STAMFORD, Conn., July 31, 2020 /PRNewswire/ -- Charter
Communications, Inc. (along with its subsidiaries, the "Company" or
"Charter") today reported financial and operating results for the
three and six months ended June 30, 2020.
Key highlights:
- Second quarter total residential and SMB customer
relationships1 increased by 755,000, compared to 203,000
during the second quarter of 2019. Second quarter total residential
and SMB Internet customers1 increased by 850,000,
compared to 258,000 during the second quarter of 2019.
- Charter added 325,000 Spectrum Mobile™
lines in the second quarter, and as of June
30, 2020, Charter served a total of 1.7 million mobile
lines.
- Second quarter revenue of $11.7
billion grew by 3.1% year-over-year, driven by residential
revenue growth of 4.1%, mobile revenue growth of 96.1% and SMB
revenue growth of 2.0%.
- Second quarter Adjusted EBITDA2 of $4.5 billion grew by 7.3% year-over-year, while
second quarter cable Adjusted EBITDA2 of $4.6 billion grew by 6.7% year-over-year.
- Net income attributable to Charter shareholders totaled
$766 million in the second quarter,
compared to $314 million during the
same period last year.
- Second quarter capital expenditures totaled $1.9 billion and included $125 million of mobile-related capital
expenditures.
- Consolidated free cash flow2 for the second quarter
of 2020 totaled $1.9 billion,
compared to $1.1 billion in 2019.
Cable free cash flow2 totaled $2.1 billion for the second quarter of 2020,
versus $1.4 billion in 2019.
- During the second quarter, Charter purchased approximately 2.3
million shares of Charter Class A common stock and Charter
Communications Holdings, LLC ("Charter Holdings") common units for
approximately $1.2 billion.
"Our ability to grow our services this year for new and existing
customers, is a testament to our operating strategy, the quality of
our products and our significant investment in systems and people
over the last several years," said Tom
Rutledge, CEO and Chairman of Charter Communications, Inc.
"We continue to perform in a difficult and disruptive environment,
and all of us at Charter are proud of our work in serving the
communities in which we operate."
1.
|
Results include the
impact of COVID-19 related offers and programs launched by Charter
in the first quarter of 2020. See page 3 for additional
information.
|
2.
|
Adjusted EBITDA,
cable Adjusted EBITDA, free cash flow and cable free cash flow are
non-GAAP measures defined in the "Use of Adjusted EBITDA and Free
Cash Flow Information" section and are reconciled to net income
attributable to Charter shareholders and net cash flows from
operating activities, respectively, in the addendum of this news
release.
|
Key Operating
Results
|
|
Approximate as
of
|
|
|
|
June 30, 2020
(a)
|
|
June 30, 2019
(a)
|
|
Y/Y
Change
|
Footprint
(b)
|
|
|
|
|
|
Estimated
Passings
|
52,714
|
|
|
51,619
|
|
|
2.1
|
%
|
|
|
|
|
|
|
Penetration
Statistics (c)
|
|
|
|
|
|
Total Customer
Relationship Penetration of Estimated Passings
|
57.8
|
%
|
|
55.5
|
%
|
|
2.3 ppts
|
|
|
|
|
|
|
Customer
Relationships (d)
|
|
|
|
|
|
Residential
|
28,496
|
|
|
26,755
|
|
|
6.5
|
%
|
Small and Medium
Business
|
1,980
|
|
|
1,902
|
|
|
4.1
|
%
|
Total Customer
Relationships
|
30,476
|
|
|
28,657
|
|
|
6.3
|
%
|
|
|
|
|
|
|
Quarterly Net
Additions (Losses)
|
|
|
|
|
|
Residential
|
751
|
|
|
164
|
|
|
357.5
|
%
|
Small and Medium
Business
|
4
|
|
|
39
|
|
|
(90.5)
|
%
|
Total Customer
Relationships
|
755
|
|
|
203
|
|
|
271.5
|
%
|
|
|
|
|
|
|
Residential
|
|
|
|
|
|
Primary Service
Units ("PSUs")
|
|
|
|
|
|
Internet
|
26,313
|
|
|
24,244
|
|
|
8.5
|
%
|
Video
|
15,652
|
|
|
15,802
|
|
|
(0.9)
|
%
|
Voice
|
9,398
|
|
|
9,808
|
|
|
(4.2)
|
%
|
|
|
|
|
|
|
Quarterly Net
Additions (Losses)
|
|
|
|
|
|
Internet
|
842
|
|
|
221
|
|
|
280.8
|
%
|
Video
|
102
|
|
|
(150)
|
|
|
167.7
|
%
|
Voice
|
38
|
|
|
(207)
|
|
|
118.5
|
%
|
|
|
|
|
|
|
Single Play
(e)
|
12,552
|
|
|
11,354
|
|
|
10.5
|
%
|
Double Play
(e)
|
9,021
|
|
|
7,709
|
|
|
17.0
|
%
|
Triple Play
(e)
|
6,923
|
|
|
7,692
|
|
|
(10.0)
|
%
|
|
|
|
|
|
|
Single Play
Penetration (f)
|
44.0
|
%
|
|
42.4
|
%
|
|
1.6 ppts
|
Double Play
Penetration (f)
|
31.7
|
%
|
|
28.8
|
%
|
|
2.9 ppts
|
Triple Play
Penetration (f)
|
24.3
|
%
|
|
28.8
|
%
|
|
(4.5) ppts
|
|
|
|
|
|
|
% Residential
Non-Video Customer Relationships
|
45.1
|
%
|
|
40.9
|
%
|
|
4.2 ppts
|
|
|
|
|
|
|
Monthly Residential
Revenue per Residential Customer (g)
|
$110.82
|
|
|
$112.20
|
|
|
(1.2)
|
%
|
|
|
|
|
|
|
Small and Medium
Business
|
|
|
|
|
|
PSUs
|
|
|
|
|
|
Internet
|
1,783
|
|
|
1,701
|
|
|
4.8
|
%
|
Video
|
516
|
|
|
518
|
|
|
(0.4)
|
%
|
Voice
|
1,169
|
|
|
1,097
|
|
|
6.5
|
%
|
|
|
|
|
|
|
Quarterly Net
Additions (Losses)
|
|
|
|
|
|
Internet
|
8
|
|
|
37
|
|
|
(79.6)
|
%
|
Video
|
(8)
|
|
|
9
|
|
|
(197.5)
|
%
|
Voice
|
7
|
|
|
25
|
|
|
(71.7)
|
%
|
|
|
|
|
|
|
Monthly Small and
Medium Business Revenue per Customer (h)
|
$166.06
|
|
|
$170.42
|
|
|
(2.6)
|
%
|
|
|
|
|
|
|
Mobile
Lines
|
|
|
|
|
|
Residential and Small
and Medium Business Mobile Lines
|
1,697
|
|
|
518
|
|
|
227.8
|
%
|
Net
Additions
|
325
|
|
|
208
|
|
|
56.3
|
%
|
|
|
|
|
|
|
Enterprise PSUs
(i)
|
|
|
|
|
|
Enterprise
PSUs
|
270
|
|
|
258
|
|
|
4.9
|
%
|
Net
Additions
|
1
|
|
|
5
|
|
|
(75.3)
|
%
|
|
Footnotes
|
In thousands, except
per customer and penetration data. See footnotes to unaudited
summary of operating statistics on page 5 of the addendum of this
news release. The footnotes contain important disclosures regarding
the definitions used for these operating statistics.
|
|
All percentages are
calculated using whole numbers. Minor differences may exist due to
rounding.
