Charter 2003 Annual Report Download - page 31

Comparability of the above information from year to year is aÅected by acquisitions and dispositions
completed by us. See note 4 to our consolidated Ñnancial statements contained herein and ""Management's
Discussion and Analysis of Financial Condition and Results of Operations Ì Acquisitions.''
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Unless stated otherwise, the information in this section is as of December 31, 2003. See section entitled
""Subsequent Events'' for a discussion of the Charter Communications Operating, LLC reÑnancing in April
2004.
Reference is made to ""Certain Trends and Uncertainties'' of this section and ""Cautionary Statement
Regarding Forward-Looking Statements,'' which describe important factors that could cause actual results to
diÅer from expectations and non-historical information contained herein. In addition, the following discussion
should be read in conjunction with the audited consolidated Ñnancial statements of Charter Communications,
Inc. and subsidiaries as of and for the years ended December 31, 2003, 2002 and 2001.
Introduction
During 2003, we undertook a number of transition activities including reorganizing our workforce,
adjusting our video pricing and packages, completing call center consolidations and implementing billing
conversions. Due to the focus on such activities and certain Ñnancial constraints, we reduced spending on
marketing our products and services. The reduced marketing activities and other necessary operational
changes negatively impacted customer retention and acquisition, primarily during the Ñrst half of the year.
During the second half of 2003, we increased our marketing eÅorts and implemented promotional campaigns
to slow the loss of analog video customers, and to accelerate advanced service penetration, speciÑcally in high-
speed data.
In 2003, we took a series of steps intended to improve our balance sheet and liquidity:
‚ We and our subsidiaries exchanged $1.9 billion of indebtedness for $1.6 billion of indebtedness while
extending maturities and achieving approximately $294 million of debt discount.
‚ Our subsidiary, CCO Holdings, sold $500 million total principal amount of 8∂% senior notes and used
the net proceeds to repay approximately $486 million principal amount of bank debt of our subsidiaries,
providing additional Ñnancial Öexibility for use of our subsidiaries credit facilities.
‚ Our subsidiaries completed the sale of cable systems in Port Orchard, Washington, for a total price of
approximately $91 million, subject to adjustments.
‚ Our subsidiary, Charter Holdings, and several of its subsidiaries closed the sale of cable systems in
Florida, Pennsylvania, Maryland, Delaware and West Virginia with Atlantic Broadband Finance, LLC.
We anticipate that an additional closing for a cable system in New York will occur during the Ñrst
quarter of 2004. After giving eÅect to the sale of the New York system, net proceeds will be
approximately $735 million, subject to post-closing adjustments. We will use these proceeds to repay
bank debt.
‚ We signiÑcantly reduced capital spending from approximately $2.2 billion for the year ended
December 31, 2002 to approximately $854 million for the year ended December 31, 2003, primarily
due to the substantial completion of our network rebuild and upgrade.
During the years 1999 through 2001, we grew signiÑcantly, principally through acquisitions of other cable
businesses Ñnanced by debt and, to a lesser extent, equity. We do not anticipate that we will engage in
signiÑcant merger or acquisition activity for the foreseeable future other than exchanges of non-strategic assets
or divestitures, such as the sale of cable systems to Atlantic Broadband Finance, LLC discussed above. We
therefore do not believe that our historical growth rates are accurate indicators of future growth.
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