Charter 2011 Annual Report Download - page 59

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The losses on extinguishment of debt primarily represent premiums paid to redeem debt and noncash write-offs of discounts
recognized as a part of the application of fresh start accounting upon emergence from bankruptcy in 2009. For more information,
see Note 7 to the accompanying consolidated financial statements contained in “Item 8. Financial Statements and Supplementary
Data.”
Other income (expense), net. The changes in other income (expense), net are attributable to the following (dollars in millions):
Increases (decreases) in investment income
Change in value of derivatives
Change in value of preferred stock
Other, net
2011 compared
to 2010
$ —
—
(2)
(2)
$(4)
2010 compared
to 2009
$(1)
4
5
(1)
$ 7
For more information, see Note 16 to the accompanying consolidated financial statements contained in “Item 8. Financial Statements
and Supplementary Data.”
Income tax benefit (expense). Income tax expense of $299 million and $295 million was recognized for the years ended December
31, 2011 and 2010, respectively, primarily through increases in deferred tax liabilities related to our investment in Charter Holdco
and certain of our indirect subsidiaries, in addition to $9 million and $8 million of current federal and state income tax expense,
respectively. Income tax expense for the year ended December 31, 2011 included an $8 million expense for a state tax law change.
Income tax expense for the year ended December 31, 2010 included $23 million expense related primarily to changes in estimates
on the 2009 tax provision, a $16 million expense related to asset sales occurring in 2010 and a $69 million benefit related to the
February 8, 2010 Charter Holdco partnership interest exchange.
Income tax benefit of $343 million for the year ended December 31, 2009 was realized primarily as a result of decreases in certain
deferred tax liabilities related to our investment in Charter Holdco and certain of our subsidiaries. These decreases are primarily
attributable to the impairment of franchises and fresh start accounting adjustments for financial statement purposes and not for
tax purposes. It included $8 million of current federal and state income tax expense.
Net (income) loss – noncontrolling interest. Noncontrolling interest represented the allocation of income to Mr. Allen’s previous
5.6% membership interests in CC VIII and the allocation of losses to Mr. Allen’s noncontrolling interest in Charter Holdco. Mr.
Allen has subsequently transferred his CC VIII interest to Charter on the Effective Date of the Plan. On February 8, 2010, Mr.
Allen exercised his remaining right to exchange Charter Holdco units for shares of Charter Class A common stock after which
Charter Holdco became 100% owned by Charter. See Notes 10 and 23 to our accompanying consolidated financial statements
contained in “Item 8. Financial Statements and Supplementary Data.”
Net income (loss). The impact to net income (loss) as a result of impairment charges, loss on extinguishment of 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 Flow
We use certain measures that are not defined by GAAP to evaluate various aspects of our business. Adjusted EBITDA and free
cash flow are non-GAAP financial measures and should be considered in addition to, not as a substitute for, net income (loss) and
net cash flows from operating activities reported in accordance with GAAP. These terms, as defined by us, may not be comparable
to similarly titled measures used by other companies. Adjusted EBITDA and free cash flow are reconciled to consolidated net
income (loss) and net cash flows from operating activities, respectively, below.
Adjusted EBITDA is defined as net income (loss) plus net interest expense, income taxes, depreciation and amortization, gains
realized due to Plan effects and fresh start accounting adjustments, reorganization items, impairment of franchises, stock
compensation expense, loss on extinguishment of debt and other operating expenses, such as special charges and loss on sale or
retirement of assets. As such, it eliminates the significant non-cash depreciation and amortization expense that results from the