Suddenlink Reports Third Quarter and Year-to-Date 2011 Financial and Operating Results
(firmenpresse) - ST. LOUIS, MO -- (Marketwire) -- 11/03/11 -- Cequel Communications Holdings I, LLC ("Cequel," and together with its subsidiaries, the "Company" or "Suddenlink") today reported financial and operating results for the three and nine months ended September 30, 2011.
"We believe our customer-centric strategy has helped us consistently produce results that are among the very best in the industry," said Suddenlink's Chairman and Chief Executive Officer Jerry Kent. "Case in point: Despite considerable economic headwinds, we have now turned in 20 consecutive quarters of pro forma revenue growth."
Operating results and metrics and year-over-year changes as described below are presented on a pro forma basis to include the acquisition of a cable system in Greenwood, Mississippi (the "Greenwood Acquisition") on August 1, 2010 and all of the issued and outstanding capital stock of NPG Cable, Inc., Mercury Voice and Data Company and NPG Digital Phone, Inc. (collectively, "NPG Cable") on April 1, 2011, and exclude two small cable systems that were sold on November 30, 2010, in each case as if those transactions had been consummated on January 1, 2010.
Third quarter revenues of $482.7 million grew 7.3% compared to third quarter revenues of the prior year. Revenues for the first nine months of 2011 of $1,440.2 million grew 7.5% compared to the first nine months of the prior year.
Adjusted EBITDA (as defined herein) for the third quarter of $177.7 million grew 9.2% compared to third quarter Adjusted EBITDA of the prior year. Adjusted EBITDA margin for the third quarter 2011 was 36.8%, an increase of 60 basis points from the third quarter 2010. Adjusted EBITDA for the first nine months of 2011 was $527.7 million, an increase of 8.7% compared to the first nine months of the prior year. Excluding the impact of certain non-recurring expenses associated almost entirely with the acquisition and integration of NPG Cable, Adjusted EBITDA for the third quarter 2011 would have increased 9.8% as compared to the third quarter last year, with Adjusted EBITDA margin of 37.1%, a 90 basis point improvement from the third quarter 2010.
Free Cash Flow (as defined herein) of $15.2 million for the third quarter grew $10.9 million compared to Free Cash Flow for the third quarter 2010.
Total customer relationships were 1,376,800, an increase of 6,800 during the third quarter and 4,800 year-over-year. RGUs increased 167,200 year-over-year, or a 5.2% gain from September 30, 2010.
Total average monthly revenue per basic video customer ("ARPU") for the third quarter was $126.75, an increase of 10.6% compared to ARPU for the third quarter of the prior year.
Bundled customers represented 61.0% of total customer relationships at September 30, 2011, an increase from 57.5% at September 30, 2010, primarily from growth in triple play customer relationships, which represented 22.8% of total customer relationships at September 30, 2011, versus 19.8% at September 30, 2010.
Non-video customers represented 15.2% of total customer relationships at September 30, 2011, an increase from 12.8% at September 30, 2010.
Commercial revenue grew 17.1% versus the third quarter of 2010, including 25.6% year over year growth in our commercial data and telephone businesses on a combined basis.
Project Imagine, the Company's bandwidth expansion plan, continues on plan. From the inception of Project Imagine in late 2009 through September 30, 2011, we have completed approximately 77% of our anticipated capital expenditures for Project Imagine, including success based capital, and expect to be 80% complete by the end of 2011.
Third quarter 2011 revenues rose 7.3%, largely attributable to increases in residential high-speed Internet, telephone and advanced digital video revenues, and growth in revenues from our commercial and carrier businesses. 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, video and high-speed Internet rate increases, and incremental revenues from video on demand ("VOD"), high definition television ("HDTV") and digital video recorder ("DVR") services as more customers purchased advanced video services from us during the trailing twelve months. Offsetting this residential growth in part was a decrease due to the impact of bundling and promotional discounts, and a decline in basic video customers. Revenues for our commercial and carrier businesses grew due to increases in commercial high-speed data and telephone customers, and from increases in cell tower and backhaul revenues.
Video service revenues increased 1.6%, primarily due to video rate increases, increased VOD service revenues and customer growth in our digital and advanced video services, offset in part by a lower number of basic video customers and digital customers purchasing fewer digital tiers of service on average.
