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InvestorsNovember 5, 2002

Charter Reports Third Quarter 2002 Results; Demand for Digital Cable and High-Speed Data Remains Strong

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ST. LOUIS, Nov 5, 2002 (BUSINESS WIRE) -- Charter Communications, Inc., (Nasdaq:CHTR) today reported third quarter 2002 revenue of approximately $1.179 billion and operating cash flow of approximately $497 million. Charter executives will discuss third quarter financial results and expectations for the remainder of the year in a conference call at 7:30 AM CT this morning.

    Third Quarter Financial Highlights
Third quarter revenue increased approximately 13% to approximately $1.179 billion and operating cash flow increased approximately 9% to approximately $497 million for the third quarter of 2002 compared to 2001 pro forma results. Pro forma third quarter 2001 results treat the acquisition of properties serving some 21,600 customers in April 2002, and the acquisition of High Speed Access Corporation in February 2002, as if they had occurred on January 1, 2001.

Revenue for the third quarter of 2002 increased approximately 13%, and operating cash flow increased approximately 6% compared to historical third quarter 2001.

Revenue and operating cash flow growth resulted primarily from increased digital video and high-speed data customers, as well as increased customer prices, partially offset by a decline in analog video customers. "We're committed to growing each segment of our business. Our high-end services, digital video and high-speed data, are continuing to grow at solid rates, and we're improving the overall customer experience by bundling our products and pricing our services competitively," said Carl Vogel, President and CEO.

    Demand For Advanced Services Continues
Charter's advanced broadband network passes nearly 12 million homes with the capability to deliver a wide range of television channels and programs, video on demand, high-speed data, home networking, and other interactive products and services. Charter added approximately 211,000 revenue generating units (RGUs) during the third quarter, fueled by a continued demand for digital video and high-speed data service. As of September 30, 2002, Charter Digital Cable(R) customers totaled approximately 2,528,000, or approximately 38% of Charter's video customer base, and Charter Pipeline(R) customers totaled approximately 1,055,000, or nearly 12% of high-speed data homes passed.

    Deferred Tax Liability
Charter is consulting with its auditors, KPMG LLP (KPMG) to evaluate the accounting for deferred tax liabilities. The issue relates to differences between the book and tax bases of certain companies acquired by Charter in 1999, and would increase intangible assets by this amount. After recording this additional liability, adjustments to income tax expense in certain subsequent periods could be required.

This issue does not affect Charter's previously reported revenue, operating cash flow or current or past cash tax obligations. Accordingly, it is not expected to have any cash impact.

The third quarter 2002 financial information being presented in this release does not give any effect to the adjustments which would be required if the deferred tax liability account were established. Any adjustments that are deemed appropriate for the third quarter will not affect revenue or operating cash flow as reported in this release.

    Looking Ahead
Charter expects revenue for the fourth quarter of 2002 to increase approximately 8% to 9% over fourth quarter 2001 pro forma results. Operating cash flow for the fourth quarter is expected to increase approximately 4% to 5% over the same prior year period pro forma results. Advertising revenue is expected to be approximately $20 million less in the fourth quarter of 2002 than the year ago period, primarily due to less advertising by programmers related to the launch of new channels. Excluding launch support advertising, revenue growth in the fourth quarter is expected to be between 11% and 12% and operating cash flow is expected to grow between 9% and 10%. Charter expects to add approximately 300,000 RGUs, comprised of basic, digital, telephony and cable modem customers, in the fourth quarter.

Charter expects 2002 annual revenue growth of between 11% and 12% and annual operating cash flow growth of between 9% and 10%. Charter expects to add a total of approximately 900,000 RGUs during 2002, despite the loss of analog customers. Annual capital expenditures are expected to be $2.350 billion, down $125 million from original guidance of $2.475 billion.

