Charter 2000 Annual Report Download - page 23

21 CHARTER COMMUNICATIONS
The number of data customers increased by
180,400 from 72,000 to 252,400 of which 12,400
were the result of acquisitions and 168,000 were the
result of internal growth. Our systems upgrades facilitated
interactive capability necessary to offer high speed
interactive services. Growth in data services was also
the result of strong marketing efforts coupled with
increased demand for such services.
Advertising revenues increased $148.2 million from
$72.0 million in 1999 to $220.2 million in 2000 of which
approximately $101.8 million was the result of operations
acquired after January 1, 1999. In addition, as a result of
our rebuild efforts, we experienced increased capacity due
to expanded channel lineups and, as a result, increased
advertising. The significant level of political campaign
advertising in 2000 also contributed to increased advertis-
ing revenues.
Operating, general and administrative expenses
Operating, general and administrative expenses increased
by $913.4 million from $738.0 million in 1999 to
$1,651.4 million in 2000. System operations acquired
after January 1, 1999 accounted for $813.8 million or
89% of the increase in 2000 while systems acquired before
January 1, 1999 accounted for $99.6 million or 11%.
Of the $405.3 million increase in programming,
approximately $355.7 million or 88% relates to operations
acquired after January 1, 1999. The remaining $49.6 mil-
lion increase is due to continued inflationary or negotiated
increases, particularly in sports programming, coupled
with increased channel capacity. The increase in general
and administrative costs of $306.4 million reflects an
increase of $275.0 million or 90% related to operations
acquired after January 1, 1999. The remaining increase
of $31.4 million is due to increases in corporate and
regional resources to support our growth. Service expenses
increased $93.1 million, of which $87.0 million or
93% relates to operations acquired after January 1, 1999
and $6.1 million or 7% is a result of internal growth.
Marketing expenses increased $40.3 million to $63.8 mil-
lion in 2000, of which approximately $20.1 million or
50% relates to operations acquired after January 1, 1999.
The remaining increase of $20.2 million relates to promo-
tions of advanced product offerings, including Charter
Digital Cable and TV-based high speed Internet service.
Advertising expenses increased $25.2 million, of which
the majority relates to operations acquired after January 1,
1999. Other operating expenses increased by $43.0 million
from $15.5 million in 1999 to $58.6 million in 2000, of
which the majority relates to operations acquired after
January 1, 1999.
Depreciation and amortization Depreciation and
amortization expense increased by $1,727.8 million from
$745.3 million in 1999 to $2,473.1 million in 2000. This
increase was due to a full year of expense on the fixed
assets and franchises of our 1999 acquisitions, a partial
year of expense on 2000 acquisitions and capital expendi-
tures of $2.8 billion to rebuild and upgrade our cable
systems in 2000. Related to the rebuild and upgrade of
our plant, the useful lives of certain depreciable assets
were shortened. As a result, an additional $508.5 million
of depreciation expense was recorded during 2000. These
increases were partially offset by the elimination of
depreciation and amortization expense related to
dispositions of cable systems.
Interest expense Interest expense increased by
$581.3 million from $477.8 million in 1999 to
$1,059.1 million in 2000. The increase in interest
expense was a result of increased average debt outstanding
in 2000 of $12,281.2 million compared to $7,108.5 mil-
lion in 1999, coupled with an increase in our average
borrowing rate of 0.66% from 8.36% in 1999 to 9.02%
in 2000. The increased debt was used for acquisitions,
capital expenditures and other corporate purposes.
Minority interest in loss of subsidiary Minority interest
in loss of subsidiary represents the allocation of losses
to the minority interest based on ownership of Charter
Communications Holding Company and the 2% accretion
of the preferred membership units in an indirect subsidiary
of Charter Holdings issued to certain sellers in a February
2000 acquisition. These membership units are exchange-
able for shares of Class A common stock of Charter
Communications, Inc. on a one-for-one basis at any time.
CAPITAL EXPENDITURES
We have substantial ongoing capital expenditure require-
ments. We make capital expenditures primarily to upgrade,
rebuild and expand our cable systems, as well as for
system maintenance, the development of new products
and services, and set-top terminals.
Upgrading our cable systems will enable us to offer
new products and services, including digital television,
additional channels and tiers, expanded pay-per-view
options, high-speed Internet access, video-on-demand,
telephony and interactive services.
We made capital expenditures, excluding acquisitions
of cable systems, of $2.83 billion and $741.5 million for
the years ended December 31, 2000 and 1999, respectively.
The majority of these capital expenditures in 2000 relate
to our accelerated rebuild and upgrade program and pur-
chases of converters and were funded from cash flows
from operations and borrowings under credit facilities.
Excluding the pending AT&T transactions, for
2001, 2002 and 2003, we expect to have capital expen-
ditures of approximately $2.9 billion, $1.75 billion and
$950,000, respectively. In addition, we anticipate rebuild
costs associated with the AT&T systems we expect to
acquire to total approximately $350 million. In 2001,
our capital expenditures will include extensions of systems,
development of new products and services, purchases of
converters, system improvements and the build-out of six
new advanced customer call centers in 2001. The amount
that we spend on these types of capital expenditures
will depend on the level of our growth in digital cable
customers and in the delivery of other advanced services.
We currently expect to finance the anticipated capital
expenditures with cash generated from operations,
additional borrowings under credit facilities, one or
more debt or equity financings and borrowings under
the 2001 senior bridge loan commitment (see Pending
AT&T Transactions).