Print Page  Close Window

SEC Filings

424B3
CHARTER COMMUNICATIONS HOLDINGS CAPITAL CORP filed this Form 424B3 on 09/02/1999
Entire Document
 
<PAGE>   60
 
Showtime, Cinemax and The Movie Channel. The MVP package has increased premium
revenue by 3.4% and premium cash flow by 5.5% in the initial nine months of this
program. We are beginning to offer our customers several other services, which
are expected to significantly contribute to our revenue. 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, 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
account for approximately 50 percent of our operating costs. 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. A significant factor
with respect to increased programming costs is 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 minimized increases to our programming
costs relative to 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, 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
to or charges from Charter Investment for corporate management and consulting
services. Charter Holdings records actual corporate expense charges incurred by
Charter Investment 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 equal to 3.0% to 5.0% of gross revenues plus
certain expenses. In October 1998, Charter Investment began managing the cable
operations of Marcus Holdings under a management fee arrangement. The Charter
Operating credit facilities limit management fees to 3.5% of gross revenues.
 
     We have had a history of net losses and expect to continue to report net
losses for the foreseeable future. The principal reasons for our prior and
anticipated net losses include the depreciation and amortization expenses
associated with our acquisitions, the capital expenditures related to
construction and upgrading of our systems, and interest costs on borrowed money.
We cannot predict what impact, if any, continued losses will have on our ability
to finance our operations in the future.
 
                                       58