STAMFORD, Conn., Nov. 3,
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 nine months ended September 30, 2016. On
May 18, 2016, Charter completed its
transactions between the Company, Time Warner Cable Inc. ("Legacy
TWC") and Charter Communications, Inc. ("Legacy Charter"), and
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
nine months ended September 30, 2016 and Legacy TWC and Legacy
Bright House for the period from May 18,
2016 through September 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 nine months ended September 30, 2016
and three and nine months ended September 30, 2015.
![Charter Communications Logo. Charter Communications Logo.](http://photos.prnewswire.com/prnvar/20110526/AQ10195LOGO)
Key highlights:
- As of September 30, 2016, Charter's network reached 49.0
million homes and businesses, and served 25.9 million residential
and small and medium business ("SMB") customers.
- In late September, Charter launched its high value
Spectrum pricing, packaging and brand in certain Legacy TWC
markets, including Texas and
Southern California.
Spectrum will launch in additional Legacy TWC and Legacy
Bright House markets in the fourth quarter of 2016 and in early
2017.
- Third quarter revenues of $10.0
billion grew 7.4% on a pro forma basis, as compared
to the prior year period, driven by residential revenue growth of
6.7% and commercial revenue growth of 12.1%. On an actual basis,
third quarter revenue grew 309.6% year-over-year, driven primarily
by the Transactions.
- Total customer relationships increased 279,000 during the third
quarter, compared to 269,000 on a pro forma basis during the
third quarter of 2015. On a pro forma basis, customer
relationships grew by 1,261,000 or 5.1% for the twelve months ended
September 30, 2016.
- During the third quarter of 2016, total residential and
SMB primary service units ("PSUs") increased by 409,000, versus
669,000 on a pro forma basis in the year-ago quarter. The
year-over-year decline in PSU net additions was primarily driven by
fewer residential voice net additions in the third quarter of 2016
versus the third quarter of 2015.
- Third quarter Adjusted EBITDA2 of $3.6 billion grew 14.5% year-over-year on a
pro forma basis. Excluding transition costs in the third
quarters of 2016 and 2015, Adjusted EBITDA grew by 15.1%
year-over-year. On an actual basis, third quarter Adjusted EBITDA
grew by 328.3%, driven primarily by the Transactions.
- Net income attributable to Charter shareholders totaled
$189 million in the third quarter,
compared to $2 million on a pro
forma basis during the same period last year, driven by higher
income from operations year-over-year and a $71 million gain on financial instruments. On an
actual basis, net income totaled $189
million, compared to $54
million during the third quarter of 2015, driven by higher
income from operations following the close of the Transactions,
partially offset by higher interest expense.
- Third quarter capital expenditures totaled $1.7 billion. Excluding transition capital, third
quarter 2016 capital expenditures totaled $1.6 billion.
"Our goal is to be a superior service provider. Charter, under
the Spectrum brand, provides high quality products and
service at attractive prices, allowing us to grow our residential
and business customer relationships," said Tom Rutledge, CEO and Chairman of Charter
Communications. "The integration of Time Warner Cable and Bright
House Networks is on track, and we are beginning to implement the
Spectrum brand, with better products, pricing and packaging.
Improving our service operations in a way that allows consumers to
recognize Spectrum as the best service provider will take
time, but our proven operating strategies will work for customers,
employees, shareholders and the communities we serve."
1
|
See Exhibit 99.1 in
the Company's Quarterly Report on Form 10-Q for the three and nine
months ended September 30, 2016 filed with the Securities and
Exchange Commission on November 3, 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 of this document 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
|
|
|
|
September 30,
2016 (a)
|
|
September 30,
2015 (a)
|
|
Y/Y
Change
|
Footprint
(b)
|
|
|
|
|
|
Estimated Video
Passings
|
49,001
|
|
48,223
|
|
2%
|
Estimated Internet
Passings
|
48,689
|
|
47,866
|
|
2%
|
Estimated Voice
Passings
|
47,854
|
|
46,997
|
|
2%
|
|
|
|
|
|
|
Penetration
Statistics (c)
|
|
|
|
|
|
Video Penetration of
Estimated Video Passings
|
35.3%
|
|
35.9%
|
|
(0.6)
ppts
|
Internet Penetration
of Estimated Internet Passings
|
45.6%
|
|
42.7%
|
|
2.9
ppts
|
Voice Penetration of
Estimated Voice Passings
|
23.1%
|
|
21.9%
|
|
1.2
ppts
|
|
|
|
|
|
|
Customer
Relationships (d)
|
|
|
|
|
|
Residential
|
24,551
|
|
23,436
|
|
5%
|
Small and Medium
Business
|
1,367
|
|
1,221
|
|
12%
|
Total Customer
Relationships
|
25,918
|
|
24,657
|
|
5%
|
|
|
|
|
|
|
Residential
|
|
|
|
|
|
Primary Service
Units ("PSUs")
|
|
|
|
|
|
Video
|
16,887
|
|
16,944
|
|
—%
|
Internet
|
21,017
|
|
19,416
|
|
8%
|
Voice
|
10,288
|
|
9,655
|
|
7%
|
|
48,192
|
|
46,015
|
|
5%
|
|
|
|
|
|
|
Quarterly Net
Additions/(Losses)
|
|
|
|
|
|
Video
|
(47)
|
|
(20)
|
|
NM
|
Internet
|
350
|
|
369
|
|
(5)%
|
Voice
|
33
|
|
256
|
|
(87)%
|
|
336
|
|
605
|
|
(44)%
|
|
|
|
|
|
|
Single Play
(e)
|
9,447
|
|
8,809
|
|
7%
|
Double Play
(e)
|
6,569
|
|
6,674
|
|
(2)%
|
Triple Play
(e)
|
8,535
|
|
7,953
|
|
7%
|
|
|
|
|
|
|
Single Play
Penetration (f)
|
38.5%
|
|
37.6%
|
|
0.9
ppts
|
Double Play
Penetration (f)
|
26.8%
|
|
28.5%
|
|
(1.7)
ppts
|
Triple Play
Penetration (f)
|
34.8%
|
|
33.9%
|
|
0.9
ppts
|
|
|
|
|
|
|
% Residential
Non-Video Customer Relationships
|
31.2%
|
|
27.7%
|
|
3.5
ppts
|
|
|
|
|
|
|
Monthly Residential
Revenue per Residential Customer (g)
|
$109.69
|
|
$107.70
|
|
2%
|
|
|
|
|
|
|
Small and Medium
Business
|
|
|
|
|
|
PSUs
|
|
|
|
|
|
Video
|
388
|
|
354
|
|
10%
|
Internet
|
1,185
|
|
1,045
|
|
13%
|
Voice
|
751
|
|
643
|
|
17%
|
|
2,324
|
|
2,042
|
|
14%
|
|
|
|
|
|
|
Quarterly Net
Additions/(Losses)
|
|
|
|
|
|
Video
|
10
|
|
7
|
|
43%
|
Internet
|
37
|
|
31
|
|
19%
|
Voice
|
26
|
|
26
|
|
—%
|
|
73
|
|
64
|
|
14%
|
|
|
|
|
|
|
Monthly Small and
Medium Business Revenue per Customer (h)
|
$214.64
|
|
$212.26
|
|
1%
|
|
|
|
|
|
|
Enterprise PSUs
(i)
|
|
|
|
|
|
Enterprise
PSUs
|
93
|
|
77
|
|
21%
|
|
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.
