##### Table of Contents



SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549
 FORM 10-Q Quarterly Report Pursuant to Section 13 or 15 (d) of the
Securities Exchange Act of 1934 For the quarterly period ended March 31, 2004 Commission File Numbers:
    
    333-57285-01333-57285
 Mediacom LLC
Mediacom Capital Corporation* (Exact names of Registrants as specified in their charters)
 New York
New York(State or other jurisdiction of
incorporation or organization)
    
    06-1433421
06-1513997(I.R.S. Employer
Identification Numbers)
 100 Crystal Run Road
Middletown, New York 10941(Address of principal executive offices)(845) 695-2600(Registrants telephone number) Indicate by check mark whether the Registrants (1) have filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrants were required to file such reports), and (2) have been subject to
such filing requirements for the past 90 days. Yes X            No Indicate by checkmark whether the registrants are accelerated filers (as
defined in Rule 12b-2 of the Act). Yes            No X Indicate the number of shares outstanding of the Registrants common
stock: Not Applicable *Mediacom Capital Corporation meets the conditions set forth in General
Instruction H (1) (a) and (b) of Form 10-Q and is therefore filing this form
with the reduced disclosure format.




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MEDIACOM LLC AND SUBSIDIARIES FORM 10-Q
FOR THE PERIOD ENDED MARCH 31, 2004 TABLE OF CONTENTS  
 PART IPageItem 1. Financial StatementsConsolidated Balance Sheets (unaudited)  March 31, 2004 and December 31, 2003
    
    
    1Consolidated Statements of Operations (unaudited)  Three Months Ended March 31, 2004 and 2003
    
    
    2Consolidated Statements of Cash Flows (unaudited)  Three Months Ended March 31, 2004 and 2003
    
    
    3Notes to Consolidated Financial Statements (unaudited)
    
    
    4Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    9Item 3. Quantitative and Qualitative Disclosures about Market Risk
    
    
    16Item 4. Controls and Procedures
    
    
    17PART IIItem 1. Legal Proceedings
    
    
    18Item 6. Exhibits and Reports on Form 8-K
    
    
    18CERTIFICATIONCERTIFICATIONCERTIFICATIONCERTIFICATION
    You should carefully review the information contained in this Quarterly
Report and in other reports or documents that we file from time to time with
the Securities and Exchange Commission (the SEC). In this Quarterly Report,
we state our beliefs of future events and of our future financial performance.
In some cases, you can identify those so-called forward-looking statements by
words such as may, will, should, expects, plans, anticipates,
believes, estimates, predicts, potential, or continue or the negative
of those words and other comparable words. You should be aware that those
statements are only our predictions. Actual events or results may differ
materially. In evaluating those statements, you should specifically consider
various factors, including the risks discussed in our Annual Report on Form
10-K for the year ended December 31, 2003 and other reports or documents that
we file from time to time with the SEC. Those factors may cause our actual
results to differ materially from any of our forward-looking statements. All
forward-looking statements attributable to us or a person acting on our behalf
are expressly qualified in their entirety by this cautionary statement.




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PART I 
 ITEM 1. FINANCIAL STATEMENTS MEDIACOM LLC AND SUBSIDIARIES 
 CONSOLIDATED BALANCE SHEETS
(Dollar amounts in 000s)
(Unaudited) March 31,
    
    December 31,2004
    
    2003ASSETSCURRENT ASSETSCash and cash equivalents
    
    $
    5,962
    
    
    $
    13,417Investments
    
    
    1,987
    
    
    
    2,288Subscriber accounts receivable, net of allowance for doubtful accounts
of $882 and $1,069, respectively
    
    
    26,333
    
    
    
    24,012Prepaid expenses and other assets
    
    
    20,189
    
    
    
    26,733Total current assets
    
    
    54,471
    
    
    
    66,450Preferred equity investment in affiliated company
    
    
    150,000
    
    
    
    150,000Investment in cable television systems:Property, plant and equipment, net of accumulated depreciation of
$661,409 and $637,254, respectively
    
    
    710,812
    
    
    
    708,159Intangible assets, net of accumulated amortization of $238,149 and
$235,979, respectively
    
    
    571,241
    
    
    
    570,953Total investment in cable television systems
    
    
    1,282,053
    
    
    
    1,279,112Other assets, net of accumulated amortization of $16,669 and $15,835,
respectively
    
    
    18,970
    
    
    
    19,804Total assets
    
    $
    1,505,494
    
    
    $
    1,515,366LIABILITIES AND MEMBERS DEFICITCURRENT LIABILITIESAccounts payable and accrued expenses
    
    $
    81,385
    
    
    $
    93,831Deferred revenue
    
    
    18,647
    
    
    
    16,432Current portion of long-term debt
    
    
    2,863
    
    
    
    2,799Total current liabilities
    
    
    102,895
    
    
    
    113,062Long-term debt, less current portion
    
    
    1,510,471
    
    
    
    1,521,525Other non-current liabilities
    
    
    21,154
    
    
    
    9,062Total liabilities
    
    
    1,634,520
    
    
    
    1,643,649MEMBERS DEFICITCapital contributions
    
    
    548,521
    
    
    
    548,521Accumulated deficit
    
    
    (677,547
    )
    
    
    (676,804
    )Total members deficit
    
    
    (129,026
    )
    
    
    (128,283
    )Total liabilities and members deficit
    
    $
    1,505,494
    
    
    $
    1,515,366
 The accompanying notes to unaudited consolidated financial statements
are an integral part of these statements. 1




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MEDIACOM LLC AND SUBSIDIARIES 
 CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollar amounts in 000s)
(Unaudited) Three Months EndedMarch 31,2004
    
    2003Revenues
    
    $
    118,777
    
    
    $
    109,110Costs and expenses:Service costs (exclusive of depreciation and amortization of
$26,326 and $49,651, respectively, shown separately below)
    
    
    46,335
    
    
    
    40,842Selling, general and administrative expenses
    
    
    20,773
    
    
    
    19,218Management fee expense
    
    
    2,205
    
    
    
