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, 2012
Commission File Numbers: 333-72440
333-82124-02
Mediacom Broadband LLC
Mediacom Broadband Corporation*
(Exact names of Registrants as specified in their charters)
Delaware | 06-1615412 | |
Delaware | 06-1630167 | |
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification Numbers) |
100 Crystal Run Road
Middletown, New York 10941
(Address of principal executive offices)
(845) 695-2600
(Registrants telephone number)
Indicate by check mark whether the Registrants (1) have 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 Registrants were required to file such reports), and (2) have been subject to such filing requirements for the past 90 days. ¨ Yes x No
Note: As voluntary filers, not subject to the filing requirements, the Registrants have filed all reports under Section 13 or 15(d) of the Exchange Act during the preceding 12 months.
Indicate by check mark whether the Registrants have submitted electronically and posted on their corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the Registrants were required to submit and post such files). x Yes ¨ No
Indicate by check mark whether the Registrants are large accelerated filers, accelerated filers, non-accelerated filers or smaller reporting companies. See the definitions of large accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act.
Large accelerated filers | ¨ | Accelerated filers | ¨ | |||
Non-accelerated filers | x | Smaller reporting companies | ¨ |
Indicate by check mark whether the Registrants are shell companies (as defined in Rule 12b-2 of the Exchange Act). ¨ Yes x No
Indicate the number of shares outstanding of the Registrants common stock: Not Applicable
* | Mediacom Broadband Corporation meets the conditions set forth in General Instruction H (1) (a) and (b) of Form 10-Q and is therefore filing this form with the reduced disclosure format. |
MEDIACOM BROADBAND LLC AND SUBSIDIARIES
FORM 10-Q
FOR THE PERIOD ENDED JUNE 30, 2012
Page | ||||||
PART I | ||||||
Item 1. | 4 | |||||
Consolidated Balance Sheets (unaudited) June 30, 2012 and December 31, 2011 | 4 | |||||
Consolidated Statements of Operations (unaudited) Three and Six Months Ended June 30, 2012 and 2011 | 5 | |||||
Consolidated Statements of Cash Flows (unaudited) Six Months Ended June 30, 2012 and 2011 | 6 | |||||
Notes to Consolidated Financial Statements (unaudited) | 7 | |||||
Item 2. | Managements Discussion and Analysis of Financial Condition and Results of Operations |
14 | ||||
Item 3. | 23 | |||||
Item 4. | 23 | |||||
PART II | ||||||
Item 1. | 25 | |||||
Item 1A. | 25 | |||||
Item 6. | 25 | |||||
26 |
This Quarterly Report on Form 10-Q is for the three months ended June 30, 2012. Any statement contained in a prior periodic report shall be deemed to be modified or superseded for purposes of this Quarterly Report to the extent that a statement contained herein modifies or supersedes such statement. The Securities and Exchange Commission allows us to incorporate by reference information that we file with them, which means that we can disclose important information by referring you directly to those documents. Information incorporated by reference is considered to be part of this Quarterly Report. References in this Quarterly Report to we, us, or our are to Mediacom Broadband LLC and its direct and indirect subsidiaries (including Mediacom Broadband Corporation), unless the context specifies or requires otherwise. References in this Quarterly Report to Mediacom or MCC are to Mediacom Communications Corporation.
2
Cautionary Statement Regarding Forward-Looking Statements
You should carefully review the information contained in this Quarterly Report and in other reports or documents that we file from time to time with the SEC.
In this Quarterly Report, we state our beliefs of future events and of our future financial performance. In some cases, you can identify those so-called forward-looking statements by words such as anticipates, believes, continue, could, estimates, expects, intends, may, plans, potential, predicts, should or will, or the negative of those and other comparable words. These forward-looking statements are not guarantees of future performance or results, and are subject to risks and uncertainties that could cause actual results to differ materially from historical results or those we anticipate as a result of various factors, many of which are beyond our control. Factors that may cause such differences to occur include, but are not limited to:
| increased levels of competition from existing and new competitors; |
| lower demand for our residential and business services; |
| our ability to successfully introduce new products and services to meet customer demands and preferences; |
| changes in laws, regulatory requirements or technology that may cause us to incur additional costs and expenses; |
| greater than anticipated increases in programming costs and other delivery expenses related to our products and services; |
| changes in assumptions underlying our critical accounting policies; |
| our ability to secure hardware, software and operational support for the delivery of products and services to our customers; |
| disruptions or failures of our network and information systems, including those caused by natural disasters; |
| our reliance on certain intellectual properties; |
| our ability to generate sufficient cash flow to meet our debt service obligations; |
| our ability to refinance future debt maturities or provide future funding for general corporate purposes and potential strategic transactions, on similar terms as we currently experience; and |
| other risks and uncertainties discussed in this Quarterly Report, our Annual Report on Form 10-K for the year ended December 31, 2011 and other reports or documents that we file from time to time with the SEC. |
Statements included in this Quarterly Report are based upon information known to us as of the date that this Quarterly Report is filed with the SEC, and we assume no obligation to update or alter our forward-looking statements made in this Quarterly Report, whether as a result of new information, future events or otherwise, except as required by applicable federal securities laws.
3
PART I
MEDIACOM BROADBAND LLC AND SUBSIDIARIES
(Dollars in thousands)
(Unaudited)
June 30, 2012 |
December 31, 2011 |
|||||||
ASSETS |
||||||||
CURRENT ASSETS |
||||||||
Cash |
$ | 9,749 | $ | 11,730 | ||||
Accounts receivable, net of allowance for doubtful accounts of $1,370 and $1,149 |
55,290 | 64,071 | ||||||
Accounts receivable - affiliates |
1,721 | | ||||||
Prepaid expenses and other current assets |
12,439 | 7,463 | ||||||
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|
|
|
|||||
Total current assets |
79,199 | 83,264 | ||||||
Property, plant and equipment, net of accumulated depreciation of $1,163,691 and $1,096,334 |
806,847 | 808,370 | ||||||
Franchise rights |
1,176,908 | 1,176,908 | ||||||
Goodwill |
195,945 | 195,945 | ||||||
Subscriber lists, net of accumulated amortization of $39,740 and $39,215 |
7 | 532 | ||||||
Other assets, net of accumulated amortization of $20,698 and $19,378 |
20,031 | 22,326 | ||||||
|
|
|
|
|||||
Total assets |
$ | 2,278,937 | $ | 2,287,345 | ||||
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|||||
LIABILITIES, PREFERRED MEMBERS INTEREST AND MEMBERS DEFICIT |
||||||||
CURRENT LIABILITIES |
||||||||
Accounts payable, accrued expenses and other current liabilities |
$ | 158,652 | $ | 170,532 | ||||
Deferred revenue |
33,949 | 33,525 | ||||||
Current portion of long-term debt |
14,000 | 14,000 | ||||||
|
|
|
|
|||||
Total current liabilities |
206,601 | 218,057 | ||||||
Long-term debt, less current portion |
1,959,000 | 1,983,000 | ||||||
Other non-current liabilities |
41,472 | 44,632 | ||||||
|
|
|
|
|||||
Total liabilities |
2,207,073 | 2,245,689 | ||||||
Commitments and contingencies (Note 10) |
||||||||
PREFERRED MEMBERS INTEREST (Note 8) |
150,000 | 150,000 | ||||||
MEMBERS DEFICIT |
||||||||
Capital contributions |
95,623 | 94,344 | ||||||
Accumulated deficit |
(173,759 | ) | (202,688 | ) | ||||
|
|
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|
|||||
Total members deficit |
(78,136 | ) | (108,344 | ) | ||||
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|
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Total liabilities, preferred members interest and members deficit |
$ | 2,278,937 | $ | 2,287,345 | ||||
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|
|
The accompanying notes to the unaudited financial statements are an integral part of these statements.
4
MEDIACOM BROADBAND LLC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands)
(Unaudited)
Three Months Ended June 30, |
Six Months Ended June 30, |
|||||||||||||||
2012 | 2011 | 2012 | 2011 | |||||||||||||
(Amounts in thousands) | ||||||||||||||||
Revenues |
$ | 223,884 | $ | 219,758 | $ | 445,084 | $ | 435,415 | ||||||||
Costs and expenses: |
||||||||||||||||
Service costs (exclusive of depreciation and amortization) |
90,593 | 89,125 | 180,902 | 179,111 | ||||||||||||
Selling, general and administrative expenses |
44,064 | 43,052 | 88,046 | 85,246 | ||||||||||||
Management fee expense |
3,625 | 3,663 | 7,085 | 7,660 | ||||||||||||
Depreciation and amortization |
37,672 | 35,972 | 75,101 | 71,277 | ||||||||||||
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|
|
|
|
|
|
|||||||||
Operating income |
47,930 | 47,946 | 93,950 | 92,121 | ||||||||||||
Interest expense, net |
(28,505 | ) | (28,228 | ) | (56,442 | ) | (55,652 | ) | ||||||||
(Loss) gain on derivatives, net |
(841 | ) | (11,577 | ) | 1,066 | (4,205 | ) | |||||||||
Other expense, net |
(327 | ) | (374 | ) | (653 | ) | (1,182 | ) | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Net income |
$ | 18,257 | $ | 7,767 | $ | 37,921 | $ | 31,082 | ||||||||
Dividend to preferred members |
4,500 | 4,500 | 9,000 | 9,000 | ||||||||||||
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|
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Net income applicable to members |
$ | 13,757 | $ | 3,267 | $ | 28,921 | $ | 22,082 | ||||||||
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The accompanying notes to the unaudited financial statements are an integral part of these statements.
