##### 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 Number: 0-29227 Mediacom Communications Corporation (Exact name of Registrant as specified in its charter)
 Delaware(State of incorporation)
    
    06-1566067(I.R.S. Employer
Identification Number)
 100 Crystal Run Road
Middletown, NY 10941(Address of principal executive offices) (845) 695-2600(Registrants telephone number) Indicate by check mark whether the Registrant (1) has filed all reports required to be
filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the Registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days. Yes þ No o Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule
12b-2 of the Exchange Act). Yes þ No o As of April 22, 2005 there were 90,609,764 shares of Class A common stock and 27,336,939
shares of Class B common stock outstanding.




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MEDIACOM COMMUNICATIONS CORPORATION 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
    
    
    21Item 4.
    
    Controls and Procedures
    
    
    22PART IIItem 1.
    
    Legal Proceedings
    
    
    23Item 2.
    
    Unregistered
Sales of Equity Securities and Use of Proceeds
    
    
    23Item 6.
    
    Exhibits
    
    
    23EX-31.1: CERTIFICATIONEX-32.1: CERTIFICATIONS
    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, 2004 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 1 
 ITEM 1. FINANCIAL STATEMENTS MEDIACOM COMMUNICATIONS CORPORATION AND SUBSIDIARIES 
 CONSOLIDATED BALANCE SHEETS   March 31,
    
    
    December 31,2005
    
    
    2004ASSETSCURRENT ASSETSCash and cash equivalents
    
    $
    5,936
    
    
    $
    23,875Investments
    
    
    1,987
    
    
    
    1,987Subscriber accounts receivable, net of allowance for doubtful accounts
of $3,591 and $3,659, respectively
    
    
    54,978
    
    
    
    58,253Prepaid expenses and other assets
    
    
    18,033
    
    
    
    12,757Deferred tax asset
    
    
    7,149
    
    
    
    7,024Total current assets
    
    
    88,083
    
    
    
    103,896Investment in cable television systems:Property, plant and equipment, net of accumulated depreciation of
$1,089,977 and $1,040,289, respectively
    
    
    1,445,029
    
    
    
    1,443,090Intangible assets, net of accumulated amortization of $299,957 and
$299,098, respectively
    
    
    2,041,251
    
    
    
    2,042,110Total investment in cable television systems
    
    
    3,486,280
    
    
    
    3,485,200Other assets, net of accumulated amortization of $26,928 and
$25,266, respectively
    
    
    49,151
    
    
    
    46,559Total assets
    
    $
    3,623,514
    
    
    $
    3,635,655LIABILITIES AND STOCKHOLDERS EQUITYCURRENT LIABILITIESAccounts payable and accrued expenses
    
    $
    233,134
    
    
    $
    261,223Deferred revenue
    
    
    39,888
    
    
    
    38,707Current portion of long-term debt
    
    
    44,592
    
    
    
    42,700Total current liabilities
    
    
    317,614
    
    
    
    342,630Long-term debt, less current portion
    
    
    2,982,371
    
    
    
    2,966,932Other non-current liabilities
    
    
    30,230
    
    
    
    32,581Total liabilities
    
    
    3,330,215
    
    
    
    3,342,143STOCKHOLDERS EQUITYClass A common stock, $.01 par value; 300,000,000 shares authorized;
93,188,700 shares issued and 90,609,764 shares outstanding as of March
31, 2005 and 93,103,134 shares issued and 90,524,198 shares outstanding
as of December 31, 2004
    
    
    932
    
    
    
    931Class B common stock, $.01 par value; 100,000,000 shares authorized;
27,336,939 shares issued and outstanding as of March 31, 2005
and December 31, 2004
    
    
    273
    
    
    
    273Deferred compensation
    
    
    (5,891
    )
    
    
    Additional paid-in capital
    
    
    989,935
    
    
    
    983,417Accumulated deficit
    
    
    (679,804
    )
    
    
    (678,963
    )Treasury stock, at cost, 2,578,936 shares of Class A common stock
as of March 31, 2005 and December 31, 2004
    
    
    (12,146
    )
    
    
    (12,146
    )Total stockholders equity
    
    
    293,299
    
    
    
    293,512Total liabilities and stockholders equity
    
    $
    3,623,514
    
    
    $
    3,635,655
 The accompanying notes to the unaudited consolidated financial
statements are an integral part of these statements 1




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MEDIACOM COMMUNICATIONS CORPORATION AND SUBSIDIARIES 
 CONSOLIDATED STATEMENTS OF OPERATIONS   Three Months EndedMarch 31,2005
    
