<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT
OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2000
COMMISSION FILE NUMBER: 333-43339
KNOLOGY BROADBAND, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 58-2203141
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
KNOLOGY BROADBAND, INC.
1241 O.G. SKINNER DRIVE
WEST POINT, GEORGIA 31833
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (706) 645-8553
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
YES [X]* NO [ ]
The aggregate market value of the voting stock held by non-affiliates
is not applicable as no public market exists for the voting stock of the
registrant.
As of July 31, 2000, there were 100 shares of the registrant's Common
Stock outstanding.
The registrant meets the conditions set forth in General Instructions
H(1)(a) and (b) of Form 10-Q and is filing this Form with the reduced disclosure
format.
*The registrant does not have any class of equity registered under the
Securities Exchange Act of 1934 and files periodic reports with the Securities
and Exchange Commission pursuant to contractual obligations with third parties.
<PAGE> 2
KNOLOGY BROADBAND, INC. AND SUBSIDIARIES
QUARTER ENDED JUNE 30, 2000
INDEX
<TABLE>
<CAPTION>
PART I FINANCIAL INFORMATION PAGE
----
<S> <C> <C> <C>
ITEM 1 FINANCIAL STATEMENTS.................................................. 2
Consolidated Balance Sheets........................................... 2
Consolidated Statements of Operations................................. 3
Consolidated Statement of Cash Flows.................................. 4
Notes to Consolidated Financial Statements............................ 5
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS................................................. 7
ITEM 3 QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK............ 10
PART II OTHER INFORMATION
ITEM 1 LEGAL PROCEEDINGS..................................................... 11
ITEM 2 CHANGES IN SECURITIES AND USE OF PROCEEDS............................. 11
ITEM 3 DEFAULTS UPON SENIOR SECURITIES....................................... 11
ITEM 4 SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS..................... 11
ITEM 5 OTHER INFORMATION..................................................... 11
ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K...................................... 11
</TABLE>
1
<PAGE> 3
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
KNOLOGY BROADBAND, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
JUNE 30, 2000
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
2000 1999
------------- -------------
(Unaudited)
ASSETS
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 2,237,966 $ 6,249,756
Marketable securities -- 6,069,461
Affiliate receivable 14,538,805 18,334,038
Accounts receivable, net 4,830,916 5,514,724
Prepaid expenses 1,182,451 750,246
------------- -------------
Total current assets 22,790,138 36,918,225
PROPERTY AND EQUIPMENT, net 295,327,577 256,298,360
INVESTMENTS 6,108,000 1,412,064
INTANGIBLE AND OTHER ASSETS, net 32,801,131 39,267,103
OTHER 201,215 136,696
------------- -------------
Total assets $ 357,228,061 $ 334,032,448
============= =============
LIABILITIES AND STOCKHOLDERS' (DEFICIT) EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt $ 12,174 $ 12,174
Accounts payable 18,045,310 13,395,068
Advances from parent 62,693,798 14,975,753
Accrued liabilities 5,290,475 5,587,863
Unearned revenue 2,271,088 2,624,308
------------- -------------
Total current liabilities 88,312,845 36,595,166
NONCURRENT LIABILITIES:
Long-term notes payable 19,103,966 19,110,520
Bonds payable, net of discount 338,312,481 319,233,545
------------- -------------
Total noncurrent liabilities 357,416,447 338,344,065
Total liabilities 445,729,292 374,939,231
WARRANTS -- --
STOCKHOLDERS' (DEFICIT) EQUITY
Convertible preferred stock 499 507
Common Stock 6 6
Additional paid-in capital 69,277,792 69,277,784
Accumulated deficit (157,779,528) (110,154,381)
Unrealized (loss) gain on marketable securities (Note 4) -- (30,699)
------------- -------------
Total stockholders' (deficit) equity (88,501,231) (40,906,783)
------------- -------------
Total liabilities and stockholders' (deficit) equity $ 357,228,061 $ 334,032,448
============= =============
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
