SOURCE: Cequel Communications Holdings I, LLC

August 11, 2011 08:00 ET

Suddenlink Reports Second Quarter and Year-to-Date 2011 Financial and Operating Results

ST. LOUIS, MO--(Marketwire - Aug 11, 2011) - 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."

Second Quarter Highlights

  • 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.

Second Quarter 2011 Compared to Pro Forma Second Quarter 2010

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.

Key Operating Metrics

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.

Liquidity and Capital Resources

The following discussion of liquidity and capital resources is presented on an actual basis and does not include historical pro forma adjustments reflecting the 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.

Acquisition of Broadband Systems

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.

Conference Call

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:

Within the United States       866-394-9561
International                  281-312-0031
Password                       Cequel Communications
Conference ID                  84355983

A replay of this earnings call will be available at the Investor Relations link on the Company's website (www.suddenlink.com) shortly after the conclusion of the call.

During the conference call, representatives of the Company may discuss and answer one or more questions concerning the Company's business and financial matters. The responses to these questions, as well as other matters discussed during the call, may contain information that has not been previously disclosed.

Quarterly Report

The information in this press release should be read in conjunction with the financial statements and footnotes contained in the Company's quarterly report for the quarter ended June 30, 2011 which will be posted on the Company's website (www.suddenlink.com) on August 11, 2011.

Current Report

A current report of this earnings release will be posted on the Company's website (www.suddenlink.com) shortly after the conference call on August 11, 2011.

Use of Non-GAAP Financial Measures

The Company uses certain measures that are not defined by Generally Accepted Accounting Principles ("GAAP") to evaluate various aspects of its business. Adjusted EBITDA and Free Cash Flow are non-GAAP financial measures. Adjusted EBITDA is a non-GAAP financial measure defined as net income/(loss), plus interest expense, provision 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.

Company Description

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.

Cautionary Note Regarding Forward-Looking Statements

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 (www.suddenlink.com). 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.

Tables:

1  Consolidated Statements of Operations - three and six month periods
2  Pro Forma Consolidated Statements of Operations - three and six month
   periods
3  Condensed Consolidated Balance Sheets
4  Condensed Consolidated Statements of Cash Flows
5  Capital Expenditures
6  Summary Operating Statistics
7  Pro Forma Summary of Operating Statistics
8  Calculation of Free Cash Flow
9  Reconciliation of Net Loss to Adjusted EBITDA
10 Reconciliation of Net Cash from Operating Activities to Free Cash Flow
11 Reconciliation of Cash Interest Expense




TABLE 1
Cequel Communications Holdings I, LLC
Consolidated Statements of Operations (unaudited)
(in thousands)

                   Three Months Ended            Six Months Ended
                        June 30,                      June 30,
                  -------------------- Percent -------------------- Percent
                    2011       2010    Change    2011       2010    Change
                  ---------  --------- ------  ---------  --------- ------
                    Actual     Actual            Actual     Actual
Revenues:
  Video           $ 230,222  $ 211,411    8.9% $ 447,684  $ 422,646    5.9%
  High Speed
   Internet         120,206     99,582   20.7%   229,792    196,737   16.8%
  Telephone          39,082     29,898   30.7%    73,848     58,093   27.1%
  Advertising
   Sales             19,921     18,262    9.1%    36,629     34,732    5.5%
  Other              72,613     61,548   18.0%   140,336    119,634   17.3%
                  ---------  ---------         ---------  ---------
Total Revenues      482,044    420,701   14.6%   928,289    831,842   11.6%

Costs and
 Expenses:
  Operating
   (excluding
   depreciation
   and
   amortization)    202,142    175,236  -15.4%   387,823    349,969  -10.8%

  Selling, general
   and
   administrative
   (excluding
   non-cash share
   based
   compensation
   expense)         100,499     90,716  -10.8%   200,937    179,696  -11.8%
                  ---------  ---------         ---------  ---------
Operating costs
 and expenses       302,641    265,952  -13.8%   588,760    529,665  -11.2%

