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FORM 10-K
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED
DECEMBER 31, 1999
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
[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 Identification No.)
incorporation or organization)
1500 Market Street, Philadelphia, PA 19102-2148
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (215) 665-1700
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SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
NONE
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SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
Class A Common Stock, $1.00 par value
Class A Special Common Stock, $1.00 par value
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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 12 months (or for such shorter period that the Registrant was
required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days.
Yes [X] No [ ]
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Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendments to
this Form 10-K. [ ]
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As of December 31, 1999, the aggregate market value of the Class A Common Stock
and Class A Special Common Stock held by non-affiliates of the Registrant was
$1.195 billion and $35.620 billion, respectively.
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As of December 31, 1999, there were 716,442,482 shares of Class A Special Common
Stock, 25,993,380 shares of Class A Common Stock and 9,444,375 shares of Class B
Common Stock outstanding.
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DOCUMENTS INCORPORATED BY REFERENCE
Part III - The Registrant's definitive Proxy Statement for its Annual Meeting of
Shareholders presently scheduled to be held in June 2000.
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<PAGE>
COMCAST CORPORATION
1999 FORM 10-K ANNUAL REPORT
TABLE OF CONTENTS
PART I
Item 1 Business..............................................................1
Item 2 Properties...........................................................16
Item 3 Legal Proceedings....................................................16
Item 4 Submission of Matters to a Vote of Security Holders..................16
Item 4A Executive Officers of the Registrant.................................16
PART II
Item 5 Market for the Registrant's Common Equity and
Related Stockholder Matters........................................18
Item 6 Selected Financial Data..............................................19
Item 7 Management's Discussion and Analysis of Financial Condition
and Results of Operations..........................................21
Item 8 Financial Statements and Supplementary Data..........................30
Item 9 Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure...........................................63
PART III
Item 10 Directors and Executive Officers of the Registrant...................63
Item 11 Executive Compensation...............................................63
Item 12 Security Ownership of Certain Beneficial Owners and Management.......63
Item 13 Certain Relationships and Related Transactions.......................63
PART IV
Item 14 Exhibits, Financial Statement Schedules and Reports on Form 8-K......64
SIGNATURES...................................................................68
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This Annual Report on Form 10-K is for the year ending December 31, 1999.
This Annual Report modifies and supersedes documents filed prior to this Annual
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 Annual Report. In addition, information that we
file with the SEC in the future will automatically update and supersede
information contained in this Annual Report. In this Annual Report, "Comcast,"
"we," "us" and "our" refer to Comcast Corporation and its subsidiaries.
You should carefully review the information contained in this Annual
Report, but should particularly consider any risk factors that we set forth in
this Annual Report and in other reports or documents that we file from time to
time with the SEC. In this Annual 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>
PART I
ITEM 1 BUSINESS
We are principally involved in three lines of business:
o Cable-through the development, management and operation of broadband
communications networks,
o Commerce-through QVC, our electronic retail- ing subsidiary, and
o Content-through our consolidated subsidiaries Comcast-Spectacor,
Comcast SportsNet and E! Entertainment Television, and through our
other programming investments, including The Golf Channel,
Speedvision and Outdoor Life.
We are currently the third largest cable operator in the United States and
are in the process of deploying digital video applications and high-speed
Internet access service to expand the products available on our cable
communications networks.
Our consolidated cable operations served 5.7 million subscribers and
passed 9.5 million homes in the United States as of December 31, 1999. In
January 2000, we acquired Lenfest Communications, Inc., a cable communications
company serving 1.3 million subscribers. We have entered into a series of
transactions whereby we will acquire, subject to receipt of necessary regulatory
and other approvals, 1.2 million cable subscribers over the next twelve months.
Upon completion of these pending transactions, we will serve 8.2 million
subscribers.
Through QVC, we market a wide variety of products directly to consumers
primarily on merchandise-focused television programs. As of December 31, 1999,
QVC was available, on a full and part-time basis, to over 72 million homes in
the United States, over 8 million homes in the United Kingdom and Ireland and
over 17 million homes in Germany.
We are a Pennsylvania corporation that was organized in 1969. We have our
principal executive offices at 1500 Market Street, Philadelphia, PA 19102-2148.
Our telephone number is (215) 665-1700. We also have a world wide web site at
http://www.comcast.com. The information posted on our web site is not
incorporated into this Annual Report.
FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS
You should see Note 10 to our consolidated financial statements in Item 8
of this Annual Report for information about our operations by industry segment.
GENERAL DEVELOPMENTS OF OUR BUSINESS
We entered into a number of significant transactions in 1999 which have or
are expected to close in 2000. We have summarized these transactions below and
have more fully described them in Note 3 to our consolidated financial
statements in Item 8 of this Annual Report.
Pending Transactions as of December 31, 1999
Acquisition of Lenfest Communications, Inc.
In January 2000, we acquired Lenfest Communications, Inc., a cable
communications company serving 1.3 million subscribers primarily in the
Philadelphia area from AT&T Corp. and the Lenfest stockholders for 121.4 million
shares of our Class A Special Common Stock with a value of $6.077 billion. In
connection with the acquisition, we assumed $1.777 billion of debt.
Acquisition of CalPERS' Interest in Jointly Owned Cable Properties
In February 2000, we acquired the California Public Employees Retirement
System's 45% interest in Comcast MHCP Holdings, L.L.C., a 55% owned consolidated
subsidiary of ours which serves 642,000 cable subscribers in Michigan, New
Jersey and Florida pursuant to an agreement entered into in December 1999. In
February 2000, the acquisition closed and, as a result, we now own 100% of
Comcast MHCP. The consideration was $750.0 million in cash.
Jones Intercable Agreement
In April 1999, we acquired a controlling interest in Jones Intercable,
Inc., a cable communications company serving 1.1 million subscribers, through
our purchase of 12.8 million shares of Jones Intercable Class A Common Stock and
2.9 million shares of Jones Intercable Common Stock for $706.3 million in cash.
In connection with the acquisition, we assumed $1.499 billion of Jones
Intercable debt. In June 1999, we acquired an additional 1.0 million shares of
Jones Intercable Class A Common Stock for $50.0 million in cash through a
private transaction. We have consolidated the operating results of Jones
Intercable since April 1999.
<PAGE>
In December 1999, we entered into a merger agreement with Jones Intercable
to acquire all of the remaining shares of Jones Intercable not currently owned
by us. Under the terms of the merger agreement, Jones Intercable shareholders
will receive 1.4 shares of our Class A Special Common Stock for each share of
Jones Intercable Class A Common Stock and Common Stock. As a result of the
merger, we will own 100% of Jones Intercable. We expect that the merger, which
is subject to shareholder approval, will close in the first quarter of 2000.
Time Warner Agreement
In November 1999, we entered into an agreement to exchange certain of our
cable communications systems with Time Warner Cable, a division of Time Warner
Entertainment Company, L.P. Under the terms of the agreement, we will receive
cable communications systems serving 120,000 subscribers. In exchange, Time
Warner will receive systems that we currently own serving 133,000 subscribers.
At closing, Time Warner will pay us an equalizing payment of $31.2 million,
reflecting the agreed upon difference in fair value of the Time Warner assets
and our assets to be exchanged, subject to adjustment. The transaction is
subject to customary closing conditions and regulatory approvals and is expected
to close in the second quarter of 2000.
Prime Communications Agreement
In December 1998, we agreed to invest in Prime Communications LLC, a cable
communications company serving 430,000 subscribers. Pursuant to the terms of
this agreement, in December 1998 we acquired from Prime a $50.0 million 12.75%
subordinated note due 2008 issued by Prime. In July 1999, we 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. In November 1999, we made an additional $20.0 million loan
to Prime (on the same terms as the original loan), and delivered a notice of our
intention to convert the 6% note. The note will be converted upon receipt of
customary closing conditions and regulatory approvals, which are expected to be
obtained in the second quarter of 2000. The owners of Prime have agreed that at
the time of conversion, they will sell their remaining 10% equity interest in
Prime to us for $82.0 million, plus accrued interest from July 1999 at 7% per
annum. As a result, we would then own 100% of Prime and assume management
control of Prime's operations. Upon closing, we will assume $550 million of
Prime's debt.
AT&T Agreement
In May 1999, we entered into an agreement with AT&T to exchange various
cable communications systems. Under the terms of the agreement, we will receive
cable communications systems serving 1.5 million subscribers. In exchange, AT&T
will receive systems that we currently own or will acquire serving 750,000
subscribers. At closing, we 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. We will
pay for the net subscribers acquired in connection with the exchanges with
shares of AT&T common stock that we currently own 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 us at the time of the agreement is $54.41 per
share.
Under the terms of the agreement, we also agreed to offer AT&T-branded
residential wireline telephony in our cable communications system markets,
provided AT&T has concluded separate residential telephony agreements with at
least two other non-AT&T affiliated multi-system cable operators. AT&T has
agreed to grant us the most favorable terms AT&T has reached with any of those
or other multi-system cable operators.
The majority of the system exchanges are contingent upon the completion of
AT&T's acquisition of MediaOne Group, Inc., which is expected to close in 2000,
subject to customary closing conditions and regulatory approvals.
Adelphia Agreement
In May 1999, we entered into an agreement to exchange certain cable
communications systems with Adelphia Communications. Under the terms of the
agreement, we will receive cable communications systems serving 464,000
subscribers from Adelphia. In exchange, Adelphia will receive cable
communications systems currently owned by us serving 440,000 subscribers. All of
the systems involved in the systems exchanges will be valued based upon
independent appraisals with any difference in relative value to be funded with
cash or additional cable communications systems. The transaction is subject to
customary closing conditions and regulatory approvals and is expected to close
in the third quarter of 2000.
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<PAGE>
Completed Transactions During 1999
MediaOne Group, Inc. Agreement
In March 1999, we entered into an Agreement and Plan of Merger with
MediaOne pursuant to which MediaOne was to be merged with us. Under the terms of
that agreement, MediaOne could terminate the agreement under certain conditions,
provided that it pay us a termination fee of $1.5 billion in cash. In April
1999, AT&T submitted an offer to purchase MediaOne. In May 1999, the MediaOne
board of directors notified us that it had determined that the AT&T offer was
superior to our offer. MediaOne then terminated the agreement and paid us the
termination fee.
Sale of Comcast Cellular Corporation
In July 1999, we sold Comcast Cellular Corporation to SBC Communications,
Inc. for $361.1 million in cash and the assumption of $1.315 billion of Comcast
Cellular debt. We recognized a gain on the sale of $355.9 million, net of income
tax expense.
DESCRIPTION OF OUR BUSINESSES
Cable Communications
Technology and Capital Improvements
Our cable communications networks receive signals by means of:
o special antennae,
o microwave relay systems,
o earth stations, and
o coaxial and fiber optic cables.
These networks distribute a variety of video, telecommunications and data
services to residential and commercial subscribers.
As of December 31, 1999, 81% of our cable subscribers were served by a
system with a capacity of at least 550-MHz and 60% of our cable subscribers were
served by a system with a capacity of at least 750-MHz. We are deploying fiber
optic cable and upgrading the technical quality of our cable communications
networks. As a result, the reliability and capacity of our systems have
increased, aiding in the delivery of additional video programming and other
services such as enhanced digital video, high-speed Internet access service and,
potentially, telephony.
We will incur significant capital expenditures in the future for the
upgrading and rebuilding of the cable communications systems to be acquired by
us as a result of our acquisition of Lenfest Communications, our pending
acquisition of Prime Communications and the pending system exchanges with AT&T,
Time Warner and Adelphia.
Franchises
Cable communications systems are constructed and operated under
non-exclusive franchises granted by state or local governmental authorities and
are subject to federal, state and local legislation and regulation. Franchises
typically contain many conditions which may include:
o rate and service conditions,
o construction schedules,
o types of programming and provision of services to schools and other
public institutions, and
o insurance and indemnity bond requirements.
Our franchises typically provide for periodic payment of fees to
franchising authorities of up to 5% of "revenues" (as defined by each franchise
agreement). We normally pass those fees on to subscribers. In many cases, we
need the consent of the franchising authority to transfer our franchises. The
franchises are granted for varying lengths of time.
Although franchises historically have been renewed, renewals may include
less favorable terms and conditions. Under existing law, franchises should
continue to be renewed for companies that have provided adequate service and
have complied generally with franchise terms. The franchising authority may
choose to award additional franchises to competing companies at any time. As of
January 31, 2000, we have 1,465 franchises in the United States, including 381
franchises acquired from Lenfest Communications.
Revenue Sources
We receive the majority of our revenues from subscription services.
Subscribers typically pay us on a monthly basis and generally may discontinue
services at any time. Monthly subscription rates and related charges vary
according to the type of service selected and the type of equipment used by
subscribers. Packages of programming services offered to subscribers may consist
of:
o national television networks,
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<PAGE>
o local and distant independent, specialty and educational television
stations,
o satellite-delivered programming,
o locally originated programs,
o audio programming, and
o electronic retailing programs.
We also offer, for an additional monthly fee, premium services, such as:
o Home Box Office(R),
o Cinemax(R),
o Showtime(R),
o The Movie Channel(TM), and
o Encore(R).
These premium services generally offer, without commercial interruption,
feature motion pictures, live and taped sporting events, concerts and other
special features. The charge for premium services depends upon the type and
level of service selected by the subscriber.
We also generate revenues from advertising sales, pay-per-view services,
installation services, commissions from electronic retailing and other services.
We generate revenues from the sale of advertising time to local, regional and
national advertisers on non-broadcast channels. Pay-per-view services permit a
subscriber to order, for a separate fee, individual feature motion pictures and
special event programs, such as professional boxing, professional wrestling and
concerts.
During 1999, we made our digital cable service available to over 80% of
our subscribers. As of December 31, 1999, more than 515,000 subscribers were
receiving our digital cable service for an additional monthly fee. Digital cable
service allows us to use digital compression to substantially increase the
capacity of our cable communications systems, as well as to improve picture
quality.
We market Excite@Home's high-speed cable modem services as Comcast@Home in
areas served by certain of our cable communications systems. Residential
subscribers can connect their personal computers via cable modems to a
high-speed national network developed and managed by Excite@Home. Subscribers
can then access online information, including the Internet, at faster speeds
than that of conventional modems. Through Excite@Home, we also provide
businesses with Internet connectivity solutions and networked business
applications. Together with Excite@Home, we provide national and local content,
sell advertising to businesses and provide services to residential subscribers.
As of December 31, 1999, the Comcast@Home service was available to over 3.2
million homes in 14 markets and served 142,000 subscribers.
Our sales efforts are primarily directed toward increasing the number of
subscribers we serve and generating incremental revenues in our franchise areas.
We sell our cable communications services through:
o telemarketing,
o direct mail advertising,
o door-to-door selling, and
o local media advertising.
Programming
We generally pay either a monthly fee per subscriber per channel or a
percentage of certain revenues for programming. Our programming costs are
increased by:
o increases in the number of subscribers,
o expansion of the number of channels provided to customers, and
o increases in contract rates from programming suppliers.
We attempt to secure long-term programming contracts with volume discounts
and/or marketing support and incentives from programming suppliers. Our
programming contracts are generally for a fixed period of time and are subject
to negotiated renewal. We anticipate that future contract renewals will result
in programming costs that are higher than our costs today, particularly for
sports programming.
Customer Service
We manage most of our cable communications systems in geographic clusters.
Clustering improves our ability to sell advertising, enhances our ability to
efficiently introduce and market new products, and allows us to more efficiently
and effectively provide customer service and support. As part of our clustering
strategy, we have recently consolidated our local customer service operations
into large regional call centers. These regional call centers have
technologically advanced telephone systems that provide 24-hour per day, 7-day
per week call answering capability, telemarketing and other services. We have 10
call centers in operation as of December 31, 1999 which serve approximately 2.5
million subscribers. Subscribers in our remaining cable communications systems
receive customer service primarily through our local, system-based
representatives.
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<PAGE>
Our Cable Communications Systems
The table below summarizes certain subscriber information for our cable
communications systems as of December 31 (homes and subscribers in thousands):
<TABLE>
<CAPTION>
1999(8) 1998 1997 1996(8) 1995
----------- ------- --------- -------- -------
<S> <C> <C> <C> <C> <C>
Basic Cable
Homes Passed (1).................................................. 9,522 7,382 7,138 6,975 5,570
Subscribers (2)................................................... 5,720 4,511 4,366 4,280 3,407
Penetration (3)................................................... 60.1% 61.1% 61.2% 61.4% 61.2%
Digital Cable
"Digital Ready" Subscribers (4)................................... 4,637 1,570
Subscribers....................................................... 515 78
Penetration (5)................................................... 11.1% 5.0%
Comcast@Home
"Modem Ready" Homes Passed (6).................................... 3,259 1,804 866
Subscribers....................................................... 142 51 10
"Modem Ready" Penetration (7)..................................... 4.4% 2.8% 1.2%
<FN>
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(1) A home is "passed" if we can connect it to our distribution system without
further extending the transmission lines.
(2) A dwelling with one or more television sets connected to a system counts as
one basic cable subscriber.
(3) Basic cable penetration means the number of basic cable subscribers as a
percentage of basic cable homes passed.
(4) A subscriber is "digital ready" if the subscriber is in a market where we
have launched our digital cable service.
(5) Digital cable penetration means the number of digital cable subscribers as a
percentage of "digital ready" subscribers.
(6) A home passed is "modem ready" if we can connect it to our internet service
connection system without further extending the transmission lines.
(7) "Modem ready" penetration means the number of Comcast@Home customers as a
percentage of "modem ready" homes passed.
(8) In November 1996, we acquired the cable operations of The E.W. Scripps
Company. In April 1999, we acquired a controlling interest in Jones
Intercable, Inc.
</FN>
</TABLE>
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Competition
Our cable communications systems compete with a number of different
sources which provide news, information and entertainment programming to
consumers, including:
o local television broadcast stations that provide off-air programming
which can be received using a roof-top antenna and television set,
o program distributors that transmit satellite signals containing
video programming, data and other information to receiving dishes of
varying sizes located on the subscriber's premises,
o satellite master antenna television systems, commonly known as
SMATV, which generally serve condominiums, apartment and office
complexes and residential developments,
o multichannel, multipoint distribution service operators, commonly
known as MMDS or wireless cable operators, which use low-power
microwave frequencies to transmit video programming and other
information over-the-air to subscribers,
o other cable operators who build and operate cable systems in the
same communities that we serve, commonly known as overbuilders,
o interactive online computer services,
o newspapers, magazines and book stores,
o movie theaters,
o live concerts and sporting events, and
o home video products.
In order to compete effectively, we strive to provide, at a reasonable
price to subscribers:
o superior technical performance,
o superior customer service,
o a greater variety of video programming, and
o new products such as digital cable and cable modem Internet access
and potential products such as telephony.
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<PAGE>
Federal law allows local telephone companies to provide, directly to
subscribers, a wide variety of services that are competitive with our cable
communications services. Some local telephone companies:
o provide video services within and outside their telephone service
areas through a variety of methods, including cable networks,
satellite program distribution and wireless transmission facilities,
and/or
o have announced plans to construct and operate cable communications
systems in various states.
A local telephone company, Ameritech, has obtained cable franchises in
communities in Michigan that we also serve. It competes directly with us in
these areas by providing video and other cable communications services to
subscribers. New facilities-based competitors such as RCN Corporation and
Knology Holdings, Inc. are now offering cable and related communications
services in various areas where we hold franchises. We anticipate that
facilities-based competitors will develop in other franchise areas we serve.
Local telephone companies and other businesses construct and operate
communications facilities that provide access to the Internet and distribute
interactive computer-based services, data and other non-video services to homes
and businesses. These competitors are not required, in certain circumstances, to
comply with some of the material obligations imposed upon our cable
communications systems under our franchises. We are unable to predict the
likelihood of success of competing video or cable service ventures by local
telephone companies or other businesses. Nor can we predict the impact these
competitive ventures might have on our business and operations.
We operate each of our cable communications systems pursuant to a
non-exclusive franchise that is issued by the community's governing body such as
a city council, a county board of supervisors or a state regulatory agency.
Federal law prohibits franchising authorities from unreasonably denying requests
for additional franchises, and it permits franchising authorities to operate
cable systems. Companies that traditionally have not provided cable services and
that have substantial financial resources (such as public utilities that own
certain of the poles to which our cables are attached) may also obtain cable
franchises and may provide competing communications services.
In the past few years, Congress has enacted legislation and the Federal
Communications Commission, commonly known as the FCC, has adopted regulatory
policies intended to provide a more favorable operating environment for existing
and new technologies that provide, or have the potential to provide, substantial
competition to our cable communications systems. These technologies include
direct broadcast satellite service, commonly known as DBS, among others.
According to recent government and industry reports, conventional, medium and
high-power satellites currently provide video programming to over 13.1 million
individual households, condominiums, apartment and office complexes in the
United States. DBS providers with high-power satellites typically offer to their
subscribers more than 300 channels of programming, including program services
similar to those provided by cable communications systems.
DBS service can be received virtually anywhere in the continental United
States through the installation of a small roof top or side-mounted antenna. DBS
systems use video compression technology to increase channel capacity and
digital technology to improve the quality of the signals transmitted to their
subscribers. Our digital cable service is competitive with the programming,
channel capacity and the digital quality of signals delivered to subscribers by
DBS systems. We are and will continue to deploy digital cable service in the
communities that we serve.
Two major companies, DirecTV and Echostar, are currently offering
nationwide high-power DBS services. Recently enacted federal legislation
establishes, among other things, a permanent compulsory copyright license that
permits satellite carriers to retransmit local broadcast television signals to
subscribers who reside inside the local television station's market. These
companies have already begun transmitting local broadcast signals in certain
major televison markets and have announced their intention to expand this local
television broadcast retransmission service to other domestic markets. With this
legislation, satellite carriers become more competitive to cable communications
system operators like us because they are now able to offer programming which
more closely resembles what we offer. We are unable to predict the effects this
legislation and these competitive developments might have on our business and
operations.
Our cable communications systems also compete for subscribers with SMATV
systems. SMATV system operators typically are not subject to regulation like
local franchised cable communications system operators. SMATV systems offer
subscribers both improved reception of local television stations and many of the
same satellite-delivered programming services offered by franchised cable
communications systems. In addition, some SMATV operators are developing and/or
offering packages of telephony, data and video services to private residential
and commercial developments. SMATV system operators often enter into exclusive
service
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<PAGE>
agreements with building owners or homeowners' associations, although some
states have enacted laws to provide cable communications systems access to these
complexes. Courts have reviewed challenges to these laws and have reached
varying results. Our ability to compete for subscribers in residential and
commercial developments served by SMATV system operators is uncertain. However,
we are developing competitive packages of services (video, data and telephony)
to offer to these residential and commercial developments.
Cable communications systems also compete with MMDS or wireless cable
systems, which are authorized to operate in areas served by our cable
communications systems. The FCC recently amended its regulations to provide
flexibility to wireless system operators to employ digital technology in
delivering two-way communications services, including high-speed Internet
access. Federal law significantly limits certain local restrictions on the use
of roof-top, satellite and microwave antennae to receive satellite programming
and over-the-air broadcasting services.
Many of our cable communications systems are currently offering, or plan
to offer, interactive online computer services to subscribers. These systems
will compete with a number of other companies, many of whom have substantial
resources, such as:
o existing Internet service providers, commonly known as ISPs,
o local telephone companies, and
o long distance telephone companies.
Recently, a number of companies, including telephone companies and ISP's,
have asked local, state and federal governments to mandate that cable
communications systems operators provide capacity on their cable infrastructure
so that these companies and others may deliver Internet services directly to
customers over cable facilities. In response, several local jurisdictions
attempted to impose these capacity obligations on several cable communications
operators. Various cable communications companies, including us, have initiated
litigation challenging these municipal requirements. In addition, two antitrust
lawsuits have been filed in federal courts alleging that we and other cable
communications companies have improperly refused to allow our cable facilities
to be used by certain ISPs to serve their customers. Franchise renewals and
transfers could become more difficult depending upon the outcome of this issue.
In a 1999 report to Congress, the FCC declined to institute an administrative
proceeding to examine this issue. It is expected that the FCC, Congress, and
state and local regulatory authorities will continue to consider actions in this
area.
The deployment of Digital Subscriber Line technology, known as DSL, allows
Internet access to subscribers at data transmission speeds equal to or greater
than that of modems over conventional telephone lines. Numerous companies,
including telephone companies, have introduced DSL service and certain telephone
companies are seeking to provide high-speed broadband services, including
interactive online services, without regard to present service boundaries and
other regulatory restrictions. We are unable to predict the likelihood of
success of competing online services offered by our competitors or what impact
these competitive ventures may have on our business and operations.
We expect advances in communications technology, as well as changes in the
marketplace and the regulatory and legislative environment to occur in the
future. We refer you to page 10 of this Annual Report for a detailed discussion
of legislative and regulatory factors. Other new technologies and services may
develop and may compete with services that our cable communications systems
offer. Consequently, we are unable to predict the effect that ongoing or future
developments might have on our business and operations.
Commerce
QVC is a domestic and international electronic media general merchandise
retailer which produces and distributes merchandise-focused television programs,
via satellite, to affiliated video program distributors for retransmission to
subscribers. At QVC, program hosts describe and demonstrate the products and
viewers place orders directly with QVC. We own 57% of QVC.
Revenue Sources
QVC sells a variety of consumer products and accessories including
jewelry, housewares, electronics, apparel and accessories, collectibles, toys
and cosmetics. QVC purchases, or obtains on consignment, products from domestic
and foreign manufacturers and wholesalers, often on favorable terms based on the
volume of the transactions. QVC intends to continue introducing new products and
product lines. QVC does not depend upon any one particular supplier for any
significant portion of its inventory.
Viewers place orders to purchase QVC merchandise by calling a toll-free
telephone number. QVC uses automatic call distributing equipment to distribute
calls to its operators. The majority of all payments for purchases are made with
a major credit card or QVC's private label credit card. QVC's private label
credit card program is serviced by an unrelated third party. QVC ships
merchandise promptly from its distribution centers, typically within 24 hours
after receipt of an order. QVC's
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return policy permits customers to return, within 30 days, any merchandise
purchased for a full refund of the purchase price and original shipping charges.
Distribution Channels
In the United States, QVC is transmitted live 24 hours a day, 7 days a
week, to 60.6 million cable television homes. An additional 1.3 million cable
television homes receive QVC on a less than full time basis and 11.9 million
home satellite dish users receive QVC programming. The QVC program schedule
consists of one-hour and multi-hour program segments. Each program theme is
devoted to a particular category of product or lifestyle. From time to time,
special program segments are devoted to merchandise associated with a particular
celebrity, event, geographical region or seasonal interest.
QVC sells products over electronic media in Germany, the United Kingdom
and Ireland. In the UK and Ireland, this service currently reaches over 8
million cable television and home satellite dish-served homes. In Germany, this
service currently is available to over 17 million cable television and home
satellite dish-served homes. However, we estimate that only 7 million homes in
Germany have programmed their television sets to receive this service.
QVC also offers an interactive shopping service, iQVC, on the Internet.
The iQVC service offers a diverse array of merchandise, on-line, 24 hours a day,
7 days a week. iQVC also maintains a mailing list which e-mails product news to
subscribers.
QVC Transmission
A transponder on a communications satellite transmits the QVC domestic
signal. QVC subleases transponders for the transmission of its signals to the UK
and Germany and has made arrangements for redundant coverage through other
satellites in case of a failure. QVC has never had an interruption in
programming due to transponder failure. We cannot offer assurances that there
will not be an interruption or termination of satellite transmission due to
transponder failure. Interruption or termination could have a material adverse
effect on QVC's future results of operations.
Program Distributors
We have entered into affiliation agreements with video program
distributors in the US to carry QVC programming. Generally, there are no
additional charges to subscribers for the distribution of QVC. In return for
carrying QVC, each programming distributor receives an allocated portion, based
upon market share, of up to five percent of the net sales of merchandise sold to
customers located in the programming distributor's service area. The terms of
most affiliation agreements are automatically renewable for one-year terms
unless terminated by either party on at least 90 days notice prior to the end of
the term. Most of the affiliation agreements provide for the programming
distributor to broadcast commercials regarding QVC on other channels and to
distribute QVC's advertising material to subscribers. As of December 31, 1999,
10.2% of the total homes reached by QVC were attributable to QVC's affiliation
agreements with us and 22% with AT&T, the indirect owner of a 43% interest in
QVC, and their respective subsidiaries.
QVC competes for cable channels against similar electronic retailing
programming, as well as against alternative programming supplied by other
sources, including news, public affairs, entertainment and sports programmers.
QVC's business depends on its affiliation with programming distributors for the
transmission of QVC programming. If a significant number of homes are no longer
served because of termination or non-renewal of affiliation agreements, our
financial results could be adversely affected. QVC has incentive programs to
induce programming distributors to enter into or extend affiliation agreements
or to increase the number of homes under existing affiliation agreements. These
incentives include various forms of marketing, launch and equipment purchase
support. QVC will continue to recruit additional programming distributors and
seek to enlarge its audience.
