Charter 2004 Annual Report Download - page 132

CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES 2004 FORM 10-K
Notes to Consolidated Financial Statements (continued)
(the consummation of any transaction resulting in any For the amounts of debt scheduled to mature during 2005,
person or group (other than the Paul Allen Group) having it is management’s intent to fund the repayments from
power, directly or indirectly, to vote more than 35% of the borrowings on the Company’s revolving credit facility. The
ordinary voting power of Charter Operating, unless the accompanying consolidated balance sheet reflects this intent by
Paul Allen Group holds a greater share of ordinary voting presenting all debt balances as long-term while the table above
power of Charter Operating, reflects actual debt maturities as of the stated date.
(certain of Charter Operating’s indirect or direct parent 10. MINORITY INTEREST AND EQUITY INTEREST OF CHARTER HOLDCO
companies having indebtedness in excess of $500 million
Charter is a holding company whose primary asset is a
aggregate principal amount which remains undefeased three
controlling equity interest in Charter Holdco, the indirect owner
months prior to the final maturity of such
of the Company’s cable systems, and $990 million and $774 mil-
indebtedness, and
lion at December 31, 2004 and 2003, respectively, of mirror
(Charter Operating ceasing to be a wholly-owned direct notes which are payable by Charter Holdco to Charter and
subsidiary of CCO Holdings, except in certain very limited have the same principal amount and terms as those of Charter’s
circumstances. convertible senior notes. Minority interest on the Company’s
In the event of a default under the Company’s subsidiaries’ consolidated balance sheets represents the ownership percentage
credit facilities or notes, the subsidiaries’ creditors could elect to of Charter Holdco not owned by Charter, or 52.8% of total
declare all amounts borrowed, together with accrued and unpaid members’ equity of Charter Holdco, plus $656 million and
interest and other fees, to be due and payable. In such event, the $694 million of preferred membership interests in CC VIII, LLC
subsidiaries’ credit facilities and indentures would not permit the (‘‘CC VIII’’), an indirect subsidiary of Charter Holdco, as of
Company’s subsidiaries to distribute funds to Charter Holdco or December 31, 2004 and 2003 respectively. As more fully
Charter to pay interest or principal on Charter’s notes. In described in Note 22, this preferred interest arises from the
addition, the lenders under the Company’s credit facilities could approximately $630 million of preferred membership units issued
foreclose on their collateral, which includes equity interests in by CC VIII in connection with an acquisition in February 2000.
the Company’s subsidiaries, and exercise other rights of secured As of December 31, 2003, minority interest also includes
creditors. In any such case, the Company might not be able to $25 million of preferred interest in Charter Helicon, LLC,
repay or make any payments on its notes. Additionally, an another indirect subsidiary of Charter Holdco, issued in connec-
acceleration or payment default under Charter Operating’s credit tion with the 1999 Helicon acquisition. As of December 31,
facilities would cause a cross-default in the indentures governing 2004, the preferred interest in Charter Helicon, LLC was
the Charter Holdings notes, CCH II notes, CCO Holdings reclassified to other long-term liabilities.
notes, Charter Operating notes and Charter’s convertible senior Members’ equity of Charter Holdco was ($4.4) billion,
notes and would trigger the cross-default provision of the ($57) million and $662 million as of December 31, 2004, 2003
Charter Operating Credit Agreement. Any default under any of and 2002, respectively. Gains and losses arising from the
the subsidiaries’ credit facilities or notes might adversely affect issuance by Charter Holdco of its membership units are
the holders of Charter’s notes and the Company’s growth, recorded as capital transactions, thereby increasing or decreasing
financial condition and results of operations and could force the shareholders’ equity and decreasing or increasing minority
Company to examine all options, including seeking the protec- interest on the accompanying consolidated balance sheets.
tion of the bankruptcy laws. Minority interest was 52.8% as of December 31, 2004 and 53.5%
Based upon outstanding indebtedness as of December 31, as of December 31, 2003 and 2002. Minority interest includes
2004, the amortization of term loans, scheduled reductions in the proportionate share of changes in fair value of interest rate
available borrowings of the revolving credit facilities, and the risk derivative agreements. Such amounts are temporary as they
maturity dates for all senior and subordinated notes and are contractually scheduled to reverse over the life of the
debentures, total future principal payments on the total borrow- underlying instrument. Additionally, reported losses allocated to
ings under all debt agreements as of December 31, 2004, are as minority interest on the consolidated statement of operations are
follows: limited to the extent of any remaining minority interest on the
Year Amount balance sheet related to Charter Holdco. Because minority
interest in Charter Holdco was substantially eliminated at
2005 $ 30
2006 186 December 31, 2003, beginning in 2004, the Company began to
2007 731 absorb substantially all losses before income taxes that otherwise
2008 858 would have been allocated to minority interest. This resulted in
2009 5,040 an additional $2.4 billion of net loss for the year ended
Thereafter 12,946 December 31, 2004. Subject to any changes in Charter Holdco’s
$19,791 capital structure, future losses will be substantially absorbed by
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