High-speed Internet service revenues increased 12.2%, due to an increase in residential high-speed Internet customers over the trailing twelve months, the impact of rate increases and growth in our commercial high-speed Internet services to small and medium sized businesses and the growth in carrier services.
Telephone service revenues increased 20.2%, primarily due to an increase in residential telephone customers, offset in part due to the impact of bundling and promotional discounts, and growth in our commercial telephone services to small and medium sized businesses.
Advertising revenues remained consistent, as higher local and national automotive ad sales revenue were offset by lower political revenues.
Other revenues increased 13.8% due to increased converter rental revenues for high-definition and DVR capable digital converters, increased home networking revenue, increased administrative fees associated with the underlying growth of the business, higher franchise fees consistent with video service revenue increases, higher commercial installation revenue and higher broadcast retransmission fees.
Our commercial lines of business, embedded in the video, high-speed Internet, telephone service revenues and other revenue described above, are comprised of commercial and bulk video, commercial high-speed Internet, fiber based on- and off-net carrier services and commercial telephone. Commercial revenue totaled $57.0 million, or 11.8% of total revenue, in the third quarter of 2011, representing growth of 17.1% versus the third quarter of 2010. Our commercial data and telephone revenue grew 25.6% year-over-year on a combined basis. We achieved our largest ever year over year growth in commercial revenue for the quarter ended September 30, 2011.
Operating costs and expenses rose 6.2%, primarily due to higher programming costs and retransmission consent expenses, increased net compensation and employee related costs, including contract labor, higher fuel expenses, increased franchise fees, increased bad debt expense and increased marketing expenses, offset in part by a decrease in telephone service costs. In addition, the third quarter of 2011 includes approximately $1.4 million of non-recurring expenses, $1.1 million for contract termination charges and expenses associated with the integration of NPG Cable and $0.3 million for expenses related to Hurricane Irene.
Adjusted EBITDA for the third quarter 2011 was $177.7 million, an increase of 9.2% from the same quarter last year, resulting in an Adjusted EBITDA margin of 36.8%. Excluding the impact of the non-recurring expenses associated with Hurricane Irene and the acquisition and integration of NPG Cable, Adjusted EBITDA for the third quarter 2011 would have increased 9.8% from the same quarter last year.
Income from operations for the third quarter 2011 was $72.4 million, an increase of 21.5%, compared to $59.6 million for the third quarter 2010 due to revenue increases year-over-year outpacing operating, selling and administrative, and depreciation and amortization expense increases.
Net loss was approximately $5.2 million for the third quarter 2011, compared to a net loss of $5.1 million for the third quarter 2010.
At September 30, 2011, Suddenlink served approximately 1.4 million customers, and Suddenlink's RGUs were comprised of 1,268,300 basic video, 753,600 digital video, 937,200 residential high-speed Internet and 426,100 residential telephone customers. Suddenlink's 3.4 million RGUs as of September 30, 2011, increased 167,200, or 5.2%, over the prior year.
Approximately 61.0% of Suddenlink's residential customers subscribe to bundled services, compared to 57.5% a year ago. Approximately 313,800 of Suddenlink's residential customers receive video, high-speed Internet and telephone services as part of a triple play bundle, representing 22.8% of Suddenlink's total residential customer relationships. Pro-forma growth of 42,000 triple play customers from the third quarter of 2010 represented an increase of 15.5%. Non-video customers of approximately 209,200 at September 30, 2011 represent 15.2% of total customer relationships, and grew 18.9% on a pro-forma basis in the trailing twelve months.
Suddenlink's ARPU for the third quarter of 2011 was $126.75, an increase of 10.6% compared to the third quarter of 2010.
Basic video customers decreased by approximately 5,900 customers while digital video customers increased by approximately 21,500 customers during the third quarter of 2011. During the trailing twelve months, basic video customers decreased by approximately 39,600, or 3.0%, while digital video customers increased by approximately 79,000, or 11.7%. Estimated basic penetration at September 30, 2011, was 43.2% of estimated homes passed. Digital penetration to basic customers was 59.4%.
Residential high-speed Internet customers increased by approximately 23,000 during the third quarter of 2011, and increased 65,700, or 7.5%, during the trailing twelve months. At September 30, 2011, estimated residential high-speed Internet penetration was 33.0% of high-speed Internet capable homes passed. During the third quarter of 2011, commercial Internet customers increased by approximately 1,200 and commercial fiber customers increased by approximately 60 customers. During the trailing twelve months, commercial Internet customers increased by approximately 4,000, or 9.6% and commercial fiber customers increased by approximately 190, or 22.4%. These commercial customers are not included in total RGU counts.
