InvestorsFebruary 22, 2013
Charter Announces Fourth Quarter and Full Year 2012 Results
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Key highlights:
- Fourth quarter 2012 residential customer relationships increased by 20,000, a four-fold increase over the fourth quarter of 2011. Residential customer relationships grew by 108,000 in 2012, compared to a loss of 20,000 in 2011.
- Revenues grew to
$1.913 billion in the fourth quarter of 2012, up 4.3% as compared to the prior-year period, driven by growth in Internet and commercial customers, and higher sales of video and advertising. Total revenues for the full year rose 3.9% on a pro forma1 basis and 4.2% on an actual basis. - Residential Internet revenues rose 9.0% in the fourth quarter, compared to the year-ago quarter as Charter added 293,000 Internet customers over the past twelve months, 28% more than in 2011.
- Commercial revenues grew 20.4% in the fourth quarter, supported by growth across all segments, marking the seventh consecutive quarter of growth in excess of 20%. Full year commercial revenues increased 20.7% on a pro forma basis and 21.0% on an actual basis.
- Adjusted EBITDA2 for the fourth quarter increased to
$698 million , up 1.7% compared to prior year. Fourth quarter net loss totaled$40 million , compared to$67 million in the comparable prior-year period. - Free cash flow2 for the quarter was
$33 million and net cash flows from operating activities totaled$485 million . Free cash flow for the year was$144 million and cash flows from operating activities were$1.876 billion .
"Our fourth quarter results provide early evidence that our strategic changes are working as planned," said
1 |
Pro forma results are described below in the "Use of Non-GAAP Financial Metrics" section and are provided in the addendum of this news release. |
2 |
Adjusted EBITDA and free cash flow are defined in the "Use of Non-GAAP Financial Metrics" section and are reconciled to net loss and net cash flows from operating activities, respectively, in the addendum of this news release. |
Key Operating Results |
||||||
Approximate as of |
||||||
December 31, 2012 (a) |
December 31, 2011 (a) |
Y/Y Change |
||||
Footprint |
||||||
Estimated Video Passings (b) |
12,112 |
12,013 |
1% |
|||
Estimated Internet Passings (b) |
11,810 |
11,692 |
1% |
|||
Estimated Telephone Passings (b) |
11,139 |
10,891 |
2% |
|||
Penetration Statistics |
||||||
Video Penetration of Estimated Video Passings (c) |
34.3% |
35.9% |
-1.6 ppts |
|||
Internet Penetration of Estimated Internet Passings (c) |
33.7% |
31.3% |
2.4 ppts |
|||
Telephone Penetration of Estimated Telephone Passings (c) |
18.1% |
17.2% |
0.9 ppts |
|||
Residential |
||||||
Residential Customer Relationships (d) |
5,035 |
4,927 |
2% |
|||
Residential Non-Video Customers |
1,046 |
783 |
34% |
|||
% Non-Video |
20.8% |
15.9% |
4.9 ppts |
|||
Customers |
||||||
Video (e) |
3,989 |
4,144 |
-4% |
|||
Internet (f) |
3,785 |
3,492 |
8% |
|||
Telephone (g) |
1,914 |
1,791 |
7% |
|||
Residential PSUs (h) |
9,688 |
9,427 |
3% |
|||
Residential PSU / Customer Relationships (d)(h) |
1.92 |
1.91 |
||||
Quarterly Net Additions/(Losses) (i) |
||||||
Video (e) |
(36) |
(44) |
18% |
|||
Internet (f) |
54 |
68 |
-21% |
|||
Telephone (g) |
34 |
27 |
26% |
|||
Residential PSUs (h) |
52 |
51 |
2% |
|||
Single Play Penetration (j) |
37.6% |
37.7% |
-0.1 ppts |
|||
Double Play Penetration (k) |
32.5% |
33.2% |
-0.7 ppts |
|||
Triple Play Penetration (l) |
29.9% |
29.1% |
0.8 ppts |
|||
Digital Penetration (m) |
86.9% |
82.0% |
4.9 ppts |
|||
Revenue per Customer Relationship (n) |
$105.78 |
$105.73 |
- |
|||
Commercial |
||||||
Commercial Customer Relationships (d)(o) |
325 |
298 |
9% |
|||
Customers |
||||||
Video (o) |
169 |
170 |
-1% |
|||
Internet (f) |
193 |
163 |
18% |
|||
Telephone (g) |
105 |
79 |
33% |
|||
Commercial PSUs (h) |
467 |
412 |
13% |
|||
Quarterly Net Additions/(Losses) (i) |
||||||
Video (o) |
(3) |
(3) |
- |
|||
Internet (f) |
7 |
7 |
- |
|||
Telephone (g) |
6 |
5 |
20% |
|||
Commercial PSUs (h) |
10 |
9 |
11% |
|||
Footnotes |
In thousands, except ARPU and penetration data. See footnotes to unaudited summary of operating statistics on page 6 of the addendum of this news release. The footnotes contain important disclosures regarding the definitions used for these operating statistics. |
During 2012, we implemented several new operating strategies to further position Charter for growth. We made significant progress in enhancing our product set and changing the way we do business to better serve our customers. At mid-year 2012, we implemented new pricing and packaging of our residential offerings and revamped our go-to-market approach, both designed to increase the penetration of our products and to produce a higher quality, longer-term relationship with our customers. As a result of these new operating strategies, in the second half of 2012, we grew our triple play penetration by 110 basis points, from 28.8% to 29.9%. This compares to an increase of 40 basis points in the second half of 2011.
