SEC Filing | Mediacom Communications Corporation

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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, 2001 Commission File Numbers: 333-57285-01 333-57285 Mediacom LLC Mediacom Capital Corporation* (Exact names of Registrants as specified in their charters) New York 06-1433421 New York 06-1513997 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification Numbers) 100 Crystal Run Road Middletown, New York 10941 (Address of principal executive offices) (845) 695-2600 (Registrants' telephone number) Indicate by check mark whether the Registrants (1) have filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrants were required to file such reports), and (2) have been subject to such filing requirements for the past 90 days: Yes X No --- --- Indicate the number of shares outstanding of the Registrants' common stock: Not Applicable *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, 2001 TABLE OF CONTENTS PART I ------ Page ------- Item 1. Financial Statements Consolidated Balance Sheets - June 30, 2001 (unaudited) and December 31, 2000............................................... 1 Consolidated Statements of Operations and Comprehensive Loss - Three and Six Months Ended June 30, 2001 and 2000 (unaudited)................................. 2 Consolidated Statements of Cash Flows - Six Months Ended June 30, 2001 and 2000 (unaudited)........................................... 3 Notes to Consolidated Financial Statements (unaudited)........................................ 4 Balance Sheets of Mediacom Capital Corporation - June 30, 2001 (unaudited) and December 31, 2000............................................... 8 Note to Balance Sheets (unaudited)............................................................ 9 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations................................................. 10 Item 3. Quantitative and Qualitative Disclosures about Market Risk................................................................................... 16 PART II ------- Item 6. Exhibits and Reports on Form 8-K.............................................................. 17 ---------------------------------- 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 Securities and Exchange Commission (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 "may," "will," "should," "expects," "plans," "anticipates," "believes," "estimates," "predicts," "potential," or "continue" or the negative of those words and other comparable words. You should be aware that those statements are only our predictions. Actual events or results may differ materially. In evaluating those statements, you should specifically consider various factors, including the risks discussed in our Annual Report on Form 10-K for the year-ended December 31, 2000 and other reports or documents that we use from time to time with the SEC. Those factors may cause our actual results to differ materially from any of our forward-looking statements. All forward- looking statements attributable to us or a person acting on our behalf are expressly qualified in their entirety by this cautionary statement.

PART I ITEM 1. FINANCIAL STATEMENTS MEDIACOM LLC AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (All dollar amounts in 000's) June 30, December 31, 2001 2000 ----------- ------------ ASSETS (Unaudited) Cash and cash equivalents $ 7,294 $ 4,093 Subscriber accounts receivable, net of allowance for doubtful accounts of $935 and $932, respectively 11,496 13,500 Prepaid expenses and other assets 14,554 7,023 Investments 6,168 3,985 Investment in cable television systems: Inventory 19,861 14,131 Property, plant and equipment, at cost 933,772 840,052 Less - accumulated depreciation (269,367) (204,440) ---------- ---------- Property, plant and equipment, net 664,405 635,612 Intangible assets, net of accumulated amortization of $161,124 and $124,955, respectively 644,680 680,420 ---------- ---------- Total investment in cable television systems 1,328,946 1,330,163 Other assets, net of accumulated amortization of $7,790 and $5,749, respectively 28,008 17,008 ---------- ---------- Total assets $1,396,466 $1,375,772 ========== ========== LIABILITIES AND MEMBER'S EQUITY LIABILITIES Debt $1,063,000 $ 987,000 Accounts payable and accrued expenses 84,034 80,143 Subscriber advances 2,494 3,886 Management fees payable 3,218 1,236 Deferred revenue 10,145 40,510 Other liabilities 4,895 - ---------- ---------- Total liabilities $1,167,786 $1,112,775 ========== ========== MEMBER'S EQUITY Capital contributions 521,696 521,696 Other equity 20,481 18,598 Accumulated comprehensive loss (88) (414) Accumulated deficit (313,409) (276,883) ---------- ---------- Total member's equity 228,680 262,997 ---------- ---------- Total liabilities and member's equity $1,396,466 $1,375,772 ========== ========== The accompanying notes to consolidated financial statements are an integral part of these statements. 1

MEDIACOM LLC AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS (All dollar amounts in 000's) (Unaudited) Three Months Ended June 30, Six Months Ended June 30, ---------------------------- --------------------------- 2001 2000 2001 2000 -------- -------- -------- -------- Revenues $ 92,854 $ 82,595 $183,188 $160,035 Costs and expenses: Service costs 32,487 28,232 63,964 54,867 Selling, general and administrative expenses 14,792 13,893 29,962 27,282 Management fee expense 1,950 1,511 3,467 2,931 Depreciation and amortization 52,702 43,407 103,485 84,088 Non-cash stock charges relating to management fee expense 688 914 1,883 26,986 -------- -------- -------- -------- Operating loss (9,765) (5,362) (19,573) (36,119) -------- -------- -------- -------- Interest expense, net 22,099 16,170 42,833 34,593 Other expenses (income) 321 414 (27,522) 871 -------- -------- -------- -------- Net loss before cumulative change in accounting principle (32,185) (21,946) (34,884) (71,583) Cumulative effect of change in accounting principle - - 1,642 - -------- -------- -------- -------- Net loss $(32,185) $(21,946) $(36,526) $(71,583) Unrealized gain (loss)on investments 1,012 (19,287) 326 (17,769) -------- -------- -------- -------- Comprehensive loss $(31,173) $(41,233) $(36,200) $(89,352) ======== ======== ======== ======== The accompanying notes to consolidated financial statements are an integral part of these statements. 2

