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COMCAST CORP - 10-Q - : MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
[April 22, 2014]

COMCAST CORP - 10-Q - : MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS


(Edgar Glimpses Via Acquire Media NewsEdge) Overview We are a global media and technology company with two primary businesses, Comcast Cable and NBCUniversal. We present our operations for Comcast Cable in one reportable business segment, referred to as Cable Communications, and our operations for NBCUniversal in four reportable business segments.



Cable Communications Segment Comcast Cable is the nation's largest provider of video, high-speed Internet and voice services ("cable services") to residential customers under the XFINITY brand, and we also provide similar and other services to small and medium-sized businesses. As of March 31, 2014, our cable systems served 22.6 million video customers, 21.1 million high-speed Internet customers and 10.9 million voice customers and passed more than 54 million homes and businesses. Our Cable Communications segment generates revenue primarily from subscriptions to our cable services, which we market individually and in packages, and from the sale of advertising. During the three months ended March 31, 2014, our Cable Communications segment generated 62% of our consolidated revenue and 79% of our operating income before depreciation and amortization.

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. The Cable Networks, Broadcast Television, Filmed Entertainment and Theme Parks segments comprise the NBCUniversal businesses and are collectively referred to as the "NBCUniversal segments." Cable Networks Our Cable Networks segment consists primarily of a diversified portfolio of cable television networks. Our cable networks are comprised of our national cable networks, which provide a variety of entertainment, news and information, and sports content, our regional sports networks, various international cable networks, and our cable television production operations. Our Cable Networks segment generates revenue primarily from the distribution of our cable network programming to multichannel video providers, the sale of advertising on our cable networks and related digital media properties, and the licensing of our owned programming.


Broadcast Television Our Broadcast Television segment consists primarily of the NBC and Telemundo broadcast networks, our NBC and Telemundo owned local broadcast television stations, and our broadcast television production operations. Our Broadcast Television segment generates revenue primarily from the sale of advertising on our broadcast networks, owned local broadcast television stations and related digital media properties, the licensing of our owned programming, and fees received under retransmission consent agreements.

Filmed Entertainment Our Filmed Entertainment segment primarily produces, acquires, markets and distributes filmed entertainment worldwide. We also develop, produce and license live stage plays. Our Filmed Entertainment segment generates revenue primarily from the worldwide distribution of our owned and acquired films for exhibition in movie theaters, the licensing of our owned and acquired films through various distribution platforms, and the sale of our owned and acquired films on standard-definition video discs and Blu-ray discs (together, "DVDs") and through digital distributors. Our Filmed Entertainment segment also generates revenue from producing and licensing live stage plays, from distributing filmed entertainment produced by third parties, and from various digital media properties.

Theme Parks Our Theme Parks segment consists primarily of our Universal theme parks in Orlando and Hollywood. Our Theme Parks segment generates revenue primarily from theme park attendance and per capita spending. Per 23-------------------------------------------------------------------------------- Table of Contents capita spending includes ticket price and in-park spending on food, beverages and merchandise. We also receive fees from third parties that own and operate Universal Studios Japan and Universal Studios Singapore for intellectual property licenses and other services.

Other Our other business interests primarily include Comcast-Spectacor, which owns the Philadelphia Flyers and the Wells Fargo Center arena in Philadelphia and operates arena management-related businesses.

Time Warner Cable Transaction On February 12, 2014, we entered into an agreement and plan of merger with Time Warner Cable Inc. ("Time Warner Cable"). As a result of this agreement, we will acquire 100% of Time Warner Cable's outstanding shares of common stock in exchange for shares of our Class A common stock. Time Warner Cable stockholders will receive, in exchange for each share of Time Warner Cable common stock owned immediately prior to the transaction, 2.875 shares of our Class A common stock.

Time Warner Cable stockholders will then own approximately 23% of our common stock, estimated based on the number of shares outstanding as of the date of the agreement. Because the exchange ratio was fixed at the time of the merger agreement and the market value of our Class A common stock will continue to fluctuate, the number of shares of Class A common stock to be issued and the total value of the consideration exchanged will not be determinable until the closing date. Following the close of the transaction, Time Warner Cable will be our wholly owned subsidiary. The transaction remains subject to shareholder approval at both companies, regulatory review and other customary conditions and is expected to close by the end of 2014.

Competition The results of operations of our reportable business segments are affected by competition, as all of our businesses operate in 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. Additionally, there continue to be new companies with significant financial resources that potentially may compete on a larger scale with our cable services, as well as with our cable and broadcast networks and filmed entertainment businesses.

