<PAGE>
FORM 10-Q
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1994
-------------------------------------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
----------------- ----------------
Commission File Number: 1-9046
----------------------
Cablevision Systems Corporation
---------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 11-2776686
- - - ------------------------------- -----------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
One Media Crossways, Woodbury, New York 11797
- - - --------------------------------------- -------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (516) 364-8450
-----------------
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 X No
----- -----
Number of shares of common stock outstanding as of May 1, 1994:
Class A Common Stock - 10,939,826
Class B Common Stock - 12,411,532
- - - --------------------------------------------------------------------------------
- - - --------------------------------------------------------------------------------
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
CABLEVISION SYSTEMS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1994 AND 1993
(Dollars in thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
1994 1993
---- ----
<S> <C> <C>
Revenues-net . . . . . . . . . . . . . . . . . $ 176,087 $ 157,023
--------- ---------
Operating expenses:
Technical. . . . . . . . . . . . . . . . . . 66,036 57,503
Selling, general and
administrative . . . . . . . . . . . . . . 29,819 35,763
Restructuring charge . . . . . . . . . . . . 4,306 -
Depreciation and amortization. . . . . . . . 54,773 46,584
--------- ---------
154,934 139,850
--------- ---------
Operating profit . . . . . . . . . . . . 21,153 17,173
--------- ---------
Other income (expense):
Interest expense . . . . . . . . . . . . . . (58,668) (54,977)
Interest income. . . . . . . . . . . . . . . 221 347
Share of affiliates' net losses. . . . . . . (17,282) (18,712)
Loss on sale of programming interests, net . - (330)
Provision for preferential payment to
related party. . . . . . . . . . . . . . . (1,400) (1,400)
Minority interest. . . . . . . . . . . . . . - 3,000
Miscellaneous. . . . . . . . . . . . . . . . (1,151) (790)
--------- ---------
(78,280) (72,862)
--------- ---------
Net loss . . . . . . . . . . . . . . . . . . . (57,127) (55,689)
Dividend requirements applicable to preferred
stocks . . . . . . . . . . . . . . . . . . . (221) (221)
--------- ---------
Net loss applicable to common
shareholders . . . . . . . . . . . . . . . . $ (57,348) $ (55,910)
--------- ---------
--------- ---------
Net loss per common share. . . . . . . . . . . $ (2.46) $ (2.46)
--------- ---------
--------- ---------
Average number of common shares
outstanding (in thousands) . . . . . . . . . 23,277 22,700
--------- ---------
--------- ---------
</TABLE>
See accompanying notes to
consolidated financial statements.
(2)
<PAGE>
CABLEVISION SYSTEMS CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
<TABLE>
<CAPTION>
March 31, December 31,
--------- ------------
1994 1993
---- ----
(Unaudited)
ASSETS
<S> <C> <C>
Cash and cash equivalents. . . . . . . . . . . . . $ 31,594 $ 12,944
Marketable securities. . . . . . . . . . . . . . . 835 835
Accounts receivable, trade (less allowance for
doubtful accounts of $5,984 and $5,055). . . . . 44,234 49,211
Notes receivable, affiliates . . . . . . . . . . . 2,679 2,858
Notes and other receivables. . . . . . . . . . . . 11,129 8,730
Prepaid expenses . . . . . . . . . . . . . . . . . 7,292 6,236
Property, plant and equipment, net . . . . . . . . 704,149 643,499
Investments in affiliates. . . . . . . . . . . . . 21,687 27,574
Advances to affiliates . . . . . . . . . . . . . . 36,782 38,157
Acquisition related costs and deposits . . . . . . 13,587 16,737
Other investments, at cost . . . . . . . . . . . . 1,266 1,971
Subscriber lists, net of accumulated amortization of
$246,076 and $237,456. . . . . . . . . . . . . . 31,179 39,799
Franchises, net of accumulated amortization of
$191,727 and $183,599. . . . . . . . . . . . . . 123,245 131,362
Excess cost over fair value of net assets acquired
and other intangible assets, net of accumulated
amortization of $181,043 and $174,211. . . . . . 314,438 221,790
Deferred financing, acquisition and other costs,
net of accumulated amortization of
$22,372 and $20,780. . . . . . . . . . . . . . . 50,756 51,550
Deferred interest expense, net of accumulated
amortization of $17,559 and $14,047. . . . . . . 52,679 56,191
---------- ----------
$1,447,531 $1,309,444
---------- ----------
---------- ----------
</TABLE>
See accompanying notes to
consolidated financial statements.
