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NBCUNIVERSAL MEDIA, LLC - 10-Q - : MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS(Edgar Glimpses Via Acquire Media NewsEdge) Overview We are a global media and technology company with two primary businesses, Comcast Cable and NBCUniversal. We present our operations for Comcast Cable in one reportable business segment, referred to as Cable Communications, and our operations for NBCUniversal in four reportable business segments. Cable Communications Segment Comcast Cable is the nation's largest provider of video, high-speed Internet and voice services ("cable services") to residential customers under the XFINITY brand, and we also provide similar and other services to small and medium-sized businesses. As of September 30, 2014, our cable systems served 22.4 million video customers, 21.6 million high-speed Internet customers and 11.1 million voice customers, with 26.9 million total customer relationships and passed more than 54 million homes and businesses. Our Cable Communications segment generates revenue primarily from subscriptions to our cable services, which we market individually and in packages, and from the sale of advertising. During the nine months ended September 30, 2014, our Cable Communications segment generated 64% of our consolidated revenue and 79% of our operating income before depreciation and amortization. NBCUniversal Segments NBCUniversal is one of the world's leading media and entertainment companies that develops, produces and distributes entertainment, news and information, sports, and other content for global audiences. The Cable Networks, Broadcast Television, Filmed Entertainment and Theme Parks segments comprise the NBCUniversal businesses and are collectively referred to as the NBCUniversal segments. Cable Networks Our Cable Networks segment consists primarily of a diversified portfolio of cable television networks. Our cable networks are comprised of our national cable networks, which provide a variety of entertainment, news and information, and sports content, our regional sports networks, various international cable networks, and our cable television production operations. Our Cable Networks segment generates revenue primarily from the distribution of our cable network programming to multichannel video providers, from the sale of advertising on our cable networks and related digital media properties, and from the licensing of our owned programming. Broadcast Television Our Broadcast Television segment consists primarily of the NBC and Telemundo broadcast networks, our NBC and Telemundo owned local broadcast television stations, and our broadcast television production operations. Our Broadcast Television segment generates revenue primarily from the sale of advertising on our broadcast networks, owned local broadcast television stations and related digital media properties, from the licensing of our owned programming, and from fees received under retransmission consent agreements. Filmed Entertainment Our Filmed Entertainment segment primarily produces, acquires, markets and distributes filmed entertainment worldwide, and it also develops, produces and licenses live stage plays. Our Filmed Entertainment segment generates revenue primarily from the worldwide distribution of our owned and acquired films for exhibition in movie theaters, from the licensing of our owned and acquired films through various distribution platforms, and from the sale of our owned and acquired films on standard-definition video discs and Blu-ray discs (together, "DVDs") and electronically through digital distributors. Our Filmed Entertainment segment also generates revenue from producing and licensing live stage plays, from distributing filmed entertainment produced by third parties, and from various digital media properties. Theme Parks Our Theme Parks segment consists primarily of our Universal theme parks in Orlando and Hollywood. Our Theme Parks segment generates revenue primarily from theme park attendance and per capita spending. Per 28-------------------------------------------------------------------------------- Table of Contents capita spending includes ticket price and in-park spending on food, beverages and merchandise. Our Theme Parks segment also receives fees from third parties that own and operate Universal Studios Japan and Universal Studios Singapore for intellectual property licenses and other services. Other Our other business interests primarily include Comcast-Spectacor, which owns the Philadelphia Flyers and the Wells Fargo Center arena in Philadelphia and operates arena management-related businesses. Significant Developments The following are the more significant developments in our businesses during the nine months ended September 30, 2014: • the entry into an agreement and plan of merger with Time Warner Cable Inc. ("Time Warner Cable") whereby Time Warner Cable would become our wholly owned subsidiary; see "Time Warner Cable Merger" below for additional information • the entry into a transactions agreement with Charter Communications, Inc. ("Charter"), contemplating three transactions that would result in a net disposition of approximately 3.9 million video customers; see "Divestiture Transactions" below for additional information • an agreement with the International Olympic Committee to extend NBCUniversal's broadcast rights of the Olympic Games from 2022 through 2032 for $7.75 billion Time Warner Cable Merger On February 12, 2014, we entered into an agreement and plan of merger (the "merger agreement") with Time Warner Cable Inc. ("Time Warner Cable") whereby Time Warner Cable will become our wholly owned subsidiary (the "Time Warner Cable merger"). Time Warner Cable stockholders will receive, in exchange for each share of Time Warner Cable common stock owned immediately prior to the Time Warner Cable merger, 2.875 shares of our Class A common stock. We estimate that at the time of closing, Time Warner Cable stockholders will own approximately 24% of the outstanding shares of our common stock. Because the exchange ratio was fixed at the time of the merger agreement and the market value of our Class A common stock will continue to fluctuate, the number of shares of Class A common stock to be issued and the total value of the consideration exchanged will not be determinable until the closing date. The Time Warner Cable merger was approved by Comcast shareholders on October 8, 2014 and by Time Warner Cable stockholders on October 9, 2014. The Time Warner Cable merger remains subject to regulatory review and other customary conditions and is expected to close in early 2015. Divestiture Transactions The terms of the merger agreement contemplate that we are prepared to divest systems serving up to approximately 3 million video customers of our company following the Time Warner Cable merger in order to obtain applicable regulatory approvals. As a result of this commitment, on April 25, 2014, we entered into a transactions agreement with Charter Communications, Inc. ("Charter") that, if consummated, would satisfy the divestiture undertaking. Under the transactions agreement, following the close of the Time Warner Cable merger and subject to various conditions, we would divest cable systems resulting in a net disposition of approximately 3.9 million video customers through three transactions: (1) a spin-off of cable systems serving approximately 2.5 million of our video customers (the "spin-off transaction") into a newly formed public entity ("SpinCo"), (2) an exchange of cable systems serving approximately 1.5 million Time Warner Cable video customers for cable systems serving approximately 1.7 million Charter video customers, and (3) a sale to Charter of cable