STAMFORD, Conn., Aug. 9,
2016 /PRNewswire/ -- Charter Communications, Inc. (formerly
known as CCH I, LLC, along with its subsidiaries, the "Company" or
"Charter") today reported financial and operating results for the
three and six months ended June 30, 2016. On May 18, 2016, Charter completed its transactions
between the Company, Time Warner Cable Inc. ("Legacy TWC"), Charter
Communications, Inc. ("Legacy Charter") and Bright House Networks,
LLC ("Legacy Bright House") (collectively, the "Transactions"). In
this release, actual results reflect the operations of Legacy
Charter for the three and six months ended June 30, 2016 and
Legacy TWC and Legacy Bright House for the period from May 18, 2016 through June 30, 2016.
Pro forma1 results give effect to the
Transactions as if they had closed at the beginning of the earliest
period presented and include the operations of Legacy Charter,
Legacy TWC and Legacy Bright House for the full three and six
months ended June 30, 2016.
![Charter Communications Logo. Charter Communications Logo.](http://photos.prnewswire.com/prnvar/20110526/AQ10195LOGO)
Key highlights:
- Charter is now a company with greater scale, an enhanced
footprint, and new revenue, product innovation and cost savings
opportunities. Charter's network reaches 48.8 million homes and
businesses, and serves 25.6 million residential and small and
medium business ("SMB") customers.
- Pro forma1 for the Transactions, second
quarter revenues of $10.0 billion
grew 6.6% as compared to the prior-year period, driven by
residential revenue growth of 5.6% and commercial revenue growth of
13.4%. On an actual1 basis, second quarter revenue of
$6.2 billion grew 153.5%
year-over-year, driven primarily by the Transactions.
- On a pro forma basis, total customer
relationships increased 173,000 during the second quarter, compared
to 54,000 during the second quarter of 2015, and for the twelve
months ended June 30, 2016, grew by 1,251,000 or 5.1%. Pro
forma residential and SMB primary service units ("PSUs")
increased by 249,000 during the period, versus 270,000 in the
year-ago quarter. The year-over-year decline in PSU net additions
was driven by fewer voice net additions in the second quarter of
2016 versus the second quarter of 2015.
- On a pro forma basis, second quarter Adjusted
EBITDA2 of $3.5 billion
grew 9.0% year-over-year. Excluding transition costs in the second
quarters of 2016 and 2015, Adjusted EBITDA grew by 9.2%
year-over-year. On an actual basis, second quarter Adjusted EBITDA
grew by 161.6%, driven primarily by the Transactions.
- Pro forma net income totaled $280
million in the second quarter, compared to $107 million during the same period last year,
driven by higher income from operations year-over-year. On an
actual basis, net income totaled $3.1
billion, compared to a net loss of $122 million during the second quarter of 2015,
driven by higher income from operations following the close of the
Transactions and the reduction of substantially all of Charter's
historical valuation allowance on its deferred tax assets.
- On a pro forma basis, second quarter capital
expenditures totaled $2.1 billion, as
compared to $1.9 billion in the
year-ago period. Excluding transition capital, second quarter 2016
pro forma capital expenditures totaled $2.0 billion as compared to $1.8 billion during the second quarter of 2015.
Second quarter actual capital expenditures totaled $1.3 billion.
"On May 18, we closed our
transactions with Time Warner Cable and Bright House Networks,
creating a new company with the ability to innovate and grow
faster," said Tom Rutledge, CEO and
Chairman of Charter Communications. "Our organization is in place,
we are executing on our plans and our track record at Charter
shows that our operating model, founded on providing high
quality products and service at great prices, works. We will apply
that model as quickly as possible to our new assets, putting our
larger company on a long-term growth trajectory, and building
greater value for our shareholders."
1
|
See Exhibit 99.1 in
the Company's Quarterly Report on Form 10-Q for the three and six
months ended June 30, 2016, which includes reconciliations of the
pro forma information to actual information for each quarter
of 2015 and the first and second quarters of 2016. See the "Use of
Adjusted EBITDA, Free Cash Flow and Pro Forma Information " section
for additional information.
|
2
|
Adjusted EBITDA and
free cash flow are defined in the "Use of Adjusted EBITDA, Free
Cash Flow and Pro Forma Information" section and are reconciled to
consolidated net income (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
|
|
|
|
June 30, 2016
(a)
|
|
June 30, 2015
(a)
|
|
Y/Y
Change
|
Footprint
(b)
|
|
|
|
|
|
Estimated Video
Passings
|
48,762
|
|
48,093
|
|
1 %
|
Estimated Internet
Passings
|
48,414
|
|
47,733
|
|
1 %
|
Estimated Voice
Passings
|
47,566
|
|
46,869
|
|
1 %
|
|
|
|
|
|
|
Penetration
Statistics (c)
|
|
|
|
|
|
Video Penetration of
Estimated Video Passings
|
35.5%
|
|
36.0%
|
|
(0.5)
ppts
|
Internet Penetration
of Estimated Internet Passings
|
45.1%
|
|
42.0%
|
|
3.1
ppts
|
Voice Penetration of
Estimated Voice Passings
|
23.1%
|
|
21.4%
|
|
1.7
ppts
|
|
|
|
|
|
|
Customer
Relationships (d)
|
|
|
|
|
|
Residential
|
24,306
|
|
23,201
|
|
5 %
|
Small and Medium
Business
|
1,333
|
|
1,187
|
|
12 %
|
Total Customer
Relationships
|
25,639
|
|
24,388
|
|
5 %
|
|
|
|
|
|
|
Residential Primary Service Units
("PSUs")
|
|
|
|
|
|
Video
|
16,934
|
|
16,964
|
|
—%
|
Internet
|
20,667
|
|
19,047
|
|
9 %
|
Voice
|
10,255
|
|
9,399
|
|
9 %
|
|
47,856
|
|
45,410
|
|
5 %
|
|
|
|
|
|
|
Pro Forma
Quarterly Net Additions/(Losses)
|
|
|
|
|
|
Video
|
(152)
|
|
(170)
|
|
NM
|
Internet
|
236
|
|
157
|
|
50 %
|
Voice
|
83
|
|
214
|
|
(61)%
|
|
167
|
|
201
|
|
(17)%
|
|
|
|
|
|
|
Single Play
(e)
|
9,252
|
|
8,716
|
|
6 %
|
Double Play
(e)
|
6,559
|
|
6,759
|
|
(3)%
|
Triple Play
(e)
|
8,495
|
|
7,726
|
|
10 %
|
|
|
|
|
|
|
Single Play
Penetration (f)
|
38.1 %
|
|
37.6 %
|
|
0.5
ppts
|
Double Play
Penetration (f)
|
27.0 %
|
|
29.1 %
|
|
(2.1)
ppts
|
Triple Play
Penetration (f)
|
35.0 %
|
|
33.3 %
|
|
1.7
ppts
|
|
|
|
|
|
|
% Residential
Non-Video Customer Relationships
|
30.3 %
|
|
26.9 %
|
|
3.4
ppts
|
|
|
|
|
|
|
Pro Forma Monthly
Residential Revenue per Residential Customer (g)
|
$109.99
|
|
$108.86
|
|
1 %
|
|
|
|
|
|
|
Small and Medium
Business PSUs
|
|
|
|
|
|
Video
|
378
|
|
347
|
|
9 %
|
Internet
|
1,148
|
|
1,014
|
|
13 %
|
Voice
|
725
|
|
617
|
|
18 %
|
|
2,251
|
|
1,978
|
|
14 %
|
|
|
|
|
|
|
Pro Forma
Quarterly Net Additions/(Losses)
|
|
|
|
|
|
Video
|
9
|
|
7
|
|
29 %
|
Internet
|
41
|
|
33
|
|
24 %
|
Voice
|
32
|
|
29
|
|
10 %
|
|
82
|
|
69
|
|
19 %
|
|
|
|
|
|
|
Pro Forma Monthly
Small and Medium Business Revenue per Customer (h)
|
$214.33
|
|
$211.76
|
|
1 %
|
|
|
|
|
|
|
Enterprise PSUs
(i)
|
|
|
|
|
|
Enterprise
PSUs
|
90
|
|
74
|
|
22 %
|
|
|
Footnotes
|
In thousands, except
per customer and penetration data. See footnotes to unaudited
summary of operating statistics on page 6 of the addendum of this
news release. The footnotes contain important disclosures regarding
the definitions used for these operating statistics.
|
|
NM - Not
meaningful
|
|
All percentages are
calculated using whole numbers. Minor differences may exist due to
rounding.
|
The combination of Legacy Charter, Legacy TWC and Legacy Bright
House has created a leading broadband services and technology
company that will drive investment into the combined entity's
advanced broadband network, resulting in faster broadband speeds,
better video products, and more affordable phone service for
consumers. Starting in the fall of 2016, Charter will begin to
introduce Charter Spectrum, in certain Legacy TWC and Legacy
Bright House markets, with remaining markets to follow in 2017.
