InvestorsFebruary 11, 2002
Charter Fourth Quarter 2001 Earnings
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During a conference call this morning, Charter President and CEO Carl Vogel will provide an overview of his first 100 days at the helm of the nation's fourth largest broadband communications company, financial results for the year 2001, and guidance for the year 2002.
"Charter will maintain its decentralized operating philosophy; take a responsible approach to internal customer growth, placing additional focus on the sale of advanced services; maintain a strong emphasis on revenue generating units (RGU's) given our multiple product offerings; and maintain leadership in the continuing rollout of interactive services and advanced set top devices over our robust broadband platform," Mr. Vogel said.
Demand for Advanced Services Remains StrongMr. Vogel said that at the close of 2001, Charter had almost 645,000 data customers, exceeding previously stated guidance of 630,000. "We narrowly missed having the largest increase ever in cable modem customers during the fourth quarter, adding some 100,000 Charter Pipeline customers, no matter that our marketing efforts were impacted by the @Home bankruptcy. We're confident in continued consumer demand for this product. I believe we could double the number of cable modem customers in 2002."
During the fourth quarter of 2001, the Company successfully converted about 145,000 cable modem customers from service with the bankrupt ISP @Home to Charter Pipeline. Mr. Vogel said the transition process was quick and handled internally, with virtually no churn as a result of customer service issues or the inconvenience of changing e-mail addresses.
As of December 31, 2001, Charter Digital Cable(TM) customers totaled 2,144,800, with fourth quarter weekly additions averaging approximately 15,000 installations per week. "Charter continues to experience strong demand for its digital video service, resulting in industry leading penetration. As we continue to add interactive products like video on demand (VOD), and personal interactive channels, we see enhanced customer satisfaction, reduced digital churn, and improved retention levels," Mr. Vogel said.
Mr. Vogel said Charter's marketing efforts are directed to attract new advanced services customers by selling a Charter bundle. "This is our triple play of digital video, data, and interactivity, which we'll price in a good-better-best scenario because of our unique ability within the industry to sell Internet access at varying speed levels. It will serve us well in today's highly competitive marketplace against satellite, with its limited, single dimension product offerings."
Fourth Quarter Financial HighlightsRevenue during the fourth quarter of 2001 increased 13.6% to $1.1 billion, and operating cash flow increased 11.0% to $502.6 million compared to pro forma results for the fourth quarter of 2000, before a special charge including the @Home conversion of $17.6 million. Year-end 2001 pro forma revenue was over $4.1 billion, up 14.0% from pro forma 2000 revenue of $3.6 billion. Pro forma operating cash flow increased 10.9% from $1.65 billion to $1.83 billion for 2001, before a special charge including the @Home conversion of $17.6 million.
New Accounting StandardEffective January 1, 2002, Charter will adopt Statement of Financial Accounting Standard No. 142, "Goodwill and Other Intangible Assets," a new accounting standard that addresses the accounting for intangible assets, including franchises. As of December 31, 2001, Charter's balance sheet reflects franchises with a net book value of $17.1 billion that are amortized over a 15 year period. We believe that substantially all franchises will qualify for indefinite life treatment under the new standard. While our analysis, including the impairment testing of franchises required under the new standard, is not complete, we expect to stop amortizing franchise intangible assets that meet the indefinite life treatment beginning January 1, 2002. If the new standard had been in effect for 2001, amortization expense would have been reduced by approximately $1.2 to $1.3 billion.
Looking AheadIn 2002, Charter expects revenue to grow between 12.0% and 14.0% compared to pro forma 2001 results. Operating cash flow growth is expected to range between 11% and 13%.
