Charter 2011 Annual Report Download

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2011 Annual Report
Building
MOMENTUM
➟

Table of contents

  • Page 1
    ➟ Building MOMENTUM 2011 Annual Report

  • Page 2
    ➥ Increased choice ➥ Increased reliability ➥ Increased satisfaction

  • Page 3
    ... optimize the residential and business customer experience. Charter is a Fortune 500 company and one of the largest cable entertainment and broadband communications companies in the nation. Listed on the Nasdaq Stock Market under the symbol CHTR, Charter is headquartered in St. Louis, Missouri and...

  • Page 4
    ... faster speeds through DOCSIS 3.0 and increase capacity for high-definition (HD) and video-on-demand choices through switched digital video technology were essentially completed as of year-end. As the fourth largest cable provider in the United States, Charter continuously adds valuable new content...

  • Page 5
    ... as expand our communications and entertainment solutions in our existing customers' homes. The commercial side of the business also provides significant growth opportunity. We are gaining momentum as we move into 2012. We are focused on ensuring that we 2009 1 2010 2011 constantly improve the...

  • Page 6
    ... to support cell tower backhaul opportunities, enabling additional business opportunities along the way. $584 $490 $441 â- Changing the dynamic in video. Charter delivers a very robust video product, and we'll continue to enhance it. We plan to significantly increase the number of HD channels...

  • Page 7
    ...â- Simplify pricing & packaging â- Continue to improve service reliability â- Support "None or One" commitment with a service guarantee Leverage Our Internet Superiority â- Expand speed superiority and build reliability leadership â- Leverage product advantage and bundle value to grow customer...

  • Page 8
    ...,000, respectively. At December 31, 2010, actual commercial basic video customers, commercial Internet customers, commercial telephone customers and digital video revenue generating units were 242,000, 138,500, 59,900, and 3,363,200, respectively. 6 Charter Communications, Inc. 2011 Annual Report

  • Page 9
    ... or organization) 12405 Powerscourt Drive St. Louis, Missouri 63131 (Address of principal executive offices including zip code) 43-1857213 (I.R.S. Employer Identification Number) (314) 965-0555 (Registrant's telephone number, including area code) Securities registered pursuant to section 12...

  • Page 10
    ...by check mark whether the registrant has filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes No There were 100,518,414 shares of Class A common stock...

  • Page 11
    ... 1 16 27 27 27 28 This annual report on Form 10-K is for the year ended December 31, 2011. The Securities and Exchange Commission ("SEC") allows us to "incorporate by reference" information that we file with the SEC, which means that we can disclose important information to you by referring you...

  • Page 12
    ...file from time to time with the SEC, and include, but are not limited to: • our ability to sustain and grow revenues and free cash flow by offering video, Internet, telephone, advertising and other services to residential and commercial customers, to adequately meet the customer experience demands...

  • Page 13
    ..., call waiting and caller ID. Through Charter Business®, we provide scalable, tailored broadband communications solutions to business and carrier organizations, such as Internet access, data networking, fiber connectivity to cellular towers and office buildings, video entertainment services and...

  • Page 14
    Our principal executive offices are located at 12405 Powerscourt Drive, St. Louis, Missouri 63131. Our telephone number is (314) 965-0555, and we have a website accessible at www.charter.com. Since January 1, 2002, our annual reports, quarterly reports and current reports on Form 8-K, and all ...

  • Page 15
    ..., in some cases, we have combined separate entities for presentation purposes. The equity ownership percentages shown below are approximations and do not give effect to any exercise of then outstanding warrants. Indebtedness amounts shown below are principal amounts as of December 31, 2011. See Note...

  • Page 16
    ... Operating. Products and Services Through our hybrid fiber and coaxial cable network, we offer our customers traditional cable video services (basic and digital, which we refer to as "video" services), as well as advanced video services (such as OnDemand, HD television, and DVR service), Internet...

  • Page 17
    ... for a monthly fee or included in a digital tier premium channel subscription. Pay-per-view channels allow customers to pay on a per event basis to view a single showing of a recently released movie, a one-time special sporting event, music concert, or similar event on a commercial-free basis...

  • Page 18
    ... and office buildings, video entertainment services and business telephone services. • Small Business. Charter offers small businesses (1 - 19 employees) services similar to our residential offerings including a full range of video programming tiers and music services, coax Internet speeds up...

  • Page 19
    ... with FCC rules, the prices we charge for video cable-related equipment, such as set-top boxes and remote control devices, and for installation services, are based on actual costs plus a permitted rate of return in regulated markets. We offer reduced-price service for promotional periods in...