5
MEDIACOM BROADBAND LLC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
Six Months Ended June 30, |
||||||||
2012 | 2011 | |||||||
OPERATING ACTIVITIES: |
||||||||
Net income |
$ | 37,921 | $ | 31,082 | ||||
Adjustments to reconcile net income to net cash flows provided by operating activities: |
||||||||
Depreciation and amortization |
75,101 | 71,277 | ||||||
(Gain) loss on derivatives, net |
(1,066 | ) | 4,205 | |||||
Amortization of deferred financing costs |
2,413 | 2,133 | ||||||
Changes in assets and liabilities, net of effects from acquisitions: |
||||||||
Accounts receivable, net |
8,781 | (2,473 | ) | |||||
Accounts receivable - affiliates |
(1,721 | ) | 8,718 | |||||
Prepaid expenses and other assets |
(4,935 | ) | 1,435 | |||||
Accounts payable, accrued expenses and other current liabilities |
(6,651 | ) | 12,991 | |||||
Deferred revenue |
424 | 1,374 | ||||||
Other non-current liabilities |
(51 | ) | (170 | ) | ||||
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|
|
|
|||||
Net cash flows provided by operating activities |
$ | 110,216 | $ | 130,572 | ||||
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|
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INVESTING ACTIVITIES: |
||||||||
Capital expenditures |
$ | (73,210 | ) | $ | (75,285 | ) | ||
Change in accrued property, plant and equipment |
(7,867 | ) | | |||||
Redemption of restricted cash and cash equivalents |
| 6,153 | ||||||
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|
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Net cash flows used in investing activities |
$ | (81,077 | ) | $ | (69,132 | ) | ||
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FINANCING ACTIVITIES: |
||||||||
New borrowings |
$ | 123,500 | $ | 250,000 | ||||
Repayment of borrowings |
(147,500 | ) | (80,400 | ) | ||||
Dividend payments on preferred members interest |
(9,000 | ) | (9,000 | ) | ||||
Capital contributions from parent |
18,500 | | ||||||
Capital distributions to parent |
(16,125 | ) | (245,000 | ) | ||||
Other financing activities - book overdrafts |
(495 | ) | (691 | ) | ||||
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Net cash flows used in financing activities |
$ | (31,120 | ) | $ | (85,091 | ) | ||
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Net decrease in cash |
(1,981 | ) | (23,651 | ) | ||||
CASH, beginning of period |
11,730 | 33,123 | ||||||
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CASH, end of period |
$ | 9,749 | $ | 9,472 | ||||
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SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: |
||||||||
Cash paid during the period for interest, net of amounts capitalized |
$ | 53,769 | $ | 54,023 | ||||
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|
|
The accompanying notes to the unaudited financial statements are an integral part of these statements.
6
MEDIACOM BROADBAND LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION
Basis of Preparation of Unaudited Consolidated Financial Statements
Mediacom Broadband LLC (Mediacom Broadband, and collectively with its subsidiaries, we, our or us), a Delaware limited liability company wholly-owned by Mediacom Communications Corporation (MCC), is involved in the acquisition and operation of cable systems serving smaller cities and towns in the United States. Our principal operating subsidiaries conduct all of our consolidated operations and own substantially all of our consolidated assets. Our operating subsidiaries are separate and distinct legal entities and have no obligation, contingent or otherwise, to make funds available to us.
We have prepared these unaudited consolidated financial statements in accordance with the rules and regulations of the Securities and Exchange Commission (the SEC). In the opinion of management, such statements include all adjustments, consisting of normal recurring accruals and adjustments, necessary for a fair presentation of our consolidated results of operations and financial position for the interim periods presented. The accounting policies followed during such interim periods reported are in conformity with generally accepted accounting principles in the United States of America and are consistent with those applied during annual periods. For a summary of our accounting policies and other information, refer to our Annual Report on Form 10-K for the year ended December 31, 2011. The results of operations for the interim periods are not necessarily indicative of the results that might be expected for future interim periods or for the full year ending December 31, 2012.
Mediacom Broadband Corporation (Broadband Corporation), a Delaware corporation wholly-owned by us, co-issued, jointly and severally with us, public debt securities. Broadband Corporation has no operations, revenues or cash flows and has no assets, liabilities or stockholders equity on its balance sheet, other than a one-hundred dollar receivable from an affiliate and the same dollar amount of common stock. Therefore, separate financial statements have not been presented for this entity.
Franchise fees imposed by local governmental authorities are collected on a monthly basis from our customers and are periodically remitted to the local governmental authorities. Because franchise fees are our obligation, we present them on a gross basis with a corresponding operating expense. Franchise fees reported on a gross basis amounted to approximately $6.2 million and $6.3 million for the three months ended June 30, 2012 and 2011, respectively, and approximately $12.3 million and $12.6 million for the six months ended June 30, 2012 and 2011, respectively.
Reclassifications
Certain reclassifications have been made to prior year amounts to conform to the current year presentation.
Revision of Prior Period Financial Statements
In connection with the preparation of our consolidated financial statements as of, and for the year ended December 31, 2011, during the fourth quarter of 2011, we identified and corrected errors in the manner in which we recorded fixed assets and the related depreciation expense on fixed assets purchased by MCC on behalf of our operating subsidiaries. Such capital expenditures and associated depreciation were recorded at MCC, whereas they were related to, and should have been incurred by, our operating subsidiaries. In accordance with accounting guidance found in ASC 250-10 (SEC Staff Accounting Bulletin No. 99, Materiality), we assessed the materiality of the errors and concluded that the errors were not material to any of our previously-issued financial statements. In accordance with accounting guidance found in ASC 250-10 (SEC Staff Accounting Bulletin No. 108, Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements), we have revised all affected periods. These non-cash errors impacted our statement of operations and cash flows for the comparative periods presented.
7
The following table presents the impact of the revision on our three month ended Consolidated Statements of Operations (dollars in thousands):
Three Months Ended June 30, 2011 | ||||||||||||
As Previously Reported |
Adjustment | As Revised |
||||||||||
Depreciation and amortization expense |
$ | 35,876 | $ | 96 | $ | 35,972 | ||||||
Operating income |
48,042 | (96 | ) | 47,946 | ||||||||
Net income |
7,863 | (96 | ) | 7,767 | ||||||||
Net income applicable to member |
3,363 | (96 | ) | 3,267 |
The following table presents the impact of the revision on our six month ended Consolidated Statements of Operations (dollars in thousands):
Six Months Ended June 30, 2011 | ||||||||||||
As Previously Reported |
Adjustment | As Revised |
||||||||||
Depreciation and amortization expense |
$ | 71,089 | $ | 188 | $ | 71,277 | ||||||
Operating income |
92,309 | (188 | ) | 92,121 | ||||||||
Net income |
31,270 | (188 | ) | 31,082 | ||||||||
Net income applicable to member |
22,270 | (188 | ) | 22,082 |
The following table presents the impact of the revision on our six month ended Consolidated Statements of Cash Flows (dollars in thousands):
Six Months Ended June 30, 2011 | ||||||||||||
As Previously Reported |
Adjustment | As Revised |
||||||||||
Net income |
$ | 31,270 | $ | (188 | ) | $ | 31,082 | |||||
Depreciation and amortization expense |
71,089 | 188 | 71,277 | |||||||||
Changes in assets and liabilities |
20,044 | 1,831 | 21,875 | |||||||||
Net cash flows provided by operating activities |
128,741 | 1,831 | 130,572 | |||||||||
Capital expenditures |
(73,454 | ) | (1,831 | ) | (75,285 | ) | ||||||
Net cash flows used in investing activities |
(67,301 | ) | (1,831 | ) | (69,132 | ) |
8
2. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In May 2011, the FASB issued Accounting Standards Update No. 2011-04 (ASU 2011-04), Fair Value Measurement (Topic 820) Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs, which provides a converged framework for fair value measurements and related disclosures between generally accepted accounting principles in the U.S. and International Financial Reporting Standards. ASU 2011-04 amends the fair value measurement and disclosure guidance in the following areas: (i) Highest-and-best use and the valuation-premise concepts for non-financial assets, (ii) application to financial assets and liabilities with offsetting positions in market or counterparty credit risk, (iii) premiums or discounts in fair value measurement, (iv) fair value measurements for amounts classified in equity; and (v) other disclosure requirements particularly involving Level 3 inputs. This guidance will be effective for us as of January 1, 2012. We adopted ASU 2011-04 on January 1, 2012. The adoption of ASU 2011-04 did not have a material impact on our financial statements or related disclosures.
