<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, 1995
-------------------------------------------------
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 April 27, 1995:
Class A Common Stock 12,047,335
Class B Common Stock 11,678,922
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
CABLEVISION SYSTEMS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Ended March 31, 1995 and 1994
(Dollars in thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 245,401 $ 176,087
---------- ---------
Operating expenses:
Technical. . . . . . . . . . . . . . . . . . . . . . . . . . . 93,225 66,036
Selling, general and
administrative . . . . . . . . . . . . . . . . . . . . . . . 55,817 29,819
Restructuring charge . . . . . . . . . . . . . . . . . . . . . -- 4,306
Depreciation and amortization. . . . . . . . . . . . . . . . . 82,654 54,773
---------- ---------
231,696 154,934
---------- ---------
Operating profit . . . . . . . . . . . . . . . . . . . . . 13,705 21,153
---------- ---------
Other income (expense):
Interest expense . . . . . . . . . . . . . . . . . . . . . . . (75,728) (58,668)
Interest income. . . . . . . . . . . . . . . . . . . . . . . . 400 221
Share of affiliates' net losses. . . . . . . . . . . . . . . . (29,105) (17,282)
Write off of deferred financing costs. . . . . . . . . . . . . (2,888) --
Provision for preferential payment to
related party. . . . . . . . . . . . . . . . . . . . . . . . (1,400) (1,400)
Minority interest. . . . . . . . . . . . . . . . . . . . . . . (2,110) --
Miscellaneous. . . . . . . . . . . . . . . . . . . . . . . . . (1,376) (1,151)
---------- ---------
(112,207) (78,280)
---------- ---------
Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . (98,502) (57,127)
Dividend requirements applicable to preferred
stocks . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2,471) (221)
---------- ---------
Net loss applicable to common
shareholders . . . . . . . . . . . . . . . . . . . . . . . . . $ (100,973) $ (57,348)
---------- ---------
---------- ---------
Net loss per common share. . . . . . . . . . . . . . . . . . . . $ (4.27) $ (2.46)
---------- ---------
---------- ---------
Average number of common shares
outstanding (in thousands) . . . . . . . . . . . . . . . . . . 23,669 23,277
---------- ---------
---------- ---------
</TABLE>
See accompanying notes to
consolidated financial statements.
(2)
<PAGE>
CABLEVISION SYSTEMS CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
<TABLE>
<CAPTION>
ASSETS March 31, December 31,
1995 1994
------ ------
(unaudited)
<S> <C> <C>
Cash and cash equivalents. . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 21,533 $ 11,350
Accounts receivable trade (less allowance for doubtful accounts of
$10,648 and $10,087) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66,790 72,881
Notes receivable affiliates. . . . . . . . . . . . . . . . . . . . . . . . . . . 1,964 2,143
Notes and other receivables. . . . . . . . . . . . . . . . . . . . . . . . . . . 15,813 14,280
Prepaid expenses and other assets. . . . . . . . . . . . . . . . . . . . . . . . 15,066 18,950
Property, plant and equipment, net . . . . . . . . . . . . . . . . . . . . . . . 893,065 886,028
Investments in affiliates. . . . . . . . . . . . . . . . . . . . . . . . . . . . 149,030 42,954
Advances to affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37,265 36,681
Acquisition related costs and deposits . . . . . . . . . . . . . . . . . . . . . -- 1,844
Feature film inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 152,398 129,496
Franchises, net of accumulated amortization of
$260,042 and $240,609. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 417,253 436,686
Excess costs over fair value of net assets acquired and other
intangible assets, net of accumulated amortization of
$494,155 and $475,673. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 411,235 430,028
Deferred financing, acquisition and other costs, net of
accumulated amortization of $19,888 and $18,422. . . . . . . . . . . . . . . . 49,681 50,949
Deferred interest expense, net of accumulated amortization of
$31,607 and $28,095. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38,631 42,143
----------- -----------
$ 2,269,724 $ 2,176,413
----------- -----------
----------- -----------
</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,
1995 1994
------ ------
(unaudited)
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 111,423 $ 120,627
Accrued liabilities:
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42,163 39,322
Payroll and related benefits . . . . . . . . . . . . . . . . . . . . . . . . . 34,630 34,085
Franchise fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,982 19,179
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100,319 86,047
