<PAGE>
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, 2000
COMMISSION FILE NUMBERS: 333-57285-01
333-57285
MEDIACOM LLC
MEDIACOM CAPITAL CORPORATION*
(EXACT NAMES OF REGISTRANTS AS SPECIFIED IN THEIR CHARTERS)
NEW YORK 06-1433421
NEW YORK 06-1513997
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBERS)
100 CRYSTAL RUN ROAD
MIDDLETOWN, NEW YORK 10941
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
914-695-2600
(REGISTRANTS' TELEPHONE NUMBER)
Indicate by check mark whether the Registrants (1) have filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrants were required to file such reports), and (2) have been subject to
such filing requirements for the past 90 days:
YES [X] NO [ ]
Indicate 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.
<PAGE>
MEDIACOM LLC AND SUBSIDIARIES
FORM 10-Q
FOR THE PERIOD ENDED MARCH 31, 2000
TABLE OF CONTENTS
PART I
Page
Item 1. Financial Statements
Consolidated Balance Sheets -
March 31, 2000 (unaudited) and December 31, 1999.............. 1
Consolidated Statements of Operations and
Comprehensive Loss - Three Months Ended
March 31, 2000 and 1999 (unaudited)........................... 2
Consolidated Statements of Cash Flows -
Three Months Ended March 31, 2000 and 1999 (unaudited)........ 3
Notes to Consolidated Financial Statements (unaudited)......... 4
Balance Sheets of Mediacom Capital Corporation -
March 31, 2000 (unaudited) and December 31, 1999.............. 10
Note to Balance Sheets (unaudited)............................. 11
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations.................. 12
Item 3. Quantitative and Qualitative Disclosures about
Market Risk.................................................... 18
PART II
ITEM 1. LEGAL PROCEEDINGS................................................ 19
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K................................. 19
i
<PAGE>
This Quarterly Report on Form 10-Q is for the three months ended March 31,
2000. In this Quarterly Report, "we," "us," "our" and the "Company" refer to
Mediacom LLC and its subsidiaries.
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 this Quarterly Report and in
our Annual Report on Form 10-K for the year ended December 31, 1999. Those
factors may cause our actual results to differ materially from any of our
forward-looking statements.
FACTORS AFFECTING FUTURE OPERATIONS
We commenced operations in 1996 and have grown rapidly since then,
principally through acquisitions. We acquired a substantial portion of our cable
systems in 1998 and 1999. As a result, you have limited information upon which
to evaluate our performance in managing our current systems, and our historical
financial information may not be indicative of the future results we can achieve
with our systems. If we are unable to successfully integrate our newly acquired
cable systems, our growth and profitability could be adversely affected.
In addition, the cable television industry may be affected by, among other
things:
o changes in laws and regulations;
o changes in the competitive environment;
o changes in the costs of programming we distribute;
o changes in technology;
o franchise related matters;
o market conditions that may adversely affect the availability of debt
and equity financing for working capital, capital expenditures or other
purposes; and
o general economic conditions.
ii
<PAGE>
PART I
ITEM 1. FINANCIAL STATEMENTS
MEDIACOM LLC AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(ALL DOLLAR AMOUNTS IN 000'S)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
2000 1999
-------------- --------------
ASSETS (UNAUDITED)
<S> <C> <C>
Cash and cash equivalents $ 1,607 $ 4,473
Subscriber accounts receivable, net of allowance
for doubtful accounts
of $553 and $772, respectively 3,958 5,194
Prepaid expenses and other assets 7,339 4,376
Investments 27,539 8,794
Investment in cable television systems:
Inventory 13,867 12,384
Property, plant and equipment, at cost 732,982 700,696
Less - accumulated depreciation (127,697) (101,693)
-------------- --------------
Property, plant and equipment, net 605,285 599,003
Intangible assets, net of accumulated
amortization of $70,133 and
$56,171, respectively 574,345 588,103
-------------- --------------
Total investment in cable television systems 1,193,497 1,199,490
Other assets, net of accumulated amortization of
$7,031 and $6,343,
respectively 18,157 43,599
-------------- --------------
Total assets $ 1,252,097 $ 1,265,926
============== ==============
LIABILITIES AND MEMBERS' EQUITY
LIABILITIES
Debt $ 800,000 $ 1,139,000
Accounts payable and accrued expenses 57,101 56,310
Subscriber advances 2,930 3,188
Management fees payable 919 873
Deferred revenue 28,552 11,940
-------------- --------------
Total liabilities 889,502 1,211,311
-------------- --------------
MEMBERS' EQUITY
Capital contributions 521,696 142,096
Other equity 16,417 39,917
Accumulated comprehensive income 1,778 261
Accumulated deficit (177,296) (127,659)
-------------- --------------
Total members' equity 362,595 54,615
-------------- --------------
Total liabilities and members' equity $ 1,252,097 $ 1,265,926
============== ==============
</TABLE>
The accompanying notes to consolidated financial statements are an
integral part of these statements.
1
<PAGE>
MEDIACOM LLC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND
COMPREHENSIVE LOSS
(ALL DOLLAR AMOUNTS IN 000'S)
(UNAUDITED)
THREE MONTHS ENDED MARCH 31,
------------ ------------
2000 1999
------------ ------------
Revenues $ 77,440 $ 36,000
Costs and expenses:
Service costs 26,635 11,825
Selling, general and administrative expenses 13,389 7,201
Management fee expense 1,420 1,665
Depreciation and amortization 40,680 20,402
Non-cash stock charges 26,073 -
------------ ------------
Operating loss (30,757) (5,093)
------------ ------------
Interest expense, net 18,423 6,380
Other expenses 457 993
------------ ------------
Net loss $ (49,637) $ (12,466)
Unrealized gain on investments 1,517 -
------------ ------------
Comprehensive loss $ (48,120) $ (12,466)
============ ============
The accompanying notes to consolidated financial statements are an
integral part of these statements.
