Comcast balance sheet has been poisoned with the acquisition of the British Broadcast Sky Plc, that has brought additional leverage and multibillion Dollar long term Debt Burden on Comcast Balance Sheet, while also having to fund very expensive business unproductive costs in the United States, and these are going to make Comcast shares sink into the abyss.
Comcast consolidated income statement highlights how the company could have cashflow issues that has been masking by borrowing. In fact, Net Cash provided amounts to $19.85 Billion dollars, less than $28.5 billion as Depreciation and Amortization are not cashflow but assesment of tangible assets value on the books. The Net Cash flow made of Net Income+Share based compensation+Net (gain)loss on investment activities (currencies exchange rate forward exposures) and Deferred Income Tax amount to $19.85 Billion Net Free Cash Flow from operating activities, that has been matched exactly by Financing Activities Expenditures, as the corporate trades in a variety of financial instruments to keep its balance sheet afloat. In the Financing activities section it’s possible to observe how servicing short terms and long terms borrowing and repurchasing stock, also by dumping Comcast shares on employees, would match exactly ($19.85) billion in outflows, that are only stemmed by Borrowing Liquidity of $6.05 Billion, that explain how Comcast has accrued very large liabilities in terms of long term and short term debt, that are very difficult for the corporate to pay-off with net cashflows, and that keeps the corporate borrowing and rolling over debt to have liquidity on its balance sheet. While, also Comcast is heavily exposed in currencies exchange rate derivatives forward contracts, on its liabilities issued in British Pound, Yuan Renminbi, and the Euro, while also its long-term debt is exposed to interest rate risk, as a portion of Comcast borrowing has been issued on a 6% Variable interest rate coupon.
On the Balance sheet side of things, we can see that the assets portion has been heavily skewed on the Sky Plc acquisition expenditure $ 59.6 Billion, also magically reported as net GoodWill addendum to the Assets side of the Balance sheet, that becomes inflated also with questionable intangible asset valuation.
In fact, the net Cash and Cash Equivalent available to Comcast are the famous $6 Billion dollar that the Corporate has indeed Borrowed, see above, Proceeds from Borrowing $ 6.05 Billion.
At a first glance, it’s possible to notice the mismatching between current assets $23,98 billions of which only $ 6.2 Billion in callable cash, compared to Current Liabilities amount of $40.2 Billion, hence a give or take $(16) billion shortfalls, in current cashflow terms between assets and liabilities. Another interesting item on the balance sheet is the Whopping Deferred Income Tax $26.0 Billon of seems to create some artificial equity in the balance sheet.
In the medium to long term, could be possible that Comcast would be faced with short term liquidity issues and mounting operating and borrowing costs, that could be adversely impacted by exchange rate and interest rate volatility risks. These series of factors could prompt Comcast board to assess an assets fire sale of acquired overseas operations such as Sky Plc, to recover the enormous borrowing costs that the corporate had to issue and finance in order to complete an acquisition that has been vastly overpriced and overvalued and in the long terms could result in additional losses and impaired goodwill decreasing the value of assets and equity on Comcast balance sheet.
