News Release
Charter Reports Second Quarter Financial and Operating Results
Click here to view the Second Quarter Financial Addendum.
Charter Drives Margin Expansion and Healthy ARPU Growth in the Second Quarter
ST. LOUIS--(BUSINESS WIRE)--Aug. 5, 2008--Charter Communications, Inc. (NASDAQ: CHTR) (along with its subsidiaries, the "Company" or "Charter") today reported its second quarter and six-month 2008 financial and operating results.
- Second quarter revenues of $1.623 billion grew 8.9% year-over-year on a pro forma(1) basis and 8.3% on an actual basis primarily driven by increases in telephone and high-speed Internet (HSI) revenues.
- Second quarter adjusted EBITDA(2) of $591 million increased 10.1% year-over-year on a pro forma basis and 9.4% on an actual basis.
- Second quarter adjusted EBITDA margin of 36.4% increased 40 basis points year-over-year on a pro forma basis.
- Total ARPU(3) for the quarter increased 12.2% year-over-year to $104.35, driven by increased sales of The Charter Bundle(TM), advanced services growth and upgrading customers to higher service tiers.
- Revenue generating units (RGUs) increased 6.4% year-over-year, with 98,900 net additions during the second quarter of 2008.
"Our solid financial performance in the second quarter is a result of our consistent strategies to increase bundled penetration, enhance products and services, and improve the customer experience," said Neil Smit, President and Chief Executive Officer. "Our priorities are to deliver healthy financial growth, leverage infrastructure investments and capture new growth opportunities."
Key Operating Results
All of the following customer growth and ARPU statistics are presented on a pro forma basis. Charter added a net 98,900 RGUs during the second quarter of 2008. As of June 30, 2008, Charter served approximately 5,557,600 customers and the Company's 12,181,700 RGUs were comprised of 5,162,000 basic video, 3,056,900 digital video, 2,787,300 HSI, and 1,175,500 telephone customers.
- Telephone customers increased by approximately 90,500 during the second quarter of 2008 and the number of telephone customers is up nearly 70% year-over-year. Telephone penetration is now 11.8% of telephone homes passed.
- Digital video customers increased by approximately 33,900 and basic video customers decreased by 44,800 during the second quarter. Video ARPU was $58.73 for the second quarter of 2008, up 5.6% year-over-year.
- HSI customers increased by approximately 19,300 in the second quarter of 2008. HSI ARPU increased year-over-year to $40.67.
Second quarter 2008 total ARPU increased 12.2% to $104.35 from the same period in 2007, driven primarily by an increase in bundled customers, advanced services growth, and upgrading customers to higher service tiers.
Second Quarter Results - Pro forma
Second quarter revenues were $1.623 billion, a pro forma increase of 8.9%, or $133 million. The increase resulted primarily from increases in telephone and HSI revenues.
Telephone revenues increased to $134 million from pro forma telephone revenues of $80 million a year ago, up 67.5% year-over-year on a pro forma basis as our telephone customer base continues to grow. HSI revenues were $339 million, up 10.4% year-over-year on a pro forma basis, due to increases in ARPU and the number of customers. Video revenues were $874 million, up 2.5% year-over-year on a pro forma basis, primarily as a result of advanced services revenue growth partially offset by a decline in basic video customers. Commercial revenues rose to $96 million, or 17.1% on a pro forma basis, resulting from increased sales of the Charter Business Bundle(R) to small and medium-size businesses.
Operating expenses, which include programming, service and advertising sales costs, were $698 million, an 8.7% increase year-over-year on a pro forma basis, reflecting annual programming rate increases, increased labor costs to support improved service levels, and growth of the Company's telephone business and other advanced services. Selling, general, and administrative expenses were $334 million, up 7.4% on a pro forma basis compared to the year-ago quarter, reflecting expenditures to further improve the customer experience and increased marketing expenditures targeted at revenue growth and retaining customers.
Adjusted EBITDA totaled $591 million for the second quarter of 2008, a pro forma increase of 10.1% compared to the year-ago quarter.
Net cash flows used in operating activities for the second quarter of 2008 were $36 million, compared to $151 million for the second quarter of 2007 on a pro forma basis. The decrease in cash flows used in operating activities is primarily the result of changes in operating assets and liabilities that used less cash in 2008 than the corresponding period in 2007, and the increase in adjusted EBITDA.
Six Months Results - Pro forma
For the six months ended June 30, 2008, revenues were $3.187 billion, a pro forma increase of $281 million, or 9.7%, primarily from telephone and HSI revenue growth.
