Charter 2005 Annual Report Download - page 151

CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES 2005 FORM 10-K
Notes to Consolidated Financial Statements (continued)
In January 2004, the Company began an option exchange established by Charter’s management and approved by its board
program in which the Company offered its employees the right of directors as of the time of the award. Charter granted
to exchange all stock options (vested and unvested) under the 3.2 million and 6.9 million shares in 2005 and 2004, respectively,
1999 Charter Communications Option Plan and 2001 Stock under this program and recognized expense of $1 million and
Incentive Plan that had an exercise price over $10 per share for $8 million in the first three quarters of 2005 and 2004,
shares of restricted Charter Class A common stock or, in some respectively. However, in the fourth quarter of 2005 and 2004,
instances, cash. Based on a sliding exchange ratio, which varied the Company reversed the entire $1 million and $8 million,
depending on the exercise price of an employees outstanding respectively, of expense based on the Company’s assessment of
options, if an employee would have received more than the probability of achieving the financial performance measures
400 shares of restricted stock in exchange for tendered options, established by Charter and required to be met for the
Charter issued that employee shares of restricted stock in the performance shares to vest. In February 2006, the Compensation
exchange. If, based on the exchange ratios, an employee would Committee approved a modification to the financial perform-
have received 400 or fewer shares of restricted stock in ance measures required to be met for the performance shares to
exchange for tendered options, Charter instead paid the vest after which management believes that a approximately
employee cash in an amount equal to the number of shares the 2.5 million of the performance shares are likely to vest. As such,
employee would have received multiplied by $5.00. The offer expense of approximately $3 million will be amortized over the
applied to options (vested and unvested) to purchase a total of remaining two year service period.
22,929,573 shares of Class A common stock, or approximately
22. HURRICANE ASSET RETIREMENT LOSS
48% of the Company’s 47,882,365 total options issued and
outstanding as of December 31, 2003. Participation by employ- Certain of the Company’s cable systems in Louisiana suffered
ees was voluntary. Those members of the Company’s board of significant plant damage as a result of hurricanes Katrina and
directors who were not also employees of the Company or any Rita in September 2005. As a result, the Company wrote off
of its subsidiaries were not eligible to participate in the exchange $19 million of its plants’ net book value in the third quarter of
offer. 2005.
In the closing of the exchange offer on February 20, 2004,
the Company accepted for cancellation eligible options to 23. SPECIAL CHARGES
purchase approximately 18,137,664 shares of its Class A com- In the fourth quarter of 2002, the Company began a workforce
mon stock. In exchange, the Company granted 1,966,686 shares reduction program and consolidation of its operations from
of restricted stock, including 460,777 performance shares to three divisions and ten regions into five operating divisions,
eligible employees of the rank of senior vice president and eliminating redundant practices and streamlining its manage-
above, and paid a total cash amount of approximately $4 million ment structure. The Company has recorded special charges as a
(which amount includes applicable withholding taxes) to those result of reducing its workforce, executive severance and
employees who received cash rather than shares of restricted consolidating administrative offices in 2003, 2004 and 2005. The
stock. The restricted stock was granted on February 25, 2004. activity associated with this initiative is summarized in the table
Employees tendered approximately 79% of the options eligible below.
to be exchanged under the program.
The cost to the Company of the stock option exchange Total
program was approximately $10 million, with a 2004 cash Severance Special
compensation expense of approximately $4 million and a non- /Leases Litigation Other Charge
cash compensation expense of approximately $6 million to be Balance at December 31, 2002 $ 31
expensed ratably over the three-year vesting period of the Special Charges 26 $ —$(5) $21
Payments (43)
restricted stock in the exchange.
Balance at December 31, 2003 14
In January 2004, the Compensation Committee of the
Special Charges 12 $ 92 $ —$104
board of directors of Charter approved Charter’s Long-Term Payments (20)
Incentive Program (‘‘LTIP’’), which is a program administered Balance at December 31, 2004 6
under the 2001 Stock Incentive Plan. Under the LTIP, employ- Special Charges 6 $ 1 $ —$7
ees of Charter and its subsidiaries whose pay classifications Payments (8)
exceed a certain level are eligible to receive stock options, and Balance at December 31, 2005 $ 4
more senior level employees are eligible to receive stock options
and performance shares. The stock options vest 25% on each of For the year ended December 31, 2003, the severance and
the first four anniversaries of the date of grant. The performance lease costs were offset by a $5 million settlement from the
shares vest on the third anniversary of the grant date and shares Internet service provider Excite@Home related to the conver-
of Charter Class A common stock are issued, conditional upon sion of high-speed Internet customers to Charter Pipeline service
Charter’s performance against financial performance measures in 2001. For the year ended December 31, 2004, special charges
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