Accounts payable to affiliates . . . . . . . . . . . . . . . . . . . . . . . . . 25,979 22,273
Feature film rights payable. . . . . . . . . . . . . . . . . . . . . . . . . . . 129,992 110,542
Bank debt. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,478,103 1,335,419
Senior debt. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 871,919 862,440
Subordinated debentures. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 623,552 623,534
Subordinated notes payable . . . . . . . . . . . . . . . . . . . . . . . . . . . 141,268 141,268
Obligation to related party. . . . . . . . . . . . . . . . . . . . . . . . . . . 188,845 193,079
Capital lease obligations and other debt . . . . . . . . . . . . . . . . . . . . 10,870 13,496
----------- -----------
Total liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,772,045 3,601,311
----------- -----------
Deficit investment in affiliates . . . . . . . . . . . . . . . . . . . . . . . . 416,922 393,637
----------- -----------
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 1
Class A Common Stock, $.01 par value, 50,000,000 shares
authorized, 12,019,010 and 11,850,242 shares issued. . . . . . . . . . . . . 120 119
Class B Common Stock, $.01 par value, 20,000,000 shares
authorized, 11,678,781 and 11,787,622 shares issued. . . . . . . . . . . . . 117 118
Par value in excess of capital contributed . . . . . . . . . . . . . . . . . . (73,530) (74,016)
Accumulated deficit. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,842,715) (1,741,521)
----------- -----------
(1,916,006) (1,815,298)
Less treasury stock, at cost (50,000 shares) . . . . . . . . . . . . . . . . . (3,237) (3,237)
----------- -----------
Total stockholders' deficiency . . . . . . . . . . . . . . . . . . . . . . . . (1,919,243) (1,818,535)
----------- -----------
$ 2,269,724 $ 2,176,413
----------- -----------
----------- -----------
</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, 1995 AND 1994
(Dollars in thousands)
(Unaudited)
<TABLE>
<CAPTION>
1995 1994
------ ------
<S> <C> <C>
Cash flows from operating activities:
Net loss. . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ($98,502) $(57,127)
-------- --------
Adjustments to reconcile net loss to net cash provided
by operating activities:
Depreciation and amortization. . . . . . . . . . . . . . . . . . . . . . . 82,654 54,773
Share of affiliates' net losses. . . . . . . . . . . . . . . . . . . . . . 29,105 17,282
Minority interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,110 --
Amortization of deferred financing . . . . . . . . . . . . . . . . . . . . 1,236 1,040
Amortization of deferred interest. . . . . . . . . . . . . . . . . . . . . 3,512 3,512
Amortization of debenture discount . . . . . . . . . . . . . . . . . . . . 18 36
Accretion of interest on debt. . . . . . . . . . . . . . . . . . . . . . . 9,479 8,617
Write off of deferred finance costs. . . . . . . . . . . . . . . . . . . . 2,888 --
Loss on sale of equpiment. . . . . . . . . . . . . . . . . . . . . . . . . 1,029 753
Changes in assets and liabilities net of effects
of acquisitions:
Decrease in accounts receivable trade. . . . . . . . . . . . . . . . . 6,091 6,069
Decrease in notes receivable, affiliates . . . . . . . . . . . . . . . 179 179
Increase in notes and other receivables. . . . . . . . . . . . . . . . (2,151) (1,269)
Decrease (increase) in prepaid expenses and
other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,774 (903)
Decrease (increase) in advances to affiliates. . . . . . . . . . . . . (584) 350
Increase in feature film inventory . . . . . . . . . . . . . . . . . . (22,902) --
Decrease in accounts payable . . . . . . . . . . . . . . . . . . . . . (9,204) (7,842)
Increase in accrued interest . . . . . . . . . . . . . . . . . . . . . 2,841 11,143
Increase (decrease) in accrued payroll and
related benefits. . . . . . . . . . . . . . . . . . . . . . . . . . . 545 (2,722)
Decrease in accrued franchise fees . . . . . . . . . . . . . . . . . . (6,197) (6,245)
Increase (decrease) in accrued liabilities, other. . . . . . . . . . . 14,272 (6,290)
Increase in accounts payable to affiliates . . . . . . . . . . . . . . 3,706 1,970
Increase in feature film rights payable. . . . . . . . . . . . . . . . 19,450 --
-------- --------
Total adjustments. . . . . . . . . . . . . . . . . . . . . . . . . . 139,851 80,453
-------- --------
Net cash provided by operating activities. . . . . . . . . . . . . . . . . . $ 41,349 $ 23,326
-------- --------
</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, 1995 AND 1994
(Dollars in thousands)
(Unaudited)
continued
<TABLE>
<CAPTION>
1995 1994
------ ------
<S> <C> <C>
Cash flows from investing activities:
Capital expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (52,264) $ (66,026)
