InvestorsApril 29, 2002
Charter Posts Strong Revenue and Cash Flow Growth For the First Quarter of 2002
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Strategic marketing and bundling of services drives first quarter 2002 revenue and operating cash flow growth
Charter Communications, Inc. (Nasdaq: CHTR) exceeded expectations for revenue and cash flow growth during the first quarter of 2002. Charter executives will discuss first quarter financial results and expectations for the remainder of the year in a conference call this morning.
First Quarter Financial HighlightsRevenue during the first quarter of 2002 increased 13.1% to $1.1 billion, and operating cash flow increased 10.4% to $449.2 million compared to pro forma results for the first quarter of 2001. "Our revenue and cash flow for the quarter exceeded the high end of our expectations and will provide a solid base of growth which we expect to accelerate throughout the year," Mr. Vogel said. Charter reported basic and diluted loss per share of $.59 for the first quarter of 2002, compared to a loss per share of $1.20 for the first quarter of 2001.
Demand For High-Speed Internet Service Drives Advanced Services Growth
Charter added 140,000 cable modem customers during the first quarter of 2002, 40% more new customers than were added during the previous quarter. Charter ended the first quarter with 780,200 data customers of which 747,700 were cable modem customers. "Demand for our high-speed Internet service has been phenomenal," said Carl Vogel, President and CEO. "With the majority of our high-speed data customers now on Charter owned and operated systems, we're focusing our efforts on marketing as well as margin improvement. We're confident there will be continued consumer demand for this product throughout the year."
As of March 31, 2002, Charter Digital Cable(R) customers totaled 2,208,900, or approximately one third of Charter's video customer base. Charter reported 6,804,800 basic video customers as of the end of the first quarter of 2002. "We're realizing success from our strategic approach to customer growth to ensure quality customers, focusing on products delivered from our digital platform, including Charter Digital Cable which allows for video on demand and interactive channels; and high-speed data via our Charter Pipeline(R) service. As we bundle these services, we expect our profitability and retention levels to continue to improve, " Mr. Vogel said.
"Our bundled digital video, high-speed data, and interactive services enhance our customers' lives. We make entertainment more enjoyable, information more accessible and our customers' lives simpler for a reasonable price," he continued. "This makes our service essential to our customers, greatly reducing churn."
New Accounting StandardsEffective January 1, 2002, Charter adopted 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. Statement No. 142 requires that franchise intangible assets that meet the indefinite life criteria of the standard to no longer be amortized against earnings, but instead tested for impairment at least annually. Upon adoption Charter did not have an impairment charge and eliminated the amortization of indefinite-lived franchises, which totaled $316.4 million for the quarter ended March 31, 2001.
Looking AheadCharter expects revenue for the second quarter of 2002 to range from $1.145 billion to $1.155 billion. Operating cash flow for the second quarter is expected to be between $500 million and $505 million. Charter expects to add 275,000 to 300,000 RGUs in the second 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 $2.07 billion. Charter expects to add a total of approximately 1,100,000 to 1,200,000 RGUs during 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 Company(TM), 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(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 Networks(TM) 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 Monday, April 29, 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 Statement of Operations
(Dollars in thousands)
Three Months Ended March 31,
---------------------------
Actual Pro Forma
2002 2001 (a) % change
---------- ---------- --------
Revenues:
Analog video $ 754,622 $ 713,128
Digital video 103,713 58,796
Cable modem 63,993 26,729
Advertising sales 59,541 60,465
Other 96,465 93,963
---------- ----------
Total revenues 1,078,334 953,081 13.1%
---------- ----------
Operating Expenses:
General, administrative and service 246,278 212,535
Analog video programming 261,641 234,451
Digital video 35,127 17,863
Cable modem 32,694 23,663
Advertising sales 19,193 17,429
Marketing 18,773 21,510
Corporate expenses 15,431 18,726
---------- ----------
Operating expenses 629,137 546,177 15.2%
---------- ----------
Operating cash flow (b) $ 449,197 $ 406,904 10.4%
========== ==========
(a) The pro forma results reflect all significant acquisitions and
dispositions closed during 2002 and 2001 as if the transactions had
occurred one year prior to their closing date to be consistent with
2002 reporting. Pro forma revenues exceed actual revenues for the
three months ended March 31, 2001 by $79.3 million. Pro forma
operating cash flow (OCF) exceeds actual OCF for three months ended
March 31, 2001 by $19.0 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. See page 2 of 4 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 generally accepted accounting
principles 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 generally
accepted accounting principles in the United States.
Charter Communications, Inc.
