<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------
FORM 10-Q
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended March 31, 2000.
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Transition Period From to .
Commission File Numbers:
333-77499
333-77499-01
CHARTER COMMUNICATIONS HOLDINGS, LLC
------------------------------------
CHARTER COMMUNICATIONS HOLDINGS CAPITAL CORPORATION*
---------------------------------------------------
(Exact names of registrants as specified in their charters)
Delaware 43-1843179
-------- ----------
Delaware 43-1843177
-------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
12444 Powerscourt Drive - Suite 100
St. Louis, Missouri 63131
---------------------------------------- -----
(Address of principal executive offices) (Zip Code)
(Registrants' telephone number, including area code) (314) 965-0555
--------------
Indicate by check mark whether the registrants (1) have filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrants were required to file such reports), and (2) have been subject to
such filing requirements for the past 90 days. Yes X No
----- -----
Number of shares of Charter Communications Holdings Capital Corporation common
stock outstanding as of May 11, 2000: 100.
* Charter Communications Holdings Capital Corporation meets the conditions set
forth in General Instruction (H)(1)(a) and (b) of Form 10-Q and is therefore
filing this Form with the reduced disclosure format.
<PAGE> 2
CHARTER COMMUNICATIONS HOLDINGS, LLC
CHARTER COMMUNICATIONS HOLDINGS CAPITAL CORPORATION
FORM 10-Q - FOR THE QUARTER ENDED MARCH 31, 2000
INDEX
<TABLE>
<CAPTION>
Page
----
<S> <C>
Part I. Financial Information
Item 1. Financial Statements - Charter Communications Holdings, LLC and Subsidiaries. 3
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations. 11
Item 3. Quantitative and Qualitative Disclosures About Market Risk. 24
Part II. Other Information
Item 2. Changes in Securities and Use of Proceeds. 25
Item 6. Exhibits and Reports on Form 8-K. 25
Signatures. 28
</TABLE>
NOTE: Separate financial statements of Charter Communications Holdings
Capital Corporation have not been presented as this entity had no
operations and substantially no assets or equity. Accordingly,
management has determined that these financial statements are not
material.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS:
This Report includes forward-looking statements regarding, among other things,
our plans, strategies and prospects, both business and financial. Although we
believe that our plans, intentions and expectations reflected in or suggested by
these forward-looking statements are reasonable, we cannot assure you that we
will achieve or realize these plans, intentions or expectations. Forward-looking
statements are inherently subject to risks, uncertainties and assumptions. Many
of the forward-looking statements contained in this Report may be identified by
the use of forward-looking words such as "believe," "expect," "anticipate,"
"should," "planned," "estimated" and "potential," among others. Important
factors that could cause actual results to differ materially from the
forward-looking statements we make in this Report are set forth in this Report
and in other reports or documents that we file from time to time with the
Securities and Exchange Commission and include, but are not limited to:
- Our plans to achieve growth by offering new products and services, and
through acquisitions and swaps;
- Our anticipated capital expenditures for our planned upgrades and the
ability to fund these expenditures;
- Our beliefs regarding the effects of governmental regulation on our
business; and
- Our ability to effectively compete in a highly competitive environment.
All forward-looking statements attributable to us or a person acting on our
behalf are expressly qualified in their entirety by those cautionary statements.
2
<PAGE> 3
PART I. FINANCIAL INFORMATION.
ITEM 1. FINANCIAL STATEMENTS.
CHARTER COMMUNICATIONS HOLDINGS, LLC AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
2000 1999*
----------- -----------
ASSETS (UNAUDITED)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 120,049 $ 114,096
Accounts receivable, net of allowance for doubtful accounts of $18,493
and $11,471, respectively 97,900 93,743
Prepaid expenses and other 44,279 34,513
----------- -----------
Total current assets 262,228 242,352
----------- -----------
INVESTMENT IN CABLE PROPERTIES:
Property, plant and equipment, net of accumulated depreciation of
$474,885 and $317,079, respectively 3,831,644 3,490,573
Franchises, net of accumulated amortization of $940,201 and $650,476,
respectively 17,446,157 14,985,793
----------- -----------
21,277,801 18,476,366
----------- -----------
OTHER ASSETS 251,953 220,759
----------- -----------
$21,791,982 $18,939,477
=========== ===========
LIABILITIES AND MEMBER'S EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued expenses $ 740,057 $ 704,734
Payables to manager of cable systems - related parties 25,797 6,713
----------- -----------
Total current liabilities 765,854 711,447
----------- -----------
LONG-TERM DEBT 11,154,423 8,936,455
----------- -----------
LOANS PAYABLE - RELATED PARTIES 39,475 1,079,163
----------- -----------
DEFERRED MANAGEMENT FEES - RELATED PARTIES 13,751 21,623
----------- -----------
OTHER LONG-TERM LIABILITIES 150,138 142,836
----------- -----------
MINORITY INTEREST 631,041 --
----------- -----------
MEMBER'S EQUITY:
Member's equity (217,585,246 units issued and outstanding at
March 31, 2000 and December 31, 1999) 9,036,144 8,045,737
Accumulated other comprehensive income 1,156 2,216
----------- -----------
Total member's equity 9,037,300 8,047,953
----------- -----------
$21,791,982 $18,939,477
=========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
- ------------
* Agrees with the supplemental audited consolidated balance sheet included in
Amendment No. 1 to the Company's Registration Statement on Form S-4.
3
<PAGE> 4
CHARTER COMMUNICATIONS HOLDINGS, LLC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS THREE MONTHS
ENDED ENDED
MARCH 31, 2000 MARCH 31, 1999
-------------- --------------
<S> <C> <C>
REVENUES $ 721,604 $ 160,956
-------------- --------------
OPERATING EXPENSES:
Operating, general and administrative 371,769 83,091
Depreciation 252,876 23,535
Amortization 293,224 66,543
Option compensation expense 15,500 16,651
Corporate expense charges - related parties 12,508 2,928
-------------- --------------
945,877 192,748
-------------- --------------
Loss from operations (224,273) (31,792)
OTHER INCOME (EXPENSE):
Interest expense (247,034) (45,426)
Interest income 5,123 1,664
Other, net 132 173
-------------- --------------
(241,779) (43,589)
-------------- --------------
Loss before minority interest and extraordinary item (466,052) (75,381)
MINORITY INTEREST EXPENSE (1,552) --
-------------- --------------
Loss before extraordinary item (467,604) (75,381)
EXTRAORDINARY ITEM - Loss from early extinguishment of debt -- (7,794)
-------------- --------------
Net loss $ (467,604) $ (83,175)
============== ==============
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
4
<PAGE> 5
CHARTER COMMUNICATIONS HOLDINGS, LLC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS THREE MONTHS
ENDED ENDED
MARCH 31, 2000 MARCH 31, 1999
-------------- --------------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net loss $ (467,604) $ (83,175)
Adjustments to reconcile net loss to net cash provided by
operating activities:
Minority interest expense 1,552 --
Depreciation and amortization 546,100 90,078
Option compensation expense 15,500 16,651
Non-cash interest expense 42,209 12,278
Gain on disposal of property, plant and equipment -- (173)
Loss from early extinguishment of debt -- 7,794
Changes in assets and liabilities, net of effects from acquisitions:
Accounts receivable (9,332) (1,788)
Prepaid expenses and other (9,464) (6,250)
Accounts payable and accrued expenses 61,276 (11,454)
Payables to manager of cable systems - related parties,
including deferred management fees 11,212 (7,341)
-------------- --------------
Net cash provided by operating activities 191,449 16,620
-------------- --------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment (259,945) (54,853)
Payments for acquisitions, net of cash acquired (643,574) (2,752)
Loan to Marcus Cable Holdings, LLC -- (1,680,142)
Other investing activities (9,927) (5,039)
-------------- --------------
Net cash used in investing activities (913,446) (1,742,786)
-------------- --------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings of long-term debt, including proceeds from Charter Holdings Notes 4,195,203 4,819,127
Repayments of long-term debt (2,384,336) (1,961,524)
Borrowings from related parties 478,475 --
Repayments of loans payable to related parties (1,518,000) --
Payments for debt issuance costs (47,227) (88,880)
Distributions to Charter Investment and Charter -- (3,240)
Payment to related party -- (20,000)
Other financing activities 3,835 --
-------------- --------------
Net cash provided by financing activities 727,950 2,745,483
-------------- --------------
NET INCREASE IN CASH AND CASH EQUIVALENTS 5,953 1,019,317
CASH AND CASH EQUIVALENTS, beginning of period 114,096 9,573
-------------- --------------
CASH AND CASH EQUIVALENTS, end of period $ 120,049 $ 1,028,890
-------------- --------------
CASH PAID FOR INTEREST $ 76,942 $ 78,865
-------------- --------------
NON-CASH TRANSACTIONS:
Transfer of operating subsidiaries to the Company $ 1,057,890 $ --
-------------- --------------
Issuance of equity by parent for acquisition $ 384,621 $ --
-------------- --------------
Preferred equity issued by subsidiary for acquisition $ 629,489 $ --
============== ==============
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
5
<PAGE> 6
CHARTER COMMUNICATIONS HOLDINGS, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(DOLLARS IN THOUSANDS)
1. ORGANIZATION AND BASIS OF PRESENTATION:
Charter Communications Holdings, LLC (Charter Holdings), a Delaware
limited liability company, owns and operates cable systems serving approximately
6.2 million customers. Charter Holdings offers a full range of traditional cable
television services and has begun to offer digital cable television services,
interactive video programming and high-speed Internet access. Charter Holdings
is a subsidiary of Charter Communications Holding Company, LLC (Charter Holdco),
which is a subsidiary of Charter Communications, Inc. (Charter).