    About Charter Communications
Charter Communications, A Wired World Company(TM), is among the nation's largest broadband communications companies, currently serving approximately 6.7 million customers in 40 states. Charter provides a full range of advanced broadband services to the home, including cable television on an advanced digital video programming platform marketed under the Charter Digital Cable(R) brand and high-speed Internet access via Charter Pipeline(R). Commercial high-speed data, video and Internet solutions are provided under the Charter Business Networks(TM) brand. Advertising sales and production services are sold under Charter Media.

    More information about Charter can be found at
Charter will conduct a conference call to discuss their operating results on Tuesday, November 5, 2002, at 8:30 AM Eastern Time. The call will be available live via webcast at The call will be available on the "Investor Center" portion of the website, via "About Us." Participants should go to the call link at least 10 minutes prior to the start time to register. The call will be archived on the website.

    Cautionary Statement Regarding Forward-Looking Statements:
This news release 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 the statement under the caption "Looking Ahead." 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. Many of the forward-looking statements contained in this news release 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 news release are set forth in 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 grow revenues and cash flow by offering
        advanced products and services;
    --  our ability to achieve free cash flow;
    --  our ability to maintain and grow the number of basic, digital
        and modem customers;
    --  the cost and availability of funding for anticipated capital
        expenditures for our upgrades, new equipment and facilities;
    --  our ability to support new advanced services through our plant
        technology upgrade;
    --  our ability to compete effectively in a highly competitive and
        changing environment;
    --  our ability to obtain programming as needed and at reasonable
    --  our ability to continue to do business with existing vendors,
        particularly high-tech companies that do not have a long
        operating history;
    --  the results of the pending grand jury inquiry filed by the
        United States Attorney's Office for the Eastern District of
        Missouri, as well as other purported class action litigation
        against the company;
    --  general business conditions and economic uncertainty; and
    --  the effects of governmental regulation on our business and our
        ability to retain local franchises.
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 news release to conform these statements to actual results or to changes in our expectations.

