UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | ||||
For the quarterly period ended September 30, 2020
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 | Exact Name of Registrant; State of Incorporation; Address and Telephone Number of Principal Executive Offices | I.R.S. Employer Identification No. | ||||||
001-32871 | COMCAST CORPORATION | 27-0000798 | ||||||
Pennsylvania
One Comcast Center
Philadelphia, PA 19103-2838
(215) 286-1700
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||||||||||||
| Class A Common Stock, $0.01 par value | CMCSA | NASDAQ Global Select Market | ||||||||||||
| 0.250% Notes due 2027 | CMCS27 | NASDAQ Global Market | ||||||||||||
| 1.500% Notes due 2029 | CMCS29 | NASDAQ Global Market | ||||||||||||
| 0.750% Notes due 2032 | CMCS32 | NASDAQ Global Market | ||||||||||||
| 1.875% Notes due 2036 | CMCS36 | NASDAQ Global Market | ||||||||||||
| 1.250% Notes due 2040 | CMCS40 | NASDAQ Global Market | ||||||||||||
| 9.455% Guaranteed Notes due 2022 | CMCSA/22 | New York Stock Exchange | ||||||||||||
| 5.50% Notes due 2029 | CCGBP29 | New York Stock Exchange | ||||||||||||
| 2.0% Exchangeable Subordinated Debentures due 2029 | CCZ | New York Stock Exchange | ||||||||||||
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding twelve months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer | ☒ | Accelerated filer | ☐ | Non-accelerated filer | ☐ | Smaller reporting company | ☐ | Emerging growth company | ☐ | ||||||||||||||||||||
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:
As of September 30, 2020, there were 4,565,878,780 shares of Comcast Corporation Class A common stock and 9,444,375 shares of Class B common stock outstanding.
TABLE OF CONTENTS
Page Number | ||||||||
| Item 1. | ||||||||
| Item 2. | ||||||||
| Item 3. | ||||||||
| Item 4. | ||||||||
| Item 1. | ||||||||
| Item 1A. | ||||||||
| Item 6. | ||||||||
Explanatory Note
Beginning with our Quarterly Report on Form 10-Q for the quarter ended March 31, 2020, we are voluntarily complying with new disclosure rules for guarantors and issuers of guaranteed debt securities issued by the Securities and Exchange Commission (“SEC”) in March 2020, as permitted by the transition guidance contained in the SEC’s final rule release “Financial Disclosures about Guarantors and Issuers of Guaranteed Securities and Affiliates Whose Securities Collateralize a Registrant’s Securities.” As a result, this report includes disclosures related to our consolidated subsidiaries that guarantee or have issued guaranteed debt securities registered with the SEC that are included within our guarantee structure (refer to Guarantee Structure within the Liquidity and Capital Resources section of Item 2: Management’s Discussion and Analysis of Financial Condition and Results of Operations). As a result of these rules, NBCUniversal Media, LLC is no longer required to prepare stand-alone periodic reports under SEC rules, and our periodic reports are no longer prepared as a combined report being filed separately by Comcast Corporation and NBCUniversal Media, LLC.
Unless indicated otherwise, throughout this Quarterly Report on Form 10-Q, we refer to Comcast and its consolidated subsidiaries, as “Comcast,” “we,” “us” and “our;” Comcast Cable Communications, LLC and its consolidated subsidiaries as “Comcast Cable;” Comcast Holdings Corporation as “Comcast Holdings;” NBCUniversal, LLC as “NBCUniversal Holdings;” NBCUniversal Enterprise, Inc. as “NBCUniversal Enterprise;” NBCUniversal Media, LLC and its consolidated subsidiaries as “NBCUniversal;” and Sky Limited and its consolidated subsidiaries as “Sky.”
This Quarterly Report on Form 10-Q is for the three and nine months ended September 30, 2020. This Quarterly Report on Form 10-Q modifies and supersedes documents filed before it. The SEC allows us to “incorporate by reference” information that we file with it, which means that we can disclose important information to you by referring you directly to those documents. Information incorporated by reference is considered to be part of this Quarterly Report on Form 10-Q. In addition, information that we file with the SEC in the future will automatically update and supersede information contained in this Quarterly Report on Form 10-Q.
You should carefully review the information contained in this Quarterly Report on Form 10-Q and particularly consider any risk factors set forth in this Quarterly Report on Form 10-Q and in other reports or documents that we file from time to time with the SEC. In this Quarterly Report on Form 10-Q, we state our beliefs of future events and of our future financial performance. In some cases, you can identify these so-called “forward-looking statements” by words such as “may,” “will,” “should,” “expects,” “believes,” “estimates,” “potential,” or “continue,” or the negative of these words, and other comparable words. You should be aware that these statements are only our predictions. In evaluating these statements, you should consider various factors, including the risks outlined below and in other reports we file with the SEC. Actual events or our actual results
could differ materially from our forward-looking statements as a result of any such factors, which could adversely affect our businesses, results of operations or financial condition. We undertake no obligation to update any forward-looking statements.
Our businesses may be affected by, among other things, the following:
•the COVID-19 pandemic has had, and we expect will continue to have, a material adverse effect on our businesses and results of operations
•our businesses operate in highly competitive and dynamic industries, and our businesses and results of operations could be adversely affected if we do not compete effectively
•changes in consumer behavior driven by online video distribution platforms for viewing content continue to adversely affect our businesses and challenge existing business models
•a decline in advertisers’ expenditures or changes in advertising markets could negatively impact our businesses
•our businesses depend on keeping pace with technological developments
•we are subject to regulation by federal, state, local and foreign authorities, which impose additional costs and restrictions on our businesses
•programming expenses for our video services are increasing, which could adversely affect Cable Communications’ and Sky’s video businesses
•NBCUniversal’s and Sky’s success depends on consumer acceptance of their content, and their businesses may be adversely affected if their content fails to achieve sufficient consumer acceptance or the costs to create or acquire content increase
•the loss of programming distribution and licensing agreements, or the renewal of these agreements on less favorable terms, could adversely affect our businesses
•less favorable telecommunications access regulations, the loss of Sky’s transmission agreements with satellite or telecommunications providers or the renewal of these agreements on less favorable terms could adversely affect Sky’s businesses
•we rely on network and information systems and other technologies, as well as key properties, and a disruption, cyber attack, failure or destruction of such networks, systems, technologies or properties may disrupt our businesses
•our businesses depend on using and protecting certain intellectual property rights and on not infringing the intellectual property rights of others
•we may be unable to obtain necessary hardware, software and operational support
•weak economic conditions may have a negative impact on our businesses
•acquisitions and other strategic initiatives present many risks, and we may not realize the financial and strategic goals that we had contemplated
•we face risks relating to doing business internationally that could adversely affect our businesses
•unfavorable litigation or governmental investigation results could require us to pay significant amounts or lead to onerous operating procedures
•labor disputes, whether involving employees or sports organizations, may disrupt our operations and adversely affect our businesses
•the loss of key management personnel or popular on-air and creative talent could have an adverse effect on our businesses
•our Class B common stock has substantial voting rights and separate approval rights over several potentially material transactions, and our Chairman and CEO has considerable influence over our company through his beneficial ownership of our Class B common stock
PART I: FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS
Comcast Corporation
Condensed Consolidated Statement of Income
(Unaudited)
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| (in millions, except per share data) | 2020 | 2019 | 2020 | 2019 | |||||||||||||||||||
| Revenue | $ | 25,532 | $ | 26,827 | $ | 75,856 | $ | 80,544 | |||||||||||||||
| Costs and Expenses: | |||||||||||||||||||||||
| Programming and production | 8,565 | 8,316 | 23,683 | 25,140 | |||||||||||||||||||
| Other operating and administrative | 8,059 | 8,090 | 23,959 | 24,076 | |||||||||||||||||||
| Advertising, marketing and promotion | 1,512 | 1,901 | 4,791 | 5,674 | |||||||||||||||||||
| Depreciation | 2,122 | 2,124 | 6,328 | 6,561 | |||||||||||||||||||
| Amortization | 1,198 | 1,056 | 3,520 | 3,215 | |||||||||||||||||||
| Total costs and expenses | 21,456 | 21,487 | 62,281 | 64,666 | |||||||||||||||||||
| Operating income | 4,076 | 5,340 | 13,575 | 15,878 | |||||||||||||||||||
| Interest expense | (1,220) | (1,167) | (3,544) | (3,454) | |||||||||||||||||||
| Investment and other income (loss), net | (86) | (110) | (382) | 511 | |||||||||||||||||||
| Income before income taxes | 2,770 | 4,063 | 9,649 | 12,935 | |||||||||||||||||||
| Income tax expense | (739) | (775) | (2,385) | (2,812) | |||||||||||||||||||
| Net income | 2,031 | 3,288 | 7,264 | 10,123 | |||||||||||||||||||
| Less: Net income (loss) attributable to noncontrolling interests and redeemable subsidiary preferred stock | 12 | 71 | 110 | 228 | |||||||||||||||||||
| Net income attributable to Comcast Corporation | $ | 2,019 | $ | 3,217 | $ | 7,154 | $ | 9,895 | |||||||||||||||
| Basic earnings per common share attributable to Comcast Corporation shareholders | $ | 0.44 | $ | 0.71 | $ | 1.57 | $ | 2.18 | |||||||||||||||
| Diluted earnings per common share attributable to Comcast Corporation shareholders | $ | 0.44 | $ | 0.70 | $ | 1.55 | $ | 2.15 | |||||||||||||||
See accompanying notes to condensed consolidated financial statements.
1
Condensed Consolidated Statement of Comprehensive Income
(Unaudited)
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| (in millions) | 2020 | 2019 | 2020 | 2019 | |||||||||||||||||||
| Net income | $ | 2,031 | $ | 3,288 | $ | 7,264 | $ | 10,123 | |||||||||||||||
Unrealized gains (losses) on marketable securities, net of deferred taxes of $—, $—, $1 and $— | 1 | 2 | (1) | 4 | |||||||||||||||||||
Deferred gains (losses) on cash flow hedges, net of deferred taxes of $6, $(35), $23 and $(24) | (99) | 82 | (72) | 146 | |||||||||||||||||||
| Amounts reclassified to net income: | |||||||||||||||||||||||
Realized (gains) losses on cash flow hedges, net of deferred taxes of $8, $11, $29 and $7 | (8) | (52) | (135) | (39) | |||||||||||||||||||
Employee benefit obligations, net of deferred taxes of $2, $3, $7 and $8 | (8) | (8) | (24) | (24) | |||||||||||||||||||
Currency translation adjustments, net of deferred taxes of $40, $(80), $24 and $(98) | 1,642 | (1,144) | (589) | (903) | |||||||||||||||||||
| Comprehensive income | 3,559 | 2,168 | 6,443 | 9,307 | |||||||||||||||||||
| Less: Net income (loss) attributable to noncontrolling interests and redeemable subsidiary preferred stock | 12 | 71 | 110 | 228 | |||||||||||||||||||
| Less: Other comprehensive income (loss) attributable to noncontrolling interests | 37 | (23) | 14 | (25) | |||||||||||||||||||
| Comprehensive income (loss) attributable to Comcast Corporation | $ | 3,510 | $ | 2,120 | $ | 6,319 | $ | 9,104 | |||||||||||||||
See accompanying notes to condensed consolidated financial statements.