                  ---------  ---------         ---------  ---------
Adjusted EBITDA     179,403    154,749   15.9%   339,529    302,177   12.4%
                  ---------  ---------         ---------  ---------
Adjusted EBITDA
 Margin (a)            37.2%      36.8%             36.6%      36.3%
  Depreciation and
   amortization     106,093     89,217  -18.9%   202,953    171,296  -18.5%
  Non-cash share
   based
   compensation
   expense              534      1,926   72.3%     1,095      3,810   71.3%
  Gain on sale of
   cable assets        (211)      (183)  15.3%      (423)      (247) -71.3%

                  ---------  ---------         ---------  ---------
Income from
 operations          72,987     63,789   14.4%   135,904    127,318    6.7%
                  ---------  ---------         ---------  ---------
Interest expense,
 net                (75,836)   (65,595) -15.6%  (150,382)  (130,551) -15.2%
Loss on swap
 termination              -    (17,774) 100.0%         -    (17,774) 100.0%
Loss on
 extinguishment
 of debt                  -    (16,344) 100.0%         -    (16,344) 100.0%
                  ---------  ---------         ---------  ---------
Loss before
 provision for
 income taxes        (2,849)   (35,924)  92.1%   (14,478)   (37,351)  61.2%
Provision for
 income taxes         2,807     (3,878) 172.4%    (2,518)    (4,347)  42.1%

                  ---------  ---------         ---------  ---------
Net loss          $     (42) $ (39,802)  99.9% $ (16,996) $ (41,698)  59.2%
                  =========  =========         =========  =========





TABLE 2
Cequel Communications Holdings I, LLC
Pro Forma Consolidated Statements of Operations (unaudited)
(in thousands)

                   Three Months Ended            Six Months Ended
                        June 30,                      June 30,
                  -------------------- Percent -------------------- Percent
                    2011       2010    Change     2011       2010   Change
                  ---------  --------- ------  ---------  --------- ------
                             Pro-Forma         Pro-Forma  Pro-Forma
                    Actual      (b)               (b)        (b)
Revenues:
  Video           $ 230,222  $ 225,859    1.9% $ 460,882  $ 451,639    2.0%
  High Speed
   Internet         120,206    106,873   12.5%   237,854    211,302   12.6%
  Telephone          39,082     32,110   21.7%    76,085     62,562   21.6%
  Advertising
   Sales             19,921     19,844    0.4%    38,653     37,852    2.1%
  Other              72,613     64,942   11.8%   143,986    126,400   13.9%
                  ---------  ---------         ---------  ---------
Total Revenues      482,044    449,628    7.2%   957,460    889,755    7.6%

Costs and
 Expenses:
  Operating
   (excluding
   depreciation
   and
   amortization)    202,142    188,969   -7.0%   401,258    377,565   -6.3%

  Selling, general
   and
   administrative
   (excluding
   non-cash share
   based
   compensation
   expense)         100,499     95,577   -5.1%   206,209    189,504   -8.8%
                  ---------  ---------         ---------  ---------
Operating costs
 and expenses       302,641    284,546   -6.4%   607,467    567,069   -7.1%

                  ---------  ---------         ---------  ---------
Adjusted EBITDA     179,403    165,082    8.7%   349,993    322,686    8.5%
                  ---------  ---------         ---------  ---------
Adjusted EBITDA
 Margin (a)            37.2%      36.7%             36.6%      36.3%

  Depreciation and
   amortization     106,093     98,063   -8.2%   211,799    188,988  -12.1%
  Non-cash share
   based
   compensation
   expense              534      1,926   72.3%     1,095      3,810   71.3%
  Gain on sale of
   cable assets        (211)      (183)  15.3%      (423)      (247) -71.3%