2
<PAGE>
<TABLE>
<CAPTION>
MEDIACOM LLC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(ALL DOLLAR AMOUNTS IN 000'S)
(UNAUDITED)
THREE MONTHS ENDED MARCH 31,
----------------------------
2000 1999
------------ ------------
<S> <C> <C>
CASH FLOWS PROVIDED BY OPERATING ACTIVITIES:
Net loss $ (49,637) $ (12,466)
Adjustments to reconcile net loss to net cash
flows from operating activities:
Accretion of interest on seller note - 74
Depreciation and amortization 40,680 20,402
Other non-cash charges 26,073 755
Other (273) -
Changes in assets and liabilities:
Subscriber accounts receivable 1,236 1,259
Prepaid expenses and other assets (2,608) (56)
Accounts payable and accrued expenses 3,616 1,702
Subscriber advances (258) (455)
Management fees payable 46 (336)
Deferred revenue (343) 334
------------ ------------
Net cash flows provided by operating activities 18,532 11,213
------------ ------------
CASH FLOWS USED IN INVESTING ACTIVITIES:
Capital expenditures (36,594) (15,907)
Other, net (204) (255)
------------ ------------
Net cash flows used in investing activities (36,798) (16,162)
------------ ------------
CASH FLOWS PROVIDED BY FINANCING ACTIVITIES:
New borrowings 26,500 133,900
Repayment of debt (365,500) (126,575)
Capital contributions 354,500 -
Financing costs (100) (3,238)
------------ ------------
Net cash flows provided by financing activities 15,400 4,087
------------ ------------
Net decrease in cash and cash equivalents (2,866) (862)
CASH AND CASH EQUIVALENTS, beginning of period 4,473 2,212
------------ ------------
CASH AND CASH EQUIVALENTS, end of period $ 1,607 $ 1,350
============ ============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for interest $ 23,001 $ 1,930
============ ============
</TABLE>
The accompanying notes to consolidated financial statements are an
integral part of these statements.
3
<PAGE>
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, is involved in the acquisition
and development of cable television systems serving principally non-metropolitan
markets of the United States. Through these cable systems, the Company provides
entertainment, information and telecommunications services to its subscribers.
As of March 31, 2000, the Company had acquired and was operating cable
television systems in 21 states, principally Alabama, California, Florida,
Illinois, Indiana, Iowa, Kentucky, Minnesota, Missouri and North Carolina.
Mediacom Capital Corporation ("Mediacom Capital"), a New York corporation
wholly-owned by Mediacom, was organized in March 1998 for the sole purpose of
acting as co-issuer with Mediacom of $200.0 million aggregate principal amount
of 8 1/2% senior notes due 2008 (the "8 1/2% Senior Notes") and of $125.0
million aggregate principal amount of 77/8% senior notes due 2011 (the "77/8%
Senior Notes" and collectively with the 8 1/2% Senior Notes, the "Senior Notes")
(see Note 4). Mediacom Capital has nominal assets and does not conduct
operations of its own. The Senior Notes are joint and several obligations of
Mediacom and Mediacom Capital, although Mediacom received all the net proceeds
of the Senior Notes.
On February 9, 2000, Mediacom Communications Corporation ("MCC"), a Delaware
corporation organized in November 1999, completed an initial public offering.
Prior to such time, MCC had no assets, liabilities, contingent liabilities or
operations. Immediately prior to the completion of its initial public offering,
MCC issued shares of its Class A and Class B common stock in exchange for all of
the outstanding membership interests in Mediacom. As a result of this exchange,
Mediacom became a wholly-owned subsidiary of MCC and Mediacom's Fourth Amended
and Restated Operating Agreement (the "1999 Operating Agreement") was amended to
reflect MCC as the sole member and manager of Mediacom. Mediacom acts as a
holding company for its operating subsidiaries. Each operating subsidiary is
wholly-owned by Mediacom, except for a 1.0% ownership interest in a subsidiary,
Mediacom California LLC, that is held by Mediacom Management Corporation
("Mediacom Management"), a Delaware corporation that is wholly-owned by the
Chairman and Chief Executive Officer of MCC.
(2) STATEMENT OF ACCOUNTING PRESENTATION AND OTHER INFORMATION
The consolidated financial statements as of March 31, 2000 and 1999 are
unaudited. However, in the opinion of management, such statements include all
adjustments, consisting only of normal recurring adjustments, necessary for a
fair presentation of the results for the periods presented. The accounting
policies followed during such interim periods reported are in conformity with
generally accepted accounting principles and are consistent with those applied
during annual periods. For additional disclosures, including a summary of the
Company's accounting policies, the interim financial statements should be read
in conjunction with the Company's Annual Report on Form 10-K (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, 2000.
Recent Accounting Pronouncements
In 1998, Statement of Financial Accounting Standards No. 133 ("SFAS 133"),
"Accounting for Derivative Instruments and Hedging Activities," was issued. SFAS
133 established accounting and reporting standards requiring that derivative
instruments be recorded in the balance sheet as either an asset or liability
measured at its fair value. The Company will adopt SFAS 133 in 2001, and has not
yet quantified the impact nor determined the timing or method of the adoption.
On March 3, 1999, the Securities and Exchange Commission ("SEC") issued
Staff Accounting Bulletin No. 101 ("SAB 101"). SAB 101 summarizes certain
areas of the SEC's views in applying generally accepted accounting
4
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MEDIACOM LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
principles to revenue recognition in financial statements. The Company does not
expect SAB 101 to have a material impact on its financial statements.
(3) ACQUISITIONS
The Company completed the undernoted acquisitions (the "Acquired Systems") in
1999. These acquisitions were accounted for using the purchase method of
accounting, and accordingly, the purchase price of each of these Acquired
Systems has been allocated to the assets acquired and liabilities assumed at
their estimated fair values at their respective dates of acquisition. The
results of operations of the Acquired Systems have been included with those of
the Company since the dates of acquisition.
