CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
1. ORGANIZATION AND BASIS OF PRESENTATION:
CHARTER COMMUNICATIONS, INC.
On July 22, 1999, Charter Investment, Inc. (Charter Investment), a company
controlled by Paul G. Allen, formed a wholly owned subsidiary, Charter
Communications, Inc. (Charter), a Delaware corporation, with a nominal initial
On November 12, 1999, Charter sold 195.5 million shares of Class A common stock
in an initial public offering and 50,000 shares of high vote Class B common
stock to Mr. Allen. The net proceeds from the offerings of approximately $3.57
billion were used to purchase membership units of Charter Communications Holding
Company, LLC (Charter Holdco), except for a portion of the proceeds that were
retained by Charter to acquire a portion of the equity interests of Avalon Cable
LLC (Avalon). In exchange for the contribution of the net proceeds from the
offering and equity interests of Avalon, Charter received 195,550,000 membership
units of Charter Holdco on November 12, 1999, representing a 100% voting
interest and an approximate 40.6% economic interest.
Prior to November 12, 1999, Charter Holdco was owned 100% by Charter Investment
and Vulcan Cable III Inc. (Vulcan Cable), both entities controlled by Mr. Allen.
Subsequent to November 12, 1999, Mr. Allen controls Charter through his
ownership of all of the high vote Class B common stock and Charter controls
Charter Holdco through its ownership of all the voting interests. Charter's
purchase of 50,000 membership units of Charter Holdco was accounted for as a
reorganization of entities under common control similar to a pooling of
interests. Accordingly, beginning December 23, 1998, the date Mr. Allen first
controlled Charter Holdco, the assets and liabilities of Charter Holdco are
reflected in the consolidated financial statements of Charter at Mr. Allen's
basis and a minority interest is recorded representing that portion of the
economic interests not owned by Charter. For financial reporting purposes,
50,000 of the membership units previously issued by Charter Holdco to companies
controlled by Mr. Allen are considered held by Charter effective December 23,
1998, representing an economic interest of less than 1%.
Charter is a holding company whose sole asset is a controlling equity interest
in Charter Holdco, a direct and indirect owner of cable systems. Charter and
Charter Holdco and its subsidiaries are collectively referred to as the Company.
The Company owns and operates cable systems currently serving approximately 5.5
million customers. The Company offers a full range of traditional cable
television services and has begun to offer digital cable television services,
interactive video programming and high-speed Internet access.
CHARTER COMMUNICATIONS HOLDING COMPANY, LLC
Charter Holdco, a Delaware limited liability company, was formed in 1999 as a
wholly owned subsidiary of Charter Investment. Charter Investment through its
wholly owned subsidiary, Charter Communications Properties Holdings, LLC (CCPH),
commenced operations with the acquisition of a cable system on September 30,
Effective December 23, 1998, through a series of transactions, Mr. Allen
acquired approximately 94% of Charter Investment for an aggregate purchase price
of $2.2 billion, excluding $2.0 billion in debt assumed (the "Paul Allen
Transaction"). In conjunction with the Paul Allen Transaction, Charter
Investment acquired, for fair value from unrelated third parties 100% of the
interests it did not already own in CharterComm Holdings, LLC (CharterComm
Holdings) and CCA Group (comprised of CCA Holdings Corp., CCT Holdings Corp. and
Charter Communications Long Beach, Inc.), all cable television operating
companies, for $2.0 billion, excluding $1.8 billion in debt assumed. Charter
Investment previously managed and owned minority interests in these companies.
These acquisitions were accounted for using the purchase method of accounting
and accordingly, results of operations of CharterComm Holdings and CCA Group are