2
<PAGE> 4
KNOLOGY BROADBAND, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
2000 1999 2000 1999
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
OPERATING REVENUES $ 14,639,021 $ 10,601,310 $ 27,932,618 $ 20,632,115
------------ ------------ ------------ ------------
OPERATING EXPENSES:
Cost of services 6,414,247 5,176,643 12,609,316 10,014,184
Selling, operating, and administrative 11,942,969 9,672,062 22,240,378 18,196,079
Depreciation and amortization 12,306,910 8,325,947 23,683,754 16,059,846
------------ ------------ ------------ ------------
Total 30,664,126 23,174,652 58,533,448 44,270,109
------------ ------------ ------------ ------------
OPERATING LOSS (16,025,105) (12,573,342) (30,600,830) (23,637,994)
OTHER INCOME AND EXPENSES:
Interest income 31,484 386,377 103,229 1,108,536
Interest expense (9,651,526) (7,846,703) (18,939,748) (15,642,451)
Other income (expense), net 35,710 47,683 56,542 92,844
------------ ------------ ------------ ------------
Total (9,584,332) (7,412,643) (18,779,977) (14,441,071)
------------ ------------ ------------ ------------
LOSS BEFORE INCOME TAX BENEFIT (25,609,437) (19,985,985) (49,380,807) (38,079,065)
INCOME TAX BENEFIT -- 3,243,989 1,755,666 7,127,122
------------ ------------ ------------ ------------
NET LOSS $(25,609,437) $(16,741,996) $(47,625,141) $(30,951,943)
============ ============ ============ ============
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
3
<PAGE> 5
KNOLOGY BROADBAND, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended June 30,
2000 1999
------------ ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(47,625,141) $(30,951,943)
Adjustments to reconcile net loss to net cash
(used in) provided by operating activities:
Depreciation and amortization 23,683,754 16,059,846
Gain on disposition of assets (2,874) (5,416)
Amortization of bond discount 8,148,576 7,255,420
Changes in operating assets and liabilities:
Accounts receivable 683,803 299,403
Accounts receivable - affiliate 3,795,233 (4,735,257)
Prepaid expenses and other (466,025) (205,205)
Accounts payable 4,650,237 11,120,868
Accrued liabilities and interest 10,632,972 (7,702,641)
Unearned revenue (353,220) 163,050
------------ ------------
Total adjustments 50,772,456 22,250,068
------------ ------------
Net cash provided by (used in) operating activities 3,147,315 (8,701,875)
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures, net of retirements (56,027,333) (45,478,497)
Investments (4,695,936)
Organizational and franchise cost expenditures, net (250,229) 43,695
Proceeds form sales of assets 33,441 54,361
Proceeds from sales of marketable securities, net 6,069,461 49,276,833
------------ ------------
Net cash provided by (used in) investing activities (54,870,596) 3,896,392
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Advances from affiliates 47,718,045
Expenditures related to issuance of debt -- (51,531)
Principal payments on debt (6,554) (2,494)
------------ ------------
Net cash provided by financing activities 47,711,491 (54,025)
------------ ------------
NET DECREASE IN CASH (4,011,790) (4,859,508)
CASH AT BEGINNING OF PERIOD 6,249,756 4,859,508
------------ ------------
CASH AT END OF PERIOD $ 2,237,966 $ --
============ ============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for interest $ 955,930 $ 8,507
</TABLE>
4
<PAGE> 6
KNOLOGY BROADBAND, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2000
(UNAUDITED)
1. ORGANIZATION AND NATURE OF BUSINESS
Knology Broadband, Inc. (the "Company"), formerly KNOLOGY
Holdings, Inc., is a wholly owned subsidiary of Knology, Inc. Knology
Broadband offers residential and business customers broadband
communications services ("Broadband Services"), including analog and
digital cable television, local and long distance telephone, high-speed
Internet access service, and other services including broadband carrier
services ("BCS"), using high capacity hybrid fiber/coaxial networks
that are two-way interactive ("Interactive Broadband Networks"). The
Company operates Interactive Broadband Networks in six metropolitan
areas (collectively the "Systems"): Huntsville and Montgomery, Alabama;
Columbus and Augusta, Georgia; Panama City, Florida; and Charleston,
South Carolina and plans to expand to additional mid-sized cities in
the southeastern United States.