On October 15, 1999, the Company acquired the stock of Zylstra Communications
Corporation ("Zylstra") for a purchase price of approximately $19.5 million.
Zylstra owned and operated cable television systems serving approximately 14,000
subscribers in Iowa, Minnesota and South Dakota. The purchase price has been
preliminarily allocated as follows: $7.8 million to property, plant and
equipment and $11.7 million to intangible assets. Such allocations are subject
to adjustments based upon the final appraisal information received by the
Company. The final allocations of the purchase price are not expected to differ
materially from the preliminary allocations. Additionally, approximately
$400,000 of direct acquisition costs has been allocated to property, plant and
equipment and intangible assets. In the fourth quarter of 1999, the Company
recorded acquisition reserves related to this acquisition in the amount of
approximately $200,000, which are included in accrued expenses.
On November 5, 1999, the Company acquired the assets of cable television
systems owned by Triax Midwest Associates, L.P. ("Triax") for a purchase price
of approximately $740.1 million. The Triax systems served approximately 344,000
subscribers primarily in Illinois, Indiana, Iowa and Minnesota. The purchase
price has been preliminarily allocated as follows: $296.0 million to property,
plant and equipment and $444.1 million to intangible assets. Such allocations
are subject to adjustments based upon the final appraisal information received
by the Company. The final allocations of the purchase price are not expected to
differ materially from the preliminary allocations. Additionally, approximately
$10.5 million of direct acquisition costs has been allocated to property, plant
and equipment, intangible assets and other assets. In the fourth quarter of
1999, the Company recorded acquisition reserves related to this acquisition in
the amount of approximately $5.5 million, which are included in accrued
expenses.
The Company has reported the operating results of the Acquired Systems from
the dates of their respective acquisition. The unaudited pro forma operating
results presented below give pro forma effect to the acquisitions of the
Acquired Systems as if such transactions had been consummated on January 1,
1999. This financial information has been prepared for comparative purposes only
and does not purport to be indicative of the operating results which actually
would have resulted had the acquisitions of the Acquired Systems been
consummated at the beginning of the period presented.
5
<PAGE>
MEDIACOM LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
PRO FORMA RESULTS FOR THE
THREE MONTHS ENDED MARCH 31,
-----------------------------
2000 1999
----------- -----------
(DOLLARS IN THOUSANDS)
Revenues ................................... $ 77,440 $ 71,161
Operating expenses and costs:
Service costs .......................... 26,635 23,606
SG&A expenses .......................... 13,389 12,829
Management fee expense ................. 1,420 2,901
Depreciation and amortization .......... 40,680 38,762
Non-cash stock charges ................. 26,073 -
----------- -----------
Operating loss ............................. (30,757) (6,937)
----------- -----------
Net loss ................................... $ (49,637) $ (27,660)
=========== ===========
(4) DEBT
As of March 31, 2000 and December 31, 1999, debt consisted of:
MARCH 31, DECEMBER 31,
2000 1999
----------- -----------
Mediacom: (DOLLARS IN THOUSANDS)
8 1/2% Senior Notes (a) .............. $ 200,000 $ 200,000
7 7/8% Senior Notes (b) .............. 125,000 125,000
Subsidiaries:
Bank Credit Facilities (c) ........... 475,000 814,000
----------- -----------
$ 800,000 $ 1,139,000
=========== ===========
(a) On April 1, 1998, Mediacom and Mediacom Capital jointly issued $200.0
million aggregate principal amount of 8 1/2% Senior Notes due on AprIl 15,
2008. The 8 1/2% Senior Notes are unsecured obligations, and tHe indenture
for the 8 1/2% Senior Notes stipulates, among other thingS, restrictions
on incurrence of indebtedness, distributions, mergers and asset sales and
has cross-default provisions related to other debt of the Company.
Interest accrues at 8 1/2% per annum, beginniNg from the date of issuance
and is payable semi-annually on April 15 and October 15 of each year. The
8 1/2% Senior Notes may be redeemEd at the option of Mediacom, in whole or
part, at any time after April 15, 2003, at redemption prices decreasing
from 104.25% of their principal amount to 100% in 2006, plus accrued and
unpaid interest.
(b) On February 26, 1999, Mediacom and Mediacom Capital jointly issued $125.0
million aggregate principal amount of 77/8% Senior Notes due on February
15, 2011. The 77/8% Senior Notes are unsecured obligations and the
indenture for the 77/8% Senior Notes stipulates, among other things,
restrictions on incurrence of indebtedness, distributions, mergers and
asset sales and has cross-default provisions related to other debt of the
Company. Interest accrues at 77/8% per annum, beginning from the date of
issuance and is payable semi-annually on February 15 and August 15 of each
year. The 77/8% Senior Notes may be redeemed at the option of Mediacom, in
whole or part, at any time after February 15, 2006, at redemption prices
decreasing from 103.938% of their principal amount to 100% in 2008, plus
accrued and unpaid interest.
6
<PAGE>
MEDIACOM LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(c) On June 24, 1997, certain operating subsidiaries of Mediacom entered into
an eight and one-half year $100.0 million reducing revolver and term loan
agreement (the "Western Credit Agreement"). On January 23, 1998, certain
other operating subsidiaries entered into a separate eight and one-half
year $225.0 million reducing revolver and term loan agreement (the
"Southeast Credit Agreement" and together with the Western Credit
Agreement, the "Former Bank Credit Agreements"). By separate amendments to
the Former Bank Credit Agreements, each dated as of January 26, 1999, the
term loans were converted into additional revolving credit loans.
