HomeMy WebLinkAbout86-22 - Reorganization of Group W Cable Inc.RESOLUTION No. 86 -22
A RESOLUTION OF THE CITY COUNCIL OF THE CITY
OF NEWPORT BEACH CONSENTING TO THE REORGANIZA-
TION OF GROUP W CABLE, INC. PURSUANT TO SECTION
5.44.060 (g) OF THE NEWPORT BEACH MUNICIPAL
CODE.
WHEREAS, Group W Cable, Inc., now a part of Westing-
house Broadcasting and Cable Corporation, plans to reorganize;
and
WHEREAS, Section 5.44.060 (g) of the Newport Beach
Municipal Code provides that a cable television franchise can-
not be sold, transferred or otherwise disposed of, in whole or
in part, by sale, merger, consolidation or otherwide, without
the prior consent of the City Council, expressed by resolution;
and
WHEREAS, COMCAST has requested the City Council of the
City of Newport Beach to consent to the reorganization, as set
forth in the attached correspondence dated March 3, 1986, attached
hereto and marked Exhibit "A" and incorporated herein as though
fully set forth at length; and
WHEREAS, the City Council finds and determines that the
reorganization into COMCAST CABLE COMMUNICATIONS, INC., a parent
company, is in the best interests of the City of Newport Beach.
NOW, THEREFORE, BE IT RESOLVED by the City Council of
the City of Newport Beach, that pursuant to Section 5.44.060 (g)
of the Newport Beach Municipal Code, the City Council hereby
consents to subject reorganization.
BE IT FURTHER RESOLVED that the City Clerk is hereby
authorized and directed to send a certified copy of this Resolu-
tion to COMCAST CABLE COMMUNICATIONS, INC., evidencing the City
of Newport Beach's prior consent to the merger.
City Clerk
ADOPTED this 24th d, ay of March 1986
Comcast Cable
Communications, Inc.
One Belmont Avenue
Bala Cynwyd, PA 19004
215 667 -4200
(B CommmST
March 3, 1986
Mr. Kenneth J. Delino
Executive Assistant to City Manager
• City of Newport Beach
3300 Newport Boulevard, P. 0. Box 1768
Newport Beach, California 92663
Re: Cable Franchise Transfer
Dear Mr. Delino:
This letter is written in reference to Comcast's plans to purchase
a portion of the stock of Group W Cable, Inc. and thereafter to own
and operate the cable system in the City of Newport Beach, California.
As has been communicated to you previously, Westinghouse Broadcasting
and Cable, Inc. is selling all of the stock of Group W Cable, Inc. to
a group of buyers, including affiliates of major cable operators such
as Comcast, American Television and Communications, Inc. (ATC) and
Tele- Communications, Inc. (TCI). Closing of this transaction is
expected in June, 1986. Group W Cable, Inc. will continue to own and
operate the cable system serving the City of Newport Beach. However,
the stock of Group W Cable, Inc. will be owned by these buyers instead
of Westinghouse Broadcasting and Cable, Inc.
The buyers intend to allocate the Group W Cable cable communications
systems among themselves at or after the time of their acquisition.
Under the plan of allocation, the cable communications system serving
the City of Newport Beach will be owned and operated by Comcast Cable -
vision of California, a Partnership.
On behalf of both the buyers and the Comcast Partnership which will
become the owner of the City of Newport Beach cable system, I am
authorized to accept the terms of the Franchise Agreement.
If you have any questions concerning the foregoing, please do not
hesitate to raise them with me.
Very truly yours,
Robert B. Clasen
,President
RBC /mm
EXHIBIT "A"
COMCAMY
CORPORATION
ONE BELMONT AVENUE • BALA- CYNWYD, PENNSYLVANIA 19004- (215)667 -4200
• SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10 -Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended September 30, 1985 Commission file number 0 -6983
COMCAST CORPORATION
(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.)
