Charter 2005 Annual Report Download - page 146

CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES 2005 FORM 10-K
Notes to Consolidated Financial Statements (continued)
For the amounts of debt scheduled to mature during 2006, 11. MINORITY INTEREST AND EQUITY INTEREST OF CHARTER HOLDCO
it is management’s intent to fund the repayments from Charter is a holding company whose primary assets are a
borrowings on the Company’s revolving credit facility. The controlling equity interest in Charter Holdco, the indirect owner
accompanying consolidated balance sheet reflects this intent by of the Company’s cable systems, and $863 million and $990 mil-
presenting all debt balances as long-term while the table above lion at December 31, 2005 and 2004, respectively, of mirror
reflects actual debt maturities as of the stated date. notes that are payable by Charter Holdco to Charter and have
the same principal amount and terms as those of Charter’s
10. NOTE PAYABLE – RELATED PARTY convertible senior notes. Minority interest on the Company’s
consolidated balance sheets as of December 31, 2005 and 2004
CCHC, LLC Note primarily represents preferred membership interests in CC VIII,
In October 2005, Charter, acting through a Special Committee LLC (‘‘CC VIII’’), an indirect subsidiary of Charter Holdco, of
of Charter’s Board of Directors, and Mr. Allen, settled a dispute $188 million and $656 million, respectively. As more fully
that had arisen between the parties with regard to the described in Note 25, this preferred interest arises from the
ownership of CC VIII. As part of that settlement, CCHC issued approximately $630 million of preferred membership units issued
a subordinated exchangeable note (the ‘‘CCHC Note’’) to by CC VIII in connection with an acquisition in February 2000
Charter Investment, Inc. (‘‘CII’’). The CCHC Note has a 15-year and was the subject of a dispute between Charter and Mr. Allen,
maturity. The CCHC Note has an initial accreted value of Charter’s Chairman and controlling shareholder that was settled
$48 million accreting at 14% compounded quarterly, except that October 31, 2005. In conjunction with the settlement, the
from and after February 28, 2009, CCHC may pay any increase Company adjusted minority interest for $467 million, of which
in the accreted value of the CCHC Note in cash and the $418 million was reclassified from minority interest to equity in
accreted value of the CCHC Note will not increase to the the fourth quarter of 2005. Beginning in the fourth quarter of
extent such amount is paid in cash. The CCHC Note is 2005, approximately 5.6% of CC VIII’s income is allocated to
exchangeable at CII’s option, at any time, for Charter Holdco minority interest.
Class A Common units at a rate equal to the then accreted Minority interest historically included the portion of Char-
value, divided by $2.00 (the ‘‘Exchange Rate’’). Customary anti- ter Holdco’s member’s equity not owned by Charter. However,
dilution protections have been provided that could cause future members’ deficit of Charter Holdco was $4.8 billion, $4.4 billion
changes to the Exchange Rate. Additionally, the Charter Holdco and $57 million as of December 31, 2005, 2004 and 2003,
Class A Common units received will be exchangeable by the respectively, thus minority interest in Charter Holdco has been
holder into Charter common stock in accordance with existing eliminated. Minority interest was 52%, 53% and 54% as of
agreements between CII, Charter and certain other parties December 31, 2005, 2004 and 2003, respectively. Reported losses
signatory thereto. Beginning February 28, 2009, if the closing allocated to minority interest on the consolidated statement of
price of Charter common stock is at or above the Exchange operations are limited to the extent of any remaining minority
Rate for a certain period of time as specified in the Exchange interest on the balance sheet related to Charter Holdco.
Agreement, Charter Holdco may require the exchange of the Additionally, minority interest includes the proportionate share
CCHC Note for Charter Holdco Class A Common units at the of changes in fair value of interest rate risk derivative agree-
Exchange Rate. Additionally, CCHC has the right to redeem ments. Such amounts are temporary as they are contractually
the CCHC Note under certain circumstances for cash in an scheduled to reverse over the life of the underlying instrument.
amount equal to the then accreted value, such amount, if Because minority interest in Charter Holdco was substantially
redeemed prior to February 28, 2009, would also include a make eliminated at December 31, 2003, beginning in 2004, the
whole up to the accreted value through February 28, 2009. Company began to absorb substantially all losses before income
CCHC must redeem the CCHC Note at its maturity for cash in taxes that otherwise would have been allocated to minority
an amount equal to the initial stated value plus the accreted interest. This resulted in an additional $454 million and
return through maturity. The accreted value of the CCHC Note $2.4 billion of net loss for the year ended December 31, 2005
as of December 31, 2005 is $49 million. and 2004, respectively. Subject to any changes in Charter
Holdco’s capital structure, future losses will continue to be
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