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Suddenlink Reports First Quarter 2016 Financial and Operating Results

FOR IMMEDIATE RELEASE

ST. LOUIS (May 11, 2016) - Cequel Communications Holdings I, LLC ("Cequel," and together with its subsidiaries, the "Company" or "Suddenlink") today reported financial and operating results for the first quarter 2016.


First Quarter Highlights

  • First quarter revenue of $627.6 million grew 6.7% compared to the first quarter of the prior year, highlighted by growth in residential high-speed Internet and commercial services revenue. Excluding the effect of cyclical political advertising sales, total revenue grew 6.5% in the first quarter 2016 versus the first quarter 2015.
     
  • High-speed Internet revenue grew 17.0% in the first quarter 2016 versus the year-ago period. This growth was driven by the addition of 69,800 residential Internet customers, representing growth of 5.9% during the trailing twelve months; growth in home networking revenue; growth in commercial high-speed Internet revenue and continued success in selling higher speed tiers of service to new and existing customers.
     
  • Commercial revenue for the first quarter 2016 grew 9.2% versus the first quarter 2015, including 15.3% growth in our commercial high-speed data, telephone and on-net carrier revenue on a combined basis.
     
  • Before the impact of non-recurring expenses, Adjusted EBITDA (as defined herein) for the first quarter 2016 was $263.0 million, representing growth of 17.8%, compared to the same period in the prior year.
     
  • Total residential customer relationships were 1,489,200 at March 31, 2016, an increase of 37,400, or 2.6%, since March 31, 2015. Including commercial, total customer relationships were 1,589,700 at March 31, 2016, an increase of 46,200, or 3.0%, since March 31, 2015.

First Quarter 2016 Compared to First Quarter 2015

First quarter 2016 revenue increased 6.7%, largely attributable to the increase in residential high-speed Internet revenue, video revenue and advertising revenue, and growth in revenue from our commercial business, including carrier services, offset in part by decreases in telephone revenue. Excluding political advertising sales, total revenue increased 6.5%.

Video service revenue increased 1.6% due primarily to the impact of video rate increases; growth in converter rental revenue for HDTV an DVR capable digital converters; and an increase in digital video customers. Offsetting this growth, in part, were basic video customer losses in the trailing twelve months, digital customers purchasing fewer digital tiers of service on average; and decreased premium and pay-per-view revenues.

High-speed Internet service revenue rose 17.0% due primarily to the sell-in of higher tiers and the shift of existing customers to higher speed Internet products; an increase in residential high-speed Internet customers; growth in home networking revenue; growth in our commercial high-speed data services to small and medium sized businesses; and growth in optical Internet and transport revenue, offset in part by a decrease in revenue from carrier services. 

Telephone service revenue decreased 1.2% due primarily to the impact of bundle discounts to residential and commercial customers, offset, in part, by an increase in residential telephone customers and growth in our commercial telephone services to small and medium sized businesses.

Advertising revenue increased 4.2% due largely to an increase in national political advertising revenue.

Other revenue decreased 1.7% due primarily to a decrease in equipment sales revenue.

Our commercial lines of business, embedded in the video, high-speed Internet, telephone service and other revenue, described above, are comprised of commercial and bulk video, commercial high-speed data, fiber based on- and off-net carrier services, and commercial telephone. Commercial revenue totaled $95.7 million, or 15.5% of total revenue, in the first quarter 2016, representing growth of 9.2% versus the first quarter 2015. Our commercial high-speed data, telephone, and on-net carrier revenue grew 15.3% on a combined basis.

Operating costs and expenses rose 1.6%, primarily due to an increase in total programming costs and increased labor and employee related costs, as well as $7.6 million of non-recurring expenses related to restructuring charges as we simplified our organization structure. These were offset in part by reductions in high-speed Internet circuit costs, telephone subscriber line costs and marketing expense.  The first quarter 2015 includes $1.2 million of non-recurring expense primarily related to costs to migrate customers onto our internal telephone platform and acquisition due diligence costs.

Before the impact of non-recurring expense described above, Adjusted EBITDA for the first quarter 2016 was $263.0 million, an increase of 17.8% compared to the first quarter last year, with an Adjusted EBITDA margin of 41.9% versus 37.9% in the first quarter 2015. After the impact of non-recurring expense, Adjusted EBITDA for the first quarter 2016 was $255.5 million, an increase of 15.1% from the same quarter last year, resulting in an Adjusted EBITDA margin of 40.7% versus 37.7% in the first quarter 2015.

