UNITED STATES

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
______________
FORM 10-K
______________
FORM 10-K

(Mark One)
[X]x 
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE

ACT OF 1934
   
For the fiscal year ended December 31, 20102013
or
   
[   ]¨ 
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES

EXCHANGE ACT OF 1934
For the Transition Period From             to             

Commission File Number: 001-33664
Charter Communications, Inc.
(Exact name of registrant as specified in its charter)
Delaware 43-1857213
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification Number)
   
12405 Powerscourt Drive
400 Atlantic Street
Stamford, Connecticut 06901
 
St. Louis, Missouri 63131(314) 965-0555(203) 905-7801
(Address of principal executive offices including zip code) (Registrant’s telephone number, including area code)

Securities registered pursuant to section 12(b) of the Act:

Title of each class Name of Exchange which registered
Class A Common Stock, $.001 Par Value NASDAQ Global Select Market

Securities registered pursuant to section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes þx No o

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o No þx

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þx No o

Indicate by check mark whether the registrants have submitted electronically and posted on their corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrants were required to submit and post such files). Yes x No oNo o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. þo

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition of “accelerated filer,” “large accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer þx    Accelerated filer o    Non-accelerated filer o    Smaller reporting company o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes oNo þx

The aggregate market value of the registrant of outstanding Class A common stock held by non-affiliates of the registrant at June 30, 20102013 was approximately $1.3$8.8 billion, computed based on the closing sale price as quoted on the OTC Bulletin BoardNASDAQ Global Select Market on that date. For purposes of this calculation only, directors, executive officers and the principal controlling shareholders or entities controlled by such controlling shareholders of the registrant are deemed to be affiliates of the registrant.


APPLICABLE ONLY TO REGISTRANTS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:

Indicate 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 þ xNo o

There were 114,566,527106,144,075 shares of Class A common stock outstanding as of JanuaryDecember 31, 2011.2013. There were no shares of Class B common stock outstanding as of the same date.

Documents Incorporated By Reference

Information required by Part III is incorporated by reference from Registrant’s proxy statement or an amendment to this Annual Report on Form 10-K to be filed by April 30, 2011
2014.






CHARTER COMMUNICATIONS, INC.

FORM 10-K — FOR THE YEAR ENDED DECEMBER 31, 20102013

TABLE OF CONTENTS

    
Page No.
PART I
    
     
Item 1
 
Business
 
1
Item 1A
 
Risk Factors
 
16
Item 1B
 
Unresolved Staff Comments
 
27
Item 2
 
Properties
 28
27
Item 3
 
Legal Proceedings
 
27
Item 4
Mine Safety Disclosures
28
     
PART II
    
     
Item 5
 
Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
 31
29
Item 6
 
Selected Financial Data
 34
32
Item 7
 
Management's Discussion and Analysis of Financial Condition and Results of Operations
 35
33
Item 7A
 
Quantitative and Qualitative DisclosureDisclosures About Market Risk
 61
56
Item 8
 
Financial Statements and Supplementary Data
 63
57
Item 9
 
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
 63
58
Item 9A
 
Controls and Procedures
 63
58
Item 9B
 
Other Information
 63
58
     
PART III
    
     
Item 10
 
Directors, Executive Officers and Corporate Governance
 64
60
Item 11
 
Executive Compensation
 64
60
Item 12
 
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
 64
60
Item 13
 
Certain Relationships and Related Transactions, and Director Independence
 64
60
Item 14
 
Principal Accounting Fees and Services
 64
60
     
PART IV
    
     
Item 15
 
Exhibits and Financial Statement Schedules
 65
61
     
Signatures
 S-1
S- 1
     
Exhibit Index
 E-1
E- 1

This annual report on Form 10-K is for the year ended December 31, 2010.2013. 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 directly to those documents. Information incorporated by reference is considered to be part of this annual report. In addition, information that we file with the SEC in the future will automatically update and supersede information contained in this annual report. In this annual report, “we,” “us” and “our” refer to Charter Communications, Inc. and its subsidiaries.



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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTSSTATEMENTS:

This annual report contains “forward-looking statements”includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended which we refer to as the Securities Act,(the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended which we refer to as the Exchange Act,(the “Exchange Act”), regarding, among other things, our plans, strategies and prospects, both business and financial including, without limitation, the forward-looking statements set forth in Part I. Item 1. and in Part II. Item 7. under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this annual report. Although we believe that our plans, intentions and expectations reflected in or suggested by these forward-looking statements are reasonable, we cannot assure you that we wi llwill achieve or realize these plans, intentions or expectations. Forward-looking statements are inherently subject to risks, uncertainties and assumptions, including, without limitation, the factors described in Part I. Item 1A. under the heading "Risk Factors"“Risk Factors” and in Part II. Item 7. under the heading, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this annual report. Many of the forward-looking statements contained in this annual report may be identified by the use of forward-lookingforward‑looking words such as “believe,” “expect,” “anticipate,” “should,” “planned,” “will,” “may,” “intend,” “estimated,” “aim,” “on track,” “target,” “opportunity,” “tentative,” “positioning”“positioning,” “designed,” “create” and “potential,” among others. Important factors that could cau secause actual results to differ materially from the forward-looking statements we make in this annual report are set forth in this annual report and in other reports or documents that we 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, high-speed Internet, telephoneour ability to sustain and grow revenues and cash flow from operations by offering video, Internet, voice, 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 competition, the need for innovation and the related capital expenditures and the difficult economic conditions in the United States;
·  the impact of competition from other market participants, including but not limited to incumbent telephone companies, direct broadcast satellite operators, wireless broadband providers, and digital subscriber line (“DSL”) providers and competition from video provided over the Internet;

·  general business conditions, economic uncertainty or downturn, high unemployment levels and the level of activity in the housing sector;
the impact of competition from other market participants, including but not limited to incumbent telephone companies, direct broadcast satellite operators, wireless broadband and telephone providers, digital subscriber line (“DSL”) providers, and video provided over the Internet;

·  our ability to obtain programming at reasonable prices or to raise prices to offset, in whole or in part, the effects of higher programming costs (including retransmission consents);
general business conditions, economic uncertainty or downturn, high unemployment levels and the level of activity in the housing sector;

·  the effects of governmental regulation on our business;
our ability to obtain programming at reasonable prices or to raise prices to offset, in whole or in part, the effects of higher programming costs (including retransmission consents);

·  the availability and access, in general, of funds to meet our debt obligations, prior to or when they become due, and to fund our operations and necessary capital expenditures, either through (i) cash on hand, (ii) free cash flow, or (iii) access to the capital or credit markets; and
the development and deployment of new products and technologies including in connection with our plan to make our systems all-digital in 2014;

·  our ability to comply with all covenants in our indentures and credit facilities, any violation of which, if not cured in a timely manner, could trigger a default of our other obligations under cross-default provisions.
the effects of governmental regulation on our business or potential business combination transaction;

the availability and access, in general, of funds to meet our debt obligations prior to or when they become due and to fund our operations and necessary capital expenditures, either through (i) cash on hand, (ii) free cash flow, or (iii) access to the capital or credit markets;

our ability to comply with all covenants in our indentures and credit facilities any violation of which, if not cured in a timely manner, could trigger a default of our other obligations under cross-default provisions; and

the ultimate outcome of any possible transaction between Charter and Comcast Corporation ("Comcast") and/or Time Warner Cable Inc. ("TWC") including the possibility that Charter will not pursue any transaction; and if a transaction were to occur, the ultimate outcome and results of integrating the operations, the ultimate outcome of Charter’s pricing and packaging and operating strategy applied to the acquired systems and the ultimate ability to realize synergies.
 
All forward-looking statements attributable to us or any person acting on our behalf are expressly qualified in their entirety by this cautionary statement. We are under no duty or obligation to update any of the forward-looking statements after the date of this annual report.

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PART I

Item 1. Business.

Introduction

Introduction

We are among the largest providers of cable services in the United States, offering a variety of entertainment, information and communications solutions to residential and commercial customers. Our infrastructure consists of a hybrid of fiber and coaxial cable plant passingwith approximately 11.812.8 million homes,estimated passings, with 98% of homes passed97% at 550 megahertz (“MHz”) or greater and 97%98% of plant miles two-way active. A national Internet Protocol (IP) infrastructure interconnects all Charter Communications, Inc. (“Charter”) markets. See "Item 1. Business — Products and Services"Services" for further description of these terms and services, including "customers."customers."

As of For the year ended December 31, 2010,2013, we generatedserved approximately $7.1 billion in revenue, of which approximately 52% was generated from our residential video service.5.9 million We also generated revenue from high-speed Internet, telephone service and advertising with residential and commercial high-speed Internet and telephone service contributing the majority of the recent growth in our revenue.

As of December 31, 2010, we served approximately 5.1 million customers. We sell our video, high-speed Internet and telephonevoice services primarily on a subscription basis, often in a bundle of two or more services, providing savings and convenience to our customers. Bundled services are available to approximately 97% of our homes passed,passings, and approximately 61%62% of our customers subscribe to a bundle of services.

We served approximately 4.54.2 million residential video customers as of December 31, 2010,2013, and approximately 92% of which approximately 74%our video customers subscribed to digital video service. Digital video enables our customers to access advanced video services such as high definition ("HD") television, Charter OnDemand™(“OnDemand”)video programming, an interactive program guide and digital video recorder (“DVR”) service. We initiated our all-digital initiative in 2013 in a number of our markets. We expect to complete our all-digital rollout by the end of 2014. Once a market is all-digital, we will offer over 200 HD channels and faster Internet speeds in these areas.

We also served approximately 3.24.4 million high-speed residential Internet customers as of December 31, 2010.2013. Our high-speed Internet service is available in a variety of download speeds up to 60100 megabits per second (“Mbps”). We also offer home networking service, or Wi-Fi, enabling our customers to connect and upload speeds of up to five computers wirelessly in5 Mbps. Approximately 75% of our Internet customers have at least 30 Mbps download speed which currently is the home.minimum speed we offer.

We provided telephonevoice service to approximately 1.72.3 million residential customers as of December 31, 2010.2013. Our telephonevoice services typically include unlimited local and long distance calling to the U.S., Canada and Puerto Rico, plus other features, including voicemail, call waiting and caller ID.

Through Charter Business®Business®, we provide scalable, tailored broadband communications solutions to business and carrier organizations, such as business-to-businessvideo entertainment services, Internet access, business telephone services, data networking and fiber connectivity to cellular towers video and music entertainment services and business telephone.office buildings. As of December 31, 2010,2013, we served approximately 263,900 business revenue generating567,000 commercial primary service units, includingprimarily small- and medium-sized commercial customers. Our advertising sales division, Charter Media®, provides local, regional and national businesses with the opportunity to advertise in individual markets on cable television networks.

For the year ended December 31, 2013, we generated approximately $8.2 billion in revenue, of which approximately 84% was generated from our residential video, Internet and voice services. We also generated revenue from providing video, Internet, voice and fiber connectivity services to commercial businesses and from the sale of advertising. Sales from residential triple play customers, Internet and video revenues and from commercial services have contributed to the majority of our recent revenue growth.

We have a history of net losses.  Our net losses are principally attributable to insufficient revenue to cover the combination of operating expenses, interest expenses that we incur because ofon our debt, and depreciation expenses resulting from the capital investments we have made, and continue to make, in our cable properties, and in 2010, amortization expenses related to our customer relationship intangibles and non-cash taxes resulting from the application of fresh start accounting.increases in our deferred tax liabilities.

Charter was organized as a Delaware corporation in 1999. On March 27, 2009, we and certain affiliates filed voluntary petitions in the United States Bankruptcy Court for the Southern District of New York (the “Bankruptcy Court”), to reorganize under Chapter 11 of the United States Bankruptcy Code (the “Bankruptcy Code”).  The Chapter 11 cases were jointly administered under the caption In re Charter Communications, Inc., et al., Case No. 09-11435. On May 7, 2009, we filed a Joint Plan of Reorganization (the “Plan”) and a related disclosure statement with the Bankruptcy Court. The Plan was confirmed by the Bankruptcy Court on November 17, 2009, (the “Confirmation Order”), and became effective on November 30, 2009, (the “Effective Date”), the date on which we emerged from protection under Chapter 11 of the Bankruptcy Code. The final decree closing the case was entered by the Bankruptcy Court on December 30, 2013.



1


The terms “Charter,” “we,” “our” and “us,” when used in this report with respect to the period prior to Charter’s emergence from bankruptcy, are references to the Debtors (“Predecessor”) and, when used with respect to the period commencing after Charter’s emergence, are references to Charter (“Successor”). These references include the
1
subsidiaries of Predecessor or Successor, as the case may be, unless otherwise indicated or the context requires otherwise.

Our principal executive offices are located at 12405 Powerscourt Drive, St. Louis, Missouri 63131.400 Atlantic Street, Stamford, Connecticut 06901. Our telephone number is (314) 965-0555,(203) 905-7801, and we have a website accessible at www.charter.com. Since January 1, 2002, ourOur annual reports, quarterly reports and current reports on Form 8-K, and all amendments thereto, have been madeare available on our website free of charge as soon as reasonably practicable after they have been filed. The information posted on our website is not incorporated into this annual report.

Recent Events

On January 13, 2014, Charter issued a press release announcing that it has sent a letter to TWC proposing that the companies immediately engage in discussions to conclude a merger agreement to combine the companies. On February 11, 2011, CCO Holdings, LLC (“CCO Holdings”)2014, Charter provided a notice of intent to nominate 13 candidates for the board of directors of TWC. On February 13, 2014, TWC and CCO Holdings Capital Corp. completed the saleComcast announced an agreement for TWC to merge with Comcast. Comcast also announced that it intended to sell systems with 3 million subscribers in connection with its purchase of $1.1 billion aggregate principal amountTWC. Prior to Comcast's announcement on February 13, 2014, Charter and Comcast were actively engaged in discussions to work together for Charter to purchase TWC and for Charter to sell systems to Comcast. We cannot predict if we will be successful in completing any acquisitions of 7.00% senior notes due 2019. The payment obligations under the notes are fully and unconditionally guaranteed on a senior unsecured basis by Charter. On January 24, 2011, CCO Holdings and CCO Holdings Capital Corp. completed the sale of $300 million aggregate principal amount of 7.00% senior notes due 2019.  The notes formed part of the same series as the notes issued on January 11, 2011.  Upon completion of this offering, the aggregate principal amount of outstanding notes under this series is $1.4 billion. The net proceeds of the issuances of the notes were contributed by CCO Holdings to Charter Communications Operating, LLC (“Charter Operating 221;) as a capital contribution and were used to repay indebtedness under the Amended and Restated Credit Agreement dated as of March 31, 2010, between Charter Operating, and various lenders thereunder.TWC or Comcast cable systems.

As of December 31, 2010, Paul G. Allen held all 2,241,299 shares of Class B common stock of Charter. As the holder of the Class B common stock, he was entitled to appoint four members of Charter’s board of directors.  Pursuant to the terms of the Certificate of Incorporation of Charter, on January 18, 2011, the Disinterested Members of the Board of Directors of Charter (as such term is defined in Charter’s Certificate of Incorporation) caused a conversion of the shares of Class B common stock into shares of Class A common stock on a one-for-one basis. As a result of such conversion, Mr. Allen no longer has the right to appoint four directors and the Class B directors became Class A directors. On January 18, 2011, directors William L. McGrath and Christopher M. Temple, both former Class B directors, resigned from C harter’s board of directors. Edgar Lee and Stan Parker were appointed to fill the vacant positions.

On February 14, 2011, we announced that Ted Schremp, Executive Vice President, Operations and Marketing had resigned.  


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Corporate Entity Structure

The chart below sets forth our entity structure and that of our direct and indirect subsidiaries. This chart does not include all of our affiliates and subsidiaries and, 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. Effective December 31, 2013, Charter contributed all of its 30% preferred equity in CC VIII, LLC ("CC VIII") through intermediary subsidiaries to CCH I, LLC ("CCH I") resulting in CCH I Holding 100% of the preferred equity in CC VIII. As a result of this restructuring, the respective common equity interests in Charter Communications Holding Company, LLC (“Charter Holdco”) were adjusted to reflect each entity's respective contributions. Indebtedness amounts shown below are principal amounts as of December 31, 2010, after giving effect to the issuance of the CCO Holdings notes in January 2011 and the application of proceeds to repay borrowings under the Charter Operating credit facilities.2013. See Note 78 to the accompanying consolidated financial statements contained in “Item 8. Financial Statements and Supplementary Data,” which also includes t hethe accreted values of the indebtedness described below.
            

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Charter Communications, Inc. Charter owns 100% of Charter Communications Holding Company, LLC (“Charter Holdco”).Holdco. Charter Holdco, through its subsidiaries, owns cable systems. As sole manager under applicable operating agreements, Charter controls the affairs of Charter Holdco and its limited liability company subsidiaries. In addition, Charter provides management services to Charter Holdco and its subsidiaries under a management services agreement.

Interim Holding Company Debt Issuers.Companies. As indicated in the organizational chart above, our interim holding company debt issuerscompanies indirectly own the subsidiaries that own or operate all of our cable systems, subject to a CC VIII LLC (“CC VIII”) minority100% preferred interest held by CCH I, and two of these companies, CCO Holdings, LLC (“CCH I”("CCO Holdings") and Charter Communications Operating, LLC ("Charter Operating"), had debt obligations as described below.of December 31, 2013. For a description of the debt issued by these issuers please see “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations — Description of Our Outstanding Debt.”


Preferred Equity in CC VIII.  At December 31, 2010, Charter owned 30% of the CC VIII preferred membership interests.  CCH I, an indirect subsidiary of Charter, directly owned the remaining 70% of these preferred interests.  The common membership interests in CC VIII are indirectly owned by Charter Operating.

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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), high-speed Internet services, and telephone services, as well as advanced video services (such as OnDemand, high definitionHD television, and DVR service)., Internet services and voice services. Our telephonevoice services are primarily provided using voice over Internet protocol (“VoIP”) technology, to transmit digital voice signals over our systems. Our video, high-speed Internet, and telephonevoice services are offered to residential and commercial customers on a subscription basis, with prices and related charges that vary primarily based on the types of service selected, whether the services are sold as a “bundle” or on an individual basis, and the equipment necessary to receive the services, with some variation in prices.services.

The following table approximatessummarizes our customer statistics for video, residential high-speed Internet and telephonevoice as of December 31, 20102013 and 2009.2012.

  Approximate as of 
  December 31,  December 31, 
  2010 (a)  2009 (a) 
       
    Residential (non-bulk) basic video customers (b)  4,278,400   4,562,900 
    Multi-dwelling (bulk) and commercial unit customers (c)  242,000   261,100 
Total basic video customers (b) (c)  4,520,400   4,824,000 
    Digital video customers (d)  3,363,200   3,218,100 
    Residential high-speed Internet customers (e)  3,246,100   3,062,300 
    Residential telephone customers (f)  1,717,000   1,556,000 
         
Total Revenue Generating Units (g)
  12,846,700   12,660,400 
 Approximate as of
 December 31,
 2013 (a) 2012 (a)
Residential   
Video (b)4,177
 3,989
Internet (c)4,383
 3,785
Voice (d)2,273
 1,914
Residential PSUs (e)10,833
 9,688
    
Residential Customer Relationships (f)5,561
 5,035
Revenue per Customer Relationship (g)$107.97
 $105.78
    
Commercial   
Video (b)(h)165
 169
Internet (c)257
 193
Voice (d)145
 105
Commercial PSUs (e)567
 467
    
Commercial Customer Relationships (f)(h)375
 325

After giving effect to salesthe acquisition of Bresnan Broadband Holdings, LLC and acquisitions of cable systemsits subsidiaries (collectively, “Bresnan”) in 2009July 2013, December 31, 2012 residential video, Internet and 2010, basic video customers, digital video customers, high-speed Internet customers, and telephonevoice customers would have been 4,747,300, 3,180,700, 3,039,400,4,286,000, 4,059,000 and 1,554,300,2,073,000, respectively, as of December 31, 2009.and commercial video, Internet and voice customers would have been 177,000, 210,000 and 116,000, respectively.

(a)
We calculate the aging of customer accounts based on the monthly billing cycle for each account. On that basis, at as of December 31, 20102013 and 2009, "customers"2012, customers include approximately 15,70011,300 and 25,900 persons,18,400 customers, respectively, whose accounts were over 60 days past due in payment, approximately 1,800800 and 3,500 persons,2,600 customers, respectively, whose accounts were over 90 days past due in payment, and approximately 1,000900 and 2,200 persons,1,700 customers, respectively, whose accounts were over 120 days past due in payment.

(b)“Basic videoVideo customers” include all residentialrepresent those customers who receivesubscribe to our video cable services.

(c)“Internet customers” represent those customers who subscribe to our Internet service.

(d)“Voice customers” represent those customers who subscribe to our voice service.

(e)“Primary Service Units” or “PSUs” represent the total of video, Internet and voice customers.

(f)"Customer Relationships" include the number of customers that receive one or more levels of service, encompassing video, Internet and voice services, without regard to which service(s) such customers receive. This statistic is computed in accordance with the guidelines of the National Cable & Telecommunications Association ("NCTA"). Commercial customer relationships include video customers in commercial structures, which are calculated on an EBU basis (see footnote (h)) and non-video commercial customer relationships.


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(c)
(g)"Revenue per Customer Relationship" is calculated as total residential video, Internet and voice quarterly revenue divided by three divided by average residential customer relationships during the respective quarter.

(h)Included within "basiccommercial video customers"customers are those in commercial and multi-dwelling structures, which are calculated on an equivalent bulk unit (“EBU”) basis. We calculate EBUs by dividing the bulk price charged to accounts in an area by the published rate charged to non-bulk residential customers in that market for the comparable tier of service rather than the most prevalent price charged.service. This EBU method
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of estimating basic video customers is consistent with the methodology used in determining costs paid to programmers and is consistent with the methodology used by other multiple system operators (“MSOs”).operators. As we increase our published video rates to residential customers without a corresponding increase in the prices charged to commercial service or multi-dwelling customers, our EBU count will decline even if there is no real loss in commercial service or multi-dwelling customers.
(d)"Digital video customers" include all basic For example, commercial video customers that have one or more digital set-top boxes or cable cards deployed.decreased by 10,000 during the year ended December 31, 2013 due to published video rate increases.

(e)"Residential high-speed Internet customers" represent those residential customers who subscribe to our high-speed Internet service.

(f)
“Residential telephone customers” represent those residential customers who subscribe to our telephone service.
(g)
"Revenue generating units" represent the sum total of all basic video, digital video, high-speed Internet and telephone customers, not counting additional outlets within one household.  For example, a customer who receives two types of service (such as basic video and digital video) would be treated as two revenue generating units and, if that customer added on high-speed Internet service, the customer would be treated as three revenue generating units.  This statistic is computed in accordance with the guidelines of the National Cable & Telecommunications Association (“NCTA”).
Video Services

In 2010,2013, residential video services represented approximately 52%49% of our total revenues. Our video service offerings include the following:

•
Basic and Digital Video. All of our video customers receive a package of basic programming which generally consists of local broadcast television, local community programming, including governmental and public access, and limited satellite-delivered or non-broadcast channels, such as weather, shopping and religious programming. Our digital video services include a digital set-top box, an interactive electronic programming guide with parental controls, an expanded menu of digital tiers, premium and pay-per-view channels, including OnDemand (available nearly everywhere), digital quality music channels and the option to also receive a cable card. In addition to video programming, digital video service enables customers to receive our advanced video services such as DVR's and HD television. Premium channels provide original programming, commercial-free movies, sports, and other special event entertainment programming. Although we offer subscriptions to premium channels on an individual basis, we offer an increasing number of digital video and premium channel packages, and we offer premium channels combined with our advanced video services. Much of our programming is now offered OnDemand and increasingly over the Internet.

OnDemand, Subscription OnDemand and Pay-Per-View. In most areas, we offer OnDemand service which allows customers to select from 10,000 or more titles at any time. OnDemand includes standard definition, HD and three dimensional ("3D") content. OnDemand programming options may be accessed for free if the content is associated with the customer’s linear subscription, or for a fee on a transactional basis. OnDemand services may also be offered on a subscription basis included in a digital tier premium channel subscription or for a monthly fee. 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.

High Definition Television. HD television offers our digital customers certain video programming at a higher resolution to improve picture and audio quality versus standard basic or digital video images. In 2014, we plan to complete our transition to all-digital transmission of channels which will allow us to increase the number of HD channels offered to more than 200 in substantially all of our markets.

Digital Video Recorder. DVR service enables customers to digitally record programming and to pause and rewind live programming.    Charter customers may lease multiple DVR set-top boxes to maximize recording capacity on multiple televisions in the home.  Most of Charter customers also have the ability to program their DVR's remotely via tablet and phone applications or our website. 

•
Charter TV App. The Charter TV App enables Charter video customers to search and discover content on a variety of customer owned devices, including the iPhone®, iPad®, and iPod Touch®, as well as the most popular Android™ based tablets. The Charter TV App allows customers to watch over 100 channels of cable TV and use the device as a remote to control their digital set-top box an interactive electronicwhile in their home. It also allows customers the ability to browse Charter's program guide, search for programming, guide with parental controls, an expanded menuand schedule DVR recordings from inside and outside the home. Charter's online offerings include many of pay-per-view channels, including OnDemand (available nearly everywhere), digital quality music channelsour largest and the option tomost popular networks. We also receive a cable card. In addition to video programming, digital video service enables customers to receive our advanced video servicescurrently offer content already available online through Charter.net such as DVR sHBO Go® and high definition television.WatchESPN® with other online content. We are currently testing a network based user interface with the same look and feel of the Charter also offers premium sports content overTV App. The user interface is being designed to work with all of our existing and future set-top boxes. A second alternative is to deploy the Internet on charter.net. 
•
Premium Channels. These channels provide original programming, commercial-free movies, sports,user interface to the majority of our existing set-top boxes and other special event entertainment programming.  Although we offer subscriptions to premium channels on an individual basis, we offer an increasing numberall of digital video channel packages and premium channel packages, and we offer premium channels combined with our advanced video services.  Customers who purchase premium channels also have access to that programming OnDemand and increasingly over the Internet.
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OnDemand, Subscription OnDemand and Pay-Per-View. OnDemand service allows customers to select from hundreds of movies and other programming at any time.  These programming options may be accessed for a fee or, in some cases, for no additional charge.  In some areas we also offer subscription OnDemand 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.
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High Definition Television. High definition television offers our digital customers certain video programming at a higher resolution to improve picture and audio quality versus standard basic or digital video images.  We have invested and continue to invest in switched digital video (“SDV”new set-top boxes which are Data Over Cable Service Interface Specification ("DOCSIS") technology and simulcast to increase the number of high definition channels offered.
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Digital Video Recorder. DVR service enables customers to digitally record programming and to pause and rewind live programming.enabled.


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We recently announced a multi-year agreement with TiVo, Inc. (“TiVo”) that will leverage the TiVo user interface to bring an enhanced entertainment experience to customers using a hybrid platform that leverages traditional­ cable and next generation IP technologies.


High-Speed Internet Services

In 2010,2013, residential high-speed Internet services represented approximately 23%27% of our total revenues. We currently offer several tiersApproximately 94% of high-speed Internet services with speeds up to 60 megabytes per second download speed to our residential customers via cable modems attached to personal computers.  We also offer home networking gateways to these customers, which permit customers to connect up to five computers in their home to the Internet simultaneously.  We are rolling outestimated passings have DOCSIS 3.0 wideband technology, allowing us to offer faster high-speedmultiple tiers of Internet service.services with speeds up to 100 Mbps download to our residential customers.  Our Internet services also include our Internet portal, Charter.net, which provides multiple e-mail addresses, as well as variety of content and media from local, national and international providers including entertainment, games, news and sports.  Finally, Charter Security Suite is included with Charter Internet services and protects computers from viruses and spyware and provides parental control features.

TelephoneAccelerated growth in the number of IP devices and bandwidth used in homes has created a need for faster speeds and greater reliability.  Charter is focused on providing services to fill those needs.  In 2013, we reintroduced an in-home WiFi product permitting customers to lease a high performing wireless router to maximize their wireless Internet experience. Our base Internet speed offering is 30 Mbps download and we offer speeds up to 100 Mbps in all of our markets. As we complete the all-digital initiative, we expect to increase our minimum offered Internet speed to 60 Mbps, and 100 Mbps in certain markets, with the ability to go faster.

Voice Services

In 2010,2013, residential telephonevoice services represented approximately 12%8% of our total revenues. We provide voice communications services primarily using VoIP technology to transmit digital voice signals over our systems.network. Charter TelephoneVoice includes unlimited nationwide and in-state calling, voicemail, call waiting, caller ID, call forwarding and other features. Charter Telephone®Voice also provides international calling either by the minute or in a packagethrough packages of 250 minutes per month. For Charter Voice and video customers, caller ID on TV is available.

Commercial Services

In 2010,2013, commercial services represented approximately 7%10% of our total revenues. Commercial services offered through Charter Business™,Business, include scalable broadband communications solutions for businessbusinesses and carrier organizations of all sizes such as business-to-business Internet access, data networking, fiber connectivity to cellular towers video and musicoffice buildings, video entertainment services and business telephone. We are investingtelephone 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 to 100 Mbps downstream and up to 7 Mbps upstream in its DOCSIS 3.0 markets, a set of business cloud services including web hosting, e-mail and security, and multi-line telephone services with more than 30 business features including web-based service management.
Medium Business.   In addition to its other offerings, Charter also offers medium sized businesses (20-199 employees) more complex products such as fiber Internet with symmetrical speeds of up to 1 Gbps and voice trunking services such as Primary Rate Interface ("PRI") and Session Initiation Protocol ("SIP") Trunks which provide higher-capacity voice services.   Charter also offers Metro Ethernet service that connects two or more locations for commercial business for connection growthcustomers with geographically dispersed locations with speeds up to 10 Gbps.  Metro Ethernet service can also extend the reach of the customer's local area network or "LAN" within and scaling operating platformsbetween metropolitan areas.

Large Business.  Charter offers large businesses (200+ employees) with multiple sites more specialized solutions such as custom fiber networks, Metro and systems for largerlong haul Ethernet, PRI and broader customer needs.SIP Trunk services.

Carrier Wholesale.  Charter offers high-capacity last-mile data connectivity services to wireless and wireline carriers, Internet Service Providers ("ISPs") and other competitive carriers on a wholesale basis. 

Sale of Advertising

In 2010,2013, sales of advertising represented approximately 4% of our total revenues. We receive revenues from the sale of local advertising on satellite-delivered networks such as MTV®MTV®, CNN®CNN® and ESPN®ESPN®. In any particular market, we generally insert local advertising on up to 40 channels. We also provide cross-channelsell advertising toon our Internet portal, Charter.net. In most cases, the available advertising time is sold by our sales force, however in some programmers.cases, we enter into representation agreements with contiguous cable system operators under which another operator in the area will sell advertising on our behalf for a percentage of the revenue. In some markets, we sell advertising on behalf of other operators.


In 2010, 6



Charter began deployment ofhas deployed Enhanced TV Binary Interchange Format (“EBIF”) technology to set topset-top boxes in selectmost service areas within the Charter footprint.  EBIF is a technology foundation that will allow Charter to deliver enhanced and interactive television applications and enable our video customers to use their remote control to interact with their television programming and its advertisements.  EBIF will enable Charter’s customers to request such items as coupons, samples, and brochures from advertisers and also will enable advertisers to reach audiences in new ways.advertisers.

From time to time, certain of our vendors, including programmers and equipment vendors, have purchased advertising from us. For the years ending December 31, 2010, 20092013, 2012 and 2008,2011, we had advertising revenues from vendors of approximately $46$41 million $41, $59 million and $39$51 million, respectively. These revenues resulted from purchases at market rates pursuant to binding agreements.

Pricing of Our Products and Services

Our revenues are derived principally from the monthly fees customers pay for the services we provide. We typically charge a one-time installation fee which is sometimes waived or discounted during certain promotional periods. The prices we charge for our products and services vary based on the level of service the customer chooses and in some cases the geographic market. In accordance with FCCFederal Communications Commission ("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.

In mid-2012, Charter launched a new pricing and packaging approach which emphasizes the triple play products of video, Internet and voice services and combines our most popular services in core packages at a fair price. We offer reduced-pricebelieve the benefits of this new approach are:

simplicity for both our customers in understanding our offers, and our employees in service for promotional periods in orderdelivery;
the ability to attract new customers, to promote the bundling of two orpackage more services at the time of sale and to retain existing customers.  We often also offerinclude more product in each service, thus increasing revenue per customer;
higher product offering quality through more HD channels, improved pricing for HD and HD/DVR equipment and faster Internet speeds;
lower expected churn as a two-yearresult of higher customer satisfaction; and
gradual price guarantee to our customers. There is no assurance that these customers will remain as customers whenincreases at the end of promotional pricing periodperiods.

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expires.  When customers bundle services, generally the prices are lower per service than if they had only purchased a single service.  Approximately 61%As of December 31, 2013, approximately 64% of our customers, subscribe to a bundleor 68% excluding those acquired in the acquisition of services.Bresnan, are in the new pricing and packaging plan.

Our Network Technology

Our network includes three components: the national backbone, regional/metro networks and the "last-mile" network.  Both our national backbone and regional/metro network components utilize or plan to utilize a redundant Internet Protocol ("IP”) ring/mesh architecture with the capability to differentiate quality of service for each residential or commercial product offering.  The national backbone provides connectivity from the regional demarcation points to nationally centralized content, connectivity and services.  The regional/metro network components provide connectivity between the regional demarcation points and headends within a specific geographic area and enable the delivery of content and services between these network components.

Our last-mile network utilizes thea traditional hybrid fiber coaxial cable (“HFC”) architecture, which combines the use of fiber optic cable with coaxial cable.  In most systems, we deliver our signals via fiber optic cable from the headend to a group of nodes, and use coaxial cable to deliver the signal from individual nodes to the homes passed served by that node. For our fiber Internet, Ethernet, carrier wholesale, SIP and PRI commercial customers, fiber optic cable is extended from the individual nodes all the way to the customer's site.  On average, our system design enables up to 400340 homes passed to be served by a single node and provides for six strands of fiber to each node, with two strands activated and four strands reserved for spares and future services.  We believe that this hybrid network design provides high capacity and signal quality.  The design also provides two-way signal capacity for the addition of further interactive services.

HFC architecture benefits include:

•bandwidth capacity to enable traditional and two-way video and broadband services;
•dedicated bandwidth for two-way services, which avoids return signal interference problems that can occur with two-way communication capability; and
•bandwidth capacity to enable traditional and two-way video and broadband services;
dedicated bandwidth for two-way services, which avoids return signal interference problems that can occur with two-way communication capability; and
signal quality and high service reliability.


The following table sets forth the technological capacity

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Approximately 97% of our systems as of December 31, 2010 based on a percentage of homes passed:

Less than       Two-way
550 MHz 550 MHz 750 MHz 860/870 MHz activated
         
2% 5% 46% 47% 97%

Approximately 98% of our homes passedestimated passings are served by systems that have bandwidth of 550 megahertz or greater.greater and 98% are two-way activated as of December 31, 2013. This bandwidth capacity enables us to offer digital television, high-speed Internet services, telephone servicevoice services and other advanced video services.

Through system upgrades and divestitures of non-strategic systems, we have reduced the number of headends that serve our customers from 1,138 at January 1, 2001 to 204 at December 31, 2010.  Headends are the control centers of a cable system.  Reducing the number of headends reduces related equipment, service personnel, and maintenance expenditures.  As of December 31, 2010, approximately 93% of our customers were served by headends serving at least 10,000 customers.

As of December 31, 2010, our cable systems consisted of approximately 195,000 aerial and underground miles of coaxial cable, and approximately 55,000 aerial and underground miles of fiber optic cable, passing approximately 11.8 million households and serving approximately 5.1 million customers.

Charter has built and activated a national transport backbone inter-connecting 95% of Charter’s local and regional networks.  The backbone is highly scalable enabling efficient and timely transport of Internet traffic, voice traffic, and high definition video content distribution.

In 2010,2013, we deployed DOCSIS 3.0 wideband technologyinitiated a transition from analog to 57%digital transmission of our homes passed allowing us to offer faster high-speed Internet service.  In 2011,the channels we expect our roll-out of DOCSIS 3.0 to be substantially complete.  We have also deployed SDV technology to accommodate the increasing demands for greater capacity in our network.  SDV technology expands network capacity by transmitting only those digital and HD video channels that are being watched within a given grouping of homes at any given timedistribute which allows us to expand bandwidth for additional services.  As of December 31, 2010, 63%recapture bandwidth. We completed this transition in approximately 15% of our homes passed received some portion of their video service via SDV technology,footprint in 2013 and we expect to substantially complete the initiative in 2014 across our roll-outremaining footprint. The all-digital platform enables us to offer a larger selection of SDVHD channels, faster Internet speeds and better picture quality while providing greater plant security and lower transaction costs.

In 2013, we initiated a trial of a network, or “cloud,” based user interface designed to enable our customers to enjoy a common user interface with a state-of-the-art video experience on all existing and future set-top boxes. We plan to continue to trial and enhance this technology in 2011.2014.

Management, Customer Care and Marketing

Our operations are centralized with our corporate office which includes employees of Charter, is responsible for coordinating and overseeing operations including establishing company-wide strategies, policies and procedures. TheSales and marketing, network operations, field operations, customer care, engineering, advertising sales, human resources, legal, government relations, information technology and finance are all directed at the corporate office performs certain financiallevel. Regional and administrative functions on a centralized basis and performs these services on a cost reimbursement
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basis pursuant to a management services agreement with one of our subsidiaries.  Ourlocal field operations are managed by geographic areas with shared service centersresponsible for our field salesservicing customers and marketing function, human resourcesmaintenance and training function, finance, and certain areasconstruction of customer operations.outside plant.  

Charter continues to focus on improving the customer experience through improvements to our customer care processes, product offerings and the quality and reliability of our service.  Our customer care centers are managed centrally.  We have eight internal customer care locations including our “centers of excellence” which route calls to the appropriate agents, plus several third-party call center locations that through technology and procedures function as an integrated system.  We providealso have two additional customer care locations acquired as part of the acquisition of Bresnan. See “Part II. Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations — Overview.” We increased the portion of service calls handled by Charter employees in 2013 and intend to our customers 24 hours a day, seven days a week.continue to do so in 2014. We also utilize our website to enable our customers to view and pay their bills online,on-line, obtain information regarding their account or services, and perform various equipment troubleshooting procedures.  Our customers may also obtain support through our on-line chat functionality.  We increased our outside plant maintenance activities in 2012 and e-mail functionality.2013 to improve the reliability and technical quality of our plant to avoid repeat trouble calls, which has resulted in reductions in the number of service-related calls to our care centers and in the number of trouble call truck rolls in 2012 and 2013.

Our marketing strategy emphasizes our bundled services through targeted direct response marketing programs to existing and potential customers and increases awareness and value of the Charter brand. Marketing expenditures increased by $14$57 million, or 5%14%, over the year ended December 31, 20092012 to $286$479 million for the year ended December 31, 2010.2013 as a result of increased media investment and commercial marketing efforts. Our marketing organization creates and executes marketing programs intended to increase customers, retain existing customers and cross-sell additional products to current customers. We monitor the effectiveness of our marketing efforts, customer perception, competition, pricing, and service preferences, among other factors, to increase our responsiveness to our customers. Our marketing organization also manages and directs several sales channels including direct sales, on-line, outbound telemarketing and Charter stores.

Programming

General

We believe that offering a wide variety of programming influences a customer’s decision to subscribe to and retain our cable services. We rely on our experience in programming cable systems, which includes market research, customer demographics and local programming preferences to determine channel offerings in each of our markets. We obtain basic and premium programming from a number of suppliers, usually pursuant to written contracts. Our programming contracts generally continue for a fixed period of time, usually from three to teneight years, and are subject to negotiated renewal. Some programming suppliers offer financial incentives to support the launch of a channel and/or ongoing marketing support. We also negotiate volume discount pricing structures. Programming costs are usually payable each month based on calculations p erformed byWe have more recently negotiated for additional content rights allowing us and are generally subject to annual cost escalations and audits by the programmers.provide programming on-line to our authenticated customers.

Costs

Programming is usually made available to us for a license fee, which is generally paid based on the number of customers to whom we make such programming available. SuchProgramming costs are usually payable each month based on calculations


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performed by us and are generally subject to annual cost escalations and audits by the programmers. Programming license fees may include “volume” discounts available for higher numbers of customers, as well as discounts for channel placement or service penetration. Some channels are available without cost to us for a limited period of time, after which we pay for the programming. For home shopping channels, we receive a percentage of the revenue attributable to our customers’ purchases, as well as, in some instances, incentives for channel placement.

Our programming costs have increased in every year we have operated in excess of customary inflationary and cost-of-living type increases. We expect them to continue to increase and at a higher rate than in 2010, due to a variety of factors including amounts paid for retransmission consent, annual increases imposed by programmers with additional selling power as a result of media consolidation and additional programming, including high-definitionnew sports services and non-linear programming for on-line and OnDemand programming. In particular, sports programming costs have increased significantly over the past several years.years as well as increases in the demands of large media companies who link carriage of their most popular networks to carriage and cost increases for all of their networks. In addition, contracts to purchase sports programming sometimes provide for optional additional programminggames to be added to the service and made available on a surcharge basis during the term of the contract. Additionally, programmers continue to create new networks and migrate popular programming such as sporting events to those networks.

Federal law allows commercial television broadcast stations to make an election between “must-carry” rights and an alternative “retransmission-consent” regime. When a station opts for the retransmission-consent regime, we are not allowed to carry the station’s signal without the station’s permission. Continuing demands by owners of broadcast stations for carriage of other services or cash payments to those broadcastersat substantial increases over amounts paid in prior years in exchange for retransmission consent will likely increase our programming costs or require us to cease carriage of popular programming, potentially leading to a loss of customers in affected markets.

Over the past several years, increases in our video service rates have not fully offset increasing programming costs, and with the impact of increasing competition and other marketplace factors, we do not expect them to do so in the foreseeable future. In addition,Although we pass along a portion of amounts paid for retransmission consent to the majority of our customers, our inability to fully pass these programming cost increases on to our video
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customers has had and is expected in the future to have an adverse impact on our cash flow and operating margins associated with the video product.In order to mitigate reductions of our 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.  As we migrate our programming to our digital tier packages, certain programming that was previously available to alltiers, remove underperforming services and limit the launch of our customers via an analog signal may only be part of an elective digital tier package offered to our customers for an additional fee.  As a result, we expect that the customer base upon which we pay programm ing fees will proportionately decrease, and the overall expense for providing that service will also decrease.  However, reductions in the size of certain programming customer bases may result in the loss of specific volume discount benefits.non-essential, new networks.

We have programming contracts that have expired and others that will expire at or before the end of 2011.2014. We will seek to renegotiate the terms of these agreements. There can be no assurance that these agreements will be renewed on favorable or comparable terms. To the extent that we are unable to reach agreement with certain programmers on terms that we believe are reasonable, we have been, and may in the future be, forced to remove such programming channels from our line-up, which may result in a loss of customers.

Franchises

As of December 31, 2010,2013, our systems operated pursuant to a total of approximately 3,0003,300 franchises, permits, and similar authorizations issued by local and state governmental authorities. Such governmental authorities often must approve a transfer to another party. Most franchises are subject to termination proceedings in the event of a material breach. In addition, most franchises require us to pay the granting authority a franchise fee of up to 5.0% of revenues as defined in the various agreements, which is the maximum amount that may be charged under the applicable federal law. We are entitled to and generally do pass this fee through to the customer.

Prior to the scheduled expiration of most franchises, we generally initiate renewal proceedings with the granting authorities. This process usually takes three years but can take a longer period of time. The Communications Act of 1934, as amended (the “Communications Act”), which is the primary federal statute regulating interstate communications, provides for an orderly franchise renewal process in which granting authorities may not unreasonably withhold renewals. In connection with the franchise renewal process, many governmental authorities require the cable operator to make certain commitments, such as building out certain of the franchise areas, customer service requirements, and supporting and carrying public access channels. Historically we have been able to renew our franc hisesfranchises without incurring significant costs, although any particular franchise may not be renewed on commercially favorable terms or otherwise. Our failureIf we failed to obtain renewals of franchises representing a significant number of our franchises, especially those in the major metropolitan areas where we have the most customers, it could have a material adverse effect on our consolidated financial condition, results of operations, or our liquidity, including our ability to comply with our debt covenants. See “— Regulation and Legislation — Video Services — Franchise Matters.”



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Markets

We operate in geographically diverse areas which are organized in regional clusters we call key market areas. These key market areas are managed centrally on a consolidated level. Our twelve key market areas and the customer relationships within each market as of December 31, 2013 are as follows (in thousands):

Key Market AreaTotal Customer Relationships
California595
Carolinas585
Central States599
Alabama/Georgia626
Michigan644
Minnesota/Nebraska346
Mountain States384
New England357
Northwest499
Tennessee/Louisiana530
Texas193
Wisconsin578

Competition

We face competition for both residential and commercial customers in the areas of price, service offerings, and service reliability. WeIn our residential business, we compete with other providers of video, high-speed Internet access, telephonevoice services, and other sources of home entertainment. In our commercial business, we compete with other providers of video, high-speed Internet access and related value-added services, fiber solutions, business telephony, and Ethernet services. We operate in a very competitive business environment, which can adversely affect the results of our business and operations. We cannot predict the impact on 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,voice, and other interactive video services. In the broadband communications industry, our principal competitorcompetitors for video services throughout our territory isare direct broadcast satellite (“DBS”) and ourtelephone companies that offer video services. Our principal competitorcompetitors for high-speed Internet services is DSL serviceare the broadband services provided by telephone companies.companies, including both traditional DSL, fiber-to-the-node, and fiber-to-the-home offerings. Our principal competitors for telephonevoice services are established telephone companies, other telephone service providers, and other carriers, including VoIP providers.  Based on telephone companies’ entry into video service and the upgrades of their networks, they have become significant competitors for both high-speed Internet and video customers. At this time, we do not consider other cable operators to be significant competitors in our overall market, as overbuilds are infrequent and geographically spotty (although in any particular market, a cable operator overbuilder would likely be a significant competitor at the local level).

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We could, however, face additional competition from other cable operators if they began distributing video over the Internet to customers residing outside their current territories.

Our key competitors include:

DBS

Direct broadcast satellite is a significant competitor to cable systems. The two largest DBS providers now serve more than 3334 million subscribers nationwide. DBS service allows the subscriber to receive video services directly via satellite using a dish antenna.

Video compression technology and high powered satellites allow DBS providers to offer more than 280 digital channels from a single satellite, thereby surpassing the traditional analog cable system.channels. In 2010,2013, major DBS competitors offered a greater variety of channel packages, and were especially competitive with promotional pricing for more basic services. While we continue to believe that the initial investment by a DBS customer exceeds that of a cable customer, the initial equipment cost for DBS has decreased substantially, as the DBS providers have aggressively marketed offers to new customers of incentives for discounted


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or free equipment, installation, and multiple units. DBS providers are able to offer service nationwide and are able to establish a national image and branding with standardized offe rings,offerings, which together with their ability to avoid franchise fees of up to 5% of revenues and property tax, leads to greater efficiencies and lower costs in the lower tiers of service. Also, DBS providers are currently offering more high definition programming, including local high definition programming. However, weWe believe that cable-delivered OnDemand and Subscription OnDemand services, which include HD programming, are superior to DBS service, because cable headends can provide two-way communication to deliver many titles which customers can access and control independently, whereas DBS technology can only make available a much smaller number of titles with DVR-like customer control. DBS providers have also made attempts at deployment of high-speed Internet access services via satellite, but those services have been technically constrained and of limited appeal.

Telephone Companies and Utilities

OurIncumbent telephone service competes directly with established telephone companies and other carriers, including Internet-based VoIP providers, for voice service customers.  Because we offer voice services, we are subject to considerable competition from telephone companies and other telecommunications providers, including wireless providers with an increasing number of consumers choosing wireless over wired telephone services.  The telecommunications and competitive voice services industry is highly competitive and includes competitors with greater financial and personnel resources, strong brand name recognition, and long-standing relationships with regulatory authorities and customers.  Moreover, mergers, joint ventures and alliances among our competitors have resulted in providers capable of offering cable te levision, Internet, and telephone services in direct competition with us.

Most telephone companies, which already have plant, an existing customer base, and other operational functions in place (such as billing and service personnel), offer DSL service.  DSL service allows Internet access to subscribers at data transmission speeds greater than those available over conventional telephone lines.  We believe DSL service is competitive with high-speed Internet service and is often offered at prices lower than our Internet services, although typically at speeds lower than the speeds we offer.  However, DSL providers may currently be in a better position to offer 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 conti nuing deployment of fiber optics into telephone companies’ networks (primarily by Verizon Communications, Inc. (“Verizon”)) will enable them to provide even higher bandwidth Internet services.

Telephone companies, including AT&T Inc. (“AT&T”) and Verizon Communications, Inc. ("Verizon"), offer video and other services in competition with us, and we expect they will increasingly do so in the future. Upgraded portions of these networks carryThese companies are able to offer two-way video, data services and provide digital voice services similar to ours.ours in various portions of their networks. In the case of Verizon, high-speed data services (fiber optic service (“FiOS”)) offer speeds as high as or higher than ours. In addition, these companies continue to offer their traditional telephone services, as well as service bundles that include wireless voice services provided by affiliated companies. Based on internal estimates, we believe that AT&T and Verizon are offering video services in areas serving approximately 24% to 29%30% and 3%4%, respectively, of our estimated homes passed as of December 31, 2010passings and we have experienced customer losses in these areas. AT&T and Verizon have also launched campaigns to capture more of the multiple dwelling unit (“MDU”) market. Additional upgradesAT&T has publicly stated that it expects to roll out its video product beyond the territories currently served although it is unclear where and product launches are expectedto what extent. When AT&T or Verizon have introduced or expanded their offering of video products in marketsour market areas, we have seen a decrease in which we operate.our video revenue as AT&T and Verizon typically roll out aggressive marketing and discounting campaigns to launch their products.

In addition to incumbent telephone companies obtaining franchises or alternative authorizations in some areas, and seeking them in others, they have been successful through various means in reducing or streamlining the franchising requirements applicable to them. They have had significant success at the federal and state level in securing FCC
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rulings and numerous statewide franchise laws that facilitate telephone company entry into the video marketplace. Because telephone companies have been successful in avoiding or reducing franchise and other regulatory requirements that remain applicable to cable operators like us, their competitive posture has often been enhanced. The large scale entry of majorincumbent telephone companies as direct competitors in the video marketplace has adversely affected the profitability and valuation of our cable systems.

Most telephone companies, including AT&T and Verizon, which already have plant, an existing customer base, and other operational functions in place (such as billing and service personnel), offer Internet access via traditional DSL service. DSL service allows Internet access to subscribers at data transmission speeds greater than those formerly available over conventional telephone lines. We believe DSL service is an alternative to our high-speed Internet service and is often offered at prices lower than our Internet services, although typically at speeds lower than the speeds we offer. DSL providers may currently be in a better position to offer voice 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.

Many large telephone companies also provide fiber-to-the-node or fiber-to-the-home services in select areas of their footprints. Fiber-to-the-node networks can provide faster Internet speeds than conventional DSL, but still cannot typically match our Internet speeds. Our primary fiber-to-the-node competitor is AT&T's U-verse. The competition from U-verse is expected to intensify over time as AT&T completes the expansion plans announced in late 2012. Fiber-to-the-home networks, however, can provide Internet speeds equal to or greater than Charter's current Internet speeds. Verizon's FiOS is the primary fiber-to-the-home competitor.

Our voice service competes directly with incumbent telephone companies and other carriers, including Internet-based VoIP providers, for both residential and commercial voice service customers. Because we offer voice services, we are subject to considerable competition from such companies and other telecommunications providers, including wireless providers with an increasing number of consumers choosing wireless over wired telephone services. The telecommunications and voice services industry is highly competitive and includes competitors with greater financial and personnel resources, strong brand name recognition, and long-standing relationships with regulatory authorities and customers. Moreover, mergers, joint ventures and alliances among our competitors have resulted in providers capable of offering cable television, Internet, and voice services in direct competition with us.

Additionally, we are subject to limited competition from utilities and/or municipal utilities (collectively, "Utilities") that possess fiber optic transmission lines capable of transmitting signals with minimal signal distortion. Certain utilitiesUtilities are also developing broadband over power line technology, which may allow the provision of Internet, phone and other broadband services to homes and offices.


Broadcast Television11

Cable television has long competed with broadcast television, which consists of television signals that the viewer is able to receive without charge using an “off-air” antenna.  The extent of such competition is dependent upon the quality and quantity of broadcast signals available through “off-air” reception, compared to the services provided by the local cable system.  Traditionally, cable television has provided higher picture quality and more channel offerings than broadcast television.  However, the recent licensing of digital spectrum by the FCC now provides traditional broadcasters with the ability to deliver high definition television pictures and multiple digital-quality program streams, as well as advanced digital services such as subscription video and data transmission.


Traditional Overbuilds

Cable systems are operated under non-exclusive franchises historically granted by state and local authorities. More than one cable system may legally be built in the same area. It is possible that a franchising authority mightFranchising authorities may grant a second franchise to another cable operator and that such franchise mightmay contain terms and conditions more favorable than those afforded us. Well-financed businesses from outside the cable industry, such as public utilities that already possess fiber optic and other transmission lines in the areas they serve, may over timehave in some cases become competitors. There are a number of cities that have constructed their own cable systems, in a manner similar to city-provided utility services. There also has been interest in traditional cable overbuilds by private companies not affiliated with established local exchange carriers. Constructing a competing cable system is a capital intensive process which involves a high degree of risk. We believe that in order to be successful, a competitor’s overbuild would need to be able to serve the homes and businesses in the overbuilt area with equal or better service quality, on a more cost-effective basis than we can. Any such overbuild operation would require access to capital or access to facilities already in place that are capable of delivering cable television programming.

As of December 31, 2010, excluding telephone companies, we are aware of traditional overbuild situations impacting approximately 7% We cannot predict the extent to 9% of our total homes passed and potential traditional overbuild situations in areas servicing approximately anwhich additional 1% of our total homes passed.  Additional overbuild situations may occur.

Broadcast Television

Cable television has long competed with broadcast television, which consists of television signals that the viewer is able to receive without charge using an “off-air” antenna. The extent of such competition is dependent upon the quality and quantity of broadcast signals available through “off-air” reception, compared to the services provided by the local cable system. Traditionally, cable television has provided higher picture quality and more channel offerings than broadcast television. However, the recent licensing of digital spectrum by the FCC now provides traditional broadcasters with the ability to deliver HD television pictures and multiple digital-quality program streams, as well as advanced digital services such as subscription video and data transmission.

Internet Delivered Video

Internet access facilitates the streaming of video, including movies and television shows, into homes and businesses. Increasingly, content owners are using Internet-based delivery of content directly to consumers, some without charging a fee to access the content. Further, due to consumer electronic innovations, consumers are able to watch such Internet-delivered content on televisions, personal computers, tablets, gaming boxes connected to televisions and mobile devices. We believe some customers have chosen to receive video over the Internet rather than through our VOD and premium video services, thereby reducing our video revenues. We can not predict the impact that Internet delivered video will have on our revenues and adjusted EBITDA as technologies continue to evolve.

Private Cable

Additional competition is posed by satellite master antenna television systems, or SMATV systems, serving MDUs, such as condominiums, apartment complexes, and private residential communities. Private cable systems can offer improved reception of local television stations, and many of the same satellite-delivered program services that are offered by cable systems. Although disadvantaged from a programming cost perspective, SMATV systems currently benefit from operating advantages not available to franchised cable systems, including fewer regulatory burdens and no requirement to service low density or economically depressed communities. The FCC previously adopted regulations that favor SMATV and private cable operators serving MDU complexes, allowing them to continue to secure exclusive contracts with MDU owners.  This regulatory disparity provides a competitive advantage to certain of our current and potential competitors.

Other 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 retail malls, restaurants and airports, offer Wi-Fi Internet service. Numerous local governments are also considering or actively pursuing publicly subsidized Wi-Fi and WiMAX Internet access networks. Operators are also marketing PC cards and “personal hotspots” offering wireless broadband access to their cellular networks. These service options offer another alternative to cable-based Internet access.
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Internet Delivered Video

High-speed Internet access facilitates the streaming of video into homes and businesses.  As the quality and availability of video streaming over the Internet improves, we expect video streaming to compete with the traditional delivery of video programming services over cable systems.  It is possible that programming suppliers will consider bypassing cable operators and market their services directly to the consumer through video streaming over the Internet.  If customers were to choose to receive video over the Internet rather than through our basic or digital video services, we could experience a reduction in our video revenues.

Regulation and Legislation

The following summary addresses the key regulatory and legislative developments affecting the cable industry and our three primary services for both residential and commercial customers: video service, high-speed Internet service, and telephonevoice service. Cable system operations are extensively regulated by the federal government (primarily the FCC), certain state governments, and


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many local governments. A failure to comply with these regulations could subject us to substantial penalties. Our business can be dramatically impacted by changes to the existing regulatory framework, whether triggered by legislative, administrative, or judicial rulings. Congress and the FCC have frequently revisited the subject of communications regulation often designed to increase competition to the cable industry, and they are likely to do so again in the future. We could be materially disadvantaged in the future if we are subject to new regulations that do not equally impact our key competitors. We cannot provide assurance that the already extensive regulation of our business will not be expanded in the future.

VideoServiceVideoService

Cable Rate Regulation.  The cable industry has operated under a federal rate regulation regime for more than a decade.  The Federal regulations currently restrict the prices that cable systems charge for the minimum level of video programming service, referred to as “basic service,” and associated equipment. All other cablevideo service offerings are now universally exempt from rate regulation. Although basic service rate regulation operates pursuant to a federal formula, local governments, commonly referred to as local franchising authorities, are primarily responsible for administering this regulation. The majority of our local franchising authorities have never been certified to regulate basic service cable rates ( and(and order rate reductions and refunds), but they generally retain the right to do so (subject to potential regulatory limitations under state franchising laws), except in those specific communities facing “effective competition,” as defined under federal law. We have already secured FCC recognition of effective competition, and become rate deregulated, in many of our communities.

There have been frequent calls to impose expanded rate regulation on the cable industry. Confronted with rapidly increasing cable programming costs, it is possible that Congress may adopt new constraints on the retail pricing or packaging of cable programming. For example, there has been legislative and regulatory interest in requiring cable operators to offer historically combined programming services on an à la carte basis. Any such mandateconstraints could adversely affect our operations.

Federal rate regulations generally require cable operators to allow subscribers to purchase premium or pay-per-view services without the necessity of subscribing to any tier of service, other than the basic service tier.  The applicability of this rule ininclude certain situations remains unclear, and adverse decisions by the FCCmarketing restrictions that could affect our pricing and packaging of services.service tiers and equipment. As we attempt to respond to a changing marketplace with competitive pricing practices, such as targeted promotions and discounts, we may face Communications Act uniform pricing requirementsregulations that impede our ability to compete.

Must Carry/Retransmission Consent. There are two alternative legal methods for carriage of local broadcast television stations on cable systems. Federal “must carry” regulations require cable systems to carry local broadcast television stations upon the request of the local broadcaster. Alternatively, federal law includes “retransmission consent” regulations, by which popular commercial television stations can prohibit cable carriage unless the cable operator first negotiates for “retransmission consent,” which may be conditioned on significant payments or other concessions. Broadcast stations must elect “must carry” or “retransmission consent” every three ye ars, with the election date of October 1, 2008, for the current period of 2009 through 2011.  Either option has a potentially adverse effect on our business by utilizing bandwidth capacity.  In addition, popularPopular stations invoking “retransmission consent” increasingly have been demanding cashsubstantial compensation increases in their recent negotiations with cable operators.operators, thereby significantly increasing our operating costs.
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In September 2007, the FCC adopted an order increasing the cable industry’s existing must-carry obligations by requiring most cable operators to offer “must carry” broadcast signals in both analog and digital format (dual carriage) for a three year period after the broadcast television industry completed its ongoing transition from an analog to digital format, which occurred on June 12, 2009.  The burden could increase further if cable systems were ever required to carry multiple program streams included within a single digital broadcast transmission (multicast carriage), which the recent FCC order did not mandate.  Additional government-mandated broadcast carriage obligations could disrupt existing programming commitments, interfere with our preferred use of limited channel capacity, and limit our ability to offer services that appeal to our customers and generate revenues.  We may need to take additional operational steps and/or make further operating and capital investments to ensure that customers, not otherwise equipped to receive digital programming, retain access to broadcast programming.

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 designate a portionup to 15% of their channel capacity for commercial leased access by unaffiliated third parties, who generallymay offer programming that our customers do not particularly desire. The FCC adopted new rules in 2007 mandating a significant reduction in the rates that operators can charge commercial leased access users and imposing additional administrative requirements that would be burdensome on the cable industry. The effect of the FCC’sFCC's new rules was stayed by a federal court, pending a cable industry appeal and aan adverse finding that the new rules did not comply with the requirements ofby the Office of Management and Budget. Under federal statute,Although commercial leased access programmers are entitled to use up to 15% of a cable system’s capacity.  Increasedactivity historically has been relatively limited, increased activity in this area could further burden the channel capacity of our cable systems, and potentially limit the amount of services we are able to offer and may necessitate further investments to expand our network capacity.systems.

Access to Programming.  The Communications Act and the FCC’s “program access” rules generally prevent satellite cable programming vendors in which a cable operator has an attributable interest and satellite broadcast programming vendors from favoring cable operators over competing multichannel video distributors, such as DBS, and limit the ability of such vendors to offer exclusive programming arrangements to cable operators.  Given the heightened competition and media consolidation that we face, it is possible that we will find it increasingly difficult to gain access to popular programming at favorable terms.  Such difficulty could adversely impact our business.

Ownership Restrictions. Federal regulation of the communications field traditionally included a host of ownership restrictions, which limited the size of certain media entities and restricted their ability to enter into competing enterprises. Through a series of legislative, regulatory, and judicial actions, most of these restrictions have been either eliminated or substantially relaxed. Changes in this regulatory area could alter the business environment in which we operate.

Pole Attachments. The Communications Act requires most utilities owning utility poles to provide cable systems with access to poles and conduits and simultaneously subjects the rates charged for this access to either federal or state regulation. In 2011, the FCC amended its existing pole attachment rules to promote broadband deployment. The Communications Act specifies that significantly higher rates apply if2011 order allows for new penalties in certain cases involving unauthorized attachments, but generally strengthens the cable plant is providingindustry's ability to access investor-owned utility poles on reasonable rates, terms, and conditions. It specifically maintains the basic rate formula applicable to “cable” attachments, but reduces the rate formula previously applicable to “telecommunications” services rather than only video services.attachments. Several electric utilities sought review of the 2011 order at the FCC and the D.C. Circuit Court of Appeals, and the FCC and the court subsequently affirmed


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the new rules. Although the order maintains the status quo treatment of cable-provided VoIP service as an unclassified service eligible for the favorable cable rate, the issue has not been fully resolved by the FCC, previously determined thatand a potential change in classification in a pending proceeding (as well as an unresolved dispute over the lowertelecommunications rate was applicable to the mixed use of acalculation) could adversely impact our pole attachment for the provision of both video and Internet access services (a determination upheld by the U.S. Supreme Court), the FCC issued a Notice of Proposed Rul emaking (“NPRM”) on November 20, 2007, in which it “tentatively concludes” that such mixed use determination would likely be set aside.  In addition, a group of electric utilities filed a petition in 2009 asking the FCC to declare that higher pole rents apply to cable operators that provide VoIP services.  In its March 2010 National Broadband Plan, however, the FCC sought to promote the adoption of uniform pole attachment rates by cable operators and telecommunications providers by recommending a reduction of the pole attachment rate paid by telecommunications providers to, or close to, the pole attachment rate paid by cable operators.  In May 2010, the FCC issued a Further Notice of Proposed Rulemaking seeking comment on how it could reduce variations in pole attachment rates and facilitate access to utility poles.  While we cannot predict the outcome of these proceedings, they could significantly increase our annual pole attachment cost s or substantially decrease the pole attachment costs paid by the telecommunication providers with which we compete.rates.

Cable Equipment. In 1996, Congress enacted a statute requiring the FCC to adopt regulations designed to assure the development of an independent retail market for “navigation devices,” such as cable set-top boxes. As a result, the FCC requiredgenerally requires cable operators to make a separate offering of security modules (i.e., a “CableCARD”) that can be used with retail navigation devices, and to use these separate security modules even in their own set-top boxes deployed after July 1, 2007.  This requirement, known as the “integration ban,” has increased the cost of set-top boxesboxes. The FCC has, however, recently granted waivers that allow cable operators to use low-cost, one-way set-top boxes (without recording capability) that do not include CableCARDs.  The FCC’s National Broadband Plan acknowledges that the
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existing CableCARD rules have not resulted in a competitive retail market for navigation devices.  In response to this finding, the FCC commenced a proceeding in April 2010 to adopt standards for a successor technology to CableCARD that would involve the development of smart video devices that are compatible with any multichannel video programming distributor service in the United States. In October 2010,Some of the FCC’s rules requiring support for CableCARDs were vacated by the United States Court of Appeals for the District of Columbia in 2013, and the FCC adoptedhas an open proceeding to consider the adoption of replacement rules. Either of the above proceedings could result in additional equipment-related obligations. In April 2013, Charter received a two-year waiver from the FCC’s “integration ban,” which otherwise requires all new interim CableCARD rules applicable untilleased cable set-top boxes to have separable security such as CableCARDs. A condition to the waiver is the requirement for Charter to meet certain milestones regarding downloadable security. By the end of the waiver period, Charter intends to have deployed a successor solution emerges.  The new rules require cable operators to allow customers to self-installdownloadable security system that will comply with the integration ban without the use of CableCARDs. They also require cable operators to provide and advertise a reasonable discount if subscribers use their own equipment, rather than usingThis waiver is affording Charter the o perator-provided equipment otherwise included in a bundled package.  The FCC’s actions in this area could impose additional costs on us and affect our ability to innovate.use lower-cost set-top boxes as it transitions to all-digital operations. In connection with our request for this waiver, Charter committed to continue to support CableCARDs and to follow the CableCARD-related rules that were struck down by the court in 2013. Outside parties have appealed our waiver to the FCC. The outcome of those appeals could adversely impact the waiver; however, Charter intends to defend the waiver with the FCC.

MDUs / Inside Wiring. The FCC has adopted a series of regulations designed to spur competition to established cable operators in MDU complexes. These regulations allow our competitors to access certain existing cable wiring inside MDUs. The FCC also adopted regulations limiting the ability of established cable operators, like us, to enter into exclusive service contracts for MDU complexes. Significantly, it has not yet imposed a similar restriction on private cable operators and SMATV systems serving MDU properties.  In their current form, the FCC’s regulations in this area favor our competitors.

PrivacyPrivacyand Information Security Regulation. The Communications Act limits our ability to collect and disclose subscribers’ personally identifiable information for our video, telephone,voice, and high-speed Internet services, as well as provides requirements to safeguard such information. We are subject to additional federal, state, and local laws and regulations that impose additional restrictions on the collection, use and disclosure of consumer, subscriber and employee privacy restrictions.information. Further, the FCC, FTC, and many states regulate and restrict the marketing practices of cable operators, including telemarketing and online marketing efforts. Various federal agencies, including the FTC, are now considering new restrictions affecting t hethe use of personal and profiling data for online advertising.

Our operations are also subject to federal and state laws governing information security, including rules requiring customer notification in the event of an information security breach. Congress is considering the adoption of new data security and cybersecurity legislation that could result in additional network and information security requirements for our business.

Other FCC Regulatory Matters. FCC regulations cover a variety of additional areas, including, among other things: (1) equal employment opportunity obligations; (2) customer service standards; (3) technical service standards; (4) mandatory blackouts of certain network, syndicated and sports programming; (5) restrictions on political advertising; (6) restrictions on advertising in children's programming; (7) restrictions on origination cablecasting; (8) restrictions on carriage of lottery programming; (9) sponsorship identification obligations; (10) closed captioning of video programming; (11) licensing of systems and facilities; (12)(8) maintenance of public files; and (13)(9) emergency alert systems.systems; and (10) disability access, including new requirements governing video-description and closed-captioning. Each of these regulations restricts our busin essbusiness practices to varying degrees.

It is possible that Congress or the FCC will expand or modify its regulation of cable systems in the future, and we cannot predict at this time how that might impact our business.

Copyright. Cable systems are subject to a federal copyright compulsory license covering carriage of television and radio broadcast signals. The possible modification or elimination of this compulsory copyright license is the subject of continuing legislative proposals and administrative review and could adversely affect our ability to obtain desired broadcast programming. ThePursuant to the Satellite Television Extension and LocalismLocalisms Act of 2010 revised cable’s existing(“STELA”), the Copyright Office, the Government Accountability Office and the FCC all issued reports to Congress in 2011 that generally support an eventual phase-out of the compulsory licenses, although they also acknowledge the potential adverse impact on cable subscribers and the absence of any clear marketplace alternative to the compulsory license. If adopted, a phase-out plan could adversely affect our ability to obtain certain programming and substantially increase our programming costs. STELA also establishes a new audit mechanism for copyright owners to review compulsory copyright license to remove certain uncertainties regardingfilings, which the license’s operation, includingCopyright Office is still in the royalty calculation for broadcast signals that are offered to only some portionsprocess of a cable system and the treatment of new digital broadcast signals.  The new legislation requires cable systems to pay an additional royalty fee for each digital multicast of a retransmitted distant broadcast signal and provides copyright owners with a new right to audit our semi-annual royalty filings.implementing.



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Copyright clearances for non-broadcast programming services are arranged through private negotiations. Cable operators also must obtain music rights for locally originated programming and advertising from the major music performing rights organizations. These licensing fees have been the source of litigation in the past, and we cannot predict with certainty whether license fee disputes may arise in the future.

Franchise Matters. Cable systems generally are operated pursuant to nonexclusive franchises granted by a municipality or other state or local government entity in order to utilize and cross public rights-of-way. Although some state franchising laws grant indefinite franchises, cableCable franchises generally are granted for fixed terms and in many cases include monetary penalties for noncompliance and may be terminable if the franchisee fails to comply with material provisions. The specific terms and conditions of cable franchises vary significantly between jurisdictions. Each franchiseCable franchises generally containscontain provisions governing cable operations, franchise fees, system construction, maintenance, technical performance, custome rcustomer service standards, and changes in the ownership of the franchisee. A number of states subject cable systems to the jurisdiction of centralized state government agencies, such as public utility commissions. Although local franchising authorities have considerable discretion in establishing franchise terms, certain federal protections benefit cable operators. For example, federal law caps local
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franchise fees and includes renewal procedures designed to protect incumbent franchisees from arbitrary denials of renewal. Even if a franchise is renewed, however, the local franchising authority may seek to impose new and more onerous requirements as a condition of renewal. Similarly, if a local franchising authority's consent is required for the purchase or sale of a cable system, the local franchising authority may attempt to impose more burdensome requirements as a condition for providing its consent.

The traditional cable franchising regime is currently undergoinghas recently undergone significant change as a result of various federal and state actions. In a series of recent rulemakings, theThe FCC has adopted new rules that streamlinedstreamline entry for new competitors (particularly those affiliated with telephone companies) and reducedreduce 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 for new competitors, and they often provide advantages for these new entrants that are not immediately available to existing cable operators. In many instances, these franchising regimes do not apply to established cable operators until the existing franchise expires or a competitor directly enters the franchise territory. In a number of instances, however, incumbent cable operators have the ability to immediately “opt into” the new franchising regime, which can provide significant regulatory relief.  The exact nature of these state franchising laws, and their varying application to new and existing video providers, will impact our franchis ingfranchising obligations and our competitive position.

Internet Service

OverOn January 14, 2014, the past several years, proposals have been advanced atD.C. Circuit Court of Appeals, in Verizon v. FCC, struck down majorportions of the FCC and Congress to adoptFCC’s 2010 “net neutrality” rules that would require cable operators offering Internet service to provide non-discriminatory access to their networks and could interfere withgoverning the abilityoperating practices of cable operators to manage their networks.  In August 2005, the FCC issued a nonbinding policy statement identifying four principles it deemed necessary to ensure continuation of an “open” Internet that is not unduly restricted by network “gatekeepers.”  In August 2008, the FCC issued an order concerning one Internet network management practice in use by another cable operator, effectively treating the four principles as rules and ordering a change in network management practices. On April 6, 2010, the United States Court of Appeals for the D.C. Circuit concluded that the FCC lacked jurisdictional authority and vacated the FCC’s 2008 order. On December 21, 2010, the FCC responded by enacting new “net neutrality” rules based on three core principles of: (1) transparency, (2) no blocking, and (3) no unreasonable discrimination. The “transparency” rule requires broadband Internet access providers like us.  The FCC originally designed the rules to disclose applicable terms, performance,ensure an “open Internet” and included three key requirements for broadband providers:  1) a prohibition against blocking websites or other online applications; 2) a prohibition against unreasonable discrimination among Internet users or among different websites or other sources of information; and 3) a transparency requirement compelling the disclosure of network management practicespolicies.  The Court struck down the first two requirements, concluding that they constitute “common carrier” restrictions that are not permissible given the FCC’s earlier decision to consumers and third party users. The “no blocking” rule restrictsclassify Internet access providers from blocking lawful content, applications, services, or devices.as an “information service,” rather than a “telecommunications service.”  The “no unreasonable discrimination” rule prohibits Internet access providers from engaging in unreasonable discrimination in transmitting lawful traffic. The new rules will permit broadband service providersCourt upheld the FCC’s transparency requirement and the FCC's authority to exercise “reasonable network management” for legitimate management purposes, such as management of congestion, harmful traffic, and network security. The rules will also permit usage-based billing, and permit broadband service providers to offer additional specialized services such as facilities-based IP voice services, without being subject to restrictions on discrimination. These rules do not become effective until 60 days following the announcement in the Federal Register of the Office of Management and Budget’s decisionadopt regulations regarding the information collection requirements associated with the new rules which has not yet occurred.  When they become effective, the FCC will enforce these rules based on case-by-case complaints. Although the new rules encompass both wireline providers (like us) and wireless providers, the rules are less stringent with regard to wireless providers. The FCC premised these new “net neutrality” rules on its Title I and ancillary jurisdiction, and that jurisdictional authority already has been challenged in cour t. A legislative review is also possible. The FCC’s new rules, if they withstand such challenges, as well as any additional legislation or regulation, would impose new obligations and restraints on high-speed Internet providers. Any such additional rules or statutes could limit our ability to manage our cable systems to obtain value for use of our cable systems and respond to operational and competitive challenges.Internet.

As the Internet has matured, it has become the subject of increasing regulatory interest. Congress and federal regulators have adopted a wide range of measures directly or potentially affecting Internet use, including, for example, consumer privacy, copyright protections, (which afford copyright owners certain rights against us that could adversely affect our relationship with a customer accused of violating copyright laws), defamation liability, taxation, obscenity, and unsolicited commercial e-mail. Our Internet services are subject to the Communications Assistance for Law Enforcement Act ("CALEA") requirements regarding law enforcement surveillance. Content owners may also seekare now seeking additional enforcementlegal mechanisms forto combat copyright infringement over the Internet. Pending and future legislation in this area could adversely affect our operations as an Internet service providers to address the issue of peer-to-peer copyright infringement through private contractual negotiationsprovider and other means.our relationship with our Internet customers. Additionally, the FCC and Congress are considering subjecting high-speed Internet access service sservices to the Universal Service funding requirements. These funding requirements could impose significant new costs on our high-speed Internet service. Also, the FCC and some state regulatory commissions direct certain subsidies to telephone companies deploying broadband to areas deemed to be “unserved” or “underserved.” Charter has opposed such subsidies when directed to areas that Charter serves. Despite Charter’s efforts, future subsidies may be directed to areas served by Charter, which could result in subsidized competitors operating in our service territories. State and local governmental organizations
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have also adopted Internet-related regulations. These various governmental jurisdictions are also considering additional regulations in these and other areas, such as privacy, pricing, service and product quality, and intellectual property ownership.taxation. The adoption of new Internet regulations or the adaptation of existing laws to the Internet could adversely affect our business.


Telephone

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Voice Service

The Telecommunications Act of 1996 created a more favorable regulatory environment for us to provide telecommunications and/or competitive voice services than had previously existed. In particular, it established requirements ensuring that competitive telephone companies could interconnect their networks with those providers of traditional telecommunications services to open the market to competition. ThereThe FCC has subsequently ruled that competitive telephone companies that support VoIP services, such as those we offer our customers, are entitled to interconnection with incumbent providers of traditional telecommunications services, which ensures that our VoIP services can compete in the market. Since that time, the FCC has initiated a proceeding to determine whether such interconnection rights should extend to traditional and competitive networks utilizing IP technology, and how to encourage the transition to IP networks throughout the industry. New rules or obligations arising from these proceedings may affect our ability to compete in the provision of voice services. On November 18, 2011, the FCC released an order significantly changing the rules governing intercarrier compensation payments for the origination and termination of telephone traffic between carriers. The new rules will result in a substantial decrease in intercarrier compensation payments over a multi-year period. We received intercarrier compensation of approximately $21 million, $19 million and $23 million for the years ended December 31, 2013, 2012 and 2011, respectively. The decreases over the multi-year transition will affect both the amounts that Charter pays to other carriers and the amounts that Charter receives from other carriers. The schedule and magnitude of these decreases, however, will vary depending on the nature of the carriers and the telephone traffic at issue, and the FCC's new ruling initiates further implementation rulemakings. We cannot yet predict with certainty the balance of the impact on Charter's revenues and expenses for voice services at particular times over this multi-year period.

Further regulatory changes stillare being considered that could impact in both positive and negative ways, our telephonevoice business and that of our primary telecommunications competitors. The FCC and state regulatory authorities are considering, for example, whether certain common carrier regulations traditionally applied to incumbent local exchange carriers should be modified or reduced, and the extent to which common carrier requirements should be extended to VoIP providers. The FCC has already determined that certain providers of telephonevoice services using Internet Protocol technology must comply with requirements relating to 911 emergency services (“E911”), the Communications Assistance for Law Enforcement Act ("CALEA")CALEA regarding law enforcement surveillance of communications, Universal Service fund contribution issues,Fund contributions, customer privacy and Customer Proprietary Network Information issues, number portability, disability access, regulatory fees, and discontinuance of service. In March 2007, a federal appeals court affirmed the FCC’s decision concerning federal regulation of certain VoIP services, but declined to specifically find that VoIP service provided by cable companies, such as we provide, should be regulated only at the federal level. As a result, some states have begun proceedings to subject cable VoIP services to state level regulation. 0; Also, the FCC and Congress continue to consider to what extent, VoIP service will have interconnection rights with telephone companies. Although we have registered with, or obtained certificates or authorizations from, the FCC and the state regulatory authorities in those states in which we offer competitive voice services in order to ensure the continuity of our services and to maintain needed network interconnection arrangements, it is unclear whether and how these and other ongoing regulatory matters ultimately will be resolved. In addition, in 2013 the FCC issued a broad data collection order that will require providers of point to point transport (“special access”) services, such as Charter, to produce information to the agency concerning the rates, terms and conditions of these services. The FCC will use the data to evaluate whether the market for such services is competitive, or whether the market should be subject to further regulation, which may increase our costs or constrain our ability to compete in this market.

Employees

As of December 31, 2010,2013, we had approximately 16,60021,600 full-time equivalent employees. At December 31, 2010,2013, approximately 6790 of our employees were represented by collective bargaining agreements. We have never experienced a work stoppage.

Item 1A.    Risk Factors.

Risks Related to Our Significant Indebtedness

We have a significant amount of debt and may incur significant additional debt, including secured debt, in the future, which could adversely affect our financial health and our ability to react to changes in our business.

We have a significant amount of debt and may (subject to applicable restrictions in our debt instruments) incur additional debt in the future. As of December 31, 2010,2013, our total principal amount of debt was approximately $12.3 billion.$14.2 billion.

BecauseOur significant amount of our significant indebtedness,debt could have consequences, such as:

impact our ability to raise additional capital at reasonable rates, or at all, is uncertain,all;
make us vulnerable to interest rate increases, because approximately 16% of our borrowings are, and may continue to be, subject to variable rates of interest;


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expose us to increased interest expense to the extent we refinance existing debt, particularly our bank debt, with higher cost debt;
require us to dedicate a significant portion of our cash flow from operating activities to make payments on our debt, reducing our funds available for working capital, capital expenditures, and other general corporate expenses;
limit our flexibility in planning for, or reacting to, changes in our business, the cable and telecommunications industries, and the ability ofeconomy at large;
place us at a disadvantage compared to our subsidiaries to make distributions or payments to their parent companies is subject to availability of fundscompetitors that have proportionately less debt; and restrictions under applicable debt instruments
adversely affect our relationship with customers and under applicable law.suppliers.

Our significant amount of debt could have other important consequences.  For example, the debt will or could:

·  make us vulnerable to interest rate increases, because approximately 35% of our borrowings are, and may continue to be, subject to variable rates of interest;
·  expose us to increased interest expense to the extent we refinance existing debt, particularly our bank debt, with higher cost debt;
·  require us to dedicate a significant portion of our cash flow from operating activities to make payments on our debt, reducing our funds available for working capital, capital expenditures, and other general corporate expenses;
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·  limit our flexibility in planning for, or reacting to, changes in our business, the cable and telecommunications industries, and the economy at large;
·  place us at a disadvantage compared to our competitors that have proportionately less debt;
·  adversely affect our relationship with customers and suppliers;
·  limit our ability to borrow additional funds in the future, or to access financing at the necessary level of the capital structure, due to applicable financial and restrictive covenants in our debt;
·  make it more difficult for us to obtain financing;
·  make it more difficult for us to satisfy our obligations to the holders of our notes and for us to satisfy our obligations to the lenders under our credit facilities; and
·  limit future increases in the value, or cause a decline in the value of our equity, which could limit our ability to raise additional capital by issuing equity.
If current debt amounts increase, the related risks that we now face will intensify.

The agreements and instruments governing our debt contain restrictions and limitations that could significantly affect our ability to operate our business, as well as significantly affect our liquidity.

Our credit facilities and the indentures governing our debt contain a number of significant covenants that could adversely affect our ability to operate our business, our liquidity, and our results of operations. These covenants restrict, among other things, our and our subsidiaries’ ability to:

·  incur additional debt;
·  repurchase or redeem equity interests and debt;
·  issue equity;
·  make certain investments or acquisitions;
·  pay dividends or make other distributions;
·  dispose of assets or merge;
·  enter into related party transactions; and
·  grant liens and pledge assets.

Additionally, the Charter Operating credit facilities require Charter Operating to comply with a maximum total leverage covenant and a maximum first lien leverage covenant. The breach of any covenants or obligations in our indentures or credit facilities, not otherwise waived or amended, could result in a default under the applicable debt obligations and could trigger acceleration of those obligations, which in turn could trigger cross defaults under other agreements governing our long-term indebtedness. In addition, the secured lenders under the Charter Operating credit facilities the holders of the Charter Operating senior second-lien notes, and the secured lenders under the CCO Holdings credit facility could foreclose on their collateral, which includes equity interests in our subsidiaries, and exercise other rights of secured creditors. Any default under those credit facilities or the indentures governing our debt could adversely affect our growth, our financial condition, our results of operations and our ability to make payments on our notes and credit facilities, and could force us to seek the protection of the bankruptcy laws.  

We depend on generating (and having available to the applicable obligor) sufficient cash flow to fund our debt obligations, capital expenditures, and ongoing operations.

WeWe are dependent on our cash on hand and free cash flow from operations to fund our debt obligations, capital expenditures and ongoing operations.

Our ability to service our debt and to fund our planned capital expenditures and ongoing operations will depend on our ability to continue to generate cash flow and our access (by dividend or otherwise) to additional liquidity sources at the applicable obligor. Our ability to continue to generate cash flow is dependent on many factors, including:

·  our ability to sustain and grow revenues and free cash flow by offering video, high-speed Internet, telephoneour ability to sustain and grow revenues and cash flow from operations by offering video, Internet, voice, 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 competition, the need for innovation and the related capital expenditures and the difficult economic conditions in the United States;
the impact of competition from other market participants, including but not limited to incumbent telephone companies, direct broadcast satellite operators, wireless broadband and telephone providers, DSL providers and video provided over the Internet;
general business conditions, economic uncertainty or downturn, high unemployment levels and the level of activity in the housing sector;
our ability to obtain programming at reasonable prices or to raise prices to offset, in whole or in part, the effects of higher programming costs (including retransmission consents);
the development and deployment of new products and technologies including in connection with our plan to make our systems all-digital in 2014; and
the effects of governmental regulation on our business.

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·  the impact of competition from other market participants, including but not limited to incumbent telephone companies, direct broadcast satellite operators, wireless broadband providers and DSL providers and competition from video provided over the Internet;


·  general business conditions, economic uncertainty or downturn, high unemployment levels and the level of activity in the housing sector;
·  our ability to obtain programming at reasonable prices or to raise prices to offset, in whole or in part, the effects of higher programming costs (including retransmission consents); and
·  the effects of governmental regulation on our business.

