SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
8-K
Current
Report
Pursuant
to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date
of Report (Date of earliest event reported): November
1, 2005
Charter
Communications, Inc.
(Exact
name of registrant as specified in its charter)
Delaware
(State
or Other Jurisdiction of Incorporation or Organization)
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000-27927
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43-1857213
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|
|
(Commission
File Number)
|
(I.R.S.
Employer Identification
Number)
|
12405
Powerscourt Drive
St.
Louis, Missouri 63131
(Address
of principal executive offices including zip code)
(314)
965-0555
(Registrant's
telephone number, including area code)
Not
Applicable
(Former
name or former address, if changed since last report)
ITEM
2.02.
RESULTS
OF OPERATONS AND FINANCIAL CONDITION.
On
November 1, 2005, Charter Communications, Inc. issued a press release announcing
its results for the third quarter ended September 30, 2005. The following
information, including the entirety of the press release appearing in Exhibit
99.1 hereto, is not filed but is furnished pursuant to Item 2.02, "Results
of
Operations and Financial Condition."
ITEM
9.01. FINANCIAL STATEMENTS
AND EXHIBITS.
|
Exhibit
Number
|
Description
|
|
|
99.1
|
Press
Release dated November 1, 2005. *
|
*
furnished herewith
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 åSecurities Actæ), 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. 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" 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 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
be able to
provide under applicable debt instruments such funds (by dividend,
investment or otherwise) to the applicable obligor of such
debt;
|
| · |
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 a stable customer base, particularly
in
the face of increasingly aggressive competition from other service
providers;
|
| · |
our
ability to comply with all covenants in our indentures, the Bridge
Loan
and credit facilities, any violation of which would result in a
violation
of the applicable facility or indenture and could trigger a default
of
other obligations under cross-default
provisions;
|
| · |
our
ability to pay or refinance debt prior to or when it becomes due
and/or to
take advantage of market opportunities and market windows to refinance
that debt in the capital markets through new issuances, exchange
offers or
otherwise, including restructuring our balance sheet and leverage
position;
|
| · |
our
ability to obtain programming at reasonable prices or to pass programming
cost increases on to our customers;
|
| · |
general
business conditions, economic uncertainty or slowdown;
and
|
| · |
the
effects of governmental regulation, including but not limited to
local
franchise authorities, 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.
SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, Charter
Communications, Inc. has duly caused this Current Report to be signed on its
behalf by the undersigned hereunto duly authorized.
CHARTER
COMMUNICATIONS, INC.
Registrant
Dated:
November 1, 2005
|
|
By:/s/
Paul E. Martin
Name:
Paul E. Martin
Title:
Senior Vice President, Interim Chief Financial Officer,
Principal
Accounting Officer and Corporate Controller
(Principal
Financial Officer and Principal Accounting
Officer)
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EXHIBIT
INDEX
|
Exhibit
Number
|
Description
|
|
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99.1
|
Press
Release dated November 1, 2005.
*
|
*
furnished herewith
Exhibit
99.1
NEWS
FOR
RELEASE: 8:00 AM CT, Tuesday, November 1, 2005
Charter
Reports Third Quarter 2005
Financial
and Operating Results
Long-Standing
CC VIII Dispute Resolved
Quarterly
Revenues Increased by 5.6% to $1.318 Billion
Driven
by High-Speed Internet
St.
Louis, MO -
Charter
Communications, Inc. (Nasdaq: CHTR) (along with its subsidiaries, the "Company"
or "Charter") today reported financial and operating results for the three
and
nine months ended September 30, 2005.
Highlights
Charter
today announced the resolution of a long-standing dispute concerning ownership
by Charter Investment, Inc. of 24.3 million Class A preferred membership
units
in CC VIII LLC, a subsidiary of Charter, and also reported that during the
third
quarter of 2005, the Company
|
·
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Added
a net 186,300 revenue generating units (RGUs) on a pro forma basis,
nearly
double the third quarter 2004 RGU gain, driven by the addition
of 98,400
high-speed Internet (HSI) customers, 75,800 digital video customers
and
22,100 telephone customers;
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|
·
|
Grew
actual revenues to $1.318 billion, a $70 million, or 5.6%, increase
over
the year ago quarter (6.5% pro forma for asset sales and excluding
hurricane impact), primarily driven by increased HSI revenues;
and
|
|
·
|
Completed
a $6.768 billion private debt exchange, issued $300 million senior
notes
and established a $600 million bridge
facility.
|
"I’m
encouraged by a number of financial and operational achievements this past
quarter," said Neil Smit, President and Chief Executive Officer. "These
achievements reflect our renewed customer-first focus and increased marketing
activity built on a disciplined, segmented approach," Mr. Smit continued.
"We’re
beginning to see improved customer growth together with better ARPU and
retention across all categories.
We
intend
to maintain this positive momentum through focused marketing and operational
programs across all product lines.
"Charter’s
employees are to be commended for the progress we are making. This quarter’s
customer performance gives me confidence that we’re on the right track to
sustain success, and our recent financing activities further improved the
Company’s long-term financial flexibility.
"On
a
personal level, I’m encouraged after two months on the job. While we have lots
of work to do, we’re building the team and the capabilities to deliver
results."
Operating
Results
During
the quarter, Charter completed the sale of certain geographically non-strategic
cable systems in Texas and West Virginia in July 2005 (July Asset Sales),
which
served approximately 26,800 analog video customers. All following quarter
over
quarter changes in customer statistics are pro forma for this sale. During
the
third quarter, Charter added a net 186,300 revenue generating units, driven
by
the addition of 98,400 high-speed Internet customers, 75,800 digital video
customers and 22,100 telephone customers, offset by the loss of 10,000 analog
video customers. As of September 30, 2005, Charter served approximately
10,865,600 RGUs, 5,906,300 analog video, 2,749,400 digital video, 2,120,000
HSI
and 89,900 telephone customers.
Third
Quarter Results
Pro
forma
for the July Asset Sales and excluding credits issued to customers impacted
by
the hurricanes, revenue for the third quarter of 2005 increased $81 million,
or
6.5%, compared to the third quarter of 2004.
Actual
third quarter 2005 revenues were $1.318 billion, an increase of $70 million,
or
5.6%, over third quarter 2004 revenues of $1.248 billion. The increase in
revenues was primarily driven by growth in HSI revenues and average revenue
per
customer. For the three months ended September 30, 2005, HSI revenues increased
$41 million, or 21.7%, reflecting 300,100 net additional HSI customers since
September 30, 2004, as well as a 3.3% increase in average revenue per HSI
customer. Video revenues increased $9 million, or 1.1%, compared to the third
quarter of 2004, due to an increase in average monthly video revenue per
customer and an increase in digital video
customers,
partially offset by the loss of analog video customers, including the July
Asset
Sales, during the period and $5 million of credits issued to customers
related
to hurricane outages. Commercial revenues increased $10 million, or 16.4%,
and
other revenue increased $9 million, or 10.5%, for the third quarter of
2005
compared to the third quarter of 2004, primarily due to increased telephone
and
franchise fee revenue. Advertising sales revenues remained essentially
flat
compared to the year ago quarter.
