Charter 2003 Annual Report Download - page 106

CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2003, 2002 and 2001
(dollars in millions, except where indicated)
requirements were satisÑed from cash Öows from operating activities and 20% was from cash on hand. For the
year ended December 31, 2003, the Company received $91 million from the sale of the Port Orchard,
Washington cable system. Additionally, the Company had net cash Öows used in Ñnancing activities of
$142 million, reÖecting a net repayment of debt, and reduced cash on hand by $194 million.
The Company expects that cash on hand, cash Öows from operating activities and the funds available
under its subsidiaries' credit facilities will be adequate to meet its 2004 cash needs. However, these credit
facilities are subject to certain restrictive covenants, portions of which are subject to the operating results of
the Company's subsidiaries. The Company expects to maintain compliance with these covenants in 2004. If
the Company's actual operating results do not result in compliance with these covenants, or if other events of
noncompliance occur, funding under the credit facilities may not be available and defaults on some or
potentially all debt obligations could occur. Additionally, no assurances can be given that the Company will
not experience liquidity problems because of adverse market conditions or other unfavorable events. Further,
cash Öows from operating activities and amounts available under credit facilities may not be suÇcient to
permit the Company to satisfy its principal repayment obligations that come due in 2005 and thereafter.
The indentures governing the Charter Holdings notes permit Charter Holdings to make distributions up
to its formulaic capacity to Charter Holdco for payment of interest on the convertible senior notes, only if,
after giving eÅect to the distribution, Charter Holdings can incur additional debt under the leverage ratio of
8.75 to 1.0, there is no default under the indentures and other speciÑed tests are met. However, in the event
that Charter Holdings could not incur any additional debt under the 8.75 to 1.0 leverage ratio, the indentures
governing the Charter Holdings notes permit Charter Holdings and its subsidiaries to make speciÑed
investments in Charter Holdco or Charter, up to its formulaic capacity, if there is no default under the
indentures. There were no defaults under the Charter Holdings indentures and other speciÑed tests were met
for the quarter ended December 31, 2003. However, Charter Holdings did not meet the leverage ratio test at
December 31, 2003, and as a result, distributions from Charter Holdings to Charter will be restricted until that
test is met. Charter's ability to make payments on its convertible senior notes is dependent on Charter
Holdco's liquidity or on the ability for it to obtain distributions from Charter Holdings and the Company's
other subsidiaries making distributions, loans, or payments to Charter Holdco, and on Charter Holdco paying
or distributing such funds to Charter. As of December 31, 2003, Charter Holdco had $41 million in cash on
hand and is owed $37 million in intercompany loans, which are available to Charter Holdco to service interest
on Charter's convertible senior notes, which is scheduled to be approximately $43 million in 2004.
Accordingly, Charter's ability to make interest payments, or principal payments at maturity in 2005 and 2006,
with respect to its currently outstanding convertible senior notes is contingent upon it obtaining additional
Ñnancing or receiving distributions or other payments from its subsidiaries.
On October 1, 2003 the Company closed on the sale of its Port Orchard, Washington system for
approximately $91 million, resulting in a $21 million gain recorded as gain on sale of system in the Company's
consolidated statement of operations. On March 1, 2004, the Company closed the sale of cable systems in
Florida, Pennsylvania, Maryland, Delaware and West Virginia with Atlantic Broadband Finance, LLC. The
Company anticipates that an additional closing for a cable system in New York will occur during the Ñrst
quarter of 2004. After giving eÅect to the sale of the New York system, net proceeds will be approximately
$735 million, subject to post-closing adjustments. The Company will use these proceeds to repay bank debt.
The Company's long-term Ñnancing structure as of December 31, 2003 includes $7.2 billion of credit
facility debt, $10.6 billion of high-yield notes and $774 million of convertible senior debentures. Approxi-
mately $188 million of this Ñnancing matures during 2004, and the Company expects to fund this through
availability under its credit facilities. Note 9 summarizes the Company's current availability under its credit
facilities and its long-term debt.
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