2
Condensed Consolidated Statement of Cash Flows
(Unaudited)
| Nine Months Ended September 30, | |||||||||||
| (in millions) | 2020 | 2019 | |||||||||
| Operating Activities | |||||||||||
| Net income | $ | 7,264 | $ | 10,123 | |||||||
| Adjustments to reconcile net income to net cash provided by operating activities: | |||||||||||
| Depreciation and amortization | 9,848 | 9,776 | |||||||||
| Share-based compensation | 922 | 790 | |||||||||
| Noncash interest expense (income), net | 606 | 310 | |||||||||
| Net (gain) loss on investment activity and other | 514 | (166) | |||||||||
| Deferred income taxes | (224) | 468 | |||||||||
| Changes in operating assets and liabilities, net of effects of acquisitions and divestitures: | |||||||||||
| Current and noncurrent receivables, net | 982 | 360 | |||||||||
| Film and television costs, net | 163 | (321) | |||||||||
| Accounts payable and accrued expenses related to trade creditors | (545) | (1,149) | |||||||||
| Other operating assets and liabilities | 165 | (729) | |||||||||
| Net cash provided by operating activities | 19,695 | 19,462 | |||||||||
| Investing Activities | |||||||||||
| Capital expenditures | (6,344) | (6,866) | |||||||||
| Cash paid for intangible assets | (1,771) | (1,686) | |||||||||
| Construction of Universal Beijing Resort | (1,118) | (736) | |||||||||
| Acquisitions, net of cash acquired | (225) | (181) | |||||||||
| Proceeds from sales of businesses and investments | 2,131 | 208 | |||||||||
| Purchases of investments | (545) | (1,697) | |||||||||
| Other | (101) | 46 | |||||||||
| Net cash provided by (used in) investing activities | (7,973) | (10,912) | |||||||||
| Financing Activities | |||||||||||
| Proceeds from (repayments of) short-term borrowings, net | — | (1,288) | |||||||||
| Proceeds from borrowings | 18,339 | 516 | |||||||||
| Proceeds from collateralized obligation | — | 5,175 | |||||||||
| Repurchases and repayments of debt | (16,771) | (9,975) | |||||||||
| Repurchases of common stock under employee plans | (429) | (432) | |||||||||
| Dividends paid | (3,086) | (2,778) | |||||||||
| Other | (1,644) | (44) | |||||||||
| Net cash provided by (used in) financing activities | (3,591) | (8,826) | |||||||||
| Impact of foreign currency on cash, cash equivalents and restricted cash | 17 | (31) | |||||||||
| Increase (decrease) in cash, cash equivalents and restricted cash | 8,148 | (307) | |||||||||
| Cash, cash equivalents and restricted cash, beginning of period | 5,589 | 3,909 | |||||||||
| Cash, cash equivalents and restricted cash, end of period | $ | 13,737 | $ | 3,602 | |||||||
See accompanying notes to condensed consolidated financial statements.
3
Condensed Consolidated Balance Sheet
(Unaudited)
| (in millions, except share data) | September 30, 2020 | December 31, 2019 | |||||||||
| Assets | |||||||||||
| Current Assets: | |||||||||||
| Cash and cash equivalents | $ | 13,707 | $ | 5,500 | |||||||
| Receivables, net | 10,310 | 11,292 | |||||||||
| Programming rights | — | 3,877 | |||||||||
| Other current assets | 3,352 | 4,723 | |||||||||
| Total current assets | 27,369 | 25,392 | |||||||||
| Film and television costs | 12,741 | 8,933 | |||||||||
| Investments | 6,702 | 6,989 | |||||||||
| Investment securing collateralized obligation | 429 | 694 | |||||||||
Property and equipment, net of accumulated depreciation of $53,959 and $53,239 | 50,466 | 48,322 | |||||||||
| Goodwill | 68,898 | 68,725 | |||||||||
| Franchise rights | 59,365 | 59,365 | |||||||||
Other intangible assets, net of accumulated amortization of $18,405 and $17,217 | 34,485 | 36,128 | |||||||||
| Other noncurrent assets, net | 8,485 | 8,866 | |||||||||
| Total assets | $ | 268,940 | $ | 263,414 | |||||||
| Liabilities and Equity | |||||||||||
| Current Liabilities: | |||||||||||
| Accounts payable and accrued expenses related to trade creditors | $ | 10,979 | $ | 10,826 | |||||||
| Accrued participations and residuals | 1,794 | 1,730 | |||||||||
| Deferred revenue | 2,888 | 2,768 | |||||||||
| Accrued expenses and other current liabilities | 9,421 | 10,516 | |||||||||
| Current portion of long-term debt | 4,429 | 4,452 | |||||||||
| Total current liabilities | 29,511 | 30,292 | |||||||||
| Long-term debt, less current portion | 99,995 | 97,765 | |||||||||
| Collateralized obligation | 5,167 | 5,166 | |||||||||
| Deferred income taxes | 27,905 | 28,180 | |||||||||
| Other noncurrent liabilities | 17,537 | 16,765 | |||||||||
| Commitments and contingencies (Note 12) | |||||||||||
| Redeemable noncontrolling interests and redeemable subsidiary preferred stock | 1,254 | 1,372 | |||||||||
| Equity: | |||||||||||
Preferred stock—authorized, 20,000,000 shares; issued, zero | — | — | |||||||||
Class A common stock, $0.01 par value—authorized, 7,500,000,000 shares; issued, 5,438,669,808 and 5,416,381,298; outstanding, 4,565,878,780 and 4,543,590,270 | 54 | 54 | |||||||||
Class B common stock, $0.01 par value—authorized, 75,000,000 shares; issued and outstanding, 9,444,375 | — | — | |||||||||
| Additional paid-in capital | 39,173 | 38,447 | |||||||||
| Retained earnings | 54,254 | 50,695 | |||||||||
Treasury stock, 872,791,028 Class A common shares | (7,517) | (7,517) | |||||||||
| Accumulated other comprehensive income (loss) | 212 | 1,047 | |||||||||
| Total Comcast Corporation shareholders’ equity | 86,176 | 82,726 | |||||||||
| Noncontrolling interests | 1,395 | 1,148 | |||||||||
| Total equity | 87,571 | 83,874 | |||||||||
| Total liabilities and equity | $ | 268,940 | $ | 263,414 | |||||||
See accompanying notes to condensed consolidated financial statements.
4
Condensed Consolidated Statement of Changes in Equity
(Unaudited)
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||
| (in millions, except per share data) | 2020 | 2019 | 2020 | 2019 | |||||||||||||
Redeemable Noncontrolling Interests and Redeemable Subsidiary Preferred Stock | |||||||||||||||||
| Balance, beginning of period | $ | 1,256 | $ | 1,329 | $ | 1,372 | $ | 1,316 | |||||||||
Contributions from (distributions to) noncontrolling interests, net | (9) | (12) | (46) | (49) | |||||||||||||
| Other | (9) | (9) | (174) | (28) | |||||||||||||
| Net income (loss) | 16 | 60 | 102 | 129 | |||||||||||||
| Balance, end of period | $ | 1,254 | $ | 1,368 | $ | 1,254 | $ | 1,368 | |||||||||
| Class A common stock | |||||||||||||||||
| Balance, beginning of period | $ | 54 | $ | 54 | $ | 54 | $ | 54 | |||||||||
| Balance, end of period | $ | 54 | $ | 54 | $ | 54 | $ | 54 | |||||||||
| Additional Paid-In Capital | |||||||||||||||||
| Balance, beginning of period | $ | 38,936 | $ | 37,950 | $ | 38,447 | $ | 37,461 | |||||||||
| Stock compensation plans | 240 | 193 | 713 | 604 | |||||||||||||
Repurchases of common stock under employee plans | (61) | 6 | (164) | (39) | |||||||||||||
| Employee stock purchase plans | 60 | 51 | 193 | 166 | |||||||||||||
| Other | (2) | (4) | (16) | 4 | |||||||||||||
| Balance, end of period | $ | 39,173 | $ | 38,196 | $ | 39,173 | $ | 38,196 | |||||||||
| Retained Earnings | |||||||||||||||||
| Balance, beginning of period | $ | 53,420 | $ | 46,425 | $ | 50,695 | $ | 41,983 | |||||||||
Cumulative effects of adoption of accounting standards | — | — | (124) | — | |||||||||||||
Repurchases of common stock under employee plans | (113) | (101) | (281) | (406) | |||||||||||||
| Dividends declared | (1,062) | (965) | (3,187) | (2,893) | |||||||||||||
| Other | (10) | (6) | (3) | (9) | |||||||||||||
| Net income (loss) | 2,019 | 3,217 | 7,154 | 9,895 | |||||||||||||
| Balance, end of period | $ | 54,254 | $ | 48,570 | $ | 54,254 | $ | 48,570 | |||||||||
| Treasury Stock at Cost | |||||||||||||||||
| Balance, beginning of period | $ | (7,517) | $ | (7,517) | $ | (7,517) | $ | (7,517) | |||||||||
| Balance, end of period | $ | (7,517) | $ | (7,517) | $ | (7,517) | $ | (7,517) | |||||||||
| Accumulated Other Comprehensive Income (Loss) | |||||||||||||||||
| Balance, beginning of period | $ | (1,279) | $ | (62) | $ | 1,047 | $ | (368) | |||||||||
| Other comprehensive income (loss) | 1,491 | (1,097) | (835) | (791) | |||||||||||||
| Balance, end of period | $ | 212 | $ | (1,159) | $ | 212 | $ | (1,159) | |||||||||
| Noncontrolling Interests | |||||||||||||||||
| Balance, beginning of period | $ | 1,177 | $ | 980 | $ | 1,148 | $ | 889 | |||||||||
| Other comprehensive income (loss) | 38 | (22) | 14 | (24) | |||||||||||||
Contributions from (distributions to) noncontrolling interests, net | 185 | 50 | 200 | 66 | |||||||||||||
| Other | (1) | (3) | 25 | (14) | |||||||||||||
| Net income (loss) | (4) | 11 | 8 | 99 | |||||||||||||
| Balance, end of period | $ | 1,395 | $ | 1,016 | $ | 1,395 | $ | 1,016 | |||||||||
| Total equity | $ | 87,571 | $ | 79,160 | $ | 87,571 | $ | 79,160 | |||||||||
| Cash dividends declared per common share | $ | 0.23 | $ | 0.21 | $ | 0.69 | $ | 0.63 | |||||||||
See accompanying notes to condensed consolidated financial statements.
5
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1: Condensed Consolidated Financial Statements
Business and Basis of Presentation
We have prepared these unaudited condensed consolidated financial statements based on SEC rules that permit reduced disclosure for interim periods. These financial statements include all adjustments that are necessary for a fair presentation of our consolidated results of operations, cash flows and financial condition for the periods shown, including normal, recurring accruals and other items. The consolidated results of operations for the interim periods presented are not necessarily indicative of results for the full year.
The year-end condensed consolidated balance sheet was derived from audited financial statements but does not include all disclosures required by generally accepted accounting principles in the United States (“GAAP”). For a more complete discussion of our accounting policies and certain other information, refer to our consolidated financial statements included in our 2019 Annual Report on Form 10-K and the notes within this Form 10-Q.
