SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
8-K
Current
Report
Pursuant
to Section 13 or 15(d) of the Securities Exchange Act of
1934
Date
of Report (Date of earliest event reported): September 30,
2007
Charter
Communications, Inc.
(Exact
name of registrant as specified in its charter)
Delaware
(State
or Other Jurisdiction of Incorporation or Organization)
|
000-27927
|
43-1857213
|
|
|
(Commission
File Number)
|
(I.R.S.
Employer Identification
Number)
|
12405
Powerscourt Drive
St.
Louis, Missouri 63131
(Address
of principal executive offices including zip code)
(314)
965-0555
(Registrant's
telephone number, including area code)
Not
Applicable
(Former
name or former address, if changed since last report)
ITEM
2.02. RESULTS
OF OPERATIONS AND FINANCIAL CONDITION.
On November
8, 2007, Charter Communications, Inc. issued a press release announcing its
results for the third quarter ended September 30, 2007. The following
information, including the entirety of the press release appearing in Exhibit
99.1 hereto, is not filed but is furnished pursuant to Item 2.02, "Results
of
Operations and Financial Condition."
ITEM
9.01. FINANCIAL STATEMENTS
AND EXHIBITS.
|
Exhibit
Number
|
Description
|
|
|
99.1
|
Press
Release dated November 8,
2007. *
|
*
furnished herewith
CAUTIONARY
STATEMENT REGARDING FORWARD-LOOKING STATEMENTS:
This
current report includes forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended (the "Securities
Act"), and Section 21E of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), regarding, among other things, our plans, strategies
and
prospects, both business and financial. 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 could trigger a default of
our other
obligations under cross-default
provisions;
|
|
|
·
|
our
ability to pay or refinance debt prior to or when it becomes
due and/or
refinance that debt through new issuances, exchange offers or
otherwise,
including restructuring our balance sheet and leverage
position;
|
|
·
|
competition
from other distributors, including incumbent telephone companies,
direct
broadcast satellite operators, wireless broadband providers,
and DSL
providers;
|
|
·
|
difficulties
in introducing, growing, and operating our telephone services,
such as our
ability to adequately meet 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;
and
|
|
|
·
|
the
effects of governmental regulation, including but not limited
to local and
state franchise authorities, on our
business.
|
All
forward-looking statements attributable to us or any person acting on our
behalf
are expressly qualified in their entirety by this cautionary
statement. We are under no duty or obligation to update any of the
forward-looking statements after the date of this current
report.
SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, Charter
Communications, Inc. has duly caused this Current Report to be signed on its
behalf by the undersigned hereunto duly authorized.
<
font id="TAB2" style="LETTER-SPACING: 9pt;"> CHARTER
COMMUNICATIONS, INC.
<
font id="TAB2" style="LETTER-SPACING: 9pt;"> Registrant
Dated
November 8, 2007
|
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 November 8, 2007. *
|
*
furnished herewith
Exhibit
99.1
NEWS
FOR
RELEASE: 7:00 a.m. CT, Thursday, November 8, 2007
Charter
Reports Third-Quarter
Financial
and Operating Results
Double-digit
pro forma revenue and pro forma adjusted EBITDA growth
for
the fourth consecutive quarter
St.
Louis, MO – November 8, 2007 – Charter Communications, Inc. (NASDAQ:
CHTR) (along with its subsidiaries, the “Company” or “Charter”) today reported
its third-quarter 2007 financial and operating
results.
Highlights:
|
·
|
Third-quarter
pro forma revenues of $1.526 billion grew 11.2% year over year
and actual revenue grew 9.9%, driven by significant increases in
telephone
and high-speed Internet (HSI)
revenues.
|
|
·
|
Third-quarter
pro forma adjusted EBITDA of $511 million increased 10.6% year
over year and actual adjusted EBITDA grew 9.2%. (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.)
|
|
·
|
Total
ARPU (average revenue per customer) increased 13.0% year over year,
driven
by increased sales of The Charter BundleTM and advanced services
growth.
|
|
·
|
In
October, Charter successfully completed a convertible note exchange
offer,
extending 88% of the Company’s convertible senior notes due
2009.
|
“We
are
pleased to be announcing double-digit pro forma revenue and adjusted
EBITDA growth for the fourth consecutive quarter,” said Neil Smit, President and
Chief Executive Officer. “We will remain disciplined in our operating, marketing
and capital investments targeted to continue growing the business.”
In
addition to the actual results for the three and nine months ended September
30,
2006 and 2007, we have provided in this release pro forma results for
the three and nine months ended September 30, 2006 and 2007. We believe these
pro forma results
1
facilitate
meaningful analysis of the results of operations. Pro forma results in
this release reflect (i) our sales of assets in 2006, (ii) our sales of
assets
in January 2007 and May 2007, and (iii) our acquisition of assets in August
2007
as if they had occurred as of January 1, 2006. Pro forma income
statements for the three and nine months ended September 30, 2006 and September
30, 2007 and pro forma customer statistics as of June 30, 2007,
December 31, 2006 and September 30, 2006 are provided in the addendum of
this
news release.
Key
Operating Results
All
of
the following customer growth and ARPU statistics are presented on a pro
forma basis. Charter added a net 130,900 revenue generating units (“RGUs”)
during the third quarter of 2007, and year to date has added 629,600 RGUs.
As of
September 30, 2007, Charter served approximately 5,655,900 customers. The
Company’s 11,672,500 RGUs were comprised of 5,347,800 analog video, 2,882,900
digital video, 2,639,200 HSI, and 802,600 telephone customers.
|
·
|
Telephone
customers increased by approximately 102,300 in the third quarter
of 2007.
Year to date, telephone customers increased 356,800, compared to
203,600
telephone customer net additions in the first nine months of
2006.
|
|
·
|
HSI
customers increased by approximately 53,000 in the third quarter
of 2007.
Year to date, HSI customers increased 237,300, compared to 245,600
HSI
customer net additions in the first nine months of
2006.
|
|
·
|
Digital
video customers increased by approximately 15,800 in the third
quarter of
2007. Year to date, digital video customers increased 88,500, compared
to
130,000 digital video net additions in the first nine months of
2006.
|
|
·
|
Analog
video customers decreased by approximately 40,200 in the third
quarter of
2007. Year to date, analog video customers decreased 53,000, compared
to a
net loss of 27,800 analog video customers in the first nine months
of
2006.
|
Third-quarter
2007 total ARPU increased 13.0%, with video ARPU increasing 4.3% and HSI
ARPU
increasing 6.1%, as compared to the same period in 2006, driven
2
primarily
by advanced services and upgrading customers to higher Internet speeds
and
programming tiers.
