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, 2010
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Commission File Numbers:
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333-72440 |
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333-72440-01 |
Mediacom Broadband LLC
Mediacom Broadband Corporation*
(Exact names of Registrants as specified in their charters)
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Delaware
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06-1615412 |
Delaware
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06-1630167 |
(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). o 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 Broadband Corporation meets the conditions set forth in General Instruction H (1)
(a) and (b) of Form 10-Q and is therefore filing this form with the reduced disclosure format. |
MEDIACOM BROADBAND LLC AND SUBSIDIARIES
FORM 10-Q
FOR THE PERIOD ENDED JUNE 30, 2010
TABLE OF CONTENTS
This Quarterly Report on Form 10-Q is for the three and six months ended June 30, 2010. 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 (SEC) 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 Broadband LLC as Mediacom Broadband, and Mediacom Broadband 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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increased levels of competition from existing and new competitors; |
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lower demand for our video, high-speed data and phone services; |
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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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fluctuations in short term interest rates which may cause our interest expense to vary
from quarter to quarter; |
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instability in the capital and credit markets, which may impact our ability to refinance
future debt maturities or provide funding for 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, 2009 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 BROADBAND 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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2010 |
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2009 |
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ASSETS |
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CURRENT ASSETS |
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Cash |
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$ |
17,063 |
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$ |
11,676 |
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Accounts receivable, net of allowance for doubtful accounts of $1,505 and $1,253 |
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54,295 |
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48,931 |
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Accounts receivable affiliates |
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71,096 |
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131,213 |
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Prepaid expenses and other current assets |
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11,518 |
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6,914 |
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Total current assets |
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153,972 |
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198,734 |
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Investment in cable television systems: |
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Property, plant and equipment, net of accumulated depreciation of $902,288 and $836,853 |
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773,481 |
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746,067 |
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Franchise rights |
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1,176,908 |
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1,176,908 |
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Goodwill |
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195,945 |
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195,945 |
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Subscriber lists, net of accumulated amortization of $36,240 and $35,201 respectively |
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3,506 |
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4,545 |
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Other assets, net of accumulated amortization of $12,611 and $11,041 |
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27,274 |
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21,636 |
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Total assets |
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2,331,086 |
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2,343,835 |
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LIABILITIES, PREFERRED MEMBERS INTEREST AND MEMBERS EQUITY |
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CURRENT LIABILITIES |
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Accounts payable, accrued expenses and other current liabilities |
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$ |
133,923 |
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$ |
147,015 |
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Deferred revenue |
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31,531 |
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31,668 |
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Current portion of long-term debt |
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14,000 |
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35,500 |
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Total current liabilities |
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179,454 |
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214,183 |
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Long-term debt, less current portion |
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1,858,000 |
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1,819,500 |
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Other non-current liabilities |
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31,461 |
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12,224 |
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Total liabilities |
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2,068,915 |
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2,045,907 |
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Commitments and contingencies (Note 9) |
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PREFERRED MEMBERS INTEREST (Note 7) |
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150,000 |
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150,000 |
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MEMBERS EQUITY |
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Capital contributions |
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361,675 |
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409,675 |
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Accumulated deficit |
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(249,504 |
) |
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(261,747 |
) |
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Total members equity |
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112,171 |
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147,928 |
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Total liabilities, preferred members interest and members equity |
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$ |
2,331,086 |
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$ |
2,343,835 |
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The accompanying notes to the unaudited financial statements are an integral part of these statements.
4
MEDIACOM BROADBAND LLC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(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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2010 |
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2009 |
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2010 |
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2009 |
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Revenues |
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$ |
213,270 |
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$ |
207,309 |
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$ |
422,048 |
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$ |
416,789 |
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Costs and expenses: |
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Service costs (exclusive of depreciation and amortization) |
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88,461 |
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84,469 |
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174,820 |
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170,187 |
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Selling, general and administrative expenses |
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41,782 |
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40,446 |
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81,741 |
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80,754 |
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Management fee expense |
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3,968 |
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3,954 |
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7,843 |
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7,850 |
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Depreciation and amortization |
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31,790 |
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28,488 |
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62,659 |
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56,985 |
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Operating income |
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47,269 |
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49,952 |
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94,985 |
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101,013 |
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Interest expense, net |
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(28,365 |
) |
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(28,099 |
) |
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(56,200 |
) |
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(55,047 |
) |
(Loss) gain on derivatives, net |
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(14,629 |
) |
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14,339 |
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(19,876 |
) |
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13,187 |
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Other expense, net |
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(468 |
) |
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(1,316 |
) |
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(955 |
) |
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(2,824 |
) |
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Net income |
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$ |
3,807 |
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$ |
34,876 |
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$ |
17,954 |
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$ |
56,329 |
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Dividend to preferred member |
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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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Net (loss) income applicable to member |
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$ |
(693 |
) |
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$ |
30,376 |
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$ |
8,954 |
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$ |
47,329 |
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The accompanying notes to the unaudited financial statements are an integral part of these statements.
5
MEDIACOM BROADBAND LLC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(All dollar amounts in thousands)
(Unaudited)
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Six Months Ended |
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June 30, |
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2010 |
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2009 |
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OPERATING ACTIVITIES: |
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Net income |
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$ |
17,954 |
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$ |
56,329 |
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Adjustments to reconcile net income to net cash flows provided by operating activities: |
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Depreciation and amortization |
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62,659 |
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56,985 |
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Loss (gain) on derivatives, net |
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19,876 |
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(13,187 |
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Amortization of deferred financing costs |
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1,571 |
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1,869 |
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Share-based compensation |
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645 |
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590 |
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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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(5,364 |
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(2,646 |
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Accounts receivable affiliates |
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39,653 |
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(9,434 |
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Prepaid expenses and other assets |
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(4,571 |
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(4,017 |
) |
Accounts payable, accrued expenses and other current liabilities |
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(169 |
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696 |
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Deferred revenue |
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(137 |
) |
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735 |
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Other non-current liabilities |
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(169 |
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706 |
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Net cash flows provided by operating activities |
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$ |
131,948 |
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$ |
88,626 |
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INVESTING ACTIVITIES: |
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Capital expenditures |
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$ |
(68,568 |
) |
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$ |
(55,672 |
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Net cash flows used in investing activities |
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$ |
(68,568 |
) |
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$ |
(55,672 |
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FINANCING ACTIVITIES: |
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New borrowings |
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824,875 |
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277,000 |
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Repayment of debt |
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(807,875 |
) |
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(217,000 |
) |
Capital distributions to parent |
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(48,000 |
) |
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(83,854 |
) |
Dividend payment on preferred members interest |
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(9,000 |
) |
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(9,000 |
) |
Financing costs |
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(9,628 |
) |
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Other financing activities book overdrafts |
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(8,365 |
) |
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(1,514 |
) |
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Net cash flows used in financing activities |
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$ |
(57,993 |
) |
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$ |
(34,368 |
) |
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Net increase (decrease) in cash |
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5,387 |
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(1,414 |
) |
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CASH, beginning of period |
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11,676 |
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15,502 |
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CASH, end of period |
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$ |
17,063 |
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$ |
14,088 |
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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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$ |
61,705 |
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$ |
55,362 |
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NON-CASH TRANSACTIONS FINANCING |
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$ |
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$ |
108,643 |
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Exchange of cable systems with related party |
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The accompanying notes to the unaudited financial statements are an integral part of these statements.
6
MEDIACOM BROADBAND LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION
Basis of Preparation of Unaudited Consolidated Financial Statements
Mediacom Broadband LLC (Mediacom Broadband, and collectively with its subsidiaries, we, our
or us), a Delaware limited liability company wholly-owned by Mediacom Communications Corporation
(MCC), is involved in the acquisition and operation of cable systems serving smaller cities and
towns in the United States. Our various 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, 2009. 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 Broadband Corporation (Broadband Corporation), a Delaware corporation wholly-owned by
us, co-issued, jointly and severally with us, public debt securities. Broadband Corporation has no
operations, revenues or cash flows and has no assets, liabilities or stockholders equity on its
balance sheet, other than a one-hundred dollar receivable from an affiliate and the same dollar
amount of common stock. Therefore, separate financial statements have not been presented for this
entity.
Franchise fees imposed by local governmental authorities are collected on a monthly basis from our
customers and are periodically remitted to the local governmental authorities. Because franchise
fees are our obligation, we present them on a gross basis with a corresponding operating expense.
Franchise fees reported on a gross basis amounted to approximately $6.3 million and $6.2 million
for the three months ended June 30, 2010 and 2009, respectively, and approximately $12.6 million
and $12.7 million for the six months ended June 30, 2010 and 2009, respectively.
2. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In January 2010, the FASB issued Accounting Standards Update (ASU) ASU No. 2010-06, Improving
Disclosures about Fair Value Measurements, which amends Accounting Standards Codification (ASC)
820 Fair Value Measurements and Disclosures 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. We do not expect that this ASU will have a significant impact
on the consolidated 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, 2010. 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. |
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Level 2 Observable market based inputs or unobservable inputs that are corroborated by
market data. |
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Level 3 Unobservable inputs that are not corroborated by market data. |
7
As of June 30, 2010, our interest rate exchange agreement liabilities, net, were valued at $50.5
million using Level 2 inputs, as follows:
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Fair Value as of June 30, 2010 |
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(dollars in thousands) |
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Level 1 |
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Level 2 |
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Level 3 |
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Total |
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Assets |
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|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate exchange agreements |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate exchange agreements |
|
$ |
|
|
|
$ |
50,535 |
|
|
$ |
|
|
|
$ |
50,535 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate exchange agreements liabilities, net |
|
$ |
|
|
|
$ |
50,535 |
|
|
$ |
|
|
|
$ |
50,535 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2009, our interest rate exchange agreement liabilities, net, were valued at
$30.7 million using Level 2 inputs, as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value as of December 31, 2009 |
|
(dollars in thousands) |
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate exchange agreements |
|
$ |
|
|
|
$ |
1,738 |
|
|
$ |
|
|
|
$ |
1,738 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate exchange agreements |
|
$ |
|
|
|
$ |
32,397 |
|
|
$ |
|
|
|
$ |
32,397 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate exchange agreements liabilities, net |
|
$ |
|
|
|
$ |
30,659 |
|
|
$ |
|
|
|
$ |
30,659 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consisted of the following (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
June 30, |
|
|
December 31, |
|
|
|
2010 |
|
|
2009 |
|
Cable systems, equipment and subscriber devices |
|
$ |
1,584,040 |
|
|
$ |
1,491,709 |
|
Vehicles |
|
|
37,780 |
|
|
|
38,636 |
|
Buildings and leasehold improvements |
|
|
27,215 |
|
|
|
27,090 |
|
Furniture, fixtures and office equipment |
|
|
21,718 |
|
|
|
20,474 |
|
Land and land improvements |
|
|
5,016 |
|
|
|
5,011 |
|
|
|
|
|
|
|
|
|
|
|
1,675,769 |
|
|
|
1,582,920 |
|
Accumulated depreciation |
|
|
(902,288 |
) |
|
|
(836,853 |
) |
|
|
|
|
|
|
|
Property, plant and equipment, net |
|
$ |
773,481 |
|
|
$ |
746,067 |
|
|
|
|
|
|
|
|
8
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, |
|
|
|
2010 |
|
|
2009 |
|
Accrued programming costs |
|
$ |
21,567 |
|
|
$ |
18,860 |
|
Liabilities under interest rate exchange agreements |
|
|
21,468 |
|
|
|
22,737 |
|
Accrued taxes and fees |
|
|
18,278 |
|
|
|
17,044 |
|
Accrued payroll and benefits |
|
|
15,428 |
|
|
|
15,252 |
|
Accrued property, plant and equipment |
|
|
12,160 |
|
|
|
5,671 |
|
Accrued interest |
|
|
10,957 |
|
|
|
16,457 |
|
Advance subscriber payments |
|
|
9,941 |
|
|
|
9,688 |
|
Accrued service costs |
|
|
6,057 |
|
|
|
7,232 |
|
Accrued telecommunications costs |
|
|
1,955 |
|
|
|
2,489 |
|
Accounts payable |
|
|
1,947 |
|
|
|
6,998 |
|
Book overdrafts (1) |
|
|
101 |
|
|
|
8,605 |
|
Intercompany accounts payable and other accrued expenses |
|
|
14,064 |
|
|
|
15,982 |
|
|
|
|
|
|
|
|
Accounts payable, accrued expenses and other current liabilities |
|
$ |
133,923 |
|
|
$ |
147,015 |
|
|
|
|
|
|
|
|
|
|
|
(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 cash flows from financing activities in our consolidated statement of cash flows. |
6. DEBT
Debt consisted of the following (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
June 30, |
|
|
December 31, |
|
|
|
2010 |
|
|
2009 |
|
Bank credit facilities |
|
$ |
1,372,000 |
|
|
$ |
1,355,000 |
|
81/2% senior notes due 2015 |
|
|
500,000 |
|
|
|
500,000 |
|
|
|
|
|
|
|
|
|
|
$ |
1,872,000 |
|
|
$ |
1,855,000 |
|
Less: current portion |
|
|
14,000 |
|
|
|
35,500 |
|
|
|
|
|
|
|
|
Total long-term debt |
|
$ |
1,858,000 |
|
|
$ |
1,819,500 |
|
|
|
|
|
|
|
|
Bank Credit Facility
As of June 30, 2010, our operating subsidiaries maintained an aggregate $1.802 billion
senior secured credit facility (the credit facility), of which $1.372 billion was outstanding.
The average interest rates on such outstanding debt, including the effect of the interest rate
exchange agreements discussed below, was 5.0%, as compared to 5.8% as of the same date last year.
As of June 30, 2010, we had no outstanding balance under our revolving credit commitments of $430.3
million, with $9.3 million of letters of credit issued under the credit facility to various parties as
collateral for our performance relating to insurance and franchise requirements and $421.0 million
of unused lines. 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 as of
June 30, 2010. As of the same date, our revolving credit commitments were scheduled to expire on
December 31, 2012, and are not subject to scheduled reductions prior to maturity.
The credit agreement for the credit facility contains various covenants that, among other things,
impose certain limitations on mergers and acquisitions, consolidations and sales of certain assets,
liens, the incurrence of additional indebtedness, certain restricted payments and certain
transactions with affiliates. As of June 30, 2010, the principal financial covenant of the credit
facility required compliance with a ratio of indebtedness to annualized system cash flow (the
senior leverage ratio) of no more than 6.0 to 1.0 at any time. As of June 30, 2010, our
operating subsidiaries senior leverage ratio was 4.1 to 1.0. The terms indebtedness and system
cash flow are defined in the credit agreement for the credit facility. The credit facility is
collateralized by all of our ownership interests in our operating subsidiaries, and is guaranteed
by us on a limited recourse basis to the extent of such ownership interests.
9
New Financings
On April 23, 2010, our operating subsidiaries entered into an incremental facility agreement that
provides for a new term loan under the Broadband credit facility in the principal amount of $600.0
million (Term Loan F), and borrowed the full amount on the same date. The proceeds from Term Loan
F were used to repay the outstanding balance of Term Loan E and the revolving credit portion of the
credit facility, without any reduction in the revolving credit commitments, as well as related fees
and expenses. Following the borrowing of Term Loan F, there were two term loans outstanding under
the credit facility (Term Loan D and Term Loan F).
Borrowings under Term Loan F generally bear interest at a floating rate or rates equal to the
Eurodollar Rate or the Base Rate (as such terms are defined in the credit agreement), plus a margin
of 3.00% for Eurodollar Rate loans and a margin of 2.00% for Base Rate loans. For the first four
years of Term Loan F, the Eurodollar Rate will be subject to a floor of 1.50% and the Base Rate
will be subject to a floor of 2.50%. Term Loan F matures on October 23, 2017, and is subject to
quarterly reductions of 0.25% of the original principal amount beginning on September 30, 2010. The
obligations of our operating subsidiaries under Term Loan F are governed by the terms of the credit
agreement.
On April 23, 2010, the credit agreement for the credit facility was amended to:
|
|
|
increase the permitted amount of incremental facilities by $250 million; and |
|
|
|
|
permit additional incremental facility term loans in an aggregate principal
amount equal to not more than 50% of any future reductions in the revolving
credit commitments. |
Senior Notes
As of June 30, 2010, we had an aggregate $500 million of senior notes outstanding. The indenture
governing our senior notes contains various covenants, though they are generally less restrictive
than those found in our credit facility. As of June 30, 2010, the principal financial covenant of
these senior notes had a limitation on the incurrence of additional indebtedness based upon a
maximum ratio of total indebtedness to cash flow, as defined (the total leverage ratio), of 8.5
to 1.0. As of June 30, 2010, the total leverage ratio was 5.9 to 1.0. These covenants also
restrict our ability, among other things, to make certain distributions, investments and other
restricted payments, sell certain assets, create certain liens, merge, consolidate or sell
substantially all of our assets and enter into certain transactions with affiliates.
Interest Rate Swaps
We use interest rate exchange agreements, or interest rate swaps, in order to fix the rate of the
applicable Eurodollar 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. 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,
2010 and 2009.
As of June 30, 2010, we had current interest rate swaps with various banks pursuant to which the
interest rate on $800 million was fixed at a weighted average rate of 3.6%. Our current interest
rate swaps are scheduled to expire in the amounts of $100 million, $200 million and $500 million
during the years ended December 31, 2010, 2011 and 2012, respectively.
As of June 30, 2010, we had also entered into forward-starting interest rate swaps that will fix
rates for: (i) a two-year period at a rate of 2.9% on $100 million of floating rate debt, which
will commence in December 2010; (ii) a three-year period at a rate of 3.5% on $100 million of
floating rate debt, which will commence in December 2011; (iii) a two and a half-year period at a
weighted average rate of 3.9% on $200 million of floating rate debt, which will commence in June
2012; and (iv) a two-year period at a weighted average rate of 3.4% on $300 million of floating
rate debt, which will commence in December 2012.
The fair value of our interest rate swaps 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, 2010, based upon mark-to-market valuation, we recorded on our
consolidated balance sheet an accumulated current liability of $21.5 million and an accumulated
long-term liability of approximately $29.1 million. As of December 31, 2009, based upon
mark-to-market valuation, we recorded on our consolidated balance sheet a long-term asset of $1.7
million, an accumulated current liability of $22.7 million and an accumulated long-term liability
of $9.7 million.
10
As a result of the mark-to-market valuations on these interest rate swaps, we recorded a net loss
on derivatives of $14.6 million and a net gain on derivatives of $14.3 million for the three months
ended June 30, 2010 and 2009, respectively, and we recorded a net loss on derivatives of $19.9 million and a
net gain on derivatives of $13.2 million for the six months ended June 30, 2010 and 2009,
respectively.
Covenant Compliance and Debt Ratings
For all periods through June 30, 2010, we were in compliance with all of the covenants under the
credit facility and senior note arrangements. 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.
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 negative outlook, by Standard and Poors. The negative outlook on our corporate credit ratings
assigned by Standard and Poors was due to the potential implications of the going private
transaction proposed by MCCs founder, Chairman and Chief Executive Officer, Rocco B. Commisso.
See Note 12. 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.
Fair Value
As of June 30, 2010, the fair values of our senior notes and credit facility are as follows
(dollars in thousands):
|
|
|
|
|
81/2% senior notes due 2015 |
|
$ |
485,000 |
|
|
|
|
|
|
|
|
|
|
Bank credit facilities |
|
$ |
1,286,030 |
|
|
|
|
|
7. PREFERRED MEMBERS INTERESTS
Mediacom LLC, a wholly owned subsidiary of MCC, has a $150.0 million preferred equity investment in
our company as of June 30, 2010. The preferred equity investment has a 12% annual dividend, payable
quarterly in cash.
During each of the three months ended June 30, 2010 and 2009, we paid $4.5 million in cash dividends on the preferred equity.
During each of the six months ended June 30, 2010 and 2009, we paid
$9.0 million in cash dividends on the preferred equity.
