table reconciles the numerator and denominator of the
computations of diluted (loss) earnings for common stockholders per common
share ("Diluted EPS") for the six and three months ended June 30, 2000 and
1999, respectively.
<TABLE>
<CAPTION>
(Amounts in millions, except per share data)
Six Months Ended Three Months Ended
June 30, June 30,
2000 1999 2000 1999
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Net (loss) income for common stockholders.............. ($18.9) $889.9 $180.1 $816.4
Preferred dividends.................................... 15.1 7.6 7.6
--------- --------- --------- ---------
Net (loss) income for common stockholders used
for Diluted EPS...................................... ($18.9) $905.0 $187.7 $824.0
========= ========= ========= =========
Basic weighted average number of common shares
outstanding.......................................... 873.2 742.9 909.8 744.4
Dilutive securities:
Series A and B convertible preferred stock........... 45.2 42.5 45.2
Stock option and restricted stock plans.............. 27.0 22.2 25.7
Put options on Class A Special Common Stock.......... 0.2
--------- --------- --------- ---------
Diluted weighted average number of common shares
outstanding.......................................... 873.2 815.1 974.7 815.3
========= ========= ========= =========
Diluted (loss) earnings for common stockholders
per common share..................................... ($.02) $1.11 $.19 $1.01
========= ========= ========= =========
</TABLE>
Put options sold by the Company on a weighted average 1.3 million shares,
4.8 million shares, 2.0 million shares and 4.2 million shares,
respectively, of its Class A Special Common stock (see Note 6) were
outstanding during the six months ended June 30, 2000 and 1999 and during
the three months ended June 30, 2000 and 1999, respectively. For the six
months ended June 30, 2000 and for the six and three months ended June 30,
1999, such
6
<PAGE>
COMCAST CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED JUNE 30, 2000
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)
put options were not included in the computation of Diluted EPS as the
options' exercise price was less than the average market price of the
Company's Class A Special Common Stock during the periods.
For the six months ended June 30, 2000, potentially dilutive securities
related to the Company's Series B convertible preferred stock, stock option
and restricted stock plans have been excluded in determining the total
weighted average number of common shares outstanding because of their
antidilutive effect on loss for common stockholders per common share.
3. SIGNIFICANT EVENTS
Acquisition of Lenfest Communications, Inc.
In January 2000, the Company acquired substantially all of the assets of
Lenfest Communications, Inc. ("Lenfest"), a cable communications company
serving approximately 1.1 million subscribers primarily in the Philadelphia
area from AT&T Corp. ("AT&T") and the other Lenfest stockholders for
approximately 121.4 million shares of the Company's Class A Special Common
Stock, subject to adjustment, with a value of $6.077 billion (the "Lenfest
Acquisition"). In connection with the Lenfest Acquisition, the Company
assumed approximately $1.326 billion of debt. Immediately upon closing of
the Lenfest Acquisition, Lenfest was merged with and into Comcast LCI
Holdings, Inc. ("LCI Holdings"), a wholly owned subsidiary of the Company,
with LCI Holdings as the successor to Lenfest.
Consolidation of Comcast Cablevision of Garden State, L.P.
Comcast Cablevision of Garden State, L.P. ("Garden State Cable") (formerly
Garden State Cablevision L.P.), a cable communications company serving
approximately 216,000 subscribers in New Jersey, is a partnership which was
owned 50% by Lenfest and 50% by the Company. The Company had accounted for
its interest in Garden State Cable under the equity method (see Note 4). As
a result of the Lenfest Acquisition, the Company now indirectly owns 100%
of Garden State Cable. As such, the operating results of Garden State Cable
have been included in the Company's condensed consolidated statement of
operations and accumulated deficit from the date of the Lenfest
Acquisition.
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.
Acquisition of Jones Intercable, Inc.
In April 1999, the Company acquired a controlling interest in Jones
Intercable, Inc. ("Jones Intercable"), a cable communications company
serving approximately 1.1 million subscribers, for aggregate consideration
of $706.3 million in cash. 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, the Company purchased an additional 1.0 million shares of
Jones Intercable Class A Common Stock for $50.0 million in cash in a
private transaction. The Company contributed its interest in Jones
Intercable to Comcast Cable Communications, Inc. ("Comcast Cable"), a
wholly owned subsidiary of the Company.
In March 2000, the Jones Intercable shareholders approved a merger
agreement pursuant to which the Jones Intercable shareholders, including
Comcast Cable, received 1.4 shares of the Company's Class A Special Common
Stock in exchange for each share of Jones Intercable Class A Common Stock
and Common Stock (the "Jones Merger") and Jones Intercable was merged with
and into Comcast JOIN Holdings, Inc., a wholly owned subsidiary of the
Company ("JOIN Holdings"), with JOIN Holdings as the successor to Jones
Intercable. In connection with the closing of the Jones Merger, the Company
issued approximately 58.9 million shares of its Class A Special
7
<PAGE>
COMCAST CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED JUNE 30, 2000
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)
Common Stock to the Jones Intercable shareholders, including approximately
23.3 million shares to a subsidiary of the Company and 35.6 million shares
with a value of $1.727 billion to the public shareholders. As required
under generally accepted accounting principles, the shares held by the
subsidiary of the Company are presented as issued but not outstanding (held
in treasury) in the Company's June 30, 2000 condensed consolidated balance
sheet.
The acquisitions completed by the Company during the six months ended June
30, 2000 were accounted for under the purchase method of accounting. As
such, the operating results of the acquired systems have been included in
the Company's condensed consolidated statement of operations and
accumulated deficit from the acquisition date. The Company adjusted the
purchase price allocation related to the Company's acquisitions of CalPERS'
interest in Comcast MHCP and of the public shareholders' interest in Jones
Intercable during the second quarter of 2000. The allocation of the
purchase price for the acquisitions of Lenfest and Garden State Cable is
preliminary pending completion of final appraisals. As the consideration
given in exchange for Jones Intercable, Lenfest and the additional 50%
interest in Garden State Cable was shares of the Company's Class A Special
Common Stock, the acquisitions of such interests 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).
Time Warner Agreement
In November 1999, the Company 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, L.P. On July 1, 2000, the
agreement expired with a closing not having occurred.
Prime Communications Agreement
In December 1998, the Company 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 the
Company acquired from Prime a $50.0 million 12.75% subordinated note due
2008 issued by Prime. In July 1999, the Company 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, the Company 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 the Company for approximately
$87.7 million. As a result, the Company now owns 100% of Prime and has
assumed management control of Prime's operations. Upon closing, the Company
repaid $535.1 million of Prime's debt with proceeds from borrowings under
existing credit facilities.