Suite 22T1 One Belmont Avenue,Bala Cynwyd, PA 19004
(Address of principal executive offices)
Registrant's telephone number, including area code (215) 667 -4200
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
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, at September 30, 1985:
Class A Common Stock, $1 par value 18,147,925
Class B Common Stock, $1 par value 3,150,000
-V
COMCAST CORPORATION AND SUBSIDIARIES
FORM 10 —Q
Quarter Ended September 30, 1985
INDEX
Page
• Number
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance
Sheet September 30, 1985 (Unaudited)
and December 31, 1984
1 — 2
Condensed Consolidated Statement of
Operations and Retained Earnings Nine
and Three Months Ended September 30,
1985 and 1984 (Unaudited)
3
Condensed Consolidated Statement of
Changes in Financial Position Nine
Months Ended September 30, 1985 and
1984 (Unaudited)
4
Notes to Condensed Consolidated
Financial Statements (Unaudited)
5
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of
Operations
6 — 9
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8 —K
9
COMCAST CORPORATION AND SUBSIDIARIES
FORM 10 —Q
Quarter Ended September 30, 1985
Part I FINANCIAL INFORMATION
Item 1. Financial Statements
• ---------------------------
Condensed Consolidated Balance Sheet
Assets
Current Assets
Page 1
(Dollars in thousands)
September 30, December 31,
1985 1984
(Unaudited) N
Cash and short -term investments
$187,428
$120,820
Accounts receivable, less allowance for
doubtful accounts of $1,329 and $913
7,079
3,973
Other current assets
9,771
8,184
Total Current Assets
--------
204,278
--------
-- - - - - --
132,977
-- - - - - --
Short —Term Investments — designated
11989
Investment in Affiliates
36,551
12,176
Property and Equipment
159,014
148,256
Less accumulated depreciation
61,581
50,517
-- 97,433
97,739
Deferred Charges
15,192
13,221
$353,454
-- ------
--------
$258,102
-- -- ----
--- - -- --
See notes to condensed consolidated financial statements
F
COMCAST CORPORATIOM AND SUBSIDIARIES Page 2
FORM 10 -Q
Quarter Ended September 30, 1985
Condensed Consolidated Balance Sheet - Continued
------------------------- ------ ---------- - -----
(Dollars in thousands)
September 30, December 31,
• - -1985w �1984N
(Unaudited)
Liabilities and Stockholders' Equity
---- ----------- ------- -----------w
Current Liabilities
Accounts payable and accrued expenses
$ 16,643
$ 19,002
Accrued interest
4,654
2,755
Subscribers' advance payments
3,845
3,752
Income and other taxes
1,261
1,299
Current portion of long -term debt
5,012
3,481
Total Current Liabilities
31,415
30,289
w
-- - - - - --
-- - - - - --
Long -Term Debt, less current portion
195,756
126,117
Deferred Income Taxes
17,461
15,318
Minority Interest in Subsidiary
1,609
1,692
Stockholders' Equity
-- - - - - --
-- - - - - --
Class A Common Stock, $1 par value
Authorized 80,000,000 shares
Issued 19,099,927 shares and
16,925,067 shares
19,100
16,925
Class B Common Stock, $1 par value
Authorized 10,000,000 shares
Issued and outstanding 3,150,000 shares
3,150
3,150
Additional capital
41,896
27,194
Retained earnings
43,581
37,931
107,727
85,200
Less 952,002 Class A Common Stock
In Treasury - at cost
514
514
107,213
-- 84,686
$353,454
-- - - - - --
--------
$258,102
-- - - - - --
-- - - - ---
See notes to condensed consolidated financial statements
7
Ll
0
COMCAST CORPORATION AND SUBSIDIARIES Page 3
FORM 10 -Q
Quarter Ended September 30, 1985
Condensed Consolidated Statement of Operations and Retained Earnings
(Unaudited)
•
Service Income
Costs and Expenses
Operating
Selling, general and
administrative
Depreciation and amortization
Interest (income) expense,
net of interest (expense)
income of ($12„140); $6,906;
($4,615) and $2,777
Earnings Before Income Taxes
Income Taxes
Net Earnings
Retained Earnings
Balance - beginning of period
Dividends declared
Balance - end of period
Earnings per Share
Primary
Fully diluted
Weighted Average Number of Common
and Common Equivalent Shares Out-
standing During the Period
Primary
Fully diluted
Dividends Declared Per Share
(Dollars in thousands, except per share data)
Nine Months Ended
Three Months Ended
September 30,
September 30,
1985
1984
1985
1984
---- ---
$86,700
- -- ----
$75,807
-- --- --
$29,983
- - -- - --
$26,322
35,929
32,112
12,421
11,020
26,947
17,253
11,952
5,823
12,249
10,536
4,142
3.502
( 600)
2,172
( 179)
659
- - - - - --
74,525
-------
62,073
----- --
28,336
- - - - --
21,004
- -- - ---
12,175
- - - - - --
13,734
- --- ---
1,647
-- ----
5,318
4,870
5,769
554
2,234
-------
7,305
- - - - - --
7,965
------
1,093
- - - - - --
3,084
37,931
