Suddenlink Reports Third Quarter and Full Year 2012 Financial and Operating Results

 

FOR IMMEDIATE RELEASE

ST. LOUIS (November 9, 2012) - Cequel Communications Holdings I, LLC ("Cequel," and together with its subsidiaries, the "Company" or "Suddenlink") today reported financial and operating results for the three and nine months ended September 30, 2012. In addition, the Company announced that it has received substantially all approvals for the acquisition of equity interests announced July 18, 2012, and currently expects that acquisition to close this month.

"Our third quarter performance adds to our long track record of successful operating results, with pro forma revenue growth of 6.1 percent; adjusted EBITDA growth of 7.6 percent; and ARPU growth of 9.6 percent," said Suddenlink Chairman and Chief Executive Officer Jerry Kent. "We are well positioned to build on this track record as we continue to improve customer satisfaction ratings and near completion of the Company's acquisition by management and new investors."

Third Quarter Highlights

Operating results and metrics and year-over-year changes described below are presented on a pro forma basis to include the acquisition of all of the issued and outstanding capital stock of NPG Cable, Inc., Mercury Voice and Data Company and NPG Digital Phone, Inc. (collectively, "NPG Cable") on April 1, 2011 and exclude the sale of News-Press3Now ("NP3Now") on June 1, 2012, as if the transactions had been consummated on January 1, 2011.

  • Third quarter revenues of $511.9 million grew 6.1% compared to the third quarter of the prior year. Revenues for the first nine months of 2012 of $1,530.1 million grew 6.3% compared to the first nine months of the prior year. 

  • Adjusted EBITDA (as defined herein) for the third quarter of 2012 of $191.2 million grew 7.6% compared to the third quarter of the prior year. Adjusted EBITDA margin for the third quarter 2012 was 37.3%, an increase of 50 basis points from the third quarter 2011. Adjusted EBITDA for the first nine months of 2012 was $571.3 million, an increase of 8.2% compared to the first nine months of 2011.  

  • Free Cash Flow (as defined herein) of $35.1 million for the third quarter 2012 grew $19.9 million compared to the third quarter 2011 of $15.2 million, an increase of 131.1%. Free cash flow for the nine months ended September 30, 2012 of $79.7 million, represents an increase of $69.8 million compared to the first nine months of 2011. 

  • Total customer relationships were 1,379,600 at September 30, 2012, an increase of 2,800 year-over-year. RGUs were 3,529,500, an increase of 144,300, or 4.3% year-over-year. 

  • Total average monthly revenue per basic video customer ("ARPU") for the third quarter was $138.86, an increase of 9.6% compared to the third quarter of the prior year. 

  • Bundled residential customers represented 64.1% of total residential customer relationships at September 30, 2012, an increase from 61.0% at September 30, 2011, primarily from growth in triple play residential customer relationships, which represented 24.7% of total residential customer relationships at September 30, 2012, versus 22.8% at September 30, 2011. 

  • Non-video residential customers represented 17.5% of total residential customer relationships at September 30, 2012, an increase of 15.1% compared to the prior year. 

  • Advertising revenues increased 21.5% versus the third quarter of 2011, due largely to higher national and local advertising sales revenue, primarily from increased political advertising, as well as increased automotive advertising. 

  • Commercial revenue grew 16.1% versus the third quarter of 2011, including 22.1% year-over-year growth in our commercial high-speed data and telephone revenues on a combined basis.  

  • Project Imagine, our three-year bandwidth expansion program, was completed as of September 30, 2012. Total capital expenditures for Project Imagine, including success based capital, was consistent with the previously announced guidance of $350.0 million for the three-year program. 

Third Quarter 2012 Compared to Third Quarter 2011

Third quarter 2012 revenues rose 6.1%, largely attributable to the increase in residential high-speed Internet, telephone and advanced digital video revenues, growth in revenues from our commercial business, including carrier services and growth in advertising revenue during the trailing twelve months. Residential revenue growth resulted from increases in the number of new telephone, high-speed Internet and digital video customers, an increase in the penetration of existing customers for these services, the impact of video and high-speed Internet rate increases, and incremental service revenues from high definition television ("HDTV") and digital video recorded ("DVR") services as more customers purchased advanced video services from us. Offsetting this residential growth in part was a decrease in revenue due to basic video customer losses, the impact of bundling and promotional discounts and digital customers purchasing fewer digital tiers of service during the trailing twelve months. Revenues from our commercial business grew due to increases in commercial high-speed data and telephone customers and from increases in cell tower and backhaul revenues from carrier customers. Advertising revenue increased primarily due to increased political advertising.  

In the first quarter of 2012, we reclassified certain revenue items from the other revenue category to the Video service, High-speed Internet service and Telephone service categories, as applicable, to better align certain revenues historically categorized as other revenue with their related products. Video revenue now includes reclassified revenue related to converter and equipment rentals, retransmission pass through, franchise fee, copyright fee and other miscellaneous video revenues. High-speed Internet revenue now includes reclassified revenue related to home networking, modem and other data equipment rental. Telephone revenue now includes reclassified revenue related to telephone regulatory fees. Prior periods were reclassified to conform to the current presentation.

Video service revenues increased 1.6% due primarily to video rate increases, higher broadcast retransmission and franchise fee revenue and customer growth in our digital and advanced video services, including converter rental revenue for high-definition and DVR capable digital converters. Offsetting this growth, in part, were the year-over-year basic video customer losses and the impact of digital customers purchasing fewer digital tiers of service on average.

