10-QPeriod: Q2 FY2014

CHARTER COMMUNICATIONS, INC. /MO/ Quarterly Report for Q2 Ended Jun 30, 2014

Filed July 31, 2014For Securities:CHTR

Summary

Charter Communications, Inc. (CHTR) reported its financial results for the quarter ended June 30, 2014, showcasing revenue growth driven by its Internet and commercial businesses, as well as the impact of the Bresnan acquisition. The company's total revenues increased by 15% year-over-year for both the three and six-month periods. Despite revenue growth, Charter continued to report net losses, a trend attributed to high operating expenses, interest payments on substantial debt, and depreciation and amortization costs. A significant development highlighted is the pending acquisition and exchange of assets with Comcast Corporation, expected to add approximately 1.4 million new TWC customers to Charter's base. This transaction is a key strategic move aimed at expanding Charter's market presence and operational efficiencies. The company's financial strategy continues to focus on managing its significant debt load, with a substantial portion of its debt effectively fixed through derivative instruments.

Financial Highlights

45 data points
Beta

Revenue

$2.26B

Net Income

-$45.00M

-2.0% Net Margin

EPS (Diluted)

$-0.42

Total Assets

$17.37B

Cash & Equivalents

$9.00M

Free Cash Flow

$62.00M

Financial Statements
Beta
Revenue$2.26B
Operating Expenses$2.02B
Operating Income$236.00M
Interest Expense$210.00M
Net Income-$45.00M
EPS (Basic)$-0.42
Shares Outstanding (Basic)107.98M

Key Highlights

  • 1Revenue increased by 15% year-over-year for both the three and six months ended June 30, 2014, reaching $2.26 billion and $4.46 billion respectively, largely driven by growth in Internet and commercial services, and the Bresnan acquisition.
  • 2The company reported a net loss of $45 million for the quarter and $82 million for the six months, a decrease in losses compared to the prior year periods ($96 million and $138 million respectively).
  • 3Charter Communications announced a significant agreement with Comcast Corporation to acquire and exchange cable systems, which is expected to add approximately 1.4 million net new customers.
  • 4Capital expenditures remained substantial, totaling $1.1 billion for the six months ended June 30, 2014, primarily for network upgrades, customer premise equipment, and the all-digital transition.
  • 5Long-term debt stood at $14.0 billion as of June 30, 2014. The company continues to manage its debt through a mix of fixed and variable rate instruments, with approximately 84% of its debt effectively fixed.
  • 6Adjusted EBITDA, a non-GAAP measure, increased by 15% year-over-year for the six-month period to $1.56 billion, reflecting operational improvements and the impact of acquisitions.
  • 7The company's free cash flow decreased for both the three and six-month periods compared to the prior year, primarily due to increased capital expenditures.

Frequently Asked Questions

Revenue growth was primarily driven by increases in the number of residential Internet and triple play customers, growth in commercial business customers, promotional and annual rate increases, and higher advanced services penetration. The acquisition of Bresnan also contributed significantly to the revenue increase.

The agreement with Comcast involves an asset purchase, asset exchange, and a contribution/spin-off transaction. This is expected to significantly expand Charter's customer base by approximately 1.4 million net new TWC customers and improve geographic presence, leading to potential operational efficiencies and enhanced service offerings. The transaction is subject to regulatory approvals and other closing conditions.

Charter Communications has a history of net losses primarily due to high operating expenses, substantial interest expenses stemming from its significant debt load, and significant depreciation and amortization expenses related to its capital-intensive business and past acquisitions.

Charter Communications carries a significant amount of long-term debt. The company actively manages its interest rate exposure by maintaining a mix of fixed and variable rate debt and utilizing interest rate derivative instruments, which effectively fix the interest rate on approximately 84% of its total debt. The company also aims to manage its debt through free cash flow generation and potential future refinancing activities.