systems serving approximately 1.5 million Time Warner Cable video customers for cash (collectively, the "divestiture transactions"). In connection with the spin-off transaction and prior to the spin-off, it is expected that SpinCo will incur new debt to fund a cash distribution to us and to issue notes to us, which notes will enable us to then retire a portion of our debt. In the spin-off transaction, we will distribute common stock of SpinCo pro rata to the holders of all of our outstanding common stock, including the former Time Warner Cable stockholders who continue to hold 29-------------------------------------------------------------------------------- Table of Contents shares through the record date of the spin-off transaction. After the spin-off transaction, a newly formed, wholly owned indirect subsidiary of Charter will merge with and into Charter with the effect that all shares of Charter will be converted into shares of a new holding company, which will survive as the publicly traded parent company of Charter ("New Charter"). New Charter will then acquire an interest in SpinCo by issuing New Charter stock in exchange for a portion of the outstanding SpinCo stock, following which it is expected that Comcast shareholders will own approximately 67% of SpinCo and New Charter will own approximately 33% of SpinCo. In addition, it is expected that Comcast shareholders will own approximately 10% of New Charter, though the actual percentage of New Charter that will be owned by Comcast shareholders will depend on a number of factors, some of which will not be known until the completion of the divestiture transactions. Following the close of the divestiture transactions, we will no longer have any ownership interest in SpinCo. The close of the divestiture transactions is subject to the completion of the Time Warner Cable merger, Charter stockholder approval, completion of the SpinCo financing transactions, regulatory approvals and other customary conditions. The Time Warner Cable merger and the divestiture transactions are subject to separate conditions, and the Time Warner Cable merger can be completed regardless of whether the divestiture transactions are ultimately completed. Competition The results of operations of our reportable business segments are affected by competition, as all of our businesses operate in competitive, consumer-driven and rapidly changing environments and compete with a growing number of companies that provide a broad range of communications products and services and entertainment, news and information content to consumers. Additionally, there continue to be new companies with significant financial resources that potentially may compete on a larger scale with our cable services, as well as with our cable and broadcast networks and filmed entertainment businesses. Competition for the cable services we offer consists primarily of direct broadcast satellite ("DBS") providers, which have a national footprint and compete in all of our service areas, and phone companies with fiber-based networks, which overlap over 50% of our service areas and are continuing to expand their fiber-based networks. We also compete with other providers of traditional cable services. All of these companies typically offer features, pricing and packaging for services comparable to our cable services. Each of NBCUniversal's businesses also faces substantial and increasing competition from providers of similar types of content, as well as from other forms of entertainment and recreational activities. NBCUniversal also must compete to obtain talent, programming and other resources required in operating these businesses. Technological changes are further intensifying and complicating the competitive landscape for all of our businesses by challenging existing business models and affecting consumer behavior. Services and devices that enable online digital distribution of movies, television shows, and other cable and broadcast video programming continue to gain consumer acceptance and evolve, including some services that charge a nominal or no fee for such programming. These services and devices may negatively affect demand for our video services, as well as demand for our cable network, broadcast television and filmed entertainment content, as the number of entertainment choices available to consumers increases and intensifies challenges posed by audience fragmentation. Wireless services and devices also continue to evolve that allow consumers to access information, entertainment and communication services, which could negatively impact demand for our cable services, including for our voice services as people substitute mobile phones for landline phones. In addition, delayed viewing and advertising skipping have become more common as the penetration of digital video recorders ("DVRs") and similar products has increased and as content has become increasingly available via video-on-demand services and Internet sources, which may have a negative impact on our advertising revenue. In our Cable Communications segment, we believe that adding more content and delivering it on an increasing variety of platforms will assist in attracting and retaining customers for our cable services. To further enhance our video and high-speed Internet services, we continue to develop and launch new technology initiatives, such as our X1 platform and Cloud DVR technology, and deploy new wireless gateway devices. In our NBCUniversal segments, to compete for consumers of our content and for customers at our theme parks, we have invested, and will continue to invest, substantial amounts in acquiring content and producing original content for our cable 30-------------------------------------------------------------------------------- Table of Contents networks and broadcast television networks, including the acquisition of sports rights, and will continue to invest in our film productions and in the development of new theme park attractions. Seasonality and Cyclicality Each of our businesses is subject to seasonal and cyclical variations. In our Cable Communications segment, our results are impacted by the seasonal nature of customers receiving our cable services in college and vacation markets. This generally results in a reduction in net customer additions in the second calendar quarter and an increase in net customer additions in the third and fourth calendar quarters of each year. Revenue in our Cable Communications, Cable Networks and Broadcast Television segments is subject to cyclicality, with a benefit in even-numbered years from advertising related to candidates running for political office and issue-oriented advertising. Revenue and operating costs and expenses in our Cable Networks and Broadcast Television segments are also cyclical as a result of our periodic broadcasts of the Olympic Games and the Super Bowl. Our advertising revenue generally increases in the period of these broadcasts as a result of increased demand for advertising time, and our operating costs and expenses also increase as a result of our production costs and the amortization of the related rights fees. Revenue in our Filmed Entertainment segment fluctuates due to the timing of the release of films in movie theaters and the release of our films on DVD and through digital distributors. Release dates are determined by several factors, including competition and the timing of vacation and holiday periods. As a result, revenue tends to be seasonal, with increases experienced each year during the summer months and around the holidays. Revenue in our Cable Networks and Broadcast Television segments fluctuates depending on the timing of when our programming is aired on television, which typically results in