Charter Communications Holdings, LLC ("Charter Holdings") is a holding company whose principal assets at March 31,June 30, 2007 are the equity interests in its operating subsidiaries.  Charter Holdings is a subsidiary of CCHC, LLC (“CCHC”), which is a subsidiary of Charter Communications Holdings Company, LLC ("Charter Holdco"), which is a subsidiary of Charter Communications, Inc. (“Charter”).  The condensed consolidated financial statements include the accounts of Charter Holdings and all of its subsidiaries where the underlying operations reside, which are collectively referred to herein as the "Company."  As part of the September 2006 exchange of Charter Holdings’ notes for CCH I, LLC (“CCH I”) notes, CCHC contributed its 70% interest in the Class A preferred equity interests of CC VIII, LLC (“CC VIII”) to CCH I, LLC (“CCH I”).I.  The contribution of the CC VIII interest was accounted for as a transaction among entities under common control, and accordingly financial statements of Charter Holdings reflect the contribution as if it had occurred on the date CCHC obtained the CC VIII interest.  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 to residential and commercial customers traditional cable video programming (analog and digital video), high-speed Internet services, advanced broadband services such as high definition television, Charter OnDemand™, and digital video recorder service, and, in many of our markets, telephone service.  The Company sells its cable video programming, high-speed Internet, telephone, and advanced broadband services on a subscription basis.  The Company also sells local advertising on cable 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 Holdings’ 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.

The Company incurred net losses of $304$281 million and $435$310 million for the three months ended March 31,June 30, 2007 and 2006, respectively, and $585 million and $745 million for the six months ended June 30, 2007 and 2006, respectively.  The Company’s net cash flows from operating activities were $266$101 million and $205$204 million for the threesix months ended March 31,June 30, 2007 and 2006, respectively.

The Company has a significant levelamount of debt.  The Company's long-term financing as of March 31,June 30, 2007 consistsconsisted of $5.6$6.9 billion of credit facility debt and $13.3$12.3 billion accreted value of high-yield notes.  For the remaining threetwo quarterly periods of 2007, $105 millionnone of the Company’s debt matures, which was paid on April 2, 2007 upon maturity of Charter Holdings’ 8.250% senior notes.matures.  In 2008, $55$65 million of the Company’s debt matures, and in 2009, $469$253 million matures. Of the debt that was scheduled to mature in 2009, $187 million was subject to a call redemption

The Company requires significant cash to fund debt service costs, capital expenditures and ongoing operations.  The Company has historically funded these requirements through cash flows from operating activities, borrowings under its credit facilities, equity contributions from Charter Holdco, sales of assets, issuances of debt securities, and cash on

hand.  However, the mix of funding sources changes from period to period.  For the threesix months ended March 31,June 30, 2007, the Company generated $266$101 million of net cash flows from operating activities, after paying cash interest of $304$904 million.  In addition, the Company used approximately $298$579 million for purchases of property, plant and equipment.  Finally, the Company generated net cash flows from financing activities of $201$488 million, as a result of refinancing transactions completed during the period.

The Company expects that cash on hand, cash flows from operating activities, and the amounts available under its credit facilities will be adequate to meet its and its parent companies’ cash needs through 2008.  The Company believes that cash flows from operating activities and amounts available under the Company’s credit facilities may not be sufficient to fund the Company’s operations and satisfy its and its parent companies’ interest and principal repayment obligations in 2009, and will not be sufficient to fund such needs in 2010 and beyond.  The Company has been advised that Charter continues to work with its financial advisors concerning its approach to addressing liquidity, debt maturities, and overall balance sheet leverage.

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.  The Charter Operating credit facilities, along with the Company’s indentures and the CCO Holdings, LLC (“CCO Holdings”) credit facilities, contain certain restrictive covenants, some of which require the Company to maintain specified leverage ratios, meet financial tests, and provide annual audited financial statements with an unqualified opinion from the Company’s independent auditors.  As of March 31,June 30, 2007, the Company was in compliance with the covenants under its indentures and credit facilities, and the Company expects to remain in compliance with those covenants for the next twelve months.  As of March 31,June 30, 2007, the Company’s potential availability under its revolving credit facility totaled approximately $1.4 billion, none of which was limited by covenant restrictions.  Continued access to the Company’s credit facilities is subject to the Company remaining in compliance with these covenants, including covenants tied to the Company’s leverage ratio.  If any event of non-compliance were to occur, funding under the credit facilities may not be available and defaults on some or potentially all of the Company’s debt obligations could occur.  An event of default under 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 and results of operations.

