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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549
 FORM 10-K [X]
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
 For the year ended December 31, 2003 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: RENAISSANCE MEDIA GROUP LLC*333-56679
RENAISSANCE MEDIA (LOUISIANA) LLC*333-56679-02
RENAISSANCE MEDIA (TENNESSEE) LLC*333-56679-01
RENAISSANCE MEDIA CAPITAL CORPORATION*333-56679-03 
  Delaware
Delaware
Delaware
Delaware
    
    14-1803051
14-1801165
14-1801164
14-1803049(State or other jurisdiction of incorporation or organization)
    
    (I.R.S. Employer Identification No.)
 12405 Powerscourt Drive St. Louis, Missouri
    
    63131(Address of principal executive offices)
    
    (Zip Code)
 (314) 965-0555 
  Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: None 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 if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrants knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. [X] Indicate by checkmark whether the registrants are accelerated filers (as
defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [X] The aggregate market value of the voting and non-voting common equity
securities held by non-affiliates as of June 30, 2003 was $0. 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. Documents Incorporated By Reference
The following documents are incorporated into this Report by reference: None   *
    
    Registrants meet the conditions set forth in General Instruction I(1)(a)
and (b) to the Form 10-K and are therefore filing 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 2003 FORM 10-K ANNUAL REPORT TABLE OF CONTENTS PAGEPart IItem 1. Business
    
    
    4Item 2. Properties
    
    
    6Item 3. Legal Proceedings
    
    
    6Part IIItem 5. Market for Registrants' Common Equity and Related Stockholder Matters
    
    
    10Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
    
    
    10Item 7A. Quantitative and Qualitative Disclosure About Market Risk
    
    
    27Item 8. Financial Statements and Supplementary Data
    
    
    27Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
    
    
    27Item 9A. Controls and Procedures
    
    
    27Part IVItem 14. Principal Accounting Fees and Services
    
    
    28Item 15. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
    
    
    28Signatures
    
    
    
    
    32SubsidiariesCertificate of Chief Executive OfficerCertificate of Chief Financial OfficerCertificationCertification
  This annual report on Form 10-K is for the year ended December 31, 2003. 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 annual report. In addition, information that we file with the SEC in the
future will automatically update and supersede information contained in this
annual report. In this annual report, we, us and our refer to
Renaissance Media Group LLC, Renaissance Media (Louisiana) LLC, Renaissance
Media (Tennessee) LLC, Renaissance Media Capital Corporation and their
subsidiaries. 2




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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS: This annual report includes forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934, as amended, regarding, among other things, our plans,
strategies and prospects, both business and financial, including, without
limitation, the forward-looking statements set forth in the Focus for 2004
section under Part I, Item 1. Business and the Liquidity and Capital
Resources sections under Part II, Item 7. Managements Discussion and
Analysis of Financial Condition and Results of Operations in this annual
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 II, Item 7.
Managements Discussion and Analysis of Financial Condition and Results of
Operations in this annual report. Many of the forward-looking statements
contained in this annual 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 annual report are set forth in this annual report
and in other reports or documents that we file from time to time with the
United States Securities and Exchange Commission, or the SEC, and include, but
are not limited to:  
    
    our ability to sustain and grow revenues and cash flows from
operating activities by offering video, high-speed data and other
services and to maintain a stable customer base, particularly in the
face of increasingly aggressive competition from other service
providers;  
    
    our ability to comply with all covenants in our indenture, any
violation of which would result in a violation of the indenture and
could trigger a default of other obligations of our affiliates under
cross default provisions;  
    
    our and our affiliates ability to pay or refinance debt as it
becomes due;  
    
    availability of funds to meet interest payment obligations under
our debt and to fund our operations and necessary capital expenditures,
either through cash flows from operating activities, further borrowings
or other sources;  
    
    any adverse consequences arising out of our restatement of our
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, the
pending SEC Division of Enforcement investigation and the putative
class action and derivative shareholders litigation against Charter
Communications, Inc., our indirect parent;  
    
    our ability to obtain programming at reasonable prices or pass 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 a person acting on our
behalf are expressly qualified in their entirety by this cautionary statement.
We are under no obligation to update any of the forward-looking statements
after the date of this annual report. 3




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PART I 
 Item 1.Business. Introduction Renaissance Media Group LLC (Renaissance Media Group), through its
subsidiaries, is the owner and operator of cable systems. We are a wholly
owned subsidiary of CCO NR Holdings, LLC (CCO NR), from which we receive
funding as needed. As of December 31, 2003, we own and operate cable systems
serving approximately 146,400 analog video customers. Through our broadband
network of coaxial and fiber optic cable, we offer our customers traditional
cable video programming (analog and digital, which we refer to as video
service), high-speed cable Internet access (which we refer to as high-speed
data service) and advanced broadband cable services (such as video on demand
(VOD)). (Homes passed represents our estimate of the number of living
units, such as single family homes, apartment units and condominium units
passed by our cable distribution network. Homes passed excludes commercial
units passed by the cable distribution network.) Renaissance Media Capital Corporation (Capital) was formed as a wholly owned
subsidiary of Renaissance Media Group for the sole purpose of being a co-issuer
of debt instruments to be offered and sold to the public. Renaissance Media
(Louisiana) LLC (Louisiana) and Renaissance Media (Tennessee) LLC
(Tennessee) are both wholly owned subsidiaries of Renaissance Media Group,
and hold a 76% interest and 24% interest, respectively, in Renaissance Media
LLC (Media). Media owns and operates cable systems in Louisiana, Tennessee
and Mississippi and commenced active operations in April 1998. Renaissance
Media Group, Capital, Louisiana and Tennessee do not, and will not, conduct any
operations, and their only assets are the equity interests in one another as
described above. At December 31, 2003, our investment in cable properties, long-term debt and
total members equity was approximately $407 million, $116 million and $229
million, respectively. Our debt-to-equity ratio and working capital deficit
were 0.5 to 1 and $58 million at December 31, 2003, respectively. For the year
ended December 31, 2003, our revenues and net income were approximately $107
million and $0.3 million, respectively. We are managed by Charter Communications, Inc. (Charter) and Charter
Communications Holding Company, LLC (Charter Holdco) and pay a fee for their
management services. See also Item 5. Market for Registrants Common Equity
and Related Stockholder Matters. Our principal executive offices are located
at Charter Plaza, 12405 Powerscourt Drive, St. Louis, Missouri, 63131. Our
telephone number is (314) 965-0555. Adoption of New Policies Charter is our manager and we have followed and continue to follow Charters
policies and practices. Commencing in January 2002 and continuing through the
first quarter of 2003, Charters management elected to implement a number of
new policies described in Item 7.  Managements Discussion and Analysis of
Financial Condition and Results of Operations  Adoption of New Polices. Restatement of Prior Results There were no restatements of prior results since those announced in our 2002
annual report on Form 10-K filed April 18, 2003. However, certain
reclassifications have been made to 2002 and 2001 amounts to conform to 2003
presentation. Also, as discussed in our annual report on Form 10-K for the
year ended December 31, 2002, as part of a re-audit performed by KPMG LLP, we
concluded that it was appropriate to make certain adjustments to previously
reported results. In the restatement of our results, adjustments were made,
among other things, to previous interpretations and applications of generally
accepted accounting principles (GAAP) that had been consistently followed by
us since 2000 and throughout the restatement period. These adjustments reduced revenues reported in our 2002 quarterly reports on
Form 10-Q for the first three quarters of 2002 by a total of $1 million, and in
our 2001 annual report on Form 10-K for the years ended December 31, 2001 and
2000 by $4 million and $2 million, respectively. Such adjustments represent
approximately 1%, 5% and 3% of previously reported revenues for the respective
periods in 2002, 2001 and 2000. Our previously reported consolidated net loss
decreased by a total of $5 million for the first three quarters of 2002 and
increased by $0.1 million and $1 million for the years ended December 31, 2001
and 2000, respectively, primarily due to 4




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adjustments related to the original accounting for acquisitions and elements of
our rebuild and upgrade activities. See Item 7. Managements Discussion and
Analysis of Financial Condition and Results of Operations  Restatement of
Prior Results. Certain Significant Developments in 2003 and Early 2004 In 2002, we substantially completed the upgrade of our cable systems. Our
systems upgrade increased our bandwidth capacity, enabling us to offer digital
video service, two-way communication capability and other advanced services,
which we continued to deploy in 2003. At December 31, 2003, approximately 88%
of our homes passed were served by a bandwidth of 550 megahertz or greater and
also had the two-way communication capability that is necessary for cable modem
high-speed Internet access. During 2003, we and our managers, Charter and Charter Holdco, undertook a
number of transition activities including reorganizing our workforce, adjusting
our video pricing and packages, completing 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 that the reduction in marketing activities and other
necessary operational changes negatively impacted customer growth and
acquisition, primarily during the first half of the year. During the second
half of 2003, we increased our marketing efforts and implemented promotional
campaigns to accelerate advanced services penetration, specifically in
high-speed data. Focus for 2004 Our principal financial goal is to maximize our return on invested capital. To
do so, we will focus on increasing revenues, improving customer retention and
enhancing customer satisfaction by providing reliable, high-quality service
offerings, superior customer service and attractive bundled offerings. Specifically, we are focusing in 2004 on:  
    
    increasing our sales and marketing efforts, especially through our
national Get Hooked campaign, to grow revenues through promoting our
advanced services and emphasizing what we believe to be competitive
advantages over satellite, including one-stop shopping for video,
voice, high-speed data and interactive services;  
    
    enhancing our digital service with new content and continued
deployment of advanced products such as digital video recorder (DVR)
service, high definition television service, VOD and subscription video
on demand service (SVOD, which is VOD service for selected
programming categories);  
    
    implementing what we believe is an attractive and competitive price
point strategy for various levels and bundled packages of digital
services;  
    
    continuing to improve customer service and satisfaction;  
    
    managing our operating costs by exercising discipline in capital and operational spending; and  
    
    identifying opportunities to continue to improve our balance sheet and liquidity. We believe that our high-speed data service has the potential to continue to
provide a substantial portion of our revenue growth in the near future. We
also plan to continue to expand our marketing of our high-speed data service to
the business community, which we believe has shown an increasing interest in
high-speed data service and private network services. We believe we offer our customers an excellent choice of services through an
increased variety of bundled packages, particularly with respect to our digital
video and high-speed data services. Our digital platform enables us to offer a
significant number and variety of channels, and we offer customers the
opportunity to choose among groups of channel offerings, including premium
channels, and to combine chosen programming with other services such as
high-speed data and VOD (in selected markets). 5




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Item 2.Properties. Our principal physical assets consist of cable distribution plant and
equipment, including signal receiving, encoding and decoding devices, headend
reception facilities, distribution systems and customer drop equipment for each
of our cable systems. Our cable plant and related equipment are generally attached to utility poles
under pole rental agreements with local public utilities and telephone
companies, and in certain locations, are buried in underground ducts or
trenches. We own or lease real property for signal reception sites and own
most of our service vehicles. The physical components of our cable systems require maintenance as well as
periodic upgrades to support the new services and products we introduce. We
believe that our properties are generally in good operating condition and are
suitable for our business operations. 
 Item 3.Legal Proceedings. Securities Class Actions and Derivative Suits Fourteen putative federal class action lawsuits (the Federal Class Actions)
have been 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 are sought by the plaintiffs. In general, the lawsuits
allege 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 annual
report. In October 2002, Charter filed a motion with the Judicial Panel on
Multidistrict Litigation (the Panel) to transfer the Federal Class Actions to
the Eastern District of Missouri. On March 12, 2003, the Panel transferred the
six Federal Class Actions not filed in the Eastern District of Missouri to that
district for coordinated or consolidated pretrial proceedings with the eight
Federal Class Actions already pending there. The Panels transfer order
assigned the Federal Class Actions to Judge Charles A. Shaw. By virtue of a
prior court order, StoneRidge Investment Partners LLC became lead plaintiff
upon entry of the Panels transfer order. StoneRidge subsequently filed a
Consolidated Amended Complaint. The Court subsequently consolidated the
Federal Class Actions into a single consolidated action (the Consolidated
Federal Class Action) for pretrial purposes. On June 19, 2003, following a
pretrial 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 have been
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 are stayed for ninety (90) days. The Consolidated Federal Class Action is entitled:  
    
    In re Charter Communications, Inc. Securities Litigation, MDL Docket No.
1506 (All Cases), StoneRidge Investments Partners, LLC, Individually and
On Behalf of All Others Similarly Situated, v. Charter Communications,
Inc., Paul Allen, Jerald L. Kent, Carl E. Vogel, Kent Kalkwarf, David G.
Barford, Paul E. Martin, David L. McCall, Bill Shreffler, Chris Fenger,
James H. Smith, III, Scientific-Atlanta, Inc., Motorola, Inc. and Arthur
Andersen, LLP, Consolidated Case No. 4:02-CV-1186-CAS. On September 12, 2002, a shareholders derivative suit (the State Derivative
Action) was filed in 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. 6




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The State Derivative Action is entitled:  
    
    Kenneth Stacey, Derivatively on behalf of Nominal Defendant Charter
Communications, Inc., v. Ronald L. Nelson, Paul G. Allen, Marc B.
Nathanson, Nancy B. Peretsman, William Savoy, John H. Tory, Carl E. Vogel,
Larry W. Wangberg, and Charter Communications, Inc. 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 alleges 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, are sought by the plaintiffs. The Federal Derivative Action is entitled:  
    
    Arthur Cohn, Derivatively on behalf of Nominal Defendant Charter
Communications, Inc., v. Ronald L. Nelson, Paul G. Allen, Marc B.
Nathanson, Nancy B. Peretsman, William Savoy, John H. Tory, Carl E. Vogel,
Larry W. Wangberg, and Charter Communications, Inc. In addition to the Federal Class Actions, the State Derivative Action and the
Federal Derivative Action, six putative class action lawsuits have been 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 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
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 were brought on behalf of Charters securities
holders as of July 29, 2002, and seek unspecified damages and possible
injunctive relief. The Delaware Class Actions are substantively identical. No
such transaction by Mr. Allen has been presented. Plaintiffs counsel has
granted the defendants an indefinite extension of time to respond to the only
complaint that has been served in the Delaware Class Actions. The Delaware Class Actions consist of:  
    
    Eleanor Leonard, v. Paul G. Allen, Larry W. Wangberg, John H. Tory,
Carl E. Vogel, Marc B. Nathanson, Nancy B. Peretsman, Ronald L.
Nelson, William Savoy, and Charter Communications, Inc., filed on
August 12, 2002;  
    
    Helene Giarraputo, on behalf of herself and all others similarly
situated, v. Paul G. Allen, Carl E. Vogel, Marc B. Nathanson, Ronald
L. Nelson, Nancy B. Peretsman, William Savoy, John H. Tory, Larry W.
Wangberg, and Charter Communications, Inc., filed on August 13, 2002;  
    
    Ronald D. Wells, Whitney Counsil and Manny Varghese, on behalf of
themselves and all others similarly situated, v. Charter
Communications, Inc., Ronald L. Nelson, Paul G. Allen, Marc B.
Nathanson, Nancy B. Peretsman, William Savoy, John H. Tory, Carl E.
Vogel, Larry W. Wangberg, filed on August 13, 2002;  
    
    Gilbert Herman, on behalf of himself and all others similarly
situated, v. Paul G. Allen, Larry W. Wangberg, John H. Tory, Carl E.
Vogel, Marc B. Nathanson, Nancy B. Peretsman, Ronald L. Nelson,
William Savoy, and Charter Communications, Inc., filed on August 14,
2002;  
    
    Stephen Noteboom, on behalf of himself and all others similarly
situated, v. Paul G. Allen, Larry W. Wangberg, John H. Tory, Carl E.
Vogel, Marc B. Nathanson, Nancy B. Peretsman, Ronald L. Nelson,
William Savoy, and Charter Communications, Inc., filed on August 16,
2002; and  
    
    John Fillmore on behalf of himself and all others similarly situated,
v. Paul G. Allen, Larry W. Wangberg, John H. Tory, Carl E. Vogel, Marc
B. Nathanson, Nancy B. Peretsman, Ronald L. Nelson, William Savoy, and
Charter Communications, Inc., filed on October 18, 2002. 7