higher advertising revenue in the second and fourth calendar quarters of each year. Revenue in our Cable Networks, Broadcast Television and Filmed Entertainment segments also fluctuates due to the timing of when our owned content is made available to licensees. Revenue in our Theme Parks segment fluctuates with changes in theme park attendance that result from the seasonal nature of vacation travel, local entertainment offerings and seasonal weather variations. Our theme parks generally experience peak attendance during the summer months when schools are closed and during early winter and spring holiday periods. Consolidated Operating Results Three Months Ended Increase/ Nine Months Ended Increase/ September 30 (Decrease) September 30 (Decrease) (in millions) 2014 2013 2014 2013 Revenue $ 16,791 $ 16,151 4.0 % $ 51,043 $ 47,731 6.9 % Costs and Expenses: Programming and production 4,772 4,787 (0.3 ) 15,554 14,418 7.9 Other operating and administrative 5,019 4,751 5.7 14,695 13,787 6.6 Advertising, marketing and promotion 1,296 1,283 0.9 3,748 3,737 0.3 Depreciation 1,539 1,520 1.3 4,707 4,669 0.8 Amortization 420 396 6.2 1,222 1,204 1.6 Operating income 3,745 3,414 9.7 11,117 9,916 12.1 Other income (expense) items, net (705 ) (615 ) 14.5 (1,762 ) (1,755 ) 0.3 Income before income taxes 3,040 2,799 8.6 9,355 8,161 14.6 Income tax expense (407 ) (1,021 ) (60.1 ) (2,759 ) (2,994 ) (7.8 ) Net income 2,633 1,778 48.0 6,596 5,167 27.7 Net (income) loss attributable to noncontrolling interests and redeemable subsidiary preferred stock (41 ) (46 ) (12.7 ) (141 ) (264 ) (46.6 ) Net income attributable to Comcast Corporation $ 2,592 $ 1,732 49.7 % $ 6,455 $ 4,903 31.7 % All percentages are calculated based on actual amounts. Minor differences may exist due to rounding. Percentage changes that are considered not meaningful are denoted with NM. 31-------------------------------------------------------------------------------- Table of Contents Consolidated Revenue Our Cable Communications, Cable Networks, Broadcast Television and Theme Parks segments, as well as our other businesses accounted for the increases in consolidated revenue for the three and nine months ended September 30, 2014. Excluding $1.1 billion of revenue associated with the broadcast of the 2014 Sochi Olympics in February 2014, consolidated revenue increased 4.6% for the nine months ended September 30, 2014. Revenue for our Cable Communications and NBCUniversal segments is discussed separately below under the heading "Segment Operating Results." Revenue for our other businesses is discussed separately below under the heading "Corporate and Other Results of Operations." Consolidated Costs and Expenses Our Cable Communications, Cable Networks, Broadcast Television and Theme Parks segments accounted for substantially all of the increases in consolidated costs and expenses, excluding depreciation and amortization ("operating costs and expenses") for the three and nine months ended September 30, 2014. The increases were partially offset by lower operating costs and expenses in our Filmed Entertainment segment. Operating costs and expenses for our Cable Communications and NBCUniversal segments are discussed separately below under the heading "Segment Operating Results." Our Corporate and Other operating costs and expenses includes transaction-related costs associated with the Time Warner Cable merger and the divestiture transactions of $77 million and $138 million for the three and nine months ended September 30, 2014, respectively. Operating costs and expenses for our corporate and other businesses are discussed separately below under the heading "Corporate and Other Results of Operations." Segment Operating Results Our segment operating results are presented based on how we assess operating performance and internally report financial information. We use operating income (loss) before depreciation and amortization, excluding impairment charges related to fixed and intangible assets and gains or losses on the sale of assets, if any, as the measure of profit or loss for our operating segments. This measure eliminates the significant level of noncash depreciation and amortization expense that results from the capital-intensive nature of certain of our businesses and from intangible assets recognized in business combinations. Additionally, it is unaffected by our capital structure or investment activities. We use this measure to evaluate our consolidated operating performance and the operating performance of our operating segments and to allocate resources and capital to our operating segments. It is also a significant performance measure in our annual incentive compensation programs. We believe that this measure is useful to investors because it is one of the bases for comparing our operating performance with that of other companies in our industries, although our measure may not be directly comparable to similar measures used by other companies. Because we use operating income (loss) before depreciation and amortization to measure our segment profit or loss, we reconcile it to operating income, the most directly comparable financial measure calculated and presented in accordance with generally accepted accounting principles in the United States of America ("GAAP"), in the business segment footnote to our condensed consolidated financial statements (see Note 13 to Comcast's condensed consolidated financial statements and Note 10 to NBCUniversal's condensed consolidated financial statements). This measure should not be considered a substitute for operating income (loss), net income (loss) attributable to Comcast Corporation or NBCUniversal, net cash provided by operating activities, or other measures of performance or liquidity we have reported in accordance with GAAP. Beginning in 2014, Fandango, our movie ticketing and entertainment business that was previously presented in our Cable Networks segment, is now presented in the Filmed Entertainment segment to reflect the change in our management reporting presentation. Due to immateriality, prior period amounts have not been adjusted. 32 -------------------------------------------------------------------------------- Table of Contents Cable Communications Segment Results of Operations Three Months Ended Increase/ September 30 (Decrease) (in millions) 2014 2013 $ % Revenue Residential: Video $ 5,179 $ 5,127 $ 52 1.0 % High-speed Internet 2,840 2,592 248 9.6 Voice 913 919 (6 ) (0.5 ) Business services 1,011 836 175 21.0 Advertising 607 541 66 12.3 Other 491 476 15 2.4 Total revenue 11,041 10,491 550 5.2 Operating costs and expenses Programming 2,450 2,288 162 7.1 Technical and product support 1,378 1,346 32 2.3 Customer service 556 527 29 5.6 Franchise and other regulatory fees 328 313 15 4.5 Advertising, marketing and promotion 827 757 70 9.1 Other 1,038 1,014 24 2.6 Total operating costs and expenses 6,577 6,245 332 5.3 Operating income before depreciation and amortization $ 4,464 $ 4,246 $ 218 5.1 % Nine Months Ended Increase/ September 30 (Decrease)(in millions) 2014 2013 $ % Revenue Residential: Video $ 15,596 $ 15,415 $ 181 1.2 % High-speed Internet 8,409 7,684 725 9.4 Voice 2,755 2,729 26 1.0 Business services 2,893 2,365 528 22.3 Advertising 1,725 1,587 138 8.7 Other 1,449 1,395 54 3.7 Total revenue 32,827 31,175 1,652 5.3 Operating costs and expenses Programming 7,335 6,821 514 7.5 Technical and product support 4,120 3,996 124 3.1 Customer service 1,648 1,565 83 5.3 Franchise and other regulatory fees 974 932 42 4.4 Advertising, marketing and promotion 2,312 2,150 162 7.5 Other 3,010 2,911 99 3.5 Total operating costs and expenses 19,399 18,375 1,024 5.6 Operating income before depreciation and amortization $ 13,428 $ 12,800 $ 628 4.9 % Beginning in 2014, our Cable Communications segment revised its methodology for counting customers related to how we count and report customers who reside in multiple dwelling units ("MDUs") that are billed under bulk contracts (the "billable customers method"). For MDUs whose residents have the ability to receive additional cable services, such as additional programming choices or our high-definition ("HD") or DVR services, we now count and report customers based on the number of potential billable relationships within each MDU. For MDUs whose residents are not able to receive additional cable services, the MDU is now counted as a single customer. Previously, we had counted and reported these customers on an equivalent billing unit basis by dividing monthly revenue received under an MDU's bulk contract by the standard monthly residential rate where the MDU was located (the "EBU method"). We believe the billable customers method is consistent with the methodology used by other companies in our industry, including Time Warner Cable, to count and report customers. 