10-Q 1 cableq6-02.txt 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: JUNE 30, 2002 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 333-30745 COMCAST CABLE COMMUNICATIONS, INC. (Exact name of registrant as specified in its charter) DELAWARE 23-2175755 -------------------------------------------------------------------------------- (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 June 30, 2002, there were 138.89 shares of Common Stock outstanding. The Registrant meets the conditions set forth in General Instructions H(1)(a) and (b) of Form 10-Q and is therefore filing this form with the reduced disclosure format. COMCAST CABLE COMMUNICATIONS, INC. AND SUBSIDIARIES FORM 10-Q QUARTER ENDED JUNE 30, 2002

___________________________________ This Quarterly Report on Form 10-Q is for the three months ended June 30, 2002. This Quarterly Report modifies and supersedes documents filed prior to this Quarterly Report. The SEC allows us to "incorporate by reference" information that we file with them, which means that we can disclose important information to you by referring you directly to those documents. Information incorporated by reference is considered to be part of this Quarterly Report. In addition, information that we file with the SEC in the future will automatically update and supersede information contained in this Quarterly Report. In this Quarterly Report, "Comcast Cable," the "Company," "we," "us" and "our" refer to Comcast Cable Communications, Inc. and its subsidiaries. You should carefully review the information contained in this Quarterly Report and in other reports or documents that we file from time to time with the SEC. In this Quarterly Report, we state our beliefs of future events and of our future financial performance. In some cases, you can identify those so-called "forward-looking statements" by words such as "may," "will," "should," "expects," "plans," "anticipates," "believes," "estimates," "predicts," "potential," or "continue" or the negative of those words and other comparable words. You should be aware that those statements are only our predictions. Actual events or results may differ materially. In evaluating those statements, you should specifically consider various factors, including the risks outlined below. Those factors may cause our actual results to differ materially from any of our forward-looking statements. Factors Affecting Future Operations Our businesses may be affected by, among other things: o changes in laws and regulations, o changes in the competitive environment, o changes in technology, o industry consolidation and mergers, o franchise related matters, o market conditions that may adversely affect the availability of debt and equity financing for working capital, capital expenditures or other purposes; and o general economic conditions. COMCAST CABLE COMMUNICATIONS, INC. AND SUBSIDIARIES FORM 10-Q QUARTER ENDED JUNE 30, 2002 PART I. FINANCIAL INFORMATION ------- --------------------- ITEM 1. FINANCIAL STATEMENTS

COMCAST CABLE COMMUNICATIONS, INC. AND SUBSIDIARIES FORM 10-Q QUARTER ENDED JUNE 30, 2002 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS Basis of Presentation Comcast Cable Communications, Inc. (the "Company"), a wholly-owned subsidiary of Comcast Corporation ("Comcast"), has prepared these unaudited condensed consolidated financial statements based upon Securities and Exchange Commission rules that permit reduced disclosure for interim periods. These financial statements include all adjustments that are necessary for a fair presentation of the Company's results of operations and financial condition for the interim periods shown including normal recurring accruals and other items. The results of operations for the interim periods presented are not necessarily indicative of results for the full year. For a more complete discussion of the Company's accounting policies and certain other information, refer to the financial statements included in the Company's Annual Report on Form 10-K for the year ended December 31, 2001. Reclassifications Certain reclassifications have been made to the prior year financial statements to conform to those classifications used in 2002 (see Note 2). 