Form 10-Q
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, 2011
Commission File Numbers: 333-57285-01
333-57285
Mediacom LLC
Mediacom Capital Corporation*
(Exact names of Registrants as specified in their charters)
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New York
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06-1433421 |
New York
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06-1513997 |
(State or other jurisdiction of
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(I.R.S. Employer |
incorporation or organization)
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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. o Yes þ No
Note: As a voluntary filer, 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
respective corporate Web site, if any, every Interactive Data File required to be submitted and
posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12
months (or for such shorter period that the Registrants were required to submit and post such
files). þ Yes o 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.
(Check one):
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o Large accelerated filers
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o Accelerated filers
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þ Non-accelerated filers
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o Smaller reporting companies |
Indicate by check mark whether the Registrants are shell companies (as defined in Rule 12b-2 of the
Exchange Act). o Yes þ No
Indicate the number of shares outstanding of the Registrants common stock: Not Applicable
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* |
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Mediacom Capital 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 LLC AND SUBSIDIARIES
FORM 10-Q
FOR THE PERIOD ENDED JUNE 30, 2011
TABLE OF CONTENTS
This Quarterly Report on Form 10-Q is for the three and six months ended June 30, 2011. 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 to you by referring you directly to those documents. Information incorporated by
reference is considered to be part of this Quarterly Report. Throughout this Quarterly Report, we
refer to Mediacom LLC as Mediacom LLC, and Mediacom LLC and its consolidated subsidiaries as
we, us and our.
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:
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lower demand for our products and services as a result of weak economic conditions or
increased levels of competition from existing and new competitors; |
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our ability to successfully introduce new products and services to meet customer demands
and preferences; |
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changes in laws, regulatory requirements or technology that may cause us to incur
additional costs and expenses; |
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greater than anticipated increases in programming costs and delivery expenses related to
our products and services; |
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changes in assumptions underlying our critical accounting policies; |
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the ability to secure hardware, software and operational support for the delivery of
products and services to our customers; |
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disruptions or failures of network and information systems upon which our business
relies; |
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our reliance on certain intellectual property; |
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our ability to generate sufficient cash flow to meet our debt service obligations; |
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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 |
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other risks and uncertainties discussed in this Quarterly Report, our Annual Report on
Form 10-K for the year ended December 31, 2010 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
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ITEM 1. |
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FINANCIAL STATEMENTS |
MEDIACOM LLC AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(All dollar amounts in thousands)
(Unaudited)
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June 30, |
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December 31, |
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2011 |
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2010 |
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(Amounts in thousands) |
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ASSETS |
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CURRENT ASSETS |
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Cash |
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$ |
8,586 |
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$ |
22,014 |
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Restricted cash and cash equivalents |
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8,853 |
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Accounts receivable, net of allowance for doubtful accounts of $1,486 and $1,228 |
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40,779 |
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35,318 |
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Prepaid expenses and other current assets |
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9,282 |
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8,079 |
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Total current assets |
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58,647 |
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74,264 |
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Preferred equity investment in affiliated company |
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150,000 |
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150,000 |
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Property, plant and equipment, net of accumulated depreciation of $1,264,270
and $1,211,315 |
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677,941 |
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688,883 |
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Franchise rights |
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616,807 |
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616,807 |
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Goodwill |
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24,046 |
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24,046 |
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Subscriber lists, net of accumulated amortization of $117,981 and $117,781 |
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295 |
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495 |
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Other assets, net of accumulated amortization of $6,231 and $4,240 |
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26,048 |
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29,613 |
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Total assets |
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$ |
1,553,784 |
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$ |
1,584,108 |
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LIABILITIES AND MEMBERS DEFICIT |
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CURRENT LIABILITIES |
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Accounts payable, accrued expenses and other current liabilities |
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$ |
149,542 |
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$ |
150,648 |
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Deferred revenue |
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27,263 |
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25,674 |
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Current portion of long-term debt |
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12,000 |
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12,000 |
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Total current liabilities |
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188,805 |
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188,322 |
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Long-term debt, less current portion |
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1,588,400 |
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1,507,000 |
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Other non-current liabilities |
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25,211 |
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23,616 |
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Total liabilities |
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1,802,416 |
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1,718,938 |
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Commitments and contingencies (Note 10) |
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MEMBERS DEFICIT |
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Capital contributions |
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342,473 |
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478,973 |
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Accumulated deficit |
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(591,105 |
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(613,803 |
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Total members deficit |
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(248,632 |
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(134,830 |
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Total liabilities and members deficit |
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$ |
1,553,784 |
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$ |
1,584,108 |
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The accompanying notes to the unaudited financial statements are an integral part of these statements.
4
MEDIACOM LLC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(All dollar amounts in thousands)
(Unaudited)
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Three Months Ended |
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Six Months Ended |
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June 30, |
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June 30, |
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2011 |
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2010 |
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2011 |
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2010 |
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Revenues |
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$ |
170,755 |
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$ |
163,739 |
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$ |
337,062 |
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$ |
323,639 |
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Costs and expenses: |
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Service costs (exclusive of depreciation
and amortization) |
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74,455 |
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73,243 |
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151,016 |
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144,503 |
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Selling, general and administrative expenses |
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28,652 |
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27,322 |
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56,193 |
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53,736 |
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Management fee expense |
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2,847 |
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3,046 |
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5,928 |
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6,015 |
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Depreciation and amortization |
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29,341 |
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27,309 |
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58,573 |
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54,210 |
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Operating income |
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35,460 |
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32,819 |
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65,352 |
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65,175 |
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Interest expense, net |
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(24,424 |
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(23,585 |
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(49,435 |
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(45,430 |
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Loss on derivatives, net |
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(8,830 |
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(14,423 |
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(1,128 |
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(20,884 |
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Loss on early extinguishment of debt |
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(1,234 |
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(1,234 |
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Investment income from affiliate |
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4,500 |
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4,500 |
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9,000 |
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9,000 |
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Other expense, net |
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(535 |
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(666 |
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(1,091 |
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(1,418 |
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Net income (loss) |
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$ |
6,171 |
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$ |
(2,589 |
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$ |
22,698 |
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$ |
5,209 |
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The accompanying notes to the unaudited financial statements are an integral part of these statements.
5
MEDIACOM LLC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(All dollar amounts in thousands)
(Unaudited)
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Six Months Ended |
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June 30, |
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2011 |
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2010 |
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OPERATING ACTIVITIES: |
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Net income |
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$ |
22,698 |
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$ |
5,209 |
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Adjustments to reconcile net loss to net cash flows provided by operating activities: |
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Depreciation and amortization |
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58,573 |
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54,210 |
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Loss on derivatives, net |
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1,128 |
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20,884 |
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Loss on early extinguishment of debt |
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1,234 |
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Amortization of deferred financing costs |
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1,991 |
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1,559 |
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Share-based compensation |
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284 |
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Changes in assets and liabilities, net of effects from acquisitions: |
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Accounts receivable, net |
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(5,461 |
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1,817 |
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Prepaid expenses and other assets |
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(1,829 |
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(2,906 |
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Accounts payable, accrued expenses and other current liabilities |
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745 |
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(43,846 |
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Deferred revenue |
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1,589 |
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423 |
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Other non-current liabilities |
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(126 |
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(126 |
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Net cash flows provided by operating activities |
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$ |
79,308 |
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$ |
38,742 |
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INVESTING ACTIVITIES: |
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Capital expenditures |
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(46,791 |
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(49,755 |
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Redemption of restricted cash and cash equivalents |
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8,853 |
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Net cash flows used in investing activities |
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$ |
(37,938 |
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$ |
(49,755 |
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FINANCING ACTIVITIES: |
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New borrowings under the bank credit facility |
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148,400 |
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498,875 |
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Repayment of borrowings under the bank credit facility |
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(67,000 |
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(483,875 |
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Capital contributions from parent |
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45,000 |
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Capital distributions to parent |
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(136,500 |
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(37,000 |
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Financing costs |
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(6,918 |
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Other financing activities book overdrafts |
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302 |
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(4,721 |
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Net cash flows (used in) provided by financing activities |
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$ |
(54,798 |
) |
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$ |
11,361 |
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Net (decrease) increase in cash |
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(13,428 |
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348 |
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CASH, beginning of period |
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22,014 |
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8,868 |
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CASH, end of period |
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$ |
8,586 |
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$ |
9,216 |
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SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: |
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Cash paid during the period for interest, net of amounts capitalized |
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$ |
48,293 |
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$ |
43,660 |
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The accompanying notes to the unaudited financial statements are an integral part of these statements.
6
MEDIACOM LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION
Basis of Preparation of Unaudited Consolidated Financial Statements
Mediacom LLC (Mediacom LLC and collectively with its subsidiaries, we, our or us), a New
York 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, 2010. 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, 2010.
