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): March
31, 2007
Charter
Communications, Inc.
(Exact
name of registrant as specified in its charter)
Delaware
(State
or Other Jurisdiction of Incorporation or Organization)
|
000-27927
|
43-1857213
|
|
|
(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 OPERATIONS AND FINANCIAL CONDITION.
On
May 3, 2007, Charter Communications, Inc. issued a
press release announcing its results for the first quarter ended March 31,
2007. 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 May 3, 2007. *
|
*
furnished herewith
CAUTIONARY
STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
This
current
report 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 including, without limitation, the forward-looking
statements set forth in the "Results
of Operations"
and
"Liquidity
and Capital Resources"
sections
under Part I, Item 2. "Management’s
Discussion and Analysis of Financial Condition and Results of
Operations"
in this
current
report.
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"
under
Part II, Item 1A. Many of the forward-looking statements contained in this
current
report 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 current
report are
set
forth in this current
report and
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 be able to
provide under the applicable debt instruments such funds
(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 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;
|
| · | competition from other distributors, including incumbent telephone companies, direct broadcast satellite operators, wireless broadband providers and DSL providers; |
| · | difficulties in introducing and operating our telephone services, such as our ability to adequately meet customer expectations for the reliability of voice services, and 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;
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 current
report.
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:
May 3, 2007
|
|
By:/s/
Kevin D. Howard
Name:
Kevin D. Howard
Title:
Vice
President and Chief Accounting
Officer
|
EXHIBIT
INDEX
|
Exhibit
Number
|
Description
|
|
|
99.1
|
Press
Release dated May 3, 2007. *
|
*
furnished herewith
Exhibit
99.1
NEWS
FOR
RELEASE: 7:00 a.m. CT, Thursday, May 3, 2007
Charter
Reports First-Quarter
Financial
and Operating Results
Quarterly
adjusted EBITDA growth of 13.2% on a pro forma basis,
the
highest increase in more than four years
332,200
quarterly net RGU additions on a pro forma basis,
the
largest increase in over five years
St.
Louis, MO -
May 3,
2007 - Charter Communications, Inc. (NASDAQ: CHTR) (along with its subsidiaries,
the “Company” or “Charter”) today reported its first-quarter 2007 financial and
operating results.
Highlights:
| · |
First-quarter
revenues of $1.425 billion grew 10.7% year over year on a pro
forma
basis and 8.0% on an actual basis, driven by strong telephone and
high-speed Internet (HSI) performance.
|
| · |
First-quarter
adjusted EBITDA of $496 million increased 13.2% year over year on
a
pro
forma
basis and 10.7% on an actual basis. (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.)
|
| · |
Revenue
generating units (RGUs) increased by 332,200 on a pro
forma
basis during the first quarter of 2007, with higher customer growth
in
every category compared to first-quarter
2006.
|
| · |
Average
revenue per analog video customer (ARPU) increased 12.3% year over
year,
driven by increased sales of bundled packages, and advanced services
growth.
|
“Charter
continued to show strong momentum in the first quarter, generating the highest
quarterly unit growth in over five years and delivering double-digit increases
in revenues and adjusted EBITDA,” said Neil Smit, President and Chief Executive
Officer. “Disciplined and consistent execution drove improvements across the key
operating
1
metrics
of our business. This is further evidence that we now have the people,
the
products, and the platform for success.”
In
addition to the actual results for the three months ended March 31, 2006
and
2007, we have provided in this release pro
forma
results
for the three months ended March 31, 2006, and December 31, 2006. We believe
these pro
forma
historical results facilitate meaningful comparison to actual results for
the
three months ended March 31, 2007. Pro
forma
results
in this release reflect (i) our sales of assets in 2006, (ii) our acquisition
in
January 2006, and (iii) our sales of assets in early January 2007, as if
they
had occurred as of January 1, 2006. Pro
forma
income
statements for the three months ended March 31, 2006 and pro
forma
customer
statistics are provided in the addendum of this news release.
Key
Operating Results
All
the
following customer growth and ARPU statistics are presented on a pro
forma
basis.