Competition for the cable services we offer consists primarily of direct broadcast satellite ("DBS") providers, which have a national footprint and compete in all our service areas, and phone companies, which overlap approximately 45% of our service areas and are continuing to expand their fiber-based networks. We also compete with other providers of traditional cable services. All of these companies typically offer features, pricing and packaging for services comparable to our cable services.

Each of NBCUniversal's businesses also faces substantial and increasing competition from providers of similar types of content, as well as from other forms of entertainment and recreational activities. NBCUniversal also must compete to obtain talent, programming and other resources required in operating these businesses.

Technological changes are further intensifying and complicating the competitive landscape for all of our businesses by challenging existing business models and affecting consumer behavior. Newer services and devices that enable online digital distribution of movies, television shows, and other cable and broadcast video programming continue to gain consumer acceptance and evolve, including some services that charge a nominal or no fee for such programming. These services and devices may potentially negatively affect demand for our video services, as well as demand for our cable network, broadcast television and filmed entertainment content, as the number of entertainment choices available to consumers increases and as video programming is more reliably delivered over the Internet and more easily viewed via the Internet on televisions. Wireless services and devices also continues to evolve allowing consumers to access information, entertainment and communication services, which could negatively impact demand for our cable services, including for our voice services as people substitute mobile phones for landline phones. In addition, delayed viewing and advertising skipping have become more common as the penetration of digital video recorders ("DVRs") and similar products has increased and as content has become increasingly available via video-on-demand services and Internet sources, which may have a negative impact on our advertising revenue.

24-------------------------------------------------------------------------------- Table of Contents In our Cable Communications segment, we believe that adding more content and delivering it on an increasing variety of platforms will assist in attracting and retaining customers for our cable services. We are also developing and launching new technology initiatives, such as our X1 platform, and deploying new wireless gateway devices, to further enhance our video and high-speed Internet services. In our NBCUniversal segments, to compete for consumers of our content and for customers at our theme parks, we have invested, and will continue to invest, substantial amounts in acquiring content and producing original content for our cable networks and broadcast television networks, including the acquisition of sports rights, and will continue to invest in our film productions and in the development of new theme park attractions.

Seasonality and Cyclicality Each of our businesses is subject to seasonal and cyclical variations. In our Cable Communications segment, our results are impacted by the seasonal nature of customers receiving our cable services in college and vacation markets. This generally results in a reduction in net customer additions in the second calendar quarter and increased net customer additions in the third and fourth quarters of each year.

Revenue in our Cable Communications, Cable Networks and Broadcast Television segments is subject to cyclicality, with a benefit in even-numbered years from advertising related to candidates running for political office and issue-oriented advertising. Our Cable Networks and Broadcast Television segments revenue and operating costs and expenses are also cyclical as a result of our periodic broadcasts of the Olympic Games and the Super Bowl. Our advertising revenue generally increases in the period of these broadcasts from increased demand for advertising time, and our operating costs and expenses also increase as a result of our production costs and the amortization of the related rights fees.

Revenue in our Filmed Entertainment segment fluctuates due to the timing of the release of films in movie theaters and the release of our films on DVD and through digital distributors. 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 holidays. Revenue in our Cable Networks and Broadcast Television segments fluctuates depending on the timing of when our programming is aired on television, which typically results in higher advertising revenue in the second and fourth calendar quarter of each year.

Revenue in our Cable Networks, Broadcast Television and Filmed Entertainment segments also fluctuates due to the timing of when our owned content is made available to licensees.

Revenue in our Theme Parks segment fluctuates with changes in theme park attendance that result from the seasonal nature of vacation travel, local entertainment offerings and seasonal weather variations. Our theme parks generally experience peak attendance during the summer months when schools are closed and during early winter and spring holiday periods.

25-------------------------------------------------------------------------------- Table of Contents Consolidated Operating Results Three Months Ended Increase/ March 31 (Decrease) (in millions) 2014 2013 Revenue $ 17,408 $ 15,310 13.7 % Costs and Expenses: Programming and production 5,908 4,663 26.7 Other operating and administrative 4,752 4,466 6.4 Advertising, marketing and promotion 1,210 1,147 5.5 Depreciation 1,569 1,566 0.2 Amortization 401 401 (0.2 ) Operating income 3,568 3,067 16.3 Other income (expense) items, net (512 ) (497 ) 3.1 Income before income taxes 3,056 2,570 18.9 Income tax expense (1,118 ) (925 ) 20.8 Net income 1,938 1,645 17.8 Net (income) loss attributable to noncontrolling interests and redeemable subsidiary preferred stock (67 ) (208 ) (67.9 ) Net income attributable to Comcast Corporation $ 1,871 $ 1,437 30.2 % 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.