Income from operations for the first quarter 2016 was $54.6 million, a decrease of 31.5%, compared to income from operations of $79.7 million for the first quarter 2015, due primarily to an increase in depreciation and amortization, offset in part by a decrease in non-cash share based compensation expense and improved operating results.

Net loss was $28.9 million for the first quarter 2016, compared to net income of $9.4 million for the first quarter 2015.


Key Operating Metrics

At March 31, 2016, Suddenlink served approximately 1,489,200 residential customers, an increase of 2.6% in the last twelve months. Including commercial, Suddenlink served approximately 1,589,700 customers, an increase of 3.0% in the last twelve months. Suddenlink's approximately 2.9 million PSUs as of March 31, 2016, increased 57,100, or 2.0%, in the last twelve months.  In addition, as of March 31, 2016, Suddenlink served approximately 74,600 commercial high-speed data and 49,000 commercial telephone customers, not included in our PSU or customer relationship totals. Including these commercial customers, our PSUs increased 72,700, or 2.4%, in the last twelve months. 

Approximately 422,500 of Suddenlink's residential customers receive video, high-speed Internet, and telephone services as part of a triple play bundle, representing 28.4% of Suddenlink's total residential customer relationships, compared to 27.7% a year ago. Growth of 20,700 triple play customers in the last twelve months represented an increase of 5.2%. Approximately 63.2% of Suddenlink's residential customers subscribe to two or more bundled services. Non-video residential customers of approximately 481,900 at March 31, 2016, represent 32.4% of total residential customer relationships, and grew 19.2% during the last twelve months.

Suddenlink's Average Revenue per Customer Relationship for the first quarter 2016 was $132.65, an increase of 3.5% compared to the first quarter 2015.

Basic video customers decreased by approximately 7,900 customers during the first quarter 2016.  During the last twelve months, basic video customers decreased 4.2%. Estimated basic penetration at March 31, 2016, was 33.7% of estimated homes passed.

Residential high-speed Internet customers increased by approximately 30,300 during the first quarter 2016, and increased by approximately 69,800, or 5.9%, during the trailing twelve months. At March 31, 2016, estimated residential high-speed Internet penetration was 40.0% of high-speed Internet capable homes passed.  During the first quarter 2016, commercial high-speed data customers increased by approximately 2,300, or 3.2%, and increased 8,800, or 13.4%, during the trailing twelve months. These commercial customers are not included in total PSU counts. Including these commercial customers, our high-speed Internet customers increased 78,600, or 6.3%, in the last twelve months.

Residential telephone customers grew by approximately 15,200 during the first quarter 2016, and increased 34,400, or 6.2%, during the last twelve months. At March 31, 2016, estimated residential telephone penetration was 21.8% of telephone capable homes passed. During the first quarter 2016, commercial telephone customers increased by approximately 1,500 customers, and increased by approximately 6,800 during the last twelve months, or 16.3%. These commercial customers purchase 2.7 lines on average and are not included in total PSU counts. Including these commercial customers, our telephone customers increased 41,200, or 6.9%, in the last twelve months.


Liquidity and Capital Resources

At March 31, 2016, the Company had approximately $154.0 million of cash on hand with $20.8 million of outstanding letters of credit, which reduced the availability under our revolving credit facility to approximately $329.2 million.

Net cash provided by operating activities was $163.9 million for the first quarter 2016, compared to $149.9 million for the first quarter 2015.

Capital expenditures were $73.9 million and $134.9 million for the first quarter 2016 and 2015, respectively.

Starting in the second half of 2014 and extending through 2017, we expect to invest up to $230 million of capital expenditures to significantly enhance our Internet speeds in markets serving over 90% of our high-speed Internet customers and ultimately position our network to offer speeds of up to 1 Gbps in markets serving nearly 85% of our high-speed Internet customers.  Internally known as "Operation GigaSpeed," this initiative will include expenditures to upgrade data network headend equipment, replace any remaining deployed Data over Cable Service Interface Specification ("DOCSIS") 2.0 customer premises equipment with DOCSIS 3.0 equipment, and complete our all-digital video conversion that began with Project Imagine, our three year bandwidth expansion plan that was completed in 2012.  We expect to complete these enhancements in a phased, market-by-market approach, focusing first on our largest and most competitive markets. Once fully phased in, the plan calls for our flagship Internet speed to increase from 15 to 200 Mbps and our top Internet speed to increase from over 100 Mbps to 1 Gbps in a vast majority of our markets. We completed the initial phases of Operation GigaSpeed in 112 markets, which serve over 90% of our residential high-speed Internet customers. Those investments allowed us to increase the flagship Internet speed from 15 Mbps to 50 Mbps and to increase our top Internet speed to up to 150 Mbps in those markets, with top speeds in 28 markets increasing to 1 Gbps, which serve approximately 40% of our residential high-speed Internet customers. For the three months ended March 31, 2016, we spent approximately $8.1 million in capital expenditures related to this initiative. Since the inception of Operation GigaSpeed, we have incurred $124.6 million in capital expenditures related to this initiative.

