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PREM14A
CHARTER COMMUNICATIONS, INC. /MO/ filed this Form PREM14A on 06/26/2015
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  debt and senior secured notes) and unsecured notes, for pro forma purposes the $2.0 billion of debt issued for the BHN transactions was assumed to be based on current market interest rates on bank debt. A 0.125% change in interest rates would increase (decrease) interest expense by $1 million and $3 million for the three months ended March 31, 2015 and year ended December 31, 2014, respectively.

 

(e) The income tax benefit was determined by applying an estimated New Charter tax rate of 39% to pro forma loss before income taxes of New Charter following the TWC transactions and BHN transactions, less the impact on the tax rate as a result of the non-controlling interest allocation of the Charter Holdings partnership which is treated as a permanent item for tax purposes in the combined entities’ pro forma tax benefit calculation. The resulting income tax benefit of $48 million and $284 million is reflected in the unaudited consolidated statements of operations for the three months ended March 31, 2015 and year ended December 31, 2014, respectively. The resulting effective tax rate of 48% and 43% for the respective periods is a result of the permanent treatment of the noncontrolling interest expense. The pro forma income tax benefit does not reflect the effects of any special partnership tax allocations as these effects are currently not estimable.

 

(f) Reflects the following noncontrolling interest adjustment for the three months ended March 31, 2015 and year ended December 31, 2014 as follows (in millions).

 

     Three Months Ended
March 31, 2015
    Year Ended
December 31, 2014
 

Charter Holdings pro forma net loss for the TWC transactions and BHN transactions

   $ (99   $ (660

Charter Holdings 6% cash dividend to preferred unit holders

     (38     (150
  

 

 

   

 

 

 

Charter Holdings pro forma net loss available for allocation to common unit holders

  (137   (810

A/N pro forma noncontrolling interest in Charter Holdings excluding preferred units

  10   10
  

 

 

   

 

 

 

Noncontrolling interest expense—Charter Holdings common units

  (14 $ (81

Noncontrolling interest expense—Charter Holdings convertible preferred units

  38      150   
  

 

 

   

 

 

 
$ 24    $ 69   
  

 

 

   

 

 

 

The allocation of Charter Holdings’ net income to noncontrolling interest for financial reporting purposes is first allocated to the convertible preferred units for their stated dividend following their aggregate liquidation preference. The residual Charter Holdings net income (loss) is allocated to the common unit holders in Charter Holdings based on the relative economic common ownership interests in Charter Holdings. A/N’s relative economic common ownership interest in Charter Holdings used for pro forma purposes is 10%.

 

(g) Completion of the TWC transactions includes a conversion of all of Charter’s existing Class A common stock into 0.9042 shares of New Charter Class A common stock. This Parent Merger Exchange Ratio is applied to all legacy Charter Class A common stock and to stock issued to Liberty and A/N. This will result in the following adjustment to weighted average common shares outstanding for both the three months ended March 31, 2015 and year ended December 31, 2014.

 

Equivalent Charter shares purchased by Liberty

  4,046,329   

Parent Merger Exchange Ratio

  0.9042   
  

 

 

 

New Charter shares issued to Liberty

  3,658,691   
  

 

 

 

The Charter Holdings common units of 34.3 million (30.9 million units applying the Parent Merger Exchange Ratio of 0.9042) and Charter Holdings convertible preferred units of 10.3 million (9.3 million units applying the Parent Merger Exchange Ratio of 0.9042) to be issued to A/N were not included on an if-converted, if-exchanged basis for purposes of the computation of pro forma diluted earnings per share because the effect would have been anti-dilutive given the pro forma net loss resulting from the TWC transactions and BHN transactions.

 

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