Charter 2004 Annual Report Download - page 121

CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES 2004 FORM 10-K
Notes to Consolidated Financial Statements (continued)
consolidated balance sheets. Gains or losses arising from service area utilizes similar means for delivering the program-
issuances by Charter Holdco of its membership units are ming of the Company’s services; have similarity in the type or
recorded as capital transactions thereby increasing or decreasing class of customer receiving the products and services; distributes
shareholders’ equity and decreasing or increasing minority the Company’s services over a unified network; and operates
interest on the consolidated balance sheets. These losses totaled within a consistent regulatory environment. In addition, each of
$0, $1 million and $1 million for the years ended December 31, the geographic divisional operating segments has similar eco-
2004, 2003 and 2002, respectively, on the accompanying nomic characteristics. In light of the Company’s similar services,
consolidated statements of changes in shareholders’ equity. means for delivery, similarity in type of customers, the use of a
Operating losses are allocated to the minority owners based on unified network and other considerations across its geographic
their ownership percentage, thereby reducing the Company’s net divisional operating structure, management has determined that
loss. the Company has one reportable segment, broadband services.
Reported losses allocated to minority interest on the
4. ACQUISITIONS
statement of operations are limited to the extent of any
remaining minority interest on the balance sheet related to On February 28, 2002, CC Systems, LLC, a subsidiary of the
Charter Holdco. Because minority interest in Charter Holdco Company, and High Speed Access Corp. (‘‘HSA’’) closed the
was substantially eliminated at December 31, 2003, beginning in Company’s acquisition from HSA of the contracts and associ-
2004, Charter began to absorb substantially all future losses ated assets, and assumed related liabilities, that served certain of
before income taxes that otherwise would have been allocated the Company’s high-speed data customers. At closing, the
to minority interest. Company paid approximately $78 million in cash and delivered
37,000 shares of HSA’s Series D convertible preferred stock and
Loss per Common Share all the warrants to buy HSA common stock owned by the
Basic loss per common share is computed by dividing the net Company. The purchase price has been allocated to assets
loss applicable to common stock by 300,291,877 shares, acquired and liabilities assumed based on fair values, including
294,597,519 shares and 294,440,261 shares for the years ended approximately $8 million assigned to intangible assets and
December 31, 2004, 2003 and 2002, representing the weighted- amortized over an average useful life of three years and
average common shares outstanding during the respective approximately $52 million assigned to goodwill. During the
periods. Diluted loss per common share equals basic loss per period from 1997 to 2000, certain subsidiaries of the Company
common share for the periods presented, as the effect of stock entered into Internet-access related service agreements with
options is antidilutive because the Company incurred net losses. HSA, and both Vulcan Ventures and certain of the Company’s
All membership units of Charter Holdco are exchangeable on a subsidiaries made equity investments in HSA. (see Note 22 for
one-for-one basis into common stock of Charter at the option of additional information).
the holders. As of December 31, 2004, Charter Holdco has In April 2002, Interlink Communications Partners, LLC,
644,385,801 membership units outstanding. Should the holders Rifkin Acquisition Partners, LLC and Charter Communications
exchange units for shares, the effect would not be dilutive Entertainment I, LLC, each an indirect, wholly-owned subsidi-
because the Company incurred net losses. ary of Charter Holdings, completed the purchase of certain
assets of Enstar Income Program II-2, L.P., Enstar Income
Segments Program IV-3, L.P., Enstar Income/Growth Program Six-A, L.P.,
SFAS No. 131, Disclosure about Segments of an Enterprise and Enstar Cable of Macoupin County and Enstar IV/PBD Systems
Related Information, established standards for reporting informa- Venture, serving approximately 21,600 (unaudited) customers,
tion about operating segments in annual financial statements and for a total cash purchase price of $48 million. In September
in interim financial reports issued to shareholders. Operating 2002, Charter Communications Entertainment I, LLC purchased
segments are defined as components of an enterprise about all of Enstar Income Program II-1, L.P.’s Illinois cable systems,
which separate financial information is available that is evaluated serving approximately 6,400 (unaudited) customers, for a cash
on a regular basis by the chief operating decision maker, or purchase price of $15 million. Enstar Communications Corpora-
decision making group, in deciding how to allocate resources to tion, a direct subsidiary of Charter Holdco, is a general partner
an individual segment and in assessing performance of the of the Enstar limited partnerships but does not exercise control
segment. over them. The purchase prices were allocated to assets
The Company’s operations are managed on the basis of acquired based on fair values, including $41 million assigned to
geographic divisional operating segments. The Company has franchises and $4 million assigned to other intangible assets
evaluated the criteria for aggregation of the geographic operat- amortized over a useful life of three years.
ing segments under paragraph 17 of SFAS No. 131 and believes The 2002 acquisitions were funded primarily from borrow-
it meets each of the respective criteria set forth. The Company ings under the credit facilities of the Company’s subsidiaries.
delivers similar products and services within each of its
geographic divisional operations. Each geographic and divisional
F-13