Charter Spectrum is an industry-leading suite of video,
Internet, and voice services that includes over 200 HD channels,
minimum offered Internet speeds of 60 Mbps, and a fully featured
voice service, delivered at a highly competitive price. As of the
end of the second quarter of 2016, 92% of Legacy Charter's
residential customers received Charter Spectrum
products.
Beginning in early 2017, Charter will also restart all-digital
efforts in those Legacy TWC and Legacy Bright House markets that
continue to broadcast analog video signals. All-digital allows
Charter to offer more advanced products and services, and will
provide 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 intends to
complete the all-digital conversion in Legacy TWC and Legacy Bright
House markets by the end of 2018.
During the second quarter of 2016, Charter's residential
customer relationships grew by 126,000, versus 19,000 in the prior
year period.1 Residential PSUs increased by 167,000
versus a gain of 201,000 in the prior year period. The
year-over-year decline in PSU net additions was primarily the
result of fewer voice net additions, and both customer relationship
and PSU net additions in the second quarter of 2016 and 2015
reflect the significant seasonality of Legacy Bright House Florida
markets. As of June 30, 2016, Charter had 24.3 million
residential customer relationships and 47.9 million residential
PSUs.
Residential video customers decreased by 152,000 in the second
quarter of 2016, versus a decrease of 170,000 in the year-ago
period, driven by better year-over-year performance at Legacy
Charter and Legacy Bright House, partially offset by higher video
losses at Legacy TWC. As of the end of the second quarter of 2016,
Legacy Charter's footprint was virtually 100% all-digital, compared
to 60% at Legacy TWC and 40% at Legacy Bright House. As of
June 30, 2016, Charter had 16.9 million residential video
customers.
Charter added 236,000 residential Internet customers in the
second quarter of 2016, compared to 157,000 a year ago. As of
June 30, 2016, 90% of Legacy Charter's residential Internet
customers subscribed to tiers that provided speeds of 60 Mbps or
more compared to 28% at Legacy TWC and 32% at Legacy Bright House.
The Company continues to see strong demand for its Internet service
as consumers value the speed and reliability of Charter's Internet
offering. As of June 30, 2016, Charter had 20.7 million
residential Internet customers.
During the second quarter, the Company added 83,000 residential
voice customers, versus 214,000 during the second quarter of 2015.
The year-over-year decline in voice net additions was primarily
driven by a Legacy TWC voice promotion that drove voice net
additions in the second quarter of 2015. As of June 30, 2016,
Charter had 10.3 million residential voice customers.
Second quarter residential revenue per customer relationship
totaled $109.99, and grew by 1.0% as
compared to the prior-year period, driven by higher product
sell-in, promotional rate step-ups and rate adjustments, partially
offset by continued single play Internet sell-in. Excluding
pay-per-view revenue, which was impacted by the Mayweather-Pacquiao
pay-per-view event in the second quarter of 2015, residential
revenue per customer relationship grew by 1.7% as compared to the
prior-year period.
During the second quarter of 2016, SMB customer relationships
grew by 47,000 versus 35,000 during the second quarter of 2015. SMB
PSUs increased 82,000, compared to 69,000 during the second quarter
of 2015. As of June 30, 2016, Charter had 1.3 million SMB
customer relationships and 2.3 million SMB PSUs.
1
|
Unless otherwise
specified, all customer data referred to herein are pro
forma for the Transactions as if they had closed at the
beginning of the earliest period presented.
|
Second 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
June 30,
|
|
2016
|
|
2015
|
|
|
|
2016
|
|
2015
|
|
|
|
Pro
Forma
|
|
Pro
Forma
|
|
%
Change
|
|
Actual
|
|
Actual
|
|
%
Change
|
REVENUES:
|
|
|
|
|
|
|
|
|
|
|
|
Video
|
$
4,143
|
|
$
4,074
|
|
1.7 %
|
|
$ 2,605
|
|
$ 1,148
|
|
126.9 %
|
Internet
|
3,132
|
|
2,797
|
|
12.0 %
|
|
1,950
|
|
743
|
|
162.5 %
|
Voice
|
730
|
|
706
|
|
3.3 %
|
|
423
|
|
135
|
|
214.1 %
|
Residential
revenue
|
8,005
|
|
7,577
|
|
5.6 %
|
|
4,978
|
|
2,026
|
|
145.8 %
|
Small and medium
business
|
842
|
|
744
|
|
13.2 %
|
|
520
|
|
190
|
|
174.2 %
|
Enterprise
|
503
|
|
442
|
|
13.7 %
|
|
296
|
|
88
|
|
233.1 %
|
Commercial
revenue
|
1,345
|
|
1,186
|
|
13.4 %
|
|
816
|
|
278
|
|
193.0 %
|
Advertising
sales
|
405
|
|
390
|
|
3.9 %
|
|
237
|
|
79
|
|
200.1 %
|
Other
|
233
|
|
217
|
|
7.5 %
|
|
130
|
|
47
|
|
175.6 %
|
Total
Revenues
|
9,988
|
|
9,370
|
|
6.6 %
|
|
6,161
|
|
2,430
|
|
153.5 %
|
|
|
|
|
|
|
|
|
|
|
|
|
COSTS AND
EXPENSES:
|
|
|
|
|
|
|
|
|
|
|
|
Total operating costs
and expenses
|
6,446
|
|
6,120
|
|
5.3 %
|
|
3,941
|
|
1,582
|
|
149.2 %
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted
EBITDA
|
$
3,542
|
|
$
3,250
|
|
9.0 %
|
|
$ 2,220
|
|
$
848
|
|
161.6 %
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA
margin
|
35.5%
|
|
34.7%
|
|
|
|
36.0%
|
|
34.9%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital
Expenditures
|
$
2,075
|
|
$
1,855
|
|
|
|
$ 1,260
|
|
$
432
|
|
|
% Total
Revenues
|
20.8%
|
|
19.8%
|
|
|
|
20.4%
|
|
17.8%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
attributable to Charter shareholders
|
$
280
|
|
$
107
|
|
|
|
$ 3,067
|
|
$
(122)
|
|
|
Earnings (loss) per
common share attributable to Charter shareholders:
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
$
1.04
|
|
$
0.40
|
|
|
|
$ 16.73
|
|
$ (1.21)
|
|
|
Diluted
|
$
0.99
|
|
$
0.39
|
|
|
|
$ 15.17
|
|
$ (1.21)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash flows from
operating activities
|
|
|
|
|
|
|
$ 1,590
|
|
$
531
|
|
|
Free cash
flow
|
|
|
|
|
|
|
$
524
|
|
$
158
|
|
|
Revenue
On a pro forma basis, second quarter revenues rose 6.6%
year-over-year to $10.0 billion,
driven primarily by growth in Internet, commercial and video
revenues. On an actual basis, second quarter revenue rose to
$6.2 billion, 153.5% higher
year-over-year, driven by the Transactions.
Pro forma video revenues totaled $4.1 billion in the second quarter, an increase
of 1.7% compared to the prior year period. Pro forma video
revenue growth was driven by higher advanced services penetration
and annual and promotional rate adjustments, partially offset by
lower pay-per-view revenue, due to the Mayweather-Pacquiao event
during the second quarter of 2015, and non-recurring customer
credits at Legacy Charter. Second quarter video revenues totaled
$2.6 billion on an actual basis, an
increase of 126.9% compared to the prior-year period, driven by the
Transactions.