|
Customers and Net Additions on
COVID-19 Offers
For the quarter
ended June 30, 2020
(in
thousands)
|
|
|
Remote
Education
Offer (a)
|
|
Keep
Americans
Connected (b)
|
|
Seasonal Plan
(c)
|
|
Total
|
Residential
|
|
|
|
|
|
|
|
Customer
Relationships
|
160
|
|
|
208
|
|
|
n/a
|
|
|
368
|
|
Internet
PSUs
|
160
|
|
|
202
|
|
|
n/a
|
|
|
362
|
|
Video PSUs
|
58
|
|
(d)
|
148
|
|
|
n/a
|
|
|
206
|
|
Voice PSUs
|
46
|
|
(d)
|
90
|
|
|
n/a
|
|
|
136
|
|
Mobile Lines
|
10
|
|
(d)
|
8
|
|
|
n/a
|
|
|
18
|
|
|
|
|
|
|
|
|
|
Quarterly Net
Additions
|
|
|
|
|
|
|
|
Customer
Relationships
|
41
|
|
|
207
|
|
|
n/a
|
|
|
248
|
|
Internet
PSUs
|
41
|
|
|
201
|
|
|
n/a
|
|
|
242
|
|
Video PSUs
|
12
|
|
(d)
|
147
|
|
|
n/a
|
|
|
159
|
|
Voice PSUs
|
12
|
|
(d)
|
90
|
|
|
n/a
|
|
|
102
|
|
Mobile Lines
|
7
|
|
(d)
|
8
|
|
|
n/a
|
|
|
15
|
|
|
|
|
|
|
|
|
|
Small and Medium
Business
|
|
|
|
|
|
|
|
Customer
Relationships
|
n/a
|
|
|
14
|
|
|
13
|
|
|
27
|
|
Internet
PSUs
|
n/a
|
|
|
13
|
|
|
11
|
|
|
24
|
|
Video PSUs
|
n/a
|
|
|
6
|
|
|
13
|
|
|
19
|
|
Voice PSUs
|
n/a
|
|
|
11
|
|
|
8
|
|
|
19
|
|
Mobile Lines
|
n/a
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
|
|
|
|
|
|
Quarterly Net
Additions
|
|
|
|
|
|
|
|
Customer
Relationships
|
n/a
|
|
|
14
|
|
|
8
|
|
|
22
|
|
Internet
PSUs
|
n/a
|
|
|
13
|
|
|
7
|
|
|
20
|
|
Video PSUs
|
n/a
|
|
|
6
|
|
|
11
|
|
|
17
|
|
Voice PSUs
|
n/a
|
|
|
11
|
|
|
5
|
|
|
16
|
|
Mobile Lines
|
n/a
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
|
|
|
|
|
|
Enterprise
PSUs
|
|
|
|
|
|
|
|
Enterprise
PSUs
|
n/a
|
|
|
1
|
|
|
9
|
|
|
10
|
|
|
|
(a)
|
The Remote Education
Offer ("REO") represents residential customers receiving free
Internet service by participating in Charter's free 60-day Internet
offer available to households with K-12 and/or college students or
educators who were not Spectrum Internet customers. This offer for
new customers ended on June 30, 2020. These residential customers
are generally eligible to purchase additional products and services
(i.e. video, voice and mobile) at current promotional rates. Of the
448,000 Internet customers who were added as part of the REO
through June 30, 2020 (of which 119,000 were added in March),
160,000 remained within their 60-day free period with 288,000
having rolled off the promotional period as of June 30, 2020.
Nearly 90% of cumulative connects on the REO remained Internet
customers as of July 27, 2020.
|
|
|
(b)
|
As part of our March
2020 pledge to the FCC which we extended through June 30, Keep
Americans Connected ("KAC") represents customers who requested to
not be disconnected from service due to COVID-19 related payment
challenges and would have been disconnected under our normal
collection policies during the pledge period. Approximately 600,000
residential customers and 100,000 SMB customers had requested
protection from disconnection, of which at the peak of the program,
208,000 and 14,000, respectively, would have been disconnected
under our normal collection policies. Approximately 30% of the KAC
customer bills were current, and over 60% were making partial or
full payments. In an effort to assist these COVID-19 impacted
customers with overdue balances, Charter waived $76 million of
residential, $6 million of SMB and $3 million of mobile
receivables, each of which were recorded as a reduction to revenue
in the second quarter. These customers no longer have an overdue
balance and will be subject to Charter's standard collection
practices going forward.
|
|
|
(c)
|
Represents small and
medium businesses and Enterprise hospitality customers who have
requested a reduced level of service and now pay a reduced price
for their service due to temporary business closure or because
these customers have reduced their service offering to their own
customers.
|
|
|
(d)
|
Customers who are
receiving free Internet Service as part of the REO who have
subscribed to products in addition to Spectrum Internet (i.e.,
video, voice, mobile) during the 60-day Free Internet Offer.
Billings are not deferred for these additional services.
|
To assist communities impacted by the COVID-19 pandemic, in
March, Charter launched its Remote Education Offer providing free
Spectrum Internet® for 60 days to households with
K-12 and/or college students as well as educators that did not
already have Spectrum Internet service. This offer for new
customers ended on June 30, 2020. The
majority of customers that participated in the Remote Education
Offer chose to be provided with Internet service at flagship speeds
(i.e., 200 Mbps or 100 Mbps). Furthermore, as of June 30,
2020, nearly 50% of participants in the Remote Education Offer
chose to subscribe to additional services (i.e., video, voice,
mobile) from Charter, and were billed for these additional
services. Charter also participated in the Federal Communication
Commission's ("FCC") Keep Americans Connected Pledge through
June 30, 2020, pausing disconnects
and collection efforts for residential and SMB customers impacted
by COVID-19. In an effort to assist these COVID-19 impacted
customers with overdue balances, Charter waived $76 million of residential, $6 million of SMB and $3
million of mobile receivables which were recorded as
reductions to revenue in the second quarter of 2020. As a result,
these customers no longer have overdue balances. Finally, Charter
provided a seasonal plan at reduced rates to SMB and Enterprise
customers that have temporarily closed or because these customers
have reduced their service offerings to their own customers. The
following discussion includes the impact of Charter's COVID-19
related offers and programs, which were generally provided up to
June 30, 2020, on customer results
and data. See page 3 for the total number of customers
participating in these COVID-19 related offers and programs as of
June 30, 2020.
During the second quarter of 2020, Charter's residential
customer relationships grew by 751,000, while second quarter 2019
residential customer relationships grew by 164,000. As of
June 30, 2020, Charter had 28.5 million residential customer
relationships, with year-over-year growth of 1.7 million, or
6.5%.
Charter added 842,000 residential Internet customers in the
second quarter of 2020, versus second quarter 2019 residential
Internet customer net additions of 221,000. As of June 30,
2020, Charter had 26.3 million residential Internet customers, with
over 85% subscribing to tiers that provided 100 Mbps or more of
speed. Currently, 200 Mbps is the slowest speed offered to new
Spectrum Internet customers in approximately 60% of
Charter's footprint, with 100 Mbps the slowest speed offered in the
remaining 40% of its footprint.
Residential video customers increased by 102,000 in the second
quarter of 2020, while second quarter 2019 residential video
customers decreased by 150,000. As of June 30, 2020, Charter
had 15.7 million residential video customers.
During the second quarter of 2020, residential wireline voice
customers increased by 38,000, while second quarter 2019 voice
customers declined by 207,000. As of June 30, 2020, Charter
had 9.4 million residential wireline voice customers.
Second quarter 2020 residential revenue per residential customer
(excluding mobile) totaled $110.82,
and declined by 1.2% compared to the prior year period, given the
waiver of overdue customer balances for customers offered
protection following Charter's participation in the FCC's Keep
Americans Connected Pledge, Charter's Remote Education Offer, a
higher percentage of non-video customers and a higher mix of lower
priced video packages within Charter's video customer base, partly
offset by promotional rate step-ups and rate adjustments.
During the second quarter of 2020, Charter added 325,000 mobile
lines, and as of June 30, 2020, Charter served a total of 1.7
million mobile lines. Spectrum Mobile is available to all
new and existing Spectrum Internet customers and runs on
America's most awarded LTE network combined with Spectrum
WiFi. Spectrum Mobile customers can choose one of two simple
ways to pay for data, "Unlimited" for $45 a month (per line), or "By the Gig" at
$14/GB, in both cases including
applicable fees and taxes. Earlier this year, Spectrum
Mobile launched 5G service. Customers with a $45/monthly
unlimited data plan can use 5G phones to access 5G service at no
additional cost in select cities nationwide.
SMB customer relationships grew by 4,000 during the second
quarter of 2020, compared to growth of 39,000 during the second
quarter of 2019. As of June 30, 2020, Charter had 2.0 million
SMB customer relationships, with year-over-year growth of 4.1%.
Enterprise PSUs grew by 1,000 during the second quarter of 2020
compared to growth of 5,000 during the second quarter of 2019. As
of June 30, 2020, Charter had 270,000 enterprise PSUs, with
growth of 4.9% year-over-year.
