STAMFORD, Conn., Aug. 6, 2013 /PRNewswire/ -- Charter
Communications, Inc. (along with its subsidiaries, the "Company" or
"Charter") today reported financial and operating results for the
three and six months ended June 30, 2013.
(Logo:
http://photos.prnewswire.com/prnh/20110526/AQ10195LOGO)
Key highlights:
- Customer trends improved across all residential and commercial
PSU categories during the second quarter of 2013 compared to the
prior-year period. Total residential customer relationships grew by
5,000 during the quarter, versus a loss of 17,000 during the second
quarter of 2012. Residential PSUs increased by 38,000 during the
period, versus a loss of 31,000 in the year-ago quarter.
- Second quarter revenues of $1,972
million grew 4.7% as compared to the prior-year period, led
by growth in video services revenue and Internet and commercial
customers.
- Second quarter residential revenues grew 4.3% compared to the
second quarter of 2012, when residential revenues grew by 2.6% on a
pro forma basis1, and 3.1% on an actual
basis.
- Commercial revenues grew 20.6% in the second quarter versus the
prior-year period, primarily driven by continued growth in small
and medium businesses.
- Second quarter Adjusted EBITDA2 declined by 0.1%
year-over-year to $692 million,
reflecting changes in operating practices to deliver higher value
products and improved service. Second quarter net loss totaled
$96 million compared to $83 million in the comparable prior-year period,
with the increase primarily driven by higher charges for
extinguishment of debt.
- Free cash flow2 for the quarter was $75 million and net cash flows from operating
activities totaled $484 million.
"We continued to make progress in the second quarter, executing
on our plan to grow market share by delivering better products,
service and value to our customers," said Tom Rutledge, President and CEO of Charter
Communications. "Two-thirds of our Internet customers receive
speeds of at least 30 Mbps, and we offer over 100 HD channels in
nearly all of our markets, with more to come as we go all-digital
and introduce new products. Combined with improvements to our
selling and customer service operations, we are driving deeper
penetration of our services into the home, which we expect will
lead to growth in market share, cash flow and return on
investment."
1 Pro forma results reflect certain
sales and acquisitions of cable systems in 2011 as if they had
occurred as of January 1, 2011.
2 Adjusted EBITDA and free cash flow are
defined in the "Use of Non-GAAP Financial Metrics" section and are
reconciled to net loss and net cash flows from operating
activities, respectively, in the addendum of this news release.
|
|
Key Operating
Results
|
|
|
Approximate as
of
|
|
|
|
June 30, 2013
(a)
|
|
June 30, 2012
(a)
|
|
Y/Y
Change
|
Footprint
|
|
|
|
|
|
Estimated Video Passings (b)
|
12,098
|
|
12,008
|
|
1 %
|
Estimated Internet Passings (b)
|
11,797
|
|
11,703
|
|
1 %
|
Estimated Telephone Passings (b)
|
11,132
|
|
10,925
|
|
2 %
|
|
|
|
|
|
|
Penetration
Statistics
|
|
|
|
|
|
Video
Penetration of Estimated Video Passings (c)
|
33.7 %
|
|
35.6 %
|
|
-1.9
ppts
|
Internet
Penetration of Estimated Internet Passings (c)
|
35.1 %
|
|
32.8 %
|
|
2.3
ppts
|
Telephone Penetration of Estimated Telephone Passings
(c)
|
19.2 %
|
|
17.6 %
|
|
1.6
ppts
|
|
|
|
|
|
|
Residential
|
|
|
|
|
|
Residential Customer Relationships (d)
|
5,096
|
|
4,996
|
|
2 %
|
Residential Non-Video Customers
|
1,179
|
|
898
|
|
31 %
|
%
Non-Video
|
23.1 %
|
|
18.0 %
|
|
5.1
ppts
|
|
|
|
|
|
|
Customers
|
|
|
|
|
|
Video (e)
|
3,917
|
|
4,098
|
|
-4 %
|
Internet (f)
|
3,924
|
|
3,662
|
|
7 %
|
Telephone (g)
|
2,019
|
|
1,828
|
|
10 %
|
Residential
PSUs (h)
|
9,860
|
|
9,588
|
|
3 %
|
Residential PSU / Customer
Relationships (d)(h)
|
1.93
|
|
1.92
|
|
|
|
|
|
|
|
|
Quarterly Net Additions/(Losses) (i)
|
|
|
|
|
|
Video (e)
|
(48)
|
|
(66)
|
|
27 %
|
Internet (f)
|
40
|
|
29
|
|
38 %
|
Telephone (g)
|
46
|
|
6
|
|
667 %
|
Residential
PSUs (h)
|
38
|
|
(31)
|
|
223 %
|
|
|
|
|
|
|
Single Play Penetration
(j)
|
37.8 %
|
|
37.0 %
|
|
0.8
ppts
|
Double Play Penetration
(k)
|
30.9 %
|
|
34.2 %
|
|
-3.3
ppts
|
Triple Play Penetration
(l)
|
31.3 %
|
|
28.8 %
|
|
2.5
ppts
|
Digital Penetration
(m)
|
90.7 %
|
|
84.7 %
|
|
6.0
ppts
|
|
|
|
|
|
|
Revenue per Customer
Relationship (d)(n)
|
$108.67
|
|
$106.00
|
|
3 %
|
|
|
|
|
|
|
Commercial
|
|
|
|
|
|
Commercial Customer Relationships (d)(o)
|
329
|
|
312
|
|
5 %
|
|
|
|
|
|
|
Customers
|
|
|
|
|
|
Video (e)(o)
|
156
|
|
171
|
|
-9 %
|
Internet (f)
|
214
|
|
177
|
|
21 %
|
Telephone (g)
|
119
|
|
91
|
|
31 %
|
Commercial PSUs
(h)
|
489
|
|
439
|
|
11 %
|
|
|
|
|
|
|
Quarterly Net Additions/(Losses) (i)
|
|
|
|
|
|
Video (e)(o)
|
(3)
|
|
(6)
|
|
50 %
|
Internet (f)
|
12
|
|
8
|
|
50 %
|
Telephone (g)
|
7
|
|
6
|
|
17 %
|
Commercial PSUs
(h)
|
16
|
|
8
|
|
100 %
|
|
Footnotes
|
|
In thousands, except
ARPU and penetration data. See footnotes to unaudited summary of
operating statistics on page 5 of the addendum of this news
release. The footnotes contain important disclosures regarding the
definitions used for these operating statistics.