We
now
serve 802,600 telephone customers – more than double the 339,600 customers
served as of September 30, 2006. Charter Telephone® was available to
approximately 8.3 million homes as of September 30, 2007, and as of October
31,
2007, we passed an additional 300,000 homes. Charter will continue to focus
on
driving deeper penetration of telephone service and bundled service packages,
while further expanding our telephone footprint. Charter expects telephone
service to reach between 9.5 million and 10 million homes passed by the end
of
2008.
Third-Quarter
Results – Pro Forma
Third-quarter
pro forma revenues were $1.526 billion, an increase of $154 million, or
11.2% – Charter’s fifth consecutive quarter of double-digit pro forma
revenue growth. A significant portion of the increase resulted
from
increases in telephone and HSI revenues.
Pro
forma telephone revenues increased by $57 million to $94 million from $37
million a year ago, as our telephone customer base has more than doubled
since
last year. Pro forma HSI revenues increased $55 million, up 20.8% year
over year, due to significant ARPU increases and customer growth. Pro
forma video revenues increased $20 million, up 2.4% year over year,
primarily as a result of advanced services growth. Pro forma commercial
revenues increased $11 million, or 14.5%, as Charter now markets the video,
HSI,
and telephone services bundle to small and medium-sized businesses.
Pro
forma operating expenses, which include programming, advertising sales, and
service costs, increased 12.0% year over year, reflecting annual programming
rate increases and growth of the Company’s telephone business and other advanced
services. Selling, general, and administrative expenses increased by 10.5%
compared to the year-ago quarter, reflecting expenditures to further improve
the
customer experience and increased marketing expenditures targeted at revenue
growth and retaining customers.
3
Pro
forma adjusted EBITDA totaled $511 million for the third quarter of
2007, an increase of 10.6% compared to the year-ago quarter – Charter’s fourth
consecutive quarter of double-digit, year over year, pro forma adjusted
EBITDA growth.
Pro
forma net cash flows from operating activities for the third quarter of
2007 were $210 million, compared to $138 million for the third quarter of
2006.
Nine-Month
Results – Pro Forma
Nine
months ended September 30, 2007 pro forma revenues were $4.451 billion,
an increase of $440 million, or 11.0%, primarily related to increases in
telephone and HSI revenues.
Pro
forma telephone revenues increased to $236 million from $86 million a year
ago. Pro forma HSI revenues increased $163 million, up 21.4% year over
year. Pro forma video revenues increased $77 million, up 3.1% year
over year. Pro forma commercial revenues increased $31 million, or
14.1%.
Pro
forma operating expenses for the nine months ended September 30, 2007,
which include programming, advertising sales, and service costs, increased
9.6%
year over year; and selling, general, and administrative expenses increased
by
13.0%.
Pro
forma adjusted EBITDA totaled $1.546 billion for the first nine months of
2007, an increase of 11.5% compared to the first nine months of last
year.
Pro
forma net cash flows from operating activities for the first nine months of
2007 were $327 million, compared to $303 million for the first nine months
of
2006.
Third-Quarter
Results – Actual
Third-quarter
revenues increased 9.9% and operating costs and expenses increased 10.2%
compared to year-ago results.
Operating
income from continuing operations increased to $107 million in the third
quarter
of 2007 from $66 million in the third quarter of 2006, primarily due to revenue
growth exceeding operating costs and expense growth by $43 million.
Net
loss
for the third quarter of 2007 was $407 million, or $1.10 per common share.
For
the third quarter of 2006, Charter reported a net loss of $133 million and
loss per common share of $0.41. Despite revenues increasing at a higher rate
than operating
4
costs
and
expenses, net loss increased primarily due to non-recurring gains in the
third
quarter of 2006 when the Company recognized a $128 million gain on a debt
exchange and a $200 million gain on the sale of discontinued
operations.
Expenditures
for property, plant, and equipment for the third quarter of 2007 were $311
million, compared to third-quarter 2006 expenditures of $256 million. The
increase in capital expenditures primarily reflects year-over-year increases
in
customer premise equipment, support capital, and scalable
infrastructure.
Nine-Months
Results – Actual
Revenues
for the first nine months of
2007 were $4.449 billion, an increase of 8.8% year over year. Operating costs
and expenses were $2.903 billion, an increase of 8.3% compared to year-ago
actual results. Adjusted EBITDA for the first nine months of 2007 was $1.546
billion, a 9.6% increase compared to the year-ago period.
Operating
income from continuing operations more than doubled to $463 million in the
first
nine months of 2007, compared to $204 million in the first nine months of
2006.
The primary drivers of the increase include revenue growth exceeding operating
costs and expense growth during the period by $135 million, and depreciation
and
amortization expenses declining by $25 million year over year. In addition,
asset impairment charges of $159 million were recorded in the first nine
months
of 2006, while similar charges of $56 million were taken in the 2007 nine-month
period.
Net
loss
for the first nine months of 2007 was $1.148 billion, or $3.12 per common
share. For the first nine months of 2006, Charter reported a net loss
of $974 million and loss per common share of $3.04.
Expenditures
for property, plant, and equipment for the first nine months of 2007 were
$890
million, compared to $795 million in the first nine months of
2006. As previously disclosed, Charter expects that approximately
three-quarters of its projected $1.2 billion of 2007 capital expenditures
will
be directed toward success-based activities.
Net
cash
flows from operating activities for the first nine months of 2007 were $327
million, compared to $348 million for the first nine months of
2006.
As
of
September 30, 2007, Charter had $19.7 billion in long-term debt and $59 million
of cash on hand. Charter expects that cash on hand, cash flows from operating
5
activities,
and amounts available under its credit facilities will be adequate to meet
its
cash needs through 2008.
Transactions
In
October of
2007 Charter successfully completed an exchange of $364 million of our existing
convertible senior notes due 2009 into $479 million of new convertible senior
notes due in 2027, subject to earlier redemption at the option of the Company
or
repurchase at the option of the holders. This transaction resulted in 88%
of the
convertible senior notes being exchanged, leaving outstanding $49 million
of
convertible senior notes due 2009.
Also,
effective November 1, 2007, Charter swapped its West Sacramento, CA cable
system
serving 19,000 analog video customers for WaveDivision’s Los Angeles area cable
systems serving the communities of Cerritos and Ventura, serving 14,200 analog
video customers. This trade reflects the Company’s continued effort to further
strengthen its strategic clusters.
Use
of Non-GAAP Financial Metrics
The
Company uses certain measures that are not defined by GAAP to evaluate various
aspects of its business. Adjusted EBITDA, pro forma adjusted EBITDA,
and free cash flow are non-GAAP financial measures and should be considered
in
addition to, not as a substitute for, net cash flows from operating activities
reported in accordance with GAAP. These terms, as defined by Charter, may
not be
comparable to similarly titled measures used by other companies.
