CC V HOLDINGS FINANCE INC - 10-Q Quarterly Report

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

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FORM 10-Q
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[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended June 30, 2003

OR

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the Transition Period From to .
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Commission File Numbers:
333-75415
333-75415-03

CC V HOLDINGS, LLC*
CC V HOLDINGS FINANCE, INC.*
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(Exact names of registrants as specified in their charters)

DELAWARE 13-4029965
DELAWARE 13-4029969
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)

12405 POWERSCOURT DRIVE
ST. LOUIS, MISSOURI 63131
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(Address of principal executive offices) (Zip Code)

(314) 965-0555
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(Registrants' telephone number, including area code)

Indicate by check mark whether the registrants: (1) have filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrants were required to file such reports), and (2) have been subject to
such filing requirements for the past 90 days. Yes X No
--- ---

Indicate by check mark whether the registrants are accelerated filers (as
defined in Rule 12b-2 of the Exchange Act). Yes No X
--- ---

Indicate the number of shares outstanding of each of the issuers' classes of
common stock, as of the latest practicable date:

All of the issued and outstanding shares of capital stock of CC V Holdings
Finance, Inc. are held by CC V Holdings, LLC. All of the limited liability
company membership interests of CC V Holdings, LLC are held by CCO NR
Holdings, LLC, an indirect subsidiary of Charter Communications Holdings,
LLC which is 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.

*CC V Holdings, LLC and CC V Holdings Finance, Inc. meet the conditions set
forth in General Instruction (H)(1)(a) and (b) of Form 10-Q and are therefore
filing this Form with the reduced disclosure format.

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CC V HOLDINGS, LLC
CC V HOLDINGS FINANCE, INC.

FORM 10-Q
QUARTER ENDED JUNE 30, 2003

TABLE OF CONTENTS

Note: Separate financial statements of CC V Holdings Finance, Inc. have not been
presented as this entity had no operations and substantially no assets or equity
during the periods reported. Accordingly, management has determined that such
financial statements are not material.

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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report includes forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended (the "Securities Act"),
and Section 21E of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), regarding, among other things, our plans, strategies and
prospects, both business and financial including, without limitation, the
forward-looking statements set forth in the "Results of Operations" and
"Liquidity and Capital Resources" sections under Part I, Item 2 ("Management's
Discussion and Analysis of Financial Condition and Results of Operations") in
this Quarterly Report. Although we believe that our plans, intentions and
expectations reflected in or suggested by these forward-looking statements are
reasonable, we cannot assure you that we will achieve or realize these plans,
intentions or expectations. Forward-looking statements are inherently subject to
risks, uncertainties and assumptions including, without limitation, the factors
described under "Certain Trends and Uncertainties" under Part I, Item 2
("Management's Discussion and Analysis of Financial Condition and Results of
Operations") in this Quarterly Report. Many of the forward-looking statements
contained in this Quarterly Report may be identified by the use of
forward-looking words such as "believe," "expect," "anticipate," "should,"
"planned," "will," "may," "intend," "estimated" and "potential," among others.
Important factors that could cause actual results to differ materially from the
forward-looking statements we make in this Quarterly Report are set forth in
this Quarterly Report and in other reports or documents that we file from time
to time with the United States Securities and Exchange Commission, or the "SEC",
and include, but are not limited to:

o our ability to sustain and grow revenues and cash flows from
operating activities by offering video and data services and
to maintain a stable customer base, particularly in the face
of increasingly aggressive competition from other service
providers;

o our and our subsidiary's ability to comply with all covenants
in our indenture and our subsidiary's credit facilities, any
violation of which would result in a violation of the
indenture or the applicable facility and could trigger a
default of other obligations under cross default provisions;

o 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;

o any adverse consequences arising out of our prior restatement
of the financial statements described herein;

o 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;

o our ability to obtain programming at reasonable prices or pass
cost increases on to our customers;

o general business conditions, economic uncertainty or slowdown;
and

o 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 undertake no duty or obligation to update any of the forward-looking
statements after the date of this Quarterly Report.

3

PART I. FINANCIAL INFORMATION.
ITEM 1. FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
CC V HOLDINGS, LLC AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)

4

CC V HOLDINGS, LLC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS)
(UNAUDITED)

5

CC V HOLDINGS, LLC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
(UNAUDITED)

6

CC V HOLDINGS, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT WHERE INDICATED)

1. ORGANIZATION

The accompanying consolidated financial statements of CC V Holdings, LLC include
the accounts of CC V Holdings, LLC and all of its wholly-owned subsidiaries
(collectively, the Company). In June and July of 2003, the Company was part of a
reorganizational restructuring of its parent company. As part of reorganization,
Charter Communications Holdings LLC (Charter Holdings), the Company's direct
parent prior to reorganization, formed CCH II, LLC. Charter Holdings then
contributed all of its equity interests in all of its subsidiaries (except
Charter Communications Capital Corporation and Charter Communications Operating,
LLC), including the Company, to the newly-formed subsidiary (CCO NR Holdings,
LLC), and then contributed CCO NR Holdings, LLC to Charter Communications
Operating, LLC. Charter Communications Operating, LLC was then contributed to a
newly-formed parent (CCO Holdings, LLC), which was then contributed to CCH II,
LLC. Thereafter, CCH I, LLC was formed as a new subsidiary of Charter Holdings,
and Charter Holdings contributed its interest in CCH II, LLC to CCH I, LLC.
These companies along with Charter Communications, Inc. (Charter), Charter
Holdings' indirect parent and the Company's manager, are collectively referred
to herein as the "Parent Companies".

As of June 30, 2003, the Company owns and operates cable systems serving
approximately 933,800 customers. The Company owns and operates cable systems
that provide a full range of video, data, telephony and other advanced broadband
services. The Company also provides commercial high-speed data, video, telephony
and Internet services and sells advertising and production services. The Company
operates primarily in the states of Michigan, Minnesota and Wisconsin and in the
New England area.

2. RESPONSIBILITY FOR INTERIM FINANCIAL STATEMENTS

The accompanying consolidated financial statements of the Company have been
prepared in accordance with accounting principles generally accepted in the
United States for interim financial information and the rules and regulations of
the Securities and Exchange Commission. Accordingly, certain information and
footnote disclosures typically included in the Company's Annual Report on Form
10-K have been condensed or omitted for this Quarterly Report. The accompanying
consolidated financial statements are unaudited and are subject to review by
regulatory authorities. However, in the opinion of management, such statements
include all adjustments, which consist of only normal recurring adjustments,
necessary for a fair presentation of the results for the periods presented.
Interim results are not necessarily indicative of results for a full year.

The preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Significant judgments and estimates include capitalization of
labor and overhead costs, depreciation and amortization costs, impairments of
property, plant and equipment and franchises, income taxes and other
contingencies. Actual results could differ from those estimates.

Reclassifications

Certain 2002 amounts have been reclassified to conform with the 2003
presentation.

3. LIQUIDITY AND CAPITAL RESOURCES

The Company has incurred net income of $2 million and net loss of $5 million for
the three and six months ended June 30, 2003, respectively, and has incurred net
loss of $14 million and $426 million for the three and six months ended June 30,
2002, respectively. The Company's net cash flows from operating activities were
$52 million and $43 million for the six months ended June 30, 2003 and 2002,
respectively. In addition, 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, borrowings under the credit facilities of the Company's subsidiary,
equity contributions from Charter Holdings, borrowings from related parties and
cash on hand. The mix of funding sources changes from period to period, but for
the six months ended June 30, 2003, approximately 62% of the Company's capital
funding requirements were from cash flows from operating activities and 38% was
from cash on hand.

7

CC V HOLDINGS, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT WHERE INDICATED)

The Company expects that cash on hand, cash flows from operating activities and
the funds available under its subsidiary's credit facilities will be adequate to
meet its 2003 cash needs. As of June 30, 2003, the Company held $18 million in
cash and cash equivalents and it had total potential unused availability of $329
million under the CC VIII Operating credit facilities, $323 million of which was
available based upon the Company's financial covenants at that time. However,
continued access to these credit facilities is subject to certain restrictive
covenants, portions of which are subject to the operating results of the
Company's subsidiaries. The Company's 2003 operating plan anticipates
maintaining compliance with these covenants. If the Company's actual operating
results do not maintain compliance with these covenants, or if other events of
noncompliance occur, funding under the credit facilities may not be available
and defaults on some or potentially all debt obligations could occur. In order
to improve the Company's ability to satisfy its leverage ratio covenants under
its credit facilities, the Company's indirect parent, CCO Holdings, LLC, entered
into a backup credit facility commitment with Vulcan Inc., which is an affiliate
of Paul G. Allen, described in Note 6.