    1,663Depreciation and amortization
    
    
    26,326
    
    
    
    49,651Operating income (loss)
    
    
    23,138
    
    
    
    (2,264
    )Interest expense, net
    
    
    (23,938
    )
    
    
    (26,153
    )(Loss) gain on derivative instruments, net
    
    
    (3,392
    )
    
    
    542Investment income from affiliate
    
    
    4,500
    
    
    
    4,500Other expense
    
    
    (1,051
    )
    
    
    (1,033
    )Net loss
    
    $
    (743
    )
    
    $
    (24,408
    )
 The accompanying notes to unaudited consolidated financial statements
are an integral part of these statements. 2




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MEDIACOM LLC AND SUBSIDIARIES 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollar amounts in 000s)
(Unaudited) Three Months EndedMarch 31,2004
    
    2003CASH FLOWS PROVIDED BY OPERATING ACTIVITIES:Net loss
    
    $
    (743
    )
    
    $
    (24,408
    )Adjustments to reconcile net loss to net cash flows from operating activities:Depreciation and amortization
    
    
    26,326
    
    
    
    49,651(Loss) gain on derivative instruments, net
    
    
    3,392
    
    
    
    (542
    )Amortization of deferred financing costs
    
    
    834
    
    
    
    794Changes in assets and liabilities, net of effects from acquisitions:Subscriber accounts receivable, net
    
    
    (2,321
    )
    
    
    (1,283
    )Prepaid expenses and other assets
    
    
    6,544
    
    
    
    (5,481
    )Accounts payable and accrued expenses
    
    
    (12,446
    )
    
    
    (5,887
    )Deferred revenue
    
    
    2,215
    
    
    
    1,203Other non current liabilities
    
    
    4,258
    
    
    
    (28
    )Net cash flows provided by operating activities
    
    
    28,059
    
    
    
    14,019CASH FLOWS USED IN INVESTING ACTIVITIES:Capital expenditures
    
    
    (21,082
    )
    
    
    (27,055
    )Acquisition of cable television systems
    
    
    (3,433
    )
    
    
    Other investing activities
    
    
    (9
    )
    
    
    (148
    )Net cash flows used in investing activities
    
    
    (24,524
    )
    
    
    (27,203
    )CASH FLOWS (USED IN) PROVIDED BY FINANCING ACTIVITIES:New borrowings
    
    
    26,043
    
    
    
    95,250Repayment of debt
    
    
    (37,033
    )
    
    
    (92,250
    )Financing costs
    
    
    
    
    
    
    (215
    )Net cash flows (used in) provided by financing activities
    
    
    (10,990
    )
    
    
    2,785Net decrease in cash and cash equivalents
    
    
    (7,455
    )
    
    
    (10,399
    )CASH AND CASH EQUIVALENTS, beginning of period
    
    
    13,417
    
    
    
    20,890CASH AND CASH EQUIVALENTS, end of period
    
    $
    5,962
    
    
    $
    10,491SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:Cash paid during the period for interest, net of amounts capitalized
    
    $
    34,137
    
    
    $
    37,651
 The accompanying notes to unaudited consolidated financial statements
are an integral part of these statements. 3




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MEDIACOM LLC AND SUBSIDIARIES 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited) (1) Organization Mediacom LLC (Mediacom, and collectively with its subsidiaries, the
Company), a New York limited liability company wholly-owned by Mediacom
Communications Corporation (MCC), is involved in the acquisition and
operation of cable systems serving smaller cities and towns in the United
States. Mediacom Capital Corporation (Mediacom Capital), a New York corporation
wholly-owned by Mediacom, co-issued, jointly and severally with
Mediacom, public debt securities. Mediacom Capital has
no assets (other than a $100 receivable from affiliate), operations, revenues
or cash flows. Therefore, separate financial statements have not been
presented for this entity. (2) Statement of Accounting Presentation and Other Information Basis of Preparation of Unaudited Consolidated Financial Statements Mediacom has prepared these unaudited consolidated financial statements as
of March 31, 2004 and 2003. In the opinion of management, such statements
include all adjustments, including normal recurring accruals and adjustments,
necessary for a fair presentation of the Companys consolidated results of
operations and financial position for the interim periods presented. The
accounting policies followed during such interim periods reported are in
conformity with generally accepted accounting principles in the United States
of America and are consistent with those applied during annual periods. For
additional disclosures, including a summary of the Companys accounting
policies, the interim unaudited consolidated financial statements should be
read in conjunction with the Companys Annual Report on Form 10-K for the year
ended December 31, 2003 (File Nos. 333-57285-01 and 333-57285). The results
of operations for the interim periods are not necessarily indicative of the
results that might be expected for future interim periods or for the full year
ending December 31, 2004. Change in Estimate Effective July 1, 2003, the Company changed the estimated useful lives of
certain plant and equipment of its cable systems in conjunction with the
Companys recently completed network upgrade and rebuild program. The changes
in estimated useful lives were made to reflect managements evaluation of the
longer economic lives of the Companys upgraded and rebuilt network. The
weighted average useful lives of such fixed assets changed from approximately 7
years to approximately 12 years. These changes were made on a prospective
basis effective July 1, 2003 and resulted in a reduction of depreciation
expense and a corresponding decrease in net loss of approximately $20.8 million
for the three months ended March 31, 2004. Property, Plant and Equipment Property, plant and equipment are recorded at cost. Additions to
property, plant and equipment generally include material, labor and indirect
costs. Depreciation is calculated on a straight-line basis over the following
useful lives: Buildings
    
    40 yearsLeasehold improvements
    
    Life of respective leaseCable systems and equipment and subscriber devices
    
    4 to 20 yearsVehicles
    
    5 yearsFurniture, fixtures and office equipment
    
    5 years
 The Company capitalizes improvements that extend asset lives and expenses
repairs and maintenance as incurred. At the time of retirements, sales or
other dispositions of property, the original cost and related accumulated 4




