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 March 31, 2003
| Commission File Numbers: |
333-72440 | |
| 333-72440-01 |
Mediacom Broadband LLC
Mediacom Broadband Corporation*
(Exact names of Registrants as specified in their charters)
| Delaware |
06-1615412 | |
| Delaware |
06-1630167 | |
| (State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification Numbers) |
100 Crystal Run Road
Middletown, New York 10941
(Address of principal executive offices)
(845) 695-2600
(Registrants’ telephone number)
Indicate by check mark whether the Registrants (1) have filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrants were required to file such reports), and (2) have been subject to such filing requirements for the past 90 days. Yes X No
Indicate by checkmark whether the registrants are accelerated filers (as defined in Rule 12b-2 of the Act). Yes No X
Indicate the number of shares outstanding of the Registrants’ common stock: Not Applicable
*Mediacom Broadband Corporation meets the conditions set forth in General Instruction H (1) (a) and (b) of Form 10-Q and is therefore filing this form with the reduced disclosure format.
MEDIACOM BROADBAND LLC AND SUBSIDIARIES
FORM 10-Q
FOR THE PERIOD ENDED MARCH 31, 2003
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, 2002 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 BROADBAND LLC AND SUBSIDIARIES
(All dollar amounts in 000’s)
| March 31, 2003 |
December 31, 2002 |
|||||||
| (Unaudited) |
||||||||
| ASSETS |
||||||||
| Cash and cash equivalents |
$ |
8,718 |
|
$ |
10,307 |
| ||
| Investments |
|
435 |
|
|
— |
| ||
| Subscriber accounts receivable, net of allowance for doubtful accounts of $2,350 and $2,683, respectively |
|
34,768 |
|
|
35,449 |
| ||
| Prepaid expenses and other assets |
|
30,326 |
|
|
8,323 |
| ||
| Investment in cable television systems: |
||||||||
| Inventory, net |
|
7,088 |
|
|
5,283 |
| ||
| Property, plant and equipment, net of accumulated depreciation of $157,336 and $131,507, respectively |
|
730,559 |
|
|
722,086 |
| ||
| Intangible assets, net of accumulated amortization of $50,252 and $49,907, respectively |
|
1,476,014 |
|
|
1,481,972 |
| ||
| Total investment in cable television systems |
|
2,213,661 |
|
|
2,209,341 |
| ||
| Other assets, net of accumulated amortization of $3,615 and $3,085, respectively |
|
18,055 |
|
|
18,528 |
| ||
| Total assets |
$ |
2,305,963 |
|
$ |
2,281,948 |
| ||
| LIABILITIES, PREFERRED MEMBERS’ INTERESTS AND MEMBER’S EQUITY |
||||||||
| LIABILITIES |
||||||||
| Debt |
$ |
1,316,000 |
|
$ |
1,298,000 |
| ||
| Accounts payable and accrued expenses |
|
220,418 |
|
|
205,055 |
| ||
| Deferred revenue |
|
19,502 |
|
|
18,371 |
| ||
| Total liabilities |
|
1,555,920 |
|
|
1,521,426 |
| ||
| PREFERRED MEMBERS’ INTERESTS |
|
150,000 |
|
|
150,000 |
| ||
| MEMBER’S EQUITY |
||||||||
| Capital contributions |
|
725,000 |
|
|
725,000 |
| ||
| Accumulated deficit |
|
(124,957 |
) |
|
(114,478 |
) | ||
| Total member’s equity |
|
600,043 |
|
|
610,522 |
| ||
| Total liabilities, preferred members’ interests and member’s equity |
$ |
2,305,963 |
|
$ |
2,281,948 |
| ||
The accompanying notes to consolidated financial
statements are an integral part of these statements.
1
MEDIACOM BROADBAND LLC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(All dollar amounts in 000’s)
(Unaudited)
| Three Months Ended March 31, |
||||||||
| 2003 |
2002 |
|||||||
| Revenues |
$ |
133,665 |
|
$ |
122,356 |
| ||
| Costs and expenses: |
||||||||
| Service costs |
|
53,668 |
|
|
54,547 |
| ||
| Selling, general and administrative expenses |
|
28,153 |
|
|
23,981 |
| ||
| Management fee expense |
|
2,036 |
|
|
1,634 |
| ||
| Depreciation and amortization |
|
28,203 |
|
|
26,019 |
| ||
| Operating income |
|
21,605 |
|
|
16,175 |
| ||
| Interest expense, net |
|
20,289 |
|
|
18,934 |
| ||
| Loss (gain) on derivative instruments, net |
|
1,634 |
|
|
(343 |
) | ||
| Other expenses |
|
1,131 |
|
|
1,329 |
| ||
| Net loss |
$ |
(1,449 |
) |
$ |
(3,745 |
) | ||
The accompanying notes to consolidated financial
statements are an integral part of these statements.
