STAMFORD, Conn., April 28,
2016 /PRNewswire/ -- Charter Communications, Inc. (along with
its subsidiaries, the "Company" or "Charter") today reported
financial and operating results for the three months ended
March 31, 2016.
Key highlights:
- As of March 31, 2016, Charter served 6.8 million
residential and small and medium business ("SMB") customers. For
the twelve months ended March 31, 2016, total residential and
SMB customers grew by 381,000 or 5.9%.
- Total customer relationships increased 119,000 during the first
quarter, versus 90,000 during the first quarter of 2015.
Residential and SMB primary service units ("PSUs") increased by
218,000 during the period, versus 173,000 in the year-ago
quarter.
- Video and Internet customer trends continued to improve on a
year-over-year basis, with total first quarter 2016 video net
additions of 15,000, versus a loss of 12,000 in the prior-year
period, and total first quarter 2016 Internet net additions of
155,000, versus 135,000 in the first quarter of 2015.
- First quarter revenues of $2.5
billion grew 7.1% as compared to the prior-year period,
driven by residential revenue growth of 6.5% and commercial revenue
growth of 12.0%.
- First quarter Adjusted EBITDA1 grew by 10.4%
year-over-year. Excluding transition costs in the first quarters of
2016 and 2015, Adjusted EBITDA grew by 10.2% year-over-year.
- Capital expenditures totaled $429
million in first quarter, an increase from $351 million in the year-ago period. Excluding
transition capital expenditures for the pending transactions, first
quarter 2016 capital expenditures totaled $376 million.
"Our products, service, customer growth and financial results
continue to improve, as we deliver more value to our residential
and business customers," said Tom
Rutledge, President and CEO of Charter Communications. "The
operating, service and financial benefits of our strategies are as
we expected and demonstrate the growth opportunity that our
consumer-friendly practices can drive on a larger set of
underpenetrated assets through our pending transactions with Time
Warner Cable and Bright House Networks."
1Adjusted 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
|
|
|
|
March 31, 2016
(a)
|
|
March 31, 2015
(a)
|
|
Y/Y
Change
|
Footprint
(b)
|
|
|
|
|
|
Estimated Video
Passings
|
12,854
|
|
|
12,745
|
|
|
1
|
%
|
Estimated Internet
Passings
|
12,588
|
|
|
12,475
|
|
|
1
|
%
|
Estimated Voice
Passings
|
12,138
|
|
|
12,022
|
|
|
1
|
%
|
|
|
|
|
|
|
Penetration
Statistics (c)
|
|
|
|
|
|
Video Penetration of
Estimated Video Passings
|
34.6
|
%
|
|
34.6
|
%
|
|
—
|
ppts
|
Internet Penetration
of Estimated Internet Passings
|
45.5
|
%
|
|
41.8
|
%
|
|
3.7
|
ppts
|
Voice Penetration of
Estimated Voice Passings
|
23.6
|
%
|
|
22.2
|
%
|
|
1.4
|
ppts
|
|
|
|
|
|
|
Customer
Relationships (d)
|
|
|
|
|
|
Residential
|
6,388
|
|
|
6,070
|
|
|
5
|
%
|
Small and Medium
Business
|
405
|
|
|
342
|
|
|
18
|
%
|
Total Customer
Relationships
|
6,793
|
|
|
6,412
|
|
|
6
|
%
|
|
|
|
|
|
|
Residential
|
|
|
|
|
|
Primary Service
Units ("PSU")
|
|
|
|
|
|
Video
|
4,332
|
|
|
4,311
|
|
|
—
|
%
|
Internet
|
5,368
|
|
|
4,910
|
|
|
9
|
%
|
Voice
|
2,633
|
|
|
2,481
|
|
|
6
|
%
|
|
12,333
|
|
|
11,702
|
|
|
5
|
%
|
|
|
|
|
|
|
Quarterly Net
Additions/(Losses)
|
|
|
|
|
|
Video
|
10
|
|
|
(13)
|
|
|
NM
|
|
Internet
|
141
|
|
|
125
|
|
|
13
|
%
|
Voice
|
35
|
|
|
42
|
|
|
(17)
|
%
|
|
186
|
|
|
154
|
|
|
21
|
%
|
|
|
|
|
|
|
Single Play
(e)
|
2,509
|
|
|
2,385
|
|
|
5
|
%
|
Double Play
(e)
|
1,813
|
|
|
1,739
|
|
|
4
|
%
|
Triple Play
(e)
|
2,066
|
|
|
1,946
|
|
|
6
|
%
|
|
|
|
|
|
|
Single Play
Penetration (f)
|
39.3
|
%
|
|
39.3
|
%
|
|
—
|
ppts
|
Double Play
Penetration (f)
|
28.4
|
%
|
|
28.6
|
%
|
|
-0.2
|
ppts
|
Triple Play
Penetration (f)
|
32.3
|
%
|
|
32.1
|
%
|
|
0.2
|
ppts
|
|
|
|
|
|
|
% Residential
Non-Video Customer Relationships
|
32.2
|
%
|
|
29.0
|
%
|
|
3
|
%
|
|
|
|
|
|
|
Monthly Residential
Revenue per Residential Customer (g)
|
$111.04
|
|
|
$109.53
|
|
|
1
|
%
|
|
|
|
|
|
|
Small and Medium
Business
|
|
|
|
|
|
PSUs
|
|
|
|
|
|
Video
|
113
|
|
|
