Actual Results of Operations
Three Months Ended March 31, 2008 compared to Three Months Ended March 31, 2007
The following tables set forth the unaudited consolidated statements of
operations for the three months ended March 31, 2008 and 2007 (dollars in
thousands and percentage changes that are not meaningful are marked NM):

                                          Three Months Ended
                                              March 31,
                                         2008           2007         $ Change        % Change

Revenues                               $ 339,679      $ 307,876      $  31,803            10.3 %
Costs and expenses:
Service costs (exclusive of
depreciation and amortization)           140,544        132,392          8,152             6.2 %
Selling, general and administrative
expenses                                  66,942         62,565          4,377             7.0 %
Corporate expenses                         7,733          6,791            942            13.9 %
Depreciation and amortization             59,844         53,801          6,043            11.2 %

Operating income                          64,616         52,327         12,289            23.5 %

Interest expense, net                    (54,589 )      (58,990 )        4,401            (7.5 %)
Loss on derivatives, net                 (24,074 )       (4,395 )      (19,679 )            NM
(Loss) gain on sale of cable
systems                                     (170 )       10,781        (10,951 )            NM
Other expense, net                        (1,849 )       (2,708 )          859           (31.7 %)

Income before income taxes               (16,066 )       (2,985 )      (13,081 )            NM
Provision for income taxes               (14,569 )      (13,895 )         (674 )           4.9 %

Net loss                               $ (30,635 )    $ (16,880 )    $ (13,755 )            NM


Adjusted OIBDA                         $ 125,772      $ 107,449      $  18,323            17.1 %




                                         Three Months Ended
                                              March 31,
                                         2008          2007        $ Change       % Change

  Adjusted OIBDA                       $ 125,772     $ 107,449     $  18,323           17.1 %
  Non-cash, share-based compensation      (1,312 )      (1,321 )           9             NM
  Depreciation and amortization          (59,844 )     (53,801 )      (6,043 )         11.2 %

  Operating income                     $  64,616     $  52,327     $  12,289           23.5 %

Revenues
The following tables set forth the unaudited revenues, and selected subscriber,
customer and average monthly revenue statistics for the three months ended
March 31, 2008 and 2007 (dollars in thousands, except per subscriber and RGU
data):

                               Three Months Ended
                                    March 31,
                               2008          2007        $ Change       % Change
            Video            $ 228,506     $ 215,628     $  12,878            6.0 %
            HSD                 76,903        65,548        11,355           17.3 %
            Phone               19,546        11,546         8,000           69.3 %
            Advertising         14,724        15,154          (430 )         (2.8 %)

            Total Revenues   $ 339,679     $ 307,876     $  31,803           10.3 %




                                            Three Months Ended
                                                March 31,                 Increase/
                                          2008             2007          (Decrease)        % Change
Basic subscribers                        1,326,000        1,362,000          (36,000 )          (2.6 %)
Digital customers                          584,000          530,000           54,000            10.2 %
HSD customers                              688,000          600,000           88,000            14.7 %
Phone customers                            204,000          123,000           81,000            65.9 %

RGUs (1)                                 2,802,000        2,615,000          187,000             7.2 %

Average total monthly revenue per
RGU (2)                                $     40.98      $     39.43      $      1.55             3.9 %

(1) RGUs represent the total of basic subscribers and digital, HSD and phone customers.

(2) Represents average monthly revenues for the quarter divided by average RGUs for such period.

