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PREM14A
CHARTER COMMUNICATIONS, INC. /MO/ filed this Form PREM14A on 06/26/2015
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Table of Contents

BRIGHT HOUSE MANAGEMENT’S DISCUSSION AND ANALYSIS

Overview

Bright House is a wholly owned subsidiary of Time Warner Entertainment-Advance/Newhouse (TWE-A/N). TWE-A/N is a partnership between A/N and a subsidiary of TWC. The Bright House systems are managed on a day to day basis by A/N, which is entitled to 100% of the economic benefits of Bright House. TWC and its affiliates provide Bright House with certain programming, engineering and technology services through a services agreement between the parties.

Bright House is a cable operator providing services in the United States with approximately 2.5 million residential and commercial customers as of March 31, 2015. Bright House’s business is concentrated in Florida with smaller operations in Michigan, Alabama, Indiana and California. Bright House provides its subscribers with video, Internet and voice services. Bright House also sells local advertising on cable networks.

Bright House offers video, Internet and voice services, as well as security and home management services, to its residential customers. As of March 31, 2015, Bright House served approximately 2.4 million residential customers. Bright House offers a wide range of Internet, networking, voice, video, hosting and cloud computing services to its commercial customers. As of March 31, 2015, Bright House served approximately 137,000 commercial customers.

Bright House’s most significant competitors are direct broadcast satellite providers and telephone companies that offer services that provide features and functions similar to Bright House’s video, Internet, and voice services. Bright House’s business plans center on providing its customers with high quality products combined with superior customer service.

On March 31, 2015, A/N entered into the BHN contribution agreement with Charter whereby Charter will acquire Bright House (with the exception of certain excluded assets and liabilities), which agreement was amended on May 23, 2015. On May 26, 2015, Charter and TWC announced that they had entered into the merger agreement and Charter and A/N announced they had amended the BHN contribution agreement. Following the closing of the mergers and the BHN transactions, A/N is expected to own between approximately 14% and 13% of New Charter (depending on elections of stockholders of TWC with respect to the two options of the applicable merger consideration), on an as-converted, as-exchanged basis.

The closing of the BHN transactions is subject to several conditions, as described under “The Contribution Agreement—Conditions to the Completion of the Contribution.”

Bright House’s total revenue growth was 6% for the year ended December 31, 2014 compared to the corresponding period in 2013, and 5% for the year ended December 31, 2013 compared to the corresponding period in 2012 primarily due to growth in its residential Internet and commercial businesses. For the years ended December 31, 2014, 2013 and 2012, Bright House’s net income was $752 million, $719 million and $705 million, respectively. Bright House’s net income increased 5% for the year ended December 31, 2014 compared to the corresponding period in 2013 and 2% for the year ended December 31, 2013 compared to the corresponding period in 2012.

Bright House’s total revenue growth was 7% for the three months ended March 31, 2015 compared to the corresponding period in 2014, due to growth in its residential and commercial businesses. For the three months ended March 31, 2015 and 2014, Bright House’s net income was $193 million and $180 million, respectively. Bright House’s net income increased 7% for the three months ended March 31, 2015 compared to the corresponding period in 2014.

Critical Accounting Policies and Estimates

Certain of Bright House’s accounting policies require it to make difficult, subjective and/or complex judgments. Bright House considers its accounting policies for intangible assets, retirement benefits and property,

 

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