    
    2004Revenues
    
    $
    266,244
    
    
    $
    263,439Costs and expenses:Service costs (exclusive of depreciation and amortization of
$53,925 and $52,703, respectively, shown separately below)
    
    
    106,058
    
    
    
    101,106Selling, general and administrative expenses
    
    
    55,938
    
    
    
    53,175Corporate expenses
    
    
    5,274
    
    
    
    4,891Depreciation and amortization
    
    
    53,925
    
    
    
    52,703Operating income
    
    
    45,049
    
    
    
    51,564Interest expense, net
    
    
    (51,274
    )
    
    
    (47,164
    )Gain (loss) on derivatives, net
    
    
    8,070
    
    
    
    (7,551
    )Other expense
    
    
    (2,696
    )
    
    
    (2,435
    )Net loss before benefit from (provision for) income taxes
    
    
    (851
    )
    
    
    (5,586
    )Benefit from (provision for) income taxes
    
    
    10
    
    
    
    (153
    )Net loss
    
    $
    (841
    )
    
    $
    (5,739
    )Weighted average shares outstanding
    
    
    117,861
    
    
    
    118,723Basic and diluted loss per share
    
    $
    (0.01
    )
    
    $
    (0.05
    )
 The accompanying notes to the unaudited consolidated financial
statements are an integral part of these statements 2




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MEDIACOM COMMUNICATIONS CORPORATION AND SUBSIDIARIES 
 CONSOLIDATED STATEMENTS OF CASH FLOWS   Three Months EndedMarch 31,2005
    
    
    2004CASH FLOWS FROM OPERATING ACTIVITIES:Net loss
    
    $
    (841
    )
    
    $
    (5,739
    )Adjustments to reconcile net loss to net cash provided by
operating activities:Depreciation and amortization
    
    
    53,925
    
    
    
    52,703(Gain) loss on derivatives, net
    
    
    (8,070
    )
    
    
    7,551Amortization of deferred financing costs
    
    
    1,662
    
    
    
    1,635Amortization of deferred compensation
    
    
    151
    
    
    
    Changes in assets and liabilities, net of effects from acquisitions:Subscriber accounts receivable, net
    
    
    3,275
    
    
    
    (1,911
    )Prepaid expenses and other assets
    
    
    (4,026
    )
    
    
    (1,784
    )Accounts payable and accrued expenses
    
    
    (17,547
    )
    
    
    (32,151
    )Deferred revenue
    
    
    1,181
    
    
    
    2,956Other non-current liabilities
    
    
    (395
    )
    
    
    3,691Net cash flows provided by operating activities
    
    
    29,315
    
    
    
    26,951CASH FLOWS FROM INVESTING ACTIVITIES:Capital expenditures
    
    
    (54,789
    )
    
    
    (39,841
    )Acquisition of cable television systems
    
    
    
    
    
    
    (3,433
    )Other investment activities
    
    
    
    
    
    
    (299
    )Net cash flows used in investing activities
    
    
    (54,789
    )
    
    
    (43,573
    )CASH FLOWS FROM FINANCING ACTIVITIES:New borrowings
    
    
    299,000
    
    
    
    57,043Repayment of debt
    
    
    (281,669
    )
    
    
    (71,268
    )Proceeds from issuance of common stock in employee stock purchase plan
    
    
    477
    
    
    
    489Other financing activities - book overdrafts
    
    
    (10,223
    )
    
    
    16,127Financing costs
    
    
    (50
    )
    
    
    Net cash flows provided by financing activities
    
    
    7,535
    
    
    
    2,391Net decrease in cash and cash equivalents
    
    
    (17,939
    )
    
    
    (14,231
    )CASH AND CASH EQUIVALENTS, beginning of period
    
    
    23,875
    
    
    
    25,815CASH AND CASH EQUIVALENTS, end of period
    
    $
    5,936
    
    
    $
    11,584SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:Cash paid during the period for interest, net of amounts capitalized
    
    $
    70,635
    
    
    $
    65,210
 The accompanying notes to the unaudited consolidated financial
statements are an integral part of these statements 3




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MEDIACOM COMMUNICATIONS CORPORATION AND SUBSIDIARIES 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited) (1) Statement of Accounting Presentation and Other Information Basis of Preparation of Unaudited Consolidated Financial Statements Mediacom Communications Corporation (MCC, and collectively with its subsidiaries, the
Company) 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 No.
000-29227). 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. 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. 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 COMMUNICATIONS CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited) 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 that 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. 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 5