27,208
43,162
31,419
( 1,655)
( 1,041)
( 674)
( 371)
- --- ---
$43.581
- ---- --
$34,132
- --- ---
$43,581
- -- ----
$34,132
$ .36
$ .42
$ .05
$ .16
$ .36
$ .40
$ .05
$ .15
20,530
19035
21,360
19,102
20,544
21,698
21060
21,769
$ .08
$ .05
$ .03
$ .02
See notes to condensed consolidated financial statements
0
COMCAST CORPORATION AND SUBSIDIARIES
FORM 10 -Q
Quarter Ended September 30, 1985
Condensed Consolidated Statement of Changes in Financial Position
(Unaudited)
•
Source of Funds
Operations
Net earnings
Add noncash items
Depreciation and amortization
Deferred income taxes
Funds provided by operations
Proceeds from long -term borrowings
Issuance of common stock upon
conversion of debentures
Proceeds from exercise of stock
options
Utilization of short -term
investments - designated
Increase in current liabilities
Application of Funds
Additions to property and
equipment, net
Increase in investment in affiliates
Retirement of bonds upon conversion
to common stock
Repayment of long -term debt and
change in current maturities
Dividends declared
Increase in accounts receivable
and other current assets
Increase in deferred charges
Minority interest in subsidiary
Increase in Cash and Short -Term
Investments
Page 4
(Dollars in thousands)
Nine Months Ended September 30,
1985 1984
8 7,305 E 7,965
12,249 10,536
2,142 3,839
21,696 22,340
93,353 16,334
16,625
252 221
11989 5,372
1,126 9,754
135,041 54,021
10,858 11,685
24,375 15,146
17,385
6,329
5,328
1,655
1,041
4,693
2,413
3,055
928
83
68,433 36,541
$66,608 817,480
- - -- --- -- --- --
------- - - - - ---
See notes to condensed consolidated financial statements
COMCAST CORPORATION AND SUBSIDIARIES Page 5
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Quarter Ended September 30, 1985
1. Condensed Consolidated Financial Statements
The condensed consolidated balance sheet at December 31, 1984 has been
condensed from the audited financial statements at that date. The condensed
consolidated balance sheet at September 30, 1985, the condensed consolidated
statement of operations and retained earnings for the nine and three months
ended September 30, 1985 and 1984, and the condensed consolidated statement of
changes in financial position for the nine months ended September 30, 1985 and
1984 have been prepared by the Company without audit. In the opinion of manage-
ment, all adjustments (which include only normal recurring adjustments)
necessary to present fairly the financial position, results of operations, and
changes in financial position at September 30, 1985 and for all periods present-
ed have been made.
Certain information and note disclosures normally included in the financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted. It is suggested that these condensed consoli-
dated financial statements be read in conjunction with the financial statements
and notes thereto included in the Company's December 31, 1984 Annual Report on
Form 10 -K filed with the Securities and Exchange Commission. The results of
operations for the period ended September 30, 1985 are not necessarily
indicative of operating results for the full year.
2. Earnings Per Share
Primary earnings per share is computed based on the weighted average number
of shares outstanding plus shares issuable under stock option plans, reduced by
the shares which could be purchased with the assumed proceeds from stock option
shares. The primary earnings per share does not give effect to the conversion
of convertible subordinated debentures when such debentures are not considered
common stock equivalents or have an antidilutive effect on earnings per share.
Fully diluted earnings per share assumes conversion of all debentures unless
antidilutive.
3. Common Stock and Additional Capital
The financial statements and all share and per share data have been
retroactively adjusted for the three - for -two stock split effected by a 50% stock
dividend on June 27, 1985.
/O
COMCAST CORPORATION AND SUBSIDIARIES Page 6
FORM 10 —Q
Quarter Ended September 30, 19.85
0
Liquidity and Capital Resources
Cable communications is a capital intensive business requiring continual
financing for development and expansion. For the nine months ended September 30,
1985, capital expenditures were approximately $11,000,000. The Company's
anticipated capital expenditures for 1985 (excluding any expenditures relating
to the Philadelphia franchise and the acquisitions described below), are
estimated to be $15,000,000 which will include expenditures to complete
construction, expansion and modernization of various cable communications
systems.