|
In late September, Charter began introducing its Spectrum
brand, and pricing and packaging, in certain Legacy TWC markets,
including Texas and Southern California. Spectrum is an
industry-leading suite of video, Internet, and voice services that
includes over 200 HD channels, minimum offered Internet speeds of
at least 60 Mbps, and a fully featured voice service, delivered at
a highly competitive price. As of the end of the third quarter of
2016, 93% of Legacy Charter's residential customers received
Charter Spectrum products. Charter will launch
Spectrum in remaining Legacy TWC and Legacy Bright House
markets in the fourth quarter of 2016 and in early 2017.
Beginning in 2017, Charter will also restart all-digital efforts
in those Legacy TWC and Legacy Bright House markets that continue
to broadcast bandwidth-intensive and low quality analog video
signals. All-digital allows Charter to offer more advanced products
and services, and provides residential customers with two-way
digital set-tops, which offer better 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,
with a minimum Internet speed offering of 100 Mbps in many
markets.
During the third quarter of 2016, Charter's residential customer
relationships grew by 245,000, versus 235,000 in the prior year
period.1 Residential PSUs increased by 336,000 versus a
gain of 605,000 in the prior year period. The year-over-year
decline in PSU net additions was primarily the result of fewer
voice net additions. As of September 30, 2016, Charter had
24.6 million residential customer relationships and 48.2 million
residential PSUs.
Residential video customers decreased by 47,000 in the third
quarter of 2016, versus a decrease of 20,000 in the year-ago
period, driven by higher video losses at Legacy TWC, partially
offset by better year-over-year performance at Legacy Charter and
Legacy Bright House. Over the last twelve months, Legacy Charter
grew residential video customers by 51,000 or 1.2%. As of the end
of the third quarter of 2016, Legacy Charter's footprint was 100%
all-digital, compared to 60% at Legacy TWC and 40% at Legacy Bright
House. As of September 30, 2016, Charter had 16.9 million
residential video customers.
Charter added 350,000 residential Internet customers in the
third quarter of 2016, compared to 369,000 a year ago. As of
September 30, 2016, over 90% of Legacy Charter's residential
Internet customers subscribed to tiers that provided speeds of 60
Mbps or more compared to 32% at Legacy TWC and 35% 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 September 30, 2016, Charter had 21.0
million residential Internet customers.
During the third quarter, the Company added 33,000 residential
voice customers, versus 256,000 during the third 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 third quarter of 2015. As of September 30,
2016, Charter had 10.3 million residential voice customers.
Third quarter residential revenue per customer relationship
totaled $109.69, and grew by 1.8% as
compared to the prior year period, driven by promotional rate
step-ups and rate adjustments, partially offset by continued single
play Internet sell-in.
During the third quarter of 2016, SMB customer relationships
grew by 34,000, in line with customer growth during the third
quarter of 2015. SMB PSUs increased 73,000, compared to 64,000
during the third quarter of 2015. As of September 30, 2016,
Charter had 1.4 million SMB customer relationships and 2.3 million
SMB PSUs.
1Except
for the third quarter of 2016, 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.
|
Third 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
September 30,
|
|
2016
|
|
2015
|
|
|
|
2015
|
|
|
|
Actual
|
|
Pro
Forma
|
|
%
Change
|
|
Actual
|
|
%
Change
|
REVENUES:
|
|
|
|
|
|
|
|
|
|
Video
|
$
|
4,094
|
|
$
|
3,973
|
|
3.0%
|
|
$
|
1,143
|
|
258.0%
|
Internet
|
3,206
|
|
2,844
|
|
12.7%
|
|
762
|
|
320.5%
|
Voice
|
728
|
|
707
|
|
3.0%
|
|
135
|
|
441.0%
|
Residential
revenue
|
8,028
|
|
7,524
|
|
6.7%
|
|
2,040
|
|
293.4%
|
Small and medium
business
|
868
|
|
767
|
|
13.2%
|
|
193
|
|
347.2%
|
Enterprise
|
508
|
|
461
|
|
10.1%
|
|
93
|
|
453.4%
|
Commercial
revenue
|
1,376
|
|
1,228
|
|
12.1%
|
|
286
|
|
381.3%
|
Advertising
sales
|
419
|
|
374
|
|
12.1%
|
|
77
|
|
448.5%
|
Other
|
214
|
|
216
|
|
(0.9)%
|
|
47
|
|
353.5%
|
Total
Revenue
|
10,037
|
|
9,342
|
|
7.4%
|
|
2,450
|
|
309.6%
|
|
|
|
|
|
|
|
|
|
|
COSTS AND
EXPENSES:
|
|
|
|
|
|
|
|
|
|
Total operating costs
and expenses
|
6,401
|
|
6,167
|
|
3.8%
|
|
1,600
|
|
299.7%
|
|
|
|
|
|
|
|
|
|
|
Adjusted
EBITDA
|
$
|
3,636
|
|
$
|
3,175
|
|
14.5%
|
|
$
|
850
|
|
328.3%
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA
margin
|
36.2%
|
|
34.0%
|
|
|
|
34.7%
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital
Expenditures
|
$
|
1,748
|
|
$
|
1,699
|
|
|
|
$
|
509
|
|
|
% Total
Revenues
|
17.4%
|
|
18.2%
|
|
|
|
20.8%
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
attributable to Charter shareholders
|
$
|
189
|
|
$
|
2
|
|
|
|
$
|
54
|
|
|
Earnings per common
share attributable to Charter shareholders:
|
|
|
|
|
|
|
|
|
|
Basic
|
$
|
0.70
|
|
$
|
0.01
|
|
|
|
$
|
0.54
|
|
|
Diluted
|
$
|
0.69
|
|
$
|
0.01
|
|
|
|
$
|
0.53
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash flows from
operating activities
|
$
|
2,801
|
|
|
|
|
|
$
|
689
|
|
|
Free cash
flow
|
$
|
1,001
|
|
|
|
|
|
$
|
208
|
|
|
Revenue
On a pro forma basis, third quarter revenues rose 7.4%
year-over-year to $10.0 billion,
driven primarily by growth in Internet, commercial and video
revenues. On an actual basis, third quarter revenue increased
309.6% year-over-year, driven by the Transactions.
