STAMFORD, Conn., Nov. 5, 2013 /PRNewswire/ -- Charter
Communications, Inc. (along with its subsidiaries, the "Company" or
"Charter") today reported financial and operating results for the
three and nine months ended September 30, 2013.
(Logo: http://photos.prnewswire.com/prnh/20110526/AQ10195LOGO)
Key highlights:
- Third quarter revenues of $2.1
billion grew 5.4% on a pro forma basis1 as
compared to the prior-year period, led by growth in video, Internet
and commercial revenues. On an actual basis, third quarter revenue
rose 12.7%, driven primarily by the acquisition of Bresnan, which
closed on July 1, 2013.
- Pro forma for the acquisition of Bresnan, total
residential customer relationships grew by 46,0002
during the quarter, versus 24,000 during the third quarter of 2012.
Residential primary service units (PSUs) increased by 100,000
during the period, versus 60,000 in the year-ago
quarter.
- Third quarter residential revenues grew 5.1% on a pro
forma basis versus the third quarter of 2012, when residential
revenues grew by 1.6% on a pro forma basis.
- Commercial revenues grew 20.4% on a pro forma basis
versus the prior-year period, primarily driven by higher sales to
small and medium businesses and to carrier customers. Pro
forma for the acquisition of Bresnan, commercial customer
relationships grew by 12,000 in the third quarter of 2013, compared
to a gain of 9,000 during the third quarter of 2012.
- Third quarter Adjusted EBITDA3 grew by 5.3%
year-over-year on a pro forma basis, reflecting higher
revenue growth and slower growth in costs to service customers. On
an actual basis, third quarter Adjusted EBITDA rose 12.4%
year-over-year, driven primarily by the acquisition of
Bresnan.
- Free cash flow3 for the quarter was $132 million and net cash flows from operating
activities totaled $538 million.
"We continue to execute well on our strategic objectives, and
that's evidenced in the solid revenue and Adjusted EBITDA growth we
delivered in the third quarter," said Tom
Rutledge, President and CEO of Charter Communications.
"We've greatly improved the competitiveness of our product offering
and the value we deliver to customers, which is driving growth in
both our residential and commercial businesses. We are backing up
our product with substantially improved service levels, an area
where we will continue to invest to drive even better quality. As
we head into 2014, we believe Charter is in an increasingly strong
position to grow both its market share and cash flow as we
accelerate our all-digital program, begin to roll out new products
and take full advantage of our superior network."
1 Pro forma results are described below
in the "Use of Non-GAAP Financial Metrics" section and are provided
in the addendum of this news release.
2 All customer data, unless otherwise noted, are
pro forma for the Bresnan transaction, as if it had occurred
on January 1, 2012.
3 Adjusted EBITDA and free cash flow are defined
in the "Use of Non-GAAP Financial Metrics" section and are
reconciled to net loss and net cash flows from operating
activities, respectively, in the addendum of this news release.
Key Operating
Results
|
|
|
Approximate as
of
|
|
|
Actual
|
|
Pro
Forma
|
|
|
|
September 30, 2013
(a)
|
|
September 30, 2012
(a)
|
|
Y/Y
Change
|
Footprint
|
|
|
|
|
|
Estimated Video
Passings (b)
|
12,794
|
|
12,699
|
|
1%
|
Estimated Internet
Passings (b)
|
12,475
|
|
12,375
|
|
1%
|
Estimated Telephone
Passings (b)
|
11,815
|
|
11,630
|
|
2%
|
|
|
|
|
|
|
Penetration
Statistics
|
|
|
|
|
|
Video Penetration of
Estimated Video Passings (c)
|
34.0%
|
|
35.5%
|
|
-1.5 ppts
|
Internet Penetration
of Estimated Internet Passings (c)
|
36.4%
|
|
34.0%
|
|
2.4 ppts
|
Telephone Penetration
of Estimated Telephone Passings (c)
|
19.9%
|
|
18.5%
|
|
1.4 ppts
|
|
|
|
|
|
|
Residential
|
|
|
|
|
|
Residential Customer
Relationships (d)
|
5,498
|
|
5,365
|
|
2%
|
Residential Non-Video
Customers
|
1,319
|
|
1,043
|
|
26%
|
%
Non-Video
|
24.0%
|
|
19.4%
|
|
4.6 ppts
|
|
|
|
|
|
|
Customers
|
|
|
|
|
|
Video (e)
|
4,179
|
|
4,322
|
|
(3)%
|
Internet
(f)
|
4,290
|
|
4,000
|
|
7%
|
Telephone
(g)
|
2,217
|
|
2,039
|
|
9%
|
Residential PSUs
(h)
|
10,686
|
|
10,361
|
|
3%
|
Residential PSU /
Customer Relationships (d)(h)
|
1.94
|
|
1.93
|
|
|
|
|
|
|
|
|
Quarterly Net
Additions/(Losses) (i)
|
|
|
|
|
|
Video (e)
|
(27)
|
|
(71)
|
|
62%
|
Internet
(f)
|
86
|
|
77
|
|
12%
|
Telephone
(g)
|
41
|
|
54
|
|
(24)%
|
Residential PSUs
(h)
|
100
|
|
60
|
|
67%
|
|
|
|
|
|
|
Single Play
Penetration (j)
|
37.7%
|
|
37.2%
|
|
0.5 ppts
|
Double Play
Penetration (k)
|
30.2%
|
|
32.4%
|
|
-2.2 ppts
|
Triple Play
Penetration (l)
|
32.2%
|
|
30.4%
|
|
1.8 ppts
|
Digital Penetration
(m)
|
91.2%
|
|
86.0%
|
|
5.2 ppts
|
|
|
|
|
|
|
Revenue per Customer
Relationship (d)(n)
|
$108.52
|
|
$105.53
|
|
3%
|
|
|
|
|
|
|
Commercial
|
|
|
|
|
|
Commercial Customer
Relationships (d)(o)
|
359
|
|
337
|
|
7%
|
|
|
|
|
|
|
Customers
|
|
|
|
|
|
Video
(e)(o)
|
166
|
|
180
|
|
(8)%
|
Internet
(f)
|
245
|
|
202
|
|
21%
|
Telephone
(g)
|
138
|
|
109
|
|
27%
|
Commercial PSUs
(h)
|
549
|
|
491
|
|
12%
|
|
|
|
|
|
|
Quarterly Net
Additions/(Losses) (i)
|
|
|
|
|
|
Video
(e)(o)
|
2
|
|
3
|
|
(33)%
|
Internet
(f)
|
12
|
|
9
|
|
33%
|
Telephone
(g)
|
7
|
|
8
|
|
(13)%
|
Commercial PSUs
(h)
|
21
|
|
20
|
|
5%
|
|
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.
|
On July 1, Charter completed its
acquisition of Cablevision's Bresnan Broadband Holdings, LLC and
its subsidiaries (collectively, "Bresnan"). As a result of
the acquisition, Charter added cable operating systems in
Montana, Wyoming, Colorado and Utah that pass approximately 670,000 homes and
serve approximately 375,000 residential and business customers. All
customer data referred to herein, are pro forma for the
Bresnan transaction, as if it had occurred on January 1, 2012.
