Charter Announces Third Quarter 2014 Results

Charter Announces Third Quarter 2014 Results

Execution of Product and Service Strategy Continues to Drive Growth

STAMFORD, Conn., Oct. 29, 2014 /PRNewswire/ -- Charter Communications, Inc. (along with its subsidiaries, the "Company" or "Charter") today reported financial and operating results for the three and nine months ended September 30, 2014.

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Key highlights:


-- Third quarter revenues of $2.3 billion grew 8.0% as compared to the
prior-year period, led by residential revenue growth of 6.7%, and
commercial revenue growth of 17.7%.
-- Third quarter Adjusted EBITDA(1) grew by 7.0% year-over-year. Net loss
totaled $53 million in the third quarter of 2014, an improvement
compared to a $70 million net loss in the year-ago period.
-- Total residential customer relationships grew by 4.9% over the last
twelve months, with third quarter residential revenue per customer
growing 2.0% compared to the prior-year period.
-- Residential customer relationships increased 68,000 during the third
quarter, versus 46,000 during the third quarter of 2013. Residential
primary service units ("PSUs") increased by 114,000 during the period,
versus 100,000 in the year-ago quarter, including continued improvement
in year-over-year Internet and video customer trends.
-- As of the end of the third quarter of 2014, Charter had completed over
80% of its all-digital initiative, having deployed over 2 million set
top boxes since the start of Charter's all-digital transition in 2013.
Charter remains on schedule to complete its all-digital initiative by
year-end 2014.
"Charter's strategy to create value by delivering superior products and service, at highly competitive prices, is working. As a result, our customer growth continues to accelerate," said Tom Rutledge, President and CEO of Charter Communications. "Our growing levels of customer and product penetration, and revenue per household, are generating faster revenue and EBITDA growth. Our new product suite, Charter Spectrum, has been deployed and is designed to further build that operating and financial momentum, delivering greater value to both customers and shareholders."

(1 )Adjusted EBITDA and free cash flow are defined in the "Use of Non-GAAP Financial Metrics" section and are reconciled to net loss and net cash flows from operating activities, respectively, in the addendum of this news release.





Key Operating Results


Approximate as of
-----------------

September 30, September 30, Y/Y Change
2014 (a) 2013 (a)
------- -------

Footprint
---------

Estimated Video
Passings (b) 12,819 12,794 -%

Estimated Internet
Passings (b) 12,484 12,475 -%

Estimated Voice
Passings (b) 11,978 11,815 1 %


Penetration Statistics
----------------------

Video Penetration of
Estimated Video
Passings (c) 33.5 % 34.0 % -0.5 ppts

Internet Penetration of
Estimated Internet
Passings (c) 39.7 % 36.4 % 3.3 ppts

Voice Penetration of
Estimated Voice
Passings (c) 21.4 % 19.9 % 1.5 ppts


Residential
-----------

Residential Customer
Relationships (d) 5,768 5,498 5 %

Residential Non-Video
Customers 1,611 1,319 22 %

% Non-Video 27.9 % 24.0 % 3.9 ppts


Customers
---------

Video (e) 4,157 4,179 (1)%

Internet (f) 4,662 4,290 9 %

Voice (g) 2,389 2,217 8 %
----- -----

Residential PSUs (h) 11,208 10,686 5 %

Residential PSU /
Customer Relationships
(d)(h) 1.94 1.94


Quarterly Net
Additions/(Losses)
(i)
-------------------

Video (e) (9) (27) NM

Internet (f) 94 86 9 %

Voice (g) 29 41 (29)%
--- ---

Residential PSUs (h) 114 100 14 %


Bulk Digital Upgrade
Net Additions (j) 20 3 NM


Single Play Penetration
(k) 38.1 % 37.7 % 0.4 ppts

Double Play Penetration
(l) 29.3 % 30.2 % -0.9 ppts

Triple Play Penetration
(m) 32.6 % 32.2 % 0.4 ppts

Digital Penetration (n) 97.7 % 91.2 % 6.5 ppts


Monthly Residential
Revenue per
Residential Customer
(d)(o) $110.81 $108.68 2 %


Commercial
----------

Commercial Customer
Relationships (d)(p) 380 359 6 %


Customers
---------

Video (e)(p) 139 166 (16)%

Internet (f) 294 245 20 %

Voice (g) 172 138 25 %
--- ---

Commercial PSUs (h) 605 549 10 %


Quarterly Net
Additions/(Losses)
(i)
-------------------

Video (e)(p) (15) 2 NM

Internet (f) 12 12 -%

Voice (g) 8 7 14 %
--- ---

Commercial PSUs (h) 5 21 (76)%
Footnotes

In thousands, except per customer and penetration data. See footnotes to unaudited summary of operating statistics on page 6 of the addendum of this news release. The footnotes contain important disclosures regarding the definitions used for these operating statistics.

