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SEC Filings

424B3
CHARTER COMMUNICATIONS HOLDINGS CAPITAL CORP filed this Form 424B3 on 09/02/1999
Entire Document
 
<PAGE>   486
                            INTERMEDIA CABLE SYSTEMS
              (COMPRISED OF COMPONENTS OF INTERMEDIA PARTNERS AND
                     INTERMEDIA CAPITAL PARTNERS IV, L.P.)
 
         NOTES TO CONDENSED COMBINED FINANCIAL STATEMENTS -- CONTINUED
                             (DOLLARS IN THOUSANDS)
                                  (UNAUDITED)
 
charge late fees to customers who do not pay their cable bills on time. These
late fee cases challenge the amount of the late fees and the practices under
which they are imposed. The Plaintiffs raise claims under state consumer
protection statutes, other state statutes and common law. Plaintiffs generally
allege that the late fees charged by InterMedia's cable systems in the States of
Tennessee, South Carolina and Georgia are not reasonably related to the costs
incurred by the cable systems as a result of late payment. Plaintiffs seek to
require cable systems to reduce their late fees on a prospective basis and to
provide compensation for alleged excessive late fee charges for past periods.
These cases are either at the early stages of the litigation process or are
subject to a case management order that sets forth a process leading to
mediation. Based upon the facts available management believes that, although no
assurances can be given as to the outcome of these actions, the ultimate
disposition of these matters should not have a material adverse effect upon the
financial condition of the Systems.
 
     Under existing Tennessee laws and regulations, the Systems paid an
Amusement Tax in the form of a sales tax on programming service revenues
generated in Tennessee in excess of charges for the basic and expanded basic
levels of service. Under the existing statute, only the service charges or fees
in excess of the charges for the "basic cable" television service package were
not exempt from the Amusement Tax. Related regulations clarify the definition of
basic cable to include two tiers of service, which InterMedia's management and
other operators in Tennessee have interpreted to mean both the basic and
expanded basic levels of service.
 
     In the Spring of 1999 Tennessee Department of Revenue ("TDOR") proposed
legislation that was passed by the Tennessee State Legislature which replaced
the current Amusement Tax with a new sales tax on all cable service revenues in
excess of fifteen dollars per month effective September 1, 1999. The new tax
would be computed at a rate approximately equal to the existing effective tax
rate.
 
     Prior to the passage of the new sales tax legislation, the TDOR suggested
that unless InterMedia and other cable operators in Tennessee support the
proposed legislation, it would assess additional taxes on prior years' expanded
basic service revenue. The TDOR can issue an assessment for prior periods up to
three years. Management estimates that the amount of such an assessment, if made
for all periods not previously audited, would be approximately $5.4 million.
InterMedia's management believes that it is possible but not likely that the
TDOR can make such an assessment and prevail in defending it. Management also
believes that such an assessment is not likely based on the passage of the new
sales tax legislation.
 
     InterMedia's management believes it has made a valid interpretation of the
current Tennessee statute and regulations and that it has properly determined
and paid all sales tax due. InterMedia further believes that the legislative
history of the current statute and related regulations, as well as the TDOR's
history of not making assessments based on audits of prior periods, support
InterMedia's interpretation. InterMedia and other cable
 
                                      F-282