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, 2008
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 12, 2008, Charter Communications, Inc. issued a press release announcing its
results for the first quarter ended March 31, 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 May 12,
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 pay or refinance debt prior to or when it becomes due and/or
refinance that debt through new issuances, exchange offers or otherwise,
including restructuring our balance sheet and leverage
position;
|
| · | the impact of competition from other distributors, including incumbent telephone companies, direct broadcast satellite operators, wireless broadband providers, and digital subscriber line (“DSL”) providers; | |
| · | difficulties in growing, further introducing, and operating our telephone services, while adequately meeting customer expectations for the reliability of voice services; | |
| · | our ability to adequately meet demand for installations and customer service; |
|
|
·
|
our
ability to sustain and grow revenues and cash flows from operating
activities by offering video, high-speed Internet, telephone and other
services, and to maintain and grow our customer base, particularly in the
face of increasingly aggressive
competition;
|
|
|
·
|
our
ability to obtain programming at reasonable prices or to adequately raise
prices to offset the effects of higher programming
costs;
|
|
|
·
|
general
business conditions, economic uncertainty or slowdown, including the
recent significant slowdown in the new 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 May
12, 2008
|
By:/s/ Kevin D.
Howard
Name:
Kevin D. Howard
Title: Vice President,
Controller and Chief Accounting
Officer
|
EXHIBIT INDEX
|
Exhibit
Number
|
Description
|
|
|
99.1
|
Press
Release dated May 12,
2008. *
|
*
furnished herewith
Exhibit
99.1
NEWS
FOR
RELEASE: 8:00 a.m. ET, Monday, May 12, 2008
Charter
Reports First Quarter
Financial
and Operating Results
Year-over-year
double-digit pro forma revenue and adjusted EBITDA growth driven by
strong
RGU net additions and over 13% increase in ARPU
St. Louis, Missouri – May 12,
2008 – Charter Communications, Inc. (NASDAQ: CHTR) (along with its subsidiaries,
the “Company” or “Charter”) today reported its first quarter 2008 financial and
operating results.
|
·
|
First
quarter revenue of $1.564 billion grew 10.5% year-over-year on a pro forma1 basis and 9.8% on an actual basis,
primarily driven by increases in telephone and high-speed Internet (HSI)
revenues.
|
|
·
|
First
quarter adjusted EBITDA2 of $545 million increased 10.5%
year-over-year on a pro
forma basis and 9.9% on an actual
basis.
|
|
·
|
Total
ARPU3 for the quarter increased 13.4%
year-over-year to $100.14, driven by increased sales of The Charter
BundleTM,
advanced services growth and rate
adjustments.
|
|
·
|
Revenue
generating units (RGUs) increased 7% year-over-year, with 302,300 net
additions during the first quarter of 2008, primarily driven by continued
strong HSI and telephone growth.
|
|
·
|
First
quarter 2008 marked the highest video RGU net additions and video ARPU
growth since 2003.
|
“Our
pro forma double digit
revenue and adjusted EBITDA growth for the first quarter was driven by strong
RGU additions and ARPU growth,” said Neil Smit, President and Chief Executive
Officer. “Our continued strong performance into 2008 reflects our focus and
execution as we pursue the right strategies for Charter,
including
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.
3 Average
revenue per basic customer.
driving
bundled penetration and targeting our operating and capital investments toward
the projects with the highest expected returns.”
Key
Operating Results
All of
the following customer growth and ARPU statistics are presented on a pro forma basis. Charter
added a net 302,300 RGUs during the first quarter of 2008. As of March 31, 2008,
Charter served approximately 5,598,800 customers and the Company’s 12,084,400
RGUs were comprised of 5,208,000 basic video, 3,023,200 digital video, 2,768,200
HSI, and 1,085,000 telephone customers.
|
·
|
Telephone
customers increased by approximately 125,700 during the first quarter of
2008 and nearly doubled year-over-year. Telephone penetration is
approximately 11% of telephone homes
passed.
|
|
·
|
Video
RGUs increased 90,900 during the first quarter and video ARPU grew 6.2%
– the highest
video RGU net additions and video ARPU growth since 2003. Digital video
customers increased by approximately 102,800 and basic video customers
decreased by 11,900.
|
|
·
|
HSI
customers increased by approximately 85,700 in the first quarter of 2008.