The Company has experienced operating losses as a result of
the expansion of the advanced broadband communications networks and
services into new and existing markets. Management expects to continue
the focus on increasing the customer base and expanding the broadband
operations. Accordingly, operating expenses and capital expenditures
will continue to increase with the extension of the broadband
communications networks in existing and new markets in accordance with
the business plan. While management expects its expansion plans to
result in profitability, there can be no assurance that growth in the
Company's revenue or customer base will continue or that the Company
will be able to achieve or sustain profitability and/or positive cash
flow.
2. BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial
statements of the Company have been prepared in accordance with
generally accepted accounting principles for interim financial
information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information
and footnotes required by generally accepted accounting principles for
complete financial statements. In the opinion of management, all
adjustments considered necessary for the fair presentation of the
financial statements have been included, and the financial statements
present fairly the financial position and results of operations for the
interim periods presented. Operating results for the three and six
months ended June 30, 2000 are not necessarily indicative of the
results that may be expected for the year ended December 31, 2000.
These financial statements should be read in conjunction with the
consolidated financial statements and notes thereto, together with
management's discussion and analysis of financial condition and results
of operations contained in the Company's 1999 Annual Report on Form
10-K for the year ended December 31, 1999.
Certain amounts included in the 1999 financial statements have
been reclassified to conform with the 2000 financial statements.
3. SEGMENT INFORMATION
Effective January 1998, the Company adopted SFAS 131,
"Disclosures about segments of an Enterprise and Related Information,"
which established revised standards for the reporting of financial and
descriptive information about operating segments in financial
statements.
5
<PAGE> 7
The Company owns and operates advanced hybrid fiber-coaxial
networks and provides residential and business customers broadband
communications services, including analog and digital cable television,
local and long distance telephone, and high-speed Internet access,
which the Company refers to as video, voice and data services. The
Company also provides BCS which includes local transport services such
as local Internet transport, special access, local private line, and
local loop services.
While management of the Company monitors the revenue generated
from each of the various broadband services, operations are managed and
financial performance is evaluated based upon the delivery of multiple
services to customers over a single network. As a result of multiple
services being provided over a single network, many expenses and assets
are shared related to providing the various broadband services to
customers. Management believes that any allocation of the shared
expenses or assets to the broadband services would be subjective and
impractical.
Revenues by broadband communications service are as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30
---------------------------- ----------------------------
2000 1999 2000 1999
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Video ........................ $10,249,827 $ 8,384,705 $19,722,674 $16,569,808
Voice ........................ 3,022,646 1,853,097 5,539,976 3,400,557
Data and Other ............... 1,366,548 363,508 2,669,968 661,750
----------- ----------- ----------- -----------
Consolidated revenues ........ $14,639,021 $10,601,310 $27,932,618 $20,632,115
=========== =========== =========== ===========
</TABLE>
6
<PAGE> 8
ITEM 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
THE MANAGEMENT'S DISCUSSION AND ANALYSIS AND OTHER PORTIONS OF THIS
REPORT INCLUDE "FORWARD-LOOKING" STATEMENTS WITHIN THE MEANING OF THE FEDERAL
SECURITIES LAWS, INCLUDING THE PRIVATE SECURITIES LITIGATION REFORM ACT, THAT
ARE SUBJECT TO FUTURE EVENTS, RISKS AND UNCERTAINTIES THAT COULD CAUSE ACTUAL
RESULTS TO DIFFER MATERIALLY FROM THOSE EXPRESSED OR IMPLIED. IMPORTANT FACTORS
THAT EITHER INDIVIDUALLY OR IN THE AGGREGATE COULD CAUSE ACTUAL RESULTS TO
DIFFER MATERIALLY FROM THOSE EXPRESSED INCLUDE, WITHOUT LIMITATION, (1) THAT WE
WILL NOT RETAIN OR GROW OUR CUSTOMER BASE, (2) THAT WE WILL FAIL TO BE
COMPETITIVE WITH EXISTING AND NEW COMPETITORS, (3) THAT WE WILL NOT ADEQUATELY
RESPOND TO TECHNOLOGICAL DEVELOPMENTS IMPACTING OUR INDUSTRY AND MARKETS, (4)
THAT NEEDED FINANCING WILL NOT BE AVAILABLE IF AND AS NEEDED, (5) THAT A
SIGNIFICANT CHANGE IN THE GROWTH RATE OF THE OVERALL U.S. ECONOMY WILL OCCUR
SUCH THAT CONSUMER AND CORPORATE SPENDING ARE MATERIALLY IMPACTED, AND (6) THAT
SOME OTHER UNFORESEEN DIFFICULTIES OCCUR. THIS LIST IS INTENDED TO IDENTIFY ONLY
CERTAIN OF THE PRINCIPAL FACTORS THAT COULD CAUSE ACTUAL RESULTS TO DIFFER
MATERIALLY FROM THOSE DESCRIBED IN THE FORWARD-LOOKING STATEMENTS INCLUDED
HEREIN.