8. MEMBERS EQUITY
Share-based Compensation
Total share-based compensation expense for the three months ended June 30, 2010 and 2009, was as
follows (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, |
|
|
|
2010 |
|
|
2009 |
|
Share-based compensation expense by type of award: |
|
|
|
|
|
|
|
|
Employee stock options |
|
$ |
44 |
|
|
$ |
38 |
|
Employee stock purchase plan |
|
|
69 |
|
|
|
66 |
|
Restricted stock units |
|
|
213 |
|
|
|
206 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total share-based compensation expense |
|
$ |
326 |
|
|
$ |
310 |
|
|
|
|
|
|
|
|
During the three months ended June 30, 2010, there were no restricted stock units and no stock
options that had been granted to our employees under MCCs compensation programs. Each of the
restricted stock units and stock options in MCCs stock compensation programs are exchangeable and
exercisable into a share of MCCs Class A common stock. During the three months ended June 30,
2010, no restricted stock units were vested and options to purchase approximately 6,000 shares of
Class A common stock were exercised.
11
Total share-based compensation expense for the six months ended June 30, 2010 and 2009, was as
follows (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30, |
|
|
|
2010 |
|
|
2009 |
|
Share-based compensation expense by type of award: |
|
|
|
|
|
|
|
|
Employee stock options |
|
$ |
84 |
|
|
$ |
72 |
|
Employee stock purchase plan |
|
|
139 |
|
|
|
146 |
|
Restricted stock units |
|
|
422 |
|
|
|
372 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total share-based compensation expense |
|
$ |
645 |
|
|
$ |
590 |
|
|
|
|
|
|
|
|
During the six months ended June 30, 2010, there were approximately 154,000 restricted stock units
and 39,000 stock options that had been granted to our employees under MCCs compensation programs.
The weighted average fair values associated with these grants were $4.33 per restricted stock unit
and $4.79 per stock option. During the six months ended June 30, 2010, approximately 100,000
restricted stock units were vested and options to purchase approximately 6,000 shares of Class A
common stock were exercised.
Employee Stock Purchase Plan
Under MCCs employee stock purchase plan, all employees are allowed to participate in the purchase
of shares of MCCs Class A common stock at a 15% discount on the date of the allocation. Shares
purchased by our employees under MCCs plan amounted to approximately 80,000 and 103,000 for the
three and six months ended June 30, 2010 and 2009, respectively. The net proceeds to us were
$0.2 million for each of the three months ended June 30, 2010 and 2009. The net proceeds to us
were approximately $0.4 million for each of the six months ended June 30, 2010 and 2009.
9. COMMITMENTS AND CONTINGENCIES
Legal Proceedings
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. MCC believes they have substantial defenses to the claims
asserted in the complaint, and they intend to defend the action vigorously. If MCC is not
successful in this litigation, Mediacom Broadband may have to distribute cash to MCC in order for
MCC to pay any damages in regard to this litigation.
Commencing in June 2010, three shareholder class action lawsuits were filed against Mediacom
Communications Corporation and its individual directors all in the Court of Chancery in the State
of Delaware. The lawsuits, Colleen Witmer vs. Mediacom Communications Corporation et al., J.
Malcolm Gray v. Mediacom Communications Corporation et al., and Haverhill Retirement System v.
Mediacom Communications Corporation, relate to the offer by Rocco B. Commisso to acquire all of
the outstanding shares of MCCs common stock, not already owned by Mr. Commisso (see Note 12). The
three lawsuits have been consolidated for all purposes in the Delaware Chancery Court. The
lawsuits allege breach of fiduciary duty and seek injunctive relief to prevent consummation of the
proposed transaction or in the alternative, rescission and compensatory damages. MCC and its
directors intend to defend the actions vigorously.
We, our parent company and other subsidiaries or affiliated companies 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.
12
10. RELATED PARTY TRANSACTION
Share Exchange Agreement between MCC and an affiliate of Morris Communications
On September 7, 2008, MCC entered into a Share Exchange Agreement (the Exchange Agreement) with
Shivers Investments, LLC (Shivers) and Shivers Trading & Operating Company (STOC). Both STOC
and Shivers are affiliates of Morris Communications Company, LLC (Morris Communications).
On February 13, 2009, MCC completed the Exchange Agreement pursuant to which it exchanged 100% of
the shares of stock of a wholly-owned subsidiary, which held approximately $110 million of cash and
non-strategic cable systems serving approximately 25,000 basic subscribers contributed to MCC by
Mediacom LLC, for 28,309,674 shares of MCC Class A common stock held by Shivers.
Asset Transfer Agreement with MCC and Mediacom LLC
On February 11, 2009, our operating subsidiaries executed an Asset Transfer Agreement (the
Transfer Agreement) with MCC and certain of the operating subsidiaries of Mediacom LLC, pursuant
to which certain of our cable systems located in Illinois, which serve approximately 42,200 basic
subscribers, and a cash payment of $8.2 million would be exchanged for certain of Mediacom LLCs
cable systems located in Florida, Illinois, Iowa, Kansas, Missouri, and Wisconsin, which serve
approximately 45,900 basic subscribers (the Asset Transfer). The Asset Transfer was completed on
February 13, 2009 (the transfer date).
No gain or loss was recorded on the Asset Transfer because we and Mediacom LLC are under common control.
As part of the Transfer Agreement, Mediacom LLC contributed to MCC cable systems located in Western
North Carolina, which serve approximately 25,000 basic subscribers. These cable systems were part
of the Exchange Agreement noted above. In connection therewith, Mediacom LLC received on February
12, 2009 a $74 million cash contribution from MCC that had been contributed to MCC by us on the
same date. On February 12, 2009, our operating subsidiaries borrowed $74 million under the
revolving commitments of their bank credit facility to fund this contribution to MCC.
The net assets of the cable systems we received as part of the Asset Transfer were accounted for as
a transfer of businesses under common control in accordance with ASC 805. Under this method of
accounting: (i) the net assets we received have been recorded at Mediacom LLCs carrying amounts;
(ii) the net assets of the cable systems we transferred to Mediacom LLC and MCC were removed from
our consolidated balance sheet at net book value on the transfer date; (iii) for the cable systems
we received, we recorded their results of operations as if the transfer date was January 1, 2009;
and (iv) for the cable systems we transferred to Mediacom LLC and MCC, we ceased recording those
results of operations as of the transfer date.
We recognized an additional $5.3 million in revenues and $1.7 million of net income, for the period
January 1, 2009 through the transfer date, because we recorded the results of operations for the
cable systems we received as part of the Asset Transfer, as if the transfer date was January 1,
2009. This $1.7 million of cash flows was recorded under the caption capital distributions to
parent on our consolidated statements of cash flows for the six months ended June 30, 2009.
The financial statements for the periods prior to January 1, 2009 were not adjusted for the receipt
of net assets because the net assets did not meet the definition of a business under generally
accepted accounting principles in effect prior to the adoption of ASC 805.
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.
13
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 Broadband. We conducted our annual impairment test as of
October 1, 2009.
The economic conditions currently affecting the U.S. economy and how that may impact the long-term
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 when we perform our next
annual impairment testing during the fourth quarter of 2010.
Because we believe there has not been a meaningful change in the long-term fundamentals of our
business during the first half of 2010, we have determined that there has been no triggering event
under ASC 350, and as such, no interim impairment test is required as of June 30, 2010.
12. GOING PRIVATE PROPOSAL
On May 31, 2010, MCCs Board of Directors received a non-binding proposal from MCCs founder,
Chairman and Chief Executive Officer, Rocco B. Commisso, for a going
private transaction. The proposal contemplates the acquisition of all
of the Class A and Class B shares of MCCs common stock not
already beneficially owned by Mr. Commisso at a price of $6.00 per share in cash and the funding of such
transaction through borrowings under MCCs aggregate bank credit
facilities, which include our credit facility.
MCCs Board of Directors appointed independent directors Thomas V. Reifenheiser and Natale S.
Ricciardi to a special committee (the Special Committee) empowered to, among other things,
consider the proposal. The Special Committee has retained financial and legal advisors to assist
in its review of the proposed transaction.
14
|
|
|
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, 2010 and 2009, and with our
annual report on Form 10-K for the year ended December 31, 2009.
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 the triple-play bundle of video, HSD
and phone over a single communications platform, a significant advantage over most competitors in
our service areas.
As of June 30, 2010, we offered our bundle of video, HSD and phone services to approximately 97% of
our estimated 1.52 million homes passed in seven states. As of the same date, we served
approximately 677,000 basic subscribers, 394,000 digital video customers, 447,000 HSD customers and
168,000 phone customers, aggregating 1.69 million revenue generating units (RGUs).
Direct broadcast satellite (DBS) companies are our most significant video competitor, and we
continue to face increased 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, as well as with national wireless providers and the impact of wireless
substitution, where certain phone customers have chosen a wireless or cellular phone product as
their only phone service. 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 is dependent on a number of factors,
including the competition we face and general economic conditions. The ongoing economic downturn
has had many effects on our business, including a reduction in sales activity, lower levels of
television advertising and greater instances of customers inability to pay for our products and
services. Most notably, as a result of continuing weak economic conditions and increasing price
competition from DBS providers, we have seen lower demand for our video, HSD and phone services,
which have led to a reduction in basic subscribers and slower growth rates of digital, HSD and
phone customers. Consequently, we believe we will experience lower revenue growth for the full year
2010 than in prior years. A continuation or broadening of such effects as a result of the current
downturn or increased competition may adversely impact our results of operations, cash flows and
financial position.
Recent Developments
New Financings
On April 23, 2010, we completed a new financing transaction (the new financing) that provided for
a term loan in the aggregate principal amount of $600 million under our existing bank credit
facility (the credit facility). The net proceeds from the new term loan were used to repay an
existing term loan and the full balance of outstanding revolving credit loans under our credit
facility. See Liquidity and Capital Resources Capital Structure New Financing below and Note
6 in our Notes to Consolidated Financial Statements for more information.