NM - Not meaningful

During the third quarter of 2014, Charter's residential customer relationship and PSU growth improved year-over-year. Residential customer relationships grew by 68,000, up from 46,000 in the third quarter of 2013, with triple play sell-in improving year-over-year, to 57% of total residential video sales. Commercial customer relationships declined by 5,000 in the third quarter of 2014, compared to a gain of 12,000 customers in the prior-year period. The year-over-year decline in net commercial customer relationship growth was primarily driven by digitization and by a higher video rate when counting Charter's commercial equivalent bulk units ("EBU") for the third quarter of 2014.

Residential PSUs increased by 114,000 versus 100,000 in the year-ago quarter, while commercial PSUs increased 5,000 during the third quarter versus a gain of 21,000 in the year-ago quarter.

As of the end of the third quarter of 2014, Charter had completed over 80% of its all-digital initiative. All-digital allows Charter to offer more advanced products and services, and provides residential customers with two-way digital set-tops, which offer higher picture quality, an interactive programming guide and video on demand on all TV outlets in the home. Charter expects to complete its all-digital initiative by year-end 2014.

During the third quarter, Charter continued to introduce its new product suite, Charter Spectrum, in markets that were recently converted to all-digital, including portions of Charter's Michigan, Wisconsin, Georgia and California footprints, and other areas. Charter customers in these markets now have access to an industry-leading suite of video, data, and voice services that includes over 200 HD channels, in addition to minimum offered Internet speeds of 60 Mbps, and a fully featured voice service, delivered at a highly competitive price. Charter Spectrum is being introduced across Charter's markets in 2014, in conjunction with the Company's all-digital initiative. Charter Spectrum is available to new Charter customers, and to existing customers within the Company's new pricing and packaging structure launched in 2012. As of the end of the third quarter of 2014, 84% of residential customers were in Charter's new pricing and packaging, excluding customers in the former Bresnan properties.

Residential video customers decreased by 9,000 in the third quarter of 2014, versus a loss of 27,000 in the year-ago period. The improvement in video customer performance was driven by digital bulk upgrades and Charter's increasingly competitive video product, including more HD channels and video on demand offerings, attractive packaging of advanced services, improved selling methods, and enhanced service quality.

Charter added 94,000 residential Internet customers in the third quarter of 2014, compared to 86,000 a year-ago. As of September 30, 2014, 85% of Charter's residential Internet customers subscribed to tiers that provided speeds of 30 Mbps or more. The Company continues to see strong demand for its Internet service as consumers value the speed and reliability of Charter's Internet offering.

During the third quarter, the Company added 29,000 residential voice customers, versus a gain of 41,000 during the third quarter of 2013.

Third quarter residential revenue per customer relationship totaled $110.81, and grew by 2.0% as compared to the prior-year period, driven by rate adjustments, higher product sell-in and promotional rate step-ups, partially offset by continued single play Internet sell-in and bulk digital upgrades.





Third 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 September 30,
--------------------------------

2014 2013 % Change
---- ---- --------

REVENUES:

Video $1,109 $1,047 5.9 %

Internet 652 575 13.4 %

Voice 141 161 (12.4)%

Commercial 253 215 17.7 %

Advertising
sales 87 75 16.0 %

Other 45 45 -%


Total
Revenues 2,287 2,118 8.0 %
----- -----


COSTS AND EXPENSES:

Total
operating
costs
and
expenses
(excluding
depreciation
and
amortization) 1,504 1,386 8.5 %
----- -----


Adjusted
EBITDA $783 $732 7.0 %
==== ====


Adjusted
EBITDA
margin 34.2 % 34.6 %


Capital
Expenditures $569 $425

%
Total
Revenues 24.9 % 20.1 %


Net
loss $(53) $(70)

Loss
per
common
share,
basic
and
diluted $(0.49) $(0.68)


Net
cash
flows
from
operating
activities $520 $538

Free
cash
flow $(62) $132
Revenue

Third quarter 2014 revenues rose to $2.3 billion, 8.0% higher than the year-ago quarter, due to growth in Internet, video and commercial revenues.

Video revenues totaled $1.1 billion in the third quarter, an increase of 5.9% compared to the prior-year period. Video revenue growth was driven by higher expanded basic and digital penetration, annual and promotional rate adjustments, higher advanced services penetration, and revenue allocation from higher bundling, partially offset by a decrease in residential limited basic video customers.

Internet revenues grew 13.4% compared to the year-ago quarter to $652 million, driven by an increase of 372,000 Internet customers during the last year and by promotional rolloff, legacy price adjustments and revenue allocation from higher bundling.