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MEDIACOM COMMUNICATIONS CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited) 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 The Company provides for income taxes using the liability method in accordance with SFAS No.
109, Accounting for Income Taxes,which requires an asset and liability based approach in
accounting for income taxes. The Company recognizes deferred tax assets and liabilities for the
future tax consequences attributable to differences between the financial statement carrying
amounts of existing assets and liabilities and their respective tax bases and expected benefits of
utilizing net operating loss carryforwards. The Company periodically assesses the likelihood of
realization of deferred tax assets and net operating loss carryforwards by considering the
scheduled reversal of deferred tax liabilities, projected taxable income in future periods and the
evaluation of available prudent tax planning strategies. 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 additional
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 prior years amounts to conform to the current
years presentation. (2) 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 and earnings per share. (3) Earnings Per Share The Company calculates earnings per share in accordance with SFAS No. 128, Earnings per
Share.SFAS No. 128 computes basic earnings (loss) per share by dividing net income (loss) by the
weighted average number of shares of common stock outstanding during the period. Diluted earnings
per share is computed by dividing net income by the weighted average number of shares of common
stock outstanding during the period plus the effects of any dilutive potential common shares.
Diluted earnings per share considers the dilutive impact of potential common shares except in
periods in which there is a net loss because the inclusion of the potential common shares would
have an anti-dilutive effect. The Companys potential common shares include common shares that may
be issued upon the exercise of stock options, conversion of convertible senior notes or vesting of
restricted stock units. For the periods presented, the Company generated net losses and so the
potential common shares were anti-dilutive. Accordingly, diluted loss per share equaled basic loss per share. If the Company did not have net
losses for the quarters ended March 31, 2005 and 2004, the number of potential common shares that
would have been included in the earnings per share calculations total
1.1 million and 91,000,
respectively. 6




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MEDIACOM COMMUNICATIONS CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited) (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
    
    $
    7,117
    
    
    $
    7,089Buildings and leasehold improvements
    
    
    40,706
    
    
    
    39,898Cable systems, equipment and subscriber devices
    
    
    2,390,610
    
    
    
    2,342,220Vehicles
    
    
    60,841
    
    
    
    60,754Furniture, fixtures and office equipment
    
    
    35,732
    
    
    
    33,4172,535,006
    
    
    
    2,483,379Accumulated depreciation
    
    
    (1,089,977
    )
    
    
    (1,040,289
    )Property, plant and equipment, net
    
    $
    1,445,029
    
    
    $
    1,443,090
 Depreciation
expense for the three months ended March 31, 2005 and 2004, were approximately
$53.0 million and $49.5 million, respectively. As of March 31, 2005 and 2004, the Company had
property under capitalized leases of $10.1 million and $11.3 million, respectively, before
accumulated depreciation, and $6.9 million and $9.1 million, respectively, net of accumulated
depreciation. During the quarter ended March 31, 2005 and 2004, the Company incurred interest
expense of $52.1 million and $48.0 million, respectively, of which $0.8 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 the acquisitions 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 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. 7




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MEDIACOM COMMUNICATIONS CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited) 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
    
    $
    1,944,918
    
    
    $
    140,947
    
    
    $
    1,803,971Goodwill
    
    
    224,614
    
    
    
    3,232
    
    
    
    221,382Subscriber lists
    
    
    165,981
    
    
    
    150,095
    
    
    
    15,886Covenants not to compete
    
    
    5,695
    
    
    
    5,683
    
    
    
    12$
    2,341,208
    
    
    $
    299,957
    
    
    $
    2,041,251
 Gross Asset
    
    
    Accumulated
    
    
    Net AssetDecember 31, 2004
    
    Value
    
    
    Amortization
    
    
    ValueFranchise costs
    
    $
    1,944,918
    
    
    $
    140,947
    
    
    $
    1,803,971Goodwill
    
    
    224,614
    
    
    
    3,232
    
    
    
    221,382Subscriber lists
    
    
    165,981
    
    
    
    149,277
    
    
    
    16,704Covenants not to compete
    
    
    5,695
    
    
    
    5,642
    
    
    
    53$
    2,341,208
    
    
    $
    299,098
    
    
    $
    2,042,110
 Amortization
expense for the three months ended March 31, 2005 and 2004 were approximately $0.9
million and $3.2 million, respectively. The Companys estimated future aggregate amortization
expense for 2005 through 2009 and beyond are $1.9 million, $2.1 million, $2.1 million, $2.1
million, $2.1 million and $5.6 million, respectively. (6) Accounts Payable and Accrued Expenses Accounts payable and accrued expenses consist of the following as of March 31, 2005 and
December 31, 2004 (dollars in thousands): March 31,
    
