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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549
   FORM 10-Q   (Mark One) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended September 30, 2004 or [  ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 For 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   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 [X] No [ ] Indicate by check mark whether the registrants are accelerated filers (as
defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [X] 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 SEPTEMBER 30, 2004 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
    
    
    12Item 4. Controls and Procedures
    
    
    24Part II. OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    25Item 6. Exhibits
    
    
    25SIGNATURES
    
    
    26EXHIBIT INDEX
    
    
    27Certification of Chief Executive OfficerCertification of Interim Co-Chief Financial OfficerCertification of Interim Co-Chief Financial OfficerCertificationCertificationCertification
  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 and nine months ended
September 30, 2004. 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:  
    
    our and our indirect parent companies ability to pay or refinance debt as it becomes due;  
    
    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;  
    
    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;  
    
    any adverse consequences arising out of our and our parent
companies restatements of
the respective 2000, 2001 and 2002 financial statements;  
    
    the results of the pending grand jury investigation by the United States Attorneys Office for the Eastern District of
Missouri, and the ability to reach 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 memoranda of understanding described herein;  
    
    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) September 30,
    
    December 31,2004
    
    2003(Unaudited)ASSETSCURRENT ASSETS:Cash and cash equivalents
    
    $
    254
    
    
    $
    257Accounts receivable, less allowance for doubtful
accounts of $271 and $172, respectively
    
    
    2,152
    
    
    
    1,600Prepaid expenses and other current assets
    
    
    164
    
    
    
    155Total current assets
    
    
    2,570
    
    
    
    2,012INVESTMENT IN CABLE PROPERTIES:Property, plant and equipment, net of accumulated
depreciation of $112,971 and $87,480, respectively
    
    
    144,237
    
    
    
    154,540Franchises, net of accumulated amortization of
$74,953 and $74,851, respectively
    
    
    225,475
    
    
    
    252,335Total investment in cable properties, net
    
    
    369,712
    
    
    
    406,875OTHER NONCURRENT ASSETS
    
    
    29
    
    
    
    2Total assets
    
    $
    372,311
    
    
    $
    408,889LIABILITIES AND MEMBERS EQUITYCURRENT LIABILITIES:Accounts payable and accrued expenses
    
    $
    17,415
    
    
    $
    16,284Payables to manager of cable systems  related parties
    
    
    39,483
    
    
    
    44,089Total current liabilities
    
    
    56,898
    
    
    
    60,373LONG-TERM DEBT
    
    
    115,909
    
    
    
    116,223OTHER LONG-TERM LIABILITIES
    
    
    2,025
    
    
    
    3,229MEMBERS EQUITY
    
    
    197,479
    
    
    
    229,064Total liabilities and members equity
    
    $
    372,311
    
    
    $
    408,889
 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
    
    Nine Months EndedSeptember 30,
    
    September 30,2004
    
    2003
    
    2004
    
    2003REVENUES
    
    $
    29,380
    
    
    $
    27,062
    
    
    $
    86,064
    
    
    $
    79,894COSTS AND EXPENSES:Operating (excluding depreciation
and amortization)
    
    
    12,196
    
    
    
    10,782
    
    
    
    36,180
    
    
    
    32,384Selling, general and administrative
    
    
    5,826
    
    
    
    5,097
    
    
    
    16,824
    
    
    
    14,257Depreciation and amortization
    
    
    10,015
    
    
    
    7,964
    
    
    
    26,720
    
    
    
    24,236Impairment of franchises
    
    
    21,014
    
    
    
    
    
    
    
    21,014
    
    
    
    Loss on sale of assets, net
    
    
    17
    
    
    
    341
    
    
    
    35
    
    
    
    642Option compensation expense, net
    
    
    156
    
    
    
    
    
    
    
    641
    
    
    
    Special charges, net
    
    
    1
    
    
    
    96
    
    
    
    2,268
    
    
    
    30849,225
    
    
    
    24,280
    
    
    
    103,682
    
    
    
    71,827Income (loss) from operations
    
    
    (19,845
    )
    
    
    2,782
    
    
    
    (17,618
    )
    
    
    8,067OTHER EXPENSE:Interest expense, net
    
    
    (2,756
    )
    
    
    (2,756
    )
    
    
    (8,268
    )
    
    
    (8,078
    )Income (loss) before
cumulative effect of
accounting change
    
    
    (22,601
    )
    
    
    26
    
    
    
    (25,886
    )
    
    
    (11
    )Cumulative effect of accounting change
    
    
    (5,744
    )
    
    
    
    
    
    
    (5,744
    )
    
    
    Net income (loss)
    
    $
    (28,345
    )
    
    $
    26
    
    
    $
    (31,630
    )
    
    $
    (11
    )
 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) Nine Months EndedSeptember 30,2004
    
    2003CASH FLOWS FROM OPERATING ACTIVITIES:Net loss
    
    $
    (31,630
    )
    
    $
    (11
    )Adjustments to reconcile net loss to net cash flows from operating activities:Depreciation and amortization
    
    
    26,720
    
    
    
