CorporateAugust 4, 2010
Charter Reports Second Quarter 2010 Financial and Operating Results
Share Article:
Charter Communications, Inc. (along with its subsidiaries, the "Company" or "Charter") today reported financial and operating results for the three and six months ended June 30, 2010.
Second Quarter Highlights:
-- Compared with the prior year, second quarter revenues grew 4.9% on a
pro forma(1) basis and 4.8% on an actual basis, driven by increases in
Internet, phone and commercial customers and improved advertising
sales.
-- Total average monthly revenue per basic video customer (ARPU) for the
second quarter increased 9.4% year-over-year to $124.06, driven by
increased sales of The Charter Bundle and advanced services.
-- Second quarter adjusted EBITDA(2) grew 1.3% year-over-year on both a
pro forma and actual basis, and net loss attributable to Charter
shareholders was reduced to $81 million in the second quarter of 2010
compared to $112 million in the second quarter of 2009.
-- Free cash flow(2) for the first six months of 2010 was $332 million
and cash flows from operating activities were $981 million.
-- Internet customer additions doubled compared to the second quarter of
2009, and we continue to reinforce our competitive superiority through
expanded DOCSIS 3.0 availability.
(1) Pro forma results are described below in the "Use of Non-GAAP
Financial Metrics" section and are provided in the addendum of this
news release.
(2) Adjusted EBITDA and free cash flow are defined in the "Use of Non-
GAAP Financial Metrics" section and are reconciled to consolidated net
income (loss) and net cash flows from operating activities,
respectively, in the addendum of this news release.
"We're pleased with our second quarter results as Charter continues to enhance our products; drive deeper Internet, digital and bundled penetration; and invest for future growth," said Mike Lovett, President and Chief Executive Officer. "We're confident that our strategy to strengthen our product and service capabilities while expanding our commercial offerings will further improve our position for long-term success."
Key Operating Results
All of the following customer and ARPU statistics are presented on a pro forma basis. Charter served approximately 12.9 million revenue generating units (RGUs) as of June 30, 2010, an increase of 423,900 RGUs, or about 3.4%, over the prior year. Approximately 59.3% of Charter's residential customers subscribe to a bundle, compared to 55.4% a year ago. Charter's ARPU for the second quarter of 2010 was $124.06, an increase of 9.4% compared to second quarter 2009, primarily as a result of strong triple play and advanced services growth.
Second quarter 2010 customer highlights included the following:
-- Digital video customers increased by approximately 25,500 and basic
video customers decreased by approximately 76,600 during the second
quarter. Year to date 2010 digital customer additions are six times
greater than year ago net additions due to product and service
enhancements. Video ARPU was $68.90 for the second quarter of 2010, up
4.8% year-over-year as we continue to increase digital, high
definition and digital video recorder (DVR) penetration.
-- Internet customers grew by approximately 21,900 during the second
quarter of 2010, more than doubling net additions in the second
quarter of 2009. Internet ARPU of $42.20 increased approximately 1.9%
compared to the year-ago quarter, as consumer demand for higher
Internet speeds and home networking continues.
-- Second quarter 2010 net gains of phone customers were approximately
35,200. Phone penetration reached 15.9% as of June 30, 2010. Phone
ARPU of $41.74 decreased approximately 4.2%.
As of June 30, 2010, Charter served approximately 5.3 million customers, and the Company's 12.9 million RGUs were comprised of 4.7 million basic video, 3.3 million digital video, 3.2 million Internet and 1.7 million phone customers.
Second Quarter Results - Actual and Pro Forma
Second quarter revenues were $1.770 billion, up 4.9%, on a pro forma basis and $1.771 billion, up 4.8%, on an actual basis, compared to the year-ago quarter, as the Company continued to grow its Internet, phone, commercial and ad sales businesses.
Second quarter 2010 video revenues were $932 million, essentially flat with the year-ago quarter, as digital and advanced services revenue growth was offset by a decline in basic video customers. Internet revenues were $402 million, up 9.5% year-over-year due to an increased number of customers and ARPU growth. Telephone revenues for the 2010 second quarter were $206 million, a 10.8% increase over second quarter 2009, as growth in the triple play bundle continues. Commercial revenues rose to $121 million, a 10.0% increase year-over-year, reflecting increased sales of the Charter Business Bundle and customer growth. Advertising sales revenues were $72 million for the second quarter of 2010, a 16.1% increase compared to the second quarter of 2009, as a result of improvements across all sectors, primarily the political, automotive and furniture sectors.
Operating costs and expenses totaled $1.124 billion, an increase of 7.0% for the second quarter of 2010, on a pro forma basis and $1.125 billion, an increase of 6.9% on an actual basis, compared to the year-ago period, primarily due to increases in programming expenses, labor costs and expenses related to investments in our commercial business and strategic bandwidth initiatives. Programming expenses increased as a result of annual rate increases while labor costs increased as a result of increases in activity related to our strategic investments and RGU growth.
Adjusted EBITDA for the second quarter of 2010 totaled $646 million, an increase of 1.3% compared to the pro forma and actual results for the year-ago period.
Charter reported $254 million of income from operations in the second quarter of 2010, compared to $301 million in the second quarter of 2009. Income from operations declined as a result of increased amortization related to customer relationships resulting from fresh start accounting.
Net loss attributable to Charter shareholders was $81 million in the second quarter of 2010, compared to a loss of $112 million in the second quarter of 2009. The improvement resulted primarily from a reduction in reorganization costs related to Charter's restructuring in 2009 offset by the decline in income from operations in 2010, the elimination of net loss allocated to non-controlling interest and a loss on extinguishment of debt. Charter reported net loss per common share of $0.72 in the second quarter of 2010, compared with a loss of $0.30 during the same period last year. The increase in loss per common share is a result of a decrease in the number of shares outstanding as a result of recapitalization upon emergence from Chapter 11 proceedings under the U.S. Bankruptcy Code.
