Suddenlink Reports Second Quarter and Year-to-Date 2011 Financial and Operating Results
(firmenpresse) - ST. LOUIS, MO -- (Marketwire) -- 08/11/11 -- 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 six months ended June 30, 2011.
"We continue to experience exceptional growth in revenues and Adjusted
EBITDA despite a very challenging economic environment," said Suddenlink's
Chairman and Chief Executive Officer Jerry Kent. "We generated our
nineteenth consecutive quarter of pro forma revenue growth while
successfully integrating nearly 90,000 new customers. Our revenue per
customer growth exceeded our expectations, Project Imagine's execution
continues as planned and we've brought some new and exciting services to
our customers that should give us a competitive advantage."
Acquired NPG Cable (as defined herein) on April 1, 2011, serving
approximately 81,700 basic video customers and 208,800 revenue generating
units ("RGUs") at the time of acquisition. The integration of NPG Cable
into Suddenlink's existing billing and operating platforms was successfully
completed in July 2011.
Second quarter revenues of $482.0 million grew 7.2% compared to pro
forma second quarter revenues of the prior year. Pro-forma revenues for the
first six months of 2011 of $957.5 million grew 7.6% compared to the first
six months of the prior year.
Adjusted EBITDA (as defined herein) for the second quarter of $179.4
million grew 8.7% compared to pro forma second quarter Adjusted EBITDA of
the prior year. Adjusted EBITDA margin for the second quarter 2011 was
37.2%, an increase of 50 basis points from the pro forma second quarter
2010. Pro forma Adjusted EBITDA for the first six months of 2011 was $350.0
million, an increase of 8.5% compared to the first six 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 second quarter 2011 would have increased 10.5% as compared
to the pro forma second quarter last year, with pro forma Adjusted EBITDA
margin of 38.2%, a 110 basis point improvement from the pro forma second
quarter 2010.
Free Cash Flow (as defined herein) of $11.8 million for the second
quarter grew $16.1 million compared to Free Cash Flow for the second
quarter 2010.
RGUs increased 190,200 on a pro forma basis year-over-year, or a 6.1%
gain from June 30, 2010.
Total average monthly revenue per basic video customer ("ARPU") for the
second quarter was $124.74, an increase of 10.4% compared to pro forma ARPU
for second quarter of the prior year.
Bundled customers represented 60.0% of total customer relationships at
June 30, 2011, an increase from 56.3% at June 30, 2010 on a pro forma
basis, primarily from growth in triple play customer relationships, which
represented 22.1% of total customer relationships at June 30, 2011, versus
18.8% at June 30, 2010 on a pro forma basis.
Commercial revenue grew 15.6% versus the pro-forma second quarter of
2010, including 25.2% pro-forma 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 June 30,
2011, we have completed approximately 70% of our anticipated capital
expenditures for Project Imagine, and expect to be 80% complete by the end
of 2011.
Operating results 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 on August 1, 2010 and NPG Cable (as defined
herein) 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.
Second quarter 2011 revenues rose 7.2%, largely attributable to the
increase 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 video 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 growth, in part, was a decrease due to the
impact of bundling and promotional discounts, and a decline in basic video
customers, including seasonal losses in the recently acquired NPG Cable
properties, and our limited marketing in those systems until the
integration was complete in July 2011.
Video service revenues increased 1.9%, primarily due to basic video rate
increases, increased premium and 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 12.5%, 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.
Telephone service revenues increased 21.7%, primarily due to an increase in
residential telephone customers and growth in our commercial telephone
services to small and medium sized businesses.
Our commercial lines of business, embedded in the video, high-speed
Internet and telephone revenues 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 $54.1 million, or 11.2% of total revenue, in the second quarter of
2011, representing growth of 15.6% versus the second quarter of 2010. Our
commercial data and telephone business grew 25.2% year-over-year on a
combined basis.