Note 2: Segment Information
We present our operations in six reportable business segments: (1) Comcast Cable in one reportable business segment, referred to as Cable Communications; (2) NBCUniversal in four reportable business segments: Cable Networks, Broadcast Television, Filmed Entertainment and Theme Parks (collectively, the “NBCUniversal segments”); and (3) Sky in one reportable business segment.
Cable Communications is a leading provider of high-speed internet, video, voice, wireless, and security and automation services to residential customers under the Xfinity brand; we also provide these and other services to business customers and sell advertising.
Cable Networks consists primarily of our national cable networks that provide a variety of entertainment, news and information, and sports content; our regional sports and news networks; our international cable networks; our cable television studio production operations; and various digital properties.
Broadcast Television consists primarily of the NBC and Telemundo broadcast networks, our NBC and Telemundo owned local broadcast television stations, the NBC Universo national cable network, our broadcast television studio production operations, and various digital properties.
Filmed Entertainment consists primarily of the operations of Universal Pictures, which produces, acquires, markets and distributes filmed entertainment worldwide; our films are also produced under the Illumination, DreamWorks Animation and Focus Features names.
Theme Parks consists primarily of our Universal theme parks in Orlando, Florida; Hollywood, California; and Osaka, Japan. In addition, we are developing a theme park in Beijing, China along with a consortium of Chinese state-owned companies, and an additional theme park in Orlando, Florida.
Sky is one of Europe’s leading entertainment companies, which primarily includes a direct-to-consumer business, providing video, high-speed internet, voice and wireless phone services, and a content business, operating entertainment networks, the Sky News broadcast network and Sky Sports networks.
Our other business interests consist primarily of the operations of Comcast Spectacor, which owns the Philadelphia Flyers and the Wells Fargo Center arena in Philadelphia, Pennsylvania, and other business initiatives, such as Peacock, our new direct-to-consumer streaming service that primarily features NBCUniversal content.
We use Adjusted EBITDA to evaluate the profitability of our operating segments and the components of net income attributable to Comcast Corporation excluded from Adjusted EBITDA are not separately evaluated. Our financial data by business segment is presented in the tables below.
6
| Three Months Ended September 30, 2020 | |||||||||||||||||
| (in millions) | Revenue | Adjusted EBITDA(d) | Depreciation and Amortization | Capital Expenditures | Cash Paid for Intangible Assets | ||||||||||||
| Cable Communications | $ | 15,000 | $ | 6,411 | $ | 1,952 | $ | 1,770 | $ | 296 | |||||||
| NBCUniversal | |||||||||||||||||
| Cable Networks | 2,736 | 870 | 191 | 6 | 3 | ||||||||||||
| Broadcast Television | 2,414 | 436 | 38 | 13 | 7 | ||||||||||||
| Filmed Entertainment | 1,280 | 300 | 26 | 2 | 4 | ||||||||||||
| Theme Parks | 311 | (203) | 208 | 306 | 11 | ||||||||||||
Headquarters and Other(a) | 32 | (121) | 113 | 30 | 28 | ||||||||||||
Eliminations(b) | (49) | (1) | — | — | — | ||||||||||||
| NBCUniversal | 6,724 | 1,281 | 576 | 357 | 53 | ||||||||||||
| Sky | 4,793 | 515 | 750 | 237 | 176 | ||||||||||||
Corporate and Other(c) | 84 | (496) | 42 | 23 | 27 | ||||||||||||
Eliminations(b) | (1,069) | (128) | — | — | — | ||||||||||||
| Comcast Consolidated | $ | 25,532 | $ | 7,583 | $ | 3,320 | $ | 2,387 | $ | 552 | |||||||
| Three Months Ended September 30, 2019 | |||||||||||||||||
| (in millions) | Revenue | Adjusted EBITDA(d) | Depreciation and Amortization | Capital Expenditures | Cash Paid for Intangible Assets | ||||||||||||
| Cable Communications | $ | 14,584 | $ | 5,801 | $ | 1,967 | $ | 1,814 | $ | 336 | |||||||
| NBCUniversal | |||||||||||||||||
| Cable Networks | 2,771 | 955 | 184 | 9 | 4 | ||||||||||||
| Broadcast Television | 2,230 | 338 | 36 | 36 | 3 | ||||||||||||
| Filmed Entertainment | 1,706 | 195 | 21 | 5 | 5 | ||||||||||||
| Theme Parks | 1,631 | 731 | 182 | 400 | 8 | ||||||||||||
Headquarters and Other(a) | 21 | (130) | 114 | 55 | 43 | ||||||||||||
Eliminations(b) | (64) | 2 | — | — | — | ||||||||||||
| NBCUniversal | 8,295 | 2,091 | 537 | 505 | 63 | ||||||||||||
| Sky | 4,554 | 899 | 644 | 104 | 188 | ||||||||||||
Corporate and Other(c) | 42 | (237) | 32 | 88 | 21 | ||||||||||||
Eliminations(b) | (648) | (1) | — | — | — | ||||||||||||
| Comcast Consolidated | $ | 26,827 | $ | 8,553 | $ | 3,180 | $ | 2,511 | $ | 608 | |||||||
| Nine Months Ended September 30, 2020 | |||||||||||||||||
| (in millions) | Revenue | Adjusted EBITDA(d) | Depreciation and Amortization | Capital Expenditures | Cash Paid for Intangible Assets | ||||||||||||
| Cable Communications | $ | 44,346 | $ | 18,663 | $ | 5,835 | $ | 4,491 | $ | 978 | |||||||
| NBCUniversal | |||||||||||||||||
| Cable Networks | 8,110 | 3,361 | 576 | 16 | 11 | ||||||||||||
| Broadcast Television | 7,462 | 1,578 | 120 | 58 | 12 | ||||||||||||
| Filmed Entertainment | 3,844 | 634 | 71 | 9 | 14 | ||||||||||||
| Theme Parks | 1,267 | (526) | 590 | 897 | 42 | ||||||||||||
Headquarters and Other(a) | 79 | (381) | 358 | 129 | 107 | ||||||||||||
Eliminations(b) | (180) | — | — | — | — | ||||||||||||
| NBCUniversal | 20,582 | 4,666 | 1,715 | 1,109 | 186 | ||||||||||||
| Sky | 13,389 | 1,815 | 2,188 | 649 | 512 | ||||||||||||
Corporate and Other(c) | 250 | (1,254) | 110 | 95 | 95 | ||||||||||||
Eliminations(b) | (2,711) | (250) | — | — | — | ||||||||||||
| Comcast Consolidated | $ | 75,856 | $ | 23,640 | $ | 9,848 | $ | 6,344 | $ | 1,771 | |||||||
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| Nine Months Ended September 30, 2019 | |||||||||||||||||
| (in millions) | Revenue | Adjusted EBITDA(d) | Depreciation and Amortization | Capital Expenditures | Cash Paid for Intangible Assets | ||||||||||||
| Cable Communications | $ | 43,314 | $ | 17,383 | $ | 6,038 | $ | 4,771 | $ | 962 | |||||||
| NBCUniversal | |||||||||||||||||
| Cable Networks | 8,586 | 3,418 | 549 | 21 | 10 | ||||||||||||
| Broadcast Television | 7,099 | 1,259 | 115 | 86 | 9 | ||||||||||||
| Filmed Entertainment | 4,931 | 742 | 60 | 13 | 16 | ||||||||||||
| Theme Parks | 4,371 | 1,819 | 514 | 1,172 | 44 | ||||||||||||
Headquarters and Other(a) | 60 | (486) | 341 | 139 | 120 | ||||||||||||
Eliminations(b) | (233) | — | — | — | — | ||||||||||||
| NBCUniversal | 24,814 | 6,752 | 1,579 | 1,431 | 199 | ||||||||||||
| Sky | 14,179 | 2,334 | 2,058 | 540 | 491 | ||||||||||||
Corporate and Other(c) | 206 | (637) | 101 | 124 | 34 | ||||||||||||
Eliminations(b) | (1,969) | (10) | — | — | — | ||||||||||||
| Comcast Consolidated | $ | 80,544 | $ | 25,822 | $ | 9,776 | $ | 6,866 | $ | 1,686 | |||||||
(a)NBCUniversal Headquarters and Other activities include costs associated with overhead, allocations, personnel costs and headquarter initiatives.
(b)Included in Eliminations are transactions that our segments enter into with one another. Our segments generally report transactions with one another as if they were stand-alone businesses in accordance with GAAP, and these transactions are eliminated in consolidation. When multiple segments enter into transactions to provide products and services to third parties, revenue is generally allocated to our segments based on relative value.
The most significant transactions between our segments include distribution revenue at Cable Networks for the sale of programming to Cable Communications; content licensing revenue in our NBCUniversal segments (Broadcast Television, Filmed Entertainment and Cable Networks) for the license of owned content to Peacock and Sky, and for licenses of owned content to other NBCUniversal segments; advertising revenue at Cable Communications, Cable Networks and Broadcast Television; and distribution revenue at Broadcast Television for fees received under retransmission consent agreements from Cable Communications. For segment reporting purposes, we account for intercompany content licenses as follows:
•Revenue for licenses of content from NBCUniversal segments to Peacock and Sky are generally recognized at a point in time, consistent with the recognition of transactions with third parties, when the content is delivered and made available for use. The costs of these licenses at Peacock and Sky are recognized as the content is used over the license period. The difference in timing of recognition between segments results in an Adjusted EBITDA impact in eliminations as the profits on these transactions are deferred in our consolidated results and recognized as the content is used over the license period.
•Revenue for licenses of content between NBCUniversal segments is recognized over time to correspond with the amortization of the programming rights asset for the licensed content as the content is used over the license period.
(c)Corporate and Other activities include costs associated with overhead and personnel, revenue and expenses associated with our other business interests, including Peacock.
(d)We use Adjusted EBITDA as the measure of profit or loss for our operating segments. Adjusted EBITDA is defined as net income attributable to Comcast Corporation before net income (loss) attributable to noncontrolling interests and redeemable subsidiary preferred stock, income tax expense, investment and other income (loss), net, interest expense, depreciation and amortization expense, and other operating gains and losses (such as impairment charges related to fixed and intangible assets and gains or losses on the sale of long-lived assets), if any. From time to time, we may exclude from Adjusted EBITDA the impact of certain events, gains, losses or other charges (such as significant legal settlements) that affect the period-to-period comparability of our operating performance. Our reconciliation of the aggregate amount of Adjusted EBITDA for our reportable segments to consolidated income before income taxes is presented in the table below.
