News Column

Suddenlink Reports Second Quarter 2014 Financial and Operating Results

August 8, 2014

FOR IMMEDIATE RELEASE ST. LOUIS (August 8, 2014) -- Cequel Communications Holdings I, LLC ("Cequel," and together with its subsidiaries, the "Company" or "Suddenlink") today reported financial and operating results for the second quarter of 2014. "Our positive momentum continued in the second quarter. Customer relationships grew at a record pace in the trailing 12 months. Net gains accelerated for our market-leading Internet services. And revenue, EBITDA and cash flow were up significantly year over year," said Suddenlink Chairman and CEO Jerry Kent. "These results put us in excellent position to make strategic investments that will enable one Gigabit speeds and thereby retain our competitive advantage in Internet services." Operating results and metrics and year-over-year changes described below are presented on a pro forma basis to include the cable systems acquired from Northland Communications ("Northland") on January 2, 2014. Second Quarter Highlights * Second quarter revenues of $579.9 million grew 5.9% compared to the second quarter of the prior year, highlighted by high speed Internet revenue growth of 15.3%. * Before the impact of non-recurring expenses, Adjusted EBITDA (as defined herein) for the second quarter 2014 was $226.1 million, representing growth of 6.2% compared to the same period in the prior year.  Adjusted EBITDA for the second quarter 2014, after the impact of non-recurring expenses, was $223.3 million, representing growth of 6.6% compared to the same period in the prior year. * Free Cash Flow (as defined herein) of $64.1 million for the second quarter 2014 grew $19.9 million compared to the second quarter 2013, an increase of 45.1%. * Total residential customer relationships were 1,403,500 at June 30, 2014, an increase of 29,600, or 2.2%, from June 30, 2013. * Including commercial, PSUs (as defined herein) were 2,903,600, an increase of 110,500, or 4.0%, over the prior year.  Including commercial, RGUs (as defined herein) were 3,785,100, an increase of 145,000, or 4.0%, from June 30, 2013. * Total average monthly revenue per basic video customer ("ARPU") for the second quarter was $163.92, an increase of 8.7% compared to the second quarter of the prior year. * Bundled residential customers represented 66.0% of total residential customer relationships at June 30, 2014, an increase from 65.1% at June 30, 2013, primarily from growth in triple play customer relationships, which represented 27.9% of total residential customer relationships at June 30, 2014, versus 25.7% at June 30, 2013. * Non-video residential customers represented 22.9% of total residential customer relationships at June 30, 2014, an increase of 20.2% compared to the prior year. * Commercial revenue grew 11.4% versus the second quarter 2013, including 18.0% year-over-year growth in our commercial high-speed data, telephone and on-net carrier revenue on a combined basis. * Advertising revenues increased 10.5% due largely to higher national political advertising revenue. Second Quarter 2014 Compared to Second Quarter 2013 Second quarter 2014 revenues increased 5.9%, largely attributable to the increase in residential high-speed Internet, telephone, and advanced digital video revenues; growth in revenues from our commercial business, including carrier services; and growth in advertising revenue. Residential revenue growth resulted from increases in the number of new telephone, high-speed Internet, and digital video customers; an increase in the penetration of existing customers for these services; the impact of video rate increases, including broadcast retransmission rate increases; incremental service revenues from high definition television ("HDTV") and digital video recorder ("DVR") services due to growth in customers purchasing advanced video services during the trailing twelve months; and the impact from the shift of customers to higher speed Internet products. Offsetting this residential growth, in part, was a decrease in basic video customers in the trailing twelve months; a decrease in revenue due to the impact of bundling and promotional discounts; digital customers purchasing fewer digital tiers of service; and decreased premium revenues. Revenues from our commercial business grew due to increases in new and bundled commercial high- speed data and telephone customers and from increases in cell tower backhaul revenues from carrier customers. Advertising revenue increased due primarily to higher national political advertising sales revenue. Video service revenues increased 1.9% due primarily to video rate increases; higher broadcast retransmission revenue and customer growth in our digital and advanced video services, including converter rental revenue for high-definition and DVR capable digital converters. Offsetting this growth, in part, was the impact of basic video customer losses in the trailing twelve months; digital customers purchasing fewer digital tiers of service on average; and decreased premium revenues. High-speed Internet service revenues rose 15.3% due primarily to an increase in residential high-speed Internet customers; growth in home networking revenues; the impact of residential rate increases; the shift of customers to higher speed Internet products; growth in our commercial high-speed data services to small and medium sized businesses; and growth in carrier services, including fiber to the tower, and optical Internet and transport revenues. Telephone service revenues grew 1.2% due primarily to an increase in residential telephone customers and growth in our commercial telephone services to small and medium sized businesses, offset, in part, by the impact of bundle discounts to residential customers. Advertising revenues increased 10.5% due largely to higher national political advertising revenue.  