Skip to main content

CorporateNovember 3, 2010

Charter Reports Third Quarter 2010 Financial and Operating Results

Share Article:

ST. LOUIS, Nov. 3, 2010 /PRNewswire-FirstCall/ -- Charter Communications, Inc. (along with its subsidiaries, the "Company" or "Charter") today reported financial and operating results for the three and nine months ended September 30, 2010.

Third Quarter Highlights:

  • Compared with the prior year, third quarter revenues grew 4.6% on a pro forma(1) basis and 4.5% on an actual basis, driven by increases in Internet, phone and commercial customers and growth in advertising sales.    
  • Charter added approximately 58,700 revenue generating units (RGUs) and increased average monthly revenue per basic video customer (ARPU) 9.4% year-over-year to $126.07, driven by increased sales of The Charter Bundle and advanced services.
  • Third quarter adjusted EBITDA(2) grew 4.5% year-over-year on a pro forma basis and 4.3% on an actual basis, and net loss attributable to Charter shareholders was reduced to $95 million in the third quarter of 2010 compared to $1.035 billion in the third quarter of 2009.
  • Free cash flow(2) for the three months ended September 30, 2010 was $135 million and cash flows from operating activities were $441 million.
  • Charter continued to extend maturities and further balance its maturity profile with CCO Holdings, LLC's issuance of $1.0 billion of 7.25% Senior Notes due 2017 with proceeds used to repay borrowings under Charter Communications Operating, LLC's credit facilities.
 

(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.

 
   

 

"I'm pleased with our third quarter results and the progress we're making on our longer term strategic initiatives," said Mike Lovett, President and Chief Executive Officer. "Our free cash flow has increased significantly this year, and we're making investments to enhance our product portfolio and service capabilities while expanding our commercial offerings, which I believe 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 13.0 million RGUs as of September 30, 2010, an increase of 402,400 RGUs, or about 3.2%, over the prior year. RGUs grew by 58,700 in the third quarter of 2010 compared to the second quarter of 2010. Approximately 60% of Charter's residential customers subscribe to a bundle, compared to 56% a year ago.  Charter's ARPU for the third quarter of 2010 was $126.07, an increase of 9.4% compared to third quarter 2009, primarily as a result of strong triple play and advanced services growth.  

Third quarter 2010 customer highlights included the following:

  • Digital video customers increased by approximately 41,800 and basic video customers decreased by approximately 63,800 during the third quarter.  Digital customer additions for the quarter were over 80% higher than year-ago net additions due to product and service enhancements. Video ARPU was $69.10 for the third quarter of 2010, up 5.0% year-over-year as a result of increases in premium revenue and higher digital, high definition and digital video recorder (DVR) penetration.
  • Internet customers grew by approximately 50,800 during the third quarter of 2010, reflecting continued consumer demand for superior speeds offered by Charter. Internet ARPU of $41.97 increased approximately 0.9% compared to the year-ago quarter, reflecting increased penetration of home networking.  
  • Third quarter 2010 net gains of phone customers were approximately 29,900.  Phone penetration reached 16.0% as of September 30, 2010. Phone ARPU of $41.45 decreased approximately 4.6%.
 

As of September 30, 2010, Charter served approximately 5.2 million customers, and the Company's 13.0 million RGUs were comprised of 4.7 million basic video, 3.4 million digital video, 3.2 million Internet and 1.7 million phone customers.

Third Quarter Results

Third quarter 2010 revenues were $1.769 billion, up 4.5% compared to the year-ago quarter, as the Company continued to grow its Internet, phone, commercial and ad sales businesses.

Third quarter 2010 video revenues were $918 million, essentially flat with the year-ago quarter, as digital, premium and advanced services revenue growth was offset by a decline in basic video customers. Internet revenues were $404 million, up 8.9% year-over-year primarily due to an increased number of customers. Telephone revenues for the 2010 third quarter were $208 million, an 8.3% increase over third quarter 2009, as growth in the triple play bundle continues. Commercial service revenues rose to $126 million, an 11.5% increase year-over-year, reflecting an increase in small to medium business (SMB), mid-market and carrier customers. Advertising sales revenues were $75 million for the third quarter of 2010, a 17.2% increase, compared to the third quarter of 2009, as a result of improvements across all sectors, primarily the political and automotive sectors.

Operating costs and expenses totaled $1.137 billion, an increase of 4.6% 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 third quarter of 2010 totaled $632 million, an increase of 4.3% compared to the year-ago period. Adjusted EBITDA margin was 35.7% for the third quarter of 2010.

