Charter 2003 Annual Report Download - page 112

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CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2003, 2002 and 2001
(dollars in millions, except where indicated)
The Company's operations are managed on the basis of geographic divisional operating segments. The
Company has evaluated the criteria for aggregation of the geographic operating segments under paragraph 17
of SFAS No. 131 and believes it meets each of the respective criteria set forth. The Company delivers similar
products and services within each of its geographic divisional operations. Each geographic and divisional
service area utilizes similar means for delivering the programming of the Company's services; have similarity
in the type or class of customer receiving the products and services; distributes the Company's services over a
uniÑed network; and operates within a consistent regulatory environment. In addition, each of the geographic
divisional operating segments has similar economic characteristics. In light of the Company's similar services,
means for delivery, similarity in type of customers, the use of a uniÑed network and other considerations across
its geographic divisional operating structure, management has determined that the Company has one
reportable segment, broadband services.
4. Acquisitions
On February 28, 2002, CC Systems, LLC, a subsidiary of the Company, and High Speed Access Corp.
(""HSA'') closed the Company's acquisition from HSA of the contracts and associated assets, and assumed
related liabilities, that served certain of the Company's high-speed data customers. At closing, the Company
paid approximately $78 million in cash and delivered 37,000 shares of HSA's Series D convertible preferred
stock and all the warrants to buy HSA common stock owned by the Company. An additional $2 million of
purchase price was retained to secure indemnity claims. The purchase price has been allocated to assets
acquired and liabilities assumed based on fair values as determined in the fourth quarter of 2002 by a third-
party valuation expert, including approximately $8 million assigned to intangible assets and amortized over an
average useful life of three years and approximately $54 million assigned to goodwill. In 2003, as part of the
Ñnalization of the HSA acquisition, goodwill was reduced to $52 million. The Ñnalization of the purchase price
did not have a material eÅect on amortization expense previously reported. During the period from 1997 to
2000, certain subsidiaries of the Company entered into Internet-access related service agreements with HSA,
and both Vulcan Ventures and certain of the Company's subsidiaries made equity investments in HSA. (See
Note 22 for additional information).
In April 2002, Interlink Communications Partners, LLC, Rifkin Acquisition Partners, LLC and Charter
Communications Entertainment I, LLC, each an indirect, wholly-owned subsidiary of Charter Holdings,
completed the purchase of certain assets of Enstar Income Program II-2, L.P., Enstar Income Pro-
gram IV-3, L.P., Enstar Income/Growth Program Six-A, L.P., Enstar Cable of Macoupin County and Enstar
IV/PBD Systems Venture, serving approximately 21,600 (unaudited) customers, for a total cash purchase
price of $48 million. In September 2002, Charter Communications Entertainment I, LLC purchased all of
Enstar Income Program II-1, L.P.'s Illinois cable systems, serving approximately 6,400 (unaudited)
customers, for a cash purchase price of $15 million. Enstar Communications Corporation, a direct subsidiary
of Charter Holdco, is a general partner of the Enstar limited partnerships but does not exercise control over
them. The purchase prices were allocated to assets acquired based on fair values, including $41 million
assigned to franchises and $4 million assigned to other intangible assets amortized over a useful life of three
years.
The 2002 acquisitions were funded primarily from borrowings under the credit facilities of the Company's
subsidiaries.
During the second and third quarters in 2001, the Company acquired cable systems in two separate
transactions. In connection with the acquisitions, the Company paid a total cash consideration of $1.8 billion,
transferred a cable system valued at $25 million, issued 505,664 shares of Charter Series A Convertible
Redeemable Preferred Stock valued at $51 million, and in the Ñrst quarter of 2003 issued 39,595 additional
F-14