                  ---------  ---------         ---------  ---------
Income from
 operations          72,987     65,276   11.8%   137,522    130,135    5.7%
                  ---------  ---------         ---------  ---------

Interest expense,
 net                (75,836)   (65,595) -15.6%  (150,382)  (130,551) -15.2%
Loss on swap
 termination              -    (17,774) 100.0%         -    (17,774) 100.0%
Loss on
 extinguishment
 of debt                  -    (16,344) 100.0%         -    (16,344) 100.0%
                  ---------  ---------         ---------  ---------
Loss before
 provision for
 income taxes        (2,849)   (34,437)  91.7%   (12,860)   (34,534)  62.8%
Provision for
 income taxes         2,807     (3,878) 172.4%    (2,518)    (4,347)  42.1%

                  ---------  ---------         ---------  ---------
Net loss          $     (42) $ (38,315)  99.9% $ (15,378) $ (38,881)  60.4%
                  =========  =========         =========  =========

(a) Represents Adjusted EBITDA as a percentage of total revenue.

(b) 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.




TABLE 3
Cequel Communications Holdings I, LLC
Condensed Consolidated Balance Sheets (unaudited)
(in thousands)


                                                   June 30,    December 31,
                                                     2011          2010
                                                 ------------  ------------
ASSETS
Cash and cash equivalents                        $     98,694  $    289,685
Accounts receivable, net                              157,522       148,280
Prepaid expenses                                       18,662        16,072
                                                 ------------  ------------
  Total current assets                                274,878       454,037

Property, plant and equipment, net                  1,435,796     1,328,479
Intangible assets, net                              2,323,931     2,083,376
Other assets, net                                      56,900        48,346
                                                 ------------  ------------
  Total assets                                   $  4,091,505  $  3,914,238
                                                 ============  ============

LIABILITIES AND MEMBER'S EQUITY
Accounts payable and accrued expenses            $    238,286  $    200,219
Deferred revenue                                      116,276       112,239
Current portion of long-term debt                      20,382        20,382
Other current liabilities                              65,888        80,248
                                                 ------------  ------------
  Total current liabilities                           440,832       413,088

Long-term debt, less current portion                3,777,598     3,145,739
Deferred tax liabilities                               26,215        25,185
Other long-term liabilities                            17,127        32,756
                                                 ------------  ------------
  Total liabilities                                 4,261,772     3,616,768

Total member's equity                                (170,267)      297,470
                                                 ------------  ------------
  Total liabilites and member's equity           $  4,091,505  $  3,914,238
                                                 ============  ============




TABLE 4
Cequel Communications Holdings I, LLC
Condensed Consolidated Statements of Cash Flows (unaudited)
(in thousands)

                                 Three Months Ended     Six Months Ended
                                      June 30,              June 30,
                                --------------------  --------------------
                                   2011       2010       2011       2010
                                ---------  ---------  ---------  ---------

Net cash provided by/(used in)
 operating activities           $  64,194  $ (45,908) $ 247,584  $  36,111

Net cash used in investing
 activities                      (442,405)   (96,449)  (551,533)  (180,215)

Net cash (used in)/provided by
 financing activities              (5,189)   215,577    112,958    215,494
                                ---------  ---------  ---------  ---------

(Decrease)/increase in cash and
 cash equivalents                (383,400)    73,220   (190,991)    71,390
Cash and cash equivalents,
 beginning of period              482,094    255,173    289,685    257,003
                                ---------  ---------  ---------  ---------
Cash and cash equivalents, end
 of period                      $  98,694  $ 328,393  $  98,694  $ 328,393
                                =========  =========  =========  =========




TABLE 5
Cequel Communications Holdings I, LLC
Capital Expenditures (unaudited)
(in thousands)

                                    Three Months Ended   Six Months Ended
                                         June 30,            June 30,
                                    ------------------- -------------------
                                      2011      2010      2011      2010
                                    --------- --------- --------- ---------