Third
quarter 2005 operating costs and expenses were $855 million, an increase
of $78
million, or 10.0%, compared to the year ago quarter. The rise in third quarter
2005 operating costs and expenses over 2004 primarily resulted from a $30
million, or 17.3%, increase in service costs, a $29 million, or 8.8%, increase
in programming costs, and an $11 million, or 5.0%, increase in general and
administrative costs. Marketing costs also increased $6 million, or 18.8%,
and
advertising sales costs increased $2 million, or 8.3%, compared to the year
ago
quarter. The rise in service costs is a result of increased labor and
maintenance costs to support improved service levels and the Company’s advanced
products, and higher fuel prices. Programming
costs grew as a result of price increases, particularly in sports programming,
partially offset by a decrease in analog video customers. General
and administrative costs increased due to increases in professional fees
associated with consulting services and a rise in salaries and benefits related
to increased emphasis on improved service levels and operational efficiencies,
partially offset by decreases in property taxes, property and casualty insurance
and bad debt expense.
Charter
reported income from operations of $63 million for the third quarter of 2005
compared to a loss of $2.344 billion for the third quarter of 2004. The variance
in income from operations was primarily driven by the $2.433 billion impairment
of franchises recorded in the third quarter of 2004, as well as the variances
discussed previously, partially offset by a $19 million loss on asset retirement
recorded due to damage incurred by hurricanes Katrina and Rita.
Net
income applicable to common stock for the third quarter of 2005 was $75 million,
and earnings per common share was 24 cents and 9 cents on a basic and fully
diluted basis, respectively. For the third quarter of 2004, Charter reported
a
net loss applicable to common stock and loss per common share of $3.295 billion
and $10.89,
respectively.
The $3.370 billion variance in net income applicable to common stock for
the
third quarter of 2005 compared to the same year ago period is primarily
the
result of the impairment charge and related cumulative effect of an accounting
change recorded in 2004 and a $490 million gain on extinguishment of debt
recorded in the third quarter of 2005 related to the debt exchange completed
in
September 2005, partially offset by the income tax benefit in the third
quarter
of 2004 as a result of the impairment charge.
Year
to Date Results
Pro
forma
for the July Asset Sales and the sale of systems in March and April 2004
and
excluding credits issued to customers impacted by the hurricanes, revenue
for
the nine months ended September 30, 2005, increased $250 million, or 6.8%
compared to the year ago period.
Actual
revenues for the nine months ended September 30, 2005, were $3.912 billion,
an
increase of $211 million, or 5.7%, over revenues for the same 2004 period
of
$3.701 billion. For the nine months ended September 30, 2005, operating costs
and expenses were $2.476 billion, an increase of $189 million, or 8.3%, compared
to the same year ago period. Service costs increased $83 million, or 17.0%,
as a
result of increased labor and maintenance costs to support improved service
levels and the Company’s advanced products, and higher fuel prices; programming
costs increased $75 million, or 7.6%; and general and administrative costs
increased $22 million, or 3.5%, compared to the year ago period. Marketing
costs
also increased $5 million, or 5.1%, and advertising sales costs increased
$4
million, or 5.6%, compared to year to date 2004.
Charter
reported income from operations of $224 million for the nine months ended
September 30, 2005, compared to a loss of $2.154 billion for the same 2004
period. The variance in income from operations was primarily driven by the
impairment of franchises and special charges primarily due to litigation
costs
related to the settlement of the securities class action lawsuits recorded
in
2004, as well as the variances discussed above, partially offset by the $104
million gain primarily related to asset sales occurring in March and April
2004.
Net
loss
applicable to common stock and loss per common share for the nine months
ended
September 30, 2005, were $634 million and $2.06, respectively. For the
nine
months ended September 30, 2004, Charter reported net loss applicable to
common
stock and loss per common share of $4.005 billion and $13.38, respectively.
Liquidity
Pro
forma
for the July Asset Sales and excluding the impact of credits associated with
hurricanes Katrina and Rita, adjusted EBITDA was essentially flat for the
third
quarter of 2005 compared to the same year ago period. Actual adjusted EBITDA
totaled $463 million for the three months ended September 30, 2005, a decrease
of $8 million, or 1.7%, compared to the year ago period. Pro forma for the
July
Asset Sales and the sale of systems in March and April 2004 and excluding
the
impact of credits associated with hurricanes Katrina and Rita, adjusted EBITDA
increased 3.0% for the nine months ended September 30, 2005, compared to
the
same year ago period. Actual adjusted EBITDA for the nine months ended September
30, 2005, was $1.436 billion, an increase of $22 million, or 1.6%, compared
to
adjusted EBITDA of $1.414 billion for the nine months ended September 30,
2004.
Net
cash
flows used in operating activities for the third quarter of 2005 were $63
million, compared to net cash provided by operating activities of $215 million
for the year ago quarter. Net cash provided by operating activities decreased
$265 million, or 69.2%, from $383 million for the nine months ended September
30, 2004 to $118 million for the nine months ended September 30, 2005.
For
the nine months ended September 30, 2005, net cash provided by operating
activities decreased primarily as a result of changes in operating assets
and
liabilities that used $144 million more cash during the nine months ended
September 30, 2005 than the corresponding period in 2004 combined with an
increase in cash interest expense of $155 million over the corresponding
prior
period, partially offset by an increase in revenue over cash costs.
Expenditures
for property, plant and equipment for the third quarter of 2005 were $273
million, compared to third quarter 2004 expenditures of $249 million. For
the
nine months ended September 30, 2005, expenditures for property, plant and
equipment were $815 million, while expenditures for the same 2004 period
totaled
$639 million. The increases were primarily driven by spending on scalable
infrastructure related to telephone, video on demand and digital simulcast,
and
support capital related to Charter’s investment in infrastructure and service
improvements.
Charter
reported negative free cash flow of $198 million for the third quarter of
2005
compared to $128 million for the third quarter of 2004. Negative free cash
flow
for the nine months ended September 30, 2005, was $524 million, compared
to $215
million for the same 2004 period. Higher capital expenditures and interest
on
cash-pay obligations contributed to the increase in negative free cash
flow.
As
of
September 30, 2005, Charter had $19.120 billion of outstanding indebtedness
and
$22 million of cash on hand. The Company’s total potential borrowing
availability under the Charter Communications Operating, LLC credit facility
totaled $786 million, as of September 30, 2005, although the actual availability
at that time was $648 million because of limits imposed by covenant
restrictions. Charter
believes that cash on hand, cash flows from operations, and amounts available
under the credit facilities and $600 million senior bridge loan becoming
available on January 2, 2006 will be sufficient to meet cash needs for the
remainder of 2005 and 2006. The Company plans to continue its opportunistic
approach to maintain liquidity, extend maturities and de-lever the balance
sheet.
Financing
As
part
of the Company’s ongoing efforts to extend maturities and reduce indebtedness,
in September 2005, Charter Communications Holdings, LLC
("Charter Holdings") exchanged in a private placement $6.768 billion of debt
due
2009-2012 for new debt securities at CCH I, LLC and CCH I Holdings, LLC due
2011-2015. During the third quarter of 2005 Charter also issued $300 million
senior notes due 2013 and put in place a $600 million senior bridge loan
agreement at CCO Holdings, LLC to further enhance liquidity.
CC
VIII Settlement
The
Company, acting through a Special Committee of Charter’s Board of Directors, and
Mr. Allen, the Company’s controlling stockholder and Chairman of the Board, have
settled a previously-disclosed dispute that had arisen between the parties
with
regard to the ownership of
a
Charter
subsidiary, CC VIII LLC ("CC VIII").
Under
the
terms of the settlement reached between the Company and Mr. Allen after
extensive negotiations, Mr.