In September 2011, the FASB issued Accounting Standards Update No. 2011-08 (ASU 2011-08) Intangibles Goodwill and Other (Topic 350). Under ASU 2011-08, an entity has the option to first assess qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If, after assessing the totality of events or circumstances, an entity determines it is more likely than not that the fair value of a reporting unit is greater than its carrying amount, then performing the two-step impairment test is unnecessary. However, if an entity concludes otherwise, then it is required to perform the first step of the two-step impairment test. Under ASU 2011-08, an entity has the option to bypass the qualitative assessment for any reporting unit in any period and proceed directly to performing the first step of the two-step goodwill impairment test. An entity may resume performing the qualitative assessment in any subsequent period. ASU 2011-08 is effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011. We adopted ASU 2011-08 on January 1, 2012. The adoption of ASU 2011-08 did not have a material impact on our financial statements or related disclosures.
In July 2012, the FASB issued Accounting Standards Update No. 2012-02 (ASU 2012-02) Intangibles - Goodwill and Other (Topic 350). ASU 2012-02 allows an entity to first assess qualitative factors to determine whether it is necessary to perform a quantitative impairment test. An entity would not be required to calculate the fair value of an indefinite-lived intangible asset unless the entity determines, based on qualitative assessment, that it is not more likely than not, the indefinite-lived intangible asset is impaired. ASU 2012-02 includes a number of events and circumstances for an entity to consider in conducting the qualitative assessment. ASU 2012-02 is effective for annual and interim impairment tests performed for fiscal years beginning after September 15, 2012. Early adoption is permitted. We are currently assessing the potential impact that the adoption of ASU 2012-02 will have on our consolidated financial statements.
3. FAIR VALUE
The tables below set forth our financial assets and liabilities measured at fair value on a recurring basis using a market-based approach at June 30, 2012. These assets and liabilities have been categorized according to the three-level fair value hierarchy established by ASC 820, which prioritizes the inputs used in measuring fair value, as follows:
| Level 1 Quoted market prices in active markets for identical assets or liabilities. |
| Level 2 Observable market based inputs or unobservable inputs that are corroborated by market data. |
| Level 3 Unobservable inputs that are not corroborated by market data. |
9
As of June 30, 2012, our interest rate exchange agreement liabilities, net, were valued at $62.2 million using Level 2 inputs, as follows (dollars in thousands):
Fair Value as of June 30, 2012 | ||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Assets |
||||||||||||||||
Interest rate exchange agreements |
$ | | $ | | $ | | $ | | ||||||||
Liabilities |
||||||||||||||||
Interest rate exchange agreements |
$ | | $ | 62,208 | $ | | $ | 62,208 | ||||||||
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Interest rate exchange agreements - liabilities, net |
$ | | $ | 62,208 | $ | | $ | 62,208 | ||||||||
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As of December 31, 2011, our interest rate exchange agreement liabilities, net, were valued at $63.3 million using Level 2 inputs, as follows (dollars in thousands):
Fair Value as of December 31, 2011 | ||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Assets |
||||||||||||||||
Interest rate exchange agreements |
$ | | $ | | $ | | $ | | ||||||||
Liabilities |
||||||||||||||||
Interest rate exchange agreements |
$ | | $ | 63,273 | $ | | $ | 63,273 | ||||||||
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Interest rate exchange agreements - liabilities, net |
$ | | $ | 63,273 | $ | | $ | 63,273 | ||||||||
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The fair value of our interest rate exchange agreements is the estimated amount that we would receive or pay to terminate such agreements, taking into account market interest rates and the remaining time to maturities. As of June 30, 2012, based upon mark-to-market valuation, we recorded on our consolidated balance sheet, an accumulated current liability of $22.1 million and an accumulated long-term liability of $40.1 million. As of December 31, 2011, based upon mark-to-market valuation, we recorded on our consolidated balance sheet an accumulated current liability of $20.0 million and an accumulated long-term liability of approximately $43.3 million. As a result of the mark-to-market valuations on these interest rate exchange agreements, we recorded a net loss on derivatives of $0.8 million and $11.6 million for the three months ended June 30, 2012 and 2011, respectively. As a result of the mark-to-market valuations on these interest rate exchange agreements, we recorded a net gain on derivatives of $1.1 million and a net loss of $4.2 million for the six months ended June 30, 2012 and 2011, respectively.
4. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consisted of the following (dollars in thousands):
June 30, 2012 |
December 31, 2011 |
|||||||
Cable systems, equipment and subscriber devices |
$ | 1,857,748 | $ | 1,793,501 | ||||
Furniture, fixtures and office equipment |
41,655 | 38,738 | ||||||
Vehicles |
37,550 | 39,018 | ||||||
Buildings and leasehold improvements |
28,566 | 28,432 | ||||||
Land and land improvements |
5,019 | 5,015 | ||||||
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|
|||||
Property, plant and equipment, gross |
1,970,538 | 1,904,704 | ||||||
Accumulated depreciation |
(1,163,691 | ) | (1,096,334 | ) | ||||
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|
|||||
Property, plant and equipment, net |
$ | 806,847 | $ | 808,370 | ||||
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10
5. ACCOUNTS PAYABLE, ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
Accounts payable, accrued expenses and other current liabilities consisted of the following (dollars in thousands):
June 30, 2012 |
December 31, 2011 |
|||||||
Accounts payable - non-affiliates |
$ | 27,291 | $ | 23,222 | ||||
Accrued programming costs |
24,317 | 23,370 | ||||||
Liabilities under interest rate exchange agreements |
22,079 | 20,036 | ||||||
Accrued taxes and fees |
20,397 | 18,026 | ||||||
Accrued payroll and benefits |
16,076 | 16,957 | ||||||
Accrued interest |
9,824 | 9,552 | ||||||
Advance subscriber payments |
8,903 | 8,554 | ||||||
Accrued service costs |
7,955 | 7,041 | ||||||
Accrued property, plant and equipment |
7,719 | 15,586 | ||||||
Book overdrafts (1) |
2,816 | 2,221 | ||||||
Accrued telecommunications costs |
1,206 | 1,384 | ||||||
Accounts payable - affiliates |
| 15,143 | ||||||
Other accrued expenses |
10,069 | 9,440 | ||||||
|
|
|
|
|||||
Accounts payable, accrued expenses and other current liabilities |
$ | 158,652 | $ | 170,532 | ||||
|
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|
(1) | Book overdrafts represent outstanding checks in excess of funds on deposit at our disbursement accounts. We transfer funds from our depository accounts to our disbursement accounts upon daily notification of checks presented for payment. Changes in book overdrafts are reported as part of net cash flows from financing activities in our Consolidated Statements of Cash Flows. |
6. DEBT
As of June 30, 2012 and December 31, 2011, our debt consisted of (dollars in thousands):
June 30, 2012 |
December 31, 2011 |
|||||||
Bank credit facility |
$ | 1,473,000 | $ | 1,497,000 | ||||
8 1/2% senior notes due 2015 |
500,000 | 500,000 | ||||||
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|
|||||
Total debt |
$ | 1,973,000 | $ | 1,997,000 | ||||
Less: current portion |
14,000 | 14,000 | ||||||
|
|
|
|
|||||
Total long-term debt |
$ | 1,959,000 | $ | 1,983,000 | ||||
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|
|
|
Bank Credit Facility
As of June 30, 2012, we maintained a $1.560 billion bank credit facility (the credit facility), comprising:
| $216.0 million of revolving credit commitments, which expire on December 31, 2016; |
| $756.0 million of outstanding Term Loan D borrowings, which mature on January 31, 2015; and |
| $588.0 million of outstanding Term Loan F borrowings, which mature on October 23, 2017. |
As of June 30, 2012, we had $76.4 million of unused revolving credit commitments, all of which were able to be borrowed and used for general corporate purposes, after giving effect to $129.0 million of outstanding loans and $10.6 million of letters of credit issued to various parties as collateral.
The credit facility is collateralized by our ownership interests in our operating subsidiaries, and is guaranteed by us on a limited recourse basis to the extent of such ownership interests. As of June 30, 2012, the credit agreement governing the credit facility (the credit agreement) required us to maintain a total leverage ratio (as defined) of no more than 6.0 to 1.0 and an interest coverage ratio (as defined) of no less than 1.75 to 1.0. The total leverage ratio covenant will be reduced to 5.5 to 1.0 commencing on April 1, 2013, and will be further reduced to 5.0 to 1.0 commencing on April 1, 2014. For all periods through June 30, 2012, we were in compliance with all of the covenants under the credit agreement and, as of the same date, our total leverage ratio and interest coverage ratio were 4.2 to 1.0 and 2.5 to 1.0, respectively.
11
Interest Rate Exchange Agreements
We use interest rate exchange agreements (which we refer to as interest rate swaps) with various banks to fix the variable portion of borrowings under the credit facility. We believe this reduces the potential volatility in our interest expense that would otherwise result from changes in market interest rates. Our interest rate swaps have not been designated as hedges for accounting purposes, and have been accounted for on a mark-to-market basis as of, and for the three months ended, June 30, 2012, and 2011. As of June 30, 2012:
| We had current interest rate swaps which set the variable portion of $700 million of borrowings under the credit facility at a rate of 3.3%. Our current interest rate swaps are scheduled to expire in the amounts of $400 million and $300 million during the years ending December 31, 2012 and 2014, respectively; and |
| We had forward-starting interest rate swaps which will fix the variable portion of $800 million of borrowings under the credit facility at a rate of 2.9%. Our forward-starting interest rate swaps are scheduled to commence in the amounts of $500 million and $300 million during the years ending December 31, 2012 and 2014, respectively. |
As of June 30, 2012, the average interest rate on outstanding borrowings under the credit facility, including the effect of these interest rate swaps, was 4.4%, as compared to 4.3% as of the same date last year.