96
|
|
|
18
|
%
|
Internet
|
359
|
|
|
300
|
|
|
20
|
%
|
Voice
|
231
|
|
|
185
|
|
|
25
|
%
|
|
703
|
|
|
581
|
|
|
21
|
%
|
|
|
|
|
|
|
Quarterly Net
Additions/(Losses)
|
|
|
|
|
|
Video
|
5
|
|
|
1
|
|
|
NM
|
|
Internet
|
14
|
|
|
10
|
|
|
40
|
%
|
Voice
|
13
|
|
|
8
|
|
|
63
|
%
|
|
32
|
|
|
19
|
|
|
68
|
%
|
|
|
|
|
|
|
Monthly Small and
Medium Business Revenue per Customer (h)
|
$169.74
|
|
|
$179.74
|
|
|
(6)
|
%
|
|
|
|
|
|
|
Enterprise PSUs
(i)
|
|
|
|
|
|
Enterprise
PSUs
|
31
|
|
|
26
|
|
|
19
|
%
|
|
Footnotes In thousands, except per customer
and penetration data. See footnotes to unaudited summary of
operating statistics on page 5 of the addendum of this news
release. The footnotes contain important disclosures regarding the
definitions used for these operating statistics.
|
|
NM - Not
meaningful
|
|
All percentages are
calculated using whole numbers. Minor differences may exist due to
rounding.
|
During the first quarter of 2016, Charter's residential customer
relationships grew by 104,000, versus 80,000 in the prior-year
period. Residential PSUs increased by 186,000 versus a gain of
154,000 in the prior-year period, driven by Charter
Spectrum, an industry-leading suite of video, Internet, and
voice services launched in 2014. Charter Spectrum includes
over 200 HD channels, in addition to minimum offered Internet
speeds of 60 Mbps, and a fully-featured voice service, delivered at
a highly competitive price. As of the end of the first quarter of
2016, 91% of Charter's residential customers received Charter
Spectrum products.
Residential video customers increased by 10,000 in the first
quarter of 2016, versus a loss of 13,000 in the year-ago period.
For the past four years, Charter has significantly increased the
competitiveness of its video product, by including more HD channels
and video on demand offerings, attractive packaging of advanced
services, improved selling methods, and enhanced service quality.
Today, virtually all of Charter's passings are fully digitized,
with access to more HD channels than satellite TV offers, and as of
March 31, 2016, over 96% of Charter's residential video
customers subscribed to the Company's expanded basic video
service.
Charter has introduced its new cloud-based user interface,
Spectrum Guide, to video customers in Fort Worth, Texas, Reno, Nevada and St.
Louis, Missouri. Spectrum Guide dramatically improves video
content search and discovery, and fully enables Charter's on-demand
offering. In addition, Spectrum Guide will function on nearly all
of Charter's deployed set-tops. Charter will soon begin the launch
of its new set-top box, World Box, which features
downloadable security along with other advanced functionality,
driving an enhanced customer experience and reducing incremental
set-top box costs.
Charter added 141,000 residential Internet customers in the
first quarter of 2016, compared to 125,000 a year ago. As of
March 31, 2016, 89% of Charter's residential Internet
customers subscribed to tiers that provided speeds of 60 Mbps or
more. The Company continues to see strong demand for its Internet
service as consumers value the speed and reliability of Charter's
Internet offering.
During the first quarter, the Company added 35,000 residential
voice customers, versus a gain of 42,000 during the first quarter
of 2015.
First quarter residential revenue per customer relationship
totaled $111.04, and grew by 1.4% as
compared to the prior-year period, driven by higher product
sell-in, promotional rate step-ups and rate adjustments, partially
offset by continued single play Internet sell-in.
During the first quarter of 2016, SMB customer relationships
grew by 15,000 versus 10,000 during the first quarter of 2015. SMB
PSUs increased 32,000, compared to 19,000 during the first quarter
of 2015. Charter's accelerating SMB customer and PSU growth is
being driven by the launch of the Spectrum Business product
suite to the small and medium business segments during the first
quarter of 2015. This competitive new offering is intended to
provide better products and greater value to SMB customers.