Adjusted
EBITDA is defined as income from operations before, depreciation and
amortization, asset 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
6
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 $32 million
for
each of the three months ended September 30, 2007 and 2006, respectively,
which
expense amounts are excluded for the purposes of calculating compliance with
leverage covenants.
Additional
Information Available on Website
A
slide
presentation to accompany the third-quarter conference call will be available
on
the Investor & News Center of our website at www.charter.com in the
“Presentations/Webcasts” section. Pro forma data, including disclosure
concerning the pro forma data and the basis upon which it was
calculated, for each quarter of 2006 and 2007 can also be found on the Investor
& News Center in the “Pro Forma Information” section. The pro
forma income statement for the three months and nine months ended September
30, 2006 and 2007 and pro forma historical customer statistics are also
provided in the addendum of this news release.
7
Conference
Call
The
Company will host a conference call on Thursday, November 8, 2007, at 9:00
a.m.
Eastern Time (ET) related to the contents of this release.
The
conference call will be webcast live via the Company’s website at
www.charter.com. Access the webcast by clicking on “About Charter” at the
top of the home page. Participants should go to the call link at least 10
minutes prior to the start time to register. The call will be archived on
the
website beginning two hours after its completion. Accompanying slides will
also
be available on the site.
Those
participating via telephone should dial 888-233-1576. International participants
should dial 706-643-3458.
A
replay
will be available at 800-642-1687 or 706-645-9291 beginning two hours after
completion of the call through end of business November 15, 2007. The passcode
for the replay is 15381251.
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
8
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 could trigger a default of our
other
obligations under cross-default
provisions;
|
|
·
|
our
ability to pay or refinance debt prior to or when it becomes due
and/or
refinance that debt through new issuances, exchange offers or otherwise,
including restructuring our balance sheet and leverage
position;
|
|
·
|
competition
from other distributors, including incumbent telephone companies,
direct
broadcast satellite operators, wireless broadband providers, and
DSL
providers;
|
|
·
|
difficulties
in introducing, growing, and operating our telephone services,
such as our
ability to adequately meet 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;
and
|
|
·
|
the
effects of governmental regulation, including but not limited to
local and
state franchise authorities, on our
business.
|
All
forward-looking statements attributable to us or any person acting on our
behalf
are expressly qualified in their entirety by this cautionary
statement. We are under no duty or obligation to update any of the
forward-looking statements after the date of this release.
# # #
9
|
CHARTER
COMMUNICATIONS, INC. AND SUBSIDIARIES
|
||||||||||||||||||||||||
|
UNAUDITED
CONSOLIDATED STATEMENTS OF OPERATIONS AND OPERATING
DATA
|
||||||||||||||||||||||||
|
(DOLLARS
IN MILLIONS, EXCEPT PER SHARE AND SHARE DATA)
|
||||||||||||||||||||||||
|
Three
Months Ended September 30,
|
Nine
Months Ended September 30,
|
|||||||||||||||||||||||
|
2007
|
2006
|
2007
|
2006
|
|||||||||||||||||||||
|
Actual
|
Actual
|
%
Change
|
Actual
|
Actual
|
%
Change
|
|||||||||||||||||||
|
REVENUES:
|
||||||||||||||||||||||||
|
Video
|
$ |
845
|
$ |
836
|
1.1 | % | $ |
2,542
|
$ |
2,520
|
0.9 | % | ||||||||||||
|
High-speed
Internet
|
320
|
267
|
19.9 | % |
926
|
773
|
19.8 | % | ||||||||||||||||
|
Telephone
|
94
|
37
|
154.1 | % |
236
|
86
|
174.4 | % | ||||||||||||||||
|
Advertising
sales
|
77
|
81
|
(4.9 | %) |
216
|
228
|
(5.3 | %) | ||||||||||||||||
|
Commercial
|
87
|
78
|
11.5 | % |
251
|
227
|
10.6 | % | ||||||||||||||||
|
Other
|
102
|
89
|
14.6 | % |
278
|
257
|
8.2 | % | ||||||||||||||||
|
Total
revenues
|
1,525
|
1,388
|
9.9 | % |
4,449
|
4,091
|
8.8 | % | ||||||||||||||||
|
COSTS
AND EXPENSES:
|
||||||||||||||||||||||||
|
Operating
(excluding depreciation and amortization) (a)
|
679
|
615
|
10.4 | % |
1,957
|
1,830
|
6.9 | % | ||||||||||||||||
|
Selling,
general and administrative (excluding stock
|
||||||||||||||||||||||||
|
compensation
expense) (b)
|
336
|
306
|
9.8 | % |
946
|
850
|
11.3 | % | ||||||||||||||||
|
Operating
costs and expenses
|
1,015
|
921
|
10.2 | % |
2,903
|
2,680
|
8.3 | % | ||||||||||||||||
|
Adjusted
EBITDA
|
510
|
467
|
9.2 | % |
1,546
|
1,411
|
9.6 | % | ||||||||||||||||
|
Adjusted
EBITDA margin
|
33.4 | % | 33.6 | % | 34.7 | % | 34.5 | % | ||||||||||||||||
|
Depreciation
and amortization
|
334
|
334
|
999
|
1,024
|
||||||||||||||||||||
|
Asset
impairment charges
|
56
|
60
|
56
|
159
|
||||||||||||||||||||
|
Stock
compensation expense
|
5
|
3
|
15
|
10
|
||||||||||||||||||||
|
Other
operating expenses, net
|
8
|
4
|
13
|
14
|
||||||||||||||||||||
|
Operating
income from continuing operations
|
107
|
66
|
463
|
204
|
||||||||||||||||||||
|
OTHER
INCOME AND (EXPENSES):
|
||||||||||||||||||||||||
|
Interest
expense, net
|
(452 | ) | (466 | ) | (1,387 | ) | (1,409 | ) | ||||||||||||||||
|
Gain
(loss) on extinguishment of debt
|
-
|
128
|
(35 | ) |
101
|
|||||||||||||||||||
|
Other
income (expense), net
|
(21 | ) |
3
|
(20 | ) |
20
|
||||||||||||||||||
| (473 | ) | (335 | ) | (1,442 | ) | (1,288 | ) | |||||||||||||||||
|
Loss
from continuing operations before income taxes
|
(366 | ) | (269 | ) | (979 | ) | (1,084 | ) | ||||||||||||||||
|
Income
tax expense
|
(41 | ) | (64 | ) | (169 | ) | (124 | ) | ||||||||||||||||
|
Loss
from continuing operations
|
(407 | ) | (333 | ) | (1,148 | ) | (1,208 | ) | ||||||||||||||||
|
Income
from discontinued operations, net of tax
|
-
|
200
|
-
|
234
|
||||||||||||||||||||
|
Net
loss
|
$ | (407 | ) | $ | (133 | ) | $ | (1,148 | ) | $ | (974 | ) | ||||||||||||
|
LOSS
PER COMMON SHARE, BASIC AND DILUTED:
|
||||||||||||||||||||||||
|
Loss
from continuing operations
|
$ | (1.10 | ) | $ | (1.02 | ) | $ | (3.12 | ) | $ | (3.77 | ) | ||||||||||||
|
Net
loss
|
$ | (1.10 | ) | $ | (0.41 | ) | $ | (3.12 | ) | $ | (3.04 | ) | ||||||||||||
|
Weighted
average common shares outstanding, basic and diluted
|
369,239,742
|
326,960,632
|
367,671,479
|
320,730,698
|
||||||||||||||||||||
|
(a) Operating
expenses include programming, service, and advertising sales
expenses.