Unaudited Pro Forma Information
The following unaudited pro forma information for the six months ended June
30, 1999 has been presented as if the Lenfest Acquisition occurred on
January 1, 1999. This information is based on historical results of
operations, adjusted for acquisition costs, and, in the opinion of
management, is not necessarily indicative of what the results would have
been had the Company operated Lenfest and Garden State Cable since January
1, 1999 (dollars in millions).
Six Months
Ended
June 30, 1999
--------------
Revenues.................................. $3,289.6
Net income................................ 665.7
Other Expense (Income)
During the three months ended June 30, 1999, the Company received a $1.5
billion termination fee from MediaOne Group, Inc. ("MediaOne") as a result
of MediaOne's termination of its Agreement and Plan of Merger with the
Company dated March 1999. The termination fee, net of transaction costs,
was recorded to other expense (income) in the Company's condensed
consolidated statement of operations and accumulated deficit.
8
<PAGE>
COMCAST CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED JUNE 30, 2000
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)
4. INVESTMENTS
<TABLE>
<CAPTION>
June 30, December 31,
2000 1999
-------- -----------
(Dollars in millions)
<S> <C> <C>
Fair value method................................ $7,579.5 $11,972.1
Cost method...................................... 313.1 1,134.6
Equity method.................................... 274.9 48.1
-------- ---------
Total investments......................... 8,167.5 13,154.8
Less, current investments........................ 2,975.0 7,606.0
-------- ---------
Non-current investments.......................... $5,192.5 $5,548.8
======== =========
</TABLE>
Fair Value Method
The Company holds unrestricted equity investments in certain publicly
traded companies, with an historical cost (including $2.025 billion and
$2.033 billion of aggregate pre-tax gains recognized through June 30, 2000
and December 31, 1999, respectively) of $2.806 billion and $2.558 billion
as of June 30, 2000 and December 31, 1999, respectively. The unrealized
pre-tax gains as of June 30, 2000 and December 31, 1999 of $4.774 billion
and $9.414 billion, respectively, have been reported in the Company's
condensed consolidated balance sheet as a component of accumulated other
comprehensive income, net of related deferred income tax expense of $1.671
billion and $3.294 billion, respectively.
Sprint PCS. As of June 30, 2000 and December 31, 1999, as adjusted for
Sprint PCS' 2-for-1 stock split in February 2000, the Company holds
approximately 88.2 million shares and 93.8 million shares of unregistered
Series 2 Sprint PCS common stock, 123,452 shares of Sprint PCS convertible
preferred stock (convertible into approximately 4.0 million shares of
unregistered Series 2 Sprint PCS common stock) and a warrant to purchase
approximately 6.0 million shares of unregistered Series 2 Sprint PCS common
stock at $12.01 per share (the "Sprint PCS Stock"). The Company has
registration rights, subject to customary restrictions, which will allow
the Company to sell its Sprint PCS Stock. During the six and three months
ended June 30, 2000, the Company sold approximately 5.6 million of its
shares of Sprint PCS common stock for total proceeds of $312.0 million and
recognized a pre-tax gain of $265.3 million. Such gain was recorded as a
reclassification from accumulated other comprehensive income to investment
income. As of June 30, 2000 and December 31, 1999, the Company has recorded
its investment in Sprint PCS at its estimated fair value of $4.423 billion
and $4.234 billion, respectively (see Note 5).
AT&T. As of June 30, 2000 and December 31, 1999, the Company holds
approximately 39.9 million shares of unregistered AT&T common stock. As of
June 30, 2000 and December 31, 1999, the Company has recorded its
investment in AT&T at its estimated fair value of $1.261 billion and $2.026
billion, respectively. The Company has registration rights, subject to
customary restrictions, which allow the Company to sell its AT&T common
stock.
In May 1999, the Company entered into an agreement with AT&T to exchange
various cable communications systems. Under the terms of the agreement, the
Company will receive cable communications systems serving approximately 1.5
million subscribers. In exchange, AT&T will receive systems that the
Company currently owns or will acquire serving 750,000 subscribers. At
closing, the Company will pay AT&T an equalizing payment of approximately
$3.4 billion (subject to adjustment based on the actual number of net
subscribers acquired and the per subscriber price of certain subscribers)
for the 750,000 net subscribers to be acquired as a result of the
exchanges. The Company will pay for the net subscribers acquired in
connection with the exchanges with shares of AT&T common stock that the
Company currently owns or may acquire and other securities or assets which
would permit the exchanges to be tax-free to the maximum extent possible.
The agreed upon value of any AT&T common stock used in the exchange that
was owned by the Company at the time of the agreement is $54.41 per share.
9
<PAGE>
COMCAST CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED JUNE 30, 2000
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)
Internet Capital Group. In August 1999, Internet Capital Group ("ICG"), an
investee of the Company previously accounted for under the cost method,
completed an initial public offering of its common stock. ICG is an
Internet holding company engaged in managing and operating a network of
business-to-business e-commerce companies. During the six months ended June
30, 2000, the Company sold approximately 2.3 million shares of its ICG
common stock for proceeds of $327.1 million and recognized a pre-tax gain
of $325.9 million. Such gain was recorded as a reclassification from
accumulated other comprehensive income to investment income. As of June 30,
2000 and December 31, 1999, the Company holds approximately 21.4 million
shares and 23.7 million shares of ICG common stock and warrants and options
to purchase approximately 0.6 million shares of ICG common stock,
respectively. As of June 30, 2000 and December 31, 1999, the Company has
recorded its investment in ICG at its estimated fair value of $813.0
million and $4.127 billion, respectively.
Excite@Home. Excite@Home provides Internet services to subscribers and
businesses over the cable communications infrastructure in a limited number
of cities in the United States. As of June 30, 2000 and December 31, 1999,
the Company holds approximately 29.1 million shares of Excite@Home Series A
Common Stock (the "Excite@Home Series A Stock") and warrants and options to
purchase an additional 2.0 million shares and 0.6 million shares,
respectively, of Excite@Home Series A Stock. As of June 30, 2000 and
December 31, 1999, 10% and 30% of the Excite@Home Series A shares held by
the Company were contractually restricted shares (the "Restricted Shares")
and 90% and 70% of the Excite@Home Series A shares held by the Company were
unrestricted shares (the "Unrestricted Shares"). The Company has recorded
the Restricted Shares at their historical cost of $0.3 million and $0.6
million and the Unrestricted Shares and warrants, which are classified as
available for sale, at their estimated fair value of $655.8 million and
$918.0 million, respectively, as of June 30, 2000 and December 31, 1999.