    24,236Impairment of franchises
    
    
    21,014
    
    
    
    Option compensation expense, net
    
    
    554
    
    
    
    Special charges, net
    
    
    1,991
    
    
    
    Noncash interest expense
    
    
    (314
    )
    
    
    2,835Loss on sale of assets, net
    
    
    35
    
    
    
    642Cumulative effect of accounting change, net
    
    
    5,744
    
    
    
    Changes in operating assets and liabilities:Accounts receivable
    
    
    (552
    )
    
    
    926Prepaid expenses and other assets
    
    
    (44
    )
    
    
    (98
    )Accounts payable, accrued expenses and other
    
    
    369
    
    
    
    4,738Payables to related party
    
    
    (8,339
    )
    
    
    (22,826
    )Net cash flows from operating activities
    
    
    15,548
    
    
    
    10,442CASH FLOWS FROM INVESTING ACTIVITIES:Purchases of property, plant and equipment
    
    
    (15,036
    )
    
    
    (6,826
    )Change in accrued expenses related to capital expenditures
    
    
    (515
    )
    
    
    (2,498
    )Other, net
    
    
    
    
    
    
    (1,118
    )Net cash flows from investing activities
    
    
    (15,551
    )
    
    
    (10,442
    )NET CHANGE IN CASH
    
    
    (3
    )
    
    
    CASH, beginning of period
    
    
    257
    
    
    
    CASH, end of period
    
    $
    254
    
    
    $
    CASH PAID FOR INTEREST
    
    $
    5,722
    
    
    $
    
 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. As of September 30, 2004, the Company owns and operates cable systems
serving approximately 145,500 analog video customers. 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 video on demand. The Company sells its cable video
programming, high-speed data and advanced broadband services on a subscription
basis. Charter Communications Holding Company, LLC (Charter Holdco), the Companys
indirect parent, and Charter Communications, Inc. (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
and contingencies. Actual results could differ from those estimates. Reclassifications Certain 2003 amounts have been reclassified to conform with
the 2004 presentation. 2. Liquidity and Capital Resources The Company recognized a loss from operations of $19.8 million and $17.6
million for the three and nine months ended September 30, 2004, respectively,
and income from operations of $2.8 million and $8.1 million for the three and
nine months ended September 30, 2003, respectively. The Companys net cash
flows from operating activities were $15.5 million and $10.4 million for the
nine months ended September 30, 2004 and 2003, respectively. The Company has
historically required significant cash to fund capital expenditures and debt
service costs. Historically, the Company has funded these requirements through
cash flows from operating activities and capital contributions from its
indirect parent companies. The mix of funding sources changes from period to
period, but for the nine months ended September 30, 2004, 100% of the Companys
funding requirements were from cash flows from 7




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RENAISSANCE MEDIA GROUP LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT WHERE INDICATED)
(UNAUDITED) operating activities. The Company expects to remain in compliance with the
covenants under its indenture, and expects that cash flow from operating
activities will be sufficient to satisfy its liquidity needs until maturity of
its public notes. The Company expects that it will rely on capital contributions from its
indirect parent companies to repay the principal amount of its public notes at
maturity. However, there can be no assurance 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, of which
approximately $618 million will mature in 2005. Currently, the Companys
indirect parent companies do not expect that cash flows from operating
activities and amounts available under their credit facilities will be
sufficient to fund their operations and permit them to satisfy their principal
repayment obligations that come due in 2005 and thereafter. In the event that
the Companys indirect parent companies are not able to demonstrate that they
have access to liquidity in an amount sufficient to fund their
business and to make principal repayment obligations that come due in 2005 and
thereafter, the indirect parent companies and the Companys ability to receive
an unqualified opinion from an independent registered public accounting firm
may be adversely affected. The failure of Charter Operating to receive an
unqualified opinion would constitute a default under its credit facilities.
Any financial or liquidity problems of the indirect parent companies, including
the inability of any of the Companys indirect parent companies to comply with
the covenants under their indentures or credit facilities, 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 credit rating, and its relations with customers
and suppliers, which could in turn further impair its ability to obtain
financing and operate its business. In addition, a default under the covenants
governing the Companys indenture could result in the acceleration of the
Companys payment obligations under its debt and, under certain circumstances,
in cross-defaults under its affiliates debt obligations, which could adversely
affect its indirect parent companies ability to provide the Company with
funding. If the Companys business does not generate sufficient cash flow from operating
activities, and sufficient future distributions are not available to the
Company from other sources of financing, it may not be able to repay its debt,
grow its business, respond to competitive challenges, or fund its other
liquidity and capital needs. 3. Franchises On January 1, 2002, the Company adopted Statement of Financial Accounting
Standards (SFAS) No. 142, which eliminates the amortization of
indefinite-lived intangible assets. Accordingly, beginning January 1, 2002,
all franchises that qualify for indefinite-life treatment under SFAS No. 142
are no longer amortized against earnings but instead are tested for impairment
annually, or more frequently as warranted by events or changes in
circumstances. Based on the guidance prescribed in Emerging Issues Task Force
(EITF) Issue No. 02-7, Unit of Accounting for Testing of Impairment of
Indefinite-Lived Intangible Assets,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. Fair value is determined based on
estimated discounted future cash flows using assumptions that are consistent
with internal forecasts. The Company has historically followed a residual
method of valuing its franchise assets, which had the effect of including
goodwill with the franchise assets. In September 2004, the SEC staff issued Topic D-108, Use of the Residual Method
to Value Acquired Assets Other than Goodwill, which requires the direct method
of separately valuing all intangible assets. On September 30, 2004, the
Company adopted Topic D-108 which resulted in the Company recording a
cumulative effect of accounting change of $5.7 million for the three and nine
months ended September 30, 2004. The Company performed an impairment assessment during the third quarter 2004
using an independent third-party appraiser and following the guidance of EITF
Issue 02-17, Recognition of Customer Relationship Intangible Assets Acquired in
a Business Combination, and Topic D-108. The use of lower projected growth
rates and the resulting revised estimates of future cash flows in the
Companys valuation, primarily as a result of increased competition, led to the
recognition of a $21.0 million impairment charge for the three and nine months
ended September 30, 2004. The valuation completed at October 1, 2003 resulted
in no impairment. 8