The Company's long-term financing structure as of June 30, 2003 includes $1.1
billion of credit facility debt and $172 million of high-yield debt.
Approximately $106 million of this financing matures during 2003 and the Company
expects to fund this through availability under its credit facilities. Note 6
discusses the Company's current availability and long-term obligations.

4. RESTATEMENT OF CONSOLIDATED FINANCIAL RESULTS

As discussed in the Company's 2002 Form 10-K, the Company identified a series of
adjustments that have resulted in the restatement of previously announced
quarterly results for the first three quarters of fiscal 2002. In summary, the
adjustments are grouped into 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; (vi) deferred tax liabilities/franchise assets; and
(vii) other adjustments. These adjustments have been reflected in the
accompanying consolidated financial statements and reduced revenues for the
three and six months ended June 30, 2002 by $2 million and $3 million,
respectively. The Company's consolidated net loss decreased by $20 million and
increased by $370 million for the three and six months ended June 30, 2002,
respectively. In addition, as a result of certain of these adjustments, the
Company's statement of cash flows for the six months ended June 30, 2002 has
been restated. Cash flows from operating activities for the six months ended
June 30, 2002 were increased by $2 million. The more significant categories of
adjustments relate to the following as 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 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 revenues by $2
million for each of the three and six months ended June 30, 2002, respectively.
The corresponding amortization of such deferred amounts reduced programming
expenses by $1 million and $3 million for the three and six months ended June
30, 2002, respectively.

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 revenues of $351 and $661 for the three and six
months ended June 30, 2002, 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 the Company's rebuild activities, customer installations
and new service introductions have been expensed in the period incurred. Such
adjustments increased operating expenses by $2 million for each of the three and
six months ended June 30, 2002.

Customer Acquisition Costs. Certain customer acquisition campaigns were
conducted through third-party contractors in 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

8

CC V HOLDINGS, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT WHERE INDICATED)

as marketing expense in the period incurred and totaled $1 million and $3
million for the three and six months ended June 30, 2002. The Company
discontinued this program in the third quarter of 2002 as contracts for
third-party vendors expired. Substantially all of these amounts are 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 substantial portion of the Company's network. In connection with this
plan, the Company 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. The Company 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 reduced property, plant and
equipment and increased franchise assets by $54 million. In addition, the
depreciation period for the assets subject to replacement 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 $31 million and $44 million for the
three and six months ended June 30, 2002, respectively.

Deferred Tax Liabilities/Franchise Assets. Adjustments were made to record
deferred tax liabilities associated with the acquisition of various cable
television businesses. These adjustments increased amounts assigned to franchise
assets by $254 million with a corresponding increase in deferred tax liabilities
of $39 million. The balance of the entry was recorded to member's equity. In
addition, as described above, a correction was made to reduce amounts assigned
in purchase accounting to assets identified for replacement over the three-year
period of the Company's rebuild and upgrade of its network. This reduced the
amount assigned to the network assets to be retained and increased the amount
assigned to franchise assets by approximately $54 million with a resulting
increase in amortization expense for the years restated. Such adjustments
increased the cumulative effect of accounting change recorded upon adoption of
Statement of Financial Accounting Standards (SFAS) No. 142 on January 1, 2002 by
$93 million.

Other Adjustments. In addition to the items described above, other adjustments
of expenses include certain tax reclassifications from tax expense to operating
costs and other miscellaneous adjustments. The net impact of these adjustments
to net loss is an increase of $2 million and $3 million for the three and six
months ended June 30, 2002, respectively.

The following tables summarize the effects of the adjustments on the
consolidated statements of operations and cash flows for the three-month and
six-month periods ended June 30, 2002.

CONSOLIDATED STATEMENT OF OPERATIONS

9

CC V HOLDINGS, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT WHERE INDICATED)

CONSOLIDATED STATEMENT OF CASH FLOWS

5. 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 Emerging Issues Task Force (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 represent geographic clusters
of the Company's cable systems, which management believes represents the highest
and best use of those assets. Fair value was determined based on estimated
discounted future cash flows using reasonable and appropriate assumptions that
are consistent with internal forecasts. As a result, the Company determined that
franchises were impaired and recorded the cumulative effect of a change in
accounting principle of $415 million (net of $3 million of tax benefit). SFAS
No. 142 does not permit the recognition of the customer relationship asset not
previously recognized. Accordingly, the impairment included approximately $324
million attributable to customer relationship values as of January 1, 2002.

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. Certain franchises did not qualify for indefinite-life
treatment due to technological or operational factors that limit their lives.
These franchise costs will be amortized on a straight-line basis over 10 years.

The following table presents the Company's indefinite-lived and finite-lived
intangible assets as of June 30, 2003 and December 31, 2002 (dollars in
thousands):

Franchise amortization expense for each of the six months ended June 30, 2003
and 2002 was $1 million, which represents the amortization relating to
franchises that did not qualify for indefinite-life treatment under SFAS No.
142, including costs associated with franchise renewals. For each of the next
five years, amortization expense relating to these franchises is expected to be
approximately $2 million.

10

CC V HOLDINGS, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT WHERE INDICATED)

6. LONG-TERM DEBT

Long-term debt consists of the following as of the dates presented (dollars in
thousands):

As of June 30, 2003, outstanding borrowings were $1.1 billion under the CC VIII
Operating credit facilities, and unused total potential availability was $329
million, $323 million of which would have been available based on financial
covenants as of June 30, 2003.

7. COMPREHENSIVE LOSS

The Company reports changes in the fair value of interest rate agreements
designated as hedging instruments of the variability of cash flows associated
with floating-rate debt obligations, that meet the effectiveness criteria of
SFAS No. 133, in accumulated other comprehensive loss. Comprehensive loss for
the three months ended June 30, 2003 and 2002 was $291 and $20 million,
respectively. Comprehensive loss for the six months ended June 30, 2003 and 2002
was $8 million and $430 million, respectively.

8. ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

The Company uses interest rate risk management derivative instruments, such as
interest rate swap agreements (referred to herein as interest rate agreements),
as required under the terms of its credit facilities. The Company's policy is to
manage interest costs using a mix of fixed and variable rate debt. Using
interest rate swap agreements, the Company agrees to exchange, at specified
intervals through 2007, the difference between fixed and variable interest
amounts calculated by reference to an agreed-upon notional principal amount.
Interest rate collar agreements are used to limit the Company's exposure to and
benefits from interest rate fluctuations on variable rate debt to within a
certain range of rates.

The Company has certain interest rate derivative instruments that have been
designated as cash flow hedging instruments. Such instruments are those that
effectively convert variable interest payments on certain debt instruments into
fixed payments. For qualifying hedges, SFAS No. 133 allows derivative gains and
losses to offset related results on hedged items in the consolidated statement
of operations. The Company has formally documented, designated and assessed the
effectiveness of transactions that receive hedge accounting. For the three
months ended June 30, 2003 and 2002, other expense includes gains of $163 and
losses of $1 million, respectively, and for the six months ended June 30, 2003
and 2002, other expenses includes gains of $138 and losses of $1 million,
respectively, which represent cash flow hedge ineffectiveness on interest rate
hedge agreements arising from differences between the critical terms of the
agreements and the related hedged obligations. Changes in the fair value of
interest rate agreements designated as hedging instruments of the variability of
cash flows associated with floating-rate debt obligations are reported in
accumulated other comprehensive loss. For the three and six months ended June
30, 2003 a loss of $2 million and $3 million, respectively, and for the three
and six months ended June 30, 2002, a loss of $6 million and $4 million,
respectively, related to derivative instruments designated as cash flow hedges
was recorded in accumulated other comprehensive loss. The amounts are
subsequently reclassified into interest expense as a yield adjustment in the
same period in which the related interest on the floating-rate debt obligations
affects earnings (losses).

11

CC V HOLDINGS, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT WHERE INDICATED)

Certain interest rate derivative instruments are not designated as hedges as
they do not meet the effectiveness criteria specified by SFAS No. 133. However,
management believes such instruments are closely correlated with the respective
debt, thus managing associated risk. Interest rate derivative instruments not
designated as hedges are marked to fair value with the impact recorded as a gain
or loss on interest rate agreements. For the three months ended June 30, 2003
and 2002, the Company recorded other expense of $4 million and $14 million,
respectively, and for the six months ended June 30, 2003 and 2002, recorded
other expense of $4 million and $9 million, respectively, for interest rate
derivative instruments not designated as hedges.

As of June 30, 2003 and December 31, 2002, the Company had outstanding $700
million in notional amounts of interest rate swaps. The notional amounts of
interest rate instruments do not represent amounts exchanged by the parties and,
thus, are not a measure of exposure to credit loss. The amounts exchanged are
determined by reference to the notional amount and the other terms of the
contracts.