                        (DOLLARS IN THOUSANDS)
                   Three Months Ended          Nine Months Ended
                      September 30,              September 30,
                  --------------------       ---------------------
                    Actual   Pro Forma  %      Actual   Pro Forma   %
                     2002     2001(a) Change    2002      2001(a) Change
                  ---------- --------- ----- ---------- ---------- -----
 Analog video     $  774,570 $ 733,502       $2,306,107 $2,177,060
 Digital video       119,475    86,271          340,748    217,233
 Cable modem          97,768    43,917          248,439    106,188
  sales               95,874    83,833          245,767    224,313
 Other                90,824    99,556          274,197    288,846
                  ---------- ---------        ---------  ---------
   Total revenues  1,178,511 1,047,079 12.6%  3,415,258  3,013,640 13.3%
                  ---------- ---------        ---------  ---------
 Analog video
  programming        267,143   238,337          794,730    709,998
 Digital video        41,736    27,329          117,690     67,404
 Cable modem          40,807    40,338          114,728     99,309
  sales               22,378    17,177           63,006     50,260
 Service             103,762    87,165          285,349    242,523
 General and
  administrative     153,415   141,865          464,243    420,180
 Marketing            36,885    22,611           80,746     67,097
  expenses            15,464    15,014           47,555     52,283
                  ---------- ---------        ---------  ---------
     expenses        681,590   589,836 15.6%  1,968,047  1,709,054 15.2%
                  ---------- ---------        ---------  ---------
     cash flow(b) $  496,921 $ 457,243  8.7% $1,447,211 $1,304,586 10.9%
                  ========== =========        =========   ========
    (a) The pro forma results reflect all significant acquisitions and
        dispositions closed during 2002 and 2001, including systems
        acquired from AT&T Broadband on June 30, 2001 and the Enstar
        Limited Partnerships on April 10, 2002, as if the transactions
        closed on January 1, 2001. Pro forma revenues exceed actual
        revenues for the three and nine months ended September 30,
        2001 by $3.2 million and $167.5 million, respectively. Actual
        operating cash flow (OCF) exceeds pro forma OCF for three
        months ended September 30, 2001 by $10.3 million and pro forma
        operating cash flow (OCF) exceeds actual OCF for nine months
        ended September 30, 2001 by $21.1 million. The unaudited pro
        forma financial information has been presented for comparative
        purposes and does not purport to be indicative of the
        consolidated results of operations had these transactions been
        completed as of the assumed date or which may be obtained in
        the future.
    (b) Information concerning OCF has been included as it is used by
        certain investors as one measure of financial performance. OCF
        is not a measure of financial performance under accounting
        principles generally accepted in the United States and is not
        necessarily comparable to similarly titled measures used by
        other companies. OCF should not be construed as an alternative
        to operating income or to cash flows from operating activities
        as determined in accordance with accounting principles
        generally accepted in the United States.
                        (DOLLARS IN THOUSANDS)
                      Three Months Ended        Nine Months Ended
                         September 30,            September 30,
                     --------------------  -------------------------
                        2002       2001        2002         2001
                     ---------  ---------  -----------  ------------
Pro Forma Operating
 Cash Flow Margin(a)     42.2%      43.7%        42.4%        43.3%
Capital Expenditures
 (dollars in
 thousands)          $ 584,948  $ 794,353  $ 1,698,850  $ 2,156,613
Pro Forma Operating
 Cash Flow per Basic
 Customer(a)(b)      $   74.19  $   65.40  $    216.07  $    186.59
Capital Expenditures
 per Basic
 Customer(c)         $   87.33  $  113.61  $    253.64  $    308.45
Free Cash Flow
Historical Operating
 Cash Flow           $ 496,921  $ 467,542  $ 1,447,211  $ 1,283,525
Less:  Capital
 Expenditures         (584,948)  (794,353)  (1,698,850)  (2,156,613)
                     ---------  ---------  -----------  -----------
Operating Free Cash
 Flow(d)               (88,027)  (326,811)    (251,639)    (873,088)
Less:  Cash Change in
 Working Capital(e)    (18,900)   (36,237)    (204,860)    (368,462)
Less:  Cash Paid for
 Interest             (161,055)  (163,372)    (693,976)    (608,893)
                     ---------  ---------  -----------  -----------
Free Cash Flow (d)   $(267,982) $(526,420) $(1,150,475) $(1,850,443)
                     =========  =========  ===========  ===========
    (a) Refer to footnote (a) on page 1 of 4 of this addendum to the
        earnings release for details related to the nature of the pro
        forma information provided.
    (b) Pro forma operating cash flow per pro forma basic customer is
        calculated by dividing pro forma operating cash flow during
        the respective period by pro forma basic customers as of the
        end of the period.
    (c) Capital expenditures per basic customer represent capital
        expenditures during the respective period divided by basic
        customers as of the end of the period.
    (d) Operating free cash flow and free cash flow are not measures
        of performance calculated in accordance with accounting
        principles generally accepted in the United States. However,
        we believe that operating free cash flow and free cash flow
        are useful in evaluating our performance based on liquidity,
        operating performance and leverage. Operating free cash flow
        and free cash flow should not be construed as alternatives to
        operating income as an indicator of our performance and may
        not be comparable to similarly titled measures used by other
