##### 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, 2005 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 þ No o Indicate by checkmark whether the registrants are accelerated filers (as defined in Rule 12b-2
of the Exchange Act). Yes o No þ 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, 2005 TABLE OF CONTENTS PagePART IItem 1.
    
    Financial StatementsConsolidated Balance Sheets (unaudited) March 31, 2005 and December 31, 2004
    
    
    1Consolidated Statements of Operations (unaudited) Three Months Ended March 31, 2005 and 2004
    
    
    2Consolidated Statements of Cash Flows (unaudited) Three Months Ended March 31, 2005 and 2004
    
    
    3Notes to Consolidated Financial Statements (unaudited)
    
    
    4Item 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    12Item 3.
    
    Quantitative and Qualitative Disclosures about Market Risk
    
    
    20Item 4.
    
    Controls and Procedures
    
    
    21PART IIItem 1.
    
    Legal Proceedings
    
    
    22Item 6.
    
    Exhibits
    
    
    22EX-31.1 CERTIFICATIONEX-31.2 CERTIFICATIONEX-32.1 CERTIFICATIONEX-32.2 CERTIFICATION
    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
(All dollar amounts in thousands)
(Unaudited) March 31,
    
    
    December 31,2005
    
    
    2004ASSETSCURRENT ASSETSCash and cash equivalents
    
    $
    8,249
    
    
    $
    12,131Investments
    
    
    1,987
    
    
    
    1,987Subscriber accounts receivable, net of allowance for doubtful
accounts of $952 and $856, respectively
    
    
    24,701
    
    
    
    26,929Note
receivable from affiliated company
    
    
    88,000
    
    
    
    Prepaid expenses and other assets
    
    
    21,298
    
    
    
    14,216Total current assets
    
    
    144,235
    
    
    
    55,263Preferred equity investment in affiliated company
    
    
    150,000
    
    
    
    150,000Investment in cable television systems:Property, plant and equipment, net of accumulated depreciation of
$751,121 and $728,048, respectively
    
    
    698,418
    
    
    
    698,363Intangible assets, net of accumulated amortization of $242,957 and
$242,615, respectively
    
    
    564,520
    
    
    
    564,862Total investment in cable television systems
    
    
    1,262,938
    
    
    
    1,263,225Other assets, net of accumulated amortization of $15,302 and
$14,443, respectively
    
    
    25,696
    
    
    
    23,412Total assets
    
    $
    1,582,869
    
    
    $
    1,491,900LIABILITIES AND MEMBERS DEFICITCURRENT LIABILITIESAccrued liabilities
    
    $
    96,000
    
    
    $
    107,520Deferred revenue
    
    
    18,385
    
    
    
    17,876Current portion of long-term debt
    
    
    6,391
    
    
    
    6,384Total current liabilities
    
    
    120,776
    
    
    
    131,780Long-term debt, less current portion
    
    
    1,569,193
    
    
    
    1,466,793Other non-current liabilities
    
    
    11,552
    
    
    
    12,634Total liabilities
    
    
    1,701,521
    
    
    
    1,611,207MEMBERS DEFICITCapital contributions
    
    
    548,521
    
    
    
    548,521Deferred compensation
    
    
    (539
    )
    
    
    Paid-in capital
    
    
    553
    
    
    
    Accumulated deficit
    
    
    (667,187
    )
    
    
    (667,828
    )Total members deficit
    
    
    (118,652
    )
    
    
    (119,307
    )Total liabilities and members deficit
    
    $
    1,582,869
    
    
    $
    1,491,900
 The accompanying notes to the unaudited consolidated financial
statements are an integral part of these statements. 1




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MEDIACOM LLC AND SUBSIDIARIES 
 CONSOLIDATED STATEMENTS OF OPERATIONS
(All dollar amounts in thousands)
(Unaudited) Three Months EndedMarch 31,2005
    
    
    2004Revenues
    
    $
    117,498
    
    
    $
    118,777Costs and expenses:Service costs (exclusive of depreciation and amortization of
$24,220 and $26,326, respectively, shown separately below)
    
    
    47,982
    
    
    
    45,822Selling, general and administrative expenses
    
    
    22,813
    
    
    
    21,286Management fee expense
    
    
    2,378
    
    
    
    2,205Depreciation and amortization
    
    
    24,220
    
    
    
    26,326Operating income
    
    
    20,105
    
    
    
    23,138Interest expense, net
    
    
    (25,662
    )
    
    
    (23,938
    )Gain (loss) on derivatives, net
    
    
    3,093
    
    
    
    (3,392
    )Investment income from affiliate
    
    
    4,500
    
    
    
    4,500Other expense
    
    
    (1,395
    )
    
    
    (1,051
    )Net income (loss)
    
    $
    641
    
    
    $
    (743
    )
 The accompanying notes to the 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
(All dollar amounts in thousands)
(Unaudited) Three Months EndedMarch 31,2005
    
    
    2004CASH FLOWS FROM OPERATING ACTIVITIES:Net income (loss)
    
    $
    641
    
    
    $
    (743
    )Adjustments to reconcile net income (loss) to net cash provided by
operating activities:Depreciation and amortization
    
    
    24,220
    
    
    
    26,326(Gain) loss on derivatives, net
    
    
    (3,093
    )
    
    
    3,392Amortization of deferred financing costs
    
    
    859
    
    
    
    834Amortization of deferred compensation
    
    
    14
    
    
    
    Changes in assets and liabilities, net of effects from acquisitions:Subscriber accounts receivable, net
    
    
    2,228
    
    
    
    (2,321
    )Prepaid expenses and other assets
    
    
    (7,190
    )
    
    
    6,544Accrued liabilities
    
    
    (11,520
    )
    
    
    (12,446
    )Deferred revenue
    
    
    509
    
    
    
    2,215Other non-current liabilities
    
    
    (1,082
    )
    
    
    4,258Net cash flows provided by operating activities
    
    
    5,586
    
    
    
    28,059CASH FLOWS FROM INVESTING ACTIVITIES:Capital expenditures
    
    
    (23,825
    )
    
    
    (21,082
    )Acquisition of cable television systems
    
    
    
    
    
    
    (3,433
    )Loan to
affiliated company - note receivable
    
    
    (88,000
    )
    
    
    Other
investment activities
    
    
    