The Company does not hold collateral for these instruments and is therefore
subject to credit loss in the event of nonperformance by the counterparty to the
interest rate exchange agreement. However, the counterparties are banks, and we
do not anticipate nonperformance by any of them on any interest rate exchange
agreement.

9. SPECIAL CHARGES

In the fourth quarter of 2002, the Company recorded a special charge of $3
million for severance costs associated with its workforce reduction program and
the consolidation of its operations, elimination of redundant practices and
streamlining its management structure. The Company intends to terminate
approximately 138 employees, of which 19 employees were terminated in the fourth
quarter of 2002. In total, approximately 29 and 148 employees were terminated
during the three and six months ended June 30, 2003, respectively. Severance
payments are made over a period of up to twelve months with approximately $1
million and $2 million paid during the three and six months ended June 30, 2003,
respectively. In addition, for the six months ended June 30, 2003, the Company
reversed $0.3 million of the severance accrual that was determined to be
excessive. As of June 30, 2003 and December 31, 2002, a liability of
approximately $1 million and $3 million, respectively, is recorded on the
accompanying consolidated balance sheet related to the realignment activities.
In addition, for the six months ended June 30, 2003, a $0.3 million settlement
was received related to the transition of data customers in 2001 from the
Internet service provider Excite@Home to our Charter Pipeline service which was
recorded in special charges.

10. 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
not subject to income tax. However, certain of the Company's indirect
subsidiaries are corporations and are subject to income tax.

As of June 30, 2003 and December 31, 2002, the Company has net deferred income
tax liabilities of approximately $18 million. These relate to certain of the
Company's indirect subsidiaries, which file separate income tax returns.

During the three months ended June 30, 2003 and 2002, the Company recorded $433
of income tax expense and $1.1 million of income tax benefit, respectively.
During the six months ended June 30, 2003 and 2002, the Company recorded $860 of
income tax expense and $1.1 million of income tax benefit, respectively. The
income tax expense recorded for the three and six months ended June 30, 2003 is
the result of federal and state income taxes payable of certain of the Company's
indirect subsidiaries. The $1.1 million of income tax benefit recorded for the
three and six months ended June 30, 2002 was the result of SFAS No. 142.

The Company is currently under examination by the Internal Revenue Service for
the tax years ending December 31, 2000 and 1999. Management does not expect the
results of this examination to have a material adverse effect on the Company's
consolidated financial position or results of operations.

12

CC V HOLDINGS, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT WHERE INDICATED)

11. CONTINGENCIES

Fourteen putative federal class action lawsuits (the "Federal Class Actions")
have been filed against Charter, the Company's manager and indirect parent, the
Company's manager and indirect parent, and certain of Charter's 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.

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 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. On August 5, 2003, lead
plaintiff was granted leave to file an amended complaint in the Consolidated
Federal Class Action.

On September 12, 2002, a shareholders derivative suit (the "State Derivative
Action") was filed in Missouri state court against Charter and its 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.

Separately, on February 12, 2003, a shareholders derivative suit (the "Federal
Derivative Action"), was filed against Charter and its 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 current directors and officers in the Court
of Chancery of the State of Delaware (the "Delaware Class Actions"). The
Delaware Class Actions are substantively identical and generally allege that the
defendants breached their fiduciary duties by participating or acquiescing in a
purported and threatened attempt by Defendant Paul Allen to purchase shares and
assets of Charter at an unfair price. The lawsuits were brought on behalf of
Charter's securities holders as of July 29, 2002, and seek unspecified damages
and possible injunctive relief. No such proposed transaction by Mr. Allen has
been presented.

The lawsuits discussed above are each in preliminary stages and no dispositive
motions or other responses to any of the complaints have been filed. No reserves
have been established for those matters because the Company believes they are
either not estimable or not probable. Charter has advised the Company that it
intends to vigorously defend the lawsuits.

In August 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 it is fully cooperating with the investigation.

13

CC V HOLDINGS, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT WHERE INDICATED)

On November 4, 2002, Charter received an informal, non-public inquiry from the
Staff of the Securities and Exchange Commission (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 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 it is fully cooperating with the SEC Staff.

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 Charter's and the Company's results of operations and financial condition.

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. Certain of the individual
defendants also serve or have served as officers and directors of the Company.
The limited liability company agreement of CC V Holdings and its limited
liability company subsidiaries, and the bylaws of its corporate subsidiaries may
require each such entity to indemnify Charter and the individual named
defendants in connection with the matters set forth above.

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 position or
results of operations.

Charter has directors' and officers' 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.

12. MINORITY INTEREST - RELATED PARTY

As part of the acquisition of the cable television systems owned by Bresnan
Communications Company Limited Partnership in February 2000, CC VIII, our
indirect limited liability company subsidiary, issued Class A Preferred
Membership Interests (collectively, the "CC VIII Interest") with a value and an
initial capital account of approximately $630 million to certain sellers
affiliated with AT&T Broadband, now owned by Comcast Corporation (the "Comcast
Sellers"). While held by the Comcast Sellers, the CC VIII Interest was entitled
to a 2% priority return on its initial capital amount and such priority return
was entitled to preferential distributions from available cash and upon
liquidation of CC VIII. While held by the Comcast Sellers, the CC VIII Interest
generally did not share in the profits and losses of CC VIII. Paul G. Allen
granted the Comcast Sellers the right to sell to him the CC VIII Interest for
approximately $630 million plus 4.5% interest annually from February 2000 (the
"Comcast Put Right"). In April 2002, the Comcast Sellers exercised the Comcast
Put Right in full, and this transaction was consummated on June 6, 2003.
Accordingly, Mr. Allen has become the holder of the CC VIII Interest indirectly
through an affiliate. Consequently, subject to the matters referenced in the
next paragraph, Mr. Allen generally thereafter will be allocated his pro rata
share (based on the number of membership interests outstanding) of profits or
losses of CC VIII. In the event of a liquidation of CC VIII, Mr. Allen will not
be entitled to any priority distributions (except with respect to the 2%
priority return, as to which such priority will continue to accrete), and Mr.
Allen's share of any remaining distributions in liquidation will be equal to the
initial capital account of the Comcast Sellers of approximately $630 million,
increased or decreased by Mr. Allen's pro rata share of CC VIII's profits or
losses (as computed for capital account purposes) after June 6, 2003. At June
30, 2003, the accreted value of the 2% priority return was $45 million. The
limited liability company agreement of CC VIII, LLC does not provide for a
mandatory redemption of the CC VIII Interest.

An issue has arisen as to whether the documentation for the Bresnan transaction
was correct and complete with regard to the ultimate ownership of the CC VIII
Interest following consummation of the Comcast Put Right.

14

CC V HOLDINGS, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT WHERE INDICATED)

Charter's Board of Directors formed a Special Committee initially comprised of
Messrs. Tory, Wangberg and Nelson to investigate and take any other appropriate
action on its behalf with respect to this matter. Charter's Board of Directors
recently appointed David Merritt to the Special Committee to take the place of
Mr. Nelson, who is no longer a director of Charter. After conducting an
investigation of the facts and circumstances relating to this matter, the
Special Committee has reached a preliminary determination that, due to a mistake
that occurred in preparing the Bresnan transaction documents, Charter should
seek the reformation of certain contractual provisions in such documents and has
notified Mr. Allen of this conclusion. The Special Committee also has
preliminarily determined that, as part of such contract reformation, Mr. Allen
should be required to contribute the CC VIII Interest to Charter Communications
Holding Company, LLC (Charter Holdco) in exchange for Charter Holdco membership
units. The Special Committee also has recommended to the Board of Directors
that, to the extent the contract reformation is achieved, the Board should
consider whether the CC VIII Interest should ultimately be held by Charter
Holdco or Charter Holdings or another entity owned directly or indirectly by
them. Mr. Allen has notified the Special Committee that he disagrees with the
Special Committee's preliminary determinations. Accordingly, the parties have
begun a process of non-binding mediation to seek to resolve this matter as soon
as practicable, but without any prejudice to any rights of the parties if such
dispute is not resolved as part of the mediation.

13. RECENTLY ISSUED ACCOUNTING STANDARDS

In April of 2003, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 149, "Amendment of
Statement 133 on Derivative Instruments and Hedging Activities." SFAS No. 149
amends and clarifies financial accounting and reporting for derivative
instruments, including certain derivative instruments embedded in other
contracts and for hedging activities under SFAS No. 133, "Accounting for
Derivative Instruments and Hedging Activities." SFAS No. 149 is effective for
contracts entered into or modified after June 30, 2003 and for hedging
relationships designated after June 30, 2003. SFAS No. 149 will be adopted by
the Company for contracts entered into or modified after June 30, 2003 and for
hedging relationships designated after June 30, 2003. The Company does not
expect the adoption of SFAS No. 149 to have a material impact on the Company's
financial condition or results of operations.