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RENAISSANCE MEDIA GROUP LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT WHERE INDICATED)
(UNAUDITED) Franchise amortization expense for the three and nine months ended September
30, 2004 was $41 and $102, respectively, and franchise amortization expense for
the three and nine months ended September 30, 2003 was $14 and $24,
respectively, which represents the amortization relating to 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 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 September
30, 2004 and December 31, 2003: September 30,
    
    December 31,2004
    
    2003Accounts
payable - trade
    
    $
    1,457
    
    
    $
    2,349Accrued capital expenditures
    
    
    1,440
    
    
    
    925Accrued expenses:Interest
    
    
    5,244
    
    
    
    2,384Programming costs
    
    
    1,694
    
    
    
    1,720Franchise-related fees
    
    
    2,196
    
    
    
    2,873State sales tax
    
    
    2,916
    
    
    
    3,630Personal property tax
    
    
    1,390
    
    
    
    1,172Other
    
    
    1,078
    
    
    
    1,231$
    17,415
    
    
    $
    16,284
 5. Long-Term Debt Long-term debt consists of the following as of September 30, 2004 and December
31, 2003: September 30,
    
    December 31,2004
    
    200310% senior discount notes
    
    $
    114,413
    
    
    $
    114,413Unamortized net premium
    
    
    1,496
    
    
    
    1,810$
    115,909
    
    
    $
    116,223
 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 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 and nine months ended
September 30, 2004 and 2003. 7. Income Taxes The Company is a single member limited liability company not subject to income
tax. The Company holds all operations through an indirect subsidiary. The
majority of the Companys subsidiaries are limited liability companies that are
also not subject to income tax. One direct 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 its inception. Any taxable income generated
by the Company would be the responsibility of the Companys equity owner. As
such, the 9




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RENAISSANCE MEDIA GROUP LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT WHERE INDICATED)
(UNAUDITED) Company has not provided for income taxes in the accompanying condensed
consolidated financial statements. 8. Contingencies As previously reported in the Companys 2003 Annual Report on Form 10-K and
2004 Quarterly Report on Form 10-Q for the quarter ended June 30, 2004,
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. 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. 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. A substantively identical
derivative action was later filed and consolidated into the State Derivative
Action. The plaintiffs allege that the individual defendants breached their
fiduciary duties by failing to establish and maintain adequate internal
controls and procedures. An action substantively identical to the State Derivative Action was filed
in March 2004. The State Derivative Actions were specifically and individually
identified in public filings made by Charter prior to the date of this
quarterly report. 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. The Federal Derivative
Action was identified in public filings made by Charter prior to the date of
this quarterly report. On August 5, 2004, Charter entered into Memoranda of Understanding setting
forth agreements in principle regarding settlement of the Federal Class
Actions, the State Derivative Action(s) and the Federal Derivative Action (the
Actions). 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 will pay to the plaintiffs a combination of cash and equity
collectively valued at $144.0 million, which will include the fees and expenses
of plaintiffs counsel. Of this amount, $64.0 million will be paid in cash (by
Charters insurance carriers) and the balance will 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. 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 expects to issue additional shares of its
Class A common stock to its insurance carrier having an aggregate value of $5.0
million. As a result, in the second quarter of 2004, the Company recorded a
$2.1 million special charge on its consolidated statement of operations for the
nine months ended September 30, 2004 related to its portion of the expense
allocation for the aggregate value of the Charter Class A common stock and
warrants to be issued. The expense was allocated amongst Charters indirect
operating subsidiaries pro rata based on analog video customers. 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. The settlement of each of the lawsuits is
conditioned upon, among other things, the parties approval and execution of
definitive settlement agreements with respect to the matters described above,
judicial approval of the settlements by the Court following notice to the
class, and dismissal of the consolidated derivative actions now pending in
Missouri State Court, which are related to the Federal Derivative Action. 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 has
also been advised by the U.S. Attorneys office that no member of its board of
directors, including its Chief 10