Video revenues totaled $4.1
billion in the third quarter, an increase of 3.0% on a
pro forma basis compared to the prior year period. Pro
forma video revenue growth was driven by annual and promotional
rate adjustments and higher advanced services penetration. On an
actual basis, third quarter video revenues increased by 258.0%
compared to the prior year period, driven by the Transactions.
On a pro forma basis, Internet revenues grew 12.7%,
compared to the year-ago quarter, to $3.2
billion, driven by an increase of 1,601,000 Internet
customers during the last year, promotional rolloff and price
adjustments. On an actual basis, Internet revenues grew 320.5%
year-over-year, as a result of the Transactions.
Voice revenues totaled $728
million in the third quarter, an increase of 3.0% on a
pro forma basis compared to the third quarter of 2015, due
to the addition of 633,000 voice customers in the last twelve
months, partially offset by promotions and value-based pricing.
Voice revenues increased 441.0% year-over-year, on an actual basis,
driven by the Transactions.
Commercial revenues rose to $1.4
billion, an increase of 12.1% on a pro forma basis
over the prior year period, driven by SMB revenue growth of 13.2%
and enterprise revenue growth of 10.1%. On an actual basis,
commercial revenues grew 381.3% year-over-year, as a result of the
Transactions.
Third quarter advertising sales revenues of $419 million increased 12.1% on a pro
forma basis compared to the year-ago quarter, primarily driven
by an increase in political advertising revenue. Advertising sales
grew 448.5% year-over-year, on an actual basis, driven by the
Transactions.
Operating Costs and Expenses
On a pro forma basis, third quarter total operating costs
and expenses increased by $234
million, or 3.8%, 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 299.7%
year-over-year as a result of the Transactions.
Third quarter programming expense increased by $182 million, or 8.2% on a pro forma
basis, as compared to the third quarter of 2015, reflecting
contractual programming increases, partly offset by Transactions
synergies.
Costs to service customers decreased by $33 million or 1.8% on a pro forma basis
year-over-year, despite year-over-year residential and SMB customer
relationship growth of 5.1%, as a result of less all-digital
activity at Legacy TWC, and fewer hard disconnects, lower service
transaction volume per customer and lower churn at Legacy Charter.
Other expenses grew by $76 million,
or 7.9% on a pro forma basis, as compared to the third
quarter of 2015, reflecting higher corporate and administrative
labor costs, including higher IT spend at Legacy TWC, as well as
advertising sales costs, and enterprise sales costs, partly offset
by early Transactions synergies.
Adjusted EBITDA
Third quarter Adjusted EBITDA of $3.6
billion grew by 14.5% year-over-year on a pro forma
basis, reflecting revenue growth and operating expense growth of
7.4% and 3.8%, respectively. Excluding transition costs of
$32 million in the third quarter of
2016 and $12 million in the prior
year period, pro forma Adjusted EBITDA grew by 15.1%
year-over-year. On an actual basis, Adjusted EBITDA grew by 328.3%
year-over-year, due to the Transactions.
Net Income Attributable to Charter Shareholders
Net income attributable to Charter shareholders totaled
$189 million in the third quarter of
2016, compared to pro forma net income of $2 million in the third quarter of 2015. The
year-over-year increase in pro forma net income was
primarily related to higher Adjusted EBITDA and a gain on financial
instruments driven by the revaluation of Legacy TWC's British pound
debt and related currency swaps, partly offset by higher other
operating expenses, including severance-related and transaction
expenses and higher depreciation and amortization. Net income per
basic common share attributable to Charter shareholders totaled
$0.70 in the third quarter of 2016
compared to $0.01, on a pro
forma basis, during the same period last year. The increase was
primarily the result of the factors described above, partly offset
by a 0.5% increase in pro forma weighted average shares
outstanding versus the prior year period.
On an actual basis, net income attributable to Charter
shareholders totaled $189 million
during the third quarter of 2016, compared to $54 million in the third quarter of 2015. The
increase in net income was primarily related to higher income from
operations as a result of the Transactions. Actual net income per
basic common share attributable to Charter shareholders totaled
$0.70 in the third quarter of 2016
compared to $0.54 during the same
period last year. The increase was driven by the Transactions,
partly offset by a 168.0% increase in weighted average shares
outstanding versus the prior year period, also a result of the
Transactions.
Capital Expenditures
Property, plant and equipment expenditures totaled $1.748 billion in the third quarter of 2016,
compared to $1.699 billion, on a
pro forma basis, during the third quarter of 2015. The
pro forma year-over-year increase in capital expenditures
was driven by higher product development investments and transition
capital expenditures incurred in connection with the Transactions,
partly offset by a decline in CPE and upgrade and rebuild spending.
Transition capital expenditures accounted for $109 million of capital expenditures in the third
quarter of 2016 versus $24 million in
the third quarter of 2015. Excluding transition-related
expenditures, third quarter 2016 property, plant and
equipment expenditures totaled $1.639
billion, compared to $1.675
billion, on a pro forma basis, during the same period
last year.
On an actual basis, third quarter 2016 property, plant and
equipment expenditures increased by $1.2
billion as compared to the prior year, due to 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 and Free Cash Flow
During the third quarter of 2016, net cash flows from operating
activities totaled $2.8 billion,
compared to $689 million in the third
quarter of 2015. The year-over-year increase in net cash flows from
operating activities was primarily due to higher Adjusted EBITDA,
partly offset by higher cash paid for interest in the third quarter
of 2016 versus the third quarter of 2015, following the close of
the Transactions.
Free cash flow for the third quarter of 2016 totaled
$1.0 billion, compared to
$208 million during the same period
last year. The increase was related to higher net cash flows from
operating activities in the third quarter of 2016 versus the third
quarter of 2015, given the close of the Transactions, partly offset
by higher capital expenditures.