2. RECENT ACCOUNTING PRONOUNCEMENTS SFAS No. 133, as Amended On January 1, 2001, the Company adopted Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivatives and Hedging Activities," as amended. SFAS No. 133 establishes accounting and reporting standards for derivatives and hedging activities. SFAS No. 133 requires that all derivative instruments be reported on the balance sheet at their fair values. Upon adoption of SFAS No. 133, the Company recognized as a loss a cumulative effect of accounting change, net of related income taxes, of $61.3 million. The loss consisted of $94.3 million principally related to the reclassification of losses previously recognized as a component of accumulated other comprehensive income on the Company's equity derivative instruments, net of related deferred income taxes of $33.0 million. SFAS No. 142 The Financial Accounting Standards Board ("FASB") issued SFAS No. 142, "Goodwill and Other Intangible Assets" in June 2001. SFAS No. 142 addresses how intangible assets that are acquired individually or with a group of other assets should be accounted for in financial statements upon and subsequent to their acquisition. The Company adopted SFAS No. 142 on January 1, 2002, as required by the new statement. Upon adoption, the Company no longer amortizes goodwill and other indefinite lived intangible assets, which consist of cable franchise rights. The Company will be required to test its goodwill and intangible assets that are determined to have an indefinite life for impairment at least annually. The provisions of SFAS No. 142 require the completion of an initial transitional impairment assessment, with any impairments identified treated as a cumulative effect of a change in accounting principle. The Company completed this assessment and determined that no cumulative effect results from adopting this change in accounting principle. The provisions of SFAS No. 142 also require the completion of an annual impairment test, with any impairments recognized in current earnings. The Company completed the annual impairment test during the three months ended June 30, 2002 and determined that no impairment charge is necessary (see Note 6). SFAS No. 143 The FASB issued SFAS No. 143, "Accounting for Asset Retirement Obligations," in June 2001. SFAS No. 143 addresses financial accounting and reporting for obligations associated with the retirement of tangible long-lived assets and the associated asset retirement costs. SFAS No. 143 is effective for fiscal years beginning after June 15, 2002. The Company does not expect the adoption of SFAS No. 143 will have a material impact on its financial condition or results of operations. 5 COMCAST CABLE COMMUNICATIONS, INC. AND SUBSIDIARIES FORM 10-Q QUARTER ENDED JUNE 30, 2002 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED (Unaudited) SFAS No. 144 The FASB issued SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets," in August 2001. SFAS No. 144, which addresses financial accounting and reporting for the impairment of long-lived assets and for long-lived assets to be disposed of, supercedes SFAS No. 121 and is effective for fiscal years beginning after December 15, 2001. The Company adopted SFAS No. 144 on January 1, 2002. The adoption of SFAS No. 144 had no impact on the Company's financial condition or results of operations. SFAS No. 145 The FASB issued SFAS No. 145, "Rescission of FASB Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections," in April 2002. SFAS No. 145 rescinds, amends or makes various technical corrections to certain existing authoritative pronouncements. Among other things, SFAS No. 145 will change the accounting for certain gains and losses resulting from extinguishments of debt by requiring that a gain or loss from extinguishments of debt be classified as an extraordinary item only if it meets the specific criteria of APB Opinion No. 30. SFAS No. 145 also requires that cash flows from all trading securities be classified as cash flows from operating activities in its statement of cash flows. The Company adopted the provisions of SFAS No. 145 effective April 1, 2002, as permitted by the new statement. Upon adoption of SFAS No. 145, all gains or losses on extinguishments of debt that were classified as extraordinary items in prior periods presented that do not meet the APB Opinion No. 30 criteria for classification as an extraordinary item shall be reclassified. The Company previously classified losses from debt extinguishments as extraordinary items in its statement of operations. The change in classification had no effect on the Company's net income (loss) or financial condition. SFAS No. 146 The FASB issued SFAS No. 146, "Accounting for Costs Associated with Exit or Disposal Activities," in June 2002. SFAS No. 146 changes the standards for recognition of a liability for a cost associated with an exit or disposal activity. SFAS No. 146 requires that a liability for a cost associated with an exit or disposal activity be recognized when the liability is incurred. SFAS No. 146 establishes that fair value is the objective for initial measurement of the liability. SFAS No. 146 nullifies the guidance of Emerging Issues Task Force ("EITF") 94-3, under which an entity recognized a liability for an exit cost on the date that the entity committed itself to an exit plan. The Company will adopt the provisions of SFAS No. 146 for exit or disposal activities that are initiated after December 31, 2002, as required