High-speed Internet service revenues rose 11.0% due primarily to an increase in residential high-speed Internet customers, growth in home networking revenues, the impact of residential rate increases, growth in our commercial high-speed data services to small and medium sized businesses and growth in carrier services, including fiber to the tower, and optical Internet and transport revenues.  

Telephone service revenues grew 11.8% due primarily to an increase in residential telephone customers and growth in our commercial telephone services to small and medium sized businesses, offset in part due to the impact of bundling and promotional discounts.

Advertising revenues increased 21.5% due largely to higher national and local advertising sales revenue, primarily from increased political advertising, as well as increased automotive advertising.

Other revenues increased 8.1% due primarily to increased administrative fee revenues, security service revenue and commercial installation revenue, offset in part by lower residential installation revenue.

Our commercial lines of business, embedded in the video, high-speed Internet, telephone service and other revenues 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 $66.2 million, or 12.9% of total revenue, in the third quarter of 2012, representing growth of 16.1% versus the third quarter of 2011. Our commercial high-speed data and telephone revenue grew 22.1% year-over-year on a combined basis.

Operating costs and expenses rose 5.2% due primarily to higher programming costs, broadcast retransmission consent expenses, increased net compensation and employee related costs, increased telephone service expenses, higher expenses associated with our ad sales business and increased marketing expenses, offset in part by lower third party call center expenses. In addition, the third quarter of 2011 included $0.8 million of non-recurring expenses associated with the purchase of NPG Cable, for which there was not a comparable expense for the three months ended September 30, 2012.

Adjusted EBITDA for the third quarter of 2012 of $191.2 million grew 7.6% compared to the third quarter of the prior year. Adjusted EBITDA margin for the third quarter 2012 was 37.3%, an increase of 50 basis points from the third quarter 2011. Adjusted EBITDA for the first nine months of 2012 was $571.3 million, an increase of 8.2% compared to the first nine months of 2011. Adjusted EBITDA margin for the first nine months of 2012 was 37.3%, an increase of 60 basis points. Excluding the impact of certain insignificant 2012 non-recurring expenses and  2011 non-recurring expenses primarily associated with the acquisition and integration of NPG Cable, Adjusted EBITDA for the third quarter of 2012 would have increased 7.0% compared to the third quarter of 2011, with Adjusted EBITDA margin of 37.4%, a 30 basis point improvement from the prior year. Additionally, Adjusted EBITDA for the nine months ended September 30, 2012 would have increased 8.5% compared to the nine months ended September 30, 2011, with Adjusted EBITDA margin of 37.9%, an 80 basis point improvement from the prior year.

Income from operations for the third quarter 2012 was $93.3 million, an increase of 28.8%, compared to $72.4 million for the third quarter 2011 due to revenue increases year-over-year outpacing operating, selling and administrative and depreciation and amortization expense increases.

Net income was $22.1 million for the third quarter 2012, compared to net loss of $5.2 million for the third quarter 2011.

Key Operating Metrics

At September 30, 2012, Suddenlink served approximately 1.4 million customers, and Suddenlink's RGUs were comprised of 1,230,300 basic video, 832,600 digital video, 996,800 residential high-speed Internet and 469,800 residential telephone customers. Suddenlink's 3.5 million RGUs as of September 30, 2012 increased 144,300, or 4.3%, over the prior year. In addition, as of September 30, 2012, we served approximately 51,000 commercial high-speed data and 22,600 commercial telephone customers, not included in our RGU totals.  

Approximately 64.1% of Suddenlink's residential customers subscribe to bundled services, compared to 61.0% a year ago. Approximately 341,300 of Suddenlink's residential customers receive video, high-speed Internet and telephone services as part of a triple play bundle, representing 24.7% of Suddenlink's total residential customer relationships. Growth of 27,500 triple play customers from the third quarter of 2011 represented an increase of 8.8%. Non-video customers of approximately 240,800 at September 30, 2012 represent 17.5% of total customer relationships, and grew 15.1% in the trailing twelve months.

Suddenlink's ARPU for the third quarter of 2012 was $138.86, an increase of 9.6% compared to the third quarter of 2011.

Basic video customers increased by approximately 200 customers, while digital video customers increased by approximately 24,900 customers during the third quarter of 2012. During the trailing twelve months, basic video customers decreased by approximately 38,000, or 3.0%, while digital video customers increased by approximately 79,000, or 10.5%. Estimated basic penetration at September 30, 2012, was 40.4% of estimated homes passed. Digital penetration of basic customers was 67.7%.

Residential high-speed Internet customers increased by approximately 17,400 during the third quarter of 2012, and increased 59,600, or 6.4%, during the trailing twelve months. At September 30, 2012, estimated residential high-speed Internet penetration was 33.7% of high-speed Internet capable homes passed.  During the third quarter of 2012, commercial high-speed data customers increased by approximately 1,100. During the trailing twelve months, commercial high-speed data customers increased by approximately 4,600, or 9.9%. These commercial customers are not included in total RGU counts.

Residential telephone customers grew by approximately 7,100 during the third quarter of 2012, and 43,700, or 10.3%, during the trailing twelve months. At September 30, 2012, estimated residential telephone penetration was 19.0% of telephone capable homes passed. During the third quarter of 2012, commercial telephone customers increased by approximately 1,400. During the trailing twelve months, commercial telephone customers increased by approximately 6,000, or 36.1%. These commercial customers purchase 2.9 lines on average and are not included in total RGU counts.

Liquidity and Capital Resources

The following discussion of liquidity and capital resources is presented on an actual basis and does not include historical pro forma adjustments reflecting the acquisition of NPG Cable in April 2011 and sale of NP3Now in June 2012.

