InvestorsAugust 6, 2002
Charter Exceeds Revenue Growth Target For the Second Quarter of 2002
Share Article:
ST. LOUIS, Aug 6, 2002 (BUSINESS WIRE) -- Charter Communications, Inc.
(Nasdaq:CHTR) reported today that second quarter 2002 revenue exceeded
expectations, and that operating cash flow and revenue generating unit (RGU)
growth were in-line with growth targets. Charter executives will discuss second
quarter financial results and expectations for the remainder of the year in a
conference call this morning.
"We're aggressively executing on our business strategy," Carl Vogel, President and CEO, said. "At the same time, we're continuing to address the need to maintain the confidence of the marketplace, including an increased level of disclosure as provided in the Form 10-Q filed with the SEC today," he continued. "We're committed to continuing careful oversight on issues related to integrity, accounting practices, financial health, and corporate governance, which are fundamental to maintaining that confidence."
Second Quarter Financial HighlightsRevenue during the second quarter of 2002 increased 14.3% to $1.158 billion, and operating cash flow increased 13.8% to $501 million compared to pro forma results for the second quarter of 2001. "The business of broadband has excellent momentum and continues to demonstrate significant consumer demand. Charter is capitalizing on this demand and delivering revenue growth for the quarter exceeding the high end of our expectations," Mr. Vogel said. Charter reported basic and diluted loss per share of $.69 for the second quarter of 2002, compared to a loss per share of $1.07 for the second quarter of 2001, an improvement primarily due to the adoption of the new accounting standard relating to the amortization of goodwill and other intangible assets.
Charter added 286,900 RGUs during the second quarter, excluding customers added through acquisition, fueled by a record 157,800 cable modem customers additions. Charter now provides high-speed Internet service to over 905,000 customers.
Charter's advanced broadband network also delivers a wide range of television channels and programs to approximately 6.8 million households. As of June 30, 2002, Charter Digital Cable(R) customers totaled 2,380,500, or approximately 35% of Charter's video customer base. "Even as we've expanded our service offerings, ventured into new areas and found more applications for our broadband pipe, we continue to produce excellent results from our video business," said Mr. Vogel. "When our broadband Internet service is combined in a bundle with our digital video product, the effect on customer retention is significant."
Mr. Vogel said Charter's challenge in the future will be to effectively market analog and digital video, video on demand, high-speed data, home networking, and other interactive services and products with compelling offers that emphasize the value of these services. "We're focused on effective ways of communicating the benefits of bundling to the general marketplace, both in terms of value and convenience. Each home and business we pass provides an opportunity to sell one or more of these products," Mr. Vogel said.
Looking AheadCharter expects revenue for the third quarter of 2002 to range from $1.185 billion to $1.20 billion, representing a 13.2% to 14.6% increase over the year ago pro forma results. Operating cash flow for the third quarter is expected to be between $520 million and $530 million, representing 13.7% to 15.9% growth over the same prior year period pro forma results. Charter expects to add 350,000 to 375,000 RGUs in the third quarter. RGUs are comprised of basic, digital and cable modem customers.
Charter expects 2002 annual revenue of between $4.6 billion and $4.7 billion. Annual operating cash flow is expected to range between $2.035 billion and $2.070 billion. Charter expects to add a total of approximately 1,100,000 to 1,200,000 RGUs during 2002. Growth in digital and cable modem customers is expected to offset a decline in basic customers compared to actual December 31, 2001 customers. Charter expects to end the year with over 6.8 million basic customers. Annual capital expenditures are expected to be $2.350 billion, down $125 million from original guidance of $2.475 billion. The capital expenditure savings will primarily come from efficiencies, decreased churn, increased self installations, reduced installation time and improved inventory management.
Effective July 1, 2002, Charter will adopt certain provisions of Statement of Financial Accounting Standards No. 123 under which compensation expense of stock-based awards to employees will be recognized over the vesting period based on the fair value of the awards on the grant dates.
About Charter CommunicationsCharter Communications, A Wired World Company(TM), is among the nation's largest broadband communications companies, currently serving some 6.8 million customers in 40 states. Charter provides a full range of advanced broadband services to the home, including cable television on an advanced digital video programming platform marketed under the Charter Digital Cable(R) brand and high-speed Internet access via Charter Pipeline(R). Commercial high-speed data, video and Internet solutions are provided under the Charter Business NetworksTM brand. Advertising sales and production services are sold under Charter Media.
