Charter Reports First Quarter 2010 Financial and Operating Results
ST. LOUIS, May 6, 2010 /PRNewswire via COMTEX/ --Charter Communications, Inc. (along with its subsidiaries, the "Company" or "Charter") today reported financial and operating results for the three months ended March 31, 2010.
First Quarter Highlights:
* Compared with the prior year, first quarter revenues grew 4.5% on a pro forma(1) basis and 4.4%on an actualbasis, driven by increases in Internet, phone, and commercial customers.
* First quarter adjusted EBITDA(2) grew 3.4% year-over-year on both a pro forma and actual basis and net income improved to $24 million compared to a net loss of $205 million in the first quarter of 2009 on an actual basis.
* Total average monthly revenue per basic video customer (ARPU) for the first quarter increased 9.0% year-over-year to $120.45, driven by increased sales of The Charter Bundle(TM) and advanced services.
* Charter added approximately 243,000 revenue generating units (RGUs) during the first quarter, approximately 100,000 more than the year ago quarter.
* Free cash flow(2) for the first quarter was $205 million and net cash flows from operating activities were $530 million.
* Charter continued to enhance its product and service capabilities in the quarter through further Internet speed upgrades and continuing DOCSIS 3.0 and switched digital video (SDV) rollouts.
(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) Adjusted EBITDA and free cash flow are defined in the "Use of Non-
GAAP Financial Metrics" section and are reconciled to consolidated net
income (loss) and net cash flows from operating activities,
respectively, in the addendum of this news release.
"We've built on the momentum gained late last year, reporting strong first quarter performance driven by bundle, Internet and commercial growth," said Mike Lovett, President and Chief Executive Officer. "During the quarter, we continued to leverage our operating platform and network capabilities to strengthen our high-speed Internet market advantage, further enhance our digital video offering and broaden our commercial solutions. We'll continue to simplify and enhance our services by offering value to our customers through the triple play and advanced services."
Key Operating Results
All of the following customer and ARPU statistics are presented on a pro forma basis. Charter served approximately 12.9 million revenue generating units (RGUs) as of March 31, 2010, an increase of 401,300 RGUs or about 3.2% over the prior year's quarter and an increase of 243,000 from the fourth quarter of 2009. Approximately 58.5% of Charter's residential customers subscribe to a bundle. Charter's ARPU for the first quarter of 2010 was $120.45, an increase of 9.0% compared to first quarter 2009, primarily as a result of strong growth in triple play and advanced services growth.
First quarter 2010 customer changes included the following:
* Digital video customers increased by approximately 95,800 and basic video customers decreased by approximately 23,400 during the first quarter. Video ARPU was $67.88 for the first quarter of 2010, up 4.3% year-over-year as we continue to increase digital, high definition and digital video recorder penetration.
* High-speed Internet customers grew by approximately 103,700 during the first quarter of 2010, a 44% increase over net additions in the first quarter of 2009. Internet ARPU of $42.31 increased approximately 2.6% compared to the year-ago quarter, as consumer demand for higher Internet speeds continues.
* First quarter 2010 net gains of phone customers were approximately 66,900. Phone penetration is now 15.7% as of March 31, 2010. Phone ARPU of $41.69 decreased approximately 3.8%.
As of March 31, 2010, Charter served approximately 5.3 million customers, and the Company's 12.9 million RGUs were comprised of 4.8 million basic video, 3.3 million digital video, 3.2 million Internet and 1.6 million phone customers.
First Quarter Results
First quarter revenues of $1.735 billion increased 4.5% compared to the year-ago quarter on a pro forma basis and 4.4% on an actual basis, as the Company continued to grow its Internet, phone and the commercial businesses.
Internet revenues were $395 million, up 9.7% year-over-year due to an increased number of customers and ARPU growth. Telephone revenues for the 2010 first quarter were $198 million, an 11.9% increase over first quarter 2009, as customers continued to sign up for Charter's bundled services. Commercial revenues rose to $118 million, a 10.3% increase year-over-year, reflecting increased sales of the Charter Business Bundle(R) and customer relationship growth. First quarter 2010 video revenues were $926 million, essentially flat with the year-ago quarter, as digital and advanced services revenue growth was offset by a decline in basic video customers. Advertising sales revenues were $59 million for the first quarter of 2010, a 9.3% increase compared to the first quarter of 2009, primarily as a result of strong political and automotive advertising.