Customer premise equipment          $  25,749 $  34,286 $  71,687 $  71,053
Scalable infrastructure                12,301    14,998    26,100    23,188
Line extensions                         2,538     1,803     3,739     3,466
Upgrade/rebuild                         5,587     8,163    11,563    14,578
Commercial                              8,370     4,058    14,925     5,999
Support capital                        39,909    33,140    71,635    57,919
                                    --------- --------- --------- ---------
                                    $  94,454 $  96,448 $ 199,649 $ 176,203
                                    ========= ========= ========= =========




TABLE 6
Cequel Communications Holdings I, LLC
Summary Operating Statistics (unaudited)
Approximate as of:


                             June 30,   March 31,  December 31,  June 30,
                               2011       2011         2010        2010
                             ---------  ---------  ------------  ---------
                               Actual     Actual      Actual       Actual
                             ---------  ---------  ------------  ---------
Revenue Generating Units
 (RGU):
Basic video customers (a)    1,274,200  1,217,000     1,215,700  1,225,100
Digital video customers (b)    732,100    679,600       651,400    595,400
Residential high-speed
 Internet customers (c)        914,200    857,100       826,300    787,000
Residential telephone
 customers (d)                 409,900    378,600       358,700    322,800
                             ---------  ---------  ------------  ---------
Total RGUs (e)               3,330,400  3,132,300     3,052,100  2,930,300

Quarterly net customer
 additions (losses)            Actual     Actual      Actual       Actual
                             ---------  ---------  ------------  ---------
Basic video customers           57,200      1,300       (12,600)   (18,800)
Digital video customers         52,500     28,200        20,000     19,700
Residential high-speed
 Internet customers             57,100     30,800        11,700      3,100
Residential telephone
 customers                      31,300     19,900        13,000     20,600
                             ---------  ---------  ------------  ---------
Total RGUs (e)                 198,100     80,200        32,100     24,600

Average Revenue per Unit
 (ARPU):                       Actual     Actual      Actual       Actual
                             ---------  ---------  ------------  ---------
Pro forma average monthly
 revenue per basic video
 customer (f)                $  124.74  $  122.51  $     118.32  $  113.50

Customer Relationships         Actual     Actual      Actual       Actual
                             ---------  ---------  ------------  ---------
Total customer relationships
 (g)                         1,370,000  1,298,000     1,273,000  1,264,900
Double play relationships
 (h)                           519,700    496,300       481,700    475,000
Double play penetration (i)       37.9%      38.2%         37.8%      37.6%
Triple play relationships
 (j)                           302,900    282,300       266,700    241,100
Triple play penetration (k)       22.1%      21.7%         21.0%      19.1%
Total bundled customers (l)    822,600    778,600       748,400    716,100
Bundled penetration (m)           60.0%      60.0%         58.8%      56.6%

Non-video customer
 relationships (n)             198,700    174,800       169,900    152,700
Non-video as a % of total
 customer relationships (o)       14.5%      13.5%         13.3%      12.1%

Estimated Customer
 Penetration                   Actual     Actual      Actual       Actual
                             ---------  ---------  ------------  --------- 
Estimated basic penetration
 (p)                              43.7%      45.4%         45.4%      46.1%
Estimated digital
 penetration (q)                  57.5%      55.8%         53.6%      48.6%
Estimated residential
 high-speed Internet
 penetration (r)                  32.3%      32.9%         31.8%      30.6%
Estimated residential
 telephone penetration (s)        17.6%      17.4%         16.3%      15.1%

Commercial Customers           Actual     Actual      Actual       Actual
                             ---------  ---------  ------------  ---------
Commercial Internet (t)         44,400     40,600        39,800     38,200
Commercial fiber (u)             1,150      1,020           970        860
Commercial telephone (v)        15,100     12,800        11,100      7,900




TABLE 7
Cequel Communications Holdings I, LLC
Pro Forma Summary Operating Statistics (unaudited)
Approximate as of:


                  June 30,       March 31,    December 31,     June 30,
                    2011           2011           2010           2010
                -------------  -------------  -------------  -------------
                    Actual     Pro Forma (w)  Pro Forma (w)  Pro Forma (w)
                -------------  -------------  -------------  -------------
Revenue
 Generating
 Units (RGU):
Basic video
 customers (a)      1,274,200      1,298,600      1,297,700      1,314,200
Digital video
 customers (b)        732,100        725,900        696,500        639,500
Residential
 high-speed
 Internet
 customers (c)        914,200        918,800        886,300        845,300
Residential
 telephone
 customers (d)        409,900        397,700        377,700        341,200
                -------------  -------------  -------------  -------------
Total RGUs (e)      3,330,400      3,341,000      3,258,200      3,140,200

Quarterly net
 customer
 additions
 (losses)           Actual     Pro Forma (w)  Pro Forma (w)  Pro Forma (w)
                -------------  -------------  -------------  -------------
Basic video
 customers            (24,400)           900        (10,300)       (21,900)
Digital video
 customers              6,200         29,400         21,900         19,400
Residential
 high-speed
 Internet
 customers             (4,600)        32,500         14,800          1,700
Residential
 telephone
 customers             12,200         20,000         13,700         19,600
                -------------  -------------  -------------  -------------
Total RGUs (e)        (10,600)        82,800         40,100         18,800

Average Revenue
 per Unit
 (ARPU):            Actual     Pro Forma (w)  Pro Forma (w)  Pro Forma (w)
                -------------  -------------  -------------  -------------
Pro forma
 average
 monthly
 revenue per
 basic video
 customer (f)   $      124.74  $      122.28  $      118.23  $      113.02

Customer
 Relationships      Actual     Pro Forma (w)  Pro Forma (w)  Pro Forma (w)
                -------------  -------------  -------------  -------------
Total customer
 relationships
 (g)                1,370,000      1,387,700      1,370,300      1,365,100
Double play
 relationships
 (h)                  519,700        527,500        517,600        511,500
Double play
 penetration
 (i)                     37.9%          38.0%          37.8%          37.5%
Triple play
 relationships
 (j)                  302,900        295,800        281,900        256,400
Triple play
 penetration
 (k)                     22.1%          21.3%          20.6%          18.8%
Total bundled
 customers (l)        822,600        823,300        799,500        767,900
Bundled
 penetration
 (m)                     60.0%          59.3%          58.3%          56.3%

Non-video
 customer
 relationships
 (n)                  198,700        194,300        181,300        165,400
Non-video as a
 % of total
 customer
 relationships
 (o)                     14.5%          14.0%          13.2%          12.1%

Estimated
 Customer
 Penetration        Actual     Pro Forma (w)  Pro Forma (w)  Pro Forma (w)
                -------------  -------------  -------------  -------------
Estimated basic
 penetration
 (p)                     43.7%          45.2%          45.3%          45.9%
Estimated
 digital
 penetration
 (q)                     57.5%          55.9%          53.7%          48.7%
Estimated
 residential
 high-speed
 Internet
 penetration
 (r)                     32.3%          32.8%          31.7%          30.4%
Estimated
 residential
 telephone
 penetration
 (s)                     17.6%          16.8%          15.9%          14.6%

Commercial
 Customers          Actual     Pro Forma (w)  Pro Forma (w)  Pro Forma (w)
                -------------  -------------  -------------  -------------
Commercial
 Internet (t)          44,400         43,400         42,500         40,800
Commercial
 fiber (u)              1,150          1,120          1,060            960
Commercial
 telephone (v)         15,100         13,700         11,900          8,700


(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.