MEDIACOM LLC AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (All dollar amounts in 000's) (Unaudited) Six Months Ended June 30, ------------------------------- 2001 2000 ---------- ---------- CASH FLOWS PROVIDED BY OPERATING ACTIVITIES: Net loss $ (36,526) $ (71,583) Adjustments to reconcile net loss to net cash flows from operating activities: Depreciation and amortization 103,485 84,088 Change in fair value of swaps 3,039 - Vesting of management stock 1,883 2,514 Other non-cash stock charges relating to management fee expense - 24,473 Elimination and amortization of deferred SoftNet revenue (30,244) (947) Changes in assets and liabilities, net of effects from acquisitions: Subscriber accounts receivable 2,004 1,989 Prepaid expenses and other assets (7,531) (1,299) Accounts payable and accrued expenses 12,086 2,741 Subscriber advances (1,392) (1,043) Management fees payable 1,982 (144) Deferred revenue (121) 429 ---------- ---------- Net cash flows provided by operating activities 48,665 41,218 ---------- ---------- CASH FLOWS USED IN INVESTING ACTIVITIES: Capital expenditures (107,646) (81,613) Acquisitions of cable television systems - (31,646) Other, net (938) (788) ---------- ---------- Net cash flows used in investing activities (108,584) (114,047) ---------- ---------- CASH FLOWS PROVIDED BY FINANCING ACTIVITIES: New borrowings 547,000 139,000 Repayment of debt (471,000) (422,000) Capital contributions - 354,500 Financing costs (12,880) (194) ---------- ---------- Net cash flows provided by financing activities 63,120 71,306 ---------- ---------- Net increase (decrease) in cash and cash equivalents 3,201 (1,523) CASH AND CASH EQUIVALENTS, beginning of period 4,093 4,473 ---------- ---------- CASH AND CASH EQUIVALENTS, end of period $ 7,294 $ 2,950 ========== ========== SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Cash paid during the period for interest $ 30,500 $ 42,079 ========== ========== The accompanying notes to consolidated financial statements are an integral part of these statements. 3

MEDIACOM LLC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (1) Organization Mediacom LLC ("Mediacom," and collectively with its subsidiaries, the "Company"), a New York limited liability company, is involved in the acquisition and development of cable television systems serving principally non-metropolitan markets in the United States. Through these cable systems, the Company provides entertainment, information and telecommunications services to its subscribers. As of June 30, 2001, the Company had acquired and was operating cable television systems in 22 states, principally Alabama, California, Florida, Illinois, Indiana, Iowa, Kentucky, Minnesota, Missouri and North Carolina. Mediacom Capital Corporation ("Mediacom Capital"), a New York corporation wholly-owned by Mediacom, was organized in March 1998 for the sole purpose of acting as co-issuer of senior notes with Mediacom. Mediacom Capital has nominal assets and does not conduct operations of its own. On February 9, 2000, Mediacom Communications Corporation ("MCC"), a Delaware corporation organized in November 1999, completed an initial public offering. Prior to such time, MCC had no assets, liabilities, contingent liabilities or operations. Immediately prior to the completion of its initial public offering, MCC issued shares of its Class A and Class B common stock in exchange for all of the outstanding membership interests in Mediacom. As a result of this exchange, Mediacom became a wholly-owned subsidiary of MCC and Mediacom's amended and restated operating agreement was amended to reflect MCC as the sole member and manager of Mediacom. (2) Statement of Accounting Presentation and Other Information Basis of Preparation of Consolidated Financial Statements The consolidated financial statements as of June 30, 2001 and 2000 are unaudited. However, in the opinion of management, such statements include all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of the results for the periods presented. The accounting policies followed during such interim periods reported are in conformity with generally accepted accounting principles and are consistent with those applied during annual periods. For additional disclosures, including a summary of the Company's accounting policies, the interim financial statements should be read in conjunction with the Company's Annual Report on Form 10-K for the year ended December 31, 2000 (File Nos. 333-57285-01 and 333-57285). 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, 2001. Recent Accounting Pronouncements In June 1998, Statement of Financial Accounting Standards No. 133 ("SFAS 133"), "Accounting for Derivative Instruments and Hedging Activities," was issued effective January 1, 2001. This statement establishes the accounting and reporting standards for derivatives and hedging activity. Upon adoption of SFAS 133, all derivatives are required to be recognized in the statement of financial position as either assets or liabilities and measured at fair value. The Company recorded a charge of approximately $1.6 million, as a change in accounting principle, in the first quarter of 2001. In June 2001, Statement of Financial Accounting Standards No. 142 ("SFAS 142"), "Accounting for Goodwill and other Intangible Assets," was issued effective January 1, 2002. This statement establishes that goodwill is no longer subject to amortization over its useful life. The new rule also states that an acquired intangible asset must be separately recognized if it is obtained through contractual or other legal rights, or if the asset can be sold, licensed, transferred, exchanged or rented, regardless of the intent to do so. The Company has not yet determined the impact that SFAS 142 may have on its results of operations and the consolidated financial statements. 4

