BECAUSE OF OUR HOLDING COMPANY STRUCTURE, THE NOTES WILL BE SUBORDINATE TO ALL
LIABILITIES OF OUR SUBSIDIARIES.
Under our credit facilities, Charter Operating is the borrower, and our
other subsidiaries are guarantors. The lenders under our credit facilities will
have the right to be paid before you from any of our subsidiaries' assets. In
the event of bankruptcy, liquidation or dissolution of a subsidiary, following
payment by such subsidiary of its liabilities, such subsidiary may not have
sufficient assets remaining to make payments to us as a shareholder or
otherwise. This will adversely affect our ability to make payments to you as a
holder of the notes.
OUR ABILITY TO GENERATE THE SIGNIFICANT AMOUNT OF CASH NEEDED TO SERVICE OUR
DEBT AND GROW OUR BUSINESS DEPENDS ON MANY FACTORS BEYOND OUR CONTROL.
Our ability to make payments on our debt, including the notes, and to fund
our planned capital expenditures for upgrading our cable systems and for other
purposes will depend on our ability to generate cash and secure financing in the
future. This, to a certain extent, is subject to general economic, financial,
competitive, legislative, regulatory and other factors that are beyond our
control. If our business does not generate sufficient cash flow from operations,
and sufficient future borrowings are not available to us under our credit
facilities or from other sources of financing, we may not be able to repay our
debt, including the notes, to grow our business or to fund our other liquidity
WE HAVE GROWN RAPIDLY AND HAVE A LIMITED HISTORY OF OPERATING OUR CURRENT
SYSTEMS. THIS MAKES IT DIFFICULT FOR YOU TO COMPLETELY EVALUATE OUR PERFORMANCE.
We commenced active operations in 1994 and have grown rapidly since then
through acquisitions of cable systems. Giving effect to our merger with Marcus
Holdings and our recent and pending acquisitions, our systems currently serve
approximately 59% more customers than were served as of December 31, 1998. As a
result, historical financial information about us may not be indicative of the
future or of results that we can achieve with the cable systems which will be
under our control. Our recent growth in revenue and growth in EBITDA over our
short operating history is not necessarily indicative of future performance.
WE HAVE A HISTORY OF NET LOSSES AND EXPECT TO CONTINUE TO EXPERIENCE NET LOSSES.
CONSEQUENTLY, WE MAY NOT HAVE THE ABILITY TO FINANCE OUR FUTURE OPERATIONS.
We have had a history of net losses and expect to continue to report net
losses for the foreseeable future. We reported net losses from continuing
operations, before extraordinary items, of $5 million for 1997, $23 million for
1998, and $224 million for the six months ended June 30, 1999. On a pro forma
basis, giving effect to our merger with Marcus Holdings and our recent and
pending acquisitions, we had net losses from continuing operations, before
extraordinary items of $760 million for 1998. For the six months ended June 30,
1999, on the same pro forma basis, we had net losses from continuing operations,
before extraordinary items of $375 million. We expect our net losses to increase
as a result of our merger with Marcus Holdings and our recent and pending
acquisitions. We cannot predict what impact, if any, continued losses will have
on our ability to finance our operations in the future.