Charter Reports Third Quarter Financial and Operating Results

Charter Communications, Inc. (NASDAQ:CHTR) (along with its subsidiaries, the "Company” or "Charter”) today reported financial and operating results for the third quarter and first nine months of 2008.

• Third quarter revenues of $1.636 billion grew 7.8% year-over-year on a pro forma¹ basis and 7.3% on an actual basis, primarily driven by increases in telephone and high-speed Internet (HSI) revenues.
• Third quarter adjusted EBITDA² of $563 million increased 10.8% year-over-year on a pro forma basis and 10.4% on an actual basis.
• Third quarter adjusted EBITDA margin of 34.4% increased 90 basis points year-over-year on a pro forma basis.
• Total ARPU³ for the quarter increased 11.1% year-over-year to $106.07, driven by increased sales of The Charter Bundle^TM, advanced services growth and upgrading customers to higher service tiers.
• Revenue generating units (RGUs) increased 7.0% year-over-year, with 205,400 net additions during the third quarter of 2008.

"Our financial and operational performance in the third quarter once again demonstrates the Company’s disciplined approach toward increasing bundle penetration and focus on continuously improving our customers’ experiences,” said Neil Smit, President and Chief Executive Officer.

Key Operating Results

All of the following customer growth and ARPU statistics are presented on a pro forma basis. RGUs increased 205,400 during the third quarter of 2008, representing more than a 50 percent increase in net adds versus the year-ago quarter. As of September 30, 2008, Charter served approximately 5,544,400 customers and the Company’s 12,387,100 RGUs were comprised of 5,136,100 basic video; 3,118,500 digital video; 2,858,200 HSI, and 1,274,300 telephone customers.

• Telephone customers increased by approximately 98,800 during the third quarter of 2008 and the number of telephone customers is up nearly 60% year-over-year. Telephone penetration is now 12.4% of telephone homes passed.
• HSI customers increased by approximately 70,900 in the third quarter of 2008, a 32% higher net gain than during the year-ago quarter. While HSI customers continued to climb, ARPU remained essentially flat with last year at $40.53.
• Digital video customers increased by approximately 61,600 and basic video customers decreased by 25,900 during the third quarter. Video ARPU was $58.87 for the third quarter of 2008, up 6.6% year-over-year.

Third quarter 2008 total ARPU increased 11.1% to $106.07 from the same period in 2007, driven primarily by an increase in bundled customers, advanced services growth, and upgrading customers to higher service tiers.

Third Quarter Results – Pro forma

Third quarter revenues were $1.636 billion, a pro forma increase of 7.8%, or $119 million. The increase resulted primarily from increases in telephone and HSI revenues.

Telephone revenues were $144 million, a 54.8% increase over third quarter 2007 pro forma telephone revenues, driven by a larger telephone customer base. HSI revenues were $342 million, up 8.2% year-over-year on a pro forma basis, due to an increased number of customers. Video revenues were $867 million, up 3.2% year-over-year on a pro forma basis, primarily as a result of digital and advanced services revenue growth, partially offset by a decline in basic video customers. Commercial revenues rose to $100 million, a 16.3% increase on a pro forma basis, resulting from increased sales of the Charter Business Bundle® primarily to small and medium-size businesses.

Operating expenses, which include programming, service and advertising sales costs, were $710 million, a 5.3% increase year-over-year on a pro forma basis, reflecting annual programming rate increases, increased labor costs to support improved service levels, and growth of the Company’s telephone business and other advanced services. Selling, general, and administrative expenses were $363 million, up 8.4% on a pro forma basis compared to the year-ago quarter, reflecting expenditures to further improve the customer experience and increased marketing expenditures targeted at growing and retaining customers.

Adjusted EBITDA totaled $563 million for the third quarter of 2008, a pro forma increase of 10.8% compared to the year-ago quarter. The third quarter adjusted EBITDA margin was 34.4%, up from 33.5% in the year-ago quarter on a pro forma basis.

Net cash flows from operating activities for the third quarter of 2008 were $242 million, compared to $207 million for the third quarter of 2007 on a pro forma basis. The increase in cash flows from operating activities is primarily the result of the increase in HSI and telephone revenues driven by the bundle and improved cost efficiencies.

Nine Months Results – Pro forma

For the nine months ended September 30, 2008, revenues were $4.823 billion, a pro forma increase of $400 million, or 9.0%, primarily from telephone and HSI revenue growth.

Telephone revenues increased to $399 million from pro forma revenues of $236 million a year ago, up 69.1% year-over-year. HSI revenues increased to $1.009 billion, up 10.2% year-over-year on a pro forma basis. Video revenues were $2.599 billion, an increase of 3.0% year-over-year on a pro forma basis. Commercial revenues increased to $289 million, up 16.1% on a pro forma basis.

Operating expenses for the nine months ended September 30, 2008 were $2.089 billion, an increase of 7.6% year-over-year on a pro forma basis; and selling, general, and administrative expenses were $1.035 billion, up 9.8% on a pro forma basis.