Charter Holdings and its subsidiaries are collectively referred to as
the "Company" herein. All material intercompany transactions and balances have
been eliminated in consolidation.
2. RESPONSIBILITY FOR INTERIM FINANCIAL STATEMENTS:
The accompanying consolidated financial statements of the Company have
been prepared in accordance with the rules and regulations of the Securities and
Exchange Commission. Accordingly, certain information and footnote disclosures
normally included in financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted.
The accompanying consolidated financial statements are unaudited;
however, in the opinion of management, such statements include all adjustments,
which consist of only normal recurring adjustments, necessary for a fair
presentation of the results for the periods presented. Interim results are not
necessarily indicative of results for a full year. For further information,
refer to the Company's Annual Report on Form 10-K for the year ended December
31, 1999.
3. ACQUISITIONS AND TRANSFERS:
On January 1, 2000, Charter Holdco and Charter Holdings effected a
number of transactions in which certain cable systems acquired by Charter Holdco
in November 1999 were contributed to Charter Holdings (the "Transferred
Systems"). The Company accounted for the contribution of the Transferred Systems
effective January 1, 2000, as a reorganization of entities under common control
in a manner similar to a pooling of interests effective January 1, 2000. The
accompanying consolidated balance sheet as of December 31, 1999, reflects this
reorganization. The accounts of the Transferred Systems are included in Charter
Holdings' financial statements from the date the Transferred Systems were
acquired by Charter Holdco.
On February 14, 2000, Charter Holdco and Charter Holdings completed the
acquisition of Bresnan Communications Company Limited Partnership and its
subsidiaries (Bresnan). Prior to the acquisition, Charter Holdco assigned a
portion of its rights to purchase Bresnan to Charter Holdings. Charter Holdco
and Charter Holdings purchased 52% of Bresnan from certain sellers for cash, and
certain sellers contributed 18% of Bresnan to Charter Holdco for 14.8 million
Class C common membership units of Charter Holdco, an approximate 2.6% equity
interest in Charter Holdco. Charter Holdco then transferred its ownership
interest to Charter Holdings. Thereafter, Charter Holdings and certain sellers
contributed all of the outstanding interests in Bresnan to CC VIII, LLC (CC
VIII), a subsidiary of Charter Holdings, and Bresnan was dissolved. In exchange
for the contribution of their interests in Bresnan, the sellers received
approximately 24.2 million Class A preferred membership units in CC VIII,
representing 30% of the equity of CC VIII, and are entitled to a 2% annual
return on their preferred membership units. The purchase price for Bresnan was
approximately $3.1 billion, subject to adjustment, and was comprised of $1.1
billion in cash, $384.6 million and $629.5 million in
6
<PAGE> 7
equity in Charter Holdco and CC VIII, respectively, and approximately $964.4
million in assumed debt. All of the membership units received by the sellers are
exchangeable on a one-for-one basis for Class A common stock of Charter. The
Bresnan cable systems acquired are primarily located in Michigan, Minnesota,
Wisconsin and Nebraska and serve approximately 687,000 customers.
The Bresnan acquisition was accounted for using the purchase method of
accounting, and, accordingly, results of operations of the acquired assets have
been included in the financial statements from the date of acquisition. The
purchase price was allocated to assets acquired and liabilities assumed based on
their relative fair values, including amounts assigned to franchises of $2.8
billion. The allocation of the purchase price for this acquisition is based, in
part, on preliminary information, which is subject to adjustment upon obtaining
complete valuation information. Management believes that finalization of the
purchase price and allocation will not have a material impact on the
consolidated results of operations or financial position of the Company.
Pro forma operating results of the Company as though the Bresnan
acquisition and transfers had occurred on January 1, 1999, with adjustments to
give effect to amortization of franchises, interest expense, and certain other
adjustments, follow. The impact of the issuance and sale of the January 2000
Charter Holdings Notes (see Note 4) is not significant and is therefore not
taken into account below.
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
-------------------------------------
2000 1999
----- ----
<S> <C> <C>
Revenues $ 759,264 $ 711,190
Loss from operations (237,108) (122,930)
Net loss (506,471) (374,372)
</TABLE>
The pro forma information has been presented for comparative purposes
and does not purport to be indicative of the results of operations had these
transactions been completed as of the assumed date or which may be obtained in
the future.
In March 2000, Charter entered into an agreement providing for the
merger of Cablevision of Michigan, Inc., the indirect owner of a cable system in
Kalamazoo, Michigan, with and into Charter. As a result of the merger, Charter
will become the indirect owner of the Kalamazoo system. The merger consideration
of approximately $172.5 million will be paid in Class A common stock of Charter.
After the merger, Charter will contribute 100% of the equity interests of the
direct owner of the Kalamazoo system to Charter Holdco in exchange for
membership units. Charter Holdco will in turn contribute 100% of the assets and
100% of the equity interests to Charter Holdings. The Kalamazoo cable system has
approximately 49,000 customers and had revenues of approximately $4.9 million
for the three months ended March 31, 2000. This acquisition is expected to close
in the third quarter of 2000.
4. LONG-TERM DEBT:
JANUARY 2000 CHARTER HOLDINGS NOTES. On January 6, 2000, Charter
Holdings and Charter Communications Holdings Capital Corporation issued notes
with a principal amount of $1.5 billion (January 2000 Charter Holdings Notes).
The January 2000 Charter Holdings Notes consist of $675.0 million 10.00% Senior
Notes due 2009, $325.0 million 10.25% Senior Notes due 2010 and $532.0 million
$11.75% Senior Discount Notes due 2010. The net proceeds were approximately $1.3
billion, after giving effect to discounts, commissions and expenses. The
proceeds from the sale of the January 2000 Charter Holdings Notes were used to
finance the repurchases of debt assumed in certain transactions, as described
below.
On April 24, 2000, Charter Holdings and Charter Communications Holdings
Capital Corporation made an offer to exchange the January 2000 Charter Holdings
Notes for new notes. The new notes have substantially similar terms, except that
the notes are registered under the Securities Act of 1933, as amended, and,
therefore, will not bear legends restricting their transfer.
7
<PAGE> 8
AVALON CABLE OF MICHIGAN HOLDINGS, INC. AND ITS SUBSIDIARIES NOTES. In
January 2000, through change of control offers and purchases in the open market,
all of the Avalon 9.375% Senior Subordinated Notes due 2008 with a principal
amount of $150.0 million were repurchased for $153.7 million. In addition, also
through change of control offers, $16.3 million in aggregate principal amount at
maturity of the Avalon 11.875% Senior Discount Notes due 2008 was repurchased
for $10.5 million. As of March 31, 2000, Avalon 11.875% notes with an aggregate
principal amount of $179.8 million at maturity remain outstanding with an
accreted value of $117.8 million.
FALCON COMMUNICATIONS, L.P. AND ITS SUBSIDIARIES DEBENTURES. In
February 2000, through change of control offers and purchases in the open
market, all of the Falcon 8.375% Senior Debentures due 2010 with a principal
amount of $375.0 million were repurchased for $388.0 million, and all of the
Falcon 9.285% Senior Discount Debentures due 2010 with an aggregate principal
amount at maturity of $435.3 million were repurchased for $328.1 million.
BRESNAN CREDIT FACILITIES. Upon the closing of the Bresnan acquisition,
we amended and assumed the previous Bresnan credit facilities. The Bresnan
credit facilities provide for borrowings of up to $900.0 million. The Bresnan
credit facilities provide for two term facilities, one with a principal amount
of $403.0 million (Term A), and the other with a principal amount of $297.0
million (Term B). The Bresnan credit facilities also provide for a $200.0
million revolving credit facility with a maturity date in June 2007 and, at the
option of lenders, supplemental facilities in the amount of $200.0 million.
Amounts under the Bresnan credit facilities bear interest at the Base Rate or
the Eurodollar Rate, as defined, plus a margin of up to 2.75% (7.5% to 8.74% as
of March 31, 2000). A quarterly commitment fee of between 0.250% and 0.375% is
payable on the unborrowed balance of Term A and the revolving credit facility.
At the closing of the Bresnan acquisition, we borrowed approximately $601.2
million to replace the borrowings outstanding under the previous credit
facilities and an additional $30.0 million to fund a portion of the Bresnan
purchase price. As of March 31, 2000, $680.9 million was outstanding and $219.1
million was available for borrowing.
BRESNAN NOTES. Charter Holdco and Charter Holdings acquired Bresnan in
February 2000 and assumed Bresnan's $170 million in principal amount of 8%
Senior Notes due 2009 and $275 million in principal amount at maturity of 9.25%
Senior Discount Notes due 2009. In March 2000, we repurchased all of the
outstanding Bresnan notes at 101% of the outstanding principal amounts plus
accrued and unpaid interest or accreted value, as applicable, for a total of
$369.7 million using proceeds from the sale of the January 2000 Charter Holdings
Notes.
CHARTER COMMUNICATIONS OPERATING, LLC CREDIT FACILITIES. In March 2000,
the Charter Operating Credit Facilities were amended to increase the amount of
the supplemental credit facility to $1.0 billion. In connection with this
amendment, $600.0 million of the supplemental credit facility was exercised,
thereby increasing the total borrowing capacity to $4.7 billion. The remaining
$400.0 million of the supplemental credit facility is subject to the Company's
ability to obtain additional commitments from the lenders. As of March 31, 2000,
outstanding borrowings were approximately $3.8 billion, and the unused
availability was $0.9 billion.