A Fortune 500 and NASDAQ 100 Company, Charter was the 2001 recipient of the Outstanding Corporate Growth Award from the Association for Corporate Growth, the 2001 R.E. "Ted" Turner Innovator of the Year Award from the Southern Cable Telecommunications Association, and the 2001 Fast 50 Award for Growth from the St. Louis Regional Chamber and Growth Association.
More information about Charter can be found at www.charter.com.Detailed financial information is included in the attached addendum.
Charter will conduct a conference call to discuss their operating results on Tuesday, August 6, 2002 at 11:00 AM Eastern Time. The call will be available live via webcast at www.charter.com. The call will be available on the "Investor Center" portion of the website, via "About Us." 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.
Statements in this press release regarding Charter Communications' business that are not historical facts may be "forward-looking statements." Forward-looking statements are inherently subject to risks, uncertainties and assumptions. Important factors that could cause actual results to differ materially from any such forward-looking statements are identified in the reports and documents Charter files from time to time with the U.S. Securities and Exchange Commission.
CHARTER COMMUNICATIONS, INC AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
Three Months Ended
June 30,
-----------------------------
-----------------------------
Actual Actual
2002 2001 % Change
----------- ----------- -----------
----------- ----------- -----------
REVENUES:
Analog video $ 776,915 $ 666,725
Digital video 117,560 68,192
Cable modem 83,410 32,850
Advertising sales 90,352 64,514
Other 90,176 96,194
----------- -----------
----------- -----------
Total revenues 1,158,413 928,475 24.8%
----------- -----------
----------- -----------
OPERATING EXPENSES:
Analog video programming 265,947 211,839
Digital video 40,827 24,081
Cable modem 39,013 20,440
Advertising sales 21,435 13,665
Service 53,377 44,083
General and administrative 194,973 153,703
Marketing 25,088 18,617
Corporate expenses 16,660 13,993
----------- -----------
----------- -----------
Operating expenses 657,320 500,421 31.4%
----------- -----------
----------- -----------
Operating cash flow 501,093 428,054 17.1%
Depreciation and
amortization 492,168 720,952
Option compensation
expense 717 4,850
Interest, net 373,388 314,910
Other, net 66,241 23,991
----------- -----------
----------- -----------
932,514 1,064,703
----------- -----------
----------- -----------
Loss before
minority interest (431,421) (636,649)
Minority interest 229,422 362,784
----------- -----------
----------- -----------
Net loss (201,999) (273,865)
Dividends of
preferred stock
- redeemable 727 0
----------- -----------
----------- -----------
Net loss applicable
to common stock $ (202,726) $ (273,865)
=========== ===========
=========== ===========
Basic and diluted
loss per share $ (0.69) $ (1.07)
=========== ===========
=========== ===========
Weighted average
common shares
outstanding 294,453,454 255,027,543
=========== ===========
=========== ===========
CHARTER COMMUNICATIONS, INC AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
Six Months Ended
June 30,
-------------------------------------
-------------------------------------
Actual Actual
2002 2001 % Change
-------------- ---------- -----------
-------------- ---------- -----------
REVENUES:
Analog video $ 1,531,537 $ 1,316,080
Digital video 221,273 123,239
Cable modem 150,671 58,016
Advertising sales 149,893 120,155
Other 183,373 184,783
-------------- ----------
-------------- ----------
Total revenues 2,236,747 1,802,273 24.1%
-------------- ----------
-------------- ----------
OPERATING EXPENSES:
Analog video
programming 527,587 422,213
Digital video 75,954 44,690
Cable modem 73,921 38,086
Advertising sales 40,628 28,930
Service 104,583 86,034
General and
administrative 387,832 303,382
Marketing 43,861 35,241
Corporate expenses 32,091 27,715
-------------- ----------
-------------- ----------
Operating
expenses 1,286,457 986,291 30.4%
-------------- ----------
-------------- ----------
Operating
cash flow 950,290 815,982 16.5%
Depreciation and
amortization 979,137 1,416,847
Option compensation
expense 1,353 10,888
Interest, net 736,555 625,650
Other, net 36,231 83,908
-------------- ----------
-------------- ----------
1,753,276 2,137,293
-------------- ----------
-------------- ----------
Loss before
minority interest (802,986) (1,321,311)
Minority interest 426,820 766,746
-------------- ----------
-------------- ----------
Net loss (376,166) (554,565)
Dividends of
preferred stock