On September 30, 1999, the Former Bank Credit Agreements were replaced
with $550.0 million of credit facilities, consisting of a $450.0 million
reducing revolving credit facility and a $100.0 million term loan (the
"Mediacom USA Credit Agreement"). The revolving credit facility expires on
March 31, 2008, subject to earlier expiration on June 30, 2007 if Mediacom
does not refinance the 8 1/2% Senior Notes by March 31, 2007. The term
loan is due aNd payable on September 30, 2008, and is subject to repayment
on September 30, 2007 if Mediacom does not refinance the 8 1/2% SeniOr
Notes by March 31, 2007. The reducing revolving credit facility makes
available a maximum commitment amount for a period of up to eight and one-
half years, which is subject to quarterly reductions, beginning September
30, 2002, ranging from 1.25% to 17.50% of the original commitment amount
of the reducing revolver. The Mediacom USA Credit Agreement requires
mandatory reductions of the reducing revolver facility from excess cash
flow, as defined therein, beginning December 31, 2002. The Mediacom USA
Credit Agreement provides for interest at varying rates based upon various
borrowing options and the attainment of certain financial ratios, and for
commitment fees of 1/4% to (3)/8% per annum on the unused portion of
available credit under the reducing revolver credit facility.
On November 5, 1999, certain newly formed operating subsidiaries of
Mediacom entered into a separate credit facility consisting of a $450.0
million reducing revolving credit facility and a $100.0 million term loan
(the "Mediacom Midwest Credit Agreement", and together with the Mediacom
USA Credit Agreement, the "Bank Credit Agreements"). The revolving credit
facility expires on June 30, 2008, subject to earlier expiration on
September 30, 2007 if Mediacom does not refinance the 8 1/2% Senior Notes
by March 31, 2007. The term loan is due and payable on December 31, 2008,
and is subject to repayment on December 31, 2007 if Mediacom does not
refinance the 8 1/2% Senior Notes by March 31, 2007. The reducing
revolving credit facility makes available a maximum commitment amount for
a period of up to eight and one-half years, which is subject to quarterly
reductions, beginning September 30, 2002, ranging from 1.25% to 8.75% of
the original commitment amount of the reducing revolver. The Mediacom
Midwest Credit Agreement requires mandatory reductions of the reducing
revolver facility from excess cash flow, as defined therein, beginning
December 31, 2002. The Midwest Credit Agreement provides for interest at
varying rates based upon various borrowing options and the attainment of
certain financial ratios, and for commitment fees of 1/4% to (3)/8% per
annum on the unused portion of available credit under the reducing
revolver credit facility. The average interest rate on outstanding debt
under the Bank Credit Agreements was 8.3% and 8.0% for the three months
ended March 31, 2000 and December 31, 1999, respectively, before giving
effect to the interest rate swap agreements discussed below.
The Bank Credit Agreements require the operating subsidiaries to maintain
compliance with certain financial covenants including, but not limited to
leverage, interest coverage and pro forma debt service coverage ratios, as
defined therein. The Bank Credit Agreements also require the Company to
maintain compliance with other covenants, including, but not limited to,
limitations on mergers and acquisitions, consolidations and sales of
certain assets, liens, the incurrence of additional indebtedness, certain
restrictive payments, and certain transactions with affiliates. The
operating subsidiaries were in compliance with all covenants of the Bank
Credit Agreements as of March 31, 2000.
The Bank Credit Agreements are secured by Mediacom's pledge of all its
ownership interests in its operating subsidiaries and is guaranteed by
Mediacom on a limited recourse basis to the extent of such
7
<PAGE>
MEDIACOM LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
ownership interests. At March 31, 2000, the operating subsidiaries had
approximately $625.0 million of unused bank commitments under the Bank
Credit Agreements.
The Company uses interest rate swap agreements in order to fix the interest
rate for the duration of the contract as a hedge against interest rate
volatility. As of March 31, 2000, the Company had entered into interest rate
exchange agreements (the "Swaps") with various banks pursuant to which the
interest rate on $40.0 million is fixed at a weighted average swap rate of
approximately 6.2%, plus the average applicable margin over the Eurodollar Rate
option under the Bank Credit Agreements. Under the terms of the Swaps, which
expire from 2000 through 2002, the Company is exposed to credit loss in the
event of nonperformance by the other parties to the Swaps. However, the Company
does not anticipate nonperformance by the counterparties.
The stated maturities of all debt outstanding as of March 31, 2000 are as
follows (dollars in thousands):
2001.................................................. $ -
2002.................................................. 750
2003.................................................. 2,000
2004.................................................. 2,000
2005.................................................. 2,000
Thereafter ........................................... 793,250
---------
$ 800,000
=========
(5) SOFTNET
As of March 31, 2000 and December 31, 1999, deferred revenue resulting from
the Company's receipt of SoftNet Systems, Inc. shares of common stock amounted
to approximately $25.3 million and $8.4 million, respectively, net of
amortization taken. For the three months ended March 31, 2000, the Company
recognized approximately $273,000 of this deferred revenue. The Company did not
recognize any deferred revenue for the three month period ended March 31, 1999.
(6) MCC INITIAL PUBLIC OFFERING
On February 9, 2000, MCC completed an initial public offering ("IPO") of
20,000,000 shares of Class A common stock at $19.00 per share. The net proceeds,
after underwriting discounts of approximately $22.8 million and estimated
expenses related to the offering of approximately $2.8 million, were $354.4
million. Immediately prior to the completion of the IPO, MCC issued 40,657,010
shares of Class A common stock and 29,342,990 shares of Class B common stock in
exchange for all the outstanding membership interests in Mediacom.
Immediately prior to the IPO, additional membership interests were issued to
all members of Mediacom in accordance with a formula set forth in the 1999
Operating Agreement, which was based upon a valuation of Mediacom established at
the time of the IPO (the "IPO Valuation"). A provision in the 1999 Operating
Agreement eliminated a certain portion of the special allocation of membership
interests awarded to certain Mediacom members (the "Primary Members") based upon
valuations of Mediacom performed from time to time. In connection with the
removal of these specified special allocation provisions and the amendments to
Mediacom's management agreements with Mediacom Management effective November 19,
1999, the Primary Members were issued new membership interests in Mediacom at
the time of the IPO representing 16.5% of the equity in Mediacom in accordance
with a formula based upon the IPO Valuation. These newly issued membership
interests were exchanged for shares of MCC Class B common stock in the IPO. In
addition, the Primary Members received options to purchase 7.2 million shares of
MCC Class B common stock in exchange for the elimination of the balance of the
provision providing for a special allocation of membership interests in
Mediacom.