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RENAISSANCE MEDIA GROUP LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT WHERE INDICATED)
(UNAUDITED) Executive Officer, 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. On July 25, 2003, one of the former officers who was
indicted entered a guilty plea. Charter has advised the Company that it is
fully cooperating with the investigation. 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. 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. 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. The South Carolina
Class Action and the Georgia Class Action were identified in public filings
made by Charter prior to the date of this quarterly report. 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. A hearing to
consider final approval of the settlement is scheduled to occur on November 10,
2004. 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. 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 financial condition, results of
operations or its liquidity. 11




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##### Table of Contents



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 Charter Communications
Holdings, LLC (Charter Holdings) for the year ended December 31, 2003. 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 During 2003, we and our indirect parents, Charter Communications, Inc.
(Charter) and Charter Communications Holding Company, LLC (Charter Holdco),
undertook a number of transition activities including reorganizing our
workforce, adjusting our cable video pricing and packages, completing customer
call center consolidations and implementing billing conversions. Due to the
focus on such activities and certain financial constraints, we reduced spending
on marketing our products and services. We believe the reduced marketing
activities and other necessary operational changes negatively impacted customer
growth and acquisition, primarily during the first half of 2003. For the nine months ended September 30, 2004, our loss from operations, which
includes depreciation and amortization expense and impairment of franchises but
excludes interest expense, was $17.6 million. For the nine months ended
September 30, 2003, our income from operations was $8.1 million. We had a
negative operating margin of 20% for the nine months ended September 30, 2004.
For the nine months ended September 30, 2003, we had an operating margin of
10%. The decrease in income from operations and operating margins from 2003 to
2004 was principally due to the impairment of franchises of $21.0 million
recorded in the third quarter of 2004. Operating margins for the nine months
ended September 30, 2004 compared to the nine months ended September 30, 2003
were also negatively impacted by increases in programming and service costs. The first cash interest payment on our public notes occurred in October 2003.
We are now required to pay cash interest each April and October. In addition,
our outstanding public notes will mature in 2008. We expect that we will rely
on loans and capital contributions from our indirect parent companies to repay
our public 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. 12




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##### Table of Contents



RESULTS OF OPERATIONS Nine Months Ended September 30, 2004 Compared to Nine Months Ended September
30, 2003 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): Nine Months Ended September 30,2004
    
    2003Revenues
    
    $
    86,064
    
    
    
    100
    %
    
    $
    79,894
    
    
    
    100
    %Costs and expenses:Operating (excluding depreciation and amortization)
    
    
    36,180
    
    
    
    42
    %
    
    
    32,384
    
    
    
    41
    %Selling, general and administrative
    
    
    16,824
    
    
    
    19
    %
    
    
    14,257
    
    
    
    18
    %Depreciation and amortization
    
    
    26,720
    
    
    
    31
    %
    
    
    24,236
    
    
    
    30
    %Impairment of franchises
    
    
    21,014
    
    
    
    24
    %
    
    
    
    
    
    
    Loss on sale of assets, net
    
    
    35
    
    
    
    
    
    
    
    642
    
    
    
    1
    %Option compensation expense, net
    
    
    641
    
    
    
    1
    %
    
    
    
    
    
    
    Special charges, net
    
    
    2,268
    
    
    
    3
    %
    
    
    308
    
    
    
    103,682
    
    
    
    120
    %
    
    
    71,827
    
    
    
    90
    %Income (loss) from operations
    
    
    (17,618
    )
    
    
    (20
    )%
    
    
    8,067
    
    
    
    10
    %Other expense:Interest expense
    
    
    (8,268
    )
    
    
    
    
    
    
    (8,078
    )Loss before cumulative effect of accounting
change
    
    
    (25,886
    )
    
    
    
    
    
    
    (11
    )Cumulative effect of accounting change
    
    
    (5,744
    )
    
    
    
    
    
    
    Net loss
    
    $
    (31,630
    )
    
    
    
    
    
    $
    (11
    )
 Revenues.Revenues increased $6.2 million, or 8%, to $86.1 million for the nine
months ended September 30, 2004 from $79.9 million for the nine months ended
September 30, 2003. 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 stabilizing our
analog video customer base, implementing price increases on certain services
and packages and increasing revenues from incremental high-speed data services,
digital video and advanced products and services, such as video on demand
(VOD), provided to our customers. Revenues by service offering were as follows (dollars in thousands): Nine Months Ended September 30,2004
    
    2003
    
    2004 over 2003% of
    
    
    
    
    
    % ofRevenues
    
    Revenues
    
    Revenues
    
    Revenues
    
    Change
    
    % ChangeVideo
    
    $
    63,061
    
    
    
    73
    %
    
    $
    61,437
    
    
    
    77
    %
    
    $
    1,624
    
    
    
    3
    %High-speed data
    
    
    10,415
    
    
    
    12
    %
    
    
    7,106
    
    
    
    9
    %
    
    
    3,309
    
    
    
    47
    %Advertising sales
    
    
    4,101
    
    
    