Second Quarter Financial Results
CHARTER
COMMUNICATIONS, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF
OPERATIONS AND OPERATING DATA
(dollars in
millions, except per share
data)
|
|
|
Three Months Ended
June 30,
|
|
2020
|
|
2019
|
|
%
Change
|
REVENUES:
|
|
|
|
|
|
Internet
|
$
|
4,530
|
|
|
$
|
4,103
|
|
|
10.4
|
%
|
Video
|
4,371
|
|
|
4,391
|
|
|
(0.4)
|
%
|
Voice
|
451
|
|
|
489
|
|
|
(7.7)
|
%
|
Residential
revenue
|
9,352
|
|
|
8,983
|
|
|
4.1
|
%
|
Small and medium
business
|
983
|
|
|
963
|
|
|
2.0
|
%
|
Enterprise
|
606
|
|
|
652
|
|
|
(7.1)
|
%
|
Commercial
revenue
|
1,589
|
|
|
1,615
|
|
|
(1.7)
|
%
|
Advertising
sales
|
249
|
|
|
395
|
|
|
(37.0)
|
%
|
Mobile
|
310
|
|
|
158
|
|
|
96.1
|
%
|
Other
|
196
|
|
|
196
|
|
|
—
|
%
|
Total
Revenue
|
11,696
|
|
|
11,347
|
|
|
3.1
|
%
|
|
|
|
|
|
|
COSTS AND
EXPENSES:
|
|
|
|
|
|
Cable operating costs
and expenses
|
6,794
|
|
|
6,885
|
|
|
(1.3)
|
%
|
Mobile operating costs
and expenses
|
413
|
|
|
277
|
|
|
48.6
|
%
|
Total operating costs
and expenses
|
7,207
|
|
|
7,162
|
|
|
0.6
|
%
|
|
|
|
|
|
|
Adjusted
EBITDA
|
$
|
4,489
|
|
|
$
|
4,185
|
|
|
7.3
|
%
|
|
|
|
|
|
|
Adjusted EBITDA
margin
|
38.4
|
%
|
|
36.9
|
%
|
|
|
|
|
|
|
|
|
Cable Adjusted
EBITDA
|
$
|
4,592
|
|
|
$
|
4,304
|
|
|
6.7
|
%
|
Cable Adjusted EBITDA
margin
|
40.3
|
%
|
|
38.5
|
%
|
|
|
|
|
|
|
|
|
Capital
Expenditures
|
$
|
1,877
|
|
|
$
|
1,597
|
|
|
|
% Total
Revenue
|
16.1
|
%
|
|
14.1
|
%
|
|
|
|
|
|
|
|
|
Cable Capital
Expenditures
|
$
|
1,752
|
|
|
$
|
1,504
|
|
|
|
% Total Cable
Revenue
|
15.4
|
%
|
|
13.4
|
%
|
|
|
|
|
|
|
|
|
Net income
attributable to Charter shareholders
|
$
|
766
|
|
|
$
|
314
|
|
|
|
Earnings per common
share attributable to Charter shareholders:
|
|
|
|
|
|
Basic
|
$
|
3.72
|
|
|
$
|
1.41
|
|
|
|
Diluted
|
$
|
3.63
|
|
|
$
|
1.39
|
|
|
|
|
|
|
|
|
|
Net cash flows from
operating activities
|
$
|
3,529
|
|
|
$
|
2,761
|
|
|
|
Free cash
flow
|
$
|
1,866
|
|
|
$
|
1,112
|
|
|
|
Cable free cash
flow
|
$
|
2,099
|
|
|
$
|
1,409
|
|
|
|
Revenues
Second quarter revenue increased by 3.1% year-over-year to
$11.7 billion, driven by growth in
Internet, mobile and SMB. Excluding mobile, revenue grew by 1.8%
year-over-year.
Residential revenue totaled $9.4
billion in the second quarter, an increase of 4.1%
year-over-year, despite $76 million
of customer receivables which Charter has waived to address past
due balances for customers offered collection protection following
Charter's participation in the FCC's Keep Americans Connected
Pledge.
Internet revenue grew by 10.4% compared to the year-ago quarter,
to $4.5 billion, driven by growth in
Internet customers during the last year, promotional rolloff and
rate adjustments, partly offset by the aforementioned waiver of
overdue customer balances.
Video revenue totaled $4.4 billion
in the second quarter, a decrease of 0.4% compared to the prior
year period, driven by a decline in video customers during the last
year, a higher mix of lower priced video packages within Charter's
video customer base and the aforementioned waiver of overdue
customer balances, partly offset by rate adjustments and
promotional rolloff.
Voice revenue totaled $451 million
in the second quarter, a decrease of 7.7% compared to the second
quarter of 2019, driven by a decline in wireline voice customers
over the last twelve months and value-based pricing.
Commercial revenue declined to $1.6
billion, a decrease of 1.7% over the prior year period,
driven by a decline in enterprise revenue of 7.1%, partly offset by
SMB revenue growth of 2.0%. SMB revenue in the second quarter was
negatively impacted by $17 million of
COVID-19 related seasonal plans and receivables waived to address
past due balances for customers offered collection protection
following Charter's participation in the FCC's Keep Americans
Connected Pledge. Excluding one-time COVID-19 related impacts, SMB
revenue grew by 3.8% year-over-year reflecting lower SMB unit
growth during the pandemic. Second quarter enterprise revenue was
negatively impacted by Charter's sale of Navisite in the third
quarter of 2019 and $18 million of
COVID-19 related hospitality customer credits. Excluding Navisite
revenue from the second quarter of 2019 and one-time COVID-19
related impacts, commercial and enterprise revenue grew by 2.8% and
1.3% year-over-year, respectively.
Second quarter advertising sales revenue of $249 million decreased by 37.0% compared to the
year-ago quarter, driven by lower local and national sales due to
the COVID-19 pandemic. Excluding political revenue in both periods,
advertising sales revenue declined by 40.8% year-over-year.
Second quarter mobile revenue totaled $310 million, an increase of 96.1%
year-over-year.
Other revenue totaled $196 million
in the second quarter, in-line with the prior year.
Operating Costs and Expenses
Second quarter total operating costs and expenses increased by
$45 million, or 0.6% year-over-year.
Excluding mobile costs in both periods, operating costs and
expenses decreased by 1.3% compared to the year-ago quarter.
Second quarter programming costs increased by $46 million, or 1.6% as compared to the second
quarter of 2019, reflecting contractual programming increases and
renewals, partly offset by lower video customers and a higher mix
of lower cost video packages within Charter's video customer
base.
Regulatory, connectivity and produced content expenses decreased
by $109 million, or 18.3%
year-over-year, primarily driven by delayed sports rights
costs.
Costs to service customers increased by $81 million, or 4.6% year-over-year, despite
year-over-year residential and SMB customer growth of 6.3%. In
addition to customer growth and record transaction volume for new
sales and service, the year-over-year increase in costs to service
customers was driven by previously announced accelerated wage
benefits for hourly field operations and call center employees and
COVID-19 related flex time, partly offset by lower medical costs
and a one-time payroll tax credit. While bad debt increased 5.0%
year-over-year, bad debt in the second quarter benefited from the
revenue reduction for Keep Americans Connected customers and better
collections from other customers as a result of Federal stimulus
under the CARES Act.
Marketing expenses decreased by $49
million, or 6.3% year-over-year, primarily driven by better
media placement rates and a one-time payroll tax credit.
Other expenses decreased by $60
million, or 6.6% as compared to the second quarter of 2019
primarily driven by lower advertising sales expense, enterprise
costs from the sale of Navisite, employee travel expense and
insurance costs.
Second quarter mobile costs totaled $413
million, an increase of 48.6% year-over-year, and were
comprised of device costs, customer acquisition costs, and service
and operating costs.
Adjusted EBITDA
Second quarter Adjusted EBITDA of $4.5
billion grew by 7.3% year-over-year, reflecting growth
in revenue and operating expenses of 3.1% and 0.6%, respectively.
Second quarter cable Adjusted EBITDA grew by 6.7% year-over-year
reflecting growth in cable revenue of 1.8% and a decline in cable
operating expenses of 1.3%.
Net Income Attributable to Charter Shareholders
Net income attributable to Charter shareholders totaled
$766 million in the second quarter of
2020, compared to $314
million in the second quarter of 2019. The year-over-year
increase in net income attributable to Charter shareholders was
primarily driven by higher Adjusted EBITDA, a non-cash gain on
financial instruments in the current year period versus a loss in
the prior year period and lower depreciation and amortization,
partly offset by higher tax expense.
Net income per basic common share attributable to Charter
shareholders totaled $3.72 in the
second quarter of 2020 compared to $1.41 during the same period last year. The
increase was primarily the result of the factors described above in
addition to a 7.5% decrease in weighted average common shares
outstanding versus the prior year period.
Capital Expenditures
Property, plant and equipment expenditures totaled $1.9 billion in the second quarter of 2020,
compared to $1.6 billion during the
second quarter of 2019, primarily driven by increases in scalable
infrastructure, line extensions and Internet CPE. The
year-over-year increase in scalable infrastructure spending was
primarily due to core network enhancements and node splits to
maintain excess network capacity with growing customers and
traffic. The increase in line extensions was driven by continued
network expansion, including to rural areas. The increase in
Internet CPE spending was due to higher Internet customer growth.
Second quarter capital expenditures included $125 million of mobile costs, most of which are
included in support capital.
Charter currently expects 2020 cable capital expenditures to
decline as a percentage of cable revenue versus 2019.
Cash Flow and Free Cash Flow
During the second quarter of 2020, net cash flows from operating
activities totaled $3.5 billion,
compared to $2.8 billion in the prior
year quarter. The year-over-year increase in net cash flows from
operating activities was primarily due to higher Adjusted EBITDA
and a favorable change in working capital.
Consolidated free cash flow for the second quarter of 2020
totaled $1.9 billion, compared to
$1.1 billion during the same period
last year. Cable free cash flow for the second quarter of 2020
totaled $2.1 billion, compared to
$1.4 billion during the same period
last year. The year-over-year increases in consolidated free cash
flow and cable free cash flow were driven by an increase in net
cash flows from operating activities.
Liquidity & Financing
As of June 30, 2020, total principal amount of debt was
$77.8 billion and Charter's credit
facilities provided approximately $4.7
billion of additional liquidity in excess of Charter's
$2.1 billion cash position.