Expenditures for property, plant and equipment for the second quarter of 2010 increased to $339 million, compared to second quarter 2009 expenditures of $271 million, as a result of strategic investments including DOCSIS 3.0; bandwidth reclamation projects, such as switched digital video (SDV) launches; and investments made to move into new commercial segments.
Free cash flow for the second quarter of 2010 was $127 million, compared to $175 million in the same period last year. The decrease in free cash flow is primarily due to increases in capital investments to enhance our residential and commercial products and service capabilities.
Net cash flows from operating activities for the second quarter of 2010 were $451 million, compared to $438 million in the second quarter of 2009.
Year to Date Results - Actual and Pro Forma
Pro Forma revenues for the six months ended June 30, 2010 were $3.504 billion, up 4.7% year-over-year, and actual revenues for the six months ended June 30, 2010 were $3.506 billion, up 4.6% year-over-year.
Operating costs and expenses totaled $2.221 billion, an increase of 6.1% for the six months ended June 30, 2010, on a pro forma basis and $2.223 billion, an increase of 6.0%, on an actual basis, compared to the year-ago period.
Adjusted EBITDA for the six months ended June 30, 2010 totaled $1.283 billion, an increase of 2.4%, on a pro forma basis and 2.3% on an actual basis, compared to the year-ago period.
Charter reported $505 million of income from operations for the six months ended June 30, 2010, compared to $635 million for the first six months of 2009.
Net loss attributable to Charter shareholders was $57 million for the six months ended June 30, 2010, compared to a loss of $317 million for the first six months of 2009. Charter reported net loss per common share of $0.51 for the six months ended June 30, 2010, compared to a loss of $0.84 in the same period last year.
Expenditures for property, plant and equipment for the six months ended June 30, 2010 were $649 million, compared to $540 million in the same period last year. The Company expects capital spending for the full year to be approximately $1.2 billion, and intends to deploy SDV to more than 60% of its footprint and DOCSIS 3.0 to approximately half of its footprint by year end 2010.
Free cash flow for the first six months of 2010 was $332 million, compared to $66 million in the same period last year. The increase in free cash flow is primarily due to decreases in interest expense and cash reorganization items and increases in RGU growth, partially offset by increases in investments to enhance our residential and commercial products and service capabilities.
Net cash flows from operating activities for the first six months of 2010 were $981 million, compared to $625 million in the first six months of 2009. The increase in cash flows from operating activities is primarily due to reduced interest expense and cash reorganization costs.
Total principal amount of debt was approximately $12.7 billion as of June 30, 2010. At the end of the second quarter, the Company had availability under its revolving credit facility of approximately $800 million.
Recent Events
The Company recently announced that Craig A. Jacobson has been appointed to the Board of Directors (the "Board"). Mr. Jacobson will serve as a member of the Audit Committee of the Board, joining David C. Merritt and Christopher M. Temple. With the appointment of Mr. Jacobson to the Audit Committee of the Board, Charter believes that it satisfies the requirements for listing its Class A common stock on the NASDAQ Stock Market and expects to complete the listing process in the coming weeks.
Conference Call
The Company will host a conference call on Wednesday, August 4, 2010 at 9:00 a.m. Eastern Time (ET) related to the contents of this release.
The conference call will be webcast live via the Company's website at charter.com. The webcast can be accessed by selecting "Investor & News Center" from the lower menu on the home page. The call will be archived in the "Investor & News Center" in the "Financial Information" section on the left beginning two hours after completion of the call. Participants should go to the call link no later than 10 minutes prior to the start time to register.
Those participating via telephone should dial 866-726-7983 no later than 10 minutes prior to the call. International participants should dial 706-758-7055. The conference ID code for the call is 85580395.
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 the end of business on August 18, 2010. The conference ID code for the replay is 85580395.
Additional Information Available on Website
A slide presentation to accompany the conference call will be available on the "Investor & News Center" of our website at charter.com in the "Financial Information" section. A trending schedule containing historical customer and financial data can also be found in the "Financial Information" section.
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. Adjusted EBITDA, adjusted EBITDA less capital expenditures and free cash flow are non-GAAP financial measures and should be considered in addition to, not as a substitute for, net income (loss) or 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 reconciled to consolidated net income (loss) and free cash flow is reconciled to net cash flows from operating activities in the addendum of this news release.
Adjusted EBITDA is defined as consolidated net loss plus net interest expense, income taxes, depreciation and amortization, reorganization items, stock compensation expense, loss on extinguishment of debt, and other 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 special items, and is unaffected by the Company's capital structure or investment activities. Adjusted EBITDA less capital expenditures is defined as Adjusted EBITDA minus purchases of property, plant and equipment. Adjusted EBITDA and adjusted EBITDA less capital expenditures are used by management and the Company's Board to evaluate the performance of the Company's business. For this reason, they are significant components of Charter's annual incentive compensation program. However, these measures are limited in that they do not reflect the periodic costs of certain capitalized tangible and intangible assets used in generating revenues and the cash cost of financing. Management evaluates these costs through other financial measures.
Free cash flow is defined as net cash flows from operating activities, less purchases of property, plant and equipment and changes in accrued expenses related to capital expenditures.
The Company believes that adjusted EBITDA and free cash flow provide information useful to investors in assessing Charter's performance and its 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 United States Securities and Exchange Commission). Adjusted EBITDA, as presented, includes management fee expenses in the amount of $36 million and $34 million for the three months ended June 30, 2010 and 2009, respectively, which expense amounts are excluded for the purposes of calculating compliance with leverage covenants.
In addition to the actual results for the three and six months ended June 30, 2010 and 2009, we have provided pro forma results in this release for the three and six months ended June 30, 2010 and 2009. We believe these pro forma results facilitate meaningful analysis of the results of operations. Pro forma results in this release reflect certain sales of cable systems in 2009 and 2010 as if they occurred as of January 1, 2009. Pro forma statements of operations for the three and six months ended June 30, 2010 and 2009; and pro forma customer statistics as of December 31, 2009 and June 30, 2009; are provided in the addendum of this news release.
