10-QPeriod: Q3 FY2009

CHARTER COMMUNICATIONS, INC. /MO/ Quarterly Report for Q3 Ended Sep 30, 2009

Filed November 9, 2009For Securities:CHTR

Summary

Charter Communications, Inc. (CHTR) filed its Form 10-Q for the period ending September 30, 2009, highlighting significant financial distress and ongoing Chapter 11 bankruptcy proceedings. The company recorded a substantial net loss of $1.035 billion for the third quarter, largely driven by a preliminary non-cash franchise impairment charge of $2.9 billion. This impairment reflects the challenging economic environment and increased competition impacting projected future growth. The company is actively working through a pre-arranged joint plan of reorganization aiming to reduce its debt by approximately $8 billion. Key aspects of the plan involve debt exchanges, an equity rights offering, and significant restructuring of its capital structure. While a preliminary ruling from the Bankruptcy Court indicates the plan will be confirmed, the outcome is still subject to final court approval and the satisfaction of various closing conditions. Investors should be aware that current equity holders are not expected to receive any value under the proposed plan.

Key Highlights

  • 1Charter Communications is operating under Chapter 11 bankruptcy protection as of September 30, 2009, with a pre-arranged plan of reorganization aiming to reduce debt by approximately $8 billion.
  • 2A significant preliminary non-cash franchise impairment charge of $2.9 billion was recorded in the third quarter of 2009 due to economic pressures and increased competition impacting future growth projections.
  • 3The company reported a net loss of $1.035 billion for the three months ended September 30, 2009, compared to a net loss of $322 million in the prior year period, heavily influenced by the impairment charge.
  • 4Revenues showed modest growth, up 3% to $1.693 billion for the quarter, driven by increases in high-speed internet and telephone subscribers, though video revenues saw a slight decline.
  • 5Operating cash flow improved significantly year-over-year, with net cash from operating activities at $1.008 billion for the nine months ended September 30, 2009, up from $410 million in the prior year, primarily due to reduced interest payments.
  • 6The company has $1.075 billion in cash and cash equivalents as of September 30, 2009, providing some liquidity amidst the restructuring.
  • 7The proposed plan of reorganization anticipates that existing common stock will be cancelled, and current equity holders are not expected to receive any recovery.

Frequently Asked Questions

Charter Communications filed for Chapter 11 bankruptcy on March 27, 2009, due to a significant debt burden and the challenging economic environment. The company reported a substantial net loss for the quarter ended September 30, 2009, largely due to a $2.9 billion franchise impairment charge. The bankruptcy filing is intended to implement a restructuring plan to improve the company's capital structure and reduce debt.

The pre-arranged joint plan of reorganization aims to reduce Charter's debt by approximately $8 billion. Key elements include debt exchanges for certain subsidiaries' notes, an equity rights offering expected to raise up to $1.6 billion, and the issuance of new debt. The plan is intended to leave the company's operations intact while addressing its balance sheet issues. The company received a preliminary ruling from the Bankruptcy Court indicating the plan would be confirmed.

The preliminary non-cash franchise impairment charge of $2.9 billion recorded in the third quarter of 2009 significantly impacted the company's results, contributing heavily to the $1.035 billion net loss for the period. This charge reflects the company's assessment that projected future growth has been negatively affected by economic downturns and increased competition, leading to a reassessment of the value of its franchise assets.

Under the proposed plan of reorganization, existing Charter common stock is expected to be cancelled, and current shareholders are not anticipated to receive any value. The plan focuses on restructuring debt and equity for creditors and new investors, rather than providing a recovery for existing equity holders.