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CorporateAugust 2, 2011

Charter Second Quarter 2011 Results

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    ST. LOUIS, Aug. 2, 2011 /PRNewswire/ -- 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, 2011.

    (Logo: http://photos.prnewswire.com/prnh/20110526/AQ10195LOGO)

    Second quarter highlights:

    • We made significant progress on strategic initiatives including customer experience, DOCSIS 3.0 and switched digital video (SDV).
    • Commercial revenues grew 17.5% on a pro forma(1) basis and 16.5% on an actual basis supported by improved sales productivity and investment.
    • Non-video customer relationships increased by approximately 40,800 for the quarter, nearly double prior-year second quarter growth.
    • Revenues grew 2.2% on a pro forma basis and 1.1% on an actual basis due to growth in commercial, Internet, telephone and advertising sales.
    • Adjusted EBITDA(2) grew 4.8% year-over-year on a pro forma basis and 4.2% on an actual basis reflecting disciplined revenue growth coupled with strong operational performance.
    • Net loss totaled $107 million in the second quarter of 2011. Free cash flow(2) increased to $155 million and cash flows from operating activities totaled $460 million.
     

    "We delivered another solid quarter of adjusted EBITDA growth and substantial free cash flow," said Mike Lovett, President and Chief Executive Officer. "We made significant progress on our longer-term strategic initiatives and are just beginning to see the benefits of these investments. We continued to drive accelerated growth in our commercial business and higher penetration of our superior Internet product, and we are confident that the investments we are making to enhance our products and customer service are setting us up for long-term success. For the remainder of 2011, we will continue to focus on our key strategies of enhancing our customers' experience, leveraging our Internet advantage while we develop next generation video services, and aggressively pursuing growth in our commercial business."

    (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 loss and net cash flows from operating activities, respectively, in the addendum of this news release.

    Key Operating Results

       

    Approximate as of

       
       

    Actual

     

    Pro Forma

         
       

    June 30,

     

    June 30,

         
       

    2011 (a)

     

    2010 (a)

     

    Y/Y Change

     

    Footprint

               
     

    Estimated Homes Passed Video (b)

    11,831,900

     

    11,695,300

     

    1%

     
     

    % Switched Digital Video

    68%

     

    24%

     

    44 ppts

     
     

    Estimated Homes Passed Internet (b)

    11,496,200

     

    11,346,000

     

    1%

     
     

    % DOCSIS 3.0

    85%

     

    30%

     

    55 ppts

     
     

    Estimated Homes Passed Phone (b)

    10,719,100

     

    10,420,400

     

    3%

     

    Customers

               
     

    Residential Customer Relationships (c)

    4,846,900

     

    4,940,000

     

    -2%

     
     

    Commercial Customer Relationships (c)

    355,200

     

    344,300

     

    3%

     
     

    Total Customer Relationships (c)(e)

    5,202,100

     

    5,284,300

     

    -2%

     
     

    Residential Non-Video Customers (d)

    673,500

     

    533,000

     

    26%

     
     

    % Non-Video (d)

    13.9%

     

    10.8%

     

    3.1 ppts

     

    Services and Revenue Generating Units (f)

               
     

    Video (d)

    4,173,400

     

    4,407,000

     

    -5%

     
     

    Internet (g)

    3,352,500

     

    3,163,700

     

    6%

     
     

    Phone (h)

    1,747,600

     

    1,656,300

     

    6%

     
     

    Residential PSUs (i)

    9,273,500

     

    9,227,000

     

    1%

     
     

    Residential PSU / Customer Relationships (c)(i)

    1.91

     

    1.87

         
     

    Video (d)(e)

    239,500

     

    243,800

     

    -2%

     
     

    Internet (g)(i)

    149,100

     

    128,300

     

    16%

     
     

    Phone (h)

    68,500

     

    49,900

     

    37%

     
     

    Commercial PSUs (i)

    457,100

     

    422,000

     

    8%

     
     

    Digital Video RGUs (k)

    3,386,700

     

    3,302,000

     

    3%

     
     

    Total RGUs

    13,117,300

     

    12,951,000

     

    1%

     

    Quarterly Net Additions/(Losses) (l)

               
     

    Video (d)

    (79,900)

     

    (71,700)

     

    -11%

     
     

    Internet (g)

    18,500

     

    22,000

     

    -16%

     
     

    Phone (h)

    6,600

     

    35,300

     

    -81%

     
     

    Residential PSUs (i)

    (54,800)

     

    (14,400)

         
     

    Video (d)(e)

    (3,800)

     

    (2,500)

     

    52%

     
     

    Internet (g)

    6,300

     

    4,100

     

    54%

     
     

    Phone (h)

    4,100

     

    5,600

     

    -27%

     
     

    Commercial PSUs (i)

    6,600

     

    7,200

     

    -8%

     
     

    Digital Video RGUs (k)

    (4,900)

     

    26,100

         
     

    Total RGUs

    (53,100)

     

    18,900

         

    Quarterly Residential ARPU

               
     

    Video (m)

    $                      71.40

     

    $                      69.05

     

    3%

     
     

    Internet (m)

    $                      41.76

     

    $                      42.18

     

    -1%

     
     

    Phone (m)

    $                      40.49

     

    $                      41.74

     

    -3%

     
     

    ARPU per Customer Relationship (n)

    $                    105.02

     

    $                    102.34

     

    3%

     
     

    Total ARPU per Video Customer (o)

    $                    133.84

     

    $                    124.64

     

    7%

     

    Residential Penetration Statistics

               
     

    Video Penetration of Homes Passed Video (p)

    35.3%

     

    37.7%

     

    -2.4 ppts

     
     

    Internet Penetration of Homes Passed Internet (p)

