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): November 1, 2001 ------------------------------------------------------------------------------ CHARTER COMMUNICATIONS, INC. ------------------------------------------------------ (Exact name of registrant as specified in its charter) Delaware -------------------------------------------------------------- (State or Other Jurisdiction of Incorporation or Organization) 000-27927 43-1857213 ------------------------ ---------------------------------------- (Commission File Number) (Federal Employer Identification Number) 12405 Powerscourt Drive St. Louis, Missouri 63131 (Address of Principal Executive Offices) (Zip Code) (Registrant's telephone number, including area code) (314) 965-0555
ITEM 5. OTHER ITEMS. On November 1, 2001, Charter Communications, Inc. announced 2001 third quarter financial results. A copy of the press release is being filed as Exhibit 99.1 with this report.
ITEM 7. EXHIBITS. 99.1 Press release dated November 1, 2001. * * filed herewith
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: November 1, 2001 By: /s/ KENT D. KALKWARF ----------------------------------------- Name: Kent D. Kalkwarf Title: Executive Vice President and Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer)
EXHIBIT INDEX EXHIBIT NUMBER DESCRIPTION ------- ----------- 99.1 Press release dated November 1, 2001.
PRESS RELEASE EXHIBIT 99.1 [CHARTER COMMUNICATIONS LOGO/NEWS BANNER] FOR RELEASE: 7:00 A.M. CT THURSDAY, NOV. 1, 2001 CHARTER COMMUNICATIONS REPORTS STRONG THIRD QUARTER ADVANCED SERVICES GROWTH Company Continues to Pace the Industry with Internal Customer Growth ST. LOUIS - Charter Communications, Inc. (Nasdaq: CHTR) today reported double-digit revenue and operating cash flow growth for the third quarter of 2001 resulting from continued consumer demand for broadband services. These results were highlighted by the addition of a record number of new cable modem customers during the third quarter. Demand for Advanced Services Remains Strong As of Sept. 30, 2001, Charter Digital Cable(TM) customers totaled 1,951,200. Third quarter weekly additions were higher than second quarter, averaging 19,400 per week. "Despite the weakening economy, Charter continues to experience strong demand for its digital video service," said Carl Vogel, President and CEO. "The addition of advanced broadband products like video on demand (VOD) and Wink's Enhanced Broadcasting service continue to enhance customer satisfaction and provide the glue necessary to retain digital customers," he said. "Our target is to end the year 2001 with more than 2,150,000 digital cable customers," he continued. "The effective sales and marketing initiatives we're undertaking to grow our digital customer base provide a foundation for continued revenue and cash flow growth as enhanced services are added to the digital video platform. I'm confident we'll end the year with over 30% digital penetration of our basic customer base." Charter continues to lead the industry in the roll-out of VOD technology. With recent launches in Glendale, Calif. and Birmingham, Ala., Charter now provides VOD technology in 10 markets, including the suburbs of Atlanta; the Pasadena and Long Beach areas of Los Angeles; St. Louis; Fort Worth; the Greenville-Spartanburg, S. C. area; Hickory, N. C.; and Slidell, La. Mr. Vogel said Charter expects to pass some 2,200,000 million homes by the end of 2001 with VOD service.