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
(in millions) | 2020 | 2019 | 2020 | 2019 | |||||||||||||||||||
| Adjusted EBITDA | $ | 7,583 | $ | 8,553 | $ | 23,640 | $ | 25,822 | |||||||||||||||
| Adjustment for potential legal settlement | (177) | — | (177) | — | |||||||||||||||||||
| Adjustment for Sky transaction-related costs | (10) | (33) | (40) | (168) | |||||||||||||||||||
| Depreciation | (2,122) | (2,124) | (6,328) | (6,561) | |||||||||||||||||||
| Amortization | (1,198) | (1,056) | (3,520) | (3,215) | |||||||||||||||||||
Interest expense | (1,220) | (1,167) | (3,544) | (3,454) | |||||||||||||||||||
| Investment and other income (loss), net | (86) | (110) | (382) | 511 | |||||||||||||||||||
| Income before income taxes | $ | 2,770 | $ | 4,063 | $ | 9,649 | $ | 12,935 | |||||||||||||||
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Note 3: Revenue
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| (in millions) | 2020 | 2019 | 2020 | 2019 | |||||||||||||||||||
| Residential: | |||||||||||||||||||||||
| High-speed internet | $ | 5,198 | $ | 4,721 | $ | 15,199 | $ | 13,961 | |||||||||||||||
| Video | 5,421 | 5,541 | 16,468 | 16,763 | |||||||||||||||||||
| Voice | 876 | 963 | 2,652 | 2,935 | |||||||||||||||||||
| Wireless | 400 | 326 | 1,069 | 795 | |||||||||||||||||||
| Business services | 2,049 | 1,971 | 6,096 | 5,795 | |||||||||||||||||||
| Advertising | 674 | 603 | 1,659 | 1,766 | |||||||||||||||||||
| Other | 382 | 459 | 1,203 | 1,299 | |||||||||||||||||||
Total Cable Communications(a) | 15,000 | 14,584 | 44,346 | 43,314 | |||||||||||||||||||
| Distribution | 1,617 | 1,681 | 4,780 | 5,123 | |||||||||||||||||||
| Advertising | 793 | 809 | 2,306 | 2,592 | |||||||||||||||||||
| Content licensing and other | 326 | 281 | 1,024 | 871 | |||||||||||||||||||
| Total Cable Networks | 2,736 | 2,771 | 8,110 | 8,586 | |||||||||||||||||||
| Advertising | 1,054 | 1,191 | 3,331 | 3,837 | |||||||||||||||||||
| Content licensing | 740 | 447 | 2,224 | 1,479 | |||||||||||||||||||
| Distribution and other | 620 | 592 | 1,907 | 1,783 | |||||||||||||||||||
| Total Broadcast Television | 2,414 | 2,230 | 7,462 | 7,099 | |||||||||||||||||||
| Theatrical | 29 | 549 | 354 | 1,246 | |||||||||||||||||||
| Content licensing | 844 | 737 | 2,385 | 2,266 | |||||||||||||||||||
| Home entertainment | 278 | 185 | 678 | 681 | |||||||||||||||||||
| Other | 129 | 235 | 427 | 738 | |||||||||||||||||||
| Total Filmed Entertainment | 1,280 | 1,706 | 3,844 | 4,931 | |||||||||||||||||||
| Total Theme Parks | 311 | 1,631 | 1,267 | 4,371 | |||||||||||||||||||
| Headquarters and Other | 32 | 21 | 79 | 60 | |||||||||||||||||||
Eliminations(b) | (49) | (64) | (180) | (233) | |||||||||||||||||||
| Total NBCUniversal | 6,724 | 8,295 | 20,582 | 24,814 | |||||||||||||||||||
| Direct-to-consumer | 3,943 | 3,793 | 11,146 | 11,516 | |||||||||||||||||||
| Content | 388 | 315 | 947 | 1,061 | |||||||||||||||||||
| Advertising | 462 | 446 | 1,296 | 1,602 | |||||||||||||||||||
| Total Sky | 4,793 | 4,554 | 13,389 | 14,179 | |||||||||||||||||||
| Corporate and Other | 84 | 42 | 250 | 206 | |||||||||||||||||||
Eliminations(b) | (1,069) | (648) | (2,711) | (1,969) | |||||||||||||||||||
| Total revenue | $ | 25,532 | $ | 26,827 | $ | 75,856 | $ | 80,544 | |||||||||||||||
(a)For both the three and nine months ended September 30, 2020 and 2019, 2.6% of Cable Communications segment revenue was derived from franchise and other regulatory fees.
(b)Included in Eliminations are transactions that our segments enter into with one another. See Note 2 for a description of these transactions.
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We operate primarily in the United States but also in select international markets. The table below summarizes revenue by geographic location.
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| (in millions) | 2020 | 2019 | 2020 | 2019 | |||||||||||||||||||
| United States | $ | 19,680 | $ | 20,398 | $ | 59,026 | $ | 61,394 | |||||||||||||||
| Europe | 5,196 | 5,211 | 14,850 | 15,878 | |||||||||||||||||||
| Other | 656 | 1,218 | 1,980 | 3,272 | |||||||||||||||||||
| Total revenue | $ | 25,532 | $ | 26,827 | $ | 75,856 | $ | 80,544 | |||||||||||||||
No single customer accounted for a significant amount of revenue in any period presented.
Condensed Consolidated Balance Sheet
The following tables summarize our accounts receivable and other balances that are not separately presented in our condensed consolidated balance sheet that relate to the recognition of revenue and collection of the related cash, as well as deferred costs associated with our contracts with customers.
| (in millions) | September 30, 2020 | December 31, 2019 | |||||||||
| Receivables, gross | $ | 11,110 | $ | 11,711 | |||||||
| Less: Allowance for doubtful accounts | 800 | 419 | |||||||||
| Receivables, net | $ | 10,310 | $ | 11,292 | |||||||
| (in millions) | September 30, 2020 | December 31, 2019 | |||||||||
| Noncurrent receivables, net (included in other noncurrent assets, net) | $ | 1,138 | $ | 1,337 | |||||||
| Contract acquisition and fulfillment costs (included in other noncurrent assets, net) | $ | 1,043 | $ | 1,083 | |||||||
| Noncurrent deferred revenue (included in other noncurrent liabilities) | $ | 698 | $ | 618 | |||||||
Note 4: Programming and Production Costs
Film and Television Costs
Cable Networks, Broadcast Television, Filmed Entertainment and Sky produce owned content or acquire the rights to programming from third parties, which are described as owned film and television costs and programming rights, respectively. We adopted new accounting guidance related to film and television costs in the first quarter of 2020 (see Note 8), and accordingly amounts presented below for periods in 2020 and the policy discussion reflect the updated accounting guidance, and amounts presented for 2019 reflect the accounting guidance in effect at that time. Under the new accounting guidance, we have determined that the predominant monetization strategy for the substantial majority of our content is on an individual basis.
Amortization of Film and Television Costs
| (in millions) | Three Months Ended September 30, 2020 | Nine Months Ended September 30, 2020 | |||||||||
| Owned film and television costs | $ | 1,556 | $ | 4,883 | |||||||
| Programming rights | $ | 3,526 | $ | 7,774 | |||||||
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Capitalized Film and Television Costs
| September 30, 2020 | December 31, 2019 | ||||||||||||||||||||||
| (in millions) | Film and Television Costs | Film Costs | Television Costs | Total | |||||||||||||||||||
| Owned film and television costs: | |||||||||||||||||||||||
| Released, less amortization | $ | 3,578 | $ | 1,551 | $ | 2,810 | $ | 4,361 | |||||||||||||||
| Completed, not released | 147 | 187 | — | 187 | |||||||||||||||||||
| In production and in development | 2,608 | 1,314 | 1,162 | 2,476 | |||||||||||||||||||
| 6,333 | 3,052 | 3,972 | 7,024 | ||||||||||||||||||||
| Programming rights, less amortization | 6,408 | 5,786 | |||||||||||||||||||||
| 12,741 | 12,810 | ||||||||||||||||||||||
| Less: Current portion of programming rights | — | 3,877 | |||||||||||||||||||||
| Film and television costs | $ | 12,741 | $ | 8,933 | |||||||||||||||||||
The table below summarizes estimated future amortization expense for the capitalized film and television costs recorded in our condensed consolidated balance sheet as of September 30, 2020.
| (in millions) | Owned Film and Television Costs | Programming Rights | |||||||||
| Completed, not released: | |||||||||||
| Remaining three months of 2020 | $ | 20 | |||||||||
| Released and programming rights: | |||||||||||
| Remaining three months of 2020 | $ | 440 | $ | 1,739 | |||||||
| 2021 | $ | 901 | $ | 2,846 | |||||||
| 2022 | $ | 463 | $ | 760 | |||||||
Capitalization and Recognition of Film and Television Costs
We capitalize costs for owned film and television content, including direct costs, production overhead, print costs, development costs and interest, as well as acquired libraries. Amortization for content predominantly monetized on an individual basis and accrued costs associated with participations and residual payments are recorded using the individual film forecast computation method, which recognizes the costs in the same ratio as the associated ultimate revenue. Estimates of ultimate revenue and total costs are based on anticipated release patterns, public acceptance and historical results for similar productions. Amortization for content predominantly monetized with other owned or licensed content is recorded based on estimated usage. In determining the method of amortization and estimated life of an acquired film or television library, we generally use the method and the life that most closely follow the undiscounted cash flows over the estimated life of the asset. We do not capitalize costs related to the distribution of a film in movie theaters or the licensing or sale of a film or television production, which primarily include costs associated with marketing and distribution.
We may enter into cofinancing arrangements with third parties to jointly finance or distribute certain of our film productions. Cofinancing arrangements can take various forms, but in most cases involve the grant of an economic interest in a film to an investor who owns an undivided copyright interest in the film. The number of investors and the terms of these arrangements can vary, although investors generally assume the full risks and rewards for the portion of the film acquired in these arrangements. We account for the proceeds received from the investor under these arrangements as a reduction of our capitalized film costs and the investor’s interest in the profit or loss of the film is recorded as either a charge or a benefit, respectively, in programming and production costs. The investor’s interest in the profit or loss of a film is recorded each period using the individual film forecast computation method.
We capitalize the costs of programming rights for content that we license but do not own when the license period begins, the content is made available for use and the costs of programming licenses are known. Programming rights are amortized as the associated programs are broadcast.
Owned film and television costs and programming rights are presented as noncurrent assets in film and television costs. We present amortization of film and television costs and accrued costs associated with participation and residual payments in programming and production costs.
When an event or a change in circumstance occurs that was known or knowable as of the balance sheet date and that indicates the fair value of either owned film and television content or programming rights is less than the unamortized costs in the
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balance sheet, we determine the fair value and record an impairment charge to the extent the unamortized costs exceed the fair value. Owned film and television costs are assessed either individually or in identified film groups, for content predominantly monetized on an individual basis or with other content, respectively. The substantial majority of our owned film and television costs are evaluated for impairment on an individual title basis. Programming rights that are not part of a film group are generally assessed in packages, channels, or dayparts. A daypart is an aggregation of programs broadcast during a particular time of day or programs of a similar type. Programming rights licensed by Cable Networks are primarily tested on a channel basis for impairment, whereas programming rights licensed by Broadcast Television are tested on a daypart basis. Estimated fair values of owned film and television costs or programming rights are generally based on level 3 inputs including analysis of market participant estimates of future cash flows. We record charges related to impairments or content that is substantively abandoned to programming and production costs. Impairments of capitalized film and television costs were not material in any of the periods presented.
Sports Programming Rights
We recognize the costs of multiyear, live-event sports programming rights as the rights are utilized over the contract term based on estimated relative value. Estimated relative value is generally based on the ratio of the current period revenue to the estimated ultimate revenue or the terms of the contract. When cash payments, including advanced payments, exceed the relative value of the programming delivered, we recognize an asset in programming rights. Production costs incurred in advance of airing are also presented in programming rights.