    
    
    
    (9
    )Net cash flows used in investing activities
    
    
    (111,825
    )
    
    
    (24,524
    )CASH FLOWS FROM FINANCING ACTIVITIES:New borrowings
    
    
    238,000
    
    
    
    26,043Repayment of debt
    
    
    (135,593
    )
    
    
    (37,033
    )Financing costs
    
    
    (50
    )
    
    
    Net cash flows provided by (used in) financing activities
    
    
    102,357
    
    
    
    (10,990
    )Net decrease in cash and cash equivalents
    
    
    (3,882
    )
    
    
    (7,455
    )CASH AND CASH EQUIVALENTS, beginning of period
    
    
    12,131
    
    
    
    13,417CASH AND CASH EQUIVALENTS, end of period
    
    $
    8,249
    
    
    $
    5,962SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:Cash paid during the period for interest, net of amounts capitalized
    
    $
    35,955
    
    
    $
    34,137
 The accompanying notes to the 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 relies on its parent, MCC, for various services such as corporate and administrative
support. The financial position, results of operations and cash flows of Mediacom could differ
from those that would have resulted had Mediacom operated autonomously or as an entity independent
of MCC. 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 operations, revenues or cash flows, and has no
assets, liabilities or stockholders equity on its consolidated
balance sheets
other than a one-hundred dollar
receivable from an affiliate and the same dollar amount of common stock. Therefore, separate financial
statements have not been presented for this entity. (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, 2005
and 2004. In the opinion of management, such statements include all adjustments, consisting of
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, 2004
(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, 2005. Revenue Recognition Revenues include amounts billed to customers for services provided, installations, advertising
and other services. Revenues from video and data services are recognized when the services are
provided to the customers. Installation revenues are less than direct installation costs.
Therefore, installation revenues are recognized as connects are completed. Advertising sales are
recognized in the period that the advertisements are exhibited. Franchise fees are collected on a
monthly basis and are periodically remitted to local franchise authorities. Franchise fees
collected and paid are reported as revenues and expenses as a component of selling, general and
administrative. Programming Costs The Company has various fixed-term carriage contracts to obtain programming for its cable
systems from content suppliers whose compensation is generally based on a fixed monthly fee per
customer. These programming contracts are subject to negotiated renewal. The Company recognizes
programming costs when it distributes the related programming. These programming costs are usually
payable each month based on calculations performed by the Company and are subject to adjustments
based on the results of periodic audits by the content suppliers. Historically, such audit
adjustments have been immaterial to the Companys total programming costs. Some content suppliers
offer financial incentives to support the launch of a channel and ongoing marketing support. When
such financial incentives are received, the Company defers them within non-current liabilities and
recognizes such amounts as a reduction of programming costs (which are a component of service costs
in the consolidated statement of operations) over the carriage term of the programming contract. 4




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MEDIACOM LLC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited) Allowance for Doubtful Accounts The allowance for doubtful accounts represents the Companys best estimate of probable losses
in the accounts receivable balance. The allowance is based on the number of days outstanding,
customer balances, historical experience and other currently available information. 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 equipments 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 depreciation are removed from the respective accounts and the
gains and losses are presented as a separate component on the statement of operations. The Company capitalizes the costs associated with the construction of cable transmission and
distribution facilities, the addition of network and other equipment and new customer
installations. Costs include direct labor and material, as well as certain indirect costs
including interest. The Company performs periodic evaluations of certain estimates used to
determine the amount and extent such costs are capitalized. Any changes to these estimates, which
may be significant, are applied prospectively 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. Long-Lived Assets In accordance with SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived
Assets,the Company periodically evaluates the recoverability and estimated lives of its
long-lived assets, including property and equipment and intangible assets subject to amortization,
whenever events or changes in circumstances indicate that the carrying amount may not be
recoverable or the useful life has changed. When the carrying amount is not recoverable, the
measurement for such impairment loss is based on the fair value of the asset, typically based upon
the future cash flows discounted at a rate commensurate with the risk involved. Unless presented
separately, the loss is included as a component of either depreciation expense or amortization
expense, as appropriate. 5




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MEDIACOM LLC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited) Intangible Assets In accordance with FASB 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. The Company has
determined that its cable franchise costs and goodwill are indefinite-lived assets and therefore
not amortizable. Other finite-lived intangible assets, which consist primarily of subscriber lists
and covenants not to compete, continue to be amortized over their useful lives of 5 to 10 years and
5 years, respectively. Derivative Instruments The Company accounts for derivative instruments in accordance with SFAS No. 133, SFAS No. 138
and SFAS No. 149. These pronouncements require that all derivative instruments be recognized on
the balance sheet at fair value. The Companys stated strategy is to manage its interest expense
using a combination of fixed and variable interest rate debt. The Company enters into interest
rate exchange agreements to fix the interest rate on a portion of its variable interest rate debt
to reduce the potential volatility in its interest expense that would otherwise result from changes
in market interest rates. The Companys derivative instruments are recorded at fair value and are
included in other current assets, other assets and other liabilities. The Companys accounting
policies for these instruments are based on whether they meet the Companys criteria for
designation as hedging transactions. The criteria for designating a derivative as a hedge include
the instruments effectiveness in risk reduction and, in most cases, a one-to-one matching of the
derivative instrument to its underlying transaction. Gains and losses from changes in fair values
of derivatives that are not designated as hedges for accounting purposes are recognized currently
in earnings. The Company had no derivative financial instruments designated as hedges. Therefore,
changes in fair value for the respective periods were recognized in earnings. Income Taxes Since the Company is a limited liability company, it is not subject to federal or state income
taxes and no provision for income taxes relating to its operations has been reflected in the
accompanying consolidated financial statements. Income or loss of the Company is
reported in MCCs income tax returns. Comprehensive Income SFAS No.130,Reporting Comprehensive Income,requires companies to classify items of other
comprehensive income by their nature in the financial statements and display the accumulated
balance of other comprehensive income separately from retained earnings and paid-in capital in the
equity section of a statement of financial position. The Company has had no other comprehensive
income items to report. Reclassifications Certain reclassifications have been made to the prior years amounts to conform to the current
years presentation. 6