Charter reported $240 million of income from operations in the third quarter of 2010, compared to $2.591 billion of loss in the third quarter of 2009. The change in income from operations is primarily a result of the $2.854 billion impairment of franchises in 2009 that did not recur in 2010.

Net loss attributable to Charter shareholders was $95 million in the third quarter of 2010, compared to a loss of $1.035 billion in the third quarter of 2009. The improvement resulted primarily from the elimination of the impairment of franchises, net of taxes, and the reduction in reorganization costs related to Charter's restructuring in 2009, partially offset by the elimination of net loss allocated to non-controlling interest.  Charter reported net loss per common share of $0.84 in the third quarter of 2010, compared with a loss of $2.73 during the same period last year. The decrease in loss per common share is a result of the decrease in net loss offset by 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 third quarter of 2010 increased to $299 million, compared to third quarter 2009 expenditures of $279 million, as a result of strategic investments including bandwidth reclamation projects, such as switched digital video (SDV) launches and investments made to move into new commercial segments.  

Free cash flow for the third quarter of 2010 was $135 million, compared to $105 million in the same period last year. The increase in free cash flow is primarily due to a decrease in cash reorganization items and growth in Adjusted EBITDA, partially offset by increases in cash paid for interest and investments to enhance our residential and commercial products and service capabilities.

Net cash flows from operating activities for the third quarter of 2010 were $441 million, compared to $383 million in the third quarter of 2009.

Year to Date Results – Actual

Revenues for the nine months ended September 30, 2010 were $5.275 billion, up 4.6% year-over-year. Operating costs and expenses totaled $3.360 billion, an increase of 5.5% for the nine months ended September 30, 2010, compared to the year-ago period. Adjusted EBITDA for the nine months ended September 30, 2010 totaled $1.915 billion, an increase of 3.0% compared to the year-ago period.  

Charter reported $745 million of income from operations for the nine months ended September 30, 2010, compared to $1.956 billion of loss from operations for the first nine months of 2009.

Net loss attributable to Charter shareholders was $152 million for the nine months ended September 30, 2010, compared to a loss of $1.352 billion for the first nine months of 2009. Charter reported net loss per common share of $1.34 for the nine months ended September 30, 2010, compared to a loss of $3.57 in the same period last year.

Expenditures for property, plant and equipment for the nine months ended September 30, 2010 were $948 million, compared to $819 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 nine months of 2010 was $467 million, compared to $171 million in the same period last year. The increase in free cash flow is primarily due to decreases in cash paid for interest and reorganization items and changes in working capital, 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 nine months of 2010 were $1.422 billion, compared to $1.008 billion in the first nine months of 2009. The increase in cash flows from operating activities is primarily due to reduced cash paid for interest and reorganization costs.

Total principal amount of debt was approximately $13.3 billion as of September 30, 2010. At the end of the third quarter, the Company had availability under its revolving credit facility of approximately $1.2 billion.

On September 27, 2010, CCO Holdings, LLC and CCO Holdings Capital Corp. closed on transactions in which they issued $1.0 billion aggregate principal amount of 7.25% Senior Notes due 2017 guaranteed by Charter. A portion of the proceeds was used to repay borrowings under Charter Communications Operating, LLC's ("Charter Operating") revolving credit facilities, resulting in the remaining cash on hand of $682 million at September 30, 2010. On October 1, 2010, a portion of the proceeds also was used to repay $631 million of amounts outstanding under the Charter Operating credit facilities.

Effective September 14, 2010, Charter's Class A common stock became listed on the NASDAQ Stock Market under the symbol "CHTR."

Conference Call

The Company will host a conference call on Wednesday, November 3, 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 16851625.

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 November 18, 2010. The conference ID code for the replay is 16851625.

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, impairment charges, 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 $34 million and $34 million for the three months ended September 30, 2010 and 2009, respectively, and $105 million and $100 million for the nine months ended September 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 nine months ended September 30, 2010 and 2009, we have provided pro forma results in this release for the three and nine months ended September 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 nine months ended September 30, 2010 and 2009; and pro forma customer statistics as of December 31, 2009 and September 30, 2009; are provided in the addendum of this news release.