Residential telephone customers grew by approximately 16,200 during the third quarter of 2011, and 62,100, or 17.1%, during the twelve months ended September 30, 2011. At September 30, 2011, estimated residential telephone penetration was 18.1% of telephone capable homes passed. During the third quarter of 2011, commercial telephone customers increased by approximately 1,500 customers, and increased by approximately 6,300 over the twelve months ended September 30, 2011, or 61.2%. These commercial customers purchase 2.8 phone lines on average and are not included in total RGU counts.
The following discussion of liquidity and capital resources is presented on an actual basis and does not include historical pro forma adjustments reflecting the acquisition of the Greenwood, Mississippi system in August 2010 and NPG Cable in April 2011, or the divestiture of two cable systems in November 2010.
At September 30, 2011, the Company had approximately $137.0 million in cash and cash equivalents on hand and a $200.0 million undrawn revolving credit facility, reduced by $12.6 million of outstanding letters of credit.
Capital expenditures for the three months ended September 30, 2011 were $89.2 million, compared to $87.4 million for the three months ended September 30, 2010. For the full year 2011, the Company expects capital expenditures at the upper end of the previously established range of $360.0 million to $370.0 million, inclusive of NPG Cable, Project Imagine and related success based capital expenditures. Through the third quarter of 2011, total capital expenditures were $288.9 million, including capital expenditures on Project Imagine and NPG Cable.
Project Imagine, our investment in the Company's existing network which will be made through 2012, is providing additional capacity to launch video on demand services into new areas, additional capacity for high definition channels and increased Internet speeds for the Company's customers and capacity to launch telephone service in a few additional communities. Capital expenditures for Project Imagine, including success based capital, were approximately $23.6 million during the third quarter 2011 and $103.1 million for the first nine months of 2011. Since the inception of Project Imagine in late 2009 through September 30, 2011, capital expenditures for Project Imagine, including success based capital, have been $270.5 million, or approximately 77% of the total anticipated capital expenditures for Project Imagine.
Net cash flows from operating activities increased $39.4 million for the three months ended September 30, 2011. This increase is primarily due to improved operating results and net changes in current assets and liabilities. Net cash flows used in investing activities decreased $18.5 million from $107.7 million for the three months ended September 30, 2010 to $89.2 million for the three months ended September 30, 2011 due to the Greenwood Acquisition in August 2010, as purchases of property, plant and equipment was relatively flat compared to 2010. Net cash flows used in financing activities increased $7.5 million for the three months ended September 30, 2011 as compared to September 30, 2010, primarily as a result of repayments of long-term debt and capital lease and other obligations.
Free Cash Flow (as defined herein) for the quarter ended September 30, 2011 was $15.2 million, compared to free cash flow of $4.3 million for the quarter ended September 30, 2010. The increase in Free Cash Flow for the third quarter 2011 as compared to 2010 is due to improved operating results, offset in part by increases in cash interest expense and capital expenditures.
The Total Leverage Ratio (Consolidated Total Debt to Adjusted Pro Forma EBITDA) for Cequel, as defined in and calculated in accordance with the indenture governing Cequel's 8.625% Senior Notes due 2017 (the "Notes"), was 5.34x at September 30, 2011.
The Total Leverage Ratio (Consolidated Total Debt to Adjusted Pro Forma EBITDA) for Cequel Communications, LLC, an indirect wholly owned subsidiary of Cequel, as defined in and calculated in accordance with Cequel Communications, LLC's Credit Facility, was 2.73x at September 30, 2011.
As previously announced, the Company will host a conference call to discuss its third quarter results at 11:00 a.m. (Eastern Time) on Thursday, November 3, 2011. The dial-in information for the earnings call is as follows:
A replay of this earnings call will be available at the Investor Relations link on the Company's website () 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.
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 September 30, 2011 which will be posted on the Company's website () on November 3, 2011.
A current report containing this earnings release will be posted on the Company's website () shortly after the conference call on November 3, 2011.
