Charter 2005 Annual Report Download - page 147

CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES 2005 FORM 10-K
Notes to Consolidated Financial Statements (continued)
absorbed by Charter. Changes to minority interest consist of the In connection with the repurchase, the holders of Preferred
following for the periods presented: Stock consented to an amendment to the Certificate of
Designation governing the Preferred Stock that will eliminate
Minority the quarterly dividends on all of the outstanding Preferred Stock
Interest and will provide that the liquidation preference for the
remaining shares outstanding will be $105.4063 per share, which
Balance, December 31, 2002 $1,050
Minority interest in loss of a subsidiary (377) amount shall accrete from September 30, 2005 at an annual rate
Minority interest in income tax benefit (8) of 7.75%, compounded quarterly. Certain holders of Preferred
Changes in fair value of interest rate agreements 25 Stock also released Charter from various threatened claims
Other (1)
relating to their acquisition and ownership of the Preferred
Balance, December 31, 2003 689 Stock, including threatened claims for breach of contract.
Minority interest in loss of a subsidiary (19)
Minority interest in cumulative effect of accounting change (19)
Reclass of Helicon, LLC interest (25) 13. COMMON STOCK
Changes in fair value of interest rate agreements 22
The Company’s Class A common stock and Class B common
Balance, December 31, 2004 648
Minority interest in loss of subsidiary (1) stock are identical except with respect to certain voting, transfer
CC VIII settlement — exchange of interests (467) and conversion rights. Holders of Class A common stock are
Changes in fair value of interest rate agreements and other 8 entitled to one vote per share and holder of Class B common
Balance, December 31, 2005 $ 188 stock is entitled to ten votes for each share of Class B common
stock held and for each Charter Holdco membership unit held.
12. PREFERRED STOCK – REDEEMABLE The Class B common stock is subject to significant transfer
restrictions and is convertible on a share for share basis into
On August 31, 2001, in connection with its acquisition of Cable Class A common stock at the option of the holder. Charter
USA, Inc. and certain cable system assets from affiliates of Cable Holdco membership units are exchangeable on a one-for-one
USA, Inc., the Company issued 505,664 shares of Series A basis for shares of Class A common stock.
Convertible Redeemable Preferred Stock (the ‘‘Preferred Stock’’)
valued at and with a liquidation preference of $51 million. 14. SHARE LENDING AGREEMENT
Holders of the Preferred Stock have no voting rights but are
In 2005, Charter issued 94.9 million shares of Class A common
entitled to receive cumulative cash dividends at an annual rate
stock in a public offering, which was effected pursuant to an
of 5.75%, payable quarterly. If for any reason Charter fails to pay
effective registration statement that initially covered the issuance
the dividends on the Preferred Stock on a timely basis, the
and sale of up to 150 million shares of Class A common stock.
dividend rate on each share increases to an annual rate of 7.75%
The shares were issued pursuant to the share lending agree-
until the payment is made. The Preferred Stock is redeemable
ment, pursuant to which Charter had previously agreed to loan
by Charter at its option on or after August 31, 2004 and must
up to 150 million shares to Citigroup Global Markets Limited
be redeemed by Charter at any time upon a change of control,
(‘‘CGML’’). Because less than the full 150 million shares covered
or if not previously redeemed or converted, on August 31, 2008.
by the share lending agreement were sold in the offering,
The Preferred Stock is convertible, in whole or in part, at the
Charter as of December 31, 2005 was obligated to issue, at
option of the holders from April 1, 2002 through August 31,
CGML’s request, up to an additional 55.1 million loaned shares
2008, into shares of common stock at an initial conversion rate
in subsequent registered public offerings pursuant to the share
equal to a conversion price of $24.71 per share of common
lending agreement. In February 2006, an additional 22.0 million
stock, subject to certain customary adjustments. The redemption
shares were issued under the share lending agreement.
price per share of Preferred Stock is the Liquidation Preference
This offering of Charter’s Class A common stock was
of $100, subject to certain customary adjustments. In the first
conducted to facilitate transactions by which investors in
quarter of 2003, the Company issued 39,595 additional shares of
Charter’s 5.875% convertible senior notes due 2009, issued on
preferred stock valued at and with a liquidation preference of
November 22, 2004, hedged their investments in the convertible
$4 million.
senior notes. Charter did not receive any of the proceeds from
In November 2005, Charter repurchased 508,546 shares of
the sale of this Class A common stock. However, under the
its Series A Convertible Redeemable Preferred Stock for an
share lending agreement, Charter received a loan fee of $.001 for
aggregate purchase price of approximately $31 million (or
each share that it lends to CGML.
$60 per share). The shares had liquidation preference of
The issuance of up to a total of 150 million shares of
approximately $51 million and had accrued but unpaid divi-
common stock (of which 94.9 million were issued in 2005)
dends of approximately $3 million resulting in a gain of
pursuant to a share lending agreement executed by Charter in
approximately $23 million recorded in gain (loss) on extinguish-
connection with the issuance of the 5.875% convertible senior
ment of debt and preferred stock. Following the repurchase,
notes in November 2004 is essentially analogous to a sale of
36,713 shares of preferred stock remained outstanding.
F-29