UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
(X) Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the Quarterly Period Ended:
SEPTEMBER 30, 1998
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 0-6983
COMCAST CORPORATION
[GRAPHIC OMITTED - LOGO]
(Exact name of registrant as specified in its charter)
PENNSYLVANIA 23-1709202
- --------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1500 Market Street, Philadelphia, PA 19102-2148
- --------------------------------------------------------------------------------
(Address of principal executive offices)
(Zip Code)
Registrant's telephone number, including area code: (215) 665-1700
--------------------------
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 requirements
for the past 90 days.
Yes __X__ No ____
--------------------------
As of September 30, 1998, there were 328,571,932 shares of Class A Special
Common Stock, 31,771,319 shares of Class A Common Stock and 8,786,250 shares of
Class B Common Stock outstanding.
COMCAST CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED SEPTEMBER 30, 1998
TABLE OF CONTENTS
Page
Number
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance
Sheet as of September 30, 1998 and December 31,
1997 (Unaudited)..................................... 2
Condensed Consolidated Statement of
Operations and Accumulated Deficit for
the Nine and Three Months Ended September 30,
1998 and 1997 (Unaudited)............................ 3
Condensed Consolidated Statement of Cash
Flows for the Nine Months Ended September 30,
1998 and 1997 (Unaudited)............................ 4
Notes to Condensed Consolidated
Financial Statements (Unaudited)..................... 5 - 13
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of
Operations.......................................... 14 - 22
PART II. OTHER INFORMATION
Item 1. Legal Proceedings................................... 23
Item 6. Exhibits and Reports on Form 8-K.................... 23
SIGNATURE..................................................... 24
-----------------------------------
This Quarterly Report on Form 10-Q contains forward looking statements made
pursuant to the "safe harbor" provisions of the Private Securities Litigation
Reform Act of 1995. Readers are cautioned that such forward looking statements
involve risks and uncertainties which could significantly affect expected
results in the future from those expressed in any such forward looking
statements made by, or on behalf, of the Company. Certain factors that could
cause actual results to differ materially include, without limitation, the
effects of legislative and regulatory changes; the potential for increased
competition; technological changes; the need to generate substantial growth in
the subscriber base by successfully launching, marketing and providing services
in identified markets; pricing pressures which could affect demand for the
Company's services; the Company's ability to expand its distribution; changes in
labor, programming, equipment and capital costs; the Company's continued ability
to create or acquire programming and products that customers will find
attractive; future acquisitions, strategic partnerships and divestitures;
general business and economic conditions; and other risks detailed from time to
time in the Company's periodic reports filed with the Securities and Exchange
Commission.
COMCAST CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED SEPTEMBER 30, 1998
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CONDENSED CONSOLIDATED BALANCE SHEET
(Unaudited)
(Dollars in millions, except share data)
September 30, December 31,
1998 1997
ASSETS
CURRENT ASSETS
Cash and cash equivalents.................................................... $435.0 $413.7
Short-term investments....................................................... 38.7 163.9
Investments, available for sale.............................................. 1,663.8
Accounts receivable, less allowance for doubtful
accounts of $119.0 and $115.0.............................................. 502.7 498.8
Inventories, net............................................................. 368.2 324.0
Other current assets......................................................... 191.1 159.1
--------- ---------
Total current assets..................................................... 3,199.5 1,559.5
--------- ---------
INVESTMENTS, principally in affiliates.......................................... 764.6 1,264.3
--------- ---------
PROPERTY AND EQUIPMENT.......................................................... 4,973.1 4,285.4
Accumulated depreciation..................................................... (1,664.4) (1,388.5)
--------- ---------
Property and equipment, net.................................................. 3,308.7 2,896.9
--------- ---------
DEFERRED CHARGES................................................................ 9,529.2 9,213.3
Accumulated amortization..................................................... (2,436.4) (2,129.8)
--------- ---------
Deferred charges, net........................................................ 7,092.8 7,083.5
--------- ---------
$14,365.6 $12,804.2
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued expenses........................................ $1,418.5 $1,195.5
Accrued interest............................................................. 152.6 89.6
Current portion of long-term debt............................................ 106.4 132.7
--------- ---------
Total current liabilities................................................ 1,677.5 1,417.8
--------- ---------
LONG-TERM DEBT, less current portion............................................ 6,597.4 6,558.6
--------- ---------
DEFERRED INCOME TAXES........................................................... 2,301.6 2,112.2
--------- ---------
MINORITY INTEREST AND OTHER..................................................... 1,026.5 1,037.7
--------- ---------
COMMITMENTS AND CONTINGENCIES
COMMON EQUITY PUT OPTIONS....................................................... 111.2 31.4
--------- ---------
STOCKHOLDERS' EQUITY
Preferred stock - authorized, 20,000,000 shares; 5% series A convertible,
no par value, issued, 6,370 at redemption value............................ 31.9 31.9
5.25% series B mandatorily redeemable convertible, $1,000 par value,
issued, 533,685 and 513,211 at redemption value............................ 533.7 513.2
Class A special common stock, $1 par value - authorized,
500,000,000 shares; issued, 328,571,932 and 317,025,969.................... 328.6 317.0
Class A common stock, $1 par value - authorized,
200,000,000 shares; issued, 31,771,319 and 31,793,487 ..................... 31.8 31.8
Class B common stock, $1 par value - authorized,
50,000,000 shares; issued, 8,786,250 ...................................... 8.8 8.8
Additional capital........................................................... 3,287.0 3,030.6
Accumulated deficit.......................................................... (1,898.7) (2,415.9)
Unrealized gains on marketable securities.................................... 337.3 140.7
Cumulative translation adjustments........................................... (9.0) (11.6)
--------- ---------
Total stockholders' equity............................................... 2,651.4 1,646.5
--------- ---------
$14,365.6 $12,804.2
========= =========
See notes to condensed consolidated financial statements.
2
COMCAST CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED SEPTEMBER 30, 1998
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS AND ACCUMULATED DEFICIT
(Unaudited)
(Amounts in millions, except per share data)
Nine Months Ended Three Months Ended
September 30, September 30,
1998 1997 1998 1997
REVENUES
Service income............................................. 2,387.9 $2,081.5 781.0 $713.6
Net sales from electronic retailing........................ 1,648.5 1,438.0 573.9 490.6
--------- --------- --------- ---------
4,036.4 3,519.5 1,354.9 1,204.2
--------- --------- --------- ---------
COSTS AND EXPENSES
Operating.................................................. 1,077.2 925.5 336.9 314.0
Cost of goods sold from electronic retailing............... 997.6 869.9 345.2 298.1
Selling, general and administrative........................ 750.1 658.0 252.1 227.1
Depreciation............................................... 407.3 341.7 138.5 120.2
Amortization............................................... 390.1 362.0 132.5 121.1
--------- --------- --------- ---------
3,622.3 3,157.1 1,205.2 1,080.5
--------- --------- --------- ---------
OPERATING INCOME.............................................. 414.1 362.4 149.7 123.7
OTHER (INCOME) EXPENSE
Interest expense........................................... 437.3 422.8 145.4 143.9
Investment income.......................................... (1,022.0) (138.1) (1,023.2) (44.5)
Equity in net losses of affiliates......................... 345.3 217.1 108.3 85.9
Gain from equity offering of affiliate..................... (157.8) (98.2)
Other...................................................... (7.0) 13.4 (3.5) 9.0
--------- --------- --------- ---------
(404.2) 515.2 (871.2) 194.3
--------- --------- --------- ---------
INCOME (LOSS) BEFORE INCOME TAX EXPENSE, MINORITY
INTEREST AND EXTRAORDINARY ITEMS........................... 818.3 (152.8) 1,020.9 (70.6)
INCOME TAX EXPENSE............................................ 309.3 45.4 309.0 8.5
--------- --------- --------- ---------
INCOME (LOSS) BEFORE MINORITY INTEREST AND
EXTRAORDINARY ITEMS........................................ 509.0 (198.2) 711.9 (79.1)
MINORITY INTEREST............................................. (44.3) (66.8) (5.1) (27.0)
--------- --------- --------- ---------
INCOME (LOSS) BEFORE EXTRAORDINARY ITEMS...................... 553.3 (131.4) 717.0 (52.1)
EXTRAORDINARY ITEMS........................................... (3.0) (25.9) (3.0) (3.1)
--------- --------- --------- ---------
NET INCOME (LOSS)............................................. 550.3 (157.3) 714.0 (55.2)
PREFERRED DIVIDENDS........................................... (21.7) (7.8) (7.4) (7.0)
--------- --------- --------- ---------
NET INCOME (LOSS) FOR COMMON STOCKHOLDERS..................... $528.6 ($165.1) $706.6 ($62.2)
========= ========= ========= =========
ACCUMULATED DEFICIT
Beginning of period ....................................... ($2,415.9) ($2,127.1) ($2,596.7) ($2,262.6)
Net income (loss).......................................... 550.3 (157.3) 714.0 (55.2)
Common dividends - $.070, $.070, $.0233 and $.0233 per share (25.8) (24.0) (8.7) (8.3)
Retirement of common stock................................. (7.3) (17.7) (7.3)
--------- --------- --------- ---------
End of period.............................................. ($1,898.7) ($2,326.1) ($1,898.7) ($2,326.1)
========= ========= ========= =========
BASIC EARNINGS (LOSS) FOR COMMON STOCKHOLDERS
PER COMMON SHARE
Income (loss) before extraordinary items................... $1.46 ($.42) $1.92 ($.17)
Extraordinary items........................................ (.01) (.08) (.01) (.01)
--------- --------- --------- ---------
Net income (loss)..................................... $1.45 ($.50) $1.91 ($.18)
========= ========= ========= =========
BASIC WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING................................. 365.5 333.2 369.3 348.9
========= ========= ========= =========
DILUTED EARNINGS (LOSS) FOR COMMON STOCKHOLDERS
PER COMMON SHARE
Income (loss) before extraordinary items................... $1.33 ($.42) $1.76 ($.17)
Extraordinary items........................................ (.01) (.08) (.01) (.01)
--------- --------- --------- ---------
Net income (loss)..................................... $1.32 ($.50) $1.75 ($.18)
========= ========= ========= =========
DILUTED WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING................................. 402.1 333.2 404.3 348.9
========= ========= ========= =========
See notes to condensed consolidated financial statements.
3
COMCAST CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED SEPTEMBER 30, 1998
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
(Dollars in millions)
Nine Months Ended September 30,
1998 1997
OPERATING ACTIVITIES
Net income (loss)............................................................ $550.3 ($157.3)
Adjustments to reconcile net income (loss) to net cash provided
by operating activities:
Depreciation............................................................... 407.3 341.7
Amortization............................................................... 390.1 362.0
Non-cash interest expense, net............................................. 30.5 39.4
Equity in net losses of affiliates......................................... 345.3 217.1
Gains on investments, net of losses........................................ (976.6) (98.1)
Gain from equity offering of affiliate..................................... (157.8)
Minority interest.......................................................... (44.3) (66.8)
Extraordinary items........................................................ 3.0 25.9
Deferred income taxes and other............................................ 191.9 (22.4)
------- --------
739.7 641.5
Changes in working capital................................................. 78.9 100.6
------- --------
Net cash provided by operating activities............................ 818.6 742.1
------- --------
FINANCING ACTIVITIES
Proceeds from borrowings..................................................... 1,058.3 2,968.3
Retirement and repayment of debt............................................. (922.5) (3,518.4)
Issuance of preferred stock.................................................. 500.0
Issuances of common stock, net............................................... 23.8 499.5
Issuances of common equity put options....................................... 11.4 2.4
Repurchases of common stock.................................................. (9.5) (36.0)
Dividends.................................................................... (27.1) (25.2)
Deferred financing costs..................................................... (4.8) (43.8)
Other........................................................................ 4.6 (1.5)
------- --------
Net cash provided by financing activities............................ 134.2 345.3
------- --------
INVESTING ACTIVITIES
Acquisitions, net of cash acquired........................................... (269.4) (136.1)
Proceeds from sales of short-term investments, net........................... 125.2 2.4
Investments, principally in affiliates....................................... (137.6) (180.3)
Proceeds from sales of and distributions from investments,
principally in affiliates ................................................ 0.7 169.1
Proceeds from sales of call options.......................................... 20.7
Proceeds from investees' repayments of loans................................. 74.7 25.2
Capital expenditures......................................................... (684.8) (682.0)
Additions to deferred charges................................................ (47.0) (37.5)
Other........................................................................ (14.0) (5.9)
------- --------
Net cash used in investing activities................................ (931.5) (845.1)
------- --------
INCREASE IN CASH AND CASH EQUIVALENTS........................................... 21.3 242.3
CASH AND CASH EQUIVALENTS, beginning of period.................................. 413.7 331.3
------- --------
CASH AND CASH EQUIVALENTS, end of period........................................ $435.0 $573.6
======= ========
See notes to condensed consolidated financial statements.
4
COMCAST CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED SEPTEMBER 30, 1998
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Basis of Presentation
The condensed consolidated balance sheet as of December 31, 1997 has been
condensed from the audited consolidated balance sheet as of that date. The
condensed consolidated balance sheet as of September 30, 1998, the
condensed consolidated statement of operations and accumulated deficit for
the nine and three months ended September 30, 1998 and 1997 and the
condensed consolidated statement of cash flows for the nine months ended
September 30, 1998 and 1997 have been prepared by Comcast Corporation (the
"Company") and have not been audited by the Company's independent auditors.
In the opinion of management, all adjustments (which include only normal
recurring adjustments) necessary to present fairly the financial position,
results of operations and cash flows as of September 30, 1998 and for all
periods presented have been made.
Certain information and note disclosures normally included in the Company's
annual financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted. These condensed
consolidated financial statements should be read in conjunction with the
financial statements and notes thereto included in the Company's December
31, 1997 Annual Report on Form 10-K filed with the Securities and Exchange
Commission. The results of operations for the periods ended September 30,
1998 are not necessarily indicative of operating results for the full year.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
New Accounting Pronouncement
In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting
for Derivative Instruments and Hedging Activities." This statement, which
establishes accounting and reporting standards for derivatives and hedging
activities, is effective for fiscal years beginning after June 15, 1999.
Upon the adoption of SFAS No. 133, all derivatives are required to be
recognized in the statement of financial position as either assets or
liabilities and measured at fair value. The Company is currently evaluating
the impact the adoption of SFAS No. 133 will have on its financial position
and results of operations.
Comprehensive Income (Loss)
In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive
Income." This statement, which establishes standards for reporting and
disclosure of comprehensive income, is effective for interim and annual
periods beginning after December 15, 1997. The Company adopted SFAS No. 130
effective January 1, 1998. Total comprehensive income (loss) for the nine
and three months ended September 30, 1998 and 1997 was $749.5 million,
($62.2) million, $760.0 million and $36.2 million, respectively. Total
comprehensive income (loss) includes net income (loss), unrealized gains
(losses) on marketable securities and foreign currency translation gains
(losses) for the periods presented.
Earnings (Loss) for Common Stockholders Per Common Share
Earnings (loss) for common stockholders per common share is computed by
dividing net income (loss), after deduction of preferred stock dividends,
by the weighted average number of common shares outstanding during the
period on a basic and diluted basis.
5
COMCAST CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED SEPTEMBER 30, 1998
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)
The following table reconciles the numerator and denominator of the
computations of diluted earnings (loss) per common share for common
stockholders ("Diluted EPS") for the nine and three months ended September
30, 1998 and 1997, respectively.