Allen’s affiliated company, Charter Investment, Inc. ("CII") will retain 30% of
the Class A preferred equity interests it previously held in CC
VIII,
subject to certain rights and restrictions concerning
transfer. Of
the
other 70% of the CC VIII preferred interests,
7.4%
has been transferred by CII to CCHC, LLC, ("CCHC") a newly formed direct,
wholly
owned subsidiary of Charter Communications Holding Company, LLC ("Charter
HoldCo") and
the
new direct parent of Charter Holdings in exchange for a subordinated
exchangeable note issued to CII and the remaining 62.4% has been transferred
by
CII to
Charter HoldCo for no additional consideration, which transferred the 62.4%
interest to CCHC. The note has an initial
accreted value of $48.2 million accreting at 14%, compounded quarterly,
with a
15-year maturity.
Also
as
part of the settlement, CC VIII issued approximately 49 million additional
Class
B units to CC V, LLC, the direct parent of CC VIII, in consideration for
prior
capital contributions to CC VIII by CC V, LLC in connection with a transaction
that was unrelated to the dispute with CII. As a result of these transfers
and
issuances, Mr. Allen's pro rata share of the profits and losses of CC VIII
is
approximately 5.6%.
Hurricanes
Katrina and Rita
Charter’s
operations in the Gulf
Coast were affected by hurricanes Katrina and Rita, with the majority of
damage
in Louisiana and Mississippi,
and
minor damage in Alabama and Georgia. The hurricanes impacted approximately
216,000 customers. Service has been restored to substantially all areas.
The
majority of damage sustained was to the Company’s field infrastructure, while
headends were largely undamaged. During the three months ended September
30,
2005, the Company
recorded a $19 million loss associated with the write-off of the net book
value
of assets
related
to these damages. Employees from other Charter locations have been dispatched
to
this area to help rebuild infrastructure to restore service to customers
in a
timely fashion.
The
Company has estimated credits to customers of $6 million for outages through
September 30, 2005, which are reflected as a reduction of revenue for the
three
and nine months ended September 30, 2005. Additional credits are expected
to be
issued in the fourth quarter of 2005 based on the period of individual customer
outages.
Mr.
Smit
said, "In the aftermath of the hurricanes, our employees and suppliers began
working immediately to restore video and high-speed Internet service. We
understand how important these connections are to our customers, because
they
are
important
to the hundreds of Charter employees who are a part of these affected
communities as well."
Use
of Non-GAAP Financial Metrics
The
Company uses certain measures that are not defined by GAAP (Generally Accepted
Accounting Principles) to evaluate various aspects of its business. Adjusted
EBITDA, un-levered free cash flow 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 special charges, non-cash
depreciation and amortization, gain/loss on sale or retirement of assets,
asset
or franchise impairment charges, option compensation expense and hurricane
asset
retirement loss. As such, it eliminates the significant non-cash depreciation
and amortization expense that results from the capital-intensive nature of
the
Company’s businesses and intangible assets recognized in business combinations
as well as other non-cash or non-recurring items, and is unaffected by the
Company’s capital structure or investment activities. Adjusted EBITDA is a
liquidity measure used by Company management and the 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.
Un-levered
free cash flow is defined as adjusted EBITDA less purchases of property,
plant
and equipment. The Company believes this is an important measure as it takes
into account the period costs associated with capital expenditures used to
upgrade, extend and maintain Charter’s plant without regard to the Company’s
leverage structure.
Free
cash
flow is defined as un-levered free cash flow less interest on cash pay
obligations. It can also be computed as net cash flows from operating
activities, less capital expenditures and cash special charges, adjusted
for the
change in operating assets
and
liabilities, net of dispositions. As such, it is unaffected by fluctuations
in
working capital levels from period to period.
The
Company believes that adjusted EBITDA, un-levered free cash flow 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, as
presented, is reduced for management fees in the amounts of $33 million and
$21
million for the three months ended September 30, 2005 and 2004, respectively,
which amounts are added back for the purposes of calculating compliance with
leverage covenants. As of September 30, 2005, Charter and its subsidiaries
are
in compliance with their debt covenants and expect to remain in compliance
for
the next 12 months.
Conference
Call
The
Company will host a Conference Call on Tuesday, November 1, 2005, at 11:00
AM
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 Us" at the top right of the page, then
again
on "Investor 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.
Those
participating via telephone should dial 888-233-1576. International participants
should dial 706-643-3458.
A
replay
will be available at 800-642-1687 or 706-645-9291 beginning two hours after
completion of the call through midnight November 8, 2005. The passcode for
the
replay is 1182357.
About
Charter Communications
Charter
Communications, Inc., a broadband communications company, provides a full
range
of advanced broadband services to the home, including cable television on
an
advanced digital video programming platform via Charter Digital™, Charter
High-
Speed™
Internet service and Charter Telephone™. Charter Business™ provides scalable,
tailored and cost-effective broadband communications solutions to organizations
of all sizes through business-to-business Internet, data networking, video
and
music services. Advertising sales and production services are sold under
the
Charter Media® brand. More information about Charter can be found at
www.charter.com
<<http://www.charter.com>>.
#
#
#
Contact:
Press: Analysts:
David
Andersen Mary
Jo
Moehle
314/543-2213 314/543-2397
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. The Company will not undertake to revise forward-looking projections
to reflect events after this date. 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. 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" 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 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
be able to
provide under applicable debt instruments such funds (by dividend,
investment or otherwise) to the applicable obligor of such
debt;
|
|
·
|
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 a stable customer base, particularly
in
the face of increasingly aggressive competition from other service
providers;
|
|
·
|
our
ability to comply with all covenants in our indentures, the Bridge
Loan
and credit facilities, any violation of which would result in a
violation
of the applicable facility or indenture and could trigger a default
of
other obligations under cross-default
provisions;
|
|
·
|
our
ability to pay or refinance debt prior to or when it becomes due
and/or to
take advantage of market opportunities and market windows to refinance
that debt in the capital markets through new issuances, exchange
offers or
otherwise, including restructuring our balance sheet and leverage
position;
|
|
·
|
our
ability to obtain programming at reasonable prices or to pass programming
cost increases on to our customers;
|
|
·
|
general
business conditions, economic uncertainty or slowdown;
and
|
|
·
|
the
effects of governmental regulation, including but not limited to
local
franchise authorities, 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.