Revenues rose 10.3%, largely attributable to an increase in video revenues, growth in our HSD and phone customers and a favorable comparison to the prior year period when results were affected by the Sinclair retransmission consent dispute. RGUs grew 7.2%, and average total monthly revenue per RGU rose 3.9%. Video revenues primarily represent monthly subscription fees charged to customers for our core cable television products and services (including 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. HSD revenues primarily represent monthly fees charged to customers, including commercial establishments, for our HSD products and services and equipment rental fees. Phone revenues primarily represent monthly fees charged to customers. Advertising revenues represent the sale of advertising time on various channels. Video revenues grew 6.0%, largely due to basic video rate increases and customer growth in our digital and other advanced video products and services, including DVRs and HDTV, partially offset by a lower number of basic subscribers. During the three months ended March 31, 2008, we gained 2,000 basic subscribers, compared to a reduction in 18,000 basic subscribers for the same period last year, which includes a significant number of basic subscribers lost in connection with the aforementioned retransmission consent dispute, and the sale during the period of cable systems serving on a net basis 3,000 basic subscribers. Digital customers grew by 27,000 during the three months ended March 31, 2008, as compared to an increase of 2,000 in the prior year period. As of March 31, 2008, 31.0% of digital customers received DVR and/or HDTV services, as compared to 22.6% at the end of the prior year period.
HSD revenues rose 17.3%, primarily due to a 14.7% year-over-year increase in HSD customers. During the three months ended March 31, 2008, HSD customers grew by 30,000, as compared to a gain of 22,000 in the prior year period. Phone revenues grew 69.3%, mainly due to a 65.9% year-over-year increase in phone customers. During the three months ended March 31, 2008, phone customers grew by 19,000, as compared to a gain of 18,000 in the prior year period. As of March 31, 2008, our phone service, which we refer to as "Mediacom Phone," was marketed to nearly 90% of our estimated 2.84 million homes passed.

Advertising revenues were lower by 2.8%, largely as a result of an overall reduction in national advertising, offset in part by an increase in both national and local political advertising. Costs and Expenses
Significant service costs include: programming expenses; employee expenses related to wages and salaries of technical personnel who maintain our cable network, perform customer installation activities and provide customer support; HSD costs, including costs of bandwidth connectivity and customer provisioning; and field operating costs, including outside contractors, vehicle, utilities and pole rental expenses. Video programming costs, which are generally paid on a per subscriber basis, represent our largest single expense and 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. These costs are expected to continue to grow principally because of contractual unit rate increases and the increasing demands of television broadcast station owners for retransmission consent fees. As a consequence, it is expected that our video gross margins will decline as increases in programming costs outpace growth in video revenues.
Service costs rose 6.2%, primarily due to increases in programming, phone and field operating expenses, offset in part by lower HSD costs. Programming expenses grew by 6.3%, principally as a result of higher contractual rates charged by our programming vendors, offset in part by a lower number of basic subscribers. The cost of our phone service rose 60.1%, mainly due to the growth in phone customers. Field operating expenses grew by 17.6%, primarily due to increased pole rental and vehicle fuel costs, offset in part by non-recurring expenses in the prior year period relating to the retransmission consent dispute noted above. HSD expenses decreased by 22.3% due to a reduction in delivery costs, offset in part by customer growth. Service costs as a percentage of revenues were 41.4% and 43.0% for the three months ended March 31, 2008 and 2007, respectively.
Significant selling, general and administrative expenses include: wages and salaries for our call centers, customer service and support and administrative personnel; franchise fees and taxes; marketing; bad debt; billing; advertising; and office costs related to telecommunications and office administration. Selling, general and administrative expenses rose 7.0%, principally due to higher marketing costs and, to a lesser extent, billing expenses and employee costs related to customer service, offset in part by a decrease in call center telecommunications charges. Marketing costs grew by 26.5%, primarily due to more frequent direct mailing campaigns, higher levels of marketing personnel and commissions and a greater use of third-party sales support. Billing expenses grew 10.8%, principally due to higher processing fees. Employee costs related to customer service rose 6.9%, principally due to increases in employee salaries, benefits and commissions. Telecommunications costs fell 19.0%, due to more favorable rates and lower call volumes at our call centers. Selling, general and administrative expenses as a percentage of revenues were 19.7% and 20.3% for the three months ended March 31, 2008 and 2007, respectively.
Corporate expenses reflect compensation of corporate employees and other corporate overhead. Corporate expenses rose 13.9%, primarily due to an increase in compensation. Corporate expenses as a percentage of revenues were 2.3% and 2.2% for the three months ended March 31, 2008 and 2007, respectively. Depreciation and amortization rose 11.2%, primarily due to increased deployment of shorter-lived customer premise equipment and scalable infrastructure components.
Adjusted OIBDA
Adjusted OIBDA increased by 17.1%, due to growth in video, HSD and, to a lesser extent, phone revenues, offset in part by higher service costs and selling, general and administrative expenses.
Operating Income
Operating income grew 23.5%, due to the increase in Adjusted OIBDA, offset in part by higher depreciation and amortization. Interest Expense, Net
Interest expense, net, decreased by 7.5%, primarily due to lower market interest rates on variable rate debt, offset in part by higher average indebtedness.