by the new statement. The Company does not expect the adoption of SFAS No. 146 will have a material impact on its financial condition or results of operations. EITF 01-14 In November 2001, the FASB staff announced EITF Topic D-103, "Income Statement Characterization of Reimbursements Received for 'Out-of-Pocket' Expenses Incurred," which has subsequently been recharacterized as EITF 01-14. EITF 01-14 requires that reimbursements received for out-of-pocket expenses incurred be characterized as revenue in the statement of operations. Under the terms of its franchise agreements, the Company is required to pay up to 5% of its gross revenues derived from providing cable services to the local franchising authority. The Company normally passes these fees through to its cable subscribers. The Company previously classified cable franchise fees collected from its cable subscribers as a reduction of the related franchise fee expense included within selling, general and administrative expenses in its statement of operations. EITF 01-14, by analogy, applies to franchise fees. Upon adoption of EITF 01-14 on January 1, 2002, the Company reclassified franchise fees collected from cable subscribers from a reduction of selling, general and administrative expenses to a component of service revenues for all periods presented in its statement of operations. The change in classification had no impact on the Company's reported operating income (loss) or financial condition. 6 COMCAST CABLE COMMUNICATIONS, INC. AND SUBSIDIARIES FORM 10-Q QUARTER ENDED JUNE 30, 2002 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED (Unaudited) 3. COMPREHENSIVE INCOME The Company's total comprehensive income (loss) for the interim periods was as follows (in millions):

4. ACQUISITIONS AND OTHER SIGNIFICANT EVENTS Unaudited Pro Forma Information The following unaudited pro forma information has been presented as if the acquisitions made by the Company in 2001 each occurred on January 1, 2001. For a discussion of the Company's 2001 acquisitions, refer to the financial statements included in the Company's Annual Report on Form 10-K for the year ended December 31, 2001.This information is based on historical results of operations and has been adjusted for acquisition costs. This information is not necessarily indicative of what the results would have been had the Company operated the entities acquired since January 1, 2001 (in millions).

Other Income (Expense) On January 1, 2001, the Company and Comcast completed their cable systems exchange with Adelphia Communications Corporation ("Adelphia"). The Company received cable systems serving approximately 445,000 subscribers from Adelphia and Adelphia received certain of the Company's cable systems serving approximately 441,000 subscribers. The Company recorded to other income (expense) a pre-tax gain of $1.199 billion, representing the difference between the estimated fair value of $1.799 billion as of the closing date of the transaction and the Company's cost basis in the systems exchanged (see Note 10). 5. INVESTMENTS Fair Value Method The Company holds unrestricted equity investments in certain publicly traded companies which it accounts for as available for sale securities. The unrealized pre-tax gains on available for sale investments as of June 30, 2002 and December 31, 2001 of $33.1 million and $54.0 million, respectively, have been reported in the Company's balance sheet as a component of accumulated other comprehensive income, net of related deferred income taxes of $11.5 million and $18.9 million, respectively. 7 COMCAST CABLE COMMUNICATIONS, INC. AND SUBSIDIARIES FORM 10-Q QUARTER ENDED JUNE 30, 2002 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED (Unaudited) The cost, fair value and gross unrealized gains related to the Company's available for sale securities are as follows (in millions):

Derivatives The Company uses derivative financial instruments to manage its exposure to fluctuations in interest rates. The Company also invests in businesses, to some degree, through the purchase of equity call option or call warrant agreements. The unrealized pre-tax gain on cash flow hedges as of June 30, 2002 of $3.6 million has been reported in the Company's balance sheet as a component of accumulated other comprehensive income, net of related deferred income taxes of $1.3 million. Investment Income (Expense) Investment income (expense) for the interim periods includes the following (in millions):

The investment impairment loss for the six months ended June 30, 2001 relates principally to other than temporary declines in the Company's investments in AT&T Corp. and Motorola Inc. 6. GOODWILL AND INTANGIBLE ASSETS The changes in the carrying amount of goodwill for the periods presented are as follows (in millions): Balance, December 31, 2001......................................... $4,478.8 Purchase price allocation adjustments.......................... 5.1 ----------- Balance, June 30, 2002............................................. $4,483.9 ===========