Mediacom Capital Corporation (Mediacom Capital), a New York corporation wholly-owned by us,
co-issued, jointly and severally with us, public debt securities. Mediacom Capital 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 $3.2 million for each of the
three months ended June 30, 2011 and 2010, and approximately $6.4 million and $6.3 million for the
six months ended June 30, 2011 and 2010, respectively.
Restricted cash and cash equivalents
Restricted cash and cash equivalents represent funds pledged to insurance carriers as security
under a master pledge and security agreement. Pledged funds are invested in short-term, highly
liquid investments. We retain ownership of the pledged funds, and under the terms of the pledge and
security agreement, we can withdraw any of the funds, with the restrictions removed from such
funds, provided comparable substitute collateral is pledged to the insurance carriers.
Reclassifications
Certain reclassifications have been made to prior year amounts to conform to the current year
presentation.
2. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In December 2010, FASB issued 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). The amendments to ASC 350 -
IntangiblesGoodwill and Other in ASU 2010-28 affect all entities that have recognized goodwill
and have one or more reporting units whose carrying amount for purposes of performing Step 1 of the
goodwill impairment test is zero or negative. The amendments modify Step 1 so that for those
reporting units, an entity is required to perform Step 2 of the goodwill impairment test if it is
more likely than not that a goodwill impairment exists. In determining whether it is more likely
than not that a goodwill impairment exists, an entity should consider whether there are any adverse
qualitative factors indicating that an impairment may exist. The qualitative factors are consistent
with existing guidance, which requires that goodwill of a reporting unit be tested for impairment
between annual tests if an event occurs or circumstances change that would more likely than not
reduce the fair
value of a reporting unit below its carrying amount. We adopted ASU 2010-28 as of January 1, 2011.
The adoption of ASU 2010-28 did not have a material impact on our financial statements.
7
In January 2010, the FASB issued Accounting Standards Update No. 2010-06 (ASU 2010-06), Improving
Disclosures about Fair Value Measurements, which amends Accounting Standards Codification (ASC)
No. 820 Fair Value Measurements and Disclosures (ASC 820) to add new requirements for
disclosures about transfers into and out of Levels 1 and 2 and separate disclosures about
purchases, sales, issuances, and settlements relating to Level 3 measurements. The ASU also
clarifies existing fair value disclosures about the level of disaggregation and about inputs and
valuation techniques used to measure fair value. The ASU is effective for the first reporting
period (including interim periods) beginning after December 15, 2009, except for the requirement to
provide the Level 3 activity of purchases, sales, issuances, and settlements on a gross basis,
which will be effective for fiscal years beginning after December 15, 2010, and for interim periods
within those fiscal years. Early adoption is permitted. The adoption of this ASU did not have a material impact on our financial statements or
related disclosures.
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 do not expect that ASU 2011-04 will have a material impact on our financial statements or related disclosures.
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, 2011. 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:
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|
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. |
As of June 30, 2011, our interest rate exchange agreement liabilities, net, were valued at $39.0
million using Level 2 inputs, as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value as of June 30, 2011 |
|
(dollars in thousands) |
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate exchange agreements |
|
$ |
|
|
|
$ |
620 |
|
|
$ |
|
|
|
$ |
620 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate exchange agreements |
|
$ |
|
|
|
$ |
39,666 |
|
|
$ |
|
|
|
$ |
39,666 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate exchange agreements liabilities, net |
|
$ |
|
|
|
$ |
39,046 |
|
|
$ |
|
|
|
$ |
39,046 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2010, our interest rate exchange agreement liabilities, net, were valued at
$37.9 million using Level 2 inputs, as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value as of December 31, 2010 |
|
(dollars in thousands) |
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate exchange agreements |
|
$ |
|
|
|
$ |
2,180 |
|
|
$ |
|
|
|
$ |
2,180 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate exchange agreements |
|
$ |
|
|
|
$ |
40,099 |
|
|
$ |
|
|
|
$ |
40,099 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate exchange agreements liabilities, net |
|
$ |
|
|
|
$ |
37,919 |
|
|
$ |
|
|
|
$ |
37,919 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8
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, 2011, based upon mark-to- market valuation, we
recorded on our consolidated balance sheet, a long-term asset of $0.6 million, an accumulated
current liability of $18.3 million and an accumulated long-term liability of approximately $21.4
million. As of December 31, 2010, based upon mark-to-market valuation, we recorded on our
consolidated balance sheet a long-term asset of $2.2 million, an accumulated current liability of
$20.5 million and an accumulated long-term liability of $19.6 million. As a result of the
mark-to-market valuations on these interest rate exchange agreements, we recorded a net loss on
derivatives of $8.8 million and $14.4 million for the three months ended June 30, 2011 and 2010,
respectively. As a result of the mark-to-market valuations on these interest rate exchange
agreements, we recorded a net loss on derivatives of $1.1 million and $20.9 million for the six
months ended June 30, 2011 and 2010, respectively.
4. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consisted of the following (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
June 30, |
|
|
December 31, |
|
|
|
2011 |
|
|
2010 |
|
Cable systems, equipment and subscriber devices |
|
$ |
1,847,380 |
|
|
$ |
1,817,314 |
|
Vehicles |
|
|
35,590 |
|
|
|
35,098 |
|
Furniture, fixtures and office equipment |
|
|
41,329 |
|
|
|
30,374 |
|
Buildings and leasehold improvements |
|
|
16,335 |
|
|
|
15,877 |
|
Land and land improvements |
|
|
1,577 |
|
|
|
1,535 |
|
|
|
|
|
|
|
|
Property, plant and equipment, gross |
|
|
1,942,211 |
|
|
|
1,900,198 |
|
Accumulated depreciation |
|
|
(1,264,270 |
) |
|
|
(1,211,315 |
) |
|
|
|
|
|
|
|
Property, plant and equipment, net |
|
$ |
677,941 |
|
|
$ |
688,883 |
|
|
|
|
|
|
|
|
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, |
|
|
December 31, |
|
|
|
2011 |
|
|
2010 |
|
Accounts payable affiliates |
|
$ |
23,607 |
|
|
$ |
35,154 |
|
Liabilities under interest rate exchange agreements |
|
|
18,328 |
|
|
|
20,481 |
|
Accrued programming costs |
|
|
18,191 |
|
|
|
17,699 |
|
Accrued taxes and fees |
|
|
15,619 |
|
|
|
15,329 |
|
Accrued interest |
|
|
12,912 |
|
|
|
13,737 |
|
Accrued payroll and benefits |
|
|
11,952 |
|
|
|
10,753 |
|
Subscriber advance payments |
|
|
10,530 |
|
|
|
6,105 |
|
Accrued service costs |
|
|
8,881 |
|
|
|
8,232 |
|
Accounts payable |
|
|
7,554 |
|
|
|
5,986 |
|
Accrued property, plant and equipment |
|
|
6,859 |
|
|
|
5,158 |
|
Book overdrafts (1) |
|
|
3,187 |
|
|
|
2,885 |
|
Accrued telecommunications costs |
|
|
1,292 |
|
|
|
1,486 |
|
Other accrued expenses |
|
|
10,630 |
|
|
|
7,643 |
|
|
|
|
|
|
|
|
Accounts payable, accrued expenses and other current liabilities |
|
$ |
149,542 |
|
|
$ |
150,648 |
|
|
|
|
|
|
|
|
|
|
|
(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. |
9
6. DEBT
Debt consisted of the following (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
June 30, |
|
|
December 31, |
|
|
|
2011 |
|
|
2010 |
|
Bank credit facility |
|
$ |
1,250,400 |
|
|
$ |
1,169,000 |
|
9 1/8% senior notes due 2019 |
|
|
350,000 |
|
|
|
350,000 |
|
|
|
|
|
|
|
|
|
|
$ |
1,600,400 |
|
|
$ |
1,519,000 |
|
Less: Current portion |
|
|
12,000 |
|
|
|
12,000 |
|
|
|
|
|
|
|
|
Total long-term debt |
|
$ |
1,588,400 |
|
|
$ |
1,507,000 |
|
|
|
|
|
|
|
|
Bank Credit Facility
As of June 30, 2011, we maintained a $1.467 billion bank credit facility (the credit facility),
comprised of:
|
|
$304.2 million of revolving credit commitments, which expire in the amounts of $79.0 million
and $225.2 million on September 30, 2011 and December 31, 2014, respectively; |
|
|
$620.8 million of outstanding Term Loan C borrowings, which mature on January 31, 2015; |
|
|
$294.8 million of outstanding Term Loan D borrowings, which mature on March 31, 2017; and |
|
|
$247.5 million of outstanding Term Loan E borrowings, which mature on October 23, 2017. |
As of June 30, 2011, we had $207.4 million of unused revolving credit commitments, after giving
effect to $87.4 million of outstanding loans and $9.4 million of letters of credit issued to
various parties as collateral, all of which were unused and available to be borrowed and used for
general corporate purposes.
