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SEC Filings

S-1/A
CHARTER COMMUNICATIONS, INC. /MO/ filed this Form S-1/A on 11/04/1999
Entire Document
 
<PAGE>   693
                               TCI FALCON SYSTEMS
            (A COMBINATION OF CERTAIN ASSETS, AS DEFINED IN NOTE 1)
 
             NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
 
     On August 15, 1998, TCI caused the TCI Falcon Systems to effect
distributions from the TCI Falcon Systems to TCI aggregating $429,739,000 (the
"Dividend"). The Dividend resulted in a non-cash increase to the intercompany
amounts owed to TCI and a corresponding non-cash decrease to retained earnings.
 
     As a result of TCI's ownership of 100% of the TCI Falcon Systems prior to
the Contribution, the amounts due to TCI have been classified as a component of
parent's investment in the accompanying combined financial statements.
 
     The TCI Falcon Systems purchase, at TCI's cost, substantially all of their
pay television and other programming from affiliates of TCI. Charges for such
programming were $21,479,000, $25,500,000 and $20,248,000 for the nine months
ended September 30, 1998 and the years ended December 31, 1997 and 1996,
respectively, and are included in operating expenses in the accompanying
combined financial statements.
 
     Certain subsidiaries of TCI provide administrative services to the TCI
Falcon Systems and have assumed managerial responsibility of the TCI Falcon
Systems' cable television system operations and construction. As compensation
for these services, the TCI Falcon Systems pay a monthly fee calculated on a
per-customer basis.
 
     The intercompany advances and expense allocation activity in amounts due to
TCI consists of the following:
 

<TABLE>
<CAPTION>
                                               JANUARY 1, 1998        YEARS ENDED
                                                   THROUGH            DECEMBER 31,
                                                SEPTEMBER 30,     --------------------
                                                    1998            1997        1996
                                               ---------------    --------    --------
                                                       (AMOUNTS IN THOUSANDS)
<S>                                            <C>                <C>         <C>
Beginning of period..........................     $224,668        $258,193    $211,351
  Transfer of cable system acquisition
     purchase price..........................        7,023              --      68,240
  Programming charges........................       21,479          25,500      20,248
  Administrative fees........................        2,853           5,034       5,768
  Intercompany interest expense..............        4,343           5,832       4,701
  Tax allocations............................        1,825           1,487       1,620
  Distribution to TCI........................      429,739              --          --
  Cash transfer..............................      (49,702)        (71,378)    (53,735)
                                                  --------        --------    --------
End of period................................     $642,228        $224,668    $258,193
                                                  ========        ========    ========
</TABLE>

 
(6) COMMITMENTS AND CONTINGENCIES
 
     The Cable Television Consumer Protection and Competition Act of 1992 (the
"1992 Cable Act") imposed certain rate regulations on the cable television
industry. Under the 1992 Cable Act, all cable systems are subject to rate
regulation, unless they face "effective competition," as defined by the 1992
Cable Act and expanded in the Telecommunications Act of 1996 (the "1996 Act"),
in their local franchise area.
 
     Although the Federal Communications Commission (the "FCC") has established
regulations required by the 1992 Cable Act, local government units (commonly
referred to as local franchising authorities) are primarily responsible for
administering the regulation of a cable system's basic service tier ("BST"). The
FCC itself directly administered rate regulation of any
 
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