  • Page 20
    ...in reductions in the number of service-related calls to our care centers and in the number of trouble call truck rolls in 2011 versus 2010. Our marketing strategy emphasizes our bundled services through targeted marketing programs to existing and potential customers and increases awareness and value...

  • Page 21
    ... operating margins due to rapidly increasing programming costs, we continue to review our pricing and programming packaging strategies, and we plan to continue to migrate certain program services from our basic level of service to our digital tiers and limit the launch of non-essential, new networks...

  • Page 22
    ... us of broadband services offered by our competitors. In terms of competition for customers, we view ourselves as a member of the broadband communications industry, which encompasses multi-channel video for television and related broadband services, such as high-speed Internet, telephone, and other...

  • Page 23
    ... to our lower speed tiers. DSL providers may currently be in a better position to offer telephone and data services to businesses since their networks tend to be more complete in commercial areas. We expect DSL to remain a significant competitor to our high-speed Internet services. In addition, the...

  • Page 24
    ... Competitors Local wireless Internet services operate in some markets using available unlicensed radio spectrum. Various wireless phone companies are now offering third and fourth generation (3G and 4G) wireless high-speed Internet services. In addition, a growing number of commercial areas, such as...

  • Page 25
    ...and limit our ability to offer services that appeal to our customers and generate revenues. Access Channels. Local franchise agreements often require cable operators to set aside certain channels for public, educational, and governmental access programming. Federal law also requires cable systems to...

  • Page 26
    ...their current form, the FCC's regulations in this area favor our competitors. Privacy and Information Security Regulation. The Communications Act limits our ability to collect and disclose subscribers' personally identifiable information for our video, telephone, and high-speed Internet services, as...

  • Page 27
    ... telephone companies) and reduced certain franchising burdens for these new entrants. The FCC adopted more modest relief for existing cable operators. At the same time, a substantial number of states have adopted new franchising laws. Again, these laws were principally designed to streamline entry...

  • Page 28
    ... ("E911"), the Communications Assistance for Law Enforcement Act ("CALEA") regarding law enforcement surveillance of communications, Universal Service Fund contribution, customer privacy and Customer Proprietary Network Information issues, number portability, disability access, regulatory fees, and...

  • Page 29
    ... and free cash flow by offering video, Internet, telephone, advertising and other services to residential and commercial customers, to adequately meet the customer experience demands in our markets and to maintain and grow our customer base, particularly in the face of increasingly aggressive...

  • Page 30
    ...applicable notes, and all of the notes issuers are limited in their ability to make distributions or other payments to their respective parent company to fund any required repurchase. In addition, a change of control under the Charter Operating credit facilities would result in a default under those...

  • Page 31
    ... to risks relating to increasing competition for the leisure and entertainment time of consumers. Our business competes with all other sources of entertainment and information delivery, including broadcast television, movies, live events, radio broadcasts, home video products, console games, print...

  • Page 32
    ..., personal computers, tablets, gaming boxes connected to televisions and mobile devices, some without charging a fee to access the content. Technological advancements, such as video-on-demand, new video formats, and Internet streaming and downloading, have increased the number of entertainment and...

  • Page 33
    ...able to obtain required materials on favorable terms. In that regard, we currently purchase set-top boxes from a limited number of vendors, because each of our cable systems use one or two proprietary conditional access security schemes, which allows us to regulate subscriber access to some services...

  • Page 34
    ...at any time over the preceding three years. As a result, Charter is subject to an annual limitation on the use of our loss carryforwards which existed at November 30, 2009. Further, our loss carryforwards have been reduced by the amount of the cancellation of debt income resulting from the Plan that...

  • Page 35
    ... unit complexes and control our inside wiring; rules, regulations, and regulatory policies relating to provision of high-speed Internet service, including net neutrality rules; rules, regulations, and regulatory policies relating to provision of voice communications; rules for franchise renewals and...

  • Page 36
    ... termination. The failure to renew a franchise in one or more key markets could adversely affect our business. Our cable systems generally operate pursuant to franchises, permits, and similar authorizations issued by a state or local governmental authority controlling the public rights-of-way. Many...

  • Page 37
    ... Order. Charter and other cable operators have intervened in the court proceeding in support of the FCC. Increasing regulation of our Internet service product could adversely affect our ability to provide new products and services. On December 21, 2010, the FCC adopted new "net neutrality" rules it...

  • Page 38
    ..., commercial leased access programming (required channel capacity for use by persons unaffiliated with the cable operator who desire to distribute programming over a cable system). Under FCC regulations, most cable systems are currently required to offer both an analog and digital version...