About Charter

Charter (Nasdaq: CHTR) is a leading broadband communications company and the fourth-largest cable operator in the United States. Charter provides a full range of advanced broadband services, including advanced Charter TV™ video entertainment programming, Charter Internet™ access, and Charter Phone™. Charter Business® similarly provides scalable, tailored, and cost-effective broadband communications solutions to business organizations, such as business-to-business Internet access, data networking, business telephone, video and music entertainment services, and wireless backhaul. Charter's advertising sales and production services are sold under the Charter Media® brand. More information about Charter can be found at charter.com.

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 free cash flow 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, the need for innovation and related capital expenditures 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) free cash flow, (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

       

Successor

   

Predecessor

     
   

Actual Three

   

Actual Three

       

Actual Nine

   

Actual Nine

     
   

Months Ended

   

Months Ended

       

Months Ended

   

Months Ended

     
   

September 30, 2010

   

September 30, 2009

 

% Change

   

September 30, 2010

   

September 30, 2009

 

% Change

 
                                 

REVENUES:

                               

  Video (a)

$

918

 

$

916

 

0.2%

 

$

2,776

 

$

2,772

 

0.1%

 

  High-speed Internet

 

404

   

371

 

8.9%

   

1,201

   

1,098

 

9.4%

 

  Telephone (a)

 

208

   

192

 

8.3%

   

612

   

555

 

10.3%

 

  Commercial

 

126

   

113

 

11.5%

   

365

   

330

 

10.6%

 

  Advertising sales

 

75

   

64

 

17.2%

   

206

   

180

 

14.4%

 

  Other (a)

 

38

   

37

 

2.7%

   

115

   

110

 

4.5%

 

     Total revenues

 

1,769

   

1,693

 

4.5%

   

5,275

   

5,045

 

4.6%

 
                                 

COSTS AND EXPENSES:

                               

  Operating (excluding depreciation and amortization) (b)

 

788

   

739

 

6.6%

   

2,317

   

2,174

 

6.6%

 

  Selling, general and administrative (excluding stock

                               

        compensation expense) (c)

 

349

   

348

 

0.3%

   

1,043

   

1,011

 

3.2%

 

     Operating costs and expenses

 

1,137

   

1,087

 

4.6%

   

3,360

   

3,185

 

5.5%

 
                                 

     Adjusted EBITDA

 

632

   

606

 

4.3%

   

1,915

   

1,860

 

3.0%

 
                                 

     Adjusted EBITDA margin

 

35.7%

   

35.8%

       

36.3%

   

36.9%

     
                                 

  Depreciation and amortization

 

385

   

327

       

1,134

   

977

     

  Impairment of franchises

 

-

   

2,854

       

-

   

2,854

     

  Stock compensation expense

 

7

   

6

       

17

   

23

     

  Other operating (income) expenses, net

 

-

   

10

       

19

   

(38)

     
                                 

    Income (loss) from operations

 

240

   

(2,591)

       

745

   

(1,956)

     
                                 

OTHER INCOME (EXPENSES):

                               

  Interest expense, net (excluding unrecorded

                               

        contractual interest expense of $204 and $421 for the three

                               

        and nine months ended September 30, 2009, respectively)

 

(222)

   

(206)

       

(645)

   

(885)

     

  Reorganization items, net

 

(1)

   

(198)

       

(6)

   

(523)

     

  Loss on extinguishment of debt

 

(3)

   

-

       

(38)

   

-

     

  Other income (expense), net

 

-

   

-

       

3

   

(3)

     
   

(226)

   

(404)

       

(686)

   

(1,411)

     
                                 

Income (loss) before income taxes

 

14

   

(2,995)

       

59

   

(3,367)

     
                                 

Income tax benefit (expense)

 

(109)

   

565

       

(211)

   

444

     
                                 

Consolidated net loss

 

(95)

   

(2,430)

       

(152)

   

(2,923)

     
                                 

Less:  Net loss - noncontrolling interest

 

-

   

1,395

       

-

   

1,571

     
                                 

Net loss - Charter shareholders

$

(95)

 

$

(1,035)

     

$

(152)

 

$

(1,352)

     
                                 

Loss per common share, basic and diluted:

                               

Net loss - Charter shareholders:

$

(0.84)

 

$

(2.73)

     

$

(1.34)

 

$

(3.57)

     
                                 

Weighted average common shares outstanding, basic and diluted

 

113,110,889

   

379,066,320

       

113,081,242

   

378,718,134

     
                                 
                                 

(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 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

       

Successor

   

Predecessor

     
   

Actual Three

   

Pro Forma Three

       

Pro Forma Nine

   

Pro Forma Nine

     
   

Months Ended

   

Months Ended

       

Months Ended

   

Months Ended

     
   