Charter expects to add approximately 1,100,000 to 1,200,000 RGU's in 2002. These RGUs will be comprised of basic, digital and cable modem customers. While the Company expects no meaningful increase in basic customers in 2002, Mr. Vogel said they expect to add 550,000 to 600,000 Charter Digital Cable customers. Cable modem marketing efforts will increase in 2002 as more plant miles are upgraded to two-way interactivity. Charter Pipeline customers are anticipated to increase by 550,000 to 600,000, nearly doubling that customer base. VOD launches are planned for 17 additional markets in 2002. Mr. Vogel said he expects about half of Charter's digital customers will have access to VOD technology by the end of 2002.
About Charter CommunicationsCharter Communications, a Wired World(TM) company, is among the nation's largest broadband communications companies, currently serving some 7 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(TM) brand and high-speed Internet access via Charter Pipeline(TM). Commercial high-speed data, video and Internet solutions are provided under the Charter Business Networks(TM) brand. Advertising sales and production services are sold under the Charter Media(TM) brand.
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 Monday, February 11, 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.
Unaudited Consolidated Statements of Operations
(Dollars in thousands)
Three Months Ended December 31,
--------------------------------
Actual Pro Forma
2001 (a) 2000 (a) % Change
---------- ---------- --------
Revenues:
Analog video $ 741,784 $ 702,396
Digital video 97,231 44,848
Cable modem 52,469 21,931
Advertising sales 108,566 98,914
Other 106,966 105,969
---------- ----------
Total revenues 1,107,016 974,058 13.6%
---------- ----------
Operating Expenses:
General, administrative
and service 244,327 204,543
Analog video programming 243,295 230,724
Digital video 35,316 13,409
Cable modem 33,008 17,036
Advertising sales 17,918 18,611
Marketing 16,316 19,615
Corporate expenses 14,203 17,420
---------- ----------
Operating expenses 604,383 521,358 15.9%
---------- ----------
Operating cash flow
before special charges 502,633 452,700 11.0%
---------- ----------
Special charges 17,629 (b) --
---------- ----------
Operating cash flow $ 485,004 $ 452,700
========== ==========
(a) The pro forma results reflect all significant acquisitions and
dispositions of cable systems closed during 2001 and 2000, as if the
transactions closed on January 1, 2000. Pro forma revenues exceed
actual revenues for the three months ended December 31, 2000 by $80.2
million. Pro forma operating cash flow before special charges exceed
actual operating cash flow before special charges for three months
ended December 31, 2000 by $19.5 million. 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.
(b) Reflects charges incurred during the fourth quarter associated
with the transition of approximately 145,000 data customers from
Excite@Home Internet service to Charter Pipeline, as well as certain
employee severance costs.
Charter Communications, Inc.
Unaudited Consolidated Statements of Operations
(Dollars in thousands)
Year Ended December 31,
----------------------------
Pro Forma Pro Forma
2001 (a) 2000 (a) % Change
----------- ----------- ----------
Revenues:
Analog video $2,912,954 $2,782,062
Digital video 314,464 104,996
Cable modem 158,657 68,173
Advertising sales 332,879 261,874
Other 395,813 393,734
---------- ----------
Total revenues 4,114,767 3,610,839 14.0%
---------- ----------
Operating Expenses:
General, administrative
and service 905,244 816,402
Analog video programming 951,458 836,871
Digital video 113,707 36,173
Cable modem 103,618 57,723
Advertising sales 68,178 71,656
Marketing 72,427 69,823
Corporate expenses 66,486 68,038
---------- ----------
Operating expenses 2,281,118 1,956,686 16.6%
---------- ----------
Operating cash flow
before special charges 1,833,649 1,654,153 10.9%
Special charges 17,629(b) --
---------- ----------
Operating cash flow $1,816,020 $1,654,153
========== ==========
(a) The pro forma results reflect all significant acquisitions and
dispositions of cable systems closed during 2001 and 2000, as if the
transactions closed on January 1, 2000. Pro forma revenues exceed
actual revenues for the years ended December 31, 2001 and 2000 by
$161.6 million and $361.6 million, respectively. Pro forma operating
cash flow before special charges exceed actual operating cash flow
before special charges for the years ended December 31, 2001 and 2000
by $47.5 million and $111.5 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.
