Delaware
|
43-1857213
|
(State or other jurisdiction
of incorporation or organization)
|
(I.R.S.
Employer Identification
Number)
|
PART
I. FINANCIAL INFORMATION
|
Page
|
Item
1.Financial Statements - Charter Communications, Inc. and
Subsidiaries
|
|
Condensed
Consolidated Balance Sheets as of March 31, 2009
|
|
and
December 31, 2008
|
4
|
Condensed
Consolidated Statements of Operations for the three
|
|
months
ended March 31, 2009 and 2008
|
5
|
Condensed
Consolidated Statements of Cash Flows for the
|
|
three
months ended March 31, 2009 and 2008
|
6
|
Notes
to Condensed Consolidated Financial Statements
|
7
|
Item
2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
|
22
|
Item
3. Quantitative and Qualitative Disclosures about Market
Risk
|
33
|
Item
4. Controls and Procedures
|
33
|
PART
II. OTHER INFORMATION
|
|
Item
1. Legal Proceedings
|
35
|
Item
1A. Risk Factors
|
35
|
Item
6. Exhibits
|
41
|
SIGNATURES
|
S-1
|
EXHIBIT
INDEX
|
E-1
|
|
·
|
the completion of the Company’s
restructuring including the outcome and impact on our business of the
proceedings under Chapter 11 of the Bankruptcy
Code;
|
·
|
the
ability of the Company to satisfy closing conditions under the
agreements-in-principle with certain of our bondholders and pre-arranged
Joint Plan of Reorganization (“the Plan”) and related documents and to
have the Plan confirmed by the bankruptcy
court;
|
|
·
|
the
availability and access, in general, of funds to meet interest payment
obligations under our debt and to fund our operations and necessary
capital expenditures, either through cash on hand, cash flows from
operating activities, further borrowings or other sources and, in
particular, our ability to fund debt obligations (by dividend, investment
or otherwise) to the applicable obligor of such
debt;
|
|
·
|
our
ability to comply with all covenants in our indentures and credit
facilities, any violation of which, if not cured in a timely manner, could
trigger a default of our other obligations under cross-default
provisions;
|
|
·
|
our
ability to repay debt prior to or when it becomes due and/or successfully
access the capital or credit markets to refinance that debt through new
issuances, exchange offers or otherwise, including restructuring our
balance sheet and leverage position, especially given recent volatility
and disruption in the capital and credit markets;
|
·
|
the
impact of competition from other distributors, including but not limited
to incumbent telephone companies, direct broadcast satellite operators,
wireless broadband providers, and digital subscriber line (“DSL”)
providers;
|
|
· |
difficulties
in growing and operating our telephone services, while adequately
meeting customer expectations for the reliability of voice
services;
|
|
·
|
our
ability to adequately meet demand for installations and customer
service;
|
|
·
|
our
ability to sustain and grow revenues and cash flows from operating
activities by offering video, high-speed Internet, telephone and other
services, and to maintain and grow our customer base, particularly in the
face of increasingly aggressive
competition;
|
|
·
|
our
ability to obtain programming at reasonable prices or to adequately raise
prices to offset the effects of higher programming
costs;
|
|
·
|
general
business conditions, economic uncertainty or downturn, including the
recent volatility and disruption in the capital and credit markets and the
significant downturn in the housing sector and overall economy;
and
|
|
·
|
the
effects of governmental regulation on our
business.
|
Item
1.
|
Financial
Statements.