On September 30, 1985 the Company acquired all of the assets of two corpor-
ations which operate the cable communications systems serving the residents of
the City of Pontiac and Waterford Township, Michigan. The aggregate purchase
price was approximately $24,000,000. The Company intends to finance this
acquisition through a non - majority owned joint venture or limited partnership
and has used its own resources until this financing is arranged. The Company
has included the acquisition as an investment in affiliates on the Company's
balance sheet. In the event the Company does not finance this acquisition by
these methods, the Company will use its own resources and will reclassify the
assets acquired to the appropriate balance sheet classifications.
A partnership comprised of two subsidiaries of the Company has been awarded
a franchise, and on September 12, 1985 executed a definitive franchise agree-
ment, to construct and operate a cable communications system in the Northeast
quadrant of the City of Philadelphia. The Company has committed to provide up to
$60,000,000 to the partnership if funds are not otherwise available.
On June 24, 1985 the Company entered into a letter of intent to acquire all
of the outstanding capital stock of Citizens Cable Communications, Inc.
( "Citizens "), which operates the cable communications systems serving the
residents of the Fort Wayne, Indiana area. The aggregate purchase price
(including existing debt of $16,000,000) is approximately $62,000,000, subject
to certain adjustments contained in the letter of intent. The consummation of
the acquisition, anticipated to occur by January 31, 1986, is subject to various
conditions, including the execution of an acquisition agreement, approval of the
transaction by Citizens' shareholders, approval of the transfer of the systems'
franchises by the franchising municipalities, approval of the transfer of
certain licenses by the FCC and the expiration or termination of "specified
waiting periods under Federal anti -trust law.
0
COMCAST CORPORATION AND SUBSIDIARIES Page 7
FORM 10 -Q
Quarter Ended September 30, 1985
The Company may finance the Philadelphia franchise and the Citizens
acquisitions discussed above through borrowings and /or the participation of a
• partner or partners in a joint venture or limited partnership. In the event the
Company does not use these financing techniques the Company will be obligated to
meet these commitments using its own financial resources. In the event the
financing of the Philadelphia franchise or either of the acquisitions discussed
above is through a non - majority owned joint venture or limited partnership, the
entity's results of operations will be included in the Company's results of
operations to the extent required by the equity method of accounting. The
Company expects that it will manage the business of the entity and receive
management fees in such a case resulting thereto. Otherwise, the results of
operations of the entity will be consolidated with the Company's results of
operations, which may have a negative impact on those results.
The Company's ability to generate cash adequate to meet its needs
depends on its results of operations and on the availability of external
financing. funds provided by operations of $21,696,000 and $22,340,000 for the
nine months ended September 30, 1985 and 1984, respectively and of $5,478,000
and $7,492,000 for the three months ended September 30, 1985 and 1984,
respectively, include net earnings plus noncash charges thereto such as
depreciation, amortization and deferred income taxes. External sources of
funds includes issuance of securities to the public and funds available under
bank lines of credit. It generally has been the practice of the Company to
finance a significant portion of capital expenditures . for the acquisition,
construction, development and expansion of its cable communications systems
through the proceeds of long -term indebtedness on a project basis. The Company
intends to continue this practice. In addition, the Company may consider
various other financial transactions, including joint ventures, partnerships and
the issuance of securities to finance these expenditures.
On August 9, 1985 the Company issued $50,000,000 convertible subordinated
debentures due In 2000 "eurobonds ". The eurobonds bear interest at 7% per
annum and are convertible beginning March 13, 1986 into class A common stock of
the Company at $23.875 per share.
At September 30, 1985, the Company had unused sources of liquidity,
consisting principally of cash and short -term investments of approximately
$187,000,000 and funds available under various bank lines of credit and capital
lease commitments of approximately $13,000,000.
/102
0
COMCAST CORPORATION AND SUBSIDIARIES Page 8
FORM 10 —Q
Quarter Ended September 30, 1985
Results of Operations
------------------ ---
• The growth in service income is attributable to (a) the increase in
subscribers in cable communications systems; (b) the increase in the number of
Pay Cable subscriptions; (c) higher rates in effect for both basic cable and Pay
Cable services; (d) partnership and management fees; and (e) the growth in sound
communications' service income due to continued increases in the number of
customers, increased rates and increased revenues from commercial sound
contracting services. Growth in service income is expected to continue.
