<PAGE>
RULE NO. 424(b)(5)
REGISTRATION NO. 33-62313
PROSPECTUS SUPPLEMENT
(to Prospectus dated October 18, 1995)
12,000,000 SHARES
[LOGO] CABLEVISION
CABLEVISION SYSTEMS CORPORATION
DEPOSITARY SHARES
EACH REPRESENTING A ONE-TENTH INTEREST IN A SHARE OF
8 1/2% SERIES I CUMULATIVE CONVERTIBLE EXCHANGEABLE PREFERRED STOCK
---------------
Each of the Depositary Shares offered hereby represents a one-tenth interest
in a share of 8 1/2% Series I Cumulative Convertible Exchangeable Preferred
Stock, par value $.01 per share (the "Series I Preferred Stock"), of
Cablevision Systems Corporation (the "Company") deposited with the Depositary
(as defined), and through the Depositary entitles the holder, in proportion to
the fractional interest in a share of Series I Preferred Stock represented by
such Depositary Share, to all rights and preferences of the Series I Preferred
Stock represented thereby, including dividend, voting, redemption, conversion
and liquidation rights. The Depositary Shares will be evidenced by Depositary
Receipts issued pursuant to the Deposit Agreement (as defined). See
"Description of Depositary Shares".
Dividends on the Depositary Shares representing the Series I Preferred Stock
are cumulative from the date of issuance and are payable at an annual rate of
$2.125 per share on January 1, April 1, July 1 and October 1 of each year,
commencing January 1, 1996. The Depositary Shares are redeemable, in whole or
in part, at the option of the Company at any time on or after November 1,
1999, at the redemption prices set forth herein, plus accrued and unpaid
dividends thereon to the date of redemption. The Series I Preferred Stock has
a liquidation preference of $250.00 per share (equivalent to $25.00 per
Depositary Share), plus accrued and unpaid dividends thereon. The Depositary
Shares are convertible, at the option of the holder at any time on or after
January 8, 1996, unless previously redeemed, into shares of the Company's
Class A Common Stock, par value $.01 per share (the "Class A Common Stock"),
at a conversion price of $67.44 per share of Class A Common Stock (equivalent
to a conversion rate of .3707 shares of Class A Common Stock per Depositary
Share), subject to adjustment under certain conditions. On November 1, 1995,
the last reported sale price of the Class A Common Stock (symbol "CVC") on the
American Stock Exchange (the "ASE") was $51.875 per share. See "Description of
Series I Preferred Stock".
The Depositary Shares are exchangeable, subject to certain conditions, in
whole but not in part, at the option of the Company on any quarterly dividend
payment date on or after January 1, 1998, for the Company's 8 1/2% Convertible
Subordinated Debentures due 2007 (the "Exchange Debentures") at a rate of
$25.00 principal amount of Exchange Debentures for each Depositary Share. The
Exchange Debentures, if issued, will bear interest payable semi-annually and
will have the terms and conditions set forth elsewhere in this Prospectus
Supplement. See "Description of Exchange Debentures".
Upon the occurrence of a Change of Control (as defined), the conversion
price of the Depositary Shares will be reduced, for a limited period, in
certain circumstances in order to provide holders a lower conversion price at
a time when the Market Value (as defined) of the Class A Common Stock is less
than the then prevailing conversion price. See "Description of Series I
Preferred Stock."
The Depositary Shares have been approved for listing on the ASE, subject to
notice of issuance, under the symbol "CVCPR".
INVESTMENT IN THE DEPOSITARY SHARES INVOLVES SIGNIFICANT RISKS DISCUSSED
UNDER "RISK FACTORS" ON PAGE 3 OF THE ACCOMPANYING PROSPECTUS WHICH SHOULD BE
CONSIDERED BY PROSPECTIVE PURCHASERS.
---------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT
OR THE PROSPECTUS TO WHICH IT RELATES. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC (1) DISCOUNT (2) COMPANY (3)
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Depositary Share... $25.00 $.75 $24.25
- ----------------------------------------------------------------------------------------
Total (4).............. $300,000,000 $9,000,000 $291,000,000
</TABLE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
(1) Plus accrued dividends, if any, from November 7, 1995.
(2) The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended. See "Underwriting".
(3) Before deducting expenses of the Company estimated at $450,000.
(4) The Company has granted to the Underwriters a 30-day option to purchase up
to 1,800,000 additional Depositary Shares solely to cover over-allotments.
If all such Depositary Shares are purchased, the total Price to Public,
Underwriting Discount and Proceeds to Company will be $345,000,000,
$10,350,000 and $334,650,000, respectively. See "Underwriting".
---------------
The Depositary Shares are offered, subject to prior sale, when, as and if
delivered to and accepted by the Underwriters, and subject to approval of
certain legal matters by counsel for the Underwriters and certain other
conditions. The Underwriters reserve the right to withdraw, cancel or modify
such offer and to reject orders in whole or in part. It is expected that
delivery of the Depositary Shares will be made against payment therefor on or
about November 7, 1995, at the offices of Bear, Stearns & Co. Inc., 245 Park
Avenue, New York, New York 10167.
BEAR, STEARNS & CO. INC.
MERRILL LYNCH & CO.
MORGAN STANLEY & CO.
INCORPORATED
The date of this Prospectus Supplement is November 1, 1995.
<PAGE>
As used herein, unless the context otherwise requires, the term "Company"
refers to Cablevision Systems Corporation and its subsidiaries. The term
"Consolidated Financial Statements" refers to the Company's Consolidated
Financial Statements and the notes thereto incorporated by reference from the
Company's Annual Report on Form 10-K for the fiscal year ended December 31,
1994 (the "Form 10-K") and the term "Management's Discussion and Analysis"
refers to the Management's Discussion and Analysis of Financial Condition and
Results of Operations incorporated by reference from the Form 10-K and the
Company's Quarterly Reports on Form 10-Q. See "Incorporation of Certain
Documents by Reference" in the accompanying Prospectus.
----------------
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICES OF THE DEPOSITARY
SHARES, THE SERIES I PREFERRED STOCK AND THE SHARES OF CLASS A COMMON STOCK OF
THE COMPANY AT LEVELS ABOVE THOSE WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE AMERICAN STOCK EXCHANGE OR
OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
S-2
<PAGE>
SUMMARY
The following summary is qualified in its entirety by the information
appearing elsewhere in this Prospectus Supplement and the accompanying
Prospectus and in the documents and financial statements incorporated therein
by reference. Except as otherwise specified, the information in this Prospectus
Supplement assumes that the Underwriters' overallotment option will not be
exercised.
THE COMPANY
The Company is one of the largest operators of cable television systems in
the United States, with approximately 2,687,000 subscribers in 19 states as of
September 30, 1995 based on the number of basic subscribers in systems which
the Company manages and which it owns or in which it has investments. The
Company also has ownership interests in companies that produce and distribute
national and regional programming services and provide advertising sales
services for the cable television industry. The Company was formed in 1985 to
effect a reorganization of its predecessors.
CABLE TELEVISION
The cable television systems that are majority owned and managed by the
Company (the "Company's cable television systems") served approximately
1,887,000 subscribers as of September 30, 1995 in New York, Ohio, Connecticut,
New Jersey, Michigan and Massachusetts. In addition, the Company has non-
majority investments in and manages cable television systems which served
approximately 800,000 subscribers as of September 30, 1995 in Alabama,
Arkansas, Florida, Illinois, Kansas, Kentucky, Maine, Massachusetts,
Mississippi, Missouri, New Jersey, New York, North Carolina, Oklahoma,
Pennsylvania and Tennessee. The Company's cable television systems have
generally been characterized by relatively high revenues per subscriber ($36.69
for September 1995) and ratios of premium service units to basic subscribers
(1.7:1 for September 1995). In calculating revenue per subscriber, the Company
includes only recurring service revenues and excludes installation charges and
certain other revenues such as advertising, pay-per-view and home shopping
revenues.
PROGRAMMING SERVICES
The Company conducts its programming activities through Rainbow Programming
Holdings, Inc. ("Rainbow Programming"), its wholly-owned subsidiary, and
through subsidiaries of Rainbow Programming in partnership with certain
unaffiliated entities, including National Broadcasting Company, Inc. ("NBC")
and Liberty Media Corporation. Rainbow Programming's businesses include eight
regional SportsChannel services, four national entertainment services (American
Movie Classics Company, Bravo Network, MuchMusic and the Independent Film
Channel), Rainbow News 12 Company (a regional news service serving Long Island)
and the national backdrop sports services of Prime SportsChannel Networks.
Rainbow Programming also owns an interest in Madison Square Garden Corporation.
ADVERTISING SERVICES
Rainbow Advertising Sales Corporation sells advertising time to national,
regional and local advertisers on behalf of the Company's cable television
systems and the SportsChannel and News 12 programming services, as well as on
behalf of unaffiliated cable television systems.
S-3
<PAGE>
THE OFFERING
Securities Offered.......... 12,000,000 Depositary Shares (the "Depositary
Shares") each representing one-tenth of a share
of 8 1/2% Series I Cumulative Convertible
Exchangeable Preferred Stock (the "Series I
Preferred Stock").
Dividends................... Cumulative at 8 1/2% per annum out of legally
available funds. Dividends will accrue from the
date of issuance and are payable quarterly in
arrears on January 1, April 1, July 1 and
October 1 of each year, commencing January 1,
1996. The rights to dividends on the Depositary
Shares will be cumulative (whether or not earned
or declared) on a daily basis from the date of
issuance of the Depositary Shares. For federal
income tax purposes, distributions with respect
to the Series I Preferred Stock will not qualify
as dividends and will be treated as a return of
capital. See "Certain Federal Income Tax
Considerations--Distributions on Depositary
Shares".
Liquidation Preference...... $25 per Depositary Share plus accrued and unpaid
dividends thereon.
Voting...................... Holders of the Series I Preferred Stock
represented by the Depositary Shares have no
general voting rights except as provided by law
and as provided in the Certificate of
Designations therefor.
Optional Redemption......... On and after November 1, 1999, the Depositary
Shares are redeemable, at the option of the
Company, in whole or in part, at the redemption
prices set forth herein, plus accrued and unpaid
dividends thereon to the date of redemption.
Special Conversion Rights... The conversion price of the Depositary Shares
will be reduced temporarily in certain
circumstances. In general, the reduction will
occur if a Change of Control (as defined) occurs
at a time that the Market Value (as defined) of
the Class A Common Stock is less than the then
prevailing conversion price. The conversion
price will not be reduced below a value equal to
66 2/3% of the last reported sale price of the
Class A Common Stock on the date of this
Prospectus Supplement as set forth on the cover
page hereof, subject to certain possible
adjustments set forth herein. No such adjustment
will occur if a majority of the consideration
received by the holders of the Class A Common
Stock is Marketable Stock (as defined) of a
successor corporation and under certain other
circumstances. See "Description of Series I
Preferred Stock."
Exchange.................... The Depositary Shares are exchangeable into the
Exchange Debentures at the option of the
Company, in whole but not in part, on or after
January 1, 1998.
Ranking..................... The Series I Preferred Stock represented by the
Depositary Shares will rank, subject to certain
conditions, junior as to payment of dividends
and distributions upon liquidation, winding-up
and
S-4
<PAGE>
dissolution of the Company to (i) each class of
capital stock of the Company or series of
preferred stock issued by the Company
established after the initial issuance of the
Series I Preferred Stock, the terms of which
specifically provide that such class or series
will rank senior to the Series I Preferred Stock
as to dividends and distributions upon the
liquidation, winding-up or dissolution of the
Company, and (ii) all liabilities and
obligations (whether or not for borrowed money)
of the Company. The Series I Preferred Stock
will rank on a parity with the Company's 8%
Series C Cumulative Preferred Stock ("Series C
Preferred Stock"), Series D Cumulative Preferred
Stock (which may be issued in exchange for
shares of Series C Preferred Stock), the 11 3/4%
Series G Redeemable Exchangeable Preferred Stock
(the "Series G Preferred Stock") and the 11 3/4%
Series H Redeemable Exchangeable Preferred Stock
(which may be issued in exchange for shares of
Series G Preferred Stock). The Series I
Preferred Stock will rank on a parity with the
preferred stock proposed to be issued by the
Company in the Proposed V Cable Transactions,
discussed under "Recent Developments".
Conversion.................. The Series I Preferred Stock will be convertible
into shares of Class A Common Stock at any time
on or after January 8, 1996 at the option of the
holder, at a conversion price set forth herein,
subject to adjustment under certain conditions.
Restrictions on Company's
Ability to Pay Dividends...
There are limitations on the Company's ability to
pay dividends on the Series I Preferred Stock.
See "Description of Series I Preferred Stock--
Dividends".
Listing..................... The Depositary Shares have been approved for
listing on the ASE, subject to notice of
issuance, under the symbol "CVCPR".
Concurrent Offering......... The Company is concurrently with the offering of
the Depositary Shares offering $300 million of
its senior subordinated notes due 2005 (the
"2005 Notes"). The Company expects to apply the
net proceeds from that offering (estimated to be
$292.2 million) to the repayment of borrowings
under the Company's principal bank credit
agreement. The consummation of the offering of
the 2005 Notes is not a condition to the
consummation of the offering of the Depositary
Shares offered hereby, nor is the consummation
of the offering of the Depositary Shares a
condition to the consummation of the offering of
the 2005 Notes.
Use of Proceeds............. The net proceeds to be received by the Company
from the offering of the Depositary Shares are
estimated to be $290.6 million, which will
initially be applied to the repayment of
borrowings under the Company's principal bank
credit agreement. The Company expects to
reborrow the amount repaid under the credit
agreement. The Company expects to raise
additional funds in the future. See "Use of
Proceeds" herein.
S-5
<PAGE>
SELECTED FINANCIAL DATA
The historical consolidated statement of operations data (except for book
value per common share, deficiency of earnings available to cover fixed charges
and deficiency of earnings available to cover fixed charges and preferred stock
dividends) and balance sheet data for each year ended December 31 and as of
December 31 in each year in the five-year period ended December 31, 1994,
included in the following selected financial data have been derived from the
Consolidated Financial Statements of the Company, audited by KPMG Peat Marwick
LLP, independent public accountants. The historical consolidated statement of
operations data and balance sheet data for the periods ended and as of
September 30, 1995 and 1994 included in the following selected financial data
have been derived from financial statements of the Company that have not been
audited, but that, in the opinion of the management of the Company, reflect all
adjustments necessary for the fair presentation of such data for the interim
periods. The results of operations for the nine-month period ended September
30, 1995 are not necessarily indicative of the results of operations for the
full year although the Company expects to incur a substantial loss for the year
ending December 31, 1995.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, YEAR ENDED DECEMBER 31,
----------------------- --------------------------------------------------------------
1995 1994 1994 1993 1992 1991 1990
--------- --------- --------- --------- --------- --------- ---------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF
OPERATIONS
DATA(1):
Net revenues............ $ 787,293 $ 591,645 $ 837,169 $ 666,724 $ 572,487 $ 603,272 $ 562,989
Operating expenses:
Technical............... 302,385 215,202 302,885 241,877 204,449 213,059 202,850
Selling, general and ad-
ministrative........... 194,821 121,801 195,942 172,687 120,356 121,527 118,825
Restructuring charge.... -- 4,306(2) 4,306(2) -- -- -- --
Depreciation and amorti-
zation................. 236,788 175,954 271,343 194,904 168,538 215,326 216,288
--------- --------- --------- --------- --------- --------- ---------
Operating profit........ 53,299 74,382 62,693 57,256 79,144 53,360 25,026
Other income (expense):
Interest expense, net... (235,372) (187,711) (261,781) (230,327) (193,379) (257,189) (261,114)
Provision for preferen-
tial payment to
related party.......... (4,200) (4,200) (5,600) (5,600) (2,662) -- --
Provision for loss on
Olympics venture....... -- -- -- -- (50,000)(3) -- --
Loss on sale of pre-
ferred stock........... -- -- -- -- (20,000)(4) -- --
Write-off of deferred
financing costs........ (2,888)(5) -- (9,884)(5) (1,044)(5) (12,284)(5) -- --
Loss on redemption of
debentures............. -- -- (7,088)(5) -- -- -- --
Share of affiliates' net
loss................... (73,090) (54,662) (82,864) (61,017) (47,278) (23,780) (39,980)
Gain (loss) on sale of
programming
and other interests,
net.................... 36,198 -- -- (330) 7,053 15,505 --
Minority interest....... (6,229) (1,656) (3,429) 3,000 -- -- --
Gain on sale of market-
able securities, net... -- -- -- -- 733 5,806 --
Settlement of litigation
and related matters.... -- -- -- -- (5,655) (9,677) --
Transaction fees........ -- -- -- -- -- -- 14,759
Miscellaneous, net...... (4,836) (4,885) (7,198) (8,720) (6,175) (11,224) (10,066)
--------- --------- --------- --------- --------- --------- ---------
Net loss................ (237,118) (178,732) (315,151) (246,782) (250,503) (227,199) (271,375)
Preferred dividend re-
quirement.............. (7,272) (4,098) (6,385) (885) (885) (4,464) (4,065)
--------- --------- --------- --------- --------- --------- ---------
Net loss applicable to
common shareholders.... $(244,390) $(182,830) $(321,536) $(247,667) $(251,388) $(231,663) $(275,440)
========= ========= ========= ========= ========= ========= =========
Net loss per common
share.................. $ (10.29) $ (7.82) $ (13.72) $ (10.83) $ (11.17) $ (10.32) $ (12.36)
========= ========= ========= ========= ========= ========= =========
Average number of common
shares
outstanding (in thou-
sands)................. 23,745 23,386 23,444 22,859 22,512 22,446 22,290
========= ========= ========= ========= ========= ========= =========
Book value per common
share.................. $ (86.51) $ (67.04) $ (76.93) $ (64.61) $ (55.28) $ (41.49) $ (31.36)
========= ========= ========= ========= ========= ========= =========
Deficiency of earnings
available to cover
fixed charges.......... $(237,062) $(178,621) $(315,003) $(246,644) $(250,429) $(227,124) $(271,301)
========= ========= ========= ========= ========= ========= =========
Deficiency of earnings
available to cover
fixed charges and pre-
ferred stock
dividends.............. $(244,334) $(182,719) $(321,388) $(247,529) $(251,314) $(231,588) $(275,366)
========= ========= ========= ========= ========= ========= =========
</TABLE>
(footnotes on following page)
S-6
<PAGE>
<TABLE>
<CAPTION>
AS OF AS OF DECEMBER 31,
SEPTEMBER 30, ----------------------------------------------------------
1995 1994 1993 1992 1991 1990
------------- ---------- ---------- ---------- ---------- ----------
(DOLLARS IN THOUSANDS, EXCEPT PER SUBSCRIBER DATA)
<S> <C> <C> <C> <C> <C> <C>
CONSOLIDATED BALANCE
SHEET DATA(1):
Total assets........... $2,342,444 $2,176,413 $1,309,444 $1,251,157 $1,475,672 $1,641,612
Total debt............. 3,224,228 3,169,236 2,235,499 2,004,452 2,211,056 2,170,275
Cumulative redeemable
preferred stock(4)..... -- -- -- -- 32,094 28,515
Series G Redeemable
Exchangeable
Preferred Stock(6).... 250,000 -- -- -- -- --
Stockholders'
deficiency............. (2,068,606) (1,818,535) (1,503,244) (1,250,248) (932,428) (702,448)
STATISTICAL DATA(1):
Homes passed(7)........ 3,028,000 2,899,000 2,240,000 2,019,000 2,005,000 1,976,000
Basic service
subscribers............ 1,887,000 1,768,000 1,379,000 1,262,000 1,372,000 1,326,000
Basic penetration(8)... 62.3% 61.0% 61.5% 62.5% 68.4% 67.1%
Number of premium
television units....... 3,237,000 3,208,000 3,003,000 2,802,000 2,326,000 2,401,000
Average number of
premium units per
basic
subscriber............ 1.7 1.8 2.2 2.2 1.7 1.8
Average monthly revenue
per basic
subscriber(9)......... $ 36.69 $ 36.33 $ 36.59 $ 37.64 $ 34.43 $ 34.09
</TABLE>
- --------
(1) The consolidated statement of operations, balance sheet and statistical
data reflect (i) the deconsolidation of A-R Cable Services, Inc. ("A-R
Cable"), effective as of January 1, 1992, as a result of the restructuring
of A-R Cable, (ii) the acquisition of Cablevision of New York City
("Cablevision of NYC"), effective as of July 10, 1992, and (iii) various
acquisitions of cable television systems and other businesses during the
periods presented. (See "Business--Cable Television Operations" in the Form
10-K and "Condensed Pro Forma Consolidated Financial Information" herein.)
