SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1996
-----------------------------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
--------------- -----------------
Commission File Number: 1-9046
------------------
Cablevision Systems Corporation
--------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 11-2776686
------------------------------ -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
One Media Crossways, Woodbury, New York 11797
- --------------------------------------- ------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (516) 364-8450
------------------
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
------ -------
Number of shares of common stock outstanding as of July 3, 1996:
Class A Common Stock 13,257,163
Class B Common Stock 11,572,709
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
CABLEVISION SYSTEMS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended Three Months Ended
June 30, June 30,
------------------------- ------------------------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues......................... $ 624,496 $ 509,135 $ 320,331 $ 263,734
---------- ---------- ----------- ----------
Operating expenses:
Technical...................... 257,580 193,243 128,890 100,018
Selling, general and
administrative............... 146,439 131,611 73,551 75,794
Depreciation and amortization.. 175,168 159,537 90,474 76,883
---------- ----------- ------------ ------------
579,187 484,391 292,915 252,695
----------- ----------- ----------- -----------
Operating profit......... 45,309 24,744 27,416 11,039
------------ ----------- ----------- -----------
Other income (expense):
Interest expense............... (132,099) (155,318) (62,402) (79,590)
Interest income................ 2,240 790 438 390
Share of affiliates' net losses (40,061) (52,692) (19,093) (23,587)
Write off of deferred interest and
financing costs.............. (24,012) (2,888) (24,012) -
Provision for preferential
payment to related party..... (2,800) (2,800) (1,400) (1,400)
Minority interest.............. (4,810) (4,276) (2,455) (2,166)
Miscellaneous.................. (4,243) (2,999) (2,666) (1,623)
---------- ---------- ---------- ----------
(205,785) (220,183) (111,590) (107,976)
---------- ---------- ---------- ----------
Net loss......................... (160,476) (195,439) (84,174) (96,937)
Dividend requirements applicable to
preferred stocks............... (58,173) (4,918) (33,795) (2,447)
----------- --------- ----------- ----------
Net loss applicable to common
shareholders................... $(218,649) $(200,357) $ (117,969) $ (99,384)
========= ========= =========== ==========
Net loss per common share........ $ (8.81) $ (8.45) $ (4.75) $ (4.18)
========== ============ ============ ==========
Average number of common shares
outstanding (in thousands)..... 24,819 23,710 24,828 23,751
========= ============ =========== ==========
</TABLE>
See accompanying notes to consolidated
financial statements.
(2)
<PAGE>
CABLEVISION SYSTEMS CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
(Unaudited)
<TABLE>
<CAPTION>
June 30, December 31,
ASSETS 1996 1995
---- ----
<S> <C> <C>
Cash and cash equivalents................................. $ 17,136 $ 15,332
Account receivable trade (less allowance for doubtful 99,745 100,506
accounts of $11,050 and $12,678)........................
Notes and other receivables............................... 17,268 16,762
Prepaid expenses and other assets......................... 22,947 19,353
Property, plant and equipment, net........................ 1,105,187 1,026,355
Investments in affiliates................................. 179,592 141,345
Advances to affiliates.................................... 80,256 6,909
Feature film inventory.................................... 132,571 143,916
Franchises, net of accumulated amortization of
$350,899 and $314,218................................... 335,620 363,077
Affiliation agreements, net of accumulated amortization
of $31,372 and $20,598.................................. 114,074 124,848
Excess costs over fair value of net assets acquired and
other intangible assets, net of accumulated
amortization of $542,569 and $518,178................... 432,719 468,133
Deferred financing, acquisition and other costs, net of
accumulated amortization of $28,973 and $23,899......... 58,969 47,673
Deferred interest expense, net of accumulated - 28,096
amortization of $42,142 in 1995......................... --------- ---------
$2,596,084 $2,502,305
========== ==========
</TABLE>
See accompanying notes to consolidated
financial statements.