33-------------------------------------------------------------------------------- Table of Contents The tables below present customer metrics using the billable customers method. Because the differences in the number of customers using the billable customers method and the EBU method for high-speed Internet and voice customers were not material, high-speed Internet and voice customer metrics as of and for the three and nine months ended September 30, 2013 are presented using the EBU method. Customer Metrics-Billable Customers Method Total Customers Net Additional Customers Three Months Ended Nine Months Ended September 30 September 30 September 30 September 30 (in thousands) 2014 2013 2014 2013 2014 2013 Video customers 22,376 22,531 (81 ) (127 ) (200 ) (313 ) High-speed Internet customers 21,586 20,283 315 297 901 917 Voice customers 11,070 10,496 68 169 347 541 Total customer relationships 26,857 26,555 82 180 Single product customers 8,444 8,921 (66 ) (308 ) Double product customers 8,650 8,491 76 110 Triple product customers 9,763 9,144 72 379 Customer metrics include residential and business customers. Customer relationships represent the number of residential and business customers that subscribe to at least one of our cable services and are presented based on actual amounts. Single product, double product and triple product customers represent customers that subscribe to one, two or three of our cable services, respectively. Cable Communications Segment-Revenue Our Cable Communications segment leverages our existing cable distribution system to grow revenue by, among other things, adding new customers, encouraging existing customers to add additional or higher-tier services, and growing other services such as our business services offerings and our home security and automation services. We offer our cable services in bundles and often provide promotional incentives. We seek to balance promotional offers and rate increases with their expected effects on the number of customers and overall revenue. Video Video revenue increased 1.0% and 1.2% for the three and nine months ended September 30, 2014, respectively, compared to the same periods in 2013. An increase in the number of customers receiving additional and higher levels of video service and rate adjustments accounted for increases in revenue of 2.3% and 2.6% for the three and nine months ended September 30, 2014, respectively. As of September 30, 2014, the number of customers who subscribed to our advanced services, which are HD and DVR services, increased 4.5% to 12.8 million customers compared to the same period in 2013. The increases in revenue in both periods were partially offset by a decline in pay-per-view revenue due to fewer events and fewer residential video customers compared to the prior year periods. The decrease in the number of residential video customers was primarily due to competitive pressures in our service areas from phone and DBS competitors and the impact of rate adjustments. We may experience further declines in the number of residential video customers. High-Speed Internet High-speed Internet revenue increased 9.6% and 9.4% for the three and nine months ended September 30, 2014, respectively, compared to the same periods in 2013. An increase in the number of residential customers receiving our high-speed Internet service accounted for increases in revenue of 5.8% and 6.0% for the three and nine months ended September 30, 2014, respectively. The remaining increases in revenue for the three and nine months ended September 30, 2014 were primarily due to higher rates from customers receiving higher levels of service and rate adjustments. Our customer base continues to grow as consumers choose our high-speed Internet service and seek higher-speed offerings. Voice Voice revenue decreased slightly for the three months ended September 30, 2014 and increased 1.0% for the nine months ended September 30, 2014 compared to the same periods in 2013. While the number of residential customer additions slowed, the number of residential customers still increased by 5.5% as of September 30, 2014 34 -------------------------------------------------------------------------------- Table of Contents compared to the same period in 2013. This growth was offset by promotions and our discounted bundled offerings. Business Services Business services revenue increased 21.0% and 22.3% for the three and nine months ended September 30, 2014, respectively, compared to the same periods in 2013. The increases were primarily due to a higher number of small business customers receiving our high-speed Internet and voice services. The remaining increases in both periods were primarily due to continued growth in the number of medium-sized business customers receiving our other services, such as Ethernet network and cellular backhaul services. During the three and nine months ended September 30, 2014, revenue from our medium-sized business customers represented 22% and 21%, respectively, of total business services revenue. We believe the increase in business customers is primarily the result of our efforts to gain market share from competitors by offering competitive services and pricing. Advertising Advertising revenue increased 12.3% and 8.7% for the three and nine months ended September 30, 2014, respectively, compared to the same periods in 2013 primarily due to increases in political advertising revenue, as well as increases in revenue in our core national and local advertising markets. Other Other revenue increased 2.4% and 3.7% for the three and nine months ended September 30, 2014, respectively, compared to the same periods in 2013 primarily due to increases in revenue from other services, including our home security and automation services, as well as increases in franchise and other regulatory fees. Cable Communications Segment-Operating Costs and Expenses Our most significant operating cost is the programming expense we incur to provide content to our video customers. We anticipate that our programming expenses will continue to increase. We have and will continue to attempt to offset increases in programming expenses through rate increases and the sale of additional video and other services, as well as by achieving operating efficiencies. Programming costs increased for the three and nine months ended September 30, 2014 compared to the same periods in 2013 primarily due to increases in programming license fees, including retransmission consent fees and sports programming costs, and fees to secure rights for additional programming for our customers across an increasing number of platforms. Technical and product support expenses increased