InvestorsFebruary 21, 2014
Charter Announces Fourth Quarter and Full Year 2013 Results
Share Article:
(Logo: http://photos.prnewswire.com/prnh/20110526/AQ10195LOGO)
Key highlights:
- Pro forma1 for the acquisition of
Bresnan , total residential customer relationships grew by 63,000 during the quarter, versus 24,000 during the fourth quarter of 2012. Residential primary service units (PSUs) increased by 147,000 during the period, versus 57,000 in the year-ago quarter. - For the full year 2013, Charter added 172,000 residential customers compared to growth of 120,000 residential customers in 2012. Charter saw improved growth across every residential PSU category in 2013, adding 415,000 residential PSUs, versus a gain of 296,000 in 2012, a year-over-year improvement of 40.2%.
- Fourth quarter revenues of
$2.1 billion grew 5.0% on a pro forma1 basis as compared to the prior-year period, or 6.2% excluding advertising, led by growth in Internet, video, and commercial revenues. Total revenues for the full year rose 5.0% on a pro forma basis. - Fourth quarter residential revenues grew 4.9% on a pro forma basis versus the fourth quarter of 2012, when residential revenues grew by 2.3% on a pro forma basis. For the full year 2013, residential revenues grew by 4.7% on a pro forma basis versus 2.1% in 2012.
- Pro forma for the acquisition of
Bresnan , commercial customer relationships grew by 16,000 in the fourth quarter of 2013, compared to a gain of 4,000 during the fourth quarter of 2012. Fourth quarter commercial revenues grew 19.4% on a pro forma basis versus the prior-year period, primarily driven by higher sales to small and medium businesses and to carrier customers. - Fourth quarter Adjusted EBITDA2 grew by 2.6% year-over-year on a pro forma basis. Excluding the impact of political advertising, fourth quarter Adjusted EBITDA grew by 4.8%.
"Our 2013 results show the early success of our strategies to drive accelerated customer growth. We now deliver a competitive, highly valuable suite of products and services to our customers, and we are beginning to execute at a high level, evidenced by improving trends through the year," said
1 All customer data and results, unless otherwise noted, are pro forma for the
2 Adjusted EBITDA and free cash flow are defined in the "Use of Non-GAAP Financial Metrics" section and are reconciled to net income (loss) and net cash flows from operating activities, respectively, in the addendum of this news release.
Key Operating Results |
|||||
Approximate as of |
|||||
Actual |
Pro Forma |
||||
December 31, 2013 (a) |
December 31, 2012 (a) |
Y/Y Change |
|||
Footprint |
|||||
Estimated Video Passings (b) |
12,799 |
12,741 |
--% |
||
Estimated Internet Passings (b) |
12,467 |
12,427 |
--% |
||
Estimated Voice Passings (b) |
11,898 |
11,752 |
1% |
||
Penetration Statistics |
|||||
Video Penetration of Estimated Video Passings (c) |
33.9% |
35.0% |
-1.1ppts |
||
Internet Penetration of Estimated Internet Passings (c) |
37.2% |
34.4% |
2.8 ppts |
||
Voice Penetration of Estimated Voice Passings (c) |
20.3% |
18.6% |
1.7 ppts |
||
Residential |
|||||
Residential Customer Relationships (d) |
5,561 |
5,389 |
3% |
||
Residential Non-Video Customers |
1,384 |
1,103 |
25% |
||
% Non-Video |
24.9% |
20.5% |
4.4 ppts |
||
Customers |
|||||
Video (e) |
4,177 |
4,286 |
(3)% |
||
Internet (f) |
4,383 |
4,059 |
8% |
||
Voice (g) |
2,273 |
2,073 |
10% |
||
Residential PSUs (h) |
10,833 |
10,418 |
4% |
||
Residential PSU / Customer Relationships (d)(h) |
1.95 |
1.93 |
|||
Quarterly Net Additions/(Losses) (i) |
|||||
Video (e) |
(2) |
(36) |
94% |
||
Internet (f) |
93 |
59 |
58% |
||
Voice (g) |
56 |
34 |
65% |
||
