Use these links to rapidly review the documentADELPHIA COMMUNICATIONS CORPORATION AND SUBSIDIARIES (Debtors-In-Possession) Quarterly Report on Form 10-Q for the period ended March 31, 2004 Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

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FORM 10-Q

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|(Mark One)                                                    |                                                                                         
|------------------------------------------------------------- | ----------------------------------------------------------------------------------------
|ý                                                             | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 
|For the quarterly period ended March 31, 2004                
|or                                                           
|o                                                             | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|For the transition period
from                             to

Commission file number: 0-16014

Adelphia Communications Corporation(Exact name of registrant as specified in its charter)

Delaware

23-2417713(State or other jurisdiction
of incorporation or organization)

(I.R.S. Employer
Identification Number)


5619 DTC Parkway
Greenwood Village, CO 80111(Address of principal executive offices including zip code)

(303) 268-6300(Registrant's telephone number, including area code)

Indicate
by check mark whether the registrant: (1) has 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 registrant was required to file reports), and (2) has been subject to such filing requirements for the past
90 days. Yes o    No ý

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange
Act). Yes o    No ý

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange
Act). Yes o    No ý

Number of shares of Class A common stock outstanding as of June 30, 2005: 228,692,414

Number
of shares of Class B common stock outstanding as of June 30, 2005: 25,055,365



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ADELPHIA COMMUNICATIONS CORPORATION AND SUBSIDIARIES  (Debtors-In-Possession)  Quarterly Report on Form 10-Q for the period ended March 31, 2004  Table of Contents



|                              |         |                                                                                                               
|----------------------------- | ------- | --------------------------------------------------------------------------------------------------------------
|PART I. FINANCIAL INFORMATION
|                              | Item 1. |                                                                                                               
|                              |         | Condensed Consolidated Balance Sheets as of March 31, 2004 (unaudited) and December 31, 2003                  
|                              |         | Condensed Consolidated Statements of Operations for the three months ended March 31, 2004 and 2003 (unaudited)
|                              |         | Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2004 and 2003 (unaudited)
|                              |         | Notes to Condensed Consolidated Financial Statements (unaudited)                                              
|                              | Item 2. |                                                                                                               
|                              | Item 3. |                                                                                                               
|                              | Item 4. |                                                                                                               
|PART II. OTHER INFORMATION   
|                              | Item 1. |                                                                                                               
|                              | Item 6. |                                                                                                               
|SIGNATURES                   

|EXHIBIT INDEX |                                                      | 
|------------- | ---------------------------------------------------- | 
|              | Section 302 Certification of Chief Executive Officer | 
|              | Section 302 Certification of Chief Financial Officer | 
|              | Section 906 Certification of Chief Executive Officer | 
|              | Section 906 Certification of Chief Financial Officer | 

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INTRODUCTORY NOTE

In this Quarterly Report, the "Company," "we," "us" and "our" refer to Adelphia Communications Corporation ("Adelphia"), its consolidated subsidiaries and other
consolidated entities. Certain terms discussed below are defined in the accompanying notes to the condensed consolidated financial statements.

This
Quarterly Report on Form 10-Q is for the quarterly period ended March 31, 2004. Simultaneously with the filing of this Quarterly Report, we are filing our
Quarterly Report on Form 10-Q for the quarterly periods ended June 30, 2004 and September 30, 2004. These filings reflect our continued efforts to again be current in
our periodic reporting obligations under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), after having ceased to be in compliance with those obligations as a result of the alleged
improper actions of certain members of the John J. Rigas family who held all of the senior executive positions at Adelphia and constituted five of the nine members of Adelphia's board of directors
(collectively, "Rigas Management") in the period prior to the commencement of the Chapter 11 bankruptcy proceedings. See "BusinessCertain Significant Business Developments Occurring Since
1999Events Leading to the Installation of Interim Management and Commencement of the Chapter 11 Cases in 2002" in our Annual Report on Form 10-K for the fiscal year
ended December 31, 2003 filed with the Securities and Exchange Commission (the "SEC") on December 23, 2004 (the "2003 Form 10-K"). This Quarterly Report should be read
in conjunction with our Annual Report on Form 10-K for the fiscal year ended December 31, 2004 filed with the SEC on October 6, 2005 (the "2004
Form 10-K"), the 2003 Form 10-K and all of our other reports, including Current Reports on Form 8-K, filed with or furnished to the SEC through
the date of this report. As disclosed in the 2004 Form 10-K and the 2003 Form 10-K, readers should not rely on Adelphia's periodic and other reports filed with or
furnished to the SEC prior to May 24, 2002.

CAUTIONARY STATEMENTS

This Quarterly Report includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities
Act"), and Section 21E of the Exchange Act. All statements regarding Adelphia and its consolidated subsidiaries' and other consolidated entities' expected future financial position, results of
operations, cash flows, sale of the Company, settlements with the SEC and the United States Attorney's Office for the Southern District of New York (the "U.S.
Attorney"), sale of Century/ML Cable Venture ("Century/ML Cable"), restructuring and financing plans, potential emergence from bankruptcy, business strategy, budgets, projected costs, capital
expenditures, network upgrades, products and services, competitive positions, growth opportunities, plans and objectives of management for future operations, as well as statements that include words
such as "anticipate," "if," "believe," "plan," "estimate," "expect," "intend," "may," "could," "should," "will" and other similar expressions are forward-looking statements. Such forward-looking
statements are inherently uncertain, and readers must recognize that actual results may differ materially from our expectations. We undertake no duty to update such forward-looking statements. You are
advised, however, to consult any future disclosures we make on related subjects in our reports filed with or furnished to the SEC. Risks, uncertainties and other factors that may cause actual results
to differ materially from those in the forward-looking statements include, but are not limited to, the following:



2

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3

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Many
of these risks, uncertainties and other factors are outside of the Company's control. Readers should consider all of these factors carefully in evaluating the forward-looking
statements contained in this Quarterly Report. We discuss these risks, uncertainties and other factors more fully in other reports filed by us with or furnished to the SEC, including our 2004
Form 10-K.

4

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PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

ADELPHIA COMMUNICATIONS CORPORATION AND SUBSIDIARIES  (Debtors-In-Possession)  CONDENSED CONSOLIDATED BALANCE SHEETS  (amounts in thousands, except share data)

|                                      |                                                                           | March 31,
2004                                                                                                                      |                             | December 31,
2003                           |            
|------------------------------------- | ------------------------------------------------------------------------- | ----------------------------------------------------------------------------------------------------------------------------------- | --------------------------- | ------------------------------------------- | -----------
|
|ASSETS                                |                                                                           |                                                                                                                                     |                             |                                             |            
|                                      | Current assets:                                                           |                                                                                                                                     |                             |                                             |            
|                                      |                                                                           | Cash and cash equivalents                                                                                                           |                             | $                                           | 272,091    
|                                      |                                                                           | Restricted cash                                                                                                                     |                             |                                             | 53,959     
|                                      |                                                                           | Accounts receivable, less allowance for doubtful accounts of $39,805, and $40,108, respectively                                     |                             |                                             | 114,981    
|                                      |                                                                           | Other current assets                                                                                                                |                             |                                             | 125,377    
|                                      |                                                                           |                                                                                                                                     |                             |                                             |            
|                                      |                                                                           |                                                                                                                                     |                             | Total current assets                        |            
|                                      | Noncurrent assets:                                                        |                                                                                                                                     |                             |                                             |            
|                                      |                                                                           | Restricted cash                                                                                                                     |                             |                                             | 29,559     
|                                      |                                                                           | Investments in equity affiliates and related receivables                                                                            |                             |                                             | 261,602    
|                                      |                                                                           | Property and equipment, net                                                                                                         |                             |                                             | 4,635,554  
|                                      |                                                                           | Intangible assets, net (Note 10)                                                                                                    |                             |                                             | 7,865,487  
|                                      |                                                                           | Other noncurrent assets, net                                                                                                        |                             |                                             | 122,523    
|                                      |                                                                           |                                                                                                                                     |                             |                                             |            
|                                      |                                                                           |                                                                                                                                     |                             | Total assets                                |            
|                                      |                                                                           |                                                                                                                                     |                             |                                             |            
|LIABILITIES AND STOCKHOLDERS' DEFICIT |                                                                           |                                                                                                                                     |                             |                                             |            
|                                      | Current liabilities:                                                      |                                                                                                                                     |                             |                                             |            
|                                      |                                                                           | Accounts payable                                                                                                                    |                             | $                                           | 152,289    
|                                      |                                                                           | Subscriber advance payments and deposits                                                                                            |                             |                                             | 36,007     
|                                      |                                                                           | Accrued liabilities (Note 10)                                                                                                       |                             |                                             | 543,594    
|                                      |                                                                           | Deferred revenue                                                                                                                    |                             |                                             | 29,556     
|                                      |                                                                           | Current portion of parent and subsidiary debt (Note 5)                                                                              |                             |                                             | 415,609    
|                                      |                                                                           | Amounts due to the Rigas Family and Other Rigas Entities from Rigas Co-Borrowing Entities (Note 3)                                  |                             |                                             | 460,256    
|                                      |                                                                           |                                                                                                                                     |                             |                                             |            
|                                      |                                                                           |                                                                                                                                     |                             | Total current liabilities                   |            
|                                      |                                                                           |                                                                                                                                     |                             |                                             |            
|                                      | Noncurrent liabilities:                                                   |                                                                                                                                     |                             |                                             |            
|                                      |                                                                           | Other liabilities                                                                                                                   |                             |                                             | 46,290     
|                                      |                                                                           | Deferred revenue                                                                                                                    |                             |                                             | 108,356    
|                                      |                                                                           | Deferred income taxes                                                                                                               |                             |                                             | 652,141    
|                                      |                                                                           |                                                                                                                                     |                             |                                             |            
|                                      |                                                                           |                                                                                                                                     |                             | Total noncurrent liabilities                |            
|                                      | Liabilities subject to compromise (Notes 2 and 5)                         |                                                                                                                                     |                             | 18,603,975                                  |            
|                                      |                                                                           |                                                                                                                                     |                             |                                             |            
|                                      |                                                                           |                                                                                                                                     |                             | Total liabilities                           |            
|                                      |                                                                           |                                                                                                                                     |                             |                                             |            
|                                      | Commitments and contingencies (Note 9)                                    |                                                                                                                                     |                             |                                             |            
|                                      | Minority's interest in equity of subsidiary                               |                                                                                                                                     |                             | 91,283                                      |            
|                                      | Stockholders' deficit:                                                    |                                                                                                                                     |                             |                                             |            
|                                      |                                                                           | Series preferred stock                                                                                                              |                             |                                             | 397        
|                                      |                                                                           | Class A Common Stock, $.01 par value, 1,200,000,000 shares authorized, 229,787,271 shares issued and 228,692,414 shares outstanding |                             |                                             | 2,297      
|                                      |                                                                           | Convertible Class B Common Stock, $.01 par value, 300,000,000 shares authorized, 25,055,365 shares issued and outstanding           |                             |                                             | 251        
|                                      |                                                                           | Additional paid-in capital                                                                                                          |                             |                                             | 12,071,165 
|                                      |                                                                           | Accumulated other comprehensive loss, net                                                                                           |                             |                                             | (10,263    
|                                      |                                                                           | Accumulated deficit                                                                                                                 |                             |                                             | (19,665,390
|                                      |                                                                           | Treasury stock, at cost, 1,094,857 shares of Class A Common Stock                                                                   |                             |                                             | (27,937    
|                                      |                                                                           |                                                                                                                                     |                             |                                             |            
|                                      |                                                                           |                                                                                                                                     | (7,629,480                  | )                                           |            
|                                      | Amounts due from the Rigas Family and Rigas Family Entities, net (Note 4) |                                                                                                                                     |                             | (28,743                                     | )          
|                                      |                                                                           |                                                                                                                                     |                             |                                             |            
|                                      |                                                                           |                                                                                                                                     | Total stockholders' deficit |                                             |            
|                                      |                                                                           |                                                                                                                                     |                             |                                             |            
|                                      |                                                                           |                                                                                                                                     |                             | Total liabilities and stockholders' deficit |            
|                                      |                                                                           |                                                                                                                                     |                             |                                             |            

See accompanying notes to the condensed consolidated financial statements.

5

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ADELPHIA COMMUNICATIONS CORPORATION AND SUBSIDIARIES  (Debtors-In-Possession)  CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS  (amounts in thousands, except share and per share amounts)  (unaudited)

|                                                                                                                                                        |                                                                                                                                                                                  | Three months ended March 31,                       |                                                                                                                                                                                   
|------------------------------------------------------------------------------------------------------------------------------------------------------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | -------------------------------------------------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
|Revenue                                                                                                                                                 |                                                                                                                                                                                  | $                                                  | 1,007,330                                                                                                                                                                         
|Costs and expenses:                                                                                                                                     |                                                                                                                                                                                  |                                                    |                                                                                                                                                                                   
|                                                                                                                                                        | Direct operating and programming                                                                                                                                                 |                                                    |                                                                                                                                                                                   
|                                                                                                                                                        | Selling, general and administrative:                                                                                                                                             |                                                    |                                                                                                                                                                                   
|                                                                                                                                                        |                                                                                                                                                                                  | Third party                                        |                                                                                                                                                                                   
|                                                                                                                                                        |                                                                                                                                                                                  | Rigas Family Entities (Note 4)                     |                                                                                                                                                                                   
|                                                                                                                                                        |                                                                                                                                                                                  | Investigation and re-audit related fees            |                                                                                                                                                                                   
|                                                                                                                                                        | Depreciation (Note 10)                                                                                                                                                           |                                                    |                                                                                                                                                                                   
|                                                                                                                                                        | Amortization                                                                                                                                                                     |                                                    |                                                                                                                                                                                   
|                                                                                                                                                        | Provision for uncollectible amounts due from the Rigas Family and Rigas Family Entities (Note 4)                                                                                 |                                                    |                                                                                                                                                                                   
|                                                                                                                                                        |                                                                                                                                                                                  |                                                    |                                                                                                                                                                                   
|                                                                                                                                                        |                                                                                                                                                                                  |                                                    | Total costs and expenses                                                                                                                                                          
|                                                                                                                                                        |                                                                                                                                                                                  |                                                    |                                                                                                                                                                                   
|                                                                                                                                                        |                                                                                                                                                                                  |                                                    | Operating loss                                                                                                                                                                    
|Other income (expense), net:                                                                                                                            |                                                                                                                                                                                  |                                                    |                                                                                                                                                                                   
|                                                                                                                                                        | Interest expense, net of amounts capitalized (contractual interest was $288,905 and $289,120 during the three months ended March 31, 2004 and 2003, respectively (Notes 2 and 5) |                                                    |                                                                                                                                                                                   
|                                                                                                                                                        | Other income (expense), net (three months ended March 31, 2004 includes a $425,000 provision for government settlement) (Note 9)                                                 |                                                    |                                                                                                                                                                                   
|                                                                                                                                                        |                                                                                                                                                                                  |                                                    |                                                                                                                                                                                   
|                                                                                                                                                        |                                                                                                                                                                                  |                                                    | Total other expense, net                                                                                                                                                          
|                                                                                                                                                        |                                                                                                                                                                                  |                                                    |                                                                                                                                                                                   
|                                                                                                                                                        |                                                                                                                                                                                  |                                                    | Loss before reorganization expenses, income taxes, share of losses of equity affiliates, minority's interest, discontinued operations and cumulative effects of accounting changes
|Reorganization expenses due to bankruptcy (Note 2)                                                                                                      |                                                                                                                                                                                  |                                                    | (15,348                                                                                                                                                                           
|                                                                                                                                                        |                                                                                                                                                                                  |                                                    |                                                                                                                                                                                   
|                                                                                                                                                        |                                                                                                                                                                                  |                                                    | Loss before income taxes, share of losses of equity affiliates, minority's interest, discontinued operations and cumulative effects of accounting changes                         
|Income tax benefit (expense)                                                                                                                            |                                                                                                                                                                                  |                                                    | 73,878                                                                                                                                                                            
|Share of losses of equity affiliates, net                                                                                                               |                                                                                                                                                                                  |                                                    | (697                                                                                                                                                                              
|Minority's interest in loss of subsidiary                                                                                                               |                                                                                                                                                                                  |                                                    | 4,241                                                                                                                                                                             
|                                                                                                                                                        |                                                                                                                                                                                  |                                                    |                                                                                                                                                                                   
|                                                                                                                                                        |                                                                                                                                                                                  |                                                    | Loss from continuing operations before cumulative effects of accounting changes                                                                                                   
|Gain (loss) from discontinued operations                                                                                                                |                                                                                                                                                                                  |                                                    | 499                                                                                                                                                                               
|                                                                                                                                                        |                                                                                                                                                                                  |                                                    |                                                                                                                                                                                   
|                                                                                                                                                        |                                                                                                                                                                                  |                                                    | Loss before cumulative effects of accounting changes                                                                                                                              
|Cumulative effects of accounting changes:                                                                                                               |                                                                                                                                                                                  |                                                    |                                                                                                                                                                                   
|                                                                                                                                                        | Due to new accounting pronouncements (Note 3)                                                                                                                                    |                                                    |                                                                                                                                                                                   
|                                                                                                                                                        | Due to new method of amortization (Note 10)                                                                                                                                      |                                                    |                                                                                                                                                                                   
|                                                                                                                                                        |                                                                                                                                                                                  |                                                    |                                                                                                                                                                                   
|                                                                                                                                                        |                                                                                                                                                                                  |                                                    | Net loss                                                                                                                                                                          
|Dividend requirements applicable to preferred stock (contractual dividends were $30,031 during each of the three months ended March 31, 2004 and 2003): |                                                                                                                                                                                  |                                                    |                                                                                                                                                                                   
|                                                                                                                                                        | Beneficial conversion feature                                                                                                                                                    |                                                    |                                                                                                                                                                                   
|                                                                                                                                                        |                                                                                                                                                                                  |                                                    |                                                                                                                                                                                   
|                                                                                                                                                        |                                                                                                                                                                                  |                                                    | Net loss applicable to common stockholders                                                                                                                                        
|                                                                                                                                                        |                                                                                                                                                                                  |                                                    |                                                                                                                                                                                   
|Basic and diluted loss applicable to common stockholders per weighted average share of common stock:                                                    |                                                                                                                                                                                  |                                                    |                                                                                                                                                                                   
|                                                                                                                                                        | From continuing operations before cumulative effects of accounting changes                                                                                                       |                                                    | $                                                                                                                                                                                 
|                                                                                                                                                        | Loss from discontinued operations                                                                                                                                                |                                                    |                                                                                                                                                                                   
|                                                                                                                                                        | Cumulative effects of accounting changes                                                                                                                                         |                                                    |                                                                                                                                                                                   
|                                                                                                                                                        |                                                                                                                                                                                  |                                                    |                                                                                                                                                                                   
|                                                                                                                                                        |                                                                                                                                                                                  |                                                    | Net loss applicable to common stockholders                                                                                                                                        
|                                                                                                                                                        |                                                                                                                                                                                  |                                                    |                                                                                                                                                                                   
|Proforma amounts assuming the new amortization method is applied retroactively:                                                                         |                                                                                                                                                                                  |                                                    |                                                                                                                                                                                   
|                                                                                                                                                        | Loss before cumulative effect of accounting change                                                                                                                               |                                                    | $                                                                                                                                                                                 
|                                                                                                                                                        |                                                                                                                                                                                  |                                                    |                                                                                                                                                                                   
|                                                                                                                                                        | Net loss applicable to common stockholders                                                                                                                                       |                                                    | $                                                                                                                                                                                 
|                                                                                                                                                        |                                                                                                                                                                                  |                                                    |                                                                                                                                                                                   
|                                                                                                                                                        | Basic and diluted loss per weighted average share of common stock:                                                                                                               |                                                    |                                                                                                                                                                                   
|                                                                                                                                                        |                                                                                                                                                                                  | Loss before cumulative effect of accounting change |                                                                                                                                                                                   
|                                                                                                                                                        |                                                                                                                                                                                  |                                                    |                                                                                                                                                                                   
|                                                                                                                                                        |                                                                                                                                                                                  | Net loss applicable to common stockholders         |                                                                                                                                                                                   
|                                                                                                                                                        |                                                                                                                                                                                  |                                                    |                                                                                                                                                                                   
|Basic and diluted weighted average shares of common stock outstanding                                                                                   |                                                                                                                                                                                  |                                                    | 253,747,779                                                                                                                                                                       
|                                                                                                                                                        |                                                                                                                                                                                  |                                                    |                                                                                                                                                                                   

See accompanying notes to the condensed consolidated financial statements.

6

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ADELPHIA COMMUNICATIONS CORPORATION AND SUBSIDIARIES  (Debtors-In-Possession)  CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS  (amounts in thousands)  (unaudited)

|                                                                                    |                                                                                                                    | Three months ended March 31, |           
|----------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------ | ---------------------------- | ----------
|
|Operating activities:                                                               |                                                                                                                    |                              |           
|Net loss                                                                            |                                                                                                                    | $                            | (1,354,572
|Adjustments to reconcile net loss to net cash provided by operating activities:     |                                                                                                                    |                              |           
|                                                                                    | Depreciation                                                                                                       |                              |           
|                                                                                    | Amortization                                                                                                       |                              |           
|                                                                                    | Provision for uncollectible amounts due from Rigas Family and Rigas Family Entities                                |                              |           
|                                                                                    | Amortization of deferred financing costs                                                                           |                              |           
|                                                                                    | Cost allocations and charges to Rigas Family Entities, net                                                         |                              |           
|                                                                                    | Provision for government settlement                                                                                |                              |           
|                                                                                    | Other noncash charges, net                                                                                         |                              |           
|                                                                                    | Reorganization expenses due to bankruptcy                                                                          |                              |           
|                                                                                    | Deferred income tax (benefit) expense                                                                              |                              |           
|                                                                                    | Share of losses of equity affiliates, net                                                                          |                              |           
|                                                                                    | Minority's interest in loss of subsidiary                                                                          |                              |           
|                                                                                    | Depreciation, amortization and other noncash charges related to discontinued operations                            |                              |           
|                                                                                    | Cumulative effects of accounting changes                                                                           |                              |           
|                                                                                    | Change in operating assets and liabilities, net of effects of initial consolidation of Rigas Co-Borrowing Entities |                              |           
|                                                                                    |                                                                                                                    |                              |           
|Net cash provided by operating activities before payment of reorganization expenses |                                                                                                                    |                              | 155,429   
|                                                                                    | Reorganization expenses paid during the period                                                                     |                              |           
|                                                                                    |                                                                                                                    |                              |           
|Net cash provided by operating activities                                           |                                                                                                                    |                              | 147,065   
|                                                                                    |                                                                                                                    |                              |           
|Investing activities:                                                               |                                                                                                                    |                              |           
|                                                                                    | Expenditures for property and equipment                                                                            |                              |           
|                                                                                    | Cash advances to the Rigas Family Entities                                                                         |                              |           
|                                                                                    | Cash received from the Rigas Family Entities                                                                       |                              |           
|                                                                                    | Change in restricted cash                                                                                          |                              |           
|                                                                                    | Other                                                                                                              |                              |           
|                                                                                    |                                                                                                                    |                              |           
|Net cash used in investing activities                                               |                                                                                                                    |                              | (196,296  
|                                                                                    |                                                                                                                    |                              |           
|Financing activities:                                                               |                                                                                                                    |                              |           
|                                                                                    | Proceeds from debt                                                                                                 |                              |           
|                                                                                    | Repayments of debt                                                                                                 |                              |           
|                                                                                    |                                                                                                                    |                              |           
|Net cash provided by (used in) financing activities                                 |                                                                                                                    |                              | 68,661    
|                                                                                    |                                                                                                                    |                              |           
|Increase in cash and cash equivalents                                               |                                                                                                                    |                              | 19,430    
|Cash and cash equivalents at beginning of period                                    |                                                                                                                    |                              | 252,661   
|                                                                                    |                                                                                                                    |                              |           
|Cash and cash equivalents at end of period                                          |                                                                                                                    | $                            | 272,091   
|                                                                                    |                                                                                                                    |                              |           

See
accompanying notes to the condensed consolidated financial statements.

7

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ADELPHIA COMMUNICATIONS CORPORATION AND SUBSIDIARIES  (Debtors-In-Possession)  NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (unaudited)

Note 1: Background and Basis of Presentation

The Company is engaged primarily in the cable television business. The cable systems owned by the Company are located in 31 states and Brazil. Effective
January 1, 2004, the Company adopted Financial Accounting Standards Board ("FASB") Interpretation ("FIN") No. 46,Consolidation of Variable Interest
Entities(as subsequently revised in December 2003, "FIN 46-R"), and began consolidating the Rigas Co-Borrowing Entities. The Company has
concluded that the Rigas Co-Borrowing Entities represent variable interest entities for which the Company is the primary beneficiary. Accordingly, all references to the Company prior to
January 1, 2004 exclude the Rigas Co-Borrowing Entities and all references to the Company subsequent to January 1, 2004 include the Rigas Co-Borrowing Entities.
As a result of the consolidation of the Rigas Co-Borrowing Entities for periods commencing in 2004, the Company's results of operations, financial position and cash flows are not
comparable to prior periods. For additional information, see Note 3.

Prior
to January 1, 2004, these condensed consolidated financial statements do not include the accounts of any of the entities in which members of the Rigas Family directly or
indirectly held controlling interests (collectively, the "Rigas Family Entities"). The Rigas Family Entities include the Rigas Co-Borrowing Entities, as well as other Rigas Family entities
(the "Other Rigas Entities"). The Company believes that under the guidelines which existed for periods prior to January 1, 2004, the Company did not have a controlling financial interest,
including majority voting interest, control by contract or otherwise, in any of the Rigas Family Entities. Accordingly, the Company did not meet the criteria for consolidation of any of the Rigas
Family Entities.

In
June 2002, the Debtors filed voluntary petitions to reorganize (the "Chapter 11 Cases") under Chapter 11 of Title 11 ("Chapter 11") of the United States Code (the
"Bankruptcy Code") in the United States Bankruptcy Court for the Southern District of New York (the "Bankruptcy Court"). The
Rigas Co-Borrowing Entities did not file for bankruptcy protection. Effective April 20, 2005, Adelphia entered into definitive agreements with TW NY and Comcast which provide for
the sale of substantially all of the Company's U.S. assets. For additional information, see Note 2.

These
condensed consolidated financial statements have been prepared on a going concern basis, which assumes continuity of operations, realization of assets and satisfaction of
liabilities in the ordinary course of business, and do not purport to show, reflect or provide for the consequences of the Debtors' Chapter 11 reorganization proceedings. In particular, these
condensed consolidated financial statements do not purport to show: (i) as to assets, the amount that may be realized upon their sale or their availability to satisfy liabilities;
(ii) as to pre-petition liabilities, the amounts at which claims or contingencies may be settled, or the status and priority thereof; (iii) as to stockholders' equity
accounts, the effect of any changes that may be made in the capitalization of the Company; or (iv) as to operations, the effect of any changes that may be made in its business.

In
May 2002, certain Rigas Family members resigned from their positions as directors and executive officers of the Company. In addition, the Rigas Family owned Adelphia $0.01 par
value Class A common stock ("Class A Common Stock") and Adelphia $0.01 par value Class B common stock ("Class B Common Stock") with a majority of the voting power in
Adelphia, and was not able to exercise such voting power since the Debtors filed for protection under the Bankruptcy Code in June 2002. Prior to May 2002, the Company engaged in numerous
transactions that directly or indirectly involved members of the Rigas Family and Rigas Family Entities. For additional information,

8

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ADELPHIA COMMUNICATIONS CORPORATION AND SUBSIDIARIES  (Debtors-In-Possession)  NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTSContinued  (unaudited)

see
Note 4. Pursuant to the Consent Order of Forfeiture entered by the United States District Court for the Southern District of New York (the "District Court") on June 8, 2005 (the
"Forfeiture Order"), all right, title and interest of the Rigas Family and Rigas Family Entities in the Rigas Co-Borrowing Entities (other than Coudersport and Bucktail), certain specified
real estate and any securities of the Company were forfeited to the United States on June 8, 2005 and such assets and securities are expected to be conveyed (subject to completion of forfeiture
proceedings before a federal judge to determine if there are any superior claims) to the Company pursuant to an
agreement between the Company and the U.S. Attorney dated April 25, 2005 (the "Non-Prosecution Agreement"), as discussed in Note 9.

These
condensed consolidated financial statements include the accounts of Adelphia and all of its subsidiaries that were directly or indirectly controlled by Adelphia prior to the
bankruptcy petition. Although the Company is operating as a debtor-in-possession in the Chapter 11 Cases, the Company's ability to control the activities and operations of its
subsidiaries that are also Debtors may be limited pursuant to the Bankruptcy Code. However, because the bankruptcy proceedings for the Debtors are consolidated for administrative purposes in the same
Bankruptcy Court and will be overseen by the same judge, the financial statements of Adelphia and its subsidiaries have been presented on a combined basis, which is consistent with condensed
consolidated financial statements (see Note 2). All inter-entity transactions between Adelphia, its subsidiaries and, beginning in 2004, the Rigas Co-Borrowing Entities have been
eliminated in consolidation.

The
accompanying condensed consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States ("GAAP")
for interim financial information and the rules and regulations of the SEC. Accordingly, certain information and footnote disclosures typically included in the Company's financial statements filed
with its Annual Report on Form 10-K have been condensed or omitted for this Quarterly Report. In the opinion of management, the accompanying condensed consolidated financial
statements include all adjustments, which consist of only normal recurring adjustments, necessary for a fair presentation of the results for the periods presented. Certain reclassifications have been
made to prior period balances to conform to the current presentation. These financial statements should be read in conjunction with the Company's 2004 Form 10-K and 2003
Form 10-K. Interim results are not necessarily indicative of results for a full year.

Note 2: Bankruptcy Proceedings and Sale of Assets of the Company

Overview

On June 25, 2002 ("Petition Date"), the Debtors filed voluntary petitions to reorganize under Chapter 11 of the Bankruptcy Code in the Bankruptcy Court. On
June 10, 2002, Century Communications Corporation ("Century"), an indirect wholly-owned subsidiary of Adelphia, filed a voluntary petition to reorganize under Chapter 11. The Debtors, which
include Century, are currently operating their business as debtors-in-possession under Chapter 11. Included in the accompanying condensed consolidated financial statements are
subsidiaries that did not file voluntary petitions under the Bankruptcy Code, including the Rigas Co-Borrowing Entities. The assets and liabilities of the non-filing
subsidiaries, excluding the Rigas Co-Borrowing Entities, are not considered material to the condensed consolidated
financial statements. The assets and liabilities of the Rigas Co-Borrowing Entities as of January 1, 2004 are presented in Note 3.

9

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ADELPHIA COMMUNICATIONS CORPORATION AND SUBSIDIARIES  (Debtors-In-Possession)  NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTSContinued  (unaudited)

On
July 11, 2002, a statutory committee of unsecured creditors (the "Creditors' Committee") was appointed, and on July 31, 2002, a statutory committee of equity holders
(the "Equity Committee" and, together with the Creditors' Committee, the "Committees") was appointed. The Committees have the right to, among other things, review and object to certain business
transactions and may participate in the formulation of the Debtors' plan of reorganization. Under the Bankruptcy Code, the Debtors were provided with specified periods during which only the Debtors
could propose and file a plan of reorganization (the "Exclusive Period") and solicit acceptances thereto (the "Solicitation Period"). The Debtors received several extensions of the Exclusive
Period and the Solicitation Period from the Bankruptcy Court with the latest extension of the Exclusive Period and the Solicitation Period being through February 17, 2004 and April 20,
2004, respectively. The Debtors filed a motion requesting an additional extension of the Exclusive Period and the Solicitation Period. However, the Equity Committee filed a motion to terminate the
Exclusive Period and the Solicitation Period and other objections were filed regarding this request. The Bankruptcy Court has extended the Exclusive Period and the Solicitation Period until the
hearing on the motions is held and a determination by the Bankruptcy Court is made. No hearing has been scheduled.

On
February 25, 2004, the Debtors filed their proposed joint plan of reorganization (the "Stand-Alone Plan"), which contemplated their emergence from bankruptcy as a stand-alone
entity, and related Disclosure Statement with the Bankruptcy Court. On April 22, 2004, Adelphia announced that it intended to pursue a sale of the Company while simultaneously pursuing the
Stand-Alone Plan. On September 21, 2004, Adelphia formally launched its sale process in which potential bidders were invited to submit preliminary indications of interest in Adelphia and its
subsidiaries or one or more Company-designated clusters of cable systems. On November 1, 2004, Adelphia, based on the non-binding indications of interest, invited qualified bidders
to further participate in the sale process and to submit final legally binding bids in accordance with the bidding procedures approved by the Bankruptcy Court. Final bids were due January 31,
2005. Adelphia received a number of bids that related to the acquisition or recapitalization of the Company, in its entirety, or the acquisition of one or more clusters of assets.