8
<PAGE>
MEDIACOM LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
The management agreements between Mediacom Management and each of the
operating subsidiaries were terminated upon completion of the IPO and replaced
with new management agreements between MCC and the Company's operating
subsidiaries. Under such agreements, MCC is entitled to receive annual
management fees in amounts not to exceed 4.5% of the Company's gross operating
revenues.
As a result of the completion of the IPO and the termination of the
management agreements with Mediacom Management, the deferred non-cash stock
expense of $24.5 million, net of amortization taken, relating to the future
benefits associated with the continuation of such management agreements, was
recognized as a non-cash stock charge in the consolidated statements of
operations for the three months ended March 31, 2000. Mediacom Management is
wholly-owned by the Chairman and Chief Executive Officer of MCC.
(7) SUBSEQUENT EVENTS
On April 6, 2000, the Company acquired the assets of cable television systems
owned by Rapid Communications Partners, L.P. ("Rapid") for a purchase price of
$8.0 million. The Rapid systems serve approximately 6,000 basic subscribers
primarily in Kentucky and Illinois.
On April 21, 2000, the Company acquired the assets of cable television
systems owned by MidAmerican Cable Systems, L.P. ("MidAmerican") for a purchase
price of approximately $8.0 million. The MidAmerican systems serve approximately
5,000 basic subscribers primarily in Illinois.
9
<PAGE>
MEDIACOM CAPITAL CORPORATION
BALANCE SHEETS
MARCH 31, DECEMBER 31,
2000 1999
--------- ------------
ASSETS (UNAUDITED)
Note receivable - from affiliate for
issuance of common stock ............................ $ 100 $ 100
-------- --------
Total assets ............................... $ 100 $ 100
======== ========
STOCKHOLDER'S EQUITY
Common stock, par value $0.10; 200 shares authorized;
100 shares issued and outstanding ................... $ 10 $ 10
Additional paid-in capital ............................. $ 90 $ 90
-------- --------
Total stockholder's equity ................. $ 100 $ 100
======== ========
The accompanying note to the balance sheets is an integral part
of these financial statements.
10
<PAGE>
MEDIACOM CAPITAL CORPORATION
NOTE TO THE BALANCE SHEETS
(UNAUDITED)
(1) ORGANIZATION
Mediacom Capital Corporation ("Mediacom Capital"), a New York corporation,
wholly-owned by Mediacom LLC ("Mediacom"), was organized on March 9, 1998 for
the sole purpose of acting as co-issuer with Mediacom of $200.0 million
aggregate principal amount of the 8 1/2% senior notes due April 15, 2008.
Interest on the 8 1/2% senior notes is payable semi-annually on April 15 aNd
October 15 of each year. Mediacom Capital does not conduct operations of its
own.
On February 26, 1999, Mediacom and Mediacom Capital jointly issued $125.0
million aggregate principal amount of 77/8% senior notes due on February 15,
2011. The net proceeds from this offering of approximately $121.9 million were
used to repay a substantial portion of outstanding bank debt under the bank
credit facilities of Mediacom's operating subsidiaries. Interest on the 77/8%
senior notes is payable semi-annually on February 15 and August 15 of each year.
11
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
INTRODUCTION
The following discussion of the financial condition and results of operations
of the Company, the description of the Company's business as well as other
sections of this Form 10-Q contain certain forward-looking statements. The
Company's actual results could differ materially from those discussed herein and
its current business plans could be altered in response to market conditions and
other factors beyond the Company's control.
EBITDA represents operating loss before depreciation and amortization and
non-cash stock charges. EBITDA:
o is not intended to be a performance measure that should be regarded as an
alternative either to operating income or net income as an indicator of
operating performance, or to the statement of cash flows as a measure of
liquidity;
o is not intended to represent funds available for debt service,
dividends, reinvestment or other discretionary uses; and
o should not be considered in isolation or as a substitute for measures of
performance prepared in accordance with generally accepted accounting
principles.
EBITDA is included herein because the Company's management believes that EBITDA
is a meaningful measure of performance as it is commonly used by the cable
television industry and by the investment community to analyze and compare cable
television companies. The Company's definition of EBITDA may not be identical to
similarly titled measures reported by other companies.
The Company was founded in July 1995 principally to acquire, operate and
develop cable television systems in selected non-metropolitan markets of the
United States. The Company's business strategy is to:
o improve the operating and financial performance of its acquired cable
systems;
o develop efficient operating clusters;
o rapidly upgrade its cable network;
o introduce new and enhanced products and services;
o maximize customer satisfaction to build customer loyalty;
o acquire underperforming cable television systems principally in
non-metropolitan markets; and
o implement a flexible financing structure.
The Company commenced operations in March 1996 with the acquisition of its
first cable television system. As of March 31, 2000, the Company had completed
11 acquisitions of cable television systems that on such date passed
approximately 1,073,000 homes and served approximately 720,000 basic
subscribers. In October 1999, the Company purchased the outstanding stock of
Zylstra Communications Corporation ("Zylstra") serving 14,000 basic subscribers.
In November 1999, the Company acquired cable television systems from Triax
Midwest Associates, L.P. ("Triax," and together with Zylstra, the "Acquired
Systems") serving 344,000 basic subscribers. All acquisitions have been
accounted for under the purchase method of accounting and, therefore, the
Company's historical results of operations include the results of operations for
each acquired system subsequent to its respective acquisition date.
12
<PAGE>
ACTUAL RESULTS OF OPERATIONS
The following historical information includes the results of operations of
the Zylstra systems, which were acquired on October 15, 1999 and the Triax
systems, which were acquired on November 5, 1999, only for that portion of the
respective period that such cable television systems were owned by the Company.
