##### 



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549
   FORM 10-Q   (Mark One)þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THESECURITIES EXCHANGE ACT OF 1934For the quarterly period ended March 31, 2005oro
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THESECURITIES EXCHANGE ACT OF 1934For the transition period from ______to ______.
 Commission file numbers:
333-56679
333-56679-02
333-56679-01
333-56679-03 RENAISSANCE MEDIA GROUP LLC*
RENAISSANCE MEDIA (LOUISIANA) LLC*
RENAISSANCE MEDIA (TENNESSEE) LLC*
RENAISSANCE MEDIA CAPITAL CORPORATION*   Delaware
    
    14-1803051Delaware
    
    14-1801165Delaware
    
    14-1801164Delaware
    
    14-1803049(State or other jurisdiction of incorporation or organization)
    
    (I.R.S. Employer Identification Number)
 12405 Powerscourt DriveSt. Louis, Missouri
    
    63131(Address of principal executive offices)
    
    (Zip Code)
 (314) 965-0555  (Registrants telephone number, including area code)
 Indicate by check mark whether the registrants: (1) have filed all reports required to be filed
by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrants were required to file such reports), and (2) have been
subject to such filing requirements for the past 90 days. YES þ NO o Indicate by check mark whether the registrants are accelerated filers (as defined in Rule 12b-2
of the Exchange Act). YES o
 NO þ Indicate the number of shares outstanding of each of the issuers classes of common stock, as of
the latest practicable date:  All of the limited liability company membership interests of Renaissance Media (Louisiana) LLC
and Renaissance Media (Tennessee) LLC are held by Renaissance Media Group LLC. All of the
issued and outstanding shares of capital stock of Renaissance Media Capital Corporation are held
by Renaissance Media Group LLC. All of the limited liability company membership interests of
Renaissance Media Group LLC are held by Charter Communications, LLC (and indirectly by Charter
Communications Holdings, LLC, a reporting company under the Exchange Act). There is no public
trading market for any of the aforementioned limited liability company membership interests or
shares of capital stock. * Renaissance Media Group LLC, Renaissance Media (Louisiana) LLC, Renaissance Media (Tennessee) LLC
and Renaissance Media Capital Corporation meet the conditions set forth in General Instruction
(H)(1)(a) and (b) of Form 10-Q and are therefore filing this Form with the reduced disclosure
format.




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RENAISSANCE MEDIA GROUP LLC
RENAISSANCE MEDIA (LOUISIANA) LLC
RENAISSANCE MEDIA (TENNESSEE) LLC
RENAISSANCE MEDIA CAPITAL CORPORATION FORM 10-Q
QUARTER ENDED MARCH 31, 2005 TABLE OF CONTENTS PAGEPart I. FINANCIAL INFORMATIONItem 1. Financial Statements - Renaissance Media Group LLC and Subsidiaries
    
    
    4Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    13Item 4. Controls and Procedures
    
    
    25Part II. OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    26Item 6. Exhibits
    
    
    26SIGNATURES
    
    
    27EXHIBIT INDEX
    
    
    28
  NOTE: Separate financial statements of Renaissance Media Capital Corporation, Renaissance Media
(Louisiana) LLC and Renaissance Media (Tennessee) LLC have not been presented pursuant to Rule
3-10(b) of Regulation S-X. This quarterly report on Form 10-Q is for the three months ended March 31, 2005. The Securities
and Exchange Commission (SEC) allows us to incorporate by reference information that we file
with the SEC, which means that we can disclose important information to you by referring you
directly to those documents. Information incorporated by reference is considered to be part of
this quarterly report. In addition, information that we file with the SEC in the future will
automatically update and supersede information contained in this quarterly report. In this
quarterly report, we, us and our refer to Renaissance Media Group LLC and its wholly owned
finance subsidiaries, Renaissance Media (Louisiana) LLC, Renaissance Media (Tennessee) LLC and
Renaissance Media Capital Corporation, unless the context requires otherwise. 2




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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS: This quarterly 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 including, without limitation, the
forward-looking statements set forth in the Results of Operations and Liquidity and Capital
Resources sections under Part I, Item 2. Managements Discussion and Analysis of Financial
Condition and Results of Operations in this quarterly report. 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 including, without limitation, the factors described under Certain Trends and
Uncertainties under Part I, Item 2. Managements Discussion and Analysis of Financial Condition
and Results of Operations in this quarterly report. Many of the forward-looking statements
contained in this quarterly report 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 quarterly report are set forth in this
quarterly report and in other reports or documents that we file from time to time with the SEC, and
include, but are not limited to:  
    the availability of funds to meet interest payment obligations under our and our indirect parent companies debt and to
fund our operations and necessary capital expenditures, either through cash flows from operating activities, further
borrowings or other sources;  
    our ability to comply with all covenants in our indenture, any violation of which would result in a violation of the
indenture and could trigger a default of other obligations of our affiliates under cross-default provisions;  
    our ability to sustain and grow revenues and cash flows from operating activities by offering video, high-speed data
and other services and to maintain a stable customer base, particularly in the face of increasingly aggressive
competition from other service providers;  
    our and our indirect parent companies ability to pay or refinance debt as it becomes due;  
    reaching (and then implementing) a final approved settlement with respect to the putative class action, the
unconsolidated state action, and derivative shareholders litigation against Charter Communications, Inc., our indirect
parent, on the terms of the stipulations of settlement;  
    our ability to obtain programming at reasonable prices or to pass programming cost increases on to our customers;  
    general business conditions, economic uncertainty or slowdown; and  
    the effects of governmental regulation, including but not limited to local franchise taxing authorities, on our
business. 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 quarterly report. 3




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PART I. FINANCIAL INFORMATION. 
 ITEM 1. FINANCIAL
STATEMENTS.
 RENAISSANCE MEDIA GROUP LLC AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS) March 31,
    
    
    December 31,2005
    
    
    2004(Unaudited)ASSETSCURRENT ASSETS:Cash and cash equivalents
    
    $
    183
    
    
    $
    228Accounts receivable, less allowance for doubtful
accounts of $181 and $234, respectively
    
    
    1,428
    
    
    
    1,764Prepaid expenses and other current assets
    
    
    267
    
    
    
    155Total current assets
    
    
    1,878
    
    
    
    2,147INVESTMENT IN CABLE PROPERTIES:Property, plant and equipment, net of accumulated
depreciation of $129,375 and $120,986, respectively
    
    
    136,200
    
    
    
    140,406Franchises
    
    
    225,414
    
    
    
    225,445Total investment in cable properties, net
    
    
    361,614
    
    
    
    365,851OTHER NONCURRENT ASSETS
    
    
    23
    
    
    
    26Total assets
    
    $
    363,515
    
    
    $
    368,024LIABILITIES AND MEMBERS EQUITYCURRENT LIABILITIES:Accounts payable and accrued expenses
    
    $
    15,717
    
    
    $
    14,923Payables to manager of cable systems  related parties
    
    
    33,678
    
    
    
    37,254Total current liabilities
    
    
    49,395
    
    
    
    52,177LONG-TERM DEBT
    
    
    115,700
    
    
    
    115,805OTHER LONG-TERM LIABILITIES
    
    
    2,490
    
    
    
    2,792MEMBERS EQUITY
    
    
    195,930
    
    
    
    197,250Total liabilities and members equity
    
    $
    363,515
    
    
    $
    368,024
 The accompanying notes are an integral part of these condensed consolidated financial statements. 4




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RENAISSANCE MEDIA GROUP LLC AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS)
(Unaudited) Three Months Ended March 31,2005
    
    
    2004REVENUES
    
    $
    29,652
    
    
    $
    27,685COSTS AND EXPENSES:Operating (excluding depreciation and amortization)
    
    
    13,395
    
    
    
    11,806Selling, general and administrative
    
    
    5,874
    
    
    
    5,419Depreciation and amortization
    
    
    8,733
    
    
    
    8,305(Gain) loss on sale of assets, net
    
    
    214
    
    
    
    (1
    )Special charges, net
    
    
    
    
    
    
    21628,216
    
    
    
    25,745Income from operations
    
    
    1,436
    
    
    
    1,940OTHER EXPENSE:Interest expense, net
    
    
    (2,756
    )
    
    
    (2,756
    )Net loss
    
    $
    (1,320
    )
    
    $
    (816
    )
 The accompanying notes are an integral part of these condensed consolidated financial statements. 5




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RENAISSANCE MEDIA GROUP LLC AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
(Unaudited) Three Months Ended March 31,2005
    
    
    2004CASH FLOWS FROM OPERATING ACTIVITIES:Net loss
    
    $
    (1,320
    )
    
    $
    (816
    )Adjustments to reconcile net loss to net cash flows from
operating activities:Depreciation and amortization
    
    
    8,733
    
    
    
    8,305Noncash interest expense
    
    
    (105
    )
    
    
    (105
    )(Gain) loss on sale of assets, net
    
    
    214
    
    
    
    (1
    )Changes in operating assets and liabilities:Accounts receivable
    
    
    336
    
    
    
    271Prepaid expenses and other assets
    
    
    (112
    )
    
    
    (75
    )Accounts payable, accrued expenses and other
    
    
    (103
    )
    
    
    236Payables to related party
    
    
    (4,120
    )
    
    
    (4,699
    )Net cash flows from operating activities
    
    
    3,523
    
    
    
    3,116CASH FLOWS FROM INVESTING ACTIVITIES:Purchases of property, plant and equipment
    
    
    (4,230
    )
    
    
    (3,477
    )Change in accrued expenses related to capital expenditures
    
    
    658
    
    
    
    352Proceeds from sale of assets
    
    
    4
    
    
    
    Net cash flows from investing activities
    
    
    (3,568
    )
    
    
    (3,125
    )NET CHANGE IN CASH
    
    
    (45
    )
    
    
    (9
    )CASH, beginning of period
    
    
    228
    
    
    
    257CASH, end of period
    
    $
    183
    
    
    $
    248CASH PAID FOR INTEREST
    
    $
    
    
    
    $
    
 The accompanying notes are an integral part of these condensed consolidated financial statements. 6




