Charter 2002 Annual Report Download - page 89

CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2002, 2001 and 2000
(dollars in millions, except where indicated)
7. Property, Plant and Equipment
Property, plant and equipment consists of the following as of December 31, 2002, 2001 and 2000 (in
millions):
2002 2001 2000
Cable distribution systems ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 8,950 $ 7,877 $ 5,289
Land, buildings and leasehold improvementsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 580 506 282
Vehicles and equipment ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 783 459 408
10,313 8,842 5,979
Less: accumulated depreciationÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (2,634) (1,928) (1,150)
$ 7,679 $ 6,914 $ 4,829
The Company periodically evaluates the estimated useful lives used to depreciate its assets and the
estimated amount of assets that will be abandoned or have minimal use in the future. A signiÑcant change in
assumptions about the extent or timing of future asset retirements, or in the Company's upgrade program,
could materially aÅect future depreciation expense.
For the years ended December 31, 2002, 2001 and 2000, depreciation expense was $1.4 billion,
$1.2 billion, and $1.0 billion, respectively.
8. Franchises and Goodwill
On January 1, 2002, the Company adopted SFAS No. 142, which eliminates the amortization of
indeÑnite lived intangible assets. Accordingly, beginning January 1, 2002, all franchises that qualify for
indeÑnite life treatment under SFAS No. 142 are no longer amortized against earnings but instead will be
tested for impairment annually, or more frequently as warranted by events or changes in circumstances.
During the Ñrst quarter of 2002, the Company had an independent appraiser perform valuations of its
franchises as of January 1, 2002. Based on the guidance prescribed in Emerging Issues Task Force (EITF)
Issue No. 02-7, Unit of Accounting for Testing of Impairment of IndeÑnite-Lived Intangible Assets, franchises
were aggregated into essentially inseparable asset groups to conduct the valuations. The asset groups generally
represent geographic clusters of the Company's cable systems, which management believes represents the
highest and best use of those assets. Fair value was determined based on estimated discounted future cash
Öows using reasonable and appropriate assumptions that are consistent with internal forecasts. As a result, the
Company determined that franchises were impaired and recorded the cumulative eÅect of a change in
accounting principle of $266 million (approximately $572 million before minority interest eÅects). The eÅect
of adoption was to increase net loss and loss per share by $266 million and $0.90, respectively. As required by
SFAS 142, the standard has not been retroactively applied to the results for the period prior to adoption.
The Company performed its annual impairment assessment on October 1, 2002 using an independent
third-party appraiser and following the guidance of EITF Issue 02-17, Recognition of Customer Relationship
Intangible Assets Acquired in a Business Combination, which was issued in October 2002 and requires the
consideration of assumptions that marketplace participants would consider, such as expectations of future
contract renewals and other beneÑts related to the intangible asset. Revised earnings forecasts and the
methodology required by SFAS No. 142 which excludes certain intangibles led to recognition of a $4.6 billion
impairment in the fourth quarter of 2002.
The independent third-party appraiser's valuation as of October 1, 2002 yielded an enterprise value of
approximately $25 billion, which included $3 billion assigned to customer relationships. SFAS No. 142 does
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