    
    December 31,2005
    
    
    2004Accounts payable
    
    $
    24,015
    
    
    $
    14,097Book
overdrafts(1)
    
    
    
    
    
    
    10,223Accrued interest
    
    
    42,778
    
    
    
    61,910Accrued payroll and benefits
    
    
    27,288
    
    
    
    24,314Accrued programming costs
    
    
    59,232
    
    
    
    62,049Accrued property, plant and equipment
    
    
    15,711
    
    
    
    18,261Accrued taxes and fees
    
    
    22,270
    
    
    
    27,777Subscriber advance payments
    
    
    9,340
    
    
    
    8,147Other accrued expenses
    
    
    32,500
    
    
    
    34,445$
    233,134
    
    
    $
    261,223
  (1)
    
    Book overdrafts represent outstanding checks in
excess of funds on deposit at the Companys disbursement accounts.
The Company transfers funds from its depository accounts to its
disbursement accounts upon daily notification of checks presented
for payment. Changes in book overdrafts are reported as part of cash flows from
financing activities in the Companys consolidated statements of cash
flows. 8




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##### Table of Contents



MEDIACOM COMMUNICATIONS CORPORATION 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
    
    $
    1,624,375
    
    
    $
    1,606,50081/2% senior notes
    
    
    200,000
    
    
    
    200,00077/8% senior notes
    
    
    125,000
    
    
    
    125,00091/2% senior notes
    
    
    500,000
    
    
    
    500,00011% senior notes
    
    
    400,000
    
    
    
    400,00051/4% convertible senior notes
    
    
    172,500
    
    
    
    172,500Capital lease obligations
    
    
    5,088
    
    
    
    5,632$
    3,026,963
    
    
    $
    3,009,632Less: current portion
    
    
    44,592
    
    
    
    42,700Total long-term debt
    
    $
    2,982,371
    
    
    $
    2,966,932
 The average interest rates on outstanding debt under the bank credit facilities as of
March 31, 2005 and 2004, were 4.8% and 2.9%,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 facilities. As of March 31, 2005, the Company had unused credit
commitments of approximately $860.7 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 $800.0 million is fixed at a weighted average
rate of approximately 3.3%. Under the terms of the interest rate exchange agreements, which expire
from 2005 through 2007, the Company is exposed to credit loss in the event of nonperformance by the
other parties. However, 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 maturity 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 $9.8 million, which is a component of other assets,
and a derivative liability of $1.4 million, which is divided between accounts payable and accrued
expenses and other non-current liabilities. As a result of the mark-to-market valuations of these interest rate swaps, the Company
recorded a gain of $8.1 million for the three months ended March 31, 2005, as compared to a loss of
$7.6 million for the three months ended March 31, 2004. At the Companys request, on March 16, 2005, the registered holders of MCC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 $19.3 million of 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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MEDIACOM COMMUNICATIONS CORPORATION 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 on 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, the Company granted stock
options and restricted stock units to certain employees. The stock options were granted in two tranches.
The first tranche was a grant of 230,000 stock options at an exercise price of $5.42
and vests equally over four years. The
second tranche was a grant of 300,000 stock options at an exercise
price of $6.29 and vests equally over
three years. The Company also granted restricted stock units in two
tranches. The first tranche was
a grant of 118,900 restricted stock units at a grant price of $5.69
and vests equally over four years. The
second tranche was a grant of 990,000 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 stock option grants in the accompanying
consolidated statements of operations since the price of the options
was at their fair market value on the date of grant. As of
March 31, 2005, the Company has recorded $6.1 million of
intrinsic value related to the restricted stock unit awards as
deferred compensation and additional paid-in capital in its
consolidated balance sheets, and during the three months ended
March 31, 2005, the Company amortized $0.2 million 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, MCCs net loss and basic and diluted loss per share would have been changed from the
as reported amounts to the pro forma amounts as follows (dollars in thousands, except per share
data): Three Months EndedMarch 31,2005
    
    
    2004Net loss as reported
    
    $
    (841
    )
    
    $
    (5,739
    )Add: Total stock-based compensation expense included in net
loss as reported above
    
    
    151
    
    
    
    Deduct: Total stock-based compensation expense determined
under fair value based method for all awards
    
    
    (1,266
    )
    
    
    (3,802
    )Pro forma net loss
    
    $
    (1,956
    )
    
    $
    (9,541
    )Basic and diluted loss per share:As reported
    
    $
    (0.01
    )
    
    $
    (0.05
    )Pro forma
    
    $
    (0.02
    )
    
    $
    (0.08
    )
 (9) Legal Proceedings On April 5, 2004, a lawsuit was filed against MCC, MCC Georgia LLC, an indirect subsidiary of
MCC 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 MCC and MCC Georgia 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 the defendants have 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. 10