(3)
<PAGE>
CABLEVISION SYSTEMS CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
<TABLE>
<CAPTION>
March 31, December 31,
--------- ------------
1994 1993
---- ----
(Unaudited)
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
<S> <C> <C>
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . $ 99,284 $ 100,017
Accrued liabilities:
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . 40,637 29,172
Payroll and related benefits . . . . . . . . . . . . . . . . . 24,362 27,068
Franchise fees . . . . . . . . . . . . . . . . . . . . . . . . 12,564 18,809
Litigation settlement and related matters. . . . . . . . . . . 4,227 4,227
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70,160 73,902
Accounts payable to affiliates . . . . . . . . . . . . . . . . . 18,206 16,236
Bank debt. . . . . . . . . . . . . . . . . . . . . . . . . . . . 545,963 480,079
Senior debt. . . . . . . . . . . . . . . . . . . . . . . . . . . 837,983 832,866
Senior subordinated debentures . . . . . . . . . . . . . . . . . 822,817 822,781
Obligation to related party. . . . . . . . . . . . . . . . . . . 87,401 91,619
Capital lease obligations and other debt . . . . . . . . . . . . 22,808 8,154
---------- ----------
Total liabilities. . . . . . . . . . . . . . . . . . . . . . . 2,586,412 2,504,930
---------- ----------
Deficit investment in affiliate. . . . . . . . . . . . . . . . . 321,558 307,758
---------- ----------
Commitments and contingencies
Stockholders' deficiency:
8% Series C Cumulative Preferred Stock, $.01 par value,
112,500 shares authorized, 110,622 shares issued
($100 per share liquidation preference). . . . . . . . . . . 1 1
8% Series D Cumulative Preferred Stock, $.01 par value,
112,500 shares authorized, none issued ($100 per
share liquidation preference). . . . . . . . . . . . . . . . - -
Series E Redeemable Exchangeable Convertible Preferred
Stock, $.01 par value, 100,000 shares authorized and
issued ($1,000 per share liquidation preference) . . . . . . 1 -
Class A Common Stock, $.01 par value, 50,000,000 shares
authorized, 10,912,922 and 10,853,607 shares issued. . . . . 109 108
Class B Common Stock, $.01 par value, 20,000,000 shares
authorized, 12,411,532 shares issued . . . . . . . . . . . . 124 124
Par value less than (in excess of) capital contributed . . . . 20,117 (80,255)
Accumulated deficit. . . . . . . . . . . . . . . . . . . . . . (1,477,554) (1,419,985)
---------- ----------
(1,457,202) (1,500,007)
Less treasury stock, at cost (50,000 shares) . . . . . . . . . (3,237) (3,237)
---------- ----------
Total stockholders' deficiency . . . . . . . . . . . . . . . . (1,460,439) (1,503,244)
---------- ----------
$ 1,447,531 $ 1,309,444
---------- ----------
---------- ----------
</TABLE>
See accompanying notes to
consolidated financial statements.
(4)
<PAGE>
CABLEVISION SYSTEMS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 1994 AND 1993
(Dollars in thousands)
(Unaudited)
<TABLE>
<CAPTION>
1994 1993
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net loss. . . . .. . . . . . . . . . . . . . . . . . . . . . . $ (57,127) $ (55,689)
--------- ---------
Adjustments to reconcile net loss to net cash provided
by operating activities:
Depreciation and amortization. . . . . . . . . . . . . . . 54,773 46,584
Share of affiliates' net losses. . . . . . . . . . . . . . 17,282 18,712
Amortization of deferred financing . . . . . . . . . . . . 1,040 794
Amortization of deferred interest. . . . . . . . . . . . . 3,512 3,512
Amortization of debenture discount . . . . . . . . . . . . 36 26
Accretion of interest on debt. . . . . . . . . . . . . . . 8,617 7,791
Loss on sale of programming interests, net . . . . . . . . - 330
Loss on sale of plant and equipment. . . . . . . . . . . . 753 183
Changes in assets and liabilities net of effects
of acquisition:
Decrease in accounts receivable trade. . . . . . . . . 6,069 880
Decrease in notes receivable, affiliates . . . . . . . 179 277
Decrease (increase) in notes and other
receivables. . . . . . . . . . . . . . . . . . . . . (1,269) 2,906
Increase in prepaid expenses . . . . . . . . . . . . . (903) (12)
Decrease (increase) in advances to affiliates. . . . . 350 (2,307)
Decrease in accounts payable . . . . . . . . . . . . . (7,842) (4,457)
Increase in accrued interest . . . . . . . . . . . . . 11,143 14,231
Decrease in accrued payroll and related benefits . . . (2,722) (577)
Decrease in accrued franchise fees . . . . . . . . . . (6,245) (1,906)
Decrease in accrued obligation, Olympics
venture . . . . . . . . . . . . . . . . . . . . . . - (50,000)
Increase (decrease) in accrued liabilities, other. . . (6,290) 1,363
Increase in accounts payable to affiliates . . . . . . 1,970 3,480
--------- ---------
Total adjustments. . . . . . . . . . . . . . . . . . 80,453 41,810
--------- ---------
Net cash provided by (used in) operating activities. . . . . 23,326 (13,879)
--------- ---------
</TABLE>
See accompanying notes
to consolidated financial statements.
(5)
<PAGE>
CABLEVISION SYSTEMS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 1994 AND 1993
(Dollars in thousands)
(Unaudited)
continued
<TABLE>
<CAPTION>
1994 1993
---- ----
<S> <C> <C>
Cash flows from investing activities:
Capital expenditures . . . . . . . . . . . . . . . . . . . . . $ (66,026) $ (34,804)
Proceeds from sale of plant and equipment. . . . . . . . . . . 620 240
Additions to intangible assets . . . . . . . . . . . . . . . . (11) -
Increase in acquisition related costs and deposits . . . . . . (63) -
Proceeds from sale of programming interests. . . . . . . . . . - 543
Decrease (increase) in investments in affiliates . . . . . . . 2,351 (1,509)
Decrease in other investments. . . . . . . . . . . . . . . . . 705 490
Payments for acquisition, net of cash acquired . . . . . . . . (98,911) -
--------- ---------
Net cash used in investing activities. . . . . . . . . . . . (161,335) (35,040)
--------- ---------
Cash flows from financing activities:
Proceeds from bank debt. . . . . . . . . . . . . . . . . . . . 174,463 101,408
Repayment of bank debt . . . . . . . . . . . . . . . . . . . . (108,579) (240,535)
Proceeds from senior debt. . . . . . . . . . . . . . . . . . . 2,500 4,000
Repayment of senior debt . . . . . . . . . . . . . . . . . . . (6,000) (4,000)
Issuance of senior subordinated debentures . . . . . . . . . . - 198,750
Preferred stock dividends. . . . . . . . . . . . . . . . . . . (442) (442)
Issuance of Redeemable Exchangeable Convertible
Preferred Stock. . . . . . . . . . . . . . . . . . . . . . . 100,000 -
Issuance of common stock . . . . . . . . . . . . . . . . . . . 374 2,553
Increase (decrease) in obligation to related party . . . . . . (4,218) 1,400
Payments of capital lease obligations and other debt . . . . . (641) (822)
Reduction of minority interest . . . . . . . . . . . . . . . . - (3,000)
Additions to deferred financing and other costs. . . . . . . . (798) (5,931)
--------- ---------
Net cash provided by financing activities. . . . . . . . . . 156,659 53,381
--------- ---------
Net increase in cash and cash equivalents. . . . . . . . . . . . 18,650 4,462
Cash and cash equivalents at beginning of year . . . . . . . . . 12,944 2,721
--------- ---------
Cash and cash equivalents at end of period . . . . . . . . . . . $ 31,594 $ 7,183
--------- ---------
--------- ---------
</TABLE>
See accompanying notes
to consolidated financial statements.