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All of the lawsuits discussed above are each in preliminary stages. No reserves
have been established for potential losses or related insurance recoveries on
these matters because Charter is unable to predict the outcome. Charter has
advised us that it intends to vigorously defend the lawsuits. 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 currently 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 has subsequently issued a formal order of
investigation dated January 23, 2003, and subsequent document and testimony
subpoenas. The investigation and subpoenas generally concern 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. Charter has advised us that it is
fully cooperating with the SEC staff. 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, SEC investigation and the above described lawsuits,
some of Charters current and former directors and Charters current and former
officers have been advanced certain costs and expenses incurred in connection
with their defense. Those current and former directors and officers include:
Paul G. Allen, David C. Andersen, David G. Barford, Margaret A. Bellville, Mary
Pat Blake, J. Christian Fenger, Kent D. Kalkwarf, Ralph G. Kelly, Jerald L.
Kent, Paul E. Martin, David L. McCall, Ronald L. Nelson, Nancy B. Peretsman,
John C. Pietri, William D. Savoy, Steven A. Schumm, Curtis S. Shaw, William J.
Shreffler, Stephen E. Silva, James Trey Smith and Carl E. Vogel. These amounts
have been submitted to Charters director and officer insurance carrier for
reimbursement. The carrier has raised various objections to portions of these
amounts, and Charter is in negotiations with the carrier regarding their
reimbursement. Insurance Charter has liability insurance coverage that we believe is available for the
matters described above, where applicable, subject to the terms, conditions and
limitations of the respective policies. There is no assurance that current
coverage will be sufficient for all claims described above or any future claims
that may arise. 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 (South Carolina Class Action), purportedly on behalf of a class of
Charter customers, alleging that Charter improperly charged them a wire
maintenance fee without request or permission. They also claimed that Charter
improperly required them to rent analog and/or digital set-top terminals even
though their television sets were cable ready. Charter removed this case 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 should
have but did not file a new motion to dismiss. The state court judge granted
the plaintiffs motion over Charters objection in September 2002. Charter
immediately appealed that decision to the South Carolina Court of Appeals and
the South Carolina Supreme Court, but those courts have ruled that until a
final judgment is entered against Charter, they lack jurisdiction to hear the
appeal. 8




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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 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s motion to dismiss
for failure to state a claim. It also took under advisement Charters motion
to set aside the default judgment. The South Carolina Class Action is entitled:  
    
    Nikki Nicholls and Geraldine M. Barber, on behalf of themselves and all
others similarly situated v. Charter Communications Holding Company, LLC
and City of Spartanburg filed on October 29, 2001. Outcome Charter is unable to predict the outcome of the lawsuits and the government
investigations described above. An unfavorable outcome in any of these
lawsuits or the government investigations could have a material adverse effect
on our consolidated financial condition, results of operations or
liquidity, including our ability to comply with our debt covenants. 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, including our ability to comply with our debt
covenants. 9




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PART II 
 Item 5.Market for Registrants Common Equity and Related Stockholder Matters.  (A)
    
    Market Information There is no established trading market for the equity interests of Renaissance
Media Group, Capital, Louisiana or Tennessee.  (B)
    
    Holders Charter Holdings owns indirectly all of the limited liability company
membership interests of the Registrants.  (C)
    
    Dividends We record distributions when management fees charged to us exceed expenses
incurred on our behalf. We did not pay distributions for the years ended
December 31, 2003 and 2002. Our ability to pay distributions is limited under
the terms of covenants in the indenture governing our outstanding senior
discount notes.  (D)
    
    Recent Sales of Unregistered Securities No unregistered equity securities of Renaissance Media Group, Capital,
Louisiana or Tennessee were sold by such entities during the fourth quarter of
the year ended December 31, 2003. 
 Item 7.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, the following
discussion should be read in conjunction with the audited consolidated
financial statements of Renaissance Media Group LLC and subsidiaries as of and
for the years ended December 31, 2003, 2002 and 2001, and the annual report on
Form 10-K of Charter Holdings for the year ended December 31, 2003. Introduction During 2003, we and our managers, Charter and Charter Holdco, undertook a
number of transition activities including reorganizing our workforce, adjusting
our video pricing and packages, completing 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 the year. During the second half of 2003,
we increased our marketing efforts and implemented promotional campaigns to
accelerate advanced service penetration, specifically in high-speed data. 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 parent companies to repay our
public notes at maturity. However, there can be no assurance that our parent
companies will have sufficient liquidity to provide funds to us to satisfy this
payment when due. Adoption of New Policies Charter is our manager and we have followed and continue to follow Charters
policies and practices. Commencing in January 2002 and continuing through the
first quarter of 2003, Charters management elected to implement a number of
new policies including: Change in Disconnect and Bad Debt Policies.Our estimated customer count is
intended to include those people receiving cable service (regardless of payment
status), except for complementary accounts (such as our employees). Our
disconnect and bad debt guidelines for slow or nonpaying customers provide
that, in general, customers are to be terminated for nonpayment after
approximately 60-75 days, and written off/referred to collection at 10




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##### Table of Contents



approximately 90-110 days. We initially began implementing this policy in
January 2002 after we decided to change our past practice under which we did
not promptly disconnect these customers on a uniform basis. Effective year-end
2001, we also increased our allowance for doubtful accounts. The number of our
customers who are presently more than 90 days overdue and our bad debt expense
associated with such customers are lower than they were prior to the
institution of these policies. Procedures to Ensure Adherence to Disconnect and Customer Count Policies.
During Charters review of its internal audit findings and in the course of
internal investigations, and subsequently in the course of responding to
Charters governmental investigations, we became concerned that certain
employees either were not or had not previously been complying with our
customer count and disconnect policies. We have since announced to our
employees that a failure to follow these polices will be met with disciplinary
action including, in appropriate cases, termination. We have terminated and
disciplined employees who have not followed the policies. We have instituted
regular review of customer reports by senior employees in an effort to ensure
adherence to our policies and consistency of application throughout our various
operating divisions, and we have established a telephone hotline number for
employees to call and report misconduct relating to the reporting of customer
numbers. We have also elected not to provide guidance on expected customer
numbers in our public disclosures. Corporate Compliance Program.Prior to 2002, Charter did not have a formal
compliance program. It has since established a corporate compliance program,
pursuant to which it provides a revised Code of Conduct to Charters employees
that is incorporated into Charters Employee Handbook. The Code and Handbook
require that employees report violations of the Code or other behavior which
they believe might be unethical or illegal. Employees can report matters to
their supervisor, to the Human Resources Department, through a hotline or
through a secure website, and may do so anonymously. The compliance program is
overseen by a compliance committee comprised of high-ranking Charter officers,
which meets on a quarterly basis. The head of the committee in turn reports to
Charters Audit Committee. Treatment of Data Only Customers.Charter changed its methodology for
reporting analog cable video customers to exclude those customers who receive
high-speed data service only. This represents a change in Charters
methodology from prior reports through September 30, 2002, in which high-speed
data service only customers were included within our analog cable video
customers. Charter made this change because it determined that a substantial
number of those customers who only received high-speed data service were unable
to receive our most basic level of analog video service because this service
was physically secured or blocked, was unavailable in certain areas or the
customers were unaware that this service was available to them. In addition,
in light of Charters decision to begin marketing our high-speed data services
as a separate product, Charter believed that separate disclosure of this
information would assist investors in understanding our current business and in
monitoring what we expected to be an increasing number of data only customers. Disclosure Committee.Charter established a Disclosure Committee, consisting
of senior personnel from the business units, Charters internal audit group,
and the finance and legal groups, and Charter now follows an extensive review
and certification process in connection with our filings with the SEC and other
disclosure documents. Audit Committee.Charter modified its Audit Committees charter to expand the
role of the committee and to comply with the Sarbanes-Oxley Act of 2002 and the
rules issued thereunder (including Nasdaq rules). Accounting Policy Changes.Consistent with the description of the restatement,
we have revised a number of our accounting policies, including treatment of
launch incentives received from programmers. For a complete discussion of
accounting changes and adjustments brought about as a result of the re-audit or
restatement, see   Restatement of Prior Results. Restatement of Prior Results There were no restatements of prior results since those announced in our 2002
annual report on Form 10-K filed April 18, 2003. However, certain
reclassifications have been made to 2002 and 2001 amounts to conform to 2003
presentation. Also, as discussed in our annual report on Form 10-K for the
year ended December 31, 2002, on November 19, 2002, Charter announced that it
had determined that additional franchise costs and deferred income tax
liability should have been recorded for the differences between the financial
statement and tax basis of assets it acquired in connection with certain cable
businesses acquired throughout 1999 and 2000. As a result of this restatement,
Charter engaged KPMG LLP to perform audits as of and for the years ended
December 31, 2001 and 11




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2000 because their former accountants, Arthur Andersen LLP, were no longer
available to provide an opinion as to restated financial statements. In
connection with these audits, Charter concluded that it was appropriate to make
certain additional adjustments to previously reported results. These
adjustments resulted in our need to restate our previously reported results.
Among other things, adjustments were made to previous interpretations and
applications of GAAP that had been consistently followed by us since 2000 and
throughout the restatement period. These adjustments reduced revenues reported in our 2002 quarterly reports on
Form 10-Q for the first three quarters of 2002 by a total of $1 million, and in
our 2001 annual report on Form 10-K for the years ended December 31, 2001 and
2000 by $4 million and $2 million, respectively. Such adjustments represent
approximately 1%, 5% and 3% of previously reported revenues for the respective
periods in 2002, 2001 and 2000. Our previously reported consolidated net loss
decreased by a total of $5 million for the first three quarters of 2002 and
increased by $0.1 million and $1 million for the years ended December 31, 2001
and 2000, respectively, primarily due to adjustments related to the original
accounting for acquisitions and elements of our rebuild and upgrade activities.
Net cash flows from operating activities for the years ended December 31, 2001
and 2000 were increased by $1 million and $0.6 million, respectively. The most
significant categories of adjustments related to the items outlined below. Launch Incentives from Programmers.Amounts previously recognized as
advertising revenue in connection with the launch of new programming channels
have been deferred and recorded in accounts payable and accrued expenses and
other long-term liabilities in the year such launch support was provided, and
amortized as a reduction of programming costs based upon the relevant contract
term. These adjustments decreased revenue by a total of $0.7 million for the
first three quarters of 2002 and $3 million and $1 million for the years ended
December 31, 2001 and 2000, respectively. Additionally, for the year ended
December 31, 2000, we increased marketing expense by $0.4 million for other
promotional activities associated with launching new programming services
previously deferred and subsequently amortized. The corresponding amortization
of such deferred amounts reduced programming expenses by a total of $0.8
million for the first three quarters of 2002, and by $0.6 million for the year
ended December 31, 2001 and increased programming expenses by $0.3 million for
the year ended December 31, 2000. Customer Incentives and Inducements.Marketing inducements paid to encourage
potential customers to switch from satellite providers to Charter-branded
services and enter into multi-period service agreements were previously
deferred and recorded as property, plant and equipment and recognized as
depreciation and amortization expense over the life of customer contracts.
These amounts have been restated as a reduction of revenue in the period such
inducements were paid. Revenues declined a total of $0.1 million for the first
three quarters of 2002, and $0.6 million and $0.1 million for the years ended
December 31, 2001 and 2000, respectively. Substantially all of these amounts
are offset by reduced depreciation and amortization expense. Capitalized Labor and Overhead Costs.Certain elements of labor costs and
related overhead allocations previously capitalized as property, plant and
equipment as part of our rebuild activities, customer installation and new
service introductions have been expensed in the period incurred. Such
adjustments increased operating expenses by a total of $1 million for the first
three quarters of 2002, and $2 million and $1 million for the years ended
December 31, 2001 and 2000, respectively. Customer Acquisition Costs.Certain customer acquisition campaigns were
conducted through third-party contractors in 2000, 2001 and portions of 2002.
The costs of these campaigns were originally deferred and recorded as other
assets and recognized as amortization expense over the average customer
contract life. These amounts have been reported as marketing expense in the
period incurred and totaled $0.6 million for the first three quarters of 2002
and $1 million and $0.1 million for the years ended December 31, 2001 and 2000,
respectively. We discontinued this program in the third quarter of 2002 as
contracts for third-party vendors expired. Substantially all of these amounts
were offset by reduced depreciation and amortization expense. Rebuild and Upgrade of Cable Systems.In 2000, Charter initiated a three-year
program to replace and upgrade a substantial portion of its network, which
included a portion of our network. In connection with this plan, we assessed
the carrying value of, and the associated depreciable lives of, various assets
to be replaced. It was determined that a portion of cable distribution system
assets, originally treated as subject to replacement, were not part of the
original replacement plan but were to be upgraded and have remained in service.
We also determined that certain assets subject to replacement during the
upgrade program were misstated in the allocation of the purchase price of the
acquisition. This adjustment is a reduction to property, plant and equipment
and increased franchise costs of approximately $8 million as a result of this
finding. In addition, the depreciation period for the 12




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##### Table of Contents



replacement assets was adjusted to more closely align with the intended service
period of these assets rather than the three-year straight-line life originally
assigned. As a result, adjustments were recorded to reduce depreciation expense
by a total of $5 million for the first three quarters of 2002, and by $4
million and $2 million for the years ended 2001 and 2000, respectively. Other Adjustments.In addition to the items described above, certain other
adjustments were made that increased net loss by $1 million and decreased net
loss by $1 million, respectively, for the years ended December 31, 2001 and
2000. These adjustments were as follows:  
    
    During 2000, advertising revenue was recognized in conjunction with
the promotion of equipment offered by two set-top terminal
manufacturers from which we purchased digital set-top terminals.
However, in connection with our restatement announced in April 2003, we
reversed all advertising revenues from the set-top terminal
manufacturers recognized in 2000. Based on a reassessment of the
underlying structure of the arrangements during 2000, the prices paid
for set-top terminals and the advertising revenues recognized were
determined to be in excess of fair value. We therefore reduced our
advertising revenue and decreased our related property, plant and
equipment associated with the purchase of set-top terminals.  
    
