KNOL » Topics » Overview.

These excerpts taken from the KNOL 10-Q filed May 11, 2009.

Overview

We were formed as a Delaware corporation in September 1998 and began trading publicly on the NASDAQ Global Market in December 2003. We are a fully integrated provider of video, voice, data and advanced communications services to residential and business customers in ten markets in the Southeastern United States and two markets in the Midwestern United States. We provide a full suite of video, voice and data services in Dothan, Huntsville and Montgomery, Alabama; Panama City and portions of Pinellas County, Florida; Augusta, Columbus and West Point, Georgia; Charleston, South Carolina; Knoxville, Tennessee; and Rapid City and Sioux Falls, South Dakota, as well as portions of Minnesota and Iowa. Our primary business is the delivery of bundled communication services over our own network. In addition to our bundled package offerings, we sell these services on an unbundled basis.

We have built our business through:

 

   

construction and expansion of our broadband network to offer integrated video, voice and data services;

 

   

organic growth of connections through increased penetration of services to new marketable homes and our existing customer base, along with new service offerings;

 

   

upgrades of acquired networks to introduce expanded broadband services including bundled video, voice and data services; and

 

   

acquisitions of other broadband companies.

The following is a discussion of our consolidated financial condition and results of operations for the three months ended March 31, 2009, and certain factors that are expected to affect our prospective financial condition. The following discussion and analysis should be read in conjunction with the financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q.

Overview

As of March 31, 2009, we had approximately $56.1 million of cash, cash equivalents, restricted cash and certificates of deposit on our balance sheet. Our net working capital on March 31, 2009 and December 31, 2008 was $25.7 million.

On March 14, 2007, the Company entered into an Amended and Restated Credit Agreement (“Amended Credit Agreement”), which provides for a $580.0 million credit facility, consisting of a $555.0 million term loan and a $25.0 million revolving credit facility. On April 3, 2007, the Company received proceeds of the term loan to fund the PrairieWave acquisition purchase price, refinance the Company’s first and second lien credit agreements, and pay transaction costs associated with the transactions. The $555.0 million term loan bears interest at LIBOR plus 2.25% and amortizes at a rate of 1.0% per annum, payable quarterly, with a June 30, 2012 maturity date. As of March 31, 2009, $537.3 million is outstanding under the term loan and $1.8 million is outstanding under the revolving credit facility as unused letter of credits. On April 18, 2007, the Company entered into a new interest rate swap contract to mitigate interest rate risk on a notional amount of $555.0 million. The swap agreement, which became effective May 3, 2007, currently fixes $505.3 million of the $537.3 million floating rate debt at 4.977%.

On January 4, 2008, the Company entered into a First Amendment to the Amended Credit Agreement which provides for a $59.0 million incremental term loan. The proceeds of the term loan were used to fund the $75.0 million Graceba acquisition purchase price. The term loan bears interest at LIBOR plus 2.75% and amortizes at a rate of 1.0% per annum, payable quarterly, with a June 30, 2012 maturity date. As of March 31, 2009, $57.4 million is outstanding under the incremental loan. In December 2007, the Company entered into a new interest rate swap contract to mitigate interest rate risk on a notional amount of $59.0 million. The swap agreement, which became effective January 4, 2008, fixes 100% of the floating rate debt at 3.995% until September 30, 2010.

The first lien and incremental term loans are guaranteed by all of the Company’s subsidiaries. The term loans are also guaranteed by first liens on all of the Company’s assets and the assets of its guarantor subsidiaries. The Amended Credit Agreement contains customary representations, warranties, various affirmative and negative covenants and customary events of default. As of March 31, 2009, we are in compliance with all of our debt covenants.

We believe there is adequate liquidity from cash on hand, cash provided from operations and funds available under the $25.0 million revolver to meet our capital spending requirements and to execute our current business plan.

These excerpts taken from the KNOL 10-K filed Mar 16, 2009.

Overview

We are a fully integrated provider of video, voice, data and advanced communications services to residential and business customers in ten markets in the southeastern United States, as well as two markets in South Dakota. We provide a full suite of video, voice and data services in Huntsville, Montgomery and Dothan, Alabama; Panama City and portions of Pinellas County, Florida; Augusta, Columbus and West Point, Georgia; Charleston, South Carolina; Knoxville, Tennessee; and Rapid City and Sioux Falls, South Dakota, as well as portions of Minnesota and Iowa. Our primary business is the delivery of bundled communication services over our own network. In addition to our bundled package offerings, we sell these services on an unbundled basis.

We have built our business through:

 

   

construction and expansion of our broadband network to offer integrated video, voice and data services;

 

   

organic growth of connections through increased penetration of services to new marketable homes and our existing customer base, along with new service offerings;

 

   

upgrades of acquired networks to introduce expanded broadband services, including bundled video, voice and data services; and

 

   

acquisitions of other broadband systems;

The following discussion includes details, highlights and insight into our consolidated financial condition and results of operations, including recent business developments, critical accounting policies, estimates used in preparing the financial statements and other factors that are expected to affect our prospective financial condition. The following discussion and analysis should be read in conjunction with our “Selected Financial Data” and our consolidated financial statements and related notes, and other financial data elsewhere in this annual report.

To date, we have experienced operating losses as a result of the expansion of our service territories and the construction of our network. We expect to continue to focus on increasing our customer base and expanding our broadband operations. Our ability to generate profits will depend in large part on our ability to increase revenues to offset the costs of construction and operation of our business.

In January 2008, we completed the $75 million acquisition of Graceba Total Communications Group, Inc., which has delivered significant increases in key operating and financial metrics as well as being free cash flow accretive. The transaction was funded by a $59 million add-on financing to our existing credit facility and $16 million from available cash.

 

39


Table of Contents
Index to Financial Statements

Overview

We are a fully integrated provider of video, voice, data and advanced communications services to residential and business customers in ten markets in the southeastern United States, as well as two markets in South Dakota. We provide a full suite of video, voice and data services in Huntsville, Montgomery and Dothan, Alabama; Panama City and portions of Pinellas County, Florida; Augusta, Columbus and West Point, Georgia; Charleston, South Carolina; Knoxville, Tennessee; and Rapid City and Sioux Falls, South Dakota, as well as portions of Minnesota and Iowa. Our primary business is the delivery of bundled communication services over our own network. In addition to our bundled package offerings, we sell these services on an unbundled basis.

We have built our business through:

 

   

construction and expansion of our broadband network to offer integrated video, voice and data services;

 

   

organic growth of connections through increased penetration of services to new marketable homes and our existing customer base, along with new service offerings;

 

   

upgrades of acquired networks to introduce expanded broadband services, including bundled video, voice and data services; and

 

   

acquisitions of other broadband systems;

The following discussion includes details, highlights and insight into our consolidated financial condition and results of operations, including recent business developments, critical accounting policies, estimates used in preparing the financial statements and other factors that are expected to affect our prospective financial condition. The following discussion and analysis should be read in conjunction with our “Selected Financial Data” and our consolidated financial statements and related notes, and other financial data elsewhere in this annual report.

To date, we have experienced operating losses as a result of the expansion of our service territories and the construction of our network. We expect to continue to focus on increasing our customer base and expanding our broadband operations. Our ability to generate profits will depend in large part on our ability to increase revenues to offset the costs of construction and operation of our business.

In January 2008, we completed the $75 million acquisition of Graceba Total Communications Group, Inc., which has delivered significant increases in key operating and financial metrics as well as being free cash flow accretive. The transaction was funded by a $59 million add-on financing to our existing credit facility and $16 million from available cash.

 

39


Table of Contents
Index to Financial Statements
This excerpt taken from the KNOL 10-Q filed Nov 7, 2008.

Overview.