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MEDIACOM LLC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited) depreciation are removed from the respective accounts and the gains and losses
are presented as a component of depreciation expense. The Company capitalizes the costs associated with the construction of
cable transmission and distribution facilities, and new cable installations.
Costs include direct labor and material, as well as certain indirect costs.
The Company performs periodic evaluations of certain estimates used to
determine such costs that are capitalized. Any changes to these estimates,
which may be significant, are applied in the period in which the evaluations
were completed. The costs of disconnecting service at a customers dwelling or
reconnecting to a previously installed dwelling are charged as expense in the
period incurred. Costs associated with subsequent installations of additional
services not previously installed at a customers dwelling are capitalized to
the extent such costs are incremental and directly attributable to the
installation of such additional services. Reclassifications Certain reclassifications have been made to prior years amounts to
conform to the current years presentation. (3) Property, Plant and Equipment As of March 31, 2004 and December 31, 2003, property, plant and equipment
consisted of (dollars in thousands): March 31,
    
    December 31,2004
    
    2003Land and land improvements
    
    $
    1,484
    
    
    $
    1,470Buildings and leasehold improvements
    
    
    18,393
    
    
    
    18,191Cable systems, equipment and subscriber devices
    
    
    1,308,933
    
    
    
    1,283,345Vehicles
    
    
    29,713
    
    
    
    29,266Furniture, fixtures and office equipment
    
    
    13,698
    
    
    
    13,1411,372,221
    
    
    
    1,345,413Accumulated depreciation
    
    
    (661,409
    )
    
    
    (637,254
    )Property, plant and equipment, net
    
    $
    710,812
    
    
    $
    708,159
 Depreciation expense for the three months ended March 31, 2004 and 2003
was approximately $24.2 million and $45.7 million, respectively. As of March
31, 2004 the Company had property under capitalized leases of $5.6 million,
before accumulated depreciation, and $4.3 million, net of accumulated
depreciation. There was no property under capital leases as of March 31, 2003. (4) Intangible Assets The Company operates its cable systems under non-exclusive cable
franchises that are granted by state or local government authorities for
varying lengths of time. The Company acquired these cable franchises through
acquisitions of cable systems and accounted for them using the purchase method
of accounting. Indefinite-lived intangible assets include goodwill and cable franchise
costs and are accounted for in accordance with SFAS No. 142 Goodwill and Other
Intangible Assets. The provisions of SFAS No. 142, which were adopted by the
Company on January 1, 2002, prohibit the amortization of indefinite-lived
intangible assets and goodwill, but require such assets to be tested annually
for impairment, or more frequently if impairment indicators arise. The Company
has determined that its cable franchise costs and goodwill are indefinite-lived
assets. Accordingly, on January 1, 2002, the Company ceased the amortization
of its indefinite-lived intangible assets. Other finite-lived intangible
assets, which consist primarily of subscriber lists and covenants not to
compete, continue to be amortized 5




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MEDIACOM LLC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited) over their useful lives of 5 to 10 years and 5 years, respectively. The
following table summarizes the net asset value for each intangible asset
category as of March 31, 2004 and December 31, 2003 (dollars in thousands): Gross Asset
    
    Accumulated
    
    Net AssetMarch 31, 2004
    
    Value
    
    Amortization
    
    ValueFranchise costs
    
    $
    655,535
    
    
    $
    102,415
    
    
    $
    553,120Goodwill
    
    
    14,217
    
    
    
    2,682
    
    
    
    11,535Subscriber lists
    
    
    133,943
    
    
    
    127,533
    
    
    
    6,410Covenants not to compete
    
    
    5,695
    
    
    
    5,519
    
    
    
    176$
    809,390
    
    
    $
    238,149
    
    
    $
    571,241
 Gross Asset
    
    Accumulated
    
    Net AssetDecember 31, 2003
    
    Value
    
    Amortization
    
    ValueFranchise costs
    
    $
    653,461
    
    
    $
    102,415
    
    
    $
    551,046Goodwill
    
    
    13,884
    
    
    
    2,682
    
    
    
    11,202Subscriber lists
    
    
    133,892
    
    
    
    125,405
    
    
    
    8,487Covenants not to compete
    
    
    5,695
    
    
    
    5,477
    
    
    
    218$
    806,932
    
    
    $
    235,979
    
    
    $
    570,953
 Amortization expense for the quarters ended March 31, 2004 and 2003 was
approximately $2.2 million and $3.9 million, respectively. The Companys
estimated aggregate amortization expense for 2004 through 2005 is $5.8 million
and $0.8 million, respectively. (5) Accounts Payable and Accrued Expenses Accounts payable and accrued expenses consist of the following as of March
31, 2004 and December 31, 2003 (dollars in thousands): March 31,
    
    December 31,2004
    
    2003Accrued capital
    
    $
    12,331
    
    
    $
    12,182Accrued interest
    
    
    20,848
    
    
    
    31,040Accrued payroll and
benefits
    
    
    8,577
    
    
    
    9,728Accrued programming
    
    
    11,729
    
    
    
    14,144Accrued service costs
    
    
    4,737
    
    
    
    3,137Accrued taxes and fees
    
    
    8,191
    
    
    
    10,057Accrued telecommunications
    
    
    6,572
    
    
    
    5,612Other accrued expenses
    
    
    4,173
    
    
    
    3,964Subscriber advance payments
    
    
    4,227
    
    
    
    3,967$
    81,385
    
    
    $
    93,831
 6




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MEDIACOM LLC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited) (6) Debt As of March 31, 2004 and December 31, 2003, debt consisted of (dollars in
thousands): March 31,
    
    December 31,2004
    
    2003Bank credit facilities
    
    $
    685,500
    
    
    $
    696,5008 1/2% senior notes
    
    
    200,000
    
    
    
    200,0007 7/8% senior notes
    
    
    125,000
    
    
    
    125,0009 1/2% senior notes
    
    
    500,000
    
    
    
    500,000Capital lease
obligations
    
    
    2,834
    
    
    
    2,824$
    1,513,334
    
    
    $
    1,524,324Less: current portion
    
    
    2,863
    
    
    