Operating costs and expenses totaled $1.098 billion for the first quarter of 2010, a 5.0% increase compared to the year-ago period, primarily due to increased programming expenses related to annual rate increases.
Adjusted EBITDA for the first quarter of 2010 totaled $637 million, an increase of 3.4% compared to the pro forma and actual results for the year-ago period.
Charter reported $251 million of income from operations in the first quarter of 2010, compared to $334 million in the first quarter of 2009. Income from operations was affected by increased amortization related to customer relationships and other intangible assets resulting from fresh start accounting, as well as favorable litigation settlements in 2009 that did not recur in 2010.
Net income available to shareholders was $24 million in the first quarter of 2010, compared to a loss of $205 million in the first quarter of 2009. The improvement resulted primarily from the reduction of interest expense and nonrecurring tax benefits recorded in the first quarter of 2010. Earnings per share improved to $0.21 in the first quarter of 2010, compared with a loss of $0.54 during the same period last year.
Expenditures for property, plant and equipment for the first quarter of 2010 were $310 million, compared to first quarter 2009 expenditures of $269 million related to strategic investments including DOCSIS 3.0 and SDV launches and broadening our business solutions. The Company expects capital spending for the full year to be approximately $1.2 billion, and intends to deploy SDV to more than 60% of its footprint and DOCSIS 3.0 to approximately half of its footprint by year end 2010.
Net cash flows from operating activities for the first quarter of 2010 were $530 million, compared to $187 million in the first quarter of 2009, primarily due to reduced interest expense and improvement in adjusted EBITDA.
Total principal amount of debt was approximately $12.8 billion as of March 31, 2010. At the end of the first quarter, the Company had liquidity of approximately $950 million, including cash and availability under the Company's revolving credit facility.
Recent Events
The Company has received notification from the Securities and Exchange Commission that its registration statement on Form S-1 registering 85,971,442 shares of the Company's Class A common stock is effective, and those shares are now freely tradable by non affiliates. The Class A common shares are currently quoted on the OTC Bulletin Board under the symbol "CCMM". The Company has applied to NASDAQ to list its Class A common stock and believes it will be in a position to complete the listing upon filling a vacancy on its audit committee.
In April the Company extended its maturity profile, selling an aggregate of $1.6 billion principal amount in two tranches of senior notes due 2018 and 2020, with proceeds used to fund the tender offers for certain senior notes due 2013 and 2014.
Conference Call
The Company will host a conference call on Thursday, May 6, 2010 at 9:00 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 call link no later than 10 minutes prior to the start time to register.
Those participating via telephone should dial 866-726-7983 no later than 10 minutes prior to the call. International participants should dial 706-758-7055. The conference ID code for the call is 72392123.
A replay of the call will be available at 800-642-1687 or 706-645-9291 beginning two hours after the completion of the call through the end of business on May 20, 2010. The conference ID code for the replay is 72392123.
Additional Information Available on Website
A slide presentation to accompany the conference call will be available on the "Investor & News Center" of our website at charter.com in the "Financial Information" section. 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, adjusted EBITDA less capital expenditures and free cash flow are non-GAAP financial measures and should be considered in addition to, not as a substitute for, net income (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 consolidated net income (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 consolidated net income (loss) plus interest expense, income taxes, depreciation and amortization, stock compensation expense and other operating expenses, such as special charges and 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. Adjusted EBITDA less capital expenditures is defined as Adjusted EBITDA minus purchases of property, plant and equipment. Adjusted EBITDA and adjusted EBITDA less capital expenditures are used by management and the Company's board of directors to evaluate the performance of the Company's business. For this reason, they are significant components of Charter's annual incentive compensation program. However, these measures are limited in that they do not reflect the periodic costs of certain capitalized tangible and intangible assets used in generating revenues and the cash cost of financing. Management evaluates these costs 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.
