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): December 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 March
16, 2009, Charter Communications, Inc. issued a press release announcing its
results for the fourth quarter ended December 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 March 16,
2009. *
|
*
furnished herewith
CAUTIONARY
STATEMENT REGARDING FORWARD-LOOKING STATEMENTS:
This
release includes forward-looking statements within the meaning of Section 27A of
the Securities Act of 1933, as amended, 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, including our
quarterly reports on Form 10-Q filed in 2008 and our most recent annual report
on Form 10-K and include, but are not limited to:
|
•
|
the
completion of the Company's announced restructuring including the outcome,
and impact on our business, of any resulting proceedings under Chapter 11
of the Bankruptcy Code;
|
|
•
|
the
availability and access, in general, of funds to meet interest payment
obligations under our debt and to fund our operations and necessary
capital expenditures, either through cash on hand, 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 but not limited
to incumbent telephone companies, direct broadcast satellite operators,
wireless broadband providers, and digital subscriber line ("DSL")
providers;
|
|
•
|
difficulties
in growing 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.
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
March 16, 2009
|
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 March 16,
2009. *
|
*
furnished herewith
Exhibit
99.1
NEWS
Charter
Reports Fourth Quarter and Full Year 2008
Financial
and Operating Results
Charter
operations are solid; financial restructuring underway to reduce
debt
St. Louis,
Missouri – March 16, 2009 – Charter Communications, Inc. (NASDAQ: CHTR)
(along with its subsidiaries, the “Company” or “Charter”) today reported
financial and operating results for the three and 12 months ended December 31,
2008.
Key
year-over-year highlights:
|
·
|
Pro forma1 annual revenues of $6.467 billion grew
8.5% on a pro
forma basis and annual revenues increased 7.9% on an actual basis;
pro forma fourth
quarter revenues of $1.653 billion grew 7.0% on a pro forma basis and revenues grew
6.6% on an actual basis; primarily driven by increases in telephone and
high-speed Internet (HSI) revenues.
|
|
·
|
Pro forma annual adjusted
EBITDA2 of $2.315 billion grew 10.3% on a pro forma basis and
2008 adjusted EBITDA grew 9.9% on an actual basis; pro forma fourth
quarter adjusted EBITDA of $619 million increased 10.1% on a pro forma basis and
adjusted EBITDA increased 9.7% on an actual
basis.
|
|
·
|
Annual adjusted
EBITDA margin of 35.8% increased 60 basis points on a pro forma and actual
basis; and fourth quarter adjusted EBITDA margin of 37.4% increased 100
basis points on a pro
forma basis and actual
basis.
|
|
·
|
Total
ARPU3 for the quarter increased 10.2% to
$108.27, driven by increased sales of The Charter BundleTM,
advanced services growth and upgrading customers to higher service
tiers.
|
|
·
|
Revenue
generating units (RGUs) increased 5.5% with 650,900 net additions during
2008, including 45,300 during the fourth
quarter.
|
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.
1
“We
are pleased with our operational results, which are consistent with the
preliminary results we reported last month. Our success in growing the bundle,
even in a challenging economic environment, demonstrates our competitive
position in this industry. We will continue to focus on increasing penetration
of our triple play offering and enhancing our customers’ overall experience
today and going forward,” said Neil Smit, President and Chief Executive
Officer.
Key
Operating Results
All
of the following customer growth and ARPU statistics are presented on a pro forma basis. Charter
added 45,300 RGUs during the fourth quarter of 2008 and 650,900 RGUs during the
full year. Approximately 53% of Charter’s customers subscribe to a bundle, up
from 47% in the fourth quarter of 2007. Charter’s pro forma average monthly
revenue per basic video customer for the fourth quarter of 2008 was $108.27, an
increase of 10.2% compared to fourth quarter 2007, primarily as a result of
higher bundled penetration and an increase in advanced services.
Fourth
quarter RGU changes (on a pro
forma basis for 2008 and 2007) consisted of the following:
|
·
|
Digital
video customers increased by approximately 22,300 and basic video
customers decreased by 75,100 during the fourth quarter. Video ARPU was
$59.15 for the fourth quarter of 2008, up 5.3%
year-over-year.
|
| · | Fourth quarter 2008 net gains of HSI were approximately 22,900, compared to a net gain of approximately 50,500 in the fourth quarter of 2007; and |
| · | Fourth quarter 2008 net gains of telephone customers were approximately 75,200, compared to a net gain of approximately 155,300 in the fourth quarter of 2007. Telephone penetration is now 12.9% of approximately 10.4 million telephone homes passed as of December 31, 2008. |
As of
December 31, 2008, Charter served approximately 5,454,600 customers and the
Company’s 12,403,100 RGUs were comprised of 5,045,700 basic video; 3,133,400
digital video; 2,875,200 HSI, and 1,348,800 telephone
customers.
2
Fourth
Quarter Results – Pro forma
Fourth
quarter pro forma
revenues were $1.653 billion, an increase of 7.0%, or $108 million, over pro forma 2007 results. The
increase resulted primarily from telephone and HSI revenue growth.
Pro
forma telephone revenues for the 2008 fourth quarter were $156 million, a
44.4% increase over fourth quarter 2007 pro
forma telephone revenues, driven by a larger telephone customer base.