Senior Notes
As of June 30, 2012, we had $500 million of senior notes outstanding, which are due in October 2015. Our senior notes are unsecured obligations, and the indenture governing our senior notes (the indenture) limits the incurrence of additional indebtedness based upon a maximum debt to operating cash flow ratio (as defined) of 8.5 to 1.0. As of June 30, 2012, we were in compliance with all of the covenants under the indenture and, as of the same date, our debt to operating cash flow ratio was 5.8 to 1.0.
Debt Ratings
MCCs corporate credit rating is B1, with a stable outlook, by Moodys, and B+, with a stable outlook, by Standard and Poors. Our senior unsecured credit rating is B3, with a stable outlook, by Moodys, and B-, with a stable outlook, by Standard and Poors.
There are no covenants, events of default, borrowing conditions or other terms in the credit agreement or indenture that are based on changes in our credit rating assigned by any rating agency.
Fair Value
As of June 30, 2012, the fair values of our senior notes and outstanding debt under the credit facility (using Level 2 inputs) were as follows (dollars in thousands):
8 1/2% senior notes due 2015 |
$ | 513,750 | ||
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|
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Bank credit facility |
$ | 1,443,600 | ||
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7. MEMBERS DEFICIT
Going Private Transaction
On November 12, 2010, MCC entered into an Agreement and Plan of Merger (the Merger Agreement), by and among MCC, JMC Communications LLC (JMC) and Rocco B. Commisso, MCCs founder, Chairman and Chief Executive Officer, who was also the sole member and manager of JMC, for the purpose of taking MCC private (the Going Private Transaction).
At a special meeting of stockholders on March 4, 2011, MCCs stockholders voted to adopt the Merger Agreement. On the same date, JMC was merged with and into MCC, with MCC continuing as the surviving corporation, a private company that is wholly-owned by an entity controlled by Mr. Commisso (the Merger).
12
The Going Private Transaction required funding of approximately $381.5 million, including related transaction expenses, and was funded, in part, by capital distributions to MCC from us, consisting of $200.0 million of borrowings under our revolving credit facility and $45.0 million of cash on hand. The balance was funded by Mediacom LLC, another wholly-owned subsidiary of MCC.
8. PREFERRED MEMBERS INTEREST
Mediacom LLC has a $150 million preferred membership investment in us, which has a 12% annual cash dividend, payable quarterly. During each of the three months ended June 30, 2012 and 2011, we paid $4.5 million in cash dividends on the preferred membership interest. During each of the six months ended June 30, 2012 and 2011, we paid $9.0 million in cash dividends on the preferred membership interest.
9. RELATED PARTY TRANSACTIONS
MCC manages us pursuant to a management agreement with our operating subsidiaries. Under such agreements, MCC has full and exclusive authority to manage our day to day operations and conduct our business. We remain responsible for all expenses and liabilities relating to the construction, development, operation, maintenance, repair, and ownership of our systems. Management fees amounted to $3.6 million and $3.7 million for the three months ended June 30, 2012 and 2011, respectively, and $7.1 million and $7.7 million for the six months ended June 30, 2012 and 2011, respectively.
Accounts receivable affiliates and accounts payable affiliates represent amounts due from, or amounts due to, MCC or its subsidiaries (other than us).
See Note 7 for more information about the Going Private Transaction between MCC and MCCs Chairman and Chief Executive Officer, Rocco B. Commisso.
10. COMMITMENTS AND CONTINGENCIES
Legal Proceedings
We are involved in various legal actions arising in the ordinary course of business. In the opinion of management, the ultimate disposition of these matters will not have a material adverse effect on our consolidated financial position, results of operations, cash flows or business.
11. GOODWILL AND OTHER INTANGIBLE ASSETS
In accordance with ASC 350 Intangibles Goodwill and Other (ASC 350), the amortization of goodwill and indefinite-lived intangible assets is prohibited and requires such assets to be tested annually for impairment, or more frequently if impairment indicators arise. We have determined that our cable franchise rights and goodwill are indefinite-lived assets and therefore not amortizable.
In accordance with ASU 2010-28, we have evaluated the qualitative factors surrounding our Mediacom Broadband reporting unit, which has negative equity carrying value. We do not believe that it is more likely than not that a goodwill impairment exists. As such, we have not performed Step 2 of the goodwill impairment test.
The economic conditions currently affecting the U.S. economy and the long-term impact on the fundamentals of our business may have a negative impact on the fair values of the assets in our reporting units. This may result in the recognition of an impairment loss in the future.
Because we believe there has not been a meaningful change in the long-term fundamentals of our business during the first six months of 2012, we have determined that there has been no triggering event under ASC 350, and as such, no interim impairment test was required as of June 30, 2012.
13
ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with our unaudited consolidated financial statements as of, and for the three and six months ended, June 30, 2012 and 2011, and with our annual report on Form 10-K for the year ended December 31, 2011.
Overview
We are a wholly-owned subsidiary of Mediacom Communications Corporation (MCC), the nations eighth largest cable company based on the number of video customers. As of June 30, 2012, we served approximately 579,000 video customers, 493,000 HSD customers and 193,000 phone customers, aggregating 1.27 million primary service units (PSUs).
Through our interactive broadband network, we provide our residential and commercial customers with a wide variety of products and services, including our primary services of video, high-speed data (HSD) and phone, which we refer to as our triple play bundle. We also provide network and transport services to medium and large sized businesses in our service areas, including cell tower backhaul for wireless telephone providers, and sell advertising time we receive under our programming license agreements to local, regional and national advertisers.
Our performance has been affected by general economic conditions and by the competition we face. We believe high unemployment levels and weakness in the housing sector and consumer spending have, in part, contributed to lower connect activity for all of our services and negatively impacted our residential customer and revenue growth. While we expect improvement as the economy recovers, a continuation or broadening of such effects may adversely impact our results of operations, cash flows and financial position.
Our residential video service principally competes with direct broadcast satellite (DBS) providers, who offer video programming substantially similar to ours. For the past several years, DBS competitors have deployed aggressive marketing campaigns, including deeply discounted promotional packages, which we believe has contributed to video customer losses in our markets. Our programming costs, particularly for sports and local broadcast programming, have risen well in excess of the inflation rate in recent years, a trend we expect to continue. Given these factors, we have generally limited our offering of discounted pricing for video-only customers, as we believe it has become uneconomic to offer a low-priced, low-margin video-only product in an attempt to match the competitions pricing. While the reduction of discounted pricing has positively impacted per-unit video revenues, we believe that it, along with weak economic conditions, has contributed to further video customer losses. If such losses were to continue, we may experience future annual declines in video revenues. We expect to mostly offset such declines through higher average unit pricing and greater penetration of our advanced video services, including video-on-demand (VOD), high-definition television (HDTV) and digital video recorders (DVRs).
Our residential HSD service competes primarily with local telephone companies, such as AT&T and CenturyLink. Such companies compete with our HSD product by offering digital subscriber line (DSL) services. In our markets, widely-available DSL service is typically limited to downstream speeds ranging from 1.5Mbps to 3Mbps, compared to our downstream speeds ranging from 3 Mbps to 105Mbps. We believe we will continue to increase HSD revenues through future growth in residential HSD customers and customers taking higher speed tiers.
Our residential phone service competes with local telephone companies that offer a product substantially similar to ours, and with cellular phone services offered by national wireless providers. We expect to face pricing pressure for our phone service, which may partially or fully offset greater revenues resulting from continuing growth of residential phone customers.
Certain local telephone companies, including AT&T and Verizon, have deployed fiber-based networks which allow for a triple play bundle that is comparable to ours. As of June 30, 2012, based on internal estimates, approximately 11% of our cable systems actively competed with these local telephone companies.
Our commercial video, HSD and phone services face similar competition to our comparable residential services. Historically, local telephone companies have been in a better position to offer HSD services to businesses, as their networks tend to be more developed in commercial areas. However, we have recently increased our efforts to offer and market a more complete array of products and services suited to businesses, and continue to extend our distribution network further into business districts in the cities and towns we serve. Our enterprise networks business faces competition from local telephone companies and other carriers, such as metro and regional fiber providers. We believe we will continue to increase business services revenues through increasing our commercial HSD, phone and, to a lesser extent, video customer base, and continued growth of our enterprise networks business, including fees for cell tower backhaul.
We face significant competition in our advertising business from a wide range of national, regional and local competitors. We compete for advertising revenues principally against local broadcast stations, national cable and broadcast networks, radio, newspapers, magazines, outdoor display and Internet companies. Advertising revenues are generally sensitive to the political election cycle, and we believe advertising revenues will increase for the full year 2012, as this is an election year.
14
Revenues
Video
Video revenues primarily represent monthly subscription fees charged to our residential video customers, which vary according to the level of service and equipment taken, and revenue from the sale of VOD content and pay-per-view events. Video revenues also include installation, reconnection and wire maintenance fees, franchise and late payment fees, and other ancillary revenues.
HSD
HSD revenues primarily represent monthly subscription fees charged to our residential HSD customers, which vary according to the level of HSD service taken.