Acquisitions made by the Company during the periods presented were
accounted for under the purchase method of accounting and, accordingly, the
acquisition costs were allocated to the net assets acquired based on their
fair value, except for the acquisition of partnership interests in
Cablevision of NYC from Charles F. Dolan and entities affiliated with him,
which were recorded at Mr. Dolan's and such entities' historical costs.
Acquisitions are reflected in the consolidated statement of operations,
balance sheet and statistical data from the time of acquisition. Certain
reclassifications have been made to the 1991 and 1990 financial statement
amounts to conform to the 1992 presentation.
(2) 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.
(3) In 1992, the Company recognized a $50.0 million loss in connection with
Rainbow Programming's commitment in respect of its venture with NBC
relating to the 1992 Summer Olympics, which the Company paid in January
1993.
(4) In connection with the 1992 V Cable Reorganization (as defined under "The
Company--Cable Television"), the Company redeemed A-R Cable's redeemable
preferred stock on May 11, 1992, incurring a loss of $20 million.
(5) In connection with the 1992 V Cable Reorganization, the Company wrote off
approximately $7.5 million of deferred financing costs related to the debt
of V Cable, Inc. Also, a portion of the Company's deferred financing costs
of approximately $4.8 million in 1992 and $1.0 million in 1993, related to
the replacement of bank debt with subordinated debt, were written off. In
October 1994, the Company entered into a new bank credit agreement and
redeemed $200 million of its reset debentures. The related deferred
financing costs and unamortized discount relating to each were written off
and approximately $2.0 million in redemption fees was incurred in
connection with the redemption of the reset debentures. In January 1995,
Rainbow Programming amended its credit agreement to refinance its existing
borrowings and to provide funds for the acquisition of SportsChannel (New
York) Associates and Rainbow News 12 Company, resulting in an approximately
$2.3 million write-off of deferred financing costs.
(6) On September 26, 1995, the Company issued 2.5 million shares of its 11 3/4%
Series G Redeemable Exchangeable Preferred Stock.
(7) Homes passed is based upon homes passed by cable actually marketed and does
not include multiple dwelling units passed by the cable plant that are not
connected to it.
(8) Basic penetration represents basic service subscribers at the end of the
period as a percentage of homes passed at the end of the period.
(9) Based on recurring service revenues, excluding installation charges and
certain other revenues such as advertising, pay-per-view and home shopping
revenues, for the last month of the period, divided by average basic
subscribers for that month.
S-7
<PAGE>
SUPPLEMENTAL FINANCIAL AND OPERATING DATA
The following tables set forth information concerning the Company's Core
Restricted Group, Cablevision of NYC, combined Restricted Group (which includes
Cablevision of NYC), V Cable and Monmouth Cable and Riverview Cable. In October
1994, Cablevision of NYC became a member of Cablevision's Restricted Group. The
data should be read in conjunction with the Company's Consolidated Financial
Statements and "Management's Discussion and Analysis".
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, YEAR ENDED DECEMBER 31,
------------------------- ----------------------------------
FINANCIAL DATA 1995 1994 1994 1993 1992
-------------- ---------- ---------- ---------- --------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
CORE RESTRICTED GROUP:
STATEMENT OF OPERATIONS
DATA:
Net revenues........... $ 348,773 $ 322,640 $ 435,171 $ 393,815 $ 378,171
Operating profit before
depreciation and
amortization(1)(2).... 166,682 162,602 212,388 196,760 192,553
Depreciation and amor-
tization.............. 89,952 81,290 119,760 90,407 85,939
Operating profit(2).... 76,730 81,312 92,628 106,353 106,614
Total interest expense. 114,970 101,834 138,154 129,799 112,137
BALANCE SHEET DATA:
Total assets........... $1,057,031 $ 905,156 $ 929,376 $ 661,303 $ 547,373
Senior debt............ 814,363(3) 522,024 829,895(3) 359,022 585,381
Subordinated debt...... 623,590 822,892 623,534 822,781 474,247
Total debt............. 1,437,953(3) 1,344,916 1,453,429(3) 1,181,803 1,059,628
FINANCIAL RATIOS AND
OTHER DATA:
Operating profit before
depreciation and
amortization to net
revenues.............. 47.8% 50.4% 48.8% 50.0% 50.9%
Total debt to operating
profit before
depreciation and
amortization.......... 6.5x(4) 6.2x(4) 6.8x 6.0x 5.5x
Operating profit before
depreciation and
amortization to total
interest expense...... 1.4x 1.6x 1.5x 1.5x 1.7x
Capital expenditures... $ 91,083 $ 102,950 $ 147,534 $ 106,379 $ 65,331
CABLEVISION OF NYC:
STATEMENT OF OPERATIONS
DATA:
Net revenues........... $ 151,112 $ 106,270 $ 149,396 $ 101,539 $ 67,409
Operating profit before
depreciation and
amortization(1)....... 42,611 26,222 36,928 18,803 11,731
FINANCIAL RATIOS AND
OTHER DATA:
Operating profit before
depreciation and
amortization to net
revenues.............. 28.2% 24.7% 24.7% 18.5% 17.4%
Capital expenditures... $ 65,392 $ 74,421 $ 103,544 $ 86,669 $ 55,652
RESTRICTED GROUP:
STATEMENT OF OPERATIONS
DATA:
Net revenues........... $ 499,885 $ 428,910 $ 584,567 $ 495,354 $ 445,580
Operating profit before
depreciation and
amortization(1)....... 209,293 188,824 249,316 215,563 204,284
Depreciation and amor-
tization.............. 121,815 104,701 154,187 111,366 102,015
Operating profit....... 87,478 84,123 95,129 104,197 102,269
Total interest expense. 124,297 110,739 150,626 137,960 118,230
BALANCE SHEET DATA:
Total assets........... $1,232,640 $1,125,987 $1,119,882 $ 838,746 $ 660,002
Senior debt............ 932,963(3) 699,465 969,895(3) 488,128 664,081
Subordinated debt...... 623,590 822,892 623,534 822,781 474,247
Obligation to related
party................. 191,579 90,114 193,079 91,619 67,000
Total debt............. 1,748,132(3) 1,612,471 1,786,508(3) 1,402,528 1,205,328
FINANCIAL RATIOS AND
OTHER DATA:
Operating profit before
depreciation and
amortization to net
revenues.............. 41.9% 44.0% 42.6% 43.5% 45.8%
Total debt to operating
profit before
depreciation and
amortization.......... 6.3x(4) 6.4x(4) 7.2x 6.5x 5.9x
Operating profit before
depreciation and
amortization to total
interest expense...... 1.7x 1.7x 1.7x 1.6x 1.7x
Capital expenditures... $ 156,475 $ 177,371 $ 251,078 $ 193,048 $ 120,983
</TABLE>
(footnotes on following page)
S-8
<PAGE>
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, YEAR ENDED DECEMBER 31,
--------------------- ----------------------------
FINANCIAL DATA 1995 1994 1994 1993 1992
-------------- -------- -------- -------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
V CABLE:
STATEMENT OF OPERATIONS
DATA:
Net revenues........... $110,612 $104,943 $140,691 $137,853 $129,409
Operating profit before
depreciation and
amortization(1)....... 50,730 51,767 68,592 65,789 63,773
Depreciation and
amortization.......... 47,208 60,097 83,671 80,287 69,148
Operating profit
(loss)................ 3,522 (8,330) (15,079) (14,498) (5,375)
Total interest expense. 77,972 71,607 96,723 94,452 79,494
BALANCE SHEET DATA:
Total assets........... $403,201 $468,203 $447,381 $536,629 $558,988
Total debt............. 888,596 853,262 862,440 832,964 799,098
FINANCIAL RATIOS AND
OTHER DATA:
Operating profit before
depreciation and
amortization to net
revenues.............. 45.9% 49.3% 48.8% 47.7% 49.3%
Total debt to operating
profit before
depreciation and
amortization.......... 13.1x(4) 12.4x(4) 12.6x 12.7x 12.5x
Operating profit before
depreciation and
amortization to total
interest expense...... 0.7x 0.7x 0.7x 0.7x 0.8x
Capital expenditures... $ 18,694 $ 13,123 $ 19,981 $ 20,304 $ 17,608
MONMOUTH CABLE AND
RIVERVIEW CABLE:
BALANCE SHEET DATA:
Total assets........... $335,866 $391,049 $375,982 -- --
Senior debt............ 206,200 233,300 230,000 -- --
Subordinated debt...... 141,268 141,268 141,268 -- --
Total debt............. 347,468 374,568 371,268 -- --
</TABLE>
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
AS OF SEPTEMBER 30, ---------------------------------
STATISTICAL DATA 1995 1994 1993 1992
---------------- ------------------- --------- --------- ---------
<S> <C> <C> <C> <C>
CORE RESTRICTED GROUP:
Homes passed(5)........ 1,320,000 1,309,000 1,086,000 1,079,000
Basic service
subscribers at end of
period................ 957,000 928,000 815,000 790,000
Basic penetration(6)... 72.5% 70.9% 75.0% 73.2%
Number of premium
television units...... 1,488,000 1,572,000 1,504,000 1,586,000
Average number of
premium units per
basic subscriber...... 1.6 1.7 1.8 2.0
Average revenue per
basic subscriber(7)... $ 37.66 $ 37.10 $ 38.01 $ 38.85
CABLEVISION OF NYC:
Homes passed(5)........ 930,000 829,000 645,000 436,000
Basic service
subscribers at end of
period................ 382,000 315,000 214,000 134,000
Basic penetration(6)... 41.0% 37.9% 33.1% 30.7%
Number of premium
television units...... 1,267,000 1,127,000 1,053,000 730,000
Average number of
premium units per
basic subscriber...... 3.3 3.6 4.9 5.4
Average revenue per
basic subscriber(7)... $ 40.55 $ 41.84 $ 41.12 $ 46.62
RESTRICTED GROUP:
Homes passed(5)........ 2,250,000 2,138,000 1,731,000 1,515,000
Basic service
subscribers at end of
period................ 1,339,000 1,243,000 1,029,000 924,000
Basic penetration(6)... 59.5% 58.1% 59.4% 61.0%
Number of premium
television units...... 2,755,000 2,699,000 2,557,000 2,316,000
Average number of
premium units per
basic subscriber...... 2.1 2.2 2.5 2.5
Average revenue per
basic subscriber(7)... $ 38.48 $ 38.29 $ 38.65 $ 39.96
V CABLE:
Homes passed(5)........ 516,000 513,000 509,000 504,000
Basic service
subscribers at end of
period................ 374,000 364,000 350,000 338,000
Basic penetration(6)... 72.5% 71.1% 68.7% 67.1%
Number of premium
television units...... 367,000 375,000(8) 446,000 485,000
Average number of
premium units per
basic subscriber...... 1.0 1.0 1.3 1.4
Average revenue per
basic subscriber(7)... $ 31.05 $ 30.41 $ 30.56 $ 31.30
MONMOUTH CABLE AND
RIVERVIEW CABLE:
Homes passed(5)........ 262,000 248,000 -- --
Basic service
subscribers at end of
period................ 174,000 161,000 -- --
Basic penetration(6)... 66.4% 65.1% -- --
Number of premium
television units...... 116,000 133,000 -- --
Average number of
premium units per
basic subscriber...... 0.7 0.8 -- --
Average revenue per
basic subscriber(7)... $ 35.05 $ 34.67 -- --
</TABLE>
(footnotes on following page)
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<PAGE>
FOOTNOTES
(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) Includes management fees from Cablevision of NYC of $5.3 million, $3.7
million, $5.2 million, $3.5 million and $2.4 million, respectively.
(3) Excludes Cablevision MFR, Inc. seller note in the amount of approximately
$141.3 million that is guaranteed by the Core Restricted Group (as defined
under "The Company--Cable Television").
(4) Operating profit before depreciation and amortization is annualized for
purposes of preparing interim financial ratios that include balance sheet
items.
(5) Homes passed is based upon homes passed by cable actually marketed and does
not include multiple dwelling units passed by the cable plant that are not
connected to it.
(6) Basic penetration represents basic service subscribers at the end of the
period as a percentage of homes passed at the end of the period.
(7) Based on recurring service revenues, excluding installation charges and
certain other revenues such as advertising, pay-per-view and home shopping
revenues, for the last month in the period presented, divided by the
average number of basic subscribers for that month.
(8) Reflects the reclassification of units of Madison Square Garden Network
subscribers to non-premium units in February 1994.
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<PAGE>
THE COMPANY
The Company is one of the largest operators of cable television systems in
the United States, with approximately 2,687,000 subscribers in 19 states as of
September 30, 1995 based on the number of basic subscribers in systems which
the Company manages and which it owns or in which it has investments. The
Company also has ownership interests in companies that produce and distribute
national and regional programming services and provide advertising sales
services for the cable television industry.
For financing purposes, the Company is structured as a restricted group
(collectively, the "Restricted Group"), consisting of Cablevision Systems
Corporation and certain of its subsidiaries, including Cablevision of New York
City ("Cablevision of NYC"), and an unrestricted group of subsidiaries,
consisting primarily of V Cable, Inc. ("V Cable"), Cablevision MFR, Inc.
("Cablevision MFR") and Rainbow Programming Holdings, Inc., including Rainbow
Advertising Sales Corporation ("Rainbow Advertising") (together, "Rainbow
Programming"). In addition, the Company has an unrestricted group of
investments, consisting of investments in A-R Cable Services, Inc. ("A-R
Cable"), U.S. Cable Television Group, L.P. ("U.S. Cable"), Cablevision of
Framingham Holding, Inc. ("CFHI"), A-R Cable Partners, Cablevision of Boston
Limited Partnership ("Cablevision of Boston") and Cablevision of Newark. The
Company's unrestricted subsidiaries and investments are collectively referred
to herein as the "Unrestricted Group". The Restricted Group and each member of
the Unrestricted Group that operates cable television systems are individually
and separately financed. The indebtedness of V Cable and A-R Cable is non-
recourse to the Company, other than with respect to the capital stock of such
entities owned by the Company. Rainbow Programming's cash requirements have
been financed to date by the Restricted Group, by sales of equity interests in
the programming businesses and, as set forth below under "--Programming
Services", through separate external debt financing. See "Management's
Discussion and Analysis--Liquidity and Capital Resources" for a discussion of
the restrictions on investments by the Restricted Group and certain other
matters.
STRATEGY
The Company's strategy has been to concentrate its cable television systems
in and around two major metropolitan areas, New York City and Cleveland, Ohio,
with a view to being the largest cable provider in each of these markets; to
maximize its revenue per subscriber through the use of "tiered" packaging
strategies for marketing premium services; to develop and promote niche
programming services; and to remain an industry leader in upgrading the
technological capabilities of its systems.
The Company believes that its cable television systems on Long Island, New
York comprise the largest contiguous group of cable television systems under
common ownership in the United States (measured by number of subscribers). By
developing systems in and around major metropolitan areas, including expansion
through acquisitions in areas in which the Company has existing systems, the
Company has been able to realize economies of scale in the operation and
management of its systems, and capitalize on opportunities to create and
market programming of regional interest.
Through the current and planned upgrade of its cable plant, including the
utilization of fiber optic cable and associated electronics, the Company is
seeking to significantly increase its analog channel capacity and add new
digital channel capacity that will facilitate the development of such adjunct
new businesses as video on demand, near video on demand, information services,
interactive services, including Internet access, residential telephony and
commercial telephony. To implement successfully and roll out these adjunct new
businesses beyond the initial development phases, the Company will require
additional capital from the sale of equity in the capital markets (in addition
to the offering of the Depositary Shares offered hereby) or to a strategic
investor.
CABLE TELEVISION
The cable television systems that are majority owned and managed by the
Company (the "Company's cable televisions systems") served approximately
1,887,000 subscribers as of September 30, 1995 in New York, Ohio, Connecticut,
New Jersey, Michigan and Massachusetts. In addition, the Company has non-
majority investments
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<PAGE>
in and manages cable television systems which served approximately 800,000
subscribers as of September 30, 1995 in Alabama, Arkansas, Florida, Illinois,
Kansas, Kentucky, Maine, Massachusetts, Mississippi, Missouri, New Jersey, New
York, North Carolina, Oklahoma, Pennsylvania and Tennessee. The Company's
cable television systems have generally been characterized by relatively high
revenues per subscriber ($36.69 for September 1995) and ratios of premium
service units to basic subscribers (1.7:1 for September 1995). In calculating
revenue per subscriber, the Company includes only recurring service revenues
and excludes installation charges and certain other revenues such as
advertising, pay-per-view and home shopping revenues.
The cable television operations in the Restricted Group (other than those of
Cablevision of NYC) (such operations, the "Core Restricted Group") served
approximately 957,000 subscribers as of September 30, 1995, primarily on Long
Island, New York, in Connecticut (principally Fairfield County), in northern
New Jersey, in Westchester County, New York and in Cleveland, Ohio. The
revenue per subscriber and ratio of premium service units to basic subscribers
for cable television systems in the Core Restricted Group for September 1995
were $37.66 and 1.6:1, respectively.
In July 1992, the Company acquired from Charles F. Dolan, the Company's
Chairman, substantially all of Cablevision of NYC (the "Cablevision of NYC
Acquisition"), a cable television system under development in The Bronx and in
parts of Brooklyn, New York. Prior to the acquisition, the Company had a 15%
interest in Cablevision of NYC. Mr. Dolan remains a partner in Cablevision of
NYC with a 1% interest and the right to certain preferential payments. See
"Business--Consolidated Cable Affiliates--Cablevision of New York City" in the
Form 10-K. As of September 30, 1995, Cablevision of NYC passed approximately
930,000 homes and served approximately 382,000 subscribers. Construction of
the systems in The Bronx and in Brooklyn has been substantially completed. The
Company expects that the remaining costs to complete the construction of the
Cablevision of NYC systems will be financed by cash flow generated from the
operations of Cablevision of NYC and the amounts available under the Company's
principal bank credit agreement (the "Credit Agreement"). See "Management's
Discussion and Analysis--Liquidity and Capital Resources--Cablevision of NYC".
The cable television operations of the Unrestricted Group are conducted
through the Company's unrestricted subsidiaries, V Cable and Cablevision MFR,
through its unrestricted investments, consisting of A-R Cable, U.S. Cable,
CFHI, A-R Cable Partners, Cablevision of Boston, and Cablevision of Newark.
In August 1994, Cablevision MFR, a wholly-owned subsidiary of the Company,
acquired substantially all of the assets of Monmouth Cablevision Associates
("Monmouth Cable") and Riverview Cablevision Associates, L.P. ("Riverview
Cable"), consisting of cable television systems in New Jersey. Also in August
1994, CFHI, a corporation jointly-owned by the Company and E.M. Warburg Pincus
Investors, L.P., acquired substantially all of the assets of Framingham
Cablevision Associates Limited Partnership ("Framingham Cable"), consisting of
a cable television system in Massachusetts. Additionally, in June 1994, a
partnership comprised of subsidiaries of the Company and E.M. Warburg, Pincus
& Co. Inc. completed the purchase of certain assets of Nashoba Communications,
a group of three limited partnerships that operate three cable television
systems in Massachusetts.