On
February 4, 2005, the Debtors filed their proposed First Amended Joint Plan of Reorganization and related First Amended Disclosure Statement with the Bankruptcy Court. This
plan contemplated the possibility of either: (i) emergence from bankruptcy as a stand-alone entity; (ii) distribution of proceeds resulting from a sale or other corporate transaction
involving one or more companies in addition to the Debtors; or (iii) emergence from bankruptcy as part of a stand-alone entity after having sold certain clusters of cable systems and
distributed the proceeds of such sales.

On
June 25, 2005, the Debtors filed their proposed Second Amended Joint Plan of Reorganization and related Second Amended Disclosure Statement with the Bankruptcy Court. The Plan
contemplates, among other things, consummation of the Sale Transaction and distribution of the cash and Class A common stock of TWC (the "TWC Class A Common Stock") received pursuant to
the Sale Transaction to the stakeholders of the Debtors in accordance with the Plan.

On
September 28, 2005, the Debtors filed their proposed Third Amended Joint Plan of Reorganization (the "Plan") and related Third Amended Disclosure Statement (the "Disclosure
Statement") with the Bankruptcy Court. The Plan contemplates, among other things, consummation of the Sale Transaction and distribution of the cash and TWC Class A Common Stock received
pursuant to the Sale Transaction to the stakeholders of the Debtors in accordance with the Plan.

10

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ADELPHIA COMMUNICATIONS CORPORATION AND SUBSIDIARIES  (Debtors-In-Possession)  NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTSContinued  (unaudited)

Sale of Assets

Effective April 20, 2005, Adelphia entered into the Sale Transaction. Upon the closing of the Sale Transaction, Adelphia will receive approximately
$12.7 billion in cash and shares of TWC Class A Common Stock, which are expected to represent 16% of the outstanding equity securities of TWC as of the closing and are to be listed on
the New York Stock Exchange. Such percentage assumes the redemption of Comcast's interest in TWC and is subject to adjustment for issuances pursuant to
employee stock programs (subject to a cap) and issuances of securities for fair consideration. The purchase price payable by TW NY and Comcast is subject to certain adjustments. TWC, Comcast and
certain of their affiliates have also agreed to swap certain cable systems and unwind Comcast's investments in TWC and Time Warner Entertainment Company, L.P., a subsidiary of TWC ("TWE"). The Sale
Transaction does not include the Company's interest in Century/ML Cable, a joint venture that owns and operates cable systems in Puerto Rico, which Century and ML Media Partners, L.P. ("ML Media")
separately agreed, on June 3, 2005, to sell to San Juan Cable, LLC ("San Juan Cable"). For additional information, see Note 9.

As
part of the Sale Transaction, Adelphia has agreed to transfer to TW NY and Comcast the assets related to the cable systems that were nominally owned by the Rigas
Co-Borrowing Entities and are managed by the Company (such Rigas Co-Borrowing Entities are herein referred to as the "Managed Cable Entities"). Pursuant to the Forfeiture
Order, all right, title and interest of the Rigas Family and Rigas Family Entities in the Rigas Co-Borrowing Entities (other than Coudersport and Bucktail) have been forfeited to the
United States. Pursuant to the Non-Prosecution Agreement, the Company expects to obtain ownership of all of the Rigas Co-Borrowing Entities other than two small entities
(Coudersport and Bucktail) and, accordingly, Adelphia expects to be able to transfer to TW NY and Comcast (subject to completion of forfeiture proceedings before a federal judge to determine if there
are any superior claims) the assets of the Managed Cable Entities (other than Coudersport and Bucktail) as part of the Sale Transaction. If the Company is unable to transfer all of the assets of the
Managed Cable Entities to Comcast and TW NY at the closing of the Sale Transaction, the initial purchase price payable by Comcast and by TW NY would be reduced by an aggregate amount of up to
$600,000,000 and $390,000,000, respectively, but would become payable to the extent such assets are transferred to TW NY and Comcast within 15 months of the closing. Adelphia believes that the
failure to transfer the assets of Coudersport and Bucktail to TW NY and Comcast will result in an aggregate purchase price reduction of approximately $23,000,000, reflecting a reduction to the
purchase price payable by TW NY of approximately $15,000,000 and by Comcast of approximately $8,000,000.

Pursuant
to a separate agreement, dated as of April 20, 2005, TWC, among other things, has guaranteed the obligations of TW NY under the asset purchase agreement between TW NY and
Adelphia.

Until
a plan of reorganization is confirmed by the Bankruptcy Court and becomes effective, the Sale Transaction cannot be consummated. The closing of the Sale Transaction is also subject
to the satisfaction or waiver of conditions customary to transactions of this type, including, among others: (i) receipt of applicable regulatory approvals, including the consent of the Federal
Communications Commission (the "FCC") to the transfer of certain licenses and any applicable approvals of local franchising authorities to the change in ownership of the cable systems operated by the
Company to the extent not preempted by section 365 of the Bankruptcy Code; (ii) expiration or termination of the

11

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ADELPHIA COMMUNICATIONS CORPORATION AND SUBSIDIARIES  (Debtors-In-Possession)  NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTSContinued  (unaudited)

applicable
waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended; (iii) the offer and sale of the shares of TWC Class A Common Stock to be
issued in the Sale Transaction having been exempted from registration pursuant to an order of the Bankruptcy Court confirming the Plan or a no-action letter from the staff of the SEC, or a
registration statement covering the offer and sale of such shares having been declared effective; (iv) the TWC Class A Common Stock to be issued in the Sale Transaction being freely
tradable and not subject to resale restrictions, except in certain circumstances; (v) approval of the shares of TWC Class A Common Stock to be issued in the Sale Transaction for listing
on the New York Stock Exchange; (vi) entry by the Bankruptcy Court of a final order confirming the Plan and, contemporaneously with the closing of the Sale Transaction, consummation of the
Plan; (vii) satisfactory settlement by Adelphia of the claims and causes of action brought by the SEC and the investigations by the United States Department of Justice (the "DoJ");
(viii) the absence of any material adverse effect with respect to TWC's business and certain significant components of the Company's business (without taking into consideration any loss of
subscribers by the Company's business (or results thereof) already reflected in the projections specified in the asset purchase agreements or the purchase price adjustments); (ix) the number of
eligible basic subscribers (as the term is used in the purchase agreements) served by the Company's cable systems as of a specified date prior to the closing of the Sale Transaction not being below an
agreed upon threshold; (x) the absence of an actual change in law, or proposed change in law that has a reasonable possibility of being enacted, that would adversely affect the tax treatment
accorded to the Sale Transaction with respect to TW NY; (xi) a filing of an election under Section 754 of the Internal Revenue Code of 1986, as amended, by each of
Century-TCI California Communications, L.P. ("Century-TCI"), Parnassos Communications, L.P. ("Parnassos") and Western NY Cablevision L.P. ("Western NY Cablevision"); and
(xii) the provision of certain audited and unaudited financial information by Adelphia.

The
closing under each purchase agreement is also conditioned on a contemporaneous closing under the other purchase agreement. However, pursuant to a letter agreement, dated as of
April 20, 2005, and the asset purchase agreement between Adelphia and TW NY, TW NY has agreed to purchase the cable operations of Adelphia that Comcast would have acquired if Comcast's purchase
agreement is terminated prior to closing as a result of the failure to obtain FCC or applicable antitrust approvals. In such event, and assuming TW NY received such approvals, TW NY will pay the
$3.5 billion purchase price to have been paid by Comcast, less Comcast's allocable share of the liabilities of Century-TCI, Parnassos and Western NY Cablevision, which shall not be
less than $549,000,000 or more than $600,000,000. Consummation of the Sale Transaction, however, is not subject to the consummation of the agreement by TWC, Comcast and certain of their affiliates to
swap certain cable systems and unwind Comcast's investments in TWC and TWE, as described above. There is no assurance that TW NY would be able to obtain the required FCC or applicable antitrust
approvals for the transaction contemplated by the letter agreement.

The
purchase agreements with TW NY and Comcast contain certain termination rights for Adelphia, TW NY and Comcast, and further provide that, upon termination of the purchase agreements
under specified circumstances, Adelphia may be required to pay TW NY a termination fee of approximately $353,000,000 and Comcast a termination fee of $87,500,000.

12

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ADELPHIA COMMUNICATIONS CORPORATION AND SUBSIDIARIES  (Debtors-In-Possession)  NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTSContinued  (unaudited)

As
described above, on September 28, 2005, the Debtors filed the Plan and the Disclosure Statement with the Bankruptcy Court that reflects the terms of the Sale Transaction.
Certain fees are due to the Company's financial advisors upon successful completion of a sale, which are calculated as a percentage (0.11% to 0.20%) of the sale value. Additional fees may be payable
depending on the outcome of the sales process. Such fees cannot be determined until the closing of the Sale Transaction.

Confirmation of Plan of Reorganization

For the Plan to be confirmed and become effective, the Debtors must, among other things:



To
complete these steps, the Bankruptcy Court must first hold a hearing to determine if the Disclosure Statement contains adequate information; the hearing to approve the Disclosure
Statement has been scheduled for October 20, 2005. Second, the Bankruptcy Court must find that the Disclosure Statement contains adequate information and the Debtors must solicit the acceptance
of the Plan. Third, before it can issue a confirmation order, the Bankruptcy Court must find that either each class of impaired claims or equity interests has accepted the Plan or the Plan meets the
requirements of the Bankruptcy Code to confirm the Plan over the objections of dissenting classes. In addition, the Bankruptcy Court must find that the Plan meets certain other requirements specified
in the Bankruptcy Code.

Pre-petition Obligations

Pre-petition and post-petition obligations of the Debtors are treated differently under the Bankruptcy Code. Due to the commencement of
the Chapter 11 Cases and the Debtors' failure to comply with certain financial and other covenants, the Debtors are in default on substantially all of their pre-petition debt obligations.
As a result of the Chapter 11 filing, all actions to collect the payment of pre-petition indebtedness are subject to compromise or other treatment under a plan of reorganization.
Generally, actions to enforce or otherwise effect payment of pre-petition liabilities are stayed against the Debtors. The Bankruptcy Court has approved the Debtors' motions to pay certain
pre-petition obligations including, but not limited to, employee wages, salaries, commissions, incentive compensation and other related benefits. The Debtors have been paying and intend to
continue to pay undisputed post-petition claims in the ordinary course of business. In addition, the Debtors may assume or reject pre-petition executory contracts and unexpired
leases with the approval of the Bankruptcy Court. Any damages resulting from the rejection of executory contracts and unexpired leases are treated as general unsecured claims and will be classified as
liabilities subject to compromise. For additional information concerning liabilities subject to compromise, see below.

13

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ADELPHIA COMMUNICATIONS CORPORATION AND SUBSIDIARIES  (Debtors-In-Possession)  NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTSContinued  (unaudited)

The
ultimate amount of the Debtors' liabilities will be determined during the Debtors' claims resolution process. The Bankruptcy Court established a bar date of January 9, 2004
for filing proofs of claim against the Debtors' estates. A bar date is the date by which proofs of claim must be filed if a claimant disagrees with how its claim appears on the Debtors' Schedules of
Liabilities. However, under certain limited circumstances, claimants may file proofs of claims after the bar date. As of the bar date, approximately 17,000 proofs of claim asserting in excess of $3.2
trillion in claims were filed and, as of August 31, 2005, approximately 18,000 proofs of claim asserting approximately $3.8 trillion in claims were filed, in each case including duplicative
claims, but excluding any estimated amounts for unliquidated claims. The aggregate amount of claims filed with the Bankruptcy Court far exceeds the Debtors' estimate of ultimate liability. The Debtors
currently are in the process of reviewing, analyzing and reconciling the scheduled and filed claims. At present, the allowed amounts of such claims are not determinable, and the Debtors expect that
the claims resolution process will take significant time to complete. As the amounts of the allowed claims are determined, adjustments will be recorded in liabilities subject to compromise and
reorganization expenses due to bankruptcy.

The
Debtors have filed several omnibus objections to certain of the claims, seeking to eliminate in excess of $2.7 trillion in claims, consisting primarily of duplicative claims. Certain
claims addressed in such objections were either: (i) reduced and allowed; (ii) disallowed and expunged; or (iii) subordinated by orders of the Bankruptcy Court. Hearings on
certain claims objections are also scheduled for October 25, 2005 and November 15, 2005. Certain other objections have been adjourned to allow the parties to continue to reconcile such
claims. The Debtors have filed an additional omnibus objection which seeks to eliminate, reduce and/or subordinate in excess of $900 billion of claims asserted against the Debtors by Leonard
Tow and Claire Tow (together, the "Tows") and the various trusts that are controlled by the Tows. Simultaneously with the filing of such omnibus objection, the Company and certain other Debtors
commenced an adversary proceeding in the Bankruptcy Court by filing a complaint against Leonard Tow seeking to: (i) avoid and recover certain unauthorized post-petition transfers
and/or fraudulent transfers totaling approximately $14,000,000 (the "Avoidable Transfers"); (ii) disallow Leonard Tow's claims pending the return of Avoidable Transfers; and
(iii) subordinate Leonard Tow's claims. Additional omnibus objections may be filed as the claims resolution process continues.

Debtor-in-Possession ("DIP") Credit Facility

In order to provide liquidity following the commencement of the Chapter 11 Cases, the Debtors entered into a $1,500,000,000
debtor-in-possession credit facility (as amended, the "DIP Facility"). On May 10, 2004, the Debtors entered into a $1,000,000,000 extended
debtor-in-possession credit facility (the "First Extended DIP Facility"), which amended and restated the DIP Facility in its entirety. On February 25, 2005, the Debtors
entered into a $1,300,000,000 further extended debtor-in-possession credit facility (the "Second Extended DIP Facility"), which amended and restated the First Extended DIP
Facility in its entirety. For additional information, see Note 5.

Exit Financing Commitment

On February 25, 2004, Adelphia executed a commitment letter and certain related documents pursuant to which a syndicate of financial institutions committed
to provide to the Debtors up to $8,800,000,000 in exit financing. Following the Bankruptcy Court's approval on June 30, 2004 of the exit financing commitment, the Company paid the exit lenders
a nonrefundable fee of $10,000,000 and reimbursed the exit lenders for certain expenses they had incurred through the date of such approval,

14

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ADELPHIA COMMUNICATIONS CORPORATION AND SUBSIDIARIES  (Debtors-In-Possession)  NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTSContinued  (unaudited)

including
certain legal expenses. In light of the agreements with TW NY and Comcast, on April 25, 2005, the Company informed the exit lenders of its election to terminate the exit financing
commitment, which termination became effective on May 9, 2005. As a result of the termination, the Company recorded a charge of $58,267,000 during the second quarter of 2005, which represents
previously unpaid commitment fees of $45,428,000, the nonrefundable fee of $10,000,000 and certain other expenses.

Going Concern

As a result of the Company's filing of the bankruptcy petition and the other matters described in the following paragraphs, there is substantial doubt about the
Company's ability to continue as a going concern. The accompanying condensed consolidated financial statements have been prepared on a going concern basis, which assumes continuity of operations and
realization of assets and satisfaction of liabilities in the ordinary course of business, and in accordance with Statement of Position 90-7,Financial Reporting by
Entities in Reorganization Under the Bankruptcy Code("SOP 90-7"). The condensed consolidated financial statements do not include any adjustments that might be
required should the Company be unable to continue to operate as a going concern. In accordance with SOP 90-7, all pre-petition liabilities subject to compromise have been
segregated in the condensed consolidated balance sheets and classified as liabilities subject to compromise, at the estimated amount of allowable claims. Interest expense related to
pre-petition liabilities subject to compromise has been reported only to the extent that it will be paid during the Chapter 11 proceedings. In addition, no preferred stock dividends have
been accrued subsequent to the Petition Date. Liabilities not subject to compromise are separately classified as current or noncurrent. Revenue, expenses, realized gains and losses, and provisions for
losses resulting from reorganization are reported separately as reorganization expenses due to bankruptcy. Cash used for reorganization items is disclosed in the condensed consolidated statements of
cash flows.

The
ability of the Debtors to continue as a going concern is predicated upon numerous matters, including:



15

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ADELPHIA COMMUNICATIONS CORPORATION AND SUBSIDIARIES  (Debtors-In-Possession)  NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTSContinued  (unaudited)



Presentation

For periods subsequent to the Petition Date, the Company has applied the provisions of SOP 90-7. SOP 90-7 requires that
pre-petition liabilities that are subject to compromise be segregated in the condensed consolidated balance sheets as liabilities subject to compromise and that revenue, expenses, realized
gains and losses, and provisions for losses resulting directly from the reorganization due to the bankruptcy be reported separately as reorganization expenses in the condensed consolidated statements
of operations. Liabilities subject to compromise are reported at the amounts expected to be allowed, even if they may be settled for lesser amounts. Liabilities subject to compromise consist of the
following (amounts in thousands):

March 31,
2004

December 31,
2003Parent and subsidiary debt

$
11,560,684

$
11,560,684Parent and subsidiary debt under co-borrowing credit facilities


4,576,375


4,576,375Accounts payable


1,058,261


1,059,231Accrued liabilities


1,259,861


839,142Series B Preferred Stock


148,794


148,794Liabilities subject to compromise

$
18,603,975

$
18,184,226


The
Rigas Co-Borrowing Entities are jointly and severally obligated with certain of the Debtors to the lenders with respect to borrowings under certain
co-borrowing facilities ("Co-Borrowing Facilities"). Borrowings under the Co-Borrowing Facilities have been presented as liabilities subject to compromise in the
accompanying condensed consolidated balance sheets as collection of such borrowings from the Debtors is stayed. Collection of such borrowings from the Rigas Co-Borrowing Entities has not
been stayed and actions may be taken to collect such borrowings from the Rigas Co-Borrowing Entities. However, the Rigas Co-Borrowing Entities would not have sufficient assets
to satisfy claims for all liabilities under the Co-Borrowing Facilities.

16

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ADELPHIA COMMUNICATIONS CORPORATION AND SUBSIDIARIES  (Debtors-In-Possession)  NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTSContinued  (unaudited)

Following
is a reconciliation of the changes in liabilities subject to compromise for the period from December 31, 2003 through March 31, 2004 (amounts in thousands):

Balance at December 31, 2003

$
18,184,226Increase in the government settlement reserve (see Note 9)


425,000Settlements


(5,251
)Balance at March 31, 2004

$
18,603,975


The
amounts presented as liabilities subject to compromise may be subject to future adjustments depending on Bankruptcy Court actions, completion of the reconciliation process with
respect to disputed claims, determinations of the secured status of certain claims, the values of any collateral securing such claims or other events. Such adjustments may be material to the amounts
reported as liabilities subject to compromise.

Amortization
of deferred financing fees related to pre-petition debt obligations was terminated effective on the Petition Date and the unamortized amount at the Petition Date
($134,208,000) has been included as an offset to liabilities subject to compromise as an adjustment of the net carrying value of the related pre-petition debt. Similarly, amortization of
the deferred issuance costs for the Company's redeemable preferred stock was also terminated at the Petition Date. For periods subsequent to the Petition Date, interest expense has been reported only
to the extent that it will be paid during the Chapter 11 proceedings. In addition, no preferred stock dividends have been accrued subsequent to the Petition Date.

Reorganization Expenses Due to Bankruptcy and Investigation and Re-audit Related Fees

Only those fees directly related to the Chapter 11 filings are included in reorganization expenses due to bankruptcy. These expenses are offset by the interest
earned during reorganization. Certain reorganization expenses are contingent upon the approval of a plan of reorganization by the Bankruptcy Court and include cure costs, financing fees and success
fees. The Company is currently aware of certain success fees that potentially could be paid upon the Company's emergence from bankruptcy to third party financial advisors retained by the Company and
the Committees in connection with the Chapter 11 Cases. Currently, these success fees are estimated to be between $6,500,000 and $19,950,000 in the aggregate. In addition, the Chief Executive Officer
("CEO") and the Chief Operating Officer ("COO") of the Company are eligible to receive equity awards of Adelphia stock with a minimum aggregate fair value of $17,000,000 upon the Debtors' emergence
from bankruptcy. The value of such equity awards will be determined based on the average trading price of the post-emergence common stock of Adelphia during the 15 trading days
immediately
preceding the 90th day following the date of emergence. These equity awards, which will be subject to vesting and trading restrictions, may be increased up to a maximum aggregate value
of $25,500,000 at the discretion of the board of directors of Adelphia (the "Board"). As no plan of reorganization has been confirmed by the Bankruptcy Court, no accrual for such contingent payments
or equity awards has been recorded in the accompanying condensed consolidated financial statements. See Note 9 for additional

17

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ADELPHIA COMMUNICATIONS CORPORATION AND SUBSIDIARIES  (Debtors-In-Possession)  NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTSContinued  (unaudited)

information.
The following table sets forth certain components of reorganization expenses for the indicated periods (amounts in thousands):

Three months ended March 31,2004

2003Professional fees

$
20,925

$
20,802Interest earned during reorganization


(725
)

(1,406
)Other


(4,852
)

740Reorganization expenses due to bankruptcy

$
15,348

$
20,136


The
Company has incurred certain professional fees that, although not directly related to the Chapter 11 filing, relate to the investigation of the actions of the Rigas Family management
and related efforts to comply with applicable laws and regulations. These expenses include the additional audit fees incurred for the year ended December 31, 2001 and prior, as well as legal
fees, forensic consultant fees and legal defense costs paid on behalf of the Rigas Family. These expenses have been included in investigation and re-audit related fees in the accompanying
condensed consolidated statements of operations.

18

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ADELPHIA COMMUNICATIONS CORPORATION AND SUBSIDIARIES  (Debtors-In-Possession)  NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTSContinued  (unaudited)

Condensed Financial Statements of Debtors

The Debtors' condensed consolidated balance sheet as of March 31, 2004 is as follows (amounts in thousands):

Assets:Total current assets

$
627,901Property and equipment, net


4,484,246Intangible assets, net


7,356,293Other noncurrent assets


408,598Total assets

$
12,877,038Liabilities and Stockholders' Deficit:Liabilities:Other current liabilities

$
737,558Current portion of parent and subsidiary debt


415,570Total noncurrent liabilities


799,416Liabilities subject to compromise


18,603,975Total liabilities


20,556,519Minority's interest


91,283Stockholders' deficit:Series preferred stock


397Common stock


2,548Additional paid-in capital


9,569,041Accumulated other comprehensive income, net


627Accumulated deficit


(16,511,937
)Treasury stock, at cost


(27,937
)(6,967,261
)Amounts due from the Rigas Family and Rigas Family Entities, net


(803,503
)Total stockholders' deficit


(7,770,764
)Total liabilities and stockholders' deficit

$
12,877,038


19

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ADELPHIA COMMUNICATIONS CORPORATION AND SUBSIDIARIES  (Debtors-In-Possession)  NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTSContinued  (unaudited)

The
Debtors' condensed consolidated statement of operations for the three months ended March 31, 2004 is as follows (amounts in thousands):

Revenue

$
957,057Costs and expenses:Direct operating and programming


622,756Selling, general and administrative


76,584Investigation and re-audit related fees


18,059Depreciation


236,487Amortization


36,698Total costs and expenses


990,584Operating loss


(33,527
)Interest expense, net of amounts capitalized


(94,150
)Other expense, net


(425,647
)Reorganization expenses due to bankruptcy


(15,348
)Income tax benefit


73,878Share of losses of equity affiliates, net


(697
)Minority's interest in loss of subsidiary


4,241Loss from continuing operations before cumulative effect of accounting change


(491,250
)Gain from discontinued operations


499Loss before cumulative effect of accounting change


(490,751
)Cumulative effect of accounting change


(262,847
)Net loss

$
(753,598
)


Following
is the condensed consolidated cash flow data for the Debtors for the three months ended March 31, 2004 (amounts in thousands):

Net cash provided by (used in):Operating activities

$
142,073Investing activities

$
(191,725
)Financing activities

$
68,661


Note 3: Variable Interest Entities

FIN 46-R requires variable interest entities, as defined by FIN 46-R, to be consolidated by the primary beneficiary if certain criteria
are met. The provisions of FIN 46-R must be applied to variable interest entities that are not special purpose entities, as defined in FIN 46-R, no later than the end of the
first interim period or annual reporting date ending after March 15, 2004, and variable interest entities that are special purpose entities no later than the first interim or annual reporting
date ending after December 15, 2003. None of the Company's variable interest entities are special purpose entities.

20

---





ADELPHIA COMMUNICATIONS CORPORATION AND SUBSIDIARIES  (Debtors-In-Possession)  NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTSContinued  (unaudited)

The
Company has concluded that the Rigas Co-Borrowing Entities represent variable interest entities for which the Company is the primary beneficiary, as contemplated by FIN
46-R. The Rigas Co-Borrowing Entities do business under the Adelphia name, are managed by the Company and rely on the Company in order to provide services to their customers.
In addition, the Company will absorb the majority of the expected losses of the Rigas Co-Borrowing Entities. Accordingly, effective January 1, 2004, the Company began consolidating
the Rigas Co-Borrowing Entities on a prospective basis and, as such, has not restated previously issued financial statements. The assets and liabilities of the Rigas
Co-Borrowing Entities are included in the Company's condensed consolidated financial statements at the Rigas Co-Borrowing Entities' historical cost because these entities first
became variable interest entities and Adelphia became the primary beneficiary when Adelphia and these entities were under the common control of the Rigas Family. As a result of the adoption of FIN
46-R, the Company recorded a $588,782,000 charge as a cumulative effect of a change in accounting principle as of January 1, 2004. The Company is reporting the operating results of
the Rigas Co-Borrowing Entities in the "cable" segment. See Note 6 for further discussion of the Company's business segments.

As
discussed in Note 9, on April 25, 2005, the Company entered into an agreement with the U.S. Attorney. Adelphia also consented to the entry of a final judgment in the
July 24, 2002 SEC civil enforcement action (the "SEC Civil Action"), thereby resolving the SEC's claims against Adelphia. Concurrently, Adelphia and the Rigas Family entered into an agreement
to settle Adelphia's lawsuit against the Rigas Family, and the Rigas Family entered into an agreement with the U.S. Attorney. These agreements are collectively referred to as the "Government
Settlement Agreements."

Certain
subsidiaries of Adelphia and the Rigas Co-Borrowing Entities are jointly and severally liable for all amounts borrowed pursuant to certain Co-Borrowing
Facilities (see Notes 4 and 5 for additional information). Prior to the consolidation of the Rigas Co-Borrowing Entities, the Company reflected the full amounts outstanding under such
Co-Borrowing Facilities as debt in the balance sheet of the Company, without regard to the attribution of such co-borrowings between the Company and the Rigas
Co-Borrowing Entities, because of the joint and several liability under these Co-Borrowing Facilities.

In
addition to the Rigas Co-Borrowing Entities, the Rigas Family owned, prior to forfeiture to the United States on June 8, 2005, at least 16 additional entities that
could be considered variable interest entities under FIN 46-R. None of these Other Rigas Entities is engaged in the cable business or is a co-borrower under the Company's
credit agreements. Certain of these Other Rigas Entities are holding companies that acquired debt and equity securities of the Company and one of the Company's subsidiaries. The business activities of
certain other of the Other Rigas Entities are not known. The Company has made an exhaustive effort to obtain the information necessary to determine whether these Other Rigas Entities are variable
interest entities and, if so, whether the Company is the primary beneficiary. The Company has requested, but has not been provided, financial statements of the Other Rigas Entities. Responses to the
Company's request indicate that the Other Rigas Entities are unable to provide the necessary financial information to the Company. Accordingly, the Company has not applied the provisions of FIN
46-R to the Other Rigas Entities because the Company does not have sufficient financial information to perform the required evaluations. The most significant assets believed to be owned by
the Other Rigas Entities consist of Adelphia securities that were purchased from the Company. The most significant liabilities of the Other Rigas Entities of which the Company is aware are the amounts
owed to the Company with respect to the purchase of such Adelphia securities and other transactions, as described in greater detail in Note 4. The Company believes that its maximum

21

---



ADELPHIA COMMUNICATIONS CORPORATION AND SUBSIDIARIES  (Debtors-In-Possession)  NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTSContinued  (unaudited)

exposure
to future loss in its statement of operations as a result of its involvement with the Other Rigas Entities is equal to the net carrying value of its advances to the Other Rigas Entities, or
approximately $28,743,000 at March 31, 2004. The net carrying value represents the application of the market price to the Adelphia securities held by such entities and does not give effect to
the terms of the Plan.

Pursuant
to the Forfeiture Order, all right, title and interest of the Rigas Family and Rigas Family Entities in the Rigas Co-Borrowing Entities (other than Coudersport and
Bucktail), certain specified real estate and any securities of the Company were forfeited to the United States on
June 8, 2005 and such assets and securities are expected to be conveyed (subject to completion of forfeiture proceedings before a federal judge to determine if there are any superior claims) to
the Company pursuant to the Non-Prosecution Agreement. See Note 9 for additional information.

The
consolidation of the Rigas Co-Borrowing Entities resulted in the following impact to the Company's condensed consolidated balance sheet as of January 1, 2004
(amounts in thousands):

Assets:Other current assets

$
10,157Property and equipment, net


144,951Intangible assets, net


509,761Other noncurrent assets


7,140Total assets

$
672,009Liabilities(d):Amounts due to the Rigas Family and Other Rigas Entities from Rigas Co-Borrowing Entities(a)

$
460,256Other current liabilities


21,158Other noncurrent liabilities


7,771Stockholders' Deficit(d):Accumulated deficit


(588,782
)Amounts due to the Rigas Co-Borrowing Entities from the Rigas Family and Other Rigas Entities(b)


Amounts due to Adelphia from the Rigas Co-Borrowing Entities(c)


771,606Total liabilities and stockholders' deficit

$
672,009


---

22

---



ADELPHIA COMMUNICATIONS CORPORATION AND SUBSIDIARIES  (Debtors-In-Possession)  NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTSContinued  (unaudited)

The
consolidation of the Rigas Co-Borrowing Entities resulted in the following impact to the Company's condensed consolidated statements of operations for the
three months ended March 31, 2004 (amounts in thousands):

Revenue

$
46,981Costs and expenses:Direct operating and programming


27,786Selling, general and administrative:Third party


3,159Investigation and re-audit related fees


12,464Depreciation


9,720Amortization


1,927Total costs and expenses


55,056Operating loss


(8,075
)Other income


419Loss before cumulative effect of accounting change


(7,656
)Cumulative effect of accounting change


(588,782
)Net loss(a)

$
(596,438
)


---

In
addition to the Rigas Family Entities, the Company performed an evaluation under FIN 46-R of other entities in which the Company has a financial interest. The Company
concluded that no further adjustments to its condensed consolidated financial statements were required as a result of these evaluations and the adoption of FIN 46-R.

23

---



ADELPHIA COMMUNICATIONS CORPORATION AND SUBSIDIARIES  (Debtors-In-Possession)  NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTSContinued  (unaudited)

Note 4: Transactions with the Rigas Family and Rigas Family Entities

The Company has had significant involvement, directly or indirectly, with the Rigas Family and numerous legal entities owned by the Rigas Family. The involvement
ranges from engaging in joint business transactions, such as co-borrowing arrangements, to managing cable system operations, participating in centralized cash management ("CMS") and
accounting functions, advancing funds, purchasing goods or services and engaging in numerous other formal and informal transactions or arrangements. At March 31, 2004, the Company did not hold
equity interests in any of the Rigas Family Entities. Pursuant to the Forfeiture Order, all right, title and interest of the Rigas Family and Rigas Family Entities in the Rigas
Co-Borrowing Entities (other than Coudersport and Bucktail), certain specified real estate and any securities of the Company were forfeited to the United States on June 8, 2005 and
such assets and securities are expected to be conveyed (subject to completion of forfeiture proceedings before a federal judge to determine if there are any superior claims) to the Company pursuant to
the Non-Prosecution Agreement.

The
following table shows the amounts due from the Rigas Family and Rigas Family Entities net of the allowance for uncollectible amounts and the amounts due from the Rigas
Co-Borrowing Entities prior to the 2004 consolidation of the Rigas Co-Borrowing Entities under FIN 46-R, as described in Note 3 (amounts in thousands):

March 31,
2004

December 31,
2003Amounts due from the Rigas Family and Other Rigas Entities

$
2,630,770

$
2,214,270Amounts due from Rigas Co-Borrowing Entities*





929,431Amounts due before allowance for uncollectible amounts


2,630,770


3,143,701Allowance for uncollectible amounts


(2,602,027
)

(2,343,352
)Amounts due from the Rigas Family and Rigas Family Entities, net

$
28,743

$
800,349


---

In
connection with the Government Settlement Agreements, amounts owed between Adelphia (including the forfeited Rigas Co-Borrowing Entities which are expected to be conveyed
to Adelphia) and the Rigas Family and Other Rigas Entities will not be collected or paid. Settlement of the $28,743,000 included in the table above, as well as the $460,256,000 due from the Rigas
Co-Borrowing Entities to the Rigas Family and Other Rigas Entities as discussed in Note 3, will be recognized by the Company when these amounts are settled or the underlying
securities are transferred to the Company.