Excluding political, advertising revenues decreased 0.4% as increases in national advertising were offset by decreases in local advertising revenues. Other revenues decreased 0.3% due primarily to decreases in installation revenue. Our commercial lines of business, embedded in the video, high-speed Internet, telephone service and other revenues, described above, are comprised of commercial and bulk video, commercial high-speed data, fiber based on- and off- net carrier services, and commercial telephone. Commercial revenue totaled $81.8 million, or 14.1% of total revenue, in the second quarter 2014, representing growth of 11.4% versus the second quarter 2013. Our commercial high-speed data, telephone and on-net carrier revenue grew 18.0% year-over-year on a combined basis. Operating costs and expenses rose 5.5%, primarily due to higher programming costs, including broadcast retransmission consent expenses, and increased labor and employee related costs. Programming costs and retransmission consent expenses grew principally as a result of higher contractual rates charged by our programming and broadcast vendors and an increased number of digital customers. Labor and employee related expenses have increased due to the impact of annual salary increases. The second quarter 2014 includes $2.8 million of non-recurring expenses primarily related to the migration to our internal telephone platform and acquisition due diligence costs. The second quarter 2013 includes $3.4 million of non-recurring expenses primarily related to credit facility amendment costs. Before the impact of non-recurring expenses described above, Adjusted EBITDA for the second quarter 2014 would have been $226.1 million, an increase of 6.2% compared to the second quarter last year, with an Adjusted EBITDA margin of 39.0%. After the impact of non-recurring expenses, Adjusted EBITDA for the second quarter 2014 was $223.3 million, an increase of 6.6% from the same quarter last year, resulting in an Adjusted EBITDA margin of 38.5%. Income from operations for the second quarter 2014 was $56.2 million, an increase of 20.8%, compared to $46.5 million for the second quarter 2013, due primarily to an increase in Adjusted EBITDA and a decrease in amortization expense, offset, in part, by an increase in depreciation expense and non-cash share based compensation expense. Net loss was $2.4 million for the second quarter 2014, compared to a net loss of $26.5 million for the second quarter 2013. Key Operating Metrics At June 30, 2014, Suddenlink served approximately 1.4 million residential customers, and Suddenlink's RGUs were comprised of 1,168,800 basic video, 881,500 digital video, 1,103,300 residential high-speed Internet, and 534,600 residential telephone customers. Suddenlink's approximately 3.7 million RGUs as of June 30, 2014, increased 130,800, or 3.7%, over the prior year, and Suddenlink's approximately 2.8 million PSUs as of June 30, 2014, increased 96,300, or 3.6%, over the prior year. In addition, as of June 30, 2014, Suddenlink served approximately 60,900 commercial high-speed data and 36,000 commercial telephone customers, not included in our RGU or customer relationship totals. Including these commercial customers, our RGUs increased 145,000, or 4.0%, and our PSUs increased 110,500, or 4.0%, over the prior year. Approximately 66.0% of Suddenlink's residential customers subscribe to bundled services, compared to 65.1% a year ago. Approximately 391,400 of Suddenlink's residential customers receive video, high-speed Internet, and telephone services as part of a triple play bundle, representing 27.9% of Suddenlink's total residential customer relationships. Growth of 38,800 triple play customers from the second quarter 2013 represented an increase of 11.0%. Non-video residential customers of approximately 319,900 at June 30, 2014, represent 22.9% of total residential customer relationships, and grew 20.2%. Suddenlink's ARPU for the second quarter 2014 was $163.92, an increase of 8.7% compared to the second quarter 2013. Basic video customers decreased by approximately 18,700 customers during the second quarter of 2014, an improvement compared to a loss of 23,100 basic video customers in the second quarter of 2013.  Digital video customers decreased by approximately 6,500 customers during the second quarter of 2014, an improvement compared to a loss of 8,200 digital video customers in the second quarter of 2013.  During the trailing twelve months, basic video customers decreased 2.4% and digital video customers grew 4.1%.  Estimated basic penetration at June 30, 2014, was 37.3% of estimated homes passed. Digital penetration to basic customers was 75.4%. Residential high-speed Internet customers increased by approximately 200 during the second quarter 2014, an improvement compared to a loss of 8,700 residential high-speed Internet customers in the second quarter of 2013.  Residential high- speed Internet customers increased 77,700, or 7.6%, during the trailing twelve months. At June 30, 2014, estimated residential high-speed Internet penetration was 36.1% of high-speed Internet capable homes passed.  During the second quarter of 2014, commercial high-speed data customers increased by approximately 1,500. These commercial customers are not included in total RGU counts. Including these commercial customers, our high-speed Internet customers increased 83,800, or 7.8%, over the prior year. Residential telephone customers grew by approximately 7,100 during the second quarter 2014, and 46,900, or 9.6%, during the trailing twelve months. At June 30, 2014, estimated residential telephone penetration was 20.5% of telephone capable homes passed. During the second quarter of 2014, commercial telephone customers increased by approximately 2,200 customers, and increased by approximately 8,100 over the trailing twelve months, or 29.0%. These commercial customers purchase 2.8 lines on average and are not included in total RGU counts. Including these commercial customers, our telephone customers increased 55,000, or 10.7%, over the prior year. Liquidity and Capital Resources The following discussion of liquidity and capital resources is presented on an actual basis and does not include historical pro forma adjustments reflecting the cable systems acquired from Northland on January 2, 2014. At June 30, 2014, the Company had approximately $221.3 million of cash on hand with $17.5 million of outstanding letters of credit, which reduced the availability under our revolving credit facility to approximately $482.5 million. Net cash provided by operating activities was $173.7 million for the three months ended June 30, 2014, compared to $58.0 million for the three months ended June 30, 2013. This increase is due primarily to improved operating results and a decrease in cash interest expense. In addition, the three months ended June 30, 2013 included the payment of a redemption premium in connection with the redemption of our senior notes due 2017, which was not present in the current period. Capital expenditures were $103.2 million and $94.9 million for the three months ended June 30, 2014 and 2013, respectively, and $198.6 million and $193.1 million for the six months ended June 30, 2014 and 2013, respectively. During 2014, we expect capital expenditures to be approximately $410.0 million to $420.0 million.  