Revolver; and (iii) Renaissance Media acquired the Systems from Time Warner
for $300.0 million in cash and the issuance to Time Warner of a $9.5 million
equity interest in Holdings.
The Company used the net proceeds from the Offering, together with the
Equity Contributions and borrowings under the Term Loans, to consummate the
Acquisition. The Company has approximately $210.0 million of indebtedness
outstanding and unused commitments under the Revolver of $40.0 million.
Subject to compliance with the terms of the Senior Credit Facility, borrowings
under the Revolver will be available for working capital purposes, capital
expenditures and acquisitions.
The Company expects to make substantial investments in capital to: (i)
upgrade its cable plant; (ii) build line extensions; (iii) purchase new
equipment; and (iv) acquire the equipment necessary to implement its digital
and Internet and data transmission strategy. In 1998, the Company estimates it
will make capital expenditures of approximately $9.8 million. The Company
believes that the borrowings expected to be available under the Revolver and
anticipated cash flow from operations will be sufficient to upgrade the
Systems as currently contemplated and to satisfy the Company's working
capital, capital expenditure and debt service requirements. However, the
actual amount and timing of the Company's capital requirements may differ
materially from the Company's estimates as a result of, among other things,
the demand for the Company's services and regulatory, technological and
competitive developments (including additional market developments and new
opportunities) in the Company's industry. The Company also expects that it
will require additional financing if the Company's development plans or
projections change or prove to be inaccurate or the Company engages in any
acquisitions. Sources of additional financing may include commercial bank
borrowings, vendor financing or the private or public sale of equity or debt
securities. There can be no assurances that such financing will be available
on terms acceptable to the Company or at all.
Borrowings under the Senior Credit Facility will bear interest at floating
rates, although the Company will be required to maintain interest rate
protection programs. Renaissance Media's obligations under the Senior Credit
Facility will be secured by substantially all the assets of Renaissance Media.
See "Description of Certain Indebtedness--Senior Credit Facility."
The Company has developed a plan for information technology resources to
address the Year 2000. While the Company believes that its planning efforts
are adequate to address the Year 2000 concerns and that CSG will resolve its
Year 2000 concerns prior to 1999, there can be no assurance that the systems
of companies on which the Systems and their operations rely, including CSG,
will be converted on a timely basis and will not have a material adverse
effect on the Company. The cost of the Year 2000 initiatives is not expected
to be material to the Company's result of operations or financial position.
During January 1998, the Systems increased their subscription rates from
$7.69 to $7.88, on a weighted average basis (excluding bulk subscribers) for
basic service, and from $17.33 to $20.28, on a weighted average basis, for
CPST. For the three months ended March 31, 1998, after giving pro forma effect
to the rate increases described above as if they all occurred on January 1,
1998 as opposed to cycling in throughout the month, and the Acquisition as if
it occurred at the beginning of the period, the Company's EBITDA would have
been approximately $7.2 million, as compared to approximately $6.9 million
reflected in the pro forma combined statement of operations for the three
months ended March 31, 1998.
IMPACT OF INFLATION
With the exception of programming costs, the Company does not believe that
inflation has had or will likely have a significant effect on its results of
operations or capital expenditure programs. Programming cost increases in the
past have tended to exceed inflation and may continue to do so in the future.
The Company, in accordance with FCC regulations, may pass along programming
cost increases to its subscribers.