Charter 2005 Annual Report Download - page 47

CHARTER COMMUNICATIONS, INC. 2005 FORM 10-K
Charter Holdco is currently under examination by the probable, a reserve is established. The reserve reflects manage-
Internal Revenue Service for the tax years ending December 31, ment’s best estimate of the probable cost of ultimate resolution
2002 and 2003. Our results (excluding Charter and our indirect of the matter and is revised accordingly as facts and circum-
corporate subsidiaries) for these years are subject to this stances change and, ultimately when the matter is brought to
examination. Management does not expect the results of this closure. We have established reserves for certain matters and if
examination to have a material adverse effect on our consoli- any of these matters are resolved unfavorably resulting in
dated financial condition, results of operations or our liquidity, payment obligations in excess of management’s best estimate of
including our ability to comply with our debt covenants. the outcome, such resolution could have a material adverse
effect on our consolidated financial condition, results of opera-
Litigation. Legal contingencies have a high degree of uncertainty. tions or our liquidity.
When a loss from a contingency becomes estimable and
RESULTS OF OPERATIONS
The following table sets forth the percentages of revenues that items in the accompanying consolidated statements of operations
constitute for the indicated periods (dollars in millions, except share data):
Year Ended December 31,
2005 2004 2003
Revenues $ 5,254 100% $ 4,977 100% $ 4,819 100%
Costs and Expenses:
Operating (excluding depreciation and amortization) 2,293 44% 2,080 42% 1,952 40%
Selling, general and administrative 1,034 20% 971 19% 940 20%
Depreciation and amortization 1,499 28% 1,495 30% 1,453 30%
Impairment of franchises —— 2,433 49% ——
Asset impairment charges 39 1% —— ——
(Gain) loss on sale of assets, net 6— (86) (2)% 5 —
Option compensation expense, net 14 — 31 1% 4 —
Hurricane asset retirement loss 19 — —— ——
Special charges, net 7— 104 2% 21 —
Unfavorable contracts and other settlements —— (5) —(72) (1)%
4,911 93% 7,023 141% 4,303 89%
Income (loss) from operations 343 7% (2,046) (41)% 516 11%
Interest expense, net (1,789) (1,670) (1,557)
Gain on derivative instruments and hedging activities, net 50 69 65
Loss on debt to equity conversions —(23) —
Gain (loss) on extinguishment of debt and preferred stock 521 (31) 267
Other, net 22 3 (16)
Loss before minority interest, income taxes and cumulative
effect of accounting change (853) (3,698) (725)
Minority interest 119 377
Loss before income taxes and cumulative effect of accounting
change (852) (3,679) (348)
Income tax benefit (expense) (115) 103 110
Loss before cumulative effect of accounting change (967) (3,576) (238)
Cumulative effect of accounting change, net of tax —(765) —
Net loss (967) (4,341) (238)
Dividends on preferred stock — redeemable (3) (4) (4)
Net loss applicable to common stock $ (970) $ (4,345) $ (242)
Loss per common share, basic and diluted $ (3.13) $ (14.47) $ (0.82)
Weighted average common shares outstanding 310,159,047 300,291,877 294,597,519
Year Ended December 31, 2005 Compared to Year Ended December 31, 121,900 high-speed Internet customers and digital video custom-
2004 ers, respectively, as well as price increases for video and high-
Revenues. The overall increase in revenues in 2005 compared to speed Internet services, and is offset partially by a decrease of
2004 is principally the result of an increase of 312,000 and 107,000 analog video customers and $12 million of credits issued
37