On a pro forma basis, Internet revenues grew 12.0%,
compared to the year-ago quarter, to $3.1
billion, driven by an increase of 1,620,000 Internet
customers during the last year, promotional rolloff and price
adjustments. On an actual basis, Internet revenues grew 162.5%
year-over-year, as a result of the Transactions.
Voice revenues totaled $730
million on a pro forma basis, an increase of 3.3%
compared to the second quarter of 2015, due to the addition of
856,000 voice customers in the last twelve months, partially offset
by promotions and value-based pricing. Voice revenues increased
214.1% year-over-year, on an actual basis, driven by the
Transactions.
Pro forma commercial revenues rose to $1.3 billion, an increase of 13.4% over the
prior-year period, driven by SMB revenue growth of 13.2% and
enterprise revenue growth of 13.7%. On an actual basis, commercial
revenues grew 193.0% year-over-year, as a result of the
Transactions.
Pro forma second quarter advertising sales revenues of
$405 million increased 3.9% compared
to the year-ago quarter, primarily driven by an increase in
national and political advertising revenue. Advertising sales grew
200.1% year-over-year, on an actual basis, driven by the
Transactions.
Operating Costs and Expenses
On a pro forma basis, second quarter total operating
costs and expenses increased by $326
million, or 5.3%, compared to the year-ago period, primarily
driven by increases in programming and other expenses. On an actual
basis, total operating costs and expenses grew by 149.2%
year-over-year as a result of the Transactions.
Second quarter programming expense increased by $167 million, or 7.5% on a pro forma
basis, as compared to the second quarter of 2015, reflecting
contractual programming increases and non-recurring items, partly
offset by lower pay-per-view programming expenses and partial
period transactions synergies.
Costs to service customers grew by $37
million, or 2.1% on a pro forma basis year-over-year,
despite year-over-year residential and SMB customer relationship
growth of 5.1%, given improved service metrics. Other expenses grew
by $81 million, or 8.5% on a pro
forma basis, as compared to the second quarter of 2015,
reflecting higher corporate and administrative labor costs,
including pre-closing bonus accrual true ups, higher IT resources
at Legacy TWC, advertising sales costs, and enterprise sales and
labor costs.
Adjusted EBITDA
Second quarter pro forma Adjusted EBITDA of $3.5 billion grew by 9.0% year-over-year,
reflecting revenue growth and operating costs and expenses growth
of 6.6% and 5.3%, respectively. Excluding transition costs of
$25 million in the second quarter of
2016 and $17 million in the
prior-year period, pro forma Adjusted EBITDA grew by 9.2%
year-over-year. On an actual basis, Adjusted EBITDA of $2.2 billion grew by 161.6% year-over-year, due
to the Transactions.
Net Income Attributable to Charter Shareholders
Pro forma net income attributable to Charter shareholders
totaled $280 million in the second
quarter of 2016, compared to $107
million in the second quarter of 2015. The year-over-year
increase in pro forma net income was primarily related to
higher Adjusted EBITDA and a pension curtailment gain related to
Charter's announcement to freeze TWC's legacy defined benefit plans
in the second quarter of 2016 totaling approximately $518 million, offset by $299 million of post-closing restructuring
charges, higher income tax expense and approximately $50 million in expenses related to the net
valuation of hedged foreign currency debt and the elimination of
TWC's interest rate swaps. Pro forma net income per basic
common share attributable to Charter shareholders totaled
$1.04 in the second quarter of 2016
compared to $0.40 during the same
period last year. The increase was primarily the result of the
factors described above, partly offset by a 0.3% increase in pro
forma weighted average shares outstanding versus the prior-year
period.
On an actual basis, net income attributable to Charter
shareholders totaled $3.1 billion
during the second quarter of 2016, compared to a net loss of
$122 million in the second quarter of
2015. The increase in net income was primarily related to higher
income from operations following the close of the Transactions and
the reduction of substantially all of Charter's historical
valuation allowance associated with its deferred tax assets of
approximately $3.3 billion. Actual
net income per basic common share attributable to Charter
shareholders totaled $16.73 in the
second quarter of 2016 compared to a loss of $1.21 during the same period last year. The
increase was primarily the result of the factors described above,
partly offset by an 81.4% increase in weighted average shares
outstanding versus the prior-year period, as a result of the
Transactions.
Capital Expenditures
Pro forma property, plant and equipment expenditures
totaled $2.1 billion in the second
quarter of 2016, compared to $1.9
billion during the second quarter of 2015. The
year-over-year increase in capital expenditures was driven by
higher product development investments, transition capital
expenditures incurred in connection with the Transactions, and
support capital investments. Transition capital expenditures
accounted for $111 million of capital
expenditures in the second quarter of 2016 versus $28 million in the second quarter of 2015.
Excluding transition-related expenditures, second quarter 2016
pro forma property, plant and equipment expenditures totaled
$2.0 billion compared to $1.8 billion during the same period last
year.
On an actual basis, second quarter 2016 property, plant and
equipment expenditures totaled $1.3
billion, an increase of $828
million as compared to the prior-year, as a result of the
Transactions.
The actual amount of capital expenditures in 2016 will depend on
a number of factors including the pace of transition planning to
service a larger customer base as a result of the Transactions and
growth rates of both residential and commercial business
customers.
Cash Flow
During the second quarter of 2016, net cash flows from operating
activities totaled $1.6 billion,
compared to $531 million in the
second quarter of 2015. The year-over-year increase in net cash
flows from operating activities was primarily due to higher
Adjusted EBITDA in the second quarter of 2016 versus the second
quarter of 2015, following the close of the Transactions.
Free cash flow for the second quarter of 2016 totaled
$524 million, compared to
$158 million during the same period
last year. The increase was related to higher net cash flows from
operating activities in the second quarter of 2016 versus the
second quarter of 2015, driven by the close of the Transactions,
partly offset by Transactions closing costs and higher capital
expenditures.
Liquidity & Financing
As of June 30, 2016, total principal amount of debt was
approximately $60.3 billion and
Charter's credit facilities provided approximately $2.8 billion of additional liquidity.
As a result of the Transactions, Charter paid $27.8 billion in cash to Legacy TWC stockholders
and $2.0 billion in cash to
Advance/Newhouse, the former parent of Legacy Bright House.
In connection with the TWC transaction, Legacy Charter and
Liberty Broadband Corporation ("Liberty Broadband") completed
their previously announced transactions pursuant to their
investment agreement, in which Liberty Broadband purchased for cash
approximately 22.0 million shares of Charter Class A common stock
valued at $4.3 billion at the signing
of the TWC transaction to partially finance the cash portion of the
TWC transaction consideration. In connection with the Bright House
transaction, Liberty Broadband purchased approximately 3.7 million
shares of Charter Class A common stock valued at $700 million at the signing of the Bright House
transaction (the "Liberty Transaction").
Charter also partially financed the cash portion of the purchase
price of the Transactions with additional indebtedness and cash on
hand. In 2015, Legacy Charter issued $15.5
billion aggregate principal amount of CCO Safari II, LLC
("CCO Safari II") senior secured notes, $3.8
billion aggregate principal amount of CCO Safari III, LLC
("CCO Safari III") senior secured bank loans and $2.5 billion aggregate principal amount of CCOH
Safari, LLC ("CCOH Safari") senior unsecured notes. The net
proceeds were initially deposited into escrow accounts. Upon
closing of the TWC transaction, the proceeds were released from
escrow and the CCOH Safari notes became obligations of CCO
Holdings, LLC ("CCO Holdings") and CCO Holdings Capital Corp. ("CCO
Holdings Capital"), and the CCO Safari II notes and CCO Safari III
credit facilities became obligations of Charter Communications
Operating, LLC ("Charter Operating") and Charter
Communications Operating Capital Corp. CCOH Safari merged into CCO
Holdings and CCO Safari II and CCO Safari III merged into Charter
Operating.