Free Cash Flow for the first quarter 2016, was $96.1 million, compared to $25.7 million for the first quarter 2015, an increase of 274.3%. The increase in Free Cash Flow for the first quarter 2016 as compared to the same period in 2015 is due primarily to an increase in Adjusted EBITDA of $33.5 million and a decrease in property, plant and equipment purchases of $65.9 million, offset in part by the change in accounts payable and accrued expenses related to capital expenditures and an increase in cash interest expense of $24.1 million primarily due to increased average indebtedness..

The Senior Secured Leverage Ratio (Consolidated Secured Debt to Adjusted Pro Forma EBITDA) for Suddenlink as defined in and calculated in accordance with the Credit Agreement was 3.19x at March 31, 2016.

The Total Leverage Ratio (Consolidated Total Debt to Adjusted Pro Forma EBITDA) for Cequel, as defined in and calculated in accordance with the indentures governing Cequel's outstanding Senior Secured Notes, was 3.07x at March 31, 2016.

The Total Leverage Ratio (Consolidated Total Debt to Adjusted Pro Forma EBITDA) for Cequel, as defined in and calculated in accordance with the indentures governing Cequel's outstanding 2020 Senior Notes and 2021 Senior Notes, was 5.93x at March 31, 2016.

The Total Leverage Ratio (Consolidated Total Debt to Adjusted Pro Forma EBITDA) for Cequel, as defined in and calculated in accordance with the indentures governing Cequel's outstanding 2025 Senior Notes, was 5.94x at March 31, 2016.


2026 Senior Secured Notes

On April 26, 2016, Altice US Finance I Corporation, a subsidiary of Suddenlink, issued $1,500.0 million aggregate principal amount of senior secured notes (the "2026 Secured Notes").  The proceeds from the sale were used to repay the $1,477.2 million remaining balance the Existing Credit Facility and to pay related fees and expenses. Upon repayment of the remaining balance on the Existing Credit Facility, the Existing Credit Facility was terminated. The 2026 Secured Notes mature on May 15, 2026, and bear interest at a rate of 5.50% annually. Interest is payable on the 2026 Secured Notes semi-annually in cash on May 15 and November 15 of each year, commencing on November 15, 2016.


Conference Call

Altice will host a conference call and webcast to discuss the Company's first quarter results at 2:30pm CET (1:30pm UK time, 8:30am Eastern Time) on Wednesday, May 11, 2016.

Webcast live: http://edge.media-server.com/m/p/vj7c4drx

The dial-in information for the earnings call is as follows:

France: +33 1 76 77 22 26
UK: +44 20 3427 1902
US: +1 646 254 3365

Confirmation code: 7645450

During the conference call, representatives of Altice may discuss certain matters concerning the Company that 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 March 31, 2016, which will be posted on the Company's website (suddenlink.com) on May 11, 2016.


Current Report

A current report containing this earnings release will be posted on the Company's website (suddenlink.com) on May 11, 2016. 


Use of Non-GAAP Financial Measures

The Company uses certain measures, including Adjusted EBITDA and Free Cash Flow, that are not defined by Generally Accepted Accounting Principles ("GAAP") to evaluate various aspects of its business.

Adjusted EBITDA is defined as net income/(loss), plus net interest expense, provision/(benefit) for income taxes, depreciation and amortization, non-cash share based compensation expense and loss on disposal of cable assets. As such, it eliminates the significant non-cash depreciation and amortization expense that results from the capital-intensive nature of the Company's businesses as well as other non-cash or special items, and is unaffected by the Company's capital structure or investment activities. Adjusted EBITDA is used by management and our board of directors to evaluate the performance of the Company's business. In addition, Adjusted EBITDA generally correlates to the covenant calculations under our Credit Agreements. However, this measure is limited in that it does not reflect the periodic costs of certain capitalized tangible and intangible assets used in generating revenues and the cash cost of financing. Management and our board of directors evaluate these costs through other financial measures.