5. POSSIBLE RESCISSION LIABILITY:
The Company acquired Helicon I, L.P. and affiliates (Helicon) in July
1999 and acquired Rifkin Acquisition Partners L.L.L.P. and InterLink
Communications Partners, LLLP (collectively, "Rifkin") in September 1999.
Charter Holdco acquired Falcon Communications, L.P. (Falcon) in November 1999,
and the Company acquired Bresnan in February 2000. The Rifkin, Falcon and
Bresnan sellers who acquired Charter Holdco membership units or, in the case of
Bresnan, additional equity interests in an indirect subsidiary of Charter
Holdings in connection with their respective acquisitions and the Helicon
sellers who acquired shares of Class A common stock in Charter's initial public
offering may have rescission rights against Charter and Charter Holdco arising
out of possible violations of Section 5 of the Securities Act of 1933, as
amended, in connection with the offers and sales of these equity interests.
8
<PAGE> 9
If all of these equity holders successfully exercised their possible
rescission rights, Charter or Charter Holdco would become obligated to
repurchase all such equity interests, and the total repurchase obligation would
be up to approximately $1.8 billion as of March 31, 2000. If Charter and Charter
Holdco fail to obtain capital sufficient to fund any required repurchases, they
could seek funds from Charter Holdings and its subsidiaries. This could
adversely affect the Company's consolidated financial condition and results of
operations. These possible rescission rights expire one year from the dates of
issuance or purchase of those equity interests.
6. REVENUES:
Revenues consist of the following:
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
-----------------------------------------
2000 1999
--------- ---------
<S> <C> <C>
Basic $ 524,547 $ 109,590
Premium 55,773 15,344
Pay-per-view 7,231 4,650
Digital 9,196 190
Advertising sales 33,278 7,839
Data 9,712 718
Other 81,867 22,625
--------- ---------
$ 721,604 $ 160,956
========= =========
</TABLE>
7. OPERATING, GENERAL AND ADMINISTRATIVE EXPENSES:
Operating, general and administrative expenses consist of the
following:
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
-----------------------------------------
2000 1999
--------- ---------
<S> <C> <C>
Programming $ 164,825 $ 36,426
General and administrative 125,292 27,256
Service 47,091 10,318
Advertising 12,277 3,659
Marketing 11,693 3,598
Other 10,591 1,834
--------- ---------
$ 371,769 $ 83,091
========= =========
</TABLE>
8. COMPREHENSIVE LOSS:
Comprehensive loss was $468,664 and $83,175 for the three months ended
March 31, 2000 and 1999, respectively. The Company owns common stock of
WorldGate Communications, Inc. that is classified as "available for sale" and
reported at market value, with unrealized gains and losses recorded as
accumulated other comprehensive income.
9. SUBSEQUENT EVENTS:
In April 2000, one of Charter Holdings' subsidiaries purchased a cable
system of Falcon/Capital Cable Partners, L.P. and another cable system of
Farmington Cablevision Company. These cable systems are primarily located in
Illinois, Indiana and Missouri. The aggregate purchase price for these
acquisitions was approximately $75.0 million in cash and was funded with
borrowings from the Charter Operating Credit Facilities. For the three months
ended March 31, 2000, these systems had revenues of approximately $3.1 million.
9
<PAGE> 10
In April 2000, Morgan Stanley Senior Funding, Inc. committed to
provide Charter Holdings and Charter Communications Holdings Capital Corporation
with senior increasing rate bridge loans in an aggregate principal amount of up
to $1.0 billion. The commitment to provide the bridge loans expires on October
14, 2000. Each bridge loan must be in a principal amount not less than $400.0
million and the bridge loans mature one year from the date of the initial loan.
The bridge loan facility will not close unless specified closing conditions are
satisfied.
10
<PAGE> 11
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
Reference is made to the "Certain Trends and Uncertainties" section below in
this Management's Discussion and Analysis for a discussion of important factors
that could cause actual results to differ from expectations and non-historical
information contained herein.
INTRODUCTION
We do not believe that our historical financial condition and results of
operations are accurate indicators of future results because of certain past and
pending events, including:
(1) the merger of Marcus Cable Holdings, LLC (Marcus Holdings) with and
into Charter Communications Holdings, LLC (Charter Holdings) in March
1999;
(2) our acquisitions and transfers completed in 1999 and 2000, and the
pending Kalamazoo transaction;
(3) the refinancing or replacement of the previous credit facilities of the
Charter companies (Charter Communications Properties Holdings, LLC, CCA
Group and CharterComm Holdings, LLC) and certain of our subsidiaries
acquired or transferred to us in 1999 and 2000; and
(4) the purchase of publicly held notes that had been issued by several of
our direct and indirect subsidiaries.
ACQUISITIONS AND TRANSFERS
On January 1, 2000, as a result of transfers from Charter Communications
Holding Company, LLC (Charter Holdco), Charter Holdings became the indirect
owner of the Fanch, Falcon and Avalon cable systems acquired by Charter Holdco
in November 1999.
On February 14, 2000, Charter Holdco and Charter Holdings completed the
acquisition of Bresnan Communications Company Limited Partnership (Bresnan).
Prior to the acquisition, Charter Holdco assigned a portion of its rights to
purchase Bresnan to Charter Holdings. Charter Holdco and Charter Holdings
purchased 52% of Bresnan from certain sellers for cash, and certain sellers
contributed 18% of Bresnan to Charter Holdco for 14.8 million Class C common
membership units of Charter Holdco, an approximate 2.6% equity interest in
Charter Holdco. Charter Holdco then transferred its ownership interest to
Charter Holdings. Thereafter, Charter Holdings and certain sellers contributed
all of the outstanding interests in Bresnan to CC VIII, LLC (CC VIII), a
subsidiary of Charter Holdings, and Bresnan was dissolved. In exchange for the
contribution of their interests in Bresnan, the sellers received approximately
24.2 million Class A preferred membership units in CC VIII, representing 30% of
the equity of CC VIII, and are entitled to a 2% annual return on their preferred
membership units. The purchase price for Bresnan was approximately $3.1 billion,
subject to adjustment, and was comprised of $1.1 billion in cash, $384.6 million
and $629.5 million in equity in Charter Holdco and CC VIII, respectively, and
approximately $964.4 million in assumed debt. All of the membership units
received by the sellers are exchangeable on a one-for-one basis for Class A
common stock of Charter Communications, Inc. (Charter). The Bresnan cable
systems acquired are located primarily in Michigan, Minnesota, Wisconsin and
Nebraska.
11
<PAGE> 12
The following table sets forth additional information on certain of our
acquisitions since January 1, 2000:
<TABLE>
<CAPTION>
AS OF AND FOR
THE THREE MONTHS ENDED
PURCHASE PRICE, MARCH 31, 2000
INCLUDING --------------
ACQUISITION DEBT ASSUMED REVENUES
DATE (IN MILLIONS) CUSTOMERS (IN THOUSANDS)
---- ------------- --------- --------------
<S> <C> <C> <C> <C>
Cable system of Interlake
Cablevision Enterprises, LLC 2/00 $ 13 5,000 $ 445
Bresnan 2/00 3,100 687,000 76,563
Cable system of Falcon/Capital
Cable Partners, L.P. 4/00 60 25,000 2,585
Cable system of Farmington
Cablevision Company 4/00 15 6,000 495
------- ------- --------
Total $ 3,188 723,000 $ 80,088
======= ======= ========
</TABLE>
- ----------
Note: As part of the October 1999 transaction with InterMedia Capital Partners
IV, L.P., InterMedia Partners and affiliates (collectively, "InterMedia"),
we agreed to swap some of our non-strategic cable systems located in
Indiana, Montana, Utah and northern Kentucky, representing 142,000 basic
customers. We transferred cable systems with 112,000 customers to InterMedia
in connection with this swap in October 1999. The remaining cable system,
with customers totaling 30,000, was transferred in March 2000 after receipt
of the necessary regulatory approvals. This transfer is not reflected in the
table above.
PENDING KALAMAZOO TRANSACTION
In March 2000, Charter entered into an agreement providing for the merger of
Cablevision of Michigan, Inc., the indirect owner of a cable system in
Kalamazoo, Michigan, with and into Charter. As a result of the merger, Charter
will become the indirect owner of the Kalamazoo system. The merger consideration
of approximately $172.5 million will be paid in Charter's Class A common stock.
After the merger, Charter will contribute 100% of the equity interests of the
direct owner of the Kalamazoo system to Charter Holdco in exchange for
membership units. Charter Holdco will, in turn, contribute all of the assets and
all of the equity interests to us. The Kalamazoo cable system has approximately
49,000 customers and had revenues of approximately $4.9 million for the three
months ended March 31, 2000. We anticipate that this acquisition will close in
the third quarter of 2000.
POSSIBLE SWAP TRANSACTION
Charter continues to hold negotiations with AT&T regarding the exchange of
certain of our cable systems for cable systems owned by AT&T. This possible swap
transaction is subject to the negotiation and execution of a definitive purchase
agreement, regulatory approvals and other conditions typical in transactions of
this type. We cannot assure you that these conditions will be satisfied.
In addition, we continue to have discussions with several other cable
operators about the possibility of "swapping" cable systems that would further
complement our regional operating clusters.
12
<PAGE> 13
OVERVIEW OF OPERATIONS
Approximately 88% of our historical revenues for the three months ended
March 31, 2000, are attributable to monthly subscription fees charged to
customers for our basic, expanded basic and premium cable television programming
services, equipment rental and ancillary services provided by our cable systems.