Pro
forma HSI revenues were $346 million, up 7.1% year-over-year on a pro
forma basis, due to an increased number of customers. Pro
forma video revenues were $862 million, up 2.1% 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 $103 million, a 15.7% increase on a pro
forma basis, resulting from increased sales of the Charter Business
Bundle® primarily to small and medium-size
businesses.
Pro
forma operating expenses for the 2008 fourth quarter, which include
programming, service and advertising sales costs, were $702 million, a 6.5%
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 advanced
services. Pro forma
selling, general, and administrative expenses were $332 million, up only 2.5% on
a pro forma basis
compared to the year-ago quarter, reflecting efficiencies gained in our
operations along with continuing efforts to further improve the customer
experience and grow and retain customers.
Pro
forma adjusted EBITDA totaled $619 million for the fourth quarter of
2008, an increase of 10.1% compared to the pro forma results for the
year-ago quarter. The pro forma adjusted EBITDA margin
increased 100 basis points in the fourth quarter to 37.4%, up from 36.4% in the
year-ago quarter on a pro
forma basis.
Pro
forma net cash
flows used in operating activities for the fourth quarter of 2008 were $12
million, compared to $3 million for the fourth quarter of 2007 on a pro
forma basis. The
increase in use of cash in operating activities is primarily the result of an
increase in interest on cash pay obligations, partially offset by the increase
in HSI and telephone revenues driven by the bundle and improved cost
efficiencies.
3
Annual
Results – Pro forma
For
the 12 months ended December 31, 2008, pro forma revenues were
$6.467 billion, an increase of $508 million, or 8.5%, on a pro forma basis, primarily
from telephone and HSI revenue growth.
Pro
forma telephone revenues in 2008 increased to $555 million from pro forma revenues of $345
million a year ago, up 60.9% year-over-year. Pro forma HSI revenues
increased to $1.353 billion, up 9.4% year-over-year on a pro forma basis. Pro forma video revenues were
$3.455 billion, an increase of 2.7% year-over-year on a pro forma basis. Pro forma commercial revenues
increased to $391 million, up 15.7% on a pro forma
basis.
Pro
forma operating expenses for the 12 months ended December 31, 2008 were
$2.787 billion, an increase of 7.4% year-over-year on a pro forma basis; and selling,
general, and administrative expenses were $1.365 billion, up 7.9% on a pro forma
basis.
Pro
forma adjusted EBITDA totaled $2.315 billion for 2008, a pro forma increase of 10.3%
compared to 2007.
Pro forma net cash flows
provided by operating activities for 2008 were $395 million, compared to $314
million for 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 an increase in interest on cash pay
obligations.
Fourth
Quarter Results – Actual
Fourth
quarter revenues increased 6.6% and operating costs and expenses increased 4.9%
compared to year-ago results. Adjusted EBITDA for the fourth quarter of 2008
rose 9.7% compared to the year-ago period.
In
the fourth quarter, the Company recorded approximately $1.521 billion of
impairment of franchises for the year ended December 31, 2008 as a result of its
annual impairment analysis, as required by Statement of Financial Accounting
Standards No. 142, “Goodwill and Other Intangible
Assets.”
As a result of the impairment charge, Charter reported a $1.257 billion loss
from operations in the fourth quarter of 2008, compared to income from
operations of $85
4
million
in the fourth quarter of 2007. Net loss for the fourth quarter of 2008 was
$1.495 billion, or $3.96 per common share. For the fourth quarter of 2007,
Charter reported a net loss of $468 million and a net loss per common share
of $1.27. The decrease in income from operations and increase in net loss
resulted primarily from the impairment charge, partially offset by the increase
in sales of our bundled services and improved cost
efficiencies.
Expenditures for
property, plant, and equipment for the fourth quarter of 2008 were $264 million,
compared to fourth quarter 2007 expenditures of $354 million. The decrease in
capital expenditures primarily reflects year-over-year decreases in customer
premise equipment, support capital and line extensions.
Net
cash flows used in operating activities for the fourth quarter of 2008 were $11
million, compared to no change in cash flows in 2007. The increase in use of
cash in operating activities is primarily the result of an increase in interest
on cash pay obligations, partially offset by the increase in HSI and telephone
revenues driven by the bundle and improved cost efficiencies.
Annual
Results – Actual
Revenues for the 12
months ended December 31, 2008 increased 7.9% year-over-year. Operating costs
and expenses rose 6.9% compared to year-ago actual results. Adjusted EBITDA for
2008 grew 9.9% compared to the year-ago period. The adjusted EBITDA margin
increased 60 basis points to 35.8% for 2008.
Despite increased revenues and cost efficiencies, Charter reported a loss from
operations in 2008 of $614 million due to the $1.521 billion impairment charge
recorded in the fourth quarter of 2008. Charter reported income from operations
of $548 million in 2007. Net loss for 2008 was $2.451 billion, or $6.56 per
common share. For 2007, Charter reported a net loss of $1.616 billion and a net
loss per common share of $4.39.
Capital
expenditures for property, plant, and equipment for 2008 were $1.202 billion,
compared to $1.244 billion in 2007. The decrease in capital expenditures
primarily reflects year-over-year decreases in support capital and line
extensions. Charter expects that capital expenditures in the year 2009 will
total approximately $1.2 billion, with over 75% of that amount directed toward
success-based activities.