|
||||||||||||||||||||||||
|
(b) Selling,
general and administrative expenses include general and administrative
and
marketing expenses.
|
||||||||||||||||||||||||
|
Adjusted
EBITDA is a non-GAAP term. See page 7 of this addendum for the
reconciliation of adjusted EBITDA to net cash flows from operating
activities as defined by GAAP.
|
||||||||||||||||||||||||
Addendum
to Charter Communications, Inc. Third Quarter 2007 Earnings Release
Page
1 of
8
|
CHARTER
COMMUNICATIONS, INC. AND SUBSIDIARIES
|
||||||||||||||||||||||||
|
UNAUDITED
CONSOLIDATED STATEMENTS OF OPERATIONS AND OPERATING
DATA
|
||||||||||||||||||||||||
|
(DOLLARS
IN MILLIONS, EXCEPT PER SHARE AND SHARE DATA)
|
||||||||||||||||||||||||
|
Three
Months Ended September 30,
|
Nine
Months Ended September 30,
|
|||||||||||||||||||||||
|
2007
|
2006
|
2007
|
2006
|
|||||||||||||||||||||
|
Pro
Forma (a)
|
Pro
Forma (a)
|
%
Change
|
Pro
Forma (a)
|
Pro
Forma (a)
|
%
Change
|
|||||||||||||||||||
|
REVENUES:
|
||||||||||||||||||||||||
|
Video
|
$ |
846
|
$ |
826
|
2.4 | % | $ |
2,544
|
$ |
2,467
|
3.1 | % | ||||||||||||
|
High-speed
Internet
|
320
|
265
|
20.8 | % |
925
|
762
|
21.4 | % | ||||||||||||||||
|
Telephone
|
94
|
37
|
154.1 | % |
236
|
86
|
174.4 | % | ||||||||||||||||
|
Advertising
sales
|
77
|
81
|
(4.9 | %) |
216
|
225
|
(4.0 | %) | ||||||||||||||||
|
Commercial
|
87
|
76
|
14.5 | % |
251
|
220
|
14.1 | % | ||||||||||||||||
|
Other
|
102
|
87
|
17.2 | % |
279
|
251
|
11.2 | % | ||||||||||||||||
|
Total
revenues
|
1,526
|
1,372
|
11.2 | % |
4,451
|
4,011
|
11.0 | % | ||||||||||||||||
|
COSTS
AND EXPENSES:
|
||||||||||||||||||||||||
|
Operating
(excluding depreciation and amortization) (b)
|
679
|
606
|
12.0 | % |
1,957
|
1,786
|
9.6 | % | ||||||||||||||||
|
Selling,
general and administrative (excluding stock
|
||||||||||||||||||||||||
|
compensation
expense) (c)
|
336
|
304
|
10.5 | % |
948
|
839
|
13.0 | % | ||||||||||||||||
|
Operating
costs and expenses
|
1,015
|
910
|
11.5 | % |
2,905
|
2,625
|
10.7 | % | ||||||||||||||||
|
Adjusted
EBITDA
|
511
|
462
|
10.6 | % |
1,546
|
1,386
|
11.5 | % | ||||||||||||||||
|
Adjusted
EBITDA margin
|
33.5 | % | 33.7 | % | 34.7 | % | 34.6 | % | ||||||||||||||||
|
Depreciation
and amortization
|
335
|
332
|
1,001
|
1,012
|
||||||||||||||||||||
|
Asset
impairment charges
|
56
|
-
|
56
|
-
|
||||||||||||||||||||
|
Stock
compensation expense
|
5
|
3
|
15
|
10
|
||||||||||||||||||||
|
Other
operating expenses, net
|
8
|
2
|
12
|
12
|
||||||||||||||||||||
|
Operating
income from operations
|
107
|
125
|
462
|
352
|
||||||||||||||||||||
|
OTHER
INCOME AND (EXPENSES):
|
||||||||||||||||||||||||
|
Interest
expense, net
|
(452 | ) | (466 | ) | (1,387 | ) | (1,383 | ) | ||||||||||||||||
|
Gain
(loss) on extinguishment of debt
|
-
|
128
|
(35 | ) |
101
|
|||||||||||||||||||
|
Other
expense, net
|
(21 | ) |
3
|
(20 | ) |
20
|
||||||||||||||||||
| (473 | ) | (335 | ) | (1,442 | ) | (1,262 | ) | |||||||||||||||||
|
Loss
before income taxes
|
(366 | ) | (210 | ) | (980 | ) | (910 | ) | ||||||||||||||||
|
Income
tax expense
|
(41 | ) | (53 | ) | (150 | ) | (132 | ) | ||||||||||||||||
|
Net
loss
|
$ | (407 | ) | $ | (263 | ) | $ | (1,130 | ) | $ | (1,042 | ) | ||||||||||||
|
LOSS
PER COMMON SHARE, BASIC AND DILUTED:
|
$ | (1.10 | ) | $ | (0.81 | ) | $ | (3.07 | ) | $ | (3.25 | ) | ||||||||||||
|
Weighted
average common shares outstanding, basic and diluted
|
369,239,742
|
326,960,632
|
367,671,479
|
320,730,698
|
||||||||||||||||||||
|
(a) Pro
forma results reflect certain sales of cable systems in the third
quarter
of 2006, January 2007 and May 2007, and the acquisition of cable
systems
in August 2007 as if they occurred as of January 1, 2006. The pro
forma
statements of operations do not include adjustments for financing
transactions completed by Charter during the periods presented
or certain
other dispositions of assets because those transactions did not
significantly impact Charter's adjusted EBITDA. However, all
transactions completed in the third quarter of 2006, January 2007,
May
2007 and August 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.