    During 2000, depreciation and amortization expense was recorded for
certain marketing expenses discussed above in Launch Incentives from
Programmers, and in 2001, this entry was reversed. As part of the
re-audit, the amortization expense entry was reversed in full to record
the cost in the appropriate period and in the appropriate line item on
our consolidated statements of operations. The tables below set forth our condensed consolidated balance sheets as of
December 31, 2001 and December 31, 2000, and condensed consolidated statements
of operations and condensed consolidated statements of cash flows information
for the years ended December 31, 2001 and 2000. Controls.The major adjustments discussed above, including for the rebuild and
upgrade of cable systems, generally relate to non-routine items and did not
result from control deficiencies in our core accounting operations. Since
Charters period of rapid growth in 2000 and early 2001, in which Charter was
rapidly acquiring cable systems, Charter has integrated the various accounting
processes of its acquired cable systems. Charter has also substantially
improved the quantity and, we believe, the quality of its accounting and
internal audit staff. In addition, Charter is developing better interactions
between its accounting and internal audit staff and the other elements of its
organization. These changes in Charters staff have been supplemented with
changes in accounting and internal controls processes and systems which Charter
believes result in an improved ability of management to understand and analyze
underlying business data. As part of its acquisitions integration process,
Charter has, among other things, standardized its data and put in place a data
warehouse, which has enhanced Charters abilities to analyze its operating
data. Budgeting has been integrated into Charters financial systems, through
the use of specialized commercial software rather than spreadsheet programs.
Additionally, Charter has implemented in the first quarter 2004, a job costing
system, that tracks capital at the project level. These changes have given us
the ability to better understand, analyze and manage our business data. The
role of Charters internal audit staff has also been expanded, particularly
with respect to capitalization and depreciation. We believe that these changes
have improved Charters, and therefore our, controls over both recurring
transactions and non-recurring transactions. The following table sets forth selected condensed consolidated balance sheet
information, showing previously reported and restated amounts, for the year
ended December 31, 2001 (dollars in thousands): As previouslyreported
    
    As restatedProperty, plant and equipment, net
    
    $
    163,681
    
    
    $
    162,398Franchises, net
    
    
    341,830
    
    
    
    347,719Total assets
    
    
    507,155
    
    
    
    511,711Long-term debt
    
    
    103,565
    
    
    
    103,565Members equity
    
    
    313,514
    
    
    
    312,388
 13




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##### Table of Contents



The following table sets forth selected condensed consolidated statement of
operations information, showing previously reported and restated amounts, for
the year ended December 31, 2001 (dollars in thousands): As previouslyreported
    
    As restatedRevenues
    
    $
    88,047
    
    
    $
    84,221Costs and expenses:Operating (excluding depreciation and amortization)
    
    
    30,452
    
    
    
    30,536Selling, general and administrative
    
    
    14,496
    
    
    
    16,490Depreciation and amortization
    
    
    66,758
    
    
    
    60,971111,706
    
    
    
    107,997Loss from operations
    
    
    (23,659
    )
    
    
    (23,776
    )Net loss
    
    
    (32,716
    )
    
    
    (32,833
    )
 The following table sets forth selected condensed consolidated balance sheet
information, showing previously reported and restated amounts, as of December
31, 2000 (dollars in thousands): As previouslyreported
    
    As restatedProperty, plant and equipment, net
    
    $
    134,497
    
    
    $
    129,423Franchises, net
    
    
    369,487
    
    
    
    375,883Total assets
    
    
    507,096
    
    
    
    508,199Long-term debt
    
    
    94,600
    
    
    
    94,600Members equity
    
    
    346,230
    
    
    
    345,221
 The following table sets forth selected condensed consolidated statement of
operations information, showing previously reported and restated amounts, for
the year ended December 31, 2000 (dollars in thousands): As previouslyreported
    
    As restatedRevenues
    
    $
    70,313
    
    
    $
    68,382Costs and expenses:Operating (excluding depreciation and amortization)
    
    
    23,312
    
    
    
    24,126Selling, general and administrative
    
    
    11,247
    
    
    
    12,351Depreciation and amortization
    
    
    56,873
    
    
    
    54,03391,432
    
    
    
    90,510Loss from operations
    
    
    (21,119
    )
    
    
    (22,128
    )Net loss
    
    
    (29,643
    )
    
    
    (30,652
    )
 14




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##### Table of Contents



The following table sets forth selected condensed consolidated cash flow
information, showing previously reported and restated amounts, for the years
ended December 31, 2001 and 2000 (dollars in thousands): 2001
    
    2000As previously
    
    As
    
    As previously
    
    Asreported
    
    restated
    
    reported
    
    As restatedNet cash from operating activities
    
    $
    66,476
    
    
    $
    67,555
    
    
    $
    95,333
    
    
    $
    95,910Net cash from investing activities
    
    $
    (68,285
    )
    
    $
    (69,364
    )
    
    $
    (97,045
    )
    
    $
    (97,622
    )
 Results of Operations The following table sets forth the percentages of revenues that items in the
accompanying consolidated statements of operations constitute for the indicated
periods (dollars in thousands): Year Ended December 31,2003
    
    2002
    
    2001Revenues
    
    $
    107,474
    
    
    
    100
    %
    
    $
    100,703
    
    
    
    100
    %
    
    $
    84,221
    
    
    
    100
    %Operating expenses:Operating (excluding depreciation and amortization)
    
    
    44,019
    
    
    
    41
    %
    
    
    39,168
    
    
    
    39
    %
    
    
    30,536
    
    
    
    36
    %Selling, general and administrative
    
    
    19,590
    
    
    
    18
    %
    
    
    19,031
    
    
    
    19
    %
    
    
    16,490
    
    
    
    20
    %Depreciation and amortization
    
    
    33,109
    
    
    
    31
    %
    
    
    19,813
    
    
    
    19
    %
    
    
    60,971
    
    
    
    72
    %Impairment of franchises
    
    
    
    
    
    
    
    
    
    
    96,551
    
    
    
    96
    %
    
    
    
    
    
    
    Acquisition liability settlements
    
    
    (402
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    96,316
    
    
    
    90
    %
    
    
    174,563
    
    
    
    173
    %
    
    
    107,997
    
    
    
    128
    %Income (loss) from operations
    
    
    11,158
    
    
    
    10
    %
    
    
    (73,860
    )
    
    
    (73
    %)
    
    
    (23,776
    )
    
    
    (28
    %)Other income (expense):Interest expense, net
    
    
    (10,835
    )
    
    
    
    
    
    
    (9,927
    )
    
    
    
    
    
    
    (8,903
    )Other, net
    
    
    
    
    
    
    
    
    
    
    140
    
    
    
    
    
    
    
    (154
    )(10,835
    )
    
    
    
    
    
    
    (9,787
    )
    
    
    
    
    
    
    (9,057
    )Net income (loss)
    
    $
    323
    
    
    
    
    
    
    $
    (83,647
    )
    
    
    
    
    
    $
    (32,833
    )
 Year Ended December 31, 2003 Compared to Year Ended December 31, 2002 Revenues.Revenues increased by $6.8 million, or 7%, from $100.7 million for
the year ended December 31, 2002 to $107.5 million for the year ended December
31, 2003. This increase is principally the result of an increase in the number
of analog, digital and high-speed data customers, as well as price increases
for video and high-speed data services. Our goal is to increase revenues by
implementing limited 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 VOD, to our existing customer base
and commercial customers. 15




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Revenues by service offering are as follows (dollars in thousands): Year ended December 31,2003
    
    2002
    
    2003 over 2002% of
    
    
    
    
    
    % ofAmount
    
    Revenues
    
    Amount
    
    Revenues
    
    Change
    
    % ChangeVideo
    
    $
    81,967
    
    
    
    77
    %
    
    $
    79,224
    
    
    
    79
    %
    
    $
    2,743
    
    
    
    3
    %High-speed data
    
    
    9,895
    
    
    
    9
    %
    
    
    5,556
    
    
    
    5
    %
    
    
    4,339
    
    
    
    78
    %Advertising sales
    
    
    5,504
    
    
    
    5
    %
    
    
    6,270
    
    
    
    6
    %
    
    
    (766
    )
    
    
    (12
    %)Commercial
    
    
    2,355
    
    
    
    2
    %
    
    
    1,863
    
    
    
    2
    %
    
    
    492
    
    
    
    26
    %Other
    
    
    7,753
    
    
    
    7
    %
    
    
    7,790
    
    
    
    8
    %
    
    
    (37
    )
    
    
    $
    107,474
    
    
    
    100
    %
    
    $
    100,703
    
    
    
    100
    %
    
    $
    6,771
    
    
    
    7
    %
 Video revenues consist primarily of revenues from analog and digital video
services provided to our non-commercial customers. Video revenues increased by
$2.7 million, or 3%, for the year ended December 31, 2003 compared to the year
ended December 31, 2002. The increase was primarily due to price increases in
our video products. Revenues from high-speed data services provided to our non-commercial customers
increased $4.3 million, or 78%, from $5.6 million for the year ended December
31, 2002 to $9.9 million for the year ended December 31, 2003. The increase
was primarily due to the addition of high-speed data customers within our
existing service areas. Advertising sales revenues consist primarily of revenues from commercial
advertising customers, programmers and other vendors. Advertising sales
decreased $0.8 million, or 12%, from $6.3 million for the year ended December
31, 2002 to $5.5 million for the year ended December 31, 2003, primarily as a
result of a decrease in advertising from vendors and offset partially by an
increase in local advertising sales revenues. For the years ended December 31,
2003 and 2002, we received $0.3 million and $1.6 million, respectively, in
advertising revenue from vendors. Commercial revenues consist primarily of revenues from video and high-speed
data services to our commercial customers. Commercial revenues increased $0.5
million, or 26%, from $1.9 million for the year ended December 31, 2002, to
$2.4 million for the year ended December 31, 2003, primarily due to 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. For the years
ended December 31, 2003 and 2002, franchise fees represented approximately 52%
and 49%, respectively, of total other revenues. Other revenues decreased $37
thousand for the year ended December 31, 2002 compared to the year ended
December 31, 2003. The decrease was primarily due to a decrease in franchise
fees after a Federal Communications Commission (FCC) ruling in March 2002, no
longer requiring the collection of franchise fees for high-speed data services.
Franchise fee revenues are collected from customers and remitted to franchise
authorities. The decrease in accounts receivable of 34% compared to the increase in revenues
of 7% is primarily due to the timing of collection of receivables from
programmers for fees associated with the launching of their networks, coupled
with our tightened credit and collections policy. These fees from programmers
are not recorded as revenue but, rather, are recorded as reductions of
programming expense on a straight-line basis over the term of the contract. 16




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##### Table of Contents



Operating expenses. Operating expenses increased by $4.9 million, or 12%, from
$39.2 million for the year ended December 31, 2002 to $44.0 million for the
year ended December 31, 2003. Programming costs included in the accompanying
consolidated statements of operations were $27.5 million and $25.2 million,
representing 63% and 64% of total operating expenses for the years ended
December 31, 2003 and 2002, respectively. Key expense components as a
percentage of revenues are as follows (dollars in thousands): Year ended December 31,2003
    
    2002
    
    2003 over 2002% of
    
    
    
    
    
    % ofAmount
    
    Revenues
    
    Amount
    
    Revenues
    
    Change
    
    % ChangeProgramming
    
    $
    27,540
    
    
    
    26
    %
    
    $
    25,215
    
    
    
    25
    %
    
    $
    2,325
    
    
    
    9
    %Advertising sales
    
    
    2,504
    
    
    
    2
    %
    
    
    2,358
    
    
    
    2
    %
    
    
    146
    
    
    
    6
    %Service
    
    
    13,975
    
    
    
    13
    %
    
    
    11,595
    
    
    
    12
    %
    
    
    2,380
    
    
    
    21
    %$
    44,019
    
    
    
    41
    %
    
    $
    39,168
    
    
    
    39
    %
    
    $
    4,851
    
    
    
    12
    %
 Programming costs consist primarily of costs paid to programmers for the
provision of analog, premium and digital channels and pay-per-view programs.
The increase in programming costs of $2.3 million, or 9%, was due to price
increases, particularly in sports programming, and due to an increased number
of channels carried on our systems. Programming costs were reduced by the
amortization of payments received from programmers in support of launches of
new channels against programming costs of $1.8 million and $1.5 million for the
years ended December 31, 2003 and 2002, 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 due to 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
cable programming and inflationary or negotiated annual increases. Our
increasing programming costs will result in declining video product margins 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 incremental
high-speed data revenues, advertising revenues and commercial services
revenues. Advertising sales expenses consist of costs related to traditional advertising
services provided to advertising customers, including salaries and benefits and
commissions. Advertising sales expenses increased $0.1 million, or 6%,
primarily due to increased sales commissions, taxes and benefits. 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 $2.4 million, or 21%, resulted
primarily from additional activity associated with ongoing infrastructure
maintenance and customer service, including activities associated with our
promotional programs. Selling, general and administrative expenses. Selling, general and
administrative expenses increased by $0.6 million, or 3%, from $19.0 million
for the year ended December 31, 2002 to $19.6 million for the year ended
December 31, 2003. Key components of expense as a percentage of revenues are
as follows (dollars in thousands): Year ended December 31,2003
    
    2002
    
    2003 over 2002% of
    
    
    
    
    
    % ofAmount
    
    Revenues
    
    Amount
    
    Revenues
    
    Change
    
    % ChangeGeneral and administrative
    
    $
    18,145
    
    
    
    17
    %
    
    $
    16,436
    
    
    
    16
    %
    
    $
    1,709
    
    
    
    10
    %Marketing
    
    
    1,445
    
    
    
    1
    %
    
    
    2,595
    
    
    
    3
    %
    
    
    (1,150
    )
    
    
    (44
    %)$
    19,590
    
    
    
    18
    %
    
    $
    19,031
    
    
    
    19
    %
    
    $
    559
    
    
    
    3
    %
 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 10%, resulted primarily from increases in call
center costs of $2.3 million and billing 17




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expenses of $0.2 million. These increases were partially offset by a decrease
in bad debt and collection expense of $1.4 million as we continue to realize
benefits from our strengthened credit policies. Marketing expenses decreased $1.2 million, or 44%, due to reduced promotional
activity related to our service offerings including reductions in advertising,
telemarketing and direct sales activities. However, we expect marketing
expenses to increase in 2004. Depreciation and amortization.Depreciation and amortization expense increased
by $13.3 million, or 67%, from $19.8 million in 2002 to $33.1 million in 2003
due primarily to an increase in depreciation expense related to additional
capital expenditures in 2003 and 2002. Impairment of franchises.We performed our annual impairment assessments on
October 1, 2002 and 2003 using an independent third-party appraiser. Revised
estimates of future cash flows and the use of a lower projected long-term
growth rate in our valuation led to a $96.6 million impairment charge in the
fourth quarter of 2002. Our 2003 assessment performed on October 1, 2003 did
not result in an impairment. We do not expect to incur impairment charges of
comparable magnitude to the 2002 charge in the future. Acquisition liability settlements.Acquisition liability settlements of $0.4
million for the year ended December 31, 2003 represents the reversal of
estimated liabilities recorded in connection with prior business combinations,
which, based on an evaluation of current facts and circumstances, are no longer
required. Interest expense, net. Interest expense, net, increased $0.9 million from $9.9
million to $10.8 million, or 9%, in 2003 compared to 2002. This increase is
the result of the accretion and cash interest associated with our senior
discount notes. Net income (loss). Net loss decreased $84 million from a net loss of $83.6
million to net income of $0.3 million for the year ended December 31, 2003
compared to 2002, as a result of the combination of factors described above.
The impact of acquisition liability settlements was to increase net income by
$0.4 million in 2003. The impact of the impairment of franchises was to
increase net loss by $96.6 million in 2002. 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 debt 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 parent companies. The mix of
funding sources changes from period to period, but for the year ended December
31, 2003, 100% of our funding requirements were from cash flows from operating
activities. During 2004, we expect to fund our liquidity and capital
requirements principally through cash flows from operating activities. 18




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The following table summarizes our payment obligations as of December 31, 2003
under our long-term debt and certain other contractual obligations and
commitments (dollars in thousands). Payment by PeriodLess than 1
    
    
    
    
    
    
    
    
    
    More than 5Total
    
    year
    
    1-3 years
    
    3-5 years
    
    yearsContractual ObligationsLong-Term Debt (1)
    
    $
    114,413
    
    
    $
    
    
    
    $
    
    
    
    $
    114,413
    
    
    $
    Operating Lease Obligations (1)
    
    
    142
    
    
    
    52
    
    
    
    50
    
    
    
    34
    
    
    
    6Total
    
    $
    114,555
    
    
    $
    52
    
    
    $
    50
    
    
    $
    114,447
    
    
    $
    6
   (1)
    
    The table presents maturities of long-term debt outstanding as of
December 31, 2003. Refer to notes 8 and 14 to our consolidated financial
statements contained in Item 8. Financial Statements and Supplementary
Data for a description of our long-term debt and other contractual
obligations and commitments. The following items are not included in the contractual obligations table due
to various factors discussed below. However, we incur these costs as part of
our operations:  
    
    We rent utility poles used in our operations. Generally, pole rentals
are cancellable on short notice, but we anticipate that such rentals
will recur. Rent expense incurred for pole rental attachments for
each of the years ended December 31, 2003, 2002 and 2001, was $1
million.  
    
    We pay franchise fees under multi-year franchise agreements based on a
percentage of revenues earned from video service per year. We also
pay other franchise related costs, such as public education grants,
under multi-year agreements. Franchise fees and other franchise
related costs included in the accompanying statements of operations
were $4 million, $4 million and $3 million for the years ended
December 31, 2003, 2002 and 2001, respectively.  
    