    (e) Cash change in working capital is calculated based on the cash
        flow changes in current assets and current liabilities during
        the respective period, excluding changes related to interest.
                              Actual         Pro Forma      Pro Forma
                           September 30,    December 31,   September 30,
                               2002           2001(a)         2001(a)
                          --------------  --------------  --------------
Basic Analog Video
  Basic Homes Passed(b)       11,972,600      11,537,900      11,521,500
  Basic Customers(c)(d)        6,697,900       6,975,300       6,991,700
  Penetration of Basic
   Homes Passed(e)                 55.9%           60.5%           60.7%
  Average Monthly
   Revenue (for the
   quarter ended) per
   Basic Customer (as of
   quarter end)                  $ 58.65         $ 53.06         $ 49.92
Digital Video
  Digital Homes Passed(b)     11,492,800      10,638,300      10,366,600
  Digital Customers(f)         2,527,700       2,144,800       1,951,200
  Penetration of Digital
   Homes Passed(e)                 22.0%           20.2%           18.8%
  Penetration of Basic
   Customers(g)                    37.7%           30.7%           27.9%
  Digital Set-Top
   Terminals Deployed          3,537,800       2,951,400       2,611,000
Data Services
  Cable Modem Homes
   Passed(b)                   8,973,200       7,560,600       6,479,700
  Data Customers:
    Cable Modem
     Customers(h)              1,055,400         607,700         507,700
    Dial-up Customers             15,800          37,100          38,200
                          --------------  --------------  --------------
      Total Data Customers     1,071,200         644,800         545,900
                          ==============  ==============  ==============
  Penetration of Cable
   Modem Homes Passed(e)           11.8%            8.0%            7.8%
Revenue Generating Units(i)
  Basic Customers(c)(d)        6,697,900       6,975,300       6,991,700
  Digital Customers(f)         2,527,700       2,144,800       1,951,200
  Cable Modem Customers(h)     1,055,400         607,700         507,700
  Telephony Customers(j)          19,700          16,100          16,300
                          --------------  -------------- ---------------
    Total Revenue
     Generating Units         10,300,700       9,743,900       9,466,900
                          ==============  ==============  ==============
  Customer Relationships(k)    6,697,900       6,975,300       6,991,700
    (a) The pro forma statistics reflect the acquisition of certain
        Enstar systems which closed during 2002 and the acquisition of
        telephony customers from AT&T on January 1, 2002 as if such
        transactions had occurred on December 31, 2001 and September
        30, 2001, respectively.
    (b) Homes passed represent the estimated number of living units,
        such as single residence homes, apartments and condominium
        units, passed by the cable television distribution network in
        a given cable system service area to which we offer the
        service indicated.
    (c) As of September 30, 2002 and 2001, basic customers include: 1)
        approximately 50,300 and 16,800 customers (0.8% and 0.2% of
        total customers), respectively, who pay for cable modem
        service only; and 2) approximately 225,100 and 228,200
        commercial customers, respectively, who are calculated on an
        equivalent bulk unit ("EBU") basis. EBU is calculated for a
        system by dividing the bulk rate charged to accounts in a
        system by the most prevalent rate charged to non-bulk
        residential customers in that system for the comparable tier
        of service. The EBU method of calculating basic customers is
        consistent with the methodology used in determining costs paid
        to programmers and has been consistently applied.
    (d) On February 11, 2002, the Company announced that it would
        remove approximately 120,000 customers in the first quarter of
        2002. This resulted principally from tightened credit and
        disconnect policies and procedures.
    (e) Penetration represents the number of customers as a percentage
        of homes passed.
    (f) Digital customers include all households that have one or more
        digital set-top terminals. Included in digital customers at
        September 30, 2002 and 2001 are 13,400 and 200 customers,
        respectively, that receive digital service directly through
        satellite transmission.
    (g) Digital penetration of basic customers represents the number
        of digital customers as a percentage of basic customers.
    (h) As of September 30, 2002 and 2001, cable modem customers
        include approximately 85,500 and 38,000 commercial customers,
        respectively, who are calculated on an equivalent modem unit
        ("EMU") basis. EMU is calculated for a system by dividing the
        aggregate commercial revenue for modem service by the average
        effective rate charged in that system for modem service to
        residential customers. We have utilized this methodology since
        1999, as it conforms to the internal practices followed for
        operating and capital expenditure budgeting.
    (i) Revenue generating units include the total of all primary
        analog video, digital video, cable modem and telephony
        customers, not counting additional outlets.
    (j) Telephony customers include all households purchasing
        telephone service.
    (k) Customer relationships include the number of customers that
        receive at least one level of service encompassing video, data
        and telephony services, without regard to which service(s)
        customers purchase.
CONTACT:          Charter Communications, Inc., St. Louis
                  Andy Morgan, 314/543-2217
                  Equity Analysts: 
                  Mary Jo Moehle, 314/543-2397
                  High Yield Analysts:  
                  Ralph Kelly, 314/543-2388

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