In April 2020, Charter
Communications Operating, LLC and Charter Communications Operating
Capital Corp. issued $1.6 billion of
2.800% senior secured notes due 2031 and $1.4 billion of 3.700% senior secured notes due
2051. The proceeds were used to pay related fees and expenses and
for general corporate purposes.
In June 2020, Charter
Communications Operating, LLC and Charter Communications Operating
Capital Corp. redeemed all of their 3.579% senior secured notes due
July 2020.
In July 2020, CCO Holdings, LLC
("CCO Holdings") and CCO Holdings Capital Corp. issued $3.0 billion of 4.250% senior unsecured notes due
2031. The proceeds will be used to pay related fees and expenses
and for general corporate purposes, including repaying certain
indebtedness, including all of CCO Holdings' 5.875% senior notes
due 2024, as well as funding buybacks of Charter Class A common
stock and/or Charter Holdings common units.
Share Repurchases
During the three months ended June 30, 2020, Charter
purchased approximately 2.3 million shares of Charter Class A
common stock and Charter Holdings common units for approximately
$1.2 billion.
Conference Call
Charter will host a conference call on Friday, July 31,
2020 at 8:30 a.m. Eastern Time (ET)
related to the contents of this release.
The conference call will be webcast live via the Company's
investor relations website at ir.charter.com. The call will be
archived under the "Financial Information" section two hours after
completion of the call. Participants should go to the webcast link
no later than 10 minutes prior to the start time to register.
Those participating via telephone should dial 866-919-0894 no
later than 10 minutes prior to the call. International participants
should dial 706-679-9379. The conference ID code for the call is
5936339.
A replay of the call will be available at 855-859-2056 or
404-537-3406 beginning two hours after the completion of the call
through the end of business on August 14,
2020. The conference ID code for the replay is 5936339.
Additional Information Available on Website
The information in this press release should be read in
conjunction with the financial statements and footnotes contained
in the Company's Quarterly Report on Form 10-Q for the three and
six months ended June 30, 2020, which will be posted on the
"Financial Information" section of our investor relations website
at ir.charter.com, when it is filed with the Securities and
Exchange Commission (the "SEC"). A slide presentation to accompany
the conference call and a trending schedule containing historical
customer and financial data will also be available in the
"Financial Information" section.
Use of Adjusted EBITDA and Free Cash Flow
Information
The company uses certain measures that are not defined by U.S.
generally accepted accounting principles ("GAAP") to evaluate
various aspects of its business. Adjusted EBITDA and free cash flow
are non-GAAP financial measures and should be considered in
addition to, not as a substitute for, net income attributable to
Charter shareholders and net cash flows from operating activities
reported in accordance with GAAP. These terms, as defined by
Charter, may not be comparable to similarly titled measures used by
other companies. Adjusted EBITDA and free cash flow are reconciled
to net income attributable to Charter shareholders and net cash
flows from operating activities, respectively, in the Addendum to
this release.
Adjusted EBITDA is defined as net income attributable to Charter
shareholders plus net income attributable to noncontrolling
interest, net interest expense, income taxes, depreciation and
amortization, stock compensation expense, loss on extinguishment of
debt, (gain) loss on financial instruments, net, other pension
(benefits) costs, net, other (income) expense, net and other
operating (income) expenses, such as special charges and (gain)
loss on sale or retirement of assets. As such, it eliminates the
significant non-cash depreciation and amortization expense that
results from the capital-intensive nature of the Company's
businesses as well as other non-cash or special items, and is
unaffected by the Company's capital structure or investment
activities. However, this measure is limited in that it does not
reflect the periodic costs of certain capitalized tangible and
intangible assets used in generating revenues and the cash cost of
financing. These costs are evaluated through other financial
measures.
Free cash flow is defined as net cash flows from operating
activities, less capital expenditures and changes in accrued
expenses related to capital expenditures.
Management and Charter's board of directors use Adjusted EBITDA
and free cash flow to assess Charter's performance and its ability
to service its debt, fund operations and make additional
investments with internally generated funds. In addition, Adjusted
EBITDA generally correlates to the leverage ratio calculation under
the Company's credit facilities or outstanding notes to determine
compliance with the covenants contained in the facilities and notes
(all such documents have been previously filed with the the SEC).
For the purpose of calculating compliance with leverage covenants,
the Company uses Adjusted EBITDA, as presented, excluding certain
expenses paid by its operating subsidiaries to other Charter
entities. The Company's debt covenants refer to these expenses as
management fees, which were $308
million and $619 million for
the three and six months ended June 30, 2020, respectively,
and $299 million and $599 million for the three and six months ended
June 30, 2019, respectively.
Cable Adjusted EBITDA is defined as Adjusted EBITDA less mobile
revenues plus mobile operating costs and expenses. Cable free cash
flow is defined as free cash flow plus mobile net cash outflows
from operating activities and mobile capital expenditures.
Management and Charter's board of directors use cable Adjusted
EBITDA and cable free cash flow to provide management and investors
a more meaningful year-over-year perspective on the financial and
operational performance and trends of our core cable business
without the impact of the revenue, costs and capital expenditures
in the initial funding period to grow a new product line as well as
the negative working capital impacts from the timing of
device-related cash flows when we sell the handset or tablet to
customers pursuant to equipment installment plans.
About Charter
Charter Communications, Inc. (NASDAQ:CHTR) is a leading
broadband connectivity company and cable operator serving more than
30 million customers in 41 states through its Spectrum brand. Over
an advanced communications network, the company offers a full range
of state-of-the-art residential and business services including
Spectrum Internet®, TV, Mobile and Voice.
For small and medium-sized companies, Spectrum
Business® delivers the same suite of broadband products
and services coupled with special features and applications to
enhance productivity, while for larger businesses and government
entities, Spectrum Enterprise provides highly customized,
fiber-based solutions. Spectrum Reach® delivers tailored
advertising and production for the modern media landscape. The
company also distributes award-winning news coverage, sports and
high-quality original programming to its customers through Spectrum
Networks and Spectrum Originals. More information about Charter can
be found at corporate.charter.com.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING
STATEMENTS
This communication includes forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of
1934, as amended, regarding, among other things, our plans,
strategies and prospects, both business and financial.
Although we believe that our plans, intentions and expectations as
reflected in or suggested by these forward-looking statements are
reasonable, we cannot assure you that we will achieve or realize
these plans, intentions or expectations. Forward-looking
statements are inherently subject to risks, uncertainties and
assumptions including, without limitation, the factors described
under "Risk Factors" from time to time in our filings with the
SEC. Many of the forward-looking statements contained in this
communication may be identified by the use of forward-looking words
such as "believe," "expect," "anticipate," "should," "planned,"
"will," "may," "intend," "estimated," "aim," "on track," "target,"
"opportunity," "tentative," "positioning," "designed," "create,"
"predict," "project," "initiatives," "seek," "would," "could,"
"continue," "ongoing," "upside," "increases," "focused on" and
"potential," among others. Important factors that could cause
actual results to differ materially from the forward-looking
statements we make in this communication are set forth in our
annual report on Form 10-K, and in other reports or documents that
we file from time to time with the SEC, and include, but are not
limited to:
- the impact of the COVID-19 pandemic on the economy, our
customers, our vendors, local, state and federal governmental
responses to the pandemic and our businesses generally;
- our ability to sustain and grow revenues and cash flow from
operations by offering Internet, video, voice, mobile, advertising
and other services to residential and commercial customers, to
adequately meet the customer experience demands in our service
areas and to maintain and grow our customer base, particularly in
the face of increasingly aggressive competition, the need for
innovation and the related capital expenditures;
- the impact of competition from other market participants,
including but not limited to incumbent telephone companies, direct
broadcast satellite ("DBS") operators, wireless broadband and
telephone providers, digital subscriber line ("DSL") providers,
fiber to the home providers and providers of video content over
broadband Internet connections;
- our ability to obtain programming at reasonable prices or to
raise prices to offset, in whole or in part, the effects of higher
programming costs (including retransmission consents);
- our ability to develop and deploy new products and technologies
including mobile products and any other consumer services and
service platforms;
- any events that disrupt our networks, information systems or
properties and impair our operating activities or our
reputation;
- the effects of governmental regulation on our business
including costs, disruptions and possible limitations on operating
flexibility related to, and our ability to comply with, regulatory
conditions applicable to us as a result of the Time Warner Cable
Inc. and Bright House Networks, LLC Transactions;
- general business conditions, economic uncertainty or downturn,
including the impacts of the COVID-19 pandemic to unemployment
levels and the level of activity in the housing sector;
- the ability to retain and hire key personnel;
- the availability and access, in general, of funds to meet our
debt obligations prior to or when they become due and to fund our
operations and necessary capital expenditures, either through (i)
cash on hand, (ii) free cash flow, or (iii) access to the capital
or credit markets; and
- our ability to comply with all covenants in our indentures and
credit facilities, any violation of which, if not cured in a timely
manner, could trigger a default of our other obligations under
cross-default provisions.
