systems, we seek to enlarge the coverage of our current areas of operations,
and, if feasible develop "clusters" in new geographic areas within existing
regions. Swapping of cable systems allows us to trade systems that do not
coincide with our operating strategy while gaining systems that meet our
objectives. Several significant swaps have been announced. These swaps have
demonstrated the industry's trend to cluster operations. To date, Charter
Holdings has participated in one swap in connection with the transaction with
InterMedia. We are currently negotiating other possible swap transactions.
LIQUIDITY AND CAPITAL RESOURCES
Our business requires significant cash to fund acquisitions, capital
expenditures, debt service costs and ongoing operations. We have historically
funded and expect to fund future liquidity and capital requirements through cash
flows from operations, equity contributions and financings, debt financings and
borrowings under our credit facilities.
Our historical cash flows from operating activities for 1998 were $145.8
million, and for the six months ended June 30, 1999, were $172.8 million. Pro
forma for our recent and pending acquisitions and our merger with Marcus
Holdings, our cash flows from operating activities for 1998 were $351.5 million,
and for the six months ended June 30, 1999, were $260.9 million.
We have substantial ongoing capital expenditure requirements. We make
capital expenditures primarily to upgrade, rebuild and expand our existing cable
systems, as well as for system maintenance, the development of new products and
services and converters. Converters are set-top devices added in front of a
subscriber's television receiver to change the frequency of the cable television
signals to a suitable channel. The television receiver is then able to tune and
to allow access to premium service.
Upgrading our cable systems will enable us to offer new products and
services, including digital television, additional channels and tiers, expanded
pay-per-view options, high-speed Internet access, and interactive services.
For the three years ending December 31, 2001, we plan to spend $1.8 billion
for capital expenditures including Marcus Cable, approximately $900 million of
which will be used to upgrade and rebuild our existing systems to bandwidth
capacity of 550 megahertz or greater and add two-way capability, so that we may
offer advanced services. The remaining $900 million will be used for extensions
of systems, development of new products and services, converters and system
maintenance. Capital expenditures for 1999, 2000 and 2001 are expected to be
approximately $600 million, $650 million, and $550 million, respectively. We
also plan to spend an additional $700 million pro forma for our recent and
pending acquisitions to upgrade our systems to bandwidth capacity of 550
megahertz or greater, so that we may offer advanced cable services. An
additional $400 million pro forma for our recent and pending acquisitions will
be used for plant extensions, new services, converters and system maintenance.
We expect to finance 80% and 20% of the anticipated capital expenditures with
distributions generated from operations and additional borrowings under our
credit facilities, respectively. We cannot assure you that these amounts will be
sufficient to accomplish our planned system upgrade, expansion and maintenance.
See "Risk Factors -- Our Business -- We may not be able to obtain capital
sufficient to fund our planned upgrades and to keep pace with technological
developments." This could adversely affect our ability to offer new products and
services and compete effectively, and could adversely affect our growth,
financial condition and results of operations.