|
March
31,
|
December
31,
|
|||||||
2009
|
2008
|
|||||||
(Unaudited)
|
||||||||
ASSETS
|
||||||||
CURRENT
ASSETS:
|
||||||||
Cash
and cash equivalents
|
$ | 836 | $ | 960 | ||||
Accounts
receivable, less allowance for doubtful accounts of $16 and $18,
respectively
|
188 | 222 | ||||||
Prepaid
expenses and other current assets
|
114 | 36 | ||||||
Total
current assets
|
1,138 | 1,218 | ||||||
INVESTMENT
IN CABLE PROPERTIES:
|
||||||||
Property,
plant and equipment, net of accumulated depreciation
|
4,927 | 4,987 | ||||||
Franchises,
net
|
7,377 | 7,384 | ||||||
Total
investment in cable properties, net
|
12,304 | 12,371 | ||||||
OTHER
NONCURRENT ASSETS
|
208 | 293 | ||||||
Total
assets
|
$ | 13,650 | $ | 13,882 | ||||
LIABILITIES
AND SHAREHOLDERS’ DEFICIT
|
||||||||
LIABILITIES
NOT SUBJECT TO COMPROMISE:
|
||||||||
CURRENT
LIABILITIES:
|
||||||||
Accounts
payable and accrued expenses
|
$ | 1,322 | $ | 1,310 | ||||
Current
portion of long-term debt
|
11,774 | 155 | ||||||
Total
current liabilities
|
13,096 | 1,465 | ||||||
LONG-TERM
DEBT
|
-- | 21,511 | ||||||
NOTE
PAYABLE – RELATED PARTY
|
-- | 75 | ||||||
DEFERRED
MANAGEMENT FEES – RELATED PARTY
|
-- | 14 | ||||||
OTHER
LONG-TERM LIABILITIES
|
683 | 1,082 | ||||||
LIABILITIES
SUBJECT TO COMPROMISE (INCLUDING AMOUNTS DUE TO
|
||||||||
RELATED
PARTY OF $102 AND $0, RESPECTIVELY)
|
10,470 | -- | ||||||
TEMPORARY
EQUITY
|
252 | 241 | ||||||
SHAREHOLDERS’
DEFICIT:
|
||||||||
Class
A Common stock; $.001 par value; 10.5 billion shares
authorized;
|
||||||||
392,705,927
and 411,737,894 shares issued and outstanding,
respectively
|
-- | -- | ||||||
Class
B Common stock; $.001 par value; 4.5 billion
|
||||||||
shares
authorized; 50,000 shares issued and outstanding
|
-- | -- | ||||||
Preferred
stock; $.001 par value; 250 million shares
|
||||||||
authorized;
no non-redeemable shares issued and outstanding
|
-- | -- | ||||||
Additional
paid-in capital
|
5,396 | 5,394 | ||||||
Accumulated
deficit
|
(15,802 | ) | (15,597 | ) | ||||
Accumulated
other comprehensive loss
|
(308 | ) | (303 | ) | ||||
Total
Charter shareholders’ deficit
|
(10,714 | ) | (10,506 | ) | ||||
Noncontrolling
interest
|
(137 | ) | -- | |||||
Total
shareholders’ deficit
|
(10,851 | ) | (10,506 | ) | ||||
Total
liabilities and shareholders’ deficit
|
$ | 13,650 | $ | 13,882 |
Three
Months Ended March 31,
|
||||||||
2009
|
2008
|
|||||||
REVENUES
|
$ | 1,662 | $ | 1,564 | ||||
COSTS
AND EXPENSES:
|
||||||||
Operating
(excluding depreciation and amortization)
|
713 | 681 | ||||||
Selling,
general and administrative
|
344 | 346 | ||||||
Depreciation
and amortization
|
321 | 321 | ||||||
Other
operating (income) expenses, net
|
(50 | ) | 11 | |||||
1,328 | 1,359 | |||||||
Income
from operations
|
334 | 205 | ||||||
OTHER
INCOME (EXPENSES):
|
||||||||
Interest
expense, net (excluding unrecorded contractual interest
expense
of $9 in 2009)
|
(463 | ) | (466 | ) | ||||
Change
in value of derivatives
|
(4 | ) | (37 | ) | ||||
Reorganization
items, net
|
(141 | ) | -- | |||||
Other
income (expense), net
|
1 | (1 | ) | |||||
(607 | ) | (504 | ) | |||||
Loss
before income taxes
|
(273 | ) | (299 | ) | ||||
INCOME
TAX EXPENSE
|
(61 | ) | (58 | ) | ||||
Consolidated
net loss
|
(334 | ) | (357 | ) | ||||
Less:
Net (income) loss – noncontrolling interest
|
129 | (2 | ) | |||||
Net
Loss – Charter shareholders
|
$ | (205 | ) | $ | (359 | ) | ||
LOSS
PER COMMON SHARE, BASIC AND DILUTED:
|
||||||||
Net
Loss – Charter shareholders
|
$ | (0.54 | ) | $ | (0.97 | ) | ||
Weighted
average common shares outstanding, basic and diluted
|
378,095,547 | 370,085,187 |
Three
Months Ended March 31,
|
||||||||
2009
|
2008
|
|||||||
CASH
FLOWS FROM OPERATING ACTIVITIES:
|
||||||||
Net
loss – Charter shareholders
|
$ | (205 | ) | $ | (359 | ) | ||
Adjustments
to reconcile net loss to net cash flows from operating
activities:
|
||||||||
Depreciation
and amortization
|
321 | 321 | ||||||
Noncash