(3)
<PAGE>
<TABLE>
<CAPTION>
CABLEVISION SYSTEMS CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
(Unaudited)
June 30, December 31,
1996 1995
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
<S> <C> <C>
Accounts payable...................................... $ 153,633 $ 156,470
Accrued liabilities:
Interest.......................................... 47,300 41,908
Payroll and related benefits...................... 55,443 47,997
Franchise fees.................................... 19,876 21,980
Other............................................. 100,338 116,125
Accounts payable to affiliates........................ 18,099 12,708
Feature film rights payable........................... 116,639 128,000
Bank debt............................................. 1,118,455 992,469
Senior debt........................................... - 898,803
Subordinated debentures............................... 1,323,037 923,608
Subordinated notes payable............................ 141,268 141,268
Obligation to related party........................... 190,081 192,945
Capital lease obligations and other debt.............. 8,478 8,014
------------- -------------
Total liabilities................................. 3,292,647 3,682,295
------------- -------------
Deficit investment in affiliates...................... 485,244 453,935
------------- -------------
Series H Redeemable Exchangeable Preferred Stock...... 273,221 257,751
------------- -------------
Series L Redeemable Exchangeable Preferred Stock...... 677,573 --
------------- -------------
Commitments and contingencies
Stockholders' deficiency:
8% Series C Cumulative Preferred Stock, $.01 par
value, 112,500 shares authorized, 110,622 shares
issued ($100 per share liquidation preference). 1 1
8% Series D Cumulative Preferred Stock, $.01 par
value, 112,500 shares authorized, none issued
($100 per share liquidation preference)........ - -
8-1/2% Series I Cumulative Convertible Exchangeable
Preferred Stock, $.01 par value, 1,380,000 shares
authorized, 1,380,000 shares issued ($250
per share liquidation preference).............. 14 14
Class A Common Stock, $.01 par value, 50,000,000
shares authorized, 13,256,423 and 14,210,599
shares issued.................................. 133 142
Class B Common Stock, $.01 par value, 20,000,000
shares authorized, 11,572,709 shares issued.... 116 116
Paid-in capital................................... 165,012 247,671
Accumulated deficit............................... (2,297,877) (2,079,228)
------------ ------------
(2,132,601) (1,831,284)
Less treasury stock, at cost (1,091,553 shares at
December 31, 1995)............................ - (60,392)
------------- ------------
Total stockholders' deficiency.................... (2,132,601) (1,891,676)
------------ ------------
$ 2,596,084 $ 2,502,305
============ ============
</TABLE>
See accompanying notes to consolidated
financial statements.
(4)
<PAGE>
<TABLE>
<CAPTION>
CABLEVISION SYSTEMS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, 1996 AND 1995
(Dollars in thousands)
(Unaudited)
1996 1995
-------- -------
<S> <C> <C>
Cash flows from operating activities:
Net loss............................................ $(160,476) $(195,439)
--------- ---------
Adjustments to reconcile net loss to net cash provided
by operating activities:
Depreciation and amortization..................... 175,168 159,537
Share of affiliates' net losses................... 40,061 52,692
Minority interest................................. 4,810 4,276
Amortization of deferred financing................ 3,331 2,619
Amortization of deferred interest................. 4,684 7,024
Amortization of debenture discount................ 44 37
Accretion of interest on debt..................... 6,828 19,065
Write off of deferred interest and finance costs.. 24,012 2,888
Loss on sale of equipment......................... 2,004 1,933
Changes in assets and liabilities net of effects of
acquisitions:
Accounts receivable trade.................... 761 1,475
Notes receivable, affiliates................. - 357
Notes and other receivables.................. (506) (2,424)
Prepaid expenses and other assets............ (8,404) 1,418
Advances to affiliates....................... (3,347) (858)
Feature film inventory....................... 11,345 (21,617)
Accounts payable............................. (2,837) (3,424)
Accrued interest............................. 5,392 2,928
Accrued payroll and related benefits......... 7,446 7,360
Accrued franchise fees....................... (2,104) (2,325)
Accrued liabilities, other................... (15,787) 26,966
Accounts payable to affiliates............... 5,391 5,304
Feature film rights payable.................. (11,361) 20,484
------------ ------------
Total adjustments........................... 246,931 285,715
----------- -----------
Net cash provided by operating activities........... $ 86,455 $ 90,276
----------- -----------
</TABLE>
See accompanying notes to consolidated
financial statements.
(5)
<PAGE>
CABLEVISION SYSTEMS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, 1996 AND 1995
(Dollars in thousands)
(Unaudited)
<TABLE>
<CAPTION>
1996 1995
------ ------
<S> <C> <C>
Cash flows from investing activities:
Capital expenditures................................ $(178,094) $(119,180)
Advance related to acquisition...................... (70,000) -
Proceeds from sale of plant and equipment........... 399 397
Additions to intangible assets...................... (1,665) (928)
(Increase) decrease in acquisition related costs and - 1,844
deposits
(Increase) decrease in investments in affiliates, net (46,485) 249
Payments for acquisitions, net of cash acquired..... - (110,906)
---------------- ----------
Net cash used in investing activities............. (295,845) (228,524)
---------- ----------
Cash flows from financing activities:
Proceeds from bank debt............................. 914,676 319,078
Repayment of bank debt.............................. (788,690) (154,735)
Proceeds from senior debt........................... 5,500 6,500
Repayment of senior debt............................ (911,131) (7,117)
Preferred stock dividends........................... (15,130) (4,918)
Net proceeds from issuance of Redeemable
Exchangeable Convertible Preferred Stock.......... 624,734 -
Proceeds from issuance of senior subordinated debt.. 399,385 -
Issuance of common stock............................ 2,990 2,629
Decrease in obligation to related party............. (2,864) (2,867)
Payments of capital lease obligations and other debt (1,647) (3,255)
Additions to deferred financing and other costs..... (16,629) (4,930)
------------ ------------
Net cash provided by financing activities......... 211,194 150,385
----------- -----------
Net increase in cash and cash equivalents............. 1,804 12,137
Cash and cash equivalents at beginning of year........ 15,332 11,350
------------ ------------
Cash and cash equivalents at end of period............ $ 17,136 $ 23,487
=========== ===========
</TABLE>
See accompanying notes to consolidated
financial statements.