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MEDIACOM LLC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited) (3) Recent Accounting Pronouncements In December 2004, the FASB issued SFAS No. 123R, Amendment of Statement 123 on Share-Based
Payment.SFAS No. 123R requires companies to expense the value of employee stock options, stock
granted through the employee stock purchase program and similar awards. On April 14, 2005, the SEC
approved a new rule delaying the effective date until the beginning of a companys next fiscal year
that commences after June 15, 2005. The Company plans on adopting SFAS No. 123R effective January
1, 2006 and expects that the adoption of SFAS No. 123R will have a material impact on its
consolidated results of operations. (4) Property, Plant and Equipment As of March 31, 2005 and December 31, 2004, property, plant and equipment consisted of
(dollars in thousands): March 31,
    
    
    December 31,2005
    
    
    2004Land and land improvements
    
    $
    1,468
    
    
    $
    1,428Buildings and leasehold improvements
    
    
    16,313
    
    
    
    15,606Cable systems, equipment and subscriber devices
    
    
    1,387,419
    
    
    
    1,365,701Vehicles
    
    
    28,371
    
    
    
    28,347Furniture, fixtures and office equipment
    
    
    15,968
    
    
    
    15,3291,449,539
    
    
    
    1,426,411Accumulated depreciation
    
    
    (751,121
    )
    
    
    (728,048
    )Property, plant and equipment, net
    
    $
    698,418
    
    
    $
    698,363
 Depreciation expenses for the three months ended March 31, 2005 and 2004 were approximately
$23.9 million and $24.1 million, respectively. As of March 31, 2005 and 2004, the Company had
property under capitalized leases of $4.7 million and $5.6 million, respectively, before
accumulated depreciation, and $3.5 million and $4.3 million, respectively, net of accumulated
depreciation. During the quarters ended March 31, 2005 and 2004, the Company incurred interest
expense, net of interest income, of $26.1 million and $24.3 million, respectively, of which $0.4 million was capitalized for
each period. (5) 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 they were accounted for using the
purchase method of accounting. On January 1, 2002, the Company adopted SFAS No. 142, Goodwill and Other Intangible Assets,
which eliminates amortization of goodwill and certain intangibles that have indefinite lives but
requires that such assets be tested for impairment at least annually. The Company evaluated the
expected useful life of its cable franchises, also referred to as franchise costs, upon adoption of
SFAS No. 142 and determined that all of its cable franchises have an indefinite useful life. As
such, the Company ceased amortizing its cable franchises effective January 1, 2002. The Company has assessed franchise value for impairment under SFAS No. 142 by utilizing a
discounted cash flow methodology. In performing an impairment test in accordance with SFAS No.
142, the Company considers the guidance contained in EITF Issue No. 02-7, Recognition of Customer
Relationship Intangible Assets acquired in a Business Combination,whereby the Company considers
assumptions, such as future cash flow expectations and other future benefits related to the
intangible assets, when measuring the fair value of each cable systems other net assets. If the
determined fair value of the Companys franchise costs is less
than the carrying amount on the financial 7




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MEDIACOM LLC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited) statements, an impairment charge would be recognized for the difference between the fair
value and the carrying value of the assets. To test the impairment of the goodwill carried on the
Companys financial statements, the fair value of the cable system clusters tangible and
intangible assets (includes franchise costs) other than goodwill is deducted from the cable system
clusters fair value. The balance represents the fair value of goodwill which is then compared to
the carrying value of goodwill to determine if there is any impairment. The Company completed its
last impairment test in accordance with SFAS No. 142 as of October 1, 2004, which reflected no
impairment of franchise costs or goodwill. As of March 31, 2005, there were no events since then
that would require an impairment analysis to be completed before the next annual test date. The following table summarizes the net asset value for each intangible asset category as of
March 31, 2005 and December 31, 2004 (dollars in thousands): Gross Asset
    
    
    Accumulated
    
    
    Net AssetMarch 31, 2005
    
    Value
    
    
    Amortization
    
    
    ValueFranchise costs
    
    $
    654,708
    
    
    $
    102,195
    
    
    $
    552,513Goodwill
    
    
    14,217
    
    
    
    2,682
    
    
    
    11,535Subscriber Lists
    
    
    132,857
    
    
    
    132,396
    
    
    
    461Covenants not to compete
    
    
    5,695
    
    
    
    5,684
    
    
    
    11$
    807,477
    
    
    $
    242,957
    
    
    $
    564,520
 Gross Asset
    
    
    Accumulated
    
    
    Net AssetDecember 31, 2004
    
    Value
    
    
    Amortization
    
    
    ValueFranchise costs
    
    $
    654,708
    
    
    $
    102,195
    
    
    $
    552,513Goodwill
    
    
    14,217
    
    
    
    2,682
    
    
    
    11,535Subscriber Lists
    
    
    132,857
    
    
    
    132,095
    
    
    
    762Covenants not to compete
    
    
    5,695
    
    
    
    5,643
    
    
    
    52$
    807,477
    
    
    $
    242,615
    
    
    $
    564,862
 Amortization expenses for the three months ended March 31, 2005 and 2004 were approximately
$0.3 million and $2.2 million, respectively. The Companys estimated aggregate amortization
expense for 2005 is $0.5 million, after which the assets will be fully amortized. (6) Accrued Liabilities Accrued liabilities consist of the following as of March 31, 2005 and December 31, 2004
(dollars in thousands): March 31,
    
    
    December 31,2005
    
    
    2004Accrued interest
    
    $
    23,993
    
    
    $
    33,041Accrued payroll and benefits
    
    
    9,061
    
    
    
    7,724Accrued programming costs
    
    
    22,764
    
    
    
    25,693Accrued property, plant and equipment
    
    
    8,874
    
    
    
    8,394Accrued service costs
    
    
    5,789
    
    
    
    5,738Accrued taxes and fees
    
    
    12,048
    
    
    
    13,667Accrued telecommunications
    
    
    1,099
    
    
    
    4,436Subscriber advance payments
    
    
    4,730
    
    
    
    4,747Other accrued expenses
    
    
    7,642
    
    
    
    4,080$
    96,000
    
    
    $
    107,520
 8




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MEDIACOM LLC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited) (7) Debt As of March 31, 2005 and December 31, 2004, debt consisted of (dollars in thousands): March 31,
    
