Charter 2007 Annual Report Download - page 109

Company Agreement. CII transferred the other 70% of the CC
VIII interest directly and indirectly, through Charter Holdco to
CCHC. Of the 70% of the CC VIII interest, 7.4% has been
transferred by CII to CCHC for the CCHC note (see Note 10).
The remaining 62.6% has been transferred by CII to Charter
Holdco, in accordance with the terms of the settlement for no
additional monetary consideration. Charter Holdco contributed
the 62.6% interest to CCHC.
As part of the Settlement, CC VIII issued approximately
49 million additional Class B units to CC V in consideration for
prior capital contributions to CC VIII by CC V, with respect to
transactions that were unrelated to the dispute in connection
with CII’s membership units in CC VIII. As a result, Mr. Allen’s
pro rata share of the profits and losses of CC VIII attributable to
the Remaining Interests is approximately 5.6%.
As part of the debt exchange in September 2006 described
in Note 9, CCHC contributed the CC VIII interest in the Class A
preferred equity interests of CC VIII to CCH I. The CC VIII
interest was pledged as security for all CCH I notes. The CC
VIII preferred interests are entitled to a 2% accreting priority
return on the priority capital.
Certain related parties, including members of the board of
directors, hold interests in the Company’s senior notes and
discount notes of the Company’s subsidiaries of approximately
$203 million of face value at December 31, 2007.
24. COMMITMENTS AND CONTINGENCIES
Commitments
The following table summarizes the Company’s payment obligations as of December 31, 2007 for its contractual obligations.
Total 2008 2009 2010 2011 2012 Thereafter
Contractual Obligations
Capital and Operating Lease Obligations
(1)
$ 99 $ 22 $ 18 $ 21 $ 11 $ 8 $19
Programming Minimum Commitments
(2)
1,020 331 316 102 105 110 56
Other
(3)
475 374 65 34 2 ——
Total $1,594 $727 $399 $157 $118 $118 $75
(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,
2007, 2006, and 2005, were $23 million, $23 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 $1.6 billion, $1.5 billion, and
$1.4 billion, for the years ended December 31, 2007, 2006, and 2005, 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 table due to various factors discussed below. However,
the Company incurs these costs as part of its operations:
kThe Company also rents utility poles used in its operations.
Generally, pole rentals are cancelable on short notice, but
the Company anticipates that such rentals will recur. Rent
expense incurred for pole rental attachments for the years
ended December 31, 2007, 2006, and 2005, was $47 million,
$44 million, and $44 million, respectively.
kThe Company pays franchise fees under multi-year franchise
agreements based on a percentage of revenues generated
from video service per year. The Company also pays other
franchise related costs, such as public education grants,
under multi-year agreements. Franchise fees and other fran-
chise-related costs included in the accompanying statement
of operations were $172 million, $175 million, and $165 mil-
lion for the years ended December 31, 2007, 2006, and 2005,
respectively.
kThe Company also has $136 million in letters of credit,
primarily to its various worker’s compensation, property and
casualty, and general liability carriers, as collateral for reim-
bursement of claims. These letters of credit reduce the
amount the Company may borrow under its credit facilities.
Litigation
The Company is a defendant or co-defendant in several unre-
lated lawsuits claiming infringement of various patents relating to
various aspects of its businesses. Other industry participants are
also defendants in certain of these cases, and, in many cases, the
Company expects that any potential liability would be the
responsibility of its equipment vendors pursuant to applicable
contractual indemnification provisions. In the event that a court
ultimately determines that the Company infringes on any intel-
lectual property rights, it may be subject to substantial damages
and/or an injunction that could require the Company or its
vendors to modify certain products and services the Company
offers to its subscribers. While the Company believes the lawsuits
are without merit and intends to defend the actions vigorously,
the lawsuits could be material to the Company’s consolidated
results of operations of any one period, and no assurance can be
given that any adverse outcome would not be material to the
F-31
CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES 2007 FORM 10-K
Notes to Consolidated Financial Statements (continued)