Note 5: Earnings Per Share
Computation of Diluted EPS
| Three Months Ended September 30, | |||||||||||||||||||||||||||||||||||
| 2020 | 2019 | ||||||||||||||||||||||||||||||||||
| (in millions, except per share data) | Net Income Attributable to Comcast Corporation | Shares | Per Share Amount | Net Income Attributable to Comcast Corporation | Shares | Per Share Amount | |||||||||||||||||||||||||||||
Basic EPS attributable to Comcast Corporation shareholders | $ | 2,019 | 4,577 | $ | 0.44 | $ | 3,217 | 4,551 | $ | 0.71 | |||||||||||||||||||||||||
| Effect of dilutive securities: | |||||||||||||||||||||||||||||||||||
| Assumed exercise or issuance of shares relating to stock plans | 51 | 68 | |||||||||||||||||||||||||||||||||
Diluted EPS attributable to Comcast Corporation shareholders | $ | 2,019 | 4,628 | $ | 0.44 | $ | 3,217 | 4,619 | $ | 0.70 | |||||||||||||||||||||||||
| Nine Months Ended September 30, | |||||||||||||||||||||||||||||||||||
| 2020 | 2019 | ||||||||||||||||||||||||||||||||||
| (in millions, except per share data) | Net Income Attributable to Comcast Corporation | Shares | Per Share Amount | Net Income Attributable to Comcast Corporation | Shares | Per Share Amount | |||||||||||||||||||||||||||||
Basic EPS attributable to Comcast Corporation shareholders | $ | 7,154 | 4,571 | $ | 1.57 | $ | 9,895 | 4,544 | $ | 2.18 | |||||||||||||||||||||||||
| Effect of dilutive securities: | |||||||||||||||||||||||||||||||||||
| Assumed exercise or issuance of shares relating to stock plans | 45 | 62 | |||||||||||||||||||||||||||||||||
Diluted EPS attributable to Comcast Corporation shareholders | $ | 7,154 | 4,616 | $ | 1.55 | $ | 9,895 | 4,606 | $ | 2.15 | |||||||||||||||||||||||||
Diluted earnings per common share attributable to Comcast Corporation shareholders (“diluted EPS”) considers the impact of potentially dilutive securities using the treasury stock method. Our potentially dilutive securities include potential common shares related to our stock options and our restricted share units (“RSUs”). Diluted EPS excludes the impact of potential common shares related to our stock options in periods in which the combination of the option exercise price and the associated unrecognized compensation expense is greater than the average market price of our common stock. The amount of potential common shares related to our share-based compensation plans that were excluded from diluted EPS because their effect would
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have been antidilutive was not material for the three and nine months ended September 30, 2020 or 2019.
Note 6: Long-Term Debt
As of September 30, 2020, our debt had a carrying value of $104.4 billion and an estimated fair value of $124.2 billion. The estimated fair value of our publicly traded debt was primarily based on level 1 inputs that use quoted market value for the debt. The estimated fair value of debt for which there are no quoted market prices was based on level 2 inputs that use interest rates available to us for debt with similar terms and remaining maturities.
Note 7: Significant Transactions
Universal Beijing Resort
We entered into an agreement with a consortium of Chinese state-owned companies to build and operate a Universal theme park and resort in Beijing, China (“Universal Beijing Resort”). We own a 30% interest in Universal Beijing Resort and the construction is being funded through a combination of debt financing and equity contributions from the investors in accordance with their equity interests. As of September 30, 2020, Universal Beijing Resort had $2.1 billion principal amount of a term loan outstanding under the debt financing agreement.
As of September 30, 2020, our condensed consolidated balance sheet included assets, primarily property and equipment, and liabilities, including the term loan, of Universal Beijing Resort totaling $4.5 billion and $3.0 billion, respectively.
Note 8: Recent Accounting Pronouncements
Film and Television Costs
In March 2019, the Financial Accounting Standards Board (“FASB”) updated the accounting guidance related to film and television costs. The updated guidance aligned the accounting for production costs of episodic television series with those of films, allowing for costs to be capitalized in excess of amounts of revenue contracted for each episode. The guidance also updated certain presentation and disclosure requirements for capitalized film and television costs, and when content is predominantly monetized with other owned or licensed content the guidance requires impairment testing for capitalized film and television costs to be performed at a film group level and amortization to be based on usage. We adopted the updated guidance on January 1, 2020 on a prospective basis and as a result, prior period amounts were not adjusted.
Following the adoption, we now present all film and television costs, including acquired programming rights previously classified as current, as noncurrent in the condensed consolidated balance sheet. The adoption of the updated accounting guidance did not have a material impact on our consolidated results of operations or financial position. See Note 4 for further information.
Credit Losses
In June 2016, the FASB updated the accounting guidance related to the measurement of credit losses on financial instruments, including trade receivables and loans. The updated guidance requires the recognition of credit losses on financial instruments based on an estimate of expected losses, replacing the incurred loss model in the prior guidance. We adopted the updated guidance on January 1, 2020 on a prospective basis, recording $124 million, net of tax, as a cumulative effect adjustment to retained earnings and as a result, prior period amounts were not adjusted. The adoption of the updated accounting guidance did not have a material impact on our consolidated results of operations or financial position for any periods presented.
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Note 9: Investments
Investment and Other Income (Loss), Net
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| (in millions) | 2020 | 2019 | 2020 | 2019 | |||||||||||||||||||
| Equity in net income (losses) of investees, net | $ | (266) | $ | (355) | $ | (634) | $ | (295) | |||||||||||||||
Realized and unrealized gains (losses) on equity securities, net | 118 | 174 | 65 | 582 | |||||||||||||||||||
| Other income (loss), net | 62 | 71 | 187 | 224 | |||||||||||||||||||
| Investment and other income (loss), net | $ | (86) | $ | (110) | $ | (382) | $ | 511 | |||||||||||||||
| (in millions) | September 30, 2020 | December 31, 2019 | |||||||||
| Equity method | $ | 5,097 | $ | 5,347 | |||||||
| Marketable equity securities | 141 | 353 | |||||||||
| Nonmarketable equity securities | 1,833 | 1,896 | |||||||||
| Other investments | 138 | 1,796 | |||||||||
| Total investments | 7,209 | 9,392 | |||||||||
| Less: Current investments | 78 | 1,709 | |||||||||
| Less: Investment securing collateralized obligation | 429 | 694 | |||||||||
| Noncurrent investments | $ | 6,702 | $ | 6,989 | |||||||
Equity Method
Atairos
Atairos follows investment company accounting and records its investments at their fair values each reporting period with the net gains or losses reflected in its statement of operations. We recognize our share of these gains and losses in equity in net income (losses) of investees, net. For the three and nine months ended September 30, 2020, we recognized losses of $107 million and $242 million, respectively. For the three and nine months ended September 30, 2019, we recognized a loss of $262 million and income of $6 million, respectively. For the nine months ended September 30, 2020 and 2019, we made cash capital contributions to Atairos totaling $184 million and $475 million, respectively. As of September 30, 2020 and December 31, 2019, our investment in Atairos was $3.3 billion and $3.2 billion, respectively.
Hulu and Collateralized Obligation
For the three and nine months ended September 30, 2020, we recognized losses of $104 million and $265 million, respectively, in equity in net income (losses) of investees, net. For the three and nine months ended September 30, 2019, we recognized losses of $101 million and $351 million, respectively, in equity in net income (losses) of investees, net and in the first quarter of 2019, we recognized a previously deferred dilution gain of $159 million in other income (loss), net. For the nine months ended September 30, 2019, we made cash capital contributions totaling $903 million to Hulu, inclusive of the funding to acquire our proportionate share of AT&T’s previously held 10% interest. There were no cash capital contributions made during the nine months ended September 30, 2020. As of September 30, 2020 and December 31, 2019, our investment was $429 million and $694 million, respectively.
In 2019, we borrowed $5.2 billion under a term loan facility due March 2024 which is fully collateralized by the minimum guaranteed proceeds of the put/call option related to our investment in Hulu. As of September 30, 2020, both the carrying value and fair value of our collateralized obligation was $5.2 billion. The estimated fair value was based on level 2 inputs that use interest rates for debt with similar terms and remaining maturities. We present our investment in Hulu and the term loan separately in our condensed consolidated balance sheet in the captions “investment securing collateralized obligation” and “collateralized obligation,” respectively. The recorded value of our investment reflects our historical cost in applying the equity method, and as a result, is less than its fair value.
Marketable Equity Securities
Peloton
Following Peloton’s initial public offering in September 2019, we recognized unrealized gains of $150 million in realized and unrealized gains (losses) on equity securities, net and presented our investment in Peloton in marketable equity securities, which was previously presented in nonmarketable equity securities. In the second quarter of 2020, we sold our investment in Peloton
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and recognized gains of $67 million in realized and unrealized gains (losses) on equity securities, net. As of December 31, 2019, our investment in Peloton was $294 million.
Snap
In the fourth quarter of 2019, we sold our investment in Snap. For the three and nine months ended September 30, 2019, we recognized unrealized gains of $45 million and $303 million, respectively, in realized and unrealized gains (losses) on equity securities, net.
Other Investments
AirTouch
In April 2020, Verizon Americas, Inc., formerly known as AirTouch Communications, Inc. (“AirTouch”), redeemed the two series of preferred stock and we received cash payments totaling $1.7 billion. Subsequently, we redeemed and repurchased the three series of preferred shares issued by one of our consolidated subsidiaries and made cash payments totaling $1.8 billion.
As of December 31, 2019, our AirTouch investment was $1.6 billion, and the associated liability related to redeemable subsidiary preferred shares was $1.7 billion.
Note 10: Intangible Assets
| September 30, 2020 | December 31, 2019 | ||||||||||||||||
| (in millions) | Weighted-Average Original Useful Life as of September 30, 2020 | Gross Carrying Amount | Accumulated Amortization | Gross Carrying Amount | Accumulated Amortization | ||||||||||||
| Indefinite-Lived Intangible Assets: | |||||||||||||||||
| Franchise rights | N/A | $ | 59,365 | $ | 59,365 | ||||||||||||
| Trade names | N/A | — | 8,809 | ||||||||||||||
| FCC licenses | N/A | 2,345 | 2,337 | ||||||||||||||
| Finite-Lived Intangible Assets: | |||||||||||||||||
| Customer relationships | 14 years | 21,665 | $ | (8,363) | 22,884 | $ | (8,295) | ||||||||||
| Software | 5 years | 16,770 | (8,786) | 15,357 | (7,287) | ||||||||||||
| Other agreements and rights | 28 years | 12,110 | (1,256) | 3,958 | (1,635) | ||||||||||||
| Total | $ | 112,255 | $ | (18,405) | $ | 112,710 | $ | (17,217) | |||||||||
Estimated Amortization Expense of Finite-Lived Intangible Assets
| (in millions) | |||||
| Remaining three months of 2020 | $ | 1,190 | |||
| 2021 | $ | 4,443 | |||
| 2022 | $ | 3,868 | |||
| 2023 | $ | 3,209 | |||
| 2024 | $ | 2,524 | |||
Note 11: Supplemental Financial Information
Share-Based Compensation
Our share-based compensation plans consist primarily of awards of RSUs and stock options to certain employees and directors as part of our approach to long-term incentive compensation. Additionally, through our employee stock purchase plans, employees are able to purchase shares of our common stock at a discount through payroll deductions.
In March 2020, we granted 15.8 million RSUs and 59.9 million stock options related to our annual management awards. The weighted-average fair values associated with these grants were $42.47 per RSU and $6.53 per stock option.