V Cable was formed by the Company in February 1989 and served approximately
374,000 subscribers as of September 30, 1995, principally in the suburbs of
Cleveland, Ohio and on Long Island. The revenue per subscriber and ratio of
premium service units to basic subscribers for V Cable's systems for September
1995 were $31.05 and 1.0:1, respectively. As described under "Business--
Consolidated Cable Affiliates--V Cable" in the Form 10-K, the Company
consummated a significant restructuring and reorganization involving V Cable
and U.S. Cable (the "1992 V Cable Reorganization") on December 31, 1992. See
also "Recent Developments--Proposed V Cable Transactions" for a description of
certain transactions involving V Cable.
PROGRAMMING SERVICES
The Company conducts its programming activities through Rainbow Programming,
its wholly-owned subsidiary and member of the Unrestricted Group, and through
subsidiaries of Rainbow Programming in partnership with certain unaffiliated
entities, including National Broadcasting Company, Inc. ("NBC") and
S-12
<PAGE>
Liberty Media Corporation ("Liberty"). Rainbow Programming's businesses
include eight regional SportsChannel services, four national entertainment
services (American Movie Classics Company ("AMCC"), Bravo Network ("Bravo"),
MuchMusic ("MM") and the Independent Film Channel ("IFC")), Rainbow News 12
Company (a regional news service serving Long Island) and the national
backdrop sports services of Prime SportsChannel Networks ("Prime
SportsChannel"). Rainbow Programming also owns an interest in Madison Square
Garden Corporation (discussed below). Rainbow Programming's SportsChannel
services provide regional sports programming to the New York, Philadelphia,
New England, Chicago, Cincinnati, Cleveland, San Francisco and Florida areas.
AMCC is a national program service featuring classic, unedited and non-
colorized films from the 1930s through the 1970s. Bravo is a national program
service offering international films and performing arts programs, including
jazz, dance, classical music, opera and theatrical programs. See "Business--
Programming Operations--General" in the Form 10-K. MM is a Canadian music
service featuring music primarily from Canadian artists. IFC is a national
program service that airs independent films made outside the traditional
Hollywood system.
In July 1994, Rainbow Programming purchased Liberty's 50% interest in AMCC
for a purchase price of approximately $181.0 million pursuant to a buy-sell
procedure set forth in the Partnership Agreement of AMCC. In July 1995,
Rainbow Programming purchased NBC's interest in SportsChannel (New York)
Associates and Rainbow News 12 Company (the "NBC Option") for an aggregate
purchase price of approximately $95.5 million, and, effective as of such date,
consolidated the results of operations of SportsChannel (New York) Associates
and Rainbow News 12 Company with those of the Company. See "Recent
Developments--NBC Option" and "Business--Programming Services" in the Form 10-
K.
On March 10, 1995, MSG Holdings, L.P. ("MSG Holdings"), a partnership
between a subsidiary of Rainbow Programming and a subsidiary of ITT
Corporation ("ITT"), acquired Madison Square Garden Corporation ("MSG") in a
transaction in which MSG was merged with and into MSG Holdings. MSG owns the
Madison Square Garden Arena and the adjoining Paramount Theater, the New York
Rangers professional hockey team, the New York Knicks professional basketball
team and the Madison Square Garden Network, a sports programming network with
over five million subscribers. Rainbow Programming has the option until March
10, 1996 to (i) acquire interests in MSG Holdings from ITT sufficient to
equalize the interests of ITT and Rainbow Programming in MSG Holdings, (ii)
maintain its investment at the initial level, or (iii) require ITT to purchase
50% of Rainbow Programming's initial interest in MSG Holdings at the price
paid by Rainbow Programming for such interest plus an adjustment for Rainbow
Programming's share of MSG Holdings' operating income after interest expense,
if any, following the closing of the acquisition of MSG. Rainbow Programming
has not determined which alternative it will pursue. See "Business--
Programming Services" in the Form 10-K.
ADVERTISING SERVICES
Rainbow Advertising sells advertising time to national, regional and local
advertisers on behalf of the Company's cable television systems and the
SportsChannel and Rainbow News 12 Company programming services, as well as on
behalf of unaffiliated cable television systems.
RECENT DEVELOPMENTS
PROPOSED V CABLE TRANSACTIONS
The Company, V Cable and VC Holding, Inc. ("VC Holding") have entered into a
general, non-binding letter of intent with General Electric Capital
Corporation ("GECC"). In the transactions contemplated by the letter of
intent, the Company would issue to GECC preferred stock having an initial
aggregate liquidation preference of $500 million for an aggregate purchase
price of $500 million. Fifty percent of the preferred stock would become
convertible into the Company's Class A Common Stock four years after the date
of issuance and the remaining fifty percent would become convertible into the
Company's Class A Common Stock six years after the date of issuance (unless
conversion is accelerated upon the occurrence of certain events), in each
case, in whole or in part, and at a conversion rate based upon the trading
value of the Class A Common Stock at the time of conversion. The terms of the
preferred stock would give the Company the right to redeem the preferred stock
for cash at any time prior to conversion, although there can be no assurance
that the Company would be able to
S-13
<PAGE>
do so. It is also anticipated that the Company would grant GECC registration
rights with respect to the preferred stock and to the Class A Common Stock
issuable upon any conversion of such preferred stock. The Company would make
an equity capital contribution to V Cable of the gross proceeds from such
issuance and V Cable would apply such amounts as set forth below. The Series I
Preferred Stock offered hereby will rank on a parity with the preferred stock
proposed to be issued by the Company in the Proposed V Cable Transactions (as
defined below).
As part of the proposed transactions contemplated by the letter of intent
(together with the issuance of the preferred stock to GECC, the "Proposed V
Cable Transactions"), the $500 million capital contribution received by V
Cable would be applied as follows: (i) approximately $27 million to repay V
Cable's outstanding indebtedness to GECC; (ii) approximately $95 million to
repay to GECC a portion of the debt of U.S. Cable payable by V Cable under
certain circumstances; (iii) approximately $328 million to repay to GECC a
portion of VC Holding's indebtedness; and (iv) approximately $50 million would
be used by VC Holding to make a preferred capital contribution to U.S. Cable
as discussed below.
The Proposed V Cable Transactions also contemplate that V Cable will enter
into one or more agreements pursuant to which, following the receipt of any
required franchise and regulatory approvals, (i) the U.S. Cable partnership
will redeem the 80% of U.S. Cable's partnership interests not already owned by
V Cable for approximately $4 million, (ii) VC Holding will make a preferred
capital contribution to U.S. Cable of approximately $50 million, and (iii) the
U.S. Cable partnership will refinance $165 million of U.S. Cable indebtedness
payable to GECC.
As part of the Proposed V Cable Transactions, GECC would also agree to
provide two new credit facilities, a $325 million three year revolving credit
facility for V Cable's Ohio subsidiary (approximately $215 million of which
would be drawn upon entering into such agreement) and a $260 million two year
revolving credit facility for V Cable's Long Island subsidiary (approximately
$224 million of which would be drawn upon entering into such agreement). The
initial amounts drawn under the respective revolving credit facilities will be
used to repay all remaining VC Holding debt to GECC. Both the Ohio and Long
Island credit facilities would be entered into upon completion of final
documentation and the receipt of any required franchise or regulatory
approvals.
The letter of intent between the Company and GECC is a general, non-binding
letter of intent. There can be no assurance that the Proposed V Cable
Transactions will be consummated or will be consummated in the form described
in the letter of intent. If the Proposed V Cable Transactions, or similar
transactions with respect to V Cable, fail to occur, then V Cable believes
that it is likely that it will be unable to meet certain of its financial
covenants as of December 31, 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. During
1995, the Restricted Group has made equity contributions aggregating $2.3
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 either 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 credit line will be sufficient to service its debt, to fund its
capital expenditures and to meet its working capital requirements through
1996.
NBC OPTION
On July 12, 1995, Rainbow Programming consummated the purchase of NBC's
interest in SportsChannel (New York) Associates and Rainbow News 12 Company
pursuant to the NBC Option, which Rainbow Programming entered into with NBC in
connection with the MSG Acquisition, for an aggregate purchase price of
approximately $95.5 million, and, effective as of such date, consolidated the
results of operations of SportsChannel (New York) Associates and Rainbow News
12 Company with those of the Company. The purchase was financed principally by
a drawdown of approximately $94.0 million under Rainbow Programming's $202
million amended and restated credit facility and an equity contribution by the
Company of the balance of the purchase price.
ISSUANCE OF SERIES G PREFERRED STOCK
On September 26, 1995, the Company issued 2.5 million shares of its 11 3/4%
Series G Redeemable Exchangeable Preferred Stock (the "Series G Preferred
Stock") with an aggregate liquidation preference of
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<PAGE>
$250 million. The Company is required to redeem the Series G Preferred Stock
on October 1, 2007 at a redemption price per share equal to the liquidation
preference of $100 per share, plus accrued and unpaid dividends thereon.
Before October 1, 2000, dividends may, at the option of the Company, be paid
in cash or by issuing fully paid and nonassessable shares of the Series G
Preferred Stock with an aggregate liquidation preference equal to the amount
of such dividends. On and after October 1, 2000, dividends must be paid in
cash. The terms of the Series G Preferred Stock permit the Company, at its
option, after January 1, 1996 to exchange the Series G Preferred Stock for the
Company's 11 3/4% Senior Subordinated Debentures due 2007 (the "11 3/4%
Debentures") in an aggregate principal amount equal to the aggregate
liquidation preference of the shares of Series G Preferred Stock.
Of the net proceeds of approximately $239.3 million received by the Company
from the issuance and sale of the Series G Preferred Stock, $136.2 million was
applied to repay borrowings under the Company's Credit Agreement and $103.1
million was applied to the redemption of the Company's outstanding Series E
Redeemable Exchangeable Convertible Preferred Stock (the "Series E Preferred
Stock") on October 26, 1995 at a redemption price equal to the aggregate
liquidation preference plus accrued and unpaid dividends thereon.
CABLEVISION OF BOSTON ACQUISITION
In June 1994, the Company and Cablevision of Boston entered into an
agreement which is designed to give the Company full ownership of Cablevision
of Boston. The agreement provides for the acquisition by the Company of the
interests of Cablevision of Boston which it does not already own in a series
of transactions. See "Condensed Pro Forma Consolidated Financial Information".
Consummation of the transactions would result in the limited partners in
Cablevision of Boston receiving Class A Common Stock of the Company with an
expected aggregate market value of approximately $40 million. Upon
consummation of the acquisition of Cablevision of Boston, the Company expects
Cablevision of Boston to become a member of the Restricted Group. All
outstanding subordinated advances made by the Company to Cablevision of Boston
will become intercompany indebtedness if the acquisition of Cablevision of
Boston is consummated. In addition, the Company, along with certain of its
affiliates, are parties to a lawsuit filed with respect to the Company's
acquisition of Cablevision of Boston. The action is brought on behalf of a
purported class consisting of limited partners in Cablevision of Boston and
seeks, among other matters, to enjoin the proposed acquisition of Cablevision
of Boston and damages. The Company, along with the other defendants, is
defending the action.
IMPACT OF PENDING TELECOMMUNICATIONS LEGISLATION ON FCC CABLE RATE REGULATION
Both the U.S. Senate and the House of Representatives have passed
legislation that would significantly relax cable rate regulation. The Senate
bill would modify the 1992 Cable Act's definition of "effective competition"
to deregulate all cable rates, including basic service rates, whenever a
telephone company begins to offer comparable video programming services to
subscribers in a cable operator's franchise area. The Senate bill also limits
the FCC's ability to regulate rates for non-basic services offered by an
operator not subject to "effective competition" only to instances in which an
operator's rates for such services substantially exceed the national average.
The House bill would deregulate non-basic rates charged by a cable operator,
on a franchise area by franchise area basis, as soon as a telephone company
has been authorized to construct video dialtone facilities or has been
authorized by the FCC or local franchising authorities to provide video
programming to subscribers in the operator's franchise area by any means. Non-
basic rates in all franchise areas would be deregulated 15 months after the
date of enactment, whether or not a telephone company has been so authorized
in a particular franchise area. The regulation of rates for basic service
offered by an operator not subject to "effective competition" would remain
unchanged.
The differences between the House and Senate passed bills would need to be
reconciled before the legislation could become law. A House-Senate conference
committee has begun meeting to attempt to resolve these differences. The
Company cannot at this point predict whether any legislation ultimately will
be enacted into law or the final form any such legislation would take.
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<PAGE>
USE OF PROCEEDS
The net proceeds to be received by the Company from the Offering are
estimated to be $290.6 million. The Company will initially apply the net
proceeds from the Offering to the repayment of borrowings under the Company's
Credit Agreement. All of the borrowings repaid may be reborrowed under the
Credit Agreement and the Company expects to reborrow such amount in the future
for general corporate purposes. The Company expects to raise additional funds
in the future. See "Management's Discussion and Analysis--Liquidity and
Capital Resources" for information concerning the Company's significant
expected expenditures.
The borrowings under the Credit Agreement being repaid bear interest at
floating rates, currently 8.3%, and mature in installments over the 1997-2003
time period. See "Management's Discussion and Analysis--Liquidity and Capital
Resources".
The Company is concurrently with this Offering of Depositary Shares offering
$300 million of its Senior Subordinated Notes due 2005 (the "2005 Notes"). If
that Offering is completed, the Company expects to use the net proceeds from
that Offering (estimated to be $292.2 million) to repay borrowings under the
Credit Agreement. The consummation of the Offering of the 2005 Notes is not a
condition to the consummation of the Offering of the Depositary Shares offered
hereby, nor is the consummation of the Offering of the Depositary Shares a
condition to the consummation of the Offering of the 2005 Notes.
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<PAGE>
CAPITALIZATION
The following table sets forth the consolidated capitalization of the
Company and its consolidated subsidiaries at September 30, 1995 and as
adjusted to reflect the pro forma consolidated capitalization of the Company
and its consolidated subsidiaries at September 30, 1995, adjusted to give
effect to (i) the proposed acquisition of Cablevision of Boston, (ii) the
Proposed V Cable Transactions and (iii) the redemption of the Company's Series
E Preferred Stock on October 26, 1995, as further adjusted to reflect the
issuance of the Series I Preferred Stock represented by the Depositary Shares
offered hereby and the 2005 Notes offered in a concurrent offering, and the
application of the estimated net proceeds to the Company from the Offering of
the Depositary Shares and the 2005 Notes. See "Recent Developments", "Use of
Proceeds" and "Condensed Pro Forma Consolidated Financial Statements".
<TABLE>
<CAPTION>
AS OF SEPTEMBER 30, 1995
-----------------------------------
AS ADJUSTED
HISTORICAL PRO FORMA PRO FORMA
---------- ---------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
LONG-TERM DEBT:
Restricted Group:
Bank indebtedness(1)(2)............... $ 925,366 $1,107,683 $ 524,933
10 3/4% Senior Subordinated Debentures
due 2004............................. 275,000 275,000 275,000
Senior Subordinated Notes due 2005.... -- -- 300,000
9 7/8% Senior Subordinated Debentures
due 2013............................. 198,914 198,914 198,914
9 7/8% Senior Subordinated Debentures
due 2023............................. 149,676 149,676 149,676
Capitalized lease obligations......... 7,597 9,481 9,481
---------- ---------- -----------
Total............................... 1,556,553 1,740,754 1,458,004
---------- ---------- -----------
V Cable:
Senior debt........................... 888,596 438,596 438,596
---------- ---------- -----------
MFR:
Senior bank debt...................... 206,200 206,200 206,200
Subordinated notes.................... 141,268 141,268 141,268
---------- ---------- -----------
Total............................... 347,468 347,468 347,468
---------- ---------- -----------
Other Unrestricted Subsidiaries:
Other indebtedness.................... 240,032 405,032 405,032
Obligation to related party(3)........ 191,579 191,579 191,579
---------- ---------- -----------
Total............................... 431,611 596,611 596,611
---------- ---------- -----------
Total long-term debt.............. 3,224,228 3,123,429 2,840,679
---------- ---------- -----------
Series G Redeemable Exchangeable Preferred
Stock:
Authorized--4,500,000 shares
Issued--2,500,000 shares.............. 250,000 250,000 250,000
---------- ---------- -----------
STOCKHOLDERS' DEFICIENCY:
Series C/D Cumulative Preferred Stock:
Authorized--225,000 shares
Issued--110,622 shares................ 1 1 1
Series E Redeemable Exchangeable Con-
vertible Preferred Stock:
Authorized--100,000 shares
Issued--100,000 shares................ 1 -- --
Series I Cumulative Convertible Ex-
changeable Preferred Stock represented
by the Depositary Shares offered here-
by..................................... -- -- 12
Series J Redeemable Convertible Pre-
ferred Stock(4)........................ -- 5 5
Class A Common Stock:
Authorized--50,000,000 shares
Issued--12,338,111 shares............. 123 129 129
Class B Common Stock:
Authorized--20,000,000 shares
Issued--11,573,909 shares............. 116 116 116
Capital contributed in excess of (less
than) par value........................ (79,478) 354,022 644,560
Accumulated deficit..................... (1,986,132) (2,016,475) (2,016,475)
---------- ---------- -----------
(2,065,369) (1,662,202) (1,371,652)
Treasury stock.......................... (3,237) (3,237) (3,237)
---------- ---------- -----------
Total stockholders' deficiency...... (2,068,606) (1,665,439) (1,374,889)
---------- ---------- -----------
Total capitalization.............. $1,405,622 $1,707,990 $ 1,715,790
========== ========== ===========
</TABLE>
(footnotes on following page)
S-17
<PAGE>
FOOTNOTES
(1) See "Management's Discussion and Analysis--Liquidity and Capital
Resources" and the Consolidated Financial Statements for a description of
the bank indebtedness. This indebtedness consists of the Company's
indebtedness under its principal bank credit agreement, the New Jersey
subsidiary credit agreement and the Cablevision of NYC credit agreement.
These amounts do not include approximately $20.4 million reserved under
the Company's bank credit agreements for certain letters of credit issued
on behalf of the Company. The Company and its New Jersey subsidiary are
jointly and severally liable under the New Jersey subsidiary credit
agreement.
(2) On October 26, 1995, the Company borrowed $103.1 million of bank debt in
order to redeem the Company's outstanding Series E Preferred Stock. This
amount is reflected in the pro forma amounts.
(3) Obligation of NYC LP Corp., a wholly-owned Unrestricted Group subsidiary,
relating to the acquisition of Cablevision of NYC, which obligation has
been guaranteed by the Company. NYC LP Corp.'s obligation under such
guarantee may be paid in cash or, at the Company's option, shares of the
Company's Common Stock. Under the Credit Agreement, the Company is
currently prohibited from paying all but $40.0 million of this obligation
in cash and, accordingly, without the consent of the Company's bank
lenders, would be required to pay it in shares of the Company's Common
Stock.
(4) Issuable in connection with the Proposed V Cable Transactions. See "Recent
Developments--Proposed V Cable Transactions" for a discussion of such
transactions.
S-18
<PAGE>
CONDENSED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
The following condensed pro forma consolidated balance sheet as of September
30, 1995 presents the Company's financial position as adjusted to give effect
to the proposed acquisition of Cablevision of Boston and the Proposed V Cable
Transactions, as if they had occurred as of that date. The following condensed
pro forma consolidated statement of operations for the year ended December 31,
1994 presents the Company's consolidated results of operations as adjusted to
give effect to (i) the acquisition (the "AMCC Acquisition") of partnership
interests in AMCC, (ii) the acquisition of substantially all of the assets of
Monmouth Cable, Riverview Cable and Framingham Cablevision Associates, Limited
Partnership ("Framingham Cable"), (iii) the proposed acquisition of
Cablevision of Boston, and (iv) the Proposed V Cable Transactions as if the
acquisition of interests in AMCC, the acquisition of Monmouth Cable, Riverview
Cable and Framingham Cable, the acquisition of Cablevision of Boston and the
Proposed V Cable Transactions had occurred at the beginning of the periods
presented. The following condensed pro forma consolidated statement of
operations for the nine months ended September 30, 1995 presents the Company's
consolidated results of operations as adjusted to give effect to the proposed
acquisition of Cablevision of Boston and the Proposed V Cable Transactions as
if the proposed acquisition of Cablevision of Boston and the Proposed V Cable
Transactions had occurred at the beginning of the periods presented. The
condensed pro forma consolidated financial statements should be read in
conjunction with the notes thereto and the historical consolidated financial
statements and notes thereto incorporated herein by reference. The pro forma
financial information is not necessarily indicative of what the actual
financial position or results of operations of the Company would have been had
the transactions occurred on the dates indicated nor does it purport to
indicate the future results of operations or the future financial condition of
the Company.