(6)
<PAGE>
CABLEVISION SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands)
(Unaudited)
Note 1. BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements of Cablevision
Systems Corporation and its majority owned subsidiaries (the "Company") have
been prepared in accordance with the rules and regulations of the Securities and
Exchange Commission. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted.
Note 2. RESPONSIBILITY FOR INTERIM FINANCIAL STATEMENTS
The financial statements as of March 31, 1994 and for the three month period
ended March 31, 1994 and 1993 are unaudited; however, in the opinion of
management, such statements include all adjustments, consisting solely of normal
recurring adjustments, necessary for a fair presentation of the results for the
periods presented.
The interim financial statements should be read in conjunction with the
financial statements and notes thereto included in the Company's Annual Report
on Form 10-K for the fiscal year ended December 31, 1993.
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, 1994.
Note 3. LOSS PER COMMON SHARE
Net loss per common share is computed based on the weighted average number of
common shares outstanding. Common stock equivalents were not included in the
computation as their effect would be to decrease net loss per share.
Note 4. CASH FLOWS
For purposes of the consolidated statements of cash flows, the Company considers
short-term investments with a maturity at date of purchase of three months or
less to be cash equivalents. The Company paid cash interest expense of
approximately
(7)
<PAGE>
CABLEVISION SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands)
(Unaudited)
Note 4. CASH FLOWS (continued)
$33,998 and $28,623 for the three months ended March 31, 1994 and 1993,
respectively. For the same periods, the Company's noncash financing activities
included capital lease obligations of $22 and $64, respectively, incurred when
the Company entered into leases for new equipment.
Note 5. RECENT DEVELOPMENTS
On March 11, 1994, Cablevision of Cleveland, L.P. ("Cablevision Cleveland"), a
partnership comprised of subsidiaries of the Company, purchased substantially
all of the assets and assumed certain liabilities of North Coast Cable Limited
Partnership, which operates a cable television system in Cleveland, Ohio. The
net cash purchase price for interests not previously owned by the Company (and
excluding excess liabilities assumed by the Company) aggregated $104,000
including expenses. The cost of the acquisition was financed principally by
borrowings under the Company's Credit Agreement, as hereinafter defined.
Cablevision Cleveland is part of the Restricted Group.
The acquisition was accounted for as a purchase. The excess of the purchase
price over the book value of the net assets acquired approximates $99,500 and
will be allocated to the specific assets acquired when independent appraisals
are completed. For purposes of these unaudited financial statements, the excess
purchase price has been amortized over a period of 10 years.
On March 31, 1994, the Company issued 100,000 shares of a new series of
preferred stock (the "Preferred Shares") to Toronto-Dominion Investments, Inc.
in a private transaction. The Preferred Shares were sold for a purchase price
of $1,000 per share and carry a liquidation preference of a like amount plus
accrued and unpaid dividends. Dividends accrue at a floating rate of LIBOR plus
2.5 percent and are payable, at the Company's option, either in cash or in
registered shares of Class A common stock with a value equalling 105 percent of
the required dividend. Additional dividend payments may be required with
respect to the availability of the dividend received deduction. The Preferred
Shares are redeemable at any time at the option of the Company at par plus
accrued and unpaid dividends to the redemption date and are convertible after
March 31, 1995 into Class A common stock, at the option of the holder, at a
conversion rate based on 95 percent of the average closing price of the Class A
Common Stock for the twenty business days prior to conversion. Additionally,
the
(8)
<PAGE>
CABLEVISION SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands)
(Unaudited)
Note 5. RECENT DEVELOPMENTS (continued)
holders of the Preferred Shares have the right to convert their shares in
connection with certain change in control transactions (regardless of when they
occur) into a number of shares of Class A Common Stock which would yield
$100,000 based upon an auction process involving the Class A Common Stock
issuable on such conversion or, at the holder's election, at a conversion rate
based on 95 percent of the average closing price of the Class A Common Stock for
the twenty business days prior to conversion. The Company has the right to
suspend the conversion of the Preferred Shares from March 31, 1995 through
March 31, 1997 as long as it is in compliance with its Restricted Group
financial covenants and is current in dividend payments on the Preferred Shares.
The Preferred Shares are not transferrable except with the Company's consent,
not to be unreasonably withheld. The Preferred Shares are exchangeable, at the
option of the holder, into a separate series of preferred stock with terms
substantially identical to the Preferred Shares, except that such series (i) are
not convertible into common stock or exchangeable for any other class of
securities, and (ii) are freely transferable. The Company has granted
registration rights with respect to the common stock issuable upon a conversion
of the Preferred Shares and with respect to the series of preferred stock into
which the Preferred Shares are exchangeable. Also, if the Company completes an
offering on non-convertible, non-exchangeable shares of preferred stock,
Preferred Shares, if not previously exchanged or converted, also may be
converted into a new series of preferred stock having terms identical to or
based upon the other series issued by the Company.