During the six months ended June 30, 2002, the Company recorded the final purchase price allocation related to certain of its cable system acquisitions, which resulted in an increase in goodwill and a corresponding decrease in franchise rights. 8 COMCAST CABLE COMMUNICATIONS, INC. AND SUBSIDIARIES FORM 10-Q QUARTER ENDED JUNE 30, 2002 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED (Unaudited) As of June 30, 2002, the weighted average amortization period for the Company's intangible assets subject to amortization is 5.7 years and estimated related amortization expense for each of the five years ended December 31 is as follows (in millions): 2002............................ $33.8 2003............................ $30.5 2004............................ $27.5 2005............................ $23.5 2006............................ $17.2 The following pro forma financial information for the three and six months ended June 30, 2001, and for the years ended December 31, 2001, 2000 and 1999, is presented as if SFAS No. 142 was adopted as of January 1, 1999 (in millions):

7. LONG-TERM DEBT Commercial Paper The Company's senior bank credit facility consists of a $2.25 billion, five-year revolving credit facility and a $1.925 billion, 364-day revolving credit facility (together, the "Comcast Cable Revolver"). The 364-day revolving credit facility supports the Company's commercial paper program. Amounts outstanding under the commercial paper program are classified as long-term in the Company's balance sheet as of June 30, 2002 and December 31, 2001 as the Company has both the ability and the intent to refinance these obligations, if necessary, on a long-term basis with amounts available under the Comcast Cable Revolver. New Credit Facilities On May 3, 2002, AT&T Broadband Corp. and AT&T Comcast Corporation, a company owned 50% each by AT&T and Comcast ("AT&T Comcast"), entered into definitive credit agreements with a syndicate of lenders for an aggregate of $12.825 billion of new indebtedness in order to obtain the financing necessary to complete the merger of Comcast and a holding company of AT&T's broadband business ("AT&T Broadband") and for the combined company's financing needs after the transaction. This financing requires subsidiary guarantees, including guarantees by the Company and by subsidiaries of AT&T Broadband. Under the terms of the new credit facilities, the obligations of the lenders to provide the financing upon the completion of the transaction are subject to a number of conditions, including the condition that the combined company holds investment-grade credit ratings from both the Standard & Poor's and Moody's rating agencies at the time of closing. Accordingly, there can be no assurance that AT&T Broadband Corp. and AT&T Comcast will be able to obtain the financing necessary to complete the transaction. 9 COMCAST CABLE COMMUNICATIONS, INC. AND SUBSIDIARIES FORM 10-Q QUARTER ENDED JUNE 30, 2002 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED (Unaudited) Interest Rates As of June 30, 2002 and December 31, 2001, the Company's effective weighted average interest rate on its long-term debt outstanding was 6.84% and 6.41%, respectively. Interest Rate Risk Management During the six months ended June 30, 2002, the Company settled all of its outstanding fixed to variable interest rate exchange agreements totaling $950.0 million aggregate notional amount and received proceeds of $56.8 million. This amount is being recognized as an adjustment to interest expense over the term of the related debt. In June 2002, the Company entered into interest rate lock agreements ("Rate Locks") to hedge the risk that the cash flows related to the interest payments on an anticipated issuance or assumption of certain fixed rate debt in connection with the AT&T Broadband transaction may be adversely affected by interest rate fluctuations. The Rate Locks mature in the fourth quarter of 2002, the timing of the anticipated issuance or assumption of the fixed rate debt. To the extent the Rate Locks are effective in offsetting the variability of the hedged cash flows, changes in the fair value of the Rate Locks will not be included in earnings but will be reported as a component of accumulated other comprehensive income. Upon the issuance or assumption of the debt, the value of the Rate Locks will be recognized as an adjustment to interest expense over the same period in which the related interest costs on the debt are recognized in earnings. Lines and Letters of Credit As of June 30, 2002, the Company had unused lines of credit of $3.085 billion under its revolving credit facility. As of June 30, 2002, the Company and certain of its subsidiaries had unused irrevocable standby letters of credit totaling $58.6 million to cover potential fundings under various agreements. 