About Charter
Charter Communications, Inc.
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 (the "Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), 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 Securities and Exchange Commission ("SEC"). Many of the forward-looking statements contained in this release may be identified by the use of forward-looking words such as "believe," "expect," "anticipate," "should," "planned," "will," "may," "intend," "estimated," "aim," "on track," "target," "opportunity," "tentative," "positioning" and "potential," among others. Important factors that could cause actual results to differ materially from the forward-looking statements we make in this release are set forth in other reports or documents that we file from time to time with 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, high-speed Internet, telephone and other
services to residential and commercial customers, and to maintain and
grow our customer base, particularly in the face of increasingly
aggressive competition and the difficult economic conditions in the
United States;
-- the impact of competition from other distributors, including but not
limited to incumbent telephone companies, direct broadcast satellite
operators, wireless broadband providers, and digital subscriber line
("DSL") providers and competition from video provided over the
Internet;
-- general business conditions, economic uncertainty or downturn, high
unemployment levels and the significant downturn in the housing sector
and overall economy;
-- our ability to obtain programming at reasonable prices or to raise
prices to offset, in whole or in part, the effects of higher
programming costs (including retransmission consents);
-- our ability to adequately deliver customer service;
-- the effects of governmental regulation on our business;
-- the availability and access, in general, of funds to meet our debt
obligations, prior to or when they become due, and to fund our
operations and necessary capital expenditures, either through (i) cash
on hand, (ii) cash flows from operating activities, (iii) access to
the capital or credit markets including through new issuances,
exchange offers or otherwise, especially given recent volatility and
disruption in the capital and credit markets, or (iv) other sources
and our ability to fund debt obligations (by dividend, investment or
otherwise) to the applicable obligor of such debt; and
-- our ability to comply with all covenants in our indentures and credit
facilities, any violation of which, if not cured in a timely manner,
could trigger a default of our other obligations under cross-default
provisions.
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.
CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS AND OPERATING DATA
(DOLLARS IN MILLIONS, EXCEPT PER SHARE AND SHARE DATA)
Successor Predecessor
Actual Three Actual Three
Months Ended Months Ended
June 30, June 30, %
2010 2009 Change
--------- --------- ------
REVENUES:
Video (a) $932 $928 0.4%
High-speed Internet 402 367 9.5%
Telephone (a) 206 186 10.8%
Commercial 121 110 10.0%
Advertising sales 72 62 16.1%
Other (a) 38 37 2.7%
Total revenues 1,771 1,690 4.8%
----- -----
COSTS AND EXPENSES:
Operating (excluding
depreciation and
amortization) (b) 766 715 7.1%
Selling, general and
administrative (excluding
stock
compensation expense) (c) 359 337 6.5%
--- ---
Operating costs and
expenses 1,125 1,052 6.9%
----- -----
Adjusted EBITDA 646 638 1.3%
--- ---
Adjusted EBITDA margin 36.5% 37.8%
---- ----
Depreciation and
amortization 380 329
Stock compensation expense 5 6
Other operating (income)
expenses, net 7 2
--- ---
Income from operations 254 301
--- ---
OTHER INCOME (EXPENSES):
Interest expense, net
(excluding unrecorded
contractual interest
expense of $206 and $215
for the
three and six months ended
June 30, 2009,
respectively) (219) (216)
Reorganization items, net (1) (184)
Loss on extinguishment of
debt (34) -
Other income (expense), net 2 -
--- ---
(252) (400)
---- ----
Income (loss) before income
taxes 2 (99)
Income tax expense (83) (60)
--- ---
Consolidated net loss (81) (159)
Less: Net loss -
noncontrolling interest - 47
--- ---
Net loss -Charter
shareholders $(81) $(112)
==== =====
Loss per common share,
basic and diluted:
Net loss -Charter
shareholders: $(0.72) $(0.30)
====== ======
Weighted average common
shares outstanding, basic
and diluted 113,110,882 378,982,037
=========== ===========
Successor Predecessor
Actual Six Actual Six
Months Ended Months Ended
June 30, %
2010 June 30, 2009 Change
--------- ------------- ------
REVENUES:
Video (a) $1,858 $1,856 0.1%
High-speed Internet 797 727 9.6%
Telephone (a) 404 363 11.3%
Commercial 239 217 10.1%
Advertising sales 131 116 12.9%
Other (a) 77 73 5.5%
Total revenues 3,506 3,352 4.6%
----- -----
COSTS AND EXPENSES:
Operating (excluding
depreciation and
amortization) (b) 1,517 1,428 6.2%
Selling, general and
administrative (excluding
stock
compensation expense) (c) 706 670 5.4%
--- ---
Operating costs and
expenses 2,223 2,098 6.0%
----- -----
Adjusted EBITDA 1,283 1,254 2.3%
----- -----
Adjusted EBITDA margin 36.6% 37.4%
---- ----
Depreciation and
amortization 749 650
Stock compensation expense 10 17
Other operating (income)
expenses, net 19 (48)
--- ---
Income from operations 505 635
--- ---
OTHER INCOME (EXPENSES):
Interest expense, net
(excluding unrecorded
contractual interest
expense of $206 and $215
for the
three and six months ended
June 30, 2009,
respectively) (423) (679)
Reorganization items, net (5) (325)
Loss on extinguishment of
debt (35) -
Other income (expense),
net 3 (3)
--- ---
(460) (1,007)
---- ------
Income (loss) before
income taxes 45 (372)
Income tax expense (102) (121)
---- ----
Consolidated net loss (57) (493)
Less: Net loss -
noncontrolling interest - 176
--- ---
Net loss -Charter
shareholders $(57) $(317)
==== =====
Loss per common share,
basic and diluted:
Net loss -Charter
shareholders: $(0.51) $(0.84)
====== ======
Weighted average common
shares outstanding, basic
and diluted 113,066,173 378,541,155
=========== ===========
(a) Certain prior year amounts have been reclassified to conform
with the 2010 presentation, including the reflection of
franchise fees, equipment rental and video customer installations
revenue as video revenue, and telephone regulatory
fees as telephone revenue, rather than other revenue.