interest expense
|
15 | 14 | ||||||
Change
in value of derivatives
|
4 | 37 | ||||||
Reorganization
items, net
|
108 | -- | ||||||
Deferred
income taxes
|
59 | 57 | ||||||
Noncontrolling
interest
|
(129 | ) | 2 | |||||
Other,
net
|
12 | 11 | ||||||
Changes
in operating assets and liabilities, net of effects from
dispositions:
|
||||||||
Accounts
receivable
|
34 | 18 | ||||||
Prepaid
expenses and other assets
|
(78 | ) | (2 | ) | ||||
Accounts
payable, accrued expenses and other
|
46 | 105 | ||||||
Net
cash flows from operating activities
|
187 | 204 | ||||||
CASH
FLOWS FROM INVESTING ACTIVITIES:
|
||||||||
Purchases
of property, plant and equipment
|
(269 | ) | (334 | ) | ||||
Change
in accrued expenses related to capital expenditures
|
(27 | ) | (31 | ) | ||||
Purchases
of short-term investments
|
-- | (74 | ) | |||||
Other,
net
|
4 | 3 | ||||||
Net
cash flows from investing activities
|
(292 | ) | (436 | ) | ||||
CASH
FLOWS FROM FINANCING ACTIVITIES:
|
||||||||
Borrowings
of long-term debt
|
-- | 1,765 | ||||||
Repayments
of long-term debt
|
(17 | ) | (1,102 | ) | ||||
Payments
for debt issuance costs
|
-- | (39 | ) | |||||
Other,
net
|
(2 | ) | -- | |||||
Net
cash flows from financing activities
|
(19 | ) | 624 | |||||
NET
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
|
(124 | ) | 392 | |||||
CASH
AND CASH EQUIVALENTS, beginning of period
|
960 | 75 | ||||||
CASH
AND CASH EQUIVALENTS, end of period
|
$ | 836 | $ | 467 | ||||
CASH
PAID FOR INTEREST
|
$ | 221 | $ | 323 |
Organization,
Basis of Presentation and Bankruptcy
Proceedings
|
Accrued
Expenses
|
|||
Accrued
interest
|
$ | 472 | |
Other
|
47 | ||
Total
Accrued Expenses Subject To Compromise
|
519 | ||
Related
Party Payables
|
|||
Note
Payable
|
77 | ||
Deferred
Management Fees
|
25 | ||
Total
Related Party Payables Subject To Compromise
|
102 | ||
Debt
|
|||
Charter
Communications, Inc.:
|
|||
5.875%
convertible senior notes due November 16, 2009
|
3 | ||
6.50%
convertible senior notes due October 1, 2027
|
479 | ||
Charter
Communications Holdings, LLC:
|
|||
10.000%
senior notes due April 1, 2009
|
53 | ||
10.750%
senior notes due October 1, 2009
|
4 | ||
9.625%
senior notes due November 15, 2009
|
25 | ||
10.250%
senior notes due January 15, 2010
|
1 | ||
11.750%
senior discount notes due January 15, 2010
|
1 | ||
11.125%
senior notes due January 15, 2011
|
47 | ||
13.500%
senior discount notes due January 15, 2011
|
60 | ||
9.920%
senior discount notes due April 1, 2011
|
51 | ||
10.000%
senior notes due May 15, 2011
|
69 | ||
11.750%
senior discount notes due May 15, 2011
|
54 | ||
12.125%
senior discount notes due January 15, 2012
|
75 | ||
CCH
I Holdings, LLC:
|
|||
11.125%
senior notes due January 15, 2014
|
151 | ||
13.500%
senior discount notes due January 15, 2014
|
581 | ||
9.920%
senior discount notes due April 1, 2014
|
471 | ||
10.000%
senior notes due May 15, 2014
|
299 | ||
11.750%
senior discount notes due May 15, 2014
|
815 | ||
12.125%
senior discount notes due January 15, 2015
|
217 | ||
CCH
I, LLC:
|
|||
11.000%
senior notes due October 1, 2015
|
3,957 | ||
CCH
II, LLC:
|
|||
10.250%
senior notes due September 15, 2010
|
1,856 | ||
10.250%
senior notes due October 1, 2013
|
580 | ||
Total
Debt Subject to Compromise
|
9,849 | ||
Total
Liabilities Subject To Compromise
|
$ | 10,470 |
Loss
on debt at allowed claim amount
|
$ | 97 | |
Professional
fees
|
23 | ||
Paul
Allen management fee settlement – related party
|
11 | ||
Other
|
10 | ||
Total
Reorganization Items, Net
|
$ | 141 |
March
31, 2009
|
December 31,
2008
|
|||||||||||||||||||||||
Gross
Carrying
Amount
|
Accumulated
Amortization
|
Net
Carrying
Amount
|
Gross
Carrying
Amount
|
Accumulated
Amortization
|
Net
Carrying
Amount
|
|||||||||||||||||||
Indefinite-lived
intangible assets:
|
||||||||||||||||||||||||
Franchises
with indefinite lives
|
$ | 7,371 | $ | -- | $ | 7,371 | $ | 7,377 | $ | -- | $ | 7,377 | ||||||||||||
Goodwill