8. NOTES RECEIVABLE FROM AFFILIATES As of June 30, 2002 and December 31, 2001, notes receivable from affiliates consist of $276.0 million and $557.8 million principal amount of notes receivable from Comcast and certain of its wholly owned subsidiaries. The notes receivable bear interest at rates ranging from 7.5% to 7.75% as of June 30, 2002 and 5.75% to 8.76% as of December 31, 2001 (weighted average interest rate of 7.74% and 7.11% as of June 30, 2002 and December 31, 2001, respectively) and are due between 2010 and 2011. Interest receivable relating to such notes of $22.8 million is included in notes receivable from affiliates as of December 31, 2001. 9. RELATED PARTY TRANSACTIONS Comcast, on behalf of the Company, has an affiliation agreement with QVC, Inc. ("QVC"), an electronic retailer and a majority owned and controlled subsidiary of Comcast, to carry its programming. In return for carrying QVC programming, the Company receives an allocated portion, based upon market share, of a percentage of net sales of merchandise sold to QVC customers located in the Company's service area. These amounts are included in service revenues in the Company's statement of operations and accumulated deficit. The Company has entered into an agreement with QVC pursuant to which the Company has agreed to reposition the QVC channel on the Company's cable systems. In return for repositioning the QVC channel, the Company receives incentive payments based on the number of subscribers for which the QVC channel has been repositioned. During the six and three months ended June 30, 2002, QVC paid $17.8 million to the Company under the terms of the agreement. As of June 30, 2002 and December 31, 2001, other non-current liabilities includes $28.2 million and $11.6 million related to this agreement. The Company recognizes to service revenues the QVC incentive payments over the ten year life of the agreement on a straight-line basis. The Company purchases programming from suppliers in which Comcast holds an equity interest. These charges are included in operating expenses in the Company's statement of operations and accumulated deficit. 10 COMCAST CABLE COMMUNICATIONS, INC. AND SUBSIDIARIES FORM 10-Q QUARTER ENDED JUNE 30, 2002 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONCLUDED (Unaudited) The Company purchases certain other services, including insurance and employee benefits, from Comcast under cost-sharing arrangements on terms that reflect Comcast's actual cost. The Company reimburses Comcast for certain other costs (primarily salaries) under cost reimbursement agreements. These charges are included in selling, general and administrative expenses in the Company's statement of operations and accumulated deficit. Effective August 1, 2001, Comcast contributed its wholly owned subsidiary, Comcast Financial Agency Corporation ("CFAC"), to the Company. CFAC provides cash management services to the Company. Under this arrangement, the Company's cash receipts are deposited with and held by CFAC, as custodian and agent, which invests and disburses such funds at the direction of the Company. In June 2002, the Company paid a cash dividend of $54.0 million to Comcast. The Company's related party transactions for the interim periods were as follows (in millions):

10. STATEMENT OF CASH FLOWS - SUPPLEMENTAL INFORMATION The fair values of the assets and liabilities acquired by the Company during the six months ended June 30, 2001 are presented as follows (in millions): Current assets..................................... $22.2 Property, plant & equipment........................ 681.3 Intangible assets.................................. 2,537.1 Current liabilities................................ (19.1) ----------- Net assets acquired....................... $3,221.5 =========== The Company made cash payments for interest and income taxes during the interim periods as follows (in millions):

11. 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 such actions is not expected to materially affect the financial condition, results of operations or liquidity of the Company. 