At September 30, 2012, we had approximately $144.5 million of cash on hand, with $160.0 million of borrowings under our $500.0 million revolving credit facility and approximately $16.4 million of outstanding letters of credit, which reduced the availability under our revolving credit facility to approximately $323.6 million.

For the full year ended December 31, 2012, we expect capital expenditures, including capital spending associated with Project Imagine and related success based capital, to be within the range of $340.0 million to $350.0 million. The increase from previously announced guidance is due to opportunities in our commercial and carrier lines of business during the remainder of 2012. Capital expenditures inclusive of Project Imagine and related success based capital for the three months ended September 30, 2012 were $87.7 million, compared to $89.2 million for the three months ended September 30, 2011, and $280.6 million for the nine months ended September 30, 2012 compared to $288.9 million for the nine months ended September 30, 2011.

Project Imagine was completed as of September 30, 2012. Project Imagine provided additional capacity to launch video on demand services into new areas, additional capacity for high definition channels and increased Internet speeds for the Company's customers and capacity to launch telephone service in a few additional communities. Capital expenditures for Project Imagine, including success based capital, were approximately $16.1 million during the third quarter 2012 and $68.5 million for the nine months ended September 30, 2012. Total capital expenditures for Project Imagine, including success based capital, were consistent with the previously announced guidance of $350 million for the three-year program.

Net cash provided by operating activities increased to $162.1 million for the three months ended September 30, 2012, compared to $135.2 million for the three months ended September 30, 2011. This increase is due primarily to improved operating results, as well as net changes in current assets and liabilities due to the timing of payments for other payables and accrued expenses. Net cash flows used in investing activities decreased to $87.7 million for the three months ended September 30, 2012, compared to $89.2 million for the three months ended September 30, 2011, due primarily to lower purchases of property, plant and equipment. The net cash used in financing activities decreased to $6.5 million for the three months ended September 30, 2012, compared to $7.6 million for the three months ended September 30, 2011, due primarily to lower capital lease and other obligation payments.

Free Cash Flow for the three and nine months ended September 30, 2012 was $35.1 million and $79.7 million, respectively, compared to $15.2 million and $9.9 million for the three and nine months ended September 30, 2011, respectively. The increase in Free Cash Flow for the three and nine months ended September 30, 2012 as compared to 2011 is primarily due to improved operating results, as well as a decrease in capital expenditures and cash interest expense.

The Total Leverage Ratio (Consolidated Total Debt to Adjusted Pro Forma EBITDA) for Cequel, as defined in and calculated in accordance with the indenture (the "Indenture") governing Cequel's 8.625% Senior Notes due 2017 (the "Notes") was 5.40x at September 30, 2012.  

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 (defined herein) was 2.90x at September 30, 2012.

Sale of Cequel Holdings Equity Interests

On July 18, 2012, Cequel Corporation (the "Purchaser"), which is currently beneficially owned by affiliates of BC Partners ("BC Partners") and Canada Pension Plan Investment Board ("CPPIB"), the sellers party thereto and our manager entered into a Purchase and Sale Agreement (the "Purchase Agreement") with respect to the sale of equity interests in Cequel Holdings (the "Acquisition"). In connection with the Acquisition, Jerald L. Kent, our Chairman and Chief Executive Officer, Thomas P. McMillin, our Executive Vice President and Chief Operating Officer and Mary E. Meduski, our Executive Vice President and Chief Financial Officer, through certain management partnerships, are required to make certain equity contributions which will result in their having an equity interest in Cequel Corporation upon the closing of the Acquisition (collectively with BC Partners and CPPIB, the "Sponsors"). Pursuant to the Purchase Agreement, the Purchaser will purchase directly and indirectly all of the outstanding common equity interests in Cequel Holdings and cause all other equity interests in Cequel Holdings (including preferred equity interests), and rights to purchase equity interests in Cequel Holdings, to be retired, redeemed or otherwise terminated. The total purchase price for the Acquisition is approximately $2.485 billion, comprised of an aggregate of $1.985 billion of cash equity contributions by BC Partners, CPPIB and by certain of our executive officers and $500 million from subsidiaries of Cequel Holdings, funded from the net proceeds of the issuance of the 6.375% Notes (defined herein) and cash on hand. The total Acquisition value is approximately $6.6 billion comprised of the purchase price and approximately $4.1 billion of net liabilities of subsidiaries of Cequel Holdings that are being assumed. The Acquisition is expected to close prior to December 31, 2012.

In connection with the Acquisition, we are required to fund (i) $500 million to Cequel Holdings as payment for a portion of the purchase price for the Acquisition, (ii) transaction fees and expenses of Cequel Holdings relating to the Acquisition and (iii) additional payment amounts to the sellers under the Purchase Agreement if the Acquisition is not consummated prior to January 1, 2013. In addition, if the Acquisition is consummated, in April 2013 we expect to make a distribution of up to $65 million to Cequel Holdings, which will be used by Cequel Holdings to pay the Sponsors a deferred sponsor fee related to the Acquisition.

In connection with these payments and the Acquisition, we have received consent from the holders of the 8.625% Notes to an amendment to the Indenture which will (i) permit us to make an additional $400 million of restricted payments under the Indenture to Cequel Holdings from the proceeds of the issuance of the 6.375% Notes and (ii) reduce the restricted payment basket by $100 million at each of June 30, 2013 and September 30, 2013. The additional $400 million of restricted payments, together with existing availability under the restricted payment basket of the 8.625% Indenture, will be used by us to make a distribution to Cequel Holdings, which will use such amount to fund the $500 million to Cequel Holdings as payment for a portion of the purchase price for the Acquisition and Cequel Holdings' fees and expenses relating to the Acquisition.

