Comcast Corporation 2012 Form 10-K Summary
Business Context and Reporting Period
Comcast is a global media and technology company operating through Cable Communications and NBCUniversal. Reportable segments are Cable Communications, Cable Networks, Broadcast Television, Filmed Entertainment and Theme Parks. The filing covers the fiscal year ended December 31, 2012, with selected unaudited fourth-quarter information. Results remain affected by the January 2011 NBCUniversal transaction, although 2012 includes a full year of NBCUniversal operations.
- Cable Communications generated 63% of consolidated revenue and more than 80% of consolidated operating income before depreciation and amortization.
- At year-end, Comcast served 22.0 million video customers, 19.4 million high-speed Internet customers and 10.0 million voice customers, and passed approximately 53.2 million homes and businesses.
Financial Performance and Key Metrics
| Metric | 2012 | 2011 | Change |
|---|
| Revenue | $62.570 billion | $55.842 billion | 12.0% |
| Operating income | $12.179 billion | $10.721 billion | 13.6% |
| Net income | $7.865 billion | $5.157 billion | 52.5% |
| Net income attributable to Comcast | $6.203 billion | $4.160 billion | 49.1% |
| Diluted EPS | $2.28 | $1.50 | 52.0% |
| Cash flow from operating activities | $14.854 billion | $14.345 billion | 3.5% |
| Capital expenditures | $5.714 billion | $5.307 billion | 7.7% |
| Total debt | $40.458 billion | $39.309 billion | 2.9% |
- Approximate consolidated operating margin was 19.5%, compared with 19.2% in 2011. Operating income before depreciation and amortization was $19.977 billion, an approximate 31.9% margin.
- Approximate net margin was 12.6% on consolidated net income and 9.9% on income attributable to Comcast Corporation.
- Year-end cash and cash equivalents were $10.951 billion, compared with $1.620 billion in 2011. Management reported $5.8 billion of availability under Comcast’s revolving facility and $1.4 billion under NBCUniversal’s facility, net of specified offsets.
- Current debt was $2.376 billion and long-term debt was $38.082 billion. Debt had a reported weighted-average interest rate of approximately 5.6%, including derivative effects.
- Operating cash flow exceeded capital expenditures by approximately $9.1 billion before other investing and financing uses.
Material Changes Versus the Prior Comparable Period
- Cable Communications revenue increased 6.4% to $39.604 billion and operating income before depreciation and amortization increased 6.3% to $16.255 billion. High-speed Internet revenue grew 9.2%, business services revenue grew 34.2%, and advertising revenue grew 14.1%.
- Video customers declined by 336,000 to 21.995 million, while high-speed Internet customers increased by 1.223 million and voice customers increased by 613,000. Cable operating margin was 41.0%, compared with 41.1% in 2011.
- NBCUniversal revenue increased 12.7% on a pro forma basis to $23.812 billion, and operating income before depreciation and amortization increased 9.0% on a pro forma basis to $4.107 billion.
- Broadcast Television benefited from the 2012 London Olympics and Super Bowl, which contributed approximately $1.4 billion of revenue and $120 million of operating income before depreciation and amortization. Excluding those events, broadcast advertising revenue still increased 9%.
- Filmed Entertainment revenue increased 12.4% on a pro forma basis, supported by films including Ted, Dr. Seuss’ The Lorax and The Bourne Legacy; segment operating income before depreciation and amortization rose to $79 million from $27 million on an actual-period comparison.
- Theme Parks revenue increased 4.8% on a pro forma basis and operating income before depreciation and amortization increased 9.9%, aided by the Transformers attraction in Hollywood.
- Other income and equity earnings materially increased due to a $1.0 billion pretax gain from the A&E Television Networks transaction and an $876 million equity-method gain from the SpectrumCo spectrum sale. SpectrumCo distributed approximately $2.3 billion of proceeds to Comcast.
- Comcast repurchased 96 million shares for $3.0 billion, compared with $2.1 billion in 2011, and declared dividends of $0.65 per share, compared with $0.45 per share.
Fourth-Quarter Information
| Metric | Fourth quarter 2012 | Fourth quarter 2011 |
|---|
| Revenue | $15.937 billion | $15.042 billion |
| Operating income | $3.294 billion | $2.918 billion |
| Net income attributable to Comcast | $1.518 billion | $1.287 billion |
| Diluted EPS | $0.56 | $0.47 |
Guidance, Outlook, Risks and Unusual Items
- Management stated that programming expenses are expected to continue increasing, particularly for sports, retransmission rights, additional content and distribution across online and mobile platforms.
- Management expected the 2013 effective tax rate to be approximately 35% to 40%, absent changes in tax law or significant changes in uncertain tax positions.
- Comcast expected to repurchase approximately $2 billion of shares during 2013, subject to market conditions. The Board also approved a 20% dividend increase to an annualized $0.78 per share.
- On February 12, 2013, Comcast agreed to acquire GE’s remaining 49% interest in NBCUniversal Holdings for approximately $16.7 billion and certain NBCUniversal real estate for approximately $1.4 billion. Funding was expected to include $11.4 billion of cash, $4 billion of HoldCo debt, $2 billion of facility borrowings and $725 million of preferred stock. The transaction was expected to close by the end of March 2013.
- The proposed NBCUniversal acquisition would increase cash usage, debt-related obligations and Comcast’s exposure to NBCUniversal operations, although it would eliminate GE’s common equity interest after closing.
- Total contractual obligations were $93.240 billion, including $40.345 billion of debt obligations, $39.020 billion of purchase obligations and $10.545 billion of other long-term liabilities. These amounts exclude certain uncertain tax positions and participation and residual obligations that could not be reliably scheduled.
- Key risks include intense competition from satellite, telecommunications, wireless and online video providers; subscriber losses in video; rising programming costs; advertising cyclicality; changing consumer viewing behavior; content performance; regulatory and franchise requirements; litigation; cybersecurity and network disruptions; intellectual property protection; and execution risk from acquisitions.
- Film and stage-play production cost impairment charges were $161 million in 2012. Uncertain tax positions were $1.573 billion, with accrued interest of $721 million.
Most Important Facts for Investors to Verify
- Whether the full acquisition of GE’s NBCUniversal interest closed on the stated terms and how the transaction affected leverage, interest expense, noncontrolling interests and cash balances.
- Whether Cable Communications can sustain growth in Internet, voice and business services while offsetting continuing video-customer losses and programming-cost inflation.
- Whether the 2012 Olympics and Super Bowl comparisons create a difficult year-over-year broadcast revenue and margin comparison.
- The composition, maturity schedule and refinancing requirements of the $40.458 billion debt balance, including the $2.363 billion of debt obligations due within one year shown in the contractual-obligations table.
- Progress against the stated 2013 share-repurchase and dividend plans and the effect of capital returns on liquidity.
- Status and potential exposure from antitrust, program-carriage, retransmission-consent, tax, regulatory and other legal proceedings.
- Changes in film and television cost estimates, programming commitments and other contractual obligations that could affect future cash flow and margins.
