Charter 2006 Annual Report Download - page 15

CHARTER COMMUNICATIONS, INC. 2006 FORM 10-K
PART I
ITEM 1. BUSINESS.
INTRODUCTION Paul G. Allen controls Charter through an as-converted
common equity interest of approximately 49% and a voting
Charter Communications, Inc. (‘‘Charter’’) is a broadband control interest of 91% as of December 31, 2006. He also owns
communications company operating in the United States, with 45% of Charter Holdco through affiliated entities. His member-
approximately 5.73 million customers at December 31, 2006. ship units in Charter Holdco are convertible at any time for
Through our hybrid fiber and coaxial cable network, we offer shares of our Class B common stock on a one-for-one basis,
our customers traditional cable video programming (analog and which shares are in turn convertible into Class A common
digital, which we refer to as ‘‘video’’ service), high-speed Internet stock. Each share of Class A common stock is entitled to one
access, advanced broadband cable services (such as Charter vote. Mr. Allen is entitled to ten votes for each share of Class B
OnDemand
TM
video service (‘‘OnDemand’’), high definition common stock and for each membership unit in Charter
television service, and digital video recorder (‘‘DVR’’) service) Holdco held by him and his affiliates.
and, in many of our markets, telephone service. See ‘‘Item 1. Our principal executive offices are located at Charter Plaza,
Business — Products and Services’’ for further description of these 12405 Powerscourt Drive, St. Louis, Missouri 63131. Our
terms, including ‘‘customers.’’ telephone number is [phone] and we have a website
At December 31, 2006, we served approximately 5.43 mil- accessible at www.charter.com. Since January 1, 2002, our
lion analog video customers, of which approximately 2.81 mil- annual reports, quarterly reports and current reports on
lion were also digital video customers. We also served Form 8-K, and all amendments thereto, have been made
approximately 2.40 million high-speed Internet customers available on our website free of charge as soon as reasonably
(including approximately 268,900 who received only high-speed practicable after they have been filed. The information posted
Internet services). We also provided telephone service to on our website is not incorporated into this annual report.
approximately 445,800 customers (including approximately
27,200 who received only telephone service). Certain Significant Developments in 2006
At December 31, 2006, our investment in cable properties, We continue to pursue opportunities to improve our liquidity.
long-term debt, accumulated deficit and total shareholders’ Our efforts in this regard have resulted in the completion of a
deficit were $14.4 billion, $19.1 billion, $11.5 billion and number of financing and asset sales transactions in 2006, as
$6.2 billion, respectively. Our working capital deficit was follows:
$959 million at December 31, 2006. For the year ended (the January 2006 sale by our subsidiaries, CCH II, LLC
December 31, 2006, our revenues, net loss applicable to (‘‘CCH II’’) and CCH II Capital Corp., of an additional
common stock, and net loss per common share were approxi- $450 million principal amount of their 10.250% senior notes
mately $5.5 billion, $1.4 billion, and $4.13, respectively. due 2010;
We have a history of net losses. Further, we expect to
(the April 2006 refinancing of our credit facilities;
continue to report net losses for the foreseeable future. Our net
losses are principally attributable to insufficient revenue to cover (the September 2006 exchange by our subsidiaries, Charter
the combination of operating expenses and interest expenses we Holdings, CCH I, LLC (‘‘CCH I’’), CCH I Capital Corp.,
incur because of our high level of debt and depreciation CCH II and CCH II Capital Corp., of approximately
expenses that we incur resulting from the capital investments we $797 million in total principal amount of outstanding debt
have made and continue to make in our cable properties. We securities of Charter Holdings in a private placement for
expect that these expenses will remain significant. CCH I and CCH II new debt securities (the ‘‘Private
Charter was organized as a Delaware corporation in 1999 Exchange’’);
and completed an initial public offering of its Class A common
(the September 2006 exchange by us and our subsidiaries,
stock in November 1999. Charter is a holding company whose CCHC, CCH II, and CCH II Capital Corp., of approxi-
principal assets are an approximate 55% equity interest (52% for mately $450 million in total principal amount of Charter’s
accounting purposes) and a 100% voting interest in Charter 5.875% convertible senior notes due 2009 for cash, shares of
Communications Holding Company, LLC (‘‘Charter Holdco’’), Charter’s Class A common stock and CCH II new debt
the direct parent of CCHC, LLC (‘‘CCHC’’), which is the direct securities; and
parent of Charter Communications Holdings, LLC (‘‘Charter
Holdings’’). Charter also holds certain preferred equity and (the third quarter 2006 sales of certain cable television
indebtedness of Charter Holdco that mirror the terms of systems serving a total of approximately 390,300 analog
securities issued by Charter. Charter’s only business is to act as video customers for a total sales price of approximately
the sole manager of Charter Holdco and its subsidiaries. As sole $1.0 billion.
manager, Charter controls the affairs of Charter Holdco and its
limited liability company subsidiaries.
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