The Preferred Shares do not have voting rights, other than as required by law,
except that (i) the vote of 60% of such shares is necessary to authorize the
issuance of capital stock ranking senior to the Preferred Shares, or certain
mergers or consolidations, in each case unless provision is made to redeem the
Preferred Stock; (ii) if the Company misses four consecutive quarterly dividends
in the Preferred Stock or in the event that certain covenants are breached, the
holders of the Preferred Stock have the right to cause an increase in the size
of the Company's Board of Directors and to elect one director during the
continuation of such default in dividend payments or covenant breach. The
Company also has the right to require conversion by the holders of the Preferred
Shares in certain circumstances.
(9)
<PAGE>
CABLEVISION SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands)
(Unaudited)
Note 6. INCOME TAXES
Effective January 1, 1993, the Company adopted the provisions of Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS
109"), which requires the liability method of accounting for deferred income
taxes and permits the recognition of deferred tax assets, subject to an ongoing
assessment of realizability. Adoption of SFAS 109 had no material impact on the
operations of the Company.
The tax effects of temporary differences resulting in a net deferred tax asset
and the corresponding valuation allowance at March 31, 1994 amounted to
approximately $437,193.
The Company has provided a valuation allowance for the total amount of the net
deferred tax assets since realization of these assets was not assured due
principally to the Company's history of operating losses. The amounts of net
deferred tax assets and corresponding valuation allowance increased by $21,847
during the three month period ended March 31, 1994. Also, in connection with
acquisitions made prior to 1993, the Company recorded certain fair value
adjustments net of their tax effects.
Note 7. RESTRUCTURING CHARGE
The Company recorded a one time charge of $4,306 in the three month period ended
March 31, 1994 to provide for severance and other costs incurred related to a
restructuring of its operations. This restructuring was undertaken in response
to recent Federal Communications Commission mandated rate reductions in
substantially all of the Company's cable television systems.
(10)
<PAGE>
CABLEVISION SYSTEMS CORPORATION
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
RESULTS OF OPERATIONS
RECENT CABLE TELEVISION REGULATIONS
The Company is still in the process of analyzing the recently released FCC rate
regulations and assessing the impact of such regulations on its operations.
Based on its preliminary analysis, however, the Company believes that this most
recent round of rate regulations will result in a regulated revenue decrease of
approximately 5%, or less than 3% of total revenues. The Company estimates from
its preliminary analysis that the revenue reduction will result in an
approximate 5% decrease in operating cash flow (operating profit before
depreciation and amortization). In addition, the Company is exploring its
options regarding cost of service showings in several of its cable television
systems to further mitigate this potential decrease.
In connection with the implementation of its revised rate structure resulting
from the initial FCC rate regulation, the Company introduced a number of
measures, including the provision of alternate service offerings and repackaging
of certain services in order to mitigate the negative impact of FCC regulation
on the Company's rate structure. Following the latest FCC rate regulation, the
Company intends to introduce additional marketing measures. The Company is not
able to predict fully the extent of the effect any of such measures will have in
mitigating the impact of rate regulation.
The following table details the Company's results of operations for individual
income statement line items as a percentage of net revenues for each of the
periods presented, and shows the (increase) or decrease in net loss attributable
to the change in that line item.
(11)
<PAGE>
CABLEVISION SYSTEMS CORPORATION
<TABLE>
<CAPTION>
Three Months Ended March 31,
--------------------------------------------------
1994 1993
---------------------- ----------------------- (Increase)
% of Net % of Net Decrease
Amount Revenues Amount Revenues in Net loss
------ -------- ------ -------- -----------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
Net revenues . . . . . . . . . . . . $ 176,087 100% $ 157,023 100% $ 19,064
Operating expenses:
Technical. . . . . . . . . . . . . 66,036 38 57,503 37 (8,533)
Selling, general &
administrative . . . . . . . . . 29,819 17 35,763 23 5,944
Restructuring charge . . . . . . . 4,306 2 - - (4,306)
--------- --------- ---------
Operating cash flow. . . . . . . . . 75,926 43 63,757 41 12,169
Depreciation and
amortization . . . . . . . . . . . 54,773 31 46,584 30 (8,189)
--------- --------- ---------
Operating profit . . . . . . . . . . 21,153 12 17,173 11 3,980
Other income (expense):
Interest expense, net. . . . . . . (58,447) (33) (54,630) (35) (3,817)
Share of affiliates' net loss. . . (17,282) (10) (18,712) (12) 1,430
Provision for preferential
payment to related party . . . . (1,400) (1) (1,400) (1) -
Loss on sale of programming
interests, net . . . . . . . . . - - (330) - 330
Minority interest. . . . . . . . . - - 3,000 2 (3,000)
Miscellaneous, net . . . . . . . . (1,151) (1) (790) (1) (361)
--------- --------- ---------
Net loss . . . . . . . . . . . . . . $ (57,127) (32)% $ (55,689) (35)% $ (1,438)
--------- --------- ---------
--------- --------- ---------
Currently payable interest
expense. . . . . . . . . . . . . . $ 45,463 26 % $ 42,854 27 %
--------- ---------
--------- ---------
</TABLE>
(12)
<PAGE>
CABLEVISION SYSTEMS CORPORATION
NET REVENUES for the three months ended March 31, 1994 increased by
approximately $19.1 million (12%) over the corresponding 1993 period. Growth in
the average number of subscribers (up 115,900 or 9%) during the first quarter of
1994 contributed $13.2 million (8%) of the increase. Increases in other
revenues, consisting of pay-per-view, installation advertising and other, offset
partially by a decrease in average revenue per subscriber (attributable to FCC
rate adjustments mentioned above) amounted to $3.9 million (3%). The remaining
increase of $2.0 million (1%) was attributable to the North Coast Cable
acquisition.