(6)
<PAGE>
CABLEVISION SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands)
(Unaudited)
Note 1. Basis of Presentation
---------------------
The accompanying unaudited consolidated financial statements of Cablevision
Systems Corporation and its majority owned subsidiaries (the "Company") have
been prepared in accordance with the rules and regulations of the Securities and
Exchange Commission. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted.
Note 2. Responsibility for Interim Financial Statements
-----------------------------------------------
The financial statements as of and for the six and three month periods ended
June 30, 1996 presented in this Form 10-Q are unaudited; however, in the opinion
of management, such interim statements include all adjustments, consisting
solely of normal recurring adjustments, necessary for a fair presentation of the
results for the periods presented.
The interim financial statements should be read in conjunction with the audited
financial statements and notes thereto included in the Company's Annual Report
on Form 10-K for the year ended December 31, 1995.
The results of operations for the interim periods are not necessarily indicative
of the results that might be expected for future interim periods or for the full
year ending December 31, 1996.
Note 3. Loss Per Common Share
---------------------
Net loss per common share is computed based on the weighted average number of
common shares outstanding. Common stock equivalents were not included in the
computation as their effect would be to decrease net loss per common share.
Note 4. Cash Flows
----------
The Company paid cash interest expense of approximately $118,648 and $123,645
for the six months ended June 30, 1996 and 1995, respectively. The Company's
noncash financing activities for the six months ended June 30, 1996 included
capital lease obligations of $2,111 incurred when the Company entered into
leases for new equipment and preferred stock dividend requirements of $43,043.
Advance related to acquisition for the six months ended June 30, 1996 represents
a payment of $70,000 made in March 1996 in connection with the Company's pending
acquisition of the interest that it does not already own in U.S. Cable.
(7)
<PAGE>
CABLEVISION SYSTEM CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 5. Write off of Deferred Interest and Financing Costs
--------------------------------------------------
During the second quarter of 1996 the Company wrote off $24,012 of deferred
interest and financing costs in connection with a reorganization and refinancing
of certain of the Company's subsidiaries. See "Liquidity and Capital Resources -
Cablevision of Ohio." In connection with the refinancing and the formation of
Cablevision of Ohio, all indebtedness to V Cable and VC Holding was repaid, and
accordingly, all deferred costs related to V Cable were written off.
Note 6. Recent Developments
-------------------
In May 1996, the Company issued $250,000 principal amount of 10 1/2% Senior
Subordinated Debentures due 2016 and $150,000 face amount ($149,392 amortized
amount at June 30, 1996) of its 9 7/8% Senior Subordinated Notes due 2006. The
net proceeds of approximately $389,000 were used to repay borrowings under the
Company's Credit Agreement.
Also in May 1996, the Company entered into an agreement with Warburg, Pincus
Investors, L.P. ("Warburg") to acquire from Warburg the approximately 70% of
equity interests that the Company does not already own in A-R Cable Services,
Inc., A-R Cable Partners, Cablevision of Newark and Cablevision of Framingham
Holdings, Inc. for $183,000. In addition, in connection with the acquisition,
the Company will assume the outstanding debt of the respective entities
(approximately $513,000 as of June 30, 1996). These systems serve approximately
420,000 customers. The transaction is subject to receipt of necessary regulatory
approvals.
(8)
<PAGE>
CABLEVISION SYSTEMS CORPORATION
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
RESULTS OF OPERATIONS
- ---------------------
The following table sets forth on an unaudited historical basis certain items
related to operations as a percentage of net revenues for the periods indicated.