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RENAISSANCE MEDIA GROUP LLC AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT WHERE INDICATED)
(UNAUDITED) 1.   Organization and Basis of Presentation The accompanying condensed consolidated financial statements of Renaissance Media Group LLC (the
Company) include the accounts of the Company and its wholly owned finance subsidiaries,
Renaissance Media (Louisiana) LLC (Renaissance Louisiana), Renaissance Media (Tennessee) LLC
(Renaissance Tennessee) and Renaissance Media Capital Corporation (Capital Corporation).
Renaissance Media LLC (Media) is owned 76% and 24% by Renaissance Louisiana and Renaissance
Tennessee, respectively, and owns all of the operating assets of the consolidated group. All
significant intercompany accounts and transactions among consolidated entities have been
eliminated. The Company is an indirect wholly owned subsidiary of Charter Communications Operating, LLC
(Charter Operating), which provides funding to the Company as needed. Charter Operating is an
indirect subsidiary of Charter Communications Holdings, LLC, which is an indirect subsidiary of
Charter Communications, Inc. (Charter). The Company offers its customers traditional cable video
programming (analog and digital video) as well as high-speed data services and, in some areas,
advanced broadband services such as high definition television and video on demand. The Company
sells its cable video programming, high-speed data and advanced broadband services on a
subscription basis. The Company also sells local advertising on satellite-delivered networks. Charter Communications Holding Company, LLC (Charter Holdco), the Companys indirect parent, and
Charter, the Companys manager and indirect parent, provide management services for the cable
systems owned or operated by the Company. The management services include such services as
centralized customer billing, data processing and related support, benefits administration and
coordination of insurance coverage and self-insurance programs for medical, dental and workers
compensation claims. Costs associated with providing these services are billed and charged
directly to the Company and are included within operating costs in the accompanying condensed
consolidated statements of operations. The accompanying condensed consolidated financial statements of the Company have been prepared in
accordance with accounting principles generally accepted in the United States for interim financial
information and the rules and regulations of the Securities and Exchange Commission (SEC).
Accordingly, certain information and footnote disclosures typically included in the Companys
Annual Report on Form 10-K have been condensed or omitted for this quarterly report. The
accompanying condensed consolidated financial statements are unaudited and are subject to review by
regulatory authorities. However, in the opinion of management, such financial statements include
all adjustments, which consist of only normal recurring adjustments, necessary for a fair
presentation of the results for the periods presented. Interim results are not necessarily
indicative of results for a full year. The preparation of financial statements in conformity with accounting principles generally accepted
in the United States requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of revenues and expenses during the reporting
period. Areas involving significant judgments and estimates include capitalization of labor and
overhead costs; depreciation and amortization costs; impairments of property, plant and equipment
and franchises; income taxes and contingencies. Actual results could differ from those estimates. Reclassifications Certain 2004 amounts have been reclassified to conform with the 2005 presentation. 2.   Liquidity and Capital Resources The Company recognized income from operations of $1.4 million and $1.9 million for the three months
ended March 31, 2005 and 2004, respectively. The Companys net cash flows from operating
activities were $3.5 million and $3.1 million for the three months ended March 31, 2005 and 2004,
respectively. The Company has historically required significant cash to fund debt service costs, capital
expenditures and ongoing operations. Historically, the Company has funded these requirements
through cash flows from operating activities. However, the mix of funding sources changes from
period to period. For the three months ended March 31, 2005, 7




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RENAISSANCE MEDIA GROUP LLC AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT WHERE INDICATED)
(UNAUDITED) the Company generated $3.5 million of net cash flows from operating activities. In addition, the
Company used approximately $4.2 million for purchases of property, plant and equipment. The
Company expects that cash on hand and cash flows from operating activities will be adequate to meet
its cash needs in 2005. The Companys long-term financing as of March 31, 2005 consists of $114.4 million principal amount
of senior discount notes which become due in 2008. The Company expects that it will rely on
capital contributions from its indirect parent companies to repay the principal amount of its notes
at maturity. However, there can be no assurances that its indirect parent companies will have
sufficient liquidity to satisfy this payment when due. The Companys indirect parent companies
have a significant amount of debt and may incur additional debt in the future. For the remainder
of 2005, $22.5 million of the Companys indirect parent companies debt matures, and in 2006, an
additional $151.9 million of the Companys indirect parent companies debt matures. Cash flows
from operating activities and amounts available under the Charter Operating credit facilities may
not be sufficient to fund the Companys and its parent companies operations and satisfy its parent
companies principal repayment obligations that come due in 2006 and, the Company believes, will
not be sufficient to fund its parent companies operations and satisfy such repayment obligations
thereafter. The debt of each of the Companys indirect parent companies has certain covenants
which may restrict such Companys ability to make distributions to their respective direct parent
companies to satisfy future principal repayment obligations. Because Charter is the Companys manager, any financial or liquidity problems of Charter could
cause serious disruption to the Companys business and have a material adverse effect on its
business and results of operations. Any such event could adversely impact the Companys own credit
rating, and its relations with customers and suppliers, which could in turn further impair the
Companys ability to obtain financing and operate its business. Further, to the extent that any
such event results in a change of control of Charter (whether through a bankruptcy, receivership or
other reorganization of Charter and/or Charter Holdco, or otherwise), it could result in an event
of default under the Charter Operating credit facilities and would require a change of control
repurchase offer under the Companys outstanding notes. 3.   Franchises Franchise rights represent the value attributed to agreements with local authorities that allow
access to homes in cable service areas acquired through the purchase of cable systems. Management
estimates the fair value of franchise rights at the date of acquisition and determines if the
franchise has a finite life or an indefinite-life as defined by SFAS No. 142, Goodwill and Other
Intangible Assets. Franchises that qualify for indefinite-life treatment under SFAS No. 142 are
tested for impairment annually based on valuations, or more frequently as warranted by events or
changes in circumstances. Franchises are aggregated into essentially inseparable asset groups to
conduct the valuations. The asset groups generally represent geographic clustering of the
Companys cable systems into groups by which such systems are managed. Management believes such
grouping represents the highest and best use of those assets. The Companys valuations, which are based on the present value of projected after tax cash flows,
result in a value of property, plant and equipment, franchises, customer relationships and total
entity value. The value of goodwill is the difference between the total entity value and amounts
assigned to the other assets. Franchises, for valuation purposes, are defined as the future economic benefits of the right to
solicit and service potential customers (customer marketing rights), and the right to deploy and
market new services such as interactivity to the potential customers (service marketing rights).
Fair value is determined based on estimated discounted future cash flows using assumptions
consistent with internal forecasts. The franchise after-tax cash flow is calculated as the
after-tax cash flow generated by the potential customers obtained and the new services added to
those customers in future periods. The sum of the present value of the franchises after-tax cash
flow in years 1 through 10 and the continuing value of the after-tax cash flow beyond year 10
yields the fair value of the franchise. Franchise amortization expense for each of the three months ended March 31, 2005 and 2004 was $31,
which represents the amortization relating to franchises that did not qualify for indefinite-life
treatment under SFAS No. 142, including costs associated with franchise renewals. The Company
expects that amortization expense on franchise assets will be approximately $0.1 million annually
for each of the next five years. Actual amortization 8




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RENAISSANCE MEDIA GROUP LLC AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT WHERE INDICATED)
(UNAUDITED) expense in future periods could differ from these estimates as a result of new intangible asset
acquisitions or divestitures, changes in useful lives and other relevant factors. 4.   Accounts Payable and Accrued Expenses Accounts payable and accrued expenses consist of the following as of March 31, 2005 and December
31, 2004: March 31,
    
    
    December 31,2005
    
    
    2004Accounts payable - trade
    
    $
    2,105
    
    
    $
    2,899Accrued capital expenditures
    
    
    1,235
    
    
    
    577Accrued expenses:Interest
    
    
    5,244
    
    
    
    2,384Programming costs
    
    
    1,112
    
    
    
    1,116Franchise-related fees
    
    
    1,909
    
    
    
    2,677State sales tax
    
    
    2,444
    
    
    
    2,792Personal property tax
    
    
    609
    
    
    
    1,182Other
    
    
    1,059
    
    
    
    1,296$
    15,717
    
    
    $
    14,923
 5.   Long-Term Debt Long-term debt consists of the following as of March 31, 2005 and December 31, 2004: March 31,
    
    
    December 31,2005
    
    
    200410% senior discount notes
    
    $
    114,413
    
    
    $
    114,413Unamortized net premium
    
    
    1,287
    
    
    
    1,392$
    115,700
    
    
    $
    115,805
 In 1998, Renaissance Louisiana, Renaissance Tennessee and Capital Corporation issued $163.2 million
principal amount at maturity of 10.000% senior discount notes due April 15, 2008 (the Notes) for
proceeds of $100.0 million. Approximately $48.8 million
principal amount of such notes were repurchased
in May 1999. The Notes began accruing cash interest on April 15, 2003. From and after April 15,
2003, the Notes bear interest, payable semi-annually in cash, at a rate of 10% per annum on April
15 and October 15 of each year, commencing October 15, 2003. The Company has fully and
unconditionally guaranteed the Notes. 6.   Comprehensive Loss Comprehensive loss is equal to net loss for the three months ended March 31, 2005 and 2004. 7.   Income Taxes The Company is a single member limited liability company not subject to income tax. The Company
holds all operations through indirect subsidiaries. The majority of those indirect subsidiaries
are limited liability companies that are also not subject to income tax. A certain indirect
subsidiary of the Company is a corporation that is subject to income tax, but has no operations and
has not generated any taxable income since inception. Any taxable income generated by the Company
would be the responsibility of the Companys equity owner. As such, the Company has not provided
for income taxes in the accompanying condensed consolidated financial statements. 9




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RENAISSANCE MEDIA GROUP LLC AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT WHERE INDICATED)
(UNAUDITED) 8.   Contingencies Fourteen putative federal class action lawsuits (the Federal Class Actions) were filed against
Charter and certain of its former and present officers and directors in various jurisdictions
allegedly on behalf of all purchasers of Charters securities during the period from either
November 8 or November 9, 1999 through July 17 or July 18, 2002. Unspecified damages were sought
by the plaintiffs. In general, the lawsuits alleged that Charter utilized misleading accounting
practices and failed to disclose these accounting practices and/or issued false and misleading
financial statements and press releases concerning Charters operations and prospects. The Federal
Class Actions were specifically and individually identified in public filings made by Charter prior
to the date of this quarterly report. In October 2002, Charter filed a motion with the Judicial Panel on Multidistrict Litigation (the
Panel) to transfer the Federal Class Actions to the Eastern District of Missouri. On March 12,
2003, the Panel transferred the six Federal Class Actions not filed in the Eastern District of
Missouri to that district for coordinated or consolidated pretrial proceedings with the eight
Federal Class Actions already pending there. The Panels transfer order assigned the Federal Class
Actions to Judge Charles A. Shaw. By virtue of a prior court order, StoneRidge Investment Partners
LLC became lead plaintiff upon entry of the Panels transfer order. StoneRidge subsequently filed
a Consolidated Amended Complaint. The Court subsequently consolidated the Federal Class Actions
into a single action (the Consolidated Federal Class Action) for pretrial purposes. On June 19,
2003, following a status and scheduling conference with the parties, the Court issued a Case
Management Order setting forth a schedule for the pretrial phase of the Consolidated Federal Class
Action. Motions to dismiss the Consolidated Amended Complaint were filed. On February 10, 2004,
in response to a joint motion made by StoneRidge and defendants Charter, Vogel and Allen, the court
entered an order providing, among other things, that: (1) the parties who filed such motion engage
in a mediation within ninety (90) days; and (2) all proceedings in the Consolidated Federal Class
Actions were stayed until May 10, 2004. On May 11, 2004, the Court extended the stay in the
Consolidated Federal Class Action for an additional sixty (60) days. On July 12, 2004, the parties
submitted a joint motion to again extend the stay, this time until September 10, 2004. The Court
granted that extension on July 20, 2004. On August 5, 2004, Stoneridge, Charter and the individual
defendants who were the subject of the suit entered into a Memorandum of Understanding setting
forth agreements in principle to settle the Consolidated Federal Class Action. These parties
subsequently entered into Stipulations of Settlement dated as of January 24, 2005 (described more
fully below) which incorporate the terms of the August 5, 2004 Memorandum of Understanding. On September 12, 2002, a shareholders derivative suit (the State Derivative Action) was filed
in the Circuit Court of the City of St. Louis, State of Missouri (the Missouri State Court)
against Charter and its then current directors, as well as its former auditors. The plaintiffs
allege that the individual defendants breached their fiduciary duties by failing to establish and
maintain adequate internal controls and procedures. Unspecified damages, allegedly on Charters
behalf, were sought by the plaintiffs. On March 12, 2004, an action substantively identical to the State Derivative Action was filed in
the Missouri State Court, against Charter and certain of its current and former directors, as well
as its former auditors. The plaintiffs in that case alleged that the individual defendants
breached their fiduciary duties by failing to establish and maintain adequate internal controls and
procedures. Unspecified damages, allegedly on Charters behalf, were sought by plaintiffs. On
July 14, 2004, the Court consolidated this case with the State Derivative Action. Separately, on February 12, 2003, a shareholders derivative suit (the Federal Derivative
Action) was filed against Charter and its then current directors in the United States District
Court for the Eastern District of Missouri. The plaintiff in that suit alleged that the individual
defendants breached their fiduciary duties and grossly mismanaged Charter by failing to establish
and maintain adequate internal controls and procedures. Unspecified damages, allegedly on
Charters behalf, were sought by the plaintiffs. As noted above, Charter and the individual defendants entered into a Memorandum of Understanding on
August 5, 2004 setting forth agreements in principle regarding settlement of the Consolidated
Federal Class Action, the State Derivative Action(s) and the Federal Derivative Action (the
Actions). Charter and various other defendants in those actions subsequently entered into
Stipulations of Settlement dated as of January 24, 2005, setting forth a settlement of the Actions
in a manner consistent with the terms of the Memorandum of Understanding. The Stipulations of
Settlement, along with various supporting documentation, were filed with the Court on February 2, 10