S-19
<PAGE>
CONDENSED PRO FORMA CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 1995
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
PRO FORMA ADJUSTMENTS*
---------------------------
CABLEVISION PROPOSED
OF V CABLE
HISTORICAL ASSETSBOSTON TRANSACTIONS PRO FORMA
----------- ----------- ------------ ----------
<S> <C> <C> <C> <C>
Cash and cash equiva-
lents.................. $ 21,950 $ 6,426 (1) $ 1,653 (4) $ 23,029
(3,000)(2) (4,000)(5)
Accounts receivable,
trade................... 84,949 2,354 (1) 1,105 (4) 88,408
Notes and other
receivables............. 18,543 789 (1) 363 (4) 19,695
Prepaid expenses and
other assets............ 18,244 326 (1) 471 (4) 19,041
Property, plant and
equipment, net.......... 941,853 36,071 (1) 102,679 (4) 1,080,603
Investments in and
advances to affiliates.. 172,562 (18,510)(1) 154,052
Feature film inventory.. 144,219 144,219
Intangible assets, net.. 859,663 113,544 (2) 136,664 (6) 1,108,647
(1,224)(3)
Deferred financing,
interest expense and
other costs, net........ 80,461 1,000 (2) (30,343)(5) 51,118
----------- -------- -------- ----------
$ 2,342,444 $137,776 $208,592 $2,688,812
=========== ======== ======== ==========
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
Accounts payable........ $ 119,634 $ 9,657 (1) $ 10,055 (4) $ 139,346
Accrued expenses........ 226,866 9,766 (1) 13,392 (4) 250,024
Accounts payable to
affiliates.............. 16,235 642 (1) 488 (4) 17,365
Feature film rights
payable................. 136,355 136,355
Bank debt............... 1,371,585 79,217 (2) 1,450,802
Senior debt............. 888,596 215,000 (4) 603,596
(500,000)(5)
Subordinated debentures. 623,590 623,590
Subordinated notes
payable................. 141,268 141,268
Obligation to related
party................... 191,579 191,579
Capital lease
obligations and other
debt.................... 7,610 1,884 (1) 9,494
----------- -------- -------- ----------
3,723,318 101,166 (261,065) 3,563,419
----------- -------- -------- ----------
Deficit investment in
affiliates.............. 437,732 437,732
----------- -------- -------- ----------
Series G Redeemable
Exchangeable Preferred
Stock................... 250,000 250,000
----------- -------- -------- ----------
Stockholders'
deficiency:
Preferred stock........ 2 5 (5) 7
Common stock........... 239 6 (2) 245
Par value in excess of
capital contributed.... (79,478) 37,828 (2) 499,995 (5) 457,121
(1,224)(3)
Accumulated deficit.... (1,986,132) (30,343)(5) (2,016,475)
----------- -------- -------- ----------
(2,065,369) 36,610 469,657 (1,559,102)
Less treasury stock, at
cost (50,000 shares).... (3,237) (3,237)
----------- -------- -------- ----------
(2,068,606) 36,610 469,657 (1,562,339)
----------- -------- -------- ----------
$ 2,342,444 $137,776 $208,592 $2,688,812
=========== ======== ======== ==========
</TABLE>
- --------
* See Note A of Notes to Condensed Pro Forma Consolidated Financial Statements.
S-20
<PAGE>
CONDENSED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1994
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
PRO FORMA ADJUSTMENTS*
--------------------------------------------------------
MONMOUTH
CABLE,
RIVERVIEW
CABLE
AMERICAN AND CABLEVISION PROPOSED
MOVIE FRAMINGHAM OF V CABLE
HISTORICAL CLASSICS CABLE BOSTON TRANSACTIONS PRO FORMA
---------- -------- ---------- ----------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C>
Net Revenues............ $ 837,169 $50,951 (7) $ 47,286 (13) $59,239 (19) $ 71,960 (22) $1,066,605
--------- ------- -------- ------- -------- ----------
Operating expenses:
Technical.............. 302,885 16,262 (7) 15,127 (13) 26,749 (19) 29,674 (22) 390,697
Selling, general and
administrative........ 195,942 16,105 (7) 9,199 (13) 17,119 (19) 20,776 (22) 254,162
(859)(11) (2,028)(16) (2,092)(20)
Restructuring charge... 4,306 4,306
Depreciation and amor-
tization.............. 271,343 142 (7) 12,488 (13) 8,428 (19) 41,861 (22) 379,719
10,827 (12) 27,273 (14) 10,974 (20) (3,617)(26)
--------- ------- -------- ------- -------- ----------
774,476 42,477 62,059 61,178 88,694 1,028,884
--------- ------- -------- ------- -------- ----------
Operating profit
(loss)................ 62,693 8,474 (14,773) (1,939) (16,734) 37,721
Other income (expense)
Interest expense....... (263,299) (1,510)(7) (4,657)(13) (8,955)(19) (24,195)(22) (266,226)
(7,615)(9) (11,093)(15) 1,769 (21) 47,323 (23)
6,006 (25)
Interest income........ 1,518 305 (7) 59 (13) 216 (19) 236 (22) 2,334
Share of affiliates'
net loss.............. (82,864) (4,304)(10) (521)(17) 8,594 (22) (79,367)
(272)(18)
Write off of deferred
financing costs....... (9,884) (9,884)
Loss on redemption of
debt.................. (7,088) (7,088)
Provision for preferen-
tial payment to
related party......... (5,600) (5,600)
Minority interest...... (3,429) (4,321)(8) (7,750)
Miscellaneous, net..... (7,198) (23)(7) (131)(13) (307)(19) (1,280)(22) (8,939)
--------- ------- -------- ------- -------- ----------
Loss before extraordi-
nary item.............. (315,151) (8,994) (31,388) (9,216) 19,950 (344,799)
Extraordinary item:
Loss on redemption of
debt.................. (40,457)(23) (40,457)
--------- ------- -------- ------- -------- ----------
Net loss................ (315,151) (8,994) (31,388) (9,216) (20,507) (385,256)
Preferred stock dividend
requirement............ (6,385) (43,403)(24) (49,788)
--------- ------- -------- ------- -------- ----------
Net loss applicable to
common shareholders.... $(321,536) $(8,994) $(31,388) $(9,216) $(63,910) $ (435,044)
========= ======= ======== ======= ======== ==========
Loss per common share
before extraordinary
item................... $ (13.72) $ (16.39)
Extraordinary item...... -- (1.68)
--------- ----------
Net loss per common
share.................. $ (13.72) $ (18.07)
========= ==========
Average number of common
shares
outstanding (in thou-
sands)................. 23,444 635 (19) 24,079
========= ======= ==========
</TABLE>
- --------
* See Note B of Notes to Condensed Pro Forma Consolidated Financial Statements.
S-21
<PAGE>
CONDENSED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
PRO FORMA ADJUSTMENTS*
---------------------------
CABLEVISION PROPOSED
OF V CABLE
HISTORICAL BOSTON TRANSACTIONS PRO FORMA
---------- ----------- ------------ ---------
<S> <C> <C> <C> <C>
Net Revenues............ $ 787,293 $46,477 (27) $57,324 (30) $ 891,094
--------- ------- ------- ---------
Operating expenses:
Technical.............. 302,385 21,425 (27) 25,695 (30) 349,505
Selling, general and
administrative........ 194,821 14,383 (27) 15,661 (30) 223,223
(1,642)(28)
Depreciation and amor-
tization.............. 236,788 6,440 (27) 27,859 (30) 278,744
8,231 (28) (574)(34)
--------- ------- ------- ---------
733,994 48,837 68,641 851,472
--------- ------- ------- ---------
Operating profit (loss). 53,299 (2,360) (11,317) 39,622
Other income (expense)
Interest expense....... (236,680) (7,999)(27) (19,395)(30) (209,647)
2,670 (29) 46,281 (31)
5,476 (33)
Interest income........ 1,308 184 (27) 53 (30) 1,545
Share of affiliates'
net income (loss)..... (73,090) 2,840 (30) (70,250)
Write off of deferred
financing costs....... (2,888) (2,888)
Gain on sale of affili-
ate interests......... 36,198 36,198
Provision for preferen-
tial payment to re-
lated party........... (4,200) (4,200)
Minority interest...... (6,229) (6,229)
Miscellaneous, net..... (4,836) (165)(27) (284)(30) (5,285)
--------- ------- ------- ---------
Net loss................ (237,118) (7,670) 23,654 (221,134)
Preferred stock dividend
requirement............. (7,272) (32,239)(32) (39,511)
--------- ------- ------- ---------
Net loss applicable to
common shareholders..... $(244,390) $(7,670) $(8,585) $(260,645)
========= ======= ======= =========
Net loss per common
share................... $ (10.29) $ (10.69)
========= =========
Average number of common
shares outstanding (in
thousands).............. 23,745 635 (27) 24,380
========= ======= =========
</TABLE>
- --------
* See Note C of Notes to Condensed Pro Forma Consolidated Financial
Statements.
NOTE A--NOTES TO CONDENSED PRO FORMA BALANCE SHEET AS OF SEPTEMBER 30, 1995
CABLEVISION OF BOSTON ACQUISITION
(1) As a result of the proposed acquisition of Cablevision of Boston, the
assets and liabilities purchased will be combined with the Company's
consolidated balance sheet amounts. The adjustments referenced by this
Note (1) reflect the consolidation of such amounts as of the balance sheet
date.
(2) Represents (a) the total cost of interests in Cablevision of Boston not
owned by the Company to be paid by the issuance of Class A Common Stock of
the Company valued at $37,834,000, (b) estimated transaction costs of
$2,000,000 and financing costs of $1,000,000, (c) bank borrowings of
$79,217,000 to be used to refinance Cablevision of Boston's bank debt and
accrued interest thereon of $59,096,000 and repay amounts owed to Charles
F. Dolan aggregating $20,121,000 for management fees, loans, accrued
interest thereon and preferred equity and (d) the excess ($113,544,000) of
the purchase price over the value of the net liabilities acquired.
S-22
<PAGE>
(3) Represents the amount paid to Mr. Dolan for his general partnership
interest and the assumption of his share of the excess liabilities over
net assets of Cablevision of Boston ($1,224,000) (such amount to be
charged to par value in excess of capital contributed). Interests in the
Dolan-owned assets and liabilities are recorded in the pro forma balance
sheet at Cablevision of Boston's historical cost.
PROPOSED V CABLE TRANSACTIONS
(4) As a result of the proposed acquisition of 80% of the partnership
interests in U.S. Cable not already owned by V Cable to be effected in
connection with the Proposed V Cable Transactions, the assets and
liabilities of U.S. Cable will be combined with the Company's consolidated
balance sheet amounts. The adjustments referenced by this Note (4) reflect
the consolidation of such amounts as of the balance sheet date.
(5) In connection with the Proposed V Cable Transactions, the Company will
redeem the outstanding preferred stock on the books of U.S. Cable for
$4,000,000 and will issue $500,000,000 of its preferred stock to GECC. The
proceeds from this issuance will be used to repay $450,000,000 of V Cable
and/or VC Holding debt to GECC and provide V Cable with $50,000,000 to
make a preferred capital contribution to U.S. Cable, which will repay an
equivalent amount of its debt to GECC. Deferred interest expense of
$30,343,000 related to V Cable's assumption of U.S. Cable's debt in the
1992 V Cable Reorganization will be written off in connection with the
repayment of such debt.
(6) Represents the excess ($136,664,000) of the purchase price of U.S. Cable
over the value of the net liabilities acquired.
NOTE B--NOTES TO CONDENSED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS FOR
THE YEAR ENDED DECEMBER 31, 1994
AMERICAN MOVIE CLASSICS COMPANY ACQUISITION
(7) As a result of the AMCC Acquisition, which was consummated on July 11,
1994, the results of operations of AMCC are combined with the Company's
consolidated results of operations. The adjustments referenced by this
Note (7) reflect the consolidation of such amounts for the period January
1, 1994 through July 10, 1994.
(8) Represents the 25.1% minority partnership interest in the results of
operations of AMCC owned by National Broadcasting Company, Inc. and
Liberty Media Corporation.
(9) Represents interest expense, at 8.0% per annum, on the $181,903,000 of
debt incurred by the Company to fund the purchase of the additional
approximate 50% interest in AMCC. NBC will not share in this expense.
(10) Represents the income of AMCC previously recorded by the Company using
the equity method of accounting.
(11) Represents the elimination of management fees paid to the former partner
by AMCC. In connection with the purchase of the approximate 50% interest
in AMCC, the Company also purchased the right to receive such fees in the
future.
(12) Represents the amortization, based on an average 10-year life, of the
excess cost over fair value of assets acquired resulting from the
purchase of the additional approximate 50% interest in AMCC. NBC will not
share in this expense.
MONMOUTH CABLE, RIVERVIEW CABLE AND FRAMINGHAM CABLE ACQUISITION
(13) As a result of the acquisition of Monmouth Cable and Riverview Cable,
which was consummated on August 8, 1994, the results of operations of
Monmouth Cable and Riverview Cable are combined with the Company's
consolidated results of operations. The adjustments referenced by this
Note (13) reflect the consolidation of such amounts for the period
January 1, 1994 through August 7, 1994.
S-23
<PAGE>
(14) Represents the depreciation and amortization, based on an average 10-year
life, of the step-up in property, plant and equipment, franchise costs
and the excess cost over fair value of assets acquired of $39,761,000 for
the period, offset by the elimination of pre-acquisition depreciation and
amortization of $12,488,000.
(15) Represents interest expense of $15,750,000 attributable to $237,800,000
of bank borrowings (interest expense of $10,444,000 at a 7.32% interest
rate); $132,158,000 of 6% senior subordinated notes (interest expense of
$4,758,000); $9,110,000 of a 6% indemnification note (interest expense of
$328,000); and amortization of deferred finance costs of $220,000, offset
by pre-acquisition interest expense of $4,657,000 incurred by Monmouth
Cable and Riverview Cable.
(16) Represents the elimination of management fees of $2,378,000 paid to
former general partners by Monmouth Cable and Riverview Cable and the
elimination of an adjustment ($350,000) made in the first half of 1994 to
reduce prior period overaccruals of franchise fees.
(17) As a result of the acquisition of Framingham Cable, which was consummated
on August 8, 1994, by the Company and Warburg Pincus Investors, L.P., a
30% Pre-Payout Interest in the results of Framingham Cable will be
combined with the Company's consolidated results of operations. The
adjustment referenced by this Note (17) reflects the 30% Pre-Payout
Interest for the period January 1, 1994 through August 7, 1994.
(18) Represents the Company's 30% share of reduced costs for Framingham Cable
management fees of $56,000, offset by additional expenses relating to the
Framingham Cable acquisition for depreciation and amortization of
$249,000 and interest of $79,000.
CABLEVISION OF BOSTON ACQUISITION
(19) As a result of the proposed acquisition of Cablevision of Boston (and
related issuance of approximately 635,000 shares of the Company's Class A
Common Stock (based on the price per share of Class A Common Stock on
September 30, 1995)), the results of operations of Cablevision of Boston
will be combined with the Company's consolidated results of operations.
The adjustments referenced by this Note (19) reflect the consolidation of
such amounts for the year ended December 31, 1994.
(20) Represents the amortization, based on an average 10-year life, of the
excess cost over fair value of assets acquired of $11,232,000 for the
period, offset by the elimination of previous amortization of intangibles
of $258,000 and the elimination from selling, general and administrative
expenses of management fees payable ($2,092,000) by Cablevision of Boston
to Cablevision Systems Services Corporation, a company wholly-owned by
Charles F. Dolan.
(21) Represents interest expense of $6,971,000 attributable to $79,217,000 of
bank debt (8.8% interest rate) reduced by pre-acquisition interest
expense of $8,740,000 incurred by Cablevision of Boston on its bank debt
and debt owed to Mr. Dolan and the Company.
PROPOSED V CABLE TRANSACTIONS
(22) As a result of the proposed acquisition of 80% of the partnership
interests in U.S. Cable not already owned by V Cable to be effected in
connection with the Proposed V Cable Transactions, the results of
operations of U.S. Cable will be combined with the Company's consolidated
results of operations. The adjustments referenced by this Note (22)
reflect the consolidation of such amounts for the year ended December 31,
1994 and the elimination of the Company's share of losses in U.S. Cable
previously recorded on the equity basis.
(23) Represents the reduction in interest expense of $47,323,000, at an
average interest rate of 10.5%, resulting from the net repayment of
$450,000,000 of V Cable and/or VC Holding debt from the proceeds of the
issuance of the preferred stock in the Proposed V Cable Transactions. In
addition, the Company will write off deferred interest and financing
costs of $40,457,000 in connection with the repayment of U.S. Cable debt
assumed by V Cable in the 1992 V Cable Reorganization.
(24) Represents the dividends payable to GECC on the preferred stock to be
issued in the Proposed V Cable Transactions. This amount does not take
into account any gross up required to be paid to a holder of preferred
stock failing to obtain a dividends received deduction.
S-24
<PAGE>
(25) Represents the reduction in interest expense, at an average interest rate
of 12.0%, resulting from the repayment of $50,000,000 of U.S. Cable debt
from the proceeds of the issuance of preferred stock and certain
reductions in U.S. Cable's debt resulting from the Proposed V Cable
Transactions.
(26) Represents the depreciation and amortization, based on an average 10-year
life, of the step-up in property, plant and equipment, franchise costs
and the excess cost over fair value of assets acquired, aggregating
$38,244,000 for the period, offset by the elimination of pre-acquisition
depreciation and amortization of $41,861,000.
NOTE C--NOTES TO CONDENSED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS FOR
THE NINE MONTHS ENDED SEPTEMBER 30, 1995
CABLEVISION OF BOSTON ACQUISITION
(27) As a result of the proposed acquisition of Cablevision of Boston (and
related issuance of approximately 635,000 shares of the Company's Class A
Common Stock), the results of operations of Cablevision of Boston will be
combined with the Company's consolidated results of operations. The
adjustments referenced by this Note (27) reflect the consolidation of
such amounts for the nine months ended September 30, 1995.
(28) Represents the amortization, based on an average 10-year life, of the
excess cost over fair value of assets acquired of $8,424,000 for the
period, offset by the elimination of previous amortization of intangibles
of $193,000 and the elimination from selling, general and administrative
expenses of management fees payable by Cablevision of Boston to
Cablevision Systems Services Corporation ($1,642,000).
(29) Represents interest expense of $5,214,000 attributable to $79,217,000 of
bank debt (8.8% interest rate) reduced by pre-acquisition interest
expense of $7,884,000 incurred by Cablevision of Boston on its bank debt
and debt owed to Mr. Dolan and the Company.
PROPOSED V CABLE TRANSACTIONS
(30) As a result of the proposed acquisition of 80% of the partnership
interests in U.S. Cable not already owned by V Cable to be effected in
connection with the Proposed V Cable Transactions, the results of
operations of U.S. Cable will be combined with the Company's consolidated
results of operations. The adjustments referenced by this Note (30)
reflect the consolidation of such amounts for the nine months ended
September 30, 1995 and the elimination of the Company's share of losses
in U.S. Cable previously recorded on the equity basis.
(31) Represents the reduction in interest expense of $36,167,000, at an
average interest rate of 10.7%, resulting from the net repayment of
$450,000,000 of V Cable and/or VC Holding debt from the proceeds of the
issuance of the preferred stock in the Proposed V Cable Transactions. In
addition, amortization of deferred interest and financing costs of
$10,114,000 is eliminated in connection with the repayment of U.S. Cable
debt assumed by V Cable in the 1992 V Cable Reorganization. Because the
write-off of deferred interest and financing costs related to this
transaction has been reflected in the Condensed Pro Forma Consolidated
Statement of Operations for the year ended December 31, 1994, no such
write-off has been made in the Condensed Pro Forma Consolidated Statement
of Operations for the nine months ended September 30, 1995.
