Charter Cuts Q1 Loss

Generally Improved Operating Performance Good News for Cable Operator Charter Communications

Cable-system giant Charter Communications narrowed its loss in the first quarter on generally improved operating performance, which follows solid earnings at other cable MSOs. Time Warner Cable, Comcast and Cablevision Systems also reported good first quarter results from core operations.

Charter posted a net loss of $358 million in the quarter ended March 31, or red ink of 97 cents per share, less than the $381 million loss ($1.04) a year earlier. Its adjusted EBITDA (earnings before interest, taxes, debt and amortization) cash flow, an indicator of core performance, rose 9.9% despite slightly increased capital expenditures. Revenue at the St. Louis-based MSO rose 10.5% to $1.56 billion.

Although results were generally good, basic-video subscribers slid to 5.21 million, off from 5.35 million a year earlier. Penetration of basic households passed fell to 44.2% from 46.4%. But on the upbeat side, average revenue per unit soared 13.4% to $100.14 per month. The smaller telephone and high-speed-Internet segments did better than cable TV.

“Operating expenses -- which include programming, service and advertising-sales costs -- increased 8.8% year-over-year on a pro forma basis, reflecting annual programming-rate increases, increased labor and maintenance costs to support improved service levels and growth of the company's telephone business and other advanced services,” Charter said in its earnings statement.

“Selling, general and administrative expenses increased by 13.8% on a pro forma basis compared to the year-ago quarter, reflecting expenditures to further improve the customer experience, increases in bad debt expense and higher marketing expenditures targeted at revenue growth and retaining customers,” the company added.

The company -- in which Microsoft cofounder Paul Allen holds a 52% equity stake and a greater proportion of voting control -- is the most debt-laden of any large MSO as a result of an ambitious tech build-out that has yet to pay off.

Charter has suffered under heavy debt load, which stood at $20.6 billion in long-term debt at the end of the quarter. The company reported that it had $476 million in cash on hand and another $1.4 billion in unrestricted credit, which it said is sufficient to fund projected cash needs through 2009, although not into 2010 due to a debt maturity.