10-QPeriod: Q3 FY2012

CHARTER COMMUNICATIONS, INC. /MO/ Quarterly Report for Q3 Ended Sep 30, 2012

Filed November 6, 2012For Securities:CHTR

Summary

Charter Communications, Inc. (CHTR) reported its third-quarter 2012 financial results, showing continued revenue growth driven by its Internet and commercial businesses, alongside advertising sales. Despite overall revenue increases, video revenues remained flat year-over-year, impacted by declining basic video subscribers and increased competition. The company's net loss widened slightly for the three-month period compared to the prior year, primarily due to increased depreciation and amortization expenses. However, for the nine-month period, the net loss narrowed. The company's balance sheet shows a significant increase in cash and cash equivalents, largely due to debt financing activities, alongside a substantial debt load. Operational focus remains on improving video product quality, increasing digital and HD-DVR penetration, and simplifying offers to enhance customer value, though these initiatives are expected to impact short-term performance.

Financial Highlights

45 data points
Beta

Revenue

$1.88B

Net Income

-$87.00M

-4.6% Net Margin

EPS (Diluted)

$-0.87

Total Assets

$16.50B

Cash & Equivalents

$868.00M

Free Cash Flow

-$20.00M

Financial Statements
Beta
Revenue$1.88B
SG&A Expenses$384.00M
Operating Expenses$1.67B
Operating Income$211.00M
Interest Expense$229.00M
Net Income-$87.00M
EPS (Basic)$-0.87
Shares Outstanding (Basic)99.69M

Key Highlights

  • 1Total revenue increased by 4% year-over-year for both the three and nine months ended September 30, 2012, reaching $1.88 billion and $5.59 billion respectively.
  • 2Internet and commercial services showed strong revenue growth, up 8% and 21% respectively for the three-month period, indicating successful expansion in these segments.
  • 3Video revenue remained flat for the three-month period and declined 1% for the nine-month period, with a loss of 163,000 basic video subscribers year-over-year.
  • 4The company reported a net loss of $87 million for the third quarter of 2012, a slight increase from $85 million in the prior year, but a narrowed net loss of $264 million for the nine months, an improvement from $302 million in 2011.
  • 5Cash and cash equivalents significantly increased to $895 million from $29 million at the end of 2011, primarily due to $1.25 billion in new senior notes issued in August 2012.
  • 6Capital expenditures increased significantly to $1.3 billion for the nine months ended September 30, 2012, up from $984 million in the prior year, reflecting investments in customer premise equipment, infrastructure, and network upgrades.
  • 7The company's long-term debt remained substantial, standing at $12.82 billion at September 30, 2012, though efforts were made to refinance and extend debt maturities.

Frequently Asked Questions

Charter's strategy to improve video revenue involves enhancing the quality of its video product by increasing digital and HD-DVR penetration, simplifying offers, improving packaging, and focusing on offers for new customers. They are also actively transitioning away from analog service to an all-digital platform.

Charter is managing its debt through a combination of debt issuance, refinancing activities, and aiming to generate positive free cash flow. The company issued $1.25 billion in senior notes in August 2012 and is using proceeds for general corporate purposes, including repaying outstanding revolving credit facility amounts and redeeming older notes. They also aim to use future free cash flow and availability under credit facilities to extend maturities or reduce principal.

The increase in capital expenditures, particularly for customer premise equipment and scalable infrastructure, is driven by anticipated residential and commercial customer growth, the need for higher bandwidth to accommodate increased Internet penetration and network throughput, and investments to improve service reliability and support digitization and DVR penetration.

In its video business, Charter faces challenges from competitors offering more channels, including more HD options, and often exclusively digital services. Increased marketing by competitors and incentives to switch providers impact customer retention. In telephone, competition from wireless services and economic factors have impacted the growth of its telephone business as customers opt for wireless alternatives.