Phone
Phone revenues primarily represent monthly subscription fees charged to our residential phone customers for our phone service.
Business Services
Business services revenues primarily represent monthly fees charged to our commercial video, HSD and phone customers, which vary according to the level of service taken, and fees charged to large sized businesses for our scalable, fiber-based enterprise networks products and services, which include wireless telephone providers for their cell tower backhaul requirements.
Advertising
Advertising revenues primarily represent revenues received from selling advertising time we receive under our programming license agreements to local, regional and national advertisers for the placement of commercials on channels offered on our video services.
Costs and Expenses
Service Costs
Service costs consist of the direct costs related to providing and maintaining services to our customers. Significant service costs include: video programming expenses; HSD service costs, including bandwidth connectivity; phone service costs, including leased circuits and long distance; costs related to our enterprise networks business; employee costs for technical personnel who maintain our cable network, perform customer installation activities and provide customer support; network operations center costs, including employee costs; and field operating costs, including the use of outside contractors, vehicle, utility and pole rental expenses.
Programming costs, which are generally paid on a per video customer basis, have historically represented our single largest expense. In recent years, we have experienced substantial increases in the cost of our programming, which we believe will continue to grow due to the increasing demands of large programmers. Our HSD and phone service costs fluctuate depending on the level of investments we make in our cable systems, and the resulting operational efficiencies. In June 2011, we completed a transition to an internal phone service platform, which greatly reduced our phone service expenses. Our other service costs generally rise as a result of customer growth and inflationary cost increases for personnel, outside vendors and other expenses. Personnel and related support costs may increase as the percentage of expenses that we capitalize declines due to lower levels of new service installations. We anticipate that our service costs, with the exception of programming expenses, will remain fairly consistent as a percentage of our revenues.
Selling, General and Administrative Expenses
Significant selling, general and administrative expenses include: wages and related expenses for our call center, customer service, marketing, business services, support and administrative personnel; franchise fees and other taxes; bad debt expense; billing costs; advertising and marketing expenses; and general office administration costs. These expenses generally rise due to customer growth and inflationary cost increases for personnel, outside vendors and other expenses. We anticipate that our selling, general and administrative expenses will remain fairly consistent as a percentage of our revenues.
Management Fee Expense
Management fee expense reflects compensation paid to MCC for the performance of services it provides our operating subsidiaries in accordance with management agreements between MCC and our operating subsidiaries.
Service costs, selling, general and administrative expenses, and management fee expenses exclude depreciation and amortization, which is presented separately.
15
Use of Non-GAAP Financial Measures
OIBDA is not a financial measure calculated in accordance with generally accepted accounting principles (GAAP) in the United States. We define OIBDA as operating income before depreciation and amortization. OIBDA has inherent limitations as discussed below.
OIBDA is one of the primary measures used by management to evaluate our performance and to forecast future results. We believe OIBDA is useful for investors because it enables them to assess our performance in a manner similar to the methods used by management, and provides a measure that can be used to analyze value and compare the companies in the cable industry. A limitation of OIBDA, however, is that it excludes depreciation and amortization, which represents the periodic costs of certain capitalized tangible and intangible assets used in generating revenues in our business. Management uses a separate process to budget, measure and evaluate capital expenditures. In addition, OIBDA may not be comparable to similarly titled measures used by other companies, which may have different depreciation and amortization policies.
OIBDA should not be regarded as an alternative to operating income or net income (loss) as an indicator of operating performance, or to the statement of cash flows as a measure of liquidity, nor should it be considered in isolation or as a substitute for financial measures prepared in accordance with GAAP. We believe that operating income is the most directly comparable GAAP financial measure to OIBDA.
Actual Results of Operations
Three Months Ended June 30, 2012 compared to Three Months Ended June 30, 2011
The table below sets forth our consolidated statements of operations and OIBDA for the three months ended June 30, 2012 and 2011 (dollars in thousands and percentage changes that are not meaningful are marked NM):
Three Months Ended June 30, |
||||||||||||||||
2012 | 2011 | $ Change | % Change | |||||||||||||
Revenues |
$ | 223,884 | $ | 219,758 | $ | 4,126 | 1.9 | % | ||||||||
Costs and expenses: |
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Service costs (exclusive of depreciation and amortization) |
90,593 | 89,125 | 1,468 | 1.6 | % | |||||||||||
Selling, general and administrative expenses |
44,064 | 43,052 | 1,012 | 2.4 | % | |||||||||||
Management fee expense |
3,625 | 3,663 | (38 | ) | (1.0 | %) | ||||||||||
Depreciation and amortization |
37,672 | 35,972 | 1,700 | 4.7 | % | |||||||||||
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Operating income |
47,930 | 47,946 | (16 | ) | (0.0 | %) | ||||||||||
Interest expense, net |
(28,505 | ) | (28,228 | ) | (277 | ) | 1.0 | % | ||||||||
Loss on derivatives, net |
(841 | ) | (11,577 | ) | 10,736 | NM | ||||||||||
Other expense, net |
(327 | ) | (374 | ) | 47 | (12.6 | %) | |||||||||
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Net income |
$ | 18,257 | $ | 7,767 | $ | 10,490 | NM | |||||||||
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OIBDA |
$ | 85,602 | $ | 83,918 | $ | 1,684 | 2.0 | % | ||||||||
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The table below represents a reconciliation of OIBDA to operating income, which is the most directly comparable GAAP measure (dollars in thousands):
Three Months Ended June 30, |
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2012 | 2011 | $ Change | % Change | |||||||||||||
OIBDA |
$ | 85,602 | $ | 83,918 | $ | 1,684 | 2.0 | % | ||||||||
Depreciation and amortization |
(37,672 | ) | (35,972 | ) | (1,700 | ) | 4.7 | % | ||||||||
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Operating income |
$ | 47,930 | $ | 47,946 | $ | (16 | ) | (0.0 | %) | |||||||
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16
Revenues
The tables below set forth our revenues and selected customer and average monthly revenue statistics as of, and for the three months ended, June 30, 2012 and 2011 (dollars in thousands, except per customer and per unit data):
Three Months Ended June 30, |
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2012 | 2011 | $ Change | % Change | |||||||||||||
Video |
$ | 117,542 | $ | 123,254 | $ | (5,712 | ) | (4.6 | %) | |||||||
HSD |
56,710 | 52,161 | 4,549 | 8.7 | % | |||||||||||
Phone |
16,642 | 16,486 | 156 | 0.9 | % | |||||||||||
Business services |
20,323 | 15,737 | 4,586 | 29.1 | % | |||||||||||
Advertising |
12,667 | 12,120 | 547 | 4.5 | % | |||||||||||
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Total |
$ | 223,884 | $ | 219,758 | $ | 4,126 | 1.9 | % | ||||||||
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June 30, | Increase (Decrease) |
% Change | ||||||||||||||
2012 | 2011 | |||||||||||||||
Video customers |
579,000 | 634,000 | (55,000 | ) | (8.7 | %) | ||||||||||
HSD customers |
493,000 | 470,000 | 23,000 | 4.9 | % | |||||||||||
Phone customers |
193,000 | 177,000 | 16,000 | 9.0 | % | |||||||||||
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Primary service units (PSUs) |
1,265,000 | 1,281,000 | (16,000 | ) | (1.2 | %) | ||||||||||
Digital customers |
442,000 | 415,000 | 27,000 | 6.5 | % | |||||||||||
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Revenue generating units |
1,707,000 | 1,696,000 | 11,000 | 0.6 | % | |||||||||||
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Average total monthly revenue per video customer (1) |
$ | 127.57 | $ | 113.75 | $ | 13.82 | 12.1 | % | ||||||||
Average total monthly revenue per PSU (2) |
$ | 58.90 | $ | 56.81 | $ | 2.09 | 3.7 | % |
(1) | Represents average total monthly revenues for the period divided by average video customers for such period. |
(2) | Represents average total monthly revenues for the period divided by average PSUs for such period. |
Revenues increased 1.9%, primarily due to higher business services and HSD revenues, offset in part by lower video revenues. Average total monthly revenue per video customer increased 12.1% to $127.57, and average total monthly revenue per PSU increased 3.7% to $58.90.
Video revenues declined 4.6%, mainly due to video customer losses, offset in part by higher unit pricing. During the three months ended June 30, 2012, we lost 12,000 video customers, compared to 20,000 in the prior year period. As of June 30, 2012, we served 579,000 video customers, or 38.9% of our estimated homes passed. As of the same date, 76.3% of our video customers were digital customers, and 45.3% of our digital customers were taking our DVR and/or HDTV services.
HSD revenues grew 8.7%, largely as a result of higher unit pricing and, to a lesser extent, an increased HSD customer base. During the three months ended June 30, 2012, we gained 4,000 HSD customers, compared to an increase of 1,000 in the prior year period. As of June 30, 2012, we served 493,000 HSD customers, or 33.1% of our estimated homes passed.
Phone revenues were 0.9% higher, as a larger phone customer base was mostly offset by lower unit pricing. During the three months ended June 30, 2012, we gained 4,000 phone customers, compared to an increase of 2,000 in the prior year period. As of June 30, 2012, we served 193,000 phone customers, or 13.0% of our estimated homes passed.