Consolidated Revenue All of our reportable business segments accounted for the increase in consolidated revenue for the three months ended March 31, 2014. The increase in revenue in our Cable Networks and Broadcast Television segments was primarily due to improved performance and our broadcast of the 2014 Sochi Olympics.

Excluding $1.1 billion of revenue associated with the broadcast of the 2014 Sochi Olympics, consolidated revenue increased 6.5% for the three months ended March 31, 2014. Revenue for our Cable Communications and NBCUniversal segments is discussed separately below under the heading "Segment Operating Results." Consolidated Costs and Expenses Our Cable Communications, Cable Networks, Broadcast Television and Theme Parks segments accounted for substantially all of the increase in consolidated costs and expenses, excluding depreciation and amortization ("operating costs and expenses") for the three months ended March 31, 2014. Operating costs and expenses for our Cable Communications and NBCUniversal segments are discussed separately below under the heading "Segment Operating Results." Consolidated depreciation and amortization remained flat for the three months ended March 31, 2014 compared to the same period in 2013.

Segment Operating Results Our segment operating results are presented based on how we assess operating performance and internally report financial information. We use operating income (loss) before depreciation and amortization, excluding impairment charges related to fixed and intangible assets and gains or losses on the sale of assets, if any, as the measure of profit or loss for our operating segments.

This measure eliminates the significant level of noncash depreciation and amortization expense that results from the capital-intensive nature of certain of our businesses and from intangible assets recognized in business combinations. Additionally, it is unaffected by our capital structure or investment activities. We use this measure to evaluate our consolidated operating performance and the operating performance of our operating segments and to allocate resources and capital to our operating segments. It is also a significant performance measure in our annual incentive compensation programs.

We believe that this measure is useful to investors because it is one of the bases for comparing our operating performance with that of other companies in our industries, although our measure may not be directly 26-------------------------------------------------------------------------------- Table of Contents comparable to similar measures used by other companies. Because we use operating income (loss) before depreciation and amortization to measure our segment profit or loss, we reconcile it to operating income, the most directly comparable financial measure calculated and presented in accordance with GAAP, in the business segment footnote to our condensed consolidated financial statements (see Note 11 to Comcast's condensed consolidated financial statements and Note 9 to NBCUniversal's condensed consolidated financial statements). This measure should not be considered a substitute for operating income (loss), net income (loss) attributable to Comcast Corporation or NBCUniversal, net cash provided by operating activities or other measures of performance or liquidity we have reported in accordance with GAAP.

Beginning in 2014, Fandango, our movie ticketing and entertainment business that was previously presented in our Cable Networks segment, is now presented in the Filmed Entertainment segment to reflect the change in our management reporting presentation. Due to immateriality, prior period amounts have not been adjusted.

Cable Communications Segment Results of Operations Three Months Ended Increase/ March 31 (Decrease) (in millions) 2014 2013 $ % Revenue Residential: Video $ 5,178 $ 5,113 $ 65 1.3 % High-speed Internet 2,750 2,523 227 9.0 Voice 920 900 20 2.1 Business services 917 741 176 23.9 Advertising 519 488 31 6.2 Other 473 452 21 4.8 Total revenue 10,757 10,217 540 5.3 Operating costs and expenses Programming 2,452 2,253 199 8.8 Technical and product support 1,377 1,320 57 4.3 Customer service 548 521 27 5.2 Franchise and other regulatory fees 321 308 13 4.2 Advertising, marketing and promotion 704 669 35 5.2 Other 955 927 28 3.1 Total operating costs and expenses 6,357 5,998 359 6.0 Operating income before depreciation and amortization $ 4,400 $ 4,219 $ 181 4.3 % Beginning in 2014, our Cable Communications segment revised its methodology for counting customers related to how we count and report customers who reside in multiple dwelling units ("MDUs") that are billed under bulk contracts (the "billable customers method"). For MDUs whose residents have the ability to receive additional cable services, such as additional programming choices or our high-definition ("HD") or DVR services, we now count and report customers based on the number of potential billable relationships within each MDU. For MDUs whose residents are not able to receive additional cable services, the MDU is now counted as a single customer. Previously, we had counted and reported these customers on an equivalent billing unit basis by dividing monthly revenue received under an MDU's bulk contract by the standard monthly residential rate where the MDU was located (the "EBU method"). We believe the billable customers method is consistent with the methodology used by other companies in our industry, including Time Warner Cable, to count and report customers.