Going Private Proposal
On
May 31, 2010, MCCs Board of Directors received a
non-binding proposal from MCCs founder,
Chairman and Chief Executive Officer, Rocco B. Commisso, for a going private transaction. The proposal contemplates the acquisition of all
of the Class A and Class B shares of MCCs common stock not
already beneficially owned by Mr. Commisso at a price of $6.00 per share in cash and the funding of such
transaction through borrowings under MCCs aggregate bank credit
facilities, which include our credit facility.
MCCs Board of Directors appointed independent directors Thomas V. Reifenheiser and Natale S.
Ricciardi to a special committee (the Special Committee) empowered to, among other things,
consider the proposal. The Special Committee has retained financial and legal advisors to assist
in its review of the proposed transaction.
15
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.
If we continue to lose video customers as a result of competition and weak economic conditions, our
video revenues could continue to decline for the foreseeable future. However, we believe this will
be mostly offset through increased gains in penetration of our advanced video services as well as
rate increases. We expect further growth in HSD and phone revenues, as we believe we will continue
to expand our penetration of our HSD and phone services. However, future growth in HSD and phone
customers may be adversely affected by intensifying competition, weakened economic conditions and,
specific to phone, wireless substitution. Advertising revenues may continue to stabilize in 2010,
given improving economic conditions and upcoming political elections.
Service costs consist primarily of video programming costs and other direct costs related to
providing and maintaining services to our customers. Significant service costs include: programming
expenses; wages and salaries of technical personnel who maintain our cable network, perform
customer installation activities and provide customer support; HSD costs, including costs of
bandwidth connectivity and customer provisioning, costs related to our enterprise networks business
and our network operations center; phone service costs, including delivery and other expenses; and
field operating costs, including outside contractors, vehicle, utilities and pole rental expenses.
These costs generally rise because of customer growth, contractual increases in video programming
rates and inflationary cost increases for personnel, outside vendors and other expenses. Costs
relating to personnel and their support may increase as the percentage of our expenses that we can
capitalize declines due to lower levels of new service installations. Service delivery related
costs may also fluctuate with the level of investment we make, and corresponding operational
efficiencies by such investments. We anticipate that our service costs will continue to grow, but
should remain fairly consistent as a percentage of our revenues, with the exception of programming
costs, which we discuss below.
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 a substantial increase
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, principally due to the increasing demands of sports programmers, television
broadcast station owners for retransmission consent fees, and large programmers for upcoming
contract renewals. While such growth in programming expenses can be partially offset by rate
increases, it is expected that our video gross margins will continue to decline, as increases in
programming costs outpace any growth in video revenues.
Significant selling, general and administrative expenses include: wages and salaries for our call
centers, customer service and support and administrative personnel; franchise fees and taxes;
marketing; bad debt; billing; advertising; and office costs related to telecommunications and
office administration. These costs typically rise because of customer growth and inflationary cost
increases for employees and other expenses, but we expect such costs should remain fairly
consistent as a percentage of revenues.
Management fee expenses reflect compensation of corporate employees and other corporate overhead.
Use of Non-GAAP Financial Measures
Adjusted OIBDA is not a financial measure calculated in accordance with generally accepted
accounting principles (GAAP) in the United States. We define Adjusted OIBDA as operating income
before depreciation and amortization and non-cash, share-based compensation charges. Adjusted OIBDA
has inherent limitations as discussed below.
Adjusted OIBDA is one of the primary measures used by management to evaluate our performance and to
forecast future results. We believe Adjusted 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 Adjusted 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, Adjusted OIBDA also has the limitation of not
reflecting the effect of our non-cash, share-based compensation charges. We believe that excluding
share-based compensation allows investors to better understand our performance without the effects
of these obligations that are not expected to be settled in cash. Adjusted OIBDA may
not be comparable to similarly titled measures used by other companies, which may have different
depreciation and amortization policies, as well as different share-based compensation programs.
16
Adjusted 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 Adjusted OIBDA.
Three Months Ended June 30, 2010 compared to Three Months Ended June 30, 2009
The table below sets forth the consolidated statements of operations and Adjusted OIBDA for the
three months ended June 30, 2010 and 2009 (dollars in thousands and percentage changes that are not
meaningful are marked NM):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
|
|
|
|
|
|
|
June 30, |
|
|
|
|
|
|
|
|
|
2010 |
|
|
2009 |
|
|
$ Change |
|
|
% Change |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues |
|
$ |
213,270 |
|
|
$ |
207,309 |
|
|
$ |
5,961 |
|
|
|
2.9 |
% |
Costs and expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Service costs (exclusive of depreciation and amortization) |
|
|
88,461 |
|
|
|
84,469 |
|
|
|
3,992 |
|
|
|
4.7 |
% |
Selling, general and administrative expenses |
|
|
41,782 |
|
|
|
40,446 |
|
|
|
1,336 |
|
|
|
3.3 |
% |
Management fee expense |
|
|
3,968 |
|
|
|
3,954 |
|
|
|
14 |
|
|
|
0.4 |
% |
Depreciation and amortization |
|
|
31,790 |
|
|
|
28,488 |
|
|
|
3,302 |
|
|
|
11.6 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income |
|
|
47,269 |
|
|
|
49,952 |
|
|
|
(2,683 |
) |
|
|
(5.4 |
%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense, net |
|
|
(28,365 |
) |
|
|
(28,099 |
) |
|
|
(266 |
) |
|
|
0.9 |
% |
(Loss) gain on derivatives, net |
|
|
(14,629 |
) |
|
|
14,339 |
|
|
|
(28,968 |
) |
|
|
NM |
|
Other expense, net |
|
|
(468 |
) |
|
|
(1,316 |
) |
|
|
848 |
|
|
|
(64.4 |
%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
3,807 |
|
|
$ |
34,876 |
|
|
$ |
(31,069 |
) |
|
|
(89.1 |
%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted OIBDA |
|
$ |
79,385 |
|
|
$ |
78,750 |
|
|
$ |
635 |
|
|
|
0.8 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
The table below represents a reconciliation of Adjusted OIBDA to operating income, which is the
most directly comparable GAAP measure (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
|
|
|
|
|
|
|
June 30, |
|
|
|
|
|
|
|
|
|
2010 |
|
|
2009 |
|
|
$ Change |
|
|
% Change |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted OIBDA |
|
$ |
79,385 |
|
|
$ |
78,750 |
|
|
$ |
635 |
|
|
|
0.8 |
% |
Non-cash, share-based compensation |
|
|
(326 |
) |
|
|
(310 |
) |
|
|
(16 |
) |
|
|
5.2 |
% |
Depreciation and amortization |
|
|
(31,790 |
) |
|
|
(28,488 |
) |
|
|
(3,302 |
) |
|
|
11.6 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income |
|
$ |
47,269 |
|
|
$ |
49,952 |
|
|
$ |
(2,683 |
) |
|
|
(5.4 |
%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
17
Revenues
The tables below set forth the revenues, and selected subscriber, customer and average monthly
revenue statistics for the three months ended June 30, 2010 and 2009 (dollars in thousands, except
per subscriber data):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
|
|
|
|
|
|
|
June 30, |
|
|
|
|
|
|
|
|
|
2010 |
|
|
2009 |
|
|
$ Change |
|
|
% Change |
|
Video |
|
$ |
131,166 |
|
|
$ |
132,901 |
|
|
$ |
(1,735 |
) |
|
|
(1.3 |
%) |
HSD |
|
|
53,476 |
|
|
|
48,698 |
|
|
|
4,778 |
|
|
|
9.8 |
% |
Phone |
|
|
16,191 |
|
|
|
15,076 |
|
|
|
1,115 |
|
|
|
7.4 |
% |
Advertising |
|
|
12,437 |
|
|
|
10,634 |
|
|
|
1,803 |
|
|
|
17.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Revenues |
|
$ |
213,270 |
|
|
$ |
207,309 |
|
|
$ |
5,961 |
|
|
|
2.9 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, |
|
|
Increase/ |
|
|
|
|
|
|
2010 |
|
|
2009 |
|
|
(Decrease) |
|
|
% Change |
|
Basic subscribers |
|
|
677,000 |
|
|
|
715,000 |
|
|
|
(38,000 |
) |
|
|
(5.3 |
%) |
Digital customers |
|
|
394,000 |
|
|
|
366,000 |
|
|
|
28,000 |
|
|
|
7.7 |
% |
HSD customers |
|
|
447,000 |
|
|
|
415,000 |
|
|
|
32,000 |
|
|
|
7.7 |
% |
Phone customers |
|
|
168,000 |
|
|
|
143,000 |
|
|
|
25,000 |
|
|
|
17.5 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
RGUs(1) |
|
|
1,686,000 |
|
|
|
1,639,000 |
|
|
|
47,000 |
|
|
|
2.9 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Average total monthly revenue per basic subscriber (2) |
|
$ |
104.16 |
|
|
$ |
96.04 |
|
|
$ |
8.12 |
|
|
|
8.5 |
% |
|
|
|
(1) |
|
RGUs represent the total of basic subscribers and digital, HSD and phone customers. |
|
(2) |
|
Represents total average monthly revenues for the quarter divided by total average basic
subscribers for such period. |
Revenues increased $6.0 million, or 2.9%, largely as a result of higher HSD and, to a much lesser
extent, advertising and phone revenues, offset in part by a decline in video revenues. Average
total monthly revenue per basic subscriber increased $8.12, or 8.5%, to $104.16.
Video revenues fell $1.7 million, or 1.3%, primarily due to a lower number of basic subscribers,
offset in part by video rate increases and continued growth in digital customers and DVR and HDTV
services. During the three months ended June 30, 2010, we lost 11,000 basic subscribers and gained
4,000 digital customers, as compared to a loss of 9,000 basic subscribers and an increase of 4,000
digital customers in the prior year period. As of June 30, 2010, we served 677,000 basic
subscribers, representing a penetration of 44.7% of our estimated homes passed and 394,000 digital
customers, representing a penetration of 58.2% of our basic subscribers. As of June 30, 2010, 42.8%
of our digital customers were taking our DVR and/or HDTV services, as compared to 37.1% as of the
same date last year.
HSD revenues rose $4.8 million, or 9.8%, principally due to a 7.7% increase in HSD customers.