    29.2%

     

    27.9%

     

    1.3 ppts

     
     

    Phone Penetration of Homes Passed Phone (p)

    16.3%

     

    15.9%

     

    0.4 ppts

     
     

    Bundled Penetration (q)

    61.6%

     

    59.2%

     

    2.4 ppts

     
     

    Triple Play Penetration (r)

    28.8%

     

    26.8%

     

    2.0 ppts

     
     

    Digital Penetration (s)

    76.7%

     

    71.0%

     

    5.7 ppts

     
     

    Advanced Digital Penetration (of Digital) (t)

    55.7%

     

    50.2%

     

    5.5 ppts

     
     

    Set-Top-Box per Digital RGU

    1.51

     

    1.49

         
                   
     

    Footnotes

               
     

    See footnotes to unaudited summary of operating statistics on page 6 of the addendum of this release. The footnotes contain important disclosures regarding the definitions used for these operating statistics.

     
                 

     

    During the second quarter, we continued to invest in bandwidth efficiency and capacity initiatives including DOCSIS 3.0 and SDV upgrades. These network improvements provide additional capacity for more high definition channels and video on demand services, expand commercial service offerings and increase Internet speeds. At the end of June, 85% of the homes passed in our footprint had been upgraded to DOCSIS 3.0 and 68% were SDV enabled. These strategic initiatives are expected to be essentially complete by the end of 2011 and contribute to the overall customer experience and brand perception.

    Residential primary service units (PSUs) decreased by 54,800 in the second quarter of 2011 as increases in Internet and phone PSUs were more than offset by a decline in video PSUs. Non-video PSUs grew by 40,800, nearly double the growth during last year's second quarter. Bundling over time to maximize retention and customer profitability remains a key strategy, with 61.6% of our residential customers in a bundle compared to 59.2% a year ago.

    Residential video customers decreased by 79,900 in the quarter, while digital video customers decreased by 4,900. Seasonality, disciplined customer acquisition and price competition in the face of generally weak economic conditions all contributed to a lower rate of video acquisition which more than offset higher retention levels compared to the prior-year second quarter. Net video losses continued to be disproportionately driven by video-only analog customers. At the end of June, 55.7% of our digital customers enjoyed HD and/or DVR services. As a result, video ARPU was $71.40 for the second quarter of 2011, up 3.4% year-over-year.

    We added 18,500 residential Internet customers during the second quarter of 2011, reflecting continued consumer demand for superior speeds offered by Charter compared to DSL. Nearly 95% of our customers have a broadband plan of 12Mbps or higher. Internet ARPU of $41.76 decreased 1.0% compared to the year-ago quarter primarily due to the mix of speed tiers. We increased the speeds of our Internet tiers at no cost to our customers twice in the past 18 months and are seeing the benefits of higher customer satisfaction, brand awareness and higher retention rates. However, we have less ARPU benefit from tier upgrades. The tier mix impact was nearly offset by an increase in home networking revenues with more than 20% of our Internet customers relying on our home wireless service.

    Second quarter 2011 net gains of phone customers were 6,600 with phone penetration at 16.3% as of June 30, 2011. Given the clear retention benefit of bundling, we recently launched an attractively priced triple play offer to our video-only customers to further drive Internet and phone bundling, and are promoting phone upsell to both video and non-video Internet customers. Phone ARPU of $40.49 decreased approximately 3.0% year-over-year due to increased bundling and value-based packages.

    Commercial PSUs increased 6,600 in the second quarter to 457,100 and were up 8.3% over the second quarter of 2010. Commercial Internet and phone PSUs increased year-over-year by more than 20%. In addition, revenues from carrier customers, which aren't reflected in PSUs, nearly doubled. In July, the number of cell tower sites we served reached the 1,000 milestone, and we have a robust pipeline. We continue to refine our commercial strategy to further accelerate our growth and see a significant opportunity to grow our commercial services.

    Total ARPU for the second quarter of 2011 was $133.84; an increase of 7.4% compared to second quarter 2010, primarily as a result of increased bundle and advanced services penetration, along with growth in our commercial business. For the first half of 2011, we lost 12,100 total customer relationships as compared to 45,900 in 2010, reflecting the early benefits of our strategic investments partially offset by disciplined customer acquisition.

    Second Quarter Financial Results

    CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES

       

    UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS AND OPERATING DATA

       

    (DOLLARS IN MILLIONS, EXCEPT PER SHARE AND SHARE DATA)

       
                               
       

    Three Months Ended June 30,

       
       

    2011

       

    2010

       

    Pro Forma

       

    2010

       
       

    Actual

       

    Pro Forma

       

    % Change

       

    Actual

       
                               

    REVENUES:

                             

      Video

    $

    903

     

    $

    921

       

    -2.0%

     

    $

    932

       

      Internet

     

    419

       

    399

       

    5.0%

       

    402

       

      Telephone

     

    213

       

    205

       

    3.9%

       

    206

       

      Commercial

     

    141

       

    120

       

    17.5%

       

    121

       

      Advertising sales

     

    76

       

    71

       

    7.0%

       

    72

       

      Other

     

    39

       

    37

       

    5.4%

       

    38

       

         Total revenues

     

    1,791

       

    1,753

       

    2.2%

       

    1,771

       
                               

    COSTS AND EXPENSES:

                             

      Operating (excluding depreciation and amortization) (a)

     

    784

       

    764

       

    2.6%

       

    773

       

      Selling, general and administrative (excluding stock

                             

    compensation expense) (b)

     

    334

       

    347

       

    -3.7%

       

    352

       

         Operating costs and expenses

     

    1,118

       

    1,111

       

    0.6%

       

    1,125

       
                               

         Adjusted EBITDA

     

    673

       

