STAMFORD, Conn., April 28, 2014 /PRNewswire/ -- Charter
Communications, Inc. (along with its subsidiaries, the "Company" or
"Charter") today reported financial and operating results for the
three months ended March 31, 2014
Key highlights:
- Pro forma1 for the acquisition of Bresnan,
total residential customer relationships grew by 112,000 during the
quarter, versus 61,000 during the first quarter of 2013.
- Residential primary service units (PSUs) increased by 206,000
during the period, versus 140,000 in the year-ago quarter,
including continued improvement in video customer trends, with
positive net additions of 18,000, in the seasonally strong first
quarter.
- First quarter revenues of $2.2
billion grew 7.5% on a pro forma basis as compared to
the prior-year period, led by growth in Internet, video, and
commercial revenues.
- First quarter residential revenues grew 6.5% on a pro
forma basis versus the first quarter of 2013, when residential
revenues grew by 4.2% on a pro forma basis.
- First quarter commercial revenues grew 20.0% on a pro
forma basis versus the prior-year period, primarily driven by
higher sales to small businesses.
- First quarter Adjusted EBITDA2 grew by 7.3%
year-over-year on a pro forma basis.
"In the past two years, we have repositioned Charter to provide
a superior set of products and services to our customers. And
we are beginning to see the results in our operating metrics,
customer satisfaction, and financial performance," said
Tom Rutledge, President and CEO of
Charter Communications. "As we move to an all-digital platform over
the course of this year, we are unleashing the inherent superiority
of our high capacity 2-way interactive network. With our new
product suite, Charter Spectrum, we will deliver the most HD
channels, video on demand and the fastest Internet service across
the vast majority of our markets, all packaged with high quality
service at a competitive price point. Launching the Charter
Spectrum brand now reflects confidence in our ability to exceed
customer expectations, grow market share and as a result, create
value for our shareholders."
1 All customer data and results, unless
otherwise noted, are pro forma for the Bresnan transaction,
as if it had occurred on January 1,
2012, and are provided in the addendum of this news
release.
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
|
|
|
|
|
Actual
|
|
Pro
Forma
|
|
|
|
|
March 31, 2014
(a)
|
|
March 31, 2013
(a)
|
|
Y/Y
Change
|
Footprint
|
|
|
|
|
|
|
|
|
Estimated Video
Passings (b)
|
12,816
|
|
12,758
|
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—%
|
Estimated Internet
Passings (b)
|
12,475
|
|
12,444
|
|
—%
|
Estimated Voice
Passings (b)
|
11,957
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|
11,774
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|
2%
|
|
|
|
|
|
|
|
|
Penetration
Statistics
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|
|
|
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|
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Video Penetration of
Estimated Video Passings (c)
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34.0%
|
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34.7%
|
|
-0.7ppts
|
Internet Penetration
of Estimated Internet Passings (c)
|
38.4%
|
|
35.2%
|
|
3.2ppts
|
Voice Penetration of
Estimated Voice Passings (c)
|
20.7%
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|
19.1%
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|
1.6ppts
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|
|
|
|
|
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Residential
|
|
|
|
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|
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Residential Customer
Relationships (d)
|
5,673
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|
5,450
|
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4%
|
Residential Non-Video
Customers
|
1,478
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|
1,189
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24%
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%
Non-Video
|
26.1%
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21.8%
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|
4.3ppts
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|
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|
|
|
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Customers
|
|
|
|
|
|
|
|
Video (e)
|
4,195
|
|
4,261
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(2)%
|
Internet
(f)
|
4,519
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|
4,166
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|
8%
|
Voice (g)
|
2,325
|
|
2,131
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9%
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Residential PSUs
(h)
|
11,039
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|
10,558
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5%
|
Residential PSU /
Customer Relationships (d)(h)
|
1.95
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|
1.94
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Quarterly Net
Additions/(Losses) (i)
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Video (e)
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18
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(25)
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NM
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Internet
(f)
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136
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|
107
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27%
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Voice (g)
|
52
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|
58
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(10)%
|
Residential PSUs
(h)
|
206
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|
140
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47%
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Bulk Digital Upgrade
Net Additions (j)
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16
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5
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220%
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Single Play
Penetration (k)
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37.9%
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37.4%
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0.5ppts
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Double Play
Penetration (l)
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29.5%
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31.3%
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-1.8ppts
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Triple Play
Penetration (m)
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32.6%
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31.2%
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|
1.4ppts
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Digital Penetration
(n)
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93.2%
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88.6%
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4.6ppts
|
|
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|
|
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Monthly Residential
Revenue per Residential Customer (d)(o)
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$110.29
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$107.33
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3%
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Commercial
|
|
|
|
|
|
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|
Commercial Customer
Relationships (d)(p)
|
379
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|
340
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11%
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|
|
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|
|
|
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|
Customers
|
|
|
|
|
|
|
|
|
Video
(e)(p)
|
160
|
|
167
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(4)%
|
Internet
(f)
|
269
|
|
220
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22%
|
Voice (g)
|
152
|
|
123
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24%
|
Commercial PSUs
(h)
|
581
|
|
510
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14%
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|
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|
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Quarterly Net
Additions/(Losses) (i)
|
|
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|
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Video
(e)(p)
|
(5)
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|
(10)
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50%
|
Internet
(f)
|
12
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|
10
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20%
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Voice (g)
|
7
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|
7
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—%
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Commercial PSUs
(h)
|
14
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7
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|
100%
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|
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|
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Footnotes
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In thousands, except
per customer 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.
