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SEC Filings

S-4
CHARTER COMMUNICATIONS HOLDINGS CAPITAL CORP filed this Form S-4 on 01/25/2000
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required to pay to AT&T approximately $108 million in cash. This payment
represents the difference in the agreed values of the systems to be exchanged.
In addition, we are negotiating with several other potential acquisition and
swapping candidates whose systems would further complement our regional
operating clusters.
 
OVERVIEW
 
     Approximately 87% of our historical revenues for the nine months ended
September 30, 1999 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
television 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 and acquisitions as well as 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 subscribers with additional programming
options. We are also offering high speed Internet access to the World Wide Web
through cable modems. Cable modems can be attached to personal computers so that
users can send and receive data over cable systems. Our television based
Internet access allows us to offer the services provided by WorldGate
Communications, Inc., which provides users with TV-based e-mail and other
Internet access.
 
     Our expenses primarily consist of operating costs, general and
administrative expenses, depreciation and amortization expense and management
fees/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 nine months ended September 1999. 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 have benefited in the past from our membership in an
industry cooperative that provides members with volume discounts from
programming networks. We believe our membership has kept increases in our
programming costs below what the increases would otherwise have been. We also
believe that we should derive additional discounts from programming networks due
to our increased size. Finally, we were 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. Management fees/corporate expense charges are fees paid
or charges for management services. Charter Holdings records actual expense
charges incurred by Charter Communications, Inc. on behalf of Charter Holdings.
Prior to the acquisition of us by Mr. Allen, the CCA Group and CharterComm
Holdings recorded management fees payable to Charter Investment, Inc. equal to
3.0% to 5.0% of gross revenues plus certain
 
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