TECHNICAL EXPENSES increased $8.5 million (15%) for the three months ended
March 31, 1994 as compared to the same period in 1993 primarily from increased
costs directly associated with the growth in revenues mentioned above. As a
percentage of revenues, such expenses increased 1% in the 1994 period compared
to 1993.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES decreased $5.9 million (17%) for
the three months ended March 31, 1994 compared to the same period in 1993. The
decrease comprises the reversal of $8.8 million in charges in the 1994 period
related to an incentive stock plan, reflecting the decrease in the market price
of the Company's Class A Common Stock from $67-7/8 at December 31, 1993 to $53-
7/8 at March 31, 1994. $3.2 million related to this plan had been expensed in
the 1993 period. Excluding the effects of the incentive stock plan expense and
subsequent adjustment, selling, general and administrative expenses would have
increased by $6.0 million (18%) attributable to general cost increases,
including higher customer service, sales and marketing costs (a portion of which
relates to compliance with FCC rate regulation). As a percentage of revenues,
excluding the incentive stock plan expense and related adjustments referred to
above, selling, general and administrative expenses would have increased 1% in
the 1994 period compared to the same 1993 period.
RESTRUCTURING CHARGE The Company recorded a one time charge of $4.3 million in
the three month period ended March 31, 1994 to provide for severance and other
costs incurred as part of a restructuring of its operations which was undertaken
in response to recent FCC mandated rate reductions in substantially all of its
cable television systems.
OPERATING CASH FLOW, excluding the effects of the restructuring charge and the
incentive stock plan expense and related adjustments in each of the periods
presented, discussed above, increased $4.5 million (7%), to $71.4 million from
$66.9 million, for the three months ended March 31, 1994 as compared to the same
period in 1993 as the combined result of the revenue and expense increases
discussed above.
(13)
<PAGE>
CABLEVISION SYSTEMS CORPORATION
DEPRECIATION AND AMORTIZATION EXPENSE increased $8.2 million (18%) for the three
months ended March 31, 1994 as compared to the same 1993 period as a result of
increased depreciation charges on capital expenditures made during 1994 and
1993, offset to some extent by decreased depreciation charges on assets which
became fully depreciated during the periods.
NET INTEREST EXPENSE increased $3.8 million (7%) during the three months ended
March 31, 1994 as compared to the corresponding 1993 period. The increase
resulted from the net effect of the Company's issuances of senior subordinated
debentures, the proceeds of which were used to repay bank debt which bore lower
average rates than the debentures.
SHARE OF AFFILIATES' NET LOSSES for the three months ended March 31, 1994
decreased $1.4 million (8%), from $(18,712) in 1993 to $(17,282) in 1994. Such
amounts consist primarily of the Company's share in the net loss of A-R Cable
Services, Inc. ("A-R Cable") and in the net income or loss of certain
programming businesses in which the Company has varying ownership interests.
PROVISION FOR PREFERENTIAL PAYMENT TO RELATED PARTY for both periods consists of
the expensing of the proportionate amount due with respect to an annual payment
($5.6 million) in connection with the acquisition of Cablevision of New York
City ("CNYC") in 1992.
MINORITY INTEREST in 1993 represents U.S. Cable Television Group, L.P.'s ("U.S.
Cable") share of losses in a subsidiary ("VC Holding") of V Cable, Inc. ("V
Cable"), limited to its $3.0 million investment. At December 31, 1992, as part
of a restructuring and reorganization involving the Company's unrestricted
subsidiary V Cable, U.S. Cable acquired a 19% interest in VC Holding for $3.0
million.
LIQUIDITY AND CAPITAL RESOURCES
For financing purposes, the Company is structured as the Restricted Group,
consisting of Cablevision Systems Corporation and certain of its subsidiaries
and an unrestricted group of certain subsidiaries which includes V Cable
(including VC Holding), CNYC, Rainbow Programming Holdings, Inc. ("Rainbow
Programming"), CV Radio Associates ("WKNR") and Rainbow Advertising Sales
Corporation ("Rainbow Advertising"). The Restricted Group, V Cable and CNYC are
individually and separately financed. To the extent necessary, equity funding
for CNYC will, however, be provided by the Restricted Group. Rainbow
Programming does not have external financing and its cash requirements have been
financed to date by the Restricted Group, although one of the programming
businesses in which Rainbow Programming invests has separate financing. WKNR
and Rainbow Advertising do not have external financing and have been financed to
date by the Restricted Group.
(14)
<PAGE>
CABLEVISION SYSTEMS CORPORATION
The following table presents selected historical results of operations and other
financial information related to the captioned groups or entities for the three
months ended March 31, 1994. (Rainbow Programming, Rainbow Advertising and WKNR
are included in "Other Unrestricted Subsidiaries".)
<TABLE>
<CAPTION>
Other Cablevision
Restricted Unrestricted Systems
Group V Cable CNYC Subsidiaries Corporation
---------- ------- ------ ------------ -----------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
Net revenues $101,809 $ 34,796 $ 32,135 $ 7,347 $ 176,087
Operating expenses:
Technical 36,568 13,530 15,033 905 66,036
Selling, general and
administrative 11,875 4,015 9,789 4,140 29,819
Restructuring charge 4,113 193 - - 4,306
Depreciation and
amortization 26,764 20,055 7,170 784 54,773
---------- ---------- ---------- ---------- ----------
Operating profit
(loss) $ 22,489 (1) $ (2,997) $ 143 (1) $ 1,518 $ 21,153
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
Currently payable
interest expense $ 31,942 $ 11,218 $ 2,297 $ 6 $ 45,463
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
Total interest expense $ 32,687 $ 23,312 $ 2,663 $ 6 $ 58,668
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
Senior debt $423,696 $838,038 $145,016 $ 4 $1,406,754
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
Subordinated debt $822,817 $ - $ - $ - $ 822,817
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
Obligation to related
party $ - $ - $ 87,401 (2) $ - $ 87,401
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
Deficit investment in
affiliate $321,558 $ - $ - $ - $ 321,558
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
Capital expenditures $ 41,171 $ 2,396 $ 22,248 $ 302 $ 66,026 (3)
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
<FN>
(1) Includes management fees from CNYC of $1,124, payment of which is
restricted under the CNYC Credit Agreement.