|
|
NM - Not
meaningful
|
On July 1, 2013, Charter completed
its acquisition of Cablevision's Bresnan Broadband Holdings, LLC
and its subsidiaries (collectively, "Bresnan"). As a result of the
acquisition, Charter added cable operating systems in Montana, Wyoming, Colorado and Utah that pass approximately 670,000 homes and
serve approximately 375,000 residential and business customers. All
customer data referred to herein, are pro forma for the
Bresnan transaction, as if it had occurred on January 1, 2012.
During the first quarter of 2014, Charter saw year-over-year and
sequential improvement in customer relationship and PSU growth.
Residential customer relationships grew by 112,000, up from 61,000
in the first quarter of 2013, with triple play sell-in improving
year-over-year, to over 50% of total residential video sales.
Commercial customer relationships grew by 4,000 in the first
quarter of 2014, compared to a loss of 1,000 in the prior-year
period, with both periods negatively impacted by equivalent bulk
unit ("EBU") reporting, which reduces reported bulk video customers
when a basic cable rate increase is implemented. Commercial video
billing relationships increased during the quarter and commercial
video revenue grew year over year.
Residential PSUs increased by 206,000 versus 140,000 in the
year-ago quarter, while commercial PSUs increased 14,000 during the
first quarter versus a gain of 7,000 in the year-ago quarter.
As of the end of the first quarter of 2014, Charter had
completed 30% of its all-digital initiative. All-digital allows
Charter to offer more advanced products and services, and provides
residential customers with two-way digital set-tops, which offer
higher picture quality, an interactive programming guide and video
on demand on all TV outlets in the home. Charter expects to
complete its all-digital initiative by year end 2014.
During the first quarter, Charter began introducing its new
product suite, Charter Spectrum, in several markets that
were recently converted to all-digital, including Dallas-Ft. Worth, Texas, and Greenville, South Carolina. Charter customers
in these markets now have access to Charter Spectrum,
an industry-leading suite of video, data, and voice services that
includes over 200 HD channels, in addition to minimum offered
Internet speeds of 60 Mbps, and a fully featured voice service, at
a highly competitive price. Charter Spectrum is being
introduced across Charter's markets in 2014, in conjunction with
the Company's all-digital initiative. Charter Spectrum is
available to new Charter customers, and to existing customers
within the Company's new pricing and packaging structure launched
in 2012. As of the end of the first quarter of 2014, 75% of
residential customers were in Charter's new pricing and packaging,
excluding customers in the former Bresnan properties.
Residential video customers increased by 18,000 in the first
quarter of 2014, versus a loss of 25,000 in the year-ago period.
The positive video customer net additions result was driven by
Charter's increasingly competitive video product, including
all-digital service, more HD channels and video on demand
offerings, attractive packaging of advanced services, improved
selling methods, and enhanced service quality.
Charter added 136,000 residential Internet customers in the
first quarter of 2014, compared to 107,000 a year ago. As of
March 31, 2014, approximately 78% of Charter's residential
Internet customers subscribed to tiers that provided speeds of 30
Mbps or more. The Company continues to see strong demand for its
Internet service as consumers value the speed and reliability of
Charter's Internet offering.
During the first quarter, the Company added 52,000 residential
voice customers, versus a gain of 58,000 during the first quarter
of 2013.
First quarter residential revenue per customer relationship
totaled $110.29, and grew by 2.8% on
a pro forma basis, from $107.33 in the first quarter of 2013, driven by
rate adjustments, higher product sell-in and promotional rate
step-ups, partially offset by the migration of legacy customers to
Charter's new pricing and packaging and continued single play
Internet sell-in.