|
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 September 30,
|
Nine
Months Ended September 30,
|
||||||||||||||||||
|
2005
|
2004
|
2005
|
2004
|
||||||||||||||||
|
Actual
|
Actual
|
%
Change
|
Actual
|
Actual
|
%
Change
|
||||||||||||||
|
REVENUES:
|
|||||||||||||||||||
|
Video
(a)
|
$
|
848
|
$
|
839
|
1.1
|
%
|
$
|
2,551
|
$
|
2,534
|
0.7
|
%
|
|||||||
|
High-speed
Internet (b)
|
230
|
189
|
21.7
|
%
|
671
|
538
|
24.7
|
%
|
|||||||||||
|
Advertising
sales
|
74
|
73
|
1.4
|
%
|
214
|
205
|
4.4
|
%
|
|||||||||||
|
Commercial
|
71
|
61
|
16.4
|
%
|
205
|
175
|
17.1
|
%
|
|||||||||||
|
Other
|
95
|
86
|
10.5
|
%
|
271
|
249
|
8.8
|
%
|
|||||||||||
|
Total
revenues
|
1,318
|
1,248
|
5.6
|
%
|
3,912
|
3,701
|
5.7
|
%
|
|||||||||||
|
COSTS
AND EXPENSES:
|
|||||||||||||||||||
|
Programming
|
357
|
328
|
8.8
|
%
|
1,066
|
991
|
7.6
|
%
|
|||||||||||
|
Service
|
203
|
173
|
17.3
|
%
|
572
|
489
|
17.0
|
%
|
|||||||||||
|
Advertising
sales
|
26
|
24
|
8.3
|
%
|
76
|
72
|
5.6
|
%
|
|||||||||||
|
General
and administrative
|
231
|
220
|
5.0
|
%
|
658
|
636
|
3.5
|
%
|
|||||||||||
|
Marketing
|
38
|
32
|
18.8
|
%
|
104
|
99
|
5.1
|
%
|
|||||||||||
|
Operating
costs and expenses
|
855
|
777
|
10.0
|
%
|
2,476
|
2,287
|
8.3
|
%
|
|||||||||||
|
Adjusted
EBITDA
|
463
|
471
|
(1.7
|
)%
|
1,436
|
1,414
|
1.6
|
%
|
|||||||||||
|
Adjusted
EBITDA margin
|
35
|
%
|
38
|
%
|
37
|
%
|
38
|
%
|
|||||||||||
|
Depreciation
and amortization
|
375
|
371
|
1,134
|
1,105
|
|||||||||||||||
|
Impairment
of franchises
|
--
|
2,433
|
--
|
2,433
|
|||||||||||||||
|
Asset
impairment charges
|
--
|
--
|
39
|
--
|
|||||||||||||||
|
(Gain)
loss on sale of assets, net
|
1
|
--
|
5
|
(104
|
)
|
||||||||||||||
|
Option
compensation expense, net
|
3
|
8
|
11
|
34
|
|||||||||||||||
|
Hurricane
asset retirement loss
|
19
|
--
|
19
|
--
|
|||||||||||||||
|
Special
charges, net
|
2
|
3
|
4
|
100
|
|||||||||||||||
|
Income
(loss) from operations
|
63
|
(2,344
|
)
|
224
|
(2,154
|
)
|
|||||||||||||
|
OTHER
INCOME AND EXPENSES:
|
|||||||||||||||||||
|
Interest
expense, net
|
(462
|
)
|
(424
|
)
|
(1,333
|
)
|
(1,227
|
)
|
|||||||||||
|
Gain
(loss) on derivative instruments and
|
|
|
|
|
|||||||||||||||
|
hedging
activities, net
|
17 | (8 | ) | 43 | 48 | ||||||||||||||
|
Loss
on debt to equity conversions
|
--
|
--
|
--
|
(23
|
)
|
||||||||||||||
|
Gain
(loss) on extinguishment of debt
|
490
|
--
|
498
|
(21
|
)
|
||||||||||||||
|
Gain
on investments
|
--
|
--
|
21
|
--
|
|||||||||||||||
|
45
|
(432
|
)
|
(771
|
)
|
(1,223
|
)
|
|||||||||||||
|
Income
(loss) before minority interest, income taxes
|
|||||||||||||||||||
|
and
cumulative effect of accounting change
|
108
|
(2,776
|
)
|
(547
|
)
|
(3,377
|
)
|
||||||||||||
|
|
|||||||||||||||||||
|
Minority
interest
|
(3
|
)
|
34
|
(9
|
)
|
24
|
|||||||||||||
|
Income
(loss) before income taxes
|
|||||||||||||||||||
|
and
cumulative effect of accounting change
|
105
|
(2,742
|
)
|
(556
|
)
|
(3,353
|
)
|
||||||||||||
|
Income
tax benefit (expense)
|
(29
|
)
|
213
|
(75
|
)
|
116
|
|||||||||||||
|
Income
(loss) before cumulative effect of accounting change
|
76
|
(2,529
|
)
|
(631
|
)
|
(3,237
|
)
|
||||||||||||
|
Cumulative
effect of accounting change, net of tax
|
--
|
(765
|
)
|
--
|
(765
|
)
|
|||||||||||||
|
Net
income (loss)
|
76
|
(3,294
|
)
|
(631
|
)
|
(4,002
|
)
|
||||||||||||
|
Dividends
on preferred stock - redeemable
|
(1
|
)
|
(1
|
)
|
(3
|
)
|
(3
|
)
|
|||||||||||
|
Net
income (loss) applicable to common stock
|
$
|
75
|
$
|
(3,295
|
)
|
$
|
(634
|
)
|
$
|
(4,005
|
)
|
||||||||
|
EARNINGS
(LOSS) PER SHARE:
|
|||||||||||||||||||
|
Basic
|
$
|
0.24
|
$
|
(10.89
|
)
|
$
|
(2.06
|
)
|
$
|
(13.38
|
)
|
||||||||
|
Diluted
|
$
|
0.09
|
$
|
(10.89
|
)
|
$
|
(2.06
|
)
|
$
|
(13.38
|
)
|
||||||||
|
Weighted
average common shares outstanding, basic
|
316,214,740
|
302,604,978
|
307,761,930
|
299,411,053
|
|||||||||||||||
|
Weighted
average common shares outstanding, diluted
|
1,012,591,842
|
302,604,978
|
307,761,930
|
299,411,053
|
|||||||||||||||
|
(a)
Video revenues is net of $5 million of credits issued to hurricanes
Katrina and Rita impacted customers related to service outages for
each of
the three and nine months
|
|||||||||||||||||||
|
ended
September 30, 2005.
|
|||||||||||||||||||
|
(b)
High-speed Internet revenues is net of $1 million of credits issued
to
hurricanes Katrina and Rita impacted customers related to service
outages
for each of the three and
|
|||||||||||||||||||
|
nine
months ended September 30, 2005.