The credit agreement governing the credit facility requires us to maintain a senior leverage ratio
(as defined) of no more than 6.0 to 1.0 and an interest coverage ratio (as defined) of no less than
2.0 to 1.0. For all periods through June 30, 2011, we were in compliance with all of the covenants
under the credit agreement and, as of June 30, 2011, our senior leverage ratio and interest
coverage ratio were 4.4 to 1.0 and 2.8 to 1.0, respectively.
Interest Rate Exchange Agreements
We use interest rate exchange agreements, or interest rate swaps, with various banks that fixes 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 and six months ended June
30, 2011, and 2010. As of June 30, 2011:
|
|
We had current interest rate swaps which fix the variable portion of $700 million of
borrowings under the credit facility at a rate of 2.9%. Our current interest rate swaps are
scheduled to expire in the amounts of $100 million, $400 million and $200 million during the
years ending December 31, 2011, 2012 and 2014, respectively; and |
|
|
We had forward-starting interest rate swaps which will fix the variable portion of $600
million of borrowings under the credit facility at a rate of 3.0%. Our forward-starting
interest rate swaps are scheduled to commence in the amounts of $100 million, $400 million and
$100 million during the years ending December 31, 2011, 2012 and 2014, respectively. |
As of June 30, 2011, the average interest rate on outstanding borrowings under the credit facility,
including the effect of our interest rate swaps, was 4.9%, as compared to 5.2% as of the same date
last year.
10
Senior Notes
As of June 30, 2011, we had $350.0 million of senior notes outstanding. The indenture governing
our senior notes requires a total leverage ratio (as defined) of no more than 8.5 to 1.0. As of
June 30, 2011, we were in compliance with all of the covenants under the indenture, and our total
leverage ratio was 5.8 to 1.0.
Debt Ratings
Our future access to the debt markets and the terms and conditions we receive are influenced by our
debt ratings. Our corporate credit ratings are B1, with a stable outlook, by Moodys, and B+, with
a stable outlook, by Standard and Poors. Any future downgrade to our 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.
There are no covenants, events of default, borrowing conditions or other terms in our credit
agreement or senior note indenture that are based on changes in our credit rating assigned by any
rating agency.
Fair Value
As of June 30, 2011, the fair values of our senior notes and outstanding debt under our credit
facility are as follows (dollars in thousands):
|
|
|
|
|
91/8%
senior notes due 2019 |
|
$ |
371,000 |
|
|
|
|
|
|
|
|
|
|
Bank credit facility |
|
$ |
1,217,757 |
|
|
|
|
|
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 Mr. Commisso (the Merger).
As a result of the Merger, (i) each outstanding share of MCCs common stock (other than shares held
by Mr. Commisso and his affiliates) was converted into the right to receive promptly after the
Merger $8.75 in cash and (ii) each vested option held by an employee of MCC (other than Mr.
Commisso) and each vested option and each unvested option and restricted stock unit held by a
non-employee director of MCC was converted into the right to receive promptly after the Merger a
cash payment calculated in accordance with the terms of the Merger Agreement. In addition, each
unvested option and restricted stock unit held by an employee of MCC (other than Mr. Commisso) was
converted into the right to receive upon vesting a cash payment calculated in accordance with the
terms of the Merger Agreement. As a result of the Merger, MCC terminated all of its share-based
compensation plans including its employee stock purchase plan and other plans which granted stock
options and restricted stock units.
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 $100.0 million of borrowings under our revolving credit facility and $36.5 million of cash on
hand. The balance was funded by Mediacom Broadband LLC, another wholly-owned subsidiary of MCC.
11
Deferred Compensation
For the three and six months ended June 30, 2011, we recorded $0.2 million and $0.4 million,
respectively, of deferred compensation expense (formerly share-based compensation expense). This
represents the recognition of expenses incurred (based upon terms of the Merger Agreement) for (i)
the unvested stock options and restricted stock units under the former share-based compensation
plans at their original grant-date fair value and (ii) adjustments to recognize the right to
receive $8.75 in cash. In addition, this amount includes the recognition of new, cash-based
deferred compensation awarded in 2011 which has vesting attributes similar to the former
share-based awards.
Total share-based compensation for the three and six months ended June 30, 2010 (prior to the Going
Private Transaction) was as follows (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Six Months Ended |
|
|
|
June 30, |
|
|
June 30, |
|
|
|
2010 |
|
|
2010 |
|
Share-based compensation expense by type of award: |
|
|
|
|
|
|
|
|
Employee stock options |
|
$ |
6 |
|
|
$ |
13 |
|
Employee stock purchase plan |
|
|
20 |
|
|
|
37 |
|
Restricted stock units |
|
|
116 |
|
|
|
233 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total share-based compensation expense |
|
$ |
142 |
|
|
$ |
283 |
|
|
|
|
|
|
|
|
Employee Stock Purchase Plan
Under MCCs former employee stock purchase plan, all employees were allowed to participate in the
purchase of shares of MCCs Class A common stock at a 15% discount on the date of the allocation.
As a result of the Going Private Transaction, the employee stock purchase plan terminated in March
2011. The net employee proceeds were $0 and approximately $0.1 million for the three months ended
June 30, 2011 and 2010, respectively. The net employee proceeds were approximately $0.1 million
for each of the six months ended June 30, 2011 and 2010.
8. INVESTMENT IN AFFILIATED COMPANY
We have a $150 million preferred equity investment in Mediacom Broadband LLC (Mediacom
Broadband), a wholly owned subsidiary of MCC. The preferred equity investment has a 12% annual
cash dividend, payable quarterly. During each of the three months ended June 30, 2011 and 2010, we
received $4.5 million in cash dividends on the preferred equity. During each of the six months
ended June 30, 2011 and 2010, we received $9.0 million in cash dividends on the preferred equity.
9. RELATED PARTY TRANSACTIONS
See Note 7 for more information about the Going Private Transaction between MCC and MCCs Chairman
and Chief Executive Officer, Rocco B. Commisso.
12
10. COMMITMENTS AND CONTINGENCIES
Legal Proceedings
Gary Ogg and Janice Ogg v. Mediacom LLC
We are named as a defendant in a putative class action, captioned Gary Ogg and Janice Ogg v.
Mediacom LLC, pending in the Circuit Court of Clay County, Missouri, originally filed in April
2001. The lawsuit alleges that we, in areas where there was no cable franchise, failed to obtain
permission from landowners to place our fiber interconnection cable notwithstanding the possession
of
agreements or permission from other third parties. While the parties continue to contest liability,
there also remains a dispute as to the proper measure of damages. Based on a report by their
experts, the plaintiffs claim compensatory damages of approximately $14.5 million. Legal fees,
prejudgment interest, potential punitive damages and other costs could increase that estimate to
approximately $26.0 million. Before trial, the plaintiffs proposed an alternative damage theory of
$42.0 million in compensatory damages. Notwithstanding the verdict in the trial described below, we
remain unable to reasonably determine the amount of our final liability in this lawsuit. Prior to
trial our experts estimated our liability to be within the range of approximately $0.1 million to
$2.3 million. This estimate did not include any estimate of damages for prejudgment interest,
attorneys fees or punitive damages.
On March 9, 2009, a jury trial commenced solely for the claim of Gary and Janice Ogg, the
designated class representatives. On March 18, 2009, the jury rendered a verdict in favor of Gary
and Janice Ogg setting compensatory damages of $8,863 and punitive damages of $35,000. The Court
did not enter a final judgment on this verdict and therefore the amount of the verdict could not at
that time be judicially collected. Although we believe that the particular circumstances of each
class member may result in a different measure of damages for each member, if the same measure of
compensatory damages was used for each member, the aggregate compensatory damages would be
approximately $16.2 million plus the possibility of an award of attorneys fees, prejudgment
interest, and punitive damages.
On April 22, 2011, the Circuit Court of Clay County, Missouri issued an opinion and order
decertifying the class in this putative class action. A notice of appeal was filed by the
plaintiff on May 2, 2011 regarding the courts decertification of the class and the courts refusal
to award prejudgment interest on the Gary and Janice Ogg judgment. We will vigorously defend this
appeal as well as any claims made by the other members of the purported class.