In addition, we derive other revenues from installation and reconnection fees
charged to customers to commence or reinstate service, pay-per-view programming,
where users are charged a fee for individual programs requested, advertising
revenues and commissions related to the sale of merchandise by home shopping
services. We have generated increased revenues in each of the past three fiscal
years, primarily through internal customer growth, basic and expanded tier rate
increases, acquisitions and innovative marketing. We are beginning to offer our
customers several other services, which are expected to significantly contribute
to our revenues. One of these services is digital cable, which provides
customers with additional programming options. We are also offering high-speed
Internet access to the World Wide Web through cable modems. Our television-based
Internet access allows us to offer users TV-based e-mail and other Internet
access.
Our expenses primarily consist of operating costs, general and
administrative expenses, depreciation and amortization expense and corporate
expense charges. Operating costs primarily include programming costs, cable
service related expenses, marketing and advertising costs, franchise fees and
expenses related to customer billings. Programming costs accounted for
approximately 44% of our operating, general and administrative expenses for the
three months ended March 31, 2000. Programming costs have increased in recent
years and are expected to continue to increase due to additional programming
being provided to customers, increased cost to produce or purchase cable
programming, inflation and other factors affecting the cable television
industry. In each year we have operated, our costs to acquire programming have
exceeded customary inflationary increases. Significant factors with respect to
increased programming costs are the rate increases and surcharges imposed by
national and regional sports networks directly tied to escalating costs to
acquire programming for professional sports packages in a competitive market. We
benefited in the past from our membership in an industry cooperative that
provided members with volume discounts from programming networks. This industry
cooperative no longer exists. However, our increased size is believed to give us
substantially equivalent buying power. Also, we have been able to negotiate
favorable terms with premium networks in conjunction with the premium packages
we offer, which minimized the impact on margins and provided substantial volume
incentives to grow the premium category. Although we believe that we will be
able to pass future increases in programming costs through to customers, there
can be no assurance that we will be able to do so.
General and administrative expenses primarily include accounting and
administrative personnel and professional fees. Depreciation and amortization
expense relates to the depreciation of our tangible assets and the amortization
of our franchise costs. Corporate expense charges are fees paid or charges for
management services. Pursuant to various management agreements with Charter,
Charter manages and operates the cable systems owned by Charter Holdings and its
subsidiaries. Charter and Charter Investment, Inc. (Charter Investment) maintain
a mutual services agreement in which each entity provides services to the other
as may be reasonably requested in order to manage Charter Holdco and to manage
and operate the cable systems owned by its subsidiaries, including Charter
Holdings. We record actual expenses incurred by Charter on our behalf. All
expenses and costs incurred with respect to the services provided are paid by
us. Our credit facilities limit the amount of such reimbursements.
We have had a history of net losses and expect to continue to report net
losses for the foreseeable future. The principal reasons for our prior and
anticipated net losses include depreciation and amortization expenses associated
with our acquisitions and capital expenditures related to construction and
upgrading of our systems, and interest costs on borrowed money. We cannot
predict what impact, if any, continued losses will have on our ability to
finance our operations in the future.
13
<PAGE> 14
RESULTS OF OPERATIONS
The following discusses the results of operations for:
(1) Charter Holdings, comprised of the Charter companies for the three
months ended March 31, 1999; and
(2) Charter Holdings, comprised of the Charter companies, all 1999
acquisitions and the following for the three months ended March 31,
2000:
- Fanch, Falcon and Avalon from January 1, 2000, the transfer date,
through March 31, 2000;
- Interlake from February 2, 2000, the acquisition date, through
March 31, 2000; and
- Bresnan from February 14, 2000, the acquisition date, through
March 31, 2000.
The following table sets forth the percentages of revenues that items in the
statements of operations constitute for the indicated periods (dollars in
thousands):
<TABLE>
<CAPTION>
THREE MONTHS THREE MONTHS
ENDED ENDED
MARCH 31, 2000 MARCH 31, 1999
--------------------- -----------------------
<S> <C> <C> <C> <C>
STATEMENTS OF OPERATIONS:
Revenues................................ $ 721,604 100.0% $ 160,956 100.0%
---------- ----- --------- -----
Operating expenses:
Operating costs....................... 246,477 34.2% 55,835 34.7%
General and administrative............ 125,292 17.4% 27,256 16.9%
Depreciation.......................... 252,876 35.0% 23,535 14.6%
Amortization.......................... 293,224 40.6% 66,543 41.3%
Option compensation expense........... 15,500 2.2% 16,651 10.4%
Corporate expense charges............. 12,508 1.7% 2,928 1.8%
---------- ----- --------- -----
Total operating expenses................ 945,877 131.1% 192,748 119.7%
---------- ----- --------- -----
Loss from operations.................... (224,273) (31.1%) (31,792) (19.7%)
Interest expense........................ (247,034) (34.2%) (45,426) (28.2%)
Interest income......................... 5,123 0.7% 1,664 1.0%
Other income (expense).................. 132 - 173 0.1%
---------- ----- --------- -----
Loss before minority interest
and extraordinary item................ (466,052) (64.6%) (75,381) (46.8%)
Minority interest expense............... (1,552) (0.2%) - -
Extraordinary item...................... - - (7,794) (4.9%)
---------- ----- --------- -----
Net loss................................ $(467,604) (64.8%) $ (83,175) (51.7%)
========== ===== ========= =====
</TABLE>
THREE MONTHS ENDED MARCH 31, 2000 COMPARED TO THREE MONTHS ENDED MARCH 31, 1999
Since January 1, 1999, we have completed numerous acquisitions. In addition,
we merged with Marcus Holdings in April 1999 and certain cable systems were
transferred to us from Charter Holdco in January 2000. Thus, increases in
amounts for the three months ended March 31, 2000 are not comparable to those
for the three months ended March 31, 1999.
REVENUES. Revenues increased by $560.6 million, from $161.0 million for the
three months ended March 31, 1999, to $721.6 million for the three months ended
March 31, 2000. The increase in revenues primarily resulted from acquisitions.
OPERATING COSTS. Operating costs increased by $190.6 million, from $55.8
million for the three months ended March 31, 1999, to $246.5 million for the
three months ended March 31, 2000. This increase was due primarily to
acquisitions.
14
<PAGE> 15
GENERAL AND ADMINISTRATIVE COSTS. General and administrative costs increased
by $98.0 million, from $27.3 million for the three months ended March 31, 1999,
to $125.3 million for the three months ended March 31, 2000.
This increase was due primarily to acquisitions.
DEPRECIATION. Depreciation expense increased by $229.3 million, from $23.5
million for the three months ended March 31, 1999, to $252.9 million for the
three months ended March 31, 2000. This increase was due primarily to
acquisitions.
AMORTIZATION. Amortization expense increased by $226.7 million, from $66.5
million for the three months ended March 31, 1999, to $293.2 million for the
three months ended March 31, 2000. There was a significant increase in
amortization expense resulting from acquisitions.
OPTION COMPENSATION EXPENSE. Option compensation expense did not change
significantly for the three months ended March 31, 2000 as compared to the three
months ended March 31, 1999. This expense is due to the granting of options to
employees in December 1998 and February 1999 at exercise prices less than the
estimated fair values of the underlying membership units at time of grant, thus,
resulting in compensation expense being accrued over the vesting period of each
grant.
CORPORATE EXPENSE CHARGES. Corporate expense charges increased by $9.6
million, from $2.9 million for the three months ended March 31, 1999, to $12.5
million for the three months ended March 31, 2000. The increase was primarily
the result of acquisitions.
INTEREST EXPENSE. Interest expense increased by $201.6 million, from $45.4
million for the three months ended March 31, 1999, to $247.0 million for the
three months ended March 31, 2000. This increase resulted primarily from
interest on debt used to finance acquisitions.
INTEREST INCOME. Interest income increased by $3.5 million, from $1.7
million for the three months ended March 31, 1999, to $5.1 million for the three
months ended March 31, 2000. The increase was primarily due to investing excess
cash from the issuance and sale of the January 2000 Charter Holdings Notes prior
to completing the change of control offers described herein.
MINORITY INTEREST EXPENSE. Minority interest expense for the three months
ended March 31, 2000, represents the accretion of dividends on the preferred
membership units in an indirect subsidiary of Charter Holdings held by certain
Bresnan sellers.
EXTRAORDINARY ITEM. In March 1999, the Company extinguished all
then-existing long-term debt, excluding borrowings of the Company under its
credit facilities, and refinanced substantially all then-existing credit
facilities at various subsidiaries with a new credit facility. The excess of the
amount paid over the carrying value, net of deferred financing costs, of the
then-existing long-term debt was recorded as an extraordinary item.
NET LOSS. Net loss increased by $384.4 million for the three months ended
March 31, 2000 compared to the three months ended March 31, 1999. The increase
in revenues that resulted from acquisitions was not sufficient to offset the
operating expenses associated with the acquired systems.
LIQUIDITY AND CAPITAL RESOURCES
Our business requires significant cash to fund acquisitions, capital
expenditures, debt service costs and ongoing operations. We have historically
funded and expect to fund future liquidity and capital requirements through cash
flows from operations, equity contributions, borrowings under our credit
facilities and debt and equity financings.
Our historical cash flows from operating activities were $191.4 million and
$16.6 million for the three months ended March 31, 2000 and 1999, respectively.
15
<PAGE> 16
CAPITAL EXPENDITURES
We have substantial ongoing capital expenditure requirements. We make
capital expenditures primarily to upgrade, rebuild and expand our cable systems,
as well as for system maintenance, the development of new products and services,
and converters. Converters are set-top devices added in front of a subscriber's
television receiver to change the frequency of the cable television signals to a
suitable channel. The television receiver is then able to tune and to allow
access to premium service.