|
68 | -- | 68 | 68 | -- | 68 | ||||||||||||||||||
$ | 7,439 | $ | -- | $ | 7,439 | $ | 7,445 | $ | -- | $ | 7,445 | |||||||||||||
Finite-lived
intangible assets:
|
||||||||||||||||||||||||
Franchises
with finite lives
|
$ | 16 | $ | 10 | $ | 6 | $ | 16 | $ | 9 | $ | 7 | ||||||||||||
Other
intangible assets
|
74 | 42 | 32 | 71 | 41 | 30 | ||||||||||||||||||
$ | 90 | $ | 52 | $ | 38 | $ | 87 | $ | 50 | $ | 37 |
March
31,
2009
|
December 31,
2008
|
|||||||
Accounts
payable – trade
|
$ | 101 | $ | 99 | ||||
Accrued
capital expenditures
|
29 | 56 | ||||||
Accrued
expenses:
|
||||||||
Terminated
interest rate swap liability
|
497 | -- | ||||||
Interest
|
139 | 408 | ||||||
Programming
costs
|
241 | 305 | ||||||
Compensation
|
94 | 124 | ||||||
Franchise-related
fees
|
49 | 60 | ||||||
Other
|
172 | 258 | ||||||
$ | 1,322 | $ | 1,310 |
March
31, 2009
|
December
31, 2008
|
|||||||||||
Principal
Amount
|
Accreted
Value
|
Principal
Amount
|
Accreted
Value
|
|||||||||
Charter
Communications, Inc.:
|
||||||||||||
5.875%
convertible senior notes due November 16, 2009
|
$ | -- | $ | -- | $ | 3 | $ | 3 | ||||
6.50%
convertible senior notes due October 1, 2027
|
-- | -- | 479 | 373 | ||||||||
Charter
Communications Holdings, LLC:
|
||||||||||||
10.000%
senior notes due April 1, 2009
|
-- | -- | 53 | 53 | ||||||||
10.750%
senior notes due October 1, 2009
|
-- | -- | 4 | 4 | ||||||||
9.625%
senior notes due November 15, 2009
|
-- | -- | 25 | 25 | ||||||||
10.250%
senior notes due January 15, 2010
|
-- | -- | 1 | 1 | ||||||||
11.750%
senior discount notes due January 15, 2010
|
-- | -- | 1 | 1 | ||||||||
11.125%
senior notes due January 15, 2011
|
-- | -- | 47 | 47 | ||||||||
13.500%
senior discount notes due January 15, 2011
|
-- | -- | 60 | 60 | ||||||||
9.920%
senior discount notes due April 1, 2011
|
-- | -- | 51 | 51 | ||||||||
10.000%
senior notes due May 15, 2011
|
-- | -- | 69 | 69 |
11.750%
senior discount notes due May 15, 2011
|
-- | -- | 54 | 54 | ||||||||
12.125%
senior discount notes due January 15, 2012
|
-- | -- | 75 | 75 | ||||||||
CCH
I Holdings, LLC:
|
||||||||||||
11.125%
senior notes due January 15, 2014
|
-- | -- | 151 | 151 | ||||||||
13.500%
senior discount notes due January 15, 2014
|
-- | -- | 581 | 581 | ||||||||
9.920%
senior discount notes due April 1, 2014
|
-- | -- | 471 | 471 | ||||||||
10.000%
senior notes due May 15, 2014
|
-- | -- | 299 | 299 | ||||||||
11.750%
senior discount notes due May 15, 2014
|
-- | -- | 815 | 815 | ||||||||
12.125%
senior discount notes due January 15, 2015
|
-- | -- | 217 | 217 | ||||||||
CCH
I, LLC:
|
||||||||||||
11.000%
senior notes due October 1, 2015
|
-- | -- | 3,987 | 4,072 | ||||||||
CCH
II, LLC:
|
||||||||||||
10.250%
senior notes due September 15, 2010
|
-- | -- | 1,860 | 1,857 | ||||||||
10.250%
senior notes due October 1, 2013
|
-- | -- | 614 | 598 | ||||||||
CCO
Holdings, LLC:
|
||||||||||||
8
¾% senior notes due November 15, 2013
|
800 | 797 | 800 | 796 | ||||||||
Credit
facility
|
350 | 350 | 350 | 350 | ||||||||
Charter
Communications Operating, LLC:
|
||||||||||||
8.000%
senior second-lien notes due April 30, 2012
|
1,100 | 1,100 | 1,100 | 1,100 | ||||||||
8
3/8% senior second-lien notes due April 30, 2014
|
770 | 770 | 770 | 770 | ||||||||
10.875%
senior second-lien notes due September 15, 2014
|
546 | 528 | 546 | 527 | ||||||||
Credit
facilities
|
8,229 | 8,229 | 8,246 | 8,246 | ||||||||
Total
Debt Not Subject to Compromise
|
$ | 11,795 | $ | 11,774 | $ | 21,729 | $ | 21,666 |
Controlling
|
Noncontrolling
|
|||||||||||
Interest
|
Interest
|
Total
|
||||||||||
Balance,
December 31, 2008
|
$ | (10,506 | ) | $ | -- | $ | (10,506 | ) | ||||
Net
loss
|
(205 | ) | (133 | ) | (338 | ) | ||||||
Changes
in the fair value of interest rate agreements
|
(5 | ) | (4 | ) | (9 | ) | ||||||
Stock
compensation expense
|
2 | -- | 2 | |||||||||
Balance,
March 31, 2009
|
$ | (10,714 | ) | $ | (137 | ) | $ | (10,851 | ) |
8.