    Our parent companies negotiate and enter into programming agreements
covering all of their subsidiaries, including us. We pay programming
fees under these multi-year contracts ranging from three to six years
typically based on a flat fee per customer, which may be fixed for the
term or may in some cases, escalate over the term. Programming costs
included in the accompanying statements of operations were $28
million, $25 million and $22 million for the years ended December 31,
2003, 2002 and 2001, respectively. The principal amount of our senior notes was $114 million as of December 31,
2003. There was no payment of any interest in respect of the notes prior to
October 15, 2003. Since October 15, 2003, interest on the notes is payable
semi-annually in arrears in cash at a rate of 10% per year. On April 15, 2003,
the notes became redeemable at the option of the issuers thereof, in whole or
in part, initially at 105% of their principal amount at maturity, plus accrued
interest, declining to 100% of the principal amount at maturity, plus accrued
interest, on or after April 15, 2006. Renaissance Media Group has fully and
unconditionally guaranteed the notes. The fair market value of the senior notes was $118 million and $93 million as
of December 31, 2003 and 2002, respectively. The fair market value of the
senior notes is based on quoted market prices. 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, it is unclear
whether 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 affiliates ability to access the public
debt and equity markets, as well as borrowings under our parents credit
facilities, as a source of capital. There can be no assurance that our 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 parent companies ability to
provide us with funding. 19




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Increased funding requirements from customer demand for digital video and
high-speed data services, or the need to offer certain services in certain of
our markets in order to compete effectively could make us further reliant on
our
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 or other unfavorable events, or if we do
not obtain sufficient additional financing on a timely basis. If, at any time,
additional capital or borrowing capacity is required beyond amounts internally
generated or available through traditional debt financings by us, we would
consider:  
    
    further reducing our expenses and capital expenditures, which would
likely impair our ability to increase revenues;  
    
    selling assets; or  
    
    seeking funding from our parent companies through the issuance of
debt or equity by our parent companies, including Charter, Charter
Holdings, CCH II, LLC (CCH II), CCO Holdings, LLC or Charter
Communications Operating, LLC (Charter Operating), the proceeds of
which could be 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 in the past, Paul G. Allen, Charters principal shareholder, and his
affiliates have purchased equity from Charter and Charter Holdco for the
purpose of funding capital contributions to us, there is no obligation for Mr.
Allen or his affiliates to purchase equity from or contribute or loan funds to
us or to our subsidiaries in the future. As a means of enhancing our liquidity, we are currently attempting to cut costs
and are exploring sales of assets. See
 Certain Trends and Uncertainties. Historical Operating, Financing and Investing Activities We held $0.3 million in cash and cash equivalents as of December 31, 2003. We
did not hold any cash and cash equivalents as of December 31, 2002. Operating Activities.Net cash provided by operating activities for the years
ended December 31, 2003, 2002 and 2001 was $14 million, $32 million and $68
million, respectively. Net cash flows from operating activities provided $18
million less cash in 2003 than in 2002 primarily due to the $23 million
reduction in the payable to related party during the year ended December 31,
2003 compared to the corresponding period in 2002. Operating activities provided $36 million less cash in 2002 than in 2001
primarily due to changes in operating assets and liabilities that provided $41
million less cash in 2002 than in 2001. Investing Activities.Net cash used in investing activities for the years ended
December 31, 2003, 2002 and 2001 was $14 million, $32 million and $69 million,
respectively. Investing activities used $18 million less cash in 2003 than in
2002 primarily as a result of reductions in purchases of property, plant and
equipment as a result of reduced rebuild and upgrade activities and our efforts
to reduce capital expenditures. Investing activities used $37 million less cash in 2002 than in 2001 primarily
as a result of reductions in capital expenditures. Capital Expenditures We have significant ongoing capital expenditure requirements. However, we
experienced a significant decline in such requirements in 2003, compared to
prior years. This decline in 2003 was primarily the result of a substantial
reduction in rebuild costs as our network had been largely upgraded and rebuilt
in prior years, consumption of inventories, negotiated savings in contract
labor and network components, including digital set-top terminals and cable
modems and reduced volume of installation related activities. Capital
expenditures were $11 million, $32 million and $62 million for the years ended
December 31, 2003, 2002 and 2001, respectively. The majority of the 20




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capital
expenditures in 2003 related to our customer premise equipment. The majority
of the capital expenditures in 2002 related to our rebuild and upgrade program
and purchases of customer premise equipment. Upgrading our cable systems has enabled us to offer digital television,
high-speed data services, VOD, 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 years ended December 31, 2003, 2002 and 2001, our liabilities
related to capital expenditures decreased $2 million, $0.7 million and $7
million, respectively. During 2004, we expect to spend a total of $10 million to $20 million on
capital expenditures. The nature of these expenditures is expected to continue
to migrate from upgrade/rebuild to customer premise equipment and scalable
infrastructure. Expected capital expenditures for 2004 are consistent with our
total capital expenditures for 2003 and significantly lower than 2002 levels
because (1) our rebuild and upgrade plans are largely completed, (2) a greater
portion of our work force is focused on maintenance and period related
activities, (3) our purchases of digital set-top terminals have declined and
(4) the volume of installation related activities has declined. We expect to
fund capital expenditures for 2004 primarily from cash flows from operating
activities. Indenture Restrictions and Covenants The following description is merely a summary of certain material provisions of
our public notes. The summary does not restate the terms of the public notes
in their entirety, nor does it describe all terms of the public notes. The
instruments governing the public notes are complicated and you should consult
such instruments for more detailed information regarding our public notes. Our
public notes are listed as exhibits to this annual report. Generally, these
restrictions apply to us and to our restricted subsidiaries, which are
currently all of our subsidiaries. Change of Control.In the event of a specified change of control, we must offer
to repurchase any then outstanding public notes at 101% of their principal
amount or accreted value, as applicable, plus accrued and unpaid interest, if
any. See - Certain Trends and Uncertainties  Long-Term Indebtedness  Change
of Control Payments. Limitation on Indebtedness.The indenture contains a number of significant
covenants that could adversely impact our business. In particular, our
indenture restricts our and our subsidiaries ability to:  
    
    incur additional debt;  
    
    pay dividends on equity or repurchase equity;  
    
    grant liens;  
    
    make investments;  
    
    sell all or substantially all of our assets or merge with or into other companies;  
    
    sell assets;  
    
    enter into sale-leasebacks;  
    
    in the case of restricted subsidiaries, create or permit to exist
dividend or payment restrictions with respect to the bond issuers,
guarantee the bond issuers debt, or issue specified equity interests;
and  
    
    engage in certain transactions with affiliates. The limitations on incurrence of debt permit us and our restricted subsidiaries
to incur additional debt, so long as we are not in default under the indenture:  
    
    if, after giving effect to the incurrence, we could meet a leverage
ratio (ratio of consolidated debt to four times consolidated EBITDA
from the most recent quarter) of 6.75 to 1.0, and, regardless of
whether the leverage ratio could be met,  
    
    up to the greater of $200 million or 4.5 times our consolidated annualized EBITDA, as defined,  
    
    up to an amount equal to 5% of our consolidated total assets to finance the purchase of new assets,  
    
    up to two times the sum of (a) the net cash proceeds of new equity
issuances and capital contributions, and (b) 80% of the fair market
value of property received by us or an issuer as a capital
contribution, in each case received after the issue date of our notes
and not allocated to make restricted payments, and 21




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
    
    other items of indebtedness for specific purposes such as
intercompany debt, refinancing of existing debt and interest rate swaps
to provide protection against fluctuation in interest rates. The indenture permits us to incur debt under one of the categories above, and
reclassify the debt into a different category.  
    
    Under the indenture governing our notes, we and our restricted
subsidiaries are permitted to pay dividends on equity interests,
repurchase interests, make restricted investments, or make other
specified restricted payments only if we could incur $1.00 of
additional debt under the debt incurrence test, which requires that,
after giving effect to the transaction, we meet the 6.75 to 1.0
leverage ratio of the indebtedness covenant and that no default exists
or would occur as a consequence thereof. If those conditions are met,
we and our restricted subsidiaries are permitted to make restricted
payments in a total amount not to exceed the result of 100% of our
consolidated EBITDA, as defined, minus 130% of our consolidated
interest expense, plus 100% of new cash equity proceeds received by us
and not allocated to the indebtedness covenant, plus returns on certain
investments, all cumulatively from June 1998. We and our restricted
subsidiaries may make permitted investments up to $2 million in related
businesses and other specified permitted investments, restricted
payments up to $10 million, dividends up to 6% each year of the net
cash proceeds of public equity offerings, and other specified
restricted payments without meeting the foregoing test.  
    
    We and our restricted subsidiaries are not permitted to grant liens
on their assets other than specified permitted liens, unless
corresponding liens are granted to secure our notes. Permitted liens
include liens securing debt permitted to be incurred under credit
facilities, liens securing debt incurred under the incurrence of
indebtedness test, in amounts up to the greater of $200 million or 4.5
times our consolidated EBITDA, as defined, liens as deposits for
acquisitions up to 10% of the estimated purchase price, liens securing
permitted financings of new assets, liens securing debt permitted to be
incurred by restricted subsidiaries, and specified liens incurred in
the ordinary course of business.  
    
    We and the issuers of our notes are generally not permitted to sell
or otherwise dispose of all or substantially all of our assets or merge
with or into other companies unless our consolidated net worth after
any such transaction would be no greater than our consolidated net
worth immediately prior to the transaction, or unless we could incur
$1.00 of additional debt under the debt incurrence test, which would
require us to meet a leverage ratio of 6.75 to 1.00 after giving effect
to the transaction.  
    
    We and our subsidiaries may generally not otherwise sell assets or,
in the case of subsidiaries, equity interests, unless we receive
consideration at least equal to the fair market value of the assets,
consisting of at least 75% cash, temporary cash investments or
assumption of debt. Charter Holdings and its restricted subsidiaries
(including us) are then required within 12 months after any asset sale
either to commit to use the net cash proceeds over a specified
threshold either to acquire assets used in their own or related
businesses or use the net cash proceeds to repay debt, or to offer to
repurchase our notes with any remaining proceeds.  
    
    We and our restricted subsidiaries may generally not engage in sale
and leaseback transactions unless the lease term does not exceed three
years or the proceeds are applied in accordance with the covenant
limiting asset sales.  
    
    Our restricted subsidiaries may generally not enter into
restrictions on our abilities to make dividends or distributions or
transfer assets to us except those not more restrictive than is
customary in comparable financings.  
    
    Our restricted subsidiaries are not permitted to guarantee or
pledge assets to secure our debt or the debt of our restricted
subsidiaries, unless the guarantying subsidiary issues a guarantee of
our notes of comparable priority and tenor, and waives any rights of
reimbursement, indemnity or subrogation arising from the guarantee
transaction for at least one year.  
    
    We and our restricted subsidiaries are generally not permitted to
issue or sell equity interests in restricted subsidiaries, except sales
of common stock of restricted subsidiaries so long as the proceeds of
the sale are applied in accordance with the asset sale covenant, and
issuances as a result of which the restricted 22




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subsidiary is no longer a
restricted subsidiary and any remaining investment in that subsidiary
is permitted by the covenant limiting restricted payments.
    
    The indenture governing our notes also restricts our ability and
the ability of our restricted subsidiaries to enter into certain
transactions with affiliates involving consideration in excess of $2
million without a determination by the disinterested members of the
board of directors that the transaction is on terms no less favorable
than arms length, or transactions with affiliates involving over $4
million with affiliates without receiving an independent opinion as to
the fairness of the transaction to us. All of these covenants are subject to additional specified exceptions. Our indenture includes various events of default. Under these provisions, a
failure by us or any of our restricted subsidiaries to pay any indebtedness
(other than under our notes) having a principal amount of $10 million or more
(or any other default under any such indebtedness resulting in its
acceleration) would result in an event of default under the indenture governing
our public notes. See  Certain Trends and Uncertainties  Restrictive
Covenants. Certain Trends and Uncertainties The following discussion highlights a number of trends and uncertainties, in
addition to those discussed elsewhere in this annual report and in other
documents that we file with the SEC, 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:  
    
    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. The 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 that could result in
acceleration of our publicly held 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 our 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 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 to fund our other liquidity and
capital needs. As a means of enhancing our liquidity, we are currently
attempting to cut costs and are exploring sales of assets. 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 23




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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 subsidiaries in the future. If we or our 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
substantial amount of debt. Any financial or liquidity problems of our
indirect parent companies would likely cause serious disruption to our business
and have a material adverse effect on our operations and results. Any such
event would likely 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 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, and several class action lawsuits
were filed in Delaware state court against Charter and certain of its directors
and officers. Finally, two shareholders derivative suits were filed in
Missouri state court against Charter, its then current directors and its former
independent auditor. These actions were consolidated during the fourth quarter
of 2002. The federal shareholders derivative suit, the Delaware class actions
and the consolidated derivative suit each allege that the defendants breached
their fiduciary duties. 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 currently 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 subsequently issued a formal order of investigation
dated January 23, 2003, and subsequent related document and testimony
subpoenas. The investigation and subpoenas generally concern 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. Charter has advised us that it is
fully cooperating with the SEC staff. Due to the inherent uncertainties of litigation and investigations, Charter
cannot predict the ultimate outcome of these proceedings. An unfavorable
outcome in the lawsuits or the government investigations described above could
have a material adverse effect on our consolidated financial condition or
results of operations. In addition, the restatement of our 2000, 2001 and 2002 financial statements
may lead to additional allegations in the pending securities class and
shareholders derivative actions against Charter, or to additional claims being
filed or to investigations being expanded or commenced. These proceedings, and
Charters actions in response to these proceedings, could result in substantial
costs, substantial potential liabilities 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. In some
instances, we compete against companies with fewer regulatory burdens, easier
access to financing, greater personnel resources, greater brand 24




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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 and aggressive pricing, has had an
adverse impact on our ability to retain customers. Local telephone companies
and electric utilities can compete in this area, and they increasingly may do
so in the future. 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. In 2004, an electrical utility will commence
competition offering video, high-speed data and telephony service with one of
our systems, serving approximately 12% of our analog video customers and
approximately 14% of our homes passed. Further loss of customers to DBS,
electrical utilities or other alternative video and data services could have a
material negative impact on our business. 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. 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 our 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, our ability to properly manage our operations will be impacted by our
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 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. As measured by programming
costs, and excluding premium services (substantially all of which were
renegotiated and renewed in 2003), as of February 18, 2004, approximately 34%
of our parents current programming contracts, which we operate under, are
scheduled to expire by the end of 2004, and approximately another 11% by the
end of 2005. There can be no assurance that these agreements will be renewed
on favorable or comparable terms. 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. Public Notes Price Volatility.The market price of our publicly traded notes
has been and is likely to continue to be highly volatile. We expect that the
price of our 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 Charters (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 legislation adopted in the United States. 25




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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 public notes, regardless of our operating performance. In the past,
securities
litigation has often commenced following periods of volatility in the market
price of our securities, and several purported class action lawsuits were filed
against Charter in 2001 and 2002, following a decline in its stock price. See
Item 3. Legal Proceedings. 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. If we experience reduced operating revenues, it could
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. 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. A failure by us to make or complete a change of control offer
would place us in default of these agreements. Regulation and Legislation.Cable systems 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. 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 this channel usage possibility, although it previously issued a
tentative decision against such dual carriage. 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 a 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 will likely be appealed, but it may
possibly lead to cable operators having to contribute to the federal
governments universal service fund, to open access requirements, and 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. Recently Issued Accounting Standards In December 2003, the Financial Accounting Standards Board (FASB) issued FASB
Interpretation No. 46 (revised December 2003), Consolidation of Variable
Interest Entities(FIN 46R), which addresses how a 26