In addition, in connection with the Acquisition, we received an acknowledgment from the lenders under the Credit Facility to a proposed amendment to the termination provisions of the Management Agreement. This amendment to the Management Agreement is expected to be entered into on the closing date of the Acquisition.

At close of the Acquisition, we will engage a third party to complete a valuation of our assets to assist us in determining our new enterprise value resulting from the transaction. We expect that this valuation will result in increases to the book value of long-lived assets, including property, plant and equipment, and intangible assets.

Senior Note Issuance

In connection with the Acquisition, on October 25, 2012, Cequel Communications Escrow I, LLC ("Cequel Escrow") and Cequel Communications Escrow Capital Corporation ("Cequel Escrow Capital" and with Cequel Escrow the "Escrow Issuers"), which are newly formed unrestricted subsidiaries of Cequel, issued $500.0 million aggregate principal amount of the 6.375% senior notes due 2020 (the "6.375% Notes") Interest is payable on the 6.375% Notes semi-annually in cash on March 15 and September 15 of each year, beginning on March 15, 2013.  The 6.375% Notes are the Escrow Issuers' senior unsecured obligations. Upon consummation of the Acquisition, Escrow LLC will be merged with and into Cequel and Escrow Corporation will be merged with and into Cequel Capital Corporation ("Cequel Capital"), which will result in these entities assuming each respective Escrow Issuer's obligations under the 6.375% Notes.

In connection with the issuance of the 6.375% Notes, on October 25, 2012, the Escrow Issuers and  Cequel entered into the Escrow and Security Agreement (the "Escrow Agreement"), whereby pending the consummation of the Acquisition, an amount equal to 100% of the issue price of the 6.375% Notes plus an amount equal to the interest that will accrue on the 6.375% Notes from the issue date of the 6.375% Notes to the latest escrow redemption date for the 6.375% Notes has been deposited by the Escrow Issuers into an escrow account established pursuant to the Escrow Agreement. If the Acquisition is not consummated by a specified date or upon the occurrence of certain other events, the Escrow Issuers will be required to mandatorily redeem the 6.375% Notes using the funds in the escrow account. Subject to the assumption of the 6.375% Notes by Cequel and Cequel Capital described above and certain other conditions, the funds in the escrow account will be released to Cequel.  Upon the release of the funds from the escrow account, Cequel will use the net proceeds from the sale of the 6.375% Notes and cash on hand to make a distribution to Holdings, which will use such distribution to fund the $500 million portion of the purchase price Holdings is required to fund in connection with the Acquisition and to pay Holdings' estimated fees and expenses relating to the Acquisition.

Pro forma for the issuance of the 6.375% Notes and the Acquisition, the Total Leverage Ratio (Consolidated Total Debt to Adjusted Pro Forma EBITDA) for Cequel, as defined in and calculated in accordance with the Indenture would have been 6.05x at September 30, 2012.  

Pro forma for the issuance of the 6.375% Notes and the Acquisition, the Total Leverage Ratio (Consolidated Total Debt to Adjusted Pro Forma EBITDA) for Cequel, as defined in and calculated in accordance with the indenture governing the 6.375% Senior Notes due 2020 would have been 5.98x at September 30, 2012.  

Agreement to Sell Broadband Systems

On October 3, 2012, the Company signed an agreement to sell systems in Indiana and Illinois serving approximately 3,000 basic video customers. The sale is expected to close in the fourth quarter of 2012.

Conference Call

As previously announced, the Company will host a conference call to discuss its third quarter results at 11:00 p.m. (Eastern Time) on Friday, November 9, 2012. The dial-in information for the earnings call is as follows: 

Within the United States 866-394-9561
International 281-312-0031
Password Cequel Communications
Conference ID 38048827
 

A replay of this earnings call will be available at the Investor Relations link on the Company's website (suddenlink.com) shortly after the conclusion of the call.

During the conference call, representatives of the Company may discuss and answer one or more questions concerning the Company's business and financial matters. The responses to these questions, as well as other matters discussed during the call, 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 September 30, 2012 which will be posted on the Company's website (suddenlink.com) on November 9, 2012. 

Current Report
A current report containing this earnings release will be posted on the Company's website (suddenlink.com) shortly after the conference call on November 9, 2012. 

Use of Non-GAAP Financial Measures

The Company uses certain measures that are not defined by Generally Accepted Accounting Principles ("GAAP") to evaluate various aspects of its business. Adjusted EBITDA and Free Cash Flow are non-GAAP financial measures. Adjusted EBITDA is a non-GAAP financial measure defined as net income/(loss), plus interest expense, provision for income taxes, depreciation, amortization, non-cash share based compensation expense, (gain)/loss on sale of cable assets, loss on termination of derivative instruments, changes in fair value of derivative instruments and loss on extinguishment of debt. Free Cash Flow is a non-GAAP financial measure defined as Adjusted EBITDA, less capital expenditures and cash interest expense. Adjusted EBITDA and Free Cash Flow 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 to Adjusted EBITDA is provided in Table 9. A reconciliation of Net Cash from Operating Activities to Free Cash Flow is provided in Table 10.

The Company believes that Adjusted EBITDA and Free Cash Flow provide information useful to investors in assessing the Company's ability to fund operations, service its debt and make additional investments from internally generated funds. In addition, Adjusted EBITDA generally correlates to the covenant calculations under the Credit Agreement.