Upgrading our cable systems will enable us to offer new products and
services, including digital television, additional channels and tiers, expanded
pay-per-view options, high-speed Internet access and interactive services.
For the three months ended March 31, 2000, we made capital expenditures,
excluding the acquisition of the Interlake and Bresnan cable systems, of $259.9
million. The majority of these capital expenditures related to rebuilding
existing cable systems and were funded from cash flows from operations and
borrowings under credit facilities.
For the period from January 1, 2000 to December 31, 2002, we plan to spend
approximately $6.4 billion for capital expenditures, approximately $3.2 billion
of which will be used to upgrade and rebuild our systems to a bandwidth capacity
of 550 megahertz or greater and add two-way capability, so that we may offer
advanced services. The remaining $3.2 billion will be used for extensions of
systems, development of new products and services, converters and system
maintenance. Capital expenditures for 2000 are expected to be approximately $2.7
billion, and aggregate capital expenditures for 2001 and 2002 are expected to be
approximately $3.7 billion. We currently expect to finance the anticipated
capital expenditures with cash generated from operations and additional
borrowings under credit facilities, including a bridge loan for which we have
received a commitment. We cannot assure you that these amounts will be
sufficient to accomplish our planned system upgrades, expansion and maintenance.
If we are not able to obtain amounts sufficient for our planned upgrades and
other capital expenditures, it could adversely affect our ability to offer new
products and services and compete effectively, and could adversely affect our
growth, financial condition and results of operations.
FINANCING ACTIVITIES
As of March 31, 2000, our total debt was approximately $11.2 billion and the
deficiency of earnings available to cover fixed charges was approximately $467.6
million for the three months then ended. In connection with the April 2000
acquisitions of Capital Cable and Farmington, an additional $75.0 million was
borrowed. Our significant amount of debt may adversely affect our ability to
obtain financing in the future and react to changes in our business. Our credit
facilities and other debt instruments contain various financial and operating
covenants that could adversely impact our ability to operate our business,
including restrictions on the ability of our operating subsidiaries to
distribute cash to their parents. See "- Certain Trends and Uncertainties -
Restrictive Covenants," for further information.
JANUARY 2000 CHARTER HOLDINGS NOTES. On January 12, 2000, Charter Holdings
and Charter Communications Holdings Capital Corporation issued notes with a
principal amount of $1.5 billion (January 2000 Charter Holdings Notes). The
January 2000 Charter Holdings Notes are comprised of $675.0 million 10.00%
Senior Notes due 2009, $325.0 million 10.25% Senior Notes due 2010, and $532.0
million $11.75% Senior Discount Notes due 2010. The net proceeds were
approximately $1.3 billion, after giving effect to discounts, commissions and
expenses. The proceeds from the January 2000 Charter Holdings Notes were used to
finance the repurchases of debt assumed in certain transactions, as described
below.
On April 24, 2000, Charter Holdings and Charter Communications Holdings
Capital Corporation made an offer to exchange the $1.5 billion January 2000
Charter Holdings Notes for new notes. The new notes have substantially similar
terms, except that the notes are registered under the Securities Act of 1933, as
16
<PAGE> 17
amended and, therefore, will not bear legends restricting their transfer.
AVALON CABLE OF MICHIGAN HOLDINGS AND ITS SUBSIDIARIES NOTES. In January
2000, through change of control offers and purchases in the open market, all of
the Avalon 9.375% Senior Subordinated Notes due 2008 with a principal amount of
$150.0 million were repurchased for $153.7 million. In addition, also through
change of control offers, $16.3 million in aggregate principal amount at
maturity of the Avalon 11.875% Senior Discount Notes due 2008 was repurchased
for $10.5 million. As of March 31, 2000, Avalon 11.875% notes with an aggregate
principal amount of $179.8 million at maturity remain outstanding with an
accreted value of $117.8 million.
FALCON COMMUNICATIONS, L.P. AND ITS SUBSIDIARIES DEBENTURES. In February
2000, through change of control offers and purchases in the open market, all of
the Falcon 8.375% Senior Debentures due 2010 with a principal amount of $375.0
million were repurchased for $388.0 million, and all of the Falcon 9.285% Senior
Discount Debentures due 2010 with an aggregate principal amount at maturity of
$435.3 million were repurchased for $328.1 million.
BRESNAN CREDIT FACILITIES. Upon the closing of the Bresnan acquisition, we
amended and assumed the previous Bresnan credit facilities. The Bresnan credit
facilities provide for borrowings of up to $900.0 million. The Bresnan credit
facilities provide for two term facilities, one with a principal amount of
$403.0 million (Term A), and the other with a principal amount of $297.0 million
(Term B). The Bresnan credit facilities also provide for a $200.0 million
revolving credit facility with a maturity date in June 2007 and, at the option
of lenders, supplemental facilities in the amount of $200.0 million. Amounts
under the Bresnan credit facilities bear interest at the Base Rate or the
Eurodollar Rate, as defined, plus a margin of up to 2.75% (7.5% to 8.74% as of
March 31, 2000). A quarterly commitment fee of between 0.250% and 0.375% is
payable on the unborrowed balance of Term A and the revolving credit facility.
At the closing of the Bresnan acquisition, we borrowed approximately $601.2
million to replace the borrowings outstanding under the previous credit
facilities and an additional $30.0 million to fund a portion of the Bresnan
purchase price. As of March 31, 2000, $680.9 million was outstanding and $219.1
million was available for borrowing.
BRESNAN NOTES. Charter Holdco and Charter Holdings acquired Bresnan in
February 2000 and assumed Bresnan's $170 million in principal amount of 8%
Senior Notes due 2009 and $275 million in principal amount at maturity of 9.25%
Senior Discount Notes due 2009. In March 2000, we repurchased all of the
outstanding Bresnan notes at 101% of the outstanding principal amounts plus
accrued and unpaid interest or accreted value, as applicable, for a total of
$369.7 million using proceeds from the sale of the January 2000 Charter Holdings
Notes.
CHARTER OPERATING CREDIT FACILITIES. In March 2000, the Charter Operating
credit facilities were amended to increase the amount of the supplemental credit
facility to $1.0 billion. In connection with this amendment, $600.0 million of
the supplemental credit facility was exercised, thereby increasing the total
borrowing capacity to $4.7 billion. The remaining $400.0 million of the
supplemental credit facility is subject to the Company's ability to obtain
additional commitments from the lenders. As of March 31, 2000, outstanding
borrowings were approximately $3.8 billion, and the unused availability was $0.9
billion.
CHARTER HOLDINGS COMMITTED SENIOR BRIDGE LOAN FACILITY. Morgan Stanley
Senior Funding, Inc. has committed to provide Charter Holdings and Charter
Communications Holdings Capital Corporation with senior increasing rate bridge
loans in an aggregate principal amount of up to $1.0 billion. The commitment to
provide the bridge loans expires on October 14, 2000. Each bridge loan must be
in a principal amount not less than $400.0 million, and the bridge loans mature
one year from the date of the initial loan.
The first loan will initially bear interest at an annual rate equal to the
yield corresponding to the bid price on our 10.25% January 2000 Charter Holdings
senior notes less 0.25%, calculated as of the initial date of funding of the
loan. If the first loan is not repaid within 90 days following its initial date
of funding, the interest rate will increase by 1.25% at the end of such 90-day
period and will increase by an additional 0.50% at the end of each additional
90-day period. The second loan will initially bear interest at an annual rate
equal to the greater of: (a) the interest rate on the first loan in effect on
the date of funding of the second loan; or
17
<PAGE> 18
(b) the yield corresponding to the bid price on our 10.25% January 2000 Charter
Holdings senior notes as of the date of funding of the second loan. If the
second loan is not repaid in whole by the last day of each 90-day period
following its funding, the interest rate on the loan will increase on the last
day of each 90-day period by an amount equal to the increase in the interest
rate on the first loan on such day. Unless additional default interest is
assessed, the interest rate on the bridge loans will be between 9% and 15%
annually.
The bridge loan facility will not close unless specified closing conditions
are satisfied. We cannot assure you that all closing conditions will be
satisfied.
CERTAIN TRENDS AND UNCERTAINTIES
The following discussion highlights a number of trends and uncertainties, in
addition to those discussed elsewhere in this Quarterly Report, that could
materially impact our business, results of operations and financial condition.
SUBSTANTIAL LEVERAGE. As of March 31, 2000, our total debt was approximately
$11.2 billion. We anticipate incurring significant additional debt in the future
to fund the expansion, maintenance and upgrade of our cable systems.
Our ability to make payments on our debt and to fund our planned capital
expenditures for upgrading our cable systems and our ongoing operations will
depend on our ability to generate cash and secure financing in the future. This,
to a certain extent, is subject to general economic, financial, competitive,
legislative, regulatory and other factors beyond our control. We cannot assure
you that our business will generate sufficient cash flow from operations, or
that future borrowings will be available to us under our existing credit
facilities, new facilities or from other sources of financing at acceptable
rates or in an amount sufficient to enable us to repay our debt, to grow our
business or to fund our other liquidity and capital needs.
VARIABLE INTEREST RATES. A significant portion of our debt bears interest at
variable rates that are linked to short-term interest rates. In addition, a
significant portion of our existing debt, assumed debt or debt we might arrange
in the future will bear interest at variable rates. If interest rates rise, our
costs relative to those obligations will also rise. See discussion in Item 3.