STATEMENT OF OPERATIONS DATA
- ----------------------------
<TABLE>
<CAPTION>
Six Months Ended June 30,
----------------------------------------------
1996 1995
---------------------- ---------------------- (Increase)
% of % of Decrease
Amount Revenues Amount Revenues in Net Loss
------ -------- ------ -------- -----------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
Revenues.............................. $ 624,496 100% $ 509,135 100% $ 115,361
Operating expenses:
Technical.......................... 257,580 41 193,243 38 (64,337)
Selling, general & administrative.. 146,439 23 131,611 26 (14,828)
Depreciation and amortization...... 175,168 28 159,537 31 (15,631)
--------- --------- ---------
Operating profit...................... 45,309 7 24,744 5 20,565
Other expense:
Interest expense, net.............. (129,859) (21) (154,528) (30) 24,669
Share of affiliates' net loss...... (40,061) (6) (52,692) (10) 12,631
Write-off of deferred interest and
financing costs.................. (24,012) (4) (2,888) (1) (21,124)
Provision for preferential payment
to related party................. (2,800) - (2,800) (1) -
Minority interest.................. (4,810) (1) (4,276) (1) (534)
Miscellaneous, net................. (4,243) (1) (2,999) (1) (1,244)
--------- --------- ---------
Net loss.............................. (160,476) (26) (195,439) (38) 34,963
Dividend requirements applicable to
preferred stocks................... (58,173) (9) (4,918) (1) (53,255)
--------- --------- ---------
Net loss applicable to common
shareholders.......................... $(218,649) (35)% $(200,357) (39)% $ (18,292)
========= ========= =========
</TABLE>
OTHER OPERATING DATA:
- --------------------
Operating profit before depreciation
and amortization1.................. $220,477 $184,281
Net cash provided by operating
activities2 ........................ 86,455 90,276
Net cash used in investing
activities2 ........................ 295,845 228,524
Net cash provided by financing
activities2 ........................ 211,194 150,385
- -----------------------------
1 Operating profit before depreciation and amortization is presented here to
provide additional information about the Company's ability to meet future
debt service, capital expenditures and working capital requirements.
Operating profit before depreciation and amortization should be considered
in addition to and not as a substitute for net income and cash flows as
indicators of financial performance and liquidity as reported in accordance
with generally accepted accounting principles.
2 See Item 1. - "Consolidated Statements of Cash Flows."
(9)
<PAGE>
CABLEVISION SYSTEMS CORPORATION
STATEMENT OF OPERATIONS DATA
- ----------------------------
<TABLE>
<CAPTION>
Three Months Ended June 30,
----------------------------------------------
1996 1995
---------------------- ---------------------- (Increase)
% of % of Decrease
Amount Revenues Amount Revenues in Net Loss
------ -------- ------ -------- -----------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
Revenues.............................. $ 320,331 100% $ 263,734 100% $ 56,597
Operating expenses:
Technical.......................... 128,890 40 100,018 38 (28,872)
Selling, general & administrative.. 73,551 23 75,794 29 2,243
Depreciation and amortization...... 90,474 28 76,883 29 (13,591)
--------- --------- ---------
Operating profit...................... 27,416 9 11,039 4 16,377
Other expense:
Interest expense, net.............. (61,964) (19) (79,200) (30) 17,236
Share of affiliates' net loss...... (19,093) (6) (23,587) (9) 4,494
Write-off of deferred interest and
financing costs.................. (24,012) (8) - - (24,012)
Provision for preferential payment
to related party................. (1,400) - (1,400) - -
Minority interest.................. (2,455) (1) (2,166) (1) (289)
Miscellaneous, net................. (2,666) (1) (1,623) (1) (1,043)
--------- --------- ---------
Net loss.............................. (84,174) (26) (96,937) (37) 12,763
Dividend requirements applicable to
preferred stocks................... (33,795) (11) (2,447) (1) (31,348)
--------- --------- ---------
Net loss applicable to common
shareholders.......................... $(117,969) (37)% $(99,384) (38)% $ (18,585)
========= ========= =========
</TABLE>
OTHER OPERATING DATA:
- --------------------
Operating profit before depreciation
and amortization1.................. $ 117,890 $ 87,922
Net cash provided by operating
activities.......................... 40,248 48,927
Net cash used in investing
activities.......................... 113,484 67,260
Net cash provided by financing
activities.......................... 62,355 20,287
- -----------------------------
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.
(10)
<PAGE>
CABLEVISION SYSTEMS CORPORATION
1995 acquisitions. In July 1995, the Company, through its wholly-owned
- -----------------
subsidiary Rainbow Programming, purchased NBC's interests in SportsChannel New
York and Rainbow News 12 Company, giving Rainbow Programming a 100% interest in
these companies. In December 1995, the Company acquired the interests in
Cablevision of Boston that it did not previously own, and upon consummation of
the acquisition, Cablevision of Boston became a member of the Restricted Group.
The foregoing acquisitions will be referred to as the "1995 Acquisitions."
Revenues for the six and three months ended June 30, 1996 increased $115.4
- --------
million (23%) and $56.6 million (21%), respectively, when compared to the same
periods in 1995. Increases of 13% and 12%, respectively, for the six and three
month periods were attributable to the 1995 Acquisitions, with the remaining
increases of 10% and 9%, respectively, resulting primarily from internal growth
in the average number of subscribers (approximately 133,000 for the six month
period), increases in other revenue sources and rate increases.
Technical expenses increased 33% and 29%, respectively, for the six and three
- -----------------
months ended June 30, 1996 over the corresponding 1995 periods. Increases of
approximately 20% and 19% for the respective six and three month periods were
directly attributable to the 1995 Acquisitions. The remaining 13% and 9%
increases were due primarily to increases in those costs directly associated
with the internal growth in the average number of subscribers mentioned above
along with higher engineering costs. As a percentage of revenues, technical
expenses increased 3% and 2%, respectively, for the six and three months ended
June 30, 1996 over the same 1995 periods.
