COMCAST CORP quarterly report, Q2 FY2012

Comcast Corporation Form 10-Q Summary

Business context and reporting period

Comcast filed its unaudited Form 10-Q for the three and six months ended June 30, 2012. The company operates Cable Communications and NBCUniversal businesses, including cable networks, broadcast television, filmed entertainment and theme parks. NBCUniversal results have been consolidated since January 28, 2011, and Universal Orlando since July 1, 2011, affecting year-over-year comparability.

Financial performance and key metrics

Metric	Three months ended June 30, 2012	Three months ended June 30, 2011	Six months ended June 30, 2012	Six months ended June 30, 2011
Revenue	$15.211 billion	$14.333 billion	$30.089 billion	$26.461 billion
Operating income	$3.079 billion	$2.938 billion	$5.837 billion	$5.162 billion
Net income	$1.633 billion	$1.367 billion	$3.080 billion	$2.406 billion
Net income attributable to Comcast	$1.348 billion	$1.022 billion	$2.572 billion	$1.965 billion
Diluted EPS	$0.50	$0.37	$0.94	$0.70
Operating cash flow	Not separately provided	Not separately provided	$7.815 billion	$6.956 billion

Second-quarter revenue increased 6.1%; six-month revenue increased 13.7%.
Second-quarter operating income increased 4.8%, while six-month operating income increased 13.1%.
Net income attributable to Comcast increased 31.9% in the quarter and 30.8% year to date.
Calculated operating margin was approximately 20.2% for the quarter and 19.4% year to date, compared with approximately 20.5% and 19.5%, respectively, in the prior-year periods.
Calculated net income attributable to Comcast margin was approximately 8.9% for the quarter and 8.5% year to date, compared with approximately 7.1% and 7.4% in the prior-year periods.
Operating cash flow increased 12.4% year to date. Capital expenditures were $2.461 billion and cash paid for intangible assets was $414 million.
Cash flow from investing activities was negative $2.829 billion; financing activities used $4.505 billion, including $1.692 billion of debt repayments, $1.500 billion of share repurchases and $741 million of dividends.

Balance sheet, debt and liquidity

Cash and cash equivalents were $2.101 billion at June 30, 2012, compared with $1.620 billion at December 31, 2011. Current investments were $2.231 billion, compared with $54 million at year-end.
Total assets were $157.688 billion and total equity was $48.179 billion.
Debt consisted of $2.954 billion of current debt and $34.175 billion of long-term debt, or approximately $37.129 billion in total, compared with approximately $39.309 billion at December 31, 2011.
The company had $5.8 billion available under its new $6.25 billion revolving credit facility due June 2017, plus $1.4 billion available under NBCUniversal’s revolving credit facility.
Management stated that operating cash flow, existing cash and investments, available borrowing capacity and future financing should be sufficient for current and long-term liquidity needs, including potential redemptions of GE’s NBCUniversal interest.

Material changes versus the prior comparable period

Cable Communications revenue increased 6.0% in the quarter and 5.8% year to date. High-speed Internet and business services were the strongest contributors, while video customer losses continued.
At June 30, 2012, Comcast had 22.1 million video customers, 18.7 million high-speed Internet customers and 9.7 million voice customers. Video customers declined by 395,000 year over year, while Internet customers increased by 1.191 million.
Cable Communications operating income before depreciation and amortization increased 5.5% in both the quarter and year to date, although programming and marketing costs also increased.
On a pro forma basis, NBCUniversal revenue increased 7.8% year to date, while operating income before depreciation and amortization increased 1.6%. Cable Networks revenue grew but profitability declined due to higher programming, production and sports-rights costs.
Filmed Entertainment reported a second-quarter operating loss before depreciation and amortization of $83 million, compared with income of $27 million, primarily reflecting marketing costs and the underperformance of Battleship.
Theme Parks operating income before depreciation and amortization increased 9.0% year to date, supported by higher attendance and per-capita spending.
The company repurchased 52 million Class A Special shares for $1.5 billion during the first six months. The board authorized $6.5 billion of repurchases and stated an intention to repurchase $3.0 billion during 2012, subject to market conditions.
The quarterly dividend was increased 44% to an annualized rate of $0.65 per share, with quarterly dividends of $0.1625 per share declared in February and May.

Guidance, outlook, risks and unusual items

Management expected the 2012 annual effective tax rate to be at the lower end of the 35% to 40% range.
Management expected third-quarter advertising revenue and programming and production costs to increase because of the 2012 London Olympic Games, with substantially all related rights fees expected to be paid in the third quarter.
Comcast expected further residential video customer declines during the remainder of 2012, primarily because of competitive pressures.
NBCUniversal expected to receive approximately $3 billion in cash during the second half of 2012 from the redemption of its 15.8% interest in A&E Television Networks. The company expected to recognize an estimated pretax gain of approximately $1 billion when the transaction closes.
In July 2012, Comcast repaid $202 million of senior subordinated debentures, redeemed $575 million of senior notes and issued $2.25 billion of new senior notes due 2022 and 2042.
NBCUniversal acquired the remaining interest in MSNBC.com on July 13, 2012; the business became a wholly owned consolidated subsidiary and was expected to be reported within Cable Networks.
Material risks include intense competition, changing consumer technology and behavior, rising programming costs, advertising-market weakness, content acceptance, programming-distribution renewals, regulation, economic conditions, cyber or network disruptions, labor disputes, litigation, acquisitions, international operations and governance concentration associated with Class B voting rights.
Pending antitrust and other litigation could be material to results or cash flows in a particular period, although Comcast stated that the ultimate disposition was not expected to materially affect its consolidated financial position. The filing does not provide a clear estimate of potential loss.

Important facts for investors to verify

Whether the A&E Television Networks redemption closed as expected and whether the approximately $1 billion pretax gain was ultimately recognized.
The pace of video customer losses, growth in high-speed Internet and business services, and trends in average monthly revenue per video customer.
The effect of Olympic programming costs, advertising demand and sports-rights expenses on third-quarter NBCUniversal results.
Filmed Entertainment performance and any further effects from underperforming releases, including Battleship.
Progress toward the planned $3.0 billion 2012 share repurchase target and the sustainability of the increased dividend.
Debt maturities, refinancing activity, availability under revolving facilities and the potential funding requirement associated with GE’s redeemable NBCUniversal interest.
Developments in the pending antitrust litigation and any related settlements, judgments or cash-flow effects.