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RENAISSANCE MEDIA GROUP LLC AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT WHERE INDICATED)
(UNAUDITED) 2005. The Stipulations of Settlement provide that, in exchange for a release of all claims by
plaintiffs against Charter and its former and present officers and directors named in the Actions,
Charter would pay to the plaintiffs a combination of cash and equity collectively valued at $144.0
million, which would include the fees and expenses of plaintiffs counsel. Of this amount, $64.0
million would be paid in cash (by Charters insurance carriers) and the balance would be paid in
shares of Charter Class A common stock having an aggregate value of $40.0 million and ten-year
warrants to purchase shares of Charter Class A common stock having an aggregate warrant value of
$40.0 million, with such values in each case being determined pursuant to formulas set forth in the
Stipulations of Settlement. The warrants would have an exercise price equal to 150% of the fair
market value (as defined) of Charter Class A common stock as of the date of the entry of the order
of final judgment approving the settlement. In addition, Charter would issue additional shares of
its Class A common stock to its insurance carrier having an aggregate value of $5.0 million. Under
this formula, Charter expects (based on recent trading prices of its Class A common stock) that the
number of shares issued will be determined based on a per share value equal to the average closing
price over the thirty calendar day period immediately preceding the final valuation date (which is
the later of the date on which a final judgment is entered or the date of entry of an order
approving the award of fees and costs to the class action plaintiffs counsel). Warrants are
expected to become exercisable approximately one year from the date of the final judgment and will
have an exercise price equal to 150% of the volume weighted average price of Charters Class A
common stock over the thirty day period immediately preceding the final valuation date. The
warrants will be valued based on a Black Scholes valuation method. Accordingly, any further
declines in Charters stock price prior to the final valuation date could result in more shares and
warrants being issued to the plaintiffs in the settlement. In the event that the valuation formula
in the Stipulations provides for a per share value of less than $2.25, Charter may elect to
terminate the settlement. As a result, in the second quarter of 2004, the Company recorded a $2.1
million special charge on its consolidated statement of operations related to its portion of the
expense allocation for the aggregate value of the Charter Class A common stock and warrants to be
issued. Additionally, as part of the settlements, Charter will also commit to a variety of
corporate governance changes, internal practices and public disclosures, some of which have already
been undertaken and none of which are inconsistent with measures Charter is taking in connection
with the recent conclusion of the SEC investigation described below. Documents related to the
settlement of the Actions have now been executed and filed. On February 15, 2005, the United
States District Court for the Eastern District of Missouri gave preliminary approval to the
settlement of the Actions. The settlement of each of the lawsuits remains conditioned upon, among
other things, final judicial approval of the settlements following notice to the class, and
dismissal, with prejudice, of the consolidated derivative actions now pending in Missouri State
Court, which are related to the Federal Derivative Actions. The hearing to consider final approval
of the settlement is scheduled for May 23, 2005. In August 2002, Charter became aware of a grand jury investigation being conducted by the U.S.
Attorneys Office for the Eastern District of Missouri into certain of its accounting and reporting
practices, focusing on how Charter reported customer numbers, and its reporting of amounts received
from digital set-top terminal suppliers for advertising. The U.S. Attorneys Office has publicly
stated that Charter is not a target of the investigation. Charter was also advised by the U.S.
Attorneys Office that no current officer or member of its board of directors is a target of the
investigation. On July 24, 2003, a federal grand jury charged four former officers of Charter with
conspiracy and mail and wire fraud, alleging improper accounting and reporting practices focusing
on revenue from digital set-top terminal suppliers and inflated customer account numbers. Each of
the indicted former officers pled guilty to single conspiracy counts related to the original mail
and wire fraud charges and were sentenced on April 22, 2005. Charter has advised the Company that
it fully cooperated with the investigation, and following the sentencings, the U.S. Attorneys
Office for the Eastern District of Missouri announced that its investigation was concluded and that
no further indictments would issue. On November 4, 2002, Charter received an informal, non-public inquiry from the staff of the SEC.
The SEC issued a formal order of investigation dated January 23, 2003, and subsequently served
document and testimony subpoenas on Charter and a number of its former employees. The
investigation and subpoenas generally concerned Charters prior reports with respect to its
determination of the number of customers, and various of its accounting policies and practices
including its capitalization of certain expenses and dealings with certain vendors, including
programmers and digital set-top terminal suppliers. On July 27, 2004, the SEC and Charter reached
a final agreement to settle the investigation. In the Settlement Agreement and Cease and Desist
Order, Charter agreed to entry of an administrative order prohibiting any future violations of
United States securities laws and requiring certain other remedial internal practices and public
disclosures. Charter neither admitted nor denied any wrongdoing, and the SEC assessed no fine
against Charter. 11




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##### 



RENAISSANCE MEDIA GROUP LLC AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT WHERE INDICATED)
(UNAUDITED) Charter is generally required to indemnify each of the named individual defendants in connection
with the matters described above pursuant to the terms of its bylaws and (where applicable) such
individual defendants employment agreements. In accordance with these documents, in connection
with the pending grand jury investigation, the now-settled SEC investigation and the
above-described lawsuits, some of Charters current and former directors and current and former
officers have been advanced certain costs and expenses incurred in connection with their defense.
On February 22, 2005, Charter filed suit against four of its former officers who were indicted in
the course of the grand jury investigation. These suits seek to recover the legal fees and other
related expenses advanced to these individuals by Charter for the grand jury investigation, SEC
investigation and class action and related lawsuits. In October 2001, two customers, Nikki Nicholls and Geraldine M. Barber, filed a class action suit
against Charter Holdco in South Carolina Court of Common Pleas (the South Carolina Class
Action), purportedly on behalf of a class of Charter Holdcos customers, alleging that Charter
Holdco improperly charged them a wire maintenance fee without request or permission. They also
claimed that Charter Holdco improperly required them to rent analog and/or digital set-top
terminals even though their television sets were cable ready. A substantively identical case
was filed in the Superior Court of Athens  Clarke County, Georgia by Emma S. Tobar on March 26,
2002 (the Georgia Class Action), alleging a nationwide class for these claims. Charter Holdco
removed the South Carolina Class Action to the United States District Court for the District of
South Carolina in November 2001, and moved to dismiss the suit in December 2001. The federal judge
remanded the case to the South Carolina Court of Common Pleas in August 2002 without ruling on the
motion to dismiss. The plaintiffs subsequently moved for a default judgment, arguing that upon
return to state court, Charter Holdco should have, but did not, file a new motion to dismiss. The
state court judge granted the plaintiffs motion over Charter Holdcos objection in September 2002.
Charter Holdco immediately appealed that decision to the South Carolina Court of Appeals and the
South Carolina Supreme Court, but those courts ruled that until a final judgment was entered
against Charter Holdco, they lacked jurisdiction to hear the appeal. In January 2003, the Court of Common Pleas granted the plaintiffs motion for class certification.
In October and November 2003, Charter Holdco filed motions (a) asking that court to set aside the
default judgment, and (b) seeking dismissal of plaintiffs suit for failure to state a claim. In
January 2004, the Court of Common Pleas granted in part and denied in part Charter Holdcos motion
to dismiss for failure to state a claim. It also took under advisement Charter Holdcos motion to
set aside the default judgment. In April 2004, the parties to both the Georgia and South Carolina
Class Actions participated in a mediation. The mediator made a proposal to the parties to settle
the lawsuits. In May 2004, the parties accepted the mediators proposal and reached a tentative
settlement, subject to final documentation and court approval. As a result of the tentative
settlement, the Company recorded a special charge of $0.2 million in its consolidated statement of
operations in the first quarter of 2004. On July 8, 2004, the Superior Court of Athens  Clarke
County, Georgia granted a motion to amend the Tobar complaint to add Nicholls, Barber and April
Jones as plaintiffs in the Georgia Class Action and to add any potential class members in South
Carolina. The court also granted preliminary approval of the proposed settlement on that date. On
August 2, 2004, the parties submitted a joint request to the South Carolina Court of Common Pleas
to stay the South Carolina Class Action pending final approval of the settlement and on August 17,
2004, that court granted the parties request. On November 10, 2004, the court granted final
approval of the settlement, rejecting positions advanced by two objectors to the settlement. On
December 13, 2004 the court entered a written order formally approving that settlement. On January
11, 2005, certain class members appealed the order entered by the Georgia court. Those objectors
voluntarily dismissed their appeal with prejudice on February 8, 2005. On February 9, 2005, the
South Carolina Court of Common Pleas entered a court order of dismissal for the South Carolina
Class Action. Additionally, one of the objectors to this settlement recently filed a similar, but
not identical, lawsuit. In addition to the matters set forth above, Charter is also party to other lawsuits and claims that
arose in the ordinary course of conducting its business. In the opinion of management, after
taking into account recorded liabilities, the outcome of these other lawsuits and claims are not
expected to have a material adverse effect on the Companys consolidated financial condition,
results of operations or its liquidity. 12




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ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS. Reference is made to Certain Trends and Uncertainties of this section and Cautionary Statement
Regarding Forward-Looking Statements, which describe important factors that could cause actual
results to differ from expectations and non-historical information contained herein. In addition,
this section should be read in conjunction with the annual reports on Form 10-K of Renaissance
Media Group LLC and subsidiaries and our indirect parents, Charter Communications, Inc. (Charter)
and Charter Communications Holdings, LLC (Charter Holdings), for the year ended December 31,
2004. We, us and our refer to Renaissance Media Group LLC and its wholly owned finance
subsidiaries, Renaissance Media (Louisiana) LLC, Renaissance Media (Tennessee) LLC and Renaissance
Media Capital Corporation. INTRODUCTION The industrys and our most significant operational challenges in 2004 and the first quarter of
2005 included competition from DBS providers and DSL service providers. We believe that
competition from DBS has resulted in net analog video customer losses and decreased growth rates
for digital video customers. Competition from DSL providers combined with limited opportunities to
expand our customer base has resulted in decreased growth rates for high-speed data customers. In
the recent past, we have grown revenues by offsetting video customer losses with price increases
and sales of incremental advanced services such as high-speed data, video on demand (VOD),
digital video recorders (DVR) and high definition television. We expect to continue to grow
revenues through continued growth in these advanced services. For the three months ended March 31, 2005 and 2004, our income from operations, which includes
depreciation and amortization expense but excludes interest expense, was $1.4 million and $1.9
million, respectively. We had an operating margin of 5% and 7% for the three months ended March
31, 2005 and 2004, respectively. The decrease in income from operations and operating margin from
2004 to 2005 was principally due to increases in programming and service costs. Our outstanding notes require us to pay cash interest each April and October and mature in 2008.
We expect that we will rely on loans and capital contributions from our indirect parent companies
to repay our notes at maturity. However, there can be no assurance that our indirect parent
companies will have sufficient liquidity to provide funds to us to satisfy this payment when due. 13