24

---



ADELPHIA COMMUNICATIONS CORPORATION AND SUBSIDIARIES  (Debtors-In-Possession)  NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTSContinued  (unaudited)

Changes
in the amounts due from the Rigas Family and Rigas Family Entities are presented below in total and separately for amounts due from the Rigas Co-Borrowing Entities
and the Rigas Family and Other Rigas Entities for the indicated periods (amounts in thousands):

Amounts due from:Rigas
Co-Borrowing
Entities

The Rigas
Family and
Other Rigas
Entities

Total amounts
due before
deducting
allowanceBalance at January 1, 2004

$
929,431

$
2,214,270

$
3,143,701Consolidation of amounts due to the Rigas Co-Borrowing Entities from the Rigas Family and Other Rigas Entities





416,500


416,500Amounts due from Rigas Co-Borrowing Entities eliminated due to consolidation


(929,431
)




(929,431
)Balance at March 31, 2004

$


$
2,630,770

$
2,630,770


The
Company has separately assessed the collectibility of the amounts due from the Rigas Family and each of the Other Rigas Entities at the end of each reporting period. Prior to the
Petition Date, the Company considered these amounts to be collateral-backed loans under Statement of Financial Accounting Standards ("SFAS") No. 114,Accounting by
Creditors for Impairment of a Loan, and SFAS No. 118,Accounting by Creditors for Impairment of a LoanIncome Recognition and
Disclosures. The Company adjusted the allowance for uncollectible amounts based on increases or decreases in the estimated values of the underlying net assets of the Rigas
Family and each of the Other Rigas Entities available for repayment of amounts advanced. The Company's assessment of collectibility was based on an orderly sale of the Rigas Family's and Other Rigas
Entities' underlying assets and did not apply current changes in circumstances to prior periods. The most significant impairment recognition occurred in June 2002 when the Debtors filed for
bankruptcy protection due to the dramatic effect that the filing had on the value of the underlying assets available for repayment of the advances. Subsequent to the Petition Date, the Company ceased
the recognition of increases in the values of the underlying assets of the Rigas Family and Other Rigas Entities. Once an allowance had been established against all or part of the amount owed to the
Company by a Rigas Family Entity, the Company adopted the cost recovery method for purposes of recognizing co-borrowing interest. Under this method, the full amount of interest is deferred
until such time as the underlying principal is fully recovered. No accounting recognition is given in the Company's financial statements for the amounts deferred.

25

---



ADELPHIA COMMUNICATIONS CORPORATION AND SUBSIDIARIES  (Debtors-In-Possession)  NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTSContinued  (unaudited)

Changes
in the allowance for uncollectible amounts due from the Rigas Co-Borrowing Entities and the Rigas Family and Other Rigas Entities are presented below (amounts in
thousands):

Allowance for uncollectible amounts due from:Rigas Co-
Borrowing
Entities

The Rigas
Family and
Other Rigas
Entities

Total
allowance for
uncollectible
amountsBalance at December 31, 2003

$
(157,825
)
$
(2,185,527
)
$
(2,343,352
)Elimination of the allowance for amounts due from Rigas Co-Borrowing Entities due to consolidation


157,825





157,825Consolidation of the allowance for amounts due to the Rigas Co-Borrowing Entities from the Rigas Family and Other Rigas Entities





(416,500
)

(416,500
)Balance at March 31, 2004

$


$
(2,602,027
)
$
(2,602,027
)


Amounts due from the Rigas Co-Borrowing Entities

As a result of the consolidation of the Rigas Co-Borrowing Entities, the $929,431,000 receivable from the Rigas Co-Borrowing Entities and
the related $157,825,000 allowance for uncollectible amounts were eliminated from the Company's condensed consolidated balance sheet as of January 1, 2004.

Amounts due from the Rigas Family and Other Rigas Entities

Because the Company and the Rigas Family and Other Rigas Entities were under common control during the periods in which the amounts due from the Rigas Family and
Other Rigas Entities were accumulated, the receivable balance, net of the allowance for uncollectible amounts, has been reported as an addition to stockholders' deficit in the accompanying condensed
consolidated financial statements. In general, amounts due from the Rigas Family and Other Rigas Entities are unsecured and have no maturity date and no specified terms for the accrual of interest.

As
a result of the January 1, 2004 consolidation of the Rigas Co-Borrowing Entities, the amounts due from the Rigas Family and Other Rigas Entities include
$416,500,000 due to the Rigas Co-Borrowing Entities from the Rigas Family and Other Rigas Entities, offset by an allowance for uncollectible amounts of $416,500,000, which was established
prior to January 1, 2004. These amounts do not include $460,256,000 that the Rigas Co-Borrowing Entities owe to the Rigas Family and Other Rigas Entities for which the Company has
determined that there is no legal right of set-off against amounts due to certain other Rigas Co-Borrowing Entities from the Rigas Family and Other Rigas Entities. As a result
of the Government Settlement Agreements, neither the amounts receivable nor the amounts payable will be collected or paid.

26

---



ADELPHIA COMMUNICATIONS CORPORATION AND SUBSIDIARIES  (Debtors-In-Possession)  NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTSContinued  (unaudited)

Impact of Transactions with the Rigas Family and Rigas Family Entities on Condensed Consolidated Statements of Operations

Transactions occurring on or after January 1, 2004 between the Company and the Rigas Co-Borrowing Entities are eliminated in consolidation. The
effects of various transactions between the Company and the Rigas Family and Rigas Family Entities on selling, general
and administrative expenses included in the accompanying condensed consolidated statements of operations are summarized below for the three months ended March 31, 2003 (amounts in
thousands):

Management fees and other costs charged by the Company to the Managed Cable Entities

$
(4,562
)Management fees charged by the Rigas Family to the Company


325Total included in selling, general and administrative

$
(4,237
)


Management Fees and Other Costs Charged by the Company to the Managed Cable Entities.The Company provides management and
administrative services, under written and unwritten enforceable agreements, to the Managed Cable Entities.

In
circumstances where a written management agreement exists, a management fee is charged to the Managed Cable Entity in accordance with the written agreement. Such management agreements
generally provide for a management fee based on a percentage of revenue plus reimbursements for expenses incurred by the Company on behalf of the Managed Cable Entities. Under unwritten agreements,
the Company charges the Managed Cable Entities their share of costs incurred by the Company, as well as reimbursable expenses. Such charges are generally based upon the Managed Cable Entities' share
of revenue or subscribers, as appropriate.The management fees actually paid by the Managed Cable Entities are generally limited by the terms of the
applicable Co-Borrowing Facility. The amounts charged to the Managed Cable Entities pursuant to these arrangements are included in management fees and other charges to the Managed Cable
Entities in the foregoing table and have been reflected as a reduction of selling, general and administrative expenses in the accompanying condensed consolidated statements of operations for the
three months ended March 31, 2003. Effective January 1, 2004, these fees and cost allocations have been eliminated upon consolidation of the Rigas Co-Borrowing
Entities.

Management Fees Charged by the Rigas Family to the Company.In one instance, the Rigas Family provided services to the
Company in exchange for consideration that may or may not have been equal to the fair value of such services. Charges for services arose from Adelphia's 99.5% limited partnership interest in Praxis
Capital Ventures, L.P. ("Praxis"), a consolidated subsidiary of Adelphia. Praxis was primarily engaged in making private equity investments in the telecommunications market. Adelphia committed to
provide $65,000,000 of capital to Praxis, of which $8,500,000 was invested by Praxis during 2002 and 2001. The Rigas Family owns membership interests in both the Praxis general partner and the company
that manages Praxis. The Praxis management company charged a management fee to
Adelphia at an annual rate equal to 2% of the capital committed by Adelphia. Adelphia recorded an expense for management fees of $325,000 for the three months ended March 31, 2003.

27

---



ADELPHIA COMMUNICATIONS CORPORATION AND SUBSIDIARIES  (Debtors-In-Possession)  NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTSContinued  (unaudited)

By
order dated October 20, 2003, the Debtors rejected the Praxis partnership agreement under applicable bankruptcy law. Rejection may give rise to pre-bankruptcy
unsecured damage claims that are included in liabilities subject to compromise at the amounts expected to be allowed. As of March 31, 2004 the Company had accrued $1,300,000 in management fees
due under the Praxis partnership agreement for the periods prior to rejection of the partnership agreement.

Other Transactions with the Rigas Family and Rigas Family Entities

The Company performs all of the cash management functions for the Rigas Co-Borrowing Entities using the CMS. As such, positive cash flows of the Rigas
Co-Borrowing Entities are generally deposited into the Company's cash accounts. Negative cash flows, which represent the payment of interest on co-borrowing debt for the Rigas
Co-Borrowing Entities, are generally deducted from the Company's cash accounts. In addition, the personnel of the Rigas Co-Borrowing Entities are employees of the Company, and
substantially all of the cash operating expenses and capital expenditures of the Rigas Co-Borrowing Entities are paid by the Company on behalf of the Rigas Co-Borrowing
Entities. Charges to the Rigas Co-Borrowing Entities for such expenditures are determined by reference to the terms of the applicable third party invoices or vendor agreements. Although
this activity affects the amounts due from the Rigas Co-Borrowing Entities, prior to the consolidation of the Rigas Co-Borrowing Entities, the Company did not include any of
these charges as related party transactions to be separately reported in its condensed consolidated statements of operations. Effective January 1, 2004, such amounts are included in the
Company's condensed consolidated statements of operations. The most significant of these expenditures incurred by the Company on behalf of the Rigas Co-Borrowing Entities during the
three months ended March 31, 2003
include third party programming charges, employee related charges and third party billing service charges which are shown in the following table (amounts in thousands):

Programming charges from third party vendors

$
11,789Employee related charges


5,107Billing charges from third party vendors


686$
17,582


Prior
to January 1, 2004, the Company recognized all of the liabilities incurred under these arrangements on behalf of the Rigas Co-Borrowing Entities. At
December 31, 2003, $51,644,000 was included in accrued liabilities in the accompanying condensed consolidated balance sheet.

During
2004 and 2003, various stipulations and orders were approved by the Bankruptcy Court that caused the Managed Cable Entities to pay approximately $28,000,000 of legal defense costs
on behalf of certain members of the Rigas Family. As a result of the consolidation of the Rigas Co-Borrowing Entities, $12,500,000 of such defense costs have been included in investigation
and re-audit related fees in the accompanying condensed consolidated statement of operations for the three months ended March 31, 2004.

In
connection with the Government Settlement Agreements, the Company agreed to pay the Rigas Family an additional $11,500,000 for legal defense costs, which was paid and expensed by the
Company in June 2005. The Government Settlement Agreements release the Company from further obligation to provide funding for legal defense costs for the Rigas Family.

28

---



ADELPHIA COMMUNICATIONS CORPORATION AND SUBSIDIARIES  (Debtors-In-Possession)  NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTSContinued  (unaudited)

Note 5: Debt

The carrying value of the Company's debt is summarized below for the indicated periods (amounts in thousands). Although the Company has timely paid all interest
due under the DIP facilities, they are classified as a current liability as the Company has received and may require future waivers to prevent or cure certain defaults under the DIP facilities. See
Note 2 for additional information.

March 31,
2004

December 31,
2003Current portion of parent and subsidiary debt:Secured:DIP Facility(a)

$
354,750

$
276,032Capital lease obligations


59,946


70,159Unsecured other subsidiary debt


913


928Current portion of parent and subsidiary debt

$
415,609

$
347,119Liabilities subject to compromise:Parent debtunsecured:(b)Senior notes

$
4,767,565

$
4,767,565Convertible subordinated notes(c)


1,992,022


1,992,022Senior debentures


129,247


129,247Pay-in-kind notes


31,847


31,847Total parent debt


6,920,681


6,920,681Subsidiary debt:Secured:Notes payable to banks


2,240,313


2,240,313Unsecured:Senior notes


1,105,538


1,105,538Senior discount notes


342,830


342,830Zero coupon senior discount notes


755,031


755,031Senior subordinated notes


208,976


208,976Other subsidiary debt


121,523


121,523Total subsidiary debt


4,774,211


4,774,211Deferred financing fees


(134,208
)

(134,208
)Parent and subsidiary debt before Co-Borrowing Facilities (Note 2)

$
11,560,684

$
11,560,684Co-Borrowing Facilities(d) (Note 2)

$
4,576,375

$
4,576,375


In connection with the Chapter 11 filings, Adelphia and certain of its subsidiaries (collectively, the "Loan Parties") entered into the $1,500,000,000 DIP
Facility which was subsequently superseded and replaced by the First Extended DIP Facility, which is described below. On August 23, 2002, the Bankruptcy Court approved the DIP Facility, and on
September 3, 2002, the Loan Parties closed on the DIP Facility. As part of the closing, the proceeds from the Tranche B Loan in the amount of

29

---



ADELPHIA COMMUNICATIONS CORPORATION AND SUBSIDIARIES  (Debtors-In-Possession)  NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTSContinued  (unaudited)

$200,000,000
were funded and transferred into certain investment accounts maintained with the administrative agents. Prior to the extension of the DIP Facility, which is described below, the DIP
Facility was scheduled to expire on the earlier of June 25, 2004 or upon the occurrence of certain other events as described in the DIP Facility. Subject to certain cash management
restrictions, borrowings under the DIP Facility could be used for general corporate purposes and investments, as defined in the agreement. The DIP Facility was secured by a first priority lien on all
of the Company's unencumbered assets, a super priority lien on all of its assets securing its pre-petition bank debt, and a junior lien on all other assets subject to valid
pre-existing liens. The DIP Facility consisted of a $1,300,000,000 Tranche A Loan revolving credit facility and a $200,000,000 Tranche B Loan. Loans under the DIP Facility accrue interest
either at the Alternate Base Rate (which was the greatest of the Prime Rate, the Base CD Rate plus 1% per annum or the Federal Funds Effective Rate plus 0.5% per annum) plus 2.5% per annum or, in the
case of Eurodollar loans, the Adjusted London interbank offered rates ("LIBOR"), as defined in the DIP Facility, plus 3.5% per annum. In addition to the borrowing rate, a commitment fee ranging from
0.5% to 1.0% per annum was charged on the unused portion of the Tranche A Loan.

The
terms of the DIP Facility contained certain restrictive covenants, which included limitations on the ability of the Loan Parties to: (i) incur additional guarantees, liens and
indebtedness; (ii) sell or otherwise dispose of certain assets; and (iii) pay dividends or make other distributions, loans or payments with respect to any shares of capital stock,
subject to certain exceptions set forth in the DIP Facility. The DIP Facility also required compliance with certain financial covenants with respect to operating results and capital expenditures.
These financial covenants became effective for periods beginning May 1, 2003. From time to time, the Loan Parties and the DIP lenders entered into certain amendments to the terms of the DIP
Facility. In addition, from time to time, the Company received
waivers to prevent or cure certain defaults under the DIP Facility. These waivers and amendments are effective through the maturity date of the Second Extended DIP Facility.

The
Loan Parties made mandatory prepayments of principal on the DIP Facility in connection with the consummation of certain asset sales. As a result, the total commitment for the entire
DIP Facility was reduced to $1,497,750,000 with the total commitment of the Tranche A Loan being reduced to $1,298,865,000 and the total commitment of the Tranche B Loan being reduced to $198,885,000.
As of March 31, 2004, $155,865,000 under the Tranche A Loan has been drawn and letters of credit totaling $18,293,000 have been issued under the Tranche A Loan, leaving availability of
$1,124,707,000 under the Tranche A Loan. There was no availability under the Tranche B Loan at March 31, 2004.



On May 10, 2004, the Loan Parties entered into the $1,000,000,000 First Extended DIP Facility, which superseded and replaced, in its entirety, the DIP
Facility. The First Extended DIP Facility was superseded and replaced in its entirety by the Second Extended DIP Facility, which is described below.

30

---



ADELPHIA COMMUNICATIONS CORPORATION AND SUBSIDIARIES  (Debtors-In-Possession)  NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTSContinued  (unaudited)

The
First Extended DIP Facility was scheduled to mature upon the earlier of March 31, 2005, or upon the occurrence of certain other events, as described in the First Extended DIP
Facility. Upon the closing of the First Extended DIP Facility, the Company borrowed an aggregate of $390,750,000 under the First Extended DIP Facility, and used all such proceeds to repay all of the
then outstanding principal, accrued interest and certain related fees and expenses under the DIP Facility. The proceeds from the borrowings under the First Extended DIP Facility were permitted to be
used for general corporate purposes and investments, as defined in the First Extended DIP Facility. The First Extended DIP Facility was secured with a first priority lien on all of the Loan Parties'
unencumbered assets, a priming first priority lien on all assets of the Loan Parties securing their pre-petition
bank debt and a junior lien on all other assets of the Loan Parties. The First Extended DIP Facility was comprised of an $800,000,000 Tranche A Loan and a $200,000,000 Tranche B Loan. The applicable
margin on loans extended under the First Extended DIP Facility was reduced (when compared to the DIP Facility). Loans under the First Extended DIP Facility accrued interest at the Alternative Base
Rate as defined in the First Extended DIP Facility plus 1.50%, or the Adjusted LIBOR rate, as defined in the First Extended DIP Facility plus 2.50%. In addition, under the First Extended DIP Facility,
the commitment fee with respect to the unused portion of the Tranche A Loan was reduced (when compared to the DIP Facility) to a range of 0.50% to 0.75% depending upon the amount of the unused portion
of the Tranche A Loan.

The
terms of the First Extended DIP Facility contained certain restrictive covenants, which included limitations on the ability of the Loan Parties to: (i) incur additional
guarantees, liens and indebtedness; (ii) sell or otherwise dispose of certain assets; and (iii) pay dividends or make other distributions or payments with respect to any shares of
capital stock, subject to certain exceptions set forth in the First Extended DIP Facility. The First Extended DIP Facility also required compliance with certain financial covenants with respect to
operating results and capital expenditures. These financial covenants became effective for periods beginning May 1, 2003. From time to time, the Loan Parties and the DIP lenders entered into
certain amendments to the terms of the First Extended DIP Facility. In addition, from time to time, the Company received waivers to prevent or cure certain defaults under the First Extended DIP
Facility.



On February 25, 2005, the Loan Parties entered into the $1,300,000,000 Second Extended DIP Facility, which supersedes and replaces in its entirety the
First Extended DIP Facility. The Second Extended DIP Facility was approved by the Bankruptcy Court on February 22, 2005 and closed on February 25, 2005. Except as set forth below, the
material terms and conditions of the Second Extended DIP Facility are substantially identical to the material terms and conditions of the First Extended DIP Facility, including the covenants and
collateral securing the Second Extended DIP Facility.

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ADELPHIA COMMUNICATIONS CORPORATION AND SUBSIDIARIES  (Debtors-In-Possession)  NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTSContinued  (unaudited)

The
Second Extended DIP Facility matures upon the earlier of March 31, 2006 or the occurrence of certain other events, as described in the Second Extended DIP Facility. The Second
Extended DIP Facility consists of an $800,000,000 Tranche A Loan (including a $500,000,000 letter of credit subfacility) and a $500,000,000 Tranche B Loan. The proceeds from borrowings under the
Second Extended DIP Facility are permitted to be used for general corporate purposes and investments, as defined in the Second Extended DIP Facility. The Second Extended DIP Facility is secured with a
first priority lien on all of the Loan Parties' unencumbered assets, a priming first priority lien on all assets of the Loan Parties securing their pre-petition bank debt and a junior lien
on all other assets of the Loan Parties. The applicable margin on loans extended under the Second Extended DIP Facility was reduced (when compared to the First Extended DIP Facility) to 1.25% per
annum in the case of Alternate Base Rate loans and 2.25% per annum in the case of Adjusted LIBOR Rate loans. In addition, under the Second Extended DIP Facility, the commitment fee with respect to the
unused portion of the Tranche A Loan was changed from a commitment fee of between 0.50% and 0.75% per annum to 0.50% per annum.

In
connection with the closing of the Second Extended DIP Facility, on February 25, 2005, the Loan Parties borrowed an aggregate of $578,000,000 and used all such proceeds and a
portion of available cash and cash equivalents to repay all of the indebtedness outstanding under the First Extended DIP Facility, including accrued and unpaid interest and certain fees and expenses.
In addition, all of the participations in the letters of credit outstanding under the First Extended DIP Facility were transferred to certain lenders under the Second Extended DIP Facility.

From
time to time, the Loan Parties and the DIP lenders entered into certain amendments to the terms of the Second Extended DIP Facility. In addition, from time to time, the Company
received waivers to prevent or cure certain defaults under the Second Extended DIP Facility. These waivers and amendments are effective through the maturity date of the Second Extended DIP Facility.

All debt of Adelphia is structurally subordinated to the debt of its subsidiaries such that the assets of an indebted subsidiary are used to satisfy the
applicable subsidiary debt before being applied to the payment of parent debt.

At March 31, 2004 and December 31, 2003, the convertible subordinated notes included: (i) $1,029,876,000 aggregate principal amount of 6%
convertible subordinated notes; (ii) $975,000,000 aggregate principal amount of 3.25% convertible subordinated notes; and (iii) unamortized discounts aggregating $12,854,000. Other Rigas
Entities hold $167,376,000 aggregate principal amount of the 6% notes and $400,000,000 aggregate principal amount of the 3.25% notes. The terms of the 6% notes and 3.25% notes provide for the
conversion of such notes into Class A Common Stock (Class B Common Stock in the case of notes held by the Other Rigas Entities) at the option of the holder any time prior to maturity at
an initial conversion price of $55.49 per share and $43.76 per share, respectively.

Pursuant
to the Forfeiture Order, all right, title and interest of the Rigas Family and Rigas Family Entities in any securities of the Company were forfeited to the United States on
June 8, 2005, and such securities are expected to be conveyed (subject to completion of forfeiture proceedings before a federal judge to determine if there are any superior claims) to the
Company pursuant to the Non-Prosecution Agreement. The Company will recognize the benefits of such conveyance when it occurs. For additional information, see Note 9.

32

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ADELPHIA COMMUNICATIONS CORPORATION AND SUBSIDIARIES  (Debtors-In-Possession)  NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTSContinued  (unaudited)

The Co-Borrowing Facilities represent the aggregate amount outstanding pursuant to three separate Co-Borrowing Facilities dated
May 6, 1999, April 14, 2000 and September 28, 2001. Each co-borrower is jointly and severally liable for the entire amount of the indebtedness under the applicable
Co-Borrowing Facility regardless of whether that co-borrower actually borrowed that amount under such Co-Borrowing Facility. All amounts outstanding under
Co-Borrowing Facilities at March 31, 2004 represent pre-petition liabilities of the Debtors and have been classified as liabilities subject to compromise in the
accompanying condensed consolidated balance sheets. Collection of amounts outstanding under the Co-Borrowing Facilities from the Rigas Co-Borrowing Entities has not been stayed
and actions may be taken to collect such borrowings from the Rigas Co-Borrowing Entities.

The
table below sets forth amounts outstanding for the Co-Borrowing Facilities at March 31, 2004 and December 31, 2003 (amounts in thousands):

Co-Borrowing
FacilitiesAttributable to Rigas Co-Borrowing Entities

$
2,846,156Attributable to non-Rigas Co-Borrowing Entities


1,730,219Total included as debt of the Company

$
4,576,375


Other Debt Matters

Due to the commencement of the Chapter 11 proceedings and the Company's failure to comply with certain financial covenants, the Company is in default on
substantially all of its pre-petition debt obligations. Except as otherwise may be determined by the Bankruptcy Court, the automatic stay protection afforded by the Chapter 11
proceedings prevents any action from being taken against any of the Debtors with regard to any of the defaults under the pre-petition debt obligations. With the exception of the Company's
capital lease obligations and a portion of other subsidiary debt, all of the pre-petition obligations are classified as liabilities subject to compromise in the accompanying condensed
consolidated balance sheets. For additional information, see Note 2.



At the Petition Date, all of the Company's derivative financial instruments had been settled or have since been settled except for one fixed rate swap, one
variable rate swap and one interest rate collar, which remain outstanding at March 31, 2004 and December 31, 2003. As the settlement of the remaining derivative financial instruments
will be determined by the Bankruptcy Court, the $3,486,000 fair value of the liability associated with the derivative financial instruments at the Petition Date has been classified as a liability
subject to compromise in the accompanying condensed consolidated balance sheets.

Note 6: Segments

The Company's only reportable operating segment is its "cable" segment. The cable segment includes the Company's cable system operations (including consolidated
subsidiaries, equity method investments and variable interest entities) that provide the distribution of analog and digital video programming and high-speed Internet ("HSI") services to
customers, for a monthly fee, through a

33

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ADELPHIA COMMUNICATIONS CORPORATION AND SUBSIDIARIES  (Debtors-In-Possession)  NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTSContinued  (unaudited)

network
of fiber optic and coaxial cables. This segment also includes the Company's media services (advertising sales) business. Upon the adoption of FIN 46-R on January 1, 2004,
the reportable cable segment also includes the operations of the Rigas Co-Borrowing Entities. See Note 3 for additional information. The reportable cable segment includes five
operating regions that have been combined as one reportable segment because all of such regions have similar economic characteristics. The Company identifies reportable segments as those consolidated
segments that represent 10% or more of the combined revenue, net earnings or loss, or total assets of all of the Company's operating segments as of and for the period ended on the most recent balance
sheet date presented. Operating segments that do not meet this threshold are aggregated for segment reporting purposes within the "corporate and other" column.

Selected
financial information concerning the Company's current operating segments is presented below for the indicated periods (amounts in thousands):

|                                        |                      | Cable                   |   | Corporate
and other |            | Eliminations |         | Total     |  
|--------------------------------------- | -------------------- | ----------------------- | - | ------------------- | ---------- | ------------ | ------- | --------- | -
|Operating and Capital Expenditure Data: |                      |                         |   |                     |            |              |         |           |  
|Three months ended March 31, 2004       |                      |                         |   |                     |            |              |         |           |  
|                                        | Revenue              |                         | $ | 996,338             |            | $            | 10,992  |           | $
|                                        | Operating loss       |                         |   | (18,916             | )          |              | (24,065 | )         |  
|                                        | Capital expenditures |                         |   | (185,230            | )          |              | (10,573 | )         |  
|Three months ended March 31, 2003       |                      |                         |   |                     |            |              |         |           |  
|                                        | Revenue              |                         | $ | 830,300             |            | $            | 11,273  |           | $
|                                        | Operating loss       |                         |   | (23,276             | )          |              | (17,724 | )         |  
|                                        | Capital expenditures |                         |   | (150,156            | )          |              | (367    | )         |  
|Balance Sheet Information:              |                      |                         |   |                     |            |              |         |           |  
|                                        | Total assets         |                         |   |                     |            |              |         |           |  
|                                        |                      | As of March 31, 2004    |   | $                   | 12,946,356 |              | $       | 5,077,952 |  
|                                        |                      | As of December 31, 2003 |   | $                   | 12,672,473 |              | $       | 4,250,691 |  

The
Company did not derive more than 10% of its revenue from any one customer during the three months ended March 31, 2004. The Company's long-lived assets
related to its foreign operations and investments were $8,103,000 and $9,837,000, as of March 31, 2004 and December 31, 2003, respectively. The Company's revenue related to its foreign
operations was $3,000,000 and $2,462,000 during the three months ended March 31, 2004 and 2003, respectively. The Company's assets and revenue related to its foreign operations and
investments were not significant to the Company's financial position or results of operations, respectively, during any of the periods presented.

34

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ADELPHIA COMMUNICATIONS CORPORATION AND SUBSIDIARIES  (Debtors-In-Possession)  NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTSContinued  (unaudited)

Note 7: Comprehensive Loss

The Company's comprehensive loss, net of tax, for the indicated periods was as follows (amounts in thousands):

Three Months Ended
March 312004

2003Net loss

$
(1,354,572
)
$
(179,125
)Other comprehensive income (loss):Foreign currency translation adjustments


320


2,550Unrealized gains (losses) on securities, net of tax


263


(91
)Other comprehensive income, net of tax


583


2,459Comprehensive loss, net

$
(1,353,989
)
$
(176,666
)


Note 8: TelCove Settlement and Discontinued Operations

Global Settlement Agreement

On February 21, 2004, the Debtors and TelCove, Inc. ("TelCove") executed a global settlement agreement (the "Global Settlement") that resolved,
among other things, certain claims put forth by both TelCove and Adelphia. The Global Settlement provided that, on the closing date, the Company would transfer to TelCove certain settlement
consideration, including approximately $60,000,000 in cash plus an additional payment of up to $2,500,000 related to certain outstanding payables, as well as certain vehicles, real property and
intellectual property licenses used in the operation of TelCove's businesses. Additionally, the parties executed various annexes to the Global Settlement (collectively, the "Annex Agreements") that
provided, among other things, for: (i) a five-year business commitment to TelCove for telecommunication services by the Company; (ii) future use by TelCove of certain fiber
capacity in assets owned by the Company; and (iii) the mutual release by the parties from any and all liabilities, claims and causes of action that either party had or may have had against the
other party. Finally, the Global Settlement provided for the transfer by the Company to TelCove of certain competitive local exchange carrier ("CLEC") systems ("CLEC Market Assets") together with the
various licenses, franchises and permits related to the operation and ownership of such assets. On March 23, 2004, the Bankruptcy Court approved the Global Settlement. The Company recorded a
$97,902,000 liability during the fourth quarter of 2003 to provide for the Global Settlement. The Annex Agreements became effective in accordance with their terms on April 7, 2004.

On
April 7, 2004, the Company paid $57,941,000 to TelCove, transferred the economic risks and benefits of the CLEC Market Assets to TelCove pursuant to the terms of the Global
Settlement and entered into a management agreement which provided for the management of the CLEC Market Assets from April 7, 2004 through the date of transfer to TelCove.

On
August 20, 2004, the Company paid TelCove an additional $2,464,000 pursuant to the Global Settlement in connection with the resolution and release of certain claims. On
August 21, 2004, the CLEC Market Assets were transferred to TelCove.

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ADELPHIA COMMUNICATIONS CORPORATION AND SUBSIDIARIES  (Debtors-In-Possession)  NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTSContinued  (unaudited)

Discontinued CLEC Operations

The Company has presented the transferred CLEC Market Assets, including the cost of the Global Settlement, as discontinued operations in the accompanying
condensed consolidated financial statements beginning in the first quarter of 2004. The following table presents the summarized results of operations for the three months ended March 31,
2004 and 2003 related to the Company's discontinued operations (amounts in thousands):

Three months ended March 31,2004

2003Revenue

$
9,216

$
10,202Costs and expenses:Direct operating and programming


6,599


9,680Selling, general and administrative


734


386Depreciation and amortization


1,236


4,226Other


148


155Total costs and expenses


8,717


14,447Gain (loss) from discontinued operations

$
499

$
(4,245
)


Note 9: Contingencies

Reorganization Expenses due to Bankruptcy and Professional Fees

The Company is currently aware of certain success fees that potentially could be paid upon the Company's emergence from bankruptcy to third party financial
advisers retained by the Company and Committees in connection with the Chapter 11 Cases. Currently, these success fees are estimated to be
between $6,500,000 and $19,950,000 in the aggregate. In addition, the CEO and the COO of the Company are eligible to receive equity awards of Adelphia stock with a minimum aggregate fair value of
$17,000,000 upon the Debtors' emergence from bankruptcy. The value of such equity awards will be determined based on the average trading price of the post-emergence common stock of
Adelphia during the 15 trading days immediately preceding the 90th day following the date of emergence. These equity awards, which will be subject to vesting and trading
restrictions, may be increased up to a maximum aggregate value of $25,500,000 at the discretion of the Board. As no plan of reorganization has been confirmed by the Bankruptcy Court, no accrual for
such contingent payments or equity awards has been recorded in the accompanying condensed consolidated financial statements.

Letters of Credit

The Company has issued standby letters of credit for the benefit of franchise authorities and other parties, most of which have been issued to an intermediary
surety bonding company. All such letters of credit will expire when the Second Extended DIP Facility expires, unless adequately collateralized. Unless otherwise amended or extended, the Second
Extended DIP Facility will expire no later than March 31, 2006. At March 31, 2004, the aggregate principal amount of letters of credit issued by the Company was $63,562,000 of which
$62,495,000 was issued under the DIP Facility and $1,067,000 was

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ADELPHIA COMMUNICATIONS CORPORATION AND SUBSIDIARIES  (Debtors-In-Possession)  NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTSContinued  (unaudited)

collateralized
by cash. Letters of credit issued under the DIP facilities reduce the amount that may be borrowed under the DIP facilities.