All forward-looking statements attributable to us or any person
acting on our behalf are expressly qualified in their entirety by
this cautionary statement. We are under no duty or obligation
to update any of the forward-looking statements after the date of
this communication.
CHARTER
COMMUNICATIONS, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF
OPERATIONS AND OPERATING DATA
(dollars in
millions, except per share
data)
|
|
|
Three Months Ended
June 30,
|
|
Six Months Ended
June 30,
|
|
2020
|
|
2019
|
|
%
Change
|
|
2020
|
|
2019
|
|
%
Change
|
REVENUES:
|
|
|
|
|
|
|
|
|
|
|
|
Internet
|
$
|
4,530
|
|
|
$
|
4,103
|
|
|
10.4
|
%
|
|
$
|
8,937
|
|
|
$
|
8,127
|
|
|
10.0
|
%
|
Video
|
4,371
|
|
|
4,391
|
|
|
(0.4)
|
%
|
|
8,793
|
|
|
8,775
|
|
|
0.2
|
%
|
Voice
|
451
|
|
|
489
|
|
|
(7.7)
|
%
|
|
908
|
|
|
993
|
|
|
(8.6)
|
%
|
Residential revenue
|
9,352
|
|
|
8,983
|
|
|
4.1
|
%
|
|
18,638
|
|
|
17,895
|
|
|
4.2
|
%
|
Small and medium
business
|
983
|
|
|
963
|
|
|
2.0
|
%
|
|
1,979
|
|
|
1,908
|
|
|
3.7
|
%
|
Enterprise
|
606
|
|
|
652
|
|
|
(7.1)
|
%
|
|
1,228
|
|
|
1,295
|
|
|
(5.2)
|
%
|
Commercial
revenue
|
1,589
|
|
|
1,615
|
|
|
(1.7)
|
%
|
|
3,207
|
|
|
3,203
|
|
|
0.1
|
%
|
Advertising
sales
|
249
|
|
|
395
|
|
|
(37.0)
|
%
|
|
614
|
|
|
740
|
|
|
(17.1)
|
%
|
Mobile
|
310
|
|
|
158
|
|
|
96.1
|
%
|
|
568
|
|
|
298
|
|
|
90.9
|
%
|
Other
|
196
|
|
|
196
|
|
|
—
|
%
|
|
407
|
|
|
417
|
|
|
(2.3)
|
%
|
Total
Revenue
|
11,696
|
|
|
11,347
|
|
|
3.1
|
%
|
|
23,434
|
|
|
22,553
|
|
|
3.9
|
%
|
COSTS AND
EXPENSES:
|
|
|
|
|
|
|
|
|
|
|
|
Programming
|
2,873
|
|
|
2,827
|
|
|
1.6
|
%
|
|
5,765
|
|
|
5,692
|
|
|
1.3
|
%
|
Regulatory,
connectivity and produced
content
|
488
|
|
|
597
|
|
|
(18.3)
|
%
|
|
1,039
|
|
|
1,158
|
|
|
(10.3)
|
%
|
Costs to service
customers
|
1,848
|
|
|
1,767
|
|
|
4.6
|
%
|
|
3,696
|
|
|
3,589
|
|
|
3.0
|
%
|
Marketing
|
719
|
|
|
768
|
|
|
(6.3)
|
%
|
|
1,485
|
|
|
1,503
|
|
|
(1.2)
|
%
|
Mobile
|
413
|
|
|
277
|
|
|
48.6
|
%
|
|
787
|
|
|
537
|
|
|
46.6
|
%
|
Other
expense
|
866
|
|
|
926
|
|
|
(6.6)
|
%
|
|
1,777
|
|
|
1,834
|
|
|
(3.1)
|
%
|
Total
operating costs and expenses
(exclusive of items shown separately
below)
|
7,207
|
|
|
7,162
|
|
|
0.6
|
%
|
|
14,549
|
|
|
14,313
|
|
|
1.7
|
%
|
Adjusted
EBITDA
|
4,489
|
|
|
4,185
|
|
|
7.3
|
%
|
|
8,885
|
|
|
8,240
|
|
|
7.8
|
%
|
Adjusted
EBITDA margin
|
38.4
|
%
|
|
36.9
|
%
|
|
|
|
37.9
|
%
|
|
36.5
|
%
|
|
|
Depreciation and
amortization
|
2,428
|
|
|
2,500
|
|
|
|
|
4,925
|
|
|
5,050
|
|
|
|
Stock compensation
expense
|
90
|
|
|
82
|
|
|
|
|
180
|
|
|
167
|
|
|
|
Other operating
expenses, net
|
2
|
|
|
62
|
|
|
|
|
9
|
|
|
57
|
|
|
|
Income from
operations
|
1,969
|
|
|
1,541
|
|
|
|
|
3,771
|
|
|
2,966
|
|
|
|
OTHER INCOME
(EXPENSES):
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense,
net
|
(957)
|
|
|
(945)
|
|
|
|
|
(1,937)
|
|
|
(1,870)
|
|
|
|
Loss on extinguishment
of debt
|
(36)
|
|
|
—
|
|
|
|
|
(63)
|
|
|
—
|
|
|
|
Gain (loss) on
financial instruments, net
|
64
|
|
|
(119)
|
|
|
|
|
(254)
|
|
|
(82)
|
|
|
|
Other pension
benefits, net
|
11
|
|
|
9
|
|
|
|
|
21
|
|
|
18
|
|
|
|
Other expense,
net
|
(9)
|
|
|
(16)
|
|
|
|
|
—
|
|
|
(126)
|
|
|
|
|
(927)
|
|
|
(1,071)
|
|
|
|
|
(2,233)
|
|
|
(2,060)
|
|
|
|
Income before income
taxes
|
1,042
|
|
|
470
|
|
|
|
|
1,538
|
|
|
906
|
|
|
|
Income tax
expense
|
(166)
|
|
|
(84)
|
|
|
|
|
(195)
|
|
|
(203)
|
|
|
|
Consolidated net
income
|
876
|
|
|
386
|
|
|
|
|
1,343
|
|
|
703
|
|
|
|
Less: Net income
attributable to noncontrolling
interests
|
(110)
|
|
|
(72)
|
|
|
|
|
(181)
|
|
|
(136)
|
|
|
|
Net income
attributable to Charter
shareholders
|
$
|
766
|
|
|
$
|
314
|
|
|
|
|
$
|
1,162
|
|
|
$
|
567
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EARNINGS PER COMMON
SHARE
ATTRIBUTABLE TO CHARTER
SHAREHOLDERS:
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
$
|
3.72
|
|
|
$
|
1.41
|
|
|
|
|
$
|
5.62
|
|
|
$
|
2.54
|
|
|
|
Diluted
|
$
|
3.63
|
|
|
$
|
1.39
|
|
|
|
|
$
|
5.48
|
|
|
$
|
2.50
|
|
|
|
Weighted average
common shares
outstanding, basic
|
205,777,438
|
|
|
222,392,274
|
|
|
|
|
206,804,371
|
|
|
223,505,016
|
|
|
|
Weighted average
common shares
outstanding, diluted
|
210,906,946
|
|
|
225,942,172
|
|
|
|
|
212,158,218
|
|
|
226,889,745
|
|
|
|
|
Adjusted EBITDA is a
non-GAAP term. See page 8 of this addendum for the
reconciliation of Adjusted EBITDA to net income attributable to
Charter shareholders as defined by GAAP.
|
|
All percentages are
calculated using whole numbers. Minor differences may exist due to
rounding.