HSI ARPU increased year-over-year to
$40.08.
|
|
·
|
First
quarter 2008 total ARPU increased 13.4% to $100.14 from the same period in
2007, driven primarily by an increase in bundled customers, advanced
services growth, and upgrading customers to higher service
tiers.
|
First Quarter Results – Pro
Forma
First
quarter revenues were $1.564 billion, a pro forma increase of $148
million, or 10.5%. The increase resulted primarily from increases in telephone
and HSI revenues.
Telephone
revenues nearly doubled to $121 million compared to pro forma revenue of $63
million in the year-ago quarter. HSI revenues increased $35 million, up 11.9%
year-over-year on a pro
forma basis, due primarily to an increased number of customers. Video
revenues increased $27 million, up 3.2% year-over-year on a pro forma basis, primarily as
a result of digital and advanced services revenue growth and rate adjustments.
Commercial revenues increased $12 million, or 14.8%, on a pro forma
basis, as
Charter continues to market The Charter Business Bundle®. Advertising sales
revenue increased $6 million, reflecting a pro forma increase of 9.7%
compared to the first quarter of 2007.
Operating
expenses, which include programming, service and advertising sales costs,
increased 8.8% year-over-year on a pro forma basis, reflecting
annual programming rate increases, increased labor and maintenance costs to
support improved service levels, and growth of the Company’s telephone business
and other advanced services. Selling, general, and administrative expenses
increased by 13.8% on a pro
forma basis compared to the year-ago quarter, reflecting expenditures to
further improve the customer experience, increases in bad debt expense, and
higher marketing expenditures targeted at revenue growth and retaining
customers.
Adjusted
EBITDA totaled $545 million for the first quarter of 2008, a pro forma increase of 10.5%
compared to the year-ago quarter.
Net cash
flows from operating activities for the first quarter of 2008 were $204 million,
compared to a pro forma
$263 million for the first quarter of 2007.
First
Quarter Results – Actual
First
quarter revenues increased 9.8% and operating costs and expenses increased 9.7%
compared to year-ago results.
Adjusted
EBITDA for the first quarter of 2008 grew 9.9% versus the actual results in the
year-ago period.
Income
from operations was $205 million in the first quarter of 2008, compared to $156
million in the first quarter of 2007.
Net loss
for the first quarter of 2008 was $358 million, or $.97 per common share. For
the first quarter of 2007, Charter reported a net loss of $381 million and
net loss per common share of $1.04. The decrease in reported net loss was
primarily related to higher adjusted EBITDA resulting from higher RGUs and
increased ARPU.
Net cash
flows from operating activities for the first quarter of 2008 were $204 million,
compared to $266 million for the first quarter of 2007.
Expenditures
for property, plant, and equipment for the first quarter of 2008 were $334
million, compared to first quarter 2007 expenditures of $298 million. The
increase
in
capital expenditures primarily reflects year-over-year increases in scalable
infrastructure related to network upgrades to support higher HSI speeds and
other advanced services.
As of
March 31, 2008, Charter had $20.575 billion in long-term debt and $467 million
of cash on hand. Availability under the Company’s revolving credit facility was
approximately $1.4 billion at March 31, 2008, none of which was limited by
covenant restrictions. Charter
expects that cash on hand, cash flows from operating activities, and amounts
available under its credit facilities will be adequate to meet its projected
cash needs through 2009 and will not be sufficient to fund projected cash needs
in 2010 (primarily as a result of the CCH II, LLC $2.2 billion of senior notes
maturing in September 2010) and thereafter.
Use
of Non-GAAP Financial Metrics
The
Company uses certain measures that are not defined by Generally Accepted
Accounting Principles (“GAAP”) to evaluate various aspects of its business.
Adjusted EBITDA, pro
forma adjusted EBITDA, and free cash flow are non-GAAP financial measures
and should be considered in addition to, not as a substitute for, net cash flows
from operating activities reported in accordance with GAAP. These terms, as
defined by Charter, may not be comparable to similarly titled measures used by
other companies.