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Recognized Share-Based Compensation Expense
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| (in millions) | 2020 | 2019 | 2020 | 2019 | |||||||||||||||||||
| Restricted share units | $ | 164 | $ | 143 | $ | 484 | $ | 437 | |||||||||||||||
| Stock options | 72 | 57 | 226 | 176 | |||||||||||||||||||
| Employee stock purchase plans | 9 | 8 | 30 | 23 | |||||||||||||||||||
| Total | $ | 245 | $ | 208 | $ | 740 | $ | 636 | |||||||||||||||
As of September 30, 2020, we had unrecognized pretax compensation expense of $1.3 billion and $615 million related to nonvested RSUs and nonvested stock options, respectively.
Cash Payments for Interest and Income Taxes
| Nine Months Ended September 30, | |||||||||||
| (in millions) | 2020 | 2019 | |||||||||
| Interest | $ | 2,845 | $ | 3,167 | |||||||
| Income taxes | $ | 2,298 | $ | 2,490 | |||||||
Noncash Activities
During the nine months ended September 30, 2020:
•we acquired $1.9 billion of property and equipment and intangible assets that were accrued but unpaid
•we recorded a liability of $1.1 billion for a quarterly cash dividend of $0.23 per common share paid in October 2020
Cash, Cash Equivalents and Restricted Cash
The following table provides a reconciliation of cash, cash equivalents and restricted cash reported in the condensed consolidated balance sheet to the total of the amounts reported in our condensed consolidated statement of cash flows.
| (in millions) | September 30, 2020 | December 31, 2019 | |||||||||
| Cash and cash equivalents | $ | 13,707 | $ | 5,500 | |||||||
| Restricted cash included in other current assets | 11 | 42 | |||||||||
| Restricted cash included in other noncurrent assets, net | 19 | 47 | |||||||||
| Cash, cash equivalents and restricted cash, end of period | $ | 13,737 | $ | 5,589 | |||||||
Accumulated Other Comprehensive Income (Loss)
| (in millions) | September 30, 2020 | September 30, 2019 | |||||||||
| Unrealized gains (losses) on marketable securities | $ | 5 | $ | 7 | |||||||
| Deferred gains (losses) on cash flow hedges | (68) | 162 | |||||||||
| Unrecognized gains (losses) on employee benefit obligations | 241 | 301 | |||||||||
| Cumulative translation adjustments | 34 | (1,629) | |||||||||
| Accumulated other comprehensive income (loss), net of deferred taxes | $ | 212 | $ | (1,159) | |||||||
Note 12: Commitments and Contingencies
Redeemable Subsidiary Preferred Stock
As of September 30, 2020, the fair value of the NBCUniversal Enterprise redeemable subsidiary preferred stock was $731 million. The estimated fair value is based on level 2 inputs that use pricing models whose inputs are derived primarily from or corroborated by observable market data through correlation or other means for substantially the full term of the financial instrument.
Contingencies
We are subject to legal proceedings and claims that arise in the ordinary course of our business. While the amount of ultimate liability with respect to such actions is not expected to materially affect our results of operations, cash flows or financial position, any litigation resulting from any such legal proceedings or claims could be time-consuming and injure our reputation.
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ITEM 2: MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Overview
We are a global media and technology company with three primary businesses: Comcast Cable, NBCUniversal, and Sky. We present our operations for (1) Comcast Cable in one reportable business segment, referred to as Cable Communications; (2) NBCUniversal in four reportable business segments: Cable Networks, Broadcast Television, Filmed Entertainment and Theme Parks (collectively, the “NBCUniversal segments”); and (3) Sky in one reportable business segment.
Cable Communications Segment
Cable Communications is a leading provider of high-speed internet, video, voice, wireless, and security and automation services to residential customers under the Xfinity brand; we also provide these and other services to business customers and sell advertising. As of September 30, 2020, our cable systems had 32.7 million total customer relationships, including 30.3 million residential and 2.4 million business customer relationships, and passed more than 59 million homes and businesses. Revenue is generated primarily from residential and business customers that subscribe to our services, which are marketed individually and as bundled services, and from the sale of advertising.
NBCUniversal Segments
NBCUniversal is one of the world’s leading media and entertainment companies that develops, produces and distributes entertainment, news and information, sports, and other content for global audiences, and owns and operates theme parks worldwide.
Cable Networks
Cable Networks consists primarily of our national cable networks that provide a variety of entertainment, news and information, and sports content; our regional sports and news networks; our international cable networks; our cable television studio production operations; and various digital properties. Revenue is generated primarily from the distribution of our cable network programming to traditional and virtual multichannel video providers; from the sale of advertising on our cable networks and digital properties; from the licensing of our owned programming, including programming from our cable television studio production operations, to cable and broadcast networks and subscription video on demand services; and from the sale of our owned content on standard-definition DVDs and Blu-ray discs (together, “DVDs”) and through digital distribution services such as iTunes.
Broadcast Television
Broadcast Television consists primarily of the NBC and Telemundo broadcast networks, our NBC and Telemundo owned local broadcast television stations, the NBC Universo national cable network, our broadcast television studio production operations, and various digital properties. Revenue is generated primarily from the sale of advertising on our networks and digital properties, from the licensing of programming, including to cable and broadcast networks as well as to subscription video on demand services; from the fees received under retransmission consent agreements and associated fees received from NBC-affiliated and Telemundo-affiliated local broadcast television stations; and from the sale of our owned programming on DVDs and through digital distribution services.
Filmed Entertainment
Filmed Entertainment primarily produces, acquires, markets and distributes filmed entertainment worldwide. Our films are produced primarily under the Universal Pictures, Illumination, DreamWorks Animation and Focus Features names. Revenue is generated primarily from the worldwide distribution of our produced and acquired films for exhibition in movie theaters, from the licensing of produced and acquired films through various distribution platforms, and from the sale of produced and acquired films on DVDs and through digital distribution services. Filmed Entertainment also generates revenue from Fandango, a movie ticketing and entertainment business, consumer products, the production and licensing of live stage plays, and the distribution of filmed entertainment produced by third parties.
Theme Parks
Theme Parks consists primarily of our Universal theme parks in Orlando, Florida; Hollywood, California; and Osaka, Japan. In addition, we are developing a theme park in Beijing, China along with a consortium of Chinese state-owned companies, and an additional theme park in Orlando, Florida. Revenue is generated primarily from guest spending at our Universal theme parks.
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Sky Segment
Sky is one of Europe’s leading entertainment companies, which primarily includes a direct-to-consumer business, providing video, high-speed internet, voice and wireless phone services, and a content business, operating entertainment networks, the Sky News broadcast network and Sky Sports networks. As of September 30, 2020, Sky had 23.7 million retail customer relationships.
Corporate and Other
Our other business interests consist primarily of the operations of Comcast Spectacor, which owns the Philadelphia Flyers and the Wells Fargo Center arena in Philadelphia, Pennsylvania, and other business initiatives, such as Peacock, which was made available to Comcast customers in April 2020 and launched nationally in July 2020.
Impacts of COVID-19
The novel coronavirus disease 2019 (“COVID-19”) and measures taken to prevent its spread across the globe continue to impact our businesses in a number of ways. Our Cable Communications results of operations were strong in the nine months ended September 30, 2020, despite having been affected by the significant deterioration in domestic economic conditions and by the costs associated with our support of customer connectivity as people continued to work and learn remotely from home. COVID-19 had material negative impacts on NBCUniversal and Sky results of operations during the second and third quarters of 2020 primarily due to the temporary closure of our theme parks and the postponement and cancellation of many sporting events. We continue to implement and evaluate cost initiatives across our businesses that have impacted and will continue to impact our results of operations; certain costs incurred by our businesses in response to COVID-19, including severance and restructuring charges, are presented in Corporate and Other. We expect the impacts of COVID-19 will continue to have a material adverse impact on our consolidated results of operations over the near to medium term.
Cable Communications
•Our distribution network to date has performed well under the stress of increased traffic and peak usage driven by increased video streaming, gaming and videoconferencing as more customers work and learn remotely from home.
•We incurred costs in 2020 associated with compensating personnel in roles affected by COVID-19, primarily during the first half of the year. These costs included additional compensation for frontline personnel who worked to keep our customers connected to our services and compensation for certain personnel who were unable to work due to the closing or suspension of operations.
•Beginning in March 2020 and continuing through the end of December 2020, new qualifying customers for Internet Essentials, our low-income internet adoption program, will receive 60 days of free internet services. We also implemented programs, primarily during the second quarter of 2020, under which we elected to waive certain fees and to not disconnect internet, voice or wireless services for customers for nonpayment, and we are now providing customers a variety of flexible and extended payment options. As a result of these programs, our customer metrics for 2020 do not include customers in the free Internet Essentials offer or certain high-risk customers who continued to receive service following nonpayment. The number of customers excluded from our customer metrics was highest as of June 30, 2020 and these customers were excluded from second quarter net additions. The number of such customers decreased in the third quarter as some of these customers began paying for service, resulting in customer net additions, or disconnected and no longer receive service. We expect the number of excluded customers to continue to decrease in the fourth quarter.
•Professional sports leagues have generally resumed, some with a reduced schedule for the remainder of the interrupted seasons. Certain of our programming distribution agreements with regional sports networks include contractual adjustment provisions if a minimum number of sporting events does not occur. In the second and third quarters of 2020, our programming expenses were reduced as a result of these provisions, and our revenue was negatively impacted in similar amounts as a result of adjustments that we have begun passing through to our customers in the fourth quarter of 2020.
•The deterioration of economic conditions and increased economic uncertainty resulting from COVID-19 have resulted in reduced demand for certain of our residential and business services and reduced spending from advertisers, which have had, and likely will continue to have, negative impacts on our revenue over the near to medium term. In addition, we believe there is increased risk associated with collections on our outstanding receivables, and we have incurred, and expect to continue to incur, increases in our bad debt expense compared to the prior year periods.
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NBCUniversal
•The temporary closure of all of our theme parks had the most significant impact on our revenue and Adjusted EBITDA for the nine months ended September 30, 2020 on a consolidated basis. Our parks in Orlando and Japan reopened with limited capacity in June 2020, while our park in Hollywood remains closed. We expect the results of operations at our theme parks will continue to be negatively impacted in the near to medium term, and we cannot predict when the Hollywood park will reopen, if any reopened parks will remain open or the level of attendance at any reopened parks. In addition, although we currently expect that Universal Beijing Resort will open in 2021, we have delayed certain construction projects, including the development of the Epic Universe theme park in Orlando.
•The deterioration of economic conditions caused by COVID-19 resulted in significant reductions in advertising spend by our customers in the Cable Networks and Broadcast Television segments in the second and third quarters of 2020, and we expect this trend to continue over the near to medium term. These conditions have also resulted, and may continue to result, in an acceleration of subscriber losses at our networks.
•We incurred costs in 2020 associated with compensating personnel who were unable to work due to the closing or suspension of operations, primarily during the first half of the year, including at our theme parks and at our production studios.