    
    December 31,2005
    
    
    2004Bank credit facilities
    
    $
    748,625
    
    
    $
    646,00081/2% senior notes
    
    
    200,000
    
    
    
    200,00077/8% senior notes
    
    
    125,000
    
    
    
    125,00091/2% senior notes
    
    
    500,000
    
    
    
    500,000Capital lease obligations
    
    
    1,959
    
    
    
    2,177$
    1,575,584
    
    
    $
    1,473,177Less: current portion
    
    
    6,391
    
    
    
    6,384Total long-term debt
    
    $
    1,569,193
    
    
    $
    1,466,793
 The average interest rates on debt outstanding under the bank credit facilities were 4.7% and
2.5% as of March 31, 2005 and 2004, respectively, before giving effect to the interest rate
exchange agreements discussed below. In January 2005, the Company borrowed the full amount under a
$200.0 million delayed-draw term loan facility and used the proceeds to reduce outstandings under
the Companys revolving credit facility and to loan $88.0 million to Mediacom Broadband LLC, a
Delaware limited liability company wholly-owned by MCC, in the form
of a demand note. As of March 31, 2005, the Company had
unused credit commitments of approximately $390.6 million under its bank credit facilities, all of
which 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 and for all periods through March 31, 2005. The Company uses interest rate exchange agreements in order to fix the interest rate on its
floating rate debt. As of March 31, 2005, 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%. 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 creditworthiness of the Companys counterparties, which are
major banking firms with investment grade ratings, the Company does not anticipate their
nonperformance. At the end of each quarterly reporting period, the carrying values of these swap
agreements are marked to market. The fair values of these agreements is the estimated amount that
the Company would receive or pay to terminate such agreements, taken into account market interest
rates, the remaining time to maturities and the creditworthiness of the Companys counterparties.
At March 31, 2005, based on the mark-to-market valuation, the Company recorded on its consolidated
balance sheet an accumulated investment in derivatives of $4.7 million, which is a component of
other assets. As a result of the mark-to-market valuations of these interest rate swaps, the Company
recorded a gain of $3.1 million for the three months ended March 31, 2005, as compared to a loss of
$3.4 million for the three months ended March 31, 2004. At the Companys request, on March 16, 2005, the registered holders of the Companys 81/2%
Senior Notes (the Notes) were notified that the Company had elected to redeem all of the Notes
outstanding. As of March 16, 2005 the aggregate principal amount of the Notes outstanding was
$200.0 million. As of March 31, 2005, approximately $9.4 million letters of credit were issued to various
parties as collateral for our performance relating primarily to insurance and franchise
requirements. 9




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##### Table of Contents



MEDIACOM LLC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited) (8) Stock-Based Compensation The Company accounts for stock-based compensation in accordance with APB Opinion No. 25,
Accounting for Stock Issued to Employees,and related interpretations, as permitted by SFAS No.
123, Accounting for Stock-Based Compensation, (SFAS No. 123) as amended. Compensation expense
for stock options, restricted stock units and other equity awards to employees is recorded by
measuring the intrinsic value, defined as the excess, if any, of the quoted market price of the
stock at the date of the grant over the amount an employee must pay to acquire the stock, and
amortizing the intrinsic value to compensation expense over the vesting period of the award. During the quarter ended March 31, 2005, certain employees received grants of stock options
and restricted stock units exercisable on underlying MCC shares. The stock option grants totaled
18,000 options which had an exercise price of $5.42 and vest equally over four years. The
restricted stock units were granted in two tranches. The first tranche was a grant of 25,800
restricted stock units at a grant price of $5.69 and vests equally over four years. The second
tranche was a grant of 75,000 restricted stock units at a grant price of $5.42 with a cliff vest at
the end of four years. No compensation cost has been recognized for any option grants in the accompanying
consolidated statements of operations since the price of the options was at their fair market value
at the date of grant. As of March 31, 2005, the Company has recorded approximately $0.6 million of
intrinsic value related to the restricted stock unit awards as deferred compensation and paid-in
capital in its consolidated balance sheets, and during the three months ended March 31, 2005, the
Company amortized $14,000 of deferred compensation as compensation expense in its consolidated
statements of operations. Had the Company applied the fair value recognition provisions of SFAS No. 123 to stock-based
compensation, the Companys net income (loss) would have been
changed from the as reported amounts to the pro
forma amounts as follows (dollars in thousands): Three Months EndedMarch 31,2005
    
    
    2004Net income (loss) as reported
    
    $
    641
    
    
    $
    (743
    )Add: Total stock-based compensation expense included in net income as reported above
    
    
    14
    
    
    
    Deduct: Total stock-based compensation expense determined under fair value based method for all awards
    
    
    (253
    )
    
    
    (625
    )Pro forma net income (loss)
    
    $
    402
    
    
    $
    (1,368
    )
 (9) Investment in Affiliated Company The Company has 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. During the
three months ended March 31, 2005, the Company received in aggregate $4.5 million in cash dividends
on the preferred equity. (10) Loan to
Affiliated Company  Note Receivable In January 2005, the Company loaned $88.0 million to Mediacom Broadband LLC. The loan is in
the form of a demand note, which has a 6.7% annual interest rate payable semi-annually in cash. 10




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MEDIACOM LLC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited) (11) Legal Proceedings On April 5, 2004, a lawsuit was filed against the Companys parent, MCC, 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. On June 29, 2004, Echostar amended its complaint to also allege that this conduct amounted to
a breach of the contract between Echostar and one of MCCs employees, who allegedly acted as an
agent for MCC, by which MCC received the Echostar satellite signal. On September 7, 2004, the U.S.
District Court granted MCCs motion to transfer the case to the Middle District of Georgia, where
venue is proper and where personal jurisdiction over MCC exists. There were no proceedings for
several months until Echostar filed a motion for default judgment on April 6, 2005. MCC filed a
response opposing the motion and the court has not yet acted upon it. MCC Georgia LLC and the Companys parent company have advised the Company that they intend to
vigorously defend against the claims made by Echostar. 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 judge whether or not those damages would
be material to their consolidated financial position, results of
operations, cash flows or business. The Company, its parent company and its subsidiaries or other affiliated companies are also
involved in various other legal actions arising in the ordinary course of business. In the opinion
of management, the ultimate disposition of these matters will not have a material adverse effect on
the Companys consolidated financial position, results of operations, cash flows or business. (12) Subsequent Events On April 15, 2005, the Company redeemed all of its outstanding 81/2% Senior Notes due 2008 (the
Notes). The redemption price was equal to 101.417% of the outstanding principal amount of the
Notes plus accrued interest. The Company funded the redemption with a combination of cash on hand
and a $204.0 million borrowing from the revolving credit portion of the Companys credit facility. The
Company will record in its consolidated statement of operations a
loss on extinguishment of debt of
$2.8 million in the second quarter ended June 30, 2005. On
April 26, 2005, Mediacom Broadband LLC repaid the $88.0 million
loan plus accrued interest to the Company. The Company used
the proceeds to repay outstandings under its revolving credit
facility. As of the same date, after giving effect to the redemption
of the Notes and repayment of this loan, the Company had unused
commitments of about $278.0 million, all of which could have been borrowed and used for general
corporate purposes based on the terms and conditions of the Companys debt arrangements. 11




