Charter Communications, Inc. · NASDAQ:CHTR
Charter Communications — Q2 2014 Earnings Presentation
34 slides from Charter Communications's earnings presentation, Jul 31, 2014
Slide 1: Second Quarter 2014 Results
Second Quarter 2014 Results July 31, 2014 Filed by Charter Communications Inc. Pursuant to Rule 425 under the Securities Act of 1933 and deemed filed pursuant to Rule 14a-12 under the Securities Exchange Act of 1934 Subject Company: Charter Communications Inc. Commission File No. 001-33664 The follo
Slide 2: Forward-looking statements
1 This communication includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), regarding, among other things, our plans, strategies a
Slide 3: Additional information about the proposed transaction
2 This communication does not constitute an offer to sell or the solicitation of an offer to buy any securities or a solicitation of any vote or approval. In connection with the proposed transaction between Comcast Corporation (“Comcast”) and Charter Communications, Inc. (“Charter”), Charter will fi
Slide 4: Thomas M. Rutledge, President and CEO
Thomas M. Rutledge President and CEO
Slide 5: Second Quarter Overview
4 Second Quarter Overview 1) Residential video customers generally include units under bulk arrangements with a digital set-top box and direct billing relationship. Second quarter 2013 and 2014 residential video net additions include 6,000 and 15,000, respectively, of bulk video units as a result of
Slide 6: Charter's Year-End 2014 Residential Triple Play Offering
5 Charter’s year-End 2014 Residential Triple Play Offering(1) 1) For new offers and customers in Charter’s new pricing and packaging (approx. 80% of residential customers, excluding Bresnan, as of June. 30, 2014) in all-digital markets. All copyrights and trademarks are the property of their respect
Slide 7: Comcast transactions: asset transfer, purchase and spin-off
6 1. Asset Transfer: Charter and Comcast transfer assets in a tax-efficient exchange involving ~1.5 million former TWC video customers and ~1.6 million Charter video customers(1) 2. Asset Purchase: Charter acquires systems serving ~1.5 million former TWC video customers • $8.4B of Debt Financing: Es
Slide 8: Pro Forma Charter and SpinCo: Scale and Footprint
7 Pro Forma Charter and SpinCo: Scale and Footprint Charter will • Acquire systems in Ohio, Kentucky, Wisconsin, Indiana and Alabama DMAs • Divest systems in California, New England, Tennessee, Georgia, North Carolina, Texas, Oregon, Washington and Virginia DMAs SpinCo to own systems that are adjace
Slide 9: Christopher L. Winfrey, Executive Vice President and CFO
Christopher L. Winfrey Executive Vice President and CFO
Slide 10: Residential Customer Trends
9 Residential Customer Trends 1) Represents the percentage of residential customers that subscribe to triple play service. Note: All results pro forma for certain acquisitions as if they occurred on January 1, 2012. 2) Second quarter video results typically reflect ~40K of seasonal customer upgrades
Slide 11: Total Revenue
10 Total Revenue Note: All results pro forma for certain acquisitions as if they occurred on January 1, 2012. Quarterly Revenue Total Revenue Growth Quarterly Highlights (In Millions) • Revenue grew 7.3% Y/Y: • Video increased 5.1% Y/Y given better mix of expanded basic and digital, price adjustment
Slide 12: Revenue Growth and Metrics
11 Revenue Growth and Metrics Note: All results pro forma for certain acquisitions as if they occurred on January 1, 2012. Residential Revenue Growth Commercial Revenue Growth Revenue Growth excl. Advertising Rev. per Resi. Cust. Relationship & Y/Y Growth 2.3% 4.2% 4.3% 5.1% 4.9% 6.5% 6.4% 4Q12 1Q13
Slide 13: Adjusted EBITDA
12 Adjusted EBITDA(1) Quarterly Adjusted EBITDA(1) LTM Adjusted EBITDA(1) Quarterly Highlights (In Millions) • Adjusted EBITDA(1) grew 7.9% Y/Y • Total operating costs rose 7.0% Y/Y driven by: • Programming expense increase of 9.8% Y/Y reflecting contractual increases and a 1.3% increase in expanded
Slide 14: Capital Investment
13 Capital Investment Quarterly Capex(1) Highlights (In Millions) • 2Q14 capex increased $130M Y/Y: • CPE increased by $99M Y/Y to support all-digital initiative and customer growth • Support capital increased by $31M Y/Y driven by insourcing initiatives • Scalable infrastructure increased by $21M Y
Slide 15: Free Cash Flow
14 Free Cash Flow(1) Free Cash Flow(1) Quarterly Highlights (In Millions) Free Cash Flow(1) • Adjusted EBITDA growth and lower interest payments funded capital expenditure increase for all-digital Financing and Leverage • Target leverage 4-4.5 times, +/- half turn • Over 96% of current outstanding d
Slide 16: New Charter: PSUs & Estimated / Illustrative Financial Data
15 New Charter: PSUs & Estimated / Illustrative Financial Data 1) Pro forma for certain acquisitions as if they occurred on January 1, 2012 2) SpinCo management fee derived by multiplying 4.25% and SpinCo pro forma revenue as disclosed in Comcast’s amended Form S-4, dated May 23, 2014. 3) Estimated
Slide 17: Significant Tax Assets Support Operating Growth and M&A Strategies
16 Significant Tax Assets Support Operating Growth and M&A Strategies Tax Basis Loss Carryforward Availability 1) Excludes depreciation and amortization on future capital expenditures and mergers and acquisitions. 2) Tax basis includes Bresnan assets. Tax Assets as of December 31, 2013 • Tax basis i