Competition
QVC operates in a highly competitive environment. As a general merchandise
retailer, QVC competes for consumer expenditures and interest with the entire
retail industry, including department, discount, warehouse and specialty stores,
mail order and other direct sellers, shopping center and mall tenants and
conventional retail stores. On television, QVC competes with other satellite-
transmitted programs for channel space and viewer loyalty. We believe that until
digital compression is utilized on a large-scale basis, most programming
distributors will not devote more than two channels to televised shopping and
may allocate only one. Many systems have limited channel capacity and may be
precluded from adding any new programs at the present time. The development and
use of digital compression is expected to provide programming distributors with
greater channel capacity. Greater channel capacity would increase the
opportunity for QVC, in addition to other home shopping programs, to be
distributed on additional channels.
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Content
We have made investments in cable television networks and other
programming related enterprises as a means of generating additional revenues and
subscriber interest. Our programming investments as of December 31, 1999
include:
<TABLE>
<CAPTION>
Ownership
Investment Description Percentage
- ------------------------- --------------------------------------------------------- ---------------
<S> <C>
CN8-The Comcast Network Regional and local programming 100.0%
Comcast SportsNet Regional sports programming and events 46.4%
Comcast Sports Southeast Regional sports programming and events 100.0%
E! Entertainment Entertainment-related news and original programming 39.7%
Style Fashion-related programming 39.7%
The Golf Channel Golf-related programming 40.1%
In Demand Pay-per-view programming 11.1%
Outdoor Life Outdoor activities 16.8%
Speedvision Automotive, marine and aviation 14.8%
The Sunshine Network Regional sports and public affairs 15.6%
</TABLE>
------------------------------------
CN8-The Comcast Network
CN8-The Comcast Network, our regional programming service is delivered to
more than 4.0 million cable subscribers in Pennsylvania, New Jersey, Delaware
and Maryland. CN8 provides original programming, including local and regional
news and public affairs, regional sports, health, cooking and family-oriented
programming. We intend to introduce similar programming in other areas we serve.
Comcast SportsNet
Comcast SportsNet is a 24-hour regional sports programming network which
provides sports related programming, including the Philadelphia Flyers NHL
hockey team, the Philadelphia 76ers NBA basketball team and the Philadelphia
Phillies MLB baseball team to approximately 2.7 million subscribers in the
Philadelphia region. Comcast SportsNet is delivered to affiliates terrestrially.
Comcast Sports Southeast
We created Comcast Sports Southeast ("CSS") in September 1999. We deliver
CSS to approximately 1.3 million cable subscribers primarily in Alabama,
Georgia, Mississippi, South Carolina and Tennessee. CSS is a satellite-delivered
service that provides original sports programming and sports news geared toward
the Southeast.
E! Entertainment
E! Entertainment is a 24-hour network with programming dedicated to the
world of entertainment. Programming formats include behind-the-scenes specials,
original movies and series, news, talk shows and comprehensive coverage of
entertainment industry awards shows and film festivals worldwide. The network
has approximately 60 million subscribers. We obtained a controlling interest in
E! Entertainment in March 1997.
Style
Style, one of the family of E! Networks, is our 24- hour basic cable
network dedicated to fashion, home design, beauty, health, fitness and more,
with distribution to approximately 6 million subscribers. We launched Style in
October 1998.
The Golf Channel
The Golf Channel is a 24-hour network devoted exclusively to golf
programming with distribution to approximately 30 million subscribers. The
programming schedule includes over 80 live tournaments, golf instruction
programs and golf news. In February 2000, we exercised certain call rights and
acquired an additional 14.6% interest for $99.0 million. As a result, we
currently own 54.7% of The Golf Channel.
In Demand
In Demand is the brand-name of a cable operator- controlled buying
cooperative for pay-per-view programming.
Outdoor Life
Outdoor Life is a 24-hour network devoted exclusively to adventure and the
outdoor lifestyle. Its programming focuses on a wide range of outdoor activities
including expeditions, skiing, cycling, surfing and camping.
Speedvision
Speedvision is a 24-hour network devoted to automotive, aviation and
marine enthusiasts. Its programming
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includes original consumer news, motorsports coverage, lifestyle and
instructional programs and historical documentaries.
The Sunshine Network
The Sunshine Network is a regional sports and public affairs network,
providing programming emphasizing Florida's local sports teams and events in
Florida. Programming rights on the network include several professional teams,
including the Orlando Magic and Miami Heat NBA basketball teams and the Tampa
Bay Lightning NHL hockey team.
Investments
We have invested in emerging and growing companies in three primary
business areas:
o Cable, infrastructure and communications,
o Interactive content, and
o E-commerce.
As of December 31, 1999, our investments are valued at $13.155 billion, with an
historical cost of $3.957 billion.
------------------------------------
LEGISLATION AND REGULATION
Cable
The Communications Act of 1934, as amended, establishes a national policy
to regulate the development and operation of cable communications systems. The
Communications Act allocates responsibility for enforcing federal policies among
the FCC, and state and local governmental authorities. The courts, and
especially the federal courts, play an important oversight role as these
statutory and regulatory provisions are interpreted and enforced by the various
federal, state and local governmental units.
We expect that court actions and regulatory proceedings will refine the
rights and obligations of various parties, including the government, under the
Communications Act. The results of these judicial and administrative proceedings
may materially affect our business operations. In the following paragraphs, we
summarize the principal federal laws and regulations materially affecting the
growth and operation of the cable communications industry. We also provide a
brief description of certain state and local laws applicable to our businesses.
The Communications Act and FCC Regulations
The Communications Act and the regulations and policies of the FCC affect
significant aspects of our cable system operations, including:
o subscriber rates,
o the content of programming we offer our subscribers, as well as the
way we sell our program packages to subscribers and other video
program distributors,
o the use of our cable systems by local franchising authorities, the
public and other unrelated third parties,
o our franchise agreements with governmental authorities,
o cable system ownership limitations and prohibitions, and
o our use of utility poles and conduit.
Subscriber Rates
The Communications Act and the FCC's regulations and policies limit the
ability of cable systems to raise rates for basic services and equipment in
communities that are not subject to effective competition, as defined by federal
law. Where there is no effective competition, federal law gives franchising
authorities the power to regulate the monthly rates charged by the operator for:
o the lowest level of programming service, typically called basic
service, which generally includes local broadcast channels and
public access or governmental channels required by the operator's
franchise, and
o the installation, sale and lease of equipment used by subscribers to
receive basic service, such as converter boxes and remote control
units.
The FCC has adopted detailed rate regulations, guidelines and rate forms
that we and the franchising authority must use in connection with the regulation
of our basic service and equipment rates. If the franchising authority concludes
that our rates are not in accordance with the FCC's rate regulations, it may
require us to reduce our rates and to refund overcharges to subscribers, with
interest. We may appeal adverse rate decisions to the FCC. Rate regulation of
non-basic cable programming service tiers ended after March 31, 1999.
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<PAGE>
The Communications Act and the FCC's regulations also:
o prohibit regulation of rates charged by cable operators for
programming offered on a per channel or per program basis, and for
multi- channel groups of non-basic programming,
o require operators to charge uniform rates throughout each franchise
area that is not subject to effective competition,
o prohibit regulation of non-predatory bulk discount rates offered by
operators to subscribers in commercial and residential developments,
and
o permit regulated equipment rates to be computed by aggregating costs
of broad categories of equipment at the franchise, system, regional
or company level.
Over the past few years, we have reached agreements with various
regulatory bodies to resolve outstanding rate disputes. We believe that the
resolution of these proceedings did not have and will not have a material
adverse impact on our financial position, results of operations or liquidity.
Content Requirements
The Communications Act and the FCC's regulations contain broadcast signal
carriage requirements that allow local commercial television broadcast stations:
o to elect once every three years to require a cable communications
system to carry the station, subject to certain exceptions, or
o to negotiate with us on the terms by which we carry the station on
our cable communications system, commonly called retransmission
consent.
The Communications Act requires a cable operator to devote up to one-third
of its activated channel capacity for the mandatory carriage of local commercial
television stations. The Communications Act also gives local non-commercial
television stations mandatory carriage rights; however, such stations are not
given the option to negotiate retransmission consent for the carriage of their
signals by cable systems. Additionally, cable systems must obtain retransmission
consent for:
o all "distant" commercial television stations (except for commercial
satellite-delivered independent "superstations" such as WGN),
o commercial radio stations, and
o certain low-power television stations.
The FCC has also initiated an administrative proceeding to consider the
requirements, if any, for the mandatory carriage of digital television signals
offered by local broadcasters. We are unable to predict the outcome of this
proceeding or the impact any new carriage requirements might have on the
operations of our cable systems.
The Communications Act requires our cable systems to permit subscribers to
purchase video programming on a per channel or a per program basis without the
necessity of subscribing to any tier of service, other than the basic cable
service tier. However, we are not required to comply with this requirement until
2002 for any of our cable systems that do not have addressable converter boxes
or that have other substantial technological limitations. A limited number of
our systems do not have the technological capability to offer programming in the
manner required by the statute and thus currently are exempt from complying with
this requirement.
To increase competition between cable operators and other video program
distributors, the Communications Act:
o precludes any satellite video programmer affiliated with a cable
company, or with a common carrier providing video programming
directly to its subscribers, from favoring an affiliated company
over competitors,
o requires such programmers to sell their satellite- delivered
programming to other video program distributors, and
o limits the ability of such programmers to offer exclusive
programming arrangements to their affiliates.
In two administrative decisions, the FCC's Cable Services Bureau concluded
that the program access rules did not apply to terrestrially-delivered
programming, such as Comcast SportsNet. The FCC is currently reviewing the Cable
Services Bureau's decisions.
The Communications Act contains restrictions on the transmission by cable
operators of obscene or indecent programming. It requires cable operators to
block fully both the video and audio portion of sexually explicit or indecent
programming on channels that are primarily dedicated to sexually oriented
programming or alternatively to carry such programming only at "safe harbor"
time periods. A three-judge federal district court determined that this
provision was unconstitutional. The United States Supreme Court is currently
reviewing the lower court's ruling.
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The FCC actively regulates other aspects of our programming, involving
such areas as:
o our use of syndicated and network programs and local sports
broadcast programming,
o advertising in children's programming,
o political advertising,
o origination cablecasting,
o sponsorship identification, and
o closed captioning of video programming.
Use of Our Cable Systems by The Government and Unrelated Third Parties
The Communications Act allows franchising authorities and unrelated third
parties to have access to our cable systems' channel capacity. For example, it:
o permits franchising authorities to require cable operators to set
aside channels for public, educational and governmental access
programming; and
o requires a cable system with 36 or more activated channels to
designate a significant portion of its channel capacity for
commercial leased access by third parties to provide programming
that may compete with services offered by the cable operator.
The FCC regulates various aspects of third party commercial use of channel
capacity on our cable systems, including the rates and certain terms and
conditions of the commercial use.
Franchise Matters
Although franchising matters are normally regulated at the local level
through a franchise agreement and/or a local ordinance, the Communications Act
provides oversight and guidelines to govern our relationship with local
franchising authorities. For example, the Communications Act:
o affirms the right of franchising authorities (state or local,
depending on the practice in individual states) to award one or more
franchises within their jurisdictions,
o generally prohibits us from operating in communities without a
franchise,
o encourages competition with our existing cable systems by:
o allowing municipalities to operate cable systems without
franchises, and
o preventing franchising authorities from granting exclusive
franchises or from unreasonably refusing to award additional
franchises covering an existing cable system's service area,
o permits local authorities, when granting or renewing our franchises,
to establish requirements for certain cable-related facilities and
equipment, but prohibits franchising authorities from establishing
requirements for specific video programming or information services
other than in broad categories,
o permits us to obtain modification of our franchise requirements from
the franchise authority or by judicial action if warranted by
changed circumstances,
o generally prohibits franchising authorities from:
o imposing requirements during the initial cable franchising
process or during franchise renewal that require, prohibit or
restrict us from providing telecommunications services,
o imposing franchise fees on revenues we derive from providing
telecommunications services over our cable systems, or
o restricting our use of any type of subscriber equipment or
transmission technology, and
o limits our payment of franchise fees to the local franchising
authority to 5% of our gross revenues derived from providing cable
services over our cable system.
The Communications Act contains procedures designed to protect us against
arbitrary denials of the renewal of our franchises, although a franchising
authority under various conditions could deny us a franchise renewal. Moreover,
even if our franchise is renewed, the franchising authority may seek to impose
upon us new and more onerous requirements such as significant upgrades in
facilities and services or increased franchise fees as a condition of renewal.
Similarly, if a franchising authority's consent is required for the purchase or
sale of our cable system or franchise, the franchising authority may attempt to
impose more burdensome or onerous franchise requirements on us in connection
with a request for such consent. Historically, cable operators providing
satisfactory services to their subscribers and complying with the terms of their
franchises have typically obtained franchise renewals. We believe that we have
generally met the terms of our franchises and have provided quality levels of
service.
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<PAGE>
We anticipate that our future franchise renewal prospects generally will be
favorable.
Various courts have considered whether franchising authorities have the
legal right to limit the number of franchises awarded within a community and to
impose certain substantive franchise requirements (e.g. access channels,
universal service and other technical requirements). These decisions have been
inconsistent and, until the United States Supreme Court rules definitively on
the scope of cable operators' First Amendment protections, the legality of the
franchising process generally and of various specific franchise requirements is
likely to be in a state of flux.
Ownership Limitations
The Communications Act generally prohibits us from owning or operating a
SMATV or wireless cable system in any area where we provide franchised cable
service. We may, however, acquire and operate SMATV systems in our franchised
service areas if the programming and other services provided to SMATV
subscribers are offered according to the terms and conditions of our franchise
agreement.
The Communications Act also authorizes the FCC to impose nationwide limits
on the number of subscribers under the control of a cable operator. While a
federal district court has declared this limitation to be unconstitutional and
delayed its enforcement, the FCC has reconsidered its cable ownership
regulations and:
o reaffirmed its 30% nationwide subscriber ownership limit, but
maintained its voluntary stay on enforcement of that regulation
pending further court action,
o reaffirmed its subscriber ownership information reporting
requirements, and
o modified its attribution rules that identify when the ownership or
management by us or third parties of other communications
businesses, including cable systems, television broadcast stations
and local telephone companies, may be imputed to us for purposes of
determining our compliance with the FCC's ownership restrictions.
Also pending on appeal is a challenge to the statutory and FCC regulatory
limitations on the number of channels that can be occupied on a cable system by
a video programmer in which a cable operator has an attributable ownership
interest. We are unable to predict the outcome of these judicial and regulatory
proceedings or the impact any ownership restrictions might have on our business
and operations.
The Communications Act eliminated the statutory prohibition on the common
ownership, operation or control of a cable system and a television broadcast
station in the same market. While the FCC has eliminated its regulations which
precluded the cross-ownership of a national broadcasting network and a cable
system, it has not yet completed its review of other regulations which prohibit
the common ownership of other broadcasting interests and cable systems in the
same geographical areas.
The 1996 amendments to the Communications Act made far-reaching changes in
the relationship between local telephone companies and cable service providers.
These amendments:
o eliminated federal legal barriers to competition in the local
telephone and cable communications businesses, including allowing
local telephone companies to offer video services in their local
telephone service areas,
o preempted state and local laws and regulations which impose barriers
to telecommunications competitions,
o set basic standards for relationships between telecommunications
providers, and
o generally limited acquisitions and prohibited certain joint ventures
between local telephone companies and cable operators in the same
market.
Local telephone companies may provide service as traditional cable
operators with local franchises or they may opt to provide their programming
over unfranchised "open video systems," subject to certain conditions,
including, but not limited to, setting aside a portion of their channel capacity
for use by unaffiliated program distributors on a non-discriminatory basis. A
federal appellate court overturned various parts of the FCC's open video rules,
including the FCC's preemption of local franchising requirements for open video
operators. The FCC has modified its open video rules to comply with the federal
court's decision, but we are unable to predict the impact these rule
modifications may have on our business and operations.
Pole Attachment Regulation
The Communications Act requires the FCC to regulate the rates, terms and
conditions imposed by public utilities for cable systems' use of utility pole
and conduit space unless state authorities demonstrate to the FCC that they
adequately regulate pole attachment rates, as is the case in certain states in
which we operate. In the absence of state regulation, the FCC administers pole
attachment
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rates on a formula basis. The FCC's current rate formula, which is being
reevaluated by the FCC, governs the maximum rate certain utilities may charge
for attachments to their poles and conduit by cable operators providing only
cable services and, until 2001, by certain companies providing
telecommunications services. The FCC also adopted a second rate formula that
will be effective in 2001 and will govern the maximum rate certain utilities may
charge for attachments to their poles and conduit by companies providing
telecommunications services, including cable operators.
Any resulting increase in attachment rates due to the FCC's new rate
formula will be phased in over a five-year period in equal annual increments,
beginning in February 2001. Several parties have requested the FCC to reconsider
its new regulations and several parties have challenged the new rules in court.
A federal appellate court recently upheld the constitutionality of the new
statutory provision which requires that utilities provide cable systems and
telecommunications carriers with nondiscriminatory access to any pole, conduit
or right-of-way controlled by the utility. We are unable to predict the outcome
of the legal challenge to the FCC's new regulations or the ultimate impact any
revised FCC rate formula or any new pole attachment rate regulations might have
on our business and operations.
Other Regulatory Requirements of the
Communications Act and the FCC
The Communications Act also includes provisions, among others, regulating:
o customer service,
o subscriber privacy,
o marketing practices,
o equal employment opportunity, and
o technical standards and equipment compatibility.
The FCC actively regulates other parts of our cable operations and has
adopted regulations implementing its authority under the Communications Act.
The FCC may enforce its regulations through the imposition of substantial
fines, the issuance of cease and desist orders and/or the imposition of other
administrative sanctions, such as the revocation of FCC licenses needed to
operate certain transmission facilities often used in connection with cable
operations. The FCC has ongoing rulemaking proceedings that may change its
existing rules or lead to new regulations. We are unable to predict the impact
that any further FCC rule changes may have on our business and operations.
Other bills and administrative proposals pertaining to cable
communications have previously been introduced in Congress or have been
considered by other governmental bodies over the past several years. It is
probable that further attempts will be made by Congress and other governmental
bodies relating to the regulation of cable communications services.
Copyright
Our cable communications systems provide our subscribers with local and
distant television and radio broadcast signals which are protected by the
copyright laws. We generally do not obtain a license to use this programming
directly from the owners of the programming; instead we comply with an
alternative federal copyright licensing process. In exchange for filing certain
reports and contributing a percentage of our revenues to a federal copyright
royalty pool, we obtain blanket permission to retransmit copyrighted material.
In a report to Congress, the U.S. Copyright Office recommended that
Congress make major revisions to both the cable television and satellite
compulsory licenses. Congress recently modified the satellite compulsory license
in a manner that permits DBS providers to become more competitive with cable
operators like us. The possible simplification, modification or elimination of
the cable communications compulsory copyright license is the subject of
continuing legislative review. The elimination or substantial modification of
the cable compulsory license could adversely affect our ability to obtain
suitable programming and could substantially increase the cost of programming
that remains available for distribution to our subscribers. We are unable to
predict the outcome of this legislative activity.
Our cable communications systems often utilize music in the programs we
provide to subscribers including local advertising, local origination
programming and pay-per-view events. The right to use this music is controlled
by music performance rights societies who negotiate on behalf of their copyright
owners for license fees covering each performance. The cable industry and one of
these societies have agreed upon a standard licensing agreement covering the
performance of music contained in programs originated by cable operators and in
pay-per-view events. Negotiations on a similar licensing agreement are in
process with another music performance rights organization. Rate courts
established by a federal court exist to determine appropriate copyright coverage
and payments in the event the parties fail to reach a negotiated settlement. We
are unable to predict the outcome of these proceedings or the amount of any
license fees we may be
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required to pay for the use of music. We do not believe that the amount of such
fees will be significant to our financial position, results of operations or
liquidity.
State and Local Regulation
Our cable systems use local streets and rights-of-way. Consequently, we
must comply with state and local regulation which is typically imposed through
the franchising process. The terms and conditions of our franchises vary
materially from jurisdiction to jurisdiction. Each franchise generally contains
provisions governing:
o cable service rates,
o franchise fees,
o franchise term,
o system construction and maintenance obligations,
o system channel capacity,
o design and technical performance,
o customer service standards,
o franchise renewal,
o sale or transfer of the franchise,
o service territory of the franchisee,
o indemnification of the franchising authority,
o use and occupancy of public streets, and
o types of cable services provided.
A number of states subject cable systems to the jurisdiction of state
governmental agencies. Those states in which we operate that have enacted such
state level regulation are Connecticut, New Jersey and Delaware. State and local
franchising jurisdiction is not unlimited, however; it must be exercised
consistently with federal law. The Communications Act immunizes franchising
authorities from monetary damage awards arising from the regulation of cable
systems or decisions made on franchise grants, renewals, transfers and
amendments.
The summary of certain federal and state regulatory requirements in the
preceding pages does not describe all present and proposed federal, state and
local regulations and legislation affecting the cable industry. Other existing
federal regulations, copyright licensing, and, in many jurisdictions, state and
local franchise requirements, are currently the subject of judicial proceedings,
legislative hearings and administrative proposals which could change, in varying
degrees, the manner in which cable systems operate. We are unable to predict the
outcome of these proceedings or their impact upon our cable operations at this
time.
Commerce and Content
The FCC does not directly regulate the content or transmission of
programming services like those offered by QVC and E! Entertainment. The FCC
does, however, exercise regulatory authority over the satellites and uplink
facilities which transmit programming services such as those provided by QVC and
E! Entertainment. The FCC has granted, subject to periodic reviews, permanent
licenses to QVC for its uplink facilities (and for backup equipment of certain
of these facilities) at sufficient power levels for transmission of the QVC
service. The FCC has licensing authority over satellites from which QVC and E!
Entertainment obtain transponder capacity, but does not regulate their rates,
terms or conditions of service. The FCC could, however, alter the regulatory
obligations applicable to satellite service providers. The QVC programming
services offered in the UK, Ireland and Germany are regulated by the media
authorities in those countries.
EMPLOYEES
As of December 31, 1999, we had approximately 25,700 employees. Of these
employees, approximately 12,000 were associated with cable communications,
approximately 9,700 were associated with electronic retailing and approximately
4,000 were associated with other divisions. We believe that our relationships
with our employees are good.
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ITEM 2 PROPERTIES
Cable
A central receiving apparatus, distribution cables, converters, customer
service call centers and local business offices are the principal physical
assets of a cable communications system. We own or lease the receiving and
distribution equipment of each system and own or lease parcels of real property
for the receiving sites, customer service call centers and local business
offices. In order to keep pace with technological advances, we are maintaining,
periodically upgrading and rebuilding the physical components of our cable
communications systems.
Commerce
Television studios, customer service call centers, business offices,
product warehouses and distribution centers are the principal physical assets of
our commerce operations. These assets include QVC's studios and offices, Studio
Park, located in West Chester, Pennsylvania. QVC owns the majority of these
assets. In order to keep pace with technological advances, QVC is maintaining,
periodically upgrading and rebuilding the physical components of our commerce
operations. QVC's warehousing and distribution facilities will continue to be
upgraded over the next several years.
We believe that substantially all of our physical assets are in good
operating condition.
ITEM 3 LEGAL PROCEEDINGS
We are subject to legal proceedings and claims which arise in the ordinary
course of our business. In the opinion of our management, the amount of ultimate
liability with respect to these actions will not materially affect our financial
position, results of operations or liquidity.
ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
ITEM 4A EXECUTIVE OFFICERS OF THE REGISTRANT
The current term of office of each of our officers expires at the first
meeting of our Board of Directors following the next Annual Meeting of
Shareholders, presently scheduled to be held in June 2000, or as soon thereafter
as each of their successors is elected and qualified. The following table sets
forth certain information concerning our principal executive officers, including
their ages, positions and tenure as of December 31, 1999:
<TABLE>
<CAPTION>
Officer
Name Age Since Position with Comcast
- -------------------- -------- ------- -----------------------------------------------------
<S> <C> <C> <C>
Ralph J. Roberts 79 1969 Chairman of the Board of Directors; Director
Julian A. Brodsky 66 1969 Vice Chairman of the Board of Directors; Director
Brian L. Roberts 40 1986 President; Director
Lawrence S. Smith 52 1988 Executive Vice President
John R. Alchin 51 1990 Executive Vice President; Treasurer
Stanley L. Wang 59 1981 Executive Vice President; General Counsel; Secretary
</TABLE>
--------------------
- 16 -
<PAGE>
Ralph J. Roberts has served as a Director and as our Chairman of the Board
of Directors for more than five years. Mr. Roberts devotes a major portion of
his time to our business and affairs. Mr. Roberts has been the President and a
Director of Sural Corporation ("Sural"), a privately-held investment company and
our controlling shareholder, for more than five years. Mr. Roberts also
presently serves as a Director of Jones Intercable, Inc. and Comcast LCI
Holdings, Inc. Mr. Roberts is the father of Brian L. Roberts.
Julian A. Brodsky has served as a Director and as our Vice Chairman of the
Board of Directors for more than five years. Mr. Brodsky devotes a major portion
of his time to our business and affairs. Mr. Brodsky presently serves as the
Treasurer and as a Director of Sural. Mr. Brodsky is also a Director of Internet
Capital Group, Inc., RBB Fund, Inc., NDS Group plc, Jones Intercable, Inc. and
Comcast LCI Holdings, Inc.
Brian L. Roberts has served as our President and as a Director for more
than five years. Mr. Roberts devotes a major portion of his time to our business
and affairs. Mr. Roberts presently serves as Vice President and as a Director of
Sural. As of December 31, 1999, our shares owned by Sural constituted
approximately 85% of the voting power of the two classes of our voting common
stock combined. Mr. Roberts has sole voting power over stock representing a
majority of voting power of all Sural stock and, therefore, has voting control
over Comcast. Mr. Roberts also presently serves as a Director of The Bank of New
York, Excite@Home, Jones Intercable, Inc., and Comcast LCI Holdings, Inc. Mr.
Roberts is a son of Ralph J. Roberts.
Lawrence S. Smith was named an Executive Vice President in December 1995.
Prior to that time, Mr. Smith served as a Senior Vice President for more than
five years. Mr. Smith presently serves as a Director of Jones Intercable, Inc.
and Comcast LCI Holdings, Inc.
John R. Alchin was named an Executive Vice President in February 2000.
Prior to that time, Mr. Alchin served as our Treasurer and as a Senior Vice
President for more than five years. Mr. Alchin is our Principal Financial
Officer. Mr. Alchin presently serves as a Director of Jones Intercable, Inc. and
Comcast LCI Holdings, Inc.
Stanley L. Wang was named an Executive Vice President in February 2000.
Prior to that time, Mr. Wang served as a Senior Vice President and as our
Secretary and General Counsel for more than five years. Mr. Wang presently
serves as a Director of Jones Intercable, Inc. and Comcast LCI Holdings, Inc.
- 17 -
<PAGE>
PART II
ITEM 5 MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
Our Class A Special Common Stock is included on Nasdaq under the symbol
CMCSK and our Class A Common Stock is included on Nasdaq under the symbol CMCSA.
There is no established public trading market for our Class B Common Stock. Our
Class B Common Stock can be converted, on a share for share basis, into Class A
Special or Class A Common Stock. The following table sets forth, for the
indicated periods, the closing price range of our Class A Special and Class A
Common Stock as furnished by Nasdaq (as adjusted for our two-for-one stock split
in the form of a 100% stock dividend in May 1999).
<TABLE>
<CAPTION>
Class A
Special Class A
------------------------------------------------------------------
High Low High Low
----------------- ------------ ----------- -----------
<S> <C> <C> <C> <C>
1999
First Quarter................................ $38 9/16 $29 5/8 $37 11/32 $28 15/16
Second Quarter............................... 42 29 7/16 39 11/16 28 3/8
Third Quarter................................ 41 9/16 32 5/8 38 9/16 29 7/16
Fourth Quarter............................... 56 1/2 35 11/16 53 1/8 32 1/16
1998
First Quarter................................ $18 19/32 $14 15/16 $18 7/16 $15 1/16
Second Quarter............................... 20 27/32 16 29/32 20 1/4 16 7/16
Third Quarter................................ 24 3/8 18 11/16 24 1/32 18 3/4
Fourth Quarter............................... 29 1/2 20 9/32 28 15/16 20 1/8
</TABLE>
--------------------
We began paying quarterly cash dividends on our Class A Common Stock in
1977. From 1978, we paid equal dividends on shares of both our Class A Common
Stock and our Class B Common Stock. From December 1986, when the Class A Special
Common Stock was issued, through March 1999 we paid equal dividends on shares of
our Class A Special, Class A and Class B Common Stock. We declared dividends of
$.0467 for the year ended December 31, 1998 on shares of our Class A Special,
Class A and Class B Common Stock (as adjusted for our two-for-one stock split in
the form of a 100% stock dividend in May 1999). Our Board of Directors
eliminated the quarterly cash dividend on all classes of our common stock in
March 1999. We do not intend to pay dividends on our Class A Special, Class A or
Class B Common Stock for the foreseeable future.