Telephone revenues increased to $255 million from pro forma revenues of $143 million a year ago, up 78.3% year-over-year. HSI revenues increased to $667 million, up 11.2% year-over-year on a pro forma basis. Video revenues were $1.732 billion, an increase of 2.9% year-over-year on a pro forma basis. Commercial revenues increased to $189 million, up 16.0% on a pro forma basis.
Operating expenses for the six months ended June 30, 2008 were $1.380 billion, an increase of 8.8% year-over-year on a pro forma basis; and selling, general, and administrative expenses were $671 million, up 10.4% on a pro forma basis.
Adjusted EBITDA totaled $1.136 billion for the first half of 2008, a pro forma increase of 10.3% compared to the first half of 2007.
Net cash flows provided by operating activities for the first six months of 2008 were $168 million, compared to $112 million for the first half of 2007 on a pro forma basis. The increase in cash flows provided by operating activities is primarily the result of adjusted EBITDA growth offset by changes in operating assets and liabilities that used more cash in 2008 than the corresponding period in 2007.
Second Quarter Results - Actual
Second quarter revenues increased 8.3% and operating costs and expenses increased 7.6% compared to year-ago results.
Adjusted EBITDA for the second quarter of 2008 rose 9.4% compared to the year-ago period.
Income from operations was $230 million in the second quarter of 2008, compared to $200 million in the second quarter of 2007. The increase was primarily related to adjusted EBITDA growth.
Net loss for the second quarter of 2008 was $276 million, or $0.74 per common share. For the second quarter of 2007, Charter reported a net loss of $360 million and net loss per common share of $0.98. Net loss decreased primarily as a result of an increase in adjusted EBITDA and decreases in non-operating expenses.
Expenditures for property, plant, and equipment for the second quarter of 2008 were $316 million, compared to second quarter 2007 expenditures of $281 million. The increase in capital expenditures primarily reflects year-over-year increases in customer premise equipment, specifically due to the purchase of advanced set top boxes.
Net cash flows used in operating activities during the second quarter of 2008 were $36 million, compared to $148 million of net cash flows used in operating activities for the second quarter of 2007. The decrease in cash flows used in operating activities is primarily the result of changes in operating assets and liabilities that used less cash in 2008 than the corresponding period in 2007 and the increase in adjusted EBITDA.
Six Months Results - Actual
Revenues for the six months ended June 30, 2008 increased 9.0% year-over-year. Operating costs and expenses rose 8.6% compared to year-ago actual results. Adjusted EBITDA for the first six months of 2008 grew 9.7% compared to the year-ago period.
Income from operations increased to $435 million for the first half of 2008, compared to $356 million in the first half of 2007 primarily due to adjusted EBITDA growth.
Net loss for the first six months of the year was $634 million, or $1.71 per common share. For the first six months of 2007, Charter reported a net loss of $741 million and net loss per common share of $2.02. The decrease in net loss is attributable to the increase in adjusted EBITDA.
Capital expenditures for property, plant, and equipment for the six months ended June 30, 2008 were $650 million, compared to $579 million in 2007. The increase in capital expenditures primarily reflects year-over-year increases in customer premise equipment, specifically an increase the purchase of advanced set top boxes. Charter expects that capital expenditures in the year 2008 will total approximately $1.2 billion and approximately 75% of that amount will be directed toward success-based activities.
Net cash flows from operating activities for the first six months of 2008 were $168 million, compared to $118 million for the first half of 2007. The increase in cash flows provided by operating activities is primarily the result of adjusted EBITDA growth offset by changes in operating assets and liabilities that used more cash in 2008 than the corresponding period in 2007.
As of June 30, 2008, Charter had $20.480 billion in long-term debt and $63 million of cash on hand. Availability under the Company's revolving credit facility totaled approximately $1.4 billion at June 30, 2008, none of which was limited by covenant restrictions. Charter expects that cash on hand, cash flows from operating activities, and the amounts available under its credit facilities will be adequate to fund its projected cash needs, including scheduled maturities, through 2009. Cash flows from operating activities, and the amounts available under Charter's credit facilities will not be sufficient to fund projected cash needs in 2010 (primarily as a result of the CCH II, LLC $1.9 billion of senior notes outstanding at July 2, 2008 that mature in September 2010) and thereafter.
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, pro forma adjusted EBITDA, and free cash flow are non-GAAP financial measures and should be considered in addition to, not as a substitute for, net 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 defined as income from operations before depreciation and amortization, impairment charges, stock compensation expense, and other operating (income) expenses, such as special charges and (gain) 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 non-recurring items, and is unaffected by the Company's capital structure or investment activities. Adjusted EBITDA and pro forma adjusted EBITDA are liquidity measures used by Company management and its board of directors to measure the Company's ability to fund operations and its financing obligations. For this reason, it is a significant component of Charter's annual incentive compensation program. However, this measure is limited in that it does not reflect the periodic costs of certain capitalized tangible and intangible assets used in generating revenues and the cash cost of financing for the Company. Company management evaluates these costs through other financial measures.