Some of these factors are beyond our control. If we are unable to generate sufficient cash flow or we are unable to access additional liquidity sources, we may not be able to service and repay our debt, operate our business, respond to competitive challenges, or fund our other liquidity and capital needs.

Restrictions in our subsidiaries' debt instruments and under applicable law limit their ability to provide funds to us and our subsidiaries that are debt issuers.

Our primary assets are our equity interests in our subsidiaries. Our operating subsidiaries are separate and distinct legal entities and are not obligated to make funds available to ustheir debt issuer holding companies for payments on our notes or other obligations in the form of loans, distributions, or otherwise. Charter Operating’s and CCO Holdings’ ability to make distributions to us or the applicableCCO Holdings, our other primary debt issuersissuer, to service debt obligations is subject to theirits compliance with the terms of theirits credit facilities, and indentures, and restrictions under applicable law. See “Part II. Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources — Limitations on Distributions” and “— Summary of Restrictive Covenants of Our Notes – Restrictions on Distributions.” Under the Delaware Limited Liability Company Act (the “Act”), our subsidiaries may only make distributions if the relevant entity has “surplus” as defined in the Act. Under fraudulent transfer laws, our subsidiaries may not pay dividends if the relevant entity is insolvent or is rendered insolvent thereby. The measures of insolvency for purposes of these fraudulent transfer laws vary depending upon the law applied in any proceeding to determine whether a fraudulent transfer has occurred. Generally, however, an entity would be considered insolvent if:

·  the sum of its debts, including contingent liabilities, was greater than the fair saleable value of all its assets;
·  the present fair saleable value of its assets was less than the amount that would be required to pay its probable liability on its existing debts, including contingent liabilities, as they become absolute and mature; or
·  it could not pay its debts as they became due.

While we believe that our relevant subsidiaries currently have surplus and are not insolvent, there can otherwise be no assurance that these subsidiaries will notmay become insolvent or will be permitted to make distributions in the future in compliance with these restrictions in amounts needed to service our indebtedness.future. Our direct or indirect subsidiaries include the borrowers under the CCO Holdings credit facility and the borrowers and guarantors under the Charter Operating credit facilities. Charter Operating is also an obligor, and its subsidiaries are guarantors under senior second-lien notes, and CCO Holdings is also an obligor under its senior notes. As of December 31, 2010,2013, our total principal amount of debt was approximately $12.3 billion.$14.2 billion.

In the event of bankruptcy, liquidation, or dissolution of one or more of our subsidiaries, that subsidiary's assets would first be applied to satisfy its own obligations, and following such payments, such subsidiary may not have sufficient assets remaining to make payments to its parent company as an equity holder or otherwise. In that event:

·  the lenders under CCO Holdings’ credit facility and Charter Operating's credit facilities, and senior second-lien notes, whose interests are secured by substantially all of our operating assets, and all holders of other debt of CCO Holdings and Charter Operating, will have the right to be paid in full before us from any of our subsidiaries' assets; and
·  Charter and CCH I, the holdersCCH I, the holder of preferred membership interests in our subsidiary, CC VIII, would have a claim on a portion of CC VIII’s assets that may reduce the amounts available for repayment to holders of our subsidiary, CC VIII, would have a claim on a portion of CC VIII’s assets that may reduce the amounts available for repayment to holders of CCO Holdings' outstanding notes.
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All of our outstanding debt is subject to change of control provisions. We may not have the ability to raise the funds necessary to fulfill our obligations under our indebtedness following a change of control, which would place us in default under the applicable debt instruments.

We may not have the ability to raise the funds necessary to fulfill our obligations under our notes and our credit facilities following a change of control. Under the indentures governing our notes and the CCO Holdings credit facility, upon the occurrence of specified change of control events, the applicable note issuerCCO Holdings is required to offer to repurchase all of its outstanding notes.notes and the debt under its credit facility. However, we may not have sufficient access to funds at the time of the change of control event to make the required repurchase of the applicable notes and all of the notes issuers aredebt under the CCO Holdings credit facility, and Charter Operating is limited in theirits ability to make distributions or other payments to their respective parent companyCCO Holdings to fund any required repurchase. In addition, a change of control under the Charter Operating credit facilities would result in a default under those credit facilities. ;BecauseBecause such credit facilities and our subsidiaries’ notes are obligations of our subsidiaries,Charter Operating, the credit facilities and our subsidiaries’ notes would have to be repaid by our subsidiaries before theirCharter Operating's assets could be available to their parent companiesCCO Holdings to repurchase their notes. Any failure to make or complete a change of control offer would place the applicable note issuer or borrowerCCO Holdings in default under its notes.notes and credit facility. The failure of our subsidiaries to make a change of control offer or repay the amounts accelerated under their notes and credit facilities would place them in default.



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Risks Related to Our Business

We operate in a very competitive business environment, which affects our ability to attract and retain customers and can adversely affect our business and operations.

The industry in which we operate is highly competitive and has become more so in recent years. In some instances, we compete against companies with fewer regulatory burdens, better access to financing, greater personnel resources, greater resources for marketing, greater and more favorable brand name recognition, and long-established relationships with regulatory authorities and customers. Increasing consolidation in the cable industry and the repeal of certain ownership rules have provided additional benefits to certain of our competitors, either through access to financing, resources, or efficiencies of scale. We could also face additional competition from multi-channel video providers if they began distributing video over the Internet to customers residing outside their current territories.

Our principal competitors for video services throughout our territory are DBS providers. The two largest DBS providers are DirecTV and DISH Network. Competition from DBS, including intensive marketing efforts with aggressive pricing, exclusive programming and increased high definitionHD broadcasting has had an adverse impact on our ability to retain customers. DBS companies have also expanded their activities in the MDU market.  The cable industry, including us, has lost a significant number of video customers to DBS competition, and we face serious challenges in this area in the future.

Telephone companies, including two major telephone companies, AT&T and Verizon, offer video and other services in competition with us, and we expect they will increasingly do so in the future. Upgraded portions of these networks carry two-way video, data service offeringsservices and provide digital voice services similar to ours. In the case of Verizon, FIOS high-speed data services offer speeds as high as or higher than ours. In addition, these companies continue to offer their traditional telephone services, as well as service bundles that include wireless voice services provided by affiliated companies. Based on our internal estimates, we believe that AT&T and Verizon are offering video services in areas serving approximately 24% to 29%30% and 3%4%, respectively, of our estimated homes passed as of December 31, 2010,passings and we have experienced customer losses in these areas. AT&T and Verizon have also launched campaigns to capture more of the MDU market. Additional upgradesAT&T has publicly stated that it expects to roll out its video product beyond the territories currently served although it is unclear where and product launches are expectedto what extent. When AT&T or Verizon have introduced or expanded their offering of video products in marketsour market areas, we have seen a decrease in which we operate. our video revenue as AT&T and Verizon typically roll out aggressive marketing and discounting campaigns to launch their products.

With respect to our Internet access services, we face competition, including intensive marketing efforts and aggressive pricing, from telephone companies, primarily AT&T and Verizon, and other providers of DSL.DSL, fiber-to-the-node and fiber-to-the-home services. DSL service competes with our high-speed Internet service and is often offered at prices lower than our Internet services, although often at speeds lower than the speeds we offer. Fiber-to-the-node networks can provide faster Internet speeds than conventional DSL, but still cannot typically match our Internet speeds. Fiber-to-the-home networks, however, can provide Internet speeds equal to or greater than our current Internet speeds. In addition, in many of our markets, these companiesDSL providers have entered into co-marketing arrangements with DBS providers to offer service bundles combining video services provided by a DBS provider with DSL and traditional telephone and wireless services offered by the telephone companies and their affiliates. These service bundles offer customers similar p ricingpricing and convenience advantages as our bundles.

Continued growth in our residential telephonevoice business faces risks. The competitive landscape for residential and commercial telephone services is intense; we face competition from providers of Internet telephone services, as well as incumbent telephone companies. Further, we face increasing competition for residential telephonevoice services as more consumers in the United States are replacing traditional telephone service with wireless service. We expect to continue to price our voice product aggressively as part of our triple play strategy which could negatively impact our revenue from voice services to the extent we do not increase volume.

The existence of more than one cable system operating in the same territory is referred to as an overbuild. Overbuilds could adversely affect our growth, financial condition, and results of operations, by creating or
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increasing competition. Based on internal estimates and excluding telephone companies, as of December 31, 2010, weWe are aware of traditional overbuild situations impacting approximately 7% to 9%certain of our estimated homes passed, and potential traditional overbuild situations in areas servicing approximately anmarkets, however, we are unable to predict the extent to which additional 1% of our estimated homes passed.  Additional overbuild situations may occur in other systems.occur.

In order to attract new customers, from time to time we make promotional offers, including offers of temporarily reduced price or free service. These promotional programs result in significant advertising, programming and operating expenses, and also may require us to make capital expenditures to acquire and install customer premise equipment. Customers who subscribe to our services as a result of these offerings may not remain customers following the end of the promotional period. A failure to retain customers could have a material adverse effect on our business.



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Mergers, joint ventures, and alliances among franchised, wireless, or private cable operators, DBS providers, local exchange carriers, and others, may provide additional benefits to some of our competitors, either through access to financing, resources, or efficiencies of scale, or the ability to provide multiple services in direct competition with us.

In addition to the various competitive factors discussed above, our business is subject 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 media, and the Internet. Further, due to consumer electronic innovations, content owners are allowing consumers to watch Internet-delivered content on televisions, 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 information delivery choices available to consumers, and intensified the challenges posed by audience fragmentation. The increasing number of choices available to audiences could also negatively impact advertisers’ willingness to purchase advertising from us, as well as the price they are willing to pay for advertising. If we do not respond appropriately to further increases in the leisure and entertainment choices available to consumers, our competitive position could deteriorate, and our financial results could suffer.

Our services may not allow us to compete effectively. Additionally, as we expand our offerings to introduce new and enhanced services, we will be subject to competition from other providers of the services we offer. Competition may reduce our expected growth of future cash flows which may contribute to future impairments of our franchises and goodwill.

Economic conditions in the United States may adversely impact the growth of our business.

We believe that continued competition and the weakenedprolonged recovery of economic conditions in the United States, including mixed recovery in the housing market and relatively high unemployment levels, have adversely affected consumer demand for our services. In addition, weservices, particularly basic video. We believe thesecompetition from wireless and economic factors 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 telephonevoice business.  These conditions have affected our net customer additions and revenue growth during 2009 and 2010 and contributed to the franchise impairment charge incurred in 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 exposure to the credit risks of our customers, vendors and third parties could adversely affect our cash flow, results of operations and financial condition.

We are exposed to risks associated with the potential financial instability of our customers, many of whom have been adversely affected by the general economic downturn. Declines in the housing market, including foreclosures, together with significant unemployment, may cause increased cancellations by our customers or lead to unfavorable changes in the mix of products purchased. These events have adversely affected, and may continue to adversely affect our cash flow, results of operations and financial condition.

In addition, we are susceptible to risks associated with the potential financial instability of the vendors and third parties on which we rely to provide products and services or to which we outsource certain functions. The same economic conditions that may affect our customers, as well as volatility and disruption in the capital and credit markets, also could adversely affect vendors and third parties and lead to significant increases in prices, reduction in output or the bankruptcy of our vendors or third parties upon which we rely. Any interruption in the services provided by our vendors or by third parties could adversely affect our cash flow, results of operation and financial condition.

We face risks inherent in our commercial business.
 
We may encounter unforeseen difficulties as we increase the scale of our service offerings to businesses. We sell Internet access, data networking and fiber connectivity to cellular towers and office buildings, video high-speed data and network and transportbusiness voice services to businesses and have increased our focus on growing this business. In order to grow our commercial business, we expect to increase expenditures on technology, equipment and personnel focused on the commercial business. Commercial business customers often require service level agreements and generally have heightened customer expectations for reliability of services. If our efforts to build the infrastructure to scale the commercial business are not successful, the growth of our commercial services business would be limited. We depend on interconnection and related services provided by certain third parties for the growth of our commercial business. As a result, our ability to implement changes as the services grow may be limited. If we are unable to meet these service level requirements or expectations, our commercial business could be adversely affected. Finally, we expect advances in communications technology, as well as changes in the marketplace and the regulatory and legislative environment. Consequently, we are unable to predict the effect that ongoing or future developments in these areas might have on our telephonevoice and commercial businesses and operations.

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Our exposure to the credit risks of our customers, vendors and third parties could adversely affect our cash flow, results of operations and financial condition.20

We are exposed to risks associated with the potential financial instability of our customers, many of whom have been adversely affected by the general economic downturn.  Dramatic declines in the housing market, including falling home prices and increasing foreclosures, together with significant increases in unemployment, have severely affected consumer confidence and caused increased delinquencies or cancellations by our customers or lead to unfavorable changes in the mix of products purchased.  These events have adversely affected, and may continue to adversely affect our cash flow, results of operations and financial condition.

In addition, we are susceptible to risks associated with the potential financial instability of the vendors and third parties on which we rely to provide products and services or to which we outsource certain functions.  The same economic conditions that may affect our customers, as well as volatility and disruption in the capital and credit markets, also could adversely affect vendors and third parties and lead to significant increases in prices, reduction in output or the bankruptcy of our vendors or third parties upon which we rely.  Any interruption in the services provided by our vendors or by third parties could adversely affect our cash flow, results of operation and financial condition.



We may not have the ability to reduce the high growth rates of, or pass on to our customers, our increasing programming costs, which would adversely affect our cash flow and operating margins.

Programming has been, and is expected to continue to be, our largest operating expense item. In recent years, the cable industry has experienced a rapid escalation in the cost of programming. We expect programming costs to continue to increase and at a higher rate than in 2010, because of a variety of factors including amounts paid for retransmission consent, annual increases imposed by programmers andwith additional selling power as a result of media consolidation, additional programming, including high definitionnew sports services and non-linear programming for on-line and OnDemand programming, being provided to customers.platforms. The inability to fully pass these programming cost increases on to our customers has had an adverse impact on our cash flow and operating margins associated with the video product. We have programming contracts that have expired and others that will expire at or before the end of 2011.  ;2014. There can be no assurance that these agreements will be renewed on favorable or comparable terms. To the extent that we are unable to reach agreement with certain programmers on terms that we believe are reasonable, we may be forced to remove such programming channels from our line-up, which could result in a further loss of customers.

Increased demands by owners of some broadcast stations for carriage of other services or payments to those broadcasters for retransmission consent are likely to further increase our programming costs. Federal law allows commercial television broadcast stations to make an election between “must-carry” rights and an alternative “retransmission-consent” regime. When a station opts for the latter, cable operators are not allowed to carry the station’s signal without the station’s permission. In some cases, we carry stations under short-term arrangements while we attempt to negotiate new long-term retransmission agreements. If negotiations with these programmers prove unsuccessful, they could require us to cease carrying their signals, possibly for an indefinite period. Any loss of stations could make our video service less attractive to customers, which could result in less subscription and advertising revenue. In retransmission-consent negotiations, broadcasters often condition consent with respect to one station on carriage of one or more other stations or programming services in which they or their affiliates have an interest. Carriage of these other services, as well as increased fees for retransmission rights, may increase our programming expenses and diminish the amount of capacity we have available to introduce new services, which could have an adverse effect on our business and financial results.

Our inability to respond to technological developments and meet customer demand for new products and services could limit our ability to compete effectively.

Our business is characterized by rapid technological change and the introduction of new products and services, some of which are bandwidth-intensive. We may not be able to fund the capital expenditures necessary to keep pace with technological developments, execute the plans to do so, or anticipate the demand of our customers for products and services requiring new technology or bandwidth. The testing and implementation of our network-based user interface may ultimately be unsuccessful or more expensive than anticipated. The completion of our plan to become all-digital in 2014 could be delayed or cost more than the anticipated $400 million in our 2014 plan. Our inability to maintain and expand our upgraded systems including through the completion of our all-digital plan and provide advanced services such as a state of the art user interface in a timely manner, or to anticipate the demands of the marketplace, could materially adversely affect our ability to attract and retain customers. Consequently, our growth, financial condition and results of operations could suffer materially.

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We depend on third party service providers, suppliers and licensors; thus, if we are unable to procure the necessary services, equipment, software or licenses on reasonable terms and on a timely basis, our ability to offer services could be impaired, and our growth, operations, business, financial results and financial condition could be materially adversely affected.

We depend on third party service providers, suppliers and licensors to supply some of the services, hardware, software and operational support necessary to provide some of our services. We obtain these materials from a limited number of vendors, some of which do not have a long operating history or which may not be able to continue to supply the equipment and services we desire. Some of our hardware, software and operational support vendors, and service providers represent our sole source of supply or have, either through contract or as a result of intellectual property rights, a position of some exclusivity. If demand exceeds these vendors’ capacity or if these vendors experience operating or financial difficulties, or are otherwise unable to provide the equipment or services we need in a timely manner, at our specifications and at reasonable prices, our ability to provide some services might be materially adversely affected, or the need to procure or develop alternative sources of the affected materials or services might delay our ability to serve our customers. These events could materially and adversely affect our ability to retain and attract customers, and have a material negative impact on our operations, business, financial results and financial condition. A limited number of vendors of key technologies can lead to less product innovation and higher costs. For these reasons,Our cable systems have historically been restricted to using one of two proprietary conditional access security systems, which we generally endeavorbelieve has limited the number of manufacturers producing set-top boxes for such systems. As an alternative, under a waiver granted to establish alternative vendorsCharter by the FCC, Charter is currently developing a conditional access security system which may be downloaded into set-top boxes provided by a variety of manufacturers. We believe this new security system will make Charter systems more suitable for materialsset-top boxes


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provided by additional suppliers; however, we consider critical, but may not be able to develop a conditional access security system, establish these relationships or be 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, such as premium channels.  We believe that the proprietary nature of these conditional access schemes makes other manufacturers reluctant to produce set-top boxes.  Future innovation in set-top boxes may be restricted until these issues are resolved.  In addition, we believe that the general lack of compatibility among set-top box operating systems has slowed the industry’s development and deployment of digital set-top box applications.

We further depend on patent, copyright, trademark and trade secret laws and licenses to establish and maintain itsour intellectual property rights in technology and the products and services used in our operating activities. Any of our intellectual property rights could be challenged or invalidated, or such intellectual property rights may not be sufficient to permit us to continue to use certain intellectual property, which could result in discontinuance of certain product or service offerings or other competitive harm, our incurring substantial monetary liability or being enjoined preliminarily or permanently from further use of the intellectual property in question.

Various events could disrupt our networks, information systems or properties and could impair our operating activities and negatively impact our reputation.

Network and information systems technologies are critical to our operating activities, as well as our customers' access to our services. We may be subject to information technology system failures and network disruptions. Malicious and abusive Internet practices could impair our high-speed Internet services.

Our high-speed Internet customers utilize our network to access the Internet and, as a consequence, we or they may become victim to common malicious and abusive Internet activities, such as peer-to-peer file sharing, unsolicited mass advertising (i.e., “spam”) andthe dissemination of computer viruses, worms, and other destructive or disruptive software.  Thesesoftware, computer hackings, social engineering, process breakdowns, denial of service attacks and other malicious activities have become more common in industry overall.  If directed at us or technologies upon which we depend, these activities could have adverse consequences on our network and our customers, including degradation of service, excessive call volume to call centers, and damage to our or our customers' equipment and data.  Significant incidentsFurther, these activities could result in security breaches, such as misappropriation, misuse, leakage, falsification or accidental release or loss of information maintained in our information technology systems and networks, and in our vendors’ systems and networks, including customer, personnel and vendor data. System failures and network disruptions may also be caused by natural disasters, accidents, power disruptions or telecommunications failures. If a significant incident were to occur, it could damage our reputation and credibility, lead to customer dissatisfaction and, ultimately, loss of customers or revenue, in addition to increased costs to service our customers and protect our network. These events also could result in large expenditures to repair or replace the damaged properties, networks or information systems or to protect them from similar events in the future. System redundancy may be ineffective or inadequate, and our disaster recovery planning may not be sufficient for all eventualities.  Any significant loss of high-speed Internet customers or revenue, or significant increase in costs of serving those customers, could adversely affect our growth, financial condition and results of operations.

For tax purposes, we experienced a deemed ownership change upon emergence from Chapter 11 bankruptcy, resulting in an annual limitation on our ability to use our existing tax loss carryforwards.  We could experience anothera deemed ownership change in the future that could further limit our ability to use our tax loss carryforwards.

As of December 31, 2010,2013, we had approximately $6.9$8.3 billion of federal tax net operating and capital loss carryforwards resulting in a gross deferred tax asset of approximately $2.4$2.9 billion expiring. Federal tax net operating loss carryforwards expire in the years 20142021 through 2030.2033. These losses resulted from the operations of Charter Holdco and its subsidiaries. In addition, as of December 31, 2010,2013, we had state tax net operating and capital loss carryforwards resulting in a gross deferred tax asset (net of federal tax benefit) of approximately $228$276 million. State tax net operating loss carryforwards generally expiringexpire in the years 20112014 through 2030.2033. Due to uncertainties in projected future taxable income, valuation allowances have been established against the gross deferred tax assets for book accounting purposes, except for future taxable income that will result from the reversal
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of existing temporary differences for which deferred tax liabilities are recognized. Such tax loss carryforwards can accumulate and be used to offset our future taxable income.

The consummation of the Plan generated an “ownership change” as defined in Section 382 of the Internal Revenue Code of 1986, as amended (the “Code”)., and the sale of shares of 27% of the beneficial amount of our common stock by Apollo Management, L.P. and certain related funds, Oaktree Opportunities Investments, L.P. and certain related funds and funds affiliated with Crestview Partners, L.P. to Liberty Media Corporation resulted in a second "ownership change" pursuant to Section 382. In general, an “ownership change” occurs whenever the percentage of the stock of a corporation owned, directly or indirectly, by “5-percent stockholders” (within the meaning of Section 382 of the Code) increases by more than 50 percentage points over the lowest percentage of the stock of such corporation owned, directly or indirectly, by such “5-percent stockholders” at any time over the preceding three years. As a result, Charter iswe are 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 by2009 for the amount offirst "ownership change" and those that existed at May 1, 2013 for the cancellation of debt income resulting from the Plan that was allocable to Charter.second "ownership change." The limitation on our ability to use our loss carryforwards, in conjunction with the loss carryforward expiration provisions, could reduce our ability to use a portion of our loss carryforwards to offset future taxable income, which could result in us being required to make material cash tax payments. Our ability to make such income tax payments, if any, will depend at such time on our liquidity or our ability to raise additional capital, and/or on receipt of payments or distributions from Charter Holdco and its subsidiaries.

If Charterwe were to experience a secondthird ownership change in the future (as a result of purchases and sales of stock by Charter’s 5-percentour "5-percent stockholders," new issuances or redemptions of Charter’sour stock, certain acquisitions of Charter’sour stock and issuances, redemptions, sales or


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other dispositions or acquisitions of interests in Charter’s 5-percent stockholders)our "5-percent stockholders"), Charter’sour ability to use our loss carryforwards could become subject to further limitations. Our common stock is subject to certain transfer restrictions contained in our amended and restated certificate of incorporation. These restrictions, which are designed to minimize the likelihood of an ownership change occurring and thereby preserve our ability to utilize our loss carryforwards, are not currently operative but could beco mebecome operative in the future if certain events occur and the restrictions are imposed by Charter’sour board of directors. However, there can be no assurance that Charter’sour board of directors would choose to impose these restrictions or that such restrictions, if imposed, would prevent an ownership change from occurring.

If we are unable to retain key employees, our ability to manage our business could be adversely affected.

Our operational results have depended, and our future results will depend, upon the retention and continued performance of our management team. Over the last twelve months, we have experienced significant changes in our management team and may experience additional changes in the future.  Our ability to retain and hire new key employees for management positions could be impacted adversely by the competitive environment for management talent in the telecommunicationsbroadband communications industry. The loss of the services of key members of management and the inability to hireor delay in hiring new key employees could adversely affect our ability to manage our business and our future operational and financial results.

Our inability to successfully acquire and integrate other businesses, assets, products or technologies could harm our operating results.

We actively evaluate acquisitions and strategic investments in businesses, products or technologies that we believe could complement or expand our business or otherwise offer growth or cost-saving opportunities. From time to time, we may enter into letters of intent with companies with which we are negotiating for potential acquisitions or investments, or as to which we are conducting due diligence. An investment in, or acquisition of, complementary businesses, products or technologies in the future could materially decrease the amount of our available cash or require us to seek additional equity or debt financing. We may not be successful in negotiating the terms of any potential acquisition, conducting thorough due diligence, financing the acquisition or effectively integrating the acquired business, product or technology into our existing business and operations. Our due diligence may fail to identify all of the problems, liabilities or other shortcomings or challenges of an acquired business, product or technology, including issues related to intellectual property, product quality or product architecture, regulatory compliance practices, revenue recognition or other accounting practices, or employee or customer issues.

Additionally, in connection with any acquisitions we complete, we may not achieve the synergies or other benefits we expected to achieve, and we may incur write-downs, impairment charges or unforeseen liabilities that could negatively affect our operating results or financial position or could otherwise harm our business. Further, contemplating or completing an acquisition and integrating an acquired business, product or technology could divert management and employee time and resources from other matters.

Risks Related to Ownership PositionsPosition of Charter’s Principal ShareholdersLiberty Media Corporation

Charter’s principal stockholders ownLiberty Media Corporation owns a significant amount of Charter’s common stock, giving themit influence over corporate transactions and other matters.

Charter’s principal stockholders have appointed members to Charter’sMembers of our board of directors in accordance withinclude directors who are also officers and directors of our principal stockholder. Dr. John Malone is the Plan, including: Mr. Darren Glatt, who is an employeeChairman of Apollo Management, L.P.;Liberty Media Corporation, and Mr. Bruce Karsh, who was appointed by Oaktree Opportunities Investments, L.P. andGreg Maffei is the president and chief executive officer of Oaktree Capital Management, L.P.  On January 18, 2011, Charter’sLiberty Media Corporation. As of December 31, 2013, Liberty Media Corporation beneficially held approximately 26% of our Class A common stock. Liberty Media Corporation has the right to designate up to four directors as nominees for our board of directors through our 2015 annual meeting of stockholders with one designated director to be appointed Mr. Stan Parker, a senior partner of Apollo Global Management LLC, and Mr. Edgar Lee, a Senior Vice President of Oaktree Capital Management, L.P. as membersto each of the board of directors to fill two vacancies onAudit Committee, the board. As of January 31, 2011, funds affiliated with AP Charter Holdings, L.P. beneficially hold approximately 31% ofNominating and Corporate Governance Committee and the Class A common stock of Charter. Oaktree Opportunities Investments, L.P.Compensation and certain affilia ted funds beneficially hold approximately 18% of the Class A common stock of Charter. Funds advised by Franklin Advisers, Inc. beneficially hold approximately 17% of the Class A common stock of Charter. Charter’s principal stockholdersBenefits Committee. Liberty Media Corporation may be able to exercise substantial influence over all matters requiring stockholder approval, including the election of directors and approval of significant corporate action, such as mergers and other business combination transactions should these stockholdersLiberty Media Corporation retain a significant ownership interest in us.
Charter’s principal stockholders  Liberty Media Corporation and its affiliates are not restricted from investing in, and have invested in, and engaged in, other businesses involving or related to the operation of cable television systems, video programming, high-speed Internet
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service, telephonevoice or business and financial transactions conducted through broadband interactivity and Internet services.  The principal stockholdersLiberty Media Corporation and its affiliates may also engage in other businesses that compete or may in the future compete with us.

The principal stockholders’Liberty Media Corporation's substantial influence over our management and affairs could create conflicts of interest if any of them wereLiberty Media Corporation faced with decisions that could have different implications for themit and us.


If we were to have a person with a 35% or greater voting interest and Paul G. Allen did not then have a voting interest in us greater than such holder, a change of control default could be triggered under our subsidiary's credit facilities.

On March 31, 2010, Charter Operating entered into an amended and restated credit agreement governing its credit facility. Such amendment removed the requirement that Mr. Allen retain a voting interest in us. On January 18, 2011, Mr. Allen’s Class B shares were converted to Class A shares, and as a result, Mr. Allen currently holds less than 10% of a voting interest in us. The credit agreement provides that a change of control under certain of our other debt instruments could result in an event of default under the credit agreement. Certain of those other instruments define a change of control as including a holder holding more than 35% of our direct or indirect voting interest and the failure by (a) Mr. Allen, (b) his estate, spouse, immediate family members and heirs and (c) any trust, corporation, partnership or other entity, t he beneficiaries, stockholders, partners or other owners of which consist exclusively of Mr. Allen or such other persons referred to in (b) above or a combination thereof to maintain a greater percentage of direct or indirect voting interest than such other holder. Such a default could result in the acceleration of repayment of our indebtedness, including borrowings under the Charter Operating credit facilities.  As of January 31, 2011, funds affiliated with AP Charter Holdings, L.P. beneficially hold approximately 31% of the Class A common stock of Charter.  See “— Risks Related to Our Significant Indebtedness and the Notes—All of our outstanding debt is subject to change of control provisions.  We may not have the ability to raise the funds necessary to fulfill our obligations under our indebtedness following a change of control, which would place us in default under the applicable debt instruments.”23


Risks Related to Regulatory and Legislative Matters

Our business is subject to extensive governmental legislation and regulation, which could adversely affect our business.

Regulation of the cable industry has increased cable operators' operational and administrative expenses and limited their revenues. Cable operators are subject to among other things:various laws and regulations including those covering the following:

·  rules governing the provisionthe provisioning and marketing of cable equipment and compatibility with new digital technologies;
·  rules and regulations relating to subscriber and employee privacy;
subscriber and employee privacy and data security;
·  limited rate regulation;
limited rate regulation of video service;
·  rules governing the copyright royalties that must be paid for retransmitting broadcast signals;
·  requirements governing when a cable system must carry a particular broadcast station and when it must first obtain retransmission consent to carry a broadcast station;
·  requirements governing the provision of channel capacity to unaffiliated commercial leased access programmers;
·  rules limitinglimitations on our ability to enter into exclusive agreements with multiple dwelling unit complexes and control our inside wiring;
·  rules, regulations, and regulatory policies relating tothe provision of high-speed Internet service, including net neutrality rules;
·  rules, regulations, and regulatory policies relating tothe provision of voice communications;
·  rules forcable franchise renewals and transfers; and
·  other requirements covering a variety of operational areas such as equal employment opportunity, emergency alert systems, technical standards, and customer service requirements.
equal employment opportunity, emergency alert systems, disability access, technical standards, marketing practices, customer service, and consumer protection; and
approval for mergers and acquisitions often accompanied by the imposition of restrictions and requirements on an applicant's business in order to secure approval of the proposed transaction.

Additionally, many aspects of these laws and regulations are currently the subject of judicial proceedings and administrative or legislative proposals. In March 2010, the FCC submitted its National Broadband Plan to Congress and announced its intention to initiate approximately 40 rulemakings addressing a host of issues related to the delivery of broadband services, including video, data, VoIP and other services. The broad reach of these rulemakings could ultimately impact the environment in which we operate. On December 21, 2010, the FCC enacted new “net neutrality” rules, regulating the provision of broadband Internet access.  There are also ongoing efforts to amend or
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expand the federal, state, and local regulation of some of the services offered over our cable systems, which may compound the regulatory risks we already face, and proposals that might make it easier for our employees to unionize.  For example, Congress and various federal agencies are now considering adoption of significant new privacy restrictions, including new restrictions on the use of personal and profiling information for behavioral advertising. In addition,response to recent global data breaches, malicious activity and cyber threats, as well as the Twenty-First Century Communicationsgeneral increasing concerns regarding the protection of consumers’ personal information, Congress is considering the adoption of new data security and Video Accessibility Act of 2010, which the FCC is now in the process of implementing, includes various provisions intended to ensure communications services are accessible to people with disabilities.  Certain states and localities are conside ring new cable and telecommunications taxescybersecurity legislation that could increase operating expenses.result in additional network and information security requirements for our business. In the event of a data breach or cyber attack, these new laws, as well as existing legal and regulatory obligations, could require significant expenditures to remedy any such breach or attack.

Our cable system franchises are subject to non-renewal or 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 franchises establish comprehensive facilities and service requirements, as well as specific customer service standards and monetary penalties for non-compliance. In many cases, franchises are terminable if the franchisee fails to comply with significant provisions set forth in the franchise agreement governing system operations. Franchises are generally granted for fixed terms and must be periodically renewed. Franchising authorities may resist granting a renewal if either past performance or the prospective operating proposal is considered inadequate. Franchise authorities often demand concessio nsconcessions or other commitments as a condition to renewal. In some instances, local franchises have not been renewed at expiration, and we have operated and are operating under either temporary operating agreements or without a franchise while negotiating renewal terms with the local franchising authorities.

The traditional cable franchising regime is currently undergoinghas recently undergone significant change as a result of various federal and state actions.  Some of the new state franchising laws do not allow us to immediately opt into favorable statewide franchising until (i) we have completed the term of the local franchise, in good standing, (ii) a competitor has entered the market, or (iii) in limited instances, where the local franchise allows the state franchise license to apply.franchising.  In many cases, state franchising laws and their varying application to us and new video providers, will result in lessfewer franchise imposed requirements for our competitors who are new entrants than for us, until we are able to opt into the applicable state franchise.

We cannot assure you that we will be able to comply with all significant provisions of our franchise agreements and certain of our franchisorsfranchisers have from time to time alleged that we have not complied with these agreements. Additionally, although historically we have renewed our franchises without incurring significant costs, we cannot assure you that we will be able to renew, or to renew as favorably, our franchises in the future. A termination of or a sustained failure to renew a franchise in one or more key markets could adversely affect our business in the affected geographic area.



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Our cable system franchises are non-exclusive. Accordingly, local and state franchising authorities can grant additional franchises and create competition in market areas where none existed previously, resulting in overbuilds, which could adversely affect results of operations.

Our cable system franchises are non-exclusive. Consequently, local and state franchising authorities can grant additional franchises to competitors in the same geographic area or operate their own cable systems. In some cases, local government entities and municipal utilities may legally compete with us without obtaining a franchise from the local franchising authority. In addition, certain telephone companies are seeking authority to operate in communities without first obtaining a local franchise.  As a result, competing operators may build systems in areas in which we hold franchises.

In a series of recent rulemakings, theThe FCC has adopted new rules that streamline entry for new competitors (particularly those affiliated with telephone companies) and reduce franchising burdens for these new entrants. At the same time, a substantial number of states recently have adopted new franchising laws.  Again, these new laws, were principally designed to streamline entry for new competitors, and they often provide advantages for these new entrants that are not immediately available to existing operators.  As a result of these new franchising laws and regulations, we have seen an increase in the number of competitive cable franchises or operating certificates being issued, and we anticipate that trend to continue.
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Local franchise authorities have the ability to impose additional regulatory constraints on our business, which could further increase our expenses.

In addition to the franchise agreement, cable authorities in some jurisdictions have adopted cable regulatory ordinances that further regulate the operation of cable systems. This additional regulation increases the cost of operating our business. Local franchising authorities may impose new and more restrictive requirements. Local franchising authorities who are certified to regulate rates in the communities where they operate generally have the power to reduce rates and order refunds on the rates charged for basic service and equipment.

Tax legislation and administrative initiatives or challenges to our tax positions could adversely affect our results of operations and financial condition.  

We operate cable systems in locations throughout the United States and, as a result, we are subject to the tax laws and regulations of federal, state and local governments. From time to time, various legislative and/or administrative initiatives may be proposed that could adversely affect our tax positions. There can be no assurance that our effective tax rate or tax payments will not be adversely affected by these initiatives. As a result of state and local budget shortfalls due primarily to the recession as well as other considerations, certain states and localities have imposed or are considering imposing new or additional taxes or fees on our services or changing the methodologies or base on which certain fees and taxes are computed. Such potential changes include additional taxes or fees on our services which could impact our cust omers,customers, combined reporting and other changes to general business taxes, central/unit-level assessment of property taxes and other matters that could increase our income, franchise, sales, use and/or property tax liabilities. In addition, federal, state and local tax laws and regulations are extremely complex and subject to varying interpretations. There can be no assurance that our tax positions will not be challenged by relevant tax authorities or that we would be successful in any such challenge.

Further regulation of the cable industry could cause us to delay or cancel service or programming enhancements, or impair our ability to raise rates to cover our increasing costs, resulting in increased losses.

Currently, rate regulation of cable systems is strictly limited to the basic service tier and associated equipment and installation activities. However, the FCC and Congress continue to be concerned that cable rate increases are exceeding inflation. It is possible that either the FCC or Congress will further restrict the ability of cable system operators to implement rate increases.increases for our video services or even for our high-speed Internet and voice services. Should this occur, it would impede our ability to raise our rates. If we are unable to raise our rates in response to increasing costs, our losses would increase.

There has been legislative and regulatory interest in requiring cable operators to offer historically combined programming services on an á la carte basis. It is possible thatWhile any new marketing restrictionsregulation or legislation designed to enable cable operators to purchase programming on a wholesale basis could be adopted in the future. Such restrictionsbeneficial to Charter, any such new regulation or legislation that limits how we sell programming could adversely affect our operations.business.

Actions by pole owners might subject us to significantly increased pole attachment costs.

Pole attachments are cable wires that are attached to utility poles. Cable system attachments to investor-owned public utility poles historically have been regulated at the federal or state level, generally resulting in favorable pole attachment rates for attachments used to provide cable service. TheIn contrast, utility poles owned by municipalities or cooperatives are not subject to federal regulation and are generally exempt from state regulation. In 2011, the FCC previously determined that the lower cable rate was applicable to the mixed use of aamended its pole attachment rules to promote broadband deployment. The order overall strengthens the cable industry's ability to access investor-owned utility poles on reasonable rates,


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terms and conditions It also allows for new penalties in certain cases involving unauthorized attachments that could result in additional costs for cable operators. Electric utilities sought review of the provision of2011 Order at both cable and Internet access services.  However, in late 2007, the FCC issued a NPRM, in which it “tentatively concludes” that this approach should be modified.  In 2009, a groupand the D.C. Circuit Court of electric utilities petitionedAppeals, but the FCC to increaseand the pole attachment rates applicable to voice service provided through any technology. Thesecourt subsequently affirmed the new rules. Future regulatory changes in this area could affectimpact the pole attachment rates we pa y when we offer either data or voice services over our broadband facility. Any changes in the FCC approach could result in a substantial increase in our pole attachment costs. In its March 2010 National Broadband Plan and a May 2010 former Notice of Proposed Rulemaking, however, the FCC suggested it might actually lower the pole attachment rates applicable to telecommunications delivery to the prevailing cable rate calculation.pay utility companies.

Increasing regulation of our Internet service product could adversely affect our ability to provide new products and services.

There has been continued advocacy by certain Internet content providers and consumer groups for new federal laws or regulations to adopt so-called “net neutrality” principles limitingOn January 14, 2014, the ability of broadband network owners (like us) to manage and control their own networks. In August 2005, the FCC issued a nonbinding policy statement identifying four principles it deemed necessary to ensure continuation of an “open” Internet that is not unduly restricted by network “gatekeepers.”  In August 2008, the FCC issued an order concerning one Internet network
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 management practice in use by another cable operator, effectively treating the four principles as rules and ordering a change in network management practices. On April 6, 2010, the United StatesD.C. Circuit Court of Appeals, for the D.C. Circuit concluded that thein Verizon v. FCC, lacked jurisdictional authority and vacatedstruck down majorportions of the FCC’s 2008 order. On December 21, 2010 the FCC responded by enacting new “net neutrality” rules based on three core principles of: (1) transparency, (2) no blocking, and (3) no unreasonable discrimination. The “transparency” rule requiresgoverning the operating practices of broadband Internet access providers like us.  The FCC originally designed the rules to disclose applicable terms, performance,ensure an “open Internet” and included three key requirements for broadband providers:  1) a prohibition against blocking websites or other online applications; 2) a prohibition against unreasonable discrimination among Internet users or among different websites or other sources of information; and 3) a transparency requirement compelling the disclosure of network management practicespolicies.  The Court struck down the first two requirements, concluding that they constitute “common carrier” restrictions that are not permissible given the FCC’s earlier decision to consumers and third party users. The “no blocking” rule restrictsclassify Internet access providers from blocking lawful content, applications, services, or devices.as an “information service,” rather than a “telecommunications service.”  The “no unreasonable discrimination” rule prohibitsCourt upheld the FCC’s transparency requirement.

The decision affirmatively recognizes the FCC’s jurisdiction over the Internet, access providers from engaging in unreasonable discrimination in transmitting lawful traffic. The new rules will permit broadband service providers to exercise “reasonable network management” for legitimate management purposes, such as managementbased on Section 706 of congestion, harmful traffic, and network security. The rules will also permit usage-based billing, and permit broadband service providers to offer additional specialized services such as facilities-based IP voice services, without being subject to restrictions on discrimination. These rules do not become effective until 60 days following the announcementTelecommunications Act of 1996. As a result, the FCC could, in the Federal Register offuture, resurrect the Office of Management and Budget’s decision regardinginvalidated network neutrality regulations or modify the information collection requirements associated withinvalidated regulations so that they restrict broadband practices, but not as rigidly as the new rules which has not yet occurred.  When they become effective,regulations the Court just invalidated.  Alternatively, the FCC will enforce these rules based on case-by-case complaints. Although(or another party) could challenge the new rules encompass both wireline providers (like us) and wireless providers, the rules are less stringent with regard to wireless providers. The FCC premised the new “net neutrality” rules on its Title I and ancillary jurisdiction, and that jurisdictional authority already has been challengedrecent court ruling by seeking rehearing en banc or Supreme Court review.  Legislation in court. A legislative reviewthis area is also possible.  The FCC’s new rules, if they withstand such challenges, as well as any additional legislationreimposition of network neutrality restrictions could adversely affect the potential development of advantageous relationships with Internet content providers.  Rules or statutes increasing the regulation could impose new obligations and restraints on high-speedof our Internet providers. Any such rules or statutesservices could limit our ability to efficiently manage our cable systems to obtain value for use of our cable systems and respond to operational and competitive challenges.
 
Changes in channel carriage regulations could impose significant additional costs on us.

Cable operators also face significant regulation of their video channel carriage. We can be required to devote substantial capacity to the carriage of programming that we might not carry voluntarily, including certain local broadcast signals; local public, educational and government access (“PEG”) programming; and unaffiliated, 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). The FCC adopted a plan in 2007 addressing the cable industry’s broadcast carriage obligations once the broadcast industry migration from analog to digital transmission is completed, which occurred in June 2009.  Under the FCC’s plan, most cable systems are required to offer both an analo g and digital version of local broadcast signals.  This burden could increase further if we are required to carry multiple programming streams included within a single digital broadcast transmission (multicast carriage) or if our broadcast carriage obligations are otherwise expanded.  At the same time, the cost that cable operators face to secure retransmission consent for the carriage of popular broadcast stations is increasing significantly. The FCC also adopted newrevised commercial leased access rules (currently stayed while under appeal) which would dramatically reduce the rate we can charge for leasing this capacity and dramatically increase our associated administrative burdens. TheseLegislation has been introduced in Congress in the past that, if adopted, could impact our carriage of broadcast signals by simultaneously eliminating the cable industry’s compulsory copyright license and the retransmission consent requirements governing cable’s retransmission of broadcast signals. The FCC also continues to consider changes to the rules affecting the relationship between programmers and multichannel video distributors. Future regulatory changes could disrupt existing programming commitments, interfere with our preferred use of limited channel capacity, increase our programming costs, and limit our ability to offer services that would maximize our revenue potential. It is possible that other legal restraints will be adopted limiting our discretio ndiscretion over programming decisions.

Offering voice communications service may subject us to additional regulatory burdens, causing us to incur additional costs.

We offer voice communications services over our broadband network and continue to develop and deploy VoIP services. The FCC has ruled that competitive telephone companies that support VoIP services, such as those we offer our customers, are entitled to interconnect with incumbent providers of traditional telecommunications services, which ensures that our VoIP services can compete in the market. The scope of these interconnection rights are being reviewed in a current FCC proceeding, which may affect our ability to compete in the provision of voice services or result in additional costs. The FCC has also declared that certain VoIP services are not subject to traditional state public utility regulation. The full extent of the FCC preemption of state and local regulation of VoIP services is not yet clear. Expanding our offering of these services may require us to obtain certain additional authorizations. We may not be able to obtain such authorizations in a timely manner, or conditions could be imposed upon such licenses or authorizations that may not be favorable to us. The FCC has extended certain traditional telecommunications carrier requirements, such as E911, Universal Service fund collection, CALEA, Customer Proprietary Network Information, number porting and te lephone relay requirements to many VoIP providers such as us.  Telecommunications companies generally are subject to other significant regulation which could also be extended to VoIP providers. If additional telecommunications regulations are applied to our VoIP service, it could cause us to incur additional costs. The FCC has already extended certain traditional telecommunications carrier requirements, such as E911, Universal Service fund collection, CALEA, privacy, Customer Proprietary Network Information, number porting, disability and discontinuance of service requirements to many VoIP providers such as us. In November 2011, the FCC released an order significantly changing the rules governing intercarrier compensation payments for the origination and termination of telephone traffic between carriers, including VoIP service providers like us. Several entities have challenged this FCC ruling in federal court, and that case is now pending before the Tenth Circuit Court of Appeals. The new rules, as they now


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stand, will result in a substantial decrease in intercarrier compensation payments over a multi-year period. We received intercarrier compensation of approximately $21 million, $19 million and $23 million for the years ended December 31, 2013, 2012 and 2011, respectively. Further, the FCC’s recent initiative to collect data concerning certain point to point transport (“special access”) services we provide could result in additional regulatory burdens and additional costs.

Item 1B. Unresolved Staff Comments.

None.

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Item 2. Properties.

Our principal physical assets consist of cable distribution plant and equipment, including signal receiving, encoding and decoding devices, headend reception facilities, distribution systems, and customer premise equipment for each of our cable systems.

Our cable plant and related equipment are generally attached to utility poles under pole rental agreements with local public utilities and telephone companies, and in certain locations are buried in underground ducts or trenches. We own or lease real property for signal reception sites, and own our service vehicles.

Our subsidiaries generally lease space for business offices. Our headend and tower locations are located on owned or leased parcels of land, and we generally own the towers on which our equipment is located. Charter Holdco owns the land and building for our principal executiveSt. Louis corporate office. We lease space for our offices in Denver, Colorado and for our corporate headquarters in Stamford, Connecticut.

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.” We believe that our properties are generally in good operating condition and are suitable for our business operations.

Item 3. Legal Proceedings.

Patent Litigation

Ronald A. Katz Technology Licensing, L.P. v. Charter Communications, Inc. et. al.  On September 5,In 2006, Ronald A. Katz Technology Licensing, L.P. servedfiled a lawsuit onagainst Charter and a group of other companiesparties in the U. S. District Court for the District of Delaware alleging that Charter and the other defendants have infringed its interactive call processing patents.  Charter denied the allegations raised in the complaint.  On March 20,In 2007, the Judicial Panel on Multi-District Litigation transferred this case, alonglawsuit was combined with 24 others, toother cases filed by Katz in a multi-district litigation proceeding in the U.S. District Court for the Central District of California for coordinated and consolidated pretrial proceedings.  On May 5,In 2010, the court denied Katz’sKatz's motion for summary judgment, struck two affirm ativeaffirmative defenses that Charter had raised, invalidated one of the nine remaining claims Katz had asserted and entered a ruling restricting Katz's damages claims by limiting Katz’s damages claims. Charter is vigorously contesting this matter.

Rembrandt Patent Litigation.  On June 6, 2006, Rembrandt Technologies, LP sued Charter and severalthe time period from which Katz may seek damages. A consolidated appeal involving other cable companies inco-defendants was held, with the U.S. District Court of Appeals for the Eastern DistrictFederal Circuit confirming invalidity of Texas, alleging that each defendant's high-speed data service infringes three patents owned by Rembrandtcertain claims and thatremanding certain rulings back to the district court for further consideration.  Based on the Federal Circuit's opinion, the district court ordered additional summary judgment briefing and some limited pretrial briefing.  In 2012, the court granted Charter's receiptsecond motion for summary judgment and retransmission of Advanced Television Systems Committee digital terrestrial broadcast signals infringes a fourth patent owned by Rembrandt (Rembrandt I).  On November 30, 2006, Rembrandt Technologies, LP again filed suit against Charter and another cable company in the U.S. District Court for the Eastern Distri ct of Texas, alleging patent infringement of an additional five patents allegedly related to high-speed Internet over cable (Rembrandt II).  Charter has denied all of Rembrandt’s allegations. On June 18, 2007, the Rembrandt I and Rembrandt II cases were combined in a multi-district litigation proceeding in the U.S. District Court for the District of Delaware. On November 21, 2007, certain vendors of the equipment that is the subject of Rembrandt I and Rembrandt II cases filed an action against Rembrandt in U.S. District Court for the District of Delaware seeking a declaration of non-infringement and invalidity on all butinvalidated one of the patents at issue in those cases.  On January 16, 2008 Rembrandt filed an answer in that case and a third party counterclaimclaims asserted against Charter, andleaving eight claims. In related litigation against others, the other MSOs for infringementcourt invalidated four of these patent claims which will result in four claims being asserted against Charter when this ruling is applied in our case. Charter initiated ex parte examinations with the U.S. Patent Office challenging the validity of all but oneeight patent claims asserted against Charter. The Patent Office granted all of these examinations finding a substantial new question as to whether the patents already at issueclaims are valid over prior art not previously considered by the Patent Office. When all pretrial proceedings are completed, any matters remaining for trial will be transferred back to the District Court in Rembrandt IDelaware.  No trial date has been set.  Charter has recently discussed settlement with Katz and Rembrandt II cases.  On February 7, 2008,believes the case will settle for an insignificant amount. If a settlement is not ultimately concluded, Charter filed an answerwill continue to Rembrandt’s counterclaims and addedvigorously contest this matter although we cannot predict the ultimate outcome of this lawsuit nor can we reasonably estimate a counter-counterclaim against Rembrandt for a declarationrange of noninfringement on the remaining patent.  On October 28, 2009, Rembrandt filed a Supplemental Covenant Not to Sue promising not to sue Charter and the other defendants on eight of the contested patents.  One patent remains in litigation, and Charter is vigorously contesting Rembrandt's claims regarding it. possible loss.

We are also defendants, co-defendants or co-defendantsplaintiffs seeking declaratory judgments in several other unrelated lawsuits claiminginvolving alleged infringement of various patents relating to various aspects of our businesses.  Other industry participants are also defendants or plaintiffs seeking declaratory judgment in certain of these cases, and, in many cases including those described above, we expect that any potential liability would be the responsibility of our equipment vendors pursuant to applicable contractual indemnification provisions.cases.

In the event that a court ultimately determines that we infringe on any intellectual property rights, we may be subject to substantial damages and/or an injunction that could require us or our vendors to modify certain products and services we offer to our subscribers, as well as negotiate royalty or license agreements with respect to the patents at
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issue.  While we believe the lawsuits are without


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merit and intend to defend the actions vigorously, no assurance can be given that any adverse outcome would not be material to our consolidated financial condition, results of operations, or liquidity.
Bankruptcy Proceedings

On March 27, 2009, Charter filed its chapter 11 petition in the United States Bankruptcy Court for the Southern District of New York.  On the same day, JPMorgan Chase Bank, N.A., (“JPMorgan”), for itself and as Administrative Agent under the Charter Operating Credit Agreement, filed an adversary proceeding (the “JPMorgan Adversary Proceeding”) in Bankruptcy Court against Charter Operating and CCO Holdings seeking a declaration that there were events of default under the Charter Operating Credit Agreement.  JPMorgan, as well as other parties, objected to the Plan.  The Bankruptcy Court jointly held 19 days of trial in the JPMorgan Adversary Proceeding and on the objections to the Plan.

On November 17, 2009, the Bankruptcy Court issued its Order and Opinion confirming the Plan over the objections of JPMorgan and various other objectors.  The Court also entered an order ruling in favor of Charter in the JPMorgan Adversary Proceeding.  Several objectors attempted to stay the consummation of the Plan, but those motions were denied by the Bankruptcy Court and the U.S. District Court for the Southern District of New York.  Charter consummated the Plan on November 30, 2009 and reinstated the Charter Operating Credit Agreement and certain other debt of its subsidiaries.

Six appeals were filed relating to confirmation of the Plan.  The parties initially pursuing appeals were: (i) JPMorgan; (ii) Wilmington Trust Company (“Wilmington Trust”) (as indenture trustee for the holders of the 8% Senior Second Lien Notes due 2012 and 8.375% senior second lien notes due 2014 issued by and among Charter Operating and Charter Communications Operating Capital Corp. and the 10.875% senior second lien notes due 2014 issued by and among Charter Operating and Charter Communications Operating Capital Corp.); (iii) Wells Fargo Bank, N.A. (“Wells Fargo”) (in its capacities as successor Administrative Agent and successor Collateral Agent for the third lien prepetition secured lenders to CCO Holdings under the CCO Holdings credit facility); (iv) Law Debenture Trust Company of New York (̶ 0;Law Debenture Trust”) (as the Trustee with respect to the $479 million in aggregate principal amount of 6.50% convertible senior notes due 2027 issued by Charter which are no longer outstanding following consummation of the Plan); (v) R2 Investments, LDC (“R2 Investments”) (an equity interest holder in Charter); and (vi) certain plaintiffs representing a putative class in a securities action against three former Charter officers or directors filed in the United States District Court for the Eastern District of Arkansas (Iron Workers Local No. 25 Pension Fund, Indiana Laborers Pension Fund, and Iron Workers District Council of Western New York and Vicinity Pension Fund, in the action styled Iron Workers Local No. 25 Pension Fund v. Allen, et al., Case No. 4:09-cv-00405-JLH (E.D. Ark.).

Charter Operating amended its senior secured credit facilities effective March 31, 2010. In connection with the closing of these amendments, each of Bank of America, N.A. and JPMorgan, for itself and on behalf of the lenders under the Charter Operating senior secured credit facilities, agreed to dismiss the pending appeal of our Confirmation Order pending before the District Court for the Southern District of New York and to waive any objections to our Confirmation Order issued by the United States Bankruptcy Court for the Southern District of New York.  The lenders filed their Stipulation of that dismissal and waiver of objections and it was signed by the judge on April 1, 2010 and the case dismissed.  On December 3, 2009, Wilmington Trust withdrew its notice of appeal.  On April 14, 2010, Wells Fargo fil ed their Stipulation of Dismissal of their appeal on behalf of the lenders under the CCO Holdings credit facility.  This Stipulation was signed by the judge on April 19, 2010 and the case dismissed. The remaining appeals by Law Debenture Trust, R2 Investments and the securities plaintiffs have been briefed but have not been argued to, or ruled upon by the District Court for the Southern District of New York. We cannot predict the ultimate outcome of the appeals.

Other Proceedings

The Montana Department of Revenue ("Montana DOR") generally assesses property taxes on cable companies at 3% and on telephone companies at 6%. Historically, Bresnan's cable and telephone operations have been taxed separately by the Montana DOR. In March 2009, Gerald Paul Bodet, Jr.2010, the Montana DOR assessed Bresnan as a single telephone business and retroactively assessed it as such for 2007 through 2009. Bresnan filed a putative classdeclaratory judgment action against Charter and Charter Holdco (Gerald Paul Bodet, Jr. v. Charter Communications, Inc. and Charter Communications Holding Company, LLC)the Montana DOR in the U.S. DistrictMontana State Court challenging its property tax classifications for the Eastern District2007 through 2010. Under Montana law, a taxpayer must first pay a current assessment of Louisiana.  In April 2010, plaintiff filed a Third Amended Complaint which also named Charter Communications, LLC as a defendant.  In the Third Amended Complaint, plaintiff alleges that the defendants violated the Sherman Act, state antitrust law and state unjust enrichment law by forcing subscribers to rent a set top boxdisputed property tax in order to subscribechallenge such assessment. In accordance with that law, Bresnan paid the disputed 2010, 2011 and 2012 property tax assessments of approximately $5 million, $11 million and $9 million, respectively, under protest. No payments for additional tax for 2007 through 2009, which could be up to cable video servicesapproximately $16 million, including interest, were made at that time. On September 26, 2011, the Montana State Court granted Bresnan's summary judgment motion seeking to vacate the Montana DOR's retroactive tax assessments for the years 2007, 2008 and 2009. The Montana DOR's assessment for 2010 was the subject of a trial, which are not availabletook place the week of October 24, 2011. On July 6, 2012, the Montana State Court entered judgment in favor of Bresnan, ruling that the Montana's DOR 2010 assessment was invalid and contrary to subscriberslaw, vacating the 2010 assessment, and directing that the Montana DOR refund the amounts paid by simply pluggingBresnan under protest, plus interest and certain costs. The Montana DOR filed a cable intonotice of appeal to the Montana Supreme Court on September 20, 2012. The appeal was fully briefed, and was argued to the Montana Supreme Court in September 2013. On December 2, 2013, the Montana Supreme Court reversed the trial court’s decision and remanded the matter to the trial court. We filed a cable-ready television.  In June 2009, Derrick Lebryk and Nichols Gladsonpetition for rehearing which was denied on January 7, 2014. At this point, there have been no further proceedings before the trial court, although we have filed but did not serve, a putative classpleadings to renew challenges to the Montana DOR’s assessments that had been mooted by the Montana State Court’s prior ruling. With respect to the Montana Supreme Court ruling, our primary remaining course of action against Charter, Charter Communications Holding Company, LLC, CCHC, LLC and
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Charter Communications Holding, LLC (Derrick Lebryk and Nicholas Gladson v. Charter Communications, Inc., Charter Communications Holding Company, LLC, CCHC, LLC and Charter Communications Holding, LLC) inis an appeal to the U.S. District Court for the Southern District of Illinois.  The plaintiffs allege that the defendants violated the Sherman Act based on similar allegations as those alleged in Bodet v. Charter, et al.  We understand similar claims haveSupreme Court. A decision has not been made against other MSOs.  The Charter defendants deny any liabilityas to whether this appeal will be pursued. Pending entry of a final judgment, the Montana DOR continues to hold our protest payments aggregating approximately $25 million in escrow and plancontinues to vigorously contest the se cases.assess our operations as a single telephone business. We will make additional protest payments until a final judgment is entered, including payments for 2007, 2008 and 2009.

We are also aware of three suits filed by holders of securities issued by us or our subsidiaries.  Key Colony Fund, LP. v. Charter Communications, Inc. and Paul W. Allen (sic), was filed in February 2009 in the Circuit Court of Pulaski County, Arkansas and asserts violations of the Arkansas Deceptive Trade Practices Act and fraud claims.  Key Colony alleges that it purchased certain senior notes based on representations of Charter and agents and representatives of Paul Allen as part of a scheme to defraud certain Charter noteholders.  Clifford James Smith v. Charter Communications, Inc. and Paul Allen, was filed in May 2009 in the United States District Court for the Central District of Califor nia.  Mr. Smith alleges that he purchased Charter common stock based on statements by Charter and Mr. Allen and that Charter’s bankruptcy filing was not necessary.  The defendants’ responded to that Complaint in February 2010 and filed a motion to dismiss thereafter. In April 2010, the court entered an order dismissing the Complaint, holding that Mr. Smith’s claims are expressly released by the Third Party Release and Injunction within Charter’s Plan of Reorganization. Mr. Smith has appealed.  Herb Lair, Iron Workers Local No. 25 Pension Fund et al. v. Neil Smit, Eloise Schmitz, and Paul G. Allen (“Iron Workers Local No. 25”), was filed in the United States District Court for the Eastern District of Arkansas on June 1, 2009.  Mr. Smit was the Chief Executive Officer and Ms. Schmitz was the Chief Financial Officer of Chart er.  The plaintiffs, who seek to represent a class of plaintiffs who acquired Charter stock between October 23, 2006 and February 12, 2009, allege that they and others similarly situated were misled by statements by Ms. Schmitz, Mr. Smit, Mr. Allen and/or in Charter SEC filings.  The plaintiffs assert violations of the Securities Exchange Act of 1934.  In February 2010, the United States Bankruptcy Court for the Southern District of New York held that these plaintiffs’ causes of action were released by the Third Party Release and Injunction within Charter’s Plan of Reorganization.  Plaintiffs thereafter filed an appealhave had communications with the United States District CourtEnvironmental Protection Agency (“the EPA”) in connection with a self reporting audit. Pursuant to the audit, we discovered certain compliance issues concerning our reports to the EPA for backup batteries used at our facilities. On January 24, 2014, Charter and the Office of Civil Enforcement for the Southern District of New York. Charter denies the allegations made by the plaintiffs in these matters, believes allEPA entered a Consent Agreement to settle this matter.  As part of the claims assertedConsent Agreement, Charter has agreed to pay a penalty of an immaterial amount to the EPA and the Office of Civil Enforcement has certified that the issues have been corrected and has recommended that the Environmental Appeals Board ratify this settlement.  We do not view this matter as material.

Also, on January 15, 2014, the California Department of Justice, in these cases were released throughconjunction with the PlanAlameda County, California District Attorney’s Office, initiated an investigation into whether Charter’s waste disposal policies, practices, and procedures violate the provisions of the California Health and Safety Code, the California Hazardous Waste Control Law, and any of their related regulations.  Charter intends to seek dismissal of these cases and otherwise vigorously contest these cases.cooperate with the investigation.  Although this investigation has only just commenced, at this time Charter does not expect that its outcome will have a material effect on our operations, financial condition, or cash flows.

We also are party to other lawsuits and claims that arise in the ordinary course of conducting our business.business, including lawsuits claiming violation of anti-trust laws and violation of wage and hour laws.  The ultimate outcome of these other legal matters pending against us or our subsidiaries cannot be predicted, and although such lawsuits and claims are not expected individually to have a material adverse effect on our consolidated financial condition, results of operations, or liquidity, such lawsuits could have in the aggregate a material adverse effect on our consolidated financial condition, results of operations, or liquidity.  Whether or not we ultimately prevail in any particular lawsuit or claim, litigation can be time consuming and costly and injure our reputation.


Item 4. Mine Safety Disclosures.

Not applicable.



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PART II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
(A)  Market Information
(A)
Market Information

Charter’s Class A common stock is listed on the NASDAQ Global Select Market under the symbol “CHTR.”

Prior to April 6, 2009, Predecessor common stock traded on the NASDAQ Global Select Market. From April 7, 2009 through the Effective Date, shares of common stock of Predecessor traded on the OTC Bulletin Board or in the “Pink Sheets.” On the Effective Date, all of the outstanding common stock and all other outstanding equity securities of Predecessor were cancelled pursuant to the terms of the Plan. The Successor’s common stock was quoted on the OTC Bulletin Board from the Effective Date until the stock was listed on the NASDAQ Global Select Market on September 14, 2010.

The following table sets forth, for the periods indicated, the range of high and low last reported sale price per share of Predecessor’s Class A common stock through April 6, 2009, and from April 7 through November 30, 2009, the range of high and low last reported bid price per share, and Charter’s Class A common stock after its emergence from bankruptcy from December 1, 2009 to September 13, 2010 on the OTC Bulletin Board or in the “Pink Sheets,” and from September 14, 2010 to December 31, 2010 on the NASDAQ Global Select Market.  There was no established trading market for Charter’s Class B common stock prior to its conversion on January 18, 2011.

Class A Common Stock
  High  Low 
Predecessor      
2009      
First quarter $0.22  $0.02 
Second quarter $0.05  $0.02 
Third quarter $0.04  $0.01 
Fourth quarter (through November 30, 2009) $0.03  $0.01 
         
Successor        
     2009        
Fourth quarter (December 1, 2009 to December 31, 2009) $36.50  $33.00 
         
2010        
First quarter $35.00  $29.50 
Second quarter $39.75  $33.75 
Third quarter $36.50  $32.50 
Fourth quarter $38.94  $32.00 
(B)  Holders
  High Low
2012    
First quarter $64.91
 $56.15
Second quarter $70.87
 $59.41
Third quarter $82.54
 $71.59
Fourth quarter $78.54
 $67.50
     
2013    
First quarter $106.29
 $76.19
Second quarter $128.57
 $99.41
Third quarter $137.29
 $119.06
Fourth quarter $144.02
 $125.68

(B)
Holders

As of JanuaryDecember 31, 2011,2013, there were approximately 1,35639 holders of record of Charter’s Class A common stock.

(C)
Dividends

(C)  Dividends
Predecessor and Charter havehas not paid stock or cash dividends on any of its common stock.

Charter would be dependent on distributions from Charter Holdcoits subsidiaries if Charter were to make any dividends.  Charter Holdco may make pro rata distributions to all holders of its common membership units, including Charter. Covenants in the indentures and credit agreements governing the debt obligations of CCH II, LLC (“CCH II”) and itsour subsidiaries restrict their ability to make distributions to us, and accordingly, limit our ability to declare or pay cash dividends. See “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Future cash dividends, if any, will be at the discretion of Charter’s board of directors and will depend upon, among other things, our future operations and earnings, capital requirements, general financial condition, contractual restrictions and su chsuch other factors as Charter’s board of directors may deem relevant.
 


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(D) Securities Authorized for Issuance Under Equity Compensation Plans

All shares issued or granted by Predecessor and not yet vested were cancelled on November 30, 2009 along with the 2001 Stock Incentive Plan.  The 2009 Stock Incentive Plan was adopted by Charter’s board of directors.

The following information is provided as of December 31, 20102013 with respect to equity compensation plans:

  Number of Securities   Number of Securities
  to be Issued Upon Weighted Average Remaining Available
  Exercise of Outstanding Exercise Price of for Future Issuance
  Options, Warrants Outstanding Options, Under Equity
Plan Category and Rights Warrants and Rights Compensation Plans
       
Equity compensation plans approved
     by security holders
 13,797,026   $                  36.90 4,817,818
Equity compensation plans not
     approved by security holders
 -- (1)  $                        -- -- (1)
         
TOTAL 13,797,026 (1)  $                  36.90 4,817,818(1)
Plan Category Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights Weighted Average Exercise Price of Outstanding Warrants and Rights Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans
        
Equity compensation plans approved by security holders 3,429,591
(1) $61.08
 7,378,794
(1)
Equity compensation plans not approved by security holders —
  $—
 —
 
         
TOTAL 3,429,591
(1)   7,378,794
(1)

(1)This total does not include 1,081,108652,988 shares issued pursuant to restricted stock grants made under our 2009 Stock Incentive Plan, which are subject to vesting based on continued employment.employment and market conditions.

For information regarding securities issued under our equity compensation plans, see Note 1715 to our accompanying consolidated financial statements contained in “Item 8. Financial Statements and Supplementary Data.”



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(E) Performance Graph

The graph below shows the cumulative total return on Charter’s Class A common stock for the period from December 2, 2009 through December 31, 2010,2013, in comparison to the cumulative total return on Standard & Poor’s 500 Index and a peer group consisting of the national cable operators that are most comparable to us in terms of size and nature of operations. The Company’s peer group consists of Cablevision Systems Corporation ("Cablevision"), Comcast, Corporation, Mediacom Communications Corp., and Time Warner Cable, Inc.TWC.  The results shown assume that $100 was invested on December 2, 2009 in Charter and peer group stock or on November 30, 2009 for the S&P 500 index and that all dividends were reinvested. These indices are included for comparative purposes only and do not reflect whether it is manage ment’smanagement’s opinion that such indices are an appropriate measure of the relative performance of the stock involved, nor are they intended to forecast or be indicative of future performance of Charter’s Class A common stock.


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(F)  Recent Sales of Unregistered Securities

During 2010,2013, there were no unregistered sales of securities of the registrant other than those previously reported on a Quarterly Report on Form 10-Q or Current Report on Form 8-K.



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(G)(G)  Purchases of Equity Securities by the Issuer
 
 
 
 
 
Period
 
 
 
 
(a)
Total Number of Shares Purchased
 
 
 
 
(b)
Average Price Paid per Share
 
 
(c)
Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs
 
 
(d)
Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs
October 1-31, 201000N/AN/A
November 1-30, 2010176,475 (1)$33.68N/AN/A
December 1-31, 201000N/AN/A

(1) On November 30, 2010, 527,468 restrictedThe following table presents Charter's purchases of equity securities completed during the fourth quarter of 2013 representing shares withheld from employees for the payment of Charter’s Class A common stock, which had been granted in 2009 to employees under Charter’s 2009 Stock Incentive Plan, vested.  The grantees of the shares were given the option of having Charter withhold an amount of shares sufficient to cover the taxes due by the grantees upon the vesting of the shares.  As a result, Charter withheld 176,475 restricted shares, valued at $33.68, the average of the high and low share price on November 30, 2010 on the NASDAQ Global Select Market, to cover the taxes of the participants.  We do not have a publicly announced plan or program to purchase shares of Charter’s Class A common stock.
equity awards.
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Period



(a)
Total Number of Shares Purchased



(b)
Average Price Paid per Share
(c)
Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs
(d)
Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs
October 1 - 31, 201311,451$136.68
—
N/A
November 1 - 30, 201311,878$132.31
—
N/A
December 1 - 31, 201313,584$133.43
—
N/A

Item 6. Selected Financial Data.

The following table presents selected consolidated financial data for the periods indicated (dollars in millions, except per share data):

  Successor  Predecessor 
  Year Ended  One Month Ended  Eleven Months Ended          
  December 31,  December 31,  November 30,  For the Years Ended December 31, 
  2010  2009  2009  2008 (a)  2007 (a)  2006 (a) 
                   
Statement of Operations Data:                  
Revenues $7,059  $572  $6,183  $6,479  $6,002  $5,504 
Operating income (loss) from
     continuing operations
 $1,024  $84  $(1,063) $(614) $548  $367 
Interest expense, net $(877) $(68) $(1,020) $(1,905) $(1,861) $(1,901)
Income (loss) from continuing
     operations before income taxes
 $58  $10  $9,748  $(2,550) $(1,318) $(1,479)
Net income (loss) – Charter shareholders $(237) $2  $11,364  $(2,451) $(1,534) $(1,454)
Basic earnings (loss) from continuing
     operations per common share
 $(2.09) $0.02  $30.00  $(6.56) $(4.17) $(5.03)
Diluted earnings (loss) from continuing
     operations per common share
 $(2.09) $0.02  $12.61  $(6.56) $(4.17) $(5.03)
Basic earnings (loss) per common share $(2.09) $0.02  $30.00  $(6.56) $(4.17) $(4.38)
Diluted earnings (loss) per common
     share
 $(2.09) $0.02  $12.61  $(6.56) $(4.17) $(4.38)
Weighted-average shares outstanding,
     basic
  113,138,461   112,078,089   378,784,231   373,464,920   368,240,608   331,941,788 
Weighted-average shares outstanding,
     diluted
  113,138,461   114,346,861   902,067,116   373,464,920   368,240,608   331,941,788 
                         
Balance Sheet Data (end of period):                        
Investment in cable properties $15,027  $15,391      $12,448  $14,123  $14,505 
Total assets $15,707  $16,658      $13,882  $14,666  $15,100 
Total debt (including debt subject to
     compromise)
 $12,306  $13,322      $21,666  $19,903  $18,962 
Note payable – related party $--  $--      $75  $65  $57 
Temporary equity (b) $--  $--      $241  $215  $198 
Noncontrolling interest (c) $--  $2      $--  $--  $-- 
Charter shareholders’ equity (deficit) $1,478  $1,916      $(10,506) $(7,887) $(6,119)
                         
Other Financial Data:                        
Ratio of earnings to fixed charges (d)  1.07   1.14   8.41   N/A   N/A   N/A 
Deficiency of earnings to cover fixed
      Charges (d)
  N/A   N/A   N/A  $2,550  $1,318  $1,241 
(a)  Years ended December 31, 2008, 2007 and 2006 have been restated to reflect the retrospective application of accounting guidance for convertible debt with cash settlement features.
 Successor  Predecessor
 Years Ended December 31, One Month Ended December 31,  Eleven Months Ended November 30,
 2013 2012 2011 2010 2009  2009
             
Statement of Operations Data:            
Revenues$8,155
 $7,504
 $7,204
 $7,059
 $572
  $6,183
Income (loss) from operations$925
 $916
 $1,041
 $1,024
 $84
  $(1,063)
Interest expense, net$(846) $(907) $(963) $(877) $(68)  $(1,020)
Income (loss) before income taxes
$(49) $(47) $(70) $58
 $10
  $9,748
Net income (loss) – Charter shareholders$(169) $(304) $(369) $(237) $2
  $11,364
Basic earnings (loss) per common share$(1.65) $(3.05) $(3.39) $(2.09) $0.02
  $30.00
Diluted earnings (loss) per common share$(1.65) $(3.05) $(3.39) $(2.09) $0.02
  $12.61
Weighted-average shares outstanding, basic101,934,630
 99,657,989
 108,948,554
 113,138,461
 112,078,089
  378,784,231
Weighted-average shares outstanding, diluted101,934,630
 99,657,989
 108,948,554
 113,138,461
 114,346,861
  902,067,116
             
Balance Sheet Data (end of period):            
Investment in cable properties$16,556
 $14,870
 $14,843
 $15,027
 $15,391
   
Total assets$17,295
 $15,596
 $15,601
 $15,737
 $16,658
   
Total debt$14,181
 $12,808
 $12,856
 $12,306
 $13,322
   
Charter shareholders’ equity$151
 $149
 $409
 $1,478
 $1,916
   
             
Other Financial Data:            
Ratio of earnings to fixed charges (a)N/A
 N/A
 N/A
 1.07
 1.14
  8.41
Deficiency of earnings to cover fixed charges (a)$49
 $47
 $70
 N/A
 N/A
  N/A

(b)  Prior to November 30, 2009, temporary equity represented nonvested shares of restricted stock and performance shares issued to employees and Mr. Allen’s previous 5.6% preferred membership interests in our indirect subsidiary, CC VIII. Mr. Allen’s CC VIII interest was classified as temporary equity as a result of Mr. Allen’s previous ability to put his interest to the Company upon a change in control. Mr. Allen has subsequently transferred his CC VIII interest to Charter pursuant to the Plan. 

(c)  Noncontrolling interest, as of December 31, 2009, represents the fair value of Mr. Allen’s previous 0.19% interest of Charter Holdco on the Effective Date plus the allocation of income for the month ended December 31, 2009.  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.

(d)  (a)Earnings include income (loss) before noncontrollingnon-controlling interest and income taxes plus fixed charges. Fixed charges consist of interest expense and an estimated interest component of rent expense.


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Comparability of the above information from year to year is affected by acquisitions and dispositions completed by us.us including the acquisition of Bresnan in July 2013. See “Part II. Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations — Overview.” In addition, upon our emergence from bankruptcy, we adopted fresh start accounting. This resulted in us becoming a new entity on December 1, 2009, with a new capital structure, a new accounting basis in the identifiable assets and liabilities assumed and no retained earnings or accumulated losses. Accordingly, the consolidated financial statements on or after December 1, 2009 are not comparable to the consolidated financial statements prior to that date. The financial statements for the periods ended prior to November 30, 2009 do not include the effect of any changes in our capital structure or changes in the fair value of assets and liabilities as a result of fresh start accounting.

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 Charter Communications, Inc. and subsidiaries included in “Item 8. Financial Statements and Supplementary Data.”

Upon our emergence from bankruptcy on November 30, 2009, 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 Form 10-K, we have combined the results of operations for the Predecessor and the Successor for 2009. The results of operations of the Predecessor an d 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 periods in 2010 and 2008.

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 cable operator providing services in the United States with approximately 5.15.9 million residential and commercial customers at December 31, 2010.2013. We offer our customers traditional cable video programming, Internet services, high-speed Internet access, and telephonevoice services, as well as advanced video services (suchsuch as OnDemand high definitionTM, HD television service and DVR).DVR service. We also sell local advertising on cable networks and provide advertising and backhaul services.fiber connectivity to cellular towers. See "Part“Part I. Item 1. Business — Products and Services" Services” for further description of these services, including “customers.”"customers."

For the years ended December 31, 2010, 2009 and 2008, adjusted earnings (loss) before interest expense, income taxes, depreciation and amortization (“Adjusted EBITDA”) was $2.6 billion, $2.5 billion, and $2.3 billion, respectively.  See “—Use of Adjusted EBITDA and Free Cash Flow” for further information on Adjusted EBITDA and free cash flow.  Adjusted EBITDA increased as a result of continued growth in high-speed Internet and telephone customers combined with growth in our commercial services and advertising sales businesses.  For the years ended December 31, 2010, our income from operations was $1.0 billion and for the years ended 2009 and 2008, our loss from operations was $979 million and $614 million, respectively.  Our income from operations for the year ended December 31, 2010 co mpared to the loss from operations for the years ended December 31, 2009 and 2008 is primarily due to impairment of franchises incurred during 2009 and 2008 that did not recur in 2010.  
We believe that continued competition and the weakened economic conditions in the United States, including the housing market and relatively high unemployment levels, have adversely affected consumer demand for our services. In addition, we believe these factors 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.  These conditions have affected our net customer additions and revenue growth during 2009 and 2010, especially with our basic video customers, and contributed to the franchise impairment charge incurred in 2009.  In 2009 and
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2010, we experienced a reduction in total customers of approximately 112,300 and 129,000, respectively.  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 telephonevoice services, including in some cases wireless services, and they also offer these services in bundles similar to ours.  See “Business — Competition.”  In the recent past, we have grown revenues by offsetting basic video customer losses with price increases and sales of incremental services such as high-speed Internet, OnDemand, DVR high definition television, and telephone.HD television.  We expect to continue to grow revenues by increasing the number of products in this mannerour current customer homes and inobtaining new customers with an improved value offering. In addition, we expect to increase revenues by expanding the sales of our services to our commercial customers.  However, we cannot assure you that we will be able to grow revenues or maintain our margins at recent historical rates.

Our business plans include goals for increasing customers and revenue. To reach our goals, we have actively invested in our network and operations, and have improved the quality and value of the products and packages that we offer. We have enhanced our video product by increasing digital and HD-DVR penetration, offering more HD channels, and deemphasizing our analog service. During the second quarter of 2012, we simplified our offers and pricing and improved our packaging of products to bring more value to new and existing customers. As part of our effort to create more value for customers, we have focused on driving penetration of our triple play offering, which includes more than 100 HD channels, video on demand, Internet service, and fully featured voice service. In addition, we have implemented a number of changes to our organizational structure, selling methods and operating tactics. We are increasingly insourcing our field operations, call center and direct sales workforces and modifying the way our sales workforce is compensated, which we believe positions us for better customer service and growth. We expect that our enhanced product set combined with improved customer service will lead to lower customer churn and longer customer lifetimes, allowing us to grow our customer base and revenue more quickly and economically. We expect our capital expenditures to remain elevated as we strive to increase digital and HD-DVR penetration, place higher levels of customer premise equipment per transaction and progressively move to an all-digital platform.

In July 2013, Charter and Charter Operating acquired Bresnan from a wholly owned subsidiary of Cablevision, for $1.625 billion in cash, subject to a working capital adjustment and a reduction for certain funded indebtedness of Bresnan (the "Bresnan Acquisition"). Bresnan manages cable operating systems in Colorado, Montana, Wyoming and Utah that pass approximately 670,000 homes and serve approximately 375,000 residential and commercial customer relationships.

Total revenue growth was 9% for the year ended December 31, 2013 compared to the corresponding period in 2012, and 4% for the year ended December 31, 2012 compared to the corresponding period in 2011, due to the Bresnan Acquisition and growth in our video, Internet and commercial businesses. Total revenue growth on a pro forma basis for the Bresnan Acquisition as if it had occurred on January 1, 2011 was 5% for the year ended December 31, 2013 compared to the corresponding period in 2012, and 4% for the year ended December 31, 2012 compared to the corresponding period in 2011. For the years ended December 31,


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2013, 2012 and 2011, adjusted earnings (loss) before interest expense, income taxes, depreciation and amortization (“Adjusted EBITDA”) was $2.9 billion, $2.7 billion and $2.7 billion, respectively.  See “—Use of Adjusted EBITDA and Free Cash Flow” for further information on Adjusted EBITDA and free cash flow.  Adjusted EBITDA increased 6% for the year ended December 31, 2013 compared to the corresponding period in 2012 as a result of the Bresnan Acquisition, which contributed $90 million, and an increase in residential and commercial revenues offset by increases in programming costs, costs to service customers and marketing costs. Costs to service customers primarily increased from higher labor to deliver improved products and service levels and greater reconnect expense. Adjusted EBITDA remained flat for the year ended December 31, 2012 compared to the corresponding period in 2011 as a result of an increase in Internet, commercial and advertising revenues offset by higher programming costs, expenses associated with driving higher growth and investments in the customer experience. For the years ended December 31, 2013, 2012 and 2011, our income from operations was $925 million, $916 million and $1.0 billion, respectively. In addition to the factors discussed above, income from operations was affected by increases in depreciation and amortization primarily due to the Bresnan Acquisition.

We believe that continued competition and the prolonged recovery of economic conditions in the United States, including mixed recovery in the housing market and relatively high unemployment levels, have adversely affected consumer demand for our services, particularly video. Historically, our primary video competitors have often offered more HD channels and have typically only offered digital services which have a better picture quality compared to our legacy analog product.  In response, Charter has promoted its digital product and initiated a transition from analog to digital transmission of all channels we distribute, which will result in substantially more HD channels and higher Internet speeds. In the current economic environment, customers have been more willing to consider our competitors' products, partially because of increased marketing highlighting perceived differences between competitive video products, especially when those competitors are often offering significant incentives to switch providers. We also believe some customers have chosen to receive video over the Internet rather than through our OnDemand and premium video services, thereby reducing our video revenues. We believe competition from wireless service operators and economic factors have contributed to an increase in the number of customershomes that replace their traditional telephone service with wireless service thereby impacting the growth of our telephone business.

If the economic and competitive conditions discussed above do not improve, we believe our business and results of operations will be adversely affected, which may contribute to recurring revenuefuture impairments of our franchises and the opportunity to sell additional services to existing customers.  In 2011, we may continue to experience challenges in increasing, or we may continue to lose, customers.goodwill.

Approximately 87%89% and 84%87% of our revenues for the years ended December 31, 20102013 and 2009,2012, respectively, are attributable to monthly subscription fees charged to customers for our video, high-speed Internet, telephone,voice, and commercial services provided by our cable systems. Generally, these customer subscriptions may be discontinued by the customer at any time.time subject to a fee for certain commercial customers and certain residential customers acquired before July 1, 2012. The remaining 13%11% and 16%13% of revenue for fiscal years 20102013 and 2009,2012, respectively, is derived primarily from advertising revenues, franchise and other regulatory fee revenues (which are collected by us but then paid to local franchising authorities), pay-per-view and OnDemand programming, installation, processing fees or reconnection fees charged to customers to commence or reinstate service, and commissions related to the sale of merchandise by home shopping services.

Our expenses primarily consist of operating costs, selling, general and administrative expenses, depreciation and amortization expense impairment of franchise intangibles and interest expense. Operating costs primarily include programming costs, connectivity, franchise and other regulatory costs, the cost ofto service our workforce, cable service related expenses, advertising salescustomers such as field, network and customer operations 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 by maintaining strict controls on expenditures.  More specifically, we are focused on managing our cost structure by improving workforce productivity, and leveraging our scale, and increasing the effectiveness of our purcha sing activities.marketing costs.

We have a history of net losses.  Our net losses are principally attributable to insufficient revenue to cover the combination of operating expenses, interest expenses that we incur because of our debt, depreciation expenses resulting from the capital investments we have made and continue to make in our cable properties, and in 2010, amortization expenses related to our customer relationship intangibles and non-cash taxes resulting from the application of fresh start accounting.  The Plan resultedincreases in the reduction of the principal amount of our debt by approximately $8 billion, reducing our interest expense by approximately $830 million annually.deferred tax liabilities.

In prior years and continuing through 2010, we sold several cable systems to divest geographically non-strategic assets and allow for more efficient operations.  In 2008, 2009, and 2010, we closed the sale of certain cable systems representing a total of approximately 14,100, 12,400 and 76,700 basic video customers, respectively.  As a result of these sales we have improved our geographic footprint by reducing our number of headends, increasing the number of customers per headend, and reducing the number of states in which the majority of our customers reside.

Critical Accounting Policies and Estimates

Certain of our accounting policies require our management to make difficult, subjective and/or complex judgments. Management has discussed these policies with the Audit Committee of Charter’s board of directors, and the Audit Committee has reviewed the following disclosure. We consider the following policies to be the most critical in understanding the estimates, assumptions and judgments that are involved in preparing our financial statements, and the uncertainties that could affect our results of operations, financial condition and cash flows:

·  Property, plant and equipment
·  Capitalization of labor and overhead costs
·  Impairment
Valuation and impairment of property, plant and equipment


·  Useful lives of property, plant and equipment
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Useful lives of property, plant and equipment
Intangible assets
Valuation and impairment of franchises
36Valuation and impairment and amortization of customer relationships
Valuation and impairment of goodwill
Impairment of trademarks
Income taxes
Litigation
·  Intangible assets
Programming agreements
·  Impairment of franchises
·  Impairment and amortization of customer relationships
·  Impairment of goodwill
·  Impairment of trademarks
·  Income taxes
·  Litigation
·  Programming agreements

In addition, there are other items within our financial statements that require estimates or judgment that are not deemed critical, such as the allowance for doubtful accounts and valuations of our derivative instruments, if any, but changes in estimates or judgment in these other items could also have a material impact on our financial statements.