Any financial or liquidity problems of the Company’s parent companies could cause serious disruption to the Company’s business and have a material adverse effect on the Company’s business and results of operations.

As long as Charter’s convertible notes remain outstanding and are not otherwise converted into shares of common stock, Charter must pay interest on the convertible senior notes and repay the principal amount in November 2009.  Charter’s ability to make interest payments on its convertible senior notes, and, in 2009, to repay the outstanding principal of its convertible senior notes of $413 million, net of $450 million of convertible senior notes now held by CCHC,Charter Holdco, will depend on its ability to raise additional capital and/or on receipt of payments or distributions from Charter Holdco and its subsidiaries.  As of March 31,June 30, 2007, Charter Holdco was owed $4 million in intercompany loans from its subsidiaries and had $8$14 million in cash, which were available to pay interest and principal on Charter's convertible senior notes.  In addition, Charter has $50$25 million of U.S. government securities pledged as security for the semi-semi-annual interest payments on Charter’s convertible senior notes scheduled in 2007.  On August 1, 2007, Charter Holdings distributed to CCHC an intercompany note issued by Charter Operating with an outstanding balance, including accrued interest, of $119 million.  On the same day, CCHC distributed such note to Charter Holdco along with $450 million of Charter’s convertible senior notes and an investment account with $26 million of cash.  As long as Charter Holdco continues to hold the $450 million of Charter’s convertible senior notes, Charter Holdco will receive interest payments from the government securities pledged for Charter’s convertible senior notes.  The

cumulative amount of interest payments expected to be received by CCHCCharter Holdco is $40 million and may be available to be distributed to pay semiannual interest due in 2008 and May 2009 on the outstanding principal amount of $413 million of Charter’s convertible senior notes, although CCHCCharter Holdco may use those amounts for other purposes.

Distributions by Charter’s subsidiaries to a parent company (including Charter, Charter Holdco, CCHC, and Charter Holdings) for payment of principal on parent company notes, are restricted under the indentures governing the CCH I Holdings, LLC (“CIH”) notes, CCH I notes, CCH II, LLC (“CCH II”) notes, CCO Holdings notes, and Charter Operating notes and under the CCO Holdings credit facilities unless there is no default under the applicable indenture and credit facilities, and unless each applicable subsidiary’s leverage ratio test is met at the time of such distribution.  For the quarter ended March 31,June 30, 2007, there was no default under any of these indentures or credit facilities. However, certain of the Company’s subsidiaries did not meet theirfacilities and each subsidiary met its applicable leverage ratio tests based on March 31,June 30, 2007 financial results.  As a result,Such distributions from certainwould be restricted, however, if any such subsidiary fails to meet these tests at the time of the Company’scontemplated distribution.  In the past, certain subsidiaries have from time to time failed to meet their parent companies would have been restrictedleverage ratio test.  There can be no assurance that they will satisfy these tests at suchthe time and will continue to be restricted unless those tests are met.of the contemplated distribution.  Distributions by Charter Operating for payment of principal on parent company notes are further restricted by the covenants in its 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 no default under the aforementioned indentures and CCO Holdings credit facilities.

The indentures governing the Charter Holdings notes permit Charter Holdings to make distributions to Charter Holdco for payment of interest or principal on Charter’s 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 March 31,June 30, 2007, there was no default under Charter Holdings’ indentures, and the other specified tests were met. However,met, and Charter Holdings did not meet themet its leverage ratio test of 8.75 to 1.0 based on March 31,June 30, 2007 financial results.  As a result,Such distributions fromwould be restricted, however, if Charter Holdings fails to meet these tests at the time of the contemplated distribution.  In the past, Charter orHoldings has from time to time failed to meet this leverage ratio test.  There can be no assurance that Charter Holdco would have been restrictedHoldings will satisfy these tests at suchthe time and will continue to be restricted unless that test is met.of the contemplated distribution.  During periods 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.  

In March 2007, Charter Operating entered into an Amended and Restated Credit Agreement (the “Charter Operating Credit Agreement”) which provides for a $1.5 billion senior secured revolving line of credit, a continuation of the existing $5.0 billion term loan facility (which was refinanced with new term loans in April 2007), and a $1.5 billion new term loan facility, which was funded in March and April 2007.  In March 2007, CCO Holdings entered into a credit agreement which consisted of a $350 million term loan facility funded in March and April 2007.  In April 2007, Charter Holdings completed a cash tender offer to purchase up to $100$97 million including premiums and accrued interest, of its outstanding notes.  In addition, Charter Holdings redeemed $187 million of its 8.625% senior notes due April 1, 2009 and CCO Holdings redeemed $550 million of its senior floating rate notes due December 15, 2010.  These redemptions closed in April 2007.  See Note 6.