Two-way high-speed data service was available to 56% of Charter's homes passed as of Sept. 30, 2001. As of that date, Charter served 545,900 data customers, having added more than 102,000 Charter Pipeline(TM) customers during the third quarter. "We added nearly 30% more data customers during the third quarter than we did during the second," Mr. Vogel said. "We're focused on increasing our data penetration as we continue to rebuild and upgrade with an advanced two-way architecture. Customers who buy both our video and data service tend to be more satisfied and are less likely to churn." Charter expects to end the year with over 630,000 data customers. "We're effectively competing against digital subscriber line (DSL) service, despite false and misleading advertising campaigns by the DSL competition," Mr. Vogel said. In response to a suit filed by Charter, a Federal judge recently issued a preliminary injunction ordering Southwestern Bell to refrain from false and misleading advertising about cable modem service. "The decision clearly discredits Southwestern Bell's claim that its DSL service offers some technological advantage over cable modem service. It's just not the case," continued Mr. Vogel. "Certain DSL providers have recently scaled back plans to provide service deeper into their networks, which is clearly an indication that cable modem service provides a competitive threat to DSL providers," Mr. Vogel said. Third Quarter Financial Highlights For the third quarter of 2001, revenue increased more than 13% to $1.04 billion, and operating cash flow increased more than 10% to $467.5 million compared to pro forma results for the third quarter of 2000. Charter continued to pace the industry with internal customer growth of 1.1% compared to pro forma third quarter of 2000 for a total of 6,970,100 customers. "Basic customer growth has slowed after a planned reduction in discounting and basic service marketing efforts, part of a previously announced strategic shift of focus to advanced services that will better enhance operating cash flow growth. This focus is starting to pay off, as evidenced by our impressive advanced services growth. I'm especially proud of the men and women of Charter for their perseverance in these challenging times," Mr. Vogel said. Outlook Due to current economic factors, Charter has lowered its guidance for fourth quarter and year 2001 revenue and operating cash flow growth. Revenue growth for the year is expected to be in the 12.5% to 13.5% range, and operating cash flow growth between 10% and 11%. Charter expects to remain among industry leaders in internal customer growth for the year 2001 with approximately 1% growth. "I'm confident in our business for the long run. As the economy and consumer confidence slows, we may experience some pressure in the short term, but as we stay the course, I'm optimistic that revenue and operating cash flow growth rates will remain strong for the remainder of this and future years," Mr. Vogel said.
About Charter Communications Charter Communications, a Wired World(TM) company, is among the nation's largest broadband communications companies, currently serving some 7 million customers in 40 states. Charter provides a full range of advanced broadband services to the home, including cable television on an advanced digital video programming platform marketed under the Charter Digital Cable(TM) brand and high-speed Internet access via Charter Pipeline(TM). Commercial high-speed data, video and Internet solutions are provided under the Charter Business Networks(TM) brand. Advertising sales and production services are sold under the Charter Media(TM) brand. A Fortune 500 company, Charter is the 2001 recipient of the Outstanding Corporate Growth Award from the Association for Corporate Growth, the 2001 R.E. "Ted" Turner Innovator of the Year Award from the Southern Cable Telecommunications Association, and the 2000 Innovator Award for Technology from Cablevision Magazine. # # # More information about Charter can be found at www.charter.com. Detailed financial information is included in the attached addendum. Charter will conduct a conference call to discuss their operating results on Thursday, November 1, 2001, at 11:00 AM Eastern Time. The call will be available live via webcast at www.charter.com. The call will be available on the "Investor Center" portion of the website, via "About Us." Participants should go to the call link at least 10 minutes prior to the start time to register. The call will be archived on the website. Statements in this press release regarding Charter Communications' business that are not historical facts may be "forward-looking statements." Forward-looking statements are inherently subject to risks, uncertainties and assumptions. Important factors that could cause actual results to differ materially from any such forward-looking statements are identified in the reports and documents Charter files from time to time with the U.S. Securities and Exchange Commission.