|
Customer trends improved year-over-year across all PSU
categories (video, Internet and phone) during the second quarter.
Residential customer relationships grew by 5,000, up from a loss of
17,000 in the second quarter of 2012. Commercial customer
relationships grew by 6,000 in the second quarter of 2013, compared
to a gain of 1,000 in the prior-year period. Residential PSUs
increased by 38,000 versus a loss of 31,000 in the year-ago
quarter, while commercial PSUs increased 16,000 during the second
quarter versus a gain of 8,000 in the year-ago quarter.
The year-over-year improvement in PSU and total customer growth
reflects the Company's continued focus on enhancing the value of
its core offerings, and improving service levels in order to
increase the penetration of its products and to produce
higher-quality, longer-term relationships with customers. Charter
experienced higher demand for all of its products during the second
quarter of 2013, including its triple play offering. Over the last
twelve months, triple play penetration grew by 250 basis points,
from 28.8% to 31.3%.
During the second quarter, Charter continued to pursue its
all-digital initiative, and completed its all-digital network
upgrade in Fort Worth, Texas.
Charter customers in the Fort
Worth region now have access to over 140 HD channels and
residential customers have been provided with two-way digital
set-tops, offering an interactive programming guide and video on
demand. Charter expects to complete its all-digital roll out by
year end 2014.
Residential video customers declined by 48,000 in the second
quarter of 2013, versus a loss of 66,000 in the year-ago period.
Excluding limited basic customer losses of 71,000, video customers
grew by 23,000 during the second quarter. Expanded basic customer
growth was driven by a more competitive video product, which now
includes over 100 HD channels, packaging of advanced services, and
the transition to new selling methods.
Charter added 40,000 residential Internet customers in the
second quarter of 2013, compared to 29,000 a year ago. The Company
continues to see strong demand for its Internet service as
consumers value the speed and reliability of Charter's high speed
offering.
During the second quarter, the Company added 46,000 residential
telephone customers, versus a gain of 6,000 during the second
quarter of 2012. The higher year-over-year telephone customer
growth reflects the improved sell-in of triple play service
resulting from simplified pricing and packaging.
Second quarter residential revenue per customer relationship
totaled $108.67, and grew by 2.5%
from $106.00 in the second quarter of
2012, driven by rate adjustments, higher product sell-in and
promotional rate step-ups, partially offset by entry-level
pricing.
|
|
Second Quarter
Financial Results
|
|
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
June 30,
|
|
2013
|
|
2012
|
|
%
Change
|
REVENUES:
|
|
|
|
|
|
Video
|
$
984
|
|
$
911
|
|
8.0 %
|
Internet
|
520
|
|
465
|
|
11.8 %
|
Telephone
|
158
|
|
217
|
|
(27.2)%
|
Commercial
|
193
|
|
160
|
|
20.6 %
|
Advertising sales
|
73
|
|
87
|
|
(16.1)%
|
Other
|
44
|
|
44
|
|
—%
|
Total Revenues
|
1,972
|
|
1,884
|
|
4.7 %
|
|
|
|
|
|
|
COSTS AND
EXPENSES:
|
|
|
|
|
|
Total operating costs and expenses (excluding depreciation and
amortization)
|
1,280
|
|
1,191
|
|
7.5 %
|
|
|
|
|
|
|
Adjusted EBITDA
|
$
692
|
|
$
693
|
|
(0.1)%
|
|
|
|
|
|
|
Adjusted EBITDA margin
|
35.1
%
|
|
36.8
%
|
|
|
|
|
|
|
|
|
Capital
Expenditures
|
$
422
|
|
$
468
|
|
|
% Total
Revenues
|
21.4 %
|
|
24.8 %
|
|
|
|
|
|
|
|
|
Net loss
|
$
(96)
|
|
$
(83)
|
|
|
Loss per common
share, basic and diluted
|
$
(0.96)
|
|
$
(0.84)
|
|
|
|
|
|
|
|
|
Net cash flows from
operating activities
|
$
484
|
|
$
469
|
|
|
Free cash
flow
|
$
75
|
|
$
26
|
|
|
|
|
|
|
|
|
Revenue
Second quarter 2013 revenues rose to $1,972 million, 4.7% higher than the year-ago
quarter, due to growth in video, Internet and commercial
revenues.