On March 14, 2007, the Company entered into an Amended and Restated Credit Agreement, which provides for a $580.0 million credit facility, consisting of a $555.0 million term loan and a $25.0 million revolving credit facility. On April 3, 2007, the Company received the proceeds of the term loan to fund the PrairieWave acquisition purchase price, refinance the Company’s first and second lien credit agreements, and pay transaction costs associated with the transactions. The $555.0 million term loan bears interest at LIBOR plus 2.25% and amortizes at a rate of 1.0% per annum, payable quarterly, with a June 30, 2012 maturity date. As of September 30, 2008, $548.0 million is outstanding under the term loan, and $1.8 million is outstanding under the revolving credit facility as unused letter of credits. On May 3, 2007, the Company entered into a new interest rate swap contract to mitigate interest rate risk on a notional amount of $555.0 million amortizing at a rate of 1.0% annually. The swap agreement, which became effective May 3, 2007 and ends July 3, 2010, currently fixes $508.0 million of the $548.0 million floating rate debt at 4.977%.

On January 4, 2008, the Company entered into a First Amendment to the Amended and Restated Credit Agreement, which provides for a $59.0 million incremental term loan. The proceeds of the incremental term loan were used to fund in part the $75.0 million Graceba acquisition purchase price. The term loan bears interest at LIBOR plus 2.75% and amortizes at a rate of 1.0% per annum, payable quarterly, with a June 30, 2012 maturity date. As of September 30, 2008, $58.6 million is outstanding under the incremental loan. In December 2007, the Company entered into a new interest rate swap contract to mitigate interest rate risk on a notional amount of $59.0 million amortizing at a rate of 1.0% annually. The swap agreement, which became effective January 4, 2008, fixes 100% of the floating rate debt at 3.995% until September 30, 2010.

The first lien and incremental term loans are guaranteed by all of the Company’s subsidiaries. The term loans are also guaranteed by first liens on all of the Company’s assets and the assets of its guarantor subsidiaries. The Credit Agreement contains customary representations, warranties, various affirmative and negative covenants and customary events of default. As of September 30, 2008, we are in compliance with all of our debt covenants.

As of September 30, 2008, we had approximately $46.7 million of cash, cash equivalents and restricted cash on our balance sheet. We believe there is adequate liquidity from cash on hand, cash provided from operations and funds available under our $25.0 million revolving credit facility to meet our capital spending requirements and to execute our current business plan.

This excerpt taken from the KNOL 10-Q filed Aug 11, 2008.

Overview.

On March 14, 2007, the Company entered into an Amended and Restated Credit Agreement, which provides for a $580.0 million credit facility, consisting of a $555.0 million term loan and a $25.0 million revolving credit facility. On April 3, 2007, the Company received proceeds of the term loan to fund the PrairieWave acquisition purchase price, refinance the Company’s first and second lien credit agreements, and pay transaction costs associated with the transactions. The $555.0 million term loan bears interest at LIBOR plus 2.25% and amortizes at a rate of 1.0% per annum, payable quarterly, with a June 30, 2012 maturity date. As of June 30, 2008, $549.4 million is outstanding under the term loan, and $1.8 million is outstanding under the revolving credit facility as unused letter of credits. On April 18, 2007, the Company entered into a new interest rate swap contract to mitigate interest rate risk on a notional amount of $555.0 million amortizing at a rate of 1.0% annually. The swap agreement, which became effective May 3, 2007 and ends July 3, 2010, currently fixes $509.4 million of the $549.4 million floating rate debt at 4.977%.

On January 4, 2008, the Company entered into a First Amendment to the Amended and Restated Credit Agreement (the “Credit Agreement”), which provides for a $59.0 million incremental term loan. The proceeds of the Amendment to the Credit Agreement were used to fund in part the $75.0 million Graceba acquisition purchase price. The term loan bears interest at LIBOR plus 2.75% and amortizes at a rate of 1.0% per annum, payable quarterly, with a June 30, 2012 maturity date. As of June 30, 2008, $58.7 million is outstanding under the incremental loan. In December 2007, the Company entered into a new interest rate swap contract to mitigate interest rate risk on a notional amount of $59.0 million amortizing at a rate of 1.0% annually. The swap agreement, which became effective January 4, 2008, fixes 100% of the floating rate debt at 3.995% until September 30, 2010.

The first lien and incremental term loans are guaranteed by all of the Company’s subsidiaries. The term loans are also guaranteed by first liens on all of the Company’s assets and the assets of its guarantor subsidiaries. The Credit Agreement contains customary representations, warranties, various affirmative and negative covenants and customary events of default. As of June 30, 2008, we are in compliance with all of our debt covenants.

As of June 30, 2008, we had approximately $37.6 million of cash, cash equivalents and restricted cash on our balance sheet. We believe there is adequate liquidity from cash on hand, cash provided from operations and funds available under a $25.0 million revolver to meet our capital spending requirements and to execute our current business plan.

This excerpt taken from the KNOL 10-Q filed May 12, 2008.

Overview.

As of March 31, 2008, we had approximately $33.0 million of cash, cash equivalents and restricted cash on our balance sheet. Our net working deficit on March 31, 2008 was $5.8 million, compared to net working capital of $6.8 million as of December 31, 2007. The reduction in the working capital from December 31, 2007 to March 31, 2008 is primarily due to using cash on hand of $16.0 million to partially fund the Graceba acquisition purchase price.

On March 14, 2007, the Company entered into an Amended and Restated Credit Agreement, which provides for a $580.0 million credit facility, consisting of a $555.0 million term loan and a $25.0 million revolving credit facility. On April 3, 2007, the Company received proceeds of the term loan to fund the PrairieWave acquisition purchase price, refinance the Company’s first and second lien credit agreements, and pay transaction costs associated with the transactions. The $555.0 million term loan bears interest at LIBOR plus 2.25% and amortizes at a rate of 1.0% per annum, payable quarterly, with a June 30, 2012 maturity date. As of March 31, 2008, $550.8 million is outstanding under the term loan and $1.6 million is outstanding under the revolving credit facility as unused letter of credits. On April 18, 2007, the Company entered into a new interest rate swap contract to mitigate interest rate risk on a notional amount of $555.0 million amortizing at a rate of 1.0% annually. The swap agreement, which became effective May 3, 2007, fixes 100% of the floating rate debt at 4.977% until July 3, 2010.

On January 4, 2008, the Company entered into a First Amendment to the Amended and Restated Credit Agreement (“the Credit Agreement”), which provides for a $59.0 million incremental term loan. The proceeds of the Credit Agreement were used to fund the $75.0 million Graceba acquisition purchase price. The term loan bears interest at LIBOR plus 2.75% and amortizes at a rate of 1.0% per annum, payable quarterly, with a June 30, 2012 maturity date. In December 2007, the Company entered into a new interest rate swap contract to mitigate interest rate risk on a notional amount of $59.0 million amortizing at a rate of 1.0% annually. The swap agreement, which became effective January 4, 2008, fixes 100% of the floating rate debt at 3.995% until September 30, 2010.

The first lien and incremental term loans are guaranteed by all of the Company’s subsidiaries. The term loans are also guaranteed by first liens on all of the Company’s assets and the assets of its guarantor subsidiaries. The Credit Agreement contains customary representations, warranties, various affirmative and negative covenants and customary events of default.

We believe there is adequate liquidity from cash on hand, cash provided from operations and funds available under a $25.0 million revolver to meet our capital spending requirements and to execute our current business plan.

As of March 31, 2008, we are in compliance with all of our debt covenants.

This excerpt taken from the KNOL 10-Q filed Mar 14, 2008.

Overview.