Free cash flow is defined as net cash flows from operating activities, less capital expenditures and changes in accrued expenses related to capital expenditures.
The Company believes that adjusted EBITDA, pro forma adjusted EBITDA, and free cash flow provide information useful to investors in assessing Charter's 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 and pro forma adjusted EBITDA, as presented, include management fee expenses in the amount of $32 million and $34 million for the three months ended June 30, 2008 and 2007, 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, 2008 and 2007, we have provided pro forma results in this release for the three and six months ended June 30, 2007. We believe these pro forma results facilitate meaningful analysis of the results of operations. Pro forma results in this release reflect certain sales and acquisitions of cable systems in 2007 as if they had occurred as of January 1, 2007. Pro forma income statements for the three and six months ended June 30, 2007 and pro forma customer statistics as of March 31, 2008, December 31, 2007 and June 30, 2007 are provided in the addendum of this news release.
Additional Information Available on Website
A slide presentation to accompany the second quarter conference call will be available on the Investor & News Center of our website at www.charter.com in the "Presentations/Webcasts" section. Pro forma data, including disclosure concerning the pro forma data and the basis upon which it was calculated, for each quarter of 2006 and 2007 can also be found on the Investor & News Center in the "Pro forma Information" section.
Conference Call
The Company will host a conference call on Tuesday, August 5, 2008, 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 www.charter.com. Access the webcast by clicking on "About Charter" at the top of the home page, then Investor and News Center. Participants should go to the call link at least 10 minutes prior to the start time to register. The call will be archived on the website beginning two hours after its completion. Accompanying slides will also be available on the site.
Those participating via telephone should dial 888/233-1576 no later than 10 minutes prior to the call. International participants should dial 706/643-3458. The passcode for the call is 52499711.
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 12, 2008. The passcode for the replay is 52499711.
About Charter Communications(R)
Charter Communications, Inc. is a leading broadband communications company and the third-largest publicly traded cable operator in the United States. Charter provides a full range of advanced broadband services, including advanced Charter Digital Cable(R) video entertainment programming, Charter High-Speed(R) Internet access, and Charter Telephone(R). Charter Business(TM) similarly provides scalable, tailored, and cost-effective broadband communications solutions to business organizations, such as business-to-business Internet access, data networking, video and music entertainment services, and business telephone. Charter's advertising sales and production services are sold under the Charter Media(R) brand. More information about Charter can be found at www.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, and Section 21E of the Securities Exchange Act of 1934, as amended, 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" 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:
- the availability, in general, of funds to meet interest payment obligations under our debt and to fund our operations and necessary capital expenditures, either through cash flows from operating activities, further borrowings or other sources and, in particular, our ability to fund debt obligations (by dividend, investment or otherwise) to the applicable obligor of such debt;
- 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;
- our ability to pay or refinance debt prior to or when it becomes due and/or refinance that debt through new issuances, exchange offers or otherwise, including restructuring our balance sheet and leverage position;
- the impact of competition from other distributors, including incumbent telephone companies, direct broadcast satellite operators, wireless broadband providers, and digital subscriber line ("DSL") providers;
- difficulties in growing, further introducing, and operating our telephone services, while adequately meeting customer expectations for the reliability of voice services;
- our ability to adequately meet demand for installations and customer service;
- our ability to sustain and grow revenues and cash flows from operating activities by offering video, high-speed Internet, telephone and other services, and to maintain and grow our customer base, particularly in the face of increasingly aggressive competition;
- our ability to obtain programming at reasonable prices or to adequately raise prices to offset the effects of higher programming costs;
- general business conditions, economic uncertainty or slowdown, including the recent significant slowdown in the housing sector and overall economy; and
- the effects of governmental regulation on our business.
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.
(1) Pro forma results are described in the "Use of Non-GAAP Financial Metrics" section and are provided in the addendum of this news release.
(2) Adjusted EBITDA is defined in the "Use of Non-GAAP Financial Metrics" section and is reconciled to net cash flows from operating activities in the addendum of this news release.
(3) Average revenue per basic customer.
