Charter 2002 Annual Report Download - page 103

CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2002, 2001 and 2000
(dollars in millions, except where indicated)
with the oÅers and sales of these equity interests. Accordingly, the maximum potential cash obligation related
to the rescission rights, estimated at $1.1 billion as of December 31, 2000, has been excluded from
shareholders' equity or minority interest and classiÑed as redeemable securities on the consolidated balance
sheet.
In February 2001, all remaining rescission rights associated with the redeemable securities expired
without the security holders requesting repurchase of their securities. Accordingly, the Company reclassiÑed
the respective amounts to minority interest and shareholders' equity, as applicable.
13. Preferred Stock Ì Redeemable
On August 31, 2001, in connection with its acquisition of Cable USA, Inc. and certain cable system
assets from aÇliates of Cable USA, Inc., the Company issued 505,664 shares of Series A Convertible
Redeemable Preferred Stock (the Preferred Stock) valued at and with a liquidation preference of $51 million.
Holders of the Preferred Stock have no voting rights but are entitled to receive cumulative cash dividends at
an annual rate of 5.75%, payable quarterly. If for any reason Charter fails to pay the dividends on the Preferred
Stock on a timely basis, the dividend rate on each share increases to an annual rate of 7.75% until the payment
is made. The Preferred Stock is redeemable by Charter at its option on or after August 31, 2004 and must be
redeemed by Charter at any time upon a change of control, or if not previously redeemed or converted, on
August 31, 2008. The Preferred Stock is convertible, in whole or in part, at the option of the holders from
April 1, 2002 through August 31, 2008, into shares of common stock at an initial conversion rate equal to a
conversion price of $24.71 per share of common stock, subject to certain customary adjustments. The
redemption price per share of Preferred Stock is the Liquidation Preference of $100, subject to certain
customary adjustments. In the Ñrst quarter of 2003, the Company issued 39,595 additional shares of preferred
stock valued at and with a liquidation preference of $4 million.
14. Comprehensive Loss
Certain marketable equity securities are classiÑed as available-for-sale and reported at market value with
unrealized gains and losses recorded as accumulated other comprehensive loss on the accompanying
consolidated balance sheets. The Company reports changes in the fair value of interest rate agreements
designated as hedging instruments of the variability of cash Öows associated with Öoating-rate debt obligations,
that meet the eÅectiveness criteria of SFAS No. 133, ""Accounting for Derivative Instruments and Hedging
Activities,'' in accumulated other comprehensive loss. Comprehensive loss for the years ended December 31,
2002, 2001 and 2000 was $2.5 billion, $1.2 billion and $0.9 billion, respectively.
15. Accounting for Derivative Instruments and Hedging Activities
The Company uses interest rate risk management derivative instruments, such as interest rate swap
agreements and interest rate collar agreements (collectively referred to herein as interest rate agreements) as
required under the terms of its credit facilities. The Company's policy is to manage interest costs using a mix
of Ñxed and variable rate debt. Using interest rate swap agreements, the Company agrees to exchange, at
speciÑed intervals through 2007, the diÅerence between Ñxed and variable interest amounts calculated by
reference to an agreed-upon notional principal amount. Interest rate collar agreements are used to limit the
Company's exposure to and beneÑts from interest rate Öuctuations on variable rate debt to within a certain
range of rates.
EÅective January 1, 2001, the Company adopted SFAS No. 133 ""Accounting for Derivative Instruments
and Hedging Activities.'' Interest rate agreements are recorded in the consolidated balance sheet at
December 31, 2002 and 2001 as either an asset or liability measured at fair value. In connection with the
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