11 COMCAST CABLE COMMUNICATIONS, INC. AND SUBSIDIARIES FORM 10-Q QUARTER ENDED JUNE 30, 2002 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Information for this item is omitted pursuant to Securities and Exchange Commission General Instruction H to Form 10-Q, except as noted below. We are a wholly owned subsidiary of Comcast Corporation ("Comcast"). AT&T Broadband Transaction On December 19, 2001, Comcast entered into an Agreement and Plan of Merger with AT&T Corp. ("AT&T") pursuant to which Comcast agreed to a transaction which will result in the combination of Comcast and a holding company of AT&T's broadband business ("AT&T Broadband") that AT&T will spin off to its shareholders immediately prior to the combination. As of June 30, 2002, AT&T Broadband served approximately 13.3 million subscribers. On July 10, 2002, shareholders of both Comcast and AT&T approved the transaction. The transaction is subject to customary closing conditions and regulatory and other approvals and is expected to close by the end of 2002. Excluding AT&T Broadband's exchangeable notes, which are mandatorily redeemable at AT&T Broadband's option into shares of certain publicly traded companies held by AT&T Broadband, Comcast currently estimates that the combined company will require approximately $20 billion of assumed, refinanced and new indebtedness upon completion of the AT&T Broadband transaction. Of this $20 billion of indebtedness, approximately $7 billion to $8 billion will be assumed indebtedness of AT&T Broadband's subsidiaries, $9 billion to $10 billion will retire amounts Comcast expects AT&T Broadband will owe AT&T at, and will be required to pay, upon closing of the AT&T Broadband transaction, and $2 billion to $4 billion will be needed to refinance AT&T Broadband debt that will become due on or shortly after the closing of the AT&T Broadband transaction and to provide appropriate cash reserves to fund AT&T Broadband's operations and capital expenditures. Comcast can not provide assurances that the actual amount of this indebtedness will not exceed $20 billion. On August 12, 2002, we, AT&T, AT&T Comcast Corporation ("AT&T Comcast"), AT&T Broadband, and two of AT&T's broadband subsidiaries, filed a registration statement with the Securities and Exchange Commission detailing a potential exchange offer for some of AT&T's existing public indebtedness. The exchange offer is designed to satisfy one of the conditions to the AT&T Broadband transaction and, if successful, would result in the assumption of a portion of this AT&T indebtedness by AT&T Broadband. The exchange offer is subject to market conditions and the resolution of continued negotiations between Comcast and AT&T. The $9 billion to $10 billion that Comcast expects AT&T Broadband will be required to pay AT&T upon closing of the AT&T Broadband transaction would be reduced based upon the amount of AT&T indebtedness assumed by AT&T Broadband in the exchange in an amount to be mutually agreed. On May 3, 2002, AT&T Broadband Corp. and AT&T Comcast entered into definitive credit agreements with a syndicate of lenders for an aggregate of $12.825 billion to provide the financing to complete the AT&T Broadband transaction and for the combined company's financing needs after the transaction. The amount of AT&T's indebtedness assumed by AT&T Broadband in the exchange offer, if any, will not reduce the amounts available under these credit agreements. Refer to Note 7 to our financial statements included in Item 1 for a discussion of the new credit facilities. In addition to any assumption of AT&T indebtedness by AT&T Broadband in the exchange offer and amounts available under the new credit agreements, Comcast may also use other available sources of financing to fund these requirements, including: o its existing cash, cash equivalents and short-term investments, which totaled $1.615 billion as of June 30, 2002, o amounts available under Comcast's subsidiaries' lines of credit, which totaled $3.363 billion as of June 30, 2002 (including $3.085 billion of amounts available under our lines of credit), and o through the sales of Comcast's and AT&T Broadband's investments, including AT&T Broadband's investment in Time Warner Entertainment. Subsequent to closing of the AT&T Broadband transaction, Comcast will have a substantially higher amount of debt, interest expense and capital expenditures at AT&T Comcast. If the credit rating agencies determine that AT&T Comcast is less creditworthy, on a combined basis, than that of Comcast on an historical basis, it is 12 COMCAST CABLE COMMUNICATIONS, INC. AND SUBSIDIARIES FORM 10-Q QUARTER ENDED JUNE 30, 2002 possible that our cost of and access to capital could be negatively affected. Comcast currently holds investment grade ratings for our various debt securities. If our debt securities are downgraded as a result of our assumption of debt in the AT&T Broadband transaction, access to the commercial paper market would likely become limited and the costs of borrowing under alternative sources would likely increase. Interest Rate Risk During the six months ended June 30, 2002, we settled $950.0 million aggregate notional amount of our fixed to variable interest rate exchange agreements ("Swaps") and received proceeds of $56.8 million. This amount is being recognized as an adjustment to interest expense over the term of the related debt. In June 2002, we entered into interest rate lock agreements ("Rate Locks") to hedge the risk that the cash flows related to the interest payments on an anticipated issuance or assumption of certain fixed rate debt in connection with the AT&T Broadband transaction may be adversely affected by interest rate fluctuations. The Rate Locks mature in the fourth quarter of 2002, the timing of the anticipated issuance or assumption of the fixed rate debt. Results of Operations --------------------- Our summarized financial information for the interim periods is as follows (dollars in millions, "NM" denotes percentage is not meaningful):