5
Net
cash flows provided by operating activities for 2008 were $399 million, compared
to $327 million for 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
an increase in interest on cash pay obligations and changes in operating assets
and liabilities.
Restructuring
As
of December 31, 2008, Charter had $21.666 billion in total debt. On February 12,
2009, Charter and its subsidiaries announced that they have reached an
agreement-in-principle with an ad hoc committee of certain
of the Company’s debt holders on the terms of a financial restructuring to
reduce the Company’s debt by approximately $8 billion. Pursuant to the proposed
restructuring, holders of Charter’s common stock will not receive any amounts on
account of their common stock, which will be cancelled. As a part of
the reduction of debt, the agreement-in-principle also includes the investment
of more than $3 billion by certain of the Company’s debt holders in the form of
debt refinancing and new equity capital. Under the terms of the agreement, the
Company intends to implement its financial restructuring through a Chapter 11
filing to be initiated on or before April 1, 2009. The agreement-in-principle
contemplates paying trade creditors in full. Charter expects that cash on hand
and cash flows from operating activities will be adequate to fund its projected
cash needs as it proceeds with its financial restructuring. The
agreement-in-principle is subject to numerous closing conditions and there can
be no assurance that the terms of the agreement-in-principle will not change
significantly.
One
of Charter’s subsidiaries, CCH II, LLC, will not make its scheduled payment of
interest on March 16, 2009 on certain of its outstanding senior notes. The
governing indenture for such notes permits a 30-day grace period for such
interest payments, and pursuant to its agreement with bondholders, Charter
expects to make its voluntary Chapter 11 filing prior to the expiration of the
grace period.
6
Use
of Non-GAAP Financial Metrics
The
Company uses certain measures that are not defined by Generally Accepted
Accounting Principles (“GAAP”) to evaluate various aspects of its business.
Adjusted EBITDA, pro
forma adjusted EBITDA, and free cash flow are non-GAAP financial measures
and should be considered in addition to, not as a substitute for, net cash flows
from operating activities reported in accordance with GAAP. These terms, as
defined by Charter, may not be comparable to similarly titled measures used by
other companies.
Adjusted
EBITDA is defined as income from operations before depreciation and
amortization, impairment charges, stock compensation expense, and other
operating 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
7
fee
expenses in the amount of $32 million and $31 million for the three months ended
December 31, 2008 and 2007, respectively, and $131 million and $129 million for
the years ended December 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 and 12 months ended December 31,
2008 and 2007, we have provided pro forma results in this
release for the three and 12 months ended December 31, 2008 and 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 2008 and 2007
as if they had occurred as of January 1, 2007. Pro forma statements of
operations for the three and 12 months ended December 31, 2008 and 2007; and
pro forma customer
statistics as of December 31, 2007 and September 30, 2008; are provided in the
addendum of this news release.
About
Charter Communications®
Charter Communications, Inc. is a leading broadband communications
company and the fourth-largest 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
8
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, including our quarterly reports on Form 10-Q filed in
2008 and our most recent annual report on Form 10-K and include, but are not
limited to:
|
•
|
the
completion of the Company's announced restructuring including the outcome,
and impact on our business, of any resulting proceedings under Chapter 11
of the Bankruptcy Code;
|
|
•
|
the
availability and access, in general, of funds to meet interest payment
obligations under our debt and to fund our operations and necessary
capital expenditures, either through cash on hand, 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 but not limited