    642

       

    4.8%

       

    646

       
                               

         Adjusted EBITDA margin

     

    37.6%

       

    36.6%

             

    36.5%

       
                               

    Capital Expenditures

    $

    324

     

    $

    337

         

    $

     

    339

       

    % Total Revenues

     

    18.1%

       

    19.2%

             

    19.1%

       
                               

    Net loss

    $

    (107)

     

    $

    (82)

         

    $

     

    (81)

       

    Loss per common share, basic and diluted

    $

    (0.98)

     

    $

    (0.72)

         

    $

     

    (0.72)

       
                               

    Net cash flows from operating activities

    $

    460

     

    $

    447

         

    $

     

    451

       

    Free cash flow

    $

    155

     

    $

    125

         

    $

     

    127

       
                               
                               

    Footnotes

                             
                               

    (a)  Operating expenses include programming, service, and advertising sales expenses.

     

    (b)  Selling, general and administrative expenses include general and administrative and marketing expenses.

     
                               

    Adjusted EBITDA and free cash flow are defined in the “Use of Non-GAAP Financial Metrics” section and are reconciled to consolidated net loss and net cash flows from operating activities, respectively,  in the addendum of this news release.

     
                             

     

    Revenue

    Second quarter 2011 revenues totaled $1.791 billion, up 2.2% on a pro forma basis and 1.1% on an actual basis compared to the year-ago quarter as we continued to grow our commercial, Internet and phone businesses and increase sales of bundled services.

    Second quarter 2011 video revenues were $903 million, a decrease of 2.0% on a pro forma basis and 3.1% on an actual basis compared to the second quarter of 2010 as a result of a decline in basic video customers, partially offset by growth in advanced service revenues. Internet revenues were $419 million, up 5.0% on a pro forma basis and 4.2% on an actual basis year-over-year due to the addition of 188,800 Internet customers. Telephone revenues for the 2011 second quarter totaled $213 million, up 3.9% on a pro forma basis and 3.4% on an actual basis over second quarter 2010 as growth in the triple play bundle continued.

    Commercial revenues rose to $141 million, a 17.5% year-over-year increase on a pro forma basis and 16.5% on an actual basis, primarily reflecting higher sales to small and medium business and carrier customers.

    Advertising sales revenues were $76 million for the second quarter of 2011, a 7.0% increase on a pro forma basis and 5.6% on an actual basis compared to the second quarter of 2010, primarily due to growth in revenue from the automotive and retail sectors combined with a $3 million change to reflect certain revenues on a gross basis, thus increasing both revenues and expenses by the same amount.

    Operating Costs and Expenses

    Operating costs and expenses totaled $1.118 billion in the second quarter of 2011, an increase of only 0.6% on a pro forma basis (0.6% actual decrease) compared to the year-ago period, as increases in programming costs were nearly offset by reduced other operating costs. Programming expenses increased as a result of contractual programming increases, offset by customer losses. Marketing expenses decreased by $6 million in the second quarter compared to the prior year reflecting a favorable adjustment related to expenses associated with prior year marketing campaigns, offset by increased spending on product and brand-focused marketing. Bad debt expense was $6 million lower in the second quarter as we saw benefits from our customer acquisition and retention strategies. Total labor was essentially flat year-over-year as operating efficiencies funded growth areas such as commercial.

    Adjusted EBITDA

    Adjusted EBITDA for the second quarter of 2011 was $673 million, an increase of 4.8% on a pro forma basis and 4.2% on an actual basis compared to the year-ago period. Adjusted EBITDA margin improved to 37.6% for the second quarter of 2011 compared to adjusted EBITDA margin of 36.6% on a pro forma basis and 36.5% on an actual basis in the year-ago quarter. The margin improvement was driven by growth in our higher margin Internet, phone and commercial products, disciplined customer acquisition and improving customer service levels.

    Net Loss

    Net loss was $107 million in the second quarter of 2011, compared to $82 million on a pro forma basis and $81 million on an actual basis in the second quarter of 2010. The change was primarily due to growth in commercial, Internet, telephone and advertising sales offset by a $19 million higher loss on extinguishment of debt, higher interest expense as we continued to refinance portions of our debt to extend maturities, and an increase in depreciation and amortization in the quarter-to-quarter comparison. Net loss per common share was $0.98 in the second quarter of 2011 compared to $0.72 on a pro forma and actual basis during the same period last quarter.

    Capital Expenditures

    Expenditures for property, plant and equipment for the second quarter of 2011 decreased to $324 million compared to second quarter 2010 expenditures of $337 million on a pro forma basis and $339 million on an actual basis. The decrease was primarily due to a decrease in scalable infrastructure spend as a result of timing of strategic investments in bandwidth initiatives partially offset by $9 million of incremental capital for storm-related damage in 2011. Our estimate for capital expenditures for 2011 remains approximately $1.3 billion to $1.4 billion.

    Cash Flow

    Net cash flows from operating activities were $460 million, compared to $447 million on a pro forma basis and $451 million on an actual basis in the second quarter of 2010. The increase in net cash flows from operating activities was primarily due to an increase in adjusted EBITDA offset by higher cash interest payments.

    Free cash flow for the second quarter of 2011 was $155 million, compared to $125 million on a pro forma basis and $127 million on an actual basis in the same period last year driven by the increase in net cash flows from operating activities and lower capital expenditures.

    Total principal amount of debt was approximately $12.5 billion as of June 30, 2011. At the end of the second quarter, we had $194 million of cash and cash equivalents (including restricted cash and cash equivalents of $28 million) and availability under our revolving credit facility of approximately $1.2 billion.

    Conference Call

    Charter will host a conference call on Tuesday, August 2, 2011 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 webcast 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 82071314.