The Company believes that adjusted EBITDA and free cash flow provide information useful to investors in assessing Charter's performance and its ability to service its debt, fund operations and make additional investments with internally generated funds. In addition, adjusted EBITDA generally correlates to the leverage ratio calculation under the Company's credit facilities or outstanding notes to determine compliance with the covenants contained in the facilities and notes (all such documents have been previously filed with the United States Securities and Exchange Commission). Adjusted EBITDA, as presented, includes management fee expenses in the amount of $35 million and $32 million for the three months ended March 31, 2010 and 2009, respectively, which expense amounts are excluded for the purposes of calculating compliance with leverage covenants.
In addition to the actual results for the three months ended March 31, 2010 and 2009, we have provided pro forma results in this release for the three months ended March 31, 2009. We believe these pro forma results facilitate meaningful analysis of the results of operations. Pro forma results in this release reflect certain sales of cable systems in 2009 as if they occurred as of January 1, 2009. Pro forma statements of operations for the three months ended March 31, 2009 and pro forma customer statistics as of March 31, 2009 are provided in the addendum of this news release.
About Charter
Charter Communications, Inc. (OTC Bulletin Board: CCMM) 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(TM) video entertainment programming, Charter Internet(TM) access, and Charter Phone(TM). Charter Business(R) similarly provides scalable, tailored, and cost-effective broadband communications solutions to business organizations, such as business-to-business Internet access, data networking, video and music entertainment services, and business telephone. Charter's advertising sales and production services are sold under the Charter Media(R) brand. More information about Charter can be found at www.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" 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 flows from operating activities by offering video, high-speed Internet, telephone and other services to residential and commercial customers, and to maintain and grow our customer base, particularly in the face of increasingly aggressive competition and the difficult economic conditions in the United States;
* the impact of competition from other distributors, including but not limited to incumbent telephone companies, direct broadcast satellite operators, wireless broadband providers, and digital subscriber line ("DSL") providers and competition from video provided over the Internet;
* general business conditions, economic uncertainty or downturn and the significant downturn in the housing sector and overall economy;
* our ability to obtain programming at reasonable prices or to raise prices to offset, in whole or in part, the effects of higher programming costs (including retransmission consents);
* our ability to adequately deliver customer service;
* 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) cash flows from operating activities, (iii) access to the capital or credit markets including through new issuances, exchange offers or otherwise, especially given recent volatility and disruption in the capital and credit markets, or (iv) other sources and our ability to fund debt obligations (by dividend, investment or otherwise) to the applicable obligor of such debt; 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 AND SHARE DATA)
Successor Predecessor
Actual Three Actual Three
Months Ended Months Ended
March 31, March 31,
2010 2009 % Change
---------- ---------- --------
REVENUES:
Video (b) $926 $928 -0.2%
High-speed
Internet 395 360 9.7%
Telephone (b) 198 177 11.9%
Commercial 118 107 10.3%
Advertising sales 59 54 9.3%
Other (b) 39 36 8.3%
Total revenues 1,735 1,662 4.4%
----- -----
COSTS AND EXPENSES:
Operating (excluding
depreciation and
amortization) (c) 751 713 5.3%
Selling, general and
administrative
(excluding stock
compensation expense)
(d) 347 333 4.2%
--- ---
Operating costs and
expenses 1,098 1,046 5.0%
----- -----
Adjusted EBITDA 637 616 3.4%
--- ---
Adjusted EBITDA
margin 36.7% 37.1%
---- ----
Depreciation and
amortization 369 321
Stock compensation
expense 5 11
Other operating
(income) expenses,
net 12 (50)
--- ---