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MEDIACOM COMMUNICATIONS
CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited) 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 the Companys employees, who allegedly acted as
an agent for the defendants, by which the Company received the Echostar satellite signal. On
September 7, 2004, the U.S. District Court granted the Companys motion to transfer the case to the
Middle District of Georgia, where venue is proper and where personal jurisdiction over the Company
exists. There were no proceedings for several months until Echostar filed a motion for default
judgment on April 6, 2005. The Company filed a response opposing
the motion and the court has not
yet acted upon it. The Company intends to vigorously defend against the claims made by Echostar. The Company is
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 its consolidated financial position, results of operations, cash flows or business. The Company also is 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. (10) Related Party Transactions Mediacom Management Corporation (Mediacom Management), a Delaware corporation, holds a 1%
direct ownership interest in Mediacom California LLC, which in turn holds a 1% interest in Mediacom
Arizona LLC. These ownership interests represent less than 1% of the Companys total revenues.
Mediacom Management is wholly-owned by the Chairman and CEO of MCC. (11) Subsequent Event 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 under the revolving credit portion of the Companys credit
facilities. As of the same date, after
giving effect to the redemption of the Notes, the Company had unused
commitments of about $649 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. 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 May 3, 2005, the Company refinanced a $496.5 million term loan with a new term loan in the
amount of $500.0 million. Borrowings under the new term loan bear interest at a rate that is 0.5%
less than the interest rate of the term loan it replaced. The new term loan matures in February
2014, whereas the term loan it replaced had a maturity of September 2010. 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 Mediacom Communications Corporation is currently the nations eighth largest cable television
company based on customers served and the leading cable operator focused on serving the smaller
cities and towns in the United States. 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 2.79 million homes and served 1.46
million basic video subscribers in 23 states. We provide digital video services to 430,000 digital
customers, representing a penetration of 29.4% of our basic subscribers. We also currently provide
HSD to 407,000 data customers, representing a penetration of 14.6% 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 92% of our basic subscribers, as compared to an estimated
62% and 28% at year-end 2003
and 2002, respectively. 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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##### Table of Contents



Actual Results of Operations  Three Months Ended March 31, 2005 Compared to Three Months Ended March 31, 2004 The following table sets forth the 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
    
    $
    266,244
    
    
    $
    263,439
    
    
    $
    2,805
    
    
    
    1.1
    %Costs and expenses:Service costs
    
    
    106,058
    
    
    
    101,106
    
    
    
    4,952
    
    
    
    4.9
    %Selling, general and administrative expenses
    
    
    55,938
    
    
    
    53,175
    
    
    
    2,763
    
    
    
    5.2
    %Corporate expenses
    
    
    5,274
    
    
    
    4,891
    
    
    
    383
    
    
    
    7.8
    %Depreciation and amortization
    
    
    53,925
    
    
    
    52,703
    
    
    
    1,222
    
    
    
    2.3
    %Operating income
    
    
    45,049
    
    
    
    51,564
    
    
    
    (6,515
    )
    
    
    (12.6
    %)Interest expense, net
    
    
    (51,274
    )
    
    
    (47,164
    )
    
    
    (4,110
    )
    
    
    8.7
    %Gain (loss) on derivatives, net
    
    
    8,070
    
    
    
    (7,551
    )
    
    
    15,621
    
    
    NMOther expense
    
    
    (2,696
    )
    
    
    (2,435
    )
    
    
    (261
    )
    
    
    10.7
    %Net loss before benefit from (provision for) income taxes
    
    
    (851
    )
    
    
    (5,586
    )
    
    
    4,735
    
    
    NMBenefit from (provision for) income taxes
    
    
    10
    
    
    
    (153
    )
    
    
    163
    
    
    NMNet loss
    
    $
    (841
    )
    
    $
    (5,739
    )
    
    $
    4,898
    
    
    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
    
    $
    209.8
    
    
    
    78.8
    %
    
    $
    216.0
    
    
    
    82.0
    %
    
    $
    (6.2
    )
    
    
    (2.9
    %)Data
    
    
    45.0
    
    
    
    16.9
    %
    
    
    36.7
    
    
    
    13.9
    %
    
    
    8.3
    
    
    
    22.6
    %Advertising
    
    
    11.4
    
    
    
    4.3
    %
    
    
    10.7
    
    
    
    4.1
    %
    
    
    0.7
    
    
    
    6.5
    %$
    266.2
    
    
    
    100.0
    %
    
    $
    263.4
    
    
    