    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 16, 2011. The conference ID code for the replay is 82071314.

    Additional Information Available on Website

    The information in this press release should be read in conjunction with the financial statements and footnotes contained in the Company's quarterly report for the quarter ended June 30, 2011 available on the "Investor & News Center" of our website at charter.com in the "Financial Information" section. A slide presentation to accompany the conference call and 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 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 net 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 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 credit 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 $35 million and $36 million for the three months ended June 30, 2011 and 2010, respectively, and $70 million and $71 million for the six months ended June 30, 2011 and 2010, 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, 2011 and 2010, we have provided pro forma results in this release for the three and six months ended June 30, 2010. 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 2010 as if they occurred as of January 1, 2010. Pro forma statements of operations for the three and six months ended June 30, 2010; and pro forma customer statistics as of June 30, 2010; 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, Internet, telephone, advertising and other services to residential and commercial customers, to adequately meet the customer experience demands in our markets and to maintain and grow our customer base, particularly in the face of increasingly aggressive competition, the need for innovation and the related capital expenditures and the difficult economic conditions in the United States;
    • the impact of competition from other market participants, including but not limited to incumbent telephone companies, direct broadcast satellite operators, wireless broadband and telephone 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 level of activity in the housing sector;
    • 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);
    • 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, or (iii) access to the capital or credit markets; 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)

     
                                     
       

    Three Months Ended June 30,

       

    Six Months Ended June 30,

     
       

    2011

       

    2010

           

    2011

       

    2010

         
       

    Actual

       

    Actual

     

    % Change

       

    Actual

       

    Actual

     

    % Change

     
                                     

    REVENUES:

                                   

      Video

    $

    903

     

    $

    932

     

    -3.1%

     

    $

    1,811

     

    $

    1,858

     

    -2.5%

     

      Internet

     

    419

       

    402

     

    4.2%

       

    831

       

    797

     

    4.3%

     

      Telephone

     

    213

       

    206

     

    3.4%

       

    425

       

    404

     

    5.2%

     

      Commercial

     

    141

       

    121

     

    16.5%

       

    278

       

    239

     

    16.3%

     

      Advertising sales

     

    76

       

    72

     

    5.6%

       

    138

       

    131

     

    5.3%

     

      Other

     

    39

       

    38

     

    2.6%

       

    78

       

    77

     

    1.3%

     

         Total revenues

     

    1,791

       

    1,771

     

    1.1%

       

    3,561

       

    3,506

     

    1.6%

     
                                     

    COSTS AND EXPENSES:

                                   

    Operating (excluding depreciation and amortization) (a)

     

    784

       

    773

     

    1.4%

       

    1,552

       

    1,529

     

    1.5%

     

    Selling, general and administrative (excluding stock compensation expense) (b)

     

    334

       

    352

     

    -5.1%

       

    673

       

    694

     

    -3.0%

     

         Operating costs and expenses

     

    1,118

       

    1,125

     

    -0.6%

       

    2,225

       

    2,223

     

    0.1%

     
                                     

         Adjusted EBITDA

     

    673

       

    646

     

    4.2%

       

    1,336

       

    1,283

     

    4.1%

     
                                     

         Adjusted EBITDA margin

     

    37.6%

       

    36.5%

           

    37.5%

       

    36.6%

         
                                     

      Depreciation and amortization

     

    393

       

    380

           

    776

       

    749

         

      Stock compensation expense

     

    9

       

    5

           

    15

       

    10

         

      Other operating expenses, net

     

    1

       

    7

           

    6

       

    19

         
                                     

        Income from operations

     

    270

       

    254

           

    539

       

    505

         
                                     

    OTHER INCOME (EXPENSES):

                                   

      Interest expense, net

     

    (241)

       

    (219)

           

    (474)

       

    (423)

         

      Loss on extinguishment of debt

     

    (53)

       

    (34)

           

    (120)

       

    (35)

         

      Other income (expense), net

     

    (2)

       

    1

           

    (2)

       

    (2)

         
       

    (296)

       

    (252)

           

    (596)

       

    (460)

         
                                     

    Income (loss) before income taxes

     

    (26)

       

    2

           

    (57)

       

    45

         
                                     

    Income tax expense

     

    (81)

       

    (83)

           

    (160)

       

    (102)

         
                                     

    Net loss

    $

    (107)

     

    $

    (81)

         

    $

    (217)

     

    $

    (57)

         
                                     
                                     

    Loss per common share, basic and diluted

    $

    (0.98)

     

    $

    (0.72)

         

    $

    (1.95)

     

    $

    (0.51)

         
                                     

    Weighted average common shares outstanding, basic and diluted

     

    109,265,876

       

    113,110,882

           

    111,234,155

       

    113,066,173

         
                                     
                                     

    (a)  Operating expenses include programming, service, and advertising sales expenses.

     
       

    (b)  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 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)

     
                                     
       

    Three Months Ended June 30,

       

    Six Months Ended June 30,

     
       

    2011

       

    2010

           

    2011

       

    2010

         
       

    Actual

       

    Pro Forma (a)

     

    % Change

       

    Actual

       

    Pro Forma (a)

     

    % Change

     
                                     

    REVENUES:

                                   

      Video

    $

    903

     

    $

    921

     

    -2.0%

     

    $

    1,811

     

    $

    1,835

     

    -1.3%

     

      Internet

     

    419

       

    399

     

    5.0%

       

    831

       

    791

     

    5.1%

     

      Telephone

     

    213

       

    205

     

    3.9%

       

    425

       

    403

     

    5.5%

     

      Commercial

     

    141

       

    120

     

    17.5%

       

    278

       

    237

     

    17.3%

     

      Advertising sales

     

    76

       

    71

     

    7.0%

       