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RESULTS OF OPERATIONS Three Months Ended March 31, 2005 Compared to Three Months Ended March 31, 2004 The following table sets forth the percentages of revenues that items in the accompanying condensed
consolidated statements of operations constituted for the periods presented (dollars in thousands): Three Months Ended March 31,2005
    
    
    2004Revenues
    
    $
    29,652
    
    
    
    100
    %
    
    $
    27,685
    
    
    
    100
    %Costs and expenses:Operating (excluding depreciation and amortization)
    
    
    13,395
    
    
    
    45
    %
    
    
    11,806
    
    
    
    43
    %Selling, general and administrative
    
    
    5,874
    
    
    
    20
    %
    
    
    5,419
    
    
    
    20
    %Depreciation and amortization
    
    
    8,733
    
    
    
    29
    %
    
    
    8,305
    
    
    
    30
    %(Gain) loss on sale of assets, net
    
    
    214
    
    
    
    1
    %
    
    
    (1
    )
    
    
    Special charges, net
    
    
    
    
    
    
    
    
    
    
    216
    
    
    
    28,216
    
    
    
    95
    %
    
    
    25,745
    
    
    
    93
    %Income from operations
    
    
    1,436
    
    
    
    5
    %
    
    
    1,940
    
    
    
    7
    %Other expense:Interest expense
    
    
    (2,756
    )
    
    
    
    
    
    
    (2,756
    )Net loss
    
    $
    (1,320
    )
    
    
    
    
    
    $
    (816
    )
 Revenues.Revenues increased $2.0 million, or 7%, to $29.7 million for the three months ended March
31, 2005 from $27.7 million for the three months ended March 31, 2004. This increase is
principally the result of increases in the number of digital video and high-speed data customers as
well as price increases for video and data services, and is offset partially by a decrease in
analog video customers. Our goal is to increase revenues by improving customer service which we
believe will stabilize our analog video customer base, implementing price increases on certain
services and packages and increasing the number of customers who purchase high-speed data services,
digital video and advanced products and services such as VOD, high definition television and DVR
service. Revenues by service offering were as follows (dollars in thousands): Three Months Ended March 31,2005
    
    
    2004
    
    
    2005 over 2004% of
    
    
    
    
    
    
    % ofRevenues
    
    
    Revenues
    
    
    Revenues
    
    
    Revenues
    
    
    Change
    
    
    % ChangeVideo
    
    $
    20,944
    
    
    
    71
    %
    
    $
    20,832
    
    
    
    75
    %
    
    $
    112
    
    
    
    1
    %High-speed data
    
    
    4,308
    
    
    
    14
    %
    
    
    3,196
    
    
    
    12
    %
    
    
    1,112
    
    
    
    35
    %Advertising sales
    
    
    1,468
    
    
    
    5
    %
    
    
    1,092
    
    
    
    4
    %
    
    
    376
    
    
    
    34
    %Commercial
    
    
    843
    
    
    
    3
    %
    
    
    656
    
    
    
    2
    %
    
    
    187
    
    
    
    29
    %Other
    
    
    2,089
    
    
    
    7
    %
    
    
    1,909
    
    
    
    7
    %
    
    
    180
    
    
    
    9
    %$
    29,652
    
    
    
    100
    %
    
    $
    27,685
    
    
    
    100
    %
    
    $
    1,967
    
    
    
    7
    %
 Video revenues consist primarily of revenues from analog and digital video services provided to our
non-commercial customers. Video revenues increased by $0.1 million, or 1%, to $20.9 million for
the three months ended March 31, 2005 as compared to $20.8 million for the three months ended March
31, 2004. The increase was primarily the result of price increases and an increase in digital
video customers, partially offset by a decline in analog video customers. Revenues from high-speed data services provided to our non-commercial customers increased $1.1
million, or 35%, from $3.2 million for the three months ended March 31, 2004 to $4.3 million for
the three months ended March 31, 14




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##### 



2005. The increase was primarily the result of an increase in high-speed data customers and an
increase in the average price of the service. Advertising sales revenues consist primarily of revenues from commercial advertising customers,
programmers and other vendors. Advertising sales increased $0.4 million, or 34%, from $1.1 million
for the three months ended March 31, 2004 to $1.5 million for the three months ended March 31,
2005, primarily as a result of an increase in new advertising sales customers and in advertising
rates. For the three months ended March 31, 2005 and 2004, we received $0.1 million and $39
thousand in advertising sales revenue from vendors. Commercial revenues consist primarily of revenues from cable video and high-speed data services to
our commercial customers. Commercial revenues increased approximately $0.2 million, or 29%, from
$0.7 million for the three months ended March 31, 2004 to $0.8 million for the three months ended
March 31, 2005, primarily as a result of an increase in commercial high-speed data revenues. Other revenues consist of revenues from franchise fees, equipment rental, customer installations,
home shopping, dial-up Internet service, late payment fees, wire maintenance fees and other
miscellaneous revenues. Other revenues increased $0.2 million, or 9%, from $1.9 million for the
three months ended March 31, 2004 to $2.1 million for the three months ended March 31, 2005. The
increase was primarily the result of an increase in installation revenue. Operating Expenses.Operating expenses increased by $1.6 million, or 13%, from $11.8 million for
the three months ended March 31, 2004 to $13.4 million for the three months ended March 31, 2005.
Programming costs included in the accompanying condensed consolidated statements of operations were
$8.6 million and $7.7 million, representing 30% of total costs and expenses for each of the three
months ended March 31, 2005 and 2004, respectively. Key expense components as a percentage of
revenues were as follows (dollars in thousands): Three Months Ended March 31,2005
    
    
    2004
    
    
    2005 over 2004% of
    
    
    
    
    
    
    % ofExpenses
    
    
    Revenues
    
    
    Expenses
    
    
    Revenues
    
    
    Change
    
    
    % ChangeProgramming
    
    $
    8,551
    
    
    
    29
    %
    
    $
    7,664
    
    
    
    28
    %
    
    $
    887
    
    
    
    12
    %Advertising sales
    
    
    612
    
    
    
    2
    %
    
    
    577
    
    
    
    2
    %
    
    
    35
    
    
    
    6
    %Service
    
    
    4,232
    
    
    
    14
    %
    
    
    3,565
    
    
    
    13
    %
    
    
    667
    
    
    
    19
    %$
    13,395
    
    
    
    45
    %
    
    $
    11,806
    
    
    
    43
    %
    
    $
    1,589
    
    
    
    13
    %
 Programming costs consist primarily of costs paid to programmers for analog, premium, digital
channels and pay-per-view programming. The increase in programming costs of $0.9 million, or 12%,
was a result of price increases, particularly in sports programming, an increased number of
channels carried on our systems and an increase in digital video customers, partially offset by
decreases in analog video customers. Programming costs were offset by the amortization of payments
received from programmers in support of launches of new channels of $0.3 million and $0.4 million
for the three months ended March 31, 2005 and 2004, respectively. Our cable programming costs have increased in every year we have operated in excess of U.S.
inflation and cost-of-living increases, and we expect them to continue to increase because of a
variety of factors, including inflationary or negotiated annual increases, additional programming
being provided to customers and increased costs to purchase programming. Our increasing
programming costs will result in declining operating margins for our video services to the extent
we are unable to pass on cost increases to our customers. We expect to partially offset any
resulting margin compression from our traditional video services with revenue from advanced video
services, increased high-speed data revenues, advertising revenues and commercial service revenues. Advertising sales expenses consist of costs related to traditional advertising services provided to
advertising customers, including salaries, benefits and commissions. Advertising sales expenses
remained virtually unchanged for the three months ended March 31, 2005 compared to the
corresponding period in 2004. Service costs consist primarily of service personnel salaries and
benefits, franchise fees, system utilities, Internet service provider fees, maintenance and pole
rent expense. The increase in service costs of $0.7 million, or 19%, resulted primarily from
increased labor costs to support our infrastructure, increased equipment maintenance and higher
fuel prices. 15




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##### 



Selling, General and Administrative Expenses.Selling, general and administrative expenses
increased by $0.5 million, or 8%, from $5.4 million for the three months ended March 31, 2004 to
$5.9 million for the three months ended March 31, 2005. Key components of expense as a percentage
of revenues were as follows (dollars in thousands): Three Months Ended March 31,2005
    
    
    2004
    
    
    2005 over 2004% of
    
    
    
    
    
    
    % ofExpenses
    
    
    Revenues
    
    
    Expenses
    
    
    Revenues
    
    
    Change
    
    
    % ChangeGeneral and
administrative
    
    $
    5,101
    
    
    
    17
    %
    
    $
    4,873
    
    
    
    18
    %
    
    $
    228
    
    
    
    5
    %Marketing
    
    
    773
    
    
    
    3
    %
    
    
    546
    
    
    
    2
    %
    
    
    227
    
    
    
    42
    %$
    5,874
    
    
    
    20
    %
    
    $
    5,419
    
    
    
    20
    %
    
    $
    455
    
    
    
    8
    %
 General and administrative expenses consist primarily of salaries and benefits, rent expense,
billing costs, call center costs, internal network costs, bad debt expense and property taxes. The
increase in general and administrative expenses of $0.2 million, or 5%, resulted primarily from
increases in expenses related to our commercial business of $0.1 million and professional fees of
$0.2 million. Marketing expenses increased $0.2 million, or 42%, as a result of an increased investment in
targeted marketing and branding campaigns. Depreciation and Amortization.Depreciation and amortization expense increased by $0.4 million, or
5%, from $8.3 million for the three months ended March 31, 2004 to $8.7 million for the three
months ended March 31, 2005. The increase in depreciation related to an increase in capital
expenditures. (Gain) Loss on Sale of Assets, Net.Loss on sale of assets of $0.2 million and gain on sale of
assets of $1 thousand for the three months ended March 31, 2005 and 2004, respectively, represents
the gain or loss realized on the disposal of fixed assets. Special Charges, Net.Special charges of $0.2 million for the three months ended March 31, 2004
primarily represents litigation costs related to our portion of Charters tentative settlement of
the South Carolina national class action suit, subject to final
documentation and court approval. Interest Expense, net.Interest expense remained unchanged at $2.8 million for the three months
ended March 31, 2005 and 2004, respectively. Net Loss.Net loss increased to $1.3 million for the three months ended March 31, 2005 from $0.8
million for the three months ended March 31, 2004 as a result of the combination of factors
described above. LIQUIDITY AND CAPITAL RESOURCES Introduction This section contains a discussion of our liquidity and capital resources, including a discussion
of our cash position, sources and uses of cash, access to credit facilities and other financing
sources, historical financing activities, cash needs, capital expenditures and outstanding debt. Overview Our business requires significant cash to fund debt service costs, distributions to our parent
companies, capital expenditures and ongoing operations. We have historically funded these
requirements through cash flows from operating activities and capital contributions from our
indirect parent companies. The mix of funding sources changes from period to period. For the
three months ended March 31, 2005, we generated $3.5 million of net cash flows from operating
activities. During 2005, we expect to fund our liquidity and capital requirements primarily
through cash flows from operating activities. 16




