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): September 30, 2008
Charter Communications,
Inc.
(Exact name of registrant as
specified in its charter)
Delaware
(State or Other Jurisdiction of
Incorporation or Organization)
|
000-27927
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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
November 6, 2008, Charter Communications, Inc. issued a press release announcing
its results for the third quarter ended September 30, 2008. 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 6,
2008. *
|
*
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. Although we believe that our
plans, intentions and expectations reflected in or suggested by these
forward-looking statements are reasonable, we cannot assure you that we will
achieve or realize these plans, intentions or
expectations. Forward-looking statements are inherently subject to
risks, uncertainties and assumptions including, without limitation, the factors
described under "Risk Factors" from time to time in our filings with the
Securities and Exchange Commission ("SEC"). Many of the forward-looking
statements contained in this 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 fund debt
obligations (by dividend, investment or otherwise) to the applicable
obligor of such debt;
|
|
|
·
|
our
ability to comply with all covenants in our indentures and credit
facilities, any violation of which, if not cured in a timely manner, could
trigger a default of our other obligations under cross-default
provisions;
|
|
|
·
|
our
ability to repay debt prior to or when it becomes due and/or successfully
access the capital or credit markets to refinance that debt through new
issuances, exchange offers or otherwise, including restructuring our
balance sheet and leverage position, especially given recent volatility
and disruption in the capital and credit markets;
|
| · | the impact of competition from other distributors, including incumbent telephone companies, direct broadcast satellite operators, wireless broadband providers, and digital subscriber line (“DSL”) providers; | |
| · | difficulties in growing, further introducing, and operating our telephone services, while adequately meeting customer expectations for the reliability of voice services; | |
| · | our ability to adequately meet demand for installations and customer service; |
|
|
·
|
our
ability to sustain and grow revenues and cash flows from operating
activities by offering video, high-speed Internet, telephone and other
services, and to maintain and grow our customer base, particularly in the
face of increasingly aggressive
competition;
|
|
|
·
|
our
ability to obtain programming at reasonable prices or to adequately raise
prices to offset the effects of higher programming
costs;
|
|
|
·
|
general
business conditions, economic uncertainty or downturn, including the
recent volatility and disruption in the capital and credit markets and the
significant downturn in the housing sector and overall economy;
and
|
|
|
·
|
the
effects of governmental regulation on our
business.
|
All
forward-looking statements attributable to us or any person acting on our behalf
are expressly qualified in their entirety by this cautionary
statement. We are under no duty or obligation to update any of the
forward-looking statements after the date of this 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.
&
#160; CHARTER COMMUNICATIONS,
INC.
&
#160; Registrant
Dated
November 6, 2008
|
By:/s/ Kevin D.
Howard
Name:
Kevin D. Howard
Title: Vice President,
Controller and Chief Accounting
Officer
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EXHIBIT INDEX
|
Exhibit
Number
|
Description
|
|
|
99.1
|
Press
Release dated November 6,
2008. *
|
*
furnished herewith
Exhibit
99.1
NEWS
Charter
Reports Third Quarter
Financial
and Operating Results
Charter
adds over 200,000 revenue generating units during the quarter
St. Louis, Missouri – November
6, 2008 – Charter Communications, Inc. (NASDAQ: CHTR) (along with its
subsidiaries, the “Company” or “Charter”) today reported financial and operating
results for the third quarter and first nine months of 2008.
|
·
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Third
quarter revenues of $1.636 billion grew 7.8% year-over-year on a pro forma1 basis and 7.3% on an actual basis,
primarily driven by increases in telephone and high-speed Internet (HSI)
revenues.
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|
·
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Third
quarter adjusted EBITDA2 of $563 million increased 10.8%
year-over-year on a pro
forma basis and 10.4% on an actual
basis.
|
|
·
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Third
quarter adjusted EBITDA margin of 34.4% increased 90 basis points
year-over-year on a pro
forma basis.
|
| · | Total ARPU3 for the quarter increased 11.1% year-over-year to $106.07, driven by increased sales of The Charter BundleTM, advanced services growth and upgrading customers to higher service tiers. |
|
·
|
Revenue
generating units (RGUs) increased 7.0% year-over-year, with 205,400 net
additions during the third quarter of
2008.
|
“Our
financial and operational performance in the third quarter once again
demonstrates the Company’s disciplined approach toward increasing bundle
penetration and focus on continuously improving our customers’ experiences,”
said Neil Smit, President and Chief Executive Officer.
1 Pro forma results are
described below in the “Use of Non-GAAP Financial Metrics” section and are
provided in the addendum of this news release.
2 Adjusted
EBITDA 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.
1
Key
Operating Results
All of
the following customer growth and ARPU statistics are presented on a pro forma basis. RGUs
increased 205,400 during the third quarter of 2008, representing more than a 50
percent increase in net adds versus the year-ago quarter. As of September 30,
2008, Charter served approximately 5,544,400 customers and the Company’s
12,387,100 RGUs were comprised of 5,136,100 basic video; 3,118,500 digital
video; 2,858,200 HSI, and 1,274,300 telephone customers.
|
·
|
Telephone
customers increased by approximately 98,800 during the third quarter of
2008 and the number of telephone customers is up nearly 60%
year-over-year. Telephone penetration is now 12.4% of telephone homes
passed.
|
|
·
|
HSI
customers increased by approximately 70,900 in the third quarter of 2008,
a 32% higher net gain than during the year-ago quarter. While HSI
customers continued to climb, ARPU remained essentially flat with last
year at $40.53.
|
|
·
|
Digital
video customers increased by approximately 61,600 and basic video
customers decreased by 25,900 during the third quarter. Video ARPU was
$58.87 for the third quarter of 2008, up 6.6%
year-over-year.
|
Third
quarter 2008 total ARPU increased 11.1% to $106.07 from the same period in 2007,
driven primarily by an increase in bundled customers, advanced services growth,
and upgrading customers to higher service tiers.
Third Quarter Results – Pro
forma
Third
quarter revenues were $1.636 billion, a pro forma increase of 7.8%,
or $119 million. The increase resulted primarily from increases in telephone and
HSI revenues.
Telephone
revenues were $144 million, a 54.8% increase over third quarter 2007 pro forma telephone revenues,
driven by a larger telephone customer base. HSI revenues were $342 million, up
8.2% year-over-year on a pro
forma basis, due to an increased number of customers. Video revenues were
$867 million, up 3.2% year-over-year on a pro forma basis, primarily as
a result of digital and advanced services revenue growth, partially offset by a
decline in basic video customers. Commercial revenues rose to $100
2
million,
a 16.3% increase on a pro
forma basis, resulting from increased sales of the Charter Business
Bundle® primarily to small and medium-size businesses.