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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, 2005 and 2004,
and with the Companys annual report on Form 10-K for the year ended December 31, 2004. Overview We
are a wholly-owned subsidiary of Mediacom Communications Corporation (MCC). Through our
interactive broadband network, we provide our customers with a wide array of broadband products and
services, including analog and digital video services, such as video-on-demand (VOD),
high-definition television (HDTV), digital video recorders (DVRs), and high-speed data access
(HSD) and beginning in the second quarter of 2005, cable telephony. We currently offer video and
HSD bundles, and, when we introduce cable telephony, we will offer triple play bundles of video,
HSD and voice. Bundled products and services offer our subscribers a single provider contact for
provisioning, billing and customer care. As
of March 31, 2005, our cable systems passed an estimated 1.34 million homes and served
673,500 million basic video subscribers. We provide digital video services to 175,500 digital
customers, representing a penetration of 26.1% of our basic subscribers. We also currently provide
HSD to 181,000 data customers, representing a penetration of 13.5% of our estimated homes passed. We have faced increasing levels of competition for our video programming services over the
past few years, mostly from direct broadcast satellite (DBS) service providers. 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 have been the primary cause of our loss of basic subscribers in recent
periods. By year-end 2004, competitive local-into-local services in our markets covered an
estimated 91% of our basic subscribers, as compared to 48% at year-end 2003. We believe, based on
publicly announced new market launches, that DBS service providers will launch local television
channels in additional markets representing a modest amount of our subscriber base in 2005. 12




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Actual Results of Operations Three Months Ended March 31, 2005 Compared to Three Months Ended March 31, 2004 The following table sets forth our unaudited consolidated statements of operations for the
three months ended March 31, 2005 and 2004 (dollars in thousands and percentage changes that are
not meaningful are marked NM): Three Months EndedMarch 31,2005
    
    
    2004
    
    
    $ Change
    
    
    % ChangeRevenues
    
    $
    117,498
    
    
    $
    118,777
    
    
    $
    (1,279
    )
    
    
    (1.1
    %)Costs and expenses:Service costs
    
    
    47,982
    
    
    
    45,822
    
    
    
    2,160
    
    
    
    4.7
    %Selling, general and administrative
expenses
    
    
    22,813
    
    
    
    21,286
    
    
    
    1,527
    
    
    
    7.2
    %Management fee expense
    
    
    2,378
    
    
    
    2,205
    
    
    
    173
    
    
    
    7.8
    %Depreciation and amortization
    
    
    24,220
    
    
    
    26,326
    
    
    
    (2,106
    )
    
    
    (8.0
    %)Operating income
    
    
    20,105
    
    
    
    23,138
    
    
    
    (3,033
    )
    
    
    (13.1
    %)Interest expense, net
    
    
    (25,662
    )
    
    
    (23,938
    )
    
    
    (1,724
    )
    
    
    7.2
    %Gain (loss) on derivatives, net
    
    
    3,093
    
    
    
    (3,392
    )
    
    
    6,485
    
    
    NMInvestment income
    
    
    4,500
    
    
    
    4,500
    
    
    
    
    
    
    
    Other expense
    
    
    (1,395
    )
    
    
    (1,051
    )
    
    
    (344
    )
    
    
    32.7
    %Net income (loss)
    
    $
    641
    
    
    $
    (743
    )
    
    $
    1,384
    
    
    NM
 Revenues The following table sets forth revenue information for the three months ended March 31, 2005
and 2004 (dollars in millions): Three Months EndedMarch 31,2005
    
    
    2004% of
    
    
    
    
    
    
    % ofAmount
    
    
    Revenues
    
    
    Amount
    
    
    Revenues
    
    
    $ Change
    
    
    % ChangeVideo
    
    $
    94.8
    
    
    
    80.7
    %
    
    $
    100.2
    
    
    
    84.3
    %
    
    $
    (5.4
    )
    
    
    (5.4
    %)Data
    
    
    19.8
    
    
    
    16.8
    %
    
    
    15.9
    
    
    
    13.4
    %
    
    
    3.9
    
    
    
    24.5
    %Advertising
    
    
    2.9
    
    
    
    2.5
    %
    
    
    2.7
    
    
    
    2.3
    %
    
    
    0.2
    
    
    
    7.4
    %$
    117.5
    
    
    
    100.0
    %
    
    $
    118.8
    
    
    
    100.0
    %
    
    $
    (1.3
    )
    
    
    (1.1
    %)
 Video revenues represent monthly subscription fees charged to customers for our core
cable television products and services (including basic, expanded basic and digital cable
programming services, wire maintenance, equipment rental and services to commercial
establishments), pay-per-view charges, installation, reconnection and late payment fees, and other
ancillary revenues. Data revenues primarily represent monthly subscription fees charged to
customers, including commercial establishments, 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 decreased 1.1%, largely attributable to a decrease in video revenues, significantly
offset by an increase in data and advertising revenues. 13