First Quarter
Financial Results
|
|
|
CHARTER
COMMUNICATIONS, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS AND OPERATING
DATA (dollars in millions, except per share
data)
|
|
|
|
Three Months Ended
March 31,
|
|
2016
|
|
2015
|
|
%
Change
|
REVENUES:
|
|
|
|
|
|
Video
|
$
|
1,170
|
|
|
$
|
1,129
|
|
|
3.7
|
%
|
Internet
|
804
|
|
|
717
|
|
|
12.1
|
%
|
Voice
|
135
|
|
|
134
|
|
|
0.5
|
%
|
Residential
revenue
|
2,109
|
|
|
1,980
|
|
|
6.5
|
%
|
Small and medium
business
|
202
|
|
|
182
|
|
|
11.3
|
%
|
Enterprise
|
99
|
|
|
87
|
|
|
13.4
|
%
|
Commercial
revenue
|
301
|
|
|
269
|
|
|
12.0
|
%
|
Advertising
sales
|
72
|
|
|
66
|
|
|
8.8
|
%
|
Other
|
48
|
|
|
47
|
|
|
2.7
|
%
|
Total
Revenues
|
2,530
|
|
|
2,362
|
|
|
7.1
|
%
|
|
|
|
|
|
|
COSTS AND
EXPENSES:
|
|
|
|
|
|
Total operating costs
and expenses
|
1,647
|
|
|
1,562
|
|
|
5.4
|
%
|
|
|
|
|
|
|
Adjusted
EBITDA
|
$
|
883
|
|
|
$
|
800
|
|
|
10.4
|
%
|
|
|
|
|
|
|
Adjusted EBITDA
margin
|
34.9
|
%
|
|
33.9
|
%
|
|
|
|
|
|
|
|
|
Capital
Expenditures
|
$
|
429
|
|
|
$
|
351
|
|
|
|
% Total
Revenues
|
17.0
|
%
|
|
14.9
|
%
|
|
|
|
|
|
|
|
|
Net loss
|
$
|
(188)
|
|
|
$
|
(81)
|
|
|
|
Loss per common
share, basic and diluted
|
$
|
(1.68)
|
|
|
$
|
(0.73)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash flows from
operating activities
|
$
|
424
|
|
|
$
|
528
|
|
|
|
Free cash
flow
|
$
|
(61)
|
|
|
$
|
101
|
|
|
|
Revenue
First quarter 2016 revenues rose to $2.5
billion, 7.1% higher than the year-ago quarter, driven
primarily by growth in Internet, video and commercial revenues.
Video revenues totaled $1.2
billion in the first quarter, an increase of 3.7% compared
to the prior-year period. Video revenue growth was driven by higher
advanced services penetration, annual and promotional rate
adjustments and an increase in expanded basic and digital customers
and revenue allocation from higher bundling, partially offset by a
decrease in residential limited basic video customers.
Internet revenues grew 12.1% compared to the year-ago quarter to
$804 million, driven by an increase
of 458,000 Internet customers during the last year, promotional
rolloff and price adjustments.
Voice revenues totaled $135
million, an increase of 0.5% versus the first quarter of
2015, due to the addition of 152,000 voice customers in the last
twelve months, partially offset by value-based pricing.
Commercial revenues rose to $301
million, an increase of 12.0% over the prior-year period,
and was driven by small and medium business revenue growth of 11.3%
and enterprise revenue growth of 13.4%. Following the launch of new
pricing and packaging for commercial customers, PSU growth has
accelerated albeit at lower promotional pricing.
First quarter advertising sales revenues of $72 million increased 8.8% compared to the
year-ago quarter primarily driven by an increase in political
advertising revenue.
Operating Costs and Expenses
First quarter total operating costs and expenses increased by
$85 million, or 5.4%, compared to the
year-ago period, reflecting increases in programming costs,
marketing costs and other expenses.
First quarter programming expense increased by $37 million, or 5.5%, as compared to the first
quarter of 2015, reflecting contractual programming increases, a
higher number of expanded basic package customers and the
introduction of new networks to Charter's video offering, partly
offset by a favorable settlement with a programmer in the first
quarter of 2016. Excluding this programming expense benefit and the
impact of video customer growth over the last twelve months, first
quarter 2016 programming expense would have increased 6.0%
year-over-year.
Costs to service customers remained virtually unchanged
year-over-year despite year-over-year residential and SMB customer
relationship growth of 5.9%, given improved service metrics. Other
expenses grew by $34 million, or
17.6%, as compared to the first quarter of 2015, reflecting higher
corporate and administrative labor costs, including the insourcing
of IT and software development resources, property taxes and
insurance costs, enterprise sales and labor costs, advertising
sales costs and a non-recurring expense associated with Charter's
incentive bonus plan. Excluding this non-recurring expense, first
quarter 2016 other expenses would have grown 13.4% versus the
prior-year period.
Adjusted EBITDA
First quarter Adjusted EBITDA of $883
million grew by 10.4% year-over-year, reflecting revenue
growth and operating costs and expenses growth of 7.1% and 5.4%,
respectively. Excluding transition related expenses, first quarter
Adjusted EBITDA grew by 10.2% year-over-year.
Net Loss
Net loss totaled $188 million in
the first quarter of 2016, compared to $81
million in the first quarter of 2015. The year-over-year
increase in net loss was primarily related to a $165 million increase in interest expense, driven
by the financing of Charter's pending transactions with Time Warner
Cable Inc. ("TWC") and Bright House Networks, LLC ("Bright House"),
offset by higher income from operations and lower income tax
expense. Basic and diluted loss per common share was $1.68 in the first quarter of 2016 compared to
$0.73 during the same period last
year. The increase in loss per common share was primarily the
result of the factors described above, partially offset by a 0.6%
increase in weighted average shares outstanding versus the
prior-year period.