Charter added a net 332,200 RGUs during the first quarter of 2007, with improved
net additions in each of our customer categories, as compared to the first
quarter of 2006.
| § |
Telephone
customers increased by approximately 126,800 in the first quarter
of 2007,
more than double the 55,100 net additions in the year-ago quarter.
|
| § |
HSI
customers increased by approximately 123,900, a nearly 20% increase
over
first-quarter 2006 net additions of
105,400.
|
| § |
Digital
video customers increased by approximately 65,000, a 15% increase
compared
to 56,500 net additions in the year-ago
quarter.
|
| § |
Analog
video customers increased by approximately 16,500, compared to 10,300
in
the first quarter of 2006.
|
As
of
March 31, 2007, Charter served approximately 5,716,300 customers, an increase
of
21,600
during the first quarter. The Company’s 11,376,800 RGUs were comprised of
5,415,400 analog video, 2,862,900 digital video, 2,525,900 HSI, and 572,600
telephone customers.
First
quarter 2007 total ARPU increased 12.3%, with video ARPU increasing 5.2%
and HSI
ARPU increasing 7.4% , as compared to the same period in 2006.
2
Strong
telephone service growth continued in the first quarter, with total customers
increasing nearly 30% since December 31, 2006. Charter Telephone® was available
to approximately 7.3 million homes, or 62% of Charter’s footprint, as of March
31, 2007. During 2007, Charter will continue to focus on driving deeper
penetration of telephone service and bundled service packages, while further
expanding our telephone footprint.
First-Quarter
Results
Actual
First-Quarter 2007 Compared to Pro Forma First-Quarter 2006
First-quarter
revenues were $1.425 billion, an increase of $138 million, or 10.7%, on a
pro
forma
basis,
resulting from increases in digital video, HSI, and telephone customers,
and
increases in average revenue per customer, versus prior year.
HSI
revenues increased $55 million, up 22.8% year over year, and pro
forma
telephone revenues more than tripled to $63 million from $20 million. Video
revenues increased $29 million, up 3.6% year over year on a pro
forma basis.
Commercial revenues increased $11 million, or 15.7%, on a pro
forma
basis,
as we continued to deploy video, HSI, and telephone services to small and
medium-sized businesses.
Revenues
increased at a faster rate than operating costs and expenses, reflecting
increased operational efficiencies, improved clustering, and benefits from
improved third-party contracts.
First-quarter
2007 operating costs and expenses were $929 million, an increase of $80 million,
or 9.4%, on a pro
forma
basis.
Our increased operating costs and expenses reflect annual programming rate
increases, growth of the Company’s telephone business and other advanced
services, increased marketing expenditures to grow and retain customers,
and
efforts to further improve the customer experience.
Operating
expenses, which include programming, advertising sales, and service costs,
increased 7.7% year over year. Selling, general, and administrative expenses
increased by 13.3% compared to the year-ago quarter, primarily resulting
from
increased marketing and customer care expenditures in the first quarter of
2007.
Adjusted
EBITDA totaled $496 million for the first quarter of 2007, an increase of
13.2% compared with the year-ago quarter on a pro
forma
basis.
3
Net
cash
flows from operating activities for the first quarter of 2007 were $266 million,
compared to $186 million on a pro
forma basis
for
the year-ago quarter. The increase is primarily the result of the increase
in
Adjusted EBITDA and the change in operating assets and liabilities, offset
by an
increase in interest on cash pay obligations.
Actual
First-Quarter 2007 Compared to Actual First-Quarter 2006
First-quarter
revenues increased 8.0% and operating costs and expenses increased 6.5% compared
to year-ago actual results. Adjusted EBITDA totaled $496 million for the
first quarter of 2007, an increase of 10.7% on an actual basis.
Operating
income from continuing operations increased by $164 million year over year
to
$156 million for the first quarter of 2007. Revenue growth exceeded operating
costs and expense growth during the period by $48 million, and depreciation
and
amortization expenses declined by $19 million year over year. In addition,
asset impairment charges of $99 million were recorded in the first quarter
of
2006, while there was no such charge in the first quarter of 2007.
Net
loss
and loss per common share for the first quarter of 2007 were $381 million
and $1.04, respectively. For the first quarter of 2006, Charter reported
a net
loss of $459 million and loss per common share of $1.45. Net loss decreased
$78 million due to telephone and HSI customer growth, improved operational
efficiencies, a $99 million impairment charge recorded in 2006, which did
not
recur in 2007, and the decrease in depreciation and amortization, partially
offset by an increase in income tax expense in 2007.
Net
cash
flows from operating activities for the first quarter of 2007 were $266 million,
compared to $209 million for the year-ago quarter. The variance is primarily
the
result of the increase in adjusted EBITDA and the change in operating assets
and
liabilities, offset by an increase in interest on cash pay obligations.