    5
    %
    
    
    3,751
    
    
    
    5
    %
    
    
    350
    
    
    
    9
    %Commercial
    
    
    2,201
    
    
    
    3
    %
    
    
    1,733
    
    
    
    2
    %
    
    
    468
    
    
    
    27
    %Other
    
    
    6,286
    
    
    
    7
    %
    
    
    5,867
    
    
    
    7
    %
    
    
    419
    
    
    
    7
    %$
    86,064
    
    
    
    100
    %
    
    $
    79,894
    
    
    
    100
    %
    
    $
    6,170
    
    
    
    8
    %
 Video revenues consist primarily of revenues from analog and digital video
services provided to our non-commercial customers. Video revenues increased by
$1.6 million, or 3%, to $63.1 million for the nine months ended September 30,
2004 as compared to $61.4 million for the nine months ended September 30, 2003.
The 13




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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 $3.3 million, or 47%, from $7.1 million for the nine months ended
September 30, 2003 to $10.4 million for the nine months ended September 30,
2004. 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 9%, for the nine months ended September 30, 2004
compared to the nine months ended September 30, 2003, primarily as a result of
an increase in national advertising campaigns and election related advertising.
For each of the nine months ended September 30, 2004 and 2003, we received
$0.2 million in advertising revenue from vendors. Commercial revenues consist primarily of revenues from cable video and
high-speed data services to our commercial customers. Commercial revenues
increased $0.5 million, or 27%, from $1.7 million for the nine months ended
September 30, 2003 to $2.2 million for the nine months ended September 30,
2004, 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 $0.4 million, or 7%, from $5.9 million for the nine months ended
September 30, 2003 to $6.3 million for the nine months ended September 30,
2004. The increase was primarily the result of an increase in infomercial
revenue and franchises fees. Operating Expenses.Operating expenses increased by $3.8 million, or 12%, from
$32.4 million for the nine months ended September 30, 2003 to $36.2 million for
the nine months ended September 30, 2004. Programming costs included in the
accompanying condensed consolidated statements of operations were $23.1 million
and $20.5 million, representing 22% and 29% of total costs and expenses for the
nine months ended September 30, 2004 and 2003, respectively. Key expense
components as a percentage of revenues were as follows (dollars in thousands): Nine Months Ended September 30,2004
    
    2003
    
    2004 over 2003% of
    
    
    
    
    
    % ofExpenses
    
    Revenues
    
    Expenses
    
    Revenues
    
    Change
    
    % ChangeProgramming
    
    $
    23,111
    
    
    
    27
    %
    
    $
    20,510
    
    
    
    26
    %
    
    $
    2,601
    
    
    
    13
    %Advertising sales
    
    
    1,748
    
    
    
    2
    %
    
    
    1,746
    
    
    
    2
    %
    
    
    2
    
    
    
    Service
    
    
    11,321
    
    
    
    13
    %
    
    
    10,128
    
    
    
    13
    %
    
    
    1,193
    
    
    
    12
    %$
    36,180
    
    
    
    42
    %
    
    $
    32,384
    
    
    
    41
    %
    
    $
    3,796
    
    
    
    12
    %
 Programming costs consist primarily of costs paid to programmers for analog,
premium and digital channels and pay-per-view programming. The increase in
programming costs of $2.6 million, or 13%, 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 $1.3 million and $1.4 million for the nine months ended
September 30, 2004 and 2003, respectively. Our cable programming costs have increased in every year we have operated in
excess of customary inflationary and cost-of-living type increases, and we
expect them to continue to increase because of a variety of factors, including
additional programming being provided to customers as a result of system
rebuilds that increase channel capacity, increased costs to produce or purchase
programming, increased costs for previously discounted programming and
inflationary or negotiated annual increases. 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. 14




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##### Table of Contents



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
nine months ended September 30, 2004 compared to the corresponding period in
2003. 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 $1.2
million, or 12%, resulted primarily from additional activity associated with
ongoing infrastructure maintenance. Selling, General and Administrative Expenses.Selling, general and
administrative expenses increased by $2.6 million, or 18%, from $14.3 million
for the nine months ended September 30, 2003 to $16.8 million for the nine
months ended September 30, 2004. Key components of expense as a percentage of
revenues were as follows (dollars in thousands): Nine Months Ended September 30,2004
    
    2003
    
    2004 over 2003% of
    
    
    
    
    
    % ofExpenses
    
    Revenues
    
    Expenses
    
    Revenues
    
    Change
    
    % ChangeGeneral and
administrative
    
    $
    14,955
    
    
    
    17
    %
    
    $
    13,210
    
    
    
    17
    %
    
    $
    1,745
    
    
    
    13
    %Marketing
    
    
    1,869
    
    
    
    2
    %
    
    
    1,047
    
    
    
    1
    %
    
    
    822
    
    
    
    79
    %$
    16,824
    
    
    
    19
    %
    
    $
    14,257
    
    
    
    18
    %
    
    $
    2,567
    
    
    