Advertising revenues increased 0.4%, largely due to higher local and
national ad sales revenue from the automotive sector, offset in part by
lower political ad sales revenue. Excluding the impact of declining
political revenue, advertising revenue would have increased 6.7%.
Other revenues increased 11.8% due to increased 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, and higher broadcast retransmission fees,
offset by lower shopping channel revenue.
Operating costs and expenses rose 6.4%, primarily due to higher programming
costs and retransmission consent expenses, increased net compensation and
employee related costs, including contract labor, and higher fuel expenses.
In addition, the second quarter of 2011 includes approximately $4.7 million
of non-recurring expenses associated with the acquisition and integration
of NPG Cable, primarily consisting of contract termination charges,
severance, billing and telephone platform conversion expenses and other due
diligence and transaction related expenses.
Adjusted EBITDA for the second quarter 2011 was $179.4 million, an increase
of 8.7% from the same quarter last year, resulting in an Adjusted EBITDA
margin of 37.2%. Excluding the impact of the non-recurring expenses
associated with the acquisition and integration of NPG Cable, Adjusted
EBITDA for the second quarter 2011 would have increased 10.5% from the same
quarter last year.
Income from operations for the second quarter 2011 was $73.0 million, an
increase of 11.8%, compared to $65.3 million for the second quarter 2010
due to revenue increases year-over-year outpacing operating cost and
expense increases, and from decreases in non-cash share based compensation
expenses.
Net loss was approximately $42,000 for the second quarter 2011, compared to
a net loss of $38.3 million for the second quarter 2010. The second quarter
of 2010 included $34.1 million of losses from interest rate swap
terminations and debt extinguishment.
Operating metrics as described below are presented on a pro forma basis to
include the acquisition of a cable system in Greenwood, Mississippi on
August 1, 2010 and NPG Cable on April 1, 2011, and exclude two cable
systems that were sold on November 30, 2010, in each case as if those
transactions had been consummated on January 1, 2010.
At June 30, 2011, Suddenlink served approximately 1.4 million customers,
and Suddenlink's RGUs were comprised of 1,274,200 basic video, 732,100
digital video, 914,200 residential high-speed Internet and 409,900
residential telephone customers. Suddenlink's 3.3 million RGUs as of June
30, 2011, increased 190,200, or 6.1%, over the prior year.
Approximately 60.0% of Suddenlink's residential customers subscribe to
bundled services, compared to 56.3% a year ago. Approximately 302,900 of
Suddenlink's residential customers receive video, high-speed Internet and
telephone services as part of a triple play bundle, representing 22.1% of
Suddenlink's total residential customer relationships. Pro-forma growth of
46,500 triple play customers from the second quarter of 2010 represented an
increase of 18.1%. Non-video customers of approximately 198,700 at June 30,
2011 represent 14.5% of total customer relationships, and grew 20.1% on a
pro-forma basis in the trailing twelve months.
Suddenlink's ARPU for the second quarter of 2011 was $124.74, an increase
of 10.4% compared to the second quarter of 2010.
Basic video customers decreased by approximately 24,400 customers while
digital video customers increased by approximately 6,200 customers during
the second quarter of 2011. During the trailing twelve months, basic video
customers decreased by approximately 40,000, or 3.0%, while digital video
customers increased by approximately 92,600, or 14.5%. Basic video customer
losses were impacted by the seasonal nature of the recently acquired NPG
Cable properties. Estimated basic penetration at June 30, 2011, was 43.7%
of estimated homes passed. Digital penetration to basic customers was
57.5%.
Residential high-speed Internet customers decreased by approximately 4,600
during the second quarter of 2011, and increased 68,900, or 8.2%, during
the trailing twelve months. At June 30, 2011, estimated residential
high-speed Internet penetration was 32.3% of high-speed Internet capable
homes passed. Residential high-speed Internet customer losses for the
second quarter were due to seasonal losses, including significant
seasonality in our recently acquired NPG Cable properties, and a weaker
economy. During the second quarter of 2011, commercial Internet customers
increased by approximately 1,000 and commercial fiber customers increased
by approximately 30 customers. During the trailing twelve months,
commercial Internet customers increased by approximately 3,600, or 8.8% and
commercial fiber customers increased by approximately 190, or 19.8%. These
commercial customers are not included in total RGU counts.