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##### Table of Contents



Video revenues decreased 5.4%, as a result of a 6.7% reduction in basic video subscribers from
722,000 as of March 31, 2004, to 673,500 as of March 31, 2005, offset in part by the full impact of
basic rate increase applied on our video subscribers during 2004 and higher service fees from
advanced video products. Average monthly video revenue per basic video subscriber increased 1.5%
from $46.19 to $46.86. Our loss in basic video subscribers in 2004 resulted primarily from
increased competitive pressures by DBS service providers, and, to a lesser extent, from
our tightened customer credit policies, which were imposed throughout 2004. To reverse
this video subscriber trend, we have been increasing customer retention efforts and our emphasis on
product bundling as well as enhancing and differentiating our video products and services with new
digital service packages, VOD, HDTV, DVRs and more local programming. As a result of these
efforts, during the three months ended March 31, 2005, we experienced
a reduction in the loss of basic video subscribers as compared to
quarterly periods in 2004 and digital customer growth of 15,500. Data revenues rose 24.5% primarily due to a 36.1% year-over-year increase in data customers
from 133,000 to 181,000 and, to a much lesser extent, an increased contribution from our commercial
enterprise business. Average monthly data revenue per data customer
decreased from $41.69 to
$38.54, largely due to discounted video and data bundles introduced in mid-year 2004. Advertising revenue increased 7.4%, as a result of stronger national advertising. This was
offset in part by a decline in political advertising, which is expected to be much lower in 2005
when compared to the 2004 election year. Costs and Expenses Service costs include: fees paid to programming suppliers; employee expenses related to wages
and salaries of technical personnel who maintain our cable network and perform customer
installation activities; data costs, including costs of bandwidth connectivity, customer
provisioning and technical support; and field operating costs, including outside contractors,
vehicle, utilities and pole rental expenses. 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 customers. Service costs increased 4.7%, primarily due to increases in field operating, data and employee
costs. Programming costs were unchanged for the three
months ended March 31, 2005 compared to the respective period in
2004, as higher unit costs
charged by programming suppliers for their services were offset by the 6.7% reduction in
basic video subscribers in the twelve-month period ended March 31,
2005. Field operating and employee related costs
rose 17.0% due to higher levels of customer activity, which increased
outside contractor costs and employee overtime and commissions,
greater expensing of operational costs resulting from the transition
from upgrade construction to maintenance activities, and higher
converter repair and vehicle fuel costs. Data costs increased 10.9% to service the
growth in our data customers. Service costs as a percentage of
revenues were 40.8% and 38.6% for the three months ended March 31, 2005 and 2004, respectively. 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 office
costs related to billing, telecommunications, marketing, bad debt, advertising and office
administration. Selling, general and administrative expenses rose 7.2%, principally due to higher marketing,
employee and office costs, partially offset by a significant decrease in bad debt expense.
Marketing costs grew 50.0% as a result of increased costs associated with contracted direct sales
personnel and advertising campaigns to support greater sales of our products and services.
Employee costs increased 7.0% due to higher employee compensation and benefit costs. Office costs
rose 21.1%, mainly due to higher telephone costs related to the greater call volumes and the use of
contracted call center services. This increase in selling, general and administrative expense was
significantly offset by a 36.9% decrease in bad debt expense as a result of improved customer
credit and collection policies. Selling, general and administrative expenses as a percentage of
revenues were 19.4% and 17.9% for the three months ended March 31, 2005 and 2004, respectively. 14




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##### Table of Contents



We expect continued revenue growth in advanced services, which include digital video, HDTV,
DVRs and HSD and, in the second quarter of 2005, the launch of cable 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, MCC. Management fee expense was $2.4 million for
the three months ended March 31, 2005 as compared to $2.2 million for the three months ended March
31, 2004. Management fee expense as a percentage of revenues was 2.0% for the three months ended
March 31, 2005, as compared with 1.9% for the three months ended March 31, 2004. Depreciation and amortization decreased 8.0% to $24.2 million for the three months ended March
31, 2005, as compared to $26.3 million for the three months ended March 31, 2004. This decrease
was principally due to higher levels of plant disposals in the second half of 2004 due to the sale
of a cable system, a storm related plant write down and the sale of a building in our southern
region, offset in part by increased depreciation for ongoing investments to continue the rollout of
products and services such as VOD, HDTV, DVRs and HSD and for investments in our cable network. Interest Expense, Net Interest
expense, net, rose 7.2% for the three months ended March 31, 2005 as
compared to the respective period in 2004, primarily due to increased average
indebtedness and to a lesser extent, higher market interest rates on
variable rate debt, offset in part by interest income on the note
receivable from Mediacom Broadband LLC (Mediacom Broadband), a Delaware limited liability
company wholly-owned by MCC. Gain (Loss) on Derivatives, 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 to reduce the potential volatility
in our interest expense that would otherwise result from changes in variable market interest rates.
As of March 31, 2005 we had interest rate swaps with an aggregate principal amount of $300.0
million. 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. As a
result of the mark-to-market valuation of these interest rate swaps, we recorded a gain on
derivatives amounting to $3.1 million for the three months ended March 31, 2005, as compared to a
loss on derivatives amounting to $3.4 million for the three months ended March 31, 2004. Investment Income from Affiliate Investment income from affiliate was $4.5 million for the three months ended March 31, 2005
and 2004. This amount represents the investment income on our $150.0 million preferred equity
investment in Mediacom Broadband. Other Expense Other expense was $1.4 million and $1.1 million for the three months ended March 31, 2005 and
2004, respectively. Other expense primarily represents amortization of deferred financing costs
and fees on unused credit commitments. Net Income (Loss) As a result of the factors described above, we generated net income for the three months ended
March 31, 2005 of $0.6 million, as compared to a net loss of $0.7 million for the three months
ended March 31, 2004. 15