In connection with the closing of the TWC transaction, Charter
Operating replaced its existing revolving credit facility with a
new $3.0 billion senior secured
revolving credit facility under Charter Operating's Amended and
Restated Credit Agreement dated May 18,
2016 (the "Credit Agreement"). In connection with the
closing of the Bright House transaction, Charter Operating closed
on a $2.6 billion aggregate principal
amount Term Loan A pursuant to the terms of the Credit Agreement of
which $2.0 billion was used to fund
the cash portion of the Bright House transaction and of which
$638 million was used to prepay
and terminate Charter Operating's existing Term A-1 Loans. Interest
on Term Loan A was set at LIBOR plus 2%. In connection with the
closing of the TWC transaction, Charter assumed approximately
$22.5 billion in aggregate principal
amount of Time Warner Cable, LLC and Time Warner Cable Enterprises,
LLC senior notes and debentures with varying maturities.
In February 2016, CCO Holdings and
CCO Holdings Capital jointly issued $1.7
billion aggregate principal amount of 5.875% senior notes
due 2024 (the "2024 Notes") and, in April
2016, they issued $1.5 billion
aggregate principal amount of 5.500% senior notes due 2026 (the
"2026 Notes") at a price of 100.075% of the aggregate principal
amount. The net proceeds from both issuances were used to
repurchase all of CCO Holdings' 7.000% senior notes due 2019,
7.375% senior notes due 2020 and 6.500% senior notes due 2021 and
to pay related fees and expenses and for general corporate
purposes. These debt repurchases resulted in a loss on
extinguishment of debt of $110
million for the three and six months ended June 30, 2016.
Conference Call
Charter will host a conference call on Tuesday, August 9,
2016 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
investor relations website at ir.charter.com. The call will be
archived under the "Financial Information" section 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
31046169.
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 August 23,
2016. The conference ID code for the replay is 31046169.
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 quarter ended June 30,
2016, which will be posted on the "Financial Information" section
of our investor relations website at ir.charter.com, when it is
filed with the United States Securities and Exchange Commission. A
slide presentation to accompany the conference call and a trending
schedule containing historical customer and financial data will
also be available in the "Financial Information" section.
Use of Adjusted EBITDA, Free Cash Flow and Pro Forma
Information
The company uses certain measures that are not defined by U.S.
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, consolidated net income
(loss) and 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 and free cash flow are reconciled to consolidated
net income (loss) and net cash flows from operating activities,
respectively, in the Addendum to this release.
Adjusted EBITDA is defined as consolidated net income (loss)
plus net interest expense, income tax (benefit) expense,
depreciation and amortization, stock compensation expense, loss on
extinguishment of debt, (gain) loss on financial instruments, other
expense, net and other operating expenses, such as merger and
restructuring costs, other pension benefits, 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 capital expenditures and changes in accrued
expenses related to capital expenditures.
Management and Charter'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 facilities and notes
(all such documents have been previously filed with the Securities
and Exchange Commission (the "SEC")). For the purpose of
calculating compliance with leverage covenants, the Company
uses Adjusted EBITDA, as presented, excluding certain expenses paid
by its operating subsidiaries to other Charter entities. The
Company's debt covenants refer to these expenses as management
fees, which were $202 million and
$76 million for the three months
ended June 30, 2016 and 2015, respectively, and $304 million and $152
million for the six months ended June 30, 2016 and
2015, respectively.
Pro forma results give effect to the Transactions as if
they had closed at the beginning of the earliest period presented
and include the operations of Legacy Charter, Legacy TWC and Legacy
Bright House for the full three and six months ended June 30,
2016 and 2015. Due to the transformative nature of the
Transactions, the Company believes that providing a discussion of
its results of operations on a pro forma basis provides
management and investors a more meaningful perspective on the
Company's financial and operational performance and
trends. The results of operations data on a pro forma
basis are provided for illustrative purposes only and are based on
available information and assumptions that Charter believes are
reasonable and do not purport to represent what the actual
consolidated results of operations of Charter would have been had
the Transactions occurred as of the beginning of the earliest
period presented, nor are they necessarily indicative of future
consolidated results of operations or consolidated financial
position. Exhibit 99.1 in the Company's second quarter 2016
Quarterly Report on Form 10-Q provides pro forma financial
information for each quarter of 2015 and the first and second
quarters of 2016 and a reconciliation of the pro forma
financial information to the actual results of operations of the
Company.
About Charter
Charter (NASDAQ: CHTR) is a leading broadband
communications company and the second largest cable operator
in the United States. Charter
provides a full range of advanced broadband services, including
Spectrum TV™ video entertainment programming, Spectrum Internet™
access, and Spectrum Voice™. Spectrum 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
Spectrum Reach™ 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, 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 as
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
communication 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," "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 communication are set forth in our quarterly report on Form
10-Q for the quarter ended June 30,
2016, in our annual report on Form 10-K, and in other
reports or documents that we file from time to time with the SEC,
and include, but are not limited to:
Risks Related to the recently completed Transactions:
- our ability to achieve the synergies and value creation
contemplated by the Transactions;
- our ability to promptly, efficiently and effectively integrate
acquired operations;
- managing a significantly larger company than before the
completion of the Transactions;
- diversion of management time on issues related to the
integration of the Transactions;
- changes in Legacy Charter, Legacy TWC or Legacy Bright House
operations' businesses, future cash requirements, capital
requirements, results of operations, revenues, financial condition
and/or cash flows;
- disruption in our business relationships as a result of the
Transactions;
- the increase in indebtedness as a result of the Transactions,
which will increase interest expense and may decrease our operating
flexibility;
- operating costs and business disruption that may be greater
than expected;
- the ability to retain and hire key personnel and maintain
relationships with providers or other business partners; and
- costs, disruptions and possible limitations on operating
flexibility related to, and our ability to comply with, regulatory
conditions applicable to us as a result of the Transactions.
Risks Related to Our Business
- 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;
- 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, fiber to the
home providers, video provided over the Internet by (i) market
participants that have not historically competed in the
multichannel video business, (ii) traditional multichannel video
distributors, and (iii) content providers that have historically
licensed cable networks to multichannel video distributors, and
providers of advertising over the Internet;
- general business conditions, economic uncertainty or downturn,
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);
- our ability to develop and deploy new products and technologies
including our cloud-based user interface, Spectrum
Guide®, and downloadable security for set-top boxes, and
any other cloud-based consumer services and service platforms;
- the effects of governmental regulation on our business or
potential business combination transactions;
- any events that disrupt our networks, information systems or
properties and impair our operating activities or our
reputation;
- 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 communication.