    138

       

    129

     

    7.0%

     

      Other

     

    39

       

    37

     

    5.4%

       

    78

       

    75

     

    4.0%

     

         Total revenues

     

    1,791

       

    1,753

     

    2.2%

       

    3,561

       

    3,470

     

    2.6%

     
                                     

    COSTS AND EXPENSES:

                                   

    Operating (excluding depreciation and amortization) (b)

     

    784

       

    764

     

    2.6%

       

    1,552

       

    1,510

     

    2.8%

     

    Selling, general and administrative (excluding stock

                                   

    compensation expense) (c)

     

    334

       

    347

     

    -3.7%

       

    673

       

    685

     

    -1.8%

     

    Operating costs and expenses

     

    1,118

       

    1,111

     

    0.6%

       

    2,225

       

    2,195

     

    1.4%

     
                                     

    Adjusted EBITDA

     

    673

       

    642

     

    4.8%

       

    1,336

       

    1,275

     

    4.8%

     
                                     

    Adjusted EBITDA margin

     

    37.6%

       

    36.6%

           

    37.5%

       

    36.7%

         
                                     

    Depreciation and amortization

     

    393

       

    380

           

    776

       

    749

         

    Stock compensation expense

     

    9

       

    5

           

    15

       

    10

         

    Other operating expenses, net

     

    1

       

    7

           

    6

       

    19

         
                                     

    Income from operations

     

    270

       

    250

           

    539

       

    497

         
                                     

    OTHER INCOME (EXPENSES):

                                   

    Interest expense, net

     

    (241)

       

    (219)

           

    (474)

       

    (423)

         

    Loss on extinguishment of debt

     

    (53)

       

    (34)

           

    (120)

       

    (35)

         

    Other income (expense), net

     

    (2)

       

    1

           

    (2)

       

    (2)

         
       

    (296)

       

    (252)

           

    (596)

       

    (460)

         
                                     

    Income (loss) before income taxes

     

    (26)

       

    (2)

           

    (57)

       

    37

         
                                     

    Income tax expense

     

    (81)

       

    (80)

           

    (160)

       

    (99)

         
                                     

    Net loss

    $

    (107)

     

    $

    (82)

         

    $

    (217)

     

    $

    (62)

         
                                     
                                     

    Loss per common share, basic and diluted

    $

    (0.98)

     

    $

    (0.72)

         

    $

    (1.95)

     

    $

    (0.55)

         
                                     

    Weighted average common shares outstanding, basic and diluted

     

    109,265,876

       

    113,110,882

           

    111,234,155

       

    113,066,173

         
                                     
                                     

    (a)  Pro forma results reflect certain sales of cable systems in 2010 as if they occurred as of January 1, 2010.

     
       

    (b)  Operating expenses include programming, service, and advertising sales expenses.

     
       

    (c)  Selling, general and administrative expenses include general and administrative and marketing expenses.

     
       

    June 30, 2010. Pro forma revenues and operating costs and expenses were reduced by $18 million and $14 million, respectively, and net loss increased by $1 million for the three months ended June 30, 2010.  Pro forma revenues and operating costs and expenses were reduced by $36 million and $28 million, respectively, and net loss increased by $5 million for the six months ended June 30, 2010.

     
       

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

     
                                   

     

    CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES

     

    UNAUDITED CONSOLIDATED BALANCE SHEETS

     

    (DOLLARS IN MILLIONS)

     
                 
                 
                 
       

    June 30,

       

    December 31,

     
       

    2011

       

    2010

     
                 

    ASSETS

               
                 

    CURRENT ASSETS:

               

      Cash and cash equivalents

    $

    166

     

    $

    4

     

      Restricted cash and cash equivalents

     

    28

       

    28

     

      Accounts receivable, net of allowance for doubtful accounts

     

    243

       

    247

     

      Prepaid expenses and other current assets

     

    53

       

    47

     

            Total current assets

     

    490

       

    326

     
                 

    INVESTMENT IN CABLE PROPERTIES:

               

      Property, plant and equipment, net

     

    6,879

       

    6,819

     

      Franchises

     

    5,257

       

    5,257

     

      Customer relationships, net

     

    1,846

       

    2,000

     

      Goodwill

     

    951

       

    951

     

            Total investment in cable properties

     

    14,933

       

    15,027

     
                 

    OTHER NONCURRENT ASSETS

     

    386

       

    354

     
                 

           Total assets

    $

    15,809

     

    $

    15,707

     
                 

    LIABILITIES AND SHAREHOLDERS' EQUITY

               
                 

    CURRENT LIABILITIES:

               

      Accounts payable and accrued expenses

    $

    1,087

     

    $

    1,049

     

            Total current liabilities

     

    1,087

       

    1,049

     
                 

    LONG-TERM DEBT

     

    12,620

       

    12,306

     
                 

    OTHER LONG-TERM LIABILITIES

     

    1,038

       

    874

     
                 

    SHAREHOLDERS' EQUITY

     

    1,064

       

    1,478

     
                 

             Total liabilities and shareholders' equity

    $

    15,809

     

    $

    15,707

     
               

     

    CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES

     

    UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

     

    (DOLLARS IN MILLIONS)

     
                             
       

    Three Months Ended June 30,

       

    Six Months Ended June 30,

     
       

    2011

       

    2010

       

    2011

       

    2010

     

    CASH FLOWS FROM OPERATING ACTIVITIES:

                           

      Net loss

    $

    (107)

     

    $

    (81)

     

    $

    (217)

     

    $

    (57)

     

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

                           

         Depreciation and amortization

     

    393

       

    380

       

    776

       

    749

     

         Noncash interest expense

     

    8

       

    18

       

    20

       

    36

     