to incumbent telephone companies, direct broadcast satellite operators,
wireless broadband providers, and digital subscriber line ("DSL")
providers;
|
|
•
|
difficulties
in growing 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 December 31,
|
Year
Ended December 31,
|
|||||||||||||||||||||||
|
2008
|
2007
|
2008
|
2007
|
|||||||||||||||||||||
|
Actual
|
Actual
|
%
Change
|
Actual
|
Actual
|
%
Change
|
|||||||||||||||||||
|
REVENUES:
|
||||||||||||||||||||||||
|
Video
|
$ | 864 | $ | 850 | 1.6 | % | $ | 3,463 | $ | 3,392 | 2.1 | % | ||||||||||||
|
High-speed
Internet
|
347 | 324 | 7.1 | % | 1,356 | 1,243 | 9.1 | % | ||||||||||||||||
|
Telephone
|
156 | 108 | 44.4 | % | 555 | 345 | 60.9 | % | ||||||||||||||||
|
Commercial
|
103 | 90 | 14.4 | % | 392 | 341 | 15.0 | % | ||||||||||||||||
|
Advertising
sales
|
85 | 82 | 3.7 | % | 308 | 298 | 3.4 | % | ||||||||||||||||
|
Other
|
101 | 99 | 2.0 | % | 405 | 383 | 5.7 | % | ||||||||||||||||
|
Total
revenues
|
1,656 | 1,553 | 6.6 | % | 6,479 | 6,002 | 7.9 | % | ||||||||||||||||
|
COSTS
AND EXPENSES:
|
||||||||||||||||||||||||
|
Operating
(excluding depreciation and amortization) (a)
|
703 | 663 | 6.0 | % | 2,792 | 2,620 | 6.6 | % | ||||||||||||||||
|
Selling,
general and administrative (excluding stock
|
||||||||||||||||||||||||
|
compensation
expense) (b)
|
333 | 325 | 2.5 | % | 1,368 | 1,271 | 7.6 | % | ||||||||||||||||
|
Operating
costs and expenses
|
1,036 | 988 | 4.9 | % | 4,160 | 3,891 | 6.9 | % | ||||||||||||||||
|
Adjusted
EBITDA
|
620 | 565 | 9.7 | % | 2,319 | 2,111 | 9.9 | % | ||||||||||||||||
|
Adjusted
EBITDA margin
|
37.4 | % | 36.4 | % | 35.8 | % | 35.2 | % | ||||||||||||||||
|
Depreciation
and amortization
|
329 | 329 | 1,310 | 1,328 | ||||||||||||||||||||
|
Impairment
charges
|
1,521 | 178 | 1,521 | 234 | ||||||||||||||||||||
|
Stock
compensation expense
|
9 | 3 | 33 | 18 | ||||||||||||||||||||
|
Other
operating expenses, net
|
18 | (30 | ) | 69 | (17 | ) | ||||||||||||||||||
|
Income
(loss) from operations
|
(1,257 | ) | 85 | (614 | ) | 548 | ||||||||||||||||||
|
OTHER
INCOME (EXPENSES):
|
||||||||||||||||||||||||
|
Interest
expense, net
|
(486 | ) | (466 | ) | (1,903 | ) | (1,851 | ) | ||||||||||||||||
|
Change
in value of derivatives
|
(28 | ) | 70 | (29 | ) | 52 | ||||||||||||||||||
|
Other
expense, net
|
(1 | ) | (117 | ) | (8 | ) | (156 | ) | ||||||||||||||||
| (515 | ) | (513 | ) | (1,940 | ) | (1,955 | ) | |||||||||||||||||
|
Loss
before income taxes
|
(1,772 | ) | (428 | ) | (2,554 | ) | (1,407 | ) | ||||||||||||||||
|
Income
tax benefit (expense)
|
277 | (40 | ) | 103 | (209 | ) | ||||||||||||||||||
|
Net
loss
|
$ | (1,495 | ) | $ | (468 | ) | $ | (2,451 | ) | $ | (1,616 | ) | ||||||||||||
|
Loss
per common share, basic and diluted
|
$ | (3.96 | ) | $ | (1.27 | ) | $ | (6.56 | ) | $ | (4.39 | ) | ||||||||||||
|
Weighted
average common shares outstanding, basic and diluted
|
377,920,301 | 369,916,556 | 373,464,920 | 368,240,608 | ||||||||||||||||||||
|
(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. Fourth 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 December 31,
|
Year
Ended December 31,
|
|||||||||||||||||||||||
|
2008
|
2007
|
2008
|
2007
|
|||||||||||||||||||||
|
Pro
Forma (a)
|
Pro
Forma (a)
|
%
Change
|
Pro
Forma (a)
|
Pro
Forma (a)
|
%
Change
|
|||||||||||||||||||
|
REVENUES:
|
||||||||||||||||||||||||
|
Video
|
$ | 862 | $ | 844 | 2.1 | % | $ | 3,455 | $ | 3,363 | 2.7 | % | ||||||||||||
|
High-speed
Internet
|
346 | 323 | 7.1 | % | 1,353 | 1,237 | 9.4 | % | ||||||||||||||||
|
Telephone
|
156 | 108 | 44.4 | % | 555 | 345 | 60.9 | % | ||||||||||||||||
|
Commercial
|
103 | 89 | 15.7 | % | 391 | 338 | 15.7 | % | ||||||||||||||||
|
Advertising
sales
|
85 | 82 | 3.7 | % | 308 | 296 | 4.1 | % | ||||||||||||||||
|
Other
|
101 | 99 | 2.0 | % | 405 | 380 | 6.6 | % | ||||||||||||||||
|
Total
revenues
|
1,653 | 1,545 | 7.0 | % | 6,467 | 5,959 | 8.5 | % | ||||||||||||||||
|
COSTS
AND EXPENSES:
|
||||||||||||||||||||||||
|
Operating
(excluding depreciation and amortization) (b)
|
702 | 659 | 6.5 | % | 2,787 | 2,596 | 7.4 | % | ||||||||||||||||
|
Selling,
general and administrative (excluding stock
|
||||||||||||||||||||||||
|
compensation
expense) (c)
|
332 | 324 | 2.5 | % | 1,365 | 1,265 | 7.9 | % | ||||||||||||||||
|
Operating
costs and expenses
|