CHARTER
COMMUNICATIONS, INC. AND SUBSIDIARIES
|
UNAUDITED
CONSOLIDATED STATEMENTS OF OPERATIONS AND OPERATING
DATA
|
(dollars in
millions, except per share data)
|
|
|
Three Months Ended
June 30,
|
|
Six Months Ended
June 30,
|
|
2016
|
|
2015
|
|
|
|
2016
|
|
2015
|
|
|
|
Actual
|
|
Actual
|
|
%
Change
|
|
Actual
|
|
Actual
|
|
%
Change
|
REVENUES:
|
|
|
|
|
|
|
|
|
|
|
|
Video
|
$
2,605
|
|
$
1,148
|
|
126.9 %
|
|
$
3,775
|
|
$
2,277
|
|
65.8 %
|
Internet
|
1,950
|
|
743
|
|
162.5 %
|
|
2,754
|
|
1,460
|
|
88.6 %
|
Voice
|
423
|
|
135
|
|
214.1 %
|
|
558
|
|
269
|
|
107.5 %
|
Residential
revenue
|
4,978
|
|
2,026
|
|
145.8 %
|
|
7,087
|
|
4,006
|
|
76.9 %
|
Small and medium
business
|
520
|
|
190
|
|
174.2 %
|
|
722
|
|
372
|
|
94.5 %
|
Enterprise
|
296
|
|
88
|
|
233.1 %
|
|
395
|
|
175
|
|
124.2 %
|
Commercial
revenue
|
816
|
|
278
|
|
193.0 %
|
|
1,117
|
|
547
|
|
104.0 %
|
Advertising
sales
|
237
|
|
79
|
|
200.1 %
|
|
309
|
|
145
|
|
112.8 %
|
Other
|
130
|
|
47
|
|
175.6 %
|
|
178
|
|
94
|
|
89.7 %
|
Total
Revenues
|
6,161
|
|
2,430
|
|
153.5 %
|
|
8,691
|
|
4,792
|
|
81.4 %
|
COSTS AND
EXPENSES:
|
|
|
|
|
|
|
|
|
|
|
|
Programming
|
1,541
|
|
671
|
|
129.9 %
|
|
2,244
|
|
1,337
|
|
67.9 %
|
Regulatory,
connectivity and produced content
|
316
|
|
109
|
|
188.1 %
|
|
428
|
|
216
|
|
97.0 %
|
Costs to service
customers
|
1,079
|
|
424
|
|
154.6 %
|
|
1,500
|
|
847
|
|
77.1 %
|
Marketing
|
377
|
|
158
|
|
137.6 %
|
|
542
|
|
311
|
|
73.8 %
|
Transition
costs
|
25
|
|
17
|
|
48.0 %
|
|
46
|
|
38
|
|
21.7 %
|
Other
|
603
|
|
203
|
|
198.0 %
|
|
828
|
|
395
|
|
110.5 %
|
Total operating costs
and expenses (exclusive of items shown separately below)
|
3,941
|
|
1,582
|
|
149.2 %
|
|
5,588
|
|
3,144
|
|
77.8 %
|
Adjusted
EBITDA
|
2,220
|
|
848
|
|
161.6 %
|
|
3,103
|
|
1,648
|
|
88.2 %
|
Adjusted EBITDA
margin
|
36.0%
|
|
34.9%
|
|
|
|
35.7%
|
|
34.4%
|
|
|
Depreciation and
amortization
|
1,436
|
|
528
|
|
|
|
1,975
|
|
1,042
|
|
|
Stock compensation
expense
|
63
|
|
19
|
|
|
|
87
|
|
38
|
|
|
Other operating
expenses, net
|
31
|
|
32
|
|
|
|
49
|
|
50
|
|
|
Income from
operations
|
690
|
|
269
|
|
|
|
992
|
|
518
|
|
|
OTHER
EXPENSES:
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense,
net
|
(593)
|
|
(229)
|
|
|
|
(1,047)
|
|
(518)
|
|
|
Loss on extinguishment
of debt
|
(110)
|
|
(128)
|
|
|
|
(110)
|
|
(128)
|
|
|
Gain (loss) on
financial instruments, net
|
(50)
|
|
1
|
|
|
|
(55)
|
|
(5)
|
|
|
Other expense,
net
|
(2)
|
|
—
|
|
|
|
(5)
|
|
—
|
|
|
|
(755)
|
|
(356)
|
|
|
|
(1,217)
|
|
(651)
|
|
|
Loss before income
taxes
|
(65)
|
|
(87)
|
|
|
|
(225)
|
|
(133)
|
|
|
Income tax benefit
(expense)
|
3,179
|
|
(35)
|
|
|
|
3,151
|
|
(70)
|
|
|
Consolidated net
income (loss)
|
3,114
|
|
(122)
|
|
|
|
2,926
|
|
(203)
|
|
|
Less: Net income
attributable to noncontrolling interests
|
(47)
|
|
—
|
|
|
|
(47)
|
|
—
|
|
|
Net income (loss)
attributable to Charter shareholders
|
$
3,067
|
|
$
(122)
|
|
|
|
$
2,879
|
|
$
(203)
|
|
|
EARNINGS (LOSS) PER
COMMON SHARE ATTRIBUTABLE TO CHARTER SHAREHOLDERS:
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
$
16.73
|
|
$
(1.21)
|
|
|
|
$
20.21
|
|
$
(2.01)
|
|
|
Diluted
|
$
15.17
|
|
$
(1.21)
|
|
|
|
$
19.00
|
|
$
(2.01)
|
|
|
Weighted average
common shares outstanding, basic
|
183,362,776
|
|
101,074,644
|
|
|
|
142,457,435
|
|
101,017,146
|
|
|
Weighted average
common shares outstanding, diluted
|
205,214,266
|
|
101,074,644
|
|
|
|
153,959,234
|
|
101,017,146
|
|
|
|
Adjusted EBITDA is a
non-GAAP term. See page 7 of this addendum for the
reconciliation of adjusted EBITDA to consolidated net loss as
defined by GAAP. All percentages are calculated using whole
numbers. Minor differences may exist due to rounding.
|
CHARTER
COMMUNICATIONS, INC. AND SUBSIDIARIES
|
UNAUDITED
CONSOLIDATED STATEMENTS OF OPERATIONS AND OPERATING
DATA
|
(dollars in
millions, except per share data)
|
|
|
Three Months Ended
June 30,
|
|
Six Months Ended
June 30,
|
|
2016
|
|
2015
|
|
|
|
2016
|
|
2015
|
|
|
|
Pro
Forma
|
|
Pro
Forma
|
|
%
Change
|
|
Pro
Forma
|
|
Pro
Forma
|
|
%
Change
|
REVENUES:
|
|
|
|
|
|
|
|
|
|
|
|
Video
|
$
4,143
|
|
$
4,074
|
|
1.7 %
|
|
$
8,235
|
|
$
8,072
|
|
2.0 %
|
Internet
|
3,132
|
|
2,797
|
|
12.0 %
|
|
6,168
|
|
5,526
|
|
11.6 %
|
Voice
|
730
|
|
706
|
|
3.3 %
|
|
1,459
|
|
1,412
|
|
3.3 %
|
Residential
revenue
|
8,005
|
|
7,577
|
|
5.6 %
|
|
15,862
|
|
15,010
|
|
5.7 %
|
Small and medium
business
|
842
|
|
744
|
|
13.2 %
|
|
1,649
|
|
1,460
|
|
13.0 %
|
Enterprise
|
503
|
|
442
|
|
13.7 %
|
|
997
|
|
877
|
|
13.6 %
|
Commercial
revenue
|
1,345
|
|
1,186
|
|
13.4 %
|
|
2,646
|
|
2,337
|
|
13.2 %
|
Advertising
sales
|
405
|
|
390
|
|
3.9 %
|
|
770
|
|
731
|
|
5.3 %
|
Other
|
233
|
|
217
|
|
7.5 %
|
|
473
|
|
433
|
|
9.5 %
|
Total
Revenues
|
9,988
|
|
9,370
|
|
6.6 %
|
|
19,751
|
|
18,511
|
|
6.7 %
|
COSTS AND
EXPENSES:
|
|
|
|
|
|
|
|
|
|
|
|
Programming
|
2,418
|
|
2,251
|
|
7.5 %
|
|
4,826
|
|
4,483
|
|
7.7 %
|
Regulatory,
connectivity and produced content
|
566
|
|
563
|
|
0.3 %
|
|
1,085
|
|
1,065
|
|
1.8 %
|
Costs to service
customers
|
1,797
|
|
1,760
|
|
2.1 %
|
|
3,589
|
|
3,501
|
|
2.5 %
|
Marketing
|
609
|
|
579
|
|
5.1 %
|
|
1,195
|
|
1,128
|
|
6.0 %
|
Transition
costs
|
25
|
|
17
|
|
48.0 %
|
|
46
|
|
38
|
|
21.7 %
|
Other
|
1,031
|
|
950
|
|
8.5 %
|
|
2,035
|
|
1,885
|
|
8.0 %
|
Total operating
costs and expenses (exclusive of items shown separately
below)
|
6,446
|
|
6,120
|
|
5.3 %
|
|
12,776
|
|
12,100
|
|
5.6 %
|
Adjusted
EBITDA
|
3,542
|
|
3,250
|
|
9.0 %
|
|
6,975
|
|
6,411
|
|
8.8 %
|
Adjusted EBITDA
margin
|
35.5%
|
|
34.7%
|
|
|
|
35.3%
|
|
34.6%
|
|
|