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 for income taxes, depreciation, amortization, non-cash share based compensation expense, (gain)/loss on sale of cable assets, loss on swap termination and loss on extinguishment of debt. 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 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 Facility.
The Company, which does business as Suddenlink Communications, is the seventh largest cable broadband company in the United States, supporting the information, communication and entertainment demands of approximately 1.4 million residential customers and thousands of commercial customers in Arkansas, Louisiana, North Carolina, Oklahoma, Texas, West Virginia, and elsewhere. Suddenlink simplifies its customers' lives through one call for support, one connection, and one bill for TV, Internet, telephone, and other services.
Some statements in this Press Release are known as "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended.
Forward-looking statements may relate to, among other things:
competition for video, high-speed Internet and telephone customers;
the Company's ability to achieve anticipated customer and revenue growth and to successfully introduce new products and services;
the Company's ability to complete Project Imagine and other capital investment plans on time and on budget;
greater than anticipated effects of the current, or any future, economic downturn or other factors which may negatively affect its customers' demand for the Company's products and services;
increasing programming costs and delivery expenses related to the Company's products and services;
changes in consumer preferences, laws and regulations or technology that may cause the Company to change its operational strategies;
the Company's ability to effectively integrate acquisitions and to maximize expected operating efficiencies from its acquisitions;
the Company's substantial indebtedness;
the restrictions contained in the Company's financing agreements;
the Company's ability to generate sufficient cash flow to meet its debt service obligations;
fluctuations in interest rates which may cause the Company's interest expense to vary from quarter to quarter; and
other risks and uncertainties, including those listed under the caption "Risk Factors" in the Company's Annual Report for the year ended December 31, 2010.
These forward-looking statements include, but are not limited to, statements about our plans, objectives, expectations and intentions and other statements contained in this Press Release that are not historical facts. When used in this Press 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 our plans, objectives, expectations and intentions and other factors. You should not place undue reliance on such forward-looking statements, which are based on the information currently available to the Company and speak only as of the date on which this Press Release is posted on the Company's website (). The Company undertakes 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 the Company's subsequent reports furnished to holders of the Notes.
(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) Digital video customers include all basic video customers that have one or more digital set-top boxes or cable cards in use.
(c) 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 Internet customers, including small and medium sized commercial cable modem accounts and customers who take our scalable, fiber-based enterprise network services.
(d) 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.
(e) Total RGUs represents the sum of basic video, digital video, residential high-speed Internet and residential telephone customers.
(f) 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.
(g) Customer relationships represent the number of residential customers who receive 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. Customer relationships exclude EBUs.
(h) Double play customer numbers reflect residential customers who subscribe to two of our core services (video, high-speed Internet and telephone).
(i) Double play penetration represents double play customers as a percentage of customer relationships.
(j) Triple play customer numbers reflect residential customers who subscribe to all three of our core services (video, high-speed Internet and telephone).
(k) Triple play penetration represents triple play customers as a percentage of customer relationships.
(l) Total bundled customers represents the sum of double play and triple play customers.
(m) Bundled penetration represents total bundled customers as a percentage of customer relationships.
(n) Non-video customer relationships represent 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.
(o) Non-video as a % of total customer relationships represents non-video customer relationships divided by total customer relationships
(p) Estimated basic penetration is calculated as basic video customers divided by the estimated total homes passed of the Company.
(q) Estimated digital penetration is calculated as digital video customers divided by basic video customers.
(r) 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.
(s) 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.
(t) Commercial Internet customers consist of commercial accounts that receive high-speed Internet service via a cable modem. Commercial Internet customers are not included in Total RGUs.
(u) Commercial fiber customers are commercial accounts that receive broadband service optically, via fiber connections. Commercial fiber customers are not included in Total RGUs.
(v) Commercial telephone customers are commercial accounts that subscribe to our telephone service. Commercial telephone customers are not included in Total RGUs.
(w) Pro forma to include the impact of the acquisition of NPG Cable on April 1, 2011, and exclude the disposition of two cable systems which occurred on November 30, 2010, in each case as if those transactions had been consummated on January 1, 2010.
Cequel contact information:
Mary Meduski
EVP - Chief Financial Officer
314-315-9603
Ralph Kelly
SVP - Treasurer
314-315-9403
Mike Pflantz
VP - Corporate Finance
314-315-9341
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Datum: 03.11.2011 - 12:00 Uhr
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