Property, plant and equipment

The cable industry is capital intensive, and a large portion of our resources are spent on capital activities associated with extending, rebuilding, and upgrading our cable network. As of December 31, 20102013 and 2009,2012, the net carrying amount of our property, plant and equipment (consisting primarily of cable network assets) was approximately $6.8$8.0 billion (representing 43%46% of total assets) and $6.8$7.2 billion (representing 41%46% of total assets), respectively. Total capital expenditures for the years ended December 31, 2010, 2009,2013, 2012 and 20082011 were approximately $1.2$1.8 billion $1.1, $1.7 billion and $1.2$1.3 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 was the primary method used to establish fair value for our property, plant and equipment in connection with the application of fresh start accounting.  The cost approach considers the amount required to replace an asset by constructing or purchasing a new asset with similar utility, then adjusts the value in consideration of all forms of depreciation as of the appraisal date.

Capitalization of labor and overhead costs. Costs associated with network construction, initial customer installations, (including initial installations of new or additional advanced video services), installation refurbishments, and the addition of network equipment necessary to provide new or advanced video services, are capitalized. While our capitalization is based on specific activities, once capitalized, we track these costs by fixed asset category at the cable system level, and not on a specific asset basis. For assets that are sold or retired, we remove the estimated applicable cost and accumulated depreciation. Costs capitalized as part of initial customer installations include materials, direct labor, and cert aincertain indirect costs. These indirect costs are associated with the activities of personnel who assist in connecting and activating the new service, and consist of compensation and overhead costs associated with these support functions. The costs of disconnecting service at a customer’s dwelling or reconnecting service to a previously installed dwelling are charged to operating expense in the period incurred.  As our service offerings mature and our reconnect activity increases, our capitalizable installations will continue to decrease and therefore our operating expenses will increase. Costs for repairs and maintenance are charged to operating expense as incurred, while equipment replacement, including replacement of certain components, and betterments, including replacement of cable drops from the pole to the dwelling, are capitalized.

We make judgments regarding the installation and construction activities to be capitalized. We capitalize direct labor and overhead using standards developed from actual costs and applicable operational data. We calculate standards annually (or more frequently if circumstances dictate) for items such as the labor rates, overhead rates, and the actual amount of time required to perform a capitalizable activity. For example, the standard amounts of time required to perform capitalizable activities are based on studies of the time required to perform such activities. Overhead rates are established based on an analysis of the nature of costs incurred in support of capitalizable activities, and a determination of the portion of costs that is directly attributable to capitalizable activities. The impact of changes that resulted from these studies were not material in the periods presented.

Labor costs directly associated with capital projects are capitalized. Capitalizable activities performed in connection with customer installations include such activities as:

·  Dispatching a “truck roll” to the customer’s dwelling or business for service connection;
·  Verification of serviceability to the customer’s dwelling or business (i.e., determining whether the customer’s dwelling 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 installation of expanded services, and equipment replacement and betterment; and
Verifying the integrity of the customer’s network connection by initiating test signals downstream from the headend to the customer’s digital set-top box.
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·  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 installation of expanded services, and equipment replacement and betterment; and
·  Verifying the integrity of the customer’s network connection by initiating test signals downstream from the headend to the customer’s digital set-top box.

Judgment is required to determine the extent to which overhead costs incurred result from specific capital activities, and therefore should be capitalized. The primary costs that are included in the determination of the overhead rate are (i) employee benefits and payroll taxes associated with capitalized direct labor, (ii) direct variable costs associated with capitalizable activities, consisting primarily of installation and construction vehicle costs, (iii) the cost of support personnel, such as dispatchers, who directly assist with capitalizable installation activities, and (iv) indirect costs directly attributable to capitalizable activities.


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While we believe our existing capitalization policies are appropriate, a significant change in the nature or extent of our system activities could affect management’s judgment about the extent to which we should capitalize direct labor or overhead in the future. We monitor the appropriateness of our capitalization policies, and perform updates to our internal studies on an ongoing basis to determine whether facts or circumstances warrant a change to our capitalization policies. We capitalized internal direct labor and overhead of $205$219 million, $199$202 million and $199 million, respectively, for the years ended December 31, 2010, 2009,2013, 2012 and 2008.2011.

Valuation and impairment. Impairment.  We evaluate the recoverability of our property, plant and equipment upon the occurrence of events or changes in circumstances indicating that the carrying amount of an asset may not be recoverable. Such events or changes in circumstances could include such factors as the impairment of our indefinite life franchises, changes in technological advances, fluctuations in the fair value of such assets, adverse changes in relationships with local franchise authorities, adverse changes in market conditions, or a deterioration of current or expected future operating results. A long-lived asset is deemed impaired when the carrying amount of the asset exceeds the projected undiscounted future cash flows associated with the asse t.asset. No impairments of long-lived assets to be held and used were recorded in the years ended December 31, 2010, 2009,2013, 2012 and 2008.2011.

We utilize the cost approach as the primary method used to establish fair value for our property, plant and equipment in connection with business combinations.  The cost approach considers the amount required to replace an asset by constructing or purchasing a new asset with similar utility, then adjusts the value in consideration of all forms of depreciation as of the appraisal date for physical depreciation and function and economic obsolescence. The cost approach relies on management’s assumptions regarding current material and labor costs required to rebuild and repurchase significant components of our property, plant and equipment along with assumptions regarding the age and estimated useful lives of our property, plant and equipment.

Useful lives of property, plant and equipment. We evaluate the appropriateness of estimated useful lives assigned to our property, plant and equipment, based on annual analysesanalysis of such useful lives, and revise such lives to the extent warranted by changing facts and circumstances. Any changes in estimated useful lives as a result of these analysesthis analysis are reflected prospectively beginning in the period in which the study is completed. Our analysis of useful lives in 20102013 did not indicate a change in useful lives.  The effect of a one-year decrease in the weighted average remaining useful life of our property, plant and equipment as of December 31, 20102013 would be an increase in annual depreciation expense of approximately $225 mi llion.$204 million.  The effect of a one-year increase in the weighted average remaining useful life of our property, plant and equipment as of December 31, 20102013 would be a decrease in annual depreciation expense of approximately $208$217 million.

Depreciation expense related to property, plant and equipment totaled $1.2$1.6 billion, for the year ended December 31, 2010$1.4 billion and $1.3 billion for each of the years ended December 31, 20092013, 2012 and 2008,2011, respectively, representing approximately 20%22%, 17%21% and 18%21% of costs and expenses, respectively. Depreciation is recorded using the straight-line composite method over management’s estimate of the useful lives of the related assets as listed below:

Cable distribution systemssystems………………………………7-20 years
Customer equipment and installationsinstallations…………………..4-8 years
Vehicles and equipmentequipment…………………………………1-6 years
Buildings and leasehold improvementsimprovements…………………15-40 years
Furniture, fixtures and equipmentequipment….……………………6-10 years

Intangible assets

In connection with the application of fresh start accounting, franchisesValuation and customer relationships were valued using an income approach and were valued at $5.3 billion and $2.4 billion, respectively, as of December 1, 2009.  The relief from royalty method was used to value trademarks at $158 million as of December 1, 2009.  The fresh start adjustments also resulted in the recording of goodwill of $951 million.  See discussion below for a description of the methods used to value intangible assets.
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Impairmentimpairment of franchises. The net carrying value of franchises as of December 31, 20102013 and 20092012 was approximately $5.3$6.0 billion (representing 33%35% of total assets) and $5.3$5.3 billion (representing 32%34% of total assets), respectively. Franchise rights represent the value attributed to agreements or authorizations with local and state authorities that allow access to homes in cable service areas. For valuation purposes, they are defined as the future economic benefits of the right to solicit and service potential customers (customer marketing rights), and the right to deploy and market new services such as Internet and telephone, to potential customers (service marketing rights).

Franchise intangible assets that meet specified indefinite life criteria must beare tested for impairment annually, or more frequently as warranted by events or changes in circumstances. In determining whether our franchises have an indefinite life, we considered the likelihood of franchise renewals, the expected costs of franchise renewals, and the technological state of the associated cable systems, with a view to whether or not we are in compliance with any technology upgrading requirements specified in a franchise agreement. We have concluded that as of December 31, 20102013 and 20092012 all of our franchises qualify for indefinite life treatment.



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Franchises are aggregated into essentially inseparable units of accounting to conduct valuations. The units of accounting represent geographical clustering of our cable systems into groups. We assess qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more likely than not that an indefinite lived intangible asset has been impaired. If, after this qualitative assessment, we determine that it is not more likely than not that an indefinite lived intangible asset has been impaired, then no further quantitative testing is necessary. In completing our 2013 and 2012 impairment testing, we evaluated the impact of various factors to the expected future cash flows attributable to our units of accounting and to the assumed discount rate which would be used to present value those cash flows. Such factors included macro-economic and industry conditions including the capital markets, regulatory, and competitive environment, and costs of programming and customer premise equipment along with changes to our organizational structure and strategies. After consideration of these qualitative factors, we concluded that it is more likely than not that the fair value of the franchise assets in each unit of accounting exceeds the carrying value of such assets and therefore did not perform a quantitative analysis in 2013 or 2012.

If we are required to perform a quantitative analysis to test our franchise assets for impairment, we determine the estimated fair value utilizing an income approach model based on the present value of the estimated discrete future cash flows attributable to each of the intangible assets identified assuming a discount rate. The fair value of franchises for impairment testing is determined based on estimated discrete discounted future cash flows using assumptions consistent with internal forecasts. The franchise after-tax cash flow is calculated as the after-tax cash flow generated by the potential customers obtained (less the anticipated customer churn), and the new services added to those customers in future periods. The sum of the present value of the franchises' after-tax cash flow in years 1 through 10 and the continuing value of the after-tax cash flow beyond year 10 yields the fair value of the franchises. Franchises are expected to generate cash flows indefinitely and are tested for impairment annually, or more frequently as warranted by events or changes in circumstances.  Franchises are aggregated into essentially inseparable units of accounting to conduct the valuations.  The units of accounting generally represent geographical clustering of our cable systems into groups by which such systems are managed.  Management believes such grouping represents the highest and best use of those assets.

We determined the estimated fair value of each unit of accounting utilizing an income approach model based on the present value of the estimated discrete future cash flows attributable to each of the intangible assets identified for each unit assuming a discount rate. This approach makes use of unobservable factors such as projected revenues, expenses, capital expenditures, and a discount rate applied to the estimated cash flows. The determination of the discount rate wasis based on a weighted average cost of capital approach, which uses a market participant’s cost of equity and after-tax cost of debt and reflects the risks inherent in the cash flows.

We estimatedestimate 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 margins; and capital expenditures.  The assumptions are derived based on Charter’s and its peers’ historical operating performance adjusted for current and expected competitive and economic factors surrounding the cable industry. The estimates and assumptions made in our valuations are inherently subject to significant uncertainties, many of which are beyond our control, and there is no assurance that these results can be achieved. The primary assumptions for which there is a reasonable possibility of the occurrence of a variation that would significantly affect the measurement val uevalue include the assumptions regarding revenue growth, programming expense growth rates, the amount and timing of capital expenditures and the discount rate utilized.

The quantitative franchise valuationvaluations completed for the year ended December 31, 20102011 showed franchise values in excess of book values and thus resulted in no impairment.  We recorded non-cash franchise impairment charges of $2.2 billion and $1.5 billion for the years ended December 31, 2009 and 2008, respectively.  The impairment charges recorded in 2009 and 2008 were primarily the result of the impact of the economic downturn along with increased competition.  The valuations used in our impairment assessments involve numerous assumptions as noted above. While economic conditions applicable at the time of the valuations indicate the combination of assumptions utilized in the valuations are reasonable, as market conditions change so will the assumptions, with a resulting impact on the valuations and consequently the pote ntial impairment charge.  At December 31, 2010, a 20% decline in the estimated fair value of our franchise assets in each of our units of accounting would have resulted in an aggregate impairment charge of approximately $49 million in three of our units of accounting.  Management has no reason to believe that any one unit of accounting is more likely than any other to incur impairments of its intangible assets.

ImpairmentValuation, impairment and amortization of customer relationships. The net carrying value of customer relationships as of December 31, 20102013 and 20092012 was approximately $2.0$1.4 billion (representing 13%8% of total assets) and $2.3$1.4 billion (representing 14%9% of total assets), respectively. Customer relationships, for valuation purposes, represent the value of the business relationship with existing customers (less the anticipated customer churn), and are calculated by projecting the discrete future after-tax cash flows from these customers, including the right to deploy and market additional services to these customers. The present value of these after-tax cash flows yields the fair value of th e
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the customer relationships. The use of different valuation assumptions or definitions of franchises or customer relationships, such as our inclusion of the value of selling additional services to our current customers within customer relationships versus franchises, could significantly impact our valuations and any resulting impairment.

We evaluate the recoverability of customer relationships upon the occurrence of events or changes in circumstances indicating that the carrying amount of an asset may not be recoverable. Customer relationships are deemed impaired when the carrying value exceeds the projected undiscounted future cash flows associated with the customer relationships. No impairment of customer relationships was recorded in the years ended December 31, 2010, 2009 or 2008.2013, 2012 and 2011.

Customer relationships are amortized on an accelerated method over useful lives of 11-158-15 years based on the period over which current customers are expected to generate cash flows. Amortization expense related to customer relationships for the years ended December 31, 2010, 2009,2013, 2012 and 20082011 was approximately $331$284 million, $29$280 million and $1$306 million, respectively.

ImpairmentValuation and impairment of goodwill. The net carrying value of goodwill as of December 31, 20102013 and 20092012 was approximately $951 million$1.2 billion (representing 6%7% of total assets). Goodwill was recorded in 2009 as the excess and $953 million (representing 6% of reorganization value on the Effective Date over amounts assigned to the other assets.
total assets), respectively. Goodwill is tested for impairment as of November 30 of each year, or more frequently as warranted by events or changes in circumstances. TheAccounting guidance also permits a qualitative assessment for goodwill to determine whether it is more likely than not that the carrying value of a reporting unit exceeds its fair value. If, after this qualitative assessment, we determine that it is not more likely than not that the fair value of a reporting unit is less than its carrying amount then no further quantitative testing would be necessary. If we are required to perform the two-step test under the accounting guidance, the first step involves a comparison of the estimated fair value of each of our reporting unitsunit to its carrying amount. If the estimated fair value of a reporting unit exceeds its carrying amount,


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goodwill of the reporting unit is not considered impaired and the second step of the goodwill impairment is not necessary. If the carrying amount of a reporting unit exceeds its estimated fair value, then the second step of the goodwill impairment test must be performed, and a comparison of the implied fair value of the reporting unit’s goodwill is compared to its carrying amount to determine the amount of impairment, if any. Reporting units are consistent with the units of accounting used f or franchise impairment testing. Likewise theThe fair valuesvalue of the reporting units areunit, when performing the second step of the goodwill impairment test, is determined using a consistent income approach model as that used for franchise impairment testing. As with our franchise impairment testing, in 2013 and 2012, we elected to perform a qualitative assessment for our goodwill impairment testing and concluded that our goodwill is not impaired. Our 2010, 2009, and 20082011 quantitative impairment analysesanalysis also did not result in any goodwill impairment charges.  At December 31, 2010 a 10% decline in the fair value of each of our reporting units would have resulted in $5 million of impairment in one reporting unit and a 20% decline would have resulted in $29 million of aggregate impairment in two of our reporting units.

Impairment of trademarks. The net carrying value of trademarks as of both December 31, 20102013 and 20092012 was approximately $158 million (representing 1% of total assets). Trademarks are tested annually for impairment, or more frequently as warranted by events or changes in circumstances. The fair value of trademarks is determined using the relief-from-royalty method which applies a fair royalty rate to estimated revenue. Royalty 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 annuall yannually for impairment.impairment using either a qualitative analysis or quantitative analysis as elected by management. The valuationqualitative analysis in 2010 showed trademark values in excess2013 and 2012 did not identify any factors that would indicate that it was more likely than not that the fair value of booktrademarks were less than the carrying value and thus resulted in no impairment.

Income taxes

All of Charter’s operations are held through Charter Holdco and its direct and indirect subsidiaries. Charter Holdco and the majority of its subsidiaries are generally limited liability companies that are not subject to income tax. However, certain of these limited liability companies are subject to state income tax. In addition, the indirect subsidiaries that are corporations are subject to federal and state income tax. All of the remaining taxable income, gains, losses, deductions and credits of Charter Holdco pass through to Charter.Charter and its direct subsidiaries.

In connection with the Plan, Charter, CII, Mr. Allen and Charter Holdco entered into an exchange agreement (the “Exchange Agreement”), pursuant to which CII had the right to require Charter to (i) exchange all or a portionAs of CII’s membership interest in Charter Holdco or 100% of CII for $1,000 in cash and shares of Charter’s Class A common stock in a taxable transaction, or (ii) merge CII with and into Charter, or a wholly-owned subsidiary of Charter, in a tax-free transaction (or undertake a tax-free transaction similar to the taxable transaction in subclause (i)), subject to CII meeting certain conditions.  In addition, Charter had the right, under certain circumstances involving a change of control of Charter to require CII to effect an exchange transaction of the type elected by CII from subclause s (i) or (ii) above, which election is subject to certain limitations.
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On December 28, 2009, CII exercised its right, under the Exchange Agreement with Charter, to exchange 81% of its common membership interest in Charter Holdco for $1,000 in cash and 907,698 shares of Charter’s Class A common stock in a fully taxable transaction.  As a result of this transaction, Charter’s deferred tax liability increased by $100 million.  Charter also received a step-up in tax basis in Charter Holdco’s assets, under section 743 of the Code, relative to the interest in Charter Holdco it acquired from CII.  Based upon the taxable exchange which occurred on December 28, 2009, CII fulfilled the conditions necessary to allow it to elect a tax-free transaction at any time during the remaining term of the Exchange Agreement.  On February 8, 2010, the remaining interest was exchanged after which Charter Holdco became 100% owned by Charter.  As a result, during 2010, Charter’s deferred tax liabilities were increased by approximately $99 million. The $99 million is the result of an overall increase in the gross deferred tax liability of $221 million and a corresponding reduction of valuation allowance of $122 million. The combined net effects of this transaction were recorded in the financial statements as a $168 million reduction of additional paid-in capital and a $69 million reduction of income tax expense for the year ended December 31, 2010.

As of December 31, 2010,2013, Charter and its indirect corporate subsidiaries had approximately $6.9$8.3 billion of federal tax net operating and capital loss carryforwards resulting in a gross deferred tax asset of approximately $2.4$2.9 billion expiring. Federal tax net operating loss carryforwards expire in the years 20142021 through 2030.2033.  These losses aroseresulted from the operations of Charter Holdco and its subsidiaries. In addition, as of December 31, 2010,2013, Charter and its indirect corporate subsidiaries had state tax net operating and capital loss carryforwards, resulting in a gross deferred tax asset (net of federal tax benefit) of approximately $228$276 million. State tax net operating loss carryforwards generally expiringexpire in the years 20112014 through 2030.2033.  Due to uncertainties in projected future taxable income, valuation allowances have been established against the gross deferred tax assets for book accounting purposes, except for fu turefuture taxable income that will result from the reversal of existing temporary differences for which deferred tax liabilities are recognized.  Such tax loss carryforwards can accumulate and be used to offset Charter’s future taxable income.

The consummation of the Plan generated an “ownership change” as defined in Section 382 of the Code.  As a result, Charter is subject to limitation on the use of a majority of its tax loss carryforwards.  Further, Charter’s net operating loss carryforwards have been reduced by the amount of the cancellation of debt income resulting from the Plan that was allocable to Charter.  The limitation on Charter’s ability to use its tax loss carryforwards, in conjunction with the loss expiration provisions, could reduce its ability to use a portion of Charter’s tax loss carryforwards to offset future taxable income.  

As of December 31, 2010, $1.32013, $2.1 billion of federal tax loss carryforwards are unrestricted and available for Charter’s immediate use, while approximately $5.6$6.2 billion of federal tax loss carryforwards are still subject to Section 382 and other restrictions. Pursuant to these restrictions, an aggregate of $2.1Charter estimates that approximately $2.0 billion, $2.0 billion and $400 million in varying amounts from 2011the years 2014 to 2014,2016, respectively, and an additional $176$226 million annually over each of the next 188 years of federal tax loss carryforwards, should become unrestricted and available for Charter’s use. Both Charter’s indirect corporate subsidiary and state tax loss carryforwards are subject to similar but varying restrictions.

In addition to its tax loss carryforward attributes,carryforwards, Charter also has $4.9 billion of tax basis of $5.2 billion in intangible assets and $4.9$5.1 billion of tax basis in property, plant, and equipment as of December 31, 2010.2013. The tax basis in these assets is not subject to Section 382 limitations and therefore the related tax basis amortization and depreciation is availablecurrently deductible. For illustrative purposes, Charter expects to reflect tax-deductible amortization and deductible for tax purposesdepreciation on assets owned as of December 31, 2013, beginning at approximately $2.2 billion in 2014 and decelerating over the following 4 years, totaling an annual basis.estimated $6.6 billion over the five year period. The foregoing projected deductions do not include any amortization or depreciation related to future capital spend or potential acquisitions. In addition, the deductions assume Charter does not dispose of a material portion of its business or make modifications to the underlying partnerships it owns, all of which may materially affect the timing or amount of its existing amortization and depreciation deductions. Any one of these factors or future legislation or adjustments by the IRS upon examination could also affect the projected deductions.

As of December 31, 20102013 and 2009,2012, we have recorded net deferred income tax liabilities of $762$1.4 billion and $1.3 billion, respectively. Net deferred tax liabilities included approximately $226 million and $306$219 million respectively.at December 31, 2013 and 2012, respectively, relating to certain indirect subsidiaries of Charter Holdco that file separate federal or state income tax returns.  The remainder of our 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 indefinite-lived. As part of our net liability, on December 31, 20102013 and 2009,2012, we had gross deferred tax assets of $3.5$3.9 billion and $3.4$3.7 billion, respectively, which primarily relate to tax losses allocated to Charter


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from Charter Holdco. In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will be realized.  Due to our history of losses and limitations imposed by Section 382 of the Code discussed above, we were unable to assume future taxable income in our analysis and accordingly valuation allowances have been established except for deferred benefits available to offset certain deferred tax liabilities that will reverse over time.  According ly,Accordingly, our gross deferred tax assets have been offset with a corresponding valuation allowance of $2.3$3.0 billion and $2.0$2.9 billion at December 31, 20102013 and 2009,2012, respectively. The amount of the deferred tax assets considered realizable and, therefore, reflected in the consolidated balance sheet, would be increased at such time that it is more-likely-than-not future taxable income will be realized during the carryforward period. At the time this consideration is met, an adjustment to reverse some portion of the existing valuation allowance would result.

In determining our tax provision for financial reporting purposes, Charter establishes a reserve for uncertain tax positions unless such positions are determined to be “more likely than not” of being sustained upon examination, based on their technical merits. In evaluating whether a tax position has met the more-likely-than-not recognition threshold, we presume the position will be examined by the appropriate taxing authority that has full knowledge of all relevant information. A tax position that meets the more-likely-than-not recognition threshold is measured to determine the amount of benefit to be recognized in our financial statements. The tax position is measured atas the
41
largest amount of benefit that has a greater than 50% likelihood of being realized when the position is ultimately resolved. There is considerable judgment involved in determining whether positions taken on the tax return are “more likely than not” of being sustained. As of December 31, 2012, we had $202 million of liabilities for uncertain tax positions. As of December 31, 2013, liabilities for uncertain tax positions were reduced to zero.

Charter adjusts its uncertain tax reserve estimates periodically because of ongoing examinations by, and settlements with, the various taxing authorities, as well as changes in tax laws, regulations and interpretations.

No tax years for Charter or Charter Holdco, for income tax purposes, are currently under examination by the Internal Revenue Service.  Tax years ending 20072010 through 20102013 remain subject to examination and assessment. Years prior to 20072010 remain open solely for purposes of examination of Charter’s net operating loss and credit carryforwards.

Litigation

Legal contingencies have a high degree of uncertainty. When a loss from a contingency becomes estimable and probable, a reserve is established. The reserve reflects management's best estimate of the probable cost of ultimate resolution of the matter and is revised as facts and circumstances change. A reserve is released when a matter is ultimately brought to closure or the statute of limitations lapses. We have established reserves for certain matters. Although certain matters are not expected individually to have a material adverse effect on our consolidated financial condition, results of operations or liquidity, such matters could have, in the aggregate, a material adverse effect on our consolidated financial condition, results of operations or liquidity.

Programming Agreements
 
We exercise significant judgment in estimating programming expense associated with certain video programming contracts. Our policy is to record video programming costs based on our contractual agreements with our programming vendors, which are generally multi-year agreements that provide for us to make payments to the programming vendors at agreed upon market rates based on the number of customers to which we provide the programming service. If a programming contract expires prior to the parties' entry into a new agreement and we continue to distribute the service, we estimate the programming costs during the period there is no contract in place. In doing so, we consider the previous contractual rates, inflation and the status of the negotiations in determining our estimates. & #160;When the programming contract terms are finalized, an adjustment to programming 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 consideration exchanged between the parties in multiple-element transactions.
 
Significant judgment is also involved when we enter into agreements that result in us receiving cash consideration from the programming vendor, usually in the form of advertising sales, channel positioning fees, launch support or marketing support. In these situations, we must determine based upon facts and circumstances if such cash consideration should be recorded as revenue, a reduction in programming expense or a reduction in another expense category (e.g., marketing).



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42

Results of Operations

The following table sets forth the percentages of revenues that items in the accompanying consolidated statements of operations constituted for the periods presented (dollars in millions, except per share data):

  Successor  Combined  Predecessor 
  2010  2009  2008 
                
Revenues $7,059  100% $6,755  100% $6,479  100%
                      
Costs and Expenses:                     
  Operating (excluding depreciation and amortization)  3,064  43%  2,909  43%  2,807  43%
  Selling, general and administrative  1,422  20%  1,380  20%  1,386  21%
  Depreciation and amortization  1,524  22%  1,316  20%  1,310  20%
  Impairment of franchises  --  --   2,163  32%  1,521  24%
  Other operating (income) expenses, net  25  --   (34) (1%)  69  1%
                      
   6,035  85%  7,734  114%  7,093  109%
                      
Income (loss) from operations  1,024  15%  (979) (14%)  (614) (9%)
                      
  Interest expense, net (excluding unrecorded interest
     expense of $558 for year ended December 31, 2009)
  (877)     (1,088)     (1,905)   
  Gain due to Plan effects  --      6,818      --    
  Gain due to fresh start accounting adjustments  --      5,659      --    
  Reorganization items, net  (6)     (647)     --    
  Gain (loss) on extinguishment of debt  (85)     --      4    
  Change in value of derivatives  --      (4)     (29)   
  Other income (expense), net  2      (1)     (6)   
                      
Income (loss) before income taxes  58      9,758      (2,550)   
                      
   Income tax benefit (expense)  (295)     343      103    
                      
Consolidated net income (loss)  (237)     10,101      (2,447)   
                      
   Less: Net (income) loss – noncontrolling interest  --      1,265      (4)   
                      
Net income (loss) – Charter shareholders $(237)    $11,366     $(2,451)   
 Year Ended December 31,
 2013 2012 2011
            
Revenues$8,155
 100% $7,504
 100% $7,204
 100%
            
Costs and Expenses:           
Operating costs and expenses (excluding depreciation and amortization)5,345
 66% 4,860
 65% 4,564
 63%
Depreciation and amortization1,854
 23% 1,713
 23% 1,592
 22%
Other operating expenses, net31
 —% 15
 —% 7
 —%
 7,230
 89% 6,588
 88% 6,163
 86%
Income from operations925
 11% 916
 12% 1,041
 14%
Interest expense, net(846)   (907)   (963)  
Loss on extinguishment of debt(123)   (55)   (143)  
Gain on derivative instruments, net11
   —
   —
  
Other expense, net(16)   (1)   (5)  
Loss before income taxes(49)   (47)   (70)  
            
Income tax expense(120)   (257)   (299)  
Net loss$(169)   $(304)   $(369)  
            
LOSS PER COMMON SHARE, BASIC AND DILUTED:$(1.65)   $(3.05)   $(3.39)  
            
Weighted average common shares outstanding, basic and diluted101,934,630
   99,657,989
   108,948,554
  

Revenues. Average monthly revenue per basic video customer, measured on an annual basis, has increased from $105Total revenues grew $651 million or 9% in 2008the year ended December 31, 2013 as compared to $1142012 and grew $300 million or 4% in 2009 and $126 in 2010.  Average monthly revenue per video customer represents total annual revenue, divided by twelve, divided by the average number of basic video customers during the respective period.year ended December 31, 2012 as compared to 2011. Revenue growth primarily reflects increases in the number of residential and commercial telephone, high-speed Internet and triple play customers and in commercial business customers, growth in expanded basic and digital video customers, pricepenetration, promotional and annual rate increases, and incremental video revenues from premium, DVR, and high-definition televisionhigher advanced services penetration offset by a decrease in basic video customers.customers and lower advertising sales in a non-political year. Asset sales, net of acquisitions in 2008, 2009 and 2010 reduced the increase inincreased revenues in 20102013 as compared to 20092012 by approximately $19$270 million and 2009approximately $20 million in 2012 as compared to 2008 by approximately $17 million.2011.

Revenues by service offering were as follows (dollars in millions):

  Successor  Combined  Predecessor       
  2010  2009  2008  2010 over 2009  2009 over 2008 
  Revenues  % of Revenues  Revenues  % of Revenues  Revenues  % of Revenues  Change  % Change  Change  % Change 
                               
Video $3,689   52% $3,686   54% $3,692   57% $3   --  $(6)  -- 
High-speed Internet  1,606   23%  1,476   22%  1,356   21%  130   9%  120   9%
Telephone  823   12%  750   11%  583   9%  73   10%  167   29%
Commercial  494   7%  446   7%  392   6%  48   11%  54   14%
Advertising sales  291   4%  249   4%  308   5%  42   17%  (59)  (19%)
Other  156   2%  148   2%  148   2%  8   5%  --   -- 
                                         
  $7,059   100% $6,755   100% $6,479   100% $304   5% $276   4%
 Years ended December 31,    
 2013 2012 2011 2013 over 2012 2012 over 2011
 Revenues % of Revenues Revenues % of Revenues Revenues % of Revenues Change % Change Change % Change
Video$4,030
 49% $3,639
 48% $3,639
 51% $391
 11 % $—
 — %
Internet2,186
 27% 1,866
 25% 1,708
 24% 320
 17 % 158
 9 %
Voice644
 8% 828
 11% 858
 12% (184) (22)% (30) (3)%
Commercial822
 10% 658
 9% 544
 8% 164
 25 % 114
 21 %
Advertising sales291
 4% 334
 4% 292
 4% (43) (13)% 42
 14 %
Other182
 2% 179
 2% 163
 2% 3
 2 % 16
 10 %
                    
 $8,155
 100% $7,504
 100% $7,204
 100% $651
 9 % $300
 4 %

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Certain prior year amounts have been reclassified to conform with the 2010 presentation, including the reflection of franchise fees, equipment rental and video customer installation revenue as video revenue, and telephone regulatory fees as telephone revenue, rather than other revenue.

40



Video revenues consist primarily 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. BasicResidential basic video customers increased by 188,000 in 2013 and decreased by 155,000 in 2012. However, after giving effect to asset acquisitions and dispositions, residential basic video customers decreased by 303,600109,000 and 212,400 customers154,000 in 20102013 and 2009, respectively, of which 76,700 in 2010 and 12,400 in 2009 were related to asset sales, net of acquisitions.  Digital video customers increased by 145,100 and 84,700 customers in 2010 and 2009,2012, respectively. The increase in 2010 and 2009 was reduced by asset sales, net of acquisitions, of 37,400 and 1,200 digital customers, respectively.  The increaseschanges in video revenues are attributable to the following (dollars in millions):

  
2010 compared
to 2009
  
2009 compared
to 2008
 
       
Incremental video services and rate adjustments $57  $57 
Increase in digital video customers  62   42 
Decrease in basic video customers  (102)  (94)
Asset sales, net of acquisitions  (14)  (11)
         
  $3  $(6)
  2013 compared to 2012 2012 compared to 2011
     
Incremental video services, price adjustments and bundle revenue allocation $375
 $115
Decrease in basic video customers (98) (89)
Decrease in premium purchases (20) (39)
Asset acquisitions, net 134
 13
     
  $391
 $—

Residential high-speed Internet customers grew by 183,800598,000 and 187,100293,000 customers in 20102013 and 2009, respectively.  The increase2012, respectively, or 324,000 and 316,000 customers in 2010 was reduced by asset sales, net of acquisitions, of 22,900 high-speed Internet customers2013 and the increase in 2009 included2012, respectively, after giving effect to asset acquisitions net of sales, of 400 high-speed Internet customers.and dispositions. The increases in high-speed Internet revenues from our residential customers are attributable to the following (dollars in millions):

  
2010 compared
to 2009
  
2009 compared
to 2008
 
       
Increase in residential high-speed Internet customers $109  $88 
Rate adjustments and service upgrades  23   34 
Asset sales, net of acquisitions  (2)  (2)
         
  $130  $120 
  2013 compared to 2012 2012 compared to 2011
     
Increase in residential Internet customers $142
 $136
Service level changes and price adjustments 106
 17
Asset acquisitions, net 72
 5
     
  $320
 $158

Residential telephonevoice customers grew by 161,000359,000 and 247,100123,000 customers in 20102013 and 2009, respectively.2012, respectively, or 200,000 and 134,000 customers in 2013 and 2012, respectively, after giving effect to asset acquisitions and dispositions. The increasechanges in 2010 was reduced by asset sales, net of acquisitions, of 1,700 telephone customers. The increases in residential telephonevoice revenues from our residential customers isare attributable to the following (dollars in millions):

  
2010 compared
to 2009
  
2009 compared
to 2008
 
       
Increase in residential telephone customers $102  $150 
Rate adjustments and service upgrades  (29)  17 
Asset sales, net of acquisitions  --   -- 
         
  $73  $167 
  2013 compared to 2012 2012 compared to 2011
     
Price adjustments and bundle revenue allocation $(259) $(71)
Increase in residential voice customers 51
 40
Asset acquisitions, net 24
 1
     
  $(184) $(30)


Average monthly revenue per telephone customer decreased during 2010 compared to 2009 due to promotional activity to increase sales of the Charter Bundle®.

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Commercial revenues consist primarily of revenues from services provided to our commercial customers. Commercial revenuesPSUs increased primarily as a result of increased sales of the Charter Business Bundle®100,000 and 55,000 in 2013 and 2012, respectively, or 64,000 and 65,000 customers in 2013 and 2012, respectively, after giving effect to our smallasset acquisitions and medium sized business customers and increases in carrier site customers.dispositions. The increases in 2010 and 2009 were reduced by approximately $1 million as a result of asset sales.commercial revenues are attributable to the following (dollars in millions):

  2013 compared to 2012 2012 compared to 2011
     
Sales to small-to-medium sized business customers $97
 $87
Carrier site customers 25
 17
Other 11
 9
Asset acquisitions, net 31
 1
     
  $164
 $114

Advertising sales revenues consist primarily of revenues from commercial advertising customers, programmers and other vendors. Advertising sales revenues decreased in 2013 primarily as a result of a decrease in revenue from the political and retail sectors of $30 million and $20 million, respectively. In 2010,2012, advertising sales revenues increased as a result of increasesan increase in all sectors, especiallyrevenue from the
44
political and automotive sectors. The increase in 2010 was reducedsectors of $20 million and $12 million, respectively. Asset acquisitions increased advertising sales revenue by approximately $1$7 million as a result of asset sales.  In 2009, advertising sales revenues decreased primarily as a result of significant decreases in revenues from the political, automotive and retail sectors coupled with a decrease of $2 million related2013 compared to asset sales.2012. For the years ended December 31, 2010, 2009,2013, 2012 and 2008,2011, we received $46$41 million $41, $59 million and $39$51 million, respectively, in advertising sales revenues from vendors.

Other revenues consist of home shopping, late payment fees, wire maintenance fees and other miscellaneous revenues. The increaseincreases in 2010 was2013 and 2012 were primarily the result of increases in home shopping, wire maintenance fees and late payment fees reducedfees. Asset acquisitions increased other revenues in 2013 compared to 2012 by approximately $1 million as a result of asset sales.$2 million.

Operating costs and expenses. The increases in our operating costs and expenses are attributable to the following (dollars in millions):

  
2010 compared
to 2009
  
2009 compared
to 2008
 
       
Programming costs $82  $96 
Labor costs  38   26 
Franchise and regulatory fees  16   10 
Commercial services  10   (1)
Vehicle costs  6   (12)
Ad sales  6   (10)
Other, net  5   -- 
Asset sales, net of acquisitions  (8)  (7)
         
  $155  $102 
  2013 compared to 2012 2012 compared to 2011
     
Programming $108
 $100
Franchise, regulatory and connectivity (1) 8
Costs to service customers 101
 90
Marketing 38
 34
Other 59
 49
Asset acquisitions 180
 15
     
  $485
 $296

Programming costs were approximately $1.8$2.1 billion $1.7, $2.0 billion and $1.6$1.9 billion, representing 59%40%, 60%40% and 59%41% of total operating costs and expenses for each of the years ended December 31, 2010, 20092013, 2012 and 2008,2011, respectively. Programming costs consist primarily of costs paid to programmers for basic, digital, premium, digital, OnDemand, and pay-per-view programming. The increases in programming costs are primarily a result of annual contractual rate adjustments, including increases in amounts paid for retransmission consents and for new programming,offset in part by asset sales andvideo customer losses. Programming costs were also offset by the amortization of payments received from programmers of $17$7 million, $26$6 million and $33$7 million in 2010, 20092013, 2012 and 2008,2011, respectively. We expect programming expenses to continue to increase and at a higher rate than in 2010, due to a variety of factors, including am ounts paidincreased demands by owners of some broadcast stations for carriage of other services or payments to those broadcasters for retransmission consent, annual increases imposed by programmers with additional selling power as a result of media consolidation, and additional programming, including high-definition,new sports services and non-linear programming for on-line and OnDemand and pay-per-view programming, being providedprogramming. We have been unable to fully pass these increases on to our customers nor do we expect to be able to do so in the future without a potential loss of customers.



42


Costs to service customers include residential and commercial costs related to field operations, network operations and customer care including labor, reconnects, maintenance, billing, occupancy and vehicle costs. The increase in costs to service customers during 2013 compared to 2012 was primarily the result of higher spending on labor to deliver improved products and service levels as well as greater reconnect expense. The increase in costs to service customers for the year ended December 31, 2012 was primarily the result of increased preventive maintenance levels and higher service labor.

Service laborThe increase in marketing costs for the year ended December 31, 2013 was the result of heavier sales activity and sales channel development. The increase in marketing costs for the year ended December 31, 2012 was the result of increased media investment and commercial marketing as well as a result$7 million favorable adjustment in the second quarter of 2011 related to expenses previously accrued on 2010 marketing campaigns.

The increases in service calls resulting from  our strategic bandwidth initiatives and commercial services expenses increased as a result of growth in our commercial business.  Our strategic bandwidth initiatives will continue in 2011 and while our service labor expenses stabilized in the fourth quarter of 2010, there can be no assurance that they will not increase in 2011.

Selling, general and administrative expenses. The increases (decreases) in selling, general and administrative expensesother expense are attributable to the following (dollars in millions):

  2013 compared to 2012 2012 compared to 2011
     
Commercial sales expense $30
 $20
Property tax and insurance 14
 (7)
Bad debt and collections 9
 (18)
Advertising sales expense 6
 15
Stock compensation expense (2) 15
Administrative labor (4) 10
Other 6
 14
     
  $59
 $49

Commercial sales expense increased in 2013 compared to 2012 and 2012 compared to 2011 and advertising sales expenses increased in 2012 compared to 2011 primarily related to growth in these businesses. The increase in property tax and insurance in 2013 compared to 2012 relates primarily to increases in the number of employees and vehicles. The increase in bad debt in 2013 compared to 2012 is primarily related to an increase in collection expenses while the decrease in 2012 compared to 2011 is primarily due to decreases in write-offs.

  
2010 compared
to 2009
  
2009 compared
to 2008
 
       
Commercial services $22  $7 
Marketing costs  15   5 
Bad debt and collection costs  3   9 
Customer care  3   (4)
Employee costs  2   (7)
Stock compensation  (1)  (6)
Other, net  3   (6)
Asset sales, net of acquisitions  (5)  (4)
         
  $42  $(6)

45
Depreciation and amortization. Depreciation and amortization expense increased by $208$141 million and $6$121 million in 20102013 and 2009, respectively.  The increases were2012, respectively, which primarily represents depreciation on more recent capital expenditures and the result of increased amortization associated with the increase in customer relationships as a part of applying fresh start accountingBresnan Acquisition offset by asset sales.certain assets becoming fully depreciated.

Impairment of franchises. We recorded impairment of $2.2 billion and $1.5 billion for the years ended December 31, 2009 and 2008, respectively. The impairments recorded in 2009 and 2008 were a result of the continued economic pressure on our customers from the economic downturn along with increased competition and the related impact to our projected future growth rates.  The valuation completed in 2010 showed franchise values in excess of book value, and thus resulted in no impairment.

Other operating (income) expenses, net. The changes in other operating (income) expenses, net are attributable to the following (dollars in millions):

  
2010 compared
to 2009
  
2009 compared
 to 2008
 
       
Increases (decreases) in losses on sales of assets $2  $(6)
Increases (decreases) in special charges, net  57   (97)
         
  $59  $(103)
  2013 compared to 2012 2012 compared to 2011
     
Increases in (gain) loss on sales of assets $13
 $(1)
Increases in special charges, net 3
 9
     
  $16
 $8

The change in special charges in 2010 and 2009, as compared to prior periods, is a result of amounts paid or net amounts received in litigation settlements. For more information, see Note 14 to the accompanying consolidated financial statements contained in “Item 8. Financial Statements and Supplementary Data.”

Interest expense, net. Net interest expense decreased by $211$61 million in 20102013 from 20092012 and $817$56 million in 20092012 from 2008.2011. Net interest expense decreased in 20102013 compared to 20092012 primarily as a result of a decrease in our weighted average interest rate from 6.5% for the year ended December 31, 2012 to 5.8% for the year ended December 31, 2013 offset by an increase in our weighted average debt outstanding from $13.0 billion for the year ended December 31, 2012 to $13.6 billion for the year ended December 31, 2013. Net interest expense decreased in 2012 compared to 2011 primarily as a result of the completion ofa decrease in our reorganization under Chapter 11 of the Bankruptcy Code and the related reduction of $8 billion principal amount of debt.  Because we filed for Chapter 11 bankruptcy on March 27, 2009, we no longer accruedweighted average interest on debt subject to compromise effective March 27, 2009, except on CCH II debt, as we intended to pay the interest under the Plan.  As such, interest expense for 2009 decreased as com pared to 2008. The amount of contractual interest expense not recordedrate from 7.3% for the year ended December 31, 2009 was approximately $558 million.2011 to 6.5% for the year ended December 31, 2012 offset by an increase in our


43


weighted average debt outstanding from $12.6 billion for the year ended December 31, 2011 to $13.0 billion for the year ended December 31, 2012.

Gain due to Plan effects.  Gain due to Plan effects represents the net gains recorded as a result of implementing the Plan including the impact of eliminating $8 billion in debt.  For more information, see Note 23 to the accompanying condensed consolidated financial statements contained in “Item 8. Financial Statements and Supplementary Data.”

Gain due to fresh start accounting adjustments.  Upon our emergence from bankruptcy, the Company applied fresh start accounting.  Gain due to fresh start accounting adjustments represents the net gains recognized as a result of adjusting all assets and liabilities to fair value.  For more information, see Note 23 to the accompanying condensed consolidated financial statements contained in “Item 8. Financial Statements and Supplementary Data.”

Reorganizations items, net.  Reorganization items, net of $6 million and $647 million for the years ended December 31, 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 condensed consolidated financial statements contained in “Item 8. Financial Statements and Supplementary Data.”

46

Gain (loss)Loss on extinguishment of debt. Gain (loss) Loss on extinguishment of debt consists of the following for the years ended December 31, 2010, 20092013, 2012 and 20082011 (dollars in millions):

  Successor  Combined  Predecessor 
  2010  2009  2008 
          
Charter Holdings debt notes repurchases / exchanges $--  $--  $3 
Charter convertible note repurchases / exchanges  --   --   5 
CCH II tender offer  --   --   (4)
CCO Holdings debt notes repurchases / exchanges  (17)  --   -- 
Charter Operating debt notes repurchases  (17)  --   -- 
Charter Operating credit amendment / prepayments  (51)  --   -- 
             
  $(85) $--  $4 
  Year ended December 31,
  2013 2012 2011
       
Charter Operating credit amendment / prepayments $58
 $92
 $120
CCH II notes redemptions —
 (46) 6
Charter Operating notes repurchases —
 9
 17
CCO Holdings notes repurchases 65
 —
 —
       
  $123
 $55
 $143

For more information, see Notes 7 and 15Note 8 to the accompanying consolidated financial statements contained in “Item 8. Financial Statements and Supplementary Data.”

Gain on derivative instruments, net. Change in value of derivatives.Interest rate swapsderivative instruments are held to manage our interest costs and reduce our exposure to increases in floating interest rates. We expenserecognized a gain of $11 million during the year ended December 31, 2013, which represents the change in fair value of derivatives that do not qualify for hedge accounting and cash flow hedge ineffectiveness onour interest rate swap agreements.  Upon filingderivative instruments offset by amortization of our accumulated other comprehensive loss 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 agreementderivative instruments no longer designated as measured on the date the counterparties terminated.  Additionally, certain provisions of our 5.875% and 6.50% convertible senior notes issued in November 2004 and Oct ober 2007, respectively, were considered embedded derivativeshedges for accounting purposes and were required to be accounted for separately from the convertible senior notes and marked to fair value at the end of each reporting period.  On the Effective Date, the convertible debt was cancelled.  Change in value of derivatives consists of the following for the years ended December 31, 2010, 2009 and 2008 (dollars in millions):

  Successor  Combined  Predecessor 
  2010  2009  2008 
          
Interest rate swaps $--  $(4) $(62)
Embedded derivatives from convertible senior notes  --   --   33 
             
  $--  $(4) $(29)

Other income (expense), net.  The changes in other income (expense), net are attributable to the following (dollars in millions):

  
2010 compared
to 2009
  
2009 compared
to 2008
 
       
Increases (decreases) in investment income $(1) $2 
Change in value of preferred stock  5   (3)
Other, net  (1)  6 
         
  $3  $5 

purposes. For more information, see Note 1611 to the accompanying consolidated financial statements contained in “Item 8. Financial Statements and Supplementary Data.”

Income tax benefit (expense).expense. Income tax expense of $295$120 million, $257 million and $299 million was recognized for the yearyears ended December 31, 2010,2013, 2012 and 2011, respectively, primarily through increases in deferred tax liabilities related to our investment in Charter Holdco and certain of our indirect subsidiaries, in addition to $8 million, $7 million and $9 million of current federal and state income tax expense.expense, respectively. Income tax expense for the year ended December 31, 2013 decreased compared to the corresponding prior period, primarily as a result of step-ups in basis of indefinite-lived assets for tax, but not GAAP purposes, including the effects of partnership gains related to financing transactions and a partnership restructuring, which decreased our net deferred tax liability related to indefinite-lived assets by $137 million. Our tax provision in future periods will vary based on various factors including changes in our deferred tax liabilities attributable to indefinite-lived intangibles, as well as future operating results, however we do not anticipate having such a large reduction in income tax expense attributable to these items unless we enter into similar future financing or restructuring transactions. The ultimate impact on the tax provision of such future financing and restructuring activities, if any, will be dependent on the underlying facts and circumstances at the time. Income tax expense for the year ended December 31, 20102011 included $23 million related primarily to changes in estimates on the 2009 tax provision, a $16an $8 million expense related to asset sales occurring in 2010 andfor a $69 million benefit related to the February 8, 2010 Charter Holdco partnership interest exchange.state tax law change.
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Income tax benefitNet loss.We incurred net loss of $343$169 million, $304 million and $369 million for the yearyears ended December 31, 2009 was realized2013, 2012 and 2011, respectively, 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.

Income tax benefit of $103 million for the year ended December 31, 2008 included $325 million of deferred tax benefit related to the impairment of franchises and $2 million of deferred tax benefit related to asset acquisitions and sales occurring in 2008.  It included $4 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 9 and 23 to our accompanying consolidated financial statements contained in “Item 8. Financial Statements and Supplementary Data.” The increase in losses allocat ed is the result of the adoption on January 1, 2009 of new accounting guidance which requires losses to be allocated to noncontrolling interest even when such interest is in a deficit position.factors described above.

Net income (loss).Loss per common share. The impact toDuring 2013 and 2012, net income (loss)loss per common share decreased by $1.40 and $0.34, respectively, as a result of impairment charges, loss on extinguishmentthe factors described above in addition to an increase in our weighted average common shares outstanding primarily as a result of debt, reorganization items and gains due to Plan effects and fresh start accounting, net of tax, was to increase net loss by approximately $91 millionwarrant exercises in 2010, increase net income by approximately $11.0 billion in 2009 and to increase net loss in 2008 by approximately $1.2 billion.2013.

Use of Adjusted EBITDAand 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)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)loss and net cash flows from operating activities, respectively, below.

Adjusted EBITDA is defined as consolidated net income (loss)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, change in value of derivatives, gain (loss)loss on extinguishment of debt, gain on derivative instruments, net and other operating expenses, such as special charges


44


and (gain) loss on sale or retirement of assets. As such, it eliminates the significant non-cash depreciation and amortization expense that results from the capital-intensive nature of our businesses as well as other non-cash or non-recurringspecial items, and is unaffected by our capital structure or investment activities. Adjusted EBITDA is used by management and Charter’s board of directors to evaluate the performance of our business. For t his reason, it is a significant component of Charter’s annual incentive compensation program. However, this measure is limited in that it does not reflect the periodic costs of certain capitalized tangible and intangible assets used in generating revenues and our cash cost of financing. Management evaluates these costs through other financial measures.

Free cash flow is defined as net cash flows from operating activities, less capital expenditures and changes in accrued expenses related to capital expenditures.

We believe that Adjusted EBITDA and free cash flow provide information useful to investors in assessing our performance and our ability to service our debt, fund operations and make additional investments with internally generated funds. In addition, Adjusted EBITDA generally correlates to the leverage ratio calculation under our credit facilities or outstanding notes to determine compliance with the covenants contained in the facilities and notes (all such documents have been previously filed with the United States Securities and Exchange Commission). Adjusted EBITDA includes management fee expenses inFor the amount of $144 million, $136 million and $131 million for the years ended December 31, 2010, 2009 and 2008, respectively, which expense amounts are excluded for the purposespurpose of calculating compliance with leverage covenants.
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covenants, we use Adjusted EBITDA, as presented, excluding certain expenses paid by our operating subsidiaries to other Charter entities. Our debt covenants refer to these expenses as management fees, which fees were in the amount of $201 million, $191 million and $151 million for the years ended December 31, 2013, 2012 and 2011, respectively.


  Successor  Combined  Predecessor 
  2010  2009  2008 
          
Consolidated net income (loss) $(237) $10,101  $(2,447)
Plus:  Interest expense, net  877   1,088   1,905 
          Income tax (benefit) expense  295   (343)  (103)
          Depreciation and amortization  1,524   1,316   1,310 
          Impairment of franchises  --   2,163   1,521 
          Stock compensation expense  26   27   33 
          (Gain) loss due to bankruptcy related items  6   (11,830)  -- 
          (Gain) loss on extinguishment of debt  85   --   (4)
          Other, net  23   (29)  104 
             
Adjusted EBITDA $2,599  $2,493  $2,319 
Years ended December 31,
2013 2012 2011
     
Net loss$(169) $(304) $(369)
Plus: Interest expense, net846
 907
 963
Income tax expense120
 257
 299
Depreciation and amortization1,854
 1,713
 1,592
Stock compensation expense48
 50
 35
Loss on extinguishment of debt123
 55
 143
Gain on derivative instruments, net(11) —
 —
Other, net47
 16
 12
     
Adjusted EBITDA$2,858
 $2,694
 $2,675
                 
Net cash flows from operating activities $1,911  $594  $399 $2,158
 $1,876
 $1,737
Less: Purchases of property, plant and equipment  (1,209)  (1,134)  (1,202)(1,825) (1,745) (1,311)
Change in accrued expenses related to capital expenditures  8   (10)  (39)76
 13
 57
                 
Free cash flow $710  $(550) $(842)$409
 $144
 $483

Liquidity and Capital Resources

Introduction

This section contains a discussion of our liquidity and capital resources, including a discussion of our cash position, sources and uses of cash, access to credit facilities and other financing sources, historical financing activities, cash needs, capital expenditures and outstanding debt.

Overview of Our DebtContractual Obligations and Liquidity

Although we reduced our debt by approximately $8 billion on November 30, 2009 pursuant to the Plan, we continue toWe have significant amounts of debt.  The accreted value of our debt as of December 31, 20102013 was $12.3$14.2 billion, consisting of $5.9$3.9 billion of credit facility debt and $6.4$10.3 billion of high-yield notes. Our business requires significant cash to fund principal and interest payments on our debt.  As of December 31, 2010, after giving effect to the issuance of the CCO Holdings notes in January 2011 and the application of proceeds to repay borrowings under the Charter Operating credit facilities, $442013, $414 million of our long-term debt matures in 2011, $1.1 billion in 2012, $3232014, $65 million in 2013, $2.2 billion in 2014, $30 million in 2015, $4.6 billion$93 million in 2016, $1.1 billion in 2017, $673 million in 2018 and $4.0$11.9 billion thereafter. As of December 31, 2013, we had other contractual obligations, including interest on our debt, totaling $7.5 billion. During 2014, we currently expect capital expenditures to be approximately $2.2 billion, including approximately $400 million for completion of our 2014 all-digital plan.


As we45



Our projected cash needs and projected sources of liquidity depend upon, among other things, our actual results, and the timing and amount of our expenditures. Free cash flow was $409 million, $144 million and $483 million for the years ended December 31, 2013, 2012 and 2011, respectively. We expect to continue to evaluate potential uses of our anticipated futuregenerate free cash flow we will consider all of our options, including reducing leverage and investing in our business growth and other strategic opportunities, including mergers and acquisitions, as well as dividends and stock repurchases. We intend to make all capital allocation decisions in a way that maximizes the long-term value for our stockholders.

2014. As of December 31, 2010,2013, the amount available under the revolvingour credit facilityfacilities was approximately $1.1 billion.  The revolving credit facility matures in March 2015.  However, if on December 1, 2013 Charter Operating has scheduled maturities in excess of $1.0$1.1 billion between January 1, 2014 and April 30, 2014, the revolving credit facility will mature on December 1, 2013 unless lenders holding more than 50% of the revolving credit facility consent to the maturity being March 2015.  As of January 31, 2011, Charter Operating had maturities of $1.3 billion between January 1, 2014 and April 30, 2014.. We expect to utilize free cash flow and availability under our revolving credit facilities as well as future refinancing trans actionstransactions to further extend the maturities of or reduce the maturities ofprincipal on our principal obligations. The timing and terms of any refinancing transactions will be subject to market conditions. Additionally, we may, from time to time, depending on market conditions and other factors, use cash on hand and the proceeds from securities offerings or other borrowings, to retire our debt through open market purchases, privately negotiated purchases, tender offers, or redemption provisions.

Our business also requires significant cash to fund capital expenditures and ongoing operations. Our projected cash needs and projected sources of liquidity depend upon, among other things, our actual results, and the timing and
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amount of our expenditures. We believe we have sufficient liquidity from cash on hand, free cash flow and Charter Operating’sOperating's revolving credit facility as well as access to the capital markets to fund our projected operating cash needs.

We continue to evaluate the deployment of our anticipated future free cash flow including to reduce our leverage, and to invest in our business growth and other strategic opportunities, including mergers and acquisitions as well as stock repurchases and dividends. As possible acquisitions, swaps or dispositions arise in our industry, we actively review them against our objectives including, among other considerations, improving the operational efficiency and clustering of our business and achieving appropriate return targets, and we may participate to the extent we believe these possibilities present attractive opportunities. However, there can be no assurance that we will actually complete any acquisition, disposition or system swap or that any such transactions will be material to our operations or results. See "Part I. Item 1A. Risk Factors - Our inability to successfully acquire and integrate other businesses, assets, products or technologies could harm our operating results."

Free Cash Flow

Free cash flow was $710$409 million for the year ended December 31, 2010 compared to negative free cash flow of $550, $144 million and $842$483 million for the years ended December 31, 20092013, 2012 and 2008,2011, respectively. The increase in free cash flow in 20102013 compared to 20092012 is primarily due to decreasesan increase of $164 million in Adjusted EBITDA, a decrease of $141 million in cash paid for interest and reorganization items offset by increases in capital investments to enhance our residential and commercial products and service capabilities.  The decrease in negative free cash flow in 2009 compared to 2008 is primarily due to a decrease in our average interest rate and timing of interest payments with the completion of refinancings, and changes in operating assets and liabilities, excluding the change in accrued interest, that provided $31 million more cash paid forduring 2013. The increase in free cash flow was offset by an increase of $80 million in capital expenditures of which $59 million was related to Bresnan.

The decrease in free cash flow in 2012 compared to 2011 is primarily due to an increase of $434 million in capital expenditures. The decrease in free cash flow is offset by changes in operating assets and liabilities, excluding the change in accrued interest, that provided $87 million more cash during 2012 driven by collection of receivables and an increase in Adjusted EBITDA, offset by reorganization items.accounts payable and accrued liabilities.


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Long-Term Debt

As of December 31, 2010,2013, the accreted value of our total debt was approximately $12.3$14.2 billion, as summarized below (dollars in millions):
  December 31, 2013    
  Principal Amount Accreted Value (a) Semi-Annual Interest Payment Dates Maturity Date (b)
CCO Holdings, LLC:        
7.250% senior notes due 2017 $1,000
 $1,000
 4/30 & 10/30 10/30/2017
7.000% senior notes due 2019 1,400
 1,393
 1/15 & 7/15 1/15/2019
8.125% senior notes due 2020 700
 700
 4/30 & 10/30 4/30/2020
7.375% senior notes due 2020 750
 750
 6/1 & 12/1 6/1/2020
5.250% senior notes due 2021 500
 500
 3/15 & 9/15 3/15/2021
6.500% senior notes due 2021 1,500
 1,500
 4/30 & 10/30 4/30/2021
6.625% senior notes due 2022 750
 747
 1/31 & 7/31 1/31/2022
5.250% senior notes due 2022 1,250
 1,239
 3/30 & 9/30 9/30/2022
5.125% senior notes due 2023 1,000
 1,000
 2/15 & 8/15 2/15/2023
5.750% senior notes due 2023 500
 500
 3/1 & 9/1 9/1/2023
5.750% senior notes due 2024 1,000
 1,000
 1/15 & 7/15 1/15/2024
Credit facility due 2014 350
 342
   9/6/2014
Charter Communications Operating, LLC:        
Credit facilities 3,548
 3,510
   Varies
         
  $14,248
 $14,181
    

  December 31, 2010    
       Semi-Annual  
  Principal  Accreted Interest Payment Maturity
  Amount  Value (a) Dates Date (b)
CCH II, LLC:         
    13.5% senior notes due 2016 $1,766  $2,057 2/15 & 8/15 11/30/16
CCO Holdings, LLC:           
    7.25% senior notes due 2017  1,000   1,000 4/30 & 10/30 10/30/17
    7.875% senior notes due 2018  900   900 4/30 & 10/30 4/30/18
    8.125% senior notes due 2020  700   700 4/30 & 10/30 4/30/20
    Credit facility  350   314   9/6/14
Charter Communications Operating, LLC:           
     8.00% senior second-lien notes due 2012  1,100   1,112 4/30 & 10/30 4/30/12
     10.875% senior second-lien notes due 2014  546   591 3/15 & 9/15 9/15/14
     Credit facilities  5,954   5,632   Varies (c)
            
  $12,316  $12,306    

(a)
The accreted values of the CCH II and Charter Operating notes and the CCO Holdings and Charter Operating credit facilities presented above represent the fair valueprincipal amount of the debt asless the original issue discount at the time of the Effective Date,sale, plus the accretion to the balance sheet date. However, the amount that is currently payable if the debt becomes immediately due is equal to the principal amount of the debt. We have availability under the revolving portion of our credit facilityfacilities of approximately $1.1$1.1 billion as of December 31, 2010.2013.
(b)In general, the obligors have the right to redeem all of the notes set forth in the above table in whole or in part at their option, beginning at various times prior to their stated maturity dates, subject to certain conditions, upon the payment of the outstanding principal amount (plus a specified redemption premium) and all accrued and unpaid interest. For additional information see Note 78 to the accompanying consolidated financial statements contained in “Item 8. Financial Statements and Supplementary Data.”

(c)Includes $2.4 billion and $307 million principal amount of term B-1 and term B-2 loans, respectively, repayable in equal quarterly installments and aggregating in each loan year to 1% of the original amount of the term loan, with the remaining balance due at final maturity on March 6, 2014, $3.0 billion principal amount of the term C loan repayable in equal quarterly installments and aggregating in each loan year to 1% of the original amount of the term loan, with the remaining balance due at final maturity on September 6, 2016, $199 million principal amount of a non-revolving loan repayable in full on March 6, 2013 and $80 million outstanding under a revolving credit facility. Amounts outstanding under the revolving credit facility mature on March 6, 2015; provided, however, that unless otherwise directed by the revolving lenders holding more than 50% of the revolving commitments, the termination date will be D ecember 1, 2013 if, on December 1, 2013, Charter Operating and its subsidiaries do not have less than $1.0 billion of indebtedness on a consolidated basis with maturities between January 1, 2014 and April 30, 2014.

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Contractual Obligations

The following table summarizes our payment obligations as of December 31, 20102013 under our long-term debt and certain other contractual obligations and commitments (dollars in millions.) 

  Payments by Period 
     Less than   1-3   3-5  More than 
  Total  1 year  years  years  5 years 
                  
Contractual Obligations                 
Long-Term Debt Principal Payments (1) $12,316  $58  $1,495  $3,561  $7,202 
Long-Term Debt Interest Payments (2)  4,896   847   1,648   1,365   1,036 
Capital and Operating Lease Obligations (3)  89   23   36   20   10 
Programming Minimum Commitments (4)  267   103   164   --   -- 
Other (5)  290   235   10   45   -- 
                     
Total $17,858  $1,266  $3,353  $4,991  $8,248 
  Payments by Period
  Total Less than 1 year 1-3 years 3-5 years More than 5 years
           
Contractual Obligations (a)          
Long-Term Debt Principal Payments (a) $14,248
 $414
 $158
 $1,775
 $11,901
Long-Term Debt Interest Payments (b) 5,877
 794
 1,575
 1,567
 1,941
Capital and Operating Lease Obligations (c) 136
 35
 56
 35
 10
Programming Minimum Commitments (d) 970
 227
 475
 245
 23
Other (e) 562
 535
 27
 —
 —
           
 Total $21,793
 $2,005
 $2,291
 $3,622
 $13,875

(1)
(a)
The table presents maturities of long-term debt outstanding as of December 31, 2010 and does not reflect the issuance of the CCO Holdings notes in January 2011 and the application of proceeds to repay borrowings under the Charter Operating credit facilities.2013. Refer to Notes 78 and 2118 to our accompanying consolidated financial statements contained in “Item 8. Financial Statements and Supplementary Data” for a description of our long-term debt and other contractual obligations and commitments.
(b)
(2)
Interest payments on variable debt are estimated using amounts outstanding at December 31, 20102013 and the average implied forward London Interbank Offering Rate (“LIBOR”) rates applicable for the quarter during the interest rate reset based on the yield curve in effect at December 31, 2010.2013. Actual interest payments will differ based on actual LIBOR rates and actual amounts outstanding for applicable periods.
(c)
(3)
We lease certain facilities and equipment under noncancelable operating leases. Leases and rental costs charged to expense for the years ended December 31, 2010, 2009,2013, 2012 and 2008,2011, were $24$34 million $25, $28 million and $24$27 million, respectively.
(d)
(4)
We pay 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 approximately $1.8$2.1 billion $1.7, $2.0 billion and $1.6$1.9 billion, for the years ended December 31, 2010, 2009,2013, 2012 and 2008,2011, respectively. Certain of our 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 our programming contracts.
(5)(e)“Other” represents other guaranteed minimum commitments, which consist primarily of commitments to our billing servicescustomer premise equipment vendors.

The following items are not included in the contractual obligations table because the obligations are not fixed and/or determinable due to various factors discussed below. However, we incur these costs as part of our operations:

·We rent utility poles used in our operations.  Generally, pole rentals are cancelable on short notice, but we anticipate that such rentals will recur.  Rent expense incurred for pole rental attachments for the years ended December 31, 2010, 2009, and 2008, was $50 million, $47 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, under multi-year agreements.  Franchise fees and other franchise-related costs included in the accompanying statement of operations were $178 million, $176 million and $179 million for the years ended December 31, 2010, 2009, and 2008, respectively.
·We also have $73 million in letters of credit, primarily to our various worker’s compensation, property and casualty, and general liability carriers, as collateral for reimbursement of claims.

We rent utility poles used in our operations. Generally, pole rentals are cancelable on short notice, but we anticipate that such rentals will recur. Rent expense incurred for pole rental attachments for the years ended December 31, 2013, 2012 and 2011 was $49 million, $47 million and $49 million, respectively.
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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, under multi-year agreements. Franchise fees and other franchise-related costs included in the accompanying statement of operations were $190 million, $176 million and $174 million for the years ended December 31, 2013, 2012 and 2011, respectively.
We also have $73 million in letters of credit, primarily to our various worker’s compensation, property and casualty, and general liability carriers, as collateral for reimbursement of claims.

Limitations on Distributions

Distributions by Charter’s subsidiaries to a parent company for payment of principal on parent company notes are restricted under indentures and credit facilities governing our indebtedness, unless there is no default under the applicable indenture and credit facilities, and unless each applicable subsidiary’s leverage ratio test is met at the time of such distribution. As of December 31, 2010,2013, there was no default under any of these indentures or credit facilities and each subsidiary met its applicable leverage ratio tests based on December 31, 20102013 financial results. Such distributions would be restricted, however, if any such subsidiary fails


48


to meet these tests at the time of the contemplated distribution. In the past, certain subsidiaries have from time to time failed to meet their leverage ratio test. There can be no assurance that they will satisfy these tests at the time of the contemplated distribution. Distributions by Charter Operating for payment of principal on parent companyCCO Holdings' notes and credit facility are further restricted by the covenants in its credit facilities.

Distributions by CCO Holdings and Charter Operating to a parent company for payment of parent company interest are permitted if there is no default under the aforementioned indentures and CCO Holdings and Charter Operating credit facilities.

In addition to the limitation on distributions under the various indentures discussed above, distributions by our subsidiaries may be limited by applicable law, including the Delaware Limited Liability Company Act, under which our subsidiaries may only make distributions if they have “surplus” as defined in the act.  See “Part I. Item 1A. Risk Factors —Restrictions in our subsidiaries’ debt instruments and under applicable law limit their ability to provide funds to us or our subsidiaries that are debt issuers.”

Historical Operating, Investing, and Financing Activities

Cash and Cash Equivalents. We held $32$21 million and $7 million in cash and cash equivalents including $28as of December 31, 2013 and 2012, respectively. Additionally, we had $27 million of restricted cash as of December 31, 2010 compared to $754 million as of December 31, 2009.   The decrease in cash resulted primarily from payments on our credit facilities.2012.

Operating Activities. Net cash provided by operating activities increased $1.3$282 million from $1.9 billion from $594 million for the year ended December 31, 20092012 to $1.9$2.2 billion for the year ended December 31, 2010,2013, primarily as the resultdue to an increase in Adjusted EBITDA of $164 million and a $141 million decrease of $495 million in cash paid for a swap termination liability, $365 million inour cash paid for interest $182 million in cash paid for reorganization items other than interest,offset by changes in operating assets and liabilities, excluding the change in accrued interest and in liabilities related to capital expenditures, that provided $242$32 million moreless cash during the same period, and revenues increasing at a faster rate than cash expenses.2013.

Net cash provided by operating activities increased $195$139 million from $399 million$1.7 billion for the year ended December 31, 20082011 to $594 million$1.9 billion for the year ended December 31, 2009,2012. The increase is primarily as a result of a decrease of $747 milliondue to changes in cash paid foroperating assets and liabilities, excluding the change in accrued interest and revenues increasing at a faster rate thanin liabilities related to capital expenditures, that provided $131 million more cash expenses.  These amounts were partially offsetduring 2012 driven by cash paid for a swap termination liabilitycollection of $495 millionreceivables and cash reorganization items of $188 million for the year ended December 31, 2009.an increase in accounts payable and accrued liabilities.

Investing Activities. Net cash used in investing activities for the years ended December 31, 2010, 2009,2013, 2012 and 2008,2011, was $1.2$2.4 billion $1.3, $1.7 billion and $1.2$1.4 billion, respectively. The decreaseincrease in 20102013 compared to 20092012 is primarily due to $676 million cash paid for the purchaseBresnan Acquisition (net of the CC VIII interest in 2009 in connection with the Plan, offset by an increase of $75 million in purchases of property, plantdebt assumed) and equipment as a result ofhigher capital investments to enhance our residential and commercial products and services capabilities.expenditures. The increase in 20092012 compared to 20082011 is primarily due to the purchase of the CC VIII interest in 2009 in connection with the Plan, offset by a decrease of $68 million in purchases of property , plant, and equipment.higher capital expenditures.

Financing Activities. Net cash provided in financing activities was $299 million for the year ended December 31, 2013, and net cash used in financing activities was $1.5 billion for the year ended December 31, 2010,$134 million and net cash provided by financing activities was $504$373 million and $1.7 billion for the years ended December 31, 20092012 and 2008,2011, respectively. The increase in cash provided during the year ended December 31, 2013 as compared to the corresponding period in 2012, was primarily the result of an increase in the amount by which borrowings of long-term debt offset repayments of long-term debt and an increase in proceeds from the exercise of options and warrants. The decrease in cash used during the year ended December 31, 20102012 as compared to the corresponding period in 2009 was primarily due to increased repayments of long-term debt and repayment of preferred stock, offset by borrowings of long-term debt. The decrease in cash provided during the year ended December 31, 2009 compared to the corresponding period in 20082011, was primarily the result of nodecreases in purchases of treasury stock offset by a decrease in the amount by which borrowings of long-term debt in 2009.offset repayments of long-term debt.

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Capital Expenditures

We have significant ongoing capital expenditure requirements.  Capital expenditures were $1.2$1.8 billion $1.1, $1.7 billion and $1.2$1.3 billion for the years ended December 31, 2010, 20092013, 2012 and 2008, respectively,2011, respectively.  The increase related to higher residential and increasedcommercial customer growth as a resultwell as higher set-top box placement in existing homes and expenditures for back-office support and for real estate related to our organizational realignment, and the acquisition of strategic investments including DOCSIS 3.0, bandwidth reclamation projects such as switch-digital video launches and investments made to move into new commercial segments.  We expect these expenditures to continue to increase in 2011.Bresnan. See the table below for more details.

During 2014, we currently expect capital expenditures to be approximately $2.2 billion. We anticipate 2014 capital expenditures to be driven by our all-digital transition including the deployment of additional set-top boxes in new and existing customer homes, growth in our commercial business, and further spend related to our efforts to insource our service operations as well as product development. The actual amount of our capital expenditures will depend on a number of factors including the growth rates of both our residential and commercial businesses, and the pace at which we progress to all-digital transmission, which we anticipate will comprise approximately $400 million of 2014 capital expenditures.

Our capital expenditures are funded primarily from free cash flowflows from operating activities and borrowings on our credit facility. In addition, our liabilities related to capital expenditures increased by $8$76 million for the year ended December 31, 2010, $13 million and decreased by $10$57 million and $39 million for the years ended December 31, 20092013, 2012 and 2008,2011, respectively.


During 2011, we expect capital expenditures to be between $1.3 billion and $1.4 billion.  We expect the nature of these expenditures will continue to be composed primarily of purchases of customer premise equipment related to advanced video services, scalable infrastructure and support capital.  The actual amount of our capital expenditures depends in part on the deployment of advanced video services and offerings.  Capital expenditures will increase if there is accelerated growth in high-speed Internet, telephone, commercial business or digital customers or there is an increased need to respond to competitive pressures by expanding the delivery of other advanced video services.

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The following table presents our major capital expenditures categories in accordance with NCTA disclosure guidelines for the years ended December 31, 2010, 20092013, 2012 and 2008.2011. The disclosure is intended to provide more consistency in the reporting of capital expenditures among peer companies in the cable industry. These disclosure guidelines are not required disclosures under GAAP, nor do they impact our accounting for capital expenditures under GAAP (dollars in millions):

  Successor  Combined  Predecessor 
  2010  2009  2008 
          
Customer premise equipment (a) $543  $593  $595 
Scalable infrastructure (b)  311   216   251 
Line extensions (c)  90   70   80 
Upgrade/rebuild (d)  21   28   40 
Support capital (e)  244   227   236 
             
  Total capital expenditures (f) $1,209  $1,134  $1,202 
 Year ended December 31,
 2013 2012 2011
      
Customer premise equipment (a)$841
 $795
 $585
Scalable infrastructure (b)352
 387
 347
Line extensions (c)219
 192
 117
Upgrade/rebuild (d)183
 212
 130
Support capital (e)230
 159
 132
      
Total capital expenditures (f)$1,825
 $1,745
 $1,311

(a)Customer premise equipment includes costs incurred at the customer residence to secure new customers and revenue generating units, and additional bandwidth revenues.  It also includesincluding customer installation costs and customer premise equipment (e.g., set-top boxes and cable modems).
(b)Scalable infrastructure includes costs not related to customer premise equipment, or our network, to secure growth of new customers and revenue generating units, and additional bandwidth revenues, or provide service enhancements (e.g., headend equipment).
(c)Line extensions include network costs associated with entering new service areas (e.g., fiber/coaxial cable, amplifiers, electronic equipment, make-ready and design engineering).
(d)Upgrade/rebuild includes costs to modify or replace existing fiber/coaxial cable networks, including betterments.
(e)Support capital includes costs associated with the replacement or enhancement of non-network assets due to technological and physical obsolescence (e.g., non-network equipment, land, buildings and vehicles).
(f)
Total capital expenditures includes $138include $319 million $83, $269 million and $79$195 million of capital expenditures related to commercial services for the years ended December 31, 2010, 20092013, 2012 and 2008,2011, respectively.

Certain prior period amounts have been reclassified to conform with the 2013 presentation.

Description of Our Outstanding Debt

Overview

As of December 31, 20102013 and 2009,2012, the blended weighted average interest rate on our debt was 6.7%5.6% and 5.5%6.0%, respectively. The interest rate on approximately 65%84% and 37%87% of the total principal amount of our debt was effectively fixed, including the effects of our interest rate hedge agreements if any, as of December 31, 20102013 and 2009,2012, respectively. The fair value of our high-yield notes was $6.6$10.4 billion and $5.4$9.9 billion at December 31, 2010
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2013and 2009,2012, respectively. The fair value of our credit facilities was $6.3$3.8 billion and $8.0$3.7 billion at December 31, 20102013 and 2009,2012, respectively. The fair value of our high-yield notes and credit facilities were based on quoted market prices.

The following description is a summary of certain provisions of our credit facilities and our notes (the “Debt Agreements”).  The summary does not restate the terms of the Debt Agreements in their entirety, nor does it describe all terms of the Debt Agreements. The agreements and instruments governing each of the Debt Agreements are complicated and you should consult such agreements and instruments for more detailed information regarding the Debt Agreements.

Credit Facilities – General

CCO Holdings Credit Facility

In March 2007, CCO Holdings entered into aHoldings' credit agreement (the “CCO Holdings credit facility”) which consists of a $350 million term loan facility. The facility matures in September 2014. Borrowings under the CCO Holdings credit facility bear interest at a variable interest rate based on either LIBOR or a base rate plus, in either case, an applicable margin. The applicable margin 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 proceeds thereof.


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Charter Operating Credit Facilities

The Charter Operating credit facilities have an outstanding principal amount of $6.0$3.5 billion at December 31, 2013 as follows:

A term loan A with a remaining principal amount of $722 million, which is repayable in equal quarterly installments and aggregating $38 million in 2014 and 2015, $66 million in 2016 and $75 million in 2017, with the remaining balance due at final maturity on April 22, 2018;
A term loan E with a remaining principal amount of approximately $1.5 billion, which is repayable in equal quarterly installments and aggregating $15 million in each loan year, with the remaining balance due at final maturity on July 1, 2020;
A term loan F with a remaining principal amount of approximately $1.2 billion, which is repayable in equal quarterly installments and aggregating $12 million in each loan year, with the remaining balance due at final maturity on January 3, 2021; and
A revolving loan with an outstanding balance of $140 million at December 31, 2010 as follows:

·  A term B-1 loan with a remaining principal amount of approximately $2.4 billion, which is repayable in equal quarterly installments and aggregating $25 million in each loan year, with the remaining balance due at final maturity on March 6, 2014;
·  A term B-2 loan with a remaining principal amount of approximately $307 million, which is repayable in equal quarterly installments and aggregating $3 million in each loan year, with the remaining balance due at final maturity on March 6, 2014;
·  A term C loan with a remaining principal amount of approximately $3.0 billion, which is repayable in equal quarterly installments and aggregating $30 million in each loan year, with the remaining balance due at final maturity on September 6, 2016;
·  A non-revolving loan with a remaining principal amount of approximately $199 million repayable in full on March 6, 2013; and
·  A revolving loan with an outstanding balance of $80 million at December 31, 2010 and allowing for borrowings of up to $1.3 billion.

The revolving loan matures in March 2015. However, if2013 and allowing for borrowings of up to $1.3 billion, maturing on December 1, 2013 Charter Operating has scheduled maturities in excess of $1.0 billion between January 1, 2014 and April 30, 2014, the revolving loan will mature on December 1, 2013 unless lenders holding more than 50% of the revolving loan consent to the maturity being March 2015.  As of January 31, 2011, Charter Operating had maturities of $1.3 billion between January 1, 2014 and April 30, 2014.  The revolving credit facility amount may be increased, but it may not exceed $1.75 billion in aggregate revolving commitments plus the amount outstanding under the non-revolving loan.22, 2018.

Amounts outstanding under the Charter Operating credit facilities bear interest, at Charter Operating’s election, at a base rate or LIBOR, as defined, plus a margin. The applicable LIBOR margin for the non-revolving loansterm A loan and the term B-1 loansrevolver is 2%currently 2.00%. The LIBOR term B-2 loan bearsE and F loans bear interest at LIBOR plus 5.0%2.25%, with a LIBOR floor of 3.5%, or at Charter Operating’s election, a base rate plus a margin of 4.00%0.75%. Charter Operating has currently elected to pay based on the base rate. The applicable margin for the term C loans is currently 3.25% in the case of LIBOR loans, provided that if certain other term loans are borrowed or certain extended loans are established, then the term C loans shall automatically increase to the extent necessary to cause the yield for the term C loans to be 25 basis points less than the yield for the other certain term loans. Charter Operating pays interest equal to LIBOR plus 3.0%2.00% on amounts borrowed under the revolving credit facility and pays a revolving commitment fee of .5%0.30% per annum on the daily average available amount of the revolving commitment, payable quarterly.
    
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The Charter Operating credit facilities also allow us to enter into incremental term loans in the future, with an aggregate, together with all other  then outstanding first lien indebtedness, including any first lien notes, of no more than $7.5 billion (less any principal payments of term loan indebtedness and first lien notes as a result of any sale of assets), with amortization as set forth in the notices establishing such term loans, but with no amortization greater than 1% per year prior to the final maturity of the existing term loans.Although the Charter Operating credit facilities allow for the incurrence of a certain amount of incremental term loans subject to pro-forma compliance with its financial maintenance covenants, no assurance can be given that the Companywe could obtain additional incremental term loans in the future if Charter Operating sought to do so or what amount of incremental term loans would be allowable at any given time under the terms of the Charter Operating credit facilities.

The obligations of Charter Operating under the Charter Operating credit facilities (the “Obligations”) are guaranteed by Charter Operating’s immediate parent company, CCO Holdings, and subsidiaries of Charter Operating, except for certain subsidiaries, including immaterial subsidiaries and subsidiaries precluded from guaranteeing by reason of the provisions of other indebtedness to which they are subject (the “non-guarantor subsidiaries”).Operating. The Obligations are also secured by (i) a lien on substantially all of the assets of Charter Operating and its subsidiaries, (other than assets of the non-guarantor subsidiaries), to the extent such lien can be perfected under the Uniform Commercial Code by the filing of a financing statement, and (ii) a pledge by CCO Holdings of the equity interests owned by it in Charter Operating or any of Charter Operating’s subsidiaries, as well as intercompany obligations owing to it by any of such entities.

Credit Facilities — Restrictive Covenants

CCO Holdings Credit Facility

The CCO Holdings credit facility contains covenants that are substantially similar to the restrictive covenants for the CCO Holdings notes except that the leverage ratio is 5.505.5 to 1.0 and the change of control definition provides that a change of control occurs if a holder becomes the beneficial owner of 35% of more of Charter’s voting stock unless Paul G. Allen beneficially owns a greater percentage.1.0. See “—Summary of Restricted Covenants of Our Notes.” Any failure to maintain the leverage ratio under the CCO Holdings credit facility is not an event of default but would negatively impact CCO Holdings' ability to incur additional debt or make distributions to its parent. At December 31, 2013, CCO Holdings' leverage ratio was approximately 4.5 to 1.0 for purposes of the CCO Holdings credit facility. The CCO Holdings credit facility contains provisions requiring mandatory loan prepayments under specific circumstances, including in connection with certain sales of assets, so long as the proceeds have not been reinvested in the business. The CCO Holdings credit facility permits CCO Holdings and its subsidiaries to make distribu tionsdistributions to pay interest on the CCH II notes, the CCO Holdings notes and the Charter Operating credit facilities and the Charter Operating second-lien notes, provided that, among other things, no default has occurred and is continuing under the CCO Holdings credit facility.

Charter Operating Credit Facilities

The Charter Operating credit facilities contain representations and warranties, and affirmative and negative covenants customary for financings of this type. The financial covenants measure performance against standards set for leverage to be tested as of the end of each quarter. Additionally, theThe Charter Operating credit facilities contain provisions requiring mandatory loan prepayments under specific circumstances, including in connection with certain sales of assets, so long as the proceeds have not been reinvested in the business. Additionally, the Charter Operating credit facilities provisions contain an allowance for restricted payments so long as the consolidated leverage ratio is no greater than 3.5 after giving pro forma effect to such restricted payment. The Charter Operating credit facilities permit Charter Operating and its subsidiaries to make distributions to pay interest on the currently outstanding


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subordinated and parent company indebtedness, provided that, among other things, no default has occurred and is continuing under th ethe Charter Operating credit facilities.

The events of default under the Charter Operating credit facilities include, among other things:

the failure to make payments when due or within the applicable grace period;
• the failure to make payments when due or within the applicable grace period;
• the failure to comply with specified covenants, including, but not limited to, a covenant to deliver audited financial statements for Charter Operating with an unqualified opinion from our independent accountants and without a “going concern” or like qualification or exception;
• the failure to comply with specified covenants including the covenant to maintain the consolidated leverage ratio at or below 5.0 to 1.0 and the consolidated first lien leverage ratio at or below 4.0 to 1.0;
the failure to pay or the occurrence of events that cause or permit the acceleration of other indebtedness owing by CCO Holdings, Charter Operating, or Charter Operating’s subsidiaries in aggregate principal amounts in excess of $100 million;
• the failure to pay or the occurrence of events that result in the acceleration of other indebtedness owing by certain of CCO Holdings’ direct and indirect parent companies in aggregate principal amounts in excess of $200 million;
• the consummation of any transaction resulting in any person or group having power, directly or indirectly, to vote more than 50% of the ordinary voting power for the management of Charter Operating on a fully diluted basis or a change of control shall occur under any indebtedness of CCO Holdings, any first lien notes of Charter Operating

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or any specified long-term indebtedness of Charter Operating (as defined in the Credit Agreement) in excess of $200 million in aggregate principal amount some of which instruments contain a 35% beneficial ownership change of control provision; and
• Charter Operating ceasing to be a wholly-owned direct subsidiary of CCO Holdings, except in certain limited circumstances.
Notes

Provided below is a brief description of the notes issued by CCH II, CCO Holdings, and Charter Operating.Operating, or Charter Operating’s subsidiaries in aggregate principal amounts in excess of $100 million; and

CCH II Notes

On November 30, 2009, CCH II and CCH II Capital Corp. issued approximately $1.8 billionsimilar to provisions contained in total principal amount of new 13.5% senior notes (the “CCH II 2016 Notes”). Such notes are guaranteed by Charter.  The CCH II 2016 Notes pay interest in cash semi-annually in arrears at the rate of 13.5% per annum and are unsecured and will mature on November 30, 2016.  The CCH II 2016 Notes are structurally subordinated to all obligations of the subsidiaries of CCH II, including the CCO Holdings notes and credit facility, the consummation of any change of control transaction resulting in any person or group having power, directly or indirectly, to vote more than 50% of the ordinary voting power for the management of Charter Operating on a fully diluted basis and the occurrence of a ratings event including a downgrade in the corporate family rating during a ratings decline period.

