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Suddenlink Reports Second Quarter and Year-to-Date 2011 Financial and Operating ResultsST. LOUIS, MO, Aug 11, 2011 (MARKETWIRE via COMTEX) -- 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 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 SOURCE: Cequel Communications Holdings I, LLC |