1,034 | 983 | 5.2 | % | 4,152 | 3,861 | 7.5 | % | ||||||||||||||||
|
Adjusted
EBITDA
|
619 | 562 | 10.1 | % | 2,315 | 2,098 | 10.3 | % | ||||||||||||||||
|
Adjusted
EBITDA margin
|
37.4 | % | 36.4 | % | 35.8 | % | 35.2 | % | ||||||||||||||||
|
Depreciation
and amortization
|
328 | 327 | 1,307 | 1,320 | ||||||||||||||||||||
|
Impairment
charges
|
1,521 | 178 | 1,521 | 178 | ||||||||||||||||||||
|
Stock
compensation expense
|
9 | 3 | 33 | 18 | ||||||||||||||||||||
|
Other
operating expenses, net
|
14 | (33 | ) | 65 | (20 | ) | ||||||||||||||||||
|
Income
(loss) from operations
|
(1,253 | ) | 87 | (611 | ) | 602 | ||||||||||||||||||
|
OTHER
INCOME (EXPENSES):
|
||||||||||||||||||||||||
|
Interest
expense, net
|
(486 | ) | (466 | ) | (1,903 | ) | (1,851 | ) | ||||||||||||||||
|
Change
in value of derivatives
|
(28 | ) | 70 | (29 | ) | 52 | ||||||||||||||||||
|
Other
expense, net
|
(1 | ) | (117 | ) | (8 | ) | (156 | ) | ||||||||||||||||
| (515 | ) | (513 | ) | (1,940 | ) | (1,955 | ) | |||||||||||||||||
|
Loss
before income taxes
|
(1,768 | ) | (426 | ) | (2,551 | ) | (1,353 | ) | ||||||||||||||||
|
Income
tax benefit (expense)
|
277 | (42 | ) | 103 | (195 | ) | ||||||||||||||||||
|
Net
loss
|
$ | (1,491 | ) | $ | (468 | ) | $ | (2,448 | ) | $ | (1,548 | ) | ||||||||||||
|
Loss
per common share, basic and diluted
|
$ | (3.95 | ) | $ | (1.27 | ) | $ | (6.55 | ) | $ | (4.21 | ) | ||||||||||||
|
Weighted
average common shares outstanding, basic and diluted
|
377,920,301 | 369,916,556 | 373,464,920 | 368,240,608 | ||||||||||||||||||||
|
(a) Pro
forma results reflect certain sales and acquisitions of cable systems in
2007 and 2008 as if they occurred as of January 1, 2007. The pro forma
statements of operations do not include adjustments for financing
transactions completed by Charter during the periods presented or certain
other dispositions of assets because those transactions did not
significantly impact Charter's adjusted EBITDA. However, all
transactions completed in 2007 and 2008 have been reflected in the
operating statistics. The pro forma data is based on information
available to Charter as of the date of this document and certain
assumptions that we believe are reasonable under the circumstances. The
financial data required allocation of certain revenues and expenses and
such information has been presented for comparative purposes and is not
intended to provide any indication of what our actual financial position,
or results of operations would have been had the transactions described
above been completed on the dates indicated or to project our results of
operations for any future date.
|
||||||||||||||||||||||||
|
(b) Operating
expenses include programming, service, and advertising sales
expenses.
|
||||||||||||||||||||||||
|
(c) Selling,
general and administrative expenses include general and administrative and
marketing expenses.
|
||||||||||||||||||||||||
|
December
31, 2008. Pro forma revenues, operating costs and expenses and net
loss were reduced by $3 million, $2 million and $4 million, respectively,
for the three months ended December 31, 2008. Pro forma revenues,
operating costs and expenses and net loss were reduced by $12 million, $8
million and $3 million, respectively, for the year ended December 31,
2008.
|
||||||||||||||||||||||||
|
December
31, 2007. Pro forma revenues, operating costs and expenses and net
loss were reduced by $8 million, $5 million and $0, respectively, for the
three months ended December 31, 2007. Pro forma revenues, operating
costs and expenses and net loss were reduced by $43 million, $30 million
and $68 million, respectively, for the year ended December 31,
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. Fourth Quarter 2008 Earnings
Release
Page 2 of
8
|
CHARTER
COMMUNICATIONS, INC. AND SUBSIDIARIES
|
||||||||
|
UNAUDITED
CONSOLIDATED BALANCE SHEETS
|
||||||||
|
(DOLLARS
IN MILLIONS)
|
||||||||
|
December
31,
|
December
31,
|
|||||||
|
2008
|
2007
|
|||||||
|
ASSETS
|
||||||||
|
CURRENT
ASSETS:
|
||||||||
|
Cash
and cash equivalents
|
$ | 960 | $ | 75 | ||||
|
Accounts
receivable, net of allowance for doubtful accounts
|
222 | 225 | ||||||
|
Prepaid
expenses and other current assets
|
36 | 36 | ||||||
|
Total
current assets
|
1,218 | 336 | ||||||
|
INVESTMENT
IN CABLE PROPERTIES:
|
||||||||
|
Property,