On June 29, 2005, the Company entered into a first lien credit agreement and second lien credit agreement providing the Company with aggregate cash proceeds of $280 million. These proceeds, together with cash on hand, were used to repay all amounts outstanding under the Company’s then existing credit facilities and to redeem its 12% senior notes due 2009, which were redeemed on July 29, 2005. The second lien was issued at a discount of 4% for $95 million, which accreted up to a face amount of $99 million on June 29, 2011.

The first lien credit agreement provided for a five-year senior secured $185 million term loan facility and a $25 million revolving loan and credit facility. The first lien term facility, as amended, bore interest at a LIBOR base rate plus 2.5%, with interest due quarterly. The first lien term facility amortized at a rate of 1.0% per annum, payable quarterly, and matured on June 29, 2010. We had the ability to prepay amounts outstanding under the first lien term facility prior to maturity, but we were required to pay a premium if we prepay prior to June 29, 2008, except for prepayments made with the proceeds from the sale of our equity securities.

 


The second lien credit agreement provided for a six-year senior secured term loan facility with an aggregate principal amount at maturity of approximately $99 million. On June 29, 2005, we received proceeds of $95 million. Borrowings under the second lien term facility bear interest at a LIBOR base rate plus 10.0%. This facility did not amortize and the entire unpaid principal amount was due in full on the maturity date of June 29, 2011. We did not have the ability to prepay any amount outstanding prior to June 29, 2008, except for prepayments made with the proceeds from the sale of our equity securities. If we prepaid any amounts after June 29, 2008 but prior to June 29, 2011, we were required to pay a premium.

On June 30, 2006, we entered into Amendment No. 1 to the first lien credit agreement dated as of June 29, 2005. The amendment reduced the interest rate on our first lien term loan to LIBOR plus 2.5% from LIBOR plus 5.5%. The amendment also amended certain operating covenants contained in the first lien credit agreement so that they were consistent with those contained in the second lien credit agreement. In accordance with the provisions of the first lien credit agreement, a 2% pre-payment premium, of approximately $3.5 million, was required with this amendment.

As discussed above, the borrowings under our credit facilities bore interest at variable rates and exposed us to interest rate risk. If interest rates increased, our debt service obligations on our variable rate debt would also increase even though the amount borrowed remained the same. In 2005, the Company entered into an interest rate hedge instrument for a notional amount of $280 million to cap its variable LIBOR rate at 5%, mitigating interest rate risk on its first and second lien term loans. On April 18, 2007, the Company unwound its existing interest rate hedge instrument for $716,000 cash proceeds. The Company has recorded a loss of $758,000 for the nine months ended September 30, 2007.

On March 14, 2007, the Company entered into an Amended and Restated Credit Agreement which provides for a $580 million credit facility, consisting of a $555 million term loan and a $25 million revolving credit facility. On April 3, 2007, the Company received proceeds of the term loan to fund the PrairieWave Holdings, Inc. acquisition purchase price, refinance the Company’s first and second lien credit agreements, and pay transaction costs associated with the transactions. The Company recognized a loss on debt extinguishment of $27.5 million related to the prepayment penalty and the writeoff of debt issuance costs on the existing credit facilities. The $555 million term loan bears interest at LIBOR plus 2.25% and amortizes at a rate of 1.0% per annum, payable quarterly, with a June 30, 2012 maturity date. As of September 30, 2007, $553.6 million is outstanding under the term loan and $1.5 million is outstanding under the revolving credit facility as unused letter of credits. The credit facility is guaranteed by all of our subsidiaries. The credit facility is also secured by first liens on all of our assets and the assets of our guarantor subsidiaries. The credit agreement contains customary representations, warranties, various affirmative and negative covenants and customary events of default.

On May 3, 2007, the Company entered into a new interest rate hedge instrument to mitigate interest rate risk on a notional amount of $555 million amortizing 1% annually. The swap agreement fixes 100% of the floating rate at 4.977% until July 3, 2010.

We believe there is adequate liquidity from cash on hand, cash provided from operations and funds available under a $25 million revolver to meet our capital spending requirements and to execute our current business plan.

As of September 30, 2007 we are in compliance with all of our debt covenants.

This excerpt taken from the KNOL 10-Q filed Mar 14, 2008.

Overview.

On June 29, 2005, the Company entered into a first lien credit agreement and second lien credit agreement providing the Company with aggregate cash proceeds of $280 million. These proceeds, together with cash on hand, were used to repay all amounts outstanding under the Company’s then existing credit facilities and to redeem its 12% senior notes due 2009, which were redeemed on July 29, 2005. The second lien was issued at a discount of 4% for $95 million, which accreted up to a face amount of $99 million on June 29, 2011.

The first lien credit agreement provided for a five-year senior secured $185 million term loan facility and a $25 million revolving loan and credit facility. The first lien term facility, as amended, bore interest at a LIBOR base rate plus 2.5%, with interest due quarterly. The first lien term facility amortized at a rate of 1.0% per annum, payable quarterly, and matured on June 29, 2010. We had the ability to prepay amounts outstanding under the first lien term facility prior to maturity, but we were required to pay a premium if we prepay prior to June 29, 2008, except for prepayments made with the proceeds from the sale of our equity securities.

The second lien credit agreement provided for a six-year senior secured term loan facility with an aggregate principal amount at maturity of approximately $99 million. On June 29, 2005, we received proceeds of $95 million. Borrowings under the second lien term facility bear interest at a LIBOR base rate plus 10.0%. This facility did not amortize and the entire unpaid principal amount was due in full on the maturity date of June 29, 2011. We did not have the ability to prepay any amount outstanding prior to June 29, 2008, except for prepayments made with the proceeds from the sale of our equity securities. If we prepaid any amounts after June 29, 2008 but prior to June 29, 2011, we were required to pay a premium.

On June 30, 2006, we entered into Amendment No. 1 to the first lien credit agreement dated as of June 29, 2005. The amendment reduced the interest rate on our first lien term loan to LIBOR plus 2.5% from LIBOR plus 5.5%. The amendment also amended certain operating covenants contained in the first lien credit agreement so that they were consistent with those contained in the second lien credit agreement. In accordance with the provisions of the first lien credit agreement, a 2% pre-payment premium, of approximately $3.5 million, was required with this amendment.

As discussed above, the borrowings under our credit facilities bore interest at variable rates and exposed us to interest rate risk. If interest rates increased, our debt service obligations on our variable rate debt would also increase even though the amount borrowed remained the same. In 2005, the Company entered into an interest rate hedge instrument for a notional amount of $280 million to cap its variable LIBOR rate at 5%, mitigating interest rate risk on its first and second lien term loans. On April 18, 2007, the Company unwound its existing interest rate hedge instrument for $716,000 cash proceeds. The Company has recorded a loss of $758,000 for the six months ended June 30, 2007.

On March 14, 2007, the Company entered into an Amended and Restated Credit Agreement which provides for a $580 million credit facility, consisting of a $555 million term loan and a $25 million revolving credit facility. On April 3, 2007, the Company received proceeds of the term loan to fund the PrairieWave Holdings, Inc. acquisition purchase price, refinance the Company’s first and second lien credit agreements, and pay transaction costs associated with the transactions. The Company recognized a loss on debt extinguishment of $27.5 million related to the prepayment penalty and the writeoff of debt issuance costs on the existing credit facilities. The $555 million term loan bears interest at LIBOR plus 2.25% and amortizes at a rate of 1.0% per annum, payable quarterly, with a June 30, 2012 maturity date. As of June 30, 2007, $555 million is outstanding under the term loan and $317,000 is outstanding under the revolving credit facility as unused letter of credits. The credit facility is guaranteed by all of our subsidiaries. The credit facility is also secured by first liens on all of our assets and the assets of our guarantor subsidiaries. The credit agreement contains customary representations, warranties, various affirmative and negative covenants and customary events of default.