In March 2000, Excite@Home and its principal cable partners, including the
Company, entered into an agreement (the "March Agreement") pursuant to
which the Company agreed to enter into a new non-exclusive distribution
agreement with Excite@Home for the period from June 2002 through June 2006,
give up its Board level veto rights and resign from the Excite@Home Board
of Directors. Also under the March Agreement, the Company may elect to
terminate the existing exclusive distribution agreement (which would
otherwise expire in June 2002) or the new distribution agreement at any
time beginning June 2001 on at least six months notice. Under the terms of
the March Agreement, AT&T agreed to give the Company the right to sell its
Excite@Home Series A shares to AT&T at any time between January 1, 2001 and
June 4, 2002 at a price equal to the higher of $48 per share or the average
per share trading price for a 30-day trading period (as defined). The
aggregate value of the Excite@Home Series A shares that AT&T would be
required to purchase from the Company is limited to $1.5 billion. The
Company has the right to elect payment in the form of cash or in shares of
AT&T common stock.
In addition, the existing Excite@Home warrants held by the Company would be
amended to eliminate any performance vesting conditions and the Company
would receive new warrants with an exercise price of $29.54 per share to
purchase two shares of Excite@Home Series A Stock for each home passed by
the Company's cable communications systems. The new warrants would vest in
installments every six months beginning in June 2001 and would be fully
vested in June 2006 provided that the Company has not elected to earlier
terminate its existing or the new distribution agreement. The new warrants
would include customary registration rights and would expire in March 2015.
All necessary stockholder and other approvals required to close under the
March Agreement have been received. However, in June 2000 Cablevision
Systems Corporation ("Cablevision"), a warrant holder in Excite@Home and
also a party to various agreements with Excite@Home and its principal cable
partners, brought an action in Delaware Chancery Court against Excite@Home
and its principal cable partners seeking to enjoin the closing and alleging
that the March Agreement breached certain contractual rights of
Cablevision. The parties have agreed not to consummate the transactions
contemplated by the March Agreement until the conclusion of a trial on the
merits of the Cablevision action, which is scheduled to begin on September
11, 2000. Although the Company believes that the defendants have valid
defenses and counterclaims to Cablevision's action, there can be no
assurance that the defendants will prevail in this litigation and that the
closing under the March Agreement will occur.
10
<PAGE>
COMCAST CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED JUNE 30, 2000
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)
Gains on Exchanges of Fair Value Method Investments
During the six months ended June 30, 2000 and 1999, in connection with
certain mergers of publicly traded companies held by the Company accounted
for as investments available for sale, the Company recognized pre-tax gains
of $33.0 million and $187.6 million, respectively, 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 gains were
recorded as a reclassification from accumulated other comprehensive income
to investment income.
Impairment Losses
During the six months ended June 30, 2000 and 1999 and during the three
months ended June 30, 2000 and 1999, the Company recorded pre-tax losses of
$7.4 million, $35.5 million, $2.5 million and $0.2 million, respectively,
on certain of its investments based on a decline in value that was
considered other than temporary. Such losses are included in investment
income in the Company's condensed consolidated statement of operations and
accumulated deficit.
Investment Expense Related to Call Options
During the six and three months ended June 30, 1999, the Company recorded
$100.8 million and $49.4 million, respectively, of investment expense
related to changes in the value of and the settlement of call options on
certain of the Company's fair value method investments, all of which
expired by November 1999.
Equity Method
The Company records its proportionate interests in the net income (loss) of
certain of its equity method investees in arrears. The Company's recorded
investments exceed its proportionate interests in the book value of the
investees' net assets by $179.8 million as of June 30, 2000 (related to the
Company's investment in The Golf Channel). Such excess is being amortized
to equity in net income or loss, over a period of twenty years, which is
consistent with the estimated lives of the underlying assets. The original
cost of investments accounted for under the equity method totaled $363.1
million and $235.6 million as of June 30, 2000 and December 31, 1999,
respectively.
During February 2000, the Company exercised a call option to purchase
shares held by certain founding members and members of management of The
Golf Channel for a total purchase price of $99.0 million. In addition, the
Company purchased shares held by other minority shareholders for $26.3
million during March 2000 and $11.2 million during April 2000,
respectively. The Company's current ownership after these transactions is
60.3%. The Company will continue to record its investment in The Golf
Channel under the equity method due to certain veto rights that are held by
one of the remaining minority partners.
As a result of the Lenfest Acquisition (see Note 3), the Company has
consolidated the results of Garden State Cable, previously accounted for
under the equity method, effective January 2000.
Sales of Other Investments
During the six months ended June 30, 2000 and 1999 and during the three
months ended June 30, 2000 and 1999, the Company recognized pre-tax gains
to investment income of $237.4 million, $14.9 million, $6.9 million and
$14.6 million, respectively, on sales of certain of its other investments.
5. LONG-TERM DEBT
ZONES
During the fourth quarter of 1999, the Company issued an aggregate of
approximately 48.3 million (as adjusted for Sprint PCS' 2-for-1 stock split
in February 2000) 2.0% Exchangeable Subordinated Debentures due 2029 (the
"ZONES") for aggregate gross proceeds of $1.807 billion. At maturity,
holders of the ZONES are entitled to receive in cash an amount equal to the
higher of (a) the principal amount of the ZONES, or (b) the market value of
Sprint PCS Stock. Prior to maturity, each ZONES is exchangeable at the
holders option for an amount of cash equal to 95% of the market value of
Sprint PCS Stock.
11
<PAGE>
COMCAST CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED JUNE 30, 2000
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)
The ZONES are being accounted for as an indexed debt instrument since the
maturity value is dependent upon the fair value of Sprint PCS Stock.
Therefore, the carrying value of the ZONES is marked to market each balance
sheet date to reflect the fair value of the underlying Sprint PCS Stock
with the change included in expense (income) related to indexed debt in the
Company's condensed consolidated statement of operations and accumulated
deficit. During the six and three months ended June 30, 2000, the Company
recorded expense (income) related to indexed debt of $398.0 million and
($289.5) million, respectively. The Company's investment in Sprint PCS is
accounted for as available for sale, with changes in fair value being
reflected in accumulated other comprehensive income (see Note 4).
Debt Assumed
In connection with the Lenfest Acquisition and the consolidation of Garden
State Cable (see Note 3), the Company assumed aggregate debt of $1.612
billion with interest rates ranging between 6.95% and 10.5%, and maturities
between 2001 and 2008.