RESTRICTIVE COVENANTS. Our credit facilities and the indentures governing
our outstanding debt contain a number of significant covenants that, among other
things, restrict our ability and the ability of our subsidiaries to:
- pay dividends or make other distributions;
- make certain investments or acquisitions;
- dispose of assets or merge;
- incur additional debt;
- issue equity;
- repurchase or redeem equity interests and debt;
- create liens; and
- pledge assets.
Furthermore, in accordance with our credit facilities we are required to
maintain specified financial ratios and meet financial tests. The ability to
comply with these provisions may be affected by events beyond our control. The
breach of any of these covenants will result in a default under the applicable
debt agreement or instrument, which could trigger acceleration of the debt. Any
default under our credit facilities or the indentures governing our outstanding
debt may adversely affect our growth, our financial condition and our results of
operations.
IMPORTANCE OF GROWTH STRATEGY AND RELATED RISKS. We expect that a
substantial portion of any of our future growth will be achieved through
revenues from additional services. We cannot assure you that we will be able to
offer new advanced services successfully to our customers or that those new
advanced services
18
<PAGE> 19
will generate revenues. The amount of our capital expenditures and related
roll-out of advanced services may be limited by the availability of certain
equipment (in particular, converters) due to production capacity constraints of
certain vendors and raw material shortages. We continue to work with our primary
vendors to address such problems and have been assured that we will have an
adequate supply to meet our demand. If we are unable to grow our cash flow
sufficiently, we may be unable to fulfill our obligations or obtain alternative
financing.
MANAGEMENT OF GROWTH. We have experienced rapid growth that has placed and
is expected to continue to place a significant strain on our management,
operations and other resources. Our future success will depend in part on our
ability to successfully integrate the operations acquired and to be acquired and
to attract and retain qualified personnel. No significant severance cost was
incurred in conjunction with the Bresnan acquisition. The failure to retain or
obtain needed personnel or to implement management, operating or financial
systems necessary to successfully integrate acquired operations or otherwise
manage growth when and as needed could have a material adverse effect on our
business, results of operations and financial condition.
In connection with our acquisitions over the past year, we maintain
multi-disciplinary teams to formulate plans for establishing customer service
centers, identifying property, plant and equipment requirements and possible
reduction of headends. Headends are the control centers of a cable television
system where incoming signals are amplified, converted, processed and combined
for transmission to customers. These teams also determine market position and
how to attract talented personnel. Our goals include rapid transition in
achieving performance objectives and implementing "best practice" procedures.
REGULATION AND LEGISLATION. Cable systems are extensively regulated at the
federal, state, and local level. These regulations have increased the
administrative and operational expenses of cable television systems and affected
the development of cable competition. Rate regulation of cable systems has been
in place since passage of the Cable Television Consumer Protection and
Competition Act of 1992, although the scope of this regulation recently was
sharply contracted. Since March 31, 1999, rate regulation exists only with
respect to the lowest level of basic cable service and associated equipment.
This change affords cable operators much greater pricing flexibility, although
Congress could revisit this issue if confronted with substantial rate increases.
Cable operators also face significant regulation of their channel capacity.
They currently can be required to devote substantial capacity to the carriage of
programming that they would not carry voluntarily, including certain local
broadcast signals, local public, educational and government access users, and
unaffiliated commercial leased access programmers. This carriage burden could
increase in the future, particularly if the Federal Communications Commission
(FCC) were to require cable systems to carry both the analog and digital
versions of local broadcast signals. The FCC is currently conducting a
proceeding in which it is considering this channel usage possibility. The FCC
recently rejected a request to allow unaffiliated Internet service providers
seeking direct cable access to invoke commercial leased access rights originally
devised for video programmers.
There is also uncertainty whether local franchising authorities, the FCC, or
the U.S. Congress will impose obligations on cable operators to provide
unaffiliated Internet service providers with access to cable plant on
non-discriminatory terms. If they were to do so, and the obligations were found
to be lawful, it could complicate our operations in general, and our Internet
operations in particular, from a technical and marketing standpoint. These
access obligations could adversely impact our profitability and discourage
system upgrades and the introduction of new products and services.
POSSIBLE RESCISSION LIABILITY. The Rifkin, Falcon and Bresnan sellers who
acquired Charter Holdco membership units or, in the case of Bresnan, additional
equity interests in an indirect subsidiary of Charter Holdings, in connection
with their respective acquisitions and the Helicon sellers who acquired shares
of Class A common stock in Charter's initial public offering may have rescission
rights against Charter and Charter Holdco arising out of possible violations of
Section 5 of the Securities Act of 1933, as amended, in connection with the
offers and sales of these equity interests.
19
<PAGE> 20
If all of these equity holders successfully exercised their possible
rescission rights, Charter or Charter Holdco would become obligated to
repurchase all such equity interests, and the total repurchase obligation would
be up to approximately $1.8 billion as of March 31, 2000. If Charter and Charter
Holdco fail to obtain capital sufficient to fund any required repurchases, they
could seek funds from us and our subsidiaries. This could adversely affect our
consolidated financial condition and results of operations. These rescission
rights expire one year from the dates of issuance or purchase of those equity
interests.
NEW PRODUCTS AND SERVICES
Charter currently offers its customers a full array of traditional cable
television services and we have begun to offer advanced high bandwidth services
such as digital video and high-speed Internet access. We plan to continually
enhance and upgrade these services, including adding new programming and other
telecommunications services.
Charter is in the process of introducing a variety of new or expanded
products and services beyond the traditional offerings of analog television
programming for the benefit of both our residential and commercial customers.
These new products and services are as follows:
- Digital television and its related enhancements;
- High-speed Internet access via cable modems;
- Internet access through dial-up telephone modems;
- Internet access through television-based service; and
- Interactive programming.
The following statistics for December 31, 1999 are pro forma for the
Interlake and Bresnan acquisitions completed in February 2000.
<TABLE>
<CAPTION>
ACTUAL PRO FORMA
MARCH 31, 2000 DECEMBER 31, 1999
-------------- -----------------
<S> <C> <C>
DIGITAL VIDEO
Homes Passed 4,808,300 4,675,000
Digital Customers 224,700 155,400
Digital Penetration 4.7% 3.3%
DATA
Homes Passed 5,081,300 4,422,000
Data Customers 122,900 84,400
Penetration 2.4% 1.9%
TELEVISION-BASED INTERNET ACCESS
Homes Passed 429,000 429,000
Customers 7,300 7,100
Penetration 1.7% 1.7%
</TABLE>
SUPPLEMENTAL UNAUDITED PRO FORMA FINANCIAL DATA
The following Supplemental Unaudited Pro Forma Financial Data is based on
the financial data of Charter Holdings. Our financial data, on a consolidated
basis, is adjusted on a pro forma basis to illustrate the estimated effects of
the Bresnan acquisition. The impact of the issuance and sale of the January 2000
Charter Holdings Notes is not significant and is therefore not taken into
account below.
The Supplemental Unaudited Pro Forma Financial Data reflects the
application of the principles of purchase accounting to the Bresnan acquisition.
The allocation of the purchase price is based, in part, on
20
<PAGE> 21
preliminary information, which is subject to adjustment upon obtaining complete
valuation information of intangible assets and is subject to post-closing
purchase price adjustments. We believe that finalization of the purchase price
allocation will not have a material impact on our results of operations or
financial position. The Supplemental Unaudited Pro Forma Financial Data does not
purport to be indicative of what our results of operations would actually have
been had the transactions described above been completed on the dates indicated
or to project our results of operations for any future date.
<TABLE>
<CAPTION>
SUPPLEMENTAL UNAUDITED PRO FORMA DATA
AS OF AND FOR THE THREE MONTHS ENDED MARCH 31, 2000
---------------------------------------------------
CHARTER
HOLDINGS ACQUISITIONS (a) TOTAL
-------- ---------------- -----------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
REVENUES:
Basic............................... $ 524,547 $ 27,953 $ 552,500
Premium............................. 55,773 2,964 58,737
Pay-per-view........................ 7,231 369 7,600
Digital............................. 9,196 705 9,901
Advertising......................... 33,278 2,344 35,622
Data................................ 9,712 1,640 11,352
Other............................... 81,867 1,685 83,552
---------- ---------- -----------
Total revenues.................... 721,604 37,660 759,264
OPERATING EXPENSES:
Programming......................... 164,825 9,397 174,222
General and administrative.......... 125,292 5,533 130,825
Service............................. 47,091 4,672 51,763
Advertising......................... 12,277 1,219 13,496
Marketing........................... 11,693 623 12,316
Other............................... 10,591 8 10,599
Depreciation........................ 252,876 6,539 259,415
Amortization........................ 293,224 20,950 314,174
Option compensation expense......... 15,500 - 15,500
Corporate expense charges........... 12,508 1,554 14,062
--------- ---------- -----------
Total operating expenses.......... 945,877 50,495 996,372
Loss from operations................ (224,273) (12,835) (237,108)
Interest expense.................... (247,034) (24,481) (271,515)
Interest income..................... 5,123 44 5,167
Other income (expense).............. 132 - 132
---------- ---------- -----------
Loss before minority interest....... (466,052) (37,272) (503,324)
Minority interest expense (b)....... (1,552) (1,595) (3,147)
----------- ----------- ------------
Net loss............................ $ (467,604) $ (38,867) $ (506,471)
========== ========== ===========
OTHER FINANCIAL DATA:
EBITDA (c).......................... $ 321,959 $ 14,654 $ 336,613
EBITDA margin (d)................... 44.6% 38.9% 44.3%
Adjusted EBITDA (e)................. $ 349,835 $ 16,208 $ 366,043
OPERATING DATA (at end of period,
except for averages):
Homes passed (f).................... 9,895,400
Basic customers (g)................. 6,152,000
Basic penetration (h)............... 62.2%
Premium units (i)................... 3,088,000
Premium penetration (j)............. 50.2%
Average monthly revenue per basic
customer (k)...................... $ 41.14
</TABLE>
- ----------
21
<PAGE> 22
(a) Comprised of Bresnan's results of operations through February 14, 2000, the
date of acquisition; and the results of operations of cable systems acquired by
Bresnan through the dates of acquisitions.