If you hold shares of our Class A Special Common Stock, you cannot vote in
the election of directors or otherwise, except where class voting is required by
law. In that case, if you hold Class A Special Common Stock, you have one vote
per share. Generally, if you hold Class A Common Stock, you have one vote per
share. If you hold Class B Common Stock, you have 15 votes per share. Generally,
including the election of directors, holders of Class A Common Stock and Class B
Common Stock vote as one class except where class voting is required by law. If
you hold Class A Common Stock or Class B Common Stock, you have cumulative
voting rights.
As of December 31, 1999, there were 3,662 record holders of our Class A
Special Common Stock, 1,792 record holders of our Class A Common Stock and one
record holder of our Class B Common Stock.
- 18 -
<PAGE>
ITEM 6 SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
Year Ended December 31,
1999(1) 1998(1) 1997(1) 1996 1995
------------------------------------------------------------------------------
(Dollars in millions, except per share data)
<S> <C> <C> <C> <C> <C>
Statement of Operations Data:
Revenues............................................ $6,209.2 $5,145.3 $4,467.7 $3,612.3 $2,988.1
Operating income.................................... 664.0 557.1 466.6 465.9 397.7
Income (loss) from continuing operations before
extraordinary items........................... 780.9 1,007.7 (182.9) (6.4) 48.0
Discontinued operations (2)......................... 335.8 (31.4) (25.6) (46.1) (85.8)
Extraordinary items................................. (51.0) (4.2) (30.2) (1.0) (6.1)
Net income (loss)................................... 1,065.7 972.1 (238.7) (53.5) (43.9)
Basic earnings (loss) for common stockholders
per common share (3)
Income (loss) from continuing operations
before extraordinary items................. $1.00 $1.34 ($.29) ($.01) $.10
Discontinued operations (2)................... .45 (.04) (.04) (.10) (.18)
Extraordinary items........................... (.07) (.01) (.04) (.02)
--------- --------- --------- --------- --------
Net income (loss)............................. $1.38 $1.29 ($.37) ($.11) ($.10)
========= ========= ========= ========= ========
Diluted earnings (loss) for common
stockholders per common share (3)
Income (loss) from continuing operations
before extraordinary items................. $.95 $1.25 ($.29) ($.01) $.10
Discontinued operations (2)................... .41 (.03) (.04) (.10) (.18)
Extraordinary items........................... (.06) (.01) (.04) (.02)
--------- --------- --------- --------- --------
Net income (loss)............................. $1.30 $1.21 ($.37) ($.11) ($.10)
========= ========= ========= ========= ========
Cash dividends declared per common share (3)........ $.0467 $.0467 $.0467 $.0467
Balance Sheet Data (at year end):
Total assets........................................ $28,685.6 $14,710.5 $11,234.3 $10,660.4 $8,159.9
Working capital..................................... 4,231.5 2,531.7 44.9 15.5 604.6
Long-term debt (4).................................. 8,707.2 5,464.2 5,334.1 5,998.3 6,014.8
Stockholders' equity (deficiency)................... 10,341.3 3,815.3 1,646.5 551.6 (827.7)
Supplementary Financial Data:
Operating income before depreciation and
amortization (5).............................. $1,880.0 $1,496.7 $1,293.1 $1,047.0 $881.0
Net cash provided by (used in) (6)..................
Operating activities.......................... 1,249.4 1,067.7 844.6 644.5 466.7
Financing activities.......................... 1,341.4 809.2 283.9 (88.0) 1,785.7
Investing activities.......................... (2,539.3) (1,415.3) (1,045.8) (749.5) (2,060.3)
<FN>
- ----------
(1) You should see "Management's Discussion and Analysis of Financial Condition
and Results of Operations" in Item 7 of this Annual Report for a discussion
of events which affect the comparability of the information reflected in
this financial data.
(2) In July 1999, we sold Comcast Cellular Corporation to SBC Communications,
Inc. Comcast Cellular is presented as a discontinued operation for all
periods presented (see Note 3 to our consolidated financial statements in
Item 8 of this Annual Report).
(3) We have adjusted these for our two-for-one stock split in the form of a 100%
stock dividend in May 1999.
(4) Includes a $666.0 million adjustment to carrying value at December 31, 1999
(see Note 5 to our consolidated financial statements in Item 8 of this
Annual Report).
- 19 -
<PAGE>
(5) 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 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 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
those measurements as an indicator of our performance.
(6) This represents net cash provided by (used in) operating activities,
financing activities and investing activities as presented in the our
consolidated statement of cash flows which is included in Item 8 of this
Annual Report.
</FN>
</TABLE>
- 20 -
<PAGE>
ITEM 7 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Overview
We have experienced significant growth in recent years through both
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.
In July 1999, we completed the sale of our wholly owned subsidiary,
Comcast Cellular Corporation ("Comcast Cellular"), to SBC Communications, Inc.
for $361.1 million in cash and the assumption of $1.315 billion of Comcast
Cellular debt. We recognized a gain on the sale of $355.9 million, net of income
tax expense. The results of Comcast Cellular have been presented as a
discontinued operation in our consolidated financial statements. See Note 3 to
our consolidated financial statements included in Item 8.
General Developments of Business
See "General Developments of Business" in Part I and Note 3 to our
consolidated financial statements in Item 8.
Liquidity and Capital Resources
The cable communications and the electronic retailing industries 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, through our cash
flows from operating activities, existing cash, cash equivalents and short-term
investments.
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 December 31,
1999 were $8.528 billion, substantially all of which is unrestricted. See Note 4
to our consolidated financial statements included in Item 8.
Capital Expenditures
During 2000, we expect to incur $1.5 billion of capital expenditures,
including $1.2 billion primarily for the upgrading and rebuilding of certain of
our cable communications systems and the deployment of digital converters and
cable modems, and $190 million primarily for the upgrading of the warehousing
and distribution facilities of our majority-owned electronic retailing
subsidiary, QVC, Inc. ("QVC"). The amount of such capital expenditures for years
subsequent to 2000 will depend on numerous factors, many of which are beyond our
control. These factors include:
o whether competition in a particular market necessitates a cable
system upgrade,
o whether a particular cable system has sufficient capacity to handle
new product offerings including the offering of cable modem, cable
telephony and telecommunications services, and
o whether we acquire additional cable systems in need of upgrading or
rebuilding.
National manufacturers are the primary sources of supplies, equipment and
materials utilized in the construction, rebuild and upgrade of our cable
communications systems. Costs have increased during recent years and are
expected to continue to increase as a result of the need to construct
increasingly complex systems, overall demand for labor and other factors. Future
increases in such costs may be significant to our financial position, results of
operations and liquidity. We anticipate capital expenditures for years
subsequent to 2000 will continue to be significant. As of December 31, 1999, we
do not have any significant contractual obligations for capital expenditures.
Financing
See Notes 5 and 6 to our consolidated financial statements included in
Item 8.
As of December 31, 1999 and 1998, our long-term debt, including current
portion, was $9.225 billion and $5.578 billion, respectively. Excluding the
effects of interest rate risk management instruments, 25.4% and 27.0% of our
long-term debt as of December 31, 1999 and 1998, respectively, was at variable
rates. The $3.647 billion increase in our long-term debt results principally
- 21 -
<PAGE>
from the $1.499 billion of debt that we assumed in connection with our
acquisition of a controlling interest in Jones Intercable, Inc. ("Jones
Intercable") in April 1999, the $1.807 billion of proceeds that we received from
the issuance of our 2% Exchangeable Subordinated Debentures due 2029 (the
"ZONES") in the fourth quarter of 1999, and the $666.0 million non-cash, non-
interest bearing adjustment to the carrying value of the ZONES during the fourth
quarter of 1999.
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.
Interest Rate Risk Management
We are exposed to market risk including changes in interest rates. To
manage the volatility relating to these exposures, we enter into various
derivative transactions pursuant to our policies in areas such as counterparty
exposure and hedging practices. Positions are monitored using techniques
including market value and sensitivity analyses. We do not hold or issue any
derivative financial instruments for trading purposes and are not a party to
leveraged instruments. The credit risks associated with our derivative financial
instruments are controlled through the evaluation and monitoring of the
creditworthiness of the counterparties. Although we may be exposed to losses in
the event of nonperformance by the counterparties, we do not expect such losses,
if any, to be significant.
Interest Rate Risk
The use of interest rate risk management instruments, such as interest
rate exchange agreements ("Swaps"), interest rate cap agreements ("Caps") and
interest rate collar agreements ("Collars"), is required under the terms of
certain of our outstanding debt agreements. Our policy is to manage interest
costs using a mix of fixed and variable rate debt. Using Swaps, we agree to
exchange, at specified intervals, the difference between fixed and variable
interest amounts calculated by reference to an agreed-upon notional principal
amount. Caps are used to lock in a maximum interest rate should variable rates
rise, but enable us to otherwise pay lower market rates. Collars limit our
exposure to and benefits from interest rate fluctuations on variable rate debt
to within a certain range of rates.
During the year ended December 31, 1999, we entered into Swaps with an
aggregate notional amount of $300.0 million and, as part of our acquisition of a
controlling interest in Jones Intercable, we acquired Swaps with an aggregate
notional amount of $400.0 million. Swaps with an aggregate notional amount of
$350.0 million either were terminated or expired during the year ended December
31, 1999. During the year ended December 31, 1999, we entered into Caps with an
aggregate notional amount of $140.0 million. Caps with an aggregate notional
amount of $240.0 million expired during the year ended December 31, 1999.
- 22 -
<PAGE>
The table set forth below summarizes the fair values and contract terms of
financial instruments subject to interest rate risk maintained by us as of
December 31, 1999 (dollars in millions):
<TABLE>
<CAPTION>
Fair
Expected Maturity Date Value at
2000 2001 2002 2003 2004 Thereafter Total 12/31/99
---- ---- ---- ---- ---- ---------- ----- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Debt
Fixed Rate (1)...................... $204.9 $108.1 $205.5 $7.4 $307.9 $5,384.9 $6,218.7 $6,891.0
Average Interest Rate............ 9.5% 10.2% 9.6% 9.2% 8.2% 6.1% 6.5%
Variable Rate....................... $312.6 $263.8 $556.1 $815.6 $240.1 $151.8 $2,340.0 $2,340.0
Average Interest Rate............ 7.2% 7.5% 7.5% 7.6% 7.5% 7.7% 7.5%
Interest Rate Instruments
Variable to Fixed Swaps (2)......... $554.1 $127.5 $243.6 $186.6 $1,111.8 $16.9
Average Pay Rate................. 5.6% 4.9% 5.1% 5.4% 5.4%
Average Receive Rate............. 6.7% 7.1% 7.0% 7.0% 6.8%
Fixed to Variable Swaps............. $300.0 $300.0 ($3.9)
Average Pay Rate................. 8.6% 8.6%
Average Receive Rate............. 8.1% 8.1%
Caps................................ $140.0 $140.0
Average Cap Rate................. 6.8% 6.8%
Collar.............................. $50.0 $50.0 $0.1
Average Cap Rate................. 6.3% 6.3%
Average Floor Rate............... 4.0% 4.0%
<FN>
(1) Excludes $666.0 million adjustment to carrying value of indexed debt due
2029 which bears no interest.
(2) Includes $361.8 million of Swaps which become effective in the year 2000
maturing through 2003.
</FN>
</TABLE>
------------------------------------
The notional amounts of interest rate instruments, as presented in the
table above are used to measure interest to be paid or received and do not
represent the amount of exposure to credit loss. The estimated fair value
approximates the proceeds (costs) to settle the outstanding contracts. Interest
rates on variable debt are estimated by us using the average implied forward
London Interbank Offer Rate ("LIBOR") rates for the year of maturity based on
the yield curve in effect at December 31, 1999, plus the borrowing margin in
effect for each credit facility at December 31, 1999. Average receive rates on
the Variable to Fixed Swaps are estimated by us using the average implied
forward LIBOR rates for the year of maturity based on the yield curve in effect
at December 31, 1999. While Swaps, Caps and Collars represent an integral part
of our interest rate risk management program, their incremental effect on
interest expense for the years ended December 31, 1999, 1998 and 1997 was not
significant.
Equity Price Risk
In October and November 1999, we issued approximately 24.1 million of
ZONES for aggregate 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. 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. As of December 31,
1999, the number of Sprint PCS shares held by us exceeded the number of ZONES
outstanding.
During the year ended December 31, 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 consolidated balance sheet.
Year 2000 Readiness Disclosure
The Year 2000 Issue is the result of computer programs being written using
two digits rather than four to define the applicable year. Computer programs
that have date-sensitive software may recognize a date using "00" as the year
1900 rather than the year 2000 (the "Year 2000 Issue"). If this situation
occurs, the potential exists
- 23 -
<PAGE>
for computer system failure or miscalculations by computer programs, which could
cause disruption of operations. We evaluated and addressed the impact of the
Year 2000 Issue on our operations to ensure that our information technology and
business systems recognize calendar Year 2000. We utilized both internal and
external resources in implementing our Year 2000 program.
Based on an inventory conducted in 1997, we identified computer systems
that required modification or replacement so that they would properly utilize
dates beyond December 31, 1999. Many of our critical systems were new and were
already Year 2000 compliant as a result of the recent rebuild of many of our
cable communications systems. In addition, we have communicated with our
significant software suppliers and service bureaus to determine their plans for
remediating the Year 2000 Issue in their software which we use or rely upon.
As of December 31, 1999, we have completed our Year 2000 remediation
program. We believe that all key systems are Year 2000 compliant and as of
February 29, 2000 we have incurred no significant disruption in operations.
Further, contingency plans have been created for our key systems and operations.
Additionally, in the majority of our operations, business continuity
preparations have been implemented to create post-Year 2000 response teams to
further mitigate Year 2000 risk. There can be no guarantee that the systems of
other companies on which we rely are Year 2000 compliant, or that a failure to
be Year 2000 compliant by another company would not have a material adverse
effect on us.
Through December 31, 1999, we have incurred approximately $18.5 million in
connection with our Year 2000 remediation program.
Our management will continue to periodically report the results of our
Year 2000 remediation program to the Audit Committee of our Board of Directors.
Statement of Cash Flows
Cash and cash equivalents increased $51.5 million as of December 31, 1999
from December 31, 1998. The increase in cash and cash equivalents resulted from
cash flows from operating, financing and investing activities as explained
below.
Net cash provided by operating activities from continuing operations
amounted to $1.249 billion for the year ended December 31, 1999 due principally
to the effects of our acquisition of a controlling interest in Jones Intercable
in April 1999, increases in our operating income from continuing operations
before depreciation and amortization (see "Results of Operations") and changes
in working capital as a result of the timing of receipts and disbursements.
Net cash provided by financing activities from continuing operations,
which includes borrowings and repayments of debt, as well as the issuances and
repurchases of our equity securities, was $1.341 billion for the year ended
December 31, 1999. During 1999, we borrowed $2.787 billion, consisting primarily
of $1.807 billion of ZONES, $718.3 million of 3.35% Exchangeable Subordinated
Debentures due 2029 (the "PHONES") and $256.9 million under revolving lines of
credit held by our subsidiaries. During 1999, we repaid $1.368 billion of our
long-term debt, consisting primarily of $718.3 million of PHONES, $200.0 million
of notes payable to insurance companies and $192.2 million of aggregate
repurchases of various of our senior subordinated debentures. In addition,
during 1999, we made net purchases of $13.6 million of our common stock and we
paid cash dividends of $9.4 million on our common stock and Series A Preferred
Stock. Deferred financing costs of $51.0 million were incurred during 1999
principally in connection with the issuances of the ZONES and the PHONES.
Net cash used in investing activities from continuing operations was
$2.539 billion for the year ended December 31, 1999. Net cash used in investing
activities includes acquisitions of cable communications systems, net of cash
acquired, of $755.2 million, consisting primarily of our acquisition of a
controlling interest in Jones Intercable. Investing activities also includes the
$1.460 billion termination fee proceeds, net of transaction costs that we
received in May 1999 from MediaOne Group, Inc. During 1999 we made investments
in US Government obligations, commercial paper, repurchase agreements and
certificates of deposit of $1.036 billion. Investments made during 1999 of
$2.012 billion primarily include a $753.5 million loan in the form of a 6%
ten-year convertible note that we issued to Prime Communications LLC, a deposit
of $750.0 million made in connection with the acquisition of the remaining
minority interest in one of our cable communications systems and the purchase of
long-term corporate bonds of $201.9 million. During 1999, we made additions to
deferred charges of $263.5 million and capital expenditures of $893.8 million.
During 1999, we received $599.8 million of proceeds from the sales of and
distributions from investments and $361.1 million of proceeds from the sale of
Comcast Cellular.
- 24 -
<PAGE>
Results of Operations
The effects of our recent acquisitions, as well as increased levels of
capital expenditures, 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
from 1998 to 1999 are primarily due to the effects of our acquisition of a
controlling interest in Jones Intercable in April 1999, offset in part by the
effects of the sale of Comcast UK Cable Partners Limited ("Comcast UK Cable"), a
former consolidated subsidiary of ours, in October 1998. In addition, our equity
in net losses of affiliates has decreased principally as a result of the
restructuring of Sprint PCS in November 1998. See "Operating Results by Business
Segment" and "Consolidated Analysis."
Our summarized consolidated financial information for the three years
ended December 31, 1999 is as follows (dollars in millions, "NM" denotes
percentage is not meaningful):
<TABLE>
<CAPTION>
Year Ended
December 31, Increase/(Decrease)
1999 1998 $ %
-------- --------- ------ ------
<S> <C> <C> <C> <C>
Revenues........................................................ $6,209.2 $5,145.3 $1,063.9 20.7%
Cost of goods sold from electronic retailing.................... 1,740.1 1,462.0 278.1 19.0
Operating, selling, general and administrative expenses......... 2,589.1 2,186.6 402.5 18.4
-------- ---------
Operating income before depreciation and amortization (1) ...... 1,880.0 1,496.7 383.3 25.6
Depreciation.................................................... 572.0 463.9 108.1 23.3
Amortization.................................................... 644.0 475.7 168.3 35.4
-------- ---------
Operating income................................................ 664.0 557.1 106.9 19.2
-------- ---------
Interest expense................................................ 538.3 466.7 71.6 15.3
Investment (income) expense..................................... (629.5) 187.8 (817.3) NM
Expense related to indexed debt................................. 666.0 666.0 NM
Equity in net (income) losses of affiliates..................... (1.4) 515.9 517.3 NM
Gain from equity offering of affiliate.......................... (157.8) (157.8) NM
Other income.................................................... (1,409.4) (2,012.9) (603.5) (30.0)
Income tax expense.............................................. 723.7 594.0 129.7 21.8
Minority interest income........................................ (4.6) (44.3) (39.7) (89.6)
-------- ---------
Income from continuing operations before
extraordinary items.......................................... $780.9 $1,007.7 ($226.8) (22.5%)
======== =========
Year Ended
December 31, Increase/(Decrease)
1998 1997 $ %
-------- --------- ------ ------
Revenues....................................................... $5,145.3 $4,467.7 $677.6 15.2%
Cost of goods sold from electronic retailing................... 1,462.0 1,270.2 191.8 15.1
Operating, selling, general and administrative expenses........ 2,186.6 1,904.4 282.2 14.8
-------- ---------
Operating income before depreciation and amortization (1) ..... 1,496.7 1,293.1 203.6 15.7
Depreciation................................................... 463.9 404.1 59.8 14.8
Amortization................................................... 475.7 422.4 53.3 12.6
-------- ---------
Operating income............................................... 557.1 466.6 90.5 19.4
-------- ---------
Interest expense............................................... 466.7 458.9 7.8 1.7
Investment expense (income).................................... 187.8 (149.4) (337.2) NM
Equity in net losses of affiliates............................. 515.9 343.8 172.1 50.1
Gain from equity offering of affiliate......................... (157.8) (7.7) 150.1 NM
Other (income) expense......................................... (2,012.9) 9.7 2,022.6 NM
Income tax expense............................................. 594.0 70.4 523.6 NM
Minority interest income....................................... (44.3) (76.2) (31.9) (41.9)
-------- ---------
Income (loss) from continuing operations before
extraordinary items......................................... $1,007.7 ($182.9) $1,190.6 NM
======== =========
<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,
- 25 -
<PAGE>
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
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 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, including: "Cable" and "Commerce." The remaining components of our
operations are not independently significant to our consolidated financial
position or results of operations (see Note 10 to our consolidated financial
statements included in Item 8).
------------------------------------
Cable
The following table presents financial information for the years ended
December 31, 1999, 1998 and 1997 for our cable segment (dollars in millions):
<TABLE>
<CAPTION>
Year Ended
December 31, Increase
1999 1998 $ %
-------- ---------- -------- -------
<S> <C> <C> <C> <C>
Service income................................................ $2,929.3 $2,277.4 $651.9 28.6%
Operating, selling, general and
administrative expenses................................. 1,576.3 1,180.8 395.5 33.5
-------- ---------- --------
Operating income before depreciation
and amortization (a).................................... $1,353.0 $1,096.6 $256.4 23.4%
======== ========== ========
Year Ended
December 31, Increase
1998 1997 $ %
-------- ---------- -------- -------
Service income................................................ $2,277.4 $2,073.0 $204.4 9.9%
Operating, selling, general and
administrative expenses................................. 1,180.8 1,085.3 95.5 8.8
-------- ---------- --------
Operating income before depreciation
and amortization (a).................................... $1,096.6 $987.7 $108.9 11.0%
======== ========== ========
<FN>
- ---------------
(a) See footnote (1) on page 25.
</FN>
</TABLE>
Of the respective $651.9 million and $204.4 million increases in service
income for the years ended December 31, 1999 and 1998, $448.4 million and $30.2
million are attributable to the effects of the acquisitions of cable
communications systems, $27.1 million and $31.8 million are attributable to
subscriber growth, $83.6 million and $109.0 million relate to changes in rates,
$21.9 million and $20.5 million are attributable to growth in cable advertising
sales and $70.9 million and $12.9 million relate to other product offerings,
including the increase in digital cable and cable modem services.
Of the respective $395.5 million and $95.5 million increases in operating,
selling, general and administrative expenses for the years ended December 31,
1999 and 1998, $286.2 million and $15.8 million are attributable to the effects
of the acquisitions of cable communications systems, $45.5 million and $48.9
million are attributable to increases in the costs of cable programming as a
result of subscriber growth, additional channel offerings and changes in rates,
$3.4 million and $5.3 million are attributable to growth in cable advertising
sales, $5.0 million and $1.5 million are attributable to increases in costs
associated with customer service and $55.4 million and $24.0 million result from
increases in the costs of labor, other volume related expenses and costs
associated with new product offerings. We anticipate that the cost of cable
programming will increase in the future as cable programming rates increase and
additional sources of cable programming become available.
- 26 -
<PAGE>
Electronic Retailing
The following table sets forth the operating results for our electronic
retailing segment (dollars in millions):
<TABLE>
<CAPTION>
Year Ended
December 31, Increase
1999 1998 $ %
-------- --------- -------- -------
<S> <C> <C> <C> <C>
Net sales from electronic retailing.......................... $2,847.4 $2,402.7 $444.7 18.5%
Cost of goods sold from electronic retailing................. 1,740.1 1,462.0 278.1 19.0
Operating, selling, general and administrative expenses...... 568.5 506.5 62.0 12.2
------- --------- --------
Operating income before depreciation
and amortization (a)................................... $538.8 $434.2 $104.6 24.1%
======= ========= ========
Gross margin................................................. 38.9% 39.2%
====== =========
Year Ended
December 31, Increase
1998 1997 $ %
-------- --------- -------- -------
Net sales from electronic retailing.......................... $2,402.7 $2,082.5 $320.2 15.4%
Cost of goods sold from electronic retailing................. 1,462.0 1,270.2 191.8 15.1
Operating, selling, general and administrative expenses...... 506.5 474.6 31.9 6.7
------- --------- --------
Operating income before depreciation
and amortization (a)................................... $434.2 $337.7 $96.5 28.6%
======= ========= ========
Gross margin................................................. 39.2% 39.0%
====== =========
<FN>
- ---------------
(a) See footnote (1) on page 25.
</FN>
</TABLE>
The respective increases in net sales from electronic retailing of $444.7
million and $320.2 million for the years ended December 31, 1999 and 1998 are
primarily attributable to the effects of 4.1%, 11.4% and 35.2% increases in the
average number of homes receiving QVC services in the United States ("US"),
United Kingdom ("UK") and Germany, respectively, and 8.5%, 8.4% and 79.6%
increases in the sales per home in the US, UK and Germany, respectively.
An allowance for returned merchandise is provided as a percentage of sales
based on historical experience. The return provision was approximately 21% of
gross sales for each of the years ended December 31, 1999, 1998 and 1997.
The increases in cost of goods sold from electronic retailing are
primarily related to the growth in net sales. The change in gross margin between
1998 and 1997 is primarily due to slight changes in product mix. The slight
decline in gross margin in 1999 from 1998 is primarily related to higher
warehousing costs due to a shortage of warehouse space in the US and inventory
adjustments in Germany.
Of the respective increases in operating, selling, general and
administrative expenses of $62.0 million and $31.9 million for the years ended
December 31, 1999 and 1998, $39.8 million and $21.7 million are attributable to
higher variable costs associated with the increase in sales volume. The
remaining increases are attributable to higher personnel costs to support the
increased sales volume in the US, UK and Germany.
------------------------------------
- 27 -
<PAGE>
Consolidated Analysis
Interest Expense
The $71.6 million increase in interest expense from 1998 to 1999 is
primarily due to the effects of our acquisition of a controlling interest in
Jones Intercable in April 1999, the issuance of 6.20% nonrecourse notes issued
by our wholly owned subsidiary Comcast Cable Communications, Inc. ("Comcast
Cable") in November 1998 and the issuance of the ZONES in October and November
1999, offset, in part, by the effects of the sale of Comcast UK Cable in October
1998.
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.
Investment (Income) Expense
During the year ended December 31, 1999, we sold all 5.8 million shares of
the NTL Incorporated ("NTL") common stock that we owned for total proceeds of
$498.3 million and recognized a pre-tax gain of $284.2 million.
In March 1999, AT&T Corp. ("AT&T") merged with Tele-Communications, Inc.
("TCI") with AT&T as the surviving corporation (the "AT&T/TCI Merger"). Upon
closing of the AT&T/TCI Merger, we received 3.6 million shares (as adjusted for
AT&T's 3-for-2 stock split in April 1999) of AT&T common stock in exchange for
the 3.1 million shares of TCI Class A Common Stock held by us and we received
3.6 million shares of Liberty Media Group Class A Tracking Shares for the 2.3
million shares of TCI Ventures Group, Inc. ("TCI Ventures") common stock and the
2.4 million shares of Liberty Media Group Class A Common Stock held by us. As a
result of the exchange, we recognized a pre-tax gain of $187.6 million during
the year ended December 31, 1999, representing the difference between the fair
value of the AT&T stock received and our basis in TCI and TCI Ventures.
During the years ended December 31, 1999 and 1998, we recorded pre-tax
losses of $35.5 million and $152.8 million, respectively, on certain of our
investments based on a decline in value that was considered other than
temporary.
Expense 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. Therefore,
the carrying value of the ZONES was increased by $666.0 million during 1999 to
reflect the fair value of the underlying Sprint PCS Stock.
Gain From Equity Offering of Affiliate
In April 1998 and November 1997, Teleport Communications Group, Inc.
("Teleport") issued shares of its Class A Common Stock. As a result of the stock
issuances, we recognized a $157.8 million increase in our proportionate share of
Teleport's net assets as a gain from equity offering of affiliate for the year
ended December 31, 1998. We recorded our proportionate share of Teleport's net
losses one quarter in arrears.
Other Income
In May 1999, we received the $1.460 billion MediaOne termination fee, net
of transaction costs.
In October 1998, we recognized a pre-tax gain of $148.3 million on the
exchange of our interest in Comcast UK Cable for NTL common stock.
In November 1998, we recognized a pre-tax gain of $758.5 million on the
restructuring of Sprint PCS, representing the difference between the aggregate
fair value of the Sprint PCS common stock, convertible preferred stock and
warrant received by us and our historical partnership interest in Sprint PCS.
In July 1998, AT&T completed its merger with Teleport. Upon closing of the
merger, we received 36.3 million shares (as adjusted for AT&T's 3-for-2 stock
split in April 1999) of AT&T common stock in exchange for the 25.6 million
shares of Teleport Class B Common Stock held by us. As a result of the exchange,
we recognized a pre-tax gain of $1.092 billion during 1998, representing the
difference between the fair value of the AT&T stock received by us and our basis
in Teleport.
Income Tax Expense
The $129.7 million increase in income tax expense from 1998 to 1999 is
primarily the result of the effects of changes in our income before taxes and
minority interest and increases in state income taxes of certain of our
subsidiaries.