Operating
expenses, which include programming, service and advertising sales costs, were
$710 million, a 5.3% increase year-over-year on a pro forma basis, reflecting
annual programming rate increases, increased labor costs to support improved
service levels, and growth of the Company’s telephone business and other
advanced services. Selling, general, and administrative expenses were $363
million, up 8.4% on a pro
forma basis compared to the year-ago quarter, reflecting expenditures to
further improve the customer experience and increased marketing expenditures
targeted at growing and retaining customers.
Adjusted
EBITDA totaled $563 million for the third quarter of 2008, a pro forma increase of 10.8%
compared to the year-ago quarter. The third quarter adjusted EBITDA margin was
34.4%, up from 33.5% in the year-ago quarter on a pro forma basis.
Net cash flows from operating
activities for the third quarter of 2008 were $242 million, compared to $207
million for the third quarter of 2007 on a pro
forma basis. The increase
in cash flows from operating activities is primarily the result of the increase
in HSI and telephone revenues driven by the bundle and improved cost
efficiencies.
Nine
Months Results – Pro forma
For the
nine months ended September 30, 2008, revenues were $4.823 billion, a pro forma increase of $400
million, or 9.0%, primarily from telephone and HSI revenue growth.
Telephone
revenues increased to $399 million from pro forma revenues of $236
million a year ago, up 69.1% year-over-year. HSI revenues increased to $1.009
billion, up 10.2% year-over-year on a pro forma basis. Video
revenues were $2.599 billion, an increase of 3.0% year-over-year on a pro forma basis. Commercial
revenues increased to $289 million, up 16.1% on a pro forma basis.
Operating
expenses for the nine months ended September 30, 2008 were $2.089 billion, an
increase of 7.6% year-over-year on a pro forma basis; and selling,
general, and administrative expenses were $1.035 billion, up 9.8% on a pro forma basis.
3
Adjusted
EBITDA totaled $1.699 billion for the first nine months of 2008, a pro forma increase of 10.5%
compared to the same nine-month period in 2007.
Net cash
flows provided by operating activities for the first nine months of 2008 were
$410 million, compared to $319 million for the first nine months of 2007 on a
pro forma basis. The
increase in cash flows provided by operating activities is primarily the result
of increased sales of our bundled services and improved cost efficiencies,
partially offset by changes in operating assets and liabilities that provided
less cash in 2008 than the corresponding period in 2007.
Third
Quarter Results – Actual
Third
quarter revenues increased 7.3% and operating costs and expenses increased 5.7%
compared to year-ago results. Adjusted EBITDA for the third quarter of 2008 rose
10.4% compared to the year-ago period.
Income
from operations was $208 million in the third quarter of 2008, compared to $107
million in the third quarter of 2007. Net loss for the third quarter of
2008 was $322 million, or $0.86 per common share. For the third quarter of 2007,
Charter reported a net loss of $407 million and net loss per common share
of $1.10. The increase in income from operations and decrease in net loss
resulted primarily from increased sales of our bundled services and improved
cost efficiencies. Additionally, the Company recorded a $56 million asset
impairment charge in 2007 that did not reoccur in 2008.
Expenditures for property, plant, and
equipment for the third quarter of 2008 were $288 million, compared to third
quarter 2007 expenditures of $311 million. The decrease in capital expenditures
primarily reflects year-over-year decreases in scalable infrastructure and
support capital.
Net cash flows from operating
activities for the third quarter of 2008 were $242 million, compared to $209
million for the third quarter of 2007.
4
Nine
Months Results – Actual
Revenues for the nine months ended
September 30, 2008 increased 8.4% year-over-year. Operating costs and expenses
rose 7.6% compared to year-ago actual results. Adjusted EBITDA for the first
nine months of 2008 grew 9.9% compared to the year-ago period.
Income
from operations increased to $643 million for the first nine months of 2008,
compared to $463 million in the first nine months of 2007. Net loss
for the first nine months of the year was $956 million, or $2.57 per common
share. For the first nine months of 2007, Charter reported a net loss of $1.148
billion and net loss per common share of $3.12. The increase in income from
operations and the decrease in net loss are primarily attributable to revenue
growth from HSI and telephone driven by the bundle, as well as improved cost
efficiencies and a decline in non-operating expenses.
Capital
expenditures for property, plant, and equipment for the nine months ended
September 30, 2008 were $938 million, compared to $890 million in 2007. The
increase in capital expenditures primarily reflects year-over-year increases in
customer premise equipment. Charter expects that capital expenditures in the
year 2008 will total approximately $1.2 billion, with over 75% of that amount
directed toward success-based activities.
Net cash
flows provided by operating activities for the first nine months of 2008 were
$410 million, compared to $327 million for the first nine months of 2007. The
increase in cash flows provided by operating activities is primarily the result
of revenue growth from HSI and telephone driven by the bundle, as well as
improved cost efficiencies, partially offset by changes in operating assets and
liabilities that provided less cash in 2008 than the corresponding period in
2007.
As of
September 30, 2008, Charter had $21.031 billion in long-term debt. Cash on hand
and availability under the Company’s revolving credit facility totaled
approximately $1.3 billion on September 30, 2008, none of which was limited by
covenant restrictions.
Use
of Non-GAAP Financial Metrics
The
Company uses certain measures that are not defined by Generally Accepted
Accounting Principles (“GAAP”) to evaluate various aspects of its business.
Adjusted
5
EBITDA,
pro forma adjusted
EBITDA, and free cash flow are non-GAAP financial measures and should be
considered in addition to, not as a substitute for, net cash flows from
operating activities reported in accordance with GAAP. These terms, as defined
by Charter, may not be comparable to similarly titled measures used by other
companies.
Adjusted
EBITDA is defined as income from operations before depreciation and
amortization, impairment charges, stock compensation expense, and other
operating expenses, such as special charges and loss on sale or retirement of
assets. As such, it eliminates the significant non-cash depreciation and
amortization expense that results from the capital-intensive nature of the
Company’s businesses as well as other non-cash or non-recurring items, and is
unaffected by the Company’s capital structure or investment activities. Adjusted
EBITDA and pro forma
adjusted EBITDA are liquidity measures used by Company management and its board
of directors to measure the Company’s ability to fund operations and its
financing obligations. For this reason, it is a significant component of
Charter’s annual incentive compensation program. However, this measure is
limited in that it does not reflect the periodic costs of certain capitalized
tangible and intangible assets used in generating revenues and the cash cost of
financing for the Company. Company management evaluates these costs through
other financial measures.