Slide 18: Comcast Tax Sharing Agreement
17 Comcast Tax Sharing Agreement • Comcast will pay its taxable gain on the TWC assets it sells to Charter • Charter has agreed to pay Comcast for the tax benefit of the step-up Charter will receive on the TWC assets it acquires • During the first 8 years, Charter will pay any tax benefit realized o
Slide 19: Charter is Well Positioned
18 Charter is Well Positioned 1) Represents commercial telecommunications services marketplace, excluding commercial video, within Charter’s footprint. • Highly capable network covering ~12.8M passings; $9.5B1 commercial market • Offering superior Internet and competitive video and voice products in
Slide 20: Investor Inquiries
Investor Inquiries: Stefan Anninger | 203.905.7955 stefan.anninger@charter.com
Slide 21: Appendix 1: Charter Supplemental Information
Appendix 1: Charter Supplemental Information
Slide 22: Non-GAAP measures definitions
21 The Company uses certain measures that are not defined by Generally Accepted Accounting Principles (“GAAP”) to evaluate various aspects of its business. Adjusted EBITDA, pro forma adjusted EBITDA, adjusted EBITDA less capital expenditures, and free cash flow are non-GAAP financial measures and sh
Slide 23: GAAP Reconciliations
22 GAAP Reconciliations June 30, June 30, 2014 2013 Actual Actual Net loss (45)$ (96)$ Plus: Interest expense, net 210 211 Income tax expense 65 58 Depreciation and amortization 528 436 Stock compensation expense 15 15 Loss on extinguishment of debt - 81 (Gain) loss on derviative instruments, net 6
Slide 24: GAAP Reconciliations
23 GAAP Reconciliations June 30, March 31, December 31, September 30, June 30, 2014 2014 2013 2013 2013 Actual Actual Actual Actual Pro Forma (1) Net income (loss) (45)$ (37)$ 39$ (70)$ (95)$ Plus: Interest expense, net 210 211 211 214 224 Income tax expense (benefit) 65 64 (4) 57 62 Depreciation an
Slide 25: GAAP Reconciliations
24 GAAP Reconciliations 2014 2013 2013 Actual Pro Forma (1) Actual Net loss (113)$ (339)$ (265)$ Plus: Interest expense, net 846 919 866 Income tax expense 182 251 185 Depreciation and amortization 2,026 1,887 1,751 Stock compensation expense 49 52 52 Loss on extinguishment of debt - 104 104 (Gain)
Slide 26: Charter Shares Outstanding
25 Charter Shares Outstanding 1) Unvested restricted stock has voting rights and is therefore included in issued and outstanding total. 2) All warrants are currently exercisable, 840K outstanding warrants with an exercise price of $19.80 per share, 2.5M outstanding warrants with an exercise price $4
Slide 27: Charter Capital Structure Summary
26 Charter Capital Structure Summary 1) Rate is stated bank interest or bond coupon. 2) Issuer amount includes stated bank, bond, and current equity market capitalization of shares outstanding based on a closing share price of $158.38 as of 6/30/14. 3) Aggregate debt is total principal amount of deb
Slide 28: Debt Maturity Profile
27 Debt Maturity Profile As of 6/30/14 Debt Maturity Profile (In Millions) Weighted Average Cost of Debt = 5.6% Weighted Average Life of Debt = 7.0 Years Over 96% of debt matures beyond 2016 $382 $65 $93 $1,102 $535 $1,427 $2,864 $3,110 $2,000 $1,500 $1,000 2014 2015 2016 2017 2018 2019 2020 2021 20
Slide 29: Charter Capital Structure – Covenant Calculations
28 Charter Capital Structure – Covenant Calculations 1) Calculated using aggregate principal amount of debt at 6/30/14 divided by LQA 2Q14 Adjusted EBITDA5 of $795M plus management fee expenses of $58M, or $853M. 2) Includes $798M of intercompany notes and $71M in letters of credit and capital lease
Slide 30: Appendix 2: Comcast Transaction Supplemental Information
Appendix 2: Comcast Transaction Supplemental Information
Slide 31: Basis of Presentation
30 Basis of Presentation The unaudited pro forma customer data and financial results and other information contained herein are based upon the Comcast/Charter Transactions Agreement, dated as of April 25, 2014 and certain available information and certain assumptions that we believe are reasonable u
Slide 32: New Charter: 1Q14 PSUs
31 New Charter: 1Q14 PSUs(1) 1) PSU data is rounded to nearest 10,000. 2) Represents our estimate of the number of units, such as single family homes, apartment and condominium units and commercial establishments passed by our cable distribution network in the areas where we offer video service. 3)
Slide 33: New Charter: Estimated / Illustrative Financial Data
32 New Charter: Estimated / Illustrative Financial Data 2013 Estimated Financial Data Illustrative 2014 Adjusted EBITDA 1) Pro forma for certain acquisitions as if they occurred on January 1, 2012 2) Estimated total pro forma 2013 revenues are derived using financial information as provided in Comca
Slide 34: New Charter: 1Q14 Estimated Financial Data
33 New Charter: 1Q14 Estimated Financial Data 1) Estimated total pro forma 1Q 2014 revenues are derived using financial information as provided in Comcast’s amended Form S-4, dated May 23, 2014. 2) SpinCo management fee derived by multiplying 4.25% and SpinCo pro forma revenue as disclosed in Comcas
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