Extraordinary Items
Extraordinary items during the six months ended June 30, 2000 and 1999 and
during the three months ended June 30, 2000 and 1999 of $16.2 million, $3.0
million, $11.1 million and $2.3 million, respectively, consist of
unamortized debt issue costs and debt extinguishment costs, net of related
tax benefits, expensed principally in connection with the redemption and
retirement of certain indebtedness.
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 6.71% and
6.55%, respectively. The Company's effective weighted average interest rate
excludes the effects of the ZONES mark to market adjustments for both dates
presented.
Lines of Credit
As of June 30, 2000, certain subsidiaries of the Company had unused lines
of credit of $1.281 billion, $681.4 million of which is restricted by the
covenants of the related debt agreements and to subsidiary general purposes
and dividend declaration.
6. STOCKHOLDERS' EQUITY
Repurchase Program
Based on the trade date for stock repurchases, during the six months ended
June 30, 2000 and 1999 and the three months ended June 30, 2000, the
Company repurchased approximately 6.0 million shares, 0.2 million shares
and 2.7 million shares, respectively, of its common stock for aggregate
consideration of $219.6 million, $11.5 million and $91.7 million,
respectively, pursuant to its Board-authorized repurchase program.
As part of the repurchase program, during the six months ended June 30,
2000, the Company sold put options on 2.0 million shares of its Class A
Special Common Stock. The put options mature on specific dates from
September through November 2000. The amount the Company would be obligated
to pay to repurchase such shares upon exercise of the put options, totaling
$82.0 million, was reclassified from additional capital to common equity
put options in the Company's June 30, 2000 condensed consolidated balance
sheet.
On August 4, 2000, the Company's Board of Directors authorized a
continuation of its stock repurchase program, pursuant to which the Company
may purchase, in the open market or in private transactions up to $500.0
million of its outstanding common equity securities.
12
<PAGE>
COMCAST CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED JUNE 30, 2000
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)
Share Exchange
During the six months ended June 30, 2000, the Company issued approximately
1.0 million shares of its Class A Special Common Stock in exchange for
approximately 1.1 million shares of its Class A Common Stock. The Class A
Common Stock was subsequently retired.
Comprehensive (Loss) Income
Total comprehensive (loss) income for the six months ended June 30, 2000
and 1999 and for the three months ended June 30, 2000 and 1999 was ($3.068)
billion, $2.573 billion, ($1.884) billion and $1.358 billion, respectively.
Total comprehensive (loss) income includes net income (loss), unrealized
gains (losses) on marketable securities and foreign currency translation
gains (losses) for the periods presented.
7. STATEMENT OF CASH FLOWS - SUPPLEMENTAL INFORMATION
During the six months ended June 30, 2000, the Company acquired all of the
capital stock and/or partnership interests not previously owned by the
Company of Lenfest, Garden State Cable, Jones Intercable and Comcast MHCP,
principally through the issuance of the Company's Class A Special Common
Stock (see Note 3). The fair values of the assets and liabilities acquired
by the Company during the six months ended June 30, 2000 are presented as
follows (in millions):
Current assets..................................... $268.7
Investments........................................ 147.6
Property, plant & equipment........................ 1,081.7
Deferred charges................................... 11,009.5
Current liabilities................................ (237.5)
Long-term debt..................................... (1,611.6)
Deferred incomes taxes............................. (2,854.3)
---------
Net assets acquired....................... $7,804.1
=========
The Company made cash payments for interest of $358.4 million, $255.2
million, $231.6 million and $198.8 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 income taxes of $596.9 million, $112.5
million, $140.9 million and $93.6 million during the six months ended June
30, 2000 and 1999 and during the three months ended June 30, 2000 and 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.
In connection with a license awarded to an affiliate, the Company is
contingently liable in the event of nonperformance by the affiliate to
reimburse a bank which has provided a performance guarantee. The amount of
the performance guarantee is approximately $500 million; however the
Company's current estimate of the amount of expenditures (principally in
the form of capital expenditures) that will be made by the affiliate
necessary to comply with the performance requirements will not exceed $150
million.
13
<PAGE>
COMCAST CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED JUNE 30, 2000
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)
9. FINANCIAL DATA BY BUSINESS SEGMENT
The following represents the Company's significant business segments,
"Cable" and "Commerce." The components of net income (loss) below operating
income (loss) are not separately evaluated by the Company's management on a
segment basis (see the Company's condensed consolidated statement of
operations and accumulated deficit) (dollars in millions).
<TABLE>
<CAPTION>
Cable Corporate and
Communications Commerce Other (1) Total
-------------- -------- --------- -----
<S> <C> <C> <C> <C>
Six Months Ended June 30, 2000
------------------------------
Revenues, net............................................... $1,998.3 $1,591.6 $261.1 $3,851.0
Operating income before depreciation and amortization (2)... 904.3 278.7 6.7 1,189.7
Depreciation and amortization............................... 1,072.1 59.0 49.0 1,180.1
Operating (loss) income..................................... (167.8) 219.7 (42.3) 9.6
Interest expense............................................ 243.0 18.0 70.8 331.8
Capital expenditures........................................ 491.3 77.9 38.8 608.0
Three Months Ended June 30, 2000
--------------------------------
Revenues, net............................................... $1,022.0 $770.6 $119.5 $1,912.1
Operating income before depreciation and amortization (2)... 467.5 134.0 1.3 602.8
Depreciation and amortization............................... 569.6 29.5 35.3 634.4
Operating (loss) income..................................... (102.1) 104.5 (34.0) (31.6)
Interest expense............................................ 118.9 9.0 35.3 163.2
Capital expenditures........................................ 262.8 43.2 12.9 318.9
As of June 30, 2000
-------------------
Assets...................................................... $22,528.5 $2,232.0 $10,571.2 $35,331.7
Long-term debt, less current portion........................ 6,039.4 421.7 3,757.5 10,218.6
Six Months Ended June 30, 1999
------------------------------
Revenues, net............................................... $1,353.7 $1,425.4 $216.8 $2,995.9
Operating income before depreciation and amortization (2)... 623.9 252.4 6.2 882.5
Depreciation and amortization............................... 454.7 57.6 33.8 546.1
Operating income (loss)..................................... 169.2 194.8 (27.6) 336.4
Interest expense............................................ 159.0 20.6 75.1 254.7
Capital expenditures........................................ 290.0 25.0 11.4 326.4
Three Months Ended June 30, 1999
--------------------------------
Revenues, net............................................... $748.9 $703.1 $97.2 $1,549.2
Operating income (loss) before depreciation and
amortization (2).......................................... 343.4 121.5 (7.6) 457.3
Depreciation and amortization............................... 260.5 29.2 17.8 307.5
Operating income (loss)..................................... 82.9 92.3 (25.4) 149.8
Interest expense............................................ 93.3 10.2 40.0 143.5
Capital expenditures........................................ 184.4 14.1 5.5 204.0
<FN>
---------------
(1) Other includes segments not meeting certain quantitative guidelines
for reporting. Other includes certain other operating businesses, such
as Comcast-Spectacor, L.P., E! Entertainment Television, Inc. and
elimination entries related to the segments presented. Corporate and
other assets consist primarily of the Company's investments (see Note
4).