Free cash
flow is defined as net cash flows from operating activities, less capital
expenditures and changes in accrued expenses related to capital
expenditures.
The
Company believes that adjusted EBITDA, pro forma adjusted EBITDA,
and free cash flow provide information useful to investors in assessing
Charter’s ability to service its debt, fund operations, and make additional
investments with internally generated funds. In addition, adjusted EBITDA
generally correlates to the leverage ratio calculation under the Company’s
credit facilities or outstanding notes to determine compliance with the
covenants contained in the facilities and notes (all such documents have been
previously filed with the United States Securities and Exchange
Commission). Adjusted EBITDA and pro forma adjusted EBITDA, as
presented, include management fee expenses in the amount of $33 million and $32
million for the three months ended September
30, 2008 and 2007, respectively, which expense amounts are excluded for the
purposes of calculating compliance with leverage covenants.
6
In
addition to the actual results for the three and nine months ended September 30,
2008 and 2007, we have provided pro forma results in this
release for the three and nine months ended September 30, 2007. We believe these
pro forma results
facilitate meaningful analysis of the results of operations. Pro forma results in this
release reflect certain sales and acquisitions of cable systems in 2007 as if
they had occurred as of January 1, 2007. Pro forma statements of
operations for the three and nine months ended September 30, 2007; and pro forma customer statistics
as of December 31, 2007 and September 30, 2007, are provided in the addendum of
this news release.
Additional
Information Available on Website
A slide
presentation to accompany the third 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 2007, can also be found on the Investor & News Center in the “Pro forma Information”
section.
Conference
Call
The
Company will host a conference call on Thursday, November 6, 2008, at 9:00 a.m.
Eastern Time (ET) related to the contents of this release.
The
conference call will be webcast live via the Company’s website at www.charter.com.
Access the webcast by clicking on “About Charter” at the top of the home page,
then Investor & News Center. Participants should go to the call link at
least 10 minutes prior to the start time to register. The call will be archived
on the website beginning two hours after its completion. Accompanying slides
will also be available on the site.
Those
participating via telephone should dial 888/233-1576 no later than 10 minutes
prior to the call. International participants should dial 706/643-3458. The
passcode for the call is 70440618.
A replay
of the call will be available at 800/642-1687 or 706/645-9291 beginning two
hours after the completion of the call through the end of business on November
13, 2008. The passcode for the replay is 70440618.
7
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
CAUTIONARY
STATEMENT REGARDING FORWARD-LOOKING STATEMENTS:
This
release includes forward-looking statements within the meaning of Section 27A of
the Securities Act of 1933, as amended, and Section 21E of the Securities
Exchange Act of 1934, as amended, regarding, among other things, our plans,
strategies and prospects, both business and financial. Although we
believe that our plans, intentions and expectations reflected in or suggested by
these forward-looking statements are reasonable, we cannot assure you that we
will achieve or realize these plans, intentions or
expectations. Forward-looking statements are inherently subject to risks,
uncertainties and assumptions including, without limitation, the factors
described under "Risk Factors" from time to time in our filings with the
Securities and Exchange Commission (“SEC”). Many of the
forward-looking statements contained in this release may be identified by the
use of forward-looking words such as "believe," "expect," "anticipate,"
"should," "planned," "will," "may," "intend," "estimated," "aim," "on track,"
"target," "opportunity" and "potential," among others. Important
factors that could cause actual results to differ materially from the
forward-looking statements we make in this release are set forth in other
reports or documents that we file from time to time with the SEC, and include,
but are not limited to:
|
|
·
|
the
availability, in general, of funds to meet interest payment obligations
under our debt and to fund our operations and necessary capital
expenditures, either through cash flows from operating activities,
further borrowings or other sources and, in particular, our ability to
fund debt obligations (by dividend, investment or otherwise) to the
applicable obligor of such debt;
|
| · | our ability to comply with all covenants in our indentures and credit facilities, any violation of which, if not cured in a timely manner, could trigger a default of our other obligations under cross-default provisions; |
8
|
|
|
|
·
|
|
|
·
|
our
ability to repay debt prior to or when it becomes due and/or successfully
access the capital or credit markets to refinance that debt through new
issuances, exchange offers or otherwise, including restructuring our
balance sheet and leverage position, especially given recent volatility
and disruption in the capital and credit markets;
|
|
·
|
the impact of competition from other distributors, including incumbent telephone companies, direct broadcast satellite operators, wireless broadband providers, and digital subscriber line (“DSL”) providers; | |
|
·
|
difficulties in growing, further introducing, and operating our telephone services, while adequately meeting customer expectations for the reliability of voice services; | |
|
·
|
our ability to adequately meet demand for installations and customer service; |
|
|
·
|
our
ability to sustain and grow revenues and cash flows from operating
activities by offering video, high-speed Internet, telephone and other
services, and to maintain and grow our customer base, particularly in the
face of increasingly aggressive
competition;
|
|
|
·
|
our
ability to obtain programming at reasonable prices or to adequately raise
prices to offset the effects of higher programming
costs;
|
|
|
·
|
general
business conditions, economic uncertainty or downturn, including the
recent volatility and disruption in the capital and credit markets and the
significant downturn in the housing sector and overall economy;
and
|
|
|
·
|
the
effects of governmental regulation on our
business.
|
All
forward-looking statements attributable to us or any person acting on our behalf
are expressly qualified in their entirety by this cautionary
statement. We are under no duty or obligation to update any of the
forward-looking statements after the date of this release.