Adjusted EBITDA totaled $1.699 billion for the first nine months of 2008, a pro forma increase of 10.5% compared to the same nine-month period in 2007.

Net cash flows provided by operating activities for the first nine months of 2008 were $410 million, compared to $319 million for the first nine months of 2007 on a pro forma basis. The increase in cash flows provided by operating activities is primarily the result of increased sales of our bundled services and improved cost efficiencies, partially offset by changes in operating assets and liabilities that provided less cash in 2008 than the corresponding period in 2007.

Third Quarter Results – Actual

Third quarter revenues increased 7.3% and operating costs and expenses increased 5.7% compared to year-ago results. Adjusted EBITDA for the third quarter of 2008 rose 10.4% compared to the year-ago period.

Income from operations was $208 million in the third quarter of 2008, compared to $107 million in the third quarter of 2007. Net loss for the third quarter of 2008 was $322 million, or $0.86 per common share. For the third quarter of 2007, Charter reported a net loss of $407 million and net loss per common share of $1.10. The increase in income from operations and decrease in net loss resulted primarily from increased sales of our bundled services and improved cost efficiencies. Additionally, the Company recorded a $56 million asset impairment charge in 2007 that did not reoccur in 2008.

Expenditures for property, plant, and equipment for the third quarter of 2008 were $288 million, compared to third quarter 2007 expenditures of $311 million. The decrease in capital expenditures primarily reflects year-over-year decreases in scalable infrastructure and support capital.

Net cash flows from operating activities for the third quarter of 2008 were $242 million, compared to $209 million for the third quarter of 2007.

Nine Months Results – Actual

Revenues for the nine months ended September 30, 2008 increased 8.4% year-over-year. Operating costs and expenses rose 7.6% compared to year-ago actual results. Adjusted EBITDA for the first nine months of 2008 grew 9.9% compared to the year-ago period.

Income from operations increased to $643 million for the first nine months of 2008, compared to $463 million in the first nine months of 2007. Net loss for the first nine months of the year was $956 million, or $2.57 per common share. For the first nine months of 2007, Charter reported a net loss of $1.148 billion and net loss per common share of $3.12. The increase in income from operations and the decrease in net loss are primarily attributable to revenue growth from HSI and telephone driven by the bundle, as well as improved cost efficiencies and a decline in non-operating expenses.

Capital expenditures for property, plant, and equipment for the nine months ended September 30, 2008 were $938 million, compared to $890 million in 2007. The increase in capital expenditures primarily reflects year-over-year increases in customer premise equipment. Charter expects that capital expenditures in the year 2008 will total approximately $1.2 billion, with over 75% of that amount directed toward success-based activities.

Net cash flows provided by operating activities for the first nine months of 2008 were $410 million, compared to $327 million for the first nine months of 2007. The increase in cash flows provided by operating activities is primarily the result of revenue growth from HSI and telephone driven by the bundle, as well as improved cost efficiencies, partially offset by changes in operating assets and liabilities that provided less cash in 2008 than the corresponding period in 2007.

As of September 30, 2008, Charter had $21.031 billion in long-term debt. Cash on hand and availability under the Company’s revolving credit facility totaled approximately $1.3 billion on September 30, 2008, none of which was limited by covenant restrictions.

Use of Non-GAAP Financial Metrics

The Company uses certain measures that are not defined by Generally Accepted Accounting Principles ("GAAP”) to evaluate various aspects of its business. Adjusted EBITDA, pro forma adjusted EBITDA, and free cash flow are non-GAAP financial measures and should be considered in addition to, not as a substitute for, net cash flows from operating activities reported in accordance with GAAP. These terms, as defined by Charter, may not be comparable to similarly titled measures used by other companies.

Adjusted EBITDA is defined as income from operations before depreciation and amortization, impairment charges, stock compensation expense, and other operating expenses, such as special charges and loss on sale or retirement of 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 non-recurring items, and is unaffected by the Company’s capital structure or investment activities. Adjusted EBITDA and pro forma adjusted EBITDA are liquidity measures used by Company management and its board of directors to measure the Company’s ability to fund operations and its financing obligations. For this reason, it is a significant component of Charter’s annual incentive compensation program. 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 for the Company. Company management evaluates these costs through other financial measures.

Free cash flow is defined as net cash flows from operating activities, less capital expenditures and changes in accrued expenses related to capital expenditures.

The Company believes that adjusted EBITDA, pro forma adjusted EBITDA, and free cash flow provide information useful to investors in assessing Charter’s ability to service its debt, fund operations, and make additional investments with internally generated funds. In addition, adjusted EBITDA generally correlates to the leverage ratio calculation under the Company’s credit facilities or outstanding notes to determine compliance with the covenants contained in the facilities and notes (all such documents have been previously filed with the United States Securities and Exchange Commission). Adjusted EBITDA and pro forma adjusted EBITDA, as presented, include management fee expenses in the amount of $33 million and $32 million for the three months ended September 30, 2008 and 2007, respectively, which expense amounts are excluded for the purposes of calculating compliance with leverage covenants.