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##### Table of Contents



business enterprise should
evaluate whether it has a controlling financial interest in an entity through
means other than voting rights and accordingly should consolidate the entity.
FIN 46R replaces FASB Interpretation No. 46, Consolidation of Variable Interest
Entities, which was issued in January 2003. We will be required to apply FIN
46R to variable interests in variable interest entities created after December
31, 2003. For variable interests in variable interest
entities created before December 31, 2003, the FIN 46R will be applied
beginning on March 31, 2004. For any variable interest entities that must be
consolidated under FIN 46R that were created before December 31, 2003, the
assets, liabilities and noncontrolling interests of the variable interest
entity initially would be measured at their carrying amounts with any
difference between the net amount added to the balance sheet and any previously
recognized interest being recognized as the cumulative effect of an accounting
change. If determining the carrying amounts is not practicable, fair value at
the date FIN 46R first applies may be used to measure the assets, liabilities
and noncontrolling interest of the variable interest entity. The adoption of
FIN 46R did not have a material impact on our consolidated financial
statements. In December 2003, the SEC issued Staff Accounting Bulletin (SAB) No. 104,
Revenue Recognition. SAB No. 104 revises or rescinds portions of
interpretative guidance on revenue recognition. SAB No. 104 became effective
immediately upon release and requires registrants to either restate prior
financial statements or report a change in accounting principle. The adoption
of SAB No. 104 did not have a material impact on our consolidated financial
statements. 
 Item 7A.Quantitative and Qualitative Disclosure About Market Risk. Not Applicable. 
 Item 8.Financial Statements and Supplementary Data. Our consolidated financial statements, the related notes thereto, and the
reports of the independent auditors are included in this annual report
beginning on page F-1. Separate financial statements for Capital have not been presented as Capital
had no operations and substantially no assets or equity. Accordingly,
management has determined that such financial statements are not material. 
 Item 9.Changes in and Disagreements with Accountants on Accounting and Financial Disclosure. Previously reported in our Current Report on Form 8-K, dated April 22, 2002 and
filed on April 26, 2002. 
 Item 9A.Controls and Procedures. As of the end of the period covered by this report, management, including our
Chief Executive Officer and Chief Financial Officer, evaluated the
effectiveness of the design and operation of our disclosure controls and
procedures with respect to the information generated for use in this annual
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 Chief Financial Officer concluded that the
disclosure controls and procedures were effective to provide reasonable
assurances that information required to be disclosed in the reports we file or
submit under the Securities Exchange Act of 1934 is recorded, processed,
summarized and reported within the time periods specified in the Commissions
rules and forms. There was no change in our internal control over financial reporting during
2003 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. 27




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PART IV 
 Item 14.Principal Accounting Fees and Services. Audit Fees During the years ended December 31, 2003 and 2002, we incurred fees and related
expenses to KPMG LLP (KPMG) for the audit of our financial statements for the
applicable year and for the review of our interim financial statements totaling
approximately $50,000 and $135,000, respectively. We have derived these fees
by allocating the KPMG fees associated with the audit of Charter and its
subsidiaries, including us. The allocation is based on a ratio of our analog
video customers to the total analog video customers of Charter. Charters Audit Committee appoints, retains, compensates and oversees the
registered public accountants (subject, if applicable, to board of directors
and/or shareholder ratification), and approves in advance all fees and terms
for the audit engagement and non-audit engagements where non-audit services are
not prohibited by Section 10A of the Securities Exchange Act of 1934, as
amended, with registered public accountants. This authority extends over all
audit and non-audit engagements of Charter and its subsidiaries, including us.
Pre-approvals of non-audit services are sometimes delegated to a single member
of Charters Audit Committee. However, any pre-approvals made by Charters
Audit Committees designee are presented at Charters Audit Committees next
regularly scheduled meeting. Charters Audit Committee has an obligation to
consult with management on these matters. Charters Audit Committee approved
100% of the KPMG fees for the years ended December 31, 2003 and 2002. Each
year, including 2003, with respect to the proposed audit engagement, Charters
Audit Committee reviews the proposed risk assessment process in establishing
the scope of examination and the reports to be rendered. In its capacity as a committee of the Board, Charters Audit Committee oversees
the work of the registered public accounting firm (including resolution of
disagreements between management and the public accounting firm regarding
financial reporting) for the purpose of preparing or issuing an audit report or
performing other audit, review or attest services. The registered public
accounting firm reports directly to Charters Audit Committee. In performing
its functions, Charters Audit Committee undertakes those tasks and
responsibilities that, in its judgment, most effectively contribute to and
implement the purposes of Charters Audit Committee charter. For more detail
on Charters Audit Committees authority and responsibilities, see Charters
Audit Committee charter set forth in Appendix A of Charters 2003 Proxy
Statement filed with the SEC on June 24, 2003. 
 Item 15.Exhibits, Financial Statement Schedules, and Reports on Form 8-K. (a) The following documents are filed as part of this annual report:  (1)
    
    Financial Statements.A listing of the financial statements, notes and reports of independent
public accountants required by Item 8 begins on page F-1 of this annual
report.(2)
    
    Financial Statement Schedules.No financial statement schedules are required to be filed by Items 8 and
15(d) because they are not required or are not applicable, or the
required information is set forth in the applicable financial statements
or notes thereto.(3)
    
    Exhibits (listed by numbers corresponding to the Exhibit Table of
Item 601 in Regulation S-K): ExhibitNumber
    
    Description3.1
    
    Certificate of Incorporation of Renaissance Media Capital Corporation and all amendments thereto
(Incorporated by reference to the Exhibit 3.1 of the Registration Statement of Renaissance Media
Group
LLC, Renaissance Media (Louisiana) LLC, Renaissance Media (Tennessee) LLC and Renaissance Media
Capital Corporation on Form S-4 (Commission File No. 333-56679), filed on June 12, 1998).3.2
    
    By-laws of Renaissance Media Capital Corporation (Incorporated by reference to the Exhibit 3.2 of
the Registration Statement of Renaissance Media Group LLC, Renaissance Media (Louisiana) LLC,
 28




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##### Table of Contents



ExhibitNumber
    
    DescriptionRenaissance Media (Tennessee) LLC and Renaissance Media Capital Corporation on Form S-4
(Commission File No. 333-56679), filed on June 12, 1998).3.3
    
    Certificate of Formation of Renaissance Media (Louisiana) LLC (Incorporated by reference to
the Exhibit 3.3 of the Registration Statement of Renaissance Media Group LLC, Renaissance Media
(Louisiana) LLC, Renaissance Media (Tennessee) LLC and Renaissance Media Capital Corporation
on Form S-4 (Commission File No. 333-56679), filed on June 12, 1998).3.4
    
    Certificate of Formation of Renaissance Media, LLC (Incorporated by reference to Exhibit 3.4 of the
annual report on Form 10-K of Renaissance Media Group LLC, Renaissance Media (Louisiana)
LLC, Renaissance Media (Tennessee) and Renaissance Media Capital Corporation, filed March 30, 2000
(Commission File No. 333-56679)).3.5
    
    Certificate of Formation of Renaissance Media (Tennessee) LLC (Incorporated by reference to the
Exhibit 3.5 of the Registration Statement of Renaissance Media Group LLC, Renaissance Media
(Louisiana) LLC, Renaissance Media (Tennessee) LLC and Renaissance Media Capital Corporation on
Form S-4 (Commission File No. 333-56679), filed on June 12, 1998).3.6
    
    Certificate of Formation of Renaissance Media Group LLC (Incorporated by reference to the Exhibit 3.7
of the Registration Statement of Renaissance Media Group LLC, Renaissance Media (Louisiana) LLC,
Renaissance Media (Tennessee) LLC and Renaissance Media Capital Corporation on Form S-4
(Commission File No. 333-56679), filed on June 12, 1998).3.7
    
    Amended and Restated Limited Liability Agreement of Renaissance Media Group LLC, dated
April 29, 1999 (Incorporated by reference to Exhibit 3.9 of the Quarterly Report on Form 10-Q
of Renaissance Media Group LLC, Renaissance Media (Louisiana) LLC, Renaissance Media
(Tennessee) LLC and Renaissance Media Capital Corporation for the quarter ended March 31, 1999,
filed on May 17, 1999 (Commission File No. 333-56679)).3.8
    
    Amended and Restated Limited Liability Agreement of Renaissance Media (Louisiana) LLC,
dated April 29, 1999 (Incorporated by reference to Exhibit 3.10 of the Quarterly Report on Form 10-Q
of
Renaissance Media Group LLC, Renaissance Media (Louisiana) LLC, Renaissance Media (Tennessee)
LLC and Renaissance Media Capital Corporation for the quarter ended March 31, 1999, filed on
May 17, 1999 (Commission File No. 333-56679)).3.9
    
    Amended and Restated Limited Liability Agreement of Renaissance Media (Tennessee) LLC,
dated April 29, 1999 (Incorporated by reference to Exhibit 3.11 of the Quarterly Report on Form 10-Q
of
Renaissance Media Group LLC, Renaissance Media (Louisiana) LLC, Renaissance Media (Tennessee)
LLC and Renaissance Media Capital Corporation for the quarter ended March 31, 1999, filed
on May 17, 1999 (Commission File No. 333-56679)).3.10
    
    Amended and Restated Limited Liability Agreement of Renaissance Media LLC, dated April 30, 1999
(Incorporated by reference to Exhibit 3.12 of the Quarterly Report on Form 10-Q of Renaissance
Media Group LLC, Renaissance Media (Louisiana) LLC, Renaissance Media (Tennessee) LLC and
Renaissance Media Capital Corporation for the quarter ended March 31, 1999, filed on May 17, 1999
(Commission File No. 333-56679)).4.1
    
    Indenture dated as of April 9, 1998, by and among Renaissance Media (Louisiana) LLC, Renaissance
Media (Tennessee) LLC, Renaissance Media Capital Corporation, Renaissance Media Group LLC
and United States Trust Company of New York, as Trustee (Incorporated by reference to the
Exhibit 4.1 of the Registration Statement of Renaissance Media Group LLC, Renaissance Media
(Louisiana) LLC, Renaissance Media (Tennessee) LLC and Renaissance Media Capital Corporation on
Form S-4 (Commission File No. 333-56679), filed on June 12, 1998).10.1(a)+
    
    Charter Communications Holdings, LLC 1999 Option Plan (Incorporated by reference to Exhibit 10.4 to
Amendment No. 4 to the registration statement on Form S-4 of Charter Communications Holdings, LLC
and Charter Communications Holdings Capital Corporation filed on July 22, 1999 (File No.
333-77499)).10.1(b)+
    
    Assumption Agreement regarding Option Plan, dated as of May 25, 1999, by and between Charter
Communications Holdings, LLC and Charter Communications Holding Company, LLC (Incorporated by
reference to Exhibit 10.13 to Amendment No. 6 to the registration statement on Form S-4 of Charter
Communications Holdings, LLC and Charter Communications Holdings Capital Corporation filed on August
27, 1999 (File No. 333-77499)).
 29




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##### Table of Contents



ExhibitNumber
    
    Description10.1(c)+
    
    Form of Amendment No. 1 to the Charter Communications Holdings, LLC 1999 Option Plan (Incorporated
by reference to Exhibit 10.10(c) to Amendment No. 4 to the registration statement on Form S-1 of
Charter Communications, Inc. filed on November 1, 1999 (File No. 333-83887)).10.1(d)+
    
    Amendment No. 2 to the Charter Communications Holdings, LLC 1999 Option Plan (Incorporated by
reference to Exhibit 10.4(c) to the annual report on Form 10-K filed by Charter Communications, Inc.
on March 30, 2000 (File No. 000-27927)).10.1(e)+
    
    Amendment No. 3 to the Charter Communications 1999 Option Plan (Incorporated by reference to Exhibit
10.14(e) to the annual report of Form 10-K of Charter Communications, Inc. filed on March 29, 2002
(File No. 000-27927).10.1(f)+
    
    Amendment No. 4 to the Charter Communications 1999 Option Plan (Incorporated by reference to Exhibit
10.10(f) to the annual report on Form 10-K of Charter Communications, Inc. filed on April 15, 2003
(File No. 000-27927)).10.2(a)+
    
    Charter Communications, Inc. 2001 Stock Incentive Plan (Incorporated by reference to Exhibit 10.25
to the quarterly report on Form 10-Q filed by Charter Communications, Inc. on May 15, 2001 (File No.
000-27927)).10.2(b)+
    
    Amendment No. 1 to the Charter Communications, Inc. 2001 Stock Incentive Plan (Incorporated by
reference to Exhibit 10.11(b) to the annual report on Form 10-K of Charter Communications, Inc.
filed on April 15, 2003 (File No. 000-27927)).10.2(c)+
    
    Amendment No. 2 to the Charter Communications, Inc. 2001 Stock Incentive Plan (Incorporated by
reference to Exhibit 10.10 to the quarterly report on Form 10-Q filed by Charter Communications,
Inc. on November 14, 2001 (File No. 000-27927).10.2(d)+
    
    Amendment No. 3 to the Charter Communications, Inc. 2001 Stock Incentive Plan effective January 2,
2002 (Incorporated by reference to Exhibit 10.15(c) to the annual report of Form 10-K of Charter
Communications, Inc. filed on March 29, 2002 (File No. 000-27927).10.2(e)+
    
    Amendment No. 4 to the Charter Communications, Inc. 2001 Stock Incentive Plan (Incorporated by
reference to Exhibit 10.11(e) to the annual report on Form 10-K of Charter Communications, Inc.
filed on April 15, 2003 (File No. 000-27927)).10.2(f)+
    
    Amendment No. 5 to the Charter Communications, Inc. 2001 Stock Incentive Plan (Incorporated by
reference to Exhibit 10.11(f) to the annual report on Form 10-K of Charter Communications, Inc.
filed on April 15, 2003 (File No. 000-27927)).10.2(g)+
    
    Description of Long-Term Incentive Program to the Charter Communications, Inc. 2001 Stock Incentive
Plan (Incorporated by reference to Exhibit 10.11(g) to the annual report on Form 10-K of Charter
Communications, Inc. filed on March 15, 2004 (File No. 000-27927)).10.3(a)+
    
    Letter Agreement, dated May 25, 1999, between Charter Communications, Inc. and Marc Nathanson
(Incorporated by reference to Exhibit 10.36 to the registration statement on Form S-4 of Charter
Communications Holdings, LLC and Charter Communications Holdings Capital Corporation filed on
January 25, 2000 (File No. 333-95351)).10.3(b)+
    
    Letter Agreement, dated March 27, 2000, between CC VII Holdings, LLC and Marc Nathanson, amending
the Letter Agreement dated May 25, 1999 (Incorporated by reference to Exhibit 10.13(b) to the annual
report on Form 10-K of Charter Communications, Inc. filed on April 15, 2003 (File No. 000-27927)).10.4+
    
    Employment Agreement, dated as of October 8, 2001, by and between Carl E. Vogel and Charter
Communications, Inc. (Incorporated by reference to Exhibit 10.4 to the quarterly report on Form 10-Q
filed by Charter Communications, Inc. on November 14, 2001 (File No. 000-27927)).
 30




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##### Table of Contents



ExhibitNumber
    
    Description10.5+
    
    Employment Agreement, dated as of October 18 2001, by and between Stephen E. Silva and Charter
Communications, Inc. (Incorporated by reference to Exhibit 10.5 to the quarterly report on Form 10-Q
filed by Charter Communications, Inc. on November 14, 2001 (File No. 000-27927)).10.6+
    
    Employment Offer Letter, dated December 2, 2003 by and between Charter Communications, Inc. and
Derek Chang (Incorporated by reference to Exhibit 10.24 to the annual report on Form 10-K of Charter
Communications, Inc. filed on March 15, 2004 (File No. 000-27927)).10.7+
    
    Employment Offer Letter, dated December 17, 2003 by and between Charter Communications, Inc. and
Michael Huseby (Incorporated by reference to Exhibit 10.25 to the annual report on Form 10-K of
Charter Communications, Inc. filed on March 15, 2004 (File No. 000-27927)).10.8+
    
    Employment Agreement between Charter Communications, Inc. and Margaret A. Maggie Bellville,
entered into as of April 27, 2003 (Incorporated by reference to Exhibit 10.1 to the quarterly report
on Form 10-Q filed by Charter Communications, Inc. on November 3, 2003 (File No. 000-27927)).14.1
    
    Code of Conduct adopted January 28, 2003 (Incorporated by reference to Exhibit 14.1 to the annual
report on Form 10-K filed by Charter Communications, Inc. on April 15, 2003 (File No. 000-27927)).21.1*
    
    Subsidiaries of Renaissance Media Group, LLC.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 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 (Chief Financial Officer).
   *
    
    Documents attached. + Management compensatory plan or arrangement.  We agree to furnish to the SEC, upon request, copies of any long-term
debt instruments that authorize an amount of securities constituting 10%
or less of the total assets of the respective registrants on a
consolidated basis. (b) Reports on Form 8-K None. SUPPLEMENTAL INFORMATION TO BE FURNISHED WITH REPORTS FILED PURSUANT TO SECTION
15(d) OF THE ACT BY REGISTRANTS WHICH HAVE NOT REGISTERED SECURITIES PURSUANT
TO SECTION 12 OF THE ACT. No annual reports or proxy materials were sent to the registrants security
holders during the year ended December 31, 2003. 31