    18
    %
 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 $1.7 million, or 13%, resulted primarily from increases in call
center costs of $2.0 million and bad debt expense of $0.8 million offset by
decreases in salaries and benefits of $1.3 million. Marketing expenses increased $0.8 million, or 79%, as a result of an increased
investment in marketing and branding campaigns. Depreciation and Amortization.Depreciation and amortization expense increased
by $2.5 million, or 10%, from $24.2 million for the nine months ended September
30, 2003 to $26.7 million for the nine months ended September 30, 2004. This
increase in depreciation related to an increase in capital expenditures. Impairment of Franchises.We performed an impairment assessment during the
third quarter 2004 using an independent third-party appraiser. The use of
lower projected growth rates and the resulting revised estimates of future cash
flows in our valuation, primarily as a result of increased competition, led to
the recognition of a $21.0 million impairment charge for the nine months ended
September 30, 2004. Loss on Sale of Assets, Net.Loss on sale of assets of $35 thousand and $0.6
million for the nine months ended September 30, 2004 and 2003, respectively,
represents the loss realized on the disposition of fixed assets. Option Compensation Expense, Net. Option compensation expense of $0.6 million
for the nine months ended September 30, 2004 primarily represents the expense
related to options granted following the adoption of Statement of Financial
Accounting Standards (SFAS) No. 123, Accounting for Stock-Based Compensation. Special Charges, Net.Special charges of $2.3 million for the nine months
ended September 30, 2004 represents approximately $2.1 million of aggregate
value of the Charter Class A common stock and warrants to purchase Charter
Class A common stock contemplated to be issued as part of a settlement of the
consolidated federal class actions and federal derivative action lawsuits and
approximately $0.2 million of litigation costs related to the tentative
settlement of a South Carolina national class action suit, all of which
settlements are subject to final documentation and court approval. Special
charges of $0.3 million for the nine months ended September 30, 2003 primarily
represents severance and related costs of our workforce reduction. We expect
to continue to record additional special charges in 2004 related to the
continued reorganization of our operations. Interest Expense, net.Interest expense increased $0.2 million, or 2%, to $8.3
million for the nine months ended September 30, 2004 from $8.1 million for the
nine months ended September 30, 2003. This increase is a result of the
accretion and cash interest associated with our senior discount notes. 15




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##### Table of Contents



Cumulative Effect of Accounting Change, Net of Tax.Cumulative effect of
accounting change of $5.7 million in 2004 represents the impairment charge
recorded as a result of our adoption of Topic D-108, Use of the Residual Method
to Value Acquired Assets Other than Goodwill, which requires the direct method
of separately valuing all intangible assets. Net Loss.Net loss increased to $31.6 million for the nine months ended
September 30, 2004 from $11 thousand for the nine months ended September 30,
2003 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 capital expenditures, debt
service costs and ongoing operations. We have historically funded our
operating activities and capital 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, but for the nine months
ended September 30, 2004, 100% of our funding requirements were from cash flows
from operating activities. During 2004, we expect to fund our liquidity and
capital requirements primarily through cash flows from operating activities. The principal amount of our senior notes was $114.4 million as of September 30,
2004. 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 2003 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 public 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 public 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: 16




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##### Table of Contents




    
    further reducing our expenses and capital expenditures, which would
likely impair our ability to increase revenue;
    
    selling assets; or
    
    seeking funding 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, ultimately, we could be forced to
restructure our obligations or seek protection under the bankruptcy laws. In
addition, if we need to raise additional capital through the issuance of equity
or 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 from or contribute or lend funds to
us or our indirect parent companies or subsidiaries in the future. Historical Operating, Financing and Investing Activities We held $0.3 million in cash and cash equivalents as of September 30, 2004 and
December 31, 2003. Operating Activities.Net cash provided by operating activities for the nine
months ended September 30, 2004 and 2003 was $15.5 million and $10.4 million,
respectively. Operating activities provided $5.1 million more cash during the
nine months ended September 30, 2004 compared to the corresponding period in
2003, primarily as a result of changes in operating assets and liabilities that
used $8.7 million less cash during the nine months ended September 30, 2004
compared to the corresponding period in 2003, partially offset by an increase
in cash interest expense of $3.3 million. Investing Activities.Net cash used in investing activities for the nine months
ended September 30, 2004 and 2003 was $15.6 million and $10.4 million,
respectively. Investing activities used $5.1 million more cash during the nine
months ended September 30, 2004 compared to the corresponding period in 2003,
primarily as a result of an increase in purchases of property, plant and
equipment of approximately $8.2 million, partially offset by a decrease of
approximately $2.0 million in our change in accrued expenses related to capital
expenditures. Capital Expenditures We have significant ongoing capital expenditure requirements. Capital
expenditures were $15.0 million and $6.8 million for the nine months ended
September 30, 2004 and 2003, respectively. The majority of the capital
expenditures for the nine months ended September 30, 2004 and 2003 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 nine months ended September 30, 2004 and
2003, our liabilities related to capital expenditures decreased $0.5 million
and $2.5 million, respectively. During 2004, we expect to spend a total of $17.0 million to $22.0 million on
capital expenditures. We expect that the nature of these expenditures will
continue to shift from upgrade/rebuild costs to customer premise equipment and
scalable infrastructure costs. We expect to fund capital expenditures for 2004
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 2003 Annual Report on Form 10-K, that could materially
impact our business, results of operations and financial condition. Restrictive Covenants.The indenture governing our publicly held notes contains
a number of significant covenants that could adversely impact our business. In
particular, our indenture restricts our and our subsidiaries ability to: 17