Income from
operations 251 334
--- ---
OTHER EXPENSES:
Interest expense, net
(excluding unrecorded
contractual interest
expense of $9 in
2009) (204) (463)
Reorganization items,
net (4) (141)
Other expense, net - (3)
--- ---
(208) (607)
---- ----
Income (loss) before
income taxes 43 (273)
Income tax expense (19) (61)
--- ---
Consolidated net
income (loss) 24 (334)
Less: Net loss -
noncontrolling
interest - 129
--- ---
Net income (loss) -
Charter shareholders $24 $(205)
=== =====
Earnings (loss) per
common share -
Charter shareholders:
Basic $0.21 $(0.54)
===== ======
Diluted $0.21 $(0.54)
===== ======
Weighted average
common shares
outstanding,
basic 113,020,967 378,095,547
=========== ===========
Weighted average
common shares
outstanding,
diluted 114,883,134 378,095,547
=========== ===========
Predecessor
Pro forma
Three
Months Ended
March 31, 2009
(a) % Change
-------------- --------
REVENUES:
Video (b) $927 -0.1%
High-speed Internet 360 9.7%
Telephone (b) 177 11.9%
Commercial 107 10.3%
Advertising sales 54 9.3%
Other (b) 36 8.3%
Total revenues 1,661 4.5%
-----
COSTS AND EXPENSES:
Operating (excluding depreciation
and amortization) (c) 712 5.5%
Selling, general and
administrative (excluding stock
compensation expense) (d) 333 4.2%
---
Operating costs and
expenses 1,045 5.1%
-----
Adjusted EBITDA 616 3.4%
---
Adjusted EBITDA margin 37.1%
----
Depreciation and
amortization 321
Stock compensation expense 11
Other operating (income)
expenses, net (52)
---
Income from operations 336
---
OTHER EXPENSES:
Interest expense, net (excluding
unrecorded contractual
interest expense of $9
in 2009) (463)
Reorganization items, net (141)
Other expense, net (3)
---
(607)
----
Income (loss) before
income taxes (271)
Income tax expense (61)
---
Consolidated net
income (loss) (332)
Less: Net loss
-noncontrolling interest 129
---
Net income (loss) -Charter
shareholders $(203)
=====
Earnings (loss) per common share -
Charter shareholders:
Basic $(0.54)
======
Diluted $(0.54)
======
Weighted average common shares
outstanding, basic 378,095,547
===========
Weighted average common shares
outstanding, diluted 378,095,547
===========
(a) Pro forma results reflect certain sales of cable systems in 2009
as if they occurred as of January 1, 2009.
(b) Certain prior year amounts have been reclassified to conform
with the 2010 presentation, including the reflection of franchise
fees, equipment rental and video customer installations revenue as
video revenue, and telephone regulatory fees as telephone revenue,
rather than other revenue.
(c) Operating expenses include programming, service, and advertising
sales expenses.
(d) Selling, general and administrative expenses include general and
administrative and marketing expenses.
March 31, 2009. Pro forma revenues, operating costs and expenses and
net loss were reduced by $1 million, $1 million and $2 million,
respectively, for the three months ended March 31, 2009
Adjusted EBITDA is a non-GAAP term. See the reconciliation of
adjusted EBITDA to consolidated net income (loss) as defined by
GAAP.
CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED BALANCE SHEETS
(DOLLARS IN MILLIONS)
March December
31, 31,
2010 2009
---- ----
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $221 $709
Restricted cash and
cash equivalents 33 45
Accounts receivable,
net of allowance for doubtful
accounts 223 248
Prepaid expenses and
other current assets 69 69
--- ---
Total current assets 546 1,071
--- -----
INVESTMENT IN CABLE PROPERTIES:
Property, plant and
equipment, net 6,859 6,833
Franchises, net 5,272 5,272
Customer relationships,
net 2,251 2,335
Goodwill 951 951
--- ---
Total investment in
cable properties, net 15,333 15,391
------ ------
OTHER NONCURRENT ASSETS 320 196
--- ---
Total assets $16,199 $16,658
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and
accrued expenses $958 $898
Current portion of
long-term debt - 70
--- ---
Total current liabilities 958 968
--- ---
LONG-TERM DEBT 12,762 13,252
OTHER LONG-TERM
LIABILITIES 710 520
TEMPORARY EQUITY 6 1
SHAREHOLDERS' EQUITY:
Charter shareholders' equity 1,763 1,915
Noncontrolling interest - 2
--- ---
Total shareholders' equity 1,763 1,917
----- -----
Total liabilities and
shareholders' equity $16,199 $16,658
======= =======
CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN MILLIONS)
Successor Predecessor
Three Months Three Months
Ended Ended
March 31, 2010 March 31, 2009
-------------- --------------