In May of 2003, the FASB issued SFAS No. 150, "Accounting for Certain Financial
Instruments with Characteristics of Both Liabilities and Equity." SFAS No. 150
establishes standards for how an issuer classifies and measures certain
financial instruments with characteristics of both liabilities and equity. SFAS
No. 150 is effective for financial instruments entered into or modified after
May 31, 2003, and otherwise is effective at the beginning of the first interim
period beginning after June 15, 2003. SFAS No. 150 will be adopted by the
Company for financial instruments entered into or modified after May 31, 2003.
The Company does not expect the adoption of SFAS No. 150 to have a material
impact on the Company's financial condition or results of operations.

15

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.

Reference is made to "Certain Trends and Uncertainties" of this section and
"Cautionary Statement Regarding Forward-Looking Statements," which describe
important factors that could cause actual results to differ from expectations
and non-historical information contained herein. In addition, this section
should be read in conjunction with the Annual Reports on Form 10-K of CC V
Holdings, LLC and subsidiaries and Charter Communications Holdings, LLC
("Charter Holdings") for the year ended December 31, 2002.

All comparisons and references in this Form 10-Q to results for the six months
ended June 30, 2002 are to the restated results. See "Restatement of
Consolidated Financial Results" below and Note 4 to our consolidated financial
statements contained in "Item 1. Financial Statements" for a more detailed
discussion of the restatement.

As used herein, the "Company" refers to CC V Holdings, LLC and subsidiaries.
"We", "us" and "our" refer to the Company and CC V Finance, Inc., collectively.
Our "parent companies" refers collectively to CCO NR Holdings, Charter
Communications Operating, LLC, CCO Holdings, LLC, CCH II, LLC, CCH I, LLC,
Charter Holdings and Charter Communications, Inc. (Charter).

INTRODUCTION

We have a history of net losses. Historically our net losses were principally
attributable to the substantial interest costs we incurred because of our high
level of debt, the significant depreciation expenses that we incurred resulting
from the extensive capital investments we had made in our cable properties and
the amortization and impairment of our franchise intangibles. We expect interest
cost and depreciation expenses will remain substantial. However, with the
adoption of Statement of Financial Accounting Standards No. 142, we no longer
are required to amortize indefinite-lived assets (franchises) but rather test
for impairment on an annual basis.

The first cash interest payment on our public notes will be due in October 2003.
Thereafter, we will be required to pay interest in cash each April and October.
In addition, our outstanding public notes will mature in 2008. We expect that we
will be reliant 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.

RESTATEMENT OF CONSOLIDATED FINANCIAL STATEMENTS

As discussed in our 2002 Form 10-K, we identified a series of adjustments that
have resulted in the restatement of previously announced quarterly results for
the first three quarters of fiscal 2002. In summary, the adjustments are grouped
into 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; (vi)
deferred tax liabilities/franchise assets; and (vii) other adjustments. These
adjustments have been reflected in the accompanying consolidated financial
statements and reduced revenues for the three and six months ended June 30, 2002
by $2 million and $3 million, respectively. Our consolidated net loss decreased
by $20 million and increased by $370 million for the three and six months ended
June 30, 2002, respectively. In addition, as a result of certain of these
adjustments, our statement of cash flows for the six months ended June 30, 2002
has been restated. Cash flows from operating activities for the six months ended
June 30, 2002 increased by $2 million. The more significant categories of
adjustments relate to the following as outlined below (dollars in thousands,
except where indicated).

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 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 revenues by $2
million for each of the three and six months ended June 30, 2002, respectively.
The corresponding amortization of such deferred amounts reduced programming
expenses by $1 million and $3 million for the three and six months ended June
30, 2002, respectively.

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 revenues of $351 and $661

16

for the three and six months ended June 30, 2002. 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 installations and new
service introductions have been expensed in the period incurred. Such
adjustments increased operating expenses by $2 million for each of the three and
six months ended June 30, 2002, respectively.

Customer Acquisition Costs. Certain customer acquisition campaigns were
conducted through third-party contractors in 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 $1 million and $3 million for the three and six months ended June 30,
2002, respectively. We discontinued this program in the third quarter of 2002 as
contracts for third-party vendors expired. Substantially all of these amounts
are 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 reduced property, plant and equipment and increased franchise assets
by $54 million. In addition, the depreciation period for the assets subject to
replacement 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 $31 million and $44 million for the three and six months ended June 30, 2002,
respectively.

Deferred Tax Liabilities/Franchise Assets. Adjustments were made to record
deferred tax liabilities associated with the acquisition of various cable
television businesses. These adjustments increased amounts assigned to franchise
assets by $254 million with a corresponding increase in deferred tax liabilities
of $39 million. The balance of the entry was recorded to member's equity. In
addition, as described above, a correction was made to reduce amounts assigned
in purchase accounting to assets identified for replacement over the three-year
period of our rebuild and upgrade of its network. This reduced the amount
assigned to the network assets to be retained and increased the amount assigned
to franchise assets by $54 million with a resulting increase in amortization
expense for the years restated. Such adjustments increased the cumulative effect
of accounting change recorded upon adoption of Statement of Financial Accounting
Standards (SFAS) No. 142 on January 1, 2002 by $93 million.

Other Adjustments. In addition to the items described above, other adjustments
of expenses include certain tax reclassifications from tax expense to operating
costs and other miscellaneous adjustments. The net impact of these adjustments
to net loss is an increase of $2 million and $3 million for the three and six
months ended June 30, 2002, respectively.

The following tables summarize the effects of the adjustments on the
consolidated statements of operations and cash flows for the three-month and
six-month period ended June 30, 2002 (dollars in thousands).

17

CONSOLIDATED STATEMENT OF CASH FLOWS

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

We disclosed our critical accounting policies and the means by which we develop
estimates therefor in "Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations" in our 2002 Annual Report on Form 10-K.

RESULTS OF OPERATIONS

SIX MONTHS ENDED JUNE 30, 2003 COMPARED TO SIX MONTHS ENDED JUNE 30, 2002

The following table summarizes amounts and the percentages of total revenues for
certain items for the periods indicated (dollars in thousands):

18

REVENUES. Revenues increased $39.3 million, or 14%, to $327.3 million for the
six months ended June 30, 2003 from $288.0 million for the six months ended June
30, 2002. Revenues by service offering are as follows (dollars in thousands):

Analog video revenues consist primarily of revenues from basic services. Analog
video revenues increased by $7.5 million, or 4%, to $200.4 million for the six
months ended June 30, 2003 as compared to $192.9 million for the six months
ended June 30, 2002. The increase was primarily due to general price increases,
offset somewhat by the decline in analog video customers. Our goal is to sustain
revenues by reversing our analog customer losses, implementing limited price
increases on certain services and packages and increasing sales of high-speed
data services and digital video services. We have continued to experience analog
customer losses in the second quarter as a result of competition and planned
rate adjustments implemented in the first and second quarter of 2003. We do not
expect further analog rate increases to any significant extent for the remainder
of the year; however, it is unclear whether or not we can reverse the trend of
analog customer loss.

All of our digital video customers also receive basic analog video service, and
digital video revenues consist of the portion of revenues from digital video
customers in excess of the amount paid by these customers for analog video
service. Additionally, included within digital video revenues are revenues from
premium services and pay-per-view services. Digital video revenues increased
$6.3 million, or 20%, from $32.2 million for the six months ended June 30, 2002
to $38.5 million for the six months ended June 30, 2003. We experienced a net
loss of digital customers during the six months ended June 30, 2003, a trend we
hope to reverse in the second half of the year through various marketing
campaigns we expect to deliver to the marketplace. Whether or not these
campaigns will be successful is impossible to predict at this time, as we do not
know what competitive marketing or discount offers may be employed by our
competition.

High-speed data revenues increased $17.5 million, or 68%, from $25.6 million for
the six months ended June 30, 2002 to $43.1 million for the six months ended
June 30, 2003. The majority of the increase was primarily due to an increase in
high-speed data customers. We were able to offer this service to more of our
customers, as the estimated percentage of homes passed that could receive
high-speed data service increased as a result of our system upgrades.

Advertising sales revenues consist primarily of revenues from commercial
advertising customers, programmers and other vendors. Advertising sales
increased $1.1 million, or 7%, from $15.1 million for the six months ended June
30, 2002 to $16.2 million for the six months ended June 30, 2003. For the six
months ended June 30, 2003 and 2002, we received $845 and $2.9 million,
respectively, in advertising revenue from programmers and digital set-top
terminal suppliers.

Other revenues consist primarily of revenues from franchise fees, commercial
high-speed data revenues, late payment fees, customer installations, wire
maintenance fees, home shopping, equipment rental, dial-up Internet service and
other miscellaneous revenues. Other revenues increased 7.0 million, or 32%, from
$22.1 million for the six months ended June 30, 2002 to $29.1 million for the
six months ended June 30, 2003. The increase was primarily due to an increase in
commercial high-speed data revenues.