MEDIACOM LLC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (3) Acquisitions During 2000, the Company completed nine acquisitions of cable systems serving approximately 53,000 basic subscribers for an aggregate purchase price of $109.2 million, including a $2.5 million deferred conditional payment to a seller. The cable systems serve communities in the states of Alabama, Illinois, Iowa, Kentucky, Minnesota and South Dakota. The aggregate purchase price has been allocated as follows: approximately $48.2 million to property, plant and equipment, and approximately $58.5 million to intangible assets. Additionally, approximately $2.7 million of direct acquisition costs have been allocated to property, plant and equipment and intangible assets. These acquisitions were financed with borrowings under the Company's subsidiary credit facilities. These acquisitions were accounted for using the purchase method of accounting, and accordingly, the purchase price of each of these acquired systems has been allocated to the assets acquired and liabilities assumed at their estimated fair values at their respective dates of acquisition. Unaudited Pro Forma Information The Company has reported the operating results of the acquired systems from the dates of their respective acquisition. The unaudited pro forma operating results presented below give pro forma effect to the acquisitions of the acquired systems as if such transactions had been consummated on January 1, 2000. This financial information has been prepared for comparative purposes only and does not purport to be indicative of the operating results which actually would have resulted had the acquisitions of the acquired systems been consummated at the beginning of the period presented. Six Months Ended June 30, --------------------------- 2001 2000 -------- -------- (dollars in thousands) Revenues..................................................................... $183,188 $170,104 Operating expenses and costs: Service costs............................................................... 63,964 58,954 Selling, general and administrative expenses................................ 29,962 29,025 Management fee expense...................................................... 3,467 2,931 Depreciation and amortization............................................... 103,485 89,121 Non-cash stock charges relating to management fee expense................... 1,883 26,986 -------- -------- Operating loss............................................................... (19,573) (36,913) -------- -------- Net loss..................................................................... $(36,526) $(76,170) ======== ======== (4) Debt As of June 30, 2001 and December 31, 2000, debt consisted of: June 30, December 31, 2001 2000 ---------- ----------- (dollars in thousands) Bank credit facilities..................................................... $ 238,000 $662,000 8 1/2% senior notes........................................................ 200,000 200,000 7 7/8% senior notes........................................................ 125,000 125,000 9 1/2% senior notes (a).................................................... 500,000 - ---------- ----------- $1,063,000 $987,000 ========== =========== 5

MEDIACOM LLC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) Debt Issued in 2001 (a) On January 24, 2001, Mediacom and Mediacom Capital jointly issued $500.0 million aggregate principal amount of 9 1/2% senior notes due January 2013 (the "9 1/2% Senior Notes"). The 9 1/2% Senior Notes are unsecured obligations of Mediacom, and the indenture for the 9 1/2% Senior Notes stipulates, among other things, restrictions on incurrence of indebtedness, distributions, mergers and asset sales and has cross-default provisions related to other debt of Mediacom. Mediacom was in compliance with the indenture governing the 9 1/2% Senior Notes as of June 30, 2001. The average interest rate on outstanding debt under the bank credit facilities was 7.0% and 8.3% for the three months ended June 30, 2001 and December 31, 2000, respectively, before giving effect to the interest rate swap agreements discussed below. The Company uses interest rate swap agreements in order to fix the interest rate for the duration of the contract as a hedge against interest rate volatility. As of June 30, 2001, the Company had entered into interest rate exchange agreements (the "Swaps") with various banks pursuant to which the interest rate on $170.0 million is fixed at a weighted average swap rate of approximately 6.7%, plus the average applicable margin over the Eurodollar Rate option under the bank credit agreements. Under the terms of the Swaps, which expire from 2002 through 2004, the Company is exposed to credit loss in the event of nonperformance by the other parties to the Swaps. However, the Company does not anticipate nonperformance by the counterparties. The stated maturities of all debt outstanding as of June 30, 2001 are as follows (dollars in thousands): 2002......................................................................................... $ 750 2003......................................................................................... 2,000 2004......................................................................................... 2,000 2005......................................................................................... 2,000 2006......................................................................................... 2,000 Thereafter................................................................................... 1,054,250 ----------- $1,063,000 =========== (5) SoftNet As of December 31, 2000, deferred revenue resulting from the Company's receipt of shares of SoftNet Systems, Inc. common stock amounted to approximately $30.2 million, net of amortization taken. As of January 31, 2001, the Company formally terminated its relationship with SoftNet in all material respects. The Company recognized revenue of approximately $0.3 million and $0.9 million for the six months ended June 30, 2001 and 2000, respectively. As a result of the termination of the SoftNet relationship in the first quarter of 2001, the Company recognized the remaining deferred revenue of approximately $30.0 million as other income in the consolidated statements of operations. 6