    2,799Total long-term debt
    
    $
    1,510,471
    
    
    $
    1,521,525
 The average interest rate on debt outstanding under the bank credit
facilities was 2.5% for the three months ended March 31, 2004, before giving
effect to the interest rate exchange agreements discussed below. As of March
31, 2004, the Company had unused credit commitments of approximately $303.8
million under its bank credit facilities, of which about $291.8 million could
be borrowed and used for general corporate purposes based on the terms and
conditions of the Companys debt arrangements. The Company was in compliance
with all covenants under its debt arrangements as of March 31, 2004. The Company uses interest rate exchange agreements with counterparties to
fix the interest rate on a portion of its floating rate debt. As of March 31,
2004, the Company had interest rate exchange agreements with various banks
pursuant to which the interest rate on $300.0 million is fixed at a weighted
average rate of approximately 3.0%. This fixed rate is then adjusted, if
necessary, by the applicable three-month London Interbank Offering Rate to
determine the interest expense related to the Companys interest rate swap
agreements. These interest rate swaps are accounted for as fair value hedges
of debt instruments as prescribed by SFAS No. 133. The changes in their
mark-to-market values are derived from changes in market interest rates, the
decrease in their time to maturity and the creditworthiness of the
counterparties. The Companys use of interest rate exchange agreements may
result in short-term gains or losses and may increase the volatility of
earnings. Under the terms of the interest rate exchange agreements, which
expire from 2006 through 2007, the Company is exposed to credit loss in the
event of nonperformance by the other parties. However, due to the high
creditworthiness of the Companys counterparties, which are major banking firms
rated investment grade or better, the Company does not anticipate their
nonperformance. The fair value of the interest rate exchange agreements is the estimated
amount that the Company would receive or pay to terminate such agreements,
taking into account current interest rates, their remaining lives and the
current creditworthiness of the Companys counterparties. At March 31, 2004,
based on the mark-to-market valuation, the Company would have paid
approximately $7.0 million if these agreements were terminated, inclusive of
accrued interest. (7) Preferred Equity Investment in Affiliated Company The Company has a $150.0 million preferred equity investment in Mediacom
Broadband LLC, a Delaware limited liability company wholly-owned by Mediacom
Communications Corporation. The preferred equity investment has a 12% annual
cash dividend, payable quarterly in cash. During the three months ended March
31, 2004, the Company received in aggregate $4.5 million in cash dividends on
the preferred equity. 7




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MEDIACOM LLC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited) (8) Subsequent Events On April 5, 2004, a lawsuit was filed against the Companys parent,
Mediacom Communications Corporation, MCC Georgia LLC, a subsidiary of the
Companys sister company, Mediacom Broadband LLC, and other, currently unnamed
potential defendants in the United States District Court for the District of
Colorado by Echostar Satellite LLC, which operates a direct broadcast satellite
business under the name Dish Network. Echostar alleges that systems operated
by MCC Georgia LLC have used, without authorization, Dish Network satellite
dishes activated under residential accounts to receive the signals of certain
broadcast television stations in one or more locations in Georgia and that it
has then been redistributing those signals, through its cable systems, to its
subscribers. Among other claims, the complaint filed by Echostar alleges that
these actions violate a provision of the Communications Act of 1934 (47 U.S.C.
Sec. 605) that prohibits unauthorized interception of radio communications.
The plaintiff seeks injunctive relief, actual and statutory damages,
disgorgement of profits, punitive damages and litigation costs, including
attorneys fees. While the Company and its subsidiaries are not defendants in the lawsuit,
in the event of an outcome materially adverse to its parent company, the
Companys own consolidated financial position, results of operation, cash flows
or business could also be materially adversely affected. MCC Georgia LLC and
the Companys parent company have advised it that they intend to vigorously
defend against such claims. They also have informed the Company that they are
unable to reasonably evaluate the likelihood of an unfavorable outcome or
quantify the possible damages, if any, associated with these matters, or
whether or not the those damages would be material. The Company, its parent company and its subsidiaries or other affiliated
companies may also be involved in various other legal actions arising in the
ordinary course of business. In the opinion of management, the ultimate
disposition of these matters will not have a material adverse effect on the
Companys consolidated financial position, results of operations, cash flows or
business. 8




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ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion should be read in conjunction with the Companys
unaudited consolidated financial statements as of and for the three months
ended March 31, 2004 and 2003 and with the Companys annual report on Form 10-K
for the year ended December 31, 2003. Overview We are a wholly-owned subsidiary of Mediacom Communications Corporation.
As of March 31, 2004, our cable systems passed approximately 1.3 million homes
and served approximately 722,000 basic subscribers in 22 states. Since
commencement of our operations in March 1996, we have experienced significant
growth by deploying a disciplined strategy of acquiring underperforming cable
systems and improving their operating and financial performance. Many of our
cable systems are located in markets that are contiguous with, or in close
proximity to, cable systems owned and operated by Mediacom Broadband LLC, a
wholly-owned subsidiary of our manager. In 2003, we completed our network upgrade program that significantly
increased bandwidth and enabled interactivity. As of March 31, 2004,
approximately 98% of our cable network was upgraded with 550MHz to 870MHz
bandwidth capacity and about 96% of our homes passed were activated with
two-way communications capability. Expressed in megahertz (MHz), bandwidth
represents a systems capacity to deliver telecommunication services. Our upgraded network allows us to introduce additional programming and
other products and services such as digital video, video-on-demand,
high-definition television and high-speed Internet access. We currently
provide digital video services to approximately 148,000 subscribers,
representing a penetration of approximately 20.5% of our basic subscribers. We
also currently provide high speed Internet services to approximately 133,000
subscribers, representing a penetration of approximately 10.0% of our homes
passed. Beginning in the fourth quarter of 2004, we plan to launch in certain
of our markets Internet protocol telephony service, which is sometimes referred
to as Voice-over-Internet-Protocol, or VoIP telephony. VoIP telephony will
allow us to offer an attractive triple-play bundle of video, data and voice
products and services. Bundled products and services offer our subscribers key
benefits such as a single provider contact for provisioning, billing and
customer care. We face increasing competition for our video programming services, most
notably from direct broadcast satellite service, or DBS service providers. In
the first quarter of 2004, competitive pressure from DBS service providers
intensified when they launched local television channels in additional markets
representing an estimated 31% of our basic subscriber base. Since they have
been permitted to deliver local television broadcast signals beginning in 1999,
DIRECTV, Inc. and Echostar Communications Corporation, the two largest DBS
service providers, have been increasing the number of markets in which they
deliver these local television signals. These local-into-local launches were
usually accompanied by heavy marketing and advertising and were the primary
cause of our loss of basic subscribers in recent periods including the first
quarter of 2004. As of March 31, 2004, competitive local-into-local services
in our markets covered an estimated 79% of our basic subscribers. 9




