included in the financial statements from the date of acquisition. In February
1999, Charter Investment transferred all of its cable television operating
subsidiaries to a wholly owned subsidiary of Charter Communications Holdings,
LLC (Charter Holdings), Charter Communications Operating, LLC (Charter
Operating). Charter Holdings is a wholly owned subsidiary of Charter Holdco.
This transfer was accounted for as a reorganization of entities under common
control similar to a pooling of interests.
As a result of the change in ownership of CCPH, CharterComm Holdings and CCA
Group, Charter Holdco has applied push-down accounting in the preparation of its
consolidated financial statements. Accordingly, on December 23, 1998, Charter
Holdco increased its members' equity by $2.2 billion to reflect the amounts paid
by Mr. Allen and Charter Investment. The purchase price was allocated to assets
acquired and liabilities assumed based on their relative fair values, including
amounts assigned to franchises of $3.6 billion. The allocation of the purchase
price is based, in part, on preliminary information which is subject to
adjustment upon obtaining complete appraisal and valuation information of
intangible assets. The valuation information is expected to be finalized in the
fourth quarter of 1999. Management believes that finalization of the purchase
price will not have a material impact on the results of operations or financial
position of the Company.
On April 23, 1998, Mr. Allen and a company controlled by Mr. Allen, (the "Mr.
Allen Companies") purchased substantially all of the outstanding partnership
interests in Marcus Cable Company, L.L.C. (Marcus Cable) for $1.4 billion,
excluding $1.8 billion in assumed liabilities. The owner of the remaining
partnership interest retained voting control of Marcus Cable. In February 1999,
Marcus Cable Holdings, LLC (Marcus Holdings) was formed, and Mr. Allen's
interests in Marcus Cable were transferred to Marcus Holdings. On March 31,
1999, Mr. Allen purchased the remaining partnership interests in Marcus Cable,
including voting control. On April 7, 1999, Marcus Holdings was merged into
Charter Holdings. For financial reporting purposes, the merger was accounted for
as an acquisition of Marcus Holdings effective March 31, 1999,the date Mr. Allen
obtained voting control of Marcus Holdings. Accordingly, the results of
operations of Marcus Holdings have been included in the financial statements
from April 1, 1999. The assets and liabilities of Marcus Holdings have been
recorded in the financial statements using historical carrying values reflected
in the accounts of the Mr. Allen Companies. Total members' equity of Charter
Holdco increased by $1.3 billion as a result of the Marcus Holdings acquisition.
Previously, on April 23, 1998, the Mr. Allen Companies recorded the assets
acquired and liabilities assumed of Marcus Holdings based on their relative fair
The consolidated financial statements of Charter Holdco include the accounts of
Charter Operating and CCPH, the accounts of CharterComm Holdings and CCA Group
and their subsidiaries since December 23, 1998 (date acquired by Charter
Investment), and the accounts of Marcus Holdings since March 31, 1999. All
subsidiaries are, directly or indirectly, wholly owned by Charter Holdco. All
material intercompany transactions and balances have been eliminated.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
The Company considers all highly liquid investments with original maturities of
three months or less to be cash equivalents. At December 31, 1998, and September
30, 1999, cash equivalents consist primarily of repurchase agreements. These
investments are carried at cost that approximates market value.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment is recorded at cost, including all direct and
certain indirect costs associated with the construction of cable television
transmission and distribution facilities, and the cost of new customer
installations. The costs of disconnecting a customer are charged to expense in
the period incurred. Expenditures for repairs and maintenance are charged to
expense as incurred, and equipment replacement and betterments are capitalized.