Charter Announces First Quarter 2018 Results
Charter Announces First Quarter 2018 Results
STAMFORD, Conn., April 27, 2018 /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, 2018.
Key highlights:
-- First quarter total residential and SMB customer relationships increased
261,000, compared to 355,000 during the first quarter of 2017, when
excluding the impact of customer activity related to Legacy Bright
House's seasonal customer plan in 2017.(1)
-- As of March 31, 2018, Charter had 27.5 million total customer
relationships and 52.5 million total PSUs.
-- In the first quarter, total residential and SMB video, Internet and
voice customers increased by 225,000, with Internet net additions of
362,000, video net losses of 112,000 and voice net losses of 25,000.
-- First quarter revenues of $10.7 billion grew 4.9%, as compared to the
prior year period, driven by residential revenue growth of 4.8%,
commercial revenue growth of 5.3%, and advertising revenue growth of
5.6%.
-- First quarter Adjusted EBITDA(2) of $3.9 billion grew 6.5%
year-over-year, and 6.8% when excluding 2018 mobile launch costs.
-- Net income attributable to Charter shareholders totaled $168 million in
the first quarter, compared to $155 million during the same period last
year.
-- First quarter capital expenditures totaled $2.2 billion compared to $1.6
billion during the first quarter of 2017, primarily driven by in-year
timing differences and Charter's all-digital initiative. First quarter
capital expenditures included $186 million of all-digital costs and $17
million of 2018 mobile launch costs.
-- During the first quarter, Charter purchased approximately 2.0 million
shares of Charter Class A common stock and Charter Holdings common units
for approximately $683 million.
"Our integration remains on track, and we continue to drive higher penetration of our Spectrum products and fully deploy our operating strategy across the company. We have accelerated our financial growth, with 4.9% revenue growth and 6.5% Adjusted EBITDA growth in the quarter," said Tom Rutledge, Chairman and CEO of Charter Communications. "When our integration is completed, we will have created a unified infrastructure company, with one service and operating approach, offering customers fast, reliable bandwidth-rich connectivity products."
1 In the second quarter of 2017,
Charter conformed the seasonal
customer program in the Bright
House footprint to Charter's
program. For additional
information, see footnote j on
page 5 of the addendum to this
release.
2 Adjusted EBITDA, free cash flow
and GAAP are defined in the
"Use of Adjusted EBITDA and
Free Cash Flow Information"
section and are reconciled to
consolidated net income and net
cash flows from operating
activities, respectively, in
the addendum of this news
release.
Key Operating Results
Approximate as of
March 31, 2018 (a) March 31, 2017
(a)(j) Y/Y Change
------------------ --------------- ----------
Footprint (b)
------------
Estimated Video Passings 50,258 49,379 1.8%
Estimated Internet
Passings 50,040 49,101 1.9%
Estimated Voice Passings 49,358 48,308 2.2%
Penetration Statistics
(c)
----------------------
Video Penetration of
Estimated Video Passings 33.6% 34.7% (1.1) ppts
Internet Penetration of
Estimated Internet
Passings 48.5% 46.9% 1.6 ppts
Voice Penetration of
Estimated Voice Passings 22.9% 23.1% (0.2) ppts
Customer Relationships
(d)
----------------------
Residential 25,870 25,131 2.9%
Small and Medium Business 1,590 1,439 10.5%
----- -----
Total Customer
Relationships 27,460 26,570 3.3%
Residential
-----------
Primary Service Units
("PSUs")
---------------------
Video 16,422 16,736 (1.9)%
Internet 22,876 21,802 4.9%
Voice 10,375 10,364 0.1%
------ ------
49,673 48,902 1.6%
Quarterly Net Additions/
(Losses)
------------------------
Video (122) (100) (22.0)%
Internet 331 428 (22.7)%
Voice (52) 37 (240.5)%
--- ---
157 365 (57.0)%
Single Play (e) 10,691 9,980 7.1%
Double Play (e) 6,556 6,540 0.2%
Triple Play (e) 8,623 8,611 0.1%
Single Play Penetration
(f) 41.3% 39.7% 1.6 ppts
Double Play Penetration
(f) 25.3% 26.0% (0.7) ppts
Triple Play Penetration
(f) 33.3% 34.3% (1.0) ppts
% Residential Non-Video
Customer Relationships 36.5% 33.4% 3.1 ppts
Monthly Residential
Revenue per Residential
Customer (g) $110.89 $109.11 1.6%
Small and Medium Business
-------------------------
PSUs
----
Video 463 411 12.7%
Internet 1,389 1,249 11.2%
Voice 939 809 16.1%
--- ---
2,791 2,469 13.0%
Quarterly Net Additions/
(Losses)
------------------------
Video 10 11 (9.1)%
Internet 31 30 3.3%
Voice 27 31 (12.9)%
--- ---
68 72 (5.6)%
Monthly Small and Medium
Business Revenue per
Customer (h) $198.50 $211.21 (6.0)%
Enterprise PSUs (i)
------------------
Enterprise PSUs 119 99 20.2%
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.
