MEDIACOM CAPITAL CORP - 10-Q Quarterly Report

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 September 30, 2002

Commission File Numbers:		333-57285-01
		333-57285

Mediacom LLC
Mediacom Capital Corporation*
(Exact names of Registrants as specified in their charters)

New York		06-1433421
New York		06-1513997
*(State or other jurisdiction of incorporation or organization)*		*(I.R.S. Employer Identification Numbers)*

100 Crystal Run Road Middletown, New York 10941
*(Address of principal executive offices)*

(845) 695-2600
*(Registrants’ telephone number)*

Indicate by check mark whether the Registrants (1) have filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrants were required to file such reports), and (2) have been subject to such filing requirements for the past 90 days:

Yes

Indicate the number of shares outstanding of the Registrants’ common stock: Not Applicable

*Mediacom Capital Corporation meets the conditions set forth in General Instruction H (1) (a) and (b) of Form 10-Q and is therefore filing this form with the reduced disclosure format.

MEDIACOM LLC AND SUBSIDIARIES

FORM 10-Q
FOR THE PERIOD ENDED SEPTEMBER 30, 2002

TABLE OF CONTENTS

			Page

PART I
Item 1.	Financial Statements

		Consolidated Balance Sheets (unaudited) - September 30, 2002 and December 31, 2001	1

		Consolidated Statements of Operations and Comprehensive Loss (unaudited) - Three and Nine Months Ended September 30, 2002 and 2001	2

		Consolidated Statements of Cash Flows (unaudited) - Nine Months Ended September 30, 2002 and 2001	3

		Notes to Consolidated Financial Statements (unaudited)	4

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		8

Item 3.	Quantitative and Qualitative Disclosures about Market Risk		17

Item 4.	Controls and Procedures		18

PART II

Item 6.	Exhibits and Reports on Form 8-K		19

You should carefully review the information contained in this Quarterly Report and in other reports or documents that we file from time to time with the Securities and Exchange Commission (the “SEC”). In this Quarterly Report, we state our beliefs of future events and of our future financial performance. In some cases, you can identify those so-called “forward-looking statements” by words such as “may,” “will,” “should,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential,” or “continue” or the negative of those words and other comparable words. You should be aware that those statements are only our predictions. Actual events or results may differ materially. In evaluating those statements, you should specifically consider various factors, including the risks discussed in our Annual Report on Form 10-K for the year ended December 31, 2001 and other reports or documents that we file from time to time with the SEC. Those factors may cause our actual results to differ materially from any of our forward-looking statements. All forward-looking statements attributable to us or a person acting on our behalf are expressly qualified in their entirety by this cautionary statement.

PART I

ITEM 1. FINANCIAL STATEMENTS

MEDIACOM LLC AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
(All dollar amounts in 000’s)
(Unaudited)

			September 30, 2002			December 31, 2001

ASSETS
Cash and cash equivalents			$	6,656		$	7,378
Investments				4,070			4,070
Subscriber accounts receivable, net of allowance for doubtful accounts of $1,039 and $1,095, respectively				19,607			19,691
Prepaid expenses and other assets				15,421			6,917
Preferred investment in affiliated company				150,000			150,000
Investment in cable television systems:
	Inventory			10,991			29,012
	Property, plant and equipment, net of accumulated depreciation of $456,313 and $338,930, respectively			729,283			717,595
	Intangible assets, net of accumulated amortization of $218,229 and $197,860, respectively			591,283			605,053

		Total investment in cable television systems		1,331,557			1,351,660
Other assets, net of accumulated amortization of $12,200 and $9,733, respectively				23,457			26,329

		Total assets	$	1,550,768		$	1,566,045

LIABILITIES AND MEMBER’S (DEFICIT) EQUITY
LIABILITIES
	Debt		$	1,530,500		$	1,425,500
	Accounts payable and accrued expenses			66,374			113,150
	Deferred revenue			14,776			13,404

		Total liabilities	$	1,611,650		$	1,552,054

MEMBER’S (DEFICIT) EQUITY
	Capital contributions			521,696			521,696
	Other equity			23,361			21,502
	Accumulated deficit			(605,939	)		(529,207	)

		Total member’s (deficit) equity		(60,882	)		13,991

		Total liabilities and member’s (deficit) equity	$	1,550,768		$	1,566,045

The accompanying notes to consolidated financial statements are an integral part of these statements.