This estimate represents a $50 million increase from our previously announced capital expenditure guidance.  The increase is primarily due to a decision to begin a process to significantly increase our Internet speeds companywide, success-based opportunities in our commercial and carrier businesses and residential new-build opportunities. Starting in the second half of 2014 and extending through 2017, we expect to invest up to an additional $230 million of capital expenditures, above and beyond our normal expected capital expenditure levels, to significantly enhance our Internet speeds and ultimately position our network to offer speeds of one Gigabit.  Internally known as "Operation GigaSpeed," this initiative will include expenditures to upgrade data network headend equipment, replace any remaining deployed DOCSIS 2.0 customer premises equipment with DOCSIS 3.0 equipment, and complete our all-digital video conversion.  We expect to complete these enhancements in a phased, market-by-market approach, focusing first on our largest and most competitive markets. Once fully phased in, the plan calls for our flagship Internet speed to increase from 15 to 200 Megabits and our top speed to increase from over 100 Megabits to one Gigabit in nearly 90% of our service areas. We expect to invest approximately $35 million of the total capital expenditures related to Operation GigaSpeed in the second half of 2014, with the remainder invested during 2015, 2016 and 2017. In March 2013, we began an initiative to replace our use of a third-party telephone provider with our own internal platform and resources. The majority of the migration activity relating to this initiative will take place in 2014, and we expect to complete this initiative by early 2015. We expect to incur up to $30 million of non-recurring operating expenses and up to $20 million of capital expenditures through early 2015 to complete this project, but also expect to significantly reduce telephone operating expenses upon completion.  For the three months ended June 30, 2014, we incurred $1.8 million in non-recurring operating expenses and $3.2 million in capital expenditures related to this initiative.  Since the inception of the initiative, we have incurred $4.5 million in non-recurring operating expenses and $11.2 million in capital expenditures. Free Cash Flow for the quarter ended June 30, 2014, was $64.1 million, compared to $44.2 million for the quarter ended June 30, 2013. The increase in Free Cash Flow for the second quarter of 2014 as compared to the same period in 2013 is due primarily to improved operating results and a decrease in cash interest expense, offset, in part, by an increase in capital expenditures. The Senior Secured Leverage Ratio (Consolidated Secured Debt to Adjusted Pro Forma EBITDA) for Suddenlink as defined in and calculated in accordance with the Credit Agreement was 2.62x at June 30, 2014. The Total Leverage Ratio (Consolidated Total Debt to Adjusted Pro Forma EBITDA) for Cequel, as defined in and calculated in accordance with the indentures governing Cequel's 6.375% Senior Notes due 2020 and 5.125% Senior Notes due 2021 was 5.11x at June 30, 2014. Acquisition of Cable Systems On January 2, 2014, the Company acquired three cable systems from Northland for approximately $40.6 million, subject to a working capital adjustment, which was funded using cash on hand.  The cable systems involved in this transaction are located in Texas and serve nearly 12,000 residential and more than 500 commercial customers. Conference Call As previously announced, the Company will host a conference call to discuss its first quarter results at 11:00 a.m. (Eastern Time) on Friday, August 8, 2014. The dial-in information for the earnings call is as follows: Within the United States 866-394-7593 International 706-758-9648 Password Cequel Communications Conference ID 72228574 A replay of this earnings call will be available at the Investor Relations link on the Company's website (suddenlink.com) shortly after the conclusion of the call. During the conference call, representatives of the Company may discuss and answer one or more questions concerning the Company's business and financial matters.  The responses to these questions, as well as other matters discussed during the call, may contain information that has not been previously disclosed. Quarterly Report The information in this press release should be read in conjunction with the financial statements and footnotes contained in the Company's quarterly report for the quarter ended June 30, 2014, which will be posted on the Company's website (suddenlink.com) on August 8, 2014. Current Report A current report containing this earnings release will be posted on the Company's website (suddenlink.com) shortly after the conference call on August 8, 2014. Use of Non-GAAP Financial Measures The Company uses certain measures that are not defined by Generally Accepted Accounting Principles ("GAAP") to evaluate various aspects of its business. Adjusted EBITDA and Free Cash Flow are non-GAAP financial measures. Adjusted EBITDA is a non-GAAP financial measure defined as net income/(loss), plus interest expense, provision/(benefit) for income taxes, depreciation, amortization, non-cash share based compensation expense, and (gain)/loss on sale of cable assets. Free Cash Flow is a non-GAAP financial measure defined as Adjusted EBITDA, less capital expenditures and cash interest expense. Adjusted EBITDA and Free Cash Flow may not be necessarily comparable to similarly titled measures of other companies.  