UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~September 30, 2005~~March 31, 2006

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ~~________to~~________ to _________

Commission file number: 000-27927

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

St. Louis, Missouri 63131

(Address of principal executive offices including zip code)

(314) 965-0555

(Registrant's telephone number, including area code)

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 [X] NO [ ]

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

Large accelerated filer o Accelerated filer þ Non-accelerated filer o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the ~~Exchange~~ Act). ~~YES [X] NO [ ]~~Yes oNo þ

Number of shares of Class A common stock outstanding as of ~~September 30, 2005: 348,576,466~~March 31, 2006: 438,437,984

Number of shares of Class B common stock outstanding as of ~~September 30, 2005:~~March 31, 2006: 50,000

Charter Communications, Inc.

Quarterly Report on Form 10-Q for the Period ended ~~September~~~~30, 2005~~March 31, 2006

Table of Contents

PART I. FINANCIAL INFORMATION	Page

Item 1. Report of Independent Registered Public Accounting Firm	4

Financial Statements - Charter Communications, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets as of ~~September 30, 2005~~ March 31, 2006
and December 31, ~~2004~~ 2005	5
Condensed Consolidated Statements of Operations for the three ~~and nine~~
months ended ~~September 30,~~March 31, 2006 and 2005 ~~and 2004~~	6
Condensed Consolidated Statements of Cash Flows for the
~~nine~~three months ended ~~September 30,~~March 31, 2006 and 2005 ~~and 2004~~	7
Notes to Condensed Consolidated Financial Statements	8

Item 2.Management's Discussion and Analysis of Financial Condition and Results of Operations	3221

Item 3.Quantitative and Qualitative Disclosures about Market Risk	5730

Item 4. Controls and Procedures	5930

PART II. OTHER INFORMATION

Item 1. Legal Proceedings	6032

Item 3. ~~Defaults Upon Senior Securities~~ 1A. Risk Factors	6232

Item 5. Other Information	42

Item ~~4. Submission of Matters to a Vote of Security Holders~~6.Exhibits	6242

~~Item 5. Other Information~~ SIGNATURES	6343

~~Item 6.Exhibits~~	63

~~SIGNATURES~~	64

EXHIBIT INDEX	6544

This quarterly report on Form 10-Q is for the three ~~and nine~~ months ended ~~September 30, 2005.~~March 31, 2006. 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 quarterly report. In addition, information that we file with the SEC in the future will automatically update and supersede information contained in this quarterly report. In this quarterly report, "we," "us" and "our" refer to Charter Communications, Inc., Charter Communications Holding Company, LLC and their subsidiaries.

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS:

This quarterly report includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended (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 the "Results of Operations" and "Liquidity and Capital Resources" sections under Part I, Item 2. "Management’s Discussion and Analysis of Financial Condition and Results of Operations" in this quarterly 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 will 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 under "Certain Trends and Uncertainties" under Part I, Item 2. "Management’s Discussion and Analysis of Financial Condition and Results of Operations" in this quarterly report. Many of the forward-looking statements contained in this quarterly report may be identified by the use of forward-looking words such as "believe," "expect," "anticipate," "should," "planned," "will," "may," "intend," ~~"estimated"~~"estimated" and "potential" among others. Important factors that could cause actual results to differ materially from the forward-looking statements we make in this quarterly report are set forth in this quarterly report and in other reports or documents that we file from time to time with the SEC, and include, but are not limited to:

the availability, in general, of funds to meet interest payment obligations under our debt and to fund our operations and necessary capital expenditures, either through cash flows from operating activities, further borrowings or other sources and, in particular, our ability to be able to provide under the applicable debt instruments such funds (by dividend, investment or otherwise) to the applicable obligor of such debt;

our ability to sustain and grow revenues and cash flows from operating activities by offering video, high-speed Internet, telephone and other services and to maintain and grow a stable customer base, particularly in the face of increasingly aggressive competition from other service providers;

~~our ability to~~ comply with all covenants in our indentures ~~the Bridge Loan~~ and credit facilities, any violation of which would result in a violation of the applicable facility or indenture and could trigger a default of other obligations under cross-default provisions;

our ability to pay or refinance debt prior to or when it becomes due and/or to take advantage of market opportunities and market windows to refinance that debt ~~in the capital markets~~ through new issuances, exchange offers or otherwise, including restructuring our balance sheet and leverage position;

our ability to obtain programming at reasonable prices or to pass programming cost increases on to our customers;

general business conditions, economic uncertainty or slowdown; and

the effects of governmental regulation, including but not limited to local franchise authorities, on our business.

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 quarterly report.

PART I. FINANCIAL INFORMATION.

Item 1. Financial Statements.

Report of Independent Registered Public Accounting Firm

The Board of Directors and Shareholders

Charter Communications, Inc.:

We have reviewed the condensed consolidated balance sheet of Charter Communications, Inc. and subsidiaries (the ~~“Company”)~~Company) as of ~~September 30, 2005,~~March 31, 2006, and the related condensed consolidated statements of operations ~~for the three-month~~ and ~~nine-month periods ended September 30, 2005 and 2004, and the related condensed consolidated statements of~~ cash flows for the ~~nine-month~~three-month periods ended ~~September 30, 2005~~March 31, 2006 and ~~2004.~~2005. These condensed consolidated financial statements are the responsibility of the Company’s management.

We conducted our reviews in accordance with the standards of the Public Company Accounting Oversight Board (United States). A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the Public Company Accounting Oversight Board (United States), the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.

Based on our reviews, we are not aware of any material modifications that should be made to the condensed consolidated financial statements referred to above for them to be in conformity with U.S. generally accepted accounting principles.

We have previously audited, in accordance with standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheet of the Company as of December 31, ~~2004,~~2005, and the related consolidated statements of operations, changes in shareholders’ equity (deficit), and cash flows for the year then ended (not presented herein);, and in our report dated ~~March~~February 27, 2006, which includes explanatory paragraphs regarding the adoption, effective September 30, 2004, of EITF Topic D-108, Use of the Residual Method to Value Acquired Assets Other than Goodwill, and effective January 1, ~~2005,~~ 2003, of Statement of Financial Accounting Standards (SFAS) No. 123, Accounting for Stock-Based Compensation, as amended by SFAS No. 148, Accounting for Stock Based Compensation—Transition and Disclosure—an amendment of FASB Statement No. 123, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of December 31, ~~2004,~~2005, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.

~~As discussed in Note 4 to the condensed consolidated financial statements, effective September 30, 2004, the Company adopted EITF Topic D-108,~~ ~~Use of the Residual Method to Value Acquired Assets Other than Goodwill.~~

/s/ KPMG LLP

St. Louis, Missouri

~~October 31, 2005~~April 28, 2006

CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(DOLLARS IN MILLIONS, EXCEPT SHARE DATA)

	September 30,			December 31,			March 31,			December 31,
	2005			2004			2006			2005
	(Unaudited)						(Unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	22		$	650		$	40		$	21
Accounts receivable, less allowance for doubtful accounts of
$15 and $15, respectively		188			190
$15 and $17, respectively								149			214
Prepaid expenses and other current assets		80			82			87			92
Assets held for sale								754			--
Total current assets		290			922			1,030			327

INVESTMENT IN CABLE PROPERTIES:
Property, plant and equipment, net of accumulated
depreciation of $6,393 and $5,311, respectively		5,936			6,289
depreciation of $7,098 and $6,749, respectively								5,440			5,840
Franchises, net		9,830			9,878			9,287			9,826
Total investment in cable properties, net		15,766			16,167			14,727			15,666

OTHER NONCURRENT ASSETS		468			584			446			438

Total assets	$	16,524		$	17,673		$	16,203		$	16,431

LIABILITIES AND SHAREHOLDERS’ DEFICIT
CURRENT LIABILITIES:
Accounts payable and accrued expenses	$	1,172		$	1,217		$	1,285		$	1,191
Liabilities held for sale								19			--
Total current liabilities		1,172			1,217			1,304			1,191

LONG-TERM DEBT		19,120			19,464			19,522			19,388
NOTE PAYABLE - RELATED PARTY								51			49
DEFERRED MANAGEMENT FEES - RELATED PARTY		14			14			14			14
OTHER LONG-TERM LIABILITIES		504			681			503			517
MINORITY INTEREST		665			648			188			188
PREFERRED STOCK - REDEEMABLE; $.001 par value; 1 million
shares authorized; 545,259 shares issued and outstanding		55			55
shares authorized; 36,713 shares issued and outstanding								4			4

SHAREHOLDERS’ DEFICIT:
Class A Common stock; $.001 par value; 1.75 billion shares authorized;
348,576,466 and 305,203,770 shares issued and outstanding, respectively		--			--
438,437,984 and 416,204,671 shares issued and outstanding, respectively								--			--
Class B Common stock; $.001 par value; 750 million
shares authorized; 50,000 shares issued and outstanding		--			--			--			--
Preferred stock; $.001 par value; 250 million shares
authorized; no non-redeemable shares issued and outstanding		--			--			--			--
Additional paid-in capital		4,821			4,794			5,238			5,241
Accumulated deficit		(9,830	)		(9,196	)		(10,625	)		(10,166	)
Accumulated other comprehensive income (loss)		3			(4	)
Accumulated other comprehensive income								4			5

Total shareholders’ deficit		(5,006	)		(4,406	)		(5,383	)		(4,920	)

Total liabilities and shareholders’ deficit	$	16,524		$	17,673		$	16,203		$	16,431

The accompanying notes are an integral part of these condensed consolidated financial statements.

CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(DOLLARS IN MILLIONS, EXCEPT SHARE AND PER SHARE DATA)

Unaudited

Three Months Ended September 30,

Nine Months Ended September 30,

2005

2004

2005

2004

REVENUES $ 1,318 $ 1,248 $ 3,912 $ 3,701

COSTS AND EXPENSES:
Operating (excluding depreciation and amortization) 586 525 1,714 1,552
Selling, general and administrative 269 252 762 735
Depreciation and amortization 375 371 1,134 1,105
Impairment of franchises -- 2,433 -- 2,433
Asset impairment charges -- -- 39 --
(Gain) loss on sale of assets, net 1 -- 5 (104 )
Option compensation expense, net 3 8 11 34
Hurricane asset retirement loss 19 -- 19 --
Special charges, net 2 3 4 100

1,255 3,592 3,688 5,855

Income (loss) from operations 63 (2,344 ) 224 (2,154 )

OTHER INCOME AND EXPENSES:
Interest expense, net (462 ) (424 ) (1,333 ) (1,227 )
Gain (loss) on derivative instruments and hedging activities, net 17 (8 ) 43 48
Loss on debt to equity conversions -- -- -- (23 )
Gain (loss) on extinguishment of debt 490 -- 498 (21 )
Gain on investments -- -- 21 --

45 (432 ) (771 ) (1,223 )

Income (loss) before minority interest, income taxes and cumulative effect of accounting change 108 (2,776 ) (547 ) (3,377 )

MINORITY INTEREST (3 ) 34 (9 ) 24

Income (loss) before income taxes and cumulative effect of accounting change 105 (2,742 ) (556 ) (3,353 )

INCOME TAX BENEFIT (EXPENSE) (29 ) 213 (75 ) 116

Income (loss) before cumulative effect of accounting change 76 (2,529 ) (631 ) (3,237 )

CUMULATIVE EFFECT OF ACCOUNTING CHANGE, NET OF TAX -- (765 ) -- (765 )

Net income (loss) 76 (3,294 ) (631 ) (4,002 )

Dividends on preferred stock - redeemable (1 ) (1 ) (3 ) (3 )

Net income (loss) applicable to common stock $ 75 $ (3,295 ) $ (634 ) $ (4,005 )

EARNINGS (LOSS) PER COMMON SHARE:

Basic $ 0.24 $ (10.89 ) $ (2.06 ) $ (13.38 )

Diluted $ 0.09 $ (10.89 ) $ (2.06 ) $ (13.38 )

Weighted average common shares outstanding, basic 316,214,740 302,604,978 307,761,930 299,411,053

Weighted average common shares outstanding, diluted 1,012,591,842 302,604,978 307,761,930 299,411,053

	Three Months Ended March 31,
	2006			2005

REVENUES	$	1,374		$	1,271

COSTS AND EXPENSES:
Operating (excluding depreciation and amortization)		626			559
Selling, general and administrative		281			241
Depreciation and amortization		358			381
Asset impairment charges		99			31
Other operating expenses, net		3			8

		1,367			1,220

Income from operations		7			51

OTHER INCOME AND (EXPENSES):
Interest expense, net		(468	)		(420	)
Other income, net		11			32

		(457	)		(388	)

Loss before income taxes		(450	)		(337	)

INCOME TAX EXPENSE		(9	)		(15	)

Net loss		(459	)		(352	)

Dividends on preferred stock - redeemable		--			(1	)

Net loss applicable to common stock	$	(459	)	$	(353	)

LOSS PER COMMON SHARE, basic and diluted	$	(1.45	)	$	(1.16	)

Weighted average common shares outstanding, basic and diluted		317,413,472			303,308,880

The accompanying notes are an integral part of these condensed consolidated financial statements.

CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(DOLLARS IN MILLIONS)

Unaudited

	Nine Months Ended September 30,						Three Months Ended March 31,
	2005			2004			2006			2005

CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(631	)	$	(4,002	)	$	(459	)	$	(352	)
Adjustments to reconcile net loss to net cash flows from operating activities:
Minority interest		9			(24	)
Depreciation and amortization		1,134			1,105			358			381
Asset impairment charges		39			--			99			31
Impairment of franchises		--			2,433
Option compensation expense, net		11			30
Hurricane asset retirement loss		19			--
Special charges, net		--			85
Noncash interest expense		188			237			52			49
Gain on derivative instruments and hedging activities, net		(43	)		(48	)
(Gain) loss on sale of assets, net		5			(104	)
Loss on debt to equity conversions		--			23
(Gain) loss on extinguishment of debt		(504	)		18
Gain on investments		(21	)		--
Deferred income taxes		71			(119	)		7			13
Cumulative effect of accounting change, net of tax		--			765
Other, net		--			(1	)		(7	)		(28	)
Changes in operating assets and liabilities, net of effects from dispositions:
Changes in operating assets and liabilities, net of effects from acquisitions and dispositions:
Accounts receivable		(3	)		1			61			45
Prepaid expenses and other assets		85			2			3			(4	)
Accounts payable, accrued expenses and other		(241	)		(18	)		95			18

Net cash flows from operating activities		118			383			209			153

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment		(815	)		(639	)		(241	)		(211	)
Change in accrued expenses related to capital expenditures		36			(23	)		(7	)		14
Proceeds from sale of assets		38			729			9			6
Purchase of cable system								(42	)		--
Purchases of investments		(3	)		(15	)		--			(2	)
Proceeds from investments		17			--			5			--
Other, net		(2	)		(2	)

Net cash flows from investing activities		(729	)		50			(276	)		(193	)

CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings of long-term debt		897			2,873			415			200
Repayments of long-term debt		(1,141	)		(4,707	)		(759	)		(775	)
Proceeds from issuance of debt		294			1,500			440			--
Payments for debt issuance costs		(67	)		(97	)		(10	)		(3	)

Net cash flows from financing activities		(17	)		(431	)		86			(578	)

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		(628	)		2			19			(618	)
CASH AND CASH EQUIVALENTS, beginning of period		650			127			21			650

CASH AND CASH EQUIVALENTS, end of period	$	22		$	129		$	40		$	32

CASH PAID FOR INTEREST	$	1,170		$	824		$	240		$	249

NONCASH TRANSACTIONS:
Issuance of debt by CCH I Holdings, LLC	$	2,423		$	--
Issuance of debt by CCH I, LLC	$	3,686		$	--
Issuance of debt by Charter Communications Operating, LLC	$	333		$	--		$	37		$	271
Retirement of Renaissance Media Group LLC debt							$	(37	)	$	--
Retirement of Charter Communications Holdings, LLC debt	$	(7,000	)	$	--		$	--		$	(284	)
Debt exchanged for Charter Class A common stock	$	--		$	30

The accompanying notes are an integral part of these condensed consolidated financial statements.

CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

(dollars in millions, except share and per share amounts and where indicated)

1.Organization and Basis of Presentation

1.	~~Organization and Basis of Presentation~~

Charter Communications, Inc. ("Charter") is a holding company whose principal assets at ~~September 30, 2005~~March 31, 2006 are the 48% controlling common equity interest in Charter Communications Holding Company, LLC ("Charter Holdco") and "mirror" notes which are payable by Charter Holdco to Charter and have the same principal amount and terms as those of Charter’s convertible senior notes. Charter Holdco is the sole owner of CCHC, LLC ("CCHC"), which is the sole owner of Charter Communications Holdings, LLC ("Charter Holdings"). The condensed consolidated financial statements include the accounts of Charter, Charter Holdco, CCHC, Charter Holdings and all of their subsidiaries where the underlying operations reside, which are collectively referred to herein as the "Company." Charter ~~consolidates~~has 100% voting control over Charter Holdco and had historically consolidated on ~~the basis~~that basis. Charter continues to consolidate Charter Holdco as a variable interest entity under Financial Accounting Standards Board ("FASB") Interpretation ("FIN") 46(R) Consolidation of ~~voting control.~~Variable Interest Entities. Charter Holdco’s limited liability company agreement provides that so long as Charter’s Class B common stock retains its special voting rights, Charter will maintain a 100% voting interest in Charter Holdco. Voting control gives Charter full authority and control over the operations of Charter Holdco. All significant intercompany accounts and transactions among consolidated entities have been eliminated. The Company is a broadband communications company operating in the United States. The Company offers its customers traditional cable video programming (analog and digital video) as well as high-speed Internet services and, in some areas, advanced broadband services such as high definition television, video on demand and telephone. The Company sells its cable video programming, high-speed Internet and advanced broadband services on a subscription basis. The Company also sells local advertising on satellite-delivered networks.

The accompanying condensed consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and the rules and regulations of the Securities and Exchange Commission (the "SEC"). Accordingly, certain information and footnote disclosures typically included in Charter’s Annual Report on Form 10-K have been condensed or omitted for this quarterly report. The accompanying condensed consolidated financial statements are unaudited and are subject to review by regulatory authorities. However, in the opinion of management, such financial statements include all adjustments, which consist of only normal recurring adjustments, necessary for a fair presentation of the results for the periods presented. Interim results are not necessarily indicative of results for a full year.

The preparation of financial statements in conformity with accounting principles generally accepted in the United States 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; impairments of property, plant and equipment, franchises and goodwill; income taxes; and contingencies. Actual results could differ from those estimates.

Reclassifications

Certain ~~2004~~2005 amounts have been reclassified to conform with the ~~2005~~2006 presentation.

2.	2.Liquidity and Capital Resources

The Company had ~~net income applicable to common stock of $75 million for the three months ended September 30, 2005. The Company incurred~~ net loss applicable to common stock of ~~$634~~$459 million and $353 million for the ~~nine~~three months ended ~~September 30,~~March 31, 2006 and 2005, ~~and $3.3 billion and $4.0 billion for the three and nine months ended September 30, 2004,~~ respectively. The Company’s net cash flows from operating activities were ~~$118~~$209 million and ~~$383~~$153 million for the ~~nine~~three months ended ~~September 30,~~March 31, 2006 and 2005, ~~and 2004,~~ respectively.

~~The Company has a significant level~~Recent Financing Transactions

On January 30, 2006, CCH II, LLC ("CCH II") and CCH II Capital Corp. issued $450 million in debt securities, the proceeds of debt. The Company's long-term financing as of September 30, 2005 consists of $5.5 billion of credit facility debt, $12.7 billion accreted value of high-yield notes and $866 million accreted value of convertible senior notes. For the remainder of 2005, $7 million of the Company’s debt matures, and in 2006, an additional $55 million of the Company’s debt matures. In 2007 and beyond, significant additional amounts will become duewhich were provided, directly or indirectly, to Charter Communications Operating, LLC ("Charter Operating"), which used such funds to reduce borrowings, but not commitments, under the ~~Company’s remaining long-term debt obligations.~~revolving portion of its credit facilities.

CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

(dollars in millions, except share and per share amounts and where indicated)

In ~~September 2005,~~April 2006, Charter ~~Holdings~~Operating completed a $6.85 billion refinancing of its credit facilities including a new $350 million revolving/term facility (which converts to a term loan in one year), a $5.0 billion term loan due in 2013 and ~~its wholly owned subsidiaries, CCH I, LLC ("CCH I")~~certain amendments to the existing $1.5 billion revolving credit facility. In addition, the refinancing reduced margins on Eurodollar rate loans to 2.625% from 3.15% previously and ~~CCH I~~margins on base rate loans to 1.625% from 2.15% previously. Concurrent with this refinancing, the CCO Holdings, LLC ("~~CIH"~~CCO Holdings"), completed the exchange of approximately $6.8 billion total principal amount of outstanding debt securities of Charter Holdings in a private placement for new debt securities. Holders of Charter Holdings notes due in 2009 and 2010 exchanged $3.4 billion principal amount of notes for $2.9 billion principal amount of new 11% CCH I senior secured notes due 2015. Holders of Charter Holdings notes due 2011 and 2012 exchanged $845 million principal amount of notes for $662 million principal amount of 11% CCH I senior secured notes due 2015. In addition, holders of Charter Holdings notes due 2011 and 2012 exchanged $2.5 billion principal amount of notes for $2.5 billion principal amount of various series of new CIH notes. Each series of new CIH notes has the same stated interest rate and provisions for payment of cash interest as the series of old Charter Holdings notes for which such CIH notes were exchanged. In addition, the maturities for each series were extended three years. See Note 6 for discussion of transaction and related financial statement impact. Bridge Loan (the "Bridge Loan") was terminated.

The Company has ~~historically required~~a significant level of debt. The Company's long-term financing as of March 31, 2006 consists of $5.4 billion of credit facility debt, $13.3 billion accreted value of high-yield notes and $866 million accreted value of convertible senior notes. Pro forma for the completion of the credit facility refinancing discussed above, $20 million of the Company’s debt matures in the remainder of 2006, and in 2007 and 2008, an additional $130 million and $128 million mature, respectively. In 2009 and beyond, significant additional amounts will become due under the Company’s remaining long-term debt obligations.

The Company requires significant cash to fund debt service costs, capital expenditures and ongoing operations. ~~Historically, the~~The Company has historically funded these requirements through cash flows from operating activities, borrowings under its credit facilities, sales of assets, issuances of debt and equity securities and ~~from~~ cash on hand. However, the mix of funding sources changes from period to period. For the ~~nine~~three months ended ~~September 30, 2005,~~March 31, 2006, the Company generated ~~$118~~$209 million of net cash flows from operating activities, after paying cash interest of ~~$1.2 billion.~~$240 million. In addition, the Company used approximately ~~$815~~$241 million for purchases of property, plant and equipment. Finally, the Company had net cash flows ~~used in~~from financing activities of ~~$17~~$86 million.

In October 2005, CCO Holdings, LLC ("CCO Holdings") and CCO Holdings Capital Corp., as guarantor thereunder, entered into a senior bridge loan agreement (the "Bridge Loan") with JPMorgan Chase Bank, N.A., Credit Suisse, Cayman Islands Branch and Deutsche Bank AG Cayman Islands Branch (the "Lenders") whereby the Lenders have committed to make loans to CCO Holdings in an aggregate amount of $600 million. CCO Holdings may draw upon the facility between January 2, 2006 and September 29, 2006 and the loans will mature on the sixth anniversary of the first borrowing under the Bridge Loan.

The Company expects that cash on hand, cash flows from operating activities, proceeds from sales of assets and the amounts available under its credit facilities ~~and Bridge Loan~~ will be adequate to meet its cash needs for the remainder of 2005 and 2006. Cash flows from operating activities and amounts available under the Company’s credit facilities and Bridge Loan may not be sufficient to fund the Company’s operations and satisfy its interest payment obligations in 2007. It is likely that the Company will require additional funding to satisfy its debt repayment obligations inthrough 2007. The Company believes that cash flows from operating activities and amounts available under ~~its~~the Company’s credit facilities may not be sufficient to fund the Company’s operations and ~~Bridge Loan~~satisfy its interest and debt repayment obligations in 2008 and will not be sufficient to fund ~~its operations~~such needs in 2009 and ~~satisfy its interest and principal repayment obligations thereafter.~~

beyond. The Company ~~is working~~continues to work with its financial advisors in its approach to ~~address~~addressing liquidity, debt maturities and its funding requirements. However, there can be no assurance that such funding will be available to the Company. Although Paul G. Allen, Charter’s Chairman and controlling shareholder, and his affiliates have purchased equity from the Company in the past, Mr. Allen and his affiliates are not obligated to purchase equity from, contribute to or loan funds to the Company in the future.overall balance sheet leverage.

~~Credit Facilities and~~Debt Covenants

The Company’s ability to operate depends upon, among other things, its continued access to capital, including credit under the Charter ~~Communications~~ Operating ~~LLC ("Charter Operating")~~ credit facilities. ~~These~~The Charter Operating credit facilities, along with the Company’s indentures, ~~and Bridge Loan,~~ contain certain restrictive covenants, some of which require the Company to maintain specified financial ratios and meet financial tests and to provide annual audited financial statements with an unqualified opinion from the Company’s independent auditors. As of ~~September 30, 2005,~~March 31, 2006, the Company is in compliance with the covenants under its indentures and credit facilities, and the Company expects to remain in compliance with those covenants ~~and the Bridge Loan covenants~~ for the next twelve months. ~~The~~As of March 31, 2006, the Company’s ~~total~~ potential ~~borrowing~~ availability under ~~the current~~its credit facilities totaled ~~$786~~approximately $904 million, ~~as of September 30, 2005,~~ although the actual availability at that time was only ~~$648~~$516 million because of limits imposed by covenant restrictions. ~~In addition, effective January 2,~~However, pro forma for the completion of the credit facility refinancing discussed above, the Company’s potential availability under its credit facilities as of March 31, 2006 ~~the Company will~~would have ~~additional borrowing~~been approximately $1.3 billion, although actual covenanted availability of ~~$600~~$516 million ~~as a result of the Bridge Loan.~~would remain unchanged. Continued access to the Company’s credit facilities ~~and Bridge Loan~~ is subject to the

~~CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(UNAUDITED)~~

~~(dollars in millions, except share and per share amounts and where indicated)~~

Company remaining in compliance with ~~the~~these covenants, ~~of these credit facilities and Bridge Loan,~~ including covenants tied to the Company’s operating performance. If ~~the Company’s operating performance results in non-compliance with these covenants, or if~~ any ~~of certain other~~ events of non-compliance ~~under these credit facilities, Bridge Loan or indentures governing the Company’s debt~~ occur, funding under the credit facilities ~~and Bridge Loan~~ may not be available and defaults on some or potentially all of the Company’s debt obligations could occur. An event of default under ~~the covenants governing~~ any of the Company’s debt instruments could result in the acceleration of its payment obligations under that debt and, under certain circumstances, in cross-defaults under its other debt obligations, which could have a material adverse effect on the Company’s consolidated financial condition orand results of operations.

CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

(dollars in millions, except share and per share amounts and where indicated)

Specific Limitations

Charter’s ability to make interest payments on its convertible senior notes, and, in 2006 and 2009, to repay the outstanding principal of its convertible senior notes of ~~$25~~$20 million and $863 million, respectively, will depend on its ability to raise additional capital and/or on receipt of payments or distributions from Charter Holdco orand its subsidiaries, including Charter Holdings, CIH, CCH I, CCH II, LLC ("CCH II"), CCO Holdings and Charter Operating. During the nine months ended September 30, 2005, Charter Holdings distributed $60 million to Charter Holdco.subsidiaries. As of ~~September 30, 2005,~~March 31, 2006, Charter Holdco was owed ~~$57~~$24 million in intercompany loans from its subsidiaries, which ~~amount was~~were available to pay interest and principal on Charter's convertible senior notes. In addition, Charter has ~~$123~~$99 million of governmental securities pledged as security for the next ~~five~~four scheduled semi-annual interest payments on Charter’s 5.875% convertible senior notes.

Distributions by Charter’s subsidiaries to a parent company (including Charter, CCHC and Charter Holdco) for payment of principal on parent company notes are restricted byunder the ~~Bridge Loan and~~ indentures governing the CIH notes, CCH I notes, CCH II notes, CCO Holdings notes and Charter Operating notes unless ~~under their respective indentures~~ there is no default, ~~and a specified~~each applicable subsidiary’s leverage ratio test is met at the time of such ~~event.~~distribution and, in the case of the convertible senior notes, other specified tests are met. For the quarter ended ~~September 30, 2005,~~March 31, 2006, there was no default under any of these indentures and the ~~aforementioned indentures.~~other specified tests were met. However, ~~CCO Holdings~~certain of the Company’s subsidiaries did not meet ~~its~~their respective leverage ratio ~~test of 4.5 to 1.0.~~tests based on March 31, 2006 financial results. As a result, distributions from ~~CCO Holdings to CCH II, CCH I, CIH, Charter Holdings, Charter Holdco or Charter for payment of principal~~certain of the ~~respective~~Company’s subsidiaries to their parent ~~company’s debt are currently~~companies have been restricted and will continue to be restricted until ~~that test~~those tests are met. Distributions by Charter Operating for payment of principal on parent company notes are further restricted by the covenants in the credit facilities.

Distributions by CIH, CCH I, CCH II, CCO Holdings and Charter Operating to a parent company for payment of parent company interest are permitted if there is ~~met.~~no default under the aforementioned indentures. However, distributions for payment of interest on the ~~respective parent company’s interest~~convertible senior notes are ~~permitted.~~further limited to when each applicable subsidiary’s leverage ratio test is met and other specified tests are met. There can be no assurance that they will satisfy these tests at the time of such distribution.

The indentures governing the Charter Holdings notes permit Charter Holdings to make distributions to Charter Holdco for payment of interest or principal on the convertible senior notes, only if, after giving effect to the distribution, Charter Holdings can incur additional debt under the leverage ratio of 8.75 to 1.0, there is no default under Charter Holdings’ indentures and other specified tests are met. For the quarter ended ~~September 30, 2005,~~March 31, 2006, there was no default under Charter Holdings’ indentures and the other specified tests were met. However, Charter Holdings did not meet the leverage ratio test of 8.75 to 1.0 based on ~~September 30, 2005~~March 31, 2006 financial results. As a result, distributions from Charter Holdings to Charter or Charter Holdco ~~for payment of interest or principal on the convertible senior notes are currently~~have been restricted and will continue to be restricted until that test is met. During this restriction period, the indentures governing the Charter Holdings notes permit Charter Holdings and its subsidiaries to make specified investments (that are not restricted payments) in Charter Holdco or Charter up to an amount determined by a formula, as long as there is no default under the indentures.

3.Sale of Assets

~~Sale of Assets~~

In ~~July 2005,~~February 2006, the Company ~~closed the sale of~~signed three separate definitive agreements to sell certain cable television systems ~~in Texas and West Virginia and closed the sale of an additional cable system in Nebraska in October 2005, representing~~serving a total of approximately ~~33,000 customers. During the nine months ended September 30, 2005,~~360,000 analog video customers in West Virginia, Virginia, Illinois, Kentucky, Nevada, Colorado, New Mexico and Utah for a total of approximately $971 million. As of March 31, 2006, those cable systems met the criteria for assets held for sale under Statement of Financial Accounting Standards ("SFAS") No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets. As such, the assets were written down to fair value less estimated costs to sell resulting in asset impairment charges during the ~~nine~~three months ended ~~September 30, 2005~~March 31, 2006 of approximately ~~$39~~$99 million. ~~At September 30, 2005~~In addition, assets and liabilities to be sold were reclassified as held for sale. Assets held for sale on the Company's balance sheet as of March 31, 2006 included ~~in investment in cable properties, are~~current assets of approximately $7$5 million, property, plant and equipment of approximately $312 million and franchises of approximately $437 million. Liabilities held for sale on the Company's balance sheet as of March 31, 2006 included current liabilities of approximately $6 million and other long-term liabilities of approximately $13 million.

CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

(dollars in millions, except share and per share amounts and where indicated)

In ~~March 2004,~~2005, the Company closed the sale of certain cable systems in ~~Florida, Pennsylvania, Maryland, Delaware and~~Texas, West Virginia and Nebraska representing a total of approximately 33,000 analog video customers. During the three months ended March 31, 2005, certain of those cable systems met the criteria for assets held for sale. As such, the assets were written down to ~~Atlantic Broadband Finance, LLC. The Company closed~~fair value less estimated costs to sell resulting in asset impairment charges during the ~~sale~~three months ended March 31, 2005 of an additional cable system in New York to Atlantic Broadband Finance, LLC in April 2004. These transactions resulted in a $106 million pretax gain recorded as a gain on sale of assets in the Company’s consolidated statements of operations. The total net proceeds from the sale of all of these systems were approximately ~~$735~~$31 million. ~~The proceeds were used to repay a portion of amounts outstanding under the Company’s revolving credit facility.~~

Gain on investments for the nine months ended September 30, 2005 primarily represents a gain realized on an exchange of the Company’s interest in an equity investee for an investment in a larger enterprise.4.Franchises and Goodwill

4.	~~Franchises and Goodwill~~

Franchise rights represent the value attributed to agreements with local authorities that allow access to homes in cable service areas acquired through the purchase of cable systems. 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 as defined by SFAS No. 142, Goodwill and Other Intangible Assets. Franchises that qualify for indefinite-life treatment under SFAS No. 142 are tested for impairment annually each October 1 based on valuations, or more frequently as warranted by events or changes in circumstances. Such test resulted in a total franchise impairment of approximately $3.3 billion during the third quarter of 2004. The October 1, 2005 annual impairment test will be finalized in the fourth quarter of 2005 and any impairment resulting from such test will be recorded in the fourth quarter. Franchises are aggregated into essentially inseparable asset groups to conduct the valuations. The asset groups generally represent geographic clustering of the Company’s cable systems into groups by which such systems are managed. Management believes such grouping represents the highest and best use of those assets.

The Company’s valuations, which are based on the present value of projected after tax cash flows, result in a value of property, plant and equipment, franchises, customer relationships and its total entity value. The value of goodwill is the difference between the total entity value and amounts assigned to the other assets.

Franchises, for valuation purposes, 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 interactivity and telephone to the potential customers (service marketing rights). Fair value is determined based on estimated 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 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 franchise.

~~The Company follows the guidance of Emerging Issues Task Force ("EITF") Issue 02-17,~~ ~~Recognition of Customer Relationship Intangible Assets Acquired in a Business Combination,~~ in valuing customer relationships. Customer relationships, for valuation purposes, represent the value of the business relationship with existing customers and are calculated by projecting future after-tax cash flows from these customers including the right to deploy and market additional services such as interactivity and telephone to these customers. The present value of these after-tax cash flows yields the fair value of the customer relationships. Substantially all acquisitions occurred prior to January 1, 2002. The Company did not record any value associated with the customer relationship intangibles related to those acquisitions. For acquisitions subsequent to January 1, 2002 the Company did assign a value to the customer relationship intangible, which is amortized over its estimated useful life.

In September 2004, the SEC staff issued EITF Topic D-108 which requires the direct method of separately valuing all intangible assets and does not permit goodwill to be included in franchise assets. The Company adopted Topic D-108 in its impairment assessment as of September 30, 2004 that resulted in a total franchise impairment of approximately $3.3 billion. The Company recorded a cumulative effect of accounting change of $765 million (approximately $875 million before tax effects of $91 million and minority interest effects of $19 million) for the nine months ended September 30, 2004 representing the portion of the Company's total franchise impairment attributable to no longer including goodwill with franchise assets. The effect of the adoption was to increase net loss and loss per share by

~~CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(UNAUDITED)~~

~~(dollars in millions, except share and per share amounts and where indicated)~~

$765 million and $2.55, respectively, for the nine months ended September 30, 2004. The remaining $2.4 billion of the total franchise impairment was attributable to the use of lower projected growth rates and the resulting revised estimates of future cash flows in the Company's valuation, and was recorded as impairment of franchises in the Company's accompanying consolidated statements of operations for the nine months ended September 30, 2004. Sustained analog video customer losses by the Company in the third quarter of 2004 primarily as a result of increased competition from direct broadcast satellite providers and decreased growth rates in the Company's high-speed Internet customers in the third quarter of 2004, in part, as a result of increased competition from digital subscriber line service providers led to the lower projected growth rates and the revised estimates of future cash flows from those used at October 1, 2003.