Voice revenues totaled $141 million, a decline of 12.4% versus the third quarter of 2013, due to value-based pricing and revenue allocation from higher bundling, partially offset by the addition of 172,000 voice customers in the last twelve months.

Commercial revenues rose to $253 million, an increase of 17.7% over the prior-year period, and was driven by higher sales to small and medium business customers and to carrier customers.

Third quarter advertising sales revenues of $87 million increased 16.0% compared to the year-ago quarter, primarily driven by an increase in political advertising revenue. Excluding the benefit of political advertising revenue generated in the third quarter of 2014, and during the corresponding prior-year period, total third quarter 2014 advertising sales revenues grew by approximately 6% year-over-year.

Operating Costs and Expenses

Third quarter total operating costs and expenses increased 8.5% compared to the year-ago period, reflecting increases in programming costs, costs to service customers, and other expenses.

Third quarter programming expense increased by $67 million, or 12.1%, as compared to the third quarter of 2013, reflecting contractual programming increases, a 1.9% increase in expanded basic package customers over the last twelve months and a one-time programming expense benefit in the third quarter of 2013. Costs to service customers grew by $17 million, or 4.1% as compared to the third quarter of last year, driven primarily by higher labor costs to deliver higher quality products and service levels. Other expenses grew by $28 million, or 15.1%, as compared to the third quarter of 2013, reflecting higher commercial and administrative labor costs.

Adjusted EBITDA

Third quarter Adjusted EBITDA of $783 million grew by 7.0% year-over-year, reflecting revenue growth and operating costs and expenses growth of 8.0% and 8.5%, respectively. Excluding the impact of non-recurring items included in Charter's third quarter 2013 and 2014 results, transition expenses associated with the Comcast transactions and political advertising, Charter's third quarter 2014 Adjusted EBITDA grew by just over 8% year-over-year.

Net Loss

Net loss totaled $53 million in the third quarter of 2014, an improvement compared to a $70 million net loss in the year-ago period, reflecting higher Adjusted EBITDA, partly offset by higher depreciation and amortization. Basic and diluted net loss per common share was $0.49 in the third quarter of 2014 compared to $0.68 during the same period last year. The decrease in net loss per common share was primarily the result of the factors described above.

Capital Expenditures

Property, plant and equipment expenditures were $569 million in the third quarter of 2014, compared to $425 million, during the third quarter of 2013. The increase was the result of greater investments in customer premise equipment ("CPE"), scalable infrastructure and support capital. The increase in CPE spending was driven by Charter's all-digital initiative. Third quarter scalable infrastructure spending included higher product development investments related to the continuing rollout of Charter Spectrum, including faster Internet. The increase in support capital expenditures was driven by Charter's ongoing insourcing initiatives.

Excluding 2014 potential expenditures specifically related to the transactions announced with Comcast on April 28, Charter expects 2014 capital expenditures to be approximately $2.2 billion, including approximately $500 million for Charter's all-digital transition and spend related to efforts to insource service operations as well as product development. The actual amount of our capital expenditures will depend on the pace of transition planning to service a larger customer base upon closing of the previously-announced transactions with Comcast.

Cash Flow

During the third quarter of 2014, net cash flows from operating activities totaled $520 million, compared to $538 million in the third quarter of 2013. The decline in net cash flows from operating activities was primarily related to an increase in working capital partly offset by higher Adjusted EBITDA.

Negative free cash flow for the third quarter of 2014 was $62 million, compared to free cash flow of $132 million during the same period last year. The decrease was primarily due to higher capital expenditures, and to lower net cash flow from operating activities.

In the third quarter of 2014, Charter secured committed financing of $8.4 billion including $1 billion of term loan A maturing in 2020. Subsequently, Charter entered into a $3.5 billion term loan G maturing in 2021. The net proceeds from the new term loans will be used to finance Charter's acquisition, from Comcast, of cable systems serving approximately 1.5 million Time Warner Cable Inc. ("TWC") video customers. The net proceeds may also be used for any "true up" payment made by Charter to Comcast associated with the previously announced asset transfer between Charter and Comcast of cable systems serving approximately 1.5 million TWC video customers and approximately 1.6 million Charter video customers, and transaction and financing expenses.

Liquidity

Total principal amount of debt was approximately $17.7 billion as of September 30, 2014, including the $3.5 billion new term loan G. Proceeds from the new term loan G are being held in escrow at Charter's unrestricted subsidiary, CCO Safari, LLC and recorded as noncurrent restricted cash and cash equivalents. At the end of the quarter, Charter held $10 million of unrestricted cash and cash equivalents, and its credit facilities provided approximately $774 million of additional liquidity.

Conference Call

Charter will host a conference call on Friday, October 31, 2014 at 10:00 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 11295259.

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 December 1, 2014. The conference ID code for the replay is 11295259.