27-------------------------------------------------------------------------------- Table of Contents The tables below present customer metrics using the billable customers method.

Because the differences in the number of customers using the billable customers method and the EBU method for high-speed Internet and voice customers were not material, high-speed Internet and voice customers metrics as of and for the three months ended March 31, 2013 are presented using the EBU method.

Customer Metrics-Billable Customers Method Total Customers Net Additional Customers March 31 March 31 Three Months Ended (in thousands) 2014 2013 March 31, 2014 March 31, 2013 Video customers 22,601 22,819 24 (25 ) High-speed Internet customers 21,068 19,799 383 433 Voice customers 10,865 10,166 142 211 Total customer relationships 26,800 26,596 124 Single product customers 8,605 9,206 (147 ) Double product customers 8,656 8,568 116 Triple product customers 9,539 8,821 155 Customer data includes residential and business customers. Customer relationships represent the number of residential and business customers that subscribe to at least one of our cable services and are presented based on actual amounts. Single product, double product and triple product customers represent customers that subscribe to one, two or three of our cable services, respectively.

Cable Communications Segment-Revenue Our Cable Communications segment leverages our existing cable distribution system to grow revenue by, among other things, adding new customers, encouraging existing customers to add additional or higher-tier services, and growing other services such as our business services offerings and our home security and automation services. We offer our cable services in bundles and often provide promotional incentives. We seek to balance promotional offers and rate increases with their expected effects on the number of customers and overall revenue.

Video Video revenue increased 1.3% for the three months ended March 31, 2014 compared to the same period in 2013. An increase in the number of customers receiving additional and higher levels of video service and rate adjustments accounted for an increase in revenue of 2.8%. As of March 31, 2014, the number of customers who subscribed to our advanced services, which are HD and DVR services, increased 4.6% to 12.6 million customers compared to the same period in 2013.

The increase in revenue was partially offset by fewer residential video customers compared to the prior year period. These decreases were primarily due to competitive pressures in our service areas from phone and satellite competitors and the impact of rate adjustments. We may experience further declines in the number of residential video customers.

High-Speed Internet High-speed Internet revenue increased 9.0% for the three months ended March 31, 2014 compared to the same period in 2013. An increase in the number of residential customers receiving our high-speed Internet service accounted for an increase in revenue of 6.0%. The remaining increase in revenue for the three months ended March 31, 2014 was primarily due to higher rates from customers receiving higher levels of service and rate adjustments. Our customer base continues to grow as consumers choose our high-speed Internet service and seek higher-speed offerings.

Voice Voice revenue increased 2.1% for the three months ended March 31, 2014 compared to the same period in 2013. An increase in the number of residential customers receiving our services through our discounted bundled offerings accounted for an increase in revenue of 6.4% for the three months ended March 31, 2014. This increase was partially offset by the impact of the allocation of voice revenue for our bundled customers because revenue attributable to voice services represents a lower proportion of the bundled rate. The amounts allocated to voice revenue in the bundled rate have decreased because video and high-speed Internet rates have increased, while voice rates have remained relatively flat.

28 -------------------------------------------------------------------------------- Table of Contents Business Services Business services revenue increased 23.9% for the three months ended March 31, 2014 compared to the same period in 2013. The increase was primarily due to a higher number of business customers receiving our cable services. The remaining increase was primarily due to continued growth in the number of medium-sized business customers, including those receiving our Ethernet network and cellular backhaul services. During the three months ended March 31, 2014, our medium- sized business customers represented 22% of total business services revenue. We believe the increase in business customers is primarily the result of our efforts to gain market share from competitors by offering competitive services and pricing.

Advertising Advertising revenue increased 6.2% for the three months ended March 31, 2014 compared to the same period in 2013 primarily due to an increase in political advertising revenue, as well as an increase in revenue primarily in our core national and local advertising markets.

Other Other revenue increased 4.8% for the three months ended March 31, 2014 compared to the same period in 2013 primarily due to increases in franchise and other regulatory fees and in revenue from other services, including our home security and automation services.