TABLE 8
Cequel Communications Holdings I, LLC
Calculation of Free Cash Flow (unaudited)
(in thousands)

                                 Three Months Ended     Six Months Ended
                                      June 30,              June 30,
                                --------------------  --------------------
                                  2011       2010       2011       2010
                                ---------  ---------  ---------  ---------

Adjusted EBITDA                 $ 179,403  $ 154,749  $ 339,529  $ 302,177
Capital expenditures              (94,454)   (96,448)  (199,649)  (176,203)
Cash interest expense             (73,150)   (62,623)  (145,128)  (123,854)
                                ---------  ---------  ---------  ---------
Free Cash Flow                  $  11,799  $  (4,322) $  (5,248) $   2,120
                                =========  =========  =========  =========




TABLE 9
Cequel Communications Holdings I, LLC
Reconciliation of Net Loss to Adjusted EBITDA (unaudited)
(in thousands)

                                 Three Months Ended     Six Months Ended
                                      June 30,              June 30,
                                --------------------  --------------------
                                  2011       2010       2011       2010
                                ---------  ---------  ---------  ---------
Net loss                        $     (42) $ (39,802) $ (16,996) $ (41,698)
  Add back:
  Interest expense, net            75,836     65,595    150,382    130,551
  (Benefit)/Provision for income
   taxes                           (2,807)     3,878      2,518      4,347
  Depreciation and amortization   106,093     89,217    202,953    171,296
  Non-cash share based
   compensation                       534      1,926      1,095      3,810
  Loss on swap termination              -     17,774          -     17,774
  Loss on extinguishment of debt        -     16,344          -     16,344
  Gain on sale of cable assets       (211)      (183)      (423)      (247)
                                ---------  ---------  ---------  ---------
Adjusted EBITDA                 $ 179,403  $ 154,749  $ 339,529  $ 302,177
                                =========  =========  =========  =========




TABLE 10
Cequel Communications Holdings I, LLC
Reconciliation of Net Cash from Operating Activities to Free Cash Flow
 (unaudited)
(in thousands)

                                 Three Months Ended     Six Months Ended
                                      June 30,              June 30,
                                --------------------  --------------------
                                  2011       2010       2011       2010
                                ---------  ---------  ---------  ---------

Net cash provided by/(used in)
 operating activities           $  64,194  $ (45,908) $ 247,584  $  36,111
Capital expenditures              (94,454)   (96,448)  (199,649)  (176,203)
Current income tax expense         (1,691)     2,393      1,487      2,682
Interest income                       (38)       (94)      (187)      (158)
Write-off of deferred financing
 costs                                  -     (6,599)         -     (6,599)
New borrowing bond premium              -    (12,000)   (17,969)   (12,000)
Repayment of paid in kind debt
 interest                               -    112,254          -    112,254
Loss on swap termination                -     17,774          -     17,774
Loss on extinguishment of debt          -     16,344          -     16,344
Changes in assets and
 liabilities, net                  43,788      7,962    (36,514)    11,915
                                ---------  ---------  ---------  ---------
Free Cash Flow                  $  11,799  $  (4,322) $  (5,248) $   2,120
                                =========  =========  =========  =========




TABLE 11
Cequel Communications Holdings I, LLC
Reconciliation of Cash Interest Expense (unaudited)
(in thousands)

                                 Three Months Ended     Six Months Ended
                                      June 30,              June 30,
                                --------------------  --------------------
                                  2011       2010       2011       2010
                                ---------  ---------  ---------  ---------

Interest expense, net           $  75,836  $  65,595  $ 150,382  $ 130,551
Add: interest income                   38         94        187        158
Add: bond premium amortization        818        183      1,578        183
Less: deferred financing
 amortization                      (3,217)    (2,893)    (6,361)    (6,318)
Less: bond discount
 amortization                        (325)      (356)      (658)      (720)
                                ---------  ---------  ---------  ---------
Cash interest expense           $  73,150  $  62,623  $ 145,128  $ 123,854
                                =========  =========  =========  =========


Source: Cequel Communications Holdings I, LLC

Contact Information

  • 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