Liquidity & Financing
As of September 30, 2016, total principal amount of debt
was $60.2 billion and Charter's
credit facilities provided approximately $2.8 billion of additional liquidity in excess of
its $1.2 billion cash position.
Conference Call
Charter will host a conference call on Thursday,
November 3, 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
83931128.
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 November 17,
2016. The conference ID code for the replay is 83931128.
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 Quarterly Report on Form 10-Q for the three and
nine months ended September 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 Securities and
Exchange Commission (the"SEC"). 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 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 $231
million and $79 million for
the three months ended September 30, 2016 and 2015,
respectively, and $535 million and
$231 million for the nine months
ended September 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 nine months ended September 30, 2016
and three and nine months ended September
30, 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 Quarterly Report on Form
10-Q for the three and nine months ended September 30, 2016
filed with the SEC on November 3,
2016 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," "initiatives," "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 promptly, efficiently and effectively integrate
acquired operations;
- managing a significantly larger company than before the
completion of the Transactions;
- our ability to achieve the synergies and value creation
contemplated by 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
September 30,
|
|
Nine Months Ended
September 30,
|
|
2016
|
|
2015
|
|
|
|
2016
|
|
2015
|
|
|
|
Actual
|
|
Actual
|
|
%
Change
|
|
Actual
|
|
Actual
|
|
%
Change
|
REVENUES:
|
|
|
|
|
|
|
|
|
|
|
|
Video
|
$
|
4,094
|
|
$
|
1,143
|
|
258.0%
|
|
$
|
7,869
|
|
$
|
3,420
|
|
130.1%
|
Internet
|
3,206
|
|
762
|
|
320.5%
|
|
5,960
|
|
2,222
|
|
168.2%
|
Voice
|
728
|
|
135
|
|
441.0%
|
|
1,286
|
|
404
|
|
218.7%
|
Residential
revenue
|
8,028
|
|
2,040
|
|
293.4%
|
|
15,115
|
|
6,046
|
|
150.0%
|
Small and medium
business
|
868
|
|
193
|
|
347.2%
|
|
1,590
|
|
565
|
|
181.3%
|
Enterprise
|
508
|
|
93
|
|
453.4%
|
|
903
|
|
268
|
|
236.8%
|
Commercial
revenue
|
1,376
|
|
286
|
|
381.3%
|
|
2,493
|
|
833
|
|
199.1%
|
Advertising
sales
|
419
|
|
77
|
|
448.5%
|
|
728
|
|
222
|
|
228.7%
|
Other
|
214
|
|
47
|
|
353.5%
|
|
392
|
|
141
|
|
178.0%
|
Total
Revenue
|
10,037
|
|
2,450
|
|
309.6%
|
|
18,728
|
|
7,242
|
|
158.6%
|
COSTS AND
EXPENSES:
|
|
|
|
|
|
|
|
|
|
|
|
Programming
|
2,404
|
|
667
|
|
260.3%
|
|
4,648
|
|
2,004
|
|
131.9%
|
Regulatory,
connectivity and produced content
|
508
|
|
108
|
|
369.2%
|
|
936
|
|
324
|
|
188.2%
|
Costs to service
customers
|
1,825
|
|
438
|
|
316.8%
|
|
3,329
|
|
1,285
|
|
159.1%
|
Marketing
|
591
|
|
163
|
|
263.4%
|
|
1,134
|
|
474
|
|
139.1%
|
Transition
costs
|
32
|
|
12
|
|
158.9%
|
|
78
|
|
50
|
|
56.0%
|
Other
expense
|
1,041
|
|
212
|
|
389.2%
|
|
1,864
|
|
607
|
|
207.1%
|
Total operating costs
and expenses (exclusive of items shown separately below)
|
6,401
|
|
1,600
|
|
299.7%
|
|
11,989
|
|
4,744
|
|
152.7%
|
Adjusted
EBITDA
|
3,636
|
|
850
|
|
328.3%
|
|
6,739
|
|
2,498
|
|
169.8%
|
Adjusted EBITDA
margin
|
36.2%
|
|
34.7%
|
|
|
|
36.0%
|
|
34.5%
|
|
|
Depreciation and
amortization
|
2,437
|
|
538
|
|
|
|
4,412
|
|
1,580
|
|
|
Stock compensation
expense
|
81
|
|
20
|
|
|
|
168
|
|
58
|
|
|
Other operating
expenses, net
|
194
|
|
19
|
|
|
|
243
|
|
69
|
|
|
Income from
operations
|
924
|
|
273
|
|
|
|
1,916
|
|
791
|
|
|
OTHER
EXPENSES:
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense,
net
|
(724)
|
|
(353)
|
|
|
|
(1,771)
|
|
(871)
|
|
|
Loss on
extinguishment of debt
|
—
|
|
—
|
|
|
|
(110)
|
|
(128)
|
|
|
Gain (loss) on
financial instruments, net
|
71
|
|
(5)
|
|
|
|
16
|
|
(10)
|
|
|
Other expense,
net
|
(5)
|
|
(3)
|
|
|
|
(10)
|
|
(3)
|
|
|
|
(658)
|
|
(361)
|
|
|
|
(1,875)
|
|
(1,012)
|
|
|
Income (loss) before
income taxes
|
266
|
|
(88)
|
|
|
|
41
|
|
(221)
|
|
|
Income tax benefit
(expense)
|
(16)
|
|
142
|
|
|
|
3,135
|
|
72
|
|
|
Consolidated net
income (loss)
|
250
|
|
54
|
|
|
|
3,176
|
|
(149)
|
|
|
Less: Net income