- redeemable 1,454 0
-------------- ----------
-------------- ----------
Net loss applicable
to common stock $ (377,620) $ (554,565)
============== ==========
============== ==========
Basic and diluted
loss per share $ (1.28) $ (2.27)
============== ==========
============== ==========
Weighted average
common shares
outstanding 294,424,366 244,461,311
============== ==========
============== ==========
CHARTER COMMUNICATIONS, INC AND SUBSIDIARIES
UNAUDITED CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
Actual Actual
June 30, December 31,
2002 2001
------------ ------------
------------ ------------
ASSETS
CURRENT ASSETS:
Cash and cash
equivalents $ 6,552 $ 1,679
Accounts receivable,
net of allowance
for doubtful
accounts 231,066 290,504
Receivables from
related party 6,782 4,634
Prepaid expenses and
other current assets 69,262 70,362
------------ ------------
------------ ------------
Total current
assets 313,662 367,179
------------ ------------
------------ ------------
INVESTMENT IN
CABLE PROPERTIES:
Property, plant and
equipment, net 7,313,082 7,149,483
Franchises, net 17,175,085 17,138,774
------------ ------------
------------ ------------
Total investment in
cable properties,
net 24,488,167 24,288,257
------------ ------------
------------ ------------
OTHER ASSETS 373,037 306,388
------------ ------------
------------ ------------
Total assets $ 25,174,866 $ 24,961,824
============ ============
============ ============
LIABILITIES AND
SHAREHOLDERS'
EQUITY
CURRENT LIABILITIES:
Accounts payable
and accrued expenses $ 1,160,712 $ 1,374,994
------------ ------------
------------ ------------
Total current
liabilities 1,160,712 1,374,994
------------ ------------
------------ ------------
LONG-TERM DEBT 17,572,357 16,342,873
DEFERRED MANAGEMENT FEES -
RELATED PARTY 13,751 13,751
OTHER LONG-TERM LIABILITIES 373,650 341,057
MINORITY INTEREST 3,523,913 3,976,791
PREFERRED STOCK - REDEEMABLE 50,566 50,566
SHAREHOLDERS' EQUITY 2,479,917 2,861,792
------------ ------------
------------ ------------
Total liabilities
and shareholders'
equity $ 25,174,866 $ 24,961,824
============ ============
============ ============
CHARTER COMMUNICATIONS, INC AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOW
(DOLLARS IN THOUSANDS)
Six Months Ended
June 30,
------------------------
2002 2001
---- ----
CASH FLOWS FROM
OPERATING ACTIVITIES:
Net loss $ (376,166) $ (554,565)
Adjustments to
reconcile net
loss to net
cash flows from
operating activities:
Minority interest (426,820) (766,746)
Depreciation and
amortization 979,137 1,416,847
Option compensation expense 1,353 10,888
Noncash interest expense 192,200 127,375
Loss on equity investments 1,547 36,094
Loss on derivative
instruments and hedging
et cash flows
from financing
activities 1,026,269 3,540,809
----------- -----------
NET INCREASE IN CASH
AND CASH EQUIVALENTS 4,873 442,031
CASH AND CASH EQUIVALENTS,
beginning of period 1,679 130,702
----------- -----------
CASH AND CASH EQUIVALENTS,
end of period $ 6,552 $ 572,733
============== ==============
============== ==============
CASH PAID FOR INTEREST $ 532,921 $ 445,521
============== ==============
============== ==============
NONCASH TRANSACTIONS:
Reclassification of
redeemable securities
to equity and minority
interest $ 0 $ 1,104,327
============== ===============
============== ===============
Exchange of cable
system for acquisition $ 0 $ 24,440
============== ===============
============== ===============
CHARTER COMMUNICATIONS, INC AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS)
Three Months Ended
June 30,
------------------------
------------------------
Actual Pro Forma
2002 2001 (a) % Change
---------- ---------- ---------
---------- ---------- ---------
REVENUES:
Analog video $ 776,915 $ 730,430
Digital video 117,560 72,166
Cable modem 83,410 35,542
Advertising sales 90,352 80,015
Other 90,176 95,327
---------- ----------
---------- ----------
Total revenues 1,158,413 1,013,480 14.3%
---------- ----------
---------- ----------
OPERATING EXPENSES:
Analog video programming 265,947 237,210
Digital video 40,827 22,212
Cable modem 39,013 35,308
Advertising sales 21,435 15,654
Service 53,377 48,650
General and administrative 194,973 172,488
Marketing 25,088 22,976
Corporate expenses 16,660 18,543
---------- ----------
---------- ----------
Operating expenses 657,320 573,041 14.7%
---------- ----------
---------- ----------
Operating cash flow (b) $ 501,093 $ 440,439 13.8%
========== ==========
========== ==========
Six Months Ended
June 30,
--------------------------
--------------------------
Actual Pro Forma
2002 2001 (a) % Change
----------- ----------- ---------