(b) Operating expenses include programming, service, and advertising
sales expenses.
(c) Selling, general and administrative expenses include general and
administrative and marketing expenses.
Adjusted EBITDA is a non-GAAP term. See page 7 of this addendum for
the reconciliation of adjusted EBITDA to consolidated net income
(loss) as defined by GAAP.
CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS AND OPERATING DATA
(DOLLARS IN MILLIONS, EXCEPT PER SHARE AND SHARE DATA)
Successor Predecessor
Pro Forma Pro Forma
Three Three
Months Ended Months Ended
June 30, 2010 June 30, 2009 %
(a) (a) Change
------------- ------------- ------
REVENUES:
Video (b) $931 $926 0.5%
High-speed Internet 402 367 9.5%
Telephone (b) 206 186 10.8%
Commercial 121 110 10.0%
Advertising sales 72 62 16.1%
Other (b) 38 37 2.7%
Total revenues 1,770 1,688 4.9%
----- -----
COSTS AND EXPENSES:
Operating (excluding
depreciation and
amortization) (c) 765 714 7.1%
Selling, general and
administrative
(excluding stock
compensation expense) (d) 359 336 6.8%
--- ---
Operating costs and
expenses 1,124 1,050 7.0%
----- -----
Adjusted EBITDA 646 638 1.3%
--- ---
Adjusted EBITDA margin 36.5% 37.8%
---- ----
Depreciation and
amortization 380 328
Stock compensation
expense 5 6
Other operating (income)
expenses, net 7 2
--- ---
Income from operations 254 302
--- ---
OTHER INCOME (EXPENSES):
Interest expense, net
(excluding unrecorded
contractual interest
expense of $206 and $215
for the
three and six months
ended June 30, 2009,
respectively) (219) (216)
Reorganization items, net (1) (184)
Loss on extinguishment of
debt (34) -
Other income (expense),
net 2 -
--- ---
(252) (400)
---- ----
Income (loss) before
income taxes 2 (98)
Income tax expense (80) (60)
--- ---
Consolidated net loss (78) (158)
Less: Net loss -
noncontrolling interest - 47
--- ---
Net loss -Charter
shareholders $(78) $(111)
==== =====
Loss per common share,
basic and diluted:
Net loss -Charter
shareholders: $(0.69) $(0.30)
====== ======
Weighted average common
shares outstanding,
basic and diluted 113,110,882 378,982,037
=========== ===========
Successor Predecessor
Pro Forma
Six Pro Forma Six
Months Ended Months Ended
June 30, June 30, 2009 %
2010 (a) (a) Change
--------- ------------- ------
REVENUES:
Video (b) $1,856 $1,851 0.3%
High-speed Internet 797 727 9.6%
Telephone (b) 404 363 11.3%
Commercial 239 217 10.1%
Advertising sales 131 116 12.9%
Other (b) 77 73 5.5%
Total revenues 3,504 3,347 4.7%
----- -----
COSTS AND EXPENSES:
Operating (excluding
depreciation and
amortization) (c) 1,516 1,425 6.4%
Selling, general and
administrative
(excluding stock
compensation expense) (d) 705 669 5.4%
--- ---
Operating costs and
expenses 2,221 2,094 6.1%
----- -----
Adjusted EBITDA 1,283 1,253 2.4%
----- -----
Adjusted EBITDA margin 36.6% 37.4%
---- ----
Depreciation and
amortization 749 649
Stock compensation
expense 10 17
Other operating (income)
expenses, net 19 (50)
--- ---
Income from operations 505 637
--- ---
OTHER INCOME (EXPENSES):
Interest expense, net
(excluding unrecorded
contractual interest
expense of $206 and $215
for the
three and six months
ended June 30, 2009,
respectively) (423) (679)
Reorganization items, net (5) (325)
Loss on extinguishment of
debt (35) -
Other income (expense),
net 3 (3)
--- ---
(460) (1,007)
---- ------
Income (loss) before
income taxes 45 (370)
Income tax expense (99) (121)
--- ----
Consolidated net loss (54) (491)
Less: Net loss -
noncontrolling interest - 176
--- ---
Net loss -Charter
shareholders $(54) $(315)
==== =====
Loss per common share,
basic and diluted:
Net loss -Charter
shareholders: $(0.48) $(0.83)
====== ======
Weighted average common
shares outstanding,
basic and diluted 113,066,173 378,541,155
=========== ===========
(a) Pro forma results reflect certain sales of cable systems in 2009 and
2010 as if they occurred as of January 1, 2009. The pro
forma statements of operations do not include adjustments for financing
transactions completed by Charter during the periods
presented or certain other dispositions or acquisitions of assets because
those transactions did not significantly impact Charter's
revenue and operating costs and expenses. However, all transactions
completed in 2009 and 2010 have been reflected in the
operating statistics. The pro forma data is based on information
available to Charter as of the date of this document and certain
assumptions that we believe are reasonable under the circumstances. The
financial data required allocation of certain revenues and
expenses and such information has been presented for comparative purposes
and is not intended to provide any indication of what our
actual financial position, or results of operations would have been had
the transactions described above been completed on the dates
indicated or to project our results of operations for any future date.
(b) Certain prior year amounts have been reclassified to conform with the
2010 presentation, including the reflection of franchise fees,
equipment rental and video customer installations revenue as video
revenue, and telephone regulatory fees as telephone revenue, rather
than other revenue.
(c) Operating expenses include programming, service, and advertising
sales expenses.