Cable Communications Segment-Operating Costs and Expenses Our most significant operating cost is the programming expense we incur to provide content to our video customers. We anticipate that our programming expenses will continue to increase. We have and will continue to attempt to offset increases in programming expenses through rate increases, the sale of additional video and other services, and through operating efficiencies.

Programming costs increased for the three months ended March 31, 2014 compared to the same period in 2013 primarily due to increases in programming license fees, including retransmission consent fees and sports programming costs, and fees to secure rights for additional programming for our customers across an increasing number of platforms.

Technical and product support expenses increased for the three months ended March 31, 2014 compared to the same period in 2013 primarily due to expenses related to customer fulfillment activities, expenses related to the development, delivery and support of our products and services, continued growth in our products, and weather related expenses.

Customer service expenses increased for the three months ended March 31, 2014 compared to the same period in 2013 primarily due to increases in total labor costs associated with increases in customer service activity. The increases in customer service activity were primarily due to increases in the number of customers as well as sales and related support activity associated with the continued deployment of enhanced services and devices, including our X1 platform and wireless gateways, and continued growth in business services.

Franchise and other regulatory fees increased for the three months ended March 31, 2014 compared to the same period in 2013 primarily due to increases in residential and business services revenue.

Advertising, marketing and promotion expenses increased for the three months ended March 31, 2014 compared to the same period in 2013 primarily due to increases in spending associated with attracting new residential and business services customers and encouraging existing customers to add additional or higher-tier services.

Other costs and expenses increased for the three months ended March 31, 2014 compared to the same period in 2013 primarily due to increases in other administrative costs and costs related to advertising sales activities.

29-------------------------------------------------------------------------------- Table of Contents NBCUniversal Segments Results of Operations Three Months Ended Increase/ March 31 (Decrease) (in millions) 2014 2013 $ % Revenue Cable Networks $ 2,505 $ 2,225 $ 280 12.6 % Broadcast Television 2,621 1,517 1,104 72.8 Filmed Entertainment 1,351 1,216 135 11.1 Theme Parks 487 462 25 5.4 Headquarters, other and eliminations (88 ) (80 ) (8 ) NM Total revenue $ 6,876 $ 5,340 $ 1,536 28.8 % Operating Income (Loss) Before Depreciation and Amortization Cable Networks $ 895 $ 859 $ 36 4.2 % Broadcast Television 122 (35 ) 157 NM Filmed Entertainment 288 69 219 319.1 Theme Parks 170 173 (3 ) (1.5 ) Headquarters, other and eliminations (164 ) (113 ) (51 ) (46.1 ) Total operating income (loss) before depreciation and amortization $ 1,311 $ 953 $ 358 37.6 % Cable Networks Segment Results of Operations Three Months Ended Increase/ March 31 (Decrease) (in millions) 2014 2013 $ % Revenue Distribution $ 1,473 $ 1,241 $ 232 18.6 % Advertising 896 828 68 8.2 Content licensing and other 136 156 (20 ) (12.3 ) Total revenue 2,505 2,225 280 12.6 Operating costs and expenses Programming and production 1,187 908 279 30.7 Other operating and administrative 303 338 (35 ) (10.3 ) Advertising, marketing and promotion 120 120 - 0.2 Total operating costs and expenses 1,610 1,366 244 17.9 Operating income before depreciation and amortization $ 895 $ 859 $ 36 4.2 % Cable Networks Segment-Revenue Cable Networks revenue increased for the three months ended March 31, 2014 compared to the same period in 2013 due to increases in distribution revenue and advertising revenue. The increase in distribution revenue was primarily due to the 2014 Sochi Olympics and increases in the contractual rates charged under distribution agreements. Advertising revenue increased for the three months ended March 31, 2014 compared to the same period in 2013 primarily due to higher advertising revenue associated with the 2014 Sochi Olympics. Advertising revenue was also affected by higher prices and an increase in the volume of advertising units sold, offset by continuing declines in audience ratings at some of our networks. Excluding $257 million of revenue associated with the 2014 Sochi Olympics, Cable Networks segment revenue increased 1.0%.

For the three months ended March 31, 2014 and 2013, 12% and 14%, respectively, of the revenue from our Cable Networks segment was generated from our Cable Communications segment. These amounts are eliminated in our condensed consolidated financial statements but are included in the amounts presented above.