Adjusted
EBITDA is defined as income from operations before depreciation and
amortization, 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 $34 million and $32
million for each of the three months ended March 31, 2008 and 2007,
respectively, which expense amounts are excluded for the purposes of calculating
compliance with leverage covenants.
In
addition to the actual results for the three months ended March 31, 2008 and
2007, we have provided pro
forma results in this release for the three months ended March 31, 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 acquisition of cable systems
in 2007 as if they had occurred on January 1, 2007. Pro forma income statements
for the three months ended March 31, 2007 and pro forma customer statistics
as of March 31, 2007 are provided in the addendum of this news
release.
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 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 Monday, May 12, 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.
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 43490012.
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 May 19,
2008. The passcode for the replay is 43490012.
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;
|
| · | our ability to pay or refinance debt prior to or when it becomes due and/or refinance that debt through new issuances, exchange offers or otherwise, including restructuring our balance sheet and leverage position; | |
| · | the impact of competition from other distributors, including incumbent telephone companies, direct broadcast satellite operators, wireless broadband providers, and digital subscriber line (“DSL”) providers; | |
| · | difficulties in growing, further introducing, and operating our telephone services, while adequately meeting customer expectations for the reliability of voice services; | |
|
|
·
|
our
ability to adequately meet demand for installations and customer
service;
|
|
|
·
|
our
ability to sustain and grow revenues and cash flows from operating
activities by offering video, high-speed Internet, telephone and other
services, and to maintain and grow our customer base, particularly in the
face of increasingly aggressive
competition;
|
|
|
·
|
our
ability to obtain programming at reasonable prices or to adequately raise
prices to offset the effects of higher programming
costs;
|
|
|
·
|
general
business conditions, economic uncertainty or slowdown, including the
recent significant slowdown in the new 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.
# # #
|
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,
|
||||||||||||||||||||
|
2008
|
2007
|
2007
|
||||||||||||||||||
|
Actual
|
Actual
|
%
Change
|
Pro
Forma (a)
|
%
Change
|
||||||||||||||||
|
REVENUES:
|
||||||||||||||||||||
|
Video
|
$ | 858 | $ | 838 | 2.4 | % | $ | 831 | 3.2 | % | ||||||||||
|
High-speed
Internet
|
328 | 294 | 11.6 | % | 293 | 11.9 | % | |||||||||||||
|
Telephone
|
121 | 63 | 92.1 | % | 63 | 92.1 | % | |||||||||||||
|
Commercial
|
93 | 81 | 14.8 | % | 81 | 14.8 | % | |||||||||||||
|
Advertising
sales
|
68 | 63 | 7.9 | % | 62 | 9.7 | % | |||||||||||||
|
Other
|
96 | 86 | 11.6 | % | 86 | 11.6 | % | |||||||||||||
|
Total
revenues
|
1,564 | 1,425 | 9.8 | % | 1,416 | 10.5 | % | |||||||||||||
|
COSTS
AND EXPENSES:
|
||||||||||||||||||||
|
Operating
(excluding depreciation and amortization) (a)
|