|
CHARTER
COMMUNICATIONS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE
SHEETS
(dollars in
millions)
|
|
|
June
30,
|
|
December
31,
|
|
2020
|
|
2019
|
ASSETS
|
(unaudited)
|
|
|
CURRENT
ASSETS:
|
|
|
|
Cash and cash
equivalents
|
$
|
2,097
|
|
|
$
|
3,483
|
|
Accounts receivable,
net
|
1,994
|
|
|
2,227
|
|
Prepaid expenses and
other current assets
|
674
|
|
|
761
|
|
Total current
assets
|
4,765
|
|
|
6,471
|
|
|
|
|
|
RESTRICTED
CASH
|
5
|
|
|
66
|
|
|
|
|
|
INVESTMENT IN CABLE
PROPERTIES:
|
|
|
|
Property, plant and
equipment, net
|
34,074
|
|
|
34,591
|
|
Customer
relationships, net
|
6,486
|
|
|
7,453
|
|
Franchises
|
67,322
|
|
|
67,322
|
|
Goodwill
|
29,554
|
|
|
29,554
|
|
Total investment in
cable properties, net
|
137,436
|
|
|
138,920
|
|
|
|
|
|
OTHER NONCURRENT
ASSETS
|
2,930
|
|
|
2,731
|
|
|
|
|
|
Total
assets
|
$
|
145,136
|
|
|
$
|
148,188
|
|
|
|
|
|
LIABILITIES AND
SHAREHOLDERS' EQUITY
|
|
|
|
CURRENT
LIABILITIES:
|
|
|
|
Accounts payable and
accrued liabilities
|
$
|
8,436
|
|
|
$
|
8,885
|
|
Current portion of
long-term debt
|
706
|
|
|
3,500
|
|
Total current
liabilities
|
9,142
|
|
|
12,385
|
|
|
|
|
|
LONG-TERM
DEBT
|
77,663
|
|
|
75,578
|
|
DEFERRED INCOME
TAXES
|
17,789
|
|
|
17,711
|
|
OTHER LONG-TERM
LIABILITIES
|
4,141
|
|
|
3,703
|
|
|
|
|
|
SHAREHOLDERS'
EQUITY:
|
|
|
|
Controlling
interest
|
29,356
|
|
|
31,445
|
|
Noncontrolling
interests
|
7,045
|
|
|
7,366
|
|
Total shareholders'
equity
|
36,401
|
|
|
38,811
|
|
|
|
|
|
Total liabilities and
shareholders' equity
|
$
|
145,136
|
|
|
$
|
148,188
|
|
CHARTER
COMMUNICATIONS, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF
CASH FLOWS
(dollars in
millions)
|
|
|
Three Months Ended
June 30,
|
|
Six Months Ended
June 30,
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
CASH FLOWS FROM
OPERATING ACTIVITIES:
|
|
|
|
|
|
|
|
Consolidated net
income
|
$
|
876
|
|
|
$
|
386
|
|
|
$
|
1,343
|
|
|
$
|
703
|
|
Adjustments to
reconcile consolidated net income to net cash flows
from operating activities:
|
|
|
|
|
|
|
|
Depreciation and amortization
|
2,428
|
|
|
2,500
|
|
|
4,925
|
|
|
5,050
|
|
Stock
compensation expense
|
90
|
|
|
82
|
|
|
180
|
|
|
167
|
|
Noncash
interest income, net
|
(9)
|
|
|
(17)
|
|
|
(21)
|
|
|
(72)
|
|
Other
pension benefits, net
|
(11)
|
|
|
(9)
|
|
|
(21)
|
|
|
(18)
|
|
Loss on
extinguishment of debt
|
36
|
|
|
—
|
|
|
63
|
|
|
—
|
|
(Gain)
loss on financial instruments, net
|
(64)
|
|
|
119
|
|
|
254
|
|
|
82
|
|
Deferred
income taxes
|
115
|
|
|
56
|
|
|
101
|
|
|
137
|
|
Other,
net
|
3
|
|
|
53
|
|
|
(17)
|
|
|
151
|
|
Changes in operating
assets and liabilities, net of effects from
acquisitions and dispositions:
|
|
|
|
|
|
|
|
Accounts
receivable
|
97
|
|
|
(492)
|
|
|
233
|
|
|
(337)
|
|
Prepaid
expenses and other assets
|
(60)
|
|
|
124
|
|
|
(164)
|
|
|
(176)
|
|
Accounts
payable, accrued liabilities and other
|
28
|
|
|
(41)
|
|
|
(127)
|
|
|
(240)
|
|
Net cash flows from
operating activities
|
3,529
|
|
|
2,761
|
|
|
6,749
|
|
|
5,447
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM
INVESTING ACTIVITIES:
|
|
|
|
|
|
|
|
Purchases of property,
plant and equipment
|
(1,877)
|
|
|
(1,597)
|
|
|
(3,338)
|
|
|
(3,262)
|
|
Change in accrued
expenses related to capital expenditures
|
214
|
|
|
(52)
|
|
|
(174)
|
|
|
(428)
|
|
Real estate
investments through variable interest entities
|
(43)
|
|
|
(25)
|
|
|
(81)
|
|
|
(64)
|
|
Other, net
|
(45)
|
|
|
8
|
|
|
(8)
|
|
|
8
|
|
Net cash flows from
investing activities
|
(1,751)
|
|
|
(1,666)
|
|
|
(3,601)
|
|
|
(3,746)
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM
FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
Borrowings of
long-term debt
|
2,983
|
|
|
3,830
|
|
|
7,322
|
|
|
10,714
|
|
Repayments of
long-term debt
|
(4,303)
|
|
|
(4,551)
|
|
|
(7,892)
|
|
|
(10,123)
|
|
Payments for debt
issuance costs
|
(21)
|
|
|
(7)
|
|
|
(62)
|
|
|
(32)
|
|
Issuance of
equity
|
—
|
|
|
—
|
|
|
23
|
|
|
—
|
|
Purchase of treasury
stock
|
(1,155)
|
|
|
(861)
|
|
|
(3,507)
|
|
|
(1,801)
|
|
Proceeds from exercise
of stock options
|
28
|
|
|
37
|
|
|
121
|
|
|
81
|
|
Purchase of
noncontrolling interest
|
(125)
|
|
|
(161)
|
|
|
(518)
|
|
|
(254)
|
|
Distributions to
noncontrolling interest
|
(38)
|
|
|
(39)
|
|
|
(77)
|
|
|
(78)
|
|
Borrowings for real
estate investments through variable interest entities
|
24
|
|
|
—
|
|
|
24
|
|
|
—
|
|
Distributions to
variable interest entities noncontrolling interest
|
(4)
|
|
|
—
|
|
|
(4)
|
|
|
—
|
|
Other, net
|
(1)
|
|
|
(123)
|
|
|
(25)
|
|
|
(127)
|
|
Net cash flows from
financing activities
|
(2,612)
|
|
|
(1,875)
|
|
|
(4,595)
|
|
|
(1,620)
|
|
|
|
|
|
|
|
|
|
NET INCREASE
(DECREASE) IN CASH, CASH EQUIVALENTS AND
RESTRICTED CASH
|
(834)
|
|
|
(780)
|
|
|
(1,447)
|
|
|
81
|
|
CASH, CASH
EQUIVALENTS AND RESTRICTED CASH, beginning of
period
|
2,936
|
|
|
1,626
|
|
|
3,549
|
|
|
765
|
|
CASH, CASH
EQUIVALENTS AND RESTRICTED CASH, end of period
|
$
|
2,102
|
|
|
$
|
846
|
|
|
$
|
2,102
|
|
|
$
|
846
|
|
|
|
|
|
|
|
|
|
CASH PAID FOR
INTEREST
|
$
|
935
|
|
|
$
|
1,051
|
|
|
$
|
1,985
|
|
|
$
|
2,017
|
|
CASH PAID FOR
TAXES
|
$
|
31
|
|
|
$
|
39
|
|
|
$
|
50
|
|
|
$
|
43
|
|
CHARTER
COMMUNICATIONS, INC. AND SUBSIDIARIES
UNAUDITED SUMMARY
OF OPERATING STATISTICS
(in thousands,
except per customer and penetration data)
|
|
|
Approximate as
of
|
|
June 30, 2020
(a)
|
|
March 31, 2020
(a)
|
|
December 31,
2019 (a)
|
|
June 30, 2019
(a)
|
Footprint
(b)
|
|
|
|
|
|
|
|
Estimated
Passings
|
52,714
|
|
|
52,418
|
|
|
52,154
|
|
|
51,619
|
|
|
|
|
|
|
|
|
|
Penetration
Statistics (c)
|
|
|
|
|
|
|
|
Total Customer
Relationship Penetration of Estimated Passings
|
57.8
|
%
|
|
56.7
|
%
|
|
56.1
|
%
|
|
55.5
|
%
|
|
|
|
|
|
|
|
|
Customer
Relationships (d)
|
|
|
|
|
|
|
|
Residential
|
28,496
|
|
|
27,745
|
|
|
27,277
|
|
|
26,755
|
|
Small and Medium
Business
|
1,980
|
|
|
1,976
|
|
|
1,958
|
|
|
1,902
|
|
Total Customer
Relationships
|
30,476
|
|
|
29,721
|
|
|
29,235
|
|
|
28,657
|
|
|
|
|
|
|
|
|
|
Quarterly Net
Additions (Losses)
|
|
|
|
|
|
|
|
Residential
|
751
|
|
|
468
|
|
|
240
|
|
|
164
|
|
Small and Medium
Business
|
4
|
|
|
18
|
|
|
28
|
|
|
39
|
|
Total Customer
Relationships
|
755
|
|
|
486
|
|
|
268
|
|
|
203
|
|
|
|
|
|
|
|
|
|
Residential
|
|
|
|
|
|
|
|
Primary Service
Units ("PSUs")
|
|
|
|
|
|
|
|
Internet
|
26,313
|
|
|
25,471
|
|
|
24,908
|
|
|
24,244
|
|
Video
|
15,652
|
|
|
15,550
|
|
|
15,620
|
|
|
15,802
|
|
Voice
|
9,398
|
|
|
9,360
|
|
|
9,443
|
|
|
9,808
|
|
|
|
|
|
|
|
|
|
Quarterly Net
Additions (Losses)
|
|
|
|
|
|
|
|
Internet
|
842
|
|
|
563
|
|
|
313
|
|
|
221
|
|
Video
|
102
|
|
|
(70)
|
|
|
(105)
|
|
|
(150)
|
|
Voice
|
38
|
|
|
(83)
|
|
|
(152)
|
|
|
(207)
|
|
|
|
|
|
|
|
|
|
Single Play
(e)
|
12,552
|
|
|
12,099
|
|
|
11,741
|
|
|
11,354
|
|
Double Play
(e)
|
9,021
|
|
|
8,655
|
|
|
8,377
|
|
|
7,709
|
|
Triple Play
(e)
|
6,923
|
|
|
6,991
|
|
|
7,159
|
|
|
7,692
|
|
|
|
|
|
|
|
|
|
Single Play
Penetration (f)
|
44.0
|
%
|
|
43.6
|
%
|
|
43.0
|
%
|
|
42.4
|
%
|
Double Play
Penetration (f)
|
31.7
|
%
|
|
31.2
|
%
|
|
30.7
|
%
|
|
28.8
|
%
|
Triple Play
Penetration (f)
|
24.3
|
%
|
|
25.2
|
%
|
|
26.2
|
%
|
|
28.8
|
%
|
|
|
|
|
|
|
|
|
% Residential
Non-Video Customer Relationships
|
45.1
|
%
|
|
44.0
|
%
|
|
42.7
|
%
|
|
40.9
|
%
|
|
|
|
|
|
|
|
|
Monthly Residential
Revenue per Residential Customer (g)
|
$
|
110.82