(Amounts in millions, except per share data)
Nine Months Ended Three Months Ended
September 30, September 30,
1998 1997 1998 1997
Net income (loss) for common stockholders..................... $528.6 ($165.1) $706.6 ($62.2)
Dilutive securities effect on net income (loss) for common
stockholders................................................ 1.0
------ ------- ------ ------
Net income (loss) for common stockholders used for
Diluted EPS................................................. $529.6 ($165.1) $706.6 ($62.2)
====== ======= ====== ======
Weighted average number of common shares outstanding.......... 365.5 333.2 369.3 348.9
Dilutive securities:
1 1/8% discount convertible subordinated debentures,
redeemed March 1998.................................... 3.4
Series A and B convertible preferred stock............... 22.6 22.6
Stock option and restricted stock plans.................. 10.6 12.4
------ ------- ------ ------
Diluted weighted average number of common shares
outstanding................................................. 402.1 333.2 404.3 348.9
====== ======= ====== ======
Diluted earnings (loss) for common stockholders per common share $1.32 ($.50) $1.75 ($.18)
====== ======= ====== ======
Put options sold by the Company on 2.75 million shares of its Class A
Special Common stock (see Note 6) were outstanding during the three months
ended September 30, 1998 but were not included in the computation of
Diluted EPS as the options' exercise price was less than the average market
price of the Company's Class A Special Common Stock during the period.
For the nine and three months ended September 30, 1997, the Company's
potential common shares of 61.2 million shares have an antidilutive effect
on loss for common stockholders per common share for the periods and,
therefore, have not been used in determining the total weighted average
number of common shares outstanding.
Reclassifications
Certain reclassifications have been made to the prior year condensed
consolidated financial statements to conform to those classifications used
in 1998.
3. SIGNIFICANT EVENTS
Sale of Comcast UK Cable
In February 1998, Comcast UK Cable Partners Limited ("Comcast UK Cable"), a
consolidated subsidiary of the Company, entered into a definitive agreement
to be acquired (the "NTL Transaction") by NTL Incorporated ("NTL"), an
alternative telecommunications company in the United Kingdom ("UK"). The
Company received 4.8 million shares of NTL common stock in exchange for all
of the shares of Comcast UK Cable held by the Company upon closing of the
NTL Transaction on October 29, 1998. Certain conditions agreed to in the
NTL Transaction restrict the Company's ability to sell the NTL common stock
to be received for a period of 150 days after the closing of the NTL
Transaction. The Company's investment in NTL common stock had a fair value,
prior to consideration of the restrictions on the NTL common stock, of
approximately $225.4 million, based on the quoted market price of $46.75
per share of NTL common stock as of October 29, 1998. As of September 30,
1998 and for the nine months then ended, the assets and revenues of Comcast
UK Cable totaled $866.0 million and $93.7 million, respectively.
6
COMCAST CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED SEPTEMBER 30, 1998
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)
AT&T Acquisition of TCGI
In January 1998, AT&T Corp. ("AT&T") entered into a definitive merger
agreement with Teleport Communications Group, Inc. ("TCGI"). Upon closing
of the merger (the "AT&T Transaction") on July 23, 1998, the Company
received 24.2 million shares of unregistered AT&T common stock in exchange
(the "Exchange") for the 25.6 million shares of TCGI Class B Common Stock
held by the Company (see Note 4). As a result of the Exchange, the Company
recognized a pre-tax gain of $1.092 billion during the nine and three
months ended September 30, 1998, representing the difference between the
fair value of the AT&T stock received and the Company's basis in TCGI. Such
gain is included in investment income in the Company's condensed
consolidated statement of operations and accumulated deficit. The Company
has registration rights, subject to customary restrictions, which allow the
Company to effect a registration of the AT&T shares received. As of
September 30, 1998, the Company has recorded its investment in AT&T,
classified as available for sale, at its estimated fair value.
Acquisition of Jones Intercable
In May 1998, the Company agreed to purchase from BCI Telecom Holding
("BTH") 6.4 million Class A Common Shares in Jones Intercable, Inc. ("Jones
Intercable"), and a 49% interest in the BTH subsidiaries which were to
continue to own BTH's remaining 6.4 million shares of Jones Intercable
Class A Common Stock. At the same time, the Company agreed to acquire
approximately 2.9 million shares of Common Stock of Jones Intercable (the
"Control Shares"), if and when acquired by BTH from affiliates of Jones
Intercable's controlling shareholder under an existing option (the "Control
Option") to acquire such shares (which absent extraordinary circumstances
would not have been exercisable until December 2001). The Company was to
purchase the remaining 51% of the BTH subsidiaries when the Control Shares
were acquired. The Company, BTH, Jones Intercable and Jones Intercable's
controlling shareholder agreed in August 1998 to accelerate the Control
Option to permit its early exercise and the early closing of the
transactions with BTH. At closing (expected to occur in the first quarter
of 1999, subject to the receipt of required regulatory approvals), the
Company will pay BTH a total of $500 million in cash to acquire the 12.8
million shares of Jones Intercable Class A Common Stock and $200 million in
cash to acquire the Control Shares. After closing, the Company will control
approximately 37% of the economic and 47% of the voting interest in Jones
Intercable. In addition, the Control Shares will represent shares having
the right to elect approximately 75% of the Board of Directors of Jones
Intercable. The transaction will be funded either with new borrowings, with
available borrowings under existing lines of credit or by other means.
Jones Intercable, a public company, owns or manages cable operations
serving approximately 1.0 million customers.
4. INVESTMENTS
September 30, December 31,
1998 1997
(Dollars in millions)
Equity method.......................................... $387.0 $867.6
Fair value method...................................... 1,984.6 346.5
Cost method............................................ 56.8 50.2
-------- --------
Total investments............................... 2,428.4 1,264.3
Less current investments, available for sale........... 1,663.8
-------- --------
Investments, principally in affiliates................. $764.6 $1,264.3
======== ========
Equity Method
The Company records its proportionate interests in the net income (loss) of
substantially all of its investees, other than the UK Investees (see
below), three months in arrears. The Company holds interests representing
less than 20% of the total outstanding ownership interests in certain of
its equity method investees. The equity method of accounting is utilized
for these investments based on the type of investment (e.g. general
partnership interest), board representation, participation in a controlling
investor group, significant shareholder rights or a combination of these
and other factors. The Company's recorded investments exceed its
proportionate interests in the book value of the investees' net assets by
$141.2 million as of September 30, 1998 (primarily related to the Company's
investments in The Golf Channel and Sprint PCS (see below)). Such excess is
being amortized to equity in net income or loss, primarily over a period of
twenty years, which is consistent with the estimated lives of the
underlying assets. The
7
COMCAST CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED SEPTEMBER 30, 1998
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)
original cost of investments accounted for under the equity method totaled
$1.179 billion and $1.454 billion as of September 30, 1998 and December 31,
1997, respectively.
Summarized financial information for the Company's equity method investees
is presented below (dollars in millions):
Sprint UK
PCS TCGI Investees Other Combined
Nine Months Ended September 30, 1998:
Combined Results of Operations
Revenues, net............................................ $477.3 $605.8 $176.5 $584.1 $1,843.7
Operating, selling, general and
administrative expenses................................ 1,300.0 558.7 136.0 613.5 2,608.2
Depreciation and amortization............................ 389.8 163.4 61.9 55.1 670.2
Operating loss........................................... (1,212.5) (116.3) (21.4) (84.5) (1,434.7)
Net loss (a)............................................. (1,600.2) (190.6) (70.6) (123.2) (1,984.6)
Company's Equity in Net Loss
Equity in current period net loss........................ ($240.0) ($27.2) ($25.9) ($47.1) ($340.2)
Amortization expense..................................... (2.3) (0.5) (2.3) (5.1)
-------- ------ ----- ------ --------
Total equity in net loss............................... ($242.3) ($27.2) ($26.4) ($49.4) ($345.3)
======= ====== ====== ====== =======
Three Months Ended September 30, 1998:
Combined Results of Operations
Revenues, net............................................ $192.3 $295.3 $60.4 $48.8 $596.8
Operating, selling, general and
administrative expenses................................ 428.5 257.4 45.8 37.2 768.9
Depreciation and amortization............................ 151.4 66.3 21.1 11.6 250.4
Operating loss........................................... (387.6) (28.4) (6.5) (422.5)
Net loss (a)............................................. (542.2) (55.9) (20.0) (9.3) (627.4)
Company's Equity in Net Loss
Equity in current period net loss........................ ($81.3) ($7.5) ($7.7) ($9.8) ($106.3)
Amortization expense..................................... (0.8) (0.2) (1.0) (2.0)
-------- ------ ----- ------ --------
Total equity in net loss............................... ($82.1) ($7.5) ($7.9) ($10.8) ($108.3)
======= ====== ====== ====== =======
Combined Financial Position
As of September 30, 1998:
Current assets........................................... $431.6 $476.7 $40.2 $57.9 $1,006.4
Noncurrent assets........................................ 6,244.0 3,056.1 739.8 318.0 10,357.9
Current liabilities...................................... 610.5 572.6 79.0 44.3 1,306.4
Noncurrent liabilities................................... 5,083.4 1,183.6 650.9 441.3 7,359.2
- ------------
(a) See footnote (1) on page 9.
8
COMCAST CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED SEPTEMBER 30, 1998
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)
Sprint UK
PCS TCGI Investees Other Combined
Nine Months Ended September 30, 1997:
Combined Results of Operations
Revenues, net............................................ $39.0 $300.0 $143.3 $672.1 $1,154.4
Operating, selling, general and
administrative expenses................................ 588.2 278.9 125.4 708.4 1,700.9
Depreciation and amortization............................ 110.1 93.4 52.5 81.7 337.7
Operating loss........................................... (659.3) (72.3) (34.6) (118.0) (884.2)
Net loss (1)............................................. (730.2) (139.1) (66.2) (159.7) (1,095.2)
Company's Equity in Net Loss
Equity in current period net loss (2).................... ($109.5) ($22.1) ($25.1) ($54.0) ($210.7)
Amortization expense..................................... (0.8) (0.3) (0.4) (4.9) (6.4)
-- ------- ------ ------ ------ --------
Total equity in net loss............................... ($110.3) ($22.4) ($25.5) ($58.9) ($217.1)
======= ====== ====== ====== ========
Three Months Ended September 30, 1997:
Combined Results of Operations
Revenues, net............................................ $25.4 $115.8 $50.4 $229.8 $421.4
Operating, selling, general and
administrative expenses................................ 236.7 107.0 43.2 255.4 642.3
Depreciation and amortization............................ 66.3 37.2 16.5 27.6 147.6
Operating loss........................................... (277.6) (28.4) (9.3) (53.2) (368.5)
Net loss (1)............................................. (331.4) (51.4) (21.4) (70.1) (474.3)
Company's Equity in Net Loss
Equity in current period net loss........................ ($49.7) ($7.9) ($8.4) ($17.7) ($83.7)
Amortization (expense) income............................ (0.7) 0.1 (0.1) (1.5) (2.2)
-- ------- ------ ------ ------ --------
Total equity in net loss............................... ($50.4) ($7.8) ($8.5) ($19.2) ($85.9)
======= ====== ====== ====== ========
--------
(1) Net loss also represents loss from continuing operations before
extraordinary items and cumulative effect of changes in accounting
principle.
(2) As a result of the acquisition of E! Entertainment Television, Inc.
("E! Entertainment") on March 31, 1997, the Company recorded a charge
representing the cumulative amount that would have been recorded had
the Company accounted for its investment in E! Entertainment under the
equity method since the date of initial investment (the "Cumulative
Charge"). Since the Company's proportionate share of E! Entertainment's
cumulative losses was in excess of the Company's historical cost basis
in E! Entertainment and as the Company was under no contractual
obligation to fund the losses of E! Entertainment, the Cumulative
Charge was limited to the Company's historical cost basis of $12.1
million. Such amount is included in equity in net losses of affiliates
in the Company's condensed consolidated statement of operations and
accumulated deficit for the nine months ended September 30, 1997 as it
is not significant for restatement of the Company's prior year
financial statements.
Sprint PCS. The Company, Tele-Communications, Inc. ("TCI"), Cox
Communications, Inc. ("Cox," and together with the Company and TCI, the
"Cable Partners") and Sprint Corporation ("Sprint," and together with the
Cable Partners, the "Parents"), engage in the wireless communications
business through a limited partnership known as "Sprint PCS." The Company
made its initial investment in 1994 to acquire a general and limited
partnership interest of 15% in Sprint PCS. As of September 30, 1998, the
Company had contributed $669.5 million to Sprint PCS. No additional amounts
are due with respect to the balance of the Company's original funding
commitment to Sprint PCS.
9
COMCAST CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED SEPTEMBER 30, 1998
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)
In May 1998, the Parents announced an agreement (the "Restructuring
Agreement") under which Sprint would assume total ownership and management
control of Sprint PCS.
At closing of the Restructuring Agreement, Sprint will issue a new class of
Sprint stock (the "Sprint PCS Stock") to track the performance of Sprint's
combined wireless operations. Initially, in exchange for its interests in
Sprint PCS, the Company will receive an approximate 11.6% interest in the
Sprint PCS Stock, consisting of approximately 47.2 million shares of Series
2 Sprint PCS common stock, approximately 2.2 million shares of Sprint PCS
preferred stock (convertible on specified terms to Series 2 Sprint PCS
common stock) and warrants to purchase approximately 3.0 million shares of
Sprint PCS Stock. Under the Restructuring Agreement, Sprint will distribute
its interest in the Sprint PCS Stock to its existing shareholders. The
Restructuring Agreement also contemplates a subsequent initial public
offering ("IPO") of the Sprint PCS Stock. The Cable Partners' interests in
the Sprint PCS Stock would be reduced proportionately by the amount of
ownership interests issued in connection with an IPO, and in connection
with any purchases made at that time by two of Sprint's major shareholders
under existing anti-dilution rights - France Telecom S.A. ("France
Telecom") and Deutsche Telekom AG ("Deutsche Telekom").
The Sprint PCS Stock will be divided into three categories: (i) Series 1
(one vote per share) to be held by the public, (ii) Series 2 (1/10 vote per
share other than in class votes) to be held by the Cable Partners, and
(iii) Series 3 (one vote per share) to be held by France Telecom and
Deutsche Telekom. Under the terms of the Restructuring Agreement, the Cable
Partners have registration rights, subject to customary restrictions, that,
if used, would permit the monetization of their Sprint PCS holdings through
equity offerings or derivatives. If the Series 2 shares are transferred by
a Cable Partner, the transferred shares become full vote Series 1 shares.
On September 25, 1998, Sprint Corporation filed a preliminary registration
statement with the Securities and Exchange Commission (the "SEC") to
register up to $604.0 million in an IPO of its Sprint PCS Stock. The timing
of the public offering can not yet be determined.
On November 13, 1998, the Sprint stockholders approved the Restructuring
Agreement. The Restructuring Agreement is expected to close on November 23,
1998, subject to the receipt of necessary regulatory approvals.
TCGI. In April 1998, in connection with an acquisition, TCGI issued 16.3
million shares of its Class A Common Stock (the "TCGI Acquisition"). In
November 1997, TCGI filed a registration statement with the SEC to sell 7.3
million shares of TCGI Class A Common Stock (the "TCGI Offering"). As a
result of the TCGI Acquisition and the TCGI Offering, the Company
recognized a $157.8 million and $98.2 million increase in its proportionate
share of TCGI's net assets as a gain from equity offering of affiliate for
the nine and three months ended September 30, 1998, respectively. The
Company records its proportionate share of TCGI's net assets one quarter in
arrears.
UK Investees. As of September 30, 1998, Comcast UK Cable (see Note 3) holds
a 27.5% interest in Birmingham Cable Corporation Limited and a 50.0%
interest in Cable London PLC.
Comcast-Spectacor. Effective January 1, 1998, the Company's condensed
consolidated financial statements include the accounts of Comcast
Spectacor, L.P. ("Comcast-Spectacor"), an affiliate previously accounted
for under the equity method, due to certain call rights held by the Company
which became exercisable effective January 16, 1998.
Other. The Company's other equity investees include investments in cable
communications (including Garden State Cablevision L.P., a cable
communications company serving more than 210,000 subscribers as of
September 30, 1998 in the State of New Jersey), cellular/PCS
telecommunications and content providers. The Company does not consider
these other equity method investments to be individually significant to its
consolidated financial position, results of operations or liquidity.