Capital Expenditures
Property, plant and equipment expenditures totaled $429 million in the first quarter of 2016,
compared to $351 million during the
first quarter of 2015. The year-over-year increase in capital
expenditures resulted from higher product development investments,
transition capital expenditures related to Charter's planned and
pending acquisitions and the timing of support capital investments
versus the prior-year, partially offset by a decline in customer
premise equipment ("CPE") spending. Transition-related capital
expenditures accounted for $53
million of capital expenditures in the first quarter of 2016
versus $14 million in the first
quarter of 2015. Excluding transition-related expenditures, first
quarter 2016 property, plant and equipment expenditures totaled
$376 million compared to $337 million during the same period last
year.
Cash Flow
During the first quarter of 2016, net cash flows from operating
activities totaled $424 million,
compared to $528 million in the first
quarter of 2015. The year-over-year decline in net cash flow from
operating activities was primarily due to higher cash interest paid
in the first quarter of 2016 versus the first quarter of 2015,
driven by the financing of Charter's pending transactions with TWC
and Bright House, partly offset by an increase in Adjusted EBITDA
year-over-year, and a smaller increase in working capital than in
the prior-year period.
Free cash flow for the first quarter of 2016 totaled negative
$61 million, compared to $101 million during the same period last year.
The decrease was primarily due to higher cash interest paid in the
first quarter of 2016 versus the first quarter of 2015, and the
year-over-year increase in capital expenditures, partly offset by
the factors described above.
Liquidity & Financing
As of March 31, 2016, total principal amount of debt was
approximately $37.3 billion, and
Charter held $21.8 billion in
proceeds from debt in escrow for Charter's pending transactions
with TWC and Bright House. As of March 31, 2016, Charter's
credit facilities provided approximately $1.2 billion of additional liquidity.
In February 2016, Charter issued
$1.7 billion of 5.875% senior
unsecured notes due 2024 (the "2024 Notes") and in April 2016, Charter issued $1.5 billion of 5.500% senior unsecured notes due
2026 (the "2026 Notes"). Charter intends to use the net proceeds
from the issuance of the 2024 Notes and the 2026 Notes for one or
more of the following: (i) to repurchase or redeem any of Charter's
outstanding 7.000% senior notes due 2019 and 7.375% senior notes
due 2020 and pay any related fees and expenses, (ii) to repurchase
or redeem all or a portion of Charter's outstanding 6.500% senior
notes due 2021 and pay related fees and expenses and (iii) for
general corporate purposes. Any redemption or repurchase of
Charter's outstanding 6.500% senior notes due 2021 would not take
place until after the Company determines the amount, if any, of the
incremental cash proceeds to TWC stockholders if they were to elect
$115 per share in cash rather than
$100 per share in connection with the
previously announced transaction with TWC.
Conference Call
Charter will host a conference call on Thursday, April 28,
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
73914494.
A replay of the call will be available at 855-859-2056 or
404-537-3406 beginning two hours after the completion of the call
through the end of business on May 12,
2016. The conference ID code for the replay is 73914494.
Additional Information Available on Website
The information in this press release should be read in
conjunction with the financial statements and footnotes contained
in the Company's Form 10-Q for the quarter ended March 31,
2016 which will be posted on the "Financial Information" section of
our investor relations website at ir.charter.com, when it is filed
with the United States Securities and Exchange Commission. A slide
presentation to accompany the conference call and a trending
schedule containing historical customer and financial data will
also be available in the "Financial Information" section.
Use of Non-GAAP Financial Metrics
The Company uses certain measures that are not defined by
Generally Accepted Accounting Principles ("GAAP") to evaluate
various aspects of its business. Adjusted EBITDA and free cash flow
are non-GAAP financial measures and should be considered in
addition to, not as a substitute for, net loss or cash flows from
operating activities reported in accordance with GAAP. These terms,
as defined by Charter, may not be comparable to similarly titled
measures used by other companies. Adjusted EBITDA is reconciled to
net loss and free cash flow is reconciled to net cash flows from
operating activities in the addendum of this news release.
Adjusted EBITDA is defined as net loss plus net interest
expense, income taxes, depreciation and amortization, stock
compensation expense, loss on extinguishment of debt, loss on
derivative instruments, net, other expense, net and other operating
expenses, such as merger and acquisition costs, 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 $102 million
and $76 million for the three months
ended March 31, 2016 and 2015, respectively.