# # #
9
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CHARTER
COMMUNICATIONS, INC. AND SUBSIDIARIES
|
|||||||||||||||||||||
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UNAUDITED
CONSOLIDATED STATEMENTS OF OPERATIONS AND OPERATING DATA
|
|||||||||||||||||||||
|
(DOLLARS
IN MILLIONS, EXCEPT PER SHARE AND SHARE DATA)
|
|||||||||||||||||||||
|
Three
Months Ended September 30,
|
Nine
Months Ended September 30,
|
||||||||||||||||||||
|
2008
|
2007
|
2008
|
2007
|
||||||||||||||||||
|
Actual
|
Actual
|
%
Change
|
Actual
|
Actual
|
%
Change
|
||||||||||||||||
|
REVENUES:
|
|||||||||||||||||||||
|
Video
|
$ | 867 | $ | 845 | 2.6 | % | $ | 2,599 | $ | 2,542 | 2.2 | % | |||||||||
|
High-speed
Internet
|
342 | 318 | 7.5 | % | 1,009 | 920 | 9.7 | % | |||||||||||||
|
Telephone
|
144 | 94 | 53.2 | % | 399 | 236 | 69.1 | % | |||||||||||||
|
Commercial
|
100 | 87 | 14.9 | % | 289 | 251 | 15.1 | % | |||||||||||||
|
Advertising
sales
|
80 | 77 | 3.9 | % | 223 | 216 | 3.2 | % | |||||||||||||
|
Other
|
103 | 104 | (1.0 | %) | 304 | 284 | 7.0 | % | |||||||||||||
|
Total
revenues
|
1,636 | 1,525 | 7.3 | % | 4,823 | 4,449 | 8.4 | % | |||||||||||||
|
COSTS
AND EXPENSES:
|
|||||||||||||||||||||
|
Operating
(excluding depreciation and amortization) (a)
|
710 | 679 | 4.6 | % | 2,089 | 1,957 | 6.7 | % | |||||||||||||
|
Selling,
general and administrative (excluding stock
|
|||||||||||||||||||||
|
compensation
expense) (b)
|
363 | 336 | 8.0 | % | 1,035 | 946 | 9.4 | % | |||||||||||||
|
Operating
costs and expenses
|
1,073 | 1,015 | 5.7 | % | 3,124 | 2,903 | 7.6 | % | |||||||||||||
|
Adjusted
EBITDA
|
563 | 510 | 10.4 | % | 1,699 | 1,546 | 9.9 | % | |||||||||||||
|
Adjusted
EBITDA margin
|
34.4 | % | 33.4 | % | 35.2 | % | 34.7 | % | |||||||||||||
|
Depreciation
and amortization
|
332 | 334 | 981 | 999 | |||||||||||||||||
|
Asset
impairment charges
|
- | 56 | - | 56 | |||||||||||||||||
|
Stock
compensation expense
|
8 | 5 | 24 | 15 | |||||||||||||||||
|
Other
operating expenses, net
|
15 | 8 | 51 | 13 | |||||||||||||||||
|
Income
from operations
|
208 | 107 | 643 | 463 | |||||||||||||||||
|
OTHER
INCOME (EXPENSES):
|
|||||||||||||||||||||
|
Interest
expense, net
|
(478 | ) | (459 | ) | (1,417 | ) | (1,385 | ) | |||||||||||||
|
Change
in value of derivatives
|
10 | (14 | ) | (1 | ) | (18 | ) | ||||||||||||||
|
Other
expense, net
|
(5 | ) | - | (7 | ) | (39 | ) | ||||||||||||||
| (473 | ) | (473 | ) | (1,425 | ) | (1,442 | ) | ||||||||||||||
|
Loss
before income taxes
|
(265 | ) | (366 | ) | (782 | ) | (979 | ) | |||||||||||||
|
Income
tax expense
|
(57 | ) | (41 | ) | (174 | ) | (169 | ) | |||||||||||||
|
Net
loss
|
$ | (322 | ) | $ | (407 | ) | $ | (956 | ) | $ | (1,148 | ) | |||||||||
|
Loss
per common share, basic and diluted
|
$ | (0.86 | ) | $ | (1.10 | ) | $ | (2.57 | ) | $ | (3.12 | ) | |||||||||
|
Weighted
average common shares outstanding, basic and diluted
|
374,145,243 | 369,239,742 | 371,968,952 | 367,671,479 | |||||||||||||||||
|
(a) Operating
expenses include programming, service, and advertising sales
expenses.
|
|||||||||||||||||||||
|
(b) Selling,
general and administrative expenses include general and administrative and
marketing expenses.
|
|||||||||||||||||||||
|
Adjusted
EBITDA is a non-GAAP term. See page 7 of this addendum for the
reconciliation of adjusted EBITDA to net cash flows from operating
activities as defined by GAAP.
|
|||||||||||||||||||||
Addendum
to Charter Communications, Inc. Third Quarter 2008 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,
|
|||||||||||||||||
|
2008
|
2007
|
2008
|
2007
|
|||||||||||||||
|
Actual
|
Pro
Forma (a)
|
%
Change
|
Actual
|
Pro
Forma (a)
|
%
Change
|
|||||||||||||
|
REVENUES:
|
||||||||||||||||||
|
Video
|
$ | 867 | $ | 840 | 3.2 | % | $ | 2,599 | $ | 2,524 | 3.0 | % | ||||||
|
High-speed
Internet
|
342 | 316 | 8.2 | % | 1,009 | 916 | 10.2 | % | ||||||||||
|
Telephone
|
144 | 93 | 54.8 | % | 399 | 236 | 69.1 | % | ||||||||||
|
Commercial
|
100 | 86 | 16.3 | % | 289 | 249 | 16.1 | % | ||||||||||
|
Advertising
sales
|
80 | 77 | 3.9 | % | 223 | 214 | 4.2 | % | ||||||||||
|
Other
|
103 | 105 | (1.9 | %) | 304 | 284 | 7.0 | % | ||||||||||
|
Total
revenues
|
1,636 | 1,517 | 7.8 | % | 4,823 | 4,423 | 9.0 | % | ||||||||||
|
COSTS
AND EXPENSES:
|
||||||||||||||||||
|
Operating
(excluding depreciation and amortization) (b)
|
710 | 674 | 5.3 | % | 2,089 | 1,942 | 7.6 | % | ||||||||||
|
Selling,
general and administrative (excluding stock
|
||||||||||||||||||
|
compensation
expense) (c)
|
363 | 335 | 8.4 | % | 1,035 | 943 | 9.8 | % | ||||||||||
|
Operating
costs and expenses
|
1,073 | 1,009 | 6.3 | % | 3,124 | 2,885 | 8.3 | % | ||||||||||
|
Adjusted
EBITDA
|
563 | 508 | 10.8 | % | 1,699 | 1,538 | 10.5 | % | ||||||||||
|
Adjusted
EBITDA margin
|
34.4 | % | 33.5 | % | 35.2 | % | 34.8 | % | ||||||||||
|
Depreciation
and amortization
|
332 | 335 | 981 | 997 | ||||||||||||||
|
Stock
compensation expense
|
8 | 5 | 24 | 15 | ||||||||||||||
|
Other
operating expenses, net
|
15 | 8 | 51 | 12 | ||||||||||||||
|
Income
from operations
|
208 | 160 | 643 | 514 | ||||||||||||||
|
OTHER
INCOME (EXPENSES):
|
||||||||||||||||||
|
Interest
expense, net
|
(478 | ) | (459 | ) | (1,417 | ) | (1,385 | ) | ||||||||||
|
Change
in value of derivatives
|
10 | (14 | ) | (1 | ) | (18 | ) | |||||||||||
|
Other
expense, net
|
(5 | ) | - | (7 | ) | (39 | ) | |||||||||||