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SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrants have duly caused this annual report to be signed
on their behalf by the undersigned, thereunder duly authorized. RENAISSANCE MEDIA GROUP LLC
RENAISSANCE MEDIA (LOUISIANA) LLC
RENAISSANCE MEDIA (TENNESSEE) LLCDated: March 25, 2004
    
    By:
    
    CHARTER COMMUNICATIONS, INC.their ManagerBy:
    
    /s/ Carl E. VogelCarl E. VogelPresident and Chief Executive OfficerRENAISSANCE MEDIA CAPITAL CORPORATIONDated: March 25, 2004
    
    By:
    
    /s/ Carl E. VogelCarl E. VogelPresident and Chief Executive Officer
 Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed by the following persons on behalf of the registrants
and in the capacities and on the dates indicated below. Dated: March 25, 2004
    
    By:
    
    /s/ Carl E. VogelCarl E. Vogelsole Director of Renaissance MediaCapital Corporation and Presidentand Chief Executive Officer ofCharter Communications, Inc., in itscapacity as Manager of Renaissance MediaGroup LLC, Renaissance Media (Louisiana)LLC, Renaissance Media (Tennessee) LLC,and Renaissance Media Capital CorporationDated: March 25, 2004
    
    By:
    
    /s/ Michael P. HusebyMichael P. HusebyExecutive Vice President and ChiefFinancial Officer (Principal Financial Officer)of Renaissance Media Capital Corporation andof Charter Communications, Inc., in itscapacity as Manager of Renaissance MediaGroup LLC, Renaissance Media (Louisiana)LLC, Renaissance Media (Tennessee) LLCDated: March 25, 2004
    
    By:
    
    /s/ Paul E. MartinPaul E. MartinSenior Vice President and Controller(Principal Accounting Officer)of Renaissance Media Capital Corporation andof Charter Communications, Inc., in itscapacity as Manager of Renaissance MediaGroup LLC, Renaissance Media(Louisiana) LLC, Renaissance Media(Tennessee) LLC
 32




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##### Table of Contents



RENAISSANCE MEDIA GROUP LLC AND SUBSIDIARIES INDEX TO FINANCIAL STATEMENTS PageRENAISSANCE MEDIA GROUP LLC AND SUBSIDIARIESIndependent Auditors Report
    
    
    F-2Consolidated Balance Sheets as of December 31, 2003 and 2002
    
    
    F-3Consolidated Statements of Operations for the Years Ended December 31, 2003, 2002 and 2001
    
    
    F-4Consolidated Statements of Changes in Members Equity for the Years Ended December 31,
2003, 2002 and 2001
    
    
    F-5Consolidated Statements of Cash Flows for the Years Ended December 31, 2003, 2002 and 2001
    
    
    F-6Notes to Consolidated Financial Statements
    
    
    F-7
 NOTE: Separate financial statements of Renaissance Media Capital Corporation,
Renaissance Media (Louisiana) LLC and Renaissance Media (Tennessee) LLC have
not been presented, in accordance with Rule 3-10(b) of Regulation S-X. F-1




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Independent Auditors Report To the Board of Directors
Renaissance Media Group LLC: We have audited the accompanying consolidated balance sheets of Renaissance
Media Group LLC and subsidiaries (the Company) as of December 31, 2003 and
2002, and the related consolidated statements of operations, changes in
members equity, and cash flows for each of the three years in the period ended
December 31, 2003. These consolidated financial statements are the
responsibility of the Companys management. Our responsibility is to express
an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Renaissance Media
Group LLC and subsidiaries as of December 31, 2003 and 2002, and the results of
their operations and their cash flows for each of the three years in the period
ended December 31, 2003, in conformity with accounting principles generally
accepted in the United States of America. As discussed in Note 3 to the consolidated financial statements, effective
January 1, 2002, the Company adopted Statement of Financial Accounting
Standards No. 142, Goodwill and Other Intangible Assets. /s/ KPMG LLP St. Louis, Missouri
March 1, 2004 F-2




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RENAISSANCE MEDIA GROUP LLC AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS
(dollars in thousands) December 31,2003
    
    2002ASSETSCURRENT ASSETS:Cash and cash equivalents
    
    $
    257
    
    
    $
    Accounts receivable, less allowance for doubtful
accounts of $172 and $278, respectively
    
    
    1,600
    
    
    
    2,421Prepaid expenses and other current assets
    
    
    155
    
    
    
    131Total current assets
    
    
    2,012
    
    
    
    2,552INVESTMENT IN CABLE PROPERTIES:Property, plant and equipment, net of accumulated depreciation
of $87,480 and $57,141, respectively
    
    
    154,540
    
    
    
    175,397Franchises, net of accumulated amortization of
$74,851 and $74,797, respectively
    
    
    252,335
    
    
    
    251,270Total investment in cable properties, net
    
    
    406,875
    
    
    
    426,667OTHER NONCURRENT ASSETS
    
    
    2
    
    
    
    60Total assets
    
    $
    408,889
    
    
    $
    429,279LIABILITIES AND MEMBERS EQUITYCURRENT LIABILITIES:Accounts payable and accrued expenses
    
    $
    16,284
    
    
    $
    15,441Payables to manager of cable systems  related parties
    
    
    44,089
    
    
    
    67,255Total current liabilities
    
    
    60,373
    
    
    
    82,696LONG-TERM DEBT
    
    
    116,223
    
    
    
    113,492OTHER LONG-TERM LIABILITIES
    
    
    3,229
    
    
    
    4,350MEMBERS EQUITY
    
    
    229,064
    
    
    
    228,741Total liabilities and members equity
    
    $
    408,889
    
    
    $
    429,279
 The accompanying notes are an integral part of these consolidated financial statements F-3




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RENAISSANCE MEDIA GROUP LLC AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS
(dollars in thousands) Year Ended December 31,2003
    
    2002
    
    2001REVENUES
    
    $
    107,474
    
    
    $
    100,703
    
    
    $
    84,221OPERATING EXPENSES:Operating (excluding depreciation
and amortization)
    
    
    44,019
    
    
    
    39,168
    
    
    
    30,536Selling, general and administrative
    
    
    19,590
    
    
    
    19,031
    
    
    
    16,490Depreciation and amortization
    
    
    33,109
    
    
    
    19,813
    
    
    
    60,971Impairment of franchises
    
    
    
    
    
    
    96,551
    
    
    
    Acquisition liability settlements
    
    
    (402
    )
    
    
    
    
    
    
    96,316
    
    
    
    174,563
    
    
    
    107,997Income (loss) from operations
    
    
    11,158
    
    
    
    (73,860
    )
    
    
    (23,776
    )OTHER INCOME (EXPENSES):Interest expense, net
    
    
    (10,835
    )
    
    
    (9,927
    )
    
    
    (8,903
    )Other, net
    
    
    
    
    
    
    140
    
    
    
    (154
    )(10,835
    )
    
    
    (9,787
    )
    
    
    (9,057
    )Net income (loss)
    
    $
    323
    
    
    $
    (83,647
    )
    
    $
    (32,833
    )
 The accompanying notes are an integral part of these consolidated financial statements F-4




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RENAISSANCE MEDIA GROUP LLC AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN MEMBERS EQUITY
(dollars in thousands) BALANCE, December 31, 2000
    
    $
    345,221Net loss
    
    
    (32,833
    )BALANCE, December 31, 2001
    
    
    312,388Net loss
    
    
    (83,647
    )BALANCE, December 31, 2002
    
    
    228,741Net income
    
    
    323BALANCE, December 31, 2003
    
    $
    229,064
 The accompanying notes are an integral part of these consolidated financial statements F-5




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RENAISSANCE MEDIA GROUP LLC AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in thousands) Year Ended December 31,2003
    
    2002
    
    2001CASH FLOWS FROM OPERATING ACTIVITIES:Net income (loss)
    
    $
    323
    
    
    $
    (83,647
    )
    
    $
    (32,833
    )Adjustments to reconcile net income (loss) to net cash flows from operating activities:Depreciation and amortization
    
    
    33,109
    
    
    
    19,813
    
    
    
    60,971Impairment of franchises
    
    
    
    
    
    
    96,551
    
    
    
    Noncash interest expense
    
    
    2,731
    
    
    
    9,927
    
    
    
    8,965Acquisition liability settlements
    
    
    (402
    )
    
    
    
    
    
    
    Changes in operating assets and liabilities, net of effects from acquisitions:Accounts receivable
    
    
    821
    
    
    
    (977
    )
    
    
    (506
    )Prepaid expenses and other current assets
    
    
    (39
    )
    
    
    (80
    )
    
    
    (17
    )Accounts payable and accrued expenses and other
    
    
    2,092
    
    
    
    (368
    )
    
    
    (12,871
    )Receivables from and payables to related party
    
    
    (24,412
    )
    
    
    (8,877
    )
    
    
    43,846Net cash flows from operating activities
    
    
    14,223
    
    
    
    32,342
    
    
    
    67,555CASH FLOWS FROM INVESTING ACTIVITIES:Purchases of property, plant and equipment
    
    
    (10,863
    )
    
    
    (31,557
    )
    
    
    (62,094
    )Change in accounts payable and accrued expenses related to capital expenditures
    
    
    (1,984
    )
    
    
    (682
    )
    
    
    (7,266
    )Other investing activities
    
    
    (1,119
    )
    
    
    (103
    )
    
    
    (4
    )Net cash flows from investing activities
    
    
    (13,966
    )
    
    
    (32,342
    )
    
    
    (69,364
    )NET CHANGE IN CASH
    
    
    257
    
    
    
    
    
    
    
    (1,809
    )CASH, beginning of period
    
    
    
    
    
    
    
    
    
    
    1,809CASH, end of period
    
    $
    257
    
    
    $
    
    
    
    $
    CASH PAID FOR INTEREST
    
    $
    5,270
    
    
    $
    
    
    
    $
    
 The accompanying notes are an integral part of these consolidated financial statements F-6




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RENAISSANCE MEDIA GROUP LLC AND SUBSIDIARIES NOTE TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except where indicated) 1. Organization and Basis of Presentation The accompanying 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 transactions and balances
have been eliminated in consolidation. The Company is an indirect wholly-owned subsidiary of Charter Communications
Operating, LLC (Charter Operating) from which the Company receives funding as
needed. As of December 31, 2003, the Company owns and operates cable systems
serving approximately 146,400 (unaudited) analog video customers. The Company
offers its customers traditional 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 video programming,
high-speed data and advanced broadband services on a subscription basis. 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; franchises;
and contingencies. Actual results could differ from those estimates. Restatement of 2001 Results.In 2002, the Company restated its consolidated
financial statements for 2001 and prior. The restatements were primarily
related to the following categories: (i) launch incentives from programmers;
(ii) customer incentives and inducements; (iii) capitalized labor and overhead
costs; (iv) customer acquisition costs; (v) rebuild and upgrade of cable
systems; and (vi) other adjustments. These adjustments reduced revenue by $4
million and increased consolidated net loss by $0.1 million for the year ended
December 31, 2001 and decreased members equity by $1 million as of January 1,
2001. In addition, as a result of certain of these adjustments, the Companys
statement of cash flow was also restated at the time. Net cash flows from
operating activities for the year ended December 31, 2001 increased by $1
million. Reclassifications. Certain 2002 and 2001 amounts have been reclassified to
conform with the 2003 presentation. 2. Liquidity and Capital Resources The Company recognized income from operations of $11 million in 2003 and
incurred losses from operations of $74 million and $24 million in 2002 and
2001, respectively. The Companys net cash flows from operating activities
were $14 million, $32 million and $68 million for the years ending December 31,
2003, 2002 and 2001, 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 Charter Communications,
Inc. (Charter), Charter Communications Holdings, LLC (Charter Holdings) and
Charter Operating. The Company expects to remain in compliance with the
covenants under its indenture, and that cash flow from operating activities
will be sufficient to satisfy its liquidity needs until maturity of the public
notes. The Company expects that it will rely on capital contributions from its parent
companies to repay the principal amount of its public notes at maturity.
However, there can be no assurances that its parent companies will have
sufficient liquidity to satisfy this payment when due. The parent companies
have a substantial amount of debt. Any financial or liquidity problems of the
parent companies would likely cause serious disruption to the Companys
business and have a material adverse effect on its operations and results. Any
such event would likely 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 any of the Companys bond indentures could result
in the acceleration of the Companys payment obligations under F-7




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RENAISSANCE MEDIA GROUP LLC AND SUBSIDIARIES
NOTE TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except where indicated) its debt and, under certain circumstances, in cross-defaults under its
affiliates debt obligations, which could adversely affect its 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 to fund its other
liquidity and capital needs. As a means of enhancing the Companys liquidity,
the Company is currently attempting to cut costs and is exploring sales of
assets. 3. Summary of Significant Accounting Policies Cash Equivalents The Company considers all highly liquid investments with original maturities of
three months or less to be cash equivalents. These investments are carried at
cost, which approximates market value. Property, Plant and Equipment Property, plant and equipment are recorded at cost, including all material,
labor and certain indirect costs associated with the construction of cable
transmission and distribution facilities. Costs associated with initial
customer installations and the additions of network equipment necessary to
enable advanced services are capitalized. Costs capitalized as part of initial
customer installations include materials, labor, and certain indirect costs.
These indirect costs are associated with the activities of the Companys
personnel who assist in connecting and activating the new service and consist
of compensation and overhead costs associated with these support functions.
Overhead costs primarily include employee benefits and payroll taxes, direct
variable costs associated with capitalizable activities, consisting primarily
of installation and construction vehicle costs, the cost of dispatch personnel
and indirect costs directly attributable to capitalizable activities. The
costs of disconnecting service at a customers dwelling or reconnecting service
to a previously installed dwelling are charged to operating expense in the
period incurred. Costs for repairs and maintenance are charged to operating
expense as incurred, while equipment replacement and betterments, including
replacement of cable drops from the pole to the dwelling, are capitalized. Depreciation is recorded using the straight-line method over managements
estimate of the useful lives of the related assets as follows: Cable distribution systems
    
    7-15 yearsCustomer equipment and installations
    
    3-5 yearsVehicles and equipment
    
    1-5 yearsBuildings and leasehold improvements
    
    5-15 yearsFurniture and fixtures
    
    5 years
 Franchises Franchise rights represent the value attributed to agreements with local
authorities that allow access to homes in cable service areas acquired through
the purchase of cable systems. Management estimates the fair value of
franchise rights at the date of acquisition and determines if the franchise has
a finite life or an indefinite life as defined by Statement of Financial
Accounting Standards (SFAS) No. 142, Goodwill and Other Intangible Assets. On
January 1, 2002, the Company adopted SFAS No. 142, which eliminates the
amortization of goodwill and 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 as of October 1, or more frequently
as warranted by events or changes in circumstances (See Note 6). The Company
concluded that all of its franchises qualify for indefinite-life treatment.
Costs incurred in renewing cable franchises are deferred and amortized over 10
years. Prior to the adoption of SFAS No. 142, costs incurred in obtaining and renewing
cable franchises were deferred and amortized using the straight-line method
over a period of 15 years. Franchise rights acquired through the purchase of
cable systems were generally amortized using the straight-line method over a
period of 15 years. The period of 15 years was managements best estimate of
the useful lives of the franchises and assumed that substantially all of F-8