Video revenues totaled $984
million in the second quarter, an increase of 8.0% compared
to the prior-year period. Video revenue growth was driven by higher
expanded basic and digital penetration, annual and promotional rate
adjustments, higher advanced services penetration, and revenue
allocation from higher bundling, partially offset by a decrease in
residential video customers.
Internet revenues grew 11.8% compared to the year-ago quarter to
$520 million, driven by an increase
of 262,000 Internet customers during the last year and by price
adjustments. Telephone revenues totaled $158
million, down 27.2% versus the second quarter of 2012, due
to value-based pricing and revenue allocation from higher bundling,
partially offset by the addition of 191,000 telephone customers in
the last twelve months.
Commercial revenues rose to $193
million, an increase of 20.6% over the prior-year period,
and was driven by higher sales to small and medium businesses and
carrier customers.
Second quarter advertising sales revenues of $73 million declined 16.1% compared to the
year-ago quarter, driven by a decline in political advertising
revenue, which saw strength in the second quarter of 2012, given
local and national elections, and from a decline in barter and
contractual revenue.
Operating Costs and Expenses
Second quarter total operating costs and expenses increased 7.5%
compared to the year-ago period, primarily reflecting increases in
costs to service customers and programming expense. Costs to
service customers increased by $46
million or 14.2% during the second quarter of 2013, as
compared to the prior-year period, reflecting higher spending on
labor and preventive plant maintenance in order to deliver higher
quality products and service levels. Second quarter programming
expense increased $27 million, or
5.4% as compared to the second quarter of 2012, reflecting
contractual programming increases, partially offset by customer
losses.
Adjusted EBITDA
Second quarter adjusted EBITDA of $692
million declined 0.1% compared to the year-ago quarter.
Adjusted EBITDA margin declined to 35.1% for the second quarter of
2013 compared to 36.8% in the year-ago quarter.
Net Loss
Net loss totaled $96 million in
the second quarter of 2013, compared to $83
million in the year-ago period. Net loss increased primarily
due to a greater loss on extinguishment of debt and higher
depreciation and amortization, partly offset by a net gain on
derivative instruments, lower interest expense, and lower income
tax expense. Net loss per common share was $0.96 in the second quarter of 2013 compared to
$0.84 during the same period last
year. The increase is a result of the 15.7% increase in net loss
compared to the prior-year period, offset by a 1.1% increase in
weighted average shares outstanding in the last twelve months.
Capital Expenditures
Property, plant and equipment expenditures were $422 million in the second quarter of 2013,
compared to $468 million in 2012. The
decrease was primarily driven by lower scalable infrastructure
spending, given the timing of expenditures in 2013 versus the prior
year.
In 2013, capital expenditures are expected to be approximately
$1.8 billion, including the impact of
the Bresnan acquisition, which closed on July 1, 2013. Charter expects 2013 capital
expenditures to be driven by the deployment of additional set-top
boxes in new and existing customer homes, growth in Charter's
commercial business, and further spend related to plant
reliability, back-office support and our organizational
realignment. The actual amount of capital expenditures will depend
on a number of factors including the growth rates of both
residential and commercial businesses, and the pace at which
Charter progresses to all-digital transmission.
Cash Flow
During the second quarter of 2013, net cash flows from operating
activities totaled $484 million,
compared to $469 million in the
second quarter of 2012. The increase in net cash flows from
operating activities was related to the reclassification of
restricted cash into operating cash.
Free cash flow for the second quarter of 2013 was $75 million, compared to $26 million during the same period last year. The
increase was primarily due to a decrease in capital expenditures
versus the prior-year period.
During the second quarter of 2013, Charter issued $1.0 billion of 5.75% senior unsecured notes due
2024. The proceeds from the issuance of these notes were used to
tender or repurchase all of Charter's 7.875% senior notes due 2018.
In the second quarter of 2013, Charter also entered into a
$1.2 billion term loan F maturing in
2021. The proceeds were used to to repay Charter's existing term
loan C due 2016 and term loan D due 2019.
In conjunction with the closing of the Bresnan transaction on
July 1, Charter activated the
previously committed term loan E facility providing for a
$1.5 billion term loan maturing in
seven years. Additionally, and as part of a previously announced
tender offer, Charter purchased $250
million aggregate principal amount of 8.00% senior notes due
2018 that were originally issued by Bresnan.
Liquidity
Total principal amount of debt was approximately $12.9 billion as of June 30, 2013. At the
end of the quarter, Charter held $44
million of cash and cash equivalents, and its credit
facilities provided approximately $986
million of additional liquidity.
Conference Call
Charter will host a conference call on Tuesday, August 6, 2013 at 10:00 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 charter.com. The webcast can be accessed by selecting
"Investor & News Center" from the lower menu on the home page.
The call will be archived in the "Investor & News Center" in
the "Financial Information" section on the left beginning two hours
after completion of the call. Participants should go to the webcast
link no later than 10 minutes prior to the start time to
register.
Those participating via telephone should dial 866-919-0894 no
later than 10 minutes prior to the call. International participants
should dial 706-679-9379. The conference ID code for the call is
10631562.