for the three and nine months ended September 30, 2014 compared to the same periods in 2013 primarily due to expenses related to customer fulfillment activities, expenses related to the development, delivery and support of our products and services, including our X1 platform, Cloud DVR technology and wireless gateways, and the continued growth in business services. Customer service expenses increased for the three and nine months ended September 30, 2014 compared to the same periods in 2013 primarily due to increases in total labor costs associated with increases in customer service activity. The increases in customer service activity were primarily due to sales and related support activity associated with the continued deployment of enhanced services and devices, which include our X1 platform, Cloud DVR technology, wireless gateways, home security and automation services, and continued growth in business services. Franchise and other regulatory fees increased for the three and nine months ended September 30, 2014 compared to the same periods in 2013 primarily due to increases in residential and business services revenue. Advertising, marketing and promotion expenses increased for the three and nine months ended September 30, 2014 compared to the same periods in 2013 primarily due to increases in spending associated with attracting new residential and business services customers and encouraging existing customers to add additional or higher-tier services. Other costs and expenses increased for the three and nine months ended September 30, 2014 compared to the same periods in 2013 primarily due to increases in costs to support the advertising sales business, as well as increases in other administrative costs. 35-------------------------------------------------------------------------------- Table of Contents NBCUniversal Segments Results of Operations Three Months Ended Increase/ September 30 (Decrease) (in millions) 2014 2013 $ % Revenue Cable Networks $ 2,255 $ 2,239 $ 16 0.7 % Broadcast Television 1,770 1,644 126 7.7 Filmed Entertainment 1,186 1,400 (214 ) (15.2 ) Theme Parks 786 661 125 18.7 Headquarters, other and eliminations (76 ) (93 ) 17 NM Total revenue $ 5,921 $ 5,851 $ 70 1.2 % Operating Income Before Depreciation and Amortization Cable Networks $ 868 $ 853 $ 15 1.8 % Broadcast Television 142 34 108 318.0 Filmed Entertainment 151 189 (38 ) (20.3 ) Theme Parks 402 343 59 16.9 Headquarters, other and eliminations (147 ) (169 ) 22 (13.9 ) Total operating income before depreciation and amortization $ 1,416 $ 1,250 $ 166 13.3 % Nine Months Ended Increase/ September 30 (Decrease) (in millions) 2014 2013 $ % Revenue Cable Networks $ 7,236 $ 6,877 $ 359 5.2 % Broadcast Television 6,207 4,893 1,314 26.9 Filmed Entertainment 3,713 4,004 (291 ) (7.3 ) Theme Parks 1,888 1,669 219 13.1 Headquarters, other and eliminations (231 ) (257 ) 26 NM Total revenue $ 18,813 $ 17,186 $ 1,627 9.5 % Operating Income Before Depreciation and Amortization Cable Networks $ 2,677 $ 2,572 $ 105 4.1 % Broadcast Television 504 205 299 145.6 Filmed Entertainment 634 291 343 117.7 Theme Parks 816 747 69 9.1 Headquarters, other and eliminations (470 ) (421 ) (49 ) (11.3 ) Total operating income before depreciation and amortization $ 4,161 $ 3,394 $ 767 22.6 % Cable Networks Segment Results of Operations Three Months Ended Increase/ September 30 (Decrease) (in millions) 2014 2013 $ % Revenue Distribution $ 1,281 $ 1,219 $ 62 5.1 % Advertising 796 835 (39 ) (4.6 ) Content licensing and other 178 185 (7 ) (4.5 ) Total revenue 2,255 2,239 16 0.7 Operating costs and expenses Programming and production 972 953 19 2.0 Other operating and administrative 302 313 (11 ) (3.5 ) Advertising, marketing and promotion 113 120 (7 ) (6.2 ) Total operating costs and expenses 1,387 1,386 1 0.1 Operating income before depreciation and amortization $ 868 $ 853 $ 15 1.8 % 36 -------------------------------------------------------------------------------- Table of Contents Nine Months Ended Increase/ September 30 (Decrease) (in millions) 2014 2013 $ % Revenue Distribution $ 4,024 $ 3,679 $ 345 9.4 % Advertising 2,637 2,629 8 0.3 Content licensing and other 575 569 6 0.9 Total revenue 7,236 6,877 359 5.2 Operating costs and expenses Programming and production 3,283 2,945 338 11.5 Other operating and administrative 914 985 (71 ) (7.3 ) Advertising, marketing and promotion 362 375 (13 ) (3.7 ) Total operating costs and expenses 4,559 4,305 254 5.9 Operating income before depreciation and amortization $ 2,677 $ 2,572 $ 105 4.1 % Cable Networks Segment-Revenue Cable Networks revenue increased slightly for the three months ended September 30, 2014 compared to the same period in 2013 primarily due to an increase in distribution revenue, which was partially offset by a decrease in advertising revenue. The increase in distribution revenue was primarily due to increases in the contractual rates charged under distribution agreements. The decrease in advertising revenue was primarily due to a continuing decline in the audience ratings at our networks, which was partially offset by higher volume and prices of advertising units sold. Cable Networks revenue for the three months ended September 30, 2014 was also impacted by the absence of the Style network and Fandango in the current year period. Cable Networks revenue increased for the nine months ended September 30, 2014 compared to the same period in 2013 primarily due to an increase in distribution revenue. The increase in distribution revenue was primarily due to our broadcast of the 2014 Sochi Olympics in February 2014 and increases in the contractual rates charged under distribution agreements. Cable Networks revenue for the nine months ended September 30, 2014 was also impacted by the absence of the Style network and Fandango in the current year period. Excluding $257 million of revenue associated with the 2014 Sochi Olympics, Cable Networks revenue increased 1.5% for the nine months ended September 30, 2014 compared to the same period in 2013. For the three and nine months ended September 30, 2014, 13% and 12%, respectively, of our Cable Networks segment revenue was generated from our Cable Communications segment. For both the three and nine months ended September 30, 2013, 13% of our Cable Networks segment revenue was generated from our Cable Communications segment. These amounts are eliminated in our condensed consolidated financial statements but are included in the amounts presented above. Cable Networks Segment-Operating Costs and Expenses Operating costs and expenses remained flat for the three months ended September 30, 2014 compared to the same period in 2013. Operating costs and expenses increased for the nine months ended September 30, 2014 compared to the same period in 2013 primarily due to an increase in programming and production costs, which was partially offset by decreases in other operating and administrative expenses and advertising, marketing and promotion expenses. The increase in programming and production costs was primarily due to costs associated with the 2014 Sochi Olympics, as well as our continued investment in programming, including sports programming rights costs. The decreases in other operating and administrative costs and advertising, marketing and promotion expenses were primarily due to the absence of the Style network and Fandango in the current year period. Other operating and administrative costs also decreased due to lower employee-related costs. 