CASH FLOWS FROM OPERATING
ACTIVITIES:
Consolidated net income (loss) $24 $(334)
Adjustments to reconcile net
income (loss) to net cash flows
from operating activities:
Depreciation and amortization 369 321
Noncash interest expense 18 15
Noncash reorganization items, net - 108
Deferred income taxes 16 59
Other, net 7 16
Changes in operating assets and
liabilities
Accounts receivable 25 34
Prepaid expenses and other assets - (78)
Accounts payable, accrued expenses
and other 71 46
--- ---
Net cash flows from operating
activities 530 187
--- ---
CASH FLOWS FROM INVESTING
ACTIVITIES:
Purchases of property, plant and
equipment (310) (269)
Change in accrued expenses related
to capital expenditures (15) (27)
Other, net (5) 4
--- ---
Net cash flows from investing
activities (330) (292)
---- ----
CASH FLOWS FROM FINANCING
ACTIVITIES:
Repayments of long-term debt (667) (17)
Payments for debt issuance costs (31) -
Other, net (2) (2)
--- ---
Net cash flows from financing
activities (700) (19)
---- ---
NET DECREASE IN CASH AND CASH
EQUIVALENTS (500) (124)
CASH AND CASH EQUIVALENTS,
beginning of period 754 960
--- ---
CASH AND CASH EQUIVALENTS, end of
period $254 $836
==== ====
CASH PAID FOR INTEREST $152 $221
==== ====
CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES
UNAUDITED SUMMARY OF OPERATING STATISTICS
Approximate as of
-----------------
Actual
------
March 31, December 31,
2010 (a) 2009 (a)
-------- --------
Customer Summary:
Customer Relationships:
Residential (non-bulk) basic video
customers (b) 4,547,800 4,562,900
Multi-dwelling (bulk) and commercial
unit customers (c) 252,800 261,100
------- -------
Total basic video customers 4,800,600 4,824,000
Non-video customers (b) 518,200 493,100
------- -------
Total customer relationships (d) 5,318,800 5,317,100
========= =========
Pro forma average monthly revenue per
basic video customer (e) $120.45 $117.43
Pro forma average monthly video
revenue per basic video customer (f) $67.88 $66.32
Residential bundled customers (g) 2,966,000 2,889,700
Revenue Generating Units:
Basic video customers (b) (c) 4,800,600 4,824,000
Digital video customers (h) 3,313,900 3,218,100
Residential high-speed Internet
customers (i) 3,166,000 3,062,300
Residential telephone customers (j) 1,622,900 1,556,000
--------- ---------
Total revenue generating units (k) 12,903,400 12,660,400
========== ==========
Total Video Services:
Estimated homes passed (l) 11,954,300 11,902,200
Basic video customers (b)(c) 4,800,600 4,824,000
Estimated penetration of basic homes
passed (b) (c) (l) (m) 40.2% 40.5%
Pro forma basic video customers
quarterly net loss (b) (c) (n) (23,400) (56,900)
Digital video customers (h) 3,313,900 3,218,100
Digital penetration of basic video
customers (b) (c) (h) (o) 69.0% 66.7%
Digital set-top terminals deployed 4,937,000 4,794,500
Pro forma digital video customers
quarterly net gain (h) (n) 95,800 43,300
High-Speed Internet Services:
Estimated high-speed Internet homes
passed (l) 11,424,500 11,360,200
Residential high-speed Internet
customers (i) 3,166,000 3,062,300
Estimated penetration of high-speed
Internet homes passed (i) (l) (m) 27.7% 27.0%
Pro forma average monthly high-speed
Internet revenue per high-speed
Internet customer (f) $42.31 $41.48
Pro forma high-speed Internet
customers quarterly net gain (i) (n) 103,700 51,800
Telephone Services:
Estimated telephone homes passed (l) 10,363,900 10,312,700
Residential telephone customers (j) 1,622,900 1,556,000
Estimated penetration of telephone
homes passed (i) (l) (m) 15.7% 15.1%
Pro forma average monthly telephone
revenue per telephone customer (f) $41.69 $42.54
Pro forma telephone customers
quarterly net gain (j) (n) 66,900 56,200
Approximate as of
-----------------
Pro Forma
---------
March 31,
2009 (a)
--------
Customer Summary:
Customer Relationships:
Residential (non-bulk) basic video customers
(b) 4,743,600
Multi-dwelling (bulk) and commercial unit
customers (c) 256,900
-------
Total basic video customers 5,000,500
Non-video customers (b) 419,200
-------
Total customer relationships (d) 5,419,700
=========
Pro forma average monthly revenue per basic
video customer (e) $110.48
Pro forma average monthly video revenue per
basic video customer (f) $65.06
Residential bundled customers (g) 2,813,800
Revenue Generating Units:
Basic video customers (b) (c) 5,000,500
Digital video customers (h) 3,157,800
Residential high-speed Internet customers (i) 2,947,500
Residential telephone customers (j) 1,396,300