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, 2008, we had interest rate swaps with an aggregate notional amount of $1.1 billion. The changes in their mark-to-market values are derived primarily from changes in market interest rates, the decrease in their time to maturity and the creditworthiness of the counterparties. These swaps have not been designated as hedges for accounting purposes. As a result of the quarterly mark-to-market valuation of these interest rate swaps, we recorded losses on derivatives amounting to $24.1 million and $4.4 million, based upon information provided by our counterparties, for the three months ended March 31, 2008 and 2007, respectively.
Gain on Sale of Cable Systems
During the three months ended March 31, 2007, we sold a cable system for $22.9 million and recorded a gain on sale of $10.8 million. Provision for Income Taxes
Provision for income taxes was $14.6 million, as compared to a provision for income taxes of $13.9 million for the three months ended March 31, 2007. These provisions for income taxes for the three months ended March 31, 2008 and 2007 resulted from non-cash charges related to our deferred tax asset positions. See Note 9 of our Notes to Consolidated Financial Statements. Net Loss
As a result of the factors described above, we recognized a net loss of $30.6 million for the three months ended March 31, 2008 compared to a net loss of $16.9 million for the prior year period. Liquidity and Capital Resources
Overview
We have invested, and will continue to invest, in our network to enhance our reliability and capacity and the further deployment of advanced broadband services. Our capital spending has recently shifted from mainly network upgrade investments to the deployment of advanced services, and we also may continue to make strategic acquisitions of cable systems. We have a high level of indebtedness and incur significant amounts of interest expense each year. We believe that we will meet interest expense and principal payments (also referred to as debt service), capital spending and other 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 is 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.
As of March 31, 2008, our total debt was $3,230.4 million. Of this amount, $101.1 million matures within the year ending March 31, 2009. During the three months ended March 31, 2008, we paid cash interest of $58.0 million, net of capitalized interest. As of March 31, 2008, about 69% of our outstanding indebtedness was at fixed interest rates or subject to interest rate protection. Bank Credit Facilities
Our principal operating subsidiaries maintain in aggregate $2.77 billion in bank credit facilities, of which $2,105.4 million was outstanding as of March 31, 2008. 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, principally the requirement that we maintain a maximum ratio of total senior debt to cash flow, as detailed in our credit agreements, of 6.0 to 1.0. The average interest rates on outstanding debt under our bank credit facilities as of March 31, 2008 and 2007, were 4.5% and 7.1%, respectively, before giving effect to the interest rate exchange agreements discussed below. As of March 31, 2008, we had unused credit commitments of $602.3 million under our bank credit facilities, all of which could be borrowed and used for general corporate purposes based on the terms and conditions of our debt arrangements.
As of March 31, 2008, approximately $23.9 million of letters of credit were issued under our bank credit facilities to various parties as collateral for our performance relating to insurance and franchise requirements.