(b) Represents the accretion of dividends on the preferred membership units in
an indirect subsidiary of Charter Holdings held by certain Bresnan sellers.
(c) EBITDA represents earnings (loss) before interest, income taxes,
depreciation and amortization, and minority interest. EBITDA is presented
because it is a widely accepted financial indicator of a cable company's ability
to service indebtedness. However, EBITDA should not be considered as an
alternative to income from operations or to cash flows from operating, investing
or financing activities, as determined in accordance with generally accepted
accounting principles. EBITDA should also not be construed as an indication of a
company's operating performance or as a measure of liquidity. Management's
discretionary use of funds depicted by EBITDA may be limited by working capital,
debt service and capital expenditure requirements and by restrictions related to
legal requirements, commitments and uncertainties.
(d) EBITDA margin represents EBITDA as a percentage of revenues.
(e) Adjusted EBITDA means EBITDA before option compensation expense, corporate
expense charges, management fees and other income (expense). Adjusted EBITDA is
presented because it is a widely accepted financial indicator of a cable
company's ability to service its indebtedness. However, adjusted EBITDA should
not be considered as an alternative to income from operations or to cash flows
from operating, investing or financing activities, as determined in accordance
with generally accepted accounting principles. Adjusted EBITDA should also not
be construed as an indication of a company's operating performance or as a
measure of liquidity. In addition, because adjusted EBITDA is not calculated
identically by all companies, the presentation here may not be comparable to
other similarly titled measures of other companies. Management's discretionary
use of funds depicted by adjusted EBITDA may be limited by working capital, debt
service and capital expenditure requirements and by restrictions related to
legal requirements, commitments and uncertainties.
(f) Homes passed are the number of living units, such as single residence homes,
apartments and condominium units, passed by the cable television distribution
network in a given cable system service area.
(g) Basic customers are customers who receive basic cable service.
(h) Basic penetration represents basic customers as a percentage of homes
passed.
(i) Premium units represent the total number of subscriptions to premium
channels.
(j) Premium penetration represents premium units as a percentage of basic
customers.
(k) Average monthly revenue per basic customer represents revenues divided by
the number of months in the period divided by the number of basic customers at
period end.
22
<PAGE> 23
The following information presents operating results and data for the three
months ended March 31, 2000, as compared to the three months ended March 31,
1999, for the cable systems owned or managed by us as of January 1, 1999.
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED MARCH 31, PERCENT
2000 1999 VARIANCE
---- ---- --------
STATEMENTS OF OPERATIONS (Unaudited) (Dollar amounts in thousands)
<S> <C> <C> <C>
Revenues:
Basic....................................................... $ 205,895 $ 188,164
Premium..................................................... 24,107 24,405
Pay-per-view................................................ 3,490 7,243
Digital..................................................... 4,276 261
Advertising sales........................................... 15,510 9,993
Data........................................................ 3,441 1,082
Other....................................................... 38,688 37,015
---------- -----------
Total revenues........................................... 295,407 268,163 10.2%
---------- -----------
Operating Expenses:
Programming................................................. 66,600 63,510
General and administrative.................................. 51,282 47,630
Service..................................................... 18,425 18,589
Marketing................................................... 5,349 6,737
Other operating expenses.................................... 9,748 5,084
---------- -----------
Total operating expenses................................. 151,404 141,550 7.0%
---------- -----------
Adjusted EBITDA............................................... $ 144,003 $ 126,613 13.7%
========== ===========
<CAPTION>
PERCENT
OPERATING DATA MARCH 31, 2000 MARCH 31, 1999 VARIANCE
-------------- -------------- --------
<S> <C> <C> <C>
Homes passed.................................................. 3,878,900 3,805,200
Basic customers*.............................................. 2,254,100 2,202,200 2.4%
Basic penetration............................................. 58.1% 57.9%
Premium units................................................. 1,365,600 1,280,200 6.7%
Digital video customers....................................... 117,300 2,800
Data customers................................................ 38,700 6,900
Average monthly revenue per basic customer.................... $ 43.68 $ 40.59 7.6%
</TABLE>
- -----------
* December 31, 1999 pro forma customers were 2,244,000 after the transfer of a
certain Indiana cable system to complete the InterMedia exchange in March 2000.
Revenues increased by $27.2 million or 10.2% when comparing the revenues
for the three months ended March 31, 2000, to the results for the comparable
systems for the three months ended March 31, 1999. This increase is due to a net
gain of approximately 51,900 or 2.4% basic customers between quarters and retail
rate increases implemented in certain of our systems. Pay-per-view revenues
decreased as a result of few special events in the first quarter of 2000.
Advertising revenues increased 55.2% as a result of launching advertising in new
markets and increasing the number of cable channels on which advertising is
sold.
Total operating expenses increased approximately $9.9 million or 7.0% when
comparing the operating expenses for the three months ended March 31, 2000, to
the results for the same systems for the three months ended March 31, 1999. This
increase is primarily due to increases in license fees paid for programming as a
result of additional subscribers, new channels launched and increases in the
rates paid for programming services. We believe that the increases in
programming expense are consistent with industry-wide increases.
We experienced growth in adjusted EBITDA of approximately $17.4 million or
13.7% when comparing adjusted EBITDA for the three months ended March 31, 2000,
to the results for the same systems for the three months ended March 31, 1999.
Adjusted EBITDA margin increased from 47.2% to 48.7% when comparing the similar
periods.
23
<PAGE> 24
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
INTEREST RATE RISK
The use of interest rate risk management instruments, such as interest rate
exchange agreements, interest rate cap agreements and interest rate collar
agreements is required under the terms of the credit facilities of our
subsidiaries. Our policy is to manage interest costs using a mix of fixed and
variable rate debt. Using interest rate swap agreements, we agree to exchange,
at specified intervals, the difference between fixed and variable interest
amounts calculated by reference to an agreed-upon notional principal amount.
Interest rate cap agreements are used to lock in a maximum interest rate should
variable rates rise, but enable us to pay lower market rates. Collars limit our
exposure to and benefits from interest rate fluctuations on variable rate debt
to within a certain range of rates.
Our participation in interest rate hedging transactions involves
instruments that have a close correlation with its debt, thereby managing its
risk. Interest rate hedge agreements have been designed for hedging purposes and
are not held or issued for speculative purposes.
The table set forth below summarizes the fair values and contract terms of
financial instruments subject to interest rate risk maintained by us as of March
31, 2000 (dollars in thousands):
<TABLE>
<CAPTION>
EXPECTED MATURITY DATE
---------------------------------------------------------------------------------------------
2000 2001 2002 2003 2004 THEREAFTER TOTAL
----------- ---------- ---------- ---------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
DEBT
Fixed Rate.................. - - - $ 56,729 - $ 5,345,662 $ 5,402,391
Average Interest Rate..... - - - 11.8% - 9.6% 9.7%
Variable Rate............... $ 3,750 $ 5,000 $ 101,345 $ 299,433 $ 444,880 $ 5,683,242 $ 6,537,650
Average Interest Rate..... 9.3% 9.3% 9.1% 9.1% 8.7% 8.4% 8.5%
INTEREST RATE INSTRUMENTS
Variable to Fixed Swaps..... $ 500,0000 $ 780,000 $ 350,000 $ 110,000 $ 300,000 $ 392,713 $ 2,432,713
Average Pay Rate.......... 8.0% 7.8% 7.5% 7.1% 6.8% 7.6% 7.6%
Average Receive Rate...... 8.9% 9.4% 9.3% 9.2% 8.8% 8.9% 9.1%
Cap......................... - - $ 15,000 - - - $ 15,000
Average Cap Rate.......... - - 9.0% - - - 9.0%
Collars..................... $ 195,000 $ 545,000 - - - - $ 740,000
Average Cap Rate.......... 9.0% 9.5% - - - - 9.3%
Average Floor Rate........ 7.8% 9.0% - - - - 8.7%
</TABLE>
The fair value of fixed-rate debt at March 31, 2000, was $4.1 billion. The
fair value of fixed-rate debt is based on quoted market prices. The fair value
of variable-rate debt approximates carrying value at March 31, 2000, since this
debt bears interest at current market rates.
The notional amounts of interest rate instruments, as presented in the
above table, are used to measure interest to be paid or received and do not
represent the amount of exposure to credit loss. The estimated fair value
approximates the costs (proceeds) to settle the outstanding contracts. Interest
rates on variable debt are estimated using the average implied forward London
Interbank Offering Rate (LIBOR) rates for the year of maturity based on the
yield curve in effect at March 31, 2000. While swaps, caps and collars represent
an integral part of our interest rate risk management program, their incremental
effect on interest expense for the three months ended March 31, 2000 and 1999,
was not significant.
24
<PAGE> 25
PART II. OTHER INFORMATION.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.