(2) Obligation of NYC LP Corp., a wholly-owned Unrestricted Group subsidiary,
relating to the CNYC Acquisition, which obligation has been guaranteed by
the Company.
(3) includes intercompany elimination of $91.
</TABLE>
(15)
<PAGE>
CABLEVISION SYSTEMS CORPORATION
At March 31, 1994, the Company's consolidated debt was $2,317.0 million
(excluding the Company's deficit investment in A-R Cable of $321.9 million), of
which $838.0 million represented V Cable's debt and $232.4 million represented
CNYC's debt including the $87.4 million obligation to a related party.
RESTRUCTURING
In the first quarter of 1994, the Company recorded a one-time charge of approx-
imately $4.3 million related to a reduction in manpower of 138 employees, or
approximately 4% of total employees in the Company's consolidated operations.
These costs will be paid by the Company during the remainder of 1994. The
Company anticipates savings of approximately $10 million during the remainder
of 1994 and $15 million in 1995 directly attributable to this manpower
reduction.
RESTRICTED Group
On March 31, 1994, the Company issued and sold 100,000 shares of a new series of
preferred stock to Toronto-Dominion Investments, Inc. in a private transaction.
The proceeds of $100.0 million were used to repay bank debt. For a further
description, see Note 5 "Recent Developments".
The Company is party to a credit facility with a group of banks led by
Toronto-Dominion (Texas) as agent, (the "Credit Agreement"). The maximum amount
available to the Restricted Group under the Credit Agreement is $688.8 million
with a final maturity at December 31, 2000. The facility consists of a $287.3
million term loan, which began amortizing on a scheduled quarterly basis on
December 31, 1993 with 68% being amortized by December 31, 1998 and a $401.5
million revolving loan with scheduled facility reductions starting on December
31, 1993 resulting in a 66.25% reduction by December 31, 1998. On May 5, 1994,
the Restricted Group had outstanding bank borrowings of $346.1 million. An
additional $18.4 million was reserved under the Credit Agreement for letters of
credit issued on behalf of the Company.
Unrestricted and undrawn funds available to the Restricted Group under the
Credit Agreement amounted to approximately $334.8 million at May 5, 1994. The
Credit Agreement contains certain financial covenants that may limit the
Restricted Group's ability to utilize all of the undrawn funds available
thereunder, including covenants requiring the Restricted Group to maintain
certain financial ratios and restricting the permitted uses of borrowed funds.
The amount outstanding under a separate credit agreement for the Company's New
Jersey subsidiary ("CNJ"), which is part of the Restricted Group, was $57.8
million as of May 5, 1994. The Company and CNJ are jointly and severally liable
for this debt. On March 31, 1993, the CNJ revolving facility converted to an
amortizing term loan.
(16)
<PAGE>
CABLEVISION SYSTEMS CORPORATION
The CNJ facility began amortizing on a scheduled quarterly basis on June 30,
1993 with 68.25% being amortized by December 31, 1998.
As of March 31, 1994 the Company had entered into interest exchange (swap)
agreements with several of its banks on a notional amount of $200.0 million, on
which its pays a fixed rate of interest and receives a variable rate of interest
for periods ranging from one to four years. The average effective annual
interest rate on all bank debt outstanding at March 31, 1994 was approximately
7.5%.
The Restricted Group made capital expenditures of approximately $41.2 million
during the first quarter of 1994, primarily in connection with system upgrades,
the expansion of existing cable plant to pass additional homes and other general
capital needs.
The cable systems located in New York State that are owned by the Restricted
Group and VC Holding are subject to agreements (the "New York Upgrade
Agreements") with the New York State Commission on Cable Television (the "New
York Cable Commission"). The New York Upgrade Agreement applicable to the
Restricted Group requires the substantial upgrade of its systems, ultimately to
a 77 channel capacity by 1995-1996, subject to certain minor exceptions. As
part of this planned upgrade of the Restricted Group's New York systems, the
Company expects to use fiber optic cable extensively in its trunk and
distribution networks. The Company believes that the remaining portion of the
upgrade as of December 31, 1993, will cost up to an additional $80.0 million
which would be spent during the period 1994 to 1996. In addition, the Company
anticipates upgrading certain of its New York systems beyond the level required
by the New York Upgrade Agreements along with upgrading certain other of its
Restricted Group systems. The Company anticipates that the capital costs of
these additional upgrades may be substantial.
In July 1992, the Company acquired substantially all of the remaining interests
in CNYC. CNYC is separately financed by a $185 million bank credit agreement.
Under an agreement with the City of New York, the Company undertook to make
aggregate equity contributions in Phases III, IV and V of CNYC of $71.0 million
or such lesser amount as the CNYC banks deem necessary. Recourse by the City
of New York with respect to such obligation is limited to remedies available
under the CNYC franchises. As of May 1, 1994, the Restricted Group had advanced
$48.2 million of equity to CNYC and had the ability to invest the balance of the
$71.0 million in CNYC. Under the CNYC purchase agreement, the Restricted Group
has guaranteed an annual payment to Charles F. Dolan, the chairman and chief
executive officer of the Company of $5.6 million (the "Annual Payment" as
defined) and a $40.0 million minimum payment (the "Minimum Payment", as
defined). The Minimum Payment can be made in either cash or stock at the
Company's option. Under its Credit Agreement, the Company is currently
prohibited from paying the Minimum Payment and any amounts in respect of the
Preferred Payment in cash.