/.3
Operating expenses have tended to rise along with the growth in service
income. The most significant portion of these increased expenses arose from the
cost of providing programming services to subscribers. In addition, charges
from suppliers of non —Pay Cable satellite services have begun to increase.
Increased depreciation expense is a result of increased additions to property
and equipment. These trends are expected to. continue. Reoccuring selling,
general and administrative expenses have tended to rise along with the growth in
service income.
On July 30, 1985, the Company's offer of July 16, 1985 to the Board of
Directors of Storer Communications Incorporated ( "Storer ") to acquire Storer was
not accepted. Included in selling, general and administrative expenses is
approximately $5,000,000 representing the Company's estimated liability for the
payment of fees and expenses relating to the offer. The after tax effect on net
income is approximately $2,500,000 reducing earnings per share by approximately
$.12 for the nine and three months ended September 30, 1985, respectively.
Net interest income for the quarter ended September 30, 1985 is due
primarily to gains on sale of short —term investments, higher levels of short —
term investments earning interest income in 1985 and the reduction of interest
due to conversion of bonds. This was offset by increased interest expense due
to higher levels of debt outstanding in 1985.
For the nine months ended September 30, 1985 the effective income tax rate
decreased to 40% from 42% for the nine months ended September 30, 1984. The
effective income tax rates for 1985 are expected to be less than the 46%
statutory rate primarily due to the use of investment tax credits and greater
investment in tax free securities.
The percentage decrease in earnings -per share is greater than the
percentage decrease in net earnings primarily due to an increase in shares
outstanding from the completion on August 15, 1985 of the conversion of
$22,500,000, 8% convertible subordinated bonds into class A common stock.
4
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COMCAST CORPORATION AND SUBSIDIARIES Page 9
FORM 10 -Q
Quarter Ended September 30, 1985
The results of operations and operating margins of recently constructed
cable communications systems reflect higher overall construction and operating
costs resulting from the effects of inflation, the introduction of modern and
more complex technology necessary to provide subscribers with the increasing
variety of cable services and the more expensive devices placed in customers'
homes to modify television receivers to accommodate such increased variety and
quantity of cable services. In addition, expenses of a new cable communications
system are a greater percentage of service income than those of a mature system
as many fixed costs are incurred prior to the time the system is fully
developed. Thus, new systems generally have a short -term adverse effect on
profits.
Item 6. Exhibits and Reports on Form 8 -K
(a) Exhibit 11 - Schedule of Computation of Earnings Per Share.
(b) There were no reports filed on Form 8 -K during the three months ended
September 30, 1985.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the under-
signed thereunto duly authorized.
Date: November 11, 1985
COMCAST CORPORATION
------------------------------
(Registrant)
r vice President and
f Financial Officer
u
/.S
E
f
COMCAST CORPORATION AND SUBSIDIARIES
Schedule of Computation of Earnings Per Share
(in thousands, except per share data)
Nine Months Ended
September 30,
1985 1984
PRIMARY
Net Income $ 7,305 $ 7,965
Weighted average number
of common shares outstanding
Add: Common equivalent shares
representing shares issuable upon
exercise of employee stock options
Weighted average number of shares
used in calculation of primary
earnings per share
Primary earnings per share
FULLY DIL41TED
Net Income
Plus — interest on conversion
of debentures net of applicable
income taxes
Net Income for fully diluted
earnings per share
Weighted average number of common
shares outstanding
Add: Common stock equivalent
shares representing shares
issuable upon exercise of
employee stock options using the
greater of period and or average
for the period stock prices.
Add: shares issuable upon
conversion of debentures Which
have a dilutive effect on
earnings per share
Weighted average number of
shares used in calculation of
fully diluted earnings per share
Fully diluted earnings per share
19,866 18,472
664 563
20,530 19,035
- ------ - - - ----
------- - - -- ---
$ .36 $ .42
------- -------
------- -------
$ 7,305 $ 7,965
686
$ 7,305
19,866
678
20,544
$ .36
$ 8,651
18,472
588
2,638
21,698
$ .40
EXHIBIT 11
Three Months Ended
September 30,
1985 1984
E 1,093 $ 3,084
20,677 18,494
683 608
21,360 19,102
----- =- - - - -- --
$ .05 $ .16
- --- --- - -- ----
------- -------
$ 1,093 $ 3,084
229
$ 1,093 $ 3,313
20,677 18,494
683 627
2,648
21,360 21,769
- ------ - ------
$ .05 $ .15