681 | 631 | 7.9 | % | 626 | 8.8 | % | |||||||||||||
|
Selling,
general and administrative (excluding stock
|
||||||||||||||||||||
|
compensation
expense) (b)
|
338 | 298 | 13.4 | % | 297 | 13.8 | % | |||||||||||||
|
Operating
costs and expenses
|
1,019 | 929 | 9.7 | % | 923 | 10.4 | % | |||||||||||||
|
Adjusted
EBITDA
|
545 | 496 | 9.9 | % | 493 | 10.5 | % | |||||||||||||
|
Adjusted
EBITDA margin
|
34.8 | % | 34.8 | % | 34.8 | % | ||||||||||||||
|
Depreciation
and amortization
|
321 | 331 | 330 | |||||||||||||||||
|
Stock
compensation expense
|
8 | 5 | 5 | |||||||||||||||||
|
Other
operating expenses, net
|
11 | 4 | 3 | |||||||||||||||||
|
Income
from operations
|
205 | 156 | 155 | |||||||||||||||||
|
OTHER
EXPENSES:
|
||||||||||||||||||||
|
Interest
expense, net
|
(465 | ) | (464 | ) | (464 | ) | ||||||||||||||
|
Change
in value of derivatives
|
(37 | ) | (1 | ) | (1 | ) | ||||||||||||||
|
Other
expense, net
|
(3 | ) | (3 | ) | (3 | ) | ||||||||||||||
| (505 | ) | (468 | ) | (468 | ) | |||||||||||||||
|
Loss
before income taxes
|
(300 | ) | (312 | ) | (313 | ) | ||||||||||||||
|
Income
tax expense
|
(58 | ) | (69 | ) | (50 | ) | ||||||||||||||
|
Net
loss
|
$ | (358 | ) | $ | (381 | ) | $ | (363 | ) | |||||||||||
|
Loss
per common share, basic and diluted
|
$ | (0.97 | ) | $ | (1.04 | ) | $ | (0.99 | ) | |||||||||||
|
Weighted
average common shares outstanding, basic and diluted
|
370,085,187 | 366,120,096 | 366,120,096 | |||||||||||||||||
|
(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 have been reflected in the operating statistics. The pro
forma data is based on information available to Charter as of the date of
this document and certain assumptions that we believe are reasonable under
the circumstances. The financial data required allocation of certain
revenues and expenses and such information has been presented for
comparative purposes and is not intended to provide any indication of what
our actual financial position, or results of operations would have been
had the transactions described above been completed on the dates indicated
or to project our results of operations for any future
date.
|
||||||||||||||||||||
|
(b) Operating
expenses include programming, service, and advertising sales
expenses.
|
||||||||||||||||||||
|
(c) Selling,
general and administrative expenses include general and administrative and
marketing expenses.
|
||||||||||||||||||||
|
March 31,
2007. Pro forma revenues, operating costs and expenses, and net
loss were reduced by $9 million, $6 million and $18 million for the three
months ended March 31, 2007, respectively.
|
||||||||||||||||||||
|
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 2008 Earnings
Release
Page 1 of
7
|
CHARTER
COMMUNICATIONS, INC. AND SUBSIDIARIES
|
||||||||
|
UNAUDITED
CONSOLIDATED BALANCE SHEETS
|
||||||||
|
(DOLLARS
IN MILLIONS)
|
||||||||
|
March
31,
|
December
31,
|
|||||||
|
2008
|
2007
|
|||||||
|
ASSETS
|
||||||||
|
CURRENT
ASSETS:
|
||||||||
|
Cash
and cash equivalents
|
$ | 467 | $ | 75 | ||||
|
Short-term
investments
|
74 | - | ||||||
|
Accounts
receivable, net of allowance for doubtful accounts
|
207 | 225 | ||||||
|
Prepaid
expenses and other current assets
|
38 | 36 | ||||||
|
Total
current assets
|
786 | 336 | ||||||
|
INVESTMENT
IN CABLE PROPERTIES:
|
||||||||
|
Property,
plant and equipment, net
|
5,114 | 5,103 | ||||||
|
Franchises,
net
|
8,941 | 8,942 | ||||||
|
Total