Free Cash Flow is defined as Adjusted EBITDA, less capital expenditures, plus or minus changes in accounts payable and accrued expenses related to capital expenditures, less cash interest expense.

The Company believes that Adjusted EBITDA and Free Cash Flow provide information useful to investors in assessing the Company's performance and its ability to fund operations, service its debt and make additional investments with internally generated funds.

Adjusted EBITDA and Free Cash Flow, as used herein, 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)/Income to Adjusted EBITDA is provided in Table 7. A reconciliation of Net Cash from Operating Activities to Free Cash Flow is provided in Table 8.


Company Description

The Company, which does business as Suddenlink Communications ("Suddenlink"), is the seventh largest cable operator in the United States. Suddenlink makes its services available over its advanced hybrid-fiber coaxial network to approximately 3.2 million homes in the United States and serves approximately 1.5 million customers as of March 31, 2016. The Company's customer base is clustered geographically with approximately 96% of our customers located in the ten states of Texas, West Virginia, Louisiana, Arkansas, North Carolina, Oklahoma, Arizona, California, Missouri and Ohio, with 91% of our customers located within our top 20 primary systems. 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 Earnings Release are known as "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). These forward-looking statements include, but are not limited to, statements about our plans, objectives, expectations and intentions and other statements contained in this Earnings Release that are not historical facts. When used in this Earnings 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 the factors set forth below:

  • competition for video, high-speed Internet and telephone customers;
  • our ability to achieve anticipated customer and revenue growth and to successfully introduce new products and services;
  • our ability to complete our capital investment plans on time and on budget;
  • the effects of economic conditions or other factors which may negatively affect our customers' demand for our products or services;
  • increased difficulty negotiating programming and retransmission agreements on favorable terms, if at all, resulting in increased costs to us and/or the loss of popular programming;
  • increasing programming costs and delivery expenses related to our products and services;
  • changes in consumer preferences, laws and regulations or technology that may cause us to change our operational strategies;
  • our ability to effectively integrate acquisitions and to maximize expected operating efficiencies from our acquisitions;
  • our substantial indebtedness;
  • the restrictions contained in our financing agreements;
  • our ability to generate sufficient cash flow to meet our debt service obligations;
  • the process of integrating us into the Altice Group and expected synergies from the Altice Acquisition;
  • fluctuations in interest rates which may cause our interest expense to vary from quarter to quarter; and
  • other risks and uncertainties, including those listed under the caption "Risk Factors" in our Annual Report for the year ended December 31, 2015 which is available on our website (suddenlink.com).

You should not place undue reliance on such forward-looking statements, which are based on the information currently available to us and speak only as of the date of this Earnings Release. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, changes in our expectations or otherwise. However, your attention is directed to any further disclosures made on related subjects in our subsequent reports furnished to holders of our notes.


Tables

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

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

  Three Months Ended    
  March 31, Percent  
  Successor
2016
Predecessor
2015
Change  
  Actual Actual    
Revenues:        
Video $ 286,586   $ 282,127   1.6 %  
High Speed Internet 241,448   206,317   17.0 %  
Telephone 51,841   52,450   -1.2 %  
Advertising Sales 20,887   20,054   4.2 %  
Other 26,828   27,302   -1.7 %  
Total Revenues 627,590   588,250   6.7 %  
         
Costs and Expenses:        
Operating (excluding depreciation and amortization) 231,238   228,745   -1.1 %  
Selling, general and administrative (excluding non-cash share based compensation expense) 140,882   137,521   -2.4 %  
Operating costs and expenses 372,120   366,266   -1.6 %  
         
Adjusted EBITDA 255,470   221,984   15.1 %  
Adjusted EBITDA Margin (a) 40.7% 37.7%    
         
Depreciation and amortization 200,915   130,993   -53.4 %  
Non-cash share based        
compensation expense 0   10,579   100.0 %  
(Gain)/Loss on disposal of cable assets (26 ) 685   103.8 %  
         
Income from operations 54,581   79,727   -31.5 %  
         
Interest expense, net (96,883 ) (60,907 ) -59.1 %  
(Loss)/income before income taxes (42,302 ) 18,820   -324.8 %  
Benefit/(provision) for income taxes 13,446   (9,435 ) 242.5 %  
         