September 30, 2010

   

September 30, 2009 (a)

 

% Change

   

September 30, 2010 (a)

   

September 30, 2009 (a)

 

% Change

 
                                 

REVENUES:

                               

  Video (b)

$

918

 

$

915

 

0.3%

 

$

2,774

 

$

2,766

 

0.3%

 

  High-speed Internet

 

404

   

371

 

8.9%

   

1,201

   

1,098

 

9.4%

 

  Telephone (b)

 

208

   

192

 

8.3%

   

612

   

555

 

10.3%

 

  Commercial

 

126

   

113

 

11.5%

   

365

   

330

 

10.6%

 

  Advertising sales

 

75

   

63

 

19.0%

   

206

   

179

 

15.1%

 

  Other (b)

 

38

   

37

 

2.7%

   

115

   

110

 

4.5%

 

     Total revenues

 

1,769

   

1,691

 

4.6%

   

5,273

   

5,038

 

4.7%

 
                                 

COSTS AND EXPENSES:

                               

  Operating (excluding depreciation and amortization) (c)

 

788

   

739

 

6.6%

   

2,316

   

2,171

 

6.7%

 

  Selling, general and administrative (excluding stock

                               

        compensation expense (d)

 

349

   

347

 

0.6%

   

1,042

   

1,009

 

3.3%

 

     Operating costs and expenses

 

1,137

   

1,086

 

4.7%

   

3,358

   

3,180

 

5.6%

 
                                 

     Adjusted EBITDA

 

632

   

605

 

4.5%

   

1,915

   

1,858

 

3.1%

 
                                 

     Adjusted EBITDA margin

 

35.7%

   

35.8%

       

36.3%

   

36.9%

     
                                 

  Depreciation and amortization

 

385

   

327

       

1,134

   

976

     

  Impairment of franchises

 

-

   

2,854

       

-

   

2,854

     

  Stock compensation expense

 

7

   

6

       

17

   

23

     

  Other operating (income) expenses, net

 

-

   

10

       

19

   

(40)

     
                                 

    Income (loss) from operations

 

240

   

(2,592)

       

745

   

(1,955)

     
                                 

OTHER INCOME (EXPENSES):

                               

  Interest expense, net (excluding unrecorded

                               

        contractual interest expense of $204 and $421 for the three

                               

        and nine months ended September 30, 2009, respectively)

 

(222)

   

(206)

       

(645)

   

(885)

     

  Reorganization items, net

 

(1)

   

(198)

       

(6)

   

(523)

     

  Loss on extinguishment of debt

 

(3)

   

-

       

(38)

   

-

     

  Other income (expense), net

 

-

   

-

       

3

   

(3)

     
   

(226)

   

(404)

       

(686)

   

(1,411)

     
                                 

Income (loss) before income taxes

 

14

   

(2,996)

       

59

   

(3,366)

     
                                 

Income tax expense

 

(109)

   

565

       

(208)

   

444

     
                                 

Consolidated net loss

 

(95)

   

(2,431)

       

(149)

   

(2,922)

     
                                 

Less:  Net loss - noncontrolling interest

 

-

   

1,395

       

-

   

1,571

     
                                 

Net loss - Charter shareholders

$

(95)

 

$

(1,036)

     

$

(149)

 

$

(1,351)

     
                                 

Loss per common share, basic and diluted:

                               

Net loss - Charter shareholders:

$

(0.84)

 

$

(2.73)

     

$

(1.32)

 

$

(3.57)

     
                                 

Weighted average common shares outstanding, basic and diluted

 

113,110,889

   

379,066,320

       

113,081,242

   

378,718,134

     
                                 
                                 

(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.

 
   

September 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 nine months ended September 30, 2010.  

 
   

September 30, 2009 Pro forma revenues and operating costs and expenses were reduced by $2 million and $1 million, respectively, and net loss increased by $1 million for the three months ended September 30, 2009.  Pro forma revenues, operating costs and expenses and net loss were reduced by $7 million, $5 million and $1 million, respectively, for the nine months ended September 30, 2009.  

 
   

Adjusted EBITDA is a non-GAAP term.  See page 7 of this addendum for the reconciliation of adjusted EBITDA to consolidated net loss as defined by GAAP.