On May 3, 2007, the Company entered into a new interest rate hedge instrument on a notional amount of $555 million amortizing 1% annually. The swap agreement fixes 100% of the floating rate at 4.977% until June 30, 2010.

We believe there is adequate liquidity from cash on hand, cash provided from operations and funds available under a $25 million


revolver to meet our capital spending requirements and to execute our current business plan.

As of June 30, 2007 we are in compliance with all of our debt covenants.

These excerpts taken from the KNOL 10-K filed Mar 14, 2008.

Overview.

As of December 31, 2007, we had approximately $47.9 million of cash, cash equivalents and restricted cash on our balance sheet. Our net working capital on December 31, 2007 was $6.8 million, compared to net working deficit of $9.7 million as of December 31, 2006.

The Company’s current financial condition has been significantly influenced by positive cash flow from operations and changes in our debt capital structure. On March 14, 2007, the Company entered into an Amended and Restated Credit Agreement that provides for a $580.0 million credit facility, consisting of a $555.0 million term loan and a $25.0 million revolving credit facility, of which $1.5 million was outstanding as unused letters of credit as of December 31, 2007. The term loan bears interest at LIBOR plus 2.25% and amortizes at a rate of 1% per annum, payable quarterly, with a June 30, 2012 maturity date.

On January 4, 2008, the Company entered into a First Amendment to Amended and Restated Credit Agreement which provides for a $59.0 million incremental term loan to partially fund the $75.0 million Graceba Total Communications Group, Inc. acquisition purchase price. The term loan bears interest at LIBOR plus 2.75% and amortizes at a rate of 1% per annum, payable quarterly, with a June 30, 2012 maturity date.

As discussed above, the borrowings under our term loans bear interest at variable rates and expose us to interest rate risk. If interest rates increase, our debt service obligations on our variable rate debt would also increase even though the amount borrowed remained the same. In May 2007, the Company entered into a new interest rate swap contract to mitigate interest rate risk on a notional amount of $555.0 million amortizing 1% annually. The swap agreement fixes 100% of the floating rate debt at 4.977% until July 3, 2010. In December 2007, the Company entered into a new interest rate swap contract to mitigate interest rate risk on a notional amount of $59.0 million amortizing 1% annually, which relates to an additional new borrowing to partially fund the Graceba acquisition. The swap agreement fixes 100% of the floating rate debt at 3.995% until September 30, 2010.

We believe there is adequate liquidity from cash on hand and cash provided from operations to fund capital expenditures, operating expenses and debt service through 2008. Should we require additional funding, we have available a $25.0 million revolving loan. We believe that cash on hand and the cash flows from the existing Knology business plus the expected cash flows from the Graceba operations will be adequate to fund the operations, capital expenditures and debt service requirements of the combined business through 2008.

As of December 31, 2007 we are in compliance with all of our debt covenants.

Overview.

STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%">As of December 31, 2007, we had approximately $47.9 million of cash, cash equivalents and restricted cash on our balance sheet. Our net working
capital on December 31, 2007 was $6.8 million, compared to net working deficit of $9.7 million as of December 31, 2006.

SIZE="2">The Company’s current financial condition has been significantly influenced by positive cash flow from operations and changes in our debt capital structure. On March 14, 2007, the Company entered into an Amended and Restated
Credit Agreement that provides for a $580.0 million credit facility, consisting of a $555.0 million term loan and a $25.0 million revolving credit facility, of which $1.5 million was outstanding as unused letters of credit as of December 31,
2007. The term loan bears interest at LIBOR plus 2.25% and amortizes at a rate of 1% per annum, payable quarterly, with a June 30, 2012 maturity date.

FACE="Times New Roman" SIZE="2">On January 4, 2008, the Company entered into a First Amendment to Amended and Restated Credit Agreement which provides for a $59.0 million incremental term loan to partially fund the $75.0 million Graceba Total
Communications Group, Inc. acquisition purchase price. The term loan bears interest at LIBOR plus 2.75% and amortizes at a rate of 1% per annum, payable quarterly, with a June 30, 2012 maturity date.

STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%">As discussed above, the borrowings under our term loans bear interest at variable rates and expose us to interest rate risk. If interest rates increase,
our debt service obligations on our variable rate debt would also increase even though the amount borrowed remained the same. In May 2007, the Company entered into a new interest rate swap contract to mitigate interest rate risk on a notional amount
of $555.0 million amortizing 1% annually. The swap agreement fixes 100% of the floating rate debt at 4.977% until July 3, 2010. In December 2007, the Company entered into a new interest rate swap contract to mitigate interest rate risk on a
notional amount of $59.0 million amortizing 1% annually, which relates to an additional new borrowing to partially fund the Graceba acquisition. The swap agreement fixes 100% of the floating rate debt at 3.995% until September 30, 2010.

We believe there is adequate liquidity from cash on hand and cash provided from operations to fund capital expenditures, operating
expenses and debt service through 2008. Should we require additional funding, we have available a $25.0 million revolving loan. We believe that cash on hand and the cash flows from the existing Knology business plus the expected cash flows from the
Graceba operations will be adequate to fund the operations, capital expenditures and debt service requirements of the combined business through 2008.

FACE="Times New Roman" SIZE="2">As of December 31, 2007 we are in compliance with all of our debt covenants.

This excerpt taken from the KNOL 10-Q filed Nov 9, 2007.

Overview.

On June 29, 2005, the Company entered into a first lien credit agreement and second lien credit agreement providing the Company with aggregate cash proceeds of $280 million. These proceeds, together with cash on hand, were used to repay all amounts outstanding under the Company’s then existing credit facilities and to redeem its 12% senior notes due 2009, which were redeemed on July 29, 2005. The second lien was issued at a discount of 4% for $95 million, which accreted up to a face amount of $99 million on June 29, 2011.

The first lien credit agreement provided for a five-year senior secured $185 million term loan facility and a $25 million revolving loan and credit facility. The first lien term facility, as amended, bore interest at a LIBOR base rate plus 2.5%, with interest due quarterly. The first lien term facility amortized at a rate of 1.0% per annum, payable quarterly, and matured on June 29, 2010. We had the ability to prepay amounts outstanding under the first lien term facility prior to maturity, but we were required to pay a premium if we prepay prior to June 29, 2008, except for prepayments made with the proceeds from the sale of our equity securities.

 

18


Table of Contents

The second lien credit agreement provided for a six-year senior secured term loan facility with an aggregate principal amount at maturity of approximately $99 million. On June 29, 2005, we received proceeds of $95 million. Borrowings under the second lien term facility bear interest at a LIBOR base rate plus 10.0%. This facility did not amortize and the entire unpaid principal amount was due in full on the maturity date of June 29, 2011. We did not have the ability to prepay any amount outstanding prior to June 29, 2008, except for prepayments made with the proceeds from the sale of our equity securities. If we prepaid any amounts after June 29, 2008 but prior to June 29, 2011, we were required to pay a premium.

On June 30, 2006, we entered into Amendment No. 1 to the first lien credit agreement dated as of June 29, 2005. The amendment reduced the interest rate on our first lien term loan to LIBOR plus 2.5% from LIBOR plus 5.5%. The amendment also amended certain operating covenants contained in the first lien credit agreement so that they were consistent with those contained in the second lien credit agreement. In accordance with the provisions of the first lien credit agreement, a 2% pre-payment premium, of approximately $3.5 million, was required with this amendment.

