Charter 2009 Annual Report Download - page 23

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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Reference is made to “Part I. Item 1A. Risk Factors” 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, the following discussion should be read in conjunction with the
audited consolidated financial statements and accompanying notes thereto of CCH II and subsidiaries included in
“Item 8. Financial Statements and Supplementary Data.”
Emergence from Reorganization Proceedings and Related Events
On March 27, 2009, the Debtors filed voluntary petitions in the Bankruptcy Court seeking relief under the
Bankruptcy Code. On November 17, 2009, the Bankruptcy Court entered the Confirmation Order confirming our
Plan and, on the Effective Date, the Plan was consummated and we emerged from bankruptcy.
Upon our emergence from bankruptcy, we adopted fresh start accounting. In accordance with accounting principles
generally accepted in the United States (“GAAP”), the accompanying consolidated statements of operations and cash
flows contained in “Item 8. Financial Statements and Supplementary Data” present the results of operations and the
sources and uses of cash for (i) the eleven months ended November 30, 2009 of the Predecessor and (ii) the one
month ended December 31, 2009 of the Successor. However, for purposes of management’ s discussion and analysis
of the results of operations and the sources and uses of cash in this Annual Report, we have combined the current
year results of operations for the Predecessor and the Successor. The results of operations of the Predecessor and
Successor are not comparable due to the change in basis resulting from the emergence from bankruptcy. This
combined presentation is being made solely to explain the changes in results of operations for the periods presented
in the financial statements. We also compare the combined results of operations and the sources and uses of cash for
the twelve months ended December 31, 2009 with the corresponding period in the prior years.
We believe the combined results of operations for the twelve months ended December 31, 2009 provide
management and investors with a more meaningful perspective on our ongoing financial and operational
performance and trends than if we did not combine the results of operations of the Predecessor and the Successor in
this manner.
Overview
We are a broadband communications company operating in the United States with approximately 5.3 million
customers at December 31, 2009. We offer our customers traditional cable video programming (basic and digital,
which we refer to as "video" service), high-speed Internet access, and telephone services, as well as advanced
broadband services (such as OnDemand, high definition television service and DVR).
Approximately 88% and 86% of our revenues for the years ended December 31, 2009 and 2008, respectively, are
attributable to monthly subscription fees charged to customers for our video, high-speed Internet, telephone, and
commercial services provided by our cable systems. Generally, these customer subscriptions may be discontinued
by the customer at any time. The remaining 12% and 14% of revenue for fiscal years 2009 and 2008, respectively,
is derived primarily from advertising revenues, franchise fee revenues (which are collected by us but then paid to
local franchising authorities), pay-per-view and OnDemand programming, installation or reconnection fees charged
to customers to commence or reinstate service, and commissions related to the sale of merchandise by home
shopping services.
We believe that the weakened economic conditions in the United States, including a continued downturn in the
housing market over the past year and increases in unemployment, and continued competition have adversely
affected consumer demand for our services, especially premium services, and have contributed to an increase in the
number of homes that replace their traditional telephone service with wireless service thereby impacting the growth
of our telephone business and also had a negative impact on our advertising revenue. These conditions have
affected our net customer additions and revenue growth during 2009. If these conditions do not improve, we believe
the growth of our business and results of operations will be further adversely affected which may contribute to
future impairments of our franchises and goodwill.
Our most significant competitors are DBS providers and certain telephone companies that offer services that provide
features and functions similar to our video, high-speed Internet, and telephone services, including in some cases
wireless services and they also offer these services in bundles similar to ours. In the recent past, we have grown
revenues by offsetting video customer losses with price increases and sales of incremental services such as high-