During the third quarter, Charter continued to see
year-over-year improvement in customer relationship and PSU growth
trends, in both its residential and commercial businesses.
Residential customer relationships grew by 46,000, up from 24,000
in the third quarter of 2012. Commercial customer relationships
grew by 12,000 in the third quarter of 2013, compared to a gain of
9,000 in the prior-year period. Residential PSUs increased by
100,000 versus 60,000 in the year-ago quarter, while commercial
PSUs increased 21,000 during the third quarter versus a gain of
20,000 in the year-ago quarter.
The continued year-over-year improvement in total customer and
PSU growth reflects the Company's ongoing efforts to simplify
offers and pricing, and enhance bundled packaging to bring more
value to both new and existing customers. As part of its efforts to
create value for customers, Charter has focused on driving
penetration of its triple play offering, which includes more than
100 HD channels, video on demand, superior Internet and
fully-featured phone service, in a straight-forward and reasonably
priced offer. Over the twelve month period ending September 30, 2013, triple play penetration grew
from 30.4% to 32.2%.
Charter also remains focused on improving its fundamental
operating execution, including its field operations, network
operations, and customer care, in order to offer better service to
new and existing customers. Service levels for both residential and
commercial customers continue to improve, and the Company expects
its improved service to lead to higher penetration of its products
and to produce higher-quality, longer-term relationships with
customers.
During the third quarter, Charter continued to pursue its
all-digital initiative and completed its all-digital network
upgrade in portions of its California and Michigan footprints, with customers in each of
these markets now having access to over 170 HD channels. Charter's
all digital initiative allows the Company to offer more advanced
services to its customers, and provides residential customers with
two-way digital set-tops, which offer higher picture quality, an
interactive programming guide and video on demand. Charter expects
to complete its all-digital roll out across its entire footprint by
year end 2014.
Residential video customers declined by 27,000 in the third
quarter of 2013, versus a loss of 71,000 in the year-ago period.
The year over year improvement in video net adds results was driven
by a more competitive video product, which now includes over 100 HD
channels, packaging of advanced services, and the transition to new
selling methods.
Charter added 86,000 residential Internet customers in the third
quarter of 2013, compared to 77,000 a year ago. The Company
continues to see strong demand for its Internet service as
consumers value the speed and reliability of Charter's high speed
offering.
During the third quarter, the Company added 41,000 residential
telephone customers, versus a gain of 54,000 during the third
quarter of 2012, when Charter's new pricing and packaging structure
was first
introduced.
Third quarter residential revenue per customer relationship
totaled $108.52, and grew by 2.8% on
a pro forma basis, from $105.53 in the third quarter of 2012, driven by
rate adjustments, higher product sell-in and promotional rate
step-ups, partially offset by entry-level pricing and
back-to-school campaigns in the quarter.
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,
|
|
2013
|
|
2012
|
|
|
|
2012
|
|
|
|
Actual
|
|
Pro
Forma
|
|
%
Change
|
|
Actual
|
|
%
Change
|
REVENUES:
|
|
|
|
|
|
|
|
|
|
Video
|
$
|
1,044
|
|
$
|
972
|
|
7.4%
|
|
$
|
906
|
|
15.2%
|
Internet
|
575
|
|
499
|
|
15.2%
|
|
467
|
|
23.1%
|
Telephone
|
161
|
|
222
|
|
(27.5)%
|
|
208
|
|
(22.6)%
|
Commercial
|
218
|
|
181
|
|
20.4%
|
|
168
|
|
29.8%
|
Advertising
sales
|
75
|
|
89
|
|
(15.7)%
|
|
85
|
|
(11.8)%
|
Other
|
45
|
|
46
|
|
(2.2)%
|
|
46
|
|
(2.2)%
|
Total
Revenues
|
2,118
|
|
2,009
|
|
5.4%
|
|
1,880
|
|
12.7%
|
|
|
|
|
|
|
|
|
|
|
COSTS AND
EXPENSES:
|
|
|
|
|
|
|
|
|
|
Total operating costs
and expenses (excluding depreciation and amortization)
|
1,386
|
|
1,314
|
|
5.5%
|
|
1,229
|
|
12.8%
|
|
|
|
|
|
|
|
|
|
|
Adjusted
EBITDA
|
$
|
732
|
|
$
|
695
|
|
5.3%
|
|
$
|
651
|
|
12.4%
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA
margin
|
34.6%
|
|
34.6%
|
|
|
|
34.6%
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital
Expenditures
|
$
|
425
|
|
$
|
505
|
|
|
|
$
|
488
|
|
|
% Total
Revenues
|
20.1%
|
|
25.1%
|
|
|
|
26.0%
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
$
|
(70)
|
|
$
|
(103)
|
|
|
|
$
|
(87)
|
|
|
Loss per common
share, basic and diluted
|
$
|
(0.68)
|
|
$
|
(1.03)
|
|
|
|
$
|
(0.87)
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash flows from
operating activities
|
$
|
538
|
|
|
|
|
|
$
|
468
|
|
|
Free cash
flow
|
$
|
132
|
|
|
|
|
|
$
|
(17)
|
|
|
Revenue
Third quarter 2013 revenues rose to $2.1
billion, 5.4% higher on a pro forma basis than the
year-ago quarter, due to growth in video, Internet and commercial
revenues. On an actual basis, third quarter revenues rose 12.7%
year-over-year.
Video revenues totaled $1.0
billion in the third quarter, an increase of 7.4% on a
pro forma basis compared to the prior-year period. Video
revenue growth was driven by higher expanded basic and digital
penetration, annual and promotional rate adjustments, higher
advanced services penetration, and revenue allocation from higher
bundling, partially offset by a decrease in residential video
customers and premium revenue. Video revenues grew by 15.2%
year-over-year, on an actual basis.
Internet revenues grew 15.2% on a pro forma basis
compared to the year-ago quarter to $575
million, driven by an increase of 290,000 Internet customers
during the last year and by price adjustments. On an actual basis,
Internet revenues grew 23.1% year-over-year.
Telephone revenues totaled $161
million, down 27.5% on a pro forma basis versus the
third quarter of 2012, due to value-based pricing and revenue
allocation from higher bundling, partially offset by the addition
of 178,000 telephone customers in the last twelve months. Telephone
revenues declined 22.6% year-over-year, on an actual basis.
Commercial revenues rose to $218
million, an increase of 20.4% on a pro forma basis
over the prior-year period, and was driven by higher sales to small
and medium businesses and to carrier customers. On an actual basis,
commercial revenues grew 29.8% year-over-year.
Third quarter advertising sales revenues of $75 million declined 15.7% on a pro forma
basis compared to the year-ago quarter, driven by a decline in
political advertising revenue, which saw strength in the third
quarter of 2012, given local and national elections, and from a
decline in contractual revenue. Advertising sales declined 11.8%
year-over-year, on an actual basis.
Operating Costs and Expenses
Third quarter total operating costs and expenses increased 5.5%
on a pro forma basis compared to the year-ago period,
reflecting increases in programming costs, costs to service
customers, and marketing expenses.