|
|||||||||||||||||||
Addendum
to Charter Communications, Inc. Third Quarter 2005 Earnings Release
Page
1 of
8
|
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 September 30,
|
Nine
Months Ended September 30,
|
||||||||||||||||||
|
2005
|
2004
|
2005
|
2004
|
||||||||||||||||
|
Pro
forma (a)
|
Pro
Forma (a)
|
%
Change
|
Pro
forma (a)
|
Pro
Forma (a)
|
%
Change
|
||||||||||||||
|
REVENUES:
|
|||||||||||||||||||
|
Video
|
$
|
852
|
$
|
835
|
2.0
|
%
|
$
|
2,547
|
$
|
2,502
|
1.8
|
%
|
|||||||
|
High-speed
Internet
|
231
|
189
|
22.2
|
%
|
672
|
536
|
25.4
|
%
|
|||||||||||
|
Advertising
sales
|
75
|
72
|
4.2
|
%
|
214
|
203
|
5.4
|
%
|
|||||||||||
|
Commercial
|
71
|
61
|
16.4
|
%
|
205
|
171
|
19.9
|
%
|
|||||||||||
|
Other
|
95
|
86
|
10.5
|
%
|
270
|
246
|
9.8
|
%
|
|||||||||||
|
Total
revenues
|
1,324
|
1,243
|
6.5
|
%
|
3,908
|
3,658
|
6.8
|
%
|
|||||||||||
|
COSTS
AND EXPENSES:
|
|||||||||||||||||||
|
Programming
|
357
|
327
|
9.2
|
%
|
1,062
|
979
|
8.5
|
%
|
|||||||||||
|
Service
|
203
|
172
|
18.0
|
%
|
571
|
485
|
17.7
|
%
|
|||||||||||
|
Advertising
sales
|
26
|
24
|
8.3
|
%
|
75
|
71
|
5.6
|
%
|
|||||||||||
|
General
and administrative
|
231
|
219
|
5.5
|
%
|
657
|
629
|
4.5
|
%
|
|||||||||||
|
Marketing
|
38
|
32
|
18.8
|
%
|
105
|
98
|
7.1
|
%
|
|||||||||||
|
Operating
costs and expenses
|
855
|
774
|
10.5
|
%
|
2,470
|
2,262
|
9.2
|
%
|
|||||||||||
|
Adjusted
EBITDA
|
469
|
469
|
--
|
1,438
|
1,396
|
3.0
|
%
|
||||||||||||
|
Adjusted
EBITDA margin
|
35
|
%
|
38
|
%
|
37
|
%
|
38
|
%
|
|||||||||||
|
Depreciation
and amortization
|
375
|
369
|
1,132
|
1,093
|
|||||||||||||||
|
Impairment
of franchises
|
--
|
2,422
|
--
|
2,422
|
|||||||||||||||
|
Asset
impairment charges
|
--
|
--
|
8
|
--
|
|||||||||||||||
|
Loss
on sale of assets, net
|
1
|
--
|
6
|
1
|
|||||||||||||||
|
Option
compensation expense, net
|
3
|
8
|
11
|
34
|
|||||||||||||||
|
Special
charges, net
|
2
|
3
|
4
|
100
|
|||||||||||||||
|
Income
(loss) from operations
|
88
|
(2,333
|
)
|
277
|
(2,254
|
)
|
|||||||||||||
|
OTHER
INCOME AND EXPENSES:
|
|||||||||||||||||||
|
Interest
expense, net
|
(462
|
)
|
(423
|
)
|
(1,331
|
)
|
(1,222
|
)
|
|||||||||||
|
Gain
(loss) on derivative instruments and
|
|
|
|
|
|
||||||||||||||
|
hedging
activities, net
|
17 | (8 | ) | 43 | 48 | ||||||||||||||
|
Loss
on debt to equity conversions
|
--
|
--
|
--
|
(23
|
)
|
||||||||||||||
|
Gain
(loss) on extinguishment of debt
|
490
|
--
|
498
|
(21
|
)
|
||||||||||||||
|
Gain
on investments
|
--
|
--
|
21
|
--
|
|||||||||||||||
|
45
|
(431
|
)
|
(769
|
)
|
(1,218
|
)
|
|||||||||||||
|
Income
(loss) before minority interest, income taxes
|
|||||||||||||||||||
|
and
cumulative effect of accounting change
|
133
|
(2,764
|
)
|
(492
|
)
|
(3,472
|
)
|
||||||||||||
|
|
|||||||||||||||||||
|
Minority
interest
|
(3
|
)
|
34
|
(9
|
)
|
24
|
|||||||||||||
|
Income
(loss) before income taxes
|
|||||||||||||||||||
|
and
cumulative effect of accounting change
|
130
|
(2,730
|
)
|
(501
|
)
|
(3,448
|
)
|
||||||||||||
|
Income
tax benefit (expense)
|
(29
|
)
|
213
|
(75
|
)
|
116
|
|||||||||||||
|
Income
(loss) before cumulative effect of accounting change
|
101
|
(2,517
|
)
|
(576
|
)
|
(3,332
|
)
|
||||||||||||
|
Cumulative
effect of accounting change, net of tax
|
--
|
(765
|
)
|
--
|
(765
|
)
|
|||||||||||||
|
Net
income (loss)
|
101
|
(3,282
|
)
|
(576
|
)
|
(4,097
|
)
|
||||||||||||
|
Dividends
on preferred stock - redeemable
|
(1
|
)
|
(1
|
)
|
(3
|
)
|
(3
|
)
|
|||||||||||
|
Net
income (loss) applicable to common stock
|
$
|
100
|
$
|
(3,283
|
)
|
$
|
(579
|
)
|
$
|
(4,100
|
)
|
||||||||
|
EARNINGS
(LOSS) PER SHARE:
|
|||||||||||||||||||
|
Basic
|
$
|
0.32
|
$
|
(10.85
|
)
|
$
|
(1.88
|
)
|
$
|
(13.69
|
)
|
||||||||
|
Diluted
|
$
|
0.11
|
$
|
(10.85
|
)
|
$
|
(1.88
|
)
|
$
|
(13.69
|
)
|
||||||||
|
Weighted
average common shares outstanding, basic
|
316,214,740
|
302,604,978
|
307,761,930
|
299,411,053
|
|||||||||||||||
|
Weighted
average common shares outstanding, diluted
|
1,012,591,842
|
302,604,978
|
307,761,930
|
299,411,053
|
|||||||||||||||
|
(a)
Pro forma results reflect the sales of systems in March and
April 2004 and
in July 2005 (collectively referred to as the "System Sales")
as if they
occurred as of January 1, 2004 for all periods
presented and the removal of the financial impact of hurricanes
Katrina
and Rita. Actual revenues were reduced by $0.6 million and
$10 million for
the three and nine months ended September 30, 2005,
respectively, and $5 million and $43 million for the three
and nine months
ended September 30, 2004, respectively, related to the System
Sales and
were increased by $6
million for the three and nine months ended September 30, 2005
related to
credits issued to hurricanes Katrina and Rita impacted customers
related
to service outages. Actual adjusted EBITDA
was reduced by $0.1 million and $4 million for the three and
nine months
ended September 30, 2005, respectively, and $2 million and
$18 million for
the three and nine months ended
September 30, 2004, respectively, related to the System Sales
and was
increased by $6 million for the three and nine months ended
September 30,
2005 for the hurricanes revenue credits.
Actual net loss was reduced by $30 million for the nine months
ended
September 30, 2005 and reduced by $12 million and increased
by $95 million
for the three and nine months ended
September 30, 2004, respectively, related to the System Sales
and was
reduced by $6 million for the nine months ended September 30,
2005 related
to the hurricanes revenue credits and
$19 million related to the hurricane asset retirement loss.
Actual net
income increased by $0.1 million related to the System Sales,
$6 million
related to the hurricanes revenue credits and $19 million related
to the hurricane asset retirement loss for the three months
ended
September 30, 2005. The unaudited pro forma financial information
has been
presented for comparative purposes and does not purport to
be indicative
of the consolidated results of operations had these transactions
been
completed as of the assumed date or which may be obtained in
the future.
Adjusted EBITDA
is a non-GAAP term. See page 7 of this addendum for the reconciliation
of
adjusted EBITDA to net cash flows from operating activities
as defined by
GAAP.