|
|
|
$
|
112.73
|
|
|
$
|
113.79
|
|
|
$
|
112.20
|
|
|
|
|
|
|
|
|
|
Small and Medium
Business
|
|
|
|
|
|
|
|
PSUs
|
|
|
|
|
|
|
|
Internet
|
1,783
|
|
|
1,775
|
|
|
1,756
|
|
|
1,701
|
|
Video
|
516
|
|
|
524
|
|
|
524
|
|
|
518
|
|
Voice
|
1,169
|
|
|
1,162
|
|
|
1,144
|
|
|
1,097
|
|
|
|
|
|
|
|
|
|
Quarterly Net
Additions (Losses)
|
|
|
|
|
|
|
|
Internet
|
8
|
|
|
19
|
|
|
26
|
|
|
37
|
|
Video
|
(8)
|
|
|
—
|
|
|
4
|
|
|
9
|
|
Voice
|
7
|
|
|
18
|
|
|
24
|
|
|
25
|
|
|
|
|
|
|
|
|
|
Monthly Small and
Medium Business Revenue per Customer (h)
|
$
|
166.06
|
|
|
$
|
168.83
|
|
|
$
|
169.06
|
|
|
$
|
170.42
|
|
|
|
|
|
|
|
|
|
Mobile
Lines
|
|
|
|
|
|
|
|
Residential and Small
and Medium Business Mobile Lines
|
1,697
|
|
|
1,372
|
|
|
1,082
|
|
|
518
|
|
Net
Additions
|
325
|
|
|
290
|
|
|
288
|
|
|
208
|
|
|
|
|
|
|
|
|
|
Enterprise PSUs
(i)
|
|
|
|
|
|
|
|
Enterprise
PSUs
|
270
|
|
|
269
|
|
|
267
|
|
|
258
|
|
Net
Additions
|
1
|
|
|
2
|
|
|
3
|
|
|
5
|
|
|
|
(a)
|
We calculate the
aging of customer accounts based on the monthly billing cycle for
each account. On that basis, at June 30, 2020,
March 31, 2020, December 31, 2019 and June 30, 2019,
customers included approximately 124,500, 140,800, 154,200 and
152,900 customers, respectively, whose accounts were over 60 days
past due, approximately 18,400, 12,500, 13,500 and 13,800
customers, respectively, whose accounts were over 90 days past due
and approximately 10,400, 8,200, 10,000 and 15,800 customers,
respectively, whose accounts were over 120 days past due. As
detailed on page 6, our customer counts include those customers who
connected as part of our Remote Education Offer and those customers
who we have not disconnected in our normal timelines associated
with our Keep Americans Connected Pledge.
|
|
|
(b)
|
Passings represent
our estimate of the number of units, such as single family homes,
apartment and condominium units and small and medium business and
enterprise sites passed by our cable distribution network in the
areas where we offer the service indicated. These estimates
are based upon the information available at this time and are
updated for all periods presented when new information becomes
available. Passings in prior periods have been updated to reflect
standardization of definitions and presentation among legacy
companies.
|
|
|
(c)
|
Penetration
represents residential and small and medium business customers as a
percentage of estimated passings. Penetration excludes
mobile-only customers.
|
|
|
(d)
|
Customer
relationships include the number of customers that receive one or
more levels of service, encompassing Internet, video and voice
services, without regard to which service(s) such customers
receive. Customers who reside in residential multiple
dwelling units ("MDUs") and that are billed under bulk contracts
are counted based on the number of billed units within each bulk
MDU. Total customer relationships exclude enterprise and
mobile-only customer relationships.
|
|
|
(e)
|
Single play, double
play and triple play customers represent customers that subscribe
to one, two or three of our cable service offerings, respectively,
excluding mobile.
|
|
|
(f)
|
Single play, double
play and triple play penetration represents the number of
residential single play, double play and triple play cable
customers, respectively, as a percentage of residential customer
relationships, excluding mobile.
|
|
|
(g)
|
Monthly residential
revenue per residential customer is calculated as total residential
Internet, video and voice quarterly revenue divided by three
divided by average residential customer relationships during the
respective quarter. Monthly residential revenue per
residential customers excludes mobile revenue and
customers.
|
|
|
(h)
|
Monthly small and
medium business revenue per small and medium business customer is
calculated as total small and medium business quarterly revenue
divided by three divided by average small and medium business
customer relationships during the respective quarter. Monthly
small and medium business revenue per small and medium customer
excludes mobile revenue and customers.
|
|
|
(i)
|
Enterprise PSUs
represents the aggregate number of fiber service offerings counting
each separate service offering at each customer location as an
individual PSU.
|
CHARTER
COMMUNICATIONS, INC. AND SUBSIDIARIES
UNAUDITED
CUSTOMERS AND NET ADDITIONS ON COVID-19 OFFERS
FOR THE QUARTER
ENDED JUNE 30, 2020
(in
thousands)
|
|
|
Remote
Education
Offer (a)
|
|
Keep
Americans
Connected (b)
|
|
Seasonal Plan
(c)
|
|
Total
|
Residential
|
|
|
|
|
|
|
|
Customer
Relationships
|
160
|
|
|
208
|
|
|
n/a
|
|
|
368
|
|
Internet
PSUs
|
160
|
|
|
202
|
|
|
n/a
|
|
|
362
|
|
Video PSUs
|
58
|
|
(d)
|
148
|
|
|
n/a
|
|
|
206
|
|
Voice PSUs
|
46
|
|
(d)
|
90
|
|
|
n/a
|
|
|
136
|
|
Mobile Lines
|
10
|
|
(d)
|
8
|
|
|
n/a
|
|
|
18
|
|
|
|
|
|
|
|
|
|
Quarterly Net
Additions
|
|
|
|
|
|
|
|
Customer
Relationships
|
41
|
|
|
207
|
|
|
n/a
|
|
|
248
|
|
Internet
PSUs
|
41
|
|
|
201
|
|
|
n/a
|
|
|
242
|
|
Video PSUs
|
12
|
|
(d)
|
147
|
|
|
n/a
|
|
|
159
|
|
Voice PSUs
|
12
|
|
(d)
|
90
|
|
|
n/a
|
|
|
102
|
|
Mobile Lines
|
7
|
|
(d)
|
8
|
|
|
n/a
|
|
|
15
|
|
|
|
|
|
|
|
|
|
Small and Medium
Business
|
|
|
|
|
|
|
|
Customer
Relationships
|
n/a
|
|
|
14
|
|
|
13
|
|
|
27
|
|
Internet
PSUs
|
n/a
|
|
|
13
|
|
|
11
|
|
|
24
|
|
Video PSUs
|
n/a
|
|
|
6
|
|
|
13
|
|
|
19
|
|
Voice PSUs
|
n/a
|
|
|
11
|
|
|
8
|
|
|
19
|
|
Mobile Lines
|
n/a
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
|
|
|
|
|
|
Quarterly Net
Additions
|
|
|
|
|
|
|
|
Customer
Relationships
|
n/a
|
|
|
14
|
|
|
8
|
|
|
22
|
|
Internet
PSUs
|
n/a
|
|
|
13
|
|
|
7
|
|
|
20
|
|
Video PSUs
|
n/a
|
|
|
6
|
|
|
11
|
|
|
17
|
|
Voice PSUs
|
n/a
|
|
|
11
|
|
|
5
|
|
|
16
|
|
Mobile Lines
|
n/a
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
|
|
|
|
|
|
Residential and
Small and Medium Business
|
|
|
|
|
|
|
|
Customer
Relationships
|
160
|
|
|
222
|
|
|
13
|
|
|
395
|
|
Internet
PSUs
|
160
|
|
|
215
|
|
|
11
|
|
|
386
|
|
Video PSUs
|
58
|
|
(d)
|
154
|
|
|
13
|
|
|
225
|
|
Voice PSUs
|
46
|
|
(d)
|
101
|
|
|
8
|
|
|
155
|
|
Mobile Lines
|
10
|
|
(d)
|
8
|
|
|
—
|
|
|
18
|
|
|
|
|
|
|
|
|
|
Quarterly Net
Additions
|
|
|
|
|
|
|
|
Customer
Relationships
|
41
|
|
|
221
|
|
|
8
|
|
|
270
|
|
Internet
PSUs
|
41
|
|
|
214
|
|
|
7
|
|
|
262
|
|
Video PSUs
|
12
|
|
(d)
|
153
|
|
|
11
|
|
|
176
|
|
Voice PSUs
|
12
|
|
(d)
|
101
|
|
|
5
|
|
|
118
|
|
Mobile Lines
|
7
|
|
(d)
|
8
|
|
|
—
|
|
|
15
|
|
|
|
|
|
|
|
|
|
Enterprise
PSUs
|
|
|
|
|
|
|
|
Enterprise
PSUs
|
n/a
|
|
|
1
|
|
|
9
|
|
|
10
|
|
|
|
(a)
|
The Remote Education
Offer ("REO") represents residential customers receiving free
Internet service by participating in Charter's free 60-day Internet
offer available to households with K-12 and/or college students or
educators who were not Spectrum Internet customers. This offer for
new customers ended on June 30, 2020. These residential customers
are generally eligible to purchase additional products and services
(i.e. video, voice and mobile) at current promotional rates. Of the
448,000 Internet customers who were added as part of the REO
through June 30, 2020 (of which 119,000 were added in March),
160,000 remained within their 60-day free period with 288,000
having rolled off the promotional period as of June 30, 2020.