As of ~~September 30, 2005~~March 31, 2006 and December 31, ~~2004,~~2005, indefinite-lived and finite-lived intangible assets are presented in the following table:

	September 30, 2005						December 31, 2004						March 31, 2006						December 31, 2005
	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
Indefinite-lived intangible assets:
Franchises with indefinite lives	$	9,797	$	--	$	9,797	$	9,845	$	--	$	9,845	$	9,270	$	--	$	9,270	$	9,806	$	--	$	9,806
Goodwill		52		--		52		52		--		52		52		--		52		52		--		52

	$	9,849	$	--	$	9,849	$	9,897	$	--	$	9,897	$	9,322	$	--	$	9,322	$	9,858	$	--	$	9,858
Finite-lived intangible assets:
Franchises with finite lives	$	40	$	7	$	33	$	37	$	4	$	33	$	23	$	6	$	17	$	27	$	7	$	20

~~Franchises~~For the three months ended March 31, 2006, the net carrying amount of indefinite-lived and finite-lived franchises was reduced by $434 million and $3 million, respectively, related to franchises reclassified as assets held for sale. For the three months ended March 31, 2006, franchises with indefinite lives also decreased ~~$39~~$3 million related to a cable asset sale completed in the first quarter of 2006 and $99 million as a result of the asset impairment charges recorded related to ~~three cable asset sales and $9 million as a result of the closing of two of the cable asset sales in July 2005~~assets held for sale (see Note 3). Franchise amortization expense for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2006 and 2005 was approximately $0 and ~~2004 was~~ $1 ~~million and $3~~ million, respectively, which represents the amortization relating to franchises that did not qualify for indefinite-life treatment under SFAS No. 142, including costs associated with franchise renewals. The Company expects that amortization expense on franchise assets will be approximately $3$2 million annually for each of the next five years. 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 and other relevant factors.

CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

(dollars in millions, except share and per share amounts and where indicated)

5.Accounts Payable and Accrued Expenses

~~Accounts Payable and Accrued Expenses~~

Accounts payable and accrued expenses consist of the following as of ~~September 30, 2005~~March 31, 2006 and December 31, ~~2004:~~2005:

	September 30, 2005		December 31, 2004		March 31, 2006		December 31, 2005

Accounts payable - trade	$	84	$	148	$	90	$	114
Accrued capital expenditures		101		65		66		73
Accrued expenses:
Interest		298		324		508		333
Programming costs		287		278		288		272
Franchise-related fees		56		67		44		67
Compensation		85		66		82		90
Other		261		269		207		242

	$	1,172	$	1,217	$	1,285	$	1,191

6.Long-Term Debt

Long-term debt consists of the following as of March 31, 2006 and December 31, 2005:

	March 31, 2006				December 31, 2005
	Principal Amount		Accreted Value		Principal Amount		Accreted Value
Long-Term Debt
Charter Communications, Inc.:
4.750% convertible senior notes due 2006	$	20	$	20	$	20	$	20
5.875% convertible senior notes due 2009		863		846		863		843
Charter Communications Holdings, LLC:
8.250% senior notes due 2007		105		105		105		105
8.625% senior notes due 2009		292		292		292		292
9.920% senior discount notes due 2011		198		198		198		198
10.000% senior notes due 2009		154		154		154		154
10.250% senior notes due 2010		49		49		49		49
11.750% senior discount notes due 2010		43		43		43		43
10.750% senior notes due 2009		131		131		131		131
11.125% senior notes due 2011		217		217		217		217
13.500% senior discount notes due 2011		94		94		94		94
9.625% senior notes due 2009		107		107		107		107
10.000% senior notes due 2011		137		136		137		136
11.750% senior discount notes due 2011		125		123		125		120
12.125% senior discount notes due 2012		113		103		113		100
CCH I Holdings, LLC:
11.125% senior notes due 2014		151		151		151		151
9.920% senior discount notes due 2014		471		471		471		471
10.000% senior notes due 2014		299		299		299		299
11.750% senior discount notes due 2014		815		804		815		781
13.500% senior discount notes due 2014		581		581		581		578
12.125% senior discount notes due 2015		217		198		217		192
CCH I, LLC:

CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

(dollars in millions, except share and per share amounts and where indicated)

6.	~~Long-Term Debt~~

11.000% senior notes due 2015		3,525		3,680		3,525		3,683
CCH II, LLC:
10.250% senior notes due 2010		2,051		2,041		1,601		1,601
CCO Holdings, LLC:
8¾% senior notes due 2013		800		795		800		794
Senior floating notes due 2010		550		550		550		550
Charter Communications Operating, LLC:
8% senior second lien notes due 2012		1,100		1,100		1,100		1,100
8 3/8% senior second lien notes due 2014		770		770		733		733
Renaissance Media Group LLC:
10.000% senior discount notes due 2008		77		78		114		115
Credit Facilities
Charter Operating		5,386		5,386		5,731		5,731
	$	19,441	$	19,522	$	19,336	$	19,388

~~Long-term debt consists~~The accreted values presented above generally represent the principal amount of the ~~following~~notes less the original issue discount at the time of sale plus the accretion to the balance sheet date except as follows. The accreted value of ~~September 30,~~the CIH notes issued in exchange for Charter Holdings notes and the portion of the CCH I notes issued in 2005 in exchange for the 8.625% Charter Holdings notes due 2009 are recorded at the historical book values of the Charter Holdings notes for financial reporting purposes as opposed to the current accreted value for legal purposes and ~~December~~notes indenture purposes (the amount that is currently payable if the debt becomes immediately due). As of March 31, ~~2004:~~2006, the accreted value of the Company’s debt for legal purposes and notes indenture purposes is approximately $19.0 billion.

September 30, 2005

December 31, 2004

Principal Amount

Accreted Value

Principal Amount

Accreted Value

Long-Term Debt

Charter Communications, Inc.:
4.75% convertible senior notes due 2006 $ 25 $ 25 $ 156 $ 156
5.875% convertible senior notes due 2009 863 841 863 834
Charter Communications Holdings, LLC:
8.250% senior notes due 2007 105 105 451 451
8.625% senior notes due 2009 292 292 1,244 1,243
9.920% senior discount notes due 2011 198 198 1,108 1,108
10.000% senior notes due 2009 154 154 640 640
10.250% senior notes due 2010 49 49 318 318
11.750% senior discount notes due 2010 43 43 450 448
10.750% senior notes due 2009 131 131 874 874
11.125% senior notes due 2011 217 217 500 500
13.500% senior discount notes due 2011 94 91 675 589
9.625% senior notes due 2009 107 107 640 638
10.000% senior notes due 2011 137 136 710 708
11.750% senior discount notes due 2011 125 116 939 803
12.125% senior discount notes due 2012 113 97 330 259
CCH I Holdings, LLC:
11.125% senior notes due 2014 151 151 -- --
9.920% senior discount notes due 2014 471 471 -- --
10.000% senior notes due 2014 299 299 -- --
11.750% senior discount notes due 2014 815 759 -- --
13.500% senior discount notes due 2014 581 559 -- --
12.125% senior discount notes due 2015 217 187 -- --
CCH I, LLC:
11.00% senior notes due 2015 3,525 3,686 -- --
CCH II, LLC:
10.250% senior notes due 2010 1,601 1,601 1,601 1,601
CCO Holdings, LLC:
8¾% senior notes due 2013 800 794 500 500
Senior floating rate notes due 2010 550 550 550 550
Charter Communications Operating, LLC:
8% senior second lien notes due 2012 1,100 1,100 1,100 1,100
8 3/8% senior second lien notes due 2014 733 733 400 400
Renaissance Media Group LLC:
10.000% senior discount notes due 2008 114 115 114 116
CC V Holdings, LLC:
11.875% senior discount notes due 2008 -- -- 113 113
Credit Facilities

Charter Operating 5,513 5,513 5,515 5,515
$ 19,123 $ 19,120 $ 19,791 $ 19,464
On January 30, 2006, CCH II and CCH II Capital Corp. issued $450 million in debt securities, the proceeds of which were provided, directly or indirectly, to Charter Operating, which used such funds to reduce borrowings, but not commitments, under the revolving portion of its credit facilities.

On March 13, 2006, the Company exchanged $37 million of Renaissance Media Group LLC 10% senior discount notes due 2008 for $37 million principal amount of new Charter Operating 8 3/8% senior second-lien notes due 2014 issued in a private transaction under Rule 144A. The terms and conditions of the new Charter Operating 8 3/8% senior second-lien notes due 2014 are identical to Charter Operating’s currently outstanding 8 3/8% senior second-lien notes due 2014.

Gain on extinguishment of debt

In March 2005, Charter Operating consummated exchange transactions with a small number of institutional holders of Charter Holdings 8.25% senior notes due 2007 pursuant to which Charter Operating issued, in private placements, approximately $271 million principal amount of new notes with terms identical to Charter Operating's 8.375% senior second lien notes due 2014 in exchange for approximately $284 million of the Charter Holdings 8.25% senior notes due 2007. The exchanges resulted in a net gain on extinguishment of debt of approximately $11 million for the three months ended March 31, 2005 included in other expense on the Company’s condensed consolidated statements of operations. The Charter Holdings notes received in the exchange were thereafter distributed to Charter Holdings and canceled.

In March 2005, the Company repurchased, in private transactions, from a small number of institutional holders, a total of $34 million principal amount of its 4.75% convertible senior notes due 2006. These transactions resulted in a net gain on extinguishment of debt of approximately $1 million for the three months ended March 31, 2005 included in other expense on the Company’s condensed consolidated statements of operations.

In March 2005, Charter’s subsidiary, CC V Holdings, LLC, redeemed all of its 11.875% notes due 2008, at 103.958% of principal amount, plus accrued and unpaid interest to the date of redemption. The total cost of redemption was

CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

(dollars in millions, except share and per share amounts and where indicated)

The accreted values presented above represent the principal amount of the notes less the original issue discount at the time of sale plus the accretion to the balance sheet date. The accreted value of CIH notes and CCH I notes issued in exchange for Charter Holdings notes are recorded in accordance with generally accepted accounting principles ("GAAP"). GAAP requires that the CIH notes issued in exchange for Charter Holdings notes and the CCH I notes issued in exchange for the 8.625% Charter Holdings notes due 2009 be recorded at the historical book values of the Charter Holdings notes as opposed to the current accreted value for legal purposes and notes indenture purposes (the amount that is currently payable if the debt becomes immediately due). As of September 30, 2005, the accreted value of the Company’s debt for legal purposes and notes indenture purposes is $18.6 billion.

In October 2005, CCO Holdings and CCO Holdings Capital Corp., as guarantor thereunder, entered into the Bridge Loan with the Lenders whereby the Lenders have committed to make loans to CCO Holdings in an aggregate amount of $600 million. CCO Holdings may draw upon the facility between January 2, 2006 and September 29, 2006 and the loans will mature on the sixth anniversary of the first borrowing under the Bridge Loan. Each loan will accrue interest at a rate equal to an adjusted LIBOR rate plus a spread. The spread will initially be 450 basis points and will increase (a) by an additional 25 basis points at the end of the six-month period following the date of the first borrowing, (b) by an additional 25 basis points at the end of each of the next two subsequent three month periods and (c) by 62.5 basis points at the end of each of the next two subsequent three-month periods. CCO Holdings will be required to prepay loans from the net proceeds from (i) the issuance of equity or incurrence of debt by Charter and its subsidiaries, with certain exceptions, and (ii) certain asset sales (to the extent not used for other purposes permitted under the Bridge Loan).

In August 2005, CCO Holdings issued $300 million in debt securities, the proceeds of which were used for general corporate purposes, including the payment of distributions to its parent companies, including Charter Holdings, to pay interest expense.

~~Gain (loss) on extinguishment of debt~~

In September 2005, Charter Holdings and its wholly owned subsidiaries, CCH I and CIH, completed the exchange of approximately $6.8 billion total principal amount of outstanding debt securities of Charter Holdings in a private placement for new debt securities. Holders of Charter Holdings notes due in 2009 and 2010 exchanged $3.4 billion principal amount of notes for $2.9 billion principal amount of new 11% CCH I senior secured notes due 2015. Holders of Charter Holdings notes due 2011 and 2012 exchanged $845 million principal amount of notes for $662 million principal amount of 11% CCH I senior secured notes due 2015. In addition, holders of Charter Holdings notes due 2011 and 2012 exchanged $2.5 billion principal amount of notes for $2.5 billion principal amount of various series of new CIH notes. Each series of new CIH notes has the same stated interest rate and provisions for payment of cash interest as the series of old Charter Holdings notes for which such CIH notes were exchanged. In addition, the maturities for each series were extended three years. The exchanges resulted in a net gain on extinguishment of debt of approximately $490 million for the three and nine months ended September 30, 2005.

In March and June 2005, Charter Operating consummated exchange transactions with a small number of institutional holders of Charter Holdings 8.25% senior notes due 2007 pursuant to which Charter Operating issued, in private placements, approximately $333 million principal amount of new notes with terms identical to Charter Operating's 8.375% senior second lien notes due 2014 in exchange for approximately $346 million of the Charter Holdings 8.25% senior notes due 2007. The exchanges resulted in gain on extinguishment of debt of approximately $10 million for the nine months ended September 30, 2005. The Charter Holdings notes received in the exchange were thereafter distributed to Charter Holdings and cancelled.

During the nine months ended September 30, 2005, the Company repurchased, in private transactions, from a small number of institutional holders, a total of $131 million principal amount of its 4.75% convertible senior notes due 2006. These transactions resulted in a net gain on extinguishment of debt of approximately $4 million for the nine months ended September 30, 2005.

~~CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(UNAUDITED)~~

~~(dollars in millions, except share and per share amounts and where indicated)~~

approximately $122 million and was funded through borrowings under the Charter Operating credit facilities. The redemption resulted in a loss on extinguishment of debt for the ~~nine~~three months ended ~~September 30,~~March 31, 2005 of approximately $5 ~~million. Following such redemption, CC V Holdings, LLC~~million included in other expense on the Company’s condensed consolidated statements of operations.

7.Minority Interest and ~~its subsidiaries (other than non-guarantor subsidiaries) guaranteed the~~Equity Interest of Charter ~~Operating credit facilities and granted a lien on all of their assets as to which a lien can be perfected under the Uniform Commercial Code by the filing of a financing statement.~~Holdco

7.	~~Minority Interest and Equity Interest of Charter Holdco~~

Charter is a holding company whose primary assets are a controlling equity interest in Charter Holdco, the indirect owner of the Company’s cable systems, and $866 million and ~~$990~~$863 million at ~~September 30, 2005~~March 31, 2006 and December 31, ~~2004,~~2005, respectively, of mirror notes that are payable by Charter Holdco to Charter and have the same principal amount and terms as those of Charter’s convertible senior notes. Minority interest on the Company’s consolidated balance sheets as of ~~September 30, 2005~~March 31, 2006 and December 31, ~~2004~~2005 primarily represents preferred membership interests in CC VIII, LLC ("CC VIII"), an indirect subsidiary of Charter Holdco, of ~~$665 million and $656 million, respectively.~~$188 million. As more fully described in Note ~~20,~~19, this preferred interest ~~arises from the approximately $630 million of preferred membership units issued~~is held by ~~CC VIII in connection with an acquisition in February 2000 and was the subject of a dispute between Charter and~~ Mr. Allen, Charter’s Chairman and controlling shareholder that was settled October 31, 2005. The Company is currently determining the impact of the settlement to be recorded in the fourth quarter of 2005. Due to the uncertainties that existed prior to October 31, 2005, related to the ultimate resolution, effective January 1, 2005, the Company ceased recognizing minority interest in earnings or losses of CC VIII for financial reporting purposes until such time as the resolution of the matter was determinable or other events occurred. For the three and nine months ended September 30, 2005, the Company’s results include income of $8 million and $25 million, respectively, attributable to CC VIII. Subsequent to recording the impact of the settlement in the fourth quarter of 2005, approximately 6%shareholder. Approximately 5.6% of CC VIII’s income ~~will be~~is allocated to minority interest.

Minority interest historically included the portion of Charter Holdco’s member’s equity not owned by Charter. However, members’ deficit of Charter Holdco was $5.0 billion and $4.4 billion as of September 30, 2005 and December 31, 2004, respectively, thus minority interest in Charter Holdco has been eliminated. Minority interest was approximately 52% as of September 30, 2005 and 53% as of December 31, 2004. Minority interest includes the proportionate share of changes in fair value of interest rate derivative agreements. Such amounts are temporary as they are contractually scheduled to reverse over the life of the underlying instrument. Additionally, reported losses allocated to minority interest on the consolidated statement of operations are limited to the extent of any remaining minority interest on the balance sheet related to Charter Holdco. As such, Charter absorbs all losses before income taxes that otherwise would be allocated to minority interest. Subject to any changes in Charter Holdco’s capital structure, future losses will continue to be absorbed by Charter.8.Share Lending Agreement

~~Changes to minority interest consist of the following:~~

Minority
Interest

Balance, December 31, 2004 $ 648
CC VIII 2% Priority Return (see Note 20) 9
Changes in fair value of interest rate agreements 8
Balance, September 30, 2005 $ 665

~~CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(UNAUDITED)~~

~~(dollars in millions, except share and per share amounts and where indicated)~~

8.	~~Share Lending Agreement~~

~~On July 29, 2005,~~ Charter issued ~~27.2~~94.9 million and 22.0 million shares of Class A common stock during 2005 and the three months ended March 31, 2006, respectively, in a public ~~offering,~~offerings, which ~~was~~were effected pursuant to an effective registration statement that initially covered the issuance and sale of up to 150 million shares of Class A common stock. 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"). Because less than the full 150 million shares covered by the share lending agreement were sold in ~~the offering,~~offerings as of March 31, 2006, Charter ~~remains~~is obligated to issue, at CGML’s request, up to an additional ~~122.8~~33.1 million loaned shares in subsequent registered public offerings pursuant to the share lending agreement.

This offering of Charter’s Class A common stock was conducted to facilitate transactions by which investors in Charter’s 5.875% convertible senior notes due 2009, issued on November 22, 2004, hedged their investments in the convertible senior notes. Charter did not receive any of the proceeds from the sale of this Class A common stock. However, under the share lending agreement, Charter received a loan fee of $.001 for each share that it lends to CGML.

The issuance of up to a total of 150 million shares of common stock (of which ~~27.2~~116.9 million were issued in ~~July 2005)~~2005 and 2006) pursuant to a share lending agreement executed by Charter in connection with the issuance of the 5.875% convertible senior notes in November 2004 is essentially analogous to a sale of shares coupled with a forward contract for the reacquisition of the shares at a future date. An instrument that requires physical settlement by repurchase of a fixed number of shares in exchange for cash is considered a forward purchase instrument. While the share lending agreement does not require a cash payment upon return of the shares, physical settlement is required (i.e., the shares borrowed must be returned at the end of the arrangement.) The fair value of the ~~27.2~~116.9 million shares lent ~~in July 2005~~ is approximately ~~$41~~$127 million as of ~~September 30, 2005.~~March 31, 2006. However, the net effect on shareholders’ deficit of the shares lent ~~in July~~ pursuant to the share lending agreement, which includes Charter’s requirement to lend the shares and the counterparties’ requirement to return the shares, is de minimis and represents the cash received upon lending of the shares and is equal to the par value of the common stock to be issued.

9.	~~Comprehensive Income (Loss)~~

The 116.9 million shares issued through March 31, 2006 pursuant to the share lending agreement are required to be returned, in accordance with the contractual arrangement, and are treated in basic and diluted earnings per share as if they were already returned and retired. Consequently, there is no impact of the shares of common stock lent under the share lending agreement in the earnings per share calculation.

9.Comprehensive Loss

Certain marketable equity securities are classified as available-for-sale and reported at market value with unrealized gains and losses recorded as accumulated other comprehensive ~~income (loss)~~loss on the accompanying condensed consolidated

CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

(dollars in millions, except share and per share amounts and where indicated)

balance sheets. Additionally, the Company reports changes in the fair value of interest rate agreements designated as hedging the variability of cash flows associated with floating-rate debt obligations, that meet the effectiveness criteria of SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities, in accumulated other comprehensive ~~income (loss),~~loss, after giving effect to the minority interest share of such gains and losses. Comprehensive ~~income for the three months ended September 30, 2005 was $77 million and comprehensive~~ loss for the three months ended ~~September 30, 2004~~March 31, 2006 and 2005 was ~~$3.3 billion and was $627~~$460 million and ~~$4.0 billion for the nine months ended September 30, 2005 and 2004,~~$349 million, respectively.

10.Accounting for Derivative Instruments and Hedging Activities

~~Accounting for Derivative Instruments and Hedging Activities~~

The Company uses interest rate risk management derivative instruments, such as interest rate swap agreements and interest rate collar agreements (collectively referred to herein as interest rate agreements) to manage its interest costs. The Company’s policy is to manage interest costs using a mix of fixed and variable rate debt. Using interest rate swap agreements, the Company has agreed to exchange, at specified intervals through 2007, the difference between fixed and variable interest amounts calculated by reference to an agreed-upon notional principal amount. Interest rate collar agreements are used to limit the Company’s exposure to and benefits from interest rate fluctuations on variable rate debt to within a certain range of rates.

The Company does not hold or issue derivative instruments for trading purposes. The Company does, however, have certain interest rate derivative instruments that have been designated as cash flow hedging instruments. Such

~~CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(UNAUDITED)~~

~~(dollars in millions, except share and per share amounts and where indicated)~~

instruments effectively convert variable interest payments on certain debt instruments into fixed payments. For qualifying hedges, SFAS No. 133 allows derivative gains and losses to offset related results on hedged items in the consolidated statement of operations. The Company has formally documented, designated and assessed the effectiveness of transactions that receive hedge accounting. For the three months ended ~~September 30,~~March 31, 2006 and 2005, and 2004, net gain (loss) on derivative instruments and hedging activities includes gains of $1 million and $1 million, respectively, and for the nine months ended September 30, 2005 and 2004, net gain (loss) on derivative instruments and hedging activitiesother income includes gains of $2 million and $3$1 million, respectively, which represent cash flow hedge ineffectiveness on interest rate hedge agreements arising from differences between the critical terms of the agreements and the related hedged obligations. Changes in the fair value of interest rate agreements designated as hedging instruments of the variability of cash flows associated with floating-rate debt obligations that meet the effectiveness criteria of SFAS No. 133 are reported in accumulated other comprehensive loss. For the three months ended ~~September 30,~~March 31, 2006 and 2005, a loss of $1 million and ~~2004,~~ a gain ~~of $5 million and $2 million, respectively, and for the nine months ended September 30, 2005 and 2004, a gain of $14 million and $31~~$9 million, respectively, related to derivative instruments designated as cash flow hedges, was recorded in accumulated other comprehensive ~~income (loss)~~loss and minority interest. The amounts are subsequently reclassified into interest expense as a yield adjustment in the same period in which the related interest on the floating-rate debt obligations affects earnings (losses).

Certain interest rate derivative instruments are not designated as hedges as they do not meet the effectiveness criteria specified by SFAS No. 133. However, management believes 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 ~~gain (loss) on derivative instruments and hedging activities~~other income in the Company’s condensed consolidated statements of operations. For the three months ended ~~September 30,~~March 31, 2006 and 2005, ~~and 2004, net gain (loss) on derivative instruments and hedging activities~~other income includes gains of ~~$16~~$6 million and ~~losses of $9 million, respectively, and for the nine months ended September 30, 2005 and 2004, net gain (loss) on derivative instruments and hedging activities includes gains of $41 million and $45~~$26 million, respectively, for interest rate derivative instruments not designated as hedges.

As of ~~September 30, 2005~~March 31, 2006 and December 31, ~~2004,~~2005, the Company had outstanding ~~$2.1~~$1.8 billion and ~~$2.7~~$1.8 billion and $20 million and $20 million, respectively, in notional amounts of interest rate swaps and collars, respectively. 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 are determined by reference to the notional amount and the other terms of the contracts.

Certain provisions of the Company’s 5.875% convertible senior notes issued in November 2004 were considered embedded derivatives for accounting purposes and were required to be accounted for separately from the convertible senior notes. In accordance with SFAS No. 133, these derivatives are marked to market with gains or losses recorded in interest expense on the Company’s condensed consolidated statement of operations. For the three ~~and nine~~ months ended ~~September 30,~~March 31, 2006 and 2005, the Company recognized ~~losses~~gains of $1$2 million and ~~gains of $26~~$19 million, respectively. The ~~loss resulted in an increase in interest expense whereas the~~ gain resulted in a reduction in interest expense related to these derivatives. At ~~September 30, 2005~~March 31, 2006 and December 31, ~~2004, $2~~2005, $1 million and ~~$10~~$1 million, respectively, is recorded in accounts payable and accrued expenses relating to the short-term ~~portion of these derivatives and $3 million and $21 million, respectively, is recorded in other long-term liabilities related to the long-term portion.~~

1715

CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

(dollars in millions, except share and per share amounts and where indicated)

portion of these derivatives and $0 and $1 million, respectively, is recorded in other long-term liabilities related to the long-term portion.

~~11.~~

11.Revenues

Revenues consist of the following for the three ~~and nine~~ months ended ~~September 30, 2005~~March 31, 2006 and ~~2004:~~2005:

	Three Months Ended September 30,				Nine Months Ended September 30,				Three Months Ended March 31,
	2005		2004		2005		2004		2006		2005

Video	$	848	$	839	$	2,551	$	2,534	$	869	$	842
High-speed Internet		230		189		671		538		254		215
Telephone										20		6
Advertising sales		74		73		214		205		70		64
Commercial		71		61		205		175		76		65
Other		95		86		271		249		85		79

	$	1,318	$	1,248	$	3,912	$	3,701	$	1,374	$	1,271

12.Operating Expenses

~~Operating Expenses~~

Operating expenses consist of the following for the three ~~and nine~~ months ended ~~September 30, 2005~~March 31, 2006 and ~~2004:~~2005:

	Three Months Ended September 30,				Nine Months Ended September 30,				Three Months Ended March 31,
	2005		2004		2005		2004		2006		2005

Programming	$	357	$	328	$	1,066	$	991	$	391	$	358
Service		203		173		572		489		209		176
Advertising sales		26		24		76		72		26		25

	$	586	$	525	$	1,714	$	1,552	$	626	$	559

13.Selling, General and Administrative Expenses

~~Selling, General and Administrative Expenses~~

Selling, general and administrative expenses consist of the following for the three ~~and nine~~ months ended ~~September 30, 2005~~March 31, 2006 and ~~2004:~~2005:

	Three Months Ended September 30,				Nine Months Ended September 30,				Three Months Ended March 31,
	2005		2004		2005		2004		2006		2005

General and administrative	$	231	$	220	$	658	$	636	$	243	$	206
Marketing		38		32		104		99		38		35

	$	269	$	252	$	762	$	735	$	281	$	241

Components of selling expense are included in general and administrative and marketing expense.

~~14.~~ ~~Hurricane Asset Retirement Loss~~

Certain of the Company’s cable systems in Louisiana suffered significant plant damage as a result of hurricanes Katrina and Rita. Based on preliminary evaluations, the Company wrote off $19 million of its plants’ net book value. Insignificant amounts of other expenses were recorded related to hurricanes Katrina and Rita.

1816

CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

(dollars in millions, except share and per share amounts and where indicated)

14.Other Operating Expenses

~~The Company has insurance coverage~~Other operating expenses consist of the following for ~~both property~~the three months ended March 31, 2006 and ~~business interruption. The Company has not recorded any potential insurance recoveries as it is still assessing the damage of its plant and the extent of insurance coverage.~~2005:

~~15.~~

~~Special Charges~~

	Three Months Ended March 31,
	2006		2005

Loss on sale of assets, net	$	--	$	4
Special charges, net		3		4

	$	3	$	8

~~The Company has recorded special~~Special charges for the three months ended March 31, 2006 and 2005 primarily represent severance costs as a result of reducing ~~its~~ workforce, consolidating administrative offices and ~~management realignment in 2004 and 2005. The activity associated with this initiative is summarized in the table below.~~executive severance.

15.Other Income

Three Months
Ended September 30,

Nine Months
Ended September 30,

2005

2004

2005

2004

Beginning Balance
$
4

$
6

$
6

$
14

Special Charges
1

6

5

9

Payments
(1
)

(3
)

(7
)

(14
)

Balance at September 30,
$
4

$
9

$
4

$
9

Other income consist of the following for the three months ended March 31, 2006 and 2005:

For the three and nine months ended September 30, 2005, special charges also included $1 million related to legal settlements. For the nine months ended September 30, 2005, special charges were offset by approximately $2 million related to an agreed upon discount in respect of the portion of the settlement consideration payable under the Stipulations of Settlement of the consolidated Federal Class Action and the Federal Derivative Action allocable to plaintiff’s attorney fees and Charter’s insurance carrier as a result of the election to pay such fees in cash (see Note 17).

	Three Months Ended March 31,
	2006		2005

Gain on derivative instruments and hedging activities, net	$	8	$	27
Gain on extinguishment of debt		--		7
Minority interest		--		(3	)
Other, net		3		1

	$	11	$	32

For the nine months ended September 30, 2004, special charges also includes approximately $85 million, as part of the terms set forth in memoranda of understanding regarding settlement of the consolidated Federal Class Action and Federal Derivative Action and approximately $9 million of litigation costs related to the tentative settlement of the South Carolina national class action suit, which were approved by the respective courts. For the three and nine months ended September 30, 2004, the severance costs were offset by $3 million received from a third party in settlement of a dispute.

16.Income Taxes

~~Income Taxes~~

All operations are held through Charter Holdco and its direct and indirect subsidiaries. Charter Holdco and the majority of its subsidiaries are not subject to income tax. However, certain of these subsidiaries are corporations and are subject to income tax. All of the taxable income, gains, losses, deductions and credits of Charter Holdco are passed through to its members: Charter, ~~Charter Investment, Inc. ("Charter Investment")~~CII and Vulcan Cable III Inc. ("Vulcan Cable"). Charter is responsible for its share of taxable income or loss of Charter Holdco allocated to Charter in accordance with the Charter Holdco limited liability company agreement (the "LLC Agreement") and partnership tax rules and regulations.

As of ~~September 30, 2005~~March 31, 2006 and December 31, ~~2004,~~2005, the Company had net deferred income tax liabilities of approximately ~~$287~~$332 million and ~~$216~~$325 million, respectively. Approximately ~~$214~~$213 million and ~~$208~~$212 million of the deferred tax liabilities recorded in the condensed consolidated financial statements at ~~September 30, 2005~~March 31, 2006 and December 31, ~~2004,~~2005, respectively, relate to certain indirect subsidiaries of Charter Holdco, which file separate income tax returns.

During the three ~~and nine~~ months ended ~~September 30,~~March 31, 2006 and 2005, the Company recorded ~~$29~~$9 million and ~~$75~~$15 million of income tax expense, ~~respectively, and during the three and nine months ended September 30, 2004, the Company recorded $304 million and $207 million of income tax benefit,~~ respectively. The Company recorded the portion of the income tax benefit associated with the adoption of Topic D-108 as a $91 million reduction of the cumulative effect of accounting change on the accompanying statement of operations for the three and nine months ended September 30,

~~CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(UNAUDITED)~~

~~(dollars in millions, except share and per share amounts and where indicated)~~

~~2004. The sale of systems to Atlantic Broadband, LLC in March and April 2004 resulted in income tax expense of $15 million for the nine months ended September 30, 2004.~~

Income tax expense is recognized through increases in the deferred tax liabilities related to Charter’s investment in Charter Holdco, as well as current federal and state income tax expense and increases to the deferred tax liabilities of certain of Charter’s indirect corporate subsidiaries. Income tax expense was offset by deferred tax benefits of $21 million and $6 million related to asset impairment charges recorded in the three months ended March 31, 2006 and 2005, respectively. The Company recorded an additional deferred tax asset of approximately ~~$222~~$182 million during the ~~nine~~three months ended ~~September 30, 2005~~March 31, 2006 relating to net operating loss

CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

(dollars in millions, except share and per share amounts and where indicated)

carryforwards, but recorded a valuation allowance with respect to this amount because of the uncertainty of the ability to realize a benefit from the Company’s carryforwards in the future.

The Company has deferred tax assets of approximately ~~$3.7~~$4.4 billion and ~~$3.5~~$4.2 billion as of ~~September 30, 2005~~March 31, 2006 and December 31, ~~2004,~~2005, respectively, which primarily relate to financial and tax losses allocated to Charter from Charter Holdco. The deferred tax assets include approximately ~~$2.3~~$2.5 billion and ~~$2.1~~$2.4 billion of tax net operating loss carryforwards as of ~~September 30, 2005~~March 31, 2006 and December 31, ~~2004,~~2005, respectively (generally expiring in years ~~2005~~2007 through ~~2025)~~2026), of Charter and its indirect corporate subsidiaries. Valuation allowances of ~~$3.4~~$3.8 billion and ~~$3.2~~$3.7 billion as of ~~September 30, 2005~~March 31, 2006 and December 31, ~~2004,~~2005, respectively, exist with respect to these deferred tax assets.

Realization of any benefit from the Company’s tax net operating losses is dependent on: (1) Charter and its indirect corporate subsidiaries’ ability to generate future taxable income and (2) the absence of certain future "ownership changes" of ~~Charter’s~~Charter's common stock. An "ownership ~~change,"~~change" as defined in the applicable federal income tax rules, would place significant limitations, on an annual basis, on the use of such net operating losses to offset any future taxable income the Company may generate. Such limitations, in conjunction with the net operating loss expiration provisions, could effectively eliminate the Company’s ability to use a substantial portion of its net operating losses to offset any future taxable income. Future transactions and the timing of such transactions could cause an ownership change. Such transactions include additional issuances of common stock by the Company (including but not limited to the issuance of up to a total of 150 million shares of common stock (of which ~~27.2~~116.9 million were issued ~~in July 2005)~~through March 31, 2006) under the share lending ~~agreement,~~agreement), the issuance of shares of common stock upon future conversion of Charter’s convertible senior notes and the issuance of common stock in the class action settlement ~~discussed~~ in ~~Note 17,~~2004, reacquisition of the borrowed shares by Charter, or acquisitions or sales of shares by certain holders of Charter’s shares, including persons who have held, currently hold, or accumulate in the future five percent or more of Charter’s outstanding stock (including upon an exchange by Mr. Allen or his affiliates, directly or indirectly, of membership units of Charter Holdco into CCI common stock)). Many of the foregoing transactions are beyond management’s control.

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. Because of the uncertainties in projecting future taxable income of Charter Holdco, valuation allowances have been established except for deferred benefits available to offset certain deferred tax liabilities.

Charter Holdco is currently under examination by the Internal Revenue Service for the tax years ending December 31, 2002 and 2003. The Company’s results ~~of the Company~~ (excluding Charter and the indirect corporate subsidiaries) for these years are subject to this examination. Management does not expect the results of this examination to have a material adverse effect on the Company’s condensed consolidated financial condition or results of operations.

~~17.~~

17.Contingencies

~~Securities Class Actions and Derivative Suits~~

~~Fourteen putative federal class action~~Charter is a party to lawsuits and claims that arise in the ordinary course of conducting its business. In the opinion of management, after taking into account recorded liabilities, the outcome of these lawsuits and claims are not expected to have a material adverse effect on the Company’s consolidated financial condition, results of operations or its liquidity.

18.Stock Compensation Plans

The Company has stock option plans (the ~~"Federal Class Actions"~~“Plans”) ~~were filed~~which provide for the grant of non-qualified stock options, stock appreciation rights, dividend equivalent rights, performance units and performance shares, share awards, phantom stock and/or shares of restricted stock (not to exceed 20,000,000), as each term is defined in ~~2002 against Charter and certain of its former and present~~the Plans. Employees, officers, consultants and directors ~~in various jurisdictions allegedly~~of the Company and its subsidiaries and affiliates are eligible to receive grants under the Plans. Options granted generally vest over four to five years from the grant date, with 25% generally vesting on ~~behalf~~the anniversary of ~~all purchasers of Charter’s securities during~~ the ~~period~~grant date and ratably thereafter. Generally, options expire 10 years from ~~either November 8 or November 9, 1999 through July 17 or July 18, 2002. Unspecified damages were sought by~~ the ~~plaintiffs. In general, the lawsuits alleged that Charter utilized misleading accounting practices and failed to disclose these accounting practices and/or issued false and misleading financial~~grant date. The

2018

CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

(dollars in millions, except share and per share amounts and where indicated)

statements and press releases concerning Charter’s operations and prospects. The Federal Class Actions were specifically and individually identified in public filings made by Charter prior to the date of this quarterly report. On March 12, 2003, the Panel transferred the six Federal Class Actions not filed in the Eastern District of Missouri to that districtPlans allow for coordinated or consolidated pretrial proceedings with the eight Federal Class Actions already pending there. The Court subsequently consolidated the Federal Class Actions into a single action (the "Consolidated Federal Class Action") for pretrial purposes. On August 5, 2004, the plaintiffs’ representatives, Charter and the individual defendants who were the subject of the suit entered into a Memorandum of Understanding setting forth agreements in principle to settle the Consolidated Federal Class Action. These parties subsequently entered into Stipulations of Settlement dated as of January 24, 2005 (described more fully below) that incorporate the terms of the August 5, 2004 Memorandum of Understanding.