    100.0
    %
    
    $
    2.8
    
    
    
    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 rose 1.1%, largely attributable to an increase in data and advertising revenues,
significantly offset by a decrease in video revenues. 13




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Video revenues decreased 2.9%, as a result of a 4.7% reduction in basic video subscribers from
1,533,000 as of March 31, 2004, to 1,461,000 as of March 31, 2005, offset in part by the full
impact of basic rate increases applied on our video subscribers during 2004 and higher service fees
from advanced video products. Average monthly video revenue per basic video
subscriber increased
2.3% from $46.81 to $47.91. 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 packages,
VOD, HDTV, DVRs and more local programming. As a result of these efforts, basic video subscribers
and digital customers increased by 3,000 and 34,000, respectively, during the three months ended
March 31, 2005. Data revenues rose 22.6% primarily due to a 34.8% year-over-year increase in data customers
from 302,000 to 407,000 and, to a much lesser extent, an increased contribution from our commercial
enterprise business. Average monthly data revenue per data customer
decreased from $42.12 to
$38.78, largely due to discounted video and data bundles introduced in mid-year 2004. Advertising revenues increased 6.5%, 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 4.9%, primarily due to increases in programming, field operating, data
and employee costs. Programming costs increased 1.3%, as a result of higher unit costs charged by
programming suppliers and lower launch support received from them in return for our carriage of
their services, significantly offset by our basic video subscriber
losses in 2004. Field operating costs
rose 38.0%, primarily due to the greater use of outside contractors to service higher levels of
customer activity and, to a lesser extent, increases in converter repair and vehicle fuel costs.
Data costs increased 13.2% to service the growth in our data customers. Employee related costs
grew 1.2%, primarily due to increased overtime and commissions related to higher levels of customer
activity, significantly offset by a decrease in certain employee insurance expenses. Service costs
as a percentage of revenues were 39.8% for the three months ended March 31, 2005, as compared to
38.4% for the three months ended March 31, 2004. Selling, general and administrative expenses include: wages and salaries for our call centers,
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 5.2%, principally due to higher marketing,
employee and office costs, partially offset by a significant decrease in bad debt expense.
Marketing costs grew 38.6% 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 8.0% due to higher employee compensation and benefit costs. Office costs
rose 26.7%, 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 36.0% 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 21.0% and 20.2% for
the three months ended March 31, 2005 and 2004, respectively. 14




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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. Corporate expenses reflect compensation of corporate employees and other corporate overhead.
Corporate expenses rose 7.8%, principally due to increases in employee compensation and, to a
lesser extent, higher professional service fees, partially offset by greater capitalization of
labor and overhead costs related to increased capital project activities in 2005. Corporate
expenses as a percentage of revenues were 2.0% and 1.9% for the three months ended March 31, 2005
and 2004, respectively. Depreciation and amortization increased 2.3%, principally due to increased depreciation for
ongoing investments to continue the rollout of products and services such as VOD, HDTV, DVRs and
HSD and the investments in our cable network.  Interest Expense, Net Interest expense, net, increased by 8.7%, primarily due to higher market interest rates on
variable rate debt. This increase was offset in part by lower average indebtedness for the three
months ended March 31, 2005.  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 $800.0
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 quarterly mark-to-market valuation of these interest rate swaps, we recorded a gain
on derivatives amounting to $8.1 million for the three months ended March 31, 2005, as compared to
a loss on derivatives of $7.6 million for the three months ended March 31, 2004.  Other Expense Other expense was $2.7 million and $2.4 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.  Benefit from (Provision for) Income Taxes Benefit from income taxes was approximately $10,000 for the three months ended March 31, 2005,
as compared to a provision for income taxes of $153,000 for the three months ended March 31, 2004.
Our income taxes relate to state income tax liabilities.  Net Loss As a result of the factors described above, we incurred a net loss for the three months ended
March 31, 2005 of $0.8 million, as compared to net loss of $5.7 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. During 2005, we expect to spend
between $200 million and $210 million on capital expenditures. In the three months ended March 31,
2005, we made $54.8 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 $3.03 billion.
Of this amount, $44.6 million and $228.4 million mature within the twelve months ending March 31,
2006 and 2007, respectively. We continue to improve our debt maturity profile through refinancing
of debt, as discussed below. Given our level of indebtedness, we also have significant interest
expense obligations. During the quarter ended March 31, 2005 we paid cash interest of $70.6
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 and
convertible senior notes. During the three months ended March 31, 2005, we generated $29.3 million of net cash flows
from operating activities. We had cash flows from financing
activities of $7.5 million, and a decrease in cash of $17.9 million. We used these sources to fund
our cash requirements, including capital expenditures. As of March 31, 2005, we had unused credit commitments of about $861.0 million under our
credit facilities, 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
facilities is subject to our remaining in compliance with the covenants of these credit facilities,
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 facilities 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 $29.3 million
and $27.0 million for the
three months ended March 31, 2005 and 2004, respectively. This increase was principally due to
the timing of cash receipts and expenses in our working capital
accounts, mainly from accounts payable and accrued expenses, offset in part by a
decline in operating income.  Investing Activities Net cash flows used in investing activities were $54.8 million and $43.6 million for the three
months ended March 31, 2005 and 2004, respectively. This increase was primarily due to higher
capital expenditures, which rose to $54.8 million from $39.8 million in the same period last year.
Capital expenditures increased mainly as a result of purchases of more units of customer premise
equipment, including higher-cost advanced digital boxes, and increased installation activity.  Financing Activities Net
cash flows provided by financing activities were $7.5 million
and $2.4 million for the three months ended
March 31, 2005 and 2004, respectively. In 2005, our principal financing activities included net borrowings under our bank credit
facilities in the amount of $17.3 million to fund in part our higher capital expenditures. 16