Selling, general and administrative expenses increased 11% for the six months
- -------------------------------------------
and decreased 3% for the three months ended June 30, 1996 over the comparable
1995 periods. Increases of 12% and 10% for the respective periods resulted from
the 1995 Acquisitions. During 1996 and 1995, adjustments were made related to an
incentive stock plan. Excluding these adjustments, and the effects of the 1995
Acquisitions, discussed above, selling, general and administrative expenses
would have increased 13% and 10%, respectively, for the six and three months
ended June 30, 1996 over the same 1995 periods primarily due to higher
administrative, sales and marketing and customer service costs, and as a
percentage of revenues, would have increased 1% for the six month period and
remained relatively constant for the three month period.
Operating profit before depreciation and amortization increased 20% and 34%,
- ----------------------------------------------------
respectively, for the six and three months ended June 30, 1996 compared to the
same periods in 1995. Increases of approximately 5% and 6%, for the respective
six and three month periods were a direct result of the 1995 Acquisitions. The
remaining 15% and 28% increases resulted as the combined effect of the revenue
and expense changes discussed above. On a pro forma basis, giving effect to the
1995 Acquisitions as if they had occurred on January 1, 1995 and the exclusion
of incentive stock plan adjustments, referred to above, operating profit before
depreciation and amortization would have increased 7% and 11% in the respective
six and three month periods. 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
(11)
<PAGE>
CABLEVISION SYSTEMS CORPORATION
performance and liquidity as reported in accordance with generally accepted
accounting principles.
Depreciation and amortization expense increased 10% and 18%, respectively, for
- -------------------------------------
the six and three months ended June 30, 1996 over the comparable 1995 periods.
Approximately 13% and 16% of the respective increases were attributable to
acquisitions. A decrease of 3% for the six month period and an increase of 2%
for the three month period were the net result of increased depreciation charges
on new assets placed in service, which were more than offset for the six month
period and partially offset in the three month period by a reduction in
amortization charges on certain intangible assets which become fully amortized.
Net interest expense decreased 16% and 22%, respectively, for the six and three
- --------------------
months ended June 30, 1996 compared to the same 1995 periods. Increases of 5% in
each period were directly attributable to the 1995 Acquisitions. Offsetting
decreases of 21% and 27% for the respective six and three month periods resulted
primarily from the repayment of bank debt with the proceeds from the Company's
issuances of preferred stock in 1995 and 1996.
Share of affiliates' net losses decreased from $52.7 million and $23.6 million
- -------------------------------
for the six and three months ended June 30, 1995 to $40.1 million and $19.1
million for the six and three months ended June 30, 1996. Such amounts consist
primarily of the Company's share in the net losses of certain cable affiliates
which, for the six months ended June 30, 1996 and 1995 amounted to $34.1 million
and $47.7 million, respectively, and in the net losses of certain programming
businesses, in which the Company has varying ownership interests, which
aggregated $6.0 million and $5.0 million for the respective six and three month
periods.
Write off of deferred interest and financing costs in 1996 consists of such
- -------------------------------------------------
costs related to a refinancing of the Company's subsidiary, V Cable, in December
1992. In April 1996, Cablevision of Ohio was formed in connection with a new
reorganization and refinancing involving certain of the Company's subsidiaries
and accordingly all costs associated with the initial refinancing in December
1992, mentioned above, were written off during the second quarter of 1996. In
1995, deferred financing costs written off were associated with Rainbow
Programming's replacement of its original $105 million credit facility in
January 1995 with a new $202 million facility.
Provision for preferential payment to related party consists of the expensing of
- ---------------------------------------------
the proportionate amount due with respect to an annual payment ($5.6 million)
made in connection with the acquisition of Cablevision of New York City in 1992.
Minority interest represents NBC's share of the net income of AMCC.
- -----------------
Dividend requirements applicable to preferred stocks increased from $4.9 million
- ----------------------------------------------------
to $58.2 million for the six months ended June 30, 1995 compared to the same
1996 period due to the Company's issuances of preferred stock during the fourth
quarter of 1995 and first quarter of 1996.
(12)
<PAGE>
CABLEVISION SYSTEMS CORPORATION
Liquidity and Capital Resources
- -------------------------------
For financing purposes, the Company is structured as the Restricted Group,
consisting of Cablevision Systems Corporation and certain of its subsidiaries
(including Cablevision of Boston as of December 15, 1995 and the Long Island
system formerly included as part of V Cable) and an unrestricted group of
certain subsidiaries. Unrestricted Cable consists of Cablevision of Ohio and
Cablevision MFR. Other Unrestricted Subsidiaries consists primarily of Rainbow
Programming and CSC Technology, Inc.