plant and equipment, net
|
4,987 | 5,103 | ||||||
|
Franchises,
net
|
7,384 | 8,942 | ||||||
|
Total
investment in cable properties, net
|
12,371 | 14,045 | ||||||
|
OTHER
NONCURRENT ASSETS
|
293 | 285 | ||||||
|
Total
assets
|
$ | 13,882 | $ | 14,666 | ||||
|
LIABILITIES
AND SHAREHOLDERS' DEFICIT
|
||||||||
|
CURRENT
LIABILITIES:
|
||||||||
|
Accounts
payable and accrued expenses
|
$ | 1,310 | $ | 1,332 | ||||
|
Current
portion of long-term debt
|
155 | - | ||||||
|
Total
current liabilities
|
1,465 | 1,332 | ||||||
|
LONG-TERM
DEBT
|
21,511 | 19,908 | ||||||
|
NOTE
PAYABLE - RELATED PARTY
|
75 | 65 | ||||||
|
DEFERRED
MANAGEMENT FEES - RELATED PARTY
|
14 | 14 | ||||||
|
OTHER
LONG-TERM LIABILITIES
|
1,120 | 1,035 | ||||||
|
MINORITY
INTEREST
|
203 | 199 | ||||||
|
PREFERRED
STOCK - REDEEMABLE
|
- | 5 | ||||||
|
SHAREHOLDERS'
DEFICIT
|
(10,506 | ) | (7,892 | ) | ||||
|
Total
liabilities and shareholders' deficit
|
$ | 13,882 | $ | 14,666 | ||||
Addendum
to Charter Communications, Inc. Fourth 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 December 31,
|
Year
Ended December 31,
|
|||||||||||||||
|
2008
|
2007
|
2008
|
2007
|
|||||||||||||
|
CASH
FLOWS FROM OPERATING ACTIVITIES:
|
||||||||||||||||
|
Net
loss
|
$ | (1,495 | ) | $ | (468 | ) | $ | (2,451 | ) | $ | (1,616 | ) | ||||
|
Adjustments
to reconcile net loss to net cash flows from operating
activities:
|
||||||||||||||||
|
Depreciation
and amortization
|
329 | 329 | 1,310 | 1,328 | ||||||||||||
|
Impairment
charges
|
1,521 | 178 | 1,521 | 234 | ||||||||||||
|
Noncash
interest expense
|
16 | 9 | 59 | 40 | ||||||||||||
|
Change
in value of derivatives
|
28 | (70 | ) | 29 | (52 | ) | ||||||||||
|
Deferred
income taxes
|
(276 | ) | 37 | (107 | ) | 198 | ||||||||||
|
Other, net
|
10 | 86 | 49 | 135 | ||||||||||||
|
Changes
in operating assets and liabilities, net of effects from
dispositions
|
||||||||||||||||
|
Accounts
receivable
|
24 | (3 | ) | 3 | (36 | ) | ||||||||||
|
Prepaid
expenses and other assets
|
8 | 24 | (1 | ) | 45 | |||||||||||
|
Accounts
payable, accrued expenses and other
|
(176 | ) | (122 | ) | (13 | ) | 51 | |||||||||
|
Net
cash flows from operating activities
|
(11 | ) | - | 399 | 327 | |||||||||||
|
CASH
FLOWS FROM INVESTING ACTIVITIES:
|
||||||||||||||||
|
Purchases
of property, plant and equipment
|
(264 | ) | (354 | ) | (1,202 | ) | (1,244 | ) | ||||||||
|
Change
in accrued expenses related to capital expenditures
|
2 | 49 | (39 | ) | (2 | ) | ||||||||||
|
Other,
net
|
32 | 102 | 31 | 108 | ||||||||||||
|
Net
cash flows from investing activities
|
(230 | ) | (203 | ) | (1,210 | ) | (1,138 | ) | ||||||||
|
CASH
FLOWS FROM FINANCING ACTIVITIES:
|
||||||||||||||||
|
Borrowings
of long-term debt
|
750 | 405 | 3,105 | 7,877 | ||||||||||||
|
Repayments
of long-term debt
|
(116 | ) | (176 | ) | (1,354 | ) | (7,017 | ) | ||||||||
|
Payments
for debt issuance costs
|
- | (9 | ) | (42 | ) | (42 | ) | |||||||||
|
Other,
net
|
(2 | ) | (1 | ) | (13 | ) | 8 | |||||||||
|
Net
cash flows from financing activities
|
632 | 219 | 1,696 | 826 | ||||||||||||
|
NET
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
|
391 | 16 | 885 | 15 | ||||||||||||
|
CASH
AND CASH EQUIVALENTS, beginning of period
|
569 | 59 | 75 | 60 | ||||||||||||
|
CASH
AND CASH EQUIVALENTS, end of period
|
$ | 960 | $ | 75 | $ | 960 | $ | 75 | ||||||||
|
CASH
PAID FOR INTEREST
|
$ | 606 | $ | 562 | $ | 1,847 | $ | 1,792 | ||||||||
|
NONCASH
TRANSACTIONS:
|
||||||||||||||||
|
Cumulative
adjustment to Accumulated Deficit for the adoption of FIN
48
|
$ | - | $ | - | $ | - | $ | 56 | ||||||||
|
Issuance
of 6.50% convertible notes
|
$ | - | $ | 479 | $ | - | $ | 479 | ||||||||
|
Retirement
of 5.875% convertible notes
|
$ | - | $ | (364 | ) | $ | - | $ | (364 | ) | ||||||
Addendum to Charter Communications, Inc. Fourth Quarter 2008 Earnings
Release
Page 4 of
8
|
CHARTER
COMMUNICATIONS, INC. AND SUBSIDIARIES
|
||||||||||||
|
UNAUDITED
SUMMARY OF OPERATING STATISTICS
|
||||||||||||
|
Approximate
as of
|
||||||||||||
|
Actual
|
Pro
Forma
|
|||||||||||
|
December
31,
|
September
30,
|
December
31,
|
||||||||||
|
2008
(a)
|
2008
(a)
|
2007
(a)
|
||||||||||
|
Customer
Summary:
|
||||||||||||
|
Customer
Relationships:
|
||||||||||||
|
Residential
(non-bulk) basic video customers (b)
|
4,779,000 | 4,846,300 | 4,944,400 | |||||||||