2
MEDIACOM BROADBAND LLC AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(All dollar amounts in 000’s)
(Unaudited)
| Three Months Ended March 31, |
||||||||
| 2003 |
2002 |
|||||||
| CASH FLOWS PROVIDED BY OPERATING ACTIVITIES: |
||||||||
| Net loss |
$ |
(1,449 |
) |
$ |
(3,745 |
) | ||
| Adjustments to reconcile net loss to net cash flows from operating activities: |
||||||||
| Depreciation and amortization |
|
28,203 |
|
|
26,019 |
| ||
| Loss (gain) on derivative instruments, net |
|
1,634 |
|
|
(343 |
) | ||
| Amortization of deferred financing costs |
|
530 |
|
|
497 |
| ||
| Changes in assets and liabilities: |
||||||||
| Subscriber accounts receivable, net |
|
681 |
|
|
(2,282 |
) | ||
| Prepaid expenses and other assets |
|
(22,003 |
) |
|
(4,044 |
) | ||
| Accounts payable and accrued expenses |
|
13,294 |
|
|
4,807 |
| ||
| Deferred revenue |
|
1,131 |
|
|
(339 |
) | ||
| Net cash flows provided by operating activities |
|
22,021 |
|
|
20,570 |
| ||
| CASH FLOWS USED IN INVESTING ACTIVITIES: |
||||||||
| Capital expenditures |
|
(41,226 |
) |
|
(51,593 |
) | ||
| Sale of cable system |
|
8,960 |
|
|
— |
| ||
| Other investment activities |
|
(257 |
) |
|
(1,053 |
) | ||
| Net cash flows used in investing activities |
|
(32,523 |
) |
|
(52,646 |
) | ||
| CASH FLOWS PROVIDED BY (USED IN) FINANCING ACTIVITIES: |
||||||||
| New borrowings |
|
41,000 |
|
|
— |
| ||
| Repayment of debt |
|
(23,000 |
) |
|
— |
| ||
| Dividend payments on preferred members’ interests |
|
(4,500 |
) |
|
(4,500 |
) | ||
| Dividend payment to parent |
|
(4,530 |
) |
|
— |
| ||
| Financing costs |
|
(57 |
) |
|
(146 |
) | ||
| Net cash flows provided by (used in) financing activities |
|
8,913 |
|
|
(4,646 |
) | ||
| Net decrease in cash and cash equivalents |
|
(1,589 |
) |
|
(36,722 |
) | ||
| CASH AND CASH EQUIVALENTS, beginning of period |
|
10,307 |
|
|
55,578 |
| ||
| CASH AND CASH EQUIVALENTS, end of period |
$ |
8,718 |
|
$ |
18,856 |
| ||
| SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: |
||||||||
| Cash paid during the period for interest |
$ |
32,317 |
|
$ |
34,468 |
| ||
The accompanying notes to consolidated financial
statements are an integral part of these statements.
3
MEDIACOM BROADBAND LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(1) Organization
Mediacom Broadband LLC (“Mediacom Broadband,” and collectively with its subsidiaries, the “Company”), a Delaware limited liability company, a wholly-owned subsidiary of Mediacom Communications Corporation (“MCC”) was formed in April 2001 for the purpose of acquiring cable systems from AT&T Broadband, LLC (“AT&T Broadband”). Through these cable systems (the “AT&T cable systems”), the Company provides entertainment, information and telecommunications services to its subscribers. As of March 31, 2003, the Company was operating cable systems in the states of Georgia, Illinois, Iowa and Missouri.
Mediacom Broadband Corporation, a Delaware corporation wholly-owned by Mediacom Broadband, was organized in May 2001 for the sole purpose of acting as co-issuer with Mediacom Broadband of $400.0 million aggregate principal amount of the 11% senior notes due July 15, 2013. Mediacom Broadband Corporation does not conduct operations of its own.
(2) Statement of Accounting Presentation and Other Information
Basis of Preparation of Consolidated Financial Statements
The consolidated financial statements as of March 31, 2003 and 2002 are unaudited. However, in the opinion of management, such statements include all adjustments, including normal recurring accruals and adjustments, necessary for a fair presentation of the results for the periods presented. The accounting policies followed during such interim periods reported are in conformity with generally accepted accounting principles in the United States of America and are consistent with those applied during annual periods. For additional disclosures, including a summary of the Company’s accounting policies, the interim financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2002 (File Nos. 333-72440 and 333-72440-01). 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, 2003.
(3) Debt
As of March 31, 2003 and December 31, 2002, debt consisted of:
| March 31, 2003 |
December 31, 2002 | |||||
| (dollars in thousands) | ||||||
| Bank credit facility |
$ |
916,000 |
$ |
898,000 | ||
| 11% senior notes |
|
400,000 |
|
400,000 | ||
| $ |
1,316,000 |
$ |
1,298,000 | |||
The average interest rate on outstanding debt under the bank credit facility was 3.4% for the three months ended March 31, 2003, before giving effect to the interest rate exchange agreements discussed below. As of March 31, 2003, the Company had unused credit commitments of approximately $479.5 million under its bank credit facility, of which about $271.8 million could be borrowed and used for general corporate purposes under the most restrictive covenants in the Company’s debt arrangements. The Company was in compliance with all covenants under its debt arrangements as of March 31, 2003.
4
MEDIACOM BROADBAND LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The Company uses interest rate exchange agreements in order to fix the interest rate for the duration of the contract to hedge against interest rate volatility. As of March 31, 2003, the Company had interest rate exchange agreements with various banks pursuant to which the interest rate on $500.0 million is fixed at a weighted average rate of approximately 3.4%, plus the average applicable margin over the eurodollar rate option under the bank credit agreement. Under the terms of the interest rate exchange agreements, which expire from 2005 through 2007, the Company is exposed to credit loss in the event of nonperformance by the other parties. However, the Company does not anticipate their nonperformance.
The fair value of the interest rate exchange agreements is the estimated amount that th