Proceeds from sale of plant and equipment. . . . . . . . . . . . . . . . . . . 123 620
Additions to intangible assets . . . . . . . . . . . . . . . . . . . . . . . . (9) (11)
(Increase) decrease in acquisition related costs and deposits. . . . . . . . . 1,844 (63)
(Increase) decrease in investments in affiliates, net. . . . . . . . . . . . . (52) 3,056
Payments for acquisition, net of cash acquired . . . . . . . . . . . . . . . . (110,906) (98,911)
--------- ---------
Net cash used in investing activities. . . . . . . . . . . . . . . . . . . . (161,264) (161,335)
--------- ---------
Cash flows from financing activities:
Proceeds from bank debt. . . . . . . . . . . . . . . . . . . . . . . . . . . . 257,732 174,463
Repayment of bank debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . (115,048) (108,579)
Proceeds from senior debt. . . . . . . . . . . . . . . . . . . . . . . . . . . 1,000 2,500
Repayment of senior debt . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,000) (6,000)
Preferred stock dividends. . . . . . . . . . . . . . . . . . . . . . . . . . . (2,692) (442)
Issuance of Redeemable Exchangeable Convertible
Preferred Stock. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -- 100,000
Issuance of common stock . . . . . . . . . . . . . . . . . . . . . . . . . . . 986 374
Decrease in obligation to related party. . . . . . . . . . . . . . . . . . . . (4,234) (4,218)
Payments of capital lease obligations and other debt . . . . . . . . . . . . . (2,626) (641)
Additions to deferred financing and other costs. . . . . . . . . . . . . . . . (4,020) (798)
--------- ---------
Net cash provided by financing activities. . . . . . . . . . . . . . . . . . 130,098 156,659
--------- ---------
Net increase in cash and cash equivalents. . . . . . . . . . . . . . . . . . . . 10,183 18,650
Cash and cash equivalents at beginning of year . . . . . . . . . . . . . . . . . 11,350 12,944
--------- ---------
Cash and cash equivalents at end of period . . . . . . . . . . . . . . . . . . . $ 21,533 $ 31,594
--------- ---------
--------- ---------
</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, 1995 presented in this Form 10-Q 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 audited
financial statements and notes thereto included in the Company's Annual Report
on Form 10-K for the fiscal year ended December 31, 1994.
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, 1995.
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 except per share amounts)
(Unaudited)
Note 4. CASH FLOWS (continued)
$58,642 and $33,998 for the three months ended March 31, 1995 and 1994,
respectively. The Company's noncash financing activities for the three months
ended March 31, 1994 included capital lease obligations of $22 incurred when the
Company entered into leases for new equipment.
Note 5. RECENT DEVELOPMENTS
On March 10, 1995, MSG Holdings, L.P. ("Holdings"), a partnership between a
subsidiary of Rainbow Programming Holdings, Inc. ("Rainbow Programming"), a
wholly owned subsidiary of the Company, and a subsidiary of ITT Corporation, a
Delaware corporation ("ITT"), acquired Madison Square Garden Corporation ("MSG")
in a transaction in which MSG merged with and into Holdings. The purchase price
paid by Holdings for MSG was $1,009,100.
Holdings funded the purchase price of the acquisition through (i) borrowings of
$289,100 under a $450,000 credit agreement among Holdings, various lending
institutions and Chemical Bank as administrative agent, (ii) an equity
contribution from Rainbow Programming of $110,000 and (iii) an equity
contribution from ITT of $610,000. ITT, Rainbow Programming and the Company are
parties to an agreement made as of August 15, 1994 (the "Bid Agreement")
pursuant to which it has been agreed that within 12 months following the MSG
closing, Rainbow Programming may elect to acquire interests in Holdings from ITT
sufficient to equalize the equity ownership of ITT and Rainbow Programming in
Holdings (the "Equalization Interest"). Rainbow Programming has the option
during the 12 months following the MSG acquisition closing to (i) acquire all or
a portion of the Equalization Interest for cash (including interest on such
Equalization Interest at the rate of 11 1/2% per year calculated from the MSG
acquisition closing date), (ii) maintain its investment at the initial level, or
(iii) require ITT to purchase one half of Rainbow Programming's initial interest
in Holdings at the price paid by Rainbow Programming plus an adjustment for
Rainbow Programming's share of Holdings' operating income after interest expense
following the MSG acquisition closing. Rainbow Programming has until one year
from the time of the MSG acquisition closing to make its election and has not
yet decided which alternative it will pursue.