•The postponement and cancellation of many sporting events and professional sports seasons impacted our first and second quarter 2020 results of operations, since both advertising revenues and costs associated with broadcasting these programs were not recognized. Professional sports leagues have generally resumed in the third quarter of 2020, some with reduced numbers of events for the remainder of the interrupted seasons. Certain of our sports programming rights agreements and distribution agreements with multichannel video providers include contractual provisions if a minimum number of events does not occur. Our distribution revenue in the second and third quarters of 2020 was negatively impacted as a result of credits accrued relating to these provisions; and the programming costs that we recognize as the remaining events occur, which were primarily in the third quarter of 2020, will also be impacted. When, or the extent to which, sporting events will occur for the remainder of 2020 and into 2021 will impact the timing, and potentially the amount, of revenue and expense recognition. In addition, the 2020 Tokyo Olympics have been postponed from the third quarter of 2020 to the third quarter of 2021, which will result in a corresponding delay of the associated revenue and costs.
•The creation and availability of our film and television programming in the United States and globally have been disrupted, including from the suspension of studio production operations in the first half of 2020. In the third quarter of 2020, our studio production operations resumed at a limited capacity. Additionally, with the temporary closure of many movie theaters worldwide, we have delayed or altered the theatrical distribution strategy for certain of our films, both domestically and internationally. Delays in theatrical releases will affect both current and future periods as a result of corresponding delays in subsequent content licensing windows. We expect results of operations in our Filmed Entertainment segment to continue to be negatively impacted over the near to medium term as a result of COVID-19.
Sky
•Many sporting events and professional sports seasons were postponed beginning in the second half of the first quarter of 2020, with certain sports, including European soccer, resuming in May and June 2020, which resulted in significant impacts on Sky’s results of operations in the first, second and third quarters of 2020. Direct-to-consumer revenue has been negatively impacted as a result of lower sports subscription revenue and we expect continued negative impacts as a result of the impacts of COVID-19 on the reopening plans and the extent of reopening of our commercial customers. Additionally, significant costs associated with broadcasting these programs were not recognized as a result of the sporting events not occurring in the first quarter and for most of the second quarter. These costs were generally recognized in the third quarter of 2020; and although sporting events have resumed, COVID-19 continues to result in uncertainty in the ultimate timing of when, or the extent to which, sporting events will occur for the remainder of 2020; their broadcast is expected to impact the timing, and potentially the amount, of revenue and expense recognition.
•We temporarily suspended certain sales channels due to COVID-19, which negatively impacted net customer additions and revenue in the first and second quarters of 2020. Our sales channels generally resumed operations in June.
•COVID-19 has resulted in the deterioration of economic conditions and increased economic uncertainty in the U.K. and Europe, intensifying what was an already deteriorating economic and advertising environment. These conditions negatively impacted revenue in the nine months ended September 30, 2020, and we expect will continue to reduce advertising spend and consumer demand for our services for the remainder of 2020. In addition, there is increased risk associated with collections on our outstanding receivables, and we have incurred and expect to continue to incur increases in our bad debt expense.
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Global financial markets have been volatile and domestic and global economic conditions continue to show signs of material weakness. At this point, it is impossible to predict the extent and duration of these and any other impacts of COVID-19 to our businesses, or the degree to which demand for our products and services, or supply of key inputs to those products and services, will be affected. This uncertainty makes it challenging for management to estimate with precision the future performance of our businesses.
As of September 30, 2020, we evaluated whether the facts and circumstances and available information resulted in the need for an impairment assessment for any of our long-lived assets and concluded no assessment was required. Refer to the Critical Accounting Judgments and Estimates section for discussion of our impairment testing of goodwill and cable franchise rights. We will continue to evaluate the impacts of COVID-19 to our businesses, including the impacts of overall economic conditions, which could result in the recognition of an impairment charge in the future. Our results for the nine months ended September 30, 2020 were impacted by significant losses and gains as a result of the volatility in the market values for publicly traded equity securities underlying our investments.
Liquidity
Although negatively impacted by the effects of COVID-19, we expect that our businesses will continue to generate significant cash flow from operating activities and we believe that these cash flows, together with our existing cash, cash equivalents and investments, available borrowings under our existing credit facilities, and our ability to obtain future external financing, will be sufficient for us to meet our current and long-term liquidity and capital requirements. However, we expect the timing of certain priorities to be impacted, such as the pace of our debt reduction efforts and return to share repurchases, and the delay of certain capital projects.
Competition
All of our businesses operate in intensely competitive, consumer-driven and rapidly changing environments and compete with a growing number of companies that provide a broad range of communications products and services, and entertainment, news and information content to consumers. Technological changes are further intensifying and complicating the competitive landscape and challenging existing business models. In particular, consumers are increasingly turning to online sources for viewing and purchasing content, which has and likely will continue to reduce the number of our video customers and subscribers to our cable networks even as it makes our high-speed internet services more valuable to consumers. In addition, the increasing number of entertainment choices available to consumers has intensified audience fragmentation and disaggregated the way that content traditionally has been viewed by consumers. This increase has caused and likely will continue to cause audience ratings declines at our programming channels.
For additional information on the competition our businesses face, see our 2019 Annual Report on Form 10-K and refer to Item 1: Business and Item 1A: Risk Factors. Within the Business section, refer to the “Competition” discussion, and within the Risk Factors section, refer to the risk factors entitled “Our businesses operate in highly competitive and dynamic industries, and our businesses and results of operations could be adversely affected if we do not compete effectively” and “Changes in consumer behavior driven by online video distribution platforms for viewing content continue to adversely affect our businesses and challenge existing business models.”
Seasonality and Cyclicality
Each of our businesses is typically subject to seasonal and cyclical variations. Cable Communications’ results are impacted by the seasonal nature of residential customers receiving our services in college and vacation markets. This generally results in fewer net customer relationship additions in the second quarter of each year.
Revenue and operating costs and expenses (comprised of total costs and expenses, excluding depreciation and amortization expense and other operating gains) are cyclical as a result of our periodic broadcasts of major sporting events, such as the Olympic Games, which affect Cable Networks and Broadcast Television, and the Super Bowl, which affects Broadcast Television. In particular, advertising revenue increases due to increased demand for advertising time for these events and distribution revenue increases in the period of broadcasts of the Olympic Games. Operating costs and expenses also increase as a result of our production costs for these broadcasts and the amortization of the related rights fees.
Revenue in Cable Communications, Cable Networks, Broadcast Television and Sky is also subject to cyclical advertising patterns and changes in viewership levels. Advertising revenue in the U.S. is generally higher in the second and fourth quarters of each year and in even-numbered years due to increases in consumer advertising in the spring and in the period leading up to and including the holiday season and advertising related to candidates running for political office and issue-oriented advertising, respectively. Revenue in Cable Networks and Broadcast Television fluctuates depending on the timing of when our programming is aired, which typically results in higher advertising revenue in the second and fourth quarters of each year.
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Revenue at Sky has seasonally higher audience levels in winter months and increased competition during major sporting events where public service broadcasters lease the rights, such as the Olympic Games and the FIFA World CupTM.
Revenue in Filmed Entertainment fluctuates due to the timing, nature and number of films released in movie theaters, on DVDs, and through various other distribution platforms. Release dates are determined by several factors, including competition and the timing of vacation and holiday periods. As a result, revenue tends to be seasonal, with increases experienced each year during the summer months and around the holiday season. Content licensing revenue in our Cable Networks, Broadcast Television and Filmed Entertainment segments also fluctuates due to the timing of when our content is made available to licensees.
Revenue in Theme Parks fluctuates with changes in theme park attendance that result from the seasonal nature of vacation travel and weather variations, local entertainment offerings and the opening of new attractions, as well as with changes in currency exchange rates. Theme Parks generally experiences peak attendance during the spring holiday period, the summer months when schools are closed and the Christmas holiday season.
Sky’s results are impacted by the seasonal nature of residential customers receiving direct-to-home (“DTH”) and over the top (“OTT”) video services, including the start of the new soccer seasons and the Christmas holiday. This generally results in greater net customer relationship additions and higher subscriber acquisition costs in the second half of each year due to higher marketing expenses.
Exclusive sports rights play a key role within Sky’s wider content strategy. In Europe, broadcasting rights for major sports are usually tendered through a competitive auction process, with the winning bidder or bidders acquiring rights over a three to five-year period. This creates some level of cyclicality for Sky, although the staggered timing of major sports rights auctions usually gives Sky time to react to any material changes in the competitive dynamics of the prevailing market. Certain of Sky’s significant sports rights agreements require payments at the start of each season, resulting in increases in sports rights payments in the third and fourth quarter of each year.
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Consolidated Operating Results
| Three Months Ended September 30, | Increase/ (Decrease) | Nine Months Ended September 30, | Increase/ (Decrease) | ||||||||||||||||||||||||||||||||
| (in millions, except per share data) | 2020 | 2019 | % | 2020 | 2019 | % | |||||||||||||||||||||||||||||
| Revenue | $ | 25,532 | $ | 26,827 | (4.8) | % | $ | 75,856 | $ | 80,544 | (5.8) | % | |||||||||||||||||||||||
| Costs and Expenses: | |||||||||||||||||||||||||||||||||||
| Programming and production | 8,565 | 8,316 | 3.0 | 23,683 | 25,140 | (5.8) | |||||||||||||||||||||||||||||
Other operating and administrative | 8,059 | 8,090 | (0.4) | 23,959 | 24,076 | (0.5) | |||||||||||||||||||||||||||||
Advertising, marketing and promotion | 1,512 | 1,901 | (20.5) | 4,791 | 5,674 | (15.6) | |||||||||||||||||||||||||||||
| Depreciation | 2,122 | 2,124 | (0.1) | 6,328 | 6,561 | (3.6) | |||||||||||||||||||||||||||||
Amortization | 1,198 | 1,056 | 13.4 | 3,520 | 3,215 | 9.5 | |||||||||||||||||||||||||||||
| Operating income | 4,076 | 5,340 | (23.7) | 13,575 | 15,878 | (14.5) | |||||||||||||||||||||||||||||
| Interest expense | (1,220) | (1,167) | 4.5 | (3,544) | (3,454) | 2.6 | |||||||||||||||||||||||||||||
Investment and other income (loss), net | (86) | (110) | (21.9) | (382) | 511 | (174.6) | |||||||||||||||||||||||||||||
| Income before income taxes | 2,770 | 4,063 | (31.8) | 9,649 | 12,935 | (25.4) | |||||||||||||||||||||||||||||
Income tax expense | (739) | (775) | (4.6) | (2,385) | (2,812) | (15.2) | |||||||||||||||||||||||||||||
| Net income | 2,031 | 3,288 | (38.2) | 7,264 | 10,123 | (28.2) | |||||||||||||||||||||||||||||
Less: Net income attributable to noncontrolling interests and redeemable subsidiary preferred stock | 12 | 71 | (83.6) | 110 | 228 | (51.9) | |||||||||||||||||||||||||||||
Net income attributable to Comcast Corporation | $ | 2,019 | $ | 3,217 | (37.2) | % | $ | 7,154 | $ | 9,895 | (27.7) | % | |||||||||||||||||||||||
Basic earnings per common share attributable to Comcast Corporation shareholders | $ | 0.44 | $ | 0.71 | (38.0) | % | $ | 1.57 | $ | 2.18 | (28.0) | % | |||||||||||||||||||||||
Diluted earnings per common share attributable to Comcast Corporation shareholders | $ | 0.44 | $ | 0.70 | (37.1) | % | $ | 1.55 | $ | 2.15 | (27.9) | % | |||||||||||||||||||||||
Adjusted EBITDA(a) | $ | 7,583 | $ | 8,553 | (11.3) | % | $ | 23,640 | $ | 25,822 | (8.5) | % | |||||||||||||||||||||||
All percentages are calculated based on actual amounts. Minor differences may exist due to rounding. Percentage changes that are considered not meaningful are denoted with NM.
