10-QPeriod: Q3 FY2016

CHARTER COMMUNICATIONS, INC. /MO/ Quarterly Report for Q3 Ended Sep 30, 2016

Filed November 3, 2016For Securities:CHTR

Summary

Charter Communications, Inc. reported a significant transformation in its Q3 2016 filing due to the completion of the Time Warner Cable (TWC) and Bright House transactions in May 2016. This has led to a substantial increase in reported revenues, assets, and liabilities. The company generated revenues of $10,037 million for the quarter, a substantial leap from $2,450 million in the prior year's comparable period, reflecting the integration of TWC and Bright House operations. Net income attributable to Charter shareholders rose to $189 million from $54 million year-over-year. Despite the significant debt taken on to finance these acquisitions, the company's liquidity remains strong, supported by available credit facilities and expected free cash flow. The integration of the acquired entities is a key focus, with management implementing 'Spectrum' pricing and packaging across all markets. Investors should note the dramatic shift in the company's scale and financial profile following these transformative acquisitions. While reported revenues and net income show substantial growth, this is largely an artifact of the combination. The balance sheet now reflects a much larger entity with considerable goodwill and intangible assets resulting from purchase accounting. The substantial increase in long-term debt ($59,946 million from $35,723 million) is a critical factor for investors to monitor, alongside the company's ability to successfully integrate operations and manage its leverage effectively. The company is focused on realizing synergies and improving operational efficiency across the combined entity.

Financial Highlights

50 data points
Beta

Revenue

$10.04B

Net Income

$189.00M

1.9% Net Margin

EPS (Diluted)

$0.69

Total Assets

$148.90B

Cash & Equivalents

$1.17B

Free Cash Flow

$1.05B

Financial Statements
Beta
Revenue$10.04B
Operating Expenses$9.13B
Operating Income$911.00M
Net Income$189.00M
EPS (Basic)$0.70
EPS (Diluted)$0.69
Shares Outstanding (Basic)271.26M
Shares Outstanding (Diluted)275.37M

Key Highlights

  • 1Completed significant acquisitions of Time Warner Cable (TWC) and Bright House in May 2016, dramatically increasing scale and financial reporting.
  • 2Reported Q3 2016 revenues of $10,037 million, a 310% increase year-over-year, primarily driven by the acquisitions.
  • 3Net income attributable to Charter shareholders increased to $189 million for Q3 2016, compared to $54 million in Q3 2015.
  • 4Long-term debt significantly increased to $59,946 million from $35,723 million due to financing for the acquisitions.
  • 5Company generated positive operating cash flow, with $4,815 million for the nine months ended September 30, 2016.
  • 6Significant investments in property, plant, and equipment totaling $3,437 million for the nine months ended September 30, 2016, reflecting integration and network upgrades.
  • 7Total assets grew to $148,897 million from $39,316 million, largely due to acquisition accounting and recognition of goodwill and intangible assets.

Frequently Asked Questions

The primary driver is the completion of the acquisitions of Time Warner Cable (TWC) and Bright House Networks in May 2016. These transformative transactions have substantially increased the company's revenue, assets, and liabilities, and altered its overall financial profile.

Charter's long-term debt has increased significantly, rising from $35,723 million at December 31, 2015, to $59,946 million at September 30, 2016, due to the financing of the TWC and Bright House acquisitions. Investors should closely monitor the company's leverage ratios and its ability to manage this increased debt burden through strong cash flow generation and potential refinancing activities.

Charter is focused on integrating the operations of TWC and Bright House to realize synergies and improve efficiency. Key initiatives include launching 'Spectrum' pricing and packaging across all acquired markets, converting analog markets to an all-digital platform, and centralizing corporate functions while optimizing field operations and customer care centers.

Net income attributable to Charter shareholders increased to $189 million for the third quarter of 2016, up from $54 million in the same period last year. However, it's important to note that this growth is largely a result of the consolidated financial statements reflecting the newly acquired entities. The company is also incurring merger and restructuring costs which impact near-term profitability.