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
    
    pay dividends or make other distributions;
    
    make certain investments or acquisitions;
    
    enter into related party transactions;
    
    dispose of assets or merge;
    
    incur additional debt;
    
    issue equity;
    
    repurchase or redeem equity interests and debt;
    
    grant liens; and
    
    pledge assets. 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 publicly held 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 publicly held 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. As the principal amounts of our public 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-Level Liquidity Concerns. Our indirect parent companies have a
significant amount of debt, of which approximately $618 million will mature in
2005. Currently, our indirect parent companies do not expect that cash flows
from operating activities and amounts available under their credit facilities
will be sufficient to fund their operations and permit them to satisfy their
principal repayment obligations that come due in 2005 and thereafter. In the
event that our indirect parent companies are not able to demonstrate that they
have adequate access to liquidity in an amount sufficient to fund their
business and to make principal repayment obligations that come due in 2005 and
thereafter, our indirect parent companies and our ability to receive an
unqualified opinion from an independent registered public accounting firm may
be adversely affected. The failure of Charter Operating to receive an
unqualified opinion would constitute a default under its credit facilities.
Any financial or liquidity problems of our indirect parent companies, including
the inability of any of our indirect parent companies to comply with the
covenants under their indentures or credit facilities, 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 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 18




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Charter (whether through a bankruptcy, receivership or other reorganization of
Charter and/or Charter Holdco, or otherwise), it could require a change of
control repurchase offer under our outstanding notes. Securities Litigation and Government Investigations.A number of putative
federal class action lawsuits have been 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 other lawsuits have been filed against Charter in other
jurisdictions. A shareholders derivative suit was filed in the U.S. District
Court for the Eastern District of Missouri against Charter and certain of its
directors and officers. Also, three shareholders derivative suits were filed
in Missouri state court against Charter, its then current directors and its
former independent auditor, which actions have been consolidated. The federal
shareholders derivative suit and the consolidated derivative suit each allege
that the defendants breached their fiduciary duties. In addition, Charter has
recently entered into Memoranda of Understanding setting forth proposed terms
of settlement for the above described class actions and derivative suits.
Settlement of those actions under the terms of the memoranda is subject to a
number of conditions, and there can therefore be no assurance that the actions
will be settled on those terms or at all. For more information, see the
section below entitled   Contingencies. 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 has
also been advised by the U.S. Attorneys Office that no member of its board of
directors, including its Chief Executive Officer, 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. On July 25, 2003,
one of the former officers who was indicted entered a guilty plea. Charter has
advised us that it is fully cooperating with the investigation. 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 investigations,
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 or the government
investigation 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
Charters 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
been 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 on a going
forward basis. 19




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Local telephone companies and electric utilities can offer video and other
services in competition with Charter, 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 telephony and Internet access services, to residential and
business customers. The subscription television industry also faces
competition from free broadcast television and from other communications and
entertainment media. 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. Further loss of customers to DBS or other
alternative video and data services and marketing efforts to retain customers
and combat that loss could have a material negative impact on the value of our
business and its performance. 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
public notes following a change of control. A change of control under our
public notes would require us to make an offer to repurchase our outstanding
public notes. However, a failure by us to make or complete a change of control
offer would place us in default of these agreements. Streamlining of Operations.In the past, Charter (our manager) experienced
rapid growth from acquisitions of a number of smaller cable operators and the
rapid rebuild and rollout of advanced services. Our future success will depend
in part on Charters ability to standardize and streamline our operations. The
failure to implement a consistent corporate culture and management, operating
or financial systems or procedures necessary to standardize and streamline our
operations and effectively operate our enterprise could have a material adverse
effect on our business, results of operations and financial condition. In
addition, Charters ability to properly manage our operations will be impacted
by Charters ability to attract, retain and incentivize experienced, qualified,
professional management. 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. 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. 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, 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. This escalation may continue, and we may not be able to
pass programming cost increases on to our customers. 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 September 30, 2004, approximately 33%
of Charters current programming contracts have expired or are scheduled to
expire by the end of 2004, and approximately another 12% are scheduled to
expire by the end of 2005. Public 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 throughout 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 further downgrade of our indirect
parent companies or our debt ratings; announcement of the development of
improved or competitive technologies; the use of new products or promotions by
us or our competitors; changes in accounting rules; and new regulatory
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In addition, the securities market in general, and the market for cable
television 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. For example, there has been considerable legislative interest
recently in requiring cable operators to offer historically bundled programming
services on an à la carte basis. 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 the FCC were to require cable
systems to carry both the analog and digital versions of local broadcast
signals or multiple channels added by digital broadcasters. The FCC is
currently conducting a proceeding in which it is considering these channel
usage possibilities. In addition, the carriage of new high definition
broadcast and satellite programming services over the next few years may
consume significant amounts of system capacity without contributing to
proportionate increases in system revenue. 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 recently 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 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 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. 21