Net (loss)/income $ (28,856 ) $ 9,385   -407.5 %  

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


TABLE 2
Cequel Communications Holdings I, LLC
Condensed Consolidated Balance Sheets
(in thousands)
(unaudited)

  Successor   Successor
  Mar 31, 2016   Dec 31, 2015
ASSETS      
Cash and cash equivalents $ 153,952     $ 80,456  
Accounts receivable, net 191,368     192,667  
Deferred tax asset 19,909     20,866  
Prepaid expenses and other assets 22,000     23,445  
Total current assets 387,229     317,434  
       
Property, plant and equipment, net 2,208,517     2,224,112  
Intangible assets, net 8,004,893     8,116,828  
Other long-term assets, net 5,149     5,368  
Total assets $ 10,605,788     $ 10,663,742  
       
LIABILITIES AND MEMBER'S EQUITY      
Accounts payable and accrued expenses $ 233,160     $ 211,518  
Deferred revenue 163,456     157,764  
Current portion of long-term debt 8,154     105,129  
Other current liabilities 61,048     90,376  
Total current liabilities 465,818     564,787  
       
Long-term debt, less current portion 6,123,113     6,020,752  
Deferred tax liabilities 1,915,012     1,932,369  
Other long-term liabilities 3,252     3,683  
Total liabilities 8,507,195     8,521,591  
       
Total member's equity 2,098,593     2,142,151  
Total liabilities and member's equity $ 10,605,788     $ 10,663,742  

TABLE 3
Cequel Communications Holdings I, LLC
Condensed Consolidated Statements of Cash Flows (unaudited)
(in thousands)

  Three Months Ended  
  March 31,  
  Successor
2016
Predecessor
2015
 
       
Net cash provided by operating activities $ 163,949   $ 149,934    
Net cash used in investing activities (65,806 ) (135,783 )  
Net cash used in financing activities (24,647 ) (14,555 )  
Increase/(Decrease) in cash and cash equivalents 73,496   (404 )  
Cash and cash equivalents, beginning of period 80,456   146,922    
Cash and cash equivalents, end of period $ 153,952   $ 146,518    

TABLE 4
Cequel Communications Holdings I, LLC
Capital Expenditures (unaudited)
(in thousands)

  Three Months Ended  
  March 31,  
  Successor
2016
Predecessor
2015
 
       
Customer premise equipment $ 26,544   $ 43,285    
Scalable infrastructure 2,434   29,180    
Line extensions 5,033   8,808    
Upgrade/rebuild 499   3,753    
Commercial 5,537   5,227    
Support capital 33,868   44,690    
Total capital expenditures $ 73,915   $ 134,943    
Changes in accounts payable and accrued expenses related to capital expenditures (7,711 ) (2,810 )  
Total capital purchases $ 66,204   $ 132,133    

TABLE 5
Cequel Communications Holdings I, LLC
Summary Operations Statistics (unaudited)
Approximate as of:

  Mar 31, 2016 Dec 31, 2015 Mar 31, 2015
  Actual Actual Actual
Revenue Generating Units (RGU):      
Basic video customers (a) 1,084,900   1,092,800   1,132,000  
Residential high-speed Internet customers (b) 1,253,400   1,223,100   1,183,600  
Residential telephone customers (c) 591,700   576,500   557,300  
Total PSUs (d) 2,930,000   2,892,400   2,872,900  
Digital video customers (e) 888,500   880,000   873,700  
Total RGUs (f) 3,818,500   3,772,400   3,746,600  
       
Commercial data (g) 74,600   72,300   65,800  
Commercial telephone (h) 49,000   47,500   42,200  
       
Total PSUs, including commercial (i) 3,053,600   3,012,200   2,980,900  
Total RGUs, including commercial (j) 3,942,100   3,892,200   3,854,600  
       
Quarterly net customer additions (losses): Actual Actual Actual
Basic video customers (7,900 ) (1,300 ) (6,400 )
Residential high-speed Internet customers 30,300   20,700   34,500  
Residential telephone customers 15,200   15,200   9,600  
Total PSUs 37,600   34,600   37,700  
Digital video customers 8,500   9,300   1,800  
Total RGUs 46,100   43,900   39,500  
       
Commercial data 2,300   2,100   2,100  
Commercial telephone 1,500   1,800   2,200  
       
