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SEC Filings

PREM14A
CHARTER COMMUNICATIONS, INC. /MO/ filed this Form PREM14A on 06/26/2015
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The estimated fair value of TWC’s equity investments was based on applying implied multiples to estimated cash flows. The implied multiples were estimated based on precedent transactions and comparable companies. Acquisition accounting rules require that the increase in the carrying value of the TWC equity investments be allocated to the underlying net assets of the investees. This allocation has not yet been performed, and for pro forma purposes, is allocated to non-amortizing goodwill of the investees and thus no pro forma adjustment related to these investments is reflected in the unaudited pro forma consolidated statements of operations.

 

(d) Adjustment of $27 million to accounts payable and accrued liabilities represents the elimination of current deferred revenue as it is assumed to have no fair value as there are no associated payment obligations or substantive performance obligations.

 

(e) The TWC long-term debt assumed was adjusted to fair value using quoted market values as of June 1, 2015. This adjustment resulted in an increase in long-term debt of $1.9 billion. The fair value adjustment to long-term debt is a result of quoted market values of TWC’s debt being higher than the face amount of the related debt. The quoted market value of a debt instrument is higher than the face amount of the debt when the market interest rates are lower than the stated interest rate of the debt. In acquisition accounting, this results in an increase in debt and a reduction in interest expense to reflect the lower market interest rate.

The pro forma adjustment to reclassify $647 million of TWC’s current portion of long-term debt to long-term debt is a result of conforming to Charter’s balance sheet classification. When Charter has availability to repay debt maturing in the next twelve months with its existing revolving credit facility, which is anticipated to be the case following the TWC transactions, those current maturities are classified as long-term debt. Long-term debt was also adjusted to reflect new debt raised to fund the TWC transactions.

The following table presents pro forma cash sources and uses as a result of the TWC transactions.

Pro Forma Cash Sources and Uses (in millions)

 

Sources:

Proceeds from issuance of long-term debt

$ 23,582   

Proceeds from issuance of Charter Class A common stock to Liberty

  4,300   

TWC cash and cash equivalents assumed

  547   
  

 

 

 
$ 28,429   
  

 

 

 

Uses:

Cash portion of purchase price

$ 27,630   

Advisor fees and other expenses directly related to the TWC transactions

  536   

Deferred financing fees

  263   
  

 

 

 
$ 28,429   
  

 

 

 

 

(f) Pro forma adjustments to deferred tax liabilities reflect the following (in millions):

 

Deferred tax liabilities from TWC acquisition accounting adjustments

$ 16,586   

Reduction in valuation allowance on Charter’s preexisting deferred tax assets

  (3,128

Other deferred taxes recorded directly to equity

  (245
  

 

 

 
$ 13,213   
  

 

 

 

The TWC transactions are assumed to be a non-taxable business combination for pro forma purposes. A pro forma adjustment was recorded for the deferred tax impact of acquisition accounting adjustments primarily related to property, plant and equipment, franchises, customer relationships and assumed TWC long-term debt. The incremental deferred tax liabilities of $16.6 billion were calculated based on the tax effect of an

 

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