Third quarter programming expense increased by $30 million on a pro forma basis, or 5.7%,
as compared to the third quarter of 2012, reflecting contractual
programming increases, partially offset by customer losses. Costs
to service customers increased by $16
million on a pro forma basis, or 4.2% as compared to
the third quarter of 2012, reflecting higher spending on labor in
order to deliver improved products and service levels and greater
reconnect expense resulting from higher sales. Marketing costs
increased by $14 million on a pro
forma basis, or 12.3% as compared to the third quarter of
2012, reflecting heavier sales activity and sales channel
development.
On an actual basis, total operating costs and expenses grew by
12.8% year-over-year.
Adjusted EBITDA
Third quarter Adjusted EBITDA of $732
million grew by 5.3% year-over-year on a pro forma
basis, reflecting pro forma revenue growth and operating
costs and expenses growth of 5.4% and 5.5%, respectively. On an
actual basis, Adjusted EBITDA grew by 12.4% compared to the
year-ago quarter, primarily driven by the acquisition of Bresnan.
Adjusted EBITDA margin remained unchanged year-over-year, on both a
pro forma and actual basis, at 34.6%.
Net Loss
Net loss totaled $70 million in
the third quarter of 2013, compared to $103
million on a pro forma basis and $87 million on an actual basis in the year-ago
period. Net loss decreased year-over-year primarily due to lower
interest expense, lower income tax expense, and higher income from
operations. Net loss per common share was $0.68 in the third quarter of 2013 compared to
$1.03 on a pro forma basis and
$0.87 on an actual basis during the
same period last year. The decrease was the result of the factors
described above, in addition to a 3.2% increase in weighted average
shares outstanding in the last twelve months, driven primarily by
the exercise of 2.3 million warrants in July
2013.
Capital Expenditures
Property, plant and equipment expenditures were $425 million in the third quarter of 2013,
compared to $505 million on a pro
forma basis and $488 million on
an actual basis in 2012. The decrease was primarily driven by lower
spending on customer premise equipment, given the timing of
expenditures in 2013 versus the prior year.
In 2013, capital expenditures are expected to be approximately
$1.8 billion, including the impact of
the Bresnan acquisition, which closed on July 1, 2013. Charter expects remaining 2013
capital expenditures to be driven by the deployment of additional
set-top boxes in new and existing customer homes, growth in
Charter's commercial business, and further spend related to plant
reliability, back-office support and Charter's organizational
realignment. The actual amount of capital expenditures will depend
on a number of factors including the growth rates of both
residential and commercial businesses, as well as the Company's
all-digital initiative.
Cash Flow
During the third quarter of 2013, net cash flows from operating
activities totaled $538 million,
compared to $468 million in the third
quarter of 2012. The increase in net cash flows from operating
activities was primarily related to an increase in Adjusted
EBITDA.
Free cash flow for the third quarter of 2013 was $132 million, compared to negative $17 million during the same period last year. The
increase was primarily due to a decrease in capital expenditures,
and higher cash flow from operating activities versus the
prior-year period.
In conjunction with the closing of the Bresnan transaction on
July 1, Charter activated the
previously committed term loan E facility providing for a
$1.5 billion term loan maturing in
seven years. Additionally, and as part of a previously announced
tender offer, Charter repurchased $250
million aggregate principal amount of 8.00% senior notes due
2018 that were originally issued by Bresnan.
Liquidity
Total principal amount of debt was approximately $14.4 billion as of September 30, 2013. At
the end of the quarter, Charter held $41
million of cash and cash equivalents, and its credit
facilities provided approximately $978
million of additional liquidity.
Conference Call
Charter will host a conference call on Tuesday, November 5, 2013 at 10:00 a.m. Eastern Time (ET) related to the
contents of this release.
The conference call will be webcast live via the Company's
website at charter.com. The webcast can be accessed by selecting
"Investor & News Center" from the lower menu on the home page.
The call will be archived in the "Investor & News Center" in
the "Financial Information" section on the left beginning two hours
after completion of the call. Participants should go to the webcast
link no later than 10 minutes prior to the start time to
register.
Those participating via telephone should dial 866-919-0894 no
later than 10 minutes prior to the call. International participants
should dial 706-679-9379. The conference ID code for the call is
45456138.
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 December 5,
2013. The conference ID code for the replay is 45456138.
Additional Information Available on Website
The information in this press release should be read in
conjunction with the financial statements and footnotes contained
in the Company's Form 10-Q for three and nine months ended
September 30, 2013 available on the "Investor & News
Center" of our website at charter.com in the "Financial
Information" section. A slide presentation to accompany the
conference call and a trending schedule containing historical
customer and financial data can also be found in the "Financial
Information" section.
Use of Non-GAAP Financial Metrics
The Company uses certain measures that are not defined by
Generally Accepted Accounting Principles ("GAAP") to evaluate
various aspects of its business. Adjusted EBITDA and free cash flow
are non-GAAP financial measures and should be considered in
addition to, not as a substitute for, net loss or cash flows from
operating activities reported in accordance with GAAP. These terms,
as defined by Charter, may not be comparable to similarly titled
measures used by other companies. Adjusted EBITDA is reconciled to
net loss and free cash flow is reconciled to net cash flows from
operating activities in the addendum of this news
release.
Adjusted EBITDA is defined as net loss plus net interest
expense, income taxes, depreciation and amortization, stock
compensation expense, loss on extinguishment of debt, (gain) loss
on derivative instruments, net and other operating expenses, such
as special charges and (gain) loss on sale or retirement of assets.
As such, it eliminates the significant non-cash depreciation and
amortization expense that results from the capital-intensive nature
of the Company's businesses as well as other non-cash or special
items, and is unaffected by the Company's capital structure or
investment activities. However, this measure is limited in that it
does not reflect the periodic costs of certain capitalized tangible
and intangible assets used in generating revenues and the cash cost
of financing. These costs are evaluated through other financial
measures.
Free cash flow is defined as net cash flows from operating
activities, less purchases of property, plant and equipment and
changes in accrued expenses related to capital expenditures.
Management and the Company's board of directors use adjusted
EBITDA and free cash flow to assess Charter's performance and its
ability to service its debt, fund operations and make additional
investments with internally generated funds. In addition, adjusted
EBITDA generally correlates to the leverage ratio calculation under
the Company's credit facilities or outstanding notes to determine
compliance with the covenants contained in the credit facilities
and notes (all such documents have been previously filed with the
United States Securities and Exchange Commission). For the purpose
of calculating compliance with leverage covenants, we use adjusted
EBITDA, as presented, excluding certain expenses paid by our
operating subsidiaries to other Charter entities. Our debt
covenants refer to these expenses as management fees which fees
were in the amount of $49 million and
$44 million for the three months
ended September 30, 2013 and 2012, respectively, and
$147 million and $126 million for the nine months ended
September 30, 2013 and 2012, respectively.