(b) Reflects charges incurred during the fourth quarter associated
with the transition of approximately 145,000 data customers from
Excite@Home Internet service to Charter Pipeline, as well as certain
employee severance costs.
Charter Communications, Inc.
Unaudited Consolidated Statements of Operations
(Dollars in thousands, except share data)
Periods Ended December 31, 2001
-----------------------------------
Three Months Twelve Months
-------------- ---------------
Revenues:
Analog video $ 741,784 $ 2,787,632
Digital video 97,231 307,240
Cable modem 52,469 154,402
Advertising sales 108,566 312,554
Other 106,966 391,304
------------- -------------
Total revenues 1,107,016 3,953,132
------------- -------------
Operating Expenses:
General, administrative
and service 244,327 861,722
Analog video programming 243,295 902,837
Digital video 35,316 111,167
Cable modem 33,008 99,956
Advertising sales 17,918 64,026
Marketing 16,316 70,335
Corporate expenses 14,203 56,930
------------- -------------
Operating expenses 604,383 2,166,973
------------- -------------
Operating cash flow
before special charges 502,633 1,786,159
Depreciation 470,855 1,662,549
Amortization 346,929 1,347,519
Option compensation expense 511 (45,683)(a)
Interest expense, net 345,830 1,311,788
Special charges 17,629 (b) 17,629 (b)
Other expense, net (24,552)(c) 148,273 (d)
------------- -------------
(654,569) (2,655,916)
Minority interest 348,882 1,478,239
------------- -------------
Net loss (305,687) (1,177,677)
Accretion of preferred
stock dividends (727) (969)
------------- -------------
Net loss applicable to
common stock $ (306,414) $ (1,178,646)
============= =============
Basic and diluted loss
per share $ (1.04) $ (4.37)
============= =============
Weighted average common
shares outstanding 294,384,003 269,594,386
============= =============
(a) Reflects the reversal of $66.6 million of expense previously
recorded in connection with approximately seven million options
forfeited by our former President and Chief Executive Officer as part
of his September 2001 separation agreement.
(b) Reflects charges incurred during the fourth quarter associated
with the transition of approximately 145,000 data customers from
Excite@Home Internet service to Charter Pipeline, as well as certain
employee severance costs.
(c) Includes current period income of $33.8 million as a result of
the application of SFAS 133 "Accounting for Derivative Instruments and
Hedging Activities."
(d) Includes a $23.9 million cumulative effect of a change in
accounting principle and net expense of $51.2 million, as a result of
the implementation and application of SFAS 133 "Accounting for
Derivative Instruments and Hedging Activities."
Charter Communications, Inc.
Unaudited Summary of Operating Statistics
As of December 31,
-------------------------------------------
Cable Television Actual Pro Forma Actual
---------------- 2001 2000 (a) 2000
---------- ----------- ----------
Homes Passed 11,502,300 11,291,800 10,225,000
Basic Customers 6,953,700 6,913,100 6,350,900
Basic Penetration 60.5% 61.2% 62.1%
Average Monthly Revenue per
Basic Customer (quarter) $ 53.07 $ 46.97 $ 46.92
As of December 31,
-------------------------------------------
Digital Video Actual Pro Forma Actual
------------- 2001 2000 (a) 2000
---------- ----------- ----------
Digital Homes Passed 10,638,300 9,711,600 8,793,000
Digital Customers 2,144,800 1,177,500 1,069,500
Penetration of Digital
Homes Passed 20.2% 12.1% 12.2%
Penetration of Basic
Customers 30.8% 17.0% 16.8%
Digital Converters Deployed 2,951,400 1,470,500 1,336,900
As of December 31,
-------------------------------------------
Data Services Actual Pro Forma Actual
------------- 2001 2000 (a) 2000
---------- ----------- ----------
Data Homes Passed 7,560,600 5,841,300 5,550,800
Cable Modem Customers 607,700 229,000 215,900
Dial-up Customers 37,100 42,000 36,500
Total Data Customers 644,800 271,000 252,400
Penetration 8.5% 4.6% 4.5%
As of December 31,
-------------------------------------------
Other Statistics Actual
---------------- 2001
-----------
Capital Expenditures (in 000's)
For the three months ended $ 870,459
For the year ended $ 3,027,059
Book Value per Share $ 9.72
(a) The pro forma operating statistics reflect all significant
acquisitions and dispositions of cable systems closed during 2001 and
2000.