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,
-----------------------------------
2008 2007
Actual Actual % Change
------------ ------------ --------
REVENUES:
Video $ 874 $ 859 1.7%
High-speed Internet 339 308 10.1%
Telephone 134 80 67.5%
Commercial 96 83 15.7%
Advertising sales 75 76 -1.3%
Other 105 93 12.9%
------------ ------------
Total revenues 1,623 1,499 8.3%
------------ ------------
COSTS AND EXPENSES:
Operating (excluding
depreciation and
amortization) (a) 698 647 7.9%
Selling, general and
administrative (excluding
stock compensation expense)
(b) 334 312 7.1%
Operating costs and expenses 1,032 959 7.6%
------------ ------------
Adjusted EBITDA 591 540 9.4%
------------ ------------
Adjusted EBITDA margin 36.4% 36.0%
------------ ------------
Depreciation and amortization 328 334
Stock compensation expense 8 5
Other operating expenses, net 25 1
------------ ------------
Income from operations 230 200
------------ ------------
OTHER INCOME (EXPENSES):
Interest expense, net (474) (462)
Change in value of derivatives 26 (3)
Other income (expense), net 1 (36)
------------ ------------
(447) (501)
------------ ------------
Loss before income taxes (217) (301)
Income tax expense (59) (59)
------------ ------------
Net loss $ (276) $ (360)
============ ============
Loss per common share, basic and
diluted $ (0.74) $ (0.98)
============ ============
Weighted average common shares
outstanding, basic and diluted 371,652,070 367,582,677
============ ============
Six Months Ended June 30,
------------------------------------
2008 2007
Actual Actual % Change
------------ ------------ ---------
REVENUES:
Video $ 1,732 $ 1,697 2.1%
High-speed Internet 667 602 10.8%
Telephone 255 143 78.3%
Commercial 189 164 15.2%
Advertising sales 143 139 2.9%
Other 201 179 12.3%
------------ ------------
Total revenues 3,187 2,924 9.0%
------------ ------------
COSTS AND EXPENSES:
Operating (excluding
depreciation and
amortization) (a) 1,380 1,278 8.0%
Selling, general and
administrative (excluding
stock compensation expense)
(b) 671 610 10.0%
Operating costs and expenses 2,051 1,888 8.6%
------------ ------------
Adjusted EBITDA 1,136 1,036 9.7%
------------ ------------
Adjusted EBITDA margin 35.6% 35.4%
------------ ------------
Depreciation and amortization 649 665
Stock compensation expense 16 10
Other operating expenses, net 36 5
------------ ------------
Income from operations 435 356
------------ ------------
OTHER INCOME (EXPENSES):
Interest expense, net (939) (926)
Change in value of derivatives (11) (4)
Other income (expense), net (2) (39)
------------ ------------
(952) (969)
------------ ------------
Loss before income taxes (517) (613)
Income tax expense (117) (128)
------------ ------------
Net loss $ (634) $ (741)
============ ============
Loss per common share, basic and
diluted $ (1.71) $ (2.02)
============ ============
Weighted average common shares
outstanding, basic and diluted 370,868,849 366,855,427
============ ============
(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 below for the reconciliation
of adjusted EBITDA to net cash flows from operating activities 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,
------------------------------------
2008 2007
Actual Pro Forma (a) % Change
------------ ------------- --------
REVENUES:
Video $ 874 $ 853 2.5%
High-speed Internet 339 307 10.4%
Telephone 134 80 67.5%
Commercial 96 82 17.1%
Advertising sales 75 75 0.0%
Other 105 93 12.9%
------------ -------------
Total revenues 1,623 1,490 8.9%
------------ -------------
COSTS AND EXPENSES:
Operating (excluding
depreciation and
amortization) (b) 698 642 8.7%
Selling, general and
administrative (excluding
stock compensation expense)
(c) 334 311 7.4%
Operating costs and
expenses 1,032 953 8.3%
------------ -------------
Adjusted EBITDA 591 537 10.1%
------------ -------------
Adjusted EBITDA margin 36.4% 36.0%
------------ -------------
Depreciation and amortization 328 332
Stock compensation expense 8 5
Other operating expenses, net 25 1
------------ -------------
Income from operations 230 199
------------ -------------
OTHER INCOME (EXPENSES):
Interest expense, net (474) (462)
Change in value of
derivatives 26 (3)
Other income (expense), net 1 (36)
------------ -------------
(447) (501)
------------ -------------
Loss before income taxes (217) (302)
Income tax expense (59) (59)
------------ -------------
Net loss $ (276) $ (361)
============ =============
Loss per common share, basic
and diluted $ (0.74) $ (0.98)
============ =============
Weighted average common shares
outstanding, basic and diluted 371,652,070 367,582,677
============ =============
Six Months Ended June 30,
-------------------------------------
2008 2007
Actual Pro Forma (a) % Change
------------ ------------- ---------
REVENUES:
Video $ 1,732 $ 1,684 2.9%
High-speed Internet 667 600 11.2%
Telephone 255 143 78.3%