See Note 3 to the Company's consolidated financial statements for a detailed
description of the Company's acquisitions in 1999.
THREE MONTHS ENDED MARCH 31, 2000 COMPARED TO THREE MONTHS ENDED MARCH 31,
1999
Revenues. Revenues increased 115.1% to approximately $77.4 million for the
three months ended March 31, 2000 as compared to $36.0 million for the three
months ended March 31, 1999. Of the revenue increase of $41.4 million, $37.1 was
attributable to the Acquired Systems. Excluding the Acquired Systems, revenues
would have increased by 12.0% principally due to monthly revenue per subscriber
increasing from $32.82 to $36.13. This increase resulted primarily from basic
rate increases, associated with new programming introductions and higher
advertising revenues, offset by a decline in pay-per-view revenues.
Service costs. Service costs increased 125.2% to approximately $26.6 million
for the three months ended March 31, 2000, as compared to approximately $11.8
million for the three months ended March 31, 1999. The Acquired Systems
accounted for approximately $13.4 million of the total increase. Excluding the
Acquired Systems, these costs increased by approximately 12.1% primarily as a
result of higher employee and programming costs and additional channel
offerings. As a percentage of revenues, service costs were 34.4% for the three
months ended March 31, 2000, as compared with 32.8% for the three months ended
March 31, 1999.
Selling, general and administrative expenses. Selling, general and
administrative expenses increased 85.9% to approximately $13.4 million for the
three months ended March 31, 2000, as compared to approximately $7.2 million for
the three months ended March 31, 1999. The Acquired Systems accounted for
approximately $6.0 million of the total increase. Excluding the systems acquired
in 1999, these costs increased by approximately 2.9%. As a percentage of
revenues, selling, general and administrative expenses were 17.3% for the three
months ended March 31, 2000, as compared with 20.0% for the three months ended
March 31, 1999.
Management fee expense. Management fee expense decreased 14.7% to $1.4
million for the three months ended March 31, 2000 as compared to $1.7 million
for the three months ended March 31, 1999. The decrease in management fee
expense was primarily due to a reduction in amounts charged by Mediacom
Management Corporation ("Mediacom Management"). As a percentage of revenues,
management fee expense was 1.8% for the three months ended March 31, 2000, as
compared with 4.6% for the three months ended March 31, 1999.
Depreciation and amortization. Depreciation and amortization increased 99.4%
to approximately $40.7 million for the three months ended March 31, 2000 as
compared to approximately $20.4 million in the three months ended March 31,
1999. This increase was due to the Acquired Systems and additional capital
expenditures associated with the upgrade of the Company's systems.
Non-cash stock charges. Non-cash stock charges were approximately $26.1
million for the three months ended March 31, 2000. These non-cash charges
comprise a $24.5 million charge resulting from the termination of the management
agreements with Mediacom Management during the first quarter of 2000 and a $1.6
million charge related to the grant of equity interests to certain members of
the Company's management team. See Note 6 of the Company's consolidated
financial statements.
Interest expense, net. Interest expense, net, increased 188.8% to
approximately $18.4 million for the three months ended March 31, 2000 as
compared to approximately $6.4 million for the three months ended March 31,
1999. This increase was substantially due to higher average debt outstanding
during the three months ended March 31, 2000 as a result of debt incurred in
connection with the Company's acquisitions in the fourth quarter of 1999.
Other expenses. Other expenses decreased 54.0% to approximately $457,000 for
the three months ended March 31, 2000 as compared to approximately $993,000 for
the three months ended March 31, 1999. This change was principally due to a
decrease in fees associated with the Company's credit arrangements.
13
<PAGE>
Net loss. Due to the factors described above, the Company generated a net
loss of approximately $49.6 million for the three months ended March 31, 2000 as
compared to a net loss of approximately $12.5 million for the three months ended
March 31, 1999.
EBITDA. EBITDA increased 135.1% to approximately $36.0 million for the three
months ended March 31, 2000 as compared to approximately $15.3 million for the
three months ended March 31, 1999. This increase was substantially due to the
reasons noted above. As a percentage of revenues, EBITDA increased to 46.5% for
the three months ended March 31, 2000, from 42.5% for the three months ended
March 31, 1999. Excluding the Acquired Systems, EBITDA increased by 23.7% over
the comparable period in 1999.
SELECTED PRO FORMA RESULTS
The Company has reported the results of operations of the Acquired Systems
from the date of their respective acquisition. The following financial
information for the three months ended March 31, 2000 and 1999, presents
selected unaudited pro forma operating results assuming the purchase of the
Acquired Systems had been consummated on January 1, 1999. See Note 3 to the
Company's consolidated financial statements for a detailed description of the
Company's acquisitions in 1999.
THREE MONTHS ENDED MARCH 31,
----------------------------
2000 1999
----------- ------------
(DOLLARS IN THOUSANDS,
EXCEPT PER
SUBSCRIBER DATA)
Revenues $ 77,440 $ 71,161
Costs and expenses:
Service costs 26,635 23,606
SG&A expenses 13,389 12,829
Management fee expense 1,420 2,901
Depreciation and amortization 40,680 38,762
Non-cash stock charges 26,073 -
--------- ---------
Operating loss $ (30,757) $ (6,937)
========= =========
OTHER DATA:
EBITDA $ 35,996 $ 31,825
EBITDA margin (1) 46.5% 44.7%
Basic subscribers (2) 720,000 709,000
Average monthly revenue per basic subscriber (3) $ 35.88 $ 33.49
- -----------------
(1) Represents EBITDA as a percentage of revenues.
(2) At end of period.
(3) Represents average monthly revenues for the period divided by
average basic subscribers for the period.