The following table presents selected unaudited historical results of operations
and other financial information related to the captioned groups or entities as
of and for the six months ended June 30, 1996. Adjustments have been made
between the Restricted Group and Unrestricted Cable to reflect the transfer of
certain cable television systems among the groups.
<TABLE>
<CAPTION>
Other
Restricted Unrestricted Unrestricted Total
Group Cable Subsidiaries Company
----- ----- ------------ -------
(Dollars in thousands)
<S> <C> <C> <C> <C>
Revenues..................... $ 412,787 $ 102,246 $ 109,463 $ 624,496
Operating expenses:
Technical................ 168,272 41,069 48,239 257,580
Selling, general and
administrative........ 73,732 18,816 53,891 146,439
Depreciation and
amortization.......... 104,311 49,486 21,371 175,168
------------ ------------ ------------ ------------
Operating profit (loss)...... $ 66,472 $ (7,125) $ (14,038) $ 45,309
============ ============ ============ ============
Total interest expense....... $ 94,131 $ 26,353 $ 11,615 $ 132,099
============ ============ ============ ============
Bank and other senior debt... $ 410,001 $ 487,400 $ 229,532 $ 1,126,933
============ =========== =========== ============
Subordinated debt............ $ 1,323,037 $ 141,268(1) $ $ 1,464,305
============ =========== =========== ============
Obligation to related party.. $ 190,081(2) $ $ $ 190,081
============ =========== =========== ============
Deficit investment in affiliates $ 482,257 $ $ 2,987 $ 485,244
============ =========== =========== ============
Redeemable Exchangeable
Preferred Stock.......... $ 950,794 $ $ $ 950,794
============ =========== =========== ============
Capital expenditures......... $ 118,361 $ 54,974 $ 4,777 $ 178,094(3)
============ =========== =========== ============
Ending Cable subscribers..... 1,646,000 487,000 2,133,000
============ =========== =========== ============
</TABLE>
- ---------------------
(1) Guaranteed by the Restricted Group.
(2) Obligation of NYC LP Corp., a wholly-owned Restricted Group subsidiary,
relating to the CNYC Acquisition.
(3) Includes intercompany elimination of $18.
(13)
<PAGE>
CABLEVISION SYSTEMS CORPORATION
Restricted Group
- ----------------
On May 16, 1996, the Company issued $150 million of 9 7/8% Senior Subordinated
Notes due 2006 and $250 million of 10 1/2% Senior Subordinated Debentures due
2016. The net proceeds of approximately $389 million were used to repay
borrowings under the Company's Credit Agreement.
On April 17, 1996, the Long Island system of V Cable became a member of the
Restricted Group, and the Cleveland System became a member of the Unrestricted
Group and a party to the Cablevision of Ohio credit agreement. This resulted in
a net increase in borrowings of $140 million under the Restricted Group's Credit
Agreement, defined below.
On July 24, 1996, the Restricted Group had total usage under its $1.5 billion
credit agreement (including the credit facility for Cablevision of New Jersey,
collectively the "Credit Agreement") of $396 million and letters of credit of
$17 million issued on behalf of the Company. Unrestricted and undrawn funds
available to the Restricted Group under the Credit Agreement amounted to
approximately $1,062 million at July 24, 1996. The Credit Agreement contains
certain financial covenants that may limit the Restricted Group's ability to
utilize all of the undrawn funds available thereunder, including covenants
requiring the Restricted Group to maintain certain financial ratios and
restricting the permitted uses of borrowed funds.
As of June 30, 1996 the Company had entered into interest exchange (swap and
interest rate cap) agreements with several of their banks on a notional amount
of $120 million, on which the Company pays a fixed rate of interest and receives
a variable rate of interest for specified periods, with an average maturity of
two and one half years. The average effective annual interest rate on all bank
debt outstanding as of June 30, 1996 was approximately 7.8%.
The Company believes that, for the Restricted Group, internally generated funds
together with funds available under its existing Credit Agreement will be
sufficient through 1997 to meet its debt service and preferred stock dividend
requirements including amortization requirements under the Credit Agreement, and
to fund its planned capital expenditures.
The Company intends to incur additional expenditures in order to facilitate the
startup of such adjunct businesses as high speed data services, residential
telephony, video on demand and near video on demand. To successfully roll out
these adjunct businesses significantly beyond the development phases, the
Company will require additional capital from the sale of equity in the capital
markets or to a strategic investor.
(14)
<PAGE>
CABLEVISION SYSTEMS CORPORATION
UNRESTRICTED CABLE
- ------------------
Cablevision of Ohio
- -------------------
On April 17, 1996, all remaining indebtedness of V Cable and VC Holding
amounting to approximately $424 million, including accrued interest, was repaid.
Under the new Cablevision of Ohio credit facility (see Cablevision of Ohio,
below), $209 million was made available with the balance of approximately $215
million provided by the Restricted Group. Upon payment and satisfaction of all
outstanding indebtedness of V Cable and VC Holding described above, such credit
agreements with GECC were terminated.