|
Multi-dwelling
(bulk) and commercial unit customers (c)
|
266,700 | 274,500 | 258,800 | |||||||||
|
Total
basic video customers
|
5,045,700 | 5,120,800 | 5,203,200 | |||||||||
|
Non-video
customers (b)
|
408,900 | 407,700 | 375,800 | |||||||||
|
Total
customer relationships (d)
|
5,454,600 | 5,528,500 | 5,579,000 | |||||||||
|
Pro
forma average monthly revenue per basic video customer (e)
|
$ | 108.27 | $ | 106.19 | $ | 98.24 | ||||||
|
Pro
forma average monthly video revenue per basic video customer
(f)
|
$ | 59.15 | $ | 58.92 | $ | 56.17 | ||||||
|
Residential
bundled customers (g)
|
2,749,000 | 2,712,800 | 2,501,300 | |||||||||
|
Revenue
Generating Units:
|
||||||||||||
|
Basic
video customers (b) (c)
|
5,045,700 | 5,120,800 | 5,203,200 | |||||||||
|
Digital
video customers (h)
|
3,133,400 | 3,111,100 | 2,912,800 | |||||||||
|
Residential
high-speed Internet customers (i)
|
2,875,200 | 2,852,300 | 2,676,900 | |||||||||
|
Telephone
customers (j)
|
1,348,800 | 1,273,600 | 959,300 | |||||||||
|
Total
revenue generating units (k)
|
12,403,100 | 12,357,800 | 11,752,200 | |||||||||
|
Video
Cable Services:
|
||||||||||||
|
Basic
Video:
|
||||||||||||
|
Estimated
homes passed (l)
|
11,918,100 | 11,897,000 | 11,705,700 | |||||||||
|
Basic
video customers (b)(c)
|
5,045,700 | 5,120,800 | 5,203,200 | |||||||||
|
Estimated
penetration of basic homes passed (b) (c) (l) (m)
|
42.3 | % | 43.0 | % | 44.5 | % | ||||||
|
Pro
forma basic video customers quarterly net loss (b) (c) (n)
|
(75,100 | ) | (25,900 | ) | (65,800 | ) | ||||||
|
Digital
Video:
|
||||||||||||
|
Digital
video customers (h)
|
3,133,400 | 3,111,100 | 2,912,800 | |||||||||
|
Digital
penetration of basic video customers (b) (c) (h) (o)
|
62.1 | % | 60.8 | % | 56.0 | % | ||||||
|
Digital
set-top terminals deployed
|
4,550,000 | 4,493,600 | 4,182,700 | |||||||||
|
Pro
forma digital video customers quarterly net gain (h) (n)
|
22,300 | 61,400 | 59,500 | |||||||||
|
Non-Video
Cable Services:
|
||||||||||||
|
High-Speed
Internet Services:
|
||||||||||||
|
Estimated
high-speed Internet homes passed (l)
|
11,257,800 | 11,214,400 | 10,990,100 | |||||||||
|
Residential
high-speed Internet customers (i)
|
2,875,200 | 2,852,300 | 2,676,900 | |||||||||
|
Estimated
penetration of high-speed Internet homes passed (i) (l)
(m)
|
25.5 | % | 25.4 | % | 24.4 | % | ||||||
|
Pro
forma average monthly high-speed Internet revenue per high-speed Internet
customer (f)
|
$ | 40.26 | $ | 40.53 | $ | 40.54 | ||||||
|
Pro
forma high-speed Internet customers quarterly net gain (i)
(n)
|
22,900 | 70,500 | 50,500 | |||||||||
|
Telephone
Services:
|
||||||||||||
|
Estimated
telephone homes passed (l)
|
10,434,400 | 10,214,600 | 9,013,900 | |||||||||
|
Telephone
customers (j)
|
1,348,800 | 1,273,600 | 959,300 | |||||||||
|
Estimated
penetration of telephone homes passed (i) (l) (m)
|
12.9 | % | 12.5 | % | 10.6 | % | ||||||
|
Pro
forma average monthly telephone revenue per telephone customer
(f)
|
$ | 41.06 | $ | 40.67 | $ | 41.74 | ||||||
|
Pro
forma telephone customers quarterly net gain (j) (n)
|
75,200 | 98,400 | 155,300 | |||||||||
|
Pro
forma operating statistics reflect the sales 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
September 30, 2008 actual basic video customers, digital video customers,
high-speed Internet customers and telephone customers were 5,136,100,
3,118,500, 2,858,200, and 1,274,300, respectively.
|
||||||||||||
|
At
December 31, 2007 actual basic video customers, digital video customers,
high-speed Internet customers and telephone customers were 5,219,900,
2,920,400, 2,682,500, and 959,300, respectively.
|
||||||||||||
|
See
footnotes to unaudited summary of operating statistics on page 6 of this
addendum.
|
||||||||||||
Addendum to Charter Communications, Inc. Fourth 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. In addition, at December 31, 2008, September 30,
2008, and December 31, 2007, “customers” include approximately 36,000,
42,100, and 48,200 persons, respectively, whose accounts were over 60 days
past due in payment, approximately 5,300, 7,700, and 10,700 persons,
respectively, whose accounts were over 90 days past due in payment and
approximately 2,700, 3,800, and 2,900 persons, respectively, whose
accounts were over 120 days past due in
payment.