In addition to the actual results for the three and nine months
ended September 30, 2013 and 2012, we have provided pro forma
results in this release for the nine months ended
September 30, 2013 and the three and nine months ended
September 30, 2012. We believe these pro forma results
facilitate meaningful analysis of the results of operations. Pro
forma results in this release reflect certain acquisitions of cable
systems in 2013 as if they occurred as of January 1, 2012. Pro forma statements of
operations for the nine months ended September 30, 2013 and
the three and nine months ended September 30, 2012 are
provided in the addendum of this news release.
About Charter
Charter (NASDAQ: CHTR) is a leading broadband communications
company and the fourth-largest cable operator in the United States. Charter provides a full
range of advanced broadband services, including advanced Charter
TV® video entertainment programming, Charter Internet® access, and
Charter Phone®. Charter Business® similarly provides scalable,
tailored, and cost-effective broadband communications solutions to
business organizations, such as business-to-business Internet
access, data networking, business telephone, video and music
entertainment services, and wireless backhaul. Charter's
advertising sales and production services are sold under the
Charter Media® brand. More information about Charter can be found
at charter.com.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING
STATEMENTS
This release includes forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended
(the "Securities Act"), and Section 21E of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), regarding, among
other things, our plans, strategies and prospects, both business
and financial. Although we believe that our plans, intentions and
expectations reflected in or suggested by these forward-looking
statements are reasonable, we cannot assure you that we will
achieve or realize these plans, intentions or expectations.
Forward-looking statements are inherently subject to risks,
uncertainties and assumptions including, without limitation, the
factors described under "Risk Factors" from time to time in our
filings with the Securities and Exchange Commission ("SEC"). Many
of the forward-looking statements contained in this release may be
identified by the use of forward-looking words such as "believe,"
"expect," "anticipate," "should," "planned," "will," "may,"
"intend," "estimated," "aim," "on track," "target," "opportunity,"
"tentative," "positioning," "designed," "create" and "potential,"
among others. Important factors that could cause actual results to
differ materially from the forward-looking statements we make in
this release are set forth in other reports or documents that we
file from time to time with the SEC, and include, but are not
limited to:
- our ability to sustain and grow revenues and cash flow from
operations by offering video, Internet, telephone, advertising and
other services to residential and commercial customers, to
adequately meet the customer experience demands in our markets and
to maintain and grow our customer base, particularly in the face of
increasingly aggressive competition, the need for innovation and
the related capital expenditures and the difficult economic
conditions in the United
States;
- the impact of competition from other market participants,
including but not limited to incumbent telephone companies, direct
broadcast satellite operators, wireless broadband and telephone
providers, digital subscriber line ("DSL") providers, and video
provided over the Internet;
- general business conditions, economic uncertainty or downturn,
high unemployment levels and the level of activity in the housing
sector;
- our ability to obtain programming at reasonable prices or to
raise prices to offset, in whole or in part, the effects of higher
programming costs (including retransmission consents);
- the development and deployment of new products and
technologies;
- the effects of governmental regulation on our business;
- the availability and access, in general, of funds to meet our
debt obligations prior to or when they become due and to fund our
operations and necessary capital expenditures, either through (i)
cash on hand, (ii) free cash flow, or (iii) access to the capital
or credit markets; and
- our ability to comply with all covenants in our indentures and
credit facilities any violation of which, if not cured in a timely
manner, could trigger a default of our other obligations under
cross-default provisions.
All forward-looking statements attributable to us or any person
acting on our behalf are expressly qualified in their entirety by
this cautionary statement. We are under no duty or obligation to
update any of the forward-looking statements after the date of this
release.
CHARTER
COMMUNICATIONS, INC. AND SUBSIDIARIES
|
UNAUDITED
CONSOLIDATED STATEMENTS OF OPERATIONS AND OPERATING
DATA
|
(dollars in
millions, except per share data)
|
|
|
Three Months Ended
September 30,
|
|
Nine Months Ended
September 30,
|
|
2013
|
|
2012
|
|
|
|
2013
|
|
2012
|
|
|
|
Actual
|
|
Actual
|
|
%
Change
|
|
Actual
|
|
Actual
|
|
%
Change
|
REVENUES:
|
|
|
|
|
|
|
|
|
|
|
|
Video
|
$
1,044
|
|
$
906
|
|
15.2%
|
|
$
2,984
|
|
$
2,712
|
|
10.0%
|
Internet
|
575
|
|
467
|
|
23.1%
|
|
1,596
|
|
1,384
|
|
15.3%
|
Telephone
|
161
|
|
208
|
|
(22.6)%
|
|
490
|
|
642
|
|
(23.7)%
|
Commercial
|
218
|
|
168
|
|
29.8%
|
|
594
|
|
481
|
|
23.5%
|
Advertising
sales
|
75
|
|
85
|
|
(11.8)%
|
|
208
|
|
238
|
|
(12.6)%
|
Other
|
45
|
|
46
|
|
(2.2)%
|
|
135
|
|
134
|
|
0.7%
|
Total
Revenues
|
2,118
|
|
1,880
|
|
12.7%
|
|
6,007
|
|
5,591
|
|
7.4%
|
|
|
|
|
|
|
|
|
|
|
|
|
COSTS AND
EXPENSES:
|
|
|
|
|
|
|
|
|
|
|
|
Programming
|
558
|
|
497
|
|
12.3%
|
|
1,596
|
|
1,484
|
|
7.5%
|
Franchises,
regulatory and connectivity
|
100
|
|
92
|
|
8.7%
|
|
285
|
|
277
|
|
2.9%
|
Costs to service
customers
|
399
|
|
356
|
|
12.1%
|
|
1,131
|
|
1,006
|
|
12.4%
|
Marketing
|
128
|
|
105
|
|
21.9%
|
|
352
|
|
324
|
|
8.6%
|
Other
|
201
|
|
179
|
|
12.3%
|
|
549
|
|
504
|
|
8.9%
|
Total
operating costs and expenses (excluding depreciation and
amortization)
|
1,386
|
|
1,229
|
|
12.8%
|
|
3,913
|
|
3,595
|
|
8.8%
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted
EBITDA
|
732
|
|
651
|
|
12.4%
|
|
2,094
|
|
1,996
|
|
4.9%
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted
EBITDA margin
|
34.6%
|
|
34.6%
|
|
|
|
34.9%
|
|
35.7%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and
amortization
|
493
|
|
424
|
|
|
|
1,354
|
|
1,247
|
|
|
Stock compensation
expense
|
11
|
|
13
|
|
|
|
37
|
|
37
|
|
|
Other operating
expenses, net
|
8
|
|
3
|
|
|
|
24
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from
operations
|
220
|
|
211
|
|
|
|
679
|
|
710
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER INCOME
(EXPENSES):
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense,
net
|
(214)
|
|
(229)
|
|
|
|
(635)
|
|
(691)
|
|
|
Loss on
extinguishment of debt
|
—
|
|
—
|
|
|
|
(123)
|
|
(74)
|
|
|
Gain (loss) on
derivative instruments, net
|
(8)
|
|
—
|
|
|
|
9
|
|
—
|
|
|
Other expense,
net
|
(11)
|
|
—
|
|
|
|
(14)
|
|
(1)
|
|
|
|
(233)
|
|
(229)
|
|
|
|
(763)
|
|
(766)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss before income
taxes
|
(13)
|
|
(18)
|
|
|
|
(84)
|
|
(56)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax
expense
|
(57)
|
|
(69)
|
|
|
|
(124)
|
|
(208)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
$
(70)
|
|
$
(87)
|
|
|
|
$
(208)
|
|
$
(264)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LOSS PER COMMON
SHARE, BASIC AND DILUTED:
|
$
(0.68)
|
|
$
(0.87)
|
|
|
|
$
(2.05)
|
|
$
(2.65)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average
common shares outstanding, basic and diluted
|
102,924,443
|
|
99,694,672
|
|
|
|
101,293,696
|
|
99,542,021
|
|
|
|
Adjusted EBITDA is a
non-GAAP term. See page 7 of this addendum for the
reconciliation of adjusted EBITDA to net loss as defined by
GAAP.