First Quarter
Financial Results
|
|
CHARTER
COMMUNICATIONS, INC. AND SUBSIDIARIES
|
UNAUDITED
CONSOLIDATED STATEMENTS OF OPERATIONS AND OPERATING
DATA
|
(dollars in
millions, except per share data)
|
|
|
Three Months Ended
March 31,
|
|
2014
|
|
2013
|
|
|
|
2013
|
|
|
|
Actual
|
|
Pro
Forma
|
|
%
Change
|
|
Actual
|
|
%
Change
|
REVENUES:
|
|
|
|
|
|
|
|
|
|
Video
|
$
1,090
|
|
$
1,025
|
|
6.3 %
|
|
$
958
|
|
13.8 %
|
Internet
|
616
|
|
534
|
|
15.4 %
|
|
501
|
|
23.0 %
|
Voice
|
150
|
|
184
|
|
(18.5)%
|
|
171
|
|
(12.3)%
|
Commercial
|
234
|
|
195
|
|
20.0 %
|
|
181
|
|
29.3 %
|
Advertising
sales
|
68
|
|
63
|
|
7.9 %
|
|
60
|
|
13.3 %
|
Other
|
44
|
|
47
|
|
(6.4)%
|
|
46
|
|
(4.3)%
|
Total
Revenues
|
2,202
|
|
2,048
|
|
7.5 %
|
|
1,917
|
|
14.9 %
|
|
|
|
|
|
|
|
|
|
|
COSTS AND
EXPENSES:
|
|
|
|
|
|
|
|
|
|
Total operating costs
and expenses (excluding depreciation and amortization)
|
1,435
|
|
1,333
|
|
7.7 %
|
|
1,247
|
|
15.1 %
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA
|
$
767
|
|
$
715
|
|
7.3 %
|
|
$
670
|
|
14.5 %
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA margin
|
34.8
%
|
|
34.9
%
|
|
|
|
35.0
%
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital
Expenditures
|
$
539
|
|
$
423
|
|
|
|
$
412
|
|
|
% Total
Revenues
|
24.5 %
|
|
20.7 %
|
|
|
|
21.5 %
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
$
(37)
|
|
$
(68)
|
|
|
|
$
(42)
|
|
|
Loss per common
share, basic and diluted
|
$
(0.35)
|
|
$
(0.68)
|
|
|
|
$
(0.42)
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash flows from
operating activities
|
$
577
|
|
|
|
|
|
$
541
|
|
|
Free cash
flow
|
$
74
|
|
|
|
|
|
$
118
|
|
|
Revenue
First quarter 2014 revenues rose to $2.2
billion, 7.5% higher on a pro forma basis than the
year-ago quarter, due to growth in Internet, video and commercial
revenues. On an actual basis, first quarter revenues rose 14.9%
year-over-year.
Video revenues totaled $1.1
billion in the first quarter, an increase of 6.3% on a
pro forma basis 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 limited
basic video customers and premium revenue. Video revenues grew by
13.8% year-over-year, on an actual basis.
Internet revenues grew 15.4% on a pro forma basis
compared to the year-ago quarter to $616
million, driven by an increase of 353,000 Internet customers
during the last year and by price adjustments. On an actual basis,
Internet revenues grew 23.0% year-over-year.
Voice revenues totaled $150
million, down 18.5% on a pro forma basis versus the
first quarter of 2013, due to value-based pricing and revenue
allocation from higher bundling, partially offset by the addition
of 194,000 voice customers in the last twelve months. Voice
revenues declined 12.3% year-over-year, on an actual basis.
Commercial revenues rose to $234
million, an increase of 20.0% on a pro forma basis
over the prior-year period, and was driven by higher sales to small
business customers. On an actual basis, commercial revenues grew
29.3% year-over-year.
First quarter advertising sales revenues of $68 million increased 7.9% on a pro forma
basis compared to the year-ago quarter, driven by an increase in
political and on-line advertising revenue. Advertising sales
increased 13.3% year-over-year, on an actual basis.
Operating Costs and Expenses
First quarter total operating costs and expenses increased 7.7%
on a pro forma basis compared to the year-ago period,
reflecting increases in programming costs, marketing expenses, and
other expenses.
First quarter programming expense increased by $60 million on a pro forma basis, or
11.0%, as compared to the first quarter of 2013, reflecting
contractual programming increases and higher expanded basic package
penetration. Marketing costs increased by $14 million on a pro forma basis, or 11.8%
as compared to the first quarter of 2013, reflecting increased
sales activity and sales channel development. Other expenses grew
by $24 million on a pro forma
basis, or 14.5%, as compared to the first quarter of 2013,
reflecting higher corporate expenses and commercial labor costs. On
an actual basis, total operating costs and expenses grew by 15.1%
year-over-year.
Adjusted EBITDA
First quarter Adjusted EBITDA of $767
million grew by 7.3% year-over-year on a pro forma
basis, reflecting pro forma revenue growth and operating
costs and expenses growth of 7.5% and 7.7%, respectively. On an
actual basis, Adjusted EBITDA grew by 14.5% compared to the
year-ago quarter, primarily driven by the acquisition of Bresnan.