Initially Holdings will be managed on a 50-50 basis by Rainbow Programming and
ITT. If, as discussed above, Rainbow Programming does not equalize its
ownership interest in Holdings by the first anniversary of the closing, its
management role will be effectively eliminated. Rainbow Programming also has the
right to voluntarily
(8)
<PAGE>
CABLEVISION SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands except per share amounts)
(Unaudited)
relinquish any power to direct the management and policies of Holdings.
Pursuant to an agreement between Rainbow Programming and National Broadcasting
Company, Inc. ("NBC"), NBC may require Rainbow Programming, by notice given on
or before April 13, 1995, to purchase its interests in SportsChannel (New York)
Associates ("SCNY") and Rainbow News 12 Company (the "NBC Put") for an aggregate
purchase price which, as of April 7, 1995, would amount to approximately $93,000
subject to certain adjustments. On April 7, 1995 NBC elected to require Rainbow
Programming to purchase such interests. Rainbow Programming has 120 days from
April 7, 1995 to consummate the acquisition. On January 27, 1995, Rainbow
Programming entered into an amended and restated credit agreement with Toronto
Dominion (Texas), Inc. and the Canadian Imperial Bank of Commerce, as co-agents,
and a group of banks increasing Rainbow Programming's credit facility from
$105,000 to $202,000 to provide funds in the event the NBC Put was exercised.
(9)
<PAGE>
CABLEVISION SYSTEMS CORPORATION
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
RESULTS OF OPERATIONS
The following table sets forth on a historical basis certain items related to
operations as a percentage of net revenues for the periods indicated.
STATEMENT OF OPERATIONS DATA
<TABLE>
<CAPTION>
Three Months Ended March 31,
-----------------------------------------------------
1995 1994
----------------------- ------------------------ (Increase)
% of Net % of Net Decrease
Amount Revenues Amount Revenues in Net loss
------ -------- ------ -------- -----------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
Revenues . . . . . . . . . . . . . . . . . . . . . $ 245,401 100% $ 176,087 100% $ 69,314
Operating expenses:
Technical. . . . . . . . . . . . . . . . . . . . 93,225 38 66,036 37 (27,189)
Selling, general &
administrative . . . . . . . . . . . . . . . . 55,817 23 29,819 17 (25,998)
Restructuring charge . . . . . . . . . . . . . . -- -- 4,306 2 4,306
Depreciation and
amortization . . . . . . . . . . . . . . . . . 82,654 34 54,773 31 (27,881)
--------- --------- --------
Operating profit . . . . . . . . . . . . . . . . . 13,705 6 21,153 12 (7,448)
Other expense:
Interest expense, net. . . . . . . . . . . . . . (75,328) (31) (58,447) (33) (16,881)
Share of affiliates' net loss. . . . . . . . . . (29,105) (12) (17,282) (10) (11,823)
Write-off of deferred financing
costs. . . . . . . . . . . . . . . . . . . . . (2,888) (1) -- -- (2,888)
Provision for preferential
payment to related party . . . . . . . . . . . (1,400) (1) (1,400) (1) --
Minority interest. . . . . . . . . . . . . . . . (2,110) (1) -- -- (2,110)
Miscellaneous, net . . . . . . . . . . . . . . . (1,376) (1) (1,151) (1) (225)
--------- --------- --------
Net loss . . . . . . . . . . . . . . . . . . . . . $ (98,502) (40)% $ (57,127) (32)% $(41,375)
--------- --------- --------
--------- --------- --------
OTHER OPERATING DATA:
Operating profit before depreciation
and amortization (1) . . . . . . . . . . . . . . . . . . . . . $ 96,359 $ 75,926
Currently payable interest expense, net. . . . . . . . . . . . . 61,483 45,463
Net cash provided by operating activities (2). . . . . . . . . . 41,349 23,326
Net cash used in investing activities (2). . . . . . . . . . . . 161,264 161,335
Net cash provided by financing activities (2). . . . . . . . . . 130,098 156,659
<FN>
(1) Operating profit before depreciation and amortization is presented here to
provide additional information about the Company's ability to meet future
debt service, capital expenditures and working capital requirements.
Operating profit before depreciation and amortization should be considered
in addition to and not as a substitute for net income and cash flows as
indicators of financial performance and liquidity as reported in accordance
with generally accepted accounting principles.
(2) See Item 1. - "Consolidated Statements of Cash Flows".