During the three months ended June 30, 2010, we gained 5,000 HSD customers, as compared to an
increase of 2,000 in the prior year period. As of June 30, 2010, we served 447,000 HSD customers,
representing a penetration of 29.5% of our estimated homes passed.
Phone revenues grew $1.1 million, or 7.4%, mainly due to a 17.5% increase in phone customers,
offset in part by higher levels of discounted pricing. During the three months ended June 30, 2010,
we gained 9,000 phone customers, as compared to an increase of 3,000 in the prior year period. As
of June 30, 2010, we served 168,000 phone customers, representing a penetration of 11.5% of our
estimated marketable phone homes.
Advertising revenues increased $1.8 million, or 17.0%, primarily due to increased local advertising
sales, largely a result of a rebound in automotive and political advertising.
18
Costs and Expenses
Service costs rose $4.0 million, or 4.7%, primarily due to higher programming expenses and, to a
much lesser extent, employee operating costs, offset in part by lower HSD delivery expenses.
Programming expenses increased 5.3%, principally due to higher contractual rates charged by our
programming vendors, offset in part by a lower number of video customers. Employee operating
costs were 11.4% higher, principally due to a lower capitalization of labor and overhead costs
resulting from decreased new installation activity. HSD delivery expenses fell 35.4%, principally
due to the transition to an internally managed e-mail system for our customers. Service costs as a
percentage of revenues were 41.5% and 40.7% for the three months ended June 30, 2010 and 2009,
respectively.
Selling, general and administrative expenses increased $1.3 million, or 3.3%, largely as a result
of higher marketing and, to a lesser extent, advertising and bad debt expenses.. Marketing costs
were 10.5% higher, primarily due to a greater use of direct mail and television and contracted
telemarketing advertising. Advertising expenses grew 11.0%, principally due to increased costs
related to higher advertising sales activity. Bad debt expense rose 7.8% as a result of an increase
in the aging of our accounts receivable, offset in part by a lower number of written off accounts.
Employee costs fell 6.7%, primarily due to a favorable shift in employee benefit expenses, offset
in part by greater compensation. Selling, general and administrative expenses as a percentage of
revenues were 19.6% and 19.5% for the three months ended June 30, 2010 and 2009, respectively.
Management fee expense was virtually unchanged from the prior year, reflecting substantially
similar overhead charges at MCC. Management fee expense as a percentage of revenues were 1.9% for
each of the three months ended June 30, 2010 and 2009.
Depreciation and amortization increased $3.3 million, or 11.6%, principally as a result of greater
deployment of shorter-lived customer premise equipment.
Adjusted OIBDA
Adjusted OIBDA increased $0.6 million, or 0.8%, largely as a result of growth in HSD and, to a much
lesser extent, advertising and phone revenues, mostly offset by higher service costs and lower
video revenues.
Operating Income
Operating income fell $2.7 million, or 5.4%, primarily due to higher depreciation and amortization,
offset in part by the increase in Adjusted OIBDA.
Interest Expense, Net
Interest expense, net, fell $0.3 million, or 0.9%, primarily due to a lower average cost of debt,
mostly offset by greater amortization of deferred financing costs.
(Loss) Gain on Derivatives, Net
As of June 30, 2010, we had interest rate exchange agreements, or interest rate swaps, with an
aggregate notional amount of $1.5 billion, of which $700 million are forward-starting interest rate
swaps. These swaps have not been designated as hedges for accounting purposes. 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 $14.6 million and a net gain on derivatives of $14.3 million for the three months
ended June 30, 2010 and 2009, respectively. Our net loss on derivatives was due to lower
expectations of future market interest rates, leading to a decline in the valuation of our interest
rate swaps, primarily those that become effective at future dates.
Other Expense, Net
Other expense, net, was $0.5 million and $1.3 million for the three months ended June 30, 2010 and
2009, respectively. During the three months ended June 30, 2010, other expense, net, substantially
consisted of $0.5 million of revolving credit facility commitment fees. During the three months ended June
30, 2009, other expense, net, included $0.8 million of deferred financing costs and $0.5 million
for revolving credit facility commitment fees.
Net Income
We recognized net income of $3.8 million for the three months ended June 30, 2010, compared to net
income of $34.9 million for the prior year period. The decrease in net income was principally
due to
a $14.6 million loss on derivatives, as compared to a $14.3 million gain on derivatives
for the three months ended June 30, 2009.
19
Actual Results of Operations
Six Months Ended June 30, 2010 compared to Six Months Ended June 30, 2009
On February 11, 2009 (the Transfer Date), our operating subsidiaries executed an Asset Transfer
Agreement (the Transfer Agreement) with MCC and certain of the operating subsidiaries of Mediacom
LLC. As part of the Transfer Agreement, we exchanged cable systems with Mediacom LLC (the Asset
Transfer) whose results of operations were substantially similar. The net effects of the Transfer
Agreement were the addition of 3,700 basic subscribers and the reduction of 1,000 digital
customers, 1,000 HSD customers and 600 phone customers. Such effects on discussions of subscriber
and customer gains and losses are referred to as the effect of the Transfer Agreement.
In accordance with ASC 805, the cable systems we received from Mediacom LLC under the Transfer
Agreement were recorded as a business under common control, and therefore we recorded the results
of operations of such systems as if the transfer date was January 1, 2009. However, for the cable
systems we transferred to Mediacom LLC, we recorded the results of operations, comprising $5.5
million of revenues and $1.7 million of net income, for the period of January 1, 2009 through the
transfer date. Where the inclusion of such results of operations of these transferred cable systems
in the prior years data may affect comparisons to 2010 results, the effect of such 2009 results
are referred to as related to the Asset Transfer.
For more information, see Note 10 in our Notes to Consolidated Financial Statements.
The tables below set forth the consolidated statements of operations for the six months ended June
30, 2010 and 2009 (dollars in thousands and percentage changes that are not meaningful are marked
NM):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended |
|
|
|
|
|
|
|
|
|
June 30, |
|
|
|
|
|
|
|
|
|
2010 |
|
|
2009 |
|
|
$ Change |
|
|
% Change |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues |
|
$ |
422,048 |
|
|
$ |
416,789 |
|
|
$ |
5,259 |
|
|
|
1.3 |
% |
Costs and expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Service costs (exclusive of depreciation and amortization) |
|
|
174,820 |
|
|
|
170,187 |
|
|
|
4,633 |
|
|
|
2.7 |
% |
Selling, general and administrative expenses |
|
|
81,741 |
|
|
|
80,754 |
|
|
|
987 |
|
|
|
1.2 |
% |
Management fee expense |
|
|
7,843 |
|
|
|
7,850 |
|
|
|
(7 |
) |
|
|
(0.1 |
%) |
Depreciation and amortization |
|
|
62,659 |
|
|
|
56,985 |
|
|
|
5,674 |
|
|
|
10.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income |
|
|
94,985 |
|
|
|
101,013 |
|
|
|
(6,028 |
) |
|
|
(6.0 |
%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense, net |
|
|
(56,200 |
) |
|
|
(55,047 |
) |
|
|
(1,153 |
) |
|
|
2.1 |
% |
(Loss) gain on derivatives, net |
|
|
(19,876 |
) |
|
|
13,187 |
|
|
|
(33,063 |
) |
|
|
NM |
|
Other expense, net |
|
|
(955 |
) |
|
|
(2,824 |
) |
|
|
1,869 |
|
|
|
(66.2 |
%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
17,954 |
|
|
$ |
56,329 |
|
|
$ |
(38,375 |
) |
|
|
(68.1 |
%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted OIBDA |
|
$ |
158,289 |
|
|
$ |
158,588 |
|
|
$ |
(299 |
) |
|
|
(0.2 |
%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
20
The table below represents a reconciliation of Adjusted OIBDA to operating income, which is the
most directly comparable GAAP measure (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended |
|
|
|
|
|
|
|
|
|
June 30, |
|
|
|
|
|
|
|
|
|
2010 |
|
|
2009 |
|
|
$ Change |
|
|
% Change |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted OIBDA |
|
$ |
158,289 |
|
|
$ |
158,588 |
|
|
$ |
(299 |
) |
|
|
(0.2 |
%) |
Non-cash, share-based compensation |
|
|
(645 |
) |
|
|
(590 |
) |
|
|
(55 |
) |
|
|
9.3 |
% |
Depreciation and amortization |
|
|
(62,659 |
) |
|
|
(56,985 |
) |
|
|
(5,674 |
) |
|
|
10.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income |
|
$ |
94,985 |
|
|
$ |
101,013 |
|
|
$ |
(6,028 |
) |
|
|
(6.0 |
%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
The tables below set forth the revenues and selected subscriber, customer and average monthly
revenue statistics for the six months ended June 30, 2010 and 2009 (dollars in thousands, except
per subscriber data):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended |
|
|
|
|
|
|
|
|
|
June 30, |
|
|
|
|
|
|
|
|
|
2010 |
|
|
2009 |
|
|
$ Change |
|
|
% Change |
|
Video |
|
$ |
261,226 |
|
|
$ |
269,334 |
|
|
$ |
(8,108 |
) |
|
|
(3.0 |
%) |
HSD |
|
|
105,915 |
|
|
|
97,924 |
|
|
|
7,991 |
|
|
|
8.2 |
% |
Phone |
|
|
32,150 |
|
|
|
29,752 |
|
|
|
2,398 |
|
|
|
8.1 |
% |
Advertising |
|
|
22,757 |
|
|
|
19,779 |
|
|
|
2,978 |
|
|
|
15.1 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Revenues |
|
$ |
422,048 |
|
|
$ |
416,789 |
|
|
$ |
5,259 |
|
|
|
1.3 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, |
|
|
Increase/ |
|
|
|
|
|
|
2010 |
|
|
2009 |
|
|
(Decrease) |
|
|
% Change |
|
Basic subscribers |
|
|
677,000 |
|
|
|
715,000 |
|
|
|
(38,000 |
) |
|
|
(5.3 |
%) |
Digital customers |
|
|
394,000 |
|
|
|
366,000 |
|
|
|
28,000 |
|
|
|
7.7 |
% |
HSD customers |
|
|
447,000 |
|
|
|
415,000 |
|
|
|
32,000 |
|
|
|
7.7 |
% |
Phone customers |
|
|
168,000 |
|
|
|
143,000 |
|
|
|
25,000 |
|
|
|
17.5 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
RGUs |
|
|
1,686,000 |
|
|
|
1,639,000 |
|
|
|
47,000 |
|
|
|
2.9 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Average total monthly revenue per basic subscriber |
|
$ |
102.91 |
|
|
$ |
97.02 |
|
|
$ |
5.89 |
|
|
|
6.1 |
% |
Revenues increased $5.3 million, or 1.3%, largely as a result of higher HSD and, to a much lesser
extent, advertising and phone revenues, offset in part by a decline in video revenues and an
unfavorable comparison to the prior year period, in which we recognized $5.3 million of revenues
related to the Asset Transfer. Average total monthly revenue per basic subscriber rose $5.89, or
6.1%, to $102.91.