On September 12, 2002, a shareholders derivative suit (the "State Derivative Action") was filed in the Circuit Court of the City of St. Louis, State of Missouri (the "Missouri State Court"), against Charter and its then current directors, as well as its former auditors. The plaintiffs alleged that the individual defendants breached their fiduciary duties by failing to establish and maintain adequate internal controls and procedures. On March 12, 2004, an action substantively identical to the State Derivative Action was filed in Missouri State Court against Charter and certain of its current and former directors, as well as its former auditors. On July 14, 2004, the Court consolidated this case with the State Derivative Action.

Separately, on February 12, 2003, a shareholders derivative suit (the "Federal Derivative Action") was filed against Charter and its then current directors in the United States District Court for the Eastern District of Missouri. The plaintiff in that suit alleged that the individual defendants breached their fiduciary duties and grossly mismanaged Charter by failing to establish and maintain adequate internal controls and procedures.

As noted above, Charter and the individual defendants entered into a Memorandum of Understanding on August 5, 2004 setting forth agreements in principle regarding settlement of the Consolidated Federal Class Action, the State Derivative Action(s) and the Federal Derivative Action (the "Actions"). Charter and various other defendants in those actions subsequently entered into Stipulations of Settlement dated as of January 24, 2005, setting forth a settlement of the Actions in a manner consistent with the terms of the Memorandum of Understanding. The Stipulations of Settlement, along with various supporting documentation, were filed with the Court on February 2, 2005. On May 23, 2005 the United States District Court for the Eastern District of Missouri conducted the final fairness hearing for the Actions, and on June 30, 2005, the Court issued its final approval of the settlements. Members of the class had 30 days from the issuance of ~~the June 30 order approving the settlement~~up to ~~file an appeal challenging the approval. Two notices~~a total of appeal were filed relating to the settlement. Those appeals were directed to the amount of fees that the attorneys for the class were to receive and to the fairness of the settlement. At the end of September 2005, Stipulations of Dismissal were filed with the Eighth Circuit Court of Appeals resulting in the dismissal of both appeals with prejudice. Procedurally therefore, the settlements are final.

As amended, the Stipulations of Settlement provide that, in exchange for a release of all claims by plaintiffs against Charter and its former and present officers and directors named in the Actions, Charter would pay to the plaintiffs a combination of cash and equity collectively valued at $144 million, which will include the fees and expenses of plaintiffs’ counsel. Of this amount, $64 million would be paid in cash (by Charter’s insurance carriers) and the $80 million balance was to be paid (subject to Charter’s right to substitute cash therefor as described below) in90,000,000 shares of Charter Class A common stock ~~having an aggregate value of $40 million and ten-year warrants to purchase shares of~~(or units convertible into Charter Class A common ~~stock having an aggregate warrant~~stock).

The fair value of ~~$40 million, with such values in~~ each case being determined pursuant to formulas set forth in the Stipulations of Settlement. However, Charter had the right, in its sole discretion, to substitute cash for some or all of the aforementioned securities on a dollar for dollar basis. Pursuant to that right, Charter elected to fund the $80 million obligation with 13.4 million shares of Charter Class A common stock (having an aggregate value of approximately $15 million pursuant to the formula set forth in the Stipulations of Settlement) with the remaining balance (less an agreed upon $2 million discount in respect of that portion allocable to plaintiffs’ attorneys’ fees) to be paid in cash. In addition, Charter had agreed to issue additional shares of its Class A common stock to its insurance carrier having an aggregate value of $5 million; however, by agreement with its carrier, Charter paid $4.5 million in cash in lieu of issuing such shares. Charter delivered the

~~CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(UNAUDITED)~~

~~(dollars in millions, except share and per share amounts and where indicated)~~

settlement consideration to the claims administrator on July 8, 2005, and it was held in escrow pending resolution of the appeals. Those appeals are now resolved. On July 14, 2005, the Circuit Court for the City of St. Louis dismissed with prejudice the State Derivative Actions. The claims administratoroption granted is ~~responsible for disbursing the settlement consideration.~~

As part of the settlements, Charter committed to a variety of corporate governance changes, internal practices and public disclosures, all of which have already been undertaken and none of which are inconsistent with measures Charter is taking in connection with the recent conclusion of the SEC investigation.

~~Government Investigations~~

In August 2002, Charter became aware of a grand jury investigation being conducted by the U.S. Attorney’s Office for the Eastern District of Missouri into certain of its accounting and reporting practices, focusing on how Charter reported customer numbers, and its reporting of amounts received from digital set-top terminal suppliers for advertising. The U.S. Attorney’s Office publicly stated that Charter was not a target of the investigation. Charter was also advised by the U.S. Attorney’s Office that no current officer or member of its board of directors was a target of the investigation. On July 24, 2003, a federal grand jury charged four former officers of Charter with conspiracy and mail and wire fraud, alleging improper accounting and reporting practices focusing on revenue from digital set-top terminal suppliers and inflated customer account numbers. Each of the indicted former officers pled guilty to single conspiracy counts related to the original mail and wire fraud charges and were sentenced April 22, 2005. Charter fully cooperated with the investigation, and following the sentencings, the U.S. Attorney’s Office for the Eastern District of Missouri announced that its investigation was concluded and that no further indictments would issue.

~~Indemnification~~

Charter was generally required to indemnify, under certain conditions, each of the named individual defendants in connection with the matters described above pursuant to the terms of its bylaws and (where applicable) such individual defendants’ employment agreements. In accordance with these documents, in connection with the grand jury investigation, a now-settled SEC investigation and the above-described lawsuits, some of Charter’s current and former directors and current and former officers were advanced certain costs and expenses incurred in connection with their defense. On February 22, 2005, Charter filed suit against four of its former officers who were indicted in the course of the grand jury investigation. These suits seek to recover the legal fees and other related expenses advanced to these individuals. One of these former officers has counterclaimed against Charter alleging, among other things, that Charter owes him additional indemnification for legal fees that Charter did not pay, and another of these former officers has counterclaimed against Charter for accrued sick leave.

~~Other Litigation~~

Charter is also party to other lawsuits and claims that arose in the ordinary course of conducting its business. In the opinion of management, after taking into account recorded liabilities, the outcome of these other lawsuits and claims are not expected to have a material adverse effectestimated on the ~~Company’s consolidated financial condition, results~~date of ~~operations or its liquidity.~~

~~CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(UNAUDITED)~~

~~(dollars in millions, except share and per share amounts and where indicated)~~

~~18.~~~~Earnings (Loss) Per Share~~

~~Basic earnings (loss) per share is based on~~grant using the Black-Scholes option-pricing model. The following weighted average ~~number of shares of common stock outstanding during the period. Diluted earnings per share is based on the average number of shares~~assumptions were used for the basic earnings per share calculation, adjusted for the dilutive effect of stock options, restricted stock, convertible debt, convertible redeemable preferred stock and exchangeable membership units. Basic loss per share equals diluted loss per share for the three months ended September 30, 2004 and the nine months ended September 30, 2004 and 2005.

Three Months Ended September 30, 2005

Earnings

Shares

Earnings Per
Share

Basic earnings per share $ 75 316,214,740 $ 0.24

Effect of restricted stock -- 840,112 --
Effect of Charter Investment Class B Common Stock -- 222,818,858 (0.10 )
Effect of Vulcan Cable III Inc. Class B Common Stock -- 116,313,173 (0.02 )
Effect of 5.875% convertible senior notes due 2009 13 356,404,959 (0.03 )

Diluted earnings per share $ 88 1,012,591,842 $ 0.09

The effect of restricted stock represents the shares resulting from the vesting of nonvested restricted stock, calculated using the treasury stock method. Charter Investment Class B common stock and Vulcan Cable III Inc. Class B common stock represent membership units in Charter Holdco, held by entities controlled by Mr. Allen, that are exchangeable at any time on a one-for-one basis for shares of Charter Class B common stock, which are 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 represent the shares resulting from the assumed conversion of the notes into shares of Charter’s Class A common stock.

~~All options to purchase common stock, which were outstanding~~grants during the three months ended ~~September 30,~~March 31, 2006 and 2005, ~~were not included in~~respectively: risk-free interest rates of 4.5% and 3.7%; expected volatility of 91.8% and 72.5%; and expected lives of 6.25 years and 4.5 years, respectively. The valuations assume no dividends are paid. During the ~~computation of diluted earnings per share because~~three months ended March 31, 2006, the ~~options’~~Company granted 4.8 million stock options with a weighted average exercise price ~~was greater than~~of $1.07. As of March 31, 2006, the Company had 30.7 million and 10.7 million options outstanding and exercisable, respectively, with weighted average ~~market price~~exercise prices of ~~the common shares or they were otherwise antidilutive. Charter’s 4.75% convertible senior notes, Charter’s series A convertible redeemable preferred stock~~$3.96 and ~~all~~$7.39, respectively, and weighted average remaining contractual lives of the outstanding exchangeable membership units in Charter’s indirect subsidiary, CC VIII, LLC, also were not included in the computation of diluted earnings per share because the effect of the conversions would have been antidilutive.

~~The 27.2 million shares issued in July pursuant to the share lending agreement are required to be returned, in accordance with the contractual arrangement,~~8 years and are treated in basic and diluted earnings per share as if they were already returned and retired. Consequently, there is no impact of the shares of common stock lent under the share lending agreement in the earnings per share calculation.

~~19.~~7 years, respectively.

~~Stock Compensation Plans~~

~~Prior to~~On January 1, ~~2003,~~2006, the Company ~~accounted for stock-based compensation in accordance with Accounting Principles Board ("APB") Opinion No. 25,~~ ~~Accounting for Stock Issued to Employees~~~~, and related interpretations, as permitted by~~adopted revised SFAS No. 123, ~~Accounting~~Share - Based payment, which addresses the accounting for ~~Stock-Based Compensation. On January 1, 2003, the Company adopted the fair value measurement provisions~~share-based payment transactions in which a company receives employee services in exchange for (a) equity instruments of ~~SFAS No. 123 using the prospective method, under which the Company recognizes compensation expense of a stock-based award to an employee over the vesting period~~that company or (b) liabilities that are based on the fair value of the ~~award on~~company’s equity instruments or that may be settled by the ~~grant date consistent with~~issuance of such equity instruments. Because the ~~method described in Financial Accounting Standards Board Interpretation No. 28,~~ ~~Accounting for Stock Appreciation Rights and Other Variable Stock Option or Award Plans~~~~. Adoption of these provisions resulted in utilizing a preferable accounting method as~~Company adopted the ~~condensed consolidated financial statements will present the estimated~~ fair value recognition provisions of ~~stock-based compensation in expense consistently with other forms of compensation and other expense associated with goods and services received for equity instruments. In accordance with~~ SFAS No. ~~148,~~ ~~Accounting for Stock-Based Compensation - Transition and Disclosure,~~ ~~the fair value~~

~~CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(UNAUDITED)~~

~~(dollars in millions, except share and per share amounts and where indicated)~~

~~method is being applied only to awards granted or modified after~~123 on January 1, 2003, ~~whereas awards granted prior to such date will continue to be accounted~~the revised standard did not have a material impact on its financial statements. The Company recorded $4 million of option compensation expense which is included in general and administrative expense for under APB No. 25, unless they are modified or settled in cash. The ongoing effect on consolidated results of operations or financial condition will depend on future stock-based compensation awards granted by the Company.

~~SFAS No. 123 requires pro forma disclosure~~each of the ~~impact on earnings as if the compensation expense for these plans had been determined using the fair value method. The following table presents the Company’s net income (loss)~~three months ended March 31, 2006 and ~~income (loss) per share as reported and the pro forma amounts that would have been reported using the fair value method under SFAS No. 123 for the periods presented:~~

Three Months Ended
September 30,

Nine Months Ended
September 30,

2005

2004

2005

2004

Net income (loss) applicable to common stock $ 75 $ (3,295 ) $ (634 ) $ (4,005 )
Add back stock-based compensation expense related to stock
options included in reported net income (loss)
3 8 11 34
Less employee stock-based compensation expense determined under fair
value based method for all employee stock option awards
(3 ) (6 ) (11 ) (37 )
Effects of unvested options in stock option exchange -- -- -- 48
Pro forma $ 75 $ (3,293 ) $ (634 ) $ (3,960 )

Basic income (loss) per common share $ 0.24 $ (10.89 ) $ (2.06 )
$
(13.38
)
Add back stock-based compensation expense related to stock
options included in reported net income (loss)
0.01 0.03 0.04 0.11
Less employee stock-based compensation expense determined under fair
value based method for all employee stock option awards
(0.01 ) (0.02 ) (0.04 ) (0.12 )
Effects of unvested options in stock option exchange -- -- -- 0.16
Pro forma
$
0.24
$ (10.88 )
$
(2.06
)
$
(13.23
)

Diluted income (loss) per common share $ 0.09 $ (10.89 ) $ (2.06 )
$
(13.38
)
Add back stock-based compensation expense related to stock
options included in reported net income (loss)
-- 0.03 0.04 0.11
Less employee stock-based compensation expense determined under fair
value based method for all employee stock option awards
-- (0.02 ) (0.04 ) (0.12 )
Effects of unvested options in stock option exchange -- -- -- 0.16
Pro forma
$
0.09
$ (10.88 )
$
(2.06
)
$
(13.23
)
2005, respectively.

In January 2004, Charter began an option exchange program in which the Company offered its employees the right to exchange all stock options (vested and unvested) under the 1999 Charter Communications Option Plan and 2001 Stock Incentive Plan that had an exercise price over $10 per share for shares of restricted Charter Class A common stock or, in some instances, cash. Based on a sliding exchange ratio, which varied depending on the exercise price of an employee’s outstanding options, if an employee would have received more than 400 shares of restricted stock in exchange for tendered options, Charter issued to that employee shares of restricted stock in the exchange. If, based on the exchange ratios, an employee would have received 400 or fewer shares of restricted stock in exchange for tendered options, Charter instead paid the employee cash in an amount equal to the number of shares the employee would have received multiplied by $5.00. The offer applied to options (vested and unvested) to purchase a total of 22,929,573 shares of Charter Class A common stock, or approximately 48% of the Company’s 47,882,365 total options (vested and unvested) issued and outstanding as of December 31, 2003. Participation by employees was voluntary. Those members of Charter’s board of directors who were not also employees of the Company were not eligible to participate in the exchange offer.

~~CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(UNAUDITED)~~

~~(dollars in millions, except share and per share amounts and where indicated)~~

~~In the closing of the exchange offer on~~ February 20, 2004, the Company accepted for cancellation eligible options to purchase approximately 18,137,664 shares of Charter Class A common stock. In exchange, the Company granted 1,966,686 shares of restricted stock, including 460,777 performance shares to eligible employees of the rank of senior vice president and above, and paid a total cash amount of approximately $4 million (which amount includes applicable withholding taxes) to those employees who received cash rather than shares of restricted stock. The restricted stock was granted on February 25, 2004. Employees tendered approximately 79% of the options exchangeable under the program.

The cost to the Company of the stock option exchange program was approximately $10 million, with a 2004 cash compensation expense of approximately $4 million and a non-cash compensation expense of approximately $6 million to be expensed ratably over the three-year vesting period of the restricted stock issued in the exchange.

~~In January 2004,~~2006, the Compensation Committee of Charter’s Board of Directors approved a modification to the ~~board of directors of Charter approved Charter’s~~financial performance measures under Charter's Long-Term Incentive Program ("LTIP")~~, which is a program administered under the 2001 Stock Incentive Plan. Under the LTIP, employees of Charter and its subsidiaries whose pay classifications exceed~~a certain level are eligible to receive stock options and more senior level employees are eligible to receive stock options and performance shares. The stock options vest 25% on each of the first four anniversaries of the date of grant. The performance units vest on the third anniversary of the grant date and shares of Charter Class A common stock are issued, conditional upon Charter’s performance against financial performance targets established by Charter’s management and approved by its board of directors. Charter granted 6.9 million performance shares in January 2004 under this program and recognized expense of $2 million and $8 million during the three and nine months ended September 30, 2004, respectively. However, in the fourth quarter of 2004, the Company reversed the $8 million of expense recorded in the first three quarters of 2004 based on the Company’s assessment of the probability of achieving the financial performance measures established by Charter and required to be met for the performance shares to vest. InAfter the modification, management believes that approximately 2.5 million of the performance shares are likely to vest. As such, expense of approximately $3 million will be amortized over the remaining two year service period. During the three months ended March ~~and April 2005,~~31, 2006, Charter granted ~~2.8~~an additional 7.9 million performance shares under the ~~LTIP~~LTIP. The impacts of such grant and ~~recognized approximately $1 million during~~the modification of the 2005 awards were de minimis to the Company’s results of operations for the three ~~and nine~~ months ended ~~September 30, 2005.~~March 31, 2006.

~~20.~~19.Related Party Transactions

~~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. Unless otherwise disclosed, management believes that each of the transactions described below was on terms no less favorable to the Company than could have been obtained from independent third parties.

CC VIII, LLC

As part of the acquisition of the cable systems owned by Bresnan Communications Company Limited Partnership in February 2000, CC VIII, LLC, Charter’s indirect limited liability company subsidiary, issued, after adjustments, 24,273,943 Class A preferred membership units (collectively, the "CC VIII interest") with a value and an initial capital account of approximately $630 million to certain sellers affiliated with AT&T Broadband, subsequently owned by Comcast Corporation (the "Comcast sellers"). While held by the Comcast sellers, the CC VIII interest was entitled to a 2% priority return on its initial capital account and such priority return was entitled to preferential distributions from available cash and upon liquidation of CC VIII. While held by the Comcast sellers, the CC VIII interest generally did not share in the profits and losses of CC VIII. Mr. Allen granted the Comcast sellers the right to sell to him the CC VIII interest for approximately $630 million plus 4.5% interest annually from February 2000 (the "Comcast put right"). In April 2002, the Comcast sellers exercised the Comcast put right in full, and this transaction was consummated on June 6, 2003. Accordingly, Mr. Allen ~~indirectly through a company controlled by him, Charter Investment, Inc. ("CII"), became~~has become the holder of the CC VIII interest. Consequently, subject to the matters referenced in the next paragraph, Mr. Allen generally thereafter has been allocated his pro rata share (based on number of membership interests outstanding) of profits or losses of CC VIII.interest, indirectly through an affiliate. In the event of a liquidation of CC VIII, Mr. Allen would be entitled to a priority distribution with respect to ~~the~~a 2% priority return (which will continue to accrete). Any remaining distributions in liquidation would be distributed to CC V Holdings, LLC ~~an indirect subsidiary of Charter ("CC V"),~~ and Mr. Allen in proportion to CC ~~V's~~V Holdings, LLC's capital account and Mr. ~~Allen’s~~Allen's capital account (which ~~will equal~~would have equaled the initial capital account of the Comcast sellers of approximately $630 million, increased or decreased by Mr. Allen's pro rata share of CC VIII’s profits or losses (as computed for capital account purposes) after June 6, 2003).

2519

CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

(dollars in millions, except share and per share amounts and where indicated)

initial capital account of the Comcast sellers of approximately $630 million, increased or decreased by Mr. Allen’s pro rata share of CC VIII’s profits or losses (as computed for capital account purposes) after June 6, 2003). The limited liability company agreement of CC VIII does not provide for a mandatory redemption of the CC VIII interest.

An issue arose as to whether the documentation for the Bresnan transaction was correct and complete with regard to the ultimate ownership of the CC VIII interest following consummation of the Comcast put right. Specifically, under the terms of the Bresnan transaction documents that were entered into in June 1999, the Comcast sellers originally would have received, after adjustments, 24,273,943 Charter Holdco membership units, but due to an FCC regulatory issue raised by the Comcast sellers shortly before closing, the Bresnan transaction was modified to provide that the Comcast sellers instead would receive the preferred equity interests in CC VIII represented by the CC VIII interest. As part of the last-minute changes to the Bresnan transaction documents, a draft amended version of the Charter Holdco limited liability company agreement was prepared, and contract provisions were drafted for that agreement that would have required an automatic exchange of the CC VIII interest for 24,273,943 Charter Holdco membership units if the Comcast sellers exercised the Comcast put right and sold the CC VIII interest to Mr. Allen or his affiliates. However, the provisions that would have required this automatic exchange did not appear in the final version of the Charter Holdco limited liability company agreement that was delivered and executed at the closing of the Bresnan transaction. The law firm that prepared the documents for the Bresnan transaction brought this matter to the attention of Charter and representatives of Mr. Allen in 2002.

Thereafter, the board of directors of Charter formed a Special Committee ~~(currently comprised~~ of ~~Messrs. Merritt, Tory and Wangberg)~~independent directors to investigate the matter and take any other appropriate action on behalf of Charter with respect to this matter. After conducting an investigation of the relevant facts and circumstances, the Special Committee determined that a "scrivener’s error" had occurred in February 2000 in connection with the preparation of the last-minute revisions to the Bresnan transaction documents and that, as a result, Charter should seek the reformation of the Charter Holdco limited liability company agreement, or alternative relief, in order to restore and ensure the obligation that the CC VIII interest be automatically exchanged for Charter Holdco units. The Special Committee further determined that, as part of such contract reformation or alternative relief, Mr. Allen should be required to contribute the CC VIII interest to Charter Holdco in exchange for 24,273,943 Charter Holdco membership units. The Special Committee also recommended to the board of directors of Charter that, to the extent contract reformation were achieved, the board of directors should consider whether the CC VIII interest should ultimately be held by Charter Holdco or Charter Holdings or another entity owned directly or indirectly by them.

Mr. Allen disagreed with the Special Committee’s determinations described above and so notified the Special Committee. Mr. Allen contended that the transaction was accurately reflected in the transaction documentation and contemporaneous and subsequent company public disclosures.

The parties engaged in a process of non-binding mediation to seek to resolve this matter, without success. The Special Committee evaluated what further actions or processes to undertake to resolve this dispute. To accommodate further deliberation, each party agreed to refrain from initiating legal proceedings over this matter until it had given at least ten days’ prior notice to the other. In addition, the Special Committee and Mr. Allen determined to utilize the Delaware Court of Chancery’s program for mediation of complex business disputes in an effort to resolve the CC VIII interest dispute.

As of October 31, 2005, Mr. Allen, the Special Committee, Charter, Charter Holdco and certain of their affiliates, having investigated the facts and circumstances relating to the dispute involving the CC VIII interest, after consultation with counsel and other advisors, and as a result of the Delaware Chancery Court’s non-binding mediation program, agreed to settle the dispute, and execute certain permanent and irrevocable releases pursuant to the Settlement Agreement and Mutual Release agreement dated October 31, 2005 (the "Settlement").

Pursuant to the Settlement, CII has retained 30% of its CC VIII interest (the "Remaining Interests"). The Remaining Interests are subject to certain drag along, tag along and transfer restrictions as detailed in the revised CC VIII Limited Liability Company Agreement. CII transferred the other 70% of the CC VIII interest directly and indirectly, through Charter Holdco, to a newly formed entity, CCHC ~~LLC~~ (a direct subsidiary of Charter Holdco and the direct parent of

~~CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(UNAUDITED)~~

~~(dollars in millions, except share and per share amounts and where indicated)~~

Charter ~~Holdings, "CCHC")~~Holdings). Of ~~that other~~the 70% of the CC VIII preferred interests, 7.4% has been transferred by CII to CCHC for a subordinated exchangeable note ~~of CCHC~~ with an initial accreted value of ~~$48.2~~$48 million, accreting at 14%, compounded quarterly, with a 15-year maturity (the "Note"). The remaining 62.6% has been transferred by CII to Charter Holdco, in accordance with the terms of the settlement for no additional monetary consideration. Charter Holdco contributed the 62.6% interest to CCHC.

As part of the Settlement, CC VIII issued approximately 49 million additional Class B units to CC V in consideration for prior capital contributions to CC VIII by CC V, with respect to transactions that were unrelated to the dispute in connection with ~~CII's~~CII’s membership units in CC VIII. As a result, Mr. Allen’s pro rata share of the profits and losses of CC VIII attributable to the Remaining Interests is approximately 5.6%.

The Note is exchangeable, at ~~CII's~~CII’s option, at any time, for Charter Holdco Class A Common units at a rate equal to the then accreted value, divided by $2.00 (the "Exchange Rate"). Customary anti-dilution protections have been provided that could cause future changes to the Exchange Rate. Additionally, the Charter Holdco Class A Common units received will be exchangeable by the holder into Charter common stock in accordance with existing agreements between CII, Charter and certain other parties signatory thereto. Beginning ~~three years and four months after the closing of the Settlement,~~February 28, 2009, if the closing price of Charter common stock is at or above the Exchange Rate for a certain period of time as specified in the Exchange Agreement, Charter Holdco may require the exchange of the Note for Charter Holdco Class A Common units at the Exchange Rate.

CCHC has the right to redeem the Note under certain circumstances, for cash in an amount equal to the then accreted ~~value.~~value, such amount, if redeemed prior to February 28, 2009, would also include a make whole up to the accreted value through February 28, 2009. CCHC must redeem the Note at its maturity for cash in an amount equal to the initial stated value plus the accreted return through maturity.

The Board of Directors has determined that the transferred CC VIII interests remain at CCHC.

~~TechTV, Inc.~~

TechTV, Inc. ("TechTV") operated a cable television network that offered programming mostly related to technology. Pursuant to an affiliation agreement that originated in 1998 and that terminates in 2008, TechTV has provided the Company with programming for distribution via Charter’s cable systems. The affiliation agreement provides, among other things, that TechTV must offer Charter certain terms and conditions that are no less favorable in the affiliation agreement than are given to any other distributor that serves the same number of or fewer TechTV viewing customers. Additionally, pursuant to the affiliation agreement, the Company was entitled to incentive payments for channel launches through December 31, 2003.

In March 2004, Charter Holdco entered into agreements with Vulcan Programming and TechTV, which provide for (i) Charter Holdco and TechTV to amend the affiliation agreement which, among other things, revises the description of the TechTV network content, provides for Charter Holdco to waive certain claims against TechTV relating to alleged breaches of the affiliation agreement and provides for TechTV to make payment of outstanding launch receivables due to Charter Holdco under the affiliation agreement, (ii) Vulcan Programming to pay approximately $10 million and purchase over a 24-month period at fair market rates, $2 million of advertising time across various cable networks on Charter cable systems in consideration of the agreements, obligations, releases and waivers under the agreements and in settlement of the aforementioned claims and (iii) TechTV to be a provider of content relating to technology and video gaming for Charter’s interactive television platforms through December 31, 2006 (exclusive for the first year). For each of the three and nine months ended September 30, 2005 and 2004, the Company recognized approximately $0.3 million and $1 million, respectively, of the Vulcan Programming payment as an offset to programming expense. For the three and nine months ended September 30, 2005, the Company paid approximately $1 million and $2 million, respectively, and for the three and nine months ended September 30, 2004, the Company paid approximately $0.5 million and $1 million, respectively, under the affiliation agreement.

The Company believes that Vulcan Programming, which is 100% owned by Mr. Allen, owned an approximate 98% equity interest in TechTV at the time Vulcan Programming sold TechTV to an unrelated third party in May 2004. Until September 2003, Mr. Savoy, a former Charter director, was the president and director of Vulcan Programming and was a director of TechTV. Mr. Wangberg, one of Charter’s directors, was the chairman, chief executive officer

~~CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(UNAUDITED)~~

~~(dollars in millions, except share and per share amounts and where indicated)~~

~~and a director of TechTV. Mr. Wangberg resigned as the chief executive officer of TechTV in July 2002. He remained a director of TechTV along with Mr. Allen until Vulcan Programming sold TechTV.~~

~~Digeo, Inc.~~

In March 2001, a subsidiary of Charter, Charter Communications Ventures, LLC ("Charter Ventures"), and Vulcan Ventures Incorporated formed DBroadband Holdings, LLC for the sole purpose of purchasing equity interests in Digeo, Inc. ("Digeo"), an entity controlled by Mr. Allen. In connection with the execution of the broadband carriage agreement, DBroadband Holdings, LLC purchased an equity interest in Digeo funded by contributions from Vulcan Ventures Incorporated. The equity interest is subject to a priority return of capital to Vulcan Ventures up to the amount contributed by Vulcan Ventures on Charter Ventures’ behalf. After Vulcan Ventures recovers its amount contributed and any cumulative loss allocations, Charter Ventures has a 100% profit interest in DBroadband Holdings, LLC. Charter Ventures is not required to make any capital contributions, including capital calls, to Digeo. DBroadband Holdings, LLC is therefore not included in the Company’s consolidated financial statements. Pursuant to an amended version of this arrangement, in 2003 Vulcan Ventures contributed a total of $29 million to Digeo, $7 million of which was contributed on Charter Ventures’ behalf, subject to Vulcan Ventures’ aforementioned priority return. Since the formation of DBroadband Holdings, LLC, Vulcan Ventures has contributed approximately $56 million on Charter Ventures’ behalf.

On March 2, 2001, Charter Ventures entered into a broadband carriage agreement with Digeo Interactive, LLC ("Digeo Interactive"), a wholly owned subsidiary of Digeo. The carriage agreement provided that Digeo Interactive would provide to Charter a "portal" product, which would function as the television-based Internet portal (the initial point of entry to the Internet) for Charter’s customers who received Internet access from Charter. The agreement term was for 25 years and Charter agreed to use the Digeo portal exclusively for six years. Before the portal product was delivered to Charter, Digeo terminated development of the portal product.

On September 27, 2001, Charter and Digeo Interactive amended the broadband carriage agreement. According to the amendment, Digeo Interactive would provide to Charter the content for enhanced "Wink" interactive television services, known as Charter Interactive Channels ("i-channels"). In order to provide the i-channels, Digeo Interactive sublicensed certain Wink technologies to Charter. Charter is entitled to share in the revenues generated by the i-channels. Currently, the Company’s digital video customers who receive i-channels receive the service at no additional charge.

On September 28, 2002, Charter entered into a second amendment to its broadband carriage agreement with Digeo Interactive. This amendment superseded the amendment of September 27, 2001. It provided for the development by Digeo Interactive of future features to be included in the Basic i-TV service to be provided by Digeo and for Digeo’s development of an interactive "toolkit" to enable Charter to develop interactive local content. Furthermore, Charter could request that Digeo Interactive manage local content for a fee. The amendment provided for Charter to pay for development of the Basic i-TV service as well as license fees for customers who would receive the service, and for Charter and Digeo to split certain revenues earned from the service. The Company paid Digeo Interactive approximately $1 million and $2 million for the three and nine months ended September 30, 2005, respectively, and $1 million and $2 million for the three and nine months ended September 30, 2004, respectively, for customized development of the i-channels and the local content tool kit. This amendment expired pursuant to its terms on December 31, 2003. Digeo Interactive is continuing to provide the Basic i-TV service on a month-to-month basis.

On June 30, 2003, Charter Holdco entered into an agreement with Motorola, Inc. for the purchase of 100,000 digital video recorder ("DVR") units. The software for these DVR units is being supplied by Digeo Interactive, LLC under a license agreement entered into in April 2004. Under the license agreement Digeo Interactive granted to Charter Holdco the right to use Digeo’s proprietary software for the number of DVR units that Charter deployed from a maximum of 10 headends through year-end 2004. This maximum number of headends was increased from 10 to 15 pursuant to a letter agreement executed on June 11, 2004 and the date for entering into license agreements for units deployed was extended to June 30, 2005. The number of headends was increased from 15 to 20 pursuant to a letter

~~CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(UNAUDITED)~~

~~(dollars in millions, except share and per share amounts and where indicated)~~

agreement dated August 4, 2004, from 20 to 30 pursuant to a letter agreement dated September 28, 2004 and from 30 to 50 headends by a letter agreement in February 2005. The license granted for each unit deployed under the agreement is valid for five years. In addition, Charter will pay certain other fees including a per-headend license fee and maintenance fees. Maximum license and maintenance fees during the term of the agreement are expected to be approximately $7 million. The agreement provides that Charter is entitled to receive contract terms, considered on the whole, and license fees, considered apart from other contract terms, no less favorable than those accorded to any other Digeo customer. Charter paid approximately $1 million in license and maintenance fees for each of the three and nine months ended September 30, 2005.

In April 2004, the Company launched DVR service using units containing the Digeo software in Charter’s Rochester, Minnesota market using a broadband media center that is an integrated set-top terminal with a cable converter, DVR hard drive and connectivity to other consumer electronics devices (such as stereos, MP3 players, and digital cameras).

In May 2004, Charter Holdco entered into a binding term sheet with Digeo Interactive for the development, testing and purchase of 70,000 Digeo PowerKey DVR units. The term sheet provided that the parties would proceed in good faith to negotiate, prior to year-end 2004, definitive agreements for the development, testing and purchase of the DVR units and that the parties would enter into a license agreement for Digeo's proprietary software on terms substantially similar to the terms of the license agreement described above. In November 2004, Charter Holdco and Digeo Interactive executed the license agreement and in December 2004, the parties executed the purchase agreement, each on terms substantially similar to the binding term sheet. Product development and testing has been completed. Total purchase price and license and maintenance fees during the term of the definitive agreements are expected to be approximately $41 million. The definitive agreements are terminable at no penalty to Charter in certain circumstances. Charter paid approximately $7 million and $9 million for the three and nine months ended September 30, 2005, respectively, and $0.2 million for each of the three and nine months ended September 30, 2004 in capital purchases under this agreement.

In late 2003, Microsoft sued Digeo for $9 million in a breach of contract action, involving an agreement that Digeo and Microsoft had entered into in 2001. Digeo informed us that it believed it had an indemnification claim against us for half that amount. Digeo settled with Microsoft agreeing to make a cash payment and to purchase certain amounts of Microsoft software products and consulting services through 2008. In consideration of Digeo agreeing to release us from its potential claim against us, after consultation with outside counsel we agreed, in June 2005, to purchase a total of $2.3 million in Microsoft consulting services through 2008, a portion of which amounts Digeo has informed us will count against Digeo’s purchase obligations with Microsoft.

In October 2005, Charter Holdco and Digeo Interactive entered into a binding Term Sheet for the test market deployment of the Moxi Entertainment Applications Pack ("MEAP"). The MEAP is an addition to the Moxi Client Software and will contain ten games (such as Video Poker and Blackjack), a photo application and jukebox application. The term sheet is limited to a test market application of approximately 14,000 subscribers and the aggregate value is not expected to exceed $0.1 million. In the event the test market proves successful, the companies will replace the Term Sheet with a long form agreement including a planned roll-out across additional markets. The Term Sheet expires on May 1, 2006.

The Company believes that Vulcan Ventures, an entity controlled by Mr. Allen, owns an approximate 60% equity interest in Digeo, Inc., on a fully-converted non-diluted basis. Mr. Allen, Lance Conn and Jo Allen Patton, directors of Charter, are directors of Digeo, and Mr. Vogel was a director of Digeo in 2004. During 2004 and 2005, Mr. Vogel held options to purchase 10,000 shares of Digeo common stock.

~~Oxygen Media LLC~~

Oxygen Media LLC ("Oxygen") provides programming content aimed at the female audience for distribution over cable systems and satellite. On July 22, 2002, Charter Holdco entered into a carriage agreement with Oxygen whereby the Company agreed to carry programming content from Oxygen. Under the carriage agreement, the Company currently makes Oxygen programming available to approximately 5 million of its video customers. The term of the

~~CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(UNAUDITED)~~

~~(dollars in millions, except share and per share amounts and where indicated)~~

carriage agreement was retroactive to February 1, 2000, the date of launch of Oxygen programming by the Company, and runs for a period of five years from that date. For the three and nine months ended September 30, 2005, the Company paid Oxygen approximately $2 million and $7 million, respectively, and for the three and nine months ended September 30, 2004, the Company paid Oxygen approximately $3 million and $11 million, respectively, for programming content. In addition, Oxygen pays the Company marketing support fees for customers launched after the first year of the term of the carriage agreement up to a total of $4 million. The Company recorded approximately $0.1 million related to these launch incentives as a reduction of programming expense for the nine months ended September 30, 2005 and $0.4 million and $1 million for the three and nine months ended September 30, 2004, respectively.

Concurrently with the execution of the carriage agreement, Charter Holdco entered into an equity issuance agreement pursuant to which Oxygen’s parent company, Oxygen Media Corporation ("Oxygen Media"), granted a subsidiary of Charter Holdco a warrant to purchase 2.4 million shares of Oxygen Media common stock for an exercise price of $22.00 per share. In February 2005, this warrant expired unexercised. Charter Holdco was also to receive unregistered shares of Oxygen Media common stock with a guaranteed fair market value on the date of issuance of $34 million, on or prior to February 2, 2005, with the exact date to be determined by Oxygen Media, but this commitment was later revised as discussed below.