Fair Value Method
The Company holds unrestricted equity investments in certain publicly
traded companies, with an historical cost (including a $1.092 billion
pre-tax gain recognized during the third quarter of 1998 - see Note 3) of
$1.466 billion and $130.0 million as of September 30, 1998 and December 31,
1997, respectively. The Company has recorded these investments, which are
classified as available for sale, at their estimated fair values of $1.985
billion and
10
COMCAST CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED SEPTEMBER 30, 1998
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)
$346.5 million as of September 30, 1998 and December 31, 1997,
respectively. The unrealized pre-tax gains as of September 30, 1998 and
December 31, 1997 of $518.9 million and $216.5 million, respectively, have
been reported in the Company's condensed consolidated balance sheet as a
component of stockholders' equity, net of related deferred income tax
expense of $181.6 million and $75.8 million, respectively.
In March 1998, the Company sold call options relating to its unrestricted
equity investments in TCI, TCI Ventures Group, Inc. and Liberty Media Group
common stock (together, the "TCI Stock") for $20.7 million. Such call
options expire between March and September 1999. During the nine and three
months ended September 30, 1998, the Company recorded pre-tax investment
(expense) income of ($32.1) million and $8.1 million, respectively, related
to changes in the value of the call options.
During the nine and three months ended September 30, 1998, the Company
recorded a pre-tax loss of $91.2 million on certain of its investments
based on a decline in value that is considered other than temporary. Such
pre-tax loss is recorded in investment income in the Company's condensed
consolidated statement of operations and accumulated deficit.
5. LONG-TERM DEBT
Debt Offering
On November 10, 1998, the Company, through its wholly owned subsidiary,
Comcast Cable Communications, Inc. ("Comcast Cable") announced that it has
sold $800.0 million aggregate principal amount of 6.20% senior notes due
2008 in a public offering (the "Offering"). Interest on the notes will be
payable semiannually on May 15 and November 15 of each year, commencing May
15, 1999. The notes are redeemable only upon maturity on November 15, 2008.
The Company expects to use all of the net proceeds from the Offering for
general corporate purposes. The Offering is expected to close on November
16, 1998.
Redemption of 1 1/8% Debentures
In March 1998, the Company completed the redemption of its $541.9 million
principal amount 1 1/8% discount convertible subordinated debentures due
2007 (the "1 1/8% Debentures"). The Company issued 10.4 million shares of
its Class A Special Common Stock upon conversion of $540.2 million
principal amount of 1 1/8% Debentures while $1.7 million principal amount
of 1 1/8% Debentures was redeemed for cash at a redemption price of 67.112%
of the principal amount, together with accrued interest thereon.
Stockholders' equity was increased by the full amount of 1 1/8% Debentures
converted plus accrued interest, less unamortized debt acquisition costs.
Unamortized debt acquisition costs related to the 1 1/8% Debentures
redeemed for cash were not significant. The issuance of the Company's Class
A Special Common Stock upon conversion of the 1 1/8% Debentures had no
impact on the Company's condensed consolidated statement of cash flows due
to its noncash nature.
Interest Rates
As of September 30, 1998 and December 31, 1997, the Company's effective
weighted average interest rate on its long-term debt outstanding was 8.39%
and 8.36%, respectively.
Lines of Credit
As of November 2, 1998, certain subsidiaries of the Company had unused
lines of credit of $870.5 million, $370.5 million of which is restricted by
the covenants of the related debt agreements and to subsidiary general
purposes and dividend declaration.
6. STOCKHOLDERS' EQUITY
Repurchase Program
In September 1998, the Company announced that its Board of Directors had
authorized a market repurchase program (the "Repurchase Program") pursuant
to which the Company may purchase, in the open market or in private
transactions up to $500.0 million of its outstanding common equity
securities, subject to certain restrictions and market conditions. Through
September 30, 1998, the Company had repurchased shares of its common stock
for aggregate consideration of $9.5 million pursuant to the Repurchase
Program. Through October 31, 1998, the
11
COMCAST CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED SEPTEMBER 30, 1998
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)
Company had repurchased additional shares for aggregate consideration of
$3.4 million. In conjunction with the Repurchase Program, in September
1998, the Company sold put options on 2.75 million shares of its Class A
Special Common Stock. The put options give the holder the right to require
the Company to repurchase such shares at specified prices on specific dates
during the period from April through September 1999. Proceeds of $11.4
million from the sale of these put options were credited to additional
capital. The amount the Company would be obligated to pay to repurchase
such shares if all outstanding put options were exercised, totaling $111.2
million, has been reclassified to a temporary equity account in the
Company's condensed consolidated balance sheet as of September 30, 1998.
In April 1997, in connection with the Company's previous market repurchase
program which terminated in May 1997, the Company sold put options on 2.0
million shares of its Class A Special Common Stock. The put options, which
expired unexercised during April and May 1998, gave the holder the right to
require the Company to repurchase such shares at a specified price on
specific dates in April and May 1998. Upon expiration, the Company
reclassified $31.4 million, the amount it would have been obligated to pay
to repurchase such shares had the put options been exercised, from common
equity put options to additional capital in the Company's condensed
consolidated balance sheet.
7. STATEMENT OF CASH FLOWS - SUPPLEMENTAL INFORMATION
The Company made cash payments for interest of $334.1 million, $303.4
million, $71.5 million and $69.6 million during the nine and three months
ended September 30, 1998 and 1997, respectively.
The Company made cash payments for income taxes of $105.2 million, $89.7
million, $17.1 million and $14.7 million during the nine and three months
ended September 30, 1998 and 1997, respectively.
During the three months ended September 30, 1998, the Company settled all
issues primarily related to the deductibility of amortization of cable
television distribution rights raised by the Internal Revenue Service
("IRS") in its examination of QVC, Inc., a majority owned subsidiary
("QVC"), through fiscal tax year 1993. Such settlement resulted in a
reversal of previously recorded deferred tax liabilities of $135.5 million.
As a result of the settlement, the Company recorded an adjustment to reduce
goodwill by $119.7 million during the three months ended September 30,
1998. Such adjustment has been excluded from the Company's condensed
consolidated statement of cash flows due to its noncash nature.
8. COMMITMENTS AND CONTINGENCIES
The Company is subject to legal proceedings and claims which arise in the
ordinary course of its business. In the opinion of management, the amount
of ultimate liability with respect to these actions will not materially
affect the financial position, results of operations or liquidity of the
Company.
12
COMCAST CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED SEPTEMBER 30, 1998
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONCLUDED
(Unaudited)
9. FINANCIAL DATA BY BUSINESS SEGMENT
(Dollars in millions)
Domestic
Cable Electronic Cellular
Communications Retailing Communications Other (1) Total
Nine Months Ended September 30, 1998
Revenues, net............................... $1,681.2 $1,648.5 $338.0 $368.7 $4,036.4
Depreciation and amortization............... 495.1 97.0 88.5 116.8 797.4
Operating income (loss)..................... 307.4 194.6 47.6 (135.5) 414.1
Interest expense............................ 163.0 39.4 82.4 152.5 437.3
Capital expenditures........................ 488.2 57.3 41.7 97.6 684.8
Equity in net losses of affiliates.......... 345.3 345.3
Three Months Ended September 30, 1998
Revenues, net............................... $571.7 $573.9 $116.7 $92.6 $1,354.9
Depreciation and amortization............... 171.5 38.7 30.8 30.0 271.0
Operating income (loss)..................... 105.7 65.1 16.6 (37.7) 149.7
Interest expense............................ 55.1 13.0 29.1 48.2 145.4
Capital expenditures........................ 194.5 15.6 24.3 30.8 265.2
Equity in net losses of affiliates.......... 108.3 108.3
As of September 30, 1998
Assets...................................... $6,302.2 $2,136.4 $1,454.8 $4,472.2 $14,365.6
Long-term debt, less current portion........ 2,699.1 681.9 1,234.2 1,982.2 6,597.4
Nine Months Ended September 30, 1997
Revenues, net............................... $1,537.0 $1,438.0 $335.4 $209.1 $3,519.5
Depreciation and amortization............... 462.7 79.2 80.7 81.1 703.7
Operating income (loss)..................... 261.9 151.7 59.3 (110.5) 362.4
Interest expense............................ 174.2 42.1 78.7 127.8 422.8
Capital expenditures........................ 367.1 69.6 87.2 158.1 682.0
Equity in net losses of affiliates.......... 217.1 217.1
Three Months Ended September 30, 1997
Revenues, net............................... $515.1 $490.6 $115.1 $83.4 $1,204.2
Depreciation and amortization............... 155.9 27.6 27.1 30.7 241.3
Operating income (loss)..................... 92.0 48.7 24.3 (41.3) 123.7
Interest expense............................ 54.3 14.2 26.6 48.8 143.9
Capital expenditures........................ 115.6 28.5 29.3 61.5 234.9
Equity in net losses of affiliates.......... 85.9 85.9
- ---------------
(1) Other includes certain other operating businesses, including
Comcast-Spectacor (effective January 1, 1998) and E! Entertainment
(effective March 31, 1997), the Company's consolidated UK cable and
telecommunications operations (see Note 3), the Company's DBS operations
(prior to April 1, 1998) and elimination entries related to the segments
presented.
13
COMCAST CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED SEPTEMBER 30, 1998
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Overview
The Company has experienced significant growth in recent years both through
strategic acquisitions and growth in its existing businesses. The Company has
historically met its cash needs for operations through its cash flows from
operating activities. Cash requirements for acquisitions and capital
expenditures have been provided through the Company's financing activities and
sales of long-term investments, as well as its existing cash, cash equivalents
and short-term investments.
General Developments of Business
See Note 3 to the Company's condensed consolidated financial statements included
in Item 1.
Liquidity and Capital Resources
Cash, Cash Equivalents, Short-term Investments and Investments, Available for
Sale The Company has traditionally maintained significant levels of cash, cash
equivalents, short-term investments and investments, available for sale to meet
its short-term liquidity requirements. Cash, cash equivalents, short-term
investments and investments, available for sale as of September 30, 1998 were
$2.138 billion. As of September 30, 1998, $406.1 million of the Company's cash,
cash equivalents, short-term investments and investments, available for sale is
restricted to use by subsidiaries of the Company under contractual or other
arrangements, including $146.8 million which is restricted to use by Comcast UK
Cable Partners Limited ("Comcast UK Cable"), a consolidated subsidiary of the
Company (see Note 3 to the Company's condensed consolidated financial
statements).
The Company's cash equivalents and short-term investments are recorded at cost
which approximates their fair value. As of September 30, 1998, short-term
investments have a weighted average maturity of approximately five months. The
Company's investments, available for sale are recorded at fair value.
Investments
See Notes 3 and 4 to the Company's condensed consolidated financial statements
included in Item 1.
The Company does not have any significant contractual commitments with respect
to any of its investments. However, to the extent the Company does not fund its
investees' capital calls, it exposes itself to dilution of its ownership
interests. The Company continually evaluates its existing investments as well as
new investment opportunities.
Financing
See Notes 5 and 6 to the Company's condensed consolidated financial statements
included in Item 1.
As of September 30, 1998 and December 31, 1997, the Company's long-term debt,
including current portion, was $6.704 billion and $6.691 billion, respectively,
of which 22.1% and 17.1%, respectively, was at variable rates.
The Company may from time to time, depending on certain factors including market
conditions, make optional repayments on its debt obligations, which may include
open market repurchases of its outstanding public notes and debentures.
Year 2000 Issue
The Year 2000 Issue is the result of computer programs being written using two
digits rather than four to define the applicable year. Certain of the Company's
computer programs that have date-sensitive software may recognize a date using
"00" as the year 1900 rather than the year 2000 (the "Year 2000 Issue"). If this
situation occurs, the potential exists for computer system failure or
miscalculations by computer programs, which could cause disruption of
operations.
14
COMCAST CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED SEPTEMBER 30, 1998
The Company is in the process of evaluating and addressing the impact of the
Year 2000 Issue on its operations to ensure that its information technology and
business systems recognize calendar Year 2000. The Company is utilizing both
internal and external resources in implementing its Year 2000 program, which
consists of the following phases:
Assessment Phase
Structured evaluation, including a detailed inventory outlining the impact that
the Year 2000 Issue may have on current operations.
Detailed Planning Phase
Establishment of priorities, development of specific action steps and allocation
of resources to address the issues identified in the Assessment Phase.
Conversion Phase
Implementation of the necessary system modifications as outlined in the Detailed
Planning Phase.
Testing Phase
Verification that the modifications implemented in the Conversion Phase will be
successful in resolving the Year 2000 Issue so that all inventory items will
function properly, both individually and on an integrated basis.
Implementation Phase
Final roll-out of fully tested components into an operational unit.
Based on an inventory conducted in 1997, the Company has identified computer
systems that will require modification or replacement so that they will properly
utilize dates beyond December 31, 1999. Many of the Company's critical systems
are new and are already Year 2000 compliant as a result of the recent rebuild of
many of the Company's cable communications systems and the implementation of a
fully digital cellular communications network. In addition, the Company has
initiated communications with all of its significant software suppliers and
service bureaus to determine their plans for remediating the Year 2000 Issue in
their software which the Company uses or relies upon.
As of September 30, 1998, the Company is in the Conversion Phase of its Year
2000 remediation program and has entered the Testing Phase with respect to
certain of its key systems. Through September 30, 1998, the Company has incurred
approximately $5.0 million in connection with its Year 2000 remediation program.
The Company estimates that it will incur between approximately $10 million to
$20 million of additional expense through December 1999 in connection with its
Year 2000 remediation program. The Company's estimate to complete the
remediation plan includes the estimated time associated with mitigating the Year
2000 Issue for third party software. However, there can be no guarantee that the
systems of other companies on which the Company relies will be converted on a
timely basis, or that a failure to convert by another company would not have a
material adverse effect on the Company.
Management of the Company will continue to periodically report the progress of
its Year 2000 remediation program to the Audit Committee of the Company's Board
of Directors. The Company plans to complete the Year 2000 mitigation by the
third quarter of 1999. Management of the Company has investigated and may
consider potential contingency plans in the event that the Company's Year 2000
remediation program is not completed by that date.
The costs of the project and the date on which the Company plans to complete the
Year 2000 modifications and replacements are based on management's best
estimates, which were derived using assumptions of future events including the
continued availability of resources and the reliability of third party
modification plans. However, there can be no guarantee that these estimates will
be achieved and actual results could differ materially from those plans.
Specific factors that may cause such material differences include, but are not
limited to, the availability and cost of personnel with appropriate necessary
skills and the ability to locate and correct all relevant computer code and
similar uncertainties.
The Company believes that with modifications to existing software and
conversions to new software, the Year 2000 Issue can be mitigated. However, if
such modifications and conversions are not made, or are not completed within an
adequate time frame, the Year 2000 Issue could have a material adverse impact on
the operations of the Company.
-------------------------
15
COMCAST CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED SEPTEMBER 30, 1998
The telecommunications industry, including cable and cellular communications,
and the electronic retailing industry are experiencing increasing competition
and rapid technological changes. The Company's future results of operations will
be affected by its ability to react to changes in the competitive environment
and by its ability to implement new technologies. However, the Company believes
that competition, technological changes and its history of significant losses
will not significantly affect its ability to obtain financing.
The Company believes that it will be able to meet its current and long-term
liquidity and capital requirements, including fixed charges, through its cash
flows from operating activities, existing cash, cash equivalents, short-term
investments, investments, available for sale and lines of credit and other
external financing.
Statement of Cash Flows
Cash and cash equivalents increased $21.3 million as of September 30, 1998 from
December 31, 1997 and increased $242.3 million as of September 30, 1997 from
December 31, 1996. Increases in cash and cash equivalents resulted from cash
flows from operating, financing and investing activities which are explained
below.