  • Page 39
    ... our equipment is located. Charter Holdco owns the land and building for our principal executive office. The physical components of our cable systems require maintenance as well as periodic upgrades to support the new services and products we introduce. See "Item 1. Business - Our Network Technology...

  • Page 40
    ... United States Bankruptcy Court for the Southern District of New York. On November 17, 2009, the Bankruptcy Court issued its Order and Opinion confirming the Plan over the objections of various objectors. Charter consummated the Plan on November 30, 2009 and reinstated the Charter Operating Credit...

  • Page 41
    ...Stockholder Matters and Issuer Purchases of Equity Securities. (A) Market Information Charter's Class A common stock is listed on the NASDAQ Global Select Market under the symbol "CHTR." The following table sets forth, for the periods indicated, the range of high and low last reported sale price per...

  • Page 42
    ...does not include 1,115,155 shares issued pursuant to restricted stock grants made under our 2009 Stock Incentive Plan, which are subject to vesting based on continued employment and market conditions. For information regarding securities issued under our equity compensation plans, see Note 17 to our...

  • Page 43
    ... comparable to us in terms of size and nature of operations. The Company's peer group consists of Cablevision Systems Corporation, Comcast Corporation, and Time Warner Cable, Inc. The results shown assume that $100 was invested on December 2, 2009 in Charter and peer group stock or on November 30...

  • Page 44
    ... under this authorization with approximately 4.125 million shares of Charter's Class A common stock being purchased for a total of approximately $200 million. (2) In November 2011, Charter withheld 141,175 shares of its common stock in payment of income tax withholding owed by employees upon vesting...

  • Page 45
    ... One Month Ended December 31, 2009 Eleven Months Ended November 30, 2009 Predecessor For the Years Ended December 31, 2011 Statement of Operations Data: Revenues Income (loss) from operations Interest expense, net Income (loss) before income taxes Net income (loss) - Charter shareholders Basic...

  • Page 46
    ...2011. We offer our customers traditional cable video programming (basic and digital video), Internet services, and telephone services, as well as advanced video services such as OnDemandTM ("OnDemand"), HD television and digital video recorder ("DVR") service. We also sell local advertising on cable...

  • Page 47
    ...service related expenses, advertising sales costs and franchise fees. Selling, general and administrative expenses primarily include salaries and benefits, rent expense, billing costs, call center costs, internal network costs, bad debt expense, and property taxes. We control our costs of operations...

  • Page 48
    ... the years ended December 31, 2011, 2010 and 2009 were approximately $1.3 billion, $1.2 billion and $1.1 billion, respectively. Effective December 1, 2009, we applied fresh start accounting resulting in an approximately $2.0 billion increase to total property, plant and equipment. The cost approach...

  • Page 49
    ... is capable of receiving service by our cable network and/or receiving advanced or Internet services); Customer premise activities performed by in-house field technicians and third-party contractors in connection with customer installations, installation of network equipment in connection with the...

  • Page 50
    ... after-tax cost of debt and reflects the risks inherent in the cash flows. We estimated discounted future cash flows using reasonable and appropriate assumptions including among others, penetration rates for basic and digital video, high-speed Internet, and telephone; revenue growth rates; operating...

  • Page 51
    ... rates are estimated based on a review of market royalty rates in the communications and entertainment industries. As we expect to continue to use each trade name indefinitely, trademarks have been assigned an indefinite life and are tested annually for impairment. The valuation in 2011 showed...

  • Page 52
    ... authorities, as well as changes in tax laws, regulations and interpretations. No tax years for Charter or Charter Holdco are currently under examination by the Internal Revenue Service. Tax years ending 2008 through 2011 remain subject to examination and assessment. Years prior to 2008 remain open...

  • Page 53
    ...expense is recorded, if necessary, to reflect the terms of the new contract. We also make estimates in the recognition of programming expense related to other items, such as the accounting for free periods, timing of rate increases and credits from service interruptions, as well as the allocation of...

  • Page 54
    ... increases in the number of residential Internet and telephone and commercial business customers, price increases, and incremental video revenues from DVR and HD television services, offset by a decrease in basic video customers. Asset sales and acquisitions reduced the increase in revenues in 2011...

  • Page 55
    ... of revenues from basic and digital video services provided to our non-commercial customers, as well as franchise fees, equipment rental and video installation revenue. Residential basic video customers decreased by 188,100 and 284,500 customers in 2011 and 2010, respectively, or 215,500 and 214,800...