 
                               

 

CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES

 

UNAUDITED CONSOLIDATED BALANCE SHEETS

 

(DOLLARS IN MILLIONS)

 
             
             
             
   

September 30,

   

December 31,

 
   

2010

   

2009

 
             

ASSETS

           
             

CURRENT ASSETS:

           

  Cash and cash equivalents

$

655

 

$

709

 

  Restricted cash and cash equivalents

 

27

   

45

 

  Accounts receivable, net of allowance for doubtful accounts

 

241

   

248

 

  Prepaid expenses and other current assets

 

96

   

69

 

        Total current assets

 

1,019

   

1,071

 
             

INVESTMENT IN CABLE PROPERTIES:

           

  Property, plant and equipment, net

 

6,867

   

6,833

 

  Franchises

 

5,257

   

5,272

 

  Customer relationships, net

 

2,081

   

2,335

 

  Goodwill

 

951

   

951

 

        Total investment in cable properties, net

 

15,156

   

15,391

 
             

OTHER NONCURRENT ASSETS

 

360

   

196

 
             

       Total assets

$

16,535

 

$

16,658

 
             

LIABILITIES AND SHAREHOLDERS' EQUITY

           
             

CURRENT LIABILITIES:

           

  Accounts payable and accrued expenses

$

1,015

 

$

898

 

  Current portion of long-term debt

 

589

   

70

 

        Total current liabilities

 

1,604

   

968

 
             

LONG-TERM DEBT

 

12,585

   

13,252

 
             

OTHER LONG-TERM LIABILITIES

 

823

   

520

 
             

SHAREHOLDERS' EQUITY:

           

  Charter shareholders' equity

 

1,523

   

1,916

 

  Noncontrolling interest

 

-

   

2

 

    Total shareholders' equity

 

1,523

   

1,918

 
             

         Total liabilities and shareholders' equity

$

16,535

 

$

16,658

 
           

 

CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES

 

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

 

(DOLLARS IN MILLIONS)

 
                         
                         
   

Three Months Ended

   

Nine Months Ended

 
   

Successor

   

Predecessor

   

Successor

   

Predecessor

 
   

September 30, 2010

   

September 30, 2009

   

September 30, 2010

   

September 30, 2009

 

CASH FLOWS FROM OPERATING ACTIVITIES:

                       

  Consolidated net loss

$

(95)

 

$

(2,430)

 

$

(152)

 

$

(2,923)

 

  Adjustments to reconcile net loss to net cash flows from operating activities:

                       

     Depreciation and amortization

 

385

   

327

   

1,134

   

977

 

     Impairment of franchises

 

-

   

2,854

   

-

   

2,854

 

     Noncash interest expense

 

18

   

9

   

54

   

35

 

     Noncash reorganization items, net

 

-

   

24

   

-

   

155

 

     Loss on extinguishment of debt

 

3

   

-

   

35

   

-

 

     Deferred income taxes

 

106

   

(567)

   

204

   

(451)

 

     Other, net

 

9

   

9

   

20

   

32

 

  Changes in operating assets and liabilities, net of effects from dispositions

                       

     Accounts receivable

 

8

   

4

   

7

   

11

 

     Prepaid expenses and other assets

 

3

   

7

   

15

   

(37)

 

     Accounts payable, accrued expenses and other

 

4

   

146

   

105

   

355

 

         Net cash flows from operating activities

 

441

   

383

   

1,422

   

1,008

 
                         

CASH FLOWS FROM INVESTING ACTIVITIES:

                       

  Purchases of property, plant and equipment

 

(299)

   

(279)

   

(948)

   

(819)

 

  Change in accrued expenses related to capital expenditures

 

(7)

   

1

   

(7)

   

(18)

 

  Other, net

 

(3)

   

(4)

   

(7)

   

(4)

 

         Net cash flows from investing activities

 

(309)

   

(282)

   

(962)

   

(841)

 
                         

CASH FLOWS FROM FINANCING ACTIVITIES:

                       

  Borrowings of long-term debt

 

1,132

   

-

   

2,757

   

-

 

  Repayments of long-term debt

 

(630)

   

(18)

   

(3,070)

   

(52)

 

  Repayment of preferred stock

 

-

   

-

   

(138)

   

-

 

  Payments for debt issuance costs

 

(17)

   

-

   

(76)

   

-

 

  Other, net

 

(2)

   

-

   

(5)

   

-

 

         Net cash flows from financing activities

 

483

   

(18)

   

(532)

   

(52)

 
                         

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS

 

615

   

83

   

(72)

   

115

 

CASH AND CASH EQUIVALENTS, beginning of period

 

67

   

992

   

754

   

960

 

CASH AND CASH EQUIVALENTS, end of period

$

682

 

