Charter Communications Holdings, LLC ("Charter Holdings") is a holding company whose principal assets at SeptemberJune 30, 20052006 are the equity interests in its operating subsidiaries. Charter Holdings is a subsidiary of CCHC, LLC ("CCHC") which is a subsidiary of Charter Communications Holding 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 direct and indirect subsidiaries where the underlying operations reside, which are collectively referred to herein as the "Company." 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 Holdings'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.

Certain 20042005 amounts have been reclassified to conform with the 20052006 presentation.

The Company had net incomeloss of $123$315 million and $309 million for the three months ended SeptemberJune 30, 2005. The Company incurred net loss of $5342006 and 2005, respectively, and $754 million and $657 million for the ninesix months ended SeptemberJune 30, 20052006 and $3.5 billion and $4.1 billion for the three and nine months ended September 30, 2004,2005, respectively. The Company’s net cash flows from operating activities were $121$204 million and $353$164 million for the ninesix months ended SeptemberJune 30, 20052006 and 2004,2005, respectively.

In September 2005, Charter Holdings and its wholly owned subsidiaries,January 2006, CCH I,II, LLC (“("CCH I”II") and CCH I Holdings, LLC (“CIH”), completed the exchange of approximately $6.8 billion total principal amount of outstandingII Capital Corp. issued $450 million in debt securities, the proceeds of which were provided, directly or indirectly, to Charter Holdings inCommunications 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 private placement for$6.85 billion refinancing of its credit facilities including a new debt securities. Holders of Charter Holdings notes$350 million revolving/term facility (which converts to a term loan no later than April 2007), a $5.0 billion term loan due in 20092013 and 2010 exchanged $3.4certain amendments to the existing $1.5 billion principal amountrevolving credit facility. In addition, the refinancing reduced margins on Eurodollar rate term loans to 2.625% from a weighted average of notes for $2.9 billion principal amount of new 11% CCH I senior secured notes due 2015. Holders of Charter Holdings notes due 20113.15% previously and 2012 exchanged $845 millionmargins on base

principal amountrate term loans to 1.625% from a weighted average of notes for $662 million principal amount of 11% CCH I senior secured notes due 2015. In addition, holders of Charter2.15% previously. Concurrent with this refinancing, the CCO 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.LLC ("CCO Holdings") bridge loan was terminated.

The Company has historically requireda significant level of debt. The Company's long-term financing as of June 30, 2006 consists of $5.8 billion of credit facility debt and $13.2 billion accreted value of high-yield notes. For the remainder of 2006, none of the Company’s debt matures, and in 2007 and 2008, $130 million and $50 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, theThe 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 from cash on hand. However, the mix of funding sources changes from period to period. For the ninesix months ended SeptemberJune 30, 2005,2006, the Company generated $121$204 million of net cash flows from operating activities, after paying cash interest of $1.1 billion.$765 million. In addition, the Company used approximately $815$539 million for purchases of property, plant and equipment. Finally, the Company had net cash flows from financing activities of $78$383 million.

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 and Charter’sits parent companies’ 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 and Charter’s interest payment obligations in 2007. It is likely that Charter and the Company will require additional funding to satisfy their debt repayment obligations inthrough 2007. The Company believes that cash flows from operating activities and amounts available under itsthe Company’s credit facilities may not be sufficient to fund the Company’s operations and Bridge Loansatisfy its and its parent companies’ interest and principal repayment obligations in 2008 and will not be sufficient to fund its operationssuch needs in 2009, and satisfy its and Charter’s interest and principal repayment obligations thereafter.

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. TheseThe 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 SeptemberJune 30, 2005,2006, 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. TheAs of June 30, 2006, the Company’s total potential borrowingavailability under its credit facilities totaled approximately $900 million, none of which was limited by covenant restrictions. In the past, the Company’s actual availability under its credit facilities has been limited by covenant restrictions. There can be no assurance that the Company’s actual availability under its credit facilities will not be limited by covenant restrictions in the future. However, pro forma for the closing of the asset sales on July 1, 2006, and the related application of net proceeds to repay amounts outstanding under the Company’s revolving credit facility, potential availability under the currentCompany’s credit facilities totaled $786 million as of SeptemberJune 30, 2005,2006 would have been approximately $1.7 billion, although the actual availability at that time was only $648 millionwould have been limited to $1.3 billion because of limits imposed by covenant restrictions. In addition, effective January 2, 2006, the Company will have additional borrowing availability of $600 million as a result of the Bridge Loan. Continued access to the Company’s credit facilities and Bridge Loan is subject to the Company remaining in compliance with thethese 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

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.