19

OPERATING EXPENSES. Operating expenses increased $14.2 million, or 13%, to
$125.2 million for the six months ended June 30, 2003 from $111.0 million for
the six months ended June 30, 2002. Key components of operating expenses as a
percentage of revenues are as follows (dollars in thousands):

Programming costs consist primarily of costs paid to programmers for the
provision of basic, premium and digital channels and pay-per-view programs. The
increase in programming costs of $8.1 million, or 11%, was primarily due to
price increases, particularly in sports programming, an increased number of
channels carried on our systems and an increase in digital customers partially
offset by decreases in analog video customers. Programming costs were offset by
the amortization of payment received from programmers in support of launches of
new channels against programming costs of $4 million and $3 million for the six
months ended June 30, 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 they are
expected 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, increased costs from certain previously discounted
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 through increased incremental high-speed
data revenues.

Advertising sales expenses consist of costs related to traditional advertising
services, including salaries and benefits and commissions. Advertising sales
expenses increased $1.0 million, or 20%, due to an increase in sales
commissions. 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 $5.1
million, or 17%, resulted primarily from a reduced amount of personnel costs
associated with the capitalizable activities of rebuild and installation.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses increased by $0.1 million to $61.7 million for the six
months ended June 30, 2003 from $61.6 million for the six months ended June 30,
2002. Key components of expense as a percentage of revenues are as follows
(dollars in thousands):

General and administrative expenses consist primarily of salaries and benefits,
rent expense, billing costs, bad debt expense and property taxes. The increase
in general and administrative expenses of $4.0 million, or 8%, resulted
primarily from an increase in corporate expense charges - related party of $2.1
million and a $1.5 million increase in property taxes coupled with other
miscellaneous items.

Marketing expenses decreased $3.8 million, or 34%, due to reduced promotional
activity related to our service offerings including advertising, telemarketing
and direct sales. We expect marketing expenses to increase in subsequent
quarters.

20

DEPRECIATION AND AMORTIZATION. Depreciation and amortization expense increased
by $20.0 million, or 30%, from $67.6 million for the six months ended June 30,
2002 to $87.6 million for the six months ended June 30, 2003. This increase was
due primarily to an increase in depreciation expense related to additional
capital expenditures in 2003 and 2002.

SPECIAL CHARGES, NET. Special charges of $0.2 million for the six months ended
June 30, 2003 primarily represents $0.8 million of severance and related costs
of our ongoing initiative to reduce our workforce coupled with a $0.3 million
reversal in the severance accrual and a $0.3 million credit from a settlement
from the Internet service provider Excite@Home related to our conversion of
certain high-speed data customers to Charter Pipeline service in 2001. We expect
to continue to record additional special charges in 2003 related to the
continued reorganization of our operations.

INTEREST EXPENSE, NET. Interest expense increased by $3.6 million, or 9%, to
$46.3 million for the six months ended June 30, 2003 from $42.7 million for the
six months ended June 30, 2002. The increase was primarily due to an increase in
our weighted average debt outstanding to $1.4 billion during the six months
ended June 30, 2003 from $1.2 billion during the six months ended June 30, 2002
partially offset by a decrease in our average borrowing rate from 6.4% during
the six months ended June 30, 2002 to 6.3% during the six months ended June 30,
2003.

OTHER, NET. Other expenses decreased by $6.8 million, or 65%, to $3.7 million
for the six months ended June 30, 2003 from $10.5 million for the six months
ended June 30, 2002. The increase was primarily due to more favorable positions
on interest rate agreements.

MINORITY INTEREST. Minority interest expense represents the 2% accretion of the
preferred membership interests in CC VIII, LLC.

INCOME TAX BENEFIT (EXPENSE). Income tax expense of $0.9 million and income tax
benefit of $1.1 million for the six months ended June 30, 2003 and 2002,
respectively, represents state income tax benefits or expense primarily related
to certain indirect corporate subsidiaries of the Company which file separate
income tax returns.

CUMULATIVE EFFECT OF ACCOUNTING CHANGE. Cumulative effect of accounting change
in 2002 represents the impairment charge recorded as a result of adopting SFAS
No. 142.

NET LOSS. Net loss decreased by $420.7 million to $4.8 million for the six
months ended June 30, 2003 from $425.5 million for the six months ended June 30,
2002 as a result of the combination of factors discussed above.

LIQUIDITY AND CAPITAL RESOURCES

INTRODUCTION

This section contains a discussion of our liquidity and capital resources,
including a discussion of our cash position, sources and uses of cash, access to
debt facilities and other financing sources, historical financing activities,
cash needs, capital expenditures and outstanding debt. The first part of this
section, entitled "Overview" summarizes our outstanding debt and provides an
overview of these topics. The second part of this section, entitled "Historical
Operating, Financing and Investing Activities" provides information regarding
the cash provided from or used in our operating, financing and investing
activities during the six months ended June 30, 2003 and 2002. The third part of
this section, entitled "Capital Expenditures" provides more detailed information
regarding our historical capital expenditures and our planned capital
expenditures going forward.

OVERVIEW

Our business requires significant cash to fund capital expenditures, debt
service costs and ongoing operations. We have historically funded our operating
activities through cash flows from operating activities. We have funded capital
requirements through cash flows from operating activities, borrowings under the
credit facilities of the Company's subsidiary, equity contributions from our
parent companies, borrowings from related parties and cash on hand. The mix of
funding sources changes from period to period, but for the six months ended June
30, 2003, approximately 62% of the Company's capital funding requirements were
from cash flows from operating activities and 38% was from cash on hand. We
expect that our mix of sources of funds will continue to change in the future
based on our overall capital needs relative to our cash flow and on the
availability under the credit facilities of our

21

subsidiary, our parent companies' ability to make additional contributions and
our ability to generate cash flows from operating activities.

During 2003, we expect to fund our liquidity and capital requirements
principally through cash on hand, cash flows from operating activities, and
through borrowings under the CC VIII Operating credit facilities. As of June 30,
2003, we held $18 million in cash and cash equivalents and we had total
potential unused availability of $329 million under the CC VIII Operating credit
facilities, $323 million of which was available based upon our financial
covenants at that time. However, continued access to these credit facilities is
subject to our remaining in compliance with the applicable covenants of these
credit facilities. In that regard, our indirect parent entered into a commitment
letter with Vulcan Inc., which is an affiliate of Paul Allen, pursuant to which
Vulcan Inc. agreed to lend, or cause an affiliate to lend to CCO Holdings, LLC
an aggregate amount of up to $300 million, which amount includes a subfacility
of up to $100 million for the issuance of letters of credit, subject to
negotiation and execution of definitive documentation, to provide funding to the
extent necessary to comply with leverage ratio covenants of subsidiary's credit
facilities, including ours, in future quarters. However, there can be no
assurance that we will choose to draw down funds under such facility or that
such facility will prevent a violation of the covenants of our subsidiary's
credit facilities. In June 2003, Vulcan Inc. agreed to remove the requirement
that definitive documentation for the facility be entered into by June 30, 2003,
since we had determined that we would not need to draw on the facility for the
quarter ending June 30, 2003. Vulcan's commitment will continue until March 31,
2004, subject to the execution and delivery of definitive documents by that
date.

As of June 30, 2003 and December 31, 2002, long-term debt totaled approximately
$1.3 billion. This debt was comprised of approximately $1.1 billion and $1.2
billion of debt under the CC VIII Operating credit facilities, and $172 million
and $163 million of high yield debt at June 30, 2003 and December 31, 2002,
respectively. As of June 30, 2003, we had unused total potential availability of
$329 million under the CC VIII Operating credit facilities, $323 million of
which would have been available to us based on our financial covenants at that
time. Continued access to these credit facilities is subject to our remaining in
compliance with the applicable covenants of these credit facilities. See the
section "Liquidity and Capital Resources" of "Item 7. Management's Discussion
and Analysis of Financial Condition and Results of Operations" included in our
2002 Annual Report on Form 10-K for a description of our credit facilities and
other long-term debt, including certain terms, restrictions and covenants.

As of June 30, 2003 and December 31, 2002, the weighted average interest rate on
our bank debt was approximately 5.5% and 5.4%, respectively, and the weighted
average interest rate on our high yield debt was approximately 11.9%, resulting
in a blended weighted average interest rate of 6.3% and 6.2%, respectively.
Approximately 67% of our debt effectively bore fixed interest rates including
the effects of our interest rate hedge agreements as of June 30, 2003 as
compared to approximately 65% at December 31, 2002. The fair value of our total
fixed-rate debt was $171 million and $118 million at June 30, 2003 and December
31, 2002, respectively. The fair value of variable-rate debt was $1.0 billion
and $943 million at June 30, 2003 and December 31, 2002, respectively. The fair
value of fixed-rate debt and variable rate debt is based on quoted market
prices.

