Comcast Corporation 2013 Form 10-K Summary
Business Context and Reporting Period
Comcast filed a combined annual report for Comcast Corporation and its wholly owned subsidiary, NBCUniversal Media, LLC, covering the fiscal year ended December 31, 2013. Comcast operates two primary businesses: Cable Communications and NBCUniversal. Cable Communications provides video, high-speed Internet, voice, business services and advertising. NBCUniversal comprises Cable Networks, Broadcast Television, Filmed Entertainment and Theme Parks.
In March 2013, Comcast acquired GE’s remaining 49% interest in NBCUniversal for approximately $16.7 billion and NBCUniversal acquired approximately $1.4 billion of related real estate. The transaction materially changed ownership, financing and tax presentation compared with 2012.
Key Financial Metrics
| Metric | 2013 | 2012 | Change |
|---|---|---|---|
| Revenue | $64.657 billion | $62.570 billion | 3.3% |
| Operating income | $13.563 billion | $12.179 billion | 11.4% |
| Operating margin | 21.0% | 19.5% | Expanded |
| Net income attributable to Comcast | $6.816 billion | $6.203 billion | 9.9% |
| Diluted EPS | $2.56 | $2.28 | 12.3% |
| Cash flow from operating activities | $14.160 billion | $14.854 billion | Down $694 million |
| Capital expenditures | $6.596 billion | $5.714 billion | 15.4% |
| Total debt | $47.847 billion | $40.458 billion | Up $7.389 billion |
| Cash and cash equivalents | $1.718 billion | $10.951 billion | Down $9.233 billion |
Consolidated operating income before depreciation and amortization was $21.434 billion, equivalent to an approximate 33.2% margin. Cable Communications generated $41.836 billion of revenue and $17.205 billion of operating income before depreciation and amortization, with a 41.1% segment margin. NBCUniversal generated $23.650 billion of revenue and $4.732 billion of operating income before depreciation and amortization.
Fourth-quarter 2013 revenue was $16.926 billion, operating income was $3.647 billion, net income attributable to Comcast was $1.913 billion and diluted EPS was $0.72. Fourth-quarter 2012 revenue was $15.937 billion, operating income was $3.294 billion, net income attributable to Comcast was $1.518 billion and diluted EPS was $0.56.
Material Changes Versus the Prior Comparable Period
- Cable Communications revenue increased 5.6% to $41.836 billion and segment operating income before depreciation and amortization increased 5.8% to $17.205 billion.
- High-speed Internet revenue increased 8.3% to $10.334 billion, supported by customer growth and higher-tier services. Customers increased to 20.7 million from 19.4 million.
- Business services revenue increased 26.4% to $3.241 billion.
- Video revenue increased 2.9%, despite video customers declining by 305,000 to 21.7 million. High-speed Internet and voice customers increased to 20.7 million and 10.7 million, respectively.
- Cable programming costs increased 8.6% to $9.107 billion, reflecting higher license fees, sports costs and retransmission consent fees.
- NBCUniversal revenue declined 0.7% because 2012 included approximately $1.4 billion from the Super Bowl and London Olympics. Excluding those events, NBCUniversal revenue increased 5.7%.
- NBCUniversal operating income before depreciation and amortization increased 15.2% to $4.732 billion. Filmed Entertainment operating income increased substantially to $483 million, primarily due to the performance of Despicable Me 2 and Fast & Furious 6.
- Theme Parks revenue increased 7.2% and operating income before depreciation and amortization increased 5.3%, driven by attendance and per-capita spending.
- Operating cash flow declined despite higher operating income, primarily reflecting a $1.442 billion payment to terminate NBCUniversal receivables monetization programs and higher income-tax payments.
- Cash used in financing activities increased to $13.879 billion, primarily because of the $10.761 billion cash component of the NBCUniversal redemption, share repurchases, dividends and debt repayments.
Guidance, Outlook, Risks and Unusual Items
- Management expected the 2014 annual effective tax rate to be approximately 37% to 39%, absent changes in tax law or significant changes in uncertain tax positions.
- Capital expenditure growth was expected to increase in 2014 as Comcast continued deploying the X1 platform and wireless gateways and expanding business services, home security and automation services.
- Comcast expected to repurchase approximately $3 billion of shares in 2014, subject to market conditions. The Board increased the authorization to $7.5 billion, and approved a 15% dividend increase to $0.90 per share annually.
- Material unusual items included the NBCUniversal acquisition, a $443 million gain on the sale of Clearwire, $142 million of equity losses related to Hulu, a $236 million impairment of an equity-method investment and $167 million of film and stage-play production impairments.
- As of December 31, 2013, available borrowing capacity under consolidated revolving credit facilities, net of commercial paper and letters of credit, was approximately $4.7 billion. Comcast reported compliance with its leverage covenant by a significant margin.
- Total contractual obligations were $107.042 billion, including $47.810 billion of debt obligations, $46.867 billion of purchase obligations and $10.184 billion of other long-term liabilities. Programming and talent commitments are a major component of future obligations.
- Key risks include competition from satellite, telephone, wireless and online video providers; declining video customers; rising programming and sports-rights costs; advertising volatility; changing consumer viewing behavior; technology execution; regulation of broadband, VoIP, retransmission consent and media ownership; content acceptance; intellectual-property disputes; cybersecurity; labor disputes; and international operations.
- The company disclosed antitrust class actions, patent litigation, regulatory matters and a California waste-disposal investigation. Management did not expect these matters to have a material adverse effect on consolidated financial position, although individual periods could be materially affected.
- Comcast’s internal control over financial reporting and disclosure controls were reported effective, and Deloitte & Touche issued unqualified audit opinions.
Most Important Facts for Investors to Verify
- Reconcile reported growth with the NBCUniversal redemption transaction and the nonrecurring 2012 Super Bowl and Olympics comparison.
- Assess whether high-speed Internet and business-services growth can offset continuing video-customer losses and rising programming costs.
- Review the effect of the acquisition-related debt increase, preferred-stock redemption features and long-term debt maturities on leverage and liquidity.
- Separate recurring operating cash generation from the $1.442 billion receivables-monetization termination payment and other transaction-related cash flows.
- Evaluate the sustainability of Cable Communications’ approximately 41% segment operating margin amid higher content, technology and customer-service costs.
- Review the $107.042 billion contractual-obligation schedule, especially long-term sports, film, television and talent commitments.
- Monitor regulatory, litigation, cybersecurity and intellectual-property developments that could affect distribution rights, programming costs or advertising revenue.