Charter 2013 Annual Report Download - page 93

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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- 11
expected volatility of 37.8%, 38.4% and 38.4%, and expected lives of 6.3 years, 6.3 years and 6.6 years. The grant date weighted
average cost of equity used was 16.2%, 16.2% and 15.5% during the years ended December 31, 2013, 2012 and 2011, respectively.
Volatility assumptions were based on historical volatility of Charter and a peer group. The Company’s volatility assumptions
represent management’s best estimate and were partially based on historical volatility of a peer group because management does
not believe Charter’s pre-emergence from bankruptcy historical volatility to be representative of its future volatility. Expected
lives were calculated based on the simplified-method due to insufficient historical exercise data. The valuations assume no
dividends are paid.
Income Taxes
The Company recognizes deferred tax assets and liabilities for temporary differences between the financial reporting basis and
the tax basis of the Company’s assets and liabilities and expected benefits of utilizing loss carryforwards. The impact on deferred
taxes of changes in tax rates and tax law, if any, applied to the years during which temporary differences are expected to be settled,
are reflected in the consolidated financial statements in the period of enactment (see Note 16).
Loss per Common Share
Basic loss per common share is computed by dividing the net loss by the weighted-average common shares outstanding during
the respective periods. Diluted loss per common share equals basic loss per common share for the periods presented, as the effect
of stock options and other convertible securities are anti-dilutive because the Company incurred net losses.
Segments
The Company’s operations are conducted through the use of a unified network and are managed and reported to its Chief Executive
Officer ("CEO"), the Company's chief operating decision maker, on a consolidated basis. The CEO assesses performance and
allocates resources based on the consolidated results of operations. Under this organizational and reporting structure, the Company
has one reportable segment, broadband services.
3. Acquisition of Bresnan
On July 1, 2013, Charter and Charter Communications Operating, LLC ("Charter Operating") acquired Bresnan Broadband
Holdings, LLC and its subsidiaries (collectively, “Bresnan”) from a wholly owned subsidiary of Cablevision Systems Corporation
("Cablevision"), for $1.625 billion in cash, subject to a working capital adjustment, a reduction for certain funded indebtedness
of Bresnan and payment of any post-closing refunds of certain Montana property taxes paid under protest by Bresnan prior to the
closing. Bresnan manages cable operating systems in Montana, Wyoming, Colorado and Utah. Charter funded the purchase of
Bresnan with a $1.5 billion term loan E (see Note 8) and borrowings under the Charter Operating credit facilities. The Company
also incurred acquisition related costs of approximately $16 million, which are included in other expense, net and interest expense,
net in the consolidated statements of operations for the year ended December 31, 2013.
The Company applied acquisition accounting to Bresnan, and its results of operations are included in the Company's consolidated
results of operations following the acquisition date. The total purchase price was allocated to the identifiable tangible and intangible
assets acquired and the liabilities assumed based on their estimated fair values using Level 3 inputs (see Note 12).
The excess of the purchase price over those fair values was recorded as goodwill. The fair value assigned to certain identifiable
tangible and intangible assets acquired and liabilities assumed were based upon a third party valuation using the assumptions
developed by management and other information compiled by management including, but not limited to, future expected cash
flows. Certain liabilities assumed were based upon quoted market prices.