Nearly 90% of cumulative connects on the REO remained Internet
customers as of July 27, 2020.
|
|
|
(b)
|
As part of our March
2020 pledge to the FCC which we extended through June 30, Keep
Americans Connected ("KAC") represents customers who requested to
not be disconnected from service due to COVID-19 related payment
challenges and would have been disconnected under our normal
collection policies during the pledge period. Approximately 600,000
residential customers and 100,000 SMB customers had requested
protection from disconnection, of which at the peak of the program,
208,000 and 14,000, respectively, would have been disconnected
under our normal collection policies. Approximately 30% of the KAC
customer bills were current, and over 60% were making partial or
full payments. In an effort to assist these COVID-19 impacted
customers with overdue balances, Charter waived $76 million of
residential, $6 million of SMB and $3 million of mobile
receivables, each of which were recorded as a reduction to revenue
in the second quarter. These customers no longer have an overdue
balance and will be subject to Charter's standard collection
practices going forward.
|
|
|
(c)
|
Represents small and
medium businesses and Enterprise hospitality customers who have
requested a reduced level of service and now pay a reduced price
for their service due to temporary business closure or because
these customers have reduced their service offering to their own
customers.
|
|
|
(d)
|
Customers who are
receiving free Internet Service as part of the REO who have
subscribed to products in addition to Spectrum Internet (i.e.,
video, voice, mobile) during the 60-day Free Internet Offer.
Billings are not deferred for these additional services.
|
CHARTER
COMMUNICATIONS, INC. AND SUBSIDIARIES
UNAUDITED
RECONCILIATION OF NON-GAAP MEASURES TO GAAP MEASURES
(dollars in
millions)
|
|
|
Three Months Ended
June 30,
|
|
Six Months Ended
June 30,
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
Net income
attributable to Charter shareholders
|
$
|
766
|
|
|
$
|
314
|
|
|
$
|
1,162
|
|
|
$
|
567
|
|
Plus: Net income
attributable to noncontrolling interest
|
110
|
|
|
72
|
|
|
181
|
|
|
136
|
|
Interest expense,
net
|
957
|
|
|
945
|
|
|
1,937
|
|
|
1,870
|
|
Income tax
expense
|
166
|
|
|
84
|
|
|
195
|
|
|
203
|
|
Depreciation and
amortization
|
2,428
|
|
|
2,500
|
|
|
4,925
|
|
|
5,050
|
|
Stock compensation
expense
|
90
|
|
|
82
|
|
|
180
|
|
|
167
|
|
Loss on extinguishment
of debt
|
36
|
|
|
—
|
|
|
63
|
|
|
—
|
|
(Gain) loss on
financial instruments, net
|
(64)
|
|
|
119
|
|
|
254
|
|
|
82
|
|
Other pension
benefits, net
|
(11)
|
|
|
(9)
|
|
|
(21)
|
|
|
(18)
|
|
Other, net
|
11
|
|
|
78
|
|
|
9
|
|
|
183
|
|
Adjusted EBITDA
(a)
|
4,489
|
|
|
4,185
|
|
|
8,885
|
|
|
8,240
|
|
Less: Mobile
revenue
|
(310)
|
|
|
(158)
|
|
|
(568)
|
|
|
(298)
|
|
Plus: Mobile
costs and expenses
|
413
|
|
|
277
|
|
|
787
|
|
|
537
|
|
Cable Adjusted
EBITDA
|
$
|
4,592
|
|
|
$
|
4,304
|
|
|
$
|
9,104
|
|
|
$
|
8,479
|
|
|
|
|
|
|
|
|
|
Net cash flows from
operating activities
|
$
|
3,529
|
|
|
$
|
2,761
|
|
|
$
|
6,749
|
|
|
$
|
5,447
|
|
Less: Purchases
of property, plant and equipment
|
(1,877)
|
|
|
(1,597)
|
|
|
(3,338)
|
|
|
(3,262)
|
|
Change in accrued
expenses related to capital expenditures
|
214
|
|
|
(52)
|
|
|
(174)
|
|
|
(428)
|
|
Free cash
flow
|
1,866
|
|
|
1,112
|
|
|
3,237
|
|
|
1,757
|
|
Plus: Mobile net
cash outflows from operating activities
|
108
|
|
|
204
|
|
|
281
|
|
|
407
|
|
Purchases of mobile property, plant and equipment
|
125
|
|
|
93
|
|
|
212
|
|
|
181
|
|
Cable free cash
flow
|
$
|
2,099
|
|
|
$
|
1,409
|
|
|
$
|
3,730
|
|
|
$
|
2,345
|
|
|
(a) See page 1
of this addendum for detail of the components included within
Adjusted EBITDA.
|
|
The above schedule is
presented in order to reconcile Adjusted EBITDA, cable Adjusted
EBITDA, free cash flow and cable free cash flow, non-GAAP measures,
to the most directly comparable GAAP measures in accordance with
Section 401(b) of the Sarbanes-Oxley Act.
|
CHARTER
COMMUNICATIONS, INC. AND SUBSIDIARIES
UNAUDITED
CAPITAL EXPENDITURES
(dollars in
millions)
|
|
|
Three Months Ended
June 30,
|
|
Six Months Ended
June 30,
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
Customer premise
equipment (a)
|
$
|
518
|
|
|
$
|
492
|
|
|
$
|
981
|
|
|
$
|
1,057
|
|
Scalable
infrastructure (b)
|
385
|
|
|
223
|
|
|
555
|
|
|
520
|
|
Line extensions
(c)
|
422
|
|
|
363
|
|
|
765
|
|
|
684
|
|
Upgrade/rebuild
(d)
|
155
|
|
|
155
|
|
|
284
|
|
|
286
|
|
Support capital
(e)
|
397
|
|
|
364
|
|
|
753
|
|
|
715
|
|
Total
capital expenditures
|
1,877
|
|
|
1,597
|
|
|
3,338
|
|
|
3,262
|
|
Less: Mobile
capital expenditures
|
(125)
|
|
|
(93)
|
|
|
(212)
|
|
|
(181)
|
|
Cable capital
expenditures
|
$
|
1,752
|
|
|
$
|
1,504
|
|
|
$
|
3,126
|
|
|
$
|
3,081
|
|
|
|
|
|
|
|
|
|
Capital expenditures
included in total related to:
|
|
|
|
|
|
|
|
Commercial
services
|
$
|
323
|
|
|
$
|
324
|
|
|
$
|
584
|
|
|
$
|
629
|
|
|
|
(a)
|
Customer premise
equipment includes costs incurred at the customer residence to
secure new customers and revenue generating units, including
customer installation costs and customer premise equipment (e.g.,
set-top boxes and cable modems).
|
(b)
|
Scalable
infrastructure includes costs, not related to customer premise
equipment, to secure growth of new customers and revenue generating
units, or provide service enhancements (e.g., headend
equipment).
|
(c)
|
Line extensions
include network costs associated with entering new service areas
(e.g., fiber/coaxial cable, amplifiers, electronic equipment,
make-ready and design engineering).
|
(d)
|
Upgrade/rebuild
includes costs to modify or replace existing fiber/coaxial cable
networks, including betterments.
|
(e)
|
Support capital
includes costs associated with the replacement or enhancement of
non-network assets due to technological and physical obsolescence
(e.g., non-network equipment, land, buildings and
vehicles).
|
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SOURCE Charter Communications, Inc.