Charter Reports Second Quarter 2010 Financial and Operating Results
Strong growth from Internet, phone, commercial services and advertising drives improved results
ST. LOUIS, Aug. 4 /PRNewswire-FirstCall/ -- Charter Communications, Inc. (along with its subsidiaries, the "Company" or "Charter") today reported financial and operating results for the three and six months ended June 30, 2010.
Second Quarter Highlights:
- Compared with the prior year, second quarter revenues grew 4.9% on a pro forma(1) basis and 4.8% on an actual basis, driven by increases in Internet, phone and commercial customers and improved advertising sales.
- Total average monthly revenue per basic video customer (ARPU) for the second quarter increased 9.4% year-over-year to $124.06, driven by increased sales of The Charter Bundle and advanced services.
- Second quarter adjusted EBITDA(2) grew 1.3% year-over-year on both a pro forma and actual basis, and net loss attributable to Charter shareholders was reduced to $81 million in the second quarter of 2010 compared to $112 million in the second quarter of 2009.
- Free cash flow(2) for the first six months of 2010 was $332 million and cash flows from operating activities were $981 million.
- Internet customer additions doubled compared to the second quarter of 2009, and we continue to reinforce our competitive superiority through expanded DOCSIS 3.0 availability.
(1) Pro forma results are described below in the "Use of Non-GAAP Financial Metrics" section and are provided in the addendum of this news release. |
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(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. |
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"We're pleased with our second quarter results as Charter continues to enhance our products; drive deeper Internet, digital and bundled penetration; and invest for future growth," said Mike Lovett, President and Chief Executive Officer. "We're confident that our strategy to strengthen our product and service capabilities while expanding our commercial offerings will further improve our position for long-term success."
Key Operating Results
All of the following customer and ARPU statistics are presented on a pro forma basis. Charter served approximately 12.9 million revenue generating units (RGUs) as of June 30, 2010, an increase of 423,900 RGUs, or about 3.4%, over the prior year. Approximately 59.3% of Charter's residential customers subscribe to a bundle, compared to 55.4% a year ago. Charter's ARPU for the second quarter of 2010 was $124.06, an increase of 9.4% compared to second quarter 2009, primarily as a result of strong triple play and advanced services growth.
Second quarter 2010 customer highlights included the following:
- Digital video customers increased by approximately 25,500 and basic video customers decreased by approximately 76,600 during the second quarter. Year to date 2010 digital customer additions are six times greater than year ago net additions due to product and service enhancements. Video ARPU was $68.90 for the second quarter of 2010, up 4.8% year-over-year as we continue to increase digital, high definition and digital video recorder (DVR) penetration.
- Internet customers grew by approximately 21,900 during the second quarter of 2010, more than doubling net additions in the second quarter of 2009. Internet ARPU of $42.20 increased approximately 1.9% compared to the year-ago quarter, as consumer demand for higher Internet speeds and home networking continues.
- Second quarter 2010 net gains of phone customers were approximately 35,200. Phone penetration reached 15.9% as of June 30, 2010. Phone ARPU of $41.74 decreased approximately 4.2%.
As of June 30, 2010, Charter served approximately 5.3 million customers, and the Company's 12.9 million RGUs were comprised of 4.7 million basic video, 3.3 million digital video, 3.2 million Internet and 1.7 million phone customers.
Second Quarter Results – Actual and Pro Forma
Second quarter revenues were $1.770 billion, up 4.9%, on a pro forma basis and $1.771 billion, up 4.8%, on an actual basis, compared to the year-ago quarter, as the Company continued to grow its Internet, phone, commercial and ad sales businesses.
Second quarter 2010 video revenues were $932 million, essentially flat with the year-ago quarter, as digital and advanced services revenue growth was offset by a decline in basic video customers. Internet revenues were $402 million, up 9.5% year-over-year due to an increased number of customers and ARPU growth. Telephone revenues for the 2010 second quarter were $206 million, a 10.8% increase over second quarter 2009, as growth in the triple play bundle continues. Commercial revenues rose to $121 million, a 10.0% increase year-over-year, reflecting increased sales of the Charter Business Bundle and customer growth. Advertising sales revenues were $72 million for the second quarter of 2010, a 16.1% increase compared to the second quarter of 2009, as a result of improvements across all sectors, primarily the political, automotive and furniture sectors.
Operating costs and expenses totaled $1.124 billion, an increase of 7.0% for the second quarter of 2010, on a pro forma basis and $1.125 billion, an increase of 6.9% on an actual basis, compared to the year-ago period, primarily due to increases in programming expenses, labor costs and expenses related to investments in our commercial business and strategic bandwidth initiatives. Programming expenses increased as a result of annual rate increases while labor costs increased as a result of increases in activity related to our strategic investments and RGU growth.
Adjusted EBITDA for the second quarter of 2010 totaled $646 million, an increase of 1.3% compared to the pro forma and actual results for the year-ago period.
Charter reported $254 million of income from operations in the second quarter of 2010, compared to $301 million in the second quarter of 2009. Income from operations declined as a result of increased amortization related to customer relationships resulting from fresh start accounting.