Expenditures
for property, plant, and equipment for the first quarter of 2007 were $298
million, compared to first-quarter 2006 expenditures of $241 million. The
increase in capital expenditures primarily reflects year-over-year increases
in
success-based spending for customer premise equipment and scalable
infrastructure supporting the growth of our telephone product and other advanced
services. Charter expects that
4
approximately
three-quarters of its projected $1.2 billion of 2007 capital expenditures
will
be directed toward success-based activity.
As
of
March 31, 2007, Charter had $19.3 billion in long-term debt and $205 million
of
cash on hand, of which $110 million was held by the trustee and restricted
for
payment of bonds due April 1, 2007. Charter expects that cash on hand, cash
flows from operating activities, and amounts available under our credit
facilities, will be adequate to meet our cash needs through 2008.
Financing
Transactions
In
March
and April 2007, the Company’s subsidiary, Charter Communications Operating, LLC
(Charter Operating) closed on a new $1.5 billion revolving credit facility,
a
new $1.5 billion term facility, and the refinancing of the $5.0 billion term
loan, each with interest rates of LIBOR plus 2.0%. In March 2007, CCO Holdings,
LLC (CCO Holdings) closed on a new $350 million third-lien term loan with
an
interest rate of LIBOR plus 2.5%.
This
$8.35 billion of new senior secured credit facilities refinanced the previous
$6.85 billion senior secured credit facilities at Charter Operating in addition
to securities at various other Charter subsidiaries, including (i) certain
notes
outstanding at Charter Communications Holdings, LLC (“Charter Holdings”) through
a $100 million tender offer; (ii) $550 million of CCO Holdings’ Senior Floating
Rate Notes due 2010; (iii) Charter Holdings’
$187 million aggregate principal amount 8.625% Senior Notes due 2009; and
(iv)
Charter Holdings’ $105 million aggregate principal amount of 8.250% Senior Notes
due 2007.
Use
of Non-GAAP Financial Metrics
The
Company uses certain measures that are not defined by 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 special charges, depreciation
and amortization, loss on sale or retirement of assets, asset impairment
5
charges,
and stock compensation expense. 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, are reduced for management fees in the amounts of
$32 million and $33 million for the three months ended March 31, 2007 and
2006, respectively, which amounts are added back for the purposes of calculating
compliance with leverage covenants.
Additional
Information Available on Website
A
slide
presentation to accompany the first-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 can also
be
found on the Investor & News Center in the “Pro
Forma
Information” section. The pro
forma
income
statement for the three months ended March 31, 2006, and pro
6
forma
historical customer statistics are also provided in the addendum of this
news
release.
Conference
Call
The
Company will host a conference call on Thursday, May 3, 2007, 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.
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. 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 May 10, 2007. The passcode for the
replay is 4583725.
About
Charter Communications®
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® video entertainment programming, Charter High-Speed®
Internet access, and Charter Telephone®. Charter Business™ 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® brand. More information about Charter can be
found at www.charter.com.
#
#
#
Contact:
Media: Analysts:
Anita
Lamont Mary
Jo
Moehle
314/543-2215 314/543-2397
7
Cautionary
Statement Regarding Forward-Looking Statements:
This
release includes
forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933, as amended (the "Securities
Act"),
and Section 21E of the Securities Exchange Act of 1934, as amended (the
"Exchange
Act"),
regarding, among other things, our plans, strategies and prospects, both
business and financial. Although we believe that our plans, intentions and
expectations reflected in or suggested by these forward-looking statements
are
reasonable, we cannot assure you that we will achieve or realize these plans,
intentions or expectations. Forward-looking statements are inherently
subject to risks, uncertainties and assumptions. Many of the forward-looking
statements contained in this quarterly
report 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
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 the applicable debt instruments such funds (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 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;
|
| · |
competition
from other distributors, including incumbent telephone companies,
direct
broadcast satellite operators, wireless broadband providers and DSL
providers;
|
| · |
difficulties
in introducing and operating our telephone services, such as our
ability
to adequately meet customer expectations for the reliability of voice
services, and 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;
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.