attributable to noncontrolling interests
|
(61)
|
|
—
|
|
|
|
(108)
|
|
—
|
|
|
Net income (loss)
attributable to Charter shareholders
|
$
|
189
|
|
$
|
54
|
|
|
|
$
|
3,068
|
|
$
|
(149)
|
|
|
EARNINGS (LOSS) PER
COMMON SHARE ATTRIBUTABLE TO CHARTER SHAREHOLDERS:
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
$
|
0.70
|
|
$
|
0.54
|
|
|
|
$
|
16.52
|
|
$
|
(1.48)
|
|
|
Diluted
|
$
|
0.69
|
|
$
|
0.53
|
|
|
|
$
|
15.23
|
|
$
|
(1.48)
|
|
|
Weighted average
common shares outstanding, basic
|
271,263,259
|
|
101,205,400
|
|
|
|
185,706,106
|
|
101,080,587
|
|
|
Weighted average
common shares outstanding, diluted
|
275,373,202
|
|
102,481,924
|
|
|
|
208,460,148
|
|
101,080,587
|
|
|
|
Adjusted EBITDA is a
non-GAAP term. See page 7 of this addendum for the
reconciliation of adjusted EBITDA to consolidated net income (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
September 30,
|
|
Nine Months Ended
September 30,
|
|
2016
|
|
2015
|
|
|
|
2016
|
|
2015
|
|
|
|
Actual
|
|
Pro
Forma
|
|
%
Change
|
|
Pro
Forma
|
|
Pro
Forma
|
|
%
Change
|
REVENUES:
|
|
|
|
|
|
|
|
|
|
|
|
Video
|
$
|
4,094
|
|
$
|
3,973
|
|
3.0%
|
|
$
|
12,291
|
|
$
|
12,009
|
|
2.3%
|
Internet
|
3,206
|
|
2,844
|
|
12.7%
|
|
9,376
|
|
8,371
|
|
12.0%
|
Voice
|
728
|
|
707
|
|
3.0%
|
|
2,185
|
|
2,117
|
|
3.2%
|
Residential
revenue
|
8,028
|
|
7,524
|
|
6.7%
|
|
23,852
|
|
22,497
|
|
6.0%
|
Small and medium
business
|
868
|
|
767
|
|
13.2%
|
|
2,520
|
|
2,223
|
|
13.3%
|
Enterprise
|
508
|
|
461
|
|
10.1%
|
|
1,500
|
|
1,339
|
|
11.9%
|
Commercial
revenue
|
1,376
|
|
1,228
|
|
12.1%
|
|
4,020
|
|
3,562
|
|
12.9%
|
Advertising
sales
|
419
|
|
374
|
|
12.1%
|
|
1,189
|
|
1,105
|
|
7.6%
|
Other
|
214
|
|
216
|
|
(0.9)%
|
|
687
|
|
649
|
|
5.9%
|
Total
Revenue
|
10,037
|
|
9,342
|
|
7.4%
|
|
29,748
|
|
27,813
|
|
7.0%
|
COSTS AND
EXPENSES:
|
|
|
|
|
|
|
|
|
|
|
Programming
|
2,404
|
|
2,222
|
|
8.2%
|
|
7,228
|
|
6,704
|
|
7.8%
|
Regulatory,
connectivity and produced content
|
508
|
|
523
|
|
(2.9)%
|
|
1,549
|
|
1,538
|
|
0.7%
|
Costs to service
customers
|
1,825
|
|
1,858
|
|
(1.8)%
|
|
5,432
|
|
5,377
|
|
1.0%
|
Marketing
|
591
|
|
587
|
|
0.7%
|
|
1,789
|
|
1,703
|
|
5.0%
|
Transition
costs
|
32
|
|
12
|
|
158.9%
|
|
78
|
|
50
|
|
56.0%
|
Other
expense
|
1,041
|
|
965
|
|
7.9%
|
|
3,061
|
|
2,855
|
|
7.2%
|
Total operating costs
and expenses (exclusive of items shown separately below)
|
6,401
|
|
6,167
|
|
3.8%
|
|
19,137
|
|
18,227
|
|
5.0%
|
Adjusted
EBITDA
|
3,636
|
|
3,175
|
|
14.5%
|
|
10,611
|
|
9,586
|
|
10.7%
|
Adjusted EBITDA
margin
|
36.2%
|
|
34.0%
|
|
|
|
35.7%
|
|
34.5%
|
|
|
Depreciation and
amortization
|
2,437
|
|
2,356
|
|
|
|
7,060
|
|
6,961
|
|
|
Stock compensation
expense
|
81
|
|
62
|
|
|
|
219
|
|
184
|
|
|
Other operating
(income) expenses, net
|
194
|
|
(6)
|
|
|
|
(30)
|
|
13
|
|
|
Income from
operations
|
924
|
|
763
|
|
|
|
3,362
|
|
2,428
|
|
|
OTHER
EXPENSES:
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense,
net
|
(724)
|
|
(724)
|
|
|
|
(2,155)
|
|
(2,270)
|
|
|
Loss on
extinguishment of debt
|
—
|
|
—
|
|
|
|
(110)
|
|
(128)
|
|
|
Gain (loss) on
financial instruments, net
|
71
|
|
(5)
|
|
|
|
16
|
|
(10)
|
|
|
Other income
(expense), net
|
(5)
|
|
7
|
|
|
|
5
|
|
145
|
|
|
|
(658)
|
|
(722)
|
|
|
|
(2,244)
|
|
(2,263)
|
|
|
Income before income
taxes
|
266
|
|
41
|
|
|
|
1,118
|
|
165
|
|
|
Income tax
expense
|
(16)
|
|
(1)
|
|
|
|
(288)
|
|
(19)
|
|
|
Consolidated net
income
|
250
|
|
40
|
|
|
|
830
|
|
146
|
|
|
Less: Net income
attributable to noncontrolling interests
|
(61)
|
|
(38)
|
|
|
|
(214)
|
|
(117)
|
|
|
Net income attributable
to Charter shareholders
|
$
|
189
|
|
$
|
2
|
|
|
|
$
|
616
|
|
$
|
29
|
|
|
EARNINGS PER COMMON
SHARE ATTRIBUTABLE TO CHARTER SHAREHOLDERS:
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
$
|
0.70
|
|
$
|
0.01
|
|
|
|
$
|
2.28
|
|
$
|
0.11
|
|
|
Diluted
|
$
|
0.69
|
|
$
|
0.01
|
|
|
|
$
|
2.25
|
|
$
|
0.11
|
|
|
Weighted average
common shares outstanding, basic
|
271,263,259
|
|
269,788,539
|
|
|
|
270,028,132
|
|
269,650,502
|
|
|
Weighted average
common shares outstanding, diluted
|
275,373,202
|
|
273,183,733
|
|
|
|
273,824,029
|
|
273,098,030
|
|
|
|
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 income 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)
|
|
|
September
30,
|
|
December
31,
|
|
2016
|
|
2015
|
|
