Comcast Corporation today reported results for the fourth quarter and the year ended December 31, 2003. Comcast will discuss fourth quarter and year-end 2003 results and its outlook for 2004 on a conference call and webcast today at 8:30 AM Eastern Time. A live broadcast of the conference call with accompanying slides will be available on the investor relations website at www.cmcsa.com or www.cmcsk.com. The Company outlined its 2004 financial outlook in a separate press release today.
Brian L. Roberts, president and CEO of Comcast Corporation said, "I am delighted to report that we achieved or exceeded all financial targets we set for ourselves in 2003 and delivered terrific results on all key integration goals. As a result, we are now uniquely positioned to deliver superior growth and value to our customers and shareholders in 2004 and beyond."
"In 2003, our cable Operating Cash Flow grew by $1.9 billion or 42% driven by significant operating efficiencies in the acquired cable systems, the continued strong performance of our historical cable systems and the benefits of our increased size."
"We added over 140,000 basic cable subscribers in 2003 compared to a pro forma loss in the prior year of over 415,000 -- a remarkable turnaround. The cable systems we acquired last year are now 93% upgraded. This is a dramatic improvement from 73% a year ago. The progress of our upgrade allowed us to extend the availability of Digital Cable and High-Speed Internet services during 2003. Demand for our new services remained strong during the year as we added more than 1 million new digital cable customers and nearly 1.7 million new high-speed Internet customers. We also met our goals for our Cable Phone service, substantially improving the operating margin for that product."
"Customer response to our Digital Cable and High-Speed Internet service enhancements has been extremely positive. Video-on-demand, high definition television and digital video recorders give our customers the ability to increasingly personalize their TV viewing experience. Similarly, enhancements to our High-Speed Internet service like doubling the downloading speed and an improved portal continue to differentiate our service in the marketplace."
Mr. Roberts continued, "Financially, we are better positioned today than I thought possible at the beginning of this year. In 2003, we reduced debt by $7 billion and have significant cash and non-strategic investments that provide added financial flexibility and strength."
"With the upgrade of our cable network and the increasing penetration of our new products, the stage is now set for accelerating growth in Free Cash Flow in 2004."
Cable results for the fourth quarter and the year ended December 31, 2003 are presented on a pro forma basis. Pro forma cable results adjust only for acquisitions and are presented as if the acquisition of AT&T Broadband completed in November 2002 was effective on January 1, 2002. Please refer to Table 7-A and B for reconciliation of historical and pro forma data.
Year ended December 31, 2003 Comcast Cable delivered solid results against increased guidance for 2003: 2003 Guidance Results Revenue growth high single digits 9.1% Operating Cash Flow $6.3 billion - $6.4 billion $6.35 billion Basic subscriber additions 125,000 to 150,000 140,600 Digital subscriber additions 950,000 to 1 million 1.033 million High-speed Internet subscriber additions 1.7 million 1.664 million Cable phone subscriber additions (175,000) (171,500)
For the year 2003, Comcast's cable operations generated revenue of $17.491 billion, a 9.1% pro forma increase from 2002. Pro forma video revenue increased 5.5% to $12.096 billion for the year 2003 compared with the prior year driven by additions in the number of basic subscribers of more than 140,000, increases in average monthly revenue per basic subscriber and growth in digital cable subscribers. High-Speed Internet service revenue for 2003 increased 51.7% over the prior year to reach $2.255 billion, reflecting a 45.9% increase in the customer base and average monthly revenue per subscriber of $42.44 for the year. Pro forma Cable Phone revenue declined 2.2% from 2002 to $801 million, reflecting a decrease in both subscribers and average monthly revenue per subscriber as a result of the Company's reduced marketing efforts and focus on profitability of the cable phone business. Pro forma advertising revenue increased 7.4% over the prior year to $1.112 billion, reflecting 19.3% growth in regional/national advertising as a result of the continuing success of Comcast Cable's regional interconnects, and growth of 1.8% in a soft local advertising market. Total pro forma revenue in Comcast's historical systems increased 11.3% during 2003 and 7.7% in the acquired cable systems. Growth in the historical markets was driven by wider availability of advanced products, such as Digital Cable and Comcast High-Speed Internet services.