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Actual Results of Operations Three Months Ended March 31, 2004 Compared to Three Months Ended March 31,
2003 The following table sets forth our unaudited consolidated statements of
operations for the three months ended March 31, 2004 and 2003 (dollars in
thousands and percentage changes that are not meaningful are marked NM): Three Months EndedMarch 31,2004
    
    2003
    
    $ Change
    
    % ChangeRevenues
    
    $
    118,777
    
    
    $
    109,110
    
    
    $
    9,667
    
    
    
    8.9
    %Costs and expenses:Service costs
    
    
    46,335
    
    
    
    40,842
    
    
    
    5,493
    
    
    
    13.4Selling, general and administrative
expenses
    
    
    20,773
    
    
    
    19,218
    
    
    
    1,555
    
    
    
    8.1Management fee expense
    
    
    2,205
    
    
    
    1,663
    
    
    
    542
    
    
    
    32.6Depreciation and amortization
    
    
    26,326
    
    
    
    49,651
    
    
    
    (23,325
    )
    
    
    (47.0
    )Operating income (loss)
    
    
    23,138
    
    
    
    (2,264
    )
    
    
    25,402
    
    
    NMInterest expense, net
    
    
    (23,938
    )
    
    
    (26,153
    )
    
    
    2,215
    
    
    
    (8.5
    )(Loss) gain on derivative instruments, net
    
    
    (3,392
    )
    
    
    542
    
    
    
    (3,934
    )
    
    NMInvestment income
    
    
    4,500
    
    
    
    4,500
    
    
    
    
    
    
    
    Other expense
    
    
    (1,051
    )
    
    
    (1,033
    )
    
    
    (18
    )
    
    
    (1.7
    )Net loss
    
    $
    (743
    )
    
    $
    (24,408
    )
    
    $
    (23,665
    )
    
    
    97.0
    %Operating income before depreciation and
amortization
    
    $
    49,464
    
    
    $
    47,387
    
    
    $
    2,077
    
    
    
    4.4
    %
 Use of Operating Income Before Depreciation and Amortization Operating income before depreciation and amortization, or OIBDA, is not a
financial measure calculated in accordance with generally accepted accounting
principles (GAAP) in the United States. However, OIBDA is one of the primary
measures used by management to evaluate our performance and to forecast future
results. We believe OIBDA is useful for investors because it enables them to
assess our performance in a manner similar to the method used by management,
and provides a measure that can be used to analyze, value and compare the
companies in the cable television industry, which may have different
depreciation and amortization policies. A limitation of this measure, however,
is that it excludes depreciation and amortization, which represents the
periodic costs of certain capitalized tangible and intangible assets used in
generating revenues in our business. Management utilizes a separate process to
budget, measure and evaluate capital expenditures. OIBDA should not be regarded as an alternative to operating income or net
loss as an indicator of operating performance nor should it be considered in
isolation or as a substitute for financial measures prepared in accordance with
GAAP. We believe that operating income is the most directly comparable GAAP
financial measure to OIBDA. The following table sets forth the reconciliation
of OIBDA to operating income for the three months ended March 31, 2004 and 2003
(dollars in thousands and unaudited): Three Months EndedMarch 31,2004
    
    2003OIBDA
    
    $
    49,464
    
    
    $
    47,387Depreciation and amortization
    
    
    (26,326
    )
    
    
    (49,651
    )Operating income
    
    $
    23,138
    
    
    $
    (2,264
    )
 10




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##### Table of Contents



Revenues Three Months Ended March 31,2004
    
    2003% of
    
    
    
    
    
    % ofAmount
    
    Revenues
    
    Amount
    
    Revenues
    
    $ Change
    
    % ChangeVideo
    
    $
    100,248
    
    
    
    84.4
    %
    
    $
    97,429
    
    
    
    89.3
    %
    
    $
    2,819
    
    
    
    2.9
    %Data
    
    
    15,876
    
    
    
    13.4
    
    
    
    10,246
    
    
    
    9.4
    
    
    
    5,630
    
    
    
    55.0Advertising
    
    
    2,653
    
    
    
    2.2
    
    
    
    1,435
    
    
    
    1.3
    
    
    
    1,218
    
    
    
    84.9$
    118,777
    
    
    
    100.0
    %
    
    $
    109,110
    
    
    
    100.0
    %
    
    $
    9,667
    
    
    