Litigation Matters

General.The Company follows SFAS No. 5,Accounting for Contingencies,
in determining its accruals and disclosures with respect to loss contingencies. Accordingly, estimated losses from loss contingencies are accrued by a charge to income when information available
indicates that it is probable that an asset had been impaired or a liability had been incurred and the amount of the loss can be reasonably estimated. If a loss contingency is not probable or
reasonably estimable, disclosure of the loss contingency is made in the financial statements when it is reasonably possible that a loss may be incurred.

SEC Civil Action and DoJ Investigation.On July 24, 2002, the SEC Civil Action was filed against Adelphia, certain
members of the Rigas Family and others, alleging various securities fraud and improper books and records claims arising out of actions allegedly taken or directed by certain members of the Rigas
Family who held all of the senior executive positions at Adelphia and constituted five of the nine members of Adelphia's board of directors (none of whom remain with the Company).

On
December 3, 2003, the SEC filed a proof of claim in the Chapter 11 Cases against Adelphia for, among other things, penalties, disgorgement and prejudgment interest in an
unspecified amount. The staff of the SEC told the Company's advisors that its asserted claims for disgorgement and civil penalties under various legal theories could amount to billions of
dollars. On July 14, 2004, the Creditors' Committee initiated an adversary proceeding seeking, in effect, to subordinate the SEC's claims based on the SEC Civil Action.

On
April 25, 2005, after extensive negotiations with the SEC and the U.S. Attorney, the Company entered into the Non-Prosecution Agreement pursuant to which the
Company agreed, among other things: (i) to contribute $715,000,000 in value to a fund to be established and administered by the United States Attorney General and the SEC for the benefit of
investors harmed by the activities of prior management (the "Restitution Fund"); (ii) to continue to cooperate with the U.S. Attorney until the later of April 25, 2007, or the date upon
which all prosecutions arising out of the conduct described in the Rigas Criminal Action (as described below) and SEC Civil Action are final; and (iii) not to assert claims against the Rigas
Family except for John J. Rigas, Timothy J. Rigas and Michael J. Rigas (together, the "Excluded Parties"), provided that Michael J. Rigas will cease to be an Excluded Party if all currently pending
criminal proceedings against him are resolved without a felony conviction on a charge involving fraud or false statements (other than false statements to the U.S. Attorney or the SEC).

The
Company's contribution to the Restitution Fund will consist of stock, future proceeds of litigation and, assuming consummation of the Sale Transaction (or another sale generating
cash of at least $10 billion), cash. In the event of a sale generating both stock and at least $10 billion in cash, as contemplated in the Sale Transaction, the components of the
Company's contribution to the Restitution
Fund will consist of $600,000,000 in cash and stock (with at least $200,000,000 in cash) and 50% of the first $230,000,000 of future proceeds, if any, from certain litigation against third parties who
injured the Company. If, however, the Sale Transaction (or another sale) is not consummated and instead the Company emerges from bankruptcy as an independent entity, the $600,000,000 payment by the
Company will consist entirely of stock in the reorganized Adelphia. Unless extended on consent of the

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ADELPHIA COMMUNICATIONS CORPORATION AND SUBSIDIARIES  (Debtors-In-Possession)  NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTSContinued  (unaudited)

U.S.
Attorney and the SEC, which consent may not be unreasonably withheld, the Company must make these payments on or before the earlier of: (i) October 15, 2006;
(ii) 120 days after confirmation of a stand-alone plan of reorganization; or (iii) seven days after the first distribution of stock or cash to creditors under any plan of
reorganization. The Company recorded charges of $425,000,000 and $175,000,000 during 2004 and 2002, respectively, related to the Non-Prosecution Agreement. The $425,000,000 charge is
reflected in other income (expense), net in the accompanying condensed consolidated statements of operations.

The
U.S. Attorney agreed: (i) not to prosecute Adelphia or specified subsidiaries of Adelphia for any conduct (other than criminal tax violations) related to the Rigas Criminal
Action (defined below) or the allegations contained in the SEC Civil Action; (ii) not to use information obtained through the Company's cooperation with the U.S. Attorney to criminally
prosecute the Company for tax violations; and (iii) to convey to the Company all of the Rigas Co-Borrowing Entities forfeited by the Rigas Family and Rigas Family Entities, certain
specified real estate forfeited by the Rigas Family and any securities of the Company that were directly or indirectly owned by the Rigas Family prior to forfeiture. The U.S. Attorney agreed with the
Rigas Family not to require forfeiture of Coudersport and Bucktail (which together served approximately 5,000 subscribers (unaudited) in July 2005). A condition precedent to the Company's
obligation to make the contribution to the Restitution Fund described in the preceding paragraph is the Company's receipt of title to the Rigas Co-Borrowing Entities, certain specified
real estate and any securities described above, forfeited by the Rigas Family and Rigas Family Entities, free and clear of all liens, claims, encumbrances, or adverse interests. The forfeited Rigas
Co-Borrowing Entities, anticipated to be conveyed to the Company, represent the overwhelming majority of the Rigas Co-Borrowing Entities' subscribers and value.

Also
on April 25, 2005, the Company consented to the entry of a final judgment in the SEC Civil Action resolving the SEC's claims against the Company. Pursuant to this agreement,
the Company will be permanently enjoined from violating various provisions of the federal securities laws, and the SEC has agreed that if the Company makes the $715,000,000 contribution to the
Restitution Fund, then the Company will not be required to pay disgorgement or a civil monetary penalty to satisfy the SEC's claims.

Pursuant
to letter agreements with TW NY and Comcast, the U.S. Attorney has agreed, notwithstanding any failure by the Company to comply with the Non-Prosecution Agreement,
that it will not criminally prosecute any of the entities or their subsidiaries purchased from the Company by TW NY or Comcast (the "Transferred Joint Venture Entities") pursuant to the Sale
Transaction. Under such letter agreements, each of TW NY and Comcast have agreed that following the closing of the Sale Transaction they will cooperate with the relevant governmental authorities'
requests for information about the Company's operations, finances and corporate governance between 1997 and confirmation of the Plan. The sole and exclusive remedy against TW NY or Comcast for breach
of any obligation in the letter agreements is a civil action for breach of contract seeking specific performance of such obligations. In addition, TW NY and Comcast entered into letter agreements with
the SEC agreeing that upon and after the closing of the Sale Transaction, TW NY, Comcast and their respective affiliates (including the Transferred Joint Venture Entities) will not be subject to, or
have any obligation under, the final judgment consented to by the Company in the SEC Civil Action.

The
Non-Prosecution Agreement was subject to the approval of, and has been approved by, the Bankruptcy Court. Adelphia's consent to the final judgment in the SEC Civil Action
was subject to the approval of, and has been approved by, both the Bankruptcy Court and the District Court. Various

38

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ADELPHIA COMMUNICATIONS CORPORATION AND SUBSIDIARIES  (Debtors-In-Possession)  NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTSContinued  (unaudited)

parties
have challenged and sought appellate review or reconsideration of the orders of the Bankruptcy Court and the District Court approving these settlements. The order of the District Court
approving Adelphia's consent to the final judgment in the SEC Civil Action has not been appealed. Although appeals of the Bankruptcy Court's order are still pending, the appeals of the District
Court's approval of the Government-Rigas Settlement Agreement (defined below) and the creation of the Restitution Fund have been denied by the United States Court of Appeals for the Second Circuit
(the "Second Circuit"). That denial is currently the subject of a pending request for full court review by the Second Circuit.

Adelphia's Lawsuit Against the Rigas Family.On July 24, 2002, Adelphia filed a complaint in the Bankruptcy Court
against John J. Rigas, Michael J. Rigas, Timothy J. Rigas, James P. Rigas, James Brown, Michael C. Mulcahey, Peter L. Venetis, Doris Rigas, Ellen Rigas Venetis and the Rigas Family Entities (the
"Rigas Civil Action"). This action generally alleged the defendants misappropriated billions of dollars from the Company in breach of their fiduciary duties to Adelphia. On November 15,
2002, Adelphia filed an amended complaint against the defendants that expanded upon the facts alleged in the original complaint and alleged violations of the Racketeering Influenced and Corrupt
Organizations ("RICO") Act, breach of fiduciary duty, securities fraud, fraudulent concealment, fraudulent misrepresentation, conversion, waste of corporate assets, breach of contract, unjust
enrichment, fraudulent conveyance, constructive trust, inducing breach of fiduciary duty, and a request for an accounting (the "Amended Complaint"). The Amended Complaint sought relief in the form of,
among other things, treble and punitive damages, disgorgement of monies and securities obtained as a consequence of the Rigas Family's improper conduct and attorneys' fees.

On
April 25, 2005, Adelphia and the Rigas Family entered into a settlement agreement with respect to the Rigas Civil Action (the "Adelphia-Rigas Settlement Agreement"), pursuant
to which Adelphia agreed, among other things: (i) to pay $11,500,000 to a legal defense fund for the benefit of the Rigas Family; (ii) to provide management services to Coudersport and
Bucktail for an interim period through and including December 31, 2005 ("Interim Management Services"); (iii) to indemnify Coudersport and Bucktail, and the Rigas Family's (other than
the Excluded Parties') interest therein, against claims asserted by the lenders under the Co-Borrowing Facilities with respect to such indebtedness up to the fair market value of those
entities (without regard to their obligations with respect to such indebtedness); (iv) to provide certain members of the Rigas Family with certain indemnities, reimbursements or other
protections in connection with certain third party claims arising out of Company litigation, and in connection with claims against certain members of the Rigas Family by any of the
Tele-Media Joint Ventures or Century/ML Cable; and (v) within ten business days of the date on which the Forfeiture Order is entered, dismiss the Rigas Civil Action except
for claims against the Excluded Parties. The Rigas Family agreed: (i) to make certain tax elections, under certain circumstances, with respect to the Rigas Co-Borrowing Entities
(other than Coudersport and Bucktail); (ii) to pay Adelphia five percent of the gross operating revenue of Coudersport and Bucktail for the Interim Management Services; and (iii) to
offer employment to certain Coudersport and Bucktail employees on terms and conditions that, in the aggregate, are no less favorable to such employees (other than any employees who were expressly
excluded by written notice to Adelphia received by July 1, 2005) than their terms of employment with the Company.

Pursuant
to the Adelphia-Rigas Settlement Agreement, on June 21, 2005, the Company filed a dismissal with prejudice of all claims in this action except against the Excluded
Parties.

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ADELPHIA COMMUNICATIONS CORPORATION AND SUBSIDIARIES  (Debtors-In-Possession)  NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTSContinued  (unaudited)

This
settlement was subject to the approval of, and has been approved by, the Bankruptcy Court. Various parties have challenged and sought appellate review or reconsideration of the
order of the Bankruptcy Court approving this settlement. The appeals of the Bankruptcy Court's approval remain pending.

Rigas Criminal Action.In connection with an investigation conducted by the DoJ, on July 24, 2002, certain members of
the Rigas Family and certain alleged co-conspirators were arrested, and on September 23, 2002, were indicted by a grand jury on charges including fraud, securities fraud, bank fraud
and conspiracy to commit fraud (the "Rigas Criminal Action"). On November 14, 2002, one of the Rigas Family's alleged co-conspirators, James Brown, pleaded guilty to one count each
of conspiracy, securities fraud and bank fraud. On January 10, 2003, another of the Rigas Family's alleged co-conspirators, Timothy Werth, who had not been arrested with the others
on July 24, 2002, pleaded guilty to one count each of securities fraud, conspiracy to commit securities fraud, wire fraud and bank fraud. The trial in the Rigas Criminal Action began on
February 23, 2004 in the District Court. On July 8, 2004, the jury returned a partial verdict in the Rigas Criminal Action. John J. Rigas and Timothy J. Rigas were each found guilty of
conspiracy (one count), bank fraud (two counts), and securities fraud (15 counts) and not guilty of wire fraud (five counts). Michael J. Mulcahey was acquitted of all 23 counts against him. The jury
found Michael J. Rigas not guilty of conspiracy and wire fraud, but remained undecided on the securities fraud and bank fraud charges against him. On July 9, 2004, the court declared a mistrial
on the remaining charges against Michael J. Rigas after the jurors were unable to reach a verdict as to those charges. The bank fraud charges against Michael J. Rigas have since been dismissed with
prejudice. The District Court has set January 9, 2006 as the date for the retrial of Michael J. Rigas on the securities fraud charges. On March 17, 2005, the District Court denied the
motion of John J. Rigas and Timothy J. Rigas for a new trial. On June 20, 2005, John J. Rigas and Timothy J. Rigas were convicted and sentenced to 15 years and 20 years in prison,
respectively. John J. Rigas and Timothy J. Rigas have appealed their convictions and sentences and remain free on bail pending resolution of their appeals.

The
indictment against the Rigas Family included a request for entry of a money judgment in an amount exceeding $2,500,000,000 and for entry of an order of forfeiture of all interests of
the convicted Rigas defendants in the Rigas Family Entities. On December 10, 2004, the DoJ filed an application for a preliminary order of forfeiture finding John J. Rigas and Timothy J. Rigas
jointly and severally liable for personal money judgments in the amount of $2,533,000,000.

On
April 25, 2005, the Rigas Family and the U.S. Attorney entered into a settlement agreement (the "Government-Rigas Settlement Agreement") pursuant to which the Rigas Family
agreed to forfeit: (i) all of the Rigas Co-Borrowing Entities with the exception of Coudersport and Bucktail; (ii) certain specified real estate; and (iii) all
securities in the Company directly or indirectly owned by the Rigas Family. The U.S. Attorney agreed: (i) not to seek additional monetary penalties from the Rigas Family, including the request
for a money judgment as noted above; (ii) from the proceeds of certain assets forfeited by the Rigas Family, to establish the Restitution Fund for the purpose of providing restitution to
holders of the Company's publicly traded securities; and (iii) to inform the District Court of this agreement at the sentencing of John J. Rigas and Timothy J. Rigas.

Pursuant
to the Forfeiture Order, all right, title and interest of the Rigas Family and Rigas Family Entities in the Rigas Co-Borrowing Entities (other than Coudersport and
Bucktail), certain specified real estate and any securities of the Company were forfeited to the United States on June 8, 2005, and such assets and securities are expected to be conveyed
(subject to completion of forfeiture proceedings

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ADELPHIA COMMUNICATIONS CORPORATION AND SUBSIDIARIES  (Debtors-In-Possession)  NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTSContinued  (unaudited)

before
a federal judge to determine if there are any superior claims) to the Company pursuant to the Non-Prosecution Agreement. On August 19, 2005, the Company filed a petition with
the District Court seeking an order conveying title to these assets and securities to the Company. A status report from the government to the District Court regarding the forfeiture proceedings is due
on November 4, 2005. To date, one other petition has been filed, asserting a claim against certain real property.

The
Company was not a defendant in the Rigas Criminal Action, but was under investigation by the DoJ regarding matters related to alleged wrongdoing by certain members of the Rigas
Family. Upon approval of the Non-Prosecution Agreement, Adelphia and specified subsidiaries are no longer subject to criminal prosecution (other than for criminal tax violations) by the
U.S. Attorney for any conduct related to the Rigas Criminal Action or the allegations contained in the SEC Civil Action, so long as the Company complies with its obligations under the
Non-Prosecution Agreement.

Securities and Derivative Litigation.Certain of the Debtors and certain former officers, directors and advisors have been
named as defendants in a number of lawsuits alleging violations of federal and state securities laws and related claims. These actions generally allege that the defendants made materially misleading
statements understating the Company's liabilities and exaggerating the Company's financial results in violation of securities laws.

In
particular, beginning on April 2, 2002, various groups of plaintiffs filed more than 30 class action complaints, purportedly on behalf of certain of the Company's shareholders
and bondholders or classes thereof in federal court in Pennsylvania. Several non-class action lawsuits were brought on behalf of individuals or small groups of security holders in federal
courts in Pennsylvania, New York, South Carolina and New Jersey, and in state courts in New York, Pennsylvania, California and Texas. Seven derivative suits were also filed in federal and state courts
in Pennsylvania, and four derivative suits were filed in state court in Delaware. On May 6, 2002, a notice and proposed order of dismissal without prejudice was filed by the plaintiff in one of
these four Delaware derivative actions. The remaining three Delaware derivative actions were consolidated on May 22, 2002. On February 10, 2004, the parties stipulated and agreed to the
dismissal of these consolidated actions with prejudice.

The
complaints, which named as defendants the Company, certain former officers and directors of the Company and, in some cases, the Company's former auditors, lawyers, as well as
financial institutions who worked with the Company, generally allege that, among other improper statements and omissions, defendants misled investors regarding the Company's liabilities and earnings
in the Company's public filings. The majority of these actions assert claims under Sections 10(b) and 20(a) of the Exchange Act and SEC Rule 10b-5. Certain bondholder
actions assert claims for violation of Section 11 and/or Section 12(a) (2) of the Securities Act of 1933. Certain of the state court actions allege various state law
claims.

On
July 23, 2003, the Judicial Panel on Multidistrict Litigation issued an order transferring numerous civil actions to the District Court for consolidated or coordinated
pre-trial proceedings (the "MDL Proceedings").

On
September 15, 2003, proposed lead plaintiffs and proposed co-lead counsel in the consolidated class action were appointed in the MDL Proceedings. On
December 22, 2003, lead plaintiffs filed a consolidated class action complaint. Motions to dismiss have been filed by various defendants. On May 27, 2005 and August 16, 2005, the
District Court granted in part and denied in part
some of the pending motions and provided the plaintiffs limited ability to replead the dismissed claims. As a result of the filing of the Chapter 11 Cases and the protections of the automatic
stay, the Company is not

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ADELPHIA COMMUNICATIONS CORPORATION AND SUBSIDIARIES  (Debtors-In-Possession)  NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTSContinued  (unaudited)

named
as a defendant in the amended complaint, but is a non-party. The consolidated class action complaint seeks monetary damages of an unspecified amount, rescission and reasonable costs
and expenses and such other and future relief as the court may deem just and proper. The individual actions against the Company also seek damages of an unspecified amount.

Pursuant
to section 362 of the Bankruptcy Code, all of the securities and derivative claims that were filed against the Company before the bankruptcy filings are automatically
stayed and not proceeding as to the Company.

The
Company cannot predict the outcome of the pending legal proceedings or estimate the possible effects on the financial condition or results of operations of the Company.

Acquisition Actions.After the alleged misconduct of certain members of the Rigas Family was publicly disclosed, three
actions were filed in May and June 2002 against the Company by former shareholders of companies that the Company acquired, in whole or in part, through stock transactions. These actions
allege that the Company improperly induced these former shareholders to enter into these stock transactions through misrepresentations and omissions, and the plaintiffs seek monetary damages and
equitable relief through rescission of the underlying acquisition transactions.

Two
of these proceedings have been filed with the American Arbitration Association alleging violations of federal and state securities laws, breaches of representations and warranties
and fraud in the inducement. One of these proceedings seeks rescission, compensatory damages and pre-judgment relief, and the other seeks specific performance. The third action alleges
fraud and seeks rescission, damages and attorneys' fees. This action was originally filed in a Colorado State Court, and subsequently was removed by the Company to the United States District Court for
the District of Colorado. The Colorado State Court action was closed administratively on July 16, 2004, subject to reopening if and when the automatic bankruptcy stay is lifted or for other
good cause shown. These actions have been stayed pursuant to the automatic stay provisions of section 362 of the Bankruptcy Code.

The
Company cannot predict the outcome of these legal proceedings or estimate the possible effects on the financial condition or results of operations of the Company.

Equity Committee Shareholder Litigation.Adelphia is a defendant in an adversary proceeding in the Bankruptcy Court
consisting of a declaratory judgment action and a motion for a preliminary injunction brought on January 9, 2003 by the Equity Committee, seeking, among other relief, a declaration as to how
the shares owned by the Rigas Family and Rigas Family Entities would be voted should a consent solicitation to elect members of the Board be undertaken. Adelphia has opposed such requests for relief.

The
claims of the Equity Committee are based on shareholder rights that the Equity Committee asserts should be recognized even in bankruptcy, coupled with continuing claims, as of the
filing of the lawsuit, of historical connections between the Board and the Rigas Family. Motions to dismiss filed by Adelphia and others are fully briefed in this action, but no argument date has been
set. If this action survives these motions to dismiss, resolution of disputed fact issues will occur in two phases pursuant to a schedule set by the Bankruptcy Court. Determinations regarding fact
questions relating to the conduct of the Rigas Family will not occur until, at a minimum, after the resolution of the Rigas Criminal Action.

No
pleadings have been filed in the adversary proceeding since September 2003.

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ADELPHIA COMMUNICATIONS CORPORATION AND SUBSIDIARIES  (Debtors-In-Possession)  NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTSContinued  (unaudited)

The
Company cannot predict the outcome of these legal proceedings or estimate the possible effects on the financial condition or results of operations of the Company.

ML Media Litigation.Adelphia and ML Media have been involved in a longstanding dispute concerning Century/ML Cable's
management, the buy/sell rights of ML Media and various other matters.

In
March 2000, ML Media brought suit against Century, Adelphia and Arahova Communications Inc. ("Arahova"), a direct subsidiary of Adelphia and Century's immediate parent,
in the Supreme Court of the State of New York, seeking, among other things: (i) the dissolution of Century/ML Cable and the appointment of a receiver to sell Century/ML Cable's assets;
(ii) if no receiver was appointed, an order authorizing ML Media to conduct an auction for the sale of Century/ML Cable's assets to an unrelated third party and enjoining Adelphia from
interfering with or participating in that process; (iii) an order directing the defendants to comply with the Century/ML Cable joint venture agreement with respect to provisions relating to
governance matters and the budget process; and (iv) compensatory and punitive damages. The parties negotiated a consent order that imposed various consultative and reporting requirements on
Adelphia and Century as well as restrictions on Century's ability to make capital expenditures without ML Media's approval. Adelphia and Century were held in contempt of that order in early 2001.

In
connection with the December 13, 2001 settlement of the above dispute, Adelphia, Century/ML Cable, ML Media and Highland Holdings ("Highland"), a general partnership then owned
and controlled by members of the Rigas Family, entered into a Leveraged Recapitalization Agreement (the "Recap Agreement"), pursuant to which Century/ML Cable agreed to redeem ML Media's 50% interest
in Century/ML Cable (the "Redemption") on or before September 30, 2002 for a purchase price between $275,000,000 and $279,800,000 depending on the timing of the Redemption, plus interest. Among
other things, the Recap Agreement provided that: (i) Highland would arrange debt financing for the Redemption; (ii) Highland, Adelphia and Century would jointly and severally guarantee
debt service on debt financing for the Redemption on and after the closing of the Redemption; and (iii) Highland and Century would own 60% and 40% interests, respectively, in the recapitalized
Century/ML Cable. Under the terms of the Recap Agreement, Century's 50% interest in Century/ML Cable was pledged to ML Media as collateral for the Company's obligations.

On
September 30, 2002, Century/ML Cable filed a voluntary petition to reorganize under Chapter 11 in the Bankruptcy Court. Century/ML Cable is operating its business as a
debtor-in-possession.

By
an order of the Bankruptcy Court dated September 17, 2003, Adelphia and Century rejected the Recap Agreement, effective as of such date. If the Recap Agreement is enforceable,
the effect of the rejection of the Recap Agreement is the same as a pre-petition breach of the Recap Agreement. Therefore, Adelphia and Century are potentially exposed to "rejection
damages," which may include the revival of ML Media's claims under the state court actions described above.

Adelphia,
Century, Highland, Century/ML Cable and ML Media are engaged in litigation regarding the enforceability of the Recap Agreement. On April 15, 2004, the Bankruptcy Court
indicated that it would dismiss all counts of Adelphia's challenge to the enforceability of the Recap Agreement except for its allegation that ML Media aided and abetted a breach of fiduciary duty in
connection with the execution of the Recap Agreement. The Bankruptcy Court also indicated that it

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ADELPHIA COMMUNICATIONS CORPORATION AND SUBSIDIARIES  (Debtors-In-Possession)  NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTSContinued  (unaudited)

would
allow Century/ML Cable's action to avoid the Recap Agreement as a fraudulent conveyance to proceed.

ML
Media has alleged that it is entitled to elect recovery of either $279,800,000 plus costs and interest in exchange for its interest in Century/ML Cable, or up to the difference
between $279,800,000 and the fair market value of its interest in Century/ML Cable, plus costs, interest and revival of the state court claims described above. Adelphia, Century and Century/ML Cable
have disputed ML Media's claims, and the Plan contemplates that ML Media will receive no distribution until such dispute is resolved.

On
June 3, 2005, Century and ML Media entered into an interest acquisition agreement ("IAA") to sell their interests in Century/ML Cable for $520,000,000 (subject to certain
potential purchase price adjustments as defined in the IAA) to San Juan Cable. Consummation of the sale is subject to approval by the Bankruptcy Court in Century/ML Cable's separate Chapter 11
case, confirmation of a plan of reorganization of Century/ML Cable, the receipt of financing by the buyers and other customary conditions, many of which are outside the control of Century/ML Cable,
Century and ML Media. There can be no assurance whether or when such conditions will be satisfied. The sale of Century/ML Cable will not resolve the pending litigation among Adelphia, Century,
Highland, Century/ML Cable and ML Media.

On
August 9, 2005, Century/ML Cable filed its plan of reorganization (the "Century/ML Plan") and its related disclosure statement (the "Century/ML Disclosure Statement") with the
Bankruptcy Court. By order dated August 18, 2005, the Bankruptcy Court approved the Century/ML Disclosure Statement. On September 7, 2005, the Bankruptcy Court confirmed the Century/ML
Plan. The Century/ML Plan is designed to satisfy the conditions of the IAA with San Juan Cable and provides that all third party claims will either be paid in full or assumed by San Juan Cable under
the terms set forth in the IAA. Consummation of the Century/ML Plan is subject to certain conditions, including the concurrent sale of the interests in Century/ML Cable pursuant to the IAA. There can
be no assurance whether or when such conditions will be satisfied. The Century/ML Plan, if consummated, will not resolve the pending litigation among Adelphia, Century, Highland, Century/ML Cable and
ML Media.

The
Company cannot predict the outcome of these legal proceedings or estimate the possible effects on the financial condition or results of operations of the Company.

The X Clause Litigation.On December 29, 2003, the Ad Hoc Committee of holders of Adelphia's 6% and 3.25% subordinated
notes (collectively, the "Subordinated Notes"), together with the Bank of New York, the indenture trustee for the Subordinated Notes (collectively, the "X Clause Plaintiffs"), commenced an adversary
proceeding against Adelphia in the Bankruptcy Court. The X Clause Plaintiffs' complaint sought a judgment declaring that the subordination provisions in the indentures for the Subordinated Notes were
not applicable to an Adelphia plan of reorganization in which constituents receive common stock of Adelphia and that the Subordinated Notes are entitled to sharepari
passuin the distribution of any common stock of Adelphia given to holders of senior notes of Adelphia. Recently, the X Clause Plaintiffs have asserted that the subordination
provisions in the indentures for the Subordinated Notes also are not applicable to an Adelphia plan of reorganization in which constituents receive TWC Class A Common Stock and that the
Subordinated Notes would therefore be entitled to sharepari passuin the distribution of any such TWC Class A Common Stock given to holders of
senior notes of Adelphia. The Debtors dispute this position and have agreed to present the issue to the Bankruptcy Court prior to confirmation of a plan of reorganization.

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ADELPHIA COMMUNICATIONS CORPORATION AND SUBSIDIARIES  (Debtors-In-Possession)  NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTSContinued  (unaudited)

The
basis for the X Clause Plaintiffs' claim is a provision in the applicable indentures, commonly known as the "X Clause," which provides that any distributions under a plan of
reorganization comprised solely of "Permitted Junior Securities" are not subject to the subordination provision of the Subordinated Notes indenture. The X Clause Plaintiffs asserted that, under their
interpretation of the applicable indentures, a distribution of a single class of new common stock of Adelphia would meet the definition of "Permitted Junior Securities" set forth in the indentures,
and therefore be exempt from subordination.

On
February 6, 2004, Adelphia filed its answer to the complaint, denying all of its substantive allegations. Thereafter, both the X Clause Plaintiffs and Adelphia cross-moved for
summary judgment with both parties arguing that their interpretation of the X Clause was correct as a matter of law. The indenture trustee for the Adelphia senior notes also intervened in the action
and, like Adelphia, moved for summary judgment, arguing that the X Clause Plaintiffs were subordinated to holders of senior notes with respect to any distribution of common stock under a plan. In
addition, the Creditors' Committee also moved to intervene and, thereafter, moved to dismiss the X Clause Plaintiffs' complaint on the grounds, among others, that it did not present a justiciable case
or controversy and therefore was not ripe for adjudication. In a written decision, dated April 12, 2004, the Bankruptcy Court granted the Creditors' Committee's motion to dismiss without ruling
on the merits of the various cross-motions for summary judgment. The Bankruptcy Court's dismissal of the action was without prejudice to the X Clause Plaintiffs' right to bring the action at a later
date, if appropriate.

Verizon Franchise Transfer Litigation.On March 20, 2002, the Company commenced an action (the "California Cablevision
Action") in the United States District Court for the Central District of California, Western Division, seeking, among other things, declaratory and injunctive relief precluding the City of Thousand
Oaks, California (the "City") from denying permits on the grounds that the Company failed to seek the City's prior approval of an asset purchase agreement (the "Asset Purchase Agreement"), dated
December 17, 2001, between the Company and Verizon Media Ventures, Inc. d/b/a Verizon Americast ("Verizon Media Ventures"). Pursuant to the Asset Purchase Agreement, the Company acquired
certain Verizon Media Ventures cable equipment and network system assets (the
"Verizon Cable Assets") located in the City for use in the operation of the Company's cable business in the City.

On
March 25, 2002, the City and Ventura County (the "County") commenced an action (the "Thousand Oaks Action") against the Company and Verizon Media Ventures in California State
Court alleging that Verizon Media Ventures' entry into the Asset Purchase Agreement and conveyance of the Verizon Cable Assets constituted a breach of Verizon Media Ventures' cable franchises and that
the Company's participation in the transaction amounted to actionable tortious interference with those franchises. The City and the County sought injunctive relief to halt the sale and transfer of the
Verizon Cable Assets pursuant to the Asset Purchase Agreement and to compel the Company to treat the Verizon Cable Assets as a separate cable system.

On
March 27, 2002, the Company and Verizon Media Ventures removed the Thousand Oaks Action to the United States District Court for the Central District of California, where it was
consolidated with the California Cablevision Action.

On
April 12, 2002, the district court conducted a hearing on the City's and County's application for a preliminary injunction and, on April 15, 2002, the district court
issued a temporary restraining order in part, pending entry of a further order. On May 14, 2002, the district court issued a preliminary

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ADELPHIA COMMUNICATIONS CORPORATION AND SUBSIDIARIES  (Debtors-In-Possession)  NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTSContinued  (unaudited)

injunction
and entered findings of fact and conclusions of law in support thereof (the "May 14, 2002 Order"). The May 14, 2002 Order, among other things: (i) enjoined the Company
from integrating the Company's and Verizon Media Ventures' system assets serving subscribers in the City and the County; (ii) required the Company to return "ownership" of the Verizon Cable
Assets to Verizon Media Ventures except that the Company was permitted to continue to "manage" the assets as Verizon Media Ventures' agent to the extent necessary to avoid disruption in services until
Verizon Media Ventures
chose to reenter the market or sell the assets; (iii) prohibited the Company from eliminating any programming options that had previously been selected by Verizon Media Ventures or from raising
the rates charged by Verizon Media Ventures; and (iv) required the Company and Verizon Media Ventures to grant the City and/or the County access to system records, contracts, personnel and
facilities for the purpose of conducting an inspection of the then-current "state of the Verizon Media Ventures and the Company systems" in the City and the County. The Company appealed
the May 14, 2002 Order and, on April 1, 2003, the U.S. Court of Appeals for the Ninth Circuit reversed the May 14, 2002 Order, thus removing any restrictions that had been imposed
by the district court against the Company's integration of the Verizon Cable Assets, and remanded the actions back to the district court for further proceedings.

In
September 2003, the City began refusing to grant the Company's construction permit requests, claiming that the Company could not integrate the acquired Verizon Cable Assets
with the Company's existing cable system assets because the City had not approved the transaction between the Company and Verizon Media Ventures, as allegedly required under the City's cable
ordinance.