Furthermore, Adjusted EBITDA and Free Cash Flow have limitations as analytical tools and should not be considered in isolation from, or as an alternative to, net income or loss, operating income, cash flow from operations or other combined income or cash flow data prepared in accordance with GAAP. A reconciliation of Net Income/(Loss) to Adjusted EBITDA is provided in Table 9. A reconciliation of Net Cash from Operating Activities to Free Cash Flow is provided in Table 10. The Company believes that Adjusted EBITDA and Free Cash Flow provide information useful to investors in assessing the Company's ability to fund operations, service its debt and make additional investments from internally generated funds. In addition, Adjusted EBITDA generally correlates to the covenant calculations under the Credit Agreement. Company Description The Company, which does business as Suddenlink Communications ("Suddenlink"), is the seventh largest cable operator in the United States. Suddenlink makes its services available over its advanced hybrid-fiber coaxial network to approximately 3.1 million homes in the United States as of June 30, 2014. Suddenlink serves approximately 1.4 million customers as of June 30, 2014. The Company's customer base is clustered geographically with approximately 96% of our customers located in the ten states of Texas, West Virginia, Louisiana, Arkansas, North Carolina, Oklahoma, Arizona, California, Missouri and Ohio, with 91% of our customers located within our top 20 primary systems. Suddenlink simplifies its customers' lives through one call for support, one connection, and one bill for TV, Internet, telephone, and other services. Cautionary Note Regarding Forward-Looking Statements Some statements in this Earnings Release are known as "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"). These forward-looking statements include, but are not limited to, statements about our plans, objectives, expectations and intentions and other statements contained in this Earnings Release that are not historical facts. When used in this Earnings Release, the words "expects," "anticipates," "intends," "plans," "believes," "seeks," "estimates" and similar expressions are generally intended to identify forward- looking statements. Because these forward-looking statements involve known and unknown risks and uncertainties, there are important factors that could cause actual results, events or developments to differ materially from those expressed or implied by these forward-looking statements, including the factors set forth below: * competition for video, high-speed Internet and telephone customers; * our ability to achieve anticipated customer and revenue growth and to successfully introduce new products and services; * our ability to complete our capital investment plans on time and on budget; * the effects of economic conditions or other factors which may negatively affect our customers' demand for our products or services; * increased difficulty negotiating programming and retransmission agreements on favorable terms, if at all, resulting in increased costs to us and/or the loss of popular programming; * increasing programming costs and delivery expenses related to our products and services; * changes in consumer preferences, laws and regulations or technology that may cause us to change our operational strategies; * our ability to effectively integrate acquisitions and to maximize expected operating efficiencies from our acquisitions; * our substantial indebtedness; * the restrictions contained in our financing agreements; * our ability to generate sufficient cash flow to meet our debt service obligations; * fluctuations in interest rates which may cause our interest expense to vary from quarter to quarter; and * other risks and uncertainties, including those listed under the caption "Risk Factors" in our Annual Report for the year ended December 31, 2013. You should not place undue reliance on such forward-looking statements, which are based on the information currently available to us and speak only as of the date of this Earnings Release. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. However, your attention is directed to any further disclosures made on related subjects in our subsequent reports furnished to holders of our notes. Tables 1 Consolidated Statements of Operations - three and six month periods 2 Pro Forma Consolidated Statements of Operations - three and six month periods 3 Condensed Consolidated Balance Sheets 4 Condensed Consolidated Statements of Cash Flows 5 Capital Expenditures 6 Summary Operating Statistics 7 Pro Forma Summary Operating Statistics 8 Calculation of Free Cash Flow 9 Reconciliation of Net Income/(Loss) to Adjusted EBITDA 10 Reconciliation of Net Cash from Operating Activities to Free Cash Flow 11 Reconciliation of Cash Interest Expense TABLE 1 Cequel Communications Holdings I, LLC Consolidated Statements of Operations (unaudited) (in thousands)   Three Months Ended       Six Months Ended   June 30, Percent   June 30, Percent ------------------------- -------------------------   2014   2013   Change   2014   2013   Change --------------------------------------------------------------------   Actual Actual       Actual Actual Revenues: Video $ 294,170   $ 287,337   2.4 %   $ 589,247   $ 576,916   2.1 % High Speed Internet 183,989   158,031   16.4 %   363,896   312,268   16.5 % Telephone 50,905   50,029   1.8 %   101,668   99,378   2.3 % Advertising Sales 23,468   21,232   10.5 %   46,389   40,982   13.2 % Other 27,410   27,365   0.2 %   53,767   53,401   0.7 % ------------------------- ------------------------- Total Revenues 579,942   543,994   6.6 %   1,154,967   1,082,945   6.7 % Costs and Expenses: Operating (excluding depreciation and amortization) 232,552 217,948 -6.7 %   462,775 435,621 -6.2 % Selling, general and administrative (excluding non-cash share based compensation expense) 124,106 117,793 -5.4 %   247,838 232,141 -6.8 % ------------------------- ------------------------- Operating costs and expenses 356,658 335,741 -6.2 %   710,613 667,762 -6.4 % ------------------------- ------------------------- Adjusted EBITDA 223,284   208,253   7.2 %   444,354   415,183   7.0 % ------------------------- ------------------------- Adjusted EBITDA Margin (a) 38.5% 38.3%     38.5% 38.3% Depreciation and amortization 153,858 156,919 2.0 %   301,950 313,496 3.7 % Non-cash share based compensation expense 12,093 4,417 -173.8 %   15,843 8,834 -79.3 % Loss on disposal of cable assets 1,152 1,061 -8.6 %   1,583 1,342 -18.0 % ------------------------- ------------------------- Income from operations 56,181 45,856 22.5 %   124,978 91,511 36.6 % ------------------------- ------------------------- Interest expense, net (55,154 ) (65,847 ) 16.2 %   (111,244 ) (132,407 ) 16.0 % Loss on extinguishment of debt - (6,525 ) 100.0 %   - (6,525 ) 100.0 % ------------------------- ------------------------- Income/(loss) before income taxes 1,027 (26,516 ) 103.9 %   13,734 (47,421 ) 129.0 % (Provision)/benefit for income taxes (3,447 ) (636 ) -442.0 %   (11,451 ) 3,242 -453.2 % ------------------------- ------------------------- Net (loss)/income $ (2,420 )$ (27,152 ) 91.1 %   $ 2,283   $ (44,179 ) 105.2 % ------------------------- ------------------------- (a) Represents Adjusted EBITDA as a percentage of total revenue. TABLE 2 Cequel Communications Holdings I, LLC Pro Forma Consolidated Statements of Operations (unaudited) (in thousands)   Three Months Ended       Six Months Ended   June 30, Percent   June 30, Percent ------------------------- -------------------------   2014   2013   Change   2014   2013   Change -------------------------------------------------------------------- Pro-Forma   Pro-Forma   Actual (b)     Actual (b) Revenues: Video $ 294,170   $ 288,826   1.9 %   $ 589,247   $ 579,898   1.6 % High Speed Internet 183,989   159,573   15.3 %   363,896   315,276   15.4 % Telephone 50,905   50,308   1.2 %   101,668   99,921   1.7 % Advertising Sales 23,468   21,232   10.5 %   46,389   40,982   13.2 % Other 27,410   27,497   -0.3 %   53,767   53,663   0.2 % ------------------------- ------------------------- Total Revenues 579,942   547,436   5.9 %   1,154,967   1,089,740   6.0 % Costs and Expenses: Operating (excluding depreciation and amortization) 232,552 219,468 -6.0 %   462,775 438,755 -5.5 % Selling, general and administrative (excluding non-cash share based compensation expense) 124,106 118,507 -4.7 %   247,838 233,409 -6.2 % ------------------------- ------------------------- Operating costs and expenses 356,658 337,975 -5.5 %   710,613 672,164 -5.7 % ------------------------- ------------------------- Adjusted EBITDA 223,284   209,461   6.6 %   444,354   417,576   6.4 % ------------------------- ------------------------- Adjusted EBITDA Margin (a) 38.5 % 38.3 %     38.5 % 38.3 % Depreciation and amortization 153,858 157,467 2.3 %   301,950 314,601 4.0 % Non-cash share based compensation expense 12,093 4,417 -173.8 %   15,843 8,834 -79.3 % Loss on sale of cable assets 1,152 1,061 -8.6 %   1,583 1,342 -18.0 % ------------------------- ------------------------- Income from operations 56,181 46,516 20.8 %   124,978 92,799 34.7 % ------------------------- ------------------------- Interest expense, net (55,154 ) (65,847 ) 16.2 %   (111,244 ) (132,407 ) 16.0 % Loss on extinguishment of debt - (6,525 ) 100.0 %   - (6,525 ) 100.0 % ------------------------- ------------------------- Income/(loss) before income taxes 1,027 (25,856 ) -104.0 %   13,734 (46,133 ) -129.8 % (Provision)/benefit for income taxes (3,447 ) (636 ) 442.0 %   (11,451 ) 3,242 -453.2 % ------------------------- ------------------------- Net (Loss)/income $ (2,420 )$ (26,492 ) -90.9 %   $ 2,283   $ (42,891 ) -105.3 % ------------------------- ------------------------- (a) Represents Adjusted EBITDA as a percentage of total revenue. (b) Pro forma to include the impact of the cable systems acquired from Northland, where applicable. TABLE 3 Cequel Communications Holdings I, LLC Condensed Consolidated Balance Sheets (in thousands)   Jun 30, 2014   (unaudited) Dec 31, 2013 ---------------------------- ASSETS Cash and cash equivalents $ 221,337   $ 192,014 Accounts receivable, net 187,898   189,052 Deferred tax asset 11,380   10,404 Prepaid expenses and other assets 26,142   25,982 ---------------------------- Total current assets 446,757   417,452 Property, plant and equipment, net 1,783,598   1,819,666 Intangible assets, net 4,999,375   5,027,184 Other long-term assets, net 35,900   41,352 ---------------------------- Total assets $ 7,265,630   $ 7,305,654 ---------------------------- LIABILITIES AND MEMBER'S EQUITY Accounts payable and accrued expenses $ 258,956   $ 248,810 Deferred revenue 148,092   147,038 Current portion of long-term debt 24,422   97,737 Other current liabilities 6,397   5,743 ---------------------------- Total current liabilities 437,867   499,328 Long-term debt, less current portion 4,651,317   4,654,124 Deferred tax liabilities 687,450   677,316 Other long-term liabilities 12,958   16,974 ---------------------------- Total liabilities 5,789,592   5,847,742 Total member's equity 1,476,038   1,457,912 ---------------------------- Total liabilities and member's equity $ 7,265,630   $ 7,305,654 ---------------------------- TABLE 4 Cequel Communications Holdings I, LLC Condensed Consolidated Statements of Cash Flows (unaudited) (in thousands)   Three Months Ended   Six Months Ended   June 30,   June 30, ------------------------ ------------------------   2014   2013     2014   2013 ------------------------ ------------------------ Net cash provided by operating activities $ 173,692$ 58,033   $ 344,468$ 212,641 Net cash used in investing activities (103,005 ) (94,623 )   (238,857 ) (192,689 ) Net cash used in financing activities (68,756 ) (144,077 )   (76,288 ) (149,701 ) ------------------------ ------------------------ Increase/(Decrease) in cash and cash equivalents 1,931 (180,667 )   29,323 (129,749 ) Cash and cash equivalents, beginning of period 219,406 259,400   192,014 208,482 ------------------------ ------------------------ Cash and cash equivalents, end of period $ 221,337$ 78,733   $ 221,337$ 78,733 ------------------------ ------------------------ TABLE 5 Cequel Communications Holdings I, LLC Capital Expenditures (unaudited) (in thousands)   Three Months Ended   Six Months Ended   June 30,   June 30, ------------------------ ------------------------   2014   2013     2014   2013 ------------------------ ------------------------ Customer premise equipment $ 27,370   $ 27,745     $ 60,862   $ 68,660 Scalable infrastructure 10,398   2,550     16,791   6,098 Line extensions 3,498   2,067     6,818   3,615 Upgrade/rebuild 3,865   2,361     6,380   6,240 Commercial 10,398   16,083     16,986   27,226 Support capital 47,660   44,139     90,795   81,270 ------------------------ ------------------------   $ 103,189   $ 94,945     $ 198,632   $ 193,109 ------------------------ ------------------------ TABLE 6 Cequel Communications Holdings I, LLC Summary Operations Statistics (unaudited) Approximate as of: Jun Mar Dec Jun   30, 2014 31, 2014 31, 2013 