At December 31, 2013, Charter operating notesOperating had a consolidated leverage ratio of approximately 1.3 to 1.0 and a consolidated first lien leverage ratio of 1.1 to 1.0. Both ratios are in compliance with the ratios required by the Charter Operating credit facilities. A failure by Charter Operating to maintain the financial covenants would result in an event of default under the Charter Operating credit facilities and the debt of CCO Holdings. See “- Cross Acceleration” and “Risk Factors - The agreements and instruments governing our debt contain restrictions and limitations that could significantly affect our ability to operate our business, as well as significantly affect our liquidity."

CCO Holdings Notes

On April 28, 2010, CCO Holdings and CCO Holdings Capital Corp. jointly issued $900 million aggregate principal amount of 7.875% Senior Notes due 2018 (the “CCO Holdings 2018 Notes”) and $700 million aggregate principal amount of 8.125% Senior Notes due 2020 (the “CCO Holdings 2020 Notes”). On September 27, 2010, CCO Holdings and CCO Holdings Capital Corp. issued $1.0 billion aggregate principal amount of 7.25% Senior Notes due 2017 (the “CCO Holdings 2017 Notes”). Such notes are guaranteed by Charter.

The CCO Holdings 2017 Notes, CCO Holdings 2018 Notes and CCO Holdings 2020 Notesnotes are senior debt obligations of CCO Holdings and CCO Holdings Capital Corp. Such notes are guaranteed by Charter. They rank equally with all other current and future unsecured, unsubordinated obligations of CCO Holdings and CCO Holdings Capital Corp. The CCO Holdings 2017 Notes, CCO Holdings 2018 Notes and CCO Holdings 2020 NotesThey are structurally subordinated to all obligations of subsidiaries of CCO Holdings, including the Charter Operating notes and Charter Operating credit facilities.

On January 11, 2011, CCO Holdings, LLC and CCO Holdings Capital Corp. completed the sale of $1.1 billion aggregate principal amount of 7.00% senior notes due 2019. On January 24, 2011, CCO Holdings and CCO Holdings Capital Corp. completed the sale of $300 million aggregate principal amount of 7.00% senior notes due 2019.  Upon completion of this offering, the aggregate principal amount of outstanding notes under this series is $1.4 billion (the “CCO Holdings 2019 Notes”). The payment obligations under the notes are fully and unconditionally guaranteed on a senior unsecured basis by Charter.  The net proceeds of the issuances of the CCO Holdings 2019 Notes were contributed by CCO Holdings to Charter Operating as a capital contribution and were used to repay indebtedness under the Charter Operating credit facilities.

The CCO Holdings 2019 Notes are senior debt obligations of CCO Holdings and CCO Holdings Capital Corp. They rank equally with all other current and future unsecured, unsubordinated obligations of CCO Holdings and CCO Holdings Capital Corp.  The CCO Holdings 2019 Notes are structurally subordinated to all obligations of subsidiaries of CCO Holdings, including the Charter Operating notes and Charter Operating credit facilities.

Charter Operating Notes

As of December 31, 2010, Charter Operating had $1.1 billion principal amount of 8.0% senior second-lien notes due 2012 and $546 million principal amount of 10.875% senior second-lien notes due 2014.

Subject to specified limitations, CCO Holdings and those subsidiaries of Charter Operating that are guarantors of, or otherwise obligors with respect to, indebtedness under the Charter Operating credit facilities and related obligations are required to guarantee the Charter Operating notes.  The note guarantee of each such guarantor is:

·a senior obligation of such guarantor;
·structurally senior to the outstanding CCO Holdings notes and the outstanding CCH II notes;
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·senior in right of payment to any future subordinated indebtedness of such guarantor; and
·
effectively senior to the relevant subsidiary’s unsecured indebtedness, to the extent of the value of the
collateral but subject to the prior lien of the credit facilities.
The Charter Operating notes and related note guarantees are secured by a second-priority lien on all of Charter Operating’s and its subsidiaries’ assets that secure the obligations of Charter Operating or any subsidiary of Charter Operating with respect to the Charter Operating credit facilities and the related obligations.  The collateral currently consists of the capital stock of Charter Operating held by CCO Holdings, all of the intercompany obligations owing to CCO Holdings by Charter Operating or any subsidiary of Charter Operating, and substantially all of Charter Operating’s and the guarantors’ assets (other than the assets of CCO Holdings) in which security interests may be perfected under the Uniform Commercial Code by filing a financing statement (including capital stock and intercompany obli gations), including, but not limited to:

·
with certain exceptions, all capital stock (limited in the case of capital stock of foreign subsidiaries, if any, to 66% of the capital stock of first tier foreign Subsidiaries) held by Charter Operating or any guarantor;
and
·with certain exceptions, all intercompany obligations owing to Charter Operating or any guarantor.

In the event that additional liens are granted by Charter Operating or its subsidiaries to secure obligations under the Charter Operating credit facilities or the related obligations, second priority liens on the same assets will be granted to secure the Charter Operating notes, which liens will be subject to the provisions of an intercreditor agreement (to which none of Charter Operating or its affiliates are parties).  Notwithstanding the foregoing sentence, no such second priority liens need be provided if the time such lien would otherwise be granted is not during a guarantee and pledge availability period (when the Leverage Condition is satisfied), but such second priority liens will be required to be provided in accordance with the foregoing sentence on or prior to the fifth business day of the commencement of the next succeeding guarantee and pledge availability period.

The Charter Operating notes are senior debt obligations of Charter Operating and Charter 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.

Redemption Provisions of Our Notes

The various notes issued by our subsidiaries included in the table may be redeemed in accordance with the following table or are not redeemable until maturity as indicated:

Note Series Redemption Dates Percentage of Principal
CCH II:     
13.5%7.250% senior notes due 2016December 1, 2012 – November 30, 2013106.75%
December 1, 2013 – November 30, 2014103.375%
December 1, 2014 – November 30, 2015101.6875%
Thereafter100.000%
CCO Holdings:
7.25% senior notes due 2017 October 30, 2013 – October 29, 2014 105.438%
  October 30, 2014 – October 29, 2015 103.625%
  October 30, 2015 – October 29, 2016 101.813%
  Thereafter 100.000%
7.875%7.000% senior notes due 20182019 April 30, 2013January 15, 2014 – April 29, 2014January 14, 2015 105.906%105.250%
  April 30, 2014January 15, 2015 – April 29, 2015January 14, 2016 103.938%103.500%
  April 30, 2015January 15, 2016 – April 29, 2016January 14, 2017 101.969%101.750%
  Thereafter 100.000%
8.125% senior notes due 2020 April 30, 2015 – April 29, 2016 104.063%
  April 30, 2016 – April 29, 2017 102.708%
  April 30, 2017 – April 29, 2018 101.354%
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  Thereafter 100.000%
Charter Operating:7.375% senior notes due 2020 December 1, 2015 – November 30, 2016 
8% senior second-lien notes due 2012Non-callable*
10.875% senior second-lien notes due 2014March 15, 2012 – March 14, 2013105.483%103.688%
  March 15, 2013December 1, 2016 – March 14, 2014November 30, 2017 102.719%101.844%
  Thereafter 100.000%
5.250% senior notes due 2021March 15, 2016 – March 14, 2017103.938%
March 15, 2017 – March 14, 2018102.625%
March 15, 2018 – March 14, 2019101.313%
Thereafter100.000%
6.500% senior notes due 2021April 30, 2015 – April 29, 2016104.875%
April 30, 2016 – April 29, 2017103.250%
April 30, 2017 – April 29, 2018101.625%
Thereafter100.000%
6.625% senior notes due 2022January 31, 2017 – January 30, 2018103.313%
January 31, 2018 – January 30, 2019102.208%
January 31, 2019 – January 30, 2020101.104%
Thereafter100.000%
5.250% senior notes due 2022September 30, 2017 – September 29, 2018102.625%
September 30, 2018 – September 29, 2019101.750%
September 30, 2019 – September 29, 2020100.875%
Thereafter100.000%
5.125% senior notes due 2023February 15, 2018 – February 14, 2019102.563%
February 15, 2019 – February 14, 2020101.708%
February 15, 2020 – February 14, 2021100.854%
Thereafter100.000%
5.750% senior notes due 2023March 1, 2018 – February 28, 2019102.875%
March 1, 2019 – February 29, 2020101.917%
March 1, 2020 – February 28, 2021100.958%
Thereafter100.000%
5.750% senior notes due 2024July 15, 2018 – July 14, 2019102.875%
July 15, 2019 – July 14, 2020101.917%
July 15, 2020 – July 14, 2021100.958%
Thereafter 100.000%


*Charter Operating may, at any time and from time to time, at their option, redeem the outstanding 8% second lien notes due 2012, in whole or in part, at a redemption price equal to 100% of the principal amount thereof plus accrued and unpaid interest, if any, to the redemption date, plus the Make-Whole Premium.  The Make-Whole Premium is an amount equal to the excess of (a) the present value of the remaining interest and principal payments due on an 8% senior second-lien 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.

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In the event that a specified change of control event occurs, each of the respective issuers of the notes must offer to repurchase any then outstanding notes at 101% of their principal amount or accrued value, as applicable, plus accrued and unpaid interest, if any.

Summary of Restrictive Covenants of Our Notes

The following description is a summary of certain restrictions of our Debt Agreements.  The summary does not restate the terms of the Debt Agreements in their entirety, nor does it describe all restrictions of the Debt Agreements.  The agreements and instruments governing each of the Debt Agreementsnotes issued are complicated and you should consult such agreements and instruments for more detailed information regarding the Debt Agreements.notes issued.  

The notes issued by certain of our subsidiaries (together, theCCO Holdings (the “note issuers”issuer”) were issued pursuant to indentures that contain covenants that restrict the ability of the note issuersissuer and theirits subsidiaries to, among other things:

·  incur indebtedness;
·  pay dividends or make distributions in respect of capital stock and other restricted payments;
·  issue equity;
·  make investments;
·  create liens;
·  sell assets;
·  consolidate, merge, or sell all or substantially all assets;
·  enter into sale leaseback transactions;
·  create restrictions on the ability of restricted subsidiaries to make certain payments; or
·  enter into transactions with affiliates.

However, such covenants are subject to a number of important qualifications and exceptions. Below we set forth a brief summary of certain of the restrictive covenants.

Restrictions on Additional Debt

The limitations on incurrence of debt and issuance of preferred stock contained in various indentures permit each of the respective notes issuersnote issuer and its restricted subsidiaries to incur additional debt or issue preferred stock, so long as, after giving pro forma effect to the incurrence, the leverage ratio would be below a specified level for each of the note issuers.issuer. The leverage ratios under our notes for CCH II, CCO Holdings and Charter Operating are as follows:is 6.0 to 1.

IssuerLeverage Ratio
CCH II5.75 to 1
CCO Holdings6.0 to 1
Charter Operating4.25 to 1

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In addition, regardless of whether the leverage ratio could be met, so long as no default exists or would result from the incurrence or issuance, eachthe note issuer and theirits restricted subsidiaries are permitted to issue among other permitted indebtedness:

·up to an amountup to $1.5 billion of debt under credit facilities not otherwise allocated as indicated below:
·  CCH II: $1 billion
up to the greater of $300 million and 5% of consolidated net tangible assets to finance the purchase or capital lease of new assets;
·  CCO Holdings:  $1.5 billion
up to the greater of $300 million and 5% of consolidated net tangible assets of additional debt for any purpose; and
·  Charter Operating: $6.8 billion
·up to $75 million of debt incurred to finance the purchase or capital lease of new assets;
·up to $300 million of additional debt for 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 fluctuation in interest rates.

Indebtedness under a single facility or agreement may be incurred in part under one of the categories listed above and in part under another, and generally may also later be reclassified into another category including as debt incurred under the leverage ratio. Accordingly, indebtedness under our credit facilities ismay be incurred under a combination of the categories of permitted indebtedness listed above. The restricted subsidiaries of the note issuersissuer are generally not permitted to issue subordinated debt securities.

Restrictions on Distributions

Generally, under the various indentures, each of the note issuersCCO Holdings and theirits respective restricted subsidiaries are permitted to pay dividends on or repurchase equity interests, or make other specified restricted payments, only if the applicable issuerit can incur $1.00 of new debt under the applicable6.0 to 1.0 leverage ratio test after giving effect to the transaction and if no default exists or would exist as a consequence of such incurrence. If those conditions are met, restricted payments may be made in a total amount of up to the following amounts for the applicable issuersum of 100% of CCO Holdings’ Consolidated EBITDA, as indicated below:defined, minus 1.3 times its Consolidated Interest Expense, as defined, cumulatively from


·  CCH II:  the sum of 100% of CCH II’s Consolidated EBITDA, as defined, minus 1.3 times its Consolidated Interest Expense, as defined, cumulatively from October 1, 2009 plus 100% of new cash and appraised non-cash equity proceeds received by CCH II and not allocated to certain investments, cumulatively from November 30, 2009;
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·  CCO Holdings:  the sum of 100% of CCO Holdings’ Consolidated EBITDA, as defined, minus 1.3 times its Consolidated Interest Expense, as defined, cumulatively from April 1, 2010, plus 100% of new cash and appraised non-cash equity proceeds received by CCO Holdings and not allocated to certain investments, cumulatively from the issue date, plus $2 billion; and


·  Charter Operating:  the sum of 100% of Charter Operating’s Consolidated EBITDA, as defined, minus 1.3 times its Consolidated Interest Expense, as defined, plus 100% of new cash and appraised non-cash equity proceeds received by Charter Operating and not allocated to certain investments, cumulatively from April 1, 2004, plus $100 million.
April 1, 2010, plus 100% of new cash and appraised non-cash equity proceeds received by CCO Holdings and not allocated to certain investments, cumulatively from the issue date, plus $2 billion.

In addition, each of the note issuersCCO Holdings may make distributions or restricted payments, so long as no default exists or would be caused by transactions among other distributions or restricted payments:

·to repurchase management equity interests in amounts not to exceed $10 million per fiscal year;
·regardless of the existence of any default, to pay pass-through tax liabilities in respect of ownership of equity interests in the applicable issuer or its restricted subsidiaries; or
·to make other specified restricted payments including merger fees up to 1.25% of the transaction value, repurchases using concurrent new issuances, and certain dividends on existing subsidiary preferred equity interests.

Charter Operating and its restricted subsidiaries may make distributions or restricted payments:  (i) so long as certain defaults do not exist and even if the applicable leverage test referred to above is not met, to enable certain of its parents to pay interest on certain of their indebtedness or (ii) so long as the applicable issuer could incur $1.00 of indebtedness under the applicable leverage ratio test referred or its restricted subsidiaries; or
to above, to enable certain of its parents to purchase, redeem or refinance certain indebtedness.  CCO Holdings may make distributions orother specified restricted payments even ifincluding merger fees up to 1.25% of the applicable leverage test referred to above is not met to enable any parent to pay interesttransaction value, repurchases using concurrent new issuances, and certain dividends on or to purchase, redeem, repay or prepay certain of their indebtedness.existing subsidiary preferred equity interests.

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Restrictions on Investments

Each of the note issuersCCO Holdings and theirits respective restricted subsidiaries may not make investments except (i) permitted investments or (ii) if, after giving effect to the transaction, their leverage would be above the applicable leverage ratio.

Permitted investments include, among others:

·  investments in and generally amounginvestments in and generally among restricted subsidiaries or by restricted subsidiaries in the applicable issuer;
·  For CCH II:
investments aggregating up to $750 million at any time outstanding.
investments aggregating up to 100% of new cash equity proceeds received by CCO Holdings since the issue date to the extent the proceeds have not been allocated to the restricted payments covenant.
·  investments aggregating up to $650 million at any time outstanding;
·  investments aggregating up to 100% of new cash equity proceeds received by CCH II since November 30, 2009 to the extent the proceeds have not been allocated to the restricted payments covenant;
·  For CCO Holdings:
·  investments aggregating up to $750 million at any time outstanding;
·  investments aggregating up to 100% of new cash equity proceeds received by CCO Holdings since the issue date to the extent the proceeds have not been allocated to the restricted payments covenant;
·  For Charter Operating:
·  investments aggregating up to $750 million at any time outstanding;
·  investments aggregating up to 100% of new cash equity proceeds received by CCO Holdings since April 27, 2004 to the extent the proceeds have not been allocated to the restricted payments covenant.

Restrictions on Liens

Charter Operating and its restricted subsidiaries are not permitted to grant liens senior to the liens securing the Charter Operating notes, other than permitted liens, on their assets to secure indebtedness or other obligations, if, after giving effect to such incurrence, the senior secured leverage ratio (generally, the ratio of obligations secured by first priority liens to four times the last quarterly EBITDA, as defined, for the most recent fiscal quarter for which internal financial reports are available) would exceed 3.75 to 1.0.  The restrictions on liens for each of the other note issuersCCO Holdings only applies to liens on assets of the issuers themselvesissuer itself and does not restrict liens on assets of subsidiaries. With respect to all of the note issuers, permittedPermitted liens include liens securing indebtedness and other oblig ationsobligations under credit facilities, (subject to specified limitations in the case of Charter Operating), liens securing the purchase price of financed new assets, liens securing indebtedness of up to $50 million (in the case of CCO Holdings notes, the greater of $50 million and 1.0% of consolidated net tangible assets)assets and other specified liens.

Restrictions on the Sale of Assets; Mergers

The note issuers areCCO Holdings is generally not permitted to sell all or substantially all of theirits assets or merge with or into other companies unless theirits leverage ratio after any such transaction would be no greater than theirits leverage ratio immediately prior to the transaction, or unless after giving effect to the transaction, leverage would be below the applicable leverage ratio for the applicable issuer,6.0 to 1.0, no default exists, and the surviving entity is a U.S. entity that assumes the applicable notes.

The note issuersCCO Holdings and theirits restricted subsidiaries may generally not otherwise sell assets or, in the case of restricted subsidiaries, issue equity interests, in excess of $100 million unless they receive consideration at least equal to the fair market value of the assets or equity interests, consisting of at least 75% in cash, assumption of liabilities, securities converted into cash within 60 days, or productive assets. The note issuersCCO Holdings and theirits restricted subsidiaries are then required within 365 days after any asset sale either to use or commit to use the net cash proceeds over a specified threshold to acquire assets used or useful in their businesses or use the net cash proceeds to repay specified debt, or to offer to repurchase the issuer’s notes with any remaining proceeds.

Restrictions on Sale and Leaseback Transactions

The note issuersissuer and theirits restricted subsidiaries may generally not engage in sale and leaseback transactions unless, at the time of the transaction, the applicablenote issuer could have incurred secured indebtedness under its leverage ratio test in an amount equal to the present value of the net rental payments to be made under the lease, and the sale of the assets and application of proceeds is permitted by the covenant restricting asset sales.
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Prohibitions on Restricting Dividends

The note issuers’issuer's restricted subsidiaries may generally not enter into arrangements involving restrictions on their ability to make dividends or distributions or transfer assets to the applicable note issuer unless those restrictions with respect to financing arrangements are on terms that are no more restrictive than those governing the credit facilities existing when they entered into the applicable indentures or are not materially more restrictive than customary terms in comparable financings and will not materially impair the applicable note issuers’issuer's ability to make payments on the notes.


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Affiliate Transactions

The indentures also restrict the ability of the note issuersCCO Holdings and theirits restricted subsidiaries to enter into certain transactions with affiliates involving consideration in excess of $15$25 million ($25 million in the case of CCO Holdings notes) without a determination by the board of directors of the applicable note issuer that the transaction complies with this covenant, or transactions with affiliates involving over $50$100 million ($100 million in the case of CCO Holdings notes) without receiving an opinion as to the fairness to the holders of such transaction from a financial point of view issued by an accounting, appraisal or investment banking firm of national standing.

Cross Acceleration

The indentures of our subsidiariesCCO Holdings include various events of default, including cross acceleration provisions. Under these provisions, a failure by any of the issuersnote issuer or any of theirits restricted subsidiaries to pay at the final maturity thereof the principal amount of other indebtedness having a principal amount of $100 million or more (or any other default under any such indebtedness resulting in its acceleration) would result in an event of default under the indenture governing the applicable notes. As a result, an event of default related to the failure to repay principal at maturity or the acceleration of the indebtedness under the CCH II notes, CCO Holdings notes, CCO Holdings credit facility Charter Operating notes or the Charter Operating credit facilities could cause cross-defaults under our subsidiaries&# 8217;all of CCO Holdings' indentures.

Recently Issued Accounting Standards

In October 2009, the FASB issued guidance included in ASU 2009-13, Multiple-Deliverable Revenue Arrangements (“ASU 2009-13”). ASU 2009-13 sets forth requirements that must be met for an entity to recognize revenue from the sale of a delivered item that is part of a multiple-element arrangement when other items have not yet been delivered. We adopted ASU 2009-13 on January 1, 2011.  The adoption did not have a material impact to our consolidated financial statements.

In January 2010,June 2013, the FASB issued guidance included in ASU 2010-06, Fair Value Measurements and Disclosures – Improving Disclosures about Fair Value Measurements (“ASU 2010-06”Financial Accounting Standards Board's Emerging Issues Task Force reached a final consensus on Issue 13-C, Presentation of an Unrecognized Tax Benefit when a Net Operating Loss or Tax Credit Carryforward Exists ("Issue 13-C"). ASU 2010-06 provides amendments to Topic 820 to provide more robust fair value disclosures. The disclosures about purchases, sales, issuancesIssue 13-C states that entities should present the unrecognized tax benefit as a reduction of the deferred tax asset for a net operating loss or similar tax loss or tax credit carryforward rather than as a liability when the uncertain tax position would reduce the net operating loss or other carryforward under the tax law. Issue 13-C requires prospective application (including accounting for uncertain tax positions that exist upon date of adoption) with optional retrospective application and settlements relating to Level 3 measurements is effective for fiscal yearsannual and interim periods beginning after December 15, 20102013, with early adoption permitted. The Company adopted Issue 13-C in the second quarter of 2013 and all interim periods within. We adopted ASU 2010-06 on January 1, 2011.  The adoption did not have a material impact on our consolidated financial statements.applied it retrospectively.

Item 7A.Quantitative and Qualitative Disclosures About Market Risk.

Interest Rate Risk

We are exposed to various market risks, including fluctuations in interest rates. We have used interest rate swap agreements to manage our interest costs and reduce our exposure to increases in floating interest rates.rates. We manage our exposure to fluctuations in interest rates by maintaining a mix of fixed and variable rate debt. Using interest rate swap agreements, we agree to exchange, at specified intervals through 2015,2017, the difference between fixed and variable interest amounts calculated by reference to agreed-upon notional principal amounts.

As of December 31, 20102013 and 2009,2012, the accreted valueprincipal amount of our debt was approximately $12.3$14.2 billion and $13.3$12.9 billion, respectively.  As of December 31, 20102013 and 2009,2012, the weighted average interest rate on the credit facility debt, including the effects of our interest rate swap agreements, was approximately 3.8%3.6% and 2.6%4.2%, respectively, and the weighted average interest rate on the high-yield notes was approximately 9.7%6.4% and 10.4%6.7%, respectively, resulting in a blended weighted average interest rate of 6.7%5.6% and 5.5%6.0%, respectively.  The increase in the credit
61
facility and blended weighted average interest rates is primarily due to the $2.0 billion notional amount of interest rate swap agreements entered into in April 2010.  The interest rate on approximately 65%84% and 37%87% of the total principal amount of our debt was effectively fixed, including the effects of our interest rate swap agreements, as of December 31, 20102013 and 2009,2012, respectively.

We do not hold or issue derivative instruments for speculative trading purposes. We, haveuntil de-designating in the first quarter of 2013, had certain interest rate derivative instruments that have beenwere designated as cash flow hedging instruments.instruments for GAAP purposes. Such instruments effectively convertconverted variable interest payments on certain debt instruments into fixed payments. For qualifying hedges, realized derivative gains and losses offset related results on hedged items in the consolidated statements of operations. We formally document, designatedocumented, designated and assessassessed the effectiveness of transactions that receivereceived hedge accounting.For each of the years ended December 31, 2010, 2009 and 2008, there was no cash flow hedge ineffectiveness on interest rate swap agreements.

Changes in the fair value of interest rate agreementsderivative instruments that arewere designated as hedging instruments of the variability of cash flows associated with floating-rate debt obligations, and that meetmet effectiveness criteria arewere reported in other comprehensive loss.  For the years ended December 31, 2010, 2009 and 2008, losses of $57 million, $9 million and $180 million, respectively, were recorded inaccumulated other comprehensive loss. The amounts arewere subsequently reclassified as an increase or decrease to interest expense in the same periods in which the related interest on the floating-rate debt obligations affectsaffected earnings (losses). For the years ended December 31, 2013, 2012 and 2011, gains of $7 million and losses of $10 million and $8 million, respectively, related to derivative instruments designated as cash flow hedges, were recorded in other comprehensive loss.



56


CertainDue to repayment of variable rate credit facility debt without a LIBOR floor, certain interest rate derivative instruments were notde-designated as cash flow hedges during the three months ended March 31, 2013, as they no longer met the criteria for cash flow hedging specified by GAAP. In addition, on March 31, 2013, the remaining interest rate derivative instruments that continued to be highly effective cash flow hedges for GAAP purposes were electively de-designated. On the date of de-designation, we completed a final measurement test for each interest rate derivative instrument to determine any ineffectiveness and such amount was reclassified from accumulated other comprehensive loss into gain on derivative instruments, net in our consolidated statements of operations. For the year ended December 31, 2013, a loss of $27 million related to the reclassification from accumulated other comprehensive loss into earnings as a result of cash flow hedge discontinuance was recorded in gain on derivative instruments, net. While these interest rate derivative instruments are no longer designated as cash flow hedges as they did not meet effectiveness criteria.  However,for accounting purposes, management believescontinues to believe such instruments wereare closely correlated with the respective debt, thus managing associated risk. Interest rate derivative instruments not designated as hedges wereare marked to fair value, with the impact recorded as other income (expenses),a gain or loss on derivative instruments, net in our consolidated statements of operations. For the yearsyear ended December 31, 2009 and 20082013, other income (expense), net included lossesgains of $4$38 million and $62 million, respectively, resulting fromrelated to the change in fair value of interest rate derivative instruments not designated as hedges.  We did not hold anycash flow hedges was recorded in gain on derivative instruments, net. The balance that remains in accumulated other comprehensive loss for these interest rate derivatives not designatedderivative instruments will be amortized over the respective lives of the contracts and recorded as hedges during 2010.a loss within gain on derivative instruments, net in our consolidated statements of operations. The net amount of existing losses that are reported in accumulated other comprehensive loss as of December 31, 2013 that is expected to be reclassified into earnings within the next twelve months is approximately $19 million.

The table set forth below summarizes the fair values and contract terms of financial instruments subject to interest rate risk maintained by us as of December 31, 20102013 (dollars in millions) and does not reflect the issuance of the CCO Holdings notes in January 2011 and the application of proceeds to repay borrowings under the Charter Operating credit facilities::

  
2011
  
2012
  
2013
  
2014
  
2015
  
Thereafter
  
Total
  
Fair Value at December 31, 2010
 
Debt:                        
Fixed Rate $--  $1,100  $--  $546  $--  $4,366  $6,012  $6,596 
Average Interest Rate  --   8.00%  --   10.88%  --   10.05%  9.75%    
                                 
Variable Rate $58  $58  $337  $2,985  $30  $2,836  $6,304  $6,252 
Average Interest Rate  3.50%  4.24%  4.75%  5.69%  7.25%  7.75%  6.54%    
                                 
Interest Rate Instruments:                                
Variable to Fixed Rate $--  $--  $900  $800  $300  $--  $2,000  $57 
Average Pay Rate  --   --   5.21%  5.65%  5.99%  --   5.50%    
Average Receive Rate  --   --   5.51%  6.41%  7.00%  --   6.09%    

Amounts outstanding under the revolving credit facility mature on March 6, 2015; provided, however, that unless otherwise directed by the revolving lenders holding more than 50% of the revolving commitments, the termination date will be December 1, 2013 if, on December 1, 2013, Charter Operating and its subsidiaries do not have less than $1.0 billion of indebtedness on a consolidated basis with maturities between January 1, 2014 and April 30, 2014. Because Charter Operating currently has indebtedness in excess of $1.0 billion with maturities between January 1, 2014 and April 30, 2014, the amount outstanding under the revolving credit facility is included in 2013 in the above table.
  2014 2015 2016 2017 2018 Thereafter Total Fair Value at December 31, 2013
Debt:                
Fixed Rate $—
 $—
 $—
 $1,000
 $—
 $9,350
 $10,350
 $10,384
Average Interest Rate —% —% —% 7.25% —% 6.28% 6.37%  
                 
Variable Rate $414
 $65
 $93
 $102
 $673
 $2,551
 $3,898
 $3,848
Average Interest Rate 2.80% 2.86% 3.84% 4.97% 5.67% 6.83% 6.01%  
                 
Interest Rate Instruments:                
Variable to Fixed Rate $800
 $300
 $250
 $850
 $—
 $—
 $2,200
 $30
Average Pay Rate 4.65% 4.99% 3.89% 3.84% —% —% 4.30%  
Average Receive Rate 2.55% 2.75% 4.47% 5.48% —% —% 3.93%  

At December 31, 2010,2013, we had $2.0$2.2 billion in notional amounts of interest rate swaps outstanding. This includes $550 million in delayed start interest rate swaps that become effective in March 2014 through March 2015.  In any future quarter in which a portion of these delayed start hedges first becomes effective, an equal or greater notional amount of the currently effective swaps are scheduled to mature.  Therefore, the $1.7 billion notional amount of currently effective interest rate swaps will gradually step down over time as current swaps mature and an equal or lesser amount of delayed start swaps become effective.

The notional amounts of interest rate instruments do not represent amounts exchanged by the parties and, thus, are not a measure of our exposure to credit loss. The amounts exchanged are determined by reference to the notional amount and the
62
other terms of the contracts. The estimated fair value is determined using a present value calculation based on an implied forward LIBOR curve (adjusted for Charter Operating’s or counterparties’ credit risk). Interest rates on variable debt are estimated using the average implied forward LIBOR for the year of maturity based on the yield curve in effect at December 31, 20102013 including applicable bank spread.

Item 8. Financial Statements and Supplementary Data.

Our consolidated financial statements, the related notes thereto, and the reports of independent accountants are included in this annual report beginning on page F-1.



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Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

None.

Item 9A. Controls and Procedures.

Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures

As of the end of the period covered by this report, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we have evaluated the effectiveness of the design and operation of our disclosure controls and procedures with respect to the information generated for use in this annual report. The evaluation was based in part upon reports and certifications provided by a number of executives. Based upon, and as of the date of that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that the disclosure 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, summariz edsummarized and reported within the time periods specified in the SEC’s rules and forms.

In designing and evaluating the disclosure controls and procedures, our management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable, not absolute, assurance of achieving the desired control objectives, and management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based upon the above evaluation, we believe that our controls provide such reasonable assurances.

There was no change in our internal control over financial reporting during the fourth quarter of 20102013 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Management’s Report on Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining 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 of published financial statements.

Management has assessed the effectiveness of our internal control over financial reporting as of December 31, 2010.2013. In making this assessment, we used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal Control — Integrated Framework.Framework (1992). Based on management’s assessment utilizing these criteria we believe that, as of December 31, 2010,2013, our internal control over financial reporting was effective.

We acquired Bresnan in July 2013. As permitted by SEC guidance, management excluded these acquired companies from its assessment of the effectiveness of our internal control over financial reporting as of December 31, 2013. In total, Bresnan represented 10% and 3% of our total assets and total revenues, respectively, as of and for the year ended December 31, 2013. Excluding identifiable intangible assets and goodwill recorded in the business combination, Bresnan represented 3% of our total assets as of December 31, 2013.

Our independent auditors, KPMG LLP, have audited our internal control over financial reporting as stated in their report on page F-2.

Item 9B. Other Information.

None.Disclosure Pursuant to Section 219 of the Iran Threat Reduction and Syria Human Rights Act
Our former principal stockholder, through its management company, Apollo Global Management, LLC (“Apollo”) provided notice to Charter on October 29, 2013, that certain investment funds managed by affiliates of Apollo may be deemed affiliates of CEVA Holdings, LLC (“CEVA”), which through subsidiaries was involved in certain transactions which constitute covered activities under the Iran Threat Reduction and Syria Human Rights Act of 2012 (“ITRA”). Apollo was previously a principal stockholder of Charter and had two representatives on Charter’s board of directors for the first and a portion of the second quarter of 2013, when some of the covered activities occurred. As a result, we are providing disclosure pursuant to Section 219 of ITRA and Section 13(r) of the Securities Exchange Act of 1934, as amended.


58


Apollo notified Charter that, according to CEVA, in December 2012, CEVA Freight Italy Srl provided customs brokerage and freight forwarding services for the export to Iran of two measurement instruments to the Iranian Offshore Engineering Construction Company, a joint venture between two entities that are identified on OFAC’s list of Specially Designated Nationals (“SDN”). The revenues and net profits for these services were approximately $1,260.64 and $151.30, respectively. In February 2013, CEVA Freight Holdings (Malaysia) SDN BHD (“CEVA Malaysia”) provided customs brokerage for export and local haulage services for a shipment of polyethylene resin to Iran shipped on a vessel owned and/or operated by HDS Lines, also an SDN. The revenues and net profits for these services were approximately $779.54 and $311.13, respectively. In September 2013, CEVA Malaysia provided customs brokerage services for the import into Malaysia of fruit juice from Alifard Co. in Iran via HDS Lines. The revenues and net profits for these services were approximately $227.41 and $89.29, respectively.
All of the information in the foregoing paragraph is based solely on information in the notice provided by Apollo. Charter has no involvement in the business of CEVA and received no direct or indirect benefits from the transactions described above.






59
63


PART III

Item 10. Directors, Executive Officers and Corporate Governance.

The information required by Item 10 will be included in Charter’s 20112014 Proxy Statement (the “Proxy Statement”) under the headings “Election of Class A Directors,” “Section 16(a) Beneficial Ownership Reporting Requirements,” and “Code of Ethics,” or in amendment to this Annual Report on Form 10-K and is incorporated herein by reference.

Item 11. Executive Compensation.
 
The information required by Item 11 will be included in the Proxy Statement under the headings “Executive Compensation,” “Election of Class A Directors – Director Compensation” and “Compensation Discussion and Analysis,” or in an amendment to this Annual Report on Form 10-K and is incorporated herein by reference. Information contained in the Proxy Statement or an amendment to this Annual Report on Form 10-Kunder 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 StockholdersStockholder Matters.
 
The information required by Item 12 will be included in the Proxy Statement under the heading “Security Ownership of Certain Beneficial Owners and Management” or in amendment to this Annual Report on Form 10-K and is incorporated herein by reference.

Item 13. Certain Relationships and Related Transactions, and Director Independence.
 
The information required by Item 13 will be included in the Proxy Statement under the heading “Certain Relationships and Related Transactions” and “Election of Class A Directors” or in amendment to this Annual Report on Form 10-K and is incorporated herein by reference.

Item 14. Principal Accounting Fees and Services.
 
The information required by Item 14 will be included in the Proxy Statement under the heading “Accounting Matters” or in amendment to this Annual Report on Form 10-K and is incorporated herein by reference.


64

60


PART IV

Item 15. Exhibits and Financial Statement Schedules.

(a)The following documents are filed as part of this annual report:

(1)Financial 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 required or are not applicable, or the required information is set forth in the applicable financial statements or notes thereto.

(3)The index to the exhibits begins on page E-1 of this annual report.



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SIGNATURES

65
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, Charter Communications, Inc. has duly caused this annual report to be signed on its behalf by the undersigned, thereunto duly authorized.

  CHARTER COMMUNICATIONS, INC.,
  Registrant
     
  By: 
/s/ Michael J. Lovett
Thomas M. Rutledge
    Michael J. LovettThomas M. Rutledge
    President, Chief Executive Officer and Director
Date: March 1, 2011February 21, 2014    


S- 1



POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Richard R. Dykhouse and Kevin D. Howard, and each of them (with full power to each of them to act alone), his or her true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, for him or her and in his or her name, place and stead, in any and all capacities, to sign on his or her behalf individually and in each capacity stated below any and all amendments (including post-effective amendments) to this annual report, and to file the same, with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents and either of them, or their substitutes, may lawfully do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of Charter Communications, Inc. and in the capacities and on the dates indicated.

SignatureTitleDate
/s/ Michael J. Lovett                                                                                       
Michael J. LovettThomas M. Rutledge    
Thomas M. Rutledge
President, Chief Executive Officer, Director

(Principal Executive Officer)
March 1, 2011February 21, 2014
   
/s/ Christopher L. Winfrey    

Christopher L. Winfrey
Executive Vice President and Chief Financial Officer
(Principal (Principal Financial Officer)
March 1, 2011February 21, 2014
   
/s/ Kevin D. Howard     

Kevin D. Howard
Senior Vice President – Finance, Controller and Chief
Accounting Officer (Principal Accounting Officer)
March 1, 2011February 21, 2014
/s/ Robert Cohn                                                                                              
Robert Cohn
DirectorMarch 1, 2011
/s/ W. Lance Conn                                                                                         
W. Lance Conn
DirectorMarch 1, 2011
   
/s/ Darren GlattBalan Nair    
Balan Nair
Darren Glatt
DirectorMarch 1, 2011February 21, 2014
/s/ Craig A. Jacobson                                                                                    
Craig A. Jacobson
DirectorMarch 1, 2011
   
/s/ Bruce A. KarshW. Lance Conn    
Bruce A. Karsh
W. Lance Conn
DirectorMarch 1, 2011February 21, 2014
/s/ Edgar Lee                                                                                                   
Edgar Lee
DirectorMarch 1, 2011
/s/ John D. Markley, Jr.                                                                                
John D. Markley, Jr.
DirectorMarch 1, 2011
   
/s/ Michael Huseby     /s/ David C. Merritt                                                                                       
Michael Huseby
David C. Merritt
DirectorMarch 1, 2011February 21, 2014
   
/s/ Stan ParkerCraig A. Jacobson    
Craig A. Jacobson
Stan Parker
DirectorMarch 1, 2011February 21, 2014
   
/s/ Gregory Maffei    
Gregory Maffei
DirectorFebruary 21, 2014
  
/s/ John Malone    
John Malone
DirectorFebruary 21, 2014
/s/ John D. Markley, Jr.    
John D. Markley, Jr.
DirectorFebruary 21, 2014
/s/ David C. Merritt    
David C. Merritt
DirectorFebruary 21, 2014
/s/ Eric L. Zinterhofer    

Eric L. Zinterhofer
DirectorMarch 1, 2011February 21, 2014

S-1
S- 2



Exhibit Index

Exhibits are listed by numbers corresponding to the Exhibit Table of Item 601 in Regulation S-K.
Exhibit Description
   
2.1 Debtors’Debtors' Joint Plan of Reorganization filed pursuant to Chapter 11 of the United States Bankruptcy Code filed on July 15, 2009 with the United States Bankruptcy Court for the Southern District of New York in Case No. 09-11435 (Jointly Administered) (incorporated by reference to Exhibit 10.2 to the quarterly report on Form 10-Q10‑Q of Charter Communications, Inc. filed on August 6, 2009 (File No. 001-33664).
2.2Purchase Agreement dated February 7, 2013 between CSC Holdings, LLC, and Charter Communications Operating, LLC (incorporated by reference to Exhibit 10.1 to the current report on Form 8-K of Charter Communications, Inc. filed on February 12, 2013 (File No. 001-33664).
3.1 Amended and Restated Certificate of Incorporation of Charter Communications, Inc. (originally incorporated July 22, 1999) (incorporated by reference to Exhibit 3.1 to the current report on Form 8-K of Charter Communications, Inc. filed on August 20, 2010 (File No. 001-33664)).
3.2 Amended and Restated By-laws of Charter Communications, Inc. as of November 30, 2009 (incorporated by reference to Exhibit 3.2 to the current report on Form 8-K of Charter Communications, Inc. filed on December 4, 2009 (File No. 001-33664)).
4.1 Warrant Agreement, dated as of November 30, 2009, by and between Charter Communications, Inc. and Mellon Investor Services LLC (incorporated by reference to Exhibit 4.1 to the current report on Form 8-K of Charter Communications, Inc. filed on December 4, 2009 (File No. 001-33664)).
4.2 Warrant Agreement, dated as of November 30, 2009, by and between Charter Communications, Inc. and Mellon Investor Services LLC (incorporated by reference to Exhibit 4.2 to the current report on Form 8-K of Charter Communications, Inc. filed on December 4, 2009 (File No. 001-33664)).
4.3 Warrant Agreement, dated as of November 30, 2009, by and between Charter Communications, Inc. and Mellon Investor Services LLC (incorporated by reference to Exhibit 4.3 to the current report on Form 8-K of Charter Communications, Inc. filed on December 4, 2009 (File No. 001-33664)).
10.1(a)4.4 RestructuringStockholders Agreement dated February 11, 2009, by and betweenof Liberty Media Corporation to purchase Charter Communications, Inc. and certain members of the Crossover Committeeshares dated March 19, 2013 (incorporated by reference to Exhibit 10.11.1 to the current report on Form 8-K of Charter Communications, Inc. filed March 19, 2013 (File No. 001-33664)).
4.5Registration Rights Agreement relating to the 5.25% senior notes due 2021 and the 5.75% senior notes due 2023, dated as of March 14, 2013, by and among CCO Holdings, LLC, CCO Holdings Capital Corp., Charter Communications, Inc. and Deutsche Bank Securities Inc., for itself and the other purchasers named therein (incorporated by reference to Exhibit 10.3 to the current report on Form 8-K of Charter Communications, Inc. filed on February 13, 2009March 15, 2013 (File No. 001-33664)).
10.1(b)Amendment to Restructuring Agreement, dated July 30, 2009, by and between Charter Communications, Inc. and certain members of the Crossover Committee (incorporated by reference to Exhibit 10.1 to the quarterly report on Form 10-Q of Charter Communications, Inc. filed on November 9, 2009 (File No. 001-33664)).
10.1(c)Second Amendment to Restructuring Agreement, dated September 29, 2009, by and between Charter Communications, Inc. and certain members of the Crossover Committee (incorporated by reference to Exhibit 10.3 to the quarterly report on Form 10-Q of Charter Communications, Inc. filed on November 9, 2009 (File No. 001-33664)).
10.1(d)Third Amendment to Restructuring Agreement, dated October 13, 2009, by and between Charter Communications, Inc. and certain members of the Crossover Committee (incorporated by reference to Exhibit 10.5 to the quarterly report on Form 10-Q of Charter Communications, Inc. filed on November 9, 2009 (File No. 001-33664)).
10.1(e)Fourth Amendment to Restructuring Agreement, dated October 30, 2009, by and between Charter Communications, Inc. and certain members of the Crossover Committee (incorporated by reference to Exhibit 10.7 to the quarterly report on Form 10-Q of Charter Communications, Inc. filed on November 9, 2009 (File No. 001-33664)).
10.1(f)Fifth Amendment to Restructuring Agreement, dated November 10, 2009, by and between Charter Communications, Inc. and certain members of the Crossover Committee (incorporated by reference to same numbered exhibit to the Registration Statement on Form S-1 of Charter Communications, Inc. filed on December 31, 2009 (SEC File No. 333-164105)).
10.1(g)Sixth Amendment to Restructuring Agreement, dated November 25, 2009, by and between Charter Communications, Inc. and certain members of the Crossover Committee (incorporated by reference to same numbered exhibit to the Registration Statement on Form S-1 of Charter Communications, Inc. filed on December 31, 2009 (SEC File No. 333-164105)).
10.2(a)Restructuring Agreement, dated as of February 11, 2009, by and among Paul G. Allen, Charter Investment, Inc. and Charter Communications, Inc. (incorporated by reference to Exhibit 10.4 to the current report on Form 8-K of Charter Communications, Inc. filed on February 13, 2009 (File No. 001-33664)).
10.2(b)Amendment to Restructuring Agreement, dated July 30, 2009, by and among Paul G. Allen, Charter
E-1
Investment, Inc. and Charter Communications, Inc. (incorporated by reference to Exhibit 10.2 to the quarterly report on Form 10-Q of Charter Communications, Inc. filed on November 9, 2009 (File No. 001-33664)).
10.2(c)Second Amendment to Restructuring Agreement, dated September 29, 2009, by and among Paul G. Allen, Charter Investment, Inc. and Charter Communications, Inc. (incorporated by reference to Exhibit 10.4 to the quarterly report on Form 10-Q of Charter Communications, Inc. filed on November 9, 2009 (File No. 001-33664)).
10.2(d)Third Amendment to Restructuring Agreement, dated October 13, 2009, by and among Paul G. Allen, Charter Investment, Inc. and Charter Communications, Inc. (incorporated by reference to Exhibit 10.6 to the quarterly report on Form 10-Q of Charter Communications, Inc. filed on November 9, 2009 (File No. 001-33664)).
10.2(e)Fourth Amendment to Restructuring Agreement, dated October 30, 2009, by and among Paul G. Allen, Charter Investment, Inc. and Charter Communications, Inc. (incorporated by reference to Exhibit 10.8 to the quarterly report on Form 10-Q of Charter Communications, Inc. filed on November 9, 2009 (File No. 001-33664)).
10.2(f)Fifth Amendment to Restructuring Agreement, dated November 11, 2009, by and among Paul G. Allen, Charter Investment, Inc. and Charter Communications, Inc. (incorporated by reference to same numbered exhibit to the Registration Statement on Form S-1 of Charter Communications, Inc. filed on December 31, 2009 (SEC File No. 333-164105)).
10.2(g)Sixth Amendment to Restructuring Agreement, dated November 25, 2009, by and among Paul G. Allen, Charter Investment, Inc. and Charter Communications, Inc. (incorporated by reference to same numbered exhibit to the Registration Statement on Form S-1 of Charter Communications, Inc. filed on December 31, 2009 (SEC File No. 333-164105)).
10.3 Indenture relating to the 13.50% senior notes due 2016, dated as of November 30, 2009, by and among CCH II, LLC, CCH II Capital Corp. and The Bank of New York Mellon Trust Company, NA (incorporated by reference to Exhibit 10.1 to the current report on Form 8-K of Charter Communications, Inc. filed on December 4, 2009 (File No. 001-33664)).
10.4Indenture relating to the 7.875% Senior Notes due 2018 and 8.125% Senior Notes due 2020, dated as of April 18, 2010, by and among CCO Holdings, LLC, CCO Holdings Capital Corp. and The Bank of New York Mellon Trust Company, N.A., as trustee (incorporated by reference to Exhibit 10.6 to the registration statement on Form S-1ofS-1 of Charter Communications, Inc. filed on June 30, 2010 (File No. 333-167877)).
10.510.2 Indenture relating to the 7.25% senior notes due 2017, dated as of September 27, 2010, by and among CCO Holdings, LLC, and CCO 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 September 30, 2010 (File No. 001-33664)).
10.610.3 Indenture relating to the 7.00% senior notes due 2019, dated as of January 11, 2011, by and among CCO Holdings, LLC, and CCO 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. 001-33664)).
10.710.4 Indenture relating to the 8% senior second lien notes due 2012 dated as of April 27, 2004,May 10, 2011, by and among CCO Holdings, LLC, and CCO Holdings Capital Corp., as Issuers, Charter Communications, Operating, LLC, Charter Communications Operating Capital Corp.Inc., as Parent Guarantor, and Wells FargoThe Bank of New York Mellon Trust Company, N.A., as trusteeTrustee (incorporated by reference to Exhibit 10.32 to Amendment No. 24.1 to the registration statementcurrent report on Form S-48-K of CCH II, LLCCharter Communications, Inc. filed on May 5, 200413, 2011 (File No. 333-111423)001-33664)).
10.8(a)10.5 First Supplemental Indenture dated as of May 10, 2011 by and among CCO Holdings, LLC, and CCO 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 4.2 to the current report on Form 8-K of Charter Communications, Inc. filed on May 13, 2011 (File No. 001-33664)).
10.6Second Supplemental Indenture dated as of December 14, 2011 by and among CCO Holdings, LLC, and CCO 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 4.2 to the current report on Form 8-K of Charter Communications, Inc. filed on December 20, 2011 (File No. 001-33664)).

E- 1



10.7Third Supplemental Indenture dated as of January 26, 2012 by and among CCO Holdings, LLC, and CCO 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 4.2 to the current report on Form 8-K of Charter Communications, Inc. filed on February 1, 2012 (File No. 001-33664))
10.8Fourth Supplemental Indenture dated August 22, 2012 relating to the 10.875% senior second lien notes5.25% Senior Notes due 2014 dated as of March 19, 2008,2022 by and among Charter Communications Operating,CCO Holdings, LLC, Charter Communications OperatingCCO Holdings Capital Corp. and WilmingtonThe Bank of New York Mellon Trust Company, N.A., as trustee (incorporated by reference to Exhibit 10.1 to the quarterly report filed on Form 10-Q of Charter Communications, Inc. filed on May 12, 2008November 6, 2012 (File No. 000-027927)001-33664)).
10.8(b)10.9 Collateral Agreement,Fifth Supplemental Indenture dated as of March 19, 2008December 17, 2012 relating to the 5.125% Senior Notes due 2023 by and among Charter Communications Operating, LLC, Charter Communications Operating Capital Corp., CCO Holdings, LLC, CCO Holdings Capital Corp. and certainThe Bank of its subsidiaries in favor of WilmingtonNew York Mellon Trust Company, N.A., as trustee (incorporated by reference to Exhibit 10.210.9 to the quarterlyannual report filed on Form 10-Q10-K of Charter Communications, Inc. filed on May 12, 2008February 22, 2013 (File No. 000-027927)001-33664)).
10.910.10 Registration Rights Agreement,Sixth Supplemental Indenture relating to the 5.25% senior notes due 2021, dated as of November 30, 2009,March 14, 2013, by and among CCO Holdings, LLC, and CCO 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 March 15, 2013 (File No. 001-33664)).
10.11Seventh Supplemental Indenture relating to the 5.75% senior notes due 2023, dated as of March 14, 2013, by and certain investors listed thereinamong CCO Holdings, LLC, and CCO 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 10.2 to the current report on Form 8-K of Charter Communications, Inc. filed on December 4, 2009March 15, 2013 (File
E-2
No. 001-33664)).
10.1010.12 Exchange and Registration Rights Agreement,Eighth Supplemental Indenture relating to the 5.75% senior notes due 2024, dated as of November 30, 2009,May 3, 2013, by and among CCH II,CCO Holdings, LLC CCH IIand CCO Holdings Capital CorpCorp., as Issuers, Charter Communications, Inc., as Parent Guarantor, and certain investors listed thereinThe Bank of New York Mellon Trust Company, N.A., as Trustee (incorporated by reference to Exhibit 10.310.7 to the currentquarterly report on Form 8-K10-Q of Charter Communications, Inc. filed on December 4, 2009May 7, 2013 (File No. 001-33664)).
10.11Exchange and Registration Rights Agreement related to the 7.875% Senior Notes due 2018 of CCO Holdings, LLC, CCO Holdings Capital Corp., dated as of April 28, 2010, by and among CCO Holdings, LLC, CCO Holdings Capital Corp., Charter Communications, Inc. and Credit Suisse Securities (USA) LLC, as representative of the several initial purchasers (incorporated by reference to Exhibit 10.9 to the registration statement on Form S-1of Charter Communications, Inc. filed on June 30, 2010 (File No. 333-167877)).
10.12Exchange and Registration Rights Agreement related to the 8.125% Senior Notes due 2020 of CCO Holdings, LLC, CCO Holdings Capital Corp., dated as April 28, 2010, by and among CCO Holdings, LLC, CCO Holdings Capital Corp., Charter Communications, Inc. and Credit Suisse Securities (USA) LLC, as representative of the several initial purchasers (incorporated by reference to Exhibit 10.10 to the registration statement on Form S-1of Charter Communications, Inc. filed on June 30, 2010 (File No. 333-167877)).
10.13
Exchange and Registration Rights Agreement relating to the 7.25% senior notes due 2017, dated as of September 27, 2010, by and among CCO Holdings, LLC, CCO Holdings Capital Corp., Charter Communications, Inc., and Citigroup Global Markets Inc., Banc of America Securities LLC, Credit Suisse Securities (USA) LLC, Deutsche Bank Securities Inc., and UBS Securities LLC, as representatives of the initial purchasers (incorporated by reference to Exhibit 10.2 to the current report on Form 8-K of Charter Communications, Inc. filed on September 30, 2010 (File No. 001-33664)).
10.14
Exchange and Registration Rights Agreement relating to $300 Million aggregate principal amount of the 7.00% senior notes due 2019, dated as of January 25, 2011 by and among CCO Holdings, LLC, CCO Holdings Capital Corp., Charter Communications, Inc., and Deutsche Bank Securities Inc., Merrill Lynch, Pierce, Fenner & Smith Incorporated, Citigroup Global Markets Inc., Credit Suisse Securities (USA) LLC, and UBS Securities LLC, as representatives of the initial purchasers (incorporated by reference to Exhibit 10.2 to the current report on Form 8-K of Charter Communications, Inc. filed on January 27, 2011 (File No. 001-33664)).
10.1510.13(a) Credit Agreement, dated as of March 6, 2007, among CCO Holdings, LLC, the lenders from time to time parties thereto and Bank of America, N.A., as administrative agent (incorporated by reference to Exhibit 10.3 to the current report on Form 8-K of Charter Communications, Inc. filed on March 12, 2007 (File No. 000-27927)).
10.1610.13(b)Amendment No. 1, dated as of April 25, 2012, to the Credit Agreement, dated as of March 6, 2007 (as amended, supplemented or otherwise modified from time to time), among CCO Holdings, LLC, as the Borrower, the lenders parties thereto, Wells Fargo Bank, N.A., as the Administrative Agent, and the other parties thereto (incorporated by reference to Exhibit 10.1 to the current report on Form 8-K filed by Charter Communications, Inc. on April 30, 2012 (File No. 001-33664)).
10.13(c) Pledge Agreement made by CCO Holdings, LLC in favor of Bank of America, N.A., as Collateral Agent, dated as of March 6, 2007 (incorporated by reference to Exhibit 10.4 to the current report on Form 8-K of Charter Communications, Inc. filed on March 12, 2007 (File No. 000-27927)).
10.1710.14(a) Amended and Restated CreditRestatement Agreement, dated as of March 31, 2010,April 11, 2012 by and among Charter Communications Operating, LLC, CCO Holdings, LLC, the lenders from timeparty thereto and Bank of America, N.A., as Administrative Agent (incorporated by reference to time parties theretoExhibit 10.2 to the current report on Form 8-K filed by Charter Communications, Inc. on April 17, 2012 (File No. 001-33664)).
10.14(b)Amendment No. 1 dated March 22, 2013 to the Amended and Restated Credit Agreement dated April 11, 2012 between Charter Communications Operating, LLC, as borrower, CCO Holdings, LLC, as guarantor, and Bank of America, N.A., as administrative agent (incorporated by reference to Exhibit 10.5 to the quarterly report on Form 10-Q of Charter Communications, Inc. filed on May 7, 2013 (File No. 001-33664)).
10.14(c)Amendment No. 2 dated April 22, 2013 to the Amended and Restated Credit Agreement dated April 11, 2012 between Charter Communications Operating, LLC, as borrower, CCO Holdings, LLC, as guarantor, and Bank of America, N.A., as administrative agent (incorporated by reference to Exhibit 10.6 to the quarterly report on Form 10-Q of Charter Communications, Inc. filed on May 7, 2013 (File No. 001-33664)).
10.14(d)Amendment No. 3, dated as of June 27, 2013, to the Amended and Restated Credit Agreement dated April 11, 2012 between Charter Communications Operating, LLC, as borrower, CCO Holdings, LLC, as guarantor, and Bank of America, N.A., as administrative agent (incorporated by reference to Exhibit 10.1 to the current report on Form 8-K offiled by Charter Communications, Inc. filed on April 6, 2010July 2, 2013 (File No. 001-33664)).
10.1810.14(e) Amended and Restated Guarantee and Collateral Agreement made by CCO Holdings, LLC, Charter Communications Operating, LLC and certain of its subsidiaries in favor of Bank of America, N.A., as administrative agent, dated as of March 18, 1999, as amended and restated as of March 31, 2010 (incorporated by reference to Exhibit 10.2 to the current report on Form 8-K of Charter Communications, Inc. filed on April 6, 2010 (File No. 001-33664)).

E- 2



10.19
10.14(f) AmendedIncremental Activation Notice, dated as of May 3, 2013 delivered by Charter Communications Operating, LLC, CCO Holdings, LLC, the Subsidiary Guarantors Party thereto and Restated Limited Liability Companyeach Term F Lender party thereto to Bank of America, N.A., as Administrative Agent under the credit agreement, dated as of March 18, 1999 as amended and restated as of March 31, 2010 and as further amended and restated as of April 11, 2012 (incorporated by reference to the quarterly report on Form 10-Q of Charter Communications, Inc. filed on May 7, 2013 (File No. 001-33664)).
10.14(g)Incremental Activation Notice, dated as of July 1, 2013 delivered by Charter Communications Operating, LLC, CCO Holdings, LLC, the Subsidiary Guarantors Party thereto and each Term E Lender party thereto to Bank of America, N.A., as Administrative Agent under the credit agreement, dated as of March 18, 1999 as amended and restated as of March 31, 2010 and as further amended and restated as of April 11, 2012 (incorporated by reference to Exhibit 10.2 to the current report on Form 8-K filed by Charter Communications, Inc. on July 2, 2013 (File No. 001-33664)).
10.15(a)Registration Rights Agreement dated as of November 30, 2009, by and among Charter Communications, Inc, Charter Investment, Inc. and Charter Communications Holding Company, LLCcertain investors listed therein (incorporated by reference to Exhibit 10.410.2 to the current report on Form 8-K of Charter Communications, Inc. filed on December 4, 2009 (File No. 001-33664)).
10.2010.15(b) ExchangeAmendment No. 1 to the Registration Rights Agreement dated as of November 30, 2009, by and among Charter Communications, Inc. , Charter Investment, Inc. Paul G. Allen and Charter Communications Holding Company, LLCcertain Investors listed therein (incorporated by reference to Exhibit 10.510.2 to the currentquarterly report on Form 8-K10-Q of Charter Communications, Inc. filed on December 4, 2009November 6, 2012 (File No. 001-33664)).
10.21(a)10.16(a) Amended and Restated Management Agreement, dated as of June 19, 2003, between Charter Communications Operating, LLC and Charter Communications, Inc. (incorporated by reference to Exhibit 10.4 to the quarterly report on Form 10-Q filed by Charter Communications, Inc. on August 5, 2003 (File No. 333-83887)).
10.21(b)10.16(b) First Amendment to the Amended and Restated Management Agreement, dated as of July 20, 2010,
E-3

between Charter Communications Operating, LLC and Charter Communications, Inc. (incorporated by reference to Exhibit 10.6 to the quarterly report on Form 10-Q filed by Charter Communications, Inc. on August 4, 2010 (File No. 001-33664)).
10.22(a)10.17(a) Second Amended and Restated Mutual Services Agreement, dated as of June 19, 2003 between Charter Communications, Inc. and Charter Communications Holding Company, LLC (incorporated by reference to Exhibit 10.5(a) to the quarterly report on Form 10-Q filed by Charter Communications, Inc. on August 5, 2003 (File No. 000-27927)).
10.22(b)10.17(b) First Amendment to the Second Amended and Restated Mutual Services Agreement, dated as of July 20, 2010, between Charter Communications, Inc. and Charter Communications Holding Company, LLC (incorporated by reference to Exhibit 10.7 to the quarterly report on Form 10-Q filed by Charter Communications, Inc. on August 4, 2010 (File No. 001-33664)).
10.23+10.18+ Charter Communications, Inc. Executive Bonus Plan (incorporated by reference to Exhibit 10.1 to the CurrentQuarterly Report on Form 8-K10-Q of Charter Communications, Inc. filed on December 16, 2010May 8, 2012 (File No. 001-33664)).
10.24+10.19+ Charter Communications, Inc. Executive Incentive Performance Plan (incorporated by reference to Exhibit 10.210.21 to the Current Reportannual report on Form 8-K of10-K filed by Charter Communications, Inc. filed December 16, 2010on February 27, 2012 (File No. 001-33664)).
10.25+10.20+ Charter Communications, Inc. Amended and Restated 2009 Stock Incentive Plan (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K of Charter Communications, Inc. filed on December 21, 2009 (File No. 001-33664)).
10.21+Charter Communications, Inc.'s Amended and Restated Supplemental Deferred Compensation Plan, dated as of September 1, 2011(incorporated by reference to Exhibit 10.1 to the current report on Form 8-K filed by Charter Communications, Inc. on September 2, 2011 (File No. 001-33664)).
10.22+Form of Non-Qualified Time Vesting Stock Option Agreement dated April 26, 2011(incorporated by reference to Exhibit 10.3 to the quarterly report on Form 10-Q filed by Charter Communications, Inc. on August 2, 2011 (File No. 001-33664)).
10.23+Form of Non-Qualified Price Vesting Stock Option Agreement dated April 26, 2011(incorporated by reference to Exhibit 10.2 to the quarterly report on Form 10-Q filed by Charter Communications, Inc. on August 2, 2011 (File No. 001-33664)).
10.24+Form of Restricted Stock Unit Agreement dated April 26, 2011(incorporated by reference to Exhibit 10.4 to the quarterly report on Form 10-Q filed by Charter Communications, Inc. on August 2, 2011 (File No. 001-33664)).
10.25+Form of Notice of LTIP Award Agreement Changes (RSU Awards) (incorporated by reference to Exhibit 10.3 to the current report on Form 8-K filed by Charter Communications, inc. on January 22, 2014 (File No. 001-33664)).
10.26+ SummaryForm of Notice of LTIP Award Agreement Changes (Time-Vesting Option Awards) (incorporated by reference to Exhibit 10.4 to the current report on Form 8-K filed by Charter Communications, Inc. 2010 Executive Bonus Planon January 22, 2014 (File No. 001-33664)).
10.27+Form of Notice of LTIP Award Agreement Changes (Restricted Stock Awards) (incorporated by reference to Exhibit 10.5 to the current report on Form 8-K filed by Charter Communications, inc. on January 22, 2014 (File No. 001-33664)).

E- 3



10.28+Form of Notice of LTIP Award Agreement Changes (Performance-Vesting Option Awards) (incorporated by reference to Exhibit 10.6 to the quarterlycurrent report on Form 10-Q of8-K filed by Charter Communications, Inc. filed on May 6, 2010January 22, 2014 (File No. 001-33664)).
10.27+10.29+ Amended and Restated Form of Stock Option Agreement dated January 15, 2014 (incorporated by reference to Exhibit 10.1 to the current report on Form 8-K filed by Charter Communications, Inc. on January 22, 2014 (File No. 001-33664)).
10.30+Form of Restricted Stock Unit Agreement dated January 15, 2014 (incorporated by reference to Exhibit 10.2 to the current report on Form 8-K filed by Charter Communications, Inc. on January 22, 2014 (File No. 001-33664)).
10.31+Employment Agreement between Michael J. LovettThomas Rutledge and Charter Communications, Inc., dated effective as of February 1, 2010December 19, 2011 (incorporated by reference to Exhibit 10.1 to the current report on Form 8-K of Charter Communications, Inc. filed on April 13, 2010December 19, 2011 (File No. 001-33664)).
10.28+10.32(a)+ Amended and Restated Employment Agreement between Christopher L. Winfrey and Charter Communications, Inc., dated effective as of August 31, 2012.
10.32(b)+The New York Relocation Agreement and Release entered into by and between Charter Communications, Inc. and Christopher Winfrey dated as of October 23, 2012 (incorporated by reference to Exhibit 10.4 to the Quarterly Report on Form 10-Q of Charter Communications, Inc. filed on November 6, 2012 (File No. 001-33664)).
10.33(a)+Employment Agreement dated as of April 30, 2012, by and between Charter Communications, Inc. and John Bickham (incorporated by reference to Exhibit 10.1 to the current report on Form 8-K filed by Charter Communications, Inc. on May 1, 20102012 (File No. 001-33664)).
10.33(b)+Time-Vesting Stock Option Agreement dated as of April 30, 2012 by and between Charter Communications, Inc. and John Bickham (incorporated by reference to Exhibit 10.2 to the current report on Form 8-K filed by Charter Communications, Inc. on May 1, 2012 (File No. 001-33664)).
10.33(c)+Performance-Vesting Restricted Stock Agreement dated as of April 30, 2012 by and between Charter Communications, Inc. and John Bickham (incorporated by reference to Exhibit 10.3 to the current report on Form 8-K filed by Charter Communications, Inc. on May 1, 2012 (File No. 001-33664))
10.33(d)+Performance-Vesting Stock Option Agreement dated as of April 30, 2012 by and between Charter Communications, Inc. and John Bickham (incorporated by reference to Exhibit 10.4 to the current report on Form 8-K filed by Charter Communications, Inc. on May 1, 2012 (File No. 001-33664))
10.33(e)+Time-Vesting Restricted Stock Agreement dated as of April 30, 2012 by and between Charter Communications, Inc. and John Bickham (incorporated by reference to Exhibit 10.5 to the current report on Form 8-K filed by Charter Communications, Inc. on May 1, 2012 (File No. 001-33664)).
10.34+*Employment Agreement dated as of July 8, 2013 by and between Charter Communications, Inc. and Catherine C. Bohigian.
10.35(a)+*Amended and Restated Employment Agreement dated as of February 20, 2013 by and between Charter Communications, Inc. and Richard R. Dykhouse.
10.35(b)+*The New York Relocation Agreement and Release entered into by and between Charter Communications, Inc. and Richard R. Dykhouse dated as of February 20, 2013. 
10.36Form of First Amended and Restated Indemnification Agreement (incorporated by reference to Exhibit 10.3 to the quarterly report on Form 10-Q of Charter Communications, Inc. filed on November 3, 2010 (File No. 001-33664)).
10.29+*Amended and Restated Employment Agreement between Marwan Fawaz and Charter Communications, Inc. dated January 3, 2011.
10.30(a)+*Amended and Restated Employment Agreement between Ted W. Schremp and Charter Communications, Inc. dated January 3, 2011.
10.30(b)+*Separation Agreement and Mutual Release between Ted W. Schremp and Charter Communications, Inc. dated February 22, 2011.
10.31+*Amended and Restated Employment Agreement between Gregory Doody and Charter Communications, Inc. dated as of January 3, 2011.
10.32+Amended and Restated Employment Agreement between Kevin D. Howard and Charter Communications, Inc. dated as of March 1, 2010 (incorporated by reference to Exhibit 10.2 to the current report on Form 8-K filed by Charter Communications, Inc. on August 2, 2010 (File No. 001-33664)).
10.33(a)+Amended and Restated Employment Agreement between Eloise E. Schmitz and Charter Communications, Inc., dated as of July 1, 2008 (incorporated by reference to Exhibit 10.4 to the quarterly report on Form 10-Q of Charter Communications, Inc. filed on August 5, 2008 (File No. 000-27927)).
10.33(b)+Amendment to Amended and Restated Employment Agreement of Eloise Schmitz, dated November 30, 2009 (incorporated by reference to Exhibit 10.8 to the current report on Form 8-K of Charter Communications, Inc. filed on December 4, 2009 (File No. 001-33664)).
10.33(c)+Separation Agreement and Mutual Release between Eloise Schmitz and Charter Communications, Inc. dated July 31, 2010 (incorporated by reference to Exhibit 10.1 to the current report on Form 8-K of Charter Communications, Inc. filed on August 6, 2010 (File No. 001-33664)).
10.34+Charter Communications, Inc. Value Creation Plan adopted on March 12, 2009 (incorporated by reference to Exhibit 10.1 to the quarterly report on Form 10-Q of Charter Communications, Inc. filed on May 7, 2009 (File No. 001-33664)).
10.35Form of Indemnification Agreement (incorporated by reference to Exhibit 10.1 to the current report on Form 8-K of Charter Communications, Inc. filed on February 12, 20102013 (File No. 001-33664)).
12.1* Computation of Ratio of Earnings to Fixed Charges.
21.1* Subsidiaries of Charter Communications, Inc.
23.1* Consent of KPMG LLP.
E-4
31.1* Certificate of Chief Executive Officer pursuant to Rule 13a-14(a)/Rule 15d-14(a) under the Securities Exchange Act of 1934.
31.2* Certificate of Chief Financial Officer pursuant to Rule 13a-14(a)/Rule 15d-14(a) under the Securities Exchange Act of 1934.
32.1* Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Chief Executive Officer).
32.2* Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Chief Financial Officer).
101 _____________The following financial information from the Annual Report of Charter Communications, Inc. on Form 10-K for the year ended December 31, 2013, filed with the SEC on February 21, 2014, formatted in eXtensible Business Reporting Language: (i) Consolidated Balance Sheets, (ii) Consolidated Statements of Operations, (iii) Consolidated Statements of Comprehensive Loss, (iv) Consolidated Statements of Changes in Shareholder Equity, (v) Consolidated Statements of Cash Flows, and (vi) Notes to Consolidated Financial Statements.
*Document attached.
_____________
*    Filed herewith.
+    Management compensatory plan or arrangement

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E-5

INDEX TO FINANCIAL STATEMENTS

 Page
  
Audited Financial Statements 
Report of Independent Registered Public Accounting Firm
F-2
F- 2
Consolidated Balance Sheets as of December 31, 20102013 and 2009 (Successor)2012
F-4
F- 3
Consolidated Statements of Operations for the YearYears Ended December 31, 2010 (Successor), One Month2013, 2012 and 2011
F- 4
Consolidated Statements of Comprehensive Loss for the Years Ended December 31, 2009 (Successor), Eleven Months Ended
      November 30, 2009 (Predecessor)2013, 2012 and Year Ended December 31, 2008 (Predecessor)2011
F-5
F- 4
Consolidated Statements of Changes in Shareholders’ Equity (Deficit) for the YearYears Ended December 31, 2010 (Successor), One Month Ended December 31, 2009
      (Successor), Eleven Months Ended November 30, 2009 (Predecessor)2013, 2012 and Year Ended December 31, 2008 (Predecessor)2011
F-6
F- 5
Consolidated Statements of Cash Flows for the YearYears Ended December 31, 2010 (Successor), One Month Ended December 31, 2009 (Successor), Eleven Months Ended
      November 30, 2009 (Predecessor)2013, 2012 and Year Ended December 31, 2008 (Predecessor)2011
F-7
F- 6
Notes to Consolidated Financial Statements
F-8
F- 7



F- 1


F-1

Report of Independent Registered Public Accounting Firm

The Board of Directors and Shareholders
Charter Communications, Inc.:

We have audited the accompanying consolidated balance sheets of Charter Communications, Inc. and subsidiaries (the Company) as of December 31, 20102013 and 2009 (Successor)2012, and the related consolidated statements of operations, comprehensive loss, changes in shareholders'shareholders’ equity, (deficit), and cash flows for each of the yearyears in the three-year period ended December 31, 2010 (Successor), the one month ended December 31, 2009 (Successor), the eleven months ended November 30, 2009 (Predecessor), and for the year ended December 31, 2008 (Predecessor).2013. We also have audited the Company’s internal control over financial reporting as of December 31, 2010,2013, based on criteria established in Internal Control - Integrated Framework (1992) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company’s management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting (Item 9A). Our responsibility is to express an opinion on these consolidated financial statements and an opinion on the Company'sCompany’s internal control over financial reporting based on our audits.

We conducted our audits in accordance with the standards 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 maintained in all material respects. Our audits of the consolidated financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, asse ssingassessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

A company'scompany’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company'scompany’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company'scompany’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

The Company acquired Bresnan Broadband Holdings, LLC and subsidiaries (Bresnan) in July 2013 and management excluded from its assessment of the effectiveness of the Company’s internal control over financial reporting as of December 31, 2013, Bresnan’s internal control over financial reporting associated with 10% and 3% of the Company’s total assets and total revenues, respectively, included in the consolidated financial statements of the Company as of and for the year ended December 31, 2013. Our audit of internal control over financial reporting of the Company as of December 31, 2013 also excluded an evaluation of the internal control over financial reporting of Bresnan.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Charter Communications, Inc. and subsidiaries as of December 31, 20102013 and 2009 (Successor),2012, and the results of their operations and their cash flows for each of the yearyears in the three-year period ended December 31, 2010 (Successor), the one month ended December 31, 2009 (Successor), the eleven months ended November 30, 2009 (Predecessor), and for the year ended December 31, 2008 (Predecessor),2013, in conformity with USU.S. generally accepted accounting principles. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2010,2013, based on the criteria established in Internal Control - Integrated Framework (1992) issued by the Committee of Sponsoring Organizations of t hethe Treadway Commission.

As discussed in Notes 1 and 23 to the consolidated financial statements, the Company filed a petition for reorganization 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
F-2
connection with its emergence from bankruptcy, the Company adopted fresh-start accounting in conformity with AICPA Statement of Position 90-7, Financial Reporting by Entities in Reorganization Under the Bankruptcy Code (included in FASB ASC Topic 852, Reorganizations), effective as of November 30, 2009. Accordingly, the Company’s consolidated financial statements prior to November 30, 2009 are not comparable to its consolidated financial statements for periods after November 30, 2009.

As discussed in Note 9 to the consolidated financial statements, effective January 1, 2009, the Company adopted Statement of Financial Accounting Standards No. 160, Noncontrolling Interests in Consolidated Financial Statements – An Amendment of ARB No. 51 (included in FASB ASC Topic 810, Consolidations).

/s/(signed) KPMG

LLP
St. Louis, Missouri
February 28, 2011
F-3
20, 2014



F- 2


CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(dollars in millions, except share data)
 December 31,
2013		 December 31,
2012
    
ASSETS   
CURRENT ASSETS:   
Cash and cash equivalents$21
 $7
Restricted cash and cash equivalents—
 27
Accounts receivable, less allowance for doubtful accounts of   
$19 and $14, respectively234
 234
Prepaid expenses and other current assets67
 62
Total current assets322
 330
    
INVESTMENT IN CABLE PROPERTIES:   
Property, plant and equipment, net of accumulated   
depreciation of $4,787 and $3,563, respectively7,981
 7,206
Franchises6,009
 5,287
Customer relationships, net1,389
 1,424
Goodwill1,177
 953
Total investment in cable properties, net16,556
 14,870
    
OTHER NONCURRENT ASSETS417
 396
    
Total assets$17,295
 $15,596
    
LIABILITIES AND SHAREHOLDERS’ EQUITY   
CURRENT LIABILITIES:   
Accounts payable and accrued liabilities$1,467
 $1,224
Total current liabilities1,467
 1,224
    
LONG-TERM DEBT14,181
 12,808
DEFERRED INCOME TAXES1,431
 1,321
OTHER LONG-TERM LIABILITIES65
 94
    
SHAREHOLDERS’ EQUITY:   
Class A common stock; $.001 par value; 900 million shares authorized;   
106,144,075 and 101,176,247 shares issued and outstanding, respectively—
 —
Class B common stock; $.001 par value; 25 million shares authorized;   
no shares issued and outstanding—
 —
Preferred stock; $.001 par value; 250 million shares authorized;   
no shares issued and outstanding—
 —
Additional paid-in capital1,760
 1,616
Accumulated deficit(1,568) (1,392)
Accumulated other comprehensive loss(41) (75)
Total shareholders’ equity151
 149
    
Total liabilities and shareholders’ equity$17,295
 $15,596
  Successor 
  
December 31,
2010
  
December 31,
2009
 
       
ASSETS      
CURRENT ASSETS:      
  Cash and cash equivalents $4  $709 
  Restricted cash and cash equivalents  28   45 
  Accounts receivable, less allowance for doubtful accounts of        
     $17 and $11, respectively  247   248 
  Prepaid expenses and other current assets  47   69 
       Total current assets  326   1,071 
         
INVESTMENT IN CABLE PROPERTIES:        
  Property, plant and equipment, net of accumulated        
     depreciation of $1,190 and $94, respectively  6,819   6,833 
  Franchises  5,257   5,272 
  Customer relationships, net  2,000   2,335 
  Goodwill  951   951 
        Total investment in cable properties, net  15,027   15,391 
         
OTHER NONCURRENT ASSETS  354   196 
         
        Total assets $15,707  $16,658 
         
LIABILITIES AND SHAREHOLDERS’ EQUITY        
CURRENT LIABILITIES:        
  Accounts payable and accrued expenses $1,049  $898 
  Current portion of long-term debt  --   70 
        Total current liabilities  1,049   968 
         
LONG-TERM DEBT  12,306   13,252 
OTHER LONG-TERM LIABILITIES  874   520 
         
SHAREHOLDERS’ EQUITY:        
  Class A common stock; $.001 par value; 900 million shares authorized;        
      112,494,166 and 112,576,872 shares issued, respectively  --   -- 
  Class B common stock; $.001 par value; 25 million shares authorized;        
      2,241,299 shares issued and outstanding  --   -- 
Preferred stock; $.001 par value; 250 million shares        
       authorized; no non-redeemable shares issued and outstanding  --   -- 
Additional paid-in capital  1,776   1,914 
Accumulated equity (deficit)  (235)  2 
Treasury stock at cost; 176,475 and no shares, respectively  (6)  -- 
Accumulated other comprehensive loss  (57)  -- 
      Total Charter shareholders’ equity  1,478   1,916 
         
Noncontrolling interest  --   2 
     Total shareholders’ equity  1,478   1,918 
         
     Total liabilities and shareholders’ equity $15,707  $16,658 


The accompanying notes are an integral part of these consolidated financial statements.
F- 3


CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(dollars in millions, except per share and share data)
F-4
 Year Ended December 31,
 2013 2012 2011
      
REVENUES$8,155
 $7,504
 $7,204
      
COSTS AND EXPENSES:     
Operating costs and expenses (excluding depreciation and amortization)5,345
 4,860
 4,564
Depreciation and amortization1,854
 1,713
 1,592
Other operating expenses, net31
 15
 7
      
 7,230
 6,588
 6,163
      
Income from operations925
 916
 1,041
      
OTHER EXPENSES:     
Interest expense, net(846) (907) (963)
Loss on extinguishment of debt(123) (55) (143)
Gain on derivative instruments, net11
 —
 —
Other expense, net(16) (1) (5)
      
 (974) (963) (1,111)
      
Loss before income taxes(49) (47) (70)
      
Income tax expense(120) (257) (299)
      
Net loss$(169) $(304) $(369)
      
LOSS PER COMMON SHARE, BASIC AND DILUTED$(1.65) $(3.05) $(3.39)
      
Weighted average common shares outstanding, basic and diluted101,934,630
 99,657,989
 108,948,554

CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(dollars in millions, except per share and share data)

  Successor  Predecessor 
  
Year Ended
December 31,
  
One Month
Ended
December 31,
  
Eleven Months
Ended
November 30,
  
Year Ended
December 31,
 
  2010  2009  2009  2008 
             
REVENUES $7,059  $572  $6,183  $6,479 
                 
COSTS AND EXPENSES:                
Operating (excluding depreciation and amortization)  3,064   246   2,663   2,807 
Selling, general and administrative  1,422   116   1,264   1,386 
Depreciation and amortization  1,524   122   1,194   1,310 
Impairment of franchises  --   --   2,163   1,521 
Other operating (income) expenses, net  25   4   (38)  69 
                 
   6,035   488   7,246   7,093 
                 
Income (loss) from operations  1,024   84   (1,063)  (614)
                 
OTHER INCOME AND EXPENSES:                
Interest expense, net (excluding unrecorded interest
 expense of $558 for the eleven  months ended November 30, 2009)
  (877)  (68)  (1,020)  (1,905)
Gain due to Plan effects  --   --   6,818   -- 
Gain due to fresh start accounting adjustments  --   --   5,659   -- 
Reorganization items, net  (6)  (3)  (644)  -- 
Gain (loss) on extinguishment of debt  (85)  --   --   4 
Change in value of derivatives  --   --   (4)  (29)
Other income (expense), net  2   (3)  2   (6)
                 
   (966)  (74)  10,811   (1,936)
                 
Income (loss) before income taxes  58   10   9,748   (2,550)
                 
Income tax benefit (expense)  (295)  (8)  351   103 
                 
Consolidated net income (loss)  (237)  2   10,099   (2,447)
                 
Less: Net (income) loss – noncontrolling interest  --   --   1,265   (4)
                 
Net income (loss) – Charter shareholders $(237) $2  $11,364  $(2,451)
                 
EARNINGS (LOSS) PER COMMON SHARE –
   CHARTER SHAREHOLDERS:
                
Basic $(2.09) $0.02  $30.00  $(6.56)
Diluted $(2.09) $0.02  $12.61  $(6.56)
                 
Weighted average common shares outstanding, basic  113,138,461   112,078,089   378,784,231   373,464,920 
Weighted average common shares outstanding, diluted  113,138,461   114,346,861   902,067,116   373,464,920 
                 

The accompanying notes are an integral part of these consolidated financial statements.
F-5

CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (DEFICIT)COMPREHENSIVE LOSS
(dollars in millions)
 Year Ended December 31,
 2013 2012 2011
      
Net loss$(169) $(304) $(369)
Net impact of interest rate derivative instruments, net of tax34
 (10) (8)
      
Comprehensive loss$(135) $(314) $(377)

             Accumulated    
  Class A Class B Additional Accumulated    Other  Total Charter 
  Common Common Paid-In Equity  Treasury Comprehensive  Shareholders' 
  Stock Stock Capital (Deficit)  Stock Income (Loss)  Equity (Deficit) 
                  
PREDECESSOR:                 
BALANCE, December 31, 2007, Predecessor $-- $-- $5,382 $(13,146) $-- $(123) $(7,887)
  Changes in fair value of interest rate                        
      agreements  --  --  --  --   --  (180)  (180)
  Stock compensation expense, net  --  --  12  --   --  --   12 
  Preferred stock redemption  --  --  5  --   --  --   5 
  Reacquisition of equity component of                        
       convertible notes  --  --  (5) --   --  --   (5)
  Net loss  --  --  --  (2,451)  --  --   (2,451)
                         
BALANCE, December 31, 2008, Predecessor  --  --  5,394  (15,597)  --  (303)  (10,506)
  Changes in fair value of interest rate                        
      agreements  --  --  --  --   --  (5)  (5)
  Stock compensation expense, net  --  --  5  --   --  --   5 
  Net income  --  --  --  11,364   --  --   11,364 
  Amortization of accumulated other
      comprehensive loss related to interest
      rate agreements
    --     --    --  --   --    32     32 
  Cancellation of Predecessor common stock  --  --  (5,399) --   --  --   (5,399)
  Elimination of Predecessor accumulated
     deficit and accumulated other
     comprehensive income (loss)
   --     --    --    4,233      --    276      4,509 
                         
BALANCE, November 30, 2009, Predecessor  --  --  --  --   --  --   -- 
                         
SUCCESSOR:                        
   Issuance of new equity  --  --  2,003  --   --  --   2,003 
                         
BALANCE, November 30, 2009, Successor  --  --  2,003  --   --  --   2,003 
  Net income  --  --  --  2   --  --   2 
  Charter Investment Inc.’s  exchange of
      Charter Holdco interest (see Note 18)
   --   --   (90) --    --  --    (90)
  Stock compensation expense, net  --  --  1  --   --  --   1 
                         
BALANCE, December 31, 2009, Successor  --  --  1,914  2   --  --   1,916 
  Net loss  --  --  --  (237)  --  --   (237)
  Charter Investment Inc.’s exchange of
      Charter Holdco interest (see Note 18)
  --  --  (166) --   --  --   (166)
  Change in fair value of interest rate swap
       agreements
  --  --  --  --   --  (57)  (57)
  Stock compensation expense, net  --  --  28  --   --  --   28 
  Purchase of treasury stock  --  --  --  --   (6) --   (6)
                         
BALANCE, December 31, 2010, Successor $-- $-- $1,776 $(235) $(6)$(57) $1,478 

The accompanying notes are an integral part of these consolidated financial statements.
F- 4
F-6


CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWSCHANGES IN SHAREHOLDERS’ EQUITY
(dollars in millions)

  Class A Common Stock Class B Common Stock Additional Paid-In Capital Accumulated Deficit Treasury Stock Accumulated Other Comprehensive Loss Total Shareholders' Equity
               
BALANCE, December 31, 2010 —
 —
 1,776
 (235) (6) (57) 1,478
Net loss —
 —
 —
 (369) —
 —
 (369)
Net impact of interest rate derivative instruments, net of tax —
 —
 —
 —
 —
 (8) (8)
Stock compensation expense, net —
 —
 36
 —
 —
 —
 36
Exercise of options —
 —
 5
 —
 —
 —
 5
Purchase of treasury stock —
 —
 —
 —
 (733) —
 (733)
Retirement of treasury stock —
 —
 (261) (478) 739
 —
 —
               
BALANCE, December 31, 2011 —
 —
 1,556
 (1,082) —
 (65) 409
Net loss —
 —
 —
 (304) —
 —
 (304)
Net impact of interest rate derivative instruments, net of tax —
 —
 —
 —
 —
 (10) (10)
Stock compensation expense, net —
 —
 50
 —
 —
 —
 50
Exercise of options —
 —
 15
 —
 —
 —
 15
Purchase of treasury stock —
 —
 —
 —
 (11) —
 (11)
Retirement of treasury stock —
 —
 (5) (6) 11
 —
 —
               
BALANCE, December 31, 2012 —
 —
 1,616
 (1,392) —
 (75) 149
Net loss —
 —
 —
 (169) —
 —
 (169)
Net impact of interest rate derivative instruments, net of tax —
 —
 —
 —
 —
 34
 34
Stock compensation expense, net —
 —
 48
 —
 —
 —
 48
Exercise of options and warrants —
 —
 104
 —
 —
 —
 104
Purchase of treasury stock —
 —
 —
 —
 (15) —
 (15)
Retirement of treasury stock —
 —
 (8) (7) 15
 —
 —
               
BALANCE, December 31, 2013 $—
 $—
 $1,760
 $(1,568) $—
 $(41) $151
               

  Successor  Predecessor
  Year Ended December 31,  
One Month
Ended
December 31,
  
Eleven Months
Ended
November 30,
Year Ended December 31,
  2010  2009  2009  2008 
             
CASH FLOWS FROM OPERATING ACTIVITIES:            
Net income (loss) – Charter shareholders $(237) $2  $10,099  $(2,447)
Adjustments to reconcile net income (loss) to net cash flows
  from operating activities:
                
Depreciation and amortization  1,524   122   1,194   1,310 
Impairment of franchises  --   --   2,163   1,521 
Noncash interest expense  74   5   42   61 
Change in value of derivatives  --   --   4   29 
Gain due to effects of Plan  --   --   (6,818)  -- 
Gain due to fresh start accounting adjustments  --   --   (5,659)  -- 
Noncash reorganizations items, net  --   --   170   -- 
(Gain) loss on extinguishment of debt  81   --   --   (5)
Deferred income taxes  287   7   (358)  (107)
Other, net  34   3   31   48 
Changes in operating assets and liabilities, net of effects from
   acquisitions and dispositions:
                
Accounts receivable  --   26   (52)  3 
Prepaid expenses and other assets  22   2   (36)  (1)
Accounts payable, accrued expenses and other  126   16   (344)  (13)
Payment of deferred management fees – related party  --   --   (25)  -- 
                 
Net cash flows from operating activities  1,911   183   411   399 
                 
CASH FLOWS FROM INVESTING ACTIVITIES:                
Purchases of property, plant and equipment  (1,209)  (108)  (1,026)  (1,202)
Change in accrued expenses related to capital expenditures  8   --   (10)  (39)
Purchase of CC VIII, LLC interest  --   --   (150)  -- 
Other, net  31   (3)  (7)  31 
                 
Net cash flows from investing activities  (1,170)  (111)  (1,193)  (1,210)
                 
CASH FLOWS FROM FINANCING ACTIVITIES:                
Proceeds from Rights Offering  --   --   1,614   -- 
Borrowings of long-term debt  3,115   --   --   3,105 
Repayments of long-term debt  (4,352)  (17)  (1,054)  (1,354)
Repayment of preferred stock  (138)  --   --   -- 
Payments for debt issuance costs  (76)  --   (39)  (42)
Purchase of treasury stock  (6)  --   --   -- 
Other, net  (6)  --   --   (13)
                 
Net cash flows from financing activities  (1,463)  (17)  521   1,696 
                 
NET INCREASE (DECREASE) IN CASH AND CASH
     EQUIVALENTS
  (722)   55   (261)  885 
CASH AND CASH EQUIVALENTS, beginning of period  754   699   960   75 
                 
CASH AND CASH EQUIVALENTS, end of period $32  $754  $699  $960 
                 
                 
                 
CASH PAID FOR INTEREST $735  $4  $1,096  $1,847 
                 
NONCASH TRANSACTIONS:                
Liabilities subject to compromise discharged at emergence $--  $--  $7,829  $-- 
                 


The accompanying notes are an integral part of these consolidated financial statements.
F- 5



CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in millions)
F-7
  Year Ended December 31,
  2013 2012 2011
CASH FLOWS FROM OPERATING ACTIVITIES:      
Net loss $(169) $(304) $(369)
Adjustments to reconcile net loss to net cash flows from operating activities:      
Depreciation and amortization 1,854
 1,713
 1,592
Non-cash interest expense 43
 45
 34
Loss on extinguishment of debt 123
 55
 143
Gain on derivative instruments, net (11) —
 —
Deferred income taxes 112
 250
 290
Other, net 82
 45
 33
Changes in operating assets and liabilities, net of effects from acquisitions and dispositions:      
Accounts receivable 10
 34
 (24)
Prepaid expenses and other assets —
 (8) 1
Accounts payable, accrued liabilities and other 114
 46
 37
Net cash flows from operating activities 2,158
 1,876
 1,737
       
CASH FLOWS FROM INVESTING ACTIVITIES:      
Purchases of property, plant and equipment (1,825) (1,745) (1,311)
Change in accrued expenses related to capital expenditures 76
 13
 57
Sales (purchases) of cable systems, net (676) 19
 (88)
Other, net (18) (24) (24)
Net cash flows from investing activities (2,443) (1,737) (1,366)
       
CASH FLOWS FROM FINANCING ACTIVITIES:      
Borrowings of long-term debt 6,782
 5,830
 5,489
Repayments of long-term debt (6,520) (5,901) (5,072)
Payments for debt issuance costs (50) (53) (62)
Purchase of treasury stock (15) (11) (733)
Proceeds from exercise of options and warrants 104
 15
 5
Other, net (2) (14) —
Net cash flows from financing activities 299
 (134) (373)
       
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 14
 5
 (2)
CASH AND CASH EQUIVALENTS, beginning of period 7
 2
 4
CASH AND CASH EQUIVALENTS, end of period $21
 $7
 $2
       
CASH PAID FOR INTEREST $763
 $904
 $899


The accompanying notes are an integral part of these consolidated financial statements.
F- 6
CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2010, 20092013, 2012 AND 20082011
(dollars in millions, except share or per share data or where indicated)


1.    Organization and Basis of Presentation

Organization

Charter Communications, Inc. (“Charter”) is a holding company whose principal asset is a 100% common equity interest in Charter Communications Holding Company, LLC (“Charter Holdco”). Charter Holdco is the sole owner of Charter’sowns cable systems through its subsidiaries, where the underlying operations reside, which are collectively, with Charter, referred to herein as the “Company.”