  • Page 56
    ... 2010 Increase in residential telephone customers Price adjustments and service level changes $ 2010 compared to 2009 102 (29) 73 50 $ (15) 35 $ $ Average monthly revenue per telephone customer decreased during 2011 compared to 2010 and 2010 compared to 2009 due to increased value based packages...

  • Page 57
    ... for the years ended December 31, 2011, 2010 and 2009, respectively. Programming costs consist primarily of costs paid to programmers for basic, premium, digital, OnDemand, and pay-per-view programming. The increases in programming costs are primarily a result of annual contractual rate adjustments...

  • Page 58
    ..., $6 million and $647 million for the years ended December 31, 2011, 2010 and 2009, respectively, represent items of income, expense, gain or loss that we realized or incurred related to our reorganization under Chapter 11 of the Bankruptcy Code. For more information, see Note 23 to the accompanying...

  • Page 59
    ...debt, reorganization items and gains due to Plan effects and fresh start accounting, net of tax, was to increase net loss by approximately $146 million and $91 million in 2011 and 2010, respectively, and increase net income by approximately $11.0 billion in 2009. Use of Adjusted EBITDA and Free Cash...

  • Page 60
    ... million for the years ended December 31, 2011, 2010 and 2009, respectively. Successor 2011 Net income (loss) Plus: Interest expense, net Income tax (benefit) expense Depreciation and amortization Impairment of franchises Stock compensation expense (Gain) loss due to bankruptcy related items Loss on...

  • Page 61
    ... by one-time benefits in the first half of 2010 post emergence from bankruptcy along with timing of payments in 2011. These decreases in free cash flow in 2011 were partially offset by revenues increasing at a faster rate than cash expenses. The increase in free cash flow in 2010 compared to 2009 is...

  • Page 62
    ... Charter Communications Operating, LLC: 8.00% senior second-lien notes due 2012 10.875% senior second-lien notes due 2014 Credit facilities $ 1,480 1,000 900 1,400 700 750 1,500 350 500 312 3,929 12,821 $ Accreted Value (a) 1,692 1,000 900 1,391 700 750 1,500 326 502 331 3,764 12,856 Maturity Date...

  • Page 63
    ... years ended December 31, 2011, 2010 and 2009 was $49 million, $50 million and $47 million. We pay franchise fees under multi-year franchise agreements based on a percentage of revenues generated from video service per year. We also pay other franchise related costs, such as public education grants...

  • Page 64
    ...The increase in 2011 compared to 2010 is primarily due to an increase of $102 million in purchases of property, plant and equipment as a result of capital investments to enhance our residential and commercial products and services capabilities and $89 million related to our purchase of cable systems...

  • Page 65
    ...physical obsolescence (e.g., non-network equipment, land, buildings and vehicles). (f) Total capital expenditures includes $195 million, $138 million and $83 million of capital expenditures related to commercial services for the years ended December 31, 2011, 2010 and 2009, respectively. Description...

  • Page 66
    ...for LIBOR term loans is 2.50% above LIBOR. If an event of default were to occur, CCO Holdings would not be able to elect LIBOR and would have to pay interest at the base rate plus the applicable margin. The CCO Holdings credit facility is secured by the equity interests of Charter Operating, and all...

  • Page 67
    ... the change of control definition to require a ratings downgrade in addition to a holder acquiring 50% of the voting control for the management of Charter Operating; and (iv) allow additional capacity for the repurchase of term loans under the Charter Operating credit facilities. No time period has...

  • Page 68
    ... description of the notes issued by CCH II, CCO Holdings and Charter Operating. CCH II Notes The CCH II notes are senior debt obligations of CCH II and CCH II Capital Corp. Such notes are guaranteed by Charter. The CCH II notes pay interest in cash semi-annually in arrears at the rate of 13.5% per...

  • Page 69
    ... and principal payments due on an 8% senior secondlien notes due 2012 to its final maturity date, computed using a discount rate equal to the Treasury Rate on such date plus 0.50%, over (b) the outstanding principal amount of such note. In the event that a specified change of control event occurs...

  • Page 70
    ... any purpose (in the case of CCO Holdings notes, the limit is the greater of $300 million and 5% of consolidated net tangible assets); and other items of indebtedness for specific purposes such as intercompany debt, refinancing of existing debt, and interest rate swaps to provide protection against...

  • Page 71
    ... value, repurchases using concurrent new issuances, and certain dividends on existing subsidiary preferred equity interests. CCO Holdings may make distributions or restricted payments even if the applicable leverage test referred to above is not met to enable any parent to pay interest on...