Cable Networks Segment-Operating Costs and Expenses Operating costs and expenses increased for the three months ended March 31, 2014 compared to the same period in 2013 primarily due to an increase in programming and production costs, which was partially offset by a decrease in other operating and administrative expenses. The increase in programming and production costs was 30 -------------------------------------------------------------------------------- Table of Contents primarily due to the 2014 Sochi Olympics and other sports programming rights costs, and our continued investment in original programming at certain of our cable networks. The decrease in other operating and administrative costs was primarily due to a decrease in employee-related costs and the absence of Fandango in the current year period.

Broadcast Television Segment Results of Operations Three Months Ended Increase/ March 31 (Decrease) (in millions) 2014 2013 $ % Revenue Advertising $ 1,833 $ 952 $ 881 92.5 % Content licensing 496 397 99 24.7 Other 292 168 124 74.5 Total revenue 2,621 1,517 1,104 72.8 Operating costs and expenses Programming and production 2,028 1,160 868 74.9 Other operating and administrative 323 292 31 10.4 Advertising, marketing and promotion 148 100 48 47.4 Total operating costs and expenses 2,499 1,552 947 61.0 Operating income (loss) before depreciation and amortization $ 122 $ (35 ) $ 157 NM Broadcast Television Segment-Revenue Broadcast Television revenue increased for the three months ended March 31, 2014 compared to the same period in 2013 primarily due to an increase in advertising revenue associated with our broadcast of the 2014 Sochi Olympics in the current year period, as well as increases in content licensing and other revenue.

Excluding $846 million of revenue associated with the 2014 Sochi Olympics, Broadcast Television revenue increased 17% primarily due to higher advertising revenue related to an increase in audience ratings. The increase in content licensing revenue was primarily due to the timing of a licensing agreement related to certain of our programming. The increase in other revenue was primarily due to fees recognized under our retransmission consent agreements and other revenue associated with the 2014 Sochi Olympics.

Broadcast Television Segment-Operating Costs and Expenses Operating costs and expenses increased for the three months ended March 31, 2014 compared to the same period in 2013 due to higher programming and production costs associated with our broadcast of the 2014 Sochi Olympics in the current year period.

Filmed Entertainment Segment Results of Operations Three Months Ended Increase/ March 31 (Decrease) (in millions) 2014 2013 $ % Revenue Theatrical $ 376 $ 313 $ 63 20.0 % Content licensing 465 438 27 6.1 Home entertainment 351 371 (20 ) (5.4 ) Other 159 94 65 70.3 Total revenue 1,351 1,216 135 11.1 Operating costs and expenses Programming and production 604 698 (94 ) (13.4 ) Other operating and administrative 188 168 20 11.9 Advertising, marketing and promotion 271 281 (10 ) (3.8 ) Total operating costs and expenses 1,063 1,147 (84 ) (7.3 ) Operating income before depreciation and amortization $ 288 $ 69 $ 219 319.1 % 31 -------------------------------------------------------------------------------- Table of Contents Filmed Entertainment Segment-Revenue Filmed Entertainment revenue increased for the three months ended March 31, 2014 compared to the same period in 2013 primarily due to increases in theatrical, other and content licensing revenue, which were partially offset by a decrease in home entertainment revenue. The increase in theatrical revenue was primarily due to the performance of our current period releases, including Ride Along and Lone Survivor and the international performance of The Wolf of Wall Street. The increase in other revenue was primarily due to the inclusion, in 2014, of Fandango, which was previously presented in our Cable Networks segment. The increase in content licensing revenue was primarily due to the timing of licensing agreements related to our film library.

Filmed Entertainment Segment-Operating Costs and Expenses Operating costs and expenses decreased for the three months ended March 31, 2014 compared to the same period in 2013 primarily due to a decrease in the amortization of film costs. Operating costs and expenses for the three months ended March 31, 2013 included $66 million of expense associated with fair value adjustments to capitalized film production costs, which did not occur in the current year period.

Theme Parks Segment Results of Operations Three Months Ended Increase/ March 31 (Decrease) (in millions) 2014 2013 $ % Revenue $ 487 $ 462 $ 25 5.4 % Operating costs and expenses 317 289 28 9.5 Operating income before depreciation and amortization $ 170 $ 173 $ (3 ) (1.5 )% Theme Parks Segment-Revenue Theme Parks revenue increased for the three months ended March 31, 2014 compared to the same period in 2013 primarily due to an increase in per capita spending at our Hollywood and Orlando theme parks. Guest attendance at our Orlando and Hollywood theme parks has remained stable despite the effect of a shift in the timing of holidays from the first quarter of 2013 to the second quarter of 2014.