Residential PSUs (h) |
147 |
57 |
158% |
||
Single Play Penetration (j) |
37.6% |
37.3% |
0.3 ppts |
||
Double Play Penetration (k) |
29.8% |
32.0% |
-2.2 ppts |
||
Triple Play Penetration (l) |
32.6% |
30.7% |
1.9 ppts |
||
Digital Penetration (m) |
91.8% |
86.8% |
5.0 ppts |
||
Revenue per Customer Relationship (d)(n) |
$107.97 |
$105.76 |
2% |
||
Commercial |
|||||
Commercial Customer Relationships (d)(o) |
375 |
341 |
10% |
||
Customers |
|||||
Video (e)(o) |
165 |
177 |
(7)% |
||
Internet (f) |
257 |
210 |
22% |
||
Voice (g) |
145 |
116 |
25% |
||
Commercial PSUs (h) |
567 |
503 |
13% |
||
Quarterly Net Additions/(Losses) (i) |
|||||
Video (e)(o) |
(1) |
(3) |
67% |
||
Internet (f) |
12 |
8 |
50% |
||
Voice (g) |
7 |
7 |
--% |
||
Commercial PSUs (h) |
18 |
12 |
50% |
||
Footnotes
In thousands, except per customer 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.
On
During the fourth quarter of 2013, Charter saw year-over-year and sequential improvement in customer relationship and PSU growth. Residential customer relationships grew by 63,000, up from 24,000 in the fourth quarter of 2012. Commercial customer relationships grew by 16,000 in the fourth quarter of 2013, compared to a gain of 4,000 in the prior-year period. Residential PSUs increased by 147,000 versus 57,000 in the year-ago quarter, while commercial PSUs increased 18,000 during the fourth quarter versus a gain of 12,000 in the year-ago quarter.
For the full year 2013, Charter added 172,000 residential customers compared to growth of 120,000 residential customers in 2012. In 2013, Charter also saw net additions improvement across every residential PSU category compared to the prior year, adding 415,000 residential PSUs, versus a gain of 296,000 in 2012, for a year-over-year improvement of 40.2%.
At the end of 2013, Charter had completed approximately 15% of its all-digital initiative, with customers in these markets generally having access to over 170 HD channels. All-digital allows Charter to offer more advanced products and services, and provides residential customers with two-way digital set-tops, which offer higher picture quality, an interactive programming guide and video on demand on all TV outlets in the home. Charter expects to complete its all-digital roll out across its footprint by year end 2014, at which time nearly all of Charter's residential customers will have access to Charter Spectrum, an industry-leading suite of video, data, and voice services that will include over 200 HD channels, in addition to minimum offered Internet speeds of 60 Mbps, and a fully featured voice service at a highly competitive price.
Residential video customers declined by 2,000 in the fourth quarter of 2013, versus a loss of 36,000 in the year-ago period. The year-over-year improvement in video net adds was driven by a more competitive video product, including more HD channels, attractive packaging of advanced services, including Charter's new TV app, our transition to new selling methods, and improved service quality.
Charter added 93,000 residential Internet customers in the fourth quarter of 2013, compared to 59,000 a year ago. The Company continues to see strong demand for its Internet service as consumers value the speed and reliability of Charter's Internet offering. As of December 31, 2013, approximately 75% of Charter's residential Internet customers subscribed to tiers that provided speeds of 30 Mbps or more.
During the fourth quarter, the Company added 56,000 residential voice customers, versus a gain of 34,000 during the fourth quarter of 2012. For the full year 2013, Charter added 200,000 voice customers versus 134,000 in 2012, an improvement of 49.3%.