About Charter
Charter (NASDAQ: CHTR) is a leading broadband communications
company and the fourth-largest cable operator in the United States. Charter provides a full
range of advanced broadband services, including 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 reflected in or
suggested by these forward-looking statements are reasonable, we
cannot assure you that we will achieve or realize these plans,
intentions or expectations. Forward-looking statements are
inherently subject to risks, uncertainties and assumptions
including, without limitation, the factors described under "Risk
Factors" from time to time in our filings with the SEC. Many
of the forward-looking statements contained in this communication
may be identified by the use of forward-looking words such as
"believe", "expect", "anticipate", "should", "planned", "will",
"may", "intend", "estimated", "aim", "on track", "target",
"opportunity", "tentative", "positioning", "designed", "create",
"predict", "project", "seek", "would", "could", "continue",
"ongoing", "upside", "increases" and "potential", among
others. Important factors that could cause actual results to
differ materially from the forward-looking statements we make in
this communication are set forth in our Annual Report on Form 10-K,
our definitive proxy statement filed with the SEC on August 20, 2015, and 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 TWC Transaction and Bright House
Transaction (collectively, the "Transactions")
- delays in the completion of the Transactions;
- the risk that a condition to completion of the Transactions may
not be satisfied;
- the risk that regulatory or other approvals that may be
required for the Transactions is delayed, is not obtained or is
obtained subject to material conditions that are not
anticipated;
- New Charter's ability to achieve the synergies and value
creation contemplated by the Transactions;
- New Charter's ability to promptly, efficiently and effectively
integrate acquired operations into its own operations;
- managing a significantly larger company than before the
completion of the Transactions;
- diversion of management time on issues related to the
Transactions;
- changes in Charter's, TWC's or Bright House's businesses,
future cash requirements, capital requirements, results of
operations, revenues, financial condition and/or cash flows;
- disruption in the existing business relationships of Charter,
TWC and Bright House as a result of the Transactions;
- the increase in indebtedness as a result of the Transactions,
which will increase interest expense and may decrease Charter's
operating flexibility;
- changes in transaction costs, the amount of fees paid to
financial advisors, potential termination fees and the potential
payments to TWC's and Bright House's executive officers in
connection with the Transactions;
- operating costs and business disruption that may be greater
than expected; and
- the ability to retain and hire key personnel and maintain
relationships with providers or other business partners pending
completion 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, video
provided over the Internet 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);
- the development and deployment of new products and technologies
including our cloud-based user interface, Spectrum Guide®, and
downloadable security for set-top boxes;
- 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 and negatively
impact 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
release.
CHARTER
COMMUNICATIONS, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS AND
OPERATING DATA (dollars in millions, except per share
data)
|
|
|
|
Three Months Ended
March 31,
|
|
2016
|
|
2015
|
|
%
Change
|
REVENUES:
|
|
|
|
|
|
Video
|
$
|
1,170
|
|
|
$
|
1,129
|
|
|
3.7
|
%
|
Internet
|
804
|
|
|
717
|
|
|
12.1
|
%
|
Voice
|
135
|
|
|
134
|
|
|
0.5
|
%
|
Residential
revenue
|
2,109
|
|
|
1,980
|
|
|
6.5
|
%
|
Small and medium
business
|
202
|
|
|
182
|
|
|
11.3
|
%
|
Enterprise
|
99
|
|
|
87
|
|
|
13.4
|
%
|
Commercial
revenue
|
301
|
|
|
269
|
|
|
12.0
|
%
|
Advertising
sales
|
72
|
|
|
66
|
|
|
8.8
|
%
|
Other
|
48
|
|
|
47
|
|
|
2.7
|
%
|
Total
Revenues
|
2,530
|
|
|
2,362
|
|
|
7.1
|
%
|
|
|
|
|
|
|
COSTS AND
EXPENSES:
|
|
|
|
|
|
Programming
|
703
|
|
|
666
|
|
|
5.5
|
%
|
Franchises, regulatory
and connectivity
|
112
|
|
|
107
|
|
|
4.5
|
%
|
Costs to service
customers
|
421
|
|
|
423
|
|
|
(0.4)
|
%
|
Marketing
|
162
|
|
|
151
|
|
|
7.2
|
%
|
Transition
costs
|
21
|
|
|
21
|
|
|
0.6
|
%
|
Other
|
228
|
|
|
194
|
|
|
17.6
|
%
|
Total operating costs
and expenses (exclusive of items shown separately below)
|
1,647
|
|
|
1,562
|
|
|
5.4
|
%
|
|
|
|
|
|
|
Adjusted
EBITDA
|
883
|
|
|
800
|
|
|
10.4
|
%
|
|
|
|
|
|
|
Adjusted EBITDA
margin
|
34.9
|
%
|
|
33.9
|
%
|
|
|
|
|
|
|
|
|
Depreciation and
amortization
|
539
|
|
|
514
|
|
|
|
Stock compensation
expense
|
24
|
|
|
19
|
|
|
|
Other operating
expenses, net
|
18
|
|
|
18
|
|
|
|
|
|
|
|
|
|
Income from
operations
|
302
|
|
|
249
|
|
|
|
|
|
|
|
|
|
OTHER
EXPENSES:
|
|
|
|
|
|
Interest expense,
net
|
(454)
|
|
|
(289)
|
|
|
|
Loss on derivative
instruments, net
|
(5)
|
|
|
(6)
|
|
|
|
Other expense,
net
|
(3)
|
|
|
—
|
|
|
|
|
(462)
|
|
|
(295)
|
|
|
|
|
|
|
|
|
|
Loss before income
taxes
|
(160)
|
|
|
(46)
|
|
|
|
|
|
|
|
|
|
Income tax
expense
|
(28)
|
|
|
(35)
|
|
|
|
|
|
|
|
|
|
Net loss
|
$
|
(188)
|
|
|
$
|
(81)
|
|
|
|
|
|
|
|
|
|
LOSS PER COMMON
SHARE, BASIC AND DILUTED
|
$
|
(1.68)
|
|
|
$
|
(0.73)
|
|
|
|
|
|
|
|
|
|
Weighted average
common shares outstanding, basic and diluted
|
112,311,539
|
|
|
111,655,617
|
|
|
|
|
Adjusted EBITDA is a
non-GAAP term. See page 6 of this addendum for the
reconciliation of adjusted EBITDA to net loss as defined by
GAAP.