Theme Parks Segment-Operating Costs and Expenses Theme Parks segment operating costs and expenses increased for the three months ended March 31, 2014 compared to the same period in 2013 primarily due to costs at our Orlando and Hollywood theme parks associated with additional attractions and an increase in per capita spending.

NBCUniversal Headquarters, Other and Eliminations The change in operating income (loss) before depreciation and amortization for headquarters, other and eliminations for the three months ended March 31, 2014 compared to the same period in 2013 was primarily due to higher employee-related costs, including severance costs.

Corporate and Other Results of Operations Three Months Ended Increase/ March 31 (Decrease) (in millions) 2014 2013 $ % Revenue $ 174 $ 162 $ 12 7.6 % Operating costs and expenses 327 245 82 33.1 Operating income (loss) before depreciation and amortization $ (153 ) $ (83 ) $ (70 ) 82.5 % Corporate and Other-Revenue Other revenue primarily relates to Comcast-Spectacor, which owns the Philadelphia Flyers and the Wells Fargo Center arena in Philadelphia and operates arena management-related businesses.

Other revenue increased for the three months ended March 31, 2014 compared to the same period in 2013 primarily due to an increase in revenue associated with Leisure Arts, a subsidiary acquired in October 2013, as well as an increase in ticketing revenue associated with our Comcast-Spectacor business.

32-------------------------------------------------------------------------------- Table of Contents Corporate and Other-Operating Costs and Expenses Corporate and Other operating costs and expenses primarily include overhead, personnel costs, the cost of corporate initiatives and branding, and operating costs and expenses associated with Comcast-Spectacor.

Corporate and Other operating costs and expenses increased for the three months ended March 31, 2014 compared to the same period in 2013 primarily due to company-wide branding initiatives, including those initiatives associated with the 2014 Sochi Olympics, $17 million of transaction-related costs recorded during the three months ended March 31, 2014 associated with the Time Warner Cable transaction, and an increase in labor costs in our Comcast-Spectacor business.

Consolidated Other Income (Expense) Items, Net Three Months Ended March 31 (in millions) 2014 2013 Interest expense $ (642 ) $ (653 ) Investment income (loss), net 113 72 Equity in net income (losses) of investees, net 32 11 Other income (expense), net (15 ) 73 Total $ (512 ) $ (497 ) Investment Income (Loss), Net The components of investment income (loss), net for the three months ended March 31, 2014 and 2013 are presented in a table in Note 5 to Comcast's condensed consolidated financial statements.

Other Income (Expense), Net The change in other income (expense), net for the three months ended March 31, 2014 compared to the same period in 2013 was primarily due to the $108 million gain recognized in the prior year period related to our sale of wireless communications spectrum licenses and a $27 million favorable settlement of a contingency related to the AT&T Broadband transaction recorded in the current year period.

Consolidated Income Tax Expense Income tax expense for the three months ended March 31, 2014 and 2013 reflects an effective income tax rate that differs from the federal statutory rate primarily due to state income taxes, adjustments associated with uncertain tax positions and foreign income taxes. We expect our 2014 annual effective tax rate to be in the range of 37% to 39%, absent changes in tax laws or significant changes in uncertain tax positions. It is reasonably possible that certain statutes of limitations for the years 2000 through 2006 will expire and/or judicial decisions related to litigation could be issued within the next 12 months that may result in a decrease in our effective tax rate.

Consolidated Net (Income) Loss Attributable to Noncontrolling Interests and Redeemable Subsidiary Preferred Stock The decrease in net (income) loss attributable to noncontrolling interests and redeemable subsidiary preferred stock for the three months ended March 31, 2014 was primarily due to our acquisition of GE's remaining 49% common equity interest in NBCUniversal Holdings in March 2013.

Liquidity and Capital Resources Our businesses generate significant cash flows from operating activities. We believe that we will be able to continue to meet our current and long-term liquidity and capital requirements, including fixed charges, through our cash flows from operating activities, existing cash, cash equivalents and investments, available borrowings under our existing credit facilities, and our ability to obtain future external financing. We anticipate that we will continue to use a substantial portion of our cash flows to meet our debt repayment obligations, to fund our capital expenditures, to invest in business opportunities and to return capital to shareholders.