All percentages are calculated using whole numbers. Minor differences may exist due to rounding.
During the first quarter of 2018, Charter's residential customer relationships grew by 231,000, while first quarter 2017 customer relationships grew by 330,000, or 320,000 when adjusted for seasonal program changes made at Legacy Bright House.(1) Residential PSUs increased by 157,000 in the first quarter of 2018, while first quarter 2017 PSUs increased by 365,000, or 338,000 when adjusted for the seasonal program changes at Legacy Bright House. As of March 31, 2018, Charter had 25.9 million residential customer relationships and 49.7 million residential PSUs.
Residential video customers decreased by 122,000 in the first quarter of 2018, while first quarter 2017 video customers decreased by 100,000, or 108,000 when adjusted for seasonal program changes at Legacy Bright House. As of March 31, 2018, Charter had 16.4 million residential video customers.
During the first quarter, Charter continued its all-digital efforts in the approximately 20% of Legacy TWC's footprint and 60% of Legacy Bright House's footprint that are not yet all-digital. All-digital allows Charter to offer more advanced products and services, and provides residential customers with two-way digital set-top boxes, which offer better video picture quality, an interactive programming guide and video on demand on all TV outlets in the home.
Charter added 331,000 residential Internet customers in the first quarter of 2018, versus first quarter 2017 Internet customers additions of 428,000, or 416,000 when adjusted for seasonal program changes made at Legacy Bright House. Charter now offers minimum Internet speeds of at least 100 Mbps to 99% of its total footprint. As of March 31, 2018, 83% of Charter's residential Internet customers subscribed to tiers that provided 60 Mbps or more of speed, and 53% subscribed to Internet tiers that provided 100 Mbps or more of speed.
In April 2018, Charter further expanded the availability of its Spectrum Internet Gig service (940 Mbps) to a number of new markets. The service, which uses DOCSIS 3.1 technology, is now available to nearly 23 million passings, approximately 45% of Charter's footprint. Charter expects to launch its Spectrum Internet Gig service to nearly all of its footprint by the end of 2018. Additionally, Charter is doubling minimum Internet speeds to 200 Mbps in a number of markets at no additional cost to new and existing Spectrum Internet customers. As of March 31, 2018, Charter had 22.9 million residential Internet customers.
During the first quarter of 2018, residential voice customers declined by 52,000, while first quarter 2017 voice customers grew by 37,000, or 30,000 when adjusted for seasonal program changes made at Legacy Bright House. As of March 31, 2018, Charter had 10.4 million residential voice customers.
First quarter residential revenue per customer relationship totaled $110.89, and grew by 1.6% compared to the prior year period, as promotional rate step-ups and modest rate adjustments, were partly offset by continued single play Internet sell-in.
During the first quarter of 2018, SMB customer relationships grew by 30,000, compared to growth of 35,000 during the first quarter of 2017. SMB PSUs increased 68,000, compared to 72,000 during the first quarter of 2017. As of March 31, 2018, Charter had 1.6 million SMB customer relationships and 2.8 million SMB PSUs.
1 See footnote j on page 5 of
the addendum to this release
for additional information
regarding changes made to
Legacy Bright House's
seasonal customer program in
the second quarter of 2017.