The Company recognized the guaranteed value of the investment over the life of the carriage agreement as a reduction of programming expense. For the nine months ended September 30, 2005, the Company recorded approximately $2 million as a reduction of programming expense and for the three and nine months ended September 30, 2004, the Company recorded approximately $3 million and $11 million as a reduction of programming expense, respectively. The carrying value of the Company’s investment in Oxygen was approximately $33 million and $32 million as of September 30, 2005 and December 31, 2004, respectively.

In August 2004, Charter Holdco and Oxygen entered into agreements that amended and renewed the carriage agreement. The amendment to the carriage agreement (a) revises the number of the Company’s customers to which Oxygen programming must be carried and for which the Company must pay, (b) releases Charter Holdco from any claims related to the failure to achieve distribution benchmarks under the carriage agreement, (c) requires Oxygen to make payment on outstanding receivables for marketing support fees due to the Company under the carriage agreement and (d) requires that Oxygen provide its programming content to the Company on economic terms no less favorable than Oxygen provides to any other cable or satellite operator having fewer subscribers than the Company. The renewal of the carriage agreement (a) extends the period that the Company will carry Oxygen programming to the Company’s customers through January 31, 2008 and (b) requires license fees to be paid based on customers receiving Oxygen programming, rather than for specific customer benchmarks.

In August 2004, Charter Holdco and Oxygen also amended the equity issuance agreement to provide for the issuance of 1 million shares of Oxygen Preferred Stock with a liquidation preference of $33.10 per share plus accrued dividends to Charter Holdco on February 1, 2005 in place of the $34 million of unregistered shares of Oxygen Media common stock. Oxygen Media delivered these shares in March 2005. The preferred stock is convertible into common stock after December 31, 2007 at a conversion ratio per share of preferred stock, the numerator of which is the liquidation preference and the denominator of which is the fair market value per share of Oxygen Media common stock on the conversion date.

As of September 30, 2005, through Vulcan Programming, Mr. Allen owned an approximate 31% interest in Oxygen assuming no exercises of outstanding warrants or conversion or exchange of convertible or exchangeable securities. Ms. Jo Allen Patton is a director and the President of Vulcan Programming. Mr. Lance Conn is a Vice President of Vulcan Programming. Mr. Nathanson has an indirect beneficial interest of less than 1% in Oxygen.

~~Helicon~~

In 1999, the Company purchased the Helicon cable systems. As part of that purchase, Mr. Allen entered into a put agreement with a certain seller of the Helicon cable systems that received a portion of the purchase price in the form of a preferred membership interest in Charter Helicon, LLC with a redemption price of $25 million plus accrued interest.

~~CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(UNAUDITED)~~

~~(dollars in millions, except share and per share amounts and where indicated)~~

Under the Helicon put agreement, such holder had the right to sell any or all of the interest to Mr. Allen prior to its mandatory redemption in cash on July 30, 2009. On August 31, 2005, 40% of the preferred membership interest was put to Mr. Allen. The remaining 60% of the preferred interest in Charter Helicon, LLC remained subject to the put to Mr. Allen. Such preferred interest was recorded in other long-term liabilities as of September 30, 2005 and December 31, 2004. On October 6, 2005, Charter Helicon, LLC redeemed all of the preferred membership interest for the redemption price of $25 million plus accrued interest.

~~21.~~~~Subsequent Events~~

In October 2005, Charter repurchased 484,908 shares of its Series A Convertible Redeemable Preferred Stock (the "Preferred Stock") for an aggregate purchase price of approximately $29 million (or $60 per share). The shares had liquidation preference of approximately $48 million and had accrued but unpaid dividends of approximately $3 million. Following the repurchase, 60,351 shares of Preferred Stock remained outstanding.

In connection with the repurchase, the holders of Preferred Stock consented to an amendment to the Certificate of Designation governing the Preferred Stock that will eliminate the quarterly dividends on all of the outstanding Preferred Stock and will provide that the liquidation preference for the remaining shares outstanding will be $105.4063 per share, which amount shall accrete from September 30, 2005 at an annual rate of 7.75%, compounded quarterly. Certain holders of Preferred Stock also released Charter from various threatened claims relating to their acquisition and ownership of the Preferred Stock, including threatened claims for breach of contract.

3120

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.

General

Charter Communications, Inc. ("Charter") is a holding company whose principal assets as of ~~September 30, 2005~~March 31, 2006 are a 48% controlling common equity interest in Charter Communications Holding Company, LLC ("Charter Holdco") and "mirror" notes that are payable by Charter Holdco to Charter and have the same principal amount and terms as Charter’s convertible senior notes. "We," "us" and "our" refer to Charter and its subsidiaries.

The chart below sets forth our organizational structure and that of our principal direct and indirect subsidiaries pro forma for the creation of CCHC, LLC and settlement of the CC VIII, LLC dispute. See Note 20 to the condensed consolidated financial statements. Equity ownership and voting percentages are actual percentages as of September 30, 2005 and do not give effect to any exercise, conversion or exchange of options, preferred stock, convertible notes or other convertible or exchangeable securities.

~~(1)~~		Charter acts as the sole manager of Charter Holdco and its direct and indirect limited liability company subsidiaries. Charter’s certificate of incorporation requires that its principal assets be securities of Charter Holdco, the terms of which mirror the terms of securities issued by Charter.

~~(2)~~		These membership units are held by Charter Investment, Inc. and Vulcan Cable III Inc., each of which is 100% owned by Paul G. Allen, our chairman and controlling shareholder. They are exchangeable at any time on a one-for-one basis for shares of Charter Class A common stock.

~~(3)~~		The percentages shown in this table reflect the issuance of the 27.2 million shares of Class A common stock issued on July 29, 2005 and the corresponding issuance of an equal number of mirror membership units by Charter Holdco to Charter. However, for accounting purposes, Charter’s common equity interest in Charter Holdco is 48%, and Paul G. Allen’s ownership of Charter Holdco is 52%. These percentages exclude the 27.2 million mirror membership units issued to Charter due to the required return of the issued mirror units upon return of the shares offered pursuant to the share lending agreement. See Note 8 to the condensed consolidated financial statements.

~~(4)~~		~~Represents the impact of the settlement of the CC VIII, LLC dispute. See Note 20 to the condensed consolidated financial statements.~~

We are a broadband communications company operating in the United States. We offer our customers traditional cable video programming (analog and digital video) as well as high-speed Internet services and, in some areas, advanced broadband services such as high definition television, video on demand, telephone and interactive television. We sell our cable video programming, high-speed Internet and advanced broadband services on a subscription basis.

The following table summarizes our customer statistics for analog and digital video, residential high-speed Internet and residential telephone as of ~~September 30, 2005~~March 31, 2006 and ~~2004:~~2005:

	Approximate as of				Approximate as of
	September 30,		September 30,		March 31,		March 31,
	2005 (a)		2004 (a)		2006 (a)		2005 (a)

Cable Video Services:
Analog Video:
Residential (non-bulk) analog video customers (b)		5,636,100		5,825,000		5,640,200		5,732,600
Multi-dwelling (bulk) and commercial unit customers (c)		270,200		249,600		273,700		252,200
Total analog video customers (b)(c)		5,906,300		6,074,600		5,913,900		5,984,800

Digital Video:
Digital video customers (d)		2,749,400		2,688,900		2,866,400		2,694,600

Non-Video Cable Services:
Residential high-speed Internet customers (e)		2,120,000		1,819,900		2,322,400		1,978,400
Residential telephone customers (f)		89,900		40,200		191,100		55,300

~~The September 30, 2005 statistics presented above reflect~~Included in the ~~minimal~~70,900 net loss of analog video customers is approximately 15,800 of net losses related to systems impacted by hurricanes Katrina and Rita. ~~Based on preliminary estimates, customer losses related to hurricanes Katrina and Rita are expected to be approximately 10,000 to 15,000.~~

After giving effect to the acquisition of cable systems in January 2006 and the sale of certain non-strategic cable systems in July 2005, ~~September 30, 2004~~March 31, 2005 analog video customers, digital video customers, ~~and~~ high-speed Internet customers and telephone customers would have been ~~6,046,900, 2,677,600~~5,974,600, 2,690,300, 1,990,200 and ~~1,819,300,~~70,300, respectively.

(a)

"Customers" include all persons our corporate billing records show as receiving service (regardless of their payment status), except for complimentary accounts (such as our employees). At ~~September 30,~~March 31, 2006 and 2005, ~~and 2004,~~ "customers" include approximately ~~44,400~~48,500 and ~~46,000~~43,100 persons whose accounts were over 60 days past due in payment, approximately ~~9,800~~11,900 and ~~5,500~~7,000 persons whose accounts were over 90 days past due in

payment, and approximately ~~6,000~~7,800 and ~~2,000~~3,600 of which were over 120 days past due in payment, respectively.

(b)

"~~Residential (non-bulk) analog~~Analog video customers" include all customers who receive video services ~~except for complimentary accounts (such~~(including those who also purchase high-speed Internet and telephone services) but excludes approximately 287,700 and 241,700 customers at March 31, 2006 and 2005, respectively, who receive high-speed Internet service only or telephone service only and who are only counted as ~~our employees).~~high-speed Internet customers or telephone customers.

(c)

Included within "video customers" are those in commercial and multi-dwelling structures, which are calculated on an equivalent bulk unit ("EBU") basis. EBU is calculated for a system by dividing the bulk price charged to accounts in an area by the most prevalent price charged to non-bulk residential customers in that market for the comparable tier of service. The EBU method of estimating analog video customers is

consistent with the methodology used in determining costs paid to programmers and has been consistently applied year over year. As we increase our effective analog prices 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 households that have one or more digital set-top terminals. Included in "digital video customers" on ~~September 30,~~March 31, 2006 and 2005 ~~and 2004~~ are approximately ~~8,900~~8,500 and ~~10,700~~10,000 customers, respectively, that receive digital video service directly through satellite transmission.

(e)

"Residential high-speed Internet customers" represent those customers who subscribe to our high-speed Internet service. At September 30, 2005 and 2004, approximately 1,896,000 and 1,614,400 of these high-speed Internet customers, respectively, receive video services from us and are included within our video statistics above.

(f)

"Residential telephone customers" include all households ~~who subscribe to our~~receiving telephone service.

Overview of Operations

We have a history of net losses. ~~Despite having net earnings for the three months ended September 30, 2005, we expect to continue to report net losses for the foreseeable future.~~ Our net losses are principally attributable to insufficient revenue to cover the combination of operating costs and interest costs we incur because of our high level of debt and depreciation expenses that we incur resulting from the capital investments we have made and continue to make in our ~~business, and impairment of our franchise intangibles.~~cable properties. We expect that these expenses ~~(other than impairment of franchises)~~ will remain significant, and we therefore expect to continue to report net losses for the foreseeable future. Additionally, reported losses allocated to minority interest on the statement of operations are limited to the extent of any remaining minority interest balance on the balance sheet related to Charter Holdco. Because minority interest in Charter Holdco has been eliminated, Charter absorbs all losses before income taxes that otherwise would be allocated to minority interest. Subject to any changes in Charter Holdco’s capital structure, future losses will continue to be absorbed by Charter. Effective January 1, 2005, we ceased recognizing minority interest in earnings or losses of CC VIII, LLC for financial reporting purposes until the resolution of the dispute between Charter and Paul G. Allen, Charter’s Chairman and controlling shareholder, regarding the preferred membership units in CC VIII, LLC was determinable or other events occurred. This dispute was settled October 31, 2005. We are currently determining the impact of the settlement. Subsequent to recording the impact of the settlement in the fourth quarter of 2005, approximately 6% of CC VIII’s income will be allocated to minority interest.

For the three ~~and nine~~ months ended ~~September 30,~~March 31, 2006 and 2005, our income from operations, which includes depreciation and amortization expense and asset impairment charges but excludes interest expense, was ~~$63~~$7 million and ~~$224~~$51 million, ~~respectively. For the three and nine months ended September 30, 2004, our loss from operations was $2.3 billion and $2.2 billion,~~ respectively. We had operating margins of 5%1% and 6%4% for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2006 and 2005, ~~respectively, and negative operating margins of 188% and 58% for the three and nine months ended September 30, 2004,~~ respectively. The ~~increase~~decrease in income from operations and operating margins for the three ~~and nine~~ months ended ~~September 30, 2005~~March 31, 2006 compared to ~~2004~~2005 was principally due to an increase in operating costs and asset impairment charges of ~~franchises of $2.4 billion recorded in 2004 which did not recur in 2005.~~$68 million.

Historically, our ability to fund operations and investing activities has depended on our continued access to credit under our credit facilities. We expect we will continue to borrow under our credit facilities from time to time to fund cash needs. The occurrence of an event of default under our credit facilities could result in borrowings from

these credit facilities being unavailable to us and could, in the event of a payment default or acceleration, also trigger events of default under the indentures governing our outstanding notes and would have a material adverse effect on us. Approximately $7$22 million of indebtedness under our ~~debt matures~~credit facilities is scheduled to mature during the remainder of ~~2005,~~2006, which we expect to fund through borrowings under our revolving credit facility. See "— Liquidity and Capital Resources."

Critical Accounting Policies and Estimates

For a discussion of our critical accounting policies and the means by which we develop estimates therefore, see "Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations" in our ~~2004~~2005 Annual Report on Form 10-K.

3522

RESULTS OF OPERATIONS

Three Months Ended ~~September 30, 2005~~March 31, 2006 Compared to Three Months Ended ~~September 30, 2004~~March 31, 2005

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

Three Months Ended September 30,

2005

2004

Revenues $ 1,318 100 % $ 1,248 100 %

Costs and expenses:
Operating (excluding depreciation and amortization) 586 45 % 525 42 %
Selling, general and administrative 269 20 % 252 20 %
Depreciation and amortization 375 29 % 371 30 %
Impairment of franchises -- -- 2,433 195 %
Loss on sale of assets, net 1 -- -- --
Option compensation expense, net 3 -- 8 1 %
Hurricane asset retirement loss 19 1 % -- --
Special charges, net 2 -- 3 --

1,255 95 % 3,592 288 %

Income (loss) from operations 63 5 % (2,344 ) (188 )%

Interest expense, net (462 ) (424 )
Gain (loss) on derivative instruments and hedging activities, net 17 (8 )
Gain on extinguishment of debt 490 --

45 (432 )

Income (loss) before minority interest, income taxes and cumulative effect of accounting change 108 (2,776 )

Minority interest (3 ) 34

Income (loss) before income taxes and cumulative effect of accounting change 105 (2,742 )

Income tax benefit (expense) (29 ) 213

Income (loss) before cumulative effect of accounting change 76 (2,529 )

Cumulative effect of accounting change, net of tax -- (765 )

Net income (loss) 76 (3,294 )

Dividends on preferred stock - redeemable (1 ) (1 )

Net income (loss) applicable to common stock $ 75 $ (3,295 )

Earnings (loss) per common share:

Basic $ 0.24 $ (10.89 )

Diluted $ 0.09 $ (10.89 )

Weighted average common shares outstanding, basic 316,214,740 302,604,978

Weighted average common shares outstanding, diluted 1,012,591,842 302,604,978

	Three Months Ended March 31,
	2006					2005

Revenues	$	1,374		100	%	$	1,271		100	%

Costs and expenses:
Operating (excluding depreciation and amortization)		626		46	%		559		44	%
Selling, general and administrative		281		20	%		241		19	%
Depreciation and amortization		358		26	%		381		30	%
Asset impairment charges		99		7	%		31		2	%
Other operating expenses, net		3		--			8		1	%

		1,367		99	%		1,220		96	%

Income from operations		7		1	%		51		4	%

Interest expense, net		(468	)				(420	)
Other income, net		11					32

		(457	)				(388	)

Loss before income taxes		(450	)				(337	)

Income tax expense		(9	)				(15	)

Net loss		(459	)				(352	)

Dividends on preferred stock - redeemable		--					(1	)

Net loss applicable to common stock	$	(459	)			$	(353	)

Loss per common share, basic and diluted	$	(1.45	)			$	(1.16	)

Weighted average common shares outstanding, basic and diluted		317,413,472					303,308,880

Revenues. ~~Revenues increased by $70 million, or 6%, from $1.2 billion for the three months ended September 30, 2004~~The overall increase in revenues in 2006 compared to ~~$1.3 billion for the three months ended September 30, 2005. This increase~~2005 is principally the result of an increase of ~~300,100~~344,000 high-speed Internet customers and ~~60,500~~171,800 digital video customers, as well as price increases for video and high-speed Internet services, and is offset partially by a decrease of ~~168,300~~70,900 analog video customers and $6 million of credits issued to hurricane Katrina impacted customers related to service outages. Through September and October, we have been restoring service to our impacted customers and, as of the date of this report, substantially all of our customers’ service has been restored. Included in the reduction in analog video customers and reducing the increase in digital video and high-speed Internet customers are 26,800 analog video customers, 12,000 digital video customers and 600 high-speed Internet customers sold in the cable system sales in Texas and West Virginia, which closed in July 2005 (referred to in this section as the "System Sales"). The System Sales reduced the increase in revenues by approximately $4 million.customers. Our goal is to increase revenues by improving customer service, which we believe will stabilize our analog video customer base, implementing price increases on certain services and packages and increasing the number of customers who purchase high-speed Internet services, digital video and advanced products and services such as telephone, video on demand ("VOD"), high definition television and digital video recorder service.

Average monthly revenue per analog video customer increased to ~~$74.15~~$77.64 for the three months ended ~~September 30, 2005~~March 31, 2006 from ~~$68.15~~$70.75 for the three months ended ~~September 30, 2004~~March 31, 2005 primarily as a result of incremental revenues from advanced services and price increases. Average monthly revenue per analog video customer represents total quarterly revenue, divided by three, divided by the average number of analog video customers during the respective period.

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

	Three Months Ended September 30,															Three Months Ended March 31,
	2005					2004					2005 over 2004					2006					2005					2006 over 2005
	Revenues		% of Revenues			Revenues		% of Revenues			Change		% Change			Revenues		% of Revenues			Revenues		% of Revenues			Change		% Change

Video	$	848		64	%	$	839		67	%	$	9		1	%	$	869		63	%	$	842		66	%	$	27		3	%
High-speed Internet		230		18	%		189		15	%		41		22	%		254		18	%		215		17	%		39		18	%
Telephone																	20		2	%		6		1	%		14		233	%
Advertising sales		74		6	%		73		6	%		1		1	%		70		5	%		64		5	%		6		9	%
Commercial		71		5	%		61		5	%		10		16	%		76		6	%		65		5	%		11		17	%
Other		95		7	%		86		7	%		9		10	%		85		6	%		79		6	%		6		8	%

	$	1,318		100	%	$	1,248		100	%	$	70		6	%	$	1,374		100	%	$	1,271		100	%	$	103		8	%

Video revenues consist primarily of revenues from analog and digital video services provided to our non-commercial customers. ~~Video revenues increased by $9 million, or 1%, from $839 million for the three months ended September 30, 2004 to $848 million for the three months ended September 30, 2005.~~ Approximately ~~$34~~$27 million of the increase was the result of price increases and incremental video revenues from existing customers and approximately $3$11 million was the result of an increase in digital video customers. The increases were offset by decreases of approximately ~~$20~~$11 million related to a decrease in analog video ~~customers, approximately $3 million resulting from the System Sales and approximately $5~~customers.

Approximately $38 million of ~~credits issued to hurricanes Katrina and Rita impacted customers related to service outages.~~

~~Revenues~~the increase in revenues from high-speed Internet services provided to our non-commercial customers ~~increased $41 million, or 22%, from $189 million for the three months ended September 30, 2004 to $230 million for the three months ended September 30, 2005. Approximately $34 million of the increase~~ related to the increase in the average number of customers receiving high-speed Internet services, whereas approximately $8$1 million related to the increase in average price of the service. ~~The~~

Revenues from telephone services increased primarily as a result of an increase ~~was offset by approximately $1 million~~ of ~~credits issued to hurricanes Katrina and Rita impacted~~135,800 telephone customers ~~related to service outages.~~in 2006.

Advertising sales revenues consist primarily of revenues from commercial advertising customers, programmers and other vendors. Advertising sales revenues increased ~~$1 million, or 1%, from $73 million for the three months ended September 30, 2004 to $74 million for the three months ended September 30, 2005,~~ primarily as a result of ~~$2 million~~an increase in local advertising sales and a one-time ad ~~buys~~buy by ~~programmers~~a programmer offset by a decline in national advertising sales. For ~~each of~~ the three months

ended ~~September 30,~~March 31, 2006 and 2005, ~~and 2004,~~ we received $5$6 million and $3 million, respectively, in advertising sales revenues from ~~vendors.~~programmers.

Commercial revenues consist primarily of revenues from cable video and high-speed Internet services to our commercial customers. Commercial revenues increased ~~$10 million, or 16%, from $61 million for the three months ended September 30, 2004 to $71 million for the three months ended September 30, 2005,~~ primarily as a result of an increase in commercial high-speed Internet revenues.

Other revenues consist of revenues from franchise fees, telephone revenue, equipment rental, customer installations, home shopping, dial-up Internet service, late payment fees, wire maintenance fees and other miscellaneous revenues. ~~Other revenues increased $9 million, or 10%, from $86 million for~~For each of the three months ended ~~September 30, 2004 to $95 million for the three months ended September 30, 2005.~~March 31, 2006 and 2005, franchise fees represented approximately 53% of total other revenues. The increase in other revenues was primarily the result of an increase in franchise fees of $6$4 million, ~~telephone revenue of $5 million and~~ installation revenue of $2$1 million and wire maintenance fees of $1 million.

Operating Expenses. Operating expenses increased $61 million, or 12%, from $525 million for the three months ended September 30, 2004 to $586 million for the three months ended September 30, 2005. The increase in operating expenses was reduced by $2 million as a result of the System Sales. Programming costs included in the accompanying condensed consolidated statements of operations were ~~$357~~$391 million and ~~$328~~$358 million, representing ~~28%~~62% and 9%64% of total ~~costs and~~operating expenses for the three months ended ~~September 30,~~March 31, 2006 and 2005, ~~and 2004,~~ respectively. Key expense components as a percentage of revenues were as follows (dollars in millions):

	Three Months Ended September 30,															Three Months Ended March 31,
	2005					2004					2005 over 2004					2006					2005					2006 over 2005
	Expenses		% of Revenues			Expenses		% of Revenues			Change		% Change			Expenses		% of Revenues			Expenses		% of Revenues			Change		% Change

Programming	$	357		27	%	$	328		26	%	$	29		9	%	$	391		29	%	$	358		28	%	$	33		9	%
Service		203		16	%		173		14	%		30		17	%		209		15	%		176		14	%		33		19	%
Advertising sales		26		2	%		24		2	%		2		8	%		26		2	%		25		2	%		1		4	%

	$	586		45	%	$	525		42	%	$	61		12	%	$	626		46	%	$	559		44	%	$	67		12	%

Programming costs consist primarily of costs paid to programmers for analog, premium, digital channels, VOD and pay-per-view programming. The increase in programming costs ~~of $29 million, or 9%, for the three months ended September 30, 2005 over the three months ended September 30, 2004,~~ was primarily a result of price increases, particularly in sports programming, partially offset by a decrease in analog video customers. Additionally, the increase in programming costs was reduced by $1 million as a result of the System Sales.rate increases. Programming costs were offset by the amortization of payments received from programmers in support of launches of new channels of $9$4 million and ~~$15~~$9 million for the three months ended ~~September 30,~~March 31, 2006 and 2005, ~~and 2004,~~ respectively.

Our cable programming costs have increased in every year we have operated in excess of ~~U.S. inflation~~customary inflationary and cost-of-living ~~increases, and we~~increases. We expect them to continue to increase ~~because of~~due to a variety of factors, including ~~inflationary or negotiated~~ annual increases imposed by programmers and additional programming being provided to customers as a result of system rebuilds and ~~increased costs to purchase or produce programming.~~bandwidth reallocation, both of which increase channel capacity. In ~~2005,~~2006, we expect programming costs ~~have increased and we expect will continue~~ to increase at a higher rate than in ~~2004.~~2005. These costs will be determined in part on the outcome of programming negotiations in ~~2005~~2006 and will likely be subject to offsetting events or otherwise affected by factors similar to the ones mentioned in the preceding paragraph. Our increasing programming costs ~~will result~~have resulted in declining operating margins for our video services ~~to the extent~~because we ~~are~~have been unable to pass on all cost increases to our customers. We expect to partially offset any resulting margin compression from our traditional video services with revenue from advanced video services, increased telephone revenues, high-speed Internet revenues, advertising revenues and commercial service revenues.

Service costs consist primarily of service personnel salaries and benefits, franchise fees, system utilities, costs of providing high-speed Internet service, maintenance and pole rent expense. The increase in service costs ~~of $30 million, or 17%,~~ resulted primarily from increased labor and maintenance costs to support improved service levels and our advanced products of $12 million, increased costs of providing high-speed Internet and telephone service of $9 million, higher fuel and utility prices of $4 million and ~~pole rent expense.~~franchise fees of $3 million. Advertising sales expenses consist of costs related to traditional advertising services provided to advertising customers, including salaries, benefits and commissions. Advertising sales expenses increased ~~$2 million, or 8%, for the three months ended September 30,~~

~~2005 compared to the three months ended September 30, 2004~~ primarily as a result of increased ~~salaries~~salary, benefit and ~~benefits and an increase in marketing.~~commission costs.

Selling, General and Administrative Expenses. Selling, general and administrative expenses increased by $17 million, or 7%, from $252 million for the three months ended September 30, 2004 to $269 million for the three months ended September 30, 2005. The increase in selling, general and administrative expenses was reduced by $1 million as a result of the System Sales. Key components of expense as a percentage of revenues were as follows (dollars in millions):

	Three Months Ended September 30,															Three Months Ended March 31,
	2005					2004					2005 over 2004					2006					2005					2006 over 2005
	Expenses		% of Revenues			Expenses		% of Revenues			Change		% Change			Expenses		% of Revenues			Expenses		% of Revenues			Change		% Change

General and administrative	$	231		17	%	$	220		18	%	$	11		5	%	$	243		17	%	$	206		16	%	$	37		18	%
Marketing		38		3	%		32		2	%		6		19	%		38		3	%		35		3	%		3		9	%

	$	269		20	%	$	252		20	%	$	17		7	%	$	281		20	%	$	241		19	%	$	40		17	%

General and administrative expenses consist primarily of salaries and benefits, rent expense, billing costs, ~~call~~customer care center costs, internal network costs, bad debt expense and property taxes. The increase in general and administrative expenses ~~of $11 million, or 5%,~~ resulted primarily from ~~increases in professional fees associated with consulting services of $11 million and~~ a rise in salaries and benefits of ~~$10~~$26 million and increases in

customer care center costs of $4 million related to ~~increased emphasis on improved~~investments to improve customer service levels, ~~and operational efficiencies offset by decreases in property taxes~~consulting services of $4$2 million, billing costs of $2 million, property and casualty insurance of ~~$4 million, bad debt expense of $3~~$2 million and ~~the System Sales~~property taxes of $1 million.

Marketing expenses increased ~~$6 million, or 19%,~~ as a result of an increased investment in targeted marketing campaigns.

Depreciation and Amortization. Depreciation and amortization expense ~~increased~~decreased by ~~$4 million, or 1%, from $371~~$23 million for the three months ended ~~September 30, 2004~~March 31, 2006 compared to ~~$375 million for~~ the three months ended ~~September 30,~~March 31, 2005. The ~~increase~~decrease in depreciation was ~~related to~~the result of assets becoming fully depreciated offset by an increase in capital expenditures.

Asset Impairment ~~of Franchises.~~Charges. ~~We performed an~~Asset impairment assessment during the third quarter of 2004 using an independent third-party appraiser. The use of lower projected growth rates and the resulting revised estimates of future cash flows in our valuation, primarily as a result of increased competition, led to the recognition of a $2.4 billion impairment chargecharges for the three months ended ~~September 30, 2004.~~March 31, 2006 and 2005 represent the write-down of assets related to cable asset sales to fair value less costs to sell. See Note 3 to the condensed consolidated financial statements.

~~Loss on Sale of Assets,~~Other Operating Expenses, Net. ~~The loss on sale of assets of $1 million for the three months ended September 30, 2005 primarily represents the loss recognized on the disposition of plant and equipment.~~

~~Option Compensation Expense, Net~~. ~~Option compensation expense for the three months ended September 30, 2005 and 2004 primarily represents options expensed in accordance with SFAS No. 123,~~ ~~Accounting for Stock-Based Compensation.~~ ~~The decrease of~~Other operating expenses decreased $5 million ~~or 63%, from $8 million for the three months ended September 30, 2004 to $3 million for the three months ended September 30, 2005 is primarily~~as a result of a $4 million decrease in ~~the fair value~~losses on sales of ~~such options related to~~assets and a $1 million decrease in ~~the price of our Class A common stock combined with a decrease in the number of options issued.~~special charges.

~~Hurricane Asset Retirement Loss.~~ ~~Hurricane asset retirement loss represents the loss associated with the write-off of the net book value of assets destroyed by hurricanes Katrina and Rita in the third quarter of 2005.~~

~~Special Charges, Net.~~Special charges of $2 million for the three months ended September 30, 2005 primarily represents $1 million of severance and related costs of our management realignment and $1 million related to legal settlements. Special charges of $3 million for the three months ended September 30, 2004 represents $6 million of severance and related costs of our workforce reduction offset by $3 million received from a third party in settlement of a dispute.

Interest Expense, Net. Net interest expense increased by ~~$38~~$48 million, or 9%11%, ~~from $424 million~~ for the three months ended ~~September 30, 2004~~March 31, 2006 compared to ~~$462 million for~~ the three months ended ~~September 30,~~March 31, 2005. The increase in net interest expense was a result of an increase in our average borrowing rate from ~~8.84%~~8.86% in the ~~third~~first quarter of ~~2004~~2005 to ~~9.07%~~9.45% in the ~~third~~first quarter of ~~2005~~2006 and an increase of ~~$770~~$229 million in average debt outstanding from ~~$18.4 billion for the third quarter of 2004 compared to~~ $19.2 billion for the ~~third~~first quarter of 2005 ~~and $1 million in losses related~~compared to ~~embedded derivatives in Charter’s 5.875% convertible senior notes issued in November 2004. See Note 10 to~~$19.5 billion for the ~~condensed consolidated financial statements.~~first quarter of 2006.

~~Gain (Loss) on Derivative Instruments and Hedging Activities,~~Other Income, Net. ~~Net gain~~Other income decreased $21 million primarily as a result of a $19 million decrease in net gains on derivative instruments and hedging activities ~~increased $25 million from~~as a ~~loss of $8 million for the three months ended September 30, 2004 to a gain of $17 million for the three months ended September 30, 2005. The increase is primarily the~~ result of ~~an increase~~decreases in gains on interest rate agreements that do not qualify for hedge accounting under ~~SFAS~~Statement of Financial Accounting Standards ("SFAS") No. 133, Accounting for Derivative Instruments and Hedging ~~Activities,~~Activities. ~~which increased from a loss of $9 million for the three months ended September 30, 2004 to a gain of $16 million for the three months ended September 30, 2005.~~

~~Gain on Extinguishment of Debt.~~ ~~Gain~~Other income in 2005 also included net gains on extinguishment of debt of ~~$490~~$7 million for the three months ended September 30, 2005 represents the net gain realized on the exchange of approximately $6.8 billion total principal amount of outstanding debt securities of Charter Holdings for new CCH I, LLC ("CCH I") and CCH I Holdings, LLC ("CIH") debt securities.which did not recur in 2006. See Note 6 to the condensed consolidated financial statements.

~~Minority Interest.~~ ~~Minority interest represents~~ Other income also includes the 2% accretion of the preferred membership interests in our indirect subsidiary, CC VIII, ~~LLC,~~ and ~~in the second quarter of 2004,~~ the pro rata share of the profits and losses of CC VIII, LLC. Effective January 1, 2005, we ceased recognizing minority interest in earnings or losses of CC VIII for financial reporting purposes until the dispute between Charter and Mr. Allen regarding the preferred membership interests in CC VIII was resolved. This dispute was settled October 31, 2005. See Note 7 to the condensed consolidated financial statements. Additionally, reported losses allocated to minority interest on the statement of operations are limited to the extent of any remaining minority interest on the balance sheet related to Charter Holdco. Because minority interest in Charter Holdco is eliminated, Charter absorbs all losses before income taxes that otherwise would be allocated to minority interest. Subject to any changes in Charter Holdco’s capital structure, future losses will continue to be substantially absorbed by Charter.VIII.

Income Tax ~~Benefit (Expense).~~Expense. Income tax expense ~~of $29 million and income tax benefit of $213 million~~ was ~~recognized for the three months ended September 30, 2005 and 2004, respectively. The income tax expense is~~ recognized through increases in deferred tax liabilities related to our 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 our indirect corporate subsidiaries. ~~The income~~Income tax ~~benefit~~expense was ~~realized as a result of decreases in certain~~offset by deferred tax ~~liabilities~~benefits of $21 million and $6 million related to ~~our investment in Charter Holdco as well as decreases in the deferred tax liabilities of certain of our indirect corporate subsidiaries.~~

~~The income tax benefit recognized~~asset impairment charges recorded in the three months ended September 30, 2004 was directly related to the impairment of franchises as discussed above. We do not expect to recognize a similar benefit associated with the impairment of franchises in future periods. However, the actual tax provision calculations in future periods will be the result of currentMarch 31, 2006 and ~~future temporary differences, as well as future operating results.~~

~~Cumulative Effect of Accounting Change, Net of Tax.~~2005, respectively.Cumulative effect of accounting change of $765 million (net of minority interest effects of $19 million and tax effects of $91 million) in 2004 represents the impairment charge recorded as a result of our adoption of EITF Topic D-108.

Net ~~Income (Loss)~~Loss. Net loss ~~decreased~~increased by ~~$3.4 billion from net loss of $3.3 billion~~$107 million, or 30%, for the three months ended ~~September 30, 2004~~March 31, 2006 compared to ~~net income of $76 million for~~ the three months ended ~~September 30,~~March 31, 2005 as a result of the factors described above.

Preferred Stock Dividends. On August 31, 2001, Charter issued 505,664 shares (and on February 28, 2003 issued an additional 39,595 shares) of Series A Convertible Redeemable Preferred Stock in connection with the Cable USA acquisition, on which Charter pays or accrues a quarterly cumulative cash dividend at an annual rate of 5.75% if paid or 7.75% if accrued on a liquidation preference of $100 per share. Beginning January 1, 2005, Charter ~~is accruing~~accrued the dividend on its Series A Convertible Redeemable Preferred Stock. In November 2005, we repurchased 508,546 shares of our Series A Convertible Redeemable Preferred Stock. Following the repurchase, 36,713 shares or preferred stock remain outstanding.