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##### 



The principal amount of our senior notes was $114.4 million as of March 31, 2005. There was no
payment of any interest in respect of the notes prior to October 15, 2003. Since October 15, 2003,
interest on the notes is payable semi-annually in arrears in cash at a rate of 10% per year. On
April 15, 2003, the notes became redeemable at the option of the issuers thereof, in whole or in
part, initially at 105% of their principal amount at maturity, plus accrued interest, declining to
100% of the principal amount at maturity, plus accrued interest, on or after April 15, 2006.
Renaissance Media Group has fully and unconditionally guaranteed the notes. See the section entitled Liquidity and Capital Resources of Item 7. Managements Discussion and
Analysis of Financial Condition and Results of Operations in our 2004 Annual Report on Form 10-K
for a description of our senior notes indenture, including certain terms, restrictions and
covenants. We expect to remain in compliance with the covenants under our indenture. We expect that cash
flows from operating activities will be sufficient to satisfy our liquidity needs until maturity of
the notes. However, if cash flows from operating activities are not sufficient, there can be no
assurance that we will have access to sufficient capital to repay our notes when they mature in
2008. Cash flows from operating activities may not be sufficient, on their own, to permit us to
satisfy these obligations. Traditionally, we have relied on our indirect parent companies ability
to access the public debt and equity markets, as well as borrowings under our indirect parent
companies credit facilities, as a source of capital. There can be no assurance that our indirect
parent companies will have sufficient liquidity to provide funds to us to satisfy this payment when
due. In addition, a default under the covenants governing our indenture could result in the
acceleration of our payment obligations under our debt and, under certain circumstances, in
cross-defaults under our affiliates debt obligations, which could adversely affect our indirect
parent companies ability to provide us with funding. Increased funding requirements from customer demand for digital video and high-speed data services,
or the need to offer other advanced services in certain of our markets in order to compete
effectively could make us further reliant on our indirect parent companies ability to make loans
and capital contributions to us. If we are unable to receive adequate financing to fund
operations, our financial condition and results of operations could suffer materially. No assurances can be given that we will not experience liquidity problems because of adverse market
conditions, increased competition or other unfavorable events, or if we do not obtain sufficient
additional financing on a timely basis as our debt becomes due. If, at any time, additional
capital or borrowing capacity is required beyond amounts internally generated or available through
our indirect parent companies existing credit facilities or in traditional debt or equity
financings, we would consider:  
    further reducing our expenses and capital expenditures, which would likely impair our
ability to increase revenue;
    selling assets; or
    seeking funding, if available, from our indirect parent companies, including from the
issuance of debt or equity by our indirect parent companies, including Charter, Charter
Holdings, CCH II, LLC, CCO Holdings, LLC or Charter Communications Operating, LLC, the
proceeds of which could be loaned or contributed to us. If the above strategies are not successful, we could be forced to restructure our obligations or
seek protection under the bankruptcy laws. In addition, if we find it necessary to engage in a
recapitalization or other similar transaction, our noteholders might not receive all principal and
interest payments to which they are contractually entitled. Although Paul G. Allen, Charters principal shareholder, and his affiliates have purchased equity
from Charter and Charter Holdco in the past, there is no obligation for Mr. Allen or his affiliates
to purchase equity or contribute or lend funds to us or to our indirect parent companies or
subsidiaries in the future. Historical Operating, Financing and Investing Activities We held $0.2 million in cash and cash equivalents as of March 31, 2005 and December 31, 2004. Operating Activities.Net cash provided by operating activities for the three months ended March
31, 2005 and 2004 was $3.5 million and $3.1 million, respectively. Operating activities provided
$0.4 million more cash during the three months ended March 31, 2005 compared to the corresponding
period in 2004, primarily as a result of changes in operating assets and liabilities that used $0.3
million less cash during the three months ended March 31, 2005 compared to the corresponding period
in 2004. 17




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##### 



Investing Activities.Net cash used in investing activities for the three months ended March 31,
2005 and 2004 was $3.6 million and $3.1 million, respectively. Investing activities used
approximately $0.4 million more cash during the three months ended March 31, 2005 compared to the
corresponding period in 2004, primarily as a result of an increase in purchases of property, plant
and equipment of approximately $0.8 million, partially offset by an increase of approximately $0.3
million in our change in accrued expenses related to capital expenditures. Capital Expenditures We have significant ongoing capital expenditure requirements. Capital expenditures were $4.2
million and $3.5 million for the three months ended March 31, 2005 and 2004, respectively. The
majority of the capital expenditures for the three months ended March 31, 2005 and 2004 related to
customer premise equipment costs. Upgrading our cable systems has enabled us to offer digital television, high-speed data services,
VOD, interactive services, additional channels and tiers, and expanded pay-per-view options to a
larger customer base. Our capital expenditures are funded primarily from cash flows from operating
activities. In addition, during the three months ended March 31, 2005 and 2004, our liabilities
related to capital expenditures increased $0.7 million and $0.4 million, respectively. Capital expenditures are expected to increase in 2005 compared to 2004 as a result of the
deployment of advanced digital boxes. We expect that the nature of these expenditures will
continue to be composed primarily of purchases of customer premise equipment and for scalable
infrastructure costs. We expect to fund capital expenditures for 2005 primarily from cash flows
from operating activities. CERTAIN TRENDS AND UNCERTAINTIES The following discussion highlights a number of trends and uncertainties, in addition to those
discussed elsewhere in this quarterly report and in Item 7. Managements Discussion and Analysis
of Financial Condition and Results of Operations in our 2004 Annual Report on Form 10-K, that
could materially impact our business, results of operations and financial condition. Restrictive Covenants.The indenture governing our notes contains a number of significant covenants
that could adversely impact our business. In particular, our indenture restricts our and our
subsidiaries ability to:  
    incur additional debt;
    repurchase or redeem equity interests and debt;
    make investments;
    sell all or substantially all of our assets or merge with or into other companies;
    sell assets;
    enter into sale-leasebacks;
    in the case of restricted subsidiaries, create or permit to exist dividend or payment
restrictions with respect to the bond issuers, guarantee the bond issuers debt, or issue
specified equity interests;
    engage in certain transactions with affiliates; and
    grant liens. Our ability to comply with these provisions may be affected by events beyond our control. The
breach of any of these covenants will result in a default under the indenture governing our notes,
which could result in acceleration of such notes and in certain cases, could result in
cross-defaults under our affiliates debt obligations. Any default under our indenture might
adversely affect our growth, our financial condition and our results of operations and the ability
to make payments on our notes. For more information, see the section above entitled  Liquidity
and Capital Resources. Liquidity.Our business requires significant cash to fund capital expenditures, debt service costs
and ongoing operations. Our ongoing operations will depend on our ability to generate cash and to
secure financing in the future. We have historically funded liquidity and capital requirements
through cash flows from operating activities and capital contributions from our indirect parent
companies. 18




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As the principal amounts of our notes become due in 2008, it is unclear whether we will have access
to sufficient capital to satisfy these principal repayment obligations. Cash flows from operating
activities and other existing sources of funds may not be sufficient, on their own, to permit us to
satisfy these obligations. If our business does not generate sufficient cash flow from operating activities, and sufficient
future contributions are not available to us from other sources of financing, we may not be able to
repay our debt, grow our business, respond to competitive challenges, or fund our other liquidity
and capital needs. If we need to seek alternative sources of financing, there can be no assurance that we will be able
to obtain the requisite financing or that such financing, if available, would not have terms that
are materially disadvantageous to our existing debt holders. Although Mr. Allen and his affiliates
have purchased equity from Charter and Charter Holdco in the past, there is no obligation for Mr.
Allen or his affiliates to purchase equity or contribute or lend funds to us or to our indirect
parent companies or subsidiaries in the future. If we or our indirect parent companies are unable to raise needed capital, ultimately, we could be
forced to restructure our obligations or seek protection under the bankruptcy laws. In addition,
if we find it necessary to engage in a recapitalization or other similar transaction, our
noteholders might not receive all principal and interest payments to which they are contractually
entitled. For more information, see the section above entitled  Liquidity and Capital Resources. Parent Company Liquidity Concerns. Our long-term financing as of March 31, 2005 consists of $114.4
million principal amount of senior discount notes which become due in 2008. We expect to rely on
capital contributions from our indirect parent companies to repay the principal amount of our notes
at maturity. However, there can be no assurances that our indirect parent companies will have
sufficient liquidity to satisfy this payment when due. Our parent companies have a significant
amount of debt and may incur additional debt in the future. For the remainder of 2005, $22.5
million of our indirect parent companies debt matures, and in 2006, an additional $151.9 million
of our indirect parent companies debt matures. Cash flows from operating activities and amounts
available under the Charter Communications Operating, LLC (Charter Operating) credit facilities
may not be sufficient to fund our and our parent companies operations and satisfy our parent
companies principal repayment obligations that come due in 2006 and, we believe, will not be
sufficient to fund our parent companies operations and satisfy such repayment obligations
thereafter. Each of our indirect parent companies debt has certain covenants which may restrict
their ability to make distributions to their respective direct parent companies to satisfy future
principal repayment obligations. Because Charter is our manager, any financial or liquidity problems of Charter could cause serious
disruption to our business and have a material adverse effect on our business and results of
operations. Any such event could adversely impact our own credit rating, and our relations with
customers and suppliers, which could in turn further impair our ability to obtain financing and
operate our business. Further, to the extent that any such event results in a change of control of
Charter (whether through a bankruptcy, receivership or other reorganization of Charter and/or
Charter Holdco, or otherwise), it could result in an event of default under the Charter Operating
credit facilities and would require a change of control repurchase offer under our outstanding
notes. Securities Litigation and Government Investigations.A number of putative federal class action
lawsuits were filed against Charter and certain of its former and present officers and directors
alleging violations of securities laws, which have been consolidated for pretrial purposes. In
addition, a number of shareholder derivative lawsuits have been filed against Charter in the same
and other jurisdictions. A shareholders derivative suit was filed in the U.S. District Court for
the Eastern District of Missouri against Charter and its then current directors. Also, three
shareholders derivative suits were filed in Missouri state court against Charter, its then current
directors and its former independent auditor. These state court actions have been consolidated.
The federal shareholders derivative suit and the consolidated derivative suit each alleged that the
defendants breached their fiduciary duties. Charter recently entered into Stipulations of Settlement setting forth proposed terms of settlement
for the above-described class actions and derivative suits. The settlement of each of the lawsuits
remains conditioned upon, among other things, final judicial approval of the settlements following
notice to the class, and dismissal with prejudice of the consolidated derivative actions now
pending in Missouri state court, which are related to the Federal Derivative Action. Additionally,
a portion of the settlement is to be paid in shares of Charters Class A common stock with a value
of $45.0 million (including shares issuable to insurance carriers) and warrants to purchase
Charters Class A common stock valued at $40.0 million, with such values in each case determined by
formulas set 19