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 Form 10-Q for the three and nine months ended September 30, 2014 which will be posted on the "Financial Information" section of our investor relations website at ir.charter.com, on October 31, 2014. 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 Non-GAAP Financial Metrics

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 and should be considered in addition to, not as a substitute for, net loss or 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 is reconciled to net loss and free cash flow is reconciled to net cash flows from operating activities in the addendum of this news release.

Adjusted EBITDA is defined as net loss plus net interest expense, income taxes, depreciation and amortization, stock compensation expense, loss on extinguishment of debt, (gain) loss on derivative instruments, net and other operating expenses, such as merger and acquisition costs, 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 purchases of property, plant and equipment and changes in accrued expenses related to capital expenditures.

Management and the Company'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 credit facilities and notes (all such documents have been previously filed with the United States Securities and Exchange Commission). For the purpose of calculating compliance with leverage covenants, we use Adjusted EBITDA, as presented, excluding certain expenses paid by our operating subsidiaries to other Charter entities. Our debt covenants refer to these expenses as management fees which fees were in the amount of $62 million and $49 million for the three months ended September 30, 2014 and 2013, respectively and $184 million and $147 million for the nine months ended September 30, 2014 and 2013, respectively.

In addition to the actual results for the three and nine months ended September 30, 2014 and 2013, we have provided pro forma results in this release for the nine months ended September 30, 2013. We believe these pro forma results facilitate meaningful analysis of the results of operations. Pro forma results in this release reflect certain acquisitions of cable systems in 2013 as if they occurred as of January 1, 2012. Pro forma statements of operations for the nine months ended September 30, 2013 are provided in the addendum of this news release.

About Charter

Charter (NASDAQ: CHTR) is a leading broadband communications company and the fourth-largest cable operator in the United States. Charter provides a full range of advanced broadband services, including advanced Charter TV® video entertainment programming, Charter Internet® access, and Charter Phone®. Charter Business® similarly provides scalable, tailored, and cost-effective broadband communications solutions to business organizations, such as business-to-business Internet access, data networking, business telephone, video and music entertainment services, and wireless backhaul. Charter's advertising sales and production services are sold under the Charter Media® brand. More information about Charter can be found at 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 (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 and prospects, both business and financial. Although we believe that our plans, intentions and expectations 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 presentation 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", "seek", "would", "could", "continue", "ongoing", "upside", "increases" and "potential", among others. Important factors that could cause actual results to differ materially from the forward-looking statements we make in this presentation are set forth in other reports or documents that we file from time to time with the SEC, and include, but are not limited to:

Risks Related to Comcast Corporation ("Comcast") Transactions


-- the ultimate outcome of the proposed transactions between Charter and
Comcast including the possibility that such transactions may not occur
if closing conditions are not satisfied;
-- if any such transaction were to occur, the ultimate outcome and results
of integrating operations and application of our operating strategies to
the acquired assets and the ultimate ability to realize synergies at the
levels currently expected as well as potential programming
dis-synergies;
-- the impact of the proposed transaction on our stock price and future
operating results, including due to transaction and integration costs,
increased interest expense, business disruption, and diversion of
management time and attention;
-- the reduction in our current stockholders' percentage ownership and
voting interest as a result of the proposed transaction;
-- the increase in indebtedness as a result of the proposed transactions,
which will increase interest expense and may decrease our operating
flexibility;
Risks Related to Our Business


-- our ability to sustain and grow revenues and cash flow from operations
by offering video, Internet, voice, advertising and other services to
residential and commercial customers, to adequately meet the customer
experience demands in our markets 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 and the
difficult economic conditions in the United States;
-- the impact of competition from other market participants, including but
not limited to incumbent telephone companies, direct broadcast satellite
operators, wireless broadband and telephone providers, digital
subscriber line ("DSL") providers, and video provided over the Internet;
-- general business conditions, economic uncertainty or downturn, high
unemployment levels and the level of activity in the housing sector;
-- 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);
-- the development and deployment of new products and technologies,
including in connection with our plan to make our systems all-digital in
2014;
-- the effects of governmental regulation on our business or potential
business combination transactions;
-- 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;
-- 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 release.







CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS AND OPERATING DATA

(dollars in millions, except per share data)


Three Months Ended September 30, Nine Months Ended September 30,
-------------------------------- -------------------------------

2014 2013 2014 2013

Actual Actual % Change Actual Actual % Change
------ ------ -------- ------ ------ --------

REVENUES:

Video $1,109 $1,047 5.9 % $3,309 $2,991 10.6 %

Internet 652 575 13.4 % 1,906 1,596 19.4 %

Voice 141 161 (12.4)% 436 490 (11.0)%

Commercial 253 215 17.7 % 731 587 24.5 %

Advertising sales 87 75 16.0 % 234 208 12.5 %

Other 45 45 -% 132 135 (2.2)%
--- --- --- ---

Total Revenues 2,287 2,118 8.0 % 6,748 6,007 12.3 %
----- ----- ----- -----


COSTS AND EXPENSES:

Programming 621 554 12.1 % 1,834 1,585 15.7 %

Franchises, regulatory
and connectivity 105 104 1.0 % 319 296 7.8 %

Costs to service
customers 429 412 4.1 % 1,250 1,164 7.4 %

Marketing 136 131 3.8 % 404 359 12.5 %

Other 213 185 15.1 % 596 509 17.1 %
--- --- --- ---

Total operating costs
and expenses
(excluding
depreciation and
amortization) 1,504 1,386 8.5 % 4,403 3,913 12.5 %
----- ----- ----- -----


Adjusted EBITDA 783 732 7.0 % 2,345 2,094 12.0 %
--- --- ----- -----


Adjusted EBITDA margin 34.2 % 34.6 % 34.8 % 34.9 %
----- ----- ----- -----


Depreciation and
amortization 535 493 1,568 1,354

Stock compensation
expense 14 11 41 37

Other operating
expenses, net 16 19 42 38
--- --- --- ---


Income from operations 218 209 694 665
--- --- --- ---


OTHER EXPENSES:

Interest expense, net (217) (214) (638) (635)

Loss on extinguishment
of debt - - - (123)

Gain (loss) on
derivative
instruments, net 5 (8) (3) 9
--- --- --- ---

(212) (222) (641) (749)
---- ---- ---- ----


Income (loss) before
income taxes 6 (13) 53 (84)


Income tax expense (59) (57) (188) (124)
--- --- ---- ----


Net loss $(53) $(70) $(135) $(208)
==== ==== ===== =====



LOSS PER COMMON SHARE,
BASIC AND DILUTED: $(0.49) $(0.68) $(1.26) $(2.05)
====== ====== ====== ======


Weighted average
common shares
outstanding, basic
and diluted 108,792,605 102,924,443 107,744,534 101,293,696
=========== =========== =========== ===========


Adjusted EBITDA is a non-GAAP term. See page 7 of this addendum for the reconciliation of adjusted EBITDA to net loss as defined by GAAP.


Certain prior year amounts have been reclassified to conform with the 2014 presentation.






CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS AND OPERATING DATA

(dollars in millions, except per share data)


Nine Months Ended September 30,
-------------------------------

2014 2013

Actual Pro Forma (a) % Change
------ ------------ --------

REVENUES:

Video $3,309 $3,128 5.8 %

Internet 1,906 1,663 14.6 %

Voice 436 514 (15.2)%

Commercial 731 615 18.9 %

Advertising sales 234 214 9.3 %

Other 132 137 (3.6)%
--- ---

Total Revenues 6,748 6,271 7.6 %
----- -----


COSTS AND EXPENSES:

Programming 1,834 1,653 10.9 %

Franchises, regulatory
and connectivity 319 314 1.6 %

Costs to service
customers 1,250 1,216 2.8 %

Marketing 404 377 7.2 %

Other 596 527 13.1 %
--- ---

Total operating costs
and expenses
(excluding
depreciation and
amortization) 4,403 4,087 7.7 %
----- -----


Adjusted EBITDA 2,345 2,184 7.4 %
----- -----


Adjusted EBITDA margin 34.8 % 34.8 %
----- -----


Depreciation and
amortization 1,568 1,408

Stock compensation
expense 41 37

Other operating
expenses, net 42 38
--- ---


Income from operations 694 701
--- ---


OTHER EXPENSES:

Interest expense, net (638) (662)

Loss on extinguishment
of debt - (123)

Gain (loss) on
derivative
instruments, net (3) 9
--- ---

(641) (776)
---- ----


Income (loss) before
income taxes 53 (75)


Income tax expense (188) (158)
---- ----


Net loss $(135) $(233)
===== =====


LOSS PER COMMON SHARE,
BASIC AND DILUTED: $(1.26) $(2.30)
====== ======


Weighted average
common shares
outstanding, basic
and diluted 107,744,534 101,293,696
=========== ===========



Adjusted EBITDA is a non-GAAP
term. See page 7 of this
addendum for the reconciliation
of adjusted EBITDA to net loss
as defined by GAAP.


Certain prior year amounts have
been reclassified to conform
with the 2014 presentation.


(a) Pro forma results reflect
certain acquisitions of cable
systems in 2013 as if they
occurred as of January 1, 2012.


September 30, 2013. Pro forma
revenues, operating expenses
and net loss increased by $264
million, $174 million and $25
million, respectively, for the
nine months ended September 30,
2013.






CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(dollars in millions)


September 30, December 31,

2014 2013
---- ----

(unaudited)

ASSETS

CURRENT ASSETS:

Cash and cash equivalents $10 $21

Accounts receivable, net 270 234

Prepaid expenses and other
current assets 90 67
--- ---

Total current assets 370 322
--- ---


RESTRICTED CASH AND CASH
EQUIVALENTS 3,513 -
----- ---


INVESTMENT IN CABLE PROPERTIES:

Property, plant and equipment,
net 8,305 7,981

Franchises 6,009 6,009

Customer relationships, net 1,175 1,389

Goodwill 1,170 1,177
----- -----

Total investment in cable
properties, net 16,659 16,556
------ ------


OTHER NONCURRENT ASSETS 408 417
--- ---


Total assets $20,950 $17,295
======= =======


LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES:

Accounts payable and accrued
liabilities $1,586 $1,467


Total current liabilities 1,586 1,467
----- -----


LONG-TERM DEBT 17,595 14,181
------ ------

DEFERRED INCOME TAXES 1,610 1,431
----- -----

OTHER LONG-TERM LIABILITIES 62 65
--- ---


SHAREHOLDERS' EQUITY 97 151
--- ---


Total liabilities and
shareholders' equity $20,950 $17,295
======= =======






CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

(dollars in millions)


Three Months Ended Nine Months Ended
September 30, September 30,
------------------- ------------------

2014 2013 2014 2013
---- ---- ---- ----

CASH FLOWS FROM OPERATING ACTIVITIES:

Net loss $(53) $(70) $(135) $(208)

Adjustments to reconcile net loss to net cash flows from
operating activities:

Depreciation and amortization 535 493 1,568 1,354

Stock compensation expense 14 11 41 37

Noncash interest expense 9 10 29 33

Loss on extinguishment of debt - - - 123

(Gain) loss on derivative
instruments, net (5) 8 3 (9)

Deferred income taxes 53 56 177 112

Other, net - 5 2 32

Changes in operating assets and liabilities, net of effects
from acquisitions:

Accounts receivable (18) (1) (36) 10

Prepaid expenses and other assets (10) (7) (21) (13)

Accounts payable, accrued
liabilities and other (5) 33 101 92
--- --- --- ---

Net cash flows from operating
activities 520 538 1,729 1,563
--- --- ----- -----


CASH FLOWS FROM INVESTING ACTIVITIES:

Purchases of property, plant and
equipment (569) (425) (1,678) (1,259)

Change in accrued expenses
related to capital expenditures (13) 19 31 21

Sales (purchases) of cable
systems, net - (673) - (673)

Restricted cash in escrow -CCO
Safari, LLC (3,513) - (3,513) -

Other, net (4) (1) (5) (15)
--- --- --- ---

Net cash flows from investing
activities (4,099) (1,080) (5,165) (1,926)
------ ------ ------ ------


CASH FLOWS FROM FINANCING ACTIVITIES:

Borrowings of long-term debt 4,284 1,859 4,914 6,569

Repayments of long-term debt (713) (1,352) (1,514) (6,177)

Payments for debt issuance costs (4) (18) (4) (50)

Purchase of treasury stock (1) (1) (18) (11)

Proceeds from exercise of options
and warrants 14 52 43 67

Other, net - (1) 4 (1)
--- --- --- ---

Net cash flows from financing
activities 3,580 539 3,425 397
----- --- ----- ---


NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS 1 (3) (11) 34

CASH AND CASH EQUIVALENTS,
beginning of period 9 44 21 7
--- --- --- ---

CASH AND CASH EQUIVALENTS, end of
period $10 $41 $10 $41
=== === === ===


CASH PAID FOR INTEREST $223 $214 $624 $584
==== ==== ==== ====




CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES

UNAUDITED SUMMARY OF OPERATING STATISTICS

(in thousands, except per customer and penetration data)


Approximate as of
-----------------

September 30, June 30, December 31, September 30,
2014 (a) 2014 (a) 2013 (a) 2013 (a)
------- ------- ------- -------

Footprint
---------

Estimated Video
Passings (b) 12,819 12,817 12,799 12,794

Estimated Internet
Passings (b) 12,484 12,482 12,467 12,475

Estimated Voice
Passings (b) 11,978 11,976 11,898 11,815


Penetration Statistics
----------------------

Video Penetration of
Estimated Video
Passings (c) 33.5 % 33.7 % 33.9 % 34.0 %

Internet Penetration of
Estimated Internet
Passings (c) 39.7 % 38.9 % 37.2 % 36.4 %