#
#
#
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 March 31,
|
Three
Months Ended March 31,
|
|||||||||||||||
|
2007
|
2006
|
2006
|
||||||||||||||
|
Actual
|
Actual
|
%
Change
|
Pro
Forma (a)
|
%
Change
|
||||||||||||
|
REVENUES:
|
||||||||||||||||
|
Video
|
$
|
838
|
$
|
831
|
0.8
|
%
|
$
|
809
|
3.6
|
%
|
||||||
|
High-speed
Internet
|
296
|
245
|
20.8
|
%
|
241
|
22.8
|
%
|
|||||||||
|
Telephone
|
63
|
20
|
215.0
|
%
|
20
|
215.0
|
%
|
|||||||||
|
Advertising
sales
|
63
|
68
|
(7.4
|
)%
|
67
|
(6.0
|
)%
|
|||||||||
|
Commercial
|
81
|
73
|
11.0
|
%
|
70
|
15.7
|
%
|
|||||||||
|
Other
|
84
|
83
|
1.2
|
%
|
80
|
5.0
|
%
|
|||||||||
|
Total
revenues
|
1,425
|
1,320
|
8.0
|
%
|
1,287
|
10.7
|
%
|
|||||||||
|
COSTS
AND EXPENSES:
|
||||||||||||||||
|
Operating
(excluding depreciation and amortization) (b)
|
631
|
604
|
4.5
|
%
|
586
|
7.7
|
%
|
|||||||||
|
Selling,
general and administrative (excluding stock
|
||||||||||||||||
|
compensation
expense) (c)
|
298
|
268
|
11.2
|
%
|
263
|
13.3
|
%
|
|||||||||
|
Operating
costs and expenses
|
929
|
872
|
6.5
|
%
|
849
|
9.4
|
%
|
|||||||||
|
Adjusted
EBITDA
|
496
|
448
|
10.7
|
%
|
438
|
13.2
|
%
|
|||||||||
|
Adjusted
EBITDA margin
|
34.8
|
%
|
33.9
|
%
|
34.0
|
%
|
||||||||||
|
Depreciation
and amortization
|
331
|
350
|
343
|
|||||||||||||
|
Asset
impairment charges
|
-
|
99
|
-
|
|||||||||||||
|
Stock
compensation expense
|
5
|
4
|
4
|
|||||||||||||
|
Other
operating expenses, net
|
4
|
3
|
3
|
|||||||||||||
|
Operating
income (loss) from continuing operations
|
156
|
(8
|
)
|
88
|
||||||||||||
|
OTHER
INCOME (EXPENSES):
|
||||||||||||||||
|
Interest
expense, net
|
(464
|
)
|
(468
|
)
|
(457
|
)
|
||||||||||
|
Other
income (expense), net
|
(4
|
)
|
11
|
11
|
||||||||||||
|
(468
|
)
|
(457
|
)
|
(446
|
)
|
|||||||||||
|
Loss
from continuing operations before income taxes
|
(312
|
)
|
(465
|
)
|
(358
|
)
|
||||||||||
|
|
||||||||||||||||
|
Income
tax expense
|
(69
|
)
|
(8
|
)
|
(28
|
)
|
||||||||||
|
Loss
from continuing operations
|
(381
|
)
|
(473
|
)
|
(386
|
)
|
||||||||||
|
Income
(loss) from discontinued operations, net of tax
|
-
|
14
|
-
|
|||||||||||||
|
Net
loss
|
$
|
(381
|
)
|
$
|
(459
|
)
|
$
|
(386
|
)
|
|||||||
|
LOSS
PER COMMON SHARE, BASIC AND DILUTED:
|
||||||||||||||||
|
Loss
from continuing operations
|
$
|
(1.04
|
)
|
$
|
(1.49
|
)
|
$
|
(1.22
|
)
|
|||||||
|
Net
loss
|
$
|
(1.04
|
)
|
$
|
(1.45
|
)
|
$
|
(1.22
|
)
|
|||||||
|
Weighted
average common shares outstanding, basic and diluted
|
366,120,096
|
317,413,472
|
317,413,472
|
|||||||||||||
|
(a)
Pro forma results reflect certain sales of cable systems in the
third
quarter of 2006 and January 2007 as if they occurred as of January
1,
2006. The pro forma statements of operations do not include adjustments
for financing transactions completed by Charter during the periods
presented or certain dispositions of assets because those transactions
did
not significantly impact Charter's adjusted EBITDA. However, all
transactions completed in the third quarter of 2006 and January
2007 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 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.