We believe that the amount of actual liability would not have a significant effect on our
consolidated financial position, results of operations, cash flows or business. There can be no
assurance, however, if the decision of the Circuit Court of Clay County, Missouri is reversed, that
the actual liability ultimately determined for all members of the class would not exceed our
estimated range or any amount derived from the verdict rendered on March 18, 2009. We have tendered
the lawsuit to our insurance carrier for defense and indemnification. The carrier has agreed to
defend us under a reservation of rights, and a declaratory judgment action is pending regarding the
carriers defense and coverage responsibilities.
Jim Knight v. Mediacom Communications Corp.
A purported class action in the United States District Court for the Southern District of New York
entitled Jim Knight v. Mediacom Communications Corp., in which MCC is named as the defendant, was
filed on March 4, 2010. The complaint asserts that the potential class is comprised of all persons
who purchased premium cable services from MCC and rented a cable box distributed by MCC. The
plaintiff alleges that MCC improperly ties the rental of cable boxes to the provision of premium
cable services in violation of Section 1 of the Sherman Antitrust Act. The plaintiff also alleges a
claim for unjust enrichment and seeks injunctive relief and unspecified damages. MCC was served
with the complaint on April 16, 2010. On August 8, 2011 Mr. Knight dismissed his claim with
prejudice and the case was closed.
Mediacom Communications Shareholders Litigation
Between June 3, 2010 and June 10, 2010, three purported class actions lawsuits were filed against
MCC and its individual directors, including Mr. Commisso, all in the Court of Chancery of the State
of Delaware (which we refer to as the Delaware Court), under the captions Colleen Witmer v.
Mediacom Communications Corporation, et al., J. Malcolm Gray v. Mediacom Communications
Corporation, et al. and Haverhill Retirement System v. Mediacom Communications Corporation, et al.
The lawsuits were subsequently consolidated for all purposes in the Delaware Court of Chancery
under the caption In Re Mediacom Communications Corporation Shareholders Litigation. On January 4,
2011, a Second Verified Consolidated Amended Class Action Complaint was filed that alleged, among
other things, that the defendant directors breached their fiduciary duties to the stockholders of
MCC in connection with Mr. Commissos proposal to take MCC private, including among other things
their fiduciary duty of disclosure, and that MCC, Mr. Commisso and JMC Communications LLC aided and
abetted such breaches. The plaintiffs sought injunctive relief, rescission of the transaction or
rescissory damages, and an accounting of all damages.
On November 18, 2010, another purported class action lawsuit was filed against MCC and its
individual directors, including Mr. Commisso, in the Supreme Court of the State of New York, Orange
County, under the caption Wendy Kwait v. Mediacom Communications Corporation, et al. The lawsuit
alleged, among other things, that the director defendants breached their fiduciary duties to the
stockholders of MCC in connection with Mr. Commissos proposal to take MCC private and that MCC and
Mr. Commisso aided and abetted such breaches. The plaintiffs sought injunctive relief, rescission
of the transaction or rescissory damages.
13
On November 29, 2010, another purported class action lawsuit was filed against MCC and its
individual directors, including Mr. Commisso, in the United States District Court for the Southern
District of New York, under the caption Thomas Turberg v. Mediacom Communications Corporation, et
al. The lawsuit alleged, among other things, that the director defendants breached their fiduciary
duties to the stockholders of MCC in connection with Mr. Commissos proposal to take MCC private
and that MCC and JMC Communications LLC aided and abetted such breaches. The plaintiffs sought
injunctive relief and damages.
On December 10, 2010, another purported class action lawsuit was filed against MCC and its
individual directors, including Mr. Commisso, in the United States District Court for the Southern
District of New York, under the caption Ella Mae Pease v. Rocco Commisso, et al. The lawsuit
alleged, among other things, that the director defendants breached their fiduciary duties to the
stockholders of MCC in connection with Mr. Commissos proposal to take MCC private; that MCC, Mr.
Commisso and JMC Communications LLC aided and abetted such breaches; and that the defendants
violated Section 14(a) of the Exchange Act and Rule 14a-9 promulgated thereunder. The plaintiffs
sought declaratory and injunctive relief, rescission of the transaction or rescissory damages, and
an accounting of all damages, profits and special benefits.
The director defendants, MCC, JMC Communications LLC and Mr. Commisso, as defendants in the
foregoing actions, reached agreement with the plaintiffs in all of the foregoing actions providing
for the settlement of the actions on the terms and subject to the conditions set forth in a
settlement agreement (the Agreement), which terms included, but were not limited to, a settlement
payment made by MCC on behalf of and for the benefit of the parties to the actions in the amount of
$0.25 per share for each share of MCC common stock held by the plaintiff class as of March 4, 2011.
The settlement payment to the plaintiff class was reduced by any attorneys fees and expenses
awarded to plaintiffs counsel. On June 6, 2011, the Agreement was approved by the Delaware Court.
All litigation related to the going private transaction has been dismissed with prejudice. As of July 25, 2011, all of the conditions to the
Agreement had been satisfied. A settlement payment of $10.3 million was subsequently made, of
which we funded $4.6 million through a capital distribution to MCC, with the remainder funded by Mediacom Broadband.
We are also involved in various other legal actions arising in the ordinary course of business. In
the opinion of management, the ultimate disposition of these other 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) (formerly SFAS No. 142,
Goodwill and Other Intangible Assets), 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.
We directly assess the value of cable franchise rights for impairment under ASC 350 by utilizing a
discounted cash flow methodology. In performing an impairment test in accordance with ASC 350, we
make assumptions, such as future cash flow expectations, customer growth, competition, industry
outlook, capital expenditures, and other future benefits related to cable franchise rights, which
are consistent with the expectations of buyers and sellers of cable systems in determining fair
value. If the determined fair value of our cable franchise rights is less than the carrying amount
on the financial statements, an impairment charge would be recognized for the difference between
the fair value and the carrying value of such assets.
Goodwill impairment is determined using a two-step process. The first step compares the fair value
of a reporting unit with our carrying amount, including goodwill. If the fair value of a reporting
unit exceeds our carrying amount, goodwill of the reporting unit is considered not impaired and the
second step is unnecessary. If the carrying amount of a reporting unit exceeds our fair value, the
second step is performed to measure the amount of impairment loss, if any. The second step compares
the implied fair value of the reporting units goodwill, calculated using the residual method, with
the carrying amount of that goodwill. If the carrying amount of the goodwill exceeds the implied
fair value, the excess is recognized as an impairment loss. We have determined that we have one
reporting unit for the purpose of applying ASC 350, Mediacom LLC. Our most recently completed
annual impairment test was conducted as of October 1, 2010, and we will be conducting our next
annual impairment test as of October 1, 2011.
In accordance with ASU 2010-28, we have evaluated the qualitative factors surrounding our Mediacom
LLC reporting unit with its 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.
14
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 2011, 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, 2011.
12. SUBSEQUENT EVENTS
We have evaluated subsequent events through August 12, 2011 (the date the financial statements were
issued).
As of July 25, 2011, all of the conditions to the Agreement discussed under Mediacom
Communications Shareholders Litigation in Note 10 had been satisfied. A settlement payment of
$10.3 million was subsequently made, of which we funded $4.6 million through a capital distribution to MCC, with the remainder funded by
Mediacom Broadband.
On August 8, 2011, all claims under the purported class action Jim Knight v. Mediacom
Communications Corp. were dismissed with prejudice and the case was closed. See Jim Knight v.
Mediacom Communications Corp. in Note 10.
15
|
|
|
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, 2011 and 2010, and with our
annual report on Form 10-K for the year ended December 31, 2010.
Overview
We are a wholly-owned subsidiary of Mediacom Communications Corporation (MCC). MCC is the
nations eighth largest cable company based on the number of customers who purchase one or more
video services, also known as basic subscribers. Through our interactive broadband network, we
provide our customers with a wide variety of advanced products and services, including video
services such as video-on-demand, high-definition television (HDTV) and digital video recorders
(DVRs), high-speed data (HSD) and phone service. We offer our primary services of video, HSD
and phone, which we refer to as our triple-play bundle, over a single communications platform, a
significant advantage over most competitors in our service areas.
As of June 30, 2011, we offered our triple-play bundle to approximately 92% of our estimated 1.29
million homes passed in twenty states. As of the same date, we served approximately 505,000 basic
subscribers, 309,000 digital video customers, 385,000 HSD customers and 158,000 phone customers,
aggregating 1.05 million primary service units (PSUs) and 1.36 million revenue generating units
(RGUs).
Our basic and digital video services compete principally with direct broadcast satellite (DBS)
companies, and we continue to face significant levels of price competition from these providers,
who offer video programming substantially similar to ours. We compete with these providers by
offering our triple-play bundle and interactive video services that are unavailable to DBS
customers due to the limited two-way interactivity of DBS service. Our HSD service competes
primarily with digital subscriber line (DSL) services offered by local telephone companies; based
upon the speeds we offer, we believe our HSD product is superior to comparable DSL offerings in our
service areas. Our phone service mainly competes with substantially comparable phone services
offered by local telephone companies and with cellular phone services offered by national wireless
providers. We believe our customers prefer the cost savings of the bundled products and services we
offer, as well as the convenience of having a single provider contact for ordering, provisioning,
billing and customer care.