         Loss on extinguishment of debt

     

    53

       

    31

       

    120

       

    32

     

         Deferred income taxes

     

    78

       

    82

       

    155

       

    98

     

    Other, net

     

    9

       

    5

       

    16

       

    11

     

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

                           

         Accounts receivable

     

    (19)

       

    (26)

       

    5

       

    (1)

     

         Prepaid expenses and other assets

     

    3

       

    12

       

    (6)

       

    12

     

         Accounts payable, accrued expenses and other

     

    42

       

    30

       

    38

       

    101

     

             Net cash flows from operating activities

     

    460

       

    451

       

    907

       

    981

     
                             

    CASH FLOWS FROM INVESTING ACTIVITIES:

                           

      Purchases of property, plant and equipment

     

    (324)

       

    (339)

       

    (680)

       

    (649)

     

      Change in accrued expenses related to capital expenditures

     

    19

       

    15

       

    -

       

    -

     

      Other, net

     

    (8)

       

    1

       

    (14)

       

    (4)

     

             Net cash flows from investing activities

     

    (313)

       

    (323)

       

    (694)

       

    (653)

     
                             

    CASH FLOWS FROM FINANCING ACTIVITIES:

                           

      Borrowings of long-term debt

     

    1,715

       

    1,625

       

    3,561

       

    1,625

     

      Repayments of long-term debt

     

    (1,700)

       

    (1,773)

       

    (3,366)

       

    (2,440)

     

      Repayment of preferred stock

     

    -

       

    (138)

       

    -

       

    (138)

     

      Payments for debt issuance costs

     

    (21)

       

    (28)

       

    (43)

       

    (59)

     

      Purchase of treasury stock

     

    -

       

    -

       

    (207)

       

    -

     

      Other, net

     

    (1)

       

    (1)

       

    4

       

    (3)

     

             Net cash flows from financing activities

     

    (7)

       

    (315)

       

    (51)

       

    (1,015)

     
                             

    NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS

     

    140

       

    (187)

       

    162

       

    (687)

     

    CASH AND CASH EQUIVALENTS, beginning of period *

     

    54

       

    254

       

    32

       

    754

     

    CASH AND CASH EQUIVALENTS, end of period *

    $

    194

     

    $

    67

     

    $

    194

     

    $

    67

     
                             

    CASH PAID FOR INTEREST

    $

    200

     

    $

    185

     

    $

    402

     

    $

    337

     
                             
                             
                             

    *  Cash and cash equivalents includes restricted cash and cash equivalents.

     
                           

     
     

    CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES

     

    UNAUDITED SUMMARY OF OPERATING STATISTICS

     
                       
       

    Approximate as of

     
       

    Actual

     

    Pro Forma

     
       

    June 30,

     

    March 31,

     

    December 31,

     

    June 30,

     
       

    2011 (a)

     

    2011 (a)

     

    2010 (a)

     

    2010 (a)

     
                       

    Footprint

                   
     

    Estimated Homes Passed Video (b)

    11,831,900

     

    11,818,400

     

    11,768,800

     

    11,695,300

     
     

    % Switched Digital Video

    68%

     

    64%

     

    63%

     

    24%

     
                       
     

    Estimated Homes Passed Internet (b)

    11,496,200

     

    11,466,200

     

    11,404,000

     

    11,346,000

     
     

    % DOCSIS 3.0

    85%

     

    70%

     

    57%

     

    30%

     
                       
     

    Estimated Homes Passed Phone (b)

    10,719,100

     

    10,655,900

     

    10,565,800

     

    10,420,400

     
                       

    Customers

                   
                       
     

    Residential Customer Relationships (c)

    4,846,900

     

    4,886,000

     

    4,864,100

     

    4,940,000

     
     

    Commercial Customer Relationships  (c)

    355,200

     

    354,400

     

    350,100

     

    344,300

     
     

    Total Customer Relationships (c)(e)

    5,202,100

     

    5,240,400

     

    5,214,200

     

    5,284,300

     
                       
     

    Residential Non-Video Customers (d)

    673,500

     

    632,700

     

    585,700

     

    533,000

     
     

    % Non-Video (d)

    13.9%

     

    12.9%

     

    12.0%

     

    10.8%

     
                       

    Services and Revenue Generating Units (f)

                   
                       
     

    Video (d)

    4,173,400

     

    4,253,300

     

    4,278,400

     

    4,407,000

     
     

    Internet (g)

    3,352,500

     

    3,334,000

     

    3,246,100

     

    3,163,700

     
     

    Phone (h)

    1,747,600

     

    1,741,000

     

    1,717,000

     

    1,656,300

     
     

    Residential PSUs (i)

    9,273,500

     

    9,328,300

     

    9,241,500

     

    9,227,000

     
     

    Residential PSU / Customer Relationships (c)(i)

    1.91

     

    1.91

     

    1.90

     

    1.87

     
                       
     

    Video (d)(e)

    239,500

     

    243,300

     

    242,000

     

    243,800

     
     

    Internet (g)(i)

    149,100

     

    142,800

     

    138,500

     

    128,300

     
     

    Phone (h)

    68,500

     

    64,400

     

    59,900

     

    49,900

     
     

    Commercial PSUs (i)

    457,100

     

    450,500

     

    440,400

     

    422,000

     
                       
     

    Digital Video RGUs (k)

    3,386,700

     

    3,391,600

     

    3,363,200

     

    3,302,000

     
                       
     

    Total RGUs

    13,117,300

     

    13,170,400

     

    13,045,100

     

    12,951,000

     
                       

    Net Additions/(Losses) (l)

                   
                       
     

    Video (d)

    (79,900)

     

    (25,100)

     

    (62,500)

     

    (71,700)

     
     

