Charter 2004 Annual Report Download - page 49

CHARTER COMMUNICATIONS, INC. 2004 FORM 10-K
In 2007 and beyond, significant additional amounts will become the credit facilities and indentures of our subsidiaries, and we
due under our remaining long-term debt obligations. expect to remain in compliance with those covenants for the
Our business requires significant cash to fund debt service next twelve months. As of December 31, 2004, we had
costs, capital expenditures and ongoing operations. We have borrowing availability under our credit facilities of $804 million,
historically funded our debt service costs, operating activities none of which was restricted due to covenants. Continued
and capital requirements through cash flows from operating access to our credit facilities is subject to our remaining in
activities, borrowings under the credit facilities of our subsidiar- compliance with the applicable covenants of these credit
ies, sales of assets, issuances of debt and equity securities and facilities, including covenants tied to our operating performance.
cash on hand. However, the mix of funding sources changes If our operating performance results in non-compliance with
from period to period. For the year ended December 31, 2004, these covenants, or if any of certain other events of non-
we generated $472 million of net cash flows from operating compliance under these credit facilities or indentures governing
activities after paying cash interest of $1.3 billion. In addition, our debt occurs, funding under the credit facilities may not be
we generated approximately $744 million in 2004 from sales of available and defaults on some or potentially all of our debt
assets, substantially all of which was used to fund operations, obligations could occur. An event of default under the covenants
including capital expenditures. Finally, we had net cash flows governing any of our debt instruments could result in the
from financing activities of $294 million, which included, among acceleration of our payment obligations under that debt and,
other things, the proceeds from the issuance in December of under certain circumstances, in cross-defaults under our other
$550 million of CCO Holdings notes. This debt issuance was debt obligations, which could have a material adverse effect on
the primary reason cash on hand increased by $523 million to our consolidated financial condition and results of operations.
$650 million at December 31, 2004. Approximately $622 million The Charter Operating credit facilities require us to redeem
was used to repay outstanding borrowings under the Charter the CC V Holdings notes within 45 days after the first date that
Operating revolving credit facility, through a series of transac- the Charter Holdings leverage ratio is less than 8.75 to 1.0. In
tions executed in February 2005. We expect that our mix of satisfaction of this requirement, CC V Holdings, LLC has called
sources of funds will continue to change in the future based on for redemption all of its outstanding notes, at 103.958% of
overall needs relative to our cash flow and on the availability of principal amount, plus accrued and unpaid interest to the date
funds under the credit facilities of our subsidiaries, our access to of redemption, which is expected to be March 14, 2005. The
the debt and equity markets, the timing of possible asset sales total cost of the redemption including accrued and unpaid
and our ability to generate cash flows from operating activities. interest is expected to be $122 million. We intend to fund the
We expect that cash on hand, cash flows from operating redemption with borrowings under our credit facilities.
activities and the amounts available under our credit facilities Specific Limitations
will be adequate to meet our cash needs in 2005. Cash flows Our ability to make interest payments on our convertible senior
from operating activities and amounts available under our credit notes, and, in 2006 and 2009, to repay the outstanding principal
facilities may not be sufficient to permit us to fund our of our convertible senior notes, will depend on our ability to
operations and satisfy our principal repayment obligations that raise additional capital and/or on receipt of payments or
come due in 2006 and, we believe, such amounts will not be distributions from Charter Holdco or its subsidiaries, including
sufficient to fund our operations and satisfy such repayment CCH II, CCO Holdings and Charter Operating. The indentures
obligations thereafter. governing the CCH II notes, CCO Holdings notes, and Charter
It is likely that we will require additional funding to repay Operating notes, however, restrict these entities and their
debt maturing after 2006. We are working with our financial subsidiaries from making distributions to their parent companies
advisors to address such funding requirements. However, there (including us) for payment of interest and principal on our
can be no assurance that such funding will be available to us. convertible senior notes, in each case unless there is no default
Although Mr. Allen and his affiliates have purchased equity under the applicable indenture and a specified leverage ratio test
from us in the past, Mr. Allen and his affiliates are not obligated is met at the time of such event. CCH II, CCO Holdings and
to purchase equity from, contribute to or loan funds to us in the Charter Operating meet the applicable leverage ratio test under
future. each of their respective indentures, and as a result are not
Credit Facilities and Covenants prohibited from making any such distributions to their respec-
Our ability to operate depends upon, among other things, our tive direct parent.
continued access to capital, including credit under the Charter The indentures governing the Charter Holdings notes
Operating credit facilities. These credit facilities, along with our permit Charter Holdings to make distributions to Charter
and our subsidiaries’ indentures, are subject to certain restrictive Holdco for payment of interest or principal on the convertible
covenants, some of which require us to maintain specified senior notes, only if, after giving effect to the distribution,
financial ratios and meet financial tests and to provide audited Charter Holdings can incur additional debt under the leverage
financial statements with an unqualified opinion from our ratio of 8.75 to 1.0, there is no default under the Charter
independent auditors. As of December 31, 2004, we were in Holdings’ indentures and other specified tests are met. For the
compliance with the covenants under our indentures and under quarter ended December 31, 2004, there was no default under
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