</TABLE>
(10)
<PAGE>
CABLEVISION SYSTEMS CORPORATION
1994 ACQUISITIONS In March 1994, the Company completed the acquisition of North
Coast Cable; in July 1994, the Company through Rainbow Programming purchased an
additional approximate 50% interest in American Movie Classics Company ("AMCC"),
giving Rainbow Programming a 75% ownership interest in AMCC; and in August 1994,
the Company consummated the acquisition of Monmouth Cablevision and Riverview
Cablevision. The foregoing acquisitions will collectively be referred to as the
"1994 Acquisitions".
REVENUES for the three months ended March 31, 1995 increased $69.3 million (39%)
over the corresponding 1994 period. Approximately $51.8 million (29%) of the
increase was attributable to the 1994 Acquisitions, with the remaining increase
of approximately 10% resulting primarily from internal growth of 146,500 in the
average number of subscribers during the three month 1995 period over the same
period in 1994.
TECHNICAL EXPENSES increased $27.2 million (41%) for the three months ended
March 31, 1995 compared to the same period in 1994. Approximately $18.8 million
(29%) of the increase was a direct result of the 1994 Acquisitions. The
remaining 12% increase was due primarily to increases in those costs directly
associated with the internal growth in the average number of subscribers
mentioned above. As a percentage of revenues, technical expenses remained
relatively constant for the periods presented.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES increased $26.0 million (87%) for
the three months ended March 31, 1995 when compared to the same 1994 period.
Approximately $12.7 million (43%) of the increase was related to the 1994
Acquisitions. Approximately $10.0 million (33%) of the increase shown in the
1995 period resulted from a credit adjustment made during the first quarter of
1994 in connection with an incentive stock plan. The remaining increase of $3.3
million (11%) resulted from higher administrative expenses and general cost
increases. Excluding the effects of the credit adjustment in 1994 and the
related incentive stock plan expense in 1995, selling, general and
administrative expenses, as a percentage of revenues, would have remained
relatively constant for the periods presented.
RESTRUCTURING CHARGE The Company recorded a one time charge in the first
quarter of 1994 to provide for employee severance and related costs, resulting
from a restructuring of its operations, which was undertaken in response to FCC-
mandated rate reductions in substantially all of the Company's cable television
systems.
(11)
<PAGE>
CABLEVISION SYSTEMS CORPORATION
OPERATING PROFIT BEFORE DEPRECIATION AND AMORTIZATION increased $20.4 million
(27%) to $96.4 million in the first quarter of 1995 from $75.9 million in the
comparable 1994 period resulting from the combined effect of the revenue and
expense changes discussed above. Operating profit before depreciation and
amortization is presented here to provide additional information about the
Company's ability to meet future debt service, capital expenditures and working
capital requirements. Operating profit before depreciation and amortization
should be considered in addition to and not as a substitute for net income and
cash flows as indicators of financial performance and liquidity as reported in
accordance with generally accepted accounting principles.
DEPRECIATION AND AMORTIZATION EXPENSE increased $27.9 million (51%) for the
three months ended March 31, 1995 as compared to the same 1994 period, with 39%
of the increase arising from the 1994 Acquisitions and the remaining 12%
increase resulting from increased depreciation charges on capital expenditures
made during 1995 and 1994, offset to some extent by decreased depreciation and
amortization charges on assets which became fully depreciated during the
periods.
NET INTEREST EXPENSE increased $16.9 million (29%) for the three months ended
March 31, 1995 over the comparable 1994 period. An increase of 19% was
attributable to the 1994 Acquisitions. The remaining 10% increase was primarily
the result of generally higher interest rates during the 1995 period as compared
to the same 1994 period.
SHARE OF AFFILIATES' NET LOSSES increased from $17.3 million to $29.1 million
for the three months ended March 31, 1995 compared to the same 1994 period.
Such amounts consist primarily of the Company's share in the net losses of
certain cable affiliates which, for the three months ended March 31, 1995 and
1994 amounted to $27.3 million and $17.1 million, respectively, and in the net
losses of certain programming businesses, in which the Company has varying
ownership interests, which aggregated $1.8 million and $.2 million for the
respective periods.
WRITE OFF OF DEFERRED FINANCING COSTS in 1995 relates primarily to costs
associated with Rainbow Programming's original $105 million credit facility
which was replaced in January 1995 with a new $202 million facility.
PROVISION FOR PREFERENTIAL PAYMENT TO RELATED PARTY consists of the expensing of
the proportionate amount due with respect to an annual payment ($5.6 million)
made in connection with the acquisition of Cablevision of New York City ("CNYC")
in 1992.