We expect that our subsidiary will remain in compliance with the covenants under
its credit facilities and that we will remain in compliance with the covenants
in our indenture. We also expect that that our cash on hand, cash flows from
operating activities and the amounts available under the credit facilities
should be sufficient to satisfy our liquidity needs through the end of 2003.
However, as the principal amounts owing under our various debt obligations
become due, sustaining our liquidity will become more difficult over time. Our
public notes begin to mature in the fourth quarter of 2003, when approximately
$66 million of accreted interest is due on our notes. Thereafter, cash interest
will accrue on the CC V notes at the annual rate of 11.875% and will be payable
each June and December, commencing June 2004, until the CC V notes mature in
December 2008. In subsequent years, substantial additional amounts will become
due under our remaining obligations. In addition, a default under the covenants
governing any of our debt instruments could result in the acceleration of our
payment obligations under that debt and, under certain circumstances, in
cross-defaults under our affiliates other debt obligations, which could
adversely affect our parent companies' ability to provide us with funding.

While we believe we will have access to sufficient capital to make the accreted
interest payment on the CC V notes in the amount of approximately $66 million in
December 2003 as required by the indenture governing the CC V notes, it is
unclear whether we will have sufficient continuing access to capital to satisfy
our cash interest payments commencing June 2004 or to repay the CC V notes at
maturity in December 2008. 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. In addition, the maximum allowable leverage ratios
under the CC VIII Operating credit facilities will decline over time and the
total potential borrowing available under those facilities (subject to covenant
restrictions

22

and limitations) will decrease from approximately $1.4 billion as of the end of
2003 to $1.3 billion and $1.1 billion by the end of 2004 and 2005, respectively.

Traditionally, we have relied on our affiliates' ability to access the public
debt and equity markets as a source of capital. Charter's and Charter Holding's
outstanding debt, liquidity and corporate credit ratings have been downgraded by
Moody's Investors Service Inc. and Standard and Poor's Rating Services.

As noted above, our access to capital from the CC VIII Operating credit
facilities is contingent on compliance with a number of restrictive covenants,
including covenants tied to our operating performance. We may not be able to
comply with all of these restrictive covenants. If there is an event of default
under any of these facilities, such as the failure to maintain the applicable
required financial ratios, we would be unable to borrow under those facilities,
which could materially adversely impact our ability to operate our business and
to make payments under the CC V notes and our other obligations. In addition, an
event of default under those facilities, if not waived, may result in the
acceleration of those facilities, which in turn result in the acceleration of
the CC V notes and our other obligations, and could result in an exercise of
remedies by our creditors and could force us to seek the protection of the
bankruptcy laws.

We may also need additional capital if we do not achieve our projected revenues,
or if our operating expenses increase. If we are not able to obtain such capital
from increases in our cash flows from operating activities, additional
borrowings, contributions from affiliates or other sources, we may not be able
to fund customer demand for digital video, data or telephony services, offer
certain services in certain of our markets or compete effectively. Consequently,
our financial condition and results of operations could suffer materially.

If, at any time, additional capital or borrowing capacity is required beyond
amounts internally generated or available through our existing credit facilities
or in traditional debt financings by us, we would consider:

o requesting waivers or amendments with respect to our credit facilities,
the availability and terms of which would be subject to market
conditions;

o further reducing our expenses and capital expenditures, which would
likely impair our ability to increase revenue;

o selling assets; or

o seeking funding from our parent companies through the issuance of debt
or equity by our parent companies, the proceeds of which could be
contributed to us.

If the above strategies were 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 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 Mr. Allen and his affiliates have purchased equity from Charter and
Charter Holdco in the past, Mr. Allen and his affiliates are not obligated to
purchase equity or, except as described in Item 7. "Management's Discussion and
Analysis of Financial Condition and Results of Operations" of our 2002 Annual
Report on Form 10-K under "Overview" with respect to the $300 million back-up
credit facility commitment, contribute or lend funds to us or to our
subsidiaries in the future.

As a means of enhancing our liquidity, we are currently attempting to cut costs,
reduce capital expenditures and exploring sales of assets.

HISTORICAL OPERATING, FINANCING AND INVESTING ACTIVITIES

We held $18 million in cash and cash equivalents as of June 30, 2003 compared to
$50 million in cash and cash equivalents as of December 31, 2002.

OPERATING ACTIVITIES. Net cash provided by operating activities for the six
months ended June 30, 2003 and 2002 was $52 million and $43 million,
respectively. Operating activities provided $9 million more cash during the six
months ended June 30, 2003 compared to the corresponding period in 2002
primarily due to increased revenues of $39 million, offset by an increase in
operating expenses of $14 million and by the change in operating assets and
liabilities of $13 million during the six months ended June 30, 2003 compared to
the corresponding period in 2002.

23

INVESTING ACTIVITIES. Net cash used in investing activities for the six months
ended June 30, 2003 and 2002 was $33 million and $128 million, respectively.
Investing activities used $95 million less cash during the six months ended June
30, 2003 compared to the corresponding period in 2002 as a result of reductions
in capital expenditures.

FINANCING ACTIVITIES. Net cash used in financing activities for the six months
ended June 30, 2003 was $51 million and net cash provided by financing
activities for the six months ended June 30, 2002 was $85 million, respectively.
Financing activities more cash during the six months ended June 30, 2003
compared to the corresponding period in 2002 primarily due to a reduction in
contributions from manager - related party and less net borrowings in 2003.

CAPITAL EXPENDITURES

We have substantial ongoing capital expenditure requirements. We made purchases
of property, plant and equipment of $23 million and $116 million for the six
months ended June 30, 2003 and 2002, respectively. The majority of the capital
expenditures in 2003 related to customer premise equipment and our rebuild and
upgrade program. Upgrading our cable systems has enabled us to offer digital
television, high-speed data services, video-on-demand, interactive services,
additional channels and tiers, and expanded pay-per-view options to a larger
customer base. Our capital expenditures in 2003 were funded primarily from cash
flows from operating activities and cash on hand. In addition, during the six
months ended June 30, 2003 and 2002, our liabilities related to capital
expenditures decreased by $10 million and $12 million, respectively.

During 2003, we expect to spend approximately $90 million to $120 million in the
aggregate on capital expenditures. We expect our capital expenditures in 2003
will be lower than 2002 levels because our rebuild and upgrade activities are
largely completed.

CERTAIN TRENDS AND UNCERTAINTIES

The following discussion highlights a number of trends and uncertainties, in
addition to those discussed elsewhere in this Quarterly Report and in our 2002
Annual Report on Form 10-K that could materially impact our business, results of
operations and financial condition.

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, borrowings under the credit facilities of our subsidiary
and capital contributions from Charter, Charter Holdco and Charter Holdings and
cash on hand. We believe, however, that at this time we have limited access to
the debt markets, and Charter, Charter Holdco and Charter Holdings have limited
access to the debt and equity markets in light of their significant levels of
debt, current market conditions and downgrades to their debt securities.

Our ability to conduct operations is dependent on our continued access to
borrowings under the CC VIII Operating credit facilities. The potential
borrowing availability under the CC VIII Operating credit facilities totaled
$329 million as of June 30, 2003, $323 million of which would have been
available based on our financial covenants at that time. Our access to those
funds is subject to our satisfaction of the covenants in those credit
facilities. We may not be able to comply with all of the financial ratios and
restrictive covenants in the CC VIII Operating credit facilities. If there is an
event of default under the CC VIII Operating credit facilities, such as the
failure to maintain the applicable required financial ratios, we would be unable
to borrow under these credit facilities, which could materially adversely impact
our ability to operate our business and to make payments under our debt
instruments. In addition, an event of default under those facilities, if not
waived, may result in the acceleration of those facilities, which could in turn
result in the acceleration of our notes and our other obligations, and could
result in an exercise of remedies by our creditors and could force us to seek
the protection of the bankruptcy laws.

In addition, as cash interest begins to accrue on our notes in December 2003 and
as the principal amounts owing under our various debt obligations become due,
sustaining our liquidity will become more difficult over time. It is unclear
whether we will have access to sufficient capital to satisfy our debt service
obligations which are scheduled to come due in future years. 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 distributions are not available to us from
borrowings under our subsidiary's credit facilities or 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

24

liquidity and capital needs. As a means of enhancing our liquidity, we are
currently attempting to cut cost and reduce capital expenditures and are
exploring sales of non-core 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 our
existing debt holders. Although Mr. Allen and his affiliates have purchased
equity from Charter and Charter Holdco in the past, Mr. Allen and his affiliates
are not obligated to purchase equity or, except as described in Item 7.
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" of our 2002 Annual Report on Form 10-K under "Overview" with respect
to the $300 million back-up credit facility commitment, contribute or lend funds
to us or to our subsidiaries in the future.