13 COMCAST CABLE COMMUNICATIONS, INC. AND SUBSIDIARIES FORM 10-Q QUARTER ENDED JUNE 30, 2002

Video revenue consists of our basic, expanded basic, premium, pay-per-view, equipment and digital subscriptions. Of the $125.9 million and $289.6 million increases in video revenues for the interim periods from 2001 to 2002, $50.2 million and $142.5 million are attributable to the effects of our acquisitions of cable systems and $75.7 million and $147.1 million relate to increased rates and subscriber growth in our historical operations, driven principally by growth in digital subscriptions. During the three and six months ended June 30, 2002, we added approximately 195,100 and 395,400 digital subscriptions. The increases in high-speed Internet revenue for the interim periods from 2001 to 2002 are primarily due to the addition of approximately 126,800 and 218,700 high-speed Internet subscribers during the three and six months ended June 30, 2002, and to the effects of rate increases. The increases in advertising sales revenue for the interim periods from 2001 to 2002 are primarily attributable to the effects of a stronger advertising market and the continued leveraging of our market-wide fiber interconnects. Other revenue includes installation revenues, guide revenues, commissions from electronic retailing, and revenue from other product offerings. The increase for the six month period from 2001 to 2002 is primarily attributable to the effects of our acquisitions of cable systems. The decrease for the three month period from 2001 to 2002 is primarily attributable to a decrease in installation revenue. 14 COMCAST CABLE COMMUNICATIONS, INC. AND SUBSIDIARIES FORM 10-Q QUARTER ENDED JUNE 30, 2002 On January 1, 2002, we adopted Emerging Issues Task Force ("EITF") 01-14, "Income Statement Characterization of Reimbursements Received for 'Out- of-Pocket' Expenses Incurred." EITF 01-14 requires that reimbursements received for out-of-pocket expenses incurred be characterized as revenue in the statement of operations. Under the terms of our franchise agreements, we are required to pay up to 5% of our gross revenues derived from providing cable services to the local franchising authority. We normally pass these fees through to our cable subscribers. Upon adoption of EITF 01-14, we reclassified franchise fees collected from cable subscribers from a reduction of selling, general and administrative expenses to a component of service revenues for all periods presented in our statement of operations. The changes in classification had no impact on our reported operating income (loss) or financial condition. Refer to Note 2 to our financial statements included in Item 1 for a discussion of the adoption of EITF 01-14. The increases in franchise fees collected from our cable subscribers under the terms of our franchise agreements for the interim periods from 2001 to 2002 are attributable to the increases in our revenues upon which the fees apply. The increases in operating, selling, general and administrative expenses are primarily due to the effects of our acquisitions of cable systems, as well as to the effects of increases in the costs of cable programming, high-speed Internet subscriber growth, and, to a lesser extent, increases in labor costs and other volume related expenses in our historical operations. Our cost of programming increases as a result of changes in rates, subscriber growth, additional channel offerings and our acquisitions. We anticipate the cost of cable programming will increase in the future as cable programming rates increase and additional sources of cable programming become available. Depreciation The increases in depreciation expense for the interim periods from 2001 to 2002 are primarily due to the effects of our acquisitions and our capital expenditures. Amortization Of the $481.4 million and $924.0 million decreases in amortization expense for the interim periods from 2001 and 2002, $483.0 million and $925.7 million are attributable to the adoption of Statement of Financial Accounting Standards ("SFAS") No. 142, "Goodwill and Other Intangible Assets." on January 1, 2002. Refer to Note 6 to our financial statements included in Item 1 for the pro forma impact of adoption of SFAS No. 142 on amortization expense. Interest Expense The increases in interest expense for the interim periods from 2001 to 2002 are primarily due to the effects of our notes offerings in May and June 2001. Interest Income (Expense) on Affiliate Notes, Net The changes in interest income (expense) on affiliate notes, net for the interim periods from 2001 to 2002 are due to the repayment of notes payable to affiliates in the second quarter of 2001 and to the increases in the average outstanding balance of notes receivable from affiliates as compared to the prior year period. 