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Other On
January 25, 2005, we borrowed the full amount of our $200.0 
million delayed-draw term loan facility and used the proceeds to
reduce outstandings under our revolving credit facilities. 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 under the revolving credit portion of our credit facilities. As of April 15, 2005, after
giving effect to the redemption of the Notes, we had unused commitments of about $649.0 million,
all of which could be borrowed and used for general corporate purposes based on the terms and
conditions of our debt arrangements. On May 3, 2005, we refinanced a $496.5 million term loan with a new term loan in the amount of
$500.0 million. Borrowings under the new term loan bear interest at a rate that is 0.5% less than
the interest rate of the term loan it replaced. The new term loan matures in February 2014,
whereas the term loan it replaced had a maturity of September 2010. We have entered into interest rate exchange agreements with counterparties, which expire from
June 2005 through March 2007, to hedge $800.0 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 73% 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 $19.3 million of letters of credit were issued to various
parties as collateral for our performance relating 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
    
    
    Interest(1)Debt
    
    
    Leases
    
    
    Leases
    
    
    Expense
    
    
    TotalApril 1, 2005 to March 31, 2006
    
    $
    42,375
    
    
    $
    2,217
    
    
    $
    4,066
    
    
    $
    201,182
    
    
    $
    249,840April 1, 2006 to March 31, 2007
    
    
    226,125

(2)
    
    
    2,286
    
    
    
    2,637
    
    
    
    190,176
    
    
    
    421,224April 1, 2007 to March 31, 2008
    
    
    75,500
    
    
    
    584
    
    
    
    1,504
    
    
    
    187,435
    
    
    
    265,023April 1, 2008 to March 31, 2009
    
    
    297,125
(3)
    
    
    1
    
    
    
    1,072
    
    
    
    183,657
    
    
    
    481,855April 1, 2009 to March 31, 2010
    
    
    219,875
    
    
    
    
    
    
    
    541
    
    
    
    178,820
    
    
    
    399,236Thereafter
    
    
    2,160,875
    
    
    
    
    
    
    
    1,108
    
    
    
    417,893
    
    
    
    2,579,876Total cash obligations
    
    $
    3,021,875
    
    
    $
    5,088
    
    
    $
    10,928
    
    
    $
    1,359,163
    
    
    $
    4,397,054
     (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 $172.5 million of convertible senior notes due 2006.(3)
    
    Includes $200.0 million of senior
notes redeemed on April 15, 2005. 17




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##### Table of Contents



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 of America. 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 that the
application of the critical accounting policies discussed below requires significant judgments and
estimates on the part of management. For a summary of our accounting policies, see Note 1 of our
unaudited 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.  Allowance for Doubtful Accounts The allowance for doubtful accounts represents our 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.  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.  Property, Plant and Equipment We capitalize the costs of new construction and replacement of our cable transmission and
distribution facilities; the addition of network and other equipment, and new customer service
installations. Capitalized costs include all direct labor and materials as well as certain
indirect costs and are based on historical construction and installation costs. Capitalized costs
are recorded as additions to property, plant and equipment and depreciate over the life of the
related asset. We perform periodic evaluations of certain estimates used to determine the amount
and extent of such costs that are capitalized. Any changes to these estimates, which may be
significant, are applied prospectively in the periods in which the evaluations were completed. 18