Minority Interest Income
The $39.7 million decrease in minority interest income from 1998 to 1999
is attributable to the effects of our acquisition of a controlling interest in
Jones Intercable in April 1999, the sale of Comcast UK Cable in October 1998 and
to changes in the net income or loss of our other less than 100% owned
consolidated subsidiaries.
- 28 -
<PAGE>
Extraordinary Items
Extraordinary items for the years ended December 31, 1999, 1998 and 1997
consist of unamortized debt issue costs and debt extinguishment costs, net of
related tax benefits, expensed in connection with the redemption and refinancing
of certain indebtedness.
We believe that our operations are not materially affected by inflation.
- 29 -
<PAGE>
ITEM 8 FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEPENDENT AUDITORS' REPORT
Board of Directors and Stockholders
Comcast Corporation
Philadelphia, Pennsylvania
We have audited the accompanying consolidated balance sheet of Comcast
Corporation and its subsidiaries as of December 31, 1999 and 1998, and the
related consolidated statements of operations, stockholders' equity and of cash
flows for each of the three years in the period ended December 31, 1999. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits. We did not audit the consolidated financial statements of QVC, Inc.
("QVC") (a consolidated subsidiary) as of December 31, 1998 and for each of the
two years in the period then ended, which statements reflect total assets
constituting 14% of the Company's consolidated total assets as of December 31,
1998 and total revenues constituting 47% of the Company's consolidated revenues
for each of the years ended December 31, 1998 and 1997. Those statements were
audited by other auditors whose report has been furnished to us, and our
opinion, insofar as it relates to the amounts included in the Company's
consolidated financial statements for QVC, is based solely upon the report of
such other auditors.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits and the report of other auditors provide a reasonable
basis for our opinion.
In our opinion, based on our audits and the report of other auditors, such
consolidated financial statements present fairly, in all material respects, the
financial position of Comcast Corporation and its subsidiaries as of December
31, 1999 and 1998, and the results of their operations and their cash flows for
each of the three years in the period ended December 31, 1999 in conformity with
generally accepted accounting principles.
Deloitte & Touche LLP
Philadelphia, Pennsylvania
February 24, 2000
- 30 -
<PAGE>
COMCAST CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(Dollars in millions, except share data)
<TABLE>
<CAPTION>
December 31,
1999 1998
------------ ------------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents...................................................... $922.2 $870.7
Investments.................................................................... 7,606.0 3,653.4
Accounts receivable, less allowance for doubtful
accounts of $136.6 and $120.7............................................... 673.3 549.3
Inventories, net............................................................... 457.0 343.8
Other current assets........................................................... 100.1 100.2
------------ ------------
Total current assets..................................................... 9,758.6 5,517.4
------------ ------------
INVESTMENTS....................................................................... 5,548.8 602.4
------------ ------------
PROPERTY AND EQUIPMENT............................................................ 5,099.0 3,886.7
Accumulated depreciation....................................................... (1,700.9) (1,362.3)
------------ ------------
Property and equipment, net.................................................... 3,398.1 2,524.4
------------ ------------
DEFERRED CHARGES
Franchise and license acquisition costs........................................ 5,155.7 4,763.6
Excess of cost over net assets acquired and other.............................. 7,566.4 3,450.9
------------ ------------
12,722.1 8,214.5
Accumulated amortization....................................................... (2,742.0) (2,148.2)
------------ ------------
Deferred charges, net.......................................................... 9,980.1 6,066.3
------------ ------------
$28,685.6 $14,710.5
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued expenses.......................................... $2,786.5 $1,600.3
Accrued interest............................................................... 104.5 73.5
Net liabilities of discontinued operations..................................... 165.2
Deferred income taxes.......................................................... 2,118.6 1,033.2
Current portion of long-term debt.............................................. 517.5 113.5
------------ ------------
Total current liabilities................................................ 5,527.1 2,985.7
------------ ------------
LONG-TERM DEBT, less current portion (including adjustment to carrying value of
$666.0 million and zero)....................................................... 8,707.2 5,464.2
------------ ------------
DEFERRED INCOME TAXES............................................................. 3,150.5 1,500.1
------------ ------------
MINORITY INTEREST AND OTHER....................................................... 959.5 834.0
------------ ------------
COMMITMENTS AND CONTINGENCIES.....................................................
COMMON EQUITY PUT OPTIONS......................................................... 111.2
------------ ------------
STOCKHOLDERS' EQUITY
Preferred stock - authorized, 20,000,000 shares; 5% series A convertible,
no par value; issued, zero and 6,370 at redemption value.................... 31.9
5.25% series B mandatorily redeemable convertible, $1,000 par value;
issued, 569,640 and 540,690 at redemption value............................. 569.6 540.7
Class A special common stock, $1 par value - authorized,
2,500,000,000 shares; issued, 716,442,482 and 698,395,170 .................. 716.4 698.4
Class A common stock, $1 par value - authorized,
200,000,000 shares; issued, 25,993,380 and 31,690,063....................... 26.0 31.7
Class B common stock, $1 par value - authorized,
50,000,000 shares; issued, 9,444,375........................................ 9.4 9.4
Additional capital............................................................. 3,527.0 2,941.7
Accumulated deficit............................................................ (619.8) (1,488.2)
Accumulated other comprehensive income......................................... 6,112.7 1,049.7
------------ ------------
Total stockholders' equity............................................... 10,341.3 3,815.3
------------ ------------
$28,685.6 $14,710.5
============ ============
</TABLE>
See notes to consolidated financial statements.
- 31 -
<PAGE>
COMCAST CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
(Amounts in millions, except per share data)
<TABLE>
<CAPTION>
Year Ended December 31,
1999 1998 1997
---------- ---------- ----------
<S> <C> <C> <C>
REVENUES
Service income.......................................................... $3,361.8 $2,742.6 $2,385.2
Net sales from electronic retailing..................................... 2,847.4 2,402.7 2,082.5
---------- ---------- ----------
6,209.2 5,145.3 4,467.7
---------- ---------- ----------
COSTS AND EXPENSES
Operating............................................................... 1,663.1 1,410.3 1,204.1
Cost of goods sold from electronic retailing............................ 1,740.1 1,462.0 1,270.2
Selling, general and administrative..................................... 926.0 776.3 700.3
Depreciation............................................................ 572.0 463.9 404.1
Amortization............................................................ 644.0 475.7 422.4
---------- ---------- ----------
5,545.2 4,588.2 4,001.1
---------- ---------- ----------
OPERATING INCOME........................................................... 664.0 557.1 466.6
OTHER (INCOME) EXPENSE
Interest expense........................................................ 538.3 466.7 458.9
Investment (income) expense............................................. (629.5) 187.8 (149.4)
Expense related to indexed debt......................................... 666.0
Equity in net (income) losses of affiliates............................. (1.4) 515.9 343.8
Gain from equity offering of affiliate.................................. (157.8) (7.7)
Other (income) expense.................................................. (1,409.4) (2,012.9) 9.7
---------- ---------- ----------
(836.0) (1,000.3) 655.3
---------- ---------- ----------
INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE INCOME TAX
EXPENSE, MINORITY INTEREST AND EXTRAORDINARY ITEMS...................... 1,500.0 1,557.4 (188.7)
INCOME TAX EXPENSE......................................................... 723.7 594.0 70.4
---------- ---------- ----------
INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE
MINORITY INTEREST AND EXTRAORDINARY ITEMS............................... 776.3 963.4 (259.1)
MINORITY INTEREST INCOME................................................... 4.6 44.3 76.2
---------- ---------- ----------
INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE
EXTRAORDINARY ITEMS..................................................... 780.9 1,007.7 (182.9)
GAIN (LOSS) FROM DISCONTINUED OPERATIONS, net of income tax expense
(benefit) of $166.1 million, ($19.1) million and ($14.8) million........ 335.8 (31.4) (25.6)
---------- ---------- ----------
INCOME (LOSS) BEFORE EXTRAORDINARY ITEMS................................... 1,116.7 976.3 (208.5)
EXTRAORDINARY ITEMS ....................................................... (51.0) (4.2) (30.2)
---------- ---------- ----------
NET INCOME (LOSS).......................................................... 1,065.7 972.1 (238.7)
PREFERRED DIVIDENDS........................................................ (29.7) (29.1) (14.8)
---------- ---------- ----------
NET INCOME (LOSS) FOR COMMON STOCKHOLDERS.................................. $1,036.0 $943.0 ($253.5)
========== ========== ==========
BASIC EARNINGS (LOSS) FOR COMMON STOCKHOLDERS PER COMMON SHARE
Income (loss) from continuing operations before extraordinary items..... $1.00 $1.34 ($.29)
Discontinued operations................................................. .45 (.04) (.04)
Extraordinary items..................................................... (.07) (.01) (.04)
---------- ---------- ----------
Net income (loss)....................................................... $1.38 $1.29 ($.37)
========== ========== ==========
BASIC WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING................ 749.1 733.0 678.0
========== ========== ==========
DILUTED EARNINGS (LOSS) FOR COMMON STOCKHOLDERS PER COMMON SHARE
Income (loss) from continuing operations before extraordinary items..... $.95 $1.25 ($.29)
Discontinued operations................................................. .41 (.03) (.04)
Extraordinary items..................................................... (.06) (.01) (.04)
---------- ---------- ----------
Net income (loss)....................................................... $1.30 $1.21 ($.37)
========== ========== ==========
DILUTED WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING............................................... 819.9 806.0 678.0
========== ========== ==========
</TABLE>
See notes to consolidated financial statements.
- 32 -
<PAGE>
COMCAST CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(Dollars in millions)
<TABLE>
<CAPTION>
Year Ended December 31,
1999 1998 1997
------------ ------------ ------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income (loss)............................................................. $1,065.7 $972.1 ($238.7)
Adjustments to reconcile net income (loss) to net cash provided
by operating activities from continuing operations:
Depreciation............................................................... 572.0 463.9 404.1
Amortization............................................................... 644.0 475.7 422.4
Non-cash interest (income) expense, net.................................... (27.8) 29.2 32.3
Non-cash expense related to indexed debt................................... 666.0
Equity in net (income) losses of affiliates................................ (1.4) 515.9 343.8
Gain from equity offering of affiliate..................................... (157.8) (7.7)
Gains on investments, net and termination fee.............................. (1,917.0) (1,758.5) (81.0)
Minority interest income................................................... (4.6) (44.3) (76.2)
Discontinued operations.................................................... (335.8) 31.4 25.6
Extraordinary items........................................................ 51.0 4.2 30.2
Deferred income taxes and other............................................ (31.9) 418.2 (40.6)
------------ ------------ ------------
680.2 950.0 814.2
Changes in working capital................................................. 569.2 117.7 30.4
------------ ------------ ------------
Net cash provided by operating activities from continuing operations.... 1,249.4 1,067.7 844.6
------------ ------------ ------------
FINANCING ACTIVITIES
Proceeds from borrowings...................................................... 2,786.6 1,938.0 1,951.1
Retirement and repayment of debt.............................................. (1,368.2) (1,113.4) (2,586.6)
Issuance of preferred stock................................................... 500.0
(Repurchases) issuances of common stock, net.................................. (13.6) 28.9 470.2
Dividends..................................................................... (9.4) (36.0) (34.0)
Deferred financing costs...................................................... (51.0) (16.3) (16.9)
Other......................................................................... (3.0) 8.0 0.1
------------ ------------ ------------
Net cash provided by financing activities from continuing operations.... 1,341.4 809.2 283.9
------------ ------------ ------------
INVESTING ACTIVITIES
Acquisitions, net of cash acquired............................................ (755.2) (309.7) (170.1)
Proceeds from termination fee, net............................................ 1,460.0
(Purchases of) proceeds from short-term investments, net...................... (1,035.5) 145.9 45.6
Capital contributions to and purchases of investments......................... (2,012.2) (202.1) (268.7)
Proceeds from sales of and distributions from investments..................... 599.8 23.6 171.1
Proceeds from investees' repayments of loans.................................. 74.7 30.6
Capital expenditures.......................................................... (893.8) (898.9) (795.5)
Sale of subsidiary, net of cash sold.......................................... 361.1 (140.4)
Additions to deferred charges................................................. (263.5) (108.4) (58.8)
------------ ------------ ------------
Net cash used in investing activities from continuing operations........ (2,539.3) (1,415.3) (1,045.8)
------------ ------------ ------------
INCREASE IN CASH AND CASH EQUIVALENTS - CONTINUING
OPERATIONS.................................................................... 51.5 461.6 82.7
CASH AND CASH EQUIVALENTS, beginning of year..................................... 870.7 409.1 326.4
------------ ------------ ------------
CASH AND CASH EQUIVALENTS, end of year........................................... $922.2 $870.7 $409.1
============ ============ ============
</TABLE>
See notes to consolidated financial statements.
- 33 -
<PAGE>
COMCAST CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(Dollars in millions, except per share data)
<TABLE>
<CAPTION>
Preferred Stock Common Stock
------------------ ----------------------------
Series Series Class A Additional Accumulated
A B Special Class A Class B Capital Deficit
------- ------- -------- ------- ------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE, JANUARY 1, 1997........................ $31.9 $609.4 $34.0 $8.8 $2,000.5 ($2,127.1)
Comprehensive income (loss):
Net loss..................................... (238.7)
Unrealized gains on marketable securities,
net of deferred taxes of $75.8............
Cumulative translation adjustments...........
Total comprehensive loss........................
Issuance of common stock..................... 49.8 450.5
Issuance of preferred stock.................. 500.0
Exercise of options.......................... 2.0 13.8
Conversion of convertible subordinated
debt to common stock...................... 16.8 201.7
Retirement of common stock................... (3.4) (2.2) (19.5) (17.7)
Cash dividends, common, $.0467 per share..... (32.4)
Cash dividends, Series A preferred........... (1.6)
Series B preferred dividends................. 13.2 (13.2)
Temporary equity related to put options...... 38.2
Proceeds from sales and extensions of put
options ................................... 2.6
------- ------ ------ ------ ------ --------- -----------
BALANCE, DECEMBER 31, 1997...................... 31.9 513.2 674.6 31.8 8.8 2,673.0 (2,415.9)
Comprehensive income:
Net income................................... 972.1
Unrealized gains on marketable securities,
net of deferred taxes of $489.4...........
Cumulative translation adjustments...........
Total comprehensive income......................
Conversion of convertible subordinated debt
to common stock........................... 20.8 336.8
Exercise of options.......................... 3.4 0.6 31.8
Retirement of common stock................... (0.4) (0.1) (2.4) (10.0)
Cash dividends, common, $.0467 per share..... (34.4)
Cash dividends, Series A preferred........... (1.6)
Series B preferred dividends................. 27.5 (27.5)
Temporary equity related to put options...... (79.8)
Proceeds from sales of put options........... 11.4
------- ------ ------ ------ ------ --------- -----------
BALANCE, DECEMBER 31, 1998...................... 31.9 540.7 698.4 31.7 9.4 2,941.7 (1,488.2)
Comprehensive income:
Net income................................... 1,065.7
Unrealized gains on marketable securities,
net of deferred taxes of $2,730.2.........
Cumulative translation adjustments...........
Total comprehensive income......................
Acquisition.................................. 8.5 283.2
Exercise of options.......................... 2.2 23.7
Conversion of Series A preferred............. (31.9) 2.7 29.2
Retirement of common stock................... (0.8) (4.6) (25.3)
Cash dividends, Series A preferred........... (0.8)
Series B preferred dividends................. 28.9 (28.9)
Share exchange............................... 4.6 (4.9) 172.3 (172.0)
Temporary equity related to put options...... 111.2
------- ------ ------ ------ ------ --------- -----------
BALANCE, DECEMBER 31, 1999......................$ $569.6 $716.4 $26.0 $9.4 $3,527.0 ($619.8)
======= ====== ====== ====== ====== ========= ===========
</TABLE>
<TABLE>
<CAPTION>
Accumulated Other
Comprehensive Income (Loss)
-------------------------------------
Unrealized
Gains on Cumulative
Marketable Translation
Securities Adjustments Total
----------- ------------ -------
<S> <C> <C> <C>
BALANCE, JANUARY 1, 1997........................ $0.1 ($6.0) $551.6
Comprehensive income (loss):
Net loss.....................................
Unrealized gains on marketable securities,
net of deferred taxes of $75.8............ 140.6
Cumulative translation adjustments........... (5.6)
Total comprehensive loss........................ (103.7)
Issuance of common stock..................... 500.3
Issuance of preferred stock.................. 500.0
Exercise of options.......................... 15.8
Conversion of convertible subordinated
debt to common stock...................... 218.5
Retirement of common stock................... (42.8)
Cash dividends, common, $.0467 per share..... (32.4)
Cash dividends, Series A preferred........... (1.6)
Series B preferred dividends.................
Temporary equity related to put options...... 38.2
Proceeds from sales and extensions of put
options ................................... 2.6
----------- ----------- ---------
BALANCE, DECEMBER 31, 1997...................... 140.7 (11.6) 1,646.5
Comprehensive income:
Net income...................................
Unrealized gains on marketable securities,
net of deferred taxes of $489.4........... 908.8
Cumulative translation adjustments........... 11.8
Total comprehensive income...................... 1,892.7
Conversion of convertible subordinated debt
to common stock........................... 357.6
Exercise of options.......................... 35.8
Retirement of common stock................... (12.9)
Cash dividends, common, $.0467 per share..... (34.4)
Cash dividends, Series A preferred........... (1.6)
Series B preferred dividends.................
Temporary equity related to put options...... (79.8)
Proceeds from sales of put options........... 11.4
----------- ----------- ---------
BALANCE, DECEMBER 31, 1998...................... 1,049.5 0.2 3,815.3
Comprehensive income:
Net income...................................
Unrealized gains on marketable securities,
net of deferred taxes of $2,730.2......... 5,070.3
Cumulative translation adjustments........... (7.3)
Total comprehensive income...................... 6,128.7
Acquisition.................................. 291.7
Exercise of options.......................... 25.9
Conversion of Series A preferred.............
Retirement of common stock................... (30.7)
Cash dividends, Series A preferred........... (0.8)
Series B preferred dividends.................
Share exchange...............................
Temporary equity related to put options...... 111.2
----------- ----------- ---------
BALANCE, DECEMBER 31, 1999...................... $6,119.8 ($7.1) $10,341.3
=========== =========== =========
</TABLE>
See notes to consolidated financial statements.
- 34 -
<PAGE>
COMCAST CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
1. BUSINESS
Comcast Corporation and its subsidiaries (the "Company") is principally
involved in three lines of business: cable, commerce and content.
The Company's cable communications business is principally involved in the
development, management and operation of broadband cable networks in the
United States ("US"). The Company's consolidated cable operations served
approximately 5.7 million subscribers and passed approximately 9.5 million
homes as of December 31, 1999.
Commerce is provided through the Company's consolidated subsidiary, QVC,
Inc. ("QVC"). Through QVC, an electronic retailer, the Company markets a
wide variety of products directly to consumers primarily on merchandise-
focused television programs. QVC was available, on a full and part-time
basis, to over 72 million homes in the US, over 8 million homes in the
United Kingdom ("UK") and Ireland and over 17 million homes in Germany as
of December 31, 1999.
Content is provided through the Company's consolidated subsidiaries
including Comcast-Spectacor, Comcast SportsNet and E! Entertainment
Television, Inc. ("E! Entertainment"), and through other programming
investments including The Golf Channel, Speedvision and Outdoor Life.
Comcast SportsNet is a 24-hour regional sports programming network which
provides sports related programming, including the Philadelphia Flyers NHL
hockey team, the Philadelphia 76ers NBA basketball team and the
Philadelphia Phillies MLB baseball team to approximately 2.7 million
subscribers in the Philadelphia region. E! Entertainment is a 24-hour
network with programming dedicated to the world of entertainment with
distribution to approximately 60 million subscribers as of December 31,
1999.
Stock Split
On March 3, 1999, the Company's board of directors authorized an increase
in the number of authorized shares of the Company's Class A Special Common
Stock from 500 million shares to 2.5 billion shares. On that date, the
Company's board of directors also authorized a two-for-one stock split in
the form of a 100% stock dividend (the "Stock Split") payable on May 5,
1999 to shareholders of record on April 20, 1999. The dividend was paid in
Class A Special Common Stock to the holders of Class A Common, Class A
Special Common and Class B Common Stock. The average number of shares
outstanding and related prices, per share amounts, share conversions and
stock option data have been retroactively restated to reflect the Stock
Split. The Company's board of directors also eliminated the quarterly cash
dividend of $.0117 per share on all classes of its common stock. The last
quarterly cash dividend was paid in March 1999.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND OTHER ITEMS
Basis of Consolidation
The consolidated financial statements include the accounts of the Company
and all wholly owned or controlled subsidiaries. All significant
intercompany accounts and transactions among consolidated entities have
been eliminated.
Management's Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
Fair Values
The estimated fair value amounts presented in these notes to consolidated
financial statements have been determined by the Company using available
market information and appropriate methodologies. However,
- 35 -
<PAGE>
COMCAST CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997 (Continued)
considerable judgment is required in interpreting market data to develop
the estimates of fair value. The estimates presented herein are not
necessarily indicative of the amounts that the Company could realize in a
current market exchange. The use of different market assumptions and/or
estimation methodologies may have a material effect on the estimated fair
value amounts. Such fair value estimates are based on pertinent
information available to management as of December 31, 1999 and 1998, and
have not been comprehensively revalued for purposes of these consolidated
financial statements since such dates.
Cash Equivalents
Cash equivalents consist principally of US Government obligations,
commercial paper, repurchase agreements and certificates of deposit with
maturities of three months or less when purchased. The carrying amounts of
the Company's cash equivalents approximate their fair values.
Inventories - Electronic Retailing
Inventories, consisting primarily of products held for sale, are stated at
the lower of cost or market. Cost is determined by the average cost
method, which approximates the first-in, first-out method.
Investments
Investments consist principally of equity securities and US Government
obligations, commercial paper, repurchase agreements and certificates of
deposit with maturities of greater than three months when purchased.
Investments in entities in which the Company has the ability to exercise
significant influence over the operating and financial policies of the
investee are accounted for under the equity method. Equity method
investments are recorded at original cost and adjusted periodically to
recognize the Company's proportionate share of the investees' net income
or losses after the date of investment, additional contributions made and
dividends received. The differences between the Company's recorded
investments and its proportionate interests in the book value of the
investees' net assets are being amortized to equity in net income or loss,
primarily over a period of 20 years, which is consistent with the
estimated lives of the underlying assets.
Unrestricted publicly traded investments are classified as available for
sale and recorded at their fair value, with unrealized gains or losses
resulting from changes in fair value between measurement dates recorded as
a component of other comprehensive income.
Restricted publicly traded investments and investments in privately held
companies are stated at cost, adjusted for any known diminution in value
(see Note 4).
Property and Equipment
Property and equipment are stated at cost. Depreciation is provided by the
straight-line method over estimated useful lives as follows:
Buildings and improvements........................8-40 years
Operating facilities..............................5-20 years
Other equipment...................................2-10 years
Improvements that extend asset lives are capitalized; other repairs and
maintenance charges are expensed as incurred. The cost and related
accumulated depreciation applicable to assets sold or retired are removed
from the accounts and the gain or loss on disposition is recognized as a
component of depreciation expense.
Capitalized Costs
Interest is capitalized as part of the historical cost of acquiring
qualifying assets, including investments in equity method investees while
the investee has activities in progress necessary to commence its planned
principal operations. Capitalized interest for the year ended December 31,
1997 was $18.0 million. The costs associated with
- 36 -
<PAGE>
COMCAST CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997 (Continued)
the construction of cable transmission and distribution facilities and new
cable service installations are capitalized. Costs include all direct
labor and materials as well as certain indirect costs.
Deferred Charges
Franchise and license acquisition costs are amortized on a straight-line
basis over their legal or estimated useful lives of 3 to 40 years. The
excess of cost over the fair value of net assets acquired is being
amortized on a straight- line basis over estimated useful lives of 20 to
40 years.
Valuation of Long-Lived Assets
The Company periodically evaluates the recoverability of its long-lived
assets, including property and equipment and deferred charges, using
objective methodologies whenever events or changes in circumstances
indicate that the carrying amount may not be recoverable. Such
methodologies include evaluations based on the cash flows generated by the
underlying assets, profitability information, including estimated future
operating results, trends or other determinants of fair value. If the
total of the expected future undiscounted cash flows is less than the
carrying amount of the asset, a loss is recognized for the difference
between the fair value and the carrying value of the asset.
Foreign Currency Translation
Assets and liabilities of the Company's foreign subsidiaries, where the
functional currency is the local currency, are translated into US dollars
at the December 31 exchange rate. The related translation adjustments are
recorded as a component of other comprehensive income. Revenues and
expenses are translated using average exchange rates prevailing during the
year. Foreign currency transaction gains and losses are included in other
(income) expense.
Revenue Recognition
Service income is recognized as service is provided. Credit risk is
managed by disconnecting services to cable customers who are delinquent.
Net sales from electronic retailing are recognized at the time of shipment
to customers. The Company's policy is to allow customers to return
merchandise for credit up to thirty days after date of shipment. An
allowance for returned merchandise is provided as a percentage of sales
based on historical experience.
Stock-Based Compensation
The Company accounts for stock-based compensation in accordance with APB
Opinion No. 25, "Accounting for Stock Issued to Employees," and related
interpretations, as permitted by Statement of Financial Accounting
Standards ("SFAS") No. 123, "Accounting for Stock-Based Compensation."
Compensation expense for stock options is measured as the excess, if any,
of the quoted market price of the Company's stock at the date of the grant
over the amount an employee must pay to acquire the stock. Compensation
expense for restricted stock awards is recorded annually based on the
quoted market price of the Company's stock at the date of the grant and
the vesting period. Compensation expense for stock appreciation rights is
recorded annually based on the changes in quoted market prices of the
Company's stock or other determinants of fair value at the end of the year
(see Note 6).
Postretirement and Postemployment Benefits
The estimated costs of retiree benefits and benefits for former or
inactive employees, after employment but before retirement, are accrued
and recorded as a charge to operations during the years the employees
provide services.
Investment Income
Investment income includes interest income and gains, net of losses, on
the sales of marketable securities and long- term investments. Gross
realized gains and losses are recognized using the specific identification
method (see Note 4). Investment income also includes impairment losses
resulting from adjustments to the net realizable value of certain of the
Company's long-term investments.
- 37 -
<PAGE>
COMCAST CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997 (Continued)
Income Taxes
The Company recognizes deferred tax assets and liabilities for temporary
differences between the financial reporting basis and the tax basis of the
Company's assets and liabilities and expected benefits of utilizing net
operating loss carryforwards. The impact on deferred taxes of changes in
tax rates and laws, if any, applied to the years during which temporary
differences are expected to be settled, are reflected in the consolidated
financial statements in the period of enactment.
Derivative Financial Instruments
The Company uses derivative financial instruments, including interest rate
exchange agreements ("Swaps"), interest rate cap agreements ("Caps") and
interest rate collar agreements ("Collars") to manage its exposure to
fluctuations in interest rates, and common stock option contracts to
manage its exposure to fluctuations in the price of its Class A Special
Common Stock ("Comcast Put Options"). The Company also enters into call
options on certain of its investments in equity securities ("Covered Call
Options").
Swaps, Caps and Collars are matched with either fixed or variable rate
debt and periodic cash payments are accrued on a settlement basis as an
adjustment to interest expense. Any premiums associated with these
instruments are amortized over their term and realized gains or losses as
a result of the termination of the instruments are deferred and amortized
over the remaining term of the underlying debt. Unrealized gains and
losses as a result of these instruments are recognized when the underlying
hedged item is extinguished or otherwise terminated.
Proceeds from sales of Comcast Put Options are recorded in stockholders'
equity and an amount equal to the redemption price of the common stock is
reclassified from permanent equity to temporary equity. Subsequent changes
in the market value of Comcast Put Options are not recorded. Covered Call
Options are marked to market on a current basis with the result included
in investment (income) expense in the Company's consolidated statement of
operations.
Those instruments that have been entered into by the Company to hedge
exposure to interest rate risks are periodically examined by the Company
to ensure that the instruments are matched with underlying liabilities,
reduce the Company's risks relating to interest rates and, through market
value and sensitivity analysis, maintain a high correlation to the
interest expense of the hedged item. For those instruments that do not
meet the above criteria, variations in their fair value are
marked-to-market on a current basis in the Company's consolidated
statement of operations.
The Company does not hold or issue any derivative financial instruments
for trading purposes and is not a party to leveraged instruments (see Note
5). The credit risks associated with the Company's derivative financial
instruments are controlled through the evaluation and monitoring of the
creditworthiness of the counterparties. Although the Company may be
exposed to losses in the event of nonperformance by the counterparties,
the Company does not expect such losses, if any, to be significant.
Sale of Stock by a Subsidiary or Equity Method Investee
Changes in the Company's proportionate share of the underlying equity of a
consolidated subsidiary or equity method investee which result from the
issuance of additional securities by such subsidiary or investee are
recognized as gains or losses in the Company's consolidated statement of
operations unless gain realization is not assured in the circumstances.
