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SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM 8-K
Current
Report
Pursuant
to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date
of Report (Date of earliest event reported): January
24, 2006
Charter
Communications, Inc.
(Exact
name of registrant as specified in its charter)
Delaware
(State
or Other Jurisdiction of Incorporation or Organization)
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000-27927
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43-1857213
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(Commission
File Number)
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(I.R.S.
Employer Identification
Number)
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12405
Powerscourt Drive
St.
Louis, Missouri 63131
(Address
of principal executive offices including zip code)
(314)
965-0555
(Registrant's
telephone number, including area code)
Not
Applicable
(Former
name or former address, if changed since last report)
Check
the
appropriate box below if the Form 8-K filing is intended to simultaneously
satisfy the filing obligation of the registrant under any of the following
provisions:
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Written
communications pursuant to Rule 425 under the Securities Act (17
CFR
230.425)
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Soliciting
material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
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Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act
(17 CFR
240.14d-2(b))
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Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act
(17 CFR
240.13e-4(c))
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ITEM
7.01. REGULATION FD DISCLOSURE.
The
following information is being provided solely to comply with Regulation
FD
because Charter Communications, Inc. ("Charter") through its subsidiary
CCH II,
LLC expects to be providing this information to certain potential investors
as
part of a private placement in the near future.
Because
the fourth quarter has only recently ended, the information that follows
is, by
necessity, preliminary in nature and based only upon preliminary information
available to Charter as of the date of this offering memorandum. Investors
should exercise caution in relying on the information contained herein
and
should not draw any inferences from this information regarding financial
or
operating data that is not discussed herein.
In
addition, certain customer and financial information is presented on a
pro forma
basis, adjusted for (i) the divestiture of geographically non-strategic
systems
in July 2005 as if these dispositions had occurred on January 1, 2004,
and (ii)
the removal of $6 million of credits issued to customers affected by hurricanes
Katrina and Rita. The divested systems served a total of approximately
26,800
analog video customers, 12,000 digital video customers and 600 high- speed
Internet customers as of their respective dates of disposition. The unaudited
pro forma information that follows has been presented for comparative purposes
and is not intended to provide any indication of what actual consolidated
results of operations or customers would have been had these dispositions
been
completed as of the date assumed.
In
the
fourth quarter of 2005, Charter increased its targeted marketing efforts
and
related expenditures that began in the third quarter of 2005. The long-term
objective of these efforts is to increase its revenues through deeper market
penetration of all of its services. We believe these efforts have been
effective
as reflected in the following preliminary customer results:
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fourth
quarter 2005 net losses of analog video customers are approximately
21,800
compared to a pro forma net loss of approximately 82,600 in the
fourth
quarter of 2004;
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fourth
quarter 2005 net gains of digital video customers are approximately
47,200
compared to a pro forma net loss of approximately 14,400 in the
fourth
quarter of 2004;
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fourth
quarter 2005 net gains of high-speed Internet customers are approximately
76,400 compared to a pro forma net gain of approximately 64,500
in the
fourth quarter of 2004; and
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fourth
quarter 2005 net gains of telephone customers are approximately
31,600
compared to a net gain of approximately 5,200 in the fourth quarter
of
2004.
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Charter
currently expects actual revenue for the fourth quarter of $1.335 billion
to
$1.345 billion, which is approximately a 4.6% to 5.4% increase compared
to
actual fourth quarter of 2004. On a pro forma basis, fourth quarter revenue
is
expected of $1.340 billion to $1.350 billion, which is approximately
a 5.5% to
6.2% increase compared to pro forma fourth quarter of 2004. Charter currently
expects actual adjusted EBITDA for the fourth quarter of $485 million
to $495
million, which is approximately a 3.3% to 5.3% decrease compared to actual
fourth quarter of 2004. On a pro forma basis, fourth quarter adjusted
EBITDA is
expected to be $490 million to $500 million, which is approximately 2.0%
to 3.7%
decrease compared to pro forma fourth quarter of 2004. The decline in
adjusted
EBITDA is reflecting in large part the increased marketing expense and
costs
associated with the increases in customers noted above. Adjusted EBITDA
is a
non-GAAP term; see the "Use of Non-GAAP Financial Metrics" section below
for a
definition of this term and additional information.
Capital expenditures for the fourth quarter of 2005 are currently expected to be approximately $270 million to $280 million, which is lower than fourth quarter of 2004 capital expenditures of $285 million and similar to the third quarter 2005 capital expenditures of $273 million. Capital expenditures for the full year, 2005, are expected to have been approximately $1.1 billion, which includes approximately $40 million to $45 million of rebuilding capital expenditures related to hurricanes Katrina and Rita.
As
of
December 31, 2005, our consolidated total long-term debt is expected to
be
approximately $10.6 billion. Pro forma for the issuance of the Notes offered
hereby and the application of proceeds therefrom (see ‘‘Use of proceeds’’), as
of December 31, 2005, total potential borrowing availability under our
credit
facilities and bridge loan is expected to be approximately $1.4 billion,
none of
which is expected to be limited because of covenant restrictions calculated
as
of that date.
Information
regarding certain financial performance measures not discussed herein,
including
net cash flows from operating activities and EBITDA, is not provided on
the date
hereof because the fourth quarter has only recently ended and reliable
estimates
of certain items used in the calculations of such measures are not yet
available.