    Internet (g)

    18,500

     

    87,900

     

    31,700

     

    22,000

     
     

    Phone (h)

    6,600

     

    24,000

     

    30,800

     

    35,300

     
     

    Residential PSUs (i)

    (54,800)

     

    86,800

     

    -

     

    (14,400)

     
                       
     

    Video (d)(e)

    (3,800)

     

    1,300

     

    (4,800)

     

    (2,500)

     
     

    Internet (g)

    6,300

     

    4,300

     

    5,300

     

    4,100

     
     

    Phone (h)

    4,100

     

    4,500

     

    5,100

     

    5,600

     
     

    Commercial PSUs (i)

    6,600

     

    10,100

     

    5,600

     

    7,200

     
                       
     

    Digital Video RGUs (k)

    (4,900)

     

    28,400

     

    19,200

     

    26,100

     
                       
     

    Total RGUs

    (53,100)

     

    125,300

     

    24,800

     

    18,900

     
                       

    Residential ARPU

                   
                       
     

    Video (m)

    $                      71.40

     

    $                      71.01

     

    $                      70.39

     

    $                      69.05

     
     

    Internet (m)

    $                      41.76

     

    $                      41.77

     

    $                      41.72

     

    $                      42.18

     
     

    Phone (m)

    $                      40.49

     

    $                      40.97

     

    $                      41.29

     

    $                      41.74

     
     

    ARPU per Customer Relationship (n)

    $                    105.02

     

    $                    104.87

     

    $                    104.17

     

    $                    102.34

     
                       
     

    Total ARPU per Video Customer (o)

    $                    133.84

     

    $                    131.01

     

    $                    130.28

     

    $                    124.64

     
                       

    Residential Penetration Statistics

                   
                       
     

    Video Penetration of Homes Passed Video (p)

    35.3%

     

    36.0%

     

    36.4%

     

    37.7%

     
     

    Internet Penetration of Homes Passed Internet (p)

    29.2%

     

    29.1%

     

    28.5%

     

    27.9%

     
     

    Phone Penetration of Homes Passed Phone (p)

    16.3%

     

    16.3%

     

    16.3%

     

    15.9%

     
                       
     

    Bundled Penetration (q)

    61.6%

     

    61.4%

     

    60.9%

     

    59.2%

     
     

    Triple Play Penetration (r)

    28.8%

     

    28.5%

     

    28.2%

     

    26.8%

     
                       
     

    Digital Penetration (s)

    76.7%

     

    75.4%

     

    74.4%

     

    71.0%

     
     

    Advanced Digital Penetration (of Digital) (t)

    55.7%

     

    55.2%

     

    53.4%

     

    50.2%

     
     

    Set-Top-Box per Digital RGU

    1.51

     

    1.51

     

    1.50

     

    1.49

     
                       
     

    Pro forma operating statistics reflect the sales of cable systems in 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 2010 have been reflected in the operating statistics.

     
         
     

    At June 30, 2010, actual residential video customers, Internet customers, and phone customers were 4,466,600, 3,187,900, and 1,658,100, respectively; actual commercial video customers, Internet customers, and phone customers were 249,900, 129,400, and 50,000, respectively; and actual digital RGUs were 3,337,500.

     
         
     

    See footnotes to unaudited summary of operating statistics on page 6 of this addendum.

     
                     

     

    (a)

    We calculate the aging of customer accounts based on the monthly billing cycle for each account.  On that basis, at June 30, 2011, March 31, 2011, December 31, 2010, and June 30, 2010, customers include approximately 16,100, 12,500, 15,700, and 20,800 persons, respectively, whose accounts were over 60 days past due in payment, approximately 2,200, 1,700, 1,800, and 2,500 persons, respectively, whose accounts were over 90 days past due in payment and approximately 1,000, 1,100, 1,000, and 1,300 persons, respectively, whose accounts were over 120 days past due in payment.

     
       

    (b)

    "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.

     
       

    (c)

    "Customer Relationships" include the number of customers that receive one or more levels of service, encompassing video, Internet and phone 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).  Commercial customer relationships includes video customers in commercial and multi-dwelling structures, which are calculated on an EBU basis (see footnote (e)) and non-video commercial customer relationships.

     
         

    (d)

    "Video Customers” represent those customers who subscribe to our video services.  

     
         

    (e)

    Included within commercial video customers are those in commercial and multi-dwelling structures, which are calculated on an equivalent bulk unit (“EBU”) basis.  We calculate EBUs 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 rather than the most prevalent price charged as was used previously.  This EBU method of estimating 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.

     
         

    (f)

    "Revenue Generating Units" or "RGUs" represent the total of all basic video, digital video, Internet and phone 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 RGUs, and if that customer added Internet service, the customer would be treated as three RGUs.  This statistic is computed in accordance with the guidelines of the NCTA.

     
         

    (g)

    "Internet Customers" represent those customers who subscribe to our Internet service.

     
         

    (h)

    "Phone Customers" represent those customers who subscribe to our phone service.

     
         

    (i)

    "Primary Service Units" or "PSUs" represent the total of video, Internet and phone customers.

     
         

    (j)

    Prior year commercial Internet customers were adjusted to reflect current year presentation.

     
         

    (k)

    "Digital Video RGUs" include all video customers that rent one or more digital set-top boxes or cable cards.  

     
         

    (l)

    "Net Additions/(Losses)" represent the pro forma net gain or loss in the respective quarter for the service indicated.

     
         

    (m)

    "Average Monthly Revenue per Customer" or "ARPU" 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.  

     
         

    (n)

    "ARPU per Customer Relationship" is calculated as total video, Internet and phone quarterly pro forma revenue divided by three divided by average residential customer relationships during the respective quarter.

