Charter Communications Reports Second Quarter 2003 Financial Results

Click here to view Financial Addendum.

ST. LOUIS--(BUSINESS WIRE)--July 31, 2003--Charter Communications, Inc. (Nasdaq:CHTR) today reported financial results for the three and six months ended June 30, 2003. "Charter Communications is pleased with its quarterly financial results in this year of transition, evidenced by growth in cash flows from operating activities," said Carl Vogel, President and CEO. "This, together with a significant reduction in capital expenditures in 2003, has allowed us to generate free cash flow."

Second Quarter Results

For the second quarter of 2003, Charter generated revenues of $1.217 billion, an increase of 7.0% over last year's second quarter revenues of $1.137 billion. Income from operations totaled $112 million in the second quarter of 2003, an increase of 31.8% from the $85 million reported in the second quarter a year ago. The current year's second quarter results includes a special charge of $8 million primarily representing severance related costs incurred in connection with the Company's reorganization plan commenced in December 2002.

This year's second quarter adjusted EBITDA, as defined below, was $497 million, up 11.2% over adjusted EBITDA of $447 million for the year ago quarter.

Net loss applicable to common stock and loss per common share for the quarter ended June 30, 2003 declined to $38 million and 13 cents, respectively. For the restated second quarter of 2002, Charter reported net loss applicable to common stock and loss per common share of $161 million and 55 cents, respectively.

Year to Date Results

Revenues for the first six months of 2003 were $2.395 billion, an increase of 8.3% over the comparable period a year ago of $2.211 billion. Income from operations for the six months ended June 30, 2003 totaled $189 million, an increase of 3.8% from $182 million reported a year ago. During the first six months of 2003, the Company recorded $10 million of special charges consisting primarily of severance related charges recorded in connection with its reorganization plan commenced in December 2002.

Charter achieved adjusted EBITDA of $955 million on revenues of $2.395 billion for the six months ended June 30, 2003. Adjusted EBITDA was up 9.4% over adjusted EBITDA of $873 million for the same year ago period.

Net loss applicable to common stock and loss per common share for the six months ended June 30, 2003 declined to $220 million and 75 cents, respectively. For the restated 2002 first six months, Charter reported net loss applicable to common stock and loss per common share of $478 million and $1.62, respectively.

Cash Flows From Operating Activities and Free Cash Flows

Cash flows from operating activities for the six months ended June 30, 2003 were $285 million, an increase of 20.3% from $237 million reported a year ago. Purchases of property, plant and equipment for the first six months of the year totaled $264 million, declining to approximately 25.4% of amounts reported for the comparable period in 2002 when capital expenditures totaled $1.038 billion. Free cash flows, as defined below, for the six months ended June 30, 2003, were $126 million, whereas, for the six months ended June 30, 2002, the Company had negative cash flows of $709 million. Free cash flows for the three months ended June 30, 2003 were $56 million, as compared to negative cash flows of $432 million a year ago.

"Charter continues to make solid progress towards the goal of consistently generating free cash flows," Mr. Vogel said. "We remain very disciplined in managing our capital expenditures and expect to spend less than the $1.1 billion previously planned." Based on our current spending and plans for the remainder of the year, Mr. Vogel said the Company expects its fiscal 2003 capital expenditures to be in the $800 million to $925 million range.

At June 30, 2003, the Company had $212 million in cash on hand.

Operating Statistics

Revenue generating units (RGU) totaled approximately 10,463,500 at June 30, 2003, an increase of approximately 495,100 units, or 5.0% for the trailing twelve months. Total advanced service RGUs, defined as digital, high-speed data and telephony units, increased by 748,300 units, or 23.2% for the twelve months ending June 30, 2003. The increase in advanced service RGUs was offset by a loss of 253,200 analog video customers, or 3.8% over the past twelve months. Revenue generating units declined approximately 10,900 units, or .1% in the second quarter as compared to the first quarter of 2003.

The Company reported net losses of analog and digital video customers of approximately 41,300 and 47,200, respectively, during the second quarter. Second quarter analog video customer loss was .6%, and quarterly digital video units declined 1.7%. Digital video customers increased by approximately 223,400 units, or 9.4% for the twelve months ending June 30, 2003.

Charter added approximately 76,700 high-speed data customers during the quarter, bringing the total modem customers served to 1,349,000. Over the trailing twelve months, modem customers have increased approximately 518,800 units, or 62.5%.

The Company has traditionally seen softness in its unit growth in the second quarter, principally as a result of disconnects from annual price adjustments and seasonality in many of its communities. More detailed information on the method of calculating customer information is contained in the Addendum and the footnotes thereto.

Organizational Update

"Our second quarter focus was to put organizational leadership in place, restart our marketing efforts, and moderate customer losses," Mr. Vogel said. "We reduced corporate and divisional staff as well, and replaced general management in many of our key markets in the quarter, which we believe will provide a strong foundation for the future."