Video revenues fell $8.1 million, or 3.0%, primarily due to a lower number of basic subscribers
and, to a lesser extent, an unfavorable
comparison to the prior year period, in which we recognized $3.7 million of video revenues related
to the Asset Transfer, offset in part by video rate increases and continued growth in digital
customers and DVR and HDTV services. During the six months ended June 30, 2010, we lost 13,000
basic subscribers and gained 16,000 digital customers, as compared to a loss of 5,700 basic
subscribers and an increase of 12,000 digital customers in the prior year period, excluding the
effect of the Asset Transfer.
HSD revenues were $8.0 million, or 8.2% higher, principally due to the increase in HSD customers,
offset in part by an unfavorable comparison to the prior year period, in which we recognized $1.2
million of HSD revenues related to the Asset Transfer. During the six months ended June 30, 2010,
we gained 19,000 HSD customers, as compared to an increase of 16,000 in the prior year period,
excluding the effect of the Asset Transfer.
Phone revenues grew $2.4 million, or 8.1%, mainly due to the increase in phone customers, offset in
part by higher levels of discounted pricing and, to a lesser extent, an unfavorable comparison to
the prior year period, in which we recognized $0.4 million of phone revenues related to the Asset
Transfer. During the six months ended June 30, 2010, we gained 16,000 phone customers, as compared
to an increase of 9,600 in the prior year period, excluding the effect of the Asset Transfer.
21
Advertising revenues increased $3.0 million, or 15.1%, primarily due to increased local and, to a
lesser extent, national advertising sales, in part due to a rebound in automotive advertising.
Costs and Expenses
Service costs rose $4.6 million, or 2.7%, primarily due to higher programming expenses and, to a
much lesser extent, field operating costs, offset in part by an unfavorable comparison to the prior
year period, in which we recognized $2.6 million of service costs related to the Asset Transfer, as
well as lower HSD delivery expenses. The following analysis of service cost components excluded the
effects of the Asset Transfer. Programming expenses increased 4.7%, principally due to higher
contractual rates charged by our programming vendors, offset in part by a lower number of video
customers. Field operating costs were 11.4% higher, largely as a result of higher vehicle fuel
costs, a greater use of outside contractors and fiber lease costs. HSD delivery expenses fell
37.8%, principally due to the transition to an internally managed e-mail system for our customers.
Service costs as a percentage of revenues were 41.4% and 40.8% for the six months ended June 30,
2010 and 2009, respectively.
Selling, general and administrative expenses increased $1.0 million, or 1.2%, largely as a result
of higher marketing and, to a lesser extent, advertising expenses, offset in part by an unfavorable
comparison to the prior year period, in which we recognized $0.7 million of selling, general and
administrative expenses related to the Asset Transfer, as well as lower taxes and fees and employee
expenses. The following analysis of selling, general and administrative expenses excluded the
effects of the Asset Transfer. Marketing costs were 7.9% higher, primarily due to a greater use of
direct mail, television and, to a lesser extent, billboard and print advertising. Advertising
expenses grew 5.3%, principally due to increased costs related to higher advertising sales
activity. Taxes and fees were 2.9% lower, largely as a result of lower franchise fees and property
taxes in certain of our service areas. Employee costs fell 10.1%, primarily due to a favorable
employee benefit expense adjustment, offset in part by greater compensation. Selling, general and
administrative expenses as a percentage of revenues were 19.4% for each of the six months ended
June 30, 2010 and 2009.
Management fee expense was virtually unchanged from the prior year, reflecting substantially
similar overhead charges at MCC. Management fee expense as a percentage of revenues were 1.9% for
each of the six months ended June 30, 2010 and 2009.
Depreciation and amortization increased $5.7 million, or 10.0%, largely as a result of greater
deployment of shorter-lived customer premise equipment.
Adjusted OIBDA
Adjusted OIBDA fell $0.3 million, or 0.2%, largely as a result of lower video revenues and, to a
lesser extent, higher service costs and an unfavorable comparison to the prior year period, in
which we recognized $2.0 million of Adjusted OIBDA related to the Asset Transfer.
Operating Income
Operating income declined $6.0 million, or 6.0%, principally due to the increase in depreciation
and amortization.
Interest Expense, Net
Interest
expense, net, was lower by $1.2 million, or 2.1%, primarily due to a lower average cost of
debt, offset in part by greater amortization of deferred financing costs.
(Loss) Gain on Derivatives, Net
We recorded a net loss on derivatives of $19.9 million and a net gain on derivatives of $13.2
million for the six months ended June 30, 2010 and 2009, respectively. Our net loss on
derivatives was due to lower expectations of future market interest rates, leading to a decline in
the valuation of our interest rate swaps, primarily those that become effective at future dates.
Other Expense, Net
Other expense, net, was $1.0 million and $2.8 million for the six months ended June 30, 2010 and
2009, respectively. During the six months ended June 30, 2010, other expense, net, consisted of
$0.8 million of revolving credit facility commitment fees and $0.2 million of other fees. During the six
months ended June 30, 2009, other expense, net, included $1.5 million of deferred financing costs,
$1.0 million for revolving credit facility commitment fees and
approximately $0.3 million of other fees.
22
Net Income
We recognized net income of $18.0 million for the six months ended June 30, 2010, compared to net
income of $56.3 million for the prior year period. The decrease in net income was principally
due to
a $19.9 million loss on derivatives, as compared to a $13.2 million gain on derivatives
for the six months ended June 30, 2009.
Liquidity and Capital Resources
Overview
Our net cash flows provided by operating and financing activities are used primarily 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 our parent. We expect that cash generated by us or available
to us will meet our anticipated capital and liquidity needs for the foreseeable future, including
scheduled term loan maturities during the remainder of 2010 of $7.0 million and in each of the
years ending December 31, 2011 through 2014 of $14.0 million. As of June 30, 2010, our sources of
liquidity included $17.1 million of cash and cash equivalents on hand and $421.0 million of unused
and available lines under our revolving credit facility.
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 or, if we not able to do so on similar terms as we currently
experience, 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 $131.9 million for the six months ended June
30, 2010, primarily due to Adjusted OIBDA of $158.3 million and,
to a much lesser extent, the $29.2
million net change in operating assets and liabilities, offset in part by interest expense of $56.2
million. The net change in operating assets and liabilities was
largely due to a decrease
in accounts receivable from affiliates of $39.7 million, offset in part by an increase in accounts
receivable, net, of $5.4 million and a increase in prepaid
expenses and other assets of $4.6
million.
Net cash flows provided by operating activities were $88.6 million for the six months ended June
30, 2009, primarily due to Adjusted OIBDA of $158.6 million, offset in part by interest expense of
$55.0 million and, to a lesser extent, the $14.0 million net change in operating assets and
liabilities. The net change in operating assets and liabilities was primarily due to an increase in
accounts receivable affiliates, of $9.4 million and, to a lesser extent, an increase in prepaid
expenses and other assets of $4.0 million and an increase in accounts receivable, net, of $2.6
million.
Net Cash Flows Used in Investing Activities
Capital expenditures continue to be our primary use of capital resources and the entirety of our
net cash flows used in investing activities. Net cash flows used in investing activities were $68.6
million for the six months ended June 30, 2010, as compared to $55.7 million for the prior year
period. The $12.9 million increase in capital expenditures largely reflected greater investments in
the internal phone platform and, to a much lesser extent, high-speed data delivery system, offset
in part by reduced outlays for customer premise equipment and network improvements and network
extensions.
Net Cash Flows Used in Financing Activities
Net cash flows used in financing activities were $58.0 million for the six months ended June 30,
2010, principally due to capital distributions to parent of $48.0 million and, to a lesser extent,
financing costs of $9.6 million, a dividend payment on preferred members interest of $9.0 million
and other financing activities, principally book overdrafts, of $8.4 million. Such financing
activities were partially offset by net borrowings of debt of $17.0 million (see New Financings
below).
Net cash flows used in financing activities were $34.4 million for the six months ended June 30,
2009, mainly due to our capital contribution to parent of $82.2 million and a dividend payment on
preferred members interest of $9.0 million, offset in part by net bank borrowings of $60.0 million
under our revolving credit facility. In February 2009, we made an $82.2 million capital
contribution to parent under the Transfer Agreement, comprising an $8.2 million payment related to the
Asset Transfer and a $74.0 million capital contribution, which MCC ultimately used to partially
fund its cash obligation under the Exchange Agreement.
23
Capital Structure
As of June 30, 2010, our outstanding total indebtedness was $1.872 billion, of which approximately
69% was at fixed interest rates or subject to interest rate protection. During the six months ended
June 30, 2010, we paid cash interest of $61.7 million, net of capitalized interest.
Bank Credit Facility
As of June 30, 2010, we had a $1.802 billion bank credit facility (the credit facility), of which
$1.372 billion was outstanding. The credit agreement governing the credit facility contains various
covenants that, among other things, impose certain limitations on mergers and acquisitions,
consolidations and sales of certain assets, liens, the incurrence of additional indebtedness,
certain restricted payments and certain transactions with affiliates. See Note 6 in our Notes to
Consolidated Financial Statements for information regarding material financial covenants.