Net cash provided by operating activities amounted to $818.6 million and $742.1
million for the nine months ended September 30, 1998 and 1997, respectively. The
increase of $76.5 million is principally due to the increase in the Company's
operating income before depreciation and amortization (see "Results of
Operations") and changes in working capital as a result of the timing of
receipts and disbursements, including the effects of the consolidation of
Comcast Spectacor, L.P. ("Comcast-Spectacor") effective January 1, 1998 (see
Note 4 to the Company's condensed consolidated financial statements included in
Item 1) and the acquisition of E! Entertainment Television, Inc. ("E!
Entertainment") on March 31, 1997 (the "E! Acquisition").
Net cash provided by financing activities was $134.2 million and $345.3 million
for the nine months ended September 30, 1998 and 1997, respectively. During the
nine months ended September 30, 1998, the Company borrowed $1.058 billion and
repaid $922.5 million of its long-term debt, primarily in connection with the
refinancing of certain subsidiary indebtedness in March 1998. In addition,
during the nine months ended September 30, 1998, the Company had net issuances
of $23.8 million of its common stock and paid cash dividends of $27.1 million on
its common stock and Series A Preferred Stock. During the nine months ended
September 30, 1997, the Company borrowed $2.968 billion, primarily in connection
with the refinancing of certain subsidiary indebtedness and the acquisition of
E! Entertainment (the "E! Acquisition"), and repaid $3.518 billion of its
long-term debt, primarily in connection with the refinancing of certain
subsidiary indebtedness and the redemption of debt. Deferred financing costs of
$43.8 million were incurred during the nine months ended September 30, 1997
related to the issuance of certain subsidiary senior notes. In addition, during
the nine months ended September 30, 1997, the Company received $1.0 billion from
Microsoft Corporation for the issuance of its Class A Special Common Stock and
Series B Preferred Stock, repurchased $36.0 million of its common stock and paid
cash dividends of $25.2 million on its common stock and Series A Preferred
Stock.
Net cash used in investing activities was $931.5 million and $845.1 million for
the nine months ended September 30, 1998 and 1997, respectively. During the nine
months ended September 30, 1998, net cash used in investing activities includes
acquisitions, net of cash acquired, of $269.4 million, investments in affiliates
of $137.6 million and capital expenditures of $684.8 million, offset by proceeds
from the sales of short-term investments and call options of $145.9 million and
proceeds from the repayment of a loan by an investee of $74.7 million. During
the nine months ended September 30, 1997, net cash used in investing activities
includes acquisitions, net of cash acquired, of $136.1 million, investments in
affiliates of $180.3 million and capital expenditures of $682.0 million, offset
by the proceeds from the sales of short-term and long-term investments and a
distribution from an investee of $171.5 million and proceeds from the repayment
of a loan by an investee of $25.2 million.
Results of Operations
The effects of the Company's recent acquisitions and the consolidation of
Comcast-Spectacor effective January 1, 1998, as well as increased levels of
capital expenditures, were to increase the Company's revenues and expenses
resulting in increases in its operating income before depreciation and
amortization, depreciation expense, amortization expense and interest expense.
In addition, the Company's equity in net losses of affiliates has increased
principally as a result of the start-up nature of certain of the Company's
equity investees (see "Consolidated Analysis").
16
COMCAST CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED SEPTEMBER 30, 1998
Summarized consolidated financial information for the Company for the nine and
three months ended September 30, 1998 and 1997 is as follows (dollars in
millions, "NM" denotes percentage is not meaningful):
Nine Months Ended
September 30, Increase / (Decrease)
1998 1997 $ %
Revenues.................................................. $4,036.4 $3,519.5 $516.9 14.7%
Cost of goods sold from electronic retailing.............. 997.6 869.9 127.7 14.7
Operating, selling, general and administrative expenses... 1,827.3 1,583.5 243.8 15.4
-------- --------
Operating income before depreciation and
amortization (1)....................................... 1,211.5 1,066.1 145.4 13.6
Depreciation.............................................. 407.3 341.7 65.6 19.2
Amortization.............................................. 390.1 362.0 28.1 7.8
-------- --------
Operating income.......................................... 414.1 362.4 51.7 14.3
-------- --------
Interest expense.......................................... 437.3 422.8 14.5 3.4
Investment income......................................... (1,022.0) (138.1) 883.9 NM
Equity in net losses of affiliates........................ 345.3 217.1 128.2 59.1
Gain from equity offering of affiliate.................... (157.8) 157.8 NM
Other..................................................... (7.0) 13.4 (20.4) NM
Income tax expense........................................ 309.3 45.4 263.9 NM
Minority interest......................................... (44.3) (66.8) (22.5) (33.7)
Extraordinary items....................................... (3.0) (25.9) (22.9) (88.4)
-------- --------
Net income (loss)......................................... $550.3 ($157.3) $707.6 NM
======== ========
Three Months Ended
September 30, Increase / (Decrease)
1998 1997 $ %
Revenues.................................................. $1,354.9 $1,204.2 $150.7 12.5%
Cost of goods sold from electronic retailing.............. 345.2 298.1 47.1 15.8
Operating, selling, general and administrative expenses... 589.0 541.1 47.9 8.9
-------- --------
Operating income before depreciation and
amortization (1) ...................................... 420.7 365.0 55.7 15.3
Depreciation.............................................. 138.5 120.2 18.3 15.2
Amortization.............................................. 132.5 121.1 11.4 9.4
-------- --------
Operating income.......................................... 149.7 123.7 26.0 21.0
-------- --------
Interest expense.......................................... 145.4 143.9 1.5 1.0
Investment income......................................... (1,023.2) (44.5) 978.7 NM
Equity in net losses of affiliates........................ 108.3 85.9 22.4 26.1
Gain from equity offering of affiliate.................... (98.2) 98.2 NM
Other..................................................... (3.5) 9.0 (12.5) NM
Income tax expense........................................ 309.0 8.5 300.5 NM
Minority interest......................................... (5.1) (27.0) (21.9) (81.1)
Extraordinary items....................................... (3.0) (3.1) (0.1) (3.2)
-------- --------
Net income (loss)......................................... $714.0 ($55.2) $769.2 NM
======== ========
- ------------
(1) Operating income before depreciation and amortization is commonly referred
to in the Company's businesses as "operating cash flow." Operating cash
flow is a measure of a company's ability to generate cash to service its
obligations, including debt service obligations, and to finance capital and
other expenditures. In part due to the capital intensive nature of the
Company's businesses and the resulting significant level of non-cash
depreciation expense and amortization expense, operating cash flow is
frequently used as one of the bases for comparing businesses in the
Company's industries, although the Company's measure of operating cash flow
may not be comparable to similarly titled measures of other companies.
Operating cash flow does not purport to represent net income or net cash
provided by operating activities, as those terms are defined under
generally accepted accounting
17
COMCAST CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED SEPTEMBER 30, 1998
principles, and should not be considered as an alternative to such
measurements as an indicator of the Company's performance. See "Statement
of Cash Flows" above for a discussion of net cash provided by operating
activities.
Operating Results by Business Segment
Domestic Cable Communications
The following table sets forth the operating results for the Company's domestic
cable communications segment (dollars in millions):
Nine Months Ended
September 30, Increase
1998 1997 $ %
Service income................................... $1,681.2 $1,537.0 $144.2 9.4%
Operating, selling, general and
administrative expenses..................... 878.7 812.4 66.3 8.2
-------- -------- ------
Operating income before depreciation
and amortization (a)........................ $802.5 $724.6 $77.9 10.8%
======== ======== ======
Three Months Ended
September 30, Increase
1998 1997 $ %
Service income................................... $571.7 $515.1 $56.6 11.0%
Operating, selling, general and
administrative expenses..................... 294.5 267.2 27.3 10.2
-------- -------- ------
Operating income before depreciation
and amortization (a)........................ $277.2 $247.9 $29.3 11.8%
======== ======== ======
- ---------------
(a) See footnote (1) on page 17.
Of the respective $144.2 million and $56.6 million increases in service income
for the nine and three month periods from 1997 to 1998, $20.0 million and $10.1
million is attributable to the effects of the acquisitions of cable
communications systems, $24.8 million and $7.7 million are attributable to
subscriber growth, $79.0 million and $28.8 million relate to changes in rates,
$14.1 million and $4.8 million are attributable to growth in cable advertising
sales and $6.3 million and $5.2 million relate to other product offerings.
Of the respective $66.3 million and $27.3 million increases in operating,
selling, general and administrative expenses for the nine and three months
period from 1997 to 1998, $10.7 million and $5.3 million is attributable to the
effects of the acquisitions of cable communications systems, $36.5 million and
$14.1 million are attributable to increases in the costs of cable programming as
a result of changes in rates, subscriber growth and additional channel
offerings, $5.8 million and $2.2 million are attributable to growth in
advertising sales and $13.3 million and $5.7 million result from increases in
the cost of labor, other volume related expenses and costs associated with new
product offerings. It is anticipated that the Company's cost of cable
programming will increase in the future as cable programming rates increase and
additional sources of cable programming become available.
18
COMCAST CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED SEPTEMBER 30, 1998
Electronic Retailing
The following table sets forth the operating results for the Company's
electronic retailing segment, consisting of the operations of QVC, Inc. and its
subsidiaries ("QVC"), a majority owned and controlled subsidiary of the Company
(dollars in millions):
Nine Months Ended
September 30, Increase
1998 1997 $ %
Net sales........................................ $1,648.5 $1,438.0 $210.5 14.6%
Cost of goods sold............................... 997.6 869.9 127.7 14.7
Operating, selling, general and administrative
expenses.................................... 359.3 337.2 22.1 6.6
-------- -------- ------
Operating income before depreciation
and amortization (a)........................ $291.6 $230.9 $60.7 26.3%
======== ======== ======
Gross margin..................................... 39.5% 39.5%
======== ========
Three Months Ended
September 30, Increase
1998 1997 $ %
Net sales........................................ $573.9 $490.6 $83.3 17.0%
Cost of goods sold............................... 345.2 298.1 47.1 15.8
Operating, selling, general and administrative
expenses.................................... 124.9 116.2 8.7 7.5
-------- -------- ------
Operating income before depreciation
and amortization (a)........................ $103.8 $76.3 $27.5 36.0%
======== ======== ======
Gross margin..................................... 39.9% 39.2%
======== ========
- ---------------
(a) See footnote (1) on page 17.
The respective increases in net sales of $210.5 million and $83.3 million for
the nine and three month periods from 1997 to 1998 are due to the effects of
6.2% and 4.3% increases in the average number of homes receiving QVC services in
the United States ("US"), increases in net sales per home and 12.5% and 11.0%
increases in the average number of homes receiving QVC services in the United
Kingdom.
The increases in cost of goods sold are primarily related to the growth in net
sales.
Of the $22.1 million increase in operating, selling, general and administrative
expenses for the nine month period from 1997 to 1998, $21.4 million is
attributable to higher variable costs associated with the increase in sales
volume. The remaining increase is attributable to personnel and facilities based
costs associated with Studio Park, QVC's new production, studio and
administrative facility which was opened in the third quarter of 1997 and
expansion in the UK and Germany, partially offset by savings in marketing and
promotional costs in the US. Of the $8.7 million increase in operating, selling,
general and administrative expenses for the three month period from 1997 to
1998, $8.9 million is attributable to higher variable costs associated with the
increase in sales volume. The remaining decrease is primarily attributable to
reduced marketing and promotional costs in the US.
19
COMCAST CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED SEPTEMBER 30, 1998
Cellular Communications
The following table sets forth the operating results for the Company's cellular
communications segment (dollars in millions):
Nine Months Ended
September 30, Increase/(Decrease)
1998 1997 $ %
Service income................................... $338.0 $335.4 $2.6 0.8%
Operating, selling, general and administrative
expenses.................................... 201.9 195.4 6.5 3.3
------ ------ -----
Operating income before depreciation
and amortization (a)........................ $136.1 $140.0 ($3.9) (2.8%)
====== ====== =====
Three Months Ended
September 30, Increase/(Decrease)
1998 1997 $ %
Service income................................... $116.7 $115.1 $1.6 1.4%
Operating, selling, general and administrative
expenses.................................... 69.3 63.7 5.6 8.8
------ ------ -----
Operating income before depreciation
and amortization (a)........................ $47.4 $51.4 ($4.0) (7.8%)
====== ====== =====
- ---------------
(a) See footnote (1) on page 17.
Service income increased by $2.6 million and $1.6 million for the nine and three
month periods from 1997 to 1998, as subscriber growth was offset, in part, by
the effects of increased use of promotional and free minute plans offered to
subscribers. These plans generally have higher access fees and increase the
minutes of use per subscriber while lowering the average rate per minute of use.
The respective $6.5 million and $5.6 million increases in operating, selling,
general and administrative expenses for the nine and three month periods from
1997 to 1998 are primarily the result of increases in commission costs
associated with more gross sales in 1998.
Consolidated Analysis
The respective $65.6 million and $18.3 million increases in depreciation expense
for the nine and three month periods from 1997 to 1998 are primarily
attributable to the effects of capital expenditures, increased losses on asset
disposals in connection with the Company's domestic cable communications rebuild
activities, the consolidation of Comcast- Spectacor and the acquisition of cable
communications systems.
The respective $28.1 million and $11.4 million increases in amortization expense
for the nine and three month periods from 1997 to 1998 are primarily
attributable to the effects of the consolidation of Comcast-Spectacor.
The $14.5 million increase in interest expense for the nine month period from
1997 to 1998 is attributable to the effects of capitalized interest associated
with the Company's investment in Sprint PCS during the nine months ended
September 30, 1997, the consolidation of Comcast-Spectacor, the E! Acquisition
and an increase in the Company's effective weighted average interest rate,
offset, in part, by lower levels of debt outstanding. The Company anticipates
that, for the foreseeable future, interest expense will be a significant cost to
the Company and will have a significant adverse effect on the Company's ability
to realize net earnings. The Company believes it will continue to be able to
meet its obligations through its ability both to generate operating income
before depreciation and amortization and to obtain external financing.
In January 1998, AT&T Corp. ("AT&T") entered into a definitive merger agreement
with Teleport Communications Group Inc. ("TCGI"). Upon closing of the merger on
July 23, 1998, the Company received 24.2 million shares of unregistered AT&T
common stock in exchange (the "Exchange") for 25.6 million shares of TCGI Class
B common stock held by the Company. As a result of the Exchange, the Company
recognized a pre-tax gain of $1.092 billion during the
20
COMCAST CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED SEPTEMBER 30, 1998
nine and three months ended September 30, 1998, representing the difference
between the fair value of the AT&T stock received and the Company's basis in
TCGI. Such gain is included in investment income in the Company's condensed
consolidated statement of operations and accumulated deficit.
During the nine and three months ended September 30, 1998, the Company recorded
a pre-tax loss of $91.2 million on certain of its investments based on a decline
in value that is considered other than temporary. Such pre-tax loss is included
in investment income in the Company's condensed consolidated statement of
operations and accumulated deficit.
In March 1998, the Company sold call options relating to its unrestricted equity
investments in Tele-Communications, Inc. ("TCI"), TCI Ventures Group, Inc. and
Liberty Media Group common stock (together, the "TCI Stock") for $20.7 million.
Such call options expire between March and September 1999. During the nine and
three months ended September 30, 1998, the Company recorded pre-tax investment
(expense) income of ($32.1) million and $8.1 million, respectively, related to
changes in the value of the call options. In addition, as of September 30, 1998,
the Company recorded net unrealized gains (losses) of $47.9 million and ($5.2)
million related to the TCI Stock, net of deferred income tax expense (benefit)
of $25.8 million and ($2.8) million, to its condensed consolidated balance
sheet, representing the increase in fair value of the TCI Stock during the nine
and three months ended September 30, 1998, respectively.