Mr. Vogel said new pricing and packaging has recently been successfully test marketed, and the Company expects to introduce these packages in many of its top 25 markets during the second half of the year. "Our primary focus remains on increasing revenues and adjusted EBITDA and being disciplined with our capital expenditures. While we are generally pleased with our progress, we need to remain focused on improving our video business, and increasing the profitability of our high-speed data business, while maintaining a customer first attitude."

Use of non-GAAP Financial Metrics

The Company believes that adjusted EBITDA and free cash flows traditionally have provided additional information useful in analyzing the underlying business results and allows a standardized peer company comparison, while minimizing the differences from depreciation policies, financial leverage and tax strategies. In addition, adjusted EBITDA generally correlates to the amount utilized under the Company's various credit facilities, senior notes and senior discount notes for its leverage ratio covenants. Adjusted EBITDA, as presented, is reduced for management fees in the amounts of $19 million and $39 million for the three months and six months ended June 30, 2003 and $17 million and $32 million for the three months and the six months ended June 30, 2002 which are added back for the purposes of the leverage covenants. Adjusted EBITDA and free cash flows are non-GAAP (Generally Accepted Accounting Principles) financial metrics and should be considered in addition to, and not as a substitute for, income from operations, net loss, earnings per share or net cash flows from operating activities. Adjusted EBITDA is defined as income from operations before special charges, non-cash depreciation and amortization and option compensation expense. A reconciliation of adjusted EBITDA to net cash flows from operating activities and income from operations is included in the following Addendum. Free cash flows is defined as adjusted EBITDA less purchases of property, plant and equipment and interest on cash pay obligations. A reconciliation of free cash flows to net cash flows from operating activities and income from operations is included in the following Addendum.

Conference Call

The Company will host a conference call Thursday, July 31,2003 at 3:00 PM Eastern Time (ET) related to the contents of this release.

The conference call will be webcast live via the Company's website at www.charter.com. The call can be accessed through the "Investor Center" portion of the website, via the "About Us" heading at the top of the page. Participants should go to the call link at least 10 minutes prior to the start time to register. The call will be archived on the website beginning two hours after completion of the call.

Those participating via telephone should dial 888/233-1576. International participants should dial 706/643-3458.

A replay of the call will be available at 800/642-1687 or 706/645-9291 beginning two hours after the completion of the call through midnight August 6, 2003. The passcode for the replay is 2068343.

About Charter Communications

Charter Communications(R), A Wired World Company(TM), is the nation's third-largest broadband communications company. Charter provides a full range of advanced broadband services to the home, including cable television on an advanced digital video programming platform via Charter Digital Cable(R) brand and high-speed Internet access marketed under the Charter Pipeline(R) brand. Commercial high-speed data, video and Internet solutions are provided under the Charter Business Networks(R) brand. Advertising sales and production services are sold under the Charter Media(R) brand. More information about Charter can be found at www.charter.com.

Cautionary Statement Regarding Forward-Looking Statements:

This news release includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 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. Many of the forward-looking statements contained in this news release may be identified by the use of forward-looking words such as "believe," "expect," "anticipate," "should," "planned," "will," "may," "intend," "estimated," and "potential," among others. Important factors that could cause actual results to differ materially from the forward-looking statements we make in this news release are set forth in reports or documents that we file from time to time with the United States Securities and Exchange Commission, or the SEC, and include, but are not limited to:

• our ability to sustain and grow revenues and cash flows from operating activities by offering video and data services and to maintain a stable customer base, particularly in the face of increasingly aggressive competition from other service providers;
• our and our subsidiaries' ability to comply with all covenants in our indentures and their credit facilities and indentures, any violation of which would result in a violation of the applicable facility or indenture and could trigger a default of other obligations under cross default provisions;
• our and our subsidiary's ability to refinance the debt as it becomes due, commencing in 2005;
• availability of funds to meet interest payment obligations under our debt and to fund our operations and necessary capital expenditures, either through cash flows from operating activities, further borrowings or other sources;
• any adverse consequences arising out of our and our subsidiaries' prior restatement of the financial statements;
• the results of the pending grand jury investigation by the United States Attorney's Office for the Eastern District of Missouri, the pending SEC Division of Enforcement investigation and the putative class action and derivative shareholders litigation against us.;
• our ability to achieve free cash flow;
• our ability to obtain programming at reasonable prices or pass cost increases on to our customers;
• general business conditions, economic uncertainty or slowdown; and
• the effects of governmental regulation, including but not limited to local franchise taxing authorities, on our business.

All forward-looking statements attributable to us or a person acting on our behalf are expressly qualified in their entirety by this cautionary statement. We are under no obligation to update any of the forward looking statements after the date of this news release to conform these statements to actual results or to changes in our expectations.

CONTACT: Charter Communications, Inc., St. Louis
Analysts:
Mary Jo Moehle, 314-543-2397
mmoehle@chartercom.com
or
Media:
Deb Seidel, 314-543-5703
dseidel@chartercom.com

SOURCE: Charter Communications, Inc.