Goodwill and other intangible assets - Goodwill and other intangibles represent
the unamortized excess of the cost of acquiring the Companies over the fair
values of such Companies' net tangible assets at the dates of acquisition.
Goodwill and other intangibles acquired are being amortized by use of the
straight-line method over various periods up to 40 years.
Income taxes - The Companies are business units of H&C Communications, Inc.,
which has elected to be taxed as an S Corporation. Accordingly, the
shareholders of H&C Communications, Inc. include their pro rata share of the
Companies' net income in their individual income tax returns and therefore the
accompanying financial statements do not include a provision for federal income
tax. The state income tax provision represents the Texas Earned Surplus Tax.
NOTE 2 - TRANSACTIONS WITH RELATED PARTY
The Companies are charged directly for certain costs that H&C Communications,
Inc. incurs on behalf of its business units. These costs primarily relate to
employee benefits; audit and legal services; insurance coverage; and, payroll
and sales and use taxes. Such charges by H&C Communications, Inc. are based on
a direct cost pass-through and have been included in these combined financial
statements. Costs associated with executive management and corporate overhead
are not allocated, as management believes these amounts to be insignificant.
Net corporate expenses charged to the Companies in 1993 approximated
$8,258,000. In the opinion of management, all allocations have been made on a
H&C Communications, Inc. Investment
Since the Companies are business units and not distinct legal entities, there
are no customary equity and capital accounts. Instead H&C Communications, Inc.
investment is maintained by the Companies to account for all interunit
transactions, including those described above. H&C Communications, Inc.
investment is comprised of net income and other transactions with H&C
Communications, Inc. as shown below:
Balance, beginning of year $114,983,997
Net income 23,223,410
Cash transfers out 34,656,239
Net interunit transactions 8,257,842
Balance, end of year $111,809,010