Charter 2006 Annual Report Download - page 115

CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES 2006 FORM 10-K
Notes to Consolidated Financial Statements (continued)
23. COMMITMENTS AND CONTINGENCIES
Commitments
The following table summarizes the Company’s payment obligations as of December 31, 2006 for its contractual obligations.
Total 2007 2008 2009 2010 2011 Thereafter
Contractual Obligations
Capital and Operating Lease Obligations(1) $ 95 $ 20 $ 17 $ 15 $ 17 $ 8 $18
Programming Minimum Commitments(2) 854 349 287 218 —— —
Other(3) 423 284 43 26 24 24 22
Total $1,372 $653 $347 $259 $ 41 $32 $40
(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,
2006, 2005, and 2004, were $23 million, $22 million, and $22 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 $1.5 billion, $1.4 billion, and
$1.3 billion, for the years ended December 31, 2006, 2005, and 2004, 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 obligation with 13.4 million shares of Charter Class A common
obligation table due to various factors discussed below. How- stock (having an aggregate value of approximately $15 million
ever, the Company incurs these costs as part of its operations: pursuant to the formula set forth in the Stipulations of
Settlement) with the remaining balance (less an agreed upon
(The Company also rents utility poles used in its operations. $2 million discount in respect of that portion allocable to
Generally, pole rentals are cancelable on short notice, but plaintiffs’ attorneys’ fees) paid in cash. In addition, Charter paid
the Company anticipates that such rentals will recur. Rent approximately $5 million in cash to its insurance carrier. As a
expense incurred for pole rental attachments for the years result in 2004, the Company recorded a $149 million litigation
ended December 31, 2006, 2005, and 2004, was $44 million, liability within other long-term liabilities and a $64 million
$44 million, and $42 million, respectively. insurance receivable as part of other non-current assets on its
(The Company pays franchise fees under multi-year consolidated balance sheet and an $85 million special charge on
franchise agreements based on a percentage of revenues its consolidated statement of operations. Charter delivered the
generated from video service per year. The Company also settlement consideration to the claims administrator on July 8,
pays other franchise related costs, such as public education 2005, and it was held in escrow pending resolution of the
grants, under multi-year agreements. Franchise fees and appeals. Those appeals are now resolved.
other franchise-related costs included in the accompanying The Company is a defendant or co-defendant in several
statement of operations were $175 million, $165 million, unrelated lawsuits claiming infringement of various patents
and $159 million for the years ended December 31, 2006, relating to various aspects of its businesses. Other industry
2005, and 2004, respectively. participants are also defendants in certain of these cases, and, in
many cases, the Company expects that any potential liability
(The Company also has $147 million in letters of credit, would be the responsibility of its equipment vendors pursuant to
primarily to its various worker’s compensation, property applicable contractual indemnification provisions. In the event
and casualty, and general liability carriers, as collateral for that a court ultimately determines that the Company infringes
reimbursement of claims. These letters of credit reduce the on any intellectual property rights, it may be subject to
amount the Company may borrow under its credit facilities. substantial damages and/or an injunction that could require the
Litigation Company or its vendors to modify certain products and services
In 2004, the Company settled a series of lawsuits filed against the Company offers to its subscribers. While the Company
Charter and certain of its former and present officers and believes the lawsuits are without merit and intends to defend the
directors (the ‘‘Settlement’’). In general, the lawsuits alleged that actions vigorously, the lawsuits could be material to the
Charter utilized misleading accounting practices and failed to Company’s consolidated results of operations of any one period,
disclose these accounting practices and/or issued false and and no assurance can be given that any adverse outcome would
misleading financial statements and press releases concerning not be material to the Company’s consolidated financial
Charter’s operations and prospects. condition, results of operations or liquidity.
The Settlement provided that Charter would pay to the Charter is a party to other lawsuits and claims that arise in
plaintiffs a combination of cash and equity collectively valued at the ordinary course of conducting its business. The ultimate
$144 million, which was to include the fees and expenses of outcome of these other legal matters pending against the
plaintiffs’ counsel. Charter elected to fund $80 million of the Company or its subsidiaries cannot be predicted, and although
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