In 2006, the Company sold certain cable television systems serving a total of approximately 356,000 analog video customers in 1) West Virginia and Virginia to Cebridge Connections, Inc. (the “Cebridge Transaction”);  2) Illinois and Kentucky to Telecommunications Management, LLC, doing business as New Wave Communications (the “New Wave Transaction”) and 3) Nevada, Colorado, New Mexico and Utah to Orange Broadband Holding Company, LLC

facilities.  These cable systems met the criteria for assets held for sale.  As such, the assets were written down to fair value less estimated costs to sell resulting in asset impairment charges during the threesix months ended March 31,June 30, 2006 of approximately $99 million related to the New Wave Transaction and the Orange Transaction.  The Company determined that the West Virginia and Virginia cable systems comprise operations and cash flows that for financial reporting purposes meet the criteria for discontinued operations.  Accordingly, the results of operations for the West Virginia and Virginia cable systems have been presented as discontinued operations, net of tax for the three and six months ended March 31,June 30, 2006.

Summarized consolidated financial information for the three and six months ended March 31,June 30, 2006 for the West Virginia and Virginia cable systems is as follows:

As of March 31,June 30, 2007 and December 31, 2006, indefinite-lived and finite-lived intangible assets are presented in the following table:

For the threesix months ended March 31,June 30, 2007, the net carrying amount of indefinite-lived and finite-lived franchises was reduced by $4$20 million, related to cable asset sales completed in the first quartersix months of 2007.  Franchise amortization expense represents the amortization relating to franchises that did not qualify for indefinite-life treatment under SFAS No. 142, including costs associated with franchise renewals.  Franchise amortization expense for the three and six months ended March 31,June 30, 2007 was approximately $1 million.million and $2 million, respectively.  The Company expects that amortization expense on franchise assets will be approximately $3 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.

For the six months ended June 30, 2007, the net carrying amount of goodwill increased $3 million as a result of new intangible asset acquisitions or divestitures, changesthe Company’s purchase of certain cable systems in useful lives and other relevant factors.Pasadena, California in June 2007.

Accounts payable and accrued expenses consist of the following as of March 31,June 30, 2007 and December 31, 2006:

Long-term debt consists of the following as of March 31,June 30, 2007 and December 31, 2006:

The accreted values presented above generally 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 except as follows. Certaindate.  However, certain of the CIH notes, CCH I notes and CCH II notes issued in exchange for Charter Holdings notes and Charter convertible notes in 2006 and 2005 are recorded for financial reporting purposes at values different from 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 March 31,June 30, 2007, the accreted value of the Company’s debt for legal purposes and notes indenture purposes is approximately $18.6$19.0 billion.

In March 2007, Charter Operating entered into the Charter Operating Credit Agreement which provides for a $1.5 billion senior secured revolving line of credit, a continuation of the existing $5.0 billion term loan facility (the “Existing Term Loan”), and a $1.5 billion new term loan facility (the “New Term Loan”), which was funded in March and April 2007.  Borrowings under the Charter Operating Credit Agreement bear interest at a variable interest rate based on either LIBOR or a base rate, plus in either case, an applicable margin.  The applicable margin for LIBOR loans under the New Term Loan and revolving loans is 2.00% above LIBOR.  The revolving line of credit commitments terminate in March 2013.  The Existing Term Loan and the New Term Loan are subject to amortization at 1% of their initial principal amount per annum. The New Term Loan amortization commencesannum commencing on March 31, 2008. The2008 with the remaining principal amount of the New Term Loan will be due in March 2014.

In March 2007, CCO Holdings entered into a credit agreement (the “CCO Holdings Credit Agreement”) which consisted of a $350 million term loan facility (the “Term Facility”).  The Term Facility matures in September 2014 (the “Maturity Date”).  The CCO Holdings Credit Agreement also provides for additional incremental term loans (the “Incremental Loans”) maturing on the dates set forth in the notices establishing such term loans, but no earlier than the Maturity Date. Borrowings under the CCO Holdings Credit Agreement bear interest at a variable interest rate based on either LIBOR or a base rate plus, in either case, an applicable margin.  The applicable margin for LIBOR term loans other than Incremental Loans, is 2.50% above LIBOR. The applicable margin with respect to Incremental Loans is to be agreed upon by CCO Holdings and the lenders when the Incremental Loans are established.  The CCO Holdings Credit Agreement is secured by the equity interests of Charter Operating, and all proceeds thereof.

