KNOL » Topics » PART II

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

PART I

For convenience in this annual report, “Knology,” “we,” “us,” and “the Company” refer to Knology, Inc. and our consolidated subsidiaries, taken as a whole.

 

ITEM 1. BUSINESS

We were formed as a Delaware corporation in September 1998 and began trading publicly on the Nasdaq National 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. For the year ended December 31, 2008, our revenues were $410.2 million and we had a net loss attributable to common stockholders of $12.1 million. Video, voice, data and other revenues accounted for approximately 42%, 33%, 23% and 2%, respectively, of our consolidated revenues for the year ended December 31, 2008. We report an aggregate number of connections for video, voice and data services. For example, a single customer who purchases cable television, local telephone and Internet access services would count as three connections. As of December 31, 2008, we had approximately 677,000 total connections.

We provide our services over our wholly owned, fully upgraded minimum 750 MHz interactive broadband network. As of December 31, 2008, our network passed approximately 919,000 marketable homes, which are residential and business units passed by our broadband network that are listed in our database and which we do not believe are covered by exclusive arrangements with other providers of competing services. Our network is designed with sufficient capacity to meet the growing demand for high-speed and high-bandwidth video, voice and data services, as well as the introduction of new communications services.

We have operating experience in marketing, selling, provisioning, servicing and operating video, voice and data systems and services. We have delivered a bundled service offering for ten years, and we are supported by a management team with decades of experience operating video, voice and data networks. We provide a full suite of video, voice and data services in certain markets in Alabama, Florida, Georgia, Iowa, Minnesota, South Carolina, South Dakota and Tennessee, which are in the Southeastern and Midwestern regions of the United States. We offer our bundled service to all of our marketable passings.

We have built our Company 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 voice and data services; and

 

   

acquisitions of other broadband systems.

On January 4, 2008, we completed our acquisition of Graceba Total Communications Group, Inc. (“Graceba”), a voice, video and high-speed Internet broadband services provider in Dothan, Alabama. Our purchase of Graceba was a strategic acquisition that we believe fits well in our concentrated Southeastern footprint and combines companies with similar business models and philosophies, such as operating in secondary and tertiary markets, servicing bundled customers, providing solid financial margins and focusing on “best in class” customer service.

We used the $59.0 million proceeds of our First Amendment to our Amended and Restated Credit Agreement and cash on hand to fund the $75.0 million purchase price. The financial position and results of

 

4


Table of Contents
Index to Financial Statements

operations for Graceba are included in our consolidated statements since the date of acquisition. The acquisition has been accounted for in accordance with Statement of Financial Accounting Standards (“SFAS”) No. 141, “Business Combinations.”

PART I

For convenience in this annual report, “Knology,” “we,” “us,” and “the Company” refer to Knology, Inc. and our consolidated subsidiaries, taken as a whole.

 

ITEM 1. BUSINESS

We were formed as a Delaware corporation in September 1998 and began trading publicly on the Nasdaq National 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. For the year ended December 31, 2008, our revenues were $410.2 million and we had a net loss attributable to common stockholders of $12.1 million. Video, voice, data and other revenues accounted for approximately 42%, 33%, 23% and 2%, respectively, of our consolidated revenues for the year ended December 31, 2008. We report an aggregate number of connections for video, voice and data services. For example, a single customer who purchases cable television, local telephone and Internet access services would count as three connections. As of December 31, 2008, we had approximately 677,000 total connections.

We provide our services over our wholly owned, fully upgraded minimum 750 MHz interactive broadband network. As of December 31, 2008, our network passed approximately 919,000 marketable homes, which are residential and business units passed by our broadband network that are listed in our database and which we do not believe are covered by exclusive arrangements with other providers of competing services. Our network is designed with sufficient capacity to meet the growing demand for high-speed and high-bandwidth video, voice and data services, as well as the introduction of new communications services.