----------- ----------- ---------
REVENUES:
Analog video $ 1,531,537 $ 1,443,558
Digital video 221,273 130,962
Cable modem 150,671 62,271
Advertising sales 149,893 140,480
Other 183,373 189,290
----------- -----------
----------- -----------
Total revenues 2,236,747 1,966,561 13.7%
----------- -----------
----------- -----------
OPERATING EXPENSES:
Analog video programming 527,587 471,661
Digital video 75,954 40,075
Cable modem 73,921 58,971
Advertising sales 40,628 33,083
Service 104,583 91,552
General and administrative 387,832 342,121
Marketing 43,861 44,486
Corporate expenses 32,091 37,269
----------- -----------
----------- -----------
Operating expenses 1,286,457 1,119,218 14.9%
----------- -----------
----------- -----------
Operating cash flow (b) $ 950,290 $ 847,343 12.1%
=========== ===========
=========== ===========
(a) The pro forma results reflect all significant acquisitions and
dispositions closed during 2002 and 2001 as if the transactions closed
on January 1, 2001. Pro forma revenues exceed actual revenues for the
three and six months ended June 30, 2001 by $85.0 million and $164.3
million, respectively. Pro forma operating cash flow (OCF) exceeds
actual OCF for three and six months ended June 30, 2001 by $12.4
million and $31.4 million, respectively. The unaudited pro forma
financial information has been presented for comparative purposes and
does not purport to be indicative of the consolidated results of
operations had these transactions been completed as of the assumed
date or which may be obtained in the future. See page 1 of 7 and page
2 of 7 of this addendum to the earnings release for a comparison of
actual operating results.
(b) Information concerning OCF has been included as it is used by
certain investors as one measure of financial performance. OCF is not
a measure of financial performance under accounting principles
generally accepted in the United States and is not necessarily
comparable to similarly titled measures used by other companies. OCF
should not be construed as an alternative to operating income or to
cash flows from operating activities as determined in accordance with
accounting principles generally accepted in the United States.
CHARTER COMMUNICATIONS, INC AND SUBSIDIARIES
UNAUDITED COMPARATIVE QUARTERLY OPERATING STATISTICS
(DOLLARS IN THOUSANDS)
Three Months Ended Six Months Ended
June 30, June 30,
------------------ ----------------
2002 2001 2002 2001
---- ---- ---- ----
Pro Forma
Operating
Cash Flow
Margin (a) 43.3% 43.5% 42.5% 43.1%
Capital
Expenditures $ 642,603 $837,737 $1,113,902 $1,362,260
Pro Forma
Operating
Cash Flow
per Pro
Forma Basic
Customer (a)(b)$ 73.87 $ 63.19 $ 140.08 $ 121.57
Capital
Expenditures
per Basic
Customer (c) $ 94.72 $ 131.14 $ 164.20 $ 213.24
Three Months Ended Six Months Ended
June 30, June 30,
------------------ -----------------
2002 2001 2002 2001
---- ---- ---- ----
Free Cash
Flow
Calculation
Historical
Operating
Cash Flow $ 501,093 $ 428,054 $ 950,290 $ 815,982
Less: Capital
Expenditures (642,603) (837,737) (1,113,902) (1,362,260)
Operating Free
Cash Flow (d) (141,510) (409,683) (163,612) (546,278)
Less: Cash
Change in
Working
Capital (e) 73,118 4,852 (185,960) (332,225)
Less: Cash
Paid for
Interest (389,871) (279,317) (532,921) (445,521)
Free Cash
Flow (d) $(458,263) $(684,148) $ (882,493)$(1,324,024)
========== ========= =========== ============
========== ========= =========== ============
(a) Refer to footnote (a) on page 5 of 7 of this addendum to the
earnings release for details related to the nature of the pro forma
information provided.
(b) Pro forma operating cash flow per pro forma basic customer is
calculated by dividing pro forma operating cash flow during the
respective period by pro forma basic customers as of the end of the
period.
(c) Capital expenditures per basic customer represent capital
expenditures during the respective period divided by basic customers
as of the end of the period. The capital expenditures and basic
customer number for June 30, 2001 does not include the systems
acquired from AT&T Broadband on June 30, 2001.
(d) Operating free cash flow and free cash flow are not measures
of performance calculated in accordance with accounting principles
generally accepted in the United States. However, we believe that
operating free cash flow and free cash flow are useful in evaluating
our performance based on liquidity, operating performance and
leverage. Operating free cash flow and free cash flow should not be
construed as alternatives to operating income as an indicator of our
performance and may not be comparable to similarly titled measures
used by other companies.