Adjusted EBITDA margin declined to 34.8% versus the prior year
period on a pro forma basis and actual basis, given higher
programming and growth-related expenses.
Net Loss
Net loss totaled $37 million in
the first quarter of 2014, an improvement compared to a
$68 million net loss on a
pro forma basis and $42
million net loss on an actual basis in the year-ago period.
Net loss decreased year-over-year on a pro forma basis
primarily due to higher Adjusted EBITDA in the first quarter of
2014. Basic and diluted net loss per common share was $0.35 in the first quarter of 2014 compared to
$0.68 on a pro forma basis,
and $0.42 on an actual basis during
the same period last year. The decrease was primarily the result of
the factors described above.
Capital Expenditures
Property, plant and equipment expenditures were $539 million in the first quarter of 2014,
compared to $423 million on a pro
forma basis and $412 million on
an actual basis, during the first quarter of 2013. Charter's
all-digital initiative accounted for $118
million of the year-over-year increase. Spending on customer
premise equipment to support residential growth also drove the
increase, partly offset by lower spending on equipment to support
customer migration to Charter's new pricing and packaging.
Charter expects 2014 capital expenditures to be approximately
$2.2 billion, driven by Charter's
all-digital transition including the deployment of additional
set-top boxes in new and existing customer homes, growth in
Charter's commercial business, and further spend related to efforts
to insource service operations as well as product development. The
actual amount of our capital expenditures will depend on a number
of factors including the growth rates of both our residential and
commercial businesses, and the pace at which we progress to
all-digital transmission, which we anticipate will comprise
approximately $400 million of 2014
capital expenditures.
Cash Flow
During the first quarter of 2014, net cash flows from operating
activities totaled $577 million,
compared to $541 million in the first
quarter of 2013. The increase in net cash flows from operating
activities was primarily related to an increase in Adjusted EBITDA
and a working capital benefit, offset by the timing of cash
interest payments.
Free cash flow for the first quarter of 2014 was $74 million, compared to $118 million during the same period last year.
The decrease was primarily due to higher capital expenditures,
offset by an increase in cash flows from operating activities.
Liquidity
Total principal amount of debt was approximately $14.2 billion as of March 31, 2014. At the
end of the quarter, Charter held $4
million of cash and cash equivalents, and its credit
facilities provided approximately $1.2
billion of additional liquidity.
Conference Call
Charter will host a conference call on Monday, April 28,
2014 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
11713153.
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 May 28,
2014. The conference ID code for the replay is 11713153.
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 the three months ended
March 31, 2014 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, loss 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, 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. 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 $64 million and
$51 million for the three months
ended March 31, 2014 and 2013, respectively.
In addition to the actual results for the three months ended
March 31, 2014 and 2013, we have provided pro forma results in
this release for the three months ended March 31, 2013. We
believe these pro forma results facilitate meaningful analysis of
the results of operations. Pro forma results in this release
reflect certain acquisitions of cable systems in 2013 as if they
occurred as of January 1, 2012. Pro
forma statements of operations for the three months ended
March 31, 2013 are provided in the addendum of this news
release.
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 communication 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 SEC. Many of the forward-looking
statements contained in this presentation 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", "predict",
"project", "seek", "would", "could", "potential", "continue",
"ongoing", "upside", "increases" and "potential", among
others. Important factors that could cause actual results to
differ materially from the forward-looking statements we make in