The Company is a cable operator providing services in the United States. The Company offers to residential and commercial customers traditional cable video programming, (basic and digital video), high-speed Internet services, and telephonevoice services, as well as advanced video services such as Charter OnDemand™, high definition television, and digital video recorder (“DVR”) service. The Company sells its cable video programming, high-speed Internet, telephone,voice, and advanced video services primarily on a subscription basis. The Company also sells local advertising on cable networks.networks and on the Internet and provides fiber connectivity to cellular towers.

Basis of Presentation

The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”).  On May 7, 2009, and the Company filed a Joint Plan of Reorganization (the “Plan”)rules and a related disclosure statement (the “Disclosure Statement”) with the United States Bankruptcy Court for the Southern District of New York (the “Bankruptcy Court”).  On November 30, 2009 the Company emerged from protection under Chapter 11regulations of the United States CodeSecurities and Exchange Commission (the “Bankruptcy Code”“SEC”).  Upon the Company’s emergence from bankruptcy, the Company applied fresh start accounting. This resulted in the Company becoming a new entity on December 1, 2009, with a new capital structure, a new accounting basis in the id entifiable assets and liabilities assumed and no retained earnings or accumulated losses. Accordingly, the consolidated financial statements on or after December 1, 2009 (“Successor”) are not comparable to the consolidated financial statements prior to that date. The financial statements for the periods through November 30, 2009 (“Predecessor”) do not include the effect of any changes in our capital structure or changes in the fair value of assets and liabilities as a result of fresh start accounting.

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Areas involving significant judgments and estimates include capitalization of labor and overhead costs; depreciation and amortization costs; valuations and impairments of property, plant and equipment, intangibles and goodwill; income taxes; contingencies;contingencies and programming expense and fresh start accounting.expense. Actual results could differ from those estimates.

Certain prior year amounts have been reclassified to conform with the 20102013 presentation.

2.    Summary of Significant Accounting Policies

Consolidation

The accompanying consolidated financial statements include the accounts of Charter and its majoritywholly owned subsidiaries. The Company consolidates variable interest entities based upon evaluation of the Company’s power, through voting rights or similar rights, to direct the activities of another entity that most significantly impact the entity’s economic performance; its obligation to absorb the expected losses of the entity; and its right to receive the expected residual returns of the entity. All significant intercompanyinter-company accounts and transactions among consolidated entities have been eliminated.

F-8
CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2010, 2009 AND 2008
(dollars in millions, except share or per share data or where indicated)

Cash and Cash Equivalents

The Company considers all highly liquid investments with original maturities of three months or less to be cash equivalents. These investments are carried at cost, which approximates market value. Cash and cash equivalents consist primarily of money market funds and commercial paper. Restricted cash and cash equivalents consistconsisted of amounts held in escrow accounts pending final resolution from the Bankruptcy Court (see Note 23).  Restricted cash is included inCourt. In April 2013, the restrictions on the cash and cash equivalents on the accompanying condensed consolidated statements of cash flows.  Approximately $17 million of restricted cash held in an escrow account established in bankruptcy proceedings was used to pay for professional services for the year ended December 31, 2010.were resolved.  

Property, Plant and Equipment

Additions to property, plant and equipment are recorded at cost, including all material, labor and certain indirect costs associated with the construction of cable transmission and distribution facilities. While the Company’s capitalization is based on specific activities, once capitalized, costs are tracked by fixed asset category at the cable system level and not on a specific asset basis. For assets that are sold or retired, the estimated historical cost and related accumulated depreciation is removed. Costs associated with initial customer installations and the additions of network equipment necessary to enable advanced video services are capitalized. Costs capitalized as part of initial customer installations include materials, labor, and certain indirect costs. Indirect costs are associated with the activities of the Company’s personnel who assist in connecting and activating the new service and


F- 7
CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2013, 2012 AND 2011
(dollars in millions, except share or per share data or where indicated)

consist of compensation and other costs associated with these support functions. Indirect costs primarily include employee benefits and payroll taxes, direct variable costs associated with capitalizable activities, consisting primarily of installation and construction, vehicle costs, the cost of dispatch personnel and indirect costs directly attributable to capitalizable activities. The costs of disconnecting service at a customer’s dwelling or reconnecting service to a previously installed dwelling are charged to operating expense in the period incurred. Costs for repairs and maintenance are charged to operating expense as incurred, while plant and equipment replacement and betterments, including replacement of cable drops from the pole to the dwelling, are capitalized.

Depreciation is recorded using the straight-line composite method over management’s estimate of the useful lives of the related assets as follows:

Cable distribution systems 7-20 years
Customer equipment and installations 4-8 years
Vehicles and equipment 1-6 years
Buildings and leasehold improvements15-40 years
Furniture, fixtures and equipment 6-10 years

Asset Retirement Obligations

Certain of the Company’s franchise agreements and leases contain provisions requiring the Company to restore facilities or remove equipment in the event that the franchise or lease agreement is not renewed. The Company expects to continually renew its franchise agreements and has concluded that substantially all of the related franchise rights are indefinite lived intangible assets. Accordingly, the possibility is remote that the Company would be required to incur significant restoration or removal costs related to these franchise agreements in the foreseeable future. A liability is required to be recognized for an asset retirement obligation in the period in which it is incurred if a reasonable estimate of fair value can be made. The Company has not recorded an estimate for potential f ranchisefranchise related obligations, but would record an estimated liability in the unlikely event a franchise agreement containing such a provision were no longer expected to be renewed. The Company also expects to renew many of its lease agreements related to the continued operation of its cable business in the franchise areas. For the Company’s lease agreements, the estimated liabilities related to the removal provisions, where applicable, have been recorded and are not significant to the financial statements.
F-9
CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2010, 2009 AND 2008
(dollars in millions, except share or per share data or where indicated)


Franchises

Franchise rights represent the value attributed to agreements or authorizations with local and state authorities that allow access to homes in cable service areas acquired through the purchase of cable systems.areas. Management estimates the fair value of franchise rights at the date of acquisition and determines if the franchise has a finite life or an indefinite life. All franchises that qualify for indefinite life treatment are tested for impairment annually or more frequently as warranted by events or changes in circumstances (see Note 5)6). The Company has concluded that all of its existing franchises qualify for indefinite life treatment.

Customer Relationships

Customer relationships represent the value attributable to the Company'sCompany’s business relationships with its current customers including the right to deploy and market additional services to these customers.  Customer relationships are amortized on an accelerated basis over the period the relationships with current customers are expected to generate cash flows (11-15(8-15 years). 

Goodwill

The Company assesses the recoverability of its goodwill as of November 30 of each year, or more frequently whenever events or changes in circumstances indicate that the asset might be impaired. The Company performs the assessment of its goodwill one level below the operating segment level, which is represented by geographical groupings of cable systems by which such systems are managed.

Other Non-current Assets

Other Noncurrent Assets

Other noncurrentnon-current assets primarily include trademarks, right-of-entry costs and deferred financing costs. Trademarks have been determined to have an indefinite life and are tested annually for impairment. Right-of-entry costs asrepresent costs incurred related to agreements entered into with landlords, real estate companies or owners to gain access to a building in order to provide cable


F- 8
CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2013, 2012 AND 2011
(dollars in millions, except share or per share data or where indicated)

service. Right-of-entry costs are generally deferred and amortized to amortization expense over the term of December 31, 2010 and trademarks as of December 31, 2009.the agreement. Costs related to borrowings are deferred and amortized to interest expense over the terms of the related borrowings.  All deferred financing costs prior to emergence were eliminated as part of fresh start accounting.  Trademarks have been determined to have an indefinite life and are tested annually for impairment.

Valuation of Long-Lived Assets

The Company evaluates the recoverability of long-lived assets to be held and used for impairment when events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Such events or changes in circumstances could include such factors as impairment of the Company’s indefinite life assets, changes in technological advances, fluctuations in the fair value of such assets, adverse changes in relationships with local franchise authorities, adverse changes in market conditions or a deterioration of operating results. If a review indicates that the carrying value of such asset is not recoverable from estimated undiscounted cash flows, the carrying value of such asset is reduced to its estimated fair value. While the Company believes that its estimates of future cash flows are reasonable, different assumptions regarding such cash flows could materially affect its evaluations of asset recoverability. No impairments of long-lived assets to be held and used were recorded in 2010, 20092013, 2012 and 2008.

Derivative Financial Instruments2011.

Derivative Financial Instruments

Gains or losses related to derivative financial instruments which qualify as hedging activities are recorded in accumulated other comprehensive income (loss).loss. For all other derivative instruments, the related gains or losses are recorded in the statements of operations. The Company uses interest rate swap agreements to manage its interest costs and reduce the Company’s exposure to increases in floating interest rates. The Company manages its exposure to fluctuations in interest rates by maintaining a mix of fixed and variable rate debt. Using interest rate swap agreements, the Company agrees to exchange, at specified intervals through 2015,2017, the difference between fixed and variable interest amounts calculated by referenc ereference to agreed-upon notional principal amounts. The Company diddoes not
F-10
CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2010, 2009 AND 2008
(dollars in millions, except share hold or per share data or where indicated)
holdissue any derivative financial instruments as of December 31, 2009, as 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. In April 2010, the Company entered into $2.0 billion notional amounts of interest rate swap agreements.

For the year ended December 31, 2008 (Predecessor), the Company recognized a gain of $33 million, related to certain provisions of the Company’s 5.875% and 6.50% convertible senior notes issued in November 2004 and October 2007, respectively, which were considered embedded derivatives for accounting purposes and were required to be accounted for separately from the convertible senior notes.  These derivatives were marked to market with gains or losses recorded as the change in value of derivatives on the Company’s consolidated statements of operations.  On the Effective Date, the Company’s 5.875% and 6.50% convertible senior notes were cancelled.  See Note 23.

Revenue Recognitiontrading purposes.

Revenue Recognition

Revenues from residential and commercial video, high-speed Internet and telephonevoice 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 feesIn some cases, the Company coordinates the advertising sales efforts of other cable operators in a certain market and remits amounts received from customers less an agreed-upon percentage to such cable operator. For those arrangements in which the Company acts as a principal, the Company records the revenues earned from the advertising customer on a gross basis and the amount remitted to the cable operator as an operating expense.

Fees imposed on Charter by localvarious governmental authorities are collectedpassed through on a monthly basis fromto the Company’s customers and are periodically remitted to local franchise authorities. Franchise feesFees of $182$263 million $15, $260 million $166 and $249 million and $187 million for the yearyears ended December 31, 2010 (Successor)2013, one month ended December 31, 2009 (Successor), eleven months ended November 30, 2009 (Predecessor)2012 and year ended December 31, 2008 (Predecessor)2011, respectively, are reported in video, voice and commercial revenues, on a gross basis with a corresponding operatin goperating expense because the Company is acting as a principal.  Sales Other taxes, such as sales taxes imposed on the Company's customers collected and remitted to state and local authorities are recorded on a net basis.basis because the Company is acting as an agent in such situation.



F- 9
CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2013, 2012 AND 2011
(dollars in millions, except share or per share data or where indicated)

The Company’s revenues by product line are as follows:

  Successor  Predecessor
  
Year Ended
December 31,
  
One Month
Ended
December 31,
  
Eleven Months
Ended
November 30,
  
Year Ended
December 31,
  2010  2009  2009  2008
            
Video$3,689 $306 $3,380 $3,692
High-speed Internet 1,606  127  1,349  1,356
Telephone 823  65  685  583
Commercial 494  39  407  392
Advertising sales 291  22  227  308
Other 156  13  135  148
            
 $7,059 $572 $6,183 $6,479
 Year Ended December 31,
 2013 2012 2011
      
Video$4,030
 $3,639
 $3,639
Internet2,186
 1,866
 1,708
Voice644
 828
 858
Commercial822
 658
 544
Advertising sales291
 334
 292
Other182
 179
 163
      
 $8,155
 $7,504
 $7,204

Certain prior year amounts have been reclassified to conform with the 2010 presentation, including the reflection of franchise fees, equipment rental and video customer installation revenue as video revenue, and telephone regulatory fees as telephone revenue, rather than other revenue.Programming Costs

Programming Costs

The Company has various contracts to obtain basic, digital and premium video programming from programming vendors 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 subject to periodic audits performed by the programmers. Certain programming contracts contain incentives to be
F-11
CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2010, 2009 AND 2008
(dollars in millions, except share or per share data or where indicated)
paid by the programmers. The Company receives these payments and recognizes the incentives on a straight-line basis over the life of the programming agreement as a reduction of programming expense. This offset to programming expense was $17$7 million $2, $6 million $24 and $7 million and $33 million for the yearyears ended December 31, 2010 (Successor)2013, one month ended December 31, 2009 (Successor), eleven months ended November 30, 2009 (Predecessor)2012 and year ended December 31, 2008 (Predecessor)2011, respectively.  As of December 31, 2010 (Successor) and 2009 (Successor), the deferred amounts of such economic consideration, included in other long-term liabilities, were $11 million and $26 million, respectively. Programming costs included in the accompanying statements of operations were $1.8$2.1 billion $146 million, $1.6, $2.0 billion and $1.6$1.9 billion for the yearyears ended December 31, 2010 (Successor)2013, one month ended December 31, 2009 (Successor), eleven months ended November 30, 2009 (Predecessor)2012 and year ended December 31, 2008 (Predecessor)2011, respectively.

Advertising Costs

Advertising costs associated with marketing the Company’s products and services are generally expensed as costs are incurred. Such advertising expense was $282$357 million $20, $325 million $230 and $285 million and $229 million for the yearyears ended December 31, 2010 (Successor)2013, one month ended December 31, 2009 (Successor), eleven months ended November 30, 2009 (Predecessor)2012 and year ended December 31, 2008 (Predecessor)2011, respectively.

Multiple-ElementCCO Holdings Notes

The CCO Holdings notes are senior debt obligations of CCO Holdings and CCO Holdings Capital Corp. Such notes are guaranteed by Charter. They rank equally with all other current and future unsecured, unsubordinated obligations of CCO Holdings and CCO Holdings Capital Corp. They are structurally subordinated to all obligations of subsidiaries of CCO Holdings, including the Charter Operating credit facilities.



52


Redemption Provisions of Our Notes

The various notes issued by our subsidiaries included in the table may be redeemed in accordance with the following table or are not redeemable until maturity as indicated:
Note SeriesRedemption DatesPercentage of Principal
7.250% senior notes due 2017October 30, 2013 – October 29, 2014105.438%
October 30, 2014 – October 29, 2015103.625%
October 30, 2015 – October 29, 2016101.813%
Thereafter100.000%
7.000% senior notes due 2019January 15, 2014 – January 14, 2015105.250%
January 15, 2015 – January 14, 2016103.500%
January 15, 2016 – January 14, 2017101.750%
Thereafter100.000%
8.125% senior notes due 2020April 30, 2015 – April 29, 2016104.063%
April 30, 2016 – April 29, 2017102.708%
April 30, 2017 – April 29, 2018101.354%
Thereafter100.000%
7.375% senior notes due 2020December 1, 2015 – November 30, 2016103.688%
December 1, 2016 – November 30, 2017101.844%
Thereafter100.000%
5.250% senior notes due 2021March 15, 2016 – March 14, 2017103.938%
March 15, 2017 – March 14, 2018102.625%
March 15, 2018 – March 14, 2019101.313%
Thereafter100.000%
6.500% senior notes due 2021April 30, 2015 – April 29, 2016104.875%
April 30, 2016 – April 29, 2017103.250%
April 30, 2017 – April 29, 2018101.625%
Thereafter100.000%
6.625% senior notes due 2022January 31, 2017 – January 30, 2018103.313%
January 31, 2018 – January 30, 2019102.208%
January 31, 2019 – January 30, 2020101.104%
Thereafter100.000%
5.250% senior notes due 2022September 30, 2017 – September 29, 2018102.625%
September 30, 2018 – September 29, 2019101.750%
September 30, 2019 – September 29, 2020100.875%
Thereafter100.000%
5.125% senior notes due 2023February 15, 2018 – February 14, 2019102.563%
February 15, 2019 – February 14, 2020101.708%
February 15, 2020 – February 14, 2021100.854%
Thereafter100.000%
5.750% senior notes due 2023March 1, 2018 – February 28, 2019102.875%
March 1, 2019 – February 29, 2020101.917%
March 1, 2020 – February 28, 2021100.958%
Thereafter100.000%
5.750% senior notes due 2024July 15, 2018 – July 14, 2019102.875%
July 15, 2019 – July 14, 2020101.917%
July 15, 2020 – July 14, 2021100.958%
Thereafter100.000%



53


In the event that a specified change of control event occurs, each of the respective issuers of the notes must offer to repurchase any then outstanding notes at 101% of their principal amount or accrued value, as applicable, plus accrued and unpaid interest, if any.

Summary of Restrictive Covenants of Our Notes

The following description is a summary of certain restrictions of our Debt Agreements.  The summary does not restate the terms of the Debt Agreements in their entirety, nor does it describe all restrictions of the Debt Agreements.  The agreements and instruments governing each of the notes issued are complicated and you should consult such agreements and instruments for more detailed information regarding the notes issued.  

The notes issued by CCO Holdings (the “note issuer”) were issued pursuant to indentures that contain covenants that restrict the ability of the note issuer and its subsidiaries to, among other things:

incur indebtedness;
pay dividends or make distributions in respect of capital stock and other restricted payments;
issue equity;
make investments;
create liens;
sell assets;
consolidate, merge, or sell all or substantially all assets;
enter into sale leaseback transactions;
create restrictions on the ability of restricted subsidiaries to make certain payments; or
enter into transactions with affiliates.

However, such covenants are subject to a number of important qualifications and exceptions. Below we set forth a brief summary of certain of the restrictive covenants.

Restrictions on Additional Debt

The limitations on incurrence of debt and issuance of preferred stock contained in various indentures permit the note issuer and its restricted subsidiaries to incur additional debt or issue preferred stock, so long as, after giving pro forma effect to the incurrence, the leverage ratio would be below a specified level for the note issuer. The leverage ratios under our notes for CCO Holdings is 6.0 to 1.

In addition, regardless of whether the leverage ratio could be met, so long as no default exists or would result from the incurrence or issuance, the note issuer and its restricted subsidiaries are permitted to issue among other permitted indebtedness:

up to $1.5 billion of debt under credit facilities not otherwise allocated
up to the greater of $300 million and 5% of consolidated net tangible assets to finance the purchase or capital lease of new assets;
up to the greater of $300 million and 5% of consolidated net tangible assets of additional debt for any purpose; and
other items of indebtedness for specific purposes such as intercompany debt, refinancing of existing debt, and interest rate swaps to provide protection against fluctuation in interest rates.

Indebtedness under a single facility or agreement may be incurred in part under one of the categories listed above and in part under another, and generally may also later be reclassified into another category including as debt incurred under the leverage ratio. Accordingly, indebtedness under our credit facilities may be incurred under a combination of the categories of permitted indebtedness listed above. The restricted subsidiaries of the note issuer are generally not permitted to issue subordinated debt securities.

Restrictions on Distributions

Generally, under the various indentures, CCO Holdings and its respective restricted subsidiaries are permitted to pay dividends on or repurchase equity interests, or make other specified restricted payments, only if it can incur $1.00 of new debt under the 6.0 to 1.0 leverage ratio test after giving effect to the transaction and if no default exists or would exist as a consequence of such incurrence. If those conditions are met, restricted payments may be made in a total amount of up to the sum of 100% of CCO Holdings’ Consolidated EBITDA, as defined, minus 1.3 times its Consolidated Interest Expense, as defined, cumulatively from


54


April 1, 2010, plus 100% of new cash and appraised non-cash equity proceeds received by CCO Holdings and not allocated to certain investments, cumulatively from the issue date, plus $2 billion.

In addition, CCO Holdings may make distributions or restricted payments, so long as no default exists or would be caused by transactions among other distributions or restricted payments:

to repurchase management equity interests in amounts not to exceed $10 million per fiscal year;
to pay pass-through tax liabilities in respect of ownership of equity interests in the applicable issuer or its restricted subsidiaries; or
to make other specified restricted payments including merger fees up to 1.25% of the transaction value, repurchases using concurrent new issuances, and certain dividends on existing subsidiary preferred equity interests.

Restrictions on Investments

CCO Holdings and its respective restricted subsidiaries may not make investments except (i) permitted investments or (ii) if, after giving effect to the transaction, their leverage would be above the applicable leverage ratio.

Permitted investments include, among others:

investments in and generally among restricted subsidiaries or by restricted subsidiaries in the applicable issuer;
investments aggregating up to $750 million at any time outstanding.
investments aggregating up to 100% of new cash equity proceeds received by CCO Holdings since the issue date to the extent the proceeds have not been allocated to the restricted payments covenant.

Restrictions on Liens

The restrictions on liens for CCO Holdings only applies to liens on assets of the issuer itself and does not restrict liens on assets of subsidiaries. Permitted liens include liens securing indebtedness and other obligations under credit facilities, liens securing the purchase price of financed new assets, liens securing indebtedness of up to the greater of $50 million and 1.0% of consolidated net tangible assets and other specified liens.

Restrictions on the Sale of Assets; Mergers

CCO Holdings is generally not permitted to sell all or substantially all of its assets or merge with or into other companies unless its leverage ratio after any such transaction would be no greater than its leverage ratio immediately prior to the transaction, or unless after giving effect to the transaction, leverage would be below 6.0 to 1.0, no default exists, and the surviving entity is a U.S. entity that assumes the applicable notes.

CCO Holdings and its restricted subsidiaries may generally not otherwise sell assets or, in the case of restricted subsidiaries, issue equity interests, in excess of $100 million unless they receive consideration at least equal to the fair market value of the assets or equity interests, consisting of at least 75% in cash, assumption of liabilities, securities converted into cash within 60 days, or productive assets. CCO Holdings and its restricted subsidiaries are then required within 365 days after any asset sale either to use or commit to use the net cash proceeds over a specified threshold to acquire assets used or useful in their businesses or use the net cash proceeds to repay specified debt, or to offer to repurchase the issuer’s notes with any remaining proceeds.

Restrictions on Sale and Leaseback Transactions

InThe note issuer and its restricted subsidiaries may generally not engage in sale and leaseback transactions unless, at the normal course of business, the Company enters into multiple-element transactions where it is simultaneously both a customer and a vendor with the same counterparty or in which it purchases multiple products and/or services, or settles outstanding items contemporaneous with the purchase of a product or service from a single counterparty.  Transactions, although negotiated contemporaneously, may be documented in one or more contracts.  The Company’s policy for accounting for each transaction negotiated contemporaneously is to record each elementtime of the transaction, basedthe note issuer could have incurred secured indebtedness under its leverage ratio test in an amount equal to the present value of the net rental payments to be made under the lease, and the sale of the assets and application of proceeds is permitted by the covenant restricting asset sales.

Prohibitions on Restricting Dividends

The note issuer's restricted subsidiaries may generally not enter into arrangements involving restrictions on their ability to make dividends or distributions or transfer assets to the note issuer unless those restrictions with respect to financing arrangements are on terms that are no more restrictive than those governing the credit facilities existing when they entered into the applicable indentures or are not materially more restrictive than customary terms in comparable financings and will not materially impair the note issuer's ability to make payments on the respective estimated fair valuesnotes.


55



Affiliate Transactions

The indentures also restrict the ability of CCO Holdings and its restricted subsidiaries to enter into certain transactions with affiliates involving consideration in excess of $25 million without a determination by the board of directors that the transaction complies with this covenant, or transactions with affiliates involving over $100 million without receiving an opinion as to the fairness to the holders of such transaction from a financial point of view issued by an accounting, appraisal or investment banking firm of national standing.

Cross Acceleration

The indentures of CCO Holdings include various events of default, including cross acceleration provisions. Under these provisions, a failure by the note issuer or any of its restricted subsidiaries to pay at the final maturity thereof the principal amount of other indebtedness having a principal amount of $100 million or more (or any other default under any such indebtedness resulting in its acceleration) would result in an event of default under the indenture governing the applicable notes. As a result, an event of default related to the failure to repay principal at maturity or the acceleration of the productsindebtedness under the CCO Holdings notes, CCO Holdings credit facility or services purchasedthe Charter Operating credit facilities could cause cross-defaults under all of CCO Holdings' indentures.

Recently Issued Accounting Standards

In June 2013, the Financial Accounting Standards Board's Emerging Issues Task Force reached a final consensus on Issue 13-C, Presentation of an Unrecognized Tax Benefit when a Net Operating Loss or Tax Credit Carryforward Exists ("Issue 13-C"). Issue 13-C states that entities should present the unrecognized tax benefit as a reduction of the deferred tax asset for a net operating loss or similar tax loss or tax credit carryforward rather than as a liability when the uncertain tax position would reduce the net operating loss or other carryforward under the tax law. Issue 13-C requires prospective application (including accounting for uncertain tax positions that exist upon date of adoption) with optional retrospective application and is effective for annual and interim periods beginning after December 15, 2013, with early adoption permitted. The Company adopted Issue 13-C in the second quarter of 2013 and applied it retrospectively.

Item 7A.Quantitative and Qualitative Disclosures About Market Risk.

We are exposed to various market risks, including fluctuations in interest rates. We have used interest rate swap agreements to manage our interest costs and reduce our exposure to increases in floating interest rates. We manage our exposure to fluctuations in interest rates by maintaining a mix of fixed and variable rate debt. Using interest rate swap agreements, we agree to exchange, at specified intervals through 2017, the difference between fixed and variable interest amounts calculated by reference to agreed-upon notional principal amounts.

As of December 31, 2013 and 2012, the principal amount of our debt was approximately $14.2 billion and $12.9 billion, respectively.  As of December 31, 2013 and 2012, the weighted average interest rate on the credit facility debt, including the effects of our interest rate swap agreements, was approximately 3.6% and 4.2%, respectively, and the productsweighted average interest rate on the high-yield notes was approximately 6.4% and 6.7%, respectively, resulting in a blended weighted average interest rate of 5.6% and 6.0%, respectively.  The interest rate on approximately 84% and 87% of the total principal amount of our debt was effectively fixed, including the effects of our interest rate swap agreements, as of December 31, 2013 and 2012, respectively.

We do not hold or services sold.  In determiningissue derivative instruments for speculative trading purposes. We, until de-designating in the first quarter of 2013, had certain interest rate derivative instruments that were designated as cash flow hedging instruments for GAAP purposes. Such instruments effectively converted variable interest payments on certain debt instruments into fixed payments. For qualifying hedges, realized derivative gains and losses offset related results on hedged items in the consolidated statements of operations. We formally documented, designated and assessed the effectiveness of transactions that received hedge accounting.

Changes in the fair value of interest rate derivative instruments that were designated as hedging instruments of the variability of cash flows associated with floating-rate debt obligations, and that met effectiveness criteria were reported in accumulated other comprehensive loss. The amounts were subsequently reclassified as an increase or decrease to interest expense in the same periods in which the related interest on the floating-rate debt obligations affected earnings (losses). For the years ended December 31, 2013, 2012 and 2011, gains of $7 million and losses of $10 million and $8 million, respectively, related to derivative instruments designated as cash flow hedges, were recorded in other comprehensive loss.



56


Due to repayment of variable rate credit facility debt without a LIBOR floor, certain interest rate derivative instruments were de-designated as cash flow hedges during the three months ended March 31, 2013, as they no longer met the criteria for cash flow hedging specified by GAAP. In addition, on March 31, 2013, the remaining interest rate derivative instruments that continued to be highly effective cash flow hedges for GAAP purposes were electively de-designated. On the date of de-designation, we completed a final measurement test for each interest rate derivative instrument to determine any ineffectiveness and such amount was reclassified from accumulated other comprehensive loss into gain on derivative instruments, net in our consolidated statements of operations. For the year ended December 31, 2013, a loss of $27 million related to the reclassification from accumulated other comprehensive loss into earnings as a result of cash flow hedge discontinuance was recorded in gain on derivative instruments, net. While these interest rate derivative instruments are no longer designated as cash flow hedges for accounting purposes, management continues to believe such instruments are closely correlated with the respective elements,debt, thus managing associated risk. Interest rate derivative instruments not designated as hedges are marked to fair value, with the Company refersimpact recorded as a gain or loss on derivative instruments, net in our consolidated statements of operations. For the year ended December 31, 2013, gains of $38 million related to quoted market prices (where availab le), historical transactions or comparablethe change in fair value of interest rate derivative instruments not designated as cash transactions.
flow hedges was recorded in gain on derivative instruments, net. The balance that remains in accumulated other comprehensive loss for these interest rate derivative instruments will be amortized over the respective lives of the contracts and recorded as a loss within gain on derivative instruments, net in our consolidated statements of operations. The net amount of existing losses that are reported in accumulated other comprehensive loss as of December 31, 2013 that is expected to be reclassified into earnings within the next twelve months is approximately $19 million.

Stock-Based CompensationThe table set forth below summarizes the fair values and contract terms of financial instruments subject to interest rate risk maintained by us as of December 31, 2013 (dollars in millions):

Restricted stock, stock options
  2014 2015 2016 2017 2018 Thereafter Total Fair Value at December 31, 2013
Debt:                
Fixed Rate $—
 $—
 $—
 $1,000
 $—
 $9,350
 $10,350
 $10,384
Average Interest Rate —% —% —% 7.25% —% 6.28% 6.37%  
                 
Variable Rate $414
 $65
 $93
 $102
 $673
 $2,551
 $3,898
 $3,848
Average Interest Rate 2.80% 2.86% 3.84% 4.97% 5.67% 6.83% 6.01%  
                 
Interest Rate Instruments:                
Variable to Fixed Rate $800
 $300
 $250
 $850
 $—
 $—
 $2,200
 $30
Average Pay Rate 4.65% 4.99% 3.89% 3.84% —% —% 4.30%  
Average Receive Rate 2.55% 2.75% 4.47% 5.48% —% —% 3.93%  

At December 31, 2013, we had $2.2 billion in notional amounts of interest rate swaps outstanding. This includes $550 million in delayed start interest rate swaps that become effective in March 2014 through March 2015.  In any future quarter in which a portion of these delayed start hedges first becomes effective, an equal or greater notional amount of the currently effective swaps are scheduled to mature.  Therefore, the $1.7 billion notional amount of currently effective interest rate swaps will gradually step down over time as current swaps mature and performance unitsan equal or lesser amount of delayed start swaps become effective.

The notional amounts of interest rate instruments do not represent amounts exchanged by the parties and, sharesthus, are measured atnot a measure of our exposure to credit loss. The amounts exchanged are determined by reference to the grant datenotional amount and the other terms of the contracts. The estimated fair value is determined using a present value calculation based on an implied forward LIBOR curve (adjusted for Charter Operating’s or counterparties’ credit risk). Interest rates on variable debt are estimated using the average implied forward LIBOR for the year of maturity based on the yield curve in effect at December 31, 2013 including applicable bank spread.

Item 8. Financial Statements and amortized to stock compensation expense overSupplementary Data.

Our consolidated financial statements, the vesting period.  The Company recorded $26 million, $1 million, $26 millionrelated notes thereto, and $33 millionthe reports of stock compensation expense which isindependent accountants are included in generalthis annual report beginning on page F-1.



57


Item 9. Changes in and administrative expensesDisagreements with Accountants on Accounting and Financial Disclosure.

None.

Item 9A. Controls and Procedures.

Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures

As of the end of the period covered by this report, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we have evaluated the effectiveness of the design and operation of our disclosure controls and procedures with respect to the information generated for use in this annual report. The evaluation was based in part upon reports and certifications provided by a number of executives. Based upon, and as of the date of that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that the disclosure 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.

In designing and evaluating the disclosure controls and procedures, our management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable, not absolute, assurance of achieving the desired control objectives, and management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based upon the above evaluation, we believe that our controls provide such reasonable assurances.

There was no change in our internal control over financial reporting during the fourth quarter of 2013 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Management’s Report on Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining 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 of published financial statements.

Management has assessed the effectiveness of our internal control over financial reporting as of 2013. In making this assessment, we used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal Control — Integrated Framework (1992). Based on management’s assessment utilizing these criteria we believe that, as of 2013, our internal control over financial reporting was effective.

We acquired Bresnan in July 2013. As permitted by SEC guidance, management excluded these acquired companies from its assessment of the effectiveness of our internal control over financial reporting as of December 31, 2013. In total, Bresnan represented 10% and 3% of our total assets and total revenues, respectively, as of and for the year ended December 31, 2010 (Successor)2013. Excluding identifiable intangible assets and goodwill recorded in the business combination, Bresnan represented 3% of our total assets as of December 31, 2013.

Our independent auditors, KPMG LLP, have audited our internal control over financial reporting as stated in their report on page F-2.

Item 9B. Other Information.

Disclosure Pursuant to Section 219 of the Iran Threat Reduction and Syria Human Rights Act
Our former principal stockholder, through its management company, Apollo Global Management, LLC (“Apollo”) provided notice to Charter on October 29, 2013, that certain investment funds managed by affiliates of Apollo may be deemed affiliates of CEVA Holdings, LLC (“CEVA”), one monthwhich through subsidiaries was involved in certain transactions which constitute covered activities under the Iran Threat Reduction and Syria Human Rights Act of 2012 (“ITRA”). Apollo was previously a principal stockholder of Charter and had two representatives on Charter’s board of directors for the first and a portion of the second quarter of 2013, when some of the covered activities occurred. As a result, we are providing disclosure pursuant to Section 219 of ITRA and Section 13(r) of the Securities Exchange Act of 1934, as amended.


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Apollo notified Charter that, according to CEVA, in December 2012, CEVA Freight Italy Srl provided customs brokerage and freight forwarding services for the export to Iran of two measurement instruments to the Iranian Offshore Engineering Construction Company, a joint venture between two entities that are identified on OFAC’s list of Specially Designated Nationals (“SDN”). The revenues and net profits for these services were approximately $1,260.64 and $151.30, respectively. In February 2013, CEVA Freight Holdings (Malaysia) SDN BHD (“CEVA Malaysia”) provided customs brokerage for export and local haulage services for a shipment of polyethylene resin to Iran shipped on a vessel owned and/or operated by HDS Lines, also an SDN. The revenues and net profits for these services were approximately $779.54 and $311.13, respectively. In September 2013, CEVA Malaysia provided customs brokerage services for the import into Malaysia of fruit juice from Alifard Co. in Iran via HDS Lines. The revenues and net profits for these services were approximately $227.41 and $89.29, respectively.
All of the information in the foregoing paragraph is based solely on information in the notice provided by Apollo. Charter has no involvement in the business of CEVA and received no direct or indirect benefits from the transactions described above.






59


PART III

Item 10. Directors, Executive Officers and Corporate Governance.

The information required by Item 10 will be included in Charter’s 2014 Proxy Statement (the “Proxy Statement”) under the headings “Election of Class A Directors,” “Section 16(a) Beneficial Ownership Reporting Requirements,” and “Code of Ethics,” or in amendment to this Annual Report on Form 10-K and is incorporated herein by reference.

Item 11. Executive Compensation.
The information required by Item 11 will be included in the Proxy Statement under the headings “Executive Compensation,” “Election of Class A Directors – Director Compensation” and “Compensation Discussion and Analysis,” or in an amendment to this Annual Report on Form 10-K and is incorporated herein by reference. Information contained in the Proxy Statement or an amendment to this Annual Report on Form 10-Kunder 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 12 will be included in the Proxy Statement under the heading “Security Ownership of Certain Beneficial Owners and Management” or in amendment to this Annual Report on Form 10-K and is incorporated herein by reference.

Item 13. Certain Relationships and Related Transactions, and Director Independence.
The information required by Item 13 will be included in the Proxy Statement under the heading “Certain Relationships and Related Transactions” and “Election of Class A Directors” or in amendment to this Annual Report on Form 10-K and is incorporated herein by reference.

Item 14. Principal Accounting Fees and Services.
The information required by Item 14 will be included in the Proxy Statement under the heading “Accounting Matters” or in amendment to this Annual Report on Form 10-K and is incorporated herein by reference.



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PART IV

Item 15. Exhibits and Financial Statement Schedules.

(a)The following documents are filed as part of this annual report:

(1)Financial 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 required or are not applicable, or the required information is set forth in the applicable financial statements or notes thereto.

(3)The index to the exhibits begins on page E-1 of this annual report.



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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, Charter Communications, Inc. has duly caused this annual report to be signed on its behalf by the undersigned, thereunto duly authorized.

CHARTER COMMUNICATIONS, INC.,
Registrant
By:/s/ Thomas M. Rutledge
Thomas M. Rutledge
President, Chief Executive Officer and Director
Date: February 21, 2014


S- 1



POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Richard R. Dykhouse and Kevin D. Howard, and each of them (with full power to each of them to act alone), his or her true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, for him or her and in his or her name, place and stead, in any and all capacities, to sign on his or her behalf individually and in each capacity stated below any and all amendments (including post-effective amendments) to this annual report, and to file the same, with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents and either of them, or their substitutes, may lawfully do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of Charter Communications, Inc. and in the capacities and on the dates indicated.

SignatureTitleDate
/s/ Thomas M. Rutledge    
Thomas M. Rutledge
President, Chief Executive Officer, Director
(Principal Executive Officer)		February 21, 2014
/s/ Christopher L. Winfrey    
Christopher L. Winfrey
Executive Vice President and Chief Financial Officer (Principal Financial Officer)February 21, 2014
/s/ Kevin D. Howard     
Kevin D. Howard
Senior Vice President – Finance, Controller and Chief Accounting Officer (Principal Accounting Officer)February 21, 2014
/s/ Balan Nair    
Balan Nair
DirectorFebruary 21, 2014
/s/ W. Lance Conn    
W. Lance Conn
DirectorFebruary 21, 2014
/s/ Michael Huseby    
Michael Huseby
DirectorFebruary 21, 2014
/s/ Craig A. Jacobson    
Craig A. Jacobson
DirectorFebruary 21, 2014
/s/ Gregory Maffei    
Gregory Maffei
DirectorFebruary 21, 2014
/s/ John Malone    
John Malone
DirectorFebruary 21, 2014
/s/ John D. Markley, Jr.    
John D. Markley, Jr.
DirectorFebruary 21, 2014
/s/ David C. Merritt    
David C. Merritt
DirectorFebruary 21, 2014
/s/ Eric L. Zinterhofer    
Eric L. Zinterhofer
DirectorFebruary 21, 2014

S- 2



Exhibit Index

Exhibits are listed by numbers corresponding to the Exhibit Table of Item 601 in Regulation S-K.
ExhibitDescription
2.1Debtors' Joint Plan of Reorganization filed pursuant to Chapter 11 of the United States Bankruptcy Code filed on July 15, 2009 with the United States Bankruptcy Court for the Southern District of New York in Case No. 09-11435 (Jointly Administered) (incorporated by reference to Exhibit 10.2 to the quarterly report on Form 10‑Q of Charter Communications, Inc. filed on August 6, 2009 (File No. 001-33664).
2.2Purchase Agreement dated February 7, 2013 between CSC Holdings, LLC, and Charter Communications Operating, LLC (incorporated by reference to Exhibit 10.1 to the current report on Form 8-K of Charter Communications, Inc. filed on February 12, 2013 (File No. 001-33664).
3.1Amended and Restated Certificate of Incorporation of Charter Communications, Inc. (incorporated by reference to Exhibit 3.1 to the current report on Form 8-K of Charter Communications, Inc. filed on August 20, 2010 (File No. 001-33664)).
3.2Amended and Restated By-laws of Charter Communications, Inc. as of November 30, 2009 (incorporated by reference to Exhibit 3.2 to the current report on Form 8-K of Charter Communications, Inc. filed on December 4, 2009 (File No. 001-33664)).
4.1Warrant Agreement, dated as of November 30, 2009, by and between Charter Communications, Inc. and Mellon Investor Services LLC (incorporated by reference to Exhibit 4.1 to the current report on Form 8-K of Charter Communications, Inc. filed on December 4, 2009 (File No. 001-33664)).
4.2Warrant Agreement, dated as of November 30, 2009, by and between Charter Communications, Inc. and Mellon Investor Services LLC (incorporated by reference to Exhibit 4.2 to the current report on Form 8-K of Charter Communications, Inc. filed on December 4, 2009 (File No. 001-33664)).
4.3Warrant Agreement, dated as of November 30, 2009, by and between Charter Communications, Inc. and Mellon Investor Services LLC (incorporated by reference to Exhibit 4.3 to the current report on Form 8-K of Charter Communications, Inc. filed on December 4, 2009 (File No. 001-33664)).
4.4Stockholders Agreement of Liberty Media Corporation to purchase Charter Communications, Inc. shares dated March 19, 2013 (incorporated by reference to Exhibit 1.1 to the current report on Form 8-K of Charter Communications, Inc. filed March 19, 2013 (File No. 001-33664)).
4.5Registration Rights Agreement relating to the 5.25% senior notes due 2021 and the 5.75% senior notes due 2023, dated as of March 14, 2013, by and among CCO Holdings, LLC, CCO Holdings Capital Corp., Charter Communications, Inc. and Deutsche Bank Securities Inc., for itself and the other purchasers named therein (incorporated by reference to Exhibit 10.3 to the current report on Form 8-K of Charter Communications, Inc. filed on March 15, 2013 (File No. 001-33664)).
10.1Indenture relating to the 8.125% Senior Notes due 2020, dated as of April 18, 2010, by and among CCO Holdings, LLC, CCO Holdings Capital Corp. and The Bank of New York Mellon Trust Company, N.A., as trustee (incorporated by reference to Exhibit 10.6 to the registration statement on Form S-1 of Charter Communications, Inc. filed on June 30, 2010 (File No. 333-167877)).
10.2Indenture relating to the 7.25% senior notes due 2017, dated as of September 27, 2010, by and among CCO Holdings, LLC, and CCO 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 September 30, 2010 (File No. 001-33664)).
10.3Indenture relating to the 7.00% senior notes due 2019, dated as of January 11, 2011, by and among CCO Holdings, LLC, and CCO 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. 001-33664)).
10.4Indenture dated as of May 10, 2011, by and among CCO Holdings, LLC, and CCO 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 4.1 to the current report on Form 8-K of Charter Communications, Inc. filed on May 13, 2011 (File No. 001-33664)).
10.5First Supplemental Indenture dated as of May 10, 2011 by and among CCO Holdings, LLC, and CCO 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 4.2 to the current report on Form 8-K of Charter Communications, Inc. filed on May 13, 2011 (File No. 001-33664)).
10.6Second Supplemental Indenture dated as of December 14, 2011 by and among CCO Holdings, LLC, and CCO 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 4.2 to the current report on Form 8-K of Charter Communications, Inc. filed on December 20, 2011 (File No. 001-33664)).

E- 1



10.7Third Supplemental Indenture dated as of January 26, 2012 by and among CCO Holdings, LLC, and CCO 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 4.2 to the current report on Form 8-K of Charter Communications, Inc. filed on February 1, 2012 (File No. 001-33664))
10.8Fourth Supplemental Indenture dated August 22, 2012 relating to the 5.25% Senior Notes due 2022 by and among CCO Holdings, LLC, CCO Holdings Capital Corp. and The Bank of New York Mellon Trust Company, N.A., as trustee (incorporated by reference to Exhibit 10.1 to the quarterly report on Form 10-Q of Charter Communications, Inc. filed on November 6, 2012 (File No. 001-33664)).
10.9Fifth Supplemental Indenture dated December 17, 2012 relating to the 5.125% Senior Notes due 2023 by and among CCO Holdings, LLC, CCO Holdings Capital Corp. and The Bank of New York Mellon Trust Company, N.A., as trustee (incorporated by reference to Exhibit 10.9 to the annual report on Form 10-K of Charter Communications, Inc. filed February 22, 2013 (File No. 001-33664)).
10.10Sixth Supplemental Indenture relating to the 5.25% senior notes due 2021, dated as of March 14, 2013, by and among CCO Holdings, LLC, and CCO 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 March 15, 2013 (File No. 001-33664)).
10.11Seventh Supplemental Indenture relating to the 5.75% senior notes due 2023, dated as of March 14, 2013, by and among CCO Holdings, LLC, and CCO 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 10.2 to the current report on Form 8-K of Charter Communications, Inc. filed March 15, 2013 (File No. 001-33664)).
10.12Eighth Supplemental Indenture relating to the 5.75% senior notes due 2024, dated as of May 3, 2013, by and among CCO Holdings, LLC and CCO 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 10.7 to the quarterly report on Form 10-Q of Charter Communications, Inc. filed on May 7, 2013 (File No. 001-33664)).
10.13(a)Credit Agreement, dated as of March 6, 2007, among CCO Holdings, LLC, the lenders from time to time parties thereto and Bank of America, N.A., as administrative agent (incorporated by reference to Exhibit 10.3 to the current report on Form 8-K of Charter Communications, Inc. filed on March 12, 2007 (File No. 000-27927)).
10.13(b)Amendment No. 1, dated as of April 25, 2012, to the Credit Agreement, dated as of March 6, 2007 (as amended, supplemented or otherwise modified from time to time), among CCO Holdings, LLC, as the Borrower, the lenders parties thereto, Wells Fargo Bank, N.A., as the Administrative Agent, and the other parties thereto (incorporated by reference to Exhibit 10.1 to the current report on Form 8-K filed by Charter Communications, Inc. on April 30, 2012 (File No. 001-33664)).
10.13(c)Pledge Agreement made by CCO Holdings, LLC in favor of Bank of America, N.A., as Collateral Agent, dated as of March 6, 2007 (incorporated by reference to Exhibit 10.4 to the current report on Form 8-K of Charter Communications, Inc. filed on March 12, 2007 (File No. 000-27927)).
10.14(a)Restatement Agreement, dated as of April 11, 2012 by and among Charter Communications Operating, LLC, CCO Holdings, LLC, the lenders party thereto and Bank of America, N.A., as Administrative Agent (incorporated by reference to Exhibit 10.2 to the current report on Form 8-K filed by Charter Communications, Inc. on April 17, 2012 (File No. 001-33664)).
10.14(b)Amendment No. 1 dated March 22, 2013 to the Amended and Restated Credit Agreement dated April 11, 2012 between Charter Communications Operating, LLC, as borrower, CCO Holdings, LLC, as guarantor, and Bank of America, N.A., as administrative agent (incorporated by reference to Exhibit 10.5 to the quarterly report on Form 10-Q of Charter Communications, Inc. filed on May 7, 2013 (File No. 001-33664)).
10.14(c)Amendment No. 2 dated April 22, 2013 to the Amended and Restated Credit Agreement dated April 11, 2012 between Charter Communications Operating, LLC, as borrower, CCO Holdings, LLC, as guarantor, and Bank of America, N.A., as administrative agent (incorporated by reference to Exhibit 10.6 to the quarterly report on Form 10-Q of Charter Communications, Inc. filed on May 7, 2013 (File No. 001-33664)).
10.14(d)Amendment No. 3, dated as of June 27, 2013, to the Amended and Restated Credit Agreement dated April 11, 2012 between Charter Communications Operating, LLC, as borrower, CCO Holdings, LLC, as guarantor, and Bank of America, N.A., as administrative agent (incorporated by reference to Exhibit 10.1 to the current report on Form 8-K filed by Charter Communications, Inc. on July 2, 2013 (File No. 001-33664)).
10.14(e)Amended and Restated Guarantee and Collateral Agreement made by CCO Holdings, LLC, Charter Communications Operating, LLC and certain of its subsidiaries in favor of Bank of America, N.A., as administrative agent, as amended and restated as of March 31, 2010 (incorporated by reference to Exhibit 10.2 to the current report on Form 8-K of Charter Communications, Inc. filed on April 6, 2010 (File No. 001-33664)).

E- 2



10.14(f)Incremental Activation Notice, dated as of May 3, 2013 delivered by Charter Communications Operating, LLC, CCO Holdings, LLC, the Subsidiary Guarantors Party thereto and each Term F Lender party thereto to Bank of America, N.A., as Administrative Agent under the credit agreement, dated as of March 18, 1999 as amended and restated as of March 31, 2010 and as further amended and restated as of April 11, 2012 (incorporated by reference to the quarterly report on Form 10-Q of Charter Communications, Inc. filed on May 7, 2013 (File No. 001-33664)).
10.14(g)Incremental Activation Notice, dated as of July 1, 2013 delivered by Charter Communications Operating, LLC, CCO Holdings, LLC, the Subsidiary Guarantors Party thereto and each Term E Lender party thereto to Bank of America, N.A., as Administrative Agent under the credit agreement, dated as of March 18, 1999 as amended and restated as of March 31, 2010 and as further amended and restated as of April 11, 2012 (incorporated by reference to Exhibit 10.2 to the current report on Form 8-K filed by Charter Communications, Inc. on July 2, 2013 (File No. 001-33664)).
10.15(a)Registration Rights Agreement dated as of November 30, 2009, by and among Charter Communications, Inc. and certain investors listed therein (incorporated by reference to Exhibit 10.2 to the current report on Form 8-K of Charter Communications, Inc. filed on December 4, 2009 (File No. 001-33664)).
10.15(b)Amendment No. 1 to the Registration Rights Agreement dated November 30, 2009, by and among Charter Communications, Inc. and certain Investors listed therein (incorporated by reference to Exhibit 10.2 to the quarterly report on Form 10-Q of Charter Communications, Inc. filed on November 6, 2012 (File No. 001-33664)).
10.16(a)Amended and Restated Management Agreement, dated as of June 19, 2003, between Charter Communications Operating, LLC and Charter Communications, Inc. (incorporated by reference to Exhibit 10.4 to the quarterly report on Form 10-Q filed by Charter Communications, Inc. on August 5, 2003 (File No. 333-83887)).
10.16(b)First Amendment to the Amended and Restated Management Agreement, dated as of July 20, 2010, between Charter Communications Operating, LLC and Charter Communications, Inc. (incorporated by reference to Exhibit 10.6 to the quarterly report on Form 10-Q filed by Charter Communications, Inc. on August 4, 2010 (File No. 001-33664)).
10.17(a)Second Amended and Restated Mutual Services Agreement, dated as of June 19, 2003 between Charter Communications, Inc. and Charter Communications Holding Company, LLC (incorporated by reference to Exhibit 10.5(a) to the quarterly report on Form 10-Q filed by Charter Communications, Inc. on August 5, 2003 (File No. 000-27927)).
10.17(b)First Amendment to the Second Amended and Restated Mutual Services Agreement, dated as of July 20, 2010, between Charter Communications, Inc. and Charter Communications Holding Company, LLC (incorporated by reference to Exhibit 10.7 to the quarterly report on Form 10-Q filed by Charter Communications, Inc. on August 4, 2010 (File No. 001-33664)).
10.18+Charter Communications, Inc. Executive Bonus Plan (incorporated by reference to Exhibit 10.1 to the Quarterly Report on Form 10-Q of Charter Communications, Inc. filed on May 8, 2012 (File No. 001-33664)).
10.19+Charter Communications, Inc. Executive Incentive Performance Plan (incorporated by reference to Exhibit 10.21 to the annual report on Form 10-K filed by Charter Communications, Inc. on February 27, 2012 (File No. 001-33664)).
10.20+Charter Communications, Inc. Amended and Restated 2009 Stock Incentive Plan (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K of Charter Communications, Inc. filed on December 21, 2009 (File No. 001-33664)).
10.21+Charter Communications, Inc.'s Amended and Restated Supplemental Deferred Compensation Plan, dated as of September 1, 2011(incorporated by reference to Exhibit 10.1 to the current report on Form 8-K filed by Charter Communications, Inc. on September 2, 2011 (File No. 001-33664)).
10.22+Form of Non-Qualified Time Vesting Stock Option Agreement dated April 26, 2011(incorporated by reference to Exhibit 10.3 to the quarterly report on Form 10-Q filed by Charter Communications, Inc. on August 2, 2011 (File No. 001-33664)).
10.23+Form of Non-Qualified Price Vesting Stock Option Agreement dated April 26, 2011(incorporated by reference to Exhibit 10.2 to the quarterly report on Form 10-Q filed by Charter Communications, Inc. on August 2, 2011 (File No. 001-33664)).
10.24+Form of Restricted Stock Unit Agreement dated April 26, 2011(incorporated by reference to Exhibit 10.4 to the quarterly report on Form 10-Q filed by Charter Communications, Inc. on August 2, 2011 (File No. 001-33664)).
10.25+Form of Notice of LTIP Award Agreement Changes (RSU Awards) (incorporated by reference to Exhibit 10.3 to the current report on Form 8-K filed by Charter Communications, inc. on January 22, 2014 (File No. 001-33664)).
10.26+Form of Notice of LTIP Award Agreement Changes (Time-Vesting Option Awards) (incorporated by reference to Exhibit 10.4 to the current report on Form 8-K filed by Charter Communications, Inc. on January 22, 2014 (File No. 001-33664)).
10.27+Form of Notice of LTIP Award Agreement Changes (Restricted Stock Awards) (incorporated by reference to Exhibit 10.5 to the current report on Form 8-K filed by Charter Communications, inc. on January 22, 2014 (File No. 001-33664)).

E- 3



10.28+Form of Notice of LTIP Award Agreement Changes (Performance-Vesting Option Awards) (incorporated by reference to Exhibit 10.6 to the current report on Form 8-K filed by Charter Communications, Inc. on January 22, 2014 (File No. 001-33664)).
10.29+Form of Stock Option Agreement dated January 15, 2014 (incorporated by reference to Exhibit 10.1 to the current report on Form 8-K filed by Charter Communications, Inc. on January 22, 2014 (File No. 001-33664)).
10.30+Form of Restricted Stock Unit Agreement dated January 15, 2014 (incorporated by reference to Exhibit 10.2 to the current report on Form 8-K filed by Charter Communications, Inc. on January 22, 2014 (File No. 001-33664)).
10.31+Employment Agreement between Thomas Rutledge and Charter Communications, Inc., dated as of December 19, 2011 (incorporated by reference to Exhibit 10.1 to the current report on Form 8-K of Charter Communications, Inc. filed on December 19, 2011 (File No. 001-33664)).
10.32(a)+Amended and Restated Employment Agreement between Christopher L. Winfrey and Charter Communications, Inc., dated effective as of August 31, 2012.
10.32(b)+The New York Relocation Agreement and Release entered into by and between Charter Communications, Inc. and Christopher Winfrey dated as of October 23, 2012 (incorporated by reference to Exhibit 10.4 to the Quarterly Report on Form 10-Q of Charter Communications, Inc. filed on November 6, 2012 (File No. 001-33664)).
10.33(a)+Employment Agreement dated as of April 30, 2012, by and between Charter Communications, Inc. and John Bickham (incorporated by reference to Exhibit 10.1 to the current report on Form 8-K filed by Charter Communications, Inc. on May 1, 2012 (File No. 001-33664)).
10.33(b)+Time-Vesting Stock Option Agreement dated as of April 30, 2012 by and between Charter Communications, Inc. and John Bickham (incorporated by reference to Exhibit 10.2 to the current report on Form 8-K filed by Charter Communications, Inc. on May 1, 2012 (File No. 001-33664)).
10.33(c)+Performance-Vesting Restricted Stock Agreement dated as of April 30, 2012 by and between Charter Communications, Inc. and John Bickham (incorporated by reference to Exhibit 10.3 to the current report on Form 8-K filed by Charter Communications, Inc. on May 1, 2012 (File No. 001-33664))
10.33(d)+Performance-Vesting Stock Option Agreement dated as of April 30, 2012 by and between Charter Communications, Inc. and John Bickham (incorporated by reference to Exhibit 10.4 to the current report on Form 8-K filed by Charter Communications, Inc. on May 1, 2012 (File No. 001-33664))
10.33(e)+Time-Vesting Restricted Stock Agreement dated as of April 30, 2012 by and between Charter Communications, Inc. and John Bickham (incorporated by reference to Exhibit 10.5 to the current report on Form 8-K filed by Charter Communications, Inc. on May 1, 2012 (File No. 001-33664)).
10.34+*Employment Agreement dated as of July 8, 2013 by and between Charter Communications, Inc. and Catherine C. Bohigian.
10.35(a)+*Amended and Restated Employment Agreement dated as of February 20, 2013 by and between Charter Communications, Inc. and Richard R. Dykhouse.
10.35(b)+*The New York Relocation Agreement and Release entered into by and between Charter Communications, Inc. and Richard R. Dykhouse dated as of February 20, 2013. 
10.36Form of First Amended and Restated Indemnification Agreement (incorporated by reference to Exhibit 10.3 to the quarterly report on Form 10-Q of Charter Communications, Inc. filed on August 6, 2013 (File No. 001-33664)).
12.1*Computation of Ratio of Earnings to Fixed Charges.
21.1*Subsidiaries of Charter Communications, Inc.
23.1*Consent of KPMG LLP.
31.1*Certificate of Chief Executive Officer pursuant to Rule 13a-14(a)/Rule 15d-14(a) under the Securities Exchange Act of 1934.
31.2*Certificate of Chief Financial Officer pursuant to Rule 13a-14(a)/Rule 15d-14(a) under the Securities Exchange Act of 1934.
32.1*Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Chief Executive Officer).
32.2*Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Chief Financial Officer).
101The following financial information from the Annual Report of Charter Communications, Inc. on Form 10-K for the year ended December 31, 2013, filed with the SEC on February 21, 2014, formatted in eXtensible Business Reporting Language: (i) Consolidated Balance Sheets, (ii) Consolidated Statements of Operations, (iii) Consolidated Statements of Comprehensive Loss, (iv) Consolidated Statements of Changes in Shareholder Equity, (v) Consolidated Statements of Cash Flows, and (vi) Notes to Consolidated Financial Statements.
_____________
*    Filed herewith.
+    Management compensatory plan or arrangement

E- 4



INDEX TO FINANCIAL STATEMENTS

Page
Audited Financial Statements
Report of Independent Registered Public Accounting Firm
F- 2
Consolidated Balance Sheets as of December 31, 2013 and 2012
F- 3
Consolidated Statements of Operations for the Years Ended December 31, 2013, 2012 and 2011
F- 4
Consolidated Statements of Comprehensive Loss for the Years Ended December 31, 2013, 2012 and 2011
F- 4
Consolidated Statements of Changes in Shareholders’ Equity for the Years Ended December 31, 2013, 2012 and 2011
F- 5
Consolidated Statements of Cash Flows for the Years Ended December 31, 2013, 2012 and 2011
F- 6
Notes to Consolidated Financial Statements
F- 7



F- 1



Report of Independent Registered Public Accounting Firm

The Board of Directors and Shareholders
Charter Communications, Inc.:
We have audited the accompanying consolidated balance sheets of Charter Communications, Inc. and subsidiaries (the Company) as of December 31, 2013 and 2012, and the related consolidated statements of operations, comprehensive loss, changes in shareholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2009 (Successor), eleven months ended November 30, 2009 (Predecessor)2013. We also have audited the Company’s internal control over financial reporting as of December 31, 2013, based on criteria established in Internal Control - Integrated Framework (1992) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company’s management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting (Item 9A). Our responsibility is to express an opinion on these consolidated financial statements and an opinion on the Company’s internal control over financial reporting based on our audits.
We conducted our audits in accordance with the standards 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 maintained in all material respects. Our audits of the consolidated financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
The Company acquired Bresnan Broadband Holdings, LLC and subsidiaries (Bresnan) in July 2013 and management excluded from its assessment of the effectiveness of the Company’s internal control over financial reporting as of December 31, 2013, Bresnan’s internal control over financial reporting associated with 10% and 3% of the Company’s total assets and total revenues, respectively, included in the consolidated financial statements of the Company as of and for the year ended December 31, 2008 (Predecessor), respectively.2013. Our audit of internal control over financial reporting of the Company as of December 31, 2013 also excluded an evaluation of the internal control over financial reporting of Bresnan.

The fair valueIn our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Charter Communications, Inc. and subsidiaries as of December 31, 2013 and 2012, and the results of their operations and their cash flows for each option granted is estimated on the date of grant using the Black-Scholes option-pricing model.  The following weighted average assumptions were used for grants during the years in the three-year period ended December 31, 2010 (Successor) and 2008 (Predecessor), respectively; risk-free interest rates2013, in conformity with U.S. generally accepted accounting principles. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of 2.5% and 3.5%; expected volatility of 47.7% and 88.1%, and expected lives of 6.3 years and 6.3 years, respectively.  Volatility assumptions for 2010 wereDecember 31, 2013, based on historical volatilitycriteria established in Internal Control - Integrated Framework (1992) issued by the Committee of a peer group while volatility assumptions for 2008 were based on Charter’s historical volatility. The Company’s volatility assumption for 2010 represents management’s best estimate and was based on historical volatilitySponsoring Organizations of a peer group because management does not believe Charter’s pre-emergence historical volati lity to be representative of its future volatility.  Expected lives were calculated based on the simplified-method due to insufficient historical exercise data.  The valuations assume no dividends are paid.  The Company did not grant stock options in 2009.Treadway Commission.
(signed) KPMG LLP
St. Louis, Missouri
February 20, 2014


Income Taxes

F- 2


CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(dollars in millions, except share data)
 December 31,
2013		 December 31,
2012
    
ASSETS   
CURRENT ASSETS:   
Cash and cash equivalents$21
 $7
Restricted cash and cash equivalents—
 27
Accounts receivable, less allowance for doubtful accounts of   
$19 and $14, respectively234
 234
Prepaid expenses and other current assets67
 62
Total current assets322
 330
    
INVESTMENT IN CABLE PROPERTIES:   
Property, plant and equipment, net of accumulated   
depreciation of $4,787 and $3,563, respectively7,981
 7,206
Franchises6,009
 5,287
Customer relationships, net1,389
 1,424
Goodwill1,177
 953
Total investment in cable properties, net16,556
 14,870
    
OTHER NONCURRENT ASSETS417
 396
    
Total assets$17,295
 $15,596
    
LIABILITIES AND SHAREHOLDERS’ EQUITY   
CURRENT LIABILITIES:   
Accounts payable and accrued liabilities$1,467
 $1,224
Total current liabilities1,467
 1,224
    
LONG-TERM DEBT14,181
 12,808
DEFERRED INCOME TAXES1,431
 1,321
OTHER LONG-TERM LIABILITIES65
 94
    
SHAREHOLDERS’ EQUITY:   
Class A common stock; $.001 par value; 900 million shares authorized;   
106,144,075 and 101,176,247 shares issued and outstanding, respectively—
 —
Class B common stock; $.001 par value; 25 million shares authorized;   
no shares issued and outstanding—
 —
Preferred stock; $.001 par value; 250 million shares authorized;   
no shares issued and outstanding—
 —
Additional paid-in capital1,760
 1,616
Accumulated deficit(1,568) (1,392)
Accumulated other comprehensive loss(41) (75)
Total shareholders’ equity151
 149
    
Total liabilities and shareholders’ equity$17,295
 $15,596

The accompanying notes are an integral part of these consolidated financial statements.
F- 3


CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(dollars in millions, except per share and share data)
 Year Ended December 31,
 2013 2012 2011
      
REVENUES$8,155
 $7,504
 $7,204
      
COSTS AND EXPENSES:     
Operating costs and expenses (excluding depreciation and amortization)5,345
 4,860
 4,564
Depreciation and amortization1,854
 1,713
 1,592
Other operating expenses, net31
 15
 7
      
 7,230
 6,588
 6,163
      
Income from operations925
 916
 1,041
      
OTHER EXPENSES:     
Interest expense, net(846) (907) (963)
Loss on extinguishment of debt(123) (55) (143)
Gain on derivative instruments, net11
 —
 —
Other expense, net(16) (1) (5)
      
 (974) (963) (1,111)
      
Loss before income taxes(49) (47) (70)
      
Income tax expense(120) (257) (299)
      
Net loss$(169) $(304) $(369)
      
LOSS PER COMMON SHARE, BASIC AND DILUTED$(1.65) $(3.05) $(3.39)
      
Weighted average common shares outstanding, basic and diluted101,934,630
 99,657,989
 108,948,554

CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(dollars in millions)
 Year Ended December 31,
 2013 2012 2011
      
Net loss$(169) $(304) $(369)
Net impact of interest rate derivative instruments, net of tax34
 (10) (8)
      
Comprehensive loss$(135) $(314) $(377)


The accompanying notes are an integral part of these consolidated financial statements.
F- 4


CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
(dollars in millions)

  Class A Common Stock Class B Common Stock Additional Paid-In Capital Accumulated Deficit Treasury Stock Accumulated Other Comprehensive Loss Total Shareholders' Equity
               
BALANCE, December 31, 2010 —
 —
 1,776
 (235) (6) (57) 1,478
Net loss —
 —
 —
 (369) —
 —
 (369)
Net impact of interest rate derivative instruments, net of tax —
 —
 —
 —
 —
 (8) (8)
Stock compensation expense, net —
 —
 36
 —
 —
 —
 36
Exercise of options —
 —
 5
 —
 —
 —
 5
Purchase of treasury stock —
 —
 —
 —
 (733) —
 (733)
Retirement of treasury stock —
 —
 (261) (478) 739
 —
 —
               
BALANCE, December 31, 2011 —
 —
 1,556
 (1,082) —
 (65) 409
Net loss —
 —
 —
 (304) —
 —
 (304)
Net impact of interest rate derivative instruments, net of tax —
 —
 —
 —
 —
 (10) (10)
Stock compensation expense, net —
 —
 50
 —
 —
 —
 50
Exercise of options —
 —
 15
 —
 —
 —
 15
Purchase of treasury stock —
 —
 —
 —
 (11) —
 (11)
Retirement of treasury stock —
 —
 (5) (6) 11
 —
 —
               
BALANCE, December 31, 2012 —
 —
 1,616
 (1,392) —
 (75) 149
Net loss —
 —
 —
 (169) —
 —
 (169)
Net impact of interest rate derivative instruments, net of tax —
 —
 —
 —
 —
 34
 34
Stock compensation expense, net —
 —
 48
 —
 —
 —
 48
Exercise of options and warrants —
 —
 104
 —
 —
 —
 104
Purchase of treasury stock —
 —
 —
 —
 (15) —
 (15)
Retirement of treasury stock —
 —
 (8) (7) 15
 —
 —
               
BALANCE, December 31, 2013 $—
 $—
 $1,760
 $(1,568) $—
 $(41) $151
               



The Company recognizes deferred tax assets and liabilities for temporary differences between theaccompanying notes are an integral part of these consolidated financial reporting basis and the tax basis of the Company’s assets and liabilities and expected benefits of utilizing loss carryforwards.  The impact on deferred taxes of changesstatements.
F- 5



CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in tax rates and tax law, if any, applied to the years during which temporary
millions)
F-12
  Year Ended December 31,
  2013 2012 2011
CASH FLOWS FROM OPERATING ACTIVITIES:      
Net loss $(169) $(304) $(369)
Adjustments to reconcile net loss to net cash flows from operating activities:      
Depreciation and amortization 1,854
 1,713
 1,592
Non-cash interest expense 43
 45
 34
Loss on extinguishment of debt 123
 55
 143
Gain on derivative instruments, net (11) —
 —
Deferred income taxes 112
 250
 290
Other, net 82
 45
 33
Changes in operating assets and liabilities, net of effects from acquisitions and dispositions:      
Accounts receivable 10
 34
 (24)
Prepaid expenses and other assets —
 (8) 1
Accounts payable, accrued liabilities and other 114
 46
 37
Net cash flows from operating activities 2,158
 1,876
 1,737
       
CASH FLOWS FROM INVESTING ACTIVITIES:      
Purchases of property, plant and equipment (1,825) (1,745) (1,311)
Change in accrued expenses related to capital expenditures 76
 13
 57
Sales (purchases) of cable systems, net (676) 19
 (88)
Other, net (18) (24) (24)
Net cash flows from investing activities (2,443) (1,737) (1,366)
       
CASH FLOWS FROM FINANCING ACTIVITIES:      
Borrowings of long-term debt 6,782
 5,830
 5,489
Repayments of long-term debt (6,520) (5,901) (5,072)
Payments for debt issuance costs (50) (53) (62)
Purchase of treasury stock (15) (11) (733)
Proceeds from exercise of options and warrants 104
 15
 5
Other, net (2) (14) —
Net cash flows from financing activities 299
 (134) (373)
       
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 14
 5
 (2)
CASH AND CASH EQUIVALENTS, beginning of period 7
 2
 4
CASH AND CASH EQUIVALENTS, end of period $21
 $7
 $2
       
CASH PAID FOR INTEREST $763
 $904
 $899


The accompanying notes are an integral part of these consolidated financial statements.
F- 6
CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2010, 20092013, 2012 AND 20082011
(dollars in millions, except share or per share data or where indicated)


1.    Organization and Basis of Presentation

differencesOrganization

Charter Communications, Inc. (“Charter”) is a holding company whose principal asset is a 100% common equity interest in Charter Communications Holding Company, LLC (“Charter Holdco”). Charter owns cable systems through its subsidiaries, which are expectedcollectively, with Charter, referred to be settled, are reflectedherein as the “Company.”

The Company is a cable operator providing services in the United States. The Company offers to residential and commercial customers traditional cable video programming, Internet services, and voice services, as well as advanced video services such as Charter OnDemand™, high definition television, and digital video recorder (“DVR”) service. The Company sells its cable video programming, Internet, voice, and advanced video services primarily on a subscription basis. The Company also sells local advertising on cable networks and on the Internet and provides fiber connectivity to cellular towers.

Basis of Presentation

The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the periodUnited States (“GAAP”) and the rules and regulations of enactment (see Note 18)the Securities and Exchange Commission (the “SEC”).

Earnings (Loss) per Common ShareThe preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Areas involving significant judgments and estimates include capitalization of labor and overhead costs; depreciation and amortization costs; valuations and impairments of property, plant and equipment, intangibles and goodwill; income taxes; contingencies and programming expense. Actual results could differ from those estimates.

Basic earnings (loss) per common share is computed by dividingCertain prior year amounts have been reclassified to conform with the net income (loss) available2013 presentation.

2.    Summary of Significant Accounting Policies

Consolidation

The accompanying consolidated financial statements include the accounts of Charter and its wholly owned subsidiaries. The Company consolidates based upon evaluation of the Company’s power, through voting rights or similar rights, to common shareholders bydirect the weighted-average common shares outstanding duringactivities of another entity that most significantly impact the respective periods.  Diluted loss per common share equals basic loss per common share forentity’s economic performance; its obligation to absorb the years ended December 31, 2010expected losses of the entity; and 2008, asits right to receive the effectexpected residual returns of stock optionsthe entity. All significant inter-company accounts and other convertible securitiestransactions among consolidated entities have been eliminated.

Cash and Cash Equivalents

The Company considers all highly liquid investments with original maturities of three months or less to be cash equivalents. These investments are antidilutive becausecarried at cost, which approximates market value. Cash and cash equivalents consist primarily of money market funds and commercial paper. Restricted cash and cash equivalents consisted of amounts held in escrow accounts pending final resolution from the Company incurred net losses.  Diluted earnings per common share forBankruptcy Court. In April 2013, the one month ended December 31, 2009restrictions on the cash and eleven months ended November 30, 2009cash equivalents were resolved.  
Property, Plant and Equipment

Additions to property, plant and equipment are recorded at cost, including all material, labor and certain indirect costs associated with the construction of cable transmission and distribution facilities. While the Company’s capitalization is based on specific activities, once capitalized, costs are tracked by fixed asset category at the average numbercable system level and not on a specific asset basis. For assets that are sold or retired, the estimated historical cost and related accumulated depreciation is removed. Costs associated with initial customer installations and the additions of shares used for the basic earnings per common share calculation, adjusted for the dilutive effectnetwork equipment necessary to enable advanced video services are capitalized. Costs capitalized as part of stock optionsinitial customer installations include materials, labor, and other convertible securities (See Note 19).  Predecessor shares were cancelled on the Effective Date and share s of Successor were issued.  As a result, earnings (loss) per share information for the Successor is not comparable to the Predecessor loss per share.

The 21.8 million shares outstanding as of December 31, 2008 (Predecessor), pursuant to the share lending agreement described in Note 10 were required to be returned, in accordancecertain indirect costs. Indirect costs are associated with the contractual arrangement, and were treated in basic and diluted earnings per common share as if they were already returned and retired.  Consequently, there was no impact of the shares of common stock lent under the share lending agreement in the earnings per common share calculation.

Segments

The Company’s operations are managed on the basis of geographic operating segments.  The Company has evaluated the criteria for aggregation of the geographic operating segments and believes it meets each of the respective criteria set forth.  The Company delivers similar products and services within each of its geographic operations.  Each geographic service area utilizes similar means for delivering the programmingactivities of the Company’s services; have similaritypersonnel who assist in connecting and activating the type or class of customer receiving the productsnew service and services; distributes the Company’s services over a unified network; and operates within a consistent regulatory environment.  In addition, each of the geographic operating segments has similar economic characteristics.  In light of the Company’s sim ilar services, means for delivery, similarity in type of customers, the use of a unified network and other considerations across its geographic operating structure, management has determined that the Company has one reportable segment, broadband services.


3.       Allowance for Doubtful Accounts

Activity in the allowance for doubtful accounts is summarized as follows for the years presented:

  Successor  Predecessor 
  Year Ended December 31,  
One Month
Ended
December 31,
  
Eleven Months Ended
November 30,
  Year Ended December 31, 
  2010  2009  2009  2008 
Balance, beginning of period $11  $--  $18  $18 
Charged to expense  133   10   120   122 
Uncollected balances written off, net of recoveries  (127)  1   (116)  (122)
Fresh start accounting adjustments  --   --   (22)  -- 
                 
Balance, end of period $17  $11  $--  $18 

On the Effective Date, the Company applied fresh start accounting and adjusted its accounts receivable to reflect fair value.  Therefore, the allowance for doubtful accounts was eliminated at November 30, 2009.

F- 7
F-13
CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2010, 20092013, 2012 AND 20082011
(dollars in millions, except share or per share data or where indicated)

4.        Property, Plantconsist of compensation and Equipment
Property,other costs associated with these support functions. Indirect costs primarily include employee benefits and payroll taxes, direct variable costs associated with capitalizable activities, consisting primarily of installation and construction, vehicle costs, the cost of dispatch personnel and indirect costs directly attributable to capitalizable activities. The costs of disconnecting service at a customer’s dwelling or reconnecting service to a previously installed dwelling are charged to operating expense in the period incurred. Costs for repairs and maintenance are charged to operating expense as incurred, while plant and equipment consistsreplacement and betterments, including replacement of cable drops from the following as of December 31, 2010 and 2009:

  Successor 
  
December 31,
2010
  
December 31,
2009
 
       
       
Cable distribution systems $5,251  $4,762 
Customer equipment and installations  2,101   1,597 
Vehicles and equipment  115   95 
Buildings and leasehold improvements  306   302 
Furniture, fixtures and equipment  236   171 
         
   8,009   6,927 
Less: accumulated depreciation  (1,190)  (94)
         
  $6,819  $6,833 

The Company periodically evaluatespole to the estimated useful lives used to depreciate its assets and the estimated amount of assets that will be abandoned or have minimal use in the future.  A significant change in assumptions about the extent or timing of future asset retirements, or in the 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 property, plant and equipment and for future purchases.dwelling, are capitalized.

Depreciation expense foris recorded using the year ended December 31, 2010 (Successor), one month ended December 31, 2009 (Successor), eleven months ended November 30, 2009 (Predecessor) and year ended December 31, 2008 (Predecessor) was $1.2 billion, $94 million, $1.2 billion and $1.3 billion, respectively.straight-line composite method over management’s estimate of the useful lives of the related assets as follows:

5.        Franchises, Goodwill
Cable distribution systems7-20 years
Customer equipment and installations4-8 years
Vehicles and equipment1-6 years
Buildings and leasehold improvements15-40 years
Furniture, fixtures and equipment6-10 years

Asset Retirement Obligations

Certain of the Company’s franchise agreements and Other Intangible Assetsleases contain provisions requiring the Company to restore facilities or remove equipment in the event that the franchise or lease agreement is not renewed. The Company expects to continually renew its franchise agreements and has concluded that all of the related franchise rights are indefinite lived intangible assets. Accordingly, the possibility is remote that the Company would be required to incur significant restoration or removal costs related to these franchise agreements in the foreseeable future. A liability is required to be recognized for an asset retirement obligation in the period in which it is incurred if a reasonable estimate of fair value can be made. The Company has not recorded an estimate for potential franchise related obligations, but would record an estimated liability in the unlikely event a franchise agreement containing such a provision were no longer expected to be renewed. The Company also expects to renew many of its lease agreements related to the continued operation of its cable business in the franchise areas. For the Company’s lease agreements, the estimated liabilities related to the removal provisions, where applicable, have been recorded and are not significant to the financial statements.

Franchises

Franchise rights represent the value attributed to agreements or authorizations with local and state authorities that allow access to homes in cable service areas. FranchisesManagement estimates the fair value of franchise rights at the date of acquisition and determines if the franchise has a finite life or an indefinite life. All franchises that qualify for indefinite life treatment are tested for impairment annually or more frequently as warranted by events or changes in circumstances.  Franchises are aggregated into essentially inseparable unitscircumstances (see Note 6). The Company has concluded that all of accountingits existing franchises qualify for indefinite life treatment.

Customer Relationships

Customer relationships represent the value attributable to conduct the valuations.  The units of accounting generally represent geographical clustering of the Company’s cable systems into groups by which such systemsbusiness relationships with its current customers including the right to deploy and market additional services to these customers.  Customer relationships are managed.  Management believes such grouping representsamortized on an accelerated basis over the highest and best use of those assets.period the relationships with current customers are expected to generate cash flows (8-15 years). 

Goodwill

The Company recorded non-cash franchise impairment chargesassesses the recoverability of $2.2 billion and $1.5 billion for the eleven months endedits goodwill as of November 30 2009 (Predecessor) andof each year, ended December 31, 2008 (Predecessor), respectively.  The impairment charges recordedor more frequently whenever events or changes in 2009 and 2008 were primarilycircumstances indicate that the result of the impact of the economic downturn along with increased competition.  The Company’s 2010 impairment analyses did not result in any franchise impairment charges.asset might be impaired.