Commercial 189 163 16.0%
Advertising sales 143 137 4.4%
Other 201 179 12.3%
------------ -------------
Total revenues 3,187 2,906 9.7%
------------ -------------
COSTS AND EXPENSES:
Operating (excluding
depreciation and
amortization) (b) 1,380 1,268 8.8%
Selling, general and
administrative (excluding
stock compensation expense)
(c) 671 608 10.4%
Operating costs and
expenses 2,051 1,876 9.3%
------------ -------------
Adjusted EBITDA 1,136 1,030 10.3%
------------ -------------
Adjusted EBITDA margin 35.6% 35.4%
------------ -------------
Depreciation and amortization 649 662
Stock compensation expense 16 10
Other operating expenses, net 36 4
------------ -------------
Income from operations 435 354
------------ -------------
OTHER INCOME (EXPENSES):
Interest expense, net (939) (926)
Change in value of
derivatives (11) (4)
Other income (expense), net (2) (39)
------------ -------------
(952) (969)
------------ -------------
Loss before income taxes (517) (615)
Income tax expense (117) (109)
------------ -------------
Net loss $ (634) $ (724)
============ =============
Loss per common share, basic
and diluted $ (1.71) $ (1.97)
============ =============
Weighted average common shares
outstanding, basic and diluted 370,868,849 366,855,427
============ =============
(a) Pro forma results reflect certain sales and acquisitions of cable
systems in 2007 as if they occurred as of January 1, 2007. The pro
forma statements of operations do not include adjustments for
financing transactions completed by Charter during the periods
presented or certain other dispositions of assets because those
transactions did not significantly impact Charter's adjusted EBITDA.
However, all transactions completed in 2007 and 2008 have been
reflected in the operating statistics. The pro forma data is based on
information available to Charter as of the date of this document and
certain assumptions that we believe are reasonable under the
circumstances. The financial data required allocation of certain
revenues and expenses and such information has been presented for
comparative purposes and is not intended to provide any indication of
what our actual financial position, or results of operations would
have been had the transactions described above been completed on the
dates indicated or to project our results of operations for any
future date.
(b) Operating expenses include programming, service, and advertising
sales expenses.
(c) Selling, general and administrative expenses include general and
administrative and marketing expenses.
June 30, 2007. Pro forma revenues and operating costs and expenses
were reduced by $9 million and $6 million, respectively, for the
three months ended June 30, 2007. Pro forma net loss increased by $1
million for the three months ended June 30, 2007. Pro forma revenues,
operating costs and expenses and net loss were reduced by $18
million, $12 million and $17 million, respectively, for the six
months ended June 30, 2007.
Adjusted EBITDA is a non-GAAP term. See below for the reconciliation
of adjusted EBITDA to net cash flows from operating activities as
defined by GAAP.
CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED BALANCE SHEETS
(DOLLARS IN MILLIONS)
June 30, December 31,
2008 2007
-------- ------------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 63 $ 75
Short-term investments 13 -
Accounts receivable, net of allowance for
doubtful accounts 250 225
Prepaid expenses and other current assets 35 36
-------- ------------
Total current assets 361 336
-------- ------------
INVESTMENT IN CABLE PROPERTIES:
Property, plant and equipment, net 5,106 5,103
Franchises, net 8,935 8,942
-------- ------------
Total investment in cable properties, net 14,041 14,045
-------- ------------
OTHER NONCURRENT ASSETS 308 285
-------- ------------
Total assets $ 14,710 $ 14,666
======== ============
LIABILITIES AND SHAREHOLDERS' DEFICIT
CURRENT LIABILITIES:
Accounts payable and accrued expenses $ 1,293 $ 1,332
-------- ------------
Total current liabilities 1,293 1,332
-------- ------------
LONG-TERM DEBT 20,480 19,908
NOTE PAYABLE - RELATED PARTY 69 65
DEFERRED MANAGEMENT FEES - RELATED PARTY 14 14
OTHER LONG-TERM LIABILITIES 1,150 1,035
MINORITY INTEREST 203 199
PREFERRED STOCK - REDEEMABLE 5 5
SHAREHOLDERS' DEFICIT (8,504) (7,892)
-------- ------------
Total liabilities and shareholders'
deficit $ 14,710 $ 14,666
======== ============
CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN MILLIONS)
Six Months Ended June 30,
--------------------------
2008 2007
------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (634) $ (741)
Adjustments to reconcile net loss to net
cash flows from operating activities:
Depreciation and amortization 649 665
Noncash interest expense 27 21
Change in value of derivatives 11 4
Deferred income taxes 114 123
Other, net 22 39
Changes in operating assets and