SELECTED PRO FORMA RESULTS FOR THREE MONTHS ENDED MARCH 31, 2000 COMPARED
TO SELECTED PRO FORMA RESULTS FOR THREE MONTHS ENDED MARCH 31, 1999
Revenues increased 8.8% to approximately $77.4 million for the three months
ended March 31, 2000, as compared to approximately $71.2 million for the three
months ended March 31, 1999. This increase was attributable principally to
internal subscriber growth of 1.6% and higher average monthly revenue per basic
subscriber of $35.88 for the three months ended March 31, 2000, as compared to
$33.49 for the three months ended March 31, 1999.
Service costs and selling, general and administrative expenses in the
aggregate increased 9.9% to approximately $40.0 million for the three months
ended March 31, 2000 from approximately $36.4 million for the three months ended
March 31, 1999, principally due to higher programming costs incurred by the
Company for the systems acquired in 1999, increased employee costs and
incremental marketing expenses associated with the launch of new products.
Management fee expense decreased 51.1% to approximately $1.4 million for the
three months ended March 31, 2000 from approximately $2.9 million for three
months ended March 31, 1999. The decrease in management fee
14
<PAGE>
expense was primarily due to a reduction in amounts charged by Mediacom
Management, resulting from amendments to management agreements between Mediacom
Management and the Company's operating subsidiaries.
Depreciation and amortization increased 4.9% to approximately $40.7 million
for the three months ended March 31, 2000 from approximately $38.8 million for
the three months ended March 31, 1999. This increase was principally due to
capital expenditures associated with the upgrade of the Company's systems.
Non-cash stock charges were as reported above. As a result of the above factors,
the Company generated an operating loss of approximately $30.8 million for the
three months ended March 31, 2000, compared to approximately $6.9 million for
the three months ended March 31, 1999.
EBITDA increased by 13.1% to approximately $36.0 million for the three months
ended March 31, 2000 from approximately $31.8 million for the three months ended
March 31, 1999. The EBITDA margin improved to 46.5% for the three months ended
March 31, 2000 from 44.7% for the three months ended March 31, 1999.
LIQUIDITY AND CAPITAL RESOURCES
The Company's business requires substantial capital for the upgrade,
expansion and maintenance of its cable and fiber network. In addition, the
Company has pursued, and will continue to pursue, a business strategy that
includes selective acquisitions. The Company has funded its working capital
requirements, capital expenditures and acquisitions through a combination of
internally generated funds, long-term borrowings and equity contributions. The
Company intends to continue to finance such expenditures through internally
generated funds, long-term borrowings and equity financings.
From the commencement of its operations in March 1996 through December 1999,
the Company invested approximately $1.2 billion, before closing costs and
adjustments, to acquire cable television systems serving 720,000 basic
subscribers as of March 31, 2000.
In 2000, the Company has completed or anticipates completing the undernoted
acquisitions of cable systems serving 100,000 basic subscribers for an aggregate
purchase price of $193.0 million.
o On April 6, 2000, the Company acquired the assets of cable television
systems owned by Rapid Communications Partners, L.P. ("Rapid") for a
purchase price of $8.0 million. The Rapid systems serve approximately
6,000 basic subscribers primarily in Kentucky and Illinois.
o On April 21, 2000, the Company acquired the assets of cable television
systems owned by MidAmerican Cable Systems, L.P. ("MidAmerican") for a
purchase price of approximately $8.0 million. The MidAmerican systems
serve approximately 5,000 basic subscribers primarily in Illinois.
o The Company has two pending acquisitions of cable television systems under
contract serving, in total, approximately 6,500 basic subscribers for an
aggregate purchase price of $12.5 million. In addition, the Company has
signed several letters of intent to acquire cable systems serving, in
total, approximately 82,500 basic subscribers for an aggregate purchase
price of approximately $164.5 million.
Substantially all of the basic subscribers served by these expected
acquisitions are contiguous or in close proximity to the Company's existing
operating clusters. The acquisitions under letter of intent are subject to the
negotiation and completion of definitive documentation, which will include
customary representations and warranties and will be subject to a number of
closing conditions, including regulatory approvals and other third party
consents. No assurance can be given that such definitive agreements will be
entered into or that if entered into, these acquisitions will be consummated.
The Company expects to complete its pending acquisitions during fiscal year
2000.
The Company has announced plans to increase its capital spending to
approximately $175.0 million in 2000, compared to the $140.0 million, as
previously disclosed. However, the Company's projected capital expenditures will
remain at the original amount of $400.0 million for the three-year period ending
2002. These amounts exclude any capital expenditures related to any acquisitions
completed in 2000 or beyond. For the first quarter of 2000, the Company's
capital expenditures were $36.6 million. As a result of its accelerated capital
investment plans, the Company anticipates that by December 2000, 77% of its
cable network will be upgraded to 550MHz - 750MHz
15
<PAGE>
bandwidth capacity as compared to 57% as of December 1999 and that 50% of its
existing homes passed will be activated with two-way communications capability
as compared to 11% as of December 1999.
To finance the Company's acquisitions, working capital requirements and
capital expenditures and to provide liquidity for future capital needs, the
Company has completed the following financing arrangements as of March 31, 2000:
o $200.0 million offering of 8 1/2% senior notes due April 2008;
o $125.0 million offering of 77/8% senior notes due February 2011;
o $550.0 million subsidiary credit facility expiring in September 2008;
o $550.0 million subsidiary credit facility expiring in December 2008; and
o $489.9 million of equity capital contributions by members of Mediacom,
including a $354.4 million equity contribution by Mediacom Communications
Corporation in February 2000.
The final maturities of the Company's subsidiary credit facilities are
subject to earlier repayment on dates ranging from June 2007 to December 2007 if
the Company does not refinance its 8 1/2% senior notes prior to March 31, 2007.
As of March 31, 2000, the Company was in compliance with all of the financial
and other covenants provided for in its subsidiary credit agreements.
As of April 30, 2000, the Company entered into interest rate swap agreements,
which expire from 2000 through 2003, to hedge $120.0 million of floating rate
debt under its subsidiary credit facilities. As a result of these interest rate
swap agreements, approximately 56% of the Company's outstanding debt was at
fixed interest rates or subject to interest rate protection on such date. After
giving effect to these interest rate swap agreements, as of April 30, 2000, the
Company's weighted average cost of indebtedness (defined as interest expense,
net, as a percentage of total outstanding indebtedness) was approximately 8.1%.