|
Comprehensive
Loss
|
Three
Months Ended March 31,
|
||||||||
2009
|
2008
|
|||||||
Change
in value of derivatives:
|
||||||||
Loss
on interest rate derivatives not designated as hedges
|
$ | (4 | ) | $ | (30 | ) | ||
Loss
on embedded derivatives
|
-- | (7 | ) | |||||
$ | (4 | ) | $ | (37 | ) | |||
Accumulated
other comprehensive loss:
|
||||||||
Loss
on interest rate derivatives designated as hedges (effective
portion)
|
$ | (9 | ) | $ | (104 | ) | ||
$ | (9 | ) | $ | (104 | ) | |||
Amount
of loss reclassified from accumulated
other
comprehensive loss into interest expense
|
$ | (33 | ) | $ | (11 | ) |
·
|
Level
1 – inputs to the valuation methodology are quoted prices (unadjusted) for
identical assets or liabilities in active
markets.
|
·
|
Level
2 – inputs to the valuation methodology include quoted prices for similar
assets and liabilities in active markets, and inputs that are observable
for the asset or liability, either directly or indirectly, for
substantially the full term of the financial
instrument.
|
·
|
Level
3 – inputs to the valuation methodology are unobservable and significant
to the fair value measurement.
|
Fair
Value As of December 31, 2008
|
|||||||||||||
Level
1
|
Level
2
|
Level
3
|
Total
|
||||||||||
Other
long-term liabilities:
|
|||||||||||||
Interest
rate derivatives designated as hedges
|
$
|
-- |
$
|
303 |
$
|
-- |
$
|
303 | |||||
Interest
rate derivatives not designated as hedges
|
-- | 108 | -- | 108 | |||||||||
$
|
-- |
$
|
411 |
$
|
-- |
$
|
411 |
Three
Months
Ended
March 31,
|
||||||||
2009
|
2008
|
|||||||
Loss
on sale of assets, net
|
$ | 2 | $ | 2 | ||||
Special
charges, net
|
(52 | ) | 9 | |||||
$ | (50 | ) | $ | 11 |
Management’s
Discussion and Analysis of Financial Condition and Results of
Operations.
|
Approximate
as of
|
||||||||
March
31,
|
March
31,
|
|||||||
2009
(a)
|
2008
(a)
|
|||||||
Video
Cable Services:
|
||||||||
Basic
Video:
|
||||||||
Residential
(non-bulk) basic video customers (b)
|
4,746,000 | 4,949,100 | ||||||
Multi-dwelling
(bulk) and commercial unit customers (c)
|
267,700 | 258,900 | ||||||
Total
basic video customers (b)(c)
|
5,013,700 | 5,208,000 | ||||||
Digital
Video:
|
||||||||
Digital
video customers (d)
|
3,157,700 | 3,023,200 | ||||||
Non-Video
Cable Services:
|
||||||||
Residential
high-speed Internet customers (e)
|
2,947,100 | 2,768,200 | ||||||
Telephone
customers (f)
|
1,423,100 | 1,085,000 | ||||||
Total
Revenue Generating Units (g)
|
12,541,600 | 12,084,400 |
(a)
|
"Customers"
include all persons our corporate billing records show as receiving
service (regardless of their payment status), except for complimentary
accounts. At March 31, 2009 and 2008, "customers" include
approximately 30,600 and 30,600 persons, respectively, whose accounts were
over 60 days past due in payment, approximately 4,400 and 4,700 persons,
respectively, whose accounts were over 90 days past due in payment, and
approximately 2,700 and 3,200 persons, respectively, of which were over
120 days past due in payment.
|
(b)
|
"Basic
video customers" include all residential customers who receive video cable
services.