---------
Total revenue generating units (k) 12,502,100
==========
Total Video Services:
Estimated homes passed (l) 11,818,000
Basic video customers (b)(c) 5,000,500
Estimated penetration of basic homes passed (b)
(c) (l) (m) 42.3%
Pro forma basic video customers quarterly net
loss (b) (c) (n) (23,500)
Digital video customers (h) 3,157,800
Digital penetration of basic video customers (b)
(c) (h) (o) 63.1%
Digital set-top terminals deployed 4,604,100
Pro forma digital video customers quarterly net
gain (h) (n) 25,600
High-Speed Internet Services:
Estimated high-speed Internet homes passed (l) 11,233,000
Residential high-speed Internet customers (i) 2,947,500
Estimated penetration of high-speed Internet
homes passed (i) (l) (m) 26.2%
Pro forma average monthly high-speed Internet
revenue per high-speed Internet customer (f) $41.25
Pro forma high-speed Internet customers
quarterly net gain (i) (n) 71,900
Telephone Services:
Estimated telephone homes passed (l) 10,096,300
Residential telephone customers (j) 1,396,300
Estimated penetration of telephone homes passed
(i) (l) (m) 13.8%
Pro forma average monthly telephone revenue per
telephone customer (f) $43.35
Pro forma telephone customers quarterly net gain
(j) (n) 70,400
Pro forma operating statistics reflect the sales and acquisitions of
cable systems in 2009 as if such transactions had occurred as of the
last day of the respective period for all periods presented.
At March 31, 2009 actual basic video customers, digital video
customers, high-speed Internet customers and telephone customers
were 5,003,200, 3,157,700, 2,947,100, and 1,396,300, respectively.
See footnotes to unaudited summary of operating statistics.
(a) Our billing systems calculate the aging of customer accounts
based on the monthly billing cycle for each account. On that basis,
at March 31, 2010, December 31, 2009, and March 31, 2009 customers
include approximately 16,200, 25,900, and 30,600 persons,
respectively, whose accounts were over 60 days past due in payment,
approximately 1,600, 3,500, and 4,400 persons, respectively, whose
accounts were over 90 days past due in payment and approximately
1,700, 2,200, and 2,700 persons, respectively, whose accounts were
over 120 days past due in payment.
(b) "Basic video customers" include all residential customers who
receive video services (including those who also purchase high-
speed Internet and telephone services) but excludes approximately
518,200, 493,100, and 419,200 customer relationships at March 31,
2010, December 31, 2009, and March 31, 2009, respectively, who
receive high-speed Internet service only, telephone service only,
or both high-speed Internet service and telephone service and who
are only counted as high-speed Internet customers or telephone
customers.
(c) Included within "basic video customers" are those in commercial
and multi-dwelling structures, which are calculated on an
equivalent bulk unit ("EBU") basis. In the second quarter of 2009,
we began calculating 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 rather than the most prevalent price charged as was used
previously. This EBU method of estimating basic video customers is
consistent with the methodology used in determining costs paid to
programmers and is consistent with the methodology used by other
multiple system operators (MSOs). EBUs presented as of March 31,
2009 decreased by 10,500 as a result of the change in methodology.
As we increase our published video rates to residential customers
without a corresponding increase in the prices charged to commercial
service or multi-dwelling customers, our EBU count will decline
even if there is no real loss in commercial service or multi-
dwelling customers.
(d) "Customer relationships" include the number of customers that
receive one or more levels of service, encompassing video, Internet
and telephone 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) that have been adopted by eleven then publicly
traded cable operators, including Charter.
(e) "Pro forma average monthly revenue per basic video customer" is
calculated as total quarterly pro forma revenue divided by three
divided by average pro forma basic video customers during the
respective quarter.
(f) "Pro forma average monthly revenue per customer" represents
quarterly pro forma revenue for the service indicated divided by
three divided by the number of pro forma customers for the service
indicated during the respective quarter.