Charter Communications, Inc.
Unaudited Consolidated Balance Sheet Data
(Dollars in thousands)
Actual Actual
Dec. 31, 2001 Dec. 31, 2000
------------- -------------
ASSETS
Current Assets:
Cash and cash equivalents $ 1,679 $ 130,702
Accounts receivable, net of
allowance for
doubtful accounts 290,504 217,667
Receivable from related party 4,634 6,480
Prepaid expenses and other 70,362 77,719
----------- -----------
Total current assets 367,179 432,568
----------- -----------
Investment in Cable Properties:
Property, plant and equipment, net 7,149,483 5,267,519
Franchises, net 17,138,774 17,068,702
----------- -----------
Total investment in cable properties 24,288,257 22,336,221
----------- -----------
Other assets 306,388 274,777
----------- -----------
$24,961,824 $23,043,566
=========== ===========
LIABILITIES AND SHAREHOLDERS'
EQUITY
Current Liabilities:
Accounts payable and accrued expenses $ 1,374,994 $ 1,367,234
----------- -----------
Total current liabilities 1,374,994 1,367,234
----------- -----------
Long-term debt 16,342,873 13,060,455
Deferred management fees -
related party 13,751 13,751
Other long-term liabilities 341,057 285,266
Minority interest 3,976,791 4,089,329
Redeemable securities -- 1,104,327
Preferred stock - redeemable 50,566 --
Shareholders' equity 2,861,792 3,123,204
----------- -----------
$24,961,824 $23,043,566
=========== ===========
Charter Communications, Inc.
(Dollars in thousands, except earnings per share)
2001 Pro Forma(a) Highlights
Q1 2001 Q2 2001 Q3 2001
--------- --------- ---------
Revenues $ 953,081 $1,010,825 $1,043,845
Operating cash flow
excluding special charges $ 411,358 $ 452,116 $ 467,542
Basic customers 6,914,500 6,949,500 6,970,100
Digital customers 1,455,900 1,701,500 1,951,200
Cable modem customers 324,600 405,300 507,700
Q4 2001 Full Year 2001
--------- --------------
Revenues $1,107,016 $4,114,767
Operating cash flow
excluding special charges $ 502,633 $1,833,649
Basic customers 6,953,700 6,953,700
Digital customers 2,144,800 2,144,800
Cable modem customers 607,700 607,700
2002 Guidance
Full Year 2002
-------------------
Growth rates over year-ago pro forma(a) period
Revenues 12-14%
Operating cash flow 11-13%
Earnings per share $(2.80) - $(3.00)
Revenue generating units (b) 1,100,000 - 1,200,000
Capital expenditures $ 2,475,000
(a) The pro forma results reflect all significant acquisitions and
dispositions of cable systems closed during 2001.
(b) Revenue generating units consist of basic customers, digital
customers, and cable modem customers.
Statements in this press release regarding Charter Communications' business that
are not historical facts may be "forward-looking statements." These
forward-looking statements include specific projections regarding Charter's
revenues, EPS and operating cash flow for the year 2002, as well as projections
regarding growth in basic, digital and data customers. 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. All forward-looking statements contained in this press release are
expressly qualified in their entirety by this cautionary statement.
CONTACT: Charter Communications, Inc., St. Louis
Media:
Andy Morgan, 314/543-2217
amorgan@chartercom.com
or
Analysts:
Colleen Hegarty, 314/543-5619
chegarty@chartercom.com
URL: http://www.businesswire.com
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