As discussed above, the borrowings under our credit facilities bore interest at variable rates and exposed us to interest rate risk. If interest rates increased, our debt service obligations on our variable rate debt would also increase even though the amount borrowed remained the same. In 2005, the Company entered into an interest rate hedge instrument for a notional amount of $280 million to cap its variable LIBOR rate at 5%, mitigating interest rate risk on its first and second lien term loans. On April 18, 2007, the Company unwound its existing interest rate hedge instrument for $716,000 cash proceeds. The Company has recorded a loss of $758,000 for the nine months ended September 30, 2007.

On March 14, 2007, the Company entered into an Amended and Restated Credit Agreement which provides for a $580 million credit facility, consisting of a $555 million term loan and a $25 million revolving credit facility. On April 3, 2007, the Company received proceeds of the term loan to fund the PrairieWave Holdings, Inc. acquisition purchase price, refinance the Company’s first and second lien credit agreements, and pay transaction costs associated with the transactions. The Company recognized a loss on debt extinguishment of $27.5 million related to the prepayment penalty and the writeoff of debt issuance costs on the existing credit facilities. The $555 million term loan bears interest at LIBOR plus 2.25% and amortizes at a rate of 1.0% per annum, payable quarterly, with a June 30, 2012 maturity date. As of September 30, 2007, $553.6 million is outstanding under the term loan and $1.5 million is outstanding under the revolving credit facility as unused letter of credits. The credit facility is guaranteed by all of our subsidiaries. The credit facility is also secured by first liens on all of our assets and the assets of our guarantor subsidiaries. The credit agreement contains customary representations, warranties, various affirmative and negative covenants and customary events of default.

On May 3, 2007, the Company entered into a new interest rate hedge instrument to mitigate interest rate risk on a notional amount of $555 million amortizing 1% annually. The swap agreement fixes 100% of the floating rate at 4.977% until July 3, 2010.

We believe there is adequate liquidity from cash on hand, cash provided from operations and funds available under a $25 million revolver to meet our capital spending requirements and to execute our current business plan.

As of September 30, 2007 we are in compliance with all of our debt covenants.

This excerpt taken from the KNOL 10-Q filed Aug 9, 2007.

Overview.

On June 29, 2005, the Company entered into a first lien credit agreement and second lien credit agreement providing the Company with aggregate cash proceeds of $280 million. These proceeds, together with cash on hand, were used to repay all amounts outstanding under the Company’s then existing credit facilities and to redeem its 12% senior notes due 2009, which were redeemed on July 29, 2005. The second lien was issued at a discount of 4% for $95 million, which accreted up to a face amount of $99 million on June 29, 2011.

The first lien credit agreement provided for a five-year senior secured $185 million term loan facility and a $25 million revolving loan and credit facility. The first lien term facility, as amended, bore interest at a LIBOR base rate plus 2.5%, with interest due quarterly. The first lien term facility amortized at a rate of 1.0% per annum, payable quarterly, and matured on June 29, 2010. We had the ability to prepay amounts outstanding under the first lien term facility prior to maturity, but we were required to pay a premium if we prepay prior to June 29, 2008, except for prepayments made with the proceeds from the sale of our equity securities.

The second lien credit agreement provided for a six-year senior secured term loan facility with an aggregate principal amount at maturity of approximately $99 million. On June 29, 2005, we received proceeds of $95 million. Borrowings under the second lien term facility bear interest at a LIBOR base rate plus 10.0%. This facility did not amortize and the entire unpaid principal amount was due in full on the maturity date of June 29, 2011. We did not have the ability to prepay any amount outstanding prior to June 29, 2008, except for prepayments made with the proceeds from the sale of our equity securities. If we prepaid any amounts after June 29, 2008 but prior to June 29, 2011, we were required to pay a premium.

On June 30, 2006, we entered into Amendment No. 1 to the first lien credit agreement dated as of June 29, 2005. The amendment reduced the interest rate on our first lien term loan to LIBOR plus 2.5% from LIBOR plus 5.5%. The amendment also amended certain operating covenants contained in the first lien credit agreement so that they were consistent with those contained in the second lien credit agreement. In accordance with the provisions of the first lien credit agreement, a 2% pre-payment premium, of approximately $3.5 million, was required with this amendment.

As discussed above, the borrowings under our credit facilities bore interest at variable rates and exposed us to interest rate risk. If interest rates increased, our debt service obligations on our variable rate debt would also increase even though the amount borrowed remained the same. In 2005, the Company entered into an interest rate hedge instrument for a notional amount of $280 million to cap its variable LIBOR rate at 5%, mitigating interest rate risk on its first and second lien term loans. On April 18, 2007, the Company unwound its existing interest rate hedge instrument for $716,000 cash proceeds. The Company has recorded a loss of $758,000 for the six months ended June 30, 2007.

On March 14, 2007, the Company entered into an Amended and Restated Credit Agreement which provides for a $580 million credit facility, consisting of a $555 million term loan and a $25 million revolving credit facility. On April 3, 2007, the Company received proceeds of the term loan to fund the PrairieWave Holdings, Inc. acquisition purchase price, refinance the Company’s first and second lien credit agreements, and pay transaction costs associated with the transactions. The Company recognized a loss on debt extinguishment of $27.5 million related to the prepayment penalty and the writeoff of debt issuance costs on the existing credit facilities. The $555 million term loan bears interest at LIBOR plus 2.25% and amortizes at a rate of 1.0% per annum, payable quarterly, with a June 30, 2012 maturity date. As of June 30, 2007, $555 million is outstanding under the term loan and $317,000 is outstanding under the revolving credit facility as unused letter of credits. The credit facility is guaranteed by all of our subsidiaries. The credit facility is also secured by first liens on all of our assets and the assets of our guarantor subsidiaries. The credit agreement contains customary representations, warranties, various affirmative and negative covenants and customary events of default.

On May 3, 2007, the Company entered into a new interest rate hedge instrument on a notional amount of $555 million amortizing 1% annually. The swap agreement fixes 100% of the floating rate at 4.977% until June 30, 2010.

We believe there is adequate liquidity from cash on hand, cash provided from operations and funds available under a $25 million revolver to meet our capital spending requirements and to execute our current business plan.

 

18


Table of Contents

As of June 30, 2007 we are in compliance with all of our debt covenants.

This excerpt taken from the KNOL 10-Q filed May 9, 2007.

Overview.

In 2005, we entered into first and second lien agreements, as arranged by Credit Suisse, to repay all amounts outstanding under our previous credit facilities.

The first lien credit agreement provided for a five-year senior secured $185 million term loan facility, of which $171.3 million was currently outstanding as of March 31, 2007, and a $25 million revolving loan and letter of credit facility of which $317,000 was outstanding as unused letters of credits as of March 31, 2007. The first lien term facility, as amended, bore interest at a LIBOR base rate plus 2.5%. The unused portion of the first lien revolving facility was subject to an annual fee of between .375% and .75%, depending on usage of the facility. Interest on the first lien facility was payable quarterly. The first lien term facility amortized at a rate of 1.0% per annum, payable quarterly, and matured on June 29, 2010. We had the ability to may prepay amounts outstanding under the first lien term facility prior to maturity, but we were required to pay a premium if we prepay prior to June 29, 2008, except for prepayments made with the proceeds from the sale of our equity securities.

The second lien credit agreement provided for a six-year senior secured term loan facility with an aggregate principal amount at maturity of approximately $99 million. On June 29, 2005, we received proceeds of $95 million, of which $98.6 million was outstanding as of March 31, 2007. Borrowings under the second lien term facility bear interest at a LIBOR base rate plus 10.0%. This facility did not amortize and the entire unpaid principal amount was due in full on the maturity date of June 29, 2011. We did not have the ability to prepay any amount outstanding prior to June 29, 2008, except for prepayments made with the proceeds from the sale of our equity securities. If we prepaid any amounts after June 29, 2008 but prior to June 29, 2011, we were required to pay a premium.