|
||||||||||||||||||||||||
|
September
30, 2007. Pro forma revenues were increased by $1 million
and $2 million for the three and nine months ended September 30,
2007,
respectively. Pro forma operating costs and expenses were increased
by $0
and $2 million for the three and nine months ended September 30,
2007,
respectively. Pro forma net loss was reduced by $0 and $18 million
for the three and nine months ended September 30, 2007,
respectively.
|
||||||||||||||||||||||||
|
September
30, 2006. Pro forma revenues were reduced by $16 million and
$80 million for the three and nine months ended September 30, 2006,
respectively. Pro forma operating costs and expenses were reduced by
$11 million and $55 million for the three and nine months ended
September
30, 2006, respectively. Pro forma net loss was increased by $130
million and $68 million for the three and nine months ended September
30,
2006, respectively.
|
||||||||||||||||||||||||
|
Adjusted
EBITDA is a non-GAAP term. See page 7 of this addendum for the
reconciliation of adjusted EBITDA to net cash flows from operating
activities as defined by GAAP.
|
||||||||||||||||||||||||
Addendum
to Charter Communications, Inc. Third Quarter 2007 Earnings Release
Page
2 of
8
|
CHARTER
COMMUNICATIONS, INC. AND SUBSIDIARIES
|
||||||||
|
UNAUDITED
CONSOLIDATED BALANCE SHEETS
|
||||||||
|
(DOLLARS
IN MILLIONS)
|
||||||||
|
September
30,
|
December
31,
|
|||||||
|
2007
|
2006
|
|||||||
|
ASSETS
|
||||||||
|
CURRENT
ASSETS:
|
||||||||
|
Cash
and cash equivalents
|
$ |
59
|
$ |
60
|
||||
|
Accounts
receivable, net of allowance for doubtful accounts
|
223
|
195
|
||||||
|
Prepaid
expenses and other current assets
|
62
|
84
|
||||||
|
Total
current assets
|
344
|
339
|
||||||
|
INVESTMENT
IN CABLE PROPERTIES:
|
||||||||
|
Property,
plant and equipment, net
|
5,108
|
5,217
|
||||||
|
Franchises,
net
|
9,144
|
9,223
|
||||||
|
Total
investment in cable properties, net
|
14,252
|
14,440
|
||||||
|
OTHER
NONCURRENT ASSETS
|
323
|
321
|
||||||
|
Total
assets
|
$ |
14,919
|
$ |
15,100
|
||||
|
LIABILITIES
AND SHAREHOLDERS' DEFICIT
|
||||||||
|
CURRENT
LIABILITIES:
|
||||||||
|
Accounts
payable and accrued expenses
|
$ |
1,410
|
$ |
1,298
|
||||
|
Total
current liabilities
|
1,410
|
1,298
|
||||||
|
LONG-TERM
DEBT
|
19,691
|
19,062
|
||||||
|
NOTE
PAYABLE - RELATED PARTY
|
63
|
57
|
||||||
|
DEFERRED
MANAGEMENT FEES - RELATED PARTY
|
14
|
14
|
||||||
|
OTHER
LONG-TERM LIABILITIES
|
874
|
692
|
||||||
|
MINORITY
INTEREST
|
196
|
192
|
||||||
|
PREFERRED
STOCK - REDEEMABLE
|
5
|
4
|
||||||
|
SHAREHOLDERS'
DEFICIT
|
(7,334 | ) | (6,219 | ) | ||||
|
Total
liabilities and shareholders' deficit
|
$ |
14,919
|
$ |
15,100
|
||||
Addendum
to Charter Communications, Inc. Third Quarter 2007 Earnings Release
Page
3 of
8
|
CHARTER
COMMUNICATIONS, INC. AND SUBSIDIARIES
|
||||||||
|
UNAUDITED
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
||||||||
|
(DOLLARS
IN MILLIONS)
|
||||||||
|
Nine
Months Ended September 30,
|
||||||||
|
2007
|
2006
|
|||||||
|
CASH
FLOWS FROM OPERATING ACTIVITIES:
|
||||||||
|
Net
loss
|
$ | (1,148 | ) | $ | (974 | ) | ||
|
Adjustments
to reconcile net loss to net cash flows from operating
activities:
|
||||||||
|
Depreciation
and amortization
|
999
|
1,032
|
||||||
|
Asset
impairment charges
|
56
|
159
|
||||||
|
Noncash
interest expense
|
33
|
108
|
||||||
|
Deferred
income taxes
|
161
|
123
|
||||||
|
(Gain)
loss on sale of assets, net
|
5
|
(198 | ) | |||||
|
(Gain)
loss on extinguishment of debt
|
23
|
(101 | ) | |||||
|
Other,
net
|
37
|
(10 | ) | |||||
|
Changes
in operating assets and liabilities, net of effects from
acquisitions
|
||||||||
|
and
dispositions:
|
||||||||
|
Accounts
receivable
|
(33 | ) |
46
|
|||||
|
Prepaid
expenses and other assets
|
21
|
23
|
||||||
|
Accounts
payable, accrued expenses and other
|
173
|
140
|
||||||
|
Net
cash flows from operating activities
|
327
|
348
|
||||||
|
CASH
FLOWS FROM INVESTING ACTIVITIES:
|
||||||||
|
Purchases
of property, plant and equipment
|
(890 | ) | (795 | ) | ||||
|
Change
in accrued expenses related to capital expenditures
|
(51 | ) |
4
|
|||||
|
Proceeds
from sale of assets, including cable systems
|
37
|
988
|
||||||
|
Other,
net
|
(31 | ) | (1 | ) | ||||
|
Net
cash flows from investing activities
|
(935 | ) |
196
|
|||||
|
CASH
FLOWS FROM FINANCING ACTIVITIES:
|
||||||||
|
Borrowings
of long-term debt
|
7,472
|
5,970
|
||||||
|
Repayments
of long-term debt
|
(6,841 | ) | (6,846 | ) | ||||
|
Proceeds
from issuance of debt
|
-
|
440
|
||||||
|
Payments
for debt issuance costs
|
(33 | ) | (44 | ) | ||||
|
Other,
net
|
9
|
-
|
||||||
|
Net
cash flows from financing activities
|
607
|
(480 | ) | |||||
|
NET
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
|
(1 | ) |
64
|
|||||
|
CASH
AND CASH EQUIVALENTS, beginning of period
|
60
|
21
|
||||||
|
CASH
AND CASH EQUIVALENTS, end of period
|
$ |
59
|
$ |
85
|
||||
|
CASH
PAID FOR INTEREST
|
$ |
1,230
|
$ |
1,121
|
||||
|
NONCASH
TRANSACTIONS:
|
||||||||
|
Cumulative
adjustment to Accumulated Deficit for the adoption of FIN
48
|
$ |
56
|
$ |
-
|
||||
|
Issuance
of debt by CCH I, LLC
|
$ |
-
|
$ |
419
|
||||
|
Issuance