During the first quarter of 1997 the Company received 2.76 million shares of
TCGI Class A Stock from TCGI in exchange for the Company's shares of an
alternate access provider. In May 1997, the Company sold all of its shares of
TCGI Class A Stock for $68.9 million and recognized a pre-tax gain of $68.9
million. In February 1997, the Company sold options to acquire 25.0 million
shares of Nextel Communications, Inc. ("Nextel") common stock to Nextel for
$25.0 million and recognized a pre-tax gain of $5.0 million. In January 1997,
the Company sold 1.27 million shares of Time Warner, Inc. ("Time Warner") common
stock, representing the Company's entire interest in Time Warner, for $48.6
million and recognized a pre-tax loss of $3.8 million. Such pre-tax gains and
pre-tax loss are included in investment income in the Company's condensed
consolidated statement of operations and accumulated deficit.
The $128.2 million and $22.4 million increases in equity in net losses of
affiliates for the nine and three month periods from 1997 to 1998 are primarily
due to the effects of increased losses incurred by Sprint PCS (see Note 4 to the
Company's condensed consolidated financial statements included in Item 1).
In April 1998, in connection with an acquisition, TCGI issued 16.3 million
shares of its Class A Common Stock (the "TCGI Acquisition"). In November 1997,
TCGI filed a registration statement with the Securities and Exchange Commission
to sell 7.3 million shares of TCGI Class A Stock (the "TCGI Offering"). As a
result of the TCGI Acquisition and the TCGI Offering, the Company recognized a
$157.8 million and $98.2 million increase in its proportionate share of TCGI's
net assets as a gain from equity offering of affiliate for the nine and three
months ended September 30, 1998, respectively. The Company records its
proportionate share of TCGI's net losses one quarter in arrears.
The fluctuations in other (income) expense for the nine and three month periods
from 1997 to 1998 are primarily attributable to the effects of fluctuations in
the foreign currency exchange rate.
The $263.9 million and $300.5 million increases in income tax expense for the
nine and three month periods from 1997 to 1998 are primarily the result of the
effects of changes in the Company's income before taxes and minority interest,
and non-deductible foreign losses and non-deductible equity in net losses of
affiliates.
The $22.5 million and $21.9 million decreases in minority interest for the nine
and three month periods from 1997 to 1998 are primarily attributable to the
effects of changes in the net income (loss) of QVC and Comcast UK Cable, the
consolidation of Comcast-Spectacor and the E! Acquisition.
In connection with the redemption of certain indebtedness, the Company expensed
unamortized debt acquisition costs and incurred debt extinguishment costs of
$4.7 million, resulting in an extraordinary loss, net of tax, of $3.0 million or
$0.01 per common share during the nine and three months ended September 30,
1998. In connection with the refinancing of certain subsidiaries' indebtedness
and the redemption of debt, the Company expensed unamortized debt acquisition
costs and incurred debt extinguishment costs of $39.8 million and $4.7 million,
resulting in an extraordinary loss, net
21
COMCAST CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED SEPTEMBER 30, 1998
of tax, of $25.9 million or $.08 per common share and $3.1 million or $.01 per
common share during the nine and three months ended September 30, 1997,
respectively. For the nine and three months ended September 30, 1998 and 1997,
the Company's earnings (net income (loss) plus income tax expense (benefit),
equity in net losses of affiliates, fixed charges (interest expense) and
extraordinary items) were $1.645 billion, $555.7 million, $1.280 billion and
$186.2 million, respectively. Such earnings were adequate to cover the Company's
fixed charges (including interest capitalized of $18.0 million for the nine
months ended September 30, 1997) of $437.3 million, $440.8 million, $145.4
million and $143.9 million for the nine and three months ended September 30,
1998 and 1997, respectively. Fixed charges include non-cash interest expense,
net of interest capitalized, of $37.4 million, $42.7 million, $11.3 million and
$13.8 million for the nine and three months ended September 30, 1998 and 1997,
respectively.
The Company believes that its losses will not significantly affect the
performance of its normal business activities because of its existing cash, cash
equivalents, short-term investments and investments, available for sale, its
ability to generate operating income before depreciation and amortization and
its ability to obtain external financing.
The Company believes that its operations are not materially affected by
inflation.
22
COMCAST CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED SEPTEMBER 30, 1998
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is subject to legal proceedings and claims which arise in the
ordinary course of its business. In the opinion of management, the amount
of ultimate liability with respect to these actions will not materially
affect the financial position, results of operations or liquidity of the
Company.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits required to be filed by Item 601 of Regulation S-K:
10.1* Compensation and Deferred Compensation Agreement by and
between Comcast Corporation and Ralph J. Roberts (as amended
and restated effective August 31, 1998).
27.1 Financial Data Schedule.
(b) Reports on Form 8-K:
(i) Comcast Corporation ("Comcast") filed a Current Report on Form
8-K under Item 5 on September 17, 1998 relating to its
determination that it would contribute, via a capital
contribution to its wholly owned subsidiary, Comcast Cable
Communications, Inc., all of the shares in Jones Intercable,
Inc. to be acquired by Comcast from BCI Telecom Holding and
affiliates of Glenn R. Jones in transactions previously
announced by Comcast.
- ----------
* Constitutes a management contract or compensatory plan or arrangement.
23
COMCAST CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED SEPTEMBER 30, 1998
SIGNATURE
Pursuant to the requirements of the Securities and Exchange Act of
1934, the Registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
COMCAST CORPORATION
-----------------------------------
/S/ LAWRENCE S. SMITH
-----------------------------------
Lawrence S. Smith
Executive Vice President
(Principal Accounting Officer)
Date: November 16, 1998
24
COMPENSATION AND DEFERRED COMPENSATION AGREEMENT
(as amended and restated effective August 31, 1998)
AGREEMENT amended and restated as of the 31st day of August, 1998 by and
between COMCAST CORPORATION, a Pennsylvania corporation (the "Company," as
further defined in Section 12), and RALPH J. ROBERTS ("Roberts").
R E C I T A L S
WHEREAS, Roberts has been employed by the Company since he founded the
Company in 1969 and is currently Chairman of the Board of Directors; and
WHEREAS, Roberts and the Company entered into a Compensation and Deferred
Compensation Agreement and Stock Appreciation Bonus Plan, as of September 9,
1993, as amended and restated March 16, 1994 (the "1993 Agreement"), which was
approved by the Company's shareholders on June 22, 1994; and
WHEREAS, certain employment and compensation terms of the 1993 Agreement
expired on December 31, 1997; and
WHEREAS, the Company's Board of Directors (the "Board") as well as the
Board's Compensation Committee (the "Compensation Committee") and its
Subcommittee on Performance-Based Compensation (the "Subcommittee") recognize
that Roberts' contribution to the growth and success of the Company has
continued to be substantial throughout the term of the 1993 Agreement and that
without his continued leadership and vision the Company would not have achieved
and maintained its current preeminent status in the cable television and
cellular communications industries nor would the Company have achieved its
performance levels or successfully consummated the many strategic transactions
that have closed during the term of the 1993 Agreement; and
WHEREAS, the Board desires to assure the Company of Roberts' continued
employment in an executive or consultative capacity and to compensate him
therefor; and
WHEREAS, the Company's shareholders approved a 1996 Executive Cash Bonus
Plan on June 18, 1997 (the "Cash Bonus Plan"); and
WHEREAS, the Board has established the Subcommittee as a subcommittee of
its Compensation Committee comprised of two outside directors and which has the
responsibility for establishing the criteria for the payment of
performance-based compensation to Roberts and the Company's other senior
executive officers; and
WHEREAS, Roberts is currently a participant in the Company's 1992 Executive
Split Dollar Insurance Plan (the "1992 Split-Dollar Plan") and its 1994
Executive Split Dollar Insurance Plan (together, the "1992 and 1994 Split-Dollar
Plans"), each of which provides a death benefit to the Roberts family following
the death of the last survivor of Roberts and his spouse and a repayment of all
amounts advanced by the Company on behalf of Roberts and his spouse for the
purpose of assisting Roberts to maintain in force the life insurance policies
issued thereunder; and
WHEREAS, in accordance with the 1993 Agreement, the Company has increased
the life insurance protection provided for the Roberts family pursuant to the
1992 Split-Dollar Plan; and
WHEREAS, in the 1993 Agreement the Company also agreed to extend its
premium payment obligations under the 1992 Split-Dollar Plan until the death of
the survivor of Roberts and his spouse and to pay an additional annual bonus
until the death of their survivor in an amount that takes into account the
owner's share of the applicable insurance premiums and the income and gift taxes
attributable thereto; and
-2-
WHEREAS, Roberts and the Company have entered into a 1996 Split-Dollar Life
Insurance Agreement (the "1996 Split-Dollar Agreement"), which provides a death
benefit to the Roberts family following Roberts' death and a repayment of all
amounts advanced by the Company on behalf of Roberts for the purpose of
assisting Roberts to maintain in force the life insurance policies issued
thereunder; and
WHEREAS, Roberts, in preference to other forms of compensation and
incentive compensation, wishes to provide additional life insurance protection
for his family following the death of the last survivor of Roberts and his
spouse and the Committee has determined that it would be in the Company's best
interests to provide such additional protection; and
WHEREAS, in order to provide this additional insurance protection Roberts
and the Compensation Committee, upon receiving the advice of management
compensation consulting firms, have agreed that the Company will increase the
insurance protection for the Roberts family under a split-dollar arrangement
pursuant to which it will (a) continue its current practice of providing an
additional bonus to Roberts (and his surviving spouse, if any) with respect to
the portion of the premiums payable by the owner of the insurance policies and
(b) provide that such additional bonus shall also take into account the income
and gift taxes payable on such bonus; and
WHEREAS, Roberts and the Company desire to amend the 1993 Agreement in
order to replace certain tax gross-up bonuses contained therein (relating to
options owned by Roberts on Class B Common Stock of the Company) with a death
benefit in a fixed amount; and
WHEREAS, Roberts and the Company wish to confirm their other continuing
rights and obligations under all of their existing agreements, including the
1993 Agreement; and
-3-
WHEREAS, Roberts is willing to commit himself to serve the Company on the
terms herein provided;
NOW THEREFORE, in consideration of the foregoing and of the respective
covenants and agreements of the parties herein contained, the parties hereto
agree as follows:
1. Continued Service to the Company; Effect of Service Period Termination.
1.1 The Company hereby agrees to retain Roberts and Roberts hereby
agrees to continue to serve the Company, on the terms and conditions set forth
herein, for a term commencing on the date hereof and expiring on December 31,
2002 (unless Roberts' services are sooner terminated as hereinafter set forth)
(the "Service Period").
1.2 Except as specifically provided herein, the termination of
Roberts' services under Section 4 shall not affect the parties' continuing
rights and obligations under this Agreement. As more specifically provided in
Sections 6, 13 and 23.1 hereof, the termination of Roberts' services under
Section 4 also shall not affect the Company's continuing obligations under the
1993 Agreement and the other Pre-Existing Agreements (as defined in Section 6).
2. Position and Duties. During the Service Period:
2.1 Roberts shall serve as the Chairman of the Board, or such other
officer position as agreed to by Roberts and the Company (unless he chooses to
withdraw from such position in connection with his making a Consultant Election
described in Section 3.2), and, in such position, he shall have such powers and
duties as may from time to time be prescribed by the Board in accordance with
Section 4-6 of the Company's By-Laws.
2.2 As long as Roberts retains his executive status, he shall continue
to devote substantially all of his working time and effort to the business and
affairs of the Company. It is recognized that Roberts has outside interests,
including, but not limited to, serving as a director
-4-
on the boards of other corporations and that Roberts may devote a reasonable
amount of time to such outside interests.
2.3 Roberts may at any time, upon thirty (30) days notice to the
Company, elect to change his position from that of an executive to that of
consultant to the Company, without any executive duties. Such an election shall
be referred to as the "Consultant Election." If Roberts makes the Consultant
Election, he shall thereafter devote such time as may be necessary for the
performance of those duties which are reasonably requested by the Company.
2.4 In connection with his service as an executive or a consultant to
the Company, Roberts shall be based at the Company's principal executive offices
in the Delaware Valley.
2.5 The provisions of this Section 2 shall not prevent Roberts from
investing his assets in such form and manner as he chooses; provided, however,
that Roberts shall not have any personal interest, direct or indirect (other
than through the Company or its subsidiaries), financial or otherwise, in any
supplier to, buyer from, or competitor of the Company unless such interest is,
or arises solely from ownership of, less than two percent (2%) of the
outstanding capital stock of such supplier, buyer or competitor and such capital
stock is available to the general public through trading on any national,
regional or over-the-counter securities market.
3. Compensation and Related Matters.
3.1 Base Payment. For each full year included in the Service Period
the Company shall pay Roberts a base payment ("Base Payment") for all services
to be rendered each year by Roberts as an executive or a consultant hereunder of
One Million Dollars ($1,000,000) per annum (less appropriate deductions),
payable in installments at such times as the Company customarily pays its senior
executive officers (but in any event no less often than
-5-
monthly). Effective as of each January 1 (beginning in 1999) or such other date
as may be determined by the Compensation Committee, the Compensation Committee
shall adjust Roberts' Base Payment in order to reflect the greater of (i)
increases subsequent to 1997 in the Consumer Price Index for all urban consumers
published by the United States Department of Labor or (ii) the average
percentage increase in the base compensation of the five (5) employees of the
Company having the highest base compensation (other than Roberts) for the
preceding year. Once established at an increased annual rate, Roberts' Base
Payment hereunder shall not thereafter be reduced unless such reduction is
pursuant to an overall plan to reduce the salaries of all the senior executive
officers of the Company.
3.2 Performance-Based Compensation under Cash Bonus Plan. For each
full year in the Service Period during which Roberts remains an executive of the
Company, he shall be entitled to an annual performance-based cash bonus ("Cash
Bonus") of up to fifty percent (50%) of the Base Payment, determined in
accordance with, and upon satisfaction of, the performance-based standards
contained in the Cash Bonus Plan.
3.3 Expenses. During the Service Period, Roberts shall be entitled to
receive prompt reimbursement for all reasonable expenses incurred by him (in
accordance with the policies and procedures established from time to time by the
Board for its senior executive officers) in performing services hereunder,
provided that Roberts properly accounts therefor in accordance with Company
policy.
3.4 1997/1998 Split-Dollar Agreement. The Company shall assist in
providing additional survivorship life insurance protection for the benefit of
the Roberts family in accordance with the terms of a separate split-dollar
insurance agreement executed by the Company and Roberts (the "1997/1998
Split-Dollar Agreement"), which in all material respects
-6-
is similar to the form of agreement attached hereto as Appendix A. The
additional insurance shall provide the survivorship life insurance protection to
the Roberts family which is shown on Schedule A attached to the form of
agreement. This increase in insurance protection shall in no way affect the
obligation to repay to the Company all loans which it has advanced and will
advance in the future pursuant to the Split-Dollar Arrangements (as defined in
Section 3.10.1(i)). In the event the additional insurance required hereunder is
unavailable, or in the event the terms on which it may be available become too
onerous, in the mutual determination of the Company and Roberts, the Company
shall satisfy the obligations contained in this Section 3.4 by providing cash
benefits or other valuable consideration, acceptable in amount and form to
Roberts.