Use
of Non-GAAP Financial Metrics
Charter
uses certain measures that are not defined by GAAP (Generally Accepted
Accounting Principles) to evaluate various aspects of its business. Adjusted
EBITDA is a non-GAAP financial measure and should be considered in addition
to,
not as a substitute for, net cash flows from operating activities reported
in
accordance with GAAP. These terms as defined by Charter may not be comparable
to
similarly titled measures used by other companies.
Adjusted
EBITDA is defined as income from operations before special charges, non-cash
depreciation and amortization, gain/loss on sale or retirement of assets,
asset
or franchise impairment charges, option compensation expense and hurricane
asset
retirement loss. As such, it eliminates the significant non-cash depreciation
and amortization expense that results from the capital-intensive nature
of the
Charter’s businesses and intangible assets recognized in business combinations
as well as other non-cash or non-recurring items, and is unaffected by
the
Charter’s capital structure or investment activities. Adjusted EBITDA is a
liquidity measure used by Charter’s management and the Board of Directors to
measure the Charter’s ability to fund operations and its financing obligations.
For this reason, it is a significant component of Charter’s annual incentive
compensation program. However, this measure is limited in that it does
not
reflect the periodic costs of certain capitalized tangible and intangible
assets
used in generating revenues and the cash cost of financing for the Charter.
Charter’s management evaluates these costs through other financial
measures.
Charter
believes that adjusted EBITDA provides information useful to investors
in
assessing Charter’s ability to service its debt, fund operations, and make
additional investments with internally generated funds. In addition, adjusted
EBITDA generally correlates to the leverage ratio calculation under its
credit
facilities or outstanding notes to determine compliance with the covenants
contained in the facilities and notes (all such documents have been previously
filed with the United States Securities and Exchange Commission).
Certain
Definitions Relating to Customer Statistics
Terms
used in this Item 7.01 shall have the following meanings:
"Customers"
include all persons our corporate billing records show as receiving service
(regardless of their payment status), except for complimentary accounts
(such as
our employees). In addition, ''customers'' include persons whose accounts
were
over 60, 90 and 120 days past due in payment. We currently believe that
the
number of customers whose accounts were over 60 days past due in payment
have
increased approximately 6% from the third quarter of 2005 and that the
number of
customers whose accounts were over 90 and 120 days past due in payment
have
decreased approximately 3% and 10%, respectively from the third quarter
of
2005.
"Analog
video customers'' include all customers who receive video services (including
those who also purchase high-speed Internet and telephone services) but
exclude
customers who receive high-speed Internet service only or telephone service
only
and who are only counted as high-speed Internet customers or telephone
customers.
Included
within 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
analog video customers is consistent with the methodology used in determining
costs paid to programmers and has been consistently applied year over year.
As
we increase our effective analog prices to residential customers without
a
corresponding increase in the prices charged to commercial service or
multi-dwelling customers, our EBU count will decline even if there is no
real
loss in commercial service or multi-dwelling customers.
"Digital
video customers'' include all households that have one or more digital
set-top
terminals.
Cautionary
Statement Regarding Forward-Looking Statements:
This
report includes forward-looking statements within the meaning of
Section
27A of the Securities Act of 1933, as amended (the "Securities Act"), and
Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), regarding, among other things, our plans, strategies and prospects,
both
business and financial. The Company will not undertake to revise forward-looking
projections to reflect events after this date. 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 release may be identified
by
the use of forward-looking words such as "believe," "expect," "anticipate,"
"should," "planned," "will," "may," "intend," "estimated" and "potential,"
among
others. Important factors that could cause actual results to differ materially
from the forward-looking statements we make in this release are
set forth
in reports or documents that we file from time to time with the SEC, and
include, but are not limited to:
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the
availability, in general, of funds to meet interest payment obligations
under our debt and to fund our operations and necessary capital
expenditures, either through cash flows from operating activities,
further
borrowings or other sources and, in particular, our ability to
be able to
provide under applicable debt instruments such funds (by dividend,
investment or otherwise) to the applicable obligor of such
debt;
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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 a stable customer base, particularly
in
the face of increasingly aggressive competition from other service
providers;
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our
ability to comply with all covenants in our indentures, the Bridge
Loan
and credit facilities, any violation of which would result in
a violation
of the applicable facility or indenture and could trigger a default
of
other obligations under cross-default provisions;
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our
ability to pay or refinance debt prior to or when it becomes
due and/or to
take advantage of market opportunities and market windows to
refinance
that debt in the capital markets through new issuances, exchange
offers or
otherwise, including restructuring our balance sheet and leverage
position;
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our
ability to obtain programming at reasonable prices or to pass
programming
cost increases on to our customers;
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general
business conditions, economic uncertainty or slowdown;
and
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the
effects of governmental regulation, including but not limited
to local
franchise authorities, on our business.
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All
forward-looking statements attributable to us or any person acting on our
behalf
are expressly qualified in their entirety by this cautionary statement.
We are
under no duty or obligation to update any of the forward-looking statements
after the date of this release.
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
Dated:
January 24, 2006
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By:/s/
Grier C. Raclin
Name:
Grier C. Raclin
Title:
Executive Vice President and General
Counsel
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