Gains for which realization is not assured are credited directly to
additional capital.
New Accounting Pronouncement
In June 1998, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 133, "Accounting for Derivative Instruments and Hedging
Activities." This statement establishes accounting and reporting standards
for derivatives and hedging activities. Upon the adoption of SFAS No. 133,
all derivatives are required to be recognized in the statement of
financial position as either assets or liabilities and measured at fair
value. In July 1999, the FASB issued SFAS No. 137, "Accounting for
Derivative Instruments and Hedging Activities - Deferral
- 38 -
<PAGE>
COMCAST CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997 (Continued)
of the Effective Date of FASB Statement No. 133 - an amendment of FASB
Statement No. 133" deferring the effective date for implementation of SFAS
No. 133 to fiscal years beginning after June 15, 2000. The Company is
currently evaluating the impact the adoption of SFAS No. 133 will have on
its financial position and results of operations.
Earnings (Loss) for Common Stockholders Per Common Share
Earnings (loss) for common stockholders per common share is computed by
dividing net income (loss), 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 earnings (loss) for common stockholders per common share ("Diluted
EPS") for the years ended December 31, 1999, 1998 and 1997, respectively.
<TABLE>
<CAPTION>
(Amounts in millions, except per share data)
Year Ended
December 31,
1999 1998 1997
------------ ---------- ---------
<S> <C> <C> <C>
Net income (loss) for common stockholders............................. $1,036.0 $943.0 ($253.5)
Dilutive securities effect on net income (loss) for common
stockholders....................................................... 1.0
Preferred dividends................................................... 29.7 29.1
---------- --------- --------
Net income (loss) for common stockholders used for
Diluted EPS........................................................ $1,065.7 $973.1 ($253.5)
========== ========= ========
Weighted average number of common shares outstanding.................. 749.1 733.0 678.0
Dilutive securities:
1 1/8% discount convertible subordinated debentures,
redeemed March 1998........................................... 5.0
Series A and B convertible preferred stock...................... 44.0 45.2
Stock option and restricted stock plans......................... 26.8 22.8
---------- --------- --------
Diluted weighted average number of common shares
outstanding........................................................ 819.9 806.0 678.0
========== ========= ========
Diluted earnings (loss) for common stockholders per
common share....................................................... $1.30 $1.21 ($.37)
========== ========= ========
</TABLE>
Comcast Put Options on a weighted average 2.7 million shares and 2.9
million shares of its Class A Special Common Stock (see Note 6) were
outstanding during the years ended December 31, 1999 and 1998 but were not
included in the computation of Diluted EPS as the Comcast Put Options'
exercise price was less than the average market price of the Company's
Class A Special Common Stock during the periods.
For the year ended December 31, 1997, the Company's potential common
shares of 106.4 million shares have an antidilutive effect on loss for
common stockholders per common share and, therefore, have not been used in
determining the total weighted average number of common shares
outstanding.
Reclassifications
Certain reclassifications have been made to the prior years' consolidated
financial statements to conform to those classifications used in 1999.
- 39 -
<PAGE>
COMCAST CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997 (Continued)
3. ACQUISITIONS AND OTHER SIGNIFICANT EVENTS
Acquisition of Lenfest Communications, Inc.
In January 2000, the Company acquired Lenfest Communications, Inc.
("Lenfest"), a cable communications company serving approximately 1.3
million subscribers primarily in the Philadelphia area from AT&T Corp.
("AT&T") and the Lenfest stockholders for approximately 121.4 million
shares of the Company's Class A Special Common Stock with a value of
$6.077 billion. In connection with the acquisition, the Company assumed
approximately $1.777 billion of debt.
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"), a 55% owned consolidated subsidiary of the
Company which serves approximately 642,000 cable subscribers in Michigan,
New Jersey and Florida pursuant to an agreement entered into in December
1999. In February 2000, the acquisition closed and, as a result, the
Company now owns 100% of Comcast MHCP. The consideration was $750.0
million in cash.
Jones Intercable Agreement
In May 1998, the Company agreed to purchase from BCI Telecom Holding
("BTH") 6.4 million Class A Common Shares in Jones Intercable, Inc.
("Jones Intercable"), and a 49% interest in the BTH subsidiaries which
were to continue to own BTH's remaining 6.4 million shares of Jones
Intercable Class A Common Stock. At the same time, the Company agreed to
acquire approximately 2.9 million shares of Common Stock of Jones
Intercable (the "Control Shares"), if and when acquired by BTH from
affiliates of Jones Intercable's controlling shareholder under an existing
option (the "Control Option") to acquire such shares (which absent
extraordinary circumstances would not have been exercisable until December
2001). The Company was to purchase the remaining 51% of the BTH
subsidiaries when the Control Shares were acquired. The Company, BTH,
Jones Intercable and Jones Intercable's controlling shareholder agreed in
August 1998 to accelerate the Control Option to permit its early exercise
and the early closing of the transactions with BTH. The transaction closed
in April 1999. The Company paid $706.3 million in cash to acquire the 12.8
million shares of Jones Intercable Class A Common Stock and the Control
Shares. In connection with the acquisition, the Company assumed $1.499
billion of Jones Intercable debt (see Note 5). In June 1999, the Company
purchased an additional 1.0 million shares of Jones Intercable Class A
Common Stock for $50.0 million through a private transaction. As a result,
the Company controls 39.6% of the economic and 48.3% of the voting
interest in Jones Intercable. In addition, the Control Shares represent
shares having the right to elect approximately 75% of the Board of
Directors of Jones Intercable. The share acquisitions were funded with
available cash and cash equivalents. Jones Intercable is a public company,
which owns cable operations serving approximately 1.1 million subscribers.
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 consolidated statement of operations from the acquisition
date. The allocation of the purchase price to the assets and liabilities
of Jones Intercable is preliminary pending completion of final appraisals.
In December 1999, the Company entered into a definitive merger agreement
with Jones Intercable to acquire all of the remaining shares of Jones
Intercable not currently owned by the Company. Under the terms of the
merger agreement, Jones Intercable shareholders will receive 1.4 shares of
the Company's Class A Special Common Stock for each share of Jones
Intercable Class A Common Stock and Common Stock. As a result of the
merger, the Company will own 100% of Jones Intercable. The Company expects
that the merger, which is subject to shareholder approval, will close in
the first quarter of 2000.
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 ("Time Warner"), a division of Time Warner Entertainment Company,
L.P. Under the terms of the agreement, the Company will receive cable
communications systems serving approximately 120,000 subscribers. In
exchange, Time Warner will receive systems that the Company currently
- 40 -
<PAGE>
COMCAST CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997 (Continued)
owns serving approximately 133,000 subscribers. At closing, Time Warner
will pay the Company an equalizing payment of $31.2 million, reflecting
the agreed upon difference in fair value of the Time Warner assets and the
Company's assets to be exchanged, subject to adjustment. The transaction
is subject to customary closing conditions and regulatory approvals and is
expected to close in the second quarter of 2000.
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. In November 1999, the Company made an additional $20.0
million loan to Prime (on the same terms as the original loan), and
delivered a notice of the Company's intention to convert the 6% note. The
note will be converted upon receipt of customary closing conditions and
required regulatory approvals, which are expected to be obtained in the
second quarter of 2000. The owners of Prime have agreed that at the time
of conversion, they will sell their remaining 10% equity interest in Prime
to the Company, for approximately $82.0 million, plus accrued interest
from July 1999 at 7% per annum. As a result, the Company would then own
100% of Prime and assume management control of Prime's operations. Upon
closing, the Company will assume approximately $550 million of Prime's
debt.
Sale of Comcast Cellular Corporation
In July 1999, the Company sold Comcast Cellular Corporation ("Comcast
Cellular") to SBC Communications, Inc. for $361.1 million in cash and the
assumption of $1.315 billion of Comcast Cellular debt, and recognized a
gain on the sale of $355.9 million, net of income tax expense. The results
of operations of Comcast Cellular have been presented as a discontinued
operation in accordance with Accounting Principles Board ("APB") Opinion
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." During the year ended
December 31, 1999, the Company recognized losses from discontinued
operations of $20.1 million.
Acquisition of Greater Philadelphia Cablevision, Inc.
In June 1999, the Company acquired Greater Philadelphia Cablevision, Inc.
("Greater Philadelphia"), a cable communications company serving
approximately 79,000 subscribers in Philadelphia, Pennsylvania, from
Greater Media, Inc. for approximately 8.5 million shares of the Company's
Class A Special Common Stock with a value of $291.7 million. The
acquisition was accounted for under the purchase method of accounting. As
such, the operating results of Greater Philadelphia have been included in
the Company's consolidated statement of operations from the acquisition
date. The allocation of the purchase price to the assets and liabilities
of Greater Philadelphia is preliminary pending a final appraisal. As the
consideration given in exchange for Greater Philadelphia was shares of the
Company's Class A Special Common Stock, the Greater Philadelphia
acquisition had no significant impact on the Company's consolidated
statement of cash flows.
AT&T Agreement
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.
- 41 -
<PAGE>
COMCAST CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997 (Continued)
Under the terms of the agreement, the Company also agreed to offer
AT&T-branded residential wireline telephony in the Company's cable
communications system markets, provided AT&T has concluded separate
residential telephony agreements with at least two other non-AT&T
affiliated multi-system cable operators. AT&T has agreed to grant the
Company the most favorable terms AT&T has reached with any of those or
other multi-system cable operators.
The majority of the exchanges are contingent upon the completion of AT&T's
acquisition of MediaOne Group, Inc. ("MediaOne"), which is expected to
close in 2000, subject to customary closing conditions and regulatory
approvals.
Adelphia Agreement
In May 1999, the Company entered into an agreement to exchange certain
cable communications systems with Adelphia Communications ("Adelphia").
Under the terms of the agreement, the Company will receive approximately
464,000 cable subscribers from Adelphia. In exchange, Adelphia will
receive cable communications systems currently owned by the Company
serving approximately 440,000 subscribers. All of the systems involved in
the system exchanges will be valued based upon independent appraisals with
any difference in relative value to be funded with cash or additional
cable communications systems. The transaction is subject to customary
closing and regulatory approvals and is expected to close in the third
quarter of 2000.
MediaOne Agreement
In March 1999, the Company entered into an Agreement and Plan of Merger
with MediaOne pursuant to which MediaOne was to be merged with the
Company. Under the terms of that agreement, MediaOne could terminate the
agreement under certain conditions, provided that it pay the Company a
termination fee of $1.5 billion in cash. In April 1999, AT&T submitted an
offer to purchase MediaOne. In May 1999, the MediaOne board of directors
notified the Company that it had determined that the AT&T offer was
superior to the Company's offer. MediaOne then terminated the agreement
and paid the Company the termination fee. The termination fee is included
in other income in the Company's consolidated statement of operations, net
of transaction costs, for the year ended December 31, 1999.
Acquisition of E! Entertainment
In March 1997, the Company, through Comcast Entertainment Holdings LLC
("Entertainment Holdings"), which is owned 50.1% by the Company and 49.9%
by The Walt Disney Company ("Disney"), purchased a 58.4% interest in E!
Entertainment from Time Warner, Inc. for $321.9 million. The acquisition
was funded by cash contributions to Entertainment Holdings by the Company
and Disney of $132.8 million and $189.1 million, respectively. In
connection with the acquisition, the Company contributed its 10.4%
interest in E! Entertainment to Entertainment Holdings. To fund the cash
contribution to Entertainment Holdings, the Company borrowed $132.8
million from Disney in the form of two 10-year, 7% notes (the "Disney
Notes").
In December 1997, Entertainment Holdings extended its carriage agreement
and acquired the 10.4% interest in E! Entertainment held by Cox
Communications, Inc. ("Cox") for $57.1 million. The acquisition was funded
by cash contributions to Entertainment Holdings by the Company and Disney
of $28.6 million and $28.5 million, respectively. As of December 31, 1999
and 1998, Entertainment Holdings owns a 79.2% interest in E!
Entertainment.
The Company accounted for the acquisitions under the purchase method of
accounting. As such, the operating results of E! Entertainment have been
included in the Company's consolidated statement of operations from the
acquisition date.
Microsoft Investment
In June 1997, the Company and Microsoft Corporation ("Microsoft")
completed a Stock Purchase Agreement. Microsoft purchased and the Company
issued approximately 49.2 million shares of the Company's Class A Special
- 42 -
<PAGE>
COMCAST CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997 (Continued)
Common Stock at $10.15 per share, for $500.0 million and 500,000 shares of
the Company's 5.25% Series B Mandatorily Redeemable Convertible Preferred
Stock, par value $1,000 per share (the "Series B Preferred Stock"), for
$500.0 million (see Note 6).
4. INVESTMENTS
<TABLE>
<CAPTION>
December 31,
1999 1998
------------ ------------
(Dollars in millions)
<S> <C> <C>
Fair value method........................................ $11,972.1 $4,170.0
Cost method.............................................. 1,134.6 74.7
Equity method............................................ 48.1 11.1
------------ ------------
Total investments............................ 13,154.8 4,255.8
Less, current investments................................ 7,606.0 3,653.4
------------ ------------
Non-current investments.................................. $5,548.8 $602.4
============ ============
</TABLE>
Fair Value Method
The Company holds unrestricted equity investments in certain publicly
traded companies, with an historical cost (including $1.999 billion of
pre-tax gains recognized during 1999 and 1998, respectively) of $2.558
billion and $2.555 billion as of December 31, 1999 and 1998, respectively.
The unrealized pre-tax gains on these investments as of December 31, 1999
and 1998 of $9.414 billion and $1.615 billion, respectively, have been
reported in the Company's consolidated balance sheet as a component of
other comprehensive income, net of related deferred income tax expense of
$3.294 billion and $565.1 million, respectively.
Sprint PCS. The Company, Cox, Tele-Communications, Inc. ("TCI," and
together with the Company and Cox, the "Cable Partners") and Sprint
Corporation ("Sprint") engaged in the wireless communications business
through a limited partnership known as "Sprint PCS."
In November 1998, Sprint assumed ownership and management control of
Sprint PCS and issued a new class of Sprint stock (the "Sprint PCS Stock")
to track the performance of Sprint's combined wireless operations. In
exchange for its 15% interest in Sprint PCS, the Company received
approximately 47.2 million shares of unregistered Series 2 Sprint PCS
common stock, 61,726 shares of Sprint PCS preferred stock (convertible
into approximately 2.0 million shares of unregistered Series 2 Sprint PCS
common stock) and a warrant to purchase approximately 3.0 million shares
of unregistered Series 2 Sprint PCS common stock at $24.02 per share. As a
result of the exchange, the Company recognized a pre-tax gain of $758.5
million during the year ended December 31, 1998 representing the
difference between the aggregate fair value of the Sprint PCS common
stock, convertible preferred stock and warrant, and the Company's basis in
Sprint PCS. This gain is included in other income in the Company's
consolidated statement of operations. The Company has registration rights,
subject to customary restrictions, which will allow the Company to sell
the Sprint PCS Stock received.
The Sprint PCS Stock is divided into three categories: (i) Series 1 (one
vote per share) to be held by the public, (ii) Series 2 (1/10 vote per
share other than in class votes) to be held by the Cable Partners, and
(iii) Series 3 (one vote per share) to be held by two of Sprint's major
shareholders. If the Series 2 shares are transferred by a Cable Partner,
the transferred shares become full vote Series 1 shares.
As of December 31, 1999 and 1998, the Company has recorded its investment
in Sprint PCS at its estimated fair value of $4.234 billion and $1.195
billion, respectively (see Note 5).
- 43 -
<PAGE>
COMCAST CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997 (Continued)
Equity Price Risk
During the year ended December 31, 1999, the Company 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 the Company's exposure to and benefits from price
fluctuations in the underlying equity securities. The Equity Collars
mature between 2001 and 2003. As the Company accounts 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 the Company's consolidated balance sheet.
AT&T. In July 1998, AT&T merged with Teleport Communications Group Inc.
("Teleport") with AT&T as the surviving corporation. Upon closing of the
transaction, the Company received approximately 36.3 million shares of
unregistered AT&T common stock (as adjusted for AT&T's 3-for-2 stock split
in April 1999) in exchange for the approximately 25.6 million shares of
Teleport Class B Common Stock held by the Company. As a result of the
exchange, the Company recognized a pre-tax gain of $1.092 billion during
the year ended December 31, 1998, representing the difference between the
fair value of the AT&T stock received and the Company's basis in Teleport.
Such gain is included in other income in the Company's consolidated
statement of operations. The Company has registration rights, subject to
customary restrictions, which allow the Company to effect a registration
of the AT&T shares received.
In March 1999, AT&T merged with TCI, with AT&T as the surviving
corporation (the "AT&T/TCI Merger"). Upon closing of the AT&T/TCI Merger,
the Company received approximately 3.6 million shares (as adjusted for
AT&T's 3-for-2 stock split in April 1999) of AT&T common stock in exchange
for the approximately 3.1 million shares of TCI Class A Common Stock held
by the Company and the Company received approximately 3.6 million shares
of Class A Liberty Media Group Tracking Shares for the approximately 2.3
million shares of TCI Ventures Group, Inc. ("TCI Ventures") common stock
and the approximately 2.4 million shares of Liberty Media Group Class A
Common Stock held by the Company. As a result of the exchange, the Company
recognized a pre-tax gain of $187.6 million during the year ended December
31, 1999, representing the difference between the fair value of the stock
received and the Company's basis in TCI and TCI Ventures. Such gain is
included in investment income in the Company's consolidated statement of
operations.
As of December 31, 1999 and 1998, the Company has recorded its investment
in AT&T at its estimated fair value of $2.026 billion and $1.830 billion,
respectively.
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. As of December 31, 1999, the
Company holds approximately 23.7 million shares of ICG common stock and
warrants and options to purchase approximately 0.6 million shares of ICG
common stock. As of December 31, 1999, the Company has recorded its
investment in ICG at its estimated fair value of $4.127 billion.
Excite@Home. Excite@Home provides Internet services to subscribers and
businesses over the cable communications infrastructure in a limited
number of cities in the US. As of December 31, 1999 and 1998 (as adjusted
for Excite@Home's two-for-one stock split in May 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 0.6 million shares of Excite@Home Series A Stock. As of
December 31, 1999 and 1998, 30% and 55% of the Excite@Home Series A shares
held by the Company were contractually restricted shares (the "Restricted
Shares") and 70% and 45% 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 $0.6
million and $1.1 million, respectively, and the Unrestricted Shares and
warrants, which are classified as available for sale, at their estimated
fair value of $918.0 million and $486.4 million, respectively, as of
December 31, 1999 and 1998.
- 44 -
<PAGE>
COMCAST CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997 (Continued)
NTL Incorporated. In October 1998, the Company received approximately 4.8
million shares of NTL Incorporated ("NTL") common stock, an alternative
telecommunications company in the UK, in exchange for all of the shares of
Comcast UK Cable Partners Limited ("Comcast UK Cable"), a consolidated
subsidiary of the Company, held by the Company. As a result of the
exchange, the Company recognized a pre-tax gain of $148.3 million during
the year ended December 31, 1998, representing the difference between the
fair value of the NTL common stock received and the Company's basis in
Comcast UK Cable. Such gain is included in other income in the Company's
consolidated statement of operations. As of December 31, 1998, the Company
recorded its investment in NTL at its estimated fair value of $272.1
million. During the year ended December 31, 1999, the Company sold all 5.8
million shares (as adjusted for NTL's 5-for-4 stock split in October 1999)
of its NTL common stock for total proceeds of $498.3 million and
recognized a pre-tax gain of $284.2 million. Such gain is included in
investment income in the Company's consolidated statement of operations.
During the years ended December 31, 1999 and 1997, the Company recognized
pre-tax gains of $323.0 million and $33.3 million, respectively, on sales
of certain of its other fair value method investments. These gains were
recorded as a reclassification from other comprehensive income to
investment income.
Cost Method
It is not practicable to estimate the fair value of the Company's
investments in privately held companies, accounted for under the cost
method, due to a lack of quoted market prices and excessive costs involved
in determining such fair value.
- 45 -
<PAGE>
COMCAST CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997 (Continued)
Equity Method
The Company records its proportionate interests in the net income (loss)
of certain of its equity method investees three months in arrears. The
Company's recorded investments exceed its proportionate interests in the
book value of the investees' net assets by $78.0 million as of December
31, 1999 (primarily related to the investment in The Golf Channel). Such
excess is being amortized to equity in net income or loss, primarily over
a period of 20 years, which is consistent with the estimated lives of the
underlying assets. The original cost of investments accounted for under
the equity method totaled $235.6 million and $215.3 million as of December
31, 1999 and 1998, respectively. Summarized financial information is not
presented for Sprint PCS, Teleport or Birmingham Cable Corporation Limited
and Cable London, PLC (together, the "UK Investees") as of December 31,
1999 and 1998 or for the year ended December 31, 1999, as such investments
are no longer accounted for under the equity method. Summarized financial
information for the Company's equity method investees for the years ended
December 31, 1998 and 1997 is as follows (dollars in millions).
<TABLE>
<CAPTION>
Sprint UK Comcast
PCS Teleport Investees Spectacor Other Combined
---------- --------- ---------- --------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
Year Ended December 31, 1998:
Combined Results of Operations
Revenues, net........................ $1,136.5 $605.8 $197.8 $638.6 $2,578.7
Operating, selling, general and
administrative expenses........... 2,587.6 558.7 153.3 653.8 3,953.4
Depreciation and amortization........ 749.5 163.4 69.7 69.1 1,051.7
Operating loss....................... (2,200.6) (116.3) (25.2) (84.3) (2,426.4)
Net loss (a)......................... (2,572.8) (190.6) (78.8) (134.2) (2,976.4)
Company's Equity in Net Loss
Equity in current period net loss.... ($385.9) ($27.2) ($28.9) ($66.4) ($508.4)
Amortization expense................. (3.5) (0.5) (3.5) (7.5)
---------- --------- ---------- --------- ---------- ---------
Total equity in net loss.......... ($389.4) ($27.2) ($29.4) ($69.9) ($515.9)
========== ========= ========== ========= ========== =========
Year Ended December 31, 1997:
Combined Results of Operations
Revenues, net........................ $111.5 $431.3 $197.5 $140.8 $743.9 $1,625.0
Operating, selling, general and
administrative expenses........... 959.4 398.5 168.4 117.9 820.9 2,465.1
Depreciation and amortization........ 194.2 133.9 76.0 46.5 66.2 516.8
Operating loss....................... (1,042.1) (101.1) (46.9) (23.6) (143.2) (1,356.9)
Net loss (a)......................... (1,187.3) (192.9) (92.2) (39.6) (189.3) (1,701.3)
Company's Equity in Net Loss
Equity in current period net loss.... ($178.1) ($30.5) ($34.6) ($26.2) ($65.3) ($334.7)
Amortization expense................. (1.5) (0.2) (0.6) (5.4) (1.4) (9.1)
---------- --------- ---------- --------- ---------- ---------
Total equity in net loss.......... ($179.6) ($30.7) ($35.2) ($31.6) ($66.7) ($343.8)
========== ========= ========== ========= ========== =========
<FN>
- ---------
(a) Net loss also represents loss from continuing operations before
extraordinary items and cumulative effect of changes in accounting
principles.
</FN>
</TABLE>
Comcast-Spectacor. Effective January 1, 1998, the Company began
consolidating the accounts of Comcast- Spectacor, an affiliate previously
accounted for under the equity method, due to certain call rights held by
the Company which became exercisable effective January 1998.
- 46 -
<PAGE>
COMCAST CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997 (Continued)
Other. The Company's other equity investees include investments in cable
communications and programming content providers. The Company does not
consider these other equity method investments to be individually
significant to its consolidated financial position, results of operations
or liquidity.
The Company does not have any additional significant contractual
commitments with respect to any of its investments. However, to the extent
the Company does not fund its investees' capital calls, it exposes itself
to dilution of its ownership interests.
Impairment Losses
During the years ended December 31, 1999, 1998 and 1997, the Company
recorded pre-tax losses of $35.5 million, $152.8 million and $2.5 million,
respectively, on certain of its investments based on a decline in value
that was considered other than temporary. Such pre-tax losses are included
in investment (income) expense in the Company's consolidated statement of
operations.
Gain from Equity Offering of Affiliate
For the years ended December 31, 1998 and 1997, Teleport issued shares of
its Class A Common Stock. As a result of these stock issuances, the
Company recognized $157.8 million and $7.7 million increases in its
proportionate share of Teleport's net assets, respectively, as gain from
equity offering of affiliate. The Company recorded its increase in
proportionate share of Teleport's net assets one quarter in arrears. In
March 1997, the Company received 2.76 million shares of Teleport Class A
Common Stock from Teleport in exchange for the Company's shares of an
alternate access provider. In May 1997, the Company sold all of its shares
of Teleport Class A Stock for $68.9 million and recognized a $68.9 million
pre-tax gain, which is included in other income in the Company's
consolidated statement of operations.
- 47 -
<PAGE>
COMCAST CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997 (Continued)
5. LONG-TERM DEBT
<TABLE>
<CAPTION>
December 31,
1999 1998
------------ ------------
(Dollars in millions)
<S> <C> <C>
Notes payable to banks and insurance companies, due
in installments through 2005.................................. $2,324.0 $1,690.8
9-5/8% Senior notes, due 2002.................................... 200.0
8-1/8% Senior notes, due 2004.................................... 299.8 299.8
8-3/8% Senior notes, due 2007.................................... 596.8 596.5
8-7/8% Senior notes, due 2007.................................... 248.9
6.20% Senior notes, due 2008..................................... 798.1 797.9
7-5/8% Senior notes, due 2008.................................... 196.8
8-7/8% Senior notes, due 2017.................................... 545.7 545.6
8-1/2% Senior notes, due 2027.................................... 249.6 249.6
10-1/4% Senior subordinated debentures, due 2001................. 100.4 125.0
9-3/8% Senior subordinated debentures, due 2005.................. 172.5 234.1
9-1/8% Senior subordinated debentures, due 2006.................. 144.7 223.7
10-1/2% Senior subordinated debentures, due 2008................. 100.0
9-1/2% Senior subordinated debentures, due 2008.................. 198.5 200.0
10-5/8% Senior subordinated debentures, due 2012................. 257.0 282.5
7% Disney Notes, due 2007 (see Note 3)........................... 132.8 132.8
24.1 million ZONES at principal amount, due 2029................. 1,806.8
Non-cash adjustment to carrying value......................... 666.0
Other debt, due in installments.................................. 186.3 199.4
------------ ------------
9,224.7 5,577.7
Less current portion............................................. 517.5 113.5
------------ ------------
$8,707.2 $5,464.2
============ ============
</TABLE>
Maturities of long-term debt outstanding as of December 31, 1999 for the
four years after 2000 are as follows (dollars in millions):
2001..................................... $371.9
2002..................................... 761.6
2003..................................... 823.0
2004..................................... 548.0
ZONES
In November 1999, the Company issued approximately 8.0 million 2.0%
Exchangeable Subordinated Debentures due 2029 (the "ZONES II") for gross
proceeds of $657.1 million. In October 1999, the Company issued
approximately 16.1 million 2.0% Exchangeable Subordinated Debentures due
2029 for gross proceeds of $1.15 billion (the "ZONES I", and together with
the ZONES II, the "ZONES") resulting in combined proceeds of $1.807
billion. The ZONES II mature on November 15, 2029. The ZONES I mature on
October 15, 2029. 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.
- 48 -
<PAGE>
COMCAST CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997 (Continued)
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. Prior
to maturity, the Company may redeem all of the ZONES for cash at the
higher of the original principal amount of ZONES or the then current
market value of the Sprint PCS Stock, plus, in either case, a per ZONES
premium of (a) 4.5% if redeemed prior to the first anniversary of the
ZONES issuance date, (b) 3.0% if redeemed prior to the second anniversary
of the ZONES issuance date, (c) 1.5% if redeemed prior to the third
anniversary of the ZONES issuance date, or (d) zero if redeemed on or
after the third anniversary of the ZONES issuance date.
Interest on the ZONES is payable quarterly (subject to deferral at the
Company's option) equal to 2.0% per year of the original principal amount,
plus the amount of the quarterly cash dividend paid on a share of Sprint
PCS Stock. The principal amount of the ZONES will be adjusted if Sprint
PCS changes the dividend paid on its stock or if there are special
distributions on or in respect of the Sprint PCS Stock.
The ZONES are unsecured, subordinated obligations ranking equally with all
of the Company's existing and future subordinated debt and trade
obligations.
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 was increased by $666.0 million
during 1999 to reflect the fair value of the underlying Sprint PCS Stock
with the change included in expense related to indexed debt in the
Company's consolidated statement of operations. 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).