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 data) |
|||||||||
Three Months Ended December 31, |
|||||||||
2013 |
2012 |
2012 |
|||||||
Actual |
Pro Forma |
% Change |
Actual |
% Change |
|||||
REVENUES: |
|||||||||
Video |
$ 1,046 |
$ 994 |
5.2% |
$ 927 |
12.8% |
||||
Internet |
590 |
513 |
15.0% |
482 |
22.4% |
||||
Voice |
154 |
199 |
(22.6)% |
186 |
(17.2)% |
||||
Commercial |
228 |
191 |
19.4% |
177 |
28.8% |
||||
Advertising sales |
83 |
101 |
(17.8)% |
96 |
(13.5)% |
||||
Other |
47 |
47 |
--% |
45 |
4.4% |
||||
Total Revenues |
2,148 |
2,045 |
5.0% |
1,913 |
12.3% |
||||
COSTS AND EXPENSES: |
|||||||||
Total operating costs and expenses (excluding depreciation and amortization) |
1,384 |
1,300 |
6.5% |
1,215 |
13.9% |
||||
Adjusted EBITDA |
$ 764 |
$ 745 |
2.6% |
$ 698 |
9.5% |
||||
Adjusted EBITDA margin |
35.6% |
36.4% |
36.5% |
||||||
Capital Expenditures |
$ 566 |
$ 469 |
$ 449 |
||||||
% Total Revenues |
26.4% |
22.9% |
23.5% |
||||||
Net income (loss) |
$ 39 |
$ (73) |
$ (40) |
||||||
Income (loss) per common share, basic |
$ 0.38 |
$ (0.73) |
$ (0.41) |
||||||
Income (loss) per common share, diluted |
$ 0.35 |
$ (0.73) |
$ (0.41) |
||||||
Net cash flows from operating activities |
$ 595 |
$ 485 |
|||||||
Free cash flow |
$ 84 |
$ 33 |
|||||||
Revenue
Fourth quarter 2013 revenues rose to
Video revenues totaled
Internet revenues grew 15.0% on a pro forma basis compared to the year-ago quarter to
Voice revenues totaled
Commercial revenues rose to
Fourth quarter advertising sales revenues of
Operating Costs and Expenses
Fourth quarter total operating costs and expenses increased 6.5% on a pro forma basis compared to the year-ago period, reflecting increases in programming costs, marketing expenses, and other expenses.
Fourth quarter programming expense increased by
Adjusted EBITDA
Fourth quarter Adjusted EBITDA of
Net Income
Net income totaled
Capital Expenditures
Property, plant and equipment expenditures were
Cash Flow
During the fourth quarter of 2013, net cash flows from operating activities totaled
Free cash flow for the fourth quarter of 2013 was
Year to Date Financial Results |
|||||||||||
CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES |
|||||||||||
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS AND OPERATING DATA |
|||||||||||
(dollars in millions, except per share data) |
|||||||||||
Year Ended December 31, 2013 |
|||||||||||
2013 |
2012 |
2013 |
2012 |
||||||||
Pro Forma |
Pro Forma |
% Change |
Actual |
Actual |
% Change |
||||||
REVENUES: |
|||||||||||
Video |
$ 4,167 |
$ 3,902 |
6.8% |
$ 4,030 |
$ 3,639 |
10.7% |
|||||
Internet |
2,253 |
1,986 |
13.4% |
2,186 |
1,866 |
17.1% |
|||||
Voice |
668 |
884 |
(24.4)% |
644 |
828 |
(22.2)% |
|||||
Commercial |
850 |
711 |
19.5% |
822 |
658 |
24.9% |
|||||
Advertising sales |
297 |
349 |
(14.9)% |
291 |
334 |
(12.9)% |
|||||
Other |
184 |
185 |
(0.5)% |
182 |
179 |
1.7% |
|||||
Total Revenues |
8,419 |
8,017 |
5.0% |
8,155 |
7,504 |
8.7% |
|||||
COSTS AND EXPENSES: |
|||||||||||
Total operating costs and expenses (excluding depreciation and amortization) |
5,471 |
5,153 |
6.2% |
5,297 |
4,810 |
10.1% |
|||||
Adjusted EBITDA |
$ 2,948 |
$ 2,864 |
2.9% |
$ 2,858 |
$ 2,694 |
6.1% |
|||||
Adjusted EBITDA margin |
35.0% |
35.7% |
35.0% |
35.9% |
|||||||
Capital Expenditures |
$ 1,854 |
$ 1,816 |
$ 1,825 |
$ 1,745 |
|||||||
% Total Revenues |
22.0% |
22.7% |
22.4% |
23.3% |
|||||||
Net loss |
$ (194) |
$ (392) |
$ (169) |
$ (304) |
|||||||
Loss per common share, basic and diluted |
$ (1.90) |
$ (3.93) |
$ (1.65) |
$ (3.05) |
|||||||