37-------------------------------------------------------------------------------- Table of Contents Broadcast Television Segment Results of Operations Three Months Ended Increase/ September 30 (Decrease) (in millions) 2014 2013 $ % Revenue Advertising $ 1,153 $ 1,104 $ 49 4.4 % Content licensing 402 355 47 12.9 Other 215 185 30 17.2 Total revenue 1,770 1,644 126 7.7 Operating costs and expenses Programming and production 1,214 1,194 20 1.6 Other operating and administrative 290 295 (5 ) (1.2 ) Advertising, marketing and promotion 124 121 3 2.4 Total operating costs and expenses 1,628 1,610 18 1.1 Operating income before depreciation and amortization $ 142 $ 34 $ 108 318.0 % Nine Months Ended Increase/ September 30 (Decrease) (in millions) 2014 2013 $ % Revenue Advertising $ 4,231 $ 3,323 $ 908 27.3 % Content licensing 1,242 1,048 194 18.4 Other 734 522 212 40.9 Total revenue 6,207 4,893 1,314 26.9 Operating costs and expenses Programming and production 4,425 3,508 917 26.1 Other operating and administrative 901 879 22 2.7 Advertising, marketing and promotion 377 301 76 25.2 Total operating costs and expenses 5,703 4,688 1,015 21.7 Operating income before depreciation and amortization $ 504 $ 205 $ 299 145.6 % Broadcast Television Segment-Revenue Broadcast Television revenue increased for the three and nine months ended September 30, 2014 compared to the same periods in 2013 primarily due to increases in advertising revenue, content licensing revenue and other revenue. The increases in advertising revenue in both periods were primarily due to increases in audience ratings and higher volume and prices of advertising units sold. The increase in content licensing revenue for the three months ended September 30, 2014 was primarily due to the timing of content provided under our licensing agreements. The increase in content licensing revenue for the nine months ended September 30, 2014 was primarily due to new content licensing agreements. The increases in other revenue in both periods were primarily due to fees recognized under our retransmission consent agreements. The increases in advertising revenue and other revenue for the nine months ended September 30, 2014 were associated with our broadcast of the 2014 Sochi Olympics in February 2014. Excluding $846 million of revenue associated with the 2014 Sochi Olympics, Broadcast Television revenue increased 9.6% for the nine months ended September 30, 2014 compared to the same period in 2013 primarily due to higher advertising revenue related to an increase in audience ratings and higher volume and prices of advertising units sold. Broadcast Television Segment-Operating Costs and Expenses Operating costs and expenses increased for the three months ended September 30, 2014 compared to the same period in 2013 primarily due to an increase in programming and production costs associated with the timing of when certain shows in our primetime schedule were aired, as well as our continued investment in original programming. Operating costs and expenses increased for the nine months ended September 30, 2014 compared to the same period in 2013 primarily due to an increase in programming and production costs associated with our broadcast of the 2014 Sochi Olympics, as well as our continued investment in original programming. 38-------------------------------------------------------------------------------- Table of Contents Filmed Entertainment Segment Results of Operations Three Months Ended Increase/ September 30 (Decrease) (in millions) 2014 2013 $ % Revenue Theatrical $ 265 $ 559 $ (294 ) (52.5 )% Content licensing 439 379 60 15.9 Home entertainment 321 359 (38 ) (10.6 ) Other 161 103 58 55.8 Total revenue 1,186 1,400 (214 ) (15.2 ) Operating costs and expenses Programming and production 541 720 (179 ) (24.8 ) Other operating and administrative 223 188 35 19.5 Advertising, marketing and promotion 271 303 (32 ) (10.8 ) Total operating costs and expenses 1,035 1,211 (176 ) (14.5 ) Operating income before depreciation and amortization $ 151 $ 189 $ (38 ) (20.3 )% Nine Months Ended Increase/ September 30 (Decrease) (in millions) 2014 2013 $ % Revenue Theatrical $ 836 $ 1,425 $ (589 ) (41.4 )% Content licensing 1,366 1,223 143 11.7 Home entertainment 1,036 1,069 (33 ) (3.0 ) Other 475 287 188 65.3 Total revenue 3,713 4,004 (291 ) (7.3 ) Operating costs and expenses Programming and production 1,692 2,235 (543 ) (24.3 ) Other operating and administrative 620 519 101 19.5 Advertising, marketing and promotion 767 959 (192 ) (20.0 ) Total operating costs and expenses 3,079 3,713 (634 ) (17.1 ) Operating income before depreciation and amortization $ 634 $ 291 $ 343 117.7 % Filmed Entertainment Segment-Revenue Filmed Entertainment revenue decreased for the three and nine months ended September 30, 2014 compared to the same periods in 2013 primarily due to decreases in theatrical revenue, which were partially offset by increases in other revenue and content licensing revenue. The decrease in theatrical revenue for the three months ended September 30, 2014 was primarily due to the strong performance of Despicable Me 2 in the prior year period, which was partially offset by the performance of our current period releases, including Lucy. The decrease in theatrical revenue for the nine months ended September 30, 2014 was primarily due to the strong performance of our prior year period releases, including Despicable Me 2, Fast and Furious 6 and Les Miserables, which were partially offset by the performance of current period releases, including Lucy and Neighbors. The increases in other revenue in both periods were primarily due to the inclusion in 2014 of Fandango, which was previously presented in our Cable Networks segment. The increases in content licensing revenue in both periods were primarily due to the timing of licensing agreements related to our film library. Filmed Entertainment Segment-Operating Costs and Expenses Operating costs and expenses decreased for the three and nine months ended September 30, 2014 compared to the same periods in 2013 primarily due to lower amortization of film cost and decreases in advertising, marketing and promotion expenses, which were primarily due to a smaller film slate in the current year periods compared to the same periods in 2013. Operating costs and expenses for the three and nine months ended September 30, 2014 included $7 million and $25 million, respectively, of expense associated with fair value adjustments to capitalized 39 -------------------------------------------------------------------------------- Table of Contents film production costs. Operating costs and expenses for the three and nine months ended September 30, 2013 included $36 million and $150 million, respectively, of expense associated with fair value adjustments to capitalized film production costs. Theme Parks Segment Results of Operations Three Months Ended Increase/ September 30 (Decrease) (in millions) 2014 2013 $ % Revenue $ 786 $ 661 $ 125 18.7 % Operating costs and expenses 384 318 66 20.7 Operating income before depreciation and amortization $ 402 $ 343 $ 59 16.9 % Nine Months Ended Increase/ September 30 (Decrease) (in millions) 2014 2013 $ % Revenue $ 1,888 $ 1,669 $ 219 13.1 % Operating costs and expenses 1,072 922 150 16.3 Operating income before depreciation and amortization $ 816 $ 747 $ 69 9.1 % Theme Parks Segment-Revenue Theme Parks revenue increased for the three and nine months ended September 30, 2014 compared to the same periods in 2013 primarily due to higher guest attendance and increases in per capita spending as a result of new attractions, such as Orlando's The Wizarding World of Harry Potter ™-Diagon Alley ™. Theme Parks Segment-Operating Costs and Expenses Operating costs and expenses increased for the three and nine months ended September 30, 2014 compared to the same periods in 2013 primarily due to costs associated with new attractions, such as Orlando's The Wizarding World of Harry Potter ™-Diagon Alley ™, and increases in per capita