investment in cable properties, net
|
14,055 | 14,045 | ||||||
|
OTHER
NONCURRENT ASSETS
|
316 | 285 | ||||||
|
Total
assets
|
$ | 15,157 | $ | 14,666 | ||||
|
LIABILITIES
AND SHAREHOLDERS' DEFICIT
|
||||||||
|
CURRENT
LIABILITIES:
|
||||||||
|
Accounts
payable and accrued expenses
|
$ | 1,408 | $ | 1,332 | ||||
|
Total
current liabilities
|
1,408 | 1,332 | ||||||
|
LONG-TERM
DEBT
|
20,575 | 19,908 | ||||||
|
NOTE
PAYABLE - RELATED PARTY
|
67 | 65 | ||||||
|
DEFERRED
MANAGEMENT FEES - RELATED PARTY
|
14 | 14 | ||||||
|
OTHER
LONG-TERM LIABILITIES
|
1,237 | 1,035 | ||||||
|
MINORITY
INTEREST
|
201 | 199 | ||||||
|
PREFERRED
STOCK - REDEEMABLE
|
5 | 5 | ||||||
|
SHAREHOLDERS'
DEFICIT
|
(8,350 | ) | (7,892 | ) | ||||
|
Total
liabilities and shareholders' deficit
|
$ | 15,157 | $ | 14,666 | ||||
Addendum
to Charter Communications, Inc. First Quarter 2008 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,
|
||||||||
|
2008
|
2007
|
|||||||
|
CASH
FLOWS FROM OPERATING ACTIVITIES:
|
||||||||
|
Net
loss
|
$ | (358 | ) | $ | (381 | ) | ||
|
Adjustments
to reconcile net loss to net cash flows from operating
activities:
|
||||||||
|
Depreciation
and amortization
|
321 | 331 | ||||||
|
Noncash
interest expense
|
13 | 11 | ||||||
|
Change
in value of derivatives
|
37 | 1 | ||||||
|
Deferred
income taxes
|
57 | 68 | ||||||
|
Other,
net
|
13 | 11 | ||||||
|
Changes
in operating assets and liabilities, net of effects from
dispositions
|
||||||||
|
Accounts
receivable
|
18 | 37 | ||||||
|
Prepaid
expenses and other assets
|
(2 | ) | (4 | ) | ||||
|
Accounts
payable, accrued expenses and other
|
105 | 192 | ||||||
|
Net
cash flows from operating activities
|
204 | 266 | ||||||
|
CASH
FLOWS FROM INVESTING ACTIVITIES:
|
||||||||
|
Purchases
of property, plant and equipment
|
(334 | ) | (298 | ) | ||||
|
Change
in accrued expenses related to capital expenditures
|
(31 | ) | (32 | ) | ||||
|
Purchases
of short-term investments
|
(74 | ) | - | |||||
|
Other,
net
|
3 | 9 | ||||||
|
Net
cash flows from investing activities
|
(436 | ) | (321 | ) | ||||
|
CASH
FLOWS FROM FINANCING ACTIVITIES:
|
||||||||
|
Borrowings
of long-term debt
|
1,765 | 911 | ||||||
|
Repayments
of long-term debt
|
(1,102 | ) | (691 | ) | ||||
|
Payments
for debt issuance costs
|
(39 | ) | (20 | ) | ||||
|
Net
cash flows from financing activities
|
624 | 200 | ||||||
|
NET
INCREASE IN CASH AND CASH EQUIVALENTS
|
392 | 145 | ||||||
|
CASH
AND CASH EQUIVALENTS, beginning of period
|
75 | 60 | ||||||
|
CASH
AND CASH EQUIVALENTS, end of period
|
$ | 467 | $ | 205 | ||||
|
CASH
PAID FOR INTEREST
|
$ | 323 | $ | 304 | ||||
|
NONCASH
TRANSACTIONS:
|
||||||||
|
Cumulative
adjustment to Accumulated Deficit for the adoption of FIN
48
|
$ | - | $ | 56 | ||||
Addendum
to Charter Communications, Inc. First Quarter 2008 Earnings
Release
Page 3 of
7
|
CHARTER
COMMUNICATIONS, INC. AND SUBSIDIARIES
|
||||||||||||
|
UNAUDITED
SUMMARY OF OPERATING STATISTICS
|
||||||||||||
|
Approximate
as of
|
||||||||||||
|
Actual
|
Pro
Forma
|
|||||||||||
|
March
31,
|
December
31,
|
March
31,
|
||||||||||
|
2008
(a)
|
2007
(a)
|
2007
(a)
|
||||||||||
|
Customer
Summary:
|
||||||||||||
|
Customer
Relationships:
|
||||||||||||
|
Residential
(non-bulk) basic video customers (b)
|
4,949,100 | 4,959,800 | 5,084,600 | |||||||||
|
Multi-dwelling
(bulk) and commercial unit customers (c)
|
258,900 | 260,100 | 268,700 | |||||||||
|