Jones Intercable Assumed Debt
In April 1999, as part of the acquisition of a controlling interest in
Jones Intercable, the Company assumed $1.499 billion of debt held by Jones
Intercable. As of December 31, 1999, borrowings under credit facilities of
certain of Jones Intercable's subsidiaries totaling $922.0 million and
senior notes totaling $745.7 million, with interest rates ranging between
7 5/8% to 10 1/2%, and maturities between 2002 and 2008 were outstanding.
PHONES
In March 1999, the Company issued 8.7 million 3.35% Exchangeable
Extendable Subordinated Debentures due 2029 (the "PHONES") for gross
proceeds of $718.3 million. At maturity, holders of the PHONES were
entitled to receive in cash an amount equal to the higher of (a) the
principal amount of the PHONES, or (b) the market value of AT&T common
stock.
In July 1999, the Company redeemed all $718.3 million principal amount of
the PHONES. The Company redeemed the PHONES due to its transaction with
AT&T in which it intends to use AT&T shares as consideration for the
purchase of cable systems from AT&T (see Note 3). In connection with the
PHONES redemption, the Company incurred debt extinguishment costs of $32.3
million and wrote-off unamortized debt issue costs of $15.0 million,
resulting in an extraordinary loss, net of tax, of $30.8 million during
the year ended December 31, 1999.
Senior Notes
In November 1998, Comcast Cable Communications, Inc. ("Comcast Cable"), a
wholly owned subsidiary of the Company, sold $800.0 million of 6.20%
nonrecourse public debt due 2008. Comcast Cable used substantially all of
the net proceeds from the offering to repay existing intercompany
borrowings to the Company and for general corporate purposes.
In May 1997, Comcast Cable sold a total of $1.7 billion of nonrecourse
public debt with interest rates ranging from 8 1/8% to 8 7/8% and maturity
dates from 2004 to 2027. Comcast Cable used the net proceeds from the
offerings to repay existing borrowings by its subsidiaries.
- 49 -
<PAGE>
COMCAST CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997 (Continued)
The Senior Notes are unsecured and unsubordinated obligations of Comcast
Cable and rank pari passu with all other unsecured and unsubordinated
indebtedness and other obligations of Comcast Cable. The Senior Notes are
effectively subordinated to all liabilities of Comcast Cable's
subsidiaries, including trade payables. The Senior Notes are obligations
only of Comcast Cable and are not guaranteed by and do not otherwise
constitute obligations of the Company.
The indenture for the Senior Notes, among other things, contains
restrictions (with certain exceptions) on the ability of Comcast Cable and
its Restricted Subsidiaries (as defined) to: (i) make dividend payments or
other restricted payments; (ii) create liens or enter into sale and
leaseback transactions; and (iii) enter into mergers, consolidations, or
sales of all or substantially all of their assets.
Redemption of Debt
During 1999, the Company repurchased certain senior subordinated
debentures having a principal amount of $192.2 million. In connection with
the repurchases of these senior subordinated debentures, the Company
incurred debt extinguishment costs of $19.8 million and wrote-off
unamortized debt issue costs of $1.8 million, resulting in an
extraordinary loss, net of tax of $14.0 million during the year ended
December 31, 1999.
In December 1999, the Company repaid $200.0 million in notes payable to
insurance companies having an interest rate of 8.6%. In connection with
this repayment, the Company incurred debt extinguishment costs of $9.2
million and wrote-off unamortized debt issue costs of $0.3 million,
resulting in an extraordinary loss, net of tax of $6.2 million during the
year ended December 31, 1999.
In March 1998, the Company completed the redemption of its $541.9 million
principal amount 1 1/8% discount convertible subordinated debentures due
2007 (the "1 1/8% Debentures"). The Company issued 20.8 million shares of
its Class A Special Common Stock upon conversion of $540.2 million
principal amount of 1 1/8% Debentures while $1.7 million principal amount
of 1 1/8% Debentures was redeemed for cash at a redemption price of
67.112% of the principal amount, together with accrued interest thereon.
Stockholders' equity was increased by the full amount of 1 1/8% Debentures
converted plus accrued interest, less unamortized debt issue costs.
Unamortized debt issue costs related to the 1 1/8% Debentures redeemed for
cash were not significant. The issuance of the Company's Class A Special
Common Stock upon conversion of the 1 1/8% Debentures had no impact on the
Company's consolidated statement of cash flows due its noncash nature.
Extraordinary Items
Extraordinary items for the years ended December 31, 1999, 1998 and 1997
of $51.0 million, $4.2 million and $30.2 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
refinancing of certain indebtedness.
Interest Rates
Bank debt interest rates vary based upon one or more of the following
rates at the option of the Company:
Prime rate to prime plus 0.75%;
Federal Funds rate plus 0.5% to 1.5%; and
LIBOR plus 0.375% to 1.875%.
As of December 31, 1999 and 1998, the Company's effective weighted average
interest rate on its variable rate bank debt outstanding was 6.67% and
5.80%, respectively.
Interest Rate Risk Management
The Company is exposed to market risk including changes in interest rates.
To manage the volatility relating to these exposures, the Company enters
into various derivative transactions pursuant to the Company's policies in
areas such as counterparty exposure and hedging practices. Positions are
monitored using techniques including market value and sensitivity
analyses.
- 50 -
<PAGE>
COMCAST CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997 (Continued)
The use of interest rate risk management instruments, such as Swaps, Caps
and Collars, is required under the terms of certain of the Company's
outstanding debt agreements. The Company's policy is to manage interest
costs using a mix of fixed and variable rate debt. Using Swaps, the
Company agrees to exchange, at specified intervals, the difference between
fixed and variable interest amounts calculated by reference to an
agreed-upon notional principal amount. Caps are used to lock in a maximum
interest rate should variable rates rise, but enable the Company to
otherwise pay lower market rates. Collars limit the Company's exposure to
and benefits from interest rate fluctuations on variable rate debt to
within a certain range of rates.
The following table summarizes the terms of the Company's existing Swaps,
Caps and Collars as of December 31, 1999 and 1998 (dollars in millions):
<TABLE>
<CAPTION>
Notional Average Estimated
Amount Maturities Interest Rate Fair Value
------ ---------- ------------- ----------
<S> <C> <C> <C> <C>
As of December 31, 1999
Variable to Fixed Swaps....................... $1,111.8 2000-2003 5.6% $16.9
Fixed to Variable Swaps....................... 300.0 2004 7.7% (3.9)
Caps.......................................... 140.0 2000 6.8%
Collar........................................ 50.0 2000 6.3%/4.0% 0.1
As of December 31, 1998
Variable to Fixed Swaps....................... $1,061.8 1999-2008 5.7% ($13.3)
Caps.......................................... 240.0 1999 7.0%
Collar........................................ 50.0 2000 6.3%/4.0%
</TABLE>
The notional amounts of interest rate instruments, as presented in the
above table, are used to measure interest to be paid or received and do
not represent the amount of exposure to credit loss. The estimated fair
value approximates the proceeds (costs) to settle the outstanding
contracts. While Swaps, Caps and Collars represent an integral part of the
Company's interest rate risk management program, their incremental effect
on interest expense for the years ended December 31, 1999, 1998 and 1997
was not significant.
Estimated Fair Value
The Company's long-term debt had estimated fair values of $9.231 billion
and $5.995 billion as of December 31, 1999 and 1998, respectively. The
estimated fair value of the Company's publicly traded debt is based on
quoted market prices for that debt. Interest rates that are currently
available to the Company for issuance of debt with similar terms and
remaining maturities are used to estimate fair value for debt issues for
which quoted market prices are not available.
Debt Covenants
Certain of the Company's subsidiaries' loan agreements contain restrictive
covenants which limit the subsidiaries' ability to enter into arrangements
for the acquisition of property and equipment, investments, mergers and
the incurrence of additional debt. Certain of these agreements require
that certain ratios and cash flow levels be maintained and contain certain
restrictions on dividend payments and advances of funds to the Company.
The Company and its subsidiaries were in compliance with such restrictive
covenants for all periods presented. In addition, the stock of certain
subsidiary companies is pledged as collateral for the notes payable to
banks and insurance companies.
As of December 31, 1999, $277.1 million of the Company's cash, cash
equivalents and short-term investments is restricted to use by
subsidiaries of the Company under contractual or other arrangements.
Restricted net assets of the Company's subsidiaries were approximately
$3.2 billion as of December 31, 1999.
- 51 -
<PAGE>
COMCAST CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997 (Continued)
Lines and Letters of Credit
As of December 31, 1999, certain subsidiaries of the Company had unused
lines of credit of $1.063 billion, $463.0 million of which is restricted
by the covenants of the related debt agreements and to subsidiary general
purposes and dividend declaration.
As of December 31, 1999, the Company and certain of its subsidiaries had
unused irrevocable standby letters of credit totaling $65.9 million to
cover potential fundings associated with several projects.
6. STOCKHOLDERS' EQUITY
Preferred Stock
The Company is authorized to issue, in one or more series, up to a maximum
of 20.0 million shares of preferred stock. The shares can be issued with
such designations, preferences, qualifications, privileges, limitations,
restrictions, options, conversion rights and other special or related
rights as the Company's board of directors shall from time to time fix by
resolution.
In June 1997, in connection with Microsoft's investment in the Company
(see Note 3), the Company issued the Series B Preferred Stock. The Series
B Preferred Stock has a 5.25% pay-in-kind annual dividend. Dividends will
be paid quarterly through the issuance of additional shares of Series B
Preferred Stock (the "Additional Shares") and will be cumulative from the
issuance date (except that dividends on the Additional Shares will accrue
from the date such Additional Shares are issued). The Series B Preferred
Stock, including the Additional Shares, is convertible, at the option of
Microsoft, into 42.4 million shares of the Company's Class A Special
Common Stock, subject to adjustment in certain limited circumstances,
which equals an initial conversion price of $11.77 per share, increasing
as a result of the Additional Shares to $16.96 per share on June 30, 2004.
The Series B Preferred Stock is mandatorily redeemable on June 30, 2017,
or, at the option of the Company beginning on June 30, 2004 or at the
option of Microsoft on June 30, 2004 or on June 30, 2012. Upon redemption,
the Company, at its option, may redeem the Series B Preferred Stock with
cash, Class A Special Common Stock or a combination thereof. As the
Company currently intends to redeem the Series B Preferred Stock with
Class A Special Common Stock upon redemption, the Series B Preferred Stock
has been classified as a component of stockholders' equity as of December
31, 1999. The Series B Preferred Stock is generally non-voting.
Series A Preferred Stock Conversion
In July 1999, the Company exercised its right to convert all 6,370 shares
of its Series A Preferred Stock into approximately 2.7 million shares of
its Class A Special Common Stock.
Common Stock
The Company's Class A Special Common Stock is generally nonvoting and each
share of the Company's Class A Common Stock is entitled to one vote. Each
share of the Company's Class B Common Stock is entitled to fifteen votes
and is convertible, share for share, into Class A or Class A Special
Common Stock, subject to certain restrictions.
Repurchase Program
Based on the trade date for stock repurchases, during the years ended
December 31, 1999, 1998 and 1997, the Company repurchased 0.8 million
shares, 0.6 million shares and 4.6 million shares, respectively, of its
common stock for aggregate consideration of $30.7 million, $12.9 million
and $36.2 million, respectively, pursuant to its Board-authorized
repurchase programs.
As part of the repurchase programs, the Company sold Comcast Put Options
on 5.5 million and 4.0 million shares, during the years ended December 31,
1998 and 1997.
The Comcast Put Options give the holder the right to require the Company
to repurchase such shares at specified prices on specific dates. All
Comcast Put Options sold during 1998 and 1997 expired unexercised. The
amount the
- 52 -
<PAGE>
COMCAST CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997 (Continued)
Company would have been obligated to pay to repurchase such shares upon
exercise of the Comcast Put Options, totaling $111.2 million was
reclassified from additional capital to common equity put options in the
Company's December 31, 1998 consolidated balance sheet. Upon expiration in
1999, the Company reclassified such amount from common equity put options
to additional capital in the Company's consolidated balance sheet. The
difference between the proceeds from the sale of these put options and
their estimated fair value was not significant as of December 31, 1998.
Share Exchange
During the year ended December 31, 1999, the Company issued approximately
4.6 million shares of its Class A Special Common Stock valued at $172.1
million in exchange for approximately 4.9 million shares of its Class A
Common Stock. The Class A Common Stock was subsequently retired.
Stock-Based Compensation Plans
As of December 31, 1999, the Company and its subsidiaries have several
stock-based compensation plans for certain employees, officers, directors
and other persons designated by the applicable compensation committees of
the boards of directors of the Company and its subsidiaries. These plans
are described below.
Comcast Option Plan. The Company maintains qualified and nonqualified
stock option plans for certain employees, directors and other persons
under which fixed stock options are granted and the option price is
generally not less than the fair value of a share of the underlying stock
at the date of grant (collectively, the "Comcast Option Plan"). Under the
Comcast Option Plan, 54.2 million shares of Class A Special Common Stock
were reserved as of December 31, 1999. Option terms are generally from
five to 10 1/2 years, with options generally becoming exercisable between
two and 9 1/2 years from the date of grant.
A summary of the activity of the Comcast Option Plan as of and for the
years ended December 31, 1999, 1998 and 1997 is presented below (options
in thousands):
<TABLE>
<CAPTION>
1999 1998 1997
----------------------------- ------------------------- -----------------------
Weighted- Weighted- Weighted-
Average Average Average
Exercise Exercise Exercise
Options Price Options Price Options Price
------------ -------------- ---------- ------------ ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
Class A Special Common Stock
Outstanding at beginning of year 43,002 $11.09 32,220 $7.75 29,702 $7.27
Granted 7,403 34.16 16,350 16.53 5,198 9.74
Exercised (7,527) 6.76 (3,970) 6.60 (1,590) 4.98
Canceled (2,462) 12.90 (1,598) 10.48 (1,090) 8.20
------------ ---------- ---------
Outstanding at end of year 40,416 16.01 43,002 11.09 32,220 7.75
============ ========== =========
Exercisable at end of year 10,947 8.19 15,390 $7.30 15,386 $6.96
============ ========== =========
Class B Common Stock
Outstanding at beginning of year 658 $2.85 658 $2.85
Exercised (658) 2.85
---------- ---------
Outstanding at end of year 658 $2.85
========== =========
Exercisable at end of year 658 $2.85
=========
</TABLE>
- 53 -
<PAGE>
COMCAST CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997 (Continued)
The following table summarizes information about the Class A Special
Common Stock options outstanding under the Comcast Option Plan as of
December 31, 1999 (options in thousands):
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
------------------------------------------------ ------------------------------
Weighted-
Average Weighted- Weighted-
Range of Number Remaining Average Number Average
Exercise Outstanding Contractual Exercise Exercisable Exercise
Prices at 12/31/99 Life Price at 12/31/99 Price
------------------ --------------- ----------------- ------------ ------------- -------------
<S> <C> <C> <C> <C> <C>
$3.17 to $6.04 4,763 1.9 years $5.43 3,962 $5.44
$6.71 to $11.00 12,758 4.5 years 9.09 6,626 9.39
$11.04 to $18.63 15,335 8.3 years 16.27 294 12.74
$20.80 to $50.13 7,560 9.3 years 33.83 65 33.99
----------- -----------
40,416 10,947
=========== ===========
</TABLE>
The weighted-average fair value at date of grant of a Class A Special
Common Stock option granted under the Comcast Option Plan during 1999,
1998 and 1997 was $20.41, $8.54 and $5.09, respectively. The fair value of
each option grant is estimated on the date of grant using the
Black-Scholes option-pricing model with the following weighted-average
assumptions: dividend yield of -0-%, .44% and .52% for 1999, 1998 and
1997, respectively; expected volatility of 36.1%, 31.3% and 30.1% for
1999, 1998 and 1997, respectively; risk-free interest rate of 5.8%, 5.6%
and 6.5% for 1999, 1998 and 1997, respectively; expected option lives of
9.9 years for all years; and a forfeiture rate of 3.0% for all years.
QVC Tandem Plan. QVC established a qualified and nonqualified combination
stock option/Stock Appreciation Rights ("SAR") plan (collectively, the
"QVC Tandem Plan") during 1995 for employees, officers, directors and
other persons designated by the Compensation Committee of QVC's Board of
Directors. Under the QVC Tandem Plan, the option price is generally not
less than the fair value, as determined by an independent appraisal, of a
share of the underlying common stock of QVC ("QVC Common Stock") at the
date of grant. As of the latest valuation date, the fair value of a share
of QVC Common Stock was $1,081.00. If the SAR feature of the QVC Tandem
Plan is elected by the eligible participant, the participant receives 75%
of the excess of the fair value of a share of QVC Common Stock over the
exercise price of the option to which it is attached at the exercise date.
Option holders have stated an intention not to exercise the SAR feature of
the QVC Tandem Plan. Because the exercise of the option component is more
likely than the exercise of the SAR feature, compensation expense is
measured based on the stock option component. Under the QVC Tandem Plan,
option/SAR terms are ten years from the date of grant, with options/SARs
generally becoming exercisable over four years from the date of grant. As
of December 31, 1999, 200,000 shares of QVC Common Stock were reserved
under the plan. Compensation expense of $450,000, $1.0 million and $3.4
million was recorded under the QVC Tandem Plan during the years ended
December 31, 1999, 1998 and 1997, respectively.
- 54 -
<PAGE>
COMCAST CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997 (Continued)
A summary of the activity of the QVC Tandem Plan as of and for the years
ended December 31, 1999, 1998 and 1997 is presented below (options/SARs in
thousands):
<TABLE>
<CAPTION>
1999 1998 1997
-------------------------- ------------------------ ----------------------
Weighted- Weighted- Weighted-
Average Average Average
Options/ Exercise Options/ Exercise Options/ Exercise
SARs Price SARs Price SARs Price
----------- ----------- --------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at
beginning of year............. 206 $500.82 180 $363.99 164 $192.16
Granted.......................... 42 832.73 72 664.76 74 601.28
Exercised........................ (42) 651.84 (41) 186.01 (55) 177.05
Canceled......................... (6) 637.05 (5) 511.01 (3) 262.20
----------- ------- -------
Outstanding at end of year....... 200 618.02 206 500.82 180 363.99
=========== ======= =======
Exercisable at end of year....... 80 $505.86 37 $397.46 20 $205.42
=========== ======= =======
</TABLE>
The following table summarizes information about the options/SARs
outstanding under the QVC Tandem Plan as of December 31, 1999
(options/SARs in thousands):
<TABLE>
<CAPTION>
Options/SARs Outstanding Options/SARs Exercisable
---------------------------------------- ------------------------
Weighted-
Number Average Number
Exercise Outstanding Remaining Exercisable
Prices at 12/31/99 Contractual Life at 12/31/99
-------------- ------------ ---------------- -------------
<S> <C> <C> <C>
$177.05 29 5.5 years 23
522.31 3 6.5 years 2
585.19 3 7.0 years 2
634.25 61 7.8 years 31
651.84 45 8.7 years 18
688.14 10 8.2 years 2
741.79 20 9.1 years 2
865.47 28 9.6 years
1,081.00 1 9.9 years
-------- ---------
200 80
======== =========
</TABLE>
The weighted-average fair value at date of grant of a QVC Common Stock
option/SAR granted during 1999, 1998 and 1997 was $407.58, $296.67 and
$331.93, respectively. The fair value of each option grant is estimated on
the date of grant using the Black-Scholes option-pricing model with the
following weighted-average assumptions: no dividend yield for all years;
expected volatility of 20% for all years; risk-free interest rate of 6.1%,
4.9% and 6.2% for 1999, 1998 and 1997, respectively; expected option lives
of 10 years for all years; and a forfeiture rate of 3.0% for all years.
E! Tandem Plan. Effective December 22, 1999, E! established a qualified
and nonqualified combination stock option/Stock Appreciation Rights
("SAR") Plan (collectively, the "E! Tandem Plan") for employees, officers
and directors of E!. Under the E! Tandem Plan, the option price is
generally not less than the fair market value, as determined by an
independent appraisal, of a share of the underlying common stock of E!
("E! Common Stock") at the date of grant. As of the latest valuation date,
the fair value of a share of E! Common Stock was $841.36. If the SAR
feature of the E! Tandem Plan is elected by the eligible participant, the
participant receives 75% of the
- 55 -
<PAGE>
COMCAST CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997 (Continued)
excess of the fair value of a share of E! Common Stock over the exercise
price of the option to which it is attached at the exercise date. Because
the Company believes the exercise of the option component is more likely
than the exercise of the SAR feature, compensation expense is measured
based on the stock option component. Under the E! Tandem Plan, option/SAR
terms are ten years from date of grant, with options/SARs generally
becoming exercisable over five years from the date of grant. As of
December 31, 1999, 59,350 shares of E! Common Stock were reserved under
the E! Tandem Plan. Compensation expense of $219,000 was recorded under
the E! Tandem Plan during the year ended December 31, 1999.
During 1999, approximately 27,000 options/SARs with an exercise price of
$841.36 were granted under the E! Tandem Plan. At December 31, 1999, all
options/SARs granted remained outstanding, of which approximately 4,100
were exercisable. The weighted-average remaining contractual life of
options/SARs outstanding and options/SARs exercisable as of December 31,
1999 was 10 years.
The weighted-average fair value at date of grant of E! Common Stock
options/SAR granted during 1999 was $432.96. The fair value of each 1999
option grant is estimated on the date of grant using the Black-Scholes
option pricing model with the following weighted-average assumptions: no
dividend yield; expected volatility of 20%; risk free interest rate of
6.8%; expected option life of 10 years; and a forfeiture rate of 3%.
Had compensation expense for the Company's aforementioned stock-based
compensation plans been determined based on the fair value at the grant
dates for awards under those plans under the provisions of SFAS No. 123,
the Company's net income (loss) and net income (loss) per share would have
changed to the pro forma amounts indicated below (dollars in millions,
except per share data):
<TABLE>
<CAPTION>
1999 1998 1997
------ ------- ------
<S> <C> <C> <C>
Net income (loss) - As reported........................ $1,065.7 $972.1 ($238.7)
Net income (loss) - Pro forma.......................... 1,005.5 936.4 (252.0)
Net income (loss) for common stockholders -
As reported...................................... $1,036.0 $943.0 ($253.5)
Net income (loss) for common stockholders -
Pro forma........................................ 975.8 907.3 (266.7)
Basic earnings (loss) for common stockholders
per common share - As reported................... $1.38 $1.29 ($.38)
Basic earnings (loss) for common stockholders
per common share - Pro forma..................... 1.30 1.24 (.40)
Diluted earnings (loss) for common stockholders
per common share - As reported................... 1.30 $1.21 ($.38)
Diluted earnings (loss) for common stockholders
per common share - Pro forma..................... 1.23 1.17 (.40)
</TABLE>
The pro forma effect on net income (loss) and net income (loss) per share
for the years ended December 31, 1999, 1998 and 1997 by applying SFAS No.
123 may not be indicative of the pro forma effect on net income or loss in
future years since SFAS No. 123 does not take into consideration pro forma
compensation expense related to awards made prior to January 1, 1995 and
since additional awards in future years are anticipated.
Other Stock-Based Compensation Plans
The Company maintains a restricted stock program under which management
employees may be granted restricted shares of the Company's Class A
Special Common Stock. The shares awarded vest annually, generally over a
period not to exceed five years from the date of the award, and do not
have voting or dividend rights until vesting occurs.
- 56 -
<PAGE>
COMCAST CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997 (Continued)
At December 31, 1999, there were 1.6 million unvested shares granted under
the program, of which 304,000 vested in January 2000. During the years
ended December 31, 1999, 1998 and 1997, 170,000, 656,000 and 416,000
shares were granted under the program, respectively, with a
weighted-average grant date market value of $43.22, $17.33 and $8.68 per
share, respectively. Compensation expense recognized during the years
ended December 31, 1999, 1998 and 1997 under this program was $4.7
million, $5.3 million and $7.1 million, respectively. There was no
significant difference between the amount of compensation expense
recognized by the Company during the years ended December 31, 1999, 1998
and 1997 and the amount that would have been recognized had compensation
expense been determined under the provisions of SFAS No. 123.
The Company and QVC have SAR plans for certain employees, officers,
directors and other persons (the "QVC SAR Plans"). Under the QVC SAR
Plans, eligible participants are entitled to receive a cash payment from
the Company or QVC equal to 100% of the excess, if any, of the fair value
of a share of QVC Common Stock at the exercise date over the fair value of
such a share at the grant date. The SARs have a term of ten years from the
date of grant and become exercisable over four to five years from the date
of grant. During the years ended December 31, 1999, 1998 and 1997, 2,000,
5,000 and 4,000 SARs were awarded, respectively, and 18,000 SARs were
outstanding at December 31, 1999, of which 10,000 were exercisable.
Compensation expense related to the QVC SAR Plans of $6.4 million, $3.2
million and $3.4 million was recorded during the years ended December 31,
1999, 1998 and 1997, respectively. There was no significant difference
between the amount of compensation expense recognized and the amount that
would have been recognized had compensation expense been determined under
the provisions of SFAS No. 123.
E! Entertainment had a SAR plan for certain of its employees and officers
(the "E! SAR Plan"). By written agreement between the participants and E!
Entertainment, the E! SAR Plan was terminated effective December 31, 1998
in exchange for a lump-sum payment of a negotiated amount which was paid
in February 1999. Terms of the agreement also included the complete and
full release of E! Entertainment from any further liability associated
with the E! SAR Plan. Compensation expense related to the E! SAR Plan was
$11.6 million and $7.0 million during the years ended December 31, 1998
and 1997, respectively. There was no significant difference between the
amount of compensation expense recognized and the amount that would have
been recognized had compensation expense been determined under the
provisions of SFAS No. 123.
- 57 -
<PAGE>
COMCAST CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997 (Continued)
7. INCOME TAXES
The Company joins with its 80% or more owned subsidiaries (the
"Consolidated Group") in filing consolidated federal income tax returns.
QVC, E! Entertainment, Jones Intercable and Comcast Communications
Properties, Inc., an indirect majority owned subsidiary of the Company,
each file separate consolidated federal income tax returns. Income tax
expense consists of the following components:
<TABLE>
<CAPTION>
Year Ended December 31,
1999 1998 1997
----------- ----------- -----------
(Dollars in millions)
<S> <C> <C> <C>
Current expense
Federal....................................... $606.7 $135.5 $94.4
State......................................... 188.4 27.5 24.7
Foreign....................................... 2.0
----------- ----------- -----------
797.1 163.0 119.1
----------- ----------- -----------
Deferred expense (benefit)
Federal....................................... (65.2) 424.6 (47.5)
State......................................... (8.2) 6.4 (1.2)
----------- ----------- -----------
(73.4) 431.0 (48.7)
----------- ----------- -----------
Income tax expense............................ $723.7 $594.0 $70.4
=========== =========== ===========
</TABLE>
The effective income tax expense of the Company differs from the statutory
amount because of the effect of the following items:
<TABLE>
<CAPTION>
Year Ended December 31,
1999 1998 1997
----------- ----------- -----------
(Dollars in millions)
<S> <C> <C> <C>
Federal tax at statutory rate...................................... $525.0 $545.1 ($66.1)
Non-deductible depreciation and amortization....................... 49.8 41.0 42.6
State income taxes, net of federal benefit......................... 117.1 22.0 15.3
Foreign (income) losses and equity in net losses of affiliates..... (2.0) (11.2) 53.1
Other.............................................................. 33.8 (2.9) 25.5
----------- ----------- -----------
Income tax expense................................................. $723.7 $594.0 $70.4
=========== =========== ===========
</TABLE>
- 58 -
<PAGE>
COMCAST CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997 (Continued)
Significant components of the Company's net deferred tax liability are as
follows:
<TABLE>
<CAPTION>
December 31,
1999 1998
------------ ------------
(Dollars in millions)
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforwards................................. $240.0 $324.7
Reserves for bad debts, obsolete inventory
and sales returns............................................. 106.9 94.4
Differences between book and tax basis of
indexed debt securities....................................... 223.1
Other............................................................ 153.5 89.6
Less: Valuation allowance........................................ (178.2) (282.5)
------------ ------------
545.3 226.2
------------ ------------
Deferred tax liabilities:
Temporary differences, principally book and tax basis
of property and equipment and deferred charges................ 1,854.5 1,558.1
Differences between book and tax basis
in investments................................................ 3,959.9 1,201.4
------------ ------------
5,814.4 2,759.5
------------ ------------
Net deferred tax liability.......................................... $5,269.1 $2,533.3
============ ============
</TABLE>
The Company recorded approximately $400.0 million of deferred income tax
liabilities in 1999 in connection with the acquisitions of Jones
Intercable and Greater Philadelphia. The Company recorded approximately
$2.730 billion and $489.4 million of deferred income taxes in 1999 and
1998, respectively, in connection with unrealized gains on marketable
securities which are included in other comprehensive income.
The Company has recorded net deferred tax liabilities of $2.119 billion
and $1.033 billion, as of December 31, 1999 and 1998, respectively, which
have been included in current liabilities, related primarily to current
investments. Subsidiaries which are not consolidated with the Company for
income tax reporting purposes have aggregate net operating loss
carryforwards of approximately $500.0 million which expire primarily in
periods through 2019. A valuation allowance has been recorded for certain
of these losses due to uncertainty as to their realization.