| (473 | ) | (473 | ) | (1,425 | ) | (1,442 | ) | |||||||||||
|
Loss
before income taxes
|
(265 | ) | (313 | ) | (782 | ) | (928 | ) | ||||||||||
|
Income
tax expense
|
(57 | ) | (44 | ) | (174 | ) | (153 | ) | ||||||||||
|
Net
loss
|
$ | (322 | ) | $ | (357 | ) | $ | (956 | ) | $ | (1,081 | ) | ||||||
|
Loss
per common share, basic and diluted
|
$ | (0.86 | ) | $ | (0.96 | ) | $ | (2.57 | ) | $ | (2.94 | ) | ||||||
|
Weighted
average common shares outstanding, basic and diluted
|
374,145,243 | 369,239,742 | 371,968,952 | 367,671,479 | ||||||||||||||
|
(a) Pro
forma results reflect certain sales and acquisitions of cable systems in
2007 as if they occurred as of January 1, 2007. The pro forma statements
of operations do not include adjustments for financing transactions
completed by Charter during the periods presented or certain other
dispositions of assets because those transactions did not significantly
impact Charter's adjusted EBITDA. However, all transactions completed
in 2007 and 2008 have been reflected in the operating statistics. The
pro forma data is based on information available to Charter as of the date
of this document and certain assumptions that we believe are reasonable
under the circumstances. The financial data required allocation of certain
revenues and expenses and such information has been presented for
comparative purposes and is not intended to provide any indication of what
our actual financial position, or results of operations would have been
had the transactions described above been completed on the dates indicated
or to proj
|
||||||||||||||||||
|
(b) Operating
expenses include programming, service, and advertising sales
expenses.
|
||||||||||||||||||
|
(c) Selling,
general and administrative expenses include general and administrative and
marketing expenses.
|
||||||||||||||||||
|
September
30, 2007. Pro forma revenues, operating costs and expenses and net
loss were reduced by $8 million, $6 million and $50 million, respectively,
for the three months ended September 30, 2007. Pro forma revenues,
operating costs and expenses and net loss were reduced by $26 million, $18
million and $67 million, respectively, for the nine months ended September
30, 2007.
|
||||||||||||||||||
|
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 2008 Earnings
Release
Page 2 of
8
|
CHARTER
COMMUNICATIONS, INC. AND SUBSIDIARIES
|
||||||||
|
UNAUDITED
CONSOLIDATED BALANCE SHEETS
|
||||||||
|
(DOLLARS
IN MILLIONS)
|
||||||||
|
September
30,
|
December
31,
|
|||||||
|
2008
|
2007
|
|||||||
|
ASSETS
|
||||||||
|
CURRENT
ASSETS:
|
||||||||
|
Cash
and cash equivalents
|
$ | 569 | $ | 75 | ||||
|
Accounts
receivable, net of allowance for doubtful accounts
|
246 | 225 | ||||||
|
Prepaid
expenses and other current assets
|
45 | 36 | ||||||
|
Total
current assets
|
860 | 336 | ||||||
|
INVESTMENT
IN CABLE PROPERTIES:
|
||||||||
|
Property,
plant and equipment, net
|
5,062 | 5,103 | ||||||
|
Franchises,
net
|
8,933 | 8,942 | ||||||
|
Total
investment in cable properties, net
|
13,995 | 14,045 | ||||||
|
OTHER
NONCURRENT ASSETS
|
302 | 285 | ||||||
|
Total
assets
|
$ | 15,157 | $ | 14,666 | ||||
|
LIABILITIES
AND SHAREHOLDERS' DEFICIT
|
||||||||
|
CURRENT
LIABILITIES:
|
||||||||
|
Accounts
payable and accrued expenses
|
$ | 1,465 | $ | 1,332 | ||||
|
Total
current liabilities
|
1,465 | 1,332 | ||||||
|
LONG-TERM
DEBT
|
21,031 | 19,908 | ||||||
|
NOTE
PAYABLE - RELATED PARTY
|
72 | 65 | ||||||
|
DEFERRED
MANAGEMENT FEES - RELATED PARTY
|
14 | 14 | ||||||
|
OTHER
LONG-TERM LIABILITIES
|
1,205 | 1,035 | ||||||
|
MINORITY
INTEREST
|
204 | 199 | ||||||
|
PREFERRED
STOCK - REDEEMABLE
|
- | 5 | ||||||
|
SHAREHOLDERS'
DEFICIT
|
(8,834 | ) | (7,892 | ) | ||||
|
Total
liabilities and shareholders' deficit
|
$ | 15,157 | $ | 14,666 | ||||
Addendum
to Charter Communications, Inc. Third Quarter 2008 Earnings
Release
Page 3 of
8
|
CHARTER
COMMUNICATIONS, INC. AND SUBSIDIARIES
|
||||||||||||||||
|
UNAUDITED
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
||||||||||||||||
|
(DOLLARS
IN MILLIONS)
|
||||||||||||||||
|
Three
Months Ended September 30,
|
Nine
Months Ended September 30,
|
|||||||||||||||
|
2008
|
2007
|
2008
|
2007
|
|||||||||||||
|
CASH
FLOWS FROM OPERATING ACTIVITIES:
|
||||||||||||||||
|
Net
loss
|
$ | (322 | ) | $ | (407 | ) | $ | (956 | ) | $ | (1,148 | ) | ||||
|
Adjustments to reconcile net loss to net cash flows from operating
activities:
|
||||||||||||||||
|
Depreciation
and amortization
|
332 | 334 | 981 | 999 | ||||||||||||
|
Asset
impairment charges
|
- | 56 | - | 56 | ||||||||||||
|
Noncash
interest expense
|
16 | 10 | 43 | 31 | ||||||||||||
|
Change
in value of derivatives
|
(10 | ) | 14 | 1 | 18 | |||||||||||
|
Deferred
income taxes
|
55 | 38 | 169 | 161 | ||||||||||||
|
Other,
net
|
17 | 10 | 39 | 49 | ||||||||||||
|
Changes
in operating assets and liabilities, net of effects from
dispositions
|
||||||||||||||||
|
Accounts
receivable
|
3 | (4 | ) | (21 | ) | (33 | ) | |||||||||
|
Prepaid
expenses and other assets
|
(9 | ) | (5 | ) | (9 | ) | 21 | |||||||||
|
Accounts
payable, accrued expenses and other
|
160 | 163 | 163 | 173 | ||||||||||||
|
Net
cash flows from operating activities
|
242 | 209 | 410 | 327 | ||||||||||||
|
CASH
FLOWS FROM INVESTING ACTIVITIES:
|
||||||||||||||||
|
Purchases
of property, plant and equipment
|
(288 | ) | (311 | ) | (938 | ) | (890 | ) | ||||||||
|
Change