Company Description

The Company, which does business as Suddenlink Communications, is the seventh largest cable operator in the United States. Suddenlink makes its services available over its advanced hybrid-fiber coaxial network to approximately 3.0 million homes in the United States as of September 30, 2012. Suddenlink services approximately 1.4 million customers as of September 30, 2012. The Company's customer base is clustered geographically with approximately 95% of our basic video customers located in the ten states of Texas, West Virginia, Louisiana, Arkansas, North Carolina, Oklahoma, Missouri, Arizona, California, Ohio, and 88% of our basic video 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 Press Release are known as "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. Forward-looking statements may relate to, among other things:

  • competition for video, high-speed Internet and telephone customers; 

  • the Company's ability to achieve anticipated customer and revenue growth and to successfully introduce new products and services; 

  • the effects of weak economic conditions or other factors which may negatively affect customer demand for the Company's products and services; 

  • increasing programming costs and delivery expenses related to the Company's products and services; 

  • changes in consumer preferences, laws and regulations or technology that may cause the Company to change its operational strategies; 

  • the Company's ability to effectively integrate acquisitions and to maximize expected operating efficiencies from its acquisitions; 

  • the Company's ability to complete its capital investment plans on time and on budget; 

  • the Company's substantial indebtedness; 

  • the restrictions contained in the Company's financing agreements; 

  • the Company's ability to generate sufficient cash flow to meet its debt service obligations;  

  • fluctuations in interest rates which may cause the Company's interest expense to vary from quarter to quarter; and  

  • other risks and uncertainties, including those listed under the caption "Risk Factors" in the Annual Report for the year ended December 31, 2011 and in the Quarterly Report for the quarter ended September 30, 2012. 

These forward-looking statements include, but are not limited to, statements about our plans, objectives, expectations and intentions and other statements contained in this Press Release that are not historical facts. When used in this Press 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 our plans, objectives, expectations and intentions and other factors. You should not place undue reliance on such forward-looking statements, which are based on the information currently available to the Company and speak only as of the date on which this Press Release is posted on the Company's website (www.suddenlink.com).  The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. However, your attention is directed to any further disclosures made on related subjects in the Company's subsequent reports furnished to holders of the Notes.

Tables:

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

TABLE 1
Cequel Communications Holdings I, LLC
Consolidated Statements of Operations (unaudited)
(in thousands)
      Three Months Ended     Nine Months Ended  
      September 30, Percent   September 30, Percent
      2012   2011 Change   2012   2011 Change
      Actual   Actual     Actual   Actual  
Revenues:                    
  Video $ 276,027 $ 271,803 1.6% $ 843,080 $ 807,843 4.4%
  High Speed Internet   140,341   126,377 11.0%   415,113   363,800 14.1%
  Telephone   47,482   42,467 11.8%   140,387   119,882 17.1%
  Advertising Sales   24,170   19,939 21.2%   64,332   56,568 13.7%
  Other   23,915   22,125 8.1%   67,269   62,907 6.9%
Total Revenues   511,935   482,711 6.1%   1,530,181   1,411,000 8.4%
                       
Costs and Expenses:                    
  Operating (excluding           depreciation and amortization)   211,516   200,902 -5.3%   629,890   588,725 -7.0%
  Selling, general and
administrative 
(excluding non-cash 
share based 
compensation expense)
  109,217   104,140 -4.9%   329,178   305,077 -7.9%
Operating costs and 
expenses
  320,733   305,042 -5.1%   959,068   893,802 -7.3%
                       
Adjusted EBITDA   191,202   177,669 7.6%   571,113   517,198 10.4%
Adjusted EBITDA 
Margin (a)
  37.3%   36.8%     37.3%   36.7%  
                       
  Depreciation and 
amortization
  97,164   105,374 7.8%   300,995   308,327 2.4%
  Non-cash share 
based compensation
expense
  355   499 28.9%   1,176   1,594 26.2%
  Loss/(gain) on sale 
of cable assets
  413   (615) -167.2%   315   (1,038) 130.3%
                       
Income from operations   93,270   72,411 28.8%   268,627   208,315 29.0%
                       
Interest expense, net   (70,950)   (75,930) 6.6%   (218,362)   (226,312) 3.5%
Loss on termination of derivative instruments   -   -                           NM   (6,565)   - NM
Change in fair value of derivative instruments    4,835    - 100.0%    (376)   - NM
Loss on extinguishment 
of debt
    -    -     NM    (14,202)   - NM
                       
Income/(loss) before 
provision for income taxes
  27,155   (3,519) 871.7%   29,122   (17,997) 261.8%
Provision for 
income taxes
  (5,067)   (1,670) -203.4%   (4,951)   (4,188) -18.2%
                       
Net income/(loss) $ 22,088 $ (5,189) 525.7 $ 24,171 $ (22,185) 209.0%
 
(a)  Represents Adjusted EBITDA as a percentage of total revenue.