this presentation 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 ultimate outcome of the proposed transactions between
Charter and Comcast including the possibility that such
transactions may not occur if closing conditions are not
satisfied;
- if any such transaction were to occur, the ultimate outcome and
results of integrating operations, the ultimate outcome of
Charter's pricing and packaging and operating strategy applied to
the acquired assets and the ultimate ability to realize synergies
at the levels currently expected;
- disruption in our business relationships as a result of the
proposed transactions;
- the impact of the proposed transaction on our stock price and
future operating results, including due to transaction and
integration costs, increased interest expenses, business
disruption, and diversion of management time and attention;
- the reduction in our current stockholders' percentage ownership
and voting interest as a result of the proposed transaction;
- the increase in indebtedness as a result of the proposed
transactions, which will increase interest expenses and may
decrease our operating flexibility;
- our ability to sustain and grow revenues and cash flow from
operations by offering video, Internet, voice, 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, including in connection with our plan to make our
systems all-digital in 2014;
- the effects of governmental regulation on our business or
potential business combination transaction;
- 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;
- 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 data)
|
|
|
Three Months Ended
March 31,
|
|
2014
|
|
2013
|
|
|
|
2013
|
|
|
|
Actual
|
|
Actual
|
|
%
Change
|
|
Pro Forma
(a)
|
|
%
Change
|
REVENUES:
|
|
|
|
|
|
|
|
|
|
Video
|
$
1,090
|
|
$
958
|
|
13.8 %
|
|
$
1,025
|
|
6.3 %
|
Internet
|
616
|
|
501
|
|
23.0 %
|
|
534
|
|
15.4 %
|
Voice
|
150
|
|
171
|
|
(12.3)%
|
|
184
|
|
(18.5)%
|
Commercial
|
234
|
|
181
|
|
29.3 %
|
|
195
|
|
20.0 %
|
Advertising sales
|
68
|
|
60
|
|
13.3 %
|
|
63
|
|
7.9 %
|
Other
|
44
|
|
46
|
|
(4.3)%
|
|
47
|
|
(6.4)%
|
Total
Revenues
|
2,202
|
|
1,917
|
|
14.9 %
|
|
2,048
|
|
7.5 %
|
|
|
|
|
|
|
|
|
|
|
COSTS AND
EXPENSES:
|
|
|
|
|
|
|
|
|
|
Programming
|
606
|
|
512
|
|
18.4 %
|
|
546
|
|
11.0 %
|
Franchises, regulatory and connectivity
|
107
|
|
95
|
|
12.6 %
|
|
104
|
|
2.9 %
|
Costs to service customers
|
400
|
|
373
|
|
7.2 %
|
|
399
|
|
0.3 %
|
Marketing
|
133
|
|
110
|
|
20.9 %
|
|
119
|
|
11.8 %
|
Other
|
189
|
|
157
|
|
20.4 %
|
|
165
|
|
14.5 %
|
Total operating
costs and expenses (excluding depreciation and
amortization)
|
1,435
|
|
1,247
|
|
15.1 %
|
|
1,333
|
|
7.7 %
|
|
|
|
|
|
|
|
|
|
|
Adjusted
EBITDA
|
767
|
|
670
|
|
14.5 %
|
|
715
|
|
7.3 %
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA
margin
|
34.8
%
|
|
35.0
%
|
|
|
|
34.9
%
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
505
|
|
425
|
|
|
|
452
|
|
|
Stock compensation expense
|
12
|
|
11
|
|
|
|
11
|
|
|
Other operating expenses, net
|
7
|
|
11
|
|
|
|
11
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
from operations
|
243
|
|
223
|
|
|
|
241
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER
EXPENSES:
|
|
|
|
|
|
|
|
|
|
Interest expense, net
|
(211)
|
|
(210)
|
|
|
|
(224)
|
|
|
Loss on extinguishment of debt
|
—
|
|
(42)
|
|
|
|
(42)
|
|
|
Loss on derivative instruments, net
|
(2)
|
|
(3)
|
|
|
|
(3)
|
|
|
Other expense, net
|
(3)
|
|
(1)
|
|
|
|
(1)
|
|
|
|
(216)
|
|
(256)
|
|
|
|
(270)
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before
income taxes
|
27
|
|
(33)
|
|
|
|
(29)
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax
expense
|
(64)
|
|
(9)
|
|
|
|
(39)
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
$
(37)
|
|
$
(42)
|
|
|
|
$
(68)
|
|
|
|
|
|
|
|
|
|
|
|
|
LOSS PER COMMON SHARE, BASIC AND DILUTED:
|
$
(0.35)
|
|
$
(0.42)
|
|
|
|
$
(0.68)
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average
common shares outstanding, basic and diluted
|
106,439,198
|
|
100,327,418
|
|
|
|
100,327,418
|
|
|
|
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.
|
|
Certain prior year
amounts have been reclassified to conform with the 2014
presentation.
|
|
(a) Pro forma results
reflect certain acquisitions of cable systems in 2013 as if they
occurred as of January 1, 2012.
|
|
March 31,
2013. Pro forma revenues, operating expenses and net
loss increased by $131 million, $86 million and $26 million,
respectively, for the three months ended March 31,
2013.
