Charter 2004 Annual Report Download - page 144

CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES 2004 FORM 10-K
Notes to Consolidated Financial Statements (continued)
Committee also recommended to the board of directors of days’ prior notice to the other. In addition, the Special
Charter that, to the extent the contract reformation is achieved, Committee and Mr. Allen have determined to utilize the
the board of directors should consider whether the CC VIII Delaware Court of Chancery’s program for mediation of
interest should ultimately be held by Charter Holdco or Charter complex business disputes in an effort to resolve the CC VIII
Holdings or another entity owned directly or indirectly by them. interest dispute. If the Special Committee and Mr. Allen are
Mr. Allen disagrees with the Special Committee’s determi- unable to reach a resolution through that mediation process or
nations described above and has so notified the Special to agree on an alternative dispute resolution process, the Special
Committee. Mr. Allen contends that the transaction is accurately Committee intends to seek resolution of this dispute through
reflected in the transaction documentation and contemporane- judicial proceedings in an action that would be commenced,
ous and subsequent company public disclosures. after appropriate notice, in the Delaware Court of Chancery
The parties engaged in a process of non-binding mediation against Mr. Allen and his affiliates seeking contract reformation,
to seek to resolve this matter, without success. The Special declaratory relief as to the respective rights of the parties
Committee is evaluating what further actions or processes it regarding this dispute and alternative forms of legal and
may undertake to resolve this dispute. To accommodate further equitable relief. The ultimate resolution and financial impact of
deliberation, each party has agreed to refrain from initiating the dispute are not determinable at this time.
legal proceedings over this matter until it has given at least ten
23. Commitments and Contingencies
Commitments
The following table summarizes the Company’s payment obligations as of December 31, 2004 for its contractual obligations.
Total 2005 2006 2007 2008 2009 Thereafter
Contractual Obligations
Operating and Capital Lease Obligations(1) $ 88 $ 23 $ 17 $ 13 $ 10 $ 7 $18
Programming Minimum Commitments(2) 1,579 318 344 375 308 234 —
Other(3) 272 62 50 47 25 21 67
Total $1,939 $403 $411 $435 $343 $262 $85
(1) The Company leases certain facilities and equipment under noncancellable operating leases. Leases and rental costs charged to expense for the years ended December 31,
2004, 2003 and 2002, were $23 million, $30 million and $31 million, respectively.
(2) The Company pays programming fees under multi-year contracts ranging from three to six years typically based on a flat fee per customer, which may be fixed for the
term or may in some cases, escalate over the term. Programming costs included in the accompanying statement of operations were $1.3 billion, $1.2 billion and
$1.2 billion for the years ended December 31, 2004, 2003 and 2002, respectively. Certain of the Company’s programming agreements are based on a flat fee per month or
have guaranteed minimum payments. The table sets forth the aggregate guaranteed minimum commitments under the Company’s programming contracts.
(3) ‘‘Other’’ represents other guaranteed minimum commitments, which consist primarily of commitments to the Company’s billing services vendors.
The following items are not included in the contractual (The Company also has $166 million in letters of credit,
obligation table due to various factors discussed below. How- primarily to its various worker’s compensation, property
ever, the Company incurs these costs as part of its operations: casualty and general liability carriers as collateral for
reimbursement of claims. These letters of credit reduce the
(The Company also rents utility poles used in its operations. amount the Company may borrow under its credit facilities.
Generally, pole rentals are cancelable on short notice, but
the Company anticipates that such rentals will recur. Rent Litigation
expense incurred for pole rental attachments for the years Fourteen putative federal class action lawsuits (the ‘‘Federal
ended December 31, 2004, 2003 and 2002, was $43 million, Class Actions’’) were filed against Charter and certain of its
$40 million and $41 million, respectively. former and present officers and directors in various jurisdictions
(The Company pays franchise fees under multi-year allegedly on behalf of all purchasers of Charter’s securities
franchise agreements based on a percentage of revenues during the period from either November 8 or November 9, 1999
earned from video service per year. The Company also through July 17 or July 18, 2002. Unspecified damages were
pays other franchise related costs, such as public education sought by the plaintiffs. In general, the lawsuits alleged that
grants under multi-year agreements. Franchise fees and Charter utilized misleading accounting practices and failed to
other franchise-related costs included in the accompanying disclose these accounting practices and/or issued false and
statement of operations were $164 million, $162 million and misleading financial statements and press releases concerning
$160 million for the years ended December 31, 2004, 2003 Charter’s operations and prospects. The Federal Class Actions
and 2002, respectively. were specifically and individually identified in public filings made
by Charter prior to the date of this annual report.
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