8. STATEMENT OF CASH FLOWS - SUPPLEMENTAL INFORMATION
The Company made cash payments for interest of $529.2 million, $418.9
million and $467.2 million during the years ended December 31, 1999, 1998
and 1997, respectively.
The Company made cash payments for income taxes of $190.5 million, $129.2
million and $113.7 million during the years ended December 31, 1999, 1998
and 1997, respectively.
9. COMMITMENTS AND CONTINGENCIES
Commitments
The Company and the owners of the 34% interest in Comcast-Spectacor that
the Company does not own (the "Minority Group") each have the right to
initiate an "exit" process under which the fair market value of Comcast-
Spectacor would be determined by appraisal. Following such determination,
the Company would have the option to acquire the interests in
Comcast-Spectacor owned by the Minority Group based on the appraised fair
market
- 59 -
<PAGE>
COMCAST CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997 (Continued)
value. In the event the Company did not exercise this option, the Company
and the Minority Group would then be required to use their best efforts to
sell Comcast-Spectacor.
Disney, in certain circumstances, is entitled to cause Entertainment
Holdings to purchase Disney's entire interest in Entertainment Holdings at
its then fair market value (as determined by an appraisal process). If
Entertainment Holdings elects not to purchase Disney's interests, Disney
has the right, at its option, to purchase either the Company's entire
interest in Entertainment Holdings or all of the shares of stock of E!
Entertainment held by Entertainment Holdings in each case at fair market
value. In the event that Disney exercises its rights, as described above,
a portion or all of the Disney Notes (see Notes 3 and 5) may be replaced
with a three year note due to Disney.
Liberty Media Group ("Liberty"), a majority owned subsidiary of AT&T, may,
at certain times following February 9, 2000, trigger the exercise of
certain exit rights with respect to its investment in QVC. If the exit
rights are triggered, the Company has first right to purchase Liberty's
stock in QVC at Liberty's pro rata portion of the fair market value (on a
going concern or liquidation basis, whichever is higher, as determined by
an appraisal process) of QVC. The Company may pay Liberty for such stock,
subject to certain rights of Liberty to consummate the purchase in the
most tax-efficient method available, in cash, the Company's promissory
note maturing not more than three years after issuance, the Company's
equity securities or any combination thereof. If the Company elects not to
purchase the stock of QVC held by Liberty, then Liberty will have a
similar right to purchase the stock of QVC held by the Company. If Liberty
elects not to purchase the stock of QVC held by the Company, then Liberty
and the Company will use their best efforts to sell QVC.
Minimum annual rental commitments for office space, equipment and
transponder service agreements under noncancellable operating leases as of
December 31, 1999 are as follows:
(Dollars
in millions)
------------
2000................................... $61.1
2001................................... 53.7
2002................................... 46.7
2003................................... 44.7
2004................................... 40.6
Thereafter............................. 165.5
Rental expense of $71.1 million, $64.8 million and $65.8 million for 1999,
1998 and 1997, respectively, has been charged to operations.
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.
- 60 -
<PAGE>
COMCAST CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997 (Continued)
10. 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 consolidated statement of
operations) (dollars in millions).
<TABLE>
<CAPTION>
Corporate
Cable Commerce and Other(1) Total
----- -------- ------------ -----
<S> <C> <C> <C> <C>
1999
Revenues.................................................................. $2,929.3 $2,847.4 $432.5 $6,209.2
Operating income (loss) before depreciation and amortization (2).......... 1,353.0 538.8 (11.8) 1,880.0
Depreciation and amortization............................................. 1,026.6 117.2 72.2 1,216.0
Operating income (loss)................................................... 326.4 421.6 (84.0) 664.0
Interest expense.......................................................... 353.0 39.6 145.7 538.3
Assets.................................................................... 10,855.3 2,243.6 15,586.7 28,685.6
Long-term debt............................................................ 4,735.3 476.7 3,495.2 8,707.2
Capital expenditures...................................................... 739.6 80.1 74.1 893.8
1998
Revenues.................................................................. $2,277.4 $2,402.7 $465.2 $5,145.3
Operating income (loss) before depreciation and amortization (2).......... 1,096.6 434.2 (34.1) 1,496.7
Depreciation and amortization............................................. 674.2 126.1 139.3 939.6
Operating income (loss)................................................... 422.4 308.1 (173.4) 557.1
Interest expense.......................................................... 223.6 51.1 192.0 466.7
Assets.................................................................... 6,449.4 2,101.8 6,159.3 14,710.5
Long-term debt............................................................ 3,462.1 626.8 1,375.3 5,464.2
Capital expenditures...................................................... 711.1 67.2 120.6 898.9
1997
Revenues.................................................................. $2,073.0 $2,082.5 $312.2 $4,467.7
Operating income (loss) before depreciation and amortization (2).......... 987.7 337.7 (32.3) 1,293.1
Depreciation and amortization............................................. 626.1 115.0 85.4 826.5
Operating income (loss)................................................... 361.6 222.7 (117.7) 466.6
Interest expense.......................................................... 227.9 56.3 174.7 458.9
Assets.................................................................... 6,057.8 2,175.8 3,000.7 11,234.3
Long-term debt............................................................ 2,554.9 768.8 2,010.4 5,334.1
Capital expenditures...................................................... 497.8 97.3 200.4 795.5
<FN>
- --------------
(1) Other includes segments not meeting certain quantitative guidelines for
reporting. Other includes certain operating businesses and programming
investments, including Comcast-Spectacor (effective January 1, 1998), E!
Entertainment (effective March 31, 1997), the Company's consolidated UK
cable and telecommunications operations (prior to October 29, 1998), the
Company's DBS operations (prior to April 1, 1998) 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 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>
- 61 -
<PAGE>
COMCAST CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1999, 1998 and 1997 (Concluded)
11. QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
<TABLE>
<CAPTION>
First Second Third Fourth Total
Quarter Quarter Quarter Quarter (4) Year
------- ------- ------- ----------- ----
(Dollars in millions, except per share data)
<S> <C> <C> <C> <C> <C>
1999 (1)
Revenues....................................................... $1,374.0 $1,478.6 $1,525.0 $1,831.6 $6,209.2
Operating income before depreciation and amortization (2)...... 425.1 457.3 463.9 533.7 1,880.0
Operating income............................................... 186.6 149.8 151.0 176.6 664.0
Income (loss) from continuing operations
before extraordinary items............................... 101.8 826.3 20.4 (167.6) 780.9
Basic earnings (loss) for common
stockholders per common share
Income (loss) from continuing operations
before extraordinary items.............................. .13 1.10 .02 (.23) 1.00
Net income (loss)........................................ .10 1.10 .44 (.24) 1.38
Diluted earnings (loss) for common
stockholders per common share
Income (loss) from continuing operations
before extraordinary items............................... .12 1.01 .03 (.23) .95
Net income (loss)........................................ .10 1.01 .41 (.24) 1.30
Cash dividends per common share (5)............................
1998 (3)
Revenues....................................................... $1,254.5 $1,205.9 $1,238.0 $1,446.9 $5,145.3
Operating income before depreciation and amortization (2)...... 348.8 353.4 373.2 421.3 1,496.7
Operating income............................................... 109.4 124.1 132.9 190.7 557.1
Income (loss) from continuing operations
before extraordinary items............................... (68.9) (79.9) 723.7 432.8 1,007.7
Basic earnings (loss) for common
stockholders per common share
Income (loss) from continuing operations
before extraordinary items............................... (.11) (.12) .98 .58 1.34
Net income (loss).............................................. (.12) (.12) .97 .57 1.29
Diluted earnings (loss) for common
stockholders per common share
Income (loss) from continuing operations
before extraordinary items............................... (.11) (.12) .90 .53 1.25
Net income (loss).............................................. (.12) (.12) .89 .52 1.21
Cash dividends per common share (5)............................ .0117 .0117 .0117 .0117 .0467
<FN>
- --------------
(1) Results of operations for 1999 were affected by the acquisition of a
controlling interest in Jones Intercable and the receipt of the MediaOne
termination fee in the second quarter, and the ZONES fair value adjustment
in the fourth quarter (see Notes 3 and 5).
(2) See Note 10, note 2.
(3) Results of operations include the results of Comcast UK Cable through
October 29, 1998. Results of operations were affected by the gain on the
AT&T/Teleport merger in the third quarter and the gains on the sale of
Comcast UK Cable and the Sprint PCS restructuring in the fourth quarter
(see Note 4).
(4) The Company's consolidated results of operations for the fourth quarter of
1999 and 1998 are also affected by the seasonality of the Company's
commerce operations.
(5) The Company's board of directors eliminated the quarterly cash dividend of
$.0117 per share on all classes of its common stock in March 1999 (see
Note 1).
</FN>
</TABLE>
- 62 -
<PAGE>
ITEM 9 CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
The information called for by Item 10, Directors and Executive Officers of
the Registrant (except for the information regarding executive officers called
for by Item 401 of Regulation S-K which is included in Part I hereof as Item 4A
in accordance with General Instruction G(3)), Item 11, Executive Compensation,
Item 12, Security Ownership of Certain Beneficial Owners and Management, and
Item 13, Certain Relationships and Related Transactions, is hereby incorporated
by reference to our definitive Proxy Statement for our Annual Meeting of
Shareholders presently scheduled to be held in June 2000, which shall be filed
with the Securities and Exchange Commission within 120 days of the end of our
latest fiscal year.
- 63 -
<PAGE>
PART IV
ITEM 14 EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) The following consolidated financial statements of ours are included
in Part II, Item 8:
Independent Auditors' Report..................................30
Consolidated Balance Sheet--December 31, 1999 and 1998........31
Consolidated Statement of Operations--Years
Ended December 31, 1999, 1998 and 1997......................32
Consolidated Statement of Cash Flows--Years
Ended December 31, 1999, 1998 and 1997......................33
Consolidated Statement of Stockholders' Equity--
Years Ended December 31, 1999, 1998 and 1997................34
Notes to Consolidated Financial Statements....................35
(b) (i) The following financial statement schedules required to be
filed by Items 8 and 14(d) of Form 10-K are included in Part
IV:
Schedule I - Condensed Financial Information of Registrant
Unconsolidated (Parent Only)
Schedule II - Valuation and Qualifying Accounts
All other schedules are omitted because they are not
applicable, not required or the required information is
included in the consolidated financial statements or notes
thereto.
(c) Reports on Form 8-K:
(i) We filed a Current Report on Form 8-K under Item 5 on October
14, 1999 relating to our announcement that we had entered into
an underwriting pursuant to which Salomon Smith Barney, Inc.
agreed to purchase 13,982,103 of the Company's 2.0%
Exchangeable Subordinated Debentures due 2029.
(ii) We filed a Current Report on Form 8-K under Item 5 on November
3, 1999 relating to our announcement that we had entered into
an underwriting pursuant to which Salomon Smith Barney, Inc.
and Merrill Lynch, Pierce, Fenner & Smith Incorporated agreed
to purchase 7,000,000 of the Company's 2.0% Exchangeable
Subordinated Debentures due 2029.
(iii) We filed a Current Report on Form 8-K under Item 5 on November
17, 1999 relating to our announcement that we had entered into
an agreement to exchange certain cable systems with Time
Warner Cable, a division of Time Warner Entertainment Company,
L.P.
(iv) We filed a Current Report on Form 8-K under Item 5 on November
17, 1999 relating to our announcement that we had entered into
an agreement to acquire Lenfest Communications, Inc.
(v) We filed a Current Report on Form 8-K under Item 5 on December
13, 1999 which included our Agreement and Plan of Merger with
Lenfest Communications, Inc.
(vi) We filed a Current Report on Form 8-K under Item 2 on December
17, 1999 which included our Unaudited Pro Forma Condensed
Consolidated Financial Statements giving effect to the
acquisition of Lenfest Communications, Inc. as of and for the
nine months ended September 30, 1999 and for the year ended
December 31, 1998.
(vii) We filed a Current Report on Form 8-K under Item 5 on December
23, 1999 relating to our announcement that we had entered into
an agreement to acquire the remaining interest in Jones
Intercable, Inc. that we do not already own.
(d) Exhibits required to be filed by Item 601 of Regulation S-K:
- 64 -
<PAGE>
3.1(a) Amended and Restated Articles of Incorporation filed on July
24, 1990 (incorporated by reference to Exhibit 3.1(a) to our
Annual Report on Form 10-K for the year ended December 31,
1995).
3.1(b) Amendment to Restated Articles of Incorporation filed on July
14, 1994 (incorporated by reference to Exhibit 3.1(b) to our
Annual Report on Form 10-K for the year ended December 31,
1995).
3.1(c) Amendment to Restated Articles of Incorporation filed on July
12, 1995 (incorporated by reference to Exhibit 3.1(c) to our
Annual Report on Form 10-K for the year ended December 31,
1995).
3.1(d) Amendment to Restated Articles of Incorporation filed on June
24, 1996 (incorporated by reference to Exhibit 4.1(d) to our
Registration Statement on Form S-3, as amended, filed on July
16, 1996).
3.1(e) Form of Statement of Designations, Preferences and Rights of
Series B Convertible Preferred Stock of the Company
(incorporated by reference to Exhibit 3.1 to our Quarterly
Report on Form 10-Q for the quarter ended June 30, 1997).
3.2 Amended and Restated By-Laws (incorporated by reference to
Exhibit 3.1 to our Quarterly Report on Form 10-Q for the
quarter ended March 31, 1999).
4.1 Specimen Class A Common Stock Certificate (incorporated by
reference to Exhibit 2(a) to our Registration Statement on
Form S-7 filed on September 17, 1980, File No. 2-69178).
4.2 Specimen Class A Special Common Stock Certificate
(incorporated by reference to Exhibit 4(2) to our Annual
Report on Form 10-K for the year ended December 31, 1986).
4.3 Indenture, dated as of October 17, 1991, between the Company
and Bank of Montreal/Harris Trust (successor to Morgan
Guaranty Trust Company of New York), as Trustee (incorporated
by reference to Exhibit 2 to our Current Report on Form 8-K
filed on October 31, 1991).
4.4 Form of Debenture relating to our 10-1/4% Senior Subordinated
Debentures due 2001 (incorporated by reference to Exhibit
4(19) to our Annual Report on Form 10-K for the year ended
December 31, 1991).
4.5 Form of Debenture relating to our $300,000,000 10-5/8% Senior
Subordinated Debentures due 2012 (incorporated by reference to
Exhibit 4(17) to our Annual Report on Form 10-K for the year
ended December 31, 1992).
4.6 Form of Debenture relating to our $200,000,000 9-1/2% Senior
Subordinated Debentures due 2008 (incorporated by reference to
Exhibit 4(18) to our Annual Report on Form 10-K for the year
ended December 31, 1992).
4.7 Indenture, dated as of February 20, 1991, between us and
Bankers Trust Company, as Trustee (incorporated by reference
to Exhibit 4.3 to our Registration Statement on Form S-3 (File
No. 33-32830), filed on January 11, 1990).
4.8 Form of Debenture relating to our $250.0 million 9-3/8% Senior
Subordinated Debentures due 2005 (incorporated by reference to
Exhibit 4.1 to our Quarterly Report on Form 10-Q for the
quarter ended June 30, 1995).
4.9 Form of Debenture relating to our $250.0 million 9-1/8% Senior
Subordinated Debentures due 2006 (incorporated by reference to
Exhibit 4.13 to our Annual Report on Form 10-K for the year
ended December 31, 1995).
10.1* Comcast Corporation 1986 Non-Qualified Stock Option Plan, as
amended and restated, effective December 10, 1996
(incorporated by reference to Exhibit 10.3 to our Annual
Report on Form 10-K for the year ended December 31, 1996).
10.2* Comcast Corporation 1987 Stock Option Plan, as amended and
restated, effective December 15, 1998 (incorporated by
reference to Exhibit 10.2 to our Annual Report on Form 10-K
for the year ended December 31, 1998).
10.3* Comcast Corporation 1996 Stock Option Plan, as amended and
restated, effective June 21, 1999 (incorporated by reference
to Exhibit 10.1 to our Quarterly Report on Form 10-Q for the
quarter ended June 30, 1999).
- --------
* Constitutes a management contract or compensatory plan or arrangement.
- 65 -
<PAGE>
10.4* Comcast Corporation 1996 Deferred Compensation Plan, as
amended and restated, effective June 21, 1999 (incorporated by
reference to Exhibit 10.2 to our Quarterly Report on Form 10-
Q for the quarter ended June 30, 1999).
10.5* Comcast Corporation 1990 Restricted Stock Plan, as amended and
restated, effective June 21, 1999 (incorporated by reference
to Exhibit 10.3 to our Quarterly Report on Form 10-Q for the
quarter ended June 30, 1999).
10.6* 1992 Executive Split Dollar Insurance Plan (incorporated by
reference to Exhibit 10(12) to our Annual Report on Form 10-K
for the year ended December 31, 1992).
10.7* Comcast Corporation 1996 Cash Bonus Plan, as amended and
restated, effective June 21, 1999 (incorporated by reference
to Exhibit 10.4 to our Quarterly Report on Form 10-Q for the
quarter ended June 30, 1999).
10.8* Comcast Corporation 1996 Executive Cash Bonus Plan, as amended
and restated, effective June 21, 1999 (incorporated by
reference to Exhibit 10.5 to our Quarterly Report on Form 10-Q
for the quarter ended June 30, 1999).
10.9* Compensation and Deferred Compensation Agreement by and
between Comcast Corporation and Ralph J. Roberts, as amended
and restated, effective August 31, 1998 (incorporated by
reference to Exhibit 10.1 to our Quarterly Report on Form 10-Q
for the quarter ended September 30, 1998).
10.10 The Comcast Corporation Retirement-Investment Plan, as amended
and restated effective January 1, 1993 (revised through
September 30, 1995) (incorporated by reference to Exhibit 10.1
to our Registration Statement on Form S-8 filed on October 5,
1995).
10.11 Defined Contribution Plans Master Trust Agreement, between
Comcast Corporation and State Street Bank and Trust Company
(incorporated by reference to Exhibit 10.2 to our Registration
Statement on Form S-8 filed on October 5, 1995).
10.12 Tax Sharing Agreement, dated as of December 2, 1992, among
Storer Communications, Inc., TKR Cable I, Inc., TKR Cable II,
Inc., TKR Cable III, Inc., Tele-Communications, Inc., the
Company and each of the Departing Subsidiaries that are
signatories thereto (incorporated by reference to Exhibit 4 to
our Current Report on Form 8-K filed on December 17, 1992, as
amended by Form 8 filed January 8, 1993).
10.13* Comcast Corporation 1997 Deferred Stock Option Plan, as
amended and restated, effective June 21, 1999 (incorporated by
reference to Exhibit 10.6 to our Quarterly Report on Form 10-Q
for the quarter ended June 30, 1999).
10.14 Tax Sharing Agreement, dated December 2, 1992, between the
Company and Comcast Storer, Inc. (incorporated by reference to
Exhibit 9 to our Current Report on Form 8-K filed on December
17, 1992, as amended by Form 8 filed January 8, 1993).
10.15 Amended and Restated Stockholders Agreement, dated as of
February 9, 1995, among the Company, Comcast QVC, Inc., QVC
Programming Holdings, Inc., Liberty Media Corporation, QVC
Investment, Inc. and Liberty QVC, Inc. (incorporated by
reference to Exhibit 10.5 to our Quarterly Report on Form 10-Q
for the quarter ended March 31, 1995).
10.16(a) Credit Agreement, dated as of February 15, 1995, among QVC,
Inc. and the Banks listed therein (incorporated by reference
to Exhibit (b)(6) to Amendment No. 21 to the Tender Offer
Statement on Schedule 14D-1 filed on February 17, 1995 by QVC
Programming Holdings, Inc., the Company and
Tele-Communications, Inc. with respect to the tender offer for
all outstanding shares of QVC, Inc.).
10.16(b)** Amendment No. 3, dated as of July 19, 1996, to the Credit
Agreement, dated as of February 15, 1995, among QVC, Inc. and
the Banks listed therein.
10.17 Comcast MHCP Holdings, L.L.C. Amended and Restated Limited
Liability Company Agreement, dated as of December 18, 1994,
among Comcast Cable Communications, Inc., The California
Public Employees' Retirement System and, for certain limited
purposes, the Company (incorporated by reference to Exhibit
10.1 to our Current Report on Form 8-K filed on January 6,
1995).
- --------
* Constitutes a management contract or compensatory plan or arrangement.
- 66 -
<PAGE>
10.18 Credit Agreement, dated as of December 22, 1994, among Comcast
MH Holdings, Inc., the banks listed therein, The Chase
Manhattan Bank (National Association), NationsBank of Texas,
N.A. and the Toronto-Dominion Bank, as Arranging Agents, The
Bank of New York, The Bank of Nova Scotia, Canadian Imperial
Bank of Commerce and Morgan Guaranty Trust Company of New
York, as Managing Agents and NationsBank of Texas, N.A., as
Administrative Agent (incorporated by reference to Exhibit
10.2 to our Current Report on Form 8-K filed on January 6,
1995).
10.19 Pledge Agreement, dated as of December 22, 1994, between
Comcast MH Holdings, Inc. and NationsBank of Texas, N.A., as
the secured party (incorporated by reference to Exhibit 10.3
to our Current Report on Form 8-K filed on January 6, 1995).
10.20 Pledge Agreement, dated as of December 22, 1994, between
Comcast Communications Properties, Inc. and NationsBank of
Texas, N.A., as the Secured Party (incorporated by reference
to Exhibit 10.4 to our Current Report on Form 8-K filed on
January 6, 1995).
10.21 Affiliate Subordination Agreement (as the same may be amended,
modified, supplemented, waived, extended or restated from time
to time, this "Agreement"), dated as of December 22, 1994,
among the Company, Comcast MH Holdings, Inc., (the
"Borrower"), any affiliate of the Borrower that shall have
become a party thereto and NationsBank of Texas, N.A., as
Administrative Agent under the Credit Agreement dated as of
December 22, 1994, among the Borrower, the Banks listed
therein, The Chase Manhattan Bank (National Association),
NationsBank of Texas, N.A. and The Toronto-Dominion Bank, as
Arranging Agents, The Bank of New York, The Bank of Nova
Scotia, Canadian Imperial Bank of Commerce and Morgan Guaranty
Trust Company of New York, as Managing Agents, and the
Administrative Agent (incorporated by reference to Exhibit
10.5 to our Current Report on Form 8-K filed on January 6,
1995).
10.22** Credit Agreement, dated as of November 15, 1996, among Comcast
SCH Holdings, Inc., the banks listed therein, Nationsbank of
Texas, N.A., as Documentation Agent, The Chase Manhattan Bank,
as Syndication Agent, The Bank of New York, The Chase
Manhattan Bank and Nationsbank of Texas, N.A., as Managing
Agents, and The Bank of New York, as Administrative Agent.
10.23 Indenture dated as of May 1, 1997, between Comcast Cable
Communications, Inc. and Bank of Montreal Trust Company, as
Trustee, in respect of Comcast Cable Communications, Inc.'s
8-1/8% Notes due 2004, 8-3/8% Notes due 2007, 8-7/8% Notes due
2017, 8-1/2% Notes due 2027 and 6.20% Notes due 2008
(incorporated by reference to Exhibit 4.1(a) to the
Registration Statement on Form S-4 (File No. 333-30745) of
Comcast Cable Communications, Inc.).
10.24 Purchase and Sale Agreement dated as of January 19, 1999 among
SBC Communications Inc., Comcast Cellular Holdings
Corporation, Comcast Financial Corporation and Comcast
Corporation (incorporated by reference to Exhibit 10.34 to our
Annual Report on Form 10-K for the year ended December 31,
1998).
10.25 Agreement and Plan of Merger, dated as of November 16, 1999,
by and among Comcast Corporation, Comcast LCI Holdings, Inc.,
a wholly owned subsidiary of Comcast, Lenfest Communications,
Inc. ("Lenfest") and Lenfest's stockholders as named therein.
(incorporated by reference to Exhibit 10.1 to our Current
Report on Form 8-K filed on December 13, 1999).
21 List of Subsidiaries.
23.1 Consent of Deloitte & Touche LLP.
23.2 Consent of KPMG LLP.
27.1 Financial Data Schedule.
99.1 Report of Independent Public Accountants to QVC, Inc., as of
December 31, 1998 and for the years ended December 31, 1998
and 1997.
- ----------
* Constitutes a management contract or compensatory plan or arrangement.
** Pursuant to Item 601(b)(4)(iii)(A) of Regulation S-K, the Registrant
agrees to furnish a copy of the referenced agreement to the Commission
upon request.
- 67 -
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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 in Philadelphia,
Pennsylvania on February 29, 2000.