|
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,
|
|
2013
|
|
2012
|
|
|
|
2013
|
|
2012
|
|
|
|
Actual
|
|
Pro Forma
(a)
|
|
%
Change
|
|
Pro Forma
(a)
|
|
Pro Forma
(a)
|
|
%
Change
|
REVENUES:
|
|
|
|
|
|
|
|
|
|
|
|
Video
|
$
1,044
|
|
$
972
|
|
7.4%
|
|
$
3,121
|
|
$
2,908
|
|
7.3%
|
Internet
|
575
|
|
499
|
|
15.2%
|
|
1,663
|
|
1,473
|
|
12.9%
|
Telephone
|
161
|
|
222
|
|
(27.5)%
|
|
514
|
|
685
|
|
(25.0)%
|
Commercial
|
218
|
|
181
|
|
20.4%
|
|
622
|
|
520
|
|
19.6%
|
Advertising
sales
|
75
|
|
89
|
|
(15.7)%
|
|
214
|
|
248
|
|
(13.7)%
|
Other
|
45
|
|
46
|
|
(2.2)%
|
|
137
|
|
138
|
|
(0.7)%
|
Total
Revenues
|
2,118
|
|
2,009
|
|
5.4%
|
|
6,271
|
|
5,972
|
|
5.0%
|
|
|
|
|
|
|
|
|
|
|
|
|
COSTS AND
EXPENSES:
|
|
|
|
|
|
|
|
|
|
|
|
Programming
|
558
|
|
528
|
|
5.7%
|
|
1,664
|
|
1,578
|
|
5.4%
|
Franchises,
regulatory and connectivity
|
100
|
|
101
|
|
(1.0)%
|
|
303
|
|
304
|
|
(0.3)%
|
Costs to service
customers
|
399
|
|
383
|
|
4.2%
|
|
1,183
|
|
1,088
|
|
8.7%
|
Marketing
|
128
|
|
114
|
|
12.3%
|
|
370
|
|
351
|
|
5.4%
|
Other
|
201
|
|
188
|
|
6.9%
|
|
567
|
|
532
|
|
6.6%
|
Total
operating costs and expenses (excluding depreciation and
amortization)
|
1,386
|
|
1,314
|
|
5.5%
|
|
4,087
|
|
3,853
|
|
6.1%
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted
EBITDA
|
732
|
|
695
|
|
5.3%
|
|
2,184
|
|
2,119
|
|
3.1%
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted
EBITDA margin
|
34.6%
|
|
34.6%
|
|
|
|
34.8%
|
|
35.5%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and
amortization
|
493
|
|
465
|
|
|
|
1,408
|
|
1,370
|
|
|
Stock compensation
expense
|
11
|
|
13
|
|
|
|
37
|
|
37
|
|
|
Other operating
expenses, net
|
8
|
|
3
|
|
|
|
24
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from
operations
|
220
|
|
214
|
|
|
|
715
|
|
710
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER INCOME
(EXPENSES):
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense,
net
|
(214)
|
|
(242)
|
|
|
|
(662)
|
|
(731)
|
|
|
Loss on
extinguishment of debt
|
—
|
|
—
|
|
|
|
(123)
|
|
(74)
|
|
|
Gain (loss) on
derivative instruments, net
|
(8)
|
|
—
|
|
|
|
9
|
|
—
|
|
|
Other expense,
net
|
(11)
|
|
—
|
|
|
|
(14)
|
|
(1)
|
|
|
|
(233)
|
|
(242)
|
|
|
|
(790)
|
|
(806)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss before income
taxes
|
(13)
|
|
(28)
|
|
|
|
(75)
|
|
(96)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax
expense
|
(57)
|
|
(75)
|
|
|
|
(158)
|
|
(223)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
$
(70)
|
|
$
(103)
|
|
|
|
$
(233)
|
|
$
(319)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LOSS PER COMMON
SHARE, BASIC AND DILUTED:
|
$
(0.68)
|
|
$
(1.03)
|
|
|
|
$
(2.30)
|
|
$
(3.20)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average
common shares outstanding, basic and diluted
|
102,924,443
|
|
99,694,672
|
|
|
|
101,293,696
|
|
99,542,021
|
|
|
|
Adjusted EBITDA is a
non-GAAP term. See page 7 of this addendum for the
reconciliation of adjusted EBITDA to net loss as defined by
GAAP.
|
|
(a) Pro forma results
reflect certain acquisitions of cable systems in 2013 as if they
occurred as of January 1, 2012.
|
September 30,
2013. Pro forma revenues, operating
expenses and net loss increased by $264
million, $174 million and
$25 million, respectively, for the
nine months ended September 30, 2013.
September 30,
2012. Pro forma revenues, operating
expenses and net loss increased by $129
million, $85 million and
$16 million, respectively, for the
three months ended September 30, 2012. Pro forma
revenues, operating expenses and net loss increased by $381 million, $258
million and $55 million,
respectively, for the nine months ended September 30,
2012.