A replay of the call will be available at 855-859-2056 or
404-537-3406 beginning two hours after the completion of the call
through the end of business on September 6,
2013. The conference ID code for the replay is 10631562.
Additional Information Available on Website
The information in this press release should be read in
conjunction with the financial statements and footnotes contained
in the Company's Form 10-Q for three and six months ended
June 30, 2013 available on the "Investor & News Center" of
our website at charter.com in the "Financial Information" section.
A slide presentation to accompany the conference call and a
trending schedule containing historical customer and financial data
can also be found in the "Financial Information" section.
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 and free cash flow
are non-GAAP financial measures and should be considered in
addition to, not as a substitute for, net loss or 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 reconciled to
net loss and free cash flow is reconciled to net cash flows from
operating activities in the addendum of this news
release.
Adjusted EBITDA is defined as net loss plus net interest
expense, income taxes, depreciation and amortization, stock
compensation expense, loss on extinguishment of debt, gain on
derivative instruments, net and other operating expenses, such as
special charges and (gain) 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 special
items, and is unaffected by the Company's capital structure or
investment activities. However, these measures are limited in that
they do not reflect the periodic costs of certain capitalized
tangible and intangible assets used in generating revenues and the
cash cost of financing. These costs are evaluated through other
financial measures.
Free cash flow is defined as net cash flows from operating
activities, less purchases of property, plant and equipment and
changes in accrued expenses related to capital expenditures.
Management and the Company's board of directors use adjusted
EBITDA and free cash flow to assess Charter's performance and its
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 credit facilities
and notes (all such documents have been previously filed with the
United States Securities and Exchange Commission). For the purpose
of calculating compliance with leverage covenants, we use adjusted
EBITDA, as presented, excluding certain expenses paid by our
operating subsidiaries to other Charter entities. Our debt
covenants refer to these expenses as management fees which fees
were in the amount of $47 million and
$41 million for the three months
ended June 30, 2013 and 2012, respectively, and $98 million and $82
million for the six months ended June 30, 2013 and
2012, respectively.
About Charter
Charter (NASDAQ: CHTR) 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
TV® video entertainment programming, Charter Internet® access, and
Charter Phone®. Charter Business® similarly provides scalable,
tailored, and cost-effective broadband communications solutions to
business organizations, such as business-to-business Internet
access, data networking, business telephone, video and music
entertainment services, and wireless backhaul. Charter's
advertising sales and production services are sold under the
Charter Media® brand. More information about Charter can be found
at charter.com.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING
STATEMENTS
This release includes forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended
(the "Securities Act"), and Section 21E of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), regarding, among
other things, our plans, strategies and prospects, both business
and financial. Although we believe that our plans, intentions and
expectations reflected in or suggested by these forward-looking
statements are reasonable, we cannot assure you that we will
achieve or realize these plans, intentions or expectations.
Forward-looking statements are inherently subject to risks,
uncertainties and assumptions 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,"
"tentative," "positioning," "designed," "create" 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:
- our ability to sustain and grow revenues and cash flow from
operations by offering video, Internet, telephone, advertising and
other services to residential and commercial customers, to
adequately meet the customer experience demands in our markets and
to maintain and grow our customer base, particularly in the face of
increasingly aggressive competition, the need for innovation and
the related capital expenditures and the difficult economic
conditions in the United
States;
- the impact of competition from other market participants,
including but not limited to incumbent telephone companies, direct
broadcast satellite operators, wireless broadband and telephone
providers, digital subscriber line ("DSL") providers, and video
provided over the Internet;
- general business conditions, economic uncertainty or downturn,
high unemployment levels and the level of activity in the housing
sector;
- our ability to obtain programming at reasonable prices or to
raise prices to offset, in whole or in part, the effects of higher
programming costs (including retransmission consents);
- the development and deployment of new products and
technologies;
- the effects of governmental regulation on our business;
- the availability and access, in general, of funds to meet our
debt obligations prior to or when they become due and to fund our
operations and necessary capital expenditures, either through (i)
cash on hand, (ii) free cash flow, or (iii) access to the capital
or credit markets; and
- 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.
All forward-looking statements attributable to us or any person
acting on our behalf are expressly qualified in their entirety by
this cautionary statement. We are under no duty or obligation to
update any of the forward-looking statements after the date of this
release.