3.5 Other Benefits. Except as otherwise specifically provided herein,
Roberts shall continue to be eligible to participate in all employee benefit
plans and arrangements in effect on the date of this Agreement and shall
continue to obtain benefits thereunder, including, without limitation, each plan
or program for key executives, each bonus plan, savings and profit sharing plan,
supplemental pension and retirement plan, stock ownership plan, stock purchase
plan, stock option plan, life insurance plan, medical insurance plan, disability
plan, dental plan and health-and-accident plan. Except as otherwise provided
herein or as required by law, the Company shall not make any changes in any such
employee benefit plans or arrangements which would adversely affect Roberts'
rights or benefits thereunder, unless such change occurs pursuant to a program
applicable to all executives of the Company and does not result in a
proportionately greater reduction in the rights of or benefits to Roberts as
compared with any executive of the Company. Roberts shall be entitled to
participate in or receive benefits under any employee benefit plan or
arrangement made available by the Company in the future to its most senior
executives and key management employees, subject to and on a basis consistent
with the terms,
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conditions and overall administration of such plan or arrangement. No amount
paid to Roberts under any plan or arrangement presently in effect or made
available in the future shall be deemed to be in lieu of the annual Base Payment
payable to Roberts pursuant to Section 3.1. In the event any benefit provided
for in this Section 3.5 is not able to be granted to Roberts because he has
become a consultant to the Company, the Company will provide Roberts with
benefits having comparable benefits and value on an after-tax basis.
3.6 Vacations. Roberts shall be entitled to not fewer than the same
number of paid vacation days in each calendar year as he is currently entitled.
Roberts shall also be entitled to all paid holidays given by the Company to its
senior executive officers.
3.7 Perquisites. So long as he serves as Chairman of the Board or
other officer position, Roberts shall be entitled to continue to receive the
perquisites and fringe benefits appertaining to the office of the Chairman of
the Board in accordance with the Company's present practice.
3.8 Deferred Compensation. As long as Roberts and the Company so agree
in writing prior to December 31 of any calendar year (or such earlier date as
may be required by the Company's 1996 Deferred Compensation Plan), and to the
extent so agreed, the payment of all or any portion of the compensation payable
to Roberts in the next following calendar year (including, without limitation,
(i) any tax grossed-up bonus payable to Roberts to cover the owner's share of
the life insurance premiums subject to the Split-Dollar Arrangements (as defined
in Section 3.10.1(i)), and (ii) any compensation payable in such year by reason
of having been deferred from a prior year pursuant to an election made prior to
June 30 of the year prior to the year of distribution in accordance with Section
3.6.2 of the 1996 Deferred Compensation Plan) shall be deferred to a subsequent
calendar year selected by Roberts and agreed to by the
-8-
Company. Once a deferral has been agreed to pursuant to this Section 3.8, the
deferred amount shall be subject to the same terms and conditions as apply to
deferrals under the Company's 1996 Deferred Compensation Plan, including,
without limitation, the crediting of interest.
3.9 Supplemental Executive Retirement Plan. In lieu of the Cash Bonus
provided in Section 3.2, if Roberts becomes a consultant to the Company, his
employment with the Company will terminate on the day before becoming a
consultant for purposes of determining his entitlement to a Normal Retirement
Pension under Article III of the Company's Supplemental Executive Retirement
Plan adopted by the Company on July 31, 1989 (the "SERP"). Each year thereafter
the amount of Roberts' Normal Retirement Pension shall be recalculated by
adjusting the amount of his final average compensation to take into account one
hundred fifty percent (150%) of the amount he has received from the Company for
the year as compensation for performing his duties as a consultant under Section
2 of this Agreement; provided, however, that the benefit payable under the SERP
for any calendar year shall not exceed the maximum Cash Bonus that Roberts could
have received for that year if he had remained an executive for the entire year.
For purposes of the definition of final average compensation in Section 2.8 of
the SERP, the date on which Roberts ceases to perform any duties as an executive
or a consultant under Section 2 of this Agreement shall be considered his
termination of employment date. In the event Roberts dies while a consultant for
the Company: (i) his surviving spouse shall be entitled to receive an annual
death benefit for her lifetime equal to one hundred percent (100%) of the annual
pension Roberts was receiving immediately prior to his death; and (ii) for
purposes of Sections 7.2 and 7.4 (relating to the payment of benefits to an
executive's surviving spouse, Roberts' death shall be treated as having occurred
before the
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commencement of his Normal Retirement Pension (as defined therein) while
employed by the Company.
3.10 Funding of Trust.
3.10.1 Prior to the occurrence of a "Change of Control" (as
hereinafter defined), the Company shall establish a grantor trust (the "Trust"),
the terms of which shall be consistent with the requirements applicable under
the Code in order to avoid the constructive receipt of the assets held in the
Trust by Roberts or his family. The trust document for the Trust shall be in a
form that is satisfactory to both the Company and Roberts, and may, but need
not, be in substantially the same form as the model trust agreement published by
the Internal Revenue Service in Revenue Procedure 92-64. The trustee of the
Trust shall be such person or institution acceptable both to the Company and
Roberts. The Company shall contribute such amounts in cash or such assets as it
deems appropriate for the purpose of funding the deferred compensation and/or
death benefits payable under the terms of this Agreement and such other deferred
compensation or insurance plans or arrangements that may be in effect. Upon the
occurrence of a Change of Control, the Trust, if not already irrevocable, shall
become irrevocable. In addition, upon the occurrence of a Change of Control, the
Company shall be required to contribute to the Trust an amount equal to the
present value of:
(i) the portion of the remaining premiums that the Company is
obligated to pay until the death of the survivor of Roberts and his spouse to
each insurance company that has issued a policy providing a death benefit to the
Roberts family in connection with a split dollar insurance plan or agreement
between the Company and Roberts, including but not limited to the 1992 and 1994
Split-Dollar Plans, the applicable provisions of the 1993 Agreement, the 1996
Split-Dollar Agreement, the 1997/1998 Split-Dollar Agreement and this
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Agreement, including Section 7 hereof (individually, a "Split-Dollar
Arrangement"; collectively, the "Split-Dollar Arrangements");
(ii) the bonuses and tax grossed-up amounts that the Company is
obligated to pay to Roberts or his surviving spouse pursuant to the split dollar
insurance plans and agreements between the Company and Roberts, including but
not limited to the Split-Dollar Arrangements; and
(iii) all deferred compensation benefits payable to Roberts under
the terms of any nonqualified deferred compensation arrangement in which Roberts
is a participant, including, but not limited to, the Company's 1996 Deferred
Compensation Plan, the SERP and this Agreement, including Sections 3.4 (in the
event additional insurance is unavailable), 3.8 and 3.9 hereof (collectively,
the "Deferred Compensation Arrangements"); and
(iv) the Death Benefit provided in Section 3.11 hereof; where for
this purpose the present value shall be calculated using the actuarial lives
provided under standard mortality tables and a discount factor equal to the then
current yield to maturity on ten (10) year obligations of the Treasury of the
United States.
3.10.2 In addition, the Company shall have the further obligation
following a Change of Control to make such additional contributions to the
Trust, from time to time (but determined no less than annually), as may become
necessary to fully fund the benefits described above, determined in the same
manner as the initial funding obligation is determined. The assets contributed
to the Trust shall, except to the extent otherwise provided in the trust
agreement in the case of the bankruptcy or insolvency of the Company, be used
exclusively for the purpose of providing the benefits described above until all
such benefits have been fully paid, at which time the Trust may be terminated
and any remaining assets revert back to the Company.
-11-
Notwithstanding the foregoing, to the extent benefits are paid by the Company
rather than out of assets held in the Trust, the trustee may reimburse the
Company out of the Trust such amounts as have been properly paid as benefits by
the Company, but only to the extent that such reimbursement does not cause the
Trust to be less than fully funded, determined in the same manner as the initial
funding obligation is determined.
3.10.3 For purposes of this Agreement, a "Change of Control"
shall be deemed to have occurred on the date that persons other than Roberts and
members of his immediate family (or trusts for their benefit) first acquire more
than fifty percent (50%) of the voting power over all outstanding voting shares
of the Company.
3.11 Supplemental Death Benefit. In addition to the other payments
provided or referred to herein, in the event of Roberts' death during the term
of this Agreement or thereafter the Company shall pay a supplemental death
benefit of Thirty Million Dollars ($30,000,000) to Roberts' personal
representatives within six (6) months following Roberts' date of death (the
"Death Benefit").
4. Termination. Roberts' services hereunder may be terminated without any
breach of this Agreement only under the following circumstances:
4.1 Death. Roberts' services hereunder shall terminate upon his death.
4.2 Disability. If, as a result of Roberts' incapacity due to physical
or mental illness, Roberts shall have been absent from his duties hereunder for
one hundred eighty (180) consecutive calendar days, and within thirty (30) days
after written notice of termination is given (which may occur before or after
the end of such 180 day period), shall not have returned to the performance of
his duties hereunder on the basis provided for in Sections 1 and 2 hereof, the
Company may terminate Roberts' services hereunder.
-12-
4.3 Cause. The Company may terminate Roberts' services hereunder for Cause.
For purposes of this Agreement, the Company shall have "Cause" to terminate
Roberts' services hereunder at any time prior to, but not after, a Change of
Control, as defined in Section 3.10.3, upon (A) the willful and continued
failure by Roberts to substantially perform his duties hereunder or to comply
with the provisions of the Company's Code of Ethics and Business Conduct (other
than a failure resulting from Roberts' incapacity due to physical or mental
illness) for a period of sixty (60) days after demand for substantial
performance or compliance is delivered by the Company specifically identifying
the manner in which the Company believes Roberts has not substantially performed
his duties or has not complied, or (B) the willful engaging by Roberts in
misconduct which is materially injurious to the Company, monetarily or
otherwise, or (C) the willful breach by Roberts either during or after the
Service Period of any material provision of this Agreement, including, but not
limited to, Sections 8, 9 and 10 hereof. For purposes of this paragraph, no act,
or failure to act, on Roberts' part shall be considered "willful" unless done,
or omitted to be done, by him not in good faith and without reasonable belief
that his action or omission was in the best interest of the Company.
Notwithstanding the foregoing, Roberts shall not be deemed to have been
terminated for Cause unless and until there shall have been delivered to Roberts
a copy of a resolution, duly adopted by the affirmative vote of not less than
two-thirds of the entire membership of the Board at a meeting of the Board
called and held for such purpose (after reasonable notice to Roberts and an
opportunity for him, together with his counsel, to be heard before the Board),
finding that in the good faith opinion of the Board Roberts was guilty of
conduct set forth above in clause (A), (B), or (C) of the preceding sentence,
and specifying the particulars thereof in detail.
-13-
4.4 Notice of Termination. Any termination of Roberts' services by the
Company shall be communicated by written Notice of Termination to Roberts. For
purposes of this Agreement, a "Notice of Termination" shall mean a notice which
shall indicate the specific termination provision in this Agreement relied upon
and shall set forth in reasonable detail the facts and circumstances claimed to
provide a basis for termination of Roberts' services under the provision so
indicated.
4.5 Date of Termination. "Date of Termination" shall mean (i) if
Roberts' services are terminated by his death, the date of his death, (ii) if
Roberts' services are terminated pursuant to Section 4.2, hereof, thirty (30)
days after Notice of Termination is given (provided that Roberts shall not have
returned to the performance of his duties on the basis provided for in Section 2
hereof during such thirty (30) day period) or (iii) if Roberts' services are
terminated pursuant to Section 4.3 hereof, the date specified in the Notice of
Termination; provided that if within thirty (30) days after a Notice of
Termination is given the party receiving such Notice of Termination notifies the
other party that a dispute exists concerning the termination, the Date of
Termination shall be the date on which the dispute is finally determined, either
by mutual written agreement of the parties, by a binding and final arbitration
award or by a final judgment, order or decree of a court of competent
jurisdiction (the time of appeal therefrom having expired and no appeal having
been perfected).
5. Compensation Upon Termination Due to Death or During Disability.
5.1 If during the Service Period Roberts' services as an executive or
a consultant shall be terminated by reason of his death, the Company shall
continue to pay to Roberts' surviving spouse, if any, Roberts' then Base
Payment, on a monthly basis for a period of five (5) years, provided that the
payments to Roberts' surviving spouse shall cease with the
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payment due immediately following her death. This death benefit shall be in
addition to (x) the Company's obligation to provide to Roberts' spouse during
her lifetime all health plan benefits which are available from time to time to
the Company's highest paid employee, and (y) any other payments Roberts' spouse,
beneficiaries or estate may be entitled to receive pursuant to this Agreement
(including, but not limited to, Roberts' Cash Bonus with respect to any period
then ended which would have accrued to him on the basis of the Company's
performance but which has not yet been paid (the "Accrued Cash Bonus") and the
Death Benefit provided in Section 3.11), as well as under any Deferred
Compensation Arrangements, Split-Dollar Arrangements or any other pension or
employee benefit plans (collectively these arrangements and plans shall be
referred to herein as the "Benefit Plans").
5.2 During any period that Roberts fails to perform his duties
hereunder as a result of incapacity due to physical or mental illness, Roberts
shall continue to receive his Base Payment until his services are terminated
pursuant to Section 4.2 hereof or until the end of the Service Period, whichever
occurs first, as well as any other payments he may be entitled to receive
pursuant to this Agreement (including, but not limited to, his Accrued Cash
Bonus) or any Benefit Plans. After termination pursuant to Section 4.2 hereof,
Roberts shall be paid for five (5) years, on a monthly basis, an annual amount
equal to his Base Payment at the rate in effect at the time the Notice of
Termination is given, as well as any other amounts he may be entitled to receive
pursuant to this Agreement or any Benefit Plans. In the event Roberts dies
before the end of the five (5) year payment period, his surviving spouse, if
any, shall be entitled to receive (i) the remaining payments for the period as a
death benefit, provided that these payments shall cease with the payment due
immediately following her death; and (ii) all benefits described in the last
sentence of Section 5.1 hereof, as if Roberts' services had been terminated
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by reason of his death. The provisions of the preceding sentence shall not alter
or detract from any other payments that Roberts' surviving spouse, beneficiaries
or estate may be entitled to receive pursuant to this Agreement (including, but
not limited to, the Death Benefit provided in Section 3.11) or any Benefit
Plans.
5.3 If Roberts' services shall be terminated for Cause, the Company
shall pay Roberts his Base Payment due through the Date of Termination at the
rate in effect at the time the Notice of Termination is given and the Company
shall have no further obligation to Roberts under this Agreement, including, but
not limited to, the obligation to make the payments provided for in Sections 3
and 7 hereof.
5.4 If, in breach of this Agreement, the Company shall terminate
Roberts' services other than pursuant to Section 4.2 or 4.3 hereof (it being
understood that a purported termination pursuant to Section 4.2 or 4.3 hereof
which is disputed and finally determined not to have been proper shall be a
termination by the Company in breach of this Agreement), then,
(i) the Company shall pay Roberts his Base Payment through the
Date of Termination at the rate in effect at the time the Notice of Termination
is given as well as any other amount, including his Cash Bonus, with respect to
any period then ended which would have accrued to Roberts on the basis of the
Company's performance but which has not yet been paid to him;
(ii) subsequent to the Date of Termination, the Company shall pay
as severance pay to Roberts on a monthly basis (or, in the case of his Cash
Bonus, on the basis provided in the Cash Bonus Plan) for the remaining Service
Period an annual amount equal to Roberts' Base Payment at the highest annual
rate in effect at any time during the portion of the Service Period immediately
preceding the Date of Termination and his Cash Bonus; provided
-16-
that: (x) should Roberts die before the end of the Service Period, Roberts'
surviving spouse shall be entitled to the death benefit provided in Section 5.1
hereof, and all benefits described in the last sentence of Section 5.1 hereof,
as if Roberts' services had been terminated by reason of his death; and (y) the
provision of this survivor's benefit shall not alter or detract from any other
payments that Roberts' surviving spouse, beneficiaries or estate may be entitled
to receive pursuant to this Agreement (including, but not limited to, the Death
Benefit provided in Section 3.11) or any Benefit Plans; and
(iii) the Company shall maintain in full force and effect for the
continued benefit of Roberts (and for his surviving spouse, as provided in
paragraph (ii) above) for the remaining Service Period all (x) health plan
benefits available from time to time to the Company's highest paid employee, and
(y) employee benefit plans and programs in which Roberts was entitled to
participate immediately prior to the Date of Termination, including, without
limitation, the Benefit Plans.