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RENAISSANCE MEDIA GROUP LLC AND SUBSIDIARIES
NOTE TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except where indicated) those franchises that expired during the period would be renewed but not
indefinitely. The Company evaluated the recoverability of franchises for
impairment when events or changes in circumstances indicated that the carrying
amount of an asset may not be recoverable. Valuation of Property, Plant and Equipment The Company evaluates the recoverability of property, plant and equipment for
impairment when events or changes in circumstances indicate that the carrying
amount of an asset may not be recoverable. Such events or changes in
circumstances could include such factors as changes in technological advances,
fluctuations in the fair value of such assets, adverse changes in relationships
with local franchise authorities, adverse changes in market conditions or poor
operating results. If a review indicates that the carrying value of such asset
is not recoverable from estimated undiscounted cash flows, the carrying value
of such asset is reduced to its estimated fair value. While the Company
believes that its estimates of future cash flows are reasonable, different
assumptions regarding such cash flows could materially affect its evaluations
of asset recoverability. No impairment of property, plant and equipment
occurred in 2003, 2002 and 2001. Revenue Recognition Revenues from residential and commercial video and high-speed data services are
recognized when the related services are provided. Advertising sales are
recognized at estimated realizable values in the period that the advertisements
are broadcast. Local governmental authorities impose franchise fees on the
Company ranging up to a federally mandated maximum of 5% of gross revenues as
defined in the franchise agreement. Such fees are collected on a monthly basis
from the Companys customers and are periodically remitted to local franchise
authorities. Franchise fees collected and paid are reported as revenues on a
gross basis with a corresponding expense pursuant to Emerging Issues Task Force
(EITF) Issue No. 01-14, Income Statement Characterization of Reimbursements
Received for Out of Pocket Expenses Incurred. Programming Costs The Companys parent companies negotiate and enter into programming agreements
covering all of their subsidiaries, including the Company. These contracts
allow the Company to obtain analog, digital and premium video programming from
program suppliers whose compensation is typically based on a flat fee per
customer. The cost of the right to exhibit programming under such arrangements
is recorded in operating expenses in the month the programming is available for
exhibition. Programming costs are paid each month based on calculations
performed by the Company and are subject to adjustment based on periodic audits
performed by the programmers. Additionally, certain programming contracts
contain launch incentives to be paid by the programmers. The Company receives
these payments related to the promotion and activation of the programmers
cable television channel and recognizes the launch incentives on a
straight-line basis over the life of the programming agreement as a reduction
of programming expense. This reduction of programming expense was $2 million,
$2 million and $1 million for the years ended December 31, 2003, 2002 and 2001,
respectively. Programming costs included in the accompanying statements of
operations were $28 million, $25 million and $22 million for the years ended
December 31, 2003, 2002 and 2001, respectively. As of December 31, 2003 and
2002, the deferred amount of launch incentives, included in accounts payable
and accrued expenses, totaled $2 million and $2 million, respectively, and the
deferred amount of launch incentives included in other long-term liabilities,
totaled $3 million and $4 million, respectively. Advertising Costs Advertising costs associated with marketing the Companys products and services
are generally expensed as costs are incurred. Such advertising expense was $1
million for each of the years ended December 31, 2003, 2002 and 2001. F-9




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RENAISSANCE MEDIA GROUP LLC AND SUBSIDIARIES
NOTE TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except where indicated) Acquisition Liability Settlements The Company recognized $0.4 million of benefit for the year ended December 31,
2003 as a result of the reversal of estimated liabilities recorded in
connection with prior business combinations, which, based on an evaluation of
current facts and circumstances, are no longer required. Income Taxes The Company is a single member limited liability company not subject to income
tax. The Company holds all operations through indirect subsidiaries. The
majority of these indirect subsidiaries are limited liability companies that
are also not subject to income tax. A certain indirect subsidiary is a
corporation that is subject to income tax, but has no operations and has not
generated any taxable income since inception. Any taxable income that would be
generated by the Company would be the responsibility of the Companys equity
owner. As such, the Company has not provided for income taxes in the
accompanying consolidated financial statements. Segments SFAS No. 131, Disclosure about Segments of an Enterprise and Related
Information, established standards for reporting information about operating
segments in annual financial statements and in interim financial reports issued
to shareholders. Operating segments are defined as components of an enterprise
about which separate financial information is available that is evaluated on a
regular basis by the chief operating decisionmaker, or decision making group,
in deciding how to allocate resources to an individual segment and in assessing
performance of the segment. The Companys operations are managed on the basis of geographic divisional
operating segments. The Company has evaluated the criteria for aggregation of
the geographic operating segments under paragraph 17 of SFAS No. 131 and
believes it meets each of the respective criteria set forth. The Company
delivers similar products and services within each of its geographic divisional
operations. Each geographic and divisional service area utilizes similar means
for delivering the programming of the Companys services; have similarity in
the type or class of customer receiving the products and services; distributes
the Companys services over a unified network; and operates within a consistent
regulatory environment. In addition, each of the geographic divisional
operating segments has similar economic characteristics. In light of the
Companys similar services, means for delivery, similarity in type of
customers, the use of a unified network and other considerations across its
geographic divisional operating structure, management has determined that the
Company has one reportable segment, broadband services. 4. Allowance for Doubtful Accounts Activity in the allowance for doubtful accounts is summarized as follows for
the years presented: December 31,2003
    
    2002
    
    2001Balance, beginning of year
    
    $
    278
    
    
    $
    468
    
    
    $
    212Charged to expense
    
    
    1,316
    
    
    
    2,718
    
    
    
    2,142Uncollected balances written off, net of recoveries
    
    
    (1,422
    )
    
    
    (2,908
    )
    
    
    (1,886
    )Balance, end or year
    
    $
    172
    
    
    $
    278
    
    
    $
    468
 F-10




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RENAISSANCE MEDIA GROUP LLC AND SUBSIDIARIES
NOTE TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except where indicated) 5. Property, Plant and Equipment Property, plant and equipment consists of the following as of December 31, 2003
and 2002: 2003
    
    2002Cable distribution systems
    
    $
    219,894
    
    
    $
    209,277Land, buildings and leasehold improvements
    
    
    13,680
    
    
    
    13,679Vehicles and equipment
    
    
    8,446
    
    
    
    9,582242,020
    
    
    
    232,538Less: accumulated depreciation
    
    
    (87,480
    )
    
    
    (57,141
    )$
    154,540
    
    
    $
    175,397
 The Company periodically evaluates the estimated useful lives used to
depreciate its assets and the estimated amount of assets that will be abandoned
or have minimal use in the future. A significant change in assumptions about
the extent or timing of future asset retirements, or in the Companys use of
new technology and upgrade programs, could materially affect future
depreciation expense. Depreciation expense for the years ended December 31, 2003, 2002 and 2001 was
$33 million, $20 million and $33 million, respectively. 6. Franchises The Company constructs and operates its cable systems under non-exclusive
franchises that are granted by state or local government authorities for
varying lengths of time. The Company obtained these franchises primarily
through acquisitions of cable systems accounted for as purchase business
combinations. These acquisitions have primarily been for the purpose of
acquiring existing franchises and related infrastructure and, as such, the
primary asset acquired by the Company has historically been cable franchises. On January 1, 2002, the Company adopted 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 will be
tested for impairment annually, or more frequently as warranted by events or
changes in circumstances. During the first quarter of 2002, the Company had an
independent appraiser perform valuations of its franchises as of January 1,
2002. Based on the guidance prescribed in EITF Issue No. 02-7, Unit of
Accounting for Testing of Impairment of Indefinite-Lived Intangible Assets,
franchises were aggregated into essentially inseparable asset groups to conduct
the valuations. The asset groups generally represented geographic clusters of
the Companys cable systems, which management then believed represented the
highest and best use of those assets. Fair value was determined based on
estimated discounted future cash flows using assumptions that are consistent
with internal forecasts. The appraiser assessed that the fair value of each of
the Companys asset groups exceeded their carrying amount. As a result, no
impairment charge was recorded upon adoption. As required by SFAS No. 142, the
standard has not been retroactively applied to the results for the period prior
to adoption. The Company performed its annual impairment assessment as of October 1, 2002
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,which was issued in October 2002 and requires the
consideration of assumptions that marketplace participants would consider, such
as expectations of future contract renewals and other benefits related to the
intangible asset. Revised estimates of future cash flows and the use of a
lower projected long-term growth rate in the Companys valuation led to
recognition of a $97 million impairment charge in the fourth quarter of 2002.
The valuation completed at October 1, 2003, showed franchise values in excess
of book value and thus resulted in no impairment. F-11




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RENAISSANCE MEDIA GROUP LLC AND SUBSIDIARIES
NOTE TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except where indicated) In determining whether its franchises have an indefinite life, the Company
considered the exclusivity of the franchise, its expected costs of franchise
renewals, and the technological state of the associated cable systems with a
view to whether or not the Company is in compliance with any technology
upgrading requirements. Based on the Companys assessment, all franchises
qualified for indefinite-life treatment. Franchise amortization expense for the years ended December 31, 2003 and 2002
was $54 and $1, which represents the amortization relating to franchise
renewals. Franchise renewals are amortized on a straight-line basis over 10
years. For each of the next five years, amortization expense relating to these
franchises is expected to be approximately $120. Actual amortization expense
to be reported 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. Franchise amortization expense for the year ended
December 31, 2001 was $28 million. As required by SFAS No. 142, the standard has not been retroactively applied to
the results for the period prior to adoption. A reconciliation of net income
(loss) for the years ended December 31, 2003, 2002 and 2001, as if SFAS No. 142
had been adopted as of January 1, 2001, is presented below: Year Ended December 31,2003
    
    2002
    
    2001NET INCOME (LOSS):Reported net income (loss)
    
    $
    323
    
    
    $
    (83,647
    )
    
    $
    (32,833
    )Add back: amortization of indefinite-lived franchises
    
    
    
    
    
    
    
    
    
    
    28,181Adjusted net income (loss)
    
    $
    323
    
    
    $
    (83,647
    )
    
    $
    (4,652
    )
 7. Accounts Payable and Accrued Expenses Accounts payable and accrued expenses consist of the following as of the dates
presented: December 31,2003
    
    2002Accounts payable
    
    $
    2,349
    
    
    $
    553Capital expenditures
    
    
    925
    
    
    
    2,909Accrued interest
    
    
    2,384
    
    
    
    Programming expenses
    
    
    1,720
    
    
    
    2,571Franchises related fees
    
    
    2,873
    
    
    
    1,737State sales tax
    
    
    3,630
    
    
    
    4,266Personal property tax
    
    
    1,172
    
    
    
    1,286Other accrued liabilities
    
    
    1,231
    
    
    
    2,119$
    16,284
    
    
    $
    15,441
 8. Long-Term Debt Long-term debt consists of the following as of the dates presented: December 31,2003
    
    200210% senior discount notes
    
    $
    114,413
    
    
    $
    114,413Unamortized net premium (discount)
    
    
    1,810
    
    
    
    (921
    )$
    116,223
    
    
    $
    113,492
 F-12




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RENAISSANCE MEDIA GROUP LLC AND SUBSIDIARIES
NOTE TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except where indicated) In 1998, Renaissance Louisiana, Renaissance Tennessee and Capital Corporation
issued $163 million principal amount at maturity of 10.000% senior discount
notes due April 15, 2008 (the Notes) for proceeds of $100 million.
Approximately $49 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. The fair market value of the Notes was $118 million and $93 million as of
December 31, 2003 and 2002, respectively. The fair market value of the Notes
is based on quoted market prices. The indenture (Indenture), pursuant to which the Notes were issued, contains
a number of significant covenants that could adversely impact the Companys
business. In particular, the Indenture restricts the Company and its restricted
subsidiaries ability to incur additional debt; pay dividends on equity or
repurchase equity; grant liens; make investments; sell all or substantially all
of its assets or merge with or into other companies; sell assets; enter into
sale-leasebacks; in the case of restricted subsidiaries, create or permit to
exist dividend or payment restrictions with respect to the bond issuers,
guarantee the bond issuers debt, or issue specified equity interests; and
engage in certain transactions with affiliates. There are no significant restrictions on the ability of the Company to obtain
funds from its subsidiaries through dividends or loans, provided that the
Company remains a guarantor under the Indenture and that any loans are
evidenced by promissory notes. Additionally, there are no significant
restrictions on the ability of Renaissance Louisiana and Renaissance Tennessee
to obtain funds from Media through dividends or loans provided that Media
remains a restricted subsidiary under the Indenture. Charter Operating holds the 100% member interest in the Company as collateral
for the Charter Operating credit facility. However, none of the Companys
subsidiaries member interests have been pledged as collateral to the Charter
Operating credit facility. In addition, neither the Company nor any of its
subsidiaries has guaranteed the Charter Operating credit facility nor will such
entities be required to guarantee the Charter Operating credit facility, as
long as the notes are outstanding. 9. Revenues Revenues consist of the following for the years presented: Year ended December 31,2003
    
    2002
    
    2001Video
    
    $
    81,967
    
    
    $
    79,224
    
    
    $
    71,639High-speed data
    
    
    9,895
    
    
    
    5,556
    
    
    
    1,435Advertising sales
    
    
    5,504
    
    
    
    6,270
    
    
    
    2,350Commercial
    
    
    2,355
    
    
    
    1,863
    
    
    
    1,533Other
    
    
    7,753
    
    
    
    7,790
    
    
    
    7,264$
    107,474
    
    
    $
    100,703
    
    
    $
    84,221
 F-13




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RENAISSANCE MEDIA GROUP LLC AND SUBSIDIARIES
NOTE TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except where indicated) 10. Operating Expenses Operating expenses consist of the following for the years presented: Year ended December 31,2003
    
    2002
    
    2001Programming
    
    $
    27,540
    
    
    $
    25,215
    
    
    $
    21,566Advertising sales
    
    
    2,504
    
    
    
    2,358
    
    
    
    Service
    
    
    13,975
    
    
    
    11,595
    
    
    
    8,970$
    44,019
    
    
    $
    39,168
    
    
    $
    30,536
 11. Selling, General and Administrative Expenses Selling, general and administrative expenses consist of the following for the
years presented: Year ended December 31,2003
    
    2002
    
    2001General and administrative
    
    $
    18,145
    
    
    $
    16,436
    
    
    $
    14,401Marketing
    
    
    1,445
    
    
    
    2,595
    
    
    
    2,089$
    19,590
    
    
    $
    19,031
    
    
    $
    16,490
 12. Comprehensive Loss Comprehensive loss is equal to net loss for the years ended December 31, 2003,
2002 and 2001. 13. Related Party Transactions The following sets forth certain transactions in which the Company and the
directors, executive officers and affiliates of Charter are involved. Unless
otherwise disclosed, management believes that each of the transactions
described below was on terms no less favorable to the Company than could have
been obtained from independent third parties. For further information
regarding related party transactions of the Company and Charter, refer to the
annual report of Charter Holdings filed on Form 10-K with the Securities and
Exchange Commission (SEC) for the year ended December 31, 2003. Charter Communications Holding Company (Charter Holdco) and Charter, both
entities controlled by Paul G. Allen, provide management services for the cable
systems owned or operated by the Company. The management services include such
services as centralized customer billing services, 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
consolidated statements of operations. These costs are allocated based on the
number of analog video customers. Such costs totaled $4 million, $5 million
and $3 million for the years ended December 31, 2003, 2002 and 2001,
respectively. All other costs incurred by Charter Holdco and Charter on behalf
of the Company are considered a part of the management fee and are recorded as
a component of selling, general and administrative expense, in the accompanying
consolidated financial statements. Management fees are stipulated in the
management agreements between Charter Holdco, Charter and the Company. To the
extent management fees charged to the Company are greater (less) than the
expenses incurred by Charter Holdco and Charter, the Company records
distributions to (capital contributions from) Charter Holdco and Charter. For
the years ended December 31, 2003, 2002 and 2001, the management fee charged to
the Company approximated the corporate expenses incurred by Charter Holdco and
Charter on behalf of the Company. The Charter Operating credit facility
prohibits payments of management fees in excess of 3.5% of Charter Operating
and its subsidiaries consolidated revenues during any fiscal year. Any amounts
accrued as management fees in excess of 3.5% of F-14