|
|
CHARTER
COMMUNICATIONS, INC. AND SUBSIDIARIES
|
UNAUDITED
CONSOLIDATED STATEMENTS OF OPERATIONS AND OPERATING
DATA
|
(dollars in
millions, except per share and share data)
|
|
|
Three Months Ended
June 30,
|
|
Six Months Ended
June 30,
|
|
2013
|
|
2012
|
|
%
Change
|
|
2013
|
|
2012
|
|
%
Change
|
REVENUES:
|
|
|
|
|
|
|
|
|
|
|
|
Video
|
$
984
|
|
$
911
|
|
8.0 %
|
|
$
1,940
|
|
$
1,806
|
|
7.4 %
|
Internet
|
520
|
|
465
|
|
11.8 %
|
|
1,021
|
|
917
|
|
11.3 %
|
Telephone
|
158
|
|
217
|
|
(27.2)%
|
|
329
|
|
434
|
|
(24.2)%
|
Commercial
|
193
|
|
160
|
|
20.6 %
|
|
376
|
|
313
|
|
20.1 %
|
Advertising sales
|
73
|
|
87
|
|
(16.1)%
|
|
133
|
|
153
|
|
(13.1)%
|
Other
|
44
|
|
44
|
|
—%
|
|
90
|
|
88
|
|
2.3 %
|
Total
Revenues
|
1,972
|
|
1,884
|
|
4.7 %
|
|
3,889
|
|
3,711
|
|
4.8 %
|
|
|
|
|
|
|
|
|
|
|
|
|
COSTS AND
EXPENSES:
|
|
|
|
|
|
|
|
|
|
|
|
Programming
|
523
|
|
496
|
|
5.4 %
|
|
1,038
|
|
987
|
|
5.2 %
|
Franchises, regulatory and connectivity
|
93
|
|
93
|
|
—%
|
|
185
|
|
185
|
|
—%
|
Costs to
service customers
|
369
|
|
323
|
|
14.2 %
|
|
732
|
|
650
|
|
12.6 %
|
Marketing
|
116
|
|
107
|
|
8.4 %
|
|
224
|
|
219
|
|
2.3 %
|
Other
|
179
|
|
172
|
|
4.1 %
|
|
348
|
|
325
|
|
7.1 %
|
Total operating costs
and expenses (excluding depreciation and amortization)
|
1,280
|
|
1,191
|
|
7.5 %
|
|
2,527
|
|
2,366
|
|
6.8 %
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA
|
692
|
|
693
|
|
(0.1)%
|
|
1,362
|
|
1,345
|
|
1.3 %
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA
margin
|
35.1
%
|
|
36.8
%
|
|
|
|
35.0
%
|
|
36.2
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
436
|
|
415
|
|
|
|
861
|
|
823
|
|
|
Stock
compensation expense
|
15
|
|
13
|
|
|
|
26
|
|
24
|
|
|
Other
operating (income) expenses, net
|
5
|
|
(4)
|
|
|
|
16
|
|
(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from operations
|
236
|
|
269
|
|
|
|
459
|
|
499
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER INCOME
(EXPENSES):
|
|
|
|
|
|
|
|
|
|
|
|
Interest
expense, net
|
(211)
|
|
(225)
|
|
|
|
(421)
|
|
(462)
|
|
|
Loss on
extinguishment of debt
|
(81)
|
|
(59)
|
|
|
|
(123)
|
|
(74)
|
|
|
Gain on
derivative instruments, net
|
20
|
|
—
|
|
|
|
17
|
|
—
|
|
|
Other
expense, net
|
(2)
|
|
—
|
|
|
|
(3)
|
|
(1)
|
|
|
|
(274)
|
|
(284)
|
|
|
|
(530)
|
|
(537)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss before income
taxes
|
(38)
|
|
(15)
|
|
|
|
(71)
|
|
(38)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax
expense
|
(58)
|
|
(68)
|
|
|
|
(67)
|
|
(139)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
$
(96)
|
|
$
(83)
|
|
|
|
$
(138)
|
|
$
(177)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LOSS PER COMMON
SHARE, BASIC AND DILUTED:
|
$
(0.96)
|
|
$
(0.84)
|
|
|
|
$
(1.37)
|
|
$
(1.78)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average
common shares outstanding, basic and diluted
|
100,600,678
|
|
99,496,755
|
|
|
|
100,464,808
|
|
99,464,858
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA is a
non-GAAP term. See page 6 of this addendum for the reconciliation
of adjusted EBITDA to net loss as defined by GAAP.
|
|
|
CHARTER
COMMUNICATIONS, INC. AND SUBSIDIARIES
|
CONSOLIDATED
BALANCE SHEETS
|
(dollars in
millions)
|
|
|
June 30,
2013
|
|
December 31,
2012
|
|
(unaudited)
|
|
|
ASSETS
|
|
|
|
CURRENT
ASSETS:
|
|
|
|
Cash and cash
equivalents
|
$
44
|
|
$
7
|
Restricted cash and
cash equivalents
|
—
|
|
27
|
Accounts receivable,
net
|
223
|
|
234
|
Prepaid expenses and
other current assets
|
66
|
|
62
|
Total
current assets
|
333
|
|
330
|
|
|
|
|
INVESTMENT IN CABLE
PROPERTIES:
|
|
|
|
Property, plant and
equipment, net
|
7,313
|
|
7,206
|
Franchises
|
5,287
|
|
5,287
|
Customer
relationships, net
|
1,294
|
|
1,424
|
Goodwill
|
953
|
|
953
|
Total
investment in cable properties, net
|
14,847
|
|
14,870
|
|
|
|
|
OTHER NONCURRENT
ASSETS
|
409
|
|
396
|
|
|
|
|
Total
assets
|
$
15,589
|
|
$
15,596
|
