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S-1
CHARTER COMMUNICATIONS, INC. /MO/ filed this Form S-1 on 07/28/1999
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<PAGE>   322
                            INTERMEDIA CABLE SYSTEMS
              (COMPRISED OF COMPONENTS OF INTERMEDIA PARTNERS AND
                     INTERMEDIA CAPITAL PARTNERS IV, L.P.)
 
             NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
                             (DOLLARS IN THOUSANDS)
 
     Deferred income taxes relate to temporary differences as follows:
 

<TABLE>
<CAPTION>
                                                                DECEMBER 31,
                                                            --------------------
                                                              1998       1997
                                                            --------   ---------
<S>                                                         <C>        <C>
Property and equipment....................................  $ (7,258)  $  (6,786)
Intangible assets.........................................   (12,930)     (8,336)
                                                            --------   ---------
                                                             (20,188)    (15,122)
Loss carryforward - federal...............................    31,547      29,058
Loss carryforward - state.................................       297          --
Other.....................................................       942         285
                                                            --------   ---------
                                                            $ 12,598   $  14,221
                                                            ========   =========
</TABLE>

 
     At December 31, 1998, RMG had net operating loss carryforwards for federal
income tax purposes aggregating $92,785, which expire through 2018. RMG is a
loss corporation as defined in Section 382 of the Internal Revenue Code.
Therefore, if certain substantial changes in RMG's ownership should occur, there
could be a significant annual limitation on the amount of loss carryforwards
which can be utilized.
 
     InterMedia's management has not established a valuation allowance to reduce
the deferred tax assets related to RMG's unexpired net operating loss
carryforwards. Due to an excess of appreciated asset value over the tax basis of
RMG's net assets, management believes it is more likely than not that the
deferred tax assets related to unexpired net operating losses will be realized.
 
     A reconciliation of the tax benefit computed at the statutory federal rate
and the tax (expense) benefit reported in the accompanying combined statements
of operations is as follows:
 

<TABLE>
<CAPTION>
                                                                 DECEMBER 31,
                                                              ------------------
                                                               1998       1997
                                                              -------   --------
<S>                                                           <C>       <C>
Tax benefit at federal statutory rate.......................  $   626   $  4,454
State taxes, net of federal benefit.........................       73        498
Goodwill amortization.......................................   (2,309)    (2,056)
Realization of acquired tax benefit.........................       --        346
Other.......................................................      (13)       784
                                                              -------   --------
                                                              $(1,623)  $  4,026
                                                              =======   ========
</TABLE>

 
13. CHANNEL LAUNCH REVENUE
 
     During the years ended December 31, 1998 and 1997, the Systems were
credited $2,646 and $5,072, respectively, representing their share of payments
received by IP-I and ICP-IV from certain programmers to launch and promote their
new channels. Also, during 1998 the Systems recorded a receivable from a
programmer, of which $1,791 remains outstanding at December 31, 1998, for the
launch and promotion of its new channel. Of the total amount credited the
Systems recognized advertising revenue of $586 and $1,182 during the year ended
December 31, 1998
 
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