|
||||||||||||||||
|
March
31, 2006. Pro
forma revenues were reduced by $33 million for the three months
ended
March 31, 2006. Pro forma operating costs and expenses were reduced
by $23
million for the three months ended March 31, 2006. Pro forma net
loss was
reduced by $73 million for the three months ended March 31, 2006.
|
||||||||||||||||
|
Adjusted
EBITDA is a non-GAAP term. See page 6 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. First Quarter 2007 Earnings Release
Page
1 of 7
CHARTER
COMMUNICATIONS, INC. AND SUBSIDIARIES
UNAUDITED
CONSOLIDATED BALANCE SHEETS
(DOLLARS
IN
MILLIONS)
|
March
31,
|
December
31,
|
||||||
|
2007
|
2006
|
||||||
|
ASSETS
|
|||||||
|
|
|||||||
|
CURRENT
ASSETS:
|
|||||||
|
Cash
and cash equivalents
|
$
|
205
|
$
|
60
|
|||
|
Accounts
receivable, net of allowance for doubtful accounts
|
158
|
195
|
|||||
|
Prepaid
expenses and other current assets
|
86
|
84
|
|||||
|
Total
current assets
|
449
|
339
|
|||||
|
|
|||||||
|
INVESTMENT
IN CABLE PROPERTIES:
|
|||||||
|
Property,
plant and equipment, net
|
5,178
|
5,217
|
|||||
|
Franchises,
net
|
9,218
|
9,223
|
|||||
|
Total
investment in cable properties, net
|
14,396
|
14,440
|
|||||
|
|
|||||||
|
OTHER
NONCURRENT ASSETS
|
332
|
321
|
|||||
|
Total
assets
|
$
|
15,177
|
$
|
15,100
|
|||
|
|
|||||||
|
LIABILITIES
AND SHAREHOLDERS' DEFICIT
|
|||||||
|
CURRENT
LIABILITIES:
|
|||||||
|
Accounts
payable and accrued expenses
|
$
|
1,464
|
$
|
1,298
|
|||
|
Total
current liabilities
|
1,464
|
1,298
|
|||||
|
LONG-TERM
DEBT
|
19,276
|
19,062
|
|||||
|
NOTE
PAYABLE - RELATED PARTY
|
59
|
57
|
|||||
|
DEFERRED
MANAGEMENT FEES - RELATED PARTY
|
14
|
14
|
|||||
|
OTHER
LONG-TERM LIABILITIES
|
709
|
692
|
|||||
|
MINORITY
INTEREST
|
194
|
192
|
|||||
|
PREFERRED
STOCK - REDEEMABLE
|
4
|
4
|
|||||
|
SHAREHOLDERS'
DEFICIT
|
(6,543
|
)
|
(6,219
|
)
|
|||
|
Total
liabilities and shareholders' deficit
|
$
|
15,177
|
$
|
15,100
|
|||
Addendum
to Charter Communications, Inc. First Quarter 2007 Earnings Release
Page
2 of 7
|
CHARTER
COMMUNICATIONS, INC. AND
SUBSIDIARIES
|
|||||||
|
UNAUDITED
CONSOLIDATED STATEMENTS OF CASH
FLOWS
|
|||||||
|
(DOLLARS
IN MILLIONS)
|
|||||||
|
Three
Months Ended March 31,
|
|||||||
|
2007
|
2006
|
||||||
|
CASH
FLOWS FROM OPERATING ACTIVITIES:
|
|||||||
|
Net
loss
|
$
|
(381
|
)
|
$
|
(459
|
)
|
|
|
Adjustments
to reconcile net loss to net cash flows from operating
activities:
|
|||||||
|
Depreciation
and amortization
|
331
|
358
|
|||||
|
Asset
impairment charges
|
-
|
99
|
|||||
|
Noncash
interest expense
|
11
|
52
|
|||||
|
Deferred
income taxes
|
68
|
7
|
|||||
|
Other,
net
|
12
|
(7
|
)
|
||||
|
Changes
in operating assets and liabilities, net of effects from acquisitions
|
|||||||
|
and
dispositions:
|
|||||||
|
Accounts
receivable
|
37
|
61
|
|||||
|
Prepaid
expenses and other assets
|
(4
|
)
|
3
|
||||
|
Accounts
payable, accrued expenses and other
|
192
|
95
|
|||||
|
Net
cash flows from operating activities
|
266
|
209
|
|||||
|
CASH
FLOWS FROM INVESTING ACTIVITIES:
|
|||||||
|
Purchases
of property, plant and equipment
|
(298
|
)
|
(241
|
)
|
|||
|
Change
in accrued expenses related to capital expenditures
|
(32
|
)
|
(7
|
)
|
|||
|
Purchase
of cable system
|
-
|
(42
|
)
|
||||
|
Other,
net
|
9
|
14
|
|||||
|
Net
cash flows from investing activities
|
(321
|
)
|
(276
|
)
|