Accordingly,
on October 2, 2003, the Company filed a motion for a preliminary injunction in the district court seeking to enjoin the City from refusing to grant the Company's
construction permit requests. On November 3, 2003, the district court granted the Company's motion for a preliminary injunction, finding that the Company had demonstrated "a strong likelihood
of success on the merits." Thereafter, the parties agreed to informally stay the litigation pending negotiations between the Company and the City for the Company's renewal of its cable franchise, with
the intent that such negotiations would also lead to a settlement of the pending litigation. However, on September 16, 2004, at the City's request, the court set certain procedural dates,
including a trial date of July 12, 2005, which has effectively re-opened the case to active litigation. Subsequently, the July 12, 2005 trial date was vacated pursuant to a
stipulation and order. On July 11, 2005, the district court referred the matter to a United States magistrate judge for settlement discussions. On September 6, 2005, the magistrate judge
scheduled a settlement conference for October 20, 2005.

The
Company cannot predict the outcome of these actions or estimate the possible effects on the financial condition or results of operations of the Company.

Dibbern Adversary Proceeding.On or about August 30, 2002, Gerald Dibbern, individually and purportedly on behalf of a
class of similarly situated subscribers nationwide, commenced an adversary proceeding in the Bankruptcy Court against Adelphia asserting claims for violation of the Pennsylvania Consumer Protection
Law, breach of contract, fraud, unjust enrichment, constructive trust, and an accounting. This complaint alleges that Adelphia charged, and continues to charge, subscribers for cable
set-top box equipment, including set-top boxes and remote controls, that is unnecessary for subscribers that receive only basic cable service and have cable-ready televisions.
The complaint further alleges that Adelphia failed to adequately notify affected subscribers that they no longer needed to rent this equipment. The complaint seeks a number of remedies including
treble money damages under the

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ADELPHIA COMMUNICATIONS CORPORATION AND SUBSIDIARIES  (Debtors-In-Possession)  NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTSContinued  (unaudited)

Pennsylvania
Consumer Protection Law, declaratory and injunctive relief, imposition of a constructive trust on Adelphia's assets, and punitive damages, together with costs and attorneys' fees.

On
or about December 13, 2002, Adelphia moved to dismiss the adversary proceeding on several bases, including that the complaint fails to state a claim for which relief can be
granted and that the matters alleged therein should be resolved in the claims process. The Bankruptcy Court granted Adelphia's motion to dismiss and dismissed the adversary proceeding on May 3,
2005. In the Bankruptcy Court, Mr. Dibbern has also objected to the provisional disallowance of his proofs of claim which comprised a portion of the Bankruptcy Court's May 3, 2005 order.
Mr. Dibbern appealed the May 3, 2005 order dismissing his claims to the District Court. In an August 30, 2005 decision, the District Court affirmed the dismissal of
Mr. Dibbern's claims for violation of the Pennsylvania Consumer Protection Law, a constructive trust and an accounting, but reversed the dismissal of Mr. Dibbern's breach of contract,
fraud and unjust enrichment claims. These three claims will proceed in the Bankruptcy Court and an answer is due from Adelphia by October 7, 2005.

The
Company cannot predict the outcome of these legal proceedings or estimate the possible effects on the financial condition or results of operations of the Company.

Tele-Media Examiner Motion.By motion filed in the Bankruptcy Court on August 5, 2004,
Tele-Media Corporation of Delaware ("TMCD") and certain of its affiliates sought the appointment of an examiner for the following Debtors: Tele-Media Company of
Tri-States, L.P., CMA Cablevision Associates VII, L.P., CMA Cablevision Associates XI, L.P., TMC Holdings Corporation, Adelphia Company of Western Connecticut, TMC Holdings, LLC,
Tele-Media Investment Limited Partnership, L. P., Eastern Virginia Cablevision, L.P., Tele-Media Company of Hopewell Prince George, and Eastern Virginia Cablevision Holdings,
LLC (collectively, the "JV Entities"). Among other things, TMCD alleged that management and the Board breached their fiduciary obligations to the creditors and equity holders of those entities.
Consequently, TMCD sought the appointment of an examiner to investigate and make recommendations to the Bankruptcy Court regarding various issues related to such entities.

On
April 14, 2005, the Debtors filed a motion with the Bankruptcy Court seeking approval of a global settlement agreement (the "Tele-Media Settlement Agreement") by
and among the Debtors and TMCD and certain of its affiliates (the "Tele-Media Parties") which, among other things: (i) transfers the Tele-Media Parties' ownership
interests in the JV Entities to the Debtors, leaving the Debtors 100% ownership of the JV Entities; (ii) requires the Debtors to make a settlement payment to the Tele-Media Parties
of $21,650,000; (iii) resolves the above-mentioned examiner motion; (iv) settles two pending avoidance actions brought by the Debtors against certain of the Tele-Media
Parties; (v) reconciles 691 separate proofs of claim filed by the Tele-Media Parties, thereby allowing claims worth approximately $5,500,000 and disallowing approximately
$1.9 billion of claims; (vi) requires the Tele-Media Parties to make a $912,500 payment to the Debtors related to workers' compensation policies; and (vii) effectuates
mutual releases between the Debtors and the Tele-Media Parties. The Tele-Media Settlement Agreement was approved by an order of the Bankruptcy Court dated May 11, 2005
and closed on May 26, 2005.

Creditors' Committee Lawsuit Against Pre-Petition Banks.Pursuant to the Bankruptcy Court order approving the DIP
Facility (the "Final DIP Order"), the Company made certain acknowledgments (the "Acknowledgments") with respect to the extent of its indebtedness under the pre-petition credit facilities,
as well as the validity and extent of the liens and claims of the lenders under such facilities. However, given the circumstances surrounding the filing of the Chapter 11 Cases, the Final DIP
Order

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ADELPHIA COMMUNICATIONS CORPORATION AND SUBSIDIARIES  (Debtors-In-Possession)  NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTSContinued  (unaudited)

preserved
the Debtors' right to prosecute, among other things, avoidance actions and claims against the pre-petition lenders and to bring litigation against the pre-petition
lenders based on any wrongful conduct. The Final DIP Order also provided that any official committee appointed in the Chapter 11 Cases would have the right to request that it be granted
standing by the Bankruptcy Court to challenge the Acknowledgments and to bring claims belonging to the Company and its estates against the pre-petition lenders.

Pursuant
to a stipulation among the Company, the Creditors' Committee and the Equity Committee, which is being challenged by certain pre-petition lenders, the Bankruptcy
Court granted the Creditors' Committee leave and standing to file and prosecute claims against the pre-petition lenders on behalf of the Company, and granted the Equity Committee leave to
seek to intervene in any such action. This stipulation also preserves the Company's ability to compromise and settle the claims against the pre-petition lenders. By motion dated
July 6, 2003, the Creditors' Committee moved for Bankruptcy Court approval of this stipulation and simultaneously filed a complaint (the "Bank Complaint") against the agents and lenders under
certain pre-petition credit facilities, and related entities, asserting, among other things, that these entities knew of, and participated in, the alleged improper actions by certain
members of the Rigas Family and Rigas Family Entities (the "Pre-petition Lender Litigation"). The Debtors are nominal plaintiffs in this action.

The
Bank Complaint contains 52 claims for relief to redress the claimed wrongs and abuse committed by the agents, lenders and other entities. The Bank Complaint seeks to, among other
things: (i) recover as fraudulent transfers the principal and interest paid by the Company to the defendants; (ii) avoid as fraudulent obligations the Company's obligations, if any, to
repay the defendants; (iii) recover damages for breaches of fiduciary duties to the Company and for aiding and abetting fraud and breaches of fiduciary duties by the Rigas Family;
(iv) equitably disallow, subordinate or recharacterize each of the defendants' claims in the Chapter 11 Cases; (v) avoid and recover certain allegedly preferential transfers made
to certain defendants; and (vi) recover damages for violations of the Bank Holding Company Act.

Numerous
motions seeking to defeat the Pre-petition Lender Litigation were filed by the defendants and the Bankruptcy Court held a hearing on such issues. The Equity
Committee has filed a motion seeking authority to bring additional claims against the pre-petition lenders pursuant to the RICO Act. The Bankruptcy Court heard oral argument on these
motions on December 20 and December 21, 2004. The Bankruptcy Court has not yet ruled on the motions to dismiss. In a memorandum decision dated August 30, 2005, the Bankruptcy
Court granted the motions of both the Creditors' Committee and the Equity Committee for standing to prosecute these claims.

Under
the Plan, the Debtors may seek to compromise and settle, in part, the Pre-petition Lender Litigation, including through the dismissal of certain claims and the release
of certain defendants.

The
Company cannot predict the outcome of these legal proceedings or estimate the possible effects on the financial condition or results of operations of the Company.

Devon Mobile Claim.Pursuant to the Agreement of Limited Partnership of Devon Mobile Communications, L.P., a Delaware limited
partnership ("Devon Mobile"), dated as of November 3, 1995, the Company owned a 49.9% limited partnership interest in Devon Mobile, which, through its subsidiaries, held licenses to operate
regional wireless telephone businesses in several states. Devon
Mobile had certain business and contractual relationships with the Company and with former subsidiaries or divisions of the Company, which were spun off as TelCove in January 2002.

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ADELPHIA COMMUNICATIONS CORPORATION AND SUBSIDIARIES  (Debtors-In-Possession)  NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTSContinued  (unaudited)

In
late May 2002, the Company notified Devon G.P., Inc. ("Devon G.P."), the general partner of Devon Mobile, that it would likely terminate certain discretionary
operational funding to Devon Mobile. On August 19, 2002, Devon Mobile and certain of its subsidiaries filed voluntary petitions for relief under Chapter 11 of the Bankruptcy Code with
the United States Bankruptcy Court for the District of Delaware (the "Devon Mobile Bankruptcy Court").

On
January 17, 2003, the Company filed proofs of claim and interest against Devon Mobile and its subsidiaries for approximately $129,000,000 in debt and equity claims, as well as
an additional claim of approximately $35,000,000 relating to the Company's guarantee of certain Devon Mobile obligations (collectively, the "Company Claims"). By order dated October 1, 2003,
the Devon Mobile Bankruptcy Court confirmed Devon Mobile's First Amended Joint Plan of Liquidation (the "Devon Plan"). The Devon Plan became effective on October 17, 2003, at which time the
Company's limited partnership interest in Devon Mobile was extinguished.

On
or about January 8, 2004, Devon Mobile filed proofs of claim in the Chapter 11 Cases seeking, in the aggregate, approximately $100,000,000 in respect of, among other
things, certain cash transfers alleged to be either preferential or fraudulent and claims for deepening insolvency, alter ego liability and breach of an alleged duty to fund Devon Mobile operations,
all of which arose prior to the commencement of the Chapter 11 Cases (the "Devon Claims"). On June 21, 2004, Devon Mobile commenced an adversary proceeding in the Chapter 11 Cases
(the "Devon Adversary Proceeding") through the filing of a complaint (the "Devon Complaint") which incorporates the Devon Claims. On August 20, 2004, the Company filed an answer and
counterclaim in response to the Devon Complaint denying the allegations made in the Devon Complaint and asserting various counterclaims against Devon Mobile, which encompassed the Company Claims. On
November 22, 2004, the Company filed a motion for leave (the "Motion for Leave") to file a third party complaint for contribution and
indemnification against Devon G.P. and Lisa-Gaye Shearing Mead, the sole owner and President of Devon G.P. By endorsed order entered January 12, 2005, Judge Robert E. Gerber, the
judge presiding over the Chapter 11 Cases and the Devon Adversary Proceeding, granted a recusal request made by counsel to Devon G.P. On January 21, 2005, the Devon Adversary Proceeding
was reassigned from Judge Gerber to Judge Cecelia G. Morris. By an order dated April 5, 2005, Judge Morris denied the Motion for Leave and a subsequent motion for reconsideration. On
May 13, 2005, the court entered an Amended Pretrial Scheduling Order extending the time for discovery and scheduled a pretrial conference for March 1, 2006, with a five day trial to be
scheduled thereafter. Discovery is ongoing.

The
Company cannot predict the outcome of these legal proceedings or estimate the possible effects on the financial condition or results of operations of the Company.

NFHLP Claim.On January 13, 2003, Niagara Frontier Hockey, L.P., a Delaware limited partnership owned by the Rigas
Family ("NFHLP") and certain of its subsidiaries (the "NFHLP Debtors") filed voluntary petitions to reorganize under Chapter 11 in the United States Bankruptcy Court of the Western District of
New York (the "NFHLP Bankruptcy Court") seeking protection under the U. S. bankruptcy laws. Certain of the NFHLP Debtors entered into an agreement dated March 13, 2003 for the sale of certain
assets, including the Buffalo Sabres National Hockey League team, and the assumption of certain liabilities. On October 3, 2003, the NFHLP Bankruptcy Court approved the NFHLP joint plan of
liquidation. The NFHLP Debtors filed a complaint, dated November 4, 2003, against, among others, Adelphia and the Creditors' Committee seeking to enforce certain prior stipulations and orders
of the NFHLP Bankruptcy Court against Adelphia and the Creditors' Committee related to the waiver of Adelphia's right to participate in certain sale proceeds resulting

49

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ADELPHIA COMMUNICATIONS CORPORATION AND SUBSIDIARIES  (Debtors-In-Possession)  NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTSContinued  (unaudited)

from
the sale of assets. Certain of the NFHLP Debtors' pre-petition lenders, which are also defendants in the adversary proceeding, have filed cross-complaints against Adelphia and the
Creditors' Committee asking the NFHLP Bankruptcy Court to enjoin Adelphia and the Creditors'
Committee from prosecuting their claims against those pre-petition lenders. Proceedings as to the complaint itself have been suspended. With respect to the cross-complaints, motion
practice and discovery are proceeding concurrently; no hearing on dispositive motions has been scheduled.

The
Company cannot predict the outcome of these legal proceedings or estimate the possible effects on the financial condition or results of operations of the Company.

Preferred Shareholder Litigation.On August 11, 2003, Adelphia initiated an adversary proceeding in the Bankruptcy
Court against the holders of Adelphia's preferred stock (the "Preferred Stockholders"), seeking, among other things, to enjoin the Preferred Stockholders from exercising certain purported rights to
elect directors to the Board due to Adelphia's failure to pay dividends and alleged breaches of covenants contained in the certificates of designations relating to Adelphia's preferred stock. On
August 13, 2003, certain of the Preferred Stockholders filed an action against Adelphia in the Delaware Chancery Court seeking a declaratory judgment of their purported right to appoint two
directors to the Board (the "Delaware Action"). On August 13, 2003, the Bankruptcy Court granted Adelphia a temporary restraining order, which, among other things, stayed the Delaware Action
and temporarily enjoined the Preferred Stockholders from exercising their purported rights to elect directors to the Board. Thereafter, the Delaware Action was withdrawn.

The
Company cannot predict the outcome of these legal proceedings or estimate the possible effects on the financial condition or results of operations of the Company.

Adelphia's Lawsuit Against Deloitte.On November 6, 2002, Adelphia sued Deloitte & Touche LLC ("Deloitte"),
Adelphia's former independent auditors, in the Court of Common Pleas for Philadelphia County. The lawsuit seeks damages against Deloitte based on Deloitte's alleged failure to conduct an audit in
compliance with generally accepted auditing standards, and for providing an opinion that Adelphia's financial statements conformed with GAAP when Deloitte allegedly knew or should have known that they
did not conform. The complaint further alleges that Deloitte knew or should have known of alleged misconduct and misappropriation by the Rigas Family, and other alleged acts of
self-dealing, but failed to report these alleged misdeeds to the Board or others who could have and would have stopped the Rigas Family's misconduct. The complaint raises claims of
professional negligence, breach of contract, aiding and abetting breach of fiduciary duty, fraud, negligent misrepresentation and contribution.

Deloitte
filed preliminary objections seeking to dismiss the complaint, which were overruled by the court by order dated June 11, 2003. On September 15, 2003, Deloitte
filed an answer, a new matter and various counterclaims in response to the complaint. In its counterclaims, Deloitte asserted causes of action against Adelphia for breach of contract, fraud, negligent
misrepresentation and contribution. Also on September 15, 2003, Deloitte filed a related complaint naming as additional defendants John J. Rigas, Timothy J. Rigas, Michael J. Rigas, and James
P. Rigas. In this complaint, Deloitte alleges causes of action for fraud, negligent misrepresentation and contribution. The Rigas defendants, in turn, have claimed a right to contribution and/or
indemnity from Adelphia for any damages Deloitte may recover against the Rigas defendants. On January 9, 2004, Adelphia answered Deloitte's counterclaims.
Deloitte moved to stay discovery in this action until completion of the Rigas Criminal Action, which Adelphia opposed. Following the motion, discovery was effectively stayed for 60 days but has
now

50

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ADELPHIA COMMUNICATIONS CORPORATION AND SUBSIDIARIES  (Debtors-In-Possession)  NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTSContinued  (unaudited)

commenced.
Deloitte and Adelphia have exchanged documents and have begun substantive discovery. On June 9, 2005, the court entered a case management order stating that all discovery shall be
completed by December 5, 2005 and that the case be ready for trial by April 3, 2006.

The
Company cannot predict the outcome of these legal proceedings or estimate the possible effects on the financial condition or results of operations of the Company.

Series E and F Preferred Stock Conversion Postponements.On October 29, 2004, Adelphia filed a motion to
postpone the conversion of Adelphia's 7.5% Series E Mandatory Convertible Preferred Stock ("Series E Preferred Stock") into shares of Class A Common Stock from November 15,
2004 to February 1, 2005, to the extent such conversion was not already stayed by the Debtors' bankruptcy filing, in order to protect the Debtors' net operating loss carryovers. On
November 18, 2004, the Bankruptcy Court entered an order approving the postponement effective November 14, 2004.

Adelphia
has subsequently entered into several stipulations further postponing, to the extent applicable, the conversion date of the Series E Preferred Stock. Adelphia has also
entered into several stipulations postponing, to the extent applicable, the conversion date of the Adelphia 7.5% Series F Mandatory Convertible Preferred Stock, which was initially convertible
into shares of Class A Common Stock on February 1, 2005.

EPA Self Disclosure and Audit.On June 2, 2004, the Company orally self-disclosed potential violations of
environmental laws to the United States Environmental Protection Agency ("EPA") pursuant to EPA's Audit Policy, and notified EPA that it intended to conduct an audit of its operations to identify and
correct any such violations. The potential violations primarily concern reporting and recordkeeping requirements arising from the Company's storage and use of petroleum and batteries to provide backup
power for its cable operations. This matter is at an early stage, but based on current facts, the Company does not anticipate that this matter will have a material adverse effect on the Company's
results of operations or financial condition.

Other.The Company is subject to various other legal proceedings and claims which arise in the ordinary course of business.
Management believes, based on information currently available, that the amount of ultimate liability, if any, with respect to any of these other actions will not materially affect the Company's
financial position or results of operations.

Note 10: Other Financial Information

Supplemental Cash Flow Information

The table below sets forth the Company's supplemental cash flow information (amounts in thousands):

Three months ended March 31,2004

2003Cash paid for interest

$
92,969

$
97,364Capitalized interest

$
(2,600
)
$
(5,396
)


51

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ADELPHIA COMMUNICATIONS CORPORATION AND SUBSIDIARIES  (Debtors-In-Possession)  NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTSContinued  (unaudited)

Stock-Based Compensation

The Company applies the intrinsic value-based method of accounting prescribed by Accounting Principles Board ("APB") Opinion No. 25, Accounting for Stock
Issued to Employees("APB Opinion No. 25"), and related interpretations to account for the Company's fixed plan stock
options. Under this method, compensation expense for stock options or awards that are fixed is required to be recognized over the vesting period only if the current market price of the underlying
stock exceeds the exercise price on the date of grant. SFAS No. 123,Accounting for Stock-Based Compensation("SFAS No. 123"), established
accounting for stock-based employee compensation plans. As allowed by SFAS No. 123, the Company has elected to continue to apply the intrinsic value-based method of accounting prescribed by APB
Opinion No. 25, and has adopted the disclosure requirements of SFAS No. 123, as amended by SFAS No. 148,Accounting for Stock-Based
CompensationTransition and Disclosurean Amendment of FASB Statement No. 123and by SFAS No. 123-R, Share-Based Payment("SFAS No. 123-R"). The
following table illustrates the effects on net loss and loss per common share as if the
Company had applied the fair value recognition provisions of SFAS No. 123 to stock-based employee compensation (amounts in thousands, except per share amounts):

Three months ended March 31,2004

2003Net lossas reported

$
(1,354,572
)
$
(179,125
)Deduct compensation expense determined under fair value method, net of taxes of $0 for all periods


(45
)

(269
)Pro forma net loss

$
(1,354,617
)
$
(179,394
)Loss per share:Basic and dilutedas reported

$
(5.35
)
$
(0.71
)Basic and dilutedpro forma

$
(5.35
)
$
(0.71
)


Recent Accounting Pronouncements

In May 2005, the FASB issued SFAS No. 154,Accounting Changes and Error Correctionsa replacement of APB Opinion
No. 20 and FASB Statement No. 3, ("SFAS No. 154"), which provides guidance on the accounting for and reporting of accounting changes and error corrections.
In general, in the absence of explicit transition requirements for new pronouncements, SFAS No. 154 requires retrospective application of the effects of changes in accounting principle to prior
periods' financial statements, unless it is impracticable to determine the effects of the change. The provisions of SFAS No. 154 are effective for accounting changes and corrections of errors
made in fiscal years beginning after December 15, 2005. The adoption of SFAS No. 154 is not expected to have a material impact on the Company's consolidated results of operations
or financial position.

In
March 2005, the FASB issued FIN 47,Accounting for Conditional Asset Retirement Obligations, an interpretation of FASB Statement
No. 143("FIN 47"), which addresses the financial accounting and reporting obligations associated with the conditional retirement of tangible long-lived
assets and the associated asset retirement costs. FIN 47 requires that, where there is an unconditional obligation to perform asset retirement activity even though there is uncertainty as to the
timing and/or the method

52

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ADELPHIA COMMUNICATIONS CORPORATION AND SUBSIDIARIES  (Debtors-In-Possession)  NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTSContinued  (unaudited)

of
settlement may be conditional on a future event, companies must recognize a liability for the fair value of the conditional asset retirement if the fair value of the liability can be reasonably
estimated. The requirements of FIN 47 are effective for fiscal periods ending after December 15, 2005. The Company is currently evaluating the impact of the adoption of FIN 47.

In
December 2004, the FASB issued SFAS No. 123-R. Generally, SFAS No. 123-R requires the Company to recognize the grant-date fair
value of stock options as compensation expense in its consolidated statements of operations at the date the options are issued to employees. SFAS No. 123-R applies to all stock
options and other share-based payments granted after December 31, 2005 and to previously granted awards that are either unvested as of the adoption date or are modified after the adoption date.
The Company is required to adopt SFAS No. 123-R in the first quarter of 2006.

The
Company has not granted any stock options since the Petition Date and does not anticipate granting any new options. In addition, all options currently outstanding will be fully
vested prior to the adoption of SFAS No. 123-R. Accordingly, at this time, the adoption of SFAS No. 123-R will not have an impact on the Company's consolidated
results of operations.

In
December 2004, the FASB issued SFAS No. 153,Exchanges of Nonmonetary Assetsan amendment of APB Opinion
No. 29, ("SFAS No. 153"). In general, SFAS No. 153 requires that exchanges of nonmonetary assets should be measured based on the fair value of the assets
exchanged, unless the entity's future cash flows are expected to change significantly as a result of the exchange. The provisions of SFAS No. 153 are effective for nonmonetary asset exchanges
occurring in fiscal periods beginning after June 15, 2005, and are to be applied prospectively. The adoption of SFAS No. 153 is not expected to have a material impact on the Company's
consolidated results of operations or financial position.

In
November 2004, the FASB issued SFAS No. 151,Inventory Costsan amendment of ARB No. 43, ("SFAS
No. 151"). In general, SFAS No. 151 requires that inventory costs such as idle facility expense, freight, handling costs and spoilage be recognized as current period charges regardless
of whether they meet the "abnormal" criterion of Accounting Research Bulletin No. 43,Inventory Pricing("ARB No. 43"). The provisions of
SFAS No. 151 are effective for inventory costs incurred during fiscal years beginning after June 15, 2005, and are to be applied prospectively. The adoption of SFAS
No. 151 is not expected to have a material impact on the Company's consolidated results of operations or financial position.

In
March 2004, the Emerging Issues Task Force ("EITF") reached a consensus on Issue No. 03-6,Participating Securities and the
Two-Class Method under FASB Statement No. 128("EITF No. 03-6"), which addresses the calculation and disclosure of earnings per
share for companies with participating convertible securities or multiple classes of common stock. EITF No. 03-6 is effective for fiscal periods beginning after March 31,
2004. The adoption of EITF No. 03-6 did not have an impact on the Company's calculation or disclosure of earnings per share.

Earnings (Loss) Per Common Share ("EPS")

The weighted average number of shares used for computing basic and diluted loss per share for the three months ended March 31, 2004 and 2003 was
253,747,779 and 253,747,604, respectively. Potential common shares were not included in the computation of diluted EPS because their inclusion would be anti-dilutive. At March 31,
2004, and 2003, the number of potential common shares was 87,080,354 and 87,456,704, respectively. The potential common shares consist of stock options to

53

---



ADELPHIA COMMUNICATIONS CORPORATION AND SUBSIDIARIES  (Debtors-In-Possession)  NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTSContinued  (unaudited)

acquire
shares of Class A Common Stock and preferred securities and debt instruments that were convertible into shares of Class A Common Stock at March 31, 2004 and 2003,
respectively. The foregoing potential common share amounts do not take into account the assumed number of shares that might be repurchased by the Company upon the exercise of stock options.

Change in Useful Life

The Company periodically evaluates the useful lives of its property and equipment. Effective January 1, 2004, the Company changed the useful life used to
calculate the depreciation of standard definition digital set-top boxes from five years to four years due to the introduction of advanced digital set-top boxes,
which provide high definition television ("HDTV") and digital video recording capabilities, and the expected migration of new and existing customers to these advanced digital set-top
boxes. In addition, consumer electronics manufacturers continue to include advanced technology necessary to receive digital and HDTV signals within television sets, which the Company expects to
further contribute to the reduction in the useful life of its set-top boxes. The impact of this change in useful life on the Company's operating results for the three months ended
March 31, 2004 was a $38,649,000, increase to the Company's net loss and a $0.15 increase to the Company's net loss per common share.

Intangible Assets

Summarized below are the carrying value and accumulated amortization of intangible assets that continue to be amortized under SFAS No. 142, Goodwill and
Other Intangible Assets("SFAS No. 142"), as well as the carrying value of intangible assets which are no longer amortized (amounts
in thousands):

|                                 |  | March 31, 2004 |           | December 31, 2003
|-------------------------------- |  | -------------- | --------- | -----------------
|
|Customer relationships and other |  | $              | 1,716,723 |                  
|Franchise rights                 |  |                |           |                  
|Goodwill                         |  |                |           |                  
|                                 |  |                |           |                  
|                                 |  |                |           |                  
|                                 |  |                |           |                  

Following the adoption of SFAS No. 142 on January 1, 2002, the Company is no longer amortizing goodwill or franchise rights.
Customer relationships represent the value attributed to customer relationships acquired in business combinations and are amortized over a 10-year period. Beginning in 2004, the Company
began amortizing its customer relationships using the double declining balance method. Customer relationships were amortized using the straight-line method prior to 2004. The new method of
amortization was adopted to better recognize the attrition patterns of our customer relationships and has been applied to customer relationships acquired prior to 2004. The effect of the change during
the three months ended March 31, 2004 was to decrease amortization expense by $5,768,000. The application of the new amortization method to customer relationships acquired prior to 2004
resulted in an additional charge of $262,847,000 which has been reflected as a cumulative effect of a change in accounting principle in the accompanying condensed consolidated statements of
operations. The proforma amounts shown in the condensed consolidated statements of operations have been adjusted for the effect of retroactive application on amortization, changes in impairment of
long-lived assets and minority's interest in loss of subsidiary which would have been made had the new method

54

---



ADELPHIA COMMUNICATIONS CORPORATION AND SUBSIDIARIES  (Debtors-In-Possession)  NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTSContinued  (unaudited)

been
in effect. Amortization of intangible assets aggregated $36,529,000 and $39,230,000 for the three months ended March 31, 2004 and 2003, respectively.

Due
to the January 1, 2004 consolidation of the Rigas Co-Borrowing Entities, goodwill, franchise rights and customer relationships and other, net increased
$116,844,000, $354,029,000 and $38,888,000, respectively.

Accrued Liabilities

The details of accrued liabilities are set forth below (amounts in thousands):

March 31,
2004

December 31,
2003Programming costs

$
97,712

$
82,100Payroll


60,664


46,868Franchise fees


41,651


53,653Interest


34,650


29,642Other


308,917


199,808Total

$
543,594

$
412,071


Tax Matters

During 2004, the Company re-evaluated the impact on its valuation allowance due to the timing of its reversing temporary differences, including its
policy of netting the effect of reversing temporary differences associated with customer relationship intangible assets with intangible assets that have indefinite lives. As a result of this
evaluation, the Company changed the expectations for scheduling the expected reversal of its deferred tax liabilities associated with these intangible assets and included in its income tax benefit for
2004 a $166,000,000 reduction in the valuation allowances on deferred tax assets related to current expectations for the reversal of its deferred tax liabilities.

Transactions With Other Officers and Directors

In a letter agreement between Adelphia and FPL Group, Inc. ("FPL Group") dated January 21, 1999, Adelphia agreed to (i) repurchase 20,000
shares of 81/8% Series C Cumulative Preferred Stock ("Series C Preferred Stock") and 1,091,524 shares of Class A Common Stock owned by Telesat
Cablevision, Inc., a subsidiary of FPL Group ("Telesat") and (ii) transfer all of the outstanding common stock of West Boca Security, Inc. ("WB Security"), a subsidiary of
Olympus Communications, L.P. ("Olympus"), to FPL Group in exchange for FPL Group's 50% voting interest and 1/3 economic interest in Olympus. The Company owned the economic and voting
interests in Olympus that were not then owned by FPL Group. At the time this agreement was entered into, Dennis Coyle, then a member of the Adelphia Board of Directors, was the General Counsel and
Secretary of FPL Group. WB Security was a subsidiary of Olympus and WB Security's sole asset was a $108,000,000 note receivable (the "WB Note") from a subsidiary of Olympus that
was secured by the FPL Group's ownership interest in Olympus and due September 1, 2004. On January 29, 1999, Adelphia purchased all of the aforementioned shares of Series C
Preferred Stock and Class A Common Stock described above from Telesat for aggregate cash consideration of $149,213,000, and on October 1, 1999, the Company acquired FPL Group's interest
in Olympus in exchange for all of the outstanding common

55

---



ADELPHIA COMMUNICATIONS CORPORATION AND SUBSIDIARIES  (Debtors-In-Possession)  NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTSContinued  (unaudited)

stock
of WB Security. The acquired shares of Class A Common Stock are presented as treasury stock in the accompanying condensed consolidated balance sheets. The acquired shares of
Series C Preferred Stock were returned to their original status of authorized but unissued. On June 24, 2004, the Creditors' Committee filed an adversary proceeding in the Bankruptcy
Court, among other things, to avoid, recover and preserve the cash paid by Adelphia pursuant to the repurchase of its Series C Preferred Stock and Class A Common Stock together with all
interest paid with respect to such repurchase. A hearing date relating to such adversary proceeding has not yet been set. Interest on the WB Note is calculated at a rate of 6% per annum
(or after default at a variable rate of LIBOR plus 5%). FPL Group has the right, upon at least 60 days prior written notice, to require repayment of the principal and accrued interest on the
WB Note on or after July 1, 2002. As of March 31, 2004 and December 31, 2003, the aggregate principal and interest due to the FPL Group pursuant to the
WB Note was $127,537,000. The Company has not accrued interest on the WB Note for periods subsequent to the Petition Date. To date, the Company has not yet received a
notice from FPL Group requiring the repayment of the WB Note.

From
May 2002 until July 2003, the Company engaged Conway, Del Genio, Gries & Co., LLC ("CDGC") to provide certain restructuring services pursuant to an engagement
letter dated May 21, 2002 (the "Conway Engagement Letter"). During that time, Ronald F. Stengel, Adelphia's former and interim Chief Operating Officer and Chief Restructuring Officer, was a
Senior Managing Director of CDGC. The Conway Engagement Letter provided for Mr. Stengel's services to Adelphia while remaining a full-time employee of CDGC. In addition, other
employees of CDGC were assigned to assist Mr. Stengel in connection with the Conway Engagement Letter. Pursuant to the Conway Engagement Letter, the Company paid CDGC a total of $1,702,000 for
its services through March 31, 2003 (which includes the services of Mr. Stengel). The Company also paid CDGC a total of $69,000 through March 31, 2003 for reimbursement of CDGC's
out-of pocket expenses incurred in connection with the engagement. These amounts are included in reorganization expenses due to bankruptcy in the accompanying condensed consolidated
statements of operations.