TABLE 2  
Cequel Communications Holdings I, LLC  
Pro Forma Consolidated Statements of Operations (unaudited)  
(in thousands)  
      Three Months Ended     Nine Months Ended    
      September 30, Percent   September 30, Percent  
      2012   2011 Change   2012   2011 Change  
      Actual   Pro-Forma (b)     Pro-Forma (b)   Pro-Forma (b)    
Revenues:                      
  Video $ 276,027 $ 271,803 1.6% $ 843,080 $ 823,319 2.4%  
  High Speed Internet   140,341   126,377 11.0%   415,113   372,459 11.5%  
  Telephone   47,482   42,467 11.8%   140,387   122,351 14.7%  
  Advertising Sales   24,170   19,892 21.5%   64,267   58,466 9.9%  
  Other   23,915   22,125 8.1%   67,269   63,450 6.0%  
Total Revenues   511,935   482,664 6.1%   1,530,116   1,440,045 6.3%  
                         
Costs and Expenses:                      
  Operating (excluding depreciation 
and amortization)
  211,516   200,902 -5.3%   629,890   602,157 -4.6%  
  Selling, general and
administrative 
(excluding non-cash 
share based 
compensation expense)
  109,217   104,089 -4.9%   328,917   310,056 -6.1%  
Operating costs and 
expenses
  320,733   304,991 -5.2%   958,807   912,213 -5.1%  
                         
Adjusted EBITDA   191,202   177,673 7.6%   571,309   527,832 8.2%  
Adjusted EBITDA 
Margin (a)
  37.3%   36.8%     37.3%   36.7%    
                         
  Depreciation and 
amortization
  97,164   105,372 7.8%   300,994   317,168 5.1%  
  Non-cash share 
based compensation
expense
  355   499 28.9%   1,176   1,594 26.2%  
  Loss/(gain) on sale 
of cable assets
  413   (615) -167.2%   315   (1,038) 130.3%  
                         
Income from operations   93,270   72,417 28.8%   268,824   210,108 27.9%  
                         
Interest expense, net   (70,950)   (75,930) 6.6%   (218,362)   (226,312) 3.5%  
Loss on termination of derivative instruments   -   - NM   (6,565)   - NM  
Change in fair value of derivative instruments    4,835    - 100.0%    (376)   - NM  
Loss on extinguishment 
of debt
    -    - NM    (14,202)   - NM  
                         
Income/(loss) before 
provision for income taxes
  27,155   (3,513)     873.0%   29,319   (16,204) 280.9%  
Provision for 
income taxes
  (5,067)   (1,670) -203.4%   (4,951)   (4,188) -18.2%  
                         
Net income/(loss) $ 22,088 $ (5,183) 526.2% $ 24,368 $ (20,392) 219.5%  
   
(a)  Represents Adjusted EBITDA as a percentage of total revenue.  
   
(b) Pro forma to include the impact of the acquisition of NPG Cable on April 1, 2011 and exclude the sale of NP3Now on June 1, 2012, as if the transactions had been consummated on January 1, 2011.  
 
 

TABLE 3          
Cequel Communications Holdings I, LLC          
Condensed Consolidated Balance Sheets (unaudited)      
(in thousands)          
      September 30,     December 31,
      2012     2011
ASSETS          
Cash and cash equivalents $ 144,513   $ 128,663
Accounts receivable, net   178,190     167,539
Prepaid expenses and other assets   26,948     18,580
  Total current assets   349,651     314,782
             
Property, plant and equipment, net   1,382,177     1,396,367
Intangible assets, net   2,313,967     2,321,902
Other long-term assets, net   55,921     49,203
  Total assets $ 4,101,716   $ 4,082,254
             
LIABILITIES AND MEMBER'S EQUITY          
Accounts payable and accrued expenses $ 268,299   $ 223,075
Deferred revenue   132,380     130,072
Current portion of long-term debt   22,000     20,382
Other current liabilities   3,591     33,547
  Total current liabilities   426,270     407,076
             
Long-term debt, less current portion   4,150,563     3,766,347
Deferred tax liabilities   27,851     26,980
Other long-term liabilities   6,386     9,310
  Total liabilities   4,611,070     4,209,713
             
Total member's deficit   (509,354)     (127,459)
  Total liabilities and member's deficit $ 4,101,716   $ 4,082,254
               

TABLE 4                  
Cequel Communications Holdings I, LLC                  
Condensed Consolidated Statements of Cash Flows (unaudited)            
(in thousands)          
    Three Months Ended     Nine Months Ended
    September 30,     September 30,
    2012   2011     2012   2011
                   
Net cash provided by operating activities $ 162,073 $ 135,153   $ 388,350 $ 382,737
Net cash used in investing activities   (87,656)    (89,236)      (284,571)   (640,769)
Net cash (used in)/provided by financing activities   (6,512)   (7,609)     (87,929)   105,349
Increase/(decrease) in cash and cash equivalents    67,905   38,308      15,850   (152,683)
Cash and cash equivalents, beginning of period   76,608   98,694     128,663   289,685
Cash and cash equivalents, end of period $ 144,513 $ 137,002   $ 144,513 $ 137,002
                         

TABLE 5                  
Cequel Communications Holdings I, LLC              
Capital Expenditures (unaudited)              
(in thousands)              
    Three Months Ended     Nine Months Ended
    September 30,     September 30,
    2012   2011     2012   2011
                   
Customer premise equipment $ 21,775 $ 21,831   $ 87,599 $ 93,518
Scalable infrastructure   7,242   10,927     26,765   37,026
Line extensions   1,874   1,873     6,131   5,611
Upgrade/rebuild   2,474   3,911     6,407   15,474
Commercial   11,438   7,004     26,374   21,929
Support capital   42,853   43,688     127,292   115,323
  $ 87,656 $ 89,234   $ 280,568 $ 288,881
                       