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##### Table of Contents



Liquidity and Capital Resources Overview As
an integral part of our business plan, we have invested, and will continue to invest,
significant amounts in our cable systems to enhance their reliability and capacity, which allows
for the introduction of new advanced broadband services. Our capital investments have recently
shifted away from the cable systems broadband network and to the deployment of new products and
services, including VOD, HDTV, DVRs, HSD and cable telephony. In the three months ended March 31,
2005, we made $23.8 million of capital expenditures. Although we did not make any strategic
acquisitions or sales of cable systems during the three months ended March 31, 2005, we have
historically entered into such transactions and may continue to do so in the future. We have a significant level of debt. As of March 31, 2005, our total debt was $1.58 billion.
Of this amount, $6.4 million will mature within the twelve
months ending March 31,
2006 and 2007. Given our level of indebtedness, we also have significant amounts of interest
expense obligations. During the quarter ended March 31, 2005 we
paid cash interest of $36.0 million.
Our cash interest payments have historically been higher in the first and third calendar quarters
of the year due to the timing of the cash interest payments on our senior notes. During
the three months ended March 31, 2005, we generated $5.6 million of
net cash flows from operating activities and $102.4 million from
financing activities, and had a decrease in cash of $3.9 million. We used these sources to fund our cash
requirements, including capital expenditures and our loan of $88.0
million to Mediacom Broadband, as discussed below. As of March 31, 2005, we had unused credit commitments of about $390.6 million under our
credit facility, all of which could be borrowed and used for general corporate purposes based on
the terms and conditions of our debt arrangements. For all periods through March 31, 2005, we were
in compliance with all of the covenants under our debt arrangements. Continued access to our
credit facility is subject to our remaining in compliance with the covenants of our credit
facility, including covenants tied to our operating performance. We believe that we will not have
any difficulty in the foreseeable future complying with these covenants and that we will meet our
current and long-term debt service, capital spending and other cash requirements through a
combination of our net cash flows from operating activities, borrowing availability under our bank
credit facility and our ability to secure future external financing. However, there can be no
assurance that we will be able to obtain sufficient future financing, or, if we were able to do so,
that the terms would be favorable to us. Operating Activities Net
cash flows provided by operating activities were $5.6 million
and $28.1 million for the three months ended March
31, 2005 and 2004, respectively. The decrease was principally due to the
timing of cash receipts and expenses in our working capital accounts, mainly from prepaid expenses
and other assets and to a lesser extent, a decline in operating income. Investing Activities Net
cash flows used in investing activities were $111.8 million and
$24.5 million for the three months ended March
31, 2005 and 2004, respectively. In January 2005, we borrowed the
full amount of our $200.0 million delayed-draw term loan and used the
proceeds to reduce outstandings under our revolving credit facility and to
loan $88.0 million to Mediacom Broadband in the form of a demand
note, with an annual interest rate of 6.7% payable semi-annually in
cash. This increase in net cash flows used in investing activities
was primarily due to the borrowing we made to fund the
$88.0 million loan to Mediacom Broadband during the
three months ended March 31, 2005. Capital expenditures were also a
meaningful component of investing activities. We invested $23.8
million and $21.1 million during the three months ended March 31,
2005 and 2004, respectively. Financing Activities Net cash flows provided by financing activities were $102.4 million for the three months ended
March 31, 2005, as compared to $11.0 million of net cash
flows used in financing activities for the same period last year. In 2005, our principal financing activities included net
borrowings under our bank credit facilities in the amount of $102.4 million, primarily to fund our
$88.0 million loan to Mediacom Broadband. 16




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##### Table of Contents



Other In January 2005,
we borrowed the full amount under a $200.0 million delayed-draw term loan
facility and used the proceeds to reduce outstandings under our credit facility and to loan $88.0
million to Mediacom Broadband. On April 15,
2005, we redeemed all of our outstanding
81/2% Senior
Notes due 2008 (the Notes).
The redemption price was equal to 101.417% of the outstanding principal amount of the Notes plus
accrued interest. We funded the redemption with a combination of cash on hand and a $204.0 million
borrowing from the revolving credit portion of our credit facility. On
April 26, 2005, Mediacom Broadband repaid the $88.0 million
demand note plus accrued interest to us. On the same date, after
giving effect to the redemption of the Notes and the repayment of such
loan plus accrued interest, we had unused commitments of about $280.0 million, all of which
could be borrowed and used for general corporate purposes based on
the terms and conditions of our debt arrangements. 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 with investment grade ratings, we do not
anticipate their nonperformance. As of March 31, 2005, about 71% of our outstanding indebtedness
was at fixed interest rates or subject to interest rate protection and our annualized cost of debt
was approximately 6.9%. As of March 31, 2005, approximately $9.4 million of letters of credit were issued to various
parties as collateral for our performance relating primarily to insurance and franchise
requirements. Contractual Obligations and Commercial Commitments The following table summarizes our contractual obligations and commercial commitments, and the
effects they are expected to have on our liquidity and cash flow, for the five years subsequent to
March 31, 2005 and thereafter (dollars in thousands)*: Capital
    
    
    Operating
    
    
    InterestDebt
    
    
    Leases
    
    
    Leases
    
    
    Expense(1)
    
    
    TotalApril 1, 2005 to March 31, 2006
    
    $
    5,500
    
    
    $
    891
    
    
    $
    4,296
    
    
    $
    102,431
    
    
    $
    113,118April 1, 2006 to March 31, 2007
    
    
    5,500
    
    
    
    918
    
    
    
    2,045
    
    
    
    102,143
    
    
    
    110,606April 1, 2007 to March 31, 2008
    
    
    10,500
    
    
    
    150
    
    
    
    1,583
    
    
    
    101,854
    
    
    
    114,087April 1, 2008 to March 31, 2009
    
    
    226,500
    (2)
    
    
    
    
    
    
    824
    
    
    
    101,353
    
    
    
    328,677April 1, 2009 to March 31, 2010
    
    
    36,000
    
    
    
    
    
    
    
    583
    
    
    
    100,100
    
    
    
    136,683Thereafter
    
    
    1,289,625
    
    
    
    
    
    
    
    1,288
    
    
    
    254,476
    
    
    
    1,545,389Total cash obligations
    
    $
    1,573,625
    
    
    $
    1,959
    
    
    $
    10,619
    
    
    $
    762,357
    
    
    $
    2,348,560
   * Refer to Note 7 to our unaudited consolidated financial statements for a discussion of our long-term debt.(1)
    
    Interest payments on floating rate debt and interest rate swaps are estimated using
amounts outstanding as of March 31, 2005 and the average interest rates applicable under such
debt obligations.(2)
    