MINORITY INTEREST in 1995 represents NBC's share of the net income of AMCC.
(12)
<PAGE>
CABLEVISION SYSTEMS CORPORATION
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, Inc.
(including VC Holding), Rainbow Programming and Cablevision MFR, Inc. On
October 14, 1994, CNYC, formerly an unrestricted subsidiary, became a member of
the Restricted Group.
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, 1995. (Rainbow Programming, Rainbow Advertising, WKNR and
AMCC are included in"Other Unrestricted Subsidiaries").
<TABLE>
<CAPTION>
Core Total Other Cablevision
Restricted Restricted Cablevision Unrestricted Systems
Group CNYC Group V Cable,Inc. MFR Subsidiaries Corporation
---------- ---- ---------- ------------ ----------- ------------ -----------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Net revenues $111,756 $ 45,981 $ 157,737 $ 35,528 $ 18,096 $ 34,040 $ 245,401
Operating expenses:
Technical 41,278 21,190 62,468 14,223 5,890 10,644 93,225
Selling, general and
administrative 14,908 11,320 26,228 5,056 3,054 21,479 55,817
Depreciation and
amortization 31,634 9,997 41,631 18,946 16,327 5,750 82,654
-------- -------- ---------- -------- -------- -------- ----------
Operating profit
(loss) $ 23,936 (1) $ 3,474 (1) $ 27,410 $ (2,697) $ (7,175) $ (3,833) $ 13,705
-------- -------- ---------- -------- -------- -------- ----------
-------- -------- ---------- -------- -------- -------- ----------
Currently payable
interest expense $ 35,430 $ 2,793 $ 38,223 $ 12,679 $ 7,257 $ 3,324 $ 61,483
-------- -------- ---------- -------- -------- -------- ----------
-------- -------- ---------- -------- -------- -------- ----------
Total interest expense $ 36,067 $ 3,021 $ 39,088 $ 25,649 $ 7,361 $ 3,630 $ 75,728
-------- -------- ---------- -------- -------- -------- ----------
-------- -------- ---------- -------- -------- -------- ----------
Senior debt $969,650 $139,300 $1,108,950 $871,919 $230,000 $150,023 $2,360,892
-------- -------- ---------- -------- -------- -------- ----------
-------- -------- ---------- -------- -------- -------- ----------
Subordinated debt $623,552 $ -- $ 623,552 $ -- $141,268 (3) $ -- $ 764,820
-------- -------- ---------- -------- -------- -------- ----------
-------- -------- ---------- -------- -------- -------- ----------
Obligation to related
party $ -- $188,845 (2) $ 188,845 $ -- $ -- $ -- $ 188,845
-------- -------- ---------- -------- -------- -------- ----------
-------- -------- ---------- -------- -------- -------- ----------
Deficit investment in
affiliates $401,608 $ -- $ 401,608 $ -- $ -- $ 15,314 $ 416,922
-------- -------- ---------- -------- -------- -------- ----------
-------- -------- ---------- -------- -------- -------- ----------
Capital expenditures $ 26,537 $ 17,516 $ 44,053 $ 4,892 $ 2,387 $ 937 $ 52,264 (4)
-------- -------- ---------- -------- -------- -------- ----------
-------- -------- ---------- -------- -------- -------- ----------
Ending Cable subscribers 936,000 335,000 1,271,000 367,000 165,000 -- 1,803,000
-------- -------- ---------- -------- -------- -------- ----------
-------- -------- ---------- -------- -------- -------- ----------
<FN>
(1) Includes management fees from CNYC of $1,605.
(2) Obligation of NYC LP Corp., a wholly-owned Restricted Group subsidiary,
relating to the CNYC acquisition.
(3) Guaranteed by the Restricted Group.
(4) Includes intercompany elimination of $5
</TABLE>
(13)
<PAGE>
CABLEVISION SYSTEMS CORPORATION
RESTRICTED GROUP
On March 10, 1995 the Company invested $110 million in the MSG acquisition. The
funds were provided by borrowings under the Restricted Group's $1.5 billion
credit agreement (the "Credit Agreement"). See Note 5 "Recent Developments".
On May 1, 1995 the Restricted Group, including CNYC, had total usage under the
Credit Agreement of $1,126.3 million and Letters of Credit of $22.7 million
issued on behalf of the Company and CNYC. Unrestricted and undrawn funds
available to the Restricted Group under the Credit Agreement amounted to
approximately $351.0 million at May 1, 1995. 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.