|
CHARTER
COMMUNICATIONS, INC. AND SUBSIDIARIES
|
CONSOLIDATED
BALANCE SHEETS
|
(dollars in
millions)
|
|
|
March
31,
|
|
December
31,
|
|
2014
|
|
2013
|
|
(unaudited)
|
|
|
ASSETS
|
|
|
|
CURRENT
ASSETS:
|
|
|
|
Cash and cash
equivalents
|
$
4
|
|
$
21
|
Accounts receivable,
net
|
217
|
|
234
|
Prepaid expenses and
other current assets
|
83
|
|
67
|
Total current
assets
|
304
|
|
322
|
|
|
|
|
INVESTMENT IN CABLE
PROPERTIES:
|
|
|
|
Property, plant and
equipment, net
|
8,079
|
|
7,981
|
Franchises
|
6,009
|
|
6,009
|
Customer
relationships, net
|
1,317
|
|
1,389
|
Goodwill
|
1,177
|
|
1,177
|
Total investment in
cable properties, net
|
16,582
|
|
16,556
|
|
|
|
|
OTHER NONCURRENT
ASSETS
|
411
|
|
417
|
|
|
|
|
Total
assets
|
$
17,297
|
|
$
17,295
|
|
|
|
|
LIABILITIES AND
SHAREHOLDERS' EQUITY
|
|
|
|
CURRENT
LIABILITIES:
|
|
|
|
Accounts payable and
accrued liabilities
|
$
1,523
|
|
$
1,467
|
Total current
liabilities
|
1,523
|
|
1,467
|
|
|
|
|
LONG-TERM
DEBT
|
14,090
|
|
14,181
|
DEFERRED INCOME
TAXES
|
1,492
|
|
1,431
|
OTHER LONG-TERM
LIABILITIES
|
65
|
|
65
|
|
|
|
|
SHAREHOLDERS'
EQUITY
|
127
|
|
151
|
|
|
|
|
Total liabilities and
shareholders' equity
|
$
17,297
|
|
$
17,295
|
CHARTER
COMMUNICATIONS, INC. AND SUBSIDIARIES
|
UNAUDITED
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
(dollars in
millions)
|
|
|
Three Months Ended
March 31,
|
|
2014
|
|
2013
|
CASH FLOWS FROM
OPERATING ACTIVITIES:
|
|
|
|
Net loss
|
$
(37)
|
|
$
(42)
|
Adjustments to
reconcile net loss to net cash flows from operating
activities:
|
|
|
|
Depreciation and
amortization
|
505
|
|
425
|
Stock compensation
expense
|
12
|
|
11
|
Noncash interest
expense
|
10
|
|
13
|
Loss on
extinguishment of debt
|
—
|
|
42
|
Loss on derivative
instruments, net
|
2
|
|
3
|
Deferred income
taxes
|
62
|
|
2
|
Other, net
|
3
|
|
1
|
Changes in operating
assets and liabilities, net of effects from
acquisitions:
|
|
|
|
Accounts
receivable
|
18
|
|
26
|
Prepaid expenses and
other assets
|
(17)
|
|
(16)
|
Accounts payable,
accrued liabilities and other
|
19
|
|
76
|
Net cash flows from
operating activities
|
577
|
|
541
|
|
|
|
|
CASH FLOWS FROM
INVESTING ACTIVITIES:
|
|
|
|
Purchases of
property, plant and equipment
|
(539)
|
|
(412)
|
Change in accrued
expenses related to capital expenditures
|
36
|
|
(11)
|
Other, net
|
4
|
|
(9)
|
Net cash flows from
investing activities
|
(499)
|
|
(432)
|
|
|
|
|
CASH FLOWS FROM
FINANCING ACTIVITIES:
|
|
|
|
Borrowings of
long-term debt
|
293
|
|
1,315
|
Repayments of
long-term debt
|
(388)
|
|
(1,355)
|
Payments for debt
issuance costs
|
—
|
|
(12)
|
Purchase of treasury
stock
|
(11)
|
|
(5)
|
Proceeds from
exercise of options and warrants
|
6
|
|
5
|
Other, net
|
5
|
|
1
|
Net cash flows from
financing activities
|
(95)
|
|
(51)
|
|
|
|
|
NET INCREASE
(DECREASE) IN CASH AND CASH EQUIVALENTS
|
(17)
|
|
58
|
CASH AND CASH
EQUIVALENTS, beginning of period
|
21
|
|
7
|
CASH AND CASH
EQUIVALENTS, end of period
|
$
4
|
|
$
65
|
|
|
|
|
CASH PAID FOR
INTEREST
|
$
225
|
|
$
120
|
CHARTER
COMMUNICATIONS, INC. AND SUBSIDIARIES
|
UNAUDITED SUMMARY
OF OPERATING STATISTICS
|
(in thousands,
except per customer and penetration data)
|
|
|
Approximate as
of
|
|
Actual
|
|
Pro
Forma
|
|
March 31, 2014
(a)
|
|
December 31, 2013
(a)
|
|
March 31, 2013
(a)
|
Footprint
|
|
|
|
|
|
Estimated Video
Passings (b)
|
12,816
|
|
12,799
|
|
12,758
|
Estimated Internet
Passings (b)
|
12,475
|
|
12,467
|
|
12,444
|
Estimated Voice
Passings (b)
|
11,957
|
|
11,898
|
|
11,774
|
|
|