MEDIACOM LLC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (6) Subsequent Events On July 17, 2001, the Company paid a $125.0 million cash dividend to MCC that was funded with borrowings under its subsidiary credit facilities. On July 18, 2001, the Company made a $150.0 million preferred equity investment in Mediacom Broadband LLC ("Mediacom Broadband"), a newly-formed wholly-owned subsidiary of MCC, that was funded with borrowings under its subsidiary credit facilities. The preferred equity investment has a 12% annual cash dividend, payable quarterly. The proceeds from the preferred equity investment, and, indirectly, the $125.0 million cash dividend discussed above were used by Mediacom Broadband to fund a portion of the $2.1 billion purchase price of its acquisitions of cable systems, serving approximately 800,000 basic subscribers in the states of Georgia, Illinois, Iowa and Missouri, from affiliates of AT&T Broadband, LLC. 7

MEDIACOM CAPITAL CORPORATION BALANCE SHEETS June 30, December 31, 2001 2000 ---------- ------------ ASSETS (Unaudited) Note receivable - from affiliate for issuance of common stock................. $ 100 $ 100 ---------- ------------ Total assets............................................................... $ 100 $ 100 ========== ============ STOCKHOLDER'S EQUITY Common stock, par value $0.10; 200 shares authorized; 100 shares issued and outstanding.......................................... $ 10 $ 10 Additional paid-in capital.................................................... 90 90 ---------- ------------ Total stockholder's equity.................................................... $ 100 $ 100 ========== ============ 8

MEDIACOM CAPITAL CORPORATION NOTE TO THE BALANCE SHEETS (Unaudited) (1) Organization Mediacom Capital Corporation ("Mediacom Capital"), a New York corporation wholly-owned by Mediacom LLC ("Mediacom"), was organized on March 9, 1998 for the sole purpose of acting as co-issuer with Mediacom of $200.0 million aggregate principal amount of the 8 1/2% senior notes due April 15, 2008. Interest on the 8 1/2% senior notes is payable semi-annually on April 15 and October 15 of each year. Mediacom Capital does not conduct operations of its own. On February 26, 1999, Mediacom and Mediacom Capital jointly issued $125.0 million aggregate principal amount of 7 7/8% senior notes due on February 15, 2011. Interest on the 7 7/8% senior notes is payable semi-annually on February 15 and August 15 of each year. On January 24, 2001, Mediacom and Mediacom Capital completed an offering of $500.0 million of 9 1/2% senior notes due January 2013. Interest on the 9 1/2% senior notes is payable semi-annually on January 15 and July 15 of each year, which commenced on July 15, 2001. Approximately $467.5 million of the net proceeds were used to repay a substantial portion of outstanding indebtedness and related accrued interest under Mediacom's subsidiary credit facilities. 9

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Introduction The Company does not believe the discussion and analysis of the its historical financial condition and results of operations set forth below are indicative, nor should they be relied upon as an indicator, of its future performance because of certain significant past events. Those events include numerous acquisitions and several financing transactions. Organization Mediacom LLC ("Mediacom") was organized as a New York limited liability company in July 1995 and serves as a holding company for its operating subsidiaries. Mediacom Capital Corporation, Mediacom's wholly-owned subsidiary, was organized as a New York corporation in March 1998 for the sole purpose of acting as a co-issuer with Mediacom of public debt securities and does not conduct operations of its own. Mediacom Communications Corporation ("MCC") was organized as a Delaware corporation in November 1999 and completed an initial public offering in February 2000. Immediately prior to the completion of MCC's initial public offering, MCC issued shares of its common stock in exchange for all of Mediacom's outstanding membership interests and became the Mediacom's sole member and manager. See Note 1 of the Company's consolidated financial statements. Until MCC's initial public offering in February 2000, Mediacom Management Corporation, a Delaware corporation, provided management services to the Company's operating subsidiaries and received annual management fees. Mediacom Management utilized these fees to compensate its employees as well as to fund its corporate overhead. Such management fees were 2% of the Company's annual gross revenues. The management agreements were terminated upon the date of MCC's initial public offering and were replaced with new agreements between MCC and the Company's operating subsidiaries. Acquisitions The Company has significantly expanded its business through acquisitions. All acquisitions have been accounted for under the purchase method of accounting and, therefore, the Company's historical results of operations include the results of operations for each acquired system subsequent to its respective acquisition date. 2000 Acquisitions In 2000, the Company completed nine acquisitions of cable systems serving a total of approximately 53,000 basic subscribers (the "2000 Acquisitions"). The table below sets forth information regarding the 2000 Acquisitions. Basic Subscribers Purchase Price as of Predecessor Owner Acquisition Date (in millions) Acquisition Date - ----------------- ---------------- ------------------- ----------------- Rapid Communications Partners, L.P. April 2000 $ 8.0 6,000 MidAmerican Cable Systems, L.P. April 2000 8.0 5,000 TriCable, Inc May 2000 1.8 1,000 Spirit Lake Cable TV, Inc. June 2000 10.8 5,000 South Kentucky Services Corporation July 2000 2.1 1,000 Dowden Midwest Cable Partners, L.P. August 2000 1.2 1,000 Illinet Communications of Central Illinois, LLC October 2000 15.8 8,000 Satellite Cable Services, Inc. October 2000 27.5 12,000 AT&T Broadband, LLC-Alabama December 2000 34.0 14,000 ------- ------ $ 109.2 53,000 ======= ====== 10