30, 2013 ------------------------------------------------   Actual Actual Actual Actual ------------------------------------------------ Revenue Generating Units (RGU): Basic video customers (a) 1,168,800   1,187,500   1,177,400   1,189,000 Residential high-speed Internet customers (b) 1,103,300 1,103,100 1,059,500 1,017,200 Residential telephone customers (c) 534,600 527,500 513,300 485,700 ------------------------------------------------ Total PSUs (d) 2,806,700   2,818,100   2,750,200   2,691,900 ------------------------------------------------ Digital video customers (e) 881,500   888,000   868,700   844,600 ------------------------------------------------ Total RGUs (f) 3,688,200   3,706,100   3,618,900   3,536,500 ------------------------------------------------ Commercial data (g) 60,900   59,400   57,300   54,500 Commercial telephone (h) 36,000   33,800   31,800   27,800 ------------------------------------------------ Total PSUs, including commercial (i) 2,903,600 2,911,300 2,839,300 2,774,200 ------------------------------------------------ Total RGUs, including commercial (j) 3,785,100 3,799,300 3,708,000 3,618,800 ------------------------------------------------ Quarterly net customer additions (losses): Actual Actual Actual Actual ------------------------------------------------ Basic video customers (18,700 ) 10,100   (8,600 ) (22,900 ) Residential high-speed Internet customers 200 43,600 20,400 (9,000 ) Residential telephone customers 7,100 14,200 9,600 8,200 ------------------------------------------------ Total PSUs (11,400 ) 67,900   21,400   (23,700 ) Digital video customers (6,500 ) 19,300   10,200   (8,500 ) ------------------------------------------------ Total RGUs (17,900 ) 87,200   31,600   (32,200 ) ------------------------------------------------ Commercial data 1,500   2,100   1,300   1,300 Commercial telephone 2,200   2,000   1,900   2,300 ------------------------------------------------ Total PSUs, including commercial (7,700 ) 72,000 24,600 (20,100 ) ------------------------------------------------ Total RGUs, including commercial (14,200 ) 91,300 34,800 (28,600 ) ------------------------------------------------ Average Revenue per Unit (ARPU): Actual Actual Actual Actual ------------------------------------------------ Pro forma average monthly revenue per basic video customer (k) $ 163.92   $ 161.93   $ 156.62   $ 150.93 Residential Customer Relationships: Actual Actual Actual Actual ------------------------------------------------ Total customer relationships (l) 1,403,500 1,415,000 1,380,700 1,362,100 Double play relationships (m) 535,300   546,800   536,900   538,400 Double play penetration (n) 38.1 % 38.6 % 38.9 % 39.5 % Triple play relationships (o) 391,400   386,300   374,400   351,300 Triple play penetration (p) 27.9 % 27.3 % 27.1 % 25.8 % Total bundled customers (q) 926,700   933,100   911,300   889,700 Bundled penetration (r) 66.0 % 65.9 % 66.0 % 65.3 % Non-video customer relationships (s) 319,900 311,300 287,200 262,000 Non-video as a % of total customer relationships (t) 22.9 % 22.0 % 20.8 % 19.2 % Estimated Customer Penetration: Actual Actual Actual Actual ------------------------------------------------ Estimated basic penetration (u) 37.3 % 38.0 % 38.2 % 38.9 % Estimated digital penetration (v) 75.4 % 74.8 % 73.8 % 71.0 % Estimated residential high- speed Internet penetration (w) 36.1 % 36.2 % 35.3 % 34.2 % Estimated residential telephone penetration (x) 20.5 % 20.3 % 20.1 % 19.1 % Commercial Customer Relationships: Actual Actual Actual Actual ------------------------------------------------ Total customer relationships (y) 86,800 85,200 83,200 80,300 Double play relationships (z) 30,200   29,100   28,000   25,900 Double play penetration (aa) 34.8 % 34.2 % 33.7 % 32.3 % Triple play relationships (ab) 10,300   9,600   8,900   7,800 Triple play penetration (ac) 11.9 % 11.3 % 10.7 % 9.7 % Total bundled customers (ad) 40,500   38,700   36,900   33,700 Bundled penetration (ae) 46.7 % 45.4 % 44.4 % 42.0 % TABLE 7 Cequel Communications Holdings I, LLC Pro Forma Summary Operations Statistics (unaudited) Approximate as of: Jun Mar Dec Jun   30, 2014 31, 2014 31, 2013 30, 2013 ------------------------------------------------ Pro Forma Pro Forma   Actual Actual (af) (af) ------------------------------------------------ Revenue Generating Units (RGU): Basic video customers (a) 1,168,800   1,187,500   1,185,100   1,197,100 Residential high-speed Internet customers (b) 1,103,300 1,103,100 1,068,000 1,025,600 Residential telephone customers (c) 534,600 527,500 515,400 487,700 ------------------------------------------------ Total PSUs (d) 2,806,700   2,818,100   2,768,500   2,710,400 ------------------------------------------------ Digital video customers (e) 881,500   888,000   872,100   847,000 ------------------------------------------------ Total RGUs (f) 3,688,200   3,706,100   3,640,600   3,557,400 ------------------------------------------------ Commercial data (g) 60,900   59,400   57,700   54,800 Commercial telephone (h) 36,000   33,800   32,000   27,900 ------------------------------------------------ Total PSUs, including commercial (i) 2,903,600 2,911,300 2,858,200 2,793,100 ------------------------------------------------ Total RGUs, including commercial (j) 3,785,100 3,799,300 3,730,300 3,640,100 ------------------------------------------------ Quarterly net customer Pro Forma Pro Forma additions (losses): Actual Actual (af) (af) ------------------------------------------------ Basic video customers (18,700 ) 2,400   (8,800 ) (23,100 ) Residential high-speed Internet customers 200 35,100 20,500 (8,700 ) Residential telephone customers 7,100 12,100 9,700 8,200 ------------------------------------------------ Total PSUs (11,400 ) 49,600   21,400   (23,600 ) ------------------------------------------------ Digital video customers (6,500 ) 15,900   10,700   (8,200 ) ------------------------------------------------ Total RGUs (17,900 ) 65,500   32,100   (31,800 ) ------------------------------------------------ Commercial data 1,500   1,700   1,400   1,300 Commercial telephone 2,200   1,800   1,900   2,200 ------------------------------------------------ Total PSUs, including commercial (7,700 ) 53,100 24,700 (20,100 ) ------------------------------------------------ Total RGUs, including commercial (14,200 ) 69,000 35,400 (28,300 ) ------------------------------------------------ Average Revenue per Unit Pro Forma Pro Forma (ARPU): Actual Actual (af) (af) ------------------------------------------------ Pro forma average monthly revenue per basic video customer (k) $ 163.92   $ 161.93   $ 156.58   $ 150.86 Residential Customer Pro Forma Pro Forma Relationships: Actual Actual (af) (af) ------------------------------------------------ Total customer relationships (l) 1,403,500 1,415,000 1,392,300 1,373,900 Double play relationships (m) 535,300   546,800   540,700   542,100 Double play penetration (n) 38.1 % 38.6 % 38.8 % 39.5 % Triple play relationships (o) 391,400   386,300   375,600   352,600 Triple play penetration (p) 27.9 % 27.3 % 27.0 % 25.7 % Total bundled customers (q) 926,700   933,100   916,300   894,700 Bundled penetration (r) 66.0 % 65.9 % 65.8 % 65.1 % Non-video customer relationships (s) 319,900 311,300 291,400 266,100 Non-video as a % of total customer relationships (t) 22.9 % 22.1 % 20.9 % 19.4 % Estimated Customer Pro Forma Pro Forma Penetration: Actual Actual (af) (af) ------------------------------------------------ Estimated basic penetration (u) 37.3 % 38.0 % 38.0 % 38.6 % Estimated digital penetration (v) 75.4 % 74.8 % 73.6 % 70.8 % Estimated residential high- speed Internet penetration (w) 36.1 % 36.2 % 35.1 % 34.0 % Estimated residential telephone penetration (x) 20.5 % 20.3 % 19.8 % 18.9 % Commercial Customer Pro Forma Pro Forma Relationships: Actual Actual (af) (af) ------------------------------------------------ Total customer relationships (y) 86,800 85,200 83,700 80,800 Double play relationships (z) 30,200   29,100   28,200   26,000 Double play penetration (aa) 34.8 % 34.2 % 33.7 % 32.2 % Triple play relationships (ab) 10,300   9,600   8,900   7,800 Triple play penetration (ac) 11.9 % 11.3 % 10.6 % 9.7 % Total bundled customers (ad) 40,500   38,700   37,100   33,800 Bundled penetration (ae) 46.7 % 45.4 % 44.3 % 41.8 % (a) Basic video customers include all residential customers who receive video cable services.  Also included are commercial or multi-dwelling accounts that are converted to equivalent basic units ("EBUs") by dividing the total bulk billed basic revenues of a particular system by the most prevalent retail rate paid by non-bulk basic customers in that market for a comparable level of service.  This conversion method is consistent with methodology used in determining costs paid to programmers.  Our methodology of calculating the number of basic video customers may not be identical to those used by other companies offering similar services. (b) Residential high-speed Internet customers include all residential customers who subscribe to our high-speed Internet service.  Excluded from these totals are all commercial high-speed data customers, including small and medium sized commercial cable modem accounts, customers who take our broadband service optically, via fiber connections, and customers who receive our services via bulk Ethernet. (c) Residential telephone customers include all residential customers who subscribe to our telephone service.  Residential customers who take multiple telephone lines are only counted once in the total.  Excluded from these totals are all commercial telephone customers. (d) Total primary service units ("PSUs") represents the sum of basic video, residential high-speed Internet and residential telephone customers, not counting additional outlets within one household. This statistic is computed in accordance with guidelines of the National Cable and Telecommunications Association ("NCTA"). (e) Digital video customers include all basic video customers that have one or more digital set-top boxes or cable cards deployed. (f) Total revenue generating units ("RGUs") represents the sum of basic video, digital video, residential high-speed Internet and residential telephone customers, not counting additional outlets within one household. This statistic is computed in accordance with guidelines of the NCTA. (g) Commercial data customers consist of commercial accounts that receive high- speed Internet service via a cable modem and commercial accounts that receive broadband service optically, via fiber connections. (h) Commercial telephone customers are commercial accounts that subscribe to our telephone service. (i) Total PSUs, including commercial, represents the sum of total PSUs, commercial data and commercial telephone customers. (j) Total RGUs, including commercial, represents the sum of basic video, digital video, residential high-speed Internet, residential telephone, commercial data and commercial telephone customers. (k) Average revenue per basic video customer represents the total revenue for a quarter, divided by three, divided by the average basic video customers for the quarter. (l) Residential customer relationships represent the number of residential customers who pay for at least one level of service, encompassing video, high- speed Internet or telephone services, without regard to the number of services purchased. For example, a residential customer who purchases only high-speed Internet service and no basic video service will count as one customer relationship, and a residential customer who purchases both basic video and high-speed Internet services will also count as only one customer relationship. (m) Residential double play customer numbers reflect residential customers who subscribe to two of our core services (video, high-speed Internet and telephone). (n) Residential double play penetration represents double play customers as a percentage of customer relationships. (o) Residential triple play customer numbers reflect residential customers who subscribe to all three of our core services (video, high-speed Internet and telephone). (p) Residential triple play penetration represents triple play customers as a percentage of customer relationships. (q) Total residential bundled customers represent the sum of residential double play and residential triple play customers. (r) Total residential bundled penetration represents the sum of residential double play and residential triple play residential customers as a percentage of customer relationships. (s) Non-video customer relationships represents the number of residential customers who receive at least one level of service, encompassing high-speed Internet or telephone services, but do not receive video services (t) Non-video as a percent