In the fourth quarter of 2012, we grew residential customer relationships 20,000, up from a gain of 5,000 in the fourth quarter last year. Residential PSUs increased by 52,000, in line with the gain in the year-ago quarter. We added 4,000 commercial customer relationships in the fourth quarter of 2012 compared to 3,000 in the prior-year quarter.
Residential video customers decreased by 36,000 in the fourth quarter of 2012, 18% better than the decline of 44,000 last year. In 2011, we lost 192,000 expanded basic video customers and in 2012, we reduced that loss to 12,000. The year-over-year improvement was driven by a combination of factors including our enhanced video product, which now includes over 100 HD channels, and the transition to new selling methods.
We added 54,000 residential Internet customers in the fourth quarter of 2012 compared to 68,000 a year ago. With our new pricing and packing, we no longer offered deeply discounted standalone offers as compared to the fourth quarter of 2011, when we actively marketed a
Fourth quarter residential revenue per customer relationship totaled
Fourth Quarter Financial Results |
|||||
CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS AND OPERATING DATA (dollars in millions, except per share and share data) |
|||||
Three Months Ended December 31, |
|||||
2012 |
2011 |
||||
Actual |
Actual |
% Change |
|||
REVENUES: |
|||||
Video |
$ 927 |
$ 902 |
2.8% |
||
Internet |
482 |
442 |
9.0% |
||
Telephone |
186 |
217 |
(14.3)% |
||
Commercial |
177 |
147 |
20.4% |
||
Advertising sales |
96 |
81 |
18.5% |
||
Other |
45 |
45 |
—% |
||
Total Revenues |
1,913 |
1,834 |
4.3% |
||
COSTS AND EXPENSES: |
|||||
Total operating costs and expenses (excluding depreciation and amortization) |
1,215 |
1,148 |
5.8% |
||
Adjusted EBITDA |
$ 698 |
$ 686 |
1.7% |
||
Adjusted EBITDA margin |
36.5% |
37.4% |
|||
Capital Expenditures |
$ 449 |
$ 327 |
|||
% Total Revenues |
23.5% |
17.8% |
|||
Net loss |
$ (40) |
$ (67) |
|||
Loss per common share, basic and diluted |
$ (0.41) |
$ (0.63) |
|||
Net cash flows from operating activities |
$ 485 |
$ 425 |
|||
Free cash flow |
$ 33 |
$ 166 |
|||
Revenue
Fourth quarter 2012 revenues were
Video revenues totaled
Internet revenues grew 9.0% compared to the year-ago quarter to
With 20.4% year-over-year growth, commercial revenues rose to
Fourth quarter advertising sales revenues of
Operating Costs and Expenses
Fourth quarter total operating costs and expenses increased 5.8% compared to the year-ago period, reflecting increases in programming expenses and costs to service customers. Fourth quarter programming expenses increased
Adjusted EBITDA
Fourth quarter adjusted EBITDA of
Net Loss
Net loss totaled
Capital Expenditures
Property, plant and equipment expenditures were
Cash Flow
During the fourth quarter of 2012, net cash flows from operating activities totaled
Free cash flow for the fourth quarter of 2012 was
In the fourth quarter of 2012, Charter redeemed the remaining
Year to Date Financial Results |
|||||||||
CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS AND OPERATING DATA (dollars in millions, except per share and share data) |
|||||||||
Year Ended December 31, |
|||||||||
2012 |
2011 |
2011 |
|||||||
Actual |
Pro forma |
% Change |
Actual |
% Change |
|||||
REVENUES: |
|||||||||
Video |
$ 3,639 |
$ 3,652 |
(0.4)% |
$ 3,639 |
—% |
||||
Internet |
1,866 |
1,713 |
8.9% |
1,708 |
9.3% |
||||
Telephone |
828 |
859 |
(3.6)% |
858 |
(3.5)% |
||||
Commercial |
658 |
545 |
20.7% |
544 |
21.0% |
||||
Advertising sales |
334 |
292 |
14.4% |
292 |
14.4% |
||||
Other |
179 |
163 |
9.8% |
163 |
9.8% |
||||
Total Revenues |
7,504 |
7,224 |
3.9% |
7,204 |
4.2% |
||||
COSTS AND EXPENSES: |
|||||||||
Total operating costs and expenses (excluding depreciation and amortization) |
4,810 |
4,544 |
5.9% |
4,529 |
6.2% |
||||
Adjusted EBITDA |
$ 2,694 |
$ 2,680 |
0.5% |
$ 2,675 |
0.7% |
||||
Adjusted EBITDA margin |
35.9% |
37.1% |
37.1% |
||||||
Capital Expenditures |
$ 1,745 |
$ 1,311 |
$ 1,311 |
||||||
% Total Revenues |