The following is a discussion of our consolidated financial condition
and results of operations for the three and six months ended June 30, 2000 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 notes thereto and other financial data included
elsewhere in this Form 10-Q.
GENERAL
We offer residential and business customers Broadband Services,
including analog and digital cable television, local and long distance
telephone, high-speed Internet access service, and broadband carrier services.
We provide these Broadband Services using high capacity hybrid fiber-coaxial
networks that are two-way interactive. We own, operate and manage Interactive
Broadband Networks in six metropolitan areas: Huntsville and Montgomery,
Alabama; Columbus and Augusta, Georgia; Panama City, Florida and Charleston,
South Carolina and plan to expand to additional mid-sized cities in the
southeastern United States.
We have been expanding our networks and adding corporate staffing
necessary to grow the business into new markets. Accordingly, our operating
expenses and capital expenditures have increased significantly and are expected
to continue to increase with the continued expansion of the existing systems and
into new markets.
We have incurred net losses in each quarter since our inception, and as
of June 30, 2000, the accumulated deficit had reached approximately $157.8
million. We anticipate incurring net losses during the next several years while
continuing to expand operations, and as a result of substantially increased
depreciation and amortization from the construction of the new networks and
operating expenses incurred in building the customer base. There can be no
assurance that growth in revenue or the subscriber base will continue or that we
will be able to achieve or sustain profitability or positive cash flow.
REVENUES AND EXPENSES
We can group our revenues into four categories: video revenues, voice revenues,
data revenues and other revenues.
- Video revenues. Our video revenues consist of fixed monthly fees for
basic, premium and digital cable television services, as well as fees
from pay-per-view movies and events such as boxing matches and
concerts, that involve a charge for each viewing. Video revenues
accounted for approximately 70% and 71% of our consolidated revenues
for
7
<PAGE> 9
the three and six months ended June 30, 2000 compared to 79% and 80
for the three and six months ended June 30, 1999.
- Voice revenues. Our voice revenues consist primarily of fixed monthly
fees for local service, enhanced services such as call waiting and
voice mail and usage fees for long distance service. Voice revenues
accounted for approximately 21% and 20% of our consolidated revenues
for the three and six months ended June 30, 2000 compared to 18% and
17% for the three and six months ended June 30, 1999.
- Data revenues and other revenues. Our data revenues consist primarily
of fixed monthly fees for Internet access service and rental of cable
modems. Other revenues resulted principally from broadband carrier
services and video production services. These combined revenues
accounted for approximately 9% and 9% of our consolidated revenues for
the three and six months ended June 30, 2000 compared to 3% and 3% for
the three and six months ended June 30, 1999.
Our operating expenses include cost of services expenses, selling, operations
and administrative expenses and depreciation and amortization expenses.
Cost of services expenses include:
- Video cost of services. Video cost of services consist primarily of
monthly fees to the National Cable Television Cooperative and other
programming providers, and are generally based on the average number
of subscribers to each program. Programming costs as a percentage of
video revenue were approximately 42.5% and 43.0% for the three and six
months ended June 30, 2000 compared to 41.9% and 42.6% for the three
and six months ended June 30, 1999. Programming costs is our largest
single cost and we expect this to continue. Since this cost is based
on numbers of subscribers, it will increase as we add more
subscribers.