(unaudited)
|
|
|
ASSETS
|
|
|
|
CURRENT
ASSETS:
|
|
|
|
Cash and cash
equivalents
|
$
|
1,165
|
|
|
$
|
5
|
|
Accounts receivable,
net
|
1,242
|
|
|
279
|
|
Prepaid expenses and
other current assets
|
374
|
|
|
61
|
|
Total current
assets
|
2,781
|
|
|
345
|
|
|
|
|
|
RESTRICTED CASH AND
CASH EQUIVALENTS
|
—
|
|
|
22,264
|
|
|
|
|
|
INVESTMENT IN CABLE
PROPERTIES:
|
|
|
|
Property, plant and
equipment, net
|
32,881
|
|
|
8,345
|
|
Franchises
|
66,245
|
|
|
6,006
|
|
Customer
relationships, net
|
15,439
|
|
|
856
|
|
Goodwill
|
30,165
|
|
|
1,168
|
|
Total investment in
cable properties, net
|
144,730
|
|
|
16,375
|
|
|
|
|
|
OTHER NONCURRENT
ASSETS
|
1,386
|
|
|
332
|
|
|
|
|
|
Total
assets
|
$
|
148,897
|
|
|
$
|
39,316
|
|
|
|
|
|
LIABILITIES AND
SHAREHOLDERS' EQUITY (DEFICIT)
|
|
|
|
CURRENT
LIABILITIES:
|
|
|
|
Accounts payable and
accrued liabilities
|
$
|
6,597
|
|
|
$
|
1,972
|
|
Current portion of
long-term debt
|
2,050
|
|
|
—
|
|
Total current
liabilities
|
8,647
|
|
|
1,972
|
|
|
|
|
|
LONG-TERM
DEBT
|
59,946
|
|
|
35,723
|
|
DEFERRED INCOME
TAXES
|
26,260
|
|
|
1,590
|
|
OTHER LONG-TERM
LIABILITIES
|
2,969
|
|
|
77
|
|
|
|
|
|
SHAREHOLDERS' EQUITY
(DEFICIT):
|
|
|
|
Controlling
interest
|
40,277
|
|
|
(46)
|
|
Noncontrolling
interests
|
10,798
|
|
|
—
|
|
Total shareholders'
equity (deficit)
|
51,075
|
|
|
(46)
|
|
|
|
|
|
Total liabilities and
shareholders' equity (deficit)
|
$
|
148,897
|
|
|
$
|
39,316
|
|
CHARTER
COMMUNICATIONS, INC. AND SUBSIDIARIES
|
UNAUDITED
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
(dollars in
millions)
|
|
|
Three Months Ended
September 30,
|
|
Nine Months Ended
September 30,
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
CASH FLOWS FROM
OPERATING ACTIVITIES:
|
|
|
|
|
|
|
|
Consolidated net
income (loss)
|
$
|
250
|
|
|
$
|
54
|
|
|
$
|
3,176
|
|
|
$
|
(149)
|
|
Adjustments to
reconcile consolidated net income (loss) to net cash flows from
operating activities:
|
|
|
|
|
|
|
|
Depreciation and
amortization
|
2,437
|
|
|
538
|
|
|
4,412
|
|
|
1,580
|
|
Stock compensation
expense
|
81
|
|
|
20
|
|
|
168
|
|
|
58
|
|
Accelerated vesting
of equity awards
|
57
|
|
|
—
|
|
|
202
|
|
|
—
|
|
Noncash interest
(income) expense, net
|
(107)
|
|
|
6
|
|
|
(148)
|
|
|
21
|
|
Other pension
benefits
|
(15)
|
|
|
—
|
|
|
(533)
|
|
|
—
|
|
Loss on
extinguishment of debt
|
—
|
|
|
—
|
|
|
110
|
|
|
128
|
|
(Gain) loss on
financial instruments, net
|
(71)
|
|
|
5
|
|
|
(16)
|
|
|
10
|
|
Deferred income
taxes
|
(6)
|
|
|
(142)
|
|
|
(3,170)
|
|
|
(76)
|
|
Other, net
|
2
|
|
|
2
|
|
|
—
|
|
|
8
|
|
Changes in operating
assets and liabilities, net of effects from
acquisitions:
|
|
|
|
|
|
|
|
Accounts
receivable
|
98
|
|
|
30
|
|
|
(2)
|
|
|
(7)
|
|
Prepaid expenses and
other assets
|
74
|
|
|
1
|
|
|
85
|
|
|
(19)
|
|
Accounts payable,
accrued liabilities and other
|
1
|
|
|
175
|
|
|
531
|
|
|
194
|
|
Net cash flows from
operating activities
|
2,801
|
|
|
689
|
|
|
4,815
|
|
|
1,748
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM
INVESTING ACTIVITIES:
|
|
|
|
|
|
|
|
Purchases of
property, plant and equipment
|
(1,748)
|
|
|
(509)
|
|
|
(3,437)
|
|
|
(1,292)
|
|
Change in accrued
expenses related to capital expenditures
|
(52)
|
|
|
28
|
|
|
86
|
|
|
11
|
|
Purchases of cable
systems, net of cash acquired
|
—
|
|
|
—
|
|
|
(28,810)
|
|
|
—
|
|
Change in restricted
cash and cash equivalents
|
—
|
|
|
(19,626)
|
|
|
22,264
|
|
|
(12,515)
|
|
Other, net
|
(2)
|
|
|
—
|
|
|
(8)
|
|
|
(69)
|
|
Net cash flows from
investing activities
|
(1,802)
|
|
|
(20,107)
|
|
|
(9,905)
|
|
|
(13,865)
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM
FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
Borrowings of
long-term debt
|
—
|
|
|
19,749
|
|
|
5,997
|
|
|
23,062
|
|
Repayments of
long-term debt
|
(50)
|
|
|
(366)
|
|
|
(4,120)
|
|
|
(10,911)
|
|
Payments for debt
issuance costs
|
—
|
|
|
(10)
|
|
|
(283)
|
|
|
(35)
|
|
Issuance of
equity
|
—
|
|
|
—
|
|
|
5,000
|
|
|
—
|
|
Purchase of treasury
stock
|
(349)
|
|
|
(1)
|
|
|
(448)
|
|
|
(24)
|
|
Proceeds from
exercise of stock options
|
47
|
|
|
16
|
|
|
71
|
|
|
22
|
|
Payment of preferred
dividend to noncontrolling interest
|
(37)
|
|
|
—
|
|
|
(55)
|
|
|
—
|
|
Proceeds from
termination of interest rate derivatives
|
—
|
|
|
—
|
|
|
88
|
|
|
—
|
|
Net cash flows from
financing activities
|
(389)