~~Income (Loss)~~Loss Per Common Share. Basic loss per common share ~~decreased~~increased by ~~$11.13 from a loss of $10.89 per common share~~$0.29, or 25%, for the three months ended ~~September 30, 2004~~March 31, 2006 compared to ~~income of $0.24 per common share for~~ the three months ended ~~September 30, 2005 as a result of the factors described above.~~

~~Nine Months Ended September 30, 2005 Compared to Nine Months Ended September 30, 2004~~

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 and share data):

Nine Months Ended September 30,

2005

2004

Revenues $ 3,912 100 % $ 3,701 100 %

Costs and expenses:
Operating (excluding depreciation and amortization) 1,714 44 % 1,552 42 %
Selling, general and administrative 762 19 % 735 20 %
Depreciation and amortization 1,134 29 % 1,105 30 %
Impairment of franchises -- -- 2,433 66 %
Asset impairment charges 39 1 % -- --
(Gain) loss on sale of assets, net 5 -- (104 ) (3 )%
Option compensation expense, net 11 -- 34 1 %
Hurricane asset retirement loss 19 1 % -- --
Special charges, net 4 -- 100 2 %

3,688 94 % 5,855 158 %

Income (loss) from operations 224 6 % (2,154 ) (58 )%

Interest expense, net (1,333 ) (1,227 )
Gain on derivative instruments and hedging activities, net 43 48
Loss on debt to equity conversions -- (23 )
Gain (loss) on extinguishment of debt 498 (21 )
Gain on investments 21 --

(771 ) (1,223 )

Loss before minority interest, income taxes and cumulative effect of accounting change (547 ) (3,377 )

Minority interest (9 ) 24

Loss before income taxes and cumulative effect of accounting change (556 ) (3,353 )

Income tax benefit (expense) (75 ) 116

Loss before cumulative effect of accounting change (631 ) (3,237 )

Cumulative effect of accounting change, net of tax -- (765 )

Net loss (631 ) (4,002 )

Dividends on preferred stock - redeemable (3 ) (3 )

Net loss applicable to common stock $ (634 ) $ (4,005 )

Loss per common share, basic and diluted $ (2.06 ) $ (13.38 )

Weighted average common shares outstanding, basic and diluted 307,761,930 299,411,053

~~Revenues.~~Revenues increased by $211 million, or 6%, from $3.7 billion for the nine months ended September 30, 2004 to $3.9 billion for the nine months ended September 30, 2005. This increase is principally the result of an increase of 300,100 and 60,500 high-speed Internet and digital video customers, respectively, as well as price increases for video and high-speed Internet services, and is offset partially by a decrease of 168,300 analog video customers and $6 million of credits issued to hurricane Katrina impacted customers related to service outages. Through September and October, we have been restoring service to our impacted customers and, as of the date of this report, substantially all of our customers’ service has been restored. Included in the reduction in analog video customers and reducing the increase in digital video and high-speed Internet customers are 26,800 analog video customers, 12,000 digital video customers and 600 high-speed Internet customers sold in the cable system sales in Texas and West Virginia, which closed in July 2005. The cable system sales to Atlantic Broadband Finance, LLC, which closed in March and April 2004 and the cable system sales in Texas and West Virginia, which closed in July 2005 (referred to in this section as the "System Sales") reduced the increase in revenues by approximately $33 million. Our goal is to increase revenues by improving customer service, which we believe will stabilize our analog video customer base, implementing price increases on certain services and packages and increasing the number of customers who purchase high-speed Internet services, digital video and advanced products and services such as telephone, VOD, high definition television and digital video recorder service.

Average monthly revenue per analog video customer increased to $72.97 for the nine months ended September 30, 2005 from $66.24 for the nine months ended September 30, 2004 primarily as a result of incremental revenues from advanced services and price increases. Average monthly revenue per analog video customer represents total revenue for the nine months ended during the respective period, divided by nine, divided by the average number of analog video customers during the respective period.

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

Nine Months Ended September 30,

2005

2004

2005 over 2004

Revenues

% of
Revenues

Revenues

% of
Revenues

Change

% Change

Video $ 2,551 65 % $ 2,534 68 % $ 17 1 %
High-speed Internet 671 17 % 538 14 % 133 25 %
Advertising sales 214 6 % 205 6 % 9 4 %
Commercial 205 5 % 175 5 % 30 17 %
Other 271 7 % 249 7 % 22 9 %

$ 3,912 100 % $ 3,701 100 % $ 211 6 %

Video revenues consist primarily of revenues from analog and digital video services provided to our non-commercial customers. Video revenues increased by $17 million for the nine months ended September 30, 2005 compared to the nine months ended September 30, 2004. Approximately $102 million of the increase was the result of price increases and incremental video revenues from existing customers and approximately $11 million resulted from an increase in digital video customers. The increases were offset by decreases of approximately $66 million related to a decrease in analog video customers, approximately $25 million resulting from the System Sales and approximately $5 million of credits issued to hurricanes Katrina and Rita impacted customers related to service outages.

Revenues from high-speed Internet services provided to our non-commercial customers increased $133 million, or 25%, from $538 million for the nine months ended September 30, 2004 to $671 million for the nine months ended September 30, 2005. Approximately $101 million of the increase related to the increase in the average number of customers receiving high-speed Internet services, whereas approximately $36 million related to the increase in average price of the service. The increase in high-speed Internet revenues was reduced by approximately $3 million as a result of the System Sales and $1 million of credits issued to hurricanes Katrina and Rita impacted customers related to service outages.

Advertising sales revenues consist primarily of revenues from commercial advertising customers, programmers and other vendors. Advertising sales increased $9 million, or 4%, from $205 million for the nine months ended September 30, 2004 to $214 million for the nine months ended September 30, 2005, primarily as a result of an

increase in local advertising sales and an increase of $3 million in advertising sales revenues from vendors offset by a decline in national advertising sales. In addition, the increase was offset by a decrease of $1 million as a result of the System Sales. For the nine months ended September 30, 2005 and 2004, we received $12 million and $9 million, respectively, in advertising sales revenues from vendors.

Commercial revenues consist primarily of revenues from cable video and high-speed Internet services to our commercial customers. Commercial revenues increased $30 million, or 17%, from $175 million for the nine months ended September 30, 2004 to $205 million for the nine months ended September 30, 2005, primarily as a result of an increase in commercial high-speed Internet revenues. The increase was reduced by approximately $3 million as a result of the System Sales.

Other revenues consist of revenues from franchise fees, telephone revenue, equipment rental, customer installations, home shopping, dial-up Internet service, late payment fees, wire maintenance fees and other miscellaneous revenues. Other revenues increased $22 million, or 9%, from $249 million for the nine months ended September 30, 2004 to $271 million for the nine months ended September 30, 2005. The increase was primarily the result of an increase in telephone revenue of $11 million, franchise fees of $11 million and installation revenue of $7 million and was partially offset by approximately $2 million as a result of the System Sales.

~~Operating Expenses~~. Operating expenses increased $162 million, or 10%, from $1.6 billion for the nine months ended September 30, 2004 to $1.7 billion for the nine months ended September 30, 2005. The increase in operating expenses was reduced by $13 million as a result of the System Sales. Programming costs included in the accompanying condensed consolidated statements of operations were $1.1 billion and $991 million, representing 29% and 17% of total costs and expenses for the nine months ended September 30, 2005 and 2004, respectively. Key expense components as a percentage of revenues were as follows (dollars in millions):

Nine Months Ended September 30,

2005

2004

2005 over 2004

Expenses

% of
Revenues

Expenses

% of
Revenues

Change

% Change

Programming
$
1,066
27 % $ 991 27 % $ 75 8 %
Service 572 15 % 489 13 % 83 17 %
Advertising sales 76 2 % 72 2 % 4 6 %

$
1,714
44 % $ 1,552 42 % $ 162 10 %

Programming costs consist primarily of costs paid to programmers for analog, premium, digital channels, VOD and pay-per-view programming. The increase in programming costs of $75 million, or 8%, for the nine months ended September 30, 2005 over the nine months ended September 30, 2004 was a result of price increases, particularly in sports programming, partially offset by decreases in analog video customers. Additionally, the increase in programming costs was reduced by $10 million as a result of the System Sales. Programming costs were offset by the amortization of payments received from programmers in support of launches of new channels of $27 million and $47 million for the nine months ended September 30, 2005 and 2004, respectively. Programming costs for the nine months ended September 30, 2004 also include a $5 million reduction related to the settlement of a dispute with TechTV, Inc. See Note 20 to the condensed consolidated financial statements.

Our cable programming costs have increased in every year we have operated in excess of U.S. inflation and cost-of-living increases, and we expect them to continue to increase because of a variety of factors, including inflationary or negotiated annual increases, additional programming being provided to customers and increased costs to purchase programming. In 2005, programming costs have increased and we expect will continue to increase at a higher rate than in 2004. These costs will be determined in part on the outcome of programming negotiations in 2005 and will likely be subject to offsetting events or otherwise affected by factors similar to the ones mentioned in the preceding paragraph. Our increasing programming costs will result in declining operating margins for our video services to the extent we are unable to pass on cost increases to our customers. We expect to partially offset any resulting margin compression from our traditional video services with revenue from advanced video services, increased high-speed Internet revenues, advertising revenues and commercial service revenues.

Service costs consist primarily of service personnel salaries and benefits, franchise fees, system utilities, costs of providing high-speed Internet service, maintenance and pole rent expense. The increase in service costs of $83 million, or 17%, resulted primarily from increased labor and maintenance costs to support improved service levels and our advanced products, higher fuel prices and pole rent expense. The increase in service costs was reduced by $3 million as a result of the System Sales. Advertising sales expenses consist of costs related to traditional advertising services provided to advertising customers, including salaries, benefits and commissions. Advertising sales expenses increased $4 million, or 6%, primarily as a result of increased salary, benefit and commission costs.

~~Selling, General and Administrative Expenses.~~ Selling, general and administrative expenses increased by $27 million, or 4%, from $735 million for the nine months ended September 30, 2004 to $762 million for the nine months ended September 30, 2005. The increase in selling, general and administrative expenses was reduced by $5 million as a result of the System Sales. Key components of expense as a percentage of revenues were as follows (dollars in millions):

Nine Months Ended September 30,

2005

2004

2005 over 2004

Expenses

% of
Revenues

Expenses

% of
Revenues

Change

% Change

General and administrative $ 658 17 % $ 636 17 % $ 22 3 %
Marketing 104 2 % 99 3 % 5 5 %

$ 762 19 % $ 735 20 % $ 27 4 %

General and administrative expenses consist primarily of salaries and benefits, rent expense, billing costs, call center costs, internal network costs, bad debt expense and property taxes. The increase in general and administrative expenses of $22 million, or 3%, resulted primarily from increases in professional fees associated with consulting services of $28 million and a rise in salaries and benefits of $21 million related to increased emphasis on improved service levels and operational efficiencies, offset by decreases in bad debt expense of $13 million, property and casualty insurance of $7 million and the System Sales of $5 million.

~~Marketing expenses increased $5 million, or 5%, as a result of an increased investment in targeted marketing campaigns.~~

~~Depreciation and Amortization~~. ~~Depreciation and amortization expense increased by $29 million, or 3%, as a result of an increase in capital expenditures.~~

~~Impairment of Franchises.~~ We performed an impairment assessment during the third quarter of 2004 using an independent third-party appraiser. The use of lower projected growth rates and the resulting revised estimates of future cash flows in our valuation, primarily as a result of increased competition, led to the recognition of a $2.4 billion impairment charge for the nine months ended September 30, 2004.

~~Asset Impairment Charges.~~ Asset impairment charges for the nine months ended September 30, 2005 represent the write-down of assets related to pending cable asset sales to fair value less costs to sell. See Note 3 to the condensed consolidated financial statements.

~~(Gain) Loss on Sale of Assets, Net.~~ Loss on sale of assets of $5 million for the nine months ended September 30, 2005 primarily represents the loss recognized on the disposition of plant and equipment. Gain on sale of assets of $104 million for the nine months ended September 30, 2004 primarily represents the pretax gain realized on the sale of systems to Atlantic Broadband Finance, LLC which closed on March 1 and April 30, 2004.

~~Option Compensation Expense, Net~~. Option compensation expense of $11 million for the nine months ended September 30, 2005 primarily represents options expensed in accordance with SFAS No. 123. Option compensation expense of $34 million for the nine months ended September 30, 2004 primarily represents the expense of approximately $9 million related to a stock option exchange program under which our employees were offered the right to exchange all stock options (vested and unvested) issued under the 1999 Charter Communications Option Plan and 2001 Stock Incentive Plan that had an exercise price over $10 per share for shares of restricted Charter

Class A common stock or, in some instances, cash. The exchange offer closed in February 2004. Additionally, during the nine months ended September 30, 2004, we recognized approximately $8 million related to the performance shares granted under the Charter Long-Term Incentive Program and approximately $17 million related to options granted following the adoption of SFAS No. 123.

~~Special Charges, Net~~. Special charges of $4 million for the nine months ended September 30, 2005 represents $5 million of severance and related costs of our management realignment and $1 million related to legal settlements offset by approximately $2 million related to an agreed upon cash discount on settlement of the consolidated Federal Class Action and Federal Derivative Action. See "— Legal Proceedings." Special charges of $100 million for the nine months ended September 30, 2004 represents approximately $85 million as part of the terms set forth in memoranda of understanding regarding settlement of the consolidated Federal Class Action and Federal Derivative Action and approximately $9 million of litigation costs related to the tentative settlement of the South Carolina national class action suit, which were approved by the respective courts and approximately $9 million of severance and related costs of our workforce reduction. For the nine months ended September 30, 2004, the severance costs were offset by $3 million received from a third party in settlement of a dispute.

~~Interest Expense, Net~~. Net interest expense increased by $106 million, or 9%, from $1.2 billion for the nine months ended September 30, 2004 to $1.3 billion for the nine months ended September 30, 2005. The increase in net interest expense was a result of an increase of $757 million in average debt outstanding from $18.4 billion for the nine months ended September 30, 2004 compared to $19.2 billion for the nine months ended September 30, 2005 and an increase in our average borrowing rate from 8.61% in the nine months ended September 30, 2004 to 8.95% in the nine months ended September 30, 2005 combined with approximately $11 million of liquidated damages on our 5.875% convertible senior notes. This was offset partially by $26 million in gains related to embedded derivatives in Charter’s 5.875% convertible senior notes issued in November 2004. See Note 10 to the condensed consolidated financial statements.

~~Gain on Derivative Instruments and Hedging Activities, Net.~~ Net gain on derivative instruments and hedging activities decreased $5 million from $48 million for the nine months ended September 30, 2004 to $43 million for the nine months ended September 30, 2005. The decrease is primarily a result of a decrease in gains on interest rate agreements that do not qualify for hedge accounting under SFAS No. 133, which decreased from $45 million for the nine months ended September 30, 2004 to $41 million for the nine months ended September 30, 2005.

~~Loss on debt to equity conversions.~~ Loss on debt to equity conversions of $23 million for the nine months ended September 30, 2004 represents the loss recognized from privately negotiated exchanges in the aggregate of $30 million principal amount of Charter’s 5.75% convertible senior notes held by two unrelated parties for shares of Charter Class A common stock, which resulted in the issuance of more shares in the exchange transaction than would have been issued under the original terms of the convertible senior notes.

~~Gain (loss) on extinguishment of debt.~~ Gain on extinguishment of debt of $498 million for the nine months ended September 30, 2005 primarily represents approximately $490 million related to the exchange of approximately $6.8 billion total principal amount of outstanding debt securities of Charter Holdings in a private placement for new debt securities, approximately $10 million related to the issuance of Charter Communications Operating, LLC ("Charter Operating") notes in exchange for Charter Holdings notes and approximately $4 million related to the repurchase of $131 million principal amount of our 4.75% convertible senior notes due 2006. These gains were offset by approximately $5 million of losses related to the redemption of our subsidiary’s, CC V Holdings, LLC, 11.875% notes due 2008. See Note 6 to the condensed consolidated financial statements. Loss on extinguishment of debt of $21 million for the nine months ended September 30, 2004 represents the write-off of deferred financing fees and third party costs related to the Charter Operating refinancing in April 2004.

~~Gain on investments.~~ Gain on investments of $21 million for the nine months ended September 30, 2005 primarily represents a gain realized on an exchange of our interest in an equity investee for an investment in a larger enterprise.

~~Minority Interest.~~ Minority interest represents the 2% accretion of the preferred membership interests in our indirect subsidiary, CC VIII, LLC, and in 2004, the pro rata share of the profits and losses of CC VIII, LLC. Effective

January 1, 2005, we ceased recognizing minority interest in earnings or losses of CC VIII for financial reporting purposes until the dispute between Charter and Mr. Allen regarding the preferred membership interests in CC VIII was resolved. This dispute was settled October 31, 2005. See Note 7 to the condensed consolidated financial statements. Additionally, reported losses allocated to minority interest on the statement of operations are limited to the extent of any remaining minority interest on the balance sheet related to Charter Holdco. Because minority interest in Charter Holdco is eliminated, Charter absorbs all losses before income taxes that otherwise would be allocated to minority interest. Subject to any changes in Charter Holdco’s capital structure, future losses will continue to be substantially absorbed by Charter.

~~Income Tax Benefit (Expense).~~Income tax expense of $75 million and income tax benefit of $116 million was recognized for the nine months ended September 30, 2005 and 2004, respectively. The income tax expense is recognized through increases in deferred tax liabilities related to our 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 our indirect corporate subsidiaries. The income tax benefit was realized as a result of decreases in certain deferred tax liabilities related to our investment in Charter Holdco as well as decreases in the deferred tax liabilities of certain of our indirect corporate subsidiaries.

The income tax benefit recognized in the nine months ended September 30, 2004 was directly related to the impairment of franchises as discussed above. We do not expect to recognize a similar benefit associated with the impairment of franchises in future periods. However, the actual tax provision calculations in future periods will be the result of current and future temporary differences, as well as future operating results.

~~Net Loss~~. Net loss decreased by $3.4 billion, from $4.0 billion for the nine months ended September 30, 2004 to $631 million for the nine months ended September 30, 2005 as a result of the factors described above.

~~Preferred stock dividends.~~On August 31, 2001, Charter issued 505,664 shares (and on February 28, 2003 issued an additional 39,595 shares) of Series A Convertible Redeemable Preferred Stock in connection with the Cable USA acquisition, on which Charter pays a quarterly cumulative cash dividends at an annual rate of 5.75% if paid or 7.75% if accrued on a liquidation preference of $100 per share. Beginning January 1, 2005, Charter is accruing the dividend on its Series A Convertible Redeemable Preferred Stock.

~~Loss Per Common Share~~~~. The loss per common share decreased by $11.32, from $13.38 per common share for the nine months ended September 30, 2004 to $2.06 per common share for the nine months ended September 30,~~ 2005 as a result of the factors described above.

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~~Recent Financing Transactions

On January 30, 2006, CCH II, LLC ("CCH II") and CCH II Capital Corp. issued $450 million in debt securities, the proceeds of which were provided, directly or indirectly, to Charter Communications Operating, LLC ("Charter Operating"), which used such funds to reduce borrowings, but not commitments, under the revolving portion of its credit facilities.

In April 2006, Charter Operating completed a $6.85 billion refinancing of its credit facilities including a new $350 million revolving/term facility (which converts to a term loan in one year), a $5.0 billion term loan due in 2013 and certain amendments to the existing $1.5 billion revolving credit facility. In addition, the refinancing reduced margins on Eurodollar rate loans to 2.625% from 3.15% previously and margins on base rate loans to 1.625% from 2.15% previously. Concurrent with this refinancing, the CCO Holdings, LLC ("CCO Holdings") bridge loan was terminated.

We have a significant level of debt. ~~For~~Our long-term financing as of March 31, 2006 consists of $5.4 billion of credit facility debt, $13.3 billion accreted value of high-yield notes and $866 million accreted value of convertible senior notes. Pro forma for the ~~remainder~~completion of ~~2005, $7~~the credit facility refinancing discussed above, $20 million of our debt matures in the remainder of 2006, and in ~~2006,~~2007 and 2008, an additional ~~$55~~$130 million ~~matures.~~and $128 million mature, respectively. In ~~2007~~2009 and beyond, significant additional amounts will become due under our remaining long-term debt obligations.

~~payment of cash interest as the series of old Charter Holdings notes for which such CIH notes were exchanged. In addition, the maturities for each series were extended three years.~~

Our business requires significant cash to fund debt service costs, capital expenditures and ongoing operations. We have historically funded ~~our debt service costs, operating activities and capital~~these requirements through cash flows from operating activities, borrowings under our credit facilities, sales of assets, issuances of debt and equity securities and cash on hand. However, the mix of funding sources changes from period to period. For the ~~nine~~three months ended ~~September 30, 2005,~~March 31, 2006, we generated ~~$118~~$209 million of net cash flows from operating activities after paying cash interest of ~~$1.2 billion.~~$240 million. In addition, we used approximately ~~$815~~$241 million for purchases of property, plant and equipment. Finally, we had net cash flows ~~used in~~from financing activities of ~~$17~~$86 million. We expect that our mix of sources of funds will continue to change in the future based on overall needs relative to our cash flow and on the availability of funds under our credit facilities, our access to the debt and equity markets, the timing of possible asset sales and our ability to generate cash flows from operating activities. We continue to explore asset dispositions as one of several possible actions that we could take in the future to improve our liquidity, but we do not presently consider unannounced future asset sales as a significant source of liquidity.

We expect that cash on hand, cash flows from operating activities, proceeds from sale of assets and the amounts available under our credit facilities ~~and Bridge Loan~~ will be adequate to meet our cash needs for the remainder of 2005 and 2006. Cash flows from operating activities and amounts available under our credit facilities and Bridge Loan may not be sufficient to fund our operations and satisfy our interest payment obligations in 2007. It is likely that we will require additional funding to satisfy our debt repayment obligations inthrough 2007. We believe that cash flows from operating activities and amounts available under our credit facilities ~~and Bridge Loan will~~may not be sufficient to fund our operations and satisfy our interest and principal repayment obligations ~~thereafter.~~

in 2008 and will not be sufficient to fund such needs in 2009 and beyond. We ~~are working~~ continue to work with our financial advisors in our approach to ~~address~~addressing liquidity, debt maturities and our funding requirements. However, there can be no assurance that such funding will be available to us. Although Paul G. Allen, Charter’s Chairman and controlling shareholder, and his affiliates have purchased equity from us in the past, Mr. Allen and his affiliates are not obligated to purchase equity from, contribute to or loan funds to us in the future.overall balance sheet leverage.

~~Credit Facilities and~~Debt Covenants

Our ability to operate depends upon, among other things, our continued access to capital, including credit under the Charter Operating credit facilities. ~~These~~The Charter Operating credit facilities, along with our indentures, ~~and Bridge Loan,~~ contain certain restrictive covenants, some of which require us to maintain specified financial ratios and meet financial tests and to provide annual audited financial statements with an unqualified opinion from our independent auditors. As of ~~September 30, 2005,~~March 31, 2006, we ~~were~~are in compliance with the covenants under our indentures and credit facilities, and we expect to remain in compliance with those covenants ~~and the Bridge Loan covenants~~ for the next twelve months. ~~Our total~~As of March 31, 2006, our potential ~~borrowing~~ availability under ~~the current~~our credit facilities totaled ~~$786~~approximately $904 million, ~~as of September 30, 2005,~~ although the actual availability at that time was only ~~$648~~$516 million because of limits imposed by covenant restrictions. ~~In addition, effective January 2,~~However, pro forma for the completion of the credit facility refinancing discussed above, our potential availability under our credit facilities as of March 31, 2006 ~~we will~~would have ~~additional borrowing~~been approximately $1.3 billion, although actual covenanted availability of ~~$600~~$516 million ~~as a result of the Bridge Loan.~~would remain unchanged. Continued access to our credit facilities ~~and Bridge Loan~~ is subject to our remaining in compliance with ~~the~~these covenants, ~~of these credit facilities and Bridge Loan,~~ including covenants tied to our operating performance. If ~~our operating performance results in non-compliance with these covenants, or if~~ any ~~of certain other~~ events of non-compliance ~~under these credit facilities, Bridge Loan or indentures governing our debt~~ occur, funding under the credit facilities ~~and Bridge Loan~~ may not be available and defaults on some or potentially all of our debt obligations could occur. An event of default under ~~the covenants governing~~ any of our debt instruments could result in the

acceleration of our payment obligations under that debt and, under certain circumstances, in cross-defaults under our other debt obligations, which could have a material adverse effect on our consolidated financial condition and results of operations.

Specific Limitations

Our ability to make interest payments on our convertible senior notes, and, in 2006 and 2009, to repay the outstanding principal of our convertible senior notes of ~~$25~~$20 million and $863 million, respectively, will depend on our ability to raise additional capital and/or on receipt of payments or distributions from Charter Holdco orand its subsidiaries, including Charter Holdings, CIH, CCH I, CCH II, LLC ("CCH II"), CCO Holdings and Charter Operating. During the nine months ended September 30, 2005, Charter Holdings distributed $60 million to Charter Holdco.subsidiaries. As of ~~September 30, 2005,~~March 31, 2006, Charter Holdco was owed ~~$57~~$24 million in intercompany loans from its subsidiaries, which were available to pay interest and principal on ~~Charter's~~our convertible senior notes. In addition, Charter has ~~$123~~$99 million of governmental securities pledged as security for the next ~~five~~four scheduled semi-annual interest payments on ~~Charter's~~Charter’s 5.875% convertible senior notes.

Distributions by Charter’s subsidiaries to a parent company (including Charter, CCHC, LLC and Charter Holdco) for payment of principal on parent company notes are restricted byunder the ~~Bridge Loan and~~ indentures governing the CIH notes, CCH I notes, CCH II notes, CCO Holdings notes and Charter Operating notes unless ~~under their respective indentures~~ there is no default, ~~and a specified~~each applicable subsidiary’s leverage ratio test is met at the time of such ~~event.~~distribution and, in the case of our convertible senior notes, other specified tests are met. For the quarter ended ~~September 30, 2005,~~March 31, 2006, there was no default under any of these indentures and the ~~aforementioned indentures.~~other specified tests were met. However, ~~CCO Holdings~~certain of our subsidiaries did not meet ~~its~~their respective leverage ratio ~~test of 4.5 to 1.0.~~tests based on March 31, 2006 financial results. As a result, distributions from ~~CCO Holdings~~certain of our subsidiaries to ~~CCH II, CCH I, CIH, Charter Holdings, Charter Holdco or Charter for payment of principal of the respective~~their parent ~~company’s debt are currently~~companies have been restricted and will continue to be restricted until ~~that test~~those tests are met. Distributions by Charter Operating for payment of principal on parent company notes are further restricted by the covenants in the credit facilities.

Distributions by CIH, CCH I, CCH II, CCO Holdings and Charter Operating to a parent company for payment of parent company interest are permitted if there is ~~met.~~no default under the aforementioned indentures. However, distributions for payment of interest on our convertible senior notes are further limited to when each applicable subsidiary’s leverage ratio test is met and other specified tests are met. There can be no assurance that they will satisfy these tests at the ~~respective parent company’s interest are permitted.~~time of such distribution.

The indentures governing the Charter Holdings notes permit Charter Holdings to make distributions to Charter Holdco for payment of interest or principal on the convertible senior notes, only if, after giving effect to the distribution, Charter Holdings can incur additional debt under the leverage ratio of 8.75 to 1.0, there is no default under Charter ~~Holdings'~~Holdings’ indentures and other specified tests are met. For the quarter ended ~~September 30, 2005,~~March 31, 2006, there was no default under Charter ~~Holdings'~~Holdings’ indentures and the other specified tests were met. However, Charter Holdings did not meet the leverage ratio test of 8.75 to 1.0 based on ~~September 30, 2005~~March 31, 2006 financial results. As a result, distributions from Charter Holdings to Charter or Charter Holdco ~~for payment of interest or principal on the convertible senior notes are currently~~have been restricted and will continue to be restricted until that test is met. During this ~~restriction~~restricition period, in which distributions are restricted, the indentures governing the Charter Holdings notes permit Charter Holdings and its subsidiaries to make specified investments (that are not restricted payments) in Charter Holdco or Charter up to an amount determined by a formula, as long as there is no default under the indentures.

Our significant amount of debt could negatively affect our ability to access additional capital in the future. Additionally, our ability to incur additional debt may be limited by the restrictive covenants in our indentures and credit facilities. No assurances can be given that we will not experience liquidity problems if we do not obtain sufficient additional financing on a timely basis as our debt becomes due or because of adverse market conditions, increased competition or other unfavorable events. If, at any time, additional capital or borrowing capacity is required beyond amounts internally generated or available under our credit facilities or through additional debt or equity financings, we would consider:

·•

issuing equity that would significantly dilute existing shareholders;

	·
	•	issuing convertible debt or some other securities that may have structural or other priority over our existing notes and may also significantly dilute ~~Charter's~~Charter’s existing shareholders;

	·
	•	further reducing our expenses and capital expenditures, which may impair our ability to increase revenue;

·•

selling assets; or

	·
	•	requesting waivers or amendments with respect to our credit facilities, the availability and terms of which would be subject to market conditions.

If the above strategies are not successful, we could be forced to restructure our obligations or seek protection under the bankruptcy laws. In addition, if we need to raise additional capital through the issuance of equity or find it necessary to engage in a recapitalization or other similar transaction, our shareholders could suffer significant dilution and our noteholders might not receive principal and interest payments to which they are contractually entitled.

Sale of Assets

In February 2006, we signed three separate definitive agreements to sell certain cable television systems serving a total of approximately 360,000 analog video customers in West Virginia, Virginia, Illinois, Kentucky, Nevada, Colorado, New Mexico and Utah for a total of approximately $971 million. As of March 31, 2006, those cable systems met the criteria for assets held for sale under SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets. As such, the assets were written down to fair value less estimated costs to sell resulting in asset impairment charges during the three months ended March 31, 2006 of approximately $99 million.

In July 2005, we closed the sale of certain cable systems in Texas and West Virginia and closed the sale of an additional cable system in Nebraska in October 2005 for a total sales price of approximately $37 million, representing a total of approximately 33,000 customers.

Acquisition

In ~~March 2004,~~January 2006, we closed the ~~sale~~purchase of certain cable systems in ~~Florida, Pennsylvania, Maryland, Delaware~~Minnesota from Seren Innovations, Inc. We acquired approximately 17,500 analog video customers, 8,000 digital video customers, 13,200 high-speed Internet customers and ~~West Virginia to Atlantic Broadband Finance, LLC. We closed the sale of an additional cable system in New York to Atlantic Broadband Finance, LLC in April 2004. The~~14,500 telephone customers for a total ~~net proceeds from the sale of all of these systems were approximately $735 million. The proceeds were used to repay a portion of amounts outstanding under our revolving credit facility.~~

~~Long-Term Debt~~

~~As of September 30, 2005 and December 31, 2004, long-term debt totaled approximately $19.1 billion and $19.5 billion, respectively. This debt was comprised~~purchase price of approximately $5.5 billion and $5.5 billion of credit facility debt, $12.7 billion and $13.0 billion accreted value of high-yield notes and $866 million and $990 million accreted value of convertible senior notes, respectively. As of September 30, 2005 and December 31, 2004, the weighted average interest rate on the credit facility debt was approximately 7.5% and 6.8%, respectively, the weighted average interest rate on the high-yield notes was approximately 10.2% and 9.9%, respectively, and the weighted average interest rate on the convertible notes was approximately 5.8% and 5.7%, respectively, resulting in a blended weighted average interest rate of 9.2% and 8.8%, respectively. The interest rate on approximately 80% and 83% of the total principal amount of our debt was effectively fixed, including the effects of our interest rate hedge agreements as of September 30, 2005 and December 31, 2004, respectively.

~~4.75% Convertible Senior Notes due 2006.~~ During the nine months ended September 30, 2005, we repurchased, in private transactions, from a small number of institutional holders, a total of $131 million principal amount of our 4.75% convertible senior notes due 2006. Approximately $25 million principal amount of these notes remain outstanding.

~~Issuance of Charter Operating Notes in Exchange for Charter Holdings Notes.~~ In March and June 2005, our subsidiary, Charter Operating, consummated exchange transactions with a small number of institutional holders of Charter Holdings 8.25% senior notes due 2007 pursuant to which Charter Operating issued, in private placement, approximately $333 million principal amount of its 8.375% senior second lien notes due 2014 in exchange for approximately $346 million of the Charter Holdings 8.25% senior notes due 2007. The Charter Holdings notes received in the exchange were thereafter distributed to Charter Holdings and cancelled.

~~CC V Holdings, LLC Notes.~~ The Charter Operating credit facilities required us to redeem the CC V Holdings, LLC notes as a result of the Charter Holdings leverage ratio becoming less than 8.75 to 1.0. In satisfaction of this requirement, in March 2005, CC V Holdings, LLC redeemed all of its 11.875% notes due 2008, at 103.958% of principal amount, plus accrued and unpaid interest to the date of redemption. The total cost of redemption was approximately $122 million and was funded through borrowings under our credit facilities. Following such redemption, CC V Holdings, LLC and its subsidiaries (other than non-guarantor subsidiaries) guaranteed the Charter Operating credit facilities and granted a lien on all of their assets as to which a lien can be perfected under the Uniform Commercial Code by the filing of a financing statement.$42 million.

Historical Operating, Financing and Investing Activities

We held ~~$22~~$40 million in cash and cash equivalents as of ~~September 30, 2005~~March 31, 2006 compared to ~~$650~~$21 million as of December 31, ~~2004.~~2005. For the ~~nine~~three months ended ~~September 30, 2005,~~March 31, 2006, we generated ~~$118~~$209 million of net cash flows from operating activities after paying cash interest of ~~$1.2 billion.~~$240 million. In addition, we used approximately ~~$815~~$241 million for purchases of property, plant and equipment. Finally, we had net cash flows ~~used in~~from financing activities of ~~$17~~$86 million.

Operating Activities. Net cash provided by operating activities ~~decreased $265~~increased $56 million, or ~~69%~~37%, from ~~$383~~$153 million for the ~~nine~~three months ended ~~September 30, 2004~~March 31, 2005 to ~~$118~~$209 million for the ~~nine~~three months ended ~~September 30, 2005.~~March 31, 2006. For the ~~nine~~three months ended ~~September 30, 2005,~~March 31, 2006, net cash provided by operating activities ~~decreased~~increased primarily as a result

of changes in operating assets and liabilities that ~~used $144~~provided $100 million more cash during the ~~nine~~three months ended ~~September 30, 2005~~March 31, 2006 than the corresponding period in ~~2004 combined~~2005 offset with an increase in cash interest expense of ~~$155~~$45 million over the corresponding prior ~~period partially offset by an increase in revenue over cash costs.~~period.

Investing Activities. Net cash used by investing activities for the ~~nine~~three months ended ~~September 30,~~March 31, 2006 and 2005 was ~~$729~~$276 million and ~~net cash provided by investing activities for the nine months ended September 30, 2004 was $50 million.~~$193 million, respectively. Investing activities used ~~$779~~$83 million more cash during the ~~nine~~three months ended ~~September 30, 2005~~March 31, 2006 than the corresponding period in ~~2004~~2005 primarily as a result of increased cash used for capital expenditures in ~~2005~~2006 coupled with ~~proceeds from~~cash used for the ~~sale~~purchase of ~~certain~~ cable systems ~~to Atlantic Broadband Finance, LLC in 2004.~~discussed above.

Financing Activities. Net cash provided by financing activities was $86 million for the three months ended March 31, 2006 and net cash used in financing activities ~~decreased $414 million from $431~~was $578 million for the ~~nine~~three months ended ~~September 30, 2004 to $17 million for~~March 31, 2005. The increase in cash provided during the ~~nine~~three months ended ~~September 30, 2005. The decrease in cash used during the nine months ended September 30, 2005~~March 31, 2006 as compared to the corresponding period in ~~2004,~~2005, was primarily the result of ~~a decrease in net repayments~~proceeds from the issuance of ~~long-term debt and in payments for debt issuance costs.~~debt.

Capital Expenditures

We have significant ongoing capital expenditure requirements. Capital expenditures were ~~$815~~$241 million and ~~$639~~$211 million for the ~~nine~~three months ended ~~September 30,~~March 31, 2006 and 2005, ~~and 2004,~~ respectively. Capital expenditures increased as a

result of increased spending on ~~support capital related to our investment~~customer premise equipment as a result of increases in ~~service improvements~~digital video, high-speed Internet and ~~scalable infrastructure related to~~ telephone ~~services, VOD and digital simulcast.~~customers. See the table below for more details.

Upgrading our cable systems has enabled us to offer digital television, high-speed Internet services, VOD, interactive services, additional channels and tiers, expanded pay-per-view options and telephone services to a larger customer base. Our capital expenditures are funded primarily from cash flows from operating activities, the issuance of debt and borrowings under credit facilities. In addition, during the ~~nine~~three months ended ~~September 30,~~March 31, 2006 and 2005, ~~and 2004,~~ our liabilities related to capital expenditures ~~increased $36~~decreased $7 million and ~~decreased $23~~increased $14 million, respectively.

During ~~2005,~~2006, we expect capital expenditures to be approximately $1 billion to $1.1 billion. The increase in capital expenditures for 2005 compared to 2004 is the result of expected increases in telephone services, deployment of advanced digital set-top terminals and capital expenditures to replace plant and equipment destroyed by hurricanes Katrina and Rita. We expect that the nature of these expenditures will continue to be composed primarily of purchases of customer premise equipment related to telephone and other advanced services, support capital and for scalable infrastructure costs. We expect to fund capital expenditures for ~~2005~~2006 primarily from cash flows from operating activities, proceeds from asset sales and borrowings under our credit facilities.

We have adopted capital expenditure disclosure guidance, which was developed by eleven publicly traded cable system operators, including Charter, with the support of the National Cable & Telecommunications Association ("NCTA"). The disclosure is intended to provide more consistency in the reporting of operating statistics in capital expenditures and customers among peer companies in the cable industry. These disclosure guidelines are not required disclosure under ~~GAAP,~~Generally Accepted Accounting Principles ("GAAP"), nor do they impact our accounting for capital expenditures under GAAP.