General EBITDA represents operating loss before depreciation and amortization and non- cash stock charges. EBITDA: . is not intended to be a performance measure that should be regarded as an alternative either to operating income or net income as an indicator of operating performance, or to the statement of cash flows as a measure of liquidity; . is not intended to represent funds available for debt service, dividends, reinvestment or other discretionary uses; and. . should not be considered in isolation or as a substitute for measures of performance prepared in accordance with generally accepted accounting principles. EBITDA is included herein because the Company's management believes that EBITDA is a meaningful measure of performance as it is commonly used by the cable television industry and by the investment community to analyze and compare cable television companies. The Company's definition of EBITDA may not be identical to similarly titled measures reported by other companies. Actual Results of Operations The following historical information includes the results of operations of the 2000 Acquisitions, only for that portion of the respective period that such cable television systems were owned by the Company. Three Months Ended June 30, 2001 Compared to Three Months Ended June 30, 2000 Revenues. Revenues increased 12.4% to $92.9 for the three months ended June 30, 2001 as compared to $82.6 for the three months ended June 30, 2000. Of the revenue increase of $10.3 million, approximately $4.9 million was attributable to the 2000 Acquisitions. Excluding the 2000 Acquisitions, revenues increased primarily due to basic rate increases associated with new programming introductions in the Company's core television services and to customer growth in the Company's recently launched digital cable and high-speed Internet access services. Service costs. Service costs increased 15.1% to $32.5 million for the three months ended June 30, 2001 as compared to $28.2 million for the three months ended June 30, 2000. Of the service cost increase of $4.3 million, approximately $1.9 million was attributable to the 2000 Acquisitions. Excluding the 2000 Acquisitions, these costs increased primarily as a result of higher programming expenses, including rate increases by programmers and the costs of channel additions As a percentage of revenues, service costs were 35.0% for the three months ended June 30, 2001, as compared with 34.2% for the three months ended June 30, 2000. Selling, general and administrative expenses. Selling, general and administrative expenses increased 6.5% to $14.8 million for the three months ended June 30, 2001 as compared to $13.9 million for the three months ended June 30, 2000. Of the selling, general and administrative expense increase of $0.9 million, approximately $0.7 million was attributable to the 2000 Acquisitions. Excluding the 2000 Acquisitions, these costs increased primarily as a result of higher customer service employee expense. As a percentage of revenues, selling, general and administrative expenses were 15.9% for the three months ended June 30, 2001 as compared with 16.8% for the three months ended June 30, 2000. Management fee expense. Management fee expense increased 29.1% to $2.0 million for the three months ended June 30, 2001 as compared to $1.5 million the three months ended June 30, 2000. As a percentage of revenues, management fee expense was 2.1% for the three months ended June 30, 2001 as compared with 1.8% for the three months ended June 30, 2000. The increase was primarily due to MCC's additional employee cost. Depreciation and amortization. Depreciation and amortization increased 21.4% to $52.7 million for the three months ended June 30, 2001 as compared to $43.4 million for the three months ended June 30, 2000. This increase was due to the Company's purchase of 2000 Acquisitions and capital expenditures associated with the upgrade of the Company's cable systems. 11