|
|
(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 408,900, 407,700, and
375,800 customer relationships at December 31, 2008, September 30, 2008,
and December 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 each reporting
year. 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 December 31, 2008, September 30, 2008, and December 31, 2007, approximately 2,576,600, 2,554,400, and 2,387,900 of these high-speed Internet customers, respectively, receive video and/or telephone services from us and are included within the respective statistics above. | |||||||||||||
|
(j) "Telephone
customers" include all customers receiving telephone
service. As of December 31, 2008, September 30, 2008, and
December 31, 2007, approximately 1,311,200, 1,232,400, and 920,600 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.
|
|||||||||||||
|
(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. Fourth 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 December 31,
|
Year
Ended December 31,
|
|||||||||||||||
|
2008
|
2007
|
2008
|
2007
|
|||||||||||||
|
ddctual
|
Actual
|
Actual
|
Actual
|
|||||||||||||
|
Net
cash flows from operating activities
|
$ | (11 | ) | $ | - | $ | 399 | $ | 327 | |||||||
|
Less: Purchases
of property, plant and equipment
|
(264 | ) | (354 | ) | (1,202 | ) | (1,244 | ) | ||||||||
|
Less: Change
in accrued expenses related to capital expenditures
|
2 | 49 | (39 | ) | (2 | ) | ||||||||||
|
Free
cash flow
|
(273 | ) | (305 | ) | (842 | ) | (919 | ) | ||||||||
|
Interest
on cash pay obligations (b)
|
470 | 457 | 1,844 | 1,811 | ||||||||||||
|
Purchases
of property, plant and equipment
|
264 | 354 | 1,202 | 1,244 | ||||||||||||
|
Change
in accrued expenses related to capital expenditures
|
(2 | ) | (49 | ) | 39 | 2 | ||||||||||
|
Other,
net
|
17 | 7 | 65 | 33 | ||||||||||||
|
Change
in operating assets and liabilities
|
144 | 101 | 11 | (60 | ) | |||||||||||
|
Adjusted
EBITDA (c)
|
$ | 620 | $ | 565 | $ | 2,319 | $ | 2,111 | ||||||||
|
Three
Months Ended December 31,
|
Year
Ended December 31,
|
|||||||||||||||
|
2008
|
2007
|
2008
|
2007
|
|||||||||||||
|
Pro
Forma (a)
|
Pro
Forma (a)
|
Pro
Forma (a)
|
Pro
Forma (a)
|
|||||||||||||
|
Net
cash flows from operating activities
|
$ | (12 | ) | $ | (3 | ) | $ | 395 | $ | 314 | ||||||
|
Less: Purchases
of property, plant and equipment
|
(264 | ) | (354 | ) | (1,202 | ) | (1,244 | ) | ||||||||
|
Less: Change
in accrued expenses related to capital expenditures
|
2 | 49 | (39 | ) | (2 | ) | ||||||||||
|
Free
cash flow
|
(274 | ) | (308 | ) | (846 | ) | (932 | ) | ||||||||
|
Interest
on cash pay obligations (b)
|
470 | 457 | 1,844 | 1,811 | ||||||||||||
|
Purchases
of property, plant and equipment
|
264 | 354 | 1,202 | 1,244 | ||||||||||||
|
Change
in accrued expenses related to capital expenditures
|
(2 | ) | (49 | ) | 39 | 2 | ||||||||||
|
Other,
net
|
17 | 7 | 65 | 33 | ||||||||||||
|
Change
in operating assets and liabilities
|
144 | 101 | 11 | (60 | ) | |||||||||||
|
Adjusted
EBITDA (c)
|
$ | 619 | $ | 562 | $ | 2,315 | $ | 2,098 | ||||||||
|
(a) Pro
forma results reflect certain sales and acquisitions of cable systems in
2007 and 2008 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. Fourth Quarter 2008 Earnings
Release
Page 7 of
8
|
CHARTER
COMMUNICATIONS, INC. AND SUBSIDIARIES
|
||||||||||||||||
|
CAPITAL
EXPENDITURES
|
||||||||||||||||
|
(DOLLARS
IN MILLIONS)
|
||||||||||||||||
|
Three
Months Ended December 31,
|
Year
Ended December 31,
|
|||||||||||||||
|
2008
|
2007
|
2008
|
2007
|
|||||||||||||
|
Customer
premise equipment (a)
|
$ | 115 | $ | 150 | $ | 595 | $ | 578 | ||||||||
|
Scalable
infrastructure (b)
|
66 | 68 | 251 | 232 | ||||||||||||
|
Line
extensions (c)
|
17 | 29 | 80 | 105 | ||||||||||||
|
Upgrade/Rebuild
(d)
|
3 | 17 | 40 | 52 | ||||||||||||
|
Support
capital (e)
|
63 | 90 | 236 | 277 | ||||||||||||
|
Total
capital expenditures
|
$ | 264 | $ | 354 | $ | 1,202 | $ | 1,244 | ||||||||
|
(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. Fourth Quarter 2008 Earnings Release
Page 8 of
8