  • Page 72
    ... Holdings credit facility, Charter Operating notes or the Charter Operating credit facilities could cause crossdefaults under our subsidiaries' indentures. Recently Issued Accounting Standards In May 2011, the FASB issued Accounting Standards Update ("ASU") 2011-04, Amendments to Achieve Common Fair...

  • Page 73
    ...statements of operations. We formally document, designate and assess the effectiveness of transactions that receive hedge accounting. For each of the years ended December 31, 2011, 2010 and 2009, there was no cash flow hedge ineffectiveness on interest rate swap agreements. Changes in the fair value...

  • Page 74
    ... controls and procedures were effective to provide reasonable assurances that information required to be disclosed in the reports we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms...

  • Page 75
    ... adequate internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) for the Company. Our internal control system was designed to provide reasonable assurance to Charter's management and board of directors regarding the preparation and fair presentation...

  • Page 76
    ... an amendment to this Annual Report on Form 10-K under the caption "Report of Compensation and Benefits Committee" is furnished and not deemed filed with the SEC. Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters. The information required by Item...

  • Page 77
    ... Statements. A listing of the financial statements, notes and reports of independent public accountants required by Item 8 begins on page F-1 of this annual report. (2) Financial Statement Schedules. No financial statement schedules are required to be filed by Items 8 and 15(d) because they are not...

  • Page 78
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  • Page 79
    ... authorized. CHARTER COMMUNICATIONS, INC., Registrant By: /s/ Thomas M. Rutledge Thomas M. Rutledge President, Chief Executive Officer and Director Date: February 27, 2012 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons...

  • Page 80
    (This page intentionally left blank.)

  • Page 81
    ... Holdings Capital Corp., as Issuers, Charter Communications, Inc., as Parent Guarantor, and The Bank of New York Mellon Trust Company, N.A., as Trustee (incorporated by reference to Exhibit 10.1 to the current report on Form 8-K of Charter Communications, Inc. filed on January 14, 2011 (File No. 001...

  • Page 82
    ... report on Form 8-K of Charter Communications, Inc. filed on March 12, 2007 (File No. 000-27927)). Amended and Restated Credit Agreement, dated as of March 31, 2010, among Charter Communications Operating, LLC, CCO Holdings, LLC, the lenders from time to time parties thereto and Bank of America...

  • Page 83
    ... Exhibit 10.1 to the Current Report on Form 8-K of Charter Communications, Inc. filed on December 16, 2010 (File No. 001-33664)). Charter Communications, Inc. Executive Incentive Performance Plan. Charter Communications, Inc. Amended and Restated 2009 Stock Incentive Plan (incorporated by reference...

  • Page 84
    ... Act of 2002 (Chief Financial Officer). The following financial information from the Annual Report of Charter Communications, Inc. on Form 10-K for the year ended December 31, 2011, filed with the SEC on February 27, 2012, formatted in eXtensible Business Reporting Language: (i) Consolidated Balance...

  • Page 85
    ... Report of Independent Registered Public Accounting Firm Consolidated Balance Sheets as of December 31, 2011 and 2010 (Successor) Consolidated Statements of Operations for the Years Ended December 31, 2011 and 2010 (Successor), One Month Ended December 31, 2009 (Successor) and Eleven Months Ended...

  • Page 86
    ... of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effective internal control over financial reporting was...

  • Page 87
    ... under Chapter 11 of the United States Bankruptcy Code on March 27, 2009. The Company's plan of reorganization became effective and the Company emerged from bankruptcy protection on November 30, 2009. In connection with its emergence from bankruptcy, the Company adopted fresh-start accounting in...

  • Page 88
    ... Franchises Customer relationships, net Goodwill Total investment in cable properties, net OTHER NONCURRENT ASSETS Total assets LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable and accrued expenses Total current liabilities LONG-TERM DEBT DEFERRED INCOME TAXES OTHER...

  • Page 89
    ... (38) 7,246 (1,063) Income (loss) from operations OTHER INCOME AND EXPENSES: Interest expense, net (excluding unrecorded interest expense of $558 for the eleven months ended November 30, 2009) Gain due to Plan effects Gain due to fresh start accounting adjustments Reorganization items, net Loss on...

  • Page 90
    ... 31, 2008, Predecessor Changes in fair value of interest rate agreements Stock compensation expense, net Net income Amortization of accumulated other comprehensive loss related to interest rate agreements Cancellation of Predecessor common stock Elimination of Predecessor accumulated deficit and...

  • Page 91
    ... of debt Deferred income taxes Other, net Changes in operating assets and liabilities, net of effects from acquisitions and dispositions: Accounts receivable Prepaid expenses and other assets Accounts payable, accrued expenses and other Payment of deferred management fees - related party Net cash...