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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 (described more fully below) setting forth
agreements in principle to settle the Consolidated Federal Class Action. 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. A substantively identical
derivative action was later filed and consolidated into the State Derivative
Action. 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,
are 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. On August 5, 2004, Charter entered into Memoranda of Understanding 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). 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 will pay to the plaintiffs a combination of cash and equity
collectively valued at $144.0 million, which will include the fees and expenses
of plaintiffs counsel. Of this amount, $64.0 million will be paid in cash (by
Charters insurance carriers) and the balance will 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. 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 expects to issue additional shares of its
Class A common stock to its insurance carrier having an aggregate value of $5.0
million. 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. The settlement of each of the lawsuits is
conditioned upon, among other things, the parties approval and execution of
definitive settlement agreements with respect to the matters described above,
judicial approval of the settlements by the Court following notice to the
class, and dismissal of the consolidated derivative actions now pending in
Missouri State Court, which are related to the Federal Derivative Action. 22




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In addition to the Federal Class Actions, the State Derivative Action, the new
Missouri State Court derivative action and the Federal Derivative Action, six
putative class action lawsuits were filed against Charter and certain of its
then current directors and officers in the Court of Chancery of the State of
Delaware (the ''Delaware Class Actions). The lawsuits were filed after the
filing of a Schedule 13D amendment by Mr. Allen indicating that he was
exploring a number of possible alternatives with respect to restructuring or
expanding his ownership interest in Charter. Charter believes that the
plaintiffs speculated that Mr. Allen might have been contemplating an unfair
bid for shares of Charter or some other sort of going private transaction on
unfair terms and generally alleged that the defendants breached their fiduciary
duties by participating in or acquiescing to such a transaction. The lawsuits,
which are substantively identical, were brought on behalf of Charters
securities holders as of July 29, 2002, and sought unspecified damages and
possible injunctive relief. However, Charter has informed us that no such
transaction by Mr. Allen has been presented. On April 30, 2004, orders of
dismissal without prejudice were entered in each of the Delaware Class Actions. 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 has also been advised by the U.S. Attorneys office
that no member of its board of directors, including its Chief Executive
Officer, 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.
On July 25, 2003, one of the former officers who was indicted entered a guilty
plea. Charter has advised us that it is fully cooperating with the
investigation. 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 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. 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), 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. 23




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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. A hearing to consider final
approval of the settlement is scheduled to occur on November 10, 2004. 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. Outcome.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
Chief Executive Officer and Interim Co-Chief Financial Officers, 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 Chief Executive Officer and Interim Co-Chief Financial Officers 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 September 30, 2004 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. 24




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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 27 of this quarterly report. 25




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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 LLCRENAISSANCE MEDIA (LOUISIANA) LLCRENAISSANCE MEDIA (TENNESSEE) LLCDated: November 12, 2004
    
    By:
    
    CHARTER COMMUNICATIONS, INC.,Registrants ManagerBy:
    
    /s/ Derek ChangName: Derek ChangTitle: Executive Vice President of Finance and Strategy andInterim Co-Chief Financial Officer(Co-Principal Financial Officer) of Charter Communications, Inc.(Manager); Renaissance Media Group LLC, Renaissance Media(Louisiana) LLC; and Renaissance Media (Tennessee) LLCBy:
    
    /s/ Paul E. MartinName: Paul E. MartinTitle: Interim Co-Chief Financial Officer,Senior Vice President and Corporate Controller(Co-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: November 12, 2004
    
    
    
    RENAISSANCE MEDIA CAPITAL CORPORATIONBy:
    
    /s/ Derek ChangName: Derek ChangTitle: Executive Vice President of Finance and Strategy andInterim Co-Chief Financial Officer(Co-Principal Financial Officer)By:
    
    /s/ Paul E. MartinName: Paul E. MartinTitle: Interim Co-Chief Financial Officer,Senior Vice President and Corporate Controller(Co-Principal Financial Officer and Principal Accounting Officer)
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EXHIBIT INDEX ExhibitNumber
    
    Description of Document10.1
    
    Separation Agreement and Release
for Margaret A. Bellville dated as of September 16, 2004 (Incorporated by reference to Exhibit 10.1 to Charter Communications, Inc.s quarterly report on Form 10-Q filed on November 4, 2004).31.1
    
    Certificate of Chief Executive Officer pursuant to Rule
13a-14(a)/Rule 15d-14(a) under the Securities Exchange Act
of 1934.31.2
    
    Certificate of Interim Co-Chief Financial Officer pursuant
to Rule 13a-14(a)/Rule 15d-14(a) under the Securities
Exchange Act of 1934.31.3
    
    Certificate of Interim Co-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 (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 Co-Chief Financial Officer).32.3
    
    Certification pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002 (Interim Co-Chief Financial Officer).
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