Total PSUs, including commercial 41,400   38,500   42,000  
Total RGUs, including commercial 49,900   47,800   43,800  
       
Average Revenue per Unit (ARPU): Actual Actual Actual
Total revenue per basic video customer (k) $ 192.22   $ 188.45   $ 172.73  
Residential revenue per residential      
customer relationship (l) $ 115.10   $ 113.53   $ 110.68  
Total revenue per customer relationship (m) $ 132.65   $ 132.36   $ 128.14  
       
Residential Customer Relationships: Actual Actual Actual
Total customer relationships (n) 1,489,200   1,467,000   1,451,800  
Double play relationships (o) 518,100   521,600   532,800  
Double play penetration (p) 34.8 % 35.6 % 36.7 %
Triple play relationships (q) 422,500   410,700   401,800  
Triple play penetration (r) 28.4 % 28.0 % 27.7 %
Total bundled customers (s) 940,600   932,300   934,600  
Bundled penetration (t) 63.2 % 63.6 % 64.4 %
       
Non-video customer relationships (u) 481,900   456,600   404,400  
Non-video as a % of total      
customer relationships (v) 32.4 % 31.1 % 28.0 %
       
Quarterly net additions (losses): Actual Actual Actual
Total customer relationships 22,200   12,800   24,600  
Double play relationships (3,500 ) (4,400 ) 4,400  
Triple play relationships 11,800   13,400   5,000  
Total bundled customers 8,300   9,000   9,400  
Non-video customer relationships 25,300   13,500   29,600  
       
Estimated Customer Penetration: Actual Actual Actual
Estimated basic penetration (w) 33.7 % 34.0 % 35.7 %
Estimated digital penetration (x) 81.9 % 80.5 % 77.2 %
Estimated residential high-speed      
Internet penetration (y) 40.0 % 39.1 % 38.3 %
Estimated residential telephone penetration (z) 21.8 % 21.3 % 21.0 %
       
Commercial Customer Relationships: Actual Actual Actual
Total customer relationships (aa) 100,500   98,300   91,700  
Double play relationships (ab) 38,400   37,300   33,600  
Double play penetration (ac) 38.2 % 37.9 % 36.6 %
Triple play relationships (ad) 13,400   13,100   12,000  
Triple play penetration (ae) 13.3 % 13.3 % 13.1 %
Total bundled customers (af) 51,800   50,400   45,600  
Bundled penetration (ag) 51.5 % 51.3 % 49.7 %
       
Quarterly net additions: Actual Actual Actual
Total customer relationships 2,200   2,200   1,800  
Double play relationships 1,100   1,100   1,400  
Triple play relationships 300   400   500  
Total bundled customers 1,400   1,500   1,900  

(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) 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 data customers, including small and medium sized commercial cable modem accounts, customers who take our broadband service optically, via fiber connections, and customers who receive our services via bulk Ethernet.

(c) 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.

(d) Total primary service units ("PSUs") represents the sum of basic video, residential high-speed Internet and residential telephone customers, not counting additional outlets within one household. This statistic is computed in accordance with guidelines of the National Cable and Telecommunications Association ("NCTA").

(e) Digital video customers include all basic video customers that have one or more digital set-top boxes or cable cards deployed.

(f) Total revenue generating units ("RGUs") represents the sum of basic video, digital video, residential high-speed Internet and residential telephone customers, not counting additional outlets within one household. This statistic is computed in accordance with guidelines of the NCTA.

(g) Commercial data customers consist of commercial accounts that receive high-speed Internet service via a cable modem and commercial accounts that receive broadband service optically, via fiber connections.

(h) Commercial telephone customers are commercial accounts that subscribe to our telephone service.

(i) Total PSUs, including commercial, represents the sum of total PSUs, commercial data and commercial telephone customers.

(j) Total RGUs, including commercial, represents the sum of basic video, digital video, residential high-speed Internet, residential telephone, commercial data and commercial telephone customers.

(k) 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.

(l) Average residential revenue per residential customer relationship represents the total residential revenue for a quarter, divided by three, divided by the average residential customer relationships for the quarter.

(m) Average revenue per customer relationship represents the total revenue for a quarter, divided by three, divided by the average total customer relationships for the quarter.

(n)Residential customer relationships represent the number of residential customers who pay for 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.

(o) Residential double play customer numbers reflect residential customers who subscribe to two of our core services (video, high-speed Internet and telephone).