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,
2018 2017 % Change
---- ---- --------
REVENUES:
Video $4,297 $4,079 5.3%
Internet 3,708 3,398 9.1%
Voice 556 694 (19.8)%
--- ---
Residential revenue 8,561 8,171 4.8%
Small and medium business 937 900 4.1%
Enterprise 579 539 7.3%
--- ---
Commercial revenue 1,516 1,439 5.3%
Advertising sales 356 337 5.6%
Other 224 217 3.2%
Total Revenue 10,657 10,164 4.9%
COSTS AND EXPENSES:
Total operating costs and
expenses 6,764 6,510 3.9%
----- -----
Adjusted EBITDA $3,893 $3,654 6.5%
====== ======
Adjusted EBITDA margin 36.5% 35.9%
Capital Expenditures $2,183 $1,555
% Total Revenues 20.5% 15.3%
Net income attributable
to Charter shareholders $168 $155
Earnings per common share attributable to
Charter shareholders:
Basic $0.71 $0.58
Diluted $0.70 $0.57
Net cash flows from
operating activities $2,699 $2,843
Free cash flow $(49) $1,138
Revenue
First quarter revenues rose 4.9% year-over-year to $10.7 billion, driven by growth in Internet, video, commercial and advertising revenues. Excluding advertising, first quarter revenues increased 4.8% year-over-year.
Video revenues totaled $4.3 billion in the first quarter, an increase of 5.3% compared to prior year period. Video revenue growth was driven by annual and promotional rate adjustments, a higher number of expanded basic video customers year-over-year and revenue allocation relating to the launch of Spectrum pricing and packaging in Legacy TWC and Legacy Bright House, partly offset by a decrease in limited basic video customers.
Internet revenues grew 9.1%, compared to the year-ago quarter, to $3.7 billion, driven by growth in Internet customers during the last year, promotional rolloff and revenue allocation relating to the launch of Spectrum pricing and packaging in Legacy TWC and Legacy Bright House.
Voice revenues totaled $556 million in the first quarter, a decrease of 19.8% compared to the first quarter of 2017, as value-based pricing and revenue allocation relating to the launch of Spectrum pricing and packaging in Legacy TWC and Legacy Bright House, more than offset voice customer growth over the last twelve months.
Commercial revenues rose to $1.5 billion, an increase of 5.3% over the prior year period, driven by SMB revenue growth of 4.1% and enterprise revenue growth of 7.3%. First quarter commercial revenue growth was lower than first quarter commercial customer relationship growth, given the migration of Legacy TWC and Legacy Bright House commercial customers to more attractively priced Spectrum pricing and packaging for both SMB and enterprise services.
First quarter advertising sales revenues of $356 million increased 5.6% compared to the year-ago quarter, driven by higher political revenue.
Operating Costs and Expenses
First quarter total operating costs and expenses increased by $254 million, or 3.9%, compared to the year-ago period.
First quarter programming expense increased by $148 million, or 5.7% as compared to the first quarter of 2017, reflecting contractual programming increases, renewals and a higher number of expanded basic video customers year-over-year, partly offset by a one-time programming expense benefit in the first quarter of 2018.
Regulatory, connectivity and produced content expenses increased by $35 million, or 7.0% year-over-year, driven in part by the Company's adoption of FASB's ASU 2014-09 as of January 1, 2018, which results in the reclassification of expenses related to the amortization of up-front fees paid to market and serve customers who reside in multiple dwelling units, and which were recorded in depreciation and amortization in the prior-year period, to regulatory, connectivity and produced content expenses.
Costs to service customers increased by $54 million or 3.0% year-over-year, as a result of an increase in bad debt expense.
Marketing expenses decreased by $14 million, or 1.8% year-over-year due to lower transition-related expenses. Other expenses increased by $23 million, or 2.7% as compared to the first quarter of 2017 driven by higher advertising sales, insurance, enterprise and product development costs.
In the first quarter of 2018, mobile launch costs totaled $8 million.
Adjusted EBITDA
First quarter Adjusted EBITDA of $3.9 billion grew by 6.5% year-over-year, reflecting revenue growth and operating expense growth of 4.9% and 3.9%, respectively. Excluding mobile costs of $8 million in the first quarter of 2018, Adjusted EBITDA grew by 6.8% year-over-year.
Net Income Attributable to Charter Shareholders
Net income attributable to Charter shareholders totaled $168 million in the first quarter of 2018, compared to $155 million in the first quarter of 2017. The year-over-year increase in net income was primarily driven by higher Adjusted EBITDA, lower severance-related and transactions expenses, a larger gain on financial instruments driven by fluctuations in the fair market value of Charter's British pound currency swap, a loss on extinguishment of debt in the prior-year period, partly offset by higher depreciation and amortization in the first quarter of 2018, and higher year-over-year interest expense.