(2) Operating income before depreciation and amortization is commonly
referred to in the Company's businesses as "operating cash flow."
Operating cash flow is a measure of a company's ability to generate
cash to service
14
<PAGE>
COMCAST CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED JUNE 30, 2000
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONCLUDED
(Unaudited)
its obligations, including debt service obligations, and to finance
capital and other expenditures. In part due to the capital intensive
nature of the Company's businesses 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
Company's industries, although the Company's 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 the
Company's management to measure the operating performance of its
businesses. 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.
</FN>
</TABLE>
15
<PAGE>
COMCAST CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED JUNE 30, 2000
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Overview
We have experienced significant growth in recent years both through
strategic acquisitions and growth in our existing businesses. We have
historically met our cash needs for operations through our cash flows from
operating activities. Cash requirements for acquisitions and capital
expenditures have been provided through our financing activities and sales of
investments, as well as our existing cash, cash equivalents and short-term
investments.
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. We assumed management control of the
operations of Prime Communications LLC in August 2000. Our previously announced
cable system exchanges with Adelphia Communications and AT&T Corp. are subject
to closing conditions and regulatory approvals and are expected to close in the
fourth quarter of 2000. Our results of operations may be significantly affected
by our ability to efficiently and effectively manage these changes.
General Developments of Business
See Note 3 to our condensed consolidated financial statements included in
Item 1.
Liquidity and Capital Resources
The cable communications and the electronic retailing industry are
experiencing increasing competition and rapid technological changes. Our future
results of operations will be affected by our ability to react to changes in the
competitive environment and by our ability to implement new technologies.
However, we believe that competition and technological changes will not
significantly affect our ability to obtain financing.
We believe that we will be able to meet our current and long-term liquidity
and capital requirements, including fixed charges, principally through our cash
flows from operating activities, existing cash, cash equivalents and
investments.
See Note 8 to our condensed consolidated financial statements included in
Item 1.
Cash, Cash Equivalents and Short-term Investments
We have traditionally maintained significant levels of cash, cash
equivalents and short-term investments to meet our short-term liquidity
requirements. Our cash equivalents and short-term investments are recorded at
fair value. Cash, cash equivalents and short-term investments as of June 30,
2000 were $3.627 billion, substantially all of which is unrestricted.
Investments
See Note 4 to our condensed consolidated financial statements included in
Item 1. A significant portion of our investments are in publicly traded
companies and are reflected at fair value which fluctuates with market changes.
We do not have any significant contractual funding commitments with respect
to any of our investments. However, to the extent we do not fund our investees'
non-binding capital calls, we are subject to dilution of our ownership
interests. We continually evaluate our existing investments, as well as new
investment opportunities.
Financing
See Notes 5 and 6 to our condensed consolidated financial statements
included in Item 1.
As of June 30, 2000 and December 31, 1999, our long-term debt, including
current portion, was $10.365 billion and $9.225 billion, respectively. Excluding
the effects of interest rate risk management instruments, 23.5% and 25.4% of our
long-term debt as of June 30, 2000 and December 31, 1999, respectively, was at
variable rates.
The $1.140 billion increase in our long-term debt, including current
portion, results principally from the $1.326 billion of Lenfest Communications,
Inc. ("Lenfest") debt that we assumed and the $286.0 million of Comcast
Cablevision of Garden State, L.P. ("Garden State Cable") (formerly Garden State
Cablevision L.P.) debt that we consolidated in connection with the acquisition
of Lenfest in January 2000 (see Notes 3 and 5 to our condensed consolidated
financial statements included in Item 1), the $398.0 million non-cash, non-
interest bearing adjustment to the carrying value of the Company's 2.0%
Exchangeable Subordinated Debentures due 2029 (the "ZONES") during the six
months ended June 30, 2000 (see Note 5 to our condensed consolidated
16
<PAGE>
COMCAST CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED JUNE 30, 2000
financial statements included in Item 1) and $188.8 million of borrowings,
offset in part by retirements and repayments of our long-term debt of $1.078
billion during the six months ended June 30, 2000.
We have and may from time to time in the future, depending on certain
factors including market conditions, make optional repayments on our debt
obligations, which may include open market repurchases of our outstanding public
notes and debentures.
Equity Price Risk
At maturity, holders of the ZONES are entitled to receive in cash an amount
equal to the higher of (a) the principal amount of the ZONES, or (b) the market
value of Sprint PCS stock. The ZONES are being accounted for as an indexed debt
instrument since the maturity value is dependent upon the fair value of Sprint
PCS stock.
During 1999, we entered into cashless collar agreements (the "Equity
Collars") covering $1.365 billion notional amount of investment securities
accounted for at fair value. The Equity Collars limit our exposure to and
benefits from price fluctuations in the underlying equity securities. The Equity
Collars mature between 2001 and 2003. As we account for the Equity Collars as a
hedge, changes in the value of the Equity Collars are substantially offset by
changes in the value of the underlying investment securities which are also
marked to market through accumulated other comprehensive income in our condensed
consolidated balance sheet.
Interest Rate Risk
During the six months ended June 30, 2000, in connection with our
acquisition of Lenfest (see Note 3 to our condensed consolidated financial
statements included in Item 1), we acquired interest rate exchange agreements
("Swaps") with an aggregate notional amount of $275.0 million. Swaps with an
aggregate notional amount of $840.0 million either were terminated or expired
during the six months ended June 30, 2000. As of June 30, 2000, we have Swaps
with an aggregate notional amount of $1.187 billion having an average pay rate
of 6.93% and an average receive rate of 7.31%.
-----------------------
Statement of Cash Flows
Cash and cash equivalents decreased $269.9 million as of June 30, 2000 from
December 31, 1999. The decrease in cash and cash equivalents resulted from cash
flows from operating, financing and investing activities which are explained
below.