|
Addendum
to Charter Communications, Inc. Third Quarter 2005 Earnings Release
Page 2
of 8
|
CHARTER
COMMUNICATIONS, INC. AND
SUBSIDIARIES
|
|||||||
|
UNAUDITED
CONSOLIDATED BALANCE SHEETS
|
|||||||
|
(DOLLARS
IN MILLIONS)
|
|||||||
|
September
30,
|
December
31,
|
||||||
|
2005
|
2004
|
||||||
|
ASSETS
|
|||||||
|
CURRENT
ASSETS:
|
|||||||
|
Cash
and cash equivalents
|
$
|
22
|
$
|
650
|
|||
|
Accounts
receivable, net of allowance for doubtful accounts
|
188
|
190
|
|||||
|
Prepaid
expenses and other current assets
|
80
|
82
|
|||||
|
Total
current assets
|
290
|
922
|
|||||
|
INVESTMENT
IN CABLE PROPERTIES:
|
|||||||
|
Property,
plant and equipment, net
|
5,936
|
6,289
|
|||||
|
Franchises,
net
|
9,830
|
9,878
|
|||||
|
Total
investment in cable properties, net
|
15,766
|
16,167
|
|||||
|
OTHER
NONCURRENT ASSETS
|
468
|
584
|
|||||
|
Total
assets
|
$
|
16,524
|
$
|
17,673
|
|||
|
LIABILITIES
AND SHAREHOLDERS' DEFICIT
|
|||||||
|
CURRENT
LIABILITIES:
|
|||||||
|
Accounts
payable and accrued expenses
|
$
|
1,172
|
$
|
1,217
|
|||
|
Total
current liabilities
|
1,172
|
1,217
|
|||||
|
LONG-TERM
DEBT
|
19,120
|
19,464
|
|||||
|
DEFERRED
MANAGEMENT FEES - RELATED PARTY
|
14
|
14
|
|||||
|
OTHER
LONG-TERM LIABILITIES
|
504
|
681
|
|||||
|
MINORITY
INTEREST
|
665
|
648
|
|||||
|
PREFERRED
STOCK - REDEEMABLE
|
55
|
55
|
|||||
|
SHAREHOLDERS'
DEFICIT
|
(5,006
|
)
|
(4,406
|
)
|
|||
|
Total
liabilities and shareholders' deficit
|
$
|
16,524
|
$
|
17,673
|
|||
Addendum
to Charter Communications, Inc. Third Quarter 2005 Earnings Release
Page 3
of 8
|
CHARTER
COMMUNICATIONS, INC. AND SUBSIDIARIES
|
|||||||
|
UNAUDITED
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
|||||||
|
(DOLLARS
IN MILLIONS)
|
|||||||
|
|
|
|
|||||
|
|
Nine
Months Ended September 30,
|
||||||
|
|
2005
|
2004
|
|||||
|
CASH
FLOWS FROM OPERATING ACTIVITIES:
|
|||||||
|
Net
loss
|
$
|
(631
|
)
|
$
|
(4,002
|
)
|
|
|
Adjustments
to reconcile net loss to net cash flows from operating
activities:
|
|||||||
|
Minority
interest
|
9
|
(24
|
)
|
||||
|
Depreciation
and amortization
|
1,134
|
1,105
|
|||||
|
Asset
impairment charges
|
39
|
--
|
|||||
|
Impairment
of franchises
|
--
|
2,433
|
|||||
|
Option
compensation expense, net
|
11
|
30
|
|||||
|
Hurricane
asset retirement loss
|
19
|
--
|
|||||
|
Special
charges, net
|
--
|
85
|
|||||
|
Noncash
interest expense
|
188
|
237
|
|||||
|
Gain
on derivative instruments and hedging activities, net
|
(43
|
)
|
(48
|
)
|
|||
|
(Gain)
loss on sale of assets, net
|
5
|
(104
|
)
|
||||
|
Loss
on debt to equity conversions
|
--
|
23
|
|||||
|
(Gain)
loss on extinguishment of debt
|
(504
|
)
|
18
|
||||
|
Gain
on investments
|
(21
|
)
|
--
|
||||
|
Deferred
income taxes
|
71
|
(119
|
)
|
||||
|
Cumulative
effect of accounting change, net of tax
|
--
|
765
|
|||||
|
Other,
net
|
--
|
(1
|
)
|
||||
|
Changes
in operating assets and liabilities, net of effects from
dispositions:
|
|||||||
|
Accounts
receivable, net
|
(3
|
)
|
1
|
||||
|
Prepaid
expenses and other assets
|
85
|
2
|
|||||
|
Accounts
payable, accrued expenses and other
|
(241
|
)
|
(18
|
)
|
|||
|
Net
cash flows from operating activities
|
118
|
383
|
|||||
|
CASH
FLOWS FROM INVESTING ACTIVITIES:
|
|||||||
|
Purchases
of property, plant and equipment
|
(815
|
)
|
(639
|
)
|
|||
|
Change
in accrued expenses related to capital expenditures
|
36
|
(23
|
)
|
||||
|
Proceeds
from sale of assets
|
38
|
729
|
|||||
|
Purchases
of investments
|
(3
|
)
|
(15
|
)
|
|||
|
Proceeds
from investments
|
17
|
--
|
|||||
|
Other,
net
|
(2
|
)
|
(2
|
)
|
|||
|
Net
cash flows from investing activities
|
(729
|
)
|
50
|
||||
|
CASH
FLOWS FROM FINANCING ACTIVITIES:
|
|||||||
|
Borrowings
of long-term debt
|
897
|
2,873
|
|||||
|
Repayments
of long-term debt
|
(1,141
|
)
|
(4,707
|
)
|
|||
|
Proceeds
from issuance of debt
|
294
|
1,500
|
|||||
|
Payments
for debt issuance costs
|
(67
|
)
|
(97
|
)
|
|||
|
Net
cash flows from financing activities
|
(17
|
)
|
(431
|
)
|
|||
|
NET
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
|
(628
|
)
|
2
|
||||
|
CASH
AND CASH EQUIVALENTS, beginning of period
|
650
|
127
|
|||||
|
CASH
AND CASH EQUIVALENTS, end of period
|
$
|
22
|
$
|
129
|
|||
|
CASH
PAID FOR INTEREST
|
$
|
1,170
|
$
|
824
|
|||
|
NONCASH
TRANSACTIONS:
|
|||||||
|
Issuance
of debt by CCH I Holdings, LLC
|
$
|
2,423
|
$
|
--
|
|||
|
Issuance
of debt by CCH I, LLC
|
$
|
3,686
|
$
|
--
|
|||
|
Issuance
of debt by Charter Communications Operating, LLC
|
$
|
333
|
$
|
--
|
|||
|
Retirement
of Charter Communications Holdings, LLC debt
|
$
|
(7,000
|
)
|
$
|
--
|
||
|
Debt
exchanged for Charter Class A common stock
|
$
|
--
|
$
|
30
|
|||
|
NOTE:
Certain 2004 amounts have been reclassified to conform with the
2005
presentation.