CHARTER COMMUNICATIONS, INC. UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS (DOLLARS IN THOUSANDS, EXCEPT SHARE DATA) THREE MONTHS ENDED SEPTEMBER 30, -------------------------------- ACTUAL ACTUAL PRO FORMA 2001 2000 2000 (A) ---- ---- -------- REVENUES: Analog video $ 730,267 $ 637,660 $ 700,907 Digital video 86,271 25,109 28,986 Cable modem 43,917 13,178 16,432 Advertising sales 83,833 67,416 73,759 Other 99,556 95,598 102,114 ------------- ------------- ------------- Total revenues 1,043,844 838,961 922,198 ------------- ------------- ------------- OPERATING EXPENSES: General, administrative and service 227,980 191,806 216,021 Analog video programming 237,329 180,920 204,505 Digital video 31,161 9,957 10,128 Cable modem 28,862 11,737 13,964 Advertising sales 17,177 15,246 17,356 Marketing 18,779 16,355 18,402 Corporate expenses 15,014 14,055 17,599 ------------- ------------- ------------- Total operating expenses 576,302 440,076 497,975 ------------- ------------- ------------- Operating cash flow 467,542 398,885 424,223 Depreciation 429,656 312,886 324,092 Amortization 345,782 315,220 348,281 Option compensation expense (57,083) 8,116 8,116 Interest, net 340,308 282,676 338,869 Other, net 88,917 3,451 3,659 ------------- ------------- ------------- (680,038) (523,464) (598,794) Minority interest 362,611 313,447 319,251 ------------- ------------- ------------- Net loss (317,427) (210,017) (279,543) Accretion of preferred stock dividends (243) -- -- ------------- ------------- ------------- Net loss applicable to common stock $ (317,670) $ (210,017) $ (279,543) ============= ============= ============= Basic and diluted loss per share $ (1.08) $ (0.93) $ (0.95) ============= ============= ============= Weighted average common shares outstanding 294,250,549 224,965,289 293,538,072 ============= ============= ============= (a) The pro forma results reflect all acquisitions and dispositions of cable systems closed during 2000 and 2001 and borrowings under the Charter Holdings senior bridge loan facility, issuance of the October 2000 senior convertible notes, issuance of the January 2001 Charter Holdings notes, issuance of the May 2001 Charter Holdings notes, issuance of 60,247,350 shares of common stock in May 2001, issuance of the May 2001 senior convertible notes and application of the proceeds from all such borrowings to repay portions of other notes and credit facilities. Addendum to Charter Communications Three Months Ended September 30, 2001 Earnings Release Page 1 of 4
CHARTER COMMUNICATIONS, INC. UNAUDITED SUMMARY OF OPERATING STATISTICS CABLE TELEVISION ACTUAL PRO FORMA PRO FORMA ---------------- ------ --------- --------- SEPTEMBER 30, DECEMBER 31, SEPTEMBER 30, 2001 2000 (A) 2000 (A) ---- -------- -------- Homes Passed 11,485,900 11,291,800 11,224,800 Basic Customers 6,970,100 6,925,400 6,897,000 Basic Penetration 60.7% 61.3% 61.4% Premium Units 6,050,500 5,515,400 5,006,200 Premium Penetration 86.8% 79.6% 72.6% Average Monthly Revenue per Basic Customer (quarter) $ 49.92 $ 46.88 $ 44.57 DIGITAL VIDEO ACTUAL PRO FORMA PRO FORMA ------------- ------ --------- --------- SEPTEMBER 30, DECEMBER 31, SEPTEMBER 30, 2001 2000 (A) 2000 (A) ---- -------- -------- Digital Homes Passed 10,366,600 9,711,600 8,373,500 Customers 1,951,200 1,177,500 760,700 Penetration of Digital Homes Passed 18.8% 12.1% 9.1% Penetration of Basic Customers 28.0% 17.0% 11.0% Digital Converters Deployed 2,611,000 1,470,500 939,600 DATA SERVICES ACTUAL PRO FORMA PRO FORMA ------------- ------ --------- --------- SEPTEMBER 30, DECEMBER 31, SEPTEMBER 30, 2001 2000 (A) 2000 (A) ---- -------- -------- Data Homes Passed 6,479,700 5,841,300 5,562,400 Cable Modem Customers 507,700 229,000 157,800 Dial-up Customers 38,200 42,000 42,300 Total Data Customers 545,900 271,000 200,100 Penetration 8.4% 4.6% 3.6% OTHER STATISTICS ACTUAL ---------------- ------ SEPTEMBER 30, 2001 ---- Capital Expenditures (in 000's) For the three months ended $ 794,400 For the nine months ended $ 2,156,600 Book Value per Share $ 10.76 (a) The pro forma statistics reflect all acquisitions and dispositions of cable systems closed during 2000 and 2001 as of the periods indicated, including the Cable USA acquisition that closed in September 2001 that added approximately 30,600 basic customers, 500 digital customers, 800 cable modem customers, and 6,500 dial-up customers. Addendum to Charter Communications Three Months Ended September 30, 2001 Earnings Release Page 2 of 4