TABLE 6                
Cequel Communications Holdings I, LLC                
Summary Operating Statistics (unaudited)                
Approximate as of:                
    Sep. 30,   Jun. 30,   Dec. 31,   Sep. 30,
    2012   2012   2011   2011
    Actual   Actual   Actual   Actual
Revenue Generating Units (RGU):                
Basic video customers (a)   1,230,300   1,230,100   1,252,200   1,268,300
Digital video customers (b)   832,600   807,700   767,300   753,600
Residential high-speed Internet customers (c)   996,800   979,400   951,400   937,200
Residential telephone customers (d)   469,800   462,700   438,600   426,100
Total RGUs (e)   3,529,500   3,479,900   3,409,500   3,385,200
                 
Quarterly net customer additions (losses):   Actual   Actual   Actual   Actual
Basic video customers   200   (20,100)   (16,100)   (5,900)
Digital video customers   24,900   11,300   13,700   21,500
Residential high-speed Internet customers   17,400   (3,200)   14,200   23,000
Residential telephone customers   7,100   9,500   12,500   16,200
Total RGUs (e)   49,600   (2,500)   24,300   54,800
                 
Average Revenue per Unit (ARPU):   Actual   Actual   Actual   Actual
Average monthly revenue 
per basic video customer (f)
$ 138.86 $ 137.99 $ 129.31   126.75
                 
Residential Customer Relationships:   Actual   Actual   Actual   Actual
Total customer relationships (g)   1,379,600   1,372,000   1,373,900   1,376,800
Double play relationships (h)   543,300   534,000   527,800   526,500
Double play penetration (i)   39.4%   38.9%   38.4%   38.2%
Triple play relationships (j)   341,300   336,200   321,900   313,800
Triple play penetration (k)   24.7%   24.5%   23.4%   22.8%
Total bundled customers (l)   884,600   870,200   849,700   840,300
Bundled penetration (m)   64.1%   63.4%   61.8%   61.0%
                 
Non-video customer relationships (n)   240,800   235,800   218,300   209,200
Non-video as a % of total 
customer relationships (o)
  17.5%   17.2%   15.9%   15.2%
Estimated Customer Penetration:  

Actual
 

Actual
 

Actual
 

Actual
Estimated basic penetration (p)   40.4%   40.6%   41.6%   42.3%
Estimated digital penetration (q)   67.7%   65.7%   61.3%   59.4%
Estimated residential high-speed 
Internet penetration (r)
  33.7%   33.3%   32.6%   32.3%
Estimated residential telephone penetration (s)   19.0%   18.9%   18.1%   17.7%
                 
Commercial Customers:   Actual   Actual   Actual   Actual
Commercial data (t )   51,000   49,900   47,400   46,400
Commercial telephone (u)   22,600   21,200   18,100   16,600
                 
Commercial Customer Relationships:   Actual   Actual   Actual   Actual
Total customer relationships (v)   76,200   75,400   72,500   71,700
Double play relationships (w)   23,200   22,400   20,700   20,200
Double play penetration (x)   30.4%   29.7%   28.7%   28.0%
Triple play relationships (y)   6,300   6,000   5,100   4,600
Triple play penetration (z)   8.3%   8.0%   7.0%   6.4%
Total bundled customers (aa)   29,500   28,400   25,800   24,800
Bundled penetration (bb)   38.7%   37.7%   35.6%   34.6%

TABLE 7                
Cequel Communications Holdings I, LLC                
Pro Forma Summary Operating Statistics (unaudited)            
Approximate as of:   Sep. 30,   Jun. 30,   Dec. 31,   Sep. 30,
    2012   2012   2011   2011
    Actual   Actual   Actual   Actual
Revenue Generating Units (RGU):                
Basic video customers (a)   1,230,300   1,230,100   1,252,200   1,268,300
Digital video customers (b)   832,600   807,700   767,300   753,600
Residential high-speed Internet customers (c)   996,800   979,400   951,400   937,200
Residential telephone customers (d)   469,800   462,700   438,600   426,100
Total RGUs (e)   3,529,500   3,479,900   3,409,500   3,385,200
                 
Quarterly net customer additions (losses):   Actual   Actual   Actual   Actual
Basic video customers   200   (20,100)   (16,100)   (5,900)
Digital video customers   24,900   11,300   13,700   21,500
Residential high-speed Internet customers   17,400   (3,200)   14,200   23,000
Residential telephone customers   7,100   9,500   12,500   16,200
Total RGUs (e)   49,600   (2,500)   24,300   54,800
                 
Average Revenue per Unit (ARPU):   Actual Pro Forma (cc)   Pro Forma (cc)   Pro Forma (cc)
Pro forma average monthly revenue 
per basic video customer (f)
$ 138.86 $ 137.98 $ 129.30 126.74
                 
Residential Customer Relationships:   Actual   Actual   Actual   Actual
Total customer relationships (g)   1,379,600   1,372,000   1,373,900   1,376,800
Double play relationships (h)   543,300   534,000   527,800   526,500
Double play penetration (i)   39.4%   38.9%   38.4%   38.2%
Triple play relationships (j)   341,300   336,200   321,900   313,800
Triple play penetration (k)   24.7%   24.5%   23.4%   22.8%
Total bundled customers (l)   884,600   870,200   849,700   840,300
Bundled penetration (m)   64.1%   63.4%   61.8%   61.0%
                 
Non-video customer relationships (n)   240,800   235,800   218,300   209,200
Non-video as a % of total 
customer relationships (o)
  17.5%   17.2%   15.9%   15.2%
                 
Estimated Customer Penetration:   Actual   Actual   Actual   Actual
Estimated basic penetration (p)   40.4%   40.6%   41.6%   42.3%
Estimated digital penetration (q)   67.7%   65.7%   61.3%   59.4%
Estimated residential high-speed 
Internet penetration (r)
  33.7%   33.3%   32.6%   32.3%
Estimated residential telephone penetration (s)   19.0%   18.9%   18.1%   17.7%
                 