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forth in the Stipulations of Settlement. If the price of Charters common stock declines,
additional shares will be required in order to fulfill this commitment. Charter has the right but
not the obligation to terminate the settlements if the value of its common stock (under the
above-described formula) is less than $2.25. As of May 9, 2005, the value of Charters common
stock was $1.16 per share. The hearing to consider final approval of the settlement is scheduled
for May 23, 2005. See Part II, Item 1. Legal Proceedings. In August 2002, Charter became aware of a grand jury investigation being conducted by the U.S.
Attorneys Office for the Eastern District of Missouri into certain of its accounting and reporting
practices focusing on how it reported customer numbers, and its reporting of amounts received from
digital set-top terminal suppliers for advertising. The U.S. Attorneys Office has publicly stated
that Charter is not a target of the investigation. Charter was also advised by the U.S. Attorneys
Office that no current officer or member of its board of directors is a target of the
investigation. On July 24, 2003, a federal grand jury charged four former officers of Charter with
conspiracy and mail and wire fraud, alleging improper accounting and reporting practices focusing
on revenue from digital set-top terminal suppliers and inflated customer account numbers. Each of
the indicted former officers pled guilty to single conspiracy counts related to the original mail
and wire fraud charges and were sentenced on April 22, 2005. Charter has advised us that it fully
cooperated with the investigation, and following the sentencings, the U.S. Attorneys Office for
the Eastern District of Missouri announced that its investigation was
concluded and that no further
indictments would issue. On November 4, 2002, Charter received an informal, non-public inquiry from the staff of the SEC.
The SEC issued a formal order of investigation dated January 23, 2003, and subsequently served
document and testimony subpoenas on Charter and a number of its former employees. The
investigation and subpoenas generally concerned Charters prior reports with respect to its
determination of the number of customers and various of its accounting policies and practices
including its capitalization of certain expenses and dealings with certain vendors, including
programmers and digital set-top terminal suppliers. On July 27, 2004, the SEC and Charter reached
a final agreement to settle the investigation. In the Settlement Agreement and Cease and Desist
Order, Charter agreed to entry of an administrative order prohibiting any future violations of
United States securities laws and requiring certain other remedial internal practices and public
disclosures. Charter neither admitted nor denied any wrongdoing, and the SEC assessed no fine
against Charter. Moreover, due to the inherent uncertainties of litigation, and due to the remaining conditions to
the finalization of our anticipated settlements, Charter cannot predict with certainty the ultimate
outcome of these proceedings. An unfavorable outcome in the lawsuits described above could result
in substantial potential liabilities and have a material adverse effect on our consolidated
financial condition and results of operations or our liquidity. Further, these proceedings, and
our actions in response to these proceedings, could result in substantial additional defense costs
and the diversion of managements attention, and could adversely affect our ability to execute our
business and financial strategies. Competition.The industry in which we operate is highly competitive, and has become more so in
recent years. In some instances, we compete against companies with fewer regulatory burdens,
easier access to financing, greater personnel resources, greater brand name recognition and
long-established relationships with regulatory authorities and customers. Increasing consolidation
in the cable industry and the repeal of certain ownership rules may provide additional benefits to
certain of our competitors, either through access to financing, resources or efficiencies of scale. Our principal competitor for video services throughout our territory is direct broadcast satellite
television services, also known as DBS. Competition from DBS, including intensive marketing
efforts, aggressive pricing, and the ability of DBS to provide certain services that we are in the
process of developing, has had an adverse impact on our ability to retain customers. DBS has grown
rapidly over the last several years and continues to do so. The cable industry, including Charter,
has lost a significant number of subscribers to DBS competition, and we face serious challenges in
this area in the future. We believe that competition from DBS service providers may present
greater challenges in areas of lower population density, and that our systems service a higher
concentration of such areas than those of other major cable service providers. Local telephone companies and electric utilities can offer video and other services in competition
with us, and they increasingly may do so in the future. Certain telephone companies have begun
more extensive deployment of fiber in their networks that will enable them to begin providing video
services, as well as high-bandwidth Internet access services, to residential and business
customers. Some of these telephone companies have obtained, and are now seeking, franchises that
are less burdensome than existing Charter franchises. The subscription television industry 20




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also faces competition from free broadcast television and from other communications and
entertainment media. Further loss of customers to DBS or other alternative video and data services
could have a material negative impact on the value of our business and its performance. With respect to our Internet access services, we face competition, including intensive marketing
efforts and aggressive pricing, from telephone companies and other providers of dial-up and
digital subscriber line technology, also known as DSL. DSL service is competitive with highspeed
data service over cable systems. Telephone companies (which already have telephone lines into the
household, an existing customer base and other operational functions in place) and other companies
offer DSL service. In addition, DBS providers have entered into joint marketing arrangements with
Internet access providers to offer bundled video and Internet service, which competes with our
ability to provide bundled services to our customers. In order to attract new customers, from time to time we make promotional offers, including offers
of temporarily reduced-price or free service. These promotional programs result in significant
advertising, programming and operating expenses, and also require us to make capital expenditures
to acquire additional digital set-top terminals. Customers who subscribe to our services as a
result of these offerings may not remain customers for any significant period of time following the
end of the promotional period. A failure to retain existing customers and customers added through
promotional offerings or to collect the amounts they owe us could have an adverse effect on our
business and financial results. Mergers, joint ventures and alliances among franchised, wireless or private cable operators,
satellite television providers, local exchange carriers and others, and the repeal of certain
ownership rules may provide additional benefits to some of our competitors, either through access
to financing, resources or efficiencies of scale, or the ability to provide multiple services in
direct competition with us. Long-Term Indebtedness  Change of Control Payments.We may not have the ability to raise the funds
necessary to fulfill our obligations under our notes following a change of control. A change of
control under our notes would require us to make an offer to repurchase our outstanding notes.
However, a failure by us to make or complete a change of control offer would place us in default of
these agreements. Services.We expect that a substantial portion of our near-term growth will be achieved through
revenues from high-speed data services, digital video, bundled service packages, and to a lesser
extent various commercial services that take advantage of cables broadband capacity. We may not be
able to offer these advanced services successfully to our customers or provide adequate customer
service and these advanced services may not generate adequate revenues. Also, if the vendors we
use for these services are not financially viable over time, we may experience disruption of
service and incur costs to find alternative vendors. In addition, the technology involved in our
product and service offerings generally requires that we have permission to use intellectual
property and that such property not infringe on rights claimed by others. If it is determined that
the product or service being utilized infringes on the rights of others, we may be sued or be
precluded from using the technology. Increasing Programming Costs.Programming has been, and is expected to continue to be, our largest
operating expense item. In recent years, the cable industry has experienced a rapid escalation in
the cost of programming, particularly sports programming. We expect programming costs to continue
to increase because of a variety of factors, including inflationary or negotiated annual increases,
additional programming being provided to customers and increased costs to purchase programming.
The inability to fully pass these programming cost increases on to our customers would have an
adverse impact on our cash flow and operating margins. As measured by programming costs, and
excluding premium services (substantially all of which were renegotiated and renewed in 2003), as
of March 31, 2005 approximately 10% of Charters current programming contracts were expired, and
approximately another 34% are scheduled to expire by the end of 2005. There can be no assurance
that these agreements will be renewed on favorable or comparable terms. To the extent that we are
unable to reach agreement with certain programmers on terms that we believe are reasonable we may
be forced to remove such programming channels from our line-up, which could result in a further
loss of customers. Notes Price Volatility.The market price of our and our indirect parent companies publicly traded
notes has been and is likely to continue to be highly volatile. We expect that the price of these
securities may fluctuate in response to various factors, including the factors described in this
section and various other factors, which may be beyond our control. These factors beyond our
control could include: financial forecasts by securities analysts; new conditions or trends in the
cable or telecommunications industry; general economic and market conditions and specifically,
conditions related to the cable or telecommunications industry; any change in our debt ratings; the
development of 21




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improved or competitive technologies; the use of new products or promotions by us or our
competitors; changes in accounting rules or interpretations; and new regulatory legislation adopted
in the United States. In addition, the securities market in general, and the market for cable industry securities in
particular, have experienced significant price fluctuations. Volatility in the market price for
companies may often be unrelated or disproportionate to the operating performance of those
companies. These broad market and industry factors may seriously harm the market price of our
notes, regardless of our operating performance. In the past, securities litigation has often
commenced following periods of volatility in the market price of a companys securities, and
several purported class action lawsuits were filed against Charter in 2001 and 2002, following a
decline in its stock price. Economic Slowdown; Global Conflict.It is difficult to assess the impact that the general economic
slowdown and global conflict will have on future operations. However, the economic slowdown has
resulted and could continue to result in reduced spending by customers and advertisers, which could
reduce our revenues, and also could affect our ability to collect accounts receivable and maintain
customers. Reductions in operating revenues would likely negatively affect our ability to make
expected capital expenditures and could also result in our inability to meet our obligations under
our financing agreements. These developments could also have a negative impact on our financing
and variable interest rate agreements through disruptions in the market or negative market
conditions. Regulation and Legislation.Cable system operations are extensively regulated at the federal,
state, and local level, including rate regulation of basic service and equipment and municipal
approval of franchise agreements and their terms, such as franchise requirements to upgrade cable
plant and meet specified customer service standards. Additional legislation and regulation is
always possible. There have been recent calls to impose indecency restrictions on cable networks. Cable operators also face significant regulation of their channel carriage. They currently can be
required to devote substantial capacity to the carriage of programming that they would not carry
voluntarily, including certain local broadcast signals, local public, educational and government
access programming, and unaffiliated commercial leased access programming. This carriage burden
could increase in the future, particularly if cable systems were required to carry both the analog
and digital versions of local broadcast signals (dual carriage) or to carry multiple program
streams included with a single digital broadcast transmission (multicast carriage). Additional
government mandated broadcast carriage obligations could disrupt existing programming commitments,
interfere with our preferred use of limited channel capacity and limit our ability to offer
services that would maximize customer appeal and revenue potential. Although the FCC issued a
decision on February 10, 2005, confirming an earlier ruling against mandating either dual carriage
or multicast carriage, that decision has been appealed. In addition, Congress could legislate
additional carriage obligations. There is also uncertainty whether local franchising authorities, state regulators, the FCC, or the
U.S. Congress will impose obligations on cable operators to provide unaffiliated Internet service
providers with regulated access to cable plant. If they were to do so, and the obligations were
found to be lawful, it could complicate our operations in general, and our Internet operations in
particular, from a technical and marketing standpoint. These open access obligations could
adversely impact our profitability and discourage system upgrades and the introduction of new
products and services. The United States Court of Appeals for the Ninth Circuit last year vacated
in part an FCC ruling defining cable modem service as an information service and remanded for
further proceedings. The Ninth Circuit held that cable modem service is not cable service but is
part telecommunications service and part information service. The decision has been appealed
to the United States Supreme Court. However, if it is not reversed, the decision may lead to our
having to contribute additional funds to the federal governments universal service fund, to comply
with open access requirements, and to subject our high-speed data operations generally to other
common carrier regulations. As we offer other advanced services over our cable system, we are
likely to face additional calls for regulation of our capacity and operation. These regulations,
if adopted, could adversely affect our operations. CONTINGENCIES Securities Class Actions and Derivative Suits Against Charter.Fourteen putative federal class
action lawsuits (the Federal Class Actions) were filed against Charter, our manager and indirect
parent, and certain of its former and present officers and directors in various jurisdictions
allegedly on behalf of all purchasers of Charters securities during the period from either
November 8 or November 9, 1999 through July 17 or July 18, 2002. Unspecified damages were sought
by the plaintiffs. In general, the lawsuits alleged that Charter utilized misleading accounting 22