As of May 1, 1995 the Company and CNYC had entered into interest exchange (swap
and interest rate cap) agreements with several of their banks on a notional
amount of $285 million, on which the Company pays a fixed rate of interest and
receives a variable rate of interest for specified periods, with an average
maturity of two years. The average effective annual interest rate on all bank
debt outstanding as of March 31, 1995 was approximately 8.3%.
The Company believes that, for the Restricted Group, internally generated funds
together with funds available under its existing Credit Agreement will be
sufficient through December 31, 1996 (i) to meet its debt service requirements
including its amortization requirements under the Credit Agreement, (ii) to fund
its ongoing capital expenditures, including CNYC and the required upgrades under
the New York Upgrade Agreement, (iii) to fund its anticipated investments
including the $5.6 million Annual Payment to Charles Dolan in connection with
the CNYC acquisition, (iv) to fund payments with respect to the proposed
Cablevision of Boston transactions and (v) to fund any anticipated equity
requirements through 1996 in A-R Cable, V Cable and/or Monmouth/Riverview.
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.
(14)
<PAGE>
CABLEVISION SYSTEMS CORPORATION
V CABLE
The long-term credit facilities extended by General Electric Capital Corporation
("GECC") to V Cable and VC Holding on December 31, 1992, refinanced all of
V Cable's pre-existing debt. 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 $25.3 million, as of March 31, 1995, 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.
Under the credit agreement between VC Holding and GECC, GECC has extended to
VC Holding a $505 million term loan (the "Series A Term Loan"), a $251.9 million
term loan (the "Series B Term Loan") and a $25 million revolving line of credit
(the "Revolving Line"). 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 1, 1995 VC Holding had no
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 1,
1995.
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 $89.7
million at March 31, 1995. 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. A mandatory prepayment of the Series A Term Loan amounting
to approximately $3.1 million was made on April 14, 1995 in accordance with this
requirement.
After taking into account the 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 certain of its financial covenants during 1995. 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.
In April 1995, the Restricted Group made an equity contribution of $1.2 million
to enable V Cable to meet certain of its financial covenants. There can be no
assurance as to V Cable's ability to accomplish any of these alternatives in the
future or the terms or timing of such alternatives. Assuming any covenant
defaults are waived or cured, 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 1996.
(15)
<PAGE>
CABLEVISION SYSTEMS CORPORATION
MONMOUTH AND RIVERVIEW
Monmouth/Riverview are party to a credit facility with a group of banks led by
Nations Bank of Texas, N.A., as agent (the "Monmouth/Riverview Credit
Facility"). The maximum amount available to Monmouth/Riverview under the
Monmouth/Riverview Credit Facility is $285 million with a final maturity at June
30, 2003. The facility is a reducing revolving loan, with scheduled facility
reductions beginning on March 31, 1996 resulting in a 15% reduction by December
31, 1998. As of May 1, 1995, Monmouth/Riverview had outstanding bank borrowings
of $227 million. Unrestricted and undrawn funds available to Monmouth/Riverview
under the Monmouth/Riverview Credit Facility amounted to approximately $58
million at May 1, 1995. The Monmouth/Riverview Credit Facility contains certain
financial covenants that may limit Monmouth/Riverview's ability to utilize all
of the undrawn funds available thereunder, including covenants requiring
Monmouth/Riverview to maintain certain financial ratios. Under the terms of the
Monmouth/Riverview Credit Facility, Monmouth/Riverview is prohibited from
transferring funds to Cablevision MFR. The weighted average interest rate on
all bank indebtedness as of April 30, 1995 was approximately 8.7%.
On February 24, 1995 Monmouth/Riverview obtained a waiver from the banks party
to the Monmouth/Riverview Credit facility of a default under a financial
covenant and an amendment to other covenants through May 15, 1995.
Monmouth/Riverview anticipates that it will be in default of certain of its
financial covenants in 1995. Monmouth/Riverview is seeking an amendment of its
credit agreement which will require equity contributions by the Restricted
Group. There can be no assurance that such amendment can be obtained or that
the Restricted Group will provide an equity contribution. The Company believes
that for Monmouth/Riverview, internally generated funds together with funds
available under its existing credit agreement, assuming such amendment is
obtained, will be sufficient to meet its debt service requirements including its
amortization requirements and to fund its capital expenditures through 1996.
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.