in accrued expenses related to capital expenditures
|
- | (12 | ) | (41 | ) | (51 | ) | |||||||||
|
Other,
net
|
10 | (25 | ) | (1 | ) | 6 | ||||||||||
|
Net
cash flows from investing activities
|
(278 | ) | (348 | ) | (980 | ) | (935 | ) | ||||||||
|
CASH
FLOWS FROM FINANCING ACTIVITIES:
|
||||||||||||||||
|
Borrowings
of long-term debt
|
590 | 225 | 2,355 | 7,472 | ||||||||||||
|
Repayments
of long-term debt
|
(43 | ) | (114 | ) | (1,238 | ) | (6,841 | ) | ||||||||
|
Payments
for debt issuance costs
|
(3 | ) | - | (42 | ) | (33 | ) | |||||||||
|
Other,
net
|
(2 | ) | 6 | (11 | ) | 9 | ||||||||||
|
Net
cash flows from financing activities
|
542 | 117 | 1,064 | 607 | ||||||||||||
|
NET
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
|
506 | (22 | ) | 494 | (1 | ) | ||||||||||
|
CASH
AND CASH EQUIVALENTS, beginning of period
|
63 | 81 | 75 | 60 | ||||||||||||
|
CASH
AND CASH EQUIVALENTS, end of period
|
$ | 569 | $ | 59 | $ | 569 | $ | 59 | ||||||||
|
CASH
PAID FOR INTEREST
|
$ | 329 | $ | 312 | $ | 1,241 | $ | 1,230 | ||||||||
|
NONCASH
TRANSACTIONS:
|
||||||||||||||||
|
Cumulative
adjustment to Accumulated Deficit for the adoption of FIN
48
|
$ | - | $ | - | $ | - | $ | 56 | ||||||||
Addendum
to Charter Communications, Inc. Third Quarter 2008 Earnings
Release
Page 4 of
8
|
CHARTER
COMMUNICATIONS, INC. AND SUBSIDIARIES
|
||||||||||||||||
|
UNAUDITED
SUMMARY OF OPERATING STATISTICS
|
||||||||||||||||
|
Approximate
as of
|
||||||||||||||||
|
Actual
|
Pro
Forma
|
|||||||||||||||
|
September
30,
|
June
30,
|
December
31,
|
September
30,
|
|||||||||||||
|
2008
(a)
|
2008
(a)
|
2007
(a)
|
2007
(a)
|
|||||||||||||
|
Customer
Summary:
|
||||||||||||||||
|
Customer
Relationships:
|
||||||||||||||||
|
Residential
(non-bulk) basic video customers (b)
|
4,860,100 | 4,897,100 | 4,958,600 | 5,011,200 | ||||||||||||
|
Multi-dwelling
(bulk) and commercial unit customers (c)
|
276,000 | 264,900 | 260,100 | 273,900 | ||||||||||||
|
Total
basic video customers
|
5,136,100 | 5,162,000 | 5,218,700 | 5,285,100 | ||||||||||||
|
Non-video
customers (b)
|
408,300 | 395,600 | 376,400 | 361,300 | ||||||||||||
|
Total
customer relationships (d)
|
5,544,400 | 5,557,600 | 5,595,100 | 5,646,400 | ||||||||||||
|
Pro
forma average monthly revenue per basic video customer (e)
|
$ | 106.07 | $ | 104.35 | $ | 98.13 | $ | 95.45 | ||||||||
|
Pro
forma average monthly video revenue per basic video customer
(f)
|
$ | 58.87 | $ | 58.73 | $ | 56.13 | $ | 55.25 | ||||||||
|
Residential
bundled customers (g)
|
2,718,100 | 2,639,000 | 2,506,700 | 2,433,400 | ||||||||||||
|
Revenue
Generating Units:
|
||||||||||||||||
|
Basic
video customers (b) (c)
|
5,136,100 | 5,162,000 | 5,218,700 | 5,285,100 | ||||||||||||
|
Digital
video customers (h)
|
3,118,500 | 3,056,900 | 2,920,100 | 2,860,500 | ||||||||||||
|
Residential
high-speed Internet customers (i)
|
2,858,200 | 2,787,300 | 2,682,300 | 2,631,800 | ||||||||||||
|
Telephone
customers (j)
|
1,274,300 | 1,175,500 | 959,300 | 804,000 | ||||||||||||
|
Total
revenue generating units (k)
|
12,387,100 | 12,181,700 | 11,780,400 | 11,581,400 | ||||||||||||
|
Video
Cable Services:
|
||||||||||||||||
|
Basic
Video:
|
||||||||||||||||
|
Estimated
homes passed (l)
|
11,932,800 | 11,890,800 | 11,741,500 | 11,671,000 | ||||||||||||
|
Basic
video customers (b)(c)
|
5,136,100 | 5,162,000 | 5,218,700 | 5,285,100 | ||||||||||||
|
Estimated
penetration of basic homes passed (b) (c) (l) (m)
|
43.0 | % | 43.4 | % | 44.4 | % | 45.3 | % | ||||||||
|
Pro
forma basic video customers quarterly net loss (b) (c) (n)
|
(25,900 | ) | (44,800 | ) | (66,400 | ) | (38,700 | ) | ||||||||
|
Digital
Video:
|
||||||||||||||||
|
Digital
video customers (h)
|
3,118,500 | 3,056,900 | 2,920,100 | 2,860,500 | ||||||||||||
|
Digital
penetration of basic video customers (b) (c) (h) (o)
|
60.7 | % | 59.2 | % | 56.0 | % | 54.1 | % | ||||||||
|
Digital
set-top terminals deployed
|
4,504,800 | 4,409,300 | 4,192,700 | 4,125,400 | ||||||||||||
|
Pro
forma digital video customers quarterly net gain (h) (n)
|
61,600 | 33,900 | 59,600 | 16,700 | ||||||||||||
|
Non-Video
Cable Services:
|
||||||||||||||||
|
High-Speed
Internet Services:
|
||||||||||||||||
|
Estimated
high-speed Internet homes passed (l)
|
11,245,600 | 11,203,400 | 11,051,400 | 10,967,600 | ||||||||||||
|
Residential
high-speed Internet customers (i)
|
2,858,200 | 2,787,300 | 2,682,300 | 2,631,800 | ||||||||||||
|
Estimated
penetration of high-speed Internet homes passed (i) (l)
(m)
|
25.4 | % | 24.9 | % | 24.3 | % | 24.0 | % | ||||||||
|
Pro
forma average monthly high-speed Internet revenue per high-speed Internet
customer (f)
|
$ | 40.53 | $ | 40.67 | $ | 40.54 | $ | 40.58 | ||||||||
|
Pro
forma high-speed Internet customers quarterly net gain (i)
(n)
|
70,900 | 19,300 | 50,500 | 53,900 | ||||||||||||
|
Telephone
Services:
|
||||||||||||||||
|
Estimated
telephone homes passed (l)
|
10,236,000 | 9,990,500 | 9,013,900 | 8,289,200 | ||||||||||||
|
Telephone
customers (j)
|
1,274,300 | 1,175,500 | 959,300 | 804,000 | ||||||||||||
|
Estimated
penetration of telephone homes passed (i) (l) (m)
|
12.4 | % | 11.8 | % | 10.6 | % | 9.7 | % | ||||||||
|
Pro
forma average monthly telephone revenue per telephone customer
(f)
|
$ | 40.67 | $ | 40.62 | $ | 41.74 | $ | 42.42 | ||||||||
|
Pro
forma telephone customers quarterly net gain (j) (n)
|
98,800 | 90,500 | 155,300 | 102,700 | ||||||||||||
