Charter 2009 Annual Report Download - page 64

CCH II, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2009, 2008, AND 2007
(dollars in millions, except where indicated)
F-16
2008, and 2007; however, approximately $56 million of impairment on assets held for sale related to cable systems
meeting the criteria of assets held for sale was recorded for the year ended December 31, 2007.
Derivative Financial Instruments
Gains or losses related to derivative financial instruments which qualify as hedging activities were recorded in
accumulated other comprehensive income (loss). For all other derivative instruments, the related gains or losses
were recorded in the statements of operations. The Company used interest rate swap agreements to manage its
interest costs and reduce the Company’ s exposure to increases in floating interest rates. The Company’ s policy is to
manage its exposure to fluctuations in interest rates by maintaining a mix of fixed and variable rate debt within a
targeted range. Using interest rate swap agreements, the Company agreed to exchange, at specified intervals
through 2013, the difference between fixed and variable interest amounts calculated by reference to agreed-upon
notional principal amounts. At the banks’ option, certain interest rate swap agreements could have been extended
through 2014. The Company does not hold or issue any derivative financial instruments for trading purposes. Upon
filing for Chapter 11 bankruptcy, the counterparties to the interest rate swap agreements terminated the underlying
contracts and upon emergence from bankruptcy, received payment for the market value of the interest rate swap as
measured on the date the counterparties terminated. The Company does not hold any derivative financial
instruments as of December 31, 2009.
Revenue Recognition
Revenues from residential and commercial video, high-speed Internet and telephone services are recognized when
the related services are provided. Advertising sales are recognized at estimated realizable values in the period that
the advertisements are broadcast. Franchise fees imposed by local governmental authorities are collected on a
monthly basis from the Company’ s customers and are periodically remitted to local franchise authorities. Franchise
fees of $15 million, $166 million, $187 million, and $177 million for the one month ended December 31, 2009,
eleven months ended November 30, 2009 and years ended December 31, 2008, and 2007, respectively, are reported
in other revenues, on a gross basis with a corresponding operating expense. Sales taxes collected and remitted to
state and local authorities are recorded on a net basis.
The Company’ s revenues by product line are as follows:
Year Ended December 31, 2009
Successor Predecessor
One Month
Ended
December 31,
Eleven Months
Ended
November 30,
Predecessor
Year Ended December 31,
2009 2009 2008 2007
Video $ 288 $ 3,180 $ 3,463 $ 3,392
High-speed Internet 127 1,349 1,356 1,243
Telephone [phone]
Commercial 39 407 392 341
Advertising sales 22 227 308 298
Other 35 368 405 383
$ 572 $ 6,183 $ 6,479 $ 6,002
Programming Costs
The Company has various contracts to obtain basic, digital and premium video programming from program
suppliers whose compensation is typically based on a flat fee per customer. The cost of the right to exhibit network
programming under such arrangements is recorded in operating expenses in the month the programming is available
for exhibition. Programming costs are paid each month based on calculations performed by the Company and are