of total customer relationships represents non-video customer relationships divided by total customer relationships. (u) Estimated basic penetration is calculated as basic video customers divided by the estimated total homes passed of the Company. (v) Estimated digital penetration is calculated as digital video customers divided by basic video customers. (w) Estimated residential high-speed Internet penetration is calculated as residential high-speed Internet customers divided by the estimated homes passed of the Company where residential high-speed Internet service is currently available. (x) Estimated residential telephone penetration is calculated as residential telephone customers divided by the estimated homes passed of the Company where residential telephone service is currently available. (y) Commercial customer relationships represent the number of commercial customers who pay for at least one level of service, encompassing video, high- speed data or telephone services, without regard to the number of services purchased. For example, a commercial customer who purchases only high-speed data service and no video service will count as one customer relationship, and a commercial customer who purchases both basic video and high-speed data services will also count as only one customer relationship. National carrier accounts are excluded from customer relationships. (z) Commercial double play customer numbers reflect commercial customers who subscribe to two of our core services (video, high-speed data and telephone). (aa) Commercial double play penetration represents double play commercial customers as a percentage of customer relationships. (ab) Commercial triple play customer numbers reflect commercial customers who subscribe to all three of our core services (video, high-speed data and telephone). (ac) Commercial triple play penetration represents triple play commercial customers as a percentage of customer relationships. (ad) Total commercial bundled customers represent the sum of commercial double play and commercial triple play customers. (ae) Total commercial bundled penetration represents the sum of commercial double play and commercial triple play residential customers as a percentage of customer relationships. (af) Pro forma to include the cable systems from acquired Northland on January 2, 2014, where applicable. TABLE 8 Cequel Communications Holdings I, LLC Calculation of Free Cash Flow (unaudited) (in thousands)   Three Months Ended   Six Months Ended   June 30,   June 30, ------------------------- ------------------------   2014   2013     2014   2013 ------------------------- ------------------------ Adjusted EBITDA $ 223,284   $ 208,253     $ 444,354   $ 415,183 Capital expenditures (103,189 ) (94,945 )   (198,632 ) (193,109 ) Cash interest expense (56,031 ) (69,144 )   (112,977 ) (139,857 ) ------------------------- ------------------------ Free Cash Flow $ 64,064   $ 44,164     $ 132,746   $ 82,217 ------------------------- ------------------------ TABLE 9 Cequel Communications Holdings I, LLC Reconciliation of Net Loss/Income to Adjusted EBITDA (unaudited) (in thousands)     Three Months Ended   Six Months Ended     June 30,   June 30, ------------------------- ------------------------     2014   2013     2014   2013 ------------------------- ------------------------ Net (loss)/income $ (2,420 )$ (27,152 )   $ 2,283   $ (44,179 )   Add back:   Interest expense, net 55,154   65,847     111,244   132,407 Provision/(benefit) for   income taxes 3,447 636   11,451 (3,242 ) Depreciation and   amortization 153,858 156,919   301,950 313,496 Non-cash share based   compensation 12,093 4,417   15,843 8,834 Loss on disposal of cable   assets 1,152 1,061   1,583 1,342 Loss on extinguishment of   debt - 6,525   - 6,525 ------------------------- ------------------------ Adjusted EBITDA $ 223,284   $ 208,253     $ 444,354   $ 415,183 ------------------------- ------------------------ TABLE 10 Cequel Communications Holdings I, LLC Reconciliation of Net Cash from Operation Activities to Free Cash Flow (unaudited) (in thousands)   Three Months Ended   Six Months Ended   June 30,   June 30, ------------------------ ------------------------   2014   2013     2014   2013 ------------------------ ------------------------ Net cash provided by operating activities $ 173,692$ 58,033   $ 344,468$ 212,641 Add back: Capital expenditures (103,189 ) (94,945 )   (198,632 ) (193,109 ) Cash income tax expense 740   4,784     2,294   6,638 Interest income (55 ) (113 )   (103 ) (173 ) Net proceeds from asset disposals 184 322   345 422 Senior Notes redemption premium - 71,976   - 71,976 Changes in assets and liabilities, net (7,308 ) 4,106   (15,626 ) (16,178 ) ------------------------ ------------------------ Free Cash Flow $ 64,064   $ 44,164     $ 132,746   $ 82,217 ------------------------ ------------------------ TABLE 11 Cequel Communications Holdings I, LLC Reconciliation of Cash Interest Expense (unaudited) (in thousands)   Three Months Ended   Six Months Ended   June 30,   June 30, ----------------------- ------------------------   2014   2013     2014   2013 ----------------------- ------------------------ Interest expense, net $ 55,154   $ 65,847     $ 111,244   $ 132,407 Add: interest income 55   113     103   173 Add: bond premium amortization 1,412   3,197     1,925   7,166 Add: term loan premium amortization 78 507   1,033 1,006 Less: deferred financing amortization (668 ) (520 )   (1,328 ) (895 ) ----------------------- ------------------------ Cash interest expense $ 56,031   $ 69,144     $ 112,977   $ 139,857 ----------------------- ------------------------ Source:  Cequel Communications Holdings I, LLC Cequel Contact Information Mary Meduski EVP, Chief Financial Officer 314-315-9603 Ralph Kelly SVP, Treasurer 314-315-9403 Mike Pflantz SVP, Corporate Finance 314-315-9341 Printer Friendly Version: http://hugin.info/150220/R/1847447/644260.pdf This announcement is distributed by GlobeNewswire on behalf of GlobeNewswire clients. The owner of this announcement warrants that: (i) the releases contained herein are protected by copyright and other applicable laws; and (ii) they are solely responsible for the content, accuracy and originality of the information contained therein. Source: Cequel Communications Holdings I, LLC via GlobeNewswire [HUG#1847447]


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