As of June 30, 2010, we had undrawn revolving credit commitments of $430.3 million, with $9.3
million of letters of credit and $421.0 million of unused lines, all available to be borrowed and
used for general corporate purposes, based on the terms and conditions of our debt arrangements. As
of the same date, our revolving credit commitments were scheduled to expire on December 31, 2012,
and are not subject to scheduled reductions prior to maturity.
New Financings
On April 23, 2010, we completed a new financing that provided for a new term loan under our
existing credit facility in the aggregate principal amount of $600 million. The new term loan
matures in October 2017, and beginning on September 30, 2010, will be subject to quarterly
reductions of 0.25%, with a final payment at maturity representing 92.75% of the original principal
amount. The net proceeds of the new term loan were largely used to repay an existing term loan and
the full balance of outstanding revolving credit loans under our credit facility. As a result of
this transaction, we believe our overall liquidity position has strengthened. See Note 6 to our
Notes to Consolidated Financial Statements for further information on the new financings.
Interest Rate Swaps
We use interest rate exchange agreements, or interest rate swaps, in order to fix the rate of the
applicable Eurodollar 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, 2010, we had current interest rate swaps with various banks pursuant to which the interest
rate on $800 million of floating rate debt was fixed at a weighted average rate of 3.6%. We also
had $700 million of forward starting interest rate swaps with a weighted average fixed rate of
approximately 3.5%, of which $100 million, $100 million and $500 million commence during the years
ended December 31, 2010, 2011 and 2012, respectively. Including the effects of such interest rate
swaps, the average interest rates on outstanding debt under our bank credit facility as of June 30,
2010 and 2009 were 5.0% and 5.8%, respectively.
Senior Notes
As of June 30, 2010, we had $500.0 million of senior notes outstanding. The indentures governing
our senior notes also contain various covenants, though they are generally less restrictive than
those found in our credit facility. Such covenants restrict our ability, among other things, make
certain distributions, investments and other restricted payments, sell certain assets, to make
restricted payments, create certain liens, merge, consolidate or sell substantially all of our
assets and enter into certain transactions with affiliates. See Note 6 in our Notes to Consolidated
Financial Statements for information regarding material financial covenants.
Covenant Compliance and Debt Ratings
For all periods through June 30, 2010, we were in compliance with all of the covenants under the
credit facility and senior note arrangements. 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.
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 negative outlook, by Standard and Poors. The negative outlook on our corporate credit ratings
by Standard and Poors was due to the potential implications of the going private transaction
proposed by MCCs founder, Chairman and Chief Executive Officer, Rocco B. Commisso. See Note 12
in our Notes to Consolidated Financial Statements.
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.
24
Contractual Obligations and Commercial Commitments
Other than the items noted above in Capital Structure New Financing, 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, 2009.
The following table updates our contractual obligations and commercial commitments for debt and
interest expense after giving effect to the new financing, and the effects they are expected to
have on our liquidity and cash flow, for the five years subsequent to June 30, 2010 and thereafter
(dollars in thousands)*:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest |
|
|
|
|
|
|
Debt |
|
|
Expense(1) |
|
|
Total |
|
July 1, 2010 to June 30, 2011 |
|
$ |
14,000 |
|
|
$ |
105,794 |
|
|
$ |
119,794 |
|
July 1, 2011 to June 30, 2013 |
|
|
28,000 |
|
|
|
203,135 |
|
|
|
231,135 |
|
July 1, 2013 to June 30, 2015 |
|
|
760,000 |
|
|
|
178,117 |
|
|
|
938,117 |
|
Thereafter |
|
|
1,070,000 |
|
|
|
36,792 |
|
|
|
1,106,792 |
|
|
|
|
|
|
|
|
|
|
|
Total cash obligations |
|
$ |
1,872,000 |
|
|
$ |
523,838 |
|
|
$ |
2,395,838 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* |
|
Refer to Note 6 of our consolidated financial statements for a discussion of the new
financing. The amounts included in the table herein reflect our contractual obligations and
commercial commitments as of June 30, 2010. |
|
(1) |
|
Interest payments on floating rate debt and interest rate swaps are estimated using
amounts outstanding, and scheduled amortizations, as of June 30, 2010 and the average interest
rates applicable under such debt obligations. |
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, 2009.
Goodwill and Other Intangible Assets
In accordance with the Financial Accounting Standards Boards Accounting Standards Codification No.
350 (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, 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.
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 Broadband. We conducted our annual
impairment test as of October 1, 2009.
25
The economic conditions currently affecting the U.S. economy and how that may impact the long-term
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 when we perform our next
annual impairment testing during the fourth quarter of 2010.
Because we believe there has not been a meaningful change in the long-term fundamentals of our
business during the first half of 2010, we have determined that there has been no triggering event
under ASC 350, and as such, no interim impairment test is required as of June 30, 2010.
Inflation and Changing Prices
Our systems 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.
|
|
|
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, 2009.
|
|
|
ITEM 4. |
|
CONTROLS AND PROCEDURES |
Mediacom Broadband LLC
Under the supervision and with the participation of the management of Mediacom Broadband, including
Mediacom Broadbands Chief Executive Officer and Chief Financial Officer, Mediacom Broadband
evaluated the effectiveness of Mediacom Broadbands 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 Broadbands Chief Executive
Officer and Chief Financial Officer concluded that Mediacom Broadbands disclosure controls and
procedures were effective as of June 30, 2010.
There has not been any change in Mediacom Broadbands 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,
2010 that has materially affected, or is reasonably likely to materially affect, Mediacom
Broadbands internal control over financial reporting.
Mediacom Broadband Corporation
Under the supervision and with the participation of the management of Mediacom Broadband
Corporation, including Mediacom Broadband Corporations Chief Executive Officer and Chief Financial
Officer, Mediacom Broadband Corporation evaluated the effectiveness of Mediacom Broadband
Corporations disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e)
under the Securities Exchange Act of 1934) as of the end of the period covered by this report.
Based upon that evaluation, Mediacom Broadband Corporations Chief Executive Officer and Chief
Financial Officer concluded that Mediacom Broadband Corporations disclosure controls and
procedures were effective as of June 30, 2010.
There has not been any change in Mediacom Broadband Corporations internal control over financial
reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the quarter
ended June 30, 2010 that has materially affected, or is reasonably likely to materially affect,
Mediacom Broadband Corporations internal control over financial reporting.
26
PART II
|
|
|
ITEM 1. |
|
LEGAL PROCEEDINGS |
See Note 9 to our 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, 2009.
|
|
|
|
|
Exhibit |
|
|
Number |
|
Exhibit Description |
|
|
|
|
|
|
10.1 |
|
|
Amendment No. 5, dated as of April 23, 2010, to the Amendment
and Restatement, dated as of December 16, 2004, of Credit
Agreement, dated as of July 18, 2001, among the operating
subsidiaries of Mediacom Broadband LLC, the lenders party
thereto and JPMorgan Chase Bank, as administrative agent for
the lenders (1) |
|
|
|
|
|
|
10.2 |
|
|
Incremental Facility Agreement, dated as of April 23, 2010,
between the operating subsidiaries of Mediacom Broadband LLC,
the lenders signatory thereto and JPMorgan Chase Bank, N.A.,
as administrative agent (1) |
|
|
|
|
|
|
31.1 |
|
|
Rule 15d-14(a) Certifications of Mediacom Broadband LLC |
|
|
|
|
|
|
31.2 |
|
|
Rule 15d-14(a) Certifications of Mediacom Broadband Corporation |
|
|
|
|
|
|
32.1 |
|
|
Section 1350 Certifications of Mediacom Broadband LLC |
|
|
|
|
|
|
32.2 |
|
|
Section 1350 Certifications of Mediacom Broadband Corporation |
|
|
|
(1) |
|
Filed as an exhibit to the Current Report on Form 8-K, dated April 23, 2010, of Mediacom
Broadband LLC and incorporated herein by reference. |
27
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 BROADBAND LLC
|
|
August 10, 2010 |
By: |
/s/ Mark E. Stephan
|
|
|
|
Mark E. Stephan |
|
|
|
Executive Vice President and
Chief Financial Officer |
|
28
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 BROADBAND CORPORATION
|
|
August 10, 2010 |
By: |
/s/ Mark E. Stephan
|
|
|
|
Mark E. Stephan |
|
|
|
Executive Vice President and
Chief Financial Officer |
|
29
EXHIBIT INDEX
|
|
|
|
|
Exhibit |
|
|
Number |
|
Exhibit Description |
|
|
|
|
|
|
10.1 |
|
|
Amendment No. 5, dated as of April 23, 2010, to the Amendment
and Restatement, dated as of December 16, 2004, of Credit
Agreement, dated as of July 18, 2001, among the operating
subsidiaries of Mediacom Broadband LLC, the lenders party
thereto and JPMorgan Chase Bank, as administrative agent for
the lenders (1) |
|
|
|
|
|
|
10.2 |
|
|
Incremental Facility Agreement, dated as of April 23, 2010,
between the operating subsidiaries of Mediacom Broadband LLC,
the lenders signatory thereto and JPMorgan Chase Bank, N.A.,
as administrative agent (1) |
|
|
|
|
|
|
31.1 |
|
|
Rule 15d-14(a) Certifications of Mediacom Broadband LLC |
|
|
|
|
|
|
31.2 |
|
|
Rule 15d-14(a) Certifications of Mediacom Broadband Corporation |
|
|
|
|
|
|
32.1 |
|
|
Section 1350 Certifications of Mediacom Broadband LLC |
|
|
|
|
|
|
32.2 |
|
|
Section 1350 Certifications of Mediacom Broadband Corporation |
|
|
|
(1) |
|
Filed as an exhibit to the Current Report on Form 8-K, dated April 23, 2010, of Mediacom
Broadband LLC and incorporated herein by reference. |
30
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 Broadband LLC; |
(2) |
|
Based on my knowledge, this report does not contain any untrue statement of a material fact
or omit to state a material fact necessary to make the statements made, in light of the
circumstances under which such statements were made, not misleading with respect to the period
covered by this report; |
(3) |
|
Based on my knowledge, the financial statements, and other financial information included in
this report, fairly present in all material respects the financial condition, results of
operations and cash flows of the registrant as of, and for, the periods presented in this
report; |
(4) |
|
The registrants other certifying officer and I are responsible for establishing and
maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and
15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules
13a-15(f) and l5d-15(f)) for the registrant and have: |
|
a) |
|
Designed such disclosure controls and procedures, or caused such disclosure controls and
procedures to be designed under our supervision, to ensure that material information
relating to the registrant, including its consolidated subsidiaries, is made known to us by
others within those entities, particularly during the period in which this report is being
prepared; |
|
b) |
|
Designed such internal control over financial reporting, or caused such internal control
over financial reporting to be designed under our supervision, to provide reasonable
assurance regarding the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted accounting
principles; |
|
c) |
|
Evaluated the effectiveness of the registrants disclosure controls and procedures and