Residential telephone customers grew by approximately 12,200 during the
second quarter of 2011, and 68,700, or 20.1%, during the trailing twelve
months. At June 30, 2011, estimated residential telephone penetration was
17.6% of telephone capable homes passed. During the second quarter of 2011,
commercial telephone customers increased by approximately 1,400 customers,
and increased by approximately 6,400 over the trailing twelve months, or
73.6%. These commercial customers 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 June 30, 2011, the Company had approximately $98.7 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 June 30, 2011 were $94.5
million, compared to $96.4 million for the three months ended June 30,
2010. For 2011, we expect total capital expenditures to be approximately
$360.0 million to $370.0 million, which includes capital expenditures for
NPG Cable. This is an increase of $25.0 million to $30.0 million from our
prior guidance, which is entirely the result of capital expenditures for
NPG Cable after acquisition. Through the second quarter of 2011, total
capital expenditures were $199.6 million, including capital expenditures on
Project Imagine, which is proceeding according to plan.
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 $28.9 million during the second quarter 2011 and $79.5
million for the first six months of 2011. Since the inception of Project
Imagine in late 2009 through June 30, 2011, capital expenditures for
Project Imagine, including success based capital, have been $246.9 million,
or approximately 70.5% of the total anticipated expenditures for Project
Imagine.
Net cash flows from operating activities increased $110.1 million for the
three months ended June 30, 2011. This increase is primarily due to
improved operating results and the 2010 repayment of $112.3 million of
paid-in-kind interest on the retired 2nd Lien Credit Facility that did not
exist for the same period in 2011, offset in part by net changes in current
assets and liabilities. Net cash flows used in investing activities
increased $346.0 million from $96.4 million for the three months ended June
30, 2010 to $442.4 million for the three months ended June 30, 2011 due to
the acquisition of NPG Cable as purchases of property, plant and equipment
were relatively flat compared to 2010. Net cash flows from financing
activities decreased $220.8 million for the three months ended June 30,
2011 as compared to June 30, 2010, primarily as a result of the May 2010
issuance of $600.0 million aggregate principal amount of 8.625% Senior
Notes due 2017, offset by the repayment of $375.0 million of debt
outstanding under Cequel Communications, LLC's 2nd Lien Credit Facility and
financing costs related to the aforementioned issuance of notes in 2010
that did not exist in 2011.
Free Cash Flow (as defined herein) for the quarter ended June 30, 2011 was
$11.8 million, compared to negative free cash flow of $4.3 million for the
quarter ended June 30, 2010. The increase in Free Cash Flow for the second
quarter 2011 as compared to 2010 is due to improved operating results,
offset in part by increases in cash interest expense.
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 5.47x at June 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 2.81x at June 30, 2011.
On April 1, 2011, the Company completed the acquisition of 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"), for a
purchase price of $347.9 million, subject to a final working capital
adjustment, which was funded using cash on hand (including a portion of the
proceeds from the issuance of $625.0 million aggregate principal amount of
8.625% Senior Notes due 2017 in January 2011). NPG Cable provides service
to customers in Arizona, California and St. Joseph, Missouri.
As previously announced, the Company will host a conference call to discuss
its second quarter results at 11:00 a.m. (Eastern Time) on Thursday, August
11, 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 June 30, 2011 which will be posted on the
Company's website () on August 11,
2011.
A current report of this earnings release will be posted on the Company's
website ()
shortly after the conference call on August 11, 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
Texas, West Virginia, Louisiana, Arkansas, North Carolina, Oklahoma, 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 Annual Report.
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 a cable system in
Greenwood, Mississippi, on August 1, 2010 and 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.
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
VP - Corporate Finance
314-315-9341
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