spending. NBCUniversal Headquarters, Other and Eliminations The change in operating income (loss) before depreciation and amortization for headquarters, other and eliminations for the three months ended September 30, 2014 compared to the same period in 2013 was primarily due to lower expenses as a result of severance costs recorded in the prior year period. The change in operating income (loss) before depreciation and amortization for headquarters, other and eliminations for the nine months ended September 30, 2014 compared to the same period in 2013 was primarily due to higher employee-related costs, including severance costs, compared to the prior year period. Corporate and Other Results of Operations Three Months Ended Increase/ September 30 (Decrease) (in millions) 2014 2013 $ % Revenue $ 174 $ 133 $ 41 30.4 % Operating costs and expenses 371 311 60 19.5 Operating loss before depreciation and amortization $ (197 ) $ (178 ) $ (19 ) (11.3 )% Nine Months Ended Increase/ September 30 (Decrease) (in millions) 2014 2013 $ % Revenue $ 520 $ 431 $ 89 20.5 % Operating costs and expenses 1,052 811 241 29.7 Operating loss before depreciation and amortization $ (532 ) $ (380 ) $ (152 ) (40.2 )% 40 -------------------------------------------------------------------------------- Table of Contents Corporate and Other-Revenue Other revenue primarily relates to Comcast-Spectacor, which owns the Philadelphia Flyers and the Wells Fargo Center arena in Philadelphia and operates arena management-related businesses. Other revenue increased for the three and nine months ended September 30, 2014 compared to the same periods in 2013 primarily due to increases in revenue from food services for sporting events associated with a new contract entered into by our Comcast-Spectacor business, as well as increases in revenue associated with newly acquired businesses. Corporate and Other-Operating Costs and Expenses Corporate and Other operating costs and expenses primarily include overhead, personnel costs, the costs of corporate initiatives and branding, and operating costs and expenses associated with Comcast-Spectacor. Corporate and Other operating costs and expenses increased for the three months ended September 30, 2014 compared to the same period in 2013 primarily due to $77 million of transaction-related costs associated with the Time Warner Cable merger and divestiture transactions, as well as an increase in costs associated with the new food services contract entered into by our Comcast-Spectacor business. The increase was partially offset by $74 million of expense recorded in the prior year period associated with the final settlement of the terminated qualified pension plan that provided benefits to former AT&T Broadband employees. Corporate and Other operating costs and expenses increased for the nine months ended September 30, 2014 compared to the same period in 2013 primarily due to company-wide branding initiatives, including initiatives associated with the 2014 Sochi Olympics, $138 million of transaction-related costs associated with the Time Warner Cable merger and divestiture transactions, and an increase in labor costs in our Comcast-Spectacor business. Consolidated Other Income (Expense) Items, Net Three Months Ended Nine Months Ended September 30 September 30 (in millions) 2014 2013 2014 2013 Interest expense $ (663 ) $ (639 ) $ (1,953 ) $ (1,928 ) Investment income (loss), net 21 464 254 549 Equity in net income (losses) of investees, net 33 (130 ) 87 (96 ) Other income (expense), net (96 ) (310 ) (150 ) (280 ) Total $ (705 ) $ (615 ) $ (1,762 ) $ (1,755 ) Investment Income (Loss), Net The changes in investment income (loss), net for the three and nine months ended September 30, 2014 compared to the same periods in 2013 were primarily due to the $443 million gain related to the sale of our investment in Clearwire Corporation recorded in the prior year periods. The components of investment income (loss), net for the three and nine months ended September 30, 2014 and 2013 are presented in a table in Note 6 to Comcast's condensed consolidated financial statements. Equity in Net Income (Loss) of Investees, Net The changes in equity in net income (loss) of investees, net for the three and nine months ended September 30, 2014 compared to the same periods in 2013 were primarily due to the $135 million of equity losses recorded in the prior year periods attributable to our investment in Hulu, LLC. Other Income (Expense), Net The changes in other income (expense), net for the three and nine months ended September 30, 2014 compared to the same periods in 2013 were primarily due to an impairment of $236 million of our equity method investment in, and loans to, a regional sports network based in Houston, Texas, which was recorded in the prior year periods. The remaining change in other income (expense), net for the nine months ended September 30, 2014 compared to the same period in 2013 was primarily due to a $108 million gain recognized in the prior year period related to our sale of wireless communications spectrum licenses and a $27 million favorable settlement of a contingency recognized in the current year period related to the AT&T Broadband transaction. 41-------------------------------------------------------------------------------- Table of Contents Consolidated Income Tax Expense Income tax expense for the three and nine months ended September 30, 2014 and 2013 reflects an effective income tax rate that differs from the federal statutory rate primarily due to adjustments associated with the accruals for uncertain tax positions. During the three months ended September 30, 2014, we reduced our accruals for uncertain tax positions and the related accrued interest on these tax positions that resulted in a decrease of $724 million in income tax expense, which excludes the benefits of uncertain tax positions for which we have been indemnified. See Note 10 for additional information on the changes in our accruals for uncertain tax positions and related interest on these tax positions. We expect our 2014 annual effective tax rate to be in the range of 31% to 33%, absent changes in tax laws or further changes in uncertain tax positions. Consolidated Net (Income) Loss Attributable to Noncontrolling Interests and Redeemable Subsidiary Preferred Stock The decrease in net (income) loss attributable to noncontrolling interests and redeemable subsidiary preferred stock for the nine months ended September 30, 2014 compared to the same period in 2013 was primarily due to our acquisition of General Electric Company's remaining 49% common equity interest in NBCUniversal Holdings in March 2013. Liquidity and Capital Resources Our businesses generate significant cash flows from operating activities. We believe that we will be able to continue to meet our current and long-term liquidity and capital requirements, including fixed charges, through our cash flows from operating activities, existing cash, cash equivalents and investments, available borrowings under our existing credit facilities, and our ability to obtain future external financing. We anticipate that we will continue to use a substantial portion of our cash flows to meet our debt repayment obligations, to fund our capital expenditures, to invest in business opportunities and to return capital to shareholders. Operating Activities Components of Net Cash Provided by Operating Activities Nine Months Ended September 30 (in millions) 2014 2013 Operating income $ 11,117 $ 9,916 Depreciation and amortization 5,929 5,873 Operating income before depreciation and amortization 17,046 15,789 Noncash share-based compensation 386 312 Changes in operating assets and liabilities (343 ) 583 Cash basis operating income 17,089 16,684 Payments