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 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 SeptemberJune 30, 2005,2006, Charter Holdco was owed $57$3 million in intercompany loans from its subsidiaries, which amount waswere available to pay interest and principal on Charter's convertible senior notes. In addition, Charter has $123$74 million of governmentalU.S. government securities pledged as security for the next fivethree scheduled semi-annual interest payments on Charter’s 5.875% convertible senior notes.

Distributions by Charter Holdings’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 by the Bridge Loan andunder the 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 specifiedunder the applicable indenture, each applicable subsidiary’s leverage ratio test is met at the time of such event.distribution and, in the case of Charter’s convertible senior notes, other specified tests are met. For the quarter ended SeptemberJune 30, 2005,2006, there was no default under any of the aforementioned indentures. However, CCO Holdings did not meetthese indentures and each such subsidiary met its applicable leverage ratio testtests based on June 30, 2006 financial results. Such distributions would be restricted, however, if any such subsidiary fails to meet these tests at such time. In the past, certain subsidiaries have from time to time failed to meet their leverage ratio test. There can be no assurance that they will satisfy these tests at the time of 4.5 to 1.0. As a result, distributions from CCO Holdings to CCH II, CCH I, CIH,such distribution. Distributions by Charter Holdings, CCHC, Charter Holdco or CharterOperating 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 no default under the respective parent company’s debt are currently restricted and will continue to be restricted until that test is met.aforementioned indentures. However, distributions for payment of interest on Charter’s 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 the respective parent company’s interest are permitted.subsidiary 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 theCharter’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'Holdings’ indentures, and other specified tests are met. For the quarter ended SeptemberJune 30, 2005,2006, there was no default under Charter Holdings'Holdings’ indentures and other specified tests were met. However, Charter Holdings did not meet themet its leverage ratio of 8.75 to 1.0test based on SeptemberJune 30, 20052006 financial results. As a result,Such distributions fromwould be restricted, however, if Charter Holdings fails to meet these tests at such time. In the past, Charter Holdings has from time to time failed to meet this leverage ratio test. There can be no assurance that Charter Holdco or CCHC for paymentHoldings will satisfy these tests at the time of interest or principalsuch distribution. During periods in which distributions are currently 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.  

In March 2004,July 2006, the Company closed the Cebridge Transaction and New Wave Transaction for net proceeds of approximately $896 million. The Company used the net proceeds from the asset sales to repay (but not reduce permanently) amounts outstanding under the Company’s revolving credit facility. The Orange Transaction is scheduled to close in the third quarter of 2006.

In 2005, the Company closed the sale of certain cable systems in Florida, Pennsylvania, Maryland, Delaware andTexas, West Virginia to Atlantic Broadband Finance, LLC. The Company closedand Nebraska representing a total of approximately 33,000 analog video customers. During the sale 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 million. The proceeds were used to repay a portion of amounts outstanding under the Company’s revolving credit facility.

As of SeptemberJune 30, 20052006 and December 31, 2004,2005, indefinite-lived and finite-lived intangible assets are presented in the following table:

FranchisesFor the six months ended June 30, 2006, the net carrying amount of indefinite-lived and finite-lived franchises was reduced by $441 million and $2 million, respectively, related to franchises reclassified as assets held for sale. For the six months ended June 30, 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 2005assets held for sale (see Note 3). Franchise amortization expense for the three and ninesix months ended SeptemberJune 30, 2005 and 20042006 was approximately $1 million and $3$1 million, respectively, and $1 million and $2 million for the three and six months ended June 30, 2005, 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.