Net loss attributable to Charter shareholders was $81 million in the second quarter of 2010, compared to a loss of $112 million in the second quarter of 2009. The improvement resulted primarily from a reduction in reorganization costs related to Charter's restructuring in 2009 offset by the decline in income from operations in 2010, the elimination of net loss allocated to non-controlling interest and a loss on extinguishment of debt. Charter reported net loss per common share of $0.72 in the second quarter of 2010, compared with a loss of $0.30 during the same period last year. The increase in loss per common share is a result of a decrease in the number of shares outstanding as a result of recapitalization upon emergence from Chapter 11 proceedings under the U.S. Bankruptcy Code.
Expenditures for property, plant and equipment for the second quarter of 2010 increased to $339 million, compared to second quarter 2009 expenditures of $271 million, as a result of strategic investments including DOCSIS 3.0; bandwidth reclamation projects, such as switched digital video (SDV) launches; and investments made to move into new commercial segments.
Free cash flow for the second quarter of 2010 was $127 million, compared to $175 million in the same period last year. The decrease in free cash flow is primarily due to increases in capital investments to enhance our residential and commercial products and service capabilities.
Net cash flows from operating activities for the second quarter of 2010 were $451 million, compared to $438 million in the second quarter of 2009.
Year to Date Results – Actual and Pro Forma
Pro Forma revenues for the six months ended June 30, 2010 were $3.504 billion, up 4.7% year-over-year, and actual revenues for the six months ended June 30, 2010 were $3.506 billion, up 4.6% year-over-year.
Operating costs and expenses totaled $2.221 billion, an increase of 6.1% for the six months ended June 30, 2010, on a pro forma basis and $2.223 billion, an increase of 6.0%, on an actual basis, compared to the year-ago period.
Adjusted EBITDA for the six months ended June 30, 2010 totaled $1.283 billion, an increase of 2.4%, on a pro forma basis and 2.3% on an actual basis, compared to the year-ago period.
Charter reported $505 million of income from operations for the six months ended June 30, 2010, compared to $635 million for the first six months of 2009.
Net loss attributable to Charter shareholders was $57 million for the six months ended June 30, 2010, compared to a loss of $317 million for the first six months of 2009. Charter reported net loss per common share of $0.51 for the six months ended June 30, 2010, compared to a loss of $0.84 in the same period last year.
Expenditures for property, plant and equipment for the six months ended June 30, 2010 were $649 million, compared to $540 million in the same period last year. The Company expects capital spending for the full year to be approximately $1.2 billion, and intends to deploy SDV to more than 60% of its footprint and DOCSIS 3.0 to approximately half of its footprint by year end 2010.
Free cash flow for the first six months of 2010 was $332 million, compared to $66 million in the same period last year. The increase in free cash flow is primarily due to decreases in interest expense and cash reorganization items and increases in RGU growth, partially offset by increases in investments to enhance our residential and commercial products and service capabilities.
Net cash flows from operating activities for the first six months of 2010 were $981 million, compared to $625 million in the first six months of 2009. The increase in cash flows from operating activities is primarily due to reduced interest expense and cash reorganization costs.
Total principal amount of debt was approximately $12.7 billion as of June 30, 2010. At the end of the second quarter, the Company had availability under its revolving credit facility of approximately $800 million.
Recent Events
The Company recently announced that Craig A. Jacobson has been appointed to the Board of Directors (the "Board"). Mr. Jacobson will serve as a member of the Audit Committee of the Board, joining David C. Merritt and Christopher M. Temple. With the appointment of Mr. Jacobson to the Audit Committee of the Board, Charter believes that it satisfies the requirements for listing its Class A common stock on the NASDAQ Stock Market and expects to complete the listing process in the coming weeks.
Conference Call
The Company will host a conference call on Wednesday, August 4, 2010 at 9:00 a.m. Eastern Time (ET) related to the contents of this release.
The conference call will be webcast live via the Company's website at charter.com. The webcast can be accessed by selecting "Investor & News Center" from the lower menu on the home page. The call will be archived in the "Investor & News Center" in the "Financial Information" section on the left beginning two hours after completion of the call. Participants should go to the call link no later than 10 minutes prior to the start time to register.
Those participating via telephone should dial 866-726-7983 no later than 10 minutes prior to the call. International participants should dial 706-758-7055. The conference ID code for the call is 85580395.
A replay of the call will be available at 800-642-1687 or 706-645-9291 beginning two hours after the completion of the call through the end of business on August 18, 2010. The conference ID code for the replay is 85580395.
Additional Information Available on Website
A slide presentation to accompany the conference call will be available on the "Investor & News Center" of our website at charter.com in the "Financial Information" section. A trending schedule containing historical customer and financial data can also be found in the "Financial Information" section.
Use of Non-GAAP Financial Metrics
The Company uses certain measures that are not defined by Generally Accepted Accounting Principles ("GAAP") to evaluate various aspects of its business. Adjusted EBITDA, adjusted EBITDA less capital expenditures and free cash flow are non-GAAP financial measures and should be considered in addition to, not as a substitute for, net income (loss) or cash flows from operating activities reported in accordance with GAAP. These terms, as defined by Charter, may not be comparable to similarly titled measures used by other companies. Adjusted EBITDA is reconciled to consolidated net income (loss) and free cash flow is reconciled to net cash flows from operating activities in the addendum of this news release.
Adjusted EBITDA is defined as consolidated net loss plus net interest expense, income taxes, depreciation and amortization, reorganization items, stock compensation expense, loss on extinguishment of debt, and other expenses, such as special charges and loss on sale or retirement of assets. As such, it eliminates the significant non-cash depreciation and amortization expense that results from the capital-intensive nature of the Company's businesses as well as other non-cash or special items, and is unaffected by the Company's capital structure or investment activities. Adjusted EBITDA less capital expenditures is defined as Adjusted EBITDA minus purchases of property, plant and equipment. Adjusted EBITDA and adjusted EBITDA less capital expenditures are used by management and the Company's Board to evaluate the performance of the Company's business. For this reason, they are significant components of Charter's annual incentive compensation program. However, these measures are limited in that they do not reflect the periodic costs of certain capitalized tangible and intangible assets used in generating revenues and the cash cost of financing. Management evaluates these costs through other financial measures.
Free cash flow is defined as net cash flows from operating activities, less purchases of property, plant and equipment and changes in accrued expenses related to capital expenditures.
The Company believes that adjusted EBITDA and free cash flow provide information useful to investors in assessing Charter's performance and its ability to service its debt, fund operations and make additional investments with internally generated funds. In addition, adjusted EBITDA generally correlates to the leverage ratio calculation under the Company's credit facilities or outstanding notes to determine compliance with the covenants contained in the facilities and notes (all such documents have been previously filed with the United States Securities and Exchange Commission). Adjusted EBITDA, as presented, includes management fee expenses in the amount of $36 million and $34 million for the three months ended June 30, 2010 and 2009, respectively, which expense amounts are excluded for the purposes of calculating compliance with leverage covenants.
In addition to the actual results for the three and six months ended June 30, 2010 and 2009, we have provided pro forma results in this release for the three and six months ended June 30, 2010 and 2009. We believe these pro forma results facilitate meaningful analysis of the results of operations. Pro forma results in this release reflect certain sales of cable systems in 2009 and 2010 as if they occurred as of January 1, 2009. Pro forma statements of operations for the three and six months ended June 30, 2010 and 2009; and pro forma customer statistics as of December 31, 2009 and June 30, 2009; are provided in the addendum of this news release.
About Charter
Charter Communications, Inc. (OTC Bulletin Board: CCMM) 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 cash flows from operating activities by offering video, high-speed Internet, telephone and other services to residential and commercial customers, and to maintain and grow our customer base, particularly in the face of increasingly aggressive competition and the difficult economic conditions in the United States;
- the impact of competition from other distributors, including but not limited to incumbent telephone companies, direct broadcast satellite operators, wireless broadband providers, and digital subscriber line ("DSL") providers and competition from video provided over the Internet;
- general business conditions, economic uncertainty or downturn, high unemployment levels and the significant downturn in the housing sector and overall economy;
- our ability to obtain programming at reasonable prices or to raise prices to offset, in whole or in part, the effects of higher programming costs (including retransmission consents);
- our ability to adequately deliver customer service;
- the effects of governmental regulation on our business;
- the availability and access, in general, of funds to meet our debt obligations, prior to or when they become due, and to fund our operations and necessary capital expenditures, either through (i) cash on hand, (ii) cash flows from operating activities, (iii) access to the capital or credit markets including through new issuances, exchange offers or otherwise, especially given recent volatility and disruption in the capital and credit markets, or (iv) other sources and our ability to fund debt obligations (by dividend, investment or otherwise) to the applicable obligor of such debt; and
- our ability to comply with all covenants in our indentures and credit facilities, any violation of which, if not cured in a timely manner, could trigger a default of our other obligations under cross-default provisions.
All forward-looking statements attributable to us or any person acting on our behalf are expressly qualified in their entirety by this cautionary statement. We are under no duty or obligation to update any of the forward-looking statements after the date of this release.
CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES |
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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 Six |
Actual Six |
|||||||||||||
Months Ended |
Months Ended |
Months Ended |
Months Ended |
|||||||||||||
June 30, 2010 |
June 30, 2009 |
% Change |
June 30, 2010 |
June 30, 2009 |
% Change |
|||||||||||
REVENUES: |
||||||||||||||||
Video (a) |
$ |
932 |
$ |
928 |
0.4% |
$ |
1,858 |
$ |
1,856 |
0.1% |
||||||
High-speed Internet |
402 |
367 |
9.5% |
797 |
727 |
9.6% |
||||||||||
Telephone (a) |
206 |
186 |
10.8% |
404 |
363 |
11.3% |
||||||||||
Commercial |
121 |
110 |
10.0% |
239 |
217 |
10.1% |
||||||||||
Advertising sales |
72 |
62 |
16.1% |
131 |
116 |
12.9% |
||||||||||
Other (a) |
38 |
37 |
2.7% |
77 |
73 |
5.5% |
||||||||||
Total revenues |
1,771 |
1,690 |
4.8% |
3,506 |
3,352 |
4.6% |
||||||||||
COSTS AND EXPENSES: |
||||||||||||||||
Operating (excluding depreciation and amortization) (b) |
766 |
715 |
7.1% |
1,517 |
1,428 |
6.2% |
||||||||||
Selling, general and administrative (excluding stock |
||||||||||||||||
compensation expense) (c) |
359 |
337 |
6.5% |
706 |
670 |
5.4% |
||||||||||
Operating costs and expenses |
1,125 |
1,052 |
6.9% |
2,223 |
2,098 |
6.0% |
||||||||||
Adjusted EBITDA |
646 |
638 |
1.3% |
1,283 |
1,254 |
2.3% |
||||||||||
Adjusted EBITDA margin |
36.5% |
37.8% |
36.6% |
37.4% |
||||||||||||
Depreciation and amortization |
380 |
329 |
749 |
650 |
||||||||||||
Stock compensation expense |
5 |
6 |
10 |
17 |
||||||||||||
Other operating (income) expenses, net |
7 |
2 |
19 |
(48) |
||||||||||||
Income from operations |
254 |
301 |
505 |
635 |
||||||||||||
OTHER INCOME (EXPENSES): |
||||||||||||||||
Interest expense, net (excluding unrecorded |
||||||||||||||||
contractual interest expense of $206 and $215 for the |
||||||||||||||||
three and six months ended June 30, 2009, respectively) |
(219) |
(216) |
(423) |
(679) |
||||||||||||
Reorganization items, net |
(1) |
(184) |
(5) |
(325) |
||||||||||||
Loss on extinguishment of debt |
(34) |
- |
(35) |
- |
||||||||||||
Other income (expense), net |
2 |
- |
3 |
(3) |
||||||||||||
(252) |
(400) |
(460) |
(1,007) |
|||||||||||||
Income (loss) before income taxes |
2 |
(99) |
45 |
(372) |
||||||||||||
Income tax expense |
(83) |
(60) |
(102) |
(121) |
||||||||||||
Consolidated net loss |
(81) |
(159) |
(57) |
(493) |
||||||||||||
Less: Net loss - noncontrolling interest |
- |
47 |
- |
176 |
||||||||||||
Net loss - Charter shareholders |
$ |
(81) |
$ |
(112) |
$ |
(57) |
$ |
(317) |
||||||||
Loss per common share, basic and diluted: |
||||||||||||||||
Net loss - Charter shareholders: |
$ |
(0.72) |
$ |
(0.30) |
$ |
(0.51) |
$ |
(0.84) |
||||||||
Weighted average common shares outstanding, basic and diluted |
113,110,882 |
378,982,037 |
113,066,173 |
378,541,155 |
||||||||||||
(a) Certain prior year amounts have been reclassified to conform with the 2010 presentation, including the reflection of |
||||||||||||||||
(b) Operating expenses include programming, service, and advertising sales expenses. |
||||||||||||||||
(c) Selling, general and administrative expenses include general and administrative and marketing expenses. |
||||||||||||||||
Adjusted EBITDA is a non-GAAP term. See page 7 of this addendum for the reconciliation of adjusted EBITDA to consolidated net income (loss) as defined by GAAP. |
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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 |
|||||||||||||
Pro Forma Three |
Pro Forma Three |
Pro Forma Six |
Pro Forma Six |
|||||||||||||
Months Ended |
Months Ended |
Months Ended |
Months Ended |
|||||||||||||
June 30, 2010 (a) |
June 30, 2009 (a) |
% Change |
June 30, 2010 (a) |
June 30, 2009 (a) |
% Change |
|||||||||||
REVENUES: |
||||||||||||||||
Video (b) |
$ |
931 |
$ |
926 |
0.5% |
$ |
1,856 |
$ |
1,851 |
0.3% |
||||||
High-speed Internet |
402 |
367 |
9.5% |
797 |
727 |
9.6% |
||||||||||
Telephone (b) |
206 |
186 |
10.8% |
404 |
363 |
11.3% |
||||||||||
Commercial |
121 |
110 |
10.0% |
239 |
217 |
10.1% |
||||||||||
Advertising sales |
72 |
62 |
16.1% |
131 |
116 |
12.9% |
||||||||||
Other (b) |
38 |
37 |
2.7% |
77 |
73 |
5.5% |
||||||||||
Total revenues |
1,770 |
1,688 |
4.9% |
3,504 |
3,347 |
4.7% |
||||||||||
COSTS AND EXPENSES: |
||||||||||||||||
Operating (excluding depreciation and amortization) (c) |
765 |
714 |
7.1% |
1,516 |
1,425 |
6.4% |
||||||||||
Selling, general and administrative (excluding stock |
||||||||||||||||
compensation expense) (d) |
359 |
336 |
6.8% |
705 |
669 |
5.4% |
||||||||||
Operating costs and expenses |
1,124 |
1,050 |
7.0% |
2,221 |
2,094 |
6.1% |
||||||||||
Adjusted EBITDA |
646 |
638 |
1.3% |
1,283 |
1,253 |
2.4% |
||||||||||
Adjusted EBITDA margin |
36.5% |
37.8% |
36.6% |
37.4% |
||||||||||||
Depreciation and amortization |
380 |
328 |
749 |
649 |
||||||||||||
Stock compensation expense |
5 |
6 |
10 |
17 |
||||||||||||
Other operating (income) expenses, net |
7 |
2 |
19 |
(50) |
||||||||||||
Income from operations |
254 |
302 |
505 |
637 |
||||||||||||
OTHER INCOME (EXPENSES): |
||||||||||||||||
Interest expense, net (excluding unrecorded |
||||||||||||||||
contractual interest expense of $206 and $215 for the |
||||||||||||||||
three and six months ended June 30, 2009, respectively) |
(219) |
(216) |
(423) |
(679) |
||||||||||||
Reorganization items, net |
(1) |
(184) |
(5) |
(325) |
||||||||||||
Loss on extinguishment of debt |
(34) |
- |
(35) |
- |
||||||||||||
Other income (expense), net |
2 |
- |
3 |
(3) |
||||||||||||
(252) |
(400) |
(460) |
(1,007) |
|||||||||||||
Income (loss) before income taxes |
2 |
(98) |
45 |
(370) |
||||||||||||
Income tax expense |
(80) |
(60) |
(99) |
(121) |
||||||||||||
Consolidated net loss |
(78) |
(158) |
(54) |
(491) |
||||||||||||
Less: Net loss - noncontrolling interest |
- |
47 |
- |
176 |
||||||||||||
Net loss - Charter shareholders |
$ |
(78) |
$ |
(111) |
$ |
(54) |
$ |
(315) |
||||||||
Loss per common share, basic and diluted: |
||||||||||||||||
Net loss - Charter shareholders: |
$ |
(0.69) |
$ |
(0.30) |
$ |
(0.48) |
$ |
(0.83) |
||||||||
Weighted average common shares outstanding, basic and diluted |
113,110,882 |
378,982,037 |
113,066,173 |
378,541,155 |
||||||||||||
(a) Pro forma results reflect certain sales of cable systems in 2009 and 2010 as if they occurred as of January 1, 2009. The pro |
||||||||||||||||
(b) Certain prior year amounts have been reclassified to conform with the 2010 presentation, including the reflection of franchise fees, |
||||||||||||||||
(c) Operating expenses include programming, service, and advertising sales expenses. |
||||||||||||||||
(d) Selling, general and administrative expenses include general and administrative and marketing expenses. |
||||||||||||||||
June 30, 2010 Pro forma revenues, operating costs and expenses and net loss were reduced by $1 million, $1 million and $3 million, |
||||||||||||||||
June 30, 2009 Pro forma revenues, operating costs and expenses and net loss were reduced by $2 million, $2 million, and $1 million, |
||||||||||||||||
Adjusted EBITDA is a non-GAAP term. See page 7 of this addendum for the reconciliation of adjusted EBITDA to consolidated net |
||||||||||||||||
CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES |
||||||
UNAUDITED CONSOLIDATED BALANCE SHEETS |
||||||
(DOLLARS IN MILLIONS) |
||||||
June 30, |
December 31, |
|||||
2010 |
2009 |
|||||
ASSETS |
||||||
CURRENT ASSETS: |
||||||
Cash and cash equivalents |
$ |
40 |
$ |
709 |
||
Restricted cash and cash equivalents |
27 |
45 |
||||
Accounts receivable, net of allowance for doubtful accounts |
249 |
248 |
||||
Prepaid expenses and other current assets |
57 |
69 |
||||
Total current assets |
373 |
1,071 |
||||
INVESTMENT IN CABLE PROPERTIES: |
||||||
Property, plant and equipment, net |
6,902 |
6,833 |
||||
Franchises, net |
5,269 |
5,272 |
||||
Customer relationships, net |
2,167 |
2,335 |
||||
Goodwill |
951 |
951 |
||||
Total investment in cable properties, net |
15,289 |
15,391 |
||||
OTHER NONCURRENT ASSETS |
345 |
196 |
||||
Total assets |
$ |
16,007 |
$ |
16,658 |
||
LIABILITIES AND SHAREHOLDERS' EQUITY |
||||||
CURRENT LIABILITIES: |
||||||
Accounts payable and accrued expenses |
$ |
1,014 |
$ |
898 |
||
Current portion of long-term debt |
- |
70 |
||||
Total current liabilities |
1,014 |
968 |
||||
LONG-TERM DEBT |
12,657 |
13,252 |
||||
OTHER LONG-TERM LIABILITIES |
692 |
520 |
||||
TEMPORARY EQUITY |
12 |
1 |
||||
SHAREHOLDERS' EQUITY: |
||||||
Charter shareholders' equity |
1,632 |
1,915 |
||||
Noncontrolling interest |
- |
2 |
||||
Total shareholders' equity |
1,632 |
1,917 |
||||
Total liabilities and shareholders' equity |
$ |
16,007 |
$ |
16,658 |
||
CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES |
||||||||||||
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS |
||||||||||||
(DOLLARS IN MILLIONS) |
||||||||||||
Three Months Ended |
Six Months Ended |
|||||||||||
Successor |
Predecessor |
Successor |
Predecessor |
|||||||||
June 30, 2010 |
June 30, 2009 |
June 30, 2010 |
June 30, 2009 |
|||||||||
CASH FLOWS FROM OPERATING ACTIVITIES: |
||||||||||||
Consolidated net loss |
$ |
(81) |
$ |
(159) |
$ |
(57) |
$ |
(493) |
||||
Adjustments to reconcile net loss to net cash flows from operating activities: |
||||||||||||
Depreciation and amortization |
380 |
329 |
749 |
650 |
||||||||
Noncash interest expense |
18 |
11 |
36 |
26 |
||||||||
Noncash reorganization items, net |
- |
23 |
- |
131 |
||||||||
Loss on extinguishment of debt |
31 |
- |
32 |
- |
||||||||
Deferred income taxes |
82 |
57 |
98 |
116 |
||||||||
Other, net |
5 |
7 |
11 |
23 |
||||||||
Changes in operating assets and liabilities, net of effects from dispositions |
||||||||||||
Accounts receivable |
(26) |
(27) |
(1) |
7 |
||||||||
Prepaid expenses and other assets |
12 |
34 |
12 |
(44) |
||||||||
Accounts payable, accrued expenses and other |
30 |
163 |
101 |
209 |
||||||||
Net cash flows from operating activities |
451 |
438 |
981 |
625 |
||||||||
CASH FLOWS FROM INVESTING ACTIVITIES: |
||||||||||||
Purchases of property, plant and equipment |
(339) |
(271) |
(649) |
(540) |
||||||||
Change in accrued expenses related to capital expenditures |
15 |
8 |
- |
(19) |
||||||||
Other, net |
1 |
(4) |
(4) |
- |
||||||||
Net cash flows from investing activities |
(323) |
(267) |
(653) |
(559) |
||||||||
CASH FLOWS FROM FINANCING ACTIVITIES: |
||||||||||||
Borrowings of long-term debt |
1,625 |
- |
1,625 |
- |
||||||||
Repayments of long-term debt |
(1,773) |
(17) |
(2,440) |
(34) |
||||||||
Repayment of preferred stock |
(138) |
- |
(138) |
- |
||||||||
Payments for debt issuance costs |
(28) |
- |
(59) |
- |
||||||||
Other, net |
(1) |
2 |
(3) |
- |
||||||||
Net cash flows from financing activities |
(315) |
(15) |
(1,015) |
(34) |
||||||||
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS |
(187) |
156 |
(687) |
32 |
||||||||
CASH AND CASH EQUIVALENTS, beginning of period |
254 |
836 |
754 |
960 |
||||||||
CASH AND CASH EQUIVALENTS, end of period |
$ |
67 |
$ |
992 |
$ |
67 |
$ |
992 |
||||
CASH PAID FOR INTEREST |
$ |
185 |
$ |
310 |
$ |
337 |
$ |
531 |
||||
CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES |
||||||||
UNAUDITED SUMMARY OF OPERATING STATISTICS |
||||||||
Approximate as of |
||||||||
Actual |
Pro Forma |
|||||||
June 30, |
March 31, |
December 31, |
June 30, |
|||||
2010 (a) |
2010 (a) |
2009 (a) |
2009 (a) |
|||||
Customer Summary: |
||||||||
Customer Relationships: |
||||||||
Residential (non-bulk) basic video customers (b) |
4,466,600 |
4,540,700 |
4,555,700 |
4,662,100 |
||||
Multi-dwelling (bulk) and commercial unit customers (c) |
249,900 |
252,400 |
260,700 |
257,200 |
||||
Total basic video customers |
4,716,500 |
4,793,100 |
4,816,400 |
4,919,300 |
||||
Non-video customers (b) |
538,900 |
518,200 |
493,100 |
431,500 |
||||
Total customer relationships (d) |
5,255,400 |
5,311,300 |
5,309,500 |
5,350,800 |
||||
Pro forma average monthly revenue per basic video customer (e) |
$ 124.06 |
$ 120.55 |
$ 117.53 |
$ 113.39 |
||||
Pro forma average monthly video revenue per basic video customer (f) |
$ 68.90 |
$ 67.90 |
$ 66.34 |
$ 65.74 |
||||
Residential bundled customers (g) |
2,969,800 |
2,965,800 |
2,889,500 |
2,821,700 |
||||
Revenue Generating Units: |
||||||||
Basic video customers (b) (c) |
4,716,500 |
4,793,100 |
4,816,400 |
4,919,300 |
||||
Digital video customers (h) |
3,337,500 |
3,312,000 |
3,216,200 |
3,150,100 |
||||
Residential high-speed Internet customers (i) |
3,187,900 |
3,166,000 |
3,062,300 |
2,958,100 |
||||
Residential telephone customers (j) |
1,658,100 |
1,622,900 |
1,556,000 |
1,448,600 |
||||
Total revenue generating units (k) |
12,900,000 |
12,894,000 |
12,650,900 |
12,476,100 |
||||
Total Video Services: |
||||||||
Estimated homes passed (l) |
11,989,900 |
11,940,000 |
11,887,800 |
11,817,300 |
||||
Basic video customers (b)(c) |
4,716,500 |
4,793,100 |
4,816,400 |
4,919,300 |
||||
Estimated penetration of basic homes passed (b) (c) (l) (m) |
39.3% |
40.1% |
40.5% |
41.6% |
||||
Pro forma basic video customers quarterly net loss (b) (c) (n) |
(76,600) |
(23,300) |
(56,700) |
(73,000) |
||||
Digital video customers (h) |
3,337,500 |
3,312,000 |
3,216,200 |
3,150,100 |
||||
Digital penetration of basic video customers (b) (c) (h) (o) |
70.8% |
69.1% |
66.8% |
64.0% |
||||
Digital set-top terminals deployed |
4,974,800 |
4,934,000 |
4,791,600 |
4,598,400 |
||||
Pro forma digital video customers quarterly net gain (h) (n) |
25,500 |
95,800 |
43,300 |
(5,800) |
||||
High-Speed Internet Services: |
||||||||
Estimated high-speed Internet homes passed (l) |
11,468,300 |
11,424,500 |
11,360,200 |
11,236,200 |
||||
Residential high-speed Internet customers (i) |
3,187,900 |
3,166,000 |
3,062,300 |
2,958,100 |
||||
Estimated penetration of high-speed Internet homes passed (i) (l) (m) |
27.8% |
27.7% |
27.0% |
26.3% |
||||
Pro forma average monthly high-speed Internet revenue per high-speed Internet customer (f) |
$ 42.20 |
$ 42.31 |
$ 41.48 |
$ 41.41 |
||||
Pro forma high-speed Internet customers quarterly net gain (i) (n) |
21,900 |
103,700 |
51,800 |
10,600 |
||||
Telephone Services: |
||||||||
Estimated telephone homes passed (l) |
10,434,800 |
10,363,900 |
10,312,700 |
10,163,100 |
||||
Residential telephone customers (j) |
1,658,100 |
1,622,900 |
1,556,000 |
1,448,600 |
||||
Estimated penetration of telephone homes passed (i) (l) (m) |
15.9% |
15.7% |
15.1% |
14.3% |
||||
Pro forma average monthly telephone revenue per telephone customer (f) |
$ 41.74 |
$ 41.68 |
$ 42.54 |
$ 43.57 |
||||
Pro forma telephone customers quarterly net gain (j) (n) |
35,200 |
66,900 |
56,200 |
52,300 |
||||
Pro forma operating statistics reflect the sales and acquisitions of cable systems in 2009 and 2010 as if such transactions had occurred as of the last day of the respective |
||||||||
At March 31, 2010 actual basic video customers, digital video customers, high-speed Internet customers and telephone customers were 4,800,600, 3,313,900, |
||||||||
At December 31, 2009, actual basic video customers, digital video customers, high-speed Internet customers and telephone customers were 4,824,000, 3,218,100, |
||||||||
At June 30, 2009, actual basic video customers, digital video customers, high-speed Internet customers and telephone customers were 4,929,900, 3,152,000, |
||||||||
See footnotes to unaudited summary of operating statistics |
||||||||
(a) Our billing systems calculate the aging of customer accounts based on the monthly billing cycle for each account. On that basis, at June 30, 2010, |
||||||||
(b) "Basic video customers" include all residential customers who receive video services (including those who also purchase high-speed Internet and |
||||||||
(c) Included within "basic video customers" are those in commercial and multi-dwelling structures, which are calculated on an equivalent bulk |
||||||||
(d) "Customer relationships" include the number of customers that receive one or more levels of service, encompassing video, Internet and telephone |
||||||||
(e) "Pro forma average monthly revenue per basic video customer" is calculated as total quarterly pro forma revenue divided by three divided by average |
||||||||
(f) "Pro forma average monthly revenue per customer" represents quarterly pro forma revenue for the service indicated divided by three divided by the |
||||||||
(g) "Residential bundled customers" include residential customers receiving a combination of at least two different types of service, including Charter's |
||||||||
(h) "Digital video customers" include all basic video customers that have one or more digital set-top boxes or cable cards deployed. |
||||||||
(i) "Residential high-speed Internet customers" represent those residential customers who subscribe to our high-speed Internet service. At June 30, 2010, |
||||||||
(j) "Residential telephone customers" represent those residential customers who subscribe to our telephone service. As of June 30, 2010, |
||||||||
(k) "Revenue generating units" represent the sum total of all basic video, digital video, high-speed Internet and telephone customers, not counting |
||||||||
(l) "Homes passed" represent our estimate of the number of living units, such as single family homes, apartment units and condominium units passed by our |
||||||||
(m) "Penetration" represents customers as a percentage of homes passed for the service indicated. |
||||||||
(n) "Pro forma quarterly net gain (loss)" represents the pro forma net gain or loss in the respective quarter for the service indicated. |
||||||||
(o) "Digital penetration of basic video customers" represents the number of digital video customers as a percentage of basic video customers. |
||||||||
CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES |
||||||||||||
UNAUDITED RECONCILIATION OF NON-GAAP MEASURES TO GAAP MEASURES |
||||||||||||
(DOLLARS IN MILLIONS) |
||||||||||||
Actual Three Months Ended |
Actual Six Months Ended |
|||||||||||
Successor |
Predecessor |
Successor |
Predecessor |
|||||||||
June 30, 2010 |
June 30, 2009 |
June 30, 2010 |
June 30, 2009 |
|||||||||
Consolidated net loss |
$ (81) |
$ (159) |
$ (57) |
$ (493) |
||||||||
Plus: |
Interest expense, net |
219 |
216 |
423 |
679 |
|||||||
Income tax expense |
83 |
60 |
102 |
121 |
||||||||
Depreciation and amortization |
380 |
329 |
749 |
650 |
||||||||
Stock compensation expense |
5 |
6 |
10 |
17 |
||||||||
Reorganization items, net |
1 |
184 |
5 |
325 |
||||||||
Loss on extinguishment of debt |
34 |
- |
35 |
- |
||||||||
Other, net |
5 |
2 |
16 |
(45) |
||||||||
Adjusted EBITDA (b) |
646 |
638 |
1,283 |
1,254 |
||||||||
Less: |
Purchases of property, plant and equipment |
(339) |
(271) |
(649) |
(540) |
|||||||
Adjusted EBITDA less capital expenditures |
$ 307 |
$ 367 |
$ 634 |
$ 714 |
||||||||
Net cash flows from operating activities |
$ 451 |
$ 438 |
$ 981 |
$ 625 |
||||||||
Less: |
Purchases of property, plant and equipment |
(339) |
(271) |
(649) |
(540) |
|||||||
Change in accrued expenses related to capital expenditures |
15 |
8 |
- |
(19) |
||||||||
Free cash flow |
$ 127 |
$ 175 |
$ 332 |
$ 66 |
||||||||
Pro Forma Three Months Ended (a) |
Pro Forma Six Months Ended (a) |
|||||||||||
Successor |
Predecessor |
Successor |
Predecessor |
|||||||||
June 30, 2010 |
June 30, 2009 |
June 30, 2010 |
June 30, 2009 |
|||||||||
Consolidated net loss |
$ (78) |
$ (158) |
$ (54) |
$ (491) |
||||||||
Plus: |
Interest expense, net |
219 |
216 |
423 |
679 |
|||||||
Income tax expense |
80 |
60 |
99 |
121 |
||||||||
Depreciation and amortization |
380 |
328 |
749 |
649 |
||||||||
Stock compensation expense |
5 |
6 |
10 |
17 |
||||||||
Reorganization items, net |
1 |
184 |
5 |
325 |
||||||||
Loss on extinguishment of debt |
34 |
- |
35 |
- |
||||||||
Other, net |
5 |
2 |
16 |
(47) |
||||||||
Adjusted EBITDA (b) |
646 |
638 |
1,283 |
1,253 |
||||||||
Less: |
Purchases of property, plant and equipment |
(339) |
(271) |
(649) |
(540) |
|||||||
Adjusted EBITDA less capital expenditures |
$ 307 |
$ 367 |
$ 634 |
$ 713 |
||||||||
Net cash flows from operating activities |
$ 451 |
$ 438 |
$ 981 |
$ 624 |
||||||||
Less: |
Purchases of property, plant and equipment |
(339) |
(271) |
(649) |
(540) |
|||||||
Change in accrued expenses related to capital expenditures |
15 |
8 |
- |
(19) |
||||||||
Free cash flow |
$ 127 |
$ 175 |
$ 332 |
$ 65 |
||||||||
(a) Pro forma results reflect certain sales of cable systems in 2009 and 2010 as if they occurred as of January 1, 2009. |
||||||||||||
(b) See page 1 of this addendum for detail of the components included within adjusted EBITDA. |
||||||||||||
The above schedules are presented in order to reconcile adjusted EBITDA and free cash flows, both non-GAAP measures, to the most |
||||||||||||
CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES |
||||||||||||
CAPITAL EXPENDITURES |
||||||||||||
(DOLLARS IN MILLIONS) |
||||||||||||
Three Months Ended |
Six Months Ended |
|||||||||||
Successor |
Predecessor |
Successor |
Predecessor |
|||||||||
June 30, 2010 |
June 30, 2009 |
June 30, 2010 |
June 30, 2009 |
|||||||||
Customer premise equipment (a) |
$ |
140 |
$ |
141 |
$ |
296 |
$ |
308 |
||||
Scalable infrastructure (b) |
108 |
50 |
195 |
95 |
||||||||
Line extensions (c) |
22 |
17 |
38 |
31 |
||||||||
Upgrade/Rebuild (d) |
7 |
9 |
16 |
14 |
||||||||
Support capital (e) |
62 |
54 |
104 |
92 |
||||||||
Total capital expenditures (f) |
$ |
339 |
$ |
271 |
$ |
649 |
$ |
540 |
||||
(a) Customer premise equipment includes costs incurred at the customer residence to |
||||||||||||
(b) Scalable infrastructure includes costs, not related to customer premise equipment |
||||||||||||
(c) Line extensions include network costs associated with entering new service areas (e.g., |
||||||||||||
(d) Upgrade/rebuild includes costs to modify or replace existing fiber/coaxial cable networks, |
||||||||||||
(e) Support capital includes costs associated with the replacement or enhancement of non- |
||||||||||||
(f) Total capital expenditures includes $34 million and $19 million of capital expenditures related to |
||||||||||||
SOURCE Charter Communications, Inc.
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