     
         

    (o)

    "Total ARPU per Video Customer" is calculated as total quarterly pro forma revenue divided by three divided by average pro forma video customers during the respective quarter.

     
         

    (p)

    "Penetration" represents residential customers as a percentage of homes passed for the service indicated.

     
         

    (q)

    "Bundled Penetration" represents the percentage of residential customers receiving a combination of at least two different types of service, including Charter's video service, Internet service or phone.  "Residential % Bundled" does not include residential customers who only subscribe to video service.  

     
         

    (r)

    "Triple Play Penetration" represents residential customers receiving all three Charter service offerings, including video, Internet and phone, as a % of residential customer relationships.

     
         

    (s)

    "Digital Penetration" represents the number of digital RGUs as a percentage of video customers, including EBUs.

     
         

    (t)

    "Advanced Digital Penetration" represents customers who subscribe to our high-definition and/or digital video recorder services as a % of digital RGUs.

     
       

     

    CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES

     

    UNAUDITED RECONCILIATION OF NON-GAAP MEASURES TO GAAP MEASURES

     

    (DOLLARS IN MILLIONS)

     
                       
       

    Three Months Ended June 30,

     

    Six Months Ended June 30,

     
       

    2011

     

    2010

     

    2011

     

    2010

     
       

    Actual

     

    Actual

     

    Actual

     

    Actual

     
                       

    Net loss

    $                       (107)

     

    $                         (81)

     

    $                       (217)

     

    $                         (57)

     

    Plus:  

    Interest expense, net

    241

     

    219

     

    474

     

    423

     
     

    Income tax expense

    81

     

    83

     

    160

     

    102

     
     

    Depreciation and amortization

    393

     

    380

     

    776

     

    749

     
     

    Stock compensation expense

    9

     

    5

     

    15

     

    10

     
     

    Loss on extinguishment of debt

    53

     

    34

     

    120

     

    35

     
     

    Other, net

    3

     

    6

     

    8

     

    21

     
                       

    Adjusted EBITDA (b)

    673

     

    646

     

    1,336

     

    1,283

     

    Less:  

    Purchases of property, plant and equipment

    (324)

     

    (339)

     

    (680)

     

    (649)

     
                       

    Adjusted EBITDA less capital expenditures

    $                         349

     

    $                         307

     

    $                         656

     

    $                         634

     
                       
                       
                       

    Net cash flows from operating activities

    $                         460

     

    $                         451

     

    $                         907

     

    $                         981

     

    Less:  

    Purchases of property, plant and equipment

    (324)

     

    (339)

     

    (680)

     

    (649)

     
     

    Change in accrued expenses related to capital expenditures

    19

     

    15

     

    -

     

    -

     
                       

    Free cash flow

    $                         155

     

    $                         127

     

    $                         227

     

    $                         332

     
                       
                       
                       
                       
       

    Three Months Ended June 30,

     

    Six Months Ended June 30,

     
       

    2011

     

    2010

     

    2011

     

    2010

     
       

    Actual

     

    Pro Forma (a)

     

    Actual

     

    Pro Forma (a)

     
                       

    Net loss

    $                       (107)

     

    $                         (82)

     

    $                       (217)

     

    $                         (62)

     

    Plus:  

    Interest expense, net

    241

     

    219

     

    474

     

    423

     
     

    Income tax expense

    81

     

    80

     

    160

     

    99

     
     

    Depreciation and amortization

    393

     

    380

     

    776

     

    749

     
     

    Stock compensation expense

    9

     

    5

     

    15

     

    10

     
     

    Loss on extinguishment of debt

    53

     

    34

     

    120

     

    35

     
     

    Other, net

    3

     

    6

     

    8

     

    21

     
                       

    Adjusted EBITDA (b)

    673

     

    642

     

    1,336

     

    1,275

     

    Less:  

    Purchases of property, plant and equipment

    (324)

     

    (337)

     

    (680)

     

    (645)

     
                       

    Adjusted EBITDA less capital expenditures

    $                         349

     

    $                         305

     

    $                         656

     

    $                         630

     
                       
                       
                       

    Net cash flows from operating activities

    $                         460

     

    $                         447

     

    $                         907

     

    $                         973

     

    Less:  

    Purchases of property, plant and equipment

    (324)

     

    (337)

     

    (680)

     

    (645)

     
     

    Change in accrued expenses related to capital expenditures

    19

     

    15

     

    -

     

    -

     
                       

    Free cash flow

    $                         155

     

    $                         125

     

    $                         227

     

    $                         328

     
                       
                       
                       
                       
                       

    (a)  Pro forma results reflect certain sales of cable systems in 2010 as if they occurred as of January 1, 2010.

         
       

    (b) See page 1 and 2 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 June 30,

       

    Six Months Ended June 30,

     
       

    2011

       

    2010

       

    2011

       

    2010

     
                             

    Customer premise equipment (a)

    $

    130

     

    $

    140

     

    $

    287

     

    $

    296

     

    Scalable infrastructure (b)

     

    85

       

    108

       

    207

       

    195

     

    Line extensions (c)

     

    29

       

    22

       

    49

       

    38

     

    Upgrade/Rebuild (d)

     

    7

       

    7

       

    12

       

    16

     

    Support capital (e)

     

    73

       

    62

       

    125

       

    104

     
                             

      Total capital expenditures (f)

    $

    324

     

    $

    339

     

    $

    680

     

    $

    649

     
                             
                             

    (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).

     
                             

    (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 $45 million and $34 million of capital expenditures related to commercial services for the three months ended June 30, 2011 and 2010, respectively, and $72 million and $52 million for the six months ended June 30, 2011 and 2010, respectively.

     
                           

     

    SOURCE Charter Communications, Inc.