    8.9
    %
 Video revenues represent monthly subscription fees charged to customers
for our core cable television products and services (including basic, expanded
basic and analog premium programming, digital cable television programming
services, wire maintenance, equipment rental and services to commercial
establishments), pay-per-view charges, installation and reconnection fees, late
payment fees, and other ancillary revenues. Data revenues primarily represent
monthly subscription fees charged to customers for our data products and
services and equipment rental fees. Franchise fees charged to customers for
payment to local franchising authorities are included in their corresponding
revenue category. Revenues rose 8.9%, largely attributable to an increase in high-speed data
customers and basic rate increases applied on our video customers, driven in
large part by our own video programming cost increases. Video revenues increased 2.9% as a result of the aforementioned basic rate
increases and a 6.5% increase in digital customers, from 139,000 to 148,000,
partially offset by a 3.7% decline in basic subscribers from 750,000 to
722,000. Our loss in basic subscribers resulted primarily from increased
competitive pressures by DBS service providers, particularly in those markets
where we experienced their local-into-local launches, and to a lesser extent
from our tighter customer credit policies. To reverse this video customer
trend, we are increasing our customer retention efforts and our emphasis on
bundling, enhancing and differentiating our video products and services with
new digital service packages, video-on-demand, high-definition television,
digital video recorders and more local programming. Data revenues rose 55.0%, due primarily to an increase in data customers
from 92,000 to 133,000, as well as a gain in average monthly data revenue per
data subscriber from $39.69 to $41.54. We expect this customer trend in our
data business to continue given anticipated demand for our high-speed data
service. Advertising revenues increased 84.9%, primarily as a result of bringing
in-house certain markets previously managed by third parties. Instead of
receiving advertising revenues net of commissions paid to third parties, we now
record the full revenues from these markets with the related expenses,
including in-house commissions, recorded as selling, general and administrative
expenses. Costs and Expenses Service costs include: fees paid to programming suppliers; expenses
related to wages and salaries of technical personnel, who maintain our cable
network and perform customer installation activities; high-speed Internet
access costs, including costs of bandwidth connectivity, customer provisioning
and technical support for our customers; and plant operating costs, such as
utilities and pole rental expense. Programming costs, which are payments to
programmers for content and are generally paid on a per subscriber basis, have
historically increased due to both increases in the rates charged for existing
programming services and the introduction of new programming services to our
basic subscribers. Service costs increased 13.4% over the prior year. Of this increase,
42.9% was due to higher programming costs related to the expansion of our
service offerings and price increases, 24.9% was due to servicing the growth in
our data customers, 18.4% was due to increased employee headcount and
compensation, and 8.1% was due to increased vehicle and other operating costs
related to servicing our customers. The balance was due to greater expensing
of labor and 11




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##### Table of Contents



overhead costs resulting from the transition from upgrade construction to
maintenance activities. The increase in programming costs, however, was
partially offset by a decline in basic subscribers and analog premium units. We
expect programming costs on a per unit basis to continue to rise in 2004,
primarily due to price increases reflecting both inflation-indexed and
negotiated license fee increases. As a percentage of revenues, service costs
were 39.0% for the three months ended March 31, 2004 and 37.4% for the same
period of the prior year. Selling, general and administrative expenses include: wages and salaries
for our call center, customer service and support and administrative personnel;
franchise fees and taxes; and expenses related to billing, telecommunications,
marketing, bad debt, advertising and office administration. Selling, general and administrative expenses increased 8.1%. Of this
increase, 37.5% was due to higher advertising expense as we now record in-house
advertising costs that were previously managed by third parties as discussed
above, 21.1% was due to an increase in telephone costs, 13.7% was due to
greater expensing of labor and overhead costs resulting from the transition
from upgrade construction to maintenance activities, and 11.8% was due to an
increase in support personnel. As a percentage of revenues, selling, general
and administrative expenses were 17.5% for the three months ended March 31,
2004, as compared with 17.6% for the three months ended March 31, 2003. We
expect the rate of increase in expenses relating to our advertising sales to
moderate as the migration of the work in-house is completed. We expect
continued growth in advanced services, which include digital cable and
high-speed Internet access and, in late 2004, the launch of VoIP telephony
service. As a result, we expect our service costs and selling, general and
administrative expenses to increase. Management fee expense reflects charges incurred under our management
agreements with our parent, Mediacom Communications Corporation (MCC).
Management fee expense increased 32.6% to $2.2 million for the three months
ended March 31, 2004, as compared to $1.7 million for the three months ended
March 31, 2003. The increase was due to greater overhead costs charged by MCC
during the three month period ended March 31, 2004. As a percentage of
revenues, management fee expense was 1.9% for the three months ended March 31,
2004, as compared with 1.5% for the three months ended March 31, 2003. Depreciation and amortization decreased 47.0% to $26.3 million for the
three months ended March 31, 2004, as compared to $49.7 million for the three
months ended March 31, 2003. The decrease was primarily due to changes,
effective July 1, 2003, in the estimated useful lives of our cable systems and
equipment in conjunction with the completion of our network upgrade and rebuild
program. These changes reduced depreciation by $20.8 million for the three
months ended March 31, 2004. This decrease was offset in part by increased
depreciation for investments in our cable network and ongoing investments to
continue the rollout of products and services such as video-on-demand,
high-definition television and high-speed Internet access. See Note 2 to our
consolidated financial statements. Interest Expense, Net Interest expense, net, decreased 8.5% to $23.9 million for the three month
period ended March 31, 2004, as compared to $26.2 million for the three months
ended March 31, 2003. This was primarily due to lower market interest rates on
our variable rate debt for the three months ended March 31, 2004. (Loss) gain on derivative instruments, net We enter into interest rate exchange agreements, or interest rate swaps,
with counterparties to fix the interest rate on a portion of our variable rate
debt in order to reduce the potential volatility in our interest expense that
would otherwise result from changes in market interest rates. As of March 31,
2004 we had interest rate swaps with an aggregate principal amount of $300.0
million. These interest rate swaps are accounted for as fair value hedges of
debt instruments as prescribed by SFAS No. 133. The changes in their
mark-to-market values are derived from changes in market interest rates, the
decrease in their time to maturity and the creditworthiness of the
counterparties. Principally as a result of a downward change during the
quarter in market interest rates that are used to fair value our interest
swaps, loss on derivative instruments, net, was $3.4 million for the three
months ended March 31, 2004, as compared to a gain on derivative instruments,
net of $0.5 million for the three months ended March 31, 2003. Other expense Other expense was $1.1 million for the three months ended March 31, 2004
and $1.0 for the three months ended March 31, 2003. Other expense primarily
represents amortization of deferred financing costs and fees on unused credit
commitments. 12




