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Charter Communications Inc. (CHTR - Analyst Report) reported mixed financial results for the fourth quarter of 2013. While net income easily surpassed the Zacks Consensus Estimate, total revenue fell below the same. Charter Communications currently has a Zacks Rank #3 (Hold).

GAAP net income in the fourth quarter of 2013 was $39 million or 35 cents per share compared with a net loss of $40 million or a loss of 41 cents per share in the year-ago quarter. Quarterly, adjusted earnings per share were 31 cents, significantly higher than the Zacks Consensus Estimate of 21 cents.

Total revenue in the reported quarter was $2,148 million, up 12.3% year over year but failed to meet the Zacks Consensus Estimate of $2,166 million.

Segment wise, Video revenues were $1,046 million, up 12.8% year over year. Internet revenues were $590 million, up 22.4% from the prior-year quarter. Voice revenues stood at $154 million, down 17.2% from the year-ago quarter. Commercial revenues totaled $228 million, up 28.85 year over year. Advertising revenues were $83 million, down 13.5% year over year. Other revenues came in at $47 million, up 4.4% year over year.

Quarterly operating income was $246 million compared with $206 million in the year-ago quarter. Operating margin stood at 11.5% against 10.8% in the prior-year quarter. Fourth-quarter, 2013 adjusted EBITDA (earnings before interest, tax, depreciation and amortization) was $764 million compared with $698 million in the year-ago quarter. EBITDA margin came in at 35.6% against 36.5% in the prior-year quarter.

During the fourth quarter of 2013, Charter Communications generated $595 million of cash from operations compared with $485 million in the year-ago quarter. Free cash flow, in the reported quarter was $84 million against $33 million in the fourth quarter of 2012.

At the end of 2013, Charter Communications had $21 million of cash and cash equivalents and $14,181 million of outstanding debt compared with $7 million of cash and cash equivalents and $12,808 million of outstanding debt at the end of 2012. The debt-to-capitalization ratio, at the end of 2013 was 0.99, remaining same year over year.   

Subscribers Statistics

Residential segment: As of Dec 31, 2013, Charter Communications had 4.177 million video, 4.383 million Internet and 2.273 million voice customers. During the reported quarter, the company lost 2,000 video customers but added 93,000 Internet and 56,000 voice customers. Average revenue per customer relationship was $107.97 compared with $105.76 in the prior-year quarter.

Single Play penetration was 37.6%, Double Play penetration was 29.8%, Triple Play penetration was 32.6% and Digital penetration was 91.8%.

Commercial Segment: As of Dec 31, 2013, Charter Communications had 165,000 video, 257,000 Internet and 145,000 voice subscribers. During the reported quarter, the company lost 1,000 video customers but added 12,000 Internet and 7,000 voice customers. 

Strategic Move

Charter Communications recently lost to Comcast Corp. (CMCSA - Analyst Report) in a bid to acquire Time Warner Cable Inc. (TWC - Analyst Report). Liberty Media Corp. (LMCA - Analyst Report), which controls a 27.3% stake in Charter Communications, was aggressively pursuing the idea of the company acquiring Time Warner Cable. However, management stated that it will further pursue suitable merger and acquisition deals.

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