15 COMCAST CABLE COMMUNICATIONS, INC. AND SUBSIDIARIES FORM 10-Q QUARTER ENDED JUNE 30, 2002 Investment Income (Expense) Investment income (expense) for the interim periods includes the following (in millions):

The investment impairment loss for the six months ended June 30, 2001 relates principally to other than temporary declines in our investments in AT&T and Motorola, Inc. Equity in Net Income (Losses) of Affiliates The changes in equity in net income (losses) of affiliates for the interim periods from 2001 to 2002 are primarily attributable to the effects of decreases in the amortization of equity method goodwill as a result of the adoption of SFAS No. 142 on January 1, 2002, as well as the effects of changes in the net income (loss) of our equity method investees. Other Income (Expense) On January 1, 2001, we and Comcast completed our cable systems exchange with Adelphia Communications Corporation ("Adelphia"). We received cable systems serving approximately 445,000 subscribers from Adelphia and Adelphia received certain of our cable systems serving approximately 441,000 subscribers. We recorded to other income (expense) a pre-tax gain of $1.199 billion, representing the difference between the estimated fair value of $1.799 billion as of the closing date of the transaction and our cost basis in the systems exchanged. Income Tax Benefit (Expense) The changes in income tax benefit (expense) for the interim periods from 2001 to 2002 are primarily the result of the effects of changes in our income (loss) before income taxes and cumulative effect of accounting change. Cumulative Effect of Accounting Change In connection with the adoption of SFAS No. 142, we completed an initial transitional impairment assessment of goodwill and other indefinite lived intangible assets, which consist of our cable franchise operating rights. Based upon further guidance provided by the EITF, we determined that no cumulative effect results from adopting this change in accounting principle. In connection with the adoption of SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities," as amended, we recognized as a loss a cumulative effect of accounting change, net of related income taxes, of $61.3 million during the six months ended June 30, 2001. The loss consisted of $94.3 million principally related to the reclassification of losses previously recognized as a component of accumulated other comprehensive income on our equity derivative instruments, net of related deferred income taxes of $33.0 million. We believe that our operations are not materially affected by inflation. Anticipated Transaction Comcast intends to merge its subsidiary, Comcast Cablevision of Philadelphia Area I, Inc. ("Greater Philadelphia"), which serves approximately 86,000 subscribers as of June 30, 2002, with and into us (the "Greater Philadelphia Merger"). The Greater Philadelphia Merger is expected to close during the third quarter of 2002, subject to receipt of certain approvals. 16 COMCAST CABLE COMMUNICATIONS, INC. AND SUBSIDIARIES FORM 10-Q QUARTER ENDED JUNE 30, 2002 PART II. OTHER INFORMATION -------- ----------------- ITEM 1. LEGAL PROCEEDINGS We are subject to legal proceedings and claims which arise in the ordinary course of our business. In the opinion of our management, the amount of ultimate liability with respect to such actions is not expected to materially affect our financial condition, results of operations or liquidity. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits required to be filed by Item 601 of Regulation S-K: 99.1 Certifications of Chief Executive Officer and Co-Chief Financial Officers of Comcast Cable Communications, Inc. pursuant to Section 1350 of Chapter 63 of Title 18 of the United States Code. (b) Reports on Form 8-K: None. 17 COMCAST CABLE COMMUNICATIONS, INC. AND SUBSIDIARIES FORM 10-Q QUARTER ENDED JUNE 30, 2002 SIGNATURE --------- 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 undersigned thereunto duly authorized. COMCAST CABLE COMMUNICATIONS, INC. -------------------------------------- /S/ LAWRENCE J. SALVA -------------------------------------- Lawrence J. Salva Senior Vice President (Principal Accounting Officer) Date: August 14, 2002 18

COMCAST CABLE COMMUNICATIONS INC 10-Q