Both credit facilities were guaranteed by all of our subsidiaries. The credit facilities were also secured by first and second liens on all of our assets and the assets of our guarantor subsidiaries. Both credit agreements contained customary representations, warranties, various affirmative and negative covenants and customary events of default.

 

16


Table of Contents

As discussed above, the borrowings under our credit facilities bore interest at variable rates and exposed us to interest rate risk. If interest rates increased, our debt service obligations on our variable rate debt would also increase even though the amount borrowed remained the same. We entered into hedging arrangements to mitigate our risk with respect to our variable rate debt. For the three months ended March 31, 2007 we recognized a loss on our interest rate cap agreement of $455,000.

On June 30, 2006, we entered into Amendment No. 1 dated as of June 30, 2006 to the first lien credit agreement dated as of June 29, 2005. The amendment reduced the interest rate on our first lien term loan to LIBOR plus 2.5% from LIBOR plus 5.5%. The amendment also amended certain operating covenants contained in the first lien credit agreement so that they were consistent with those contained in the second lien credit agreement. In accordance with the provisions of the first lien credit agreement, a 2% pre-payment premium, of approximately $3.5 million, was required with this amendment. The decrease in the interest rate reduced our annual interest expense by approximately $5.0 million.

We believe there is adequate liquidity from cash on hand, cash provided from operations and funds available under a $25.0 million revolver to meet our capital spending requirements and to execute our current business plan.

As of March 31, 2007 we are in compliance with all of our debt covenants.

This excerpt taken from the KNOL 10-K filed Mar 15, 2007.

Overview.

As of December 31, 2006, we had approximately $13.2 million of cash, cash equivalents and restricted cash on our balance sheet. Our net working capital on December 31, 2006, was a deficit of $9.7 million, compared to net working deficit of $14.2 million as of December 31, 2005.

The Company’s current financial condition has been significantly influenced by positive cash flow from operations and changes in our debt capital structure. In 2005, we entered into first and second lien agreements, as arranged by Credit Suisse, to repay all amounts outstanding under our previous credit facilities.

The first lien credit agreement provides for a five-year senior secured $185 million term loan facility, of which $171.8 million was outstanding at December 31, 2006, and a $25 million revolving loan and letter of credit facility of which $317,000 was outstanding as unused letters of credit as of December 31, 2006. The first lien term facility, as amended, bears interest at a LIBOR base rate plus 2.5%. The unused portion of the first lien revolving facility is subject to an annual fee of between .375% and .75%, depending on usage of the facility. Interest on the first lien facility is payable quarterly. The first lien term facility amortizes at a rate of 1.0% per annum, payable quarterly, and matures on June 29, 2010. We may prepay amounts outstanding under the first lien term facility prior to maturity, but we must pay a premium if we prepay prior to June 29, 2008, except for prepayments made with the proceeds from the sale of our equity securities.

The second lien credit agreement provides for a six-year senior secured term loan facility with an aggregate principal amount at maturity of approximately $99 million. On June 29, 2005, we received proceeds of $95 million, and at December 31, 2006, $98.3 million was outstanding. Borrowings under the second lien term facility bear interest at a LIBOR base rate plus 10.0%. This facility does not amortize and the entire unpaid principal amount is due in full on the maturity date of June 29, 2011. We may not prepay any amount outstanding prior to June 29, 2008, except for prepayments made with the proceeds from the sale of our equity securities. If we prepay any amounts after June 29, 2008 but prior to June 29, 2011, we are required to pay a premium.

Both credit facilities are guaranteed by all of our subsidiaries. The credit facilities are also secured by first and second liens on all of our assets and the assets of our guarantor subsidiaries. Both credit agreements contain customary representations, warranties, various affirmative and negative covenants and customary events of default.

 

50


Table of Contents
Index to Financial Statements

As discussed above, the borrowings under our credit facilities bear interest at variable rates and expose us to interest rate risk. If interest rates increase, our debt service obligations on our variable rate debt would also increase even though the amount borrowed remained the same. In July 2005, the Company entered into an interest rate cap agreement with Credit Suisse First Boston International with a notional amount of $280 million to cap its adjustable LIBOR rate at 5%, mitigating interest rate risk on the first and second lien term loans. The Company paid $1.3 million for this cap agreement, which became effective July 29, 2005 and terminates July 29, 2008. We have entered into hedging arrangements that cover 100% of our variable rate debt to mitigate our risk with respect to our variable rate debt. For the year ended December 31, 2006 we recognized a loss on our interest rate cap agreement of $63,000.

On June 30, 2006, we entered into Amendment No. 1 dated as of June 30, 2006 to the first lien credit agreement dated as of June 29, 2005. The amendment reduced the interest rate on our first lien term loan to LIBOR plus 2.5% from LIBOR plus 5.5%. The amendment also amended certain operating covenants contained in the first lien credit agreement so that they are consistent with those contained in the second lien credit agreement. In accordance with the provisions of the first lien credit agreement, a 2% pre-payment premium, of approximately $3.5 million, was required with this amendment. The decrease in the interest rate will reduce our annual interest expense by approximately $5.0 million.

We believe there is adequate liquidity from cash on hand and cash provided from operations to fund capital expenditures, operating expenses and debt service through 2007. Should we require additional funding, we have available a $25.0 million revolver. Additionally, we have obtained a financing commitment for the $255 million acquisition of the stock of PrairieWave Holdings, Inc., which we announced in January 2007. See Note 12 of the “Notes to Consolidated Financial Statements” included elsewhere in this annual report. We believe that cash on hand and the cash flows from the existing Knology business plus the expected cash flows from the PrairieWave operations will be adequate to fund the operations, capital expenditures and debt service requirements of the combined business through 2007.

As of December 31, 2006 we are in compliance with all of our debt covenants.

This excerpt taken from the KNOL 10-Q filed Nov 14, 2006.

Overview.

In 2005, we entered into first and second lien agreements, as arranged by Credit Suisse, to repay all amounts outstanding under our previous credit facilities.

The first lien credit agreement provides for a five-year senior secured $185 million term loan facility, of which $172.3 million is currently outstanding, and a $25 million revolving loan and letter of credit facility of which no funds have been drawn. The first lien term facility, as amended, bears interest at a LIBOR base rate plus 2.5%. The unused portion of the first lien revolving facility is subject to an annual fee of between .375% and .75%, depending on usage of the facility. Interest on the first lien facility is payable quarterly. The first lien term facility amortizes at a rate of 1.0% per annum, payable quarterly, and matures on June 29, 2010. We may prepay amounts outstanding under the first lien term facility prior to maturity, but we must pay a premium if we prepay prior to June 29, 2008, except for prepayments made with the proceeds from the sale of our equity securities.

The second lien credit agreement provides for a six-year senior secured term loan facility with an aggregate principal amount at maturity of approximately $99 million. On June 29, 2005, we received proceeds of $95 million, of which $97.7 million is currently outstanding. Borrowings under the second lien term facility bear interest at a LIBOR base rate plus 10.0%. This facility does not amortize and the entire unpaid principal amount is due in full on the maturity date of June 29, 2011. We may not prepay any amount outstanding prior to June 29, 2008, except for prepayments made with the proceeds from the sale of our equity securities. If we prepay any amounts after June 29, 2008 but prior to June 29, 2011, we are required to pay a premium.

Both credit facilities are guaranteed by all of our subsidiaries. The credit facilities are also secured by first and second liens on all of our assets and the assets of our guarantor subsidiaries. Both credit agreements contain customary representations, warranties, various affirmative and negative covenants and customary events of default.