The Company's subsidiaries Telerama, Inc., Cablevision of the Midwest, Inc., and
Cablevision of Cleveland L.P., (collectively "Cablevision of Ohio") are party to
a credit facility with a group of banks led by NationsBank of Texas, N.A., as
agent (the "Cablevision of Ohio Credit Facility") which consists of a nine year
$425 million reducing revolving credit facility which matures on June 30, 2005
and a nine and one half year $75 million term loan facility which matures on
December 31, 2005. The reducing revolving facility has scheduled facility
reductions beginning in 1999. The term loan facility requires repayments of
$375,000 per year from 1997 through 2003 with the balance to be repaid in the
final two years. As of July 24, 1996 Cablevision of Ohio had outstanding
borrowings under its reducing revolving facility of $227 million, $1 million of
outstanding letters of credit leaving unrestricted and undrawn funds available
amounting to $197 million. The funds available under the reducing revolving
credit facility will be used to rebuild the Cablevision of Ohio plant and for
general corporate purposes. The Cablevision of Ohio Credit Facility contains
certain financial covenants that may limit its ability to utilize all of the
undrawn funds available thereunder, including covenants requiring Cablevision of
Ohio to maintain certain financial ratios.
The Company believes that for Cablevision of Ohio, internally generated funds
together with funds available under its existing credit agreement, will be
sufficient to meet its debt service requirements including amortization
requirements under its credit agreement and to fund its capital expenditures
through 1997.
Monmouth and Riverview
- ----------------------
Monmouth/Riverview are party to a credit facility, as amended on May 12, 1995,
with a group of banks led by Nations Bank of Texas, N.A., as agent (the
"Monmouth/Riverview Credit Facility"). The maximum amount available to
Monmouth/Riverview under the Monmouth/Riverview Credit Facility is $285 million
with a final maturity at June 30, 2003. The facility is a reducing revolving
loan, with scheduled facility reductions beginning on March 31, 1996 resulting
in a 15% reduction by December 31, 1998. As of July 24, 1996, Monmouth/Riverview
had outstanding bank borrowings of $198 million. Unrestricted and undrawn funds
available to Monmouth/Riverview under the Monmouth/Riverview Credit
(15)
<PAGE>
CABLEVISION SYSTEMS CORPORATION
Facility amounted to approximately $84 million at July 24, 1996. The
Monmouth/Riverview Credit Facility contains certain financial covenants that
may limit Monmouth/Riverview's ability to utilize all of the undrawn funds
available thereunder, including covenants requiring Monmouth/Riverview to
maintain certain financial ratios. The weighted average interest rate on all
bank indebtedness as of June 30, 1996 was approximately 7.9%.
As of June 30, 1996, Monmouth Cablevision and Riverview Cablevision have entered
into interest rate swap and cap agreements with several banks on a notional
amount of $130 million on which the Company pays a fixed rate of interest and
receives a variable rate of interest for specified period, with an average
maturity of approximately one year.
The Company believes that for Monmouth/Riverview, internally generated funds
together with funds available under its existing credit agreement and capital
contributions from the Restricted Group will be sufficient to meet its debt
service requirements including its amortization requirements and to fund its
capital expenditures through 1997.
On August 8, 1994, Cablevision MFR issued promissory notes totaling $141
million, due in 1998 and bearing interest at 6% until the third anniversary and
8% thereafter (increasing to 8% and 10%, respectively, if interest is paid in
shares of the Company's Class A Common Stock). Principal and interest on the
notes is payable at Cablevision MFR's election, in cash or in shares of the
Company's Class A Common Stock. The promissory notes are guaranteed by the
Company and the obligations under the guarantee rank pari passu with the
Company's public subordinated debt. In certain circumstances, Cablevision MFR
may extend the maturity date of the promissory notes until 2003 for certain
additional consideration.
UNRESTRICTED - OTHER
- --------------------
Rainbow Programming
- -------------------
On January 27, 1995, Rainbow entered into an amended and restated credit
facility with Toronto-Dominion (Texas), Inc., and Canadian Imperial Bank of
Commerce, as co-agents, and a group of banks for $202 million. The credit
facility is payable in full at maturity on December 31, 1996, bears interest at
varying rates based upon the banks' Base Rate or Eurodollar Rate, as defined in
the credit agreement, and contains certain restrictive covenants. Repayment of
the loan, as well as the future cash needs of Rainbow Programming and its
current programming partnerships including any payments in respect of its MSG
option, are anticipated to be made by Rainbow Programming from one or a
combination of the following: (i) internally generated funds; (ii) refinancing
the existing Rainbow Programming $202 million credit facility; (iii) refinancing
the existing $42 million credit agreement of AMCC ($27 million outstanding as of
June 30, 1996); (iv) the sale of debt or equity interests in Rainbow Programming
or its businesses; and (v) investments or advances from the Restricted Group.