Business services revenues rose 29.1%, mainly due to a larger customer base for our enterprise networks business, principally for cell tower backhaul and, to a lesser extent, an increase in commercial HSD and phone customers.
Advertising revenues were 4.5% higher, principally due to higher levels of political advertising.
17
Costs and Expenses
Service costs increased 1.6%, primarily due to greater field operating and HSD service costs, offset in part by lower utilities, phone service and programming expenses. Field operating costs grew 17.4%, largely as a result of a greater use of outside contractors and, to a lesser extent, higher fiber lease and cable location expenses, offset in part by lower vehicle fuel costs. HSD service costs rose 30.2%, mainly due to greater bandwidth, maintenance and connectivity costs. Utilities expenses were 9.5% lower, primarily due to a reduction in electric utility costs and, to a lesser extent, pole rental expenses. Phone service costs fell 9.6%, substantially due to cost savings resulting from our transition from a third-party provider to an internal phone service platform. Programming costs decreased 0.3%, largely as a result of a lower number of video customers, mostly offset by higher contractual rates charged by our programming vendors and greater retransmission consent fees. Service costs as a percentage of revenues were 40.5% and 40.6% for the three months ended June 30, 2012 and 2011, respectively.
Selling, general and administrative expenses grew 2.4%, principally due to higher marketing costs, offset in part by lower bad debt and taxes and fees. Employee marketing costs were 20.8% higher, largely as a result of increased business services marketing and direct sales staffing levels. Non-employee marketing costs increased 12.0%, primarily due to costs related to our rebranding and greater spending on direct mail market research and radio and internet advertising. Bad debt fell by 9.3%, mainly due to a lower number of written-off accounts. Taxes and fees decreased 3.7%, principally as a result of lower franchise fees and property taxes. Selling, general and administrative expenses as a percentage of revenues were 19.7% and 19.6% for the three months ended June 30, 2012 and 2011, respectively.
Management fee expense decreased 1.0%, reflecting lower overhead costs charged by MCC. Management fee expense as a percentage of revenues was 1.6% and 1.7% for the three months ended June 30, 2012 and 2011, respectively.
Depreciation and amortization increased 4.7%, largely as a result of the depreciation of investments in shorter-lived customer premise equipment and our internal phone service platform.
OIBDA
OIBDA grew 2.0%, primarily due to greater revenues, offset in part by higher service costs and selling, general and administrative expenses.
Operating Income
Operating income was essentially flat, as higher depreciation and amortization was mostly offset by the growth in OIBDA.
Interest Expense, Net
Interest expense, net, increased 1.0%, as a higher average cost of debt was mostly offset by lower average outstanding indebtedness.
Loss on Derivatives, Net
As of June 30, 2012, we had interest rate exchange agreements (which we refer to as interest rate swaps) with an aggregate notional amount of $1.5 billion, of which $800 million were forward-starting interest rate swaps. These interest rate swaps have not been designated as hedges for accounting purposes, and the changes in their mark-to-market values are derived primarily from changes in market interest rates and the decrease in their time to maturity. As a result of changes to the mark-to-market valuation of these interest rate swaps, based upon information provided by our counterparties, we recorded a net loss on derivatives of $0.8 million and $11.6 million for the three months ended June 30, 2012 and 2011, respectively.
Other Expense, Net
Other expense, net, was $0.3 million and $0.4 million for the three months ended June 30, 2012 and 2011, respectively. During the three months ended June 30, 2012, other expense, net, consisted of $0.2 million of revolving credit commitment fees and $0.1 million of other fees. During the three months ended June 30, 2011, other expense, net, consisted of $0.3 million of revolving credit facility commitment fees and $0.1 million of other fees.
Net Income
As a result of the factors described above, we recognized net income of $18.3 million for the three months ended June 30, 2012, compared to $7.8 million for the three months ended June 30, 2011.
18
Actual Results of Operations
Six Months Ended June 30, 2012 compared to Six Months Ended June 30, 2011
The table below sets forth our consolidated statements of operations and OIBDA for the six months ended June 30, 2012 and 2011 (dollars in thousands and percentage changes that are not meaningful are marked NM):
Six Months Ended June 30, |
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2012 | 2011 | $ Change | % Change | |||||||||||||
Revenues |
$ | 445,084 | $ | 435,415 | $ | 9,669 | 2.2 | % | ||||||||
Costs and expenses: |
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Service costs (exclusive of depreciation and amortization) |
180,902 | 179,111 | 1,791 | 1.0 | % | |||||||||||
Selling, general and administrative expenses |
88,046 | 85,246 | 2,800 | 3.3 | % | |||||||||||
Management fee expense |
7,085 | 7,660 | (575 | ) | (7.5 | %) | ||||||||||
Depreciation and amortization |
75,101 | 71,277 | 3,824 | 5.4 | % | |||||||||||
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Operating income |
93,950 | 92,121 | 1,829 | 2.0 | % | |||||||||||
Interest expense, net |
(56,442 | ) | (55,652 | ) | (790 | ) | 1.4 | % | ||||||||
Gain (loss) on derivatives, net |
1,066 | (4,205 | ) | 5,271 | NM | |||||||||||
Other expense, net |
(653 | ) | (1,182 | ) | 529 | (44.8 | %) | |||||||||
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Net income |
$ | 37,921 | $ | 31,082 | $ | 6,839 | 22.0 | % | ||||||||
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OIBDA |
$ | 169,051 | $ | 163,398 | $ | 5,653 | 3.5 | % | ||||||||
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The table below represents a reconciliation of OIBDA to operating income, which is the most directly comparable GAAP measure (dollars in thousands):
Six Months Ended June 30, |
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2012 | 2011 | $ Change | % Change | |||||||||||||
OIBDA |
$ | 169,051 | $ | 163,398 | $ | 5,653 | 3.5 | % | ||||||||
Depreciation and amortization |
(75,101 | ) | (71,277 | ) | (3,824 | ) | 5.4 | % | ||||||||
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Operating income |
$ | 93,950 | $ | 92,121 | $ | 1,829 | 2.0 | % | ||||||||
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Revenues
The table below sets forth our revenues for the six months ended, June 30, 2012 and 2011 (dollars in thousands):
Six Months Ended June 30, |
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2012 | 2011 | $ Change | % Change | |||||||||||||
Video |
$ | 235,593 | $ | 246,391 | $ | (10,798 | ) | (4.4 | %) | |||||||
HSD |
112,099 | 101,944 | 10,155 | 10.0 | % | |||||||||||
Phone |
33,162 | 33,241 | (79 | ) | (0.2 | %) | ||||||||||
Business services |
39,708 | 30,564 | 9,144 | 29.9 | % | |||||||||||
Advertising |
24,522 | 23,275 | 1,247 | 5.4 | % | |||||||||||
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|
|
|||||||||
Total |
$ | 445,084 | $ | 435,415 | $ | 9,669 | 2.2 | % | ||||||||
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Revenues increased 2.2%, primarily due to higher HSD and business services revenues, offset in part by lower video revenues. Average total monthly revenue per video customer increased 12.8% to $126.26, and average total monthly revenue per PSU increased 5.0% to $59.13.
Video revenues declined 4.4%, as video customer losses were partly offset by higher unit pricing. During the six months ended June 30, 2012, we lost 17,000 video customers, compared to a loss of 29,000 in the prior year period.
HSD revenues grew 10.0%, largely as a result of higher unit pricing and, to a much lesser extent, an increased HSD customer base. During the six months ended June 30, 2012, we gained 25,000 HSD customers, compared to an increase of 11,000 in the prior year period.
Phone revenues declined 0.2%, as lower unit pricing was mostly offset by a larger phone customer base. During the six months ended June 30, 2012, we gained 13,000 phone customers, compared to an increase of 2,000 in the prior year period.
Business services revenues rose 29.9%, mainly due to a larger customer base for our enterprise networks business, principally for cell tower backhaul and, to a lesser extent, an increase in commercial HSD and phone customers.
Advertising revenues rose 5.4%, principally due to higher levels of political advertising.
Costs and Expenses
Service costs increased 1.0%, primarily due to greater field and employee operating costs, mostly offset by lower phone service expenses. Field operating costs grew 13.5%, largely as a result of a greater use of outside contractors and, to a lesser extent, higher cable location and fiber lease costs, offset in part by favorable insurance adjustments and lower vehicle costs. Employee costs increased 7.5%, principally due to higher staffing levels and unfavorable employee benefit and insurance adjustments. Phone service expenses fell 25.7%, substantially due to cost savings resulting from our transition from a third-party provider to an internal phone service platform. Service costs as a percentage of revenues were 40.6% and 41.1% for the six months ended June 30, 2012 and 2011, respectively.
Selling, general and administrative expenses grew 3.3%, principally as a result of higher marketing costs. Employee marketing costs were 26.3% higher, largely as a result of increased business services marketing and direct sales staffing levels. Non-employee marketing costs increased 11.4%, primarily due to costs related to our rebranding and greater spending on direct mail, market research and television and radio advertising. Selling, general and administrative expenses as a percentage of revenues were 19.8% and 19.6% for the six months ended June 30, 2012 and 2011, respectively.
Management fee expense decreased 7.5%, reflecting lower overhead costs charged by MCC. Management fee expense as a percentage of revenues was 1.6% and 1.8% for the six months ended June 30, 2012 and 2011, respectively.