of debt by CCH II, LLC
|
$ |
-
|
$ |
410
|
||||
|
Issuance
of debt by Charter Communications Operating, LLC
|
$ |
-
|
$ |
37
|
||||
|
Retirement
of Charter Communications Holdings, LLC debt
|
$ |
-
|
$ | (796 | ) | |||
|
Retirement
of Renaissance Media Group LLC debt
|
$ |
-
|
$ | (37 | ) | |||
|
Issuance
of Class A common stock
|
$ |
-
|
$ |
68
|
||||
|
Retirement
of convertible notes
|
$ |
-
|
$ | (255 | ) | |||
Addendum
to Charter Communications, Inc. Third Quarter 2007 Earnings Release
Page
4 of
8
|
CHARTER
COMMUNICATIONS, INC. AND SUBSIDIARIES
|
||||||||||||||||
|
UNAUDITED
SUMMARY OF OPERATING STATISTICS
|
||||||||||||||||
|
Approximate
|
||||||||||||||||
|
Actual
|
Pro
Forma as of
|
|||||||||||||||
|
September
30,
|
June
30,
|
December
31,
|
September
30,
|
|||||||||||||
|
2007
(a)
|
2007
(a)
|
2006
(a)
|
2006
(a)
|
|||||||||||||
|
Customer
Summary:
|
||||||||||||||||
|
Customer
Relationships:
|
||||||||||||||||
|
Residential
(non-bulk) analog video customers (b)
|
5,073,900
|
5,119,000
|
5,141,800
|
5,184,600
|
||||||||||||
|
Multi-dwelling
(bulk) and commercial unit customers (c)
|
273,900
|
269,000
|
259,000
|
257,700
|
||||||||||||
|
Total
analog video customers (b) (c)
|
5,347,800
|
5,388,000
|
5,400,800
|
5,442,300
|
||||||||||||
|
Non-video
customers (b)
|
308,100
|
303,100
|
295,800
|
288,000
|
||||||||||||
|
Total
customer relationships (d)
|
5,655,900
|
5,691,100
|
5,696,600
|
5,730,300
|
||||||||||||
|
Pro
forma average monthly revenue per analog video customer
(e)
|
$ |
94.90
|
$ |
92.46
|
$ |
86.53
|
$ |
83.98
|
||||||||
|
Pro
forma average monthly video revenue per analog video customer
(m)
|
$ |
55.04
|
$ |
55.36
|
$ |
52.91
|
$ |
52.76
|
||||||||
|
Bundled
customers (f)
|
2,448,400
|
2,386,500
|
2,190,300
|
2,124,600
|
||||||||||||
|
Revenue
Generating Units:
|
||||||||||||||||
|
Analog
video customers (b) (c)
|
5,347,800
|
5,388,000
|
5,400,800
|
5,442,300
|
||||||||||||
|
Digital
video customers (g)
|
2,882,900
|
2,867,100
|
2,794,400
|
2,753,700
|
||||||||||||
|
Residential
high-speed Internet customers (h)
|
2,639,200
|
2,586,200
|
2,401,900
|
2,342,900
|
||||||||||||
|
Telephone
customers (i)
|
802,600
|
700,300
|
445,800
|
339,600
|
||||||||||||
|
Total
revenue generating units (j)
|
11,672,500
|
11,541,600
|
11,042,900
|
10,878,500
|
||||||||||||
|
Video
Cable Services:
|
||||||||||||||||
|
Analog
Video:
|
||||||||||||||||
|
Estimated
homes passed (k)
|
11,837,000
|
11,757,800
|
11,714,700
|
11,675,600
|
||||||||||||
|
Analog
video customers (b)(c)
|
5,347,800
|
5,388,000
|
5,400,800
|
5,442,300
|
||||||||||||
|
Estimated
penetration of analog video homes passed (b) (c) (k) (l)
|
45.2 | % | 45.8 | % | 46.1 | % | 46.6 | % | ||||||||
|
Pro
forma analog video customers quarterly net gain (loss) (b) (c)
(n)
|
(40,200 | ) | (29,300 | ) | (41,500 | ) | (8,900 | ) | ||||||||
|
Digital
Video:
|
||||||||||||||||
|
Estimated
digital video homes passed (k)
|
11,740,600
|
11,660,900
|
11,579,200
|
11,512,200
|
||||||||||||
|
Digital
video customers (g)
|
2,882,900
|
2,867,100
|
2,794,400
|
2,753,700
|
||||||||||||
|
Estimated
penetration of digital homes passed (g) (k) (l)
|
24.6 | % | 24.6 | % | 24.1 | % | 23.9 | % | ||||||||
|
Digital
penetration of analog video customers (b) (c) (g) (o)
|
53.9 | % | 53.2 | % | 51.7 | % | 50.6 | % | ||||||||
|
Digital
set-top terminals deployed
|
4,141,800
|
4,118,900
|
4,003,000
|
3,918,400
|
||||||||||||
|
Pro
forma digital video customers quarterly net gain (g) (n)
|
15,800
|
7,700
|
40,700
|
49,700
|
||||||||||||
|
Non-Video
Cable Services:
|
||||||||||||||||
|
High-Speed
Internet Services:
|
||||||||||||||||
|
Estimated
high-speed Internet homes passed (k)
|
11,007,000
|
10,916,500
|
10,860,600
|
10,788,100
|
||||||||||||
|
Residential
high-speed Internet customers (h)
|
2,639,200
|
2,586,200
|
2,401,900
|
2,342,900
|
||||||||||||
|
Estimated
penetration of high-speed Internet homes passed (h) (k)
(l)
|
24.0 | % | 23.7 | % | 22.1 | % | 21.7 | % | ||||||||
|
Pro
forma average monthly high-speed Internet revenue per high-speed
Internet
customer (m)
|
$ |
40.88
|
$ |
40.41
|
$ |
38.98
|
$ |
38.53
|
||||||||
|
Pro
forma high-speed Internet customers quarterly net gain (h)
(n)
|
53,000
|
60,300
|
59,000
|
88,100
|
||||||||||||
|
Telephone
Services:
|
||||||||||||||||
|
Estimated
telephone homes passed (k)
|
8,289,200
|
7,649,100
|
6,799,300
|
5,892,000
|
||||||||||||
|
Telephone
customers (i)
|
802,600
|
700,300
|
445,800
|
339,600
|
||||||||||||
|
Estimated
penetration of telephone homes passed (h) (k) (l)
|
9.7 | % | 9.2 | % | 6.6 | % | 5.8 | % | ||||||||
|
Pro
forma average monthly telephone revenue per telephone customer
(m)
|
$ |
42.48
|
$ |
42.06
|
$ |
42.26
|
$ |
42.40
|
||||||||
|
Pro
forma telephone customers quarterly net gain (i) (n)
|
102,300
|
127,700
|
106,200
|
82,000
|
||||||||||||
|
Pro
forma operating statistics reflect the sales of cable systems in
the third
quarter of 2006, January 2007 and May 2007, and the acquisition
of cable
systems in August 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 the third quarter of 2006, January 2007,
May
2007 and August 2007 have been reflected in the operating
statistics.