|||
|
CASH
FLOWS FROM FINANCING ACTIVITIES:
|
|||||||
|
Borrowings
of long-term debt
|
911
|
415
|
|||||
|
Repayments
of long-term debt
|
(691
|
)
|
(759
|
)
|
|||
|
Proceeds
from issuance of debt
|
-
|
440
|
|||||
|
Payments
for debt issuance costs
|
(20
|
)
|
(10
|
)
|
|||
|
Net
cash flows from financing activities
|
200
|
86
|
|||||
|
NET
INCREASE IN CASH AND CASH EQUIVALENTS
|
145
|
19
|
|||||
|
CASH
AND CASH EQUIVALENTS, beginning of period
|
60
|
21
|
|||||
|
CASH
AND CASH EQUIVALENTS, end of period
|
$
|
205
|
$
|
40
|
|||
|
CASH
PAID FOR INTEREST
|
$
|
304
|
$
|
240
|
|||
|
NONCASH
TRANSACTIONS:
|
|||||||
|
Issuance
of debt by Charter Communications Operating, LLC
|
$
|
-
|
$
|
37
|
|||
|
Retirement
of Renaissance Media Group LLC debt
|
$
|
-
|
$
|
(37
|
)
|
||
|
Cumulative
adjustment to Accumulated Deficit for the adoption of FIN 48
|
$
|
56
|
$
|
-
|
|||
Addendum
to Charter Communications, Inc. First Quarter 2007 Earnings Release
Page
3 of 7
|
CHARTER
COMMUNICATIONS, INC. AND SUBSIDIARIES
|
||||||||||
|
UNAUDITED
SUMMARY OF OPERATING STATISTICS
|
||||||||||
|
Approximate
|
||||||||||
|
Actual
|
Pro
Forma as of
|
|||||||||
|
March
31,
|
December
31,
|
March
31,
|
||||||||
|
2007
(a)
|
2006
(a)
|
2006
(a)
|
||||||||
|
Customer
Summary:
|
||||||||||
|
Customer
Relationships:
|
||||||||||
|
Residential
(non-bulk) analog video customers (b)
|
5,146,700
|
5,139,500
|
5,231,100
|
|||||||
|
Multi-dwelling
(bulk) and commercial unit customers (c)
|
268,700
|
259,400
|
247,500
|
|||||||
|
Total
analog video customers (b) (c)
|
5,415,400
|
5,398,900
|
5,478,600
|
|||||||
|
Non-video
customers (b)
|
300,900
|
295,800
|
271,700
|
|||||||
|
Total
customer relationships (d)
|
5,716,300
|
5,694,700
|
5,750,300
|
|||||||
|
Average
monthly revenue per analog video customer (e)
|
$
|
88.00
|
$
|
86.56
|
$
|
78.33
|
||||
|
Average
monthly video revenue per analog video customer (m)
|
$
|
54.03
|
$
|
52.92
|
$
|
51.35
|
||||
|
Bundled
customers (f)
|
2,317,600
|
2,192,700
|
1,956,200
|
|||||||
|
Revenue
Generating Units:
|
||||||||||
|
Analog
video customers (b) (c)
|
5,415,400
|
5,398,900
|
5,478,600
|
|||||||
|
Digital
video customers (g)
|
2,862,900
|
2,797,900
|
2,683,500
|
|||||||
|
Residential
high-speed Internet customers (h)
|
2,525,900
|
2,402,000
|
2,203,000
|
|||||||
|
Residential
telephone customers (i)
|
572,600
|
445,800
|
191,100
|
|||||||
|
Total
revenue generating units (j)
|
11,376,800
|
11,044,600
|
10,556,200
|
|||||||
|
Video
Cable Services:
|
||||||||||
|
Analog
Video:
|
||||||||||
|
Estimated
homes passed (k)
|
11,702,800
|
11,691,800
|
11,553,700
|
|||||||
|
Analog
video customers (b)(c)
|
5,415,400
|
5,398,900
|
5,478,600
|
|||||||
|
Estimated
penetration of analog video homes passed (b) (c) (k) (l)
|
46
|
%
|
46
|
%
|
47
|
%
|
||||
|
Pro
forma analog video customers quarterly net gain (loss) (b) (c)
(n)
|
16,500
|
(42,000
|
)
|
10,300
|
||||||
|
Digital
Video:
|
||||||||||
|
Estimated
digital video homes passed (k)
|
11,597,000
|
11,556,300
|
11,373,800
|
|||||||
|
Digital
video customers (g)
|
2,862,900
|
2,797,900
|
2,683,500
|
|||||||
|
Estimated
penetration of digital homes passed (g) (k) (l)
|
25
|
%
|
24
|
%
|
24
|
%
|
||||
|
Digital
penetration of analog video customers (b) (c) (g) (o)
|
53
|
%
|
52
|
%
|
49
|
%
|
||||
|
Digital
set-top terminals deployed
|