Total
basic video customers
|
5,208,000 | 5,219,900 | 5,353,300 | |||||||||
|
Non-video
customers (b)
|
390,800 | 376,400 | 343,700 | |||||||||
|
Total
customer relationships (d)
|
5,598,800 | 5,596,300 | 5,697,000 | |||||||||
|
Pro
forma average monthly revenue per basic video customer (e)
|
$ | 100.14 | $ | 97.99 | $ | 88.28 | ||||||
|
Pro
forma average monthly video revenue per basic video customer
(f)
|
$ | 57.46 | $ | 56.05 | $ | 54.11 | ||||||
|
Residential
bundled customers (g)
|
2,602,800 | 2,506,700 | 2,305,300 | |||||||||
|
Revenue
Generating Units:
|
||||||||||||
|
Basic
video customers (b) (c)
|
5,208,000 | 5,219,900 | 5,353,300 | |||||||||
|
Digital
video customers (h)
|
3,023,200 | 2,920,400 | 2,835,400 | |||||||||
|
Residential
high-speed Internet customers (i)
|
2,768,200 | 2,682,500 | 2,517,300 | |||||||||
|
Telephone
customers (j)
|
1,085,000 | 959,300 | 573,300 | |||||||||
|
Total
revenue generating units (k)
|
12,084,400 | 11,782,100 | 11,279,300 | |||||||||
|
Video
Cable Services:
|
||||||||||||
|
Basic
Video:
|
||||||||||||
|
Estimated
homes passed (l)
|
11,795,600 | 11,744,300 | 11,530,200 | |||||||||
|
Basic
video customers (b)(c)
|
5,208,000 | 5,219,900 | 5,353,300 | |||||||||
|
Estimated
penetration of basic homes passed (b) (c) (l) (m)
|
44.2 | % | 44.4 | % | 46.4 | % | ||||||
|
Pro
forma basic video customers quarterly net gain (loss) (b) (c)
(n)
|
(11,900 | ) | (66,400 | ) | 17,100 | |||||||
|
Digital
Video:
|
||||||||||||
|
Estimated
digital video homes passed (l)
|
11,701,000 | 11,650,000 | 11,426,000 | |||||||||
|
Digital
video customers (h)
|
3,023,200 | 2,920,400 | 2,835,400 | |||||||||
|
Estimated
penetration of digital homes passed (h) (l) (m)
|
25.8 | % | 25.1 | % | 24.8 | % | ||||||
|
Digital
penetration of basic video customers (b) (c) (h) (o)
|
58.0 | % | 55.9 | % | 53.0 | % | ||||||
|
Digital
set-top terminals deployed
|
4,340,300 | 4,192,700 | 4,077,500 | |||||||||
|
Pro
forma digital video customers quarterly net gain (h) (n)
|
102,800 | 59,700 | 65,100 | |||||||||
|
Non-Video
Cable Services:
|
||||||||||||
|
High-Speed
Internet Services:
|
||||||||||||
|
Estimated
high-speed Internet homes passed (l)
|
11,078,100 | 11,023,700 | 10,777,400 | |||||||||
|
Residential
high-speed Internet customers (i)
|
2,768,200 | 2,682,500 | 2,517,300 | |||||||||
|
Estimated
penetration of high-speed Internet homes passed (i) (l)
(m)
|
25.0 | % | 24.3 | % | 23.4 | % | ||||||
|
Pro
forma average monthly high-speed Internet revenue per high-speed Internet
customer (f)
|
$ | 40.08 | $ | 40.53 | $ | 39.76 | ||||||
|
Pro
forma high-speed Internet customers quarterly net gain (i)
(n)
|
85,700 | 50,500 | 123,900 | |||||||||
|
Telephone
Services:
|
||||||||||||
|
Estimated
telephone homes passed (l)
|
9,525,200 | 9,013,900 | 7,264,000 | |||||||||
|
Telephone
customers (j)
|
1,085,000 | 959,300 | 573,300 | |||||||||
|
Estimated
penetration of telephone homes passed (i) (l) (m)
|
11.4 | % | 10.6 | % | 7.9 | % | ||||||
|
Pro
forma average monthly telephone revenue per telephone customer
(f)
|
$ | 40.42 | $ | 41.77 | $ | 42.06 | ||||||
|
Pro
forma telephone customers quarterly net gain (j) (n)
|
125,700 | 155,300 | 127,000 | |||||||||
|
Pro
forma operating statistics reflect the sales and acquisitions of cable
systems in 2007 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 have been reflected in the operating
statistics.