|
||||||||||||||||
|
At
June 30, 2007 actual analog video customers, digital video customers,
high-speed Internet customers and telephone customers were 5,376,800,
2,866,000, 2,583,200 and 700,300, respectively.
|
||||||||||||||||
|
At
December 31, 2006 actual analog video customers, digital video
customers,
high-speed Internet customers and telephone customers were 5,433,300,
2,808,400, 2,402,200 and 445,800, respectively.
|
||||||||||||||||
|
At
September 30, 2006 actual analog video customers, digital video
customers,
high-speed Internet customers and telephone customers were 5,476,600,
2,767,900, 2,343,200 and 339,600, respectively.
|
||||||||||||||||
|
See
footnotes to unaudited summary of operating statistics on page
6 of this
addendum.
|
||||||||||||||||
Addendum
to Charter Communications, Inc. Third Quarter 2007 Earnings Release
Page
5 of
8
|
(a) "Customers"
include all persons our corporate billing records show as receiving
service (regardless of their payment status), except for complimentary
accounts (such as our employees). In addition, at September 30,
2007, June 30, 2007, December 31, 2006 and September 30, 2006,
“customers”
include approximately 33,800, 31,300, 32,700 and 43,500 persons
whose accounts were over 60 days past due in payment, approximately
5,700,
3,800, 5,400 and 8,400 persons whose accounts were over 90 days
past due
in payment and approximately 2,100, 1,500, 2,700 and 5,100 of which
were
over 120 days past due in payment, respectively.
|
|||||||||||||
|
(b) "Analog
video customers" include all customers who receive video services
(including those who also purchase high-speed Internet and telephone
services) but excludes approximately 308,100, 303,100, 295,800
and 288,000
customer relationships at September 30, 2007, June 30, 2007, December
31,
2006 and September 30, 2006, respectively, who receive high-speed
Internet
service only or telephone service only and who are only counted
as
high-speed Internet customers or telephone customers.
|
|||||||||||||
|
(c) Included
within "analog video customers" are those in commercial and multi-dwelling
structures, which are calculated on an equivalent bulk unit (“EBU”)
basis. EBU is calculated for a system by dividing the bulk
price charged to accounts in an area by the most prevalent price
charged
to non-bulk residential customers in that market for the comparable
tier
of service. The EBU method of estimating analog video customers
is consistent with the methodology used in determining costs paid
to
programmers and has been used consistently. As we increase our
effective analog video prices to residential customers without
a
corresponding increase in the prices charged to commercial service
or
multi-dwelling customers, our EBU count will decline even if there
is no
real loss in commercial service or multi-dwelling
customers.
|
|||||||||||||
|
(d) "Customer
relationships" include the number of customers that receive one
or more
levels of service, encompassing video, Internet and telephone services,
without regard to which service(s) such customers receive. This
statistic is computed in accordance with the guidelines of the
National
Cable & Telecommunications Association (NCTA) that have been adopted
by eleven publicly traded cable operators, including
Charter.
|
|||||||||||||
|
(e)
"Pro forma average monthly revenue per analog video customer" is
calculated as total quarterly pro forma revenue divided by three
divided
by average pro forma analog video customers during the respective
quarter.
|
|||||||||||||
|
(f)
"Bundled customers" include customers receiving a combination of
at least
two different types of service, including Charter's video service,
high-speed Internet service or telephone. "Bundled customers"
do not include customers who only subscribe to video
service.
|
|||||||||||||
|
(g) "Digital
video customers" include all households that have one or more digital
set-top boxes or cable cards deployed. Included in "digital video
customers" on September 30, 2007, June 30, 2007, December 31, 2006
and
September 30, 2006 are approximately 3,100, 3,200, 4,700 and 5,100
customers, respectively, that receive digital video service directly
through satellite transmission.
|
|||||||||||||
|
(h) "Residential
high-speed Internet customers" represent those residential customers
who
subscribe to our high-speed Internet service. At September 30,
2007, June 30, 2007, December 31, 2006 and September 30, 2006,
approximately 2,363,100, 2,313,000, 2,133,300 and 2,080,500 of
these
high-speed Internet customers, respectively, receive video and/or
telephone services from us and are included within the respective
statistics above.
|
|||||||||||||
|
(i) "Telephone
customers" include all customers receiving telephone
service. As of September 30, 2007, June 30, 2007, December 31,
2006 and September 30, 2006, approximately 770,600, 670,400, 418,600
and
314,000 of these telephone customers, respectively, receive video
and/or
high-speed Internet services from us and are included within the
respective statistics above.
|
|||||||||||||
|
(j) "Revenue
generating units" represent the sum total of all analog video,
digital
video, high-speed Internet and telephone customers, not counting
additional outlets within one household. For example, a
customer who receives two types of service (such as analog video
and
digital video) would be treated as two revenue generating units,
and if
that customer added on high-speed Internet service, the customer
would be
treated as three revenue generating units. This statistic is
computed in accordance with the guidelines of the NCTA that have
been
adopted by eleven publicly traded cable operators, including
Charter.
|
|||||||||||||
|
(k) "Homes
passed" represent our estimate of the number of living units, such
as
single family homes, apartment units and condominium units passed
by our
cable distribution network in the areas where we offer the service
indicated. "Homes passed" exclude commercial units passed by
our cable distribution network. These estimates are updated for
all periods presented when estimates change.
|
|||||||||||||
|
(l) "Penetration"
represents customers as a percentage of homes passed for the service
indicated.
|
|||||||||||||
|
(m)
"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.
|
|||||||||||||
|
(n) "Pro
forma quarterly net gain (loss)" represents the pro forma net gain
or loss
in the respective quarter for the service indicated.
|
|||||||||||||
|
(o) "Digital
penetration of analog video customers" represents the number of
digital
video customers as a percentage of analog video
customers.