Other Non-current Assets
On the Effective Date, the Company applied fresh start accounting
Other non-current assets primarily include trademarks, right-of-entry costs and adjusted its franchise, goodwill,deferred financing costs. Trademarks have been determined to have an indefinite life and other intangible assets including trademarks and customer relationshipsare tested annually for impairment. Right-of-entry costs represent costs incurred related to reflect fair value.  The Company’s valuations, which are based on the present value of projected after tax cash flows, resultedagreements entered into with landlords, real estate companies or owners to gain access to a building in a value for property, plant and equipment, franchises, and customer relationships for each unit of accounting.  As a result of applying fresh start accounting, the Company recorded goodwill of $951 million which represents the excess of reorganization value over amounts assignedorder to the other assets.provide cable


F- 8
F-14
CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2010, 20092013, 2012 AND 20082011
(dollars in millions, except share or per share data or where indicated)

service. Right-of-entry costs are generally deferred and amortized to amortization expense over the term of the agreement. Costs related to borrowings are deferred and amortized to interest expense over the terms of the related borrowings.

Franchises, for valuation purposes, are defined as the future economic benefitsValuation of the right to solicit and service potential customers (customer marketing 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 cash flow is calculated as the after-tax cash flow generated by the potential customers obtained (less the anticipated customer churn), and the new services added to those customers in future periods.  The sum of the present value of the franchises' after-tax cash flow in years 1 through 10 and the continuing value of the after-tax cash flow beyond year 10 yields the fair value of the franchises.Long-Lived Assets

The Company determinedevaluates the estimated fair valuerecoverability of each unit of accounting utilizing an income approach model based on the present value of the estimated discrete future cash flows attributablelong-lived assets to each of the intangible assets identified for each unit assuming a discount rate. This approach makes use of unobservable factors such as projected revenues, expenses, capital expenditures,be held and a discount rate applied to the estimated cash flows. The determination of the discount rate was based on a weighted average cost of capital approach, which uses a market participant’s cost of equity and after-tax cost of debt and reflects the risks inherent in the cash flows.

The Company 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 margins; and capital expenditures.  The assumptions are derived based on the Company’s and its peers’ historical operating performance adjusted for current and expected competitive and economic factors surrounding the cable industry.  The estimates and assumptions made in the Company’s valuations are inherently subject to significant uncertainties, many of which are beyond its control, and there is no assurance that these results can be achieved. The primary assumptions for which there is a reasonable possibility of the occurrence of a variation that would significant ly affect the measurement value include the assumptions regarding revenue growth, programming expense growth rates, the amount and timing of capital expenditures and the discount rate utilized.

Goodwill is tested for impairment as of November 30 of each year, or more frequently as warranted by events or changes in circumstances.  The first step involves a comparison of the estimated fair value of each of our reporting units to its carrying amount.  If the estimated fair value of a reporting unit exceeds its carrying amount, goodwill of the reporting unit is not considered impaired and the second step of the goodwill impairment is not necessary. If the carrying amount of a reporting unit exceeds its estimated fair value, then the second step of the goodwill impairment test must be performed, and a comparison of the implied fair value of the reporting unit’s goodwill is compared to its carrying amount to determine the amount of impairment, if any. Reporting units are consistent with the units of accoun ting used for franchise impairment testing. Likewise the fair values of the reporting units are determined using a consistent income approach model as that used for franchise impairment testing. The Company’s 2010 impairment analyses did not result in any goodwill impairment charges.

Customer relationships, for valuation purposes, represent the value of the business relationship with existing customers (less the anticipated customer churn), and are calculated by projecting the discrete future after-tax cash flows from these customers, including the right to deploy and market additional services to these customers.  The present value of these after-tax cash flows yields the fair value of the customer relationships.  Customer relationships are amortized on an accelerated method over useful lives of 11-15 years based on the period over which current customers are expected to generate cash flows.  Customer relationships are evaluated upon the occurrence ofwhen events or changes in circumstances indicatingindicate that the carrying amount of an asset may not be recoverable.

The fair value of trademarks was determined using the relief-from-royalty method which applies a fair royalty rate to estimated revenue.  Royalty rates are estimated based on a review of market royalty rates in the communications and entertainment industries.   As the Company expects to continue to use each trademark indefinitely, trademarks have been assigned an indefinite life and are tested annually for impairment, or more frequently as warranted by Such events or changes in circumstances.circumstances could include such factors as impairment of the Company’s indefinite life assets, changes in technological advances, fluctuations in the fair value of such assets, adverse changes in relationships with local franchise authorities, adverse changes in market conditions or a deterioration of operating results. If a review indicates that the carrying value of such asset is not recoverable from estimated undiscounted cash flows, the carrying value of such asset is reduced to its estimated fair value. While the Company believes that its estimates of future cash flows are reasonable, different assumptions regarding such cash flows could materially affect its evaluations of asset recoverability. No impairments of long-lived assets to be held and used were recorded in 2013, 2012 and 2011.

Derivative Financial Instruments

Gains or losses related to derivative financial instruments which qualify as hedging activities are recorded in accumulated other comprehensive loss. For all other derivative instruments, the related gains or losses are recorded in the statements of operations. The Company uses interest rate swap agreements to manage its interest costs and reduce the Company’s 2010 impairment analyses didexposure to increases in floating interest rates. The Company manages its exposure to fluctuations in interest rates by maintaining a mix of fixed and variable rate debt. Using interest rate swap agreements, the Company agrees to exchange, at specified intervals through 2017, the difference between fixed and variable interest amounts calculated by reference to agreed-upon notional principal amounts. The Company does not resulthold or issue any derivative financial instruments for trading purposes.

Revenue Recognition

Revenues from residential and commercial video, Internet and voice services are recognized when the related services are provided. Advertising sales are recognized at estimated realizable values in any trademark impairment charges.the period that the advertisements are broadcast. In some cases, the Company coordinates the advertising sales efforts of other cable operators in a certain market and remits amounts received from customers less an agreed-upon percentage to such cable operator. For those arrangements in which the Company acts as a principal, the Company records the revenues earned from the advertising customer on a gross basis and the amount remitted to the cable operator as an operating expense.

Fees imposed on Charter by various governmental authorities are passed through on a monthly basis to the Company’s customers and are periodically remitted to authorities. Fees of $263 million, $260 million and $249 million for the years ended December 31, 2013, 2012 and 2011, respectively, are reported in video, voice and commercial revenues, on a gross basis with a corresponding operating expense because the Company is acting as a principal. Other taxes, such as sales taxes imposed on the Company's customers collected and remitted to state and local authorities are recorded on a net basis because the Company is acting as an agent in such situation.



F- 9
F-15
CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2010, 20092013, 2012 AND 20082011
(dollars in millions, except share or per share data or where indicated)


As of December 31, 2010 and 2009, indefinite lived and finite-lived intangible assetsThe Company’s revenues by product line are presented in the following table:as follows:

  Successor 
  2010 2009 
  Gross     Net  Gross     Net 
  Carrying  Accumulated  Carrying  Carrying  Accumulated  Carrying 
  Amount  Amortization  Amount  Amount  Amortization  Amount 
                   
Indefinite lived intangible assets:                  
Franchises $5,257  $--  $5,257  $5,272  $--  $5,272 
Goodwill  951   --   951   951   --   951 
Trademarks  158   --   158   158       158 
                         
  $6,366  $--  $6,366  $6,381  $--  $6,381 
                         
Finite-lived intangible assets:                        
Customer relationships $2,358  $358  $2,000  $2,363  $28  $2,335 
Other intangible assets  53   7   46   33   --   33 
  $2,411  $365  $2,046  $2,396  $28  $2,368 

Amortization expense related to customer relationships and other intangible assets for the year ended December 31, 2010 (Successor), one month ended December 31, 2009 (Successor), eleven months ended November 30, 2009 (Predecessor), and year ended December 31, 2008 (Predecessor) was $337 million, $28 million, $5 million and $5 million, respectively.  During the year ended December 31, 2010 (Successor) and eleven months ended November 30, 2009 (Predecessor), the net carrying amount of franchises was reduced by $15 million and $9 million, respectively, and customer relationships was reduced by $5 million and $0, respectively, related to cable asset sales, net of acquisitions completed in 2010 and 2009.

The Company expects amortization expense on its finite-lived intangible assets will be as follows.

2011 $313 
2012  287 
2013  261 
2014  234 
2015  208 
Thereafter  743 
     
  $2,046 

Actual amortization expense in future periods could differ from these estimates as a result of new intangible asset acquisitions or divestitures, changes in useful lives, impairments and other relevant factors.
F-16
CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2010, 2009 AND 2008
(dollars in millions, except share or per share data or where indicated)


6.        Accounts Payable and Accrued Expenses

Accounts payable and accrued expenses consist of the following as of December 31, 2010 and 2009:

  Successor 
  December 31,  December 31, 
  2010  2009 
       
Accounts payable – trade $168  $113 
Accrued capital expenditures  54   46 
Accrued expenses:        
Interest  162   90 
Programming costs  282   270 
Franchise related fees  53   53 
Compensation  124   102 
Other  206   224 
         
  $1,049  $898 
7.        Long-Term Debt
Long-term debt consists of the following as of December 31, 2010 and 2009:

  December 31, 2010  December 31, 2009 
  Principal  Accreted  Principal  Accreted 
  Amount  Value  Amount  Value 
CCH II, LLC:            
13.500% senior notes due November 15, 2016 $1,766  $2,057  $1,766  $2,092 
CCO Holdings, LLC:                
8.75% senior notes due November 15, 2013  --   --   800   812 
7.25% senior notes due October 30, 2017  1,000   1,000   --   -- 
7.875% senior notes due April 30, 2018  900   900   --   -- 
8.125% senior notes due April 30, 2020  700   700   --   -- 
Credit facility  350   314   350   304 
Charter Communications Operating, LLC:                
8.00% senior second-lien notes due April 30, 2012  1,100   1,112   1,100   1,120 
8.375% senior second-lien notes due April 30, 2014  --   --   770   779 
10.875% senior second-lien notes due September 15, 2014  546   591   546   601 
Credit facilities  5,954   5,632   8,177   7,614 
Total Debt $12,316  $12,306  $13,509  $13,322 
Less: Current Portion  --   --   70   70 
Long-Term Debt $12,316  $12,306  $13,439  $13,252 
 Year Ended December 31,
 2013 2012 2011
      
Video$4,030
 $3,639
 $3,639
Internet2,186
 1,866
 1,708
Voice644
 828
 858
Commercial822
 658
 544
Advertising sales291
 334
 292
Other182
 179
 163
      
 $8,155
 $7,504
 $7,204

As of December 31, 2010 and 2009, the accreted values of the CCH II, LLC (“CCH II”) and Charter Communications Operating, LLC (“Charter Operating”) notes and the CCO Holdings, LLC (“CCO Holdings”) and Charter Operating credit facilities presented above represent the fair value of the debt as of the Effective Date, plus the accretion to the balance sheet date.  However, the amount that is currently payable if the debt becomes immediately due is equal to the principal amount of the debt.  Programming Costs

The Company has availabilityvarious contracts to obtain basic, digital and premium video programming from programming vendors 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 revolving portionmonth the programming is available for exhibition. Programming costs are paid each month based on calculations performed by the Company and are subject to periodic audits performed by the programmers. Certain programming contracts contain incentives to be paid by the programmers. The Company receives these payments and recognizes the incentives on a straight-line basis over the life of its credit facilitythe programming agreement as a reduction of approximately $1.1 billion as of programming expense. This offset to programming expense was $7 million, $6 million and $7 million for the years ended December 31, 2010.  As such, debt scheduled to mature during2013, 2012 and 2011, respectively. Programming costs included in the next 12 months is reflected as long-term asaccompanying statements of De cemberoperations were $2.1 billion, $2.0 billion and $1.9 billion for the years ended December 31, 2010.2013

F-17
CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2010, 2009 AND 2008
(dollars in millions, except share or per share data or where indicated)
, 2012 and 2011, respectively.

CCH II NotesAdvertising Costs

OnAdvertising costs associated with marketing the Effective Date, CCH IICompany’s products and CCH II Capital Corp. issued approximately $1.8 billion in total principal amount of new 13.5% senior notes.services are generally expensed as costs are incurred. Such notes are guaranteed by Charter.  Existing holders of $1.5 billion principal amount of senior notes of CCH IIadvertising expense was $357 million, $325 million and CCH II Capital Corp. (“CCH II Notes”) exchanged their CCH II Notes plus accrued interest$285 million for $1.7 billion principal amount ($2.0 billion fair value) of new 13.5% Senior Notes of CCH IIthe years ended December 31, 2013, 2012 and CCH II Capital Corp. (the “New CCH II Notes”).  CCH II Notes and accrued interest that were not exchanged were paid in cash in an amount equal to $1.1 billion. 2011, respectively.

The New CCH II Notes are senior debt obligations of CCH II and CCH II Capital Corp.   The New CCH II Notes rank equally with all other current and future unsecured, unsubordinated obligations of CCH II and CCH II Capital Corp.  The New CCH II notes are structurally subordinated to all obligations of the subsidiaries of CCH II, including the CCO Holdings notes and credit facility and the Charter Operating notes and credit facilities.

At any time prior to the third anniversary of their issuance, CCH II will be permitted to redeem up to 35% of the New CCH II Notes with the proceeds of an equity offering, for cash equal to 113.5% of the then-outstanding principal amount of the New CCH II Notes being redeemed, plus accrued and unpaid interest.  At or any time prior to the third anniversary of their issuance, CCH II will be permitted to redeem the New CCH II Notes, in whole or in part, at 100% of the principal amount outstanding thereof plus accrued and unpaid interest, if any, to the redemption date, plus the Applicable Premium.  The Applicable Premium is an amount equal to the excess of (a) the present value of the remaining interest and principal payments due on a New CCH II Note to its final maturity date, computed using a dis count rate equal to the Treasury Rate on such date plus 0.50%, over (y) the outstanding principal amount of such note. On or after the third anniversary of their issuance, the New CCH II Notes may be redeemed by CCH II for cash equal to 106.75% of the principal amount of the New CCH II Notes being redeemed for redemptions made during the fourth year following their issuance, 103.375% for redemptions made during the fifth year following their issuance, 101.6875% for redemptions made during the sixth year following their issuance, and 100.000% for redemptions made thereafter, in each case, together with accrued and unpaid interest.
In the event of specified change of control events, CCH II must offer to purchase the outstanding CCH II notes from the holders at a purchase price equal to 101% of the total principal amount of the notes, plus any accrued and unpaid interest.

CCO Holdings Notes

The CCO Holdings notes are senior debt obligations of CCO Holdings and CCO Holdings Capital Corp. Such notes are guaranteed by Charter. They rank equally with all other current and future unsecured, unsubordinated obligations of CCO Holdings and CCO Holdings Capital Corp. They are structurally subordinated to all obligations of subsidiaries of CCO Holdings, including the Charter Operating credit facilities.



52


Redemption Provisions of Our Notes

The various notes issued by our subsidiaries included in the table may be redeemed in accordance with the following table or are not redeemable until maturity as indicated:
Note SeriesRedemption DatesPercentage of Principal
7.250% senior notes due 2017October 30, 2013 – October 29, 2014105.438%
October 30, 2014 – October 29, 2015103.625%
October 30, 2015 – October 29, 2016101.813%
Thereafter100.000%
7.000% senior notes due 2019January 15, 2014 – January 14, 2015105.250%
January 15, 2015 – January 14, 2016103.500%
January 15, 2016 – January 14, 2017101.750%
Thereafter100.000%
8.125% senior notes due 2020April 30, 2015 – April 29, 2016104.063%
April 30, 2016 – April 29, 2017102.708%
April 30, 2017 – April 29, 2018101.354%
Thereafter100.000%
7.375% senior notes due 2020December 1, 2015 – November 30, 2016103.688%
December 1, 2016 – November 30, 2017101.844%
Thereafter100.000%
5.250% senior notes due 2021March 15, 2016 – March 14, 2017103.938%
March 15, 2017 – March 14, 2018102.625%
March 15, 2018 – March 14, 2019101.313%
Thereafter100.000%
6.500% senior notes due 2021April 30, 2015 – April 29, 2016104.875%
April 30, 2016 – April 29, 2017103.250%
April 30, 2017 – April 29, 2018101.625%
Thereafter100.000%
6.625% senior notes due 2022January 31, 2017 – January 30, 2018103.313%
January 31, 2018 – January 30, 2019102.208%
January 31, 2019 – January 30, 2020101.104%
Thereafter100.000%
5.250% senior notes due 2022September 30, 2017 – September 29, 2018102.625%
September 30, 2018 – September 29, 2019101.750%
September 30, 2019 – September 29, 2020100.875%
Thereafter100.000%
5.125% senior notes due 2023February 15, 2018 – February 14, 2019102.563%
February 15, 2019 – February 14, 2020101.708%
February 15, 2020 – February 14, 2021100.854%
Thereafter100.000%
5.750% senior notes due 2023March 1, 2018 – February 28, 2019102.875%
March 1, 2019 – February 29, 2020101.917%
March 1, 2020 – February 28, 2021100.958%
Thereafter100.000%
5.750% senior notes due 2024July 15, 2018 – July 14, 2019102.875%
July 15, 2019 – July 14, 2020101.917%
July 15, 2020 – July 14, 2021100.958%
Thereafter100.000%



53


In the event that a specified change of control event occurs, each of the respective issuers of the notes must offer to repurchase any then outstanding notes at 101% of their principal amount or accrued value, as applicable, plus accrued and unpaid interest, if any.

Summary of Restrictive Covenants of Our Notes

The following description is a summary of certain restrictions of our Debt Agreements.  The summary does not restate the terms of the Debt Agreements in their entirety, nor does it describe all restrictions of the Debt Agreements.  The agreements and instruments governing each of the notes issued are complicated and you should consult such agreements and instruments for more detailed information regarding the notes issued.  

The notes issued by CCO Holdings (the “note issuer”) were issued pursuant to indentures that contain covenants that restrict the ability of the note issuer and its subsidiaries to, among other things:

incur indebtedness;
pay dividends or make distributions in respect of capital stock and other restricted payments;
issue equity;
make investments;
create liens;
sell assets;
consolidate, merge, or sell all or substantially all assets;
enter into sale leaseback transactions;
create restrictions on the ability of restricted subsidiaries to make certain payments; or
enter into transactions with affiliates.

However, such covenants are subject to a number of important qualifications and exceptions. Below we set forth a brief summary of certain of the restrictive covenants.

Restrictions on Additional Debt

The limitations on incurrence of debt and issuance of preferred stock contained in various indentures permit the note issuer and its restricted subsidiaries to incur additional debt or issue preferred stock, so long as, after giving pro forma effect to the incurrence, the leverage ratio would be below a specified level for the note issuer. The leverage ratios under our notes for CCO Holdings is 6.0 to 1.

In addition, regardless of whether the leverage ratio could be met, so long as no default exists or would result from the incurrence or issuance, the note issuer and its restricted subsidiaries are permitted to issue among other permitted indebtedness:

up to $1.5 billion of debt under credit facilities not otherwise allocated
up to the greater of $300 million and 5% of consolidated net tangible assets to finance the purchase or capital lease of new assets;
up to the greater of $300 million and 5% of consolidated net tangible assets of additional debt for any purpose; and
other items of indebtedness for specific purposes such as intercompany debt, refinancing of existing debt, and interest rate swaps to provide protection against fluctuation in interest rates.

Indebtedness under a single facility or agreement may be incurred in part under one of the categories listed above and in part under another, and generally may also later be reclassified into another category including as debt incurred under the leverage ratio. Accordingly, indebtedness under our credit facilities may be incurred under a combination of the categories of permitted indebtedness listed above. The restricted subsidiaries of the note issuer are generally not permitted to issue subordinated debt securities.

Restrictions on Distributions

Generally, under the various indentures, CCO Holdings and its respective restricted subsidiaries are permitted to pay dividends on or repurchase equity interests, or make other specified restricted payments, only if it can incur $1.00 of new debt under the 6.0 to 1.0 leverage ratio test after giving effect to the transaction and if no default exists or would exist as a consequence of such incurrence. If those conditions are met, restricted payments may be made in a total amount of up to the sum of 100% of CCO Holdings’ Consolidated EBITDA, as defined, minus 1.3 times its Consolidated Interest Expense, as defined, cumulatively from


54


April 1, 2010, plus 100% of new cash and appraised non-cash equity proceeds received by CCO Holdings and not allocated to certain investments, cumulatively from the issue date, plus $2 billion.

In addition, CCO Holdings may make distributions or restricted payments, so long as no default exists or would be caused by transactions among other distributions or restricted payments:

to repurchase management equity interests in amounts not to exceed $10 million per fiscal year;
to pay pass-through tax liabilities in respect of ownership of equity interests in the applicable issuer or its restricted subsidiaries; or
to make other specified restricted payments including merger fees up to 1.25% of the transaction value, repurchases using concurrent new issuances, and certain dividends on existing subsidiary preferred equity interests.

Restrictions on Investments

CCO Holdings and its respective restricted subsidiaries may not make investments except (i) permitted investments or (ii) if, after giving effect to the transaction, their leverage would be above the applicable leverage ratio.

Permitted investments include, among others:

investments in and generally among restricted subsidiaries or by restricted subsidiaries in the applicable issuer;
investments aggregating up to $750 million at any time outstanding.
investments aggregating up to 100% of new cash equity proceeds received by CCO Holdings since the issue date to the extent the proceeds have not been allocated to the restricted payments covenant.

Restrictions on Liens

The restrictions on liens for CCO Holdings only applies to liens on assets of the issuer itself and does not restrict liens on assets of subsidiaries. Permitted liens include liens securing indebtedness and other obligations under credit facilities, liens securing the purchase price of financed new assets, liens securing indebtedness of up to the greater of $50 million and 1.0% of consolidated net tangible assets and other specified liens.

Restrictions on the Sale of Assets; Mergers

CCO Holdings is generally not permitted to sell all or substantially all of its assets or merge with or into other companies unless its leverage ratio after any such transaction would be no greater than its leverage ratio immediately prior to the transaction, or unless after giving effect to the transaction, leverage would be below 6.0 to 1.0, no default exists, and the surviving entity is a U.S. entity that assumes the applicable notes.

CCO Holdings and its restricted subsidiaries may generally not otherwise sell assets or, in the case of restricted subsidiaries, issue equity interests, in excess of $100 million unless they receive consideration at least equal to the fair market value of the assets or equity interests, consisting of at least 75% in cash, assumption of liabilities, securities converted into cash within 60 days, or productive assets. CCO Holdings and its restricted subsidiaries are then required within 365 days after any asset sale either to use or commit to use the net cash proceeds over a specified threshold to acquire assets used or useful in their businesses or use the net cash proceeds to repay specified debt, or to offer to repurchase the issuer’s notes with any remaining proceeds.

Restrictions on Sale and Leaseback Transactions

The note issuer and its restricted subsidiaries may generally not engage in sale and leaseback transactions unless, at the time of the transaction, the note issuer could have incurred secured indebtedness under its leverage ratio test in an amount equal to the present value of the net rental payments to be made under the lease, and the sale of the assets and application of proceeds is permitted by the covenant restricting asset sales.

Prohibitions on Restricting Dividends

The note issuer's restricted subsidiaries may generally not enter into arrangements involving restrictions on their ability to make dividends or distributions or transfer assets to the note issuer unless those restrictions with respect to financing arrangements are on terms that are no more restrictive than those governing the credit facilities existing when they entered into the applicable indentures or are not materially more restrictive than customary terms in comparable financings and will not materially impair the note issuer's ability to make payments on the notes.


55



Affiliate Transactions

The indentures also restrict the ability of CCO Holdings and its restricted subsidiaries to enter into certain transactions with affiliates involving consideration in excess of $25 million without a determination by the board of directors that the transaction complies with this covenant, or transactions with affiliates involving over $100 million without receiving an opinion as to the fairness to the holders of such transaction from a financial point of view issued by an accounting, appraisal or investment banking firm of national standing.

Cross Acceleration

The indentures of CCO Holdings include various events of default, including cross acceleration provisions. Under these provisions, a failure by the note issuer or any of its restricted subsidiaries to pay at the final maturity thereof the principal amount of other indebtedness having a principal amount of $100 million or more (or any other default under any such indebtedness resulting in its acceleration) would result in an event of default under the indenture governing the applicable notes. As a result, an event of default related to the failure to repay principal at maturity or the acceleration of the indebtedness under the CCO Holdings notes, CCO Holdings credit facility or the Charter Operating credit facilities could cause cross-defaults under all of CCO Holdings' indentures.

Recently Issued Accounting Standards

In June 2013, the Financial Accounting Standards Board's Emerging Issues Task Force reached a final consensus on Issue 13-C, Presentation of an Unrecognized Tax Benefit when a Net Operating Loss or Tax Credit Carryforward Exists ("Issue 13-C"). Issue 13-C states that entities should present the unrecognized tax benefit as a reduction of the deferred tax asset for a net operating loss or similar tax loss or tax credit carryforward rather than as a liability when the uncertain tax position would reduce the net operating loss or other carryforward under the tax law. Issue 13-C requires prospective application (including accounting for uncertain tax positions that exist upon date of adoption) with optional retrospective application and is effective for annual and interim periods beginning after December 15, 2013, with early adoption permitted. The Company adopted Issue 13-C in the second quarter of 2013 and applied it retrospectively.

Item 7A.Quantitative and Qualitative Disclosures About Market Risk.

We are exposed to various market risks, including fluctuations in interest rates. We have used interest rate swap agreements to manage our interest costs and reduce our exposure to increases in floating interest rates. We manage our exposure to fluctuations in interest rates by maintaining a mix of fixed and variable rate debt. Using interest rate swap agreements, we agree to exchange, at specified intervals through 2017, the difference between fixed and variable interest amounts calculated by reference to agreed-upon notional principal amounts.

As of December 31, 2013 and 2012, the principal amount of our debt was approximately $14.2 billion and $12.9 billion, respectively.  As of December 31, 2013 and 2012, the weighted average interest rate on the credit facility debt, including the effects of our interest rate swap agreements, was approximately 3.6% and 4.2%, respectively, and the weighted average interest rate on the high-yield notes was approximately 6.4% and 6.7%, respectively, resulting in a blended weighted average interest rate of 5.6% and 6.0%, respectively.  The interest rate on approximately 84% and 87% of the total principal amount of our debt was effectively fixed, including the effects of our interest rate swap agreements, as of December 31, 2013 and 2012, respectively.

We do not hold or issue derivative instruments for speculative trading purposes. We, until de-designating in the first quarter of 2013, had certain interest rate derivative instruments that were designated as cash flow hedging instruments for GAAP purposes. Such instruments effectively converted variable interest payments on certain debt instruments into fixed payments. For qualifying hedges, realized derivative gains and losses offset related results on hedged items in the consolidated statements of operations. We formally documented, designated and assessed the effectiveness of transactions that received hedge accounting.

Changes in the fair value of interest rate derivative instruments that were designated as hedging instruments of the variability of cash flows associated with floating-rate debt obligations, and that met effectiveness criteria were reported in accumulated other comprehensive loss. The amounts were subsequently reclassified as an increase or decrease to interest expense in the same periods in which the related interest on the floating-rate debt obligations affected earnings (losses). For the years ended December 31, 2013, 2012 and 2011, gains of $7 million and losses of $10 million and $8 million, respectively, related to derivative instruments designated as cash flow hedges, were recorded in other comprehensive loss.



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Due to repayment of variable rate credit facility debt without a LIBOR floor, certain interest rate derivative instruments were de-designated as cash flow hedges during the three months ended March 31, 2013, as they no longer met the criteria for cash flow hedging specified by GAAP. In addition, on March 31, 2013, the remaining interest rate derivative instruments that continued to be highly effective cash flow hedges for GAAP purposes were electively de-designated. On the date of de-designation, we completed a final measurement test for each interest rate derivative instrument to determine any ineffectiveness and such amount was reclassified from accumulated other comprehensive loss into gain on derivative instruments, net in our consolidated statements of operations. For the year ended December 31, 2013, a loss of $27 million related to the reclassification from accumulated other comprehensive loss into earnings as a result of cash flow hedge discontinuance was recorded in gain on derivative instruments, net. While these interest rate derivative instruments are no longer designated as cash flow hedges for accounting purposes, management continues to believe such instruments are closely correlated with the respective debt, thus managing associated risk. Interest rate derivative instruments not designated as hedges are marked to fair value, with the impact recorded as a gain or loss on derivative instruments, net in our consolidated statements of operations. For the year ended December 31, 2013, gains of $38 million related to the change in fair value of interest rate derivative instruments not designated as cash flow hedges was recorded in gain on derivative instruments, net. The balance that remains in accumulated other comprehensive loss for these interest rate derivative instruments will be amortized over the respective lives of the contracts and recorded as a loss within gain on derivative instruments, net in our consolidated statements of operations. The net amount of existing losses that are reported in accumulated other comprehensive loss as of December 31, 2013 that is expected to be reclassified into earnings within the next twelve months is approximately $19 million.

The table set forth below summarizes the fair values and contract terms of financial instruments subject to interest rate risk maintained by us as of December 31, 2013 (dollars in millions):

  2014 2015 2016 2017 2018 Thereafter Total Fair Value at December 31, 2013
Debt:                
Fixed Rate $—
 $—
 $—
 $1,000
 $—
 $9,350
 $10,350
 $10,384
Average Interest Rate —% —% —% 7.25% —% 6.28% 6.37%  
                 
Variable Rate $414
 $65
 $93
 $102
 $673
 $2,551
 $3,898
 $3,848
Average Interest Rate 2.80% 2.86% 3.84% 4.97% 5.67% 6.83% 6.01%  
                 
Interest Rate Instruments:                
Variable to Fixed Rate $800
 $300
 $250
 $850
 $—
 $—
 $2,200
 $30
Average Pay Rate 4.65% 4.99% 3.89% 3.84% —% —% 4.30%  
Average Receive Rate 2.55% 2.75% 4.47% 5.48% —% —% 3.93%  

At December 31, 2013, we had $2.2 billion in notional amounts of interest rate swaps outstanding. This includes $550 million in delayed start interest rate swaps that become effective in March 2014 through March 2015.  In any future quarter in which a portion of these delayed start hedges first becomes effective, an equal or greater notional amount of the currently effective swaps are scheduled to mature.  Therefore, the $1.7 billion notional amount of currently effective interest rate swaps will gradually step down over time as current swaps mature and an equal or lesser amount of delayed start swaps become effective.

The notional amounts of interest rate instruments do not represent amounts exchanged by the parties and, thus, are not a measure of our exposure to credit loss. The amounts exchanged are determined by reference to the notional amount and the other terms of the contracts. The estimated fair value is determined using a present value calculation based on an implied forward LIBOR curve (adjusted for Charter Operating’s or counterparties’ credit risk). Interest rates on variable debt are estimated using the average implied forward LIBOR for the year of maturity based on the yield curve in effect at December 31, 2013 including applicable bank spread.

Item 8. Financial Statements and Supplementary Data.

Our consolidated financial statements, the related notes thereto, and the reports of independent accountants are included in this annual report beginning on page F-1.



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Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

None.

Item 9A. Controls and Procedures.

Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures

As of the end of the period covered by this report, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we have evaluated the effectiveness of the design and operation of our disclosure controls and procedures with respect to the information generated for use in this annual report. The evaluation was based in part upon reports and certifications provided by a number of executives. Based upon, and as of the date of that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that the disclosure 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.

In designing and evaluating the disclosure controls and procedures, our management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable, not absolute, assurance of achieving the desired control objectives, and management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based upon the above evaluation, we believe that our controls provide such reasonable assurances.

There was no change in our internal control over financial reporting during the fourth quarter of 2013 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Management’s Report on Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining 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 of published financial statements.

Management has assessed the effectiveness of our internal control over financial reporting as of 2013. In making this assessment, we used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal Control — Integrated Framework (1992). Based on management’s assessment utilizing these criteria we believe that, as of 2013, our internal control over financial reporting was effective.

We acquired Bresnan in July 2013. As permitted by SEC guidance, management excluded these acquired companies from its assessment of the effectiveness of our internal control over financial reporting as of December 31, 2013. In total, Bresnan represented 10% and 3% of our total assets and total revenues, respectively, as of and for the year ended December 31, 2013. Excluding identifiable intangible assets and goodwill recorded in the business combination, Bresnan represented 3% of our total assets as of December 31, 2013.

Our independent auditors, KPMG LLP, have audited our internal control over financial reporting as stated in their report on page F-2.

Item 9B. Other Information.

Disclosure Pursuant to Section 219 of the Iran Threat Reduction and Syria Human Rights Act
Our former principal stockholder, through its management company, Apollo Global Management, LLC (“Apollo”) provided notice to Charter on October 29, 2013, that certain investment funds managed by affiliates of Apollo may be deemed affiliates of CEVA Holdings, LLC (“CEVA”), which through subsidiaries was involved in certain transactions which constitute covered activities under the Iran Threat Reduction and Syria Human Rights Act of 2012 (“ITRA”). Apollo was previously a principal stockholder of Charter and had two representatives on Charter’s board of directors for the first and a portion of the second quarter of 2013, when some of the covered activities occurred. As a result, we are providing disclosure pursuant to Section 219 of ITRA and Section 13(r) of the Securities Exchange Act of 1934, as amended.


58


Apollo notified Charter that, according to CEVA, in December 2012, CEVA Freight Italy Srl provided customs brokerage and freight forwarding services for the export to Iran of two measurement instruments to the Iranian Offshore Engineering Construction Company, a joint venture between two entities that are identified on OFAC’s list of Specially Designated Nationals (“SDN”). The revenues and net profits for these services were approximately $1,260.64 and $151.30, respectively. In February 2013, CEVA Freight Holdings (Malaysia) SDN BHD (“CEVA Malaysia”) provided customs brokerage for export and local haulage services for a shipment of polyethylene resin to Iran shipped on a vessel owned and/or operated by HDS Lines, also an SDN. The revenues and net profits for these services were approximately $779.54 and $311.13, respectively. In September 2013, CEVA Malaysia provided customs brokerage services for the import into Malaysia of fruit juice from Alifard Co. in Iran via HDS Lines. The revenues and net profits for these services were approximately $227.41 and $89.29, respectively.
All of the information in the foregoing paragraph is based solely on information in the notice provided by Apollo. Charter has no involvement in the business of CEVA and received no direct or indirect benefits from the transactions described above.






59


PART III

Item 10. Directors, Executive Officers and Corporate Governance.

The information required by Item 10 will be included in Charter’s 2014 Proxy Statement (the “Proxy Statement”) under the headings “Election of Class A Directors,” “Section 16(a) Beneficial Ownership Reporting Requirements,” and “Code of Ethics,” or in amendment to this Annual Report on Form 10-K and is incorporated herein by reference.

Item 11. Executive Compensation.
The information required by Item 11 will be included in the Proxy Statement under the headings “Executive Compensation,” “Election of Class A Directors – Director Compensation” and “Compensation Discussion and Analysis,” or in an amendment to this Annual Report on Form 10-K and is incorporated herein by reference. Information contained in the Proxy Statement or an amendment to this Annual Report on Form 10-Kunder 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 12 will be included in the Proxy Statement under the heading “Security Ownership of Certain Beneficial Owners and Management” or in amendment to this Annual Report on Form 10-K and is incorporated herein by reference.

Item 13. Certain Relationships and Related Transactions, and Director Independence.
The information required by Item 13 will be included in the Proxy Statement under the heading “Certain Relationships and Related Transactions” and “Election of Class A Directors” or in amendment to this Annual Report on Form 10-K and is incorporated herein by reference.

Item 14. Principal Accounting Fees and Services.
The information required by Item 14 will be included in the Proxy Statement under the heading “Accounting Matters” or in amendment to this Annual Report on Form 10-K and is incorporated herein by reference.



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PART IV

Item 15. Exhibits and Financial Statement Schedules.

(a)The following documents are filed as part of this annual report:

(1)Financial 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 required or are not applicable, or the required information is set forth in the applicable financial statements or notes thereto.

(3)The index to the exhibits begins on page E-1 of this annual report.



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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, Charter Communications, Inc. has duly caused this annual report to be signed on its behalf by the undersigned, thereunto duly authorized.

CHARTER COMMUNICATIONS, INC.,
Registrant
By:/s/ Thomas M. Rutledge
Thomas M. Rutledge
President, Chief Executive Officer and Director
Date: February 21, 2014


S- 1



POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Richard R. Dykhouse and Kevin D. Howard, and each of them (with full power to each of them to act alone), his or her true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, for him or her and in his or her name, place and stead, in any and all capacities, to sign on his or her behalf individually and in each capacity stated below any and all amendments (including post-effective amendments) to this annual report, and to file the same, with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents and either of them, or their substitutes, may lawfully do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of Charter Communications, Inc. and in the capacities and on the dates indicated.

SignatureTitleDate
/s/ Thomas M. Rutledge    
Thomas M. Rutledge
President, Chief Executive Officer, Director
(Principal Executive Officer)		February 21, 2014
/s/ Christopher L. Winfrey    
Christopher L. Winfrey
Executive Vice President and Chief Financial Officer (Principal Financial Officer)February 21, 2014
/s/ Kevin D. Howard     
Kevin D. Howard
Senior Vice President – Finance, Controller and Chief Accounting Officer (Principal Accounting Officer)February 21, 2014
/s/ Balan Nair    
Balan Nair
DirectorFebruary 21, 2014
/s/ W. Lance Conn    
W. Lance Conn
DirectorFebruary 21, 2014
/s/ Michael Huseby    
Michael Huseby
DirectorFebruary 21, 2014
/s/ Craig A. Jacobson    
Craig A. Jacobson
DirectorFebruary 21, 2014
/s/ Gregory Maffei    
Gregory Maffei
DirectorFebruary 21, 2014
/s/ John Malone    
John Malone
DirectorFebruary 21, 2014
/s/ John D. Markley, Jr.    
John D. Markley, Jr.
DirectorFebruary 21, 2014
/s/ David C. Merritt    
David C. Merritt
DirectorFebruary 21, 2014
/s/ Eric L. Zinterhofer    
Eric L. Zinterhofer
DirectorFebruary 21, 2014

S- 2



Exhibit Index

Exhibits are listed by numbers corresponding to the Exhibit Table of Item 601 in Regulation S-K.
ExhibitDescription
2.1Debtors' Joint Plan of Reorganization filed pursuant to Chapter 11 of the United States Bankruptcy Code filed on July 15, 2009 with the United States Bankruptcy Court for the Southern District of New York in Case No. 09-11435 (Jointly Administered) (incorporated by reference to Exhibit 10.2 to the quarterly report on Form 10‑Q of Charter Communications, Inc. filed on August 6, 2009 (File No. 001-33664).
2.2Purchase Agreement dated February 7, 2013 between CSC Holdings, LLC, and Charter Communications Operating, LLC (incorporated by reference to Exhibit 10.1 to the current report on Form 8-K of Charter Communications, Inc. filed on February 12, 2013 (File No. 001-33664).
3.1Amended and Restated Certificate of Incorporation of Charter Communications, Inc. (incorporated by reference to Exhibit 3.1 to the current report on Form 8-K of Charter Communications, Inc. filed on August 20, 2010 (File No. 001-33664)).
3.2Amended and Restated By-laws of Charter Communications, Inc. as of November 30, 2009 (incorporated by reference to Exhibit 3.2 to the current report on Form 8-K of Charter Communications, Inc. filed on December 4, 2009 (File No. 001-33664)).
4.1Warrant Agreement, dated as of November 30, 2009, by and between Charter Communications, Inc. and Mellon Investor Services LLC (incorporated by reference to Exhibit 4.1 to the current report on Form 8-K of Charter Communications, Inc. filed on December 4, 2009 (File No. 001-33664)).
4.2Warrant Agreement, dated as of November 30, 2009, by and between Charter Communications, Inc. and Mellon Investor Services LLC (incorporated by reference to Exhibit 4.2 to the current report on Form 8-K of Charter Communications, Inc. filed on December 4, 2009 (File No. 001-33664)).
4.3Warrant Agreement, dated as of November 30, 2009, by and between Charter Communications, Inc. and Mellon Investor Services LLC (incorporated by reference to Exhibit 4.3 to the current report on Form 8-K of Charter Communications, Inc. filed on December 4, 2009 (File No. 001-33664)).
4.4Stockholders Agreement of Liberty Media Corporation to purchase Charter Communications, Inc. shares dated March 19, 2013 (incorporated by reference to Exhibit 1.1 to the current report on Form 8-K of Charter Communications, Inc. filed March 19, 2013 (File No. 001-33664)).
4.5Registration Rights Agreement relating to the 5.25% senior notes due 2021 and the 5.75% senior notes due 2023, dated as of March 14, 2013, by and among CCO Holdings, LLC, CCO Holdings Capital Corp., Charter Communications, Inc. and Deutsche Bank Securities Inc., for itself and the other purchasers named therein (incorporated by reference to Exhibit 10.3 to the current report on Form 8-K of Charter Communications, Inc. filed on March 15, 2013 (File No. 001-33664)).
10.1Indenture relating to the 8.125% Senior Notes due 2020, dated as of April 18, 2010, by and among CCO Holdings, LLC, CCO Holdings Capital Corp. and The Bank of New York Mellon Trust Company, N.A., as trustee (incorporated by reference to Exhibit 10.6 to the registration statement on Form S-1 of Charter Communications, Inc. filed on June 30, 2010 (File No. 333-167877)).
10.2Indenture relating to the 7.25% senior notes due 2017, dated as of September 27, 2010, by and among CCO Holdings, LLC, and CCO 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 September 30, 2010 (File No. 001-33664)).
10.3Indenture relating to the 7.00% senior notes due 2019, dated as of January 11, 2011, by and among CCO Holdings, LLC, and CCO 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. 001-33664)).
10.4Indenture dated as of May 10, 2011, by and among CCO Holdings, LLC, and CCO 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 4.1 to the current report on Form 8-K of Charter Communications, Inc. filed on May 13, 2011 (File No. 001-33664)).
10.5First Supplemental Indenture dated as of May 10, 2011 by and among CCO Holdings, LLC, and CCO 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 4.2 to the current report on Form 8-K of Charter Communications, Inc. filed on May 13, 2011 (File No. 001-33664)).
10.6Second Supplemental Indenture dated as of December 14, 2011 by and among CCO Holdings, LLC, and CCO 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 4.2 to the current report on Form 8-K of Charter Communications, Inc. filed on December 20, 2011 (File No. 001-33664)).

E- 1



10.7Third Supplemental Indenture dated as of January 26, 2012 by and among CCO Holdings, LLC, and CCO 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 4.2 to the current report on Form 8-K of Charter Communications, Inc. filed on February 1, 2012 (File No. 001-33664))
10.8Fourth Supplemental Indenture dated August 22, 2012 relating to the 5.25% Senior Notes due 2022 by and among CCO Holdings, LLC, CCO Holdings Capital Corp. and The Bank of New York Mellon Trust Company, N.A., as trustee (incorporated by reference to Exhibit 10.1 to the quarterly report on Form 10-Q of Charter Communications, Inc. filed on November 6, 2012 (File No. 001-33664)).
10.9Fifth Supplemental Indenture dated December 17, 2012 relating to the 5.125% Senior Notes due 2023 by and among CCO Holdings, LLC, CCO Holdings Capital Corp. and The Bank of New York Mellon Trust Company, N.A., as trustee (incorporated by reference to Exhibit 10.9 to the annual report on Form 10-K of Charter Communications, Inc. filed February 22, 2013 (File No. 001-33664)).
10.10Sixth Supplemental Indenture relating to the 5.25% senior notes due 2021, dated as of March 14, 2013, by and among CCO Holdings, LLC, and CCO 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 March 15, 2013 (File No. 001-33664)).
10.11Seventh Supplemental Indenture relating to the 5.75% senior notes due 2023, dated as of March 14, 2013, by and among CCO Holdings, LLC, and CCO 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 10.2 to the current report on Form 8-K of Charter Communications, Inc. filed March 15, 2013 (File No. 001-33664)).
10.12Eighth Supplemental Indenture relating to the 5.75% senior notes due 2024, dated as of May 3, 2013, by and among CCO Holdings, LLC and CCO 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 10.7 to the quarterly report on Form 10-Q of Charter Communications, Inc. filed on May 7, 2013 (File No. 001-33664)).
10.13(a)Credit Agreement, dated as of March 6, 2007, among CCO Holdings, LLC, the lenders from time to time parties thereto and Bank of America, N.A., as administrative agent (incorporated by reference to Exhibit 10.3 to the current report on Form 8-K of Charter Communications, Inc. filed on March 12, 2007 (File No. 000-27927)).
10.13(b)Amendment No. 1, dated as of April 25, 2012, to the Credit Agreement, dated as of March 6, 2007 (as amended, supplemented or otherwise modified from time to time), among CCO Holdings, LLC, as the Borrower, the lenders parties thereto, Wells Fargo Bank, N.A., as the Administrative Agent, and the other parties thereto (incorporated by reference to Exhibit 10.1 to the current report on Form 8-K filed by Charter Communications, Inc. on April 30, 2012 (File No. 001-33664)).
10.13(c)Pledge Agreement made by CCO Holdings, LLC in favor of Bank of America, N.A., as Collateral Agent, dated as of March 6, 2007 (incorporated by reference to Exhibit 10.4 to the current report on Form 8-K of Charter Communications, Inc. filed on March 12, 2007 (File No. 000-27927)).
10.14(a)Restatement Agreement, dated as of April 11, 2012 by and among Charter Communications Operating, LLC, CCO Holdings, LLC, the lenders party thereto and Bank of America, N.A., as Administrative Agent (incorporated by reference to Exhibit 10.2 to the current report on Form 8-K filed by Charter Communications, Inc. on April 17, 2012 (File No. 001-33664)).
10.14(b)Amendment No. 1 dated March 22, 2013 to the Amended and Restated Credit Agreement dated April 11, 2012 between Charter Communications Operating, LLC, as borrower, CCO Holdings, LLC, as guarantor, and Bank of America, N.A., as administrative agent (incorporated by reference to Exhibit 10.5 to the quarterly report on Form 10-Q of Charter Communications, Inc. filed on May 7, 2013 (File No. 001-33664)).
10.14(c)Amendment No. 2 dated April 22, 2013 to the Amended and Restated Credit Agreement dated April 11, 2012 between Charter Communications Operating, LLC, as borrower, CCO Holdings, LLC, as guarantor, and Bank of America, N.A., as administrative agent (incorporated by reference to Exhibit 10.6 to the quarterly report on Form 10-Q of Charter Communications, Inc. filed on May 7, 2013 (File No. 001-33664)).
10.14(d)Amendment No. 3, dated as of June 27, 2013, to the Amended and Restated Credit Agreement dated April 11, 2012 between Charter Communications Operating, LLC, as borrower, CCO Holdings, LLC, as guarantor, and Bank of America, N.A., as administrative agent (incorporated by reference to Exhibit 10.1 to the current report on Form 8-K filed by Charter Communications, Inc. on July 2, 2013 (File No. 001-33664)).
10.14(e)Amended and Restated Guarantee and Collateral Agreement made by CCO Holdings, LLC, Charter Communications Operating, LLC and certain of its subsidiaries in favor of Bank of America, N.A., as administrative agent, as amended and restated as of March 31, 2010 (incorporated by reference to Exhibit 10.2 to the current report on Form 8-K of Charter Communications, Inc. filed on April 6, 2010 (File No. 001-33664)).

E- 2



10.14(f)Incremental Activation Notice, dated as of May 3, 2013 delivered by Charter Communications Operating, LLC, CCO Holdings, LLC, the Subsidiary Guarantors Party thereto and each Term F Lender party thereto to Bank of America, N.A., as Administrative Agent under the credit agreement, dated as of March 18, 1999 as amended and restated as of March 31, 2010 and as further amended and restated as of April 11, 2012 (incorporated by reference to the quarterly report on Form 10-Q of Charter Communications, Inc. filed on May 7, 2013 (File No. 001-33664)).
10.14(g)Incremental Activation Notice, dated as of July 1, 2013 delivered by Charter Communications Operating, LLC, CCO Holdings, LLC, the Subsidiary Guarantors Party thereto and each Term E Lender party thereto to Bank of America, N.A., as Administrative Agent under the credit agreement, dated as of March 18, 1999 as amended and restated as of March 31, 2010 and as further amended and restated as of April 11, 2012 (incorporated by reference to Exhibit 10.2 to the current report on Form 8-K filed by Charter Communications, Inc. on July 2, 2013 (File No. 001-33664)).
10.15(a)Registration Rights Agreement dated as of November 30, 2009, by and among Charter Communications, Inc. and certain investors listed therein (incorporated by reference to Exhibit 10.2 to the current report on Form 8-K of Charter Communications, Inc. filed on December 4, 2009 (File No. 001-33664)).
10.15(b)Amendment No. 1 to the Registration Rights Agreement dated November 30, 2009, by and among Charter Communications, Inc. and certain Investors listed therein (incorporated by reference to Exhibit 10.2 to the quarterly report on Form 10-Q of Charter Communications, Inc. filed on November 6, 2012 (File No. 001-33664)).
10.16(a)Amended and Restated Management Agreement, dated as of June 19, 2003, between Charter Communications Operating, LLC and Charter Communications, Inc. (incorporated by reference to Exhibit 10.4 to the quarterly report on Form 10-Q filed by Charter Communications, Inc. on August 5, 2003 (File No. 333-83887)).
10.16(b)First Amendment to the Amended and Restated Management Agreement, dated as of July 20, 2010, between Charter Communications Operating, LLC and Charter Communications, Inc. (incorporated by reference to Exhibit 10.6 to the quarterly report on Form 10-Q filed by Charter Communications, Inc. on August 4, 2010 (File No. 001-33664)).
10.17(a)Second Amended and Restated Mutual Services Agreement, dated as of June 19, 2003 between Charter Communications, Inc. and Charter Communications Holding Company, LLC (incorporated by reference to Exhibit 10.5(a) to the quarterly report on Form 10-Q filed by Charter Communications, Inc. on August 5, 2003 (File No. 000-27927)).
10.17(b)First Amendment to the Second Amended and Restated Mutual Services Agreement, dated as of July 20, 2010, between Charter Communications, Inc. and Charter Communications Holding Company, LLC (incorporated by reference to Exhibit 10.7 to the quarterly report on Form 10-Q filed by Charter Communications, Inc. on August 4, 2010 (File No. 001-33664)).
10.18+Charter Communications, Inc. Executive Bonus Plan (incorporated by reference to Exhibit 10.1 to the Quarterly Report on Form 10-Q of Charter Communications, Inc. filed on May 8, 2012 (File No. 001-33664)).
10.19+Charter Communications, Inc. Executive Incentive Performance Plan (incorporated by reference to Exhibit 10.21 to the annual report on Form 10-K filed by Charter Communications, Inc. on February 27, 2012 (File No. 001-33664)).
10.20+Charter Communications, Inc. Amended and Restated 2009 Stock Incentive Plan (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K of Charter Communications, Inc. filed on December 21, 2009 (File No. 001-33664)).
10.21+Charter Communications, Inc.'s Amended and Restated Supplemental Deferred Compensation Plan, dated as of September 1, 2011(incorporated by reference to Exhibit 10.1 to the current report on Form 8-K filed by Charter Communications, Inc. on September 2, 2011 (File No. 001-33664)).
10.22+Form of Non-Qualified Time Vesting Stock Option Agreement dated April 26, 2011(incorporated by reference to Exhibit 10.3 to the quarterly report on Form 10-Q filed by Charter Communications, Inc. on August 2, 2011 (File No. 001-33664)).
10.23+Form of Non-Qualified Price Vesting Stock Option Agreement dated April 26, 2011(incorporated by reference to Exhibit 10.2 to the quarterly report on Form 10-Q filed by Charter Communications, Inc. on August 2, 2011 (File No. 001-33664)).
10.24+Form of Restricted Stock Unit Agreement dated April 26, 2011(incorporated by reference to Exhibit 10.4 to the quarterly report on Form 10-Q filed by Charter Communications, Inc. on August 2, 2011 (File No. 001-33664)).
10.25+Form of Notice of LTIP Award Agreement Changes (RSU Awards) (incorporated by reference to Exhibit 10.3 to the current report on Form 8-K filed by Charter Communications, inc. on January 22, 2014 (File No. 001-33664)).
10.26+Form of Notice of LTIP Award Agreement Changes (Time-Vesting Option Awards) (incorporated by reference to Exhibit 10.4 to the current report on Form 8-K filed by Charter Communications, Inc. on January 22, 2014 (File No. 001-33664)).
10.27+Form of Notice of LTIP Award Agreement Changes (Restricted Stock Awards) (incorporated by reference to Exhibit 10.5 to the current report on Form 8-K filed by Charter Communications, inc. on January 22, 2014 (File No. 001-33664)).

E- 3



10.28+Form of Notice of LTIP Award Agreement Changes (Performance-Vesting Option Awards) (incorporated by reference to Exhibit 10.6 to the current report on Form 8-K filed by Charter Communications, Inc. on January 22, 2014 (File No. 001-33664)).
10.29+Form of Stock Option Agreement dated January 15, 2014 (incorporated by reference to Exhibit 10.1 to the current report on Form 8-K filed by Charter Communications, Inc. on January 22, 2014 (File No. 001-33664)).
10.30+Form of Restricted Stock Unit Agreement dated January 15, 2014 (incorporated by reference to Exhibit 10.2 to the current report on Form 8-K filed by Charter Communications, Inc. on January 22, 2014 (File No. 001-33664)).
10.31+Employment Agreement between Thomas Rutledge and Charter Communications, Inc., dated as of December 19, 2011 (incorporated by reference to Exhibit 10.1 to the current report on Form 8-K of Charter Communications, Inc. filed on December 19, 2011 (File No. 001-33664)).
10.32(a)+Amended and Restated Employment Agreement between Christopher L. Winfrey and Charter Communications, Inc., dated effective as of August 31, 2012.
10.32(b)+The New York Relocation Agreement and Release entered into by and between Charter Communications, Inc. and Christopher Winfrey dated as of October 23, 2012 (incorporated by reference to Exhibit 10.4 to the Quarterly Report on Form 10-Q of Charter Communications, Inc. filed on November 6, 2012 (File No. 001-33664)).
10.33(a)+Employment Agreement dated as of April 30, 2012, by and between Charter Communications, Inc. and John Bickham (incorporated by reference to Exhibit 10.1 to the current report on Form 8-K filed by Charter Communications, Inc. on May 1, 2012 (File No. 001-33664)).
10.33(b)+Time-Vesting Stock Option Agreement dated as of April 30, 2012 by and between Charter Communications, Inc. and John Bickham (incorporated by reference to Exhibit 10.2 to the current report on Form 8-K filed by Charter Communications, Inc. on May 1, 2012 (File No. 001-33664)).
10.33(c)+Performance-Vesting Restricted Stock Agreement dated as of April 30, 2012 by and between Charter Communications, Inc. and John Bickham (incorporated by reference to Exhibit 10.3 to the current report on Form 8-K filed by Charter Communications, Inc. on May 1, 2012 (File No. 001-33664))
10.33(d)+Performance-Vesting Stock Option Agreement dated as of April 30, 2012 by and between Charter Communications, Inc. and John Bickham (incorporated by reference to Exhibit 10.4 to the current report on Form 8-K filed by Charter Communications, Inc. on May 1, 2012 (File No. 001-33664))
10.33(e)+Time-Vesting Restricted Stock Agreement dated as of April 30, 2012 by and between Charter Communications, Inc. and John Bickham (incorporated by reference to Exhibit 10.5 to the current report on Form 8-K filed by Charter Communications, Inc. on May 1, 2012 (File No. 001-33664)).
10.34+*Employment Agreement dated as of July 8, 2013 by and between Charter Communications, Inc. and Catherine C. Bohigian.
10.35(a)+*Amended and Restated Employment Agreement dated as of February 20, 2013 by and between Charter Communications, Inc. and Richard R. Dykhouse.
10.35(b)+*The New York Relocation Agreement and Release entered into by and between Charter Communications, Inc. and Richard R. Dykhouse dated as of February 20, 2013. 
10.36Form of First Amended and Restated Indemnification Agreement (incorporated by reference to Exhibit 10.3 to the quarterly report on Form 10-Q of Charter Communications, Inc. filed on August 6, 2013 (File No. 001-33664)).
12.1*Computation of Ratio of Earnings to Fixed Charges.
21.1*Subsidiaries of Charter Communications, Inc.
23.1*Consent of KPMG LLP.
31.1*Certificate of Chief Executive Officer pursuant to Rule 13a-14(a)/Rule 15d-14(a) under the Securities Exchange Act of 1934.
31.2*Certificate of Chief Financial Officer pursuant to Rule 13a-14(a)/Rule 15d-14(a) under the Securities Exchange Act of 1934.
32.1*Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Chief Executive Officer).
32.2*Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Chief Financial Officer).
101The following financial information from the Annual Report of Charter Communications, Inc. on Form 10-K for the year ended December 31, 2013, filed with the SEC on February 21, 2014, formatted in eXtensible Business Reporting Language: (i) Consolidated Balance Sheets, (ii) Consolidated Statements of Operations, (iii) Consolidated Statements of Comprehensive Loss, (iv) Consolidated Statements of Changes in Shareholder Equity, (v) Consolidated Statements of Cash Flows, and (vi) Notes to Consolidated Financial Statements.
_____________
*    Filed herewith.
+    Management compensatory plan or arrangement

E- 4



INDEX TO FINANCIAL STATEMENTS

Page
Audited Financial Statements
Report of Independent Registered Public Accounting Firm
F- 2
Consolidated Balance Sheets as of December 31, 2013 and 2012
F- 3
Consolidated Statements of Operations for the Years Ended December 31, 2013, 2012 and 2011
F- 4
Consolidated Statements of Comprehensive Loss for the Years Ended December 31, 2013, 2012 and 2011
F- 4
Consolidated Statements of Changes in Shareholders’ Equity for the Years Ended December 31, 2013, 2012 and 2011
F- 5
Consolidated Statements of Cash Flows for the Years Ended December 31, 2013, 2012 and 2011
F- 6
Notes to Consolidated Financial Statements
F- 7



F- 1



Report of Independent Registered Public Accounting Firm

The Board of Directors and Shareholders
Charter Communications, Inc.:
We have audited the accompanying consolidated balance sheets of Charter Communications, Inc. and subsidiaries (the Company) as of December 31, 2013 and 2012, and the related consolidated statements of operations, comprehensive loss, changes in shareholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2013. We also have audited the Company’s internal control over financial reporting as of December 31, 2013, based on criteria established in Internal Control - Integrated Framework (1992) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company’s management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting (Item 9A). Our responsibility is to express an opinion on these consolidated financial statements and an opinion on the Company’s internal control over financial reporting based on our audits.
We conducted our audits in accordance with the standards 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 maintained in all material respects. Our audits of the consolidated financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
The Company acquired Bresnan Broadband Holdings, LLC and subsidiaries (Bresnan) in July 2013 and management excluded from its assessment of the effectiveness of the Company’s internal control over financial reporting as of December 31, 2013, Bresnan’s internal control over financial reporting associated with 10% and 3% of the Company’s total assets and total revenues, respectively, included in the consolidated financial statements of the Company as of and for the year ended December 31, 2013. Our audit of internal control over financial reporting of the Company as of December 31, 2013 also excluded an evaluation of the internal control over financial reporting of Bresnan.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Charter Communications, Inc. and subsidiaries as of December 31, 2013 and 2012, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2013, in conformity with U.S. generally accepted accounting principles. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2013, based on criteria established in Internal Control - Integrated Framework (1992) issued by the Committee of Sponsoring Organizations of the Treadway Commission.
(signed) KPMG LLP
St. Louis, Missouri
February 20, 2014



F- 2


CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(dollars in millions, except share data)
 December 31,
2013		 December 31,
2012
    
ASSETS   
CURRENT ASSETS:   
Cash and cash equivalents$21
 $7
Restricted cash and cash equivalents—
 27
Accounts receivable, less allowance for doubtful accounts of   
$19 and $14, respectively234
 234
Prepaid expenses and other current assets67
 62
Total current assets322
 330
    
INVESTMENT IN CABLE PROPERTIES:   
Property, plant and equipment, net of accumulated   
depreciation of $4,787 and $3,563, respectively7,981
 7,206
Franchises6,009
 5,287
Customer relationships, net1,389
 1,424
Goodwill1,177
 953
Total investment in cable properties, net16,556
 14,870
    
OTHER NONCURRENT ASSETS417
 396
    
Total assets$17,295
 $15,596
    
LIABILITIES AND SHAREHOLDERS’ EQUITY   
CURRENT LIABILITIES:   
Accounts payable and accrued liabilities$1,467
 $1,224
Total current liabilities1,467
 1,224
    
LONG-TERM DEBT14,181
 12,808
DEFERRED INCOME TAXES1,431
 1,321
OTHER LONG-TERM LIABILITIES65
 94
    
SHAREHOLDERS’ EQUITY:   
Class A common stock; $.001 par value; 900 million shares authorized;   
106,144,075 and 101,176,247 shares issued and outstanding, respectively—
 —
Class B common stock; $.001 par value; 25 million shares authorized;   
no shares issued and outstanding—
 —
Preferred stock; $.001 par value; 250 million shares authorized;   
no shares issued and outstanding—
 —
Additional paid-in capital1,760
 1,616
Accumulated deficit(1,568) (1,392)
Accumulated other comprehensive loss(41) (75)
Total shareholders’ equity151
 149
    
Total liabilities and shareholders’ equity$17,295
 $15,596

The accompanying notes are an integral part of these consolidated financial statements.
F- 3


CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(dollars in millions, except per share and share data)
 Year Ended December 31,
 2013 2012 2011
      
REVENUES$8,155
 $7,504
 $7,204
      
COSTS AND EXPENSES:     
Operating costs and expenses (excluding depreciation and amortization)5,345
 4,860
 4,564
Depreciation and amortization1,854
 1,713
 1,592
Other operating expenses, net31
 15
 7
      
 7,230
 6,588
 6,163
      
Income from operations925
 916
 1,041
      
OTHER EXPENSES:     
Interest expense, net(846) (907) (963)
Loss on extinguishment of debt(123) (55) (143)
Gain on derivative instruments, net11
 —
 —
Other expense, net(16) (1) (5)
      
 (974) (963) (1,111)
      
Loss before income taxes(49) (47) (70)
      
Income tax expense(120) (257) (299)
      
Net loss$(169) $(304) $(369)
      
LOSS PER COMMON SHARE, BASIC AND DILUTED$(1.65) $(3.05) $(3.39)
      
Weighted average common shares outstanding, basic and diluted101,934,630
 99,657,989
 108,948,554

CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(dollars in millions)
 Year Ended December 31,
 2013 2012 2011
      
Net loss$(169) $(304) $(369)
Net impact of interest rate derivative instruments, net of tax34
 (10) (8)
      
Comprehensive loss$(135) $(314) $(377)


The accompanying notes are an integral part of these consolidated financial statements.
F- 4


CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
(dollars in millions)

  Class A Common Stock Class B Common Stock Additional Paid-In Capital Accumulated Deficit Treasury Stock Accumulated Other Comprehensive Loss Total Shareholders' Equity
               
BALANCE, December 31, 2010 —
 —
 1,776
 (235) (6) (57) 1,478
Net loss —
 —
 —
 (369) —
 —
 (369)
Net impact of interest rate derivative instruments, net of tax —
 —
 —
 —
 —
 (8) (8)
Stock compensation expense, net —
 —
 36
 —
 —
 —
 36
Exercise of options —
 —
 5
 —
 —
 —
 5
Purchase of treasury stock —
 —
 —
 —
 (733) —
 (733)
Retirement of treasury stock —
 —
 (261) (478) 739
 —
 —
               
BALANCE, December 31, 2011 —
 —
 1,556
 (1,082) —
 (65) 409
Net loss —
 —
 —
 (304) —
 —
 (304)
Net impact of interest rate derivative instruments, net of tax —
 —
 —
 —
 —
 (10) (10)
Stock compensation expense, net —
 —
 50
 —
 —
 —
 50
Exercise of options —
 —
 15
 —
 —
 —
 15
Purchase of treasury stock —
 —
 —
 —
 (11) —
 (11)
Retirement of treasury stock —
 —
 (5) (6) 11
 —
 —
               
BALANCE, December 31, 2012 —
 —
 1,616
 (1,392) —
 (75) 149
Net loss —
 —
 —
 (169) —
 —
 (169)
Net impact of interest rate derivative instruments, net of tax —
 —
 —
 —
 —
 34
 34
Stock compensation expense, net —
 —
 48
 —
 —
 —
 48
Exercise of options and warrants —
 —
 104
 —
 —
 —
 104
Purchase of treasury stock —
 —
 —
 —
 (15) —
 (15)
Retirement of treasury stock —
 —
 (8) (7) 15
 —
 —
               
BALANCE, December 31, 2013 $—
 $—
 $1,760
 $(1,568) $—
 $(41) $151
               



The accompanying notes are an integral part of these consolidated financial statements.
F- 5



CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in millions)
  Year Ended December 31,
  2013 2012 2011
CASH FLOWS FROM OPERATING ACTIVITIES:      
Net loss $(169) $(304) $(369)
Adjustments to reconcile net loss to net cash flows from operating activities:      
Depreciation and amortization 1,854
 1,713
 1,592
Non-cash interest expense 43
 45
 34
Loss on extinguishment of debt 123
 55
 143
Gain on derivative instruments, net (11) —
 —
Deferred income taxes 112
 250
 290
Other, net 82
 45
 33
Changes in operating assets and liabilities, net of effects from acquisitions and dispositions:      
Accounts receivable 10
 34
 (24)
Prepaid expenses and other assets —
 (8) 1
Accounts payable, accrued liabilities and other 114
 46
 37
Net cash flows from operating activities 2,158
 1,876
 1,737
       
CASH FLOWS FROM INVESTING ACTIVITIES:      
Purchases of property, plant and equipment (1,825) (1,745) (1,311)
Change in accrued expenses related to capital expenditures 76
 13
 57
Sales (purchases) of cable systems, net (676) 19
 (88)
Other, net (18) (24) (24)
Net cash flows from investing activities (2,443) (1,737) (1,366)
       
CASH FLOWS FROM FINANCING ACTIVITIES:      
Borrowings of long-term debt 6,782
 5,830
 5,489
Repayments of long-term debt (6,520) (5,901) (5,072)
Payments for debt issuance costs (50) (53) (62)
Purchase of treasury stock (15) (11) (733)
Proceeds from exercise of options and warrants 104
 15
 5
Other, net (2) (14) —
Net cash flows from financing activities 299
 (134) (373)
       
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 14
 5
 (2)
CASH AND CASH EQUIVALENTS, beginning of period 7
 2
 4
CASH AND CASH EQUIVALENTS, end of period $21
 $7
 $2
       
CASH PAID FOR INTEREST $763
 $904
 $899


The accompanying notes are an integral part of these consolidated financial statements.
F- 6
CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2013, 2012 AND 2011
(dollars in millions, except share or per share data or where indicated)


1.    Organization and Basis of Presentation

Organization

Charter Communications, Inc. (“Charter”) is a holding company whose principal asset is a 100% common equity interest in Charter Communications Holding Company, LLC (“Charter Holdco”). Charter owns cable systems through its subsidiaries, which are collectively, with Charter, referred to herein as the “Company.”

The Company is a cable operator providing services in the United States. The Company offers to residential and commercial customers traditional cable video programming, Internet services, and voice services, as well as advanced video services such as Charter OnDemand™, high definition television, and digital video recorder (“DVR”) service. The Company sells its cable video programming, Internet, voice, and advanced video services primarily on a subscription basis. The Company also sells local advertising on cable networks and on the Internet and provides fiber connectivity to cellular towers.

Basis of Presentation

The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) and the rules and regulations of the Securities and Exchange Commission (the “SEC”).

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Areas involving significant judgments and estimates include capitalization of labor and overhead costs; depreciation and amortization costs; valuations and impairments of property, plant and equipment, intangibles and goodwill; income taxes; contingencies and programming expense. Actual results could differ from those estimates.

Certain prior year amounts have been reclassified to conform with the 2013 presentation.

2.    Summary of Significant Accounting Policies

Consolidation

The accompanying consolidated financial statements include the accounts of Charter and its wholly owned subsidiaries. The Company consolidates based upon evaluation of the Company’s power, through voting rights or similar rights, to direct the activities of another entity that most significantly impact the entity’s economic performance; its obligation to absorb the expected losses of the entity; and its right to receive the expected residual returns of the entity. All significant inter-company accounts and transactions among consolidated entities have been eliminated.

Cash and Cash Equivalents

The Company considers all highly liquid investments with original maturities of three months or less to be cash equivalents. These investments are carried at cost, which approximates market value. Cash and cash equivalents consist primarily of money market funds and commercial paper. Restricted cash and cash equivalents consisted of amounts held in escrow accounts pending final resolution from the Bankruptcy Court. In April 28, 2010,2013, the restrictions on the cash and cash equivalents were resolved.  
Property, Plant and Equipment

Additions to property, plant and equipment are recorded at cost, including all material, labor and certain indirect costs associated with the construction of cable transmission and distribution facilities. While the Company’s capitalization is based on specific activities, once capitalized, costs are tracked by fixed asset category at the cable system level and not on a specific asset basis. For assets that are sold or retired, the estimated historical cost and related accumulated depreciation is removed. Costs associated with initial customer installations and the additions of network equipment necessary to enable advanced video services are capitalized. Costs capitalized as part of initial customer installations include materials, labor, and certain indirect costs. Indirect costs are associated with the activities of the Company’s personnel who assist in connecting and activating the new service and


F- 7
CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2013, 2012 AND 2011
(dollars in millions, except share or per share data or where indicated)

consist of compensation and other costs associated with these support functions. Indirect costs primarily include employee benefits and payroll taxes, direct variable costs associated with capitalizable activities, consisting primarily of installation and construction, vehicle costs, the cost of dispatch personnel and indirect costs directly attributable to capitalizable activities. The costs of disconnecting service at a customer’s dwelling or reconnecting service to a previously installed dwelling are charged to operating expense in the period incurred. Costs for repairs and maintenance are charged to operating expense as incurred, while plant and equipment replacement and betterments, including replacement of cable drops from the pole to the dwelling, are capitalized.

Depreciation is recorded using the straight-line composite method over management’s estimate of the useful lives of the related assets as follows:

Cable distribution systems7-20 years
Customer equipment and installations4-8 years
Vehicles and equipment1-6 years
Buildings and leasehold improvements15-40 years
Furniture, fixtures and equipment6-10 years

Asset Retirement Obligations

Certain of the Company’s franchise agreements and leases contain provisions requiring the Company to restore facilities or remove equipment in the event that the franchise or lease agreement is not renewed. The Company expects to continually renew its franchise agreements and has concluded that all of the related franchise rights are indefinite lived intangible assets. Accordingly, the possibility is remote that the Company would be required to incur significant restoration or removal costs related to these franchise agreements in the foreseeable future. A liability is required to be recognized for an asset retirement obligation in the period in which it is incurred if a reasonable estimate of fair value can be made. The Company has not recorded an estimate for potential franchise related obligations, but would record an estimated liability in the unlikely event a franchise agreement containing such a provision were no longer expected to be renewed. The Company also expects to renew many of its lease agreements related to the continued operation of its cable business in the franchise areas. For the Company’s lease agreements, the estimated liabilities related to the removal provisions, where applicable, have been recorded and are not significant to the financial statements.

Franchises

Franchise rights represent the value attributed to agreements or authorizations with local and state authorities that allow access to homes in cable service areas. Management estimates the fair value of franchise rights at the date of acquisition and determines if the franchise has a finite life or an indefinite life. All franchises that qualify for indefinite life treatment are tested for impairment annually or more frequently as warranted by events or changes in circumstances (see Note 6). The Company has concluded that all of its existing franchises qualify for indefinite life treatment.

Customer Relationships

Customer relationships represent the value attributable to the Company’s business relationships with its current customers including the right to deploy and market additional services to these customers.  Customer relationships are amortized on an accelerated basis over the period the relationships with current customers are expected to generate cash flows (8-15 years). 

Goodwill

The Company assesses the recoverability of its goodwill as of November 30 of each year, or more frequently whenever events or changes in circumstances indicate that the asset might be impaired.

Other Non-current Assets

Other non-current assets primarily include trademarks, right-of-entry costs and deferred financing costs. Trademarks have been determined to have an indefinite life and are tested annually for impairment. Right-of-entry costs represent costs incurred related to agreements entered into with landlords, real estate companies or owners to gain access to a building in order to provide cable


F- 8
CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2013, 2012 AND 2011
(dollars in millions, except share or per share data or where indicated)

service. Right-of-entry costs are generally deferred and amortized to amortization expense over the term of the agreement. Costs related to borrowings are deferred and amortized to interest expense over the terms of the related borrowings.

Valuation of Long-Lived Assets

The Company evaluates the recoverability of long-lived assets to be held and used when events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Such events or changes in circumstances could include such factors as impairment of the Company’s indefinite life assets, changes in technological advances, fluctuations in the fair value of such assets, adverse changes in relationships with local franchise authorities, adverse changes in market conditions or a deterioration of operating results. If a review indicates that the carrying value of such asset is not recoverable from estimated undiscounted cash flows, the carrying value of such asset is reduced to its estimated fair value. While the Company believes that its estimates of future cash flows are reasonable, different assumptions regarding such cash flows could materially affect its evaluations of asset recoverability. No impairments of long-lived assets to be held and used were recorded in 2013, 2012 and 2011.

Derivative Financial Instruments

Gains or losses related to derivative financial instruments which qualify as hedging activities are recorded in accumulated other comprehensive loss. For all other derivative instruments, the related gains or losses are recorded in the statements of operations. The Company uses interest rate swap agreements to manage its interest costs and reduce the Company’s exposure to increases in floating interest rates. The Company manages its exposure to fluctuations in interest rates by maintaining a mix of fixed and variable rate debt. Using interest rate swap agreements, the Company agrees to exchange, at specified intervals through 2017, the difference between fixed and variable interest amounts calculated by reference to agreed-upon notional principal amounts. The Company does not hold or issue any derivative financial instruments for trading purposes.

Revenue Recognition

Revenues from residential and commercial video, Internet and voice 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. In some cases, the Company coordinates the advertising sales efforts of other cable operators in a certain market and remits amounts received from customers less an agreed-upon percentage to such cable operator. For those arrangements in which the Company acts as a principal, the Company records the revenues earned from the advertising customer on a gross basis and the amount remitted to the cable operator as an operating expense.

Fees imposed on Charter by various governmental authorities are passed through on a monthly basis to the Company’s customers and are periodically remitted to authorities. Fees of $263 million, $260 million and $249 million for the years ended December 31, 2013, 2012 and 2011, respectively, are reported in video, voice and commercial revenues, on a gross basis with a corresponding operating expense because the Company is acting as a principal. Other taxes, such as sales taxes imposed on the Company's customers collected and remitted to state and local authorities are recorded on a net basis because the Company is acting as an agent in such situation.



F- 9
CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2013, 2012 AND 2011
(dollars in millions, except share or per share data or where indicated)

The Company’s revenues by product line are as follows:

 Year Ended December 31,
 2013 2012 2011
      
Video$4,030
 $3,639
 $3,639
Internet2,186
 1,866
 1,708
Voice644
 828
 858
Commercial822
 658
 544
Advertising sales291
 334
 292
Other182
 179
 163
      
 $8,155
 $7,504
 $7,204

Programming Costs

The Company has various contracts to obtain basic, digital and premium video programming from programming vendors 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 subject to periodic audits performed by the programmers. Certain programming contracts contain incentives to be paid by the programmers. The Company receives these payments and recognizes the incentives on a straight-line basis over the life of the programming agreement as a reduction of programming expense. This offset to programming expense was $7 million, $6 million and $7 million for the years ended December 31, 2013, 2012 and 2011, respectively. Programming costs included in the accompanying statements of operations were $2.1 billion, $2.0 billion and $1.9 billion for the years ended December 31, 2013, 2012 and 2011, respectively.

Advertising Costs

Advertising costs associated with marketing the Company’s products and services are generally expensed as costs are incurred. Such advertising expense was $357 million, $325 million and $285 million for the years ended December 31, 2013, 2012 and 2011, respectively.

Multiple-Element Transactions

In the normal course of business, the Company enters into multiple-element transactions where it is simultaneously both a customer and a vendor with the same counterparty or in which it purchases multiple products and/or services, or settles outstanding items contemporaneous with the purchase of a product or service from a single counterparty. Transactions, although negotiated contemporaneously, may be documented in one or more contracts. The Company’s policy for accounting for each transaction negotiated contemporaneously is to record each element of the transaction based on the respective estimated fair values of the products or services purchased and the products or services sold. In determining the fair value of the respective elements, the Company refers to quoted market prices (where available), historical transactions or comparable cash transactions.

Stock-Based Compensation

Restricted stock, restricted stock units, stock options and performance units and shares are measured at the grant date fair value and amortized to stock compensation expense over the requisite service period. The Company recorded $48 million, $50 million and $36 million of stock compensation expense which is included in operating costs and expenses and other operating expenses, net for the years ended December 31, 2013, 2012 and 2011, respectively.

The fair value of options granted is estimated on the date of grant using the Black-Scholes option-pricing model and Monte Carlo simulations for options and restricted stock units with market conditions. The grant date weighted average assumptions used during the years ended December 31, 2013, 2012 and 2011, respectively, were: risk-free interest rate of 1.5%, 1.5% and 2.5%;


F- 10
CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2013, 2012 AND 2011
(dollars in millions, except share or per share data or where indicated)

expected volatility of 37.8%, 38.4% and 38.4%, and expected lives of 6.3 years, 6.3 years and 6.6 years. The grant date weighted average cost of equity used was 16.2%, 16.2% and 15.5% during the years ended December 31, 2013, 2012 and 2011, respectively. Volatility assumptions were based on historical volatility of Charter and a peer group. The Company’s volatility assumptions represent management’s best estimate and were partially based on historical volatility of a peer group because management does not believe Charter’s pre-emergence from bankruptcy historical volatility to be representative of its future volatility. Expected lives were calculated based on the simplified-method due to insufficient historical exercise data.  The valuations assume no dividends are paid.

Income Taxes

The Company recognizes deferred tax assets and liabilities for temporary differences between the financial reporting basis and the tax basis of the Company’s assets and liabilities and expected benefits of utilizing loss carryforwards. The impact on deferred taxes of changes in tax rates and tax law, if any, applied to the years during which temporary differences are expected to be settled, are reflected in the consolidated financial statements in the period of enactment (see Note 16).

Loss per Common Share

Basic loss per common share is computed by dividing the net loss by the weighted-average common shares outstanding during the respective periods. Diluted loss per common share equals basic loss per common share for the periods presented, as the effect of stock options and other convertible securities are anti-dilutive because the Company incurred net losses.

Segments

The Company’s operations are conducted through the use of a unified network and are managed and reported to its Chief Executive Officer ("CEO"), the Company's chief operating decision maker, on a consolidated basis. The CEO assesses performance and allocates resources based on the consolidated results of operations. Under this organizational and reporting structure, the Company has one reportable segment, broadband services.

3.    Acquisition of Bresnan

On July 1, 2013, Charter and Charter Communications Operating, LLC ("Charter Operating") acquired Bresnan Broadband Holdings, LLC and its subsidiaries (collectively, “Bresnan”) from a wholly owned subsidiary of Cablevision Systems Corporation ("Cablevision"), for $1.625 billion in cash, subject to a working capital adjustment, a reduction for certain funded indebtedness of Bresnan and payment of any post-closing refunds of certain Montana property taxes paid under protest by Bresnan prior to the closing. Bresnan manages cable operating systems in Montana, Wyoming, Colorado and Utah. Charter funded the purchase of Bresnan with a $1.5 billion term loan E (see Note 8) and borrowings under the Charter Operating credit facilities. The Company also incurred acquisition related costs of approximately $16 million, which are included in other expense, net and interest expense, net in the consolidated statements of operations for the year ended December 31, 2013.

The Company applied acquisition accounting to Bresnan, and its results of operations are included in the Company's consolidated results of operations following the acquisition date. The total purchase price was allocated to the identifiable tangible and intangible assets acquired and the liabilities assumed based on their estimated fair values using Level 3 inputs (see Note 12).

The excess of the purchase price over those fair values was recorded as goodwill. The fair value assigned to certain identifiable tangible and intangible assets acquired and liabilities assumed were based upon a third party valuation using the assumptions developed by management and other information compiled by management including, but not limited to, future expected cash flows. Certain liabilities assumed were based upon quoted market prices.



F- 11
CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2013, 2012 AND 2011
(dollars in millions, except share or per share data or where indicated)

The tables below present the calculation of the purchase price and the allocation of the purchase price to the assets and liabilities acquired.

Purchase Price:
Purchase price$1,625
Bresnan debt assumed (including accrued interest)(962)
Working capital adjustment13
 Cash purchase price, net of cash acquired$676
Purchase Price Allocation:

Property, plant and equipment$515
Franchises722
Customer relationships249
Goodwill224
Other noncurrent assets4
Current assets16
Current liabilities(69)
Long-term debt (including accrued interest)(985)
 Cash purchase price, net of cash acquired$676

Concurrent with the closing of the acquisition, Charter Operating repaid $711 million principal amount outstanding under the Bresnan credit facility and purchased $250 million aggregate principal amount of the 8.00% senior notes due 2018 issued by Bresnan (the “2018 Notes”) for $274 million, including approximately $23 million of tender premium. The 2018 Notes were initially recorded on the balance sheet at fair value, which approximated the principal amount plus the tender premium, with the offset to goodwill.

Charter's consolidated statement of operations for the year ended December 31, 2013 included $270 million of revenue and $17 million of net loss, including $16 million of acquisition related costs described above, from the acquisition of Bresnan.

The following unaudited pro forma financial information of Charter is based on the historical consolidated financial statements of Charter and the historical consolidated financial statements of Bresnan and is intended to provide information about how the acquisition of Bresnan and related financing may have affected Charter's historical consolidated financial statements if they had closed as of January 1, 2012. The pro forma financial information below is based on available information and assumptions that the Company believes are reasonable. The pro forma financial information is for illustrative and informational purposes only and is not intended to represent or be indicative of what Charter's financial condition or results of operations would have been had the transactions described above occurred on the date indicated. The pro forma financial information also should not be considered representative of Charter's future financial condition or results of operations.

 Year Ended December 31,
 2013 2012
Revenues$8,419
 $8,017
Net loss$(194) $(392)
Loss per common share, basic and diluted$(1.90) $(3.93)



F- 12
CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2013, 2012 AND 2011
(dollars in millions, except share or per share data or where indicated)

4.    Allowance for Doubtful Accounts

Activity in the allowance for doubtful accounts is summarized as follows for the years presented:

 Year Ended December 31,
 2013 2012 2011
Balance, beginning of period$14
 $16
 $17
Charged to expense101
 105
 117
Uncollected balances written off, net of recoveries(96) (107) (118)
      
Balance, end of period$19
 $14
 $16

5.    Property, Plant and Equipment

Property, plant and equipment consists of the following as of December 31, 2013 and 2012:

  December 31,
  2013 2012
     
Cable distribution systems $7,556
 $6,588
Customer equipment and installations 4,061
 3,292
Vehicles and equipment 270
 195
Buildings and leasehold improvements 425
 342
Furniture, fixtures and equipment 456
 352
     
  12,768
 10,769
Less: accumulated depreciation (4,787) (3,563)
     
  $7,981
 $7,206

The Company periodically evaluates the estimated useful lives used to depreciate its assets and the estimated amount of assets that will be abandoned or have minimal use in the future. A significant change in assumptions about the extent or timing of future asset retirements, or in the Company’s use of new technology and upgrade programs, could materially affect future depreciation expense.

Depreciation expense for the years ended December 31, 2013, 2012 and 2011 was $1.6 billion, $1.4 billion, and $1.3 billion, respectively. Property, plant and equipment increased $515 million as a result of cable system acquisitions during the year ended December 31, 2013.

6.    Franchises, Goodwill and Other Intangible Assets

Franchise rights represent the value attributed to agreements or authorizations with local and state authorities that allow access to homes in cable service areas. For valuation purposes, they are defined as the future economic benefits of the right to solicit and service potential customers (customer marketing rights), and the right to deploy and market new services to potential customers (service marketing rights).

Franchise assets are tested for impairment annually, or more frequently as warranted by events or changes in circumstances. Franchise assets are aggregated into essentially inseparable units of accounting to conduct valuations. The units of accounting generally represent geographical clustering of our cable systems into groups.



F- 13
CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2013, 2012 AND 2011
(dollars in millions, except share or per share data or where indicated)

The Company assesses qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more likely than not that an indefinite lived intangible asset has been impaired. If, after this qualitative assessment, the Company determines that it is not more likely than not that an indefinite lived intangible asset has been impaired, then no further quantitative testing is necessary. In completing the 2013 and 2012 impairment testing, the Company evaluated the impact of various factors to the expected future cash flows attributable to its units of accounting and to the assumed discount rate which would be used to present value those cash flows. Such factors included macro-economic and industry conditions including the capital markets, regulatory, and competitive environment, and costs of programming and customer premise equipment along with changes to our organizational structure and strategies. After consideration of these qualitative factors, the Company concluded that it is more likely than not that the fair value of the franchise assets in each unit of accounting exceeds the carrying value of such assets and therefore did not perform a quantitative analysis in 2013 or 2012.

If we are required to perform a quantitative analysis to test the Company's franchise assets for impairment, the Company determines the estimated fair value utilizing an income approach model based on the present value of the estimated discrete future cash flows attributable to each of the intangible assets identified assuming a discount rate. This approach makes use of unobservable factors such as projected revenues, expenses, capital expenditures, and a discount rate applied to the estimated cash flows. The determination of the discount rate is based on a weighted average cost of capital approach, which uses a market participant’s cost of equity and after-tax cost of debt and reflects the risks inherent in the cash flows.