Accounts payable and accrued expenses consist of the following as of SeptemberJune 30, 20052006 and December 31, 2004:2005:

Long-term debt consists of the following as of SeptemberJune 30, 20052006 and December 31, 2004:2005:

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.date except as follows. 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 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 notes indenture purposes (the amount that is currently payable if the debt becomes immediately due). As of June 30, 2006,

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 $17.7approximately $18.6 billion.

In October 2005, CCO HoldingsJanuary 2006, CCH II and CCO HoldingsCCH II 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 March 2006, the Company exchanged $37 million of Renaissance Media Group LLC 10% senior discount notes due 2008 for general corporate purposes, including$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 paymentnew 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. In June 2006, the Company retired the remaining $77 million principal amount of distributions to its parent companies, including Charter Holdings, to pay interest expense.Renaissance Media Group LLC’s 10% senior discount notes due 2008.

In September 2005,April 2006, Charter Holdings andOperating completed a $6.85 billion refinancing of its wholly owned subsidiaries, CCH I and CIH, completed the exchange of approximately $6.8credit facilities including a new $350 million revolving/term facility (which converts to a term loan no later than April 2007), a $5.0 billion total principal amount of outstanding debt securities of Charter Holdings in a private placement for new debt securities. Holders of Charter Holdings notesterm loan due in 20092013 and 2010 exchanged $3.4certain amendments to the existing $1.5 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.revolving credit facility. In addition, the maturities for each series were extended three years.refinancing reduced margins on Eurodollar rate term loans to 2.625% from a weighted average of 3.15% previously and margins on base rate term loans to 1.625% from a weighted average of 2.15% previously. Concurrent with this refinancing, the CCO Holdings bridge loan was terminated. The exchangesrefinancing resulted in a net gainloss on extinguishment of debt of approximately $490 million for the three and ninesix months ended SeptemberJune 30, 2005.2006 of approximately $27 million included in other income (expenses), net on the Company’s condensed consolidated statements of operations.

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 a loss on extinguishment of debt of approximately $1 million for the three months ended June 30, 2005 and a gain on extinguishment of debt of approximately $10 million for the ninesix months ended SeptemberJune 30, 2005.2005 included in other income (expenses), net on the Company’s condensed consolidated statements of operations. The Charter Holdings notes received in the exchange were thereafter distributed to Charter Holdings and cancelled.

In March 2005, Charter Holdings’ 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 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 ninesix months ended SeptemberJune 30, 2005 of approximately $5 million.million included in other income (expenses), net on the Company’s condensed consolidated statements of operations. Following such redemption, CC V Holdings, LLC and its subsidiaries (other than non-guarantor subsidiaries) guaranteedbecame guarantors under the Charter Operating credit facilities and granted a lien on all of their assets to the same extent as to which a lien can be perfectedgranted by the other guarantors under the Uniform Commercial Code by the filing of a financing statement.credit facility.

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 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 each of the three months ended SeptemberJune 30, 2006 and 2005, and 2004, net gain (loss) on derivative instruments and hedging activitiesother income includes gains of $1 million and $1 million, respectively,$0, and for the ninesix months ended SeptemberJune 30, 2006 and 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 SeptemberJune 30, 20052006 and 2004,2005, a gain of $5$1 million and $2 million,$0, respectively, and for the ninesix months ended SeptemberJune 30, 20052006 and 2004,2005, a gain of $14 million$0 and $31$9 million, respectively, related to derivative instruments designated as cash flow hedges, was recorded in accumulated other comprehensive income (loss).loss. The amounts are

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 activitiesother income in the Company’s condensed consolidated statements of operations. For the three months ended SeptemberJune 30, 2006 and 2005, and 2004, net gain (loss) on derivative instruments and hedging activitiesother income includes gains of $16$3 million and losses of $9$1 million, respectively, and for the ninesix months ended SeptemberJune 30, 2006 and 2005, and 2004, net gain (loss) on derivative instruments and hedging activitiesother income includes gains of $41$9 million and $45$25 million, respectively, for interest rate derivative instruments not designated as hedges.

As of SeptemberJune 30, 20052006 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.

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