Voice Penetration of
Estimated Voice
Passings (c) 21.4 % 21.1 % 20.3 % 19.9 %


Residential
-----------

Residential Customer
Relationships (d) 5,768 5,700 5,561 5,498

Residential Non-Video
Customers 1,611 1,534 1,384 1,319

% Non-Video 27.9 % 26.9 % 24.9 % 24.0 %


Customers
---------

Video (e) 4,157 4,166 4,177 4,179

Internet (f) 4,662 4,568 4,383 4,290

Voice (g) 2,389 2,360 2,273 2,217

Residential PSUs (h) 11,208 11,094 10,833 10,686
====== ====== ====== ======

Residential PSU /
Customer Relationships
(d)(h) 1.94 1.95 1.95 1.94


Quarterly Net Additions/(Losses) (i)
------------------------------------

Video (e) (9) (29) (2) (27)

Internet (f) 94 49 93 86

Voice (g) 29 35 56 41

Residential PSUs (h) 114 55 147 100
=== === === ===


Bulk Digital Upgrade
Net Additions (j) 20 15 4 3


Single Play Penetration
(k) 38.1 % 37.9 % 37.6 % 37.7 %

Double Play Penetration
(l) 29.3 % 29.3 % 29.8 % 30.2 %

Triple Play Penetration
(m) 32.6 % 32.7 % 32.6 % 32.2 %

Digital Penetration (n) 97.7 % 96.1 % 91.8 % 91.2 %

Monthly Residential
Revenue per
Residential Customer
(d)(o) $110.81 $110.81 $108.12 $108.68


Commercial
----------

Commercial Customer
Relationships (d)(p) 380 385 375 359


Customers
---------

Video (e)(p) 139 154 165 166

Internet (f) 294 282 257 245

Voice (g) 172 164 145 138

Commercial PSUs (h) 605 600 567 549
=== === === ===


Quarterly Net Additions/(Losses) (i)
------------------------------------

Video (e)(p) (15) (6) (1) 2

Internet (f) 12 13 12 12

Voice (g) 8 12 7 7

Commercial PSUs (h) 5 19 18 21
=== === === ===


See footnotes to unaudited summary of operating statistics on page 6 of this addendum.


(a) We calculate the aging of customer accounts
based on the monthly billing cycle for each
account. On that basis, at September 30,
2014, June 30, 2014, December 31, 2013 and
September 30, 2013, customers include
approximately 13,500, 15,400, 11,300 and 9,700
customers, respectively, whose accounts were
over 60 days, approximately 1,200, 1,300, 800
and 1,000 customers, respectively, whose
accounts were over 90 days and approximately
800, 700, 900 and 900 customers, respectively,
whose accounts were over 120 days.


(b) "Passings" represent 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 the service indicated. These estimates
are updated for all periods presented based
upon the information available at that time.


(c) "Penetration" represents residential and
commercial customers as a percentage of
estimated passings for the service indicated.


(d) "Customer Relationships" include the number of
customers that receive one or more levels of
service, encompassing video, Internet and
voice services, without regard to which
service(s) such customers receive. This
statistic is computed in accordance with the
guidelines of the National Cable &
Telecommunications Association ("NCTA").
Commercial customer relationships include
video customers in commercial structures,
which are calculated on an EBU basis (see
footnote (p)) and non-video commercial
customer relationships.


(e) "Video Customers" represent those customers who
subscribe to our video services. Our
methodology for reporting residential video
customers generally excludes units under bulk
arrangements, unless those units have a
digital set-top box, thus a direct billing
relationship. As we complete our all-digital
transition, bulk units are supplied with
digital set-top boxes adding to our bulk
digital upgrade customers.


(f) "Internet Customers" represent those customers
who subscribe to our Internet services.


(g) "Voice Customers" represent those customers who
subscribe to our voice services.


(h) "Primary Service Units" or "PSUs" represent the
total of video, Internet and voice customers.


(i) "Quarterly Net Additions/(Losses)" represent
the net gain or loss in the respective quarter
for the service indicated.


(j) "Bulk Digital Upgrade Net Additions" represents
the portion of residential video net additions
as a result of adding a digital set-top box
to a bulk unit.


(k) "Single Play Penetration" represents
residential customers receiving only one
Charter service offering, including video,
Internet or voice, as a % of residential
customer relationships.


(l) "Double Play Penetration" represents
residential customers receiving only two
Charter service offering, including video,
Internet and/or voice, as a % of residential
customer relationships.


(m) "Triple Play Penetration" represents
residential customers receiving all three
Charter service offerings, including video,
Internet and voice, as a % of residential
customer relationships.


(n) "Digital Penetration" represents the number of
residential digital video customers as a
percentage of residential video customers.


(o) "Monthly Residential Revenue per Residential
Customer" is calculated as total residential
video, Internet and voice quarterly revenue
divided by three divided by average
residential customer relationships during the
respective quarter.