Our ability to continue to grow our customer base and revenues depends on several factors,
including the competition we face and general economic conditions. Continuing weak economic
conditions for customers, and significant video price competition from DBS providers, have
contributed to lower demand for our video, HSD and phone services, which has led to a reduction in
basic subscribers and slower growth rates of digital, HSD and phone customers. A continuation or
broadening of such effects may adversely impact our results of operations, cash flows and financial
position.
Recent Developments
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 Mr. Commisso (the Merger). As a result of
the Merger, among other things, each share of MCCs common stock (other than shares held by Mr.
Commisso and his affiliates) was converted into the right to receive promptly after the Merger
$8.75 in cash.
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 $100.0 million of borrowings under our revolving credit facility and $36.5 million of cash on
hand. The balance was funded by Mediacom Broadband LLC, another wholly-owned subsidiary of MCC.
16
Revenues, Costs and Expenses
Video revenues primarily represent monthly subscription fees charged to customers for our core
cable products and services (including basic and digital cable programming services, wire
maintenance, equipment rental and services to commercial establishments), pay-per-view charges,
installation, reconnection and late payment fees, franchise fees and other ancillary revenues. HSD
revenues primarily represent monthly fees charged to customers (including small to medium sized
commercial establishments) for our HSD products and services and equipment rental fees, as well as
fees charged to large-sized businesses for our scalable, fiber-based enterprise network products
and services. Phone revenues primarily represent monthly fees charged to customers (including small
to medium sized commercial establishments) for our phone service. Advertising revenues represent
the sale of advertising placed on our video services.
As a result of competition and weak economic conditions, we have lost video customers in the past
and our video revenues may decline in the foreseeable future if this trend continues. We believe
this loss of revenue will be mostly offset through greater penetration of our advanced video
services. We also expect to continue to expand our penetration of our HSD and phone services,
which we believe will result in further growth in HSD and phone revenues. However, weak economic
conditions, intense competition and, specific to phone, wireless substitution, may adversely affect
future growth in HSD and phone customers. Advertising revenues are generally sensitive to the
political election cycle, and we believe advertising revenues may decline in 2011, as 2010 was an
election year.
Service costs consist of the direct costs related to providing and maintaining services to our
customers. Significant service costs include: programming expenses; HSD costs, including costs of
bandwidth connectivity and customer provisioning and costs related to our enterprise networks
business and our network operations center; phone service costs, including delivery and other
expenses; employee costs, including wages and other expenses for technical personnel who maintain
our cable network, perform customer installation activities and provide customer support; and field
operating costs, including the use of outside contractors, and vehicle, utility and pole rental
expenses. These costs generally rise as a result of contractual increases in video programming
rates, customer growth and inflationary cost increases for personnel, outside vendor 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. Our service costs may
fluctuate depending on the level of investments we make in our cable systems, and the resulting
operational efficiencies. In 2011, we completed a transition to an internal phone service
platform, which greatly reduced our phone service expenses. We anticipate that our service costs,
with the exception of programming expenses, will remain fairly consistent as a percentage of our
revenues.
Video programming expenses, which are generally paid on a per subscriber basis, have historically
been our largest single expense item. In recent years, we have experienced substantial increases
in the cost of our programming, particularly sports and local broadcast programming, well in excess
of the inflation rate or the change in the consumer price index. We believe that these expenses
will continue to grow, due to the increasing demands of sports and other large programmers for
contract renewals and television broadcast station owners for retransmission consent fees,
including certain large programmers who also own major market television broadcast stations. While
such growth in programming expenses can be partially offset by rate increases, we expect our video
gross margins may continue to decline if increases in programming costs outpace any growth in video
revenues.
Significant selling, general and administrative expenses include: wages and related expenses for
our call center, customer service and 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 employees and other expenses. We anticipate that our selling, general and
administrative expenses should remain fairly consistent as a percentage of our revenues.
Management fee expenses reflect 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.
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.
17
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
indicators of operating performance, or to the statement of cash flows as measures 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.
In our Annual Report on Form 10-K for the year ended December 31, 2010, we have presented OIBDA as
adjusted for non-cash stock based compensation, or Adjusted OIBDA. As a result of the Going
Private Transaction, such compensation plans have been terminated, and we believe OIBDA is the most
appropriate measure to evaluate our performance and forecast future results.
Actual Results of Operations
Three Months Ended June 30, 2011 compared to Three Months Ended June 30, 2010
The table below sets forth our consolidated statements of operations and OIBDA for the three months
ended June 30, 2011 and 2010 (dollars in thousands and percentage changes that are not meaningful
are marked NM):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
|
|
|
|
|
|
|
June 30, |
|
|
|
|
|
|
|
|
|
2011 |
|
|
2010 |
|
|
$ Change |
|
|
% Change |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues |
|
$ |
170,755 |
|
|
$ |
163,739 |
|
|
$ |
7,016 |
|
|
|
4.3 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs and expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Service costs (exclusive of depreciation and amortization) |
|
|
74,455 |
|
|
|
73,243 |
|
|
|
1,212 |
|
|
|
1.7 |
% |
Selling, general and administrative expenses |
|
|
28,652 |
|
|
|
27,322 |
|
|
|
1,330 |
|
|
|
4.9 |
% |
Management fee expense |
|
|
2,847 |
|
|
|
3,046 |
|
|
|
(199 |
) |
|
|
(6.5 |
%) |
Depreciation and amortization |
|
|
29,341 |
|
|
|
27,309 |
|
|
|
2,032 |
|
|
|
7.4 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income |
|
|
35,460 |
|
|
|
32,819 |
|
|
|
2,641 |
|
|
|
8.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense, net |
|
|
(24,424 |
) |
|
|
(23,585 |
) |
|
|
(839 |
) |
|
|
3.6 |
% |
Loss on derivatives, net |
|
|
(8,830 |
) |
|
|
(14,423 |
) |
|
|
5,593 |
|
|
|
(38.8 |
%) |
Loss on early extinguishment of debt |
|
|
|
|
|
|
(1,234 |
) |
|
|
1,234 |
|
|
|
NM |
|
Investment income from affiliate |
|
|
4,500 |
|
|
|
4,500 |
|
|
|
|
|
|
|
NM |
|
Other expense, net |
|
|
(535 |
) |
|
|
(666 |
) |
|
|
131 |
|
|
|
(19.7 |
%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
$ |
6,171 |
|
|
$ |
(2,589 |
) |
|
$ |
8,760 |
|
|
|
NM |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OIBDA |
|
$ |
64,801 |
|
|
$ |
60,128 |
|
|
$ |
4,673 |
|
|
|
7.8 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
18
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, |
|
|
|
|
|
|
|
|
|
2011 |
|
|
2010 |
|
|
$ Change |
|
|
% Change |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OIBDA |
|
$ |
64,801 |
|
|
$ |
60,128 |
|
|
$ |
4,673 |
|
|
|
7.8 |
% |
Depreciation and amortization |
|
|
(29,341 |
) |
|
|
(27,309 |
) |
|
|
(2,032 |
) |
|
|
7.4 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income |
|
$ |
35,460 |
|
|
$ |
32,819 |
|
|
$ |
2,641 |
|
|
|
8.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
The tables below set forth our revenues and selected subscriber, customer and average monthly
revenue statistics as of, and for the three months ended, June 30, 2011 and 2010 (dollars in
thousands, except per subscriber data):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
|
|
|
|
|
|
|
June 30, |
|
|
|
|
|
|
|
|
|
2011 |
|
|
2010 |
|
|
$ Change |
|
|
% Change |
|
Video |
|
$ |
102,382 |
|
|
$ |
100,993 |
|
|
|
1,389 |
|
|
|
1.4 |
% |
HSD |
|
|
48,493 |
|
|
|
43,849 |
|
|
|
4,644 |
|
|
|
10.6 |
% |
Phone |
|
|
15,836 |
|
|
|
14,613 |
|
|
|
1,223 |
|
|
|
8.4 |
% |
Advertising |
|
|
4,044 |
|
|
|
4,284 |
|
|
|
(240 |
) |
|
|
(5.6 |
%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Revenues |
|
$ |
170,755 |
|
|
$ |
163,739 |
|
|
|
7,016 |
|
|
|
4.3 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, |
|
|
Increase/ |
|
|
|
|
|
|
2011 |
|
|
2010 |
|
|
(Decrease) |
|
|
% Change |
|
Basic subscribers |
|
|
505,000 |
|
|
|
539,000 |
|
|
|
(34,000 |
) |
|
|
(6.3 |
%) |
HSD customers |
|
|
385,000 |
|
|
|
367,000 |
|
|
|
18,000 |
|
|
|
4.9 |
% |
Phone customers |
|
|
158,000 |
|
|
|
149,000 |
|
|
|
9,000 |
|
|
|
6.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Primary Service Units (PSUs) |
|
|
1,048,000 |
|
|
|
1,055,000 |
|
|
|
(7,000 |
) |
|
|
(0.7 |
%) |
Digital customers |
|
|
309,000 |
|
|
|
311,000 |
|
|
|
(2,000 |
) |
|
|
(0.6 |
%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue Generating Units (RGUs) |
|
|
1,357,000 |
|
|
|
1,366,000 |
|
|
|
(9,000 |
) |
|
|
(0.7 |
%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average total monthly revenue per basic subscriber
(1) |
|
$ |
110.95 |
|
|
$ |
100.61 |
|
|
$ |
10.34 |
|
|
|
10.3 |
% |
Average total monthly revenue per PSU (2) |
|
$ |
53.87 |
|
|
$ |
51.88 |
|
|
$ |
1.99 |
|
|
|
3.8 |
% |
|
|
|
(1) |
|
Represents average total monthly revenues for the period divided by average basic
subscribers for such period. |
|
(2) |
|
Represents average total monthly revenues for the period divided by average PSUs for
such period. |
Revenues increased 4.3%, primarily due to higher HSD and, to a lesser extent, video and phone
revenues. Average total monthly revenue per basic subscriber increased 10.3% to $110.95, and
average total monthly revenue per PSU increased 3.8% to $53.87.