|
|
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)
|
|
|
|
|
|
March
31,
|
|
December
31,
|
|
2016
|
|
2015
|
|
|
|
|
ASSETS
|
|
|
|
CURRENT
ASSETS:
|
|
|
|
Cash and cash
equivalents
|
$
|
1,278
|
|
|
$
|
5
|
|
Accounts receivable,
net
|
253
|
|
|
279
|
|
Prepaid expenses and
other current assets
|
81
|
|
|
61
|
|
Total current
assets
|
1,612
|
|
|
345
|
|
|
|
|
|
RESTRICTED CASH AND
CASH EQUIVALENTS
|
22,313
|
|
|
22,264
|
|
|
|
|
|
INVESTMENT IN CABLE
PROPERTIES:
|
|
|
|
Property, plant and
equipment, net
|
8,294
|
|
|
8,345
|
|
Franchises
|
6,006
|
|
|
6,006
|
|
Customer
relationships, net
|
800
|
|
|
856
|
|
Goodwill
|
1,168
|
|
|
1,168
|
|
Total investment in
cable properties, net
|
16,268
|
|
|
16,375
|
|
|
|
|
|
OTHER NONCURRENT
ASSETS
|
331
|
|
|
332
|
|
|
|
|
|
Total
assets
|
$
|
40,524
|
|
|
$
|
39,316
|
|
|
|
|
|
LIABILITIES AND
SHAREHOLDERS' DEFICIT
|
|
|
|
CURRENT
LIABILITIES:
|
|
|
|
Accounts payable and
accrued liabilities
|
$
|
1,925
|
|
|
$
|
1,972
|
|
Total current
liabilities
|
1,925
|
|
|
1,972
|
|
|
|
|
|
LONG-TERM
DEBT
|
37,124
|
|
|
35,723
|
|
DEFERRED INCOME
TAXES
|
1,618
|
|
|
1,590
|
|
OTHER LONG-TERM
LIABILITIES
|
76
|
|
|
77
|
|
|
|
|
|
SHAREHOLDERS'
DEFICIT
|
(219)
|
|
|
(46)
|
|
|
|
|
|
Total liabilities and
shareholders' deficit
|
$
|
40,524
|
|
|
$
|
39,316
|
|
CHARTER
COMMUNICATIONS, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF CASH
FLOWS (dollars in millions)
|
|
|
|
Three Months Ended
March 31,
|
|
2016
|
|
2015
|
CASH FLOWS FROM
OPERATING ACTIVITIES:
|
|
|
|
Net loss
|
$
|
(188)
|
|
|
$
|
(81)
|
|
Adjustments to
reconcile net loss to net cash flows from operating
activities:
|
|
|
|
Depreciation and
amortization
|
539
|
|
|
514
|
|
Stock compensation
expense
|
24
|
|
|
19
|
|
Noncash interest
expense
|
7
|
|
|
8
|
|
Loss on derivative
instruments, net
|
5
|
|
|
6
|
|
Deferred income
taxes
|
28
|
|
|
34
|
|
Other, net
|
3
|
|
|
3
|
|
Changes in operating
assets and liabilities, net of effects from
acquisitions:
|
|
|
|
Accounts
receivable
|
24
|
|
|
21
|
|
Prepaid expenses and
other assets
|
(21)
|
|
|
(26)
|
|
Accounts payable,
accrued liabilities and other
|
3
|
|
|
30
|
|
Net cash flows from
operating activities
|
424
|
|
|
528
|
|
|
|
|
|
CASH FLOWS FROM
INVESTING ACTIVITIES:
|
|
|
|
Purchases of
property, plant and equipment
|
(429)
|
|
|
(351)
|
|
Change in accrued
expenses related to capital expenditures
|
(56)
|
|
|
(76)
|
|
Change in restricted
cash and cash equivalents
|
(49)
|
|
|
(1)
|
|
Other, net
|
(2)
|
|
|
(13)
|
|
Net cash flows from
investing activities
|
(536)
|
|
|
(441)
|
|
|
|
|
|
CASH FLOWS FROM
FINANCING ACTIVITIES:
|
|
|
|
Borrowings of
long-term debt
|
2,139
|
|
|
332
|
|
Repayments of
long-term debt
|
(727)
|
|
|
(392)
|
|
Payments for debt
issuance costs
|
(17)
|
|
|
—
|
|
Purchase of treasury
stock
|
(16)
|
|
|
(16)
|
|
Proceeds from
exercise of options and warrants
|
5
|
|
|
6
|
|
Other, net
|
1
|
|
|
—
|
|
Net cash flows from
financing activities
|
1,385
|
|
|
(70)
|