Interest Rate Exchange Agreements
As of March 31, 2008, we had entered into interest rate swaps with counterparties to hedge $1.1 billion of floating rate debt at a weighted average fixed rate of 5.0%. These swaps are scheduled to expire in the amounts of $800.0 million, $200.0 and $100.0 million during the years ended December 31, 2009, 2010 and 2011, respectively, and have been accounted for on a mark-to-market basis as of, and for, the three months ended March 31, 2008. 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. However, due to the high creditworthiness of our counterparties, which are major banking firms with investment grade rankings, we do not anticipate their nonperformance.

The fair value of the interest rate swaps is the estimated amount that we would receive or pay to terminate such agreements, taking into account market interest rates, the remaining time to maturities and the creditworthiness of our counterparties. As of March 31, 2008 and December 31, 2007, based on the mark-to-market valuation, we recorded on our consolidated balance sheets a net accumulated liability for derivatives of $49.9 million and $25.8 million, respectively, of which $29.8 million and $0 was classified as current liabilities, respectively. The increase in the current portion of the net accumulated liability for derivatives since December 31, 2007 was driven primarily by a decline in expected interest rates.

Senior Notes
We have issued senior notes totaling $1.125 billion as of March 31, 2008. The indentures governing our senior notes also contain financial and other covenants, though they are generally less restrictive than those found in our bank credit facilities and do not require us to maintain any financial ratios. Principal covenants include a limitation on the incurrence of additional indebtedness based upon a maximum ratio of total indebtedness to cash flow, as defined in these debt agreements, ranging from 7.0 to 1.0 to 8.5 to 1.0. These agreements also contain limitations on dividends, investments and distributions. Covenant Compliance and Debt Ratings
For all periods through March 31, 2008, we were in compliance with all of the covenants under our bank credit facilities and senior note arrangements. There are no covenants, events of default, borrowing conditions or other terms in our bank credit facilities and senior note arrangements that are based on changes in our credit rating assigned by any rating agency. We believe that we will not have any difficulty complying with any of the applicable covenants in the foreseeable future.
Operating Activities
Net cash flows provided by operating activities were $51.5 million for the three months ended March 31, 2008, as compared to $39.2 million for the comparable period last year. This change of $12.3 million is primarily due to an $18.3 million increase in Adjusted OIBDA and, to a lesser extent, a $4.4 million decrease in interest expense, offset in part by the net change in our operating assets and liabilities.
During the three months ended March 31, 2008, the net change in our operating assets and liabilities was $19.0 million, principally due to a decrease in accounts payable, accrued expenses and other current liabilities of $28.2 million, offset in part by a decrease in accounts receivable, net, of $7.1 million, an increase in deferred revenue of $1.9 million and a decrease in prepaid expenses and other assets of $0.9 million. Investing Activities
Net cash flows used in investing activities, which consisted primarily of capital expenditures, were $64.0 million for the three months ended March 31, 2008, as compared to $34.2 million for the prior year period. This change of $29.8 million was due to proceeds received from the sale of cable systems, net of acquisitions, of $15.7 million in the prior year period and a $14.1 million increase in capital expenditures to $64.0 million, primarily due to higher spending on network performance related to customer growth in our HSD and phone services and customer premise equipment and related installation activities. Financing Activities
Net cash flows provided by financing activities were $15.0 million for the three months ended March 31, 2008, as compared to net cash flows used in financing activities of $17.5 million for the comparable period last year. This change of $32.5 million is principally due to net bank financing of $15.3 million and other financing activities of $13.0 million, which funded repurchases of our Class A common stock totaling $12.9 million in the three months ended March 31, 2008.

Contractual Obligations and Commercial Commitments There have been no material changes to our contractual obligations and commercial commitments as previously disclosed in our annual report on Form 10-K for the year ended December 31, 2007.
Critical Accounting Policies
The preparation of our 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 requires significant judgments and estimates on the part of management. For a summary of our critical accounting policies, please refer to our annual report on Form 10-K for the year ended December 31, 2007. 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.