Video revenues rose 1.4%, as lower levels of discounted pricing and, to a lesser extent, higher
penetration of our advanced video services and greater revenues from customer fees were mostly
offset by a lower number of basic subscribers. During the three months ended June 30, 2011, we
lost 16,000 basic subscribers and 10,000 digital customers, as compared to a loss of 7,000 basic
subscribers and an increase of 2,000 digital customers in the prior year period. As of June 30,
2011, we served 505,000 basic subscribers, or 39.1% of our estimated homes passed, and 309,000
digital customers, or 61.2% of our basic subscribers. As of June 30, 2011, 48.4% of our digital
customers were taking our DVR and/or HDTV services, as compared to 41.4% as of the same date last
year.
19
HSD revenues grew 10.6%, primarily due to a 4.9% increase in HSD customers and, to a lesser extent,
greater revenues from equipment rentals and our enterprise networks business. During the three
months ended June 30, 2011, we lost 1,000 HSD customers, as compared to an increase of 5,000 in the
prior year period. As of June 30, 2011, we served 385,000 HSD customers, or 29.8% of our estimated
homes passed.
Phone revenues were 8.4% higher, principally due to a 6.0% increase in phone customers. During the
three months ended June 30, 2011, there was no change in phone customers, as compared to an
increase of 8,000 phone customers in the prior year period. As of June 30, 2011, we served 158,000
phone customers, or 13.3% of our estimated marketable phone homes.
Advertising revenues were 5.6% lower, mainly due to lower levels of political advertising.
Costs and Expenses
Service costs grew 1.7%, primarily due to higher programming and field operating expenses, largely
offset by lower phone service costs. Programming expenses were 3.6% higher, principally due to
higher contractual rates and fees charged by our programming vendors and, to a lesser extent,
greater retransmission consent expenses, offset in part by a lower number of basic subscribers.
Field operating costs rose 16.0%, largely as a result of higher vehicle fuel and insurance,
electricity and fiber lease expenses, offset in part by a lower usage of outside contractors. Phone
service costs fell 43.7%, substantially due to cost savings provided by our transition to an
internal phone service platform. Service costs as a percentage of revenues were 43.6% and 44.7% for
the three months ended June 30, 2011 and 2010, respectively.
Selling, general and administrative expenses increased 4.9%, mainly a result of higher marketing
and, to a lesser extent, bad debt expenses. Marketing expenses grew 10.2%, primarily due to
increased employee and other expenses related to our business service marketing. Bad debt expense
rose 11.9% largely due to a higher average balance of written off accounts and, to a lesser extent,
greater collection expenses. Selling, general and administrative expenses as a percentage of
revenues were 16.8% and 16.7% for the three months ended June 30, 2011 and 2010, respectively.
Management fee expense was 6.5% lower, reflecting lower overhead charges at MCC. Management fee
expense as a percentage of revenues were 1.7% and 1.9% for the three months ended June 30, 2011 and
2010, respectively.
Depreciation and amortization increased 7.4%, largely a result of the depreciation of new investments related to our internal phone service platform.
OIBDA
OIBDA rose 7.8%, primarily due to greater revenues and constrained growth in service costs.
Operating Income
Operating income increased 8.0%, as the growth in OIBDA was partly offset by higher depreciation
and amortization.
Interest Expense, Net
Interest expense, net, increased 3.6%, mainly due to higher average outstanding balances under our
bank credit facility (the credit facility), offset in part by a lower average cost of debt.
Loss on Derivatives, Net
As of June 30, 2011, we had interest rate exchange agreements, or interest rate swaps, with an
aggregate notional amount of $1.3 billion, of which $600 million are 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 the quarterly mark-to-market
valuation of these interest rate swaps based upon information provided by our counterparties, we
recorded a net loss on derivatives of $8.8 million and $14.4 million for the three months ended
June 30, 2011 and 2010, respectively.
20
Loss on Early Extinguishment of Debt
Loss on early extinguishment of debt totaled $1.2 million for the three months ended June 30, 2010.
This amount represented the write-off of certain deferred financing costs associated with prior
financings that were repaid during the period.
Investment Income from Affiliate
Investment income from affiliate was $4.5 million for each of the three months ended June 30, 2011
and 2010. This amount represents the investment income on our $150.0 million preferred equity
investment in Mediacom Broadband LLC.
Other Expense, Net
Other expense, net, was $0.5 million and $0.7 million for the three months ended June 30, 2011 and
2010, respectively. During the three months ended June 30, 2011, other expense, net, substantially
consisted of revolving credit facility commitment fees. During the three months ended June 30,
2010, other expense, net, consisted of $0.6 million of revolving credit facility commitment fees
and $0.1 million of other fees.
Net Income (Loss)
As a result of the factors described above, we recognized net income of $6.2 million for the three
months ended June 30, 2011, compared to a net loss of $2.6 million for the three months ended June
30, 2010.