(32) Represents the dividends payable to GECC on the preferred stock to be
issued in the Proposed V Cable Transactions. This amount does not take
into account any gross up required to be paid to a holder of preferred
stock failing to obtain a dividends received deduction.
(33) Represents the reduction in interest expense, at an average interest rate
of 11.6%, resulting from the repayment of $50,000,000 of U.S. Cable debt
from the proceeds of the issuance of preferred stock and certain
reductions in U.S. Cable's debt resulting from the Proposed V Cable
Transactions.
(34) Represents the depreciation and amortization, based on an average 10-year
life, of the step-up in property, plant and equipment, franchise costs
and the excess cost over fair value of assets acquired, aggregating
$27,285,000 for the period, offset by the elimination of pre-acquisition
depreciation and amortization of $27,859,000.
S-25
<PAGE>
PRICE RANGE OF CLASS A COMMON STOCK AND DIVIDEND POLICY
The Class A Common Stock is listed on the ASE under the symbol CVC. The
following table sets forth on a per share basis the high and low sale prices
for the Class A Common Stock as reported on the ASE for the periods indicated:
<TABLE>
<CAPTION>
HIGH LOW
---- ----
<S> <C> <C>
1993
First Quarter.......................................... $44 $34 3/8
Second Quarter......................................... 38 7/8 29 3/8
Third Quarter.......................................... 49 5/8 37 1/2
Fourth Quarter......................................... 72 48 1/4
1994
First Quarter.......................................... 67 7/8 52 3/8
Second Quarter......................................... 52 7/8 39
Third Quarter.......................................... 61 3/8 45 7/8
Fourth Quarter......................................... 59 7/8 45 7/8
1995
First Quarter.......................................... 58 3/4 48 7/8
Second Quarter......................................... 63 3/4 52 1/4
Third Quarter.......................................... 69 3/4 58
Fourth Quarter (through November 1, 1995).............. 61 51
</TABLE>
For a recent sale price of the Class A Common Stock, see the cover page of
this Prospectus Supplement. As of September 30, 1995, there were approximately
582 holders of record of the Cablevision Class A Common Stock. There is no
public trading market for the Company's Class B Common Stock. As of September
30, 1995, there were 24 holders of record of the Class B Common Stock.
The Company has not paid any cash dividends on shares of Class A Common
Stock or Class B Common Stock. The Company does not anticipate paying any cash
dividends on shares of Class A Common Stock or Class B Common Stock in the
foreseeable future. The Company may pay cash dividends on its capital stock
only from surplus as determined under Delaware law. Holders of Class A Common
Stock and Class B Common Stock are entitled to receive dividends equally on a
per-share basis if and when such dividends are declared by the Board of
Directors of the Company from funds legally available therefor. No dividend
may be declared or paid in cash or property on shares of either Class A Common
Stock or Class B Common Stock unless the same dividend is paid simultaneously
on each share of the other class of common stock. In the case of any stock
dividend, holders of Class A Common Stock are entitled to receive the same
percentage dividend (payable in shares of Class A Common Stock) as the holders
of Class B Common Stock receive (payable in shares of Class B Common Stock).
In a distribution of shares of capital stock of a subsidiary of the Company to
the holders of the Company's Class A Common Stock and Class B Common Stock,
such distributed shares may differ to the extent that the Company's Class A
Common Stock and Class B Common Stock differ, including as to voting rights
and rights in connection with certain dividends. Under the most restrictive
provisions of the Company's debt agreements, cash dividends could not be paid
on Class A Common Stock or Class B Common Stock at September 30, 1995.
Dividends may not be paid in respect of shares of Class A Common Stock or
Class B Common Stock unless all dividends due and payable in respect of the
preferred stock of the Company have been paid or provided for. See
"Description of Series I Preferred Stock--Dividends".
S-26
<PAGE>
DESCRIPTION OF DEPOSITARY SHARES
The following summary description of the Depositary Shares offered hereby
supplements the description of the terms of the Depositary Shares set forth
under the heading "Description of Depositary Shares" in the accompanying
Prospectus, to which description reference is hereby made. The summary
description of the Depositary Shares set forth below does not purport to be
complete and is subject to, and qualified in its entirety by reference to, the
Deposit Agreement referred to below, the form of which will be filed as an
exhibit to the Current Report on Form 8-K to be filed with respect to this
Offering.
Each Depositary Share represents a one-tenth interest in a share of Series I
Preferred Stock. The shares of Series I Preferred Stock underlying the
Depositary Shares will be deposited with Harris Trust and Savings Bank, as
Depositary (the "Depositary"), under a Deposit Agreement (the "Deposit
Agreement"), among the Company, the Depositary and all holders from time to
time of depositary receipts issued by the Depositary thereunder (the
"Depositary Receipts"). The Depositary Shares have been approved for listing
on the ASE, subject to notice of issuance. The Company does not plan to apply
to list the Series I Preferred Stock on any national securities exchange or
any similar system of automated dissemination of quotations of securities.
Accordingly, the Company does not expect that there will be any public trading
market for the Series I Preferred Stock except as represented by the
Depositary Shares. The Depositary Shares will be evidenced by Depositary
Receipts.
Subject to the terms of the Deposit Agreement, each owner of a Depositary
Share will be entitled through the Depositary, in proportion to the one-tenth
interest in a share of Series I Preferred Stock underlying such Depositary
Share, to all the rights, preferences and privileges of a share of Series I
Preferred Stock (including dividend, voting, redemption, conversion and
liquidation rights), and will be subject to all of the limitations of the
fractional share of Series I Preferred Stock represented thereby, which are
summarized in the accompanying Prospectus under "Description of Capital Stock"
or set forth below. Since each share of Series I Preferred Stock entitles the
holder thereof to one vote on matters on which the Series I Preferred Stock is
entitled to vote, each Depositary Share will, in effect, entitle the holder
thereof to one-tenth of a vote thereon, rather than one full vote. See
"Description of Series I Preferred Stock--Voting Rights" below and
"Description of Depositary Shares" in the accompanying Prospectus.
The Depositary will act as transfer agent and registrar and paying agent
with respect to the Depositary Shares.
DESCRIPTION OF SERIES I PREFERRED STOCK
The following description of certain terms of the Series I Preferred Stock
supplements the description of the general terms and provisions of the
preferred stock of the Company set forth under the heading "Description of
Capital Stock--Preferred Stock" in the accompanying Prospectus, to which
description reference is hereby made. Certain terms not defined in this
Prospectus Supplement are defined in the accompanying Prospectus.
The Company is authorized to issue 10,000,000 shares of preferred stock, par
value $.01 per share. The description of the Series I Preferred Stock set
forth below does not purport to be complete and is subject to, and qualified
in its entirety by reference to, the certificate of designations relating to
the Series I Preferred Stock (the "Certificate of Designations"), which
Certificate of Designations will be filed as an exhibit to the Current Report
on Form 8-K to be filed with respect to this Offering.
Ranking
The Series I Preferred Stock, with respect to dividends and distributions
upon the liquidation, winding-up and dissolution of the Company, ranks (i)
senior to all classes of Common Stock and each other class of capital stock or
series of preferred stock established by the Board of Directors after the
issuance of the Series I Preferred
S-27
<PAGE>
Stock which does not expressly provide that it ranks senior to or on a parity
with the Series I Preferred Stock as to dividends and distributions upon the
liquidation, winding-up and dissolution of the Company (collectively referred
to as "Junior Stock"); (ii) on a parity with the Company's Series C Preferred
Stock, 8% Series D Cumulative Preferred Stock (which may be issued in exchange
for shares of the Series C Preferred Stock), Series G Preferred Stock, 11 3/4%
Series H Redeemable Exchangeable Preferred Stock (which is expected to be
established and issued in exchange for shares of the Series G Preferred Stock)
and any other class of capital stock or series of preferred stock established
by the Board of Directors after the initial issuance of the Series I Preferred
Stock, the terms of which expressly provide that such class or series will
rank on a parity with the Series I Preferred Stock as to dividends and
distributions upon the liquidation, winding-up and dissolution of the Company
(collectively referred to as "Parity Stock"); and (iii) junior to each class
of capital stock or series of preferred stock established by the Board of
Directors after the initial issuance of the Series I Preferred Stock, the
terms of which specifically provide that such class or series will rank senior
to the Series I Preferred Stock as to dividends and distributions upon the
liquidation, winding-up and dissolution of the Company (collectively referred
to as "Senior Stock"). The Series I Preferred Stock will rank on a parity with
the preferred stock proposed to be issued by the Company in the Proposed V
Cable Transactions, discussed under "Recent Developments--Proposed V Cable
Transactions".
The Company may not issue any Senior Stock without the approval of the
holders of at least 66 2/3% of the shares of Series I Preferred Stock then
outstanding, voting or consenting, as the case may be, as one class.
Dividends
Holders of the Series I Preferred Stock are entitled, when declared by the
Board of Directors, out of funds legally available therefor, to receive
cumulative cash dividends on each outstanding share of the Series I Preferred
Stock, at the annual rate of 8 1/2% or $21.25 per share of Series I Preferred
Stock (equivalent to $2.125 per annum per Depositary Share). Dividends on the
Series I Preferred Stock are payable quarterly in arrears on January 1, April
1, July 1 and October 1 of each year, commencing on January 1, 1996. Dividends
will be payable to the holder of record on the respective record date as may
be fixed by the Board of Directors in advance of each dividend. The right to
dividends on the Series I Preferred Stock will be cumulative (whether or not
earned or declared) from the date of issuance of the Series I Preferred Stock.
If any dividend (or portion thereof) payable on any dividend payment date is
not paid in full on the dividend payment date therefor, the amount of such
dividend that is payable and that is not paid on such date will increase at
the rate of 8 1/2% per annum per share of Series I Preferred Stock from such
dividend payment date until paid in full.
No full dividends may be declared or paid or funds set apart for the payment
of dividends on any Parity Stock for any period unless full cumulative
dividends shall have been paid or set apart for such payment on the Series I
Preferred Stock. If the funds available for the payment of dividends are
insufficient to pay in full the dividends payable on all outstanding shares of
Series I Preferred Stock and any series of Parity Stock, the total available
funds to be paid in partial dividends shall be divided among the Series I
Preferred Stock and such other series pro rata in proportion to the aggregate
amount of dividends accrued and unpaid with respect to such Series I Preferred
Stock and such other series. No dividends may be paid or set apart for such
payment on Junior Stock (except dividends on Junior Stock in additional shares
of Junior Stock), and no Junior Stock, or any warrants, rights, calls or
options exercisable for or convertible into any Junior Stock, may be
repurchased, redeemed or otherwise retired nor may funds be set apart for
payment with respect thereto, if full dividends have not been paid on the
Series I Preferred Stock, except for (i) any conversion of Class B Common
Stock of the Company into Class A Common Stock of the Company, (ii) prior to
November 1, 2000, the occurrence of the Rainbow Spin-Off, (iii) repurchases of
Common Stock, or warrants, rights, calls or options exercisable for or
convertible into Common Stock, issued under the Company's stock incentive
programs, and (iv) dividends or distributions payable-in-kind in additional
shares of, or warrants, rights, calls or options exercisable for or
convertible into additional shares of, Junior Stock. "Rainbow Spin-Off" means
the payment of any dividend by the Company or the making by the Company of any
other distribution or the consummation of an exchange offer, or any
combination of the foregoing, which results in all or a portion of the capital
stock of Rainbow Programming
S-28
<PAGE>
Holdings, Inc. or any successor to the assets or equity interests thereof, or
of another entity holding only assets that were held by Rainbow Programming
Holdings, Inc. immediately prior to the acquisition thereof by such entity,
being held by all or any portion of the shareholders of the Company.
After dividends on the Series I Preferred Stock for all past and current
quarterly dividend periods have been paid in full, the Series I Preferred
Stock will not be entitled to participate in any further distributions by the
Company.
Certain of the Company's debt instruments contain covenants that may
restrict the Company's ability to pay, or prevent the payment of, dividends on
the Series I Preferred Stock. In addition, under Delaware law, dividends on
capital stock may only be paid from "surplus" or if there is no surplus from
the corporation's net profits for the then current or the preceding fiscal
year. The Company does not anticipate having net profits for the foreseeable
future and its ability to pay dividends on the Series I Preferred Stock will
require the availability of adequate "surplus", which is defined as the
excess, if any, of the Company's net assets (total assets less total
liabilities) over its capital (generally the par value of its issued capital
stock). As of September 30, 1995, the Company's total liabilities exceeded its
total assets by $1.4 billion. Accordingly, in connection with dividend
payments on the Series I Preferred Stock, the Company's Board of Directors
will have to determine that the Company has adequate surplus on the basis of
valuations of the Company's assets at higher amounts than are reflected in the
Company's financial statements. There can be no assurance that the Company's
Board of Directors will be able to make such determination and that adequate
surplus will be available to pay dividends on the Series I Preferred Stock.
Because the Company's business requires substantial investment on a
continuing basis to finance capital expenditures and related expenses for,
among other things, upgrade of the Company's cable plant (including the need
to make cable system upgrades mandated by franchise authorities), the offering
of new services and the servicing, repayment or refinancing of its
indebtedness and preferred stock, the Company will require significant
additional financing, through debt and/or equity issuances, to meet its
capital expenditure plans and to pay its debt and preferred stock obligations.
There can be no assurance that the Company will be able to issue additional
debt or obtain additional equity capital on satisfactory terms, or at all, to
meet its future financing needs. See "Management's Discussion and Analysis--
Liquidity and Capital Resources".
Exchange
On or after January 1, 1998, the Company may, at its option, on any
scheduled dividend payment date, exchange the Series I Preferred Stock, in
whole but not in part, for the Company's 8 1/2% Convertible Subordinated
Debentures due 2007 (the "Exchange Debentures"). See "Description of Exchange
Debentures" below for a summary of the terms of the Exchange Debentures.
Holders of Series I Preferred Stock so exchanged will be entitled to receive a
principal amount of $250.00 of Exchange Debentures for each share of Series I
Preferred Stock (equivalent to $25.00 principal amount of Exchange Debentures
for each Depositary Share) held by such holders at the time of exchange plus
an amount per share in cash equal to all accrued but unpaid dividends thereon
from the last dividend payment date to the exchange date. The Exchange
Debentures will be issuable only in denominations of $1,000 and integral
multiples thereof. An amount in cash will be paid to holders for any principal
amount otherwise issuable which is less than $1,000.
Upon the date fixed for exchange of Series I Preferred Stock for Exchange
Debentures (the "Exchange Date"), the rights of holders of Series I Preferred
Stock as stockholders of the Company shall cease (except the right to receive
accumulated and unpaid dividends), such holders' shares of Series I Preferred
Stock no longer will be deemed outstanding and will represent only the right
to receive the Exchange Debentures and any accumulated and unpaid dividends
and the person or persons entitled to receive the Exchange Debentures issuable
upon exchange shall be treated as the registered holder or holders of such
Exchange Debentures. If full cumulative dividends on the Series I Preferred
Stock through the Exchange Date have not been paid, or if funds have not been
set aside to provide for payment in full of such dividends, the Company may
not exercise its option to exchange the Series I Preferred Stock for the
Exchange Debentures. The exchange of Series I Preferred Stock for Exchange
Debentures will be a taxable event and, therefore, may result in a tax
liability for the holder
S-29
<PAGE>
exchanging such stock without any correlative cash payment to such holder. See
"Certain Federal Income Tax Considerations--Redemption, Sale or Exchange for
Exchange Debentures". In the event that the Company elects to exchange the
Series I Preferred Stock for the Exchange Debentures, the Company will comply
with all applicable provisions of the Exchange Act and the rules and
regulations issued thereunder, including, without limitation, Sections 13(e)
and 14(e) under the Exchange Act and the rules thereunder. Notice of exchange
will be mailed at least 30 days but not more than 60 days prior to the date of
exchange to each holder of Series I Preferred Stock. See "Description of
Exchange Debentures" below.
Optional Redemption
The Company at its option may, but shall not be required to, redeem the
Series I Preferred Stock (subject to contractual and other restrictions with
respect thereto and to the legal availability of funds therefor) at any time
after November 1, 1999, in whole or in part, at the redemption prices per
share (expressed as a percentage of liquidation preference) set forth below
together with all accrued and unpaid dividends from the last payment date to
the redemption date, if redeemed during the 12-month period beginning November
1 of the years indicated:
<TABLE>
<CAPTION>
REDEMPTION
YEAR PRICE
---- ----------
<S> <C>
1999........................................................... 102.8%
2000........................................................... 101.4
2001 and thereafter............................................ 100.0
</TABLE>
In the event of partial redemptions of Series I Preferred Stock, the shares
to be redeemed will be determined pro rata or by lot, as determined by the
Company, except that the Company may redeem such shares held by any holders of
fewer than 100 shares (or shares held by holders who would hold less than 100
shares as a result of such redemption), as may be determined by the Company.
See "Description of Depositary Shares--Redemption of Depositary Shares" in the
accompanying Prospectus.
Procedure for Redemption
On and after a redemption date, unless the Company defaults in the payment
of the applicable redemption price, dividends will cease to accrue on shares
of Series I Preferred Stock called for redemption and all rights of holders of
such shares will terminate except for the right to receive the redemption
price, without interest. The Company will send a written notice of redemption
by first class mail to each holder of record of shares of Series I Preferred
Stock, not fewer than 30 days nor more than 60 days prior to the date fixed
for such redemption.
Conversion Rights
General. Each share of Series I Preferred Stock will be convertible into
shares of Class A Common Stock at the option of the holder, at any time on or
after January 8, 1996, at a conversion rate equal to $250.00 (the original
liquidation preference of the shares of Series I Preferred Stock), divided by
the conversion price, except that, if shares of Series I Preferred Stock are
called for redemption or the Company elects to issue Exchange Debentures in
exchange for the Series I Preferred Stock, the conversion right will terminate
at the close of business five business days prior to the date fixed for
redemption or exchange.
The initial conversion price is $67.44 per share. The conversion price is
subject to adjustment (under formulas set forth in the Certificate of
Designations) in certain events, including (a) the issuance of Class A Common
Stock as a dividend or distribution on any class of the capital stock of the
Company; (b) subdivisions, reclassifications and combinations of the Class A
Common Stock; (c) the issuance to all holders of Class A Common Stock of
certain rights or warrants entitling them to subscribe for or purchase Class A
Common Stock at less than the current market price (as defined in the
Certificate of Designations); and (d) the distribution to all holders of Class
A Common Stock of capital stock or evidences of indebtedness of the Company or
cash or
S-30
<PAGE>
other assets of the Company (excluding issuances covered by clause (a),
issuances of rights and warrants covered by clause (c) and cash dividends or
distributions from earnings unless the sum of (x) all such cash dividends and
distributions made within the preceding 12 months in respect of which no
adjustment has been made and (y) any cash and the fair market value of other
consideration paid in respect of any repurchases of Common Stock by the
Company or any of its subsidiaries within the preceding 12 months in respect
of which no adjustment has been made, exceeds 20% of the Company's market
capitalization (being the product of the then current market price of the
Class A Common Stock times the aggregate number of shares of Class A Common
Stock and Class B Common Stock then outstanding) on the record date for such
distribution). The following transactions are excluded from the foregoing
clauses (x) and (y): (i) any conversion of Class B Common Stock of the Company
into Class A Common Stock of the Company, (ii) repurchases of Common Stock
issued under the Company's stock incentive programs, and (iii) dividends or
distributions payable-in-kind in additional shares of, or warrants, rights,
calls or options exercisable for or convertible into additional shares of,
Junior Stock. In addition, the Company will be permitted to make such
reduction in the Conversion Price as it considers to be advisable in order
that any event treated for federal income tax purposes as a dividend of stock
or stock rights will not be taxable to the holders of the Class A or Class B
Common Stock.