Unaudited Consolidated Statement of Operations
(Dollars in thousands, except share data)
Three Months Ended March 31,
----------------------------
Actual Actual
2002 2001 % change
---------- ---------- --------
Revenues:
Analog video $ 754,622 $ 649,355
Digital video 103,713 55,047
Cable modem 63,993 25,166
Advertising sales 59,541 55,641
Other 96,465 88,588
---------- ----------
Total revenues 1,078,334 873,797 23.4%
---------- ----------
Operating Expenses:
General, administrative and service 246,278 191,630
Analog video programming 261,641 210,374
Digital video 35,127 20,609
Cable modem 32,694 17,646
Advertising sales 19,193 15,265
Marketing 18,773 16,623
Corporate expenses 15,431 13,721
---------- ----------
Operating expenses 629,137 485,868 29.5%
---------- ----------
Operating cash flow 449,197 387,929 15.8%
Depreciation and amortization 486,969 695,895
Option compensation expense 636 6,038
Interest, net 363,167 310,740
Other, net (30,010) 59,917
---------- ----------
820,762 1,072,590
---------- ----------
Loss before minority interest in loss
of subsidiary (371,565) (684,661)
Minority interest in loss
of subsidiary 197,398 403,962
---------- ----------
Net loss (174,167) (280,699)
Dividends of preferred stock
- redeemable 727 -
---------- ----------
Net loss applicable to common stock $ (174,894) $ (280,699)
========== ==========
Basic and diluted loss per share $ (0.59) $ (1.20)
========== ==========
Weighted average common shares
outstanding 294,394,955 233,777,675
=========== ===========
Charter Communications, Inc.
Unaudited Summary of Operating Statistics
Actual Pro Forma Pro Forma
---------- ----------- -----------
March 31, December 31, March 31,
Basic Analog Video 2002 2001 (a) 2001 (a)
---------- ---------- ----------
Basic Homes Passed 11,777,300 11,502,300 11,363,300
Basic Customers 6,804,800 6,953,700 6,914,500
Penetration of Basic Homes
Passed 57.8% 60.5% 60.8%
Average Monthly Revenue per
Basic Customer (quarter) $ 52.82 $ 53.07 $ 45.95
Actual Pro Forma Pro Forma
---------- ----------- -----------
March 31, December 31, March 31,
Digital Video 2002 2001 (a) 2001 (a)
---------- ----------- -----------
Digital Homes Passed 10,894,000 10,638,300 9,751,900
Digital Customers 2,208,900 2,144,800 1,455,900
Penetration of Digital Homes
Passed 20.3% 20.2% 14.9%
Penetration of Basic Customers 32.5% 30.8% 21.1%
Digital Converters Deployed 3,055,900 2,951,400 1,832,300
Actual Pro Forma Pro Forma
----------- ----------- -----------
March 31, December 31, March 31,
Data Services 2002 2001 (a) 2001 (a)
----------- ----------- -----------
Data Customers:
Cable Modem Customers 747,700 607,700 324,600
Dial-up Customers 32,500 37,100 41,900
----------- ----------- -----------
Total Data Customers 780,200 644,800 366,500
=========== =========== ===========
Data Homes Passed 8,180,300 7,560,600 5,972,400
Penetration of Data Homes
Passed 9.5% 8.5% 6.1%
Actual Pro Forma Pro Forma
----------- ----------- -----------
March 31, December 31, March 31,
Revenue Generating Units: 2002 2001 (a) 2001 (a)
----------- ----------- -----------
Basic Customers 6,804,800 6,953,700 6,914,500
New Services (Digital Video
and Cable Modem) 2,956,600 2,752,500 1,780,500
----------- ----------- -----------
Total Revenue
Generating Units 9,761,400 9,706,200 8,695,000
=========== =========== ===========
Actual
----------
March 31,
Other Statistics 2002
----------
For the quarter ended
Capital Expenditures (in 000's) $ 471,300
As of
Book Value per Share $ 9.09
(a) The pro forma statistics reflect all significant acquisitions
and dispositions closed during 2002 and 2001 as of the periods
indicated.
Charter Communications, Inc.
Unaudited Consolidated Balance Sheet Data
(Dollars in thousands)
Actual Actual
March 31, December 31,
2002 2001
----------- ------------
ASSETS
Current Assets:
Cash and cash equivalents $ 16,749 $ 1,679
Accounts receivable, net of
allowance for doubtful accounts 224,441 290,504
Receivable from related party 6,509 4,634
Prepaid expenses and other 70,025 70,362
----------- -----------
Total current assets 317,724 367,179
----------- -----------
Investment in Cable Properties:
Property, plant and equipment, net 7,152,588 7,149,483
Franchises, net 17,137,096 17,138,774
----------- -----------
Total investment in cable properties 24,289,684 24,288,257
----------- -----------
Other assets 394,600 306,388
----------- -----------
$25,002,008 $24,961,824
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable and accrued expenses $ 1,193,322 $ 1,374,994
----------- -----------
Total current liabilities 1,193,322 1,374,994
----------- -----------
Long-term debt 16,982,543 16,342,873
Deferred management fees - related party 13,751 13,751
Other long-term liabilities 288,599 341,057
Minority interest 3,778,188 3,976,791
Preferred stock - redeemable 50,566 50,566
Shareholders' equity 2,695,039 2,861,792
----------- -----------
$25,002,008 $24,961,824
=========== ===========
CONTACT: Charter Communications Inc., St. Louis
Andy Morgan, 314/543-2217 (Media)
amorgan@chartercom.com
or
Mary Jo Moehle, 314/543-2397 (Analysts)
mmoehle@chartercom.com
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