liabilities, net of effects from
dispositions
Accounts receivable (24) (29)
Prepaid expenses and other assets - 26
Accounts payable, accrued expenses and
other 3 10
------------ ------------
Net cash flows from operating
activities 168 118
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and
equipment (650) (579)
Change in accrued expenses related to
capital expenditures (41) (39)
Other, net (11) 31
------------ ------------
Net cash flows from investing
activities (702) (587)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings of long-term debt 1,765 7,247
Repayments of long-term debt (1,195) (6,727)
Payments for debt issuance costs (39) (33)
Other, net (9) 3
------------ ------------
Net cash flows from financing
activities 522 490
------------ ------------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS (12) 21
CASH AND CASH EQUIVALENTS, beginning of
period 75 60
------------ ------------
CASH AND CASH EQUIVALENTS, end of period $ 63 $ 81
============ ============
CASH PAID FOR INTEREST $ 912 $ 918
============ ============
NONCASH TRANSACTIONS:
Cumulative adjustment to Accumulated
Deficit for the adoption of FIN 48 $ - $ 56
============ ============
CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES
UNAUDITED SUMMARY OF OPERATING STATISTICS
Approximate as of
---------------------------------------------------
Actual Pro Forma
------------ --------------------------------------
June 30, March 31, December 31, June 30,
2008 (a) 2008 (a) 2007 (a) 2007 (a)
------------ ------------ ------------ ------------
Customer Summary:
Customer
Relationships:
Residential
(non-bulk)
basic video
customers (b) 4,897,100 4,947,900 4,958,600 5,054,800
Multi-dwelling
(bulk) and
commercial unit
customers (c) 264,900 258,900 260,100 269,000
------------ ------------ ------------ ------------
Total basic
video
customers 5,162,000 5,206,800 5,218,700 5,323,800
Non-video
customers (b) 395,600 390,800 376,400 348,400
------------ ------------ ------------ ------------
Total customer
relationships
(d) 5,557,600 5,597,600 5,595,100 5,672,200
============ ============ ============ ============
Pro forma
average monthly
revenue per
basic video
customer (e) $ 104.35 $ 100.16 $ 98.13 $ 93.01
Pro forma
average monthly
video revenue
per basic video
customer (f) $ 58.73 $ 57.48 $ 56.13 $ 55.59
Residential
bundled
customers (g) 2,639,000 2,602,800 2,506,700 2,370,900
Revenue Generating
Units:
Basic video
customers (b)
(c) 5,162,000 5,206,800 5,218,700 5,323,800
Digital video
customers (h) 3,056,900 3,023,000 2,920,100 2,843,800
Residential
high-speed
Internet
customers (i) 2,787,300 2,768,000 2,682,300 2,577,900
Telephone
customers (j) 1,175,500 1,085,000 959,300 701,300
------------ ------------ ------------ ------------
Total revenue
generating
units (k) 12,181,700 12,082,800 11,780,400 11,446,800
============ ============ ============ ============
Video Cable
Services:
Basic Video:
Estimated homes
passed (l) 11,890,800 11,792,800 11,741,500 11,591,700
Basic video
customers
(b)(c) 5,162,000 5,206,800 5,218,700 5,323,800
Estimated
penetration of
basic homes
passed (b) (c)
(l) (m) 43.4% 44.2% 44.4% 45.9%
Pro forma basic
video customers
quarterly net
loss (b) (c)
(n) (44,800) (11,900) (66,400) (28,300)
Digital Video:
Digital video
customers (h) 3,056,900 3,023,000 2,920,100 2,843,800
Digital
penetration of
basic video
customers (b)
(c) (h) (o) 59.2% 58.1% 56.0% 53.4%
Digital set-top
terminals
deployed 4,409,300 4,340,300 4,192,700 4,102,400
Pro forma
digital video
customers
quarterly net
gain (h) (n) 33,900 102,900 59,600 8,700
Non-Video Cable
Services:
High-Speed
Internet
Services:
Estimated high-
speed Internet
homes passed
(l) 11,203,400 11,105,800 11,051,400 10,877,000
Residential
high-speed
Internet
customers (i) 2,787,300 2,768,000 2,682,300 2,577,900
Estimated
penetration of
high-speed
Internet homes
passed (i) (l)
(m) 24.9% 24.9% 24.3% 23.7%
Pro forma
average monthly
high-speed
Internet
revenue per
high-speed
Internet
customer (f) $ 40.67 $ 40.08 $ 40.21 $ 40.14
Pro forma high-
speed Internet
customers
quarterly net
gain (i) (n) 19,300 85,700 50,500 60,800
Telephone
Services:
Estimated
telephone homes
passed (l) 9,990,500 9,525,200 9,013,900 7,649,100
Telephone
customers (j) 1,175,500 1,085,000 959,300 701,300
Estimated
penetration of
telephone homes
passed (i) (l)
(m) 11.8% 11.4% 10.6% 9.2%
Pro forma
average monthly
telephone
revenue per
telephone
customer (f) $ 40.62 $ 40.42 $ 41.74 $ 42.01
Pro forma
telephone
customers
quarterly net
gain (j) (n) 90,500 125,700 155,300 128,000
Pro forma operating statistics reflect the sales and acquisitions of
cable systems in 2007 and 2008 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 of assets because
those transactions did not significantly impact Charter's adjusted
EBITDA. However, all transactions completed in 2007 and 2008 have
been reflected in the operating statistics.