In case of (i) any consolidation of the Company with, or merger of the
Company into, any other entity, (ii) any merger of another entity into the
Company (other than a merger which does not result in any reclassification,
conversion, exchange or cancellation of outstanding shares of Class A Common
Stock of the Company), or (iii) any sale or transfer of all or substantially
all of the assets of the Company, each holder of a share of Series I Preferred
Stock then outstanding shall have the right thereafter to convert their shares
of Series I Preferred Stock only into the kind and amount of securities, cash
and other property receivable upon such consolidation, merger, sale or
transfer by a holder of the number of shares of Class A Common Stock of the
Company into which such share of Series I Preferred Stock might have been
converted immediately prior to such consolidation, merger, sale or transfer,
assuming such holder of Class A Common Stock of the Company is not an entity
with which the Company consolidated or into which the Company merged or which
merged into the Company or to which such sale or transfer was made, as the
case may be (a "constituent entity"), or an affiliate of a constituent entity
and failed to exercise its rights of election, if any, as to the kind or
amount of securities, cash or other property receivable upon such
consolidation, merger, sale or transfer (provided that if the kind or amount
of securities, cash and other property receivable upon such consolidation,
merger, sale or transfer is not the same for each share of Class A Common
Stock of the Company held immediately prior to such consolidation, merger,
sale or transfer by other than a constituent entity or an affiliate thereof
and in respect of which such rights of election shall not have been exercised
("nonelecting share"), then the kind and amount of securities, cash and other
property receivable upon such consolidation, merger, sale or transfer by each
nonelecting share shall be deemed to be the kind and amount so receivable per
share by a plurality of the nonelecting shares). In the case of a cash merger
of the Company into another corporation or any other cash transaction of the
type mentioned above, the effect of these provisions would be that thereafter
each share of Series I Preferred Stock would be convertible at the conversion
price in effect immediately prior to such merger or transaction into the same
amount of cash per share as the holder of such share of Series I Preferred
Stock would have received if such share had been converted into Class A Common
Stock immediately prior to the effective date of such cash merger or
transaction. If necessary, appropriate adjustment shall be made in the
application of the provisions set forth in this Prospectus Supplement with
respect to the rights and interests thereafter of the holders of shares of
Series I Preferred Stock to the end that the provisions set forth in this
Prospectus Supplement shall thereafter correspondingly be made applicable, as
nearly as may reasonably be, in relation to any shares of stock or other
securities or property thereafter deliverable on the conversion of the shares.
No adjustment in the conversion price will be required unless the adjustment
would require a change of at least one percent in the conversion price then in
effect; provided, however, that any adjustment that would otherwise be
required to be made will be carried forward and taken into account in any
subsequent adjustment. Except as stated above, the conversion price will not
be adjusted for the issuance of Class A Common Stock or any securities
convertible into or exchangeable for Class A Common Stock, or carrying the
right to purchase any such securities.
S-31
<PAGE>
No fractional shares of securities representing fractional shares of Class A
Common Stock will be issued upon conversion. Instead, any fractional shares
resulting from conversion will be paid in cash based on the last sale price of
the Class A Common Stock at the close of business on the last trading day
preceding the date of conversion.
Except as described below, no payment or adjustment is to be made on
conversion for accrued and unpaid dividends on the Series I Preferred Stock or
for dividends on the Class A Common Stock issued on conversion, including for
dividends on the Series I Preferred Stock that were not paid in full on any
prior dividend payment date. The holder of record of a share of Series I
Preferred Stock at the close of business on a record date with respect to the
payment of a dividend on the Series I Preferred Stock will be entitled to
receive the dividend on that share of Series I Preferred Stock on the
corresponding dividend payment date notwithstanding the conversion of the
share after the record date and prior to the opening of business on such
dividend payment date. Except as provided below, a share of Series I Preferred
Stock surrendered for conversion during the period from the close of business
on any record date for the payment of a dividend on the Series I Preferred
Stock to the opening of business on the corresponding dividend payment date
must be accompanied by payment of an amount equal to the dividend payable on
such dividend payment date. The dividend with respect to a share of Series I
Preferred Stock called for redemption on a redemption date during the period
from the fifth business day after a record date with respect to the payment of
a dividend on the Series I Preferred Stock to the fifth business day after the
corresponding dividend payment date will be payable on that dividend payment
date to the holder of record of such share on such dividend record date,
notwithstanding the conversion of the share of Series I Preferred Stock after
the close of business on the record date and prior to the opening of business
on the dividend payment date, and the holder converting such share of Series I
Preferred Stock need not include a payment of such dividend amount upon
surrender of such share of Series I Preferred Stock for conversion. Holders of
record of shares of Series I Preferred Stock on a record date with respect to
the payment of a dividend on the Series I Preferred Stock who convert their
shares on or after the corresponding dividend payment date will receive the
dividend payable by the Company on that date and need not include payment in
the amount of the dividend upon surrender of such shares for conversion.
The Company will endeavor to comply with all federal and state securities
laws regulating the offer and delivery of shares of Class A Common Stock upon
conversion of the Series I Preferred Stock and has applied and will endeavor
to list the shares of Class A Common Stock deliverable upon conversion of the
Depositary Shares on the ASE or on any other exchange or the NASDAQ National
Market System (the "NASDAQ-NMS") on which the Class A Common Stock is then
listed or traded principally.
Special Conversion Rights Upon Change of Control. The Series I Preferred
Stock has a special conversion right that becomes effective upon the
occurrence of certain types of significant transactions affecting ownership or
control of the Company or the market for the Class A Common Stock. The purpose
of the special conversion right is to provide (subject to certain exceptions)
a lower conversion price upon the occurrence of a Change of Control (as
defined below) at a time when the Market Value (as defined below) of the Class
A Common Stock is less than the then prevailing conversion price. In such
situations, the special conversion right will permit a holder of Series I
Preferred Stock, at the holder's option during the 45-day period described
below, to convert all, but not less than all, of the holder's Series I
Preferred Stock at a conversion price equal to the Special Conversion Price,
which is equal to the greater of the Market Value of the Class A Common Stock
and $34.58 per share (which is 66 2/3% of the last reported sale price of the
Class A Common Stock on the date of this Prospectus Supplement as set forth on
the cover page hereof and which is subject to adjustment as described below).
The full definition of "Special Conversion Price" is set forth below.
Consequently, to the extent that the Market Value of the Class A Common Stock
is less than $34.58, a holder will not be fully protected.
As used herein, a "Change of Control" with respect to the Company shall be
deemed to have occurred in the event that (A) any person, or group of persons
(within the meaning of Section 13(d) of the Exchange Act), other than Dolan,
becomes entitled to elect a majority of the Board of Directors of the Company;
(B) any person or group of persons (within the meaning of Section 13(d) of the
Exchange Act), other than Dolan, is or becomes the beneficial owner (as
defined in Section 13(d) of the Exchange Act and the rules promulgated
thereunder),
S-32
<PAGE>
directly or indirectly, of shares representing 50% or more of the outstanding
voting power of the Company; (C) a transaction or an event occurs in
connection with which 66 2/3% or more of the aggregate outstanding amount of
Common Stock of the Company shall be exchanged for, converted into, acquired
for or constitutes solely the right to receive, cash, securities of an entity
other than the Company or any of its subsidiaries, property or other assets
(whether by means of an exchange offer, tender offer, consolidation, merger
(other than a holding company reorganization or a change of domicile merger),
combination or similar transaction); or (D) there occurs the conveyance, sale,
lease, assignment, transfer or other disposal of (but excluding any mortgage
or pledge of, or other grant of a security interest in) all or substantially
all of the Company's property, business or assets; provided, however, that a
Change of Control will not be deemed to have occurred with respect to either
of the following transactions or events (unless the Company shall have elected
in the context of a specific transaction or event that such transaction or
event shall constitute a Change of Control): (a) any transaction or event in
which more than 50% (by value as determined in good faith by the Board of
Directors of the Company) of the consideration received by holders of Class A
Common Stock consists of Marketable Stock (as defined below), or (b) any
consolidation or merger of the Company in which the holders of Common Stock
immediately prior to such transaction own, directly or indirectly, (1) 50% or
more of the common equity securities of the sole surviving entity (or of the
ultimate parent of such sole surviving entity) outstanding at the time
immediately after such consolidation or merger and (2) securities representing
50% or more of the combined voting power of the surviving entity's voting
power (or the voting power of the ultimate parent of such surviving entity)
outstanding at such time. If a conveyance, sale, lease, assignment, transfer
or other disposal of all or substantially all of the Company's property,
business or assets occurs and the consideration, including Marketable Stock,
received by the Company is not subsequently distributed to the holders of
Class A Common Stock, a Change of Control would be deemed to have occurred.
As used herein, "Dolan" shall mean Charles F. Dolan, his spouse, his
descendants or any spouse of any such descendants and trusts for the benefit
of, inter alia, him, his spouse, his descendants or any spouse of any such
descendants, and any estate, testamentary trust, or executor, administrator,
conservator or legal or personal representative of any of the foregoing or any
partnership, limited liability company, corporation or similar entity all the
owners of which are comprised of one or more of the foregoing.
As used herein, "Special Conversion Price" means the higher of the Market
Value of the Class A Common Stock and $34.58 per share (which amount will,
each time the conversion price is adjusted, be adjusted so that the ratio of
such dollar amount to the conversion price, after giving effect to any such
adjustment, shall always be the same as the ratio of $34.58 to the initial
conversion price, without giving effect to any such adjustment).
As used herein, "Market Value" of the Class A Common Stock is the average of
the Closing Prices of the Class A Common Stock for the five trading days
ending on the last business day preceding the date of the Change of Control.
For purposes of the definition of Market Value, the date of the Change of
Control shall be deemed to be the later of the date of occurrence of the
Change of Control or the tenth Trading Day after the first public announcement
thereof. "Closing Price" shall mean, for each Trading Day, the last reported
sale price regular way on the ASE (or, if the ASE is not the principal
national securities exchange on which the Class A Common Stock is listed or
admitted for trading, on such other national securities exchange or, if the
Class A Common Stock is not so listed or admitted for trading on the ASE or
any other national securities exchange, on the NASDAQ-NMS or, if the Class A
Common Stock is not quoted on the NASDAQ-NMS, the average of the closing bid
and asked prices in the over-the-counter market as furnished by any New York
Stock Exchange member firm selected from time to time by the Company for that
purpose).
As used herein, the term "Marketable Stock" means common equity securities
of (i) any entity that is the successor to all or substantially all of the
business or assets of the Company as a result of a Change of Control (or of
the ultimate parent of such successor), or (ii) a wholly-owned subsidiary of
the Company which, in either the case of clause (i) or (ii), is (or will, upon
distribution thereof, be) listed or quoted on the ASE, or another national
securities exchange or the NASDAQ-NMS or any similar system of automated
dissemination of quotations of securities prices in the United States.
The Company will mail to each registered holder of Series I Preferred Stock
a notice setting forth details of any special conversion right occasioned by a
Change of Control, together with all information required by the
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<PAGE>
securities laws, within 30 days after the event occurs. A special conversion
right may be exercised only within the 45-day period commencing on the date
the notice is mailed and will expire at the end of that period. Exercise of a
special conversion right is irrevocable, except that a holder of Series I
Preferred Stock shall have the right to withdraw its election to exercise the
special conversion right at any time prior to the conversion date by providing
timely written, telegraphic or facsimile transmission notice of withdrawal to
the conversion agent of the Company, and all Series I Preferred Stock tendered
for conversion will be converted at the end of the 45-day period mentioned in
the preceding sentence. In the event that a Change of Control occurs, the
Company will comply with all applicable provisions of the Exchange Act and the
rules and regulations issued thereunder, including, without limitation,
Sections 13(e) and 14(e) under the Exchange Act and the rules thereunder,
including Rule 13e-4.
If a Change of Control occurs, a holder exercising a special conversion
right will receive Class A Common Stock or such other securities, properties
or cash as may be issuable upon conversion as provided in the Certificate of
Designations; provided, however, the Company or its successor may, at its
option, elect to provide the holder with cash equal to the Market Value of the
number of shares of Class A Common Stock into which the holder's Series I
Preferred Stock is convertible at the Special Conversion Price. Series I
Preferred Stock that is not converted pursuant to a special conversion right
will continue to be convertible pursuant to the general conversion rights
described under the caption "--Conversion Rights" above.
Subject to the limitations discussed below, the Company could, in the
future, enter into certain transactions, including acquisitions, refinancings
or other recapitalizations, that would not constitute a Change of Control
under the Certificate of Designations but that could affect the Company's
capital structure or the Market Value of the Class A Common Stock or the
Series I Preferred Stock.
Liquidation Preference
In the event of any liquidation, dissolution or winding-up of the Company,
after payment or processing for payment of the debts and other liabilities of
the Company and of liquidation preferences in respect of any Senior Stock,
holders of Series I Preferred Stock will be entitled to receive out of the
remaining net assets of the Company, if any, a preferential amount equal to
$250.00 per share (equivalent to $25.00 per Depositary Share), plus all
accrued and unpaid dividends thereon to the date fixed for liquidation,
dissolution or winding-up of the Company (including an amount equal to a
prorated dividend from the last dividend payment date to the date fixed for
liquidation, dissolution or winding-up), before any distribution is made on
any Junior Stock, including, without limitation, on any Common Stock. If, upon
any voluntary or involuntary liquidation, dissolution or winding-up of the
Company, the amounts payable with respect to the Series I Preferred Stock and
all other Parity Stock are not paid in full, the holders of the Series I
Preferred Stock and the Parity Stock will share equally and ratably in any
distribution of assets of the Company in proportion to the full liquidation
preference to which each is entitled. After payment of the full amount of the
liquidation preferences to which they are entitled, the holders of shares of
Series I Preferred Stock will not be entitled to any further participation in
any distribution of assets of the Company. Neither the sale, conveyance,
exchange or transfer (for cash, shares of stock, securities or other
consideration) of all or substantially all of the property or assets of the
Company nor the consolidation or merger of the Company with one or more
corporations shall be deemed to be a liquidation, dissolution or winding-up of
the Company.
The Certificate of Designations for the Series I Preferred Stock does not
contain any provision requiring funds to be set aside to protect the
liquidation preference of the Series I Preferred Stock, although such
liquidation preference will be substantially in excess of the par value of
such shares of Series I Preferred Stock. In addition, the Company is not aware
of any provision of Delaware law or any controlling decision of the courts of
the State of Delaware (the state of incorporation of the Company) that
requires a restriction upon any surplus of the Company solely because the
liquidation preference of the Series I Preferred Stock will exceed its par
value. Consequently, there will be no restriction upon any surplus of the
Company solely because the liquidation preference of the Series I Preferred
Stock will exceed the par value and there will be no remedies available to
holders of the Series I Preferred Stock before or after the payment of any
dividend, other than in connection with the liquidation of the Company, solely
by reason of the fact that such dividend would reduce any then
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<PAGE>
existing surplus of the Company to an amount less than the difference between
the liquidation preference of the Series I Preferred Stock and its par value.
Voting Rights
Holders of the Series I Preferred Stock will have no voting rights with
respect to general corporate matters except as provided by law or as set forth
in the Certificate of Designations. The Certificate of Designations provides
that if dividends on the Series I Preferred Stock are in arrears and unpaid
for six quarterly periods (whether or not consecutive), then the number of
directors constituting the Board of Directors will be adjusted to permit the
holders of the majority of the then outstanding Series I Preferred Stock,
voting as a class, to elect one director and a second director if the right to
elect a second director is required by the ASE or any other national
securities exchange on which the Company elects to list the Class A Common
Stock or by the requirements of the NASDAQ-NMS if the Company elects to have
the Class A Common Stock traded thereon. Such voting rights will continue
until such time as all dividends in arrears on the Series I Preferred Stock
are paid in full, at which time the term of the directors elected pursuant to
the provisions of this paragraph shall terminate. Such event described above
is referred to herein as a "Voting Rights Triggering Event".
Any vacancy occurring in the office of the director elected by holders of
the Series I Preferred Stock may be filled by the remaining director, if any,
or otherwise by the departing director unless and until such vacancy shall be
filled by such holders.
The Certificate of Designations also provides that, except as stated above
under "--Ranking", the Company will not authorize any class of Senior Stock
without the affirmative vote or consent of holders of at least 66 2/3% of the
shares of Series I Preferred Stock then outstanding, voting or consenting, as
the case may be, separately as one class. The Certificate of Designations also
provides that the Company may not amend the Certificate of Designations so as
to affect adversely the specified rights, preferences, privileges or voting
rights of holders of shares of the Series I Preferred Stock, or authorize the
issuance of any additional shares of Series I Preferred Stock, without the
affirmative vote or consent of the holders of at least 66 2/3% of the
outstanding shares of Series I Preferred Stock, voting or consenting, as the
case may be, as one class. The holders of at least 66 2/3% of the outstanding
shares of Series I Preferred Stock, voting or consenting, as the case may be,
as one class, may also waive compliance with any provision of the Certificate
of Designations. The Certificate of Designations also provides that (a) the
creation, authorization, existence or issuance of any shares of Parity Stock
or Junior Stock or (b) the increase or decrease in the amount of authorized
capital stock of any class, including any preferred stock, shall not require
the consent of the holders of Series I Preferred Stock and shall not be deemed
to affect adversely the rights, preferences, privileges or voting rights of
holders of shares of Series I Preferred Stock.
Merger, Consolidation and Sale of Assets
Without the affirmative vote or consent of the holders of a majority of the
issued and outstanding shares of Series I Preferred Stock, the Company may not
consolidate or merge with or into, or sell, assign, transfer, lease, convey or
otherwise dispose of all or substantially all of its assets to, any person
unless: (a) the entity formed by such consolidation or merger (if other than
the Company) or to which such sale, assignment, transfer, lease, conveyance or
other disposition shall have been made (the "resulting entity") shall be a
corporation organized or existing under the laws of the United States or any
State thereof or the District of Columbia; (b) the Series I Preferred Stock
shall remain unchanged or be converted into or exchanged for and shall become
shares of such resulting entity, having in respect of such resulting entity
the same (or more favorable) powers, preferences and relative participating,
optional or other special rights, and the same (or more favorable)
qualifications, limitations or restrictions thereon, that the Series I
Preferred Stock had immediately prior to such transaction (provided that (i)
if, in accordance with the Certificate of Designations, the Series I Preferred
Stock shall become convertible into a different amount or type of securities,
cash or other property, such change shall not be deemed to be a change in the
powers, preferences and relative participating, optional or other special
rights of the Series I Preferred Stock and (ii) the fact that the resulting
entity has authorized or outstanding any securities other than
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<PAGE>
Senior Stock, shall not be deemed to be a change in the powers, preferences
and relative participating, optional or other special rights of the Series I
Preferred Stock); and (c) immediately after giving effect to such transaction,
no Voting Rights Triggering Event shall have occurred or be continuing;
provided, however, that the foregoing shall not be applicable to a transaction
or event that constitutes a "Change of Control", as defined under "--
Conversion Rights--Special Conversion Rights Upon Change of Control" above.
Covenant to Report
Notwithstanding that the Company may not be subject to the reporting
requirements of Section 13 or Section 15(d) of the Securities Exchange Act of
1934, as amended (the "Exchange Act"), the Company will file with the
Securities and Exchange Commission (the "Commission") and provide the Transfer
Agent and the holders of the Series I Preferred Stock with all information,
documents and reports specified in Section 13 and Section 15(d) of the
Exchange Act.
DESCRIPTION OF EXCHANGE DEBENTURES
The following description of the particular terms of the Exchange Debentures
supplements and, to the extent inconsistent therewith, supersedes the
description of the general terms of the Debt Securities set forth under the
heading "Description of Debt Securities" in the accompanying Prospectus, to
which description reference is made.
