FORM 8-K
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported): September 28, 2001
CHARTER COMMUNICATIONS, INC.
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(Exact name of registrant as specified in its charter)
Delaware
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(State or Other Jurisdiction of Incorporation or Organization)
000-27927 43-1857213
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(Commission File Number) (Federal Employer Identification Number)
12405 Powerscourt Drive
St. Louis, Missouri 63131
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(Address of Principal Executive Offices) (Zip Code)
(314) 965-0555
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(Registrant's telephone number, including area code)
ITEM 5. OTHER EVENTS.
During 2001, Charter Communications, Inc. (the Company) continued to
roll out its advanced services aggressively, focusing on its digital cable and
cable modem businesses. The Company expects 2001 revenue growth of 12.5% to
13.5% and operating cash flow growth after corporate overhead expense of 10% to
11% compared with 2000. Charter Communications, Inc. expects basic analog
customer growth of approximately 1% in 2001 over the previous year. The Company
anticipates that the number of its digital customers will increase dramatically,
from 1.07 million customers at December 31, 2000 to approximately 2.15 million
customers by the end of 2001. The number of data customers added in the third
quarter of 2001 was the largest number added in a single quarter in the
Company's history. Charter Communications, Inc. anticipates that the number of
its data customers will increase from 252,400 data customers at December 31,
2000 to approximately 630,000 data customers by the end of 2001. In addition, it
expects video-on-demand to be available to approximately 2.0 million homes
passed and approximately 500,000 digital customers by the end of 2001. The
Company's guidance does not include expected transitional operational expenses
of approximately $15 to $20 million, substantially all of which will be incurred
during 2001, related to the restructuring of its high-speed data network for
approximately 25% of its data customers due to the bankruptcy of Excite@Home
Corporation. Voice-over Internet protocol telephony initiatives will continue to
be tested and developed. Furthermore, the Company will continue its focus on
interactive TV following its recent launch in Glendale, California by commencing
additional launches in several markets in 2002. The Company's advanced
technology team is working on digital video recorder (DVR) capability in
advanced digital set-top terminals and wireless home networking. Set-top
terminals with built-in DVR functionality should be available to the Company's
digital customers in 2002. Further guidance for 2002 will be provided in the
Company's fourth quarter earnings release and conference call in February 2002.
Charter Communications, Inc. expects operating expenses to increase by
18% to 19% in 2001 over the previous year, driven primarily by increased digital
and data sales, as well as higher programming and general and administrative
costs. The Company expects programming costs to increase approximately 25% in
2001 over 2000 costs. The year over year increase on a per channel basis is
expected to be approximately 12% to 13%. Sports programming is the largest
portion of the expected increase. The remainder of the increase is due to
digital and basic customer growth, new channel launches and higher costs for
premium programming. The primary drivers for increased general and
administrative costs in 2001 are higher property taxes of approximately $22
million, resulting from the network upgrades and approximately $11 million of
expenses associated with new customer contact centers.
Charter Communications, Inc. will continue its system rebuilds and
upgrades so that its customers have access to advanced service technology. The
Company expects to spend approximately $2.4 billion during 2002 for upgrades,
rebuilds, and normal recurring capital expenditures.
Achieving the anticipated growth and increases specified above is
subject to many factors, some of which are outside the control of the Company.
On January 3, 2002, the Company's subsidiaries Charter Communications
Operating LLC and CC VIII Operating, LLC (Bresnan) amended their credit
facilities to provide, among other things, for the deferral of the repayment of
the principal and the delay in the reduction of certain facilities and in
consideration increased the interest rates related to such facilities and paid a
consent fee to those lenders that consented to the amendments. The amounts
available for borrowing under the Charter Operating and the CC VIII (Bresnan)
facilities were increased by $200 million and $100 million, respectively, at the
time of the amendments.
