Charter projects liquidity to be adequate to cover 2009 cash needs; 2010 remains in question

By Jennifer Lanning Drey

Portland, Ore., May 12 - Charter Communications, Inc. believes its cash on hand, cash flows from operating activities and amounts available under credit facilities will be adequate to meet its projected cash needs for 2009, Neil Smit, chief executive officer of Charter, said Monday during the company's first-quarter earnings conference call.

At March 31, the company's total liquidity stood at $1.9 billion, Eloise Schmitz, Charter's interim chief financial officer, reported during the call.

Cash and cash equivalents at the close of the quarter were $467 million, up from $75 million at Dec. 31. The company's long-term debt balance stood at $20.58 billion at March 31, according to its earnings release.

During the quarter, Charter boosted its liquidity by completing financing transactions totaling more than $1 billion. Specifically, in March, Charter Operating issued $546 million principal amount of 10 7/8% senior second-lien notes due 2014 and borrowed $500 million principal amount of incremental term loans under the Charter Operating credit facilities.

Additionally, in April, Charter Holdco repurchased in private transactions $35 million principal amount of various Charter Holdings notes due 2009 and 2010 and $35 million principal amount of Charter's 5.875% convertibles due 2009 for $66 million cash. Charter Holdco continues to hold the Charter Holdings notes. The 5.875% convertibles were cancelled, leaving approximately $14 million principal amount of the notes outstanding.

"To the extent that it makes sense for us, we'll always be balancing extending maturities and maintaining liquidity, so we'll continue to weigh those as we go forward," she said in response to a question on possible future debt repurchases.

Though not addressed during the call, the company said in its 10-Q filed with the Securities and Exchange Commission that it does not expect cash flows from operating activities and amounts available under its credit facilities to be sufficient to cover its cash needs in 2010.

During the call, Schmitz commented that the company is focused on enhancing liquidity, extending its maturities and, to the extent possible, reducing its leverage.

"We're always looking at what the options are to work through those strategies and we'll continue to do so," she said.

Higher EBITDA leads to lower net loss

Charter reported a first-quarter net loss of $358 million, compared with a net loss of $381 million for the first quarter of 2007. The improvement was primarily related to higher adjusted EBITDA, which resulted from higher revenue-generating units and increased average revenue per user, the company said.

Adjusted EBITDA totaled $545 million for the first quarter, demonstrating a 9.9% increase over the year-ago quarter.

Charter's first-quarter net cash flows from operating activities were $204 million, down from net cash from operating activities of $266 million for the same period in 2007.

The company spent $334 million on capital expenditures during the quarter and expects to spend about $1.2 billion of capex for the full year.

"We remain disciplined in our capital spending, and we expect to continue to prioritize investments in the products with the highest projected returns to enhance our services and maintain our competitive advantages," Smit said.

Charter is a St. Louis-based broadband communications company and cable operator.

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