In addition to the actual results for the three and nine months ended September 30, 2008 and 2007, we have provided pro forma results in this release for the three and nine months ended September 30, 2007. We believe these pro forma results facilitate meaningful analysis of the results of operations. Pro forma results in this release reflect certain sales and acquisitions of cable systems in 2007 as if they had occurred as of January 1, 2007. Pro forma statements of operations for the three and nine months ended September 30, 2007; and pro forma customer statistics as of December 31, 2007 and September 30, 2007, are provided in the addendum of this news release.

Additional Information Available on Website

A slide presentation to accompany the third quarter conference call will be available on the Investor & News Center of our website at www.charter.com in the "Presentations/Webcasts” section. Pro forma data, including disclosure concerning the pro forma data and the basis upon which it was calculated, for each quarter of 2007, can also be found on the Investor & News Center in the "Pro forma Information” section.

Conference Call

The Company will host a conference call on Thursday, November 6, 2008, at 9:00 a.m. Eastern Time (ET) related to the contents of this release.

The conference call will be webcast live via the Company’s website at www.charter.com. Access the webcast by clicking on "About Charter” at the top of the home page, then Investor & News Center. Participants should go to the call link at least 10 minutes prior to the start time to register. The call will be archived on the website beginning two hours after its completion. Accompanying slides will also be available on the site.

Those participating via telephone should dial 888/233-1576 no later than 10 minutes prior to the call. International participants should dial 706/643-3458. The passcode for the call is 70440618.

A replay of the call will be available at 800/642-1687 or 706/645-9291 beginning two hours after the completion of the call through the end of business on November 13, 2008. The passcode for the replay is 70440618.

About Charter Communications®

Charter Communications, Inc. is a leading broadband communications company and the third-largest publicly traded cable operator in the United States. Charter provides a full range of advanced broadband services, including advanced Charter Digital Cable® video entertainment programming, Charter High-Speed® Internet access, and Charter Telephone®. Charter Business™ similarly provides scalable, tailored, and cost-effective broadband communications solutions to business organizations, such as business-to-business Internet access, data networking, video and music entertainment services, and business telephone. Charter’s advertising sales and production services are sold under the Charter Media® brand. More information about Charter can be found at www.charter.com.

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS:

This release includes 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, regarding, among other things, our plans, strategies and prospects, both business and financial. Although we believe that our plans, intentions and expectations reflected in or suggested by these forward-looking statements are reasonable, we cannot assure you that we will achieve or realize these plans, intentions or expectations. Forward-looking statements are inherently subject to risks, uncertainties and assumptions including, without limitation, the factors described under "Risk Factors" from time to time in our filings with the Securities and Exchange Commission ("SEC”). Many of the forward-looking statements contained in this release may be identified by the use of forward-looking words such as "believe," "expect," "anticipate," "should," "planned," "will," "may," "intend," "estimated," "aim," "on track," "target," "opportunity" and "potential," among others. Important factors that could cause actual results to differ materially from the forward-looking statements we make in this release are set forth in other reports or documents that we file from time to time with the SEC, and include, but are not limited to:

• the availability, in general, of funds to meet interest payment obligations under our debt and to fund our operations and necessary capital expenditures, either through cash flows from operating activities, further borrowings or other sources and, in particular, our ability to fund debt obligations (by dividend, investment or otherwise) to the applicable obligor of such debt;
• our ability to comply with all covenants in our indentures and credit facilities, any violation of which, if not cured in a timely manner, could trigger a default of our other obligations under cross-default provisions;
• our ability to repay debt prior to or when it becomes due and/or successfully access the capital or credit markets to refinance that debt through new issuances, exchange offers or otherwise, including restructuring our balance sheet and leverage position, especially given recent volatility and disruption in the capital and credit markets;
• the impact of competition from other distributors, including incumbent telephone companies, direct broadcast satellite operators, wireless broadband providers, and digital subscriber line ("DSL”) providers;
• difficulties in growing, further introducing, and operating our telephone services, while adequately meeting customer expectations for the reliability of voice services;
• our ability to adequately meet demand for installations and customer service;
• our ability to sustain and grow revenues and cash flows from operating activities by offering video, high-speed Internet, telephone and other services, and to maintain and grow our customer base, particularly in the face of increasingly aggressive competition;
• our ability to obtain programming at reasonable prices or to adequately raise prices to offset the effects of higher programming costs;
• general business conditions, economic uncertainty or downturn, including the recent volatility and disruption in the capital and credit markets and the significant downturn in the housing sector and overall economy; and
• the effects of governmental regulation on our business.

All forward-looking statements attributable to us or any person acting on our behalf are expressly qualified in their entirety by this cautionary statement. We are under no duty or obligation to update any of the forward-looking statements after the date of this release.

¹ Pro forma results are described below in the "Use of Non-GAAP Financial Metrics” section and are provided in the addendum of this news release.

² Adjusted EBITDA is defined in the "Use of Non-GAAP Financial Metrics” section and is reconciled to net cash flows from operating activities in the addendum of this news release.

³ Average revenue per basic customer.