MEDIACOM LLC AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE LOSS
(All dollar amounts in 000’s)
(Unaudited)

		Three Months Ended September 30,						Nine Months Ended September 30,

		2002			2001			2002			2001

Revenues		$	104,536		$	94,007		$	304,254		$	274,789
Costs and expenses:
	Service costs		38,156			33,079			112,966			94,637
	Selling, general and administrative expenses		17,798			16,365			51,618			46,327
	Management fee expense		1,441			1,140			4,319			4,607
	Depreciation and amortization		47,636			55,449			144,717			158,934
	Non-cash stock charges relating to management fee expense		396			529			1,859			2,412

Operating loss			(891	)		(12,555	)		(11,225	)		(32,128	)
Interest expense, net			25,627			25,563			76,706			68,396
Loss (gain) on derivative instruments, net			672			7,604			(1,423	)		9,001
Investment income from affiliate			(4,500	)		(3,620	)		(13,500	)		(3,620	)
Other expenses (income)			1,144			384			3,724			(28,535	)

Net loss before cumulative effect of accounting change			(23,834	)		(42,486	)		(76,732	)		(77,370	)
Cumulative effect of accounting change, net of tax			—			—			—			(1,642	)

Net loss		$	(23,834	)	$	(42,486	)	$	(76,732	)	$	(79,012	)
Unrealized gain on investments			—			(1,034	)		—			(708	)

Comprehensive loss		$	(23,834	)	$	(43,520	)	$	(76,732	)	$	(79,720	)

The accompanying notes to consolidated financial statements are an integral part of these statements.

MEDIACOM LLC AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
(All dollar amounts in 000’s)
(Unaudited)

						Nine Months Ended September 30,

						2002			2001

CASH FLOWS PROVIDED BY OPERATING ACTIVITIES:
	Net loss					$	(76,732	)	$	(79,012	)
	Adjustments to reconcile net loss to net cash flows from operating activities:
		Depreciation and amortization					144,717			156,050
		(Gain) loss on derivative instruments, net					(1,423	)		9,001
		Vesting of management stock					1,859			2,412
		Elimination and amortization of deferred SoftNet revenue					—			(30,244	)
		Amortization of deferred financing costs					2,911			2,884
		Cumulative effect of accounting change, net of tax					—			1,642
		Changes in assets and liabilities, net of effects from acquisitions:
			Subscriber accounts receivable, net				69			2,214
			Prepaid expenses and other assets				(8,504	)		(11,586	)
			Accounts payable and accrued expenses				(45,359	)		551
			Deferred revenue				1,372			(169	)

					Net cash flows provided by operating activities		18,910			53,743

CASH FLOWS USED IN INVESTING ACTIVITIES:
	Capital expenditures						(118,015	)		(162,222	)
	Acquisitions of cable television systems						(6,548	)		—
	Preferred investment in affiliated company						—			(150,000	)
	Other investment activities						(30	)		(1,085	)

					Net cash flows used in investing activities		(124,593	)		(313,307	)

CASH FLOWS PROVIDED BY FINANCING ACTIVITIES:
	New borrowings						304,375			872,000
	Repayment of debt						(199,375	)		(471,000	)
	Dividend payment						—			(125,000	)
	Financing costs						(39	)		(13,130	)

				Net cash flows provided by financing activities			104,961			262,870

				Net (decrease) increase in cash and cash equivalents			(722	)		3,306
CASH AND CASH EQUIVALENTS, beginning of period							7,378			4,093

CASH AND CASH EQUIVALENTS, end of period						$	6,656		$	7,399

The accompanying notes to consolidated financial statements are an integral part of these statements.

MEDIACOM LLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

(1) Organization

Mediacom LLC (“Mediacom,” and collectively with its subsidiaries, the “Company”), a New York limited liability company wholly-owned by Mediacom Communications Corporation (“MCC”), is involved in the acquisition and development of cable television systems serving smaller cities and towns in the United States. Through these cable systems, the Company offers a wide array of broadband products and services to its customers, including traditional video services, digital television, high-speed Internet access and video-on-demand. As of September 30, 2002, the Company had acquired and was operating cable television systems in 22 states, principally Al

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