$

1,075

 

$

682

 

$

1,075

 
                         

CASH PAID FOR INTEREST

$

224

 

$

177

 

$

561

 

$

685

 
                       

 

CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES

 

UNAUDITED SUMMARY OF OPERATING STATISTICS

 
                 
 

Approximate as of

 
 

Actual

 

Pro Forma

 
 

September 30,

 

June 30,

 

December 31,

 

September 30,

 
 

2010 (a)

 

2010 (a)

 

2009 (a)

 

2009 (a)

 
                 

Customer Summary:

               

Customer Relationships:

               

 Residential (non-bulk) basic video customers (b)

4,399,900

 

4,466,600

 

4,555,700

 

4,610,500

 

 Multi-dwelling (bulk) and commercial unit customers (c)

252,800

 

249,900

 

260,700

 

262,600

 

     Total basic video customers

4,652,700

 

4,716,500

 

4,816,400

 

4,873,100

 
                 

 Non-video customers (b)

564,200

 

538,800

 

493,000

 

462,500

 

     Total customer relationships (d)

5,216,900

 

5,255,300

 

5,309,400

 

5,335,600

 
                 

 Pro forma average monthly revenue per basic video customer (e)

$                    126.07

 

$                    124.06

 

$                 117.53

 

$                   115.29

 

 Pro forma average monthly video revenue per basic video customer (f)

$                      69.10

 

$                      68.90

 

$                   66.34

 

$                     65.83

 
                 

 Residential bundled customers (g)

3,000,500

 

2,971,000

 

2,890,700

 

2,858,500

 
                 

Revenue Generating Units:

               

 Basic video customers (b) (c)

4,652,700

 

4,716,500

 

4,816,400

 

4,873,100

 

 Digital video customers (h)

3,379,300

 

3,337,500

 

3,216,200

 

3,172,900

 

 Residential high-speed Internet customers (i)

3,238,700

 

3,187,900

 

3,062,300

 

3,010,500

 

 Residential telephone customers (j)

1,688,000

 

1,658,100

 

1,556,000

 

1,499,800

 

     Total revenue generating units (k)  

12,958,700

 

12,900,000

 

12,650,900

 

12,556,300

 
                 

Total Video Services:

               

 Estimated homes passed (l)

12,030,900

 

11,989,900

 

11,887,800

 

11,847,300

 

 Basic video customers  (b)(c)

4,652,700

 

4,716,500

 

4,816,400

 

4,873,100

 

 Estimated penetration of basic homes passed (b) (c) (l) (m)

38.7%

 

39.3%

 

40.5%

 

41.1%

 

 Pro forma basic video customers quarterly net loss (b) (c) (n)

(63,800)

 

(76,600)

 

(56,700)

 

(46,200)

 
                 

 Digital video customers (h)

3,379,300

 

3,337,500

 

3,216,200

 

3,172,900

 

 Digital penetration of basic video customers (b) (c) (h) (o)

72.6%

 

70.8%

 

66.8%

 

65.1%

 

 Digital set-top terminals deployed

5,043,500

 

4,974,800

 

4,791,600

 

4,710,500

 

 Pro forma digital video customers quarterly net gain (h) (n)

41,800

 

25,500

 

43,300

 

22,800

 
                 

High-Speed Internet Services:

               

 Estimated high-speed Internet homes passed (l)

11,527,300

 

11,468,300

 

11,360,200

 

11,308,600

 

 Residential high-speed Internet customers (i)

3,238,700

 

3,187,900

 

3,062,300

 

3,010,500

 

 Estimated penetration of high-speed Internet homes passed (i) (l) (m)

28.1%

 

27.8%

 

27.0%

 

26.6%

 

 Pro forma average monthly high-speed Internet revenue per high-speed Internet customer (f)

$                      41.97

 

$                      42.20

 

$                   41.48

 

$                     41.58

 

 Pro forma high-speed Internet customers quarterly net gain (i) (n)

50,800

 

21,900

 

51,800

 

52,400

 
                 

Telephone Services:

               

 Estimated telephone homes passed (l)

10,521,400

 

10,434,800

 

10,312,700

 

10,219,200

 

 Residential telephone customers (j)

1,688,000

 

1,658,100

 

1,556,000

 

1,499,800

 

 Estimated penetration of telephone homes passed (i) (l) (m)

16.0%

 

15.9%

 

15.1%

 

14.7%

 

 Pro forma average monthly telephone revenue per telephone customer (f)

$                      41.45

 

$                      41.74