|
|
|
19,388
|
|
|
6,250
|
|
|
12,114
|
|
|
|
|
|
|
|
|
|
NET INCREASE
(DECREASE) IN CASH AND CASH EQUIVALENTS
|
610
|
|
|
(30)
|
|
|
1,160
|
|
|
(3)
|
|
CASH AND CASH
EQUIVALENTS, beginning of period
|
555
|
|
|
30
|
|
|
5
|
|
|
3
|
|
CASH AND CASH
EQUIVALENTS, end of period
|
$
|
1,165
|
|
|
$
|
—
|
|
|
$
|
1,165
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
CASH PAID FOR
INTEREST
|
$
|
950
|
|
|
$
|
202
|
|
|
$
|
1,964
|
|
|
$
|
747
|
|
CHARTER
COMMUNICATIONS, INC. AND SUBSIDIARIES
|
UNAUDITED SUMMARY
OF OPERATING STATISTICS
|
(in thousands,
except per customer and penetration data)
|
|
|
Approximate as
of
|
|
Actual
|
|
Pro
Forma
|
|
September 30,
2016 (a)
|
|
June 30,
2016 (a)
|
|
December 31,
2015 (a)
|
|
September 30,
2015 (a)
|
Footprint
(b)
|
|
|
|
|
|
|
|
Estimated Video
Passings
|
49,001
|
|
48,762
|
|
48,375
|
|
48,223
|
Estimated Internet
Passings
|
48,689
|
|
48,414
|
|
48,019
|
|
47,866
|
Estimated Voice
Passings
|
47,854
|
|
47,566
|
|
47,164
|
|
46,997
|
|
|
|
|
|
|
|
|
Penetration
Statistics (c)
|
|
|
|
|
|
|
|
Video Penetration of
Estimated Video Passings
|
35.3%
|
|
35.5%
|
|
36.0%
|
|
35.9%
|
Internet Penetration
of Estimated Internet Passings
|
45.6%
|
|
45.1%
|
|
43.7%
|
|
42.7%
|
Voice Penetration of
Estimated Voice Passings
|
23.1%
|
|
23.1%
|
|
22.5%
|
|
21.9%
|
|
|
|
|
|
|
|
|
Customer
Relationships (d)
|
|
|
|
|
|
|
|
Residential
|
24,551
|
|
24,306
|
|
23,795
|
|
23,436
|
Small and Medium
Business
|
1,367
|
|
1,333
|
|
1,256
|
|
1,221
|
Total Customer
Relationships
|
25,918
|
|
25,639
|
|
25,051
|
|
24,657
|
|
|
|
|
|
|
|
|
Residential
|
|
|
|
|
|
|
|
Primary Service
Units ("PSUs")
|
|
|
|
|
|
|
|
Video
|
16,887
|
|
16,934
|
|
17,062
|
|
16,944
|
Internet
|
21,017
|
|
20,667
|
|
19,911
|
|
19,416
|
Voice
|
10,288
|
|
10,255
|
|
9,959
|
|
9,655
|
|
48,192
|
|
47,856
|
|
46,932
|
|
46,015
|
|
|
|
|
|
|
|
|
Pro Forma
Quarterly Net Additions/(Losses)
|
|
|
|
|
|
|
|
Video
|
(47)
|
|
(152)
|
|
118
|
|
(20)
|
Internet
|
350
|
|
236
|
|
495
|
|
369
|
Voice
|
33
|
|
83
|
|
304
|
|
256
|
|
336
|
|
167
|
|
917
|
|
605
|
|
|
|
|
|
|
|
|
Single Play
(e)
|
9,447
|
|
9,252
|
|
8,883
|
|
8,809
|
Double Play
(e)
|
6,569
|
|
6,559
|
|
6,687
|
|
6,674
|
Triple Play
(e)
|
8,535
|
|
8,495
|
|
8,225
|
|
7,953
|
|
|
|
|
|
|
|
|
Single Play
Penetration (f)
|
38.5%
|
|
38.1%
|
|
37.3%
|
|
37.6%
|
Double Play
Penetration (f)
|
26.8%
|
|
27.0%
|
|
28.1%
|
|
28.5%
|
Triple Play
Penetration (f)
|
34.8%
|
|
35.0%
|
|
34.6%
|
|
33.9%
|
|
|
|
|
|
|
|
|
% Residential
Non-Video Customer Relationships
|
31.2%
|
|
30.3%
|
|
28.3%
|
|
27.7%
|
|
|
|
|
|
|
|
|
Pro Forma Monthly
Residential Revenue per Residential Customer (g)
|
$
|
109.69
|
|
$
|
109.73
|
|
$
|
108.20
|
|
$
|
107.70
|
|
|
|
|
|
|
|
|
Small and Medium
Business
|
|
|
|
|
|
|
|
PSUs
|
|
|
|
|
|
|
|
Video
|
388
|
|
378
|
|
361
|
|
354
|
Internet
|
1,185
|
|
1,148
|
|
1,078
|
|
1,045
|
Voice
|
751
|
|
725
|
|
667
|
|
643
|
|
2,324
|
|
2,251
|
|
2,106
|
|
2,042
|
|
|
|
|
|
|
|
|
Pro Forma
Quarterly Net Additions/(Losses)
|
|
|
|
|
|
|
|
Video
|
10
|
|
9
|
|
7
|
|
7
|
Internet
|
37
|
|
41
|
|
33
|
|
31
|
Voice
|
26
|
|
32
|
|
24
|
|
26
|
|
73
|
|
82
|
|
64
|
|
64
|
|
|
|
|
|
|
|
|
Pro Forma Monthly
Small and Medium Business Revenue per Customer (h)
|
$
|
214.64
|
|
$
|
214.62
|
|
$
|
212.51
|
|
$
|
212.26
|
|
|
|
|
|
|
|
|
Enterprise PSUs
(i)
|
|
|
|
|
|
|
|
Enterprise
PSUs
|
93
|
|
90
|
|
81
|
|
77
|
|
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.
|
|
|
|
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 September 30,
2015, actual residential video, Internet and voice PSUs were
4,293,000, 5,112,000 and 2,551,000, respectively; actual commercial
video, Internet and voice PSUs were 104,000, 331,000 and 208,000,
respectively; Enterprise PSUs were 28,000.
|
|
|
|
We calculate the
aging of customer accounts based on the monthly billing cycle for
each account. On that basis, at September 30, 2016, June 30,
2016, December 31, 2015 and September 30, 2015, actual customers
include approximately 200,900, 208,600, 38,100 and 36,800
customers, respectively, whose accounts were over 60 days past due,
approximately 15,200, 14,000, 1,700 and 1,200 customers,
respectively, whose accounts were over 90 days past due and
approximately 8,900, 8,000, 900 and 800 customers, respectively,
whose accounts were over 120 days past due.