- Voice and data services. Cost of services related to our voice and
data services include costs of Internet transport and telephone
switching, and interconnection and transport charges payable to local
and long distance carriers.
Selling, operations and administrative expenses include:
- Sales and marketing costs. Sales and marketing costs include the cost
of sales and marketing personnel and advertising and promotional
expenses.
- Network operations and maintenance expenses. Network operations and
maintenance expenses include payroll and departmental costs incurred
for network design and maintenance monitoring.
- Customer service expenses. Customer service expenses include payroll
and departmental costs incurred for customer service representatives
and management.
- General and administrative expenses. General and administrative
expenses consist of corporate and subsidiary general management and
administrative costs.
Depreciation and amortization expenses include depreciation of our
interactive broadband networks and equipment, and amortization of cost in excess
of net assets and other intangible assets related to acquisitions.
8
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RESULTS OF OPERATION
THREE MONTHS ENDED JUNE 30, 2000 COMPARED TO THREE MONTHS ENDED JUNE 30, 1999
Revenues. Operating revenues increased 38.1% from $10.6 million for the
three months ended June 30, 1999 to $14.6 million for the three months ended
June 30, 2000. Operating revenues from video services increased 22.2% from $8.4
million for the three months ended June 30, 1999 to $10.2 million for the same
period in 2000. Operating revenues from voice services increased 63.1% from $1.9
million for the three months ended June 30, 1999 to $3.0 million for the same
period in 2000. Operating revenue from data and other services increased 276%
from $364,000 for the three months ended June 30, 1999 to $1.4 million for the
same period in 2000, $1.2 million of which were revenues from data services. The
increased revenues for voice and data and other services are primarily due to an
increase in the number of connections, from 97,565 during the three months ended
June 30, 1999 to 131,872 for the same period in 2000. The additional connections
resulted primarily from the extension of our broadband networks in Montgomery,
Columbus, Panama City, Augusta and Charleston.
Expenses. Our operating expenses, excluding depreciation and
amortization, increased 23.6%, from $14.8 million for the three months ended
June 30, 1999, to $18.4 million for the three months ended June 30, 2000. The
cost of services component of operating expenses increased 23.9%, from $5.2
million for 1999 to $6.4 for 1999. The increase in our cost of services and
other operating expenses is consistent with the growth in revenues and is a
result of the expansion of our operations and the increase in the number of
subscribers and the number of employees associated with such expansion and
growth into new markets.
Our depreciation and amortization expenses increased 47.8% from $8.3
million for the three months ended June 30, 1999, to $12.3 million for the three
months ended June 30, 2000. The increase in depreciation is primarily due to the
expansion of our networks and growth in to new markets.
Other Income and Expenses. Our interest income was approximately
$386,000 for the three months ended June 30, 1999, compared to $31,000 for the
three months ended June 30, 2000. The interest income reflects the interest
earned from the investment of certain proceeds received from the issuance of the
senior discount notes in October 1997. The decrease in interest income is due to
the draw down of marketable securities to fund planned expansion and
acquisitions.
Our interest expense increased from $7.8 million for the three months
ended June 30, 1999 to $9.7 million for the three months ended June 30, 2000.
The increase in interest expense reflects the accrual of the interest
attributable to the senior discount notes issued in October 1997.
Income Tax (Provision) Benefit. We recorded an income tax benefit of
$3.2 million for the three months ended June 30, 1999 compared to no income tax
benefit for the three months ended June 30, 2000. The income tax benefit in 1999
resulted from our utilizing net tax losses under a tax sharing agreement with
ITC Holding.
Net Loss. We incurred a net loss of $16.7 million for the three months
ended June 30, 1999 compared to a net loss of $25.6 million for the year ended
December 31, 2000. The increase in net loss is a result of the expansion of our
operations and the increase in the number of employees associated with such
expansion and growth into new markets.