(16)
<PAGE>
CABLEVISION SYSTEMS CORPORATION
On July 11, 1994, Rainbow Programming entered into a $105 million credit
facility with a group of banks. On January 27, 1995 Rainbow entered into an
amended and restated credit facility with Toronto-Dominion (Texas), Inc., and
Canadian Imperial Bank of Commerce, as co-agents and a group of banks for $202
million of which $108 million was drawn on such date to refinance the original
facility. The balance of the funds could be used only to purchase NBC's 50%
interest in SportsChannel (New York) Associates in the event NBC decided to
exercise its option to sell such interests. The proceeds of the initial $105
million loan plus $76 million of equity from the Company were used to purchase
Liberty Media's 50% interest in AMCC giving Rainbow Programming a 75% ownership
interest in AMCC. The credit facility is payable in full at maturity on
December 31, 1996 and bears interest at varying rates based upon the banks' Base
Rate or Eurodollar Rate, as defined in the credit agreement. Repayment of the
loan is anticipated to be made by Rainbow Programming from one or a combination
of the following: (i) internally generated funds; (ii) refinancing the existing
Rainbow Programming $202 million credit facility; (iii) refinancing the existing
$57 million credit agreement of AMCC; (iv) the sale of equity interests in, or
assets of, the programming businesses; and (v) advances from the Restricted
Group. The loan is secured by a pledge of the Company's stock in Rainbow
Programming and is guaranteed by the subsidiaries of Rainbow Programming as
permitted.
On March 10, 1995, MSG Holdings, L.P. ("Holdings"), a partnership between a
subsidiary of Rainbow Programming and a subsidiary of ITT Corporation, a
Delaware corporation ("ITT"), acquired Madison Square Garden Corporation ("MSG")
in a transaction in which MSG merged with and into Holdings. The purchase price
paid by Holdings for MSG was $1,009.1 million.
Pursuant to an agreement between Rainbow Programming and National Broadcasting
Company, Inc. ("NBC"), NBC could require Rainbow Programming, by notice given on
or before April 13, 1995, to purchase its interests in SportsChannel (New York)
Associates ("SCNY") and Rainbow News 12 Company (the "NBC Put") for an aggregate
purchase price which, as of April 7, 1995, would amount to approximately $93
million subject to certain adjustments. On April 7, 1995 NBC elected to require
Rainbow Programming to purchase such interests. Rainbow Programming has 120
days from April 7, 1995 to consummate the acquisition.
(17)
<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 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.
The index to exhibits is on page 19.
(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.
(18)
<PAGE>
CABLEVISION SYSTEMS CORPORATION
INDEX TO EXHIBITS
EXHIBIT PAGE
NO. DESCRIPTION NO.
- ------- ----------- ----
27 Financial Data Schedule
(19)
<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 4, 1995 /s/William J. Bell
-------------------- ------------------------------------------
By: William J. Bell, as Vice Chairman of
Cablevision Systems Corporation
Date: May 4, 1995 /s/Barry J. O'Leary
-------------------- ------------------------------------------
By: Barry J. O'Leary, as Senior Vice
President - Finance and Treasurer and
Principal Financial Officer of
Cablevision Systems Corporation
Date: May 4, 1995 /s/Jerry Shaw
-------------------- ------------------------------------------
By: Jerry Shaw, as Vice President and
Controller and Chief Accounting
Officer of Cablevision Systems
Corporation
(20)
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> MAR-31-1995
<CASH> 21,533
<SECURITIES> 0
<RECEIVABLES> 77,438
<ALLOWANCES> (10,648)
<INVENTORY> 152,398
<CURRENT-ASSETS> 0
<PP&E> 1,608,642
<DEPRECIATION> (715,577)
<TOTAL-ASSETS> 2,269,724
<CURRENT-LIABILITIES> 0
<BONDS> 3,314,557
<COMMON> 237
0
2
<OTHER-SE> (1,919,716)
<TOTAL-LIABILITY-AND-EQUITY> 2,269,724
<SALES> 0
<TOTAL-REVENUES> 245,401
<CGS> 0
<TOTAL-COSTS> 93,225
<OTHER-EXPENSES> 82,654
<LOSS-PROVISION> (3,017)
<INTEREST-EXPENSE> 75,728
<INCOME-PRETAX> (98,502)
<INCOME-TAX> 0
<INCOME-CONTINUING> (98,502)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (98,502)
<EPS-PRIMARY> (4.27)
<EPS-DILUTED> 0<F1>
<FN>
<F1>Not presented as the resultant computation would be a decrease in
net loss per share and therefore not meaningful.
</FN>
</TABLE>
