Charter 2002 Annual Report Download - page 109

CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2002, 2001 and 2000
(dollars in millions, except where indicated)
$3 million. The Company intends to terminate approximately 1,400 employees, of which 100 employees were
terminated in the fourth quarter of 2002. As of December 31, 2002, a liability of approximately $31 million is
recorded on the accompanying consolidated balance sheet related to the realignment activities.
During the year ended December 31, 2001, the Company recorded $18 million in special charges that
represent $15 million of costs associated with the transition of approximately 145,000 (unaudited) data
customers from the Excite@Home Internet service to the Charter Pipeline Internet service, as well as
$3 million associated with certain employee severance costs.
In December 2001, the Company implemented a restructuring plan to reduce its workforce in certain
markets and reorganize its operating divisions from two to three and operating regions from twelve to ten. The
restructuring plan was completed during the Ñrst quarter of 2002, resulting in the termination of approximately
320 employees and severance costs of $4 million of which $1 million was recorded in the Ñrst quarter of 2002
and $3 million was recorded in the fourth quarter of 2001.
22. Income Taxes
All operations are held through Charter Holdco and its direct and indirect subsidiaries. Charter Holdco
and the majority of its subsidiaries are not subject to income tax. However, certain of these subsidiaries are
corporations and are subject to income tax. All of the taxable income, gains, losses, deductions and credits of
Charter Holdco are passed through to its members: Charter, Charter Investment, Vulcan Cable, and certain
former owners of acquired companies.
Charter is responsible for its share of taxable income or loss of Charter Holdco allocated to it in
accordance with the Charter Holdco amended and restated limited liability company agreement (""Agree-
ment'') and partnership tax rules and regulations.
The Agreement provides for certain special allocations of net tax proÑts and net tax losses (such net tax
proÑts and net tax losses being determined under the applicable federal income tax rules for determining
capital accounts). Pursuant to the Agreement, through the end of 2003, net tax losses of Charter Holdco that
would otherwise have been allocated to Charter based generally on its percentage ownership of outstanding
common units will be allocated instead to the membership units held by Vulcan Cable and Charter
Investment (the ""Special Loss Allocations'') to the extent of their capital account balances. The Agreement
further provides that, beginning at the time Charter Holdco Ñrst generates net tax proÑts, the net tax proÑts
that would otherwise have been allocated to Charter based generally on its percentage ownership of
outstanding common membership units will instead be allocated to Vulcan Cable and Charter Investment
(the ""Special ProÑt Allocations''). The Special ProÑt Allocations to Vulcan Cable and Charter Investment
will generally continue until the cumulative amount of the Special ProÑt Allocations oÅsets the cumulative
amount of the Special Loss Allocations. The Agreement generally provides that any additional net tax proÑts
are to be allocated proportionately among the members of Charter Holdco based on their ownership of
Charter Holdco membership units. The cumulative amount of the actual income tax losses allocated to
Vulcan Cable and Charter Investment as a result of the Special Loss Allocations through the period ended
December 31, 2002 is approximately $3.3 billion.
In certain situations, the Special Loss Allocations and Special ProÑt Allocations described above could
result in Charter paying taxes in an amount that is more or less than if Charter Holdco had allocated net tax
proÑts and net tax losses among its members based generally on the number of common membership units
owned by such members. This could occur due to diÅerences in (i) the character of the allocated income
(e.g., ordinary versus capital), (ii) the allocated amount and timing of tax depreciation and tax amortization
expense due to application of section 704(c) under the Internal Revenue Code, (iii) the amount and timing of
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