We have operating experience in marketing, selling, provisioning, servicing and operating video, voice and data systems and services. We have delivered a bundled service offering for ten years, and we are supported by a management team with decades of experience operating video, voice and data networks. We provide a full suite of video, voice and data services in certain markets in Alabama, Florida, Georgia, Iowa, Minnesota, South Carolina, South Dakota and Tennessee, which are in the Southeastern and Midwestern regions of the United States. We offer our bundled service to all of our marketable passings.

We have built our Company 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 voice and data services; and

 

   

acquisitions of other broadband systems.

On January 4, 2008, we completed our acquisition of Graceba Total Communications Group, Inc. (“Graceba”), a voice, video and high-speed Internet broadband services provider in Dothan, Alabama. Our purchase of Graceba was a strategic acquisition that we believe fits well in our concentrated Southeastern footprint and combines companies with similar business models and philosophies, such as operating in secondary and tertiary markets, servicing bundled customers, providing solid financial margins and focusing on “best in class” customer service.

We used the $59.0 million proceeds of our First Amendment to our Amended and Restated Credit Agreement and cash on hand to fund the $75.0 million purchase price. The financial position and results of

 

4


Table of Contents
Index to Financial Statements

operations for Graceba are included in our consolidated statements since the date of acquisition. The acquisition has been accounted for in accordance with Statement of Financial Accounting Standards (“SFAS”) No. 141, “Business Combinations.”

PART I

FACE="Times New Roman" SIZE="2">For convenience in this annual report, “Knology,” “we,” “us,” and “the Company” refer to Knology, Inc. and our consolidated subsidiaries, taken as a whole.

STYLE="font-size:18px;margin-top:0px;margin-bottom:0px"> 





ITEM 1.BUSINESS

We were formed as a Delaware corporation
in September 1998 and began trading publicly on the Nasdaq National 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. For the year ended December 31, 2008, our revenues were $410.2 million and we had a net loss attributable to common stockholders of $12.1 million. Video,
voice, data and other revenues accounted for approximately 42%, 33%, 23% and 2%, respectively, of our consolidated revenues for the year ended December 31, 2008. We report an aggregate number of connections for video, voice and data services.
For example, a single customer who purchases cable television, local telephone and Internet access services would count as three connections. As of December 31, 2008, we had approximately 677,000 total connections.

STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%">We provide our services over our wholly owned, fully upgraded minimum 750 MHz interactive broadband network. As of December 31, 2008, our network
passed approximately 919,000 marketable homes, which are residential and business units passed by our broadband network that are listed in our database and which we do not believe are covered by exclusive arrangements with other providers of
competing services. Our network is designed with sufficient capacity to meet the growing demand for high-speed and high-bandwidth video, voice and data services, as well as the introduction of new communications services.

STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%">We have operating experience in marketing, selling, provisioning, servicing and operating video, voice and data systems and services. We have delivered a
bundled service offering for ten years, and we are supported by a management team with decades of experience operating video, voice and data networks. We provide a full suite of video, voice and data services in certain markets in Alabama, Florida,
Georgia, Iowa, Minnesota, South Carolina, South Dakota and Tennessee, which are in the Southeastern and Midwestern regions of the United States. We offer our bundled service to all of our marketable passings.

STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%">We have built our Company through:

 







  

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

STYLE="font-size:6px;margin-top:0px;margin-bottom:0px"> 







  

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 voice and data services; and

STYLE="font-size:6px;margin-top:0px;margin-bottom:0px"> 







  

acquisitions of other broadband systems.

SIZE="2">On January 4, 2008, we completed our acquisition of Graceba Total Communications Group, Inc. (“Graceba”), a voice, video and high-speed Internet broadband services provider in Dothan, Alabama. Our purchase of Graceba was a
strategic acquisition that we believe fits well in our concentrated Southeastern footprint and combines companies with similar business models and philosophies, such as operating in secondary and tertiary markets, servicing bundled customers,
providing solid financial margins and focusing on “best in class” customer service.

We used the $59.0 million proceeds of our
First Amendment to our Amended and Restated Credit Agreement and cash on hand to fund the $75.0 million purchase price. The financial position and results of

 


4







Table of Contents


Index to Financial Statements



operations for Graceba are included in our consolidated statements since the date of acquisition. The acquisition has been accounted for in accordance with
Statement of Financial Accounting Standards (“SFAS”) No. 141, “Business Combinations.”