Sale of Security Monitoring Business

In November 2004, the Company entered into an asset purchase agreement to sell its security monitoring business in Pennsylvania, Florida and New York for
approximately $38,000,000. Pursuant to the bidding procedures order filed with the Bankruptcy Court on November 22, 2004, qualified bidders had the opportunity to submit higher or otherwise
better offers with a bid deadline of January 17, 2005.
The Company received a better offer within the bid deadline and, as a result, conducted an auction for the sale of the security monitoring business on January 21, 2005. The sale of the security
monitoring business to the winning bidder was approved by the Bankruptcy Court on January 28, 2005. On February 28, 2005, the transaction closed based on a preliminary adjusted purchase
price of $40,200,000.

56

---





ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

OVERVIEW

General

We are the fifth largest operator of cable systems in the United States. Our operations primarily consist of providing analog and digital cable services, HSI
services and other advanced services over our cable systems. These services are generally provided to residential subscribers. At March 31, 2004, our consolidated cable operations served
approximately 5,272,000 basic cable subscribers, of which approximately 1,888,000 also received digital cable service. Our consolidated cable systems also provided HSI services to approximately
1,141,000 subscribers at March 31, 2004. With the exception of approximately 47,000 basic cable subscribers that were located in Brazil, all of our consolidated basic cable subscribers at
March 31, 2004 were located in the United States. Our domestic consolidated cable operations are located in 31 states, with large clusters in Los Angeles, New England, Western New York, West
Palm Beach, Cleveland, Western Pennsylvania, Northern Virginia and Colorado Springs.

Our
only reportable operating segment is our "cable" segment. The cable segment includes our cable system operations (including consolidated subsidiaries and equity method investments)
that provide video services, HSI services and media services. Operating segments that are not included in the cable segment are aggregated together in the "corporate and other" segment. For additional
information, see Note 6, "Segments," to the accompanying condensed consolidated financial statements.

Bankruptcy Proceedings

In June 2002, the Debtors filed voluntary petitions to reorganize under Chapter 11 of the Bankruptcy Code in the Bankruptcy Court. The Debtors are
operating their business as debtors-in-possession under Chapter 11. The rights and claims of the Debtors' various creditors and security holders will be determined by a plan of
reorganization that is ultimately subject to confirmation by the Bankruptcy Court.

On
September 28, 2005, the Debtors filed their proposed Plan and related Disclosure Statement with the Bankruptcy Court. The Plan contemplates, among other things,
(i) consummation of the Sale Transaction and (ii) distribution of the cash and common stock of TWC received pursuant to the Sale Transaction to the holders of claims against and equity
interests in the Debtors in accordance with the Plan. For additional information, see Note 2, "Bankruptcy Proceedings and Sale of Assets of the Company," to the accompanying condensed
consolidated financial statements.

In
order to provide liquidity, on August 26, 2002 the Debtors entered into the DIP Facility. On May 10, 2004, the Debtors entered into the First Extended DIP Facility. On
February 25, 2005, the Debtors entered into the Second Extended DIP Facility. For additional information, see Note 5, "Debt," to the accompanying condensed consolidated financial
statements.

For
additional information see Note 2, "Bankruptcy Proceedings and Sale of Assets of the Company," to the accompanying condensed consolidated financial statements.

Sale of Assets

Effective April 20, 2005, we entered into the Sale Transaction. Under the terms of the Sale Transaction, TW NY and Comcast will purchase substantially all
of our U.S. assets and assume certain of our liabilities. Upon the closing of the Sale Transaction, Adelphia will receive approximately $12.7 billion in cash and shares of TWC Class A
Common Stock, which are expected to represent 16% of the outstanding equity securities of TWC as of the closing and are to be listed on the New York Stock Exchange. Such percentage assumes the
redemption of Comcast's interest in TWC and is subject

57

---



to
adjustment for issuances pursuant to employee stock programs (subject to a cap) and issuances of securities for fair consideration. The purchase price payable by TW NY and Comcast is subject to
certain adjustments. TWC, Comcast and certain of their affiliates have also agreed to swap certain cable systems and unwind Comcast's investments in TWC and TWE. Certain fees are due to our financial
advisors upon successful completion of a sale, which are calculated as a percentage (0.11% to 0.20%) of the sale value. Additional fees may be payable depending on the outcome of the sales process.
Such fees cannot be determined until the closing of the Sale Transaction. The Sale Transaction does not include our interest in our cable system joint venture in Puerto Rico, which Century and ML
Media separately agreed, on June 3, 2005, to sell to San Juan Cable. For additional information, see Note 2, "Bankruptcy Proceedings and Sale of Assets of the Company," to the
accompanying condensed consolidated financial statements.

Government Settlement Agreements

On April 25, 2005, after extensive negotiations with the SEC and the U.S. Attorney, we entered into the Non-Prosecution Agreement with the U.S.
Attorney, pursuant to which we agreed, among other things: (i) to contribute $715 million in value to the Restitution Fund; (ii) to continue to cooperate with the U.S. Attorney
until the later of April 25, 2007, or the date upon which all prosecutions arising out of the conduct described in the Rigas Criminal Action and SEC Civil Action are final; and (iii) not
to assert claims against the Rigas Family except for the Excluded Parties. We recorded a charge of $425 million during 2004 related to the Non-Prosecution Agreement. Such amount is
reflected in other income (expense), net in the accompanying condensed consolidated statements of operations.

Also
on April 25, 2005, we consented to an entry of a final judgment in the SEC Civil Action resolving the SEC's claims against us. Pursuant to this agreement, we will be
permanently enjoined from violating various provisions of federal securities laws, and the SEC has agreed that, if we make the $715 million payment to the Restitution Fund, we will not be
required to pay disgorgement or a civil monetary penalty to satisfy the SEC's claims.

On
April 25, 2005, Adelphia and the Rigas Family entered into an agreement to settle the lawsuit against the Rigas Family. The Adelphia-Rigas Settlement Agreement includes, among
other things, agreements to pay $11.5 million to a legal defense fund for the benefit of the Rigas Family and to provide management services to Coudersport and Bucktail for an interim period
through and including December 31, 2005.

The
Rigas Family agreed to enter into a settlement agreement with the U.S. Attorney which, among other things, led to the Forfeiture Order. Pursuant to the Forfeiture Order, all right,
title and interest of the Rigas Family and Rigas Family Entities in the Rigas Co-Borrowing Entities (other than Coudersport and Bucktail), certain specified real estate and any securities
of the Company were forfeited to the United States on June 8, 2005 and such assets and securities are expected to be conveyed (subject to completion of forfeiture proceedings before a federal
judge to determine if there are any superior claims) to us pursuant to the Non-Prosecution Agreement.

For
additional information about the Government Settlement Agreements, see Note 9, "Contingencies," to the accompanying condensed consolidated financial statements.

Variable Interest Entities

In January 2003, the FASB issued FIN 46-R, which requires variable interest entities, as defined by FIN 46-R, to be consolidated by
the primary beneficiary if certain criteria are met. We concluded that the Rigas Co-Borrowing Entities represent variable interest entities for which we are the primary beneficiary and
have included them in our condensed consolidated financial statements effective January 1, 2004. For additional information, see Note 3, "Variable Interest Entities," to the

58

---



accompanying
condensed consolidated financial statements. Due to the consolidation of the Rigas Co-Borrowing Entities effective January 1, 2004, direct comparisons of our results of
operations during 2004 to corresponding prior periods are not meaningful without taking into account the effects of the Rigas Co-Borrowing Entities. Accordingly, the impacts of the
operating results of the Rigas Co-Borrowing Entities are identified, where material, in the "Results of Operations" discussion below.

The
consolidation of the Rigas Co-Borrowing Entities resulted in the following impact to our condensed consolidated statements of operations for the three months ended
March 31, 2004 (amounts in thousands):

Revenue

$
46,981Costs and expenses:Direct operating and programming


27,786Selling, general and administrative:Third party


3,159Investigation and re-audit related fees


12,464Depreciation


9,720Amortization


1,927Total costs and expenses


55,056Operating loss


(8,075
)Other income


419Loss before cumulative effect of accounting change


(7,656
)Cumulative effect of accounting change


(588,782
)Net loss

$
(596,438
)


Discontinued Operations

Revenue and expenses related to the CLEC Market Assets, which were transferred to TelCove effective April 2004 as part of the TelCove Global Settlement,
have been included in loss from discontinued operations for all periods presented in our condensed consolidated statements of operations. For additional information, see Note 8, "TelCove
Settlement and Discontinued Operations," to the accompanying condensed consolidated financial statements.

Trends

The following table summarizes our subscribers before consolidation of the Rigas Co-Borrowing Entities, the subscribers of the Rigas
Co-Borrowing Entities and our subscribers after consolidation of

59

---



the
Rigas Co-Borrowing Entities. Prior to January 1, 2004, we did not include the Rigas Co-Borrowing Entities' subscribers in our subscriber totals (amounts in
thousands).

March 31,% Increase
(decrease)2004

2003Subscribers before consolidation of the Rigas Co-Borrowing Entities:Basic

5,037

5,175

(2.7
)%Digital

1,807

1,746

3.5HSI

1,075

705

52.5Subscribers of the Rigas Co-Borrowing Entities:Basic

235



nmDigital

81



nmHSI

66



nmSubscribers after consolidation of the Rigas Co-Borrowing Entities:Basic

5,272

5,175

1.9
%Digital

1,888

1,746

8.1HSI

1,141

705

61.8


---

nmnot
meaningful

We
face increasing competition for our video services primarily from direct broadcast satellite operators and for our HSI services from local telephone companies. Competition has put
downward pressure on the number of basic subscribers and pricing for certain services. Excluding the consolidation of the Rigas Co-Borrowing Entities, basic cable subscribers decreased
2.7% at March 31, 2004 as compared to the same period in 2003 and have continued to decline through the first half of 2005. In an effort to reverse the trend of basic subscriber losses, we are
increasing our subscriber retention efforts and our emphasis on enhancing and differentiating our video products and services with video on demand, HDTV and digital video recorders. Despite these
efforts, we may continue to experience a loss of basic cable subscribers.

Excluding
the consolidation of the Rigas Co-Borrowing Entities, digital cable subscribers increased 3.5% at March 31, 2004 when compared to the same period in 2003.
Growth of digital cable subscribers has moderated from that of prior periods. Future growth of our digital cable business is dependent upon our ability to retain our basic subscribers and to
successfully market our digital cable services.

Excluding
the consolidation of the Rigas Co-Borrowing Entities, HSI subscribers increased 52.5% at March 31, 2004 when compared to the same period in 2003. We
anticipate continued demand for our HSI services. However, as the existing HSI subscriber base grows, we expect the rate of growth will continue to decline.

We
use ARPU as a measure of performance for our business. ARPU represents total revenue for the related period, divided by the number of months in the period, divided by an
average of the number of monthly subscribers for the related period.

The
following table summarizes ARPU for selected revenue components. The Rigas Co-Borrowing Entities are included in the ARPU calculations for the three months ended
March 31, 2004 but are not

60

---



included
in calculations for the corresponding 2003 period. The consolidation of the Rigas Co-Borrowing Entities did not have a material impact on ARPU.

Three months ended March 31,2004

2003

Increase
(decrease)ARPU:Video revenue (including digital cable and media services), per basic subscriber

$
55.10

$
48.81

$
6.29HSI revenue, per HSI subscriber

$
37.68

$
37.07

$
0.61Total revenue, per basic subscriber

$
63.43

$
54.20

$
9.23


ARPU
for video revenue increased $6.29, or 13%, during the three months ended March 31, 2004 as compared to the same period in 2003. ARPU for HSI revenue increased $0.61,
or 2%, during the three months ended March 31, 2004 as compared to the same period in 2003. ARPU for total revenue increased $9.23, or 17%, during the three months ended
March 31, 2004 as compared to the same period
in 2003. Historically, ARPU for total revenue has been increasing and we expect this trend to continue during 2005.

Excluding
the consolidation of the Rigas Co-Borrowing Entities, programming costs increased 7% during the three months ended March 31, 2004 compared to the same
period in 2003. Programming costs are expected to continue to rise during the next several years, primarily due to the expansion of service offerings and industry-wide programming
cost increases (particularly with respect to sports programming), reflecting both inflation-indexed and negotiated license fee increases. To offset these increased costs, we expect to continue to
review and adjust, as necessary, the pricing for our services and to create efficiencies in our operations. However, any cost increases that we are not able to pass on to our subscribers through
service rate increases would reduce our operating margins unless offset by improved operational efficiencies.

Recent
examples of operational efficiencies include a reduction in the number of customer care call center operations and the introduction of interactive voice response technology. These
changes are designed to improve operational efficiencies by reducing the overall cost of serving subscribers as well as providing a higher level of service to subscribers.

61

---



RESULTS OF OPERATIONS

Three Months Ended March 31, 2004 Compared to Three Months Ended March 31, 2003

The following table summarizes the results of operations for the periods presented (dollars in thousands):

Three months ended March 31,2004

2003$

% of
Revenue

$

% of
RevenueRevenue

$
1,007,330

100
%
$
841,573

100
%Costs and expenses:Direct operating and programming


652,032

65


563,710

67Selling, general and administrative:Third party and Rigas Family Entities


81,361

8


59,991

7Investigation and re-audit related fees


30,522

3


9,534

1Total selling, general and administrative


111,883

11


69,525

8Depreciation


247,771

24


204,942

24Amortization


38,625

4


39,230

5Provision for uncollectible amounts due from the Rigas Family and Rigas Family Entities







5,166

1Total costs and expenses


1,050,311

104


882,573

105Operating loss


(42,981
)
(4
)%

(41,000
)
(5
)%Other income (expense), net:Interest expense, net of amounts capitalized


(97,319
)



(95,823
)Other income (expense), net


(425,216
)



101Total other expense, net


(522,535
)



(95,722
)Loss before reorganization expenses, income taxes, share of losses of equity affiliates, minority's interest, discontinued operations and cumulative effects of accounting changes


(565,516
)



(136,722
)Reorganization expenses due to bankruptcy


(15,348
)



(20,136
)Income tax benefit (expense)


73,878




(25,137
)Share of losses of equity affiliates, net


(697
)



(244
)Minority's interest in loss of subsidiary


4,241




7,359Loss from continuing operations before cumulative effects of accounting changes


(503,442
)



(174,880
)Gain (loss) from discontinued operations


499




(4,245
)Cumulative effects of accounting changes


(851,629
)



Net loss

$
(1,354,572
)


$
(179,125
)


62

---



Revenue

Revenue increased $166 million, or 20%, during the three months ended March 31, 2004 as compared to the same period in 2003, of which the
consolidation of the Rigas Co-Borrowing Entities accounted for $47 million, or 6%. The following table summarizes revenue for the periods indicated (dollars in thousands, except
ARPU amounts):

|                    |                           | Three months ended March 31, |       
|------------------- | ------------------------- | ---------------------------- | ------
|
|
|Cable:              |                           |                              |       
|                    | Video (including digital) |                              | $     
|                    | High-speed Internet       |                              |       
|                    | Media services            |                              |       
|                    |                           |                              |       
|                    |                           | Total cable                  |       
|Corporate and other |                           |                              | 10,992
|                    |                           |                              |       
|                    |                           | Total                        |       
|                    |                           |                              |       
|ARPU                |                           | $                            | 63.43 
|                    |                           |                              |       

Cable
revenue increased $166 million, or 20%, during the three months ended March 31, 2004, as compared to the same period in 2003, of which, as noted above, the
Rigas Co-Borrowing Entities accounted for $47 million, or 6%, of the increase ($38 million of video revenue, $7 million of HSI revenue and $2 million of media
services revenue). The remaining increase in cable revenue was primarily attributable to increased revenue from HSI services, higher rates for basic and expanded basic service tiers, increased revenue
from digital cable services and higher media services revenue. The positive impact of higher rates for basic and expanded basic service tiers was partially offset by a decrease in our basic subscriber
base. An increase in HSI and digital cable subscribers accounted for most of the increase in revenue from these services. The increase in media services revenue was attributable to our ability to
increase both the average rate received and the volume of advertising sold as a result of an industry wide trend of viewers switching from broadcast to cable, thereby increasing viewership and the
advertising population. Subscriber counts, excluding the Rigas Co-Borrowing Entities, increased 52.5% for HSI services and 3.5% for digital cable and decreased 2.7% for basic cable when
comparing subscriber counts at March 31, 2004 to the same period in 2003.

Corporate
and other revenue includes revenue from our security monitoring business, our sports programming network (Empire Sports Network) and our long-distance telephone
resale
business. Corporate and other revenue decreased $281,000 when comparing the three months ended March 31, 2004 to the same period in 2003.

Direct operating and programming costs

Direct operating and programming costs increased $88 million, or 16%, during the three months ended March 31, 2004 as compared to the same
period in 2003, of which the consolidation of the Rigas

63

---



Co-Borrowing
Entities accounted for $28 million, or 5%. The following table summarizes direct operating and programming costs for the periods indicated (dollars in thousands):

Three months ended March 31,2004

2003

$
Increase
(decrease)

%
Increase
(decrease)Cable:Programming costs

$
289,844

$
259,563

$
30,281

12
%Other cable


351,567


293,141


58,426

20Total cable


641,411


552,704


88,707

16Corporate and other


10,621


11,006


(385
)
(3
)Total

$
652,032

$
563,710

$
88,322

16
%


Programming
costs consist primarily of costs paid to programmers for the provision of analog, premium and digital channels and pay-per-view programs. Programming
costs increased $30 million, or 12%, of which the consolidation of the Rigas Co-Borrowing Entities accounted for $13 million, or 5%. The remaining increase was primarily
attributable to an increase in the rates paid to programming providers and an increase in the number of programming services offered. Excluding the consolidation of the Rigas Co-Borrowing
Entities, the 2004 programming cost increase was below historic trends due primarily to the decrease in our basic subscriber base.

Other
cable operating costs consist of labor and other costs associated with the provision of cable services to subscribers and the operation and maintenance of our cable systems. Other
cable operating costs increased $58 million, or 20%, of which the consolidation of the Rigas Co-Borrowing Entities accounted for $15 million, or 5%. The remaining increase
was primarily the result of annual wage increases and costs associated with increased customer service call activities.

Our
corporate and other operating costs include costs associated with our sports programming network, our security monitoring business and long-distance telephone resale
business. Corporate and other costs decreased $385,000 when comparing the three months ended March 31, 2004 to the same period in 2003.

Total
direct operating and programming costs, expressed as a percentage of revenue, decreased to 65% for the three months ended March 31, 2004 from 67% for the
three months ended March 31, 2003. This decrease reflects increased cable revenue from higher rates, as explained above, and improving operating efficiencies.

Selling, general and administrative expenses ("SG&A")

Third party and Rigas Family Entities.Third party and Rigas Family Entities' SG&A expenses increased $21 million, or
36%, during the three months ended March 31, 2004 as compared to the same period in 2003, of which, the consolidation of the Rigas Co-Borrowing Entities accounted for
$3 million of this increase. The following table summarizes certain components of third party and Rigas Family Entities' SG&A expenses for the indicated periods (dollars in thousands):

Three months ended March 31,2004

2003

$
Increase
(decrease)

%
Increase
(decrease)Cable

$
29,134

$
19,532

$
9,602

49
%Corporate and other


52,227


40,459


11,768

29Total

$
81,361

$
59,991

$
21,370

36
%


64

---



Third
party and Rigas Family Entities' SG&A expenses consist of salaries and benefits, marketing expenses, professional fees, insurance and other general and administrative expenses
related to our operations. Cable SG&A expenses increased approximately $10 million when comparing the three months ended March 31, 2004 to the same period in 2003 primarily due to
increased marketing expenses and the consolidation of the Rigas Co-Borrowing Entities as discussed above. The increased marketing expenses were the result of our efforts to retain our
basic subscriber base and continue to grow the number of HSI subscribers.

Corporate
and other SG&A expenses include those expenses associated with our corporate functions, our sports programming network, our security monitoring business and our
long-distance telephone resale business. Corporate and other SG&A expenses increased $12 million primarily due to increases in employee costs, contracted professional fees,
maintenance and repair expenses and insurance expenses. These increases include, among other items, expenses associated with compliance with the Sarbanes-Oxley Act, higher hardware and software
maintenance expenses and higher directors' and officers' liability insurance premiums incurred during the three months ended March 31, 2004 as compared to the same period in 2003.

Investigation and re-audit related fees.We incurred costs that, although not directly related to the Chapter 11
filing, are related to the investigation of the alleged actions of Rigas Management and related efforts to comply with applicable laws and regulations. These expenses include re-audit,
legal and forensic consulting fees and aggregated $31 million and $10 million for the three months ending March 31, 2004 and 2003, respectively. The consolidation of the
Rigas Co-Borrowing Entities accounted for $12 million of the increase, all of which relates to legal defense costs of the Rigas Family.

Depreciation

Depreciation expense increased by $43 million, or 21%, for the three months ended March 31, 2004 as compared to the same period in 2003. The
following table summarizes certain components of depreciation expense for the indicated periods (dollars in thousands):

Three months ended March 31,2004

2003

$
Increase
(decrease)

%
Increase
(decrease)Cable

$
229,970

$
195,356

$
34,614

18
%Corporate and other


17,801


9,586


8,215

86Total

$
247,771

$
204,942

$
42,829

21
%


Cable
depreciation expense increased $35 million, of which the consolidation of the Rigas Co-Borrowing Entities accounted for $10 million, or 5%. The remaining
increase was primarily attributable to a reduction in the useful life used to depreciate standard definition digital set-top boxes from five years to four years (for
additional information, see Note 10, "Other Financial Information," to the accompanying condensed consolidated financial statements). Offsetting these increases was the net effect of a decrease
in depreciation expense associated with property and equipment that has become fully depreciated or retired and increases in depreciation expense due to capital expenditures.

Corporate
and other depreciation expense increased $8 million primarily due to the write-off of abandoned assets.

Amortization

Amortization expense was $39 million for both the three months ended March 31, 2004 and 2003. As described in Note 10, "Other
Financial Information," to the accompanying condensed consolidated

65

---



financial
statements, beginning in 2004, we began amortizing our customer relationships using the double declining balance method. The effect of the change in 2004 was to decrease amortization expense
by $6 million. This decrease was offset by increases due to the consolidation of the Rigas Co-Borrowing Entities and amortization of internally developed software costs.

Provision for uncollectible amounts due from the Rigas Family and Rigas Family Entities

During the first quarter of 2003, we recorded an additional provision of $5 million to increase the allowance for uncollectible amounts from the Rigas
Family and Rigas Family Entities due to further decreases in the fair value of the underlying net assets of the Rigas Family and Rigas Family Entities.

Interest expense, net of amounts capitalized

Interest expense, net of amounts capitalized, was $97 million for the three months ended March 31, 2004, as compared to $96 million
for the same period in 2003. The increase relates to higher average monthly outstanding debt balances, higher average interest rates and lower capitalized interest in the first three months of
2004 as compared to the same period in 2003. Since the Petition Date, we have been paying or accruing interest only on amounts outstanding under the DIP facilities and the pre-petition
credit agreements, including the entire principal balance outstanding under the Co-Borrowing Facilities.

Other income (expense), net

Other expense, net was $425 million during the three months ended March 31, 2004, as compared to $101,000 of other income, net for the
three months ended March 31, 2003. In the first quarter of 2004, we recorded a $425 million charge related to the Non-Prosecution Agreement. See Note 9,
"Contingencies," to the accompanying condensed consolidated financial statements for additional information.

Reorganization expenses due to bankruptcy

Certain expenses directly related to the Chapter 11 filing are expensed and included in reorganization expenses due to bankruptcy. Such expenses aggregated
$15 million and $20 million for the three months ended March 31, 2004 and 2003, respectively. We will continue to incur significant reorganization expenses until we emerge from
bankruptcy. For additional information, see Note 2, "Bankruptcy Proceedings and Sale of Assets of the Company," to the accompanying condensed consolidated financial statements.

Income tax benefit (expense)

We recorded an income tax benefit of $74 million and an income tax expense of $25 million for the three months ended March 31, 2004
and 2003, respectively. Such amounts differ from the amounts that would have resulted from the application of statutory tax rates due primarily to increases in the valuation allowances provided
against our net operating loss carryforwards and other deferred tax assets during 2004 and 2003. During 2004, we re-evaluated the impact on our valuation allowance due to the timing of our
reversing temporary differences, including our policy of netting the effect of reversing temporary differences associated with customer relationship intangible assets with intangible assets that have
indefinite lives. As a result of this evaluation, we changed the expectations for scheduling the expected reversal of our deferred tax liabilities associated with these intangible assets and included
in our income tax benefit for 2004 a $166 million reduction in the valuation allowances on deferred tax assets related to current expectations for the reversal of our deferred tax liabilities.

66

---



Minority's interest in loss of subsidiary

Minority's interest in loss of subsidiary was $4 million for the three months ended March 31, 2004 as compared to $7 million for the
same period in 2003. Minority's interest in loss of subsidiary represents the minority interest owner's share of the loss of our majority-owned subsidiary, Century-TCI.

Gain (loss) from discontinued operations

As discussed in Note 8, "TelCove Settlement and Discontinued Operations," to the accompanying condensed consolidated financial statements, the transfer of
economic risks and benefits of the CLEC Market Assets to TelCove pursuant to the Global Settlement occurred on April 7, 2004. The $499,000 gain from discontinued operations for the first
three months of 2004 included $9.2 million of revenue and $8.7 million of costs and expenses. The $4 million loss from discontinued operations for the first
three months of 2003 included $10 million of revenue and $14 million of costs and expenses.

Cumulative effects of accounting changes

As a result of the adoption of FIN 46-R and the consolidation of the Rigas Co-Borrowing Entities, we recorded a charge of
$589 million as a cumulative effect of an accounting change on January 1, 2004. See Note 3, "Variable Interest Entities," to the accompanying condensed consolidated financial
statements for additional information. In addition, beginning in 2004, we began amortizing our customer relationships using the double declining balance method. Customer relationships were amortized
using the straight-line method prior to 2004. The application of the new amortization method to customer relationships acquired prior to 2004 resulted in an additional charge of
$263 million which has been reflected as a cumulative effect of a change in accounting principle. See Note 10, "Other Financial Information," to the accompanying condensed consolidated
financial statements for additional information.

Net loss

Our net loss was $1,355 million and $179 million for the three months ended March 31, 2004 and 2003, respectively. As described above,
we recorded charges of $852 million for cumulative effects of accounting changes and a $425 million charge related to the Non-Prosecution Agreement. In addition, although
revenue increased 20%, such increase was offset by a 19% increase in operating costs and expenses, including a $21 million increase in investigation and re-audit related fees.

We
are attempting to improve our operating results by increasing revenue while containing, and wherever possible, reducing expenses and capital expenditures. Future increases in revenue
are dependent on our ability to: (i) increase the penetration of our digital and HSI services; (ii) launch new service offerings; (iii) implement rate increases; and
(iv) maintain or increase the number of basic cable subscribers. We implemented cost reduction and containment efforts in 2004 and 2003 and we expect to focus on available opportunities to
reduce or contain costs for the foreseeable future. Our ability to increase revenue and reduce or contain expenses and capital expenditures may be adversely affected by unfavorable developments in the
Chapter 11 proceedings, by the Sale Transaction and by competitive, regulatory, technological and other factors outside of our control. Accordingly, no assurance can be given that we will be able to
improve our operating results in future periods.

67

---



LIQUIDITY AND CAPITAL RESOURCES

Historical Sources and Uses of Cash

The following table summarizes net cash provided by (used in) our operating, investing and financing activities during the indicated periods (amounts in
thousands):

Three months ended March 31,2004

2003Operating activities

$
147,065

$
171,491Investing activities:Capital expenditures

$
(195,803
)
$
(150,523
)Other investing activities


(493
)

65,969Total investing activities

$
(196,296
)
$
(84,554
)Financing activities

$
68,661

$
(8,202
)


Operating activities.Net cash provided by operating activities for the three months ended March 31, 2004 and 2003 was
$147 million and $171 million, respectively. The $24 million decrease during the first three months of 2004 compared to the same period of 2003 was due primarily to a
decrease in accounts payable, partially offset by a decrease in accounts receivable.

Investing activities.Net cash used in investing activities increased to $196 million for the three months
ended March 31, 2004 from $85 million for the comparable period of the prior year. In both periods, we continued to make significant capital expenditures to upgrade and rebuild our cable
systems and to support the launch of new services and such expenditures increased 30% to $196 million for the three months ended March 31, 2004 from $151 million for the
same period of the prior year. During the first quarter of 2004, cash used by other investing activities was $493,000 compared to cash provided by other investing activities of $66 million in
the first quarter of 2003. A reduction in restricted cash of $59 million and net cash received from the Rigas Family and Rigas Family Entities of $15 million were the main components of
other investing activities in the first quarter of 2003. The reduction in net cash received from the Rigas Family and Rigas Family Entities was primarily due to the consolidation of the Rigas
Co-Borrowing Entities effective January 1, 2004.

Financing activities.Net cash provided by financing activities during the 2004 period was comprised of borrowings made
pursuant to the DIP Facility, net of repayments of debt. For the three months ended March 31, 2004, we borrowed $80 million against the Tranche A Loan. There were no borrowings in
the first three months of 2003.

CURRENT AND FUTURE SOURCES OF LIQUIDITY

General

Since the Petition Date, we have utilized cash provided by operating activities and borrowings under our DIP facilities to fund capital expenditures and other
liquidity requirements. As discussed in greater detail below, our restricted cash balances do not represent sources of short-term liquidity.

68

---





First Extended DIP Facility

In connection with the Chapter 11 filings, the Loan Parties entered into the $1,500 million DIP Facility. On May 10, 2004, the Loan Parties entered
into the $1,000 million First Extended DIP Facility, which superseded and replaced in its entirety the DIP Facility. The First Extended DIP Facility was superseded and replaced in its entirety
by the Second Extended DIP Facility, which is described below.

The
First Extended DIP Facility was scheduled to mature upon the earlier of March 31, 2005 or upon the occurrence of certain other events, as described in the First Extended DIP
Facility. Upon the closing of the First Extended DIP Facility, we borrowed an aggregate of $391 million under the First Extended DIP Facility, and used all such proceeds to repay all of the
then outstanding principal, accrued interest and certain related fees and expenses under the DIP Facility. The proceeds from the borrowings under the First Extended DIP Facility were permitted to be
used for general corporate purposes and investments, as defined in the First Extended DIP Facility. The First Extended DIP Facility was secured with a first priority lien on all of the Loan Parties'
unencumbered assets, a priming first priority lien on all assets of the Loan Parties securing their pre-petition bank debt and a junior lien on all other assets of the Loan Parties. The
First Extended DIP Facility was comprised of an $800 million Tranche A Loan and a $200 million Tranche B Loan. Loans under the First Extended DIP Facility accrued interest at the
Alternative Base Rate as defined in the First Extended DIP Facility, plus 1.50% or the Adjusted LIBOR Rate as defined in the First Extended DIP Facility, plus 2.50%.

The
terms of the First Extended DIP Facility contained certain restrictive covenants, which included limitations on the ability of the Loan Parties to: (i) incur additional
guarantees, liens and indebtedness; (ii) sell or otherwise dispose of certain assets; and (iii) pay dividends or make other distributions, loans or payments with respect to any shares of
capital stock, subject to certain exceptions set forth in the First Extended DIP Facility. The First Extended DIP Facility also required compliance with certain financial covenants with respect to
operating results and capital expenditures. These financial covenants became effective for periods beginning May 1, 2003. From time to time, the Loan Parties and the DIP lenders entered into
certain amendments to the terms of the First Extended DIP Facility. In addition, from time to time, we received waivers to prevent or cure certain defaults under the First Extended DIP Facility.

Second Extended DIP Facility

On February 25, 2005, the Loan Parties entered into the $1,300 million, Second Extended DIP Facility, which supersedes and replaces in its entirety
the First Extended DIP Facility. The Second Extended DIP Facility was approved by the Bankruptcy Court on February 22, 2005 and closed on February 25, 2005. Except as set forth below,
the material terms and conditions of the Second Extended DIP Facility are substantially identical to the material terms and conditions of the First Extended DIP Facility, including the covenants and
collateral securing the Second Extended DIP Facility.

