Mediacom Raises Free Cash Flow Guidance

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Mediacom Communications increased free cash flow in the second quarter by more than five times, prompting the small market MSO to raise its guidance on the metric for the full year.

Mediacom said free cash flow for the second quarter was $31.1 million (46 cents per share), a 480% increase over the $5.4 million (5.6 cents per share) generated in the same period of 2008.

Over the first six months of the year, Mediacom generated more than $62 million in free cash flow (84 cents per share) well on its way to its previous goal of $1 per share. As a result, Mediacom increased its free cash flow guidance for the year by 30% to $1.30 per share.
Mediacom said that it has been using its increased free cash flow to pay down debt, dropping its leverage ratio to 6 times cash flow, its lowest point since 2000. The reduction came despite assuming an additional $110 million in debt to finance the purchase of 28.3 million shares from former partner Morris Communications.

For the quarter, revenue grew 6% to $364.5 million and adjusted operating income before depreciation and amortization rose 6.6% to $136.8 million. Basic customers declined by about 15,000 for the period. Mediacom added 8,000 digital subscribers, 6,000 high-speed data subscribers and 8,000 telephony customers in the period.
Although the company said the sluggish national economy caught up to them in the period -- revenue generating unit growth was weak at 7,000 for the quarter -- chairman and CEO Rocco Commisso was cautiously optimistic for the future.
"We are confident that we will show resilience in the slumping economy," Commisso said on a conference call with analysts Friday. "But until we see real signs of a recovery, we remain cautious about the second half of the year."

Investor seemed pleased with the results, driving up Mediacom's stock price by 79 cents each (15.5%) in early trading Friday to $5.90 per share.

Commisso said on the call that beginning in September, Mediacom will increase download speeds by 50% for its high-speed Internet product from 8 megabits per second to 12 Mbps and double upload speeds to 1 Mbps. For its higher-end VIP Extra high-speed data service, download speeds will also rise 50% from 10 Mbps to 15 Mbps.

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