Non-cash stock charges relating to management fee expense. Non-cash stock charges relating to management fee expense decreased 24.7% to $0.7 million for the three months ended June 30, 2001 as compared to $0.9 million for the three months ended June 30, 2000. This decrease is due to reduced vesting in equity interests granted to certain members of MCC's management team. Interest expense, net. Interest expense, net, increased 36.7% to $22.1 million for the three months ended June 30, 2001 as compared to $16.2 million for the three months ended June 30, 2000. This increase was primarily due to a higher interest rate associated with the Company's 9 1/2% senior notes, which were issued in January 2001. Other (income) expenses. Other expense was $0.3 million for the three months ended June 30, 2001 as compared to $0.4 million of other expense for the three months ended June 30, 2000. This change was principally due to the recording of the fair value of the Company's interest rate derivatives as a result of the adoption of SFAS 133. Net loss. Due to the factors described above, the Company generated a net loss of $32.2 million for the three months ended June 30, 2001 as compared to a net loss of $21.9 million for the three months ended June 30, 2000. EBITDA. EBITDA increased 12.0% to $43.6 million for the three months ended June 30, 2001 as compared to $39.0 million for the three months ended June 30, 2000. Of the EBITDA increase of $4.6 million, approximately $2.2 million was attributable to the 2000 Acquisitions. Excluding the 2000 Acquisitions, EBITDA increased primarily due to the increase in revenues described above, offset primarily by the increases in programming expenses and customer service employee expense described above. As a percentage of revenues, EBITDA was 47.0% for the three months ended June 30, 2001 as compared with 47.2% for the three months ended June 30, 2000. Six Months Ended June 30, 2001 Compared to Six Months Ended June 30, 2000 Revenues. Revenues increased 14.5% to $183.2 for the six months ended June 30, 2001 as compared to $160.0 for the six months ended June 30, 2000. Of the revenue increase of $23.2 million, approximately $11.0 million was attributable to the 2000 Acquisitions. Excluding the 2000 Acquisitions, revenues increased primarily due to basic rate increases associated with new programming introductions in the Company's core television services and to customer growth in the Company's recently launched digital cable and high-speed Internet access services. Service costs. Service costs increased 16.6% to $64.0 million for the six months ended June 30, 2001 as compared to $54.9 million for the six months ended June 30, 2000. Of the service cost increase of $9.1 million, approximately $4.5 million was attributable to the 2000 Acquisitions. Excluding the 2000 Acquisitions, these costs increased primarily as a result of higher programming expenses, including rate increases by programmers and the costs of channel additions. As a percentage of revenues, service costs were 34.9% for the six months ended June 30, 2001, as compared with 34.3% for the six months ended June 30, 2000. Selling, general and administrative expenses. Selling, general and administrative expenses increased 9.8% to $30.0 million for the six months ended June 30, 2001 as compared to $27.3 million for the six months ended June 30, 2000. Of the selling, general and administrative expense increase of $2.7 million, approximately $1.8 million was attributable to the 2000 Acquisitions. Excluding the 2000 Acquisitions, these costs increased primarily as a result of higher customer service employee expense and marketing costs associated with the promotion of the Company's new product offerings. As a percentage of revenues, selling, general and administrative expenses were 16.4% for the six months ended June 30, 2001 as compared with 17.0% for the six months ended June 30, 2000. Management fee expense. Management fee expense increased 18.3% to $3.5 million for the six months ended June 30, 2001 as compared to $2.9 million the six months ended June 30, 2000. As a percentage of revenues, management fee expense was 1.9% for the six months ended June 30, 2001 as compared with 1.8% for the six months ended June 30, 2000. The increase was primarily due to MCC's additional employee cost. Depreciation and amortization. Depreciation and amortization increased 23.1% to $103.5 million for the six months ended June 30, 2001 as compared to $84.1 million for the six months ended June 30, 2000. This increase was due to the Company's purchase of 2000 Acquisitions and capital expenditures associated with the upgrade of the Company's cable systems. 12

Non-cash stock charges relating to management fee expense. Non-cash stock charges relating to management fee expense decreased 93.0% to $1.9 million for the six months ended June 30, 2001 as compared to $27.0 million for the six months ended June 30, 2000. This decrease is due to a one-time $24.5 million charge which occurred in February 2000, resulting from the termination of the management agreements with Mediacom Management on the date of MCC's initial public offering. Interest expense, net. Interest expense, net, increased 23.8% to $42.8 million for the six months ended June 30, 2001 as compared to $34.6 million for the six months ended June 30, 2000. This increase was primarily due to a higher interest rate associated with the Company's 9 1/2% senior notes, which were issued in January 2001. Other (income) expenses. Other income was $27.5 million for the six months ended June 30, 2001 as compared to $0.9 million of other expense for the six months ended June 30, 2000. This change was principally due to the elimination of the remainder of the deferred SoftNet revenue resulting from the termination of the contract with SoftNet Systems, Inc. (See Note 5). Net loss. Due to the factors described above and a one-time charge of $1.6 million resulting from the cumulative effect of change in accounting principle, the Company generated a net loss of $36.5 million for the six months ended June 30, 2001 as compared to a net loss of $71.6 million for the six months ended June 30, 2000. EBITDA. EBITDA increased 14.5% to $85.8 million for the six months ended June 30, 2001 as compared to $75.0 million for the three months ended June 30, 2000. Of the EBITDA increase of $10.8 million, approximately $4.5 million was attributable to the 2000 Acquisitions. Excluding the 2000 Acquisitions, EBITDA increased primarily due to the increase in revenues described above, offset primarily by the increases in programming expenses and customer service employee expense described above. As a percentage of revenues, EBITDA was 46.8% for the six months ended June 30, 2001 and 2000. Selected Pro Forma Results The Company has reported the results of operations of the 2000 Acquisitions from the date of their respective acquisition. The financial information below for the six months ended June 30, 2001 and 2000, presents selected unaudited pro forma operating results assuming the purchase of the 2000 Acquisitions had been consummated on January 1, 2000. This financial information is not necessarily indicative of what results would have been had the Company operated these cable systems since the beginning of 2000. Six Months Ended June 30, --------------------------------- 2001 2000 ----------- ----------- (dollars in thousands, except per subscriber data) Revenues..................................................................... $183,188 $170,104 Costs and expenses: Service costs............................................................. 63,964 58,954 Selling, general and administrative expenses.............................. 29,962 29,025 Management fee expense.................................................... 3,467 2,931 Depreciation and amortization............................................. 103,485 89,121 Non-cash stock charges relating to management fee expense................. 1,883 26,986 ----------- ---------- Operating loss............................................................... $(19,573) $(36,913) =========== ========== Other Data: EBITDA....................................................................... $ 85,795 $ 79,194 EBITDA margin(1)............................................................. 46.8% 46.6% Basic subscribers(2)......................................................... 774,000 770,800 Average monthly revenue per basic subscriber(3).............................. $39.91 $37.65 - -------------------------- (1) Represents EBITDA as a percentage of revenues. (2) At end of the period. (3) Represents average monthly revenues for the last three months of the period divided by average basic subscribers for the period. 13