(e) Cash change in working capital is calculated based on the cash
flow changes in current assets and current liabilities during the
respective period, excluding changes related to interest.
CHARTER COMMUNICATIONS, INC AND SUBSIDIARIES
UNAUDITED SUMMARY OF OPERATING STATISTICS
Actual Pro Forma Pro Forma
------------- -------------- -------------
------------- -------------- -------------
June 30, December 31, June 30,
2002 2001 (a) 2001 (a)
------------- -------------- -------------
------------- -------------- -------------
Basic Analog
Video
Basic Homes
Passed (b) 11,800,700 11,502,300 11,481,500
Basic
Customers (c) 6,783,900 6,953,700 6,969,900
Penetration of
Basic Homes
Passed (d) 57.5% 60.5% 60.7%
Average
Monthly
Revenue
(for the
quarter ended)
per Basic
Customer (as
of quarter
end) $ 56.92 $ 53.07 $ 48.47
Digital Video
Digital Homes
Passed (b) 11,222,500 10,638,300 10,042,500
Digital
Customers (e) 2,380,500 2,144,800 1,701,500
Penetration of
Digital Homes
Passed (d) 21.2% 20.2% 16.9%
Penetration of
Basic
Customers (f) 35.1% 30.8% 24.4%
Digital
Converters
Deployed 3,305,300 2,951,400 2,100,400
Data Services
Cable Modem
Homes Passed
(b) 8,795,200 7,560,600 6,399,000
Data
Customers:
Cable Modem
Customers
(g) 905,500 607,700 405,400
Dial-up
Customers 18,600 37,100 40,300
------------- -------------- -------------
------------- -------------- -------------
Total Data
Customers 924,100 644,800 445,700
============= ============== =============
============= ============== =============
Penetration of
Cable Modem
Homes Passed
(d) 10.3% 8.0% 6.3%
Revenue
Generating
Units
Basic
Customers (c) 6,783,900 6,953,700 6,969,900
New Services
(Digital
Video and
Cable Modem
Customers)
(e) (g) 3,286,000 2,752,500 2,106,900
------------- -------------- -------------
------------- -------------- -------------
Total
Revenue
Generating
Units 10,069,900 9,706,200 9,076,800
============= ============== =============
============= ============== =============
(a) The pro forma statistics reflect all significant acquisitions
and dispositions closed during 2002 and 2001 as if such transactions
had occurred on January 1, 2001.
(b) Homes passed represent the number of living units, such as
single residence homes, apartments and condominium units, passed by
the cable television distribution network in a given cable system
service area to which we offer the service indicated.
(c) As of June 30, 2002 and 2001, basic customers include: 1)
approximately 43,800 and 18,000 (0.6% and 0.3% of total customers),
respectively, customers who pay an additional $10 per month over the
standard modem retail rate and are entitled to receive "lifeline
basic" service as a result of their purchase of cable modem service
and 2) approximately 217,800 and 218,500, respectively, commercial
customers who are calculated on an equivalent bulk unit ("EBU") basis.
EBU is calculated by dividing the bulk rate charged to respective
accounts by the most prevalent rate charged in each system for the
comparable tier of service to determine the equivalent customers. The
EBU method of calculating basic customers is consistent with the
methodology used in determining costs paid to programmers and has been
consistently applied.
(d) Penetration represents the number of customers as a percentage
of homes passed.
(e) Digital customers include all households that have one or more
digital converter boxes. Included in digital customers at June 30,
2002 and 2001 are 11,900 and 0, respectively, customers that receive
digital service directly through satellite transmission.
(f) Penetration of basic customers represents the number of
digital customers as a percentage of basic customers.
(g) As of June 30, 2002 and 2001, cable modem customers include
approximately 75,300 and 28,000, respectively, commercial customers
who are calculated on an equivalent modem unit ("EMU") basis. EMU is
calculated by dividing commercial revenue by the average effective
rate charged in each system for modem services to determine the
equivalent customers. We have utilized this methodology since 1999, as
it conforms to the internal practices followed for operating and
capital expenditure budgeting.
CONTACT: Charter Communications Inc., St. Louis
Media: Andy Morgan, 314/543-2217
amorgan@chartercom.com
or
Equity Analysts: Mary Jo Moehle, 314/543-2397
mmoehle@chartercom.com
or
High Yield Analysts: Ralph Kelly, 314/543-2388
rkelly@chartercom.com
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