10-QPeriod: Q2 FY2006

CHARTER COMMUNICATIONS, INC. /MO/ Quarterly Report for Q2 Ended Jun 30, 2006

Filed August 8, 2006For Securities:CHTR

Summary

Charter Communications, Inc. reported its second quarter 2006 financial results, highlighting revenue growth driven by increasing adoption of high-speed Internet and telephone services, which helped offset a decline in traditional analog video customers. Despite the revenue increase, the company continued to experience net losses, primarily due to significant interest expenses stemming from its substantial debt load and ongoing capital expenditures. The company emphasized its ongoing efforts to manage its significant debt obligations, including a recent $6.85 billion refinancing of its credit facilities. While Charter expects to meet its cash needs through 2007, it anticipates potential liquidity challenges in 2008 and beyond, underscoring the importance of continued operational performance and access to credit markets. The company is actively pursuing asset sales and exploring other strategic options to address its long-term leverage and liquidity position.

Key Highlights

  • 1Total revenues increased by 9% year-over-year to $1.383 billion for the three months ended June 30, 2006, and by 9% to $2.703 billion for the six months ended June 30, 2006.
  • 2The company experienced a net loss of $382 million for the three months ended June 30, 2006, and $841 million for the six months ended June 30, 2006.
  • 3High-speed Internet customers grew by 19% year-over-year, and telephone customers increased significantly by 250% for the six-month period.
  • 4Long-term debt remained substantial at $19.86 billion as of June 30, 2006.
  • 5The company completed a significant $6.85 billion refinancing of its credit facilities in April 2006.
  • 6Charter Communications is engaged in the sale of certain cable systems for approximately $971 million, with $896 million in proceeds already utilized to repay revolving credit facility borrowings.
  • 7The company expects cash on hand and operating cash flow to be sufficient through 2007, but anticipates potential liquidity shortfalls in 2008 and beyond.

Frequently Asked Questions

Charter Communications reported increased revenues driven by growth in high-speed Internet and telephone services, which partially offset a decline in analog video customers. However, the company continued to incur significant net losses, largely due to high interest expenses from its substantial debt and capital expenditures. The company generated $1.383 billion in revenue for the quarter, a 9% increase year-over-year, but reported a net loss of $382 million.

Charter Communications has a substantial debt of $19.86 billion as of June 30, 2006. To address this, the company completed a major $6.85 billion refinancing of its credit facilities in April 2006, which reduced interest margins. They are also actively pursuing asset sales, having agreed to sell certain cable systems for approximately $971 million, with a significant portion of the proceeds used to repay outstanding debt. Despite these efforts, the company anticipates potential liquidity challenges in 2008 and beyond.

Revenue growth is primarily being driven by the increasing adoption of high-speed Internet and telephone services. For the six months ended June 30, 2006, high-speed Internet customers grew by 19% year-over-year, and residential telephone customers saw a substantial increase of 250%. These gains are helping to offset the ongoing decline in traditional analog video subscribers.

Charter Communications expects its current cash reserves, operating cash flow, and available credit facilities to be sufficient to meet its cash needs through 2007. However, management projects that these sources may not be sufficient to cover its operational and debt obligations in 2008 and beyond. This outlook highlights the ongoing need for careful financial management, potential asset sales, and access to capital markets.