(g) "Residential bundled customers" include residential customers
receiving a combination of at least two different types of service,
including Charter's video service, high-speed Internet service or
telephone. "Residential bundled customers" do not include
residential customers who only subscribe to video service.
(h) "Digital video customers" include all basic video customers that
have one or more digital set-top boxes or cable cards deployed.
(i) "Residential high-speed Internet customers" represent those
residential customers who subscribe to our high-speed Internet
service. At March 31, 2010, December 31, 2009, and March 31, 2009,
approximately 2,784,000, 2,705,300, and 2,640,000 of these high-
speed Internet customers, respectively, receive video and/or
telephone services from us and are included within the respective
statistics above.
(j) "Residential telephone customers" represent those residential
customers who subscribe to our telephone service. As of March 31,
2010, December 31 2009, and March 31, 2009 approximately 1,580,000,
1,508,200, and 1,363,300 of these telephone customers, respectively,
receive video and/or high-speed Internet services from us and are
included within the respective statistics above.
(k) "Revenue generating units" represent the sum total of all basic
video, digital video, high-speed Internet and telephone customers,
not counting additional outlets within one household. For example,
a customer who receives two types of service (such as basic video
and digital video) would be treated as two revenue generating units,
and if that customer added on high-speed Internet service, the
customer would be treated as three revenue generating units. This
statistic is computed in accordance with the guidelines of the NCTA.
(l) "Homes passed" represent our estimate of the number of living
units, such as single family homes, apartment units and condominium
units passed by our cable distribution network in the areas where we
offer the service indicated. "Homes passed" exclude commercial
units passed by our cable distribution network. These estimates are
updated for all periods presented when estimates change.
(m) "Penetration" represents customers as a percentage of homes
passed for the service indicated.
(n) "Pro forma quarterly net gain (loss)" represents the pro forma
net gain or loss in the respective quarter for the service
indicated.
(o) "Digital penetration of basic video customers" represents the
number of digital video customers as a percentage of basic video
customers.
CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES
UNAUDITED RECONCILIATION OF NON-GAAP MEASURES TO GAAP MEASURES
(DOLLARS IN MILLIONS)
Successor Predecessor
Actual Actual
Three Three
Months Months
Ended March Ended March
31, 2010 31, 2009
----------- -----------
Consolidated net income (loss) $24 $(334)
Plus: Interest expense, net 204 463
Income tax expense 19 61
Depreciation and amortization 369 321
Stock compensation expense 5 11
Reorganization items, net 4 141
Other, net 12 (47)
--- ---
Adjusted EBITDA (b) 637 616
Purchases of property, plant and
Less: equipment (310) (269)
-----
Adjusted EBITDA less capital
expenditures $327 $347
==== ====
Net cash flows from operating
activities $530 $187
Purchases of property, plant and
Less: equipment (310) (269)
Change in accrued expenses related
to capital expenditures (15) (27)
--- ---
Free cash flow $205 $(109)
==== =====
Predecessor
-----------
Pro forma Three
Months Ended
March 31, 2009
(a)
----------------
Consolidated net income (loss) $(332)
Plus: Interest expense, net 463
Income tax expense 61
Depreciation and amortization 321
Stock compensation expense 11
Reorganization items, net 141
Other, net (49)
---
Adjusted EBITDA (b) 616
Purchases of property, plant and
Less: equipment (269)
-----
Adjusted EBITDA less capital
expenditures $347
====
Net cash flows from operating
activities $187
Purchases of property, plant and
Less: equipment (269)
Change in accrued expenses related
to capital expenditures (27)
---
Free cash flow $(109)
=====
(a) Pro forma results reflect certain sales of cable systems in 2009
as if they occurred as of January 1, 2009.
(b) See 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)
Successor Predecessor
Three Months Three Months
Ended Ended
March 31, 2010 March 31, 2009
-------------- --------------
Customer premise
equipment (a) $156 $167
Scalable infrastructure
(b) 87 45
Line extensions (c) 16 14
Upgrade/Rebuild (d) 9 5
Support capital (e) 42 38
--- ---
Total capital
expenditures (f) $310 $269
==== ====
SOURCE Charter Communications, Inc.