(d) Selling, general and administrative expenses include general and
administrative and marketing expenses.
June 30, 2010 Pro forma revenues, operating costs and expenses and net
loss were reduced by $1 million, $1 million and $3 million,
respectively, for the three months ended June 30, 2010. Pro forma
revenues, operating costs and expenses and net loss were reduced by
$2 million, $2 million and $3 million, respectively, for the six months
ended June 30, 2010.
June 30, 2009 Pro forma revenues, operating costs and expenses and net
loss were reduced by $2 million, $2 million, and $1 million,
respectively, for the three months ended June 30, 2009. Pro forma
revenues, operating costs and expenses and net loss were reduced by
$5 million, $4 million and $2 million, respectively, for the six months
ended June 30, 2009.
Adjusted EBITDA is a non-GAAP term. See page 7 of this addendum for the
reconciliation of adjusted EBITDA to consolidated net
income (loss) as defined by GAAP.
CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED BALANCE SHEETS
(DOLLARS IN MILLIONS)
June December
30, 31,
2010 2009
---- ----
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $40 $709
Restricted cash and cash equivalents 27 45
Accounts receivable, net of allowance for
doubtful accounts 249 248
Prepaid expenses and other current assets 57 69
--- ---
Total current assets 373 1,071
--- -----
INVESTMENT IN CABLE PROPERTIES:
Property, plant and equipment, net 6,902 6,833
Franchises, net 5,269 5,272
Customer relationships, net 2,167 2,335
Goodwill 951 951
--- ---
Total investment in cable properties, net 15,289 15,391
------ ------
OTHER NONCURRENT ASSETS 345 196
--- ---
Total assets $16,007 $16,658
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued expenses $1,014 $898
Current portion of long-term debt - 70
--- ---
Total current liabilities 1,014 968
----- ---
LONG-TERM DEBT 12,657 13,252
OTHER LONG-TERM LIABILITIES 692 520
TEMPORARY EQUITY 12 1
SHAREHOLDERS' EQUITY:
Charter shareholders' equity 1,632 1,915
Noncontrolling interest - 2
--- ---
Total shareholders' equity 1,632 1,917
----- -----
Total liabilities and shareholders' equity $16,007 $16,658
======= =======
CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN MILLIONS)
Three Months Ended
------------------
Successor Predecessor
June 30, June 30,
2010 2009
--------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES:
Consolidated net loss $(81) $(159)
Adjustments to reconcile net loss to
net cash flows from operating
activities:
Depreciation and amortization 380 329
Noncash interest expense 18 11
Noncash reorganization items, net - 23
Loss on extinguishment of debt 31 -
Deferred income taxes 82 57
Other, net 5 7
Changes in operating assets and
liabilities, net of effects from
dispositions
Accounts receivable (26) (27)
Prepaid expenses and other assets 12 34
Accounts payable, accrued expenses and
other 30 163
--- ---
Net cash flows from operating
activities 451 438
--- ---
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and
equipment (339) (271)
Change in accrued expenses related to
capital expenditures 15 8
Other, net 1 (4)
--- ---
Net cash flows from investing
activities (323) (267)
---- ----
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings of long-term debt 1,625 -
Repayments of long-term debt (1,773) (17)
Repayment of preferred stock (138) -
Payments for debt issuance costs (28) -
Other, net (1) 2
--- ---
Net cash flows from financing
activities (315) (15)
---- ---
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS (187) 156
CASH AND CASH EQUIVALENTS, beginning
of period 254 836
--- ---
CASH AND CASH EQUIVALENTS, end of
period $67 $992
=== ====
CASH PAID FOR INTEREST $185 $310
==== ====
Six Months Ended
----------------
Successor Predecessor
June 30, June 30,
2010 2009
--------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES:
Consolidated net loss $(57) $(493)
Adjustments to reconcile net loss to
net cash flows from operating
activities:
Depreciation and amortization 749 650
Noncash interest expense 36 26
Noncash reorganization items, net - 131
Loss on extinguishment of debt 32 -
Deferred income taxes 98 116
Other, net 11 23
Changes in operating assets and
liabilities, net of effects from
dispositions
Accounts receivable (1) 7
Prepaid expenses and other assets 12 (44)
Accounts payable, accrued expenses and
other 101 209
--- ---
Net cash flows from operating
activities 981 625
--- ---
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and
equipment (649) (540)
Change in accrued expenses related to
capital expenditures - (19)
Other, net (4) -
--- ---
Net cash flows from investing
activities (653) (559)
---- ----
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings of long-term debt 1,625 -
Repayments of long-term debt (2,440) (34)
Repayment of preferred stock (138) -
Payments for debt issuance costs (59) -
Other, net (3) -
--- ---
Net cash flows from financing
activities (1,015) (34)
------ ---
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS (687) 32
CASH AND CASH EQUIVALENTS, beginning of
period 754 960
--- ---
CASH AND CASH EQUIVALENTS, end of
period $67 $992
=== ====
CASH PAID FOR INTEREST $337 $531
==== ====
CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES
UNAUDITED SUMMARY OF OPERATING STATISTICS
Approximate as of
-----------------
Actual
------
June 30,
2010 (a)
--------
Customer Summary:
Customer Relationships:
Residential (non-bulk) basic video customers (b) 4,466,600
Multi-dwelling (bulk) and commercial unit
customers (c) 249,900
-------
Total basic video customers 4,716,500
Non-video customers (b) 538,900
-------
Total customer relationships (d) 5,255,400
=========
Pro forma average monthly revenue per basic video
customer (e) $124.06
Pro forma average monthly video revenue per basic
video customer (f) $68.90
Residential bundled customers (g) 2,969,800
Revenue Generating Units:
Basic video customers (b) (c) 4,716,500
Digital video customers (h) 3,337,500
Residential high-speed Internet customers (i) 3,187,900
Residential telephone customers (j) 1,658,100
---------
Total revenue generating units (k) 12,900,000