Depreciation and
amortization
|
2,276
|
|
2,209
|
|
|
|
4,441
|
|
4,370
|
|
|
Stock compensation
expense
|
72
|
|
61
|
|
|
|
138
|
|
122
|
|
|
Other operating
(income) expenses, net
|
(237)
|
|
1
|
|
|
|
(224)
|
|
19
|
|
|
Income from
operations
|
1,431
|
|
979
|
|
|
|
2,620
|
|
1,900
|
|
|
OTHER
EXPENSES:
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense,
net
|
(723)
|
|
(745)
|
|
|
|
(1,431)
|
|
(1,546)
|
|
|
Loss on extinguishment
of debt
|
(110)
|
|
(128)
|
|
|
|
(110)
|
|
(128)
|
|
|
Gain (loss) on
financial instruments, net
|
(50)
|
|
1
|
|
|
|
(55)
|
|
(5)
|
|
|
Other income,
net
|
2
|
|
127
|
|
|
|
10
|
|
138
|
|
|
|
(881)
|
|
(745)
|
|
|
|
(1,586)
|
|
(1,541)
|
|
|
Income before income
taxes
|
550
|
|
234
|
|
|
|
1,034
|
|
359
|
|
|
Income tax
expense
|
(181)
|
|
(70)
|
|
|
|
(337)
|
|
(99)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated net
income
|
369
|
|
164
|
|
|
|
697
|
|
260
|
|
|
Less: Net income
attributable to noncontrolling interests
|
(89)
|
|
(57)
|
|
|
|
(172)
|
|
(103)
|
|
|
Net income attributable
to Charter shareholders
|
$
280
|
|
$
107
|
|
|
|
$
525
|
|
$
157
|
|
|
EARNINGS PER COMMON
SHARE ATTRIBUTABLE TO CHARTER SHAREHOLDERS:
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
$
1.04
|
|
$
0.40
|
|
|
|
$
2.29
|
|
$
0.58
|
|
|
Diluted
|
$
0.99
|
|
$
0.39
|
|
|
|
$
2.26
|
|
$
0.58
|
|
|
Weighted average
common shares outstanding, basic
|
270,464,654
|
|
269,643,930
|
|
|
|
229,559,308
|
|
269,580,340
|
|
|
Weighted average
common shares outstanding, diluted
|
304,798,080
|
|
273,081,641
|
|
|
|
232,720,158
|
|
273,022,498
|
|
|
|
Pro forma results
reflect certain acquisitions of cable systems in 2016 as if they
occurred as of the earliest period presented. Adjusted EBITDA
is a non-GAAP term. See page 7 of this addendum for the
reconciliation of adjusted EBITDA to consolidated net loss as
defined by GAAP. All percentages are calculated using whole
numbers. Minor differences may exist due to rounding.
|
CHARTER
COMMUNICATIONS, INC. AND SUBSIDIARIES
|
CONSOLIDATED
BALANCE SHEETS
|
(dollars in
millions)
|
|
|
June
30,
|
|
December
31,
|
|
2016
|
|
2015
|
|
(unaudited)
|
|
|
ASSETS
|
|
|
|
CURRENT
ASSETS:
|
|
|
|
Cash and cash
equivalents
|
$
555
|
|
$
5
|
Accounts receivable,
net
|
1,340
|
|
279
|
Prepaid expenses and
other current assets
|
430
|
|
61
|
Total current
assets
|
2,325
|
|
345
|
|
|
|
|
RESTRICTED CASH AND
CASH EQUIVALENTS
|
—
|
|
22,264
|
|
|
|
|
INVESTMENT IN CABLE
PROPERTIES:
|
|
|
|
Property, plant and
equipment, net
|
33,358
|
|
8,345
|
Franchises
|
66,245
|
|
6,006
|
Customer
relationships, net
|
16,154
|
|
856
|
Goodwill
|
29,692
|
|
1,168
|
Total investment in
cable properties, net
|
145,449
|
|
16,375
|
|
|
|
|
OTHER NONCURRENT
ASSETS
|
1,421
|
|
332
|
|
|
|
|
Total
assets
|
$
149,195
|
|
$
39,316
|
|
|
|
|
LIABILITIES AND
SHAREHOLDERS' EQUITY (DEFICIT)
|
|
|
|
CURRENT
LIABILITIES:
|
|
|
|
Accounts payable and
accrued liabilities
|
$
6,736
|
|
$
1,972
|
Current portion of
long-term debt
|
2,071
|
|
—
|
Total current
liabilities
|
8,807
|
|
1,972
|
|
|
|
|
LONG-TERM
DEBT
|
60,132
|
|
35,723
|
DEFERRED INCOME
TAXES
|
26,339
|
|
1,590
|
OTHER LONG-TERM
LIABILITIES
|
2,885
|
|
77
|
|
|
|
|
SHAREHOLDERS' EQUITY
(DEFICIT):
|
|
|
|
Controlling
interest
|
40,240
|
|
(46)
|
Noncontrolling
interests
|
10,792
|
|
—
|
Total shareholders'
equity (deficit)
|
51,032
|
|
(46)
|
|
|
|
|
Total liabilities and
shareholders' equity (deficit)
|
$149,195
|
|
$39,316
|
CHARTER
COMMUNICATIONS, INC. AND SUBSIDIARIES
|
UNAUDITED
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
(dollars in
millions)
|
|
|
Three Months Ended
June 30,
|
|
Six Months Ended
June 30,
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
CASH FLOWS FROM
OPERATING ACTIVITIES:
|
|
|
|
|
|
|
|
Consolidated net
income (loss)
|
$
3,114
|
|
$
(122)
|
|
$
2,926
|
|
$
(203)
|
Adjustments to
reconcile consolidated net income (loss) to net cash flows from
operating activities:
|
|
|
|
|
|
|
|
Depreciation and
amortization
|
1,436
|
|
528
|
|
1,975
|
|
1,042
|
Stock compensation
expense
|
63
|
|
19
|
|
87
|
|
38
|
Accelerated vesting
of equity awards
|
145
|
|
—
|
|
145
|
|
—
|
Noncash interest
(income) expense, net
|
(48)
|
|
7
|
|
(41)
|
|
15
|
Pension curtailment
gain and remeasurement loss, net
|
(518)
|
|
—
|
|
(518)
|
|
—
|
Loss on
extinguishment of debt
|
110
|
|
128
|
|
110
|
|
128
|
(Gain) loss on
financial instruments, net
|
50
|
|
(1)
|
|
55
|
|
5
|
Deferred income
taxes
|
(3,192)
|
|
32
|
|
(3,164)
|
|
66
|
Other, net
|
(5)
|
|
3
|
|
(2)
|
|
6
|
Changes in operating
assets and liabilities, net of effects from
acquisitions:
|
|
|
|
|
|
|
|
Accounts
receivable
|
(124)
|
|
(58)
|
|
(100)
|
|
(37)
|
Prepaid expenses and
other assets
|
32
|
|
6
|
|
11
|
|
(20)
|
Accounts payable,
accrued liabilities and other
|
527
|
|
(11)
|
|
530
|
|
19
|
Net cash flows from
operating activities
|
1,590
|
|
531
|
|
2,014
|
|
1,059
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM
INVESTING ACTIVITIES:
|
|
|
|
|
|
|
|
Purchases of
property, plant and equipment
|
(1,260)
|
|
(432)
|
|
(1,689)
|
|
(783)
|
Change in accrued
expenses related to capital expenditures
|
194
|
|
59
|
|
138
|
|
(17)
|
Purchases of cable
systems, net of cash acquired
|
(28,810)
|
|
—
|
|
(28,810)
|
|
—
|
Change in restricted
cash and cash equivalents
|
22,313
|
|
7,112
|
|
22,264
|
|
7,111
|
Other, net
|
(4)
|
|
(56)
|
|
(6)
|
|
(69)
|
Net cash flows from
investing activities
|
(7,567)
|
|
6,683
|
|
(8,103)
|
|
6,242
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM
FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
Borrowings of
long-term debt
