Our ability to make payments on our debt and to fund our planned capital
expenditures for upgrading our cable systems and our ongoing operations 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. There can
be no assurance that our business will generate sufficient cash flow from
operations, or that future borrowings will be available to us under our existing
credit facilities, new facilities or from other sources of financing in an
amount sufficient to enable us to repay our debt, to grow our business or to
fund our other liquidity and capital needs.
VARIABLE INTEREST RATES. A significant portion of our debt bears interest at
variable rates that are linked to short-term interest rates. In addition, a
significant portion of our assumed debt or debt we expect to arrange in
connection with our pending acquisitions will bear interest at variable rates.
If interest rates rise, our costs relative to those obligations will also rise.
See later discussion in "Interest Rate Risk".
RESTRICTIVE COVENANTS. Our debt and credit facilities contain a number of
significant covenants that, among other things, restrict the ability of our
- pay dividends or make other distributions;
- make certain investments or acquisitions
- dispose of assets or merge;
- incur additional debt;
- issue equity;
- repurchase or redeem equity interests and debt;
- create liens; and
- pledge assets.
Furthermore, in accordance with our credit facilities we are required to
maintain specified financial ratios and meet financial tests. The ability to
comply with these provisions may be affected by events beyond our control. The
breach of any of these covenants will result in a default under the applicable
debt agreement or instrument, which could trigger acceleration of the debt. Any
default under our credit facilities or the indentures governing our outstanding
debt may adversely affect our growth, our financial condition and our results of
IMPORTANCE OF GROWTH STRATEGY AND RELATED RISKS. We expect that a substantial
portion of any of our future growth will be achieved through revenues from
additional services and the acquisition of additional cable systems. We cannot
assure you that we will be able to offer new services successfully to our
customers or that those new services will generate revenues. In addition, the
acquisition of additional cable systems may not have a positive net impact on
our operating results. Acquisitions involve a number of special risks, including
diversion of management's attention, failure to retain key acquired personnel,
risks associated with unanticipated events or liabilities and difficulties in
assimilation of the operations of the acquired companies, some or all of which
could have a material adverse effect on our business, results of operations and
financial condition. If we are unable to grow our cash flow sufficiently, we may
be unable to fulfill our obligations or obtain alternative financing.
MANAGEMENT OF GROWTH. As a result of the acquisition of the Charter companies by
Mr. Allen, our merger with Marcus Holdings and our recent acquisitions, we have
experienced and will continue to experience rapid growth that has placed and is
expected to continue to place a significant strain on our management, operations
and other resources. Our future success will depend in part on our ability to
successfully integrate the operations acquired and to be acquired and to attract
and retain qualified personnel. Historically, acquired entities have had minimal
employee benefit related costs and all benefit plans have been terminated with
acquired employees transferring to our 401(k) plan. No significant severance
cost is expected in conjunction with the recent acquisitions. The failure to
retain or obtain needed personnel or to implement management, operating or
financial systems necessary to successfully integrate acquired operations or
otherwise manage growth when and as needed could have a material adverse effect
on our business, results of operations and financial condition.
In connection with our recent acquisitions, we have formed multi-disciplinary
teams to formulate plans for establishing customer service centers, identifying
property, plant and equipment requirements and possible reduction of headends.
Headends are the control centers of a cable system, where incoming signals are
amplified, converted, processed and combined for transmission to customers.
These teams also determine market position and how to attract "talented"