The loan is secured by a pledge of the Company's stock in Rainbow Programming
and is guaranteed by the subsidiaries of Rainbow Programming as permitted.
(16)
<PAGE>
CABLEVISION SYSTEMS CORPORATION
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
The Company is party to various lawsuits, some involving substantial
amounts. Management does not believe that such lawsuits will have a
material adverse impact on the financial position of the Company.
Item 4. Submission of Matters to a Vote of Security-Holders.
The Company's Annual Meeting of Shareholders was held on June 19,
1996.
The following matters were voted upon at the Company's Annual Meeting
of Shareholders, indicating the number of votes cast for and against
as well as the number of abstentions:
Election of Directors:
----------------------
Class A Directors:
Charles D. Ferris: For: 10,520,810
Votes withheld: 245,637
Richard H. Hochman: For: 10,679,810
Votes withheld: 86,637
Victor Oristano: For: 10,679,510
Votes withheld: 86,937
Vincent Tese: For: 10,520,710
Votes withheld: 245,737
Class B Directors:
William J. Bell Marc A. Lustgarten For: 115,342,090
Charles F. Dolan Sheila A. Mahony Against: 0
James L. Dolan Francis F. Randolph, Jr.
Patrick F. Dolan Daniel T. Sweeney
Robert S. Lemle John Tatta
Each nominee for election by the Class B common stockholders
received the same vote as indicated above.
(17)
<PAGE>
CABLEVISION SYSTEMS CORPORATION
<TABLE>
<CAPTION>
Authorize and approve the Company's First Amended and Restated 1996
Employee Stock Plan:
<S> <C> <C>
Class A Common Stock: For: 6,243,463
Against: 2,844,122
Abstain: 32,895
Class B Common Stock: For: 115,342,090
Against: 0
Abstain: 0
<CAPTION>
Authorize and approve the Company's 1996 Non-Employee Director Stock Option Plan:
<S> <C> <C>
Class A Common Stock: For: 6,897,178
Against: 2,296,116
Abstain: 33,464
Class B Common Stock: For: 115,342,090
Against: 0
Abstain: 0
<CAPTION>
Ratification and approval of KPMG Peat Marwick LLP
<S> <C> <C>
Class A Common Stock: For: 10,738,684
Against: 11,777
Abstain: 15,986
Class B Common Stock: For: 115,342,090
Against: 0
Abstain: 0
</TABLE>
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
The index to exhibits is on page 20.
(b) During the quarter, the Company filed a Current Report on Form
8-K with the Commission on May 17, 1996.
(18)
<PAGE>
CABLEVISION SYSTEMS CORPORATION
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf of the
undersigned thereunto duly authorized.
CABLEVISION SYSTEMS CORPORATION
Registrant
Date: July 31, 1996 /s/William J. Bell
---------------------- ----------------------------------------
By: William J. Bell, as Vice Chairman of
Cablevision Systems Corporation
Date: July 31, 1996 /s/Barry J. O'Leary
---------------------- ----------------------------------------
By: Barry J. O'Leary, as Senior Vice
President - Finance and Treasurer and
Principal Financial Officer of
Cablevision Systems Corporation
Date: July 31, 1996 /s/Andrew B. Rosengard
---------------------- ----------------------------------------
By: Andrew B. Rosengard, as Senior Vice
President and Controller and Chief
Accounting Officer of Cablevision
Systems Corporation
<PAGE>
CABLEVISION SYSTEMS CORPORATION
INDEX TO EXHIBITS
EXHIBIT PAGE
NO. DESCRIPTION NO.
-------- ----------- ----
27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 17,136
<SECURITIES> 0
<RECEIVABLES> 110,795
<ALLOWANCES> (11,050)
<INVENTORY> 132,571
<CURRENT-ASSETS> 0
<PP&E> 2,046,947
<DEPRECIATION> (941,760)
<TOTAL-ASSETS> 2,596,084
<CURRENT-LIABILITIES> 0
<BONDS> 2,781,319
950,794
<COMMON> 249
15
<OTHER-SE> (2,132,865)
<TOTAL-LIABILITY-AND-EQUITY> 2,596,084
<SALES> 0
<TOTAL-REVENUES> 632,588
<CGS> 0
<TOTAL-COSTS> 257,580
<OTHER-EXPENSES> 175,168
<LOSS-PROVISION> (8,092)
<INTEREST-EXPENSE> 132,099
<INCOME-PRETAX> (160,476)
<INCOME-TAX> 0
<INCOME-CONTINUING> (160,476)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (160,476)
<EPS-PRIMARY> (8.81)
<EPS-DILUTED> 0<F1>
<FN>
<F1>Not presented as the resultant computation would be a decrease in net loss
per share and therefore not meaningful.
</FN>
</TABLE>