As discussed above, the borrowings under our credit facilities bear interest at variable rates and expose us to interest rate risk. If interest rates increase, our debt service obligations on our variable rate debt would also increase even though the amount borrowed remained the same. We have entered into hedging arrangements to mitigate our risk with respect to our variable rate debt. For the nine months ended September 30, 2006 we recognized a gain on our interest rate cap agreement of $150,000.

On June 30, 2006, we entered into Amendment No. 1 dated as of June 30, 2006 (the “Amendment”) to the first lien credit agreement dated as of June 29, 2005. The Amendment reduces the interest rate on our first lien term loan to LIBOR plus 2.5 percent from LIBOR plus 5.5 percent. The amendment also amends certain operating covenants contained in the first lien credit agreement so that they are consistent with those contained in the second lien credit agreement. In accordance with the provisions of the first lien credit agreement, a 2% pre-payment premium, of approximately $3.5 million, was required with this amendment. The decrease in the interest rate will reduce our annual interest expense by approximately $5.0 million.

We believe there is adequate liquidity from cash on hand, cash provided from operations and funds available under a $25.0 million revolver to meet our capital spending requirements and to execute our current business plan.

As of September 30, 2006 we are in compliance with all of our debt covenants.

This excerpt taken from the KNOL 10-Q filed Aug 11, 2006.

Overview.

In 2005, we entered into first and second lien agreements, as arranged by Credit Suisse, to repay all amounts outstanding under our previous credit facilities.

The first lien credit agreement provides for a five-year senior secured $185 million term loan facility, of which $172.8 million is currently outstanding, and a $25 million revolving loan and letter of credit facility of which no funds have been drawn. The first lien

 

18


Table of Contents

term facility, as amended, bears interest at a LIBOR base rate plus 2.5%. The unused portion of the first lien revolving facility is subject to an annual fee of between .375% and .75%, depending on usage of the facility. Interest on the first lien facility is payable quarterly. The first lien term facility amortizes at a rate of 1.0% per annum, payable quarterly, and matures on June 29, 2010. We may prepay amounts outstanding under the first lien term facility prior to maturity.

The second lien credit agreement provides for a six-year senior secured term loan facility with an aggregate principal amount at maturity of approximately $99 million. On June 29, 2005, we received proceeds of $95 million, of which $97.2 million is currently outstanding. Borrowings under the second lien term facility bear interest at a LIBOR base rate plus 10.0%. This facility does not amortize and the entire unpaid principal amount is due in full on the maturity date of June 29, 2011. We may not prepay any amount outstanding prior to June 29, 2008, except for prepayments made with the proceeds from the sale of our equity securities. If we prepay any amounts after June 29, 2008 but prior to June 29, 2011, we are required to pay a premium.

Both credit facilities are guaranteed by all of our subsidiaries. The credit facilities are also secured by first and second liens on all of our assets and the assets of our guarantor subsidiaries. Both credit agreements contain customary representations, warranties, various affirmative and negative covenants and customary events of default.

As discussed above, the borrowings under our credit facilities bear interest at variable rates and expose us to interest rate risk. If interest rates increase, our debt service obligations on our variable rate debt would also increase even though the amount borrowed remained the same. We have entered into hedging arrangements to mitigate our risk with respect to our variable rate debt. For the six months ended June 30, 2006 we recognized a gain on our interest rate cap agreement of $1.9 million.

On June 30, 2006, we entered into Amendment No. 1 dated as of June 30, 2006 (the “Amendment”) to the first lien credit agreement dated as of June 29, 2005. The Amendment reduces the interest rate on our first lien term loan to LIBOR plus 2.5 percent from LIBOR plus 5.5 percent. The amendment also amends certain operating covenants contained in the first lien credit agreement so that they are consistent with those contained in the second lien credit agreement. In accordance with the provisions of the first lien credit agreement, a 2% pre-payment premium, of approximately $3.5 million, was required with this amendment. The decrease in the interest rate will reduce our annual interest expense by approximately $5.0 million.

We believe there is adequate liquidity from cash on hand, cash provided from operations and funds available under a $25.0 million revolver to meet our capital spending requirements and to execute our current business plan.

As of June 30, 2006 we are in compliance with all of our debt covenants.

This excerpt taken from the KNOL 10-Q filed May 12, 2006.

Overview.

In 2005, we entered into first and second lien agreements, as arranged by Credit Suisse, to repay all amounts outstanding under our previous credit facilities.

The first lien credit agreement provides for a five-year senior secured $185 million term loan facility, of which $173.2 million is currently outstanding, and a $25 million revolving loan and letter of credit facility of which no funds have been drawn. The first lien term facility bears interest at a LIBOR base rate plus 5.5%. The unused portion of the first lien revolving facility is subject to an annual fee of between .375% and .75%, depending on usage of the facility. Interest on the first lien facility is payable quarterly. The first lien term facility amortizes at a rate of 1.0% per annum, payable quarterly, and matures on June 29, 2010. We may prepay amounts outstanding under the first lien term facility prior to maturity, but we must pay a premium if we prepay prior to June 29, 2008, except for prepayments made with the proceeds from the sale of our equity securities.

The second lien credit agreement provides for a six-year senior secured term loan facility with an aggregate principal amount at maturity of approximately $99 million. On June 29, 2005, we received proceeds of $95 million, of which $96.1 million is currently outstanding. Borrowings under the second lien term facility bear interest at a LIBOR base rate plus 10.0%. This facility does not amortize and the entire unpaid principal amount is due in full on the maturity date of June 29, 2011. We may not prepay any amount outstanding prior to June 29, 2008, except for prepayments made with the proceeds from the sale of our equity securities. If we prepay any amounts after June 29, 2008 but prior to June 29, 2011, we are required to pay a premium.

Both credit facilities are guaranteed by all of our subsidiaries. The credit facilities are also secured by first and second liens on all of our assets and the assets of our guarantor subsidiaries. Both credit agreements contain customary representations, warranties, various affirmative and negative covenants and customary events of default.

As discussed above, the borrowings under our credit facilities bear interest at variable rates and expose us to interest rate risk. If interest rates increase, our debt service obligations on our variable rate debt would also increase even though the amount borrowed remained the same. We have entered into hedging arrangements to mitigate our risk with respect to our variable rate debt. For the three months ended March 31, 2006 we recognized a gain on our interest rate cap agreement of $727,000.

We believe there is adequate liquidity from cash on hand, cash provided from operations and funds available under a $25.0 million revolver to meet our capital spending requirements and to execute our current business plan.

As of March 31, 2006 we are in compliance with all of our debt covenants.

This excerpt taken from the KNOL 10-K filed Mar 28, 2006.

Overview

We are a fully integrated provider of video, voice, data and advanced communications services to residential and business customers in nine markets in the southeastern United States. We provide a full suite of video, voice and data services in Huntsville and Montgomery, Alabama; Panama City and a portion of Pinellas County, Florida; Augusta, Columbus and West Point, Georgia; Charleston, South Carolina; and Knoxville, Tennessee. Our primary business is the delivery of bundled communication services over our own network. In addition to our bundled package offerings, we sell these services on an unbundled basis.

We have built our business through:

 

    acquisitions of other cable related assets and subsidiaries, networks and franchises;

 

    upgrades of acquired networks to introduce expanded broadband services including bundled video, voice and data services;

 

    construction and expansion of our broadband network to offer integrated video, voice and data services; and

 

    organic growth of connections through increased penetration of services to new marketable homes and our existing customer base.

The following discussion includes details, highlights and insight into our consolidated financial condition and results of operations, including recent business developments, critical accounting policies, estimates used in preparing the financial statements and other factors that are expected to affect our prospective financial condition. The following discussion and analysis should be read in conjunction with our “Selected Financial Data” and our financial statements and related notes elsewhere in this annual report.