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##### Table of Contents



Net loss Due to the factors described above, we generated a net loss of $0.7
million for the three months ended March 31, 2004, as compared to a net loss of
$24.4 million for the three months ended March 31, 2003. Operating Income Before Depreciation and Amortization OIBDA increased 4.4% to $49.5 million due to an 8.9% increase in revenues,
partially offset by a 13.4% increase in service costs and 8.1% increase in
selling, general and administrative expenses. OIBDA, expressed as a percentage
of revenues, was 41.6% for the three months ended March 31, 2004, as compared
to 43.4% for the year-ago period. Liquidity and Capital Resources As an integral part of our business plan, we have significantly invested,
and will continue to invest, additional capital in our cable network to enhance
its reliability and capacity, which will allow for the introduction of new
advanced broadband services. We also will continue to pursue a business
strategy that includes selective acquisitions. We expect to fund our capital
requirements through a combination of internally generated funds, and amounts
available under our bank credit facilities. Operating Activities Net cash flows provided by operating activities were $28.1 million and
$14.0 million for the three months ended March 31, 2004 and 2003, respectively.
The change in net operating cash flows was primarily due to a reduction in net
loss, and to a lesser extent, a reduction in the use of cash for certain
working capital accounts, principally prepaid expenses and other non-current
liabilities for the three months ended March 31, 2004. Investing Activities Net cash flows used in investing activities were $24.5 million and $27.2
million for the three months ended March 31, 2004 and 2003, respectively. The
change in net investing cash flows resulted primarily from a reduction in
capital expenditures for the three month period ended March 31, 2004, due to
the completion of our planned network upgrade and rebuild program. Our capital expenditures were $21.1 million for the three months ended
March 31, 2004, as compared to $27.1 million for the three months ended March
31, 2003. We expect prospective capital expenditures to consist primarily of
the costs of new advanced service installations and equipment, new plant
construction and network replacement. We plan to invest approximately $105.0
million to $110.0 million in capital expenditures in 2004. We have a $150.0 million preferred equity investment in Mediacom Broadband
LLC. The preferred equity investment has a 12% annual cash dividend, payable
quarterly in cash. For the three months ended March 31, 2004, we received in
aggregate $4.5 million of cash dividends on the preferred equity. Financing Activities For the three months ended March 31, 2004, net cash flows used in
financing activities were $11.0 million, as compared to net cash flows provided
by financing activities of $2.8 million for the same period of the prior year.
The use of net cash flows in the first quarter of 2004 was due principally to
the above-mentioned increase in net cash flows provided by operating activities
and the significant reduction of capital expenditures, which allowed us to make
net repayments of debt, as compared to our net borrowings in the comparable
2003 quarter, which funded capital expenditures in that period. We have two bank credit facilities in the aggregate amount of $995.5
million. These bank credit facilities expire in September 2008 and December
2008, however, their final maturities are subject to earlier repayment on dates
ranging from June 2007 to December 2007 if we do not refinance our $200.0
million 8 1/2% senior notes due April 2008 prior to March 31, 2007. 13




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##### Table of Contents



We have entered into interest rate exchange agreements with
counterparties, which expire from September 2006 through March 2007, to hedge
$300.0 million of floating rate debt. Under the terms of all of our interest
rate exchange agreements, we are exposed to credit loss in the event of
nonperformance by the other parties of the agreements. However, due to the
high creditworthiness of our counterparties, which are major banking firms
rated investment grade or better, we do not anticipate their nonperformance.
As of March 31, 2004, about 74% of our outstanding indebtedness was at fixed
interest rates or subject to interest rate protection. As of March 31, 2004, our total debt was approximately $1.51 billion, we
had unused credit commitments of about $303.8 million under our bank credit
facilities and our annualized cost of debt capital was approximately 6.5%. On
such date, approximately $291.8 million could be borrowed and used for general
corporate purposes based on the terms and conditions of our debt arrangements.
As of March 31, 2004, we were in compliance with all covenants under our debt
arrangements. As of March 31, 2004, approximately $6.2 million of letters of credit were
issued to various parties to secure our performance relating to insurance and
franchise requirements. Although we have not generated earnings sufficient to cover fixed charges,
we have generated cash and obtained financing sufficient to meet our short-term
requirements, including our debt service, working capital and capital
expenditures. We expect that we will continue to be able to generate funds and
obtain financing sufficient to service our long-term business plan, service our
debt obligations and complete any future acquisitions. However, there can be
no assurance that we will be able to obtain sufficient financing, or, if we
were able to do so, that the terms would be favorable to us. Critical Accounting Policies The foregoing discussion and analysis of our financial condition and
results of operations is based upon our consolidated financial statements,
which have been prepared in accordance with accounting principles generally
accepted in the United States. The preparation of these financial statements
requires us to make estimates and assumptions that affect the reported amounts
of assets, liabilities, revenues and expenses, and related disclosure of
contingent assets and liabilities. Periodically we evaluate our estimates,
including those related to doubtful accounts, long-lived assets, capitalized
costs and accruals. We base our estimates on historical experience and on
various other assumptions that we believe are reasonable. Actual results may
differ from these estimates under different assumptions or conditions. We believe the following represent the most significant and subjective
estimates used in the preparation of our consolidated financial statements: Property, Plant and Equipment In accordance with Statement of Financial Accounting Standards (SFAS)
No. 51, Financial Reporting by Cable Television Companies, we capitalized a
portion of direct and indirect costs related to the construction, replacement
and installation of property, plant and equipment. Capitalized costs are
recorded as additions to property, plant and equipment and depreciated over the
life of the related assets. We perform periodic evaluations of the estimates
used to determine the amount of costs that are capitalized. Any changes to
these estimates, which may be significant, are applied in the period in which
the evaluations were completed. Goodwill and Other Intangible Assets In accordance with SFAS No. 142, Goodwill and Other Intangible Assets,
the amortization of goodwill and indefinite-lived intangible assets is
prohibited and requires such assets to be tested annually for impairment, or
more frequently if impairment indicators arise. We have determined that our
cable franchise costs are indefinite-lived assets. Our annual impairment
tests, performed as of March 31, 2004, determined that there was no impairment
of goodwill or indefinite-lived intangible assets. There have been no events
since then that would require an analysis to be completed before the annual
test date. 14




