Charter 2005 Annual Report Download - page 11

CHARTER COMMUNICATIONS, INC. 2005 FORM 10-K
PART I
ITEM 1. BUSINESS.
INTRODUCTION Charter was organized as a Delaware corporation in 1999
and completed an initial public offering of its Class A common
Charter Communications, Inc. (‘‘Charter’’) is a broadband stock in November 1999. Charter is a holding company whose
communications company operating in the United States, with principal assets are, for accounting purposes, an approximate
approximately 6.16 million customers at December 31, 2005. 48% equity interest and a 100% voting interest in Charter
Through our broadband network of coaxial and fiber optic Holdco, the direct parent of CCHC, LLC, which is the direct
cable, we offer our customers traditional cable video program- parent of Charter Communications Holdings, LLC (‘‘Charter
ming (analog and digital, which we refer to as ‘‘video’’ service), Holdings’’). Charter also holds certain preferred equity and
high-speed Internet access, advanced broadband cable services indebtedness of Charter Holdco that mirror the terms of
(such as video on demand (‘‘VOD’’), high definition television securities issued by Charter. Charter’s only business is to act as
service and interactive television) and, in some of our markets, the sole manager of Charter Holdco and its subsidiaries. As sole
telephone service. See ‘‘Item 1. Business — Products and Ser- manager, Charter controls the affairs of Charter Holdco and
vices’’ for further description of these terms, including most of its subsidiaries. Certain of our subsidiaries commenced
‘‘customers.’’ operations under the ‘‘Charter Communications’’ name in 1994,
At December 31, 2005, we served approximately 5.88 mil- and our growth through 2001 was primarily due to acquisitions
lion analog video customers, of which approximately 2.80 mil- and business combinations. We do not expect to make any
lion were also digital video customers. We also served significant acquisitions in the foreseeable future, but plan to
approximately 2.20 million high-speed Internet customers evaluate opportunities to consolidate our operations through
(including approximately 253,400 who received only high-speed exchanges of cable systems with other cable operators, as they
Internet services). We also provided telephone service to arise. We may also sell certain assets from time to time. Paul G.
approximately 121,500 customers (including approximately Allen owns 45% of Charter Holdco through affiliated entities.
19,300 who received telephone service only.) His membership units are convertible at any time for shares of
At December 31, 2005, our investment in cable properties, our Class A common stock on a one-for-one basis. Paul G.
long-term debt, accumulated deficit and total shareholders’ Allen controls Charter with an as-converted common equity
deficit were $15.7 billion, $19.4 billion, $10.2 billion and interest of approximately 49% and a voting control interest of
$4.9 billion, respectively. Our working capital deficit was 90% as of December 31, 2005.
$864 million at December 31, 2005. For the year ended Our principal executive offices are located at Charter Plaza,
December 31, 2005, our revenues, net loss applicable to 12405 Powerscourt Drive, St. Louis, Missouri 63131. Our
common stock and loss per common share were approximately telephone number is [phone] and we have a website
$5.3 billion, $970 million and $3.13, respectively. accessible at www.charter.com. Since January 1, 2002, our
We have a history of net losses. Further, we expect to annual reports, quarterly reports and current reports on
continue to report net losses for the foreseeable future. Our net Form 8-K, and all amendments thereto, have been made
losses are principally attributable to insufficient revenue to cover available on our website free of charge as soon as reasonably
the interest costs we incur because of our high level of debt, the practicable after they have been filed. The information posted
depreciation expenses that we incur resulting from the capital on our website is not incorporated into this annual report.
investments we have made in our cable properties, and the
impairment of our franchise intangibles. We expect that these Certain Significant Developments in 2005 and 2006
expenses (other than impairment of franchises) will remain We continue to pursue opportunities to improve our liquidity.
significant, and we therefore expect to continue to report net Our efforts in this regard have resulted in the completion of a
losses for the foreseeable future. Historically, a portion of the number of financing transactions in 2005 and 2006, as follows:
losses were allocated to minority interest. However, at Decem- (the January 2006 sale by our subsidiaries, CCH II, LLC
ber 31, 2003, the minority interest in Charter Communications (‘‘CCH II’’) and CCH II Capital Corp., of an additional
Holding Company, LLC (‘‘Charter Holdco’’) had been substan- $450 million principal amount of their 10.250% senior notes
tially eliminated by these loss allocations. Beginning in 2004, we due 2010;
absorb substantially all future losses before income taxes that
(the October 2005 entry by our subsidiaries, CCO Holdings,
otherwise would have been allocated to minority interest. Under
LLC (‘‘CCO Holdings’’) and CCO Holdings Capital Corp.,
our existing capital structure, future losses will continue to be
as guarantor thereunder, into a $600 million senior bridge
absorbed by Charter. The remaining minority interest relates to
loan agreement with various lenders (which was reduced to
CC VIII, LLC (‘‘CC VIII’’) and the related profit and loss
$435 million as a result of the issuance of CCH II notes);
allocations for these interests have not had a significant impact
on our statement of operations nor are they expected to have a (the September 2005 exchange by Charter Holdings, CCH I,
significant impact in the future. LLC (‘‘CCH I’’) and CCH I Holdings, LLC (‘‘CIH’’) of
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