Net cash provided by operating activities from continuing operations
amounted to $173.7 million for the six months ended June 30, 2000, due
principally to the effects of our acquisition of Lenfest in January 2000 (see
Note 3 to our condensed consolidated financial statements included in Item 1)
and increases in our operating income before depreciation and amortization (see
"Results of Operations"), offset by changes in working capital as a result of
the timing of receipts and disbursements.
Net cash used in financing activities from continuing operations, which
includes borrowings and repayments of debt, as well as the issuances and
repurchases of our equity securities, was $1.088 billion for the six months
ended June 30, 2000. During the six months ended June 30, 2000, we borrowed
$188.8 million, consisting primarily of borrowings under revolving lines of
credit held by our subsidiaries. During the six months ended June 30, 2000 we
repaid $1.078 billion of our long-term debt, consisting primarily of $572.0
million of repayments on certain of our revolving credit facilities and $471.0
million of aggregate repurchases of various of our senior notes and of our
senior subordinated debentures. In addition, during the six months ended June
30, 2000, we had proceeds of $21.5 million related to issuances of our common
stock and the sale of put options on our common stock and repurchased $219.6
million of our common stock.
Net cash provided by investing activities from continuing operations was
$644.0 million for the six months ended June 30, 2000. Net cash provided by
investing activities includes net proceeds from sales of short-term investments
of $867.4 million and proceeds from sales of investments of $983.8 million,
offset by the effects of acquisitions, net of cash acquired, of $83.8 million,
consisting of our acquisition of certain cable communications systems,
investments of $348.7 million, capital expenditures of $608.0 million and
additions to deferred charges of $166.7 million.
17
<PAGE>
COMCAST CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED JUNE 30, 2000
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>
Revenues..................................................... $3,851.0 $2,995.9 $855.1 28.5%
Cost of goods sold from electronic retailing................. 1,015.2 912.6 102.6 11.2
Operating, selling, general and administrative expenses...... 1,646.1 1,200.8 445.3 37.1
--------- --------- ---------
Operating income before depreciation and amortization (1).... 1,189.7 882.5 307.2 34.8
Depreciation................................................. 376.7 254.0 122.7 48.3
Amortization................................................. 803.4 292.1 511.3 NM
--------- ---------
Operating income............................................. 9.6 336.4 (326.8) (97.1)
--------- ---------
Interest expense............................................. 331.8 254.7 77.1 30.3
Investment income............................................ (959.4) (128.0) 831.4 NM
Expense related to indexed debt.............................. 398.0 398.0 NM
Equity in net losses of affiliates........................... 4.0 1.6 2.4 NM
Other expense (income)....................................... 8.6 (1,430.9) (1,439.5) NM
Income tax expense........................................... 153.3 723.7 (570.4) (78.8)
Minority interest............................................ 60.9 (12.8) (73.7) NM
--------- ---------
Income from continuing operations before
extraordinary items....................................... $12.4 $928.1 ($915.7) (98.7%)
========= =========
<CAPTION>
Three Months Ended
June 30, Increase / (Decrease)
2000 1999 $ %
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Revenues..................................................... $1,912.1 $1,549.2 $362.9 23.4%
Cost of goods sold from electronic retailing................. 488.2 449.4 38.8 8.6
Operating, selling, general and administrative expenses...... 821.1 642.5 178.6 27.8
--------- --------- ---------
Operating income before depreciation and amortization (1).... 602.8 457.3 145.5 31.8
Depreciation................................................. 204.8 137.3 67.5 49.2
Amortization................................................. 429.6 170.2 259.4 NM
--------- ---------
Operating (loss) income...................................... (31.6) 149.8 (181.4) NM
--------- ---------
Interest expense............................................. 163.2 143.5 19.7 13.7
Investment income............................................ (314.8) (0.2) 314.6 NM
Income related to indexed debt............................... (289.5) 289.5 NM
Equity in net losses of affiliates........................... 1.1 2.7 (1.6) (59.3)
Other income................................................. (2.2) (1,430.7) (1,428.5) (99.8)
Income tax expense........................................... 185.1 636.3 (451.2) (70.9)
Minority interest............................................ 26.7 (28.1) (54.8) NM
--------- ---------
Income from continuing operations before
extraordinary items....................................... $198.8 $826.3 ($627.5) (75.9%)
========= =========
<FN>
------------
(1) Operating income before depreciation and amortization is commonly referred
to in our businesses 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 our businesses
and the resulting significant level of non-cash depreciation expense and
amortization expense, operating cash flow is frequently used as one of the
bases for comparing businesses in our industries, 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
18
<PAGE>
COMCAST CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED JUNE 30, 2000
of our businesses. 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. See "Statement of Cash Flows" above for a discussion of net
cash provided by operating activities.
</FN>
</TABLE>
Operating Results by Business Segment
The following represent the operating results of our significant business
segments, "Cable Communications" and "Commerce." The remaining components of our
operations are not independently significant to our consolidated financial
position or results of operations (see Note 9 to our condensed consolidated
financial statements included in Item 1).
Cable Communications
The following table presents the operating results of our cable
communications segment (dollars in millions):
<TABLE>
<CAPTION>
Six Months Ended
June 30, Increase
2000 1999 $ %
--------- --------- --------- --------
<S> <C> <C> <C> <C>
Service income............................................... $1,998.3 $1,353.7 $644.6 47.6%
Operating, selling, general and administrative expenses...... 1,094.0 729.8 364.2 49.9
--------- --------- --------- --------
Operating income before depreciation
and amortization (a).................................... $904.3 $623.9 $280.4 44.9%
========= ========= ========= ========
<CAPTION>
Three Months Ended
June 30, Increase
2000 1999 $ %
--------- --------- --------- --------
<S> <C> <C> <C> <C>
Service income............................................... $1,022.0 $748.9 $273.1 36.5%
Operating, selling, general and administrative expenses...... 554.5 405.5 149.0 36.7
--------- --------- --------- --------
Operating income before depreciation
and amortization (a).................................... $467.5 $343.4 $124.1 36.1%
========= ========= ========= ========
<FN>
---------------
(a) See footnote (1) on page 18.
</FN>
</TABLE>
Of the respective $644.6 million and $273.1 million increases in service
income for the six and three month periods from 1999 to 2000, $532.2 million and
$212.7 million are due to the effects of our acquisitions of cable
communications systems and $112.4 million and $60.4 million are due to growth in
our historical operations. Of the respective $112.4 million and $60.4 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 $4.5 million and $2.6 million are related to
increases in other service offerings.