|
(c
)
|
Included
within "basic video customers" are those in commercial and multi-dwelling
structures, which are calculated on an equivalent bulk unit ("EBU")
basis. EBU is calculated for a system by dividing the bulk
price charged to accounts in an area by the most prevalent price charged
to non-bulk residential customers in that market for the comparable tier
of service. The EBU method of estimating basic video customers
is consistent with the methodology used in determining costs paid to
programmers and has been used consistently each reporting
period.
|
(d)
|
"Digital
video customers" include all basic video customers that have one or more
digital set-top boxes or cable cards
deployed.
|
(e)
|
"Residential
high-speed Internet customers" represent those residential customers who
subscribe to our high-speed Internet
service.
|
(f)
|
“Telephone
customers" include all customers receiving telephone
service.
|
(g)
|
"Revenue
generating units" represent the sum total of all basic video, digital
video, high-speed Internet and telephone customers, not counting
additional outlets within one household. For example, a
customer who receives two types of service (such as basic video and
digital video) would be treated as two revenue generating units and, if
that customer added on high-speed Internet service, the customer would be
treated as three revenue generating units. This statistic is
computed in accordance with the guidelines of the National Cable &
Telecommunications Association
(“NCTA”).
|
Three
Months Ended March 31,
|
||||||||||||||||
2009
|
2008
|
|||||||||||||||
REVENUES
|
$ | 1,662 | 100 | % | $ | 1,564 | 100 | % | ||||||||
COSTS
AND EXPENSES:
|
||||||||||||||||
Operating
(excluding depreciation and amortization)
|
713 | 43 | % | 681 | 44 | % | ||||||||||
Selling,
general and administrative
|
344 | 21 | % | 346 | 22 | % | ||||||||||
Depreciation
and amortization
|
321 | 19 | % | 321 | 21 | % | ||||||||||
Other
operating (income) expenses, net
|
(50 | ) | (3 | %) | 11 | -- | ||||||||||
1,328 | 80 | % | 1,359 | 87 | % | |||||||||||
Income
from operations
|
334 | 20 | % | 205 | 13 | % | ||||||||||
OTHER
INCOME (EXPENSES):
|
||||||||||||||||
Interest
expense, net
|
(463 | ) | (466 | ) | ||||||||||||
Change
in value of derivatives
|
(4 | ) | (37 | ) | ||||||||||||
Reorganization
items, net
|
(141 | ) | -- | |||||||||||||
Other
income (expense), net
|
1 | (1 | ) | |||||||||||||
(607 | ) | (504 | ) | |||||||||||||
Loss
before income taxes
|
(273 | ) | (299 | ) | ||||||||||||
INCOME
TAX EXPENSE
|
(61 | ) | (58 | ) | ||||||||||||
Consolidated
net loss
|
(334 | ) | (357 | ) | ||||||||||||
Less: Net
(income) loss – noncontrolling interest
|
129 | (2 | ) | |||||||||||||
Net
loss – Charter shareholders
|
$ | (205 | ) | $ | (359 | ) | ||||||||||
LOSS
PER COMMON SHARE, BASIC AND DILUTED:
|
||||||||||||||||
Net
Loss – Charter shareholders
|
$ | (0.54 | ) | $ | (0.97 | ) | ||||||||||
Weighted
average common shares outstanding, basic and diluted
|
378,095,547 | 370,085,187 |
Three
Months Ended March 31,
|
|||||||||||||||||||||
2009
|
2008
|
2009
over 2008
|
|||||||||||||||||||
Revenues
|
%
of
Revenues
|
Revenues
|
%
of
Revenues
|
Change
|
%
Change
|
||||||||||||||||
Video
|
$ | 872 | 53 | % | $ | 858 | 55 | % | $ | 14 | 2 | % | |||||||||
High-speed
Internet
|
360 | 22 | % | 328 | 21 | % | 32 | 10 | % | ||||||||||||
Telephone
|
169 | 10 | % | 121 | 8 | % | 48 | 40 | % | ||||||||||||
Commercial
|
107 | 6 | % | 92 | 6 | % | 15 | 16 | % | ||||||||||||
Advertising
sales
|
54 | 3 | % | 67 | 4 | % | (13 | ) | (19 | %) | |||||||||||
Other
|
100 | 6 | % | 98 | 6 | % | 2 | 2 | % | ||||||||||||
$ | 1,662 | 100 | % | $ | 1,564 | 100 | % | $ | 98 | 6 | % |
Three
months ended
March
31, 2009
compared
to
three
months ended
March
31, 2008
Increase
/ (Decrease)
|
||||
Incremental
video services and rate adjustments
|
$ | 20 | ||
Increase
in digital video customers
|
16 | |||
Decrease
in basic video customers
|
(20 | ) | ||
Asset
sales
|
(2 | ) | ||
$ | 14 |
Three
months ended
March
31, 2009
compared
to
three
months ended
March
31, 2008
Increase
/ (Decrease)
|
||||
Increase
in high-speed Internet customers
|
$ | 23 | ||
Rate
adjustments and service upgrades
|
10 | |||
Asset
sales
|
(1 | ) | ||
$ | 32 |
Three