|
Pro
forma operating statistics reflect the sales and acquisitions of cable
systems in 2007 and 2008 as if such transactions had occurred as of the
last day of the respective period for all periods presented. The pro
forma statements of operations do not include adjustments for financing
transactions completed by Charter during the periods presented or certain
other dispositions of assets because those transactions did not
significantly impact Charter's adjusted EBITDA. However, all
transactions completed in 2007 and 2008 have been reflected in the
operating statistics.
|
||||||||||||||||
|
At
December 31, 2007 actual basic video customers, digital video customers,
high-speed Internet customers and telephone customers were 5,219,900,
2,920,400, 2,682,500, and 959,300, respectively.
|
||||||||||||||||
|
At
September 30, 2007 actual basic video customers, digital video customers,
high-speed Internet customers and telephone customers were 5,347,800,
2,882,900, 2,639,200, and 802,600, respectively.
|
||||||||||||||||
|
See
footnotes to unaudited summary of operating statistics on page 6 of this
addendum.
|
||||||||||||||||
Addendum
to Charter Communications, Inc. Third Quarter 2008 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). In addition, at September 30,
2008, June 30, 2008, December 31, 2007, and September 30, 2007,
“customers” include approximately 42,100, 34,200, 48,200, and 33,800
persons whose accounts were over 60 days past due in payment,
approximately 7,700, 5,300, 10,700, and 5,700 persons whose accounts were
over 90 days past due in payment and approximately 3,800, 2,600, 2,900,
and 2,100 of which were over 120 days past due in payment,
respectively.
|
|||||||||||||
|
(b) "Basic
video customers" include all residential customers who receive video
services (including those who also purchase high-speed Internet and
telephone services) but excludes approximately 408,300, 395,600, 376,400,
and 361,300 customer relationships at September 30, 2008, June 30, 2008,
December 31, 2007, and September 30, 2007, respectively, who receive
high-speed Internet service only, telephone service only, or both
high-speed Internet service and telephone service and who are only counted
as high-speed Internet customers or telephone
customers.
|
|||||||||||||
|
(c) Included
within "basic video customers" are those in commercial and multi-dwelling
structures, which are calculated on an equivalent bulk unit (“EBU”)
basis. EBU is calculated for a system by dividing the bulk
price charged to accounts in an area by the most prevalent price charged
to non-bulk residential customers in that market for the comparable tier
of service. The EBU method of estimating basic video customers
is consistent with the methodology used in determining costs paid to
programmers and has been used consistently. As we increase our
effective video prices to residential customers without a corresponding
increase in the prices charged to commercial service or multi-dwelling
customers, our EBU count will decline even if there is no real loss in
commercial service or multi-dwelling customers.
|
|||||||||||||
|
(d) "Customer
relationships" include the number of customers that receive one or more
levels of service, encompassing video, Internet and telephone services,
without regard to which service(s) such customers receive. This
statistic is computed in accordance with the guidelines of the National
Cable & Telecommunications Association (NCTA) that have been adopted
by eleven publicly traded cable operators, including
Charter.
|
|||||||||||||
|
(e)
"Pro forma average monthly revenue per basic video customer" is calculated
as total quarterly pro forma revenue divided by three divided by average
pro forma basic video customers during the respective
quarter.
|
|||||||||||||
|
(f)
"Pro forma average monthly revenue per customer" represents quarterly pro
forma revenue for the service indicated divided by three divided by the
number of pro forma customers for the service indicated during the
respective quarter.
|
|||||||||||||
|
(g)
"Residential bundled customers" include residential customers receiving a
combination of at least two different types of service, including
Charter's video service, high-speed Internet service or
telephone. "Residential bundled customers" do not include
residential customers who only subscribe to video
service.
|
|||||||||||||
|
(h) "Digital
video customers" include all basic video customers that have one or more
digital set-top boxes or cable cards deployed.
|
|||||||||||||
|
(i) "Residential
high-speed Internet customers" represent those residential customers who
subscribe to our high-speed Internet service. At September 30,
2008, June 30, 2008, December 31, 2007, and September 30, 2007,
approximately 2,559,700, 2,494,600, 2,392,700, and 2,343,700 of these
high-speed Internet customers, respectively, receive video and/or
telephone services from us and are included within the respective
statistics above.
|
|||||||||||||
|
(j) "Telephone
customers" include all customers receiving telephone
service. As of September 30, 2008, June 30, 2008, December 31,
2007, and September 30, 2007, approximately 1,233,100, 1,133,800, 920,600,
and 769,800 of these telephone customers, respectively, receive video
and/or high-speed Internet services from us and are included within the
respective statistics above.