The
Second Extended DIP Facility matures upon the earlier of March 31, 2006 or the occurrence of certain other events, as described in the Second Extended DIP Facility. The Second
Extended DIP Facility is comprised of an $800 million Tranche A Loan (including a $500 million letter of credit subfacility) and a $500 million Tranche B Loan. The proceeds from
borrowings under the Second Extended DIP Facility are permitted to be used for general corporate purposes and investments, as defined in the Second Extended DIP Facility. The Second Extended DIP
Facility is secured with a first priority lien on all of the Loan Parties' unencumbered assets, a priming first priority lien on all assets of the Loan Parties securing their pre-petition
bank debt and a junior lien on all other assets of the Loan Parties. The applicable margin on loans extended under the Second Extended DIP Facility was reduced (when compared to the First Extended DIP
Facility) to 1.25% per annum in the case of Alternate Base Rate loans and 2.25% per annum in the case of Adjusted LIBOR rate loans. In

69

---



addition,
under the Second Extended DIP Facility, the commitment fee with respect to the unused portion of the Tranche A Loan was changed from a commitment fee of between 0.50% and 0.75% per annum to
0.50% per annum.

In
connection with the closing of the Second Extended DIP Facility, on February 25, 2005, the Loan Parties borrowed an aggregate of $578 million thereunder, and used all
such proceeds and a portion of available cash and cash equivalents to repay all of the indebtedness, including accrued and unpaid interest and certain fees and expenses, outstanding under the First
Extended DIP Facility. In addition, all of the participations in the letters of credit outstanding under the First Extended DIP Facility were transferred to certain lenders under the Second Extended
DIP Facility.

The
terms of the Second Extended DIP Facility contain certain restrictive covenants, which include limitations on the ability of the Loan Parties to (i) incur additional
guarantees, liens and indebtedness, (ii) sell or otherwise dispose of certain assets and (iii) pay dividends or make other distributions or payments with respect to any shares of capital
stock, subject to certain exceptions set forth in the Second Extended DIP Facility. The Second Extended DIP Facility also requires compliance with certain financial covenants with respect to operating
results and capital expenditures.

On
March 9, 2005, certain Loan Parties cash collateralized certain letters of credit outstanding under the Second Extended DIP Facility in connection with the consummation of
certain asset sales. On May 27, 2005, certain Loan Parties made mandatory prepayments of principal on the Second Extended DIP Facility in connection with the consummation of certain asset
sales. As a result, the total commitment of the entire Second Extended DIP Facility was reduced to $1,276 million, with the total commitment of the Tranche A Loan being reduced to
$776 million. As of June 30, 2005, $202 million under the Tranche A Loan has been drawn and letters of credit totaling $86 million have been issued under the Tranche A
Loan, leaving availability of $488 million under the Tranche A Loan. Furthermore, as of June 30, 2005, the entire $500 million under the Tranche B Loan has been drawn.

Cash Provided by Operating Activities

Consistent with our historical experience, we expect that net cash provided by operating activities will continue to represent an important source of liquidity
for us in future periods. We consider both traditional GAAP and alternative measures of cash generated by our operations when evaluating this source of liquidity. Free cash flow is an important
alternative indicator we use to measure our ability to service debt. Free cash flow, which is defined by us as net cash provided by operating activities less capital expenditures, is used by us as a
measure of liquidity. Our definition of free cash flow may differ from similar cash flow measurements used by other public companies, including other public companies offering similar services. We
believe that free cash flow provides a useful means of evaluating our liquidity by enabling us to focus on our ability to service debt and make strategic investments, after giving effect to capital
expenditures, which is a significant and ongoing obligation for us. See "Current and Future Uses of LiquidityCapital Expenditures" below. However, free cash flow is not intended to
replace or supersede any information presented in accordance with GAAP. The following table presents the non-GAAP measure, free cash flow (deficit), together with a reconciliation of such
alternative

70

---



measure
to the corresponding GAAP measure, net cash provided by operating activities, for the indicated periods (amounts in thousands):

Three months ended March 31,2004

2003Free cash flow (deficit)

$
(48,738
)
$
20,968Adjustments to reconcile free cash flow to net cash provided by operating activities:Capital expenditures


195,803


150,523Net cash provided by operating activities

$
147,065

$
171,491


Net
cash provided by operating activities is largely a function of the revenue generated and cash expenses incurred during the period. Accordingly, the future reliability of net cash
provided by operating activities is dependent on our ability to maintain or increase our revenue while controlling the corresponding cash expenses. Future increases in revenue are dependent on our
ability to increase the penetration of our digital and HSI services, launch new service offerings, implement rate increases and maintain or increase the number of basic cable subscribers. Our ability
to continue to achieve growth in digital cable, HSI and other new service offerings is in part dependent on our ability to economically rebuild and upgrade our cable systems. Although we believe that
we can continue to increase our revenue and control our cash expenses, factors outside of our control such as adverse changes in the competitive, regulatory, economic, technological, or political
environment, or in consumer trends and/or demographics could adversely affect our ability to do so. Although we have generated free cash flow deficits in recent years, we plan to manage our
operations, debt structure and capital expenditures with the objective of achieving positive free cash flow in future periods. However, due to uncertainties relating to the timing of our emergence
from bankruptcy and other matters, we cannot predict when, or if, we will achieve positive free cash flow. For additional information concerning our planned capital expenditures, see "Current and
Future Uses of LiquidityCapital Expenditures" below.

Adequacy of Current Sources of Liquidity

Although no assurance can be given, we believe that cash provided by operating activities, along with the financing provided by the Second Extended DIP Facility,
should provide us with sufficient liquidity to fund our operations through the expiration date of the Second Extended DIP Facility. As noted above, the Second Extended DIP Facility expires on
March 31, 2006 or earlier upon the occurrence of certain events. If it appears likely that the Second Extended DIP Facility will expire prior to the effective date of a plan of reorganization,
we expect to request an amendment of the Second Extended DIP Facility to postpone the expiration thereof to a date that would allow sufficient time for a plan of reorganization to become effective. It
is uncertain whether the Second Extended DIP Facility lenders would agree to such an amendment and what terms might be imposed by such lenders in connection with such an amendment. If we were not
successful in postponing the expiration of the Second Extended DIP Facility, we would seek alternative debtor-in-possession financing. No assurance can be given that
alternative debtor-in-possession financing would be available on terms acceptable to us, if at all.

Our
ability to obtain sufficient liquidity to fund our operations during the term of the Second Extended DIP Facility is dependent upon our ability to maintain compliance with the
covenants under the Second Extended DIP Facility and upon our ability to generate sufficient cash from operating activities and financing activities to meet our obligations as they become due.

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Current and Future Uses of Liquidity

Contractual Obligations.Future payments due under the Debtors' pre-petition obligations are subject to
adjustment depending on Bankruptcy Court actions, further developments with respect to disputed claims, determinations of the secured status of certain claims, the value of any collateral securing
such claims, or other events. Such adjustments may be material. There have been no material changes from the 2003 Form 10-K related to contractual obligations.

Off-Balance Sheet Arrangements.We have issued standby letters of credit for the benefit of franchise authorities
and other parties, most of which have been issued to an intermediary surety bonding company. The letters of credit are collateralized by either cash or the undrawn portion of the Second Extended DIP
Facility. At March 31, 2004, the aggregate principal amount of letters of credit issued by us was $63 million, of which $62 million was issued under the DIP Facility and
$1 million was collateralized by cash. Letters of credit issued under the DIP facilities reduce the amount that may be borrowed under the DIP facilities. We do not have any other
off-balance sheet arrangements.

Capital Expenditures.The cable television industry is capital intensive and our ability to offer new services and increase
revenue in future periods is largely dependent on our ability to upgrade the capacity and other technical capabilities of our cable systems. In addition, we deploy capital to: (i) support the
launch of new services; (ii) extend our services to new and existing residential development; and (iii) improve or maintain the quality of our cable distribution systems in order to
retain subscribers and reduce the costs associated with service calls and maintenance activities. In general, our deployment of capital is designed to maximize the return on capital while taking into
account relevant factors such as: (i) available sources of liquidity; (ii) debt covenants; (iii) franchise requirements; and (iv) availability of skilled labor.

Our
total capital expenditures for the first three months of 2004 were $196 million as compared to $151 million for the same period in 2003. In recent years,
we have devoted significant capital to the rebuild and upgrade of our cable systems and substantially all of our cable networks have been rebuilt
to a bandwidth of 550 Megahertz or greater with two-way capability. Nevertheless, subject to the availability of sufficient financial resources and to possible future changes in our
business plan in response to the Sale Transaction, or competitive, technological, regulatory and other external developments, capital expenditures during the next several years following 2004
are not expected to decrease significantly from the 2004 level as we migrate our expenditures from the rebuild program to customer premise equipment and scaleable infrastructure associated with new
services and technologies such as telephony and video on demand. The Sale Transaction also requires us to use commercially reasonable efforts to maintain capital expenditures in accordance with our
long range plan.

Liquidation of Debt and Other Liabilities.At March 31, 2004, our liabilities totaled $21,064 million including
$18,604 million representing pre-petition liabilities that are subject to compromise. We currently cannot predict the amount of cash that will be required to settle
pre-petition liabilities subject to compromise, as the rights and claims of the Debtors' various creditors will be determined by a plan of reorganization that is ultimately subject to
confirmation by the Bankruptcy Court.

CRITICAL ACCOUNTING POLICIES

Subsequent to filing our 2003 Form 10-K, we concluded that the Rigas Co-Borrowing Entities represent variable interest entities for
which we are the primary beneficiary, as contemplated by FIN 46-R. Accordingly, effective January 1, 2004, we began consolidating the Rigas Co-Borrowing Entities on
prospective basis and, as such, have not restated previously issued financial statements. For additional information, see Note 3, "Variable Interest Entities," to the accompanying condensed
consolidated financial statements.

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NEW ACCOUNTING PRONOUNCEMENTS

In May 2005, the FASB issued SFAS No. 154 which provides guidance on the accounting for and reporting of accounting changes and error corrections.
In general, in the absence of explicit transition requirements for new pronouncements, SFAS No. 154 requires retrospective application of the effects of changes in accounting principle to prior
periods' financial statements, unless it is impracticable to determine the effects of the change. The provisions of SFAS No. 154 are effective for accounting changes and corrections of errors
made in fiscal years beginning after December 15, 2005. The adoption of SFAS No. 154 is not expected to have a material impact on our consolidated results of operations or
financial position.

In
March 2005, the FASB issued FIN 47 which addresses the financial accounting and reporting obligations associated with the conditional retirement of tangible
long-lived assets and the associated asset retirement costs. FIN 47 requires that, where there is an unconditional obligation to perform asset retirement activity even though there is
uncertainty as to the timing and/or the method of settlement may be conditional on a future event, companies must recognize a liability for the fair value of the conditional asset retirement if the
fair value of the liability can be reasonably estimated. The requirements of FIN 47 are effective for fiscal periods ending after December 15, 2005. We are currently evaluating the impact of
the adoption of FIN 47.

In
December 2004, the FASB issued SFAS No. 123-R. Generally, SFAS No. 123-R requires us to recognize the grant-date fair value of
stock options as compensation expense in its consolidated statements of operations at the date the options are issued to employees. SFAS No. 123-R applies to all options and other
share-based payments granted after December 31, 2005 and to previously granted awards that are either unvested as of the adoption date or are modified after the adoption date. Following an
April 2005 amendment to SFAS No. 123-R, we are required to adopt this pronouncement on January 1, 2006 for our 2006 fiscal year.

We
have not granted any stock options since the Petition Date and do not anticipate granting any new options until we emerge from bankruptcy. All options currently outstanding will be
fully vested prior to the adoption of SFAS No. 123-R. Accordingly, at this time, the adoption of SFAS No. 123-R will not impact our consolidated results of
operations.

In
December 2004, the FASB issued SFAS No. 153. In general, SFAS No. 153 requires that exchanges of nonmonetary assets should be measured based on the fair value of
the assets exchanged, unless the entity's future cash flows are expected to change significantly as a result of the exchange. The provisions of SFAS No. 153 are effective for nonmonetary asset
exchanges occurring in fiscal periods beginning after June 15, 2005, and are to be applied prospectively. The adoption of SFAS No. 153 is not expected to have a material impact on our
consolidated results of operations or financial position.

In
November 2004, the FASB issued SFAS No. 151. In general, SFAS No. 151 requires that inventory costs such as idle facility expense, freight, handling costs and
spoilage be recognized as current period charges regardless of whether they meet the "abnormal" criterion of ARB No. 43. The provisions of SFAS No. 151 are effective for inventory costs
incurred during fiscal years beginning after June 15, 2005, and are to be applied prospectively. The adoption of SFAS No. 151 is not expected to have a material impact on our
consolidated results of operations or financial position.

In
March 2004, the EITF reached a consensus on Issue No. 03-6 which addresses the calculation and disclosure of earnings per share for companies with
participating convertible securities or multiple classes of common stock. EITF No. 03-6 is effective for fiscal periods beginning after March 31, 2004. The adoption of EITF
No. 03-6 did not have an impact on our calculation or disclosure of earnings per share.

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

There have been no material changes from the 2004 Form 10-K and 2003 Form 10-K related to our exposure to market risk from
interest rates.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

The Company maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports filed under the
Exchange Act are recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms. Disclosure controls and procedures include controls and procedures
designed to ensure that such information is accumulated and communicated to our management, including our CEO, Chief Financial Officer ("CFO") and Chief Accounting Officer ("CAO"), as appropriate, to
allow timely decisions regarding required financial disclosure.

Our
management, under the supervision and with the participation of our CEO, CFO and CAO, has completed an evaluation of the effectiveness of the design and operation of our disclosure
controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) as of the end of the fiscal year ended December 31, 2004. Based on our evaluation of the
effectiveness of the design and operation of our disclosure controls and procedures, which included consideration of certain material weaknesses and our inability to file this Quarterly Report on
Form 10-Q within the
statutory time period, our management, including our CEO, CFO and CAO, concluded that as of December 31, 2004, the Company's disclosure controls and procedures were not effective. In light of
the material weaknesses, we performed additional analyses and other post-closing procedures to ensure the condensed consolidated financial statements (unaudited) were prepared in
accordance with GAAP. Accordingly, we believe that the condensed consolidated financial statements (unaudited) included in this Quarterly Report on Form 10-Q fairly present, in all
material respects, the Company's financial position, results of operations and cash flows for the periods presented.

Changes in Internal Control Over Financial Reporting

In connection with our evaluation of the effectiveness of the Company's internal control over financial reporting at December 31, 2004, we have taken a
number of steps that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.

Throughout
2004, the Company, assisted by significant outside resources that supplemented our accounting and internal audit functions, carried out documentation and testing of the
Company's internal control over financial reporting as required by Section 404 of the Sarbanes-Oxley Act of 2002 and Audit Standard No. 2 as promulgated by the Public Company Accounting
Oversight Board. During this documentation and testing process, we preliminarily identified a substantial number of internal control deficiencies, including, to the extent they still existed, the
material weaknesses and/or reportable conditions discussed in our 2003 Form 10-K. As part of our Sarbanes-Oxley Section 404 efforts, we reviewed these deficiencies, including
identification of those that relate to key internal controls over financial reporting, and determined the level of significance of each such key deficiency. As of the filing of this Quarterly Report,
we have successfully remediated a portion of these control deficiencies. We will continue our efforts to remediate previously disclosed internal control deficiencies that are unremediated as of the
filing date of this Quarterly Report.

We
continue to dedicate substantial resources to this effort and believe that we have made considerable progress in establishing effective internal control over financial reporting.
However, our management is unable to provide assurance as to when we and our independent registered public accountants will be able to determine that the Company's internal control over financial
reporting is effective.

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PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

Bankruptcy Proceedings.On June 25, 2002, Adelphia and substantially all of its wholly-owned, domestic subsidiaries
filed voluntary petitions to reorganize under Chapter 11 in the Bankruptcy Court. Previously, on June 10, 2002, Century filed a voluntary petition to reorganize under Chapter 11, seeking
protection under the U.S. bankruptcy laws. These cases are being jointly administered under the caption "In re: Adelphia Communications Corporation, et al., Case No. 02-41729." We
are currently operating as debtors-in-possession.

Under
the Bankruptcy Code, actions to collect pre-petition indebtedness, as well as most other pending litigation, are stayed and other contractual obligations against the
Company generally may not be enforced. Absent an order of the Bankruptcy Court, substantially all pre-petition contractual liabilities can only be settled under a plan of reorganization to
be voted upon by holders of claims and equity interests and approved by the Bankruptcy Court.

The
Company cannot predict the outcome of these legal proceedings or estimate the possible effects on the financial condition or results of operations of the Company.

SEC Civil Action and DoJ Investigation.On July 24, 2002, the SEC Civil Action was filed against Adelphia, certain
members of the Rigas Family and others, alleging various securities fraud and improper books and records claims arising out of actions allegedly taken or directed by certain members of the Rigas
Family who held all of the senior executive positions at Adelphia and constituted five of the nine members of Adelphia's board of directors (none of whom remain with the Company).

On
December 3, 2003, the SEC filed a proof of claim in the Chapter 11 Cases against Adelphia for, among other things, penalties, disgorgement and prejudgment interest in an
unspecified amount. The staff of the SEC told the Company's advisors that its asserted claims for disgorgement and civil penalties under various legal theories could amount to billions of
dollars. On July 14, 2004, the Creditors' Committee initiated an adversary proceeding seeking, in effect, to subordinate the SEC's claims based on the SEC Civil Action.

On
April 25, 2005, after extensive negotiations with the SEC and the U.S. Attorney, the Company entered into the Non-Prosecution Agreement pursuant to which the
Company agreed, among other things: (i) to contribute $715,000,000 in value to a fund to be established and administered by the United States Attorney General and the SEC for the benefit of
investors harmed by the activities of prior management (the "Restitution Fund"); (ii) to continue to cooperate with the U.S. Attorney until the later of April 25, 2007, or the date upon
which all prosecutions arising out of the conduct described in the Rigas Criminal Action (as described below) and SEC Civil Action are final; and (iii) not to assert claims against the Rigas
Family except for John J. Rigas, Timothy J. Rigas and Michael J. Rigas (together, the "Excluded Parties"), provided that Michael J. Rigas will cease to be an Excluded Party if all currently pending
criminal proceedings against him are resolved without a felony conviction on a charge involving fraud or false statements (other than false statements to the U.S. Attorney or the SEC).

The
Company's contribution to the Restitution Fund will consist of stock, future proceeds of litigation and, assuming consummation of the Sale Transaction (or another sale generating
cash of at least $10 billion), cash. In the event of a sale generating both stock and at least $10 billion in cash, as contemplated in the Sale Transaction, the components of the
Company's contribution to the Restitution Fund will consist of $600,000,000 in cash and stock (with at least $200,000,000 in cash) and 50% of the first $230,000,000 of future proceeds, if any, from
certain litigation against third parties who injured the Company. If, however, the Sale Transaction (or another sale) is not consummated and instead the Company emerges from bankruptcy as an
independent entity, the $600,000,000 payment by the Company will consist entirely of stock in the reorganized Adelphia. Unless extended on consent of the

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U.S.
Attorney and the SEC, which consent may not be unreasonably withheld, the Company must make these payments on or before the earlier of: (i) October 15, 2006;
(ii) 120 days after confirmation of a stand-alone plan of reorganization; or (iii) seven days after the first distribution of stock or cash to creditors under any plan of
reorganization. The Company recorded charges of $425,000,000 and $175,000,000 during 2004 and 2002, respectively, related to the Non-Prosecution Agreement. The $425,000,000 charge is
reflected in other income (expense), net in the accompanying condensed consolidated statements of operations.

The
U.S. Attorney agreed: (i) not to prosecute Adelphia or specified subsidiaries of Adelphia for any conduct (other than criminal tax violations) related to the Rigas Criminal
Action (defined below) or the allegations contained in the SEC Civil Action; (ii) not to use information obtained through the Company's cooperation with the U.S. Attorney to criminally
prosecute the Company for tax violations;
and (iii) to convey to the Company all of the Rigas Co-Borrowing Entities forfeited by the Rigas Family and Rigas Family Entities, certain specified real estate forfeited by the
Rigas Family and any securities of the Company that were directly or indirectly owned by the Rigas Family prior to forfeiture. The U.S. Attorney agreed with the Rigas Family not to require forfeiture
of Coudersport and Bucktail (which together served approximately 5,000 subscribers (unaudited) in July 2005). A condition precedent to the Company's obligation to make the contribution to the
Restitution Fund described in the preceding paragraph is the Company's receipt of title to the Rigas Co-Borrowing Entities, certain specified real estate and any securities described
above, forfeited by the Rigas Family and Rigas Family Entities, free and clear of all liens, claims, encumbrances, or adverse interests. The forfeited Rigas Co-Borrowing Entities,
anticipated to be conveyed to the Company, represent the overwhelming majority of the Rigas Co-Borrowing Entities' subscribers and value.

Also
on April 25, 2005, the Company consented to the entry of a final judgment in the SEC Civil Action resolving the SEC's claims against the Company. Pursuant to this agreement,
the Company will be permanently enjoined from violating various provisions of the federal securities laws, and the SEC has agreed that if the Company makes the $715,000,000 contribution to the
Restitution Fund, then the Company will not be required to pay disgorgement or a civil monetary penalty to satisfy the SEC's claims.

Pursuant
to letter agreements with TW NY and Comcast, the U.S. Attorney has agreed, notwithstanding any failure by the Company to comply with the Non-Prosecution Agreement,
that it will not criminally prosecute any of the entities or their subsidiaries purchased from the Company by TW NY or Comcast (the "Transferred Joint Venture Entities") pursuant to the Sale
Transaction. Under such letter agreements, each of TW NY and Comcast have agreed that following the closing of the Sale Transaction they will cooperate with the relevant governmental authorities'
requests for information about the Company's operations, finances and corporate governance between 1997 and confirmation of the Plan. The sole and exclusive remedy against TW NY or Comcast for breach
of any obligation in the letter agreements is a civil action for breach of contract seeking specific performance of such obligations. In addition, TW NY and Comcast entered into letter agreements with
the SEC agreeing that upon and after the closing of the Sale Transaction, TW NY, Comcast and their respective affiliates (including the Transferred Joint Venture Entities) will not be subject to, or
have any obligation under, the final judgment consented to by the Company in the SEC Civil Action.

The
Non-Prosecution Agreement was subject to the approval of, and has been approved by, the Bankruptcy Court. Adelphia's consent to the final judgment in the SEC Civil Action
was subject to the approval of, and has been approved by, both the Bankruptcy Court and the District Court. Various parties have challenged and sought appellate review or reconsideration of the orders
of the Bankruptcy Court and the District Court approving these settlements. The order of the District Court approving Adelphia's consent to the final judgment in the SEC Civil Action has not been
appealed. Although appeals of the Bankruptcy Court's order are still pending, the appeals of the District Court's approval of the Government-Rigas Settlement Agreement (defined below) and the creation
of the Restitution

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Fund
have been denied by the United States Court of Appeals for the Second Circuit (the "Second Circuit"). That denial is currently the subject of a pending request for full court review by the Second
Circuit.

Adelphia's Lawsuit Against the Rigas Family.On July 24, 2002, Adelphia filed a complaint in the Bankruptcy Court
against John J. Rigas, Michael J. Rigas, Timothy J. Rigas, James P. Rigas, James Brown, Michael C. Mulcahey, Peter L. Venetis, Doris Rigas, Ellen Rigas Venetis and the Rigas Family Entities (the
"Rigas Civil Action"). This action generally alleged the defendants misappropriated billions of dollars from the Company in breach of their fiduciary duties to Adelphia. On November 15,
2002, Adelphia filed an amended complaint against the defendants that expanded upon the facts alleged in the original complaint and alleged violations of the Racketeering Influenced and Corrupt
Organizations ("RICO") Act, breach of fiduciary duty, securities fraud, fraudulent concealment, fraudulent misrepresentation, conversion, waste of corporate assets, breach of contract, unjust
enrichment, fraudulent conveyance, constructive trust, inducing breach of fiduciary duty, and a request for an accounting (the "Amended Complaint"). The Amended Complaint sought relief in the form of,
among other things, treble and punitive damages, disgorgement of monies and securities obtained as a consequence of the Rigas Family's improper conduct and attorneys' fees.

On
April 25, 2005, Adelphia and the Rigas Family entered into a settlement agreement with respect to the Rigas Civil Action (the "Adelphia-Rigas Settlement Agreement"), pursuant
to which Adelphia agreed, among other things: (i) to pay $11,500,000 to a legal defense fund for the benefit of the Rigas Family; (ii) to provide management services to Coudersport and
Bucktail for an interim period through and including December 31, 2005 ("Interim Management Services"); (iii) to indemnify Coudersport and Bucktail, and the Rigas Family's (other than
the Excluded Parties') interest therein, against claims asserted by the lenders under the Co-Borrowing Facilities with respect to such indebtedness up to the fair market value of those
entities (without regard to their obligations with respect to such indebtedness); (iv) to provide certain members of the Rigas Family with certain indemnities, reimbursements or other
protections in connection with certain third party claims arising out of Company litigation, and in connection with claims against certain members of the Rigas Family by any of the
Tele-Media Joint Ventures or Century/ML Cable; and (v) within ten business days of the date on which the Forfeiture Order is entered, dismiss the Rigas Civil Action except
for claims against the Excluded Parties. The Rigas Family agreed: (i) to make certain tax elections, under certain circumstances, with respect to the Rigas Co-Borrowing Entities
(other than Coudersport and Bucktail); (ii) to pay Adelphia five percent of the gross operating revenue of Coudersport and Bucktail for the Interim Management Services; and (iii) to
offer employment to certain Coudersport and Bucktail employees on terms and conditions that, in the aggregate, are no less
favorable to such employees (other than any employees who were expressly excluded by written notice to Adelphia received by July 1, 2005) than their terms of employment with the Company.

Pursuant
to the Adelphia-Rigas Settlement Agreement, on June 21, 2005, the Company filed a dismissal with prejudice of all claims in this action except against the Excluded
Parties.

This
settlement was subject to the approval of, and has been approved by, the Bankruptcy Court. Various parties have challenged and sought appellate review or reconsideration of the
order of the Bankruptcy Court approving this settlement. The appeals of the Bankruptcy Court's approval remain pending.

Rigas Criminal Action.In connection with an investigation conducted by the DoJ, on July 24, 2002, certain members of
the Rigas Family and certain alleged co-conspirators were arrested, and on September 23, 2002, were indicted by a grand jury on charges including fraud, securities fraud, bank fraud
and conspiracy to commit fraud (the "Rigas Criminal Action"). On November 14, 2002, one of the Rigas Family's alleged co-conspirators, James Brown, pleaded guilty to one count each
of conspiracy, securities fraud and bank fraud. On January 10, 2003, another of the Rigas Family's alleged

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co-conspirators,
Timothy Werth, who had not been arrested with the others on July 24, 2002, pleaded guilty to one count each of securities fraud, conspiracy to commit securities
fraud, wire fraud and bank fraud. The trial in the Rigas Criminal Action began on February 23, 2004 in the District Court. On July 8, 2004, the jury returned a partial verdict in the
Rigas Criminal Action. John J. Rigas and Timothy J. Rigas were each found guilty of conspiracy (one count), bank fraud (two counts), and securities fraud (15 counts) and not guilty of wire fraud (five
counts). Michael J. Mulcahey was acquitted of all 23 counts against him. The jury found Michael J. Rigas not guilty of conspiracy and wire fraud, but remained undecided on the securities fraud and
bank fraud charges against him. On July 9, 2004, the court declared a mistrial on the remaining charges against Michael J. Rigas after the jurors were unable to reach a verdict as to those
charges. The bank fraud charges against Michael J. Rigas have since been dismissed with prejudice. The District Court has set January 9, 2006 as the date for the retrial of Michael J. Rigas on
the securities fraud charges. On March 17, 2005, the District Court denied the motion of John J. Rigas and Timothy J. Rigas for a new trial. On June 20, 2005, John J. Rigas and Timothy
J. Rigas were convicted and sentenced to 15 years and 20 years in prison, respectively. John J. Rigas and Timothy J. Rigas have appealed their convictions and sentences and remain free
on bail pending resolution of their appeals.

The
indictment against the Rigas Family included a request for entry of a money judgment in an amount exceeding $2,500,000,000 and for entry of an order of forfeiture of all interests of
the convicted Rigas defendants in the Rigas Family Entities. On December 10, 2004, the DoJ filed an application for a preliminary order of forfeiture finding John J. Rigas and Timothy J. Rigas
jointly and severally liable for personal money judgments in the amount of $2,533,000,000.

On
April 25, 2005, the Rigas Family and the U.S. Attorney entered into a settlement agreement (the "Government-Rigas Settlement Agreement") pursuant to which the Rigas Family
agreed to forfeit: (i) all of the Rigas Co-Borrowing Entities with the exception of Coudersport and Bucktail; (ii) certain specified real estate; and (iii) all
securities in the Company directly or indirectly owned by the Rigas Family. The U.S. Attorney agreed: (i) not to seek additional monetary penalties from the Rigas Family, including the request
for a money judgment as noted above; (ii) from the proceeds of certain assets forfeited by the Rigas Family, to establish the Restitution Fund for the purpose of providing restitution to
holders of the Company's publicly traded securities; and (iii) to inform the District Court of this agreement at the sentencing of John J. Rigas and Timothy J. Rigas.

Pursuant
to the Forfeiture Order, all right, title and interest of the Rigas Family and Rigas Family Entities in the Rigas Co-Borrowing Entities (other than Coudersport and
Bucktail), certain specified real estate and any securities of the Company were forfeited to the United States on June 8, 2005, and such assets and securities are expected to be conveyed
(subject to completion of forfeiture proceedings before a federal judge to determine if there are any superior claims) to the Company pursuant to the Non-Prosecution Agreement. On
August 19, 2005, the Company filed a petition with the District Court seeking an order conveying title to these assets and securities to the Company. A status report from the government to the
District Court regarding the forfeiture proceedings is due on November 4, 2005. To date, one other petition has been filed, asserting a claim against certain real property.

The
Company was not a defendant in the Rigas Criminal Action, but was under investigation by the DoJ regarding matters related to alleged wrongdoing by certain members of the Rigas
Family. Upon approval of the Non-Prosecution Agreement, Adelphia and specified subsidiaries are no longer subject to criminal prosecution (other than for criminal tax violations) by the
U.S. Attorney for any conduct related to the Rigas Criminal Action or the allegations contained in the SEC Civil Action, so long as the Company complies with its obligations under the
Non-Prosecution Agreement.

Securities and Derivative Litigation.Certain of the Debtors and certain former officers, directors and advisors have been
named as defendants in a number of lawsuits alleging violations of federal and state securities laws and related claims. These actions generally allege that the defendants made

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materially
misleading statements understating the Company's liabilities and exaggerating the Company's financial results in violation of securities laws.

In
particular, beginning on April 2, 2002, various groups of plaintiffs filed more than 30 class action complaints, purportedly on behalf of certain of the Company's shareholders
and bondholders or classes thereof in federal court in Pennsylvania. Several non-class action lawsuits were brought on behalf of individuals or small groups of security holders in federal
courts in Pennsylvania, New York, South Carolina and New Jersey, and in state courts in New York, Pennsylvania, California and Texas.
Seven derivative suits were also filed in federal and state courts in Pennsylvania, and four derivative suits were filed in state court in Delaware. On May 6, 2002, a notice and proposed order
of dismissal without prejudice was filed by the plaintiff in one of these four Delaware derivative actions. The remaining three Delaware derivative actions were consolidated on May 22, 2002. On
February 10, 2004, the parties stipulated and agreed to the dismissal of these consolidated actions with prejudice.

The
complaints, which named as defendants the Company, certain former officers and directors of the Company and, in some cases, the Company's former auditors, lawyers, as well as
financial institutions who worked with the Company, generally allege that, among other improper statements and omissions, defendants misled investors regarding the Company's liabilities and earnings
in the Company's public filings. The majority of these actions assert claims under Sections 10(b) and 20(a) of the Exchange Act and SEC Rule 10b-5. Certain bondholder
actions assert claims for violation of Section 11 and/or Section 12(a) (2) of the Securities Act of 1933. Certain of the state court actions allege various state law
claims.

On
July 23, 2003, the Judicial Panel on Multidistrict Litigation issued an order transferring numerous civil actions to the District Court for consolidated or coordinated
pre-trial proceedings (the "MDL Proceedings").

On
September 15, 2003, proposed lead plaintiffs and proposed co-lead counsel in the consolidated class action were appointed in the MDL Proceedings. On
December 22, 2003, lead plaintiffs filed a consolidated class action complaint. Motions to dismiss have been filed by various defendants. On May 27, 2005 and August 16, 2005, the
District Court granted in part and denied in part some of the pending motions and provided the plaintiffs limited ability to replead the dismissed claims. As a result of the filing of the Chapter 11
Cases and the protections of the automatic stay, the Company is not named as a defendant in the amended complaint, but is a non-party. The consolidated class action complaint seeks
monetary damages of an unspecified amount, rescission and reasonable costs and expenses and such other and future relief as the court may deem just and proper. The individual actions against the
Company also seek damages of an unspecified amount.