==========
Total Video Services:
Estimated homes passed (l) 11,989,900
Basic video customers (b)(c) 4,716,500
Estimated penetration of basic homes passed (b)
(c) (l) (m) 39.3%
Pro forma basic video customers quarterly net loss
(b) (c) (n) (76,600)
Digital video customers (h) 3,337,500
Digital penetration of basic video customers (b)
(c) (h) (o) 70.8%
Digital set-top terminals deployed 4,974,800
Pro forma digital video customers quarterly net
gain (h) (n) 25,500
High-Speed Internet Services:
Estimated high-speed Internet homes passed (l) 11,468,300
Residential high-speed Internet customers (i) 3,187,900
Estimated penetration of high-speed Internet
homes passed (i) (l) (m) 27.8%
Pro forma average monthly high-speed Internet
revenue per high-speed Internet customer (f) $42.20
Pro forma high-speed Internet customers quarterly
net gain (i) (n) 21,900
Telephone Services:
Estimated telephone homes passed (l) 10,434,800
Residential telephone customers (j) 1,658,100
Estimated penetration of telephone homes passed
(i) (l) (m) 15.9%
Pro forma average monthly telephone revenue per
telephone customer (f) $41.74
Pro forma telephone customers quarterly net gain
(j) (n) 35,200
Approximate as of
-----------------
Pro Forma
---------
March 31,
2010 (a)
--------
Customer Summary:
Customer Relationships:
Residential (non-bulk) basic video customers (b) 4,540,700
Multi-dwelling (bulk) and commercial unit
customers (c) 252,400
-------
Total basic video customers 4,793,100
Non-video customers (b) 518,200
-------
Total customer relationships (d) 5,311,300
=========
Pro forma average monthly revenue per basic video
customer (e) $120.55
Pro forma average monthly video revenue per basic
video customer (f) $67.90
Residential bundled customers (g) 2,965,800
Revenue Generating Units:
Basic video customers (b) (c) 4,793,100
Digital video customers (h) 3,312,000
Residential high-speed Internet customers (i) 3,166,000
Residential telephone customers (j) 1,622,900
---------
Total revenue generating units (k) 12,894,000
==========
Total Video Services:
Estimated homes passed (l) 11,940,000
Basic video customers (b)(c) 4,793,100
Estimated penetration of basic homes passed (b)
(c) (l) (m) 40.1%
Pro forma basic video customers quarterly net loss
(b) (c) (n) (23,300)
Digital video customers (h) 3,312,000
Digital penetration of basic video customers (b)
(c) (h) (o) 69.1%
Digital set-top terminals deployed 4,934,000
Pro forma digital video customers quarterly net
gain (h) (n) 95,800
High-Speed Internet Services:
Estimated high-speed Internet homes passed (l) 11,424,500
Residential high-speed Internet customers (i) 3,166,000
Estimated penetration of high-speed Internet
homes passed (i) (l) (m) 27.7%
Pro forma average monthly high-speed Internet
revenue per high-speed Internet customer (f) $42.31
Pro forma high-speed Internet customers quarterly
net gain (i) (n) 103,700
Telephone Services:
Estimated telephone homes passed (l) 10,363,900
Residential telephone customers (j) 1,622,900
Estimated penetration of telephone homes passed
(i) (l) (m) 15.7%
Pro forma average monthly telephone revenue per
telephone customer (f) $41.68
Pro forma telephone customers quarterly net gain
(j) (n) 66,900
Approximate as of
-----------------
Pro Forma
---------
December
31, June 30,
2009 (a) 2009 (a)
-------- --------
Customer Summary:
Customer Relationships:
Residential (non-bulk) basic video
customers (b) 4,555,700 4,662,100
Multi-dwelling (bulk) and commercial
unit customers (c) 260,700 257,200
------- -------
Total basic video customers 4,816,400 4,919,300
Non-video customers (b) 493,100 431,500
------- -------
Total customer relationships (d) 5,309,500 5,350,800
========= =========
Pro forma average monthly revenue per
basic video customer (e) $117.53 $113.39
Pro forma average monthly video revenue
per basic video customer (f) $66.34 $65.74
Residential bundled customers (g) 2,889,500 2,821,700
Revenue Generating Units:
Basic video customers (b) (c) 4,816,400 4,919,300
Digital video customers (h) 3,216,200 3,150,100
Residential high-speed Internet
customers (i) 3,062,300 2,958,100
Residential telephone customers (j) 1,556,000 1,448,600
--------- ---------
Total revenue generating units (k) 12,650,900 12,476,100
========== ==========
Total Video Services:
Estimated homes passed (l) 11,887,800 11,817,300
Basic video customers (b)(c) 4,816,400 4,919,300
Estimated penetration of basic homes
passed (b) (c) (l) (m) 40.5% 41.6%
Pro forma basic video customers quarterly
net loss (b) (c) (n) (56,700) (73,000)
Digital video customers (h) 3,216,200 3,150,100
Digital penetration of basic video
customers (b) (c) (h) (o) 66.8% 64.0%
Digital set-top terminals deployed 4,791,600 4,598,400
Pro forma digital video customers
quarterly net gain (h) (n) 43,300 (5,800)
High-Speed Internet Services:
Estimated high-speed Internet homes
passed (l) 11,360,200 11,236,200
Residential high-speed Internet
customers (i) 3,062,300 2,958,100
Estimated penetration of high-speed
Internet homes passed (i) (l) (m) 27.0% 26.3%
Pro forma average monthly high-speed
Internet revenue per high-speed
Internet customer (f) $41.48 $41.41
Pro forma high-speed Internet customers
quarterly net gain (i) (n) 51,800 10,600
Telephone Services:
Estimated telephone homes passed (l) 10,312,700 10,163,100
Residential telephone customers (j) 1,556,000 1,448,600
Estimated penetration of telephone homes
passed (i) (l) (m) 15.1% 14.3%
Pro forma average monthly telephone
revenue per telephone customer (f) $42.54 $43.57
Pro forma telephone customers quarterly
net gain (j) (n) 56,200 52,300
Pro forma operating statistics reflect the sales and acquisitions of
cable systems in 2009 and 2010 as if such transactions had occurred
as of the last day of the respective
period for all periods presented. The pro forma statements of
operations do not include adjustments for financing transactions
completed by Charter during the periods
presented or certain other dispositions or acquisitions of assets
because those transactions did not significantly impact Charter's
revenue and operating costs and expenses.