21
Actual Results of Operations
Six Months Ended June 30, 2011 compared to Six Months Ended June 30, 2010
The table below sets forth our consolidated statements of operations and OIBDA for the six months
ended June 30, 2011 and 2010 (dollars in thousands and percentage changes that are not meaningful
are marked NM):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended |
|
|
|
|
|
|
|
|
|
June 30, |
|
|
|
|
|
|
|
|
|
2011 |
|
|
2010 |
|
|
$ Change |
|
|
% Change |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues |
|
$ |
337,062 |
|
|
$ |
323,639 |
|
|
$ |
13,423 |
|
|
|
4.1 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs and expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Service costs (exclusive of depreciation and amortization) |
|
|
151,016 |
|
|
|
144,503 |
|
|
|
6,513 |
|
|
|
4.5 |
% |
Selling, general and administrative expenses |
|
|
56,193 |
|
|
|
53,736 |
|
|
|
2,457 |
|
|
|
4.6 |
% |
Management fee expense |
|
|
5,928 |
|
|
|
6,015 |
|
|
|
(87 |
) |
|
|
(1.4 |
%) |
Depreciation and amortization |
|
|
58,573 |
|
|
|
54,210 |
|
|
|
4,363 |
|
|
|
8.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income |
|
|
65,352 |
|
|
|
65,175 |
|
|
|
177 |
|
|
|
0.3 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense, net |
|
|
(49,435 |
) |
|
|
(45,430 |
) |
|
|
(4,005 |
) |
|
|
8.8 |
% |
Loss on derivatives, net |
|
|
(1,128 |
) |
|
|
(20,884 |
) |
|
|
19,756 |
|
|
|
NM |
|
Loss on early extinguishment of debt |
|
|
|
|
|
|
(1,234 |
) |
|
|
1,234 |
|
|
|
NM |
|
Investment income from affiliate |
|
|
9,000 |
|
|
|
9,000 |
|
|
|
|
|
|
|
NM |
|
Other expense, net |
|
|
(1,091 |
) |
|
|
(1,418 |
) |
|
|
327 |
|
|
|
(23.1 |
%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
22,698 |
|
|
$ |
5,209 |
|
|
$ |
17,489 |
|
|
|
NM |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OIBDA |
|
$ |
123,925 |
|
|
$ |
119,385 |
|
|
$ |
4,540 |
|
|
|
3.8 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
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, |
|
|
|
|
|
|
|
|
|
2011 |
|
|
2010 |
|
|
$ Change |
|
|
% Change |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OIBDA |
|
$ |
123,925 |
|
|
$ |
119,385 |
|
|
$ |
4,540 |
|
|
|
3.8 |
% |
Depreciation and amortization |
|
|
(58,573 |
) |
|
|
(54,210 |
) |
|
|
(4,363 |
) |
|
|
8.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income |
|
$ |
65,352 |
|
|
$ |
65,175 |
|
|
$ |
177 |
|
|
|
0.3 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
22
Revenues
The tables below set forth our revenues and selected subscriber, customer and average monthly
revenue statistics as of, and for the six months ended, June 30, 2011 and 2010 (dollars in
thousands, except per subscriber data):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended |
|
|
|
|
|
|
|
|
|
June 30, |
|
|
|
|
|
|
|
|
|
2011 |
|
|
2010 |
|
|
$ Change |
|
|
% Change |
|
Video |
|
$ |
203,728 |
|
|
$ |
199,905 |
|
|
$ |
3,823 |
|
|
|
1.9 |
% |
HSD |
|
|
95,085 |
|
|
|
86,731 |
|
|
|
8,354 |
|
|
|
9.6 |
% |
Phone |
|
|
30,961 |
|
|
|
28,915 |
|
|
|
2,046 |
|
|
|
7.1 |
% |
Advertising |
|
|
7,288 |
|
|
|
8,088 |
|
|
|
(800 |
) |
|
|
(9.9 |
%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
337,062 |
|
|
$ |
323,639 |
|
|
$ |
13,423 |
|
|
|
4.1 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, |
|
|
Increase |
|
|
|
|
|
|
2011 |
|
|
2010 |
|
|
(Decrease) |
|
|
% Change |
|
Basic subscribers |
|
|
505,000 |
|
|
|
539,000 |
|
|
|
(34,000 |
) |
|
|
(6.3 |
%) |
HSD customers |
|
|
385,000 |
|
|
|
367,000 |
|
|
|
18,000 |
|
|
|
4.9 |
% |
Phone customers |
|
|
158,000 |
|
|
|
149,000 |
|
|
|
9,000 |
|
|
|
6.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Primary Service Units (PSUs) |
|
|
1,048,000 |
|
|
|
1,055,000 |
|
|
|
(7,000 |
) |
|
|
(0.7 |
%) |
Digital customers |
|
|
309,000 |
|
|
|
311,000 |
|
|
|
(2,000 |
) |
|
|
(0.6 |
%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue Generating Units (RGUs) |
|
|
1,357,000 |
|
|
|
1,366,000 |
|
|
|
(9,000 |
) |
|
|
(0.7 |
%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average total monthly revenue per basic subscriber |
|
$ |
108.55 |
|
|
$ |
99.25 |
|
|
$ |
9.30 |
|
|
|
9.4 |
% |
Average total monthly revenue per PSU |
|
$ |
53.15 |
|
|
$ |
51.67 |
|
|
$ |
1.48 |
|
|
|
2.9 |
% |
Revenues increased 4.1%, primarily due to higher HSD and, to a much lesser extent, video and phone
revenues. Average total monthly revenue per basic subscriber increased 9.4% to $108.55, and average
total monthly revenue per PSU increased 2.9% to $53.15.
Video revenues were 1.9% higher, as lower levels of discounted pricing and, to a lesser extent,
greater revenues from customer fees and increased penetration of our advanced video services were
mostly offset by a lower number of basic subscribers. During the six months ended June 30, 2011, we
lost 25,000 basic subscribers and 13,000 digital customers, as compared to a loss of 9,000 basic
subscribers and an increase of 11,000 digital customers in the prior year period.
HSD revenues grew 9.6%, primarily due to the increase in HSD customers and, to a lesser extent,
greater revenues from our enterprise networks business. During the six months ended June 30, 2011,
we gained 6,000 HSD customers, as compared to an increase of 17,000 in the prior year period.
Phone revenues rose 7.1%, principally due to the increase in phone customers. During the six months
ended June 30, 2011, we gained 1,000 phone customers, as compared to a gain of 14,000 phone
customers in the prior year period.
Advertising revenues fell 9.9%, primarily due to lower levels of automotive and political
advertising.
Costs and Expenses
Service costs grew 4.5%, primarily due to higher programming and, to a lesser extent, field
operating expenses, offset in part by lower phone service costs. Programming expenses increased
5.0%, principally due to higher contractual rates and fees charged by our programming vendors,
offset in part by a lower number of basic subscribers. Field operating costs rose 16.3%, largely as
a result of higher vehicle fuel and repair, fiber lease and electricity costs, offset in part by a
lower usage of outside contractors. Phone service
costs fell 23.8%, substantially due to cost savings provided by our transition to an internal phone
service platform. Service costs as a percentage of revenues were 44.8% and 44.6% for the six months
ended June 30, 2011 and 2010, respectively.
23
Selling, general and administrative expenses increased 4.6%, mainly due to higher marketing and, to
a lesser extent, bad debt expense. Marketing expenses grew 12.4%, primarily due to increased
employee and other expenses related to our business service marketing. Bad debt expense rose 14.0%
largely due to a higher average balance of written off accounts and, to a lesser extent, greater
collection expenses. Selling, general and administrative expenses as a percentage of revenues were
16.7% and 16.6% for the six months ended June 30, 2011 and 2010, respectively.
Management fee expense was 1.4% lower, reflecting lower overhead charges at MCC. Management fee
expense as a percentage of revenues were 1.8% and 1.9% for the six months ended June 30, 2011 and
2010, respectively.
Depreciation and amortization rose 8.0%, largely a result of the depreciation of new investments related
to our internal phone service platform.
OIBDA
OIBDA grew 3.8%, primarily due to greater revenues, offset in part by higher service costs and, to
a lesser extent, selling, general and administrative expenses.
Operating Income
Operating income increased 0.3%, as the growth in OIBDA was mostly offset by higher depreciation
and amortization.
Interest Expense, Net
Interest expense, net, rose 8.8%, mainly due to higher average outstanding balances under our bank
credit facility, offset in part by a lower average cost of debt.
Loss on Derivatives, Net
As a result of changes to the mark-to-market valuation of our interest rate exchange agreements, we
recorded a net loss on derivatives of $1.1 million and $20.9 million for the six months ended June
30, 2011 and 2010, respectively.
Loss on Early Extinguishment of Debt
Loss on early extinguishment of debt totaled $1.2 million for the six months ended June 30, 2010.
This amount represented the write-off of certain deferred financing costs associated with prior
financings that were repaid during the period.
Other Expense, Net
Other expense, net, was $1.1 million and $1.4 million for the six months ended June 30, 2011 and
2010, respectively. During the six months ended June 30, 2011, other expense, net, consisted of
$1.0 million of revolving credit facility commitment fees and $0.1 million of other fees. During
the six months ended June 30, 2010, other expense, net, consisted of $1.1 million of revolving
credit facility commitment fees and $0.3 million of other fees.
Net Income
As a result of the factors described above, we recognized net income of $22.7 million for the six
months ended June 30, 2011, compared to $5.2 million in the prior year period.
Liquidity and Capital Resources
Overview
Our net cash flows provided by operating activities are primarily used to fund network investments to accommodate
customer growth and the further deployment of our advanced products and services, as well as scheduled
repayments of our external financing and contributions to MCC. Our liquidity needs in the foreseeable future
include, as of June 30, 2011, scheduled term loan amortization of $6.0 million during the remainder of 2011 and
$12.0 million in each of the years ending December 31, 2012 through December 31, 2014, and $87.4 million of
outstanding loans under our revolving credit facility, which expires
December 31, 2014. As of June 30, 2011, our sources of liquidity included $8.6 million of cash on hand and $207.4 million of unused and available lines under
our revolving credit facility. We believe that cash generated by us, and available to us through our borrowing
capacity under the revolving credit facility, will meet our anticipated capital and liquidity needs for the foreseeable
future.
24
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 $79.3 million for the six months ended June
30, 2011, primarily due to OIBDA of $123.9 million, mostly offset by interest expense of $49.4
million and, to a much lesser extent, the net change in operating assets and liabilities of $5.1
million. The net change in operating assets and liabilities was largely a result of an increase in
accounts receivable, net of $5.5 million, and to a lesser extent, an increase in prepaid expenses
and other assets of $1.8 million, offset by a increase in deferred revenue of $1.6 million.