23.3% |
18.1% |
18.2% |
||||||
Net loss |
$ (304) |
$ (370) |
$ (369) |
||||||
Loss per common share, basic and diluted |
$ (3.05) |
$ (3.39) |
$ (3.39) |
||||||
Net cash flows from operating activities |
$ 1,876 |
$ 1,742 |
$ 1,737 |
||||||
Free cash flow |
$ 144 |
$ 488 |
$ 483 |
||||||
Revenue
For the year ended December 31, 2012, revenues rose to
Operating Costs and Expenses
Operating costs and expenses totaled
Adjusted EBITDA
Adjusted EBITDA was
Net Loss
For the year ended December 31, 2012, net loss was
Capital Expenditures
Property, plant and equipment expenditures for the year ended December 31, 2012, totaled
In 2013, we expect capital expenditures to be approximately
Cash Flow
Net cash flows from operating activities were
Free cash flow for the year ended December 31, 2012 was
Liquidity
Total principal amount of debt was approximately
Conference Call
Charter will host a conference call on
The conference call will be webcast live via the Company's website at charter.com. The webcast can be accessed by selecting "Investor & News Center" from the lower menu on the home page. The call will be archived in the "Investor & News Center" in the "Financial Information" section on the left beginning two hours after completion of the call. Participants should go to the webcast link no later than 10 minutes prior to the start time to register.
Those participating via telephone should dial 866-919-0894 no later than 10 minutes prior to the call. International participants should dial 706-679-9379. The conference ID code for the call is 83494589.
A replay of the call will be available at 855-859-2056 or 404-537-3406 beginning two hours after the completion of the call through the end of business on
Additional Information Available on Website
The information in this press release should be read in conjunction with the financial statements and footnotes contained in the Company's Form 10-K for year ended December 31, 2012 available on the "Investor & News Center" of our website at charter.com in the "Financial Information" section. A slide presentation to accompany the conference call and a trending schedule containing historical customer and financial data can also be found in the "Financial Information" section.
Use of Non-GAAP Financial Metrics
The Company uses certain measures that are not defined by Generally Accepted Accounting Principles ("GAAP") to evaluate various aspects of its business. Adjusted EBITDA and free cash flow are non-GAAP financial measures and should be considered in addition to, not as a substitute for, net loss or cash flows from operating activities reported in accordance with GAAP. These terms, as defined by Charter, may not be comparable to similarly titled measures used by other companies. Adjusted EBITDA is reconciled to net loss and free cash flow is reconciled to net cash flows from operating activities in the addendum of this news release.
Adjusted EBITDA is defined as net loss plus net interest expense, income taxes, depreciation and amortization, stock compensation expense, (gain) loss on extinguishment of debt, and other operating (income) expenses, such as special charges and (gain) loss on sale or retirement of assets. As such, it eliminates the significant non-cash depreciation and amortization expense that results from the capital-intensive nature of the Company's businesses as well as other non-cash or special items, and is unaffected by the Company's capital structure or investment activities. Adjusted EBITDA is used by management and the Company's Board to evaluate the performance of the Company's business. However, these measures are limited in that they do not reflect the periodic costs of certain capitalized tangible and intangible assets used in generating revenues and the cash cost of financing. Management evaluates these costs through other financial measures.
Free cash flow is defined as net cash flows from operating activities, less purchases of property, plant and equipment and changes in accrued expenses related to capital expenditures.