Of the respective $364.2 million and $149.0 million increases in operating,
selling, general, and administrative expenses for the six and three month
periods from 1999 to 2000, $277.6 million and $96.1 million are due to the
effects of our acquisitions of cable communications systems and $86.6 million
and $52.9 million are due to growth in our historical operations. Of the $86.6
million and $52.9 million increases related to our historical operations, $31.4
million and $17.1 million are due to increases in the costs of cable programming
as a result of changes in rates, subscriber growth and additional channel
offerings, $24.0 million and $10.8 million are due principally to subscriber
growth in cable modem Internet access service, $32.3 million and $23.4 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.
19
<PAGE>
COMCAST CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED JUNE 30, 2000
Commerce
The following presents the operating results of our commerce segment,
consisting of the operations of QVC, Inc. and its subsidiaries ("QVC"), a
majority owned and controlled subsidiary (dollars in millions).
<TABLE>
<CAPTION>
Six Months Ended
June 30, Increase
2000 1999 $ %
--------- --------- --------- --------
<S> <C> <C> <C> <C>
Net sales from electronic retailing.......................... $1,591.6 $1,425.4 $166.2 11.7%
Cost of goods sold from electronic retailing................. 1,015.2 912.6 102.6 11.2
Operating, selling, general and administrative
expenses................................................ 297.7 260.4 37.3 14.3
--------- --------- --------- --------
Operating income before depreciation
and amortization (a).................................... $278.7 $252.4 $26.3 10.4%
========= ========= ========= ========
Gross margin................................................. 36.2% 36.0%
========= =========
<CAPTION>
Three Months Ended
June 30, Increase
2000 1999 $ %
--------- --------- --------- --------
<S> <C> <C> <C> <C>
Net sales from electronic retailing.......................... $770.6 $703.1 $67.5 9.6%
Cost of goods sold from electronic retailing................. 488.2 449.4 38.8 8.6
Operating, selling, general and administrative
expenses................................................ 148.4 132.2 16.2 12.3
--------- --------- --------- --------
Operating income before depreciation
and amortization (a).................................... $134.0 $121.5 $12.5 10.3%
========= ========= ========= ========
Gross margin................................................. 36.6% 36.1%
========= =========
<FN>
---------------
(a) See footnote (1) on page 18.
</FN>
</TABLE>
The increase in net sales from electronic retailing of $166.2 million for
the six month period from 1999 to 2000 is due to following: an increase of 4.2%,
10.5% and 41.3% in the average number of homes receiving QVC services in the
United States ("US"), United Kingdom ("UK") and Germany, respectively; an
increase of 4.7% and 18.0% in net sales per home in the US and Germany (in
Deutschemarks), respectively, and a 7.0% decrease in net sales per home in the
UK (in British pounds); and the negative effects of fluctuations in foreign
currency exchange rates during the period.
The increase in net sales from electronic retailing of $67.5 million for
the three month period from 1999 to 2000 is due to the following: an increase of
4.8%, 9.2% and 45.2% in the average number of homes receiving QVC services in
the US, UK and Germany, respectively; an increase of 2.8% and 5.5% in net sales
per home in the US and Germany (in Deutschemarks), and a 7.7% decrease in net
sales per home in the UK (in British pounds), respectively; and the negative
effects of fluctuations in foreign currency exchange rates during the period.
The increase in cost of goods sold is primarily related to the growth
in net sales. The changes in gross margin are a result of a shift in sales mix.
In connection with new accounting guidance issued in May and July 2000
(see discussion of EITF 00-10 at Note 2 to our condensed consolidated financial
statements included in Item 1), QVC reclassified shipping and handling revenue
from cost of goods sold from electronic retailing to net sales from electronic
retailing for all periods presented. This reclassification had no effect on
QVC's reported operating income before depreciation and amortization and no
significant effect on growth in net sales from electronic retailing. The effect
of the reclassification was to increase QVC's net sales from electronic
retailing by approximately 11% and to decrease gross margin by approximately
four percentage points, respectively, for all periods presented as compared to
the amounts previously reported.
20
<PAGE>
COMCAST CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED JUNE 30, 2000
Of the respective $37.3 million and $16.2 million increases in operating,
selling, general and administrative expenses for the six and three month periods
from 1999 to 2000, $16.8 million and $5.9 million are attributable to higher
variable costs associated with the increase in sales volume, and $3.1 million
and $3.1 million are attributable to certain lease termination costs incurred in
the UK during the second quarter of 2000. The remaining increases are primarily
attributable to higher personnel costs to support the increased sales volume in
the US and Germany.
-----------------------
Consolidated Analysis
The effects of our recent acquisitions were to increase our revenues and
expenses resulting in increases in our operating income before depreciation and
amortization. The increases in depreciation expense, amortization expense and
interest expense for the six and three month periods from 1999 to 2000 are
primarily due to the effects of our acquisition of Lenfest in January 2000, our
acquisition of a controlling interest in Jones Intercable, Inc. ("Jones
Intercable") in April 1999, as well as our increased levels of capital
expenditures.
Interest Expense
The $77.1 million and $19.7 million increases in interest expense for the
six and three month periods from 1999 to 2000 are primarily due to the effects
of our acquisition of Lenfest in January 2000, our acquisition of a controlling
interest in Jones Intercable in April 1999 and the issuance of the ZONES in
October and November 1999, offset, in part, by the effects of our repayments and
retirement of debt.
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.
Investment Income
During the six months ended June 30, 2000 and 1999 and during the three
months ended June 30, 2000 and 1999, we recognized pre-tax gains of $828.6
million, $14.9 million, $272.2 million and $14.6 million, respectively, on sales
of certain of our investments.
During the six months ended June 30, 2000 and 1999, in connection with
certain mergers of publicly traded companies held by us and accounted for as
investments available for sale, we recognized pre-tax gains of $33.0 million and
$187.6 million, respectively, representing the difference between the fair value
of the securities received by us and our basis in the securities exchanged. Such
gains were recorded as reclassifications from accumulated other comprehensive
income to investment income.
During the six and three months ended June 30, 1999, we recorded investment
expense of $100.8 million and $49.4 million related to changes in the value of
and the settlement of call options on certain of our unrestricted equity
investments, all of which expired by November 1999.
During the six months ended June 30, 2000 and 1999 and during the three
months ended June 30, 2000 and 1999, we recorded pre-tax losses of $7.4 million,
$35.5 million, $2.5 million and $0.2 million on certain of our investments based
on a decline in value that was considered other than temporary.