Depreciation and amortization increased 5.4%, largely as a result of the depreciation of investments in shorter-lived customer premise equipment and our internal phone service platform.
OIBDA
OIBDA grew 3.5%, primarily due to greater revenues, offset in part by higher selling, general and administrative expenses and service costs.
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Operating Income
Operating income was 2.0% higher, as the growth in OIBDA was partly offset by higher depreciation and amortization.
Interest Expense, Net
Interest expense, net, increased 1.4%, as a higher average cost of debt was mostly offset by lower average outstanding indebtedness.
Gain (Loss) on Derivatives, Net
As a result of changes to the mark-to-market valuation of our interest rate swaps, based upon information provided by our counterparties, we recorded a net gain on derivatives of $1.1 million for the six months ended June 30, 2012, and a net loss on derivatives of $4.2 million for the six months ended June 30, 2011.
Other Expense, Net
Other expense, net, was $0.7 million and $1.2 million for the six months ended June 30, 2012 and 2011, respectively. During the six months ended June 30, 2012, other expense, net, consisted of $0.4 million of revolving credit commitment fees and $0.3 million of other fees. During the six months ended June 30, 2011, other expense, net, consisted of $0.8 million of revolving credit facility commitment fees and $0.4 million of other fees.
Net Income
As a result of the factors described above, we recognized net income of $37.9 million for the six months ended June 30, 2012, compared to $31.1 million for the six months ended June 30, 2011.
Liquidity and Capital Resources
Our net cash flows provided by operating activities are primarily used to fund investments in the capacity and reliability of our network and the further expansion of our products and services, as well as scheduled repayments of our indebtedness and periodic contributions to MCC. Our liquidity requirements in the foreseeable future include scheduled term loan amortization of $7.0 million during the remainder of 2012 and $14.0 million in each of the years ending December 31, 2013 and 2014, and $129.0 million of outstanding loans under our revolving credit facility, which is scheduled to expire on December 31, 2016.
As of June 30, 2012, our sources of liquidity included $9.7 million of cash on hand and $76.4 million of unused and available lines under our revolving credit facility. We believe that cash generated by or available to us will meet our anticipated capital and liquidity needs for the foreseeable future.
In the longer term, specifically 2015 and beyond, we do not expect to generate sufficient net cash flows from operations to fund our maturing term loans and senior notes. If we are unable to obtain sufficient future financing on similar terms as we currently experience, or at all, we may need to take other actions to conserve or raise capital that we would not take otherwise. However, we have accessed the debt markets for significant amounts of capital in the past, and expect to continue to be able to access these markets in the future as necessary.
Net Cash Flows Provided by Operating Activities
Net cash flows provided by operating activities were $110.2 million for the six months ended June 30, 2012, primarily due to OIBDA of $169.1 million, offset in part by interest expense of $56.4 million and, to a much lesser extent, the $4.2 million net change in our operating assets and liabilities. The net change in our operating assets and liabilities was primarily due to a decrease in accounts payable, accrued expenses and other current liabilities of $6.7 million, an increase in prepaid expenses and other assets of $4.9 million and, an increase in accounts receivable from affiliates of $1.7 million, largely offset by a decrease in accounts receivable, net, of $8.8 million.
Net cash flows provided by operating activities were $130.6 million for the six months ended June 30, 2011, primarily due to OIBDA of $163.4 million and, to a much lesser extent, the $21.9 million net change in our operating assets and liabilities, offset in part by interest expense of $55.7 million. The net change in our operating assets and liabilities was largely as a result of an increase in accounts payable, accrued expenses and other current liabilities of $13.0 million and a decrease in accounts receivable from affiliates of $8.7 million.
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Net Cash Flows Used in Investing Activities
Capital expenditures continue to be our primary use of capital resources and the majority of our net cash flows used in investing activities. Net cash flows used in investing activities were $81.1 million for the six months ended June 30, 2012, compared to $69.1 million in the prior year period. The $12.0 million increase in net cash flows used in investing activities was due to a $7.9 million net change in accrued property, plant and equipment and a $6.2 million redemption of restricted cash and cash equivalents in the prior year period, offset in part by a $2.1 million decrease in capital expenditures. The decrease in capital expenditures largely reflects reduced outlays for investments in our phone and HSD service platforms, offset in part by greater investments in our enterprise networks business and our ongoing digital transition.
Net Cash Flows Used in Financing Activities
Net cash flows used in financing activities were $31.1 million for the six months ended June 30, 2012, primarily due to net repayments of $24.0 million under the credit facility, capital distributions to MCC of $16.1 million and dividend payments on preferred members interest of $9.0 million, offset in part by capital contributions from MCC of $18.5 million.
Net cash flows used in financing activities were $85.1 million for the six months ended June 30, 2011, primarily due to capital distributions to MCC of $245.0 million, offset in part by net borrowings of $169.6 million under the credit facility. The capital distributions to MCC included a distribution to partially fund the Going Private Transaction. See Note 7 in our Notes to Consolidated Financial Statements.
Capital Structure
As of June 30, 2012, our total indebtedness was $1.973 billion, of which approximately 61% was at fixed interest rates or subject to interest rate protection. During the six months ended June 30, 2012, we paid cash interest of $53.8 million, net of capitalized interest.
Bank Credit Facility
As of June 30, 2012, we maintained a $1.560 billion credit facility (the credit facility), comprising $1.344 billion of term loans with maturities ranging from January 2015 to October 2017, and a $216.0 million revolving credit facility, which is scheduled to expire on December 31, 2016. As of the same date, we had $76.4 million of unused lines under the revolver, all of which were available to be borrowed and used for general corporate purposes, after giving effect to $129.0 million of outstanding loans and $10.6 million of letters of credit issued to various parties as collateral.
The credit facility is collateralized by our ownership interests in our operating subsidiaries, and is guaranteed by us on a limited recourse basis to the extent of such ownership interests. As of June 30, 2012, the credit agreement governing the credit facility required us to maintain a total leverage ratio (as defined) of no more than 6.0 to 1.0 and an interest coverage ratio (as defined) of no less than 1.75 to 1.0. The total leverage ratio covenant will be reduced to 5.5 to 1.0 commencing on April 1, 2013, and will be further reduced to 5.0 to 1.0 commencing on April 1, 2014.
Interest Rate Exchange Agreements
We use interest exchange agreements (which we refer to as interest rate swaps) in order to fix the variable portion of debt under the credit facility to reduce the potential volatility in our interest expense that would otherwise result from changes in market interest rates. As of June 30, 2012, we had interest rate swaps with various banks pursuant to which the rate on $700 million of floating rate debt was fixed at a weighted average rate of 3.3%. As of the same date, we also had $800 million of forward starting interest rate swaps with a weighted average fixed rate of approximately 2.9%.
Including the effects of these interest rate swaps, the average interest rates on outstanding debt under the credit facility as of June 30, 2012 and 2011 were 4.4% and 4.3%, respectively.
Senior Notes
As of June 30, 2012, we had $500.0 million of outstanding senior notes, all of which mature in October 2015. Our senior notes are unsecured obligations, and the indenture governing our senior notes limits the incurrence of additional indebtedness based upon a maximum debt to operating cash flow ratio (as defined) of 8.5 to 1.0.
Covenant Compliance and Debt Ratings
For all periods through June 30, 2012, we were in compliance with all of the covenants under the credit facility and senior note arrangements. We do not believe that we will have any difficulty complying with any of the applicable covenants in the near future.
Our future access to the debt markets and the terms and conditions we receive are influenced by our debt ratings. MCCs corporate credit rating is B1, with a stable outlook, by Moodys, and B+, with a stable outlook, by Standard and Poors. Our senior unsecured
22
credit rating is B3 by Moodys, with a stable outlook, and B-, with a stable outlook, by Standard and Poors. We cannot assure you that Moodys and Standard and Poors will maintain their ratings on MCC and us. A negative change to these credit ratings could result in higher interest rates on future debt issuance than we currently experience, or adversely impact our ability to raise additional funds.
Contractual Obligations and Commercial Commitments
There have been no material changes to our contractual obligations and commercial commitments as previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2011.
Critical Accounting Policies
The preparation of our financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. Periodically, we evaluate our estimates, including those related to doubtful accounts, long-lived assets, capitalized costs and accruals. We base our estimates on historical experience and on various other assumptions that we believe are reasonable. Actual results may differ from these estimates under different assumptions or conditions. We believe that the application of the critical accounting policies requires significant judgments and estimates on the part of management. For a summary of our critical accounting policies, please refer to our annual report on Form 10-K for the year ended December 31, 2011.
Goodwill and Other Intangible Assets
In accordance with the Financial Accounting Standards Boards Accounting Standards Codification No. 350 Intangibles Goodwill and Other (ASC 350), the amortization of goodwill and indefinite-lived intangible assets is prohibited and requires such assets to be tested annually for impairment, or more frequently if impairment indicators arise. We have determined that our cable franchise rights and goodwill are indefinite-lived assets and therefore not amortizable.