|
|
|
|
|
NET INCREASE IN CASH
AND CASH EQUIVALENTS
|
1,273
|
|
|
17
|
|
CASH AND CASH
EQUIVALENTS, beginning of period
|
5
|
|
|
3
|
|
CASH AND CASH
EQUIVALENTS, end of period
|
$
|
1,278
|
|
|
$
|
20
|
|
|
|
|
|
CASH PAID FOR
INTEREST, NET
|
$
|
448
|
|
|
$
|
255
|
|
CHARTER
COMMUNICATIONS, INC. AND SUBSIDIARIES
UNAUDITED SUMMARY OF OPERATING STATISTICS
(in thousands, except per customer and penetration
data)
|
|
|
|
Approximate as
of
|
|
March 31, 2016
(a)
|
|
December 31, 2015
(a)
|
|
March 31, 2015
(a)
|
Footprint
(b)
|
|
|
|
|
|
Estimated Video
Passings
|
12,854
|
|
|
12,783
|
|
|
12,745
|
|
Estimated Internet
Passings
|
12,588
|
|
|
12,515
|
|
|
12,475
|
|
Estimated Voice
Passings
|
12,138
|
|
|
12,062
|
|
|
12,022
|
|
|
|
|
|
|
|
Penetration
Statistics (c)
|
|
|
|
|
|
Video Penetration of
Estimated Video Passings
|
34.6
|
%
|
|
34.7
|
%
|
|
34.6
|
%
|
Internet Penetration
of Estimated Internet Passings
|
45.5
|
%
|
|
44.5
|
%
|
|
41.8
|
%
|
Voice Penetration of
Estimated Voice Passings
|
23.6
|
%
|
|
23.3
|
%
|
|
22.2
|
%
|
|
|
|
|
|
|
Customer
Relationships (d)
|
|
|
|
|
|
Residential
|
6,388
|
|
|
6,284
|
|
|
6,070
|
|
Small and Medium
Business
|
405
|
|
|
390
|
|
|
342
|
|
Total Customer
Relationships
|
6,793
|
|
|
6,674
|
|
|
6,412
|
|
|
|
|
|
|
|
Residential
|
|
|
|
|
|
Primary Service
Units ("PSU")
|
|
|
|
|
|
Video
|
4,332
|
|
|
4,322
|
|
|
4,311
|
|
Internet
|
5,368
|
|
|
5,227
|
|
|
4,910
|
|
Voice
|
2,633
|
|
|
2,598
|
|
|
2,481
|
|
|
12,333
|
|
|
12,147
|
|
|
11,702
|
|
|
|
|
|
|
|
Quarterly Net
Additions/(Losses)
|
|
|
|
|
|
Video
|
10
|
|
|
29
|
|
|
(13)
|
|
Internet
|
141
|
|
|
115
|
|
|
125
|
|
Voice
|
35
|
|
|
47
|
|
|
42
|
|
|
186
|
|
|
191
|
|
|
154
|
|
|
|
|
|
|
|
Single Play
(e)
|
2,509
|
|
|
2,458
|
|
|
2,385
|
|
Double Play
(e)
|
1,813
|
|
|
1,790
|
|
|
1,739
|
|
Triple Play
(e)
|
2,066
|
|
|
2,036
|
|
|
1,946
|
|
|
|
|
|
|
|
Single Play
Penetration (f)
|
39.3
|
%
|
|
39.1
|
%
|
|
39.3
|
%
|
Double Play
Penetration (f)
|
28.4
|
%
|
|
28.5
|
%
|
|
28.6
|
%
|
Triple Play
Penetration (f)
|
32.3
|
%
|
|
32.4
|
%
|
|
32.1
|
%
|
|
|
|
|
|
|
% Residential
Non-Video Customer Relationships
|
32.2
|
%
|
|
31.2
|
%
|
|
29.0
|
%
|
|
|
|
|
|
|
Monthly Residential
Revenue per Residential Customer (g)
|
$
|
111.04
|
|
|
$
|
111.19
|
|
|
$
|
109.53
|
|
|
|
|
|
|
|
Small and Medium
Business
|
|
|
|
|
|
PSUs
|
|
|
|
|
|
Video
|
113
|
|
|
108
|
|
|
96
|
|
Internet
|
359
|
|
|
345
|
|
|
300
|
|
Voice
|
231
|
|
|
218
|
|
|
185
|
|
|
703
|
|
|
671
|
|
|
581
|
|
|
|
|
|
|
|
Quarterly Net
Additions/(Losses)
|
|
|
|
|
|
Video
|
5
|
|
|
4
|
|
|
1
|
|
Internet
|
14
|
|
|
14
|
|
|
10
|
|
Voice
|
13
|
|
|
10
|
|
|
8
|
|
|
32
|
|
|
28
|
|
|
19
|
|
|
|
|
|
|
|
Monthly Small and
Medium Business Revenue per Customer (h)
|
$
|
169.74
|
|
|
$
|
173.12
|
|
|
$
|
179.74
|
|
|
|
|
|
|
|
Enterprise PSUs
(i)
|
|
|
|
|
|
Enterprise
PSUs
|
31
|
|
|
30
|
|
|
26
|
|
|
All percentages are
calculated using whole numbers. Minor differences may exist due to
rounding.
