Charter 2005 Annual Report Download - page 159

CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES 2005 FORM 10-K
Notes to Consolidated Financial Statements (continued)
26. Commitments and Contingencies
Commitments
The following table summarizes the Company’s payment obligations as of December 31, 2005 for its contractual obligations.
Total 2006 2007 2008 2009 2010 Thereafter
Contractual Obligations
Operating and Capital Lease Obligations(1) $ 94 $ 20 $ 15 $ 12 $ 10 $13 $24
Programming Minimum Commitments(2) 1,253 342 372 306 233 — —
Other(3) 301 146 49 21 21 21 43
Total $1,648 $508 $436 $339 $264 $34 $67
(1) The Company leases certain facilities and equipment under noncancelable operating leases. Leases and rental costs charged to expense for the years ended December 31,
2005, 2004 and 2003, were $23 million, $23 million and $30 million, respectively.
(2) The Company pays programming fees under multi-year contracts ranging from three to ten years typically based on a flat fee per customer, which may be fixed for the
term or may in some cases, escalate over the term. Programming costs included in the accompanying statement of operations were $1.4 billion, $1.3 billion and
$1.2 billion for the years ended December 31, 2005, 2004 and 2003, respectively. Certain of the Company’s programming agreements are based on a flat fee per month or
have guaranteed minimum payments. The table sets forth the aggregate guaranteed minimum commitments under the Company’s programming contracts.
(3) ‘‘Other’’ represents other guaranteed minimum commitments, which consist primarily of commitments to the Company’s billing services vendors.
The following items are not included in the contractual agreements in principle regarding settlement of the Actions.
obligation table due to various factors discussed below. How- Charter and various other defendants in those actions subse-
ever, the Company incurs these costs as part of its operations: quently entered into Stipulations of Settlement dated as of
January 24, 2005, setting forth a settlement of the Actions in a
(The Company also rents utility poles used in its operations. manner consistent with the terms of the Memorandum of
Generally, pole rentals are cancelable on short notice, but Understanding. On June 30, 2005, the Court issued its final
the Company anticipates that such rentals will recur. Rent approval of the settlements. At the end of September 2005, after
expense incurred for pole rental attachments for the years the period for appeals of the settlements expired, Stipulations of
ended December 31, 2005, 2004 and 2003, was $46 million, Dismissal were filed with the Eighth Circuit Court of Appeals
$43 million and $40 million, respectively. resulting in the dismissal of the two appeals with prejudice.
(The Company pays franchise fees under multi-year Procedurally therefore, the settlements are final.
franchise agreements based on a percentage of revenues As amended, the Stipulations of Settlement provided that,
earned from video service per year. The Company also in exchange for a release of all claims by plaintiffs against
pays other franchise related costs, such as public education Charter and its former and present officers and directors named
grants under multi-year agreements. Franchise fees and in the Actions, Charter would pay to the plaintiffs a combina-
other franchise-related costs included in the accompanying tion of cash and equity collectively valued at $144 million,
statement of operations were $170 million, $164 million and which was to include the fees and expenses of plaintiffs’ counsel.
$162 million for the years ended December 31, 2005, 2003 Of this amount, $64 million was to be paid in cash (by Charter’s
and 2002, respectively. insurance carriers) and the $80 million balance was to be paid in
shares of Charter Class A common stock having an aggregate
(The Company also has $165 million in letters of credit, value of $40 million and ten-year warrants to purchase shares of
primarily to its various worker’s compensation, property Charter Class A common stock having an aggregate warrant
casualty and general liability carriers as collateral for value of $40 million, with such values in each case being
reimbursement of claims. These letters of credit reduce the determined pursuant to formulas set forth in the Stipulations of
amount the Company may borrow under its credit facilities. Settlement. However, Charter had the right, in its sole discre-
tion, to substitute cash for some or all of the aforementioned
Litigation
securities on a dollar for dollar basis. Pursuant to that right,
Securities Class Actions and Derivative Suits Charter elected to fund the $80 million obligation with
In 2002 and 2003, the Company had a series of lawsuits filed 13.4 million shares of Charter Class A common stock (having
against Charter and certain of its former and present officers and an aggregate value of approximately $15 million pursuant to the
directors (collectively the ‘‘Actions’’). In general, the lawsuits formula set forth in the Stipulations of Settlement) with the
alleged that Charter utilized misleading accounting practices and remaining balance (less an agreed upon $2 million discount in
failed to disclose these accounting practices and/or issued false respect of that portion allocable to plaintiffs’ attorneys’ fees) to
and misleading financial statements and press releases concern- be paid in cash. In addition, Charter had agreed to issue
ing Charter’s operations and prospects. additional shares of its Class A common stock to its insurance
Charter and the individual defendants entered into a carrier having an aggregate value of $5 million; however, by
Memorandum of Understanding on August 5, 2004 setting forth agreement with its carrier, Charter paid $4.5 million in cash in
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