of interest (1,820 ) (1,768 ) Payments of income taxes (2,878 ) (3,180 ) Excess tax benefits under share-based compensation (240 ) (176 ) Other 151 119 Net cash provided by operating activities $ 12,302 $ 11,679 The variance between changes in operating assets and liabilities for the nine months ended September 30, 2014 compared to the same period in 2013 was $926 million, of which approximately $900 million was related to the timing of film and television production and related costs, net of amortization. The remaining variance was primarily related to the recognition of deferred revenue associated with the broadcast of the 2014 Sochi Olympics in February 2014 offset by the timing of payments of our accounts payable. The decrease in income tax payments for the nine months ended September 30, 2014 compared to the same period in 2013 was primarily due to lower tax payments in the first quarter of 2014 that related to 2013 compared to the prior year period. The decrease was also due to the settlement of tax disputes recorded in 2013 and a decrease in taxes on nonrecurring gains. The decreases were partially offset by higher taxable income from operations and the expiration of the economic stimulus legislation in 2014. 42-------------------------------------------------------------------------------- Table of Contents Investing Activities Net cash used in investing activities for the nine months ended September 30, 2014 consisted primarily of cash paid for capital expenditures, intangible assets and acquisitions, which was partially offset by proceeds from the sale of investments. Capital expenditures increased for the nine months ended September 30, 2014 compared to the same period in 2013 primarily due to increased spending in our Cable Communications segment on customer premise equipment related to the deployment of our X1 platform and Cloud DVR technology, and our continued investment in network infrastructure to increase network capacity. Financing Activities Net cash used in financing activities for the nine months ended September 30, 2014 consisted primarily of repayments of debt, repurchases of our common stock and dividend payments, which were partially offset by proceeds from new borrowings. In January 2014, we repaid at maturity $1 billion aggregate principal amount of 5.30% senior notes due 2014. In February 2014, we repaid $1.25 billion of borrowings outstanding under NBCUniversal Enterprise Inc.'s ("NBCUniversal Enterprise") revolving credit facility with the proceeds from $990 million of borrowings under its new commercial paper program and cash on hand. In February 2014, we issued $1.2 billion aggregate principal amount of 3.60% senior notes due 2024 and $1 billion aggregate principal amount of 4.75% senior notes due 2044. The proceeds from this offering were used for working capital and general corporate purposes, including the repayment of a portion of our outstanding commercial paper and $900 million aggregate principal amount of our 2.10% senior notes due April 2014 at maturity. In August 2014, we issued $1 billion aggregate principal amount of 3.375% senior notes due 2025 and $1 billion aggregate principal amount of 4.20% senior notes due 2034. The proceeds from this offering were used for working capital and general corporate purposes, which may, in the future, include the repayment of certain of our senior notes. We have made, and may from time to time in the future make, optional repayments on our debt obligations, which may include repurchases of our outstanding public notes and debentures, depending on various factors, such as market conditions. Available Borrowings Under Credit Facilities We maintain significant availability under our lines of credit and our commercial paper programs to meet our short-term liquidity requirements. In February 2014, NBCUniversal Enterprise established a commercial paper program. The maximum borrowing capacity under this commercial paper program is $1.35 billion, and it is supported by NBCUniversal Enterprise's existing $1.35 billion revolving credit facility due March 2018. The commercial paper program is fully and unconditionally guaranteed by us and the cable guarantors. The proceeds from NBCUniversal Enterprise's issuance of commercial paper were used to repay $1.25 billion of borrowings outstanding under its revolving credit facility. As of September 30, 2014, NBCUniversal Enterprise had $910 million face amount of commercial paper outstanding. As of September 30, 2014, amounts available under our consolidated revolving credit facilities, net of amounts outstanding under our commercial paper programs and undrawn letters of credit, totaled $6.4 billion, which included $440 million available under NBCUniversal Enterprise's credit facility. Share Repurchases and Dividends In January 2014, our Board of Directors increased our share repurchase authorization to $7.5 billion, which does not have an expiration date. Under this authorization, we may repurchase shares in the open market or in private transactions. During the nine months ended September 30, 2014, we repurchased a total of 44 million shares of our Class A Special and Class A common stock for $2.25 billion. We expect to make $750 million more in repurchases during the remainder of 2014, subject to market conditions. In addition, because we and Time Warner Cable have received shareholder approval for the merger, we intend to repurchase an additional $2.5 billion of shares through the close of the Time Warner Cable merger in early 2015, subject to market conditions. 43-------------------------------------------------------------------------------- Table of Contents In January 2014, our Board of Directors approved a 15% increase in our dividend to $0.90 per share on an annualized basis. In each of January, May and July 2014, our Board of Directors approved a quarterly dividend of $0.225 per share as part of our planned annual dividend. We expect to continue to pay quarterly dividends, although each dividend is subject to approval by our Board of Directors. Quarterly Dividends Declared (in millions) Amount Month of Payment Three months ended March 31, 2014 $ 585 April Three months ended June 30, 2014 $ 583 July Three months ended September 30, 2014 $ 580 October Critical Accounting Judgments and Estimates The preparation of our condensed consolidated financial statements requires us to make estimates that affect the reported amounts of assets, liabilities, revenue and expenses, and the related disclosure of contingent assets and contingent liabilities. We base our judgments on our historical experience and on various other assumptions that we believe are reasonable under the circumstances, the results of which form the basis for making estimates about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. We believe our judgments and related estimates associated with the valuation and impairment testing of our cable franchise rights, accounting for income taxes, and accounting for film and television costs are critical in the preparation of our condensed consolidated financial statements. We performed our annual impairment testing of our cable franchise rights as of July 1, 2014 and no impairment charge was required. For a more complete discussion of the accounting judgments and estimates that we have identified as critical in the preparation of our condensed consolidated financial statements, please refer to our Management's Discussion and Analysis of Financial Condition and Results of Operations in our 2013 Annual Report on Form 10-K. Recent Accounting Pronouncements See Note 2 to each of Comcast's and NBCUniversal's condensed consolidated financial statements for additional information related to recent accounting pronouncements. |