SIX MONTHS ENDED JUNE 30, 2000 COMPARED TO SIX MONTHS ENDED JUNE 30, 1999
Revenues. Operating revenues increased 35.4% from $20.6 million for the
six months ended June 30, 1999 to $27.9 million for the six months ended June
30, 2000. Operating revenues from video services increased 19.0% from $16.6
million for the six months ended June 30, 1999 to $19.7 million for the same
period in 2000. Operating revenues from voice services increased 62.9% from $3.4
million for the six months ended June 30, 1999 to $5.5 million for the same
period in 2000. Operating revenue from data and other services increased 304%
from $662,000 for the six months ended June 30, 1999 to $2.7
9
<PAGE> 11
million for the same period in 2000, $2.4 million of which were revenues from
data services. The increased revenues for voice and data and other services are
primarily due to an increase in the number of connections, from 97,565 during
the six months ended June 30, 1999 to 131,872 for the same period in 2000. The
additional connections resulted primarily from the extension of our broadband
networks in Montgomery, Columbus, Panama City, Augusta and Charleston.
Expenses. Our operating expenses, excluding depreciation and
amortization, increased 23.5%, from $28.2 million for the six months ended June
30, 1999, to $34.8 million for the six months ended June 30, 2000. The cost of
services component of operating expenses increased 25.9%, from $10.0 million for
1999 to $12.6 for 1999. The increase in our cost of services and other operating
expenses is consistent with the growth in revenues and is a result of the
expansion of our operations and the increase in the number of subscribers and
the number of employees associated with such expansion and growth into new
markets.
Our depreciation and amortization expenses increased 47.5% from $16.1
million for the six months ended June 30, 1999, to $23.7 million for the six
months ended June 30, 2000. The increase in depreciation is primarily due to the
expansion of our networks and growth in to new markets.
Other Income and Expenses. Our interest income was approximately $1.1
million for the six months ended June 30, 1999, compared to $103,000 for the six
months ended June 30, 2000. The interest income reflects the interest earned
from the investment of certain proceeds received from the issuance of the senior
discount notes in October 1997. The decrease in interest income is due to the
draw down of marketable securities to fund planned expansion and acquisitions.
Our interest expense increased from $15.6 million for the six months
ended June 30, 1999 to $18.9 million for the six months ended June 30, 2000. The
increase in interest expense reflects the accrual of the interest attributable
to the senior discount notes issued in October 1997.
Income Tax (Provision) Benefit. We recorded an income tax benefit of
$7.1 million for the six months ended June 30, 1999 compared an income tax
benefit of $1.8 million for the six months ended June 30, 2000. The income tax
benefit in 1999 resulted from our utilizing net tax losses under a tax sharing
agreement with ITC Holding.
Net Loss. We incurred a net loss of $31.0 million for the six months
ended June 30, 1999 compared to a net loss of $47.6 million for the year ended
December 31, 2000. The increase in net loss is a result of the expansion of our
operations and the increase in the number of employees associated with such
expansion and growth into new markets.
ITEM 3. Quantitative and Qualitative Disclosures About Market Risk
Not required under reduced disclosure format.
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PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings
None
ITEM 2. Changes in Securities and Use of Proceeds
Not required under reduced disclosure format.
ITEM 3. Default upon Senior Securities
Not required under reduced disclosure format.
ITEM 4. Submission of Matters to a Vote of Security Holders
Not required under reduced disclosure format.
ITEM 5. Other Information
None
ITEM 6. Exhibits and Reports on Form 8-K
(A) EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NUMBER DESCRIPTION OF EXHIBIT
-------------- ----------------------
<S> <C>
3.1 Certificate of Amendment of Certificate of
Incorporation of Knology Broadband, Inc.
3.2 Certificate of Amendment of Certificate of
Designation of Preferred Stock of Knology Broadband,
Inc.
27.1 Financial Data Schedule for the six months ended June
30, 2000 (for SEC use only).
</TABLE>
(B) REPORTS ON FORM 8-K
The Company did not file any reports on form 8-K during the quarterly
period ended June 30, 2000.
11
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the Company
has duly caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
Knology Broadband, Inc.
August 11, 2000 By: /s/ RODGER L. JOHNSON
----------------------------------------
President and Chief Executive Officer
August 11, 2000 By: /s/ ROBERT K. MILLS
----------------------------------------
Chief Financial Officer
(Principal Financial Officer)
12
