Charter 2004 Annual Report Download - page 133

CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES 2004 FORM 10-K
Notes to Consolidated Financial Statements (continued)
Charter. Changes to minority interest consist of the following stock held and for each Charter Holdco membership unit held.
for the periods presented: The Class B common stock is subject to significant transfer
restrictions and is convertible on a share for share basis into
Minority Class A common stock at the option of the holder. Charter
Interest
Holdco membership units are exchangeable on a one-for-one
Balance, December 31, 2001 $ 4,434 basis for shares of Class A common stock.
Minority interest in loss of a subsidiary (3,176)
Minority interest in change in accounting principle (306)
Minority interest in income tax benefit 132 13. COMPREHENSIVE LOSS
Changes in fair value of interest rate agreements (35) Certain marketable equity securities are classified as available-
Other 1
for-sale and reported at market value with unrealized gains and
Balance, December 31, 2002 1,050 losses recorded as accumulated other comprehensive loss on the
Minority interest in loss of a subsidiary (377)
Minority interest in income tax benefit (8) accompanying consolidated balance sheets. Additionally, the
Changes in fair value of interest rate agreements 25 Company reports changes in the fair value of interest rate
Other (1) agreements designated as hedging the variability of cash flows
Balance, December 31, 2003 689 associated with floating-rate debt obligations, that meet the
Minority interest in loss of a subsidiary (19) effectiveness criteria of SFAS No. 133, Accounting for Derivative
Minority interest in cumulative effect of accounting change (19) Instruments and Hedging Activities, in accumulated other compre-
Reclass of Helicon, LLC interest (25)
Changes in fair value of interest rate agreements 22 hensive loss, after giving effect to the minority interest share of
such gains and losses. Comprehensive loss for the years ended
Balance, December 31, 2004 $ 648
December 31, 2004, 2003 and 2002 was $4.3 billion, $219 mil-
lion and $2.5 billion, respectively.
11. PREFERRED STOCK – REDEEMABLE
On August 31, 2001, in connection with its acquisition of Cable 14. ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES
USA, Inc. and certain cable system assets from affiliates of Cable The Company uses interest rate risk management derivative
USA, Inc., the Company issued 505,664 shares of Series A instruments, such as interest rate swap agreements and interest
Convertible Redeemable Preferred Stock (the Preferred Stock) rate collar agreements (collectively referred to herein as interest
valued at and with a liquidation preference of $51 million. rate agreements) to manage its interest costs. The Company’s
Holders of the Preferred Stock have no voting rights but are policy is to manage interest costs using a mix of fixed and
entitled to receive cumulative cash dividends at an annual rate variable rate debt. Using interest rate swap agreements, the
of 5.75%, payable quarterly. If for any reason Charter fails to pay Company has agreed to exchange, at specified intervals through
the dividends on the Preferred Stock on a timely basis, the 2007, the difference between fixed and variable interest amounts
dividend rate on each share increases to an annual rate of 7.75% calculated by reference to an agreed-upon notional principal
until the payment is made. The Preferred Stock is redeemable amount. Interest rate collar agreements are used to limit the
by Charter at its option on or after August 31, 2004 and must Company’s exposure to and benefits from interest rate fluctua-
be redeemed by Charter at any time upon a change of control, tions on variable rate debt to within a certain range of rates.
or if not previously redeemed or converted, on August 31, 2008. The Company does not hold or issue derivative instruments
The Preferred Stock is convertible, in whole or in part, at the for trading purposes. The Company does, however, have certain
option of the holders from April 1, 2002 through August 31, interest rate derivative instruments that have been designated as
2008, into shares of common stock at an initial conversion rate cash flow hedging instruments. Such instruments effectively
equal to a conversion price of $24.71 per share of common convert variable interest payments on certain debt instruments
stock, subject to certain customary adjustments. The redemption into fixed payments. For qualifying hedges, SFAS No. 133
price per share of Preferred Stock is the Liquidation Preference allows derivative gains and losses to offset related results on
of $100, subject to certain customary adjustments. In the first hedged items in the consolidated statement of operations. The
quarter of 2003, the Company issued 39,595 additional shares of Company has formally documented, designated and assessed the
preferred stock valued at and with a liquidation preference of effectiveness of transactions that receive hedge accounting. For
$4 million. the years ended December 31, 2004, 2003 and 2002, net gain
(loss) on derivative instruments and hedging activities includes
12. COMMON STOCK
gains of $4 million and $8 million and losses of $14 million,
The Company’s Class A common stock and Class B common respectively, which represent cash flow hedge ineffectiveness on
stock are identical except with respect to certain voting, transfer interest rate hedge agreements arising from differences between
and conversion rights. Holders of Class A common stock are the critical terms of the agreements and the related hedged
entitled to one vote per share and holder of Class B common obligations. Changes in the fair value of interest rate agreements
stock is entitled to ten votes for each share of Class B common designated as hedging instruments of the variability of cash
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