Charter 2013 Annual Report Download - page 115

CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2013, 2012 AND 2011
(dollars in millions, except share or per share data or where indicated)
F- 33
In determining the Company’s tax provision for financial reporting purposes, the Company establishes a reserve for uncertain tax
positions unless such positions are determined to be “more likely than not” of being sustained upon examination, based on their
technical merits. There is considerable judgment involved in determining whether positions taken on the tax return are “more
likely than not” of being sustained. A reconciliation of the beginning and ending amount of unrecognized tax benefits included
in deferred income taxes on the accompanying consolidated balance sheets of the Company is as follows:
Balance at December 31, 2011 $ 228
Additions based on tax positions related to prior year 1
Reductions due to tax positions related to prior year (27)
Balance at December 31, 2012 202
Additions based on tax positions related to prior year —
Reductions due to tax positions related to prior year (202)
Balance at December 31, 2013 $ —
The Company's entire reserve for uncertain tax positions includes tax positions for which the ultimate deductibility is highly
certain, but for which there is uncertainty about the character of the deductibility. Included in the balance at December 31, 2013,
is $202 million of net reductions related to losses which were offset by gains discussed above. The change in character of the
deduction would not impact the annual effective tax rate after consideration of the valuation allowance. The deductions for the
uncertain tax positions are included with the loss carryforwards in the deferred tax assets and therefore there is no impact to the
financial statements.
No tax years for Charter or Charter Holdco, for income tax purposes, are currently under examination by the IRS. Tax years
ending 2010 through 2013 remain subject to examination and assessment. Years prior to 2010 remain open solely for purposes
of examination of Charter’s loss and credit carryforwards.
17. Related Party Transactions
The following sets forth certain transactions in which the Company and the directors, executive officers, and affiliates of the
Company are involved or, in the case of the management arrangements, subsidiaries that are debt issuers that pay certain of their
parent companies for services.
Charter is a party to management arrangements with Charter Holdco and certain of its subsidiaries. Under these agreements,
Charter and Charter Holdco provide management services for the cable systems owned or operated by their subsidiaries. Costs
associated with providing these services are charged directly to the Company’s operating subsidiaries and are included within
operating costs and expenses in the accompanying consolidated statements of operations. Such costs totaled $305 million, $247
million, and $249 million for the years ended December 31, 2013, 2012, and 2011, respectively. All other costs incurred on behalf
of Charter’s operating subsidiaries are considered a part of the management fee and are recorded as a component of operating
costs and expenses, in the accompanying consolidated financial statements. The management fee charged to the Company’s
operating subsidiaries approximated the expenses incurred by Charter Holdco and Charter on behalf of the Company’s operating
subsidiaries in 2013, 2012, and 2011.
Liberty Media
On May 1, 2013, Liberty Media completed its purchase from investment funds managed by, or affiliated with, Apollo Global
Management, LLC ("Apollo"), Oaktree Capital Management, L.P. ("Oaktree") and Crestview Partners ("Crestview") of
approximately 26.9 million shares and warrants to purchase approximately 1.1 million shares in Charter for approximately $2.6
billion (the "Liberty Media Transaction"), which represents an approximate 27% beneficial ownership in Charter and a price per
share of $95.50.
In connection with the Liberty Media Transaction, Charter entered into a stockholders agreement with Liberty Media that, among
other things, provided Liberty Media with the right to designate four directors for appointment to Charter's board of directors in