Net income per basic common share attributable to Charter shareholders totaled $0.71 in the first quarter of 2018 compared to $0.58 during the same period last year. The increase was primarily the result of the factors described above and a 11.6% decrease in weighted average common shares outstanding versus the prior year period.
Capital Expenditures
Property, plant and equipment expenditures totaled $2.2 billion in the first quarter of 2018, compared to $1.6 billion during the first quarter of 2017, primarily driven by an increase in CPE, scalable infrastructure and support capital spending. The increase in CPE spending was related to higher customer connect volumes and a higher set-top box placement rate per connect driven by the launch of Spectrum pricing and packaging in Legacy TWC and Legacy Bright House, and CPE related to Charter's all-digital initiative. The increase in scalable infrastructure was related to the timing of in-year spend and planned product improvements for video and Internet, including spending related to DOCSIS 3.1 launches. Support capital increased due to higher vehicle, tools and test equipment purchases related to in-year timing and insourcing and capitalized labor associated with software development. First quarter capital expenditures included $186 million of all-digital costs and $17 million of 2018 mobile launch costs.
Cash Flow and Free Cash Flow
During the first quarter of 2018, net cash flows from operating activities totaled $2.7 billion, compared to $2.8 billion in the first quarter of 2017. The year-over-year decrease in net cash flows from operating activities was primarily due to a more unfavorable change in working capital during the first quarter of 2018 versus the first quarter of 2017, and higher cash paid for interest, partly offset by higher Adjusted EBITDA.
Negative free cash flow for the first quarter of 2018 totaled $49 million, compared to free cash flow of $1.1 billion during the same period last year. The decrease was driven by lower net cash flows from operating activities and higher capital expenditures in the first quarter of 2018 versus the first quarter of 2017, including a larger decrease in accrued expenses associated with capital expenditures due to timing of fourth quarter 2017 capital expenditures.
Liquidity & Financing
As of March 31, 2018, total principal amount of debt was $69.8 billion and Charter's credit facilities provided approximately $2.8 billion of additional liquidity in excess of Charter's $576 million cash position.
In April, Charter Communications Operating, LLC and Charter Communications Operating Capital Corp issued $800 million of 5.375% senior secured notes due 2038, and $1.7 billion of 5.750% senior secured notes due 2048. The net proceeds will be used to repay existing indebtedness, including to repurchase or redeem all of the outstanding $2.0 billion in aggregate principal amount of TWC's 6.75% notes due July 2018, to pay related fees and expenses and for general corporate purposes, including potential buybacks of Charter Class A common stock or common units of Charter Communications Holdings, LLC.
Share Repurchases
During the three months ended March 31, 2018, Charter purchased approximately 2.0 million shares of Charter Class A common stock and Charter Holdings common units for approximately $683 million.
Conference Call
Charter will host a conference call on Friday, April 27, 2018 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 4754889.
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 11, 2018. The conference ID code for the replay is 4754889.
Additional Information Available on Website
The information in this press release should be read in conjunction with the financial statements and footnotes contained in the Company's Quarterly Report on Form 10-Q for the three months ended March 31, 2018, which will be posted on the "Financial Information" section of our investor relations website at ir.charter.com, when it is filed with the Securities and Exchange Commission (the "SEC"). A slide presentation to accompany the conference call and a trending schedule containing historical customer and financial data will also be available in the "Financial Information" section.
Use of Adjusted EBITDA and Free Cash Flow Information
The company uses certain measures that are not defined by U.S. generally accepted accounting principles ("GAAP") to evaluate various aspects of its business. Adjusted EBITDA and free cash flow are non-GAAP financial measures and should be considered in addition to, not as a substitute for, consolidated net income and net cash flows from operating activities reported in accordance with GAAP. These terms, as defined by Charter, may not be comparable to similarly titled measures used by other companies. Adjusted EBITDA and free cash flow are reconciled to consolidated net income and net cash flows from operating activities, respectively, in the Addendum to this release.
Adjusted EBITDA is defined as consolidated net income plus net interest expense, income taxes, depreciation and amortization, stock compensation expense, loss on extinguishment of debt, (gain) loss on financial instruments, other (income) expense, net and other operating (income) expenses, such as merger and restructuring 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 capital expenditures and changes in accrued expenses related to capital expenditures.