|
|
|
|
Penetration
Statistics
|
|
|
|
|
|
Video Penetration of
Estimated Video Passings (c)
|
34.0 %
|
|
33.9 %
|
|
34.7 %
|
Internet Penetration
of Estimated Internet Passings (c)
|
38.4 %
|
|
37.2 %
|
|
35.2 %
|
Voice Penetration of
Estimated Voice Passings (c)
|
20.7 %
|
|
20.3 %
|
|
19.1 %
|
|
|
|
|
|
|
Residential
|
|
|
|
|
|
Residential Customer
Relationships (d)
|
5,673
|
|
5,561
|
|
5,450
|
Residential Non-Video
Customers
|
1,478
|
|
1,384
|
|
1,189
|
%
Non-Video
|
26.1 %
|
|
24.9 %
|
|
21.8 %
|
|
|
|
|
|
|
Customers
|
|
|
|
|
|
Video (e)
|
4,195
|
|
4,177
|
|
4,261
|
Internet
(f)
|
4,519
|
|
4,383
|
|
4,166
|
Voice (g)
|
2,325
|
|
2,273
|
|
2,131
|
Residential PSUs
(h)
|
11,039
|
|
10,833
|
|
10,558
|
Residential PSU /
Customer Relationships (d)(h)
|
1.95
|
|
1.95
|
|
1.94
|
|
|
|
|
|
|
Quarterly Net
Additions/(Losses) (i)
|
|
|
|
|
|
Video (e)
|
18
|
|
(2)
|
|
(25)
|
Internet
(f)
|
136
|
|
93
|
|
107
|
Voice (g)
|
52
|
|
56
|
|
58
|
Residential PSUs
(h)
|
206
|
|
147
|
|
140
|
|
|
|
|
|
|
Bulk Digital Upgrade
Net Additions (j)
|
16
|
|
4
|
|
5
|
|
|
|
|
|
|
Single Play
Penetration (k)
|
37.9 %
|
|
37.6 %
|
|
37.4 %
|
Double Play
Penetration (l)
|
29.5 %
|
|
29.8 %
|
|
31.3 %
|
Triple Play
Penetration (m)
|
32.6 %
|
|
32.6 %
|
|
31.2 %
|
Digital Penetration
(n)
|
93.2 %
|
|
91.8 %
|
|
88.6 %
|
Monthly Residential
Revenue per Residential Customer (d)(o)
|
$
110.29
|
|
$
108.12
|
|
$
107.33
|
|
|
|
|
|
|
Commercial
|
|
|
|
|
|
Commercial Customer
Relationships (d)(p)
|
379
|
|
375
|
|
340
|
|
|
|
|
|
|
Customers
|
|
|
|
|
|
Video
(e)(p)
|
160
|
|
165
|
|
167
|
Internet
(f)
|
269
|
|
257
|
|
220
|
Voice (g)
|
152
|
|
145
|
|
123
|
Commercial PSUs
(h)
|
581
|
|
567
|
|
510
|
|
|
|
|
|
|
Quarterly Net
Additions/(Losses) (i)
|
|
|
|
|
|
Video
(e)(p)
|
(5)
|
|
(1)
|
|
(10)
|
Internet
(f)
|
12
|
|
12
|
|
10
|
Voice (g)
|
7
|
|
7
|
|
7
|
Commercial PSUs
(h)
|
14
|
|
18
|
|
7
|
|
Pro forma operating
statistics reflect certain acquisitions of cable systems in 2013 as
if such transactions had occurred as of the last day of the
respective period for all periods presented.
|
|
At March 31, 2013,
actual residential video, Internet and voice customers were
3,965,000, 3,884,000 and 1,973,000, respectively; actual commercial
video, Internet and voice customers were 159,000, 202,000 and
112,000, respectively.
|
|
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 March 31, 2014, December 31,
2013 and March 31, 2013, customers include approximately 11,100,
11,300 and 12,000 customers, respectively, whose accounts were over
60 days past due in payment, approximately 900, 800 and 2,400
customers, respectively, whose accounts were over 90 days past due
in payment and approximately 800, 900 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 voice
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
include video customers in commercial structures, which are
calculated on an EBU basis (see footnote (p)) and non-video
commercial customer relationships.
|
|
|
(e)
|
"Video Customers"
represent those customers who subscribe to our video
services. Our methodology for reporting residential video
customers generally excludes units under bulk arrangements, unless
those units have a digital set-top box, thus a direct billing
relationship. As we complete our all-digital transition, bulk
units are supplied with digital set-top boxes adding to our bulk
digital upgrade customers.
|
|
|
(f)
|
"Internet Customers"
represent those customers who subscribe to our Internet
services.