Commercial Customers:   Actual   Actual   Actual   Actual
Commercial data (t)   51,000   49,900   47,400   46,400
Commercial telephone (u)   22,600   21,200   18,100   16,600
                 
Commercial Customer Relationships:   Actual   Actual   Actual   Actual
Total customer relationships (v)   76,200   75,400   72,500   71,700
Double play relationships (w)   23,200   22,400   20,700   20,200
Double play penetration (x)   30.4%   29.7%   28.7%   28.0%
Triple play relationships (y)   6,300   6,000   5,100   4,600
Triple play penetration (z)   8.3%   8.0%   7.0%   6.4%
Total bundled customers (aa)   29,500   28,400   25,800   24,800
Bundled penetration (bb)   38.7%   37.7%   35.6%   34.6%

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

(c) 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 and customers who take our scalable, fiber-based enterprise network services.

(d) 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.

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

(f) 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.

(g) 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 video service will count as one customer relationship, and a residential customer who purchases both video and high-speed Internet services will also count as only one customer relationship. Customer relationships exclude EBUs.

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

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

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

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

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

(m) Bundled residential penetration represents total bundled residential customers as a percentage of customer relationships.

(n) 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

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

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

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

(r) 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.

(s) 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.

(t) Commercial high-speed 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. Commercial high-speed data customers are not included in Total RGUs.

(u) Commercial telephone customers are commercial accounts that subscribe to our telephone service. Commercial telephone customers are not included in Total RGUs.

(v) 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 video and high-speed data services will also count as only one customer relationship. National carrier accounts are excluded from customer relationships.

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

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

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

(z) Commercial triple play penetration represents triple play residential customers as a percentage of customer relationships.

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

(bb) Bundled commercial penetration represents total bundled commercial customers as a percentage of customer relationships.

(cc) Pro forma to exclude the impact of the sale of NP3Now on June 1, 2012, as if the transaction had been consummated on January 1, 2011.

TABLE 8                  
Cequel Communications Holdings I, LLC          
Calculation of Free Cash Flow (unaudited)          
(in thousands)                  
    Three Months Ended     Nine Months Ended
    September 30,     September 30,
    2012   2011     2012   2011
                   
Adjusted EBITDA $ 191,202 $ 177,669   $ 571,113 $ 517,198
Capital expenditures   (87,656)   (89,234)     (280,568)   (288,881)
Cash interest expense    (68,483)   (73,262)     (210,861)   (218,390)
Free Cash Flow $ 35,063 $ 15,173   $ 79,684 $ 9,927
 

TABLE 9                    
Cequel Communications Holdings I, LLC                  
Reconciliation of Net Loss to Adjusted EBITDA                
(in thousands)                    
      Three Months Ended     Nine Months Ended  
      September 30,     September 30,
      2012   2011     2012   2011  
                       
Net income/(loss) $ 22,088 $ (5,189)   $ 24,171 $  (22,185)  
  Add back:                    
  Interest expense, net   70,950   75,930     218,362   226,312  
  Provision for income taxes   5,067   1,670     4,951   4,188  
  Depreciation and amortization   97,164   105,374     300,995   308,327  
  Non-cash share based compensation   355   499     1,176   1,594  
  Loss/(gain) on sale of cable assets   413   (615)     315   (1,038)    
  Loss on termination of derivative instruments    -      -        6,565     -    
  Change in fair value of derivative instruments    (4,835)      -        376     -    
  Loss on extinguishment of debt    -      -        14,202     -    
Adjusted EBITDA $ 191,202 $ 177,669   $ 571,113 $ 517,198  


TABLE 10                  
Cequel Communications 
Holdings I, LLC
                 
Reconciliation of Net Cash from Operating Activities to Free Cash Flow    
(in thousands)                  
    Three Months Ended     Nine Months Ended
    September 30,     September 30,
    2012   2011     2012   2011
                   
Net cash provided by operating activities $ 162,073 $ 135,153   $ 388,350 $ 382,737
     Add back:
     Capital expenditures
  (87,656)   (89,234)     (280,568)   (288,881)
     Cash income tax expense   4,252   920     4,080   2,409
     Interest income   (29)   (31)     (116)   (218)
     Bond premium    -      -       -     (17,969)
     Changes in assets and liabilities, net   (43,577)   (31,635)     (32,062)   (68,151)
Free Cash Flow $ 35,063 $ 15,173   $ 79,684 $ 9,927
 

TABLE 11                  
Cequel Communications Holdings I, LLC              
Reconciliation of Cash Interest Expense              
(in thousands)                  
    Three Months Ended     Nine Months Ended
    September 30,     September 30,
    2012   2011     2012   2011
                   
Interest expense, net $ 70,950 $ 75,930   $ 218,362 $ 226,312
Add: interest income   29   31     116   218
Add: bond premium amortization   906   835     2,663   2,413
Less: deferred financing amortization   (2,311)   (3,217)     (7,386)   (9,578)
Less: bond discount amortization   (290)   (317)     (890)   (975)
Less: term loan discount amortization   (801)   -     (2,004)   -
Cash interest expense $ 68,483 $ 73,262   $ 210,861 $ 218,390
 

Source:  Cequel Communications Holdings I, LLC

Cequel Contact Information

Mary Meduski
EVP - Chief Financial Officer
314-315-9603

Ralph Kelly
SVP - Treasurer
314-315-9403

Mike Pflantz
VP-Corporate Finance
314-315-9341