Management and Charter's board of directors use Adjusted EBITDA and free cash flow to assess Charter's performance and its ability to service its debt, fund operations and make additional investments with internally generated funds. In addition, Adjusted EBITDA generally correlates to the leverage ratio calculation under the Company's credit facilities or outstanding notes to determine compliance with the covenants contained in the facilities and notes (all such documents have been previously filed with the the SEC). For the purpose of calculating compliance with leverage covenants, the Company uses Adjusted EBITDA, as presented, excluding certain expenses paid by its operating subsidiaries to other Charter entities. The Company's debt covenants refer to these expenses as management fees, which were $273 million for both the three months ended March 31, 2018 and 2017.
About Charter
Charter (NASDAQ: CHTR) is a leading broadband communications company and the second largest cable operator in the United States. Charter provides a full range of advanced broadband services, including Spectrum TV(TM) video entertainment programming, Spectrum Internet(TM) access, and Spectrum Voice(TM). Spectrum Business(TM) 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(TM) brand. More information about Charter can be found at charter.com.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
This communication includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, regarding, among other things, our plans, strategies and prospects, both business and financial. Although we believe that our plans, intentions and expectations as reflected in or suggested by these forward-looking statements are reasonable, we cannot assure you that we will achieve or realize these plans, intentions or expectations. Forward-looking statements are inherently subject to risks, uncertainties and assumptions including, without limitation, the factors described under "Risk Factors" from time to time in our filings with the SEC. Many of the forward-looking statements contained in this communication may be identified by the use of forward-looking words such as "believe," "expect," "anticipate," "should," "planned," "will," "may," "intend," "estimated," "aim," "on track," "target," "opportunity," "tentative," "positioning," "designed," "create," "predict," "project," "initiatives," "seek," "would," "could," "continue," "ongoing," "upside," "increases" and "potential," among others. Important factors that could cause actual results to differ materially from the forward-looking statements we make in this communication are set forth in our annual report on Form 10-K, and in other reports or documents that we file from time to time with the SEC, and include, but are not limited to:
-- our ability to efficiently and effectively integrate acquired
operations;
-- our ability to sustain and grow revenues and cash flow from operations
by offering video, Internet, voice, mobile, advertising and other
services to residential and commercial customers, to adequately meet the
customer experience demands in our markets and to maintain and grow our
customer base, particularly in the face of increasingly aggressive
competition, the need for innovation and the related capital
expenditures;
-- the impact of competition from other market participants, including but
not limited to incumbent telephone companies, direct broadcast satellite
operators, wireless broadband and telephone providers, digital
subscriber line ("DSL") providers, fiber to the home providers, video
provided over the Internet by (i) market participants that have not
historically competed in the multichannel video business, (ii)
traditional multichannel video distributors, and (iii) content providers
that have historically licensed cable networks to multichannel video
distributors, and providers of advertising over the Internet;
-- general business conditions, economic uncertainty or downturn,
unemployment levels and the level of activity in the housing sector;
-- our ability to obtain programming at reasonable prices or to raise
prices to offset, in whole or in part, the effects of higher programming
costs (including retransmission consents);
-- our ability to develop and deploy new products and technologies
including mobile products, our cloud-based user interface, Spectrum
Guide(®), and downloadable security for set-top boxes, and any other
cloud-based consumer services and service platforms;
-- the effects of governmental regulation on our business including costs,
disruptions and possible limitations on operating flexibility related
to, and our ability to comply with, regulatory conditions applicable to
us as a result of the Time Warner Inc. and Bright House Networks, LLC
transactions;
-- any events that disrupt our networks, information systems or properties
and impair our operating activities or our reputation;
-- the ability to retain and hire key personnel;
-- the availability and access, in general, of funds to meet our debt
obligations prior to or when they become due and to fund our operations
and necessary capital expenditures, either through (i) cash on hand,
(ii) free cash flow, or (iii) access to the capital or credit markets;
and
-- our ability to comply with all covenants in our indentures and credit
facilities, any violation of which, if not cured in a timely manner,
could trigger a default of our other obligations under cross-default
provisions.
All forward-looking statements attributable to us or any person acting on our behalf are expressly qualified in their entirety by this cautionary statement. We are under no duty or obligation to update any of the forward-looking statements after the date of this communication.
CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS AND OPERATING DATA
(dollars in millions, except per share data)
Three Months Ended March 31,
2018 2017 % Change
---- ---- --------
REVENUES:
Video $4,297 $4,079 5.3%
Internet 3,708 3,398 9.1%
Voice 556 694 (19.8)%
--- ---
Residential revenue 8,561 8,171 4.8%
Small and medium business 937 900 4.1%
Enterprise 579 539 7.3%
--- ---
Commercial revenue 1,516 1,439 5.3%
Advertising sales 356 337 5.6%
Other 224 217 3.2%
--- ---
Total Revenue 10,657 10,164 4.9%
------ ------
COSTS AND EXPENSES:
Programming 2,752 2,604 5.7%
Regulatory, connectivity and
produced content 533 498 7.0%
Costs to service customers 1,855 1,801 3.0%
Marketing 751 765 (1.8)%
Mobile 8 - NM
Other expense 865 842 2.7%
--- ---
Total operating costs and
expenses (exclusive of items
shown separately below) 6,764 6,510 3.9%
----- -----
Adjusted EBITDA 3,893 3,654 6.5%
----- -----
Adjusted EBITDA margin 36.5% 35.9%
---- ----
Depreciation and amortization 2,710 2,550
Stock compensation expense 72 69
Other operating expenses, net 69 94
--- ---
Income from operations 1,042 941
----- ---
OTHER EXPENSES:
Interest expense, net (851) (713)
Loss on extinguishment of debt - (34)
Gain on financial instruments,
net 63 38
Other income (expense), net (3) 4
--- ---
(791) (705)
---- ----
Income before income taxes 251 236
Income tax expense (28) (25)
--- ---
Consolidated net income 223 211
Less: Net income attributable
to noncontrolling interests (55) (56)
--- ---
Net income attributable to
Charter shareholders $168 $155
==== ====
EARNINGS PER COMMON SHARE
ATTRIBUTABLE TO CHARTER SHAREHOLDERS:
Basic $0.71 $0.58
===== =====
Diluted $0.70 $0.57
===== =====
Weighted average common shares
outstanding, basic 237,762,295 269,004,817
=========== ===========
Weighted average common shares
outstanding, diluted 241,420,722 273,199,509
=========== ===========
Adjusted EBITDA is a non-GAAP
term. See page 6 of this
addendum for the reconciliation
of Adjusted EBITDA to
consolidated net income as
defined by GAAP. All
percentages are calculated using
whole numbers. Minor differences
may exist due to rounding.
CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(dollars in millions)
March 31, December 31,
2018 2017
---- ----
(unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash
equivalents $576 $621
Accounts
receivable,
net 1,409 1,635
Prepaid
expenses and
other
current
assets 413 299
--- ---
Total current
assets 2,398 2,555
----- -----
INVESTMENT IN CABLE
PROPERTIES:
Property,
plant and
equipment,
net 34,002 33,888
Customer
relationships,
net 11,315 11,951
Franchises 67,319 67,319
Goodwill 29,554 29,554
------ ------
Total
investment
in cable
properties,
net 142,190 142,712
------- -------
OTHER
NONCURRENT
ASSETS 1,563 1,356
----- -----
Total assets $146,151 $146,623
======== ========
LIABILITIES AND SHAREHOLDERS'
EQUITY
CURRENT LIABILITIES:
Accounts
payable and
accrued
liabilities $8,262 $9,045
Current
portion of
long-term
debt 3,340 2,045
----- -----
Total current
liabilities 11,602 11,090
------ ------
LONG-TERM
DEBT 67,609 68,186
------ ------
DEFERRED
INCOME TAXES 17,351 17,314
------ ------
OTHER LONG-
TERM
LIABILITIES 2,464 2,502
----- -----
SHAREHOLDERS' EQUITY:
Controlling
interest 38,768 39,084
Noncontrolling
interests 8,357 8,447
----- -----
Total
shareholders'
equity 47,125 47,531
------ ------
Total
liabilities
and
shareholders'
equity $146,151 $146,623
======== ========
CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in millions)
Three Months Ended March 31,
2018 2017
---- ----
CASH FLOWS FROM OPERATING
ACTIVITIES:
Consolidated net
income $223 $211
Adjustments to reconcile
consolidated net income to net
cash flows from operating
activities:
Depreciation and
amortization 2,710 2,550
Stock
compensation
expense 72 69
Accelerated
vesting of
equity awards 5 17