Selected Pro Forma Results for Six Months Ended June 30, 2001 Compared to Selected Pro Forma Results for Six Months Ended June 30, 2000 Revenues increased 7.7% to $183.2 million for the six months ended June 30, 2001, as compared to $170.1 million for the six months ended June 30, 2000. This increase was attributable principally to basic rate increases associated with new programming introductions in the Company's core television services, internal subscriber growth of 0.4% and to customer growth in the Company's recently launched digital cable and high-speed Internet access services. Service costs and selling, general and administrative expenses in the aggregate increased 6.8% to $93.9 million for the six months ended June 30, 2001 from $88.0 million for the six months ended June 30, 2000, principally due to higher programming expenses and customer service employee expense. Management fee expense increased 18.3% to $3.5 million for the six months ended June 30, 2001 from $2.9 million for the six months ended June 30, 2000. As a percentage of revenues, management fee expense was 2.0% for the six months ended June 30, 2001 as compared with 1.7% for the six months ended June 30, 2000. Depreciation and amortization increased 16.1% to $103.5 million for the six months ended June 30, 2001 from $89.1 million for the six months ended June 30, 2000. This increase was principally due to capital expenditures associated with the upgrade of the Company's cable systems. Non-cash stock charges were as reported above. As a result of the above factors, the Company generated an operating loss of $19.6 million for the six months ended June 30, 2001, compared to $36.9 million for the six months ended June 30, 2000. EBITDA increased by 8.3% to $85.8 million for the six months ended June 30, 2001 from $79.2 million for the six months ended June 30, 2000. The EBITDA margin was 46.8% for the six months ended June 30, 2001 as compared with 46.6% for the six months ended June 30, 2000. Liquidity and Capital Resources The Company's business requires substantial capital for the upgrade, expansion and maintenance of its cable network. In addition, the Company has pursued, and will continue to pursue, a business strategy that includes selective acquisitions. The Company has funded and will continue to fund its working capital requirements, capital expenditures and acquisitions through a combination of internally generated funds, long-term borrowings and equity financings. Investing Activities The Company has revised its capital investment program and now expects to spend approximately $210.0 million on capital expenditures in 2001, an increase from previously announced amounts of between $180.0 million and $200.0 million. This revision reflects an acceleration of the Company's network upgrade plan. The Company plans to fund these expenditures through net cash flows from operations and additional borrowings under its subsidiary bank credit facilities. By December 2001, the Company expects that 91% of its cable network will be upgraded with 550MHz to 870MHz bandwidth capacity and 81% of its homes passed will have two-way communications. For the six months ended June 30, 2001, the Company's capital expenditures were $107.6 million. On July 18, 2001, the Company made a $150.0 million preferred equity investment in Mediacom Broadband, LLC ("Mediacom Broadband"), a newly-formed, wholly-owned subsidiary of MCC, that was funded with borrowings under its subsidiary credit facilities. The preferred equity investment has a 12% annual cash dividend, payable quarterly. The proceeds from the preferred equity investment, were used by Mediacom Broadband to pay a portion of the $2.1 billion purchase price of its acquisition of cable systems serving approximately 800,000 subscribers in the states of Georgia, Illinois, Iowa and Missouri (the "AT&T systems") from affiliates of AT&T Broadband, LLC. In 2000, the Company completed nine acquisitions of cable systems that served approximately 53,000 basic subscribers for an aggregate purchase price of $109.2 million. 14