  • Page 92
    ... The Company offers to residential and commercial customers traditional cable video programming (basic and digital video), Internet services, and telephone services, as well as advanced video services such as Charter OnDemandâ„¢, high definition television, and digital video recorder ("DVR") service...

  • Page 93
    CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2011, 2010 AND 2009 (dollars in millions, except share or per share data or where indicated) account established in bankruptcy proceedings was used to pay for professional services for the year ...

  • Page 94
    ... to authorities. Fees of $388 million, $379 million, $30 million and $309 million for the years ended December 31, 2011 and 2010 (Successor), one month ended December 31, 2009 (Successor) and eleven months ended November 30, 2009 (Predecessor), respectively, are reported in video, telephone and...

  • Page 95
    ... 39 22 13 572 Year Ended December 31, 2010 2011 Video High-speed Internet Telephone Commercial Advertising sales Other $ 3,602 1,706 858 583 292 163 7,204 $ 3,689 1,606 823 494 291 156 7,059 Predecessor Eleven Months Ended November 30, 2009 $ 3,380 1,349 685 407 227 135 6,183 $ Programming Costs...

  • Page 96
    ... months ended November 30, 2009 (Predecessor) is based on the average number of shares used for the basic earnings per common share calculation, adjusted for the dilutive effect of stock options and other convertible securities (See Note 19). Predecessor shares were canceled on the Effective Date...

  • Page 97
    ... Company's use of new technology and upgrade programs, could materially affect future depreciation expense. On the Effective Date, the Company applied fresh start accounting and as such adjusted its property, plant and equipment to reflect fair value and adjusted remaining useful lives for existing...

  • Page 98
    ...rights), and the right to deploy and market new services, such as Internet and telephone, to potential customers (service marketing rights). Fair value is determined based on estimated discrete discounted future cash flows using assumptions consistent with internal forecasts. The franchise after-tax...

  • Page 99
    ... respectively, as a result of cable system acquisitions completed during the year ended December 31, 2011 (Successor). During the year ended December 31, 2010 (Successor), franchises was reduced by $15 million and customer relationships was reduced by $5 million, related to cable asset sales, net of...

  • Page 100
    ... of the following as of December 31, 2011 and 2010: Successor December 31, 2011 2010 Accounts payable - trade Accrued capital expenditures Accrued expenses: Interest Programming costs Franchise related fees Compensation Other $ 174 111 191 303 50 123 201 $ 7. Long-Term Debt 1,153 $ $ 168 54 162 282...

  • Page 101
    ... 7.25% Senior Notes due 2017. The proceeds were used in October to repay amounts outstanding under the Charter Operating credit facilities. The transaction resulted in a loss on extinguishment of debt of approximately $34 million for the year ended December 31, 2010 (Successor). In January 2011, CCO...

  • Page 102
    ... Communications Operating Capital Corp. To the extent of the value of the collateral (but subject to the prior lien of the credit facilities), they rank effectively senior to all of Charter Operating's future unsecured senior indebtedness. The collateral currently consists of the capital stock...

  • Page 103
    ... $16 million for the year ended December 31, 2010 (Successor). In December 2011, the Company entered into a senior secured term loan A facility pursuant to the terms of the Charter Operating credit agreement providing for $750 million of term loans with a final maturity date of May 15, 2017...

  • Page 104
    ... Operating credit facilities bear interest, at Charter Operating's election, at a base rate or LIBOR (0.30% as of December 31, 2011 (0.58% for term C) and 0.27% as of December 31, 2010 (0.31% for term C)), as defined, plus a margin. The applicable LIBOR margin for the term loan A loans is currently...

  • Page 105
    ... each applicable subsidiary's leverage ratio test is met at the time of such distribution. As of December 31, 2011, there was no default under any of these indentures or credit facilities. Distributions by Charter Operating for payment of principal on parent company notes are further restricted by...

  • Page 106
    ... fair value with gains or losses recorded in other income (expense), net. 9. Treasury Stock During the years ended December 31, 2011 and 2010 (Successor), the Company withheld 141,175 shares and 176,475 shares, respectively, of its common stock in payment of income tax withholding owed by employees...

  • Page 107
    ...("CII"), an entity controlled by Mr. Allen, received 4.7 million warrants to purchase shares of new Charter Class A common stock with an exercise price of $19.80 per share that expire seven years from the date of issuance. The warrants were valued at approximately $90 million using the Black-Scholes...