If we 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.

RESTRICTIVE COVENANTS. The credit facilities of our subsidiary and the indenture
governing our publicly held notes contain a number of significant covenants that
could adversely impact our business. In particular, the credit facilities of our
subsidiary and our indenture restrict our and our subsidiaries' ability to:

o pay dividends or make other distributions;

o make certain investments or acquisitions;

o enter into related party transactions unless certain
conditions are met;

o dispose of assets or merge;

o incur additional debt;

o issue equity;

o repurchase or redeem equity interests and debt;

o grant liens; and

o pledge assets.

Furthermore, in accordance with our subsidiary's credit facilities, CC VIII and
its subsidiaries are required to maintain specified financial ratios and meet
financial tests. These financial ratios become more restrictive over time and
will become more difficult to maintain during the latter half of 2003 and
thereafter. 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 applicable debt agreement or instrument and could trigger
acceleration of the debt under the CC VIII credit facilities and in certain
cases under other agreements governing our long-term indebtedness. Any default
under our credit facilities or indenture governing our outstanding debt might
adversely affect our growth, our financial condition and our results of
operations and our ability to make payments on our publicly held notes and the
CC VIII credit facilities.

ACCELERATION OF INDEBTEDNESS OF OUR SUBSIDIARIES. In the event of a default
under any of CC VIII Operating's credit facilities, our subsidiaries' creditors
could elect to declare all amounts borrowed, together with accrued and unpaid
interest and other fees, to be due and payable. In such event, those credit
facilities will not permit our subsidiaries to distribute funds to CC V
Operating to pay interest or principal on our public notes. If the amounts
outstanding under such credit facilities are accelerated, all of our
subsidiaries' debt and liabilities would be payable from our subsidiaries'
assets, prior to any distribution of our subsidiaries' assets to pay the
interest and principal amounts on our public notes. In addition, the lenders
under the CC VIII Operating credit facilities could foreclose on their
collateral, which includes equity interests in CC VIII Operating, and exercise
other rights of secured creditors. In any such case, we might not be able to
repay or make any payments on our public notes. Any default under any of our
subsidiary's credit facilities or our public notes might adversely affect the
holders of our public notes and our growth, financial condition and results of
operations and could force us to examine all options, including seeking the
protection of the bankruptcy laws.

PARENT LEVEL LIQUIDITY CONCERNS. Our indirect parent companies, Charter Holdings
and Charter, have a substantial amount of debt. Assuming the recently announced
Charter tender offers and the Charter Holdings tender offers are fully
subscribed and funded, Charter will still have approximately $1.0 billion
aggregate principal amount of convertible senior notes, which mature in 2005 and
2006, outstanding following these tender offers, and Charter Holdings will still
have approximately $9.2 billion aggregate principal amount of senior notes and
senior discount notes, some of which mature in 2007, outstanding following these
tender offers. Charter's and Charter Holdings' ability to make interest
payments, or principal payments at maturity starting in 2005, on their
convertible senior

25

notes, senior notes and senior discount notes is dependent on their ability to
obtain additional financing and on their subsidiaries making distributions,
loans, or payments to Charter Holdings and Charter Holdco, and on Charter Holdco
paying or distributing such funds to Charter. Because, Charter and Charter
Holdings are parent companies to us, any of their financial or liquidity
problems would likely cause serious disruption to our business and have a
material adverse affect 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. To
partially address these liquidity concerns, Charter and Charter Holdings are
commencing tender offers to purchase a portion of Charter's convertible senior
notes and a portion of Charter Holdings' senior notes and senior discount notes.
These tender offers are contingent on, among other things, the success of
financing transactions. Even if these tender offers are completed successfully,
Charter's and Charter Holdings' ability to access the debt or equity markets in
future would depend on their operating performance, market conditions in light
of general economic conditions, their substantial leverage, current business
conditions and their credit and liquidity ratings.

SECURITIES LITIGATION AND GOVERNMENT INVESTIGATIONS. As previously reported, a
number of Federal Class Actions were filed against Charter and certain of its
former and present officers and directors alleging violations of securities law.
The Federal Class Actions have been consolidated for pretrial purposes into a
Consolidated Federal Class Action. In addition, a number of other lawsuits have
been filed against Charter in other jurisdictions. A shareholders derivative
suit was filed in the United States 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
derivative suits were filed in Missouri state court against Charter, its current
directors and its former independent auditor; these actions were consolidated
during the fourth quarter of 2002. The federal 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 United States 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 Charter's 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 us that it is fully cooperating with the investigation.

In November 2002, Charter received an informal, non-public inquiry from the
Staff of the Securities and Exchange Commission (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 the determination of the number
of its 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 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. In addition, its
restatement may lead to additional allegations in the pending securities class
and 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,
all of which could affect adversely the market price of our publicly-traded
notes, as well as our ability to meet future operating and financial estimates
and to execute our business and financial strategies. To the extent that the
foregoing matters are not covered by insurance, our limited liability company
agreement and those of our limited liability company subsidiaries, and the
bylaws of our corporate subsidiaries may require each entity to indemnify
Charter and the above directors and current and former officers in connection
with such matters.

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 name recognition
and long-established relationships with regulatory authorities and customers.
Increasing

26

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. Further loss of customers to DBS or other alternative video and data
services could have a material negative impact on our business.

Mergers, joint ventures and alliances among franchise, 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.

VARIABLE INTEREST RATES. At June 30, 2003, excluding the effects of hedging,
approximately 87% of our debt bears interest at variable rates that are linked
to short-term interest rates. In addition, a significant portion of our existing
debt, assumed debt or debt we might arrange in the future will bear interest at
variable rates. If interest rates rise, our costs relative to those obligations
will also rise. As of June 30, 2003 and December 31, 2002, the weighted average
rate on the bank debt was approximately 5.5% and 5.4%, respectively, and the
weighted average rate on the high-yield debt was approximately 11.9%, resulting
in a blended weighted average rate of 6.3% and 6.2%, respectively. Approximately
67% of our debt was effectively fixed including the effects of our interest rate
hedge agreements as of June 30, 2003 as compared to approximately 65% at
December 31, 2002.

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 other 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. The inability to 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 our or our affiliates' 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.

27

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 and our subsidiaries' public notes, regardless of our operating performance.
In the past, securities litigation has often commenced following periods of
volatility in the market price of a company's securities, and recently such
purported class action lawsuits were filed against Charter.

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 operating cash flow, and also could affect our ability to collect
accounts receivable and maintain customers. In addition, any prolonged military
conflict would materially and adversely affect our revenues from our systems
providing services to military installations. 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 and the credit facilities of our subsidiary following a change of control.
A change of control under our public notes and our subsidiary's credit
facilities would require the repayment of borrowings under those credit
facilities and indenture. A failure by us or our subsidiary to make or complete
a change of control offer or to repurchase the amounts outstanding under the
credit facilities would place us or our subsidiary 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 Federal
Communications Commission 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 Federal Communications Commission is currently
conducting a proceeding in which it is considering this channel usage
possibility, although it recently 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 Federal Communications Commission, 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 access obligations could adversely impact our
profitability and discourage system upgrades and the introduction of new
products and services. Multiple federal courts have now struck down open-access
requirements imposed by several different franchising authorities as unlawful.
In March 2002, the Federal Communications Commission officially classified
cable's provision of high-speed Internet service in a manner that makes open
access requirements unlikely. At the same time, the Federal Communications
Commission initiated a rulemaking proceeding that leaves open the possibility
that the Commission may assert regulatory control in the future. 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.

The Federal Communications Commission's March 2002 ruling also held that
Internet access service provided by cable operators was not subject to franchise
fees assessed by local franchising authorities. A number of local franchise
authorities and Internet service providers have appealed this decision. The
matter is scheduled to be argued in May 2003. As a result of this ruling, we
have stopped collecting franchise fees for high-speed data service.

A recent court decision concerning the Digital Millenium Copyright Act ("DMCA")
has enabled copyright owners to obtain expedited subpoenas compelling disclosure
by Internet service providers of the names of customers that are otherwise known
only by an Internet protocol, or IP, address or screen name. This has led to a
marked increase in the volume of subpoeas received by us, as copyright owners
seek to constrain the use of peer-to-peer networks for

28

unauthorized copying and distribution of copyrighted works. Internet service
providers also have a DMCA obligation to adopt and implement a policy of
terminating the accounts of repeat copyright infringers. The increased activity
and responsibilities in this area pose an additional burden on our operations.