The Company believes that adjusted EBITDA and free cash flow provide information useful to investors in assessing Charter's performance and its ability to service its debt, fund operations and make additional investments with internally generated funds. In addition, adjusted EBITDA generally correlates to the leverage ratio calculation under the Company's credit facilities or outstanding notes to determine compliance with the covenants contained in the credit facilities and notes (all such documents have been previously filed with the
In addition to the actual results for the three and twelve months ended December 31, 2012 and 2011, we have provided pro forma results in this release for the twelve months ended December 31, 2011. We believe these pro forma results facilitate meaningful analysis of the results of operations. Pro forma results in this release reflect certain acquisitions of cable systems in 2011 as if they occurred as of
About Charter
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
This release includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), regarding, among other things, our plans, strategies and prospects, both business and financial. Although we believe that our plans, intentions and expectations reflected in or suggested by these forward-looking statements are reasonable, we cannot assure you that we will achieve or realize these plans, intentions or expectations. Forward-looking statements are inherently subject to risks, uncertainties and assumptions including, without limitation, the factors described under "Risk Factors" from time to time in our filings with the
- our ability to sustain and grow revenues and cash flow from operations by offering video, Internet, telephone, advertising and other services to residential and commercial customers, to adequately meet the customer experience demands in our markets and to maintain and grow our customer base, particularly in the face of increasingly aggressive competition, the need for innovation and the related capital expenditures and the difficult economic conditions in
the United States ; - the impact of competition from other market participants, including but not limited to incumbent telephone companies, direct broadcast satellite operators, wireless broadband and telephone providers, digital subscriber line ("DSL") providers, and video provided over the Internet;
- general business conditions, economic uncertainty or downturn, high unemployment levels and the level of activity in the housing sector;
- our ability to obtain programming at reasonable prices or to raise prices to offset, in whole or in part, the effects of higher programming costs (including retransmission consents);
- the development and deployment of new products and technologies;
- the effects of governmental regulation on our business;
- the availability and access, in general, of funds to meet our debt obligations prior to or when they become due and to fund our operations and necessary capital expenditures, either through (i) cash on hand, (ii) free cash flow, or (iii) access to the capital or credit markets; and
- our ability to comply with all covenants in our indentures and credit facilities any violation of which, if not cured in a timely manner, could trigger a default of our other obligations under cross-default provisions.
All forward-looking statements attributable to us or any person acting on our behalf are expressly qualified in their entirety by this cautionary statement. We are under no duty or obligation to update any of the forward-looking statements after the date of this release.
CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS AND OPERATING DATA (dollars in millions, except per share and share data) |
|||||||||||
Three Months Ended December 31, |
Year Ended December 31, |
||||||||||
2012 |
2011 |
2012 |
2011 |
||||||||
Actual |
Actual |
% Change |
Actual |
Actual |
% Change |
||||||
REVENUES: |
|||||||||||
Video |
$ 927 |
$ 902 |
2.8 % |
$ 3,639 |
$ 3,639 |
—% |
|||||
Internet |
482 |
442 |
9.0 % |
1,866 |
1,708 |
9.3 % |
|||||
Telephone |
186 |
217 |
(14.3)% |
828 |
858 |
(3.5)% |
|||||
Commercial |
177 |
147 |
20.4 % |
658 |
544 |
21.0 % |
|||||
Advertising sales |
96 |
81 |
18.5 % |
334 |
292 |
14.4 % |
|||||
Other |
45 |
45 |
—% |
179 |
163 |
9.8 % |
|||||
Total Revenues |
1,913 |
1,834 |
4.3 % |
7,504 |
7,204 |
4.2 % |
|||||
COSTS AND EXPENSES: |
|||||||||||
Programming |
495 |
469 |
5.5 % |
1,979 |
1,872 |
5.7 % |
|||||
Franchises, regulatory and connectivity |
92 |
90 |
2.2 % |
369 |
359 |
2.8 % |
|||||
Costs to service customers |
357 |
325 |
9.8 % |
1,363 |
1,268 |
7.5 % |
|||||
Marketing |
98 |
96 |
2.1 % |
422 |
387 |
9.0 % |
|||||
Other |
173 |
168 |
3.0 % |
677 |
643 |
5.3 % |
|||||
Total operating costs and expenses (excluding depreciation and amortization) |
1,215 |
1,148 |
5.8 % |
4,810 |
4,529 |
6.2 % |
|||||
Adjusted EBITDA |
698 |
686 |
1.7 % |
2,694 |
2,675 |
0.7 % |
|||||
Adjusted EBITDA margin |
36.5 % |
37.4 % |
35.9 % |
37.1 % |
|||||||
Depreciation and amortization |
466 |
411 |
1,713 |
1,592 |
|||||||
Stock compensation expense |
13 |
10 |
50 |
35 |
|||||||
Other operating expenses, net |
13 |
- |