|
||||||||||||
|
At
March 31, 2007 actual basic video customers, digital video customers,
high-speed Internet customers and telephone customers were 5,415,400,
2,862,900, 2,525,900, and 572,600, respectively.
|
||||||||||||
|
See
footnotes to unaudited summary of operating statistics on page 5 of this
addendum.
|
||||||||||||
Addendum
to Charter Communications, Inc. First Quarter 2008 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,
2008, December 31, 2007, and March 31, 2007, “customers” include
approximately 30,600, 48,200, and 31,700 persons whose accounts were over
60 days past due in payment, approximately 4,700, 10,700, and 4,100
persons whose accounts were over 90 days past due in payment and
approximately 3,200, 2,900, and 2,000 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 390,800, 376,400, and
343,700 customer relationships at March 31, 2008, December 31, 2007, and
March 31, 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. Included in "digital video
customers" on March 31, 2008, December 31, 2007, and March 31, 2007 are
approximately 1,900, 2,000, and 3,500 customers, respectively, that
receive digital video service directly through satellite
transmission.
|
|||||||||||||
|
(i) "Residential
high-speed Internet customers" represent those residential customers who
subscribe to our high-speed Internet service. At March 31,
2008, December 31, 2007, and March 31, 2007, approximately 2,470,500,
2,392,900, and 2,229,600 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 March 31, 2008, December 31, 2007, and March 31,
2007, approximately 1,048,800, 920,600, and 547,200 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. First Quarter 2008 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,
|
||||||||||||
|
2008
|
2007
|
2007
|
||||||||||
|
Actual
|
Actual
|
Pro
Forma (a)
|
||||||||||
|
Net
cash flows from operating activities
|
$ | 204 | $ | 266 | $ | 263 | ||||||
|
Less: Purchases
of property, plant and equipment
|
(334 | ) | (298 | ) | (298 | ) | ||||||
|
Less: Change
in accrued expenses related to capital expenditures
|
(31 | ) | (32 | ) | (32 | ) | ||||||
|
Free
cash flow
|
(161 | ) | (64 | ) | (67 | ) | ||||||
|
Interest
on cash pay obligations (b)
|
452 | 453 | 453 | |||||||||
|
Purchases
of property, plant and equipment
|
334 | 298 | 298 | |||||||||
|
Change
in accrued expenses related to capital expenditures
|
31 | 32 | 32 | |||||||||
|
Other,
net
|
10 | 2 | 2 | |||||||||
|
Change
in operating assets and liabilities
|
(121 | ) | (225 | ) | (225 | ) | ||||||
|
Adjusted
EBITDA (c)
|
$ | 545 | $ | 496 | $ | 493 | ||||||
|
(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. First Quarter 2008 Earnings
Release
Page 6 of
7
|
CHARTER
COMMUNICATIONS, INC. AND SUBSIDIARIES
|
||||||||
|
CAPITAL
EXPENDITURES
|
||||||||
|
(DOLLARS
IN MILLIONS)
|
||||||||
|
Three
Months Ended March 31,
|
||||||||
|
2008
|
2007
|
|||||||
|
Customer
premise equipment (a)
|
$ | 165 | $ | 161 | ||||
|
Scalable
infrastructure (b)
|
81 | 49 | ||||||
|
Line
extensions (c)
|
21 | 24 | ||||||
|
Upgrade/Rebuild
(d)
|
17 | 12 | ||||||
|
Support
capital (e)
|
50 | 52 | ||||||
|
Total
capital expenditures
|
$ | 334 | $ | 298 | ||||
|
(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. First Quarter 2008 Earnings
Release
Page 7 of
7