(a)Adjusted EBITDA is a non-GAAP financial measure. Refer to the “Non-GAAP Financial Measures” section on page 36 for additional information, including our definition and our use of Adjusted EBITDA, and for a reconciliation from net income attributable to Comcast Corporation to Adjusted EBITDA.
Consolidated Revenue
Theme Parks, Filmed Entertainment and Cable Networks drove decreases in consolidated revenue for the three months ended September 30, 2020, which were partially offset by increases in revenue in Cable Communications, Sky and Broadcast Television.
Theme Parks, Filmed Entertainment, Sky and Cable Networks drove decreases in consolidated revenue for the nine months ended September 30, 2020, which were partially offset by increases in revenue in Cable Communications and Broadcast Television.
Revenue for our segments and other businesses is discussed separately below under the heading “Segment Operating Results.”
Consolidated Costs and Expenses
Filmed Entertainment, Theme Parks and Cable Communications drove decreases in consolidated operating costs and expenses for the three months ended September 30, 2020, which were partially offset by increases in operating costs and expenses in Sky, Broadcast Television and Cable Networks.
Filmed Entertainment, Theme Parks, Cable Networks, Sky and Cable Communications drove decreases in consolidated operating costs and expenses for the nine months ended September 30, 2020, which were partially offset by increases in operating costs and expenses in Broadcast Television.
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Operating costs and expenses for our segments and our corporate operations, businesses development initiatives and other businesses are discussed separately below under the heading “Segment Operating Results.”
Consolidated Depreciation and Amortization Expense
| Three Months Ended September 30, | Increase/ (Decrease) | Nine Months Ended September 30, | Increase/ (Decrease) | ||||||||||||||||||||||||||||||||
| (in millions) | 2020 | 2019 | % | 2020 | 2019 | % | |||||||||||||||||||||||||||||
| Cable Communications | $ | 1,952 | $ | 1,967 | (0.7) | % | $ | 5,835 | $ | 6,038 | (3.4) | % | |||||||||||||||||||||||
| NBCUniversal | 576 | 537 | 7.3 | 1,715 | 1,579 | 8.6 | |||||||||||||||||||||||||||||
| Sky | 750 | 644 | 16.5 | 2,188 | 2,058 | 6.3 | |||||||||||||||||||||||||||||
| Corporate and Other | 42 | 32 | 26.7 | 110 | 101 | 6.9 | |||||||||||||||||||||||||||||
| Comcast Consolidated | $ | 3,320 | $ | 3,180 | 4.4 | % | $ | 9,848 | $ | 9,776 | 0.7 | % | |||||||||||||||||||||||
Consolidated depreciation and amortization expense increased for the three and nine months ended September 30, 2020 compared to the same periods in 2019 primarily due to an increase in the amortization of certain trade names beginning in the first quarter of 2020, which were previously accounted for as indefinite-lived intangible assets (see Note 10), partially offset by a decrease in depreciation at Cable Communications related to a reduction in capital expenditures on customer premise equipment. During the first quarter of 2019, we recorded adjustments to the purchase price allocation of Sky, primarily related to intangible assets and property and equipment. This change resulted in an adjustment recorded in the first quarter of 2019 related to the fourth quarter of 2018 that increased depreciation and amortization expense by $53 million.
Amortization expense from acquisition-related intangible assets totaled $574 million and $1.7 billion for the three and nine months ended September 30, 2020, respectively. Amortization expense from acquisition-related intangible assets totaled $486 million and $1.5 billion for the three and nine months ended September 30, 2019, respectively. Amounts primarily relate to customer relationship intangible assets recorded in connection with the Sky transaction in the fourth quarter of 2018 and the NBCUniversal transaction in 2011.
Consolidated Interest Expense
Interest expense increased for the three months ended September 30, 2020 compared to the same period in 2019 primarily due to a $220 million charge recorded in the third quarter of 2020 related to the early redemption of senior notes due 2022 and 2023, partially offset by lower weighted average interest rates in the current year period. Interest expense increased for the nine months ended September 30, 2020 compared to the same period in 2019 primarily due to $360 million of charges recorded in the first and third quarters of 2020 related to the early redemption of senior notes due 2021 to 2023, partially offset by decreases in our debt outstanding.
Consolidated Investment and Other Income (Loss), Net
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| (in millions) | 2020 | 2019 | 2020 | 2019 | |||||||||||||||||||
| Equity in net income (losses) of investees, net | $ | (266) | $ | (355) | $ | (634) | $ | (295) | |||||||||||||||
Realized and unrealized gains (losses) on equity securities, net | 118 | 174 | 65 | 582 | |||||||||||||||||||
| Other income (loss), net | 62 | 71 | 187 | 224 | |||||||||||||||||||
| Total investment and other income (loss), net | $ | (86) | $ | (110) | $ | (382) | $ | 511 | |||||||||||||||
Equity in Net Income (Losses) of Investees, Net
The change in equity in net income (losses) of investees, net for the three and nine months ended September 30, 2020 compared to the same periods in 2019 were primarily due to our equity method investments in Atairos and Hulu. The income (losses) at Atairos were driven by fair value adjustments on its underlying investments. The equity in net income (losses) of Atairos and Hulu for the three and nine months ended September 30, 2020 and 2019 are presented in the table below.
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| (in millions) | 2020 | 2019 | 2020 | 2019 | |||||||||||||||||||
| Atairos | $ | (107) | $ | (262) | $ | (242) | $ | 6 | |||||||||||||||
| Hulu | $ | (104) | $ | (101) | $ | (265) | $ | (351) | |||||||||||||||
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Realized and Unrealized Gains (Losses) on Equity Securities, Net
The changes in realized and unrealized gains (losses) on equity securities, net for the three and nine months ended September 30, 2020 compared to the same periods in 2019 were primarily due to gains related to our investment in Peloton and gains and losses related to other investments in the current year compared to gains related to our investments in Snap and Peloton in the prior year. See Note 9.
Other Income (Loss), Net
The decrease in other income (loss), net for the three months ended September 30, 2020 compared to the same period in 2019 primarily relates to higher foreign exchange remeasurement gains in 2020, more than offset by a gain of $60 million recorded in the prior year period related to the dilution of our Hulu ownership. The decrease in other income (loss), net for the nine months ended September 30, 2020 compared to the same period in 2019 primarily relates to gains of $219 million recorded in the first and third quarters of 2019 related to the dilution of our Hulu ownership, partially offset by $90 million of losses due to equity method investment impairments recorded in the second and third quarters of 2019 and higher foreign exchange remeasurement gains in 2020. See Note 9.
Consolidated Income Tax Expense
Income tax expense for the three and nine months ended September 30, 2020 and 2019 reflects an effective income tax rate that differs from the federal statutory rate primarily due to state and foreign income taxes and adjustments associated with uncertain tax positions. The decrease in income tax expense for the three and nine months ended September 30, 2020 compared to the same periods in 2019 was primarily due to lower income before income taxes in 2020, partially offset by the impact of tax law changes in the third quarter of 2020 and a benefit from state tax adjustments recognized in the third quarter of 2019.
Segment Operating Results
Our segment operating results are presented based on how we assess operating performance and internally report financial information. We use Adjusted EBITDA as the measure of profit or loss for our operating segments. See Note 2 for our definition of Adjusted EBITDA and a reconciliation from the aggregate amount of Adjusted EBITDA for our reportable business segments to consolidated income before income taxes.
Cable Communications Segment Results of Operations
| Three Months Ended September 30, | Increase/ (Decrease) | ||||||||||||||||||||||
| (in millions) | 2020 | 2019 | $ | % | |||||||||||||||||||
| Revenue | |||||||||||||||||||||||
| Residential: | |||||||||||||||||||||||
| High-speed internet | $ | 5,198 | $ | 4,721 | $ | 477 | 10.1 | % | |||||||||||||||
| Video | 5,421 | 5,541 | (120) | (2.1) | |||||||||||||||||||
| Voice | 876 | 963 | (87) | (9.0) | |||||||||||||||||||
| Wireless | 400 | 326 | 74 | 22.8 | |||||||||||||||||||
| Business services | 2,049 | 1,971 | 78 | 4.0 | |||||||||||||||||||
| Advertising | 674 | 603 | 71 | 11.8 | |||||||||||||||||||
| Other | 382 | 459 | (77) | (17.2) | |||||||||||||||||||
| Total revenue | 15,000 | 14,584 | 416 | 2.9 | |||||||||||||||||||
| Operating costs and expenses | |||||||||||||||||||||||
| Programming | 3,296 | 3,315 | (19) | (0.6) | |||||||||||||||||||
| Technical and product support | 1,980 | 2,066 | (86) | (4.2) | |||||||||||||||||||
| Customer service | 598 | 628 | (30) | (4.8) | |||||||||||||||||||
| Advertising, marketing and promotion | 929 | 1,024 | (95) | (9.2) | |||||||||||||||||||
| Franchise and other regulatory fees | 421 | 408 | 13 | 3.3 | |||||||||||||||||||
| Other | 1,365 | 1,342 | 23 | 1.6 | |||||||||||||||||||
| Total operating costs and expenses | 8,589 | 8,783 | (194) | (2.2) | |||||||||||||||||||
Adjusted EBITDA | $ | 6,411 | $ | 5,801 | $ | 610 | 10.5 | % | |||||||||||||||
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| Nine Months Ended September 30, | Increase/ (Decrease) | ||||||||||||||||||||||
| (in millions) | 2020 | 2019 | $ | % | |||||||||||||||||||
| Revenue | |||||||||||||||||||||||
| Residential: | |||||||||||||||||||||||
| High-speed internet | $ | 15,199 | $ | 13,961 | $ | 1,238 | 8.9 | % | |||||||||||||||
| Video | 16,468 | 16,763 | (295) | (1.8) | |||||||||||||||||||
| Voice | 2,652 | 2,935 | (283) | (9.6) | |||||||||||||||||||
| Wireless | 1,069 | 795 | 274 | 34.5 | |||||||||||||||||||
| Business services | 6,096 | 5,795 | 301 | 5.2 | |||||||||||||||||||
| Advertising | 1,659 | 1,766 | (107) | (6.1) | |||||||||||||||||||
| Other | 1,203 | 1,299 | (96) | (7.5) | |||||||||||||||||||
| Total revenue | 44,346 | 43,314 | 1,032 | 2.4 | |||||||||||||||||||
| Operating costs and expenses | |||||||||||||||||||||||
| Programming | 9,978 | 10,106 | (128) | (1.3) | |||||||||||||||||||
| Technical and product support | 5,925 | 5,844 | 81 | 1.4 | |||||||||||||||||||
| Customer service | 1,836 | 1,877 | (41) | (2.2) | |||||||||||||||||||
| Advertising, marketing and promotion | 2,717 | 3,000 | (283) | (9.4) | |||||||||||||||||||
| Franchise and other regulatory fees | 1,225 | 1,189 | 36 | 3.0 | |||||||||||||||||||
| Other | 4,002 | 3,915 | 87 | 2.2 | |||||||||||||||||||
| Total operating costs and expenses | 25,683 | 25,931 | (248) | (1.0) | |||||||||||||||||||
Adjusted EBITDA | $ | ||||||||||||||||||||||