On April 24, 2000, Charter Holdings and Charter Communications Holdings
Capital Corporation made effective an offer to exchange the $1.5 billion January
2000 Charter Holdings Notes for new notes. The new notes have substantially
similar terms, except that the notes are registered under the Securities Act
and, therefore, will not bear legends restricting their transfer. No cash or
other consideration will be received in the exchange.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) EXHIBITS
1.1 Purchase Agreement, dated as of January 6, 2000 by
and among Charter Communications Holdings, LLC,
Charter Communications Capital Corporation and
Goldman, Sachs & Co., Chase Securities Inc.,
FleetBoston Robertson Stephens Inc., Merrill Lynch,
Pierce, Fenner & Smith Incorporated, Morgan Stanley &
Co. Incorporated, TD Securities (USA) Inc., First
Union Securities, Inc., PNC Capital Markets, Inc. and
SunTrust Equitable Securities Corporation (1)
4.1(a) Indenture relating to the 10.00% Senior Notes due
2009, dated as of January 12, 2000 between Charter
Communications Holdings, LLC and Charter
Communications Holdings Capital Corporation and
Harris Trust and Savings Bank (1)
4.1(b) Form of 10.00% Senior Note due 2009 (1)
4.1(c) Exchange and Registration Rights Agreement, dated
January 12, 2000, by and among Charter Communications
Holdings, LLC and Charter Communications Holdings
Capital Corporation, Goldman, Sachs & Co., Chase
Securities Inc., FleetBoston Robertson Stephens Inc.,
Merrill Lynch, Pierce, Fenner & Smith Incorporated,
Morgan Stanley & Co. Incorporated, TD Securities
(USA) Inc., First Union Securities, Inc., PNC Capital
Markets, Inc. and SunTrust Equitable Securities
Corporation, relating to the 10.00% Senior Notes due
2010 (1)
4.2(a) Indenture relating to the 10.25% Senior Notes due
2010, dated as of January 12, 2000 between Charter
Communications Holdings, LLC and Charter
Communications Holdings Capital Corporation and
Harris Trust and Savings Bank (1)
4.2(b) Form of 10.25% Senior Note due 2010 (included in
Exhibit No. 4.2(a)) (1)
4.2(c) Exchange and Registration Rights Agreement, dated
January 12, 2000, by and among Charter Communications
Holdings, LLC and Charter Communications Holdings
Capital Corporation, Goldman, Sachs & Co., Chase
Securities Inc., FleetBoston Robertson Stephens Inc.,
Merrill Lynch, Pierce, Fenner & Smith Incorporated,
Morgan Stanley & Co. Incorporated, TD Securities
(USA) Inc., First Union Securities, Inc., PNC Capital
Markets, Inc. and SunTrust Equitable Securities
Corporation, relating to the 10.25% Senior Notes due
2010 (1)
4.3(a) Indenture relating to the 11.75% Senior Discount
Notes due 2010, dated as of January 12, 2000 between
Charter Communications Holdings, LLC and Charter
Communications Holdings Capital Corporation and
Harris Trust and Savings Bank (1)
25
<PAGE> 26
4.3(b) Form of 11.75% Senior Discount Notes due 2010
(included in Exhibit No. 4.3(a)) (1)
4.3(c) Exchange and Registration Rights Agreement, dated
January 12, 2000, by and among Charter Communications
Holdings, LLC and Charter Communications Holdings
Capital Corporation, Goldman, Sachs & Co., Chase
Securities Inc., FleetBoston Robertson Stephens Inc.,
Merrill Lynch, Pierce, Fenner & Smith Incorporated,
Morgan Stanley & Co. Incorporated, TD Securities
(USA) Inc., First Union Securities, Inc., PNC Capital
Markets, Inc. and SunTrust Equitable Securities
Corporation, relating to the 11.75% Senior Discount
Notes due 2010 (1)
10.1(c) Third Amendment to Credit Agreement dated as of March
18, 2000, between Charter Communications Operating,
LLC, Charter Communications Holdings, LLC and certain
lenders and agents named therein (2)
10.2(f) Management Agreement, dated as of February 14, 2000,
by and between CC VIII Operating, LLC, certain
subsidiaries of CC VIII Operating, LLC and Charter
Communications, Inc. (2)
10.4(c) Amendment No. 2 to the Charter Communications
Holdings, LLC 1999 Option Plan (2)
10.18(a) Amended and Restated Credit Agreement, dated as of
February 14, 2000, made by CC VIII Holdings, LLC, CC
VIII Operating, LLC and certain of its subsidiaries
in favor of Toronto Dominion (Texas), Inc., as
Administrative Agent (3)
10.22 Amended and Restated Limited Liability Company
Agreement for Charter Communications Holdings
Company, LLC, dated February 14, 2000 (3)
10.24 Exchange Agreement, dated as of February 14, 2000, by
and among Charter Communications, Inc., BCI (USA),
LLC, William J. Bresnan, Blackstone BC Capital
Partners L.P., Blackstone BC Offshore Capital
Partners L.P., Blackstone Family Media, III L.P. (as
assignee of Blackstone Family Investment III L.P.),
TCID of Michigan, Inc. and TCI Bresnan LLC (3)
10.26 Commitment Letter dated April 14, 2000 from Morgan
Stanley Senior Funding, Inc. (4)
27.1 Financial Data Schedule.*
---------
* Filed herewith.
(1) Incorporated by reference to the registration statement on Form
S-4 of Charter Communications Holdings, LLC and Charter
Communications Holdings Capital Corporation filed on January 25,
2000 (File No. 333-77499).
(2) Incorporated by reference to the annual report on Form 10-K of
Charter Communications, Inc. filed on March 30, 2000 (File No.
000-27927).
(3) Incorporated by reference to the current report on Form 8-K of
Charter Communications, Inc. filed on February 29, 2000 (File No.
000-27927).
26
<PAGE> 27
(4) Incorporated by reference to Amendment No.1 to the registration
statement on Form S-4 of Charter Communications Holdings, LLC and
Charter Communications Holdings Capital Corporation filed on April
18, 2000 (File No. 333-77499).
(b) REPORTS ON FORM 8-K
- On January 5, 2000, an 8-K dated December 27, 1999, was filed
to announce plans for Charter Holdings and Charter
Communications Holdings Capital Corporation to raise $900.0
million in a private placement of high yield bonds.
- On January 18, 2000, an 8-K dated January 1, 2000, was filed
to announce that Charter Holdings and Charter Holdco had
effected a number of transactions to transfer recently
acquired cable systems to Charter Holdings. As a result of
these transactions, Charter Holdings became the indirect
parent of the Fanch, Falcon and Avalon cable systems. In
addition, Charter Holdings and Charter Communications
Holdings Capital Corporation announced that they had entered
into an agreement to sell $675.0 million of 10.00% Senior
Notes due 2009, $325.0 million of 10.25% Senior Notes due
2010, and 11.75% Senior Discount Notes due 2010 with a
principal amount at maturity of $532.0 million. The sale of
the notes provided gross proceeds of approximately $1.3
billion.
- On February 29, 2000, an 8-K dated February 14, 2000, was
filed to announce the completion of the acquisition of
Bresnan; the subsequent change of Bresnan's name to CCG VIII,
LLC; Charter's intention to make an offer to repurchase
Bresnan's publicly held notes as required under the
indenture; the increase in the borrowing availability under
Bresnan's credit agreement to $900.0 million; and the
amendment and restatement of Charter Holdco's limited
liability company agreement. Finally, a new management
agreement with Bresnan was disclosed, and Bresnan financial
statements were filed as exhibits.
- On March 16, 2000, an amended 8-K dated January 1, 2000, was
filed to provide historical financial statements of Fanch,
Falcon and Avalon and pro forma financial information to
reflect the transfer of those cable systems to Charter
Holdings.
- On March 20, 2000, an amended 8-K dated January 1, 2000, was
filed to provide the same historical financial statements and
pro forma financial information described for the preceding
8-K, except that the Fanch historical financial statements
were now presented as audited statements and included reports
of independent auditors.
27
<PAGE> 28
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrants have duly caused this report to be signed on their behalf by the
undersigned thereunto duly authorized.
CHARTER COMMUNICATIONS HOLDINGS, LLC,
a registrant
By: CHARTER COMMUNICATIONS, INC.,
----------------------------------
sole manager
Dated May 12, 2000 By: /s/ Kent D. Kalkwarf
----------------------------------
Name: Kent D. Kalkwarf
Title: Senior Vice President and
Chief Financial Officer (Principal
Financial Officer and Principal
Accounting Officer)
CHARTER COMMUNICATIONS HOLDINGS
CAPITAL CORPORATION,
a registrant
Dated May 12, 2000 By: /s/ Kent D. Kalkwarf
----------------------------------
Name: Kent D. Kalkwarf
Title: Senior Vice President and
Chief Financial Officer (Principal
Financial Officer and Principal
Accounting Officer)
28
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0001085476
<NAME> CHARTER COMMUNICATIONS HOLDINGS, LLC
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-1-2000
<PERIOD-END> MAR-31-2000
<CASH> 120,049
<SECURITIES> 0
<RECEIVABLES> 116,393
<ALLOWANCES> 18,493
<INVENTORY> 0
<CURRENT-ASSETS> 262,228
<PP&E> 4,306,529
<DEPRECIATION> 474,885
<TOTAL-ASSETS> 21,791,982
<CURRENT-LIABILITIES> 765,854
<BONDS> 11,154,423
0
0
<COMMON> 0
<OTHER-SE> 9,037,300
<TOTAL-LIABILITY-AND-EQUITY> 21,791,982
<SALES> 0
<TOTAL-REVENUES> 721,604
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 945,877
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 247,034
<INCOME-PRETAX> (466,052)
<INCOME-TAX> 0
<INCOME-CONTINUING> (467,604)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (467,604)
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
