Comcast 2007 Annual Report Download - page 53

As a result of the Exchanges, we recognized a gain on the sale of
discontinued operations of $195 million, net of tax of $541 million
and a gain on the sale of the Century and Parnassos cable sys-
tems of approximately $111 million that is included within invest-
ment income (loss), net.
The cable systems that TWC transferred to us in the Exchanges
included cable systems that TWC acquired from Adelphia in its asset
purchase from Adelphia and TWC’s Philadelphia cable system.
Purchase Price Allocation
The cable systems acquired in the Houston transaction and in the
Adelphia and Time Warner transactions were accounted for in
accordance with SFAS No. 141. The results of operations for the
cable systems acquired in these transactions are reported in our
Cable segment, effective August 1, 2006 for the Houston trans-
action and effective July 31, 2006 for the Adelphia and Time Warner
transactions. The results of operations for the cable systems ac-
quired have been included in our consolidated financial statements
since January 1, 2007 for the Houston transaction (the date of the
distribution of assets) and since July 31, 2006 for the Adelphia and
Time Warner transactions (the acquisition date). For both the Hous-
ton transaction and the Adelphia and Time Warner transactions, the
weighted-average amortization period of the franchise-related cus-
tomer relationship intangible assets acquired was seven years. As a
result of the Houston transaction, we reversed deferred tax liabilities
of approximately $200 million, primarily related to the excess of tax
basis of the assets acquired over the tax basis of the assets
exchanged, and reduced the amount of goodwill that would have
otherwise been recorded in the acquisition. As a result of the
redemption of our investment in TWC and the exchange of the cable
systems held by Century and Parnassos in 2006, we reversed
deferred tax liabilities of approximately $760 million, primarily related
to the excess of tax basis of the assets acquired over the tax basis
of the assets exchanged, and reduced the amount of goodwill and
other noncurrent assets that would have otherwise been recorded in
the acquisition. Substantially all of the goodwill recorded is expected
to be amortizable for tax purposes.
The table below presents the purchase price allocation to assets
acquired and liabilities assumed as a result of the Houston trans-
action and the Adelphia and Time Warner transactions, exclusive
of the cable systems held by Century and Parnassos and trans-
ferred to TWC:
(in millions) Houston
Adelphia and
Time Warner
Property and equipment $ 870 $ 2,640
Franchise-related customer relationships 266 1,627
Cable franchise rights 1,954 6,730
Goodwill 426 420
Other assets 267 111
Total liabilities (73) (351)
Net assets acquired $ 3,710 $ 11,177
Discontinued Operations
As discussed above, the operating results of the Comcast Ex-
change Systems transferred to TWC are reported as discontinued
operations for all periods and are presented in accordance with
SFAS No. 144. The table below presents the operating results of
the Comcast Exchange Systems through the closing date of the
Exchanges (July 31, 2006):
Year ended December 31 (in millions) 2006 2005
Revenues $ 734 $ 1,180
Income before income taxes $ 121 $ 159
Income tax expense $ (18) $ (59)
Net income $ 103 $ 100
Unaudited Pro Forma Information
The following unaudited pro forma information has been presented
as if the Houston transaction occurred on January 1, 2006 and the
Adelphia and Time Warner transactions occurred on January 1,
2005. This information is based on historical results of operations,
adjusted for purchase price allocations, and is not necessarily
indicative of what the results would have been had we operated
the entities since the dates indicated.
Year ended December 31
(in millions, except per share data) 2006 2005
Revenues $ 27,526 $ 23,672
Income from continuing operations $ 2,225 $ 770
Income from discontinued operations,
net of tax $ 103 $ 100
Gain on discontinued operations,
net of tax $ 195 $ —
Net Income $ 2,523 $ 870
Basic earnings per common share $ 0.80 $ 0.26
Diluted earnings per common share $ 0.79 $ 0.26
51 Comcast 2007 Annual Report on Form 10-K