|
|||||||||||||
Addendum
to Charter Communications, Inc. Third Quarter 2007 Earnings Release
Page
6 of
8
|
CHARTER
COMMUNICATIONS, INC. AND SUBSIDIARIES
|
||||||||||||||||
|
UNAUDITED
RECONCILIATION OF NON-GAAP MEASURES TO GAAP MEASURES
|
||||||||||||||||
|
(DOLLARS
IN MILLIONS)
|
||||||||||||||||
|
Three
Months Ended September 30,
|
Nine
Months Ended September 30,
|
|||||||||||||||
|
2007
|
2006
|
2007
|
2006
|
|||||||||||||
|
Actual
|
Actual
|
Actual
|
Actual
|
|||||||||||||
|
Net
cash flows from operating activities
|
$ |
209
|
$ |
143
|
$ |
327
|
$ |
348
|
||||||||
|
Less: Purchases
of property, plant and equipment
|
(311 | ) | (256 | ) | (890 | ) | (795 | ) | ||||||||
|
Less: Change
in accrued expenses related to capital expenditures
|
(12 | ) |
13
|
(51 | ) |
4
|
||||||||||
|
Free
cash flow
|
(114 | ) | (100 | ) | (614 | ) | (443 | ) | ||||||||
|
Interest
on cash pay obligations (a)
|
449
|
445
|
1,354
|
1,301
|
||||||||||||
|
Purchases
of property, plant and equipment
|
311
|
256
|
890
|
795
|
||||||||||||
|
Change
in accrued expenses related to capital expenditures
|
12
|
(13 | ) |
51
|
(4 | ) | ||||||||||
|
Other,
net
|
6
|
3
|
26
|
17
|
||||||||||||
|
Change
in operating assets and liabilities
|
(154 | ) | (124 | ) | (161 | ) | (209 | ) | ||||||||
|
Adjusted
EBITDA from continuing and discontinued
operations (b)
|
$ |
510
|
$ |
467
|
$ |
1,546
|
$ |
1,457
|
||||||||
|
Three
Months Ended September 30,
|
Nine
Months Ended September 30,
|
|||||||||||||||
|
2007
|
2006
|
2007
|
2006
|
|||||||||||||
|
Pro
Forma (c)
|
Pro
Forma (c)
|
Pro
Forma (c)
|
Pro
Forma (c)
|
|||||||||||||
|
Net
cash flows from operating activities
|
$ |
210
|
$ |
138
|
$ |
327
|
$ |
303
|
||||||||
|
Less: Purchases
of property, plant and equipment
|
(311 | ) | (254 | ) | (890 | ) | (777 | ) | ||||||||
|
Less: Change
in accrued expenses related to capital expenditures
|
(12 | ) |
13
|
(51 | ) |
4
|
||||||||||
|
Free
cash flow
|
(113 | ) | (103 | ) | (614 | ) | (470 | ) | ||||||||
|
Interest
on cash pay obligations (a)
|
449
|
445
|
1,354
|
1,275
|
||||||||||||
|
Purchases
of property, plant and equipment
|
311
|
254
|
890
|
777
|
||||||||||||
|
Change
in accrued expenses related to capital expenditures
|
12
|
(13 | ) |
51
|
(4 | ) | ||||||||||
|
Other,
net
|
6
|
3
|
26
|
17
|
||||||||||||
|
Change
in operating assets and liabilities
|
(154 | ) | (124 | ) | (161 | ) | (209 | ) | ||||||||
|
Adjusted
EBITDA (b)
|
$ |
511
|
$ |
462
|
$ |
1,546
|
$ |
1,386
|
||||||||
|
(a) 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.
|
||||||||||||||||
|
(b)
See page 1 of this addendum for detail of the components included
within
adjusted EBITDA. Adjusted EBITDA from continuing and discontinued
operations of $467 million
|
||||||||||||||||
|
and
$1.5 billion for the three and nine months ended September 30,
2006,
respectively, includes $0 and $46 million of adjusted EBITDA recorded
in
discontinued operations
|
||||||||||||||||
|
in
our consolidated statements of operations.
|
||||||||||||||||
|
(c) Pro
forma results reflect certain sales of cable systems in the third
quarter
of 2006, January 2007 and May 2007, and the acquisition of cable
systems
in August 2007 as if they occurred as of January 1, 2006.
|
||||||||||||||||
|
The
above schedules are presented in order to reconcile adjusted EBITDA
and
free cash flows, both non-GAAP measures, to the most directly comparable
GAAP measures
|
||||||||||||||||
|
in
accordance with Section 401(b) of the Sarbanes-Oxley Act.
|
||||||||||||||||
Addendum
to Charter Communications, Inc. Third Quarter 2007 Earnings Release
Page
7 of
8
|
CHARTER
COMMUNICATIONS, INC. AND SUBSIDIARIES
|
||||||||||||||||
|
CAPITAL
EXPENDITURES
|
||||||||||||||||
|
(DOLLARS
IN MILLIONS)
|
||||||||||||||||
|
Three
Months Ended September 30,
|
Nine
Months Ended September 30,
|
|||||||||||||||
|
2007
|
2006
|
2007
|
2006
|
|||||||||||||
|
Customer
premise equipment (a)
|
$ |
139
|
$ |
120
|
$ |
428
|
$ |
378
|
||||||||
|
Scalable
infrastructure (b)
|
64
|
49
|
164
|
146
|
||||||||||||
|
Line
extensions (c)
|
27
|
23
|
76
|
82
|
||||||||||||
|
Upgrade/Rebuild
(d)
|
11
|
13
|
35
|
36
|
||||||||||||
|
Support
capital (e)
|
70
|
51
|
187
|
153
|
||||||||||||
|
Total
capital expenditures
|
$ |
311
|
$ |
256
|
$ |
890
|
$ |
795
|
||||||||
|
(a) Customer
premise equipment includes costs incurred at the customer residence
to
secure new customers, revenue units and additional bandwidth
revenues. It also includes customer installation costs in accordance
with SFAS No. 51 and customer premise equipment (e.g., set-top
boxes and
cable modems, etc.).
|
||||||||||||||||
|
(b)
Scalable infrastructure includes costs, not related to customer
premise
equipment or our network, to secure growth of new customers, revenue
units
and additional bandwidth revenues or provide service enhancements
(e.g.,
headend equipment).
|
||||||||||||||||
|
(c)
Line extensions include network costs associated with entering
new service
areas (e.g., fiber/coaxial cable, amplifiers, electronic equipment,
make-ready and design engineering).
|
||||||||||||||||
|
(d) Upgrade/rebuild
includes costs to modify or replace existing fiber/coaxial cable
networks,
including betterments.
|
||||||||||||||||
|
(e) Support
capital includes costs associated with the replacement or enhancement
of
non-network assets due to technological and physical obsolescence
(e.g.,
non-network equipment, land, buildings and vehicles).
|
||||||||||||||||
Addendum
to Charter Communications, Inc. Third Quarter 2007 Earnings Release
Page
8 of
8