CHARTER
COMMUNICATIONS, INC. AND SUBSIDIARIES
|
CONSOLIDATED
BALANCE SHEETS
|
(dollars in
millions)
|
|
|
September 30,
2013
|
|
December 31,
2012
|
|
(unaudited)
|
|
|
ASSETS
|
|
|
|
CURRENT
ASSETS:
|
|
|
|
Cash and cash
equivalents
|
$
41
|
|
$
7
|
Restricted cash and
cash equivalents
|
—
|
|
27
|
Accounts receivable,
net
|
235
|
|
234
|
Prepaid expenses and
other current assets
|
81
|
|
62
|
Total
current assets
|
357
|
|
330
|
|
|
|
|
INVESTMENT IN CABLE
PROPERTIES:
|
|
|
|
Property, plant and
equipment, net
|
7,838
|
|
7,206
|
Franchises
|
6,009
|
|
5,287
|
Customer
relationships, net
|
1,465
|
|
1,424
|
Goodwill
|
1,159
|
|
953
|
Total
investment in cable properties, net
|
16,471
|
|
14,870
|
|
|
|
|
OTHER NONCURRENT
ASSETS
|
422
|
|
396
|
|
|
|
|
Total
assets
|
$
17,250
|
|
$
15,596
|
|
|
|
|
LIABILITIES AND
SHAREHOLDERS' EQUITY
|
|
|
|
CURRENT
LIABILITIES:
|
|
|
|
Accounts payable and
accrued liabilities
|
$
1,382
|
|
$
1,224
|
Total
current liabilities
|
1,382
|
|
1,224
|
|
|
|
|
LONG-TERM
DEBT
|
14,306
|
|
12,808
|
DEFERRED INCOME
TAXES
|
1,432
|
|
1,321
|
OTHER LONG-TERM
LIABILITIES
|
69
|
|
94
|
|
|
|
|
SHAREHOLDERS'
EQUITY
|
61
|
|
149
|
|
|
|
|
Total
liabilities and shareholders' equity
|
$
17,250
|
|
$
15,596
|
CHARTER
COMMUNICATIONS, INC. AND SUBSIDIARIES
|
UNAUDITED
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
(dollars in
millions)
|
|
|
|
|
|
|
|
Three Months Ended
September 30,
|
|
Nine Months Ended
September 30,
|
|
2013
|
|
2012
|
|
2013
|
|
|
2012
|
CASH FLOWS FROM
OPERATING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
$
|
(70)
|
|
$
|
(87)
|
|
$
|
(208)
|
|
$
|
(264)
|
Adjustments to
reconcile net loss to net cash flows from operating
activities:
|
|
|
|
|
|
|
|
|
|
|
Depreciation and
amortization
|
493
|
|
|
424
|
|
|
1,354
|
|
|
1,247
|
Stock compensation
expense
|
11
|
|
|
13
|
|
|
37
|
|
|
37
|
Noncash interest
expense
|
10
|
|
|
9
|
|
|
33
|
|
|
33
|
Loss on
extinguishment of debt
|
—
|
|
|
—
|
|
|
123
|
|
|
74
|
(Gain) loss on
derivative instruments, net
|
8
|
|
|
—
|
|
|
(9)
|
|
|
—
|
Deferred income
taxes
|
56
|
|
|
67
|
|
|
112
|
|
|
203
|
Other, net
|
5
|
|
|
1
|
|
|
32
|
|
|
(12)
|
Changes in operating
assets and liabilities, net of effects from
acquisitions:
|
|
|
|
|
|
|
|
|
|
|
Accounts
receivable
|
(1)
|
|
|
2
|
|
|
10
|
|
|
18
|
Prepaid expenses and
other assets
|
(7)
|
|
|
(1)
|
|
|
(13)
|
|
|
(12)
|
Accounts payable,
accrued liabilities and other
|
33
|
|
|
40
|
|
|
92
|
|
|
67
|
Net cash flows from
operating activities
|
538
|
|
|
468
|
|
|
1,563
|
|
|
1,391
|
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM
INVESTING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
Purchases of
property, plant and equipment
|
(425)
|
|
|
(488)
|
|
|
(1,259)
|
|
|
(1,296)
|
Change in accrued
expenses related to capital expenditures
|
19
|
|
|
3
|
|
|
21
|
|
|
16
|
Sales (purchases) of
cable systems, net
|
(673)
|
|
|
(2)
|
|
|
(673)
|
|
|
19
|
Other, net
|
(1)
|
|
|
(7)
|
|
|
(15)
|
|
|
(18)
|
Net cash flows from
investing activities
|
(1,080)
|
|
|
(494)
|
|
|
(1,926)
|
|
|
(1,279)
|
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM
FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
Borrowings of
long-term debt
|
1,859
|
|
|
1,536
|
|
|
6,569
|
|
|
4,353
|
Repayments of
long-term debt
|
(1,352)
|
|
|
(635)
|
|
|
(6,177)
|
|
|
(3,554)
|
Payments for debt
issuance costs
|
(18)
|
|
|
(17)
|
|
|
(50)
|
|
|
(41)
|
Purchase of treasury
stock
|
(1)
|
|
|
—
|
|
|
(11)
|
|
|
(4)
|
Proceeds from
exercise of options and warrants
|
51
|
|
|
10
|
|
|
67
|
|
|
13
|
Other, net
|
—
|
|
|
(5)
|
|
|
(1)
|
|
|
(13)
|
Net cash flows from
financing activities
|
539
|
|
|
889
|
|
|
397
|
|
|
754
|
|
|
|
|
|
|
|
|
|
|
|
NET INCREASE
(DECREASE) IN CASH AND CASH EQUIVALENTS
|
(3)
|
|
|
863
|
|
|
34
|
|
|
866
|
CASH AND CASH
EQUIVALENTS, beginning of period
|
44
|
|
|
5
|
|
|
7
|
|
|
2
|
CASH AND CASH
EQUIVALENTS, end of period
|
$
|
41
|
|
$
|
868
|
|
$
|
41
|
|
$
|
868
|
|
|
|
|
|
|
|
|
|
|
|
CASH PAID FOR
INTEREST
|
$
|
214
|
|
$
|
199
|
|
$
|
584
|
|
$
|
647
|
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, 2013
(a)
|
|
June 30, 2013
(a)
|
|
December 31, 2012
(a)
|
|
September 30, 2012
(a)
|
Footprint
|
|
|
|
|
|
|
|
Estimated Video
Passings (b)
|
12,794
|
|
12,768
|
|
12,741
|
|
12,699
|
Estimated Internet
Passings (b)
|
12,475
|
|
12,454
|
|
12,427
|
|
12,375
|
Estimated Telephone
Passings (b)
|
11,815
|
|
11,784
|
|
11,752
|
|
11,630
|
|
|
|
|
|
|
|
|
Penetration
Statistics
|
|
|
|
|
|
|
|
Video Penetration of
Estimated Video Passings (c)
|
34.0%
|
|
34.2%
|
|
35.0%
|
|
35.5%
|
Internet Penetration
of Estimated Internet Passings (c)
|
36.4%
|
|
35.6%
|
|
34.4%
|
|
34.0%
|
Telephone Penetration
of Estimated Telephone Passings (c)
|
19.9%
|
|
19.6%
|
|
18.6%
|
|
18.5%
|
|
|
|
|
|
|
|
|
Residential
|
|
|
|
|
|
|
|
Residential Customer
Relationships (d)
|
5,498
|
|
5,452
|
|
5,389
|
|
5,365
|
Residential Non-Video
Customers
|
1,319
|
|
1,246
|
|
1,103
|
|
1,043
|
%
Non-Video
|
24.0%
|
|
22.9%
|
|
20.5%
|
|
19.4%
|
|
|
|
|
|
|
|
|
Customers
|
|
|
|
|
|
|
|
Video (e)
|
4,179
|
|
4,206
|
|
4,286
|
|
4,322
|
Internet
(f)
|
4,290
|
|
4,204
|
|
4,059
|
|
4,000
|
Telephone
(g)
|
2,217
|
|
2,176
|
|
2,073
|
|
2,039
|
Residential PSUs
(h)
|
10,686
|
|
10,586
|
|
10,418
|
|
10,361
|
Residential PSU /
Customer Relationships (d)(h)
|
1.94
|
|
1.94
|
|
1.93
|
|
1.93
|
|
|
|
|
|
|
|
|
Quarterly Net
Additions/(Losses) (i)
|
|
|
|
|
|
|
|
Video (e)
|
(27)
|
|
(55)
|
|
(36)
|
|
(71)
|
Internet
(f)
|
86
|
|
38
|
|
59
|
|
77
|
Telephone
(g)
|
41
|
|
45
|
|
34
|
|
54
|
Residential PSUs
(h)
|
100
|
|
28
|
|
57
|
|
60
|
|
|
|
|
|
|
|
|
Single Play
Penetration (j)
|
37.7%
|
|
37.6%
|
|
37.3%
|
|
37.2%
|
Double Play
Penetration (k)
|
30.2%
|
|
30.5%
|
|
32.0%
|
|
32.4%
|
Triple Play
Penetration (l)
|
32.2%
|
|
31.9%
|