Debt leverage and interest coverage ratios are commonly used in the cable
television industry to measure liquidity and financial condition. For the three
month period ended March 31, 2000, the Company's debt leverage ratio (defined as
total debt at the end of the period, divided by annualized EBITDA for the
period) was 5.6x and the Company's interest coverage ratio (defined as EBITDA
divided by interest expense, net for the period) was 2.0x. As of March 31, 2000,
the Company had approximately $625.0 million of unused credit commitments under
its subsidiary credit facilities.
Although the Company has not generated earnings sufficient to cover fixed
charges, the Company has generated cash and obtained financing sufficient to
meet its debt service, working capital, capital expenditure and acquisition
requirements. The Company expects that it will continue to be able to generate
funds and obtain financing sufficient to service its obligations and complete
its pending and future acquisitions. There can be no assurance that the Company
will be able to obtain sufficient financing, or, if it was able to do so, that
the terms would be favorable to them.
RECENT ACCOUNTING PRONOUNCEMENTS
In 1998, Statement of Financial Accounting Standards No. 133 ("SFAS 133"),
"Accounting for Derivative Instruments and Hedging Activities," was issued. SFAS
133 established accounting and reporting standards requiring that derivative
instruments be recorded in the balance sheet as either an asset or liability
measured at its fair value. The Company will adopt SFAS 133 in 2001, and has not
yet quantified the impact nor determined the timing or method of the adoption.
16
<PAGE>
On March 3, 1999, the Securities and Exchange Commission ("SEC") issued Staff
Accounting Bulletin No. 101 ("SAB 101"). SAB 101 summarizes certain areas of the
SEC's views in applying generally accepted accounting principles to revenue
recognition in financial statements. The Company does not expect SAB 101 to have
a material impact on its financial statements.
INFLATION AND CHANGING PRICES
The Company's systems' costs and expenses are subject to inflation and price
fluctuations. Since changes in costs can be passed through to subscribers, such
changes are not expected to have a material effect on their results of
operations.
17
<PAGE>
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
In the normal course of business, the Company uses interest rate swap
agreements in order to fix the interest rate for the duration of the contract as
a hedge against interest rate volatility. As of March 31, 2000, the Company had
interest rate exchange agreements (the "Swaps") with various banks pursuant to
which the interest rate on $40.0 million is fixed at a weighted average swap
rate of approximately 6.2%, plus the average applicable margin over the
Eurodollar Rate option under the Company's bank credit agreement. Under the
terms of the Swaps, which expire from 2000 through 2002, the Company is exposed
to credit loss in the event of nonperformance by the other parties to the Swaps.
However, the Company does not anticipate nonperformance by the counterparties.
The Company would have received approximately $675,000 at March 31, 2000 to
terminate the Swaps, inclusive of accrued interest. The table below provides
information for the Company's long term debt. See Note 4 to the Company's
consolidated financial statements.
<TABLE>
<CAPTION>
EXPECTED MATURITY
(ALL DOLLAR AMOUNTS IN THOUSANDS)
2001 2002 2003 2004 2005 Thereafter Total Fair Value
---- ---- ---- ---- ---- ---------- ----- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Fixed rate $ - $ - $ - $ - $ - $ 200,000 $ 200,000 $ 182,000
Weighted average
interest rate 8.5% 8.5% 8.5% 8.5% 8.5% 8.5% 8.5%
Fixed rate $ - $ - $ - $ - $ - $ 125,000 $ 125,000 $ 108,125
Weighted average
interest rate 7.9% 7.9% 7.9% 7.9% 7.9% 7.9% 7.9%
Variable rate $ - $500 $ 1,000 $ 2,000 $ 2,000 $ 471,500 $ 475,000 $ 475,000
Weighted average
interest rate 8.3% 8.3% 8.3% 8.3% 8.3% 8.3% 8.3%
</TABLE>
18
<PAGE>
PART II
ITEM 1. LEGAL PROCEEDINGS
Reference is made to the Company's Annual Report on Form 10-K for the year
ended December 31, 1999 for a discussion of certain litigation.
ITEM 6.
(a) EXHIBITS
Exhibit
Number Exhibit Descriptions
------ --------------------
27.1 Financial Data Schedule
(b) REPORTS ON FORM 8-K
None.
19
<PAGE>
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 LLC
May 15, 2000 /s/ MARK E. STEPHAN
---------------------------------
By: MARK E. STEPHAN
Senior Vice President,
Chief Financial Officer, Treasurer
and Principal Financial Officer
20
<PAGE>
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 CORPORATION
May 15, 2000 By: /s/ MARK E. STEPHAN
-------------------------------------
MARK E. STEPHAN
Treasurer, Secretary and
Principal Financial Officer
21
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary information extracted from the consolidated
statements of operations and consolidated balance sheets of Mediacom LLC and its
subsidiaries and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<CIK> 0001064117
<NAME> MEDIACOM LLC
<MULTIPLIER> 1,000
<CURRENCY> USD
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<EXCHANGE-RATE> 1
<CASH> 1,607
<SECURITIES> 27,539
<RECEIVABLES> 4,511
<ALLOWANCES> 553
<INVENTORY> 13,867
<CURRENT-ASSETS> 0
<PP&E> 732,982
<DEPRECIATION> (127,697)
<TOTAL-ASSETS> 1,252,097
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 362,595
<TOTAL-LIABILITY-AND-EQUITY> 1,252,097
<SALES> 77,440
<TOTAL-REVENUES> 77,440
<CGS> 26,635
<TOTAL-COSTS> 108,197
<OTHER-EXPENSES> 457
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 18,423
<INCOME-PRETAX> (49,637)
<INCOME-TAX> 0
<INCOME-CONTINUING> (49,637)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (49,637)
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