|
3,858
|
|
2,981
|
|
5,997
|
|
3,313
|
Repayments of
long-term debt
|
(3,343)
|
|
(10,153)
|
|
(4,070)
|
|
(10,545)
|
Payments for debt
issuance costs
|
(266)
|
|
(25)
|
|
(283)
|
|
(25)
|
Issuance of
equity
|
5,000
|
|
—
|
|
5,000
|
|
—
|
Purchase of treasury
stock
|
(84)
|
|
(7)
|
|
(99)
|
|
(23)
|
Proceeds from
exercise of stock options
|
19
|
|
—
|
|
24
|
|
6
|
Payment of preferred
dividend to noncontrolling interest
|
(18)
|
|
—
|
|
(18)
|
|
—
|
Proceeds from
termination of interest rate derivatives
|
88
|
|
—
|
|
88
|
|
—
|
Net cash flows from
financing activities
|
5,254
|
|
(7,204)
|
|
6,639
|
|
(7,274)
|
|
|
|
|
|
|
|
|
NET INCREASE
(DECREASE) IN CASH AND CASH EQUIVALENTS
|
(723)
|
|
10
|
|
550
|
|
27
|
CASH AND CASH
EQUIVALENTS, beginning of period
|
1,278
|
|
20
|
|
5
|
|
3
|
CASH AND CASH
EQUIVALENTS, end of period
|
$
555
|
|
$
30
|
|
$
555
|
|
$
30
|
|
|
|
|
|
|
|
|
CASH PAID FOR
INTEREST
|
$
544
|
|
$
290
|
|
$
1,014
|
|
$
545
|
CHARTER
COMMUNICATIONS, INC. AND SUBSIDIARIES
|
UNAUDITED SUMMARY
OF OPERATING STATISTICS
|
(in thousands,
except per customer and penetration data)
|
|
|
Approximate as
of
|
|
Actual
|
|
Pro
Forma
|
|
June 30,
2016 (a)
|
|
March 31,
2016 (a)
|
|
December 31,
2015 (a)
|
|
June 30,
2015 (a)
|
Footprint
(b)
|
|
|
|
|
|
|
|
Estimated Video
Passings
|
48,762
|
|
48,561
|
|
48,375
|
|
48,093
|
Estimated Internet
Passings
|
48,414
|
|
48,209
|
|
48,019
|
|
47,733
|
Estimated Voice
Passings
|
47,566
|
|
47,339
|
|
47,164
|
|
46,869
|
|
|
|
|
|
|
|
|
Penetration
Statistics (c)
|
|
|
|
|
|
|
|
Video Penetration of
Estimated Video Passings
|
35.5%
|
|
35.9%
|
|
36.0%
|
|
36.0%
|
Internet Penetration
of Estimated Internet Passings
|
45.1%
|
|
44.7%
|
|
43.7%
|
|
42.0%
|
Voice Penetration of
Estimated Voice Passings
|
23.1%
|
|
23.0%
|
|
22.5%
|
|
21.4%
|
|
|
|
|
|
|
|
|
Customer
Relationships (d)
|
|
|
|
|
|
|
|
Residential
|
24,306
|
|
24,180
|
|
23,795
|
|
23,201
|
Small and Medium
Business
|
1,333
|
|
1,286
|
|
1,256
|
|
1,187
|
Total Customer
Relationships
|
25,639
|
|
25,466
|
|
25,051
|
|
24,388
|
|
|
|
|
|
|
|
|
Residential Primary Service Units
("PSUs")
|
|
|
|
|
|
|
|
Video
|
16,934
|
|
17,086
|
|
17,062
|
|
16,964
|
Internet
|
20,667
|
|
20,431
|
|
19,911
|
|
19,047
|
Voice
|
10,255
|
|
10,172
|
|
9,959
|
|
9,399
|
|
47,856
|
|
47,689
|
|
46,932
|
|
45,410
|
|
|
|
|
|
|
|
|
Pro Forma
Quarterly Net Additions/(Losses)
|
|
|
|
|
|
|
|
Video
|
(152)
|
|
24
|
|
118
|
|
(170)
|
Internet
|
236
|
|
520
|
|
495
|
|
157
|
Voice
|
83
|
|
213
|
|
304
|
|
214
|
|
167
|
|
757
|
|
917
|
|
201
|
|
|
|
|
|
|
|
|
Single Play
(e)
|
9,252
|
|
9,088
|
|
8,883
|
|
8,716
|
Double Play
(e)
|
6,559
|
|
6,675
|
|
6,687
|
|
6,759
|
Triple Play
(e)
|
8,495
|
|
8,417
|
|
8,225
|
|
7,726
|
|
|
|
|
|
|
|
|
Single Play
Penetration (f)
|
38.1%
|
|
37.6%
|
|
37.3%
|
|
37.6%
|
Double Play
Penetration (f)
|
27.0%
|
|
27.6%
|
|
28.1%
|
|
29.1%
|
Triple Play
Penetration (f)
|
35.0%
|
|
34.8%
|
|
34.6%
|
|
33.3%
|
|
|
|
|
|
|
|
|
% Residential
Non-Video Customer Relationships
|
30.3%
|
|
29.3%
|
|
28.3%
|
|
26.9%
|
|
|
|
|
|
|
|
|
Pro Forma Monthly
Residential Revenue per Residential Customer (g)
|
$
109.99
|
|
$
109.25
|
|
$
108.46
|
|
$
108.86
|
|
|
|
|
|
|
|
|
Small and Medium
Business PSUs
|
|
|
|
|
|
|
|
Video
|
378
|
|
369
|
|
361
|
|
347
|
Internet
|
1,148
|
|
1,107
|
|
1,078
|
|
1,014
|
Voice
|
725
|
|
693
|
|
667
|
|
617
|
|
2,251
|
|
2,169
|
|
2,106
|
|
1,978
|
|
|
|
|
|
|
|
|
Pro Forma
Quarterly Net Additions/(Losses)
|
|
|
|
|
|
|
|
Video
|
9
|
|
8
|
|
7
|
|
7
|
Internet
|
41
|
|
29
|
|
33
|
|
33
|
Voice
|
32
|
|
26
|
|
24
|
|
29
|
|
82
|
|
63
|
|
64
|
|
69
|
|
|
|
|
|
|
|
|
Pro Forma Monthly
Small and Medium Business Revenue per Customer (h)
|
$
214.33
|
|
$
211.85
|
|
$
213.05
|
|
$
211.76
|
|
|
|
|
|
|
|
|
Enterprise PSUs
(i)
|
|
|
|
|
|
|
|
Enterprise
PSUs
|
90
|
|
85
|
|
81
|
|
74
|
|
Pro forma results
reflect certain acquisitions of cable systems in 2016 as if they
occurred at the beginning of the earliest period presented.
All percentages are calculated using whole numbers. Minor
differences may exist due to rounding. See footnotes to
unaudited summary of operating statistics on page 6 of this
addendum.
|
|
|
|
|
(a)
|
All customer
statistics include the operations of Legacy TWC, Legacy Bright
House and Legacy Charter each of which is based on the legacy
company's reporting methodology. Such methodologies differ
and these differences may be material. Once statistical
reporting is fully integrated, all prior periods will be recast to
reflect a consistent methodology. We calculate the aging of
customer accounts based on the monthly billing cycle for each
account. On that basis, at June 30, 2016, March 31, 2016,
December 31, 2015 and June 30, 2015, customers include
approximately 208,600, 27,900, 38,100 and 39,400 customers,
respectively, whose accounts were over 60 days past due,
approximately 14,000, 1,100, 1,700 and 2,000 customers,
respectively, whose accounts were over 90 days past due and
approximately 8,000, 900, 900 and 900 customers, respectively,
whose accounts were over 120 days past due.
|
|
|
|
At March 31, 2016,
actual residential video, Internet and voice PSUs were 4,332,000,
5,368,000 and 2,633,000, respectively; actual commercial video,
Internet and voice PSUs were 113,000, 359,000 and 231,000,
respectively; Enterprise PSUs were 31,000.
|
|
|
|
At December 31, 2015,
actual residential video, Internet and voice PSUs were 4,322,000,
5,227,000 and 2,598,000, respectively; actual commercial video,
Internet and voice PSUs were 108,000, 345,000 and 218,000,
respectively; Enterprise PSUs were 30,000.