The Company estimates discounted future cash flows using reasonable and appropriate assumptions including among others, penetration rates for video, high-speed Internet, and voice; revenue growth rates; operating margins; and capital expenditures. The assumptions are based on the Company’s and its peers’ historical operating performance adjusted for current and expected competitive and economic factors surrounding the cable industry. The estimates and assumptions made in the Company’s valuations are inherently subject to significant uncertainties, many of which are beyond its control, and there is no assurance that these results can be achieved. The primary assumptions for which there is a reasonable possibility of the occurrence of a variation that would significantly affect the measurement value include the assumptions regarding revenue growth, programming expense growth rates, the amount and timing of capital expenditures and the discount rate utilized. The quantitative franchise valuation completed for the year ended December 31, 2011 showed franchise values in excess of book values and thus resulted in no impairment.

Goodwill is tested for impairment as of November 30 of each year, or more frequently as warranted by events or changes in circumstances. Accounting guidance also permits a qualitative assessment for goodwill to determine whether it is more likely than not that the carrying value of a reporting unit exceeds its fair value. If, after this qualitative assessment, the Company determines that it is not more likely than not that the fair value of a reporting unit is less than its carrying amount then no further quantitative testing would be necessary. If the Company is required to perform the two-step test under the accounting guidance, the first step involves a comparison of the estimated fair value of each reporting unit to its carrying amount. If the estimated fair value of a reporting unit exceeds its carrying amount, goodwill of the reporting unit is not considered impaired and the second step of the goodwill impairment is not necessary. If the carrying amount of a reporting unit exceeds its estimated fair value, then the second step of the goodwill impairment test must be performed, and a comparison of the implied fair value of the reporting unit’s goodwill is compared to its carrying amount to determine the amount of impairment, if any. The fair value of the reporting unit, when performing the second step of the goodwill impairment test, is determined using a consistent income approach model as that used for franchise impairment testing. As with the Company's franchise impairment testing, in 2013 and 2012, the Company elected to perform a qualitative assessment for its goodwill impairment testing and concluded that goodwill is not impaired. The Company’s 2011 quantitative impairment analysis also did not result in any goodwill impairment charges.

Customer relationships, for valuation purposes, represent the value of the business relationship with existing customers (less the anticipated customer churn), and are calculated by projecting the discrete future after-tax cash flows from these customers, including the right to deploy and market additional services to these customers. The present value of these after-tax cash flows yields the fair value of the customer relationships. Customer relationships are amortized on an accelerated method over useful lives of 8-15 years based on the period over which current customers are expected to generate cash flows. Customer relationships are evaluated for impairment upon the occurrence of events or changes in circumstances indicating that the carrying amount of an asset may not be recoverable.

The fair value of trademarks is determined using the relief-from-royalty method which applies a fair royalty rate to estimated revenue. Royalty rates are estimated based on a review of market royalty rates in the communications and entertainment industries. As the Company expects to continue to use each trademark indefinitely, trademarks have been assigned an indefinite life and are tested annually for impairment using either a qualitative analysis or quantitative analysis as elected by management. The qualitative


F- 14
CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2013, 2012 AND 2011
(dollars in millions, except share or per share data or where indicated)

analyses in 2013 and 2012 did not identify any factors that would indicate that it was more likely than not that the fair value of trademarks were less than the carrying value and thus resulted in no impairment. The Company’s 2011 quantitative impairment analysis did not result in any trademark impairment charges.
As of December 31, 2013 and 2012, indefinite lived and finite-lived intangible assets are presented in the following table:

  December 31,
  2013 2012
  Gross Carrying Amount Accumulated Amortization Net Carrying Amount Gross Carrying Amount Accumulated Amortization Net Carrying Amount
             
Indefinite lived intangible assets:            
Franchises $6,009
 $—
 $6,009
 $5,287
 $—
 $5,287
Goodwill 1,177
 —
 1,177
 953
 —
 953
Trademarks 158
 —
 158
 158
 —
 158
Other intangible assets 4
 —
 4
 —
 —
 —
             
  $7,348
 $—
 $7,348
 $6,398
 $—
 $6,398
             
Finite-lived intangible assets:            
Customer relationships $2,617
 $1,228
 $1,389
 $2,368
 $944
 $1,424
Other intangible assets 130
 44
 86
 105
 29
 76
  $2,747
 $1,272
 $1,475
 $2,473
 $973
 $1,500

Amortization expense related to customer relationships and other intangible assets for the years ended December 31, 2013, 2012 and 2011 was $299 million, $293 million and $315 million, respectively. Franchises, customer relationships and goodwill increased by $722 million, $249 million and $224 million, respectively, as a result of the acquisition of Bresnan completed during the year ended December 31, 2013.

The Company expects amortization expense on its finite-lived intangible assets will be as follows.

2014 $298
2015 264
2016 231
2017 197
2018 162
Thereafter 323
   
  $1,475

Actual amortization expense in future periods could differ from these estimates as a result of new intangible asset acquisitions or divestitures, changes in useful lives, impairments and other relevant factors.




F- 15
CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2013, 2012 AND 2011
(dollars in millions, except share or per share data or where indicated)

7.    Accounts Payable and Accrued Liabilities

Accounts payable and accrued liabilities consist of the following as of December 31, 2013 and 2012:

  December 31,
  2013 2012
     
Accounts payable – trade $91
 $107
Accrued capital expenditures 235
 156
Deferred revenue 90
 81
Accrued liabilities:    
Interest 195
 155
Programming costs 379
 323
Franchise related fees 62
 52
Compensation 156
 145
Other 259
 205
     
  $1,467
 $1,224

8.    Long-Term Debt

Long-term debt consists of the following as of December 31, 2013 and 2012:

 December 31,
 2013 2012
 Principal Amount Accreted Value Principal Amount Accreted Value
CCO Holdings, LLC:       
7.250% senior notes due October 30, 2017$1,000
 $1,000
 $1,000
 $1,000
7.875% senior notes due April 30, 2018—
 —
 900
 900
7.000% senior notes due January 15, 20191,400
 1,393
 1,400
 1,392
8.125% senior notes due April 30, 2020700
 700
 700
 700
7.375% senior notes due June 1, 2020750
 750
 750
 750
5.250% senior notes due March 15, 2021500
 500
 —
 —
6.500% senior notes due April 30, 20211,500
 1,500
 1,500
 1,500
6.625% senior notes due January 31, 2022750
 747
 750
 746
5.250% senior notes due September 30, 20221,250
 1,239
 1,250
 1,238
5.125% senior notes due February 15, 20231,000
 1,000
 1,000
 1,000
5.750% senior notes due September 1, 2023500
 500
 —
 —
5.750% senior notes due January 15, 20241,000
 1,000
 —
 —
Credit facility due September 6, 2014350
 342
 350
 332
Charter Communications Operating, LLC:       
Credit facilities3,548
 3,510
 3,337
 3,250
 $14,248
 $14,181
 $12,937
 $12,808

The accreted values presented above represent the principal amount of the debt less the original issue discount at the time of sale, plus the accretion to the balance sheet date. However, the amount that is currently payable if the debt becomes immediately due


F- 16
CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2013, 2012 AND 2011
(dollars in millions, except share or per share data or where indicated)

is equal to the principal amount of the debt. The Company has availability under its credit facilities of approximately $1.1 billion as of December 31, 2013, and as such, debt maturing in the next twelve months is classified as long-term.

CCO Holdings Notes

In January 2011, CCO Holdings, LLC ("CCO Holdings") and CCO Holdings Capital Corp. closed on transactions in which they issued $1.4 billion aggregate principal amount of 7.000% senior notes due 2019. The net proceeds of the issuances were contributed by CCO Holdings to Charter Communications Operating, LLC ("Charter Operating") as a capital contribution and were used to repay indebtedness under the Charter Operating credit facilities. The Company recorded a loss on extinguishment of debt of approximately $67 million for the year ended December 31, 2011 related to these transactions.

In May 2011, CCO Holdings and CCO Holdings Capital Corp. closed on transactions in which they issued $900$1.5 billion aggregate principal amount of 6.500% senior notes due 2021. The net proceeds of the issuances were contributed by CCO Holdings to Charter Operating as a capital contribution and inter-company loan and were used to repay indebtedness under the Charter Operating credit facilities. The Company recorded a loss on extinguishment of debt of approximately $53 million for the year ended December 31, 2011 related to these transactions.

In December 2011, CCO Holdings and CCO Holdings Capital Corp. closed on transactions in which they issued $750 million aggregate principal amount of 7.875% Senior Notes7.375% senior notes due 2018 (the “2018 Notes”) and $700 million aggregate principal amount of 8.125% Senior Notes due 2020 (the “2020 Notes”).2020. The net proceeds of the issuances were used, along with borrowings under the Charter Operating credit facilities, to finance the tender offers and redemptions in which $800$407 million aggregate principal amount of Charter Operating's outstanding 8.000% senior second-lien notes due 2012, $234 million aggregate principal amount of Charter Operating's 10.875% senior second-lien notes due 2014 and $286 million aggregate principal amount of CCH II, LLC's ("CCH II") 13.500% senior notes due 2016 were repurchased. These transactions resulted in a loss on extinguishment of debt for the year ended December 31, 2011 of approximately $19 million.

In January 2012, CCO Holdings and CCO Holdings Capital Corp. closed on transactions in which they issued $750 million principal amount of CCO Holdings' outstanding 8.75% Senior Notes6.625% senior notes due 2013 (the “2013 Notes”) and $7702022. The notes were issued at a price of 99.5% of the aggregate principal amount. The net proceeds of the notes were used, along with a draw on the $500 million delayed draw portion of the Charter Operating Term Loan A facility, to repurchase $300 million aggregate principal amount of Charter Operating’sOperating's outstanding 8.375% Senior Second Lien Notes8.000% senior second-lien notes due 2012, $294 million aggregate principal amount of Charter Operating's 10.875% senior second-lien notes due 2014 (the “2014 Notes) were repurchased. and $334 million aggregate principal amount of CCH II's 13.500% senior notes due 2016, as well as to repay amounts outstanding under the Company's revolving credit facility. The tender offers closed in January and February 2012 and the Company recorded a loss on extinguishment of debt of approximately $15 million on this transaction for the year ended December 31, 2012.

In September 2010,August 2012, CCO Holdings and CCO Holdings Capital Corp. closed on transactions in which they issued $1.25 billion aggregate principal amount of 5.250% senior notes due 2022. The notes were issued at a price of 99.026% of the aggregate principal amount. The proceeds from the notes were used for general corporate purposes, including repaying amounts outstanding under the Company's revolving credit facility, and to fund the redemption of the CCH II 13.500% senior notes due 2016 during the fourth quarter of 2012.

In December 2012, CCO Holdings and CCO Holdings Capital Corp. closed on transactions in which they issued $1.0 billion aggregate principal amount of 7.25% Senior Notes5.125% senior notes due 2017 (the “2017 Notes”).2023. The proceeds from the notes were used to repayfor general corporate purposes, including repaying amounts outstanding under the Charter OperatingCompany's credit facilities. These transactions resulted in a loss on extinguishment of debt for the year ended December 31, 2012 of approximately $33 million.

In January 2011,March 2013, CCO Holdings and CCO Holdings Capital Corp. closed on transactions in which they issued $1.4 billion$500 million aggregate principal amount of 7.00% Senior Notes5.250% senior notes due 2019 (the “2019 Notes”). 2021 and $500 million aggregate principal amount of 5.750% senior notes due 2023. The net proceeds of the issuances of the 2019 Notes were contributed by CCO Holdings to Charter Operating as a capital contribution and were used to repay indebtednessfor repaying amounts outstanding under the Charter Operating credit facilities.term loan C facility. The Company expects to recordrecorded a loss on extinguishment of debt of approximately $67$42 million infor the first quarter of 2011year ended December 31, 2013 related to these transactions.

In May 2013, CCO Holdings and CCO Holdings Capital Corp. closed on transactions in which they issued $1.0 billion aggregate principal amount of 5.750% senior notes due 2024. Concurrently with the pricing of the 5.750% senior notes, a tender offer was launched to purchase any and all of the CCO Holdings 7.875% senior notes due 2018. The Company used the proceeds from the issuance to purchase the notes tendered in the tender offer. Any notes not tendered were subsequently called in June 2013. The


F- 17
CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2013, 2012 AND 2011
(dollars in millions, except share or per share data or where indicated)

Company recorded a loss on extinguishment of debt of approximately $65 million for the year ended December 31, 2013 related to these transactions.

The CCO Holdings notes are guaranteed by Charter.  They are senior debt obligations of CCO Holdings and CCO Holdings Capital CorpCorp. and rank equally with all other current and future unsecured, unsubordinated obligations of
F-18
CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2010, 2009 AND 2008
(dollars in millions, except share or per share data or where indicated)
CCO Holdings and CCO Holdings Capital Corp.  The CCO Holdings notes are structurally subordinated to all obligations of subsidiaries of CCO Holdings, including the Charter Operating notes and Charter Operating credit facilities. 

CCO Holdings may redeem some or all of the CCO Holdings notes at any time at a premium.  The optional redemption price declines to 100% of the respective series’ principal amount, plus accrued and unpaid interest, if any, on or after varying dates in 20152016 through 2018. 2021. 

In addition, at any time prior to April 30, 2013varying dates in the case of the 2018 and 2020 Notes, October 30, 2013 in the case of the 2017 Notes and January 15, 2014 in the case of the 2019 Notes,through 2016, CCO Holdings may redeem up to 35% of the aggregate principal amount of the notes at a redemption price at a premium plus accrued and unpaid interest to the redemption date, with the net cash proceeds of one or more equity offerings (as defined in the indenture); provided that certain conditions are met.

In the event of specified change of control events, CCO Holdings must offer to purchase the outstanding CCO Holdings notes from the holders at a purchase price equal to 101% of the total principal amount of the notes, plus any accrued and unpaid interest.

Charter Operating Notes

TheIn August 2011, Charter Operating notes are senior debt obligationsrepurchased, in private transactions, a total of $193 million principal amount of Charter Operating and Charter 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 effectively8.000% senior to all of Charter Operating’s future unsecured senior indebtedness.  The collateral currently consists of the capital stock of Charter Operating held by CCO Holdings, all of the intercompany obligations owing to CCO Holdings by Charter Operating or any subsidiary of Charter Operating, and substantially all of Charter Operating’s and the guarantors’ assets (other than the assets of CCO Holdings).  CCO Holdings and those subsidiaries of Charter Operating that are guarantors of, or otherwise obligors with respect to, indebtedness under the Charter Operating credit facilities and related obligations, guarantee the Charter Operating notes.

Charter Operating may, at any time and from time to time, at their option, redeem the outstanding 8.00% second-lien notes due 2012 for approximately $199 million cash. The transactions resulted in whole or in part,a loss on extinguishment of debt of approximately $4 million for the year ended December 31, 2011.

In March 2012, Charter Operating redeemed the remaining $18 million of 10.875% senior notes due 2014 pursuant to a notice of redemption.

CCH II Notes

In October 2012, the Company redeemed $678 million aggregate principal amount of the CCH II 13.500% senior notes due 2016 at a redemption price equal to 100%108.522% of the principal amount thereof plus accrued and unpaid interest, if any, toamount. In November 2012, the redemption date, plus the Make-Whole Premium.  The Make-Whole Premium is an amount equal to the excess of (a) the present value ofCompany redeemed the remaining interest and principal payments due on an 8% senior second-lien note 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$468 million aggregate principal amount of such note.CCH II 13.500% senior notes due 2016 at 106.750% of the principal amount. The transactions resulted in a gain on extinguishment of debt of approximately $52 million for the year ended December 31, 2012.

In March 2008, Charter Operating issued $546 million principal amount of 10.875% senior second-lien notes due 2014, guaranteed by CCO Holdings and certain other subsidiaries of Charter Operating, in a private transaction.  Net proceeds from the senior second-lien notes were used to reduce borrowings, but not commitments, under the revolving portion of the Charter Operating credit facilities.

High-Yield Restrictive Covenants; Limitation on Indebtedness.

The indentures governing the CCH II, CCO Holdings and Charter Operating notes contain certain covenants that restrict the ability of CCH II, CCH II Capital Corp., CCO Holdings, CCO Holdings Capital Corp., Charter Operating, Charter Communications Operating Capital Corp., and all of their restricted subsidiaries to:

·incur additional debt;
·pay dividends on equity or repurchase equity;
·make investments;
·sell all or substantially all of their assets or merge with or into other companies;
·sell assets;
·enter into sale-leasebacks;
in the case of restricted subsidiaries, create or permit to exist dividend or payment restrictions with respect to CCO Holdings, guarantee their parent companies debt, or issue specified equity interests;
engage in certain transactions with affiliates; and
grant liens.
F-19
CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2010, 2009 AND 2008
(dollars in millions, except share or per share data or where indicated)

·in the case of restricted subsidiaries, create or permit to exist dividend or payment restrictions with respect to the bond issuers, guarantee their parent companies debt, or issue specified equity interests;
·engage in certain transactions with affiliates; and
·grant liens.
CCO Holdings Credit Facility

In March 2007, CCO Holdings entered into aHoldings' credit agreement consists of a $350 million term loan facility (the “CCO Holdings credit facility”) which consists of a $350 million term loan facility.. The facility matures in September 2014. Borrowings under the CCO Holdings credit facility bear interest at a variable interest rate based on


F- 18
CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2013, 2012 AND 2011
(dollars in millions, except share or per share data or where indicated)

either LIBOR (0.26%(0.17% as of December 31, 2010)2013) or a base rate plus, in either case, an applicable margin. The applicable margin 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 proceeds thereof.

In April 2012, CCO Holdings entered into an amendment to its existing credit agreement dated March 6, 2007 which included, among other things, amendments to the Change of Control definition and certain other provisions and definitions related thereto. The Change of Control definition was amended to conform to the provision contained in Charter Operating's credit agreement as described below. Previously, the percentage of voting power necessary for a Change of Control had been 35%, and the definition of Change of Control did not include a Ratings Event.

Charter Operating Credit Facilities

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 and no LIBOR floor. The term loan A facility had a delayed draw component: $250 million was funded on closing of the term loan A and the remaining $500 million was funded in March 2012. The proceeds were used along with proceeds of the CCO Holdings 2020 Notes to finance the repurchase of certain Charter Operating's 8.000% and 10.875% senior second-lien notes and certain of CCH II's 13.500% senior notes discussed above.

In April 2012, Charter Operating entered into a senior secured term loan D 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, 2019. Pricing on the new term loan D was set at LIBOR plus 3% with a LIBOR floor of 1%, and issued at a price of 99.5% of the aggregate principal amount. The proceeds were used to refinance Charter Operating's existing term loan B-1 and term loan B-2, both due 2014, with the remaining amount used to pay down a portion of its existing term loan C due 2016. Charter Operating concurrently amended and restated its existing $1.3 billion revolving credit facility with a new $1.15 billion revolving credit facility due 2017 at the interest rate of LIBOR plus 2.25% and amended and restated its existing credit agreement dated March 31, 2010. The Company recorded a loss on extinguishment of debt of approximately $59 million during the year ended December 31, 2012 related to these transactions.

In March 2013, Charter Operating entered into an amendment to its credit agreement.  The amendment, among other things, eliminated the $7.5 billion cap on the incurrence of first lien debt; and eliminated the requirement for providing Charter Operating financial statements and instead allowing for Charter financial statements with consolidating information.

In April 2013, Charter Operating entered into an amendment to its credit agreement extending the maturity of its term loan A and revolver one year to 2018, decreasing the applicable LIBOR margin for the term loan A and revolver to 2%, decreasing the undrawn commitment fee on the revolver to 0.30% and increasing the revolver capacity to $1.3 billion. The Company recorded a loss on extinguishment of debt of approximately $2 million for the year ended December 31, 2013 related to these transactions.

In May 2013, Charter Operating entered into a new term loan F facility pursuant to the terms of the Charter Operating credit agreement providing for a $1.2 billion term loan maturing in 2021. Pricing on the new term loan F was set at LIBOR plus 2.25% with a LIBOR floor of 0.75%, and issued at a price of 99.75% of the aggregate principal amount. The Company used the proceeds to repay Charter Operating's existing term loan C due 2016 and term loan D due 2019. The Company recorded a loss on extinguishment of debt of approximately $14 million for the year ended December 31, 2013 related to these transactions.

In June 2013, Charter Operating entered into an amendment to its credit agreement. The amendment, among other things: (i) modified the restricted payments covenant to permit expanded flexibility for acquisitions; (ii) modified the events of default under the credit agreement to permit change of control offers with respect to assumed indebtedness subject to certain restrictions; (iii) modified the transactions with affiliates covenant; (iv) permits the granting of equal and ratable security on certain assumed indebtedness subject to pro forma compliance with certain financial tests; (v) permits incremental term loans to amortize equivalent to the existing term loan A-1; and (vi) allows for an increase in revolving commitments based on Charter Operating's annualized operating cash flow.

In July 2013, Charter Operating activated the previously committed term loan E facility pursuant to the terms of the Charter Operating credit agreement providing for a $1.5 billion term loan maturing in seven years. Pricing on the new term loan E was set


F- 19
CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2013, 2012 AND 2011
(dollars in millions, except share or per share data or where indicated)

at LIBOR plus 2.25% with a LIBOR floor of 0.75%, and the term loan was issued at a price of 99.5% of the aggregate principal amount.

The Charter Operating credit facilities have an outstanding principal amount of $6.0$3.5 billion at December 31, 20102013 as follows:

·  A term B-1 loan with a remaining principal amount of approximately $2.4 billion, which is repayable in equal quarterly installments and aggregating $25 million in each loan year, with the remaining balance due at final maturity on March 6, 2014;
·  A term B-2 loan with a remaining principal amount of approximately $307 million, which is repayable in equal quarterly installments and aggregating $3 million in each loan year, with the remaining balance due at final maturity on March 6, 2014;
·  A term C loan with a remaining principal amount of approximately $3.0 billion, which is repayable in equal quarterly installments and aggregating $30 million in each loan year, with the remaining balance due at final maturity on September 6, 2016;
·  A non-revolving loan with a remaining principal amount of approximately $199 million repayable in full on March 6, 2013; and
·  A revolving loan with an outstanding balance of $80 million at December 31, 2010 and allowing for borrowings of up to $1.3 billion.
A term loan A with a remaining principal amount of $722 million, which is repayable in equal quarterly installments and aggregating $38 million in 2014 and 2015, $66 million in 2016 and $75 million in 2017, with the remaining balance due at final maturity on April 22, 2018;

A term loan E with a remaining principal amount of approximately $1.5 billion , which is repayable in equal quarterly installments and aggregating $15 million in each loan year, with the remaining balance due at final maturity on July 1, 2020;
The
A term loan F with a remaining principal amount of approximately $1.2 billion , which is repayable in equal quarterly installments and aggregating $12 million in each loan year, with the remaining balance due at final maturity on January 3, 2021; and
A revolving loan matureswith an outstanding balance of $140 million at December 31, 2013 and allowing for borrowings of up to $1.3 billion, maturing on March 6, 2015. However, if on December 1, 2013, Charter Operating has scheduled maturities in excess of $1.0 billion between January 1, 2014 and April 30, 2014, the revolving loan will mature on December 1, 2013 unless lenders holding more than 50% of the revolving loan consent to the maturity being March 6, 2015.  As of January 31, 2011, Charter Operating had maturities of $1.3 billion between January 1, 2014 and April 30, 2014.  The revolving credit facility amount may be increased, but it may not exceed $1.75 billion in aggregate revolving commitments including the amount outstanding under the non-revolving loan.22, 2018.

Amounts outstanding under the Charter Operating credit facilities bear interest, at Charter Operating’s election, at a base rate or LIBOR (0.27%(0.17% as of December 31, 2010 (0.31% for term C)2013 and 0.26%0.22% as of December 31, 2009)2012), as defined, plus aan applicable margin. The applicable LIBOR margin for the non-revolving loans and the term B-1 loans is currently 2.00%. The LIBOR term B-2 loan bears interest at LIBOR plus 5.0%, with a LIBOR floor of 3.5%, or at Charter Operating’s election, a base rate plus a margin of 4.00%. Charter Operating has currently elected to pay based on the base rate. The applicable margin for the term C loans is currently 3.25% in the case of LIBOR loans, provided that if certain other term loans are borrowed or certain extended loans are established, then the term C loans shall automatically increase to th e extent necessary to cause the yield for the term C loans to be 25 basis points less than the yield for the other certain term loans. Charter Operating pays interest equal to LIBOR plus 3.0% on amounts borrowed under the revolving credit facility and pays a revolving commitment fee of .5% per annum on the daily average available amount of the revolving commitment, payable quarterly.
F-20
CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2010, 2009 AND 2008
(dollars in millions, except share or per share data or where indicated)

The Charter Operating credit facilities also allow the Companyus to enter into incremental term loans in the future, with an aggregate, together with all other  then outstanding first lien indebtedness, including any first lien notes, of no more than $7.5 billion (less any principal payments of term loan indebtedness and first lien notes as a result of any sale of assets), with amortization as set forth in the notices establishing such term loans, but with no amortization greater than 1% per year prior to the final maturity of the existing term loans. Although the Charter Operating credit facilities allow for the incurrence of a certain amount of incremental term loans subject to pro-forma compliance with its financial maintenance covenants, no assurance can be given that the Companywe could obtain additional incremental term loans in the future if Charter Operating sought to do so or what amount of incremental term loans would be allowable at any given time under the terms of the Charter Operating credit facilities.

The obligations of Charter Operating under the Charter Operating credit facilities (the “Obligations”) are guaranteed by Charter Operating’s immediate parent company, CCO Holdings, and subsidiaries of Charter Operating, except for certain subsidiaries, including immaterial subsidiaries and subsidiaries precluded from guaranteeing by reason of the provisions of other indebtedness to which they are subject (the “non-guarantor subsidiaries”).Operating. The Obligations are also secured by (i) a lien on substantially all of the assets of Charter Operating and its subsidiaries, (other than assets of the non-guarantor subsidiaries), to the extent such lien can be perfected under the Uniform Commercial Code by the filing of a financing statement, and (ii) a pledge by CCO Holdings of the equity interests owned by it in Charter Operating or any of Charter Operating’s subsidiaries, as well as intercompanyinter-company obligations owing to it by any of such entities.

Credit Facilities — Restrictive Covenants

CCO Holdings Credit Facility

The CCO Holdings credit facility contains covenants that are substantially similar to the restrictive covenants for the CCO Holdings notes except that the leverage ratio is 5.50 to 1.0 and the change of control definition provides that a change of control occurs if a holder becomes the beneficial owner of 35% or more of Charter’s voting stock unless Paul G. Allen (“Mr. Allen”) beneficially owns a greater percentage.. The CCO Holdings credit facility contains provisions requiring mandatory loan prepayments under specific circumstances, including in connection with certain sales of assets, so long as the proceeds have not been reinvested in the business. The CCO Holdings credit facility permits CCO Holdings and its subsidiaries to make distributions to pay interest on the CCH II notes, the CCO Holdi ngs notes, and the Charter Operating second-lienHoldings notes, provided that, among other things, no default has occurred and is continuing under the CCO Holdings credit facility.

Charter Operating Credit Facilities

The Charter Operating credit facilities contain representations and warranties, and affirmative and negative covenants customary for financings of this type. The financial covenants measure performance against standards set for leverage to be tested as of the end of each quarter. Additionally, theThe Charter Operating credit facilities contain provisions requiring mandatory loan prepayments under specific circumstances, including in connection with certain sales of assets, so long as the proceeds have not been reinvested in the business. Additionally, the Charter Operating credit facilities provisions contain an allowance for restricted payments so long as the consolidated leverage ratio is no greater than 3.5 after giving pro forma effect to such restricted payment. The Charter Operating credit facilities permit Charter Operating and its subsidiaries to make distributions to pay interest on the currently outstanding subordinated and parent company indebtedness, provided that, among other things, no default has occurred and is continui ngcontinuing under the Charter Operating credit facilities.


F- 20
CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2013, 2012 AND 2011
(dollars in millions, except share or per share data or where indicated)

The events of default under the Charter Operating credit facilities include, among other things:

·the failure to make payments when due or within the applicable grace period;
·
the failure to comply with specified covenants, including but not limited to a covenant to deliver audited financial statements for Charter Operating with an unqualified opinion from the Company’s independent accountants and without a “going concern” or like qualification or exception;
the failure to comply with specified covenants including the covenant to maintain the consolidated leverage ratio at or below 5.0 to 1.0 and the consolidated first lien leverage ratio at or below 4.0 to 1.0;
·the failure to pay or the occurrence of events that cause or permit the acceleration of other indebtedness owing by CCO Holdings, Charter Operating, or Charter Operating’s subsidiaries in aggregate principal amounts in excess of $100 million;

the failure to pay or the occurrence of events that cause or permit the acceleration of other indebtedness owing by CCO Holdings, Charter Operating, or Charter Operating’s subsidiaries in aggregate principal amounts in excess of $100 million; and
F-21
similar to provisions contained in the CCO Holdings notes and credit facility, the consummation of any change of control transaction resulting in any person or group having power, directly or indirectly, to vote more than 50% of the ordinary voting power for the management of Charter Operating on a fully diluted basis and the occurrence of a ratings event including a downgrade in the corporate family rating during a ratings decline period.
CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2010, 2009 AND 2008
(dollars in millions, except share or per share data or where indicated)

·the failure to pay or the occurrence of events that result in the acceleration of other indebtedness owing by certain of CCO Holdings’ direct and indirect parent companies in aggregate principal amounts in excess of $200 million;
·the consummation of any transaction resulting in any person or group having power, directly or indirectly, to vote more than 50% of the ordinary voting power for the management of Charter Operating on a fully diluted basis or a change of control shall occur under any indebtedness of CCO Holdings, any first lien notes of Charter Operating or any specified long-term indebtedness of Charter Operating (as defined in the Credit Agreement) in excess of $200 million in aggregate principal amount some of which instruments contain a 35% beneficial ownership change of control provision; and
·Charter Operating ceasing to be a wholly-owned direct subsidiary of CCO Holdings, except in certain limited circumstances.
Limitations on Distributions

Distributions by the Company’s subsidiaries to a parent company for payment of principal on parent company notes are restricted under the indentures and credit facilities discussed above, unless there is no default under the applicable indenture and credit facilities, and unless each applicable subsidiary’s leverage ratio test is met at the time of such distribution. As of December 31, 2010,2013, 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 the covenants in its credit facilities.

Distributions by CCO Holdings, and Charter Operating to a parent company for payment of parent company interest are permitted if there is no default under the aforementioned indentures and CCO Holdings and Charter Operating credit facilities.

In addition to the limitation on distributions under the various indentures discussed above, distributions by the Company’s subsidiaries may only be made if they have “surplus” as defined in the Delaware Limited Liability Company Act.

Liquidity and Future Principal Payments

The Company continues to have significant amounts of debt, and its business requires significant cash to fund principal and interest payments on its debt, capital expenditures and ongoing operations. As set forth below, the Company has significant future principal payments beginning in 20122014 and beyond. The Company continues to monitor the capital markets, and it expects to undertake refinancing transactions and utilize free cash flow and cash on hand to further extend or reduce the maturities of its principal obligations. The timing and terms of any refinancing transactions will be subject to market conditions.

Based upon outstanding indebtedness as of December 31, 2010,2013, the amortization of term loans, and the maturity dates for all senior and subordinated notes, total future principal payments on the total borrowings under all debt agreements as of December 31, 2010,2013, are as follows:

Year Amount 
    
2011 $58 
2012  1,158 
2013  337 
2014  3,531 
2015  30 
Thereafter  7,202 
     
  $12,316 
Year Amount
   
2014 $414
2015 65
2016 93
2017 1,102
2018 673
Thereafter 11,901
   
  $14,248

9.    Treasury Stock

On March 22, 2011, the Company purchased, in a private transaction, 4.5 million shares of Charter’s Class A common stock from funds advised by Franklin Advisers, Inc.  The price paid was $46.10 per share for a total of $207 million.  The transaction was funded from existing cash on hand and available liquidity. 


F- 21
F-22
CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2010, 20092013, 2012 AND 20082011
(dollars in millions, except share or per share data or where indicated)


Under a repurchase program authorized by Charter’s board of directors in August 2011, 4.1 million shares of Charter’s Class A common stock and warrants to purchase Charter’s Class A common stock were purchased during the course of 2011 for a total of approximately $200 million. The average price per share paid was $48.48.

8.        Preferred Stock

On the Effective Date, Charter issued approximately 5.5 million shares of 15% Pay-In-Kind Preferred Stock having an aggregate liquidation preference of $138 million to holders of Charter convertible notes (the “Preferred Stock”).  Pursuant to the terms of the Preferred Stock,In December 2011, the Company was required to paypurchased, in a dividendprivate transaction with a shareholder, 750,000 shares at an annual rate equal to 15% on the liquidation preference$55.18 for a total of the Preferred Stock.$41 million. The liquidation preference of the Preferred Stock was $25 per share. On April 16, 2010, Charter redeemed allCompany received 700,668 of the shares prior to December 31, 2011, with 49,332 shares received in January 2012. In December 2011, the Company also entered into stock repurchase agreements for approximately 3.0 million shares of the Preferred StockCharter's Class A common stock from funds advised by Oaktree Capital Management and approximately 2.2 million shares of Charter's Class A common stock from funds advised by Apollo Management Holdings. The price paid was $54.35 per share for a redemptiontotal of $163 million for the shares purchased from Oaktree Capital Management and $117 million for the shares purchased from Apollo Management Holdings.

During the years ended December 31, 2013, 2012 and 2011, the Company withheld 150,258, 129,417 and 141,175 shares, respectively, of its common stock in payment of $25.948 per share or a total redemption payment for all$15 million, $9 million and $7 million, respectively, of tax withholdings owed by employees upon vesting of restricted shares.

In December 2011, Charter's board of directors approved the retirement of treasury stock and 14.8 million shares of approximately $143 million.treasury stock were retired as of December 31, 2011. The remaining 49,332 shares received in January 2012 were retired in January 2012.

In December 2013 and 2012, Charter's board of directors approved the retirement of treasury stock and 150,258 and 129,417 shares of treasury stock were retired as of December 31, 2013 and 2012, respectively.

These transactions were funded from existing cash on hand and available liquidity.  The Preferred Stock was included in other long-term liabilitiesCompany accounted for treasury stock using the cost method and the treasury shares upon repurchase were reflected on the Company’s consolidated balance sheets at fair valueas a component of $148 million astotal shareholders’ equity. Upon retirement, these treasury shares were allocated between additional paid-in capital and accumulated deficit based on the cost of December 31, 2009 (Successor).  The Preferred Stock was recorded at fair value with gains or losses recordedoriginal issue included in other income (expense), net.additional paid-in capital.

9.        Noncontrolling Interest

On February 8, 2010, Mr. Allen exercised his remaining right to exchange Charter Holdco units for shares of Class A common stock after which Charter Holdco became 100% owned by Charter. Noncontrolling interest on the Company’s condensed consolidated balance sheets at December 31, 2009 represented the fair value of Mr. Allen’s .19% interest of Charter Holdco plus the allocation of income for the month ended December 31, 2009.
On January 1, 2009, Charter adopted new accounting guidance regarding consolidations and noncontrolling interests, which requires losses to be allocated to noncontrolling interest even when such amounts are deficits. As such, losses are allocated between Charter and the noncontrolling interest.  Net income and basic and diluted earnings per common share would have been $10.1 billion and $26.68 and $11.20, respectively, for the eleven months ended November 30, 2009 if such new accounting guidance had not been adopted.
F-23
CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2010, 2009 AND 2008
(dollars in millions, except share or per share data or where indicated)

Changes to controlling and noncontrolling interest consist of the following for the periods presented:

  Controlling  Noncontrolling    
  Interest  Interest  Total 
          
PREDECESSOR:         
Balance, December 31, 2008, Predecessor $(10,506) $--  $(10,506)
  Net income (loss)  11,364   (1,265)  10,099 
  Loss included in temporary equity (see Note 11)  --   7   7 
  Changes in the fair value of interest rate agreements  (5)  (4)  (9)
  Stock compensation expense, net  5   --   5 
  Amortization of accumulated other comprehensive loss related to interest rate agreements  32   29   61 
  Cancellation of Predecessor common stock and noncontrolling interest  (5,399)  1,233   (4,166)
  Elimination of Predecessor accumulated deficit and accumulated other comprehensive income (loss)  4,509   --   4,509 
             
Balance, November 30, 2009, Predecessor  --   --   -- 
             
SUCCESSOR:            
  Issuance of new equity  2,003   12   2,015 
             
Balance, November 30, 2009, Successor  2,003   12   2,015 
  Net income  2   --   2 
  Charter Investment Inc.’s (“CII”) exchange of Charter Holdco interest (see Note 18)  (90)  (10)  (100)
  Stock compensation expense, net  1   --   1 
             
Balance, December 31, 2009, Successor  1,916   2   1,918 
  Net loss  (237)  --   (237)
  CII’s exchange of Charter Holdco interest (see Note 18)  (166)  (2)  (168)
  Change in fair value of interest rate swap agreements  (57)  --   (57)
  Stock compensation expense, net  28   --   28 
  Purchase of treasury stock  (6)  --   (6)
             
Balance, December 31, 2010, Successor $1,478  $--  $1,478 

10.    Common Stock

All of the issued and outstanding shares of Predecessor common stock, par value $.001 per share, and any other outstanding equity securities of Predecessor, including all options and restricted stock, were cancelled on the Effective Date, and Successor issued 109.7 million shares of new Charter Class A common stock, par value $.001 per share and 2.2 million shares of new Charter Class B common stock, par value $.001 per share.

Charter’s Class A common stock and Class B common stock wereare identical except with respect to certain voting, transfer and conversion rights. Holders of Class A common stock are entitled to one vote per share and the holderholders of Class B common stock waswere entitled to votes equaling 35% of the voting interests in Charter on a fully diluted basis. Charter Holdco membership units were exchangeable on a one-for-one basis for shares of Class A common stock.

As of December 31, 2010, Mr. Allen held all 2,241,299 shares ofThe Company currently does not have any outstanding Class B common stock of Charter.Common Stock. Pursuant to the terms of the Certificate of Incorporation of Charter, on January 18, 2011, the Disinterested Members of the Board of Directors of Charter caused a conversion of the shares of Class B common stock into shares of Class A common stock on a one-for-one basis.

Charter has outstanding 5.1 million warrants to purchase shares of Charter Class A common stock with an exercise price of $46.86 per share and 0.8 million warrants to purchase shares of Charter Class A common stock with an exercise price $51.28 per share, both of which expire on November 30, 2014. Charter also has outstanding 0.8 million warrants to purchase shares of Charter Class A common stock with an exercise price of $19.80 per share that expire on November 30, 2016 owned by Paul G. Allen ("Mr. Allen"), the Company's former principal stockholder. The warrants are included in the accompanying balance sheets in total shareholders’ equity.

In 2013, the Company issued approximately 4.5 million shares of Charter Class A common stock as a result of exercises by holders who received warrants pursuant to the Joint Plan of Reorganization upon the Company's emergence from bankruptcy. The exercises resulted in proceeds to the Company of approximately $76 million.




F- 22
F-24
CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2010, 20092013, 2012 AND 20082011
(dollars in millions, except share or per share data or where indicated)


On the Effective Date, holders of notes issued by CIH and Charter Holdings received 6.4 million and 1.3 million warrants, respectively, to purchase shares of new Charter Class A common stock with an exercise price of $46.86 and $51.28 per share, respectively, that expire five years from the date of issuance, and CII 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 option-pricing model and are included in the accompanying balance sheets in total Charter shareholders’ equity.

The following table summarizes our share activityshares outstanding for the three years ended December 31, 2010:2013:

  Class A  Class B 
  Common  Common 
  Stock  Stock 
       
PREDECESSOR:      
BALANCE, January 1, 2008, Predecessor  398,226,468   50,000 
Option exercises and performance share vesting  1,616,906   -- 
Restricted stock issuances, net of cancellations  10,194,534   -- 
Issuances in exchange for preferred shares  4,699,986   -- 
Returns pursuant to share lending agreement  (3,000,000)  -- 
         
BALANCE, December 31, 2008, Predecessor  411,737,894   50,000 
Performance share vesting  890,692   -- 
Restricted stock cancellations  (10,518,362)  -- 
    Returns pursuant to share lending agreement  (18,784,300)  -- 
    Cancellation of Predecessor Class A and Class B common stock  (383,325,924)  (50,000)
         
BALANCE, November 30, 2009, Predecessor  --   -- 
         
SUCCESSOR:        
  Issuance of new Charter Class A and Class B common stock in connection with emergence from Chapter 11  109,748,948   2,241,299 
         
Balance, November 30, 2009, Successor  109,748,948   2,241,299 
   CII exchange of Charter Holdco interest (see Note 18)  907,698   -- 
   Restricted stock issuances  1,920,226   -- 
         
BALANCE, December 31, 2009, Successor  112,576,872   2,241,299 
   CII exchange of Charter Holdco interest (see Note 18)  212,923   -- 
   Restricted stock issuances, net of cancellations  (311,650)  -- 
   Warrant exercise  21   -- 
   Stock issuance  16,000    -- 
   Purchase of treasury stock  (176,475)  -- 
         
BALANCE, December 31, 2010, Successor  112,317,691   2,241,299 
  Class A Common Stock Class B Common Stock
     
BALANCE, December 31, 2010 112,317,691
 2,241,299
Conversion of Class B common stock into Class A 2,241,299
 (2,241,299)
Restricted stock issuances, net of cancellations 472,099
 —
Option exercises 140,893
 —
Stock issuances pursuant to employment agreements 7,000
 —
Purchase of treasury stock (see Note 9) (14,608,564) —
     
BALANCE, December 31, 2011 100,570,418
 —
Option exercises 370,715
 —
Restricted stock issuances, net of cancellations 182,537
 —
Stock issuances from exercise of warrants 179,850
 —
Restricted stock unit vesting 51,476
 —
Purchase of treasury stock (see Note 9) (178,749) —
     
BALANCE, December 31, 2012 101,176,247
 —
Option exercises 543,221
 —
Restricted stock issuances, net of cancellations 4,879
 —
Stock issuances from exercise of warrants 4,481,656
 —
Restricted stock unit vesting 88,330
 —
Purchase of treasury stock (see Note 9) (150,258) —
     
BALANCE, December 31, 2013 106,144,075
 —

In 2006 and 2005, Charter issued 116.9 million shares of Class A common stock in public offerings.  These offerings of Class A common stock were conducted to facilitate transactions by which investors in Charter’s 5.875% convertible senior notes due 2009 hedged their investments in the convertible senior notes.  The shares were issued pursuant to the share lending agreement, pursuant to which Charter had previously agreed to loan up to 150 million shares to Citigroup Global Markets Limited (“CGML”).  As of November 30, 2009, 113.9 million shares had been returned under the share lending agreement.  The remaining shares were cancelled on the Effective Date.
F-25
CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2010, 2009 AND 2008
(dollars in millions, except share or per share data or where indicated)

During the year ended December 31, 2010, the Company withheld 176,475 shares of its common stock in payment of income tax withholding owed by employees upon vesting of restricted shares. The Company accounts for treasury stock using the cost method and includes treasury stock as a component of total Charter shareholders’ equity. The Company currently does not have or intend to initiate a share repurchase program.

11.      Comprehensive Income (Loss)

The Company reports changes in the fair value of interest rate swap agreements designated as hedging the variability of cash flows associated with floating-rate debt obligations, that meet effectiveness criteria in accumulated other comprehensive income (loss). Consolidated comprehensive loss for the years ended December 31, 2010 (Successor) and 2008 (Predecessor) was $294 million and $2.6 billion, respectively.  Consolidated comprehensive income for the one month ended December 31, 2009 (Successor) and eleven months ended November 30, 2009 (Predecessor) was $2 million and $10.2 billion, respectively. Consolidated comprehensive income (loss) for the year ended December 31, 2010 (Successor), eleven months ended November 30, 2009 (Predecessor) and the year ended December 31, 2008 (Predecessor), includes a $57 million, $9 millio n and $180 million loss, respectively, on the fair value of interest rate swap agreements designated as cash flow hedges. For the eleven months ended November 30, 2009, consolidated comprehensive income also included a $61 million gain related to the amortization of the accumulated other comprehensive loss related to terminated interest rate swap agreements in connection with the bankruptcy.

12.     Accounting for Derivative Instruments and Hedging Activities

The Company uses interest rate swap agreementsderivative instruments to manage its interest costs and reduce the Company’s exposure to increases in floating interest rates. The Company manages its exposure to fluctuations in interest rates by maintaining a mix of fixed and variable rate debt. Using interest rate swap agreements,derivative instruments, the Company agrees to exchange, at specified intervals through 2015,2017, the difference between fixed and variable interest amounts calculated by reference to agreed-upon notional principal amounts.

The Company does not hold or issue derivative instruments for speculative trading purposes. The Company, hasuntil de-designating in the three months ended March 31, 2013, had certain interest rate derivative instruments that have beenwere designated as cash flow hedging instruments.instruments for GAAP purposes. Such instruments effectively convertconverted variable interest payments on certain debt instruments into fixed payments. For qualifying hedges, realized derivative gains and losses offset related results on hedged items in the consolidated statements of operations. The Company formally documents, designatesdocumented, designated and assessesassessed the effectiveness of transactions that receivereceived hedge accounting.



F- 23
CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2013, 2012 AND 2011
(dollars in millions, except share or per share data or where indicated)

The effect of interest rate derivative instruments on the Company’s consolidated balance sheets is presented in the table below:

Interest rate swap agreements are included in other long-term liabilities at fair value of $57 million as of December 31, 2010 (Successor).
 December 31, 2013 December 31, 2012
    
Other long-term liabilities:   
Fair value of interest rate derivatives designated as hedges$—
 $67
Fair value of interest rate derivatives not designated as hedges$22
 $—
    
Accrued interest:   
Fair value of interest rate derivatives designated as hedges$—
 8
Fair value of interest rate derivatives not designated as hedges$8
 $—
    
Accumulated other comprehensive loss:   
Fair value of interest rate derivatives designated as hedges$—
 $(75)
Fair value of interest rate derivatives not designated as hedges$(41) $—

Changes in the fair value of interest rate agreementsderivative instruments that arewere designated as hedging instruments of the variability of cash flows associated with floating-rate debt obligations, and that meetmet effectiveness criteria arewere reported in accumulated other comprehensive income (loss).loss. The amounts arewere subsequently reclassified as an increase or decrease to interest expense in the same periods in which the related interest on the floating-rate debt obligations affected earnings (losses).

In 2009 and 2008,Due to repayment of variable rate credit facility debt without a LIBOR floor, certain interest rate derivative instruments did not meet effectiveness criteria. Management believedwere de-designated as cash flow hedges during the three months ended March 31, 2013, as they no longer met the criteria for cash flow hedging specified by GAAP. In addition, on March 31, 2013, the remaining interest rate derivative instruments that continued to be highly effective cash flow hedges for GAAP purposes were electively de-designated. On the date of de-designation, the Company completed a final measurement test for each interest rate derivative instrument to determine any ineffectiveness and such amount was reclassified from accumulated other comprehensive loss into gain on derivative instruments, net in the Company's consolidated statements of operations. While these interest rate derivative instruments are no longer designated as cash flow hedges for accounting purposes, management continues to believe such instruments wereare closely correlated with the respective debt, thus managing associated risk. Interest rate derivative instruments not designated as hedges wereare marked to fair value, with the impact recorded as other income (expenses),a gain or loss on derivative instruments, net in the Company's consolidated statements of operations. The balance that remains in accumulated other comprehensive loss for these interest rate derivative instruments will be amortized over the respective lives of the contracts and recorded as a loss within gain on derivative instruments, net in the Company's consolidated statements of operations. The estimated net amount of existing losses that are reported in accumulated other comprehensive loss as of December 31, 2013 that is expected to be reclassified into earnings within the next twelve months is approximately $19 million.



F- 24
CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2013, 2012 AND 2011
(dollars in millions, except share or per share data or where indicated)

The effects of derivative instruments on the Company’s consolidated statements of operations.comprehensive loss and consolidated statements of operations is presented in the table below.

 Year Ended December 31, 2013
 2013 2012 2011
      
Gain (loss) on derivative instruments, net:     
Change in fair value of interest rate derivative instruments not designated as cash flow hedges$38
 $—
 $—
Loss reclassified from accumulated other comprehensive loss into earnings as a result of cash flow hedge discontinuance$(27) $—
 $—
      
Interest expense:     
Loss reclassified from accumulated other comprehensive loss into interest expense$(10) $(36) $(39)

As of December 31, 2010 (Successor)2013 and 2012, the Company had $2.0$2.2 billion and $3.1 billion in notional amounts of interest rate swap agreementsderivative instruments outstanding. This includes $550 million in delayed start interest rate derivative instruments that become effective in March 2014 through March 2015.  In any future quarter in which a portion of these delayed start interest rate derivative instruments first becomes effective, an equal or greater notional amount of the currently effective interest rate derivative instruments are scheduled to mature.  Therefore, the $1.7 billion notional amount of currently effective interest rate derivative instruments will gradually step down over time as current interest rate derivative instruments mature and an equal or lesser amount of delayed start interest rate derivative instruments become effective.

The notional amounts of interest rate instruments do not represent amounts exchanged by the parties and, thus, are not a measure of exposure to credit loss. The amounts exchanged were determined by reference to the notional amount and the other terms of the contracts.

F-26
CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2010, 2009 AND 2008
(dollars in millions, except share or per share data or where indicated)
12.    Fair Value Measurements

The effectaccounting guidanceestablishes a three-level hierarchy for disclosure of derivative instruments onfair value measurements, based upon the Company’s consolidated statementstransparency of operations is presented ininputs to the table below.
  Successor  Predecessor 
  Year Ended December 31,  
One Month 
Ended
December 31,
  
Eleven Months Ended
November 31,
  Year Ended December 31, 
  2010  2009  2009  2008 
             
Other income (expense), net:            
Loss on interest rate derivates not designated as hedges or ineffective portion of hedges $--  $--  $(4) $(62)
Gain on embedded derivatives  --   --   --   33 
  $--  $--  $(4) $(29)
                 
Accumulated other comprehensive loss:                
Loss on interest rate derivatives designated as hedges (effective portion) $(57) $--  $(9) $(180)
  $(57) $--  $(9) $(180)
                 
Amount of gain (loss) reclassified from accumulated other comprehensive loss into interest
   expense or reorganization items, net
 $(27) $--  $275  $(76)
                 
valuation of an asset or liability as of the measurement date, as follows:

13.      Fair Value MeasurementsLevel 1 – inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.
Level 2 – inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.
Level 3 – inputs to the valuation methodology are unobservable and significant to the fair value measurement.

Financial Assets and Liabilities

The Company has estimated the fair value of its financial instruments as of December 31, 20102013 and 20092012 using available market information or other appropriate valuation methodologies. Considerable judgment, however, is required in interpreting market data to develop the estimates of fair value. Accordingly, the estimates presented in the accompanying consolidated financial statements are not necessarily indicative of the amounts the Company would realize in a current market exchange.

The carrying amounts of cash and cash equivalents, receivables, payables and other current assets and liabilities approximate fair value because of the short maturity of those instruments.



F- 25
CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2013, 2012 AND 2011
(dollars in millions, except share or per share data or where indicated)

The estimated fair value of the Company’s debt at December 31, 20102013 and 20092012 are based on quoted market prices and is classified within Level 1 (defined below) of the valuation hierarchy.

A summary of the carrying value and fair value of the Company’s debt at December 31, 20102013 and 20092012 is as follows:

  December 31, 2010 December 31, 2009
  Carrying Fair Carrying Fair
  Value Value Value Value
Debt                
CCH II debt $2,057  $2,113  $2,092  $2,086
CCO Holdings debt $2,600  $2,709  $812  $816
Charter Operating debt $1,703  $1,774  $2,500  $2,527
Credit facilities $5,946  $6,252  $7,918  $8,000

F-27
CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2010, 2009 AND 2008
(dollars in millions, except share or per share data or where indicated)
The accounting guidance establishes a three-level hierarchy for disclosure of fair value measurements, based upon the transparency of inputs to the valuation of an asset or liability as of the measurement date, as follows:

·  Level 1 – inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.
·  Level 2 – inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.
·  Level 3 – inputs to the valuation methodology are unobservable and significant to the fair value measurement.
  December 31, 2013 December 31, 2012
  Carrying Value Fair Value Carrying Value Fair Value
Debt        
CCO Holdings debt $10,329
 $10,384
 $9,226
 $9,933
Credit facilities $3,852
 $3,848
 $3,582
 $3,695

The interest rate derivatives designated as hedges were valued at as $30 million and $75 million liabilities as of December 31, 20102013 and 2012, 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 (defined above) of the valuation hierarchy. The weighted average pay rate for the Company’s currently effective interest rate swap agreementsswaps was 2.17% and 2.25% at December 31, 20102013 and 2012 (exclusive of applicable spreads).

The Preferred Stock was valued at December 31, 2009 using an income approach based on yields of the Company’s debt securities and was classified within Level 3 of the valuation hierarchy.  On April 16, 2010, Charter redeemed all of the shares of the Preferred Stock.

At December 31, 2010 and 2009, the Company’s financial liabilities that were accounted for at fair value on a recurring basis are presented in the table below:

  Fair Value As of December 31, 2010  Fair Value As of December 31, 2009 
  Level 1  Level 2  Level 3  Total  Level 1  Level 2  Level 3  Total 
Other long-term liabilities:                        
Preferred stock $--  $--  $--  $--  $--  $--  $148  $148 
Interest rate derivatives
    designated as hedges
  --   57   --   57   --   --   --   -- 
  $--  $57  $--  $57  $--  $--  $148  $148 

The Company’s long-term debt was adjusted to fair value on the Effective Date.  Debt instruments with a fair value of $9.8 billion were classified as Level 1 within the fair value hierarchy and debt instruments with a fair value of $3.5 billion were classified as Level 2 in the fair value hierarchy on the Effective Date.

NonfinancialNon-financial Assets and Liabilities

The Company adopted new accounting guidance effective January 1, 2009 with respect to its nonfinancialCompany’s non-financial assets and liabilities including fair value measurements ofsuch as franchises, property, plant, and equipment, and other intangible assets.  These assets are not measured at fair value on a recurring basis; however they are subject to fair value adjustments in certain circumstances, such as when there is evidence that an impairment may exist.  During 2009,No impairments were recorded in 2013, 2012 and 2011.

13.     Operating Costs and Expenses

Operating costs and expenses consist of the Company recorded an impairment on itsfollowing for the years presented:

 Year Ended December 31,
 2013 2012 2011
Programming$2,146
 $1,965
 $1,860
Franchise, regulatory and connectivity399
 383
 371
Costs to service customers1,514
 1,363
 1,268
Marketing479
 422
 387
Other807
 727
 678
      
 $5,345
 $4,860
 $4,564

Programming costs consist primarily of costs paid to programmers for basic, premium, digital, OnDemand, and pay-per-view programming. Franchise, regulatory and connectivity costs represent payments to franchise assetsand regulatory authorities and costs directly related to providing Internet and voice services. Costs to service customers include residential and commercial costs related to field operations, network operations and customer care including labor, reconnects, maintenance, billing, occupancy and vehicle costs. Marketing costs represents the costs of $2.2 billionmarketing to our current and reflected its franchises,potential commercial and residential customers including labor costs. Other includes bad debt and collections expense, corporate overhead, commercial and advertising sales expenses, property planttax and equipment, customer relationshipsinsurance and goodwill at fair value based on applying fresh start accounting.  The fair value of these assets was determined utilizing an income approach or cost approach that makes use of significant unobservable inputs. Such fair values are classified as level 3 in the fair value hierarchy.  See Note 5 for additional information. stock compensation expense, among others.



F- 26
F-28
CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2010, 20092013, 2012 AND 20082011
(dollars in millions, except share or per share data or where indicated)


14.     Other Operating (Income) Expenses, Net

Other operating (income) expenses, net consist of the following for the years presented:

  Successor  Predecessor 
  Year Ended December 31,  
One Month
Ended
December 31,
  
Eleven Months Ended
November 31,
  Year Ended December 31, 
  2010  2009  2009  2008 
             
Loss on sale of assets, net $9  $1  $6  $13 
Special charges, net  16   3   (44)  56 
                 
  $25  $4  $(38) $69 
 Year Ended December 31,
 2013 2012 2011
      
(Gain)/loss on sale of assets, net$8
 $(5) $(4)
Special charges, net23
 20
 11
      
 $31
 $15
 $7

Loss(Gain) loss on sale of assets, net

Loss(Gain) loss on sale of assets represents the gain or loss recognized on the sales and disposals of fixed assets and cable systems, including the sale of systems serving approximately 64,900 basic video customers in October 2010.systems.

Special charges, net

Special charges, net for the yearyears ended December 31, 2010, one month ended December 31, 2009, eleven months ended November 30, 20092013, 2012 and year ended December 31, 20082011 primarily includesinclude severance charges and net amounts received or paid inof litigation settlements and severance charges.settlements.

15.    Stock Compensation Plans

15.      Gain (Loss) on Extinguishment of Debt

Gain (loss) on extinguishment of debt consists of the following for years presented:

  Successor  Predecessor 
  Year Ended December 31,  
One Month
 Ended
December 31,
  
Eleven Months Ended
November 30,
  Year Ended December 31, 
  2010  2009  2009  2008 
             
Charter Holdings debt notes repurchases / exchanges $--  $--  $--  $3 
Charter convertible note repurchases / exchanges  --   --   --   5 
CCH II tender offer  --   --   --   (4)
CCO Holdings debt notes repurchases / exchanges  (17)  --   --   -- 
Charter Operating debt notes repurchases  (17)  --   --   -- 
Charter Operating credit amendment / prepayments  (51)  --   --   -- 
                 
  $(85) $--  $--  $4 

In October and December 2010, the Company prepaid $266 million principal amount of term B-1 and B-2 loans under the Charter Operating credit facilities resulting in a loss on extinguishment of debt of approximately $13 million for the year ended December 31, 2010 (Successor).

On September 27, 2010 CCO Holdings and CCO Holdings Capital Corp. closed on transactions in which they issued the 2017 Notes. The net 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).
F-29
CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2010, 2009 AND 2008
(dollars in millions, except share or per share data or where indicated)

In August and September 2010, the Company prepaid $122 million principal amount of term B-2 loans under the Charter Operating credit facilities resulting in a loss on extinguishment of debt of approximately $3 million for the year ended December 31, 2010 (Successor).

On April 28, 2010, CCO Holdings and CCO Holdings Capital Corp. closed on transactions in which they issued the 2018 Notes and 2020 Notes. The net proceeds were used to finance the tender offers and redemptions of CCO Holdings’ 2013 Notes and Charter Operating’s 2014 Notes. The transactions resulted in a loss on extinguishment of debt of approximately $34 million for the year ended December 31, 2010 (Successor).

On March 31, 2010, Charter Operating entered into an amended and restated credit agreement. The refinancing resulted in a loss on extinguishment of debt of approximately $1 million for the year ended December 31, 2010 (Successor).

In October 2008, Charter Holdco completed a tender offer, in which a total of approximately $102 million principal amount of various Charter Holdings notes due 2009 and 2010 were exchanged for approximately $99 million of cash.  Charter Holdco held the Charter Holdings notes.  The transactions resulted in a gain on extinguishment of debt of approximately $2 million for the year ended December 31, 2008 (Predecessor).

In July 2008, CCH II completed a tender offer, in which $338 million of CCH II’s 10.25% senior notes due 2010 were accepted for $364 million of CCH II’s 10.25% Senior Notes due 2013, which were issued as part of the same series of notes as CCH II’s $250 million aggregate principal amount of 10.25% Senior Notes due 2013, which were issued in September 2006.  The transactions resulted in a loss on extinguishment of debt of approximately $4 million for the year ended December 31, 2008 (Predecessor).

In the second quarter of 2008, Charter Holdco repurchased, in private transactions from a small number of institutional holders, a total of approximately $35 million principal amount of various Charter Holdings notes due 2009 and 2010 for approximately $35 million of cash.  Charter Holdco held the Charter Holdings notes.  The transactions resulted in a gain on extinguishment of debt of approximately $1 million for the year ended December 31, 2008 (Predecessor).

In the second quarter of 2008, Charter Holdco repurchased, in private transactions, from a small number of institutional holders, a total of approximately $46 million principal amount of Charter’s 5.875% Convertible Senior Notes due 2009, for approximately $42 million of cash.  The purchased 5.875% Convertible Senior Notes were cancelled resulting in approximately $3 million principal amount of such notes remaining outstanding.  The transactions resulted in a gain on extinguishment of debt of approximately $5 million for the year ended December 31, 2008 (Predecessor).

16.      Other Income (Expense), Net

Other income (expense), net consists of the following for years presented:

  Successor  Predecessor 
  Year Ended December 31,  
One Month
Ended
December 31,
  
Eleven Months Ended
 November 30,
  Year Ended December 31, 
  2010  2009  2009  2008 
             
Gain (loss) on investment $--  $--  $1  $(1)
Change in value of preferred stock  2   (3)  --   -- 
Other, net  --   --   1   (5)
                 
  $2  $(3) $2  $(6)
F-30
CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2010, 2009 AND 2008
(dollars in millions, except share or per share data or where indicated)

17.      Stock Compensation Plans

In accordance with the Plan, the Company's board of directors adopted the Charter Communications, Inc. 2009 Stock Incentive Plan (the “2009 Stock Plan”).  The 2009 Stock Plan provides for grants of nonqualifiednon-qualified stock options, incentive stock options, stock appreciation rights, dividend equivalent rights, performance units and performance shares, share awards, phantom stock, restricted stock units and restricted stock.  Directors, officers and other employees of the Company and its subsidiaries, as well as others performing consulting services for the Company, are eligible for grants under the 2009 Stock Incentive Plan. The 2009 Stock Incentive Plan allows for the issuance of up to 14 million shares of Charter Class A common stock (or units convertible into Charter Class A common stock).
 
In 2009,Stock options generally vest annually over three or four years from either the majority of restricted stock and performance units and shares were voluntarily forfeited by participants without termination ofgrant date or delayed vesting commencement dates. Stock options generally expire ten years from the service period, and the remaining, along with all stock options, were cancelled 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 shares under the 2009 Stock Plan and awarded to certain employees 2 million shares of restricted stock, one-third of which are to vest on each of the first three anniversaries of the Effective Date.  Such grant of new awards is deemed to be a modification of old awards and was accounted for as a modification of the original awards. As a result, unamortized compensation cost of $12 million was added to the cost of the new award and is being amortized over the vesting period.

Under the 2009 Stock Plan, restricteddate. Restricted stock vests annually over a one to three-yearfour-year period beginning from the date of grant. StockA portion of stock options and restricted stock vest annuallybased on achievement of stock price hurdles. Restricted stock units have no voting rights and generally vest over three or four years from either the grant date and expire ten years from the grant date.or delayed vesting commencement dates. As of December 31, 2010 (Successor)2013, total unrecognized compensation remaining to be recognized in future periods totaled $39$34 million for stock options, $18 million for restricted stock and $19$18 million for restricted stock optionsunits and the weighted average period over which it isthey are expected to be recognized is 2 years for stock options, 2 years for restricted stock and 43 years for restricted stock options.  During 2009, no equity awards were granted; however Charter granted $12 million of performance cash and restricted cash under Charter’s 2009 incentive program.units.

The Company recorded $26$48 million, $1 million, $26$50 million and $33$36 million of stock compensation expense for the yearyears ended December 31, 2010 (Successor)2013, one month ended December 31, 2009 (Successor), eleven months ended November 30, 2009 (Predecessor)2012 and year ended December 31, 2008 (Predecessor)2011, respectively, which is included in selling, general,operating costs and administrative expense.expenses and other operating expenses, net.



F- 27
F-31
CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2010, 20092013, 2012 AND 20082011
(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 yearyears ended December 31, 2010, one month ended December 31, 2009, eleven months ended November 30, 20092013, 2012 and year ended December 31, 2008,2011, is as follows (amounts in thousands, except per share data):

  Successor  Predecessor 
  Year Ended  One Month Ended  Eleven Months Ended  Year Ended 
  December 31, 2010  December 31, 2009  November 30, 2009  December 31, 2008 
     Weighted     Weighted     Weighted     Weighted 
     Average     Average     Average     Average 
     Exercise     Exercise     Exercise     Exercise 
  Shares  Price  Shares  Price  Shares  Price  Shares  Price 
                         
Outstanding,
     beginning of period
  --  $--   --  $--   22,044  $3.82   25,682  $4.02 
Granted  1,461  $35.12   --  $--   --  $--   45  $1.19 
Exercised  --  $--   --  $--   --  $--   (53) $1.18 
Cancelled  (30) $35.38   --  $--   (22,044) $3.82   (3,630) $5.27 
                                 
Outstanding,
     end of period
  1,431  $35.12   --  $--   --  $--   22,044  $3.82 
                                 
Weighted average
     remaining contractual life
 10 years       --       --      6 years     
                                 
Options exercisable,
     end of period
  --  $--   --  $--   --  $--   15,787  $4.53 
                                 
Weighted average fair
     value of options granted
 $17.00      $--      $--      $0.90     
 Year Ended December 31,
 2013 2012 2011
 Shares Weighted Average Exercise Price Shares Weighted Average Exercise Price Shares Weighted Average Exercise Price
            
Outstanding, beginning of period3,552
 $54.35
 4,018
 $49.53
 1,431
 $35.12
Granted276
 $108.89
 813
 $69.00
 3,042
 $54.30
Exercised(543) $51.22
 (371) $40.57
 (141) $35.38
Canceled(143) $50.54
 (908) $51.74
 (314) $36.40
            
Outstanding, end of period3,142
 $59.86
 3,552
 $54.35
 4,018
 $49.53
            
Weighted average remaining contractual life7
years 8
years 9
years
            
Options exercisable, end of period1,128
 $52.07
 469
 $46.23
 189
 $34.92
            
Weighted average fair value of options granted$41.52
   $28.17
   $23.03
  

A summary of the activity for the Company’s restricted stock for the yearyears ended December 31, 2010, one month ended December 31, 2009, eleven months ended November 30, 20092013, 2012 and year ended December 31, 2008,2011, is as follows (amounts in thousands, except per share data):

  Successor  Predecessor
  
Year Ended
December 31,
 
One Month Ended
December 31,
  
Eleven Months Ended
November 30,
 
Year Ended
December 31,
  2010 2009  2009 2008
    Weighted   Weighted    Weighted   Weighted
    Average   Average    Average   Average
    Grant   Grant    Grant   Grant
  Shares Price Shares Price  Shares Price Shares Price
                        
Outstanding, beginning of period 1,920$35.25  -- $--   12,009 $1.21  4,112 $2.87
Granted 177$32.23  1,920 $35.25   -- $--  10,761 $0.85
Vested (527)$35.14  -- $--   (259) $1.08  (2,298) $2.36
Cancelled (489)$35.25  -- $--   (11,750) $1.21  (566) $1.57
                        
Outstanding, end of period 1,081$34.81  1,920 $35.25   -- $--  12,009 $1.21
 Year Ended December 31,
 2013 2012 2011
 Shares Weighted Average Grant Price Shares Weighted Average Grant Price Shares Weighted Average Grant Price
            
Outstanding, beginning of period928
 $54.16
 1,115
 $45.72
 1,081
 $34.81
Granted13
 $101.81
 244
 $60.48
 669
 $53.16
Vested(280) $51.62
 (370) $36.02
 (438) $34.98
Canceled(8) $56.50
 (61) $35.25
 (197) $34.98
            
Outstanding, end of period653
 $56.14
 928
 $54.16
 1,115
 $45.72



F- 28
F-32
CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2010, 20092013, 2012 AND 20082011
(dollars in millions, except share or per share data or where indicated)

No performance units or shares were granted in 2009 or 2010.  On the Effective Date, all remaining performance units and shares were cancelled. A summary of the activity for the Company’s performancerestricted stock units and shares for the eleven monthsyears ended November 30, 2009 (Predecessor) and year ended December 31, 2008 (Predecessor)2013, 2012 and 2011, is as follows (amounts in thousands, except per share data):

 Predecessor 
 Eleven Months Ended Year Ended, 
 November 30, 2009 December 31, 2008 
   Weighted   Weighted 
   Average   Average 
   Grant   Grant 
 Shares Price Shares Price 
           
Outstanding, beginning of period33,037 $1.80 28,013 $2.16 
Granted-- $ -- 10,137 $ 0.84 
Vested(951) $ 1.21 (1,562) $ 1.49 
Cancelled(32,086) $ 1.81 (3,551) $ 2.08 
           
Outstanding, end of period-- $-- 33,037 $1.80 
 Year Ended December 31,
 2013 2012 2011
 Shares Weighted Average Grant Price Shares Weighted Average Grant Price Shares Weighted Average Grant Price
            
Outstanding, beginning of period327
 $61.79
 273
 $54.86
 —
 $—
Granted73
 $109.96
 142
 $71.33
 276
 $54.87
Vested(88) $61.17
 (52) $56.59
 —
 $—
Canceled(24) $55.28
 (36) $54.47
 (3) $55.12
            
Outstanding, end of period288
 $74.73
 327
 $61.79
 273
 $54.86

18.16.    Income Taxes

All of Charter’s operations are held through Charter Holdco and its direct and indirect subsidiaries. Charter Holdco and the majority of its subsidiaries are generally limited liability companies that are not subject to income tax. However, certain of these limited liability companies are subject to state income tax. In addition, the indirect subsidiaries that are corporations are subject to federal and state income tax. All of the remaining taxable income, gains, losses, deductions and credits of Charter Holdco are passed through to Charter.Charter and its direct subsidiaries.

In connection withFor the Plan, Charter, CII, Mr. Allen and Charter Holdco entered into an exchange agreement (the “Exchange Agreement”), pursuant to which CII had the right to require Charter to (i) exchange all or a portion of CII’s membership interest in Charter Holdco or 100% of CII for $1,000 in cash and shares of Charter’s Class A common stock in a taxable transaction, or (ii) merge CII with and into Charter, or a wholly-owned subsidiary of Charter, in a tax-free transaction (or undertake a tax-free transaction similar to the taxable transaction in subclause (i)), subject to CII meeting certain conditions.  In addition, Charter had the right, under certain circumstances involving a change of control of Charter to require CII to effect an exchange transaction of the type elected by CII from subclause s (i) or (ii) above, which election is subject to certain limitations.

On December 28, 2009, CII exercised its right, under the Exchange Agreement with Charter, to exchange 81% of its common membership interest in Charter Holdco for $1,000 in cash and 907,698 shares of Charter’s Class A common stock in a fully taxable transaction.  As a result of this transaction, Charter’s deferred tax liability increased by $100 million.  Charter also received a step-up in tax basis in Charter Holdco’s assets, under section 743 of the Code, relative to the interest in Charter Holdco it acquired from CII.  Based upon the taxable exchange which occurred on December 28, 2009, CII fulfilled the conditions necessary to allow it to elect a tax-free transaction at any time during the remaining term of the Exchange Agreement.

On February 8, 2010, the remaining CII interest in Charter Holdco was exchanged for 212,923 shares of Charter’s Class A common stock in a non-taxable transaction after which Charter Holdco became 100% owned by Charter.  As a result of this transaction, Charter recorded the tax attributes previously attributed to the CII noncontrolling interest which increased net deferred tax liabilities by approximately $99 million. The $99 million is the result of an overall increase in the gross deferred tax liability of $221 million and a corresponding reduction of valuation allowance of $122 million. The combined net effects of this transaction were recorded in the financial statements as a $168 million reduction of additional paid-in capital and a $69 million reduction of income tax expense for the yearyears ended December 31, 2010 (Su ccessor).
F-33
CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2010, 2009 AND 2008
(dollars in millions, except share or per share data or where indicated)

For the year ended December 2010 (Successor)2013, one month ended December 31, 2009 (Successor)2012, eleven months ended November 30, 2009 (Predecessor) and year ended December 31, 2008 (Predecessor)2011, the Company recorded deferred income tax expense and benefits as shown below. The incomeIncome tax expense is recognized primarily through increases in deferred tax liabilities related to ourthe Company's investment in Charter Holdco, as well as through current federal and state income tax expense and increases in the deferred tax liabilities of certain of ourits indirect corporate subsidiaries. The incomeIncome tax benefits wereare realized through reductions in the deferred tax liabilities related to Charter’s investment in Charter Holdco, as well as the deferred tax liabilities of certain of Charter’s indirect corporate subsidiaries.&# 160; The tax provision in future periods will vary based on current and future temporary differences, as well as future operating results.


Current and deferred income tax benefit (expense) is as follows:

  Successor  Predecessor 
  Year Ended  
One Month
Ended
  Eleven Months Ended  Year Ended 
  
December 31,
2010
  
December 31,
2009
  
November 30,
2009
  
December 31,
2008
 
             
Current expense:            
Federal income taxes $--  $--  $(1) $(2)
State income taxes  (8)  (1)  (6)  (2)
                 
Current income tax expense  (8)  (1)  (7)  (4)
                 
Deferred benefit (expense):                
Federal income taxes  (263)  (6)  343   95 
State income taxes  (24)  (1)  15   12 
                 
Deferred income tax benefit (expense)  (287)  (7)  358   107 
                 
Total income benefit (expense) $(295) $(8) $351  $103 

Income tax benefit for the eleven months ended November 30, 2009 (Predecessor) and year ended December 31, 2008 (Predecessor) included $480 million and $325 million, respectively, of deferred tax benefit related to the impairment of franchises.

F- 29
F-34
CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2010, 20092013, 2012 AND 20082011
(dollars in millions, except share or per share data or where indicated)


Current and deferred income tax expense is as follows:

  Year Ended December 31, 
  2013 2012 2011 
        
Current expense:       
Federal income taxes $(1) $—
 $—
 
State income taxes (7) (7) (9) 
        
Current income tax expense (8) (7) (9) 
        
Deferred expense:       
Federal income taxes (101) (223) (258) 
State income taxes (11) (27) (32) 
        
Deferred income tax expense (112) (250) (290) 
        
Total income tax expense $(120) $(257) $(299) 

Income tax expense for the year ended December 31, 2013 decreased compared to the corresponding prior period, primarily as a result of step-ups in basis of indefinite-lived assets for tax, but not GAAP purposes, including the effects of partnership gains related to financing transactions and a partnership restructuring, which decreased the Company's net deferred tax liability related to indefinite-lived assets by $137 million.

Of the $137 million decrease in net deferred tax liability, $101 million of deferred tax benefits correspond to gains recognized by corporate subsidiaries of Charter, which are partners in Charter Holdco, and resulted primarily from the repayment of Charter Operating credit facility debt with proceeds from the CCO Holdings notes issued in March 2013, see Note 8. The repayment of Charter Operating credit facility debt, which is not guaranteed by Charter, with proceeds from the notes, which are guaranteed by Charter, had the effect of reducing the amount of debt allocable to the non-guarantor corporate subsidiaries of Charter. For partnership tax purposes, the reduction in the amount of non-guaranteed debt available to allocate to these corporate subsidiaries caused them to recognize gains due to limited basis in their partnership interests in Charter Holdco. These gains result in a step-up in the underlying tax basis of Charter Holdco's assets and a corresponding reduction in the deferred tax liabilities for financial reporting purposes. In addition, on December 31, 2013, Charter restructured one of its tax partnerships which resulted in a $405 million net step-up to primarily intangible assets and a deferred income tax benefit of $36 million due to a shift in step-ups to indefinite-lived intangibles. The tax provision in future periods will vary based on various factors including changes in the Company's deferred tax liabilities attributable to indefinite-lived intangibles, as well as future operating results, however the Company does not anticipate having such a large reduction in tax expense attributable to these items unless it enters into similar future financing or restructuring transactions. The ultimate impact on the tax provision of such future financing and restructuring activities, if any, will be dependent on the underlying facts and circumstances at the time.



F- 30
CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2013, 2012 AND 2011
(dollars in millions, except share or per share data or where indicated)

The Company’s effective tax rate differs from that derived by applying the applicable federal income tax rate of 35% for the years ended December 31, 2013, 2012, and 2011, respectively, as follows:

  Year Ended December 31,
  2013 2012 2011
       
Statutory federal income taxes $17
 $17
 $24
Statutory state income taxes, net (7) (7) (9)
Nondeductible expenses (3) (6) (5)
Change in valuation allowance (127) (264) (312)
State rate changes 4
 —
 —
Other (4) 3
 3
       
Income tax expense $(120) $(257) $(299)

For the years ended December 31, 2012 and 2011, the change in valuation allowance includes an increase of $4 million and $3 million, respectively, related to adjustments to cash flow hedges included in other comprehensive income. In addition, the change in the valuation allowance above for the year ended December 31, 2010, one month ended December 31, 2009, eleven months ended November 30, 20092013 differs from the change between the beginning and year ended December 31, 2008, respectively, as follows:ending deferred tax position due to a reduction of certain deferred tax assets and valuation allowance with no impact to the consolidated statements of operations.

  Successor  Predecessor 
  
Year Ended
December 31,
  
One Month
Ended
December 31,
  
Eleven Months
Ended
November 30,
  
Year Ended
December 31,
  2010  2009  2009  2008
            
Statutory federal income taxes$(20) $(4) $(3,412) $894
Statutory state income taxes, net (8)  (1)  (298)  151
Nondeductible expenses (4)  --  --  --
Non-includable reorganization income --  --  420  --
Franchises --  --  --  107
Change in valuation allowance (248)  (3)  3,826  (1,049)
Changes in provision estimates (23)  --  --  --
Other    8  --  (185)  --
            
Income tax benefit (expense)$(295) $(8) $351 $103

The tax effects of these temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities at December 31, 20102013 and 2009 which are included in other long-term liabilities accompanying consolidated balance sheets2012 are presented below.
  December 31,
  2013 2012
Deferred tax assets:    
Goodwill $274
 $199
Investment in partnership 289
 448
Loss carryforwards 3,170
 2,943
Other intangibles 48
 —
Accrued and other 112
 135
     
Total gross deferred tax assets 3,893
 3,725
Less: valuation allowance (2,961) (2,851)
     
Deferred tax assets $932
 $874
     
Deferred tax liabilities:    
Indefinite life intangibles $(1,205) $(1,094)
Other intangibles —
 (256)
Property, plant and equipment (901) (575)
Indirect corporate subsidiaries:    
Indefinite life intangibles (122) (120)
Other (119) (132)
     
Deferred tax liabilities (2,347) (2,177)
     
Net deferred tax liabilities $(1,415) $(1,303)


  Successor 
  December 31,  December 31, 
  2010  2009 
Deferred tax assets:      
Goodwill $192  $194 
Deferred financing  31   214 
Investment in partnership  450   400 
Loss carryforwards  2,643   2,428 
Accrued and other  148   131 
         
Total gross deferred tax assets  3,464   3,367 
Less: valuation allowance  (2,275)  (1,955)
         
Deferred tax assets $1,189  $1,412 
         
Deferred tax liabilities:        
Indefinite life intangibles $(575) $(123)
Other intangibles  (489)  (705)
Property, plant and equipment  (626)  (642)
Other  (1)  -- 
Indirect corporate subsidiaries:        
Indefinite life intangibles  (117)  (114)
Other  (143)  (134)
         
Deferred tax liabilities  (1,951)  (1,718)
         
Net deferred tax liabilities $(762) $(306)

F- 31
F-35
CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2010, 20092013, 2012 AND 20082011
(dollars in millions, except share or per share data or where indicated)


Included in net deferred tax liabilities above is net current deferred assets of $16 million and $18 million as of December 31, 2013 and 2012, respectively, included in prepaid expenses and other current assets in the accompanying consolidated balance sheets of the Company. Net deferred tax liabilities included approximately $226 million and $219 million at December 31, 2013 and 2012, respectively, relating to certain indirect 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 indefinite-lived.

In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will be realized.  Due to the Company’s history of losses and the limitations imposed under Section 382 of the Code, discussed below, on Charter’s ability to use existing loss carryforwards in the future, valuation allowances have been established except for future taxable income that will result from the reversal of existing temporary differences for which deferred tax liabilities are recognized. Realization of deferred tax assets is dependent on generating sufficient taxable income prior to expiration of the loss carryforwards. The 2010 increaseamount of the deferred tax assets considered realizable and, therefore, reflected in the consolidated balance sheet, would be increased at such time that it is more-likely-than-not future taxable income will be realized during the carryforward period. At the time this consideration is met, an adjustment to reverse some portion of the existing valuation allowance includes an increase of $50 million related to Charter’s investment in partnership interest and an increase of $22 million related to adjustments to cash flow hedges included in other comprehensive income.would result.

As of December 31, 2010,2013, Charter and its indirect corporate subsidiaries had approximately $6.9$8.3 billion of federal tax net operating and capital loss carryforwards resulting in a gross deferred tax asset of approximately $2.4$2.9 billion expiring. Federal tax net operating loss carryforwards expire in the years 20142021 through 2030.2033.  These losses resulted from the operations of Charter Holdco and its subsidiaries. In addition, as of December 31, 2010,2013, Charter and its indirect corporate subsidiaries had state tax net operating losses,loss carryforwards, resulting in a gross deferred tax asset (net of federal tax benefit) of approximately $228$276 million. State tax net operating loss carryforwards generally expiringexpire in the years 20112014 through 2030.  2033. Included in the loss carryforwards is $63 million of loss, the tax benefit of which will be recorded through equity when realized as a reduction of income tax payable.

On May 1, 2013, Liberty Media Corporation (“Liberty Media”) completed its purchase of a 27% beneficial interest in Charter (see Note 17). Upon emergence from bankruptcy,closing, Charter experienced ana second “ownership change” as defined in Section 382 of the Code.  Therefore, theInternal Revenue Code resulting in a second set of limitations on Charter’s use of Charter’sits existing federal and state net operating losses, capital losses, and tax loss carryforwards is subjectcredit carryforwards. The first ownership change limitations that applied as a result of our emergence from bankruptcy in 2009 will also continue to certain limitations under Section 382.apply. As of December 31, 2010, $1.32013, $2.1 billion of federal tax loss carryforwards are unrestricted and available for Charter’s immediate use, while approximately $5.6$6.2 billion of federal tax loss carryforwards are still subject to Section 382 and other restrictions. Pursuant to these restrictions, an aggregate of $2.1Charter estimates that approximately $2.0 billion, $2.0 billion and $400 million in varying amounts from 2011the years 2014 to 2014,2016, respectively, and an additional $176$226 million annually over each of the next 188 years of federal tax loss carryforwards should become unrestricted and available for Charter’sCharter's use. ThoseSince the limitation amounts accumulate for future use to the extent they are not utilized in aany given year.year, Charter believes its loss carryforwards should become fully available to offset future taxable income, if any. Charter’s state loss carryforwards and indirect corporate subsidiaries’ loss carryforwards are also subject to similar, but varying restrictionslimitations on their future use.  Charter’s indirect corporate subsidiaries are also subject to separate Section 382 limitations on the utilization of their net operating loss carryforwards. If the Company was to experience another “ownership change” in the future, its ability to use its loss carryforwards could be subject to further limitations.


F- 32
CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2013, 2012 AND 2011
(dollars in millions, except share or per share data or where indicated)

In determining the Company’s tax provision for financial reporting purposes, the Company establishes a reserve for uncertain tax positions unless such positions are determined to be “more likely than not” of being sustained upon examination, based on their technical merits. There is considerable judgment involved in determining whether positions taken on the tax return are “more likely than not” of being sustained.  The Company did not have any unrecognized tax benefits for the year ended December 31, 2008.  A reconciliation of the beginning and ending amount of unrecognized tax benefits included in other long-term liabilities indeferred income taxes on the accompanying consolidated balance sheets of the Company is as follows.follows:  

Balance at January 1, 2009 (Predecessor) $-- 
Additions based on tax positions related to current period  20 
     
Balance at November 30, 2009 (Predecessor)  20 
Additions based on tax positions related to current period  3 
     
Balance at December 31, 2009 (Successor)  23 
Additions based on tax positions related to prior year  228 
Reductions due to tax positions related to prior year  (27)
     
Balance at December 31, 2010 (Successor) $224 
Balance at December 31, 2011 $228
Additions based on tax positions related to prior year 1
Reductions due to tax positions related to prior year (27)
   
Balance at December 31, 2012 202
Additions based on tax positions related to prior year —
Reductions due to tax positions related to prior year (202)
   
Balance at December 31, 2013 $—

Included in the balance at December 31, 2010, are additions to theThe Company's entire reserve for uncertain tax position of $228 million related to a 2009positions includes tax positionpositions for which the ultimate deductibility is highly certain, but for which there is uncertainty about the character of the deductibility. Included in the balance at December 31, 2009, are $232013, is $202 million of uncertain tax positions fornet reductions related to losses which the ultimate deductibility is highly certain, but for which there is uncertainty about the character of the deductibility.were offset by gains discussed above. The change in character of the deduction would not impact the annual effective tax rate after consideration of the valuation allowance.
F-36
CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2010, 2009 AND 2008
(dollars in millions, except share or per share data or where indicated)

The Company does not currently anticipate that its existing reserves related to uncertain income tax positions as of December 31, 2010 will significantly increase or decrease duringdeductions for the twelve-month period ending December 31, 2011; however, various events could cause the Company’s current expectations to change in the future. These uncertain tax positions if ever recognizedare included with the loss carryforwards in the deferred tax assets and therefore there is no impact to the financial statements, would be recorded in the consolidated statement of operations as part of the income tax provision.
statements.

