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S-1
CHARTER COMMUNICATIONS, INC. /MO/ filed this Form S-1 on 07/28/1999
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<PAGE>   562
                          FALCON COMMUNICATIONS, L.P.
                   (SUCCESSOR TO FALCON HOLDING GROUP, L.P.)
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
would have occurred had the acquisitions been made as of such dates or of
results which may occur in the future.
 

<TABLE>
<CAPTION>
                                                     YEAR ENDED DECEMBER 31,
                                               -----------------------------------
                                                 1996         1997         1998
                                               ---------    ---------    ---------
                                                     (DOLLARS IN THOUSANDS)
<S>                                            <C>          <C>          <C>
Revenues.....................................  $ 399,449    $ 424,994    $ 426,827
Expenses.....................................   (429,891)    (438,623)    (444,886)
                                               ---------    ---------    ---------
  Operating loss.............................    (30,442)     (13,629)     (18,059)
Interest and other expenses..................   (126,904)    (115,507)    (130,632)
                                               ---------    ---------    ---------
Loss before extraordinary item...............  $(157,346)   $(129,136)   $(148,691)
                                               =========    =========    =========
</TABLE>

 
NOTE 4 -- DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
 
     The following methods and assumptions were used to estimate the fair value
of each class of financial instruments for which it is practicable to estimate
that value:
 
CASH AND CASH EQUIVALENTS
 
     The carrying amount approximates fair value due to the short maturity of
those instruments.
 
NOTES PAYABLE
 
     The fair value of the Partnership's 11% Senior Subordinated Notes, 8.375%
Senior Debentures and 9.285% Senior Discount Debentures is based on quoted
market prices for those issues of debt. The fair value of the Partnership's
other subordinated notes is based on quoted market prices for similar issues of
debt with similar maturities. The carrying amount of the Partnership's remaining
debt outstanding approximates fair value due to its variable rate nature.
 
INTEREST RATE HEDGING AGREEMENTS
 
     The fair value of interest rate hedging agreements is estimated by
obtaining quotes from brokers as to the amount either party would be required to
pay or receive in order to terminate the agreements.
 
     The following table depicts the fair value of each class of financial
instruments for which it is practicable to estimate that value as of December
31:
 

<TABLE>
<CAPTION>
                                                     1997                       1998
                                            ----------------------    ------------------------
                                            CARRYING                   CARRYING
                                             VALUE      FAIR VALUE      VALUE       FAIR VALUE
                                            --------    ----------    ----------    ----------
                                                          (DOLLARS IN THOUSANDS)
<S>                                         <C>         <C>           <C>           <C>
Cash and cash equivalents.................  $ 13,917     $ 13,917     $   14,284     $ 14,284
Notes payable (Note 6):
  11% Senior Subordinated Notes...........   282,193      299,125             --           --
  8.375% Senior Debentures................        --           --        375,000      382,500
  9.285% Senior Discount Debentures.......        --           --        294,982      289,275
  Bank credit facilities..................   606,000      606,000        926,000      926,000
  Other Subordinated Notes................    15,000       16,202         15,000       16,426
  Capitalized lease obligations...........        10           10              1            1
  Other...................................     8,018        8,018            370          370
</TABLE>

 
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