The following table presents our major capital expenditures categories in accordance with NCTA disclosure guidelines for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2006 and 2005 ~~and 2004~~ (dollars in millions):

	Three Months Ended September 30,				Nine Months Ended September 30,				Three Months Ended March 31,
	2005		2004		2005		2004		2006		2005

Customer premise equipment (a)	$	94	$	119	$	322	$	345	$	130	$	86
Scalable infrastructure (b)		49		22		138		55		34		42
Line extensions (c)		37		41		114		94		26		29
Upgrade/Rebuild (d)		13		12		35		28		9		10
Support capital (e)		80		55		206		117		42		44

Total capital expenditures ~~(f)~~	$	273	$	249	$	815	$	639	$	241	$	211

(a)

Customer premise equipment includes costs incurred at the customer residence to secure new customers, revenue units and additional bandwidth revenues. It also includes customer installation costs in accordance with SFAS No. 51, Financial Reporting by Cable Television Companies, and customer premise equipment (e.g., set-top terminals and cable modems, etc.).

(b)	Scalable infrastructure includes costs, not related to customer premise equipment or our network, to secure growth of new customers, revenue 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).

Item 3.Quantitative and Qualitative Disclosures about Market Risk.

No material changes in reported market risks have occurred since the filing of our December 31, 2005 10-K.

Item 4.Controls and Procedures.

As of the end of the period covered by this report, management, including our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the design and operation of our disclosure controls and procedures with respect to the information generated for use in this quarterly report. The evaluation was based in part upon

reports and affidavits 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 Commission’s rules and forms.

There was no change in our internal control over financial reporting during the quarter ended March 31, 2006 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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, Charter’s management believes that its controls provide such reasonable assurances.

PART II. OTHER INFORMATION.

Item 1.Legal Proceedings.

Charter is a party to lawsuits and claims that have arisen in the ordinary course of conducting its business. In the opinion of management, after taking into account recorded liabilities, the outcome of these other lawsuits and claims are not expected to have a material adverse effect on our consolidated financial condition, results of operations or our liquidity.

Item 1A.Risk Factors

Risks Related to Significant Indebtedness of Us and Our Subsidiaries

We may not generate (or, in general, have available to the applicable obligor) sufficient cash flow or access to additional external liquidity sources to fund our capital expenditures, ongoing operations and debt obligations.

Our ability to service our debt and to fund our planned capital expenditures and ongoing operations will depend on both our ability to generate cash flow and our access to additional external liquidity sources, and in general our ability to provide (by dividend or otherwise), such funds to the applicable issuer of the debt obligation. Our ability to generate cash flow is dependent on many factors, including:

~~(f)~~

~~Represents all capital expenditures made during the three and nine months ended September 30, 2005 and 2004, respectively.~~·

our future operating performance;

~~Certain Trends and Uncertainties~~

the demand for our products and services;

general economic conditions and conditions affecting customer and advertiser spending;

~~The following discussion highlights a number~~

competition and our ability to stabilize customer losses; and

legal and regulatory factors affecting our business.

Some of ~~trends~~these factors are beyond our control. If we are unable to generate sufficient cash flow and/or access additional external liquidity sources, we may not be able to service and ~~uncertainties,~~repay our debt, operate our business, respond to competitive challenges or fund our other liquidity and capital needs. Although our subsidiaries, CCH II and CCH II Capital Corp., sold $450 million principal amount of 10.250% senior notes due 2010 in ~~addition~~January 2006, we may not be able to ~~those discussed elsewhere~~access additional sources of external liquidity on similar terms, if at all. We believe that cash flows from operating activities and amounts available under our credit facilities will not be sufficient to fund our operations and satisfy our interest payment and principal repayment obligations in ~~this quarterly report~~2009 and ~~in the "Critical Accounting Policies and Estimates" section of Item 7. "Management's~~beyond. See “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of ~~Operations" in our 2004 Annual Report on Form 10-K, that could materially impact our business, results of operations~~Operations — Liquidity and ~~financial condition.~~Capital Resources.”

~~Substantial Leverage.~~We have a significant amount of debt. As of September 30, 2005, our total debt was approximately $19.1 billion. For the remainder of 2005, $7 million of our debt matures and in 2006, an additional $55 million matures. In 2007 and beyond, significant additional amounts will become due under our remaining obligations. We believe that, as a result of our significant levels of debt and operating performance, our access to the debt markets could be limited when substantial amounts of our current indebtedness become due. If our business does not generate sufficient cash flow from operating activities, and sufficient funds are not available to us from borrowings under our credit facilities or from other sources, weCharter Operating may not be able to repay our debt, fund our other liquidity and capital needs, grow our business or respond to competitive challenges. Further, if we are unable to repay or refinance our debt, as it becomes due, we could be forced to restructure our obligations or seek protectionaccess funds under the bankruptcy laws. If we were to raise capital through the issuance of additional equity or if we were to engage in a recapitalization or other similar transaction, our shareholders could suffer significant dilution and our noteholders might not receive all principal and interest payments to which they are contractually entitled on a timely basis or at all. For more information, see the section above entitled "— Liquidity and Capital Resources."

~~Restrictive Covenants.~~~~Our~~its credit facilities if it fails to satisfy the ~~Bridge Loan and the indentures governing our and our subsidiaries’ other debt contain a number of significant covenants that could adversely impact our ability to operate our business, and therefore~~covenant restrictions in its credit facilities, which could adversely affect our ~~results of operations and the price of our Class A common stock. These covenants restrict our~~financial condition and our ~~subsidiaries’~~ ability ~~to:~~to conduct our business.

·~~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;~~

·~~grant liens; and~~

·~~pledge assets.~~

~~Furthermore, our~~Our subsidiaries have historically relied on access to credit facilities ~~require us~~in order to ~~among other things, maintain specified financial ratios, meet specified financial tests~~fund operations and ~~provide audited financial statements with an unqualified opinion from our independent auditors. Our ability~~ to ~~comply with these provisions may be affected by events beyond our control.~~

~~The breach of any covenants or obligations~~service parent company debt, and we expect such reliance to continue in the ~~foregoing indentures or credit facilities, not otherwise waived or amended, could result in a default under the applicable debt agreement or instrument and could trigger acceleration~~

~~of the related debt, which in turn could trigger defaults under other agreements governing our long-term indebtedness. In addition, the secured lenders~~future. Our total potential borrowing availability under the Charter Operating credit facilities ~~and~~was approximately $904 million as of March 31, 2006, although the ~~Charter Operating senior second-lien notes could foreclose on their collateral, which includes equity interests in our subsidiaries, and exercise other rights~~actual availability at that time was only $516 million because of ~~secured creditors. Any default~~limits imposed by covenant restrictions. However, pro forma for the completion of the credit facility refinancing discussed above, the Company’s potential availability under ~~those~~its credit facilities ~~the Bridge Loan, the indentures governing our convertible notes or our subsidiaries’ debt could adversely affect our growth, our financial condition and our results~~as of ~~operations and our ability to make payments on our notes, the Bridge Loan and the credit facilities and other debt~~March 31, 2006 would have been approximately $1.3 billion, although actual covenanted availability of ~~our subsidiaries. For more information, see the section above entitled "— Liquidity and Capital Resources."~~$516 million would remain unchanged.

~~Liquidity~~. Our business requires significant cash to fund debt service costs, capital expenditures and ongoing operations. Our ongoing operations will depend on our ability to generate cash and to secure financing in the future. We have historically funded liquidity and capital requirements through cash flows from operating activities, borrowings under our credit facilities, issuances of debt and equity securities and cash on hand.

Our ability to operate depends upon, among other things, our continued access to capital, including credit under the Charter Operating credit facilities. These credit facilities are subject to certain restrictive covenants, some of which require us to maintain specified financial ratios and meet financial tests and to provide audited financial statements with an unqualified opinion from our independent auditors. As of September 30, 2005, we are in compliance with the covenants under our indentures and credit facilities, and we expect to remain in compliance with those covenants and the Bridge Loan covenants for the next twelve months. If our operating performance results in non-compliance with these covenants, or if any of certain other events of non-compliance under these credit facilities, the Bridge Loan or indentures governing our debt occurs, funding under the credit facilities and the Bridge Loan may not be available and defaults on some or potentially all of our debt obligations could occur. An event of default under the credit facilities ~~the Bridge Loan~~ or indentures, if not waived, could result in the acceleration of those debt obligations and, consequently, other debt obligations. Such acceleration could result in exercise of remedies by our creditors and could force us to seek the protection of the bankruptcy laws, which could materially adversely impact our ability to operate our business and to make payments under our debt instruments. ~~Our total potential borrowing availability~~In addition, an event of default under the ~~current~~ credit facilities, ~~totaled $786 million~~such as ~~of September 30, 2005, although~~ the ~~actual availability at that time was only $648 million because of limits imposed by covenant restrictions. In addition, effective January 2, 2006, we will have~~failure to maintain the applicable required financial ratios, would

prevent additional borrowing ~~availability of $600 million as a result of the Bridge Loan.~~

~~If, at any time, additional capital or capacity is required beyond amounts internally generated or available~~ under our credit facilities, ~~or through~~which could materially adversely affect our ability to operate our business and to make payments under our debt instruments.

We and our subsidiaries have a significant amount of existing debt and may incur significant additional debt, ~~or equity financings, we would consider:~~including secured debt, in the future, which could adversely affect our financial health and our ability to react to changes in our business.

·~~issuing equity that would significantly dilute existing shareholders;~~

·~~issuing convertible debt or some other securities that may have structural or other priority over our existing notes and may also significantly dilute Charter’s existing shareholders;~~

·~~further reducing our expenses and capital expenditures, which may impair our ability to increase revenue;~~

·~~selling assets; or~~

·~~requesting waivers or amendments with respect to our credit facilities, the availability and terms of which would be subject to market conditions.~~

Charter and its subsidiaries have a significant amount of debt and may (subject to applicable restrictions in their debt instruments) incur additional debt in the future. As of March 31, 2006, our total debt was approximately $19.5 billion, our shareholders’ deficit was approximately $5.4 billion and the deficiency of earnings to cover fixed charges for the three months ended March 31, 2006 was $450 million.

IfAs of March 31, 2006, Charter had outstanding approximately $883 million aggregate principal amount of convertible notes, $20 million of which mature in 2006. We will need to raise additional capital and/or receive distributions or payments from our subsidiaries in order to satisfy our debt obligations in 2009. However, because of our significant indebtedness, our ability to raise additional capital at reasonable rates or at all is uncertain, and the ~~above strategies were not successful, we could be forced~~ability of our subsidiaries to ~~restructure~~make distributions or payments to us is subject to availability of funds and restrictions under our ~~obligations or seek protection under the bankruptcy laws.~~and our subsidiaries’ applicable debt instruments. If we were to raise ~~additional~~ capital through the issuance of additional equity or ~~find it necessary~~ to engage in a recapitalization or other similar transaction, our shareholders could suffer significant ~~dilution~~dilution.

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

require us to dedicate a significant portion of our cash flow from operating activities to make payments on our debt, which will reduce 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 economy at large;

place us at a disadvantage as compared to our competitors that have proportionately less debt;

make us vulnerable to interest rate increases, because a significant portion of our borrowings are, and will continue to be, at variable rates of interest;

expose us to increased interest expense as we refinance all existing lower interest rate instruments;

adversely affect our relationship with customers and suppliers;

limit our ability to borrow additional funds in the future, if we need them, due to applicable financial and restrictive covenants in our debt; and

make it more difficult for us to satisfy our obligations to the holders of our notes and for our subsidiaries to satisfy their obligations to their lenders under their credit facilities and to their noteholders.

A default by one of our subsidiaries under its debt obligations could result in the acceleration of those obligations, the obligations of our other subsidiaries and our ~~noteholders might not receive all or any principal~~obligations under our convertible notes. We and ~~interest payments to which they are contractually entitled. For more information, see~~our subsidiaries may incur substantial additional debt in the ~~section above entitled "— Liquidity and Capital Resources."~~future. If current debt levels increase, the related risks that we now face will intensify.

~~Acceleration of Indebtedness of Charter’s Subsidiaries.~~~~In the event of a default under~~The agreements and instruments governing our ~~credit facilities, the Bridge Loan or notes, our creditors could elect to declare all amounts borrowed, together with accrued~~debt and unpaid interest and other fees, to be due and payable. In such event, our credit facilities, the Bridge Loan and indentures would not permit Charter’s subsidiaries to distribute funds to Charter Holdco or Charter to pay interest or principal on their notes. If the amounts outstanding under such credit facilities, the Bridge Loan or notes are accelerated, all of the debt and liabilities of Charter’s subsidiaries would be payable from the subsidiaries’ assets, prior to any distribution of the subsidiaries’ assets to pay the interest and principal amounts on Charter’s notes. In addition, the lenders under our credit facilities could foreclose on their collateral, which includes equity interests in Charter’s subsidiaries, and they could exercise other rights of secured creditors. In any such case, we might not be able to

repay or make any payments on our notes. Additionally, an acceleration or payment default under our credit facilities would cause a cross-default in the Bridge Loan and the indentures governing the Charter Holdings notes, CIH notes, CCH I notes, CCH II notes, CCO Holdings notes, Charter Operating notes and Charter’s convertible senior notes and would trigger the cross-default provision of the Charter Operating credit agreement. Any default under any of our ~~credit facilities, Bridge Loan or notes might adversely~~subsidiaries contain restrictions and limitations that could significantly affect ~~the holders of~~ our ~~notes and~~ability to operate our ~~growth, financial condition and results of operations and could force us to examine all options, including seeking the protection of the bankruptcy laws.~~

~~Charter Communications, Inc. Relies on its Subsidiaries to Meet its Liquidity Needs, and Charter’s Convertible Senior Notes are Structurally Subordinated to all Liabilities of its Subsidiaries.~~business, as well as significantly affect our liquidity.We rely on our subsidiaries to make distributions or other payments to Charter Holdco and Charter to enable Charter to make payments on its convertible senior notes. The borrowers and guarantors under the Charter Operating credit facilities are Charter’s indirect subsidiaries. A number of Charter’s subsidiaries are also obligors under other debt instruments, including Charter Holdings, CIH, CCH I, CCH II, CCO Holdings and Charter Operating, which are each a co-issuer of senior notes, senior-second lien notes and/or senior discount notes. As of September 30, 2005, our total debt was approximately $19.1 billion, of which $18.3 billion was structurally senior to the Charter convertible senior notes.

The Charter Operating credit facilities and the indentures governing ~~the senior notes, senior discount notes~~our and ~~senior second-lien notes issued by subsidiaries~~our subsidiaries’ debt contain a number of ~~Charter contain restrictive~~significant covenants that ~~limit~~could adversely affect our ability to operate our business, as well as significantly affect

our liquidity, and therefore could adversely affect our results of operations and the price of our Class A common stock. These covenants will restrict, among other things, our and our subsidiaries’ ability ~~of such~~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;

grant liens and pledge assets.

Furthermore, Charter Operating’s credit facilities require our subsidiaries to, ~~make distributions or~~among other ~~payments~~things, maintain specified financial ratios, meet specified financial tests and provide annual audited financial statements, with an unqualified opinion from our independent auditors. Charter Operating’s ability to ~~Charter Holdco or Charter.~~comply with these provisions may be affected by events beyond our control.

InThe breach of any covenants or obligations in the ~~event of~~foregoing indentures or credit facilities, not otherwise waived or amended, could result in a default under ~~our credit facilities,~~ the ~~Bridge Loan~~applicable debt agreement or ~~notes, our lenders or noteholders~~instrument and could ~~elect to declare all amounts borrowed, together with accrued and unpaid interest and other fees, to be due and payable. An~~trigger acceleration or certain payment events of default under our credit facilities would cause a cross-default in the Bridge Loan, the indentures governing the Charter Holdings notes, CIH notes, CCH I notes, CCH II notes, CCO Holdings notes, Charter Operating notes and Charter’s convertible senior notes. Similarly, such a default or acceleration under any of these notes would cause a cross-default under the notes of the ~~parent entities of the relevant entity. If the amounts outstanding~~related debt, which in turn could trigger defaults under the credit facilities, the Bridge Loan or notes are accelerated, all of the debt and liabilities of Charter’s subsidiaries would be payable from the subsidiaries’ assets, prior to any distribution of the subsidiaries’ assets to pay the interest and principal amounts on Charter’s notes.other agreements governing our long-term indebtedness. In addition, the secured lenders under ~~our~~the Charter Operating credit facilities and ~~noteholders under our~~the holders of the Charter Operating senior second-lien notes could foreclose on their collateral, which includes equity interests in ~~Charter’s~~our subsidiaries, and ~~they could~~ exercise other rights of secured creditors. Any default under ~~any of our~~those credit facilities, the ~~Bridge Loan~~indentures governing our convertible notes or our subsidiaries’ debt could adversely affect our growth, our financial condition and our results of operations and our ability to make payments on our notes could force us to examine all options, including seeking the protection of the bankruptcy laws. In the event of the bankruptcy, liquidation or dissolution of a subsidiary, following payment by such subsidiary of its liabilities, the lenders under ourand Charter Operating’s credit facilities and ~~the holders of the~~ other debt ~~instruments~~of our subsidiaries.

All of our and ~~all other creditors~~our subsidiaries’ outstanding debt is subject to change of ~~Charter’s subsidiaries would~~control provisions. We may not have the ~~right~~ability to ~~be paid before holders~~raise the funds necessary to fulfill our obligations under our indebtedness following a change of ~~Charter’s convertible senior~~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 and our subsidiaries’ notes ~~from any~~and credit facilities following a change of ~~Charter’s~~control. Under the indentures governing our and our subsidiaries’ ~~assets. Such~~notes, upon the occurrence of specified change of control events, we are required to offer to repurchase all of these notes. However, Charter and our subsidiaries may not have sufficient ~~assets remaining~~funds at the time of the change of control event to make ~~any payments to Charter as an equity holder or otherwise~~the required repurchase of these notes, and ~~may be restricted by bankruptcy and insolvency laws from making any such payments.~~

~~The foregoing contractual and legal restrictions could limit Charter’s~~our subsidiaries are limited in their ability to make distributions or other payments to fund any required repurchase. In addition, a change of ~~principal and/or interest~~control under our subsidiaries’ credit facilities would result in a default under those credit facilities. Because such credit facilities and our subsidiaries’ notes are obligations of our subsidiaries, the credit facilities and our subsidiaries’ notes would have to ~~the holders of its~~be repaid by our subsidiaries before their assets could be available to us to repurchase our convertible senior notes. ~~Further, if Charter made such payments by causing~~Our failure to make or complete a ~~subsidiary~~change of control offer would place us in default under our convertible senior notes. The failure of our subsidiaries to make a ~~distribution to it, and such transfer were deemed a fraudulent transfer~~change of control offer or ~~an unlawful distribution,~~repay the ~~holders of Charter’s convertible senior notes could be required to return the payment to (or for the benefit of) the creditors of its subsidiaries.~~amounts accelerated under their credit facilities would place them in default.

~~Securities Litigation.~~ Paul G. Allen and his affiliates are not obligated to purchase equity from, contribute to or loan funds to us or any of our subsidiaries.A number of putative federal class action lawsuits were filed against Charter and certain of its former and present officers and directors alleging violations of securities laws, which have been consolidated for pretrial purposes. In addition, a number of shareholder derivative lawsuits were filed against Charter in the same and other jurisdictions. A shareholders derivative suit was filed in the U.S. District Court for the Eastern District of Missouri against Charter and its then current directors. Also, three shareholders derivative suits were filed in Missouri state court against Charter, its then current directors and its former independent auditor. These state court actions have been consolidated. The federal shareholders derivative suit and the consolidated derivative suit each alleged that the defendants breached their fiduciary duties.

~~Charter entered into Stipulations~~Paul G. Allen and his affiliates are not obligated to purchase equity from, contribute to or loan funds to us or any of ~~Settlement setting forth proposed terms of settlement for the above-described class actions and derivative suits. On May 23, 2005 the United States District Court for the Eastern District of~~our subsidiaries.

5334

Missouri conducted the final fairness hearing for the Actions, and on June 30, 2005, the Court issued its final approval of the settlements. Members of the class had 30 days from the issuance of the June 30 order approving the settlementRisks Related to file an appeal challenging the approval. Two notices of appeal were filed relating to the settlement. Those appeals were directed to the amount of fees that the attorneys for the class were to receive and to the fairness of the settlement. At the end of September 2005, Stipulations of Dismissal were filed with the Eighth Circuit Court of Appeals resulting in the dismissal of both appeals with prejudice. Procedurally therefore, the settlements are final. See "Part II, Item 1. Legal Proceedings."Our Business

~~Competition.~~ 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. We have lost a significant number of video customers to direct broadcast satellite competition and further loss of video customers could have a material negative impact on our business.

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, easier access to financing, greater personnel resources, greater 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 may provide additional benefits to certain of our competitors, either through access to financing, resources or efficiencies of scale.

Our principal competitor for video services throughout our territory is ~~direct broadcast satellite television services, also known as~~ DBS. Competition from DBS, including intensive marketing efforts and aggressive pricing has had an adverse impact on our ability to retain customers. DBS has grown rapidly over the last several years and continues to do so. The cable industry, including ~~Charter,~~us, has lost a significant number of subscribers to DBS competition, and we face serious challenges in this area in the future. We believe that competition from DBS service providers may present greater challenges in areas of lower population density, and that our systems ~~serve~~service a higher concentration of such areas than those of other major cable service providers.

Local telephone companies and electric utilities can offer video and other services in competition with us and they increasingly may do so in the future. Certain telephone companies have begun more extensive deployment of fiber in their networks that ~~will~~ enable them to begin providing video services, as well as telephone and ~~high-bandwidth~~high bandwidth Internet access services, to residential and business ~~customers.~~customers and they are now offering such service in limited areas. Some of these telephone companies have obtained, and are now seeking, franchises or ~~alternative~~operating authorizations that are less burdensome than existing Charter franchises.

The subscription television industry also faces competition from free broadcast television and from other communications and entertainment media. Further loss of customers to DBS or other alternative video and ~~data~~Internet services could have a material negative impact on the value of our business and its performance.

With respect to our Internet access services, we face competition, including intensive marketing efforts and aggressive pricing, from telephone companies and other providers of ~~"dial-up"~~DSL and ~~digital subscriber line technology, also known as DSL.~~“dial-up”. DSL service is competitive with high-speed Internet service over cable systems. In addition, DBS providers have entered into joint marketing arrangements with Internet access providers to offer bundled video and Internet service, which competes with our ability to provide bundled services to our customers. Moreover, as we expand our telephone offerings, we will face considerable competition from established telephone ~~companies.~~companies and other carriers, including VoIP providers.

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 require us to make capital expenditures to acquire additional digital set-top terminals. Customers who subscribe to our services as a result of these offerings may not remain customers for any significant period of time following the end of the promotional period. A failure to retain existing customers and customers added through promotional offerings or to collect the amounts they owe us could have ana material adverse effect on our business and financial results.

Mergers, joint ventures and alliances among franchised, wireless or private cable operators, satellite television providers, ~~telephone companies~~local exchange carriers and others, ~~and the repeal of certain ownership rules~~ 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.

We cannot assure you that our cable systems will allow us to compete effectively. Additionally, as we expand our offerings to include other telecommunications services, and to introduce new and enhanced services, we will be subject to competition from other providers of the services we offer. We cannot predict the extent to which competition may affect our business and operations in the future.

~~Long-Term Indebtedness — Change~~We have a history of ~~Control Payments.~~net losses and expect to continue to experience net losses. Consequently, we may not have the ability to finance future operations.

We have had a history of net losses and expect to continue to report net losses for the foreseeable future. Our net losses are principally attributable to insufficient revenue to cover the combination of operating costs and interest costs we incur because of our high level of debt and the depreciation expenses that we incur resulting from the capital investments we have made in our cable properties. We expect that these expenses will remain significant, and we expect to continue to report net losses for the foreseeable future. We reported net losses applicable to common stock of $459 million and $353 million for the three months ended March 31, 2006 and 2005, respectively. Continued losses would reduce our cash available from operations to service our indebtedness, as well as limit our ability to finance our operations.

We may not have the ability to ~~raise the funds necessary to fulfill~~pass our obligations under Charter’s convertible senior notes, our senior and senior discount notes, our Bridge Loan and our credit facilities following a change of control. Under the indentures governing the Charter convertible senior notes, upon the occurrence of specified change of control events, Charter is required to offer to repurchase all of the outstanding Charter convertible senior notes. However, we may not have sufficient funds at the

time of the change of control event to make the required repurchase of the Charter convertible senior notes and Charter’s subsidiaries are limited in their ability to make distributions or other payments to Charter to fund any required repurchase. In addition, a change of control under our credit facilities, Bridge Loan and indentures governing our notes could result in a default under those credit facilities and Bridge Loan and a required repayment of the notes under those indentures. Because such credit facilities, Bridge Loan and notes are obligations of Charter’s subsidiaries, the credit facilities, Bridge Loan and the notes would have to be repaid by Charter’s subsidiaries before their assets could be available to Charter to repurchase the Charter convertible senior notes. Charter’s failure to make or complete a change of control offer would place it in default under the Charter convertible senior notes. The failure of Charter’s subsidiaries to make a change of control offer or repay the amounts accelerated under their credit facilities and Bridge Loan would result in default under these agreements and could result in a default under the indentures governing the Charter convertible senior notes. See "— Certain Trends and Uncertainties — Liquidity."

~~Variable Interest Rates.~~ At September 30, 2005, excluding the effects of hedging, approximately 32% of our debt bears interest at variable rates that are linked to short-term interest rates. In addition, a significant portion of our existing debt, assumed debt or debt we might arrange in the future will bear interest at variable rates. If interest rates rise, ourincreasing programming costs ~~relative to those obligations will also rise. As of September 30, 2005 and December 31, 2004, the weighted average interest rate~~ on the credit facility debt was approximately 7.5% and 6.8%, respectively, the weighted average interest rate on the high-yield notes was approximately 10.2% and 9.9%, respectively, and the weighted average interest rate on the convertible notes was approximately 5.8% and 5.7%, respectively, resulting in a blended weighted average interest rate of 9.2% and 8.8%, respectively. The interest rate on approximately 80% and 83% of the total principal amount of our debt was effectively fixed, including the effects of our interest rate hedge agreements as of September 30, 2005 and December 31, 2004, respectively.

~~Services.~~ We expect that a substantial portion of our near-term growth will be achieved through revenues from high-speed Internet services, digital video, bundled service packages, and to a lesser extent various commercial services that take advantage of cable’s broadband capacity. We may not be able to offer these advanced services successfully to our customers, ~~or provide adequate customer service~~which would adversely affect our cash flow and these advanced services may not generate adequate revenues. Also, if the vendors we use for these services are not financially viable over time, we may experience disruption of service and incur costs to find alternative vendors. In addition, the technology involved in our product and service offerings generally requires that we have permission to use intellectual property and that such property not infringe on rights claimed by others. If it is determined that the product or service being utilized infringes on the rights of others, we may be sued or be precluded from using the technology.operating margins.

~~Increasing Programming Costs.~~ 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, particularly sports programming. We expect programming costs to continue to increase because of a variety of factors, including inflationary or negotiated annual increases, additional programming being provided to customers and increased costs to purchase programming. The inability to fully pass these programming cost increases on to our customers ~~would have~~has had an adverse impact on our cash flow and operating margins. As measured by programming costs, and excluding premium services (substantially all of which were renegotiated and renewed in 2003), as of ~~September 30, 2005~~March 31, 2006, approximately 9%12% of our current programming contracts were expired, and approximately another ~~20% are~~6% were scheduled to expire at or before the end of ~~2005.~~2006. There can be no assurance that these agreements will be renewed on favorable or comparable terms. Our programming costs increased by approximately 9% in the three months ended March 31, 2006 compared to the corresponding period in 2005. We expect our programming costs in 2006 to continue to increase at a higher rate than in 2005. 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.

~~Utilization~~If our required capital expenditures exceed our projections, we may not have sufficient funding, which could adversely affect our growth, financial condition and results of ~~Net~~operations.

During the three months ended March 31, 2006, we spent approximately $241 million on capital expenditures. During 2006, we expect capital expenditures to be approximately $1.0 billion to $1.1 billion. The actual amount of our capital expenditures depends on the level of growth in high-speed Internet and telephone customers and in the delivery of other advanced services, as well as the cost of introducing any new services. We may need additional capital if there is accelerated growth in high-speed Internet customers, telephone customers or in the delivery of other advanced services. If we cannot obtain such capital from increases in our cash flow from operating activities, additional borrowings, proceeds from asset sales or other sources, our growth, financial condition and results of operations could suffer materially.

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. We cannot assure you that we will be able to fund the capital expenditures necessary to keep pace with unanticipated technological developments, or that we will successfully anticipate the demand of our customers for products and services requiring new technology. Our inability to maintain and expand our upgraded systems and provide advanced services 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.

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 unsolicited mass advertising (i.e.,

“spam”) and dissemination of viruses, worms and other destructive or disruptive software. 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 incidents could lead to customer dissatisfaction and, ultimately, loss of customers or revenue, in addition to increased costs to us to service our customers and protect our network. 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.

We could be deemed an “investment company” under the Investment Company Act of 1940. This would impose significant restrictions on us and would be likely to have a material adverse impact on our growth, financial condition and results of operation.

Our principal assets are our equity interests in Charter Holdco and certain indebtedness of Charter Holdco. If our membership interest in Charter Holdco were to constitute less than 50% of the voting securities issued by Charter Holdco, then our interest in Charter Holdco could be deemed an “investment security” for purposes of the Investment Company Act. This may occur, for example, if a court determines that the Class B common stock is no longer entitled to special voting rights and, in accordance with the terms of the Charter Holdco limited liability company agreement, our membership units in Charter Holdco were to lose their special voting privileges. A determination that such interest was an investment security could cause us to be deemed to be an investment company under the Investment Company Act, unless an exemption from registration were available or we were to obtain an order of the Securities and Exchange Commission excluding or exempting us from registration under the Investment Company Act.

If anything were to happen which would cause us to be deemed an investment company, the Investment Company Act would impose significant restrictions on us, including severe limitations on our ability to borrow money, to issue additional capital stock and to transact business with affiliates. In addition, because our operations are very different from those of the typical registered investment company, regulation under the Investment Company Act could affect us in other ways that are extremely difficult to predict. In sum, if we were deemed to be an investment company it could become impractical for us to continue our business as currently conducted and our growth, our financial condition and our results of operations could suffer materially.

If a court determines that the Class B common stock is no longer entitled to special voting rights, we would lose our rights to manage Charter Holdco. In addition to the investment company risks discussed above, this could materially impact the value of the Class A common stock.

If a court determines that the Class B common stock is no longer entitled to special voting rights, Charter would no longer have a controlling voting interest in, and would lose its right to manage, Charter Holdco. If this were to occur:

we would retain our proportional equity interest in Charter Holdco but would lose all of our powers to direct the management and affairs of Charter Holdco and its subsidiaries; and

we would become strictly a passive investment vehicle and would be treated under the Investment Company Act as an investment company.

This result, as well as the impact of being treated under the Investment Company Act as an investment company, could materially adversely impact:

the liquidity of the Class A common stock;

how the Class A common stock trades in the marketplace;

the price that purchasers would be willing to pay for the Class A common stock in a change of control transaction or otherwise; and

the market price of the Class A common stock.

Uncertainties that may arise with respect to the nature of our management role and voting power and organizational documents as a result of any challenge to the special voting rights of the Class B common stock, including legal actions or proceedings relating thereto, may also materially adversely impact the value of the Class A common stock.

Risks Related to Mr. Allen’s Controlling Position

The failure by Mr. Allen to maintain a minimum voting and economic interest in us could trigger a change of control default under our subsidiary’s credit facilities.

The Charter Operating ~~Loss Carryforwards~~credit facilities provide that the failure by Mr. Allen to maintain a 35% direct or indirect voting interest in the applicable borrower would result in a change of control default. Such a default could result in the acceleration of repayment of our and our subsidiaries’ indebtedness, including borrowings under the Charter Operating credit facilities.

Mr. Allen controls our stockholder voting and may have interests that conflict with your interests.

Mr. Allen has the ability to control us. Through his control as of March 31, 2006 of approximately 90% of the voting power of our capital stock, Mr. Allen is entitled to elect all but one of our board members and effectively has the voting power to elect the remaining board member as well. Mr. Allen thus has the ability to control fundamental corporate transactions requiring equity holder approval, including, but not limited to, the election of all of our directors, approval of merger transactions involving us and the sale of all or substantially all of our assets.

Mr. Allen is not restricted from investing in, and has invested in, and engaged in, other businesses involving or related to the operation of cable television systems, video programming, high-speed Internet service, telephone or business and financial transactions conducted through broadband interactivity and Internet services. Mr. Allen may also engage in other businesses that compete or may in the future compete with us.

Mr. Allen’s control over our management and affairs could create conflicts of interest if he is faced with decisions that could have different implications for him, us and the holders of our Class A common stock. Further, Mr. Allen could effectively cause us to enter into contracts with another entity in which he owns an interest or to decline a transaction into which he (or another entity in which he owns an interest) ultimately enters.

Current and future agreements between us and either Mr. Allen or his affiliates may not be the result of arm’s-length negotiations. Consequently, such agreements may be less favorable to us than agreements that we could otherwise have entered into with unaffiliated third parties.

We are not permitted to engage in any business activity other than the cable transmission of video, audio and data unless Mr. Allen authorizes us to pursue that particular business activity, which could adversely affect our ability to offer new products and services outside of the cable transmission business and to enter into new businesses, and could adversely affect our growth, financial condition and results of operations.

Our certificate of incorporation and Charter Holdco’s limited liability company agreement provide that Charter and Charter Holdco and our subsidiaries, cannot engage in any business activity outside the cable transmission business except for specified businesses. This will be the case unless Mr. Allen consents to our engaging in the business activity. The cable transmission business means the business of transmitting video, audio (including telephone services), and data over cable television systems owned, operated or managed by us from time to time. These provisions may limit our ability to take advantage of attractive business opportunities.

The loss of Mr. Allen’s services could adversely affect our ability to manage our business.

Mr. Allen is Chairman of our board of directors and provides strategic guidance and other services to us. If we were to lose his services, our growth, financial condition and results of operations could be adversely impacted.

The special tax allocation provisions of the Charter Holdco limited liability company agreement may cause us in some circumstances to pay more taxes than if the special tax allocation provisions were not in effect.

Charter Holdco’s limited liability company agreement provided that through the end of 2003, net tax losses (such net tax losses being determined under the federal income tax rules for determining capital accounts) of Charter Holdco that would otherwise have been allocated to us based generally on our percentage ownership of outstanding common membership units of Charter Holdco would instead be allocated to the membership units held by Vulcan Cable III Inc. (“Vulcan Cable”) and Charter Investment, Inc. (“CII”). The purpose of these special tax allocation provisions was to allow Mr. Allen to take advantage, for tax purposes, the losses generated by Charter Holdco during such period. In some situations, these special tax allocation provisions could result in our having to pay taxes in an amount that is more or less than if Charter Holdco had allocated net tax losses to its members based generally on the percentage of outstanding common membership units owned by such members. For further discussion on the details of the tax allocation provisions see “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations — Critical Accounting Policies and Estimates — Income Taxes” of our 2005 annual report on Form 10-K.

The recent issuance of our Class A common stock, as well as possible future conversions of our convertible notes, significantly increase the risk that we will experience an ownership change in the future for tax purposes, resulting in a material limitation on the use of a substantial amount of our existing net operating loss carryforwards.

As of ~~September 30, 2005,~~March 31, 2006, we had approximately ~~$5.7~~$6.2 billion of tax net operating losses (resulting in a gross deferred tax asset of approximately ~~$2.3~~$2.5 billion), expiring in the years ~~2005~~2006 through ~~2025.~~2026. 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 deferred benefits available to offset certain deferred tax liabilities. Currently, such tax net operating losses can accumulate and be used to offset any of our future taxable income. An ~~"ownership change"~~“ownership change” as defined in Section 382 of the ~~applicable federal income tax rules,~~Internal Revenue Code of 1986, as amended, would place significant limitations, on an annual basis, on the use of such net operating losses to offset any future taxable income we may generate. Such limitations, in conjunction with the net operating loss expiration provisions, could effectively eliminate our ability to use a substantial portion of our net operating losses to offset future taxable income.