Pro forma operating income before depreciation and amortization (Operating Cash Flow or OCF) for the year 2003 increased 42.1% to $6.350 billion from $4.469 billion in 2002. Operating Cash Flow increased due to solid revenue growth and dramatically improving OCF margins driven by cost reductions related to overhead, a slower rate of growth in the cost of programming and increases in the number of basic, high-speed Internet and digital cable subscribers. Further contributing to the improvement in operating margins was the reduction in costs in the cable phone business. Reflecting the Operating Cash Flow improvement, OCF margins at the acquired cable systems grew from 19.5% for the year 2002 to 32.3% for 2003. Operating Cash Flow margin at Comcast's historical cable systems continue to show solid improvement ending the year at 42.5% compared to 41.3% in 2002. Pro forma results include an estimated $15 to $20 million of acquisition related costs incurred by Comcast in connection with the AT&T Broadband acquisition, and $425 million of acquisition and other costs incurred by AT&T Broadband prior to the closing of the AT&T Broadband acquisition in November 2002. Cable operating income increased to $2.127 billion for 2003 compared to a pro forma operating loss of $16.468 billion for 2002. The pro forma operating loss in 2002 includes $16.525 billion of goodwill and franchise impairment charges recognized by AT&T prior to the acquisition of AT&T Broadband by Comcast.
In 2003, Comcast Cable added over 140,000 basic cable subscribers, a significant improvement over the pro forma loss of more than 415,000 subscribers in 2002. This increase reflects gains in the acquired cable systems of over 117,000 for the year, a turnaround from the loss of over 483,000 subscribers in 2002.
Comcast Cable added 1.664 million high-speed Internet subscribers in 2003, a pro forma increase in net additions of 38.7% over the same period last year. Comcast finished the year with nearly 5.3 million subscribers, representing a penetration rate of 15.2%. More than 87% of the homes in Comcast's footprint, or over 34.7 million homes, now have access to High-Speed Internet service.
Comcast Cable added 1.033 million digital cable customers in 2003 to end the year at nearly 7.7 million customers, a 15.6% increase over the year-ago period, representing a penetration rate of nearly 36%. Comcast Cable continues to focus on expanding the availability of new features and functions for its Digital Cable service. Video-on-demand (VOD) service which is now available to 50% of Comcast's cable subscribers has had a significant impact on how customers view television. In the Philadelphia market, where VOD was first launched over a year-ago, 50% of customers use VOD on average 15 times every month, triple last year's rate with nearly double the usage. VOD availability is expected to increase to over 80% of basic subscribers by the end of 2004. Comcast Cable's high definition television (HDTV) deployment is ahead of schedule with availability to over 84% of basic subscribers, surpassing the year-end goal of 75%. HDTV is expected to be available to at least 90% of basic subscribers by the end of 2004. Today, Digital Video Recorder (DVR) service is available to 10% of basic subscribers. By year-end 2004, 100% of the Company's subscribers will have the ability to obtain DVR service.
Comcast Cable capital expenditures totaled $4.1 billion as Comcast Cable completed the upgrade of over 53,000 miles of cable plant to end the year with nearly 95% of its footprint upgraded to provide two-way services. The acquired systems are now 93% upgraded, up from 73% at December 31, 2002. The upgrade is well ahead of schedule and is expected to be completed during 2004.
Comcast outlined its 2004 financial guidance in a separate press release today.
Quarter ended December 31, 2003
Comcast Cable revenue for the fourth quarter of 2003 was $4.507 billion, representing an 8.6% increase over the $4.149 billion in the fourth quarter of 2002. Revenue growth was driven by a 6.1% increase in video revenue as both the number of digital subscribers and average monthly revenue per subscriber increased. Comcast Cable added 70,000 basic cable subscribers and over 383,000 digital cable subscribers during the quarter. Comcast High-Speed Internet service revenue increased 44.8% over the prior year quarter driven by a nearly 46% increase in the number of High-Speed Internet subscribers.
Comcast Cable reported Operating Cash Flow of $1.712 billion for the quarter, a pro forma increase of 63.3% over the same period of 2002. Comcast Cable Operating Cash Flow margin reached 38.0% this quarter, up significantly from the pro forma margin of 25.3% in the fourth quarter of 2002. The OCF margin for the acquired cable systems reached 34.9% in the current quarter up from 15.8% in the fourth quarter of 2002. Operating Cash Flow margin at the historical cable systems was 42.7% during the fourth quarter of 2003 up from 40.3% a year ago. Pro forma results include an estimated $7 to $10 million of acquisition related costs incurred by Comcast in connection with the AT&T Broadband acquisition, and $130 million of acquisition and other costs incurred by AT&T Broadband prior to the closing of the AT&T Broadband acquisition in November 2002. Cable operating income was $788 million in the fourth quarter compared to pro forma operating loss of $143 million in the fourth quarter of 2002.
Comcast's content businesses include Comcast-Spectacor and national cable networks E! Entertainment Television, Style Network, The Golf Channel, Outdoor Life Network and G4.
Comcast's content businesses delivered outstanding results in 2003 compared to guidance for the year which excluded the results of Outdoor Life and G4.