33-------------------------------------------------------------------------------- Table of Contents Operating Activities Components of Net Cash Provided by Operating Activities Three Months Ended March 31 (in millions) 2014 2013 Operating income $ 3,568 $ 3,067 Depreciation and amortization 1,970 1,967 Operating income before depreciation and amortization 5,538 5,034 Noncash share-based compensation 119 102 Changes in operating assets and liabilities (267 ) 369 Cash basis operating income 5,390 5,505 Payments of interest (623 ) (617 ) Payments of income taxes (186 ) (461 ) Excess tax benefits under share-based compensation (151 ) (94 ) Other 56 36 Net cash provided by operating activities $ 4,486 $ 4,369 The changes in operating assets and liabilities for the three months ended March 31, 2014 compared to the same period in 2013 were primarily related to the timing of operating items associated with our broadcast of the 2014 Sochi Olympics and an increase in film and television costs.

The decrease in income tax payments for the three months ended March 31, 2014 compared to the same period in 2013 was primarily due to lower tax payments made in 2014 that related to 2013.

Investing Activities Net cash used in investing activities for the three months ended March 31, 2014 consisted primarily of cash paid for capital expenditures and cash paid for intangible assets, which were partially offset by proceeds from the sales of businesses and investments.

Financing Activities Net cash used in financing activities for the three months ended March 31, 2014 consisted primarily of repayments of debt, repurchases of our common stock and dividend payments.

In February 2014, we issued $1.2 billion aggregate principal amount of 3.60% senior notes due 2024 and $1 billion aggregate principal amount of 4.75% senior notes due 2044. The proceeds from this offering were used for working capital and general corporate purposes, including the repayment of a portion of our outstanding commercial paper and our $900 million aggregate principal amount of 2.10% senior notes in April 2014 at maturity.

In January 2014, we repaid at maturity $1 billion aggregate principal amount of 5.30% senior notes due 2014. In February 2014, we repaid $1.25 billion of borrowings outstanding under NBCUniversal Enterprise's revolving credit facility with the proceeds from $990 million of borrowings under its new commercial paper program and cash on hand.

We have made, and may from time to time in the future make, optional repayments on our debt obligations, which may include repurchases of our outstanding public notes and debentures, depending on various factors, such as market conditions.

Available Borrowings Under Credit Facilities We also maintain significant availability under our lines of credit and our commercial paper program to meet our short-term liquidity requirements.

In February 2014, NBCUniversal Enterprise established a commercial paper program. The maximum borrowing capacity under this commercial paper program is $1.35 billion, and it is supported by NBCUniversal Enterprise's existing $1.35 billion revolving credit facility due March 2018. The commercial paper program is fully and unconditionally guaranteed by us and the cable guarantors. As of March 31, 2014, NBCUniversal Enterprise had 34-------------------------------------------------------------------------------- Table of Contents $990 million face amount of commercial paper outstanding. The proceeds from NBCUniversal Enterprise's issuance of commercial paper were used to repay the $1.25 billion borrowings outstanding under its revolving credit facility.

As of March 31, 2014, amounts available under our consolidated revolving credit facilities, net of amounts outstanding under our commercial paper program and undrawn letters of credit, totaled $6.3 billion, which included $360 million available under NBCUniversal Enterprise's credit facility.

Share Repurchases and Dividends In January 2014, our Board of Directors increased our share repurchase authorization to $7.5 billion, which does not have an expiration date. Under this authorization, we may repurchase shares in the open market or in private transactions. During the three months ended March 31, 2014, we repurchased 15 million shares of our Class A Special common stock for $750 million. We intend to repurchase a total of $3 billion of shares in 2014, subject to market conditions. In addition, after shareholder approval has been obtained by both Comcast and Time Warner Cable related to the merger, we intend to repurchase an additional $2.5 billion of shares during 2014, subject to market conditions.

In January 2014, our Board of Directors approved a 15% increase in our dividend to $0.90 per share on an annualized basis and approved our first quarter dividend of $0.225 per share to be paid in April 2014. We expect to continue to pay quarterly dividends, although each dividend is subject to approval by our Board of Directors.

Critical Accounting Judgments and Estimates The preparation of our condensed consolidated financial statements requires us to make estimates that affect the reported amounts of assets, liabilities, revenue and expenses, and the related disclosure of contingent assets and contingent liabilities. We base our judgments on our historical experience and on various other assumptions that we believe are reasonable under the circumstances, the results of which form the basis for making estimates about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

For a more complete discussion of the accounting judgments and estimates that we have identified as critical in the preparation of our condensed consolidated financial statements, please refer to our Management's Discussion and Analysis of Financial Condition and Results of Operations in our 2013 Annual Report on Form 10-K.

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