Net cash flows provided by operating activities were $38.7 million for the six months ended June
30, 2010, primarily due to OIBDA of $119.4 million, offset in part by interest expense of $45.4
million and the net change in operating assets and liabilities of $44.6 million. The net change in
operating assets and liabilities was substantially due to a decrease in accounts payable, accrued
expenses and other current liabilities of $43.8 million.
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 $37.9
million for the six months ended June 30, 2011, as compared to $49.8 million in the prior year
period. The $11.9 million decline in net cash flows used in investing activities was due to an $8.9
million redemption of restricted cash and cash equivalents and, to a lesser extent, a $3.0 million
reduction in capital spending. The decrease in capital spending largely reflects reduced outlays for investments in our phone service platform and customer premise equipment,
offset by scalable infrastructure for our HSD service.
Net Cash Flows (Used in) Provided By Financing Activities
Net cash flows used in financing activities were $54.8 million for the six months ended June 30,
2011, primarily due to capital distributions to MCC of $136.5 million, offset in part by net
borrowings of $81.4 million under the credit facility. The capital distributions to MCC partially
funded the Going Private Transaction (see Recent Developments Going Private Transaction above).
Net cash flows provided by financing activities were $11.4 million for the six months ended June
30, 2010, primarily due to capital contributions from MCC of $45.0 million and, to a lesser extent,
net borrowings of debt of $15.0 million offset in part by capital
distributions to parent of $37.0 million, financing costs of $6.9 million and other financing
activities, principally book overdrafts, of $4.7 million.
Capital Structure
As of June 30, 2011, our outstanding total indebtedness was $1.600 billion, of which approximately
65.6% was at fixed interest rates or subject to interest rate protection. During the six months
ended June 30, 2011, we paid cash interest of $48.3 million, net of capitalized interest.
25
Bank Credit Facility
As of June 30, 2011, we had a $1.467 billion credit facility, of which $1.250 billion was
outstanding. As of the same date, we had $207.4 million of unused lines under our $304.2 million
revolving credit facility, after giving effect to $87.4 million of outstanding loans and $9.4
million of letters of credit issued to various parties as collateral. As of the same date, based on
the terms and conditions of our debt arrangements, all of our unused revolving credit lines were
available to be borrowed and used for general corporate purposes. Our revolving credit commitments
are scheduled to expire in the amounts of $79.0 million and $225.2 million on September 30, 2011
and December 31, 2014, respectively.
We use interest rate exchange agreements, or 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, 2011, 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 2.9%. As of the same date, we also had $600
million of forward starting interest rate swaps with a weighted average fixed rate of approximately
3.0%. Including the effects of such interest rate swaps, the average interest rates on outstanding
debt under the credit facility as of June 30, 2011 and 2010 were 4.9% and 5.2%, respectively.
Senior Notes
As of June 30, 2011, we had $350.0 million of outstanding senior notes.
Covenant Compliance and Debt Ratings
For all periods through June 30, 2011, 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. Our corporate credit ratings are B1, with a stable outlook, by Moodys, and B+, with
a stable outlook, by Standard and Poors. Any future downgrade to our 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. However, there are no covenants, events of default,
borrowing conditions or other terms in the credit facility or senior note arrangements that are
based on changes in our credit rating assigned by any rating agency.
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, 2010.
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, 2010.
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.
We directly assess the value of cable franchise rights for impairment under ASC 350 by utilizing a
discounted cash flow methodology. In performing an impairment test in accordance with ASC 350, we
make assumptions, such as future cash flow expectations, unit growth, competition, industry
outlook, capital expenditures, and other future benefits related to cable franchise rights, which
are consistent with the expectations of buyers and sellers of cable systems in determining fair
value. If the determined fair value of our cable franchise rights is less than the carrying amount
on the financial statements, an impairment charge would be recognized for the difference between
the fair value and the carrying value of such assets.
26
Goodwill impairment is determined using a two-step process. The first step compares the fair value
of a reporting unit with our carrying amount, including goodwill. If the fair value of a reporting
unit exceeds our carrying amount, goodwill of the reporting unit is considered not impaired and the
second step is unnecessary. If the carrying amount of a reporting unit exceeds our fair value, the
second step is performed to measure the amount of impairment loss, if any. The second step compares
the implied fair value of the reporting units goodwill, calculated using the residual method, with
the carrying amount of that goodwill. If the carrying amount of the goodwill exceeds the implied
fair value, the excess is recognized as an impairment loss. We have determined that we have one
reporting unit for the purpose of applying ASC 350, Mediacom LLC. Our most recently completed
annual impairment test was conducted as of October 1, 2010, and we will be conducting our next
annual impairment test as of October 1, 2011.
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 LLC reporting unit with its 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 2011, 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, 2011.
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 subscribers. 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.
27
|
|
|
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, 2010.
|
|
|
ITEM 4. |
|
CONTROLS AND PROCEDURES |
Mediacom LLC
Under the supervision and with the participation of the management of Mediacom LLC, including
Mediacom LLCs Chief Executive Officer and Chief Financial Officer, Mediacom LLC evaluated the
effectiveness of Mediacom 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 LLCs Chief Executive Officer and Chief Financial
Officer concluded that Mediacom LLCs disclosure controls and procedures were effective as of June
30, 2011.
There has not been any change in Mediacom 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,
2011 that has materially affected, or is reasonably likely to materially affect, Mediacom LLCs
internal control over financial reporting.
Mediacom Capital Corporation
Under the supervision and with the participation of the management of Mediacom Capital Corporation
(Mediacom Capital), including Mediacom Capitals Chief Executive Officer and Chief Financial
Officer, Mediacom Capital evaluated the effectiveness of Mediacom Capitals 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 Capitals
Chief Executive Officer and Chief Financial Officer concluded that Mediacom Capitals disclosure
controls and procedures were effective as of June 30, 2011.
There has not been any change in Mediacom Capitals 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,
2011 that has materially affected, or is reasonably likely to materially affect, Mediacom Capitals
internal control over financial reporting.
28
PART II
|
|
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ITEM 1. |
|
LEGAL PROCEEDINGS |
See Note 10 in our Notes to Consolidated Financial Statements.
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, 2010.
|
|
|
|
|
Exhibit |
|
|
Number |
|
Exhibit Description |
|
31.1 |
|
|
Rule 15d-14(a) Certifications of Mediacom LLC |
|
31.2 |
|
|
Rule 15d-14(a) Certifications of Mediacom Capital Corporation |
|
32.1 |
|
|
Section 1350 Certifications of Mediacom LLC |
|
32.2 |
|
|
Section 1350 Certifications of Mediacom Capital Corporation |
29
SIGNATURES
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.
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MEDIACOM LLC
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|
August 12, 2011 |
By: |
/s/ Mark E. Stephan
|
|
|
|
Mark E. Stephan |
|
|
|
Executive Vice President and Chief Financial Officer |
|
30
SIGNATURES
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.
|
|
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|
|
|
MEDIACOM CAPITAL CORPORATION
|
|
August 12, 2011 |
By: |
/s/ Mark E. Stephan
|
|
|
|
Mark E. Stephan |
|
|
|
Executive Vice President and Chief Financial Officer |
|
31
EXHIBIT INDEX
|
|
|
|
|
Exhibit |
|
|
Number |
|
Exhibit Description |
|
31.1 |
|
|
Rule 15d-14(a) Certifications of Mediacom LLC |
|
31.2 |
|
|
Rule 15d-14(a) Certifications of Mediacom Capital Corporation |
|
32.1 |
|
|
Section 1350 Certifications of Mediacom LLC |
|
32.2 |
|
|
Section 1350 Certifications of Mediacom Capital Corporation |
32
Exhibit 31.1
Exhibit 31.1
CERTIFICATIONS
I, Rocco B. Commisso, certify that:
(1) |
|
I have reviewed this report on Form 10-Q of Mediacom 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 12, 2011 |
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 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 12, 2011 |
By: |
/s/ Mark E. Stephan
|
|
|
|
Mark E. Stephan |
|
|
|
Executive Vice President and Chief Financial Officer |
|
Exhibit 31.2
Exhibit 31.2
CERTIFICATIONS
I, Rocco B. Commisso, certify that:
(1) |
|
I have reviewed this report on Form 10-Q of Mediacom Capital 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 12, 2011 |
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 Capital 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 12, 2011 |
By: |
/s/ Mark E. Stephan
|
|
|
|
Mark E. Stephan |
|
|
|
Executive Vice President and Chief Financial Officer |
|
Exhibit 32.1
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 LLC (the Company) on Form 10-Q for the period
ended June 30, 2011 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 12, 2011 |
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
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 Capital Corporation (the Company) on Form
10-Q for the period ended June 30, 2011 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 12, 2011 |
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 |
|