In accordance with Accounting Standards Update 2010-28 (ASU 2010-28) When to Perform Step 2 of the Goodwill Impairment Test for Reporting Units with Zero or Negative Carrying Amounts (a consensus of the FASB Emerging Issues Task Force), we have evaluated the qualitative factors surrounding our Mediacom Broadband reporting unit, which has negative equity carrying value. We do not believe that it is more likely than not that a goodwill impairment exists. As such, we have not performed Step 2 of the goodwill impairment test.
The economic conditions currently affecting the U.S. economy and the long-term impact on the fundamentals of our business may have a negative impact on the fair values of the assets in our reporting units. This may result in the recognition of an impairment loss in the future.
Because we believe there has not been a meaningful change in the long-term fundamentals of our business during the first six months of 2012, we have determined that there has been no triggering event under ASC 350, and as such, no interim impairment test was required as of June 30, 2012.
Inflation and Changing Prices
Our costs and expenses are subject to inflation and price fluctuations. Such changes in costs and expenses can generally be passed through to customers. Programming costs have historically increased at rates in excess of inflation and are expected to continue to do so. We believe that under the Federal Communications Commissions existing cable rate regulations we may increase rates for cable television services to more than cover any increases in programming. However, competitive conditions and other factors in the marketplace may limit our ability to increase our rates.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
There have been no significant changes to the information required under this Item from what was disclosed in Item 7A of our Annual Report on Form 10-K for the year ended December 31, 2011.
ITEM 4. CONTROLS AND PROCEDURES
Mediacom Broadband LLC
Under the supervision and with the participation of the management of Mediacom Broadband LLC, including Mediacom Broadband LLCs Chief Executive Officer and Chief Financial Officer, Mediacom Broadband LLC evaluated the effectiveness of Mediacom Broadband LLCs disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934) as of the end of the period covered by this report. Based upon that evaluation, Mediacom Broadband LLCs Chief Executive Officer and Chief Financial Officer concluded that Mediacom Broadband LLCs disclosure controls and procedures were effective as of June 30, 2012.
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There has not been any change in Mediacom Broadband LLCs internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the quarter ended June 30, 2012 that has materially affected, or is reasonably likely to materially affect, Mediacom Broadband LLCs internal control over financial reporting.
Mediacom Broadband Corporation
Under the supervision and with the participation of the management of Mediacom Broadband Corporation, including Mediacom Broadband Corporations Chief Executive Officer and Chief Financial Officer, Mediacom Broadband Corporation evaluated the effectiveness of Mediacom Broadband Corporations disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934) as of the end of the period covered by this report. Based upon that evaluation, Mediacom Broadband Corporations Chief Executive Officer and Chief Financial Officer concluded that Mediacom Broadband Corporations disclosure controls and procedures were effective as of June 30, 2012.
There has not been any change in Mediacom Broadband Corporations internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the quarter ended June 30, 2012 that has materially affected, or is reasonably likely to materially affect, Mediacom Broadband Corporations internal control over financial reporting.
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PART II
See Note 10 in our Notes to Consolidated Financial Statements.
ITEM 1A. | RISK FACTORS |
There have been no material changes in our risk factors from those disclosed in our Annual Report on Form 10-K for the year ended December 31, 2011.
ITEM 6. | EXHIBITS |
Exhibit Number |
Exhibit Description | |
31.1 | Rule 15d-14(a) Certifications of Mediacom Broadband LLC | |
31.2 | Rule 15d-14(a) Certifications of Mediacom Broadband Corporation | |
32.1 | Section 1350 Certifications of Mediacom Broadband LLC | |
32.2 | Section 1350 Certifications of Mediacom Broadband Corporation | |
101 | The following financial information from Mediacom Broadband LLCs and Mediacom Broadband Corporations Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2012, formatted in eXtensible Business Reporting Language (XBRL): (i) Consolidated Balance Sheets at June 30, 2012 and December 31, 2011, (ii) Consolidated Statements of Operations for the three and six months ended June 30, 2012 and 2011, (iii) Consolidated Statements of Cash Flows for the six months ended June 30, 2012 and 2011, (iv) Notes to Consolidated Financial Statements |
25
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
MEDIACOM BROADBAND LLC | ||||||
August 10, 2012 | By: | /s/ Mark E. Stephan | ||||
Mark E. Stephan | ||||||
Executive Vice President and Chief Financial Officer |
26
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
MEDIACOM BROADBAND CORPORATION | ||||||
August 10, 2012 | By: | /s/ Mark E. Stephan | ||||
Mark E. Stephan | ||||||
Executive Vice President and Chief Financial Officer |
27
EXHIBIT INDEX
Exhibit Number |
Exhibit Description | |
31.1 | Rule 15d-14(a) Certifications of Mediacom Broadband LLC | |
31.2 | Rule 15d-14(a) Certifications of Mediacom Broadband Corporation | |
32.1 | Section 1350 Certifications of Mediacom Broadband LLC | |
32.2 | Section 1350 Certifications of Mediacom Broadband Corporation | |
101 | The following financial information from Mediacom Broadband LLCs and Mediacom Broadband Corporations Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2012, formatted in eXtensible Business Reporting Language (XBRL): (i) Consolidated Balance Sheets at June 30, 2012 and December 31, 2011, (ii) Consolidated Statements of Operations for the three and six months ended June 30, 2012 and 2011, (iii) Consolidated Statements of Cash Flows for the six months ended June 30, 2012 and 2011, (iv) Notes to Consolidated Financial Statements |
28
Exhibit 31.1
CERTIFICATIONS
I, Rocco B. Commisso, certify that:
(1) | I have reviewed this report on Form 10-Q of Mediacom Broadband LLC; |
(2) | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
(3) | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
(4) | The registrants other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and l5d-15(f)) for the registrant and have: |
a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c) | Evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of end of the period covered by this report based on such evaluation; and |
d) | Disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter (the registrants fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and |
(5) | The registrants other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of registrants board of directors (or persons performing the equivalent function): |
a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information; and |
b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting. |
August 10, 2012 | By: | /S/ ROCCO B. COMMISSO | ||||
Rocco B. Commisso | ||||||
Chairman and Chief Executive Officer |
CERTIFICATIONS
I, Mark E. Stephan, certify that:
(1) | I have reviewed this report on Form 10-Q of Mediacom Broadband LLC; |
(2) | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
(3) | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
(4) | The registrants other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and l5d-15(f)) for the registrant and have: |
a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c) | Evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of end of the period covered by this report based on such evaluation; and |
d) | Disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter (the registrants fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and |
(5) | The registrants other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of registrants board of directors (or persons performing the equivalent function): |
a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information; and |
b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting. |
August 10, 2012 | By: | /S/ MARK E. STEPHAN | ||||
Mark E. Stephan | ||||||
Executive Vice President and Chief Financial Officer |
Exhibit 31.2
CERTIFICATIONS
I, Rocco B. Commisso, certify that:
(1) | I have reviewed this report on Form 10-Q of Mediacom Broadband Corporation; |
(2) | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
(3) | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
(4) | The registrants other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and l5d-15(f)) for the registrant and have: |
a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c) | Evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of end of the period covered by this report based on such evaluation; and |
d) | Disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter (the registrants fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and |
(5) | The registrants other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of registrants board of directors (or persons performing the equivalent function): |
a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information; and |
b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting. |
August 10, 2012 | By: | /S/ ROCCO B. COMMISSO | ||||
Rocco B. Commisso | ||||||
Chairman and Chief Executive Officer |
CERTIFICATIONS
I, Mark E. Stephan, certify that:
(1) | I have reviewed this report on Form 10-Q of Mediacom Broadband Corporation; |
(2) | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
(3) | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
(4) | The registrants other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and l5d-15(f)) for the registrant and have: |
a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c) | Evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of end of the period covered by this report based on such evaluation; and |
d) | Disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter (the registrants fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and |
(5) | The registrants other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of registrants board of directors (or persons performing the equivalent function): |
a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information; and |
b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting. |
August 10, 2012 | By: | /S/ MARK E. STEPHAN | ||||
Mark E. Stephan | ||||||
Executive Vice President and Chief Financial Officer |
Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Mediacom Broadband LLC (the Company) on Form 10-Q for the period ended June 30, 2012 as filed with the Securities and Exchange Commission on the date hereof (the Report), Rocco B. Commisso, Chairman and Chief Executive Officer and Mark E. Stephan, Executive Vice President and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:
(1) | the Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
(2) | the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
August 10, 2012 | By: | /S/ ROCCO B. COMMISSO | ||||
Rocco B. Commisso | ||||||
Chairman and Chief Executive Officer | ||||||
By: | /S/ MARK E. STEPHAN | |||||
Mark E. Stephan | ||||||
Executive Vice President and Chief Financial Officer |
Exhibit 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Mediacom Broadband Corporation (the Company) on Form 10-Q for the period ended June 30, 2012 as filed with the Securities and Exchange Commission on the date hereof (the Report), Rocco B. Commisso, Chairman and Chief Executive Officer and Mark E. Stephan, Executive Vice President and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:
(1) | the Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
(2) | the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
August 10, 2012 | By: | /S/ ROCCO B. COMMISSO | ||||
Rocco B. Commisso | ||||||
Chairman and Chief Executive Officer | ||||||
By: | /S/ MARK E. STEPHAN | |||||
Mark E. Stephan | ||||||
Executive Vice President and Chief Financial Officer |