|
|
|
|
LIABILITIES AND
SHAREHOLDERS' EQUITY
|
|
|
|
CURRENT
LIABILITIES:
|
|
|
|
Accounts payable and
accrued liabilities
|
$
1,280
|
|
$
1,224
|
Total
current liabilities
|
1,280
|
|
1,224
|
|
|
|
|
LONG-TERM
DEBT
|
12,812
|
|
12,808
|
DEFERRED INCOME
TAXES
|
1,374
|
|
1,321
|
OTHER LONG-TERM
LIABILITIES
|
62
|
|
94
|
|
|
|
|
SHAREHOLDERS'
EQUITY
|
61
|
|
149
|
|
|
|
|
Total
liabilities and shareholders' equity
|
$
15,589
|
|
$
15,596
|
|
|
CHARTER
COMMUNICATIONS, INC. AND SUBSIDIARIES
|
UNAUDITED
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
(dollars in
millions)
|
|
|
Three Months Ended
June 30,
|
|
Six Months Ended
June 30,
|
|
2013
|
|
2012
|
|
2013
|
|
2012
|
CASH FLOWS FROM
OPERATING ACTIVITIES:
|
|
|
|
|
|
|
|
Net loss
|
$
(96)
|
|
$
(83)
|
|
$
(138)
|
|
$
(177)
|
Adjustments to
reconcile net loss to net cash flows from operating
activities:
|
|
|
|
|
|
|
|
Depreciation and amortization
|
436
|
|
415
|
|
861
|
|
823
|
Stock
compensation expense
|
15
|
|
13
|
|
26
|
|
24
|
Noncash
interest expense
|
10
|
|
10
|
|
23
|
|
24
|
Loss on
extinguishment of debt
|
81
|
|
59
|
|
123
|
|
74
|
Gain on
derivative instruments, net
|
(20)
|
|
—
|
|
(17)
|
|
—
|
Deferred
income taxes
|
54
|
|
66
|
|
56
|
|
136
|
Other,
net
|
26
|
|
(13)
|
|
27
|
|
(13)
|
Changes in operating
assets and liabilities:
|
|
|
|
|
|
|
|
Accounts
receivable
|
(15)
|
|
(24)
|
|
11
|
|
16
|
Prepaid
expenses and other assets
|
10
|
|
(3)
|
|
(6)
|
|
(11)
|
Accounts
payable, accrued liabilities and other
|
(17)
|
|
29
|
|
59
|
|
27
|
Net cash flows from operating activities
|
484
|
|
469
|
|
1,025
|
|
923
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM
INVESTING ACTIVITIES:
|
|
|
|
|
|
|
|
Purchases of
property, plant and equipment
|
(422)
|
|
(468)
|
|
(834)
|
|
(808)
|
Change in accrued
expenses related to capital expenditures
|
13
|
|
25
|
|
2
|
|
13
|
Other, net
|
(5)
|
|
23
|
|
(14)
|
|
10
|
Net cash flows from investing activities
|
(414)
|
|
(420)
|
|
(846)
|
|
(785)
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM
FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
Borrowings of
long-term debt
|
3,395
|
|
1,348
|
|
4,710
|
|
2,817
|
Repayments of
long-term debt
|
(3,470)
|
|
(1,380)
|
|
(4,825)
|
|
(2,919)
|
Payments for debt
issuance costs
|
(20)
|
|
(14)
|
|
(32)
|
|
(24)
|
Purchase of treasury
stock
|
(5)
|
|
(1)
|
|
(10)
|
|
(4)
|
Other, net
|
9
|
|
(1)
|
|
15
|
|
(5)
|
Net cash flows from financing activities
|
(91)
|
|
(48)
|
|
(142)
|
|
(135)
|
|
|
|
|
|
|
|
|
NET INCREASE
(DECREASE) IN CASH AND CASH EQUIVALENTS
|
(21)
|
|
1
|
|
37
|
|
3
|
CASH AND CASH
EQUIVALENTS, beginning of period
|
65
|
|
4
|
|
7
|
|
2
|
CASH AND CASH
EQUIVALENTS, end of period
|
$
44
|
|
$
5
|
|
$
44
|
|
$
5
|
|
|
|
|
|
|
|
|
CASH PAID FOR
INTEREST
|
$
250
|
|
$
232
|
|
$
370
|
|
$
448
|
|
|
CHARTER
COMMUNICATIONS, INC. AND SUBSIDIARIES
|
UNAUDITED SUMMARY
OF OPERATING STATISTICS
|
(in thousands,
except ARPU and penetration data)
|
|
|
Approximate as
of
|
|
June 30, 2013
(a)
|
|
March 31, 2013
(a)
|
|
December 31, 2012
(a)
|
|
June 30, 2012
(a)
|
Footprint
|
|
|
|
|
|
|
|
Estimated Video Passings (b)
|
12,098
|
|
12,090
|
|
12,074
|
|
12,008
|
Estimated Internet Passings (b)
|
11,797
|
|
11,789
|
|
11,772
|
|
11,703
|
Estimated Telephone Passings (b)
|
11,132
|
|
11,124
|
|
11,103
|
|
10,925
|
|
|
|
|
|
|
|
|
Penetration
Statistics
|
|
|
|
|
|
|
|
Video Penetration of
Estimated Video Passings (c)
|
33.7 %
|
|
34.1 %
|
|
34.4 %
|
|
35.6 %
|
Internet Penetration
of Estimated Internet Passings (c)
|
35.1 %
|
|
34.7 %
|
|
33.8 %
|
|
32.8 %
|
Telephone Penetration
of Estimated Telephone Passings (c)
|
19.2 %
|
|
18.7 %
|
|
18.2 %
|
|
17.6 %
|
|
|
|
|
|
|
|
|
Residential
|
|
|
|
|
|
|
|
Residential Customer
Relationships (d)
|
5,096
|
|
5,091
|
|
5,035
|
|
4,996
|
Residential Non-Video
Customers
|
1,179
|
|
1,126
|
|
1,046
|
|
898
|
%
Non-Video
|
23.1 %
|
|
22.1 %
|
|
20.8 %