5.5 Roberts shall not be required to mitigate the amount of any
payment provided for in this Section 5 by seeking other employment or otherwise,
nor shall the amount of any payment provided for in this Section 5 be reduced by
any compensation earned by Roberts as a result of employment by another employer
after the Date of Termination, or otherwise.
5.6 Notwithstanding anything herein to the contrary, in the event
Roberts' services are terminated on or after the occurrence of a Change of
Control, as defined in Section 3.10, such termination shall in no circumstances
be treated under the terms of this Agreement as a termination for Cause, and
Roberts shall be entitled to the same benefits as are payable with respect to a
termination of Roberts' services subject to the provisions of Section 5.4.
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6. Pre-Existing Agreements. Roberts has entered into certain agreements
with the Company providing for the deferral of income and the maintenance of
life insurance protection for the Roberts family, and he is a participant in a
supplemental retirement plan and several split-dollar life insurance plans
maintained by the Company. Each of these agreements and plans (the "Pre-Existing
Agreements") pre-date this Agreement. The parties hereto intend that the
Pre-Existing Agreements shall remain in full force and effect and, except as
expressly provided in this Agreement, the Company's obligations and liabilities
thereunder shall not be affected in any way by the Company and Roberts entering
into this Agreement or by the termination of the Service Period.
7. Split-Dollar Arrangements.
7.1 Except as otherwise provided in Section 5.3 (relating to a
termination for Cause), during the term of this Agreement and thereafter the
Company shall both: (a) pay to Roberts (or his spouse, if she survives him) the
bonuses described in Section 7.2 hereof, until the death of the last survivor of
Roberts and his spouse; and (b) satisfy its obligations under the Split-Dollar
Arrangements for all benefits granted to Roberts to date or hereunder,
cumulatively, including, but not limited to, advancing its share of the annual
premiums to the issuers of the insurance policies subject to the Split-Dollar
Arrangements (individually, an "Insurance Policy"; collectively, the "Insurance
Policies"). The form and amount of death benefit and the method of financing the
payment of premiums available to Roberts and his family under the 1992 and 1994
Split-Dollar Plans shall be continued by the Company in a substantially similar
manner even if the Company terminates the 1992 and 1994 Split-Dollar Plans with
respect to its other senior executive officers.
7.2 The bonus payments referred to in Section 7.1 hereof shall be as
follows:
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7.2.1 at least thirty (30) days before the annual premium is due
for an Insurance Policy (the "Premium") the Company shall pay to Roberts if he
is living, otherwise to his spouse if she is living, as a bonus (a "Premium
Bonus") an amount equal to that portion of the Premium which equals the economic
benefit of the insurance protection then provided to the owner of the Policy
under the Policy and the applicable Split-Dollar Arrangement on the life or
lives of such as are then living of Roberts and his spouse. The economic benefit
referred to in the preceding sentence shall be the lesser of (i) the P.S. 58
cost for the insurance protection referred to therein (as determined under
tables published by the Internal Revenue Service) and modified as appropriate
(or, if applicable, as specifically prescribed by the Internal Revenue Service)
to reflect that such insurance protection is on the joint lives of Roberts and
his spouse and that the death benefit under the Policy is payable only upon the
death of the second to die of them, and (ii) if such insurance protection is
available from the issuer of the Policy as term insurance, the premium for such
insurance protection as determined by reference to such issuer's current
published premium rate for one-year term life insurance protection available to
all standard risks; and
7.2.2 if the Company pays at least one Premium Bonus during a
calendar year, then on or before March 15th of the following year the Company
shall pay an additional bonus equal to the sum of (x) and (y), where:
(x) equals (i) the product of the aggregate Premium Bonuses
paid during such calendar year and the highest marginal income tax rate, (ii)
divided by one minus the highest marginal income tax rate, where the term
"highest marginal income tax rate" means the sum of the highest marginal
combined local, state and federal personal income tax rates (including any state
unemployment compensation tax rate, any surtax rate as well as the
-19-
Medicare hospital insurance tax rate imposed on employees under the Federal
Insurance Contributions Act), as in effect for the calendar year as to which the
Premium Bonuses relate, provided that in determining such tax rate the highest
marginal state and local income tax rates shall be reduced by such number of
percentage points as will give effect to the tax benefit obtained by Roberts (or
his surviving spouse, if applicable) in connection with the deduction of state
and local income taxes for federal income tax purposes; and
(y) equals (i) the product of the aggregate Premium Bonuses
paid during the calendar year and the highest marginal gift tax rate, (ii)
divided by one minus the highest marginal income tax rate; provided that for
this purpose the term "highest marginal gift tax rate" shall mean the highest
tax rate (including any surtax) imposed under Section 2001(c) of the Internal
Revenue Code of 1986, as amended (or any successor provision) as applied to
gifts made in the calendar year to which the Premium Bonuses relate.
8. Confidential Information. The Company, pursuant to Roberts' employment
hereunder, provides him access to and confides in him business methods and
systems, techniques and methods of operation developed at great expense by the
Company ("Trade Secrets") and which Roberts recognizes to be unique assets of
the Company's business. Roberts shall not, during or at any time after the
Service Period, directly or indirectly, in any manner utilize or disclose to any
person, firm, corporation, association or other entity, except (i) where
required by law, (ii) to directors, consultants or employees of the Company in
the ordinary course of his duties or (iii) during his employment and in the
ordinary course of his services as Chairman of the Board for such use and
disclosure as he shall reasonably determine to be in the best interest of the
Company: (a) any such Trade Secrets, (b) any sales prospects, customer lists,
products, research or data of any kind, or (c) any information relating to
strategic plans, sales, costs, profits
-20-
or the financial condition of the Company or any of its customers or prospective
customers, which are not generally known to the public or recognized as standard
practice in the industry in which the Company shall be engaged. Roberts further
covenants and agrees that he will promptly deliver to the Company all tangible
evidence of the knowledge and information described in (a), (b) and (c), above,
prior to or at the termination of Roberts' employment.
9. Prohibited Public Statements and Promotion of Goodwill.
9.1 Roberts shall not, either during or at any time after the
termination of his employment, make any public statement (including a private
statement reasonably likely to be repeated publicly) reflecting adversely on the
Company and its business prospects, except for such statements which during
Roberts' employment he may be required to make in the ordinary course of his
service as Chairman of the Board.
9.2 For a period of five (5) years following the Service Period or
following any termination of Roberts' service hereunder Roberts agrees, that
while he is alive and not disabled, he will perform such reasonable ceremonial
functions as the Company may request, and will promote the interests and
goodwill of the Company in such manner as the Company may reasonably request.
Roberts shall be entitled to receive prompt reimbursement for all reasonable
expenses incurred by him in performing such functions or duties provided that
Roberts properly accounts for such expenses.
10. Noncompetition, Noninterference and Nonsolicitation.
10.1 Subject to the geographic limitation of Section 10.2 hereof,
Roberts during the Service Period and for a period of five (5) years following
termination of his service in accordance with this Agreement shall not, directly
or indirectly, on his behalf or on behalf of any other person, firm,
corporation, association or other entity, as an employee or otherwise, engage
-21-
in, or in any way be concerned with or negotiate for, or acquire or maintain any
ownership interest in any business or activity which is the same as or
competitive with that conducted by the Company at the termination of his
service, or which was engaged in or developed by the Company at any time during
the Service Period for specific implementation in the immediate future by the
Company.
10.2 Roberts acknowledges that the Company is engaged in business
throughout the United States and in various foreign countries and that the
Company intends to expand the geographic scope of its activities. Accordingly
and in view of the nature of his position and responsibilities, Roberts agrees
that the provisions of this Section shall be applicable to each state and each
foreign country, possession or territory in which the Company may be engaged in
business during the Service Period, or, with respect to Roberts' obligations
following termination of his service, at the termination of his service or at
any time within the twelve-month period following the effective date of his
termination of service.
10.3 Roberts agrees that for a period of five (5) years following
termination of service in accordance with this Agreement, Roberts will not,
directly or indirectly, for himself or on behalf of any third party at any time
in any manner, request or cause any of the Company's customers to cancel or
terminate any existing or continuing business relationship with the Company;
solicit, entice, persuade, induce, request or otherwise cause any employee,
officer or agent of the Company to refrain from rendering services to the
Company or to terminate his or her relationship, contractual or otherwise, with
the Company; induce or attempt to influence any supplier to cease or refrain
from doing business or to decline to do business with the Company; divert or
attempt to divert any supplier from the Company; or induce or attempt to
influence any
-22-
supplier to decline to do business with any businesses of the Company as such
businesses are constituted immediately prior to the termination of service.
10.4 Roberts agrees that for a period of five (5) years following his
termination of service in accordance with this Agreement, Roberts will not
directly or indirectly, for himself or on behalf of any third party, solicit for
business, accept any business from or otherwise do, or contract to do, business
with any person or entity who, at the time of, or any time during the twelve
(12) months preceding such termination, was an active customer or was actively
solicited by the Company according to the books and records of the Company and
within the knowledge, actual or constructive of Roberts.
11. Equitable Remedies. Roberts acknowledges that his compliance with the
covenants in Sections 8, 9 and 10 of this Agreement is necessary to protect the
good will and other proprietary interests of the Company and that, in the event
of any violation by Roberts of the provisions of Section 8, 9 or 10 of this
Agreement, the Company will sustain serious, irreparable and substantial harm to
its business, the extent of which will be difficult to determine and impossible
to remedy by an action at law for money damages. Accordingly, Roberts agrees
that, in the event of such violation or threatened violation by Roberts, the
Company shall be entitled to any injunction before trial from any court of
competent jurisdiction as a matter of course and upon the posting of not more
than a nominal bond in addition to all such other legal and equitable remedies
as may be available to the Company. Roberts further agrees that, in the event
any of the provisions of Sections 8, 9 and 10 of this Agreement are determined
by a court of competent jurisdiction to be contrary to any applicable statute,
law or rule, or for any reason to be unenforceable as written, such court may
modify any of such provisions so as to permit enforcement thereof as thus
modified.
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12. Successors; Related Companies; Binding Agreement.
12.1 The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company, by agreement in
form and substance satisfactory to Roberts, to expressly assume and agree to
perform this Agreement in the same manner and to the same extent that the
Company would be required to perform it if no such succession had taken place.
Failure of the Company to obtain such agreement prior to the effectiveness of
any such succession shall be a breach of this Agreement and shall entitle
Roberts to compensation from the Company in the same amount and on the same
terms as he would be entitled to hereunder pursuant to Section 5.4 hereof,
except that for purposes of implementing the foregoing, the date on which any
such succession becomes effective shall be deemed the Date of Termination. As
used in this Agreement, "Company" shall mean the Company and any successor to
its business and/or assets as aforesaid which executes and delivers the
agreement provided for in this Section 12 or which otherwise becomes bound by
all the terms and provisions of this Agreement by operation of law.
12.2 For purposes of Sections 8, 9, 10 and 11 hereof the term
"Company" shall mean Comcast Corporation ("Comcast") as well as (i) each of its
more than fifty percent (50%) owned subsidiaries and (ii) each other entity in
which Comcast directly or indirectly has a greater than ten percent (10%) equity
interest, the fair market value of which interest is in excess of Fifty Million
Dollars ($50,000,000). In determining Comcast's equity interest for purposes of
this Section 12.2, any equity interest which Comcast has an option to purchase
shall be considered as owned by Comcast.
12.3 This Agreement and all rights of Roberts hereunder shall inure to
the benefit of and shall be binding upon Roberts' personal or legal
representatives, executors,
-24-
administrators, successors, heirs, distributees, devisees and legatees. If
Roberts should die while any amounts would still be payable to him hereunder if
he had continued to live, all such amounts, unless otherwise provided herein,
shall be paid in accordance with the terms of this Agreement to Roberts'
devisee, legatee, or other designee or, if there be no such designee, to
Roberts' estate.
13. Entire Agreement. This Agreement, the provisions of the 1993 Agreement
recited in Section 23 hereof, the Pre-Existing Agreements described in Section 6
hereof, and the 1997/1998 Split-Dollar Agreement constitute the full and
complete understanding and agreement of Roberts and the Company respecting the
subject matter hereof, and supersede all prior understandings and agreements,
oral or written, express or implied. This Agreement may not be modified or
amended orally but only by an agreement in writing, signed by the party against
whom enforcement of any waiver, change, modification, extension or discharge is
sought.
14. Headings. The section headings of this Agreement are for convenience of
reference only and are not to be considered in the interpretation of the terms
and conditions of this Agreement.
15. Actions by Board. The Company is governed by its Board and,
accordingly, all references in this Agreement to the actions and discretion of
the Company are meant and deemed to refer to the actions and discretion of the
Board.
16. Notices. Any notice required or permitted to be given under this
Agreement shall be in writing and shall be deemed to have been given when sent
by certified mail, postage prepaid, addressed as follows:
-25-
If to the Company:
35th Floor
1500 Market Street
Philadelphia, Pennsylvania 19102-2148
Attn: Corporate Secretary
If to Roberts, at his last known personal residence.
Any party may change the persons and address to which notices or other
communications are to be sent by giving written notice of such change to the
other party in the manner provided herein for giving notice.
17. Waiver of Breach. No waiver by either party of any condition or of the
breach by the other of any term or covenant contained in this Agreement, whether
by conduct or otherwise, in any one or more instances shall be deemed or
construed as a further or continuing waiver of any such condition or breach or a
waiver of any other condition, or of the breach of any other term or covenant
set forth in this Agreement. Moreover, the failure of either party to exercise
any right hereunder shall not bar the later exercise thereof.
18. Nonalienation. Roberts shall not pledge, hypothecate, anticipate or in
any way create a lien upon any amounts provided under this Agreement. This
Agreement and the benefits payable hereunder shall not be assignable by either
party without the prior written consent of the other; provided, however, that
nothing in this Section shall preclude Roberts from designating a beneficiary to
receive any benefit payable hereunder upon his death, or the executors,
administrators or other legal representatives of Roberts or his estate from
assigning any rights hereunder to which they become entitled to the person or
persons entitled thereto.
19. Governing Law. This Agreement is entered into and shall be construed in
accordance with the internal laws of the Commonwealth of Pennsylvania.
-26-
20. Continuation of Covenants. The covenants and agreements of Roberts set
forth in Sections 8, 9 and 10 hereof shall survive any termination of services,
shall continue thereafter, and shall not expire unless and except as may be
expressly set forth in Sections 8, 9 and 10 hereof.
21. Invalidity or Unenforceability. If any term or provision of this
Agreement is held to be invalid or unenforceable, for any reason, such
invalidity or enforceability shall not affect any other term or provision hereof
and this Agreement shall continue in full force and effect as if such invalid or
unenforceable term or provision (to the extent of the invalidity or
unenforceability) had not been contained herein.
22. Counterparts. This Agreement may be executed in on or more
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
23. Effect on 1993 Agreement and on Certain Conditions to 1996 Split-Dollar
Agreement.
23.1 1993 Agreement.
23.1.1 This Agreement is intended to replace and supersede the
1993 Agreement, except for Sections 3(b), 3(c), 3(e), 3(i), 5, 6, 7, 8
(including, as to Section 8, the definition of "Options" in the Recitals of the
1993 Agreement, which definition is hereby amended to include any and all
non-qualified options issued or to be issued subsequent to March 16, 1994) and
13 through 23 thereof, all of which provisions of the 1993 Agreement shall
remain in effect (except as amended by Section 23.1.2 below), as well as any
other provisions of the 1993 Agreement (to the extent not inconsistent with this
Agreement) which are necessary to remain in effect in order to effectuate any or
all of the above-referenced provisions.
-27-
23.1.2 Notwithstanding anything to the contrary in Section 23.1.1
of this Agreement, Sections 3(b), 3(c), 8(b) and 8(c), as well as the
parenthetical clause in the first sentence of Section 3(i), of the 1993
Agreement shall be amended and replaced in full by the provisions of Section
3.11 of this Agreement. The parties hereby agree that the Company shall not pay
the Stock Appreciation Bonus provided in Section 3(b) of the 1993 Agreement or
the mandatory Tax Grossed-Up Bonus provided in Section 8(b) of the 1993
Agreement following the exercise of any of Roberts' options to purchase shares
of Class B Common Stock of the Company.