|
|
|
(g)
|
"Voice Customers"
represent those customers who subscribe to our voice
services.
|
|
|
(h)
|
"Primary Service
Units" or "PSUs" represent the total of video, Internet and voice
customers.
|
|
|
(i)
|
"Quarterly Net
Additions/(Losses)" represent the net gain or loss in the
respective quarter for the service indicated.
|
|
|
(j)
|
"Bulk Digital Upgrade
Net Additions" represents the portion of residential video net
additions as a result of adding a digital set-top box to a bulk
unit.
|
|
|
(k)
|
"Single Play
Penetration" represents residential customers receiving only one
Charter service offering, including video, Internet or voice, as a
% of residential customer relationships.
|
|
|
(l)
|
"Double Play
Penetration" represents residential customers receiving only two
Charter service offering, including video, Internet and/or voice,
as a % of residential customer relationships.
|
|
|
(m)
|
"Triple Play
Penetration" represents residential customers receiving all three
Charter service offerings, including video, Internet and/or voice,
as a % of residential customer relationships.
|
|
|
(n)
|
"Digital Penetration"
represents the number of residential digital video customers as a
percentage of residential video customers.
|
|
|
(o)
|
"Monthly Residential
Revenue per Residential Customer" is calculated as total
residential video, Internet and voice quarterly revenue divided by
three divided by average residential customer relationships during
the respective quarter.
|
|
|
(p)
|
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 basic 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 5,000 and 10,000 during the three months ended March 31, 2014
and 2013, respectively, due to published video rate increases and
other revisions to customer reporting methodology.
|
CHARTER
COMMUNICATIONS, INC. AND SUBSIDIARIES
|
UNAUDITED
RECONCILIATION OF NON-GAAP MEASURES TO GAAP MEASURES (dollars in
millions)
|
|
|
Three Months Ended
March 31,
|
|
2014
|
|
2013
|
|
2013
|
|
Actual
|
|
Actual
|
|
Pro Forma
(a)
|
|
|
|
|
|
|
Net loss
|
$
(37)
|
|
$
(42)
|
|
$
(68)
|
Plus: Interest
expense, net
|
211
|
|
210
|
|
224
|
Income tax
expense
|
64
|
|
9
|
|
39
|
Depreciation and
amortization
|
505
|
|
425
|
|
452
|
Stock compensation
expense
|
12
|
|
11
|
|
11
|
Loss on
extinguishment of debt
|
—
|
|
42
|
|
42
|
Loss on derivative
instruments, net
|
2
|
|
3
|
|
3
|
Other, net
|
10
|
|
12
|
|
12
|
|
|
|
|
|
|
Adjusted EBITDA
(b)
|
767
|
|
670
|
|
715
|
Less: Purchases
of property, plant and equipment
|
(539)
|
|
(412)
|
|
(423)
|
|
|
|
|
|
|
Adjusted EBITDA less
capital expenditures
|
$
228
|
|
$
258
|
|
$
292
|
|
|
|
|
|
|
Net cash flows from
operating activities
|
$
577
|
|
$
541
|
|
|
Less: Purchases
of property, plant and equipment
|
(539)
|
|
(412)
|
|
|
Change in accrued
expenses related to capital expenditures
|
36
|
|
(11)
|
|
|
|
|
|
|
|
|
Free cash
flow
|
$
74
|
|
$
118
|
|
|
|
|
(a)
|
Pro forma results
reflect certain acquisitions of cable systems in 2013 as if they
occurred as of January 1, 2012.
|
|
|
(b)
|
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
March 31,
|
|
2014
|
|
2013
|
|
2013
|
|
Actual
|
|
Actual
|
|
Pro Forma
(g)
|
|
|
|
|
|
|
Customer premise
equipment (a)
|
$
329
|
|
$
233
|
|
$
240
|
Scalable
infrastructure (b)
|
87
|
|
54
|
|
56
|
Line extensions
(c)
|
40
|
|
46
|
|
47
|
Upgrade/Rebuild
(d)
|
33
|
|
39
|
|
39
|
Support capital
(e)
|
50
|
|
40
|
|
41
|
|
|
|
|
|
|
Total
capital expenditures (f)
|
$
539
|
|
$
412
|
|
$
423
|
|
|
(a)
|
Customer premise
equipment includes costs incurred at the customer residence to
secure new customers and revenue generating units, including
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 include $119 million and $1 million related to our
all-digital transition and $59 million and $61 million related to
commercial services for the three months ended March 31, 2014
and 2013, respectively.
|
|
|
(g)
|
Pro forma results
reflect certain acquisitions of cable systems in 2013 as if they
occurred as of January 1, 2012.
|
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SOURCE Charter Communications, Inc.