The Exchange Debentures will be issued under an Indenture to be dated as of
November 1, 1995, between the Company and The Bank of New York, trustee (the
"Trustee"), a form of which was filed as an exhibit to the Company's
Registration Statement on Form S-3 relating to this Prospectus Supplement, as
supplemented by a supplemental indenture to be dated as of November 1, 1995
(as so supplemented, the "Exchange Indenture"). The Exchange Indenture is
subject to and is governed by the Trust Indenture Act of 1939, as amended. The
following summaries of certain provisions of the Exchange Indenture do not
purport to be complete, and, where reference is made to particular provisions
of the Exchange Indenture, such provisions, including the definitions of
certain terms, are incorporated by reference as a part of such summaries,
which are qualified in their entirety by such reference. The definitions of
certain capitalized terms used in the Exchange Indenture and in the following
summary are set forth under "Description of Debt Securities--Certain
Definitions" in the accompanying Prospectus.
The Exchange Debentures will be unsecured obligations of the Company and
will be limited in aggregate principal amount to the aggregate liquidation
preference of the Series I Preferred Stock. The Exchange Debentures will be
issued only in fully registered form without coupons, in denominations of
$1,000 or any integral multiple thereof. The Exchange Debentures will be
subordinated to all existing and future Senior Indebtedness of the Company.
The Exchange Debentures will mature on November 1, 2007. Each Exchange
Debenture will accrue interest at an annual rate equal to the annual dividend
rate of the Series I Preferred Stock from the Exchange Date or from the most
recent interest payment date to which interest has been paid or provided for.
Interest will be payable semi-annually in cash in arrears on January 1 and
July 1 of each year, commencing with the first such date after the Exchange
Date. Interest on the Exchange Debentures will be computed on the basis of a
360-day year of twelve 30-day months and the actual number of days elapsed.
Principal of and premium, if any, and interest on the Exchange Debentures
will be payable, and the Exchange Debentures will be exchangeable and
transferable, at the office or agency of the Company in The City of New York
(which initially will be the Corporate Trust Office of the Trustee); provided,
however, that payment of interest may be made at the option of the Company by
check mailed to the person entitled thereto as shown
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<PAGE>
on the Register of the Exchange Debentures. No service charge will be made for
any registration of transfer or exchange of Exchange Debentures, except for
any tax or other governmental charge that may be imposed in connection
therewith.
The Exchange Indenture will not contain any provisions that limit the
ability of the Company to incur indebtedness or that afford Holders of the
Exchange Debentures protection in the event of a highly leveraged or similar
transaction involving the Company.
Sinking Fund
The Exchange Debentures will not be entitled to the benefits of a sinking
fund.
Subordination
The indebtedness represented by the Exchange Debentures will be subordinated
in right of payment to the prior payment in full of all Senior Indebtedness.
Upon the maturity of any Senior Indebtedness, by lapse of time, acceleration
or otherwise, or upon any payment default (with or without the giving of
notice or lapse of time or both in accordance with the terms of the instrument
governing such Senior Indebtedness, and without any waiver or forgiveness)
with respect to any Senior Indebtedness, all obligations with respect to such
Senior Indebtedness must first be paid in full, or such payment duly provided
for, before any payment is made with respect to the Exchange Debentures or
before any acquisition of Exchange Debentures by the Company.
Upon (i) a default with respect to any Senior Indebtedness (other than under
circumstances when the terms of the previous paragraph are applicable), as
such default is defined therein or in the instrument under which it is
outstanding, permitting the holders of Senior Indebtedness to accelerate the
maturity thereof, and (ii) written notice thereof ("Default Notice") given to
the Company and the Trustee by the agent or agents under the Credit Agreement,
then, unless and until such default shall have been cured or waived by the
holders of such Senior Indebtedness or shall have ceased to exist, no direct
or indirect payment may be made by the Company with respect to the principal
of, premium, if any, or interest on the Exchange Debentures (other than
payments made in Junior Securities) or to acquire any of the Exchange
Debentures or on account of the redemption provisions of the Exchange
Debentures (except mandatory redemption payments made, in accordance with the
terms of the Exchange Debentures, in Exchange Debentures acquired by the
Company before the Default Notice; provided, however, that such provision
shall not prevent the making of any payment (which is not otherwise prohibited
by the previous paragraph) for more than 120 days after the Default Notice
shall have been given unless the Senior Indebtedness in respect of which such
event of default exists has been declared due and payable in its entirety, in
which case no such payment may be made until such acceleration has been
rescinded or annulled or such Senior Indebtedness has been paid in full.
Notwithstanding the foregoing, not more than one Default Notice may be given
with respect to Senior Indebtedness within a period of 240 consecutive days.
The Exchange Indenture will provide that, upon any payment by or
distribution of the assets of the Company to creditors upon any dissolution,
winding up, liquidation, bankruptcy, reorganization, assignment for the
benefit of creditors, or any insolvency, receivership or similar proceeding
relating to the Company, all Senior Indebtedness must be paid in full, or such
payment duly provided for, before any payment or distribution (other than in
Junior Securities) is made on account of the principal of or premium, if any,
or interest on the Exchange Debentures.
By reason of such subordination, in the event of liquidation or insolvency,
creditors of the Company who are holders of Senior Indebtedness may recover
more, ratably, than other creditors of the Company and creditors of the
Company who are not holders of Senior Indebtedness or of the Exchange
Debentures may recover more, ratably, than the Holders of the Exchange
Debentures.
A Holder of Exchange Debentures by his acceptance of Exchange Debentures
agrees to be bound by such provisions and authorizes and expressly directs the
Trustee, on his behalf, to take such action as may be
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<PAGE>
necessary or appropriate to effectuate the subordination provided for in the
Exchange Indenture and appoints the Trustee his attorney-in-fact for such
purpose.
The Exchange Indenture does not limit or prohibit the incurrence of
additional Senior Debt, which may include indebtedness that is senior to the
Exchange Debentures, but subordinate to other obligations of the Company.
For the purposes of the Exchange Debentures, "Senior Indebtedness" means the
principal, premium, if any, interest (including post-petition interest in any
proceeding under any Bankruptcy Law, whether or not such interest is an
allowed claim enforceable against the debtor in a proceeding under such
Bankruptcy Law), penalties, fees and other liabilities payable with respect to
(i) all Debt of the Company, other than the Exchange Debentures and other Debt
Securities with which the Exchange Debentures are intended to rank on a
parity, whether outstanding on the date of the Exchange Indenture or
thereafter created, incurred or assumed, which is (x) for money borrowed, (y)
evidenced by a note or similar instrument given in connection with the
acquisition of any businesses, properties or assets of any kind or (z) in
respect of any Capitalized Lease Obligations and (ii) all renewals,
extensions, refundings, increases or refinancings thereof, unless, in the case
of clause (i) or (ii) above, the instrument under which the Debt is created,
incurred, assumed or guaranteed expressly provides that such Debt is not
senior in right of payment of the Exchange Debentures. Notwithstanding
anything to the contrary contained in the Exchange Indenture, Senior
Indebtedness shall mean and include all amounts of Senior Indebtedness that is
such by virtue of clause (i) or (ii) of the foregoing definition that are
repaid by the Company and subsequently recovered from the holder of such
Senior Indebtedness under any applicable Bankruptcy Laws or otherwise (other
than by reasons of some wrongful conduct on the part of the holders of such
Debt).
The amount of Senior Indebtedness outstanding at September 30, 1995,
adjusted to give pro forma effect to the transactions described under
"Capitalization" and the application of the net proceeds to the Company from
the Offerings of the Depositary Shares and the 2005 Notes, would have been
approximately $1,790.9 million. Such amount of Senior Indebtedness includes,
inter alia, all of the Company's outstanding senior subordinated debt and
reflects the expected issuance of the 2005 Notes.
Optional Redemption
The Exchange Debentures will be subject to redemption at any time on or
after November 1, 1999, at the option of the Company, in whole or in part, on
not less than 30 nor more than 60 days' prior notice at the following
redemption prices (expressed as percentages of the principal amount), if
redeemed during the 12-month period beginning November 1 of the years
indicated:
<TABLE>
<CAPTION>
REDEMPTION
YEAR PRICE
---- ----------
<S> <C>
1999.............................. 102.8%
2000.............................. 101.4
2001 and thereafter............... 100.0
</TABLE>
in each case together with accrued interest to the redemption date (subject to
the right of Holders of record on relevant record dates to receive interest
due on an interest payment date). If less than all of the Exchange Debentures
are to be redeemed, the Trustee shall select the Exchange Debentures or
portions thereof to be redeemed either pro rata or by lot.
The Credit Agreement currently prohibits the Company from making optional
redemptions of the Exchange Debentures other than through the issuance of
subordinated indebtedness, preferred stock or common stock.
Change of Control
The Exchange Debentures are redeemable, for cash, at the option of the
holder upon the occurrence of a "Change of Control" at a redemption price
equal to 100% of the principal amount plus accrued and unpaid
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<PAGE>
interest to the date fixed for redemption. A "Change of Control" for purposes
of the Exchange Debentures will have the same meaning as set forth above under
"Description of Series I Preferred Stock--Conversion Rights--Special
Conversion Rights". The holders of Exchange Debentures will not have the
option to require the Company to redeem the Exchange Debentures if either (i)
the closing price of the Class A Common Stock for five of the ten trading days
before the date of the Change of Control equals or exceeds 105% of the then
prevailing conversion price or (ii) the consideration paid for the Class A
Common Stock in a transaction constituting the Change of Control consists of
cash, securities that are traded on a national securities exchange or quoted
on the NASDAQ-NMS, or a combination of cash and such securities and as a
result of such Change of Control, the Class A Common Stock becomes convertible
into cash and/or such securities, and the aggregate fair market value per
share of such consideration is at least 105% of the then prevailing conversion
price in effect immediately before the closing of such transaction. The
Company's then existing financial resources may limit its ability to pay cash
to the holders of Exchange Debentures upon the occurrence of a Change of
Control. In the event that a Change of Control occurs, the Company will comply
with all applicable provisions of the Exchange Act and the rules and
regulations issued thereunder including, without limitation, Sections 13(c)
and 14(c) under the Exchange Act and the rules thereunder.
Inapplicability of Certain Covenants of the Company
The covenants described under "Description of Debt Securities--Certain
Covenants of the Company" in the accompanying Prospectus shall not apply to
the Exchange Debentures.
Conversion Rights
The Exchange Debentures will be convertible into Class A Common Stock of the
Company, at the option of the holder, at any time prior to redemption or
maturity, at a conversion rate equal to the principal amount of the Exchange
Debentures surrendered for conversion, divided by the conversion price then in
effect (that is, the conversion price set forth on the cover page of this
Prospectus Supplement, as subsequently adjusted). The right to convert
Exchange Debentures called for redemption will terminate at the close of
business on the fifth business day preceding the date fixed for redemption and
will be lost if not exercised prior to that time. For information as to
notices of redemption, see "--Optional Redemption".
The registered holders of Exchange Debentures at the close of business on an
interest payment record date will be entitled to receive the interest payable
on the Exchange Debentures on the corresponding interest payment date
notwithstanding the conversion of the Exchange Debentures after the record
date or, subject to certain provisions applicable to defaulted interest, the
Company's default in payment of the interest due on the interest payment date.
Except as provided below, Exchange Debentures surrendered for conversion
during the period from the close of business on any record date for the
payment of interest to the opening of business on the corresponding interest
payment date must be accompanied by payment of an amount equal to the interest
payable on that interest payment date. Subject to certain provisions
applicable to defaulted interest, the interest payment with respect to an
Exchange Debenture called for redemption on a redemption date during the
period from the fifth business day after a record date for the payment of
interest to the fifth business day after the corresponding interest payment
date will be payable on that interest payment date to the registered holder at
the close of business on that interest payment record date, notwithstanding
the conversion of such Exchange Debenture after the close of business on such
interest payment record date and prior to the opening of business on the
interest payment date, and the Exchange Debenture holder converting the
Exchange Debenture need not make a payment equal to the interest payment
amount upon surrender of the Exchange Debenture for conversion. Exchange
Debenture holders on an interest payment record date who convert Exchange
Debentures on or after the corresponding interest payment date will receive
the interest payable by the Company on that date and need not include payment
in the amount of such interest upon surrender of those Exchange Debentures for
conversion. Except as described above, no payment or adjustment is to be made
on conversion for interest accrued on the Exchange Debentures or for dividends
on the Class A Common Stock issued on conversion.
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<PAGE>
The Company will not issue fractional shares of Class A Common Stock upon
conversion of Exchange Debentures and, in lieu thereof, will pay a cash
adjustment based upon the last reported sales price of the Class A Common
Stock (determined as set forth in the Exchange Indenture) on the last trading
day prior to the date of conversion.
The conversion price is subject to adjustment upon the occurrence of events
comparable to the events described in the second paragraph under "Description
of Series I Preferred Stock--Conversion Rights--General".
In the case of (i) any consolidation of the Company with, or merger of the
Company into, any other entity, (ii) any merger of another entity into the
Company (other than a merger which does not result in any reclassification,
conversion, exchange or cancellation of outstanding shares of Class A Common
Stock of the Company), or (iii) any sale or transfer of all or substantially
all of the assets of the Company, each holder of an Exchange Debenture then
outstanding shall have the right thereafter to convert such Exchange Debenture
only into the kind and amount of securities, cash and other property
receivable upon such consolidation, merger, sale or transfer by a holder of
the number of shares of Class A Common Stock of the Company into which such
Exchange Debenture might have been converted immediately prior to such
consolidation, merger, sale or transfer, assuming such holder of Class A
Common Stock of the Company is not an entity with which the Company
consolidated or into which the Company merged or which merged into the Company
or to which such sale or transfer was made, as the case may be (a "constituent
entity"), or an affiliate of a constituent entity and failed to exercise his
rights of election, if any, as to the kind or amount of securities, cash or
other property receivable upon such consolidation, merger, sale or transfer
(provided that if the kind or amount of securities, cash and other property
receivable upon such consolidation, merger, sale or transfer is not the same
for each share of Common Stock of the Company held immediately prior to such
consolidation, merger, sale or transfer by other than a constituent entity or
an affiliate thereof and in respect of which such rights of election shall not
have been exercised ("nonelecting share"), then the kind and amount of
securities, cash and other property receivable upon such consolidation,
merger, sale or transfer by each nonelecting share shall be deemed to be the
kind and amount so receivable per share by a plurality of the nonelecting
shares). In the case of a cash merger of the Company into another corporation
or any other cash transaction of the type mentioned above, the effect of these
provisions would be that thereafter each Exchange Debenture would be
convertible at the conversion price in effect immediately prior to such merger
or transaction into the same amount of cash per share as the holder of such
Exchange Debenture would have received if such Exchange Debenture had been
converted into Class A Common Stock immediately prior to the effective date of
such cash merger or transaction. If necessary, appropriate adjustment shall be
made in the application of the provisions set forth in this Prospectus
Supplement with respect to the rights and interests thereafter of the holders
of Exchange Debentures to the end that the provisions set forth in this
Prospectus Supplement shall thereafter correspondingly be made applicable, as
nearly as may reasonably be, in relation to any shares of stock or other
securities or property thereafter deliverable on the conversion of the
Exchange Debentures.
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
In the opinion of Sullivan & Cromwell, counsel to the Company ("Counsel"),
the following discussion sets forth the material anticipated federal income
tax consequences of the purchase, ownership and disposition of the Depositary
Shares, Exchange Debentures and Class A Common Stock. This summary is based
upon the provisions of the Internal Revenue Code of 1986, as amended (the
"Code"), the final, temporary and proposed regulations promulgated thereunder,
and administrative rulings and judicial decisions now in effect, all of which
are subject to change (possibly with retroactive effect) or different
interpretations. This summary does not purport to deal with all aspects of
federal income taxation that may be relevant to an investor's decision to
purchase and it is not intended to be applicable to all categories of
investors, some of which, such as dealers in securities, banks, insurance
companies, tax-exempt organizations, foreign persons, persons that hold
Depositary Shares, Exchange Debentures or Class A Common Stock as part of a
straddle or conversion transaction or holders subject
S-40
<PAGE>
to the alternative minimum tax, may be subject to special rules. In addition,
the summary is limited to persons that will hold the Depositary Shares, any
Exchange Debentures received in exchange therefor or shares of Class A Common
Stock received on a conversion of Depositary Shares or Exchange Debentures as
"capital assets" (generally, property held for investment) within the meaning
of Section 1221 of the Code. Holders should note that Counsel's opinion is not
binding on the Internal Revenue Service (the "Service") and there can be no
assurance that the Service will take a similar view with respect to the tax
consequences described below. No ruling has been or will be requested by the
Company from the Service on any tax matters relating to the Depositary Shares,
Exchange Debentures or Class A Common Stock. ALL PROSPECTIVE PURCHASERS OF
DEPOSITARY SHARES ARE ADVISED TO CONSULT THEIR OWN TAX ADVISORS REGARDING THE
FEDERAL, STATE, LOCAL AND FOREIGN TAX CONSEQUENCES OF THE PURCHASE, OWNERSHIP
AND DISPOSITION OF DEPOSITARY SHARES, EXCHANGE DEBENTURES AND CLASS A COMMON
STOCK.
In general, for U.S. federal income tax purposes, holders of Depositary
Shares will be treated as the owners of the shares of the Series I Preferred
Stock represented by those Depositary Shares.
DISTRIBUTIONS ON DEPOSITARY SHARES
The Company believes that it does not presently have any current or
accumulated earnings and profits ("earnings and profits") as determined under
U.S. federal income tax principles and that it is unlikely to have earnings
and profits for several years. As a result, until such time as the Company
does have earnings and profits, distributions with respect to the Depositary
Shares will not qualify as dividends for federal income tax purposes and will
not be eligible for the dividends-received deduction. Instead, such
distributions on the Depositary Shares will be treated as a nontaxable return
of capital and will be applied against and reduce the adjusted tax basis of
the Depositary Shares in the hands of each holder (but not below zero), thus
increasing the amount of any gain (or reducing the amount of any loss) which
would otherwise be realized by such holder upon the disposition of such
Depositary Shares. The amount of any such distribution which exceeds the
adjusted tax basis of the Depositary Shares in the hands of the holder will be
treated as capital gain and will be long-term capital gain if the
stockholder's holding period for such Depositary Shares exceeds one year.
TREATMENT OF DISTRIBUTIONS OUT OF EARNINGS AND PROFITS
If the Company were to have earnings and profits, distributions on
Depositary Shares would be treated as dividends to holders to the extent of
the Company's earnings and profits. Under Section 243 of the Code, corporate
stockholders generally would be able to deduct 70% of the amount of any
distribution qualifying as a dividend. There are, however, many exceptions and
restrictions relating to the availability of such dividends-received deduction
such as restrictions relating to (i) the holding period of stock, dividends on
which are sought to be deducted, (ii) debt-financed portfolio stock, (iii)
dividends treated as "extraordinary dividends" for purposes of Section 1059 of
the Code, and (iv) taxpayers that pay alternative minimum tax. Corporate
stockholders should consult their own tax advisors regarding the extent, if
any, to which such exceptions and restrictions may apply to their particular
factual situation.
Additionally, if the Company were to have earnings and profits, the excess
of the liquidation preference over the issue price of the Depositary Shares,
if any, would be treated as received by a holder as dividends over the term of
the Depositary Shares (or, possibly, the period to an earlier call date) to
the extent such excess was considered an unreasonable redemption premium.
Regulations regarding the taxation of redemption premium currently exist in
both final and proposed form. While the proposed regulations will, by their
terms, only apply to stock issued on or after the date new final regulations
are adopted, there is uncertainty as to whether similar rules currently apply
and which rules will apply at the time of any future distribution of
Depositary Shares in lieu of payment of cash. Holders should consult their own
tax advisors regarding the application of the redemption premium rules to
their particular situation.
S-41
<PAGE>
ADJUSTMENTS TO CONVERSION RATIO
Pursuant to the terms of the Depositary Shares and the Exchange Debentures,
the number of shares of Class A Common Stock to which a holder of Depositary
Shares or Exchange Debentures is entitled upon conversion may be adjusted upon
the occurrence of certain specified events. Holders should consult their own
tax advisors regarding the possible U.S. federal income tax consequences of a
change in the conversion ratio of Depositary Shares or Exchange Debentures.