|
|
|
|
At June 30, 2015,
actual residential video, Internet and voice PSUs were 4,282,000,
4,982,000 and 2,514,000, respectively; actual commercial video,
Internet and voice PSUs were 100,000, 316,000 and 197,000,
respectively; Enterprise PSUs were 27,000.
|
|
|
(b)
|
Passings represent
our estimate of the number of units, such as single family homes,
apartment and condominium units and small and medium business and
enterprise sites passed by our cable distribution network in the
areas where we offer the service indicated. These estimates
are based upon the information available at this time and are
updated for all periods presented when new information becomes
available.
|
|
|
(c)
|
Penetration
represents residential and small and medium business 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. Customers who reside in residential multiple
dwelling units ("MDUs") and that are billed under bulk contracts
are counted based on the number of billed units within each bulk
MDU. Total customer relationships excludes enterprise
customer relationships.
|
|
|
(e)
|
Single play, double
play and triple play customers represent customers that subscribe
to one, two or three of Charter service offerings,
respectively.
|
|
|
(f)
|
Single play, double
play and triple play penetration represents the number of
residential single play, double play and triple play customers,
respectively, as a percentage of residential customer
relationships.
|
|
|
(g)
|
Pro forma monthly
residential revenue per residential customer is calculated as total
pro forma residential video, Internet and voice quarterly revenue
divided by three divided by average pro forma residential customer
relationships during the respective quarter.
|
|
|
(h)
|
Pro forma monthly
small and medium business revenue per customer is calculated as
total pro forma small and medium business quarterly revenue divided
by three divided by average pro forma small and medium business
customer relationships during the respective quarter.
|
|
|
(i)
|
Enterprise PSUs
represents the aggregate number of fiber service offerings counting
each separate service offering at each customer location as an
individual PSU.
|
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,
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
Actual
|
|
Actual
|
|
Actual
|
|
Actual
|
|
|
|
|
|
|
|
|
Consolidated net
income (loss)
|
$
3,114
|
|
$
(122)
|
|
$
2,926
|
|
$
(203)
|
Plus: Interest
expense, net
|
593
|
|
229
|
|
1,047
|
|
518
|
Income tax (benefit)
expense
|
(3,179)
|
|
35
|
|
(3,151)
|
|
70
|
Depreciation and
amortization
|
1,436
|
|
528
|
|
1,975
|
|
1,042
|
Stock compensation
expense
|
63
|
|
19
|
|
87
|
|
38
|
Loss on
extinguishment of debt
|
110
|
|
128
|
|
110
|
|
128
|
(Gain) loss on
financial instruments, net
|
50
|
|
(1)
|
|
55
|
|
5
|
Other, net
|
33
|
|
32
|
|
54
|
|
50
|
|
|
|
|
|
|
|
|
Adjusted EBITDA
(a)
|
2,220
|
|
848
|
|
3,103
|
|
1,648
|
Less: Purchases
of property, plant and equipment
|
(1,260)
|
|
(432)
|
|
(1,689)
|
|
(783)
|
|
|
|
|
|
|
|
|
Adjusted EBITDA less
capital expenditures
|
$
960
|
|
$
416
|
|
$
1,414
|
|
$
865
|
|
|
|
|
|
|
|
|
Net cash flows from
operating activities
|
$
1,590
|
|
$
531
|
|
$
2,014
|
|
$
1,059
|
Less: Purchases
of property, plant and equipment
|
(1,260)
|
|
(432)
|
|
(1,689)
|
|
(783)
|
Change in accrued
expenses related to capital expenditures
|
194
|
|
59
|
|
138
|
|
(17)
|
|
|
|
|
|
|
|
|
Free cash
flow
|
$
524
|
|
$
158
|
|
$
463
|
|
$
259
|
|
|
|
|
|
|
|
|
|
Three Months Ended
June 30,
|
|
Six Months Ended
June 30,
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
Pro Forma
(b)
|
|
Pro Forma
(b)
|
|
Pro Forma
(b)
|
|
Pro Forma
(b)
|
|
|
|
|
|
|
|
|
Consolidated net
income
|
$
369
|
|
$
164
|
|
$
697
|
|
$
260
|
Plus: Interest
expense, net
|
723
|
|
745
|
|
1,431
|
|
1,546
|
Income tax
benefit
|
181
|
|
70
|
|
337
|
|
99
|
Depreciation and
amortization
|
2,276
|
|
2,209
|
|
4,441
|
|
4,370
|
Stock compensation
expense
|
72
|
|
61
|
|
138
|
|
122
|
Loss on
extinguishment of debt
|
110
|
|
128
|
|
110
|
|
128
|
(Gain) loss on
financial instruments, net
|
50
|
|
(1)
|
|
55
|
|
5
|
Other, net
|
(239)
|
|
(126)
|
|
(234)
|
|
(119)
|
|
|
|
|
|
|
|
|
Adjusted EBITDA
(a)
|
3,542
|
|
3,250
|
|
6,975
|
|
6,411
|
Less: Purchases
of property, plant and equipment
|
(2,075)
|
|
(1,855)
|
|
(3,909)
|
|
(3,439)
|
|
|
|
|
|
|
|
|
Adjusted EBITDA less
capital expenditures
|
$
1,467
|
|
$
1,395
|
|
$
3,066
|
|
$
2,972
|
|
|
|
|
(a)
|
See page 1 and 2 of
this addendum for detail of the components included within adjusted
EBITDA.
|
|
|
(b)
|
Pro forma results
reflect certain acquisitions of cable systems in 2016 as if they
occurred as of the earliest period presented.
|
|
|
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
|
UNAUDITED CAPITAL
EXPENDITURES
|
(dollars in
millions)
|
|
|
Three Months Ended
June 30,
|
|
Six Months Ended
June 30,
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
Actual
|
|
Actual
|
|
Actual
|
|
Actual
|
|
|
|
|
|
|
|
|
Customer premise
equipment (a)
|
$
378
|
|
$
135
|
|
$
515
|
|
$
285
|
Scalable
infrastructure (b)
|
386
|
|
118
|
|
496
|
|
193
|
Line extensions
(c)
|
171
|
|
48
|
|
218
|
|
87
|
Upgrade/Rebuild
(d)
|
110
|
|
33
|
|
151
|
|
56
|
Support capital
(e)
|
215
|
|
98
|
|
309
|
|
162
|
|
|
|
|
|
|
|
|
Total
capital expenditures
|
$
1,260
|
|
$
432
|
|
$
1,689
|
|
$
783
|
|
|
|
|
|
|
|
|
Capital expenditures
included in total related to:
|
|
|
|
|
|
|
|
Commercial
services
|
$
191
|
|
$
65
|
|
$
255
|
|
$
116
|
Transition
|
$
111
|
|
$
28
|
|
$
164
|
|
$
42
|
|
|
|
|
|
|
|
|
|
Three Months Ended
June 30,
|
|
Six Months Ended
June 30,
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
Pro Forma
(f)
|
|
Pro Forma
(f)
|
|
Pro Forma
(f)
|
|
Pro Forma
(f)
|
|
|
|
|
|
|
|
|
Customer premise
equipment (a)
|
$
651
|
|
$
698
|
|
$
1,412
|
|
$
1,385
|
Scalable
infrastructure (b)
|
640
|
|
466
|
|
1,115
|
|
858
|
Line extensions
(c)
|
277
|
|
244
|
|
502
|
|
488
|
Upgrade/Rebuild
(d)
|
171
|
|
166
|
|
305
|
|
267
|
Support capital
(e)
|
336
|
|
281
|
|
575
|
|
441
|
|
|
|
|
|
|
|
|
Total
capital expenditures
|
$
2,075
|
|
$
1,855
|
|
$
3,909
|
|
$
3,439
|
|
|
|
|
(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)
|
Pro forma results
reflect certain acquisitions of cable systems in 2016 as if they
occurred as of the earliest period presented.
|
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visit:http://www.prnewswire.com/news-releases/charter-announces-second-quarter-2016-results-300310990.html
SOURCE Charter Communications, Inc.