PART I

FACE="Times New Roman" SIZE="2">For convenience in this annual report, “Knology,” “we,” “us,” and “the Company” refer to Knology, Inc. and our consolidated subsidiaries, taken as a whole.

STYLE="font-size:18px;margin-top:0px;margin-bottom:0px"> 





ITEM 1.BUSINESS

We were formed as a Delaware corporation
in September 1998 and began trading publicly on the Nasdaq National 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. For the year ended December 31, 2008, our revenues were $410.2 million and we had a net loss attributable to common stockholders of $12.1 million. Video,
voice, data and other revenues accounted for approximately 42%, 33%, 23% and 2%, respectively, of our consolidated revenues for the year ended December 31, 2008. We report an aggregate number of connections for video, voice and data services.
For example, a single customer who purchases cable television, local telephone and Internet access services would count as three connections. As of December 31, 2008, we had approximately 677,000 total connections.

STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%">We provide our services over our wholly owned, fully upgraded minimum 750 MHz interactive broadband network. As of December 31, 2008, our network
passed approximately 919,000 marketable homes, which are residential and business units passed by our broadband network that are listed in our database and which we do not believe are covered by exclusive arrangements with other providers of
competing services. Our network is designed with sufficient capacity to meet the growing demand for high-speed and high-bandwidth video, voice and data services, as well as the introduction of new communications services.

STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%">We have operating experience in marketing, selling, provisioning, servicing and operating video, voice and data systems and services. We have delivered a
bundled service offering for ten years, and we are supported by a management team with decades of experience operating video, voice and data networks. We provide a full suite of video, voice and data services in certain markets in Alabama, Florida,
Georgia, Iowa, Minnesota, South Carolina, South Dakota and Tennessee, which are in the Southeastern and Midwestern regions of the United States. We offer our bundled service to all of our marketable passings.

STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%">We have built our Company through:

 







  

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

STYLE="font-size:6px;margin-top:0px;margin-bottom:0px"> 







  

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 voice and data services; and

STYLE="font-size:6px;margin-top:0px;margin-bottom:0px"> 







  

acquisitions of other broadband systems.

SIZE="2">On January 4, 2008, we completed our acquisition of Graceba Total Communications Group, Inc. (“Graceba”), a voice, video and high-speed Internet broadband services provider in Dothan, Alabama. Our purchase of Graceba was a
strategic acquisition that we believe fits well in our concentrated Southeastern footprint and combines companies with similar business models and philosophies, such as operating in secondary and tertiary markets, servicing bundled customers,
providing solid financial margins and focusing on “best in class” customer service.

We used the $59.0 million proceeds of our
First Amendment to our Amended and Restated Credit Agreement and cash on hand to fund the $75.0 million purchase price. The financial position and results of

 


4







Table of Contents


Index to Financial Statements



operations for Graceba are included in our consolidated statements since the date of acquisition. The acquisition has been accounted for in accordance with
Statement of Financial Accounting Standards (“SFAS”) No. 141, “Business Combinations.”

PART II

 

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

PART II

 

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

PART II

 





ITEM 5.MARKET FOR REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
STYLE="margin-top:12px;margin-bottom:0px">Market Information

Our common stock has traded on
the Nasdaq Global Market under the ticker symbol “KNOL” since December 18, 2003. The following table sets forth the high and low sales prices as reported on the Nasdaq Global Market for the period from January 1, 2007 through
December 31, 2008.

 






































































































   High  Low

2008

    

Fourth Quarter

  $8.03  $3.70

Third Quarter

  $12.10  $8.00

Second Quarter

  $15.87  $10.84

First Quarter

  $13.89  $8.47

2007

    

Fourth Quarter

  $17.16  $11.12

Third Quarter

  $18.22  $12.88

Second Quarter

  $19.73  $16.04

First Quarter

  $15.83  $10.38

PART II

 





ITEM 5.MARKET FOR REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
STYLE="margin-top:12px;margin-bottom:0px">Market Information

Our common stock has traded on
the Nasdaq Global Market under the ticker symbol “KNOL” since December 18, 2003. The following table sets forth the high and low sales prices as reported on the Nasdaq Global Market for the period from January 1, 2007 through
December 31, 2008.