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RENAISSANCE MEDIA GROUP LLC AND SUBSIDIARIES
NOTE TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except where indicated) consolidated revenues can be carried forward and paid in subsequent fiscal
years, but such payments, together with amounts paid, and within the 3.5% limit
for, such subsequent fiscal year may not exceed 5% of consolidated revenues.
Any deferred amount of the management fee will bear interest at the rate of 10%
per annum, compounded annually, from the date it was due and payable until the
date it is paid. The Company pays costs on behalf of Charter Holdco and Charter. These costs
are reimbursed by Charter Holdco and Charter and are recorded as receivables
from related parties in the accompanying consolidated financial statements. Mr. Allen, the controlling shareholder of Charter, and a number of his
affiliates have interests in various entities that provide services or
programming to the Companys subsidiaries. Given the diverse nature of Mr.
Allens investment activities and interests, and to avoid the possibility of
future disputes as to potential business, the Company may not, and may not
allow its subsidiaries to, engage in any business transaction outside the cable
transmission business except for certain existing approved investments. Should
Charter, the Company or their subsidiaries wish to pursue, or allow their
subsidiaries to pursue, a business transaction outside of this scope, it must
first offer Mr. Allen the opportunity to pursue the particular business
transaction. If he decides not to pursue the business transaction and consents
to Charter, the Company or their subsidiaries to engage in the business
transaction, they will be able to do so. The cable transmission business means
the business of transmitting video, audio, including telephony, and data over
cable systems owned, operated or managed by Charter, the Company or their
subsidiaries from time to time. Mr. Allen or his affiliates own equity interests or warrants to purchase equity
interests in various entities with which the Company does business or which
provides it with products, services or programming. Among these entities are
TechTV Inc. (TechTV), Oxygen Media Corporation (Oxygen Media), Digeo,
Inc. (Digeo), Click2learn, Inc., Trail Blazer Inc. and Microsoft Corporation.
In addition, Mr. Allen and Mr. Savoy were directors of USA Networks, Inc.
(USA Networks), who operates the USA Network, The Sci-Fi Channel, Trio, World
News International and Home Shopping Network, owning approximately 5% and less
than 1%, respectively, of the common stock of USA Networks. In 2002, Mr. Allen
and Mr. Savoy sold their common stock and are no longer directors of the USA
Network. Mr. Allen owns 100% of the equity of Vulcan Ventures Incorporated
(Vulcan Ventures) and Vulcan Inc. and is the president of Vulcan Ventures.
Mr. Savoy was a vice president and a director of Vulcan Ventures until his
resignation in September 2003. Mr. Savoy will remain as a member of the board
of directors of Charter. The various cable, media, Internet and telephony
companies in which Mr. Allen has invested may mutually benefit one another.
The agreements governing the Companys relationship with Digeo are an example
of a cooperative business relationship among Mr. Allens affiliated companies.
The Company can give no assurance that any of these business relationships will
be successful, that the Company will realize any benefits from these
relationships or that the Company will enter into any business relationships in
the future with Mr. Allens affiliated companies. Mr. Allen and his affiliates have made, and in the future likely will make,
numerous investments outside of the Company and its business. The Company
cannot assure that, in the event that the Company or any of its subsidiaries
enter into transactions in the future with any affiliate of Mr. Allen, such
transactions will be on terms as favorable to the Company as terms it might
have obtained from an unrelated third party. Also, conflicts could arise with
respect to the allocation of corporate opportunities between the Company and
Mr. Allen and his affiliates. The Company has not instituted any formal plan
or arrangement to address potential conflicts of interest. High Speed Access Corp. (High Speed Access) was a provider of high-speed
Internet access services over cable modems. During the period from 1997 to
2000, certain Charter entities entered into Internet-access related service
agreements, and both Vulcan Ventures and certain of Charters subsidiaries made
equity investments in High Speed Access. On February 28, 2002, Charters subsidiary and an affiliate to the Company, CC
Systems, purchased from High Speed Access the contracts and associated assets,
and assumed related liabilities, that served the Companys customers, including
a customer contact center, network operations center and provisioning software.
Immediately prior to the asset purchase, Vulcan Ventures beneficially owned
approximately 37%, and Charter beneficially owned approximately 13%, of the
common stock of High Speed Access (including the shares of common stock which
could be acquired upon conversion of the Series D preferred stock, and upon
exercise of the warrants, owned by F-15




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RENAISSANCE MEDIA GROUP LLC AND SUBSIDIARIES
NOTE TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except where indicated) Charter Holdco). Following the consummation of the asset purchase, neither
Vulcan Ventures, Charter nor the Company beneficially owned any securities of,
or were otherwise affiliated with, High Speed Access. The Company receives or will receive programming for broadcast via its cable
systems from TechTV, USA Networks and Oxygen Media. The Company pays a fee for
the programming service generally based on the number of customers receiving
the service. Such fees for the years ended December 31, 2003, 2002 and 2001
were each less than 2% of total operating expenses with the exception of USA
Networks which was 2%, 2% and 3% of total operating expenses for the years
ended December 31, 2003, 2002 and 2001, respectively. In addition, the Company
receives commissions from USA Networks for home shopping sales generated by its
customers. Such revenues for the years ended December 31, 2003, 2002 and 2001
were less than 1% of total revenues. Charter Holdco entered into various broadband affiliation agreements with Digeo
Interactive, LLC (Digeo Interactive), a wholly-owned subsidiary of Digeo.
These agreements provide for the development by Digeo Interactive of future
features to be included in the Basic i-TV service provided by Digeo and for
Digeos development of an interactive toolkit to enable the Company to
develop interactive local content. Furthermore, the Company may request that
Digeo Interactive manage local content for a fee. The agreement provides for
the Company to pay for development of the Basic i-TV service as well as license
fees for customers who receive the service, and for the Company and Digeo to
split certain revenues earned from the service. In 2003, Charter paid Digeo
Interactive for customized development of the i-channels and the local content
tool kit. The Company received no revenues under the broadband carriage
agreement in 2003. On June 30, 2003, Charter Holdco entered into an agreement with Motorola for
the purchase of 100,000 broadband media centers, subject to the Companys
testing and approval of product performance and functionality. It is
contemplated that the software for these broadband media centers would be
supplied to Motorola by Digeo. License fees for Digeo to license such software
to the Company and support fees for the broadband media centers and relevant
content and support services are currently under negotiation. In March 2001, Charter Communications Ventures, LLC (Charter Ventures), an
affiliate of the Company, and Vulcan Ventures formed DBroadband Holdings, LLC
(DBroadband) for the sole purpose of purchasing equity interests in Digeo.
In connection with the execution of the broadband carriage agreement,
DBroadband purchased an equity interest in Digeo funded by contributions from
Vulcan Ventures. The equity interest is subject to a priority return of
capital to Vulcan Ventures up to the amount contributed by Vulcan Ventures on
Charter Ventures behalf. Charter Ventures has a 100% profit interest in
DBroadband. Vulcan Ventures also agreed to make, through January 24, 2004,
certain additional contributions through DBroadband to acquire additional
equity in Digeo as necessary to maintain Charter Ventures pro rata interest in
Digeo in the event of certain future Digeo equity financings by the founders of
Digeo. These additional equity interests are also subject to a priority return
of capital to Vulcan Ventures up to amounts contributed by Vulcan Ventures on
Charter Ventures behalf. The Company believes that Vulcan Ventures, an entity controlled by Mr. Allen,
owns an approximate 60% equity interest in Digeo, Inc. Messrs. Allen and Vogel
are directors of Digeo. Mr. Savoy was a director and served on the
compensation committee of Digeo until September 2003. Mr. Vogel owns options
to purchase 10,000 shares of Digeo common stock. On January 10, 2003, Charter signed an agreement to carry two around-the-clock,
high definition networks, HDNet and HDNet Movies. The Company believes that
entities controlled by Mr. Mark Cuban, co-founder and president of HDNet, owns
85% of HDNet and HDNet Movies as of December 31, 2003. As of December 31,
2003, Mr. Cuban owns an approximate 6.4% equity interest in Charter. 14. Commitments and Contingencies Leases The Company leases certain facilities and equipment under noncancelable
operating leases. Leases and rental costs charged to expense for each of the
years ended December 31, 2003, 2002 and 2001, were approximately $0.1 million.
As of December 31, 2003, future minimum lease payments are as follows: F-16




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RENAISSANCE MEDIA GROUP LLC AND SUBSIDIARIES
NOTE TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except where indicated) Year ended December 31,
    
    Amount2004
    
    $
    522005
    
    
    312006
    
    
    192007
    
    
    192008
    
    
    15Thereafter
    
    
    6
 The Company rents utility poles used in its operations. Generally, pole
rentals are cancelable on short notice, but the Company anticipates that such
rentals will recur. Rent expense incurred for pole rental attachments for each
of the years ended December 31, 2003, 2002 and 2001, was $1 million. The Company pays franchise fees under multi-year franchise agreements based on
a percentage of revenues earned from video service per year. The Company also
pays other franchise related costs, such as public education grants, under
multi-year agreements. Franchise fees and other franchise related costs
included in the accompanying statements of operations were $4 million, $4
million and $3 million for the years ended December 31, 2003, 2002 and 2001,
respectively. The Companys parent companies negotiate and enter into programming agreements
covering all of their subsidiaries, including the Company. The Company pays
programming fees under multi-year contracts ranging from three to six years
typically based on a flat fee per customer, which may be fixed for the term or
may in some cases, escalate over the term. Programming costs included in the
accompanying statement of operations were $28 million, $25 million and $22
million for the years ended December 31, 2003, 2002 and 2001, respectively. Litigation Fourteen putative federal class action lawsuits (the Federal Class Actions)
have been filed against Charter and certain of its former and present officers
and directors in various jurisdictions allegedly on behalf of all purchasers of
Charters securities during the period from either November 8 or November 9,
1999 through July 17 or July 18, 2002. Unspecified damages are sought by the
plaintiffs. In general, the lawsuits allege 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 annual report. In October 2002, Charter filed a motion with the Judicial Panel on
Multidistrict Litigation (the Panel) to transfer the Federal Class Actions to
the Eastern District of Missouri. On March 12, 2003, the Panel transferred the
six Federal Class Actions not filed in the Eastern District of Missouri to that
district for coordinated or consolidated pretrial proceedings with the eight
Federal Class Actions already pending there. The Panels transfer order
assigned the Federal Class Actions to Judge Charles A. Shaw. By virtue of a
prior court order, StoneRidge Investment Partners LLC became lead plaintiff
upon entry of the Panels transfer order. StoneRidge subsequently filed a
Consolidated Amended Complaint. The Court subsequently consolidated the
Federal Class Actions for pretrial purposes. On June 19, 2003, following a
pretrial conference with the parties, the Court issued a Case Management Order
setting forth a schedule for the pretrial phase of the consolidated class
action. Motions to dismiss the Consolidated Amended Complaint have been 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 are stayed for ninety (90) days. On September 12, 2002, a shareholders derivative suit (the State Derivative
Action) was filed in 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. F-17




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RENAISSANCE MEDIA GROUP LLC AND SUBSIDIARIES
NOTE TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except where indicated) 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 alleges 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, are sought by the plaintiffs. In addition to the Federal Class Actions, the State Derivative Action and the
Federal Derivative Action, six putative class action lawsuits have been 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 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
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 were brought on behalf of Charters securities
holders as of July 29, 2002, and seek unspecified damages and possible
injunctive relief. The Delaware Class Actions are substantively identical. No
such transaction by Mr. Allen has been presented. Plaintiffs counsel has
granted the defendants an indefinite extension of time to respond to the only
complaint that has been served in the Delaware Class Actions. The lawsuits discussed above are each in preliminary stages. No reserves have
been established for potential losses or related insurance recoveries on these
matters because Charter is unable to predict the outcome. Charter has advised
the Company that Charter intends to vigorously defend the lawsuits. In August of 2002, Charter became aware of a grand jury investigation being
conducted by the United States 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 currently 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 subscriber account
numbers. On July 25, 2003, one of the former officers who was indicted entered
a guilty plea. Charter has advised the Company that Charter 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 subsequently issued a formal order of investigation
dated January 23, 2003, and subsequent related document and testimony
subpoenas. The investigation and subpoenas generally concern Charters prior
reports with respect to its determination of the number of customers, and
various of its other accounting policies and practices including its
capitalization of certain expenses and dealings with certain vendors, including
programmers and digital set-top terminal suppliers. Charter has advised the
Company that Charter is fully cooperating with the SEC staff. Charter is generally required to indemnify each of the named individual
defendants in connection with these matters pursuant to the terms of its Bylaws
and (where applicable) such individual defendants employment agreements.
Pursuant to the terms of certain employment agreements and in accordance with
the Bylaws of Charter, in connection with the pending grand jury investigation,
SEC investigation and the above described lawsuits, Charters current directors
and its current and former officers have been advanced certain costs and
expenses incurred in connection with their defense. Charter has liability insurance coverage that it believes is available for
these matters, where applicable, and subject to the terms, conditions and
limitations of the respective policies. There is no assurance that current
coverage will be sufficient for all claims described above or any future claims
that may arise. 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
(South Carolina Class Action), purportedly on behalf of a class of Charter
customers, alleging that Charter improperly charged them a wire maintenance fee
without request or permission. F-18




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RENAISSANCE MEDIA GROUP LLC AND SUBSIDIARIES
NOTE TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except where indicated) They also claimed that Charter improperly required them to rent analog and/or
digital set-top terminals even though their television sets were cable ready.
Charter removed this case 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 should have but did not file a new motion to dismiss.
The state court judge granted the plaintiffs motion over Charters objection
in September 2002. Charter immediately appealed that decision to the South
Carolina Court of Appeals and the South Carolina Supreme Court, but those
courts have ruled that until a final judgment is entered against Charter, they
lack jurisdiction to hear the appeal. In January 2003, the Court of Common Pleas granted the plaintiffs motion for
class certification. In October and November 2003, Charter 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s motion to dismiss
for failure to state a claim. It also took under advisement Charters motion
to set aside the default judgment. Charter is unable to predict the outcome of the lawsuits and the government
investigations described above. An unfavorable outcome in the lawsuits or the
government investigations described above could have a material adverse effect
on the Companys consolidated financial condition or results of operations. 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 will not have a
material adverse effect on the Companys consolidated financial condition or
results of operations. Regulation in the Cable Industry The operation of a cable system is extensively regulated by the Federal
Communications Commission (FCC), some state governments and most local
governments. The FCC has the authority to enforce its regulations through the
imposition of substantial fines, the issuance of cease and desist orders and/or
the imposition of other administrative sanctions, such as the revocation of FCC
licenses needed to operate certain transmission facilities used in connection
with cable operations. The 1996 Telecom Act altered the regulatory structure
governing the nations communications providers. It removed barriers to
competition in both the cable television market and the local telephone market.
Among other things, it reduced the scope of cable rate regulation and
encouraged additional competition in the video programming industry by allowing
local telephone companies to provide video programming in their own telephone
service areas. The 1996 Telecom Act required the FCC to undertake a number of implementing
rulemakings. Moreover, Congress and the FCC have frequently revisited the
subject of cable regulation. Future legislative and regulatory changes could
adversely affect the Companys operations. 15. Employee Benefit Plan The Companys employees may participate in the Charter Communications, Inc.
401(k) Plan. Employees that qualify for participation can contribute up to 50%
of their salary, on a pre-tax basis, subject to a maximum contribution limit as
determined by the Internal Revenue Service. The Company matches 50% of the
first 5% of participant contributions. The Company made contributions to the
401(k) plan totaling $0.1 million for each of the years ended December 31,
2003, 2002 and 2001. 16. Recently Issued Accounting Standards In December 2003, the FASB issued FASB Interpretation No. 46 (revised December
2003), Consolidation of Variable Interest Entities(FIN 46R), which addresses
how a business enterprise should evaluate whether it has a controlling
financial interest in an entity through means other than voting rights and
accordingly should consolidate the entity. FIN 46R replaces FASB
Interpretation No. 46, Consolidation of Variable Interest Entities, which was
issued in January 2003. The Company will be required to apply FIN 46R to
variable interests in variable interest F-19




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RENAISSANCE MEDIA GROUP LLC AND SUBSIDIARIES
NOTE TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except where indicated) entities created after December 31, 2003. For variable interests in variable
interest entities created before December 31, 2003, the FIN 46R will be applied
beginning on March 31, 2004. For any variable interest entities that must be
consolidated under FIN 46R that were created before December 31, 2003, the
assets, liabilities and noncontrolling interests of the variable interest
entity initially would be measured at their carrying amounts with any
difference between the net amount added to the balance sheet and any previously
recognized interest being recognized as the cumulative effect of an accounting
change. If determining the carrying amounts is not practicable, fair value at
the date FIN 46R first applies may be used to measure the assets, liabilities
and noncontrolling interest of the variable interest entity. The adoption of
FIN 46R did not have a material impact on the Companys consolidated financial
statements. In December 2003, the SEC issued Staff Accounting Bulletin (SAB) No. 104,
Revenue Recognition. SAB No. 104 revises or rescinds portions of
interpretative guidance on revenue recognition. SAB No. 104 became effective
immediately upon release and requires registrants to either restate prior
financial statements or report a change in accounting principle. The adoption
of SAB No. 104 did not have a material impact on the Companys consolidated
financial statements. F-20