Pursuant
to section 362 of the Bankruptcy Code, all of the securities and derivative claims that were filed against the Company before the bankruptcy filings are automatically
stayed and not proceeding as to the Company.

The
Company cannot predict the outcome of the pending legal proceedings or estimate the possible effects on the financial condition or results of operations of the Company.

Acquisition Actions.After the alleged misconduct of certain members of the Rigas Family was publicly disclosed, three
actions were filed in May and June 2002 against the Company by former shareholders of companies that the Company acquired, in whole or in part, through stock transactions. These actions
allege that the Company improperly induced these former shareholders to enter into these stock
transactions through misrepresentations and omissions, and the plaintiffs seek monetary damages and equitable relief through rescission of the underlying acquisition transactions.

Two
of these proceedings have been filed with the American Arbitration Association alleging violations of federal and state securities laws, breaches of representations and warranties
and fraud in the inducement. One of these proceedings seeks rescission, compensatory damages and pre-judgment

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relief,
and the other seeks specific performance. The third action alleges fraud and seeks rescission, damages and attorneys' fees. This action was originally filed in a Colorado State Court, and
subsequently was removed by the Company to the United States District Court for the District of Colorado. The Colorado State Court action was closed administratively on July 16, 2004, subject
to reopening if and when the automatic bankruptcy stay is lifted or for other good cause shown. These actions have been stayed pursuant to the automatic stay provisions of section 362 of the
Bankruptcy Code.

The
Company cannot predict the outcome of these legal proceedings or estimate the possible effects on the financial condition or results of operations of the Company.

Equity Committee Shareholder Litigation.Adelphia is a defendant in an adversary proceeding in the Bankruptcy Court
consisting of a declaratory judgment action and a motion for a preliminary injunction brought on January 9, 2003 by the Equity Committee, seeking, among other relief, a declaration as to how
the shares owned by the Rigas Family and Rigas Family Entities would be voted should a consent solicitation to elect members of the Board be undertaken. Adelphia has opposed such requests for relief.

The
claims of the Equity Committee are based on shareholder rights that the Equity Committee asserts should be recognized even in bankruptcy, coupled with continuing claims, as of the
filing of the lawsuit, of historical connections between the Board and the Rigas Family. Motions to dismiss filed by Adelphia and others are fully briefed in this action, but no argument date has been
set. If this action survives these motions to dismiss, resolution of disputed fact issues will occur in two phases pursuant to a schedule set by the Bankruptcy Court. Determinations regarding fact
questions relating to the conduct of the Rigas Family will not occur until, at a minimum, after the resolution of the Rigas Criminal Action.

No
pleadings have been filed in the adversary proceeding since September 2003.

The
Company cannot predict the outcome of these legal proceedings or estimate the possible effects on the financial condition or results of operations of the Company.

ML Media Litigation.Adelphia and ML Media have been involved in a longstanding dispute concerning Century/ML Cable's
management, the buy/sell rights of ML Media and various other matters.

In
March 2000, ML Media brought suit against Century, Adelphia and Arahova Communications Inc. ("Arahova"), a direct subsidiary of Adelphia and Century's immediate parent,
in the Supreme Court of the State of New York, seeking, among other things: (i) the dissolution of Century/ML Cable and the appointment of a receiver to sell Century/ML Cable's assets;
(ii) if no receiver was appointed, an order authorizing ML Media to conduct an auction for the sale of Century/ML Cable's assets to an unrelated third party and enjoining Adelphia from
interfering with or participating in that process; (iii) an order directing the defendants to comply with the Century/ML Cable joint venture agreement with respect to provisions relating to
governance matters and the budget process; and (iv) compensatory and punitive damages. The parties negotiated a consent order that imposed various consultative and reporting requirements on
Adelphia and Century as well as restrictions on Century's ability to make capital expenditures without ML Media's approval. Adelphia and Century were held in contempt of that order in early 2001.

In
connection with the December 13, 2001 settlement of the above dispute, Adelphia, Century/ML Cable, ML Media and Highland Holdings ("Highland"), a general partnership then owned
and controlled by members of the Rigas Family, entered into a Leveraged Recapitalization Agreement (the "Recap Agreement"), pursuant to which Century/ML Cable agreed to redeem ML Media's 50% interest
in Century/ML Cable (the "Redemption") on or before September 30, 2002 for a purchase price between $275,000,000 and $279,800,000 depending on the timing of the Redemption, plus interest.

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Among
other things, the Recap Agreement provided that: (i) Highland would arrange debt financing for the Redemption; (ii) Highland, Adelphia and Century would jointly and severally
guarantee debt service on debt financing for the Redemption on and after the closing of the Redemption; and (iii) Highland and Century would own 60% and 40% interests, respectively, in the
recapitalized Century/ML Cable. Under the terms of the Recap Agreement, Century's 50% interest in Century/ML Cable was pledged to ML Media as collateral for the Company's obligations.

On
September 30, 2002, Century/ML Cable filed a voluntary petition to reorganize under Chapter 11 in the Bankruptcy Court. Century/ML Cable is operating its business as a
debtor-in-possession.

By
an order of the Bankruptcy Court dated September 17, 2003, Adelphia and Century rejected the Recap Agreement, effective as of such date. If the Recap Agreement is enforceable,
the effect of the
rejection of the Recap Agreement is the same as a pre-petition breach of the Recap Agreement. Therefore, Adelphia and Century are potentially exposed to "rejection damages," which may
include the revival of ML Media's claims under the state court actions described above.

Adelphia,
Century, Highland, Century/ML Cable and ML Media are engaged in litigation regarding the enforceability of the Recap Agreement. On April 15, 2004, the Bankruptcy Court
indicated that it would dismiss all counts of Adelphia's challenge to the enforceability of the Recap Agreement except for its allegation that ML Media aided and abetted a breach of fiduciary duty in
connection with the execution of the Recap Agreement. The Bankruptcy Court also indicated that it would allow Century/ML Cable's action to avoid the Recap Agreement as a fraudulent conveyance to
proceed.

ML
Media has alleged that it is entitled to elect recovery of either $279,800,000 plus costs and interest in exchange for its interest in Century/ML Cable, or up to the difference
between $279,800,000 and the fair market value of its interest in Century/ML Cable, plus costs, interest and revival of the state court claims described above. Adelphia, Century and Century/ML Cable
have disputed ML Media's claims, and the Plan contemplates that ML Media will receive no distribution until such dispute is resolved.

On
June 3, 2005, Century and ML Media entered into an interest acquisition agreement ("IAA") to sell their interests in Century/ML Cable for $520,000,000 (subject to certain
potential purchase price adjustments as defined in the IAA) to San Juan Cable. Consummation of the sale is subject to approval by the Bankruptcy Court in Century/ML Cable's separate Chapter 11 case,
confirmation of a plan of reorganization of Century/ML Cable, the receipt of financing by the buyers and other customary conditions, many of which are outside the control of Century/ML Cable, Century
and ML Media. There can be no assurance whether or when such conditions will be satisfied. The sale of Century/ML Cable will not resolve the pending litigation among Adelphia, Century, Highland,
Century/ML Cable and ML Media.

On
August 9, 2005, Century/ML Cable filed its plan of reorganization (the "Century/ML Plan") and its related disclosure statement (the "Century/ML Disclosure Statement") with the
Bankruptcy Court. By order dated August 18, 2005, the Bankruptcy Court approved the Century/ML Disclosure Statement. On September 7, 2005, the Bankruptcy Court confirmed the Century/ML
Plan. The Century/ML Plan is designed to satisfy the conditions of the IAA with San Juan Cable and provides that all third party claims will either be paid in full or assumed by San Juan Cable under
the terms set forth in the IAA. Consummation of the Century/ML Plan is subject to certain conditions, including the concurrent sale of the interests in Century/ML Cable pursuant to the IAA. There can
be no assurance whether or when such conditions will be satisfied. The Century/ML Plan, if consummated, will not resolve the pending litigation among Adelphia, Century, Highland, Century/ML Cable and
ML Media.

The
Company cannot predict the outcome of these legal proceedings or estimate the possible effects on the financial condition or results of operations of the Company.

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The X Clause Litigation.On December 29, 2003, the Ad Hoc Committee of holders of Adelphia's 6% and 3.25% subordinated
notes (collectively, the "Subordinated Notes"), together with the Bank of New York, the indenture trustee for the Subordinated Notes (collectively, the "X Clause Plaintiffs"), commenced an adversary
proceeding against Adelphia in the Bankruptcy Court. The X Clause Plaintiffs' complaint sought a judgment declaring that the subordination provisions in the indentures for the Subordinated Notes were
not applicable to an Adelphia plan of reorganization in which constituents receive common stock of Adelphia and that the Subordinated Notes are entitled to sharepari
passuin the distribution of any common stock of Adelphia given to holders of senior notes of Adelphia. Recently, the X Clause Plaintiffs have asserted that the subordination
provisions in the indentures for the Subordinated Notes also are not applicable to an Adelphia plan of reorganization in which constituents receive TWC Class A Common Stock and that the
Subordinated Notes would therefore be entitled to sharepari passuin the distribution of any such TWC Class A Common Stock given to holders of
senior notes of Adelphia. The Debtors dispute this position and have agreed to present the issue to the Bankruptcy Court prior to confirmation of a plan of reorganization.

The
basis for the X Clause Plaintiffs' claim is a provision in the applicable indentures, commonly known as the "X Clause," which provides that any distributions under a plan of
reorganization comprised solely of "Permitted Junior Securities" are not subject to the subordination provision of the Subordinated Notes indenture. The X Clause Plaintiffs asserted that, under their
interpretation of the applicable indentures, a distribution of a single class of new common stock of Adelphia would meet the definition of "Permitted Junior Securities" set forth in the indentures,
and therefore be exempt from subordination.

On
February 6, 2004, Adelphia filed its answer to the complaint, denying all of its substantive allegations. Thereafter, both the X Clause Plaintiffs and Adelphia cross-moved for
summary judgment with both parties arguing that their interpretation of the X Clause was correct as a matter of law. The indenture trustee for the Adelphia senior notes also intervened in the action
and, like Adelphia, moved for summary judgment, arguing that the X Clause Plaintiffs were subordinated to holders of senior notes with respect to any distribution of common stock under a plan. In
addition, the Creditors' Committee also moved to intervene and, thereafter, moved to dismiss the X Clause Plaintiffs' complaint on the grounds, among others, that it did not present a justiciable case
or controversy and therefore was not ripe for adjudication. In a written decision, dated April 12, 2004, the Bankruptcy Court granted the Creditors' Committee's motion to dismiss without ruling
on the merits of the various cross-motions for summary judgment. The Bankruptcy Court's dismissal of the action was without prejudice to the X Clause Plaintiffs' right to bring the action at a later
date, if appropriate.

Verizon Franchise Transfer Litigation.On March 20, 2002, the Company commenced an action (the "California Cablevision
Action") in the United States District Court for the Central District of California, Western Division, seeking, among other things, declaratory and injunctive relief precluding the City of Thousand
Oaks, California (the "City") from denying permits on the grounds that the Company failed to seek the City's prior approval of an asset purchase agreement (the "Asset Purchase Agreement"), dated
December 17, 2001, between the Company and Verizon Media Ventures, Inc. d/b/a Verizon Americast ("Verizon Media Ventures"). Pursuant to the Asset Purchase Agreement, the Company acquired
certain Verizon Media Ventures cable equipment and network system assets (the "Verizon Cable Assets") located in the City for use in the operation of the Company's cable business in the City.

On
March 25, 2002, the City and Ventura County (the "County") commenced an action (the "Thousand Oaks Action") against the Company and Verizon Media Ventures in California State
Court alleging that Verizon Media Ventures' entry into the Asset Purchase Agreement and conveyance of the Verizon Cable Assets constituted a breach of Verizon Media Ventures' cable franchises and that
the Company's participation in the transaction amounted to actionable tortious interference with those franchises. The City and the County sought injunctive relief to halt the sale and transfer of the
Verizon

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Cable
Assets pursuant to the Asset Purchase Agreement and to compel the Company to treat the Verizon Cable Assets as a separate cable system.

On
March 27, 2002, the Company and Verizon Media Ventures removed the Thousand Oaks Action to the United States District Court for the Central District of California, where it was
consolidated with the California Cablevision Action.

On
April 12, 2002, the district court conducted a hearing on the City's and County's application for a preliminary injunction and, on April 15, 2002, the district court
issued a temporary restraining order in part, pending entry of a further order. On May 14, 2002, the district court issued a preliminary injunction and entered findings of fact and conclusions
of law in support thereof (the "May 14, 2002 Order"). The May 14, 2002 Order, among other things: (i) enjoined the Company from integrating the Company's and Verizon Media
Ventures' system assets serving subscribers in the City and the County; (ii) required the Company to return "ownership" of the Verizon Cable Assets to Verizon Media Ventures except that the
Company was permitted to continue to "manage" the assets as Verizon Media Ventures' agent to the extent necessary to avoid disruption in services until Verizon Media Ventures chose to reenter the
market or sell the assets; (iii) prohibited the Company from eliminating any programming options that had previously been selected by Verizon Media Ventures or from raising the rates charged by
Verizon Media Ventures; and (iv) required the Company and Verizon Media Ventures to grant the City and/or the County access to system records, contracts, personnel and facilities for the
purpose of conducting an inspection of the then-current "state of the Verizon Media Ventures and the Company systems" in the City and the County. The Company appealed the May 14,
2002 Order and, on April 1, 2003, the U.S. Court of Appeals for the Ninth Circuit reversed the May 14, 2002 Order, thus removing any restrictions that had been imposed by the district
court against the Company's integration of the Verizon Cable Assets, and remanded the actions back to the district court for further proceedings.

In
September 2003, the City began refusing to grant the Company's construction permit requests, claiming that the Company could not integrate the acquired Verizon Cable Assets
with the Company's existing cable system assets because the City had not approved the transaction between the Company and Verizon Media Ventures, as allegedly required under the City's cable
ordinance.

Accordingly,
on October 2, 2003, the Company filed a motion for a preliminary injunction in the district court seeking to enjoin the City from refusing to grant the Company's
construction permit requests. On November 3, 2003, the district court granted the Company's motion for a preliminary injunction, finding that the Company had demonstrated "a strong likelihood
of success on the merits." Thereafter, the parties agreed to informally stay the litigation pending negotiations between the Company and the City for the Company's renewal of its cable franchise, with
the intent that such negotiations would also lead to a settlement of the pending litigation. However, on September 16, 2004, at the City's request, the court set certain procedural dates,
including a trial date of July 12, 2005, which has effectively re-opened the case to active litigation. Subsequently, the July 12, 2005 trial date was vacated pursuant to a
stipulation and order. On July 11, 2005, the district court referred the matter to a United States magistrate judge for settlement discussions. On September 6, 2005, the magistrate judge
scheduled a settlement conference for October 20, 2005.

The
Company cannot predict the outcome of these actions or estimate the possible effects on the financial condition or results of operations of the Company.

Dibbern Adversary Proceeding.On or about August 30, 2002, Gerald Dibbern, individually and purportedly on behalf of a
class of similarly situated subscribers nationwide, commenced an adversary proceeding in the Bankruptcy Court against Adelphia asserting claims for violation of the Pennsylvania Consumer Protection
Law, breach of contract, fraud, unjust enrichment, constructive trust, and an accounting. This complaint alleges that Adelphia charged, and continues to charge, subscribers for cable
set-top box equipment, including set-top boxes and remote controls, that is unnecessary for

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subscribers
that receive only basic cable service and have cable-ready televisions. The complaint further alleges that Adelphia failed to adequately notify affected subscribers that they no longer
needed to rent this equipment. The complaint seeks a number of remedies including treble money damages under the Pennsylvania Consumer Protection Law, declaratory and injunctive relief, imposition of
a constructive trust on Adelphia's assets, and punitive damages, together with costs and attorneys' fees.

On
or about December 13, 2002, Adelphia moved to dismiss the adversary proceeding on several bases, including that the complaint fails to state a claim for which relief can be
granted and that the matters alleged therein should be resolved in the claims process. The Bankruptcy Court granted Adelphia's motion to dismiss and dismissed the adversary proceeding on May 3,
2005. In the Bankruptcy Court, Mr. Dibbern has also objected to the provisional disallowance of his proofs of claim which comprised a
portion of the Bankruptcy Court's May 3, 2005 order. Mr. Dibbern appealed the May 3, 2005 order dismissing his claims to the District Court. In an August 30, 2005 decision,
the District Court affirmed the dismissal of Mr. Dibbern's claims for violation of the Pennsylvania Consumer Protection Law, a constructive trust and an accounting, but reversed the dismissal
of Mr. Dibbern's breach of contract, fraud and unjust enrichment claims. These three claims will proceed in the Bankruptcy Court and an answer is due from Adelphia by October 7, 2005.

The
Company cannot predict the outcome of these legal proceedings or estimate the possible effects on the financial condition or results of operations of the Company.

Tele-Media Examiner Motion.By motion filed in the Bankruptcy Court on August 5, 2004,
Tele-Media Corporation of Delaware ("TMCD") and certain of its affiliates sought the appointment of an examiner for the following Debtors: Tele-Media Company of
Tri-States, L.P., CMA Cablevision Associates VII, L.P., CMA Cablevision Associates XI, L.P., TMC Holdings Corporation, Adelphia Company of Western Connecticut, TMC Holdings, LLC,
Tele-Media Investment Limited Partnership, L. P., Eastern Virginia Cablevision, L.P., Tele-Media Company of Hopewell Prince George, and Eastern Virginia Cablevision Holdings,
LLC (collectively, the "JV Entities"). Among other things, TMCD alleged that management and the Board breached their fiduciary obligations to the creditors and equity holders of those entities.
Consequently, TMCD sought the appointment of an examiner to investigate and make recommendations to the Bankruptcy Court regarding various issues related to such entities.

On
April 14, 2005, the Debtors filed a motion with the Bankruptcy Court seeking approval of a global settlement agreement (the "Tele-Media Settlement Agreement") by
and among the Debtors and TMCD and certain of its affiliates (the "Tele-Media Parties") which, among other things: (i) transfers the Tele-Media Parties' ownership
interests in the JV Entities to the Debtors, leaving the Debtors 100% ownership of the JV Entities; (ii) requires the Debtors to make a settlement payment to the Tele-Media Parties
of $21,650,000; (iii) resolves the above-mentioned examiner motion; (iv) settles two pending avoidance actions brought by the Debtors against certain of the Tele-Media
Parties; (v) reconciles 691 separate proofs of claim filed by the Tele-Media Parties, thereby allowing claims worth approximately $5,500,000 and disallowing approximately
$1.9 billion of claims; (vi) requires the Tele-Media Parties to make a $912,500 payment to the Debtors related to workers' compensation policies; and (vii) effectuates
mutual releases between the Debtors and the Tele-Media Parties. The Tele-Media Settlement Agreement was approved by an order of the Bankruptcy Court dated May 11, 2005
and closed on May 26, 2005.

Creditors' Committee Lawsuit Against Pre-Petition Banks.Pursuant to the Bankruptcy Court order approving the DIP
Facility (the "Final DIP Order"), the Company made certain acknowledgments (the "Acknowledgments") with respect to the extent of its indebtedness under the pre-petition credit facilities,
as well as the validity and extent of the liens and claims of the lenders under such facilities. However, given the circumstances surrounding the filing of the Chapter 11 Cases, the Final DIP Order
preserved the Debtors' right to prosecute, among other things, avoidance actions and claims against the pre-petition lenders and to bring litigation against the pre-petition
lenders based on any wrongful

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conduct.
The Final DIP Order also provided that any official committee appointed in the Chapter 11 Cases would have the right to request that it be granted standing by the Bankruptcy Court to
challenge the Acknowledgments and to bring claims belonging to the Company and its estates against the pre-petition lenders.

Pursuant
to a stipulation among the Company, the Creditors' Committee and the Equity Committee, which is being challenged by certain pre-petition lenders, the Bankruptcy
Court granted the Creditors' Committee leave and standing to file and prosecute claims against the pre-petition lenders on behalf of the Company, and granted the Equity Committee leave to
seek to intervene in any such action. This stipulation also preserves the Company's ability to compromise and settle the claims against the pre-petition lenders. By motion dated
July 6, 2003, the Creditors' Committee moved for Bankruptcy Court approval of this stipulation and simultaneously filed a complaint (the "Bank Complaint") against the agents and lenders under
certain pre-petition credit facilities, and related entities, asserting, among other things, that these entities knew of, and participated in, the alleged improper actions by certain
members of the Rigas Family and Rigas Family Entities (the "Pre-petition Lender Litigation"). The Debtors are nominal plaintiffs in this action.

The
Bank Complaint contains 52 claims for relief to redress the claimed wrongs and abuse committed by the agents, lenders and other entities. The Bank Complaint seeks to, among other
things: (i) recover as fraudulent transfers the principal and interest paid by the Company to the defendants; (ii) avoid as fraudulent obligations the Company's obligations, if any, to
repay the defendants; (iii) recover damages for breaches of fiduciary duties to the Company and for aiding and abetting fraud and breaches of fiduciary duties by the Rigas Family;
(iv) equitably disallow, subordinate or recharacterize each of the defendants' claims in the Chapter 11 Cases; (v) avoid and recover certain allegedly preferential transfers made to
certain defendants; and (vi) recover damages for violations of the Bank Holding Company Act.

Numerous
motions seeking to defeat the Pre-petition Lender Litigation were filed by the defendants and the Bankruptcy Court held a hearing on such issues. The Equity
Committee has filed a motion seeking authority to bring additional claims against the pre-petition lenders pursuant to the RICO Act. The Bankruptcy Court heard oral argument on these
motions on December 20 and December 21, 2004. The Bankruptcy Court has not yet ruled on the motions to dismiss. In a memorandum decision dated August 30, 2005, the Bankruptcy
Court granted the motions of both the Creditors' Committee and the Equity Committee for standing to prosecute these claims.

Under
the Plan, the Debtors may seek to compromise and settle, in part, the Pre-petition Lender Litigation, including through the dismissal of certain claims and the release
of certain defendants.

The
Company cannot predict the outcome of these legal proceedings or estimate the possible effects on the financial condition or results of operations of the Company.

Devon Mobile Claim.Pursuant to the Agreement of Limited Partnership of Devon Mobile Communications, L.P., a Delaware limited
partnership ("Devon Mobile"), dated as of November 3, 1995, the Company owned a 49.9% limited partnership interest in Devon Mobile, which, through its subsidiaries, held licenses to operate
regional wireless telephone businesses in several states. Devon Mobile had certain business and contractual relationships with the Company and with former subsidiaries or divisions of the Company,
which were spun off as TelCove in January 2002.

In
late May 2002, the Company notified Devon G.P., Inc. ("Devon G.P."), the general partner of Devon Mobile, that it would likely terminate certain discretionary
operational funding to Devon Mobile. On August 19, 2002, Devon Mobile and certain of its subsidiaries filed voluntary petitions for relief under Chapter 11 of the Bankruptcy Code with the
United States Bankruptcy Court for the District of Delaware (the "Devon Mobile Bankruptcy Court").

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On
January 17, 2003, the Company filed proofs of claim and interest against Devon Mobile and its subsidiaries for approximately $129,000,000 in debt and equity claims, as well as
an additional claim of approximately $35,000,000 relating to the Company's guarantee of certain Devon Mobile obligations (collectively, the "Company Claims"). By order dated October 1, 2003,
the Devon Mobile Bankruptcy Court confirmed Devon Mobile's First Amended Joint Plan of Liquidation (the "Devon Plan"). The Devon Plan became effective on October 17, 2003, at which time the
Company's limited partnership interest in Devon Mobile was extinguished.

On
or about January 8, 2004, Devon Mobile filed proofs of claim in the Chapter 11 Cases seeking, in the aggregate, approximately $100,000,000 in respect of, among other things,
certain cash transfers alleged to be either preferential or fraudulent and claims for deepening insolvency, alter ego liability and breach of an alleged duty to fund Devon Mobile operations, all of
which arose prior to the commencement of the Chapter 11 Cases (the "Devon Claims"). On June 21, 2004, Devon Mobile commenced an adversary proceeding in the Chapter 11 Cases (the "Devon
Adversary Proceeding") through the filing of a complaint (the "Devon Complaint") which incorporates the Devon Claims. On August 20, 2004, the Company filed an answer and counterclaim in
response to the Devon Complaint denying the allegations made in the Devon Complaint and asserting various counterclaims against Devon Mobile, which encompassed the Company Claims. On
November 22, 2004, the Company filed a
motion for leave (the "Motion for Leave") to file a third party complaint for contribution and indemnification against Devon G.P. and Lisa-Gaye Shearing Mead, the sole owner and
President of Devon G.P. By endorsed order entered January 12, 2005, Judge Robert E. Gerber, the judge presiding over the Chapter 11 Cases and the Devon Adversary Proceeding, granted a recusal
request made by counsel to Devon G.P. On January 21, 2005, the Devon Adversary Proceeding was reassigned from Judge Gerber to Judge Cecelia G. Morris. By an order dated April 5, 2005,
Judge Morris denied the Motion for Leave and a subsequent motion for reconsideration. On May 13, 2005, the court entered an Amended Pretrial Scheduling Order extending the time for discovery
and scheduled a pretrial conference for March 1, 2006, with a five day trial to be scheduled thereafter. Discovery is ongoing.

The
Company cannot predict the outcome of these legal proceedings or estimate the possible effects on the financial condition or results of operations of the Company.

NFHLP Claim.On January 13, 2003, Niagara Frontier Hockey, L.P., a Delaware limited partnership owned by the Rigas
Family ("NFHLP") and certain of its subsidiaries (the "NFHLP Debtors") filed voluntary petitions to reorganize under Chapter 11 in the United States Bankruptcy Court of the Western District of New
York (the "NFHLP Bankruptcy Court") seeking protection under the U. S. bankruptcy laws. Certain of the NFHLP Debtors entered into an agreement dated March 13, 2003 for the sale of certain
assets, including the Buffalo Sabres National Hockey League team, and the assumption of certain liabilities. On October 3, 2003, the NFHLP Bankruptcy Court approved the NFHLP joint plan of
liquidation. The NFHLP Debtors filed a complaint, dated November 4, 2003, against, among others, Adelphia and the Creditors' Committee seeking to enforce certain prior stipulations and orders
of the NFHLP Bankruptcy Court against Adelphia and the Creditors' Committee related to the waiver of Adelphia's right to participate in certain sale proceeds resulting from the sale of assets. Certain
of the NFHLP Debtors' pre-petition lenders, which are also defendants in the adversary proceeding, have filed cross-complaints against Adelphia and the Creditors' Committee asking the
NFHLP Bankruptcy Court to enjoin Adelphia and the Creditors' Committee from prosecuting their claims against those pre-petition lenders. Proceedings as to the complaint itself have been
suspended. With respect to the cross-complaints, motion practice and discovery are proceeding concurrently; no hearing on dispositive motions has been scheduled.

The
Company cannot predict the outcome of these legal proceedings or estimate the possible effects on the financial condition or results of operations of the Company.

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Preferred Shareholder Litigation.On August 11, 2003, Adelphia initiated an adversary proceeding in the Bankruptcy
Court against the holders of Adelphia's preferred stock (the "Preferred Stockholders"), seeking, among other things, to enjoin the Preferred Stockholders from exercising certain purported rights to
elect directors to the Board due to Adelphia's failure to pay dividends and alleged breaches of covenants contained in the certificates of designations relating to Adelphia's preferred stock. On
August 13, 2003, certain of the Preferred Stockholders filed an action against Adelphia in the Delaware
Chancery Court seeking a declaratory judgment of their purported right to appoint two directors to the Board (the "Delaware Action"). On August 13, 2003, the Bankruptcy Court granted Adelphia a
temporary restraining order, which, among other things, stayed the Delaware Action and temporarily enjoined the Preferred Stockholders from exercising their purported rights to elect directors to the
Board. Thereafter, the Delaware Action was withdrawn.

The
Company cannot predict the outcome of these legal proceedings or estimate the possible effects on the financial condition or results of operations of the Company.

Adelphia's Lawsuit Against Deloitte.On November 6, 2002, Adelphia sued Deloitte & Touche LLC ("Deloitte"),
Adelphia's former independent auditors, in the Court of Common Pleas for Philadelphia County. The lawsuit seeks damages against Deloitte based on Deloitte's alleged failure to conduct an audit in
compliance with generally accepted auditing standards, and for providing an opinion that Adelphia's financial statements conformed with GAAP when Deloitte allegedly knew or should have known that they
did not conform. The complaint further alleges that Deloitte knew or should have known of alleged misconduct and misappropriation by the Rigas Family, and other alleged acts of
self-dealing, but failed to report these alleged misdeeds to the Board or others who could have and would have stopped the Rigas Family's misconduct. The complaint raises claims of
professional negligence, breach of contract, aiding and abetting breach of fiduciary duty, fraud, negligent misrepresentation and contribution.

Deloitte
filed preliminary objections seeking to dismiss the complaint, which were overruled by the court by order dated June 11, 2003. On September 15, 2003, Deloitte
filed an answer, a new matter and various counterclaims in response to the complaint. In its counterclaims, Deloitte asserted causes of action against Adelphia for breach of contract, fraud, negligent
misrepresentation and contribution. Also on September 15, 2003, Deloitte filed a related complaint naming as additional defendants John J. Rigas, Timothy J. Rigas, Michael J. Rigas, and James
P. Rigas. In this complaint, Deloitte alleges causes of action for fraud, negligent misrepresentation and contribution. The Rigas defendants, in turn, have claimed a right to contribution and/or
indemnity from Adelphia for any damages Deloitte may recover against the Rigas defendants. On January 9, 2004, Adelphia answered Deloitte's counterclaims. Deloitte moved to stay discovery in
this action until completion of the Rigas Criminal Action, which Adelphia opposed. Following the motion, discovery was effectively stayed for 60 days but has now commenced. Deloitte and
Adelphia have exchanged documents and have begun substantive discovery. On June 9, 2005, the court entered a case management order stating that all discovery shall be completed by
December 5, 2005 and that the case be ready for trial by April 3, 2006.

The
Company cannot predict the outcome of these legal proceedings or estimate the possible effects on the financial condition or results of operations of the Company.

Series E and F Preferred Stock Conversion Postponements.On October 29, 2004, Adelphia filed a motion to
postpone the conversion of Adelphia's 7.5% Series E Mandatory Convertible Preferred Stock ("Series E Preferred Stock") into shares of Class A Common Stock from November 15,
2004 to February 1, 2005, to the extent such conversion was not already stayed by the Debtors' bankruptcy filing, in order to protect
the Debtors' net operating loss carryovers. On November 18, 2004, the Bankruptcy Court entered an order approving the postponement effective November 14, 2004.

Adelphia
has subsequently entered into several stipulations further postponing, to the extent applicable, the conversion date of the Series E Preferred Stock. Adelphia has also
entered into several

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stipulations
postponing, to the extent applicable, the conversion date of the Adelphia 7.5% Series F Mandatory Convertible Preferred Stock, which was initially convertible into shares of
Class A Common Stock on February 1, 2005.

EPA Self Disclosure and Audit.On June 2, 2004, the Company orally self-disclosed potential violations of
environmental laws to the United States Environmental Protection Agency ("EPA") pursuant to EPA's Audit Policy, and notified EPA that it intended to conduct an audit of its operations to identify and
correct any such violations. The potential violations primarily concern reporting and recordkeeping requirements arising from the Company's storage and use of petroleum and batteries to provide backup
power for its cable operations. This matter is at an early stage, but based on current facts, the Company does not anticipate that this matter will have a material adverse effect on the Company's
results of operations or financial condition.

Other.The Company is subject to various other legal proceedings and claims which arise in the ordinary course of business.
Management believes, based on information currently available, that the amount of ultimate liability, if any, with respect to any of these other actions will not materially affect the Company's
financial position or results of operations.

ITEM 6. EXHIBITS

|Exhibit
Number |  | Description                                                                                                                                   
|-------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------
|31.1           |  | Certification of Chief Executive Officer pursuant to Rule 13a-14(a)/15d-14(a) under the Securities Exchange Act of 1934, as amended           
|31.2           |  | Certification of Chief Financial Officer pursuant to Rule 13a-14(a)/15d-14(a) under the Securities Exchange Act of 1934, as amended           
|32.1           |  | Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
|32.2           |  | Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

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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.

|                      |  | ADELPHIA COMMUNICATIONS CORPORATION
|--------------------- |  | -----------------------------------
|                      |  |                                    
|Date: October 7, 2005 |  | By:                                
|Date: October 7, 2005 |  | By:                                

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