(p) Residential double play penetration represents double play customers as a percentage of customer relationships.

(q) Residential triple play customer numbers reflect residential customers who subscribe to all three of our core services (video, high-speed Internet and telephone).

(r) Residential triple play penetration represents triple play customers as a percentage of customer relationships.

(s) Total residential bundled customers represent the sum of residential double play and residential triple play customers.

(t) Total residential bundled penetration represents the sum of residential double play and residential triple play residential customers as a percentage of customer relationships.

(u) Non-video customer relationships represents 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

(v) Non-video as a percent of total customer relationships represents non-video customer relationships divided by total customer relationships.

(w) Estimated basic penetration is calculated as basic video customers divided by the estimated total homes passed of the Company.

(x) Estimated digital penetration is calculated as digital video customers divided by basic video customers.

(y) 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.

(z) 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.

(aa) Commercial customer relationships represent the number of commercial customers who pay for at least one level of service, encompassing video, high-speed data or telephone services, without regard to the number of services purchased. For example, a commercial customer who purchases only high-speed data service and no video service will count as one customer relationship, and a commercial customer who purchases both basic video and high-speed data services will also count as only one customer relationship. National carrier accounts are excluded from customer relationships.

(ab) Commercial double play customer numbers reflect commercial customers who subscribe to two of our core services (video, high-speed data and telephone).

(ac) Commercial double play penetration represents double play commercial customers as a percentage of customer relationships.

(ad) Commercial triple play customer numbers reflect commercial customers who subscribe to all three of our core services (video, high-speed data and telephone).

(ae) Commercial triple play penetration represents triple play commercial customers as a percentage of customer relationships.

(af) Total commercial bundled customers represent the sum of commercial double play and commercial triple play customers.

(ag) Total commercial bundled penetration represents the sum of commercial double play and commercial triple play residential customers as a percentage of customer relationships.


TABLE 6
Cequel Communications Holdings I, LLC
Calculation of Free Cash Flow (unaudited)
(in thousands)

  Three Months Ended  
  March 31,  
  Successor
2016
Predecessor
2015
 
       
Adjusted EBITDA $ 255,470   $ 221,984    
Capital purchases (66,204 ) (132,133 )  
Change in accounts payable and accrued expenses related to capital expenditures (7,711 ) (2,810 )  
Cash interest expense (85,467 ) (61,371 )  
Free Cash Flow $ 96,088   $ 25,670    

TABLE 7
Cequel Communications Holdings I, LLC
Reconciliation of Net Loss/Income to Adjusted EBITDA (unaudited)
(in thousands)

    Three Months Ended  
    March 31,  
    Successor
2016
Predecessor
2015
 
         
Net (loss)/income $ (28,856 ) $ 9,385    
  Add back:      
  Interest expense, net 96,883   60,907    
  (Benefit)/provision for income taxes (13,446 ) 9,435    
  Depreciation and amortization 200,915   130,993    
  Non-cash share based compensation 0   10,579    
  (Gain)/Loss on disposal of cable assets (26 ) 685    
Adjusted EBITDA $ 255,470   $ 221,984    

TABLE 8
Cequel Communications Holdings I, LLC
Reconciliation of Net Cash from Operating Activities to Free Cash Flow (unaudited)
(in thousands)

  Three Months Ended  
  March 31,  
  Successor
2016
Predecessor
2015
 
       
Net cash provided by operating activities $ 163,949   $ 149,934    
Add back:      
Capital purchases (66,204 ) (132,133 )  
Change in accounts payable and accrued expenses related to capital expenditures (7,711 ) (2,810 )  
Cash income tax expense 2,955   825    
Interest income (28 ) (47 )  
Changes in assets and liabilities, net 3,127   9,901    
Free Cash Flow $ 96,088   $ 25,670    

TABLE 9
Cequel Communications Holdings I, LLC
Reconciliation of Cash Interest Expense (unaudited)
(in thousands)

  Three Months Ended  
  March 31,  
  Successor
2016
Predecessor
2015
 
       
Interest expense, net $ 96,883   $ 60,907    
Add: interest income 27   46    
Add: non-cash interest expense (11,443 ) 418    
Cash interest expense $ 85,467   $ 61,371    

Source:  Cequel Communications Holdings I, LLC

Cequel Contact Information

Mike Pflantz
SVP, Corporate Finance

314-315-9341


HUG#2011522