|
|||||||
Addendum
to Charter Communications, Inc. Third Quarter 2005 Earnings Release
Page 4
of 8
|
CHARTER
COMMUNICATIONS, INC. AND SUBSIDIARIES
|
|||||||||||||
|
UNAUDITED
SUMMARY OF OPERATING STATISTICS
|
|||||||||||||
|
|
Approximate
as of
|
||||||||||||
|
September
30,
|
June
30,
|
December
31,
|
September
30,
|
||||||||||
|
2005
(a)
|
2005
(a)
|
2004
(a)
|
2004
(a)
|
||||||||||
|
Customer
Summary:
|
|||||||||||||
|
Customer
Relationships:
|
|||||||||||||
|
Residential
(non-bulk) analog video customers (b)
|
5,636,100
|
5,683,400
|
5,739,900
|
5,825,000
|
|||||||||
|
Multi-dwelling
(bulk) and commercial unit customers (c)
|
270,200
|
259,700
|
251,600
|
249,600
|
|||||||||
|
Total
analog video customers (b) (c)
|
5,906,300
|
5,943,100
|
5,991,500
|
6,074,600
|
|||||||||
|
Non-video
customers (b)
|
261,800
|
248,400
|
228,700
|
216,200
|
|||||||||
|
Total
customer relationships (d)
|
6,168,100
|
6,191,500
|
6,220,200
|
6,290,800
|
|||||||||
|
Pro
forma average monthly revenue per analog video customer
(e)
|
$
|
74.32
|
$
|
74.00
|
$
|
70.55
|
$
|
68.19
|
|||||
|
Bundled
customers (f)
|
1,872,700
|
1,783,400
|
1,659,700
|
1,617,600
|
|||||||||
|
Revenue
Generating Units:
|
|||||||||||||
|
Analog
video customers (b) (c)
|
5,906,300
|
5,943,100
|
5,991,500
|
6,074,600
|
|||||||||
|
Digital
video customers (g)
|
2,749,400
|
2,685,600
|
2,674,700
|
2,688,900
|
|||||||||
|
Residential
high-speed Internet customers (h)
|
2,120,000
|
2,022,200
|
1,884,400
|
1,819,900
|
|||||||||
|
Residential
telephone customers (i)
|
89,900
|
67,800
|
45,400
|
40,200
|
|||||||||
|
Total
revenue generating units (j)
|
10,865,600
|
10,718,700
|
10,596,000
|
10,623,600
|
|||||||||
|
Video
Cable Services:
|
|||||||||||||
|
Analog
Video:
|
|||||||||||||
|
Estimated
homes passed (k)
|
12,336,000
|
12,287,500
|
12,085,900
|
12,066,300
|
|||||||||
|
Analog
video customers (b)(c)
|
5,906,300
|
5,943,100
|
5,991,500
|
6,074,600
|
|||||||||
|
Estimated
penetration of analog video homes passed (b) (c) (k) (l)
|
48
|
%
|
48
|
%
|
50
|
%
|
50
|
%
|
|||||
|
Pro
forma average monthly analog revenue per analog video customer
(m)
|
$
|
37.95
|
$
|
38.51
|
$
|
37.52
|
$
|
37.14
|
|||||
|
Analog
video customers quarterly net loss (b) (c) (n)
|
(36,800
|
)
|
(41,700
|
)
|
(83,100
|
)
|
(58,600
|
)
|
|||||
|
Digital
Video:
|
|||||||||||||
|
Estimated
digital video homes passed (k)
|
12,236,700
|
12,156,300
|
12,000,500
|
11,966,400
|
|||||||||
|
Digital
video customers (g)
|
2,749,400
|
2,685,600
|
2,674,700
|
2,688,900
|
|||||||||
|
Estimated
penetration of digital homes passed (g) (k) (l)
|
22
|
%
|
22
|
%
|
22
|
%
|
22
|
%
|
|||||
|
Digital
penetration of analog video customers (b) (c) (g) (o)
|
47
|
%
|
45
|
%
|
45
|
%
|
44
|
%
|
|||||
|
Digital
set-top terminals deployed
|
3,908,800
|
3,836,600
|
3,791,600
|
3,792,900
|
|||||||||
|
Pro
forma average incremental monthly digital revenue per digital video
customer (m)
|
$
|
25.94
|
$
|
25.64
|
$
|
24.09
|
$
|
23.95
|
|||||
|
Digital
video customers quarterly net gain (loss) (g) (n)
|
63,800
|
(9,000
|
)
|
(14,200
|
)
|
38,700
|
|||||||
|
Non-Video
Cable Services:
|
|||||||||||||
|
High-Speed
Internet Services:
|
|||||||||||||
|
Estimated
high-speed Internet homes passed (k)
|
10,985,400
|
10,984,100
|
10,682,800
|
10,618,200
|
|||||||||
|
Residential
high-speed Internet customers (h)
|
2,120,000
|
2,022,200
|
1,884,400
|
1,819,900
|
|||||||||
|
Estimated
penetration of high-speed Internet homes passed (h) (k)
(l)
|
19
|
%
|
18
|
%
|
18
|
%
|
17
|
%
|
|||||
|
Pro
forma average monthly high-speed Internet revenue per high-speed
Internet
customer (m)
|
$
|
36.86
|
$
|
37.67
|
$
|
36.37
|
$
|
35.69
|
|||||
|
Residential
high-speed Internet customers quarterly net gain (h) (n)
|
97,800
|
43,800
|
64,500
|
108,500
|
|||||||||
|
Telephone
Services:
|
|||||||||||||
|
Residential
telephone customers (i)
|
89,900
|
67,800
|
45,400
|
40,200
|
|||||||||
|
Pro
forma average monthly telephone revenue per telephone customer
(m)
|
$
|
39.74
|
$
|
41.26
|
$
|
41.95
|
$
|
43.26
|
|||||
|
Residential
telephone customers quarterly net gain (i) (n)
|
22,100
|
12,500
|
5,200
|
9,000
|
|||||||||
| The September 30, 2005 statistics presented above reflect the minimal losses of customers related to hurricanes Katrina and Rita. Based on preliminary estimates, customer losses related to hurricanes Katrina and Rita are expected to be approximately 10,000 to 15,000. | |||||||||||||
|
Pro
forma for the effects of the sale of certain non-strategic cable
systems
in July 2005, June 30, 2005 analog video customers, digital video
customers and high-speed Internet customers would have been 5,916,300,
2,673,600 and 2,021,600, respectively.
|
|||||||||||||
|
Pro
forma for the effects of the sale of certain non-strategic cable
systems
in July 2005, December 31, 2004 analog video customers, digital
video
customers and high-speed Internet customers would have been 5,964,300,
2,663,200 and 1,883,800, respectively.
|
|||||||||||||
|
Pro
forma for the effects of the sale of certain non-strategic cable
systems
in July 2005, September 30, 2004 analog video customers, digital
video
customers and high-speed Internet customers would have been 6,046,900,
2,677,600 and 1,819,300, respectively.
|
|||||||||||||
|
See
footnotes to unaudited summary of operating statistics on page 6
of
this Addendum.
|
|||||||||||||
Addendum
to Charter Communications, Inc. Third Quarter 2005 Earnings Release
Page 5
of 8
|
(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). At September 30,
2005,
June 30, 2005, December 31, 2004 and September 30, 2004, “customers”
include approximately 44,400, 45,100, 44,700 and 46,000 persons
whose
accounts were over 60 days past due in payment, approximately 9,800,
8,200, 5,200 and 5,500 persons whose accounts were over 90 days
past due
in payment and approximately 6,000, 4,500, 2,300 and 2,000 of which
were
over 120 days past due in payment, respectively.
|
|||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(b)
“Analog video customers” include all customers who receive video services
(including those who also purchase high-speed Internet and telephone
services) but excludes approximately 261,800, 248,400, 228,700
and 216,200
customer relationships at September 30, 2005, June 30, 2005, December
31,
2004 and September 30, 2004, respectively, who receive high-speed
Internet
service only or telephone service only and who are only counted
as
high-speed Internet customers or telephone customers, and therefore
are
shown as "non-video" customers.
|
|||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(c)
Included within "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 analog video customers is
consistent
with the methodology used in determining costs paid to programmers
and has
been consistently applied year over year. As we increase our effective
analog 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 analog video customer" is
calculated as total pro forma quarterly revenue divided by three
divided
by average pro forma analog video customers during the respective
quarter.
