Refinancing and New Capital to Total
Operations Expected to Continue As Usual
“We are pleased to have reached an agreement with such a significant
portion of our bondholders on a long-term solution to improve our
capital structure,” said
Charter’s operations are strong and the Company remains focused on
continuing to provide its customers with quality service and support
today and going forward. Preliminary fourth quarter 2008 results reflect pro
forma1 revenue growth of approximately 7% and pro-forma
adjusted EBITDA2 growth of more than 10%, on a
year-over-year basis. As of
The funding required by the financial restructuring contemplated by the
agreement-in-principle is expected to be satisfied by cash on hand, an
exchange of debt of
The agreement-in-principle is subject to numerous closing conditions and
there is no assurance that the treatment of creditors outlined above
will not change significantly. Under the terms of the agreement, the
Company intends to implement its financial restructuring through a
Chapter 11 filing to be initiated on or before
The transaction described above is subject to numerous closing conditions and is not an offer to sell securities or a solicitation of an offer to purchase any securities. Any securities to be issued pursuant to the backstop commitment described above and the new CCH II notes issued to the ad-hoc committee of noteholders will be issued pursuant to an exemption under the Securities Act of 1933, as amended.
The Company issued a separate release today announcing preliminary
results for the quarter and year ended
Notably, the agreement-in-principle contains an agreement by the parties that the Company shall not be required to comply with any terms if such compliance would trigger a default under one or more of the debt instruments to remain outstanding. All of the summaries of the provisions of the agreement-in-principle are qualified entirely by the terms in the definitive documentation.
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. We have provided pro forma results in this release
for the three months ended
Pro forma adjusted EBITDA is a non-GAAP financial measure and should be considered in addition to, not as a substitute for, net 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 defined as income from operations before depreciation and amortization, impairment charges, stock compensation expense, and other operating expenses, such as special charges and 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 non-recurring items, and is unaffected by the Company’s capital structure or investment activities. Adjusted EBITDA and pro forma adjusted EBITDA are liquidity measures used by Company management and its board of directors to measure the Company’s ability to fund operations and its financing obligations. For this reason, it is a significant component of Charter’s annual incentive compensation program. 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 for the Company. Company management evaluates these costs through other financial measures.
The Company believes that pro forma adjusted EBITDA provides
information useful to investors in assessing Charter’s 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 facilities and notes (all such documents have
been previously filed with the
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, and Section 21E
of the Securities Exchange Act of 1934, as amended, 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
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.
1 Pro forma results are described below in the “Use of Non-GAAP Financial Metrics” section of this news release.
2 Adjusted EBITDA is defined in the “Use of Non-GAAP Financial Metrics” section and is reconciled to net cash flows from operating activities in the addendum of this news release.
|CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES
|UNAUDITED RECONCILIATION OF NON-GAAP MEASURES TO GAAP MEASURES
|(DOLLARS IN MILLIONS)
|The schedules below are presented in order to reconcile adjusted EBITDA, a non-GAAP measure, to the most directly comparable GAAP measure in accordance with Section 401(b) of the Sarbanes-Oxley Act. Because the fourth quarter has only recently ended, the information in the schedules below, is by necessity, preliminary in nature and based only upon preliminary, unaudited information available to Charter as of the date of this release. Investors should be aware that the information in the schedules is subject to change upon the release of Charter's audited results and therefore should exercise caution in relying on the information in these schedules and should not draw any inferences from this information regarding financial or operating data that is not presented in the schedules. Because of the potential for further adjustments, investors, in particular, should not rely on net cash flows from operating activities for the period ended December 31, 2008.
|Three Months Ended December 31,
|Pro Forma (a)
|Pro Forma (a)
|Net cash flows from operating activities
|Less: Purchases of property, plant and equipment
|Less: Change in accrued expenses related to capital expenditures
|Free cash flow
|Interest on cash pay obligations (b)
|Purchases of property, plant and equipment
|Change in accrued expenses related to capital expenditures
|Change in operating assets and liabilities
|(a) Pro forma results reflect certain sales and acquisitions of cable systems in 2007 and 2008 as if they occurred as of January 1, 2007.
|(b) Interest on cash pay obligations excludes accretion of original issue discounts on certain debt securities and amortization of deferred financing costs that are reflected as interest expense in our consolidated statements of operations.
|The above schedules are presented in order to reconcile adjusted EBITDA and free cash flows, both non-GAAP measures, to the most directly comparable GAAP measures in accordance with Section 401(b) of the Sarbanes-Oxley Act.
Charter Communications, Inc.
Anita Lamont, 314-543-2215
Joele Frank, Wilkinson Brimmer Katcher
Andy Brimmer / Sharon Stern, 212-355-4449
Charter Communications, Inc.
Mary Jo Moehle, 314-543-2397