|
|||||||||||||
|
(k) "Revenue
generating units" represent the sum total of all basic video, digital
video, high-speed Internet and telephone customers, not counting
additional outlets within one household. For example, a
customer who receives two types of service (such as basic video and
digital video) would be treated as two revenue generating units, and if
that customer added on high-speed Internet service, the customer would be
treated as three revenue generating units. This statistic is
computed in accordance with the guidelines of the NCTA that have been
adopted by eleven publicly traded cable operators, including
Charter.
|
|||||||||||||
|
(l) "Homes
passed" represent our estimate of the number of living units, such as
single family homes, apartment units and condominium units passed by our
cable distribution network in the areas where we offer the service
indicated. "Homes passed" exclude commercial units passed by
our cable distribution network. These estimates are updated for
all periods presented when estimates change.
|
|||||||||||||
|
(m) "Penetration"
represents customers as a percentage of homes passed for the service
indicated.
|
|||||||||||||
|
(n) "Pro
forma quarterly net gain (loss)" represents the pro forma net gain or loss
in the respective quarter for the service indicated.
|
|||||||||||||
|
(o) "Digital
penetration of basic video customers" represents the number of digital
video customers as a percentage of basic video
customers.
|
|||||||||||||
Addendum
to Charter Communications, Inc. Third Quarter 2008 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,
|
||||||||||||
|
2008
|
2007
|
2007
|
||||||||||
|
Actual
|
Actual
|
Pro
Forma (a)
|
||||||||||
|
Net
cash flows from operating activities
|
$ | 242 | $ | 209 | $ | 207 | ||||||
|
Less: Purchases
of property, plant and equipment
|
(288 | ) | (311 | ) | (311 | ) | ||||||
|
Less: Change
in accrued expenses related to capital expenditures
|
- | (12 | ) | (12 | ) | |||||||
|
Free
cash flow
|
(46 | ) | (114 | ) | (116 | ) | ||||||
|
Interest
on cash pay obligations (b)
|
462 | 449 | 449 | |||||||||
|
Purchases
of property, plant and equipment
|
288 | 311 | 311 | |||||||||
|
Change
in accrued expenses related to capital expenditures
|
- | 12 | 12 | |||||||||
|
Other,
net
|
13 | 6 | 6 | |||||||||
|
Change
in operating assets and liabilities
|
(154 | ) | (154 | ) | (154 | ) | ||||||
|
Adjusted
EBITDA (c)
|
$ | 563 | $ | 510 | $ | 508 | ||||||
|
Nine
Months Ended September 30,
|
||||||||||||
|
2008
|
2007
|
2007
|
||||||||||
|
Actual
|
Actual
|
Pro
Forma (a)
|
||||||||||
|
Net
cash flows from operating activities
|
$ | 410 | $ | 327 | $ | 319 | ||||||
|
Less: Purchases
of property, plant and equipment
|
(938 | ) | (890 | ) | (890 | ) | ||||||
|
Less: Change
in accrued expenses related to capital expenditures
|
(41 | ) | (51 | ) | (51 | ) | ||||||
|
Free
cash flow
|
(569 | ) | (614 | ) | (622 | ) | ||||||
|
Interest
on cash pay obligations (b)
|
1,374 | 1,354 | 1,354 | |||||||||
|
Purchases
of property, plant and equipment
|
938 | 890 | 890 | |||||||||
|
Change
in accrued expenses related to capital expenditures
|
41 | 51 | 51 | |||||||||
|
Other,
net
|
48 | 26 | 26 | |||||||||
|
Change
in operating assets and liabilities
|
(133 | ) | (161 | ) | (161 | ) | ||||||
|
Adjusted
EBITDA (c)
|
$ | 1,699 | $ | 1,546 | $ | 1,538 | ||||||
|
(a) Pro
forma results reflect certain sales and acquisitions of cable systems in
2007 as if they occurred as of January 1, 2007.
|
||||||||||||
|
(b)
Interest on cash pay obligations excludes accretion of original issue
discounts on certain debt securities and amortization of deferred
financing costs that are reflected as interest expense in our consolidated
statements of operations.
|
||||||||||||
|
(c)
See page 1 of this addendum for detail of the components included within
adjusted EBITDA.
|
||||||||||||
|
The
above schedules are presented in order to reconcile adjusted EBITDA and
free cash flows, both non-GAAP measures, to the most directly comparable
GAAP measures in accordance with Section 401(b) of the Sarbanes-Oxley
Act.
|
||||||||||||
Addendum
to Charter Communications, Inc. Third Quarter 2008 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,
|
|||||||||||||||
|
2008
|
2007
|
2008
|
2007
|
|||||||||||||
|
Customer
premise equipment (a)
|
$ | 157 | $ | 139 | $ | 480 | $ | 428 | ||||||||
|
Scalable
infrastructure (b)
|
52 | 64 | 185 | 164 | ||||||||||||
|
Line
extensions (c)
|
19 | 27 | 63 | 76 | ||||||||||||
|
Upgrade/Rebuild
(d)
|
8 | 11 | 37 | 35 | ||||||||||||
|
Support
capital (e)
|
52 | 70 | 173 | 187 | ||||||||||||
|
Total
capital expenditures
|
$ | 288 | $ | 311 | $ | 938 | $ | 890 | ||||||||
|
(a) Customer
premise equipment includes costs incurred at the customer residence to
secure new customers, revenue units and additional bandwidth
revenues. It also includes customer installation costs in accordance
with SFAS No. 51 and customer premise equipment (e.g., set-top boxes and
cable modems, etc.).
|
||||||||||||||||
|
(b)
Scalable infrastructure includes costs, not related to customer premise
equipment or our network, to secure growth of new customers, revenue units
and additional bandwidth revenues or provide service enhancements (e.g.,
headend equipment).
|
||||||||||||||||
|
(c)
Line extensions include network costs associated with entering new service
areas (e.g., fiber/coaxial cable, amplifiers, electronic equipment,
make-ready and design engineering).
|
||||||||||||||||
|
(d) Upgrade/rebuild
includes costs to modify or replace existing fiber/coaxial cable networks,
including betterments.
|
||||||||||||||||
|
(e) Support
capital includes costs associated with the replacement or enhancement of
non-network assets due to technological and physical obsolescence (e.g.,
non-network equipment, land, buildings and vehicles).
|
||||||||||||||||
Addendum
to Charter Communications, Inc. Third Quarter 2008 Earnings
Release
Page 8 of
8