(p) Included within commercial video customers are
those in commercial structures, which are
calculated on an equivalent bulk unit ("EBU")
basis. We calculate EBUs by dividing the bulk
price charged to accounts in an area by the
published rate charged to non-bulk
residential customers in that market for the
comparable tier of service. This EBU method of
estimating video customers is consistent with
the methodology used in determining costs paid
to programmers and is consistent with the
methodology used by other multiple system
operators. As we increase our published video
rates to residential customers without a
corresponding increase in the prices charged
to commercial service customers, our EBU count
will decline even if there is no real loss in
commercial service customers. For example,
commercial video customers decreased by 13,000
during the three months ended September 30,
2014 due to a higher applicable video rate
applied.








CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES

UNAUDITED RECONCILIATION OF NON-GAAP MEASURES TO GAAP MEASURES

(dollars in millions)


Three Months Ended September Nine Months Ended
30, September 30,
---------------------------- ------------------

2014 2013 2014 2013

Actual Actual Actual Actual
------ ------ ------ ------


Net loss $(53) $(70) $(135) $(208)

Plus: Interest expense, net 217 214 638 635

Income tax expense 59 57 188 124

Depreciation and amortization 535 493 1,568 1,354

Stock compensation expense 14 11 41 37

Loss on extinguishment of
debt - - - 123

(Gain) loss on derivative
instruments, net (5) 8 3 (9)

Other, net 16 19 42 38
--- --- --- ---


Adjusted EBITDA (b) 783 732 2,345 2,094

Less: Purchases of property,
plant and equipment (569) (425) (1,678) (1,259)
---- ---- ------ ------


Adjusted EBITDA less capital
expenditures $214 $307 $667 $835
==== ==== ==== ====


Net cash flows from operating
activities $520 $538 $1,729 $1,563

Less: Purchases of property,
plant and equipment (569) (425) (1,678) (1,259)

Change in accrued expenses
related to capital
expenditures (13) 19 31 21
--- --- --- ---


Free cash flow $(62) $132 $82 $325
==== ==== === ====


Nine Months Ended September
30,
----------------------------

2014 2013

Actual Pro Forma (a)
------ ------------


Net loss $(135) $(233)

Plus: Interest expense, net 638 662

Income tax expense 188 158

Depreciation and amortization 1,568 1,408

Stock compensation expense 41 37

Loss on extinguishment of
debt - 123

(Gain) loss on derivative
instruments, net 3 (9)

Other, net 42 38
--- ---


Adjusted EBITDA (b) 2,345 2,184

Less: Purchases of property,
plant and equipment (1,678) (1,288)
------ ------


Adjusted EBITDA less capital
expenditures $667 $896
==== ====



(a) Pro forma results reflect
certain acquisitions of cable
systems in 2013 as if they
occurred as of January 1,
2012.


(b) See page 1 and 2 of this
addendum for detail of the
components included within
adjusted EBITDA.


The above schedules are
presented in order to
reconcile adjusted EBITDA and
free cash flows, both 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

CAPITAL EXPENDITURES

(dollars in millions)


Three Months Ended Nine Months Ended
September 30, September 30,
------------------- ------------------

2014 2013 2014 2013

Actual Actual Actual Actual
------ ------ ------ ------


Customer premise
equipment (a) $282 $193 $908 $618

Scalable infrastructure
(b) 113 78 307 210

Line extensions (c) 50 54 131 162

Upgrade/Rebuild (d) 47 50 131 137

Support capital (e) 77 50 201 132
--- --- --- ---


Total capital
expenditures (f) $569 $425 $1,678 $1,259
==== ==== ====== ======


Nine Months Ended
September 30,
------------------

2014 2013

Actual Pro Forma (g)
------ ------------


Customer premise
equipment (a) $908 $631

Scalable infrastructure
(b) 307 220

Line extensions (c) 131 164

Upgrade/Rebuild (d) 131 139

Support capital (e) 201 134
--- ---


Total capital
expenditures (f) $1,678 $1,288
====== ======



(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).


(f) Total capital expenditures include
$115 million and $25 million for the
three months ended September 30, 2014
and 2013, respectively, and $368
million and $29 million for the nine
months ended September 30, 2014 and
2013, respectively, related to our
all-digital transition; and $62
million and $71 million for the three
months ended September 30, 2014 and
2013, respectively, and $184 million
and $216 million for the nine months
ended September 30, 2014 and 2013,
respectively, related to commercial
services.


(g) Pro forma results reflect certain
acquisitions of cable systems in 2013
as if they occurred as of January 1,
2012.
Logo - http://photos.prnewswire.com/prnh/20110526/AQ10195LOGO





SOURCE Charter Communications, Inc.

Photo:http://photos.prnewswire.com/prnh/20110526/AQ10195LOGO
http://photoarchive.ap.org/
Charter Communications, Inc.

CONTACT: Media, Justin Venech, 203-905-7818; or Analysts, Stefan Anninger, 203-905-7955

Web Site: http://www.charter.com


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