Comcast Corporation
By: /s/ Brian L. Roberts
------------------------------
Brian L. Roberts
President and Director
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Ralph J. Roberts Chairman of the Board of Directors; Director February 29, 2000
- --------------------------
Ralph J. Roberts
/s/ Julian A. Brodsky Vice Chairman of the Board of Directors; February 29, 2000
- -------------------------- Director
Julian A. Brodsky
/s/ Brian L. Roberts President; Director (Principal Executive February 29, 2000
- -------------------------- Officer)
Brian L. Roberts
/s/ John R. Alchin Executive Vice President, Treasurer February 29, 2000
- -------------------------- (Principal Financial Officer)
John R. Alchin
/s/ Lawrence J. Salva Senior Vice President February 29, 2000
- -------------------------- (Principal Accounting Officer)
Lawrence J. Salva
/s/ Gustave G. Amsterdam Director February 29, 2000
- --------------------------
Gustave G. Amsterdam
/s/ Sheldon M. Bonovitz Director February 29, 2000
- --------------------------
Sheldon M. Bonovitz
/s/ Joseph L. Castle II Director February 29, 2000
- --------------------------
Joseph L. Castle II
/s/ Bernard C. Watson Director February 29, 2000
- --------------------------
Bernard C. Watson
/s/ Irving A. Wechsler Director February 29, 2000
- --------------------------
Irving A. Wechsler
/s/ Anne Wexler Director February 29, 2000
- --------------------------
Anne Wexler
</TABLE>
- 68 -
<PAGE>
COMCAST CORPORATION AND SUBSIDIARIES
SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF
REGISTRANT UNCONSOLIDATED (PARENT ONLY)
CONDENSED BALANCE SHEET
(In millions, except share data)
<TABLE>
<CAPTION>
December 31,
ASSETS 1999 1998
- ------ ------------- ------------
<S> <C> <C>
Cash and cash equivalents........................................................ $8.6 $31.2
Other current assets............................................................. 16.2 18.4
------------- ------------
Total current assets.......................................................... 24.8 49.6
Investments in and amounts due from subsidiaries
eliminated upon consolidation................................................. 14,664.6 5,679.6
Property and equipment, net...................................................... 11.7 14.0
Other assets, net................................................................ 66.7 23.5
------------- ------------
$14,767.8 $5,766.7
============= ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Accrued interest................................................................. $34.9 $30.5
Other current liabilities........................................................ 694.3 286.3
------------- ------------
Total current liabilities..................................................... 729.2 316.8
------------- ------------
Long-term debt, less current portion (including adjustment
to carrying value of $666.0 million and zero)................................. 3,147.5 1,065.3
------------- ------------
Deferred income taxes and other.................................................. 549.8 458.1
------------- ------------
Common equity put options........................................................ 111.2
------------- ------------
Stockholders' equity
Preferred stock - authorized, 20,000,000 shares; 5% series A convertible,
no par value; issued,
zero and 6,370 at redemption value......................................... 31.9
5.25% series B mandatorily redeemable convertible,
$1,000 par value; issued, 569,640 and 540,690
at redemption value........................................................ 569.6 540.7
Class A special common stock, $1 par value - authorized,
2,500,000,000 shares; issued, 716,442,482 and 698,395,170.................. 716.4 698.4
Class A common stock, $1 par value - authorized,
200,000,000 shares; issued, 25,993,380 and 31,690,063...................... 26.0 31.7
Class B common stock, $1 par value - authorized,
50,000,000 shares; issued, 9,444,375....................................... 9.4 9.4
Additional capital............................................................ 3,527.0 2,941.7
Accumulated deficit........................................................... (619.8) (1,488.2)
Accumulated other comprehensive income........................................ 6,112.7 1,049.7
------------- ------------
Total stockholders' equity................................................. 10,341.3 3,815.3
------------- ------------
$14,767.8 $5,766.7
============= ============
</TABLE>
- 69 -
<PAGE>
COMCAST CORPORATION AND SUBSIDIARIES
SCHEDULE I -- CONDENSED FINANCIAL INFORMATION OF
REGISTRANT UNCONSOLIDATED (PARENT ONLY)
CONDENSED STATEMENT OF OPERATIONS AND ACCUMULATED DEFICIT
(In millions, except per share data)
<TABLE>
<CAPTION>
Year Ended December 31,
1999 1998 1997
------------- -------------- -------------
<S> <C> <C> <C>
REVENUES, principally intercompany fees eliminated
upon consolidation............................................ $377.7 $320.1 $286.8
GENERAL AND ADMINISTRATIVE EXPENSES.............................. 91.3 83.2 69.5
------------- -------------- -------------
OPERATING INCOME................................................. 286.4 236.9 217.3
OTHER (INCOME) EXPENSE
Interest expense, including intercompany interest, net........ 275.8 239.1 231.2
Expense related to indexed debt............................... 666.0
Equity in net (income) losses of affiliates and other......... (1,652.4) (976.2) 238.6
------------- -------------- -------------
(710.6) (737.1) 469.8
------------- -------------- -------------
INCOME (LOSS) BEFORE INCOME TAX BENEFIT
AND EXTRAORDINARY ITEMS....................................... 997.0 974.0 (252.5)
INCOME TAX BENEFIT............................................... (113.5) (2.1) (16.6)
------------- -------------- -------------
INCOME (LOSS) BEFORE EXTRAORDINARY ITEMS......................... 1,110.5 976.1 (235.9)
EXTRAORDINARY ITEMS.............................................. (44.8) (4.0) (2.8)
------------- -------------- -------------
NET INCOME (LOSS)................................................ 1,065.7 972.1 (238.7)
ACCUMULATED DEFICIT
Beginning of year............................................. (1,488.2) (2,415.9) (2,127.1)
Retirement of common stock.................................... (25.3) (10.0) (17.7)
Share exchange................................................ (172.0)
Cash dividends, $.0467 per share in 1998 and 1997............. (34.4) (32.4)
------------- -------------- -------------
End of year................................................... ($619.8) ($1,488.2) ($2,415.9)
============= ============== =============
</TABLE>
- 70 -
<PAGE>
COMCAST CORPORATION AND SUBSIDIARIES
SCHEDULE I -- CONDENSED FINANCIAL INFORMATION OF
REGISTRANT UNCONSOLIDATED (PARENT ONLY)
CONDENSED STATEMENT OF CASH FLOWS
(In millions)
<TABLE>
<CAPTION>
Year Ended December 31,
1999 1998 1997
-------------- ------------- ------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income (loss)....................................................... $1,065.7 $972.1 ($238.7)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization........................................ 6.8 13.2 7.0
Non-cash interest expense, net....................................... 3.7 106.8
Non-cash expense related to indexed debt............................. 666.0
Equity in net (income) losses of affiliates.......................... (1,593.0) (976.6) 275.2
Extraordinary items.................................................. 44.8 4.0 2.8
Deferred income taxes and other...................................... 292.9 104.2 88.9
-------------- ------------- ------------
483.2 120.6 242.0
Changes in working capital........................................... 79.0 155.2 (80.1)
-------------- ------------- ------------
Net cash provided by operating activities...................... 562.2 275.8 161.9
-------------- ------------- ------------
FINANCING ACTIVITIES
Proceeds from borrowings................................................ 2,525.4
Retirement and repayment of debt........................................ (962.9) (50.6) (59.5)
Issuance of preferred stock............................................. 500.0
(Repurchases) issuances of common stock, net............................ (13.6) 28.9 470.2
Dividends............................................................... (9.4) (36.0) (34.0)
Other................................................................... (23.0) (32.8) 12.7
-------------- ------------- ------------
Net cash provided by (used in) financing activities............ 1,516.5 (90.5) 889.4
-------------- ------------- ------------
INVESTING ACTIVITIES
Net transactions with affiliates........................................ (2,087.1) (164.0) (1,026.4)
Capital expenditures and other.......................................... (14.2) (2.9) (21.8)
-------------- ------------- ------------
Net cash used in investing activities.......................... (2,101.3) (166.9) (1,048.2)
-------------- ------------- ------------
(DECREASE) INCREASE IN CASH AND
CASH EQUIVALENTS........................................................ (22.6) 18.4 3.1
CASH AND CASH EQUIVALENTS, beginning of year............................... 31.2 12.8 9.7
-------------- ------------- ------------
CASH AND CASH EQUIVALENTS, end of year..................................... $8.6 $31.2 $12.8
============== ============= ============
</TABLE>
- 71 -
<PAGE>
COMCAST CORPORATION AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
(In millions)
<TABLE>
<CAPTION>
Additions
Balance at Charged to Deductions Balance
Beginning Costs and from at End
of Year Expenses Reserves(A) of Year
------- -------- ----------- -------
<S> <C> <C> <C> <C>
Allowance for Doubtful Accounts
1999................................................... $120.7 $48.6 $32.7 $136.6
1998................................................... 108.8 52.2 40.3 120.7
1997................................................... 94.0 55.1 40.3 108.8
Allowance for Obsolete
Electronic Retailing Inventories
1999................................................... $60.9 $61.9 $33.6 $89.2
1998................................................... 44.5 39.0 22.6 60.9
1997................................................... 34.7 37.0 27.2 44.5
<FN>
(A) Uncollectible accounts and obsolete inventory written off.
</FN>
</TABLE>
- 72 -
Exhibit 21 Subsidiaries of the Registrant
Entity Name Organization Place
- ----------- ------------------
1278844 Ontario Ltd. Canada
Affiliate Marks Investments, Inc. DE
Affiliate Relations Holdings, Inc. DE
Affiliate Relations, Inc. DE
Affiliate Sales & Marketing, Inc. DE
AWACS Garden State, Inc. DE
BroadNet Austria GmbH Austria
BroadNet Czech s.r.o. Czech Republic
BroadNet Deutschland GmbH Germany
BroadNet Europe SPRL Belgium
BroadNet France S.A.S. France
BroadNet Hellas S.A. Greece
BroadNet Holdings B.V. The Netherlands
BroadNet Italy Holdings Ltd UK
BroadNet Italy SPA Italy
BroadNet Magyarorszag Kft Poland
BroadNet Norway A.S. Norway
BroadNet Poland Holdings Ltd UK
BroadNet Polska s.p.z.o.o. Poland
BroadNet Slovakia s.r.o. Slovakia
BroadNet Suisse A.S. Switzerland
BroadNet UK Ltd UK
BroadNet Hungary Holdings Ltd UK
Cable TV Fund 12-A, Ltd. CO
Cable TV Fund 12-B, Ltd. CO
Cable TV Fund 12-B/C/D Venture CO
Cable TV Fund 12-C, Ltd. CO
Cable TV Fund 12-D, Ltd. CO
Cable TV Fund 14-A, Ltd. CO
Cable TV Fund 14-B, Ltd. CO
Cable TV Fund 15-A, Ltd. CO
Cablevision Investment of Detroit, Inc. MI
CAH, Inc. PA
California Ad Sales, Inc. DE
CDirect Mexico I, Inc. DE
CDirect Mexico II, Inc. DE
Classic Services, Inc. DE
Clinton Cable TV Investors, Inc. MI
Page 1
<PAGE>
Entity Name Organization Place
- ----------- ------------------
Coastal Cable TV, Inc. CT
COM Indiana, Inc. DE
COM Indianapolis, Inc. DE
COM Inkster, Inc. MI
COM MH, Inc. DE
COM Sacramento, Inc. CA
COM South, Inc. CO
COM Sports Holding Company, Inc. DE
COM Sports Ventures, Inc. DE
Comcast 38GHZ, Inc. DE
Comcast Brazil, Inc. DE
Comcast Business Telephony Services, Inc. DE
Comcast Cable Communications, Inc. DE
Comcast Cable Communications, Inc. PA
Comcast Cable Funding GP, Inc. DE
Comcast Cable Funding LP, Inc. DE
Comcast Cable Funding, Inc. DE
Comcast Cable Funding, L.P. DE
Comcast Cable Investors, Inc. DE
Comcast Cable of Indiana, Inc. DE
Comcast Cable of Maryland, Inc. DE
Comcast Cable Tri-Holdings, Inc. DE
Comcast Cable Trust I DE
Comcast Cable Trust II DE
Comcast Cable Trust III DE
Comcast Cablevision Corporation of Alabama AL
Comcast Cablevision Corporation of California CA
Comcast Cablevision Corporation of Connecticut CT
Comcast Cablevision Corporation of Florida FL
Comcast Cablevision Corporation of the Southeast FL
Comcast Cablevision Investment Corporation DE
Comcast Cablevision of Arkansas, Inc. DE
Comcast Cablevision of Boca Raton, Inc. DE
Comcast Cablevision of Broward County, Inc. DE
Comcast Cablevision of Bryant, Inc. AR
Comcast Cablevision of Burlington County, Inc. DE
Comcast Cablevision of Carolina, Inc. SC
Comcast Cablevision of Central New Jersey, Inc. DE
Page 2
<PAGE>
Entity Name Organization Place
- ----------- ------------------
Comcast Cablevision of Chesterfield County, Inc. VA
Comcast Cablevision of Clinton MI
Comcast Cablevision of Clinton, Inc. MI
Comcast Cablevision of Clinton, Inc. CT
Comcast Cablevision of Colorado, LLC DE
Comcast Cablevision of Danbury, Inc. DE
Comcast Cablevision of Delmarva, Inc. DE
Comcast Cablevision of Detroit MI
Comcast Cablevision of Detroit, Inc. MI
Comcast Cablevision of Dothan, Inc. AL
Comcast Cablevision of Flint, Inc. MI
Comcast Cablevision of Fontana, Inc. DE
Comcast Cablevision of Fort Wayne Limited Partnership IN
Comcast Cablevision of Gadsden, Inc. AL
Cocmast Cablevision of Georgia/South Carolina, Inc. CO
Comcast Cablevision of Gloucester County, Inc. DE
Comcast Cablevision of Grosse Pointe, Inc. MI
Comcast Cablevision of Groton, Inc. CT
Comcast Cablevision of Hallandale, Inc. FL
Comcast Cablevision of Harford County, Inc. MD
Comcast Cablevision of Hopewell Valley, Inc. NJ
Comcast Cablevision of Howard County, Inc. MD
Comcast Cablevision of Huntsville, Inc. AL
Comcast Cablevision of Indianapolis, Inc. DE
Comcast Cablevision of Indianapolis, L.P. DE
Comcast Cablevision of Inkster Limited Partnership MI
Comcast Cablevision of Inland Empire, Inc. DE
Comcast Cablevision of Jersey City, Inc. NJ
Comcast Cablevision of Lake County, LLC DE
Comcast Cablevision of Laurel, Inc. MS
Comcast Cablevision of Lawrence, Inc. NJ
Comcast Cablevision of Little Rock, Inc. AR
Comcast Cablevision of Lompoc, Inc. DE
Comcast Cablevision of Lower Merion, Inc. PA
Comcast Cablevision of Macomb County, Inc. MI
Comcast Cablevision of Macomb, Inc. MI
Comcast Cablevision of Marianna, Inc. DE
Comcast Cablevision of Maryland Limited Partnership MD
Page 3
<PAGE>
Entity Name Organization Place
- ----------- ------------------
Comcast Cablevision of Maryland LLC DE
Comcast Cablevision of Maryland, Inc. CO
Comcast Cablevision of Mercer County, Inc. NJ
Comcast Cablevision of Meridian, Inc. MS
Comcast Cablevision of Middletown, Inc. DE
Comcast Cablevision of Missouri, Inc. CO
Comcast Cablevision of Mobile, Inc. AL
Comcast Cablevision of Monmouth County, Inc. DE
Comcast Cablevision of Mt. Clemens MI
Comcast Cablevision of Mt. Clemens, Inc. MI
Comcast Cablevision of New Haven, Inc. CT
Comcast Cablevision of New Jersey, Inc. NJ
Comcast Cablevision of New Mexico, Inc. CO
Comcast Cablevision of Newport Beach, Inc. DE
Comcast Cablevision of Northwest New Jersey, Inc. DE
Comcast Cablevision of Ocean County, Inc. DE
Comcast Cablevision of Orange County, Inc. DE
Comcast Cablevision of Paducah, Inc. KY
Comcast Cablevision of Panama City, Inc. DE
Comcast Cablevision of Perry, Inc. DE
Comcast Cablevision of Philadelphia Area I, Inc. PA
Comcast Cablevision of Philadelphia, Inc. PA
Comcast Cablevision of Plainfield, Inc. DE
Comcast Cablevision of Quincy, Inc. DE
Comcast Cablevision of Sacramento CA
Comcast Cablevision of Sacramento, Inc. DE
Comcast Cablevision of San Bernardino, Inc. DE
Comcast Cablevision of Santa Ana, Inc. DE
Comcast Cablevision of Santa Maria, Inc. DE
Comcast Cablevision of Seal Beach, Inc. DE
Comcast Cablevision of Shelby, Inc. MI
Comcast Cablevision of Simi Valley, Inc. DE
Comcast Cablevision of Southeast Michigan, Inc. DE
Comcast Cablevision of Sterling Heights, Inc. MI
Comcast Cablevision of Tallahassee, Inc. DE
Comcast Cablevision of Taylor, Inc. MI
Comcast Cablevision of the Meadowlands, Inc. NJ
Comcast Cablevision of the Shoals, Inc. AL
Page 4
<PAGE>
Entity Name Organization Place
- ----------- ------------------
Comcast Cablevision of the South CO
Comcast Cablevision of the South, Inc. CO
Comcast Cablevision of the South, LP DE
Comcast Cablevision of the South, LLC DE
Comcast Cablevision of Tupelo, Inc. MS
Comcast Cablevision of Tuscaloosa, Inc. AL
Comcast Cablevision of Utica, Inc. MI
Comcast Cablevision of Virginia, Inc. CO
Comcast Cablevision of Warren MI
Comcast Cablevision of Warren, Inc. MI
Comcast Cablevision of West Florida, Inc. DE
Comcast Cablevision of West Palm Beach, Inc. DE
Comcast Cablevision of Westmoreland, Inc. PA
Comcast Cablevision of Willow Grove, Inc. PA
Comcast Cablevision of Wisconsin, Inc. CO
Comcast Capital Corporation DE
Comcast CICG GP, Inc. DE
Comcast CICG LP, Inc. DE
Comcast CICG, L.P. DE
Comcast Commercial Online Communications, Inc. DE
Comcast Communications Properties, Inc. DE
Comcast Content & Communications Corporation DE
Comcast Corporate Investments, Inc. DE
Comcast Corporation Trust I DE
Comcast Corporation Trust II DE
Comcast Corporation Trust III DE
Comcast Crystalvision, Inc. DE
Comcast DC Radio, Inc. DE
Comcast do Brasil Ltda. Brazil
Comcast Entertainment Holdings LLC DE
Comcast Financial Agency Corporation DE
Comcast Florida Programming Investments, Inc. DE
Comcast Funding GP, Inc. DE
Comcast Funding LP, Inc. DE
Comcast Funding, Inc. DE
Comcast Funding, L.P. DE
Comcast FW, Inc. DE
Comcast Garden State, Inc. DE
Page 5
<PAGE>
Entity Name Organization Place
- ----------- ------------------
Comcast Hattiesburg Holding Company, Inc. DE
Comcast Heritage, Inc. DE
Comcast Holdings, Inc. DE
Comcast ICG, Inc. DE
Comcast International Holdings, Inc. DE
Comcast Investment Holdings, Inc. DE
Comcast JOIN Holdings, Inc. DE
Comcast LCI Bond Holdings, Inc. DE
Comcast LCI Holdings, Inc. DE
Comcast Life Insurance Holding Company DE
Comcast MH Holdings, Inc. DE
Comcast MH Telephony Communications of Florida, Inc. FL
Comcast MH Telephony Communications of Michigan, Inc. MI
Comcast MH Telephony Communications of New Jersey, Inc. NJ
Comcast MHCP Holdings, L.L.C DE
Comcast Michigan Holdings, Inc. MI
Comcast Midwest Management, Inc. DE
Comcast Online Communications, Inc. DE
Comcast Online Communications, LLC DE
Comcast Online Holdings, Inc. DE
Comcast PC Investments, Inc. DE
Comcast Philadelphia Interconnect Partner, Inc. DE
Comcast Prime, LLC DE
Comcast Primestar Holdings, Inc. DE
Comcast Programming Holdings, Inc. DE
Comcast Programming Ventures, Inc. DE
Comcast QIH GP, Inc. DE
Comcast QIH LP, Inc. DE
Comcast QIH, L.P. DE
Comcast QVC, Inc. DE
Comcast Real Estate Holdings of Alabama, Inc. AL
Comcast Real Estate Holdings, Inc. DE
Comcast SCH Holdings, Inc. CO
Comcast SCH Holdings, LLC DE
Comcast Southeast Sports Channel, LLC DE
Comcast Spectacor Foundation PA
Comcast Spectacor, L.P. PA
Comcast Sports Holding Company, Inc. DE
Page 6
<PAGE>
Entity Name Organization Place
- ----------- ------------------
Comcast Storer Finance Sub, Inc. DE
Comcast Storer, Inc. DE
Comcast Technology, Inc. DE
Comcast Telecommunications, Inc. PA
Comcast Telephony Communications Holdings, Inc. DE
Comcast Telephony Communications of California, Inc. CA
Comcast Telephony Communications of Connecticut, Inc. CT
Comcast Telephony Communications of Delaware, Inc. DE
Comcast Telephony Communications of Florida, Inc. FL
Comcast Telephony Communications of Georgia, Inc. GA
Comcast Telephony Communications of Indiana, Inc. IN
Comcast Telephony Communications of Maryland, Inc. MD
Comcast Telephony Communications of Michigan, Inc. MI
Comcast Telephony Communications of New Jersey, Inc. NJ
Comcast Telephony Communications of Pennsylvania, Inc. PA
Comcast Telephony Communications of South Carolina, Inc. SC
Comcast Telephony Communications, Inc. DE
Comcast Telephony Services Holdings, Inc. DE
Comcast Teleport, Inc. DE
Comcast TM, Inc. DE
Comcast WCS Communications, Inc. DE
Comcast WCS ME02, Inc. DE
Comcast WCS MEO4, Inc. DE
Comcast WCS MEO5, Inc. DE
Comcast WCS ME16, Inc. DE
Comcast WCS ME19A, Inc. DE
Comcast WCS ME22, Inc. DE
Comcast WCS ME26, Inc. DE
Comcast WCS ME28, Inc. DE
Comcast WCS ME43, Inc. DE
Comcast WCS RE01, Inc. DE
ComCon Entertainment Holdings, Inc. DE
CVN Companies, Inc. MN
CVN Distribution Co., Inc. MN
Diamonique Corporation NJ
Diamonique Corporation PA
E! Entertainment Television International Holdings Inc. DE
E! Entertainment Television, Inc. DE
Page 7
<PAGE>
Entity Name Organization Place
- ----------- ------------------
E! Online, Inc. DE
E! Online, LLC CA
Eastechnica IV S.G.P.S. Portugal
ER Marks, Inc. DE
Exclamation Music, Inc. CA
Exclamation Productions, Inc. CA
EZShop International, Inc. DE
First Television Corporation DE
Florida Telecommunications Services, Inc. FL
Flyers Skate Zone, Inc. PA
Flyers Skate Zone, L.P. PA
FPS Rink, Inc. PA
FPS Rink, L.P. PA
Global Spectrum, Inc. PA
Globe Facilities Limited Patnership DE
IDS/Jones Growth Patners 89-B, Ltd. CO
IDS/Jones Growth Patners II, L.P. CO
IDS/Jones Joint Venture Partners CO
Innovative Retailing, Inc. DE
Interactive Technology Holdings, LLC DE
Jones Cable Corporation CO
Jones Cable Holdings II, Inc. CO
Jones Cable Holdings, Inc. CO
Jones Cable Income Fund 1-B, Ltd. CO
Jones Cable Income Fund 1-B/C Venture CO
Jones Cable Income Fund 1-C, Ltd. CO
Jones Communications of Arizona, Inc. CO
Jones Communications of California, Inc. CO
Jones Futurex, Inc. CO
Jones Growth Partners L.P. CO
Jones Intercable Funds, Inc. CO
Jones Intercable, Inc. CO
Jones Panorama Properties, Inc. CO
Jones Programming Services, Inc. CO
Jones Spacelink Cable Corporation CO
Jones Spacelink Income/Growth Fund 1-A, Ltd. CO
Jones Telecommunications of California, Inc. CO
Jones Telecommunications of Maryland, Inc. CO
Page 8
<PAGE>
Entity Name Organization Place
- ----------- ------------------
Jones Telecommunications of Virginia, Inc. VA
LenComm, Inc. CA
Lenfest Advertising, Inc. DE
Lenfest Atlantic Communications, Inc. DE
Lenfest Atlantic, Inc. NJ
Lenfest Australia Group Pty Ltd. Australia
Lenfest Australia Investment Pty Ltd. Australia
Lenfest Australia, Inc. DE
Lenfest Clearview, Inc. DE
Lenfest Delaware Properties, Inc. DE
Lenfest International, Inc. DE
Lenfest Investments, Inc. DE
Lenfest Jersey, Inc. DE
Lenfest MCN Delmarva Associates, L.P.
Lenfest MCN Delmarva Investments, Inc. DE
Lenfest MCN Delmarva, Inc. DE
Lenfest MCN, Inc. DE
Lenfest New Castle County, Inc. DE
Lenfest Oaks, Inc. PA
Lenfest Philadelphia Interconnect, Inc. DE
Lenfest Raystay Holdings, Inc. DE
Lenfest West, Inc. CA
Lenfest York, Inc. DE
M H Lightnet Inc. DE
Mobile Enterprises, Inc. DE
Mt. Clemens Cable TV Investors, Inc. MI
MTCB S.A Brazil
New England Microwave, Inc. CT
Pattison Development, Inc. PA
Pattison Realty, Inc. PA
Philadelphia 76ers, Inc. DE
Philadelphia 76ers, L.P. DE
Philadelphia Flyers Enterprises Co. Nova Scotia
Philadelphia Phantoms, Inc. PA
Philadelphia Phantoms, L.P. PA
Philadelphia Sports Media, Inc. PA
Philadelphia Sports Media, L.P. PA
Pioneer Studios, Inc. DE
Page 9
<PAGE>
Entity Name Organization Place
- ----------- ------------------
Q Fit, Inc. DE
Q The Music, Inc. DE
Q2 Inc. NY
QDirect Ventures, Inc. DE
QExhibits, Inc. DE
QFit, Inc. DE
QHealth, Inc. DE
QVC UK
QVC Britain UK
QVC Britain I, Inc. DE
QVC Britain II, Inc. DE
QVC Britain III, Inc. DE
QVC Canada Holdings II Ltd. Ontario
QVC Canada Holdings Ltd. Ontario
QVC Chesapeake, Inc. VA
QVC de Mexico de C.V Mexico
QVC Delaware, Inc. DE
QVC Deutschland GMBH Germany
QVC EDV-SERVICE GmbH Germany
QVC Germany I, Inc. DE
QVC Germany II, Inc. DE
QVC Holdings, Inc. DE
QVC International, Inc. DE
QVC Local, Inc. DE
QVC Mexico II, Inc. DE
QVC Mexico III, Inc. DE
QVC Mexico, Inc. DE
QVC Middle East, Inc. DE
QVC NS Holding Company Nova Scotia
QVC ProductWorks, Inc. DE
QVC Publishing, Inc. DE
QVC Realty, Inc. PA
QVC Rocky Mount, Inc. DE
QVC San Antonio, Inc. TX
QVC St. Lucie, Inc. FL
QVC Virginia, Inc. VA
QVC, Inc. DE
Raystay Corp. PA
Page 10
<PAGE>
Entity Name Organization Place
- ----------- ------------------
River City Cablevision, Inc. CA
Saturn Cable TV, Inc. CO
SCI 11, Inc. DE
SCI 34, Inc. DE
SCI 36, Inc. DE
SCI 37, Inc. DE
SCI 38, Inc. DE
SCI 48, Inc. DE
SCI 55, Inc. DE
Selkirk Communications (Delaware) Corporation DE
Shop.eonline.com, LLC CA
Spectacor Adjoining Real Estate New Arena, L.P. DE
Spectrum Arena Limited Partnership PA
StarNet Development, Inc. UT
StarNet Interactive Entertainment, Inc. DE
StarNet, Inc. DE
Storer Communications, Inc. DE
Suburban Cable TV Co. Inc. PA
Suburban Digital Services, Inc. DE
Suburban Networks, Inc. DE
The Comcast Foundation DE
The Intercable Group, Ltd. CO
The Jones Group, Ltd. CO
The Sacramento Interconnect, LLC DE
Tri-State Media, Inc. DE
Page 11
INDEPENDENT AUDITORS' CONSENT AND REPORT ON SCHEDULES
To the Board of Directors and Stockholders
Comcast Corporation
Philadelphia, Pennsylvania
We consent to the incorporation by reference in the following Registration
Statements of Comcast Corporation and its subsidiaries (the "Company") on Form
S-3 and S-8 of our report dated February 24, 2000, appearing in the Annual
Report on Form 10-K of Comcast Corporation and its subsidiaries for the year
ended December 31, 1999.
Registration Statements on Form S-8:
Title of Securities Registered Registration Statement Number
The Comcast Corporation Retirement Investment Plan 33-41440
The Comcast Corporation Retirement Investment Plan 33-63223
Storer Communications Retirement Savings Plan 33-54365
Stock Option Plans 33-56903
The 1996 Comcast Corporation Stock Option Plan 333-08577
The 1996 Comcast Corporation Deferred Compensation Plan 333-18715
Comcast-Spectacor 401(k) Plan 333-69709
Registration Statements on Form S-3:
Title of Securities Registered
- ------------------------------
Senior Debt Securities; Subordinated Debt Securities;
Warrants; Purchase Contracts; Units; Guaranteed
Trust Preferred Securities; Guaranteed Trust Preferred
Securities Guarantees; Preferred Stock, without par
value; Depository Shares; Class A Common Stock,
$1.00 par value and Class A Special Common Stock,
$1.00 par value 333-81391
Our audits of the financial statements referred to in our aforementioned report
also included the financial statement schedules of the Company, listed in Item
14(b)(i). These financial statement schedules are the responsibility of the
Company's management. Our responsibility is to express an opinion based on our
audits. In our opinion, such financial statement schedules, when considered in
relation to the basic financial statements taken as a whole, present fairly in
all material respects the information set forth therein.
/s/ Deloitte & Touche LLP
February 24, 2000
Philadelphia, Pennsylvania
Exhibit 23.2 Consent of KPMG LLP
Consent of Independent Certified Public Accountants
The Board of Directors
QVC, Inc.:
We consent to the incorporation by reference in the registration statements
(Nos. 33-41440, 33-63223, 33-54365, 33-56903, 333-08577, 333-18715 and
333-69709) on Form S-8 and (No. 333-81391) on Form S-3 of Comcast Corporation of
our report dated February 3, 1999, with respect to the consolidated balance
sheet of QVC, Inc. and subsidiaries as of December 31, 1998, and the related
consolidated statements of operations and comprehensive income, shareholders'
equity, and cash flows for each of the years in the two-year period ended
December 31, 1998 (such consolidated financial statements are not separately
presented herein), which report is included as an exhibit to the Form 10-K of
Comcast Corporation for the year ended December 31, 1999.
/s/ KPMG LLP
Philadelphia, Pennsylvania
February 28, 2000
<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> 0000022301
<NAME> COMCAST CORPORATION
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> DEC-31-1999
<CASH> 922
<SECURITIES> 7,606
<RECEIVABLES> 673
<ALLOWANCES> (137)
<INVENTORY> 457
<CURRENT-ASSETS> 9,759
<PP&E> 5,099
<DEPRECIATION> (1,701)
<TOTAL-ASSETS> 28,686
<CURRENT-LIABILITIES> 5,527
<BONDS> 8,707
570
0
<COMMON> 716
<OTHER-SE> 9,055
<TOTAL-LIABILITY-AND-EQUITY> 28,686
<SALES> 6,209
<TOTAL-REVENUES> 6,209
<CGS> (1,740)
<TOTAL-COSTS> (5,545)
<OTHER-EXPENSES> 1,374
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 538
<INCOME-PRETAX> 1,500<F1>
<INCOME-TAX> (724)
<INCOME-CONTINUING> 776
<DISCONTINUED> 336
<EXTRAORDINARY> (51)
<CHANGES> 0
<NET-INCOME> 1,066
<EPS-BASIC> 1.38
<EPS-DILUTED> 1.30
<FN>
<F1>
Income before income tax expense and other items excludes the effect of
minority interests, net of tax, of $4.6.
</FN>
</TABLE>
Independent Auditors' Report
The Board of Directors and Shareholders
QVC, Inc.:
We have audited the accompanying consolidated balance sheet of QVC, Inc. and
subsidiaries as of December 31, 1998, and the related consolidated statements of
operations and comprehensive income, shareholders' equity and cash flows for
each of the years in the two-year period ended December 31, 1998. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of QVC, Inc. and
subsidiaries as of December 31, 1998, and the results of their operations and
their cash flows for each of the years in the two-year period ended December 31,
1998, in conformity with generally accepted accounting principles.
/s/ KPMG LLP
Philadelphia, Pennsylvania
February 3, 1999
