Charter 2003 Annual Report Download - page 141

Download and view the complete annual report

Please find page 141 of the 2003 Charter annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 153

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123
  • 124
  • 125
  • 126
  • 127
  • 128
  • 129
  • 130
  • 131
  • 132
  • 133
  • 134
  • 135
  • 136
  • 137
  • 138
  • 139
  • 140
  • 141
  • 142
  • 143
  • 144
  • 145
  • 146
  • 147
  • 148
  • 149
  • 150
  • 151
  • 152
  • 153

CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2003, 2002 and 2001
(dollars in millions, except where indicated)
Mr. Allen and his aÇliates. The Company has not instituted any formal plan or arrangement to address
potential conÖicts of interest.
High Speed Access Corp. (""High Speed Access'') was a provider of high-speed Internet access services
over cable modems. During the period from 1997 to 2000, certain Charter entities entered into Internet-access
related service agreements, and both Vulcan Ventures and certain of Charter's subsidiaries made equity
investments in High Speed Access.
On February 28, 2002, Charter's subsidiary, CC Systems, purchased from High Speed Access the
contracts and associated assets, and assumed related liabilities, that served the Company's customers,
including a customer contact center, network operations center and provisioning software. Immediately prior
to the asset purchase, Vulcan Ventures beneÑcially owned approximately 37%, and the Company beneÑcially
owned approximately 13%, of the common stock of High Speed Access (including the shares of common
stock which could be acquired upon conversion of the Series D preferred stock, and upon exercise of the
warrants owned by Charter Holdco). Following the consummation of the asset purchase, neither the Company
nor Vulcan Ventures beneÑcially owned any securities of, or were otherwise aÇliated with, High Speed
Access.
The Company receives or will receive programming for broadcast via its cable systems from TechTV,
USA Networks, Oxygen Media and Action Sports. The Company pays a fee for the programming service
generally based on the number of customers receiving the service. Such fees for the years ended December 31,
2003, 2002 and 2001 were each less than 1% of total operating expenses with the exception of USA Networks
which was 2%, 2% and 3% of total operating expenses for the years ended December 31, 2003, 2002 and 2001,
respectively. In addition, the Company receives commissions from USA Networks for home shopping sales
generated by its customers. Such revenues for the years ended December 31, 2003, 2002 and 2001 were less
than 1% of total revenues. On November 5, 2002, Action Sports announced that it was discontinuing its
business. The Company believes that the failure of Action Sports will not materially aÅect the Company's
business or results of operations.
The Company entered into an equity issuance agreement pursuant to which Oxygen Media granted a
subsidiary of Charter Holdco a warrant to purchase 2.4 million shares of common stock of Oxygen Media for
an exercise price of $22.00 per share. Charter Holdco will also receive unregistered shares of Oxygen Media
common stock with a guaranteed fair market value on the date of issuance of $34 million, on or prior to
February 2, 2005 with the exact date to be determined by Oxygen Media. The Company currently recognizes
the guaranteed value of the investment over the life of the programming agreement as a reduction of
programming expense. For the year ended December 31, 2003, the Company recorded approximately
$9 million as a reduction of programming expense. The carrying value of the Company's investment in Oxygen
was approximately $19 million as of December 31, 2003.
The Company receives from TechTV programming for distribution via its cable system pursuant to an
aÇliation agreement. The aÇliation agreement provides, among other things, that TechTV must oÅer the
Company certain terms and conditions that are no less favorable in the aÇliation agreement than are given to
any other distributor that serves the same number of or fewer TechTV viewing customers. The Company
believes that TechTV has breached the TechTV aÇliation agreement, and is involved in discussions with
TechTV representatives in an eÅort to reach a settlement regarding the damages owed to the Company for
such breach. To date, no settlement has been reached and no formal legal proceedings have been commenced.
In the event the parties are not able to reach a settlement, the Company intends to pursue its contractual and
legal rights for relief.
F-43