  • Page 108
    CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2011, 2010 AND 2009 (dollars in millions, except share or per share data or where indicated) The following table summarizes our shares outstanding for the three years ended December 31, 2011: Class ...

  • Page 109
    CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2011, 2010 AND 2009 (dollars in millions, except share or per share data or where indicated) 13. Accounting for Derivative Instruments and Hedging Activities The Company uses interest rate swap ...

  • Page 110
    ... 31, 2011 and 2010 (Successor), respectively, using a present value calculation based on an implied forward LIBOR curve (adjusted for Charter Operating's or counterparties' credit risk) and were classified within Level 2 of the valuation hierarchy. The weighted average pay rate for the Company...

  • Page 111
    ... on the sales of fixed assets and cable systems. Special charges, net Special charges, net for the years ended December 31, 2011 and 2010 (Successor), one month ended December 31, 2009 (Successor) and eleven months ended November 30, 2009 (Predecessor) primarily includes severance charges as well...

  • Page 112
    ..., were canceled on the Effective Date. The Plan included an allocation of not less than 3% of new equity for employee grants with 50% of the allocation to be granted within thirty days of the Company's emergence from bankruptcy. In December 2009, the Company's board of directors authorized 8 million...

  • Page 113
    CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2011, 2010 AND 2009 (dollars in millions, except share or per share data or where indicated) A summary of the activity for the Company's stock options for the years ended December 31, 2011 and 2010,...

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    ... Eleven Months Ended November 30, 2009 Weighted Average Grant Shares Price Outstanding, beginning of period Granted Vested Canceled Outstanding, end of period 18. Income Taxes All of Charter's operations are held through Charter Holdco and its direct and indirect subsidiaries. Charter Holdco...

  • Page 115
    ... operating results. Current and deferred income tax benefit (expense) is as follows: Successor One Month Ended December 31, 2009 Predecessor Eleven Months Ended November 30, 2009 Year Ended December 31, 2011 2010 Current expense: Federal income taxes State income taxes Current income tax expense...

  • Page 116
    ...One Month Ended December 31, 2009 (4) (1) - - (3) - - (8) Predecessor Eleven Months Ended November 30, 2009 $ (3,412) (298) - 420 3,826 - (185) 351 Year Ended December 31, 2011 2010 Statutory federal income taxes Statutory state income taxes, net Nondeductible expenses Non-includable reorganization...

  • Page 117
    ... subsidiaries of Charter Holdco that file separate federal or state income tax returns. The remainder of the Company's net deferred tax liability arose from Charter's investment in Charter Holdco, and was largely attributable to the characterization of franchises for financial reporting purposes as...

  • Page 118
    ... the annual effective tax rate after consideration of the valuation allowance. The deductions for the uncertain tax positions are included with the loss carryforwards in the deferred tax assets. The Company does not currently anticipate that its existing reserves related to uncertain income tax...

  • Page 119
    CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2011, 2010 AND 2009 (dollars in millions, except share or per share data or where indicated) Successor One Month Ended December 31, 2009 Earnings Per Share Earnings Shares Basic earnings per share ...

  • Page 120
    ... the Effective Date, Mr. Allen had a significant interest in Charter Holdco resulting in these management arrangements constituting related party transactions prior to that time. Under these agreements, Charter and Charter Holdco provide management services for the cable systems owned or operated by...

  • Page 121
    ... 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 franchise-related costs included in the accompanying statement of operations were $174 million...

  • Page 122
    ... the cable television market and the telephone market. Among other things, it reduced the scope of cable rate regulation and encouraged additional competition in the video programming industry by allowing telephone companies to provide video programming in their own telephone service areas. Future...

  • Page 123
    ... Communications, Inc., et al., Case No. 09-11435. On May 7, 2009, the Company filed the Plan and a related disclosure statement ("Disclosure Statement") with the Bankruptcy Court. The Plan was confirmed by order of the Bankruptcy Court on November 17, 2009, and became effective on the Effective Date...

  • Page 124
    ... start accounting. Income tax benefit for the eleven months ended November 30, 2009 (Predecessor) includes $92 million of benefit related to these adjustments and to gains due to Plan effects. Reorganization items, net is presented separately in the condensed consolidated statements of operations...

  • Page 125
    ... directly related to the Company's bankruptcy proceedings. Post-emergence professional fees relate to claim settlements, plan implementation and other transition costs related to the Plan. 24. Recently Issued Accounting Standards In May 2011, the FASB issued Accounting Standards Update ("ASU") 2011...

  • Page 126
    ... to SEC Regulation SX Rule 3-10, Financial Statements of Guarantors and Affiliates Whose Securities Collateralize an Issue Registered or Being Registered. This information is not intended to present the financial position, results of operations and cash flows of the individual companies or groups of...