|
|
|
(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
September 30,
|
|
Nine Months Ended
September 30,
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
Actual
|
|
Actual
|
|
Actual
|
|
Actual
|
|
|
|
|
|
|
|
|
Consolidated net
income (loss)
|
$
|
250
|
|
|
$
|
54
|
|
|
$
|
3,176
|
|
|
$
|
(149)
|
|
Plus: Interest
expense, net
|
724
|
|
|
353
|
|
|
1,771
|
|
|
871
|
|
Income tax (benefit)
expense
|
16
|
|
|
(142)
|
|
|
(3,135)
|
|
|
(72)
|
|
Depreciation and
amortization
|
2,437
|
|
|
538
|
|
|
4,412
|
|
|
1,580
|
|
Stock compensation
expense
|
81
|
|
|
20
|
|
|
168
|
|
|
58
|
|
Loss on extinguishment
of debt
|
—
|
|
|
—
|
|
|
110
|
|
|
128
|
|
(Gain) loss on
financial instruments, net
|
(71)
|
|
|
5
|
|
|
(16)
|
|
|
10
|
|
Other, net
|
199
|
|
|
22
|
|
|
253
|
|
|
72
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA
(a)
|
3,636
|
|
|
850
|
|
|
6,739
|
|
|
2,498
|
|
Less: Purchases
of property, plant and equipment
|
(1,748)
|
|
|
(509)
|
|
|
(3,437)
|
|
|
(1,292)
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA less
capital expenditures
|
$
|
1,888
|
|
|
$
|
341
|
|
|
$
|
3,302
|
|
|
$
|
1,206
|
|
|
|
|
|
|
|
|
|
Net cash flows from
operating activities
|
$
|
2,801
|
|
|
$
|
689
|
|
|
$
|
4,815
|
|
|
$
|
1,748
|
|
Less: Purchases
of property, plant and equipment
|
(1,748)
|
|
|
(509)
|
|
|
(3,437)
|
|
|
(1,292)
|
|
Change in accrued
expenses related to capital expenditures
|
(52)
|
|
|
28
|
|
|
86
|
|
|
11
|
|
|
|
|
|
|
|
|
|
Free cash
flow
|
$
|
1,001
|
|
|
$
|
208
|
|
|
$
|
1,464
|
|
|
$
|
467
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
September 30,
|
|
Nine Months Ended
September 30,
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
Actual
|
|
Pro Forma
(b)
|
|
Pro Forma
(b)
|
|
Pro Forma
(b)
|
|
|
|
|
|
|
|
|
Consolidated net
income
|
$
|
250
|
|
|
$
|
40
|
|
|
$
|
830
|
|
|
$
|
146
|
|
Plus: Interest
expense, net
|
724
|
|
|
724
|
|
|
2,155
|
|
|
2,270
|
|
Income tax
expense
|
16
|
|
|
1
|
|
|
288
|
|
|
19
|
|
Depreciation and
amortization
|
2,437
|
|
|
2,356
|
|
|
7,060
|
|
|
6,961
|
|
Stock compensation
expense
|
81
|
|
|
62
|
|
|
219
|
|
|
184
|
|
Loss on extinguishment
of debt
|
—
|
|
|
—
|
|
|
110
|
|
|
128
|
|
(Gain) loss on
financial instruments, net
|
(71)
|
|
|
5
|
|
|
(16)
|
|
|
10
|
|
Other, net
|
199
|
|
|
(13)
|
|
|
(35)
|
|
|
(132)
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA
(a)
|
3,636
|
|
|
3,175
|
|
|
10,611
|
|
|
9,586
|
|
Less: Purchases
of property, plant and equipment
|
(1,748)
|
|
|
(1,699)
|
|
|
(5,657)
|
|
|
(5,138)
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA less
capital expenditures
|
$
|
1,888
|
|
|
$
|
1,476
|
|
|
$
|
4,954
|
|
|
$
|
4,448
|
|
(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
September 30,
|
|
Nine Months Ended
September 30,
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
Actual
|
|
Actual
|
|
Actual
|
|
Actual
|
|
|
|
|
|
|
|
|
Customer premise
equipment (a)
|
$
|
662
|
|
|
$
|
163
|
|
|
$
|
1,177
|
|
|
$
|
448
|
|
Scalable
infrastructure (b)
|
441
|
|
|
142
|
|
|
937
|
|
|
335
|
|
Line extensions
(c)
|
249
|
|
|
57
|
|
|
467
|
|
|
144
|
|
Upgrade/Rebuild
(d)
|
156
|
|
|
38
|
|
|
307
|
|
|
94
|
|
Support capital
(e)
|
240
|
|
|
109
|
|
|
549
|
|
|
271
|
|
|
|
|
|
|
|
|
|
Total
capital expenditures
|
$
|
1,748
|
|
|
$
|
509
|
|
|
$
|
3,437
|
|
|
$
|
1,292
|
|
|
|
|
|
|
|
|
|
Capital expenditures
included in total related to:
|
|
|
|
|
|
|
|
Commercial
services
|
$
|
278
|
|
|
$
|
70
|
|
|
$
|
533
|
|
|
$
|
186
|
|
Transition
(f)
|
$
|
109
|
|
|
$
|
24
|
|
|
$
|
273
|
|
|
$
|
66
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
September 30,
|
|
Nine Months Ended
September 30,
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
Actual
|
|
Pro Forma
(g)
|
|
Pro Forma
(g)
|
|
Pro Forma
(g)
|
|
|
|
|
|
|
|
|
Customer premise
equipment (a)
|
$
|
662
|
|
|
$
|
712
|
|
|
$
|
2,074
|
|
|
$
|
2,097
|
|
Scalable
infrastructure (b)
|
441
|
|
|
330
|
|
|
1,556
|
|
|
1,188
|
|
Line extensions
(c)
|
249
|
|
|
237
|
|
|
751
|
|
|
725
|
|
Upgrade/Rebuild
(d)
|
156
|
|
|
171
|
|
|
461
|
|
|
438
|
|
Support capital
(e)
|
240
|
|
|
249
|
|
|
815
|
|
|
690
|
|
|
|
|
|
|
|
|
|
Total
capital expenditures
|
$
|
1,748
|
|
|
$
|
1,699
|
|
|
$
|
5,657
|
|
|
$
|
5,138
|
|
|
|
(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)
|
Transition represents
incremental costs incurred to integrate the Legacy TWC and Legacy
Bright House operations and to bring the three companies' systems
and processes into a uniform operating structure.
|
(g)
|
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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SOURCE Charter Communications, Inc.