Expense (Income) Related to Indexed Debt
The ZONES are being accounted for as an indexed debt instrument since the
maturity value is dependent upon the fair value of Sprint PCS stock. During the
six and three months ended June 30, 2000, we recorded expense (income) related
to indexed debt of $398.0 million and ($289.5) million to reflect the fair value
of the underlying Sprint PCS stock.
Other Expense (Income)
The $1.440 billion and $1.429 billion decreases in other income for the six
and three month periods from 1999 to 2000 are primarily attributable to the
receipt of the $1.5 billion termination fee from MediaOne Group, Inc.
("MediaOne"), net of transaction costs, in May 1999 as a result of MediaOne's
termination of its Agreement and Plan of Merger with us dated March 1999.
21
<PAGE>
COMCAST CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED JUNE 30, 2000
Income Tax Expense
The changes in income tax expense for the six and three month periods from
1999 to 2000 are primarily the result of the effects of changes in our income
before taxes and minority interest, and non-deductible goodwill amortization.
Minority Interest
The $73.7 million and $54.8 million changes in minority interest for the
six and three month periods from 1999 to 2000 are attributable to the effects of
our acquisition of a controlling interest in Jones Intercable in April 1999, our
acquisition of the California Public Employees Retirement System's 45% interest
in Comcast MHCP Holdings L.L.C. in February 2000 and to changes in the net
income or loss of our other less than 100% owned consolidated subsidiaries.
Extraordinary Items
During the six months ended June 30, 2000 and 1999 and during the three
months ended June 30, 2000 and 1999, we incurred debt extinguishment costs and
wrote off unamortized debt issue costs principally in connection with the
redemption and retirement of certain indebtedness, resulting in extraordinary
losses, net of tax of $16.2 million, $3.0 million, $11.1 million and $2.3
million, respectively.
We believe that our operations are not materially affected by inflation.
22
<PAGE>
COMCAST CORPORATION 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.
In March 2000, Excite@Home and its principal cable partners, including the
Company, entered into an agreement (the "March Agreement") pursuant to
which the Company agreed to enter into a new non-exclusive distribution
agreement with Excite@Home for the period from June 2002 through June 2006,
give up its Board level veto rights and resign from the Excite@Home Board
of Directors. Also under the March Agreement, the Company may elect to
terminate the existing exclusive distribution agreement (which would
otherwise expire in June 2002) or the new distribution agreement at any
time beginning June 2001 on at least six months notice. Under the terms of
the March Agreement, AT&T agreed to give the Company the right to sell its
Excite@Home Series A shares to AT&T at any time between January 1, 2001 and
June 4, 2002 at a price equal to the higher of $48 per share or the average
per share trading price for a 30-day trading period (as defined). The
aggregate value of the Excite@Home Series A shares that AT&T would be
required to purchase from the Company is limited to $1.5 billion.
In addition, the existing Excite@Home warrants held by the Company would be
amended to eliminate any performance vesting conditions and the Company
would receive new warrants with an exercise price of $29.54 per share to
purchase two shares of Excite@Home Series A Stock for each home passed by
the Company's cable communications systems. The new warrants would vest in
installments every six months beginning in June 2001 and would be fully
vested in June 2006 provided that the Company has not elected to earlier
terminate its existing or the new distribution agreement. The new warrants
would include customary registration rights and would expire in March 2015.
All necessary stockholder and other approvals required to close under the
March Agreement have been received. However, in June 2000 Cablevision
Systems Corporation ("Cablevision"), a warrant holder in Excite@Home and
also a party to various agreements with Excite@Home and its principal cable
partners, brought an action in Delaware Chancery Court against Excite@Home
and its principal cable partners seeking to enjoin the closing and alleging
that the March Agreement breached certain contractual rights of
Cablevision. The parties have agreed not to consummate the transactions
contemplated by the March Agreement until the conclusion of a trial on the
merits of the Cablevision action, which is scheduled to begin on September
11, 2000. Although the Company believes that the defendants have valid
defenses and counterclaims to Cablevision's action, there can be no
assurance that the defendants will prevail in this litigation and that the
closing under the March Agreement will occur.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At the Annual Meeting on June 22, 2000, the shareholders approved the
following proposals:
To elect nine directors to serve for the ensuing year and until their
respective successors shall have been duly elected and qualified.
<TABLE>
<CAPTION>
Director Class of Stock For Withheld
-------- -------------- --- --------
<S> <C> <C> <C>
Ralph J. Roberts Class A 19,571,763 105,364
Class B 141,665,625
Julian A. Brodsky Class A 18,866,986 810,141
Class B 141,665,625
Brian L. Roberts Class A 19,573,238 103,889
Class B 141,665,625
23
<PAGE>
COMCAST CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED JUNE 30, 2000
<CAPTION>
Director Class of Stock For Withheld
-------- -------------- --- --------
<S> <C> <C> <C>
Gustave G. Amsterdam Class A 19,561,541 115,586
Class B 141,665,625
Sheldon M. Bonovitz Class A 18,160,334 1,516,793
Class B 141,665,625
Joseph L. Castle II Class A 19,575,338 101,789
Class B 141,665,625
Bernard C. Watson Class A 19,571,068 106,059
Class B 141,665,625
Irving A. Wechsler Class A 19,566,241 110,886
Class B 141,665,625
Anne Wexler Class A 19,567,968 109,159
Class B 141,665,625
</TABLE>
To approve an amendment to the Comcast Corporation 1996 Stock Option Plan.
<TABLE>
<CAPTION>
Class of Stock For Against Abstain
-------------- --- ------- -------
<S> <C> <C> <C>
Class A 16,249,759 3,294,512 132,856
Class B 141,665,625
</TABLE>
To ratify the appointment of Deloitte & Touche LLP as the Company's
independent auditors for the 2000 fiscal year.
<TABLE>
<CAPTION>
Class of Stock For Against Abstain
-------------- --- ------- -------
<S> <C> <C> <C>
Class A 19,595,626 50,610 30,891
Class B 141,665,625
</TABLE>
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:
(i) We filed a Current Report on Form 8-K/A under Item 2 on April 3,
2000 which included our Unaudited Pro Forma Condensed
Consolidated Financial Statements giving effect to the
acquisition of Lenfest Communications, Inc. as of December 31,
1999 and for the year then ended.
24
<PAGE>
COMCAST CORPORATION 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 CORPORATION
/s/ LAWRENCE J. SALVA
------------------------------
Lawrence J. Salva
Senior Vice President
(Principal Accounting Officer)
Date: August 11, 2000
25