As part of the refinancing, the existing $350 million revolving/term credit facility was terminated.  A $1The refinancing resulted in a loss on extinguishment of debt for the three and six months ended June 30, 2007 of approximately $12 million loss was recognized related toand $13 million, respectively, included in other expense, net on the write-offCompany’s condensed consolidated statements of unamortized deferred debt financing costs related to this facility.operations.

Minority interest on the Company’s condensed consolidated balance sheets at March 31,June 30, 2007 and December 31, 2006 primarily represents preferred membership interests in CC VIII, an indirect subsidiary of Charter Holdings, of $194$195 million and $192 million, respectively.  This preferred interest is held by Mr. Allen, Charter’s Chairman and controlling shareholder.  Approximately 5.6% of CC VIII’s income is allocated to minority interest.

The Company uses interest rate risk management derivative instruments, including but not limited to 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 its exposure to fluctuations in interest rates by maintaining a mix of fixed and variable rate debt within a targeted range.  Using interest rate swap agreements, the Company has agreed to exchange, at specified intervals through 2013, the difference between fixed and variable interest amounts calculated by reference to agreed-upon notional principal amounts.

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 other income (expense) in the Company’s condensed consolidated statements of operations. For the three months ended March 31, 2007 and 2006, other income (expense), net, includes losses of $1 million and gains of $6 million, respectively, resulting from interest rate derivative instruments not designated as hedges.

Other operating expenses, net consist of the following for the three and six months ended March 31,June 30, 2007 and 2006:

Special charges, net for the three and six months ended March 31,June 30, 2007 and 2006 primarily represent severance associated with the closing of call centers and divisional restructuring.

Other income (expense),expense, net consists of the following for the three and six months ended March 31,June 30, 2007 and 2006:

Charter Holdings is a single member limited liability company not subject to income tax.  Charter Holdings holds all operations through indirect subsidiaries.  The majority of these indirect subsidiaries are generally limited liability companies that are also not subject to income tax.  However, certain of Charter Holdings’ indirect subsidiaries are corporations thatthese limited liability companies are subject to state income tax.  In addition, the subsidiaries that are corporations are subject to federal and state income tax.

As of June 30, 2007 and December 31, 2006, the Company had net deferred income tax liabilities of approximately $197 million and $200 million, respectively.  The deferred tax liabilities relate to certain of the Company’s indirect subsidiaries, which file separate income tax returns.

During the three and six months ended March 31,June 30, 2007, the Company recorded $1 million of income tax benefit and $1 million of income tax expense, respectively, and during the three and six months ended June 30, 2006, the Company recorded $2 million and $4 million of income tax expense. Income tax expense, is recognized through current federal and state income tax expense as well as increases to the deferred tax liabilities of certain ofrespectively.

The Company and its parentsparent companies are party to other lawsuits and claims that arise in the ordinary course of conducting its business.  The ultimate outcome of these other legal matters pending against the Company or its subsidiariesparent companies cannot be predicted, and although such lawsuits and claims are not expected individually to have a material adverse effect on the Company’s consolidated financial condition, results of operations, or liquidity, such lawsuits could have, in the aggregate, a material adverse effect on the Company’s consolidated financial condition, results of operations, or liquidity.

Charter has stock option plans (the “Plans”) 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 restricted stock (not to exceed 20,000,000 shares of Charter Class A common stock), as each term is defined in the Plans.  Employees, officers, consultants and directors of the Charter and its subsidiaries and affiliates are eligible to receive grants under the Plans.  Options granted generally vest over four years from the grant date, with 25% generally vesting on the anniversary of the grant date and ratably thereafter.  Generally, options expire 10 years from the grant date.  The Plans allow for the issuance of up to a total of 90,000,000 shares of Charter Class A common stock (or units convertible into Charter Class A common stock).  During the three and six months ended March 31,June 30, 2007, Charter granted 3.80.1 million and 3.9 million stock options, respectively, and 6.70.2 million and 6.9 million performance units, respectively, under Charter’s Long-Term Incentive Program.  The Company recorded $5 million and $4$3 million of stock compensation expense for the three months ended June 30, 2007 and 2006, respectively, and $10 million and $7 million for the six months ended June 30, 2007 and 2006, which is included in selling, general, and administrative expense for the three months ended March 31, 2007 and 2006, respectively.expense.

As part of the September 2006 exchange of Charter Holdings notes for CCH I notes, CCHC contributed its 70% interest in the Class A preferred equity interests of CC VIII to CCH I.  The contribution of the CC VIII interest was accounted for as a transaction among entities under common control, and accordingly financial statements of Charter Holdings reflect the contribution as if it had occurred on the date of the settlement with Paul Allen.