|
|
18.0 %
|
|
|
|
|
|
|
|
|
Customers
|
|
|
|
|
|
|
|
Video (e)
|
3,917
|
|
3,965
|
|
3,989
|
|
4,098
|
Internet
(f)
|
3,924
|
|
3,884
|
|
3,785
|
|
3,662
|
Telephone
(g)
|
2,019
|
|
1,973
|
|
1,914
|
|
1,828
|
Residential PSUs
(h)
|
9,860
|
|
9,822
|
|
9,688
|
|
9,588
|
Residential PSU /
Customer Relationships (d)(h)
|
1.93
|
|
1.93
|
|
1.92
|
|
1.92
|
|
|
|
|
|
|
|
|
Quarterly Net Additions/(Losses) (i)
|
|
|
|
|
|
|
|
Video (e)
|
(48)
|
|
(24)
|
|
(36)
|
|
(66)
|
Internet
(f)
|
40
|
|
99
|
|
54
|
|
29
|
Telephone
(g)
|
46
|
|
59
|
|
34
|
|
6
|
Residential PSUs (h)
|
38
|
|
134
|
|
52
|
|
(31)
|
|
|
|
|
|
|
|
|
Single Play
Penetration (j)
|
37.8 %
|
|
37.7 %
|
|
37.6 %
|
|
37.0 %
|
Double Play
Penetration (k)
|
30.9 %
|
|
31.7 %
|
|
32.5 %
|
|
34.2 %
|
Triple Play
Penetration (l)
|
31.3 %
|
|
30.5 %
|
|
29.9 %
|
|
28.8 %
|
Digital Penetration
(m)
|
90.7 %
|
|
88.7 %
|
|
86.9 %
|
|
84.7 %
|
|
|
|
|
|
|
|
|
Revenue per Customer
Relationship (d)(n)
|
$
108.67
|
|
$
107.25
|
|
$
105.78
|
|
$
106.00
|
|
|
|
|
|
|
|
|
Commercial
|
|
|
|
|
|
|
|
Commercial Customer
Relationships (d)(o)
|
329
|
|
323
|
|
325
|
|
312
|
|
|
|
|
|
|
|
|
Customers
|
|
|
|
|
|
|
|
Video
(e)(o)
|
156
|
|
159
|
|
169
|
|
171
|
Internet
(f)
|
214
|
|
202
|
|
193
|
|
177
|
Telephone (g)
|
119
|
|
112
|
|
105
|
|
91
|
Commercial PSUs
(h)
|
489
|
|
473
|
|
467
|
|
439
|
|
|
|
|
|
|
|
|
Quarterly Net Additions/(Losses) (i)
|
|
|
|
|
|
|
|
Video
(e)(o)
|
(3)
|
|
(10)
|
|
(3)
|
|
(6)
|
Internet
(f)
|
12
|
|
9
|
|
7
|
|
8
|
Telephone (g)
|
7
|
|
7
|
|
6
|
|
6
|
Commercial PSUs
(h)
|
16
|
|
6
|
|
10
|
|
8
|
|
|
|
|
|
|
|
|
See footnotes to
unaudited summary of operating statistics on page 5 of this
addendum.
|
|
|
(a)
|
We calculate the
aging of customer accounts based on the monthly billing cycle for
each account. On that basis, at June 30, 2013, March 31,
2013, December 31, 2012, and June 30, 2012, customers include
approximately 9,600, 12,000, 18,400, and 17,000 customers,
respectively, whose accounts were over 60 days past due in payment,
approximately 900, 2,400, 2,600, and 2,900 customers, respectively,
whose accounts were over 90 days past due in payment and
approximately 700, 1,300, 1,700, and 1,300 customers, respectively,
whose accounts were over 120 days past due in payment.
|
|
|
(b)
|
"Passings" represent
our estimate of the number of units, such as single family homes,
apartment and condominium units and commercial establishments
passed by our cable distribution network in the areas where we
offer the service indicated. These estimates are updated for
all periods presented based upon the information available at that
time.
|
|
|
(c)
|
"Penetration"
represents residential and commercial customers as a percentage of
estimated passings for the service indicated.
|
|
|
(d)
|
"Customer
Relationships" include the number of customers that receive one or
more levels of service, encompassing video, Internet and phone
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). Commercial customer relationships
includes video customers in commercial structures, which are
calculated on an EBU basis (see footnote (o)) and non-video
commercial customer relationships.
|
|
|
(e)
|
"Video Customers"
represent those customers who subscribe to our video
services.
|
|
|
(f)
|
"Internet Customers"
represent those customers who subscribe to our Internet
services.
|
|
|
(g)
|
"Telephone Customers"
represent those customers who subscribe to our telephone
services.
|
|
|
(h)
|
"Primary Service
Units" or "PSUs" represent the total of video, Internet and
telephone customers.
|
|
|
(i)
|
"Quarterly Net
Additions/(Losses)" represent the net gain or loss in the
respective quarter for the service indicated.
|
|
|
(j)
|
"Single Play
Penetration" represents residential customers receiving only one of
Charter service offerings, including video, Internet or phone, as a
% of residential customer relationships.