|
30.7%
|
|
30.4%
|
Digital Penetration
(m)
|
91.2%
|
|
90.4%
|
|
86.8%
|
|
86.0%
|
Revenue per Customer
Relationship (d)(n)
|
$
|
108.52
|
|
$
|
108.55
|
|
$
|
105.76
|
|
$
|
105.53
|
|
|
|
|
|
|
|
|
Commercial
|
|
|
|
|
|
|
|
Commercial Customer
Relationships (d)(o)
|
359
|
|
347
|
|
341
|
|
337
|
|
|
|
|
|
|
|
|
Customers
|
|
|
|
|
|
|
|
Video
(e)(o)
|
166
|
|
164
|
|
177
|
|
180
|
Internet
(f)
|
245
|
|
233
|
|
210
|
|
202
|
Telephone
(g)
|
138
|
|
131
|
|
116
|
|
109
|
Commercial PSUs
(h)
|
549
|
|
528
|
|
503
|
|
491
|
|
|
|
|
|
|
|
|
Quarterly Net
Additions/(Losses) (i)
|
|
|
|
|
|
|
|
Video
(e)(o)
|
2
|
|
(3)
|
|
(3)
|
|
3
|
Internet
(f)
|
12
|
|
13
|
|
8
|
|
9
|
Telephone
(g)
|
7
|
|
8
|
|
7
|
|
8
|
Commercial PSUs
(h)
|
21
|
|
18
|
|
12
|
|
20
|
Pro forma operating statistics reflect certain acquisitions of
cable systems in 2013 as if such transactions had occurred as of
the last day of the respective period for all periods
presented.
At June 30, 2013, actual
residential video, Internet and telephone customers were 3,917,000,
3,924,000 and 2,019,000, respectively; actual commercial video,
Internet and telephone customers were 156,000, 214,000 and 119,000,
respectively.
At December 31, 2012, actual
residential video, Internet and telephone customers were 3,989,000,
3,785,000 and 1,914,000, respectively; actual commercial video,
Internet and telephone customers were 169,000, 193,000 and 105,000,
respectively.
At September 30, 2012, actual
residential video, Internet and telephone customers were 4,025,000,
3,731,000 and 1,880,000, respectively; actual commercial video,
Internet and telephone customers were 172,000, 186,000 and 99,000,
respectively.
See footnotes to unaudited summary of operating statistics on
page 6 of this addendum.
(a)
|
We calculate the
aging of customer accounts based on the monthly billing cycle for
each account. On that basis, at September 30, 2013, June 30,
2013, December 31, 2012, and September 30, 2012, customers include
approximately 9,700, 9,600, 18,400, and 16,900 customers,
respectively, whose accounts were over 60 days past due in payment,
approximately 1,000, 900, 2,600, and 3,400 customers, respectively,
whose accounts were over 90 days past due in payment and
approximately 900, 700, 1,700, and 1,600 customers, respectively,
whose accounts were over 120 days past due in payment.
|
|
|
(b)
|
"Passings" represent
our estimate of the number of units, such as single family homes,
apartment and condominium units and commercial establishments
passed by our cable distribution network in the areas where we
offer the service indicated. These estimates are updated for
all periods presented based upon the information available at that
time.
|
|
|
(c)
|
"Penetration"
represents residential and commercial customers as a percentage of
estimated passings for the service indicated.
|
|
|
(d)
|
"Customer
Relationships" include the number of customers that receive one or
more levels of service, encompassing video, Internet and phone
services, without regard to which service(s) such customers
receive. This statistic is computed in accordance with the
guidelines of the National Cable & Telecommunications
Association (NCTA). Commercial customer relationships
includes video customers in commercial structures, which are
calculated on an EBU basis (see footnote (o)) and non-video
commercial customer relationships.
|
|
|
(e)
|
"Video Customers"
represent those customers who subscribe to our video
services.
|
|
|
(f)
|
"Internet Customers"
represent those customers who subscribe to our Internet
services.
|
|
|
(g)
|
"Telephone Customers"
represent those customers who subscribe to our telephone
services.
|
|
|
(h)
|
"Primary Service
Units" or "PSUs" represent the total of video, Internet and
telephone customers.
|
|
|
(i)
|
"Quarterly Net
Additions/(Losses)" represent the net gain or loss in the
respective quarter for the service indicated.
|
|
|
(j)
|
"Single Play
Penetration" represents residential customers receiving only one of
Charter service offerings, including video, Internet or phone, as a
% of residential customer relationships.
|
|
|
(k)
|
"Double Play
Penetration" represents residential customers receiving only two of
Charter service offerings, including video, Internet and/or phone,
as a % of residential customer relationships.
|
|
|
(l)
|
"Triple Play
Penetration" represents residential customers receiving all three
Charter service offerings, including video, Internet and phone, as
a % of residential customer relationships.
|
|
|
(m)
|
"Digital Penetration"
represents the number of residential digital video customers as a
percentage of residential video customers.
|
|
|
(n)
|
"Revenue per Customer
Relationship" is calculated as total residential video, Internet
and phone quarterly revenue divided by three divided by average
residential customer relationships during the respective
quarter.
|
|
|
(o)
|
Included within
commercial video customers are those in commercial structures,
which are calculated on an equivalent bulk unit ("EBU")
basis. We calculate EBUs by dividing the bulk price charged
to accounts in an area by the published rate charged to non-bulk
residential customers in that market for the comparable tier of
service. This EBU method of estimating video customers is
consistent with the methodology used in determining costs paid to
programmers and is consistent with the methodology used by other
multiple system operators. As we increase our published video
rates to residential customers without a corresponding increase in
the prices charged to commercial service customers, our EBU count
will decline even if there is no real loss in commercial service
customers. For example, commercial video customers decreased
by 10,000 during the nine months ended September 30, 2013 due to
published video rate increases.