(17)
<PAGE>
CABLEVISION SYSTEMS CORPORATION
The Company believes that, for the Restricted Group, and based upon a
preliminary analysis of the impact of the revised FCC rate regulations referred
to above, internally generated funds together with funds available under its
existing Credit Agreement will be sufficient through December 31, 1995 (i) to
meet its debt service requirements including its amortization requirements under
the Credit Agreement, (ii) to fund its normal capital expenditures, including
the required upgrades under the New York Upgrade Agreement, and (iii) to fund
its anticipated investments, including its $75 million investment in Rainbow
Programming in connection with Rainbow Programming's purchase of Liberty Media's
50% interest in American Movie Classics Company, the $5.6 million annual
payments to Charles Dolan in connection with the CNYC Acquisition and the equity
requirements in connection with the build out of the CNYC cable systems.
As a result of the new FCC rate regulations discussed above, the Company is re-
examining its plan to spin-off its programming operations to shareholders and is
reviewing the planned acquisition of Sutton Capital, which operates Cable
Television systems in Monmouth County, New Jersey and Framingham, Massachusetts.
Further acquisitions and other investments by the Company, if any, will be
funded by undrawn borrowing capacity and by possible increases in the amount
available under the Credit Agreement, additional borrowings from other sources,
and/or possible future sales of debt, equity or equity related securities.
The senior secured indebtedness incurred by A-R Cable and V Cable is guaranteed
by the Restricted Group, but recourse against the Restricted Group is limited
solely to the common stock of A-R Cable and of V Cable pledged to A-R Cable's
and V Cable's senior secured lenders, respectively.
Under the terms of its Credit Agreement, as amended, the Company is permitted to
make unspecified investments of up to $200 million, which include the Company's
planned investment in Rainbow Programming, in any remaining equity contributions
to CNYC and any equity contributions the Company may make to A-R Cable and
V Cable.
The terms of the instruments governing A-R Cable's and V Cable's indebtedness
prohibit transfer of funds (except for certain payments related to corporate
overhead allocations by A-R Cable and V Cable and pursuant to an income tax
allocation agreement with respect to V Cable) from A-R Cable and V Cable to the
Restricted Group and are expected to prohibit such transfer of funds for the
foreseeable future. Payments to the Restricted Group in respect of its
investments in and advances to Cablevision of Chicago and Cablevision of Boston
are also presently prohibited by the terms of those companies' applicable debt
instruments and are expected to be prohibited for the foreseeable future. The
Restricted Group does not expect that such limitations on transfer of funds or
payments will have an adverse effect on the ability of the Company to meet its
obligations.
(18)
<PAGE>
CABLEVISION SYSTEMS CORPORATION
V CABLE
The new long-term credit facilities extended by General Electric Capital
Corporation ("GECC") to V Cable and VC Holding in connection with the
reorganization of the Company's subsidiary, V Cable (the "V Cable
Reorganization"), refinanced all of V Cable's pre-existing debt on December 31,
1992. Under the credit agreement between V Cable and GECC (the "V Cable Credit
Agreement"), GECC has provided a term loan (the "V Cable Term Loan") in the
amount of $22.8 million, as of March 31, 1994, which loan accretes interest at a
rate of 10.62% compounded semi-annually until December 31, 1997 (the reset date)
and is payable in full on December 31, 2001. In addition, GECC has extended to
VC Holding a $505.0 million, as of September 30, 1993, term loan (the "Series A
Term Loan"), a $25 million revolving line of credit (the "Revolving Line") of
which $2.5 million was outstanding at March 31, 1994 and a $227.2 million, as of
March 31, 1994, term loan (the "Series B Term Loan") all three of which comprise
the VC Holding Credit Agreement. The Series A Term Loan and any amounts drawn
under the Revolving Line pay current cash interest and mature on December 31,
2001. The Series B Term Loan does not pay cash interest but rather accretes
interest at a rate of 10.62% compounded semi-annually until December 31, 1997
(the reset date) and is payable in full on December 31, 2001. On May 5, 1994 VC
Holding had amounts outstanding under the Revolving Line and had letters of
credit issued approximating $1.8 million. Accordingly, unrestricted and undrawn
funds under the VC Holding Revolving Line amounted to approximately $23.2
million on May 5, 1994.
The VC Holding Credit Agreement also provides for the assumption by VC Holding
of certain loans of U.S. Cable, the present value of which amounted to $80.5
million at March 31, 1994.
The outstanding principal amount of the V Cable Term Loan is payable in full,
with accreted interest, at maturity on December 31, 2001. VC Holding is
obligated to make principal payments on a portion of the Series A Term Loan
beginning on June 30, 1997 totalling $18 million, $20 million, $30 million, $40
million and $56 million for the years ending December 31, 1997, 1998, 1999, 2000
and 2001, respectively. The remaining balance of the Series A Term Loan, as
well as any amounts borrowed under the VC Holding Revolving Line, is due
December 31, 2001. In addition, VC Holding and V Cable are required to apply
all consolidated available cash flow (as defined), as well as the net proceeds
of any disposition of assets, to the reduction of the VC Holding Term Loans and
the V Cable Term Loan.