The issuance of up to a total of 150 million shares of our Class A common stock (of which ~~27.2~~a total of 116.9 million ~~were~~have been issued ~~in July 2005)~~through March 2006) offered pursuant to a share lending agreement executed by Charter in connection with the issuance of the 5.875% convertible senior notes in November 2004, as well as possible future conversions of our convertible notes, significantly increases the risk that we will experience an ownership change in the future for tax purposes, resulting in a material limitation on the use of a substantial amount of our existing net operating loss carryforwards. ~~We do not believe that~~As of March 31, 2006, the issuance of shares associated with the share lending agreement ~~would~~did not result in our experiencing an ownership change. However, future transactions and the timing of such transactions could cause an ownership change. Such transactions include additional issuances of common stock by us (including but not limited to issuances upon future conversion of our 5.875% convertible senior notes or as issued in the ~~proposed~~ settlement of derivative class action litigation), reacquisitions of the borrowed shares by us, or acquisitions or sales of shares by certain holders of our shares, including persons who have held, currently hold, or accumulate in the future five percent or more of our outstanding stock (including upon an exchange by Mr. Allen or his affiliates, directly or indirectly, of membership units of Charter Holdco into our Class A common stock). Many of the foregoing transactions are beyond our control.

~~Class A Common Stock~~Risks Related to Regulatory and ~~Notes Price Volatility.~~ Legislative Matters

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

Regulation of the cable industry has increased cable operators’ administrative and operational expenses and limited their revenues. Cable operators are subject to, among other things:

rules governing the provision of cable equipment and compatibility with new digital technologies;

rules and regulations relating to subscriber privacy;

limited rate regulation;

requirements governing when a cable system must carry a particular broadcast station and when it must first obtain consent to carry a broadcast station;

rules for franchise renewals and transfers; and

other requirements covering a variety of operational areas such as equal employment opportunity, technical standards and customer service requirements.

Additionally, many aspects of these regulations are currently the subject of judicial proceedings and administrative or legislative proposals. There are also ongoing efforts to amend or expand the federal, state and local regulation of some of our ~~Class~~cable systems, which may compound the regulatory risks we already face. Certain states and localities are considering new telecommunications taxes that could increase operating expenses.

Our cable systems are operated under franchises that 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. Local franchising authorities may resist granting a renewal if either past performance or the prospective operating proposal is considered inadequate. Franchise authorities often demand concessions or other commitments as a condition to renewal. In some instances, franchises have not been renewed at expiration, and we have operated and are operating under either temporary operating agreements or without a license while negotiating renewal terms with the local franchising authorities. Approximately 11% of our franchises, covering approximately 12% of our analog video customers, were expired as of March 31, 2006. Approximately 6% of additional franchises, covering approximately an additional 7% of our analog video customers, will expire on or before December 31, 2006, if not renewed prior to expiration.

We cannot assure you that we will be able to comply with all significant provisions of our franchise agreements and certain of our franchisors 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 ~~common stock~~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.

Our cable systems are operated under franchises that are non-exclusive. Accordingly, local franchising authorities can grant additional franchises and ~~our publicly traded notes~~create competition in market areas where none existed previously, resulting in overbuilds, which could adversely affect results of operations.

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

Different legislative proposals have been introduced in the United States Congress and in some state legislatures that would greatly streamline cable franchising. This legislation is intended to facilitate entry by new competitors, particularly local telephone companies. Such legislation has ~~been~~passed in at least four states in which we have operations and one of these newly enacted statutes is ~~likely~~subject to court challenge. Although various legislative proposals provide some regulatory relief for incumbent cable operators, these proposals are generally viewed as being more favorable to new entrants due to a number of varying factors including efforts to withhold streamlined cable franchising from incumbents until after the expiration of their existing franchises. To the extent incumbent cable operators are not able to avail themselves of this streamlined franchising process, such operators may continue to be ~~highly volatile. We expect that~~subject to more onerous franchise requirements at the ~~price~~local level than new entrants. The Federal Communications Commission ("FCC'') recently initiated a proceeding to determine whether local franchising

authorities are impeding the deployment of competitive cable services through unreasonable franchising requirements and whether such impediments should be preempted. At this time, we are not able to determine what impact such proceeding may have on us.

The existence of more than one cable system operating in the same territory is referred to as an overbuild. These overbuilds could adversely affect our growth, financial condition and results of operations by creating or increasing competition. As of March 31, 2006, we are aware of overbuild situations impacting approximately 6% of our ~~securities~~estimated homes passed, and potential overbuild situations in areas servicing approximately an additional 4% of our estimated homes passed. Additional overbuild situations may ~~fluctuate~~occur in ~~response~~other systems.

Local franchise authorities have the ability to ~~various factors, including the factors described in this section and various other factors,~~impose additional regulatory constraints on our business, which ~~may be beyond~~could further increase our control. These factors beyond our control could include: financial forecasts by securities analysts; new conditions or trends in the cable or telecommunications industry; general economic and market conditions and specifically, conditions related to the cable or telecommunications industry; any change in our debt ratings; the development of improved or competitive technologies; the use of new products or promotions by us or our competitors; changes in accounting rules or interpretations; new regulatory legislation adopted in the United States; and any action taken or requirements imposed by NASDAQ if our Class A common stock trades below $1.00 per share for over 30 consecutive trading days. On October 28, 2005, our Class A common stock closed on NASDAQ at $1.20 per share.expenses.

In addition to the ~~securities market~~franchise agreement, cable authorities in ~~general,~~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. We cannot assure you that the local franchising authorities will not impose new and more restrictive requirements. Local franchising authorities also have the power to reduce rates and order refunds on the rates charged for basic services.

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 is strictly limited to the basic service tier and associated equipment and installation activities. However, the FCC and the ~~Nasdaq National Market~~U.S. Congress continue to be concerned that cable rate increases are exceeding inflation. It is possible that either the FCC or the U.S. Congress will again restrict the ability of cable system operators to implement rate increases. 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 considerable legislative and regulatory interest in requiring cable operators to offer historically bundled programming services on an á la carte basis or to at least offer a separately available child-friendly “Family Tier.” It is possible that new marketing restrictions could be adopted in the future. Such restrictions could adversely affect our operations.

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

Pole attachments are cable wires that are attached to poles. Cable system attachments to 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. The FCC clarified that a cable operator’s favorable pole rates are not endangered by the provision of Internet access, and that approach ultimately was upheld by the Supreme Court of the United States. Despite the existing regulatory regime, utility pole owners in many areas are attempting to raise pole attachment fees and impose additional costs on cable operators and others. In addition, the favorable pole attachment rates afforded cable operators under federal law can be increased by utility companies if the operator provides telecommunications services, as well as cable service, over cable wires attached to utility poles. Any significant increased costs could have a material adverse impact on our profitability and discourage system upgrades and the market for cable television securities in particular, have experienced significant price fluctuations. Volatility in the market price for companies may often be unrelated or disproportionate to the operating performanceintroduction of ~~those companies. These broad market~~new products and industry factors may seriously harm the market price of our Class A common stock and our notes, regardless of our operating performance. In the past, securities litigation has often commenced following periods of volatility in the market price of a company’s securities, and several purported class action lawsuits were filed against us in 2001 and 2002, following a decline in our stock price.services.

~~Economic Slowdown; Global Conflict~~. ~~It is difficult~~We may be required to ~~assess the impact that the general economic slowdown and global conflict will have on future operations. However, the economic slowdown has resulted and could continue~~provide access to ~~result in reduced spending by customers and advertisers,~~our networks to other Internet service providers, which could ~~reduce~~significantly increase our ~~revenues,~~competition and ~~also could~~adversely affect our ability to ~~collect accounts receivable~~provide new products and ~~maintain customers. Reductions~~services.

A number of companies, including independent Internet service providers, or ISPs, have requested local authorities and the FCC to require cable operators to provide non-discriminatory access to cable’s broadband infrastructure, so that these companies may deliver Internet services directly to customers over cable facilities. In a June 2005 ruling, commonly referred to as Brand X, the Supreme Court upheld an FCC decision (and overruled a conflicting Ninth Circuit opinion) making it much less likely that any nondiscriminatory “open access” requirements (which are generally associated with common carrier regulation of “telecommunications services”) will be imposed on the cable industry by local, state or federal authorities. The Supreme Court held that the FCC was correct in ~~operating revenues~~classifying cable provided Internet service as an “information service,” rather than a “telecommunications service.” This favorable regulatory classification limits the ability of various governmental authorities to impose open access

requirements on cable-provided Internet service. Given how recently Brand X was decided, however, the nature of any legislative or regulatory response remains uncertain. The imposition of open access requirements could materially affect our business.

If we were required to allocate a portion of our bandwidth capacity to other Internet service providers, we believe that it would ~~likely negatively affect~~impair our ability to ~~make expected capital expenditures and could also result~~use our bandwidth in our inability to meet our obligations under our financing agreements. These developments could also have a negative impact on our financing and variable interest rate agreements through disruptions in the market or negative market conditions.ways that would generate maximum revenues.

~~Regulation and Legislation~~Changes in channel carriage regulations could impose significant additional costs on us.. Cable system operations are extensively regulated at the federal, state, and local level, including rate regulation of basic service and equipment and municipal approval of franchise agreements and their terms, such as franchise requirements to upgrade cable plant and meet specified customer service standards. Additional legislation and regulation is always possible. In fact, there has been legislative activity at the state level to streamline cable franchising and there is proposed legislation in the United States Congress to overhaul traditional communications regulation and cable franchising.

Cable operators also face significant regulation of their channel carriage. They currently can be required to devote substantial capacity to the carriage of programming that they would not carry voluntarily, including certain local broadcast signals, local public, educational and government access programming, and unaffiliated commercial leased access programming. This carriage burden could increase in the future, particularly if cable systems were required to carry both the analog and digital versions of local broadcast signals (dual carriage) or to carry multiple program streams included ~~within~~with a single digital broadcast transmission (multicast carriage). Additional ~~government mandated~~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 would maximize

customer appeal and revenue potential. Although the FCC issued a decision onin February ~~10,~~ 2005, confirming an earlier ruling against mandating either dual carriage or multicast carriage, that decision has been appealed. In addition, the FCC could ~~modify~~reverse its ~~position~~own ruling or Congress could legislate additional carriage obligations.

~~Over the past several years, proposals have been advanced that would require cable operators offering Internet~~Offering voice communications service may subject us to ~~provide non-discriminatory access~~additional regulatory burdens, causing us to ~~their networks to competing Internet service providers. In a June 2005 ruling, commonly referred to as~~ ~~Brand X~~, the Supreme Court upheld an FCC decision making it less likely that any non-discriminatory "open" access requirements (which are generally associated with common carrier regulation of "telecommunications services") will be imposed on the cable industry by local, state or federal authorities. The Supreme Court held that the FCC was correct in classifying cable-provided Internet service as an "information service," rather than a "telecommunications service." This favorable regulatory classification limits the ability of various governmental authorities to impose open access requirements on cable-provided Internet service. Given the recency of the ~~Brand X~~ ~~decision, however, the nature of any legislative or regulatory response remains uncertain. The imposition of open access requirements could materially affect our business.~~

~~Item 3.~~~~Quantitative and Qualitative Disclosures about Market Risk.~~

~~Interest Rate Risk~~

We are exposed to various market risks, including fluctuations in interest rates. We use interest rate risk management derivative instruments, such as interest rate swap agreements and interest rate collar agreements (collectively referred to herein as interest rate agreements) as required under the terms of the credit facilities of our subsidiaries. Our policy is to manage interest costs using a mix of fixed and variable rate debt. Using interest rate swap agreements, we agree to exchange, at specified intervals through 2007, the difference between fixed and variable interest amounts calculated by reference to an agreed-upon notional principal amount. Interest rate collar agreements are used to limit our exposure to, and to derive benefits from, interest rate fluctuations on variable rate debt to within a certain range of rates. Interest rate risk management agreements are not held or issued for speculative or trading purposes.

As of September 30, 2005 and December 31, 2004, our long-term debt totaled approximately $19.1 billion and $19.5 billion, respectively. This debt was comprised of approximately $5.5 billion and $5.5 billion of credit facility debt, $12.7 billion and $13.0 billion accreted value of high-yield notes and $866 million and $990 million accreted value of convertible senior notes, respectively.

As of September 30, 2005 and December 31, 2004, the weighted average interest rate on the credit facility debt was approximately 7.5% and 6.8%, the weighted average interest rate on the high-yield notes was approximately 10.2% and 9.9%, and the weighted average interest rate on the convertible senior notes was approximately 5.8% and 5.7%, respectively, resulting in a blended weighted average interest rate of 9.2% and 8.8%, respectively. The interest rate on approximately 80% and 83% of the total principal amount of our debt was effectively fixed, including the effects of our interest rate hedge agreements as of September 30, 2005 and December 31, 2004, respectively. The fair value of our high-yield notes was $11.6 billion and $12.2 billion at September 30, 2005 and December 31, 2004, respectively. The fair value of our convertible senior notes was $718 million and $1.1 billion at September 30, 2005 and December 31, 2004, respectively. The fair value of our credit facilities was $5.5 billion and $5.5 billion at September 30, 2005 and December 31, 2004, respectively. The fair value of high-yield and convertible notes is based on quoted market prices, and the fair value of the credit facilities is based on dealer quotations.

We do not hold or issue derivative instruments for trading purposes. We do, however, have certain interest rate derivative instruments that have been designated as cash flow hedging instruments. Such instruments effectively convert variable interest payments on certain debt instruments into fixed payments. For qualifying hedges, SFAS No. 133 allows derivative gains and losses to offset related results on hedged items in the consolidated statement of operations. We have formally documented, designated and assessed the effectiveness of transactions that receive hedge accounting. For the three months ended September 30, 2005 and 2004, net gain (loss) on derivative instruments and hedging activities includes gains of $1 million and $1 million, respectively, and for the nine months ended September 30, 2005 and 2004, net gain (loss) on derivative instruments and hedging activities includes gains of $2 million and $3 million, respectively, which represent cash flow hedge ineffectiveness on interest rate hedge agreements arising from differences between the critical terms of the agreements and the related hedged obligations. Changes in the fair value of interest rate agreements designated as hedging instruments of the variability of cash flows associated with floating-rate debt obligations that meet the effectiveness criteria of SFAS No. 133 are reported

in accumulated other comprehensive loss. For the three months ended September 30, 2005 and 2004, a gain of $5 million and $2 million, respectively, and for the nine months ended September 30, 2005 and 2004, a gain of $14 million and $31 million, respectively, related to derivative instruments designated as cash flow hedges, was recorded in accumulated other comprehensive income (loss) and minority interest. The amounts are subsequently reclassified into interest expense as a yield adjustment in the same period in which the related interest on the floating-rate debt obligations affects earnings (losses).

Certain interest rate derivative instruments are not designated as hedges as they do not meet the effectiveness criteria specified by SFAS No. 133. However, management believes 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 gain (loss) on derivative instruments and hedging activities in our statements of operations. For the three months ended September 30, 2005 and 2004, net gain (loss) on derivative instruments and hedging activities includes gains of $16 million and losses of $9 million, respectively, and for the nine months ended September 30, 2005 and 2004, net gain (loss) on derivative instruments and hedging activities includes gains of $41 million and $45 million, respectively, for interest rate derivative instruments not designated as hedges.

~~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 September 30, 2005 (dollars in millions):~~

2005

2006

2007

2008

2009

2010

Thereafter

Total

Fair Value at September 30, 2005

Debt:

Fixed Rate $ -- $ 25 $ 105 $ 114 $ 1,547 $ 1,693 $ 9,576 $ 13,060 $ 11,802
Average Interest Rate -- 4.75% 8.25% 10.00% 7.48% 10.29% 10.44% 10.04%

Variable Rate $ 7 $ 30 $ 280 $ 629 $ 779 $ 1,536 $ 2,802 $ 6,063 $ 6,059
Average Interest Rate 6.81% 7.88% 7.73% 7.78% 7.88% 8.33% 8.20% 8.12%

Interest Rate Instruments:
Variable to Fixed Swaps $ 500 $ 873 $ 775 $ -- $ -- $ -- $ -- $ 2,148 $ 13
Average Pay Rate 7.49% 8.23% 8.04% -- -- -- -- 7.99%
Average Receive Rate 7.17% 7.82% 7.83% -- -- -- -- 7.69%

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 approximates the costs (proceeds) to settle the outstanding contracts. Interest rates on variable debt are estimated using the average implied forward London Interbank Offering Rate (LIBOR) rates for the year of maturity based on the yield curve in effect at September 30, 2004.

At September 30, 2005 and December 31, 2004, we had outstanding $2.1 billion and $2.7 billion and $20 million and $20 million, respectively, in notional amounts of interest rate swaps and collars, respectively. 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 are determined by reference to the notional amount and the other terms of the contracts.

Certain provisions of Charter’s 5.875% convertible senior notes issued in November 2004 were considered embedded derivatives for accounting purposes and were required to be accounted for separately from the convertible senior notes. In accordance with SFAS No. 133, these derivatives are marked to market with gains or losses recorded in interest expense on our condensed consolidated statement of operations. For the three and nine months ended September 30, 2005, we recognized losses of $1 million and gains of $26 million, respectively. The loss resulted in an increase in interest expense whereas the gain resulted in a reduction in interest expense related to these derivatives. At September 30, 2005 and December 31, 2004, $2 million and $10 million, respectively, is recorded in accounts payable and accrued expenses relating to the short-term portion of these derivatives and $3 million and $21 million, respectively, is recorded in other long-term liabilities related to the long-term portion.

~~Item 4.~~~~Controls and Procedures.~~

As of the end of the period covered by this report, management, including our Chief Executive Officer and Interim Chief Financial Officer, evaluated the effectiveness of the design and operation of our disclosure controls and procedures with respect to the information generated for use in this quarterly report. The evaluation was based in part upon reports and affidavits provided by a number of executives. Based upon, and as of the date of that evaluation, our Chief Executive Officer and Interim 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 Commission’s rules and forms.

There was no change in our internal control over financial reporting during the quarter ended September 30, 2005 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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~~PART II. OTHER INFORMATION.~~

~~Item 1.~~~~Legal Proceedings.~~

~~Securities Class Actions and Derivative Suits~~

Fourteen putative federal class action lawsuits (the "Federal Class Actions") were filed in 2002 against Charter and certain of its former and present officers and directors in various jurisdictions allegedly on behalf of all purchasers of Charter’s securities during the period from either November 8 or November 9, 1999 through July 17 or July 18, 2002. Unspecified damages were sought by the plaintiffs. In general, the lawsuits alleged that Charter utilized misleading accounting practices and failed to disclose these accounting practices and/or issued false and misleading financial statements and press releases concerning Charter’s operations and prospects. The Federal Class Actions were specifically and individually identified in public filings made by Charter prior to the date of this quarterly report. On March 12, 2003, the Panel transferred the six Federal Class Actions not filed in the Eastern District of Missouri to that district for coordinated or consolidated pretrial proceedings with the eight Federal Class Actions already pending there. The Court subsequently consolidated the Federal Class Actions into a single action (the "Consolidated Federal Class Action") for pretrial purposes. On August 5, 2004, the plaintiffs’ representatives, Charter and the individual defendants who were the subject of the suit entered into a Memorandum of Understanding setting forth agreements in principle to settle the Consolidated Federal Class Action. These parties subsequently entered into Stipulations of Settlement dated as of January 24, 2005 (described more fully below) that incorporate the terms of the August 5, 2004 Memorandum of Understanding.

~~The Consolidated Federal Class Action was entitled:~~

· In re Charter Communications, Inc. Securities Litigation, MDL Docket No. 1506 (All Cases), StoneRidge Investments Partners, LLC, Individually and On Behalf of All Others Similarly Situated, v. Charter Communications, Inc., Paul Allen, Jerald L. Kent, Carl E. Vogel, Kent Kalkwarf, David G. Barford, Paul E. Martin, David L. McCall, Bill Shreffler, Chris Fenger, James H. Smith, III, Scientific-Atlanta, Inc., Motorola, Inc. and Arthur Andersen, LLP, Consolidated Case No. 4:02-CV-1186-CAS.

On September 12, 2002, a shareholders derivative suit (the "State Derivative Action") was filed in the Circuit Court of the City of St. Louis, State of Missouri (the "Missouri State Court"), against Charter and its then current directors, as well as its former auditors. The plaintiffs alleged that the individual defendants breached their fiduciary duties by failing to establish and maintain adequate internal controls and procedures.

~~The consolidated State Derivative Action was entitled:~~

· Kenneth Stacey, Derivatively on behalf of Nominal Defendant Charter Communications, Inc., v. Ronald L. Nelson, Paul G. Allen, Marc B. Nathanson, Nancy B. Peretsman, William Savoy, John H. Tory, Carl E. Vogel, Larry W. Wangberg, and Charter Communications, Inc.

On March 12, 2004, an action substantively identical to the State Derivative Action was filed in Missouri State Court against Charter and certain of its current and former directors, as well as its former auditors. On July 14, 2004, the Court consolidated this case with the State Derivative Action.

~~This action was entitled:~~

· Thomas Schimmel, Derivatively on behalf on Nominal Defendant Charter Communications, Inc., v. Ronald L. Nelson, Paul G. Allen, Marc B. Nathanson, Nancy B. Peretsman, William D. Savoy, John H. Tory, Carl E. Vogel, Larry W. Wangberg, and Arthur Andersen, LLP, and Charter Communications, Inc.

Separately, on February 12, 2003, a shareholders derivative suit (the "Federal Derivative Action"), was filed against Charter and its then current directors in the United States District Court for the Eastern District of Missouri. The plaintiff in that suit alleged that the individual defendants breached their fiduciary duties and grossly mismanaged Charter by failing to establish and maintain adequate internal controls and procedures.
60

~~The Federal Derivative Action was entitled:~~

· Arthur Cohn, Derivatively on behalf of Nominal Defendant Charter Communications, Inc., v. Ronald L. Nelson, Paul G. Allen, Marc B. Nathanson, Nancy B. Peretsman, William Savoy, John H. Tory, Carl E. Vogel, Larry W. Wangberg, and Charter Communications, Inc.

As noted above, Charter and the individual defendants entered into a Memorandum of Understanding on August 5, 2004 setting forth agreements in principle regarding settlement of the Consolidated Federal Class Action, the State Derivative Action(s) and the Federal Derivative Action (the "Actions"). Charter and various other defendants in those actions subsequently entered into Stipulations of Settlement dated as of January 24, 2005, setting forth a settlement of the Actions in a manner consistent with the terms of the Memorandum of Understanding. The Stipulations of Settlement, along with various supporting documentation, were filed with the Court on February 2, 2005. On May 23, 2005 the United States District Court for the Eastern District of Missouri conducted the final fairness hearing for the Actions, and on June 30, 2005, the Court issued its final approval of the settlements. Members of the class had 30 days from the issuance of the June 30 order approving the settlement to file an appeal challenging the approval. Two notices of appeal were filed relating to the settlement. Those appeals were directed to the amount of fees that the attorneys for the class were to receive and to the fairness of the settlement. At the end of September 2005, Stipulations of Dismissal were filed with the Eighth Circuit Court of Appeals resulting in the dismissal of both appeals with prejudice. Procedurally therefore, the settlements are final.

As amended, the Stipulations of Settlement provide that, in exchange for a release of all claims by plaintiffs against Charter and its former and present officers and directors named in the Actions, Charter would pay to the plaintiffs a combination of cash and equity collectively valued at $144 million, which will include the fees and expenses of plaintiffs’ counsel. Of this amount, $64 million would be paid in cash (by Charter’s insurance carriers) and the $80 million balance was to be paid (subject to Charter’s right to substitute cash therefor as described below) in shares of Charter Class A common stock having an aggregate value of $40 million and ten-year warrants to purchase shares of Charter Class A common stock having an aggregate warrant value of $40 million, with such values in each case being determined pursuant to formulas set forth in the Stipulations of Settlement. However, Charter had the right, in its sole discretion, to substitute cash for some or all of the aforementioned securities on a dollar for dollar basis. Pursuant to that right, Charter elected to fund the $80 million obligation with 13.4 million shares of Charter Class A common stock (having an aggregate value of approximately $15 million pursuant to the formula set forth in the Stipulations of Settlement) with the remaining balance (less an agreed upon $2 million discount in respect of that portion allocable to plaintiffs’ attorneys’ fees) to be paid in cash. In addition, Charter had agreed to issueincur additional shares of its Class A common stock to its insurance carrier having an aggregate value of $5 million; however, by agreement with its carrier, Charter paid $4.5 million in cash in lieu of issuing such shares. Charter delivered the settlement consideration to the claims administrator on July 8, 2005, and it was held in escrow pending resolution of the appeals. Those appeals are now resolved. On July 14, 2005, the Circuit Court for the City of St. Louis dismissed with prejudice the State Derivative Actions. The claims administrator is responsible for disbursing the settlement consideration.

As part of the settlements, Charter committed to a variety of corporate governance changes, internal practices and public disclosures, all of which have already been undertaken and none of which are inconsistent with measures Charter is taking in connection with the recent conclusion of the SEC investigation.

~~Government Investigations~~costs.

In ~~August~~ 2002, ~~Charter became aware~~we began to offer voice communications services on a limited basis over our broadband network. We continue to explore development and deployment of Voice over Internet Protocol or VoIP services. The regulatory requirements applicable to VoIP service are unclear although the FCC has declared that certain VoIP services are not subject to traditional state public utility regulation. The full extent of the FCC preemption of VoIP services is not yet clear. Expanding our offering of these services may require us to obtain certain authorizations, including federal, state and local licenses. We may not be able to obtain such authorizations in a ~~grand jury investigation being conducted~~timely manner, or conditions could be imposed upon such licenses or authorizations that may not be favorable to us. Furthermore, telecommunications companies generally are subject to significant regulation, including payments to the Federal Universal Service Fund and the intercarrier compensation regime. In addition, pole attachment rates are higher for providers of telecommunications services than for providers of cable service. If there were to be a final legal determination by the ~~U.S. Attorney’s Office for the Eastern District~~FCC, a state Public Utility Commission, or appropriate court that VoIP services are subject to these higher rates, our pole attachment costs could increase significantly, which could adversely affect our financial condition and results of Missouri into certain of its accounting and reporting practices, focusing on how Charter reported customer numbers, and its reporting of amounts received from digital set-top terminal suppliers for advertising. The U.S. Attorney’s Office publicly stated that Charter was not a target of the investigation. Charter was also advised by the U.S. Attorney’s Office that no current officer or member of its board of directors was a target of the investigation. On July 24, 2003, a federal grand jury charged four former officers of Charter with conspiracy and mail and wire fraud, alleging improper accounting and reporting practices focusing on revenue from digital set-top terminal suppliers and inflated customer account numbers. Each of the indicted former officers pled guilty to single conspiracy counts related to the original mail and wire fraud charges and were sentenced April 22, 2005. Charter fully cooperated with the investigation, and following the sentencings, the U.S. Attorney’s Office for the Eastern District of Missouri announced that its investigation was concluded and that no further indictments would issue.

61

~~Indemnification~~operations.

Charter was generally required to indemnify, under certain conditions, each of the named individual defendants in connection with the matters described above pursuant to the terms of its bylaws and (where applicable) such individual defendants’ employment agreements. In accordance with these documents, in connection with the grand jury investigation, a now-settled SEC investigation and the above-described lawsuits, some of Charter’s current and former directors and current and former officers were advanced certain costs and expenses incurred in connection with their defense. On February 22, 2005, Charter filed suit against four of its former officers who were indicted in the course of the grand jury investigation. These suits seek to recover the legal fees and other related expenses advanced to these individuals. One of these former officers has counterclaimed against Charter alleging, among other things, that Charter owes him additional indemnification for legal fees that Charter did not pay, and another of these former officers has counterclaimed against Charter for accrued sick leave.

~~Other Litigation~~

Charter is also party to other lawsuits and claims that arose in the ordinary course of conducting its business. In the opinion of management, after taking into account recorded liabilities, the outcome of these other lawsuits and claims are not expected to have a material adverse effect on our consolidated financial condition, results of operations or our liquidity.

~~Item 3.~~ ~~Defaults Upon Senior Securities~~

We did not declare or pay the scheduled dividend payments on our Series A Convertible Redeemable Preferred Stock at March 31, 2005, June 30, 2005 or September 30, 2005. Accordingly, such amounts were accrued, and, since March 31, 2005, dividends have accrued at an increased rate of 7.75% of the redemption value of the shares (which totals approximately $55 million) and will continue to accrue at that rate until accrued dividends have been paid in full. At September 30, 2005, the total accrued dividends equaled $3 million.

~~Item 4.~~~~Submission of Matters to a Vote of Security Holders.~~

The annual meeting of shareholders of Charter Communications, Inc. was held on August 23, 2005. Of the total 345,694,905 shares of Class A common stock issued, outstanding and eligible to be voted at the meeting, 295,439,569 shares, representing the same number of votes, were represented in person or by proxy at the meeting. Of the total 50,000 shares of Class B common stock issued, outstanding and eligible to be voted at the meeting, 50,000 shares, representing 3,391,820,310 votes, were represented in person or by proxy at the meeting. Four matters were submitted to a vote of the shareholders at the meeting.

ELECTION OF ONE CLASS A/CLASS B DIRECTOR. The holders of the Class A common stock and the Class B common stock voting together elected Robert P. May as the Class A/Class B director, to hold office for a term of one year. The voting results are set forth below:

NOMINEE

FOR

WITHHELD

BROKER NON-VOTE

Robert P. May 3,665,081,181 22,178,698 N/A

ELECTION OF TEN CLASS B DIRECTORS. The holder of the Class B common stock elected ten Class B directors to the Board of Directors, each to hold office for a term of one year. The voting results are set forth below:

NOMINEE

FOR

WITHHELD

Paul G. Allen 3,391,820,310 0
W. Lance Conn 3,391,820,310 0
Nathaniel A. Davis 3,391,820,310 0
Jonathan L. Dolgen 3,391,820,310 0
David C. Merritt 3,391,820,310 0
Marc B. Nathanson 3,391,820,310 0
Jo Allen Patton 3,391,820,310 0
Neil Smit 3,391,820,310 0
62
John H. Tory 3,391,820,310 0
Larry W. Wangberg 3,391,820,310 0

APPROVAL OF AMENDMENT TO 2001 STOCK INCENTIVE PLAN. The holders of the Class A common stock and the Class B common stock voting together approved an amendment to Charter's 2001 Stock Option Plan. The voting results are as follows:

FOR

AGAINST

ABSTAIN

BROKER NON-VOTE

3,477,799,591 33,515,888 453,122 N/A

RATIFICATION OF KPMG LLP AS INDEPENDENT PUBLIC ACCOUNTANTS. The holders of the Class A common stock and the Class B common stock voting together ratified KPMG LLP as Charter Communications, Inc.’s independent public accountants for the year ended December 31, 2005. The voting results are set forth below:

FOR

AGAINST

ABSTAIN

BROKER NON-VOTE

3,685,147,885 1,807,367 304,627 N/A

Under the Certificate of Incorporation and Bylaws of Charter Communications, Inc. for purposes of determining whether votes have been cast, abstentions and broker "non-votes" are not counted and therefore do not have an effect on the proposals.

Item 5. Other Information.

At its meeting held on February 7, 2006, the Board of Directors of Charter ~~entered into an employment agreement with Sue Ann R. Hamilton,~~approved the metrics for the 2006 Executive Vice President, Programming, as of October 31, 2005. This agreement sets forth the terms under which Ms. Hamilton will serve as an executive of Charter. The term of this agreement is two years from the dateBonus Plan participants. A description of the ~~agreement.~~specific performance metrics and bonus target is attached hereto as Exhibit 10.2.

The agreement provides that Ms. Hamilton shall be employed in an executive capacity to perform such duties as are assigned or delegated by the President and Chief Executive Officer or the designee thereof. She shall be eligible to participate in Charter's incentive bonus plan that applies to senior executives, stock option plan and to receive such employee benefits as are available to other senior executives. In the event that Ms. Hamilton is terminated by Charter without "cause" or for "good reason termination," as those terms are defined in the employment agreement, Ms. Hamilton will receive her salary for the remainder of the term of the agreement or twelve months salary, whichever is greater; a pro rata bonus for the year of termination; twelve months of COBRA payments; and the vesting of options and restricted stock for as long as severance payments are made. The employment agreement contains a one-year, non-compete provision (or until the end of the term of the agreement, if longer) in a "competitive business," as such term is defined in the agreement, and two-year non-solicitation clauses. The agreement provides that Ms. Hamilton's salary shall be $371,800.

~~The full text of Ms. Hamilton's employment agreement is filed herewith as Exhibit 10.22.~~

Item 6. Exhibits.

The index to the exhibits begins on page 6344 of this quarterly report.

6342

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, Charter Communications, Inc. has duly caused this quarterly report to be signed on its behalf by the undersigned, thereunto duly authorized.