RECENTLY ISSUED ACCOUNTING STANDARDS

In April of 2003, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 149, "Amendment of
Statement 133 on Derivative Instruments and Hedging Activities." SFAS No. 149
amends and clarifies financial accounting and reporting for derivative
instruments, including certain derivative instruments embedded in other
contracts and for hedging activities under SFAS No. 133, "Accounting for
Derivative Instruments and Hedging Activities." SFAS No. 149 is effective for
contracts entered into or modified after June 30, 2003 and for hedging
relationships designated after June 30, 2003. We will adopt SFAS No. 149 for
contracts entered into or modified after June 30, 2003 and for hedging
relationships designated after June 30, 2003. We do not expect the adoption of
SFAS No. 149 to have a material impact on our financial condition or results of
operations.

In May of 2003, the FASB issued SFAS No. 150, "Accounting for Certain Financial
Instruments with Characteristics of Both Liabilities and Equity." SFAS No. 150
establishes standards for how an issuer classifies and measures certain
financial instruments with characteristics of both liabilities and equity. SFAS
No. 150 is effective for financial instruments entered into or modified after
May 31, 2003, and otherwise is effective at the beginning of the first interim
period beginning after June 15, 2003. We will adopt SFAS No. 150 for financial
instruments entered into or modified after May 31, 2003. We do not expect the
adoption of SFAS No. 150 to have a material impact on our financial condition or
results of operations.

CONTINGENCIES

SECURITIES CLASS ACTIONS AND DERIVATIVE SUITS AGAINST CHARTER. Fourteen putative
federal class action lawsuits (the "Federal Class Actions") have been filed
against Charter, our manager and indirect parent, and certain of Charter's
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 prior public filings
made by Charter. In October 2002, Charter filed a motion with the Judicial Panel
on Multidistrict Litigation (the "Panel") to transfer the Federal Class Actions
to the United States District Court for 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 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. On August 5, 2003, lead plaintiff was granted
leave to file an amended complaint in the Consolidated Federal Class Action.

On September 12, 2002, a shareholders derivative suit (the "State Derivative
Action") was filed in Missouri state court against Charter and its 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.

Separately, on February 12, 2003, a shareholders derivative suit (the "Federal
Derivative Action"), was filed against Charter and its 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 current directors and officers in the Court
of Chancery of the State of Delaware (the "Delaware Class Actions"). The
Delaware Class Actions are substantively

29

identical and generally allege that the defendants breached their fiduciary
duties by participating or acquiescing in a purported and threatened attempt by
Defendant Paul Allen to purchase shares and assets of Charter at an unfair
price. The lawsuits were brought on behalf of Charter's securities holders as of
July 29, 2002, and seek unspecified damages and possible injunctive relief. No
such purported or threatened transaction by Mr. Allen has been presented.

All of the lawsuits discussed above are each in preliminary stages, and no
dispositive motions or other responses to any of the complaints have been filed.
Charter has advised us that it intends to vigorously defend the lawsuits.

GOVERNMENT INVESTIGATIONS. In August of 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 subscriber 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 Securities and Exchange Commission. 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.

OUTCOME. 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 its results of operations and financial condition.

INDEMNIFICATION. 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. Certain of the
individual defendants also serve or have served as our officers and directors.
The limited liability company agreements of the Company and its limited
liability company subsidiaries, and the bylaws of its corporate subsidiaries,
may require each such entity to indemnify Charter and the individual named
defendants in connection with the matters set forth above.

INSURANCE. Charter has directors' and officers' 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.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

No material changes in reported market risks have occurred since the filing of
our December 31, 2002 Form 10-K.

ITEM 4. CONTROLS AND PROCEDURES.

As of the end of the period covered by this report, management, including our
Chief Executive Officer and interim Chief Financial Officer, evaluated the
effectiveness of the design and operation of our disclosure controls and
procedures with respect to the information generated for use in this Quarterly
Report. The evaluation was based in part upon reports and affidavits provided by
a number of executives. Based upon, and as of the date of that evaluation, our
Chief Executive Officer and interim Chief Financial Officer concluded that the
disclosure controls and procedures were effective to provide reasonable
assurances that information required to be disclosed in the reports we file or
submit under the Securities Exchange Act of 1934 is recorded, processed,
summarized and reported within the time periods specified in the Commission's
rules and forms.

30

There was no change in our internal control over financial reporting during the
quarter ended June 30, 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 its controls do provide such reasonable assurances.

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PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS.

In addition to those matters disclosed under the heading "Contingencies" of Part
I, Item 2 "Management's Discussion and Analysis of Financial Condition and
Results of Operations", we are involved from time to time in routine legal
matters and other claims incidental to our business. We believe that the
resolution of such routine matters and other incidental claims, taking into
account established reserves and insurance, will not have a material adverse
impact on our consolidated financial position or results of operations.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.

(a) EXHIBITS

Exhibit
Number Description of Document
------- -----------------------
3.1 Certificate of Formation of CC V Holdings, LLC (formerly Known
as Avalon Cable LLC). (Incorporated by reference to Amendment
No. 1 to the Registration Statement on Form S-4 (File No.
333-75415) filed by CC V Holdings, LLC (formerly known as
Avalon Cable LLC), CC V Holdings Finance, Inc. (formerly known
as Avalon Cable Holdings Finance, Inc.), Avalon Cable of
Michigan Holdings, Inc. and Avalon Cable of Michigan, Inc. on
May 28, 1999).

3.1(a) Amendment to Certificate of Formation of CC V Holdings,
LLC(formerly known as Avalon Cable LLC). ( Incorporated by
reference to the Annual Report on Form 10-K of CC V Holdings,
LLC and CC V Holdings Finance, Inc. (File Nos. 333-75415 and
333-75415-03, respectively) filed on March 30, 2000).

3.2 Certificate of Incorporation of CC V Holdings Finance, Inc.
(formerly known as Avalon Cable Holdings Finance, Inc.).
(Incorporated by reference to Amendment No. 1 to the
Registration Statement on Form S-4 (File No. 333-75415) filed
by CC V Holdings, LLC (formerly known as Avalon Cable LLC), CC
V Holdings Finance, Inc. (formerly known as Avalon Cable
Holdings Finance, Inc.), Avalon Cable of Michigan Holdings,
Inc. and Avalon Cable of Michigan, Inc. on May 28, 1999).

3.5 Amended and Restated Limited Liability Company Agreement of CC
V Holdings, LLC (formerly known as Avalon Cable LLC).
(Incorporated by reference to Amendment No. 1 to the
Registration Statement on Form S-4 (File No. 333-75415) filed
by CC V Holdings, LLC (formerly known as Avalon Cable LLC), CC
V Holdings Finance, Inc. (formerly known as Avalon Cable
Holdings Finance, Inc.), Avalon Cable of Michigan Holdings,
Inc. and Avalon Cable of Michigan, Inc. on May 28, 1999).

3.6 Amended and Restated By-Laws of CC V Holdings Finance, Inc.
(formerly known as Avalon Cable Holdings Finance, Inc.).
(Incorporated by reference to the Annual Report on Form 10-K
of CC V Holdings, LLC and CC V Holdings Finance, Inc. (File
Nos. 333-75415 and 333-75415-03, respectively) filed on March
30, 2000).

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). *

* filed herewith

(b) REPORTS ON FORM 8-K

On June 12, 2003, the registrant filed a current report on Form 8-K dated
June 6, 2003 to announce that the sale of the CC VIII Interest to Mr. Allen
pursuant to the Comcast Put Right had been consummated.

32

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended,
the registrants have duly caused this Quarterly Report to be signed on their
behalf by the undersigned thereunto duly authorized.

CC V HOLDINGS, LLC

Dated: August 12, 2003 By: CHARTER COMMUNICATIONS, INC.,
---------------------------------------------
Registrants' Manager

By: /s/ Steven A. Schumm
---------------------------------------------
Name: Steven A. Schumm
Title: Executive Vice President and Chief
Administrative Officer and interim Chief
Financial Officer (Principal Financial
Officer) of Charter Communications, Inc.
(Manager) and CC V Holdings, LLC

By: /s/ Paul E. Martin
---------------------------------------------
Name: Paul E. Martin
Title: Senior Vice President and Corporate
Controller (Principal Accounting Officer) of
Charter Communications, Inc. (Manager) and
CC V Holdings, LLC

CC V HOLDINGS FINANCE, INC.

Dated: August 12, 2003 By: /s/ Steven A. Schumm
---------------------------------------------
Name: Steven A. Schumm
Title: Executive Vice President and Chief
Administrative Officer and interim Chief
Financial Officer (Principal Financial
Officer) of Charter Communications, Inc.
(Manager) and CC V Holdings, LLC

By: /s/ Paul E. Martin
---------------------------------------------
Name: Paul E. Martin
Title: Senior Vice President - Corporate
Controller (Principal Accounting Officer) of
CC V Holdings Finance, Inc.

33

EXHIBIT INDEX

* filed herewith

34