This calculation is pro forma giving affect to the reduction of
monthly
revenue and average analog video customers for the disposition
of systems
in July 2005 as if it occurred as of the earliest period
reported.
|
|||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(f)
"Bundled customers" include customers receiving a combination of
at least
two different types of service, including Charter's video service,
high-speed Internet service or telephone. "Bundled customers" do
not
include customers who only subscribe to video service.
|
|||||||||||||
|
(g)
“Digital video customers” include all households that have one or more
digital set-top terminals. Included in "digital video customers"
on
September 30, 2005, June 30, 2005, December 31, 2004 and September
30,
2004 are approximately 8,900, 9,700, 10,100 and 10,700 customers,
respectively, that receive digital video service directly through
satellite transmission.
|
|||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(h)
"Residential high-speed Internet customers” represent those customers who
subscribe to our high-speed Internet service. At September 30,
2005, June
30, 2005, December 31, 2004 and September 30, 2004, approximately
1,896,000, 1,787,600, 1,667,000 and 1,614,400 of these high-speed
Internet
customers, respectively, receive video services from us and are
included
within our video statistics above.
|
|||||||||||||
|
(i)
“Residential telephone customers” include all households who subscribe to
our telephone service.
|
|||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(j)
"Revenue generating units" represent the sum total of all analog
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 analog 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.
|
|||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(k)
“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.
|
|||||||||||||
|
(l)
"Penetration" represents customers as a percentage of homes passed
for the
service indicated.
|
|||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(m)
"Pro forma average monthly revenue" represents pro forma quarterly
revenue
for the service indicated divided by three divided by the average
number
of pro forma customers for the service indicated during the respective
quarter. The calculation is pro forma giving effect to the reduction
of
monthly revenue and average customers for the disposition of systems
sold
in July 2005, as if it occurred as of the earliest period reported.
|
|||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(n)
"Quarterly net gain (loss)" represents the net gain or loss in
the
respective quarter for the service indicated.
|
|||||||||||||
|
|
|
|
|
|
|
|
|
||||||
|
(o)
"Digital penetration of analog video customers" represents the
number of
digital video customers as a percentage of analog video
customers.
|
|||||||||||||
Addendum
to Charter Communications, Inc. Third Quarter 2005 Earnings Release
Page 6
of 8
|
CHARTER
COMMUNICATIONS, INC. AND SUBSIDIARIES
|
|||||||||||||
|
UNAUDITED
RECONCILIATION OF NON-GAAP MEASURES TO GAAP
MEASURES
|
|||||||||||||
|
(DOLLARS
IN MILLIONS)
|
|||||||||||||
|
Three
Months Ended September 30,
|
Nine
Months Ended September 30,
|
||||||||||||
|
2005
|
2004
|
2005
|
2004
|
||||||||||
|
|
Actual
|
Actual
|
Actual
|
Actual
|
|||||||||
|
Adjusted
EBITDA (a)
|
$
|
463
|
$
|
471
|
$
|
1,436
|
$
|
1,414
|
|||||
|
Less:
Purchases of property, plant and equipment
|
(273
|
)
|
(249
|
)
|
(815
|
)
|
(639
|
)
|
|||||
|
Un-levered
free cash flow
|
190
|
222
|
621
|
775
|
|||||||||
|
Less:
Interest on cash pay obligations (b)
|
(388
|
)
|
(350
|
)
|
(1,145
|
)
|
(990
|
)
|
|||||
|
Free
cash flow
|
(198
|
)
|
(128
|
)
|
(524
|
)
|
(215
|
)
|
|||||
|
Purchases
of property, plant and equipment
|
273
|
249
|
815
|
639
|
|||||||||
|
Special
charges, net
|
--
|
(3
|
)
|
(4
|
)
|
(15
|
)
|
||||||
|
Other,
net
|
(1
|
)
|
(2
|
)
|
(10
|
)
|
(11
|
)
|
|||||
|
Change
in operating assets and liabilities
|
(137
|
)
|
99
|
(159
|
)
|
(15
|
)
|
||||||
|
Net
cash flows from operating activities
|
$
|
(63
|
)
|
$
|
215
|
$
|
118
|
$
|
383
|
||||
|
Three
Months Ended September 30,
|
Nine
Months Ended September 30,
|
||||||||||||
|
2005
|
2004
|
2005
|
2004
|
||||||||||
|
Pro
forma (c)
|
Pro
forma (c)
|
Pro
forma (c)
|
Pro
forma (c)
|
||||||||||
|
Adjusted
EBITDA (a)
|
$
|
469
|
$
|
469
|
$
|
1,438
|
$
|
1,396
|
|||||
|
Less:
Purchases of property, plant and equipment
|
(273
|
)
|
(248
|
)
|
(814
|
)
|
(635
|
)
|
|||||
|
Un-levered
free cash flow
|
196
|
221
|
624
|
761
|
|||||||||
|
Less:
Interest on cash pay obligations (b)
|
(388
|
)
|
(349
|
)
|
(1,143
|
)
|
(985
|
)
|
|||||
|
Free
cash flow
|
(192
|
)
|
(128
|
)
|
(519
|
)
|
(224
|
)
|
|||||
|
Purchases
of property, plant and equipment
|
273
|
248
|
814
|
635
|
|||||||||
|
Special
charges, net
|
--
|
(3
|
)
|
(4
|
)
|
(15
|
)
|
||||||
|
Other,
net
|
(1
|
)
|
(2
|
)
|
(10
|
)
|
(11
|
)
|
|||||
|
Change
in operating assets and liabilities
|
(137 | ) | 99 | (159 | ) | (7 | ) | ||||||
|
Net
cash flows from operating activities
|
$ | (57 | ) | $ | 214 | $ | 122 | $ | 378 | ||||
|
(a)
See page 1 of this addendum for detail of the components included
within
adjusted EBITDA.
|
|||||||||||||
|
(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) Pro forma results reflect the sales of systems in March and April 2004 and July 2005 as if they occurred as of January 1, 2004 for all periods presented and the removal of the financial impact of hurricanes Katrina and Rita. | |||||||||||||
|
The
above schedules are presented in order to reconcile adjusted
EBITDA,
un-levered free cash flows and free cash flows, all non-GAAP
|
|||||||||||||
|
measures,
to the most directly comparable GAAP measures in accordance with
Section
401(b) of the Sarbanes-Oxley Act.
|
|||||||||||||
Addendum
to Charter Communications, Inc. Third Quarter 2005 Earnings Release
Page 7
of 8
|
CHARTER
COMMUNICATIONS, INC. AND
SUBSIDIARIES
|
|||||||||||||
|
CAPITAL
EXPENDITURES
|
|||||||||||||
|
(DOLLARS
IN
MILLIONS)
|
|||||||||||||
|
Three
Months Ended September 30,
|
Nine
Months Ended September 30,
|
||||||||||||
|
2005
|
|
2004
|
|
2005
|
|
2004
|
|||||||
|
Customer
premise equipment (a)
|
$
|
94
|
$
|
119
|
$ |
322
|
$
|
345
|
|||||
|
Scalable
infrastructure (b)
|
49
|
22
|
138
|
55
|
|||||||||
|
Line
extensions (c)
|
37
|
41
|
114
|
94
|
|||||||||
|
Upgrade/Rebuild
(d)
|
13
|
12
|
35
|
28
|
|||||||||
|
Support
capital (e)
|
80
|
55
|
206
|
117
|
|||||||||
|
Total
capital expenditures (f)
|
$
|
273
|
$
|
249
|
$ |
815
|
$
|
639
|
|||||
|
(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 51 and customer premise equipment (e.g., set-top terminals
and cable
modems, etc.).
|
|||||||||||||
|
(b)
Scalable infrastructure includes costs, not related to customer
premise
equipment or our network, to secure growth of new customers, revenue
units
and additional bandwidth revenues or provide service enhancements
(e.g.,
headend equipment).
|
|||||||||||||
|
(c)
Line extensions include network costs associated with entering
new service
areas (e.g., fiber/coaxial cable, amplifiers, electronic equipment,
make-ready and design engineering).
|
|||||||||||||
|
(d)
Upgrade/rebuild includes costs to modify or replace existing fiber/coaxial
cable networks, including betterments.
|
|||||||||||||
|
(e)
Support capital includes costs associated with the replacement
or
enhancement of non-network assets due to technological and physical
obsolescence (e.g., non-network equipment, land, buildings and
vehicles).
|
|||||||||||||
|
(f)
Represents all capital expenditures made during the three and nine
months
ended September 30, 2005 and 2004, respectively.
|
|||||||||||||
Addendum
to Charter Communications, Inc. Third Quarter 2005 Earnings Release
Page 8
of 8