CHARTER COMMUNICATIONS, INC.,
Registrant

Dated: ~~November 1, 2005~~May 2, 2006 By: /s/ ~~Paul E. Martin~~Kevin D. Howard
Name: ~~Paul E. Martin~~Kevin D. Howard
Title:
~~Senior~~ Vice President
~~Interim Chief Financial Officer,~~
~~Principal Accounting Officer~~ and

~~Corporate Controller~~
~~(Principal Financial~~Chief Accounting Officer ~~and~~
~~Principal Accounting Officer)~~

6443

EXHIBIT INDEX

Exhibit
Number
Description of Document
2.1 Purchase Agreement dated as of January 26, 2006, by and between CCH II, LLC, CCH II Capital Corp and J.P. Morgan Securities, Inc as Representative of several Purchasers for $450,000,000 10.25% Senior Notes Due 2010 (incorporated by reference to Exhibit 10.3 to the current report on Form 8-K of Charter Communications, Inc. filed on January 27, 2006 (File No. 000-27927)).
2.2* Asset Purchase Agreement, dated February 27, 2006, by and between Charter Communications Operating, LLC and Cebridge Acquisition Co., LLC.
3.1(a) Restated Certificate of Incorporation of Charter Communications, Inc. (Originally incorporated July 22, 1999) ~~(Incorporated~~(incorporated by reference to Exhibit 3.1 to Amendment No. 3 to the registration statement on Form S-1 of Charter Communications, Inc. filed on October 18, 1999 (File No. 333-83887)).
3.1(b) Certificate of Amendment of Restated Certificate of Incorporation of Charter Communications, Inc. filed May 10, 2001 ~~(Incorporated~~(incorporated by reference to Exhibit 3.1(b) to the annual report on Form 10-K filed by Charter Communications, Inc. on March 29, 2002 (File No. 000-27927)).
~~3.2~~3.2(a) Amended and Restated By-laws of Charter Communications, Inc. as of June 6, 2001 ~~(Incorporated~~(incorporated by reference to Exhibit 3.2 to the quarterly report on Form 10-Q filed by Charter Communications, Inc. on November 14, 2001 (File No. 000-27927)).
~~3.3~~3.2(b) First Amendment to Amended and Restated By-Laws of Charter Communications, Inc. adopted as of November 8, 1999 (incorporated by reference to Exhibit 3.2(b) to Amendment No. 1 to the registration statement on Form S-1 filed by Charter Communications, Inc. on February 3, 2006 (File No. 333-130898)).
3.2(c) Second Amendment to Amended and Restated By-Laws of Charter Communications, Inc. adopted as of January 1, 2000 (incorporated by reference to Exhibit 3.2(c) to Amendment No. 1 to the registration statement on Form S-1 filed by Charter Communications, Inc. on February 3, 2006 (File No. 333-130898)).
3.2(d) Third Amendment to Amended and Restated By-Laws of Charter Communications, Inc. adopted as of June 6, 2001(incorporated by reference to Exhibit 3.2(d) to Amendment No. 1 to the registration statement on Form S-1 filed by Charter Communications, Inc. on February 3, 2006 (File No. 333-130898)).
3.2(e) Fourth Amendment to Amended and Restated By-laws of Charter Communications, Inc. as of October 3, 2003 ~~(Incorporated~~(incorporated by reference to Exhibit 3.3 to Charter Communications, Inc.’s's quarterly report on Form 10-Q filed on November 3, 2003 (File No. 000-27927)).
~~3.4~~3.2(f) Fifth Amendment to Amended and Restated By-laws of Charter Communications, Inc. as of October 28, 2003 ~~(Incorporated~~(incorporated by reference to Exhibit 3.4 to Charter Communications, Inc.’s's quarterly report on Form 10-Q filed on November 3, 2003 (File No. 000-27927)).
~~3.5~~3.2(g) Sixth Amendment to Amended and Restated By-laws of Charter Communications, Inc. ~~(Incorporated~~(incorporated by reference to Charter Communications, Inc.'s current report on Form 8-K filed on September 30, ~~2004)~~2004 (File No. 000-27927)).
~~3.6~~3.2(h) Seventh Amendment to Amended and Restated By-laws of Charter Communications, Inc. ~~(Incorporated~~(incorporated by reference to Charter Communications, Inc.'s current report on Form 8-K filed on October 22, ~~2004)~~2004 (File No. 000-27927)).
~~10.1~~3.2(i) ~~First Supplemental Indenture relating~~Eighth Amendment to the ~~8.625% Senior Notes due 2009, dated~~Amended and Restated By-Laws of Charter Communications, Inc. adopted as of ~~September 28, 2005, among Charter Communications Holdings, LLC, Charter Communications Holdings Capital Corporation and BNY Midwest Trust Company as Trustee~~December 14, 2004 (incorporated by reference to Exhibit ~~10.3~~3.1 to the current report on Form 8-K of Charter Communications, Inc. filed on ~~October 4, 2005~~December 15, 2004 (File No. 000-27927)).
~~10.2~~3.2(j) ~~First Supplemental Indenture relating~~Ninth Amendment to ~~the 9.920% Senior Discount Notes due 2011, dated as~~Amended and Restated By-laws of ~~September 28, 2005, among~~ Charter Communications, ~~Holdings, LLC, Charter Communications Holdings Capital Corporation and BNY Midwest Trust Company as Trustee~~Inc. (incorporated by reference to Exhibit ~~10.4~~3.1 to the Charter Communications, Inc.'s current report on Form 8-K filed of Charter Communications, Inc. filed on ~~October 4, 2005~~April 21, 2006 (File No. 000-27927)).
~~10.3~~10.1(a) ~~First Supplemental Indenture relating to the 10.00%~~ Senior Notes due 2009, dated as of September 28, 2005, between Charter Communications Holdings, LLC, Charter Communications Holdings Capital Corporation and BNY Midwest Trust Company as Trustee (incorporated by reference to Exhibit 10.5 to the current report on Form 8-K of Charter Communications, Inc. filed on October 4, 2005 (File No. 000-27927)).
~~10.4~~ First Supplemental Indenture relating to the 10.25% Senior Notes due 2010, dated as of September 28, 2005, among Charter Communications Holdings, LLC, Charter Communications Holdings Capital Corporation and BNY Midwest Trust Company as Trustee (incorporated by reference to Exhibit 10.6 to the current report on Form 8-K of Charter Communications, Inc. filed on October 4, 2005 (File No. 000-27927)).
~~10.5~~ First Supplemental Indenture relating to the 11.75% Senior Discount Notes due 2010, among Charter Communications Holdings, LLC, Charter Communications Holdings Capital Corporation and BNY Midwest Trust Company as Trustee, dated as of September 28, 2005 (incorporated by reference to Exhibit 10.7 to the current report on Form 8-K of Charter Communications, Inc. filed on October 4, 2005 (File No. 000-27927)).
~~10.6~~ First Supplemental Indenture dated as of September 28, 2005 between Charter Communications Holdings, LLC, Charter Communications Holdings Capital Corporation and BNY Midwest Trust Company as Trustee governing 10.750% Senior Notes due 2009 (incorporated by reference to Exhibit 10.8 to the current report on Form 8-K of Charter Communications, Inc. filed on October 4, 2005 (File No. 000-27927)).
~~10.7~~ ~~First Supplemental Indenture dated as of September 28, 2005, between Charter Communications Holdings, LLC, Charter Communications Capital Corporation and BNY Midwest Trust Company~~

65
governing 11.125% Senior Notes due 2011 (incorporated by reference to Exhibit 10.9 to the current report on Form 8-K of Charter Communications, Inc. filed on October 4, 2005 (File No. 000-27927)).
~~10.8~~ First Supplemental Indenture dated as of September 28, 2005, between Charter Communications Holdings, LLC, Charter Communications Holdings Capital Corporation and BNY Midwest Trust Company as Trustee governing 13.500% Senior Discount Notes due 2011 (incorporated by reference to Exhibit 10.10 to the current report on Form 8-K of Charter Communications, Inc. filed on October 4, 2005 (File No. 000-27927)).
~~10.9~~ Third Supplemental Indenture dated as of September 28, 2005 between Charter Communications Holdings, LLC, Charter Communications Capital Corporation and BNY Midwest Trust Company as Trustee governing 9.625% Senior Notes due 2009 (incorporated by reference to Exhibit 10.11 to the current report on Form 8-K of Charter Communications, Inc. filed on October 4, 2005 (File No. 000-27927)).
~~10.10~~ Third Supplemental Indenture dated as of September 28, 2005 between Charter Communications Holdings, LLC, Charter Communications Holdings Capital Corporation and BNY Midwest Trust Company as Trustee governing the 10.000% Senior Notes due 2011 (incorporated by reference to Exhibit 10.12 to the current report on Form 8-K of Charter Communications, Inc. filed on October 4, 2005 (File No. 000-27927)).
~~10.11~~ First Supplemental Indenture dated as of September 28, 2005 between Charter Communications Holdings, LLC, Charter Communications Holdings Capital Corporation and BNY Midwest Trust Company as Trustee governing 11.750% Senior Discount Notes due 2011 (incorporated by reference to Exhibit 10.13 to the current report on Form 8-K of Charter Communications, Inc. filed on October 4, 2005 (File No. 000-27927)).
~~10.12~~ Second Supplemental Indenture dated as of September 28, 2005 between Charter Communications Holdings, LLC, Charter Communications Holdings Capital Corporation and BNY Midwest Trust Company as Trustee governing 12.125% Senior Discount Notes due 2012 (incorporated by reference to Exhibit 10.14 to the current report on Form 8-K of Charter Communications, Inc. filed on October 4, 2005 (File No. 000-27927)).
~~10.13~~ Indenture dated as of September 28, 2005 among CCH I Holdings, LLC and CCH I Holdings Capital Corp., as Issuers and Charter Communications Holdings, LLC, as Parent Guarantor, and The Bank of New York Trust Company, NA, as Trustee, governing: 11.125% Senior Accreting Notes due 2014, 9.920% Senior Accreting Notes due 2014, 10.000% Senior Accreting Notes due 2014, 11.75% Senior Accreting Notes due 2014, 13.50% Senior Accreting Notes due 2014, 12.125% Senior Accreting Notes due 2015 (incorporated by reference to Exhibit 10.1 to the current report on Form 8-K of Charter Communications, Inc. filed on October 4, 2005 (File No. 000-27927)).
~~10.14~~ Indenture dated as of September 28, 2005 among CCH I, LLC and CCH I Capital Corp., as Issuers, Charter Communications Holdings, LLC, as Parent Guarantor, and The Bank of New York Trust Company, NA, as Trustee, governing 11.00% Senior Secured Notes due 2015 (incorporated by reference to Exhibit 10.2 to the current report on Form 8-K of Charter Communications, Inc. filed on October 4, 2005 (File No. 000-27927)).
~~10.15~~ ~~Pledge~~Bridge Loan Agreement made by CCH I, LLC in favor of The Bank of New York Trust Company, NA, as Collateral Agent dated as of September 28, 2005 (incorporated by reference to Exhibit 10.15 to the current report on Form 8-K of Charter Communications, Inc. filed on October 4, 2005 (File No. 000-27927)).
~~10.16~~ ~~SENIOR BRIDGE LOAN AGREEMENT~~ dated as of October 17, 2005 by and among CCO Holdings, LLC, CCO Holdings Capital Corp., certain lenders, JPMorgan Chase Bank, N.A., as Administrative Agent, J.P. Morgan Securities Inc. and Credit Suisse, Cayman Islands Branch, as joint lead arrangers and joint bookrunners, and Deutsche Bank Securities Inc., as documentation agent. ~~(Incorporated~~(incorporated by reference to Exhibit 99.1 to the current report on Form 8-K of Charter Communications, Inc. filed on October 19, 2005 (File No. 000-27927)).
~~10.17*†~~10.1(b) ~~Settlement~~Waiver and Amendment Agreement ~~and Mutual Releases, dated as of October 31, 2005, by and among Charter Communications, Inc., Special Committee of~~to the ~~Board of Directors of Charter Communications, Inc., Charter Communications Holding Company, LLC, CCHC, LLC, CC VIII, LLC, CC V, LLC, Charter Investment, Inc., Vulcan Cable III, LLC and Paul G. Allen.~~
10.18* ~~Exchange~~Senior Bridge Loan Agreement dated as of ~~October 31, 2005,~~January 26, 2006 by and among ~~Charter Communications Holding Company,~~CCO Holdings, LLC, ~~Charter Investment,~~CCO Holdings Capital Corp., certain lenders, JPMorgan Chase Bank, N.A., as Administrative Agent, J.P. Morgan Securities Inc. and ~~Paul G. Allen.~~
10.19* ~~CCHC, LLC Subordinated and Accreting Note, dated as of October 31, 2005.~~Credit Suisse, Cayman

6644

10.20* ~~Third Amended~~Islands Branch, as joint lead arrangers and ~~Restated Limited Liability Company Agreement for CC VIII, LLC, dated~~joint bookrunners, and Deutsche Bank Securities Inc., as ~~of October 31, 2005.~~
10.21* ~~Second Amended and Restated Limited Liability Company Agreement for Charter Communications Holdings, LLC, dated as of October 31, 2005.~~
~~10.22+~~ ~~Amendment No. 7 to the Charter Communications, Inc. 2001 Stock Incentive Plan effective August 23, 2005~~documentation agent (incorporated by reference to Exhibit ~~10.43(h) to the registration statement on Form S-1 of Charter Communications, Inc. filed on October 5, 2005 (File No. 333-128828)).~~
~~10.23+~~ Restricted Stock Agreement, dated as of July 13, 2005, by and between Robert P. May and Charter Communications, Inc. (incorporated by reference to Exhibit 99.1 to the current report on Form 8-K of Charter Communications, Inc. filed July 13, 2005 (File No. 000-27927)).
~~10.24+~~ Restricted Stock Agreement, dated as of July 13, 2005, by and between Michael J. Lovett and Charter Communications, Inc. (incorporated by reference to Exhibit 99.2 to the current report on Form 8-K of Charter Communications, Inc. filed July 13, 2005 (File No. 000-27927)).
~~10.25+~~ ~~Employment Agreement, dated as of August 9, 2005, by and between Neil Smit and Charter Communications, Inc. (incorporated by reference to Exhibit 99.1~~10.2 to the current report on Form 8-K of Charter Communications, Inc. filed on ~~August 15, 2005~~January 27, 2006 (File No. 000-27927)).
~~10.26+~~10.2+* ~~Employment~~Description of Charter Communications, Inc. 2006 Executive Bonus Plan.
10.3+ Retention Agreement dated as of ~~September 2, 2005,~~January 9, 2006, by and between Paul E. Martin and Charter Communications, Inc. (incorporated by reference to Exhibit 99.1 to the current report on Form 8-K of Charter Communications, Inc. filed on ~~September 9, 2005~~January 10, 2006 (File No. 000-27927)).
~~10.27+~~10.4+ Employment Agreement dated as of ~~September 2, 2005,~~January 20, 2006 by and between ~~Wayne H. Davis~~Jeffrey T. Fisher and Charter Communications, Inc. (incorporated by reference to Exhibit 10.1 to the current report on Form 8-K of Charter Communications, Inc. filed on January 27, 2006 (File No. 000-27927)).
10.5+ Employment Agreement dated as of February 28, 2006 by and between Michael J. Lovett and Charter Communications, Inc. (incorporated by reference to Exhibit 99.2 to the current report on Form 8-K of Charter Communications, Inc. filed on ~~September 9, 2005~~March 3, 2006 (File No. 000-27927)).
10.28+*10.6+ ~~Employment~~Separation Agreement of Wayne H. Davis, dated as of ~~October 31, 2005,~~March 23, 2006 (incorporated by ~~and between Sue Ann Hamilton and~~reference to Exhibit 99.1 to the current report on Form 8-K of Charter Communications, Inc. filed on April 6, 2006 (File No. 000-27927)).
10.7+ Consulting Agreement of Wayne H. Davis, dated as of March 23, 2006 (incorporated by reference to Exhibit 99.2 to the current report on Form 8-K of Charter Communications, Inc. filed on April 6, 2006 (File No. 000-27927)).
15.1* Letter re Unaudited Interim Financial Statements.
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 ~~Interim~~ 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 ~~(Interim Chief~~(Chief Financial Officer).

* Document attached

+ Management compensatory plan or arrangement

~~† Portions of this document have been omitted pursuant to a request for confidential treatment. The omitted portions of this document have been filed with the Securities and Exchange Commission.~~

67
45

	Three Months Ended September 30,						Nine Months Ended September 30,
	2005			2004			2005			2004

REVENUES	$	1,318		$	1,248		$	3,912		$	3,701

COSTS AND EXPENSES:
Operating (excluding depreciation and amortization)		586			525			1,714			1,552
Selling, general and administrative		269			252			762			735
Depreciation and amortization		375			371			1,134			1,105
Impairment of franchises		--			2,433			--			2,433
Asset impairment charges		--			--			39			--
(Gain) loss on sale of assets, net		1			--			5			(104	)
Option compensation expense, net		3			8			11			34
Hurricane asset retirement loss		19			--			19			--
Special charges, net		2			3			4			100

		1,255			3,592			3,688			5,855

Income (loss) from operations		63			(2,344	)		224			(2,154	)

OTHER INCOME AND EXPENSES:
Interest expense, net		(462	)		(424	)		(1,333	)		(1,227	)
Gain (loss) on derivative instruments and hedging activities, net		17			(8	)		43			48
Loss on debt to equity conversions		--			--			--			(23	)
Gain (loss) on extinguishment of debt		490			--			498			(21	)
Gain on investments		--			--			21			--

		45			(432	)		(771	)		(1,223	)

Income (loss) before minority interest, income taxes and cumulative effect of accounting change		108			(2,776	)		(547	)		(3,377	)

MINORITY INTEREST		(3	)		34			(9	)		24

Income (loss) before income taxes and cumulative effect of accounting change		105			(2,742	)		(556	)		(3,353	)

INCOME TAX BENEFIT (EXPENSE)		(29	)		213			(75	)		116

Income (loss) before cumulative effect of accounting change		76			(2,529	)		(631	)		(3,237	)

CUMULATIVE EFFECT OF ACCOUNTING CHANGE, NET OF TAX		--			(765	)		--			(765	)

Net income (loss)		76			(3,294	)		(631	)		(4,002	)

Dividends on preferred stock - redeemable		(1	)		(1	)		(3	)		(3	)

Net income (loss) applicable to common stock	$	75		$	(3,295	)	$	(634	)	$	(4,005	)

EARNINGS (LOSS) PER COMMON SHARE:

Basic	$	0.24		$	(10.89	)	$	(2.06	)	$	(13.38	)

Diluted	$	0.09		$	(10.89	)	$	(2.06	)	$	(13.38	)

Weighted average common shares outstanding, basic		316,214,740			302,604,978			307,761,930			299,411,053

Weighted average common shares outstanding, diluted		1,012,591,842			302,604,978			307,761,930			299,411,053

	September 30, 2005				December 31, 2004
	Principal Amount		Accreted Value		Principal Amount		Accreted Value
Long-Term Debt
Charter Communications, Inc.:
4.75% convertible senior notes due 2006	$	25	$	25	$	156	$	156
5.875% convertible senior notes due 2009		863		841		863		834
Charter Communications Holdings, LLC:
8.250% senior notes due 2007		105		105		451		451
8.625% senior notes due 2009		292		292		1,244		1,243
9.920% senior discount notes due 2011		198		198		1,108		1,108
10.000% senior notes due 2009		154		154		640		640
10.250% senior notes due 2010		49		49		318		318
11.750% senior discount notes due 2010		43		43		450		448
10.750% senior notes due 2009		131		131		874		874
11.125% senior notes due 2011		217		217		500		500
13.500% senior discount notes due 2011		94		91		675		589
9.625% senior notes due 2009		107		107		640		638
10.000% senior notes due 2011		137		136		710		708
11.750% senior discount notes due 2011		125		116		939		803
12.125% senior discount notes due 2012		113		97		330		259
CCH I Holdings, LLC:
11.125% senior notes due 2014		151		151		--		--
9.920% senior discount notes due 2014		471		471		--		--
10.000% senior notes due 2014		299		299		--		--
11.750% senior discount notes due 2014		815		759		--		--
13.500% senior discount notes due 2014		581		559		--		--
12.125% senior discount notes due 2015		217		187		--		--
CCH I, LLC:
11.00% senior notes due 2015		3,525		3,686		--		--
CCH II, LLC:
10.250% senior notes due 2010		1,601		1,601		1,601		1,601
CCO Holdings, LLC:
8¾% senior notes due 2013		800		794		500		500
Senior floating rate notes due 2010		550		550		550		550
Charter Communications Operating, LLC:
8% senior second lien notes due 2012		1,100		1,100		1,100		1,100
8 3/8% senior second lien notes due 2014		733		733		400		400
Renaissance Media Group LLC:
10.000% senior discount notes due 2008		114		115		114		116
CC V Holdings, LLC:
11.875% senior discount notes due 2008		--		--		113		113
Credit Facilities
Charter Operating		5,513		5,513		5,515		5,515
	$	19,123	$	19,120	$	19,791	$	19,464

	Minority Interest

Balance, December 31, 2004	$	648
CC VIII 2% Priority Return (see Note 20)		9
Changes in fair value of interest rate agreements		8
Balance, September 30, 2005	$	665

	Three Months Ended September 30,						Nine Months Ended September 30,
	2005			2004			2005			2004

Beginning Balance	$	4		$	6		$	6		$	14

Special Charges		1			6			5			9
Payments		(1	)		(3	)		(7	)		(14	)

Balance at September 30,	$	4		$	9		$	4		$	9

	Three Months Ended September 30, 2005
	Earnings		Shares		Earnings Per Share

Basic earnings per share	$	75		316,214,740	$	0.24

Effect of restricted stock		--		840,112		--
Effect of Charter Investment Class B Common Stock		--		222,818,858		(0.10	)
Effect of Vulcan Cable III Inc. Class B Common Stock		--		116,313,173		(0.02	)
Effect of 5.875% convertible senior notes due 2009		13		356,404,959		(0.03	)

Diluted earnings per share	$	88		1,012,591,842	$	0.09

	Three Months Ended September 30,						Nine Months Ended September 30,
	2005			2004			2005			2004

Net income (loss) applicable to common stock	$	75		$	(3,295	)	$	(634	)	$	(4,005	)
Add back stock-based compensation expense related to stock options included in reported net income (loss)		3			8			11			34
Less employee stock-based compensation expense determined under fair value based method for all employee stock option awards		(3	)		(6	)		(11	)		(37	)
Effects of unvested options in stock option exchange		--			--			--			48
Pro forma	$	75		$	(3,293	)	$	(634	)	$	(3,960	)

Basic income (loss) per common share	$	0.24		$	(10.89	)	$	(2.06	)	$	(13.38	)
Add back stock-based compensation expense related to stock options included in reported net income (loss)		0.01			0.03			0.04			0.11
Less employee stock-based compensation expense determined under fair value based method for all employee stock option awards		(0.01	)		(0.02	)		(0.04	)		(0.12	)
Effects of unvested options in stock option exchange		--			--			--			0.16
Pro forma	$	0.24		$	(10.88	)	$	(2.06	)	$	(13.23	)

Diluted income (loss) per common share	$	0.09		$	(10.89	)	$	(2.06	)	$	(13.38	)
Add back stock-based compensation expense related to stock options included in reported net income (loss)		--			0.03			0.04			0.11
Less employee stock-based compensation expense determined under fair value based method for all employee stock option awards		--			(0.02	)		(0.04	)		(0.12	)
Effects of unvested options in stock option exchange		--			--			--			0.16
Pro forma	$	0.09		$	(10.88	)	$	(2.06	)	$	(13.23	)

	2005		2006		2007		2008		2009		2010		Thereafter		Total		Fair Value at September 30, 2005

Debt:
Fixed Rate	$	--	$	25	$	105	$	114	$	1,547	$	1,693	$	9,576	$	13,060	$	11,802
Average Interest Rate		--		4.75%		8.25%		10.00%		7.48%		10.29%		10.44%		10.04%

Variable Rate	$	7	$	30	$	280	$	629	$	779	$	1,536	$	2,802	$	6,063	$	6,059
Average Interest Rate		6.81%		7.88%		7.73%		7.78%		7.88%		8.33%		8.20%		8.12%

Interest Rate Instruments:
Variable to Fixed Swaps	$	500	$	873	$	775	$	--	$	--	$	--	$	--	$	2,148	$	13
Average Pay Rate		7.49%		8.23%		8.04%		--		--		--		--		7.99%
Average Receive Rate		7.17%		7.82%		7.83%		--		--		--		--		7.69%

NOMINEE	FOR	WITHHELD	BROKER NON-VOTE

Robert P. May	3,665,081,181	22,178,698	N/A

FOR	AGAINST	ABSTAIN	BROKER NON-VOTE

3,477,799,591	33,515,888	453,122	N/A

Dated: ~~November 1, 2005~~May 2, 2006	By: /s/ ~~Paul E. Martin~~Kevin D. Howard
	Name:	~~Paul E. Martin~~Kevin D. Howard
	Title:	~~Senior~~ Vice President
		~~Interim Chief Financial Officer,~~
		~~Principal Accounting Officer~~ and
		~~Corporate Controller~~
		~~(Principal Financial~~Chief Accounting Officer ~~and~~
		~~Principal Accounting Officer)~~

Exhibit Number	Description of Document
2.1	Purchase Agreement dated as of January 26, 2006, by and between CCH II, LLC, CCH II Capital Corp and J.P. Morgan Securities, Inc as Representative of several Purchasers for $450,000,000 10.25% Senior Notes Due 2010 (incorporated by reference to Exhibit 10.3 to the current report on Form 8-K of Charter Communications, Inc. filed on January 27, 2006 (File No. 000-27927)).
2.2*	Asset Purchase Agreement, dated February 27, 2006, by and between Charter Communications Operating, LLC and Cebridge Acquisition Co., LLC.
3.1(a)	Restated Certificate of Incorporation of Charter Communications, Inc. (Originally incorporated July 22, 1999) ~~(Incorporated~~(incorporated by reference to Exhibit 3.1 to Amendment No. 3 to the registration statement on Form S-1 of Charter Communications, Inc. filed on October 18, 1999 (File No. 333-83887)).
3.1(b)	Certificate of Amendment of Restated Certificate of Incorporation of Charter Communications, Inc. filed May 10, 2001 ~~(Incorporated~~(incorporated by reference to Exhibit 3.1(b) to the annual report on Form 10-K filed by Charter Communications, Inc. on March 29, 2002 (File No. 000-27927)).
~~3.2~~3.2(a)	Amended and Restated By-laws of Charter Communications, Inc. as of June 6, 2001 ~~(Incorporated~~(incorporated by reference to Exhibit 3.2 to the quarterly report on Form 10-Q filed by Charter Communications, Inc. on November 14, 2001 (File No. 000-27927)).
~~3.3~~3.2(b)	First Amendment to Amended and Restated By-Laws of Charter Communications, Inc. adopted as of November 8, 1999 (incorporated by reference to Exhibit 3.2(b) to Amendment No. 1 to the registration statement on Form S-1 filed by Charter Communications, Inc. on February 3, 2006 (File No. 333-130898)).
3.2(c)	Second Amendment to Amended and Restated By-Laws of Charter Communications, Inc. adopted as of January 1, 2000 (incorporated by reference to Exhibit 3.2(c) to Amendment No. 1 to the registration statement on Form S-1 filed by Charter Communications, Inc. on February 3, 2006 (File No. 333-130898)).
3.2(d)	Third Amendment to Amended and Restated By-Laws of Charter Communications, Inc. adopted as of June 6, 2001(incorporated by reference to Exhibit 3.2(d) to Amendment No. 1 to the registration statement on Form S-1 filed by Charter Communications, Inc. on February 3, 2006 (File No. 333-130898)).
3.2(e)	Fourth Amendment to Amended and Restated By-laws of Charter Communications, Inc. as of October 3, 2003 ~~(Incorporated~~(incorporated by reference to Exhibit 3.3 to Charter Communications, Inc.’s's quarterly report on Form 10-Q filed on November 3, 2003 (File No. 000-27927)).
~~3.4~~3.2(f)	Fifth Amendment to Amended and Restated By-laws of Charter Communications, Inc. as of October 28, 2003 ~~(Incorporated~~(incorporated by reference to Exhibit 3.4 to Charter Communications, Inc.’s's quarterly report on Form 10-Q filed on November 3, 2003 (File No. 000-27927)).
~~3.5~~3.2(g)	Sixth Amendment to Amended and Restated By-laws of Charter Communications, Inc. ~~(Incorporated~~(incorporated by reference to Charter Communications, Inc.'s current report on Form 8-K filed on September 30, ~~2004)~~2004 (File No. 000-27927)).
~~3.6~~3.2(h)	Seventh Amendment to Amended and Restated By-laws of Charter Communications, Inc. ~~(Incorporated~~(incorporated by reference to Charter Communications, Inc.'s current report on Form 8-K filed on October 22, ~~2004)~~2004 (File No. 000-27927)).
~~10.1~~3.2(i)	~~First Supplemental Indenture relating~~Eighth Amendment to the ~~8.625% Senior Notes due 2009, dated~~Amended and Restated By-Laws of Charter Communications, Inc. adopted as of ~~September 28, 2005, among Charter Communications Holdings, LLC, Charter Communications Holdings Capital Corporation and BNY Midwest Trust Company as Trustee~~December 14, 2004 (incorporated by reference to Exhibit ~~10.3~~3.1 to the current report on Form 8-K of Charter Communications, Inc. filed on ~~October 4, 2005~~December 15, 2004 (File No. 000-27927)).
~~10.2~~3.2(j)	~~First Supplemental Indenture relating~~Ninth Amendment to ~~the 9.920% Senior Discount Notes due 2011, dated as~~Amended and Restated By-laws of ~~September 28, 2005, among~~ Charter Communications, ~~Holdings, LLC, Charter Communications Holdings Capital Corporation and BNY Midwest Trust Company as Trustee~~Inc. (incorporated by reference to Exhibit ~~10.4~~3.1 to the Charter Communications, Inc.'s current report on Form 8-K filed of Charter Communications, Inc. filed on ~~October 4, 2005~~April 21, 2006 (File No. 000-27927)).
~~10.3~~10.1(a)	~~First Supplemental Indenture relating to the 10.00%~~ Senior Notes due 2009, dated as of September 28, 2005, between Charter Communications Holdings, LLC, Charter Communications Holdings Capital Corporation and BNY Midwest Trust Company as Trustee (incorporated by reference to Exhibit 10.5 to the current report on Form 8-K of Charter Communications, Inc. filed on October 4, 2005 (File No. 000-27927)).
~~10.4~~	First Supplemental Indenture relating to the 10.25% Senior Notes due 2010, dated as of September 28, 2005, among Charter Communications Holdings, LLC, Charter Communications Holdings Capital Corporation and BNY Midwest Trust Company as Trustee (incorporated by reference to Exhibit 10.6 to the current report on Form 8-K of Charter Communications, Inc. filed on October 4, 2005 (File No. 000-27927)).
~~10.5~~	First Supplemental Indenture relating to the 11.75% Senior Discount Notes due 2010, among Charter Communications Holdings, LLC, Charter Communications Holdings Capital Corporation and BNY Midwest Trust Company as Trustee, dated as of September 28, 2005 (incorporated by reference to Exhibit 10.7 to the current report on Form 8-K of Charter Communications, Inc. filed on October 4, 2005 (File No. 000-27927)).
~~10.6~~	First Supplemental Indenture dated as of September 28, 2005 between Charter Communications Holdings, LLC, Charter Communications Holdings Capital Corporation and BNY Midwest Trust Company as Trustee governing 10.750% Senior Notes due 2009 (incorporated by reference to Exhibit 10.8 to the current report on Form 8-K of Charter Communications, Inc. filed on October 4, 2005 (File No. 000-27927)).
~~10.7~~	~~First Supplemental Indenture dated as of September 28, 2005, between Charter Communications Holdings, LLC, Charter Communications Capital Corporation and BNY Midwest Trust Company~~

	governing 11.125% Senior Notes due 2011 (incorporated by reference to Exhibit 10.9 to the current report on Form 8-K of Charter Communications, Inc. filed on October 4, 2005 (File No. 000-27927)).
~~10.8~~	First Supplemental Indenture dated as of September 28, 2005, between Charter Communications Holdings, LLC, Charter Communications Holdings Capital Corporation and BNY Midwest Trust Company as Trustee governing 13.500% Senior Discount Notes due 2011 (incorporated by reference to Exhibit 10.10 to the current report on Form 8-K of Charter Communications, Inc. filed on October 4, 2005 (File No. 000-27927)).
~~10.9~~	Third Supplemental Indenture dated as of September 28, 2005 between Charter Communications Holdings, LLC, Charter Communications Capital Corporation and BNY Midwest Trust Company as Trustee governing 9.625% Senior Notes due 2009 (incorporated by reference to Exhibit 10.11 to the current report on Form 8-K of Charter Communications, Inc. filed on October 4, 2005 (File No. 000-27927)).
~~10.10~~	Third Supplemental Indenture dated as of September 28, 2005 between Charter Communications Holdings, LLC, Charter Communications Holdings Capital Corporation and BNY Midwest Trust Company as Trustee governing the 10.000% Senior Notes due 2011 (incorporated by reference to Exhibit 10.12 to the current report on Form 8-K of Charter Communications, Inc. filed on October 4, 2005 (File No. 000-27927)).
~~10.11~~	First Supplemental Indenture dated as of September 28, 2005 between Charter Communications Holdings, LLC, Charter Communications Holdings Capital Corporation and BNY Midwest Trust Company as Trustee governing 11.750% Senior Discount Notes due 2011 (incorporated by reference to Exhibit 10.13 to the current report on Form 8-K of Charter Communications, Inc. filed on October 4, 2005 (File No. 000-27927)).
~~10.12~~	Second Supplemental Indenture dated as of September 28, 2005 between Charter Communications Holdings, LLC, Charter Communications Holdings Capital Corporation and BNY Midwest Trust Company as Trustee governing 12.125% Senior Discount Notes due 2012 (incorporated by reference to Exhibit 10.14 to the current report on Form 8-K of Charter Communications, Inc. filed on October 4, 2005 (File No. 000-27927)).
~~10.13~~	Indenture dated as of September 28, 2005 among CCH I Holdings, LLC and CCH I Holdings Capital Corp., as Issuers and Charter Communications Holdings, LLC, as Parent Guarantor, and The Bank of New York Trust Company, NA, as Trustee, governing: 11.125% Senior Accreting Notes due 2014, 9.920% Senior Accreting Notes due 2014, 10.000% Senior Accreting Notes due 2014, 11.75% Senior Accreting Notes due 2014, 13.50% Senior Accreting Notes due 2014, 12.125% Senior Accreting Notes due 2015 (incorporated by reference to Exhibit 10.1 to the current report on Form 8-K of Charter Communications, Inc. filed on October 4, 2005 (File No. 000-27927)).
~~10.14~~	Indenture dated as of September 28, 2005 among CCH I, LLC and CCH I Capital Corp., as Issuers, Charter Communications Holdings, LLC, as Parent Guarantor, and The Bank of New York Trust Company, NA, as Trustee, governing 11.00% Senior Secured Notes due 2015 (incorporated by reference to Exhibit 10.2 to the current report on Form 8-K of Charter Communications, Inc. filed on October 4, 2005 (File No. 000-27927)).
~~10.15~~	~~Pledge~~Bridge Loan Agreement made by CCH I, LLC in favor of The Bank of New York Trust Company, NA, as Collateral Agent dated as of September 28, 2005 (incorporated by reference to Exhibit 10.15 to the current report on Form 8-K of Charter Communications, Inc. filed on October 4, 2005 (File No. 000-27927)).
~~10.16~~	~~SENIOR BRIDGE LOAN AGREEMENT~~ dated as of October 17, 2005 by and among CCO Holdings, LLC, CCO Holdings Capital Corp., certain lenders, JPMorgan Chase Bank, N.A., as Administrative Agent, J.P. Morgan Securities Inc. and Credit Suisse, Cayman Islands Branch, as joint lead arrangers and joint bookrunners, and Deutsche Bank Securities Inc., as documentation agent. ~~(Incorporated~~(incorporated by reference to Exhibit 99.1 to the current report on Form 8-K of Charter Communications, Inc. filed on October 19, 2005 (File No. 000-27927)).
~~10.17*†~~10.1(b)	~~Settlement~~Waiver and Amendment Agreement ~~and Mutual Releases, dated as of October 31, 2005, by and among Charter Communications, Inc., Special Committee of~~to the ~~Board of Directors of Charter Communications, Inc., Charter Communications Holding Company, LLC, CCHC, LLC, CC VIII, LLC, CC V, LLC, Charter Investment, Inc., Vulcan Cable III, LLC and Paul G. Allen.~~
10.18*	~~Exchange~~Senior Bridge Loan Agreement dated as of ~~October 31, 2005,~~January 26, 2006 by and among ~~Charter Communications Holding Company,~~CCO Holdings, LLC, ~~Charter Investment,~~CCO Holdings Capital Corp., certain lenders, JPMorgan Chase Bank, N.A., as Administrative Agent, J.P. Morgan Securities Inc. and ~~Paul G. Allen.~~
10.19*	~~CCHC, LLC Subordinated and Accreting Note, dated as of October 31, 2005.~~Credit Suisse, Cayman

10.20*	~~Third Amended~~Islands Branch, as joint lead arrangers and ~~Restated Limited Liability Company Agreement for CC VIII, LLC, dated~~joint bookrunners, and Deutsche Bank Securities Inc., as ~~of October 31, 2005.~~
10.21*	~~Second Amended and Restated Limited Liability Company Agreement for Charter Communications Holdings, LLC, dated as of October 31, 2005.~~
~~10.22+~~	~~Amendment No. 7 to the Charter Communications, Inc. 2001 Stock Incentive Plan effective August 23, 2005~~documentation agent (incorporated by reference to Exhibit ~~10.43(h) to the registration statement on Form S-1 of Charter Communications, Inc. filed on October 5, 2005 (File No. 333-128828)).~~
~~10.23+~~	Restricted Stock Agreement, dated as of July 13, 2005, by and between Robert P. May and Charter Communications, Inc. (incorporated by reference to Exhibit 99.1 to the current report on Form 8-K of Charter Communications, Inc. filed July 13, 2005 (File No. 000-27927)).
~~10.24+~~	Restricted Stock Agreement, dated as of July 13, 2005, by and between Michael J. Lovett and Charter Communications, Inc. (incorporated by reference to Exhibit 99.2 to the current report on Form 8-K of Charter Communications, Inc. filed July 13, 2005 (File No. 000-27927)).
~~10.25+~~	~~Employment Agreement, dated as of August 9, 2005, by and between Neil Smit and Charter Communications, Inc. (incorporated by reference to Exhibit 99.1~~10.2 to the current report on Form 8-K of Charter Communications, Inc. filed on ~~August 15, 2005~~January 27, 2006 (File No. 000-27927)).
~~10.26+~~10.2+*	~~Employment~~Description of Charter Communications, Inc. 2006 Executive Bonus Plan.
10.3+	Retention Agreement dated as of ~~September 2, 2005,~~January 9, 2006, by and between Paul E. Martin and Charter Communications, Inc. (incorporated by reference to Exhibit 99.1 to the current report on Form 8-K of Charter Communications, Inc. filed on ~~September 9, 2005~~January 10, 2006 (File No. 000-27927)).
~~10.27+~~10.4+	Employment Agreement dated as of ~~September 2, 2005,~~January 20, 2006 by and between ~~Wayne H. Davis~~Jeffrey T. Fisher and Charter Communications, Inc. (incorporated by reference to Exhibit 10.1 to the current report on Form 8-K of Charter Communications, Inc. filed on January 27, 2006 (File No. 000-27927)).
10.5+	Employment Agreement dated as of February 28, 2006 by and between Michael J. Lovett and Charter Communications, Inc. (incorporated by reference to Exhibit 99.2 to the current report on Form 8-K of Charter Communications, Inc. filed on ~~September 9, 2005~~March 3, 2006 (File No. 000-27927)).
10.28+*10.6+	~~Employment~~Separation Agreement of Wayne H. Davis, dated as of ~~October 31, 2005,~~March 23, 2006 (incorporated by ~~and between Sue Ann Hamilton and~~reference to Exhibit 99.1 to the current report on Form 8-K of Charter Communications, Inc. filed on April 6, 2006 (File No. 000-27927)).
10.7+	Consulting Agreement of Wayne H. Davis, dated as of March 23, 2006 (incorporated by reference to Exhibit 99.2 to the current report on Form 8-K of Charter Communications, Inc. filed on April 6, 2006 (File No. 000-27927)).
15.1*	Letter re Unaudited Interim Financial Statements.
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 ~~Interim~~ 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 ~~(Interim Chief~~(Chief Financial Officer).