Charter 2005 Annual Report Download - page 149

CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES 2005 FORM 10-K
Notes to Consolidated Financial Statements (continued)
exposed to market price risk volatility with respect to invest- 19. OPERATING EXPENSES
ments in publicly traded and privately held entities. Operating expenses consist of the following for the years
The fair value of interest rate agreements represents the presented:
estimated amount the Company would receive or pay upon
termination of the agreements. Management believes that the Year Ended December 31,
sellers of the interest rate agreements will be able to meet their 2005 2004 2003
obligations under the agreements. In addition, some of the Programming $ 1,417 $1,319 $1,249
interest rate agreements are with certain of the participating Service 775 663 615
banks under the Company’s credit facilities, thereby reducing Advertising sales 101 98 88
the exposure to credit loss. The Company has policies regarding $ 2,293 $2,080 $1,952
the financial stability and credit standing of major counterparties.
Nonperformance by the counterparties is not anticipated nor
would it have a material adverse effect on the Company’s 20. SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
consolidated financial condition or results of operations. Selling, general and administrative expenses consist of the
The estimated fair value of the Company’s notes and following for the years presented:
interest rate agreements at December 31, 2005 and 2004 are
based on quoted market prices, and the fair value of the credit Year Ended December 31,
facilities is based on dealer quotations. 2005 2004 2003
A summary of the carrying value and fair value of the
General and administrative $ 889 $849 $833
Company’s debt and related interest rate agreements at Decem- Marketing 145 122 107
ber 31, 2005 and 2004 is as follows: $ 1,034 $971 $940
2005 2004 Components of selling expense are included in general and
Carrying Fair Carrying Fair administrative and marketing expense.
Value Value Value Value
Debt 21. STOCK COMPENSATION PLANS
Charter convertible notes $ 863 $ 647 $ 990 $1,127
Charter Holdings debt 1,746 1,145 8,579 7,669 The Company grants stock options, restricted stock and other
CIH debt 2,472 1,469 — — incentive compensation pursuant to the 2001 Stock Incentive
CCH I debt 3,683 2,959 — —
Plan of Charter (the ‘‘2001 Plan’’). Prior to 2001, options were
CCH II debt 1,601 1,592 1,601 1,698
CCO Holdings debt 1,344 1,299 1,050 1,064 granted under the 1999 Option Plan of Charter Holdco (the
Charter Operating debt 1,833 1,820 1,500 1,563 ‘‘1999 Plan’’).
Credit facilities 5,731 5,719 5,515 5,502 The 1999 Plan provided for the grant of options to
Other 115 114 229 236 purchase membership units in Charter Holdco to current and
Interest Rate Agreements
Assets (Liabilities) prospective employees and consultants of Charter Holdco and
Swaps (4) (4) (69) (69) its affiliates and current and prospective non-employee directors
Collars —— (1) (1) of Charter. Options granted generally vest over five years from
the grant date, with 25% vesting 15 months after the anniversary
The weighted average interest pay rate for the Company’s
of the grant date and ratably thereafter. Options not exercised
interest rate swap agreements was 9.51% and 8.07% at Decem-
accumulate and are exercisable, in whole or in part, in any
ber 31, 2005 and 2004, respectively.
subsequent period, but not later than 10 years from the date of
18. REVENUES grant. Membership units received upon exercise of the options
are automatically exchanged into Class A common stock of
Revenues consist of the following for the years presented: Charter on a one-for-one basis.
The 2001 Plan provides for the grant of non-qualified stock
Year Ended December 31, options, stock appreciation rights, dividend equivalent rights,
2005 2004 2003 performance units and performance shares, share awards, phan-
Video $ 3,401 $3,373 $3,461 tom stock and/or shares of restricted stock (not to exceed
High-speed Internet 908 741 556 20,000,000), as each term is defined in the 2001 Plan. Employ-
Telephone 36 18 14 ees, officers, consultants and directors of the Company and its
Advertising sales 294 289 263
Commercial 279 238 204 subsidiaries and affiliates are eligible to receive grants under the
Other 336 318 321 2001 Plan. Options granted generally vest over four years from
$ 5,254 $4,977 $4,819 the grant date, with 25% vesting on the anniversary of the grant
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