2003 Guidance Results Revenue growth high single digit growth 12.7% OCF growth mid to high teens growth 25.9%
In 2003, revenue for Comcast's content businesses, including all national cable networks and Comcast-Spectacor, increased 15.4% over 2002 to $885 million. Operating Cash Flow grew 18.0% during 2003 to $227 million due to increases in distribution and advertising revenues at each of the cable networks offset in part by continued funding for expansion of Outdoor Life and G4.
In the fourth quarter of 2003, Comcast's content businesses reported revenue of $250 million and Operating Cash Flow of $58 million representing increases quarter over quarter of 13.4% and 23.1%, respectively.
Corporate and Other
Comcast's Corporate and Other category primarily includes corporate overhead and eliminations between Comcast's businesses. Comcast reported in the Corporate and Other category an Operating Cash Flow loss of $185 million and $50 million, respectively, for the year and quarter ended December 31, 2003.
The Company's consolidated results include all acquisitions as of the date of their closing. The Company acquired AT&T Broadband in November 2002 adding over 13 million cable subscribers to Comcast's customer base. Comcast sold its 57% ownership interest in QVC in September 2003. QVC's results, prior to its sale, are presented as discontinued operations for all periods presented.
For the year ended December 31, 2003, the Company reported consolidated revenues of $18.348 billion, as compared to $8.102 billion reported in 2002. Consolidated Operating Cash Flow increased to $6.392 billion in 2003 from the $2.836 billion reported in the prior year. Increases in revenue, Operating Cash Flow, depreciation and amortization and interest expense primarily reflect the acquisition of AT&T Broadband in November 2002. For the year ended December 31, 2003, the Company reported operating income of $1.954 billion compared to an operating income of $921 million in 2002.
The Company reported a consolidated net loss from continuing operations for 2003 of $218 million or $0.10 per share as compared to net loss from continuing operations of $469 million or $0.42 per share in 2002. Contributing to the reduction in the net loss from continuing operations in 2003 was the impact of the acquisition of AT&T Broadband and lower investment losses. Comcast reported investment losses for 2003 of $84 million notably lower than the $543 million of losses in the prior year, due to improving market conditions in 2003 for its investment portfolio. Please refer to Tables 7-A, B and C of this release for a reconciliation of historical and pro forma data and for details regarding non-operating items. For the year ended December 31, 2003, the Company reported net income of $3.240 billion or $1.44 per share, due primarily to the gain on the sale of its 57% ownership interest in QVC.
Balance Sheet and Liquidity
During 2003, Comcast made significant progress strengthening its balance sheet and liquidity position. At December 31, 2003, Comcast reported total debt of $27.0 billion, including $4.3 billion of exchangeable notes collateralized by equity securities that the Company owns, resulting in debt excluding exchangeables of $22.7 billion at December 31, 2003. The Company repaid $7.1 billion of debt during 2003 primarily through the proceeds from the restructuring of Time Warner Entertainment and the sale of QVC. Comcast retains significant financial flexibility at year-end with cash of nearly $1.6 billion and non-strategic investments including $1.5 billion in Time Warner stock, $1.5 billion in Liberty Media stock, a 21% interest in Time Warner Cable and interests in several cable joint ventures.
This press release contains forward-looking statements. Readers are cautioned that such forward-looking statements involve risks and uncertainties that could significantly affect actual results from those expressed in any such forward-looking statements. Readers are directed to Comcast's Annual Report on Form 10-K for a description of such risks and uncertainties.
Comcast Corporation will host a conference call with the financial community today February 11, 2004 at 8:30 a.m. Eastern Time (ET). The conference call will be broadcast live on the Company's Investor Relations website at www.cmcsa.com or www.cmcsk.com. A recording of the call will be available on the Investor Relations websites starting at 12:30 p.m. ET on February 11, 2004.
Those parties interested in participating via telephone should dial (847) 413-3156. A telephone replay will begin immediately following the call until February 12, 2004 at midnight ET. To access the rebroadcast, please dial (630) 652-3000 and enter passcode number 8239543.
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About Comcast Corporation
Comcast Corporation (Nasdaq: CMCSA, CMCSK) (www.comcast.com) is principally involved in the development, management and operation of broadband cable networks and in the provision of programming content. The Company is the largest cable company in the United States, serving more than 21 million cable subscribers. The Company's content businesses include majority ownership of Comcast Spectacor, Comcast SportsNet, E! Entertainment Television, Style Network, The Golf Channel, Outdoor Life Network and G4. Comcast Class A common stock and Class A Special common stock trade on The NASDAQ Stock Market under the symbols CMCSA and CMCSK, respectively.