Noncash interest
income, net (89) (108)
Loss on
extinguishment
of debt - 34
Gain on
financial
instruments,
net (63) (38)
Deferred income
taxes 28 16
Other, net 18 (7)
Changes in operating assets and
liabilities, net of effects
from acquisitions:
Accounts
receivable 226 236
Prepaid expenses
and other
assets (131) (83)
Accounts
payable,
accrued
liabilities and
other (300) (54)
---- ---
Net cash flows
from operating
activities 2,699 2,843
----- -----
CASH FLOWS FROM INVESTING
ACTIVITIES:
Purchases of
property, plant
and equipment (2,183) (1,555)
Change in
accrued
expenses
related to
capital
expenditures (565) (150)
Other, net 10 (7)
--- ---
Net cash flows
from investing
activities (2,738) (1,712)
------ ------
CASH FLOWS FROM FINANCING
ACTIVITIES:
Borrowings of
long-term debt 2,929 4,640
Repayments of
long-term debt (2,185) (3,475)
Payments for
debt issuance
costs - (21)
Purchase of
treasury stock (617) (895)
Proceeds from
exercise of
stock options 36 72
Purchase of
noncontrolling
interest (127) (27)
Distributions to
noncontrolling
interest (39) (38)
Other, net (3) (2)
--- ---
Net cash flows
from financing
activities (6) 254
--- ---
NET INCREASE
(DECREASE) IN
CASH AND CASH
EQUIVALENTS (45) 1,385
CASH AND CASH
EQUIVALENTS,
beginning of
period 621 1,535
--- -----
CASH AND CASH
EQUIVALENTS,
end of period $576 $2,920
==== ======
CASH PAID FOR
INTEREST $1,007 $892
====== ====
CASH PAID FOR
TAXES $1 $1
=== ===
CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES
UNAUDITED SUMMARY OF OPERATING STATISTICS
(in thousands, except per customer and penetration data)
Approximate as of
March 31, December 31, March 31,
2018 (a) 2017 (a) 2017 (a)(j)
------- ------- ----------
Footprint (b)
------------
Estimated Video Passings 50,258 50,066 49,379
Estimated Internet
Passings 50,040 49,820 49,101
Estimated Voice Passings 49,358 49,088 48,308
Penetration Statistics (c)
-------------------------
Video Penetration of
Estimated Video
Passings 33.6% 33.9% 34.7%
Internet Penetration of
Estimated Internet
Passings 48.5% 48.0% 46.9%
Voice Penetration of
Estimated Voice
Passings 22.9% 23.1% 23.1%
Customer Relationships (d)
-------------------------
Residential 25,870 25,639 25,131
Small and Medium
Business 1,590 1,560 1,439
Total Customer
Relationships 27,460 27,199 26,570
====== ====== ======
Residential
-----------
Primary Service Units ("PSUs")
-----------------------------
Video 16,422 16,544 16,736
Internet 22,876 22,545 21,802
Voice 10,375 10,427 10,364
49,673 49,516 48,902
====== ====== ======
Quarterly Net Additions/(Losses)
--------------------------------
Video (122) 2 (100)
Internet 331 263 428
Voice (52) 22 37
157 287 365
=== === ===
Single Play (e) 10,691 10,456 9,980
Double Play (e) 6,556 6,490 6,540
Triple Play (e) 8,623 8,693 8,611
Single Play Penetration
(f) 41.3% 40.8% 39.7%
Double Play Penetration
(f) 25.3% 25.3% 26.0%
Triple Play Penetration
(f) 33.3% 33.9% 34.3%
% Residential Non-Video
Customer Relationships 36.5% 35.5% 33.4%
Monthly Residential
Revenue per Residential
Customer (g) $110.89 $110.21 $109.11
Small and Medium Business
-------------------------
PSUs
----
Video 463 453 411
Internet 1,389 1,358 1,249
Voice 939 912 809
2,791 2,723 2,469
===== ===== =====
Quarterly Net Additions/(Losses)
--------------------------------
Video 10 13 11
Internet 31 37 30
Voice 27 31 31
68 81 72
=== === ===
Monthly Small and Medium
Business Revenue per
Customer (h) $198.50 $201.37 $211.21
Enterprise PSUs (i)
------------------
Enterprise PSUs 119 114 99
(a) All customer statistics include the operations of
TWC, Bright House and Charter each of which is
based on individual legacy company reporting
methodology. These methodologies differ and
their differences may be material. Statistical
reporting will be conformed over time to a single
Charter reporting methodology.