As of September 30, 2001, Charter Communications, Inc. had
approximately $15.7 billion of outstanding long-term debt, including
approximately $6.1 billion of indebtedness under its subsidiaries' credit
facilities, approximately $8.2 billion of indebtedness related to bond issuances
of its subsidiaries and approximately $1.4 billion related to the Company's
convertible senior notes. As of September 30, 2001, the
Company had unused availability of $2.9 billion under the credit facilities of
its subsidiaries. As of December 31, 2001, Charter Communications, Inc. had
$16.4 billion of outstanding long-term debt, including approximately $6.7
billion of indebtedness under its subsidiaries' credit facilities, $8.3 billion
related to bond issuances of its subsidiaries and approximately $1.4 billion
related to the Company's convertible senior notes. As of December 31, 2001, the
Company had unused availability of $2.3 billion under the credit facilities of
its subsidiaries. After giving effect to the amendments of the Charter Operating
and CC VIII (Bresnan) credit facilities on January 3, 2002, Charter
Communications, Inc. would have had $2.6 billion of unused availability under
the credit facilities of its subsidiaries as of December 31, 2001.
On September 28, 2001, Excite@Home Corporation, the provider of
high-speed Internet access service to approximately 145,000, or 25%, of the
Company's data customers, filed for protection under Chapter 11 of the U.S.
Bankruptcy Code. Charter Communications, Inc. has successfully transitioned over
90% of its customers served by Excite@Home to its Charter Pipeline(TM) service.
The Company expects to transition its remaining customers served by Excite@Home
to Charter Pipeline as soon as telephone circuits are available, which it
anticipates will be in February 2002. The Company expects to incur approximately
$15 to $20 million of non-recurring operational expenses, substantially all of
which will be incurred during 2001, in connection with this transition,
including a one-time contract payment of $1 million to Excite@Home for the
provision of services through February 2002 to those customers that have not yet
been transitioned to Charter Pipeline.
Charter Communications, Inc. anticipates that its subsidiaries' asset
acquisition from High Speed Access Corp. will close during the first quarter of
2002.
In December 2001, John H. Tory was elected to the board of directors of
Charter Communications, Inc. and Howard L. Wood resigned from the board of
directors.
Effective as of January 4, 2002, the Company restructured from two to
three operating divisions. The existing Eastern Division, serving approximately
three million customers, will now be subdivided into four rather than six
operating regions. David L. McCall will continue to head the Eastern Division.
The former Western Division, previously serving approximately four million
customers, will be divided into two divisions - the Western Division and Central
Division. The Western Division, consisting of the North Central, Northwest, and
Western regions, will now serve approximately two million customers and will be
headed by J. Christian Fenger, promoted to Senior Vice President in charge of
the Western Division. The Central Division, consisting of the Central, Michigan
and National regions, will serve approximately two million customers and will be
headed by William J. Schreffler, promoted to Senior Vice President in charge of
the Central Division. James H. Smith, III, Senior Vice President in charge of
the former Western Division, has announced his resignation.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS:
This report on Form 8-K includes forward-looking statements regarding,
among other things, the Company's plans, strategies and prospects, both business
and financial. Although the Company believes that its plans, intentions and
expectations reflected in or suggested by these forward-looking statements are
reasonable, it cannot assure you that it 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 Form 8-K may be identified by the use of forward-looking words
such as "believes," "expects," "anticipates," "should," "planned," "estimated"
and "potential," among others. Important factors that could cause actual results
to differ materially from the forward-looking statements the Company makes in
this Form 8-K are set forth in other reports or documents that the Company files
from time to time with the Securities and Exchange Commission. All
forward-looking statements attributable to the Company or a person acting on the
Company's behalf are expressly qualified in their entirety by these cautionary
statements.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
Charter Communications, Inc. has duly caused this Current Report to be signed on
its behalf by the undersigned hereunto duly authorized.
CHARTER COMMUNICATIONS, INC.,
Registrant
By: /s/ KENT D. KALKWARF
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Name: Kent D. Kalkwarf
Title: Executive Vice President and Chief
Financial Officer (Principal Financial
Officer and Principal Accounting Officer)
Dated: January 7, 2002