4,100,300
|
4,008,400
|
3,814,800
|
|||||||
|
Pro
forma digital video customers quarterly net gain (g) (n)
|
65,000
|
40,800
|
56,500
|
|||||||
|
Non-Video
Cable Services:
|
||||||||||
|
High-Speed
Internet Services:
|
||||||||||
|
Estimated
high-speed Internet homes passed (k)
|
10,848,700
|
10,832,300
|
10,623,600
|
|||||||
|
Residential
high-speed Internet customers (h)
|
2,525,900
|
2,402,000
|
2,203,000
|
|||||||
|
Estimated
penetration of high-speed Internet homes passed (h) (k)
(l)
|
23
|
%
|
22
|
%
|
21
|
%
|
||||
|
Average
monthly high-speed Internet revenue per high-speed Internet customer
(m)
|
$
|
40.04
|
$
|
39.02
|
$
|
37.28
|
||||
|
Pro
forma residential high-speed Internet customers quarterly net gain
(h)
(n)
|
123,900
|
58,900
|
105,400
|
|||||||
|
Telephone
Services:
|
||||||||||
|
Estimated
telephone homes passed (k)
|
7,264,000
|
6,799,300
|
3,911,600
|
|||||||
|
Residential
telephone customers (i)
|
572,600
|
445,800
|
191,100
|
|||||||
|
Estimated
penetration of telephone homes passed (h) (k) (l)
|
8
|
%
|
7
|
%
|
5
|
%
|
||||
|
Average
monthly telephone revenue per telephone customer (m)
|
$
|
42.06
|
$
|
42.25
|
$
|
42.53
|
||||
|
Pro
forma residential telephone customers quarterly net gain (i)
(n)
|
126,800
|
106,200
|
55,100
|
|||||||
|
Pro
forma operating statistics reflect the acquisition of cable systems
in
January 2006 and the sales of cable systems in the third quarter
of 2006
and January 2007 as if such transactions had occurred as of January
1,
2006 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 dispositions of assets
because
those transactions did not significantly impact Charter's adjusted
EBITDA.
However, all transactions completed in January 2006, the third
quarter of
2006 and January 2007 have been reflected in the operating
statistics.
|
||||||||||
|
At
December 31, 2006 analog video customers, digital video customers,
high-speed Internet customers and telephone customers were 5,433,300,
2,808,400, 2,402,200 and 445,800, respectively.
|
||||||||||
|
At
March 31, 2006 analog video customers, digital video customers,
high-speed
Internet customers and telephone customers were 5,913,900, 2,866,400,
2,322,400 and 191,100, respectively.
|
||||||||||
|
See
footnotes to unaudited summary of operating statistics on page
5 of this
addendum.
|
||||||||||
Addendum
to Charter Communications, Inc. First Quarter 2007 Earnings Release
Page
4 of 7
(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 March 31, 2007, December 31, 2006
and
March 31, 2006, “customers” include approximately 31,700, 35,700 and 48,500
persons whose accounts were over 60 days past due in payment, approximately
4,100, 6,000 and 11,900 persons whose accounts were over 90 days past due
in
payment and approximately 2,000, 2,700 and 7,800 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 300,900, 288,000 and 271,700 customer relationships
at March 31, 2007, December 31, 2006 and March 31, 2006, 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.
(c)
Included within "analog 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 used consistently.
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)
"Average monthly revenue per analog video customer" is calculated as total
quarterly revenue divided by three divided by average analog video customers
during the respective quarter.