We calculate the aging of customer accounts based
on the monthly billing cycle for each account.
On that basis, at March 31, 2018, December 31,
2017 and March 31, 2017, actual customers include
approximately 186,500, 245,800 and 168,400
customers, respectively, whose accounts were over
60 days past due, approximately 16,000, 19,500
and 13,300 customers, respectively, whose
accounts were over 90 days past due and
approximately 12,800, 12,600 and 7,900 customers,
respectively, whose accounts were over 120 days
past due.
(b) Passings represent our estimate of the number of
units, such as single family homes, apartment and
condominium units and small and medium business
and enterprise sites passed by our cable
distribution network in the areas where we offer
the service indicated. These estimates are based
upon the information available at this time and
are updated for all periods presented when new
information becomes available.
(c) Penetration represents residential and small and
medium business customers as a percentage of
estimated passings for the service indicated.
(d) Customer relationships include the number of
customers that receive one or more levels of
service, encompassing video, Internet and voice
services, without regard to which service(s) such
customers receive. Customers who reside in
residential multiple dwelling units ("MDUs") and
that are billed under bulk contracts are counted
based on the number of billed units within each
bulk MDU. Total customer relationships excludes
enterprise customer relationships.
(e) Single play, double play and triple play customers
represent customers that subscribe to one, two or
three of Charter service offerings, respectively.
(f) Single play, double play and triple play
penetration represents the number of residential
single play, double play and triple play
customers, respectively, as a percentage of
residential customer relationships.
(g) 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
fiber service offerings counting each separate
service offering at each customer location as an
individual PSU.
(j) In the second quarter of 2017, Charter conformed
the seasonal customer program in the Bright House
footprint to Charter's program. Prior to the plan
change, Bright House customers enrolling in the
seasonal plan were charged a one-time fee and
counted as customer disconnects, and as new
connects, when moving off the seasonal plan.
Under Charter's seasonal plan, residential
customers pay a reduced monthly fee while the
seasonal plan is active and remain reported as
customers. Excluding the impact of customer
activity related to Bright House's previous
seasonal plan, residential customer relationships
and video, Internet and voice net additions for
the first quarter of 2017 would have been lower
by 10,000, 8,000, 12,000 and 7,000, respectively,
and there would have been no impact to
residential customer relationships and video,
Internet and voice PSUs at March 31, 2017.
CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES
UNAUDITED RECONCILIATION OF NON-GAAP MEASURES TO GAAP MEASURES
(dollars in millions)
Three Months Ended March 31,
2018 2017
---- ----
Consolidated net income $223 $211
Plus: Interest expense, net 851 713
Income tax expense 28 25
Depreciation and amortization 2,710 2,550
Stock compensation expense 72 69
Loss on extinguishment of debt - 34
Gain on financial instruments, net (63) (38)
Other, net 72 90
Adjusted EBITDA (a) $3,893 $3,654
====== ======
Net cash flows from operating
activities $2,699 $2,843
Less: Purchases of property, plant
and equipment (2,183) (1,555)
Change in accrued expenses related
to capital expenditures (565) (150)
Free cash flow $(49) $1,138
==== ======
-- See page 1 of this addendum for
detail of the components
included within Adjusted
EBITDA.
The above schedule is
presented in order to
reconcile Adjusted EBITDA and
free cash flows, both non-
GAAP measures, to the most
directly comparable GAAP
measures in accordance with
Section 401(b) of the
Sarbanes-Oxley Act.
CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES
UNAUDITED CAPITAL EXPENDITURES
(dollars in millions)
Three Months Ended March 31,
2018 2017
---- ----
Customer premise
equipment (a) $934 $707
Scalable
infrastructure
(b) 486 268
Line extensions
(c) 291 248
Upgrade/rebuild
(d) 142 107
Support capital
(e) 330 225
--- ---
Total capital
expenditures $2,183 $1,555
====== ======
Capital expenditures included
in total related to:
Commercial
services $283 $268
All-digital
transition $186 $1
Mobile $17 $ -
(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).
CONTACT: Media: Justin Venech, 203-905-7818, OR Analysts: Stefan Anninger, 203-905-7955
View original content with multimedia:http://www.prnewswire.com/news-releases/charter-announces-first-quarter-2018-results-300637964.html
SOURCE Charter Communications, Inc.