|
CHARTER
COMMUNICATIONS, INC. AND SUBSIDIARIES
|
UNAUDITED
RECONCILIATION OF NON-GAAP MEASURES TO GAAP MEASURES
|
(dollars in
millions)
|
|
|
Three Months Ended
September 30,
|
|
Nine Months Ended
September 30,
|
|
2013
|
|
2012
|
|
2013
|
|
2012
|
|
Actual
|
|
Actual
|
|
Actual
|
|
Actual
|
|
|
|
|
|
|
|
|
Net loss
|
$
(70)
|
|
$
(87)
|
|
$
(208)
|
|
$
(264)
|
Plus: Interest
expense, net
|
214
|
|
229
|
|
635
|
|
691
|
Income tax
expense
|
57
|
|
69
|
|
124
|
|
208
|
Depreciation and
amortization
|
493
|
|
424
|
|
1,354
|
|
1,247
|
Stock compensation
expense
|
11
|
|
13
|
|
37
|
|
37
|
Loss on
extinguishment of debt
|
—
|
|
—
|
|
123
|
|
74
|
(Gain) loss on
derivative instruments, net
|
8
|
|
—
|
|
(9)
|
|
—
|
Other, net
|
19
|
|
3
|
|
38
|
|
3
|
|
|
|
|
|
|
|
|
Adjusted EBITDA
(b)
|
732
|
|
651
|
|
2,094
|
|
1,996
|
Less: Purchases
of property, plant and equipment
|
(425)
|
|
(488)
|
|
(1,259)
|
|
(1,296)
|
|
|
|
|
|
|
|
|
Adjusted EBITDA less
capital expenditures
|
$
307
|
|
$
163
|
|
$
835
|
|
$
700
|
|
|
|
|
|
|
|
|
Net cash flows from
operating activities
|
$
538
|
|
$
468
|
|
$
1,563
|
|
$
1,391
|
Less: Purchases
of property, plant and equipment
|
(425)
|
|
(488)
|
|
(1,259)
|
|
(1,296)
|
Change in accrued
expenses related to capital expenditures
|
19
|
|
3
|
|
21
|
|
16
|
|
|
|
|
|
|
|
|
Free cash
flow
|
$
132
|
|
$
(17)
|
|
$
325
|
|
$
111
|
|
|
|
|
|
|
|
|
|
Three Months Ended
September 30,
|
|
Nine Months Ended
September 30,
|
|
2013
|
|
2012
|
|
2013
|
|
2012
|
|
Actual
|
|
Pro Forma
(a)
|
|
Pro Forma
(a)
|
|
Pro Forma
(a)
|
|
|
|
|
|
|
|
|
Net loss
|
$
(70)
|
|
$
(103)
|
|
$
(233)
|
|
$
(319)
|
Plus: Interest
expense, net
|
214
|
|
242
|
|
662
|
|
731
|
Income tax
expense
|
57
|
|
75
|
|
158
|
|
223
|
Depreciation and
amortization
|
493
|
|
465
|
|
1,408
|
|
1,370
|
Stock compensation
expense
|
11
|
|
13
|
|
37
|
|
37
|
Loss on
extinguishment of debt
|
—
|
|
—
|
|
123
|
|
74
|
(Gain) loss on
derivative instruments, net
|
8
|
|
—
|
|
(9)
|
|
—
|
Other, net
|
19
|
|
3
|
|
38
|
|
3
|
|
|
|
|
|
|
|
|
Adjusted EBITDA
(b)
|
732
|
|
695
|
|
2,184
|
|
2,119
|
Less: Purchases
of property, plant and equipment
|
(425)
|
|
(505)
|
|
(1,288)
|
|
(1,347)
|
|
|
|
|
|
|
|
|
Adjusted EBITDA less
capital expenditures
|
$
307
|
|
$
190
|
|
$
896
|
|
$
772
|
|
(a) Pro forma results
reflect certain acquisitions of cable systems in 2013 as if they
occurred as of January 1, 2012.
|
|
(b) See page 1 and 2
of this addendum for detail of the components included within
adjusted EBITDA.
|
The above schedules are presented in order to reconcile adjusted
EBITDA and free cash flows, both non-GAAP measures, to the most
directly comparable GAAP measures in accordance with Section 401(b)
of the Sarbanes-Oxley Act.
CHARTER
COMMUNICATIONS, INC. AND SUBSIDIARIES
|
CAPITAL
EXPENDITURES
|
(dollars in
millions)
|
|
|
Three Months Ended
September 30,
|
|
Nine Months Ended
September 30,
|
|
2013
|
|
2012
|
|
2013
|
|
2012
|
|
Actual
|
|
Actual
|
|
Actual
|
|
Actual
|
|
|
|
|
|
|
|
|
Customer premise
equipment (a)
|
$
193
|
|
$
258
|
|
$
618
|
|
$
631
|
Scalable
infrastructure (b)
|
78
|
|
67
|
|
210
|
|
301
|
Line extensions
(c)
|
54
|
|
57
|
|
162
|
|
131
|
Upgrade/Rebuild
(d)
|
50
|
|
54
|
|
137
|
|
138
|
Support capital
(e)
|
50
|
|
52
|
|
132
|
|
95
|
|
|
|
|
|
|
|
|
Total capital
expenditures (f)
|
$
425
|
|
$
488
|
|
$
1,259
|
|
$
1,296
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
September 30,
|
|
Nine Months Ended
September 30,
|
|
2013
|
|
2012
|
|
2013
|
|
2012
|
|
Actual
|
|
Pro Forma
(g)
|
|
Pro Forma
(g)
|
|
Pro Forma
(g)
|
|
|
|
|
|
|
|
|
Customer premise
equipment (a)
|
$
193
|
|
$
265
|
|
$
631
|
|
$
657
|
Scalable
infrastructure (b)
|
78
|
|
72
|
|
220
|
|
315
|
Line extensions
(c)
|
54
|
|
58
|
|
164
|
|
134
|
Upgrade/Rebuild
(d)
|
50
|
|
56
|
|
139
|
|
142
|
Support capital
(e)
|
50
|
|
54
|
|
134
|
|
99
|
|
|
|
|
|
|
|
|
Total capital
expenditures
|
$
425
|
|
$
505
|
|
$
1,288
|
|
$
1,347
|
|
|
(a)
|
Customer premise
equipment includes costs incurred at the customer residence to
secure new customers and revenue generating units. It also
includes customer installation costs and customer premise equipment
(e.g., set-top boxes and cable modems).
|
|
|
(b)
|
Scalable
infrastructure includes costs, not related to customer premise
equipment, to secure growth of new customers and revenue generating
units, or provide service enhancements (e.g., headend
equipment).
|
|
|
(c)
|
Line extensions
include network costs associated with entering new service areas
(e.g., fiber/coaxial cable, amplifiers, electronic equipment,
make-ready and design engineering).
|
|
|
(d)
|
Upgrade/rebuild
includes costs to modify or replace existing fiber/coaxial cable
networks, including betterments.
|
|
|
(e)
|
Support capital
includes costs associated with the replacement or enhancement of
non-network assets due to technological and physical obsolescence
(e.g., non-network equipment, land, buildings and
vehicles).
|
|
|
(f)
|
Total capital
expenditures includes $74 million and $82 million for the three
months ended September 30, 2013 and 2012, respectively, and
$221 million and $181 million for the nine months ended
September 30, 2013 and 2012, respectively, of capital
expenditures related to commercial services.
|
|
|
(g)
|
Pro forma results
reflect certain acquisitions of cable systems in 2013 as if they
occurred as of January 1, 2012.
|
SOURCE Charter Communications, Inc.