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practices and failed to disclose these accounting practices and/or issued false and misleading
financial statements and press releases concerning Charters operations and prospects. The Federal
Class Actions were specifically and individually identified in public filings made by Charter prior
to the date of this quarterly report. In October 2002, Charter filed a motion with the Judicial Panel on Multidistrict Litigation (the
Panel) to transfer the Federal Class Actions to the Eastern District of Missouri. On March 12,
2003, the Panel transferred the six Federal Class Actions not filed in the Eastern District of
Missouri to that district for coordinated or consolidated pretrial proceedings with the eight
Federal Class Actions already pending there. The Panels transfer order assigned the Federal Class
Actions to Judge Charles A. Shaw. By virtue of a prior court order, StoneRidge Investment Partners
LLC became lead plaintiff upon entry of the Panels transfer order. StoneRidge subsequently filed
a Consolidated Amended Complaint. The Court subsequently consolidated the Federal Class Actions
into a single action (the Consolidated Federal Class Action) for pretrial purposes. On June
19, 2003, following a status and scheduling conference with the parties, the Court issued a Case
Management Order setting forth a schedule for the pretrial phase of the Consolidated Federal Class
Action. Motions to dismiss the Consolidated Amended Complaint were filed. On February 10, 2004,
in response to a joint motion made by StoneRidge and defendants Charter, Vogel and Allen, the court
entered an order providing, among other things, that: (1) the parties who filed such motion, engage
in a mediation within ninety (90) days; and (2) all proceedings in the Consolidated Federal Class
Actions were stayed until May 10, 2004. On May 11, 2004, the Court extended the stay in the
Consolidated Federal Class Action for an additional sixty (60) days. On July 12, 2004, the parties
submitted a joint motion to again extend the stay, this time until September 10, 2004. The Court
granted that extension on July 20, 2004. On August 5, 2004, Stoneridge, Charter and the individual
defendants who were the subject of the suit entered into a Memorandum of Understanding setting
forth agreements in principle to settle the Consolidated Federal Class Action. These parties
subsequently entered into Stipulations of Settlement dated as of January 24, 2005 (described more
fully below) which incorporate the terms of the August 5, 2004 Memorandum of Understanding. On September 12, 2002, a shareholders derivative suit (the State Derivative Action) was filed
in the Circuit Court of the City of St. Louis, State of Missouri (the Missouri State Court),
against Charter and its then current directors, as well as its former auditors. The plaintiffs
allege that the individual defendants breached their fiduciary duties by failing to establish and
maintain adequate internal controls and procedures. Unspecified damages, allegedly on Charters
behalf, were sought by the plaintiffs. On March 12, 2004, an action substantively identical to the State Derivative Action was filed in
the Missouri State Court, against Charter and certain of its current and former directors, as well
as its former auditors. The plaintiffs in that case alleged that the individual defendants
breached their fiduciary duties by failing to establish and maintain adequate internal controls and
procedures. Unspecified damages, allegedly on Charters behalf, were sought by plaintiffs. On
July 14, 2004, the Court consolidated this case with the State Derivative Action. Separately, on February 12, 2003, a shareholders derivative suit (the Federal Derivative
Action), was filed against Charter and its then current directors in the United States District
Court for the Eastern District of Missouri. The plaintiff in that suit alleged that the individual
defendants breached their fiduciary duties and grossly mismanaged Charter by failing to establish
and maintain adequate internal controls and procedures. Unspecified damages, allegedly on
Charters behalf, were sought by the plaintiffs. As noted above, Charter and the individual defendants entered into a Memorandum of Understanding on
August 5, 2004 setting forth agreements in principle regarding settlement of the Consolidated
Federal Class Action, the State Derivative Action(s) and the Federal Derivative Action (the
Actions). Charter and various other defendants in those actions subsequently entered into
Stipulations of Settlement dated as of January 24, 2005, setting forth a settlement of the Actions
in a manner consistent with the terms of the Memorandum of Understanding. The Stipulations of
Settlement, along with various supporting documentation, were filed with the Court on February 2,
2005. The Stipulations of Settlement provide that, in exchange for a release of all claims by
plaintiffs against Charter and its former and present officers and directors named in the Actions,
Charter would pay to the plaintiffs a combination of cash and equity collectively valued at $144.0
million, which would include the fees and expenses of plaintiffs counsel. Of this amount, $64.0
million would be paid in cash (by Charters insurance carriers) and the balance would be paid in
shares of Charter Class A common stock having an aggregate value of $40.0 million and ten-year
warrants to purchase shares of Charter Class A common stock having an aggregate warrant value of
$40.0 million, with such values in each case being determined pursuant to formulas set forth in the
Stipulations of Settlement. The warrants would have an exercise price equal to 150% of the fair
market value (as defined) of Charter Class A common stock as of the date of the entry of the order
of final judgment approving the settlement. In addition, Charter would issue additional shares of
its Class A common stock to its insurance carrier having an 23




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aggregate value of $5.0 million. Under this formula, Charter expects (based on recent trading
prices of its Class A common stock) that the number of shares issued will be determined based on a
per share value equal to the average closing price over the thirty calendar day period immediately
preceding the final valuation date (which is the later of the date on which a final judgment is
entered or the date of entry of an order approving the award of fees and costs to the class action
plaintiffs counsel). Warrants are expected to become exercisable approximately one year from the
date of the final judgment and will have an exercise price equal to 150% of the volume weighted
average price of Charters Class A common stock over the thirty day period immediately preceding
the final valuation date. The warrants will be valued based on a Black Scholes valuation method.
Accordingly, any further declines in Charters stock price prior to the final valuation date could
result in more shares and warrants being issued to the plaintiffs in the settlement. In the event
that the valuation formula in the Stipulations provides for a per share value of less than $2.25,
Charter may elect to terminate the settlement. As a result, in the second quarter of 2004, the
Company recorded a $2.1 million special charge on its consolidated statement of operations related
to its portion of the expense allocation for the aggregate value of the Charter Class A common
stock and warrants to be issued. Additionally, as part of the settlements, Charter will also
commit to a variety of corporate governance changes, internal practices and public disclosures,
some of which have already been undertaken and none of which are inconsistent with measures Charter
is taking in connection with the recent conclusion of the SEC investigation described below.
Documents related to the settlement of the Actions have now been executed and filed. On February
15, 2005,
 the United States District Court for the Eastern District of Missouri gave preliminary
approval to the settlement of the Actions. The settlement of each of the lawsuits remains
conditioned upon, among other things, final judicial approval of the settlements following notice
to the class, and dismissal, with prejudice, of the consolidated derivative actions now pending in
Missouri State Court, which are related to the Federal Derivative Actions. The hearing to consider
final approval of the settlement is scheduled for May 23, 2005. Government Investigations. In August 2002, Charter became aware of a grand jury investigation
being conducted by the U.S. Attorneys Office for the Eastern District of Missouri into certain of
its accounting and reporting practices, focusing on how Charter reported customer numbers, and its
reporting of amounts received from digital set-top terminal suppliers for advertising. The U.S.
Attorneys Office has publicly stated that Charter is not a target of the investigation. Charter
was also advised by the U.S. Attorneys Office that no current officer or member of its board of
directors is a target of the investigation. On July 24, 2003, a federal grand jury charged four
former officers of Charter with conspiracy and mail and wire fraud, alleging improper accounting
and reporting practices focusing on revenue from digital set-top terminal suppliers and inflated
customer account numbers. Each of the indicted former officers pled guilty to single conspiracy
counts related to the original mail and wire fraud charges and were sentenced on April 22, 2005.
Charter has advised us that it fully cooperated with the investigation, and following the
sentencings, the U.S. Attorneys Office for the Eastern District of Missouri announced that its
investigation was concluded and that no further indictments would issue. On November 4, 2002, Charter received an informal, non-public inquiry from the staff of the SEC.
The SEC issued a formal order of investigation dated January 23, 2003, and subsequently served
document and testimony subpoenas on Charter and a number of its former employees. The
investigation and subpoenas generally concerned Charters prior reports with respect to its
determination of the number of customers, and various of its accounting policies and practices
including its capitalization of certain expenses and dealings with certain vendors, including
programmers and digital set-top terminal suppliers. On July 27, 2004, the SEC and Charter reached
a final agreement to settle the investigation. In the Settlement Agreement and Cease and Desist
Order, Charter agreed to entry of an administrative order prohibiting any future violations of
United States securities laws and requiring certain other remedial internal practices and public
disclosures. Charter neither admitted nor denied any wrongdoing, and the SEC assessed no fine
against Charter. Indemnification.Charter is generally required to indemnify under certain conditions each of the
named individual defendants in connection with the matters described above pursuant to the terms of
its bylaws and (where applicable) such individual defendants employment agreements. In accordance
with these documents, in connection with the pending grand jury investigation, the now-settled SEC
investigation and the above-described lawsuits, some of Charters current and former directors and
current and former officers have been advanced certain costs and expenses incurred in connection
with their defense. On February 22, 2005, Charter filed suit against four of its former officers
who were indicted in the course of the grand jury investigation. These suits seek to recover the
legal fees and other related expenses advanced to these individuals by Charter for the grand jury
investigation, SEC investigation and class action and related lawsuits. Other Litigation.In October 2001, two customers, Nikki Nicholls and Geraldine M. Barber, filed a
class action suit against Charter Holdco in South Carolina Court of Common Pleas (the South
Carolina Class Action), 24




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purportedly on behalf of a class of Charter Holdcos customers, alleging that Charter Holdco
improperly charged them a wire maintenance fee without request or permission. They also claimed
that Charter Holdco improperly required them to rent analog and/or digital set-top terminals even
though their television sets were cable ready. A substantively identical case was filed in the
Superior Court of Athens  Clarke County, Georgia by Emma S. Tobar on March 26, 2002 (the Georgia
Class Action), alleging a nationwide class for these claims. Charter Holdco removed the South
Carolina Class Action to the United States District Court for the District of South Carolina in
November 2001, and moved to dismiss the suit in December 2001. The federal judge remanded the case
to the South Carolina Court of Common Pleas in August 2002 without ruling on the motion to dismiss.
The plaintiffs subsequently moved for a default judgment, arguing that upon return to state court,
Charter Holdco should have, but did not, file a new motion to dismiss. The state court judge
granted the plaintiffs motion over Charter Holdcos objection in September 2002. Charter Holdco
immediately appealed that decision to the South Carolina Court of Appeals and the South Carolina
Supreme Court, but those courts ruled that until a final judgment was entered against Charter
Holdco, they lacked jurisdiction to hear the appeal. In January 2003, the Court of Common Pleas granted the plaintiffs motion for class certification.
In October and November 2003, Charter Holdco filed motions (a) asking that court to set aside the
default judgment, and (b) seeking dismissal of plaintiffs suit for failure to state a claim. In
January 2004, the Court of Common Pleas granted in part and denied in part Charter Holdcos motion
to dismiss for failure to state a claim. It also took under advisement Charter Holdcos motion to
set aside the default judgment. In April 2004, the parties to both the Georgia and South Carolina
Class Actions participated in a mediation. The mediator made a proposal to the parties to settle
the lawsuits. In May 2004, the parties accepted the mediators proposal and reached a tentative
settlement, subject to final documentation and court approval. As a result of the tentative
settlement, we recorded a special charge of $0.2 million in our consolidated statement of
operations in the first quarter of 2004. On July 8, 2004, the Superior Court of Athens  Clarke
County, Georgia granted a motion to amend the Tobar complaint to add Nicholls, Barber and April
Jones as plaintiffs in the Georgia Class Action and to add any potential class members in South
Carolina. The court also granted preliminary approval of the proposed settlement on that date. On
August 2, 2004, the parties submitted a joint request to the South Carolina Court of Common Pleas
to stay the South Carolina Class Action pending final approval of the settlement and on August 17,
2004, that court granted the parties request. On November 10, 2004, the court granted final
approval of the settlement, rejecting positions advanced by two objectors to the settlement. On
December 13, 2004 the court entered a written order formally approving that settlement. On January
11, 2005, certain class members appealed the order entered by the Georgia court. Those objectors
voluntarily dismissed their appeal with prejudice on February 8, 2005. On February 9, 2005, the
South Carolina Court of Common Pleas entered a court order of dismissal for the South Carolina
Class Action. Additionally, one of the objectors to this settlement recently filed a similar, but
not identical, lawsuit. In addition to the matters set forth above, Charter is also party to other lawsuits and claims that
arose in the ordinary course of conducting its business. In the opinion of management, after
taking into account recorded liabilities, the outcome of these other lawsuits and claims are not
expected to have a material adverse effect on our consolidated financial condition, results of
operations or our liquidity. 
 ITEM 4. CONTROLS AND PROCEDURES. As of the end of the period covered by this report, management, including our Interim Chief
Executive Officer and Interim Chief Financial Officer, evaluated the effectiveness of the design
and operation of our disclosure controls and procedures with respect to the information generated
for use in this quarterly report. The evaluation was based in part upon reports and affidavits
provided by a number of executives. Based upon, and as of the date of that evaluation, our Interim
Chief Executive Officer and Interim Chief Financial Officer concluded that the disclosure controls
and procedures were effective to provide reasonable assurances that information required to be
disclosed in the reports we file or submit under the Securities Exchange Act of 1934 is recorded,
processed, summarized and reported within the time periods specified in the Commissions rules and
forms. There was no change in our internal control over financial reporting during the quarter ended March
31, 2005 that has materially affected, or is reasonably likely to materially affect, our internal
control over financial reporting. In designing and evaluating the disclosure controls and procedures, our management recognized that
any controls and procedures, no matter how well designed and operated, can provide only reasonable,
not absolute, assurance of achieving the desired control objectives and management necessarily was
required to apply its judgment in evaluating the cost-benefit relationship of possible controls and
procedures. Based upon the above evaluation, our management believes that our controls do provide
such reasonable assurances. 25