No tax years for Charter or Charter Holdco, or its indirect subsidiariesfor income tax purposes, are currently under examination by the Internal Revenue Service.IRS.  Tax years ending 20072010 through 20102013 remain subject to examination and assessment. Years prior to 20072010 remain open solely for purposes of examination of Charter’s loss and credit carryforwards.

19.      Earnings (Loss) Per Share

Basic earnings (loss) per share is based on the average number of shares of common stock outstanding during the period.  Diluted earnings per share is based on the average number of shares used for the basic earnings per share calculation, adjusted for the dilutive effect of stock options, restricted stock, performance shares and units, convertible debt, convertible redeemable preferred stock and exchangeable membership units.  Basic loss per share equaled diluted loss per share for the years ended December 31, 2010 and 2008.

  Successor 
  One Month Ended December 31, 2009 
  Earnings  Shares  Earnings Per Share 
          
Basic earnings per share $2   112,078,089  $0.02 
             
  Effect of Class B common stock  --   212,923   -- 
  CII warrants  --   2,055,849   -- 
             
Diluted earnings per share $2   114,346,861  $0.02 

The shares of Class B common stock held by Mr. Allen had a 35% voting interest in Charter, on a fully diluted basis, and were exchangeable at any time on a one-for-one basis for shares of Charter Class A common stock. The CII warrants represent shares resulting from the exercise of warrants held by CII.  See Note 23.

The 1.3 million Charter Holdings warrants and 6.4 million CIH warrants were not included in the computation of diluted earnings per share because their exercise prices were greater than the average market price of the common shares.  Restricted stock was also not included in the computation of diluted earnings per share because the effect would have been antidilutive.

F-37
CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2010, 2009 AND 2008
(dollars in millions, except share or per share data or where indicated)

  Predecessor 
  Eleven Months Ended November 30, 2009 
  Earnings  Shares  Earnings Per Share 
          
Basic earnings per share $11,364   378,784,231  $30.00 
             
  Effect of CII Class B Charter Holdco units  --   222,818,858   (11.11)
  Effect of Vulcan Class B Charter Holdco units  --   116,313,173   (3.06)
  Effect of 5.875% convertible senior notes due 2009  --   1,287,190   (0.03)
  Effect of CCHC note  1   42,282,098   (0.87)
  Effect of 6.50% convertible senior notes due 2027  8   140,581,566   (2.32)
             
Diluted earnings per share $11,373   902,067,116  $12.61 

Prior to the Effective Date, CII Class B Charter Holdco units and Vulcan Class B Charter Holdco units represented membership units in Charter Holdco, held by entities controlled by Mr. Allen, that were exchangeable at any time on a one-for-one basis for shares of Charter Class B common stock, which were in turn convertible on a one-for-one basis into shares of Charter Class A common stock.  The 5.875% convertible senior notes due 2009 and 6.50% convertible senior notes due 2027 represent the shares resulting from the assumed conversion of the notes into shares of Charter’s Class A common stock.  The CCHC note represented the shares resulting from the assumed conversion of the note into Charter Holdco units that were exchangeable on a one-for-one basis for shares of Charter Class B common stock, which were in t urn convertible on a one-for-one basis into shares of Charter Class A common stock.

All options to purchase common stock, which were outstanding during the eleven months ended November 30, 2009, were not included in the computation of diluted earnings per share because the options’ exercise price was greater than the average market price of the common shares.  All restricted stock and performance units were also not included in the computation of diluted earnings per share because the effect would have been antidilutive.

Shares issued pursuant to the share lending agreement were required to be returned, in accordance with the contractual arrangement, and were treated in basic and diluted earnings per share as if they were already returned and retired.  Consequently, there was no impact of the shares of common stock lent under the share lending agreement in the earnings per share calculation.

20.17.    Related Party Transactions

The following sets forth certain transactions in which the Company and the directors, executive officers, and affiliates of the Company are involved.involved or, in the case of the management arrangements, subsidiaries that are debt issuers that pay certain of their parent companies for services.

Charter is a holding company and its principal assets are its equity interest in Charter Holdco and prior to the Effective Date, certain mirror notes payable by Charter Holdco to Charter and mirror preferred units held by Charter, which had the same principal amount and terms as those of Charter’s convertible senior notes and Charter’s outstanding preferred stock.  During the year ended December 31, 2008 (Predecessor), Charter Holdco paid to Charter $32 million related to interest on the mirror notes. No amounts were paid for 2009 and 2010.

Charter is a party to management arrangements with Charter Holdco and certain of its subsidiaries. Under these agreements, Charter and Charter Holdco provide management services for the cable systems owned or operated by their subsidiaries. The management services include such services as centralized customer billing services, data processing and related support, benefits administration and coordination of insurance coverage and self-insurance programs for medical, dental and workers’ compensation claims.  Costs associated with providing these services are charged directly to the Company’s operating subsidiaries and are included within operating costs and expenses in the accompanying consolidated statements of operations. Such costs totaled $246$305 million $21, $247 million $217, and $249 million and $213 milli on for the yearyears ended December 31, 2010 (Successor)2013, one month ended December 31, 2009
F-38
CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2010, 2009 AND 2008
(dollars in millions, except share or per share data or where indicated)
(Successor)2012, eleven months ended November 30, 2009 (Predecessor) and year ended December 31, 2008 (Predecessor)2011, respectively. All other costs incurred on behalf of Charter’s operating subsidiaries are considered a part of the management fee and are recorded as a component of selling, generaloperating costs and administrative expense,expenses, in the accompanying consolidated financial statements. The management fee charged to the Company’s operating subsidiaries approximated the expenses incurred by Charter Holdco and Charter on behalf of the Company’s operating subsidiaries in 2010, 20092013, 2012, and 2008.2011.

CC VIII, LLC InterestLiberty Media

For the year ended December 31, 2009, pursuantOn May 1, 2013, Liberty Media completed its purchase from investment funds managed by, or affiliated with, Apollo Global Management, LLC ("Apollo"), Oaktree Capital Management, L.P. ("Oaktree") and Crestview Partners ("Crestview") of approximately 26.9 million shares and warrants to indemnification provisionspurchase approximately 1.1 million shares in the October 2005 settlement with Mr. Allen regarding the CC VIII, LLC (“CC VIII”) interest, the Company reimbursed Vulcan Inc.Charter for approximately $3 million$2.6 billion (the "Liberty Media Transaction"), which represents an approximate 27% beneficial ownership in legal expenses.Charter and a price per share of $95.50.

Allen Agreement

In connection with the Plan,Liberty Media Transaction, Charter Mr. Allen and CII entered into a separate restructuringstockholders agreement (as amended, the “Allen Agreement”), in settlement and compromise of their legal, contractual and equitable rights, claims and remedies against Charter and its subsidiaries.  In addition to any amounts received by virtue of CII’s holdingwith Liberty Media that, among other claims against Charter and its subsidiaries, on the Effective Date, CII was issued 2.2 million shares of the new Charter Class B common stock equal to 2% of the equity value of Charter, after giving effect to the equity rights offering, but prior to issuance of warrants and equity-based awardsthings, provided for by the Plan and 35% (determined on a fully diluted basis) of the total voting power of all new capital stock of Charter.  Each share of new Charter Class B co mmon stock is convertible, at the option of the holder or the Disinterested Members of the Board of Directors of Charter, into one share of new Charter Class A common stock, and is subject to significant restrictions on transfer and conversion.  Certain holders of new Charter Class A common stock (and securities convertible into or exercisable or exchangeable therefore) and new Charter Class B common stock received certain customary registration rightsLiberty Media with respect to their shares.  On the Effective Date, CII received: (i) 4.7 million warrants to purchase shares of new Charter Class A common stock, (ii) $85 million principal amount of new CCH II notes (transferred from CCH I, LLC (“CCH I”) noteholders), (iii) $25 million in cash for amounts previously owed to CII under a management agreement, (iv) $20 million in cash for reimbursement of fees and expenses in connection with the Plan, and (v) an additional $150 million in cash.  The warrants described above have an exercise price of $19.80 per share and expire seven years after the date of issuance. In addition, on the Effective Date, CII retained a minority equity interest in reorganized Charter Holdco of 1% and a right to exchange such interest into new Charter Class A common stock. On December 28, 2009, CII exchanged 81% of its interest in Charter Holdco, and on February 8, 2010 the remaining interest was exchanged after which Charter Holdco became 100% owned by Charter.  Further, Mr. Allen transferred his preferred equity interest in CC VIII to Charter.  As of December 31, 2010, Mr. Allen held all 2,241,299 shares of Class B common stock of Charter.  Pursuant to the terms of the Certificate of Incorporation of Charter, on January 18, 2011, the Disinterested Members of the Board of Directors of Charter caused a conversion of the shares of Class B common stock into shares of Class A common stock on a one-for-one basis.  As a result of such conversion, Mr. Allen no longer has the right to appointdesignate four directors and the Class B directors became Class A directors. On January 18, 2011, directors William L. McGrath and Christopher M. Temple, both former Class B directors, resigned from Charter’sfor appointment to Charter's board of directors. Edgar Lee and Stan Parker were appointed to fill the vacant positions.directors in


F- 33
F-39
CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2010, 20092013, 2012 AND 20082011
(dollars in millions, except share or per share data or where indicated)

connection with the closing. Liberty Media designated John Malone, Chairman of Liberty Media, Gregory Maffei, president and chief executive officer of Liberty Media, Balan Nair, executive vice president and chief technology officer of Liberty Global plc, and Michael Huseby, chief executive officer of Barnes & Noble, Inc. Charter’s board of directors appointed these directors effective upon the resignations of Stan Parker, Darren Glatt, Bruce Karsh and Edgar Lee in connection with the closing of the Liberty Media Transaction on May 1, 2013. Subject to Liberty Media’s continued ownership level in Charter, the stockholders agreement also provides that Liberty Media can designate up to four directors as nominees for election to Charter’s board of directors at least through Charter’s 2015 annual meeting of stockholders, and that up to one of these individuals may serve on each of the Audit Committee, the Nominating and Corporate Governance Committee, and Compensation and Benefits Committee of Charter’s board of directors. Consistent with these provisions, the board appointed Dr. Malone to serve on the Nominating and Corporate Governance Committee, Mr. Maffei to serve on the Finance Committee and the Compensation and Benefits Committee and Mr. Huseby to serve on the Audit Committee.

In addition, Liberty Media agreed to not increase its beneficial ownership in Charter above 35% until January 2016, at which point such limit increases to 39.99%. Liberty Media is also, subject to certain exceptions, subject to certain customary standstill provisions that prohibit Liberty Media from, among other things, engaging in proxy or consent solicitations relating to the election of directors. The standstill limitations apply through the 2015 shareholder meeting and continue to apply as long as Liberty Media's designees are nominated to the Charter board, unless the agreement is earlier terminated. Charter approved Liberty Media as an interested stockholder under the business combination provisions of the Delaware General Corporation Law.

21.The Company is aware that Dr. Malone may be deemed to have a 34.5% voting interest in Liberty Interactive Corp. (“Liberty Interactive”) and is Chairman of the board of directors, an executive officer position, of Liberty Interactive. Liberty Interactive owns 36.9% of the common stock of HSN, Inc. (“HSN”) and has the right to elect 20% of the board members of HSN. Liberty Interactive wholly owns QVC, Inc (“QVC”). The Company has programming relationships with HSN and QVC which pre-date the Liberty Media Transaction. For the nine months ended December 31, 2013, the Company received payments in aggregate of approximately $10 million from HSN and QVC as part of channel carriage fees and revenue sharing arrangements for home shopping sales made to customers in Charter's footprint.
Dr. Malone also serves on the board of directors of Discovery Communications, Inc., (“Discovery”) and the Company is aware that Dr. Malone owns 4.3% in the aggregate of the common stock of Discovery and has a 29.2% voting interest in Discovery for the election of directors. In addition, Dr. Malone owns 9.2% in the aggregate of the common stock of Starz and has 42.8% of the voting power. Mr. Maffei is a non-executive Chairman of the board of Starz. The Company purchases programming from both Discovery and Starz pursuant to agreements entered into prior to the Liberty Media Transaction and Dr. Malone and Mr. Maffei joining Charter's board of directors. Based on publicly available information, the Company does not believe that either Discovery or Starz would currently be considered related parties. The amounts paid in aggregate to Discovery and Starz represent less than 3% of total operating costs and expenses for the nine months ended December 31, 2013.

Registration Rights Agreement

As part of the emergence from Chapter 11 bankruptcy in 2009, the Company agreed to a Registration Rights Agreement with certain holders of the Company's Class A common stock which required the Company to file a shelf-registration statement with the SEC to provide for a continuous secondary offering of the stock. The registration statement became effective in November 2010. The Registration Rights Agreement provided that any holder of securities that wished to sell stock under the existing shelf-registration statement must give the Company five business days notice that such holder wishes to sell and that the Company notify the other holders which were party to the Registration Rights Agreement.

In August 2012, the Company and the Company's then three largest holders, Apollo, Oaktree and Crestview amended the Registration Rights Agreement to provide for sales of shares of the Company's Class A common stock in a block trade through an underwriter and the related mechanics for block trades.  Because the amendment involved the Company and affiliates, it was deemed a related party transaction.  The amendment was considered and approved by the Audit Committee.  Charter received no compensation from entering into the amendment nor from any subsequent sales of shares.



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CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2013, 2012 AND 2011
(dollars in millions, except share or per share data or where indicated)

Stock Repurchases

See “Note 9. Treasury Stock” for the description of Charter’s purchase of shares of its Class A common stock from Franklin Advisers, Inc., Oaktree and Apollo. At the time of the purchase, funds advised by Franklin Advisers, Inc., Oaktree and Apollo beneficially each held more than 10% of Charter’s Class A common stock.

18.    Commitments and Contingencies

Commitments

The following table summarizes the Company’s payment obligations as of December 31, 20102013 for its contractual obligations.

  Total  2011  2012  2013  2014  2015  Thereafter 
                      
Contractual Obligations                     
Capital and Operating Lease Obligations (1) $89  $23  $20  $16  $13  $7  $10 
Programming Minimum Commitments(2)  267   103   108   56   --   --   -- 
Other (3)  290   235   7   3   1   44   -- 
                             
Total $646  $361  $135  $75  $14  $51  $10 
  Total 2014 2015 2016 2017 2018 Thereafter
               
Contractual Obligations              
Capital and Operating Lease Obligations (1) $136
 $35
 $30
 $26
 $22
 13
 $10
Programming Minimum Commitments (2) 970
 227
 236
 239
 236
 9
 23
Other (3) 562
 535
 22
 5
 —
 —
 —
               
 Total $1,668
 $797
 $288
 $270
 $258
 $22
 $33

(1)  The Company leases certain facilities and equipment under noncancelable operating leases.  Leases and rental costs charged to expense for the year ended December 31, 2010 (Successor), one month ended December 31, 2009 (Successor), eleven months ended November 30, 2009 (Predecessor) and year ended December 31, 2008 (Predecessor), were $24 million, $2 million, $23 million and $24 million, respectively.
(1) The Company leases certain facilities and equipment under non-cancelable operating leases. Leases and rental costs charged to expense for the years ended December 31, 2013, 2012 and 2011 were $34 million, $28 million, $27 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 $1.8 billion, $146 million, $1.6 billion and $1.6 billion, for the year ended December 31, 2010 (Successor), one month ended December 31, 2009 (Successor), eleven months ended November 30, 2009 (Predecessor) and year ended December 31, 2008 (Predecessor), 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.
(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 $2.1 billion, $2.0 billion and $1.9 billion for the years ended December 31, 2013, 2012, and 2011 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(3) “Other” represents other guaranteed minimum commitments, which consist primarily of commitments to the Company's customer premise equipment 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:

·The Company 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 year ended December 31, 2010 (Successor), one month ended December 31, 2009 (Successor), eleven months ended November 30, 2009 (Predecessor) and year ended December 31, 2008 (Predecessor), was $50 million, $4 million, $43 million and $47 million, respectively.
The Company 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, 2013, 2012, and 2011 was $49 million, $47 million, and $49 million, respectively.

·The 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 franchise-related costs included in the accompanying statement of operations were $178 million, $15 million, $161 million and $179 million for the year ended December 31, 2010 (Successor), one month ended December 31, 2009 (Successor), eleven months ended November 30, 2009 (Predecessor) and year ended December 31, 2008 (Predecessor), respectively.

·The Company also has $73 million in letters of credit, primarily to its various worker’s compensation, property and casualty, and general liability carriers, as collateral for reimbursement of claims.


The 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 franchise-related costs included in the accompanying statement of operations were $190 million, $176 million, and $174 million for the years ended December 31, 2013, 2012, and 2011 respectively.
F-40
The Company also has $73 million in letters of credit, primarily to its various worker’s compensation, property and casualty, and general liability carriers, as collateral for reimbursement of claims.



F- 35
CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2010, 20092013, 2012 AND 20082011
(dollars in millions, except share or per share data or where indicated)

Litigation

The Montana Department of Revenue ("Montana DOR") generally assesses property taxes on cable companies at 3% and on telephone companies at 6%. Historically, Bresnan's cable and telephone operations have been taxed separately by the Montana DOR. In 2010, the Montana DOR assessed Bresnan as a single telephone business and retroactively assessed it as such for 2007 through 2009. Bresnan filed a declaratory judgment action against the Montana DOR in Montana State Court challenging its property tax classifications for 2007 through 2010. Under Montana law, a taxpayer must first pay a current assessment of disputed property tax in order to challenge such assessment. In accordance with that law, Bresnan paid the disputed 2010, 2011 and 2012 property tax assessments of approximately $5 million, $11 million and $9 million, respectively, under protest. No payments for additional tax for 2007 through 2009, which could be up to approximately $16 million, including interest, were made at that time. On August 28,September 26, 2011, the Montana State Court granted Bresnan's summary judgment motion seeking to vacate the Montana DOR's retroactive tax assessments for the years 2007, 2008 and 2009. The Montana DOR's assessment for 2010 was the subject of a lawsuittrial, which took place the week of October 24, 2011. On July 6, 2012, the Montana State Court entered judgment in favor of Bresnan, ruling that the Montana's DOR 2010 assessment was invalid and contrary to law, vacating the 2010 assessment, and directing that the Montana DOR refund the amounts paid by Bresnan under protest, plus interest and certain costs. The Montana DOR filed againsta notice of appeal to the Montana Supreme Court on September 20, 2012. The appeal was fully briefed, and was argued to the Montana Supreme Court in September 2013. On December 2, 2013, the Montana Supreme Court reversed the trial court’s decision and remanded the matter to the trial court. Charter filed a petition for rehearing which was denied on January 7, 2014. At this point, there have been no further proceedings before the trial court, although Charter has filed pleadings to renew challenges to the Montana DOR’s assessments that had been mooted by the Montana State Court’s prior ruling. With respect to the Montana Supreme Court ruling, Charter’s primary remaining course of action is an appeal to the U.S. Supreme Court. A decision has not been made as to whether this appeal will be pursued. Pending entry of a final judgment, the Montana DOR continues to hold Charter's protest payments aggregating approximately $25 million in escrow and Charter Communications, LLC (“Charter LLC”)continues to assess the Company as a single telephone business. The Company will make additional protest payments until a final judgment is entered, including payments for 2007, 2008 and 2009. The prior years' assessments are accrued in the United States District Court for the Western District of Wisconsin (now entitled, Marc Goodell et al.  v. Charter Communications, LLC and Charter Communications, Inc.).  The plaintiffs sought to represent a class of current and former broadband, system and other types of technicians who are or were employed by Charter or Charter LLC in the states of Michigan, Minnesota, Missouri or California.  Plaintiffs alleged that Charter and Charter LLC violated certain wage and hour statutes of those four states by failing to pay technicians for all hours worked.  In May 2010, the parties entered into a settlement agreement disposing of all claims, including those potential wage and hour claims for potential class members in additional states beyond the four identified above. On September 24, 2010, the court granted final approval of the settlement. Company's financial statements.

The Company accruedis a defendant, co-defendant or plaintiff seeking declaratory judgments in several lawsuits involving alleged infringement of various patents relating to various aspects of its businesses.  Other industry participants are also defendants or plaintiffs seeking declaratory judgments in certain of these cases. In the event that a court ultimately determines that the Company infringes on any intellectual property rights, the Company may be subject to substantial damages and/or an injunction that could require the Company or its vendors to modify certain products and paid expected settlement costs associatedservices the Company offers to its subscribers, as well as negotiate royalty or license agreements with this case. The Company has been subjected, in the normal course of business,respect to the assertionpatents at issue.  While the Company believes the lawsuits are without merit and intends to defend the actions vigorously, no assurance can be given that any adverse outcome would not be material to the Company's consolidated financial condition, results of other wage and hour claims and could be subjected to additional such claims in the future.operations, or liquidity. The Company cannot predict the outcome of any such claims.

On March 27, 2009, Charter filed its chapter 11 petition in the United States Bankruptcy Court for the Southern Districtclaims nor can it reasonably estimate a range of New York.  On the same day, JPMorgan Chase Bank, N.A., (“JPMorgan”), for itself and as Administrative Agent under the Charter Operating Credit Agreement, filed an adversary proceeding (the “JPMorgan Adversary Proceeding”) in Bankruptcy Court against Charter Operating and CCO Holdings seeking a declaration that there were events of default under the Charter Operating Credit Agreement.  JPMorgan, as well as other parties, objected to the Plan.  The Bankruptcy Court jointly held 19 days of trial in the JPMorgan Adversary Proceeding and on the objections to the Plan.

On November 17, 2009, the Bankruptcy Court issued its Order and Opinion confirming the Plan over the objections of JPMorgan and various other objectors.  The Court also entered an order ruling in favor of Charter in the JPMorgan Adversary Proceeding.  Several objectors attempted to stay the consummation of the Plan, but those motions were denied by the Bankruptcy Court and the U.S. District Court for the Southern District of New York.  Charter consummated the Plan on November 30, 2009 and reinstated the Charter Operating Credit Agreement and certain other debt of its subsidiaries.

Six appeals were filed relating to confirmation of the Plan.  The parties initially pursing appeals were: (i) JPMorgan; (ii) Wilmington Trust Company (“Wilmington Trust”) (as indenture trustee for the holders of the 8% senior second lien notes due 2012 and 8.375% senior second lien notes due 2014 issued by and among Charter Operating and Charter Communications Operating Capital Corp. and the 10.875% senior second lien notes due 2014 issued by and among Charter Operating and Charter Communications Operating Capital Corp.); (iii) Wells Fargo Bank, N.A. (“Wells Fargo”) (in its capacities as successor Administrative Agent and successor Collateral Agent for the third lien prepetition secured lenders to CCO Holdings under the CCO Holdings credit facility); (iv) Law Debenture Trust Company of New York (“ ;Law Debenture Trust”) (as the Trustee with respect to the $479 million in aggregate principal amount of 6.50% convertible senior notes due 2027 issued by Charter which are no longer outstanding following consummation of the Plan); (v) R2 Investments, LDC (“R2 Investments”) (an equity interest holder in Charter); and (vi) certain plaintiffs representing a putative class in a securities action against three former Charter officers or directors filed in the United States District Court for the Eastern District of Arkansas (Iron Workers Local No. 25 Pension Fund, Indiana Laborers Pension Fund, and Iron Workers District Council of Western New York and Vicinity Pension Fund, in the action styled Iron Workers Local No. 25 Pension Fund v. Allen, et al., Case No. 4:09-cv-00405-JLH (E.D. Ark.).

Charter Operating amended its senior secured credit facilities effective March 31, 2010.  In connection with the closing of these amendments, each of Bank of America, N.A. and JPMorgan, for itself and on behalf of the lenders under the Charter Operating senior secured credit facilities, agreed to dismiss the pending appeal of the Company’s Confirmation Order pending before the District Court for the Southern District of New York and to waive any objections to the Company’s Confirmation Order issued by the United States Bankruptcy Court for the Southern District of New York.  The lenders filed their Stipulation of that dismissal and waiver of objections and it was signed by the judge on April 1, 2010 and the case dismissed.  On December 3, 2009, Wilmington Trust withdrew its notice of appeal. 60; On April 14, 2010, Wells Fargo filed their Stipulation of Dismissal of their appeal on behalf of the
F-41
CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2010, 2009 AND 2008
(dollars in millions, except share or per share data or where indicated)
lenders under the CCO Holdings credit facility.  This Stipulation was signed by the judge on April 19, 2010 and the case dismissed. The remaining appeals by Law Debenture Trust, R2 Investments and the securities plaintiffs have been briefed but have not been argued to, or ruled upon by the District Court for the Southern District of New York. The Company cannot predict the ultimate outcome of the appeals.possible loss.

The Company is party to lawsuits and claims that arise in the ordinary course of conducting its business.business, including lawsuits claiming violation of wage and hour laws. The ultimate outcome of these other legal matters pending against the Company cannot be predicted, and although such lawsuits and claims are not expected individually to have a material adverse effect on the Company’s consolidated financial condition, results of operations or liquidity, such lawsuits could have, in the aggregate, a material adverse effect on the Company’s consolidated financial condition, results of operations or liquidity. Whether or not the Company ultimately prevails in any particular lawsuit or claim, litigation can be time consuming and costly and injure the Company's reputation.

Regulation in the Cable Industry

The operation of a cable system is extensively regulated by the Federal Communications Commission (“FCC”), some state governments and most local governments. The FCC has the authority to enforce its regulations through the imposition of substantial fines, the issuance of cease and desist orders and/or the imposition of other administrative sanctions, such as the revocation of FCC licenses needed to operate certain transmission facilities used in connection with cable operations. The Telecommunications Act of 1996 altered the regulatory structure governing the nation’s communications providers. It removed barriers to competition in both the cable television market and the telephone market. Among other things, it reduced the scope of cable rate regulation and encouraged additi onaladditional competition in the video programming industry by allowing telephone companies to provide video programming in their own telephone service areas.

Future legislative and regulatory changes could adversely affect the Company’s operations, including, without limitation, additional regulatory requirements the Company may be required to comply with as it offers services such as telephone.operations.


22.

F- 36
CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2013, 2012 AND 2011
(dollars in millions, except share or per share data or where indicated)

19.    Employee Benefit Plan

The Company’s employees may participate in the Charter Communications, Inc. 401(k) Plan. Employees that qualify for participation can contribute up to 50% of their salary, on a pre-tax basis, subject to a maximum contribution limit as determined by the Internal Revenue Service. For eachEach payroll period, the Company contributedwill contribute to the 401(k) Plan (a) the total amount of the salary reduction the employee elects to defer between 1% and 50%. The Company’s matching contribution is discretionary and (b) prior to January 1, 2010, a matching contributionis equal to 50% of the amount of the salary reduction the participant electedelects to defer (up to 5%6% of the participant’s payrolleligible compensation), excluding any catch-up contributions.contributions and is paid by the Company on a per pay period basis.  The Company made contributions to the 401(k) plan totaling $1$16 million $7, $8 million and $8$6 million for the one monthyears ended December 31, 2009 (Successor)2013, eleven months ended November 30, 2009 (Predecessor)2012 and year ended December 31, 2008 (Predecessor),2011, respectively.

Effective January 1, 2010, the Company’s matching contribution is discretionary with the intent that any contribution be based on performance metrics used in its other bonus and incentive plans.  The discretionary performance contribution is made on an annual basis (instead of on a per pay period basis).  Each participant who makes before-tax contributions and is employed on the last day of the fiscal year received a portion of the discretionary performance contribution, if any, on a pro rata basis. The Company divided each participant’s before-tax contributions for the year (up to 5% of eligible earnings, excluding catch-up contributions) by the total employee contributions (up to 5% of eligible earnings, excluding catch-up contributions) for the year to determine each participant’s share of any discre tionary performance contribution. The Company intends to make contributions to the 401(k) plan totaling $6 million for the year ended December 31, 2010 (Successor).
23.      Emergence from Reorganization Proceedings

On March 27, 2009, the Company and certain affiliates filed voluntary petitions in the Bankruptcy Court to reorganize under the Bankruptcy Code.  The Chapter 11 cases were jointly administered under the caption In re Charter Communications, Inc., et al., Case No. 09-11435.  On May 7, 2009, the Company filed the Plan and
F-42
CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2010, 2009 AND 2008
(dollars in millions, except share or per share data or where indicated)
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, the date on which the Company emerged from protection under Chapter 11 of the Bankruptcy Code.

The Company selected December 1, 2009 for application of fresh start accounting. Accordingly, the results of operations of the Company for the eleven months ended November 30, 2009 include reorganization items of $644 million and a pre-emergence gain of $6.8 billion primarily resulting from the discharge of long-term debt under the Plan and the related accrued interest offset by the issuance of common stock, preferred stock, warrants and new notes to holders of such notes. The following notes were eliminated on the Effective Date:

Charter Convertible Notes. On the Effective Date, $482 million of Charter convertible senior notes were cancelled and holders of the convertible senior notes received $25 million in cash and 5.5 million shares of preferred stock issued by Charter valued at $145 million as of the Effective Date.

Charter Holdings Notes. On the Effective Date, $440 million of Charter Holdings senior and senior discount notes were cancelled. Holders of Charter Holdings notes received 1.3 million warrants to purchase shares of new Charter Class A common stock with an exercise price of $51.28 per share that expire five years after the date of issuance.  The warrants were valued at $6 million as of the Effective Date.

CCH I Holdings, LLC Notes. On the Effective Date, $2.5 billion of CCH I Holdings, LLC (“CIH”) senior and senior discount notes were cancelled.  Holders of CIH notes received 6.4 million warrants to purchase shares of new Charter Class A common stock with an exercise price of $46.86 per share that expire five years after the date of issuance.  The warrants were valued at $35 million as of the Effective Date.

CCH I, LLC Notes. On the Effective Date, $4.0 billion of CCH I senior and senior discount notes were cancelled. Holders of CCH I notes received 21.1 million shares of new Charter Class A common stock.  In addition, as part of the Plan, the holders of CCH I notes received and transferred to Mr. Allen $85 million principal amount of new CCH II notes valued at $101 million as of the Effective Date.
CCH II, LLC Notes. On the Effective Date, $2.5 billion of CCH II senior notes were cancelled through an exchange with holders who received new 13.500% senior CCH II notes and cash paid for the remaining unexchanged amount.

Fresh start accounting provided, among other things, for a determination of the value assigned to the equity of the emerging company as of a date selected for financial reporting purposes. In the Disclosure Statement, the reorganization value of the Company was set forth as approximately $14.1 billion to $16.6 billion, with a midpoint estimate of $15.4 billion. Under fresh start accounting, this reorganization value was allocated to the Company’s assets based on their respective fair values.  The fresh start adjustments to fair value resulted in an increase to the carrying value of property, plant and equipment of $2.0 billion, the establishment of customer relationships at a fair value of $2.4 billion, and the recording of goodwill of $951 million.  The reduction in long-term debt was $502 million to reflect it at its fair value and the net increase to shareholder’s equity was $6.0 billion.

Reorganization value, along with other terms of the Plan, was determined after extensive arms-length negotiations with the Company’s creditors.  The value was based upon expected future cash flows of the business after emergence from Chapter 11, discounted at rates reflecting perceived business and financial risks (the discounted cash flows). This valuation and a valuation using market value multiples for peer companies were blended to arrive at the reorganization value. Reorganization value is intended to approximate the amount a willing buyer would pay for the assets of the Company immediately after the reorganization.

Based on conditions in the cable industry and general economic conditions, the mid-point of the range of valuations was used to determine the reorganization value.  Under fresh start accounting, this reorganization value was allocated to the Company’s assets based on their respective fair values.  The reorganization value, after adjustments for working capital, is reduced by the fair value of debt and other noncurrent liabilities, and preferred stock with the remainder representing the value to common shareholders.  The market capitalization of Charter’s common stock may differ materially from this value.
F-43
CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2010, 2009 AND 2008
(dollars in millions, except share or per share data or where indicated)

The significant assumptions related to the valuations of the Company's assets and liabilities in connection with fresh start accounting include the following:

Property, plant and equipment — Property, plant and equipment was valued at fair value of $6.8 billion as of November 30, 2009.  In establishing fair value for the vast majority of the Company’s property, plant and equipment, the cost approach was utilized. The cost approach considers the amount required to replace an asset by constructing or purchasing a new asset with similar utility, then adjusts the value in consideration of all forms of depreciation as of the appraisal date.

The cost approach relies on management’s assumptions regarding current material and labor costs required to rebuild and repurchase significant components of the Company's property, plant and equipment along with assumptions regarding the age and estimated useful lives of the Company's property, plant and equipment.

Intangible Assets — The Company identified the following intangible assets to be valued:  (i) franchise marketing rights, (ii) customer relationships, and (iii) trademarks.

Franchise marketing rights and customer relationships were valued using an income approach and were valued at $5.3 billion and $2.4 billion, respectively, as of November 30, 2009. See Note 5 to the consolidated financial statements for a description of the methods used to value intangible assets.

The relief from royalty method was used to value trademarks at $158 million as of November 30, 2009. See Note 5 to the consolidated financial statements for a description of the methods used to value intangible assets.

Long-Term Debt – Long-term debt was valued at fair value using quoted market prices.

We recorded a pre-tax gain of $5.7 billion resulting from the aggregate changes to the net carrying value of our pre-emergence assets and liabilities to record their fair values under fresh 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 and represents items of income, expense, gain or loss that are realized or incurred by the Company because it was in reorganization under Chapter 11 of the U.S. Bankruptcy Code.

Reorganization items, net consisted of the following items:

  Successor  Predecessor 
  
Year Ended
December 31,
 2010
  
One Month
Ended
December 31,
2009
  
Eleven Months
Ended
November 30,
2009
 
 Penalty interest, net $--  $--  $351 
 Loss on debt at allowed claim amount  --   --   97 
 Professional fees  6   3   167 
 Paul Allen management fee settlement – related party  --   --   11 
 Other  --   --   18 
             
Total Reorganization Items, Net $6  $3  $644 

Reorganization items, net consist of adjustments to record liabilities at the allowed claim amounts, including the write off of deferred financing fees, and other expenses directly related to the Company’s bankruptcy proceedings.  Post-
F-44
CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2010, 2009 AND 2008
(dollars in millions, except share or per share data or where indicated)
emergence professional fees relate to claim settlements, plan implementation and other transition costs related to the Plan.

24.20.    Recently Issued Accounting Standards

In October 2009,June 2013, the FASB issued guidance included in ASU 2009-13, Multiple-Deliverable Revenue Arrangements (“ASU 2009-13”Financial Accounting Standards Board's Emerging Issues Task Force reached a final consensus on Issue 13-C, Presentation of an Unrecognized Tax Benefit when a Net Operating Loss or Tax Credit Carryforward Exists ("Issue 13-C"). ASU 2009-13 sets forth requirementsIssue 13-C states that must be metentities should present the unrecognized tax benefit as a reduction of the deferred tax asset for an entity to recognize revenue froma net operating loss or similar tax loss or tax credit carryforward rather than as a liability when the saleuncertain tax position would reduce the net operating loss or other carryforward under the tax law. Issue 13-C requires prospective application (including accounting for uncertain tax positions that exist upon date of a delivered item that is part of a multiple-element arrangement when other items have not yet been delivered. The Company adopted ASU 2009-13 on January 1, 2011.  The adoption did not have a material impact to its consolidated financial statements.

In January 2010, the FASB issued guidance included in ASU 2010-06, Fair Value Measurementsadoption) with optional retrospective application and Disclosures – Improving Disclosures about Fair Value Measurements (“ASU 2010-06”). ASU 2010-06 provides amendments to Topic 820 to provide more robust fair value disclosures. The disclosures about purchases, sales, issuances and settlements relating to Level 3 measurements is effective for fiscal yearsannual and interim periods beginning after December 15, 2010 and all interim periods within.2013, with early adoption permitted. The Company adopted ASU 2010-06 on January 1, 2011.Issue 13-C in the second quarter of 2013 and applied it retrospectively. The adoption did not have a material impact on its consolidated financial statements.of Issue 13-C decreased prepaid expenses and other current assets by $3 million and other long-term liabilities by $202 million and increased deferred income taxes by $199 million as of December 31, 2012.

25.21.    Unaudited Quarterly Financial Data

The following table presents quarterly data for the periods presented on the consolidated statement of operations:
  Year Ended December 31, 2010 
  Successor 
  First  Second  Third  Fourth 
  Quarter  Quarter  Quarter  Quarter 
Revenues $1,735  $1,771  $1,769  $1,784 
Income from operations $251  $254  $240  $279 
Net income (loss) – Charter shareholders $24  $(81) $(95) $(85)
                 
Earnings (loss) per common share – Charter shareholders:                
Basic $0.21  $(0.72) $(0.84) $(0.75)
Diluted $0.21  $(0.72) $(0.84) $(0.75)
                 
Weighted average common shares outstanding:                
Basic  113,020,967   113,110,882   113,110,889   113,308,253 
Diluted  114,883,134   113,110,882   113,110,889   113,308,253 

  Year Ended December 31, 2013
  
First
 Quarter
 Second Quarter 
Third
Quarter
 Fourth Quarter
Revenues $1,917
 $1,972
 $2,118
 $2,148
Income from operations $223
 $236
 $220
 $246
Net income (loss) $(42) $(96) $(70) $39
         
Income (loss) per common share:        
Basic $(0.42) $(0.96) $(0.68) $0.38
Diluted $(0.42) $(0.96) $(0.68) 0.35
         
Weighted average common shares
     outstanding:
        
Basic 100,327,418
 100,600,678
 102,924,443
 103,836,535
Diluted 100,327,418
 100,600,678
 102,924,443
 111,415,982



F- 37
F-45
CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2010, 20092013, 2012 AND 20082011
(dollars in millions, except share or per share data or where indicated)

  Year Ended December 31, 2012
  
First
 Quarter
 Second Quarter 
Third
Quarter
 Fourth Quarter
Revenues $1,827
 $1,884
 $1,880
 $1,913
Income from operations $230
 $269
 $211
 $206
Net loss $(94) $(83) $(87) $(40)
         
Loss per common share:        
Basic and diluted $(0.95) $(0.84) $(0.87) $(0.41)
         
Weighted average common shares
     outstanding:
        
Basic and diluted 99,432,960
 99,496,755
 99,694,672
 100,003,344

  Year Ended December 31, 2009 
  Predecessor  Successor 
  First  Second  Third  
Two Months
 Ended
November 30,
  
One Month
Ended
December 31,
 
  Quarter  Quarter  Quarter  2009  2009 
Revenues $1,662  $1,690  $1,693  $1,138  $572 
Income (loss) from operations $334  $301  $(2,591) $893  $84 
Net income (loss) – Charter shareholders $(205) $(112) $(1,035) $12,716  $2 
                     
Earnings (loss) per common share – Charter shareholders:                    
Basic $(0.54) $(0.30) $(2.73) $33.55  $0.02 
Diluted $(0.54) $(0.30) $(2.73) $14.09  $0.02 
                     
Weighted average common shares outstanding:                    
Basic  378,095,547   378,982,037   379,066,320   379,080,041   112,078,089 
Diluted  378,095,547   378,982,037   379,066,320   902,362,926   114,346,861 

26.22.    Consolidating Schedules

The CCO Holdings notes and the CCO Holdings credit facility are obligations of CCO Holdings. The CCH IIHowever, the CCO Holdings notes issued on the Effective Date are obligations of CCH II.  However, these obligations are also jointly, severally, fully and unconditionally guaranteed on an unsecured senior basis by Charter. 

The accompanying condensed consolidating financial information has been prepared and presented pursuant to SEC Regulation S-X 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 companies in accordance with generally accepted accounting principles.

Condensed consolidating financial statements as of December 31, 20102013 and 20092012 and for the yearyears ended December 31, 2010, one month ended December 31, 2009, eleven months ended November 30, 20092013, 2012 and year ended December 31, 20082011 follow.


F- 38
F-46
CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2010, 20092013, 2012 AND 20082011
(dollars in millions, except share or per share data or where indicated)

Charter Communications, Inc.Charter Communications, Inc. Charter Communications, Inc.
Condensed Consolidating Balance SheetCondensed Consolidating Balance Sheet Condensed Consolidating Balance Sheet
Successor 
As of December 31, 2010 
As of December 31, 2013As of December 31, 2013
            
 Charter  Intermediate Holding Companies  CCH II  CCO Holdings  
Charter Operating
and Subsidiaries
  Eliminations  Charter Consolidated Charter Intermediate Holding Companies CCO Holdings Charter Operating and Subsidiaries Eliminations Charter Consolidated
ASSETS                                
                                
CURRENT ASSETS:                                
Cash and cash equivalents $--  $--  $3  $1  $--  $--  $4 $—
 $5
 $—
 $16
 $—
 $21
Restricted cash and cash equivalents  --   --   --   --   28   --   28 
Accounts receivable, net  --   1   --   --   246   --   247 4
 4
 —
 226
 —
 234
Receivables from related party  57   182   8   8   --   (255)  -- 54
 170
 11
 —
 (235) —
Prepaid expenses and other current assets  2   20   --   --   25   --   47 14
 10
 —
 43
 —
 67
Total current assets  59   203   11   9   299   (255)  326 72
 189
 11
 285
 (235) 322
                                       
INVESTMENT IN CABLE PROPERTIES:                            INVESTMENT IN CABLE PROPERTIES:          
Property, plant and equipment, net  --   34   --   --   6,785   --   6,819 —
 30
 —
 7,951
 —
 7,981
Franchises  --   --   --   --   5,257   --   5,257 —
 —
 —
 6,009
 —
 6,009
Customer relationships, net  --   --   --   --   2,000   --   2,000 —
 —
 —
 1,389
 —
 1,389
Goodwill  --   --   --   --   951   --   951 —
 —
 —
 1,177
 —
 1,177
Total investment in cable properties, net  --   34   --   --   14,993   --   15,027 —
 30
 —
 16,526
 —
 16,556
                                       
CC VIII PREFERRED INTEREST  79   183   --   --   --   (262)  -- —
 392
 —
 —
 (392) —
                                       
INVESTMENT IN SUBSIDIARIES  1,889   1,409   3,296   5,946   --   (12,540)  -- 1,295
 325
 10,592
 —
 (12,212) —
                                       
LOANS RECEIVABLE – RELATED PARTY  --   42   248   252   --   (542)  -- —
 318
 461
 —
 (779) —
                                       
OTHER NONCURRENT ASSETS  --   160   --   43   153   (2)  354 —
 160
 119
 138
 —
 417
                                       
Total assets $2,027  $2,031  $3,555  $6,250  $15,445  $(13,601) $15,707 $1,367
 $1,414
 $11,183
 $16,949
 $(13,618) $17,295
                                       
LIABILITIES AND SHAREHOLDERS’/MEMBER’S EQUITYLIABILITIES AND SHAREHOLDERS’/MEMBER’S EQUITY                         LIABILITIES AND SHAREHOLDERS’/MEMBER’S EQUITY      
                                       
CURRENT LIABILITIES:                                       
Accounts payable and accrued expenses $11  $138  $89  $40  $771  $--  $1,049 
Accounts payable and accrued liabilities$12
 $113
 $187
 $1,155
 $—
 $1,467
Payables to related party  --   --   --   --   255   (255)  -- —
 —
 —
 235
 (235) —
Total current liabilities  11   138   89   40   1,026   (255)  1,049 12
 113
 187
 1,390
 (235) 1,467
                                       
LONG-TERM DEBT  --   --   2,057   2,914   7,335   --   12,306 —
 —
 10,671
 3,510
 —
 14,181
LOANS PAYABLE – RELATED PARTY  --   --   --   --   542   (542)  -- —
 —
 —
 779
 (779) —
DEFERRED INCOME TAXES1,204
 —
 —
 227
 —
 1,431
OTHER LONG-TERM LIABILITIES  536   4   --   --   334   --   874 —
 6
 —
 59
 —
 65
                                       
Shareholders’/Member’s equity  1,480   1,889   1,409   3,296   5,946   (12,542)  1,478 151
 1,295
 325
 10,592
 (12,212) 151
Noncontrolling interest  --   --   --   --   262   (262)  -- 
Non-controlling interest—
 —
 —
 392
 (392) —
Total shareholders’/member’s equity  1,480   1,889   1,409   3,296   6,208   (12,804)  1,478 151
 1,295
 325
 10,984
 (12,604) 151
                                       
Total liabilities and shareholders’/member’s equity $2,027  $2,031  $3,555  $6,250  $15,445  $(13,601) $15,707 $1,367
 $1,414
 $11,183
 $16,949
 $(13,618) $17,295



F- 39
F-47
CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2010, 20092013, 2012 AND 20082011
(dollars in millions, except share or per share data or where indicated)

Charter Communications, Inc.
Condensed Consolidating Balance Sheet
As of December 31, 2012
 
 Charter Intermediate Holding Companies CCO Holdings Charter Operating and Subsidiaries Eliminations Charter Consolidated
ASSETS           
            
CURRENT ASSETS:           
Cash and cash equivalents$1
 $—
 $—
 $6
 $—
 $7
Restricted cash and cash equivalents—
 —
 —
 27
 —
 27
Accounts receivable, net1
 3
 —
 230
 —
 234
Receivables from related party59
 176
 11
 —
 (246) —
Prepaid expenses and other current assets16
 8
 —
 38
 —
 62
Total current assets77
 187
 11
 301
 (246) 330
            
INVESTMENT IN CABLE PROPERTIES:          
Property, plant and equipment, net—
 32
 —
 7,174
 —
 7,206
Franchises—
 —
 —
 5,287
 —
 5,287
Customer relationships, net—
 —
 —
 1,424
 —
 1,424
Goodwill—
 —
 —
 953
 —
 953
Total investment in cable properties, net—
 32
 —
 14,838
 —
 14,870
            
CC VIII PREFERRED INTEREST104
 242
 —
 —
 (346) —
            
INVESTMENT IN SUBSIDIARIES1,081
 269
 9,485
 —
 (10,835) —
            
LOANS RECEIVABLE – RELATED PARTY—
 309
 359
 —
 (668) —
            
OTHER NONCURRENT ASSETS—
 163
 118
 115
 —
 396
            
Total assets$1,262
 $1,202
 $9,973
 $15,254
 $(12,095) $15,596
            
LIABILITIES AND SHAREHOLDERS’/MEMBER’S EQUITY      
            
CURRENT LIABILITIES:           
Accounts payable and accrued liabilities$12
 $121
 $146
 $945
 $—
 $1,224
Payables to related party—
 —
 —
 246
 (246) —
Total current liabilities12
 121
 146
 1,191
 (246) 1,224
            
LONG-TERM DEBT—
 —
 9,558
 3,250
 —
 12,808
LOANS PAYABLE – RELATED PARTY—
 —
 —
 668
 (668) —
DEFERRED INCOME TAXES1,101
 —
 —
 220
 —
 1,321
OTHER LONG-TERM LIABILITIES—
 —
 —
 94
 —
 94
            
Shareholders’/Member’s equity149
 1,081
 269
 9,485
 (10,835) 149
Non-controlling interest—
 —
 —
 346
 (346) —
Total shareholders’/member’s equity149
 1,081
 269
 9,831
 (11,181) 149
            
Total liabilities and shareholders’/member’s equity$1,262
 $1,202
 $9,973
 $15,254
 $(12,095) $15,596

Charter Communications, Inc. 
Condensed Consolidating Balance Sheet 
Successor 
As of December 31, 2009 
                      
  Charter  Intermediate Holding Companies  CCH II  CCO Holdings  
Charter Operating
and Subsidiaries
  Eliminations  Charter Consolidated 
ASSETS                     
                      
CURRENT ASSETS:                     
Cash and cash equivalents $185  $12  $6  $--  $506  $--  $709 
Restricted cash and cash equivalents  18   --   --   --   27   --   45 
Accounts receivable, net  --   1   --   --   247   --   248 
Receivables from related party  41   178   1   5   --   (225)  -- 
Prepaid expenses and other current assets  --   24   --   --   45   --   69 
Total current assets  244   215   7   5   825   (225)  1,071 
                             
INVESTMENT IN CABLE PROPERTIES:                            
Property, plant and equipment, net  --   36   --   --   6,797   --   6,833 
Franchises  --   --   --   --   5,272   --   5,272 
Customer relationships, net  --   --   --   --   2,335   --   2,335 
Goodwill  --   --   --   --   951   --   951 
Total investment in cable properties, net  --   36   --   --   15,355   --   15,391 
                             
CC VIII PREFERRED INTEREST  68   157   --   --   --   (225)  -- 
                             
INVESTMENT IN SUBSIDIARIES  1,853   1,414   3,280   4,158   --   (10,705)  -- 
                             
LOANS RECEIVABLE – RELATED PARTY  --   13   239   242   --   (494)  -- 
                             
OTHER NONCURRENT ASSETS  --   160   --   --   38   (2)  196 
                             
Total assets $2,165  $1,995  $3,526  $4,405  $16,218  $(11,651) $16,658 
                             
LIABILITIES AND SHAREHOLDERS’/MEMBER’S EQUITY                         
                             
CURRENT LIABILITIES:                            
Accounts payable and accrued expenses $8  $134  $20  $9  $727  $--  $898 
Current portion of long-term debt  --   --   --   --   70   --   70 
Payables to related party  --   --   --   --   225   (225)  -- 
Total current liabilities  8   134   20   9   1,022   (225)  968 
                             
LONG-TERM DEBT  --   --   2,092   1,116   10,044   --   13,252 
LOANS PAYABLE  – RELATED PARTY  --   --   --   --   494   (494)  -- 
OTHER LONG-TERM LIABILITIES  239   6   --   --   275   --   520 
                             
Shareholders’/Member’s equity  1,918   1,853   1,414   3,280   4,158   (10,707)  1,916 
Noncontrolling interest  --   2   --   --   225   (225)  2 
                 Total shareholders’/member’s equity  1,918   1,855   1,414   3,280   4,383   (10,932)  1,918 
                             
Total liabilities and shareholders’/member’s equity $2,165  $1,995  $3,526  $4,405  $16,218  $(11,651) $16,658 

F- 40
F-48
CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2010, 20092013, 2012 AND 20082011
(dollars in millions, except share or per share data or where indicated)


Charter Communications, Inc.Charter Communications, Inc. Charter Communications, Inc.
Condensed Consolidating Statement of OperationsCondensed Consolidating Statement of Operations Condensed Consolidating Statement of Operations
Successor 
For the year ended December 31, 2010 
For the year ended December 31, 2013For the year ended December 31, 2013
                                
 Charter  Intermediate Holding Companies  CCH II  
CCO
Holdings
  
Charter Operating
and Subsidiaries
  Eliminations  Charter Consolidated Charter Intermediate Holding Companies 
CCO
Holdings
 Charter Operating and Subsidiaries Eliminations Charter Consolidated
                                
REVENUES $33  $118  $--  $--  $7,059  $(151) $7,059 $22
 $188
 $—
 $8,155
 $(210) $8,155
                                       
COSTS AND EXPENSES:                                       
Operating (excluding depreciation and amortization)  --   --   --   --   3,064   --   3,064 
Selling, general and administrative  33   118   --   --   1,422   (151)  1,422 
Operating costs and expenses (excluding depreciation and amortization)22
 188
 —
 5,345
 (210) 5,345
Depreciation and amortization  --   --   --   --   1,524   --   1,524 —
 —
 —
 1,854
 —
 1,854
Other operating expenses, net  --   --   --   --   25   --   25 —
 —
 —
 31
 —
 31
                                       
  33   118   --   --   6,035   (151)  6,035 22
 188
 —
 7,230
 (210) 7,230
                                       
Income from operations  --   --   --   --   1,024   --   1,024 —
 —
 —
 925
 —
 925
                                       
OTHER INCOME AND (EXPENSES):                                       
Interest expense, net  --   1   (196)  (142)  (540)  --   (877)—
 8
 (681) (173) —
 (846)
Reorganization items, net  --   --   --   --   (6)  --   (6)
Loss on extinguishment of debt  --   --   --   (17)  (68)  --   (85)—
 —
 (65) (58) —
 (123)
Other income, net  2   --   --   --   --   --   2 
Equity in income of subsidiaries  25   (2)  194   353   --   (570)  -- 
Gain on derivative instruments, net—
 —
 —
 11
 —
 11
Other expense, net—
 —
 —
 (16) —
 (16)
Equity in income (loss) of subsidiaries(75) (114) 632
 —
 (443) —
                                       
  27   (1)  (2)  194   (614)  (570)  (966)(75) (106) (114) (236) (443) (974)
                                       
Income (loss) before income taxes  27   (1)  (2)  194   410   (570)  58 (75) (106) (114) 689
 (443) (49)
                                       
INCOME TAX EXPENSE  (275)  --   --   --   (20)  --   (295)(108) (1) —
 (11) —
 (120)
                                       
Consolidated net income (loss)  (248)  (1)  (2)  194   390   (570)  (237)(183) (107) (114) 678
 (443) (169)
                                       
Less: Net (income) loss – noncontrolling interest  11   26   --   --   (37)  --   -- 
Less: Net (income) loss – non-controlling interest14
 32
 —
 (46) —
 —
                                       
Net income (loss) $(237) $25  $(2) $194  $353  $(570) $(237)$(169) $(75) $(114) $632
 $(443) $(169)


F- 41
F-49
CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2010, 20092013, 2012 AND 20082011
(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 
                      
  Charter  Intermediate Holding Companies  CCH II  
CCO
Holdings
  
Charter Operating
and Subsidiaries
  Eliminations  Charter Consolidated 
                      
REVENUES $7  $12  $--  $--  $572  $(19) $572 
                             
COSTS AND EXPENSES:                            
Operating (excluding depreciation and amortization)  --   --   --   --   246   --   246 
Selling, general and administrative  7   10   --   --   116   (17)  116 
Depreciation and amortization  --   --   --   --   122   --   122 
Other operating expenses, net  --   --   --   --   4   --   4 
                             
   7   10   --   --   488   (17)  488 
                             
Income from operations  --   2   --   --   84   (2)  84 
                             
OTHER INCOME AND (EXPENSES):                            
Interest expense, net  --   --   (16)  (7)  (45)  --   (68)
Reorganization items, net  --   (2)  --   --   (3)  2   (3)
Other expense, net  (3)  --   --   --   --   --   (3)
Equity in income of subsidiaries  9   6   22   29   --   (66)  -- 
                             
   6   4   6   22   (48)  (64)  (74)
                             
Income before income taxes  6   6   6   22   36   (66)  10 
                             
INCOME TAX EXPENSE  (4)  --   --   --   (4)  --   (8)
                             
Consolidated net income  2   6   6   22   32   (66)  2 
                             
Less: Net (income) loss – noncontrolling interest  --   3   --   --   (3)  --   -- 
                             
Net income $2  $9  $6  $22  $29  $(66) $2 


F-50
Charter Communications, Inc.
Condensed Consolidating Statement of Operations
For the year ended December 31, 2012
            
 Charter Intermediate Holding Companies 
CCO
Holdings
 Charter Operating and Subsidiaries Eliminations Charter Consolidated
            
REVENUES$24
 $159
 $—
 $7,504
 $(183) $7,504
            
COSTS AND EXPENSES:           
Operating costs and expenses (excluding depreciation and amortization)24
 159
 —
 4,860
 (183) 4,860
Depreciation and amortization—
 —
 —
 1,713
 —
 1,713
Other operating expenses, net—
 —
 —
 15
 —
 15
            
 24
 159
 —
 6,588
 (183) 6,588
            
Income from operations—
 —
 —
 916
 —
 916
            
OTHER INCOME AND (EXPENSES):           
Interest expense, net—
 (103) (541) (263) —
 (907)
Gain (loss) on extinguishment of debt—
 46
 —
 (101) —
 (55)
Other expense, net—
 —
 —
 (1) —
 (1)
Equity in income (loss) of subsidiaries(63) (35) 506
 —
 (408) —
            
 (63) (92) (35) (365) (408) (963)
            
Income (loss) before income taxes(63) (92) (35) 551
 (408) (47)
            
INCOME TAX EXPENSE(254) —
 —
 (3) —
 (257)
            
Consolidated net income (loss)(317) (92) (35) 548
 (408) (304)
            
Less: Net (income) loss – non-controlling interest13
 29
 —
 (42) —
 —
            
Net income (loss)$(304) $(63) $(35) $506
 $(408) $(304)




F- 42
CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2010, 20092013, 2012 AND 20082011
(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 
                      
  Charter  Intermediate Holding Companies  CCH II  
CCO
Holdings
  
Charter Operating
and Subsidiaries
  Eliminations  Charter Consolidated 
                      
REVENUES $29  $306  $--  $--  $6,183  $(335) $6,183 
                             
COSTS AND EXPENSES:                            
Operating (excluding depreciation and amortization)  --   --   --   --   2,663   --   2,663 
Selling, general and administrative  17   133   --   --   1,264   (150)  1,264 
Depreciation and amortization  --   --   --   --   1,194   --   1,194 
Impairment of franchises  --   --   --   --   2,163   --   2,163 
Other operating income, net  --   --   --   --   (38)  --   (38)
                             
   17   133   --   --   7,246   (150)  7,246 
                             
Income (loss) from operations  12   173   --   --   (1,063)  (185)  (1,063)
                             
OTHER INCOME AND (EXPENSES):                            
Interest expense, net  --   (204)  (233)  (68)  (515)  --   (1,020)
Gain (loss) due to Plan effects  (229)  7,400   (351)  --   (2)  --   6,818 
Gain due to fresh start accounting adjustments  --   158   --   25   5,476   --   5,659 
Reorganization items, net  (12)  (229)  (38)  (22)  (528)  185   (644)
Change in value of derivatives  --   --   --   --   (4)  --   (4)
Other income, net  --   --   --   --   2   --   2 
Equity in income of subsidiaries  11,203   2,666   3,288   3,353   --   (20,510)  -- 
                             
   10,962   9,791   2,666   3,288   4,429   (20,325)  10,811 
                             
Income before income taxes  10,974   9,964   2,666   3,288   3,366   (20,510)  9,748 
                             
INCOME TAX BENEFIT (EXPENSE)  390   -- �� --   --   (39)  --   351 
                             
Consolidated net income  11,364   9,964   2,666   3,288   3,327   (20,510)  10,099 
                             
Less: Net loss – noncontrolling interest  --   1,239   --   --   26   --   1,265 
                             
Net income $11,364  $11,203  $2,666  $3,288  $3,353  $(20,510) $11,364 
Charter Communications, Inc.
Condensed Consolidating Statement of Operations
For the year ended December 31, 2011
            
 Charter Intermediate Holding Companies 
CCO
Holdings
 Charter Operating and Subsidiaries Eliminations Charter Consolidated
            
REVENUES$33
 $124
 $—
 $7,204
 $(157) $7,204
            
COSTS AND EXPENSES:           
Operating costs and expenses (excluding depreciation and amortization)33
 124
 —
 4,564
 (157) 4,564
Depreciation and amortization—
 —
 —
 1,592
 —
 1,592
Other operating expenses, net—
 —
 —
 7
 —
 7
            
 33
 124
 —
 6,163
 (157) 6,163
            
Income from operations—
 —
 —
 1,041
 —
 1,041
            
OTHER INCOME AND (EXPENSES):           
Interest expense, net—
 (191) (381) (391) —
 (963)
Loss on extinguishment of debt—
 (6) —
 (137) —
 (143)
Other expense, net—
 —
 —
 (5) —
 (5)
Equity in income (loss) of subsidiaries(87) 82
 463
 —
 (458) —
            
 (87) (115) 82
 (533) (458) (1,111)
            
Income (loss) before income taxes(87) (115) 82
 508
 (458) (70)
            
INCOME TAX EXPENSE(295) (1) —
 (3) —
 (299)
            
Consolidated net income (loss)(382) (116) 82
 505
 (458) (369)
            
Less: Net (income) loss – non-controlling interest13
 29
 —
 (42) —
 —
            
Net income (loss)$(369) $(87) $82
 $463
 $(458) $(369)



F- 43
F-51
CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2010, 20092013, 2012 AND 20082011
(dollars in millions, except share or per share data or where indicated)


Charter Communications, Inc. 
Condensed Consolidating Statement of Operations 
Predecessor 
For the year ended December 31, 2008 
                      
  Charter  Intermediate Holding Companies  CCH II  
CCO
Holdings
  
Charter Operating
and Subsidiaries
  Eliminations  Charter Consolidated 
                      
REVENUES $21  $166  $--  $--  $6,479  $(187) $6,479 
                             
COSTS AND EXPENSES:                            
Operating (excluding depreciation and amortization)  --   --   --   --   2,807   --   2,807 
Selling, general and administrative  21   166   --   --   1,386   (187)  1,386 
Depreciation and amortization  --   --   --   --   1,310   --   1,310 
Impairment of franchises  --   --   --   --   1,521   --   1,521 
Other operating expenses, net  --   --   --   --   69   --   69 
                             
   21   166   --   --   7,093   (187)  7,093 
                             
Operating loss  --   --   --   --   (614)  --   (614)
                             
OTHER INCOME AND (EXPENSES):                            
Interest expense, net  --   (841)  (246)  (74)  (744)  --   (1,905)
Change in value of derivatives  --   33   --   --   (62)  --   (29)
Gain (loss) on extinguishment of debt  --   8   (4)  --   --   --   4 
Other expense, net  --   --   --   --   (6)  --   (6)
Equity in losses of subsidiaries  (2,514)  (1,723)  (1,473)  (1,399)  --   7,109   -- 
                             
   (2,514)  (2,523)  (1,723)  (1,473)  (812)  7,109   (1,936)
                             
Loss before income taxes  (2,514)  (2,523)  (1,723)  (1,473)  (1,426)  7,109   (2,550)
                             
INCOME TAX BENEFIT  63   --   --   --   40   --   103 
                             
Consolidated net loss  (2,451)  (2,523)  (1,723)  (1,473)  (1,386)  7,109   (2,447)
                             
Less: Net (income) loss – noncontrolling interest  --   9   --   --   (13)  --   (4)
                             
Net loss $(2,451) $(2,514) $(1,723) $(1,473) $(1,399) $7,109  $(2,451)
Charter Communications, Inc.
Condensed Consolidating Statement of Comprehensive Income (Loss)
For the year ended December 31, 2013
            
 Charter Intermediate Holding Companies 
CCO
Holdings
 Charter Operating and Subsidiaries Eliminations Charter Consolidated
            
Consolidated net income (loss)$(183) $(107) $(114) $678
 $(443) $(169)
Net impact of interest rate derivative instruments, net of tax—
 —
 —
 34
 —
 34
            
Comprehensive income (loss)$(183) $(107) $(114) $712
 $(443) $(135)


F-52
Charter Communications, Inc.
Condensed Consolidating Statement of Comprehensive Income (Loss)
For the year ended December 31, 2012
            
 Charter Intermediate Holding Companies 
CCO
Holdings
 Charter Operating and Subsidiaries Eliminations Charter Consolidated
            
Consolidated net income (loss)$(317) $(92) $(35) $548
 $(408) $(304)
Net impact of interest rate derivative instruments, net of tax—
 —
 —
 (10) —
 (10)
            
Comprehensive income (loss)$(317) $(92) $(35) $538
 $(408) $(314)


Charter Communications, Inc.
Condensed Consolidating Statement of Comprehensive Income (Loss)
For the year ended December 31, 2011
            
 Charter Intermediate Holding Companies 
CCO
Holdings
 Charter Operating and Subsidiaries Eliminations Charter Consolidated
            
Consolidated net income (loss)$(382) $(116) $82
 $505
 $(458) $(369)
Net impact of interest rate derivative instruments, net of tax—
 —
 —
 (8) —
 (8)
            
Comprehensive income (loss)$(382) $(116) $82
 $497
 $(458) $(377)



F- 44
CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2010, 20092013, 2012 AND 20082011
(dollars in millions, except share or per share data or where indicated)

Charter Communications, Inc.
Condensed Consolidating Statement of Cash Flows
For the year ended December 31, 2013
            
 Charter Intermediate Holding Companies 
CCO
Holdings
 Charter Operating and Subsidiaries Eliminations Charter Consolidated
            
CASH FLOWS FROM OPERATING ACTIVITIES:           
Consolidated net income (loss)$(183) $(107) $(114) $678
 $(443) $(169)
Adjustments to reconcile net income (loss) to net cash flows from operating activities:           
Depreciation and amortization—
 —
 —
 1,854
 —
 1,854
Noncash interest expense—
 —
 27
 16
 —
 43
Loss on extinguishment of debt—
 —
 65
 58
 —
 123
Gain on derivative instruments, net—
 —
 —
 (11) —
 (11)
Deferred income taxes105
 —
 —
 7
 —
 112
Equity in (income) losses of subsidiaries75
 114
 (632) —
 443
 —
Other, net—
 —
 —
 82
 —
 82
Changes in operating assets and liabilities, net of effects from acquisitions and dispositions:           
Accounts receivable(3) (1) —
 14
 —
 10
Prepaid expenses and other assets—
 1
 —
 (1) —
 —
Accounts payable, accrued liabilities and other—
 (3) 41
 76
 —
 114
Receivables from and payables to related party5
 (1) (10) 6
 —
 —
            
Net cash flows from operating activities(1) 3
 (623) 2,779
 —
 2,158
            
CASH FLOWS FROM INVESTING ACTIVITIES:           
Purchases of property, plant and equipment—
 —
 —
 (1,825) —
 (1,825)
Change in accrued expenses related to capital expenditures—
 —
 —
 76
 —
 76
Purchases of cable systems, net—
 —
 —
 (676) —
 (676)
Contribution to subsidiary(89) (534) (1,022) —
 1,645
 —
Distributions from subsidiary—
 6
 630
 —
 (636) —
Other, net—
 1
 —
 (19) —
 (18)
            
Net cash flows from investing activities(89) (527) (392) (2,444) 1,009
 (2,443)
            
CASH FLOWS FROM FINANCING ACTIVITIES:           
Borrowings of long-term debt—
 —
 2,000
 4,782
 —
 6,782
Repayments of long-term debt—
 —
 (955) (5,565) —
 (6,520)
Borrowings (payments) loans payable - related parties—
 —
 (93) 93
 —
 —
Payment for debt issuance costs—
 —
 (25) (25) —
 (50)
Purchase of treasury stock(15) —
 —
 —
 —
 (15)
Proceeds from exercise of options and warrants104
 —
 —
 —
 —
 104
Contributions from parent—
 534
 89
 1,022
 (1,645) —
Distributions to parent—
 (5) (1) (630) 636
 —
Other, net—
 —
 —
 (2) —
 (2)
            
Net cash flows from financing activities89
 529
 1,015
 (325) (1,009) 299
            
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS(1) 5
 —
 10
 —
 14
CASH AND CASH EQUIVALENTS, beginning of period1
 —
 —
 6
 —
 7
            
CASH AND CASH EQUIVALENTS, end of period$—
 $5
 $—
 $16
 $—
 $21

Charter Communications, Inc. 
Condensed Consolidating Statement of Cash Flows 
Successor 
For the year ended December 31, 2010 
                      
  Charter  Intermediate Holding Companies  CCH II  
CCO
Holdings
  
Charter Operating
and Subsidiaries
  Eliminations  Charter Consolidated 
                      
CASH FLOWS FROM OPERATING ACTIVITIES:                     
Consolidated net income (loss) $(248) $(1) $(2) $194  $390  $(570) $(237)
Adjustments to reconcile net income (loss) to net
    cash flows from operating activities:
                            
Depreciation and amortization  --   --   --   --   1,524   --   1,524 
Noncash interest expense  --   --   (35)  12   97   --   74 
Loss on extinguishment of debt  --   --   --   15   66   --   81 
Deferred income taxes  275   --   --   --   12   --   287 
Equity in losses of subsidiaries  (25)  2   (194)  (353)  --   570   -- 
Other, net  (2)  2   --   --   34   --   34 
Changes in operating assets and liabilities, net
    of effects from acquisitions and dispositions:
                            
Accounts receivable  --   --   --   --   --   --   -- 
Prepaid expenses and other assets  (2)  4   --   --   20   --   22 
Accounts payable, accrued expenses and other  --   --   70   31   25   --   126 
Receivables from and payables to related party  (18)  (21)  (16)  (14)  69   --   -- 
                             
Net cash flows from operating activities  (20)  (14)  (177)  (115)  2,237   --   1,911 
                             
CASH FLOWS FROM INVESTING ACTIVITIES:                            
Purchases of property, plant and equipment  --   --   --   --   (1,209)  --   (1,209)
Change in accrued expenses related to capital
    expenditures
  --   --   --   --   8   --   8 
Investment in subsidiary  (45)  (77)  (5)  (1,697)  --   1,824   -- 
Distributions from subsidiary  6   36   172   251   --   (465)  -- 
Loans to subsidiaries  --   (30)  --   --   --   30   -- 
Other, net  --   --   --   --   31   --   31 
                             
Net cash flows from investing activities  (39)  (71)  167   (1,446)  (1,170)  1,389   (1,170)
                             
CASH FLOWS FROM FINANCING ACTIVITIES:                            
Borrowings of long-term debt  --   --   --   2,600   515   --   3,115 
Repayments of long-term debt  --   --   --   (826)  (3,526)  --   (4,352)
Repayments of preferred stock  (138)  --   --   --   --   --   (138)
Payment for debt issuance costs  --   --   --   (45)  (31)  --   (76)
Purchase of treasury stock  (6)  --   --   --   --   --   (6)
Contributions from parent  --   109   13   5   1,697   (1,824)  -- 
Distributions to parent  --   (36)  (6)  (172)  (251)  465   -- 
Borrowings from parent  --   --   --   --   30   (30)  -- 
Other, net  --   --   --   --   (6)  --   (6)
                             
Net cash flows from financing activities  (144)  73   7   1,562   (1,572)  (1,389)  (1,463)
                             
NET INCREASE (DECREASE) IN CASH AND
    CASH EQUIVALENTS
  (203)  (12)  (3)  1   (505)  --   (722)
CASH AND CASH EQUIVALENTS, beginning of
    period
  203   12   6   --   533   --   754 
                             
CASH AND CASH EQUIVALENTS, end of period $--  $--  $3  $1  $28  $--  $32 


F- 45
F-53
CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2010, 20092013, 2012 AND 20082011
(dollars in millions, except share or per share data or where indicated)

Charter Communications, Inc.Charter Communications, Inc. Charter Communications, Inc.
Condensed Consolidating Statement of Cash FlowsCondensed Consolidating Statement of Cash Flows Condensed Consolidating Statement of Cash Flows
Successor 
For the one month ended December 31, 2009 
For the year ended December 31, 2012For the year ended December 31, 2012
                                
 Charter  Intermediate Holding Companies  CCH II  
CCO
Holdings
  
Charter Operating
and Subsidiaries
  Eliminations  Charter Consolidated Charter Intermediate Holding Companies 
CCO
Holdings
 Charter Operating and Subsidiaries Eliminations Charter Consolidated
                                
CASH FLOWS FROM OPERATING ACTIVITIES:                                
Consolidated net income $2  $9  $6  $22  $29  $(66) $2 
Adjustments to reconcile net income to net cash
flows from operating activities:
                            
Consolidated net income (loss)$(317) $(92) $(35) $548
 $(408) $(304)
Adjustments to reconcile net income (loss) to net cash flows from operating activities:           
Depreciation and amortization  --   --   --   --   122   --   122 —
 —
 —
 1,713
 —
 1,713
Noncash interest expense  --   --   (5)  1   9   --   5 —
 (23) 18
 50
 —
 45
(Gain) loss on extinguishment of debt—
 (46) —
 101
 —
 55
Deferred income taxes  4   --   --   --   3   --   7 252
 —
 —
 (2) —
 250
Equity in losses of subsidiaries  (9)  (6)  (22)  (29)  --   66   -- 
Equity in (income) losses of subsidiaries63
 35
 (506) —
 408
 —
Other, net  2   (2)  --   --   3   --   3 —
 —
 —
 45
 —
 45
Changes in operating assets and liabilities, net of
effects from acquisitions and dispositions:
                                       
Accounts receivable  --   --   --   --   26   --   26 (1) 1
 —
 34
 —
 34
Prepaid expenses and other assets  --   ---   --   --   2   --   2 2
 8
 —
 (18) —
 (8)
Accounts payable, accrued expenses and
other
  (14)  (16)  21   6   19   --   16 
Accounts payable, accrued liabilities and other—
 (87) 47
 86
 —
 46
Receivables from and payables to related party  --   18   --   --   (18)  --   -- (1) (1) (11) 13
 —
 —
                                       
Net cash flows from operating activities  (15)  3   --   --   195   --   183 (2) (205) (487) 2,570
 —
 1,876
                                       
CASH FLOWS FROM INVESTING ACTIVITIES:                                       
Purchases of property, plant and equipment  --   --   --   --   (108)  --   (108)—
 —
 —
 (1,745) —
 (1,745)
Change in accrued expenses related to capital
expenditures
  --   --   --   --   --   --   -- —
 —
 —
 13
 —
 13
Sales of cable systems, net—
 —
 —
 19
 —
 19
Contribution to subsidiary(14) (71) (2,330) —
 2,415
 —
Distributions from subsidiary12
 1,891
 2,014
 —
 (3,917) —
Other, net  --   --   --   --   (3)  --   (3)—
 —
 —
 (24) —
 (24)
                                       
Net cash flows from investing activities  --   --   --   --   (111)  --   (111)(2) 1,820
 (316) (1,737) (1,502) (1,737)
                                       
CASH FLOWS FROM FINANCING ACTIVITIES:                                       
Borrowings of long-term debt—
 —
 2,984
 2,846
 —
 5,830
Repayments of long-term debt  --   --   --   --   (17)  --   (17)—
 (1,621) —
 (4,280) —
 (5,901)
Borrowings (payments) loans payable - related parties—
 —
 (314) 314
 —
 —
Payment for debt issuance costs—
 —
 (39) (14) —
 (53)
Purchase of treasury stock(11) —
 —
 —
 —
 (11)
Proceeds from exercise of options and warrants15
 —
 —
 —
 —
 15
Contributions from parent—
 84
 1
 2,330
 (2,415) —
Distributions to parent—
 (72) (1,831) (2,014) 3,917
 —
Other, net1
 (6) —
 (9) —
 (14)
                                       
Net cash flows from financing activities  --   --   --   --   (17)  --   (17)5
 (1,615) 801
 (827) 1,502
 (134)
                                       
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS
  (15)  3   --   --   67   --   55 1
 —
 (2) 6
 —
 5
CASH AND CASH EQUIVALENTS, beginning of
period
  218   9   6   --   466   --   699 —
 —
 2
 —
 —
 2
                                       
CASH AND CASH EQUIVALENTS, end of period $203  $12  $6  $--  $533  $--  $754 $1
 $—
 $—
 $6
 $—
 $7



F- 46
F-54
CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2010, 20092013, 2012 AND 20082011
(dollars in millions, except share or per share data or where indicated)

Charter Communications, Inc. 
Condensed Consolidating Statement of Cash Flows 
Predecessor 
For the eleven months ended November 30, 2009 
                      
  Charter  Intermediate Holding Companies  CCH II  
CCO
Holdings
  
Charter Operating
and Subsidiaries
  Eliminations  Charter Consolidated 
                      
CASH FLOWS FROM OPERATING ACTIVITIES:                     
Consolidated net income $11,364  $9,964  $2,666  $3,288  $3,327  $(20,510) $10,099 
Adjustments to reconcile net income to net cash
   flows from operating activities:
                            
Depreciation and amortization  --   --   --   --   1,194   --   1,194 
Impairment of franchises  --   --   --   --   2,163   --   2,163 
Noncash interest expense  --   11   9   2   20   --   42 
Change in value of derivatives  --   --   --   --   4   --   4 
(Gain) loss due to effects of Plan  229   (7,400)  351   --   2   --   (6,818)
Gain due to fresh start accounting adjustments  --   (158)  --   (25)  (5,476)  --   (5,659)
Noncash reorganization items, net  --   56   (8)  --   122   --   170 
Deferred income taxes  (390)  --   --   --   32   --   (358)
Equity in income of subsidiaries  (11,203)  (2,666)  (3,288)  (3,353)  --   20,510   -- 
Other, net  --   (1)  --   1   31   --   31 
Changes in operating assets and liabilities, net of
  effects from acquisitions and dispositions:
                            
Accounts receivable  --   --   --   --   (52)  --   (52)
Prepaid expenses and other assets  --   (12)  --   --   (24)  --   (36)
Accounts payable, accrued expenses and other  (18)  195   279   (6)  (658)  (136)  (344)
Receivables from and payables to related party,
  including deferred management fees
  --   14   (8)  (10)  (21)  --   (25)
                             
Net cash flows from operating activities  (18)  3   1   (103)  664   (136)  411 
                             
CASH FLOWS FROM INVESTING ACTIVITIES:                            
Purchases of property, plant and equipment  --   --   --   --   (1,026)  --   (1,026)
Change in accrued expenses related to capital
   expenditures
  --   --   --   --   (10)  --   (10)
Purchase of CC VIII interest  (150)  --   --   --   --   --   (150)
Purchase of CCH II notes and accrued interest  (1,112)  --   --   --   --   1,112   -- 
Investment in subsidiaries  (71)  (255)  (51)  (25)  --   402   -- 
Payments from subsidiaries  19   --   --   75   --   (94)  -- 
Other, net  --   --   --   --   (7)  --   (7)
                             
Net cash flows from investing activities  (1,314)  (255)  (51)  50   (1,043)  1,420   (1,193)
                             
CASH FLOWS FROM FINANCING ACTIVITIES:                            
Proceeds from Rights Offering  1,614   --   --   --   --   --   1,614 
Repayments of long-term debt  (25)  --   --   --   (53)  (976)  (1,054)
Repayments to parent companies  --   (19)  --   --   (75)  94   -- 
Payments for debt issuance costs  (39)  --   --   --   --   --   (39)
Contributions from parent  --   275   51   51   25   (402)  -- 
Other, net  --   (2)  --   --   2   --   -- 
                             
Net cash flows from financing activities  1,550   254   51   51   (101)  (1,284)  521 
                             
NET INCREASE (DECREASE) IN CASH AND CASH
     EQUIVALENTS
  218   2   1   (2)  (480)  --   (261)
CASH AND CASH EQUIVALENTS, beginning of period  --   7   5   2   946   --   960 
                             
CASH AND CASH EQUIVALENTS, end of period $218  $9  $6  $--  $466  $--  $699 
Charter Communications, Inc.
Condensed Consolidating Statement of Cash Flows
For the year ended December 31, 2011
            
 Charter Intermediate Holding Companies 
CCO
Holdings
 Charter Operating and Subsidiaries Eliminations Charter Consolidated
            
CASH FLOWS FROM OPERATING ACTIVITIES:           
Consolidated net income (loss)$(382) $(116) $82
 $505
 $(458) $(369)
Adjustments to reconcile net income (loss) to net cash flows from operating activities:           
Depreciation and amortization—
 —
 —
 1,592
 —
 1,592
Noncash interest expense—
 (38) 20
 52
 —
 34
Loss on extinguishment of debt—
 6
 —
 137
 —
 143
Deferred income taxes294
 —
 —
 (4) —
 290
Equity in (income) losses of subsidiaries87
 (82) (463) —
 458
 —
Other, net—
 —
 —
 33
 —
 33
Changes in operating assets and liabilities, net of effects from acquisitions and dispositions:           
Accounts receivable—
 (5) —
 (19) —
 (24)
Prepaid expenses and other assets1
 (1) —
 1
 —
 1
Accounts payable, accrued liabilities and other1
 (16) 58
 (6) —
 37
Receivables from and payables to related party(1) —
 (7) 8
 —
 —
            
Net cash flows from operating activities—
 (252) (310) 2,299
 —
 1,737
            
CASH FLOWS FROM INVESTING ACTIVITIES:           
Purchases of property, plant and equipment—
 —
 —
 (1,311) —
 (1,311)
Change in accrued expenses related to capital expenditures—
 —
 —
 57
 —
 57
Purchases of cable systems, net—
 —
 —
 (88) —
 (88)
Contribution to subsidiary—
 —
 (2,837) —
 2,837
 —
Distributions from subsidiary528
 4,956
 650
 —
 (6,134) —
Other, net—
 —
 —
 (24) —
 (24)
            
Net cash flows from investing activities528
 4,956
 (2,187) (1,366) (3,297) (1,366)
            
CASH FLOWS FROM FINANCING ACTIVITIES:           
Borrowings of long-term debt—
 —
 3,640
 1,849
 —
 5,489
Repayments of long-term debt—
 (332) —
 (4,740) —
 (5,072)
Borrowings (payments) loans payable - related parties—
 —
 223
 (223) —
 —
Payment for debt issuance costs—
 —
 (54) (8) —
 (62)
Purchase of treasury stock(533) (200) —
 —
 —
 (733)
Proceeds from exercise of options and warrants5
 —
 —
 —
 —
 5
Contributions from parent—
 —
 —
 2,837
 (2,837) —
Distributions to parent—
 (4,173) (1,311) (650) 6,134
 —
Other, net—
 (2) —
 2
 —
 —
            
Net cash flows from financing activities(528) (4,707) 2,498
 (933) 3,297
 (373)
            
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS—
 (3) 1
 —
 —
 (2)
CASH AND CASH EQUIVALENTS, beginning of period—
 3
 1
 —
 —
 4
            
CASH AND CASH EQUIVALENTS, end of period$—
 $—
 $2
 $—
 $—
 $2



F- 47
F-55
CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2010, 2009 AND 2008
(dollars in millions, except share or per share data or where indicated)

Charter Communications, Inc. 
Condensed Consolidating Statement of Cash Flows 
Predecessor 
For the year ended December 31, 2008 
                      
  Charter  Intermediate Holding Companies  CCH II  
CCO
Holdings
  
Charter Operating
and Subsidiaries
  Eliminations  Charter Consolidated 
                      
CASH FLOWS FROM OPERATING ACTIVITIES:                     
Consolidated net loss $(2,451) $(2,523) $(1,723) $(1,473) $(1,386) $7,109  $(2,447)
Adjustments to reconcile net loss to net cash
  flows from operating activities:
                            
Depreciation and amortization  --   --   --   --   1,310   --   1,310 
Impairment of franchises  --   --   --   --   1,521   --   1,521 
Noncash interest expense  --   31   8   3   19   --   61 
Change in value of derivatives  --   (33)  --   --   62   --   29 
(Gain) loss on extinguishment of debt  --   (9)  4   --   --   --   (5)
Deferred income taxes  (63)  3   --   --   (47)  --   (107)
Equity in losses of subsidiaries  2,514   1,723   1,473   1,399   --   (7,109)  -- 
Other, net  --   --   --   --   48   --   48 
Changes in operating assets and liabilities, net of
  effects from acquisitions and dispositions:
                            
Accounts receivable  --   4   --   --   (1)  --   3 
Prepaid expenses and other assets  --   (1)  --   --   --   --   (1)
Accounts payable, accrued expenses and
 other
  --   8   --   (1)  (20)  --   (13)
Receivables from and payables to related
  party, including deferred management fees
  --   (22)  (11)  (19)  52   --   -- 
                             
Net cash flows from operating activities  --   (819)  (249)  (91)  1,558   --   399 
                             
CASH FLOWS FROM INVESTING ACTIVITIES:                            
Purchases of property, plant and equipment  --   --   --   --   (1,202)  --   (1,202)
Change in accrued expenses related to capital
    expenditures
  --   --   --   --   (39)  --   (39)
Investment in subsidiaries  --   (17)  --   --   --   17   -- 
Distributions from subsidiaries  --   1,347   1,072   1,163   --   (3,582)  -- 
Other, net  --   --   --   --   31   --   31 
                             
Net cash flows from investing activities  --   1,330   1,072   1,163   (1,210)  (3,565)  (1,210)
                             
CASH FLOWS FROM FINANCING ACTIVITIES:                            
Borrowings of long-term debt  --   --   --   --   3,105   --   3,105 
Repayments of long-term debt  --   (175)  --   --   (1,179)  --   (1,354)
Repayments to parent companies  --   115   --   --   (115)  --   -- 
Payments for debt issuance costs  --   --   (4)  --   (38)  --   (42)
Distributions to parent  --   (511)  (836)  (1,072)  (1,163)  3,582   -- 
Contributions from parent  --   --   17   --   --   (17)  -- 
Other, net  --   (1)  --   --   (12)  --   (13)
                             
Net cash flows from financing activities  --   (572)  (823)  (1,072)  598   3,565   1,696 
                             
NET INCREASE (DECREASE) IN CASH AND
   CASH  EQUIVALENTS
  --   (61)  --   --   946   --   885 
CASH AND CASH EQUIVALENTS, beginning of period  --   68   5   2   --   --   75 
                             
CASH AND CASH EQUIVALENTS, end of period $--  $7  $5  $2  $946  $--  $960 

  F-56