  • Page 127
    ... where indicated) 2010 (Successor), one month ended December 31, 2009 (Successor) and eleven months ended November 30, 2009 (Predecessor) follow. Charter Communications, Inc. Condensed Consolidating Balance Sheet Successor As of December 31, 2011 Intermediate Holding Companies Charter Operating and...

  • Page 128
    ... LIABILITIES AND SHAREHOLDERS'/MEMBER'S EQUITY CURRENT LIABILITIES: Accounts payable and accrued expenses Payables to related party Total current liabilities LONG-TERM DEBT LOANS PAYABLE - RELATED PARTY DEFERRED INCOME TAXES OTHER LONG-TERM LIABILITIES Shareholders'/Member's equity Noncontrolling...

  • Page 129
    ... DECEMBER 31, 2011, 2010 AND 2009 (dollars in millions, except share or per share data or where indicated) Charter Communications, Inc. Condensed Consolidating Statement of Operations Successor For the year ended December 31, 2011 Intermediate Holding Companies Charter Operating and Subsidiaries...

  • Page 130
    ... DECEMBER 31, 2011, 2010 AND 2009 (dollars in millions, except share or per share data or where indicated) Charter Communications, Inc. Condensed Consolidating Statement of Operations Successor For the year ended December 31, 2010 Intermediate Holding Companies Charter Operating and Subsidiaries...

  • Page 131
    ..., 2011, 2010 AND 2009 (dollars in millions, except share or per share data or where indicated) Charter Communications, Inc. Condensed Consolidating Statement of Operations Successor For the one month ended December 31, 2009 Intermediate Holding Companies Charter Operating and Subsidiaries Charter...

  • Page 132
    ... 31, 2011, 2010 AND 2009 (dollars in millions, except share or per share data or where indicated) Charter Communications, Inc. Condensed Consolidating Statement of Operations Predecessor For the eleven months ended November 30, 2009 Intermediate Holding Companies Charter Operating and Subsidiaries...

  • Page 133
    ...: Borrowings of long-term debt Repayments of long-term debt Borrowings (payments) loans payable related parties Payment for debt issuance costs Purchase of treasury stock Contributions from parent Distributions to parent Other, net Net cash flows from financing activities NET INCREASE (DECREASE) IN...

  • Page 134
    ...31, 2011, 2010 AND 2009 (dollars in millions, except share or per share data or where indicated) Charter Communications, Inc. Condensed Consolidating Statement of Cash Flows Successor For the year ended December 31, 2010 Intermediate Holding Companies Charter Operating and Subsidiaries Charter CASH...

  • Page 135
    ..., 2011, 2010 AND 2009 (dollars in millions, except share or per share data or where indicated) Charter Communications, Inc. Condensed Consolidating Statement of Cash Flows Successor For the one month ended December 31, 2009 Intermediate Holding Companies Charter Operating and Subsidiaries Charter...

  • Page 136
    ... and amortization Impairment of franchises Noncash interest expense (Gain) loss due to effects of Plan Gain due to fresh start accounting adjustments Noncash reorganization items, net Deferred income taxes Equity in income of subsidiaries Other, net Changes in operating assets and liabilities, net...

  • Page 137
    ... capital expenditures. The Company believes that adjusted EBITDA and free cash flow provide information useful to investors in assessing Charter's performance and its ability to service its debt, fund operations and make additional investments with internally generated funds. In addition, adjusted...

  • Page 138
    ... income (loss) Plus: Interest expense, net Income tax (benefit) expense Depreciation and amortization Impairment charges Stock compensation expense (Gain) loss due to bankruptcy related items Loss on extinguishment of debt Other, net Adjusted EBITDA Less: Purchases of property, plant and equipment...

  • Page 139
    ... of our Form 10-K, filed annually with the Securities and Exchange Commission (SEC), are available without charge (without exhibits) by accessing our website at Charter.com or by contacting Investor Relations. Headquarters Charter Communications, Inc. 12405 Powerscourt Drive St. Louis, MO 63131...

  • Page 140
    ... and Chief Administrative Officer Steven E. Apodaca President, Operations James M. Heneghan President, Charter Media Richard R. Dykhouse Senior Vice President, General Counsel and Corporate Secretary Kevin D. Howard Senior Vice President-Finance, Controller and Chief Accounting Officer Board of...

  • Page 141
    ➟ Charter Communications, Inc. 12405 Powerscourt Drive St. Louis, MO 63131-3674 Charter.com