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##### Table of Contents



Inflation and Changing Prices Our systems costs and expenses are subject to inflation and price
fluctuations. Such changes in costs and expenses can generally be passed
through to subscribers. Programming costs have historically increased at rates
in excess of inflation and are expected to continue to do so. We believe that
under the Federal Communications Commissions existing cable rate regulations,
we may increase rates for cable television services to more than cover any
increases in programming. However, competitive conditions and other factors in
the marketplace may limit our ability to increase its rates. 15




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##### Table of Contents



ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK In the normal course of business, the Company uses interest rate exchange
agreements with counterparties in order to fix the interest rate on its
floating rate debt. As of March 31, 2004, the Company had interest rate
exchange agreements with various banks pursuant to which the interest rate on
$300.0 million is fixed at a weighted average rate of approximately 3.0%. This
fixed interest rate is then adjusted, if necessary, by the applicable
three-month London Interbank Offering Rate to determine the interest expense
related to the Companys interest rate swap agreements. Under the terms of the
interest rate exchange agreements, which expire from 2006 through 2007, the
Company is exposed to credit loss in the event of nonperformance by the other
parties. However, due to the high creditworthiness of our counterparties,
which are major banking firms rated investment grade or better, the Company
does not anticipate nonperformance by the other parties. At March 31, 2004,
based on the mark-to-market valuation, the Company would have paid
approximately $7.0 million if it terminated these agreements, inclusive of
accrued interest. The table below provides the expected maturity and estimated fair value of
the Companys debt as of March 31, 2004 (dollars in thousands). See Note 7 to
the Companys unaudited consolidated financial statements. Bank Credit
    
    Capital LeaseSenior Notes
    
    Facilities
    
    Obligations
    
    TotalExpected Maturity:April 1, 2004 to March 31, 2005
    
    $
    
    
    
    $
    2,000
    
    
    $
    863
    
    
    $
    2,863April 1, 2005 to March 31, 2006
    
    
    
    
    
    
    27,000
    
    
    
    890
    
    
    
    27,890April 1, 2006 to March 31, 2007
    
    
    
    
    
    
    173,250
    
    
    
    918
    
    
    
    174,168April 1, 2007 to March 31, 2008
    
    
    
    
    
    
    255,125
    
    
    
    163
    
    
    
    255,288April 1, 2008 to March 31, 2009
    
    
    200,000
    
    
    
    228,125
    
    
    
    
    
    
    
    428,125Thereafter
    
    
    625,000
    
    
    
    
    
    
    
    
    
    
    
    625,000Total
    
    $
    825,000
    
    
    $
    685,500
    
    
    $
    2,834
    
    
    $
    1,513,334Fair Value
    
    $
    818,188
    
    
    $
    685,500
    
    
    $
    2,834
    
    
    $
    1,506,522Weighted Average Interest Rate
    
    
    9.0
    %
    
    
    2.5
    %
    
    
    3.1
    %
    
    
    6.0
    %
 16




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##### Table of Contents



ITEM 4. CONTROLS AND PROCEDURES Mediacom LLC The management of Mediacom LLC (Mediacom) carried out an evaluation,
with the participation of Mediacoms Chief Executive Officer and Chief
Financial Officer, of the effectiveness of Mediacoms disclosure controls and
procedures as of March 31, 2004. Based upon that evaluation, Mediacoms Chief
Executive Officer and Chief Financial Officer concluded that Mediacoms
disclosure controls and procedures were effective to ensure that information
required to be disclosed by Mediacom in the reports that it files or submits
under the Securities Exchange Act of 1934 is recorded, processed, summarized
and reported within the time periods specified in the rules and forms of the
Securities and Exchange Commission. There has not been any change in Mediacoms internal control over
financial reporting in connection with the evaluation required by Rule
15d-15(d) under the Exchange Act that occurred during the quarter ended March
31, 2004 that has materially affected, or is reasonably likely to materially
affect, Mediacoms internal control over financial reporting. Mediacom Capital Corporation The management of Mediacom Capital Corporation (Mediacom Capital)
carried out an evaluation, with the participation of Mediacom Capitals Chief
Executive Officer and Chief Financial Officer, of the effectiveness of
Mediacom Capitals disclosure controls and procedures as of March 31, 2004.
Based upon that evaluation, Mediacom Capitals Chief Executive Officer and
Chief Financial Officer concluded that Mediacom Capitals disclosure controls
and procedures were effective to ensure that information required to be
disclosed by Mediacom Capital in the reports that it files or submits under
the Securities Exchange Act of 1934 is recorded, processed, summarized and
reported within the time periods specified in the rules and forms of the
Securities and Exchange Commission. There has not been any change in Mediacom Capitals internal control over
financial reporting in connection with the evaluation required by Rule
15d-15(d) under the Exchange Act that occurred during the quarter ended March
31, 2004 that has materially affected, or is reasonably likely to materially
affect, Mediacom Capitals internal control over financial reporting. 17




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PART II 
 ITEM 1. LEGAL PROCEEDINGS See Note 9 to our consolidated financial statements. 
 ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits ExhibitNumber
    
    Exhibit Description31.1
    
    Rule 15d-14(a) Certifications of Mediacom LLC31.2
    
    Rule 15d-14(a) Certifications of Mediacom Capital Corporation32.1
    
    Section 1350 Certifications of Mediacom LLC32.2
    
    Section 1350 Certifications of Mediacom Capital Corporation
 (b) Reports on Form 8-K None. 18




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##### Table of Contents



SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized. MEDIACOM LLCMay 13, 2004
    
    By:
    
    /s/ MARK E. STEPHANMark E. StephanExecutive Vice President andChief Financial Officer
 19




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SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized. MEDIACOM CAPITAL CORPORATIONMay 13, 2004
    
    By:
    
    /s/ MARK E. STEPHANMark E. StephanExecutive Vice President andChief Financial Officer
 20