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Charter Communications Inc. reported mixed financial results for the second quarter of 2014. GAAP net loss in the reported quarter of 2014 stood at $45 million or 42 cents per share compared with a net loss of $95 million or 94 cents per share in the year-ago quarter. Quarterly, loss per share of 42 cents was markedly in contrast to the Zacks Consensus Estimate of an income of 8 cents per share.

Total revenue in the reported quarter came in at $2,259 million, up 7.3% year over year and exactly in line with the Zacks Consensus Estimate. Segment wise, Video revenues were $1,110 million, up 5.1% year over year. Internet revenues came in at $638 million, up 15.2% from the prior-year quarter. Voice revenues stood at $145 million, down 14.2% from the year-ago quarter. Commercial revenues totaled $244 million, up 19% year over year. Advertising revenues were $79 million, up 3.9% year over year. Other revenues came in at $43 million, down 4.4% year over year.

Quarterly operating income was $250 million compared with $254 million in the year-ago quarter. Operating margin stood at 11.1% against 12.1% in the prior-year quarter. Second-quarter, 2014 adjusted EBITDA (earnings before interest, tax, depreciation and amortization) was $795 million compared with $737 million in the year-ago quarter. EBITDA margin came in at 35.2% as against 35% in the prior-year quarter.

During the second quarter of 2014, Charter Communications generated $632 million of cash from operations compared with $484 million in the year-ago quarter. Free cash flow, in the reported quarter was $70 million against $75 million in the second quarter of 2013.

At the end of the second quarter of 2014, Charter Communications had $9 million of cash and cash equivalents and $14,019 million of outstanding debt compared with $21 million of cash and cash equivalents and $14,181 million of outstanding debt at the end of 2013. The debt-to-capitalization ratio, at the end of the reported quarter was 0.99, remaining same with the figure reported at the end of 2013.   

Subscribers Statistics

Residential segment: As of Jun 30, 2014, Charter Communications had 4.166 million video, 4.568 million Internet and 2.36 million voice customers. During the reported quarter, the company lost 29,000 video customers but gained 49,000 Internet and 35,000 voice customers. Average revenue per customer relationship was $110.81 compared with $108.71 in the prior-year quarter. Single Play penetration was 37.9%, Double Play penetration was 29.3%, Triple Play penetration was 32.7% and Digital penetration was 96.1%.

Commercial Segment: As of Jun 30, 2014, Charter Communications had 154,000 video, 282,000 Internet and 164,000 voice subscribers. During the reported quarter, the company lost 6,000 video customers but added 13,000 Internet and 12,000 voice customers. 

Strategic Move

In Apr 2014,Comcast Corp. reached an agreement with Charter Communicationsto divest 3.9 million subscribers as a strategic decision to ease the regulatory concern over its proposed merger with Time Warner Cable Inc. . This dates back to Feb 2014, when Comcast had reached an agreement with Time Warner Cable to acquire the latter in an all-stock deal valued at around $45.2 billion.

Liberty Media Corp. , which controls a 27.3% stake in Charter Communications, was also aggressively pursuing the idea of Charter Communications taking over Time Warner Cable. However, Charter Communications lost to Comcast in the bid. Charter Communications currently sports a Zacks Rank #1 (Strong Buy).

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