|
|
See footnotes to
unaudited summary of operating statistics on page 5 of this
addendum.
|
|
(a)
|
We calculate the
aging of customer accounts based on the monthly billing cycle for
each account. On that basis, at March 31, 2016, December 31,
2015 and March 31, 2015, customers include approximately 27,900,
38,100 and 27,700 customers, respectively, whose accounts were over
60 days, approximately 1,100, 1,700 and 900 customers,
respectively, whose accounts were over 90 days and approximately
900, 900 and 700 customers, respectively, whose accounts were over
120 days.
|
|
|
(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. Small and medium business customers are counted based on
the number of customer locations. 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)
|
Monthly residential
revenue per residential customer is calculated as total residential
video, Internet and voice quarterly revenue divided by three
divided by average residential customer relationships during the
respective quarter.
|
|
|
(h)
|
Monthly small and
medium business revenue per customer is calculated as total small
and medium business quarterly revenue divided by three divided by
average small and medium business customer relationships during the
respective quarter.
|
|
|
(i)
|
Enterprise PSUs
represents the aggregate number of Charter's 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
March 31,
|
|
2016
|
|
2015
|
|
|
|
|
Net loss
|
$
|
(188)
|
|
|
$
|
(81)
|
|
Plus: Interest
expense, net
|
454
|
|
|
289
|
|
Income tax
expense
|
28
|
|
|
35
|
|
Depreciation and
amortization
|
539
|
|
|
514
|
|
Stock compensation
expense
|
24
|
|
|
19
|
|
Loss on derivative
instruments, net
|
5
|
|
|
6
|
|
Other, net
|
21
|
|
|
18
|
|
|
|
|
|
Adjusted EBITDA
(a)
|
883
|
|
|
800
|
|
Less: Purchases
of property, plant and equipment
|
(429)
|
|
|
(351)
|
|
|
|
|
|
Adjusted EBITDA less
capital expenditures
|
$
|
454
|
|
|
$
|
449
|
|
|
|
|
|
Net cash flows from
operating activities
|
$
|
424
|
|
|
$
|
528
|
|
Less: Purchases
of property, plant and equipment
|
(429)
|
|
|
(351)
|
|
Change in accrued
expenses related to capital expenditures
|
(56)
|
|
|
(76)
|
|
|
|
|
|
Free cash
flow
|
$
|
(61)
|
|
|
$
|
101
|
|
|
(a) See page 1 of
this addendum for detail of the components included within adjusted
EBITDA.
|
|
The above schedules
are presented in order to reconcile adjusted EBITDA and free cash
flows, both non-GAAP measures, to the most directly comparable GAAP
measures in accordance with Section 401(b) of the Sarbanes-Oxley
Act.
|
CHARTER
COMMUNICATIONS, INC. AND SUBSIDIARIES
CAPITAL EXPENDITURES (dollars in
millions)
|
|
|
|
Three Months Ended
March 31,
|
|
2016
|
|
2015
|
|
|
|
|
Customer premise
equipment (a)
|
$
|
137
|
|
|
$
|
150
|
|
Scalable
infrastructure (b)
|
110
|
|
|
75
|
|
Line extensions
(c)
|
47
|
|
|
39
|
|
Upgrade/Rebuild
(d)
|
41
|
|
|
23
|
|
Support capital
(e)
|
94
|
|
|
64
|
|
|
|
|
|
Total
capital expenditures (f)
|
$
|
429
|
|
|
$
|
351
|
|
|
|
(a)
|
Customer premise
equipment includes costs incurred at the customer residence to
secure new customers and revenue generating units, including
customer installation costs and customer premise equipment (e.g.,
set-top boxes and cable modems).
|
|
|
(b)
|
Scalable
infrastructure includes costs, not related to customer premise
equipment, to secure growth of new customers and revenue generating
units, or provide service enhancements (e.g., headend
equipment).
|
|
|
(c)
|
Line extensions
include network costs associated with entering new service areas
(e.g., fiber/coaxial cable, amplifiers, electronic equipment,
make-ready and design engineering).
|
|
|
(d)
|
Upgrade/rebuild
includes costs to modify or replace existing fiber/coaxial cable
networks, including betterments.
|
|
|
(e)
|
Support capital
includes costs associated with the replacement or enhancement of
non-network assets due to technological and physical obsolescence
(e.g., non-network equipment, land, buildings and
vehicles).
|
|
|
(f)
|
Total capital
expenditures for the three months ended March 31, 2016 and
2015 include the following (dollars in millions):
|
|
Three Months Ended
March 31,
|
|
2016
|
|
2015
|
|
|
|
|
Commercial
services
|
$
|
64
|
|
|
$
|
51
|
|
Transition
|
$
|
53
|
|
|
$
|
14
|
|
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SOURCE Charter Communications, Inc.