 






































































































   High  Low

2008

    

Fourth Quarter

  $8.03  $3.70

Third Quarter

  $12.10  $8.00

Second Quarter

  $15.87  $10.84

First Quarter

  $13.89  $8.47

2007

    

Fourth Quarter

  $17.16  $11.12

Third Quarter

  $18.22  $12.88

Second Quarter

  $19.73  $16.04

First Quarter

  $15.83  $10.38
These excerpts taken from the KNOL 10-K filed Mar 14, 2008.

PART II

 

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

PART II

 






ITEM 5.
MARKET FOR REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
STYLE="margin-top:12px;margin-bottom:0px">Market Information

Our common stock has traded on
the Nasdaq Global Market under the ticker symbol “KNOL” since December 18, 2003. The following table sets forth the high and low sales prices as reported on the Nasdaq Global Market for the period from January 1, 2006 through
December 31, 2007:

 






































































































   High  Low

2007

    

Fourth Quarter

  $17.16  $11.12

Third Quarter

  $18.22  $12.88

Second Quarter

  $19.73  $16.04

First Quarter

  $15.83  $10.38

2006

    

Fourth Quarter

  $11.12  $9.82

Third Quarter

  $10.76  $8.75

Second Quarter

  $10.07  $6.50

First Quarter

  $6.83  $3.50
This excerpt taken from the KNOL 10-K filed Mar 15, 2007.

PART II

 

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
This excerpt taken from the KNOL 10-K filed Mar 28, 2006.

PART III

 

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

A portion of the information required by this Item 10 will be contained in the sections entitled “Information About Our Executive Officers, Directors and Nominees,” “Meetings and Committees of the Board” and “Section 16(a) Beneficial Ownership Reporting Compliance” of our definitive proxy statement for our 2006 Annual Meeting of Stockholders to be filed with the SEC, and such information is incorporated in this Annual Report on Form 10-K by this reference.

We have adopted a code of ethics that applies to our employees, officers and directors, including our chief executive officer, chief financial officer, principal accounting officer and controller. This code of ethics is posted on our website located at www.knology.com. The code of ethics may be found as follows: From our main web page, first click on “About Us” at the bottom of the page and then on “Investor Relations.” Next, click on “Corporate Governance.” Finally, click on “Standards of Conduct.” We intend to satisfy the disclosure requirement under Item 10 of Form 8-K regarding an amendment to, or waiver from, a provision of this code of ethics by posting such information on our website, at the address and location specified above.

 

ITEM 11. EXECUTIVE COMPENSATION

The information required by this Item 11 will be contained in the section entitled “Executive Compensation” and “Meetings and Committees of the Board” of our definitive proxy statement for our 2006 Annual Meeting of Stockholders to be filed with the SEC, and such information is incorporated in this Annual Report on Form 10-K by this reference.

 

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The information required by this Item 12 will be contained in the sections entitled “Executive Compensation—Equity Compensation Plan Information” and “Principal Stockholders” of our definitive proxy statement for our 2006 Annual Meeting of Stockholders to be filed with the SEC, and such information is incorporated in this Annual Report on Form 10-K by this reference.

 

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The information required by this Item 13 will be contained in the section entitled “Certain Relationships and Related Transactions” of our definitive proxy statement for our 2006 Annual Meeting of Stockholders to be filed with the SEC, and such information is incorporated in this Annual Report on Form 10-K by this reference.

 

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

The information required by this Item 14 will be contained in the section entitled “Independent Registered Public Accounting Firm” of our definitive proxy statement for our 2006 Annual Meeting of Stockholders to be filed with the SEC, and such information is incorporated in this Annual Report on Form 10-K by this reference.

 

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