REDEMPTION, SALE OR EXCHANGE FOR EXCHANGE DEBENTURES
A sale or redemption of the Depositary Shares for cash will be a taxable
transaction on which a holder will generally recognize capital gain or loss
(except to the extent of cash payments received on the exchange that are
attributable to declared dividends which will be treated in the same manner as
distributions described above). The gain or loss recognized on such exchange
will generally be equal to the difference between the amount realized by the
holders of the Depositary Shares and such holder's adjusted tax basis in the
Depositary Shares surrendered in the redemption. Different rules may apply to
holders that continue to own stock of the Company, actually or constructively,
following the redemption.
A redemption of Depositary Shares in exchange for Exchange Debentures will
be subject to the same general rules as a redemption for cash, except that the
holder would have capital gain or loss equal to the difference between the
issue price of the Exchange Debentures received and the holder's adjusted tax
basis in the Depositary Shares redeemed. The issue price of the Exchange
Debentures would be determined in the manner described below under "--Original
Issue Discount" for purposes of computing original issue discount (if any) on
the Exchange Debentures.
Depending upon a holder's particular circumstances, the tax consequences of
holding Exchange Debentures may be less advantageous than the tax consequences
of holding Depositary Shares because, for example, payments of interest on the
Exchange Debentures will not be eligible for any dividends-received deduction
that may be available to corporate holders and because, as discussed below,
Exchange Debentures may be issued with original issue discount ("OID").
CONVERSION OF DEPOSITARY SHARES INTO SHARES OF CLASS A COMMON STOCK
No gain or loss will be recognized by a holder that converts Depositary
Shares into Class A Common Stock pursuant to the conversion feature of the
Depositary Shares (including a conversion pursuant to the special conversion
rights upon a Change of Control). Such holder's tax basis in the Class A
Common Stock received upon conversion will be the same as the holder's tax
basis in the Depositary Shares converted into Class A Common Stock reduced by
any amount received in lieu of a fractional share of Class A Common Stock, and
such holder's holding period for such Class A Common Stock will include the
holder's holding period for the Depositary Shares so converted. A holder
receiving cash in lieu of a fractional share of Class A Common Stock will
recognize gain or loss in an amount equal to the difference between the amount
of cash so received and the holder's tax basis in the converted Depositary
Shares allocable to the fractional share of Class A Common Stock. Any such
gain or loss will be capital gain or loss and will be long-term gain or loss
if the holder's holding period in the converted Depositary Shares exceeds one
year.
ORIGINAL ISSUE DISCOUNT
If the Depositary Shares are exchanged for Exchange Debentures at a time
when the stated redemption price at maturity of the Exchange Debentures
exceeds their issue price by more than a de minimis amount, the Exchange
Debentures will be treated as having OID equal to the entire amount of such
excess. If the Exchange Debentures are deemed to be traded on an established
securities market on or at any time during the 60-day period ending 30 days
after their issue date, the issue price of the Exchange Debentures will be
their fair market value as determined as of their issue date. Subject to
certain limitations described in the regulations, the
S-42
<PAGE>
Exchange Debentures will be deemed to be traded on an established securities
market if, among other things, price quotations are readily available from
dealers, brokers or traders. Similarly, if the Depositary Shares, but not the
Exchange Debentures issued and exchanged therefor, are deemed to be traded on
an established securities market at the time of the exchange, then the issue
price of each Exchange Debenture should be the fair market value of the
Depositary Shares exchanged therefor at the time of the exchange. The
Depositary Shares will generally be deemed to be traded on an established
securities market if it appears on a system of general circulation that
provides a reasonable basis to determine fair market value based either on
recent price quotations or recent sales transactions. In the event that
neither the Depositary Shares nor the Exchange Debentures are deemed to be
traded on an established securities market, the issue price of the Exchange
Debentures will be their stated principal amount or, in the event the Exchange
Debentures do not bear "adequate stated interest" within the meaning of
Section 1274 of the Code, their "imputed principal amount," which is generally
the sum of the present values of all payments due under the Exchange
Debentures, discounted from the date of payment to their issue date at the
appropriate "applicable federal rate."
The stated redemption price at maturity of the Exchange Debentures would
equal the total of all payments required to be made thereon, other than
payments of qualified stated interest. Qualified stated interest generally is
stated interest that is unconditionally payable in cash or other property
(other than debt instruments of the issuer) at least annually at a single
fixed rate.
In the event the Exchange Debentures are not issued with OID, because they
are issued at a time when the redemption price of the Exchange Debentures does
not exceed their issue price by more than a de minimis amount, stated interest
should be included in income by a holder in accordance with such holder's
method of accounting.
BOND PREMIUM ON EXCHANGE DEBENTURES RECEIVED IN EXCHANGE
If at the time the Depositary Shares are exchanged for Exchange Debentures
the holder's tax basis in any such Exchange Debenture exceeds the amount
payable at the maturity date, such excess may constitute amortizable bond
premium which the holder may elect to amortize over the term of the Exchange
Debenture on a constant yield method (except to the extent attributable under
applicable regulations to the right to convert Exchange Debentures into Class
A Common Stock). In the case of an obligation, such as an Exchange Debenture,
that may be called at declining premiums prior to maturity, an earlier call
date is treated as its maturity date and the amount of amortizable bond
premium is determined by treating the amount payable on such call date as the
amount payable at maturity if such calculation produces a smaller amortizable
bond premium than the method described in the preceding sentence. If a holder
of an Exchange Debenture is required to amortize and deduct bond premium by
reference to a call date, the Exchange Debenture will be treated as maturing
on such date for the amount payable, and, if not redeemed on such date, the
Exchange Debenture will be treated (for purposes of the bond premium rules) as
reissued on such date for the amount so payable. A holder who elects to
amortize bond premium must reduce its tax basis in the Exchange Debentures by
the amount so amortized, and the amount amortized in any year will be treated
as a reduction of interest income on the Exchange Debenture. The election to
amortize premium applies to all obligations owned or acquired by the holder in
the current and all subsequent tax years and may not be revoked without the
consent of the Service. Bond premium on an Exchange Debenture held by a holder
that does not make such an election will decrease the gain or increase the
loss otherwise recognized on disposition of the Exchange Debenture.
ACQUISITION PREMIUM
A holder of an Exchange Debenture issued with OID who purchases such
Exchange Debenture for an amount that is greater than its adjusted issue price
but equal to or less than the sum of all amounts payable on the Exchange
Debenture after the purchase date other than payments of qualified stated
interest will be considered to have purchased such Exchange Debenture at an
"acquisition premium". Under the acquisition premium rules, the amount of OID
which such holder must include in income with respect to such Exchange
Debenture for any taxable year will be reduced by the portion of such
acquisition premium properly allocable to such year.
S-43
<PAGE>
MARKET DISCOUNT ON RESALE OF EXCHANGE DEBENTURES
Holders of Exchange Debentures should be aware that a disposition of the
Exchange Debentures may be affected by the market discount provisions of
Sections 1276-1278 of the Code. These rules generally provide that if a holder
acquires Exchange Debentures (other than in an original issuance) at a market
discount which equals or exceeds one-fourth of one percent of the stated
redemption price of the Exchange Debenture at maturity multiplied by the
number of remaining years to maturity and thereafter recognizes gain upon a
disposition of the Exchange Debentures, the lesser of (i) such gain or (ii)
the portion of the market discount which accrued while the Exchange Debenture
was held by such holder will be treated as ordinary income at the time of the
disposition. For these purposes, market discount means the excess (if any) of
the stated redemption price at maturity (or, if the Exchange Debenture is
issued with OID, the Exchange Debenture's revised issue price which is the sum
of the issue price of the Exchange Debenture and the aggregate amount of OID
includible in the gross income of all previous holders of the Exchange
Debenture) over the basis of such Exchange Debenture immediately after its
acquisition by the holder. A holder of an Exchange Debenture may elect to
include any market discount in income currently rather than upon disposition
of the Exchange Debenture. This election once made applies to all market
discount obligations acquired on or after the first taxable year to which the
election applies, and may not be revoked without the consent of the Service.
A holder of any Exchange Debenture who acquired such Exchange Debenture at a
market discount generally will be required to defer the deduction of a portion
of the interest on any indebtedness incurred or maintained to purchase or
carry such Exchange Debenture until the market discount is recognized upon a
subsequent disposition of such Exchange Debenture. Such a deferral is not
required, however, if the holder elects to include accrued market discount in
income currently.
ELECTION TO TREAT ALL INTEREST AS ORIGINAL ISSUE DISCOUNT
A holder may elect to include in gross income all interest that accrues on
an Exchange Debenture using the constant yield method described above under
the heading "Original Issue Discount". Holders should consult their own tax
advisors regarding the manner and advisability of making this election.
REDEMPTION OR SALE OF EXCHANGE DEBENTURES
Generally, any redemption (including a redemption at the option of a holder
upon a Change of Control) or sale of Exchange Debentures by a holder will
result in taxable gain or loss equal to the difference between the amount of
cash received (except to the extent the cash received is attributable to
accrued interest) and the holder's adjusted tax basis in such Exchange
Debentures. The adjusted tax basis of a holder who received such Exchange
Debentures in exchange for the Depositary Shares will generally be equal to
the issue price of such Exchange Debentures, increased by any OID or market
discount on the Exchange Debentures included in such holder's income prior to
their sale or redemption, and reduced by any bond premium previously allowed
as an offset to interest payments on such Exchange Debentures and any cash
payments on the Exchange Debentures other than qualified stated interest. Such
gain or loss would be capital gain or loss if the Exchange Debentures were
held as a capital asset and would be long-term gain or loss if the holder's
holding period exceeded one year.
APPLICABLE HIGH YIELD DISCOUNT OBLIGATIONS
Pursuant to Section 163 of the Code a portion of the OID accruing on certain
debt instruments may be treated as a dividend eligible for the dividends-
received deduction and the corporation issuing such debt instrument would not
be entitled to deduct the "disqualified portion" of the OID accruing on such
debt instrument and would be allowed to deduct the remainder of the OID only
when paid.
This treatment would apply to "applicable high yield discount obligations"
("AHYDO"), that is, debt instruments that have a term of more than five years,
have a yield to maturity that equals or exceeds five percentage points over
the "applicable federal rate" and have "significant" OID. A debt instrument is
treated
S-44
<PAGE>
as having "significant" OID if the aggregate amount that would be includible
in gross income with respect to such debt instrument for periods before the
close of any accrual period ending after the date five years after the date of
issue exceeds the sum of (i) the aggregate amount of interest to be paid in
cash under the debt instrument before the close of such accrual period and
(ii) the product of the initial issue price of such debt instrument and its
yield to maturity. Because the amount of OID, if any, attributable to the
Exchange Debentures will be determined at the time such Exchange Debentures
are issued and the applicable federal rate at the time the Exchange Debentures
are issued is not predictable, it is impossible to determine at the present
time whether an Exchange Debenture will be treated as an AHYDO.
If an Exchange Debenture is treated as an AHYDO, a holder would be treated
as receiving dividend income (to the extent of the Company's current and
accumulated earnings and profits) solely for purposes of the dividends-
received deduction in an amount equal to the "dividend equivalent portion" of
the "disqualified portion" of the OID of such AHYDO. The "disqualified
portion" of the OID is equal to the lesser of (i) the amount of OID or (ii)
the portion of the "total return" (the excess of all payments to be made with
respect to such obligation over its issue price) on such obligation that bears
the same ratio to the obligation's total return as the "disqualified yield"
(the extent to which the yield exceeds the applicable federal rate plus 6%)
bears to the obligation's yield to maturity. The dividend equivalent portion
of the disqualified portion is the amount thereof that would be treated as a
dividend if distributed by the issuer with respect to its stock. The Company's
deduction for OID will be substantially deferred with respect to an Exchange
Debenture that is treated as an AHYDO. In addition, such deduction will be
disallowed if and to the extent that the yield on such AHYDO exceeds the
applicable federal rate by more than 6%.
CONVERSION OF EXCHANGE DEBENTURES INTO SHARES OF CLASS A COMMON STOCK
No gain or loss will be recognized by a holder that converts Exchange
Debentures into Class A Common Stock pursuant to the conversion feature of the
Exchange Debentures. Such holder's tax basis in the Class A Common Stock
received upon conversion will be the same as the holder's tax basis in the
Exchange Debenture converted into Class A Common Stock reduced by any amount
received in lieu of a fractional share of Class A Common Stock, and such
holder's holding period for such Class A Common Stock will include the
holder's holding period for the Exchange Debentures so converted. A holder
receiving cash in lieu of a fractional share of Class A Common Stock will
recognize gain or loss in an amount equal to the difference between the amount
of cash so received and the holder's tax basis in the converted Exchange
Debenture allocable to the fractional share of Class A Common Stock. Any such
gain or loss will be capital gain or loss and will be long-term gain or loss
if the holder's holding period in the converted Exchange Debenture exceeds one
year.
DISTRIBUTIONS ON SHARES OF CLASS A COMMON STOCK
Distributions on shares of Class A Common Stock will be taxed in the same
manner as distributions on Depositary Shares as described above in "--
Distributions on Depositary Shares" and the first paragraph of "--Treatment of
Distributions out of Earnings and Profits".
SALE OF SHARES OF CLASS A COMMON STOCK
Generally, the sale of shares of Class A Common Stock by a holder will
result in taxable gain or loss equal to the difference between the amount of
cash received and the holder's adjusted tax basis (determined in the manner
described above in "--Conversion of Depositary Shares into Shares of Class A
Common Stock") in such shares of Class A Common Stock. Such gain or loss will
be capital gain or loss if the shares of Class A Common Stock were held as a
capital asset and would be long-term gain or loss if the holder's holding
period in such shares exceeds one year.
BACKUP WITHHOLDING
In general, a noncorporate holder of Depositary Shares or Exchange
Debentures will be subject to backup withholding at the rate of 31% with
respect to reportable payments of dividends, interest, or OID accrued with
respect to, or the proceeds of a sale, exchange or redemption of, Depositary
Shares or Exchange Debentures, as the case may be, if the holder fails to
provide a taxpayer identification number or certification of foreign or other
exempt status or fails to report in full dividend and interest income. Amounts
paid as backup withholding do not constitute an additional tax and will be
credited against the holder's federal income tax liabilities.
S-45
<PAGE>
UNDERWRITING
Subject to the terms and conditions set forth in the Underwriting Agreement,
the Company has agreed to sell to each of the Underwriters named below, and
each of the Underwriters has severally agreed to purchase, the number of
Depositary Shares set forth opposite its name below. The Underwriters are
committed to purchase all of the Depositary Shares if any are purchased.
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITER DEPOSITARY SHARES
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<S> <C>
Bear, Stearns & Co. Inc................................... 6,000,000
Merrill Lynch, Pierce, Fenner & Smith
Incorporated......................................... 3,000,000
Morgan Stanley & Co. Incorporated......................... 3,000,000
----------
Total................................................ 12,000,000
==========
</TABLE>
The Underwriters have advised the Company that they propose initially to
offer the Depositary Shares to the public at the initial public offering price
set forth on the cover page of this Prospectus Supplement, and in part to
certain dealers at such price less a concession not in excess of $0.45 per
share, and the Underwriters may allow, and such dealers may reallow, a
discount not in excess of $0.10 per share on sales to certain other dealers.
After the initial public offering, the public offering price, concession and
reallowance may be changed by the Underwriters. The Depositary Shares are
offered subject to receipt and acceptance by the Underwriters and to certain
other conditions, including the right to reject orders in whole or in part.
The Company has agreed with the Underwriters that it will not, without the
prior written consent of the Underwriters, offer, sell, contract to sell or
otherwise dispose of any Class A Common Stock (except for shares issuable in
connection with the proposed acquisition of Cablevision of Boston described
under "Recent Developments" or issuable upon conversion of securities or
exercise of warrants and options outstanding as of the date of this Prospectus
Supplement or pursuant to employee benefit plans) or preferred stock (except
for any Series D Preferred Stock, Series H Redeemable Exchangeable Preferred
Stock or the preferred stock to be issued in the Proposed V Cable
Transactions) or warrants, rights or options exercisable at any time therefore
for a period of 90 days after the date of this Prospectus Supplement.
The Depositary Shares have been approved for listing on the ASE, subject to
notice of issuance.
Each of Bear, Stearns & Co. Inc. ("Bear Stearns") and Merrill Lynch, Pierce,
Fenner & Smith Incorporated ("Merrill Lynch") has from time to time provided
investment banking services to the Company (and in the case of Merrill Lynch,
Charles F. Dolan) in connection with various transactions and proposed
transactions. In addition, Bear Stearns, Merrill Lynch and Morgan Stanley &
Co. Incorporated were the initial purchasers in the offering of the Company's
Series G Preferred Stock in September 1995 and are among the underwriters of
the Company's 2005 Notes. Bear Stearns has agreed to reimburse the Company for
certain expenses of this Offering and the concurrent offering of the 2005
Notes.
The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act.
VALIDITY OF DEPOSITARY SHARES AND CLASS A COMMON STOCK
The validity of the Depositary Shares offered hereby and of the Class A
Common Stock issuable upon conversion of the Depositary Shares will be passed
upon for the Company by Sullivan & Cromwell, New York, New York and for the
Underwriters by Shearman & Sterling, New York, New York.
S-46
<PAGE>
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NO DEALER, SALESMAN OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS SUPPLEMENT OR THE ACCOMPANYING
PROSPECTUS IN CONNECTION WITH THE OFFERING COVERED BY THIS PROSPECTUS
SUPPLEMENT AND THE PROSPECTUS. IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
COMPANY OR THE UNDERWRITERS. THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING
PROSPECTUS DO NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER
TO BUY, THE DEPOSITARY SHARES OFFERED HEREBY IN ANY JURISDICTION IN WHICH SUCH
OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH
OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANY PERSON TO WHOM IT IS
UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS
PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION THAT THERE HAS
NOT BEEN A CHANGE IN THE FACTS SET FORTH IN THIS PROSPECTUS SUPPLEMENT OR THE
ACCOMPANYING PROSPECTUS OR IN THE AFFAIRS OF THE COMPANY SINCE THE DATE
HEREOF.
---------------
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Summary.................................................................... S-3
The Company................................................................ S-11
Recent Developments........................................................ S-13
Use of Proceeds............................................................ S-16
Capitalization............................................................. S-17
Condensed Pro Forma Consolidated
Financial Information..................................................... S-19
Price Range of Class A Common Stock and Dividend Policy.................... S-26
Description of Depositary Shares........................................... S-27
Description of Series I Preferred Stock.................................... S-27
Description of Exchange Debentures......................................... S-36
Certain Federal Income Tax Considerations.................................. S-40
Underwriting............................................................... S-46
Validity of Depositary Shares and Class A Common Stock..................... S-46
PROSPECTUS
Available Information...................................................... 2
Incorporation of Certain Documents by
Reference................................................................. 2
The Company................................................................ 3
Risk Factors............................................................... 3
Use of Proceeds............................................................ 8
Ratio of Earnings to Fixed Charges......................................... 9
Description of Debt Securities............................................. 9
Description of Capital Stock............................................... 23
Description of Depositary Shares........................................... 29
Description of Warrants.................................................... 31
Plan of Distribution....................................................... 32
Validity of the Securities................................................. 33
Experts.................................................................... 33
</TABLE>
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[LOGO] CABLEVISION
12,000,000 SHARES
CABLEVISION SYSTEMS
CORPORATION
DEPOSITARY SHARES
EACH REPRESENTING A
ONE-TENTH INTEREST IN A SHARE OF
8 1/2% SERIES I CUMULATIVE CONVERTIBLE EXCHANGEABLE PREFERRED STOCK
---------------
PROSPECTUS SUPPLEMENT
---------------
BEAR, STEARNS & CO. INC.
MERRILL LYNCH & CO.
MORGAN STANLEY & CO.
INCORPORATED
November 1, 1995
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