(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 boxes or cable cards deployed. Included in "digital video customers"
on
March 31, 2007, December 31, 2006 and March 31, 2006 are approximately 3,500,
4,700 and 6,700 customers, respectively, that receive digital video service
directly through satellite transmission.
(h)
"Residential high-speed Internet customers" represent those residential
customers who subscribe to our high-speed Internet service. At March 31,
2007,
December 31, 2006 and March 31, 2006, approximately 2,249,700, 2,133,400
and
1,952,100 of these high-speed Internet customers, respectively, receive video
and/or telephone services from us and are included within the respective
statistics above.
(i)
"Residential telephone customers" include all residential customers receiving
telephone service. As of March 31, 2007, December 31, 2006 and March 31,
2006,
approximately 547,900, 418,600 and 170,300 of these telephone customers,
respectively, receive video and/or high-speed Internet services from us and
are
included within the respective statistics above.
(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)
"Average monthly revenue per customer" represents quarterly revenue for the
service indicated divided by three divided by the number of customers for
the
service indicated during the respective quarter.
(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 analog video customers" represents the number of
digital
video customers as a percentage of analog video customers.
Addendum
to Charter Communications, Inc. First Quarter 2007 Earnings Release
Page 5
of 7
|
CHARTER
COMMUNICATIONS, INC. AND SUBSIDIARIES
|
||||||||||
|
UNAUDITED
RECONCILIATION OF NON-GAAP MEASURES TO GAAP
MEASURES
|
||||||||||
|
(DOLLARS
IN MILLIONS)
|
||||||||||
|
Three
Months Ended March 31,
|
||||||||||
|
2007
|
2006
|
2006
|
||||||||
|
Actual
|
Actual
|
Pro
Forma (a)
|
||||||||
|
Net
cash flows from operating activities
|
$
|
266
|
$
|
209
|
$
|
186
|
||||
|
Less:
Purchases of property, plant and equipment
|
(298
|
)
|
(241
|
)
|
(233
|
)
|
||||
|
Less:
Change in accrued expenses related to capital expenditures
|
(32
|
)
|
(7
|
)
|
(7
|
)
|
||||
|
Free
cash flow
|
(64
|
)
|
(39
|
)
|
(54
|
)
|
||||
|
Interest
on cash pay obligations (b)
|
453
|
416
|
406
|
|||||||
|
Purchases
of property, plant and equipment
|
298
|
241
|
233
|
|||||||
|
Change
in accrued expenses related to capital expenditures
|
32
|
7
|
7
|
|||||||
|
Other,
net
|
2
|
5
|
5
|
|||||||
|
Change
in operating assets and liabilities
|
(225
|
)
|
(159
|
)
|
(159
|
)
|
||||
|
Adjusted
EBITDA from continuing and discontinued operations (c)
|
$
|
496
|
$
|
471
|
$
|
438
|
||||
|
(a)
Pro forma results reflect certain sales of cable systems in the
third
quarter of 2006 and January 2007 as if they occurred as
|
||||||||||
|
of
January 1, 2006.
|
||||||||||
|
(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 page 1 of this addendum for detail of the components included
within
adjusted EBITDA. Adjusted EBITDA of $471 million for the
|
||||||||||
|
three
months ended March 31, 2006 includes $23 million of adjusted
EBITDA
recorded in discontinued operations in our consolidated
|
||||||||||
|
statements
of operations.
|
||||||||||
|
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.
|
||||||||||
Addendum
to Charter Communications, Inc. First Quarter 2007 Earnings Release
Page 6
of 7
|
CHARTER
COMMUNICATIONS, INC. AND
SUBSIDIARIES
|
|
CAPITAL
EXPENDITURES
|
|||||||
|
(DOLLARS
IN MILLIONS)
|
|||||||
|
Three
Months Ended March 31,
|
|||||||
|
2007
|
2006
|
||||||
|
Customer
premise equipment (a)
|
$
|
161
|
$
|
130
|
|||
|
Scalable
infrastructure (b)
|
49
|
34
|
|||||
|
Line
extensions (c)
|
24
|
26
|
|||||
|
Upgrade/Rebuild
(d)
|
12
|
9
|
|||||
|
Support
capital (e)
|
52
|
42
|
|||||
|
Total
capital expenditures
|
$
|
298
|
$
|
241
|
|||
|
(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 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).
|
|||||||
Addendum
to Charter Communications, Inc. First Quarter 2007 Earnings Release
Page
7 of 7