|
|
|
(k)
|
"Double Play
Penetration" represents residential customers receiving only two of
Charter service offerings, including video, Internet and/or phone,
as a % of residential customer relationships.
|
|
|
(l)
|
"Triple Play
Penetration" represents residential customers receiving all three
Charter service offerings, including video, Internet and phone, as
a % of residential customer relationships.
|
|
|
(m)
|
"Digital Penetration"
represents the number of residential digital video customers as a
percentage of residential video customers.
|
|
|
(n)
|
"Revenue per Customer
Relationship" is calculated as total residential video, Internet
and phone quarterly revenue divided by three divided by average
residential customer relationships during the respective
quarter.
|
|
|
(o)
|
Included within
commercial video customers are those in commercial structures,
which are calculated on an equivalent bulk unit ("EBU")
basis. We calculate EBUs by dividing the bulk price charged
to accounts in an area by the published rate charged to non-bulk
residential customers in that market for the comparable tier of
service. This EBU method of estimating video customers is
consistent with the methodology used in determining costs paid to
programmers and is consistent with the methodology used by other
multiple system operators. As we increase our published video
rates to residential customers without a corresponding increase in
the prices charged to commercial service customers, our EBU count
will decline even if there is no real loss in commercial service
customers. For example, commercial video customers decreased
by 10,000 during the six months ended June 30, 2013 due to
published video rate increases.
|
|
|
CHARTER
COMMUNICATIONS, INC. AND SUBSIDIARIES
|
UNAUDITED
RECONCILIATION OF NON-GAAP MEASURES TO GAAP MEASURES
|
(dollars in
millions)
|
|
|
Three Months Ended
June 30,
|
|
Six Months Ended
June 30,
|
|
2013
|
|
2012
|
|
2013
|
|
2012
|
|
|
|
|
|
|
|
|
Net loss
|
$
(96)
|
|
$
(83)
|
|
$
(138)
|
|
$
(177)
|
Plus: Interest
expense, net
|
211
|
|
225
|
|
421
|
|
462
|
Income tax
expense
|
58
|
|
68
|
|
67
|
|
139
|
Depreciation and
amortization
|
436
|
|
415
|
|
861
|
|
823
|
Stock compensation
expense
|
15
|
|
13
|
|
26
|
|
24
|
Loss on
extinguishment of debt
|
81
|
|
59
|
|
123
|
|
74
|
Gain on derivative
instruments, net
|
(20)
|
|
—
|
|
(17)
|
|
—
|
Other, net
|
7
|
|
(4)
|
|
19
|
|
—
|
|
|
|
|
|
|
|
|
Adjusted EBITDA
(a)
|
692
|
|
693
|
|
1,362
|
|
1,345
|
Less: Purchases
of property, plant and equipment
|
(422)
|
|
(468)
|
|
(834)
|
|
(808)
|
|
|
|
|
|
|
|
|
Adjusted EBITDA less
capital expenditures
|
$
270
|
|
$
225
|
|
$
528
|
|
$
537
|
|
|
|
|
|
|
|
|
Net cash flows from
operating activities
|
$
484
|
|
$
469
|
|
$
1,025
|
|
$
923
|
Less: Purchases
of property, plant and equipment
|
(422)
|
|
(468)
|
|
(834)
|
|
(808)
|
Change in accrued
expenses related to capital expenditures
|
13
|
|
25
|
|
2
|
|
13
|
|
|
|
|
|
|
|
|
Free cash
flow
|
$
75
|
|
$
26
|
|
$
193
|
|
$
128
|
|
|
|
|
|
|
|
|
(a) 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.
|
|
|
CHARTER
COMMUNICATIONS, INC. AND SUBSIDIARIES
|
CAPITAL
EXPENDITURES
|
(dollars in
millions)
|
|
|
|
|
|
Three Months Ended
June 30,
|
|
Six Months Ended
June 30,
|
|
2013
|
|
2012
|
|
2013
|
|
2012
|
|
|
|
|
|
|
|
|
Customer premise
equipment (a)
|
$
192
|
|
$
201
|
|
$
425
|
|
$
373
|
Scalable
infrastructure (b)
|
78
|
|
146
|
|
132
|
|
234
|
Line extensions
(c)
|
62
|
|
44
|
|
108
|
|
74
|
Upgrade/Rebuild
(d)
|
48
|
|
50
|
|
87
|
|
84
|
Support capital
(e)
|
42
|
|
27
|
|
82
|
|
43
|
|
|
|
|
|
|
|
|
Total capital
expenditures (f)
|
$
422
|
|
$
468
|
|
$
834
|
|
$
808
|
|
|
|
|
|
|
|
|
(a)
|
Customer premise
equipment includes costs incurred at the customer residence to
secure new customers and revenue generating units. It also
includes customer installation costs and customer premise equipment
(e.g., set-top boxes and cable modems).
|
|
|
(b)
|
Scalable
infrastructure includes costs, not related to customer premise
equipment, to secure growth of new customers and revenue generating
units, 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).
|
|
|
(f)
|
Total capital
expenditures includes $85 million and $61 million for the three
months ended June 30, 2013 and 2012, respectively, and $147
million and $99 million for the six months ended June 30, 2013
and 2012, respectively, of capital expenditures related to
commercial services.
|
SOURCE Charter Communications, Inc.