(19)
<PAGE>
CABLEVISION SYSTEMS CORPORATION
V Cable made capital expenditures of approximately $2.4 million during the first
quarter of 1994, primarily in connection with the expansion of existing cable
plant to pass additional homes and for system upgrades and other general capital
needs. The New York Upgrade Agreement applicable to V Cable requires the
substantial upgrade of its systems in New York State, ultimately to a 77 channel
capacity in 1995. In 1992 V Cable completed the first phase of this required
upgrade, under which it expanded all of its New York cable systems to a 52
channel capacity. The Company believes that the upgrade of V Cable's New York
systems from 52 to 77 channels will cost up to an additional $9.9 million, as of
December 31, 1993, which would be spent during 1994 and 1995.
V Cable anticipates that its cash flow from operations and amounts available
under the VC Holding Revolving Line will be sufficient to service its debt, to
fund its capital expenditures and to meet its working capital requirements
through 1995. However, after taking into account the anticipated reductions to
regulated revenue arising from the latest round of FCC regulation, V Cable
believes that it is likely that it will be unable to meet several of its
financial covenants during such period. To remedy the anticipated covenant
defaults, V Cable may request waivers and/or amendments to its credit agreement
and/or seek equity contributions from the Restricted Group. There can be no
assurance as to V Cable's ability to accomplish any of these alternatives or the
terms or timing of such alternatives.
CABLEVISION OF NEW YORK CITY
CNYC is party to an $185 million credit facility with a group of banks led by
the Chase Manhattan Bank, N.A. as agent (the "CNYC Credit Agreement") which is
restricted to the construction and operating needs of Phases I through V in
Brooklyn and The Bronx. In Brooklyn, CNYC has completed construction of Phases
I through IV. In The Bronx, CNYC has completed construction of Phases I, II and
III.
At May 5, 1994 CNYC had outstanding bank borrowings of $151.1 million and an
additional $7.2 million was reserved under the CNYC Credit Agreement for letters
of credit issued on behalf of CNYC. Unrestricted and undrawn funds available to
CNYC under the most restrictive borrowing conditions of the CNYC Credit
Agreement amounted to approximately $26.7 million on May 5, 1994.
As of May 5, 1994 the Restricted Group had contributed $48.2 million to CNYC.
(20)
<PAGE>
CABLEVISION SYSTEMS CORPORATION
CNYC made capital expenditures of approximately $22.2 million in the first
quarter of 1994. At March 31, 1994, the cost to complete CNYC construction was
estimated at $111.1 million. CNYC expects the remaining costs for all CNYC
construction will be financed by the amounts available under the CNYC Credit
Agreement, committed equity contributions and cash flow generated from
operations. To eliminate the need for further equity contributions, CNYC
expects to refinance the CNYC Credit Facility in 1994 to provide for additional
amounts to complete construction.
Substantially all of the assets of the Phase Partnerships (as well as the
interests in the Phase Partnerships held directly or indirectly by the Company
and Mr. Dolan) are pledged to secure the obligations to the banks under the CNYC
Credit Facility.
The Company is party to a management agreement with CNYC which requires the
Company to provide management assistance to CNYC in exchange for 3-1/2% of gross
revenues, as defined, plus reimbursement of general and administrative expenses
and overhead. Payment of the 3-1/2% management fee is restricted under the CNYC
Credit Facility, although a one time payment of $2.4 million was made to the
Company in 1992 as permitted by the CNYC bank group. Unpaid management fees
accrue interest at a rate equal to 2% above the average borrowing rate of CNYC
under the CNYC Credit Agreement, compounded quarterly. As of March 31, 1994,
CNYC owed the Company approximately $8.3 million for unpaid management fees and
accrued interest thereon.
RAINBOW PROGRAMMING
Rainbow Programming's financing needs have been funded by the Restricted Group's
investments in and advances to Rainbow Programming, by sales of equity interests
in the programming businesses and in the case of one of the programming
businesses, through separate external debt financing. The Company expects that
the future cash needs of Rainbow Programming's current programming partnerships
will increasingly be met by internally generated funds, although certain of such
partnerships will at least in the near future rely to some extent upon their
partners (including Rainbow Programming) for certain cash needs. The partners'
contributions may be supplemented through the sale of additional equity
interests in, or through the incurrence of indebtedness by, such programming
businesses.
(21)
<PAGE>
CABLEVISION SYSTEMS CORPORATION
On September 16, 1993 Rainbow Programming notified its partners in AMCC that it
has elected to purchase Liberty Media's 50% interest in AMCC at the stated
value. As described above, the Company anticipates that $75 million will be
contributed to Rainbow Programming by the Company through drawings under its
senior credit facility. Rainbow Programming has obtained an underwriting
commitment from a commercial bank for the balance of the funds required. The
Company anticipates that the transaction will be consummated in the second
quarter of 1994.
(22)
<PAGE>
CABLEVISION SYSTEMS CORPORATION
Part II. Other Information
Item 1. Legal Proceedings
The Company is party to various lawsuits, some involving substantial
amounts. Management does not believe that the resolution of such
lawsuits will have a material adverse impact on the financial position
of the Company.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits. None
(b) The Company has not filed any Current Reports on Form 8-K with
the Commission during the quarter for which this report is filed.
(23)
<PAGE>
CABLEVISION SYSTEMS CORPORATION
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.
CABLEVISION SYSTEMS CORPORATION
Registrant
Date: May 10, 1994 /s/William J. Bell
----------------------- -------------------------------------------
By: William J. Bell, as Vice Chairman of
Cablevision Systems Corporation
Date: May 10, 1994 /s/Barry J. O'Leary
----------------------- -------------------------------------------
By: Barry J. O'Leary, as Senior Vice
President - Finance and Treasurer of
Cablevision Systems Corporation
Date: May 10, 1994 /s/Jerry Shaw
----------------------- -------------------------------------------
By: Jerry Shaw, as Vice President and
Controller of Cablevision Systems
Corporation
(24)