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##### 



PART II. OTHER INFORMATION. 
 ITEM 1. LEGAL PROCEEDINGS. In addition to those matters disclosed under the heading Contingencies of Part I, Item 2.
Managements Discussion and Analysis of Financial Condition and Results of Operations, we are
involved from time to time in routine legal matters and other claims incidental to our business.
We believe that the resolution of such routine matters and other incidental claims, taking into
account established reserves and insurance, will not have a material adverse impact on our
consolidated financial position or results of operations. 
 ITEM 6. EXHIBITS. The index to the exhibits begins on page 28 of this quarterly report. 26




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##### 



SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrants
have duly caused this quarterly report to be signed on their behalf by the undersigned, thereunto
duly authorized. RENAISSANCE MEDIA GROUP LLC
RENAISSANCE MEDIA (LOUISIANA) LLC
RENAISSANCE MEDIA (TENNESSEE) LLCDated: May 11, 2005
    
    By:
    
    CHARTER COMMUNICATIONS, INC.,Registrants ManagerBy:
    
    /s/ Paul E. MartinName: Paul E. MartinTitle: Interim Chief Financial Officer,
Senior Vice President and Corporate Controller
(Principal Financial Officer and Principal Accounting Officer)
of Charter Communications, Inc. (Manager);
Renaissance Media Group LLC; Renaissance Media
(Louisiana) LLC; and Renaissance Media (Tennessee) LLCDated: May 11, 2005
    
    RENAISSANCE MEDIA CAPITAL CORPORATIONBy:
    
    /s/ Paul E. MartinName: Paul E. MartinTitle: Interim Chief Financial Officer,
Senior Vice President and Corporate Controller
(Principal Financial Officer and Principal Accounting Officer)
 27




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##### 



EXHIBIT INDEX ExhibitNumber
    
    Description of Document3.1
    
    Certificate of Incorporation of Renaissance Media Capital
Corporation and all amendments thereto (incorporated by
reference to the Exhibit 3.1 of the Registration Statement
of Renaissance Media Group LLC, Renaissance Media
(Louisiana) LLC, Renaissance Media (Tennessee) LLC and
Renaissance Media Capital Corporation on Form S-4 filed on
June 12, 1998 (File No. 333-56679)).3.2
    
    By-laws of Renaissance Media Capital Corporation
(incorporated by reference to the Exhibit 3.2 of the
Registration Statement of Renaissance Media Group LLC,
Renaissance Media (Louisiana) LLC, Renaissance Media
(Tennessee) LLC and Renaissance Media Capital Corporation
on Form S-4 filed on June 12, 1998 (File No. 333-56679)).3.3
    
    Certificate of Formation of Renaissance Media (Louisiana)
LLC (incorporated by reference to the Exhibit 3.3 of the
Registration Statement of Renaissance Media Group LLC,
Renaissance Media (Louisiana) LLC, Renaissance Media
(Tennessee) LLC and Renaissance Media Capital Corporation
on Form S-4 filed on June 12, 1998 (File No. 333-56679)).3.4
    
    Certificate of Formation of Renaissance Media (Tennessee)
LLC (incorporated by reference to the Exhibit 3.5 of the
Registration Statement of Renaissance Media Group LLC,
Renaissance Media (Louisiana) LLC, Renaissance Media
(Tennessee) LLC and Renaissance Media Capital Corporation
on Form S-4 filed on June 12, 1998 (File No. 333-56679)).3.5
    
    Certificate of Formation of Renaissance Media Group LLC
(incorporated by reference to the Exhibit 3.7 of the
Registration Statement of Renaissance Media Group LLC,
Renaissance Media (Louisiana) LLC, Renaissance Media
(Tennessee) LLC and Renaissance Media Capital Corporation
on Form S-4 filed on June 12, 1998 (File No. 333-56679)).3.6
    
    Amended and Restated Limited Liability Agreement of
Renaissance Media Group LLC, dated April 29, 1999
(incorporated by reference to Exhibit 3.9 of the Quarterly
Report on Form 10-Q of Renaissance Media Group LLC,
Renaissance Media (Louisiana) LLC, Renaissance Media
(Tennessee) LLC and Renaissance Media Capital Corporation
filed on May 17, 1999 (File No. 333-56679)).3.7
    
    Amended and Restated Limited Liability Agreement of
Renaissance Media (Louisiana) LLC, dated April 29, 1999
(incorporated by reference to Exhibit 3.10 of the Quarterly
Report on Form 10-Q of Renaissance Media Group LLC,
Renaissance Media (Louisiana) LLC, Renaissance Media
(Tennessee) LLC and Renaissance Media Capital Corporation
filed on May 17, 1999 (File No. 333-56679)).3.8
    
    Amended and Restated Limited Liability Agreement of
Renaissance Media (Tennessee) LLC, dated April 29, 1999
(incorporated by reference to Exhibit 3.11 of the Quarterly
Report on Form 10-Q of Renaissance Media Group LLC,
Renaissance Media (Louisiana) LLC, Renaissance Media
(Tennessee) LLC and Renaissance Media Capital Corporation
filed on May 17, 1999 (File No. 333-56679)).3.9
    
    Amended and Restated Limited Liability Agreement of
Renaissance Media LLC, dated April 30, 1999 (incorporated
by reference to Exhibit 3.12 of the Quarterly Report on
Form 10-Q of Renaissance Media Group LLC, Renaissance Media
(Louisiana) LLC, Renaissance Media (Tennessee) LLC and
Renaissance Media Capital Corporation filed on May 17, 1999
(File No. 333-56679)).3.10
    
    Certificate of Formation of Renaissance Media LLC
(incorporated by reference to Exhibit 3.4 of the annual
report on Form 10-K of Renaissance Media Group LLC,
Renaissance Media (Louisiana) LLC, Renaissance Media
(Tennessee) and Renaissance Media Capital Corporation filed
March 30, 2000 (File No. 333-56679)).
 28




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##### 



ExhibitNumber
    
    Description of Document4.1
    
    Indenture dated as of April 9, 1998, by and among
Renaissance Media (Louisiana) LLC, Renaissance Media
(Tennessee) LLC, Renaissance Media Capital Corporation,
Renaissance Media Group LLC and United States Trust Company
of New York, as Trustee (incorporated by reference to the
Exhibit 4.1 of the Registration Statement of Renaissance
Media Group LLC, Renaissance Media (Louisiana) LLC,
Renaissance Media (Tennessee) LLC and Renaissance Media
Capital Corporation on Form S-4 filed on June 12, 1998
(File No. 333-56679)).10.1
    
    Stipulation of Settlement, dated as of January 24, 2005,
regarding settlement of Consolidated Federal Class Action
entitled In Re Charter Communications, Inc. Securities
Litigation. (incorporated by reference to Exhibit 10.48 to
the annual report on Form 10-K filed by Charter
Communications, Inc. on March 3, 2005 (File No.
000-27927)).10.2
    
    Settlement Agreement and Mutual Release, dated as of
February 1, 2005, by and among Charter Communications, Inc.
and certain other insureds, on the one hand, and Certain
Underwriters at Lloyds of London and certain subscribers,
on the other hand. (incorporated by reference to Exhibit
10.49 to the annual report on Form 10-K filed by Charter
Communications, Inc. on March 3, 2005 (File No.
000-27927)).10.3
    
    Stipulation of Settlement, dated as of January 24, 2005,
regarding settlement of Federal Derivative Action, Arthur
J. Cohn v. Ronald L. Nelson et al and Charter
Communications, Inc. (incorporated by reference to Exhibit
10.50 to the annual report on Form 10-K filed by Charter
Communications, Inc. on March 3, 2005 (File No.
000-27927)).10.4+
    
    Description of Long-Term Incentive Program to the Charter
Communications, Inc. 2001 Stock Incentive Plan
(incorporated by reference to Exhibit 10.18(g) to the
annual report on Form 10-K filed by Charter Communications
Holdings, LLC on March 31, 2005 (File No. 000-27927)).10.5+
    
    Amendment to Employment Offer Letter, dated January 27,
2005, by and between Charter Communications, Inc. and Derek
Chang. (incorporated by reference to Exhibit 99.1 to the
current report on Form 8-K of Charter Communications, Inc.
filed January 28, 2005 (File No. 000-27927)).10.6+
    
    Executive Services Agreement, dated as of January 17, 2005,
between Charter Communications, Inc. and Robert P. May
(incorporated by reference to Exhibit 99.1 to the current
report on Form 8-K of Charter Communications, Inc. filed on
January 21, 2005 (File No. 000-27927)).10.7+
    
    Separation Agreement and Release for Steven A. Schumm,
dated as of February 8, 2005 (incorporated by reference to
Exhibit 99.1 to the current report on Form 8-K filed by
Charter Communications, Inc. on February 11, 2005 (File No.
000-27927)).10.8+
    
    Separation Agreement and Release for Carl E. Vogel, dated
as of February 17, 2005 (incorporated by reference to
Exhibit 99.1 to the current report on Form 8-K filed by
Charter Communications, Inc. on February 22, 2005 (File No.
000-27927)).10.9+
    
    Separation Agreement and Release for Thomas A. Cullen,
dated as of March 15, 2005 (incorporated by reference to
Exhibit 99.1 to the current report on Form 8-K filed by
Charter Communications, Inc. on March 17, 2005 (File No.
000-27927)).10.10+
    
    Description of Charter Communications, Inc. 2005 Executive
Bonus Plan (incorporated by reference to Exhibit 10.51 to
the annual report on Form 10-K filed by Charter
Communications, Inc. on March 3, 2005 (File No.
000-27927)).10.11+
    
    Employment Agreement, dated as of April 1, 2005, by and
between Michael J. Lovett and Charter Communications, Inc.
(incorporated by reference to Exhibit 10.11 to the
quarterly report on Form 10-Q filed by Charter
Communications, Inc. on May 3, 2005 (File No. 000-27927)).31.1*
    
    Certificate of Interim Chief Executive Officer pursuant to
Rule 13a-14(a)/Rule 15d-14(a) under the Securities Exchange
Act of 1934.
 29




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##### 



ExhibitNumber
    
    Description of Document31.2*
    
    Certificate of Interim Chief Financial Officer pursuant to
Rule 13a-14(a)/Rule 15d-14(a) under the Securities Exchange
Act of 1934.32.1*
    
    Certification pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002 (Interim Chief Executive Officer).32.2*
    
    Certification pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002 (Interim Chief Financial Officer).
  *
    
    Document attached+
    
    Management compensatory plan or arrangement 30