    Includes $200.0 million of senior notes redeemed on April 15, 2005. 17




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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: Revenue Recognition Revenues include amounts billed to customers for services provided, installations, advertising
and other services. Revenues from video and data services are recognized when the services are
provided to the customers. Installation revenues are less than direct installation costs.
Therefore, installation revenues are recognized as connects are completed. Advertising sales are
recognized in the period that the advertisements are exhibited. Franchise fees are collected on a
monthly basis and are periodically remitted to local franchise authorities. Franchise fees
collected and paid are reported as revenues and expenses as a component of selling, general and
administrative. Programming Costs We have various fixed-term carriage contracts to obtain programming for our cable systems from
content suppliers whose compensation is generally based on a fixed monthly fee per customer. These
programming contracts are subject to negotiated renewal. We recognize programming costs when we
distribute the related programming. These programming costs are usually payable each month based
on calculations performed by us and are subject to adjustments based on the results of periodic
audits by the content suppliers. Historically, such audit adjustments have been immaterial to our
total programming costs. Some content suppliers offer financial incentives to support the launch of
a channel and ongoing marketing support. When such financial incentives are received, we defer them
within non-current liabilities and recognize such amounts as a reduction of programming costs
(which are a component of service costs in our consolidated statement of operations) over the
carriage term of the programming contract. Allowance for Doubtful Accounts The allowance for doubtful accounts represents the Companys best estimate of probable losses
in the accounts receivable balance. The allowance is based on the number of days outstanding,
customer balances, historical experience and other currently available information. 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 prospectively in the period in which the evaluations were completed. 18




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Long-Lived Assets In accordance with SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived
Assets,we periodically evaluate the recoverability and estimated lives of our long-lived assets,
including property and equipment and intangible assets subject to amortization, whenever events or
changes in circumstances indicate that the carrying amount may not be recoverable or the useful
life has changed. When the carrying amount is not recoverable, the measurement for such impairment
loss is based on the fair value of the asset, typically based upon the future cash flows discounted
at a rate commensurate with the risk involved. Any loss is included as a component of either
depreciation expense or amortization expense, as appropriate unless it is material to the period in
question whereby we would present it separately. 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
in the October 2004, determined that there was no impairment of goodwill or indefinite-lived
intangible assets. As of March 31, 2005, there were no events since then that would require an
impairment analysis to be completed before the annual test date. Derivative Instruments We account for derivative instruments in accordance with SFAS No. 133, SFAS No. 138 and SFAS
No. 149. Our primary objective for holding derivative financial instruments is to manage interest
rate risk. Our derivative instruments are recorded at fair value and are included in other current
assets, other assets and other liabilities. Our accounting policies for these instruments are
based on whether they meet our criteria for designation as hedging transactions. The criteria for
designating a derivative as a hedge include the instruments effectiveness in risk reduction and,
in most cases, a one-to-one matching of the derivative instrument to its underlying transaction.
We had no derivative financial instruments designated as hedges. Gains and losses from changes in
the mark-to-market values are currently recognized in earnings. Short-term valuation changes
derived from changes in market interest rates, time to maturity and the creditworthiness of the
counterparties may increase the volatility of earnings. Recent Accounting Pronouncements In December 2004, the FASB issued SFAS No. 123R, Amendment of Statement 123 on Share-Based
Payment.SFAS No. 123R requires companies to expense the value of employee stock options, stock
granted through the employee stock purchase program and similar awards. SFAS No. 123R was
originally effective for interim periods beginning after June 15, 2005. On April 14, 2005, the
Securities and Exchange Commission approved a new rule delaying the effective date the beginning of
a companys next fiscal year that commences after June 15, 2005. We plan on adopting SFAS No. 123R
effective January 1, 2006 and expect that the adoption of SFAS No. 123R will have a material impact
on our consolidated results of operations. 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. 19




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ITEM 3. QUANTITATIVE AND QUALITATIVE
DISCLOSURES ABOUT MARKET RISK In the normal course of business, we use interest rate exchange agreements, or interest rate
swaps, with counterparties to fix the interest rate on our variable interest rate debt. As of
March 31, 2005, we had $300.0 million of interest rate
swaps with various banks at a
weighted-average fixed rate of approximately 3.0%. The fixed rates of the interest rate swaps are
offset against the applicable three-month London Interbank Offering Rate to determine the interest
expense. Under the terms of the interest rate swaps, which expire from 2006 through 2007, we are
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 with investment grade
ratings, we do not anticipate their nonperformance. At March 31, 2005, based on the mark-to-market
valuation, we would have received approximately $4.7 million, including accrued interest, if we
terminated these agreements. The table below
provides the expected maturity and estimated fair value of our debt as of
March 31, 2005 (dollars in thousands). See Note 7 to our unaudited consolidated financial
statements. Bank Credit
    
    
    Capital LeaseSenior Notes
    
    

Facilities
    
    
    Obligations
    
    
    TotalExpected Maturity:April 1, 2005 to March 31, 2006
    
    $
    
    
    
    $
    5,500
    
    
    $
    891
    
    
    $
    6,391April 1, 2006 to March 31, 2007
    
    
    
    
    
    
    5,500
    
    
    
    918
    
    
    
    6,418April 1, 2007 to March 31, 2008
    
    
    
    
    
    
    10,500
    
    
    
    150
    
    
    
    10,650April 1, 2008 to March 31, 2009
    
    
    200,000
    
    
    
    26,500
    
    
    
    
    
    
    
    226,500April 1, 2009 to March 31, 2010
    
    
    
    
    
    
    36,000
    
    
    
    
    
    
    
    36,000Thereafter
    
    
    625,000
    
    
    
    664,625
    
    
    
    
    
    
    
    1,289,625Total
    
    $
    825,000
    
    
    $
    748,625
    
    
    $
    1,959
    
    
    $
    1,575,584Fair Value
    
    $
    822,209
    
    
    $
    748,625
    
    
    $
    1,959
    
    
    $
    1,572,793Weighted Average Interest Rate
    
    
    9.0
    %
    
    
    4.7
    %
    
    
    3.1
    %
    
    
    6.9
    %
 20




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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, 2005. 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, 2005 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, 2005.
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, 2005 that has materially affected, or is reasonably likely to
materially affect, Mediacom Capitals internal control over financial reporting. 21




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PART II 
 ITEM 1. LEGAL PROCEEDINGS See Note 11 to our consolidated financial statements. 
 ITEM 6. 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
 22




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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 LLCMay 16, 2005
    By:
    /s/ Mark E. StephanMark E. StephanExecutive
Vice President,Chief Financial Officer and Treasurer 23




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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 16, 2005
    By:
    /s/ Mark E. StephanMark E. StephanTreasurer
and Secretary 24