Financing Activities As of June 30, 2001 and December 31, 2000 the Company's debt was $1.1 billion and $987.0 million, respectively. As of June 30, 2001, the Company entered into interest rate swap agreements, which expire from 2002 through 2004, to hedge $170.0 million of floating rate debt under its subsidiary credit facilities. As a result of these interest rate swap agreements, 94% of the Company's outstanding indebtedness was at fixed interest rates or subject to interest rate protection on such date. After giving effect to these interest rate swap agreements, as of June 30, 2001, the Company's weighted average cost of indebtedness was approximately 8.8%. As of June 30, 2001, the Company was in compliance with all of the financial and other covenants in its subsidiary credit facilities and public debt indentures. On January 24, 2001, Mediacom and Mediacom Capital completed an offering of $500.0 million of 9 1/2% senior notes due January 2013. Interest on the 9 1/2% senior notes is payable semi-annually on January 15 and July 15 of each year, which commenced on July 15, 2001. Approximately $467.5 million of the net proceeds were used to repay a substantial portion of the indebtedness outstanding under the Company's subsidiary credit facilities and related accrued interest. The balance of the net proceeds was used for general corporate purposes. On July 17, 2001, the Company paid a $125.0 million cash dividend to MCC that was funded with borrowings under its subsidiary credit facilities. The proceeds of this cash dividend were then contributed to Mediacom Broadband to pay a portion of $2.1 billion purchase price of Mediacom Broadband's acquisitions of the AT&T systems. After giving pro forma effect to the cash dividend paid to MCC and its preferred equity investment in Mediacom Broadband, as of June 30, 2001, the Company's indebtedness was approximately $1.3 billion and it had approximately $586.0 million of unused credit commitments under its subsidiary credit facilities. Although the Company has not generated earnings sufficient to cover fixed charges, the Company has generated cash and obtained financing sufficient to meet its debt service, working capital, capital expenditure and acquisition requirements. The Company expects that it will continue to be able to generate funds and obtain financing sufficient to service the Company's obligations and complete its future acquisitions. There can be no assurance that the Company will be able to obtain sufficient financing, or, if it were able to do so, that the terms would be favorable to them. Recent Accounting Pronouncements In June 1998, Statement of Financial Accounting Standards No. 133 ("SFAS 133"), "Accounting for Derivative Instruments and Hedging Activities," was issued effective January 1, 2001. This statement establishes the accounting and reporting standards for derivatives and hedging activity. Upon adoption of SFAS 133, all derivatives are required to be recognized in the statement of financial position as either assets or liabilities and measured at fair value. The Company recorded a charge of approximately $1.6 million as a change in accounting principle in the first quarter of 2001. In June 2001, Statement of Financial Accounting Standards No. 142 ("SFAS 142"), "Accounting for Goodwill and other Intangible Assets," was issued effective January 1, 2002. This statement establishes that goodwill is no longer subject to amortization over its useful life. The new rule also states that an acquired intangible assets must be separately recognized if it is obtained through contractual or other legal rights, or if the asset can be sold, licensed, transferred, exchanged or rented, regardless of the intent to do so. The Company has not yet determined the impact that SFAS 142 may have on its results of operations and consolidated financial statements. Inflation and Changing Prices The Company's systems' costs and expenses are subject to inflation and price fluctuations. Since changes in costs can be passed through to subscribers, such changes are not expected to have a material effect on their results of operations. 15

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK In the normal course of business, the Company uses interest rate swap agreements in order to fix the interest rate for the duration of the contract as a hedge against interest rate volatility. As of June 30, 2001, the Company had interest rate exchange agreements (the "Swaps") with various banks pursuant to which the interest rate on $170.0 million is fixed at a weighted average swap rate of approximately 6.7%, plus the average applicable margin over the Eurodollar Rate option under the Company's bank credit agreements. Under the terms of the Swaps, which expire from 2002 through 2004, the Company is exposed to credit loss in the event of nonperformance by the other parties to the Swaps. However, the Company does not anticipate nonperformance by the counterparties. The Company would have paid approximately $3.0 million if it terminated the Swaps, inclusive of accrued interest, at June 30, 2001. The table below provides information for the Company's long term debt. See Note 4 to the Company's consolidated financial statements. Expected Maturity --------------------------------------------------------- (All dollar amounts in thousands) 2002 2003 2004 2005 2006 Thereafter Total Fair Value ------ -------- ------- -------- -------- ---------- -------- ---------- Fixed rate $ - $ - $ - $ - $ - $200,000 $200,000 $185,000 Weighted average interest rate 8.5% 8.5% 8.5% 8.5% 8.5% 8.5% 8.5% Fixed rate $ - $ - $ - $ - $ - $125,000 $125,000 $107,000 Weighted average interest rate 7.9% 7.9% 7.9% 7.9% 7.9% 7.9% 7.9% Fixed rate $ - $ - $ - $ - $ - $500,000 $500,000 $480,000 Weighted average interest rate 9.5% 9.5% 9.5% 9.5% 9.5% 9.5% 9.5% Variable rate $ 750 $2,000 $2,000 $2,000 $2,000 $229,250 $238,000 $238,000 Weighted average interest rate 7.0% 7.0% 7.0% 7.0% 7.0% 7.0% 7.0% 16

PART II ------- ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits None (b) Reports on Form 8-K We filed the following reports on Form 8-K during the three months ended June 30, 2001: Date Report Date of Report Filed with SEC Items Reported - -------------- -------------- -------------- February 26, 2001 June 6, 2001 Item 5 - Other Events (Amendment No.1) Item 7 - Financial Statements, Pro Forma Financial Information and Exhibits * - ---------- * Included historical financial statements for Georgia Mediacom Systems, the Southern Illinois Mediacom Systems, the Iowa Mediacom Systems and the Missouri Mediacom Systems 17

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. MEDIACOM LLC August 14, 2001 By: /s/ Mark E. Stephan ------------------- Mark E. Stephan Senior Vice President, Chief Financial Officer, Treasurer and Principal Financial Officer 18

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. MEDIACOM CAPITAL CORPORATION August 14, 2001 By: /s/ Mark E. Stephan ------------------- Mark E. Stephan Treasurer, Secretary and Principal Financial Officer 19