presented in this report our conclusions about the effectiveness of the disclosure controls
and procedures, as of end of the period covered by this report based on such evaluation; and |
|
d) |
|
Disclosed in this report any change in the registrants internal control over financial
reporting that occurred during the registrants most recent fiscal quarter (the registrants
fourth fiscal quarter in the case of an annual report) that has materially affected, or is
reasonably likely to materially affect, the registrants internal control over financial
reporting; and |
(5) |
|
The registrants other certifying officer and I have disclosed, based on our most recent
evaluation of internal control over financial reporting, to the registrants auditors and the
audit committee of registrants board of directors (or persons performing the equivalent
function): |
|
a) |
|
All significant deficiencies and material weaknesses in the design or operation of
internal control over financial reporting which are reasonably likely to adversely affect
the registrants ability to record, process, summarize and report financial information; and |
|
b) |
|
Any fraud, whether or not material, that involves management or other employees who have
a significant role in the registrants internal control over financial reporting. |
|
|
|
|
|
August 10, 2010 |
By: |
/s/ Rocco B. Commisso
|
|
|
|
Rocco B. Commisso |
|
|
|
Chairman and Chief Executive Officer |
|
CERTIFICATIONS
I, Mark E. Stephan, certify that:
(1) |
|
I have reviewed this report on Form 10-Q of Mediacom Broadband LLC; |
(2) |
|
Based on my knowledge, this report does not contain any untrue statement of a material fact
or omit to state a material fact necessary to make the statements made, in light of the
circumstances under which such statements were made, not misleading with respect to the period
covered by this report; |
(3) |
|
Based on my knowledge, the financial statements, and other financial information included in
this report, fairly present in all material respects the financial condition, results of
operations and cash flows of the registrant as of, and for, the periods presented in this
report; |
(4) |
|
The registrants other certifying officer and I are responsible for establishing and
maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and
15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules
13a-15(f) and l5d-15(f)) for the registrant and have: |
|
a) |
|
Designed such disclosure controls and procedures, or caused such disclosure controls and
procedures to be designed under our supervision, to ensure that material information
relating to the registrant, including its consolidated subsidiaries, is made known to us by
others within those entities, particularly during the period in which this report is being
prepared; |
|
b) |
|
Designed such internal control over financial reporting, or caused such internal control
over financial reporting to be designed under our supervision, to provide reasonable
assurance regarding the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted accounting
principles; |
|
c) |
|
Evaluated the effectiveness of the registrants disclosure controls and procedures and
presented in this report our conclusions about the effectiveness of the disclosure controls
and procedures, as of end of the period covered by this report based on such evaluation; and |
|
d) |
|
Disclosed in this report any change in the registrants internal control over financial
reporting that occurred during the registrants most recent fiscal quarter (the registrants
fourth fiscal quarter in the case of an annual report) that has materially affected, or is
reasonably likely to materially affect, the registrants internal control over financial
reporting; and |
(5) |
|
The registrants other certifying officer and I have disclosed, based on our most recent
evaluation of internal control over financial reporting, to the registrants auditors and the
audit committee of registrants board of directors (or persons performing the equivalent
function): |
|
a) |
|
All significant deficiencies and material weaknesses in the design or operation of
internal control over financial reporting which are reasonably likely to adversely affect
the registrants ability to record, process, summarize and report financial information; and |
|
b) |
|
Any fraud, whether or not material, that involves management or other employees who have
a significant role in the registrants internal control over financial reporting. |
|
|
|
|
|
August 10, 2010 |
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 Broadband Corporation; |
(2) |
|
Based on my knowledge, this report does not contain any untrue statement of a material fact
or omit to state a material fact necessary to make the statements made, in light of the
circumstances under which such statements were made, not misleading with respect to the period
covered by this report; |
(3) |
|
Based on my knowledge, the financial statements, and other financial information included in
this report, fairly present in all material respects the financial condition, results of
operations and cash flows of the registrant as of, and for, the periods presented in this
report; |
(4) |
|
The registrants other certifying officer and I are responsible for establishing and
maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and
15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules
13a-15(f) and l5d-15(f)) for the registrant and have: |
|
a) |
|
Designed such disclosure controls and procedures, or caused such disclosure controls and
procedures to be designed under our supervision, to ensure that material information
relating to the registrant, including its consolidated subsidiaries, is made known to us by
others within those entities, particularly during the period in which this report is being
prepared; |
|
b) |
|
Designed such internal control over financial reporting, or caused such internal control
over financial reporting to be designed under our supervision, to provide reasonable
assurance regarding the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted accounting
principles; |
|
c) |
|
Evaluated the effectiveness of the registrants disclosure controls and procedures and
presented in this report our conclusions about the effectiveness of the disclosure controls
and procedures, as of end of the period covered by this report based on such evaluation; and |
|
d) |
|
Disclosed in this report any change in the registrants internal control over financial
reporting that occurred during the registrants most recent fiscal quarter (the registrants
fourth fiscal quarter in the case of an annual report) that has materially affected, or is
reasonably likely to materially affect, the registrants internal control over financial
reporting; and |
(5) |
|
The registrants other certifying officer and I have disclosed, based on our most recent
evaluation of internal control over financial reporting, to the registrants auditors and the
audit committee of registrants board of directors (or persons performing the equivalent
function): |
|
a) |
|
All significant deficiencies and material weaknesses in the design or operation of
internal control over financial reporting which are reasonably likely to adversely affect
the registrants ability to record, process, summarize and report financial information; and |
|
b) |
|
Any fraud, whether or not material, that involves management or other employees who have
a significant role in the registrants internal control over financial reporting. |
|
|
|
|
|
August 10, 2010 |
By: |
/s/ Rocco B. Commisso
|
|
|
|
Rocco B. Commisso |
|
|
|
Chairman and Chief Executive Officer |
|
CERTIFICATIONS
I, Mark E. Stephan, certify that:
(1) |
|
I have reviewed this report on Form 10-Q of Mediacom Broadband Corporation; |
(2) |
|
Based on my knowledge, this report does not contain any untrue statement of a material fact
or omit to state a material fact necessary to make the statements made, in light of the
circumstances under which such statements were made, not misleading with respect to the period
covered by this report; |
(3) |
|
Based on my knowledge, the financial statements, and other financial information included in
this report, fairly present in all material respects the financial condition, results of
operations and cash flows of the registrant as of, and for, the periods presented in this
report; |
(4) |
|
The registrants other certifying officer and I are responsible for establishing and
maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and
15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules
13a-15(f) and l5d-15(f)) for the registrant and have: |
|
a) |
|
Designed such disclosure controls and procedures, or caused such disclosure controls and
procedures to be designed under our supervision, to ensure that material information
relating to the registrant, including its consolidated subsidiaries, is made known to us by
others within those entities, particularly during the period in which this report is being
prepared; |
|
b) |
|
Designed such internal control over financial reporting, or caused such internal control
over financial reporting to be designed under our supervision, to provide reasonable
assurance regarding the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted accounting
principles; |
|
c) |
|
Evaluated the effectiveness of the registrants disclosure controls and procedures and
presented in this report our conclusions about the effectiveness of the disclosure controls
and procedures, as of end of the period covered by this report based on such evaluation; and |
|
d) |
|
Disclosed in this report any change in the registrants internal control over financial
reporting that occurred during the registrants most recent fiscal quarter (the registrants
fourth fiscal quarter in the case of an annual report) that has materially affected, or is
reasonably likely to materially affect, the registrants internal control over financial
reporting; and |
(5) |
|
The registrants other certifying officer and I have disclosed, based on our most recent
evaluation of internal control over financial reporting, to the registrants auditors and the
audit committee of registrants board of directors (or persons performing the equivalent
function): |
|
a) |
|
All significant deficiencies and material weaknesses in the design or operation of
internal control over financial reporting which are reasonably likely to adversely affect
the registrants ability to record, process, summarize and report financial information; and |
|
b) |
|
Any fraud, whether or not material, that involves management or other employees who have
a significant role in the registrants internal control over financial reporting. |
|
|
|
|
|
August 10, 2010 |
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 Broadband LLC (the Company) on Form 10-Q for
the period ended June 30, 2010 as filed with the Securities and Exchange Commission on the date
hereof (the Report), Rocco B. Commisso, Chairman and Chief Executive Officer and Mark E. Stephan,
Executive Vice President and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C.
§ 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:
(1) |
|
the Report fully complies with the requirements of section 13(a) or 15(d) of the Securities
Exchange Act of 1934; and |
(2) |
|
The information contained in the Report fairly presents, in all material respects, the
financial condition and results of operations of the Company. |
|
|
|
|
|
August 10, 2010 |
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 Broadband Corporation (the Company) on Form
10-Q for the period ended June 30, 2010 as filed with the Securities and Exchange Commission on the
date hereof (the Report), Rocco B. Commisso, Chairman and Chief Executive Officer and Mark E.
Stephan, Executive Vice President and Chief Financial Officer of the Company, certify, pursuant to
18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:
(1) |
|
the Report fully complies with the requirements of section 13(a) or 15(d) of the Securities
Exchange Act of 1934; and |
(2) |
|
The information contained in the Report fairly presents, in all material respects, the
financial condition and results of operations of the Company. |
|
|
|
|
|
August 10, 2010 |
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 |
|