months ended
March
31, 2009
compared
to
three
months ended
March
31, 2008
Increase
/ (Decrease)
|
||||
Programming
costs
|
$ | 25 | ||
Maintenance
costs
|
4 | |||
Labor
costs
|
3 | |||
Other,
net
|
1 | |||
Asset
sales
|
(1 | ) | ||
$ | 32 |
Three
months ended
March
31, 2009
compared
to
three
months ended
March
31, 2008
Increase
/ (Decrease)
|
||||
Marketing
costs
|
$ | 4 | ||
Stock
compensation costs
|
3 | |||
Employee
costs
|
(4 | ) | ||
Customer
care costs
|
(2 | ) | ||
Other,
net
|
(3 | ) | ||
$ | (2 | ) |
Three
months ended March 31,
|
||||||||
2009
|
2008
|
|||||||
Interest
rate swaps
|
$ | (4 | ) | $ | (30 | ) | ||
Embedded
derivatives from convertible senior notes
|
-- | (7 | ) | |||||
$ | (4 | ) | $ | (37 | ) |
·
|
the
commitments set forth in the respective Noteholder’s Commitment Letter
shall have expired or been
terminated;
|
·
|
Charter’s
board of directors shall have been advised in writing by its outside
counsel that continued pursuit of the Plan is inconsistent with its
fiduciary duties, and the board of directors determines in good faith
that, (A) a proposal or offer from a third party is reasonably likely to
be more favorable to us than is proposed under the Term Sheet, taking into
account, among other factors, the identity of the third party, the
likelihood that any such proposal or offer will be negotiated to finality
within a reasonable time, and the potential loss to the company if the
proposal or offer were not accepted and consummated, or (B) the Plan is no
longer confirmable or feasible;
|
·
|
the
Plan or any subsequent plan filed by us with the Bankruptcy Court (or a
plan supported or endorsed by us) is not reasonably consistent in all
material respects with the terms of the Restructuring
Agreements;
|
·
|
a
disclosure statement order reasonably acceptable to Charter, the holders
of a majority of the CCH I Notes held by the ad-hoc committee of
certain Noteholders (the “Requisite Holders”) and Mr. Allen has not been
entered by the Bankruptcy Court on or before the 50th day following the
bankruptcy petition date;
|
·
|
a
confirmation order reasonably acceptable to Charter, the Requisite Holders
and Mr. Allen is not entered by the Bankruptcy Court on or before the
130th day following the bankruptcy petition
date;
|
·
|
any
of the Chapter 11 Cases of Charter is converted to cases under Chapter 7
of the Bankruptcy Code if as a result of such conversion the Plan is not
confirmable;
|
·
|
any
Chapter 11 Cases of Charter is dismissed if as a result of such dismissal
the Plan is not confirmable;
|
·
|
the
order confirming the Plan is reversed on appeal or vacated;
and
|
·
|
any
Restructuring Agreement or the Allen Agreement has terminated or been
breached in any material respect subject to notice and cure
provisions.
|
Three
Months Ended
March
31,
|
||||||||
2009
|
2008
|
|||||||
Customer
premise equipment (a)
|
$ | 167 | $ | 165 | ||||
Scalable
infrastructure (b)
|
45 | 81 | ||||||
Line
extensions (c)
|
14 | 21 | ||||||
Upgrade/Rebuild
(d)
|
5 | 17 | ||||||
Support
capital (e)
|
38 | 50 | ||||||
Total
capital expenditures
|
$ | 269 | $ | 334 |
(a)
|
Customer
premise equipment includes costs incurred at the customer residence to
secure new customers, revenue units and additional bandwidth
revenues. It also includes customer installation costs in
accordance with SFAS No. 51, Financial Reporting by Cable
Television Companies, and customer premise equipment (e.g., set-top
boxes and cable modems, etc.).
|
(b)
|
Scalable
infrastructure includes costs not related to customer premise equipment or
our network, to secure growth of new customers, revenue units, and
additional bandwidth revenues, or provide service enhancements (e.g.,
headend equipment).
|
(c)
|
Line
extensions include network costs associated with entering new service
areas (e.g., fiber/coaxial cable, amplifiers, electronic equipment,
make-ready and design engineering).
|
(d)
|
Upgrade/rebuild
includes costs to modify or replace existing fiber/coaxial cable networks,
including betterments.
|
(e)
|
Support
capital includes costs associated with the replacement or enhancement of
non-network assets due to technological and physical obsolescence (e.g.,
non-network equipment, land, buildings and
vehicles).