CHARTER COMMUNICATIONS, INC. UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS (DOLLARS IN THOUSANDS, EXCEPT SHARE DATA) PERIODS ENDED SEPTEMBER 30, 2001 -------------------------------- THREE MONTHS NINE MONTHS ------------ ----------- REVENUES: Analog video $ 730,267 $ 2,045,848 Digital video 86,271 210,009 Cable modem 43,917 101,933 Advertising sales 83,833 203,988 Other 99,556 284,338 ------------- ------------- Total revenues 1,043,844 2,846,116 ------------- ------------- OPERATING EXPENSES: General, administrative and service 227,980 617,396 Analog video programming 237,329 659,542 Digital video 31,161 75,851 Cable modem 28,862 66,948 Advertising sales 17,177 46,107 Marketing 18,779 54,019 Corporate expenses 15,014 42,728 ------------- ------------- Total operating expenses 576,302 1,562,591 ------------- ------------- Operating cash flow 467,542 1,283,525 Depreciation 429,656 1,191,694 Amortization 345,782 1,000,591 Option compensation expense (57,083)(a) (46,195) Interest, net 340,308 965,958 Other, net 88,917(b) 172,825 (c) ------------- ------------- (680,038) (2,001,348) Minority interest 362,611 1,129,357 ------------- ------------- Net loss (317,427) (871,991) Accretion of preferred stock dividends (243) (243) ------------- ------------- Net loss applicable to common stock $ (317,670) $ (872,234) ============= ============= Basic and diluted loss per share $ (1.08) $ (3.34) ============= ============= Weighted average common shares outstanding 294,250,549 261,240,101 ============= ============= (a) Reflects the reversal of $66.6 million of expense previously recorded in connection with approximately seven million options forfeited by our former President and Chief Executive Officer as part of his September 2001 separation agreement. (b) Includes current period expense of $72.4 million as a result of the application of SFAS 133 "Accounting for Derivative Instruments and Hedging Activities". (c) Includes a $23.9 million cumulative effect of a change in accounting principle and expense of $109.0 million, as a result of the implementation and application of SFAS 133 "Accounting for Derivative Instruments and Hedging Activities". Addendum to Charter Communications Three Months Ended September 30, 2001 Earnings Release Page 3 of 4
CHARTER COMMUNICATIONS, INC. UNAUDITED CONSOLIDATED BALANCE SHEET DATA (DOLLARS IN THOUSANDS) ACTUAL ACTUAL SEPTEMBER 30, 2001 DECEMBER 31, 2000 ------------------ ----------------- ASSETS Current Assets: Cash and cash equivalents $ 15,205 $ 130,702 Accounts receivable, net of allowance for doubtful accounts 257,380 217,667 Receivable from related party 4,181 6,480 Prepaid expenses and other 77,076 77,719 ----------- ----------- Total current assets 353,842 432,568 ----------- ----------- Investment in Cable Properties: Property, plant and equipment, net 6,727,029 5,267,519 Franchises, net 17,503,324 17,068,702 ----------- ----------- Total investment in cable properties 24,230,353 22,336,221 ----------- ----------- Other assets 310,093 274,777 ----------- ----------- $24,894,288 $23,043,566 =========== =========== LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities: Accounts payable and accrued expenses $ 1,295,821 $ 1,367,234 ----------- ----------- Total current liabilities 1,295,821 1,367,234 ----------- ----------- Long-term debt 15,654,739 13,060,455 Deferred management fees - related party 13,751 13,751 Other long-term liabilities 410,117 285,266 Minority interest 4,303,363 4,089,329 Redeemable securities 50,566 1,104,327 Shareholders' equity 3,165,931 3,123,204 ----------- ----------- $24,894,288 $23,043,566 =========== =========== Addendum to Charter Communications Three Months Ended September 30, 2001 Earnings Release Page 4 of 4