23.2 Concurrent with approval of this Agreement by the Subcommittee on
December 16, 1997, the Subcommittee rescinded the resolutions adopted at its
meeting of April 15, 1996 relating to amendment of Roberts' 1996 Split-Dollar
Agreement to condition entitlements thereunder on a performance test.
-28-
IN WITNESS WHEREOF, the parties have executed this amended and restated
Agreement on the dates set forth below.
Attest: COMCAST CORPORATION
/s/ Stanley Wang By: /s/ Joseph S. Smith August 31, 1998
Secretary Title: Executive V.P.
Witness:
/s/ ____________________ /s/ Ralph J. Roberts August 31, 1998
Ralph J. Roberts
-29-
Appendix A
1997/1998 SPLIT-DOLLAR LIFE
INSURANCE AGREEMENT
(as amended and restated effective August 31, 1998)
AGREEMENT amended and restated as of the 31st day of August, 1998, by and
among Comcast Corporation, a Pennsylvania corporation (the "Corporation"), Ralph
J. Roberts, Sr., an executive of the Corporation (the "Employee"), and Sheldon
M. Bonovitz, Trustee U/T/A of Ralph J. and Suzanne F. Roberts, dated January 13,
1998 (the "Owner").
R E C I T A L S
WHEREAS, the Employee has rendered loyal and valuable service to the
Corporation; and
WHEREAS, the Employee and the Corporation have previously entered into
several split-dollar life insurance agreements in order to provide life
insurance protection for the Employee's family; and
WHEREAS, in the Compensation and Deferred Compensation Agreement as of
December 16, 1997, as amended and restated effective August 31, 1998 (the
"Compensation Agreement"), the Corporation agreed to provide additional life
insurance protection for the Employee's family by advancing a portion of the
annual premiums for such protection pursuant to a split-dollar life insurance
arrangement on the terms and conditions contained herein; and
WHEREAS, the Owner has applied for the additional policies insuring the
life of last survivor of the Employee and his spouse listed on Schedule A
attached to this Agreement (individually, a "Policy"; collectively, the
"Policies") and, upon their issuance, will possess all incidents of ownership in
and to the Policies; and
WHEREAS, the parties desire to enter into this split-dollar agreement with
respect to the Policies to provide that the Corporation will advance a portion
of the annual premiums due on the Policies on the terms and conditions
hereinafter set forth, the Owner will collaterally assign the Policies to the
Corporation to secure the repayment of the amounts advanced, and the Corporation
will have a security interest in the aggregate cash surrender value of the
Policies and in the proceeds thereof;
NOW THEREFORE, in consideration of the premises and the mutual promises
contained herein and intending to be legally bound, the parties hereby agree as
follows:
1. Policies. The parties have taken the actions necessary to cause each
insurance company identified on Schedule A (individually, an "Insurer") to issue
its Policy to the Owner, and shall take any further action that may be necessary
to cause each Policy to conform to the
provisions of this Agreement. The parties agree that each Policy shall be
subject to the terms and conditions of this Agreement and of the collateral
assignment filed with the Insurer relating to its Policy.
2. Ownership Rights. Except as otherwise provided herein, the Owner shall
be the sole and absolute owner of each Policy and may exercise all ownership
rights granted to the owner thereunder.
3. Payment of Annual Premiums.
3.1 The Owner shall pay each annual premium for a Policy (a "Premium")
on or before its due date or within the grace period provided therefor under the
Policy (the "Premium Due Date") as follows:
3.1.1 At least fifteen (15) days before the Premium Due Date, the
Owner shall pay the portion of the Premium that would be includable in the gross
income of the insured for federal income tax purposes if not paid by the insured
(the "Taxable Portion") and shall send evidence of its payment to the
Corporation.
3.1.2 Upon receipt of the Owner's evidence of payment, the
Corporation promptly shall advance to the Owner the remaining portion of the
Premium (the "Remaining Portion"), or in its discretion the Corporation may pay
its advance directly to the Insurer.
3.1.3 The obligation of the Corporation to advance the Remaining
Portion of a Premium under Section 3.1.2 is conditioned upon the Owner's payment
of the Taxable Portion of the Premium under Section 3.1.1.
3.2 The obligation of the Corporation to make the annual payments
provided in Section 3.1 hereof shall be governed by Compensation Agreement.
Accordingly, if it is determined that the Employee's services are terminated for
"Cause" (as defined in Section 4.3 of the Compensation Agreement), the
Corporation shall have no further obligation to make payments under Section 3.1
following the Employee's Date of Termination, as determined under Section 4.5 of
the Compensation Agreement.
4. Proof of Payment of Advances. The Corporation shall, upon request,
promptly furnish the Owner evidence of timely payment of each advance paid
directly to the Insurer under Section 3.1.2.
5. Collateral Assignment of Policies. To secure the repayment to the
Corporation of the amounts it advances to the Owner under Section 3.1.2, the
Owner has, contemporaneously herewith, assigned each Policy to the Corporation
as collateral, under instruments which in all material respects are the same as
the form attached hereto as Addendum A. The collateral assignment of a Policy to
the Corporation hereunder shall not be terminated, altered or amended by the
Owner, without the express written consent of the Corporation. The parties
hereto agree to take all action necessary to cause each collateral assignment to
conform to the provisions of
-2-
this Agreement. In the event of any inconsistency between the terms of this
Agreement and the terms of a collateral assignment, the terms of this Agreement
shall control.
6. Limitation on Policy Disposition. During the period that a collateral
assignment of a Policy is in effect, the Owner shall not borrow from, pledge,
transfer or assign the Policy and shall not sell, surrender or cancel the
Policy, change the beneficiary designation provision or terminate the dividend
election without the express written consent of the Corporation, which consent
shall not be unreasonably withheld.
7. Policy Proceeds.
7.1 Upon the death of the Employee (or his wife, if she survives him),
the Corporation and the Owner shall promptly take all action necessary to obtain
the death benefit provided under each Policy.
7.2 The Corporation shall have the unqualified right to receive a
portion of each Policy's death benefit equal to the total amount that it
advanced with respect to the Policy under Section 3.1.2. The balance of the
death benefit, if any, shall be paid directly to the beneficiary or
beneficiaries designated by the Owner, in the manner and the amount or amounts
provided in the beneficiary designation provision of the Policy. In no event
shall the amount payable to the Corporation hereunder with respect to a Policy
exceed the amount of the Policy's death benefit. The parties agree that the
beneficiary designation provision of each Policy shall conform to the provisions
hereof.
8. Termination.
8.1 This Agreement shall terminate, without notice, upon the surrender
of the Policies by the Owner with the written consent of the Corporation as
provided in Section 6.
8.2 In addition, either the Owner or the Employee may terminate this
Agreement by written notice to the other parties hereto at any time that the
cash surrender value of each Policy at least equals the total amount that the
Corporation has advanced with respect to the Policy under Section 3.1.2. Such
termination shall be effective as of the date of such notice. The Corporation
may not terminate this Agreement.
9. Release of Policy Collateral.
9.1 For sixty (60) days after the earlier of the date of termination
of this Agreement or the date on which the Corporation's payment obligation
ceases under Section 3.2 hereof as a result of the termination of the Employee's
services for Cause, the Owner shall have the option of obtaining the release of
the collateral assignment of each Policy to the Corporation. To obtain such
release, the Owner shall pay or cause to be paid to the Corporation an amount
equal to the Policy's then cash surrender value. Upon receipt of that payment,
the Corporation promptly shall release the collateral assignment of the Policy.
-3-
9.2 If the Owner fails to exercise such option within such sixty (60)
day period with respect to a Policy, then the Owner shall transfer the Policy to
the Corporation. Thereafter, neither the Owner, the Employee, his wife nor their
respective heirs, assigns or beneficiaries shall have any further interest in
and to the Policy, either under the terms thereof or under this Agreement.
10. Insurer. An Insurer shall be fully discharged from its obligations
under a Policy by payment of the Policy death benefit to the beneficiary or
beneficiaries named in the Policy, subject to the terms and conditions of the
Policy. In no event shall an Insurer be considered a party to this Agreement, or
any modification or amendment hereof. No provision of this Agreement, nor of any
modification or amendment hereof, shall in any way be construed as enlarging,
changing, varying, or in any other way affecting the obligations of an Insurer
as expressly provided in the Policy, except insofar as the provisions hereof are
made a part of the Policy by the collateral assignment executed by the Owner and
filed with the Insurer in connection herewith.
11. Amendment. This Agreement may not be amended, altered or modified,
except by a written instrument signed by the parties hereto, or their respective
successors or assigns, and may not be otherwise terminated except as provided
herein.
12. Succession. This Agreement shall be binding upon and shall inure to the
benefit of the Corporation and its successors and assigns, and the Employee, his
wife, the Owner and their respective successors, assigns, heirs, executors,
administrators and beneficiaries.
13. Notices. Any notice, consent or demand required or permitted to be
given under the provisions of this Agreement shall be in writing, and shall be
signed by the party giving or making the same. If such notice, consent or demand
is mailed to a party hereto, it shall be sent by United States certified mail,
postage prepaid, addressed to such party's last known address as shown on the
records of the Corporation. The date of such mailing shall be deemed the date of
notice, consent or demand.
14. Captions. The captions of the Sections herein are inserted as a matter
of convenience of reference only and in no way define, limit or describe the
scope of this Agreement or any provisions hereof.
15. Governing Law. This Agreement, and the rights of the parties hereunder,
shall be governed by and construed in accordance with the internal laws of the
Commonwealth of Pennsylvania and shall be enforced in the Commonwealth of
Pennsylvania.
16. Trust Agreement. Recognizing that the Owner is a trustee and that the
Policies are held in trust, the parties agree that the terms of this Agreement
shall control in the event of any inconsistencies between the terms of this
Agreement and the terms of any trust agreement.
-4-
IN WITNESS WHEREOF, the Corporation has caused the amendment and
restatement of this Agreement to be executed by its duly authorized officers and
the Employee and the Owner have hereunto set their hands and seals on the dates
set forth below.
Attest: COMCAST CORPORATION
By: ___________, 1998
- ------------------------- ---------------------------
Secretary Title:
------------------------------ ___________, 1998
Ralph J. Roberts, Sr.
------------------------------ ___________, 1998
Sheldon M. Bonovitz, Trustee
U/T/A of Ralph J. and Suzanne F.
Roberts, dated January 13, 1998
Schedule A
The following survivorship life insurance policies are subject to this
1997/1998 Split-Dollar Life Insurance Agreement:
Insurer Policy No. Initial Face Amount
Phoenix Home Life Mutual
Insurance Company 2 745 863 $ 5,000,000
Phoenix Home Life Mutual
Insurance Company 2 751 332 962,000
Phoenix Home Life Mutual
Insurance Company 2 751 655 750,000
Massachusetts Mutual Life
Insurance Company (formerly
Connecticut Mutual) 6,262,844 8,000,000
Massachusetts Mutual Life
Insurance Company (formerly
Connecticut Mutual) 6,277,777 3,000,000
John Hancock Life Insurance Co. 5700110 5,000,000
The New England Life Insurance
Company 1Z002938 8,000,000
Transamerica Occidental Life
Insurance Company 60026274 2,000,000
-6-
Addendum A
COLLATERAL ASSIGNMENT
A. FOR VALUE RECEIVED the undersigned hereby assigns, transfers and sets
over to Comcast Corporation, a Pennsylvania corporation, its successors and
assigns (the "Assignee") Policy number policy~ issued by Insurer~ (the
"Insurer") and any supplementary contracts issued in connection therewith
(together, the "Policy"), upon the life of the survivor of Ralph J. Roberts, Sr.
and Suzanne F. Roberts, residents of the Commonwealth of Pennsylvania, and all
claims, options, privileges, rights, titles and interests therein and thereunder
(except as provided in Paragraph B hereof), subject to all the terms and
conditions of the Policy and to all superior liens, if any, which the Insurer
may have against the Policy. The undersigned by this instrument agrees and the
Assignee by the acceptance of this assignment agrees to the conditions and
provisions herein set forth.
B. It is expressly understood and agreed that the Assignee shall have the
sole right to collect from the Insurer the net proceeds of the Policy when it
becomes a claim by death or maturity and that all other rights under the Policy,
including, by way of illustration and not limitation, the right to surrender the
Policy, the right to obtain loans or advances on the Policy, the right to
designate and change the beneficiary, and the right to elect and to receive
dividends, are reserved exclusively to the undersigned and are excluded from
this assignment and do not pass by virtue hereof and may be exercised by the
undersigned on its sole signature. Nothing herein shall affect funds, if any,
now or hereafter held by the Insurer for the purpose of paying premiums under
the Policy.
C. This assignment is made and the Policy is to be held as collateral
security for any and all liabilities of the undersigned to the Assignee, either
now existing or that may hereafter arise under the Insurance Agreement
(collectively, the "Liabilities").
D. The Assignee covenants and agrees with the undersigned as follows:
1. That any balance of sums received hereunder from the Insurer
remaining after payment of the then existing Liabilities, matured or unmatured,
shall be paid by the Assignee to the persons entitled thereto under the terms of
the Policy had this assignment not been executed; and
2. That the Assignee shall upon request forward without unreasonable
delay to the Insurer the Policy for endorsement for any designation or change of
beneficiary or any election of an optional mode of settlement.
E. The Insurer is hereby authorized to recognize the Assignee's claims to
rights hereunder without investigating the reason for any action taken by the
Assignee after the Policy becomes a claim by death or maturity, including the
application to be made by the Assignee of any amounts to be paid to the
Assignee. The sole signature of the Assignee shall be sufficient for the
exercise of the rights under the Policy assigned hereby and the sole receipt of
the Assignee for any sums received shall be a full discharge and release
therefor to the Insurer. Checks for all or any part of the sums payable under
the Policy and assigned herein, shall be drawn to the exclusive order of the
Assignee if, when, and in such amounts as may be, requested by the Assignee.
F. The exercise of any right, option, privilege or power given herein to
the Assignee shall be at the option of the Assignee; the Assignee may exercise
any such right, option, privilege, or power without notice to, or assent by, or
without affecting the liability of, or releasing any interest hereby assigned
by, the undersigned.
G. The Assignee may take or release other security, may release any party
primarily or secondarily liable for any of the Liabilities, may grant
extensions, renewals or indulgences with respect to the Liabilities, or may
apply to the Liabilities in such order as the Assignee shall determine, the
proceeds of the Policy hereby assigned or any amount received on account of the
Policy by the exercise of any right permitted under this assignment, without
resorting to other security.
H. The undersigned declares that no proceedings in bankruptcy are pending
against it and that its property is not subject to any assignment for the
benefit of creditors.
Signed and sealed as of the _____ day of _______.
Witness:
_________________________ _______________________
Owner
Sheldon M. Bonovitz, Trustee,
U/T/A of Ralph J. and Suzanne F. Roberts,
dated January 13, 1998
CORPORATION'S CONSENT
As of the ______ day of _________, Comcast Corporation, having reviewed the
foregoing collateral assignment, does hereby consent and agree to the terms and
conditions therein set forth.
Attest: COMCAST CORPORATION
By:______________________ By:______________________
Title: Secretary Title:
5
0000022301
COMCAST CORPORATION
1,000,000
9-MOS
DEC-31-1998
SEP-30-1998
435
39
622
119
368
3,200
4,973
(1,664)
14,366
1,678
6,597
534
32
369
1,717
14,366
4,036
4,036
998
3,622
(842)
0
437
818
309
553
0
(3)
0
550
1.45
1.32
Current assets includes investments available for sale of $1,664.
Loss before income tax expense and other items excludes the effect of
minority interests, net of tax, of $44.3.