At March 31, 2008 actual basic video customers, digital video
customers, high-speed Internet customers and telephone customers were
5,208,000, 3,023,200, 2,768,200, and 1,085,000, respectively.
At December 31, 2007 actual basic video customers, digital video
customers, high-speed Internet customers and telephone customers were
5,219,900, 2,920,400, 2,682,500, and 959,300, respectively.
At June 30, 2007 actual basic video customers, digital video
customers, high-speed Internet customers and telephone customers were
5,376,800, 2,866,000, 2,583,200, and 700,300, respectively.
See footnotes to unaudited summary of operating statistics below.
(a) "Customers" include all persons our corporate billing records show
as receiving service (regardless of their payment status), except for
complimentary accounts (such as our employees). In addition, at June
30, 2008, March 31, 2008, December 31, 2007, and June 30, 2007,
"customers" include approximately 34,200, 30,600, 48,200, and 31,300
persons whose accounts were over 60 days past due in payment,
approximately 5,300, 4,700, 10,700, and 3,800 persons whose accounts
were over 90 days past due in payment and approximately 2,600, 3,200,
2,900, and 1,500 of which were over 120 days past due in payment,
respectively.
(b) "Basic video customers" include all residential customers who
receive video services (including those who also purchase high-speed
Internet and telephone services) but excludes approximately 395,600,
390,800, 376,400, and 348,400 customer relationships at June 30,
2008, March 31, 2008, December 31, 2007, and June 30, 2007,
respectively, who receive high-speed Internet service only, telephone
service only, or both high-speed Internet service and telephone
service and who are only counted as high-speed Internet customers or
telephone customers.
(c) Included within "basic video customers" are those in commercial
and multi-dwelling structures, which are calculated on an equivalent
bulk unit ("EBU") basis. EBU is calculated for a system by dividing
the bulk price charged to accounts in an area by the most prevalent
price charged to non-bulk residential customers in that market for
the comparable tier of service. The EBU method of estimating basic
video customers is consistent with the methodology used in
determining costs paid to programmers and has been used consistently.
As we increase our effective video prices to residential customers
without a corresponding increase in the prices charged to commercial
service or multi-dwelling customers, our EBU count will decline even
if there is no real loss in commercial service or multi-dwelling
customers.
(d) "Customer relationships" include the number of customers that
receive one or more levels of service, encompassing video, Internet
and telephone services, without regard to which service(s) such
customers receive. This statistic is computed in accordance with the
guidelines of the National Cable & Telecommunications Association
(NCTA) that have been adopted by eleven publicly traded cable
operators, including Charter.
(e) "Pro forma average monthly revenue per basic video customer" is
calculated as total quarterly pro forma revenue divided by three
divided by average pro forma basic video customers during the
respective quarter.
(f) "Pro forma average monthly revenue per customer" represents
quarterly pro forma revenue for the service indicated divided by
three divided by the number of pro forma customers for the service
indicated during the respective quarter.
(g) "Residential bundled customers" include residential customers
receiving a combination of at least two different types of service,
including Charter's video service, high-speed Internet service or
telephone. "Residential bundled customers" do not include residential
customers who only subscribe to video service.
(h) "Digital video customers" include all basic video customers that
have one or more digital set-top boxes or cable cards deployed.
(i) "Residential high-speed Internet customers" represent those
residential customers who subscribe to our high-speed Internet
service. At June 30, 2008, March 31, 2008, December 31, 2007, and
June 30, 2007, approximately 2,494,600, 2,470,300, 2,392,700, and
2,294,900 of these high-speed Internet customers, respectively,
receive video and/or telephone services from us and are included
within the respective statistics above.
(j) "Telephone customers" include all customers receiving telephone
service. As of June 30, 2008, March 31, 2008, December 31, 2007, and
June 30, 2007, approximately 1,133,800, 1,048,800, 920,600, and
669,500 of these telephone customers, respectively, receive video
and/or high-speed Internet services from us and are included within
the respective statistics above.