To date, we have experienced operating losses as a result of the expansion of our service territories and the construction of our network. We expect to continue to focus on increasing our customer base and expanding our broadband operations. Our ability to generate profits will depend in large part on our ability to increase revenues to offset the costs of construction and operation of our business.

We completed several key transactions during 2005, to improve the financial condition and liquidity of the company. These transactions include the following:

 

   

We issued and sold 2,000,000 shares of a newly created series of preferred stock, the Series AA convertible preferred stock, at $10.00 per share, for aggregate gross proceeds of $20 million. 920,000

 

40


Table of Contents
 

shares of a the Series AA preferred stock were issued and sold in May 2005 in a private offering to certain new and existing investors, with the remaining shares issued and sold in October 2005 through a rights offering to existing stockholders. The Series AA preferred stock provides for a cumulative dividend of 8% per annum, which we pay in additional shares of Series AA preferred stock, and we issued 58,742 additional shares of the Series AA preferred stock in 2005. On November 1, 2005, we used the net proceeds from the rights offering to pay down our first lien indebtedness.

 

    In September 2005, we completed the sale of our cable assets in Cerritos, California to WaveDivision Holdings, LLC for $10 million in cash. The net proceeds from the sale were used for general corporate purposes, including the funding of success-based capital expenditures and operating expenses. We had acquired the Cerritos cable system in December 2003 from Verizon Media Ventures Inc. in conjunction with our acquisition of Verizon Media’s Pinellas County, Florida operations.

 

    In June 2005, we entered into a first lien credit agreement and second lien credit agreement providing us with aggregate cash proceeds of $280 million. Credit Suisse acted as administrative agent and sole lead arranger. We used these proceeds, together with cash on hand, to repay all amounts outstanding under our credit facilities with Wachovia Bank, National Association and CoBank, ACB and to redeem our 12% senior notes due 2009, which were redeemed on July 29, 2005. Both credit facilities are guaranteed by all of our subsidiaries. The credit facilities are also secured by first and second liens on all of our assets and the assets of our guarantor subsidiaries.
This excerpt taken from the KNOL 10-Q filed Nov 14, 2005.

Overview.

 

On July 29, 2005, we used the proceeds from the first and second lien agreements, as arranged by Credit Suisse, Caymen Islands branch, together with cash on hand, to redeem our 12% senior notes due 2009.

 

On September 12, 2005, we completed the sale of our cable assets in Cerritos, California to WaveDivision Holdings, LLC for $10.0 million in cash, subject to certain closing adjustments. The net proceeds from the sale will be used for general corporate purposes, including the funding of success-based capital expenditures and operating expenses. $1.0 million of the proceeds is recorded as restricted cash as of September 30, 2005 and represents an escrow requirement in connection with the closing. $500,000 of this balance is expected to be released in March 2006, with the remaining 500,000 expected to be released in September 2006.

 

We believe there is adequate liquidity from cash on hand, cash provided from operations and funds available under a $25.0 million revolver to meet our capital spending requirements and to execute our current business plan.

 

Our first lien credit agreement provides for a five-year senior secured $185 million term loan facility, all of which is currently outstanding, and a $25 million revolving loan and letter of credit facility of which no funds have been drawn. The first lien term facility bears interest at a base rate plus 4.5% or a Eurodollar rate plus 5.5%. The unused portion of the first lien revolving facility is subject to an annual fee of between .375% and .75%, depending on usage of the facility. Interest on the first lien facilities is payable quarterly. The first lien term facility amortizes at a rate of 1.0% per annum, payable quarterly, and matures on June 29, 2010. We may prepay amounts outstanding under the first lien term facility prior to maturity, but we must pay a premium if we prepay prior to June 29, 2008, except for prepayments made with the proceeds from the sale of our equity securities. On November 1, 2005 we repaid $10.4 million outstanding under our first lien credit agreement with the proceeds from our equity rights offering.

 

Our second lien credit agreement provides for a six-year senior secured term loan facility with an aggregate principal amount at maturity of approximately $99 million. On June 29, 2005, we received proceeds of $95 million. Borrowings under the second lien term facility bear interest at a base rate plus 9.0% or a Eurodollar rate plus 10.0%. This facility does not amortize and the entire unpaid principal amount is due in full on the maturity date of June 29, 2011. We may not prepay any amount outstanding prior to June 29, 2008, except for prepayments made with the proceeds from the sale of our equity securities. If we prepay any amounts after June 29, 2008 but prior to June 29, 2011, we are required to pay a premium.

 

Both credit facilities are guaranteed by all of our subsidiaries. The credit facilities are also secured by first and second liens on all of our assets and the assets of our guarantor subsidiaries.

 

The credit agreements both contain customary representations and warranties and various affirmative and negative covenants, including:

 

    limitations on the incurrence of additional debt;

 

    limitations on the incurrence of liens;

 

    restrictions on investments;

 

    restrictions on the sale of assets;

 

    restrictions on the payment of cash dividends on and the redemption or repurchase of capital stock;

 

    mandatory prepayment of amounts outstanding under the first lien facilities or second lien facility, as applicable, with excess cash flow, proceeds from asset sales, proceeds from the issuance of debt obligations, proceeds from any equity offerings, and proceeds from casualty losses;

 

    restrictions on mergers and acquisitions, sale/leaseback transactions and fundamental changes in the nature of our business;

 

    limitations on capital expenditures; and

 

    maintenance of minimum ratios of first lien debt to EBITDA (as defined in the credit agreements), total debt to EBITDA, and EBITDA to cash interest.

 

The credit agreements also include customary events of default, including but not limited to:

 

    nonpayment of principal, interest or other fees or amounts;

 

    incorrectness of representations and warranties in any material respect;

 

20


Table of Contents
    violations of covenants;

 

    cross defaults and cross acceleration;

 

    bankruptcy;

 

    material judgments;

 

    ERISA events;

 

    actual or asserted invalidity of provisions of or liens created under guarantees or security documents;

 

    change of control;

 

    material violations of environmental laws;

 

    defaults under material contractual obligations; and

 

    the failure to maintain our licenses and franchises if such failure would have a material adverse effect.

 

As discussed above, the borrowings under our credit facilities bear interest at variable rates and expose us to interest rate risk. If interest rates increase, our debt service obligations on our variable rate debt would also increase even though the amount borrowed remained the same. An increase of 1.0% in the interest rates payable on our credit facilities would increase our estimated debt service requirements for the third and fourth quarters of 2005 by approximately $140,000 in the aggregate. We have entered into hedging arrangements to mitigate our risk with respect to our variable rate debt. For the quarter ended September 30, 2005 we recognized a gain on our interest rate hedge of $257,000.

 

As of September 30, 2005 we were in compliance with all of our debt covenants.

 

Wikinvest © 2006, 2007, 2008, 2009, 2010, 2011, 2012. Use of this site is subject to express Terms of Service, Privacy Policy, and Disclaimer. By continuing past this page, you agree to abide by these terms. Any information provided by Wikinvest, including but not limited to company data, competitors, business analysis, market share, sales revenues and other operating metrics, earnings call analysis, conference call transcripts, industry information, or price targets should not be construed as research, trading tips or recommendations, or investment advice and is provided with no warrants as to its accuracy. Stock market data, including US and International equity symbols, stock quotes, share prices, earnings ratios, and other fundamental data is provided by data partners. Stock market quotes delayed at least 15 minutes for NASDAQ, 20 mins for NYSE and AMEX. Market data by Xignite. See data providers for more details. Company names, products, services and branding cited herein may be trademarks or registered trademarks of their respective owners. The use of trademarks or service marks of another is not a representation that the other is affiliated with, sponsors, is sponsored by, endorses, or is endorsed by Wikinvest.
Powered by MediaWiki