Net cash flows from operating activities |
$ 2,158 |
$ 1,876 |
|||||||||
Free cash flow |
$ 409 |
$ 144 |
|||||||||
Revenue
For the year ended December 31, 2013, pro forma revenues rose to
Operating Costs and Expenses
Pro forma operating costs and expenses totaled
Adjusted EBITDA
Pro forma Adjusted EBITDA was
Net Loss
For the year ended December 31, 2013, pro forma net loss was
On an actual basis, net loss for the year ended December 31, 2013, totaled
Capital Expenditures
On an actual basis, capital expenditures for the year ended December 31, 2013, totaled
Pro forma property, plant and equipment expenditures for the full year 2013, totaled
In 2014, capital expenditures are expected to be approximately
Cash Flow
In 2013, net cash flows from operating activities totaled
Free cash flow for the year ended December 31, 2013 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 30047929.
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 the year ended December 31, 2013 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 income (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 income (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 income (loss) plus net interest expense, income taxes, depreciation and amortization, stock compensation expense, (gain) loss on extinguishment of debt, (gain) loss on derivative instruments, net and other operating 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. However, this measure is limited in that it does not reflect the periodic costs of certain capitalized tangible and intangible assets used in generating revenues and the cash cost of financing. These costs are evaluated 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.
Management and the Company's board of directors use adjusted EBITDA and free cash flow to assess 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 months and year ended December 31, 2013 and 2012, we have provided pro forma results in this release for the year ended December 31, 2013 and the three months and year ended December 31, 2012. 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 2013 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, voice, 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, including in connection with our plan to make our systems all-digital in 2014;
- the effects of governmental regulation on our business or potential business combination transaction;
- 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;
- 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; and
- the ultimate outcome of any possible transaction between
Charter andComcast Corporation ("Comcast ") and/orTime Warner Cable Inc. ("TWC"), including the possibility that Charter will not pursue any transaction; and if a transaction were to occur, the ultimate outcome and results of integrating the operations, the ultimate outcome of Charter's pricing and packaging and operating strategy applied to the acquired systems and the ultimate ability to realize synergies.
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 data) |
|||||||||||
Three Months Ended December 31, |
Year Ended December 31, |
||||||||||
2013 |
2012 |
2013 |
2012 |
||||||||
Actual |
Actual |
% Change |
Actual |
Actual |
% Change |
||||||
REVENUES: |
|||||||||||
Video |
$ 1,046 |
$ 927 |
12.8% |
$ 4,030 |
$ 3,639 |
10.7% |
|||||
Internet |
590 |
482 |
22.4% |
2,186 |
1,866 |
17.1% |
|||||
Voice |
154 |
186 |
(17.2)% |
644 |
828 |
(22.2)% |
|||||
Commercial |
228 |
177 |
28.8% |
822 |
658 |
24.9% |
|||||
Advertising sales |
83 |
96 |
(13.5)% |
291 |
334 |
(12.9)% |