Charter 2005 Annual Report Download - page 51

CHARTER COMMUNICATIONS, INC. 2005 FORM 10-K
lion in the year ended December 31, 2005 compared to the year Income tax benefit (expense). Income tax expense for the year
ended December 31, 2004. The decrease is primarily the result of ended December 31, 2005 was recognized through increases in
a decrease in gains on interest rate agreements that do not qualify deferred tax liabilities related to our investment in Charter
for hedge accounting under SFAS No. 133, Accounting for Holdco, as well as through current federal and state income tax
Derivative Instruments and Hedging Activities, which decreased from expense and increases in the deferred tax liabilities of certain of
a gain of $65 million for the year ended December 31, 2004 to our indirect corporate subsidiaries. Income tax benefit for the
$47 million for the year ended December 31, 2005. This was year ended December 31, 2004 was realized as a result of
coupled with a decrease in gains on interest rate agreements, as a decreases in certain deferred tax liabilities related to our
result of hedge ineffectiveness on designated hedges, which investment in Charter Holdco as well as decreases in the
decreased from $4 million for the year ended December 31, 2004 deferred tax liabilities of certain of our indirect corporate
to $3 million for the year ended December 31, 2005. subsidiaries, attributable to the write-down of franchise assets for
financial statement purposes and not for tax purposes. We do
Loss on debt to equity conversions. Loss on debt to equity not expect to recognize a similar benefit associated with the
conversions for the year ended December 31, 2004 represents impairment of franchises in future periods. However, the actual
the loss recognized from privately negotiated exchanges of a tax provision calculations in future periods will be the result of
total of $30 million principal amount of Charter’s 5.75% convert- current and future temporary differences, as well as future
ible senior notes held by two unrelated parties for shares of operating results.
Charter Class A common stock. The exchange resulted in the
issuance of more shares in the exchange transaction than would Cumulative effect of accounting change, net of tax. Cumulative effect
have been issuable under the original terms of the convertible of accounting change of $765 million (net of minority interest
senior notes. effects of $19 million and tax effects of $91 million) in 2004
represents the impairment charge recorded as a result of our
Gain (loss) on extinguishment of debt and preferred stock. Gain on adoption of Topic D-108.
extinguishment of debt and preferred stock for the year ended
December 31, 2005 represents $490 million related to the Net loss. Net loss decreased by $3.4 billion in 2005 compared to
exchange of approximately $6.8 billion total principal amount of 2004 as a result of the factors described above. The impact to
outstanding debt securities of Charter Holdings for new CCH I net loss in 2005 of the asset impairment charges, extinguishment
and CIH debt securities, approximately $10 million related to of debt and preferred stock was to decrease net loss by
the issuance of Charter Operating notes in exchange for Charter approximately $482 million. The impact to net loss in 2004 of
Holdings notes, approximately $3 million related to the repur- the impairment of franchises, cumulative effect of accounting
chase of $136 million principal amount of our 4.75% convertible change and the reduction in losses allocated to minority interest
senior notes due 2006 and $23 million of gain realized on the was to increase net loss by approximately $3.7 billion.
repurchase of 508,546 shares of Series A convertible redeemable Preferred stock dividends. On August 31, 2001, Charter issued
preferred stock. These gains were offset by approximately 505,664 shares (and on February 28, 2003 issued an additional
$5 million of losses related to the redemption of our subsidiary’s 39,595 shares) of Series A Convertible Redeemable Preferred
CC V Holdings, LLC 11.875% notes due 2008. See Note 9 to Stock in connection with the Cable USA acquisition, on which
the accompanying consolidated financial statements contained in Charter pays or accrues a quarterly cumulative cash dividend at
‘‘Item 8. Financial Statements and Supplementary Data.’’ Loss an annual rate of 5.75% if paid or 7.75% if accrued on a
on extinguishment of debt for the year ended December 31, liquidation preference of $100 per share. Beginning January 1,
2004 represents the write-off of deferred financing fees and third 2005, Charter accrued the dividend on its Series A Convertible
party costs related to the Charter Communications Operating Redeemable Preferred Stock. In November 2005, we repurchased
refinancing in April 2004 and the redemption of our 5.75% con- 508,546 shares of our Series A Convertible Redeemable Preferred
vertible senior notes due 2005 in December 2004. Stock. Following the repurchase, 36,713 shares or preferred stock
Other, net. Net other income for the year ended December 31, remain outstanding. In addition, the Certificate of Designation
2005 represents the gain realized on an exchange of our interest governing the Series A Convertible Redeemable Preferred Stock
in an equity investee for an investment in a larger enterprise. was amended to (i) delete the dividend rights of the remaining
Net other income for the year ended December 31, 2004 shares outstanding and (ii) increase the liquidation preference and
represents gains realized on equity investments. redemption price from $100 to $105.4063 per share, which
amount shall further increase at the rate of 7.75% per annum,
Minority interest. Minority interest represents the 2% accretion of compounded quarterly, from September 30, 2005.
the preferred membership interests in our indirect subsidiary,
CC VIII, LLC, and the pro rata share of the profits and losses of Loss per common share. The loss per common share 6 decreased
CC VIII, LLC. See ‘‘Item 13. Certain Relationships and Related by $11.34, or 78%, as a result of the factors described above.
Transactions — Transactions Arising Out of Our Organizational
Structure and Mr. Allen’s Investment in Charter Communica-
tions, Inc. and Its Subsidiaries — Equity Put Rights — CC VIII.’’
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