However, all transactions completed in 2009 and 2010 have been
reflected in the operating statistics.
At March 31, 2010 actual basic video customers, digital video
customers, high-speed Internet customers and telephone customers
were 4,800,600, 3,313,900,
3,166,000, and 1,622,900, respectively.
At December 31, 2009, actual basic video customers, digital video
customers, high-speed Internet customers and telephone customers
were 4,824,000, 3,218,100,
3,062,300, and 1,556,000, respectively.
At June 30, 2009, actual basic video customers, digital video
customers, high-speed Internet customers and telephone customers
were 4,929,900, 3,152,000,
2,957,700, and 1,448,600, respectively.
See footnotes to unaudited summary of operating statistics
(a) Our billing systems calculate the aging of customer accounts
based on the monthly billing cycle for each account. On that basis,
at June 30, 2010,
March 31, 2010, December 31, 2009, and June 30, 2009 customers
include approximately 20,800, 16,200, 25,900, and 37,200 persons,
respectively,
whose accounts were over 60 days past due in payment, approximately
2,500, 1,600, 3,500, and 6,200 persons, respectively, whose accounts
were
over 90 days past due in payment and approximately 1,300, 1,700,
2,200, and 2,900 persons, respectively, whose accounts were over
120 days past due in payment.
(b) "Basic video customers" include all residential customers who
receive video services (including those who also purchase high-
speed Internet and
telephone services) but excludes approximately 538,900, 518,200,
493,100, and 431,500 customer relationships at June 30, 2010, March
31, 2010,
December 31, 2009, and June 30, 2009, respectively, who receive high-
speed Internet service only, telephone service only, or both high-
speed
Internet service and telephone service and who are only counted as
high-speed Internet customers or telephone customers.
(c) Included within "basic video customers" are those in commercial
and multi-dwelling structures, which are calculated on an
equivalent bulk
unit ("EBU") basis. EBUs are calculated by dividing the bulk price
charged to accounts in an area by the published rate charged to non-
bulk residential
customers in that market for the comparable tier of service. This
EBU method of estimating basic video customers is consistent with
the methodology
used in determining costs paid to programmers and is consistent with
the methodology used by other multiple system operators (MSOs). As
we increase
our published video rates to residential customers without a
corresponding increase in the prices charged to commercial service
or multi-dwelling
customers, our EBU count will decline even if there is no real loss
in commercial service or multi-dwelling customers.
(d) "Customer relationships" include the number of customers that
receive one or more levels of service, encompassing video, Internet
and telephone
services, without regard to which service(s) such customers receive.
This statistic is computed in accordance with the guidelines of the
National Cable
& Telecommunications Association (NCTA) that have been adopted by the
publicly traded cable operators, including Charter.
(e) "Pro forma average monthly revenue per basic video customer" is
calculated as total quarterly pro forma revenue divided by three
divided by average
pro forma basic video customers during the respective quarter.
(f) "Pro forma average monthly revenue per customer" represents
quarterly pro forma revenue for the service indicated divided by
three divided by the
number of pro forma customers for the service indicated during the
respective quarter.
(g) "Residential bundled customers" include residential customers
receiving a combination of at least two different types of service,
including Charter's
video service, high-speed Internet service or telephone.
"Residential bundled customers" do not include residential customers
who only subscribe to video service.
(h) "Digital video customers" include all basic video customers that
have one or more digital set-top boxes or cable cards deployed.
(i) "Residential high-speed Internet customers" represent those
residential customers who subscribe to our high-speed Internet
service. At June 30, 2010,
March 31, 2010, December 31, 2009, and June 30, 2009, approximately
2,789,900, 2,784,000, 2,705,300, and 2,644,800 of these high-speed
Internet
customers, respectively, receive video and/or telephone services
from us and are included within the respective statistics above.
(j) "Residential telephone customers" represent those residential
customers who subscribe to our telephone service. As of June 30,
2010,
March 31, 2010, December 31 2009, and June 30, 2009 approximately
1,613,600, 1,580,000, 1,508,200, and 1,412,300 of these telephone
customers, respectively, receive video and/or high-speed Internet
services from us and are included within the respective statistics
above.
(k) "Revenue generating units" represent the sum total of all basic
video, digital video, high-speed Internet and telephone customers,
not counting
additional outlets within one household. For example, a customer who
receives two types of service (such as basic video and digital
video) would
be treated as two revenue generating units, and if that customer
added on high-speed Internet service, the customer would be treated
as
three revenue generating units. This statistic is computed in
accordance with the guidelines of the NCTA.
(l) "Homes passed" represent our estimate of the number of living
units, such as single family homes, apartment units and condominium
units passed by our
cable distribution network in the areas where we offer the service
indicated. "Homes passed" exclude commercial units passed by our
cable distribution network.
These estimates are updated for all periods presented when estimates
change.
(m) "Penetration" represents customers as a percentage of homes
passed for the service indicated.
(n) "Pro forma quarterly net gain (loss)" represents the pro forma
net gain or loss in the respective quarter for the service
indicated.
(o) "Digital penetration of basic video customers" represents the
number of digital video customers as a percentage of basic video
customers.
CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES
UNAUDITED RECONCILIATION OF NON-GAAP MEASURES TO GAAP MEASURES
(DOLLARS IN MILLIONS)
Actual Three Months Ended
-------------------------
Successor Predecessor
June 30, June 30,
2010 2009
--------- ---------
Consolidated net
loss $(81) $(159)
Interest
Plus: expense, net 219 216
Income tax expense 83 60
Depreciation and
amortization 380 329
Stock compensation
expense 5 6
Reorganization
items, net 1 184
Loss on
extinguishment of
debt 34 -
Other, net 5 2
--- ---
Adjusted EBITDA (b) 646 638
Purchases of
property,
plant and
Less: equipment (339) (271)
-----
Adjusted EBITDA
less capital
expenditures $307 $367
==== ====
Net cash flows from
operating
activities $451 $438
Purchases of
property,
plant and
Less: equipment (339) (271)
Change in accrued
expenses related
to capital
expenditures 15 8
--- ---
Free cash flow $127 $175
==== ====
Actual Six Months Ended
-----------------------
Successor Predecessor
June 30, June 30,
2010 2009
--------- ---------
Consolidated net loss $(57) $(493)
Plus: Interest expense, net 423 679
Income tax expense 102 121
Depreciation and amortization 749 650
Stock compensation expense 10 17
Reorganization items, net 5 325
Loss on extinguishment of debt 35 -
Other, net 16 (45)
--- ---
Adjusted EBITDA (b) 1,283 1,254
Purchases of property,
Less: plant and equipment (649) (540)
Adjusted EBITDA less capital
expenditures $634 $714
==== ====
Net cash flows from operating
activities $981 $625
Purchases of property,
Less: plant and equipment (649) (540)
Change in accrued expenses
related to capital expenditures - (19)
--- ---
Free cash flow $332 $66
==== ===
Pro Forma Three Months
Ended (a)
----------------------
Successor Predecessor
June 30, June 30,
2010 2009
--------- ---------
Consolidated net
loss $(78) $(158)
Interest expense,
Plus: net 219 216
Income tax expense 80 60
Depreciation and
amortization 380 328
Stock compensation
expense 5 6
Reorganization
items, net 1 184
Loss on
extinguishment of
debt 34 -
Other, net 5 2
--- ---
Adjusted EBITDA (b) 646 638
Purchases of
property, plant and
Less: equipment (339) (271)
-----
Adjusted EBITDA
less capital
expenditures $307 $367
==== ====
Net cash flows from
operating
activities $451 $438
Purchases of
property, plant and
Less: equipment (339) (271)
Change in accrued
expenses related
to capital
expenditures 15 8
--- ---
Free cash flow $127 $175
==== ====
Pro Forma Six Months Ended
(a)
--------------------------
Successor Predecessor
June 30, June 30,
2010 2009
--------- ---------
Consolidated net loss $(54) $(491)
Interest
Plus: expense, net 423 679
Income tax expense 99 121
Depreciation and
amortization 749 649
Stock compensation
expense 10 17
Reorganization items,
net 5 325
Loss on
extinguishment of
debt 35 -
Other, net 16 (47)
--- ---
Adjusted EBITDA (b) 1,283 1,253
Purchases of
property, plant
Less: and equipment (649) (540)
Adjusted EBITDA less
capital expenditures $634 $713
==== ====
Net cash flows from
operating activities $981 $624
Purchases of
property, plant
Less: and equipment (649) (540)
Change in accrued
expenses related to
capital expenditures - (19)
--- ---
Free cash flow $332 $65
==== ===
(a) Pro forma results reflect certain sales of cable systems in 2009
and 2010 as if they occurred as of January 1, 2009.
(b) See page 1 of this addendum for detail of the components included
within adjusted EBITDA.
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. AND SUBSIDIARIES
CAPITAL EXPENDITURES
(DOLLARS IN MILLIONS)
Three Months Ended
------------------
Successor Predecessor
June 30, June 30,
2010 2009
--------- ---------
Customer premise
equipment (a) $140 $141
Scalable
infrastructure (b) 108 50
Line extensions (c) 22 17
Upgrade/Rebuild (d) 7 9
Support capital (e) 62 54
--- ---
Total capital
expenditures (f) $339 $271
==== ====
Six Months Ended
----------------
Successor Predecessor
June 30, June 30,
2010 2009
--------- ---------
Customer premise
equipment (a) $296 $308
Scalable
infrastructure (b) 195 95
Line extensions (c) 38 31
Upgrade/Rebuild (d) 16 14
Support capital (e) 104 92
--- ---
Total capital
expenditures (f) $649 $540
==== ====
(a) Customer premise equipment includes costs incurred at the
customer residence to
secure new customers, revenue units and additional bandwidth
revenues. It also includes
customer installation costs and customer premise equipment (e.g.,
set-top boxes and cable
modems, etc.).
(b) Scalable infrastructure includes costs, not related to customer
premise equipment
or our network, to secure growth of new customers, revenue units and
additional bandwidth
revenues or provide service enhancements (e.g., headend equipment).
(c) Line extensions include network costs associated with entering
new service areas (e.g.,
fiber/coaxial cable, amplifiers, electronic equipment, make-ready
and design engineering).
(d) Upgrade/rebuild includes costs to modify or replace existing
fiber/coaxial cable networks,
including betterments.
(e) Support capital includes costs associated with the replacement
or enhancement of non-
network assets due to technological and physical obsolescence (e.g.,
non-network equipment,
land, buildings and vehicles).
(f) Total capital expenditures includes $34 million and $19 million
of capital expenditures related to
commercial services for the three months ended June 30, 2010 and
2009, respectively, and $52
million and $35 million for the six months ended June 30, 2010 and
2009, respectively.
First Call Analyst:
FCMN Contact:
SOURCE: Charter Communications, Inc.
CONTACT: Media, Anita Lamont, +1-314-543-2215; or Analysts, Mary Jo
Moehle, +1-314-543-2397, both for Charter Communications, Inc.
Web Site: http://www.charter.com/