|
Legal
Proceedings.
|
Item
1A.
|
Risk
Factors.
|
·
|
Charter’s
board of directors shall have been advised in writing by its outside
counsel that continued pursuit of the Plan is inconsistent with its
fiduciary duties because, and the board of directors determines in good
faith that, (A) a proposal or offer from a third party is reasonably
likely to be more favorable to us than is proposed under the Plan, taking
into account, among other factors, the identity of the third party, the
likelihood that any such proposal or offer will be negotiated to finality
within a reasonable time, and the potential loss to us if the proposal or
offer were not accepted and consummated, or (B) the Plan is no longer
confirmable or feasible;
|
·
|
the
Plan or any subsequent plan filed by us with the Bankruptcy Court (or a
plan supported or endorsed by us) is not reasonably consistent in all
material respects with the terms of the Restructuring
Agreements;
|
·
|
a
confirmation order reasonably acceptable to us, the Requisite Holders and
Mr. Allen is not entered by the bankruptcy court on or before August 4,
2009, the 130th day following the date of our bankruptcy petition, March
27, 2009 (the “Petition Date”);
|
·
|
the
effective date of the Plan (the “Effective Date”) shall not have occurred
on or before August 24, 2009, the 150th day following the Petition Date,
or before December 15, 2009 in the case that certain consents, approvals
or waivers required to be obtained from governmental authorities have not
been obtained on or before the 150th day following the Petition Date, and
all other conditions precedent to the Effective Date shall have been
satisfied before the 150th day following the Petition Date or waived by
the Requisite Holders (other than those conditions that by their nature
are to be satisfied on the Effective
Date);
|
·
|
any
of our Chapter 11 Cases is converted to cases under Chapter 7 of the
Bankruptcy Code if as a result of such conversion the Plan is not
confirmable;
|
·
|
the
Bankruptcy Court enters an order in any of our Chapter 11 Cases appointing
(i) a trustee under Chapter 7 or Chapter 11 of the Bankruptcy Code, (ii) a
responsible officer or (iii) an examiner, in each case with enlarged
powers relating to the operation of the business under the Bankruptcy
Code;
|
·
|
any
of our Chapter 11 Cases is dismissed if as a result of such dismissal the
Plan is not confirmable;
|
·
|
the
order confirming the Plan is reversed on appeal or
vacated;
|
·
|
any
party breaches any material provision of the Restructuring Agreements or
the Plan and any such breach has not been duly waived or cured after a
period of five days;
|
·
|
Charter
withdraws the Plan or publicly announces its intention not to support the
Plan; and
|
·
|
any
Restructuring Agreement or the separate restructuring agreement among
Charter, Mr. Allen and CII has terminated or been breached in any material
respect, subject to notice and cure
provisions.
|
·
|
The
actions and decisions of our creditors and other third parties with
interests in our bankruptcy, including official and unofficial committees
of creditors, which may be inconsistent with our
plans;
|
·
|
objections
to or limitations on our ability to obtain Bankruptcy Court approval with
respect to motions in the bankruptcy that we may seek from time to time or
potentially adverse decisions by the Bankruptcy Court with respect to such
motions;
|
·
|
objections
to or limitations on our ability to avoid or reject contracts or leases
that are burdensome or
uneconomical;
|
·
|
our
ability to obtain customers and obtain and maintain normal terms with
regulators, franchise authorities, vendors and service
providers;
|
·
|
our
ability to maintain contracts and leases that are critical to our
operations; and
|
·
|
our
ability to retain key employees.
|
Exhibits.
|
Dated: May
7, 2009
|
By:
/s/ Kevin D.
Howard
|
|
Name:
|
Kevin
D. Howard
|
|
Title:
|
Vice
President, Controller and
|
|
Chief
Accounting Officer
|
Exhibit
Number
|
Description
of Document
|
|||
10.1 | +* |
Charter
Communications, Inc. Value Creation Plan adopted on March 12,
2009.
|
||
10.2 | +* |
Summary
of Charter Communications, Inc. 2009 Executive Bonus
Plan.
|
||
12.1 | * |
Computation
of Ratio of Earnings to Fixed Charges.
|
||
31.1 | * |
Certificate
of Chief Executive Officer pursuant to Rule 13a-14(a)/Rule 15d-14(a) under
the under the Securities Exchange Act of 1934.
|
||
31.2 | * |
Certificate
of Chief Financial Officer pursuant to Rule 13a-14(a)/Rule 15d-14(a) under
the Securities Exchange Act of 1934.
|
||
32.1 | * |
Certification
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002 (Chief Executive
Officer).
|
||
32.2 | * |
Certification
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002 (Chief Financial
Officer).
|