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##### Table of Contents



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.  Intangibles 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. We completed our most recent
impairment test as of October 1, 2004, which reflected no impairment of our franchise costs and
goodwill. As of March 31, 2005, there were no events since then that would require an analysis to be completed
before the next annual test date.  Derivative Instruments We account for derivatives 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 have 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.  Income Taxes We provide for income taxes using the liability method in accordance with SFAS No. 109,
Accounting for Income Taxes,which requires an asset and liability based approach in accounting
for income taxes. We recognize deferred tax assets and liabilities for the future tax consequences
attributable to differences between the financial statement carrying amounts of existing assets and
liabilities and their respective tax bases and expected benefits of utilizing net operating loss
carryforwards. We periodically assess the likelihood of realization of deferred tax assets and net
operating loss carryforwards by considering the scheduled reversal of deferred tax liabilities,
projected taxable income in future periods and the evaluation of available prudent tax planning
strategies. If our assessment changes in the future, we may be required to adjust our valuation
allowance against deferred tax assets, resulting in either an increase or decrease in income tax expense
in our consolidated statement of operations. 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 until 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 and earnings per share. 19




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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 our rates. 20




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##### Table of Contents



ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK In the normal course of business, we use interest rate swaps to fix the interest rate on our
variable interest rate debt. As of March 31, 2005, we had $800.0 million of interest rate swaps
with various banks with a weighted average fixed rate of approximately 3.3%. The fixed rates of
the interest rate swaps are offset against the applicable three-month London Interbank Offering
Rate to determine the related interest expense. Under the terms of the interest rate exchange
agreements, which expire from 2005 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 $8.4 million, including accrued interest, if we terminated these agreements. The table below provides the new 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
    
    $
    
    
    
    $
    42,375
    
    
    $
    2,217
    
    
    $
    44,592April 1, 2006 to March 31, 2007
    
    
    172,500

(1)
    
    
    53,625
    
    
    
    2,286
    
    
    
    228,411April 1, 2007 to March 31, 2008
    
    
    
    
    
    
    75,500
    
    
    
    584
    
    
    
    76,084April 1, 2008 to March 31, 2009
    
    
    200,000
    
    
    
    97,125
    
    
    
    1
    
    
    
    297,126April 1, 2009 to March 31, 2010
    
    
    
    
    
    
    219,875
    
    
    
    
    
    
    
    219,875Thereafter
    
    
    1,025,000
    
    
    
    1,135,875
    
    
    
    
    
    
    
    2,160,875Total
    
    $
    1,397,500
    
    
    $
    1,624,375
    
    
    $
    5,088
    
    
    $
    3,026,963Fair Value
    
    $
    1,419,690
    
    
    $
    1,624,375
    
    
    $
    5,088
    
    
    $
    3,049,153Weighted Average Interest Rate
    
    
    9.1
    %
    
    
    4.8
    %
    
    
    3.1
    %
    
    
    6.8
    %
   (1)
    
    Represents convertible senior notes due July 2006. 21




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##### Table of Contents



ITEM 4. CONTROLS AND PROCEDURES Our management carried out an evaluation, with the participation of our Chief Executive
Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures
as of March 31, 2005. Based upon that evaluation, our Chief Executive Officer and Chief Financial
Officer concluded that our disclosure controls and procedures were effective to ensure that
information required to be disclosed by us in reports that we file or submit 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 our internal control over financial reporting in connection
with the evaluation required by Rule 13a-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, our internal control over financial reporting. 22




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##### Table of Contents



PART II 
 ITEM 1. LEGAL PROCEEDINGS See Note 9 to our consolidated financial statements. 
 ITEM 2. CHANGES IN SECURITIES, USE OF PROCEEDS AND
ISSUER PURCHASES OF EQUITY SECURITIES During the quarter ended March 31, 2005, we granted stock options to certain of our employees
to purchase an aggregate of 530,000 shares of Class A Common Stock at exercise prices ranging from
$5.42 to $6.29 per share. The grant of stock options to the employees was not registered under the
Securities Act of 1933 because the stock options either did not involve an offer or sale for
purposes of Section 2(a)(3) of the Securities Act of 1933, in reliance on the fact that the stock
options were granted for no consideration, or were offered and sold in transactions not involving a
public offering, exempt from registration under the Securities Act of 1933 pursuant to Section
4(2). 
 ITEM 6. EXHIBITS ExhibitNumber
    
    Exhibit Description31.1
    
    Rule 13a-14(a) Certifications32.1
    
    Section 1350 Certifications
 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 COMMUNICATIONS
CORPORATIONMay 10, 2005
    By:

/s/
Mark E. StephanMark E. StephanExecutive Vice President and
     Chief Financial Officer 24