(k) "Revenue generating units" represent the sum total of all basic
video, digital video, high-speed Internet and telephone customers,
not counting additional outlets within one household. For example, a
customer who receives two types of service (such as basic video and
digital video) would be treated as two revenue generating units, and
if that customer added on high-speed Internet service, the customer
would be treated as three revenue generating units. This statistic is
computed in accordance with the guidelines of the NCTA that have been
adopted by eleven publicly traded cable operators, including Charter.
(l) "Homes passed" represent our estimate of the number of living
units, such as single family homes, apartment units and condominium
units passed by our cable distribution network in the areas where we
offer the service indicated. "Homes passed" exclude commercial units
passed by our cable distribution network. These estimates are updated
for all periods presented when estimates change.
(m) "Penetration" represents customers as a percentage of homes passed
for the service indicated.
(n) "Pro forma quarterly net gain (loss)" represents the pro forma net
gain or loss in the respective quarter for the service indicated.
(o) "Digital penetration of basic video customers" represents the
number of digital video customers as a percentage of basic video
customers.
CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES
UNAUDITED RECONCILIATION OF NON-GAAP MEASURES TO GAAP MEASURES
(DOLLARS IN MILLIONS)
Three Months Ended June 30,
-----------------------------
2008 2007 2007
Actual Actual Pro Forma (a)
------- ------- -------------
Net cash flows from operating activities $ (36) $ (148) $ (151)
Less: Purchases of property, plant and
equipment (316) (281) (281)
Less: Change in accrued expenses related
to capital expenditures (10) (7) (7)
------- ------- -------------
Free cash flow (362) (436) (439)
Interest on cash pay obligations (b) 460 452 452
Purchases of property, plant and
equipment 316 281 281
Change in accrued expenses related to
capital expenditures 10 7 7
Other, net 25 18 18
Change in operating assets and
liabilities 142 218 218
------- ------- -------------
Adjusted EBITDA (c) $ 591 $ 540 $ 537
======= ======= =============
Six Months Ended June 30,
-----------------------------
2008 2007 2007
Actual Actual Pro Forma (a)
------- ------- -------------
Net cash flows from operating activities $ 168 $ 118 $ 112
Less: Purchases of property, plant and
equipment (650) (579) (579)
Less: Change in accrued expenses related
to capital expenditures (41) (39) (39)
------- ------- -------------
Free cash flow (523) (500) (506)
Interest on cash pay obligations (b) 912 905 905
Purchases of property, plant and
equipment 650 579 579
Change in accrued expenses related to
capital expenditures 41 39 39
Other, net 35 20 20
Change in operating assets and
liabilities 21 (7) (7)
------- ------- -------------
Adjusted EBITDA (c) $1,136 $1,036 $ 1,030
======= ======= =============
(a) Pro forma results reflect certain sales and acquisitions of cable
systems in 2007 as if they occurred as of January 1, 2007.
(b) Interest on cash pay obligations excludes accretion of original
issue discounts on certain debt securities and amortization of
deferred financing costs that are reflected as interest expense in
our consolidated statements of operations.
(c) See above 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 Six Months Ended
June 30, June 30,
------------------ ------------------
2008 2007 2008 2007
-------- -------- -------- --------
Customer premise equipment (a) $ 158 $ 128 $ 323 $ 289
Scalable infrastructure (b) 52 51 133 100
Line extensions (c) 23 25 44 49
Upgrade/Rebuild (d) 12 12 29 24
Support capital (e) 71 65 121 117
-------- -------- -------- --------
Total capital expenditures $ 316 $ 281 $ 650 $ 579
======== ======== ======== ========
(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 in
accordance with SFAS No. 51 and customer premise equipment (e.g.,
set-top boxes and cable modems, etc.).
(b) Scalable infrastructure includes costs, not related to customer
premise equipment or our network, to secure growth of new customers,
revenue units and additional bandwidth revenues or provide service
enhancements (e.g., headend equipment).
(c) Line extensions include network costs associated with entering new
service areas (e.g., fiber/coaxial cable, amplifiers, electronic
equipment, make-ready and design engineering).
(d) Upgrade/rebuild includes costs to modify or replace existing
fiber/coaxial cable networks, including betterments.
(e) Support capital includes costs associated with the replacement or
enhancement of non-network assets due to technological and physical
